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Frequent Flyer Loses Supreme Court Case

Published April 4th, 2014 by Jean Chaintreuil

The Supreme Court has further insulated airlines from the reach of state and local laws, ruling that frequent flyers and other airline customers cannot assume that they are protected by common law expectations of “good faith and fair dealing.”

Ruling on the scope of the federal preemption language in the Airline Deregulation Act, the Supreme Court unanimously held that a Minnesota rabbi could not sue Northwest Airlines for kicking him out of its frequent flyer program in 2008.

The rabbi, S. Binyomin Ginsberg, claimed that Northwest violated an “implied covenant of good faith and fair dealing.”

Delta, which inherited the case, argued that the implied covenant is a feature of state law and cannot be imposed on an air carrier under the preemption doctrine. The Airline Deregulation Act preempts states from enforcing any law (or any rule or provision with the force of law) “related to” airline prices, routes or services.

In an opinion written by Associate Justice Samuel Alito, the Supreme Court rejected an appeals court decision holding that the frequent-flyer contract was “too tenuously connected to airline regulation” to trigger the preemption doctrine.

Citing earlier Supreme Court rulings favoring a “broad preemptive purpose,” Alito wrote that Ginsberg’s reliance on an implied covenant of good faith “seeks to enlarge his contractual agreement” with the airline and “cannot stand.”

He added that Minnesota law in particular “does not authorize parties to free themselves from the [implied] covenant,” which means that the covenant is a feature of state law and therefore cannot be imposed in a case “related to” airline service.

Alito added that not all claims relying on an implied covenant are preempted. He said a state’s implied covenant rules can escape preemption “if the law of the relevant state permits an airline to contract around those rules in its frequent flyer program agreement.”

He continued, “If an airline’s agreement is governed by the law of such a state, the airline can specify that the agreement does not incorporate the covenant.”

The decision also concluded that the result “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 (who are generally the airline’s most loyal and valuable customers), customers can avoid that program.”
~~ Bill Poling

 

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