Tuesday night I read the Supreme Court transcripts so you don’t have to — there were some priceless frequent flyer moments during the Court’s oral argument in the case of the Rabbi who complained too much and Ngorthwest Airlines closed his frequent flyer account…
Justice Ginsburg didn’t seem to think that an airline unilaterally cancelling an account and refusing to honor accrued obligations was reasonable.
JUSTICE GINSBURG: Mr. Clement, the argument was made that if — if the airline has an unreviewable right to terminate this agreement for any reason or for no reason, if that is so, then it’s an illusory contract. What — what is your answer to that, if one 16 party can get out willy-nilly, why — what kind of 17 bargain is it?
Delta’s lawyer suggests that people pay for travel, they get travel, and the miles aren’t really promises beyond that. That would be Delta’s position.
You could also conceive of it as basically being a premium that’s offered by the company to reward your loyalty, but you’ve already gotten full performance.
Justice Kagan thought that was pure B.S.:
JUSTICE KAGAN: I just don’t see why that would make sense. Because if I knew that it was really up to you to give me the free ticket, maybe I was willing to get it and maybe I wasn’t. I don’t think that I’d be spending all this time in the air on your planes. You know, I’d find another company that actually gave me the free ticket.
Clearly she’s not familiar with Skypesos!
Delta’s lawyer responds that if an airline doesn’t honor its contracts, go fly another airline…!
Delta’s lawyer also suggests a consumer can just complain to the Department of Transportation, though in practice the Department of Transportation doesn’t regulate frequent flyer programs.
Justice Kagan sees limits to an airline’s ability to walk away from its obligations. Delta claims that all a consumer can do is sue for breach of contract, they can’t make arguments over whether the terms of the contract are fair. So if the contract gives an airline a unilateral right not to fulfill obligations, that’s the end of the story. Justice Kagan doesn’t think that can be right, and doesn’t see using an ‘implied covenant of good faith’ as adding a new separate claim but rather as a simple tool for understanding what’s really agreed to.
Ultimately there’s a disagreement over whether a rule that a contract has to has some reasonableness to it is an “interpretive tool” or an additional requirement meant by a state to impose its beliefs onto a contract, and that matters because in the former case it would be permissable and in the latter likely pre-empted by the Airline Deregulation Act.
Delta then shifts to argue that if you allow suits over its frequent flyer programs, you allow suits over its judgments to remove passengers from a plane and that would be unmanageable if each decision could be second-guessed in court.
Justice Breyer, of course, was a key architect of airline deregulation in his capacity working for the late Senator Kennedy. Here’s how he views frequent flyer programs:
frequent flyer programs are simply price discounts. Given.
Justice Scalia pretty clearly throughout his questioning wants to side with Delta. He goes so far as to say that even when you’re redeeming your miles for something other than air travel, what you’re really doing is getting a rebate on air travel (and thus regulating frequent flyer programs means regulating prices which the Airline Deregulation Act doesn’t let states do).
JUSTICE SCALIA: Why does — it relates to prices. Even if you get credit for miles from staying in certain hotels, it still has the effect of lowering the price for your airline ticket. And likewise, if you can use your frequent flyer miles to get cheaper hotel rooms, that effectively lowers the price of your airline ticket, doesn’t it? I mean, it doesn’t seem to me to make any difference whether the only thing you get from the frequent flyer mileage is, you know, is airfares or other goodies. They are all price.
Scalia’s analysis, of course, only holds up for miles earned by flying (and it doesn’t quite deal with elite status, which was also cancelled in this case but doesn’t make an appearance in oral argument at all) and it fails for any other miles whatsoever, redeeming points for hotel stays when those points were earned from refinancing a mortgage does not mean you’re getting a discount on airfare — you’re getting a rebate on the cost of the mortgage.
Respondent’s counsel makes that point. Scalia doesn’t get it.
JUSTICE SCALIA: I’m sorry. You are talking about a situation where you can assign your mileage to somebody else who can get the hotel room?
MS. ROSENBAUM: No, I’m saying that someone -
JUSTICE SCALIA: The person who gets the discount for the hotel room is the person who bought the airline ticket, right?
And Justice Ginsburg has to explain it to Scalia.
JUSTICE GINSBURG: Your point is that you can get frequent flyer miles by purchases other than airplane transportation.
But Justice Breyer tries to shut down this line of questioning quickly, because the original filing the Rabbi made argued he was being deprived his flight benefits and his air travel — and not his free hotel rooms from points acquired via credit card.
This is why frequent flyer programs will eventually be back to this Court — they’re really only addressing frequent flyer programs as rebates for air travel in the current case. Justice Breyer says “we might preserve that question for another day.”
The best exchange on it belonged to Justice Alito:
JUSTICE ALITO: I don’t want to take up your rebuttal time, but if the facts were that under a particular program 90 percent of the miles were earned by purchasing things other than flying and 90 percent of the miles were spent on things other than flying, wouldn’t that be very different?
MR. CLEMENT: I’m not sure it would be different in a claim brought against the airlines. I mean, maybe if you want to sue the credit card partner, the ADA has nothing to do with that. But I would say that if you’re suing an airline, the Airline Deregulation Act speaks to it.
See that? Delta’s lawyer thinks we should sue American Express when the Skymiles award chart devalues.
Ultimately Delta’s position — if it were to reach adjudication — wouldn’t hold. They say in effect ‘if you’re suing an airline it’s air transportation.’ But Delta owns an oil refinery. Airlines aren’t able to run other businesses and simply be exempt from all state regulation of those businesses by virtue of being an airline. Otherwise that would give them some pretty strong competitive advantages. They could run local bars and ignore liquor laws, for instance!
I’m certainly not a professional court watcher (and many of those who are get these guesses wildly wrong), but judging only from the questions asked it sounded as though the justices were breaking down as follows:
- For Delta: Scalia, Roberts, Breyer, and probably Alito
- For Ginsberg: Sotomayor, Ginsburg, Kagan
- Unclear to me: Thomas (he doesn’t ask questions in oral argument), Kennedy