Supreme Court to take up case of flyer booted from Northwest's Frequent Flier Program.

Discussion in 'General Discussion | Miles/Points' started by LarryInNYC, May 20, 2013.  |  Print Topic

  1. LarryInNYC

    LarryInNYC Gold Member

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    In a reversal of a district court ruling, the Supreme Court will hear the case of a Rabbi who was expelled from Northwest's frequent flier program for complaining too often. Reading between the lines of the article it sounds like Northwest believed that the passenger was essentially manufacturing reasons to receive compensation.

    http://www.nytimes.com/reuters/2013/05/20/us/20reuters-usa-court-miles.html?hp&_r=0
     
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  2. gleff
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    gleff Co-founder

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    The only issue here at this point was whether the District Court was correct to throw out the case as being precluded by the deregulation act which forbids certain kinds of state regulation of airlines.

    It seems to me that under the Court's American AIrlines vs Wolens a suit for breach of contract by a frequent flyer program should be allowed to proceed, and that the airline's claim that they terminated the Rabbi's membership over complaints related to service doesn't mean that suing over alleged breach of contract by the mileage program means the state law was regulating service.

    But what do I know... ;)
     
  3. MX

    MX Gold Member

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    The NYT headline is a bit misleading. It appears from the article that the Supreme Court has not accepted this case yet. Frankly, I'd be astonished if it does. It's hard to imagine how a simple commercial dispute can be blown into a constitutional issue.
     
  4. gleff
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  5. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Opportunity for the justices to protect their own large mileage account balances? :D
     
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  6. icurhere2
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  7. gleff
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    Well since the 9th circuit ruled in favor of the rabbi, the airlines are arguing the 9th circuit erred because of the airline deregulation act's federal pre-emption in the area of service, pricing, and routes.
     
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  8. Counsellor
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    Counsellor Gold Member

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    Not really. See the "Question Presented" which notes:
    This is a classic example of what is called a "split in the Circuits" case, where different Circuit courts interpret a law or Supreme Court decision in a manner inconsistent with each other. Usually the Supreme Court will take the case to resolve the split so that the law is not applied differently depending on in which Circuit the case is brought.
     
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  9. Counsellor
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    Apparently there were two "breach of contract" claims, and the District Court threw out the first one for failure to state a claim (not for violation of the Airline Deregulation Act), according to the history of the case (but I only know what I read in the newspapers). What that probably means is that the Rabbi was unable to show a contractual provision that Northwest allegedly breached. (Possibly because the "contract" says the airline can essentially breach it at will, and thus arguably there is no mutuality and thus legally no contract, or because the contract says the individual’s membership can be terminated by the airline at any time for any reason.)

    The Ninth Circuit upheld that decision, and that part is not being appealed.

    The other claim was founded in "an implied covenant of good faith and fair dealing under Minnesota law." This is essentially a consumer protection law the state passed, and the District Court threw out that claim as preempted (forbidden) by The Airline Deregulation Act of 1978 ("ADA"), which includes a preemption provision providing that States "may not enact or enforce a law, regulation or other provision having the force and effect of law related to a price, route, or service of an air carrier." 49 U.S.C. § 41713(b).

    The Ninth Circuit found that the ADA did not preclude the claim because what the airline did was not clearly “related to a price, route, or service”. I haven’t read their opinion,* but it would appear the Ninth Circuit reads the statutory bar in the ADA very narrowly, so that merely throwing someone out of the club and terminating his miles does not “relate to a price, route, or service of an air carrier.”

    It is that part of the Ninth Circuit’s decision the airline is appealing, and that the Supreme Court took for consideration.

    It does present some interesting questions. For example:

    - Is the term “service” intended to be limited to services provided as a part of the flight (e.g., whether meals are served, how much luggage can be carried free, etc.) or does it more broadly encompass any “service” an airline offers, to include anything to do with a frequent flyer program?

    - I’m not sure whether Northwest had spun off its WorldPerks program or not, but if it did, and WorldPerks was a separate entity, does the ADA even apply to it?

    * It can be found at this link, and when I get a chance I’ll read it and perhaps edit this post.
     
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  10. Counsellor
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    OK, I read it, and I’m back. Please understand that the below is simply what I’m taking away from the Ninth Circuit’s decision, and different readers may interpret the decision differently.

    Boiled down, there appear to be two legs to the Court’s decision.

    The first has to do with whether allowing a claim based in the general obligation of good faith and fair dealing constitutes an attempt by the state to regulate the airline. The Court’s analysis is that it does not, since the state is not requiring the airline to have a frequent flyer program, it is just saying that IF the airline decides to have one, it must treat the members fairly.

    They use the analogy of an airline setting up a service at an airport. The state cannot require it to set up the service, but if the airline decides to set up the service, it has to follow state laws on worker protection and anti-discrimination in hiring that apply to all businesses.

    At one point, the Court says,


    The second leg is indeed that this case does not “relate to a price, route, or service of an air carrier.”

    The Court takes a rather strict reading of the ADA, and does not believe that the term “services” reaches everything that an airline does with or for passengers, but rather is limited to matters related to routes and rates:


    Now, it is important to keep in mind that the question before these courts is not whether Northwest has or has not breached the covenant of good faith and fair dealing, but whether the Rabbi will have a chance to prove his claim that they did. The claim is couched in terms of the WorldPerks agreement, and Northwest may point to the term saying that it can revoke membership at will. At that point, the Rabbi may claim that such a unilateral provision is void as a violation of the obligation of good faith and fair dealing, and it would then be up to the judge to decide.

    So, the question before the Court is whether denying him that opportunity was a correct application of the ADA
     
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  11. gleff
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    Bingo, I've actually read the documents and indeed the argument is that an actual breach of contract claim (enforcing the contract between customer and airline) would be permitted under Wolens, the addition of new claims -- if regarding service, scheduling pricing -- via state law would be impermissible.

    While Delta cites Wolens as suggesting a frequent flyer program on face falls within these categories, I'm actually not sure that that's true any longer even if it was true 18 years ago when the case was decided.

    Back then a frequent flyer program was effectively a rebate for flying, and inextricably linked therefore to pricing.

    But when a majority of miles are earned via credit cards, they're a standalone business apart from schedule, service, and pricing of air travel. The majority of redemptions are of course for travel - but so is that the case for the Capital One Venture Card, and claims against Capital One are not barred by the Airline Deregulation Act.
     
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  12. LarryInNYC

    LarryInNYC Gold Member

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    It is said that in the olden days the Rabbis would stay up all night debating the applicability of the Airline Deregulation Act. Rabbi Shammai said "clearly, it is written that an eye shall be paid for an eye and that involuntary denied boarding shall be paid with a voucher or elite qualifying miles." Rabbi Hillel said "Compensate unto others as you wish to be compensated yourself, everything else is printed in small type in the back of the in-flight magazine." Rabbi Ginsberg said "Hey, these dates are stale -- that ought to be good for 5,000 miles, right?"
     
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  13. Counsellor
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    Counsellor Gold Member

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    I agree with you, and have commented to that effect over recent years in various threads on FlyerTalk. It has gotten to the point that some Frequent Flyer program participants have never boarded the airline whose program they're a member of.

    Additionally, now that some of the airlines have spun off their FF program as a separate (albeit daughter) corporation, in part to allow it to keep separate books and not be exposed directly to the liability of the "airline" operation, to what degree have they essentially divorced the FF program from the operation the ADA was designed to protect from state regulation?
     
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  14. chff

    chff Silver Member

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    Who are those Rabbis you list?
     
  15. waqararif

    waqararif New Member

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    very good
     
  16. Counsellor
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    Not sure whether that is a serious question or sarcasm, but in case it's serious (which LarryInNYC's post really wasn't), here goes: Rabbis Shammai and Hillel lived in the first century BC and were major thinkers (scholars) in the Jewish religion; they authored important discussions of philosophical points of religious teaching. For more details, click the links at their names (above).

    Rabbi Ginsberg is the plaintiff in the original case and respondent in the appeal to the Supreme Court in the case linked in the original post starting this thread. According to the NYT article at that link, Northwest felt he was seizing on minor and routine failings of service to demand compensation.

    I think LarryInNYC is cleverly contrasting the two scholars with the type of Frequent Flyer who thinks only on how to squeeze out a few more miles. But then again, many of us do our best to squeeze out a few more miles. Is that a sin? :D
     
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