WASHINGTON — Rabbi S. Binyomin Ginsberg used to fly often enough on Northwest Airlines that he achieved Platinum Elite status, the highest level. But the airline revoked his membership in its frequent flier program in June 2008, saying that he had abused it by making too many complaints and by booking himself on full flights in the hope of being bumped.
On Tuesday, the Supreme Court considered Rabbi Ginsberg’s suit against the airline, which contends that Northwest’s move was an effort to purge an expensive program in advance of its merger with Delta Air Lines. Northwest said its contract with Rabbi Ginsberg gave it the right to cancel memberships for abuse “in its sole judgment.”
Several justices seemed concerned that the contract governing Northwest’s program was either illusory, as Justice Ruth Bader Ginsburg put it, or subject to the airline’s “whim and caprice,” in Justice Sonia Sotomayor’s words.
But a federal law, the Airline Deregulation Act of 1978, limits the kinds of lawsuits disgruntled travelers may file. The law sought to bring competition to the airline industry, in part by ensuring that states would not adopt their own regulations. It therefore displaced, or pre-empted, state laws and policies “related to a price, route or service of an air carrier.”
Justice Stephen G. Breyer summarized the competing interests in the case before the court, Northwest Inc. v. Ginsberg, No. 12-462.
“A free market in price is at the heart of the Deregulation Act,” Justice Breyer said, and “frequent flier programs are simply price discounts.”
“If you don’t have contracts, you can’t have free markets,” he added. “But I also think the states cannot, under the guise of contract law, regulate the prices of airlines.”
In 1995, consistent with those distinctions, the Supreme Court carved out routine breach of contract claims from the 1978 law’s pre-emption requirement in American Airlines v. Wolens.
In Rabbi Ginsberg’s case, the trial court addressed but dismissed his claim for breach of contract, citing the part of the contract that gave Northwest complete discretion to kick people out of its program.
The court also rejected three other legal theories, saying they were pre-empted by the 1978 law. Rabbi Ginsberg appealed only one part of the trial court’s decision, which had dismissed on pre-emption grounds his claim for breach of an implied covenant of good faith and fair dealing.
The United States Court of Appeals for the Ninth Circuit, in San Francisco, reversed that part of the trial court’s decision and allowed Rabbi Ginsberg’s suit to proceed, reasoning that the remaining theory did not relate to prices, routes or services; did not interfere with the federal law’s “deregulatory mandate”; and was merely an attempt to enforce private contractual obligations.
The arguments on Tuesday revolved mostly around the question of whether Rabbi Ginsberg’s legal theory was a kind of contract claim, and so permissible, or a kind of state policy or regulation, and so pre-empted.
Paul D. Clement, a lawyer for the airline, said Rabbi Ginsberg “seeks to impose a duty of fair dealing and reasonableness” even though “the parties to the contract have essentially given one party absolute discretion.” That duty, he said, is a state policy pre-empted by the 1978 law.
Justice Anthony M. Kennedy seemed troubled by the prospect of leaving Rabbi Ginsberg without any recourse. “Is the choice we have here only between state law and no relief?” he asked.
Mr. Clement responded that the rabbi could complain to the Transportation Department.
Adina H. Rosenbaum, a lawyer for Rabbi Ginsberg, acknowledged that the agency could play a role, but said it was not one that could help her client.
“The Department of Transportation does have authority over unfair and deceptive practices by airlines, but that’s very different than the claim that we’re pursuing here,” she said. “That doesn’t give remedies to the specific consumer who was hurt.”
Justice Elena Kagan, probably expressing the views of many air travelers, suggested that the case had made something complicated out of a simple arrangement.
“I always thought that the way these agreements worked,” she said, was that “if I flew a certain number of miles on your plane, I was going to get a free ticket.”