Hidden Fees Claims May Stick to Avis Budget

(CN) - The parent company of Avis must face claims related to secret charges customers allegedly incur while earning frequent flyer miles and other reward points, a federal judge ruled.

In a 2011 class action, lead plaintiff Edward Schwartz claimed that Avis Rent a Car Systems "makes customers believe that it will provide them frequent-flyer miles or reward points at no additional charge while unnoticeably charging them for these miles or points" earned with vehicle rentals on the Avis website. His first amended complaint asserts violations of the New Jersey Consumer Fraud Act, breach of contract and bad faith, and seeks damages, an injunction and declaratory relief.

Daniel and Stephanie Klein filed similar claims against Budget Rent a Car and its corporate stockholder, Avis Budget Car Rental, in New Jersey about a year later. They claimed that Budget's website is designed to "bury" a 75-cent surcharge for earning frequent flyer miles.

Though U.S. District Judge Jose Linares dismissed the claims against Avis on May 2, he said the Kleins could carry on suing Budget.

Schwartz's fraud claim is the sole count remaining against Avis after surviving two attempts at dismissal. With class certification on the horizon, the company identified three employees of its parent, Avis Budget Group Inc. (ABG), as persons likely to possess discoverable information. During their depositions in February, Schwartz allegedly learned that the employees were directly responsible for the Avis website, rental agreement and frequent traveler program.

Although the court had previously set Sept. 15, 2012, as the deadline to propose adding new defendants or amend the pleadings, U.S. Magistrate Judge Michael Hammer authorized Schwartz to amend his complaint a third time to add Avis Budget Group on May 20.

"The court finds that plaintiff acted with diligence in seeking leave to amend to add ABG," Hammer wrote. "Plaintiff did not know at the outset of the litigation the relationship of ABG and Avis as it is relevant to the facts of the case. Defendant included ABG employees in its Rule 26 disclosures and because discovery was delayed, the depositions of those ABG employees only recently took place. It was during those depositions that plaintiff learned of ABG's oversight and management of the Avis.com website and the Avis frequent traveler program. And only then did plaintiff have enough information to bring a claim against ABG."

The judge held that Schwartz's proposed complaint "states the same allegations, which the court has deemed sufficient, against an additional, albeit related, party."

"Avis argues that by adding ABG, plaintiff is improperly attempting to 'pierce the corporate veil,'" Hammer wrote. "The court disagrees. The proposed third amended complaint does not state a claim for indirect or vicarious liability against ABG based on the actions of Avis Rent a Car System Inc. Rather, plaintiff alleges that ABG is directly liable for the same misconduct he has alleged against Avis. This conduct concerns the Avis website, and plaintiff alleges that ABG controlled the website with Avis from the corporate headquarters that they shared. As noted earlier, the website is central to the plaintiff's allegations because the reservation process that he used with Avis was web-based; indeed, '[t]his lawsuit currently concerns only vehicle rentals made through www.avis.com.'"

The judge later added: "Because plaintiff is alleging that ABG, as well as Avis, had control over the website, and the content and omissions of the website give rise to the alleged fraud, the allegations of the proposed third amended complaint directly implicate ABG."

Merits-based discovery has not begun, according to the ruling.

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