A couple of years ago the story went ’round about Rabbi Binyomin Ginsberg, a Northwest Airlines Platinum elite who apparently complained too much and had his frequent flyer account shut down. He lost hundreds of thousands of miles (and his elite status) in the process.
Ginsburg sued. His complaint was dismissed in federal district court on the basis that state law can’t be used to address airline price, route or service issues since those are pre-empted by the federal Airline Deregulation Act.
I admit I’m a bit surprised by the Supreme Court’s willingness to take this case, although I have not yet read the 9th Circuit’s decision (but I have read the petitioner’s brief to the Court).
Delta argues that the 9th Circuit’s ruling is inconsistent with Supreme Court precedent as recognized in other circuits.
The issue here at this point is whether the District Court was correct to throw out the case as being precluded by the deregulation act which forbids certain kinds of state regulation of airlines.
Under the Court’s American Airlines vs Wolens decision, a suit for breach of contract by a frequent flyer program shouldn’t be pre-empted by federal law. However, in my rudimentary understanding, a claim created by state law (in this instance, an implied covenant of good faith in Minnesota law) would be barred.
The airline’s claim that they terminated the Rabbi’s membership over complaints related to service doesn’t mean that suing over alleged breach of contract by the mileage program means the state law addressing breach of contract is in fact impermissibly regulating service. But the Rabbi’s claim of breach of contract was thrown out by the District court and is not at issue here.
What’s being considered is not what’s in the Northwest Worldperks contract (I haven’t re-read it, but I’m confident it would have permitted changing of terms and termination of membership). What’s being considered is whether, aside from the contract, this is ‘fair’ under state law.
If the terms of the frequent flyer program are considered pricing and service under the Airline Deregulation Act, as Delta contends Wolens clearly says they are, then the Rabbi’s claim under Minnesota state law is pre-empted. If the terms of the frequent flyer program are entirely apart from the basics of operating an airline (the airline service, ticket pricing) as the 9th Circuit believes, the claim should be allowed.
In some manner it comes down to whether operating a frequent flyer program is part of operating an airline, with the miles a rebate for ticket purchases (and thus part of its pricing) or whether operating such a program is in effect a side business distinct from the operations of an airline.
And even if a frequent flyer program was primarily about flying when Wolens was decided, it might no longer be so now that a majority of miles are earned via financial services activities rather than flying.
I’m not especially sympathetic with the Rabbi whose couple dozen complaints seem a bit much, and I do not blame the airline for firing him as a customer. It seems to me that this ought to be a two-way decision, the Rabbi could choose not to fly an airline any longer if it wasn’t providing him the service he expects and an airline ought to be able to choose not to sell tickets to someone that it finds is too costly to satisfy.
On the other hand I do think that confiscating earned-miles is extreme, and I’d certainly seek redress of that myself if I could.
While I don’t think the Rabbi’s desire for a class action lawsuit makes sense, I also think there’s an important principle in Supreme Court jurisprudence potentially at issue and I’d hate to see Wolens narrowed or even interpreted in a time capsule, as though frequent flyer programs are what they were 18 years ago when the case was decided. Delta (which took over Northwest) is represented in the case by former Solicitor General Paul Clement, a real legal heavyweight.
The case will bear watching, entirely apart from the specifics of a kvetching Rabbi.
Do any of lawyers among my readership care to weigh in, especially to contradict or correct my read of the case?
(HT: LarryInNYC on Milepoint)