Posts belonging to Category New Filings

Just as water only flows downhill, money seems to only flow in one direction—out of the wallets of consumers and into the coffers of corporations, nary to return. This has never been so evident as during the COVID-19 crisis, in which hundreds of thousands of consumers, taken unaware by the crisis, purchased pre-paid services that they now cannot use, or dare not to use, because of the pandemic. Although these purchases are either now worthless, or literally “worth less,” many businesses are recalcitrant to refund money for bargained-for services that they are now unable to provide.

The difficulty in obtaining “COVID refunds” is an issue that permeates every strata of pre-paid consumer services. Prior to March of 2020, consumers paid money in advance for professional sporting events, concert tickets (e.g. In re: StubHub Refund Litig., MDL No. 2951), hotels, vacation rentals, cruises, summer camps, youth sports programs, and college tuition. See Latisha Watson v. The University of Southern California, et al., No. 20-04107 (C.D. Cal., filed May 5, 2020) (seeking refunds for student tuitions for the Spring 2020 academic semester due to COVID-19). The list goes on. Then there is the airline industry.

All of the major airlines have enacted COVID-related refund and flight change policies. However, some consumers allege in recently filed actions that their chosen airlines refused to refund money for air travel that they failed to deliver. A case in point is Southwest Airlines customer Adrian Bombin, who purchased two tickets to Havana, Cuba, in February 2020. According to Bombin, Southwest cancelled the flights and could not offer any other comparable flight to Cuba. Still, the plaintiff was not given a refund, but was only offered a credit for use on a future flight. See Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn., filed April 13, 2020). Other consumers have filed similar actions. See Rudolph v. United Airlines Holdings Inc. et al., No. 20-02142 (N.D. Ill., filed April 6, 2020) (alleging United denied a refund for cancelled flight, and offered only rebooking or ticket credit for travel within one year); Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV et al., No. 20- 02215 (N.D. Ill., filed May 8, 2020) (alleging Mexican airline Volaris canceled several of its U.S. flights to Mexico amid the coronavirus pandemic and refused to refund its travelers or let them rebook their flights without penalty).

The problem is so widespread that the U.S. Department of Transportation (DOT) issued an enforcement notice on April 3, 2020, clarifying airlines’ refund obligations in the context of the COVID-19 public health emergency. See U.S. Department of Transportation Issues Enforcement Notice Clarifying Air Carrier Refund Requirements, Given the Impact of COVID-19. Nevertheless, some airlines remain recalcitrant to provide refunds, as is evidenced by the allegations in these later-filed class actions.

Although these airlines contend that they have operated within the law, it is evident that the opportunity or ability of most consumers to engage in air travel has all but been severely curtailed or eliminated due to the pandemic. Offering travel credit is not a solution under these circumstances. Consumers are subject to numerous travel restrictions, possible quarantine on arrival, a risk of infection through close contact with other air travelers, and now, unpredictable flight cancellations that risk loss of airfare in many cases. The possibility that travelers may someday receive the air travel is not a solution in these unprecedented times. Sometimes “someday” means never.

We plan to keep the filed cases Bombin, Rudolph, and Levey on our radar and see where they land.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

It may soon be up to the California Supreme Court to determine the applicable scope of AT&T Mobility v. Concepcion (131 S. Ct. 1740 (2011)) in California.  Specifically at issue is the Second Appellate District’s ruling in Iskanian, which created multiple conflicts within California courts.  Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012) (available here).  As expected, the plaintiffs’ attorneys have filed a Petition for Review (available here), arguing the necessity of California Supreme Court intervention to resolve the numerous conflicting decisions.

The Petition for Review casts the Iskanian decision as a distinct outlier in California law, focusing on several new splits of authority within the California courts engendered by the Iskanian decision and requiring Supreme Court review.  Foremost, the Petitioners point out that, in Iskanian, the Second Appellate District, Division Two, rejected Brown v. Ralphs, 197 Cal. App. 4th 489 (2011), which was decided by Division Five of the same court just one year ago.  Whereas Brown held that PAGA waivers are outside the scope of the Supreme Court’s Concepcion decision, Iskanian disagreed, extending the scope of FAA preemption considerably to cover PAGA claims based on violations of employees’ workplace rights.  By ruling as it did, the Petition argues, the Iskanian court has ignored the California legislature, effectively “dismantle[ing] the entire statutory design of PAGA.”  Petition at 4.

The Petitioners also emphasize that the Iskanian decision, by purporting to invalidate the California Supreme Court’s Gentry decision (Gentry v. Super. Ct., 42 Cal. 4th 443 (2007)), upends years of California law that had treated employers’ arbitration agreements essentially as “choice-of-forum” clauses that in no case could force employees to give up their substantive rights.  Petition at 4.  The Petition asserts that Iskanian also disregards United States Supreme Court decisional law on this point, noting that the high Court “has never endorsed the notion that ‘arbitration agreements must be enforced according to their terms’ regardless of whether enforcement would eviscerate a party’s substantive rights, as the Court of Appeal did here.”  Petition at 3.  Moreover, the Petition contends that Iskanian usurps the California Supreme Court’s role by attempting to overrule the Gentry decision, a step that cannot be taken by an intermediate appellate court.  Petition at 5-6.

The Petition vividly evokes the practical considerations at stake: “If this decision takes root, California employers will demand arbitration not because of its traditional benefits of speed, cost-effectiveness and informality, but because it is a means to make any contract enforceable, thereby avoiding any liability for violations of California law.”  Petition at 8.

The Petition is expected to attract considerable amicus interest on both sides.

The approval of a $90 million settlement late last year between investors and the embattled M.F. Global company (see Rubin v. MF Global, No. 1:08-cv-02233 (S.D. N.Y. Nov. 18, 2011) (final order and judgment)) appears to have been only the beginning of litigation aimed at the bankrupt derivatives broker.  Last week, farmers representing as many as 38,000 putative class members filed a lawsuit against MF Global and others, including the brokerage house J.P. Morgan, and auditors PricewaterhouseCoopers.  The plaintiffs allege that their accounts were among those raided by M.F. Global in an effort to conceal its massive losses.  See Complaint, Klinker v. J.P. Morgan Chase & Co., No. 9:12-cv-00005 (D. Mont. Jan. 9, 2012) (available here).

The contracts between the putative class members and M.F. Global provided that customer funds would not be commingled with the firm’s monies.  Id. at ¶¶ 8-13.  However, the plaintiffs allege that MF Global lost huge sums in bad investments on European government bonds, and tried to cover its losses by stealing from segregated customer accounts.  Id. at ¶¶ 80-85.  MF Global then purchased additional, distressed European assets with clients’ money.  Id. at ¶ 53.

The Klinker matter is expected to receive considerable media coverage in part because the plaintiffs named MF Globale’s former CEO, John Corzine, as a defendant.  Id. at ¶¶ 26, 37.  Mr. Corzine served as a United States Senator from New Jersey from 2001 to 2006.

The U.S. Supreme Court’s Dukes v. Wal-Mart decision reversed certification of a class of approximately 1.5 million current and former Wal-Mart employees, partly on grounds that litigating the claims of a class so large would be unwieldy.  See Dukes v. Wal-Mart, 131 S. Ct. 2541, 2555-56 (2011) (“Even if [statistical proof] established (as it does not) a pay or promotion pattern that differs from the nationwide figures or the regional figures in all of Wal-Mart’s 3,400 stores, that would still not demonstrate that commonality of issue exists.”).  Now, despite that ruling, the California-based plaintiffs have filed a fourth amended complaint, which alleges sex discrimination against Wal-Mart, but only on behalf of a putative class of California employees.  See Plaintiffs’ Fourth Amended Complaint, Dukes v. Wal-Mart, No. 3:01-cv-02252 (N.D. Cal. October 27, 2011) (available here).  The named plaintiffs seek to represent approximately 90,000 prospective class members.  Id. at ¶¶ 15-17.

Still captioned Dukes v. Wal-Mart, the newly filed action could become a model for additional, regional lawsuits against Wal-Mart.  The plaintiffs’ attorneys in the California action have indicated their intention to file similar class actions in other states.  This suggests a potential new trend in class actions, marked by narrower class definitions more conducive to identifiable and answerable common questions.  This could also pave the way for more targeted “mass actions” that disaggregate class actions into simultaneously pending individual actions.