Law360 (January 22, 2021, 6:37 PM EST) -- Airbnb has asked a California federal court to compel arbitration in a proposed class action challenging the home-sharing platform's purported failure to properly repay hosts and guests for canceled bookings during the COVID-19 pandemic, saying the dispute's claims must be arbitrated under an agreement the parties signed.
Airbnb Inc. and its payments arm argued in their Thursday bid to compel arbitration and dismiss Anthony Farmer's suit that the former Texas-based host signed terms of service documents that governed his contractual relationship with the company and effectively assented to the TOS arbitration provisions.
Farmer last summer had already sought a currently pending arbitration against Airbnb before the American Arbitration Association, seeking $1,000 in compensatory damages, according to Airbnb. But after Airbnb answered his arbitration demand and paid $3,200 to the AAA for filing and arbitrator compensation fees, Farmer improperly attempted to withdraw his claims from arbitration so he could pursue his lawsuit, Airbnb said.
"Assent is unquestionably established here," Airbnb said. "Plaintiff admits that he was required under the TOS to arbitrate his claims, and he in fact initially filed a demand in arbitration, thereby conceding that he assented to the TOS and the arbitration agreements contained therein."
Farmer filed suit in federal court on Nov. 5, saying the action's amount in controversy exceeds $5 million, as there are more than 100 members in the proposed class. He claims that he is "one of the hundreds of thousands of hosts" shortchanged by Airbnb when the pandemic hit. Farmer seeks to compel Airbnb to make a full accounting to hosts and pay them what the company has allegedly promised.
When the coronavirus hit U.S. shores last year, Airbnb told guests they could cancel their reservations for a full refund and no cancellation fees, the suit said. The company then passed on the cost to hosts by saying it was establishing a $250 million fund to help refund them for canceled bookings but actually paying them with their own money as it attempted to burnish its reputation ahead of an initial public offering.
"Airbnb is planning an IPO for later in the year and needed the positive press," Farmer's suit said. "But that press came at the expense of hosts, who had negotiated their own cancellation policies with guests and were hurt as much as anyone by the pandemic's sudden impact on travel."
On Dec. 1, Airbnb launched an estimated $2.4 billion IPO, telling regulators that it planned to offer 51.9 million shares at between $44 and $50, raising $2.4 billion at midpoint and valuing the company at more than $30 billion. Based on that projection, Airbnb's offering would be among the largest U.S. IPOs in 2020 by an operating company.
Behind the scenes, Airbnb did not issue full refunds to guests as it had promised, according to Farmer's suit. Instead, the company rejected many guests' refund requests, issued some partial refunds and forced others to accept travel credits that expire in 2021, the suit said.
"Airbnb then kept the remaining funds for itself — ignoring its fiduciary and contractual obligations to remit any such money to hosts," according to Farmer's suit.
An Airbnb spokesperson on Friday told Law360 that the company stood by a statement it made when Farmer filed suit, saying that when the World Health Organization declared COVID-19 as a global pandemic, the company decided to activate its longstanding extenuating circumstances policy and provide full refunds to eligible guests.
According to Airbnb, extenuating circumstances under the policy and the terms of service supersede hosts' cancellation policies, and include "unexpected serious illness," "travel restrictions imposed by a government" and "epidemic disease or illness."
"Public health and safety comes first," Airbnb said in the statement. "While we know [the extenuating circumstances policy] had a significant impact on bookings and revenue for our host community, we still believe firmly that it was the right thing to do. The allegations in this complaint are completely frivolous and without merit."
Counsel for Farmer did not immediately respond Friday to a request for comment.
Farmer is represented by Michael L. Schrag, Geoffrey A. Munroe and Joshua J. Bloomfield of Gibbs Law Group LLP; and Enrico Schaefer and Adrianos Facchetti of Traverse Legal PLC.
Airbnb is represented by Jonathan H. Blavin, Hailyn J. Chen and Katherine G. Incantalupo of Munger Tolles & Olson LLP.
The case is Farmer v. Airbnb Inc. et al., case number 4:20-cv-07842, in the U.S. District Court for the Northern District of California.
--Additional reporting by Tom Zanki. Editing by Peter Rozovsky.
By Joyce Hanson