Travel CUTS lawsuit settled
AMS and three other student governments obtain 24 per cent ownership of Travel CUTS as part of settlement
A settlement has been reached in the decade-long Travel CUTS lawsuit between the plaintiffs including the AMS and the Canadian Federation of Student-Services (CFS-S).
The settlement will see the ownership of the Canadian Universities Travel Service (Travel CUTS), a travel agency geared toward low-budget and student travel, divided between a newly-formed non-profit corporation and its current owners, the CFS-S.
CFS-S will maintain 76 per cent ownership of Travel CUTS, with 24 per cent ownership being transferred to the new non-profit corporation on Mar. 31.
The new corporation will be composed of all non-CFS-S members such as the AMS who were members of the now-defunct Association of Student Councils Canada (AOSC) which founded Travel CUTS in 1974. The student governments at the University of Alberta, the University of Western Ontario and UBC were the other plaintiffs in the suit along with the AMS. According to the settlement, Travel CUTS’s Board of Directors will also be expanded to eight seats, two of which will be filled by members appointed by the new shareholder.
The lawsuit was initiated in 1996 by the Western Students’ University Council, and on Sept. 23, 1999, AMS Assembly voted to join the three other university groups in the lawsuit against CFS-S, which alleged the CFS-S illegally transferred assets from the AOSC, including Travel CUTS, to itself at a 1987 meeting. According to the National Post, the plaintiffs alleged that their organizations did not receive proper notice of the meeting, and people representing the CFS-S at the meeting were the same ones representing the AOSC.
In 1999, Assembly allocated as much as $30,000 for legal fees, according to that year’s Journal. By 2003, the AMS had increased funding to a maximum of $90,000.
Currently, it’s uncertain what amount the financial contribution of the AMS will be towards the lawsuit. Should the AMS’s contribution to the legal fees exceed $90,000, the AMS Board of Directors will have to approve excess costs, said Ethan Rabidoux, AMS president.
“All the costs are split four ways between the plaintiff schools,” he said. “We’re still determining what the final cost will be.”
Rabidoux said it was the legitimacy of the transfer of Travel CUTS to the CFS-S that was the most important issue in the lawsuit.
“Was the process legit, and was it all done by the books? That’s what triggered the whole process we went through for the last seven years.”
Link told the Journal CFS-S did nothing wrong in the transfer process.
“We feel now, and we felt then, that these claims were without any basis, that they’re not true,” Link said. “You can write anything you want in a statement of claim. It doesn’t mean there’s any truth to it. We would argue strongly that none of that is true.”
The second element of the lawsuit concerns the CFS-S’s relationship with the Canadian Federation of Students (CFS), a national student lobby group.
While the CFS-S and CFS are separate legal entities, they share their membership and work out of the same office in Ottawa.
In their statement of claim, the plaintiffs alleged that profits from Travel CUTS have been funnelled into the CFS by way of “referral fees,” leaving Travel CUTS with a low profit or a loss at the end of past fiscal years.
Philip Link, executive director of CFS-S, told the Journal he disagreed with allegations that profits were funnelled into the CFS, citing the travel industry’s downturn in recent years as a reason for low profits or losses.
While Travel CUTS showed high profits from the 1990s through to 2001, the travel industry suffered a significant economic slump in the aftermath of 9/11. As such, Travel CUTS experienced a “break-even year” in fiscal 2002, Link said.
He said Travel CUTS reported “significant losses” in fiscal 2003 and fiscal 2004, which Link attributed to SARS. Travel CUTS rebounded in fiscal 2005 with a small surplus. Numbers for fiscal 2006 are not yet available, but according to Link, the company expects to once again post a break-even year.
Rabidoux said he did not know if, as a member of Travel CUTS’s new not-for-profit shareholder corporation, the AMS would become jointly responsible for absorbing any future fiscal losses incurred by Travel CUTS.
He added the settlement will mean the AMS will receive a portion of Travel CUTS’s profits.
“Depending on how many schools become part of this, we will get a share of the profits of Travel CUTS,” he said. “We will once again be benefiting from the student use of that company.”
In 2003, former AMS President Christie Knitter told the Journal many Queen’s students purchase ISIC cards—which are issued by Travel CUTS—to receive travel discounts.
She said she was concerned about the cost to Queen’s students accrued in the purchase of these cards at $16 each, given that the cards are free for CFS members.
Despite the settlement, Queen’s students will still pay to get the cards which provide savings on train and airplane tickets, and CFS membership holders will still receive their ISIC cards free.
Although he said he believes the transfer was legal, Link said the CFS-S decided to settle because it was the best decision for the future of Travel CUTS.
“Avoiding the trial costs was a significant motivator when it came to settling … we’re talking a trial that was expected to last at the minimum of eight weeks, going to possibly as long as 12 weeks, so that would transfer into hundreds of thousands of dollars.
“But more importantly, and probably a stronger reason … is to have all student unions supportive of the national student travel agency,” Link said.