In a rare case of a national class action going to trial, American Express Co. has defeated a consumer class action in California alleging that it overcharged customers as much as $310 million for travel insurance. The win was all the more unusual because it came at the end of the plaintiffs' 11-week trial presentation of evidence and without American Express putting on its case. Hoffman v. American Express Travel Related Services Co. Inc., No. 01-022881 (Alameda Co., Calif., Sup. Ct.).
Judge George Hernandez of the California Superior Court in Fremont, Calif., ruled on March 26, after hearing 11 weeks of testimony from the class of cardholders in a nonjury trial, that the cardholders failed to prove their case.
The suit alleged that American Express overbilled on travel insurance for cardholders who charged flights on their charge cards and that it allegedly used deceptive marketing of the program that misrepresented or was unclear about how the system worked.
Max Folkenflik of Folkenflik & McGerity in New York, an attorney for the plaintiffs, pledged to appeal the trial court ruling.
"We do indeed intend to pursue this," he said. "We are surprised and astonished there could be a rule of law that allows a company to take money that does not belong to it and allows it to keep the money if individuals do not catch it," he said.
In addition, he said a separate class action against American Express remains in the Eastern District of New York, representing 25 percent of the total class of customers. That case was stayed awaiting this trial outcome and it includes a civil racketeering claim not litigated in California.
"We think American Express' position was absolutely correct throughout the litigation and are gratified the judge analyzed the case to come out the way he did," said David Shapiro of the Oakland, Calif., office of Boies, Schiller & Flexner, who represented American Express.
"There are very few nationwide class action cases that go to trial and all the way to resolution. Amex has disputed the plaintiffs' contentions from the beginning," said Shapiro.
The California trial that ended on March 26 was the second phase of the long-running dispute. This phase centered on the deception marketing allegations. Hernandez had previously ruled in the first phase of the trial, which began in November, that the terms of the contract with customers were unambiguous under California law.
The lawsuit began in 2001. The California and New York suits cover roughly 7.5 million current and former American Express cardholders who purchased the travel-related insurance between 1995 and 2008.
The company charged a fee for airline travel purchased on its charge card and would sweep in inappropriate insurance charges for flights consumers later canceled, seat upgrades and baggage fees.
Consumers were given the opportunity to seek refunds through a form provided by the company or by calling for a refund, according to Shapiro. It was estimated that the company refunded about $140 million in the course of 13 years, he said.
Also representing the plaintiffs was Michael Brickman of Richardson, Patrick, Westbrook & Brickman in Charleston, S.C.
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Amex Wins Rare National Class Action Trial Over Allegations of Overcharging
The National Law Journal
March 31, 2009
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