US Supreme Court Takes Flight - to Hear Airline Deregulation Act Case

Aviation cases brought before the United States Supreme Court are infrequent, but on December 3, 2013, the high court will hear argument in a case styled Northwest, Inc. v. Ginsberg, which USA Today reports this way:

The airline revoked Rabbi Binyomin Ginsberg's membership in the WorldPerks Platinum Elite program in June 2008. He had complained 24 times in eight months about Northwest's service and sought "compensation over and above (Northwest's) guidelines," according to the airline's written argument.

Ginsberg, who flies 75 times a year as a lecturer, filed a federal class-action lawsuit seeking $5 million, saying he was dropped without adequate cause. He acknowledged complaining about getting bumped from flights, but not every time.

"Rabbi Ginsberg appealed solely with respect to the claim for breach of the implied covenant of good faith and fair dealing," Ginsberg's written argument said.

But Northwest, which is now part of Delta Air Lines, argued that the Airline Deregulation Act of 1978 prevents lawsuits governing "price, route or service of an air carrier."

It is true that the Airline Deregulation Act preempts state law claims that "relate to" airline prices, routes, or services.

What will be interesting in this case is whether the Supreme Court determines, as it has in the past, that frequent flyer programs represent contract rights and voluntary airline undertakings that are not preempted under the federal deregulation act, or whether the passenger's particular claim here (including "bumping"), falls within the "price, route, or service" an air carrier offers so as to be preempted. 

AA-USAir Merger Approved by US Department of Justice

The New York Times reports that

The Justice Department has reached a preliminary agreement to settle its fight with American Airlines and US Airways over their proposed merger, according to a court document filed on Tuesday. Under the proposal, American and US Airways would sell 104 takeoff and landing slots at Ronald Reagan National Airport in Washington, 34 slots at La Guardia Airport in New York, and various assets at five other airports, including O’Hare Airport in Chicago, Los Angeles International Airport and Boston Logan International Airport. The settlement still needs to be approved by the Federal District Court in the District of Columbia as well as a judge overseeing American Airlines’ bankruptcy proceeding. The airlines are confident they can now close their merger deal by mid-December

The implications of the merger are very significant here in Miami from an economic perspective. American is a major employer in the region and has a robust network of flights to and from Latin and South American and Europe. Because American Airlines already operates as a hub with few flights overlying USAir's route system (USAir typically served specific markets with a few flights a day to Charlotte, Philadelphia), it is not clear that domestic operations will be impacted to any remarkable measure. 

Not the case in other cities, particularly Washington, D.C. and New York (LaGuardia). As part of a stipulated agreement with the federal government, the merged airline will have to divest of particular "slots" to "low cost carriers" such as JetBlue to ensure the promise (or what is left of the promise) of a contestable deregulated airline marketplace. 

A copy of the proposed consent order appears here:

AA-USAir Proposed Final Judgment.pdf by Timothy M. Ravich, Esq.

On August 13, 2013, the United States Department of Justice  and attorneys general from six states, including Florida,and the District of Columbia filed a lawsuit challenging the $11 billion merger of American Airlines and US Airways, saying the combination would lead to higher prices and less service for consumers. 

 A formatted copy of the complaint appears below. 

Interestingly, these cases have proven very difficult for the government to establish. In the late 1990s, for example, the Department of Justice was not successful in prosecuting American Airlines (via its parent AMR) for "predatory pricing." Antitrust enforcement is a highly complicated area of the law. The goal of such litigation is to make sure that consumers are not worse off in the long run as a result of market behavior that actually reduces competition.  While that sounds easy and good, marshaling the facts and evidence and expert resources to prove that free market impulses should be stopped requires tremendous legal resources.

While globally important, this lawsuit is particularly important to South Florida and Miami residents who have already suffered the demised of Eastern Air Lines and Pan Am in years past.

Department of Justice Complaint (Re USAir -American merger) by Timothy M. Ravich, Esq.