Does A New British Airways Frequent Flyer Program Rule Violate 14 CFR § 253.10?

Yesterday British Airways announced a change to its frequent flyer program purporting to preclude members from taking it to court or participating in any class action lawsuit.

The ‘binding arbitration’ provision would, in theory, protect BA from a future version of the US$42 million and over 2.2 billion frequent flyer miles the fuel surcharge class action settlement cost them for deceptive practices.

Commenter RTS pointed out that no airline can impose such a requirement in its contract of carriage aimed at U.S. travel. Here the clause applies specifically to U.S. members. 14 CFR § 253.10 says,

§ 253.10 Notice of contract of carriage choice-of-forum provisions.

No carrier may impose any contract of carriage provision containing a choice-of-forum clause that attempts to preclude a passenger, or a person who purchases a ticket for air transportation on behalf of a passenger, from bringing a claim against a carrier in any court of competent jurisdiction, including a court within the jurisdiction of that passenger’s residence in the United States (provided that the carrier does business within that jurisdiction).

British Airways would say that the change wasn’t made to their contract of carriage, it was made to their frequent flyer program terms. However it’s still British Airways rule limiting the ability of U.S. passengers to sue the airline in U.S. courts.

And the Supreme Court ruled in Northwest v. Ginsberg that frequent flyer programs were part and parcel of airline air transportation (that miles are effectively a rebate on travel).

It seems like it might be time for another formal DOT complaint, this time against British Airways.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. This obviously begs the question of what the result would be if Executive Club or any pther program was an independent entity like Aeroplan is (was?).

    Miles may be a rebate, but what happens when Avios miles are a rebate for paying for an AA ticket?

    I’d anticipate that the judiciary would be loathe to extend regulation of contracts of carriage to FFP’s. There may be state law claims, however, that waiver of arbitration and ability to organize a class runs counter to public policy.

  2. @jfhscott but wpuldn’t those state law claims be preempted by the Airline Deregularion Act based on the decision in Northwest v Ginsberg?

  3. Can someone comment why this change to terms and conditions does not include an opt-out option? When Chase and Starbucks Cards updated their T&C’s to add mandatory arbitration in the few years, there was an opt-out clause. Amex, T-Mobile and Comcast have an arbitration opt-out method within 30 days of becoming a new customer.

  4. This argument is unpersuasive because the Federal Register rule making notice DOT issued on this rule stated that the rule was merely intended to prohibit airlines from requiring plaintiffs to bring their claims in a particularly inconvenient forum like faraway foreign courts. As long as it’s possible to bring an arbitration against BA in the US, they’d be compliant with the purpose of the rule as DOT has articulated it. Strictly speaking arbitration is not quite a “forum,” so you can sometimes have both an arbitration clause and a forum selection clause in the same contract.

    I’d also doubt that a court would necessarily uphold the rule if it purported to preclude arbitration in any event. There’s a separate congressional statute, the Federal Arbitration Act, that makes arbitration clauses legally binding and sets a national policy of encouraging arbitration. DOT’s reg — issued under its general power to prohibit unfair and deceptive airline practices — probably can’t trump the Federal Arbitration Act. So even if DOT wanted to prohibit arbitration, it wouldn’t be able to do so unless Congress more explicitly said that DOT would have the power to make exceptions to the Federal Arbitration Act requirements.

  5. Arbitration has to be voluntary. That’s why the requirement to opt in. Notice that you opt in by booking via the website. So don’t book using the web site and preserve your right to sue.

  6. Gary,

    Ginsberg was indeed all about preemption rather than the substance.

    The best test case would have to involve someone who never earned a single Avios as a result of flying BA metal, or better yet, not even a OW carrier – it would have to be all ancillary earn. Some tribunal would have to decouple the Avios from the idea that any given Avios is a rebate for flying. A lower or state tribunal that finds the new anti-class and mandatory arbitration clauses offensive (don’t try this in Virginia) might distinguish the facts from Ginsburg.

    And, had Aeroplan been spun off when Ginsburg was decided? It may not matter analytically in the context of BIS miles earned as a rebate, but the idea that FF programs are such independent profit centers that they can literally be spun off into a distinct profit center has certainly grown legs sufficient to give it a new look.

  7. @jfhscott Aeroplan was spun off in 2005, so yes – the argument about earning for things other than travel (a majority of earn!) and redeeming for non-travel wasn’t sufficiently developed in the record to be a significant issue at the high court

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