Debit memos coming hot, heavy and 'stupid'
Debit memos coming hot, heavy and 'stupid'
NEW YORK -- Travel lawyers, from their unique vantage point in the industry, report an increase this year in the number of airline debit memos, the dollars demanded in the debit memos and illogical justifications for debit memos.
As travel attorney Mark Pestronk put it, there is a greater incidence of "stupid debit memos," of agent explanations "rejected stupidly" by the carriers and of agents saying "let them lift the plate."
He said he also has heard of a new phenomenon that he calls the "anticipatory debit memo," whereby the airline sends out the debit memo before the expected offense has even occurred.
He told of an agent who said he received a debit memo related to a roundtrip discount ticket, ostensibly because the client only needed a one-way ticket, which would have cost more. But the debit memo was issued before the roundtrip return date.
For each ticket handled by ARC, American charged the agent a $200 fee. It began collecting those fees, the court papers charged, by extortionate means and in violation of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. The lawsuit, intended as a class action, seeks an injunction to stop the collections, recovery of all American's "ill-gotten gains," and treble damages.
The central question in many debit-memo cases, Platisha said, is whether the debit amounts related to real losses or harm to the airlines.
Citing the All World suit, she said agents used standard procedures, so if they did not know in a timely fashion that American wanted direct dealings, "What is the problem?"
Similarly, when airlines issue debit memos related to back-to-back ticketing, Platisha said, "going for the value of full-fare tickets is out of line." These claims are not related to the airlines' actual injury, she said.
United earlier this year warned agents it would crack down on back-to-back abuse. Since then, Platisha said, she has seen United claims that soared past $500,000 against individual agencies in connection with back-to-back ticket usage.
Travel attorney Alexander Anolik, who characterized United's debit memos as "out of hand," said they aren't just about back-to-backs. And United isn't the only offender, he said, when it comes to six-figure debit memos.
Most often, Anolik said, the big memos originate with a salesperson who gave an agency a waiver for a specific fare. But in those instances, he said, the sales staff hasn't communicated with accounting, and the salesperson may have resigned or been laid off.
Alternatively, he said, he negotiates, citing a recent case involving Continental. He said the agency had been authorized to use a specific fare for conventioneers, but the carrier later debited the agency for $820,000. The agency will settle for $25,000, he said, so it can keep the carrier's plate.
Ironically, Pestronk said, sometimes larger agencies are in a weaker position because they need to keep a carrier's plate and, when the airline with the claim is paying overrides, the carrier may withhold the claimed amount from the overrides.
He said he has cases where the agency (call it Agency A) that gives up a carrier's plate has gone to another firm (Agency B) for tickets, sharing related service fees and so on.
Anolik said all the majors have at one time or another made buys from one or more Agency As in order to determine if and how the agencies are selling the carrier's seats after a plate has been lifted. When they identify Agency B, he said, they have inhibited the plating ability for that agency, too.
He said this is "not new, but more intensified, more blatant" now. He also said he believes it is "criminal" to cut off Agency B, "as long as there is no funny business" with the pricing or handling of the tickets.
Anolik said he has succeeded in getting some Agency Bs reinstated by threatening civil action and "suggesting the [carrier's] attorney consult with a criminal lawyer" about the appropriateness of canceling Agency B.
Also, he advised, the Agency As have to tell prospective Agency Bs what is going on or risk liability if Agency B has trouble with a carrier.
"The main issue is whether travel agents can be held liable for the independent acts and decisions of third parties -- their customers," said Linda Platisha, the attorney who filed the suit.
The court filing also charged American with a pattern of debit memos "for amounts exceeding nine times the value of the original ticket, or up to 100 times the actual commission paid to the travel agency." Such amounts, the suit said, "have no relationship to any actual damages incurred..., but rather represent a penalty designed in part to force [travel agents] out of the business."
Platisha said the judge took 20 months to deny an American motion to dismiss. A request for class-action certification is pending.
All Direct described an instance where it proved Delta had issued a debit memo in error; as a result, the agency said, Delta reduced the fee to $100 to cover the costs of investigating its own mistake. The plaintiffs said debit memos have been for up to 150 times the agency's commission and nine times the face value of a ticket -- well beyond the airline's actual losses.
The plaintiffs estimated that Delta collected more than $50 million in such "illegal penalties" from ARC agencies since Sept. 20, 1997. The purpose, they said, is to make it so difficult for agents to sell air tickets that customers will have to buy direct.
The plaintiffs are seeking class-action status, triple damages for all affected agencies plus injunctive relief from certain memos.
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