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Supreme Court appears split over frequent flyer case

By Bill Mears, CNN Supreme Court Producer
updated 3:22 PM EST, Tue December 3, 2013
STORY HIGHLIGHTS
  • Justices hear argument in airline case
  • At issue is a customer's repeated complaints about airline service
  • Does the traveler have a right to bring the case under federal law?

(CNN) -- A Supreme Court dispute over frequent flyer programs was left up in the air Tuesday, as the justices appeared split during oral arguments over whether the airline or a well-traveled rabbi should prevail.

Binyomin Ginsberg claims his WorldPerks Platinum Elite membership was revoked after being told he had "abused" his privileges, repeatedly filing complaints for upgrades and other benefits.

Northwest Airlines, which was consumed by Delta Air Lines in a 2008 merger, said it had "sole judgment" over the program's general terms and conditions to make such determinations.

At issue is whether Ginsberg has a right under state law to bring his case or whether it is preempted by a 1970s-era federal law that deregulated the airline industry.

That law prohibits parties from bringing similar state claims against airlines relating to a "price, route, or service" of the carrier.

The court offered contrasting views in an energetic hour of arguments.

"If the airline has an unreviewable right to terminate this agreement for any reason or for no reason, then it's an illusory contract," said Justice Ruth Bader Ginsburg. "If one party can get out willy-nilly, what kind of bargain is it" for the consumer?

But Justice Antonin Scalia said the statute in question was designed to preempt state laws. "The whole purpose of the (federal law) was to deregulate airlines," he said. "Let the free market handle it, and there be will be no state regulation."

Ginsberg runs an educational consulting firm for parents and schools in Minneapolis, and travels frequently to lecture and teach.

He joined Northwest's WorldPerks frequent flier program in 1999 and reached Platinum Elite status -- the program's highest -- in 2005.

But in June of 2008, Ginsberg claimed a Northwest representative called him and told him his status was being revoked on grounds that he "abused" the program, according to court papers.

He said the airline also took away the hundreds of thousands of miles accumulated in his account.

"It wasn't the nature that the peanuts were too salty or they served Pepsi vs. Coke. These were legitimate concerns and they were expressed in a very polite and cordial way," Ginsberg told CNN in an interview on Tuesday, just before he attended the arguments.

Airline says 24 complaints

A month after that call, Northwest sent him a letter noting he had made 24 complaints in the past eight months, including nine incidents of his bag arriving late at the luggage carousel, according to court papers.

"You have continually asked for compensation over and above our guidelines. We have awarded you $1,925 in travel credit vouchers, 78,500 WorldPerks bonus miles, a voucher extension for your son, and $491 in cash reimbursements," the letter said.

"Due to our past generosity, we must respectfully advise that we will no longer be awarding you compensation each time you contact us."

Ginsberg's lawyers countered he and his wife had been averaging about 75 flights on Northwest each year, and that Ginsberg estimated that only about 10 percent had resulted in a call to Northwest's customer care.

He said the airline's attitude was, "This is who we are, we are not accountable to you," he said. "I felt someone was stealing something from me."

Mishmash of state laws

The tone of the arguments left the court struggling to grasp the legal and practical consequences of enforcing contracts, under the specialized application of airline deregulation.

Attorney Paul Clement, representing the airline, said a mishmash of differing state laws would make these frequent flyer programs almost unworkable, and that companies need "sole discretion" to define the terms.

"Why do they say 'sole discretion' and not say sole discretion unless it violates reasonable norms of community standards and decency?" asked Clement. "The reason is you can't run a national, let alone international airline, if every one of your judgments about taking an unruly passenger off or taking out an abusive customer is going to be second-guessed by a jury" applying those standards.

Some on the bench were unconvinced.

"Even if you have absolute discretion, isn't there a limit to that?" asked Justice Sonia Sotomayor. "Isn't there a limit of reasonableness to that absolute discretion? That's the whole question-- otherwise, you have a contract with no substance."

Pleasing busy travelers

Clement said the U.S. Department of Transportation properly handles consumer complaints about frequent flyer programs, and that companies have an incentive to entice and please busy travelers.

"If some airline really was crazy enough to systematically turn on its most lucrative and loyal customers, surely, the market would solve that," he said.

But Justice Elena Kagan intervened.

"Usually when we say a contract has no consideration, we don't say, 'Oh, we're going to hold you to it anyway because the market will solve it.' We say, 'The contract has no consideration, it's illusory.' If there's really no obligation on the part of the airline here to give that free ticket, if they can do it when they feel like it and not do it when they don't feel like it, why is there any consideration?"

Some justices worried how claims like Ginsberg's would be applied if different states used different standards to determine whether a contract was "unreasonably" breached.

"It seems to me to be a particular problem when you're talking about the objectives of the ADA to say that the rule varies from state to state," said Chief Justice John Roberts. "Particularly since, we're dealing with airlines that go to a lot of different states. I mean, it seems to me that the loosest state from the point of view of the preemption is going to set the standard."

Different states and different consumers, added Justice Stephen Breyer.

"My reasonable expectation is they're not going to charge me what they're going to charge, I mean, it's unbelievable," he said in a hypothetical about soaring ticket prices. "But you see, that's my reasonable expectation, and I'm the other party. And so that clause sounds as if you could, under state contract law, govern the price according to my reasonable expectation, namely, the consumer. That might be a great idea, but I don't think that's the idea behind" the federal law's preemption goals and remedies.

Corporate partners

Complicating matters is that many airlines work with corporate partners, allowing frequent flyers to redeem miles in other areas besides air transportation. Some industry analysts say the majority of those redeemed miles now go for things like car rentals, hotels, and vacation packages.

As for Ginsberg, he says the legal fight that has taken him to the nation's highest court is more than just about himself.

"I feel very proud taking on this battle, I'm doing this for you and I and everyone else on this country," he told CNN. "I don't want anything, just give me back my miles. You took them, they're mine -- give them back to me."

The case is Northwest, Inc. v. Ginsberg (12-462). A ruling is expected by the spring.

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