By Rachel O'Brien

Law360 (August 14, 2020, 3:17 PM EDT) -- American Airlines Inc. told a Texas federal judge Thursday he should toss a proposed class action seeking refunds for flights canceled amid the COVID-19 pandemic, because the passengers suing canceled their own flights or never bought tickets from the airline.

American, the nation's largest airline by fleet size, also asked U.S. District Court Judge Reed C. O'Connor to compel arbitration because two of the three named plaintiffs, James Saunders and William Holloway, agreed to arbitration clauses when they bought their tickets, according to Thursday's motion to dismiss.

"American is entitled to enforce plaintiffs' commitments to arbitrate," the airline said. "The Expedia and Hotwire terms and conditions expressly set forth plaintiffs' agreement to arbitrate claims against third-party travel suppliers, like American, and further provides that travel suppliers like American are intended beneficiaries of that provision."

The April 22 lawsuit is one of several proposed class actions against major airlines seeking refunds for flights canceled during the pandemic, alleging that the airlines violated federal guidance and consumer protection laws by giving credits for future flights.

Lee Ward, Saunders and Holloway each were scheduled to travel on American flights in March, April or May and claim the airline violated state consumer protection acts and is guilty of unjust enrichment, conversion and fraudulent misrepresentation because it refused to refund their nonrefundable tickets.

Passengers suing the airlines have cited an April 3 enforcement notice from the U.S. Department of Transportation that states airlines must refund passengers for flights that are canceled or significantly delayed due to COVID-19.

In arguing for the refunds, the Ward suit noted that U.S. taxpayers have funded $25 billion in payroll support grants for airlines and $25 billion in loans as part of the Coronavirus Aid, Relief and Economic Security Act.

"American not only has a moral responsibility to provide real refunds, it has a legal obligation to do so, particularly in light of the substantial bailout it received from American taxpayers, including plaintiff and the class members," the complaint said.

But American Airlines argued that since Saunders and Holloway agreed to pursue claims in binding arbitration when they bought their tickets from Hotwire and Expedia, respectively, the complaint should be moved to arbitration.

Any claim that is not sent to arbitration should be dismissed because the Airline Deregulation Act of 1978 bars state law claims "having a connection with or reference to airline prices, routes or services," according to Thursday's motion.

The airline also said American's conditions of carriage states that although passengers with tickets may get refunds if the airline cancels their flights, it "do[es]n't refund cash for nonrefundable tickets" when passengers themselves "cancel [their] trip before departure."

Saunders and Holloway both canceled their tickets while their flights remained scheduled, so they're not owed a refund, the airline said.

American cites DOT guidance from May 12, 2020, that states, "Passengers who purchase a nonrefundable ticket on a flight to, within, or from the United States that is still being operated without a significant change, but would like to change or cancel their reservation, are generally not entitled to a refund or a travel voucher for future use on the airline. This is true even if the passenger wishes to change or cancel due to concerns related to the COVID-19 public health emergency."

And Ward's claim should be dismissed because he didn't buy tickets from American, the airline said. The two tickets for which he is seeking a refund involved segments on multiple airlines, including American, but Ward bought his tickets from a Chilean airline, LATAM, according to the motion to dismiss.

Ward bought a roundtrip ticket from LATAM Airlines leaving March 12 from Las Vegas, Nevada, to Lima, Peru, via Los Angeles, California, and returning on March 31 from Lima to Las Vegas via Miami, Florida, according to the airline.

One of the four flight segments that LATAM sold Ward — his return flight from Miami to Las Vegas — would have been an American flight segment, according to the motion to dismiss.

"While LATAM is authorized to sell seats on American flight segments pursuant to an interline agreement with American, the tickets at issue were both unmistakably issued by LATAM," the motion to dismiss said. "Because plaintiff admittedly never traveled on American, American never received any payment from LATAM (or Mr. Ward); there is thus nothing for American to refund."

The three customers seek to represent a class of people who bought tickets for travel on American flights in the United States from March 1, 2020, onward and who were not issued a refund for canceled or changed flights.

Counsel for the parties didn't immediately respond to requests for comment Friday.

The customers are represented by Daniel J. Kurowski, Steve W. Berman and Whitney K. Siehl of Hagens Berman Sobol Shapiro LLP, E. Adam Webb and G. Franklin Lemond of Webb Klase & Lemond LLC and Allen R. Vaught of Nilges Draher Vaught PLLC.

American Airlines is represented by James E. Brandt, Michael E. Bern and Tyce R. Walters of Latham & Watkins LLP and Dee J. Kelly Jr. and Lars L. Berg of Kelly Hart & Hallman LLP.

The case is Lee Ward et al. v. American Airlines Inc., case number 4:20-cv-00371, in the U.S. District Court for the Northern District of Texas.

--Editing by Stephen Berg.

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