A Supreme Court Watcher Explains the Issues Raised By the Rabbi’s Account Closure Complaint

Yesterday I discussed the Supreme Court agreeing to hear the case of the Rabbi whose Northwest account was closed for complaining too much.

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Ginsberg sought to certify his case as a class action on behalf of all former WorldPerks members whose status was revoked.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  Of note for the readers of this blog, Ginsberg claims his status was revoked because he complained to Northwest too much and that he booked reservations on full flights with the purpose of being bumped.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!

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Amazing. Being a point uber-geek would rather see this 24/7 on CNN over the idiot endless cases they do air! Nice post Gary and so appreciate your view on all things aviation!

  2. No wonder we have so many lawyers, this sounds difficult.

    “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”

    So, surely membership of a frequent flyer plan is so far removed from the actual operation of aircraft that it is frankly barely part of the airline, let alone an issue of prices, routes or services.

    On the other hand, surely the price of a ticket buys miles and status and other direct benefits that simply happen to be codified in the frequent flyer plan of the airline.

    Is it me, or will the decision of the court be almost arbitrary?

    Great post, thanks!

  3. @srptraveller – If you agree with the Court’s decision, it’ll be based on a solid reading an application of the law. If you disagree with the Court’s decision, it’ll be arbitrary and irrational. 😀

  4. Interesting post. Thanks to Eric for the explanation.

    There was a lot of talk a while back about airlines spinning off their frequent flyer programs. Seems like if that happened, the Frequent Flyer Co. (separate from the airline) would have a much weaker argument for preemption.

  5. Again, while only indirectly at issue in the case, the court will have an opportunity here to make a statement on contracts of adhesion (the Worldperks contract is one of adhesion). I think it is unlikely they will take a stance with broad implications given this court’s record, but those interested in the legal status of contracts of adhesion (really every consumer should be) should pay close attention to this case.

  6. @srptraveller The important feature of the SCOTUS is that unlike other governing bodies, their decisions cannot in practice be arbitrary; every decision entails a written justification, which can have much further-reaching implications than the decision itself. I understand your question was likely theoretical, but in practice that doesn’t matter, since every decision must be justified, even if (to take the cynical view) that justification is assembled after the fact.

  7. This rabi should be handcuffed and put in jail as thats where he blongs. People like him roaming the streets are a danger to society. He is not satisfied with the thousands of dollars worth of priveliges he scammed out of airline by complaining every single day? People like him keep the businesses unprofitable and add heavy costs to system by wasting the precious time of supreme court. Pathetic turd this Mr. Binyomin is.

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