Northwest Inc. v. Ginsberg

Whether a contract claims based on the doctrine of good faith and fair dealing is preempted by the Airline Deregulation Act.

Petitioner was an active member of a frequent-flyer program offered by Respondent. Respondent revoked Petitioner's membership, referring to language in the membership agreement which provides that the airline may determine "in its sole judgment" whether a passenger has abused the program, and that abuse may result in termination of their account. Petitioner claimed that the real reason for the revocation of his membership was because he complained too frequently. Petitioner filed suit, claiming that the airline breached their implied covenant of good faith and fair dealing.

The lower court held that Plaintiffs claim was preempted by the Airline Deregulation Act ("ADA"), 49 U.S.C. § 41713(b)(1), and dismissed the claim pursuant to Fed.R.Civ.P. 12(b)(6). On appeal, the Ninth Circuit concluded that the ADA does not preempt this common law contract claim, and reversed the district court. The court reasoned that by including a preemption clause, Congress wanted to ensure that the States would not undo the deregulation established by the ADA with regulation of their own. Congress's "manifest purpose" was to make the airline industry more efficient — it was not to immunize the airline industry from liability for common law contract claims. The Supreme Court granted certiorari to determine whether the implied covenant of good faith and fair dealing is preempted by the ADA.