Coronavirus in Austin: SXSW sued over no-refund policy after cancellation

The company that puts on Austin’s internationally acclaimed South by Southwest festival is being sued over its no-refund policy, after the annual event was canceled this year because of the coronavirus pandemic.

The lawsuit was filed Friday in U.S. District Court in Travis County on behalf of two people who said they each spent more than $1,000 on entry fees to attend but were denied refunds. It seeks class-action status on behalf of potentially “hundreds of thousands” of others similarly rebuffed.

The plaintiffs, “on behalf of themselves and all other persons who purchased wristbands, tickets, passes, and badges to the 2020 South by Southwest festival, bring this action for breach of contract and unjust enrichment in order to recover (money) paid for a festival that never occurred,” the suit says.

SXSW LLC, the company behind the annual festival, said in a written statement Saturday that it lacks the financial resources to issue refunds.

“Due to the unique nature of SXSW’s business, where we are reliant on one annual event, we incurred extensive amounts of non-recoupable costs well in advance of March,” the statement said.

“SXSW, like many small businesses across the country, is in a dire financial situation requiring that we rely on our contracts (agreed to by would-be attendees at the time of purchase), which have a clearly stated no refunds policy. Though we wish we were able to do more, we are doing our best to reconcile the situation and offered a deferral package option” allowing people to use their entry fees to attend in future years instead, it said.

The SXSW festival, which annually attracts more than 100,000 music fans, technology buffs and pop culture enthusiasts to Austin, had been scheduled to take place March 13-22 this year.

Amid mounting coronavirus fears, however, the event was effectively canceled by the city a week before its scheduled start when Mayor Steve Adler declared a public disaster related to the pandemic. Prior to Adler’s decision, SXSW organizers faced significant public pressure to scrap it this year to prevent the huge festival crowds and influx of attendees from potentially spreading the virus. About 55,000 people signed a Change.org petition asking that the festival be called off.

The list price of SXSW platinum badges — the event’s most expensive credentials to attend — was $1,600 this year, although discounts were available for early purchases.

SXSW’s official policy states that it doesn’t issue refunds “under any circumstances.” Still, the company announced following the cancellation that it would allow people who had already paid for credentials to defer their badges to any of the next three annual festivals from 2021 to 2023, and to get 50% off the walk-up rate in any of those years.

But the plaintiffs named in the recent lawsuit — Massachusetts resident Maria Bromley and Colorado resident Kleber Pauta — want their money back. Bromley spent $1,600 on a platinum badge and $70 for “meals and merchandise,” according to the suit, while Pauta spent about $1,020.

They “do not necessarily plan to attend future festivals,” the lawsuit says. “And even SXSW has acknowledged that future festivals may not occur.”

SXSW co-founder and CEO Roland Swenson previously has said that the company — which lacked insurance coverage for cancellations triggered by “bacterial infections, communicable diseases, viruses and pandemics” — incurred large financial losses because this year’s event couldn’t go forward, and it laid off about a third of its 175 year-round employees last month.

But the company also has said it’s still aiming to hold the event in 2021.

“The pandemic and the cancellation have caused a tremendous loss to our business, our staff, the city, and its citizens,” the company said in its written statement Saturday. “We are still picking up the pieces after spending a year to program what would have been a remarkable event that required significant time, energy, and resources to produce.”

Regardless, the lawsuit calls SXSW’s no-refund policy “an unenforceable, illusory, unilateral option contract that allows SXSW to sell credentials, cancel the festival for any or no reason whatsoever, and retain all customer payments while leaving (would-be attendees) without a remedy.”

It seeks refunds and “equitable monetary relief” for the plaintiffs, as well as interest and attorneys fees. The suit was brought by Austin law firm Howry Breen & Herman LLP, Pennsylvania firm Sauder Schelkopf LLC and Chicago firm Cafferty Clobes Meriwether & Sprengel LLP.

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