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. A 9th Circuit Court of Appeals ruling disagreed, and now the Supreme Court will hear the issue.
I asked reader and attorney Eric M. Fraser if he’d share thoughts on the case.
- Mr. Fraser is an attorney with Osborn Maledon and an active flyer. He has written posts about the Supreme Court at SCOTUSblog and has preferred status in US Airways’s Dividend Miles program — status he doesn’t want to see disappear.
His comments follow:
Rabbi S. Binyomin Ginsberg had top-tier status in Northwest’s WorldPerks program. His wife had Silver status. Northwest revoked his membership in 2008.
Ginsberg sued Northwest in federal court in California on a number of theories, including that Northwest breached the implied covenant of good faith and fair dealing. This implied covenant theory, rooted in Minnesota state law, means that he is not suing directly for a breach of the terms of the WorldPerks contract (which allows Northwest “in its sole judgment” to cancel a member’s account). Essentially, Ginsberg’s theory of the case means that even through the WorldPerks agreement gives Northwest the discretion to terminate his membership, he is entitled to compensation if Northwest abuses that discretion and unjustly deprives him of the benefits of the contract. This is a long-standing principle: parties to a contract have to act in good faith. But that principle is from state law, not from the terms of the contract itself.
Ginsberg sought to certify his case as a class action on behalf of all former WorldPerks members whose status was revoked. (We should wonder how big that class would be!) The district court dismissed the case quickly, meaning a factual record was never developed. As a result, we don’t know why Northwest kicked him out. Of note for the readers of this blog, Ginsberg claims his status was revoked because he complained to Northwest too much and that he booked reservations on full flights with the purpose of being bumped. Unfortunately the case hasn’t developed far enough procedurally to know whether those were really the reasons.
The court dismissed the case because the Airline Deregulation Act says that a state may not enact laws “related to a price, route, or service” of an airline. Although the case was brought in federal court, state law applies to Ginsberg’s claim, so the court dismissed the case.
Ginsberg appealed to the U.S. Court of Appeals for the Ninth Circuit, which reversed and reinstated his case. The Ninth Circuit reasoned that the Minnesota implied covenant of good faith and fair dealing is not related to prices, routes, or service of an airline. Minnesota isn’t trying to regulate an airline, in other words. Northwest then turned to the United States Supreme Court, which accepted the case.
Courts have given us several guideposts about that preemption provision. States cannot prohibit deceptive airfare advertisements. But they can forbid employment discrimination under state law. Passengers may also bring state law claims for personal injury and wrongful death. And, in the American Airlines v. Wolens case that Gary mentioned, a passenger may bring a routine contract claim, but cannot bring a claim based on a state consumer protection law.
Northwest tries to paint the Wolens case as distinguishing between a state-imposed obligation (preempted) versus an obligation the airline imposed on itself through contract (not preempted). Ginsberg tries to paint the case as distinguishing between enforcing ordinary contract claims (not preempted) versus state enacted laws that have the effect of regulating airlines (preempted). Said another way, Northwest suggests that the “good faith” obligation is not a contract claim, whereas Ginsberg suggests that it is a state contract remedy. To law nerds, these distinctions matter. Both sides are trying to fit the case into one corner or another of the old Wolens holding.
Gary is concerned about the ongoing vitality of the Wolens principle. Wolens is unlikely to go away. That means that passengers will continue to have the right to sue for breach of contract under state law. The question the Supreme Court will answer is whether passengers may also sue when the claim isn’t defined by the terms of the contract, but instead is based on a state’s principle that parties to a contract must operate in good faith.
It’s important to note that the Supreme Court won’t resolve the question many readers will want answered: whether an airline can close accounts and use the broad, unfettered discretion the frequent flyer programs’ contracts give to the airlines. If Ginsberg’s case survives, the lower courts will begin to answer that question (unless Northwest settles). But the Supreme Court will answer the question of whether those claims can even be brought in court at all without immediately being dismissed.
The Supreme Court is not hearing any more cases this term before its summer break, so the case will be briefed over the summer and probably argued in the fall. The decision will be released before June 2014.
Thanks to Eric M. Fraser for his perspective!