The Seventh Circuit recently affirmed dismissal of a putative class action alleging that a major airline improperly calculated frequent-flyer miles. In Han v. United Continental Holdings, Inc. et al., No. 13-3871, decided August 11, 2014, the plaintiff, Hongbo Han, filed a putative class action against United Air Lines, Inc. and related entities (“United”) alleging it breached the terms of its frequent-flyer program, called the “MileagePlus Program.”
Han asserted a breach of contract claim under Illinois law, which requires a party to allege (i) the existence of a valid and enforceable contract; (ii) substantial performance by the plaintiff; (iii) a breach by the defendant; and (iv) resultant damages. Citing Reger Dev, LLC v. Nat’l City Bank, 592 F.3d 759, 764 (7th Cir. 2010). The district court dismissed Han’s complaint for failing to state a claim and Hans appealed to the Seventh Circuit. The crux of Han’s complaint was that United breached the MileagePlus Program contract by crediting him only for mileage between airports, instead of the number of miles the airplanes actually flew – which could often be greater if the calculation included weather diversions, landing delays, and similar scenarios resulting in longer than expected flight times.
As you might expect, the case would turn on the fine print. To enroll in United’s MileagePlus Program, members must complete an enrollment form and must accept the MileagePlus Program Rules, Terms, Conditions and Legal Notices. The Program Rules state that its provisions form the basis of the MileagePlus Program, that a member’s participation in the program is governed by the Program Rules, and that the Program Rules cannot be superseded or changed except in writing from United. Not surprisingly, the Program Rules further state they are subject to change at United’s discretion. Of particular relevance to this dispute was section 18a of the Program Rules, which states that “[i]n the case of air travel, mileage will be credited only for flights actually flown by the member.” Han did not dispute he could only be credited for flights he actually flew, but argued that “mileage” as used in the Program Rules was ambiguous because it was undisputed that the Program Rules did not specify how the mileage was to be calculated.
United argued that very silence defeated Han’s claim because Illinois law provides that a court could not add terms to a contract to which the parties did not assent. The Seventh Circuit disagreed, finding that the silence as to how “mileage” was to be calculated did, in fact, create an ambiguity because it involved a matter naturally within the scope of the contract as written. Han argued that this ambiguity must be interpreted in his favor because United drafted the contract. He also argued other language used by United to describe the MileagePlus Program supported his interpretation.
The Seventh Circuit was not persuaded, noting that Han’s argument ignores the plain language of the Program Rules which unequivocally states that “United has the sole right to interpret and apply the Program Rules.” The Court explained that, under Illinois law, a “court must give meaning and effect to every part of the contract” and should not “interfere with the rights of two parties to contract with one another if they freely and knowing enter into the agreement.” Finally, the Seventh Circuit explained that Illinois law allows contracting parties to grant discretion to one party to interpret and apply contract terms, provided their interpretation was reasonable. Unfortunately for Han and his putative class, the Seventh Circuit concluded United’s interpretation of mileage under its MileagePlus Program Rules was, in fact, reasonable.