Legal Roundup: Airlines Sued Over COVID-19 Refunds, Tesla’s Twitter Lawsuit and More

The latest court decisions impacting risk management and the insurance industry.
By: | April 22, 2020

Airlines Sued Over COVID-19 Refunds

The Case: Adrian Bombin cancelled his Southwest Airlines flight to Havana, Cuba due to COVID-19.

He expected a full refund. Instead he got a travel voucher. It led Bombin to sue the company in the hopes of becoming the catalyst for a class-action suit.

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The Washington Post reports: “The suit pointed to language in Southwest’s contract with customers, which says the airline in such situations would put a customer on the next available flight or refund the fare ‘in accordance with the form of payment utilized for the Ticket.’ It alleges Southwest violated that contract for Bombin and seeks class-action status to represent everyone Southwest failed to refund since March 1.”

Scorecard: Southwest said it will review the complaint and that it’s policies are customer-friendly. Airlines like United and Spirit have also faced similar complaints.

The Washington Post reports that United was providing credits to customers but is now allowing those people to request refunds instead.

Takeaway: Southwest Airlines has developed a devoted following due to its upbeat employees, hearts painted on its airplanes, and culture of trustworthiness.

That’s not easy in the aviation business where one bad experience can lead to fuming cusomter complaints. That reputation could decline if consumers think Southwest is taking advantage of COVID-19 by refusing to issue full refunds for cancelled flights. If that weren’t enough, Southwest is facing political pressure to provide refunds.

Nine senators sent letters to airlines urging them to refund travel and the Transportation Department said it’s monitoring the Southwest situation and could take action.

Judge: Tesla Must Face Lawsuit After Musk Tweet About Going Private

The Case: On August 7, 2018, Elon Musk issued the following tweet: “Am considering taking Tesla private at $420. Funding secured.”

Business Insider reports that “it was later established that he had not lined up funding, and Musk backed down from the going-private offer.”

The tweet led to a lawsuit from shareholders stating that Musk was attempting to artificially inflate the stock price and damage investors who sold the stock short. 

Scorecard: U.S. District Judge Edward Chen ruled on April 15 that shareholders could, indeed, sue Tesla to determine if Musk’s tweet was “the ‘proximate cause’ of volatility in Tesla’s stock price, causing billions of dollars of alleged losses that prompted the lawsuit,” according to Business Insider.

The incident also led to Musk stepping down as chairman of the Tesla board and a $40 million settlement with the Securities and Exchange Commission.

Takeaway: Tweets are considered speech, so executives had better be think them through. 

Lawsuit Over Underfilled Junior Mints Boxes Tossed

The Case: Three consumers sued Tootsie Roll Industries claiming that Junior Mints boxes are larger than necessary to purposely trick consumers into thinking they contain more candy.

They claimed to be defrauded because “35 percent to 43 percent of the boxes contained mostly wasted air known as ‘slack-fill,’ ” according to Reuters.

Scorecard: U.S. District Judge Naomi Reice Buchwald in Manhattan dismissed the lawsuit. She noted that the weight is clearly marked on the packaging and that consumers should expect some empty space.

In her opinion, she didn’t hold back on the plaintiffs, according to Reuters.

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She wrote that “the law simply does not provide the level of coddling plaintiffs seek” and “assuming that a reasonable consumer might ignore the evidence plainly before him attributes to consumers a level of stupidity that the court cannot countenance.”

Takeaway: This is hardly the first case against a candymaker claiming that slack-fill is purposely misleading consumers.

Many cases are settled or dismissed, but in one instance a California district court judge fined Ghirardelli and Russell Stover $750,000 and forced them to change their packaging.

Vox took a deep dive into slack-fill cases to learn why some are prosecuted and others are simply thrown out. It’s worth a read. &

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected]

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