Consumers must arbitrate, even if they didn’t sign agreement, 9th Circuit rules

A divided 9th U.S. Circuit Court of Appeals panel on Monday ruled for Cathay Pacific Airways Ltd.’s bid to compel arbitration of a couple’s class action alleging it breached their contract by not issuing a refund after their flight was canceled with tickets they purchased from a booking website.

An attorney for the plaintiffs vowed to seek en banc review of the decision, which he described as blessing “a legally dubious end-around its own contract.”

Senior 9th Circuit Judge J. Clifford Wallace, an appointee of President Richard Nixon, reversed a decision by Chief U.S. Magistrate Judge Joseph C. Spero of San Francisco in favor of Winifredo and Macaria Herrera’s lawsuit against the airline.

The Herreras argued that Cathay Pacific shouldn’t be able to force them into arbitration over an agreement they never signed with the airline. Matthew Z. Robb, an attorney with Liddle Sheets Coulson PC who represents them, wrote that the only arbitration agreement was between Cathay and ASAP Tickets, the booking site.

But Wallace disagreed, arguing that “nothing in the plain language of [Code of Federal Regulations] section 253.10 prohibits airline carriers from enforcing arbitration agreements between passengers and third parties if the applicable law permits them to do so.” Herrera et al. v. Cathay Pacific Airways Ltd., 2024 DJDAR 2171 (9th Circ., filed June 28, 2021).

The dispute started after Cathay Pacific canceled return flights from the Philippines in February 2020 at the outset of the COVID-19 pandemic. The couple paid to fly on another airline, and rejected an offer of travel vouchers that were going to expire in July of that year.

The Herreras filed a class action, and the airline moved to dismiss the case or compel arbitration. Spero denied the motion and the airline appealed.

Benedict Idemundia, an attorney with Clyde & Co. LLP in Los Angeles who represents Cathay Pacific, argued before the 9th Circuit panel that the Herreras, by purchasing their tickets from ASAP Tickets, agreed to arbitration – especially because they never requested a refund directly from the airline.

He could not be reached for comment Monday.

“Because the Herreras’ allegations that Cathay Pacific breached its [General Conditions of Carriage for Passengers and Baggage] is ‘intimately founded in and intertwined with’ ASAP’s alleged conduct under the Terms & Conditions, it is appropriate to enforce the arbitration clause contained in the Terms & Conditions,” Wallace wrote.

Senior 6th U.S. Circuit Court of Appeals Judge Danny J. Boggs, an appointee of President Ronald Reagan, concurred.

9th Circuit Judge Danielle J. Forrest, an appointee of President Donald Trump, dissented.

“Because the Herreras’ claim against Cathay Pacific — as they presented it—does not rely or depend on the terms of their ASAP Tickets contract, this is not a case where the Herreras are unfairly trying to avoid their agreement to arbitrate,” she wrote. “In contrast, here, a factfinder can resolve the Herreras’ claim that Cathay Pacific owes them a refund without any information about their relationship to ASAP Tickets.”

Nicholas A. Coulson, a Liddle Sheets Coulson PC partner, decried the majority decision.

“We’re disappointed both for our clients and for the many other people who will be hurt by this decision if it stands,” he wrote in an email.

“Being forced into that process against a corporation you never formed any agreement to arbitrate with, and who would almost certainly be legally prohibited from placing an arbitration agreement in its own contract with you, is something most people would never expect could happen,” Coulson added.