High Court Hears American Frequent-Flier Case

WASHINGTON – Travelers angered over changes in American Airlines’ frequent-flier program should not be allowed to sue the carrier in state courts, a lawyer for the Fort Worth-based company argued before the Supreme Court yesterday.

The court is expected to rule in the case by July. American began the AAdvantage program in 1981. It offers free tickets to air travelers who earn AAdvantage miles, either through flying on American or doing business with selected American associates, such as car rental companies or hotel chains.

But a lawyer for a group of AAdvantage members from Illinois told the high court that if travelers in frequent-flier programs are not allowed to sue the company in state courts, they will have no other legal remedy if they are wronged.

American is trying to halt a suit by the Illinois travelers, who have filed on behalf of an estimated 4 million AAdvantage members in that state.

They say American Airlines cheated them when it changed AAdvantage rules in 1988 and made the changes retroactive. American contends it has the right to make changes in the frequent-flier program to stay competitive. About 21 million travelers belong to AAdvantage.

Bruce J. Ennis, American’s attorney, told the nine justices in an hourlong session that a federal law, the Airline Deregulation Act of 1978, precludes state court lawsuits, such as the one pending in Illinois. Ennis said disputes over frequent-flier miles are related to American’s rates, routes and services and as such should be handled by the U.S. Department of Transportation.

But travelers’ attorney Gilbert W. Gordon of Chicago said: “If we’re pre-empted today, these consumers and other consumers cannot take action against American.” “There is no federal court remedy. We have been to the federal courts and they sent it back to state courts. There is no place to litigate this case other than in a state court. I want to make that very clear. If we lose, we’re extinguished.”

On the steps of the court building after the hearing, American’s general counsel, Anne McNamara, said the Transportation Department could hear the claims of passengers.

“The Department of Transportation is uniquely capable of dealing with the interest of consumers,” she said. “They were given the authority to regulate this sort of matter.” But Gordon said American wants to interpret the act in such a way that anything relating in any way to an airline’s rates, routes and services is pre-empted under the act.

“Almost anything an airline does has at least a tenuous connection to its rates, routes or services,” Gordon said.

But Ennis said that allowing individuals or groups to sue in state court over similar problems would be asking American to try and “guess what magic words” each state used in writing laws affecting air carriers. He said that would limit the flexibility air carriers need to react to changes in the marketplace.

Ennis vigorously defended American’s position during the half-hour he was allowed to address the court. He was interrupted often, sometimes in mid-sentence, by justices posing questions about the company’s stance. Chief Justice William H. Rehnquist asked whether, under American’s interpretation of the act, a passenger’s family could sue over his death in a plane crash.

“What about a negligence claim from a plane crash?” he asked. “That would affect rates.” Ennis responded that the act did not keep passengers and families from suing after plane crashes.

Justice Ruth Bader Ginsburg asked Ennis what a customer would do if the price of a purchased ticket was changed once the passenger arrived at the gate. “What if he gets to the gate and is told it’s $100 more?” she asked. “Under your theory, he would have no claim.”

Ennis said, “That’s correct.”

He noted that the complaint would deal with ticket rates and services, which are the jurisdiction of the Transportation Department.

But Justice Sandra Day O’Connor noted that an irked customer could ask the department to bar American from making retroactive changes in its frequent-flier program. She added that frequent-flier plans appear to be related to airline rates because trading in mileage credits is “just another way of buying a ticket on the airline.”

In 1988, however, American changed the rules of its AAdvantage program from allowing members to use earned miles for any available seat on a flight to allowing members to use those credits for one of a select number of seats on each flight.

The case is known as American Airlines vs. Wolens. American has said its financial stability was threatened when the Illinois Supreme Court ruled in March 1992 that American could be sued if it is suspected of violating Illinois contract law and the state’s Consumer Fraud and Deceptive Business Practices Act.

The high court, later in 1992, told the Illinois Supreme Court to restudy its initial decision to allow the lawsuit. After re-examining the case, the Illinois Supreme Court again allowed the suit in December 1993.

November 2, 1994 Edition: FINAL AM Section: Page: 1

Author: Michael D. Towle; Star-Telegram Writer