I am not sure where AA's logic implies this. The passenger was downgraded and the reservations staff stated that a refund for difference between cabins would be provided. If it wasn't a different cabin, then there would be no refund for what would therefore be , just a seat assignment change

What was wrong was the agent stating that there was no refund entitlement on cancellation. There obviously would be and , even if the airline didn't want to refund, a disputed charge on grounds of purchased service not being provided would work