What Travel Advisors Need to Know About “Sleeper” Laws

My attention was recently called to a report from a Massachusetts-based law firm that specializes in, among other areas, travel law, referencing what I call “sleeper laws.” That label refers to laws and regulations on the books in various states that were usually adopted a long time ago and are often forgotten. Until they’re not. These laws and regulations are different from the active regulatory regimes in states like California and Florida.

The law firm, Smith Duggan Buell & Rufo LLP, has offices in Boston and Lincoln, Mass. Their report is contained in a general communication to clients and is not on their website. The essence of it is clear.

The Massachusetts Attorney General adopted a regulation in 1996 that imposes significant and potentially costly obligations on creators and sellers of travel packages sold in Massachusetts or sold to a Massachusetts resident. In substance, if a change in the package itinerary or services occurs, the consumer must be offered three choices and the consumer may choose in her sole discretion which option she wants.

The options are: (1) cash refund for the “fair market value” of undelivered services; (2) a specific substitute service of equal or greater value; or (3) a specific substitute service of lower “fair market value” plus a cash refund of the difference. If the package creator/seller violates the rule, an aggrieved consumer may sue under the state’s consumer protection statute (Chapter 93A) for multiple damages and attorney’s fees.

Any law requiring identification of the “fair market value” of services is highly problematic and likely to lead to lengthy and costly conflicts. The good news is that the Massachusetts regulation appears on its face to apply only to what are called “tour operators” and not to travel advisors who play no role in constructing the travel program and serve only as retailers of the services packaged by others.

Massachusetts is not alone.

In New York City the current Administrative Code indicates that § 20-744 dealing with “Procurement or sale of tickets, reservations or passenger accommodations,” is still in effect. That astonishing piece of old law states:

1. the purpose of the regulation is “safeguarding the public against fraud, extortion, exorbitant rates, and similar abuses.”
2. declares it unlawful to charge a “service fee” [using contemporary terminology] of more than “one dollar” for procuring a railroad, cruise line [the regulation refers to ‘steamship company’], air or bus line “ticket over the established tariff charge or charges therefor.”
3. More bizarrely, the rule adds that “intent” to charge more than a dollar is an essential element of the offense but that proof of payment in excess of one dollar is itself “presumptive evidence of the intent.”
4. the rule further outlaws the marking up of the price of any covered transportation ticket “over the established tariff charge or charges therefor.”

There are so many problems with this regulation that it would require a much longer dissertation to cover them all. Suffice to say for present purposes that it defines “established tariff charge” as “the charge set forth in the tariff as published and filed by the railroad, parlor or sleeping car owner or operator, steamship company, airline or bus line involved.” Since most transportation services today do not file and are not required to file tariffs, it is possible that the entire regulation is invalid, especially since the regulation purports to make violations into misdemeanor crimes punishable by “a fine not exceeding one hundred dollars or by imprisonment not exceeding ten days or both, for each separate offense.”

The rule goes further and requires the manager of every travel agency and hotel in New York City to post its terms in a “conspicuous place upon the premises of the agency or hotel for the information of patrons, guests and members of the public at large.” And, oh yes, the rule does not apply to sales of travel to “tickets, reservations or passenger accommodations: … to or from places outside of the continental United States and Canada, excluding Alaska” and does not apply to “existing written contracts between any travel agency with corporations, firms or government agencies covering tourist or travel services.”

Obviously, the New York City regulation is “out of its time” and there is no evidence of its enforcement after World War II. Any attempt to enforce it by the city would face many strong defenses. The regulation contains no evidence of intent to make it enforceable by private parties.

The point is that there may be other “out of time” laws in the codes of the states. ASTA, the industry’s trade association, has identified and analyzed some of the principal regulatory schemes in a series of papers available to members at ASTA.org. Others may exist.

The Massachusetts regulation is a classic example of misdirected remedies. For example, as the law firm memo describes, the court cases indicate that there are no realistic defenses such as “force majeure, governmental activity, the impossibility of performance and, of course, notwithstanding contrary refund language in otherwise valid terms and conditions.” Thus, supplier cancellation of services during a pandemic places the retail travel advisor in the sights of any consumer that wants to take advantage of the situation by suing the party that sold them the services. Contract terms and even express waivers cannot apparently override the consumer’s rights in this regard.

The practical effect of the Massachusetts regulation is daunting and advisors in that state may want to consider seeking legislation to realign the equities involved. Travel advisors should not be held responsible for supplier actions over which they have no control.

In other states, advisors should consult their local counsel to be sure there is no “sleeper” law buried in the state code waiting for an aggrieved consumer to find it.