American AAdvantage Just Made One Shocking Change to Its Terms and Conditions

The American AAdvantage program recently updated its terms and conditions. They added this sentence:

To the full extent allowed by law, these Terms and Conditions disclaim any duty of good faith and fair dealing as well as any implied contractual terms or obligations.

That’s pretty striking language — they have no “duty of good faith and fair dealing” — and my conclusion is that this means either nothing at all or at most only one thing: American doesn’t have very good lawyers.

All this change does is accurately describe the current law with respect to claims against frequent flyer programs. The language added to American’s terms and conditions is completely unnecessary because the law already says precisely what the terms have added as something that members presumably are agreeing to. The Supreme Court ruled as such in Northwest vs. Ginsberg last year.

Good lawyers balance their legalese with a firm’s business objectives, and here the legalese doesn’t appear to add substantive protections for the program — yet serves to remind us of the precarious position we’re in as program members, not just with AAdvantage but with all programs.

Members Have No State Contracts Claims Against Frequent Flyer Programs

I asked American about the changes to AAdvantage terms and conditions, and Barb DeLollis said “We added the language in the interest of full communication and transparency. We don’t think it changes members’ rights or creates any material changes.”

And that’s 100% true. Members aren’t hurt by American saying they don’t have an obligation of good faith or fair dealing with their members, because the Supreme Court in Northwest vs. Ginsberg ruled precisely that they don’t. Or rather, the Court ruled that you can sue a frequent flyer program for direct breach of contract but that you can not base your claim on a state rule of implied covenant of good faith or fair dealing.

That’s because a state law contract obligation is essentially the state regulating an airline, something that is pre-empted by the Airline Deregulation Act.

I think the Court’s conclusion completely misses the way that frequent flyer programs have developed beyond just rebates for travel (Justice Breyer took it as ‘given’ that this is all frequent flyer programs are) and how they’ve become all-purpose marketing currencies that are standalone billion dollar businesses in their own right. This issue hadn’t really been developed in the record as the case proceeded. We were dealing with someone who earned their miles by flying and for whom the program benefits were predominantly related to their flying (eg upgrades).

How the Supreme Court Got Us Here

At oral argument before the Supreme Court in Northwest v. Ginsberg, Delta’s lawyer said they have no obligations whatsoever with respect to their miles — that people pay for travel, they get travel, and the miles aren’t really promises beyond that.

JUSTICE GINSBURG: Mr. Clement, the argument was made that if — if the airline has an unreviewable right to terminate this agreement for any reason or for no reason, if that is so, then it’s an illusory contract. What — what is your answer to that, if one party can get out willy-nilly, why — what kind of bargain is it?

MR. CLEMENT: …You could also conceive of it as basically being a premium that’s offered by the company to reward your loyalty, but you’ve already gotten full performance

(Emphasis mine.)

Delta’s lawyer in the case suggested that if an airline doesn’t honor its contracts, then your remedy is to go fly another airline. Or you can complain to the Department of Transportation, though in practice the Department of Transportation doesn’t regulate frequent flyer programs at all. He even went so far as to suggest that if you earned points through a program partner (like a bank) then you should go sue the bank and not the frequent flyer program.

Where the court ultimately left us is that you can’t sue your frequent flyer program for anything other than failing to do what they say they’re going to do. And since program terms say they don’t really promise you anything, you can’t even really do that. Your only recourse is to the Department of Transportation, which doesn’t regulate frequent flyer programs anyway.

So American’s statement in their terms is 100% accurate – the AAdvantage program does not have any state contracts “duty of good faith and fair dealing.” They don’t need their terms and conditions to say so, though, because the Supreme Court already did.

And that leaves us between a rock and a hard place.

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. By your logic, all US frequent flier programs shouldn’t have any terms at all. Your point seems to be, if you can’t sue them for it, it’s not an obligation. That’s really not true. I’m sure AA intends to comply with their terms and conditions, and I’m sure they think the document is important for ensuring what members understand their rights to be. It’s true that, if they want to, AA could simply say, “nahh, we don’t care what it says,” and you wouldn’t have any legal recourse. But that doesn’t mean the enterprise of writing terms and conditions to communicate terms to members and even state what the program aspires to is useless. Here, AA is communicating that there are no unwritten terms in the contract. The covenant of good faith and fair dealing is a term implied in contract by law, and they are disclaiming it. Telling that to members is not inappropriate.

    Also, and perhaps more important, the Supreme Court could change the law tomorrow. Or Congress could do the same, and then the contract language would most definitely matter.

  2. Gary, i feel this is the kind of thing that you, with your contacts and clout, should pick up the phone and encourage a major network to do a piece on. these merged-due-to-govt-bailout airlines need to be checked and exposed.

    i disagree that this is already out there per SCUS. this addition basically purports to say, ‘even if we purposely lie and deceive the public to encourage them to fly AA in this contract, and then pull the rug out, it’s ok’. all contracts have an implied covenant of good faith and fair dealing. AA attempts to undermine centuries of contract law because ‘they can’. the hubris.

    i’d love to see them explain this sentence on 20/20 and answer tough questions positing that they are saying they don’t have to/won’t deal with customers in good faith. a good interviewer would make the airline look so bad that it would start congressional hearings!

  3. @abby “all contracts have an implied covenant of good faith and fair dealing” not really, the supreme court said that no such thing could be read into a contract in the case of an airline or frequent flyer program.

  4. I suppose this means that customers also don’t have an obligation of good faith and fair dealing as well as with the AAdvantage program.

    Although they say they can prosecute abuse or violation of the rules, if there is no obligation of good faith and fair dealing as well as any implied contractual terms or obligations, then customers seem to be free try and do whatever they want with the AAdvantage program. Even better, they don’t even have to feel bad about it because AA says they can do it.

  5. That wording is not enforceable if a dispute made it to court for some reason. I am not an atty, maybe one will post here in reply. Just because a contract has an outrageous statement like that, it does not mean that is enforceable. And the statement itself is not shocking. Nothing in these programs is shocking to me.

  6. I would be more shocked if AA opened some Saver inventory on various routes on their own metal. Like ORD or NYC to Japan or DFW to HKG.

  7. View From The Wing Started Using Terrible Upworthy-style Headlines … You Won’t Believe What Happened Next!

  8. Anon, I think that it’s well estabilshed that conscience-free demon customers exist. Many of them (or should I say us?) read blogs like this one.

  9. SHOCKING!! (yawn). Please stop trying to drive traffic through these horribly exaggerated headlines. It’s pathetic.

  10. As a regular reader who finds the blog informative, I must agree about the headline. This is a bad trend in the gossip media, but doesn’t need to be part of a thoughtful blog’s way of doing things.

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