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COVID-19 Sparks Rapid Rise in “Cancellation” and “Refund” Litigation

Philip R. Stein

A proposed class action filed in federal court in California on April 20 demands refunds for all fans who purchased tickets to Major League Baseball (MLB) games that have been postponed indefinitely due to the coronavirus pandemic. The suit, filed against MLB and online ticket sellers StubHub, Ticketmaster, Live Nation, and Last Minute Transactions, may be the first of its kind against a major sports league — but it is one of a rapidly growing number of suits seeking refunds for cancellations and postponements of events and pre-paid reservations.

MLB’s regular season was scheduled to begin last month. Though no games have been played, MLB has stated that the games’ current status is postponed, not canceled, and that the league and its players union are exploring contingency plans to allow the games to go forward later this year. The lead plaintiffs allege in their lawsuit that this is all a “pretext” for MLB and its online ticketing partners to avoid refunding the prices paid for the tickets. They claim the games are “unlikely to be played,” or, if they do take place, will likely go forward without fans in attendance.

In the past, “cancellation” and “refund” putative class actions have yielded mixed results. Though some courts certified classes, others concluded that common issues of the class did not predominate over individualized issues, a finding that precludes class certification. Those mixed results do not seem to have deterred plaintiffs from seeking class status in recent weeks for refund claims. Such suits include: another against StubHub, alleging that it improperly retroactively discontinued its money-back guarantee program; a case against United Airlines seeking full refunds for unused flight tickets; college students have sued universities, most recently Columbia and Cornell, seeking reimbursement for tuition and fees as a result of coronavirus-related campus closures; and one against Blink Fitness seeking return of monthly membership fees for such time as members cannot visit the company’s fitness centers.

Though the temptation may be great at first blush to assume that the customers must be entitled to refunds (and some businesses may conclude in certain circumstances that staying in their customers’ good graces is more important than fighting on the legal merits), each case must be assessed on its own merits — and it is often the case that the targets of such suits may have potent legal and factual defenses. Those defenses fall into at least two categories. The first pertains specifically to attempts to structure such suits as class actions. As noted above, meaningful individual variations in the details of plaintiffs’ particular situations can make certification of a class untenable, and other prerequisites for class actions may not be met in a given case. In fact, arbitration may be required under the terms of the applicable agreement between the parties. The second category of defenses relates to the merits of a particular claim. A ticket or fee may have been clearly identified as non-refundable at the time of sale. Certain steps may need to be followed, or time limits observed, when seeking a refund. The party from which the refund is sought may have contractual discretion to proffer an alternative remedy. Again, the strength or weakness of any such defenses (and of the claims giving rise to those defenses) must be evaluated on a case-by-case basis.

What is certain is that one of many notable legal and economic consequences of COVID-19 is a spate of “cancellation and refund” litigation. These early cases bear watching for consumers and event, transportation, hospitality, or membership-focused businesses alike.

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