Fraud Possible in Budget Car’s Fee-Based Rewards

(CN) - The car rental company Budget cannot dismiss claims that its rewards program came at a secret charge of 75 cents per rental day, a federal judge ruled.

While making an online reservation with Budget Rent a Car for Stephanie Klein on July 14, 2012, Daniel Klein says he was prompted to enter her United Mileage Plus number for the "perk" of earning frequent flyer miles at no additional cost.

Days later, however, Stephanie found in the car an itemized rental agreement, which - unlike her confirmation screen and email confirmation - included a 75-cent "FTP SUR" charge. The surcharge was also listed on receipts Stephanie received upon returning the car.

The Kleins filed a federal class action in New Jersey against Budget and its corporate stock holder, Avis Budget Car Rental LLC, on Nov. 27, claiming their website is designed to "bury" the surcharge. They assert claims for violation of the New Jersey Consumer Fraud Act, breach of contract and bad faith.

Last week, U.S. District Judge Jose Linares dismissed the claims against Avis, but said the Kleins can carry on suing Budget.

"Plaintiffs' unsupported claim that '[Avis Budget Car Rental] ABCR controls the Budget website' is, at best, a legal conclusion draped in the guise of a factual allegation," Linares wrote. "Fed. R. Civ. P. 12(b)(6) does not require the court to credit such a conclusion. Consequently, the court grants defendants' motion to dismiss all claims against ABCR without prejudice."

He preserved the claims against Budget by citing precedent from the 2012 decisions Mendez v. Avis Budget Group and Schwartz v. Avis Rent a Car System.

These cases show that a complaint must "support[] the plausible inference that defendant intentionally concealed information about a 75-cent per rental day surcharge for frequent-flyer miles and reward points," Linares wrote. "In the instant matter this court also relies on Mendez and concludes that plaintiffs have made a sufficient factual showing to support the plausible inference that Budget intentionally failed to disclose the surcharge."

Budget must also face a claim under the New Jersey Consumer Fraud Act.

"The complaint alleges Budget 'advertised' frequent-flyer miles and reward points at no additional charge to plaintiffs, the 'bait,' and then subsequently charged them, the 'switch,'" Linares wrote. "In light of these allegations, the court holds that plaintiffs have adequately pleaded a 'bait-and-switch' scheme."

Ambiguity will meanwhile keep the Kleins' contract and bad faith claims alive.

"The complaint raises a plausible inference that whether the contract in fact included the surcharge terms disclosed in the 'pop-up' window is ambiguous," Linares wrote. "The existence of such alleged ambiguity raises an issue of fact and, consequently, the court declines to dismiss plaintiffs' breach of contract claim at this time."

Headquartered in Parsippany-Troy Hills Township, N.J., Budget has more than 3,000 locations in more than 120 countries.

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