Analysis

3 Types Of Suits Airlines Are Bracing For Post-Pandemic

By Linda Chiem
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Law360 (May 18, 2020, 8:54 PM EDT) -- Airlines are contending with a wave of pandemic-related litigation that will complicate recovery efforts as governments begin easing travel and stay-at-home restrictions.

Ticket refunds for canceled flights are a lightning-rod issue, triggering suits against most major carriers as well as two enforcement notices from the U.S. Department of Transportation warning airlines they're legally required to give refunds — not just vouchers or travel credits.

Meanwhile, some carriers have been accused of circumventing rules barring them from cutting payroll or reducing staffing levels before Sept. 30 in order to receive taxpayer-funded aid in the sprawling Coronavirus Aid, Relief, and Economic Security, or CARES, Act.

This represents the start of what could be a swell of consumer protection, breach of contract and other tort liability litigation that will make it more difficult to recover from more than two months of stay-at-home mandates that have decimated passenger volume and revenue, experts say.

"If airlines are acting reasonably to make their critical product available as best as possible under the circumstances, they should not face lawsuits as a result," Stinson LLP aviation litigation partner Roy Goldberg said. "The right to travel is a fundamental right, and it should not be effectively taken away by unfair targeting of the airline industry for civil liability where the airline has acted reasonably."

Here, Law360 examines the kinds of lawsuits that airlines can expect to see more of in the coming months.

Ticket Refund Suits

Desperate to conserve cash amid widespread flight cancellations, many carriers have defaulted to offering vouchers or credits for future travel instead of cash refunds, while others have made customers jump through hoops in order to secure refunds.

The confusion over legal obligations and outright frustration with their refusal to refund customers in many cases have boiled over into class actions against American Airlines, Delta Air Lines, United Airlines, Allegiant Air, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and various other carriers.

The DOT offered some clarity, issuing enforcement notices on April 3 and again on May 12 warning airlines they're required to refund passengers for flights that are canceled or significantly delayed. The European Commission also made clear on May 13 that they must give refunds for canceled flights.

Yet many airlines have defended their refund policies, saying they're stuck with two bad choices in an unprecedented global crisis: compound billions of dollars in losses by immediately paying out customer refunds, or stem the cash bleed with travel vouchers and stave off bankruptcy.

And as carriers continue to make tough cost-cutting decisions — such as modifying schedules or changing refund policies — they'll likely see more consumer protection lawsuits, according to Jennifer Trock, chair of Baker McKenzie's international commercial practice group and its global aviation group.

"Airlines must consider these changes in the context of their commercial obligations and various DOT regulatory requirements related to airline advertising, marketing and other consumer protection areas," she said. "Even where an airline's changes may comply with the letter of the law, frequent changes that have negative impacts on consumers can expose carriers to liability. Regulators and lawmakers are watching this space closely."

The pandemic has also made it difficult for carriers to wield long-standing policies or contracts of carriage differentiating nonrefundable and refundable tickets. How the suits play out may come down to whether the company initiated the cancellation or the consumer chose to cancel in order to comply with public health directives and official advisories against nonessential travel, experts say.

CARES Act Litigation

Major carriers agreed to a number of concessions in order to receive taxpayer-funded aid under the CARES Act, which offered $25 billion in direct grants to passenger airlines to pay employees. But the payroll support came with a number of conditions, including barring involuntary layoffs, furloughs or pay reductions for employees before Sept. 30. The law provided another $25 billion in loans that also came with conditions.

And legal issues abound, given the legislation was hastily drafted with strings attached that don't offer much clarity, according to Alan Hoffman, a private pilot and retired attorney with Husch Blackwell LLP.

"The airlines are required to maintain employment levels through Sept. 30, but what does that mean? If employees remain on the payroll but are required to make other concessions, does that violate the statute? And who has standing to enforce it?" Hoffman said.

United in particular recently came under fire for its perceived attempts to circumvent the conditions of the CARES Act, even after accepting $5 billion in payroll support.

Earlier this month, the International Association of Machinists and Aerospace Workers, AFL-CIO and IAMAW District Lodge 141 accused the airline of reneging on its promise not to cut workers' pay rates or benefits in exchange for receiving the funds. They said United attempted to force roughly 27,000 passenger service and fleet service employees into part-time positions in order to reduce their wages, retirement benefits and paid leave. United scuttled that furlough plan shortly after the IAM's lawsuit.

Then on May 13, employee Kenneth England filed a proposed class action alleging the carrier again flouted the CARES Act by telling its management and administration employees they had to take 20 unpaid days off. United has countered that it continues to employ 100% of its workforce and that tens of thousands of employees "in an extraordinary show of loyalty to the company have voluntarily agreed to unpaid leave because they want to help the company survive the crisis."

Yet the CARES Act provides no express private right of action, Hoffman explained, and England's suit alleges the employees are third-party beneficiaries of the contract between the government and the airlines.

"That is far from clear as a matter of law," Hoffman said. "Many airline workers are union members, and their rights may be governed by applicable work rules and grievance procedures under collective bargaining agreements."

Health and Safety Actions

Airlines have also beefed up health and safety measures, with many voluntarily announcing earlier this month that all customer-facing employees and passengers will be required to wear a face covering throughout check-in and boarding, and while onboard and deplaning the aircraft.

Experts say carriers are hoping their voluntary measures will eliminate the need for binding regulations that could hamstring recovery efforts or set off new legal challenges. But the issue of liability for health-related matters is even more complicated, given the intersection of federal preemption, guidelines from the Centers for Disease Control and Prevention, international restrictions, and regulatory requirements, according to Baker McKenzie's Trock.

So to minimize legal exposure, experts say airlines should follow best practices from industry groups such as the International Air Transport Association or public health bodies such as the World Health Organization, as well as federal rules and guidance for preventing disease transmission.

That can include barring passengers from booking the middle seat, allowing passengers to move to different seats in order to increase physical distancing, and limiting flight crew interactions with passengers during flight, among other things.

"Following best practices will help the defense of the airline if it is sued and, as a practical matter, it will be extremely difficult for a plaintiff to prove that his or her infection occurred on, boarding or disembarking from the aircraft, as opposed to some other activity," Goldberg said.

So far, U.S. airlines haven't been required to test or trace passengers for potential COVID-19 exposure, an idea that's been floated by some public health experts and government officials but raises a host of issues surrounding implementation and liability.

"Practically speaking, anyone filing a lawsuit against airlines on testing/tracing grounds would have to show the airline was negligent in some way, perhaps by failing to identify a sick passenger or by insufficiently cleaning the aircraft," Trock said. "And anyone afflicted with the coronavirus would also have to establish causation, which could be very difficult to show. In many cases, it may not be possible to determine if a passenger caught the virus on the aircraft itself versus in the airport terminal or on the way to or from the airport." 

The Airline Deregulation Act might also serve as another shield. The federal statute — which gives the airline industry control over things like their fares, routes, schedules and services — preempts various state law torts and other claims. But there is an exception for self-imposed obligations by the airlines, Goldberg explained.

"So it is important that there is no language in the air carrier contract of carriage or other documents — such as terms and conditions or customer promises — that create a self-imposed contractual obligation or incorporate by reference a federal, state or local law, or international treaty or practice, which could be used by a class action lawyer to assert that the airline is liable for breach of contract," he said.

--Editing by Philip Shea and Alanna Weissman.

For a reprint of this article, please contact reprints@law360.com.

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