The Supreme Court gave frequent fliers a lift Wednesday by permitting a group of them to sue American Airlines over changes in American’s frequent flier program that reduced the value of passenger miles already accumulated.
American had asked the high court to bar the suit in Illinois state court on the grounds that the federal 1978 Airline Deregulation Act prohibits states from enforcing laws relating to airline “rates, routes or services.” Under the law, American argued, only the federal Department of Transportation has the authority to police the airlines.
But in a 6-2 ruling Wednesday, the Supreme Court said passengers with complaints about changes in American’s frequent flier program could pursue their lawsuit in state court as a breach-of-contract matter between private parties.
The federal airline deregulation law of 1978 “bars state-imposed regulation of air carriers, but allows room for court enforcement of contract terms set by the parties themselves,” Justice Ruth Bader Ginsburg wrote for the court’s majority.
The federal law “stops states from imposing their own substantive standards with respect to rates, routes or services, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated,” Ginsburg wrote.
However, Ginsburg said passengers may not pursue a claim against American based on Illinois consumer fraud law because federal law supersedes state law in this instance,
The ruling conformed exactly with the position of the Clinton administration as outlined in a brief submitted to the court by Solicitor General Drew Days III.
Gilbert Gordon, a Chicago lawyer who represented the passengers, called the high court’s Wednesday decision “a great victory for consumers. Airlines can’t hide behind technical interpretations of federal law to shield themselves from liability for breaching their own contracts.”
The ruling is a blow to the major airlines, virtually all of which have some form of frequent flier program.
“Opening the industry to massive new and unforeseen liabilities under state law through actions of the sort at issue here would be devastating not only to the air transport industry, but to all other segments of the economy inextricably linked to it,” said a friend-of-the-court brief submitted on behalf of the Air Transport Association of America, a trade group representing airlines.
The case, American Airlines v. Wolens, began in 1988 after the airline issued new rules limiting the availability of seats for frequent fliers and eliminating certain days on which frequent flier coupons could be used.
Five participants in American’s frequent flier program filed a class action lawsuit in state court.
The plaintiffs, representing between four- and five-million frequent fliers on American, did not dispute the airline’s right to change its program, but objected to its application to miles they had already accumulated.
They claimed violation of the state’s consumer fraud statute and a breach of contract. In 1992, the Illinois Supreme Court ruled the passengers could pursue both legal avenues in state court.
American appealed to the Supreme Court, which on Wednesday permitted the passengers to go forward on the breach of contract, but not on the Illinois consumer fraud law.
The ruling represented the first time the court gave an opening to consumers seeking remedies in state courts against airlines.