Justices Unsympathetic to Kvetching Rabbi
WASHINGTON (CN) - Northwest Airlines need not face claims that it booted a rabbi from its frequent-flier program for complaining too much, the Supreme Court ruled Wednesday.
Rabbi S. Binyomin Ginsberg had filed a class action against the airline, which Delta acquired in 2009, after it dismissed him from the WorldPerks frequent-flier program.
The airline justified its June 2008 expulsion of the rabbi based on his supposed "abuse" of frequent-flying perks.
It wrote that the rabbi had complained 24 times in the last six months about supposed travel problems, including nine incidents of his bag arriving late at the luggage carousel.
"Since December 3, 2007, you have continually asked for compensation over and above our guidelines," the letter stated. "We have awarded you $1,925.00 in travel credit vouchers, 78,500 WorldPerks bonus miles, a voucher extension for your son, and $491.00 in cash reimbursements. ... Due to our past generosity, we must respectfully advise that we will no longer be awarding you compensation each time you contact us."
Ginsberg claimed that the cancelation of his membership amounted to breach of contract, bad faith and misrepresentation.
He sought $5 million in damages, but U.S. District Judge Janis Sammartino in San Diego dismissed the case, finding that the Airline Deregulation Act (ADA) pre-empted most of the rabbi's claims. The remaining contract claim meanwhile failed under Federal Rule of Civil Procedure 12(b)(6).
A three-judge appellate panel of the 9th Circuit revived the bad-faith claim in 2011 because it found that the virtues of deregulation do not trump the common law.
After taking up the case in May 2013, the Supreme Court said Wednesday that the case had been properly dismissed.
"When the application of the implied covenant depends on state policy, a breach of implied covenant claim cannot be viewed as simply an attempt to vindicate the parties' implicit understanding of the contract," Justice Samuel Alito wrote for the court.
"For these reasons, the breach of implied covenant claim in this case cannot stand."
The court declined to go further and "hold that all such claims, no matter the content of the law of the relevant jurisdiction, are pre-empted."
"A state's implied covenant rules will escape pre-emption only if the law of the relevant state permits an airline to contract around those rules in its frequent flyer program agreement, and if an airline's agreement is governed by the law of such a state, the airline can specify that the agreement does not incorporate the covenant," Alito wrote. "While the inclusion of such a provision may impose transaction costs and presumably would not enhance the attractiveness of the program, an airline can decide whether the benefits of such a provision are worth the potential costs."
Ginsberg's attorney, Adina Rosenbaum with Public Citizen, highlighted this silver lining while complaining how the ruling "gives airlines greater freedom to act in bad faith in performing their contracts with consumers, to the detriment of the millions of consumers."
"Particularly in states in which the covenant of good faith cannot be waived, consumers will be unable to bring such claims when airlines breach the covenant in cases concerning prices, routes and services," Rosenbaum said in a statement.
Alito had emphasized that a free-market economy protects the rights of consumers, who can always enroll in rival programs that they deem more favorable.
Ginsberg's breach-of-contract claim alone did not give rise to pre-emption issues, but the court said it could not consider that dismissal because the appeal concerned only the bad-faith count.