By Katie Buehler

Law360 (August 24, 2020, 5:25 PM EDT) -- American Airlines Inc. passengers are arguing the airline can't enforce an unrelated third-party travel agency's arbitration clause to dodge a proposed class action in Texas federal court seeking refunds for flights canceled due to the COVID-19 pandemic.

The proposed class, led by named plaintiffs Lee Ward of Arizona, James Saunders of Pennsylvania and William Holloway of Texas, said in court filings Friday that they entered into contracts with Hotwire and Expedia Group when they bought flight tickets through the travel agencies. American, the nation's largest air carrier by fleet size, can't compel arbitration under those contracts because it's not a party to them, they said.

Instead, the airline should be bound by its own contract and conditions of carriage that state if Fort Worth, Texas-based American cancels a flight or changes a flight time by more than four hours, passengers can receive a full refund, the passengers said. Ward, Saunders and Holloway urged the Northern District of Texas court to consider the wider consequences if it grants American's request.

"American's requested relief would open the door to forced arbitration of millions of potential claims for the millions of travelers that purchase tickets, hotels or rental cars with travel agents where the website has an arbitration clause," they said. "So if a passenger was injured in an airline crash, or a hotel patron was assaulted by an employee, or a rental car provider negligently maintains its cars, they avoid court simply because reservations were booked through an online travel site."

American asked the court in an Aug. 13 motion to send the claims brought by Saunders and Holloway to arbitration, saying their agreements with Hotwire and Expedia, respectively, stated the purchaser "must bring claims against travel suppliers (like American) in individual arbitration or small claims court."

The airline also said Ward's claims should be tossed because he didn't purchase his tickets through American, but through its then-partner airline LATAM Airlines.

The proposed class argued Friday that the airline giant doesn't identify any language in Hotwire or Expedia's terms of use that allow for its interpretation of their arbitration clauses. And the definitions used in the terms of service are defined to include only the travel agency and its customers, they said.

In its motion to compel, American said if the court doesn't send the proposed class claims to arbitration, it must dismiss them as barred by the Airline Deregulation Act of 1978, which preempts state law claims having a connection with or reference to airline prices, routes or services.

In a separate Aug. 13 motion, American asked the court to halt discovery pending a ruling on its motion to compel arbitration, which the plaintiffs also oppose, according to court documents.

Ward first hit American with this proposed class action in April, accusing the comapny of propping up its revenue shortfalls by hanging on to money that should be paid back to customers for canceled flights. He claims the airline makes customers jump through hoops to get refunds, outright refusing or forcing customers to rebook flights or accept travel vouchers in place of refunds.

Earlier this year, Ward booked two separate trips to travel from Las Vegas, Nevada, to Lima, Peru, on American Airlines flights, with the first trip scheduled for March 12-31 and the second trip scheduled for May 30-Aug. 3, according to the complaint. Ward paid more than $3,200 for his tickets.

Ward traveled to Lima, Peru, as planned on March 12. But while still abroad, he was notified that his upcoming flights to return to the U.S. on American Airlines and LATAM Airlines for March 31 had been canceled and that the next possible return flight it had available wouldn't be until May 7, according to the suit. Ward had to pay out of pocket to book a return flight on different airlines, and once he returned stateside, American still refused to refund Ward for its portion of his canceled flight back to Las Vegas, according to the suit.

Ward amended his complaint in July and added Saunders and Holloway to the named plaintiffs' list, according to court records.

Saunders had also purchased tickets earlier this year through Hotwire to travel from Allentown, Pennsylvania, to New Orleans on April 9 through April 12. He claims American informed him just days before his trip that his connecting flight from Charlotte, North Carolina, to New Orleans was canceled and has refused to refund the $4,167.05 he spent on his tickets, according to court documents.

Similarly, Holloway purchased tickets through Expedia to travel from Austin, Texas, to Washington, D.C., on April 7, but was told prior to his departure that American had canceled his flight. The airline has allegedly refused to refund him the $114.40 he spent on his tickets, according to court documents.

Counsel for both parties didn't immediately respond to requests for comment Monday.

Ward, Saunders and Holloway are represented by Steve W. Berman, Daniel J. Kurowski and Whitney K. Siehl of Hagens Berman Sobol Shapiro LLP, E. Adam Webb G. and Franklin Lemond Jr. of Webb Klase & Lemond LLC and Allen R. Vaught of Vaught Law Firm LLC.

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

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

--Additional reporting by Linda Chiem. Editing by Stephen Berg.

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