Highlights from Supreme Court Oral Argument: What the Justices Do — And Do Not — Know About Miles and Points

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.

(Emphasis mine.)

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

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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  1. “Delta’s lawyer responds that if an airline doesn’t honor its contracts, go fly another airline…!”

    That’s what frequent fliers do whenever an airline severely disappoints us. But pretty soon you run out of airlines!!

  2. Nice post, Gary! Two points:

    1) As I tell my law students re: appellate oral arguments, just because a justice is asking tough Qs seemingly against your side, it does not always mean (s)he is against you. That justice may just be confirming (s)he agrees with you on that manner/issue. (Just one reason why predictions by oral arguments are so tough.)

    2) As for Ginsberg, while the oral arguments shed little light on where the Court is going, it can be argued that it is ‘win-win’ for him.

    If the Court affirms, his claim, at least in part, is not preempted by ADA and he may proceed on its merits. Then the factual fun really begins (less a settlement).

    If the Court reverses and remands to the 9th Cir., it would likely do so with some standard that must be formulated in a manner that the majority of the Justices can agree on it, i.e. more of a broad than narrow standard. As such, Ginsberg might still have some hook to hang his hat on to escape ADA preemption and proceed with a breach of contract theory to some degree.

    Time will tell!

  3. Wouldn’t we love to know which, if any, of the justices collect miles and points?
    By the way, great use of your famous SkyPesos line!

  4. My take on this hearing was that siding with the plaintiff could create an unworkable system where litigation could result from almost anything the airlines did with regard to loyalty programs. Even if the litigation likely would not succeed on the merits, the cost of defending strike suits could turn the loyalty programs from cash cows to big money losers. I’m guessing SCOTUS will be reluctant to impose a reasonable standard into these contracts that could, for example, open the airlines up to a class action every time they devalued their award chart. Of course, the justices are not experts about points and miles so they could potentially make a decisions without understanding the consequences.

  5. Am I the only person that cannot wait for Scalia to retire? Or suffer some sort of incapacitation that prevents him from ever ruling on another case? My libertarian sensibilities despise his economic rulings AND his social rulings. The liberal and the conservative in me are both appalled by every word he utters. To me, he would have been a great justice on some kangaroo court in a dictatorship somewhere. It really gets me hot under the collar that this neanderthal has made so many decisions that negatively impact my life. And now he’s going off on my miles and points!! Okay, rant off. 😉

  6. Why would a Supreme Court justice need to collect miles and points. The government pays their fares and the hotels get reimbursed at the GAA rate.

  7. No Tom, you’re not. And to think he used to be one of my favorites. He’s becoming a bit of a brutish bully in his elder years.

  8. Oh and as far as the “legal” stuff. You want this quick, quiet, painless and LIMITED. I did however love the fact that the new kid in town was without a doubt on the right side of the issue.

  9. Gary — sounds like you needed to file a “Friend of the Court” brief to explain frequent flier miles, sky pesos, etc to the honorable court. Your guess on the breakdown of the decision sounds about right, with the possible exception of Breyer. Scalia, Alito, and Roberts almost always vote in favor of the corporation no matter what the issue. Nobody can ever tell which way Kennedy is going to vote. Although Thomas never asks questions, he almost always votes with Scalia, so is predictible that way.

  10. @BK actually the government does not pay all of a Supreme Court Justice’s travel, some years ago Scalia explained away taking a one-way flight on a private jet and paying for his return ticket as having borne the full cost (he bought a roundtrip to get home and threw away his return — violating the airline’s contract of carriage in the process).

  11. Well, all conservative judges are waiting for a GOP president so that they can retire and be replaced (the same as liberal ones wait for Dem. president). I mean, there was even a potential conflict on interest during the 2000 election case, when it was a public knowledge that both Rehnquist and O’Connor were looking at retiring and didn’t want to wait for another administration (though both stayed thru G.W. Bush’s first term)

    I wonder whether anyone filled a brief on behalf of frequent flyers with details explaining all this stuff (and more) mentioned in the post.

  12. Thomas will side with Scalia.

    If I had to bet, I’d bet DL wins this case, unfortunate as that outcome would be.

    Of the current bunch of Justices, only the Clinton and Obama appointments to the court don’t tend to default to being corporate apologists.

    I’d be surprised if Breyer does anything to limit the scope of something upon which he worked to deregulate, but he’s surprised me before.

  13. 1) With regard to the more recent blog entry, those points aren’t conflicts of interest. They are interesting facts, but neither gives the justice an actual interest in the outcome. The fact that each Justice has a frequent flier account actually is a conflict of interest, but it cuts in the Rabbi’s favor not Delta’s. Nevertheless, the standards are high for Supreme Court Justice recusal, and none of this is even worth talking about as a basis for disqualification.

    2) Though it’s not a conflict of interest, former Scalia clerks tend to do very well in front of Scalia, statistically — in fact, if you ever see a Scalia vote that seems to surprise you given his political leanings, check who argued the case for the winner. Delta’s lawyer was a Scalia clerk. He also was the Solicitor General of the United States, appointed by the President who put both Roberts and Alito on the Court (and the son of the President who put Thomas on the Court).

    3) The post above about being unable to know how an appellate judge is leaning by the questions is sort of right in many courts, but not really in the Supreme Court. It’s usually quite easy to tell with several of them when they are against you.

    4) If he doesn’t get Breyer, the Rabbi doesn’t really have a chance. And I don’t think he’ll get Breyer. Getting two of Alito, Kennedy and Thomas won’t happen in this case. I think the only hope is Roberts, and unlike the rest of your list, I don’t think he’s a solid vote in Delta’s camp. The Rabbi didn’t seem to have much of a chance going into this one, and the only real surprise from oral argument to me is that it’s closer than I expected. I’d add that I’d put Sotomayor in the Roberts camp — she clearly seemed to be leaning, but we aren’t sure. 7-2 doesn’t seem out of the question, actually, but my money is on 6-3, Breyer writing Kagan dissenting, Scalia writing a separate concurrence. The only hope is that Breyer heard something that turns him around.

  14. Well this is terribly complex. And Alito’s comment is quite cogent, as frequent flyer programs are more and more just loyalty programs like good old fashioned S & H green stamps, with miles coming from hundreds of sources.

    Clement’s response was actually appropriate – to whatever extent the ADA applies to miles/status earned, it is pertinent only to the airlines which issue. Gripes about miles issued from other sources should not be subject to the ADA’s preemption of state law claims.

  15. @jfhscott – I really disagree with you on this. Clement isn’t saying that airline miles from non-travel sources aren’t subject to Deregulation Act’s preemption claim, he is saying that the airline remains exempt from claims even when the miles are earned via other sources because they are an airline. That makes no sense.

    Alito’s point that 90% of miles could be earned and even redeemed from other sources suggests that the frequent flyer program is a distinct marketing business owned by an airline rather than being part of air transportation’s routes, schedules, and pricing.

    When an airline owns an unrelated business, the unreleted business is not exempt from state regulations that apply to other similar businesses in the state. “Being an airline” doesn’t mean you are free from regulation by the state if you own a barber shop, an auto repair shop, etc.

    Delta owns an oil refinery. United owns or at least used to own (I haven’t verified this is current) Mypoints.com.

    Clement’s claim is that you can’t sue Delta using a state-level claim when Delta is engaged in unrelated activities because Delta is an airline. That isn’t an especially cogent position, he is blurring “being an airline” with an airline’s scheduling, pricing, and route practices which are what the Airline Deregulation Act precludes pre-empting.

  16. Scalia and Thomas usually have their minds made up before a case is heard. Scalia then works very hard to find some grounds for his already made decision. Thomas doesn’t even bother.

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