Saul Ewing Arnstein & Lehr LLP

Companies should be careful about changing their refund / cancellation policy, or not honoring their pre-COVID-19 policy.

Following the outbreak of COVID-19, many companies in the hospitality industry changed their cancellation and refund policies, knowing that many individuals would be wary of traveling and would opt to cancel their upcoming trips. However, these changes could spawn lawsuits brought by consumers under state consumer protection laws modeled on Section 5(a) of the Federal Trade Commission Act (15 U.S.C. § 45 (a)) if the changed policy has a detrimental effect on them. An example of a potentially problematic policy is if an individual was permitted to a refund of the full monetary value of a trip prior to COVID-19, but the company now only allows a credit for a future trip or a partial monetary refund.

This is precisely what led to the filing of a class action lawsuit by a group of consumers against United Airlines on April 6, 2020. Rudolph v. United Airlines Holdings, Inc., No. 1:20-cv-02142 (N.D. Ill.). The complaint arises from United Airlines’ policy for refunding fares for cancelled flights and alleges that prior to COVID-19, United Airlines would issue full monetary refunds to passengers who booked a flight that was subsequently cancelled. United Airlines allegedly changed its refund policy four times between March 7 and March 14, 2020 and now is only providing credit towards future travel for flights it had to cancel due to the travel restrictions imposed by states due to COVID-19. The complaint asserts claims for damages under the Illinois Consumer Fraud and Deceptive Business Practices Act (815 Ill. Comp. Stat. 505/2) and under each state’s consumer protection acts.

This lawsuit is a warning to companies that have recently decided to change their refund / cancellation policy if the new policy has any negative impact on consumers. State consumer protection laws that prohibit unfair and deceptive trade practices allow consumers to sue companies for any damages connected to such actions and may subject the defendants to claims for punitive damage or recovery of plaintiffs’ reasonable attorney’s fees.