SwiftAir v. Southwest Airlines

Filed 3/11/22; modified and certified for publication 4/5/22 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
SWIFTAIR, LLC, B303314
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC122964)
v.
SOUTHWEST AIRLINES CO.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Nancy Newman and Elaine W. Mandel, Judges.
Affirmed.
Holmgren Johnson: Mitchell Madden and Dennis M.
Holmgren; Shamoun & Norman and Stephen R. Tittle, Jr. for
Plaintiff and Appellant.
Baker & Hostetler and Teresa C. Chow; Hawxhurst Harris,
David S. Harris, Gerald E. Hawxhurst, and Patrick B. Nichols;
Douglas D. D’Arche for Defendant and Respondent.
INTRODUCTION
SwiftAir, LLC and Southwest Airlines Co. agreed that
SwiftAir would develop a software platform offering certain
inflight deals to Southwest passengers and that Southwest would
test the software to determine whether to license it. After
Southwest ultimately decided not to license the software,
SwiftAir filed this action against Southwest for breach of
contract, fraud, and other causes of action. The trial court
granted Southwest’s motion for summary adjudication on
SwiftAir’s non-contract causes of action on the ground they were
preempted by the federal Airline Deregulation Act (49 U.S.C.
§ 41713(b)(1)) (ADA). A jury then determined Southwest was not
liable for breach of contract, finding SwiftAir failed to prove it
was harmed by Southwest’s failure to comply with the parties’
agreement.
On appeal SwiftAir contends the trial court erred in
granting Southwest’s motion for summary adjudication because
the ADA did not preempt any of its causes of action. SwiftAir
also contends the court erred in denying motions for judgment
notwithstanding the verdict and for a new trial in which SwiftAir
argued the jury was required to award reliance damages on
SwiftAir’s breach of contract cause of action. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. SwiftAir Develops a Software Platform That
Southwest Decides Not To License
In 2010 SwiftAir was beginning to develop a software
platform that would allow airplane passengers to purchase, while
2
in flight, coupons and vouchers the passengers could use at
restaurants and other local merchants in their destination cities.
Later that year Southwest expressed an interest in evaluating
the software platform for use on its flights.
In August 2011 SwiftAir and Southwest entered into a
“Beta Test Agreement” in which Southwest agreed to evaluate
the software platform by testing it for eight weeks on some of
Southwest’s WiFi-enabled aircraft, to report to SwiftAir during
the testing period on the software’s performance, and to notify
SwiftAir within 30 days after the testing period whether
Southwest intended to use the software “on an extended basis.”
The agreement also provided that, in the event Southwest
“elect[ed] to continue use” of the software platform, Southwest
and SwiftAir would “enter into good faith discussions prior to the
termination of the Initial Term [of testing] to negotiate a full
license agreement.” The parties later amended the Beta Test
Agreement to extend the period of testing to 24 weeks, from
September 15, 2011 through March 28, 2012. Installing the
software platform on Southwest’s planes also required SwiftAir to
enter into an agreement with the company that operated
Southwest’s inflight WiFi service, Row 44, Inc.
At the end of the testing period, Southwest had not decided
whether to license SwiftAir’s software platform, but for a time
Southwest continued “to work toward some arrangement
whereby the SwiftAir product would be refined and deployed
ultimately to Southwest planes.” In the end, however, Southwest
decided not to license SwiftAir’s software platform.
3
B. SwiftAir Files This Action
In August 2014 SwiftAir filed this action against Southwest
and Row 44.1 In the operative first amended complaint SwiftAir
asserted causes of action against Southwest for: (1) breach of
contract and the covenant of good faith and fair dealing,
(2) quantum meruit, (3) quantum valebant,2 (4) restitution/unjust
enrichment, (5) unfair competition, (6) misappropriation of trade
secrets, (7) interference with prospective economic advantage,
(8) breach of fiduciary duty, (9) fraudulent concealment,
(10) promissory fraud, (11) intentional interference with
contractual relations, and (12) conspiracy.
Southwest filed a motion for summary judgment or, in the
alternative, summary adjudication, arguing, among other things,
that “almost all of” SwiftAir’s causes of action were preempted by
the ADA. The trial court agreed the ADA preempted all of
SwiftAir’s causes of action except for the first—for breach of
contract (which included a claim for breach of the covenant of
good faith and fair dealing)—and the court granted Southwest’s
1 Row 44 is no longer a party to this appeal.
2 The “common count of quantum valebant [is] for the
reasonable value of goods sold and delivered.” (Weitzenkorn v.
Lesser (1953) 40 Cal.2d 778, 792; see Lake v. Wyatt Earp
Enterprises, Inc. (1962) 210 Cal.App.2d 366, 370 [“‘The existence
of a contract implied in law under a quantum valebant count
depends upon whether the defendant “has used for its benefit any
property of [plaintiff] in such manner and under such
circumstances that the law will impose a duty of compensation
therefor.”’”]; 4 Witkin, Cal. Procedure (2021 supp.) Pleading,
§ 573 [“The count on quantum valebant is similar to that on
quantum meruit . . ., except that it seeks recovery of the
reasonable value of goods sold.”].)
4
motion for summary adjudication on all causes of action but that
one. On a motion by Southwest for reconsideration, the court
granted summary adjudication on the portion of the first cause of
action that alleged breach of the covenant of good faith and fair
dealing.
The parties tried SwiftAir’s remaining cause of action to a
jury. As relevant to this appeal, that cause of action rested on
SwiftAir’s allegation Southwest breached the Beta Test
Agreement by not entering into good-faith discussions to
negotiate a full licensing agreement and by not timely removing
SwiftAir’s software platform from Southwest’s planes after the
testing period. The jury found that Southwest failed to comply
with the Beta Test Agreement (in an unspecified manner), but
that Southwest’s failure to do so did not harm SwiftAir.
Consequently, the jury did not award SwiftAir any damages.
SwiftAir filed motions for judgment notwithstanding the
verdict and for a new trial, contending the jury, having found
Southwest breached the Beta Test Agreement, should have
awarded SwiftAir “at least $878,000 in damages for the monies
SwiftAir spen[t] developing” the software platform. The trial
court denied the motions. SwiftAir timely appealed from the
judgment. (See Cal. Rules of Court, rule 8.108(b).)
DISCUSSION
A. The Trial Court Did Not Err in Granting Southwest’s
Motion for Summary Adjudication Based on ADA
Preemption
SwiftAir contends the trial court erred in granting
Southwest’s motion for summary adjudication on SwiftAir’s non-
5
contract causes of action. SwiftAir argues that, in ruling the
ADA preempted those causes of action, the court misinterpreted
the ADA’s preemption provision.
“We review a ruling on a motion for summary adjudication
de novo [citations] and ‘decide independently whether the facts
not subject to triable dispute warrant judgment for the moving
party as a matter of law.’” (Doe v. Lawndale Elementary School
Dist. (2021) 72 Cal.App.5th 113, 124.) We also review questions
of law, including statutory interpretation, de novo. (Lozano v.
City of Los Angeles (2022) 73 Cal.App.5th 711, 723.)
1. ADA Preemption
In 1978 “Congress enacted the ADA, which sought to
promote ‘efficiency, innovation, and low prices’ in the airline
industry through ‘maximum reliance on competitive market
forces and on actual and potential competition.’” (Northwest, Inc.
v. Ginsberg (2014) 572 U.S. 273, 280 (Ginsberg); see 49 U.S.C.
§ 40101(a)(6), (12)(A).) The ADA “included a pre-emption
provision in order to ‘ensure that the States would not undo
federal deregulation with regulation of their own.’ [Citation.] In
its current form, this provision states that ‘a State, political
subdivision of a State, or political authority of at least 2 States
may not enact or enforce a law, regulation, or other provision
having the force and effect of law related to a price, route, or
service of an air carrier that may provide air transportation
under this subpart.’” (Ginsberg, at p. 280; see 49 U.S.C.
§ 41713(b)(1).)
Interpreting the ADA’s preemption provision in Morales v.
Trans World Airlines, Inc. (1992) 504 U.S. 374 [112 S.Ct. 2031,
6
119 L.Ed.2d 157] (Morales),3 the United States Supreme Court
held preemption applied to any state enforcement action “having
a connection with, or reference to, airline ‘rates, routes, or
services.’” (Id. at p. 384; see id. at pp. 383, 391 [ADA precludes
states from using their consumer protection laws to enforce
guidelines on fare advertising]; see also Ginsberg, supra, 572 U.S.
at p. 284 [under Morales a claim “relates to” an air carrier’s
prices, routes, or services “if it has ‘a connection with, or
reference to’” them].) The Supreme Court observed that the
phrase “relating to” in the ADA preemption provision expressed
“a broad pre-emptive purpose.” (Morales, at p. 383.) The
Supreme Court acknowledged, however, that some state actions,
such as “state laws against gambling and prostitution as applied
to airlines,” “‘may affect [airline fares] in too tenuous, remote, or
peripheral a manner’ to have pre-emptive effect.” (Id. at p. 390.)
The Supreme Court further interpreted the scope of ADA
preemption in American Airlines, Inc. v. Wolens (1995) 513 U.S.
219 [115 S.Ct. 817, 130 L.Ed.2d 715] (Wolens). There, the
plaintiffs alleged in an Illinois state court action that changes to
3 At the time of that decision, the ADA’s preemption
provision read, in relevant part: “‘No State . . . shall enact or
enforce any law, rule, regulation, standard, or other provision
having the force and effect of law relating to rates, routes, or
services of any air carrier . . . .’” (American Airlines, Inc. v.
Wolens (1995) 513 U.S. 219, 222-223 [115 S.Ct. 817, 130 L.Ed.2d
715]; see Morales, supra, 504 U.S. at pp. 378-379.) In 1994
Congress revised this provision to read, in relevant part: “[A]
State . . . may not enact or enforce a law, regulation, or other
provision having the force and effect of law related to a price,
route, or service of an air carrier . . . .” (Wolens, at p. 223, fn. 1.)
“Congress intended the revision to make no substantive change.”
(Ibid.)
7
an airline’s frequent flyer program violated state consumer
protection laws and constituted breach of contract. (Id. at
pp. 224-225.) The Illinois Supreme Court concluded that the
ADA did not preempt the state laws because the frequent flyer
program was “not ‘essential,’ [citation] but merely ‘peripheral to
the operation of an airline,’” and that therefore the plaintiffs’
claims related to the airline’s rates, routes, or services “only
‘tangentially’ or ‘tenuously.’” (Wolens, at p. 226.) The United
States Supreme Court, observing that Morales, supra, 504 U.S.
374 “does not countenance . . . separation of matters ‘essential’
from matters unessential to airline operations,” reversed the
Illinois Supreme Court’s judgment as it related to the consumer
protection law claims, holding the ADA preempted them.
(Wolens, at p. 226.) But the Supreme Court in Wolens affirmed
the judgment as it related to the breach of contract claims, which
it held were not preempted. (Ibid.) The Supreme Court stated it
did “not read the ADA’s preemption clause . . . to shelter airlines
from suits alleging no violation of state-imposed obligations, but
seeking recovery solely for the airline’s alleged breach of its own,
self-imposed undertakings.” (Wolens, at p. 228.)
In Rowe v. New Hampshire Motor Transport Assn. (2008)
552 U.S. 364 [128 S.Ct. 989, 169 L.Ed.2d 933] (Rowe) the United
States Supreme Court applied its analysis of the ADA’s
preemption provision in Morales to interpret a similar
preemption provision in the Federal Aviation Administration
Authorization Act, concluding the latter provision preempted
provisions of a Maine law regulating the delivery of tobacco to
customers within the state. (See Rowe, at pp. 367-368, 370-371.)
The Supreme Court in Rowe observed: “Morales said that federal
law might not pre-empt state laws that affect fares in only a
8
‘tenuous, remote, or peripheral . . . manner,’ such as state laws
forbidding gambling. [Citation.] But the Court did not say
where, or how, ‘it would be appropriate to draw the line,’ for the
state law before it did not ‘present a borderline question.’” (Rowe,
at p. 371.)
“Taken together, Morales, Wolens, and Rowe stand for the
proposition that for a claim to be preempted by the ADA, ‘“two
things must be true[:] (1) the claim must derive from the
enactment or enforcement of state law, and (2) the claim must
relate to airline rates, routes, or services, either by expressly
referring to them or by having a significant economic effect upon
them.”’” (Tanen v. Southwest Airlines Co. (2010) 187 Cal.App.4th
1156, 1166-1167 (Tanen); see All World Professional Travel
Services, Inc. v. American Airlines, Inc. (C.D.Cal. 2003)
282 F.Supp.2d 1161, 1168 (All World).) More recently, in
Ginsberg, supra, 572 U.S. 273 the United States Supreme Court
held the ADA’s preemption provision applies not “only to
legislation enacted by a state legislature and regulations issued
by a state administrative agency,” but also to “state common-law
rules.” (Ginsberg, at p. 281; see ibid. [“state common-law rules
fall comfortably within the language of the ADA pre-emption
provision”].) Specifically, the Supreme Court held the ADA
preempted the plaintiff’s state-law claim that, in terminating his
membership in a frequent flyer program, the airline in question
breached the implied covenant of good faith and fair dealing.
(Ginsberg, at pp. 278, 289.)
9
2. The ADA Preempted SwiftAir’s Non-contract
Causes of Action
Southwest argues the ADA preempts SwiftAir’s non-
contract causes of action because those causes of action, in
alleging SwiftAir developed its software platform for inflight use
by Southwest’s passengers, “expressly refer to” Southwest
“services”—specifically, to Southwest’s provision of “in-flight
entertainment” and “in-flight wireless internet access” to its
passengers. SwiftAir does not dispute that its non-contract
causes of action expressly refer to Southwest’s provision of
inflight entertainment and wireless internet access,4 but argues
these are not “services” within the meaning of the ADA’s
preemption provision.
SwiftAir relies heavily on Charas v. Trans World Airlines,
Inc. (9th Cir. 1998) 160 F.3d 1259 (Charas). There, the Ninth
Circuit held that “Congress used the word ‘service’ in the phrase
‘rates, routes, or service’ in the ADA’s preemption clause to refer
to the prices, schedules, origins and destinations of the point-to-
point transportation of passengers, cargo, or mail.” (Charas, at
p. 1261.) According to the court in Charas: “In the context in
which it was used in the Act, ‘service’ was not intended to include
an airline’s provision of in-flight beverages, personal assistance to
passengers, the handling of luggage, and similar amenities.”
(Ibid.; see id. at pp. 1261-1262, 1266 [the ADA did not preempt
“run-of-the-mill personal injury claims” relating to inflight
provision of beverages, post-flight passenger assistance, and
luggage handling].) SwiftAir argues that, under Charas, the
inflight entertainment and wireless internet access Southwest
4 Nor does SwiftAir dispute that its non-contract causes of
action derive from the enactment or enforcement of state law.
10
provided its passengers are “amenities,” not “services” within the
meaning of the ADA’s preemption provision.
As SwiftAir grudgingly acknowledges in a footnote,
however, the Charas court’s interpretation of the term “service”
in the ADA’s preemption provision is the minority view among
the federal circuits. (See Air Transport Assn. of America, Inc. v.
Cuomo (2d Cir. 2008) 520 F.3d 218, 223 (Air Transport)
[collecting cases].) Only the Third Circuit has followed Charas.
(Ibid.; see Taj Mahal Travel, Inc. v. Delta Airlines, Inc. (3d Cir.
1998) 164 F.3d 186, 194.) The Fifth Circuit in Hodges v. Delta
Airlines, Inc. (5th Cir. 1995) 44 F.3d 334 (Hodges) articulated the
majority view: “‘Services’ generally represent a bargained-for or
anticipated provision of labor from one party to another. . . .
Elements of the air carrier service bargain include items such as
ticketing, boarding procedures, provision of food and drink, and
baggage handling, in addition to the transportation itself. These
matters are all appurtenant and necessarily included with the
contract of carriage between the passenger or shipper and the
airline. It is these [contractual] features of air transportation
that we believe Congress intended to de-regulate as ‘services’ and
broadly to protect from state regulation.” (Id. at p. 336.) The
First, Seventh, and Eleventh Circuits have joined the Fifth
Circuit in adopting the Hodges definition of “services.”
(See Bower v. Egyptair Airlines Co. (1st Cir. 2013) 731 F.3d 85,
94-95 (Bower); Travel All Over the World, Inc. v. Kingdom of
Saudi Arabia (7th Cir. 1996) 73 F.3d 1423, 1433 (Travel All Over
the World); Koutsouradis v. Delta Air Lines, Inc. (11th Cir. 2005)
427 F.3d 1339, 1343-1344.)
In addition, while not explicitly adopting the Hodges
definition, the Fourth and Tenth Circuits have cited it in
11
determining that airline activities under consideration were
“services” within the meaning of the ADA preemption provision.
(See Smith v. Comair, Inc. (4th Cir. 1998) 134 F.3d 254, 259
[“boarding procedures” are a service]; Arapahoe County Public
Airport Authority v. F.A.A. (10th Cir. 2001) 242 F.3d 1213, 1222
[“transportation itself” is a service].) Similarly, the Eighth
Circuit has observed the Hodges definition is “[c]onsistent with”
the Supreme Court’s decision in Wolens, supra, 513 U.S. 219 and
has “assume[d] for the sake of analysis” it is correct. (Watson v.
Air Methods Corp. (8th Cir. 2017) 870 F.3d 812, 818.) And
remarking that the Ninth Circuit’s definition of “services” in
Charas is “inconsistent with” aspects of the Supreme Court’s
decision in Rowe, supra, 552 U.S. 364, the Second Circuit has
held that “[o]nboard amenities, regardless of whether they are
luxuries or necessities, still relate to airline service and fall
within the express terms of the preemption provision.” (Air
Transport, supra, 520 F.3d at p. 224; see id. at p. 222 [providing
“food, water, electricity, and restrooms to passengers during
lengthy ground delays” was a “service” within the meaning of the
preemption provision]; see also Bower, supra, 731 F.3d at p. 94
[the Supreme Court’s decision in Rowe “treated service more
expansively” and “forecloses the Charas interpretation of ‘service’
as a term closely related to prices and routes”].)5
5 Although several published California court of appeal
decisions discuss this split of authority among the federal courts
of appeals, the California decisions generally avoid taking a clear
position on the issue. (See, e.g., Tanen, supra, 187 Cal.App.4th at
pp. 1167-1169 [“What we find striking about the federal cases . . .
is not their differences, but their similarities.”]; Rubin v. United
Air Lines, Inc. (2002) 96 Cal.App.4th 364, 377 [“[w]e need not
12
The overwhelming weight of authority and the analysis in
those cases adopting the broader, Hodges definition of “services”
(see, e.g., Bower, supra, 731 F.3d at p. 94; Branche v. Airtran
Airways, Inc. (11th Cir. 2003) 342 F.3d 1248, 1257-1258
(Branche)) persuade us to apply that definition here. Among
other considerations, the definition is more consistent with what
the Supreme Court in Morales discerned to be the “broad pre-
emptive purpose” of the ADA’s preemption provision. (Morales,
supra, 504 U.S. at p. 383; see Branche, at p. 1257 [“as the
Supreme Court plainly explained in Morales, the ADA’s pre-
emption clause is properly afforded an extremely broad scope,”
and the “Ninth Circuit’s reading of ‘services,’ we believe, tends to
undermine this interpretive guideline”].) Moreover, “the Charas
interpretation skirts the long-recognized canon of avoiding
superfluousness” (Bower, at p. 94): If “service” in the phrase
“price, route, or service” means “the prices, schedules, origins and
destinations of the point-to-point transportation of passengers,
cargo, or mail” (Charas, supra, 160 F.3d at p. 1261), the word
adds little to what is already covered by “price” and “route.”
(See Bower, at p. 94 [“By narrowly interpreting ‘service’ to relate
to scheduling and ‘service to’ certain destinations, the Charas
opinion does little to distinguish ‘service’ from ‘route.’”].)
Providing inflight entertainment and wireless internet
access to passengers falls well within the Hodges definition of an
airline “service.” (See Lyn-Lea Travel Corp. v. American Airlines,
decide which of the competing definitions of ‘service’ most
accurately reflects Congress’s intent”]; but see id. at p. 376
[stating the court in Romano v. American Trans Air (1996)
48 Cal.App.4th 1637 “essentially adopted the so-called majority
view as expressed in the Hodges opinion”].)
13
Inc. (5th Cir. 2002) 283 F.3d 282, 289, fn. 11 [“‘preemption
extends to all of the economic factors that go into the provision of
the quid pro quo for [a] passenger’s fare, including . . .
entertainment’”]; David v. United Continental Holdings, Inc.
(D.N.J. Nov. 24, 2015, No. 2:15-cv-01926-SDW-LDW) 2015
WL 7573204, p. 3 [providing “in-flight DirectTV and Wi-Fi” is a
“service”]; Rosen v. Continental Airlines, Inc. (N.J. Super. Ct.
App. Div. 2013) 62 A.3d 321, 326 [“the provision of an airline
entertainment headset falls squarely within” the Hodges
definition of “service”].) SwiftAir does not suggest otherwise.
SwiftAir does suggest ADA preemption did not apply here
for the additional reason that Southwest “did not and could not
prove that SwiftAir’s claims would have a significant economic
effect on Southwest’s services.” But as cases cited by Southwest
explain, the ADA preempts a cause of action if it relates to an
airline’s prices, routes, or services “‘“either by expressly referring
to them or by having a significant economic effect upon them.”’”
(Tanen, supra, 187 Cal.App.4th at pp. 1166-1167, italics added;
accord, All World, supra, 282 F.Supp.2d at p. 1168.) After
appearing to concede this point in its opening brief,6 SwiftAir
6 There, SwiftAir argued: “As the Product [i.e., SwiftAir’s
software platform] does not expressly refer to any of Southwest’s
services, for ADA preemption to apply, Southwest must prove
that the Product has ‘a significant economic effect upon them.’”
Notably, this formulation mischaracterizes the requirements for
ADA preemption. The issue is whether a given “claim”—not
SwiftAir’s software platform—relates to airline prices, routes, or
services, by having a connection with or reference to them.
(Ginsberg, supra, 572 U.S. at p. 280.) The “facts underlying the
specific claim” determine whether it has that connection or
14
questions in its reply brief whether these cases correctly state the
law. They do. (See, e.g., S.C. Johnson & Son, Inc. v. Transport
Corp. of America, Inc. (7th Cir. 2012) 697 F.3d 544, 553; Branche,
supra, 342 F.3d at p. 1259; Parise v. Delta Airlines, Inc. (11th Cir.
1998) 141 F.3d 1463, 1465; Travel All Over the World, supra,
73 F.3d at p. 1431 [observing that the Supreme Court in Morales
“reasoned that, because the guidelines expressly referred to air
fares, ‘one cannot avoid the conclusion that . . . the guidelines
“relate to” airline rates,’” then found “[a]lternatively” that “even if
the guidelines were considered to refer to the advertising of fares,
and not directly to fares, such restrictions on advertising would
‘have the forbidden significant [economic] effect upon fares’”];
Giannopoulos v. Iberia Líneas Aéreas de España, S.A. (N.D.Ill.
2014) 17 F.Supp.3d 743, 751; Banga v. Gundumolgula (E.D.Cal.
July 19, 2013, No. 2:13-cv-00667-MCE-CKD) 2013 WL 3804046,
p. 2; Chrissafis v. Continental Airlines, Inc. (N.D.Ill. 1996)
940 F.Supp. 1292, 1297; Leonard v. Northwest Airlines, Inc.
(Minn.Ct.App. 2000) 605 N.W.2d 425, 429-430 [the Supreme
Court in Morales “reasoned that the advertising provisions
related to fares within the meaning of the ADA not only because
they expressly referred to them, but also because they reduced
the incentive to price competitively”].) SwiftAir, moreover, cites
no authority to the contrary. Because SwiftAir’s non-contract
causes of action expressly referred to Southwest services, the
ADA preempted them without Southwest having to demonstrate
a significant economic impact on those services. The trial court
reference. (Smith v. Comair, Inc., supra, 134 F.3d at p. 259; see
Travel All Over the World, supra, 73 F.3d at p. 1433; Lopez v.
Amazon Logistics, Inc. (N.D.Tex. 2020) 458 F.Supp.3d 505, 513.)
15
did not err in granting Southwest’s motion for summary
adjudication.
B. The Trial Court Did Not Err in Denying SwiftAir’s
Motions for Judgment Notwithstanding the Verdict
and for a New Trial
SwiftAir also contends the trial court erred in denying its
motions for judgment notwithstanding the verdict and for a new
trial because the jury found Southwest breached the Beta Test
Agreement, uncontroverted evidence established “SwiftAir
expended $878,000 developing the Beta Test product,” and
therefore the jury was required to award SwiftAir $878,000 in
“reliance damages” on its breach of contract cause of action. The
trial court did not err in denying the motions.
The parties agree the trial court correctly ruled Texas law
governed the Beta Test Agreement. To prevail on a breach of
contract claim under Texas law, “a party must establish the
following elements: (1) a valid contract existed between the
plaintiff and the defendant; (2) the plaintiff tendered
performance or was excused from doing so; (3) the defendant
breached the terms of the contract; and (4) the plaintiff sustained
damages as a result of the defendant’s breach.” (Toth v. Sears
Home Improvement Products, Inc. (Tex.Ct.App. 2018) 557 S.W.3d
142, 157; see Alliantgroup, L.P. v. Feingold (S.D.Tex. 2011)
803 F.Supp.2d 610, 623.) “The last element encompasses a
causation requirement.” (Toth, at p. 157.)
Texas law does permit a plaintiff on a breach of contract
action to recover “reliance damages,” which “are similar to out-of-
pocket damages” and have the purpose of restoring “the status
quo at the time before the contract was made.” (Geis v. Colina
16
Del Rio, LP (Tex.Ct.App. 2011) 362 S.W.3d 100, 112; see Jerry L.
Starkey, TBDL, L.P. v. Graves (Tex.Ct.App. 2014) 448 S.W.3d 88,
109, fn. 28 [“In a contract claim, out-of-pocket damages protect a
reliance interest by restoring to the non-breaching party the
expenditures made in reliance on the contract.”].) Still, as the
last element of the cause of action requires, “the breach must
have caused those damages.” (Jerry L. Starkey, at p. 109; see id.
at pp. 109-110 [no evidence the defendant’s breach caused the
plaintiff to sustain out-of-pocket loss]; Bechtel Corp. v. CITGO
Products Pipeline Co. (Tex.Ct.App. 2008) 271 S.W.3d 898, 926
[reliance damages protect a promisee’s “interest in being
reimbursed for loss caused by reliance on the promise”].) Here,
the jury found SwiftAir did not meet its burden of proving
Southwest’s breach of the Beta Test Agreement caused SwiftAir’s
alleged damages.7
Ordinarily, we review the denial of a motion for judgment
notwithstanding the verdict for substantial evidence (see Brown
v. City of Sacramento (2019) 37 Cal.App.5th 587, 598 [“‘As in the
trial court, the standard of review is whether any substantial
evidence—contradicted or uncontradicted—supports the jury’s
conclusion.’”]) and the denial of a motion for new trial for abuse of
discretion (see Crouch v. Trinity Christian Center of Santa Ana,
Inc. (2019) 39 Cal.App.5th 995, 1018). But where, as here, “‘the
issue on appeal turns on a failure of proof at trial, the question
for a reviewing court becomes whether the evidence compels a
finding in favor of the appellant as a matter of law. [Citations.]
Specifically, the question becomes whether the appellant’s
7 Asked in the special verdict form whether SwiftAir was
“harmed by Southwest’s failure to comply with the Beta Test
Agreement,” the jury answered “No.”
17
evidence was (1) “uncontradicted and unimpeached” and (2) “of
such a character and weight as to leave no room for a judicial
determination that it was insufficient to support a finding.”’”
(Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc.
(2011) 196 Cal.App.4th 456, 466; see Phipps v. Copeland Corp.
LLC (2021) 64 Cal.App.5th 319, 333 [where “‘“the trier of fact has
expressly or implicitly concluded that the party with the burden
of proof did not carry the burden and that party appeals,”’
generally ‘“the question for a reviewing court becomes whether
the evidence compels a finding in favor of the appellant as a
matter of law”’”].)
SwiftAir does not address the issue of causation, let alone
cite evidence compelling a finding in its favor on the issue as a
matter of law. Therefore, it has failed to demonstrate that the
jury was required to award it $878,000 in reliance damages or
that the trial court erred in denying SwiftAir’s posttrial motions
grounded on that contention.
18
DISPOSITION
The judgment is affirmed. Southwest is to recover its costs
on appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
FEUER, J.
19
Filed 4/5/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
SWIFTAIR LLC, B303314
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC122964)
v.
ORDER MODIFYING OPINION,
SOUTHWEST AIRLINES CO., AND CERTIFYING OPINION FOR
PUBLICATION [NO CHANGE IN
Defendant and Respondent.
APPELLATE JUDGMENT]
THE COURT:
The opinion in this case filed March 11, 2022 is modified as follows:
On page 2, paragraph 2, the last sentence is deleted and replaced with:
Agreeing with the vast majority of federal cases that have addressed the
preemption issue, and with Texas law that (like California law) requires
causation to recover reliance damages, we affirm.
The opinion in this case filed March 11, 2022 was not certified for
publication. Because the opinion meets the standards for publication
specified in California Rules of Court, rule 8.1105(c), the respondent’s request
for publication under California Rules of Court, rule 8.1120(a), are granted.
IT IS HEREBY CERTIFIED that the opinion meets the standards for
publication specified in California Rules of Court, rule 8.1105(c); and
ORDERED that the words “Not to be Published in the Official Reports”
appearing on page 1 of said opinion be deleted and the opinion herein be
published in the Official Reports.
This order does not change the appellate judgment.
PERLUSS, P. J. SEGAL, J. FEUER, J.
2