The 10 Biggest American Airlines Lawsuits in Company History
American Airlines is one of the biggest airlines in the United States. The US Department of Transportation classifies it as a major airline carrier because it generates more than $1 billion in revenue annually. Its headquarters are in Fort Worth, Texas. It is also the biggest airline in the world by fleet size and passengers. American Airlines and affiliates have a wide-ranging domestic and international flight network operation.
This includes more than 6,000 flights daily going to over 300 destinations in 48 countries. American Eagle is one of its subsidiaries and is in charge of the airline’s regional services. The two airlines operate from ten hubs in the country, but the American Airlines headquarters in Fort Worth is the biggest hub. Annually, the Airline gets more than 200 million passengers on average, with 500,000 people traveling with American Airlines and its subsidiaries.
American Airlines’ revenue in 2021 was $29.8 billion, up 72% from 2020 when it made $17.3 billion. With immense success and being a billion-dollar company comes many responsibilities towards your passengers and employees. The Airline employs more than 130,000 people. A company handling over 500,000 people daily is bound to get into trouble. From time to time, American Airlines has violated some laws, discriminated against some people, and even illegally charged others for services. These violations have seen the company face many lawsuits and pay millions of dollars in settlements over the years. Here are ten of the biggest lawsuits that American Airlines has faced.
10. Steven Rothstein v. American Airlines (Breach of Contract for a lifetime AAirpass)
Steven Rothstein, a former Investment banker from Chicago, filed a lawsuit against American Airlines for breach of contract after the airline terminated his lifetime AAirpass. He purchased a lifetime AAirpass from the airline for $233,500 in October 1987. Two years later, he used another $150,000 to purchase an additional companion pass which allowed him unlimited first-class travel with a companion for the rest of his life. The then American Airlines CEO even wrote him a letter promising to honor their deal for a long time. In December 2008, Rothstein tried to board a plane with a friend when the airline informed him they had revoked his lifetime pass.
Steven then sued the airline for breaching their agreement, but American Airlines countersued Rothstein for fraud and breach of contract. The airline accused Rothstein of Fraudulently using his pass by reserving companion seats even when he did not travel with one. They claimed that Rothstein’s fraudulent actions cost the company approximately $58,650. In 2011, the court upheld American Airlines’ decision to revoke his AAirpass, finding that the Airline reserved the right to cancel his ass if they felt his conduct was fraudulent.
9. Sylvia Varga v. American Airlines (Overdraft credit fees) – $1.59 million
Sylvia Varga sued the American Airlines Federal Credit Union for charging overdraft fees to its clients. The lawsuit, which reached class-action status with over 26,000 members, alleged that the credit union charged her and several other members unnecessary banking fees, including overdraft fees, NSF bills, and APPSN charges. The class action lawsuit alleged that that went on for over four years.
The credit union’s actions were in breach of contract and breach of good faith signed between the union and its clients. American Airlines FCU denied all wrongdoing in the case but admitted to charging its clients the alleged banking fees only within legal limits. The American Airlines FCU proposed a $1.8 million settlement for the lawsuit. The class members shared $1.59 million while the credit union forgave $175,807 in unpaid overdraft fees as long as the class members would not take further action.
8. The US Airways Inc. v. Sabre Holdings Corp (Antitrust lawsuit for unreasonably restraining trade) – $5 million
In 2016, a jury decided in favor of American Airlines and awarded the company $5 million against airline booking service provider Sabre Holdings Corporation. US Airways merged with American Airways in 2013, with American Airways Corporation owning 72% of the airline until 2015, when the two companies split up. In 2011, before the merger with the AMR Corporation, US Airlines filed an antitrust lawsuit against Sabre.
The lawsuit accused the airline booking service of hurting competition and charging the airline excessive booking fees. The Airline also accused Sabre of conspiring with the airline’s competitors to not compete with each other, but a jury rejected the claim. According to Travel Weekly, the jury found Sabre liable for irrationally restraining trade through its actions and awarded a $5 million settlement to American Airlines. Initially, the airline sought at least $44 million in damages.
7. Max Bazerman et al. v. American Airlines, Inc. (Charging to check bags) – $9 million
In 2017, Max Bazerman sued American Airlines for breach of contract, alleging that the airline had promised frequent flyers free bag checks, but then it charged him and several others. The lawsuit stated that the airline had told some passengers they could have up to three free bag checks, but when they arrived at the airport ready to enjoy their privileges, the airline told them to pay for them. According to Bazerman, the airline had offered him two free bag checks due to his platinum status, but when he tried to check into his flight with his bags, he was forced to pay for his bags to be checked. The class action alleged that clients who were AA members and those with “elite” status with the airline’s subsidiaries and partners were promised free bag checks upon purchasing AA flights. But some people who promised the free service were instead charged between $25 to $200.
A Massachusetts judge approved the settlement in 2019, which came to approximately $9 million. According to GBDH Legal, verified class members would receive a full refund and interest or a 75% refund. The 191,025 class members would receive approximately $6.8 million, and attorneys representing the class action members would receive at least $2.25 million.
6. Equal Employment Opportunity Commission v. American Airlines Inc. (Disability Discrimination) – $9.8 million
The Equal Employment Opportunity Commission sued American Airlines and Envoy Airlines, one of AA’s biggest regional subsidiaries, for disability discrimination. After conducting its investigations, the EEOC found that the two companies illegally denied accommodating hundreds of employees who were getting back to work after sick leave. The companies violated the Americans with Disabilities Act when they decided to enforce a policy that stated that employees must have no restrictions when they returned to work after their medical leave. The policy allowed AA and Envoy Airlines to fire employees with said restrictions before determining if any accommodations would allow the employee to return to work.
In 2017, American Airlines agreed to settle the discrimination allegations by paying $9.8 million in shares to eligible class members, about 1500 current and former company employees. In addition to the settlement, the companies were required to implement policies to ensure they didn’t discriminate against people with disabilities.
5. Main et al. v. American Airlines, Inc et al. (Violating the Employee Retirement Income Security Act) – $22 million
In 2018, American Airlines and its former subsidiary American Beacon agreed to pay $22 million to settle a lawsuit against them that accused the companies of mismanaging employee 401(k) plans. The class action suit alleged that the airline violated its fiduciary duties when it decided to load the 401(k) funds to American Beacon. This company had financial ties to AA and had higher fees compared to other better-performing funds that were looked over by American Airlines.
American beacon was founded by AMR Corp, which is American Airlines’ former parent company. AMR Corp sold American Beacon to Lighthouse Holdings in 2008 and acquired an ownership stake in the company. According to the class action, the selection by American Beacon Funds over other better and cheaper alternatives cost the participating employees millions in the five years that the retirement plan was still under the American Beacon Fund.
The plaintiffs accused the defendants of violating the 1974 Employee Retirement Security Act. According to Nichols Kaster, the law firm representing the plaintiffs, the court upheld all claims made by the plaintiffs and the defendants and agreed to pay $22 million to the class members.
4. United States Postal Service v. American Airlines (Falsely reporting mail delivery times) – $22.1 million
In 2019, American Airlines agreed to settle a lawsuit brought against it by the United States Postal Service under the False Claims Act. The lawsuit accused American Airlines of sending USPS altered scans of when mails arrived at different locations. USPS had contracted the airline to take receptacles at six locations and then deliver them to international and domestic countries. The receptacle locations included several overseas State Departments and the Department of Defense locations.
To be paid, AA had to send electronic scans of when they delivered the mail to its destinations. Otherwise, the contract imposed penalties for mail that arrived late and ones that the airline delivered to the wrong destination. USPS sued American Airlines for illegally altering the time-stamped scans to avoid penalties. According to the DOJ, the airline agreed to settle the case with $22.1 million.
3. United States v. American Airlines (violating safety regulations) – $24.9 million
In 2013, American Airlines and three of its subsidiaries agreed to pay $24.9 million to settle claims by the Federal Aviation Administration accusing the companies of violating several safety regulations. The other companies included in the lawsuit were American Eagle Airlines, Eagle Aviation Services, and Executive Airlines. In 2008, the FAA issued directives to all airlines operating McDonnell Douglas MD-80 planes to modify a few wiring harnesses.
Between March and April, the regulator conducted inspections and found that all American Airlines MD-80 planes had not been modified properly, forcing the airline to ground its entire fleet of MD-80s. In 2010, the FAA proposed a $24.9 million fine on AA and its subsidiaries for the safety issues found in their planes. The airline appealed the proposed penalty claiming that the FAA had blown the charges out of proportion and that it never compromised the safety of passengers.
In 2012, FAA filed bankruptcy claims against AA and its subsidiaries for more than $160 million. AA chose to settle the claims with $24.9 million. The regulatory body held $24 million against American Airlines, and the rest of the settlement was against the company’s three subsidiaries included in the suit.
2. United States v. American Airlines (Consumer antitrust lawsuit for scheme to drive u fares) – $45 million
In 2018, American Airlines agreed to pay a fine of $45 million to settle a lawsuit accusing the airline of scheming with other airlines to drive up fares by limiting capacity. American Airlines, Delta Airlines, Southwest Airlines, and United airlines were all mentioned in the antitrust class action lawsuit. The lawsuit claimed that the four airlines had signed mergers that allowed them to control at least 80 % of the domestic flight markets. These allowed them to get rid of unprofitable flight routes and fill more seats on planes while also limiting flights and flight capacities to drive up the cost of fares, which in turn increased profits.
According to CourtHouse News, even though the airline did not admit to any wrongdoing, American Airlines agreed to pay the $45 million fine to the federal government. The agreement was made six months after Southwest Airlines had settled the allegations for $15 million. American Airlines vehemently defended its innocence, citing the costly attorney fees for litigation and showing that it had increased flights and flight capacities in contrast to the allegations against them.
1. Cantor Fitzgerald v. American Airlines (Business and Financial losses from 9/11) – $135 million
Cantor Fitzgerald, a financial firm that suffered catastrophic losses during the 9/11 terrorist attacks, filed a lawsuit against American Airlines in 2004. The company accused American Airlines of negligence for failing to prevent terrorists from boarding their plane. Cantor Fitzgerald company was located on the top floors of the world trade center before the terrorist attacks. After an American Airlines flight crashed into one of the towers, the company lost over half its workforce. 685 of its 1000 employees died in the attack when the plane struck the top five floors of the building. The total death toll from the attacks was almost 3,000.