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Update: Supreme Court Hears Rabbi’s Case Against Frequent Flyer Programs

by on December 4, 2013 · 35 comments

in Airline Industry

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It might sound like the start of a bad joke: a rabbi walks into a plane…but there’s no punchline in this case. Instead, the Supreme Court of the US heard arguments yesterday in the case of Rabbi S. Binyomin Ginsberg against Northwest (now Delta).

Rabbi Ginsberg outside the SCOTUS after the hearing. Photo by Jonathan Ernst for Reuters.

Rabbi Ginsberg outside the SCOTUS after the hearing. Photo by Jonathan Ernst for Reuters.

Back in 2008, the rabbi was a Platinum elite with Northwest, but the airline shut down his frequent flyer account, revoked his status and took back hundreds of thousands of frequent flyer miles he had accumulated. Ginsberg contends it was part of Northwest’s effort to purge its expensive frequent flyer program before proceeding with its merger with Delta. While Northwest claimed it was because Ginsberg abused the terms of its frequent flyer program by complaining too much and intentionally booking himself on full flights in the hopes of being bumped.

The case has been fought through the state level, federal circuit court, the 9th Circuit Court of Appeals, and has now landed in the Supreme Court. At issue is whether Ginsberg’s complaint has standing in light of the Airline Deregulation Act of 1978, which limits the types of lawsuits disgruntled flyers may file as well as the laws states may pass relating to airlines’ operations. Or whether the airline did not act in good faith in its contract with frequent flyers and thus does not have to do with pricing/routes/anything else pre-empted by the Deregulation act, and is subject to Minnesota state contract law.

That’s the very basic, top-level idea of the case, so lawyer-readers, feel free to comment with your own take on it. What’s important, though, is that the Supreme Court will not be ruling on whether airline frequent flyer programs can cancel accounts, but whether consumers can bring lawsuits like this to court at all. That’s still very important, and the outcome will determine whether we might see a rash of frequent flyer suits flood the courts or not.

The hearing lasted about an hour yesterday morning, with some justices clearly skeptical of the terms of Northwest’s frequent flyer contract, which Justice Sotomayor said was subject only to the “whim and caprice” of the airline, while moderate Justice Stephen Breyer suggested that state contract law should not be applied to airline pricing, of which he sees frequent flyer programs as part of (he called them a sort of discount on airline pricing).

On the other side of the argument, Justice Kennedy wondered aloud whether the outcome of this case meant simply having to choose between accepting the jurisdiction of state law or providing consumers with no recourse in a situation like this. The airline’s attorney responded that consumers can still take their issues to the Department of Transportation, but Ginsberg’s attorney retorted that the agency can police unfair or deceptive practices by airlines, but cannot address specific consumer complaints.

There weren’t hardliners on either side of the issue it seemed, though my favorite quote was from Justice Elena Kagan, who said, “I always thought the way these agreements worked were there were agreements that if I flew a certain number of miles on your plane, I was going to get a free ticket.” While they are much more complex than that these days, I hope Justice Kagan sides on behalf of the consumer and allows state contract law to determine whether an airline has acted in “bad faith” when unilaterally closing a frequent flyer account.

As the Court pointed out, frequent flyer agreements are one-way contracts pretty much with all the power and terms in the hands of the airlines who allow, by their good grace, us flyers to earn and redeem miles, elite status, etc. But that does not take into account the role of individual flyers, and as the airline claims, Ginsberg issued dozens of complaints and tried to “game” the system by purposely getting himself bumped to reap the benefits.

Those issues are still murky, but it will be interesting to see where the court falls on this case – whether they’ll decide that consumers need some form of recourse and kick the case back to state court where Ginsberg can sue that Northwest acted in bad faith, or whether the Deregulation Act preempts lawsuits of this kind and frequent flyers will have to mind their p’s and q’s and hope they don’t do anything to anger airlines or risk losing their miles and status.

I don’t think it’ll come to that since cases like this are very rare, and while I think that people who abuse the system don’t do anyone any good – either the airlines or other frequent flyers – it would still be nice to have some kind of tangible forum for recourse if you feel you are unfairly treated by an airline or frequent flyer program.

I don’t have all the details of Ginsberg’s case, but my gut is that he probably did badly abuse the program and Northwest decided to boot him has a customer and I do believe that airlines should have that power. Ginsberg claims that they canceled his miles simply to get them off their books- that really doesn’t happen. I know people with many, many, many more millions of miles than him and as long as you play by the rules you shouldn’t have anything to worry about. However, I’m still hoping the court rules in his favor because it will pave the way for  *hopefully* more consumer protections down the line, especially as frequent flyer programs become more and more like liquid currencies that can be earned and redeeemed for much more than flying on airplanes.

But what do you think? If you’re interested in learning more about the case or commenting on it, you can find the full transcript here.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Leigh Barratt

    People like GINSBERG just ruin it for everyone else with their deception and abuse of the system. Then, when they get called on it, they sue………typical.

  • Barb

    The Daily Mail’s article title is:

    Rabbi who had his Northwest frequent flier privileges revoked after he complained 24 times CANNOT sue the airline

    http://www.dailymail.co.uk/news/article-2517770/Rabbi-fails-bid-sue-airline-taking-away-frequent-flier-privileges-complained-24-times.html

  • george

    I say give it back. A couple hundred thousand miles on delta, thatll get him a domestic round trip and maybe a ham sandwhich that he will pass on.

  • Steve K

    So many words to say absolutely nothing of real substance. I am amazed this is from an “expert” who then gets interviewed on TV…

  • thepointsguy

    Would you like me to make the Supreme Court’s decision for them? I’m simply updating what happened and my thoughts

  • Mark Dreher

    The Talmud does allow Jews “to cheat Gentiles”. This is written. Can you please leave them alone? They are just following their bible.

    Don’t mess with religion.

    It is in the Talmud: Sanhedrin 57a: “JEWS MAY ROB AND KILL NON-JEWS. When a Jew murders a Christian (“Cuthean”), there will be no death penalty. What a Jew steals from a Gentile he may keep.”

    See, they get to do this.

    Don’t mess with religion.

  • Aaron Parker

    Based on what evidence can you make that claim?

  • pwc122

    Great take on the suit, but I have a much better quote, from the WaPo article:

    “Clement said that was the point of deregulation:

    ‘So if some airline really were crazy enough to systematically turn on its most lucrative and loyal customers, surely, the market would solve that,’ he said. ‘And, of course, if a bunch of airlines did it, the Department of Transportation stands ready to police that.’”

    If I understand Clement (the airline’s defense lawyer) correctly, he seems to be advocating for the DoT to get involved in stopping frequent flyer program devaluations???

    On a serious note, I think it’s perfectly reasonable for airlines to boot customers, moving forward, but I think it’s outrageous for them to take points earned according to program rules. Cut off future earning, drop the Platinum Status in future years, but let him keep the miles for future travel. That seems fair.

  • Max Bilen

    I agree completely, Justice Ginsberg has been a thorn in the side of the Supreme Court since she joined.

  • Leigh Barratt

    That was pretty funny.

  • koam

    The consistency with Ginsberg, apparently, is a dishonest approach to the program. Ginsberg’s complaint after having his account closed is dishonest as well. Nortthwest shut him down for his behavior, not for the reason Ginsberg stated. If Ginsburg believed in his prior behavior, then his complaint about the shutdown should have been to justify his behavior, not to invent a fictitious motive for Northwest’s actions.

  • theanswriz42

    I don’t really see a problem with a guy trying to game a system that constantly is trying to game the consumer.

  • Rob

    Wow, good old fashioned antisemitism rearing its head on a frequent flyer website. I’m so angry I may go out and kill a Gentile!

  • Rob

    HAHAHA cause Jews can’t eat pork!!! Good one George, you’re such a cutup.

  • thepointsguy

    FYI the original comment was deleted- this is not the forum for anything anti-Semitic or that could be perceived that way.

  • Cheng Fang

    Enough said:

    “Northwest says Ginsberg complained 24 times in a 7-month period, including nine instances of luggage that turned up late on airport baggage carousels. Northwest said that before it took action, it awarded Ginsberg $1,925 in travel credit vouchers, 78,500 bonus miles, a voucher for his son and $491 in cash reimbursements.
    Read more: http://www.dailymail.co.uk/news/article-2517770/Rabbi-fails-bid-sue-airline-taking-away-frequent-flier-privileges-complained-24-times.html#ixzz2mWURqMWA

    Follow us: @MailOnline on Twitter | DailyMail on Facebook”

  • thepointsguy

    Original comment deleted due to offensive nature

  • clvus

    If he abused the NorthWest agreement then he should lose his miles.
    Mine moved to Delta no problem.
    The way I see it is that airlines do not HAVE TO give free tickets. If more people piss off the airline industry then it will offer less perks.

  • Seth

    I dont exactly understand whats so offensive. I am Jewish – I took at as more of comment towards to devaluation of 200k miles between when he had them revoked and reinstating them today. How many times have you been on a flight sitting in 1st and the meal option is a ham sandwich? A Rabbi is not allowed to eat ham. This is your forum, which I greatly respect and read all the time though, it’s not an FT board – so it is your call.

  • clvus

    “Northwest said that before it took action, it awarded Ginsberg $1,925 in travel credit vouchers, 78,500 bonus miles, a voucher for his son and $491 in cash reimbursements.”

    and he still complained!

  • Bottle mania

    “GINSBERG” in all caps? People “like” him? “‘They’ sue?” Wow, So many dog whistles MY ears hurt.

  • Chris Robins

    Clement was referring to the fact that the DOT has the authority to police these practices; however, they don’t really do much. “The Department of Transportation does not have rules applicable to the terms of airline frequent flyer program contracts. These are matters of individual company policy. If you are dissatisfied with the way a program is administered, changes which may take place, or the basic terms of the agreement, you should complain directly to the company. If such informal efforts to resolve the problem are unsuccessful, you may wish to consider legal action through the appropriate civil court.” http://airconsumer.dot.gov/publications/frequent.htm

  • Chris Robins

    I have followed this issue very closely and am in the process of publishing a law review commentary on Northwest v. Ginsberg. TheSupreme Court will likely answer two questions: (1) whether frequent flyer programs relate to the routes, prices, and services of an airline and (2) if it does, whether the implied covenant of good faith claim is preempted by the Airline Deregulation Act. The answer to the first question is almost certainly yes. The Supreme Court’s previous decisions (Wolens and Morales) are pretty definitive on this point. After hearing the oral arguments and questions from the justices, the second question appears to be more likely yes than no.

    Both parties concede that in the event of a contract dispute between an airline and another party, the parties CAN adjudicate the claim using state common law claims for breach-of-contract. The issue here is separate from the breach-of-contract claim (which the district court dismissed for failure to state facts sufficient to show a material breach of contract). Here, Ginsberg alleges that under Minnesota law, the implied covenant of good faith and fair dealing is an interpretative mechanism for contracts that allows courts to determine what the reasonable expectations of the parties were. The implied covenant doctrine differs from state to state. The WorldPerks terms and conditions stated that Northwest could revoke a customer’s membership for abusive practices, as determined by its “sole discretion.” Ginsberg believes that Northwest could only revoke his status for what someone would reasonably expect to be abusive practices, while Northwest believes that the express terms of the contract (i.e. its “sole discretion”) should prevail.

    Although the topic of frequent flyer miles is of interest of TPG readers, this case really isn’t that about miles or frequent flyer programs. It’s about contract law and federal preemption. If the Supreme Court were to rule in favor of Ginsberg, the likely outcome would be 50 states applying their own contract common law standards. This is the type of state intervention that Congress wanted to avoid when they passed the ADA. They did not want differing standards for states (hence the route, price, and services preemption clause). Many of the justices (Roberts, Breyer, Scalia, and Alito) hinted at their reservation to allow that scenario to occur. There will be no determination of whether Northwest acted in “good faith” since that issue is not before the court. The court will likely only decide whether these types of suits are allowed.

  • Simon

    Instead of canceling his account, why didnt they simply stop reimbursing him for the complaints?

  • DealsSeeker

    Exactly! They didn’t like that he tried to get bumped, so don’t bump him! But to take away his miles? I just don’t agree with that. And if he complained 9 times about his luggage being delayed, so what? He couldn’t have complained about that if it wasn’t delayed in the first place.

  • jeff4444jojo

    I agree with that. I cannot stand people who are so ignorant that they find every excuse to be sexist, racist or whatever. Thanks.

  • Also a lawyer

    If the Court comes out the way you predict, then will we see the development of a federal common law of contracts that are Airline Deregulation Act-covered?

  • sam

    to everyone who believes that rabbi binyoman ginsberg is trying to play the airline and did a bad job and got caught…
    this is what i have to say:
    the Rabbi flew tens of thousands of miles a year earning top tier level status and spending thousands of dollars a year with northwest.
    he was a road warrior, he is entitled to having his flight arrive ontime, having his checked bags arrive ontime.the list gets longer and longer.

    someone demands that airline does what their supposed to do is not complaining/playing. its simply receiving the customer service he is supposed to get.

    i dont know about most of you, but i spend alot of time on the road.
    and when my flight gets delayed 5 hours because of mechanical issues, hell ya i will demand compensation. even if it happens on every flight i take that year.i believe everyone will.

    frequent fliers have higher standards than regular travelers.

    rabbi ginsberg didnt do anything wrong! the airline did and he pointed it out to them

  • wtfci

    I agree. Rabbi Ginsburg is entitled to complain if bags are lost or late. Customers are entitled to give feedback to servicers. For a servicer to cancel an account because of the complaints would make me highly suspicious of their commitment to high quality service.

    Delta is really going to cause big problems here. They are going to loselose. Consumers will be able to sue. Airlines will need to deal with their factors that drive complaints. And if the factor are the FAA then they should sue the FAA.

  • wtfci

    Clement is batting pretty low at the court lately. No change here. He cannot defend Delta’s arbitrary decision.

  • wtfci

    I manage cases like the Rabbis. Difficult customers are still customers. I don’t get to decide to reappropriate their proprietary currency because they complain. I still needed to respond to them.

    If it comes to the point where I cannot please them, then I will extend an offer to end the relationship. But if they refuse I am SOL.

    Trying to cap complaints is a terrible way to run a business, but Delta is doing that quite well without this case. The last thing they need is more PR of how they screw their customers even when they aren’t flying.

  • McCaron

    the guy is not doing any good to his community by reinforcing cultural stereotypes with his dishonest manners
    now talking about him like any customer, the termination of the program is at the sole discretion of the airline
    they have evidence that he bothered them so many times over the years and got multiple compensations that the situation is clearly obvious that he is playing the company
    i’m very surprised that such a futile lawsuit goes up to the highest court of justice in the US

  • Stvemiller

    Seems to me that taking his miles is unreasonable. Simply cancel his status and account and either give him a reasonable time to spend the miles or convert them to cash and pay him out on the way out the door. Anything less is both unethical and dishonest

  • Bhakti B.

    By law, you must be compensated up to $1,300 by the airline that bumps you. Therefore, $1,925 is not much–that’s probably compensation for being bumped twice. As a former commercial photographer who traveled often, being bumped twice is not an outrageous claim.

  • henny y

    get a job promotion so you won’t have to travel so much

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