Protecting the traveler, and sometimes the travel industry

The California Legislature enacted the Seller of Travel statutes in 1995 to provide restitution/refund of payments for consumers located in California who suffered losses as a result of bankruptcy, cessation of operations, insolvency, or material failure of a seller of travel to provide the transportation or travel services for which they had contracted (see Bus. & Prof. Code Sections 17550, et seq.). In keeping with this objective, the Seller of Travel Law created the Travel Consumer Restitution Fund. The Travel Consumer Restitution Corporation (TCRC) was created to manage the fund.

While the key objective of the new law was to protect consumers, certain provisions may protect sellers of travel as well, especially in the event that a traveler files a claim with the TCRC and then seeks to also file a lawsuit. The filing of a TCRC claim may bar the subsequent lawsuit. In defending lawsuits filed against sellers of travel alleging failure to provide transportation or travel services, it is important to determine whether plaintiff filed a TCRC claim. But first, how does a traveler make a claim to the TCRC?

Restitution for Consumer

California consumers who contract with a seller of travel and sustain one of the enumerated travel-related losses covered by the Seller of Travel Law may be entitled to restitution from the fund. The statute defines a seller of travel as persons who sell, provide, furnish, contract for, arrange, or advertise that they arrange, or have arranged, enumerated transportation or travel services including air or sea transportation, or land or water vessel transportation, other than sea carriage, either separately or in conjunction with other travel services, if the total charge to the passenger exceeds $300. In other words, when a consumer pays a seller of travel for transportation or travel services and does not receive what he or she paid for, that consumer may be entitled to restitution.

Making a Claim

Making a claim to the TCRC for payment from the fund is a relatively easy process, made easier by the availability of an online claim submission process. After describing the claim, including the amount and basis, providing documentary evidence to support it, and paying the minimal processing fee, restitution is potentially only a few clicks away.

There is also a procedure for reconsideration and appeal of a decision denying a claim. The notice of appeal is filed with the clerk of the superior court either in the county in which the principal place of business of the TCRC is located, or in the county in which the claimant was a resident at the time the claimant purchased the services in dispute. Proceedings in the superior court pursuant to an appeal are subject to certain limitations however, including that the record is limited to the record before the TCRC, pretrial discovery procedures available in civil actions are not permitted and there is no right to a jury trial.

Claims or Lawsuits

Although this process provides a relatively straightforward and expedited means by which to seek restitution, the number of claims filed with the TCRC each year is relatively low. From July of 2014 through June of 2015, only 127 claims were filed, and from July of 2015 through June of 2016, only 34 claims were filed. The reasons are unclear although it may result from the limitation on damages ($15,000 per person) or the fact that by filing a claim with the TCRC, the traveler may waive the right to bring an action in law or equity (TCRC waiver). This includes small claims actions. In other words, a consumer who files a claim with the TCRC for a refund payment for transportation or travel services not received, cannot turn around and file a lawsuit against the seller of travel.

While California case law addressing this TCRC waiver is extremely limited, the import of the TCRC waiver is that lawsuits filed against sellers of travel for failure to provide enumerated services where plaintiffs already filed a claim with the TCRC, may be dismissed for lack of jurisdiction (courts have dismissed with and without prejudice). On occasion, a plaintiff may name an individual associated with the seller of travel personally, such as an owner or employee, in an attempt to circumvent the TCRC waiver. This is an end run around to California law, and counsel should argue that it is ineffective to save the lawsuit.

In light of the potential applicability of the waiver to a lawsuit in which a plaintiff already filed a claim with the TCRC, counsel defending sellers of travel should determine at the outset of a lawsuit whether plaintiffs previously filed a claim and obtain all related information and documents. If such information and/or documents are not available from the client, counsel defending sellers of travel should keep the potential existence of a TCRC waiver in mind when conducting discovery, to ensure this potential defense is not overlooked. This is especially true in small claims and limited jurisdiction actions in light of the TCRC's $15,000 per person limitation on recovery from the fund.

Until case law addressing the TCRC waiver develops, there is no certainty as to how different courts will handle its effect on subsequent lawsuits. Even so, in the event of a lawsuit, it is important for counsel who defend sellers of travel to ask whether plaintiff made a claim to the TCRC. If a claim was made, this may support an argument that the court lacks jurisdiction. While this certainly does not ensure a final victory for the seller of travel, it is an important argument that could potentially lead to a dismissal without prejudice at a minimum.