Seventh Circuit Offers No Relief for United Airlines' "Million Milers"

For years United Airlines has asked its customers to “Fly the Friendly Skies,” but a dispute with one of its frequent flyers turned decidedly unfriendly and became the subject of a recent case before the Seventh Circuit in Lagen v. United Continental Holdings, Inc., No. 14-1375 (7th Cir. Dec. 22, 2014).

The case has an interesting exposition of the law that governs airlines’ frequent-flyer programs, but what was unusual was the stinging dissent written by Judge Hamilton, in which he called out United’s CEO and general counsel by name and accused the airline of failing to “defend[] this lawsuit honorably.” Fly the friendly skies, indeed. 

The case began when George Lagen attempted to bring an action on behalf of himself and a class of consumers allegedly harmed by the merger of United and Continental. Lagen is a “Million Miler” on United, which means that, having flown on the airline for 13 years and racked up over a million miles in flight, he qualified for certain lifetime benefits in the airlines’ frequent-flyer program. Or so he was told.

When United merged with Continental, it restructured its frequent-flyer program, stratifying its customers into four levels instead of three. The restructuring’s effect on Lagen was to move him down one level. He filed an action for breach of contract, claiming that he was guaranteed his original level of benefits for life under the “Million Mile” program. But the district court granted summary judgment for United, and the Seventh Circuit affirmed in a decision written by Chief Judge Wood and joined by Judge Posner.

The problem with Lagen’s breach-of-contract claim, according to the majority, was that United reserved the right to modify its frequent-flyer program “unilaterally and without notice.” Lagen made a feeble attempt to distinguish his “Million Miler” membership from the frequent-flyer program (attempting to create, in essence, two contracts with United), but the facts were stacked against him. United’s “Million Mile” benefits were part and parcel of its frequent-flyer program, and it was free to change them as it wished. The majority further noted that United’s promise of “lifetime” benefits might be “misleading[,] perhaps even fraudulent,” but the Airline Deregulation Act of 1978 preempted claims based on violations of state consumer-protection law, so Lagen could find no relief there. The Act requires Lagen to channel this sort of grievance through the Department of Transportation, depriving him of a private right of action.

Judge Hamilton recognized the Act’s preemptive effect, but thought that Lagen’s claim for breach of contract should have survived summary judgment. He called United’s defense “a confession of consumer fraud” and its argument regarding its reservation-of-rights clause “legal sophistry in defense of consumer fraud.” Judge Hamilton would have rejected the airline’s argument that its Million-Miler program was meaningless by allowing the “later promise . . . of limited benefits” to “trump the earlier reservation of rights by modifying the contract.” Ultimately his position didn’t carry the day, and Lagen was left with nothing but the grievance procedure before the DOT. We’re tempted to say that Lagen was left with “peanuts,” but since airlines have eliminated even that little luxury, the pun probably is no longer apropos.