The U.S. District Court for the Eastern District of New York recently held that a passenger who endorsed an airline’s check offered in “full and final settlement” of her baggage claim could not later pursue damages in a lawsuit.1 The decision demonstrates how airlines can protect themselves from liability by clearly communicating with passengers when offering a pre-litigation settlement.
The passenger originally asserted the airline had lost items of her checked baggage during a flight from New York to Amsterdam. In response, the airline’s customer service representative mailed the passenger a letter offering the maximum damages allowable under the Montreal Convention, approximately $1,680, in “full and final settlement” of her claims. Enclosed with the letter was a check for the offered amount.
The passenger emailed the airline to protest that the amount was unsatisfactory, but subsequently deposited the check in her bank account. Days later, she filed a lawsuit, claiming over $26,000 in compensatory damages and over $1 million for emotional distress and punitive damages.
The Magistrate Judge assigned to the case recommended that the District Court grant the airline’s motion to dismiss on the basis that the passenger’s claims were barred under the common law doctrine of accord and satisfaction, which applies where there is a dispute as to an amount owed and one party knowingly accepts from the other an amount less than the sum claimed. The Magistrate Judge concluded that, by including the phrase “full and final settlement” in the letter offering payment to the passenger, the airline had put her on notice that cashing the enclosed check would settle her claim. Despite her dissatisfaction with the amount offered, she knowingly accepted the settlement when she deposited the check, thereby precluding any future recovery.
The passenger objected to the Magistrate Judge’s recommendation, pointing to a subsequent email protesting the offered amount and arguing that she had cashed the check under protest. The District Court Judge rejected the contention, holding that whether she believed she was settling her claim was irrelevant because she deposited the settlement check without explicitly reserving her rights. Accordingly, the Court dismissed the case.
This case follows a line of recent U.S. decisions dismissing claims that were filed after passengers accepted payment accompanied by correspondence using “full and final settlement” language. Last year the Eastern District of New York decided a similar case, dismissing a passenger’s $5,795 claim for lost baggage filed after he had deposited the airline’s check enclosed in a letter offering $1,065 as “full and final settlement.”2 The District Court held that the doctrine of accord and satisfaction is recognized under both federal and New York state law and required dismissal of the claim.
In 2001, a federal appeals court applied the doctrine of accord and satisfaction in upholding the dismissal of a class action brought on behalf of United Airlines passengers.3 The United passengers asserted baggage loss, damage, or delay claims against the airline, but all had received and deposited checks for $635 bearing the caption “By endorsement of this check payee(s) agree that the amount shown is accepted in full and complete settlement of any and all claims which payee(s) may have against United Air Lines, Inc.” The appellate court held that this language, which was printed above the signature line of the checks and accompanied by a letter explaining that the amount offered represented the airline’s maximum liability under the Warsaw Convention, effectively notified the passengers that depositing the checks would preclude further recovery.
U.S. Courts have consistently held that an airline’s offer of payment, sent to a passenger in the form of a check and accompanied by a clear explanation that the amount represents “full and final settlement” will, if deposited by the passenger, protect the airline from further liability. Clear and unequivocal use of this language when handling passenger claims can ensure that an airline’s initial settlement payment actually disposes of a claim.
1 Sade Coppens v. Aer Lingus Limited, No. 14-CV-6597 (JFB) (AKT), 2015 WL 3885742 (E.D.N.Y. June 22, 2015).
2 Carrion v. United Airlines, Inc., No. 13-CV-4875 (NGG) (RER), 2014 WL 3756385 (E.D.N.Y. July 30, 2014).
3 Curtin v. United Airlines, Inc., 275 F.3d 88 (D.C. Cir. 2001).