Hongbo Han v. United Continental Holdings, Inc. ( 2014 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 13-3871
HONGBO HAN,
Plaintiff-Appellant,
v.
UNITED CONTINENTAL HOLDINGS,
INC., et al.,
Defendants-Appellees.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13-C-2067 — Joan B. Gottschall, Judge.
ARGUED MAY 28, 2014 — DECIDED AUGUST 11, 2014
Before FLAUM, MANION, and TINDER, Circuit Judges.
MANION, Circuit Judge. Hongbo Han filed a putative class
action against United Continental Holding, Inc., United Air
Lines, Inc., and Mileage Plus Holdings LLC (hereinafter
“United”), alleging that the defendant breached the terms of its
frequent-flyer program, the “MileagePlus Program.” Specifi-
cally, Han maintained that United breached the MileagePlus
Program contract by crediting him for “mileage” determined
2 No. 13-3871
by the distance between the airports, instead of the number of
miles the airplanes actually flew (including such things as
weather diversions and landing delays). The district court
dismissed Han’s complaint with prejudice and he now appeals.
We affirm.
I.
United’s MileagePlus Program is a voluntary customer-
loyalty program. This Program allows members to earn
“mileage” when they fly on United, or its partner airlines, or
through other qualifying activities such as car or hotel room
rentals. Han filed a putative class action suit against United
alleging a breach of the MileagePlus Program. The district
court dismissed Han’s complaint with prejudice. We review
the dismissal de novo and take as true all facts alleged in the
complaint; we also draw all reasonable inferences from those
facts in Han’s favor. Abcarian v. McDonald, 617 F.3d 931, 933
(7th Cir. 2010). Viewing the facts in this light, dismissal is
appropriate if Han fails to “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Han asserted only a breach of contract claim under Illinois
law. To state a claim for breach of contract under Illinois law,
a party must allege “(1) the existence of a valid and enforceable
contract; (2) substantial performance by the plaintiff; (3) a
breach by the defendant; and (4) the resultant damages.” Reger
Dev., LLC v. Nat’l City Bank, 592 F.3d 759, 764 (7th Cir. 2010).
Han alleged that the MileagePlus Program required United to
credit him for the total miles the airplane actually flew, and
that United breached its contract by instead crediting him
No. 13-3871 3
based on the mileage between the airports. Contract construc-
tion is a legal issue which is reviewed de novo. See Yockey v.
Horn, 880 F.2d 945, 949 (7th Cir. 1989) (citing Morris v. Flores,
528 N.E.2d 1013, 1015 (Ill. App. Ct. 1988)).
II.
Members of United’s MileagePlus voluntary customer-
loyalty program earn “mileage” when, among other things,
they fly on United, or its partner airlines. Members can then
use these “mileage” credits to purchase United flights, as well
as other goods or services. Additionally, customers who fly
often can qualify for various levels of “Premier” status, which
provides the members with increasing tiers of benefits.
To enroll in the Program, members must complete a
MileagePlus enrollment form and must accept the MileagePlus
Program Rules, Terms, Conditions, and Legal Notices. The
Mileage Plus Program Rules begin by stating: “[t]he following
provisions form the basis of the MileagePlus Program.”1 The
Program Rules then stated that “[y]our participation in the
Program will be governed by these provisions,” and that
“[t]hese Program Rules cannot be superseded or changed,
except in writing from United Airlines.” The Program Rules
also state that “Participation in the MileagePlus Program (the
“Program”) is subject to any terms and conditions, rules,
regulations, and policies and procedures (“Program Rules”)
1
The plaintiff attached the MileagePlus contract in response to the motion
to dismiss. Because the terms of the MileagePlus contract are central to
Han’s complaint, we may consider them in ruling on a motion to dismiss.
See Rosenblum v. Travelbyus.com, Ltd., 299 F.3d 657, 661 (7th Cir. 2002).
4 No. 13-3871
that United may, at its discretion, adopt from time to time.”
The Program Rules then provide that “United shall attempt to
advise active members of various matters of interest through
such means as may be appropriate, such as account summaries,
emails, newsletters and its website … .” The Program Rules
further provide that “United has the sole right to interpret and
apply the Program Rules.”
Relevant to the question of miles awarded for air travel,
Section 18a of the Rules states that “[i]n the case of air travel,
mileage will be credited only for flights actually flown by the
member.” The district court held, and we agree, that this
language unambiguously clarifies that mileage credit will be
awarded only for flights flown, as opposed to reserved or
ticketed flights on which an individual does not travel. Han
does not challenge that conclusion on appeal; rather, he argues
that “mileage,” as used in the Program Rules, is ambiguous.
United acknowledges that the MileagePlus Program Rules
do not specify the method by which United will determine the
amount of “mileage” credit for any particular flight. Appellee
Br. 14 (“the Rules are silent as to the method by which United
calculates the size of the award corresponding to each flight”).
But United argues that this silence defeats Han’s claim because
“a court may not ‘add new terms or conditions to which the
parties do not appear to have assented [or] write into the
contract something which the parties have omitted.’” Appellee
Br. 14 (quoting Gallagher v. Lenart, 854 N.E.2d 800, 807 (Ill. App.
Ct. 2006)).
We disagree with United’s reasoning. While a court cannot
add terms to a contract, “[s]ilence creates ambiguity … only
No. 13-3871 5
when the silence involves a matter naturally within the scope
of the contract as written.” Consolidated Bearings Co. v. Ehret-
Krohn Corp., 913 F.2d 1224, 1233 (7th Cir. 1990). In this case,
United agreed in the MileagePlus Program Rules to award
customers mileage for flights actually flown, and thus the
method for determining the number of miles to be credited a
customer is naturally within the scope of the contract as
written. Because the Rules are silent on the method United will
use to calculate mileage credit, the contract is ambiguous
concerning the meaning of mileage.
Han maintains that because United drafted the contract, the
ambiguity in the MileagePlus Program Rules must be inter-
preted in his favor. See Outboard Marine Corp. v. Liberty Mut.
Ins. Co., 607 N.E.2d 1204, 1219 (Ill. 1992); Gassner v. Raynor Mfg.
Co., 948 N.E.2d 315, 328 (Ill. App. Ct. 2011) (“the risk of
ambiguity and lack of clarity is [placed] on the drafting
party”). He also argues that language from other sections of
United’s web page supports his view that “mileage” means the
actual miles flown by the airplane, as opposed to the actual
distance-in-miles between the airports.2 For instance, Han cites
to the “Premier Status” qualification requirements, listed on
United’s web page, where United states that “[Premier
qualifying miles] are based on the number of paid flight miles
traveled and the fare purchased.” He also points to a “Promo-
tion Page” contained on United’s web page which, according
2
Han quotes the relevant language from the web page in his complaint and
thus it is properly considered on review of a motion to dismiss, even
though the actual web page printouts were not attached to his complaint.
See Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013).
6 No. 13-3871
to Han’s complaint, states that “flight miles” are “determined
by the purchased ticket routing.”3 Compl. ¶ 23. Han argues
that this language shows that the MileagePlus Program Rules
contract is not only ambiguous, but that his reading of the
contract is the better one.4
Han’s argument, though, ignores the plain language of the
MileagePlus Program Rules which unequivocally states that
“United has the sole right to interpret and apply the Program
Rules.” Under Illinois law, “a court must give meaning and
effect to every part of the contract.” Cress v. Recreation Servs.,
Inc., 795 N.E.2d 817, 852 (Ill. App. Ct. 2003). Additionally,
“Illinois will not ‘interfere with the rights of two parties to
contract with one another if they freely and knowingly enter
into the agreement.’” Hussein v. L.A. Fitness Int’l, L.L.C., 987
N.E.2d 460, 465 (Ill. App. Ct. 2013) (quoting Garrison v. Com-
bined Fitness Centre, Ltd., 559 N.E.2d 187, 190 (Ill. App. Ct.
3
The web page appears to have slightly different language. Specifically,
“Actual mileage will be determined by the purchased ticket routing, fare
class, Premier status, residency and ticket issue date.” But the differences
do not affect our analysis.
4
Han also argues that the Premier Status Qualification Requirements and
the frequent flyer “Promotion Page” are integrated into, and thus part of,
the four corners of the Program Rules contract. But the Mileage Plus Rules
provide that: “The most current Program Rules may be found on
mileageplus.com and this is the final authority on the Program Rules.”
Accordingly, the contract terms are limited to those contained in the
Program Rules. But whether those provisions are considered part of the
contract, or as extrinsic evidence explaining the contract, they do not help
Han because United has the discretion to interpret the contract. See infra at
6–8 .
No. 13-3871 7
1990)). More specifically, we have recognized that under
Illinois law, “a contract can vary from the norm by including
language which indicates that one of the parties is to have
discretion to interpret and apply the contract.” Herzberger v.
Standard Ins. Co., 205 F.3d 327, 330 (7th Cir. 2000). However, the
interpretation must be based on “‘grounds which are reason-
able and just.’” Id. (quoting Muka v. Estate of Muka, 517 N.E.2d
673, 677 (Ill. App. Ct. 1987)); see also Wilson v. Career Educ. Corp.,
729 F.3d 665, 672 (7th Cir. 2013) (Darrow, district judge, by
designation, concurring) (“Here, the Plan gave CEC clear
discretion to interpret the termination provision; thus, we must
uphold CEC’s interpretation unless it is unreasonable. CEC’s
interpretation is not unreasonable at least for the reasons
already discussed.”) (applying Illinois law). Accordingly,
because the MileagePlus Program Rules gave United discretion
to interpret the terms of that contract, to state a breach of
contract claim Han must allege an interpretation of that
contract that is unreasonable. Merely alleging that the term is
ambiguous and pointing to extrinsic evidence which could
support his interpretation of the contract is not enough.5
5
On appeal, Han also argues that because the MileagePlus Program Rules
constitute a contract of adhesion, “the canon of contract interpretation
holding that an ambiguity should be construed against the drafter applies
with particular force … .” Han forfeited this argument by not presenting it
below. Jackson v. Parker, 627 F.3d 634, 640 (7th Cir. 2010). But even if Han
had not forfeited the argument, the MileagePlus Program Rules unambigu-
ously gave United deference to interpret the contract terms. Han does not
argue that this clause, or the contract as a whole, is unconscionable.
Accordingly, treating a customer-loyalty program as an adhesion contract
would not alter our analysis.
8 No. 13-3871
Han, however, does not claim that United’s interpretation
of the term “mileage,” as used in the Program Rules, is
unreasonable; rather, he argues that his view is the better one,
or at a minimum that the contract is ambiguous. But to avoid
dismissal, Han needs to plausibly allege that United’s interpre-
tation of the contract is unreasonable. United interprets
“mileage” for flights as the total distance-in-miles between the
airports. As a matter of law, this interpretation is not unreason-
able. Rather, it is entirely reasonable for an airline to use a
standard measure of miles for all flights between the same
airports. It is quicker, cheaper, easier, and more predictable,
and allows customers to readily determine the number of miles
they will earn per flight. Conversely, Han’s interpretation of
“mileage” as the total distance flown to arrive at the destina-
tion airport would require an airline to track the exact miles for
every flight flown and to credit customers accounts based on
that information. While it might be possible for an airline to do
that, that does not make United’s interpretation of mileage as
the actual distance between airports an unreasonable interpre-
tation of the contract. Nor does any of the language from other
parts of United’s website render its interpretation of “mileage”
in the Mileage-Plus Program Rules unreasonable.
Finally, Han requests that this court grant him leave to
amend his complaint, but does not propose any allegations that
would change the result here. Han never sought leave to
amend his complaint while in the district court. We see no
basis for remanding to the district court to allow Han to amend
the complaint because any amendment would be futile. See
Bausch v. Stryker Corp., 630 F.3d 546, 562 (7th Cir. 2010)
(explaining that a district court may deny leave to file an
No. 13-3871 9
amended complaint in the case of “futility of amendment”). As
explained above, because United has discretion to interpret the
meaning of “mileage” and the interpretation United gave that
term is reasonable, Han cannot state a claim for breach of the
MileagePlus Program contract. We AFFIRM.