Airbnb Owners Sue Company Over March Refunds for Owners

A recently filed class action lawsuit demonstrates the difficulties that travel companies have faced during the pandemic. In a way, they are caught between a rock and a hard place. There have been many lawsuits filed against airlines and other travel operators for the failure to refund customers' money when their trips got cancelled at the start of the coronavirus crisis. Now, rental unit owners are suing Airbnb because they did exactly just that. These owners claim that Airbnb violated their agreement with the owners when they gave customers refunds for having to cancel their stays during the early days of the crisis.

Of course, Airbnb is slightly different from the average travel company since it acts as a middleman between the owner and customer. It does not directly own the units that are rented. It is a marketplace where customers go for short-term rentals. However, Airbnb does have the right to set the terms of the transaction between the customers and owners. The owners are bound to follow the decisions that Airbnb makes based on the terms of their agreement.

The Lawsuit Was Filed After Airbnb Allegedly Failed to Pay Arbitration Fees

One of the terms of the agreement that the owners first tried to follow was the fact that they would try to first handle claims against Airbnb through arbitration. They were unsuccessful in trying to get any relief in that forum, so they moved to file a class action lawsuit. In fact, the only way that the plaintiffs were able to escape arbitration and file a class action was that Airbnb allegedly failed to pay their arbitration fees on time. California law gives plaintiffs the ability to escape arbitration and head to civil court if parties do not pay fees within 30 days. Defendants who have an agreement requiring arbitration usually do not want the case in civil court.

These arbitration agreements are almost always upheld in civil court. The Supreme Court has said that there is a preference for arbitration over lawsuits. Companies take advantage of it because they view arbitration as a cheaper and friendlier forum.

The reason for the lawsuit was that Airbnb made a decision in March to activate its extenuating circumstances policy to force refunds for customers. Usually, each owner is allowed to set their ow refund policy. Some owners allow customers to cancel up until the time of their stay, and they receive back everything but the service fee. However, other owners are more restrictive. Airbnb reserves the right to override the individual agreement between the renter and buyer, and this is what it did in March. Even still, many customers complained that it was difficult for them to receive their refunds. Airbnb did set up a $250 million relief funds for hosts to help them cushion the blow that they received from the cancellations. However, many owners said that they either never got the money or were paid in the wrong amounts.

Airbnb Owners Also Suffer When They Miss Out on Payments

The problem is that many Airbnb owners are paying mortgages on their properties. They depend on the rental income to help them make these payments. When they experience cancellations, it hurts their own bottom line. They are not similarly situated with hotel owners as they are often individuals who go into the business to make some extra side income. In this case, the plaintiff claims that he needed the $655 from the cancelled stay to make his mortgage, utilities and homeowners association payments.

Here, the lawsuit has been filed in the Northern District of California, where Airbnb is based. The plaintiff alleges the Airbnb breached their contract with the owners, violated a fiduciary duty and broke California's consumer protection laws.

For Airbnb, this is just the latest litigation challenge that the company faces as it prepares for a massive IPO. Airbnb has also been sued over alleged discrimination against African-Americans who sought to rent properties through the company. Airbnb has also faced legal scrutiny from cities over their alleged failure to properly collect occupancy taxes. Nonetheless, the company's founders and funders stand poised to reap a fortune after the company goes public.

As of now, this case is a proposed class action. The plaintiff is hoping that others will join him in trying to recoup some money from Airbnb. Of course, the court will first need to certify the class, which is not always a given.

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