Class Action Filed Against Airbnb Over Missed Host Cancellation Payments

Carolyn Casey, J.D.

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— Updated on April 20, 2021

Class Action Filed Against Airbnb Over Missed Host Cancellation Payments

On November 5, 2020, an Airbnb host filed a proposed class action against the short-term rental company in the U.S. District Court for the Northern District of California. The plaintiff, Anthony Farmer, claims Airbnb took actions concerning reservation cancellations during the COVID-19 crisis that violated contractual and fiduciary duties and California consumer protection law. He says the company owes hosts cancellation fees that were improperly waived and mismanaged.

Pandemic Cancellations

Each Airbnb host is able to choose one of six cancellation policies when listing their property with the site: flexible, moderate, strict, long term, super strict 30 days, and super strict 60 days. This dictates how much guests will be refunded for canceled trips, if at all. Under normal operating conditions, Airbnb is obligated to collect payment from guests at the time of booking and remit any fees to hosts due under the applicable cancellation policy.

However, Airbnb also has an extenuating circumstances policy (ECP). Under the ECP policy, “Airbnb may be able to offer a full refund in the event of certain unexpected events, including death; serious illness or injury; urgent travel restrictions or severe security advisories; natural disaster; or epidemic disease.”

Early on in the pandemic, Airbnb announced that it would invoke the ECP policy in regards to COVID-19 and allow guests to cancel their reservations made within a certain timeframe with full refunds and no fees. This move essentially overrode the cancellation agreements each host had in place—and left hosts in the lurch over lost payments and cancellation fees.

When hosts pushed back, Airbnb quickly apologized and announced a $250 million fund to compensate hosts for canceled bookings. Many hosts reported, however, that Airbnb rejected their requests for compensation, instead offering travel credits or issuing only partial refunds.

Class Action Allegations

Anthony Farmer, an Airbnb host based in Texas, moved to legal action over $655 he claims is owed to him following Airbnb’s cancellation allowance. Farmer paints a picture of a company so concerned with COVID-19 impacts to its business and a planned initial public offering that it unilaterally took refund actions that harmed the class. Rather than remitting the remaining funds to hosts, Farmer says the company kept the money.

In the complaint, Farmer requests that the court determine that this class action can proceed. The complaint proposes that class members include:  “[A]ll persons residing 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.” The plaintiff wants a jury trial and class damages that include statutory damages, treble damages, and punitive damages. The complaint also requests injunctive relief that compels Airbnb to provide a court-ordered accounting of missed payments. In its claims against Airbnb, the proposed class action outlines three main grievances: breach of contract, breach of fiduciary duty, and violation of California consumer protection laws.

Breach of Contract

The plaintiff’s first claim is that Airbnb breached contractual terms when they denied class members cancellation funds due to them per their Airbnb contract. The plaintiff alleges that Airbnb was not contractually permitted to alter the specific cancellation policy between guests and hosts. Additionally, the plaintiff claims that prior to COVID-19, Airbnb’s ECP did not mention epidemic diseases or pandemics—it referred only to endemic diseases such as Chagas disease, Zika, and Ebola. Farmer asserts that Airbnb breached its contract when it failed to pay hosts the cancellation fees that guests had agreed to when they booked their reservations. Farmer says he was paid $185.03 for six cancellations during March and April rather than the $840.03 due to him. He suggests that other class members can prove they were similarly shortchanged.

Breach of Fiduciary Duty

Farmer says Airbnb breached its fiduciary duties as the payment collection agent for hosts under the Airbnb payments terms of service. This breach occurred when Airbnb failed to remit the money it had collected from guests to the class members. Moreover, the plaintiff alleges that the defendant knowingly and intentionally acted “against plaintiff’s and class members’ interests, secretly profiting from its agency relationship, and failing to disclose to Plaintiff and class members all information relevant to the subject matter of its agency.”

Violation of California Unfair Competition Law

Finally, the complaint asserts that Airbnb engaged in unfair business practices under California’s Unfair Competition Law. According to the plaintiff, the systematic retention of funds Airbnb collected from guests for the purported benefit of hosts is an unlawful business practice under the law. Farmer also asserts that the defendant’s misleading and bad faith application of the ECP to allow them to retain funds that were neither paid out to hosts nor refunded to guests also violates the unfair competition law.

For hosts facing similar issues with Airbnb, this is a class action to keep watching and potentially join the future class.

 

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