The airline industry is facing a flurry of suits for failing to issue refunds to consumers for flights canceled due to the coronavirus pandemic.
The most recent suits, filed Monday against
Plaintiffs’ attorneys say more are on the way. But the prospect for recovery may be clouded—at least with regard to some carriers—by potential insolvency.
Attorney Hassan Zavareei with Tycko & Zavareei LLP in Washington, which represents the plaintiffs against Southwest, said the firm has been contacted by many airline ticket purchasers interested in pursuing similar claims against the airlines and anticipates they will be filing more suits.
Attorney Steve Berman with Hagens Berman in Seattle, who filed the suit against United, said his firm has “several others in the works.” But because many airlines are offering refunds, he said, he’s “not sure how many are out there.”
Playing for Time
Counsel for the plaintiffs say it won’t be difficult to show that the airlines breached their contracts.
“The contracts provide that if a passenger cancels they are entitled to a credit with some limitations, including a re-book fee. But if the airline cancels, they are entitled to a refund,” Zavareei told Bloomberg Law.
And the contract language requiring a refund should the airline cancel appears to be standard across carriers, Berman said.
“We haven’t heard their defense yet,” Berman said. “I suspect it’s really about preserving cash and they’d rather delay in court than have to pay now as obviously this isn’t a good time for the airlines.”
A spokesman for the International Air Transport Association declined to comment on the litigation but cited the comment of IATA’s Director General and CEO, Alexandre de Juniac, posted on the organization’s website.
“The simple answer is that airlines need time. And that is why I am supporting airlines (and our partners in the travel and tourism sector) in their request for governments to delay the requirement for immediate refunds,” he said.
“We propose vouchers that could be used for future travel or refunded once we are out of this crisis period. This would buy the industry vital time to breathe—surviving the crisis so that they are ready to fly when better days arrive.”
In a statement, Southwest said, “in light of the current circumstances, we made additional changes to our already flexible policies,” allowing customers to “request a refund to the original form of payment” if a flight is canceled by Southwest.
Regardless of the strength of their case, the plaintiffs could face a problem in collecting from insolvent carriers.
Berman concedes it is “a worry” that airlines may be judgment-proof if they are headed into bankruptcy.
But Zavareei said the issue won’t deter the suits from going forward. “If we have to be creditors in bankruptcy that’s fine. We’ve done it before,” he said.
Professor Emeritus Jean Eggen at Widener University Delaware Law School says bankruptcy won’t necessarily mean the plaintiffs are out of luck, but could limit recovery.
“The reorganization plan, assuming reorganization, would provide for paying claims, but there may be larger creditors who are in line before the passengers, all of which means a protracted time frame and smaller reimbursement amounts,” Eggen said.
The suit against Southwest estimates a class of tens of thousands if not hundreds of thousands of members geographically dispersed throughout the United States.
The Norwegian Air suit alleges hundreds of thousands of individuals who are members of the proposed classes, and tens of thousands of individuals that are members of the proposed subclasses.
Neither United nor Norwegian Air immediately responded to requests for comment.