Supreme Court Action: Pre-emption of Common Law Under the Airline Deregulation Act

The second case decided by the Supreme Court last Wednesday us Northwest, Inc. v. Ginsberg (12-462).  It concerns whether the Airline Deregulation Act pre-empts state common law claims, here a claim for violating the implied covenant of good faith and fair dealing, against an airline when the airline revokes membership in a frequent flyer program.

Rabbi S. Binyomin Ginsberg became a member of Northwest’s WorldPerks program in 1999, and as a result of extensive travel on Northwest flights, he achieved “Platinum Elite” status (the highest level available) in 2005.  The agreement language for the plan gave Northwest the sole discretion of determining abuse.  Rabbi Ginsberg apparently filed numerous complaints based on the quality of services he received.  Northwest gave him program benefits due to his complaints.  Northwest, however, terminated his membership in the program in 2008 for abuse.  The details of the complaints and Northwest’s responses are in the opinion.

Rabbi Ginsberg sued on four counts:  (1)  Northwest had breached its contract by re­voking his “Platinum Elite” status without valid cause; (2) Northwest violated the duty of good faith and fair dealing because it terminated his membership in a way that contravened his reasonable expectations with respect to the manner in which North­west would exercise its discretion; (3) he asserted a claim for negligent misrepresentation; and (4) he alleged intentional misrepresenta­tion.   The action sought class action status.

The District Court dismissed the complaint as pre-empted by the Airline Deregulation Act.  Rabbi Ginsburg appealed only the dismissal of the duty of good faith and fair dealing claim to the Ninth Circuit.   That Court reversed on circuit precedent holding that the claim was too tenuous to be related to the objectives of the Act.  The Supreme Court reversed.

The language of the Act pre-empts state regulation in areas of “price, route, or service of an air carrier.”  The Court, reviewing its precedent, noted that the pre-emption language should be interpreted broadly.  Common law claims easily fell into the statutory language of “law[s], regulation[s], or other provision[s] having the force and effect of law,” with “provisions” covering common law claims.  The Court stated that reward programs did affect rates as benefits included perks that could be redeemed for tickets and upgrades.  Minnesota law, which governs here, does not allow contracts to write out the provision of good faith and fair dealing.  This makes it a component of state law.

The Court noted further that the breach of contract claim is invoked from a private agreement rather than an obligation imposed by the State.  As such, Rabbi Ginsberg may have prevailed in that claim had he appealed its dismissal.  He did not and that issue was not before the Court.  Justice Alito delivered the opinion for a unanimous Court.  — Mark

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