Southwest Lawsuit: $140M DOT Penalty, Discrimination, Antitrust

Southwest Airlines lawsuits over the past several years span federal consumer protection penalties, employment discrimination verdicts, airport gate disputes, shareholder litigation, wage-and-hour class actions, and antitrust cases where Southwest sits on both sides of the “v.” The largest single item remains the $140 million civil penalty tied to the 2022 holiday meltdown; the newest active matters include a New York wage class action and a 730-page price-fixing suit Southwest itself filed against generic drugmakers.

The $140 Million Holiday Meltdown Penalty

In late December 2022, a winter storm triggered an operational collapse at Southwest. The airline canceled nearly 17,000 flights and stranded more than two million passengers. The U.S. Department of Transportation investigated and concluded Southwest violated consumer protection laws by failing to deliver adequate customer service, timely flight status updates, and prompt refunds.¹

In December 2023, the DOT assessed a $140 million civil penalty, the largest consumer protection fine in the agency’s history. Of that, $35 million was earmarked for the U.S. Treasury in three installments. Another $90 million was credited toward a compensation system for future passengers affected by controllable delays and cancellations, and $33 million was credited for 25,000 Rapid Rewards points issued to affected passengers. Combined with more than $600 million in refunds and reimbursements the DOT said Southwest provided, the airline’s total exposure from the meltdown topped $750 million.¹

Southwest paid the first two Treasury installments of $12 million each, in February 2024 and January 2025. In December 2025, the Trump administration’s DOT waived the final $11 million payment, citing Southwest’s $112.4 million investment in its Network Operations Control center and improved on-time performance.² Senator Maria Cantwell of Washington, the ranking Democrat on the Senate Commerce Committee, accused the administration of “letting Southwest Airlines off the hook.”³

Two private suits followed the meltdown. A passenger class action, Capdeville v. Southwest Airlines Co., filed in New Orleans federal court on December 30, 2022, was voluntarily dismissed without prejudice in July 2023.⁴ A shareholder class action, Teroganesian v. Southwest Airlines Co., was filed in the Southern District of Texas in January 2023, alleging executives made misleading statements about the airline’s technology vulnerabilities.⁵

DOT Chronically Delayed Flights Suit

On January 15, 2025, the DOT filed a separate lawsuit in the U.S. District Court for the Northern District of California, accusing Southwest of operating two “chronically delayed” routes in 2022: Chicago Midway to Oakland, and Baltimore to Cleveland. Under DOT rules, a flight qualifies as chronically delayed if it operates at least ten times a month and arrives late more than half the time, counting cancellations and diversions. The government alleged 180 flight disruptions between April and August 2022 and said Southwest failed to adjust its schedule to reflect realistic times.⁶

The case did not last. In mid-May 2025, the Department of Justice filed a one-page notice of voluntary dismissal. The case was terminated on May 16, 2025, with no explanation on the record.⁷⁸

Employment Lawsuits

Carter Religious Discrimination Verdict

Flight attendant Charlene Carter sued Southwest and Transport Workers Union of America Local 556 in 2017, alleging she was fired for her religious beliefs after sharing anti-abortion messages with a union leader. A federal jury found both the airline and the union violated Carter’s rights under Title VII of the Civil Rights Act.⁹

In May 2025, the U.S. Fifth Circuit Court of Appeals issued a mixed ruling. It affirmed judgment against Southwest on Carter’s practice-based Title VII claims and upheld all findings against the union. It reversed the verdict on Carter’s belief-based Title VII claim and her retaliation claim under the Railway Labor Act, ordering judgment for Southwest on those counts. The court vacated a permanent injunction against the airline and struck down a contempt order.¹⁰

As of April 2026, the nine-year litigation was nearing a close. Southwest had paid Carter nearly $473,051, including $150,000 in back pay, out of a total court-determined award of $946,102. A satisfaction of judgment was filed, though proceedings tied to a potential contempt order against the airline remained active at the district court level.¹¹

USERRA Military Leave Settlement

In 2019, lead plaintiff Jayson Huntsman filed a class action in the Northern District of California alleging Southwest violated the Uniformed Services Employment and Reemployment Rights Act by refusing to pay employees for short-term military leave — such as National Guard duty or reservist deployments — while providing paid leave for comparable absences like jury duty, bereavement, and sick days.¹²

Southwest agreed to an $18.5 million settlement covering roughly 2,791 current and former employees. Beyond the payment, the airline committed to providing up to ten paid days per year of short-term military leave from 2026 through 2030. The settlement was awaiting final court approval as of May 2026, with a hearing scheduled for May 12, 2026.¹³¹⁴

New York Wage-and-Hour Class Action

On December 30, 2024, a group of ramp agents, cargo handlers, and other manual workers filed a class action in the Eastern District of New York seeking more than $100 million in damages. Strain v. Southwest Airlines Co. alleges Southwest violated New York Labor Law by failing to pay manual workers on a weekly basis and violated the Fair Labor Standards Act by failing to issue prompt payment. The proposed class includes workers employed in New York State from 2018 onward, estimated at more than 100 members.¹⁵ By January 2026, the plaintiffs had won collective certification, allowing additional workers to opt in. The case remains active.¹⁶

San Antonio Airport Gate Fight

Southwest sued the City of San Antonio in September 2024, alleging officials used “subjective factors” to assign terminal gates and had improperly excluded the airline from a new 17-gate Terminal C, part of a roughly $1.2 billion project that broke ground that December. Southwest said it had been promised space for ten gates in the new terminal and that being left in older Terminal A would restrict its growth.¹⁷

The airline’s theory rested on the 1978 Airline Deregulation Act, which generally bars local governments from regulating airline routes, rates, and services. On August 29, 2025, U.S. District Judge Xavier Rodriguez dismissed all of Southwest’s claims with prejudice, ruling the city acted as a “market participant” rather than a regulator and that gate assignments were contractual matters lacking the “force and effect of law.”¹⁷

Southwest appealed to the Fifth Circuit, but in April 2026 both sides jointly requested a 30-day pause to finalize a settlement.¹⁸ On May 14, 2026, they announced a deal: Southwest will receive at least six gates, three in the renovated Terminal B and three in the new Terminal C, expected to open in 2028. Southwest signed a new Airline Use and Lease Agreement and agreed to withdraw its federal court litigation and its complaint before the Federal Aviation Administration.¹⁹

Elliott Investment Management and the Shareholder Derivative Suit

In June 2024, activist hedge fund Elliott Investment Management, led by Paul Singer, disclosed a roughly $1.9 billion stake — about 11% — in Southwest Airlines. Elliott called the airline “the most compelling airline turnaround opportunity in the last two decades” and pushed for the removal of CEO Bob Jordan and former CEO and executive chairman Gary Kelly. In October 2024, Southwest settled with Elliott. The airline added six new directors, five chosen by Elliott, including the former CEO of Virgin America and a former senior DOT official. Kelly and six existing directors accelerated their retirements effective November 1, 2024. Jordan kept his job, and Elliott withdrew its push for a special shareholder meeting.²⁰

After the reconstituted board eliminated Southwest’s longstanding “Bags Fly Free” policy, shareholder Vladimir Gusinsky, owner of 100 shares, sued the board in a derivative action. Gusinsky v. Reynolds (No. 3:25-cv-01816-K) was filed in the Northern District of Texas.²¹

Southwest moved to dismiss under Texas Senate Bill 29, a recently enacted corporate law allowing Texas companies to amend their bylaws to require shareholders to own at least 3% of outstanding stock before bringing a derivative suit. Southwest had adopted exactly that bylaw. On March 17, 2026, Judge Ed Kinkeade dismissed the case with prejudice, upheld the constitutionality of SB 29, and ruled the ownership threshold applies at the time suit is filed, not when a pre-suit demand letter is served. It was the first judicial test of the new Texas corporate law.²²

Discrimination and Consumer Suits Against Southwest

Lánzate Travel Award Program

In May 2024, the American Alliance for Equal Rights sued in the Northern District of Texas, alleging Southwest’s “Lánzate Travel Award Program” violated federal civil rights law by limiting free flight passes to Hispanic students. Southwest moved to dismiss, arguing the claim was moot because it had opened the program to all applicants. In December 2024, the court dismissed claims about future discrimination but let AAER pursue past conduct.²³ The case ended in May 2025 when Senior U.S. District Judge Sidney Fitzwater noted Southwest had “unconditionally surrendered” on the relief sought. The court ordered Southwest to pay one cent in nominal damages, and the parties reached a confidential agreement on attorney fees.²⁴

Misleading Sales Email Class Action

In mid-2025, Washington resident Karleasa Mitchell filed a class action in the Western District of Washington, Mitchell v. Southwest Airlines Co. (No. 2:25-cv-01593). The complaint alleged Southwest sent email subject lines that created false urgency, advertising sales as “ending” or “limited” when the airline intended to extend them, and claiming consumers had “early access” when the sale was already public. Mitchell argued this violated Washington’s Commercial Electronic Mail Act and its Consumer Protection Act.²⁵ The case did not advance. The plaintiff filed a notice of voluntary dismissal on September 5, 2025, and the case was terminated the same day.²⁶

Antitrust Cases: Southwest as Plaintiff and Defendant

Generic Drug Price-Fixing Suit

In July 2025, Southwest filed a 730-page complaint in the Eastern District of Pennsylvania. Southwest Airlines Co. v. Actavis Holdco U.S., Inc., et al. (No. 2:25-cv-02951) names 54 corporate defendants including Teva, Sandoz, Dr. Reddy’s Laboratories, Mylan, and Pfizer. Southwest alleges a sweeping price-fixing conspiracy dating to at least 2009, with generic drugmakers coordinating to allocate markets and avoid price competition.²⁷

As a large employer that self-funds its employee health plans, Southwest claims the alleged conspiracy cost the company “hundreds of millions of dollars” in inflated prices. The suit joins pending multidistrict litigation in the same court that groups more than 20 separate lawsuits dating to 2016. American Airlines and Target have filed similar claims. The Southwest case is active, with a jury trial demanded.²⁷

Capacity-Discipline Settlement

Southwest was earlier a defendant in In re Domestic Airline Travel Antitrust Litigation (No. 1:15-mc-01404), filed in 2015 in the District of Columbia. Passengers alleged Southwest, American, Delta, and United conspired to restrain capacity to inflate domestic airfares in violation of the Sherman Act. Southwest settled for $15 million in early 2018, denying wrongdoing and citing the cost of prolonged litigation. As part of the deal, Southwest agreed to cooperate with plaintiffs in ongoing claims against the remaining defendants. The settlement received final court approval in May 2019.²⁸²⁹

1
U.S. Department of Transportation. DOT Penalizes Southwest Airlines $140 Million for 2022 Holiday Meltdown
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U.S. Department of Transportation. Southwest Airlines Order 2025-12-4
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U.S. Senate Committee on Commerce, Science, and Transportation. Cantwell Slams Trump Admin for Giving Southwest Airlines Free Pass
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ClassAction.org. Southwest Fails to Refund Customers for Holiday Flight Cancellations, Class Action Says
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Duquesne University School of Law – Juris Magazine. Legal Fallout of Southwest Airlines Holiday Meltdown
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CNN. DOT Sues Southwest Airlines Over Late Flights
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KERA News. Feds Drop Lawsuit Against Southwest Airlines Over Delayed Flights
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CourtListener. United States of America v. Southwest Airlines Co.
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KERA News. Southwest Airlines Flight Attendant Religious Discrimination Abortion
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U.S. Court of Appeals for the Fifth Circuit. Carter v. Transport Workers Union of America Local 556
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National Right to Work Legal Defense Foundation. Carter Satisfaction of Judgment
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Outten & Golden LLP. Outten & Golden Reaches Historic Settlement with Southwest Airlines
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Southwest Airlines USERRA Settlement. Huntsman v. Southwest Airlines Co. Settlement
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Military Times. Southwest Airlines to Provide Military Leave for Pilots in 2026
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GlobeNewsWire. Southwest Airlines Hit with $100 Million Wage and Hour Lawsuit
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Sanford Heisler Sharp. Southwest Airlines Wage Rights Class Action
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San Antonio Report. Southwest Will Keep Fighting City of San Antonio After Losing Airport Lawsuit
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San Antonio Express-News. Southwest, San Antonio Airport Reach Settlement
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City of San Antonio. Joint Statement from San Antonio International Airport and Southwest Airlines
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Forbes. Southwest Airlines Bends to Activist Investor, Restructures Board
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Gibson Dunn. Federal Court Enforces Texas SB 29 to Bar Derivative Suits by De Minimis Shareholder
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Law360. Southwest Board Beats Suit in First Texas Corporate Law Test
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Advancing DEI – Meltzer Center. American Alliance for Equal Rights v. Southwest Airlines Co.
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Texas Lawbook. Southwest Airlines to Pay One Cent in Damages
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ClassAction.org. Mitchell v. Southwest Airlines Co. Complaint
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CourtListener. Mitchell v. Southwest Airlines Co. Docket
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Fierce Pharma. Southwest Airlines Sues Dozens of Generic Drugmakers Over Alleged Price-Fixing Scheme
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Hausfeld. Hausfeld Wins Significant Victory on Behalf of Class of Domestic Airline Ticket Purchasers
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PhocusWire. Southwest Agrees to Settle Antitrust Lawsuit Over Capacity Discipline