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Southwest Booze Coupon War Fought on 2 Fronts

CHICAGO (CN) - Southwest Airlines must face a second class action related to the free drink coupons that it no longer honors, a federal judge ruled.

For a number of years, Southwest Airlines offered free drink coupons to business-class customers and frequent fliers in the Rapid Rewards program. The coupons, which did feature expiration dates, were redeemable on any Southwest flight for drinks that would otherwise cost $5.

In August 2010, however, Southwest announced that its flexible policy was hurting the company. "To help purge the system of these excess coupons, we will start enforcing expiration dates on coupons over the course of the next year," Southwest CEO Mike Hafner said in company blog post.

"Beginning today, Southwest Airlines will only accept Business Select drink coupons on the day of travel which allows customers to use the coupon for the flight it was purchased," Hafner continued.

Future coupons for frequent fliers would include an expiration date going forward, and older coupons without expiration dates would be accepted through August 2011.

In November 2011, Adam Levitt and Herbert Malone filed a class action on behalf of all persons with unredeemed Southwest drink coupons that were obtained with the purchase of Business Select tickets. They asserted claims for breach of contract, unjust enrichment, and violations of the Illinois and Pennsylvania Consumer Fraud Acts.

Citing pre-emption under the Airline Deregulation Act (ADA), U.S. District Judge Matthew Kennelly dismissed all but the breach-of-contract claim Monday.

"The ADA provides that a state 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 that may provide air transportation under this subpart," Kennelly said. "It is not necessary for a state statute to refer expressly to airlines in order for a claim under the statute involving an airline's services to be preempted."

Southwest had also moved to stay the case pending the outcome of a class action it faces in Alabama, but Kennelly refused after finding that the Alabama case, captioned Grimsley v. Southwest Airlines Co., apparently plans to cover frequent fliers only.

"As plaintiffs argue, it appears likely that the arguments in the present case will concern the legal implications of plaintiffs' alleged purchases of individual airline tickets that came with the coupons, whereas those in Grimsley will focus on whether any provision of the Southwest Airlines Rapid Rewards Program allows Southwest to revoke a coupon," the judge said.

"Finally, the Southwest blog post that announced the company's decision to cease honoring the coupons includes separate paragraphs describing the changes for Business Select and Rapid Rewards customers and the differing terms that will apply in the future to the two types of coupons," Kennelly concluded.

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