Nw., Inc. v. Ginsberg
| Decision Date | 02 April 2014 |
| Docket Number | No. 12–462.,12–462. |
| Parties | NORTHWEST, INC., et al., Petitioners v. Rabbi S. Binyomin GINSBERG. |
| Court | U.S. Supreme Court |
Paul D. Clement, Washington, DC, for Petitioners.
Lewis S. Yelin, Washington, DC, for the United States as amicus curiae, by special leave of the Court, supporting the Petitioners.
Adina H. Rosenbaum, Washington, DC, for Respondent.
Paul D. Clement, Counsel of Record, George W. Hicks, Jr., Bancroft PLLC, Washington, DC, for Petitioners.
Adina H. Rosenbaum, Counsel of Record, Michael T. Kirkpatrick, Public Citizen Litigation Group, Washington, DC, for Respondent.
We must decide in this case whether the Airline Deregulation Act pre-empts a state-law claim for breach of the implied covenant of good faith and fair dealing. Following our interpretation of the Act in American Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995), we hold that such a claim is pre-empted if it seeks to enlarge the contractual obligations that the parties voluntarily adopt. And because the doctrine is invoked in the present case in an attempt to expand those obligations, we reverse the judgment of the Court of Appeals.
Like many airlines, petitioner Northwest, Inc. (Northwest), established a frequent flyer program, its WorldPerks Airline Partners Program, to attract loyal customers. Under this program, members are able to earn " miles" by taking flights operated by Northwest and other "partner" airlines. Members can then redeem these miles for tickets and service upgrades with Northwest or its airline partners.
Respondent became a member of Northwest's WorldPerks program in 1999, and as a result of extensive travel on Northwest flights, he achieved "Platinum Elite" status (the highest level available) in 2005.
In 2008, however, Northwest terminated respondent's membership, apparently in reliance on a provision of the WorldPerks agreement that provided that "[a]buse of the ... program (including ... improper conduct as determined by [Northwest] in its sole judgment[ ) ] ... may result in cancellation of the member's account." App. 64–65. According to respondent, a Northwest representative telephoned him in June 2008 and informed him that his "Platinum Elite" status was being revoked because he had " 'abused' " the program. Id ., at 35. In a letter sent about two weeks later, Northwest wrote:
Respondent requested clarification of his status, but a Northwest representative sent him an e-mail stating that "[a]fter numerous conversations with not only the Legal Department, but with members of the WorldPerks department, I believe your status with the program should be very clear." Id ., at 60.
Alleging that Northwest had ended his membership as a cost-cutting measure tied to Northwest's merger with Delta Air Lines, respondent filed a class action in the United States District Court for the Southern District of California on behalf of himself and all other similarly situated WorldPerks members. Respondent's complaint asserted four separate claims.1 First, his complaint alleged that Northwest had breached its contract by revoking his "Platinum Elite" status without valid cause. Second, the complaint claimed that Northwest violated the duty of good faith and fair dealing because it terminated his membership in a way that contravened his reasonable expectations with respect to the manner in which Northwest would exercise its discretion. Third, the complaint asserted a claim for negligent misrepresentation, and fourth, the complaint alleged intentional misrepresentation. Respondent sought damages in excess of $5 million, as well as injunctive relief requiring Northwest to restore the class members' WorldPerks status and prohibiting Northwest from future revocations of membership.
The District Court held that respondent's claims for breach of the covenant of good faith and fair dealing, negligent misrepresentation, and intentional misrepresentation were pre-empted by the Airline Deregulation Act of 1978 (ADA or Act) as amended, 49 U.S.C. § 41713. These claims, the court concluded, were "relate[d] to" Northwest's rates and services and thus fell within the ADA's express pre-emption clause. App. to Pet. for Cert. 69. Respondent's remaining claim—for breach of contract—was dismissed without prejudice under Federal Rule of Civil Procedure 12(b)(6). The court held that respondent had failed to identify any material breach because the frequent flyer agreement gave Northwest sole discretion to determine whether a participant had abused the program. Respondent appealed the dismissal of his breach of the duty of good faith and fair dealing claim but not the other claims that the court had dismissed.
The Ninth Circuit reversed. 695 F.3d 873 (2012). Relying on pre-Wolens Circuit precedent, the Ninth Circuit first held that a breach of implied covenant claim is " 'too tenuously connected to airline regulation to trigger preemption under the ADA.' " 695 F.3d, at 879. Such a claim, the Ninth Circuit wrote, "does not interfere with the deregulatory mandate" and does not " 'force the Airlines to adopt or change their prices, routes or services—the prerequisite for ... preemption.' " Id., at 880. In addition, the Court held that the covenant of good faith and fair dealing does not fall within the terms of the Act's pre-emption provision because it does not have a "direct effect" on either "prices" or "services." Id., at 877, 881.
We granted certiorari. 569 U.S. ––––, 133 S.Ct. 2387, 185 L.Ed.2d 1103 (2013).
Before the enactment of the ADA, the Federal Aviation Act of 1958 empowered the Civil Aeronautics Board to regulate the interstate airline industry. Pursuant to this authority, the Board closely regulated air carriers, controlling, among other things, routes, rates, and services. See, e.g., Western Air Lines, Inc. v. CAB, 347 U.S. 67, 74 S.Ct. 347, 98 L.Ed. 508 (1954) ; Federal Aviation Act of 1958, 72 Stat. 731. And since the Federal Aviation Act contained a saving provision preserving pre-existing statutory and common-law remedies, § 1106, id ., at 798, air carriers were also regulated by the States. See Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992).
In 1978, however, Congress enacted the ADA, which sought to promote "efficiency, innovation, and low prices" in the airline industry through "maximum reliance on competitive market forces and on actual and potential competition." 49 U.S.C. §§ 40101(a)(6), (12)(A). While the ADA did not repeal the predecessor law's saving provision, it included a pre-emption provision in order to "ensure that the States would not undo federal deregulation with regulation of their own." Moralessupra, at 378, 112 S.Ct. 2031. In its current form, this provision states that "a State, political subdivision of a State, or political authority of at least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart." § 41713(b)(1).
We have had two occasions to consider the ADA's pre-emptive reach. In Morales , we held that the ADA pre-empted the use of state consumer protection laws to regulate airline advertising. We recognized that the key phrase "related to" expresses a "broad pre-emptive purpose." 504 U.S., at 383, 112 S.Ct. 2031. Noting our interpretation of similar language in the pre-emption provision of the Employee Retirement and Income Security Act of 1974, 29 U.S.C. § 1144(a), we held that a claim "relat[es] to rates, routes, or services," within the meaning of the ADA, if the claim "ha[s] a connection with, or reference to, airline 'rates, routes, or services.' "
504 U.S., at 384, 112 S.Ct. 2031. The older saving provision, we concluded, did not undermine this conclusion. Id., at 384–385, 112 S.Ct. 2031.
Subsequently, in American Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995), we considered the application of the ADA pre-emption provision to two types of claims concerning an airline's frequent flyer program: first, claims under the Illinois Consumer Fraud and Deceptive Business Practices Act challenging an airline's devaluation of earned miles (chiefly as the result of the imposition of "blackout dates" and limits on the number of seats available for customers wishing to obtain tickets by using those miles) and, second, breach of contract claims. We reaffirmed Morales ' broad interpretation of the ADA pre-emption provision and held that this provision barred the claims based on the Illinois statute but not the breach-of-contract claims. "[T]erms and conditions airlines offer and passengers accept," we wrote, "are privately ordered obligations and thus do not amount to a State's 'enact[ment] or enforce[ment] [of] any law, rule, regulation, standard, or other provision having the force and effect of law' within the meaning of [the ADA pre-emption provision]." 513 U.S., at 228–229, 115 S.Ct. 817.
With this background in mind, we turn to the question whether the ADA pre-empts respondent's claim for breach of the implied covenant of good faith and fair dealing.
The first question we address is whether, as respondent now maintains, the ADA's pre-emption...
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