It has taken some time to find its way through the courts, but Rabbi S. Binyomin Ginsberg of Minneapolis has had some vindication of his 2009 lawsuit over a frequent flyer program’s promises. A San Francisco federal appeals court has ruled that despite the federal Airline Deregulation Act (ADA) of 1978, which largely frees airlines from regulation and prohibits state regulation of their prices, routes or services, members of frequent flyer programs can sue the airlines if they feel that a deal has been revoked.
The Ninth U.S. Circuit Court of Appeals in San Francisco said that the federal law forbids only state laws and lawsuits that would directly require changes in prices, routes or service and doesn’t excuse airlines from honoring their contracts with passengers. The court said the purpose of the law was “to make the airline industry more efficient by unleashing market forces of competition–it was not to immunize the airline industry” from reneging on its agreements, like with a frequent flyer program. Earlier, a court in San Diego ruled in the airlines’ favor, dismissing the claim by the plaintiff of breach of implied covenant of good faith and fair dealing by saying the claim was preempted by the ADA, but the San Francisco appeals court concluded that the ADA “does not preempt this common law contract claim” and has reversed the ruling made by the district court.
The plaintiff, Rabbi Ginsberg, contended that the Northwest WorldPerks program broke their contract with him when they withdrew his membership after nine years in the program. Ginsberg, a Platinum elite member, claims the airline “punished him” for his complaints about its service. In an email to Ginsberg, Northwest quoted from the WorldPerks General Terms and Conditions, which provided that Northwest may determine “in its sole judgment” whether a member has abused the program, and that abuse “may result in cancellation from program participation, forfeiture of all mileage accrued and cancellation of previously issued but unused awards.”
In a statement in the San Francisco Guardian newspaper, Ginsberg’s lawyer, Thatcher Stone, said this is good news for “anybody who does business with airlines.” Since the 1978 law passed, he said, “airlines in this country have acted as if they were independent governments with sovereign immunity” from lawsuits.
The U.S. Supreme Court has allowed customers to sue an airline for frequent flyer program changes that reduced the value of their credits, saying the law allowed claims for breach of contract even if they might affect the passengers’ fares. You can read the ruling from the Ginsberg case at http://www.insideflyer.com/link/?5268
Bottom line: This might pave the way for more lawsuits from members of frequent flyer programs who feel that the program has reneged on a promise.