Articles from April 2021

COVID-19 Airline Refund Cases Survive Headwinds

Shortly after the outbreak of the COVID-19 pandemic last year, some consumers sued airlines for refusing to refund the money they spent on flights that their airlines did not provide. We had reported on some of these cases, including Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn., filed April 13, 2020) (“Bombin”), and Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV et al., No. 20- 02215 (N.D. Ill., filed May 8, 2020) (“Levey”). A year later, we have decided to check in on the progress of these airline refund cases.

Bombin is a typical example; in Bombin, the plaintiffs booked flights to Cuba and Arizona. The flight to Cuba was cancelled and the flight to Arizona was rescheduled three times. Both of the plaintiffs sought refunds from Southwest, and were denied. Instead, Southwest offered the plaintiffs travel credits toward future flights in lieu of refunds. The plaintiffs then filed a class action against Southwest alleging breach of contract.

The Bombin plaintiffs’ breach of contract class action recently survived a motion to dismiss. Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn. March 29, 2021) (slip op. available here). In its motion, Southwest argued that the claim should be dismissed because its Contract of Carriage is unambiguous and vests Southwestern with discretion to issue fare credits instead of refunds. Id. at 10. The plaintiffs argued that the Contract of Carriage is ambiguous, stating that it can reasonably be interpreted to provide customers with the right to choose a refund. The court agreed with the plaintiffs. Acknowledging “the labyrinthine nature of the Contract of Carriage,” the district court held that the plaintiffs plausibly alleged a breach of contract claim under the unclear contract because “Southwest failed to give Plaintiffs the option of a refund.” Id. at 10, 13.

The Bombin court also rejected Southwest’s argument that the plaintiffs’ breach of contract claim is preempted by the Airline Deregulation Act (“ADA”). Id. at 13. The ADA “stops States from imposing their own substantive standards with respect to rates, routes, or services, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated.” Am. Airlines v. Wolens, 513 U.S. 219, 232-233, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995). Because the plaintiffs’ claim is based on Southwest’s alleged breach of its own Contract of Carriage (i.e., “a term the airline itself stipulated”), the court held that Southwest’s preemption argument fails under Wolens.

Other courts have reached similar conclusions. In Levey, the plaintiff alleged the airline canceled flights amid the pandemic and refused to refund travelers or let them rebook their flights without penalty. The airline moved to dismiss, arguing (among other things) that it did not breach its Contract of Carriage and that the plaintiff’s claims are preempted by the ADA. As in Bombin, the district court declined to dismiss the breach of contract claim at the pleading stage, holding that it is plausible that the plaintiff was entitled to a prompt refund of her airfare under the terms of the Contract of Carriage. Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV, et al., No. 20- 02215 (N.D. Ill., March 29, 2021), at 12. The court also rejected the airline’s preemption argument, citing the “Wolens exception” to ADA preemption, discussed in Bombin. Id. at 7.

In another case filed after the onset of the pandemic, the plaintiffs alleged that British Airways breached its Contract of Carriage by failing to provide them with refunds after their flights were cancelled. Ide, et al. v. British Airways, PLC, No. 20-3542 (S.D.N.Y., March 26, 2021) at 1 (slip op. available here). First, the plaintiffs alleged that the airline offered them travel vouchers instead of refunds to which they are entitled under the contract. Second, the plaintiffs alleged that British Airways actually frustrated their attempts to obtain refunds: “[B]y removing refund claim forms from its website and channeling their refund requests through overburdened and inadequate call centers, British Airways frustrated their ability to secure refunds.” Id. at 13-14. British Airways moved to dismiss. The district court found that the plaintiffs plausibly alleged breaches of contract on both theories. Also, as in the other cases, the court rejected the airline’s preemption argument based on the “Wolens exception.” Id. at 14-15.

One year since March 2020, these airline refund cases have set the course. They have generally been successful in alleging breaches of the airlines’ Contract of Carriage and evaded preemption under the ADA based on the Wolen exception. We will check in with them again when there are further developments.

Authored by:
Robert Friedl, Senior Counsel

DiCarlo v. MoneyLion, Inc.: Arbitration Agreement Allowing Public Injunctive Relief Dodges The McGill Rule, Says 9th Cir.

In McGill v. Citibank, N.A., 2 Cal.5th 945 (2017), the California Supreme Court held that under California law, a provision in any contract purporting to waive a party’s right to seek public injunctive relief in any forum is contrary to public policy and unenforceable. Id. at 952. The legal requirement that contracts must allow public injunctive relief is known as the McGill rule. DiCarlo v. MoneyLion, Inc., 9th Cir. Feb. 19, 2021 (“DiCarlo”). Slip op. at 6 (available here). The McGill rule has provided consumer plaintiffs with a stalwart defense against being compelled to arbitration. In DiCarlo, the Ninth Circuit held that an arbitration agreement that allows a litigant “all remedies” available in an individual lawsuit does not violate the rule.

In DiCarlo, the defendant operated a smartphone app that provided financial services to its customers. The services included a product called the MoneyLion Plus program, which offered a credit-builder loan. The plaintiff joined the program and signed a membership agreement, but fell behind on her fees and loan payments. Unable to cancel her membership without paying off the loan, the plaintiff filed a putative class action under California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and Consumers Legal Remedies Act (“CLRA”). Slip op. at 3-4.

The defendant moved to compel the plaintiff’s claims to arbitration under an arbitration provision contained in the membership agreement. DiCarlo opposed the motion based on the McGill rule, arguing that the provision violated California law by prohibiting public injunctive relief. Slip op. at 5. The defendant argued that its arbitration provision, in fact, allowed public injunctive relief. Id. The Ninth Circuit agreed.

The defendant’s arbitration provision “‘authorize[s] the arbitrator to ‘award all [injunctive] remedies available in an individual lawsuit under [California] law.’” Slip. op. at 7. McGill has made clear that a litigant can seek public injunctive relief in an individual lawsuit under the UCL and FAL. Id. at 14 (citing McGill, 2 Cal.5th at 959). Public injunctive relief is typically available in consumer arbitrations, according to the Ninth Circuit. Id. (citing Blair v. Rent-A-Ctr., Inc., 928 F.3d 819, 829 (9th Cir. 2019)). Thus, the court of appeals concluded, the “all remedies” clause in the arbitration provision allowed the plaintiff to seek public injunctive relief in arbitration. Furthermore, the Ninth Circuit held that a plaintiff need not act as a private attorney general or represent others in order to obtain a public injunction.

Authored by:
Robert Friedl, Senior Counsel