Herrera v. Cathay Pac. Airways Ltd.

94 F.4th 1083

Winifredo HERRERA; Macaria Herrera, Plaintiffs-Appellees, v. CATHAY PACIFIC AIRWAYS LIMITED, Defendant-Appellant.

No. 21-16083

United States Court of Appeals, Ninth Circuit

Argued and Submitted September 13, 2023 San Francisco, California

Filed March 11, 2024

Appeal from the United States District Court for the Northern District of California Joseph C. Spero, Magistrate Judge, Presiding, D.C. No. 3:20-cv-03019-JCS

Benedict Idemundia (argued), Clyde & Co US LLP, Los Angeles, California; Kevin R. Sutherland, Clyde & Co US LLP, San Francisco, California; for Defendant-Appellant.

Matthew Z. Robb (argued) and Nicholas A. Coulson, Liddle Sheets Coulson PC, Detroit, Michigan; Bradley K. King, Ahdoot & Wolfson PC, New York, New York; Tina Wolfson, Ahdoot & Wolfson PC, Burbank, California; for Plaintiffs-Appellees.

Before: J. Clifford Wallace, Danny J. Boggs,^** and Danielle J. Forrest, Circuit Judges.

Dissent by Judge Forrest

OPINION

WALLACE, Circuit Judge:

Cathay Pacific Airways Limited (Cathay Pacific) appeals from the district court's denial of its motion to compel arbitration in a putative class action brought by Winifredo and Macaria Herrera (Herreras) alleging that Cathay Pacific breached their contract by not issuing a refund following flight cancellations for tickets that the Herreras purchased through a third-party vendor. We have jurisdiction over this timely appeal pursuant to 9 U.S.C. § 16. We reverse and remand.

I.

"We usually review a district court's decision about the arbitrability of claims de novo." Franklin v. Cmty. Reg'l Med. Ctr., 998 F.3d 867, 870 (9th Cir. 2021). "When the arbitrability decision concerns equitable estoppel, however, our caselaw has been inconsistent on whether we review the district court's decision de novo or for abuse of discretion." Id. (collecting cases).¹

The line of cases in our circuit applying the abuse-of-discretion standard rely on our decision in Hoefler v. Babbitt, where we reasoned that the standard was appropriate "[b]ecause estoppel is an equitable concept that is invoked by the court in its discretion." 139 F.3d 726, 727 (9th Cir. 1998).² However, such is not the case here where a nonsignatory to the contract containing the arbitration provision seeks to compel enforcement of the arbitration provision against a signatory. Moreover, our review of the district court's order denying the motion to compel arbitration presents mixed questions of law and fact. We review such mixed questions de novo. Disability L. Ctr. of Alaska, Inc. v. Anchorage Sch. Dist., 581 F.3d 936, 938 (9th Cir. 2009). Accordingly, we hold that, when a nonsignatory seeks to enforce an arbitration provision, an order denying a motion to compel arbitration based on the doctrine of equitable estoppel is reviewed de novo.

"The validity and scope of an arbitration clause are reviewed de novo." Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1267 (9th Cir. 2006).

At this stage of the litigation, we assume that all allegations in the complaint are true. Brown v. Dillard's, Inc., 430 F.3d 1004, 1006 (9th Cir. 2005). "In reviewing motions to compel arbitration . . . a court must 'consider all relevant, admissible evidence submitted by the parties and contained in pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits.' " Barrows v. Brinker Rest. Corp., 36 F.4th 45, 50 (2d Cir. 2022), quoting Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016) (emphasis removed).

II.

Around July 2019, the Herreras purchased international round-trip flights on Cathay Pacific through a third-party booking website, ASAP Tickets (ASAP), which is operated by International Travel Network, LLC (ITN). The Herreras agreed to ASAP's Terms & Conditions, which provided:

If fare rules allow refunds and/or exchanges, a $250.00 [ ] fee per ticket will be charged to process any refund and/or exchange request . . . . After the tickets are issued, any changes or refunds are subject to the restrictions on the fares used . . . . The airlines determine the restrictions of the fares, and [ASAP] has no power to override these restrictions.

ASAP's Terms & Conditions also included an arbitration clause, which stated that, except for small-claims court, "[t]he exclusive means of resolving any dispute or claim arising out of or relating to this Agreement (including any alleged breach thereof), the Service, or the Website shall be BINDING ARBITRATION administered by the American Arbitration Association."

The tickets issued by Cathay Pacific for the Herreras' flights incorporated Cathay Pacific's General Conditions of Carriage for Passengers and Baggage (GCC). Article 10.2 of the GCC in relevant part stated that "[e]xcept as otherwise provided by the Warsaw Convention or the Montreal Convention or applicable law, if [Cathay Pacific] cancel[s] a flight . . . [Cathay Pacific] shall . . . make a refund in accordance with the provisions of Article 11[.]" In turn, Article 11.1.1 of the GCC stated:

Except as otherwise provided in this Article, [Cathay Pacific] shall be entitled to make refund either to the person named in the Ticket, or to the person who has paid for the Ticket upon presentation of satisfactory proof of such payment.

While the Herreras were on their trip, Cathay Pacific cancelled their return flight due to "operational reasons." After the cancellation, the Herreras spoke with a Cathay Pacific agent at the airport who recommended that the Herreras purchase a return flight on another airline and "expressly assured [them] that they would receive a refund for the unused portion of their Cathay Pacific tickets." The Herreras followed the agent's recommendation and purchased a return flight on another airline.

In the email notifying the Herreras of their flight cancellation, Cathay Pacific instructed them to "contact [their] travel agent" to request a refund. The Herreras reached out to ASAP and made "multiple requests" to receive a refund. After the Herreras returned home, an ASAP agent communicated to them that Cathay Pacific would only offer them travel vouchers that would expire a handful of months later, an offer which the Herreras rejected due to travel restrictions related to the ongoing COVID-19 pandemic. Cathay Pacific attests that the airline never received a refund request either from the Herreras or from ASAP on behalf of the Herreras.

The Herreras filed a First Amended Class Action Complaint (FAC), asserting a breach-of-contract claim against Cathay Pacific for failing to provide a refund under the GCC. In response, Cathay Pacific moved to dismiss or, in the alternative, to compel arbitration based on the doctrine of equitable estoppel, relying on the arbitration clause in ASAP's Terms & Conditions. The district court denied Cathay Pacific's motion to compel, reasoning that the Herreras "base[d] their breach of contract claim on Cathay Pacific's obligations under its own GCC, not on any obligation contained in ASAP's Terms and Conditions[,]" and the Herreras "d[id] not assert that ASAP engaged in any misconduct or breached its contractual obligations to them under the Terms and Conditions." Cathay Pacific appealed from the order under 9 U.S.C. § 16(a)(1)(c), which provides for interlocutory appellate review of orders denying motions to compel arbitration. On appeal, Cathay Pacific seeks reversal of the district court's denial of its motion to compel arbitration, and either dismissal or a stay of the action pending arbitration of the Herreras' breach-of-contract claim.

III.

As a threshold issue, the Herreras contend that 14 C.F.R. § 253.10 bars Cathay Pacific's motion to compel arbitration.³ "[T]he plain meaning of a regulation governs and deference to an agency's interpretation of its regulation is warranted only when the regulation's language is ambiguous." Wards Cove Packing Corp. v. Nat'l Marine Fisheries Serv., 307 F.3d 1214, 1219 (9th Cir. 2002), citing Christensen v. Harris County, 529 U.S. 576, 588, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000). "Therefore, the starting point of our analysis must begin with the language of the regulation." Id. Section 253.10 reads:

No carrier may impose any contract of carriage provision containing a choice-of-forum clause that attempts to preclude a passenger, or a person who purchases a ticket for air transportation on behalf of a passenger, from bringing a claim against a carrier in any court of competent jurisdiction, including a court within the jurisdiction of that passenger's residence in the United States (provided that the carrier does business within that jurisdiction).

14 C.F.R. § 253.10.

Section 253.10 clearly and unambiguously regulates a carrier's ability to impose a choice-of-forum clause in contracts of carriage. However, nothing in the plain language of section 253.10 prohibits airline carriers from enforcing arbitration agreements between passengers and third parties if the applicable law permits them to do so. Accordingly, section 253.10 does not bar Cathay Pacific's motion to compel arbitration on equitable-estoppel grounds.

IV.

"[T]he Federal Arbitration Act (FAA) governs the enforceability of arbitration agreements in contracts involving interstate commerce," including the purchase of airfare. Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126 (9th Cir. 2013), citing 9 U.S.C. § 1 et seq. "The FAA states that '[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' " Id., quoting 9 U.S.C. § 2. "The United States Supreme Court has held that a litigant who is not a party to an arbitration agreement may invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the agreement." Id. at 1128, citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624,...