ContractsProf Blog

Editor: Jeremy Telman
Valparaiso University Law School

Thursday, July 2, 2020

Airlines and Lawsuits Over Refunds

Southwest Airlines recently filed a motion to dismiss a class action lawsuit that was based upon a claim of breach of contract for failure to refund fares for flights cancelled due to the pandemic. The plaintiff had purchased two nonrefundable round trip tickets from Baltimore-Washington International airport to Havana, Cuba. The plaintiff’s flight was cancelled as a result of Cuba’s closing of its borders on March 20, 2020 to non-Cuban citizens. Southwest offered to provide a future travel credit to plaintiff for his nonrefundable fare instead of a refund. The plaintiff argued that Southwest’s “Contract of Carriage” required Southwest to provide refunds, not credits, in this situation. Southwest’s motion states that it had the option under its Contract of Carriage permits it to offer credits or refunds and cited the following language which applied to nonrefundable tickets purchased for a flight that is subsequently cancelled:

“the Carrier will either transport the passenger at no additional charge on another of Carrier’s flights, refund the fare for the unused transportation in accordance with the form of payment utilized for the Ticket, or provide a credit for such amount toward the purchase of future travel.”

Southwest argued that the above language gave it the “choice of one of three options” with respect to nonrefundable tickets because it contained the disjunctive “or.”

I’m not sure that the language is as “unambiguous” as Southwest claims; it could, after all, have expressly written that the “Carrier may, at its option, either transport…” 

Southwest’s motion references a different section of its contract which applies to refundable tickets, claiming that because it has two different sections for refundable and non-refundable tickets, that it means it does not have the same discretion for refundable tickets.  It does not, however, quote that section so I decided to take a look at it myself with the caveat that I pulled this contract off Southwest’s website and don’t know if this is the actual contract that bound the plaintiff.  But after taking a look, I’m even less convinced than I was before about the claim that the language is “unambiguous.”  The section for refundable tickets 4(c)(1) states that the fare will:

“either be refunded if canceled and refunded instead of exchanging or changing the Ticket or applied as travel credit toward the purchase of future travel for the originally ticketed Passenger in accordance with the form of payment utilized for the Ticket.”

The provision also contains the disjunctive “or,” so I am not sure what Southwest means by contrasting the two provisions.  In other words, the language for the refundable and non-refundable tickets are substantively similar (either transport, refund or provide credit) except that the non-refundable tickets are subject to the remedy contained in the language only in the event of a “delay or involuntary cancellation.” 

Furthermore, Section 9(a) states that if a flight is cancelled,

“the Carrier will, at the request of a Passenger with a confirmed Ticket on such flight, take one of the following actions….(ii) Refund the unused portion of the Passenger’s fare in accordance with Section 4(c).” 

Southwest claims that the reference to Section 4(c) means that it has the discretion to elect a fare credit instead of issuing a refund.  But I think that the language “at the request of a Passenger” means that it is at the Passenger’s option, not the Carrier’s. 

The plaintiffs also argued that Southwest failed to comply with the U.S. Dept. of Transportation notice to provide travelers with refunds.  Southwest argues that the notice and the relevant statute did not create a private right of action and so failed to state a breach of contract claim.

Regardless of how I feel about Southwest’s interpretation of the contract, I will be dismayed if the lawsuit proceeds given that Southwest subsequently refunded the $345.35 fee.  IMHO, it seems like a waste of resources to let this case proceed and I hope the motion to dismiss is granted.  How is the economy ever going to right itself if flailing airlines are sued for failing to refund fees that they have already refunded?  Who actually benefits from that? (Answer: The kind of lawyer that gives lawyers a bad reputation).  Talk about the social costs of enforcing a contract!

Also, I’m not sure why the lawsuit wouldn’t be considered moot.  Compare this motion filed by Volaris, a Mexican airline, which seeks to dismiss a similar class action over its cancellation of flights.  Volaris claims that because it has been offering its passengers the option of a refund, the claims are moot. 

https://lawprofessors.typepad.com/contractsprof_blog/2020/07/airlines-and-lawsuits-over-refunds.html

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Comments

An interesting side note: I had several flights (on airlines other than Southwest) canceled by airlines or by us in view of border closings and reduced flight schedules. The airlines offered us only credits, which they said was based on their internal rules or policies. That wasn't very helpful, as the airlines are local South American airlines we are not so likely to use again, at least in the near future, so we disputed the charges on our credit card. To our amazement, the disputes resulted in receiving refunds for all the flights. I don't know what happened behind the scenes, or what the airlines' refund contract rules were, but somehow the credit card company concluded refunds weren't enough. (In one instance, the airline said they would refund, keeping a $50/ticket fee, and the credit card company came up with the same end result.) Perhaps our airlines relented when approached by the credit card company, as Southwest seems to have done here. The dispute process was a black box, so I don't know any of the analysis. I might have tried to get more information if the disputes were denied, but we were just happy to have our money back for flights we could not take!

Posted by: Carol Chomsky | Jul 2, 2020 7:53:33 AM

Has Southwest refunded all of the class members or just the lead plaintiff?

Posted by: Paul MacMahon | Jul 2, 2020 8:49:03 AM

My conjecture runs as follows. On April 3rd, the DoT issued this enforcement notice:
https://www.transportation.gov/sites/dot.gov/files/2020-04/Enforcement%20Notice%20Final%20April%203%202020.pdf
Southwest likely refunded all class members' fees pursuant to the DoT notice. Still, it wants to stand by its interpretation of its contract and so wants the case dismissed. Plaintiffs should be satisfied, because all got the refunds they sought through litigation, but plaintiffs' attorneys may think there is still a live issue because of the dispute over the proper interpretation of the contract. My guess is that the issue is moot, at least as to class members, assuming that all come within the ambit of the DoT notice.

Posted by: Jeremy Telman | Jul 3, 2020 12:41:44 PM

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