The legal fight over what it means for United Airlines to offer “lifetime” benefits continues to wend its way through the courts. The case was dismissed in January but that decision was appealed. Oral arguments in that appeal were heard yesterday by a three judge panel and both sides got beat up a bit; it is not clear based on the recording that either side necessarily did a great job of making their case.
The knowledge of frequent flyer programs across the panel spans the gamut from completely uninformed (Judge Posner didn’t understand what an upgrade would get you on board) to very well educated (Judge Wood at one point quoted the exact United mileage credit for Chicago to Houston off the top of her head). Judge Hamilton was in the middle; he clearly understands the basics of the programs but was not nearly as into them as Judge Wood. This range of knowledge set up some interesting dialogues during the hearing, with Judge Wood occasionally answering the questions of her colleagues rather than allowing the attorneys to do so.
Ultimately it seems to me that the Court was keen to understand whether this was just bad business or actually a breach of contract. Judge Wood quipped early in the session,
Now, this may be stupid on United’s part. I feel as though maybe they should say “Don’t rely on anything we say at the top of every page” and people would probably be well advised to probably take that thought.
But it is not clear if bits like that are sufficient to make Mr. Lagen’s claim stick. Here are a couple of the more interesting bits transcribed from the court recordings.
First up in the hearing the attorney for Mr. Lagen was on. The judges focused on two main points: Whether the MMer program was separate from MileagePlus or not and whether Mr. Lagen actually lost benefits he was guaranteed. And also whether Mr. Lagen realized additional benefits over time.
Hamilton: As I understand it the benefits of Premier Executive or MM status have been changing, some times for the better and some times for the worse. Compare Mr. Lagen’s position today versus in 2006 when he qualified for the status.
Posner: What concretely did he lose in the way of benefits?
Lagen: In the way of benefits He lost his tier status.
Posner: What does that mean?
Lagen: It means that his ability to be able to procure upgrades at the same level as he could under Premier Executive has been hampered…. Now he gets fewer upgrades because he is third tier.
Wood: So you’re theory is that United was prohibited from creating any higher tiers?
Lagen: No, your honor. Our theory is that United was prohibited from transitioning people who had vested with MM flyer benefits into alternative tiers.
Wood: That’s what you really want? Gold to Platinum?
Wood: But he really just wants the same status. Because as someone who follows United’s tiers more than I should, even Platinum isn’t the old fashioned Premier Executive. They change stuff all the time taking advantage of the reservation of rights. Next year [Lagen] may think he really belongs in 1K if he wants the upgrades as often as he used to receive them when he first became a Million Mile flyer. Essentially what you want to say is there’s a list of benefits that existed in 2006 that went along with getting Million Mile status and those should be replicated. But I thought that United had also sweetened the pot in some ways.
Lagen: No, Your Honor.
Wood: The spouses, right? He can designate somebody?
Yes, Your Honor, that is correct.
Wood: And that was not the case, right?
Lagen: In this particular case it doesn’t pertain as our appellant doesn’t have a spouse.
Wood: Not everybody gets to use every benefit. But if United says we used to make use Premier Executive with this package of benefits and now we’re going to make u premier Gold but we’re going to let you designate a significant other, you know, whether you have one or not and whether this person flies with you all the time can’t really be United’s problem.
Lagen: Yes, Your Honor, but what can be United’s problem is that they offered lifetime benefits.
A bit later in the discussion the idea of bankruptcy was broached. It was acknowledged that the loyalty programs typically survive through such bankruptcies but Lagen’s attorney also conceded that the Million Miler program would be subject to cancellation or renegotiation, just like any other contract. This section of the discussion also once again brought up what the actual promised benefits were and what is being delivered today.
Wood: It is just a contract, though. The truth is if there were a bankruptcy it would be subject to renegotiation.
Lagen: Correct. In this particular case our argument remains that MileagePlus the underlying program and Million Mile Flier are distinct.
W: Your evidence on that is weak at best. If that were the case then you have a smooth sail. … The problem is to even find the Million Mile status it is part of MileagePlus. That’s where you find it on the website.
Lagen: Our distinction on that level is that, while we do not dispute that one must be a member of Mileage Plus in order to be a Million Miler, we do dispute that Million Mile flyer and the Million Mile Flyer program are part of Mileage Plus. We believe they are separate and distinct.
Hamilton: Is it correct that he is still being treated as if he were flying 50,000 miles every year whether he does so or not?
Lagen: However, none of United’s advertisements ever identified Million Mile flyer status would be at the 50,000 mile level of MileagePlus. Every advertisement distributed by United stated it would be at the Premier Executive level, without exception.
Hamilton: And Premier Executive was 50,000, right?
Lagen: Correct, Your Honor. However that operated under the assumption that the 50k mile level and Premier Executive would be distinct at some date. Which they are now after United has modified the program. But at the time the appellant accepted that they were one in the same.
The judges did hammer UA’s attorney a bit on their ability to just pull the plug completely on the program. Her response was basically that they could, but it would be stupid. And also that if they did so the lawsuit for doing so would be preempted by DoT jurisdiction.
Wood: How can United really call something lifetime when really the only benefit we get from that is to understand that we can’t trust anything they say?
United: It is lifetime, but everything is subject to the MileagePlus rules
Wood: So it is not lifetime. It is lifetime unless we decide tomorrow that it would be a better business model to just abolish million mile altogether. You admit that that could happen?
United: Yes, I would agree that United has the ability under the MP rules to abolish the benefits that they give to MM flyers entirely.
United also made the claim that what Lagen was paying for was transportation, not the miles. This part of the discussion is where Judge Wood’s program knowledge shone most brightly.
Posner: He didn’t pay anything for it. It seems to me if you don’t pay for something it is a little…
Hamilton: He spent hundreds of thousands of dollars buying tickets with United rather than British Airways.
United: And for every one of those tickets he flew from point A to point B.
Posner: Well does United charge more than BA?
Wood: There is nothing in the record. What airlines do with these FF programs is they want you to get into the game and build up miles. So if WN is willing to fly you to HOU for $275 and UA will fly you down there for $325 they want you to choose the United flight even though it is $50 more because you’re going to get upwards of 2000 miles for that, 1950 to be exact.
United: I’m impressed that you know that.
Wood: Oh, well, believe me…. In other words there is money on the table. That’s the only point I want to make. People pay a little more sometimes even if there is competition for a route so they can earn the miles.
And then the question of whether reserving the right to make changes essentially makes the promise of a lifetime benefit deceptive or fraudulent.
Hamilton: So how is a promise of lifetime benefit not deceptive & fraudulent?
United: I would say two things on that in this case. Actually three things. One is, Congress in the ADA of 1978 made very explicit, and the Supreme Court has recognized this multiple times, that Congress’s determination was the best way to promote competition, innovation, etc. in the airline industry was through market forces.
Hamilton: Market forces are great but they also tend not to approve of fraudulent promises.
United: Well, That’s the second piece. The DoT has the authority to regulate and to bring enforcement actions if it decides the actions of an airline, including activities related to frequent flyer, are deceptive or fraudulent.
Hamilton: Are you arguing this claim is preempted?
United: It is not preempted as a breach of contract claim. If the claim was that the contract is somehow losery or fraudulent because of the reservation of rights yes, that claim would be preempted. Because that would be an attempt not to enforce United self-imposed obligations which say black-letter law we can change at any time. It would be an attempt to impose other obligations based on state law norms of what constitutes appropriate consideration, what constitutes fraud.
Hamilton: Then why not simply interpret a promise of lifetime benefits as being flatly inconsistent with the reservation of rights and therefore having trumped it as a later promise?
United: No, because there is no separate promise of lifetime benefits…. But the whole thing is under the umbrella of MileagePlus. It is not separate.
When it comes to changing the terms the judges and United’s attorney sparred a bit more, both about what the changes might be.
Wood: They could say “We’re still giving a spouse,” until they decide to change that. But there is nothing guaranteed for lifetime under your view.
United: That is correct, subject to, again, the DoT’s ability to bring an enforcement action if it thinks the practices are fraudulent or deceptive or unfair and also subject again to the competitive market fores that Congress has said are what should govern the airline industry in general. If were UA were to eliminate the MM flyer program completely that’s certainly going to have an impact on its business and that’s not what it did here; let’s also remember that.
Hamilton: But you’re claiming it has the right to do so.
United: Yes, that is true.
The details about what is promised with the lifetime tier came up again, and Judge Posner got everyone in the room to chuckle as he expressed confusion over the “spousal” benefit with his nomination.
United: But one point I did want to make again as Judge Wood recognized and also Judge Hamilton recognized the only lifetime benefit that was ever promised as part of the program was lifetime Premier Executive status. Which he still has. That has not changed. The benefits associated with the status changed and the name has changed. Obviously the name change, that can’t possibly be a breach. And, as you pointed out Judge Hamilton, there is no promise that we’re not going to have another tier about the 50k level. He’s still got the same status. The benefits associated with that status have changed but that is clearly allowed by the contract. And, as Judge Wood points out, he got a new benefit which was [spousal match].
Wood: Does it have to be a spouse? You could just name anybody? Your best friend who you like to fly around with?
United: I believe it might have to be someone in the same household. I’d have to go back and look at specifics at that.
Wood: It could be a daughter?
United: Right. Exactly.
Posner: A cat?
Wood: Posner’s nominated his cat.
And then, once again, United was on the hot seat with respect to whether they’re actually making promises they are bound by or just misleading customers.
Hamilton: Let’s talk about that. How does United expect people to respond to that news: We’re offering this lifetime benefit if you reach a million miles. Why isn’t hat obviously a unilateral contract offer that can be accepted by performance?
United: Because, again, it is all subject to the MileagePlus rules.
Hamilton: Any other reason? That leads us back to the conflict betwen lifetime and our fingers are crossed, this means nothing.
United: But it doesn’t mean nothing.
Hamilton: Yes, you’re telling us you have the right to cut off these million mile flyers any time you like for any reason.
United: Yes, but I don’t think that’s equivalent to saying it means nothing. Mr. Lagen has received the benefits of the status for many years. He’s still receiving the benefits of the status.
Hamilton: That’s a different question.
Wood: That’s because you’ve been nice enough not to pull the rug out from under him.
United: It is not just “nice enough”
Hamilton: Because you expect your customers to respond to this offer by shifting their loyalties as Mr. Lagen did. Right?
Hamilton: That’s the purpose of this program.
United: Yes, it is.
Hamilton: You expect people to rely on this promise.
United: We expect people who enroll in the MP program to read the rules, to understand what those rules are and those rules govern govern benefits.
Hamilton: To understand the difference between lifetime and fingers crossed? That lifetime doesn’t mean lifetime?
United: That lifetime means lifetime unless…
Wood: Unless we change our mind.
Hamilton: Unless we change our mind.
United: Yes, that’s exactly right. That’s the case.
At this point we’re back to a waiting game. The Court did not make clear when we should expect to hear a ruling or indicate which side might be favored by such a ruling. It is also important to note that while the questioning pressed both sides there is more to evaluating the legal claims than just those bits discussed.
And so, once again, we wait.
n.b. – The transcripts above are ones I created from the recording. They’re pretty darn close but likely not perfect.
- United Million Miler lawsuit dismissed
- Lawsuit decided against Rabbi in frequent flyer account termination
- A frequent flyer loser loses a lawsuit
- United responds to “lifetime” benefits lawsuit
- Lawsuit filed over United’s “lifetime” elite benefits
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