Class Action Claims Airbnb ‘Shortchanges’ Hosts By Keeping Portions of Guests’ Virus Cancellation Refunds [UPDATE]
Last Updated on July 26, 2021
Farmer v. Airbnb, Inc. et al.
Filed: November 5, 2020 ◆§ 3:20-cv-07842
A class action alleges Airbnb has shortchanged hosts by choosing to keep money only partially refunded to guests who've canceled reservations due to the coronavirus pandemic.
Case Updates
July 26, 2021 – Lawsuit Sent to Arbitration
The judge overseeing the case detailed on this page has granted Airbnb’s motion to compel arbitration and has stayed the lawsuit pending the results.
In an order issued June 1, 2021, found here, U.S. District Judge Jon S. Tigar noted that the plaintiff does not dispute the existence of a valid arbitration agreement within Airbnb’s terms of service and has indeed initiated arbitration of his claims with the American Arbitration Association (AAA). Subsequently, the plaintiff attempted to withdraw from the proceedings, arguing that Airbnb had not paid the $1,500 arbitrator compensation fee requested by AAA within 30 days of the due date, according to court documents.
The judge ruled, however, that the arbitration agreement signed by the plaintiff clearly delegated such matters to the arbitrator, who found that the plaintiff’s notice to withdraw from arbitration was “void and has no effect.”
As a result, Judge Tigar has ordered the clerk to administratively close the case while allowing either party to initiate further proceedings in court should they become necessary.
A proposed class action claims Airbnb has wronged rental hosts by choosing to keep for itself the remainder of money only partially refunded to guests who’ve canceled bookings due to the COVID-19 crisis.
The lawsuit alleges more specifically that Airbnb’s creation of a $250 million fund to help hosts better shoulder the burden of virus-related cancellations was “yet another ruse to burnish the company’s public image” given the defendant has chosen to retain for itself the remainder of cancellation refunds only partially issued to guests.
“Plaintiff is one of the hundreds of thousands of Hosts who have been shortchanged by Airbnb,” the 19-page case claims.
Against the backdrop of the coronavirus pandemic, Airbnb, in an effort to garner some positive press with an initial public offering (IPO) over the horizon later in the year, enacted a policy that allowed guests to cancel their reservations for a full refund without being charged cancellation fees, the suit says. According to the lawsuit, however, this move came at the expense of Airbnb hosts, who were left to negotiate their own cancellation policies with guests and “were hurt as much as anyone by the pandemic’s sudden impact on travel.”
Soon thereafter, Airbnb, the middleman between rental hosts and guests looking to book their properties, apologized to hosts and announced it was establishing a $250 million fund to help repay the individuals for canceled bookings, the case says. The problem, the plaintiff argues, is that Airbnb, a company recently valued at more than $25 billion, has not actually given guests full refunds as promised, the effects of which have decidedly impacted hosts’ bottom lines.
From the suit:
“Airbnb had not actually issued refunds to Guests as it said it would. Instead, Airbnb rejected many Guests’ refund requests, forced others to accept travel credits that expire next year, and issued only partial refunds to still more Guests.”
As the plaintiff tells it, Airbnb then kept the remaining money for itself.
Airbnb stresses in its terms and conditions that it is only an intermediary between hosts and guests, the complaint says. Although Airbnb is not supposed to participate in transactions between users, and is not and does not become party to any contractual relationships between hosts and guests, the company does provide the mechanism, called Airbnb Payments, by which users can pay one another, the suit states.
As many Airbnb guests were unable or unwilling to travel and chose to cancel their bookings as the coronavirus pandemic spread, the company quickly announced, pursuant to the Extenuating Circumstance Policy in its terms of use, that it would offer guests full refunds for those who made bookings on or before March 14, 2020, even if the agreement between the guest and host did not provide for a full refund, the complaint says.
The plaintiff says, however, that the refunds Airbnb purported to be issuing itself came instead directly out of hosts’ pockets. Per the case, this conduct amounted to Airbnb discarding the terms that existed between hosts and guests and siding almost entirely with guests, leaving hosts to fend for themselves amid the pandemic.
“The Guests and Hosts had previously agreed on a cancellation policy that allocated the risk between each respective side, and Airbnb was now overriding the terms of the Guest-Host contract and siding entirely with one group of Airbnb users (the Guests) and against another group of users (the Hosts),” the suit reads.
What followed was an apology from Airbnb, who said to hosts that it was “sorry that we did not consult you—like partners should,” and the creation of a $250 million fund to help pay hosts for canceled bookings, the case goes on. Per the lawsuit, hosts would be eligible to receive 25 percent of what they would have gotten from a guest under the cancellation policy in effect at the time of the booking.
The plaintiff claims, though, that Airbnb has fallen short of its public promises.
“Rather than issuing full refunds to Guests who cancelled bookings, Airbnb is giving Guests travel credits, issuing partial refunds, or denying guests any compensation whatsoever,” the suit says, relaying that the process through which guests can seek a refund from Airbnb is frustrating at best:
“Hundreds of Guests have complained about Airbnb’s refund process, which has often required Guests to contact customer service repeatedly, navigate a confusing web interface designed to force Guests to accept a travel credit rather than a full refund, and upload a variety of supporting documentation to support their claim.”
In the end, many guests are forced to accept travel credits they are unlikely to use, partial refunds, or nothing at all, while hosts are forced by Airbnb to accept 25 percent of the amount the company allows in its cancellation policy, or nothing at all, the lawsuit says.
“By shortchanging both Hosts and Guests, Airbnb has been able to retain large sums of money that Airbnb Payments was holding in escrow when the pandemic started,” the complaint charges. “This money doesn’t belong to Airbnb.”
The lawsuit looks to represent all individuals in the United States who accepted rental bookings through the Airbnb platform that were subsequently canceled by the booking party, and who were not paid the amount owed to them under the booking’s cancellation policy.
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