On April 2, 2014, the U.S. Supreme Court decided in Northwest, Inc. v. Ginsberg, No. 12-462, that the Airline Deregulation Act (ADA) pre-empts a state law claim for breach of the implied duty of good faith and fair dealing if it seeks to enlarge the contractual obligations that the parties agreed on.
Rabbi Ginsberg was a member of Northwest's WorldPerks frequent flyer program, and achieved the highest status available. In 2008, however, Northwest terminated Ginsberg's frequent flyer membership in reliance on a provision of the WorldPerks contract, informing Ginsberg that he had "abused" the program.
Ginsberg subsequently filed a class action complaint in the Southern District of California, alleging claims governed by Minnesota state law for breach of contract, breach of the duty of good faith and fair dealing, negligent misrepresentation, and intentional misrepresentation. The district court held that, except for the breach-of-contract claim, all of Ginsberg's claims were pre-empted by the ADA because they were related to Northwest's rates and services, and thus fell within the ADA's express pre-emption clause.
Ginsberg appealed only the dismissal of his claim for breach of the duty of good faith and fair dealing. The Ninth Circuit reversed, holding that a breach of implied duty claim is "too tenuously connected to airline regulation to trigger preemption under the ADA."
The Supreme Court reversed the Ninth Circuit. The Court first found that the ADA's pre-emption provision applies not only to legislation enacted by a state legislature and regulations issued by a state administrative agency, but also to a common-law rule. It then concluded that Ginsberg's breach of implied duty claim "relates to" airline rates, routes, or services because it has a connection with, or reference to, airline prices, routes, or services. Referring to its prior decision in American Airlines, Inc. v. Wolens, the Court held that Northwest's frequent flyer program is connected to its rates in part because it awards mileage credits that can be redeemed for tickets and upgrades, thereby eliminating or reducing the price of a particular ticket. Finally, the Court held that, under applicable Minnesota law, the implied duty of good faith and fair dealing is a state-imposed obligation that applies to every contract, and that consequently is pre-empted by the ADA.
Justice Alito delivered the opinion for a unanimous Court