JetSmarter agrees to settle Class Action Arbitration filing

JetSmarter remains the subject of individual lawsuits, however, up to 12,000 members may be eligible for cash and credits under a proposed Class Action Arbitration settlement.

By Doug Gollan, April 10, 2019

The jet sharing broker remains the subject of individual lawsuits, however, up to 12,000 members may be eligible for cash and credits under a proposed Class Arbitration settlement

We take an in-depth look at the value of the proposed settlement

Anyone who was a member of JetSmarter from September 5, 2014 until June 19, 2018 should be receiving a Notice of Settlement (Arbitration Matter No. 01-18-0003-3338) as part of a Class Action filed via arbitration last September. It’s estimated as many as 12,000 former and current members of the private jet plane sharing membership program could be eligible.

The proposed settlement offers members of the Class a net distribution of $2,975,000 plus potentially tens of millions of dollars in free membership extensions and flight credits.

The action was filed by Solowsky & Allen, P.L., a Miami law firm, which also apparently negotiated the settlement with JetSmarter. Requests for comment were not returned from either Solowsky & Allen or a second law firm listed on the settlement notice.

Why arbitration?

One lawyer not associated with any JetSmarter actions said there are various reasons to pursue a complaint via arbitration instead of the courts, including a faster resolution. JetSmarter also has a clause in its member contracts requiring arbitration that is being challenged in various lawsuits by filed by unhappy members.

According to the notice to members obtained Private Jet Card Comparisons, a hearing to decide approval of the settlement is scheduled for June 4, 2019. If approved, payment of claims would then take place soon after.

Using arbitration also means the lawyers representing the Class can request as much as 50% of the total settlement. In a normal Class Action through the court system, it could be 25%.

In this case, the filing states that the lawyers representing the Class are seeking up to $3,125,000 for themselves if the settlement is approved. The net payment to members is less as it is after administration expenses.

Terms were apparently only agreed recently and eligible JetSmarter members began receiving the notice last week.

How much will you get?

Potential compensation is based on what type of membership you held and how much more time you had on you membership on June 18, 2018.  There are four different groups.

There are four Sub-Class Members

Sub-Class 1 Members are set to receive one-year free individual JetSmarter memberships if the settlement is approved. The current value of a membership per JetSmarter’s website is $2,500 (below).

JetSmarter membership

Sub-Class 2 Members will receive one membership for up to four users or membership extensions and $9,000 of Creation Credits. Again, this is if the settlement is approved at the June 4th hearing.

Sub-Class 3 and 3A Members will receive $9,000 in Creation Credits, Resolution Credits and six months of free individual memberships or membership extensions..

How do you know which Class you’re in?

  • Sub-Class 1 Members are all Class Members who were JetSmarter members on or after September 5, 2014 and who ceased being members prior to December 31, 2016.
  • Sub-Class 2 Members are all Class Members who were JetSmarter members on or after January 1, 2017 and who ceased being members prior to June 18, 2018.
  • Sub-Class 3 Members are all Class Members who were JetSmarter members as of June 18, 2018.
  • Sub-Class 3A Members are all Sub-Class 3 Members who had at least six months remaining on their memberships as of June 18, 2018.

Two types of Credits

There are two types of Credits. One is called Resolution Credits. The other is Creation Credits. The value ranges from 15% to 50% of the seat cost, and there are rules governing the flights you can use them.

How do the Resolution Credits work?

Resolution Credits are reserved for Sub-Class 3 and 3A members. Sophisticated Members of the Class can use Resolution Credits for up to 50% of the total cost of a seat purchased on a “confirmed shared flight.” There’s maximum utilization of $6,000 for any single transaction.

The next sentence (below) states “Smart or other types of members can use the Resolution Credits for up to 50% of the total cost of a seat purchase, subject to a maximum of $3,000 for any single transaction.” This seemingly also refers to use on “confirmed shared flights” although it doesn’t necessarily say that.

How much will seats cost using Resolution Credits?

We found what we believe qualifies as confirmed shared flights (below) between New York and South Florida in April with member pricing between $1,595 and $1,975 each way. These are flights that JetSmarter has scheduled, so they are supposed to fly regardless of how many seats are sold.

Using Resolution Credits, one could book single seats on these flights for $797.50 and $987.50 each.

JetSmarter pricing

That’s still about three times more than United Airlines’ selling price of $277 for first class seats via Google Flights on that same date. Then again you wouldn’t be flying United Airlines, but a Challenger 850.

private jet charter price

We also found plentiful JetSuiteX flights between Los Angeles and San Francisco priced from $92 to $281 (below). The JetSmarter website designates them as “confirmed flights.” It’s unclear if these flights are part of the “confirmed shared flights” the settlement agreement specifies to use the Resolution Credits.

There are JetSuiteX flights from Los Angeles and San Francisco to Las Vegas as well, so, for anyone in those markets, the credits could be high value, if you can use your Resolution Credits for those flights.

JetSuiteX pricing

There was a single confirmed flight on April 12 during the next eight weeks between Orlando and South Florida (below). However, we are told crowdsourced flights pop up regularly, and members can set up notifications. If there are routes you plan to fly, it probably makes sense to review current availability and receive notifications.

JetSmarter May flights

The confirmed flight we found from Orlando to South Florida was priced at $195 on an eight seat Cessna Caravan 208 turboprop. That would be only $97.50 with the 50% discount (see below).

JetSmarter Florida routes

We reached out to JetSmarter to find out what routes it operates confirmed flights and the frequency of its confirmed shared flights, but didn’t receive a reply.

How many Resolution Credits will you get?

Resolution Credits are based on the number of days remaining for your membership on June 18, 2018. The document sites as an example, if a member paid $10,000 for their annual membership and there were 180 days remaining, they would be entitled to $5,000 in Resolution Credits.

For somebody who paid $90,000 for a multi-year membership and 90% of their membership remaining at that point, they would receive $81,000 in Resolution Credits.

What’s a “confirmed shared flight?”

I’m glad you asked. The term “confirmed, shared flight” doesn’t necessarily correspond directly to how flights are described on JetSmarter’s website.

For example, once a crowdsourced flight is confirmed, since it is a shared flight, is that then a “confirmed shared flight” eligible to use resolution credits? Are the JetSuiteX flights eligible?

If the answer to either is yes, it significantly expands the inventory of flights you could redeem the 50% discount that the Resolution Credits provide.

How do Creation Credits work?

Creation Credits for Sub-Class 2 and 3 Members can be used for up to 33% of the cost of a single seat purchase to create a crowdfunded shared flight or up to 15% of the cost to buy a seat on a pending crowd-funded flight. There are limits of $3,000 and $5,000 for any single transaction.

Looking between New York and South Florida (below), we found a price of $2,870 for a seat when creating our own flight ($3,560 less a $690 member discount) on April 18. Using a 33% credit, you could start a crowd funded flight for $1,923, however, you would need five other people to buy in for the flight to go.

JetSmarter crowdsourcing prices

On the same day was a flight with two seats already sold, so you could buy a seat on that flight at a 15% discount from the $2,870 advertised price, a savings of $430, and of course, hope enough other people bought seats so the flight would actually depart.

Bruce Baldinger, who represents over a dozen former members in lawsuits filed against JetSmarter, says, “My clients aren’t interested in paying thousands of dollars for something they already paid for that was supposed to be provided for free.” He says he expects to file several more lawsuits in the next couple weeks.

What about cash payouts?

Only Sub-Class 3A, those Sub-Class 3 Members who had at least six months remaining on their memberships as of June 18, 2018, are eligible for cash compensation from the pool of $2,975,000. See chart below.

JetSmarter Class Action payout schedule

In terms of cash payouts, Sophisticated members who had 30 or more months left under their memberships on June 18, 2018 would receive a minimum of $7,000. Those memberships were being sold for around $90,000 and several lawsuits were from members who bought in right before JetSmarter changed their model.

Sophisticated members who had 24 to 30 months left would receive $5,000, those with nine to 14 months remaining would receive $1,750, and members with six to nine months left on their membership would be eligible to receive $1,000 in cash.

Smart members with nine months or more left would get $450 while those with six to nine months left would receive a cash payment of $250.

Is it worth it?

A lot may depend on where you live and where you are planning on flying. However, first of all you would have to block out from your mind some of the million dollar numbers being bandied about in the various lawsuits that have been filed.

Those lawsuits use the value of past flights taken by the Plaintiff as reported by JetSmarter, not what the member actually paid. They then projected the value into future, making the case that those figures represented what the injured member would now have to pay to fly privately, in other words, their expense to replace the future services JetSmarter was obligated to provide and failed to do so. In some instances, a member who might have paid $15,000 received seats on private jet flights valued at several hundred thousand dollars.

As part of the proposed settlement, JetSmarter “strongly denies” the allegations. The agreement says the tech, social sharing start-up agreed to the settlement “because it wishes to put this matter behind it and move forward to serve its members as best as possible.”

A good deal on the West Coast?

Using Resolution Credits to get half off on JetSuiteX flights, which are already priced on par with commercial airlines but provide the convenience of using private terminals, could deliver very good value. JetSuite publishes an ongoing fixed schedule, so you don’t have to guess when you can use the credits.

Of course, that’s assuming the JetSuiteX relationship continues and that you can actually use the Resolution Credits for those flights. We could not get an answer, but that is a question anyone who is eligible for Resolution Credits should ask.

If you fly between New York and South Florida and can adapt your schedule to the JetSmarter confirmed flights, and are willing to pay about $1,000 each way, there’s value in not having to go through commercial airports.

Lastly, if you can use the Resolution Credits for the 50% discount on Crowdsourced Flights once they are confirmed, that could be a good value, but again, not crystal clear from my reading of the Settlement Agreement.

The future for Jetsmarter

Recently, there were reports that Vista Group, parent of VistaJet and XOJET was going to acquire JetSmarter. Vista Group executives declined to comment while JetSmarter asserted the sale rumors were being stirred up by competitors. One observer noted that if JetSmarter’s backers are willing to put up over $6 million for this proposed settlement, that’s probably a good sign that they see some light at the end of the tunnel.

What should you do?

According to the notice, if you do nothing, “You give up your right to bring action against JetSmarter.” One lawyer disputed that a non-response impacts future rights. He said, essentially you have three options: Take the settlement, file your own lawsuit against JetSmarter, or forget it ever happened and move on.

What will happen on June 4th?

The Arbitrator is Ellen Leesfield, a former judge with an extensive resume. She will review and consider the settlement and then if she feels it provides an equitable offer approve it.

Considerations, according to other lawyers I spoke with could include but aren’t limited to overall response from Class Members, objections and also how many Class Members have accepted the terms. She could also consider JetSmarter’s future viability. One lawyer told me an Arbitrator has the ability to take a fairly broad view if they want. It’s less about the law and what the Arbitrator feels is fair. He noted that it’s hard to appeal an arbitration ruling.

I would hope that one thing Judge Leesfield does is to clarify which flights the valuable 50% discount Resolution Credits can be used for. I think there also needs to be clarity about how long the credits are valid. Current JetSmarter policy is they expire 12 months after issuance or at the termination of one’s membership, whichever comes first.

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