By Dash Radosti
As consumer-related COVID-19 litigation continues, the courts are sending airlines an important reminder: vouchers are not the same as refunds. However, there is a catch – courts are limiting this holding to the plain text of the contract between flyers and carriers.
Two recent federal cases reiterated this principle: Ide v. British Airways PLC, No. 1:2020cv03542 – Document 53 (SDNY 2021) (J. Furman) and Bombin v. Southwest Airlines, Civil No. 5:20-cv-01883-JMG, (EDPA 2021) (J. Gallagher). While the facts of these cases vary, the complaints’ gravamen are the same – customers whose flights were canceled due to COVID-19 wanted full cash refunds instead of vouchers.
Ide is especially notable for Judge Jesse Furman’s strong treatment against issuing vouchers instead of refunds. Quoting cases from the 7th Circuit Court of Appeals, the court explains that “compensation in kind is worth less than cash of the same nominal value.” Judge Furman then quickly dispensed with British Airways’ position that the flyers suffered no damage because they received a voucher instead of a cash refund.
The Ide court relied on the language within the four corners of British Airways’ ticket contract to reach its result, primarily because only breach of contract, with narrow exceptions, survives preemption under the Airline Deregulation Act (ADA) when a consumer sues an air carrier. In Ide, British Airways stated that a flyer would get either a refund or a rescheduling at their convenience if the airline canceled the flight. Although the defendant tried to argue a voucher was the equivalent of rescheduling, the court rejected the argument. The contract said nothing about vouchers, and, in any event, vouchers had many more terms and conditions than a rescheduling at a flyer’s convenience.
Bombin similarly interpreted a Contract of Carriage (COC)—this time, it was Southwest’s–in favor of the consumer. Southwest’s COC stated, “Carrier will either transport the Passenger at no additional charge . . . refund the fare . . . or provide a credit.” The court explained that this clause made it seem as if the airline had discretion to select among those remedies. However, the court then interpreted specific language in the customer service agreement within the COC that made it seem as if the consumer had the right to make the choice. The court interpreted this as ambiguity and denied a motion to dismiss.
Both Ide and Bombin show that, at least at the motion to dismiss stage, courts prefer to interpret the airline contract in favor of allowing a full refund. As shown in Bombin, this includes loosely reading in another agreement referenced in generality by the carriage contract.
But there are limits to how far courts will go. In Rudolph v. United Airlines Holdings, Inc., et al., No. 1:2020cv02142 – Document 65 (N.D. Ill. 2021)(J. Durkin), United Airlines had a legal agreement that specifically authorized vouchers for force majeure events. However, the plaintiffs cleverly alleged that United did not cancel its flights because of a force majeure, but rather, to save money.
The court largely agreed that these allegations created a dispute of fact that could not be resolved at the pleading stage. However, the court did dismiss the claims of a plaintiff who received a voucher for a canceled flight to Costa Rica after Costa Rican authorities shut down the airport. That, the court explained, was a proper force majeure event, and per the contract, allowed United to give a voucher.
The upshot of these recent cases is that courts continue to be skeptical that vouchers are adequate replacements for cash refunds. However, given the strong preemption of all claims outside of breach of contract, consumer remedies remain limited to the four corners of their contract with the airlines. How airlines react, and whether they change the terms of their agreements, remains to be seen.
Dash Radosti is a third year law student at Georgetown University Law Center.
