Complaining-Passenger High Court Case May Shield Airlines

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U.S. Supreme Court justices indicated they may reinforce the airline industry’s shield from passenger lawsuits as they heard the case of a man kicked out of Northwest Airlines’s frequent-flyer program for complaining too much.

In an hourlong argument session today in Washington, the justices explored the workings of frequent-flyer programs and the expectations customers can reasonably have. They suggested the man’s suit, filed under Minnesota state law, may be barred by a 1978 federal statute that deregulated the airline industry.

The “whole purpose” of that law was to block state regulation, Justice Antonin Scalia said. “Let the free market handle it and there will be no state regulation.”

The passenger, S. Binyomin Ginsberg, contacted Northwest offices 24 times over seven and a half months, according to a 2008 letter sent to him by the airline, which is now part of Delta Air Lines Inc. The letter said that nine of the complaints concerned delayed luggage and that Ginsberg repeatedly asked for compensation above the airline’s guidelines.

Ginsberg, a rabbi who says he flies 75 times a year because of his work as an education and administration expert, had achieved the highest level in Northwest’s WorldPerks frequent-flyer program.

The WorldPerks membership agreement gave the airline the right, in its “sole judgment,” to revoke the membership of passengers who abuse the program.

Deregulation Law

The case turns on the 1978 Airline Deregulation Act, which bars lawsuits or state regulations that are “related to a price, route or service of an air carrier.”

In a 1995 case, the Supreme Court said the 1978 law barred passengers from using a state consumer-fraud law to sue American Airlines over retroactive changes to its frequent-flyer program. At the same time, the court said the measure doesn’t bar traditional breach of contract suits, which seek damages “solely for the airline’s alleged breach of its own, self-imposed undertakings.”

The question for the court is how to classify Ginsberg’s case. He is seeking to press a class-action suit against Northwest under Minnesota law, accusing the airline of breaching what lawyers call the implied covenant of good faith.

Ginsberg’s lawyer, Adina Rosenbaum, said he is simply trying to enforce his contract with the airline. The covenant of good faith “is being used to help give meaning to the terms in the contract,” she said.

Adding Terms

Delta’s attorney, Paul Clement, contended that Ginsberg is seeking to add terms to the frequent-flyer agreement by invoking state-law policies. The Obama administration is largely backing Atlanta-based Delta.

Several justices today suggested they agreed with Delta that Minnesota law would impose something on the airline beyond the terms of its contract.

“How is it self-imposed if a party has no say?” asked Justice Ruth Bader Ginsburg, who wrote the 1995 ruling.

Some justices wondered whether frequent-flyer programs are contracts at all if the airline is free to expel participants without a good reason.

Justice Elena Kagan said that if she knew an airline could renege on the promise of a free ticket, she might not travel on its planes.

Free Tickets

“I’d find another company that actually gave me the free ticket,” she told Clement.

Justice Samuel Alito asked Clement whether the outcome would be different if 90 percent of the miles in a frequent-flyer program were earned for, and then spent on, things other than travel.

Clement said a customer might be able to sue a credit-card company in partnership with an airline on a miles program.

“But I would say that if you’re suing an airline, the Airline Deregulation Act speaks to it,” Clement said.

A trial judge threw out the suit before a San Francisco-based federal appeals court reinstated it. The appeals court said the purpose of the 1978 law was to unleash “the market forces of competition,” not to confer sweeping immunity from a suit.

The case, which the court will decide by July, is Northwest v. Ginsberg, 12-462.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Patrick Oster at poster@bloomberg.net

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