Vozzolo v. Air Canada

Background

Emilio L. Vozzolo, Thomas Piercy, and Barry Winograd brought consolidated proposed class actions on behalf of themselves and others similarly situated. They sought refunds for Air Canada tickets purchased for flights canceled because of the COVID-19 pandemic. Air Canada initially offered affected passengers travel vouchers rather than full refunds.

On April 13, 2021, Air Canada began a refund program covering eligible customers holding non-refundable or partially refundable tickets for flights canceled for any reason from March 1, 2020, forward. The parties accepted that the Refund Offer made the passengers’ claims moot. The court therefore considered only whether to preserve part of any refunds not yet paid for a possible attorney-fee award.

Legal standard

The court applied the common fund doctrine. That doctrine can allow attorneys’ fees to be paid from money recovered for the benefit of a group, even when there is no judgment on the merits and the defendant voluntarily provides the requested relief after the case becomes moot. For a fee claim in a moot case, the court must eventually decide whether the lawsuit was a substantial cause of the benefit obtained.

At the preliminary-injunction stage, the court did not finally decide whether the lawsuits caused Air Canada’s Refund Offer. It instead considered whether the plaintiffs showed irreparable harm, either a likelihood of success or sufficiently serious questions about their fee claim, and a balance of hardships that strongly favored them.

Analysis

The court rejected Air Canada’s argument that no common fund existed because the Canadian government’s financial assistance was structured as financing rather than as a fund formally set aside for refunds. The court held that the refunds themselves could constitute a common fund. It reasoned that eligible customers still existed who had paid for canceled flights but had not received refunds, selected vouchers, or used credits.

The court found irreparable harm because, if the plaintiffs later received a fee award, the fees would need to come from the refund fund or from people who benefited from the lawsuits. Once refunds were distributed, recovering small amounts individually from numerous customers would be impractical.

The court also found sufficiently serious questions about whether the lawsuits were a substantial cause of the Refund Offer. The plaintiffs submitted evidence involving Air Canada’s statements about litigation and regulatory exposure, government statements, press reports, and the Department of Transportation’s threatened and later-filed enforcement action. Air Canada submitted evidence and a statement from Kevin Strohmaier asserting that the lawsuits had “absolutely no bearing” on its decision. The court found that this conclusory statement did not establish the absence of a causal connection. The court noted that several lawsuits and regulatory actions existed, and that the timing of the Canadian government’s financial package could also have contributed to Air Canada’s decision. It stated that the ultimate causation question required a hearing because it involved Air Canada’s state of mind.

The court concluded that the balance of hardships favored the plaintiffs. Without an injunction, the refund fund could be fully distributed, leaving no practical source for a possible fee award. Air Canada’s concern that the government funding might not be used for fees was unsupported by cited evidence, and the court stated that the source of the money did not change the fact that Air Canada had created refunds available to affected passengers.

Relief ordered

The court granted the plaintiffs’ motion for a preliminary injunction. Air Canada was enjoined from distributing refunds that had not been paid to proposed class members as of August 12, 2021, unless 5% of those refunds was placed in escrow pending the court’s final decision on attorney’s fees. The opinion’s public version leaves the total refund amount and the corresponding escrow amount blank because the figures appeared in sealed filings.

The court did not require the plaintiffs to post a bond. It scheduled a hearing on causation for January 11, 2022, allowed discovery on causation, and required pre-hearing submissions concerning causation and the plaintiffs’ entitlement to attorney’s fees. The order did not finally determine whether the lawsuits substantially caused the Refund Offer or whether the plaintiffs were entitled to fees.