Ginsberg v. Northwest, Inc.

The Airline Deregulation Act (“ADA”) does not preempt a claim for breach of the implied covenant of good faith and fair dealing, because state enforcement of the covenant does not “force the Airlines to adopt or change their prices, routes or services – the prerequisite for ADA preemption.”

S. Binyomin Ginsberg brought suit against Northwest Airlines, Inc. (“Northwest”), after Northwest revoked Ginsberg’s frequent flier membership. Ginsberg asserted breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, and intentional misrepresentation. The district court dismissed Ginsberg’s claims, concluding that the Airline Deregulation Act (“ADA”) preempted all of Ginsberg’s claims except for his breach of contract claim, “because they relate to airline prices and services.” Ginsberg appealed the dismissal of his claim for breach of the implied covenant of good faith and fair dealing. Based on case law precedent and the ADA’s legislative history and language, the Ninth Circuit found that the district court erred in dismissing Ginsberg’s claim on preemption grounds. By including a preemption clause in the ADA, Congress sought to prevent state laws that would adversely affect the deregulation of the airline industry. This, coupled with the inclusion of a savings clause preserving common-law remedies, evidences Congress’s intent to preserve state contract law remedies that do not interfere with federal deregulation. The Court held that state enforcement of the covenant of good faith and fair dealing does not “‘relate to’ prices, routes, or services,” the prerequisite to ADA preemption. Congress intended the preemption provision to apply only to state laws directly “regulating rates, routes, or services.” Further, the covenant of good faith and fair dealing does not relate to “services” because it does not involve “schedules, origins, destinations, cargo, or mail.” REVERSED and REMANDED.