Northwest, Inc. v. Ginsberg

PETITIONER: Northwest, Inc., et al.
RESPONDENT: S. Binyomin Ginsberg
LOCATION: Northwest Airlines Headquarters

DOCKET NO.: 12-462
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT:

CITATION: 572 US (2014)
GRANTED: May 20, 2013
ARGUED: Dec 03, 2013
DECIDED: Apr 02, 2014

ADVOCATES:
Adina H. Rosenbaum - for the respondent
Lewis S. Yelin - Assistant to the Solicitor General, Department of Justice, for the United States, as amicus curiae, supporting the petitioners
Paul D. Clement - for the petitioners

Facts of the case

S. Binyomin Ginsberg became a member of the Northwest Airlines frequent flyer program in 1999 and obtained Premium Elite Status in 2005. In 2008, his membership was terminated, as per the terms of the program that allow Northwest Airlines discretion over the removal of participants. In January 2009, Ginsberg sued Northwest Airlines and argued that, by terminating his membership in the frequent flyer program, the company breached both the contractual agreement and the implied doctrine of good faith and fair dealing under Minnesota law.

At trial in district court, the defense argued that Ginsberg's claims were preempted by the Airline Deregulation Act of 1978 (ADA), which prohibits states from enacting or enforcing regulation over the price, route, or service of an air carrier. The district court found in favor of Northwest Airlines. The U.S. Court of Appeals for the Ninth Circuit reversed and held that the ADA did not preempt the claims because the claims were unrelated to the price, route, or services of the air carrier.

Question

Are claims arising from a frequent flyer program contract preempted by the Airline Deregulation Act as dealing with the price, route, or service of an air carrier?

Media for Northwest, Inc. v. Ginsberg

Audio Transcription for Oral Argument - December 03, 2013 in Northwest, Inc. v. Ginsberg

Audio Transcription for Opinion Announcement - April 02, 2014 in Northwest, Inc. v. Ginsberg

Justice Alito has our opinion in this morning in case 12-462, Northwest Incorporated v. Ginsberg.

This case presents the question whether the preemption provision of the Airline Deregulation Act of 1978 reaches the claim for breach of the implied covenant of good faith and fair dealing.

The respondent in this case was a participant in the Northwest Airlines frequent flyer program, and after taking a great many, Northwest flights and achieving a highest membership status, he was informed by Northwest that his membership was being terminated due to abuse of the program.

In taking the step, Northwest apparently relied on a provision in the frequent flyer agreement that gave Northwest sole discretion to determine whether a participant had abused the program.

Respondent then filed this action on behalf of himself and a class of similarly situated participants and he asserted claims for, among other things, breach of contract and breach of the covenant of good faith and fair dealing.

The District Court dismissed the breach of contract claim on the ground to not add issue before us and petitioner declined to appeal that decision.

The District Court dismissed the breach of covenant claim holding that it was pre-empted by the Airline Deregulation Act.

The respondent appealed that decision, the Ninth Circuit reversed and we granted certiorari.

We addressed three issues.

First, we reject respondent's argument that the Airline Deregulation Act preemption provision is limited to state statutes and regulations.

We hold that it also reaches common law rules.

Second, we conclude that respondent's claim falls within the terms of the preemption provision which applies to claims that relate to rates, routes or services.

The breach of contract claim qualifies because -- breach of covenant claim qualifies because the frequent flyer program awards mileage credits that can be used to reduce or eliminate the price of a ticket, so that concerns rates or to secure a service upgrade which obviously involves a service.

Finally, we hold that under our interpretation of the preemption provision in the 1995 decision in American Airlines v. Wolens, a breach of covenant claim under the law of the relevant jurisdiction in this case, Minnesota is a state imposed obligation and not an obligation voluntarily undertaken by the parties.

For this -- for these reasons, we reverse the decision of the Ninth Circuit and remand for further proceedings consistent with this opinion.

Our decision is unanimous.