Supreme Court limits suits over frequent flyer miles

[JURIST] The US Supreme Court [official website] ruled Wednesday In Northwest Inc. v. Ginsberg [opinion, PDF] that federal aviation law preempts a state law claim for breach of contract. Rabbi Binyomin Ginsberg sued Northwest Airlines for breach of implied covenant of good faith in dealing under Minnesota state contract law after the airline removed him from their frequent flyer program. The airline argued that frequent flyer programs operate at the discretion of the airline, and they cannot tailor their programs to the consumer laws in each of the 50 states. The court ruled in favor of the airline, finding that Ginsberg is barred from pursuing his claims by the Airline Deregulation Act of 1978 (ADA) [49 USC § 41713(b), text], which says that states have no say in regulating the price, route or service of an air carrier. A district court in California had dismissed the lawsuit, saying that Ginsberg's claims were barred by federal aviation law. On appeal, the Ninth Circuit reversed the lower court and ruled that Ginsberg's contractual claim was unrelated to the price, route or service of an air carrier. Justice Samuel Alito, writing for the unanimous court, disagreed with the Ninth Circuit:

[T]he Northwest [frequent flyer] program is connected to the airline's "rates" because the program awards mileage credits that can be redeemed for tickets and upgrades. When miles are used this way, the rate that a customer pays, i.e., the price of a particular ticket, is either eliminated or reduced. The program is also connected to "services," i.e., access to flights and to higher service categories.
Alito assured that the holding does not leave participants in frequent flyer programs without protection:
The ADA is based on the view that the best interests of airline passengers are most effectively promoted, in the main, by allowing the free market to operate. If an airline acquires a reputation for mistreating the participants in its frequent flyer program ... customers can avoid that program and may be able to enroll in a more favorable rival program.
The court left open the possibility for passengers to still sue for breach of contract, just not for covenants such as good faith and fair dealing that Ginsberg argued were implied by participating in frequent flyer program. The US Chamber or Commerce, and the Obama administration sided with the airline in the case.

 

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