By Adina Rosenbaum, Public Citizen
This morning, the Supreme Court handed down its decision in Northwest v. Ginsberg, holding that the Airline Deregulation Act (ADA) preempts Rabbi S. Binyomin Ginsberg’s claim that Northwest breached the covenant of good faith and fair dealing when it terminated his frequent flyer program membership.
Rabbi Ginsberg was a long-standing member of Worldperks, Northwest’s frequent flyer program. In 2008, Northwest abruptly terminated his membership in the program. Rabbi Ginsberg filed suit, alleging, among other things, that the airline’s termination of his membership was a breach of the implied covenant of good faith and fair dealing. The district court held that his claim was preempted by a provision of the ADA that preempts state laws, regulations, and other provisions relating to air carrier prices, routes, or services. The Ninth Circuit reversed, allowing the claim to go forward, and the Supreme Court took the case.
The Supreme Court’s decision this morning reversed the Ninth Circuit. The Court held that covenant-of-good-faith claims are preempted if they seek “to enlarge the contractual obligations that the parties voluntarily adopt.” It determined that, under Minnesota law (the law at issue in the case), covenant-of-good-faith claims are state-imposed obligations, rather than voluntarily-adopted obligations, because the State does not allow parties to contract out of the covenant and because the State has created various exemptions to the covenant for policy reasons, thereby implying that its decision not to exempt certain contracts from the covenant is also based on policy. “When the application of the implied covenant depends on state policy,” the Court stated, “a breach of implied covenant claim cannot be viewed as simply an attempt to vindicate the parties’ implicit understanding of the contract.”
In addition, the Court rejected the argument that common-law claims are not preempted by the ADA because they do not involve a “law, regulation, or other provision having the force and effect of law.” It also rejected the argument that claims related solely to membership in a frequent flyer program (rather than to flights themselves) are not preempted because they are not related to airline prices, routes, or services.[Guest blogger Adina was counsel for Ginsburg in the Supreme Court.]