Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 19, 1995 TAG: 9501190106
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Knight-Ridder Newspapers
DATELINE: WASHINGTON LENGTH: Medium
Millions of air passengers have won the right to sue airlines that retroactively reduce their frequent-flier benefits.
In a 6-2 ruling Wednesday, the Supreme Court opened the doors of state courts to frequent fliers to seek damages for breach of contract.
The text of the decision also helps air passengers who claim they were physically injured or unfairly bumped from flights. Many personal-injury and contract suits had been held up to await the Supreme Court ruling, consumer advocates said.
The justices ruled against American Airlines, which pioneered the popular frequent-flier programs and has more than 24 million participants in its ``AAdvantage'' plan.
Because of the court decision, a suit filed on behalf of an estimated 4 million AAdvantage members will return to an Illinois court on the contract claim. Other groups of passengers are expected to pursue similar suits against United and Delta airlines.
The key issue to be decided in state court: Did American's contract with its passengers reserve its right to decrease the value of already accumulated mileage credits - or to alter only credits earned after the date of the change?
In 1988 American, eager to cut the costs of its popular frequent-flier program, reduced the plan's benefits unilaterally and retroactively under a clause allowing it to ``restrict, suspend or otherwise alter aspects of the program.''
American cut the number of seats available to free fliers on every plane, listed blackout dates and shut plan members out of all flights during holidays and peak travel seasons.
One protesting passenger was Myron ``Mike'' Wolens, a 63-year-old salesman from suburban Chicago, who recalled in a recent interview: ``All of a sudden, I started having trouble using my tickets. I tried to book a flight and couldn't get it. I felt I'd been taken advantage of.''
In the case Wolens et al. vs. American Airlines, frequent fliers from Illinois, California and Connecticut convinced Illinois courts that they had a right to sue despite the broad sweep of the U.S. Airline Deregulation Act of 1978.
The act forbids states from imposing their standards for rates, routes or services of airlines.
Only two years ago, in a case called Morales vs. Trans World Airlines, the Supreme Court said the act barred state attorneys general from suing airlines for allegedly misleading advertising.
But on Wednesday, Justice Ruth Bader Ginsburg, accepting the Clinton administration's viewpoint, said contract suits are different.
Federal law doesn't stop states from providing relief to passengers who prove that an airline violated a contract that the airline itself offered and the passengers accepted, Ginsburg wrote for the court.
``A remedy confined to a contract's terms simply holds parties to their agreements,'' Ginsburg declared.
Justice Sandra Day O'Connor, joined by Clarence Thomas, dissented from the decision that allows breach-of-contract suits. She said state laws governing contracts are likely to interfere with airline services.
On a related issue, Ginsburg concluded for a 7-1 majority that federal law bars state consumer fraud suits against airlines.
Unlike contract laws, there is a ``potential for intrusive regulation of airline business practices'' in state consumer protection laws, Ginsburg said. Justice John Paul Stevens was the lone dissenter.
by CNB