American Airlines Sued For COVID-19 Cancellations, Refunds

By Linda Chiem
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Law360 (April 22, 2020, 7:00 PM EDT) -- American Airlines is the latest major airline to get hit with a proposed class action in Texas federal court Wednesday, alleging that its refusal to refund passengers for canceled flights amid the COVID-19 pandemic flouts federal guidance and violates consumer protection laws.

Arizona resident Lee Ward has accused American Airlines, the nation's largest air carrier by fleet size, of propping up its revenue shortfalls by hanging on to money that should be paid back to customers for canceled flights, as global travel has ground to a near halt in response to the public health crisis.

Fort Worth, Texas-based American is the latest target on a growing list of consumer lawsuits seeking full cash refunds — not just vouchers or credits for future travel — for customers with canceled flights. Ward's suit similarly accuses American of engaging in unfair and deceptive conduct by making customers jump through hoops to get refunds, outright refusing refunds or forcing customers to rebook flights or accept travel vouchers in place of refunds.

"Not only is American refusing to refund passengers for canceled flights, American is misleading passengers about their rights by making it difficult to locate information about refunds, refusing refunds, unilaterally providing travel vouchers if a passenger is unable to contact a American customer service representative and waiting until the last minute to cancel flights to induce passengers to cancel their flights," Ward said in Wednesday's suit.

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.

Despite the uncertainty over travel due to the COVID-19 pandemic, and the fact that Arizona's governor has issued a stay-at-home order for residents, American has still refused Ward's request for a refund on his upcoming May 30 trip to Peru, the suit said.

In fact, American's own contract and conditions of carriage state that if American canceled a flight or changed a flight time by more than four hours, passengers can receive a full refund, the suit says.

Ward is represented by plaintiffs' firm Hagens Berman Sobol Shapiro LLP, which is also spearheading consumer refund suits against Delta Air Lines and United Airlines. Known as the "Big Three," American, Delta and United account for roughly 65% of the domestic air travel market.

Other airlines to be swept up in the cascade of consumer refund lawsuits have included Allegiant Air, Hawaiian Airlines, JetBlue Airways, Southwest Airlines and Spirit Airlines. Most of the suits were filed shortly after the U.S. Department of Transportation issued an enforcement notice on April 3 warning airlines that they are still required to refund passengers for flights that are canceled or significantly delayed, even as government travel advisories and stay-at-home mandates aimed at combating the COVID-19 outbreak obliterate airlines' passenger volumes and revenues.

According to the consumers, the airlines' refund policies and practices are all the more galling in light of the fact that U.S. taxpayers have fronted the airlines $25 billion in payroll support grants and $25 billion in loans as part of the sprawling 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," Ward said in the complaint.

American said in a U.S. Securities and Exchange Commission 8-K filing on Wednesday that it has inked an agreement with the U.S. Treasury for a $4.1 billion direct grant and a low-interest-rate loan of $1.7 billion under the Cares Act to be used exclusively for employee wages, salaries and benefits.

The airline said it has agreed to limitations on stock buybacks, dividends and executive compensation, and will give the government stock warrants in exchange for the payroll funds. Additionally, American said it will separately apply for an approximately $4.75 billion loan from the Treasury.

American Airlines declined to specifically comment on Ward's lawsuit Wednesday. However, the airline defended its policies in response to COVID-19, which includes waiving change fees for previously booked flights taking place through Sept. 30, as well as new bookings made through May 31 for all future travel.

"We know flexibility is important to our customers during this time of uncertainty, and the comprehensive travel waivers we've put in place are designed to meet that need," American spokesman Matt Miller said in a statement Wednesday. "The safety and well-being of our customers and team members remains our highest priority, and American's 130,000 team members are working around the clock to care for our customers."

Moreover, if American Airlines cancels a flight for any reason, it is and has always been the company's policy that a customer can receive a full refund back in his or her original form of payment, Miller said.

Ward is 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.

Counsel information for American Airlines was not immediately available Wednesday.

The case is Lee Ward 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.

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