Northwest Airlines, Inc. et al. v. Ginsberg (Oral Argument Transcript)

8/13/2019 Northwest Airlines, Inc. et al. v. Ginsberg (Oral Argument Transcript)

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Official - Subject to Review

1 I N THE SUPREME COURT OF THE UNI TED STATES

2 - - - - - - - - - - - - - - - - - x

3 NORTHWEST, I NC. , ET AL. , :

4 Pet i t i oner s : No. 12- 462

5 v . :

6 RABBI S. BI NYOMI N GI NSBERG :

7 - - - - - - - - - - - - - - - - - x

8 Washi ngt on, D. C.

9 Tuesday, December 3, 2013

10

11 The above- ent i t l ed mat t er came on f or or al

12 argument bef ore the Supr eme Cour t of t he Uni t ed St ates

13 at 10: 12 a. m.

14 APPEARANCES:

15 PAUL D. CLEMENT, ESQ. , Washi ngt on, D. C. ; on behal f of

16 Pet i t i oner s.

17 LEWI S S. YELI N, ESQ. , Assi st ant t o t he Sol i ci t or

18 Gener al , Depar t ment of J ust i ce, Washi ngt on, D. C. ; f or

19 Uni t ed St at es, as ami cus cur i ae, suppor t i ng

20 Pet i t i oner s.

21 ADI NA H. ROSENBAUM, ESQ. , Washi ngt on, D. C. ; on behal f of

22 Respondent .

23

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25

Alderson Reporting Company


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C O N T E N T SORAL ARGUMENT OF PAGEPAUL D. CLEMENT, ESQ.

On behal f of t he Pet i t i oner s 3ORAL ARGUMENT OFLEWI S S. YELI N, ESQ. ,

For Uni t ed St at es, as ami cus cur i ae, 18suppor t i ng t he Pet i t i oner s

ORAL ARGUMENT OFADI NA H. ROSENBAUM, ESQ.

On behal f of t he Respondent 28REBUTTAL ARGUMENT OFPAUL D. CLEMENT, ESQ.

On behal f of t he Pet i t i oner s 53



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Official - Subject to Review3

1 P R O C E E D I N G S2 ( 10: 12 a. m. ) 3 CHI EF J USTI CE ROBERTS: We wi l l hear 4 ar gument f i r st t hi s mor ni ng i n Case 12- 462, Nor t hwest , 5 I ncor por at ed v. Rabbi Gi nsber g. 6 Mr . Cl ement . 7 ORAL ARGUMENT OF PAUL D. CLEMENT8 ON BEHALF OF THE PETI TI ONERS9 MR. CLEMENT: Mr . Chi ef J ust i ce, and may i t

10 pl ease t he Cour t : 11 Under t hi s Cour t ' s deci si on i n Wol ens, t her e12 ar e onl y t wo rel evant quest i ons her e, and t he Ni nt h13 Ci r cui t got bot h of t hem wr ong. The f i r st quest i on i s14 whet her a cl ai m f or addi t i onal benef i t s under a f r equent 15 f l yer pr ogr am, l i ke f l i ght upgr ades, r el at e t o pr i ces, 16 r out es and servi ces. Thi s Cour t answer ed t hat quest i on17 i n t he af f i r mat i ve i n Wol ens and, i ndeed, under scor ed18 t he quest i ons not par t i cul ar l y cl ose. The Ni nt h19 Ci r cui t ' s abi l i t y t o r each t he cont r ar y concl usi on i n20 t he pr eci se same cont ext underscores how f ar t hey have21 st r ayed f r om t hi s Cour t ' s pr ecedence. 22 The second quest i on i s whet her t he23 Pl ai nt i f f s' cl ai m her e seek mer el y t o enf or ce t he24 par t i es' vol unt ar y under t aki ngs or , r at her , seek t o25 enf or ce St at e l aw t o enl ar ge t hose under t aki ngs and



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1 enl ar ge t he par t i es' bar gai n. 2 And i t ' s t o t hat quest i on 2 we t hi nk3 Respondent ' s own cl ai ms her e make t he case qui t e cl ear . 4 Respondent di d br i ng a cl ai m her e t o enf or ce t he5 par t i es' vol unt ar y under t aki ngs, a br each of cont r act 6 cl ai m and l ost on t he mer i t s. The i mpl i ed pr eempt i on7 cl ai m i s di f f er ent . I t seeks t o i mpose a dut y of f ai r 8 deal i ng and r easonabl eness and super i mposed t hat on t he9 bar gai n, even wher e t he par t i es t o t he cont r act have

10 essent i al l y gi ven one par t y absol ut e di scret i on. 11 J USTI CE GI NSBURG: Mr . Cl ement , t he ar gument 12 was made t hat i f - - i f t he ai r l i ne has an unr evi ewabl e13 r i ght t o t er mi nat e t hi s agr eement f or any reason or f or 14 no r eason, i f t hat i s so, t hen i t ' s an i l l usor y15 cont r act . What - - what i s your answer t o t hat , i f one16 par t y can get out wi l l y- ni l l y, why - - what ki nd of17 bar gai n i s i t ?18 MR. CLEMENT: Wel l , t here are a coupl e of19 answer s t o t hat , J ust i ce Gi nsbur g. The f i r st i s I t hi nk20 al t hough t he f ocus on whet her a cont r act i s i l l usor y i s21 somet i mes used as par t of t he anal ysi s under t he i mpl i ed22 covenant f or a bi l at er al cont r act . I don' t t hi nk t hat 23 same anal ysi s woul d appl y t o somethi ng l i ke a f r equent 24 f l yer pr ogr am, whi ch I t hi nk woul d be pr oper l y25 under st ood as a uni l at er al cont r act , wher e you don' t



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1 wor r y about t hose sor t of i l l usor y pr omi ses. 2 The second t hi ng i s I t hi nk you have t o3 under st and i n t he cont ext -

4 J USTI CE SOTOMAYOR: Di d a uni t ar y cont r act ?5 MR. CLEMENT: I ' m sor r y. 6 J USTI CE SOTOMAYOR: I ' m not sure I 7 under st and that poi nt . 8 MR. CLEMENT: Ther e - - t her e i s a9 di st i nct i on, i f you go back to t he Hor ne books on

10 cont r act l aw bet ween a uni l at er al cont r act and a11 bi l at eral cont ract . A uni l at eral cont ract i s - - i s a12 t ypi cal sor t of out st andi ng pr omi se, t hat pr omi se13 doesn' t r equi r e an exchange of consi der at i on, and t he14 par t y who makes t he pr omi se has t he abi l i t y to wi t hdr aw15 t he pr omi se unt i l t her e' s - - t her e' s per f or mance16 essent i al l y r el yi ng on t he pr omi se. And t hat ' s why I 17 t hi nk i t ' s act ual l y a l i t t l e bi t of a mi st ake t o appl y18 t hat doct r i ne t o somet hi ng l i ke a f r equent f l yer 19 progr am. 20 J USTI CE KAGAN: I guess I don' t under st and21 t hat , Mr . Cl ement , because I al ways t hought t hat t he way22 t hese agr eement s worked wer e ther e wer e agreement s t hat 23 i f I f l ew a cer t ai n number of mi l es on your pl an, I was24 goi ng t o get a f r ee t i cket . And - - and i t wasn' t a gi f t 25 t hat I was get t i ng a f r ee t i cket , i t was because I di d



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1 somet hi ng, I f l ew a cer t ai n number of mi l es. So t hat 2 t here was an exchange wi t h val ue on both si des. 3 MR. CLEMENT: Wel l , I - - I suppose you coul d4 concei ve of i t t hat way. You coul d al so concei ve of i t 5 as basi cal l y bei ng a pr emi um t hat ' s of f er ed by t he6 company t o rewar d your l oyal t y, but you' ve al r eady7 got t en f ul l per f or mance. 8 J USTI CE SCALI A: No. I t hi nk you have t o9 concei ve of i t t hat way, but t hat st i l l makes i t a

10 uni l at er al cont r act . I t ' s not a pr omi se i n exchange f or 11 anot her pr omi se. I t ' s a pr omi se i n exchange f or t he12 per f or mance of an act ; t hat i s, f l yi ng t he ai r l i ne, you13 know, a cer t ai n number of mi l es. You' r e cor r ect , i t i s14 a - - a uni l at er al cont r act . Now, whet her t hat - - t hat 15 means t hat t her e' s no - - i s t her e no such t hi ng as an16 i l l usor y uni l at er al cont r act ?17 MR. CLEMENT: I don' t t hi nk t her e r eal l y i s. 18 You know, I l ooked at t he - - t he t r eat i ses f or t hat , and19 I j ust don' t t hi nk that concept r eal l y appl i es i n t he20 uni t ar y - - t he uni l at er al cont r act cont ext . 21 J USTI CE KAGAN: I j ust don' t see why t hat 22 woul d make sense. Because i f I knew t hat i t was r eal l y23 up t o you t o gi ve me the f r ee t i cket , maybe I was 24 wi l l i ng t o get i t and maybe I wasn' t . I don' t t hi nk25 t hat I ' d be spendi ng al l t hi s t i me i n t he ai r on your



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1 pl anes. You know, I ' d f i nd another company t hat 2 act ual l y gave me t he f r ee t i cket . 3 MR. CLEMENT: That r eal l y, I t hi nk, get s t o4 t he nub of t hi s, because, of cour se, what you' r e5 suggest i ng i s t hat t her e woul d be a mar ket sol ut i on t o6 t hi s pr obl em. And t hat ' s what t he Ai r l i ne Der egul at i on7 Act i s al l about . Let t i ng t he mar ket deci de t hese8 i ssues. 9 So i f some ai r l i ne r eal l y wer e cr azy enough

10 t o systemat i cal l y t ur n on i t s most l ucrat i ve and l oyal 11 cust omer s, sur el y, t he mar ket woul d sol ve t hat . And, of12 cour se, i f a bunch of ai r l i nes di d i t , t he Depar t ment of13 Transpor t at i on st ands r eady t o pol i ce t hat . 14 J USTI CE KAGAN: But usual l y what we say when15 a cont r act has no consi der at i on, we don' t say, oh, we' r e16 goi ng t o hol d you t o i t anyway because t he market wi l l 17 sol ve i t . We say t he cont r act has no consi der at i on, 18 i t ' s i l l usor y, i n j ust t he way t hat J usti ce Gi nsbur g19 poi nt ed out . 20 And t he quest i on i s: I f t her e' s r eal l y no21 obl i gat i on on t he par t of t he ai r l i ne her e t o gi ve t hat 22 f r ee t i cket , i f t hey can do i t when t hey f eel l i ke i t 23 and not do i t when t hey don' t f eel l i ke i t , why i s t her e24 any consi der at i on? Why i sn' t t he cont r act not i l l usor y?25 MR. CLEMENT: Ther e - - t her e i s



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1 consi der at i on - - I ' m not sur e anyt hi ng t ur ns on t hi s -

2 but t her e i s consi der at i on because thi s i s not somet hi ng3 wher e the ai r l i ne says, l ook, we can do anythi ng we4 want . They say, l ook, i f you pr esent us wi t h mi l es5 whi l e you' r e st i l l i n good st andi ng i n t he pr ogr am, 6 we' l l gi ve you upgr ades, we' l l l et you i nt o a l ounge. 7 But i f , pur suant t o t he cont r act , you abuse t he pr ogr am8 i n our sol e di scr et i on, t hen you l ose your member shi p9 st at us. And t hat ' s what ' s happened her e.

10 J USTI CE SCALI A: You' r e not t r yi ng t o11 enf or ce t he cont r act anyway. You - - you want t o get out 12 of t he cont r act . So you - - you ought t o be happy t o13 have i t pr onounced an i l l usory cont r act , r i ght ? What do14 you car e?15 MR. CLEMENT: Wel l , t hat i s t r ue. But I 16 suppose t he ar gument mi ght be t hat you coul d, as a17 mat t er of br each of cont r act l aw, use t hi s pr i nci pl e t o18 i nt er pr et t he cont r act . And i f t hat wer e an ar gument , 19 i t ' s an ar gument t hat ' s made under Count 1 of t hi s20 compl ai nt . 21 J USTI CE SOTOMAYOR: Mr . Cl ement , you' r e22 maki ng - - you' r e maki ng an assumpt i on. The cl ai m her e23 i s not whether he abused or di dn' t abuse t he pr ogr am. 24 Hi s al l egat i on i s t hat t he onl y reason you t er mi nat ed25 wi t h a cont r act was because you want ed t o get r i d of



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1 t hese hi gh f l yer s i n your mer ger negot i at i ons wi t h t he2 ot her ai r l i ne. That ' s t he same as sayi ng t hey di dn' t 3 t ermi nat e me because I abused t he progr am. They4 t er mi nated me because I was of a cer t ai n r ace or I was a5 woman or I was handi capped or some ot her i mproper 6 consi der at i on. 7 So ar e you suggest i ng t hat t hi s cont r act 8 per mi t s you t o use t hat ki nd of sel f - - t hat ki nd of9 gr ound, one not gr ounded i n t he cont r act , but gr ounded

10 i n your whi m and capr i ce?11 MR. CLEMENT: Wel l , a coupl e of poi nt s, 12 J ust i ce Sot omayor . Fi r st of al l , I t hi nk i t ' s - - i t ' s13 r eal l y i mpor t ant t o emphasi ze t hat t he cl ai m about 14 pr et ext and t hi s al l bei ng about t he mer ger i s act ual l y15 not somethi ng t hat ' s made i n t he br each of cont r act 16 count or t he br each of i mpl i ed covenant count . That ' s17 pl ed act ual l y i n t he mi sr epr esent at i on count s. Count s 318 and 4 of t he compl ai nt t hat everybody recogni zes ar e19 pr eempt i ve. 20 Now, what ' s pl ed i n cont r act Count 1, t he21 br each of cont r act count , i s t hat under t he cont r act , 22 somehow we don' t have t he abi l i t y t o t ermi nate somebody23 wi t hout j ust cause. And t hat ' s t he ar gument t hat t he24 di st r i ct cour t r ej ected on t he mer i t s. 25 Now, t he i mpl i ed covenant count , Count 2, i s



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1 di f f er ent . I t says t hat under St at e l aw, t her e i s a2 dut y of good f ai t h and f ai r deal i ng and t hat dut y i s3 super i mposed on t he cont r act even i f t he cont r act gi ves4 one of t he par t i es absol ut e di scr et i on. And t hose5 aren' t my words. Those are t he words of Count 2 of t he6 compl ai nt at J oi nt Appendi x page 51. 7 J USTI CE SOTOMAYOR: Even i f you have8 absol ut e di scr et i on, i sn' t t her e a l i mi t t o t hat ? I sn' t 9 t her e a l i mi t of r easonabl eness t o t hat absol ut e

10 di scret i on? That ' s t he whol e quest i on of - - ot her wi se, 11 you have a cont r act wi t h no subst ance. 12 MR. CLEMENT: The way I woul d t hi nk about 13 i t , J ust i ce Sot omayor , i s "absol ut e" mi ght not qui t e14 mean absol ut e. And t he pl ace t o make t hat argument i s15 under t he br each of cont r act r ubr i c. That you can ci t e16 Cardozo and Lady Duf f - Gordon. 17 But when you get t o sayi ng even i f t he18 cont r act ' s absol ut e, St at e l aw st i l l super i mposes a19 r easonabl eness r equi r ement on t he cont r act , t hat ' s t he20 poi nt at whi ch pr eempt i on ki cks i n. 21 J USTI CE SCALI A: I s t hat ent i r el y - - I mean, 22 suppose t he cont r act sai d "i n i t s absol ut e di scret i on23 and subj ect t o no obl i gat i on of good f ai t h. " Suppose i t 24 sai d t hat . Woul d St at e l aw st i l l i mpose an obl i gat i on25 of good f ai t h?



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1 MR. CLEMENT: I t mi ght wel l , J ust i ce Scal i a, 2 because -

3 J USTI CE SCALI A: Wel l , i t mi ght wel l or i t 4 woul d?5 MR. CLEMENT: I t depends on t he St ate. So6 t he maj or i t y -

7 J USTI CE SCALI A: Wel l , t hi s Stat e. I mean, 8 t he St at e we' r e t al ki ng about . 9 MR. CLEMENT: Okay, Mi nnesota. I - - as I

10 r ead t he cases, t he r ul e i n Mi nnesot a i s t hat t he11 covenant of good f ai t h and f ai r deal i ng i s not wai vabl e. 12 So there' s a case t hat we f ound cal l ed New Amst erdam13 Casual t y. I t ' s i n t he i ndemni t y cont ext , so I assume14 t hat - - and i t says t hat i n t he i ndemni t y cont ext a15 covenant of good f ai t h and f ai r deal i ng i s not wai vabl e. 16 So I don' t t hi nk you coul d do t hat , whi ch I t hi nk17 under scor es t hat t hi s i s not t he par t i es agr eei ng t o18 t hi s. Thi s i s havi ng t hi s condi t i on super i mposed on19 t hem by St at e l aw. 20 J USTI CE KENNEDY: I s t he choi ce we have her e21 onl y bet ween St at e l aw and no r el i ef ? Or i s t her e some22 t heor y under whi ch ei t her Federal common l aw or appeal 23 t o the DOT coul d gi ve t he f l yer , t he cust omer , some24 r el i ef ? And, you know, we can al l t hi nk of cr azy25 hypothet i cal s. Suppose t he phone r i ngs and he says:



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1 I ' m J ohn Doe, I want t o t al k t o you about my ai r l i ne, 2 you' ve mi scal cul at ed. They sai d: Mr . Doe, we' ve hear d3 f r om you 15 t i mes, you' r e - - you' r e out of t hi s pr ogr am. 4 I t ' s a mi st aken i dent i t y. Ther e ar e t wo J ohn Does. Can5 t he i nnocent , good f ai t h J ohn Doe do any - - anythi ng at 6 al l ?7 MR. CLEMENT: Yes. The - - t he good f ai t h8 J ohn Doe can do t wo t hi ngs: One, as your quest i on9 suggest ed, he can go t o t he DOT. The DOT has t he

10 aut hor i t y t o i nvest i gat e compl ai nt s about f r equent f l yer 11 pr ogr ams. I t exer ci ses t hat aut hor i t y. I t ' s di scussed12 at pages, I t hi nk, 20 and 21 of t he SG' s br i ef . They13 hear d somet hi ng l i ke 289 of t hese compl ai nt s l ast year . 14 So t hat ' s - - so t hat ' s one pl ace you can go. 15 The ot her pl ace you can go i n t he cases l i ke16 t he mi st aken i dent i t y - - I mean, i f you f ol l owed up and17 cer t ai nl y i f you went so f ar as t o br i ng a r out i ne18 br each of cont r act cl ai m, I assume that woul d get 19 addr essed i n t hat f or um. Because ai r l i nes ar e not i n20 t he i nt er est - - do not have an i nt er est i n get t i ng r i d21 of t hei r most l ucr at i ve and l oyal cust omer s. 22 J USTI CE KENNEDY: Wel l , but - - i n par t of23 t hat sui t , woul dn' t you have t o - - t he j udge says, 24 what ' s t he under l yi ng subst ance and you say, wel l , 25 t her e' s a dut y of good f ai t h deal i ng under Mi nnesota



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1 l aw. And t hen you' r e r i ght back wher e you st ar t ed, 2 unl ess t her e' s some - - unl ess t her e' s some Feder al 3 common l aw wi t h Li ncol n Mi l l s or somet hi ng l i ke t hat ?4 MR. CLEMENT: No, I don' t t hi nk t her e' s5 Feder al common l aw. Thi s Cour t I t hi nk essent i al l y6 r ej ect ed t hat i n Wol ens. I ' m maki ng a mor e pr act i cal 7 poi nt , whi ch i s i n a r eal case of mi st aken i dent i t y I 8 t hi nk t hat woul d get sort ed out i n t he pr ocess, 9 cer t ai nl y at t he poi nt wher e a br each of cont r act act i on

10 was br ought . Because, agai n, i f t her e' s - - i f t her e' s a11 J ohn Doe who r eal l y i s a f r equent f l yer -

12 J USTI CE KENNEDY: I st i l l don' t under st and13 t he subst ant i ve basi s f or t he br each of cont r act sui t i f14 you say we can' t r ef er t o St at e l aw. 15 MR. CLEMENT: You can r ef er t o St ate l aw f or 16 t he br each of cont r act . You can' t , we woul d submi t , add17 t he i mpl i ed covenant of br each of good f ai t h because18 t hat enl ar ges t he bar gai n. 19 J USTI CE KAGAN: Wel l , Mr . Cl ement , suppose20 t hat t hi s compl ai nt onl y had one count . And suppose21 t hat t hey had sai d: Look, we have t hi s cont r act and i t 22 gi ves ver y subst ant i al di scret i on, i t gi ves - - you know, 23 by the wor ds al one, i t gi ves absol ut e di scret i on t o24 Nor t hwest , but t hat can' t r eal l y be r i ght because25 cont r act s have t hi s i mpl i ed covenant of good f ai t h.



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1 Ther e' s an i mpl i ed dut y t o per f or m i n good f ai t h. And2 t hat means t hat t hi s di scret i on i s nar r owed i n cer t ai n3 ki nds of ways, t hat t hey can' t t ermi nate my membershi p4 f or cer t ai n ki nds of r easons. And t hat ' s al l t he5 compl ai nt sai d. Ther e was j ust t hi s one count . Do you6 t hi nk t hat woul d be pr eempt ed?7 MR. CLEMENT: I t hi nk t he r el i ance on t he8 i mpl i ed covenant i n t hat cont ext shoul d be pr eempt ed. I 9 t hi nk t hat ' s t he bet t er r ul e. I f t hi s Cour t want ed t o

10 adopt a nar r ower r ul e and say, l ook, i t ' s r eal l y at t he11 poi nt t hat you t r y t o br i ng a separ at e i mpl i ed covenant 12 cl ai m, t hat ' s preempt ed, I suppose as a mat t er of13 admi nst r abi l i t y you coul d do t hat . I t mi ght make some14 sense, because, I mean, you do have to t ake a pr act i cal 15 l ook at t hi s. 16 I n t he wake of Wol ens, i f you pl ead a17 r out i ne br each of cont r act cl ai m, you' r e goi ng t o avoi d18 pr eempt i on. The onl y r eason pr act i cal l y you r un t he19 r i sk of pr eempt i on by pl eadi ng a separ at e cl ai m i s when20 you' r e t r yi ng t o r eal l y get out si de of t he t er ms of t he21 cont r act . 22 J USTI CE KAGAN: I guess what I ' m suggest i ng23 i s t hat t he i mpl i ed covenant her e, i t ' s j ust an24 i nt er pr et i ve t ool . I t says t hat t her e ar e cer t ai n ki nds25 of pr ovi si ons t hat ar e wr i t t en ver y br oadl y or ver y



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1 vaguel y, and an i mpl i ed covenant comes i n t o hel p us2 i nt er pr et t hose ki nds of pr ovi si ons. And vi ewed i n t hat 3 way, i t ' s j ust a cont r actual devi ce t hat i n l i ght of4 Wol ens ought t o be permi t t ed. 5 MR. CLEMENT: Wel l , her e' s my t hought on6 t hat , whi ch i s I t hi nk even t he Respondent s admi t t hat 7 i n some St ates t he i mpl i ed covenant i s much more t han8 si mpl y a r ul e of const r uct i on f or t he expl i ci t t er ms of9 t he cont r act . And I suppose i f t hi s Cour t want s t o say

10 t hat t he onl y way t he i mpl i ed covenant i s not pr eempt ed11 i s when i t ' s j ust a r ul e of const r ucti on f or t he12 expl i ci t t er ms of t he cont r act , I suppose we coul d l i ve13 wi t h t hat r ul e and I t hi nk we' d cer t ai nl y wi n i n t hi s14 case. 15 The r eason I woul d suggest t hat t he bet t er 16 r ul e f or t hi s Cour t t o adopt i s t hat t he i mpl i ed17 covenant shoul d j ust be pr eempt ed even i n t hat 18 ci r cumst ance i s because i n t hat ci r cumst ance i t doesn' t 19 add anyt hi ng. I f i t r eal l y i s j ust a r ul e of20 const r uct i on f or t he expr ess t er ms of t he cont r act , you21 coul d get i n t he same pl ace wi t h t he ci t at i on t o Car dozo22 and Lady Duf f - Gordon. 23 CHI EF J USTI CE ROBERTS: Counsel , coul d you24 t el l me wher e you t hi nk t hey concede t hat some St ates -

25 t hat t hei r posi t i on woul d l ead t o a di f f er ent r esul t i n



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1 some St at es? 2 MR. CLEMENT: Wel l , I ' m not - - i t ' s - - i t ' s3 i n t he r ed br i ef and I t hi nk i t ' s qui t e cl ear . I t hi nk4 t hey - - t hey say - - I ' l l t r y t o f i nd t he - - t he poi nt 5 wher e - - wher e I f i nd t hi s r ebut t al . But I don' t t hi nk6 t hey do t hi s. They basi cal l y say t hat some St at es do7 appl y t hi s r ul e. They say t hat our cl ai m i s di f f er ent . 8 And I ' l l get you t he exact page. 9 CHI EF J USTI CE ROBERTS: I t hought t hey were

10 sayi ng t hat i n some St at es i t ' s not an i mpl i ed t er m of11 t he cont r act , but a di f f er ent sor t of pr ovi si on. 12 MR. CLEMENT: Wel l , I may have mi sspoke. 13 What I meant was I t hi nk bot h par t i es agr ee, as t hey14 woul d have to, t hat i n some St ates t he i mpl i ed covenant 15 doct r i ne i s used t o di r ect l y i mpose publ i c pol i cy. And16 so i n Al aska t hat seems t o be t he case. I n Mont ana t hat 17 seems t o be t he case. 18 J USTI CE GI NSBURG: How about Mi nnesot a? I n19 Mi nnesot a, i sn' t i t j ust a r ul e of const r ucti on of t he20 cont r act ?21 MR. CLEMENT: We don' t bel i eve so, Your 22 Honor . I t hi nk - - I ' m not goi ng t o t r y t o t el l you t hat 23 Mi nnesot a l aw i s pel l uci dl y cl ear on t hi s. But 24 Mi nnesot a - - t he Mi nnesot a Supr eme Cour t case, t he25 Hennepi n case that adopt s - - r ecogni zes t he i mpl i ed



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1 covenant , ci t es t he Rest at ement . The Rest at ement qui t e2 cl ear l y embr aces a vi ew of t he i mpl i ed covenant t hat 3 goes beyond merel y const r uct i ng t he expr ess t erms of t he4 cont r act . 5 J USTI CE ALI TO: I s i t t he case t hat -

6 J USTI CE KENNEDY: I st i l l - - I st i l l have7 t hi s pr obl em. You say don' t - - now don' t wor r y. You8 can al ways br i ng an expr ess cont r act act i on. And I say, 9 wel l , what l aw do you appl y? Wel l , you - - you have no

10 St ate l aw and t here' s no Federal common l aw. I don' t 11 underst and how you can br i ng an act i on wi t h no12 subst ant i ve l aw t o i nf or m i t . 13 MR. CLEMENT: I may have mi sspoke, J ust i ce14 Kennedy. The br each of cont r act cl ai m t hat you br i ng -

15 t he r out i ne br each of cont r act cl ai m you br i ng i s a16 St at e l aw cl ai m. So we don' t have any quar r el wi t h17 Count 1 of t hi s cl ai m, whi ch vi ews Mi nnesot a St at e18 cont r act l aw t o i nt er pr et t he expr ess t er ms of t he19 cont r act . 20 Wher e we have a beef i s wi t h Count 2 of t he21 compl ai nt t hat says, even i f t he cont r act gi ves t he22 par t i es absol ut e di scr et i on, we ar e goi ng t o super i mpose23 a dut y of good f ai t h and f ai r deal i ng. And t o compl et e24 t he answer , si nce Mi nnesot a has adopt ed t he Rest atement , 25 t he Rest atement suggest s t hat t he way you f i nd good



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1 f ai t h i s you excl ude t he possi bi l i t y of bad f ai t h based2 on communi t y st andards of f ai r ness and decency. 3 And at t he poi nt t hat you' r e appl yi ng4 communi t y st andards of f ai r ness and decency, i t seems t o5 me qui t e cl ear t hat you ar e not appl yi ng t he par t i es' 6 sel f - i mposed under t aki ngs, but somet hi ng el se. 7 J USTI CE SCALI A: Wel l , I suppose you coul d8 say that i t i s assumed t hat par t i es t o a cont r act 9 comport wi t h communi t y st andards of f ai r ness and

10 decency. You know, you can wi ggl e t o t here i f you want . 11 MR. CLEMENT: You coul d t r y t o wi ggl e t here. 12 And my poi nt woul d be the way t o t r y t o wi ggl e there i s13 i nt er pr et i ng t he expr ess ter ms of t he cont r act . An14 i mpl i ed covenant i s di f f er ent . And I t hi nk i f you t ake15 a st ep back and t hi nk about t hi s cont ext : When an16 ai r l i ne r eser ves t o i t sel f t he sol e di scr et i on t o make a17 j udgment about f r equent f l yer s or about t aki ng an unr ul y18 passenger of f a pl ane, do you r eal l y want St at e cour t s19 appl yi ng communi t y st andards of decency t o j udge t hat , 20 or i s t hat somet hi ng t hat shoul d be j udged by a21 compl ai nt t o the Depar t ment of Tr anspor t at i on?22 I f I coul d r eserve t he r emai nder of my t i me. 23 CHI EF J USTI CE ROBERTS: Thank you, counsel . 24 Mr . Yel i n. 25 ORAL ARGUMENT OF LEWI S S. YELI N,



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1 FOR UNI TED STATES, AS AMI CUS CURI AE, 2 SUPPORTI NG THE PETI TI ONERS3 MR. YELI N: Thank you, Mr . Chi ef J ust i ce, 4 and may i t pl ease t he Cour t : 5 I n Wol ens, t hi s Cour t r ecogni zed t hat 6 Congr ess enacted t he ADA t o l eave deci si ons concerni ng7 ai r l i ne pr i ces, r out es, and ser vi ces t o t he busi ness8 j udgment of ai r car r i er s subj ect t o market f or ces and9 l i mi t ed over si ght by t he Depar t ment of Tr anspor t at i on.

10 I n l i ght of t hat st at ut or y pur pose, Wol ens11 hel d that cl ai ms based on the Stat e common l aw of12 cont r act are not pr eempt ed by the ADA t o the ext ent t hey13 seek t o enf or ce t he vol unt ar y under t aki ngs of t he14 par t i es. 15 CHI EF J USTI CE ROBERTS: What i f you had a16 deci si on by t he Mi nnesot a Supr eme Cour t on common l aw17 cont r act pr i nci pl es and i t sai d, you know, when t he18 par t i es use t he wor d "sol e" i n a cont r act , we i nt er pr et 19 t hat t o mean subj ect t o r easonabl eness const r ai nt . The20 par t i es her e use t he wor d "sol e. " Woul d t he appl i cat i on21 of t hat pr i nci pl e vi ol at e - - woul d t hat be pr eempt ed or 22 not ?23 MR. YELI N: I n t hat cont ext , I t hi nk not . 24 I t depends on what t he Cour t meant by t he t erm25 "r easonabl e. " I f t he t er m "r easonabl e" i ncor por at es



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1 ext ernal st andards such as communi t y -

2 CHI EF J USTI CE ROBERTS: Wel l , " r easonabl e" 3 means - - I mean, you know, t he - - t he ai r l i ne says4 "sol e" means sol e. We don' t have t o expl ai n why we di d5 i t . And t he Mi nnesota cour t sai d: No, when you say6 "sol e" i t has t o be r easonabl e. I t can' t be, f or 7 exampl e, f or no r eason. I t has t o be f or some8 ar t i cul at ed r eason. 9 MR. YELI N: Yes, I under st and,

10 Chi ef J ust i ce, t hank you. But I t hi nk "r easonabl e" can11 have di f f er ent f ocuses. I t coul d be r easonabl e i n l i ght 12 of t he expect at i ons of t he par t i es at t he t i me t hat t hey13 f or med t he cont r act or i t coul d be r easonabl e i n l i ght 14 of communi t y st andards of decency, whi ch ar e -

15 CHI EF J USTI CE ROBERTS: Wel l , l et ' s say16 goi ng f or war d. Goi ng f or war d, t he par t i es know t hat 17 t hi s deci si on i s out t her e and t hey say "sol e. " So i t 18 means t hey' r e usi ng t he t er m subj ect t o t he gl oss t hat ' s19 been put on i t by t he Mi nnesot a Supreme Cour t . So what 20 about i n t hat case?21 MR. YELI N: I t hi nk subsequent , i f t her e i s22 a gl oss wher e - - and t he - - I t hi nk t hat woul d be a23 quest i on of what t he par t i es i nt ended wi t h t he cont r act , 24 and I t hi nk t here may wel l be an ar gument under t hat 25 scenar i o t hat t he ai r l i ne under st ood t hat t he gl oss was



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1 goi ng t o be gi ven, al t hough I -

2 CHI EF J USTI CE ROBERTS: We woul d assume t hen3 t hat t he part i es knew whenever t hey used the word4 "sol e, " t hey act ual l y meant subj ect t o r easonabl eness as5 i nt erpr eted by the Mi nnesot a Supr eme Cour t . 6 MR. YELI N: I t hi nk t hat may wel l be r i ght , 7 Your Honor . But I - - I want t o caut i on t hat an ar gument 8 l i ke t hat can pr ove t oo much. An argument l i ke t hat 9 coul d suggest , as Respondent ar gued i n t he l ower cour t ,

10 t hat any t i me a par t y ent er s i nt o a cont r act , t he par t y11 endor ses or at l east accept s al l nor mat i ve pr i nci pl es of12 cont r act l aw. That woul d i ncl ude t hi ngs l i ke doct r i nes13 of unconsci onabi l i t y and ot her doct r i nes t hat i mpose14 ext r acont r actual l i mi t at i ons on t he par t i es' choi ces. 15 CHI EF J USTI CE ROBERTS: So you' r e not goi ng16 t o gi ve me " r easonabl e" f or anythi ng?17 MR. YELI N: No, no. I absol ut el y am goi ng18 t o gi ve you " r easonabl e. " 19 CHI EF J USTI CE ROBERTS: Okay. 20 MR. YELI N: I t hi nk i t j ust -

21 CHI EF J USTI CE ROBERTS: Wel l , i f you' r e22 goi ng t o gi ve me " r easonabl e" - - i n ot her wor ds, t he23 par t i es' expr ess t er ms do not say "r easonabl e" ; i n f act , 24 t he most nat ur al r eadi ng i s t hat i t ' s not r easonabl e, 25 but t hey t ake t he cont r actual - - t he i nt er pr et at i on t hat



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1 t he Mi nnesota Supr eme Cour t has adopt ed, I don' t know2 why t he same rul e woul dn' t appl y when t he Mi nnesot a3 Supr eme Cour t says t her e i s an i mpl i ed condi t i on of4 r easonabl eness acr oss - - acr oss t he boar d, and t hat t he5 par t i es cont r act agai nst t hat backgr ound j ust l i ke they6 do when t her e' s a speci f i c i nt er pr et at i on of t he wor d7 "sol e. " 8 MR. YELI N: I t hi nk t he pr obl em, Chi ef9 J ust i ce, i s t hat t he not i on of t he doct r i ne of t he

10 i mpl i ed covenant i s ext r aor di nar i l y br oad and11 encompasses a number of di f f erent concept s. I t 12 encompasses not i ons of r easonabl eness and i mpl yi ng13 l i mi t at i ons t o di scr et i onar y gr ant s of aut hor i t y14 r eserved i n cont r act s. I t al so encompasses i n some15 St at es concept s such as not i ons of f ai r ness or whi ch16 ext end beyond t he i nt ent of t he par t i es. 17 J USTI CE ALI TO: Let me change t he18 hypot het i cal sl i ght l y. Suppose t he cont r act says t hat 19 one of t he par t i es r eser ves sol e di scret i on t o do20 somethi ng and t hen t he cont r act goes on t o say: And21 t hen i n exer ci si ng t hi s di scret i on, we don' t pr omi se t o22 act i n a r easonabl e manner . But t he St at e cour t says23 t hat , never t hel ess, t hat has t o be i nt er pr et ed t o mean24 t hat t he par t y can onl y per f or m i n a r easonabl e manner . 25 Then what woul d t he si t uat i on be?



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1 MR. YELI N: I t hi nk t he ADA woul d preempt 2 exact l y t hat sor t of cl ai m or a cl ai m based on t hat sor t 3 of an ar gument . The - - t he cr ux of t he ADA i s to l eave4 t o t he j udgment of ai r car r i er s, subj ect t o mar ket 5 f or ces, deci si ons concer ni ng r at es, r out es or ser vi ces. 6 And I ' d l i ke t o under scor e t hi s poi nt by poi nt i ng out 7 t hat t he i nt er pr et at i on t hat t hi s Cour t gi ves t o t he ADA8 i s not onl y goi ng t o cont r ol f r equent f l yer pr ogr ams; 9 i t ' s al so goi ng t o cont r ol t hi ngs l i ke cont r acts of

10 car r i age, whi ch ar e -

11 J USTI CE BREYER: That ' s r i ght . Al l r i ght . 12 But now t he quest i on I have, whi ch i s, I t hi nk, f or 13 anyone who want s t o answer i t , par t i cul ar l y t he14 gover nment . I absol ut el y agr ee wi t h you t hat - - t hat a15 f r ee mar ket i n pr i ce i s at t he hear t of t he Der egul at i on16 Act . Gi ven. 17 I al so t hi nk f r equent f l yer pr ogr ams ar e18 si mpl y pr i ce di scount s. Gi ven. 19 I al so t hi nk that i f you don' t have20 cont r act s, you can' t have f r ee mar ket s. Gi ven. 21 But I al so thi nk t he St at e cannot , under t he22 gui se of cont r act l aw, r egul at e t he pr i ces of ai r l i nes. 23 I f you al l ow t hat , you' r e goi ng t o have wor se than we24 ever had. I t ' l l be 50 di f f er ent syst ems, al l r i ght ?25 So, i f I t hi nk those f our t hi ngs, what



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1 st andard do I use t o separate when a St ate i s and when2 i t i s not usi ng i t s cont r act l aw t o r egul at e pr i ces?3 MR. YELI N: J ust i ce Br eyer , I hear t i l y4 endor se each of t he f our cr i t er i a you i dent i f i ed. 5 J USTI CE BREYER: Wel l , good. Then you' l l 6 gi ve me t he answer , because where I ' m mi ssi ng i s what 7 t he st andar d i s. 8 ( Laught er . ) 9 MR. YELI N: And I t hi nk t he st andar d t hat

10 t hi s Cour t coul d adopt and make ver y cl ear i s t hat any11 cont r act doct r i ne whi ch seeks t o i nt er pr et t he i nt ent of12 t he par t i es at t he t i me of t he cont r act ' s f or mat i on i s a13 val i d st andar d t o be appl i ed i n any sui t and i s not 14 pr eempt ed by t he ADA. But any cont r act doct r i ne l i ke15 unconsci onabi l i t y and l i ke i n some St at es some i nst ances16 of t he doct r i ne of t he i mpl i ed covenant , whi ch seeks t o17 i mpose ext r acont r actual t erms l i ke communi t y18 st andar ds -

19 J USTI CE GI NSBURG: You sai d " i n some20 St at es. " So what about t he St at es wher e t hat doesn' t ?21 Ar e you sayi ng t hat i n some St ates, t he i mpl i ed covenant 22 i s assumed t o be what t he par t i es agr eed upon and i n23 some St at es i t ' s not ?24 MR. YELI N: J ust i ce Gi nsbur g, I t hi nk25 t her e' s a cont i nuum. The - - t he not i on of t he i mpl i ed



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1 covenant , as J ust i ce Scal i a expl ai ned f or t he D. C. 2 Ci r cui t i n t he Tymshar e deci si on, i s a l abel wi t h many3 - - t hat encompasses many meani ngs. Some St ates, l i ke4 I l l i noi s and Connect i cut , use t he doct r i ne pur el y, i t 5 appear s t o us, as an i nt er pr et i ve devi ce t o di scer n t he6 i nt ent of t he par t i es. Ot her St at es at t he ot her end of7 t he spect r um - - Ar i zona i s one; we' ve ci t ed a number of8 ot her cases i n our br i ef - - used t he same concept t o9 encompass ext r acont r act ual pr i nci pl es.

10 J USTI CE GI NSBURG: Suppose t he Stat e -

11 J USTI CE SCALI A: I don' t want t o have t o12 sor t t hose out St at e by St at e. I mean, i t seems t o me13 t he - - t he r egi me pr oposed by t he Pet i t i oner i s - - i s14 much more manageabl e. I f i t goes beyond t he words of15 t he cont r act , i t - - and you' r e r eadi ng i nt o i t somet hi ng16 t hat i t doesn' t say, i t ' s a mat t er of St at e pol i cy. So17 I can - - I can wor k wi t h t hat . 18 But you' r e - - you' r e aski ng me t o go t hr ough19 each of t he 50 St ates one by one t o deci de, oh, whi ch -

20 whi ch of t hese ar e r eal l y t r yi ng t o di scer n t he i nt ent 21 of t he par t i es and whi ch ones ar en' t . Especi al l y si nce22 you di scer n t he i nt ent of t he par t i es by si mpl y sayi ng, 23 wel l , par t i es i nt end t o appl y communi t y st andar ds, 24 r i ght ? And t her e' l l be di f f er ent communi t y st andar ds i n25 ever y Stat e presumabl y. Some Stat es ar e more honest



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1 t han ot her s, r i ght ?2 MR. YELI N: J ust i ce Scal i a, I have t wo3 r esponses to t hat obser vat i on. The f i r st i s I don' t 4 t hi nk the St at e- by- St at e anal ysi s i s ei t her unusual or 5 di f f i cul t . Ther e has t o be a St at e- by- St at e anal ysi s6 any t i me you - - you have a cont r act cl ai m appl yi ng St at e7 l aw. Ther e ar e var i ances among St at es i n t hei r cont r act 8 l aw. 9 The - - t he second par t of t he same r esponse

10 i s, I don' t t hi nk t he st andar d t hat we' r e ar t i cul at i ng11 i s a par t i cul ar l y di f f er ent one. 12 J USTI CE SCALI A: Ther e ar e var i ances, but 13 not var i ances i n such an i nef f abl e quest i on as t o14 whet her t hi s i s r eal l y an ef f or t t o di scer n t he r eal 15 i nt ent of t he par t i es or r at her , whet her i t ' s an i nt ent 16 t o i mpose communi t y st andar ds, especi al l y si nce, as I 17 say, par t i es i nt end t o adopt communi t y st andar ds18 usual l y. 19 MR. YELI N: Wi t h r espect , J ust i ce Scal i a, I 20 t hi nk t hat ' s not at al l a di f f i cul t quest i on. I t hi nk a21 cont r act - - I t hi nk i t ' s unl i kel y t hat a f r equent f l yer 22 cont r act or any ai r l i ne cont r act t hat r eser ves23 di scr et i on i s l i kel y t o have i ncor por at ed i mpl i ci t l y24 communi t y st andar ds. I t hi nk t he poi nt woul d be t hat i f25 a car r i er wer e t o deci de t o - - t o i ncor por at e i nef f abl e



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1 st andar ds such as t hat , i t woul d have been pr et t y cl ear 2 i n any reser vat i on -

3 J USTI CE SOTOMAYOR: Coul d I gi ve you - - I ' m4 quot i ng t he Mi nnesota -

5 J USTI CE KENNEDY: Wel l , i t ' s easy f or you, 6 r epr esent i ng t he government . But suppose you were7 r epr esent i ng t he ai r l i ne. Woul d you come up here and8 say, t he ai r l i nes want i t t o be wel l known t hat we don' t 9 have t o be r easonabl e? I - - I f i nd t hat ver y di f f i cul t

10 t o underst and. 11 MR. YELI N: I - - I have one pr i nci pal 12 r esponse, J ust i ce Kennedy, whi ch i s thi s. I f t he Cour t 13 wer e t o adopt a pr ophyl act i c rul e al ong t he l i nes t hat 14 Pet i t i oner was suggest i ng, we thi nk t hat woul d be bet t er 15 t han an al t er nat i ve pr ophyl act i c r ul e i n t he ot her 16 di r ect i on, because i t woul d cut of f t he use of t he17 i mpl i ed covenant doct r i ne t hat woul d i mpose18 ext r acont r actual l i mi t at i ons. 19 J USTI CE GI NSBURG: I f we had -

20 CHI EF J USTI CE ROBERTS: I do agr ee, i t seems21 pr et t y i nconsi st ent wi t h the nor mal pr esumpt i on agai nst 22 pr eempt i on t hat we appl y out of r espect f or t he St at e23 l egal r egi mes t o say we' r e goi ng t o adopt a br oad24 pr ophyl act i c r ul e. 25 MR. YELI N: Thi s - - t hi s i s , i n par t ,



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1 pr eci sel y why we pr opose t hat t he Cour t l ook - - adopt a2 st andar d, whi ch we don' t t hi nk woul d be par t i cul ar l y -

3 J USTI CE SOTOMAYOR: So l et ' s go back t o a4 si mpl er st andar d. 5 CHI EF J USTI CE ROBERTS: You - - go ahead. 6 J USTI CE SOTOMAYOR: My si mpl er st andar d7 comes f r omquot i ng Hennepi n: "Does t he i mpl i ed covenant 8 cl ai m extend t o act i ons beyond t he scope of t he9 under l yi ng cont r act , or can i t over r i de t he expr ess

10 t er ms of an agr eement ? I f t he answer i s no, i t ' s not 11 pr eempt ed. " I s t hat an okay st atement ?12 MR. YELI N: That i s an okay st atement . 13 We -

14 J USTI CE SOTOMAYOR: So i f t hat ' s what 15 Mi nnesota l aw says, i t ' s okay and i t ' s not pr eempt ed. 16 MR. YELI N: Wi t h t he f ol l owi ng caveat , 17 J ust i ce Sot omayor . I n some Stat es t hat have adopt ed t he18 i mpl i ed covenant , t hey have hybr i d appr oaches where t hey19 not onl y l ook to t he i nt ent of t he par t i es, but al so20 i mpose exter nal st andar ds. The st andar d -

21 CHI EF J USTI CE ROBERTS: Thank you. Thank22 you, counsel . 23 Ms. Rosenbaum. 24 ORAL ARGUMENT OF ADI NA H. ROSENBAUM25 ON BEHALF OF THE RESPONDENT



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1 MS. ROSENBAUM: Mr . Chi ef J ust i ce, and may2 i t pl ease t he Cour t : 3 Nor t hwest cl ai ms t hat t he Wor l d Per ks4 cont r act al l owed i t t o t er mi nat e Rabbi Gi nsber g' s 5 member shi p and t ake away t he mi l es he had al r eady6 accrued i n r el i ance on t he f r equent f l yer pr ogr am7 cont r act ; t hat i s, t hat i t al l owed i t f or any r eason or 8 on any whi m t o depr i ve hi m of al l of t he benef i t s of t he9 f r equent f l yer pr ogr am cont r act bar gai n.

10 Our posi t i on, i n cont r ast , i s t hat 11 Nor t hwest ' s act i ons br eached i t s obl i gat i ons under t he12 cont r act, speci f i cal l y t he cont r actual obl i gat i on t o13 per f or m i n good f ai t h. Because t hi s i s a quest i on of14 cont r act i nt er pr et at i on, Rabbi Gi nsber g' s cl ai m i s15 not -

16 J USTI CE SOTOMAYOR: What was t he l ack of17 good f ai t h t hat you ar e cl ai mi ng? That t hey t hought he18 was abusi ve, or ar e you sayi ng - - what ar e you sayi ng19 was t he bad f ai t h, what act i on?20 MS. ROSENBAUM: The act i on was ter mi nat i ng21 hi m f r om t he pr ogr am and t aki ng away hi s mi l es -

22 J USTI CE SOTOMAYOR: Can' t be t hat -

23 MS. ROSENBAUM: - - wi t hout possi bl e cause. 24 J USTI CE SOTOMAYOR: - - because t her e has t o25 be - - what are you sayi ng was t he bad cause here?



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1 Assume t hei r answer , t hat he was abusi ng t he pr ogr am. 2 MS. ROSENBAUM: Wel l , we do not t hi nk t hat 3 he was abusi ng t he pr ogr am. 4 J USTI CE SOTOMAYOR: That ' s -

5 MS. ROSENBAUM: The al l egat i ons i n t he6 compl ai nt ar e t hat -

7 J USTI CE SOTOMAYOR: So you ar e doi ng exact l y8 what he i s sayi ng. You ar e sayi ng t hat t hei r j udgment 9 of abuse i s not enough.

10 MS. ROSENBAUM: We t hi nk t hat t her e i s some11 - - t her e ar e some r easons t hat he coul d not be12 t er mi nat ed f r om t he pr ogr am f or , and t her e ar e13 al l egat i ons i n t he compl ai nt , t hat ar e i ncor por at ed i nt o14 t he covenant of good f ai t h cl ai m i n t he compl ai nt , t hat 15 he was t ermi nat ed because of t he merger bet ween Del t a16 and Nor t hwest . 17 J USTI CE SCALI A: As I under st and your 18 ar gument - - cor r ect me i f I am wr ong - - he coul d be19 t er mi nated wi t hout r easonabl e cause i f he happened t o be20 f r om a St at e or i f t he sui t was br ought under t he21 gover ni ng l aw of a St at e whi ch i mposed t hi s obl i gat i on22 of good f ai t h as a mat t er of l aw. The St at e says: 23 Regar dl ess of what t he cont r act says, even i f i t says i n24 i t s sol e di scret i on wi t hout any obl i gat i on of good25 f ai t h, even i f i t says t hat , as a mat t er of l aw, t her e



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1 MS. ROSENBAUM: The vast maj or i t y of Stat es, 2 and t her e i s an appendi x to t he St at es' br i ef on t hi s3 i ssue, t al k about t he covenant of good f ai t h as a way of4 i nt er pr et i ng t he cont r act , and Mi nnesot a -

5 J USTI CE ALI TO: Wel l , l et me ask you t hi s. 6 Suppose you have i n Mi nnesot a or one of t he St ates where7 you say t he covenant i s si mpl y a way of ef f ect uat i ng t he8 i nt ent of t he par t i es, you have a cont r act bet ween t wo9 ver y t ough and nast y busi nessmen. And t hey wr i t e r i ght

10 i n t hei r cont r act , you know, we' r e goi ng t o compl y wi t h11 t he l i t er al t er ms of t hi s cont r act , but we do not 12 pr omi se each other t hat we' r e goi ng t o pr oceed i n good13 f ai t h or t hat we ar e goi ng t o deal wi t h each ot her 14 f ai r l y. We are goi ng t o t ake every advant age we can15 under t he l i t er al t er ms of t he cont r act . 16 Now, woul d t hat get r i d of t he covenant 17 under Mi nnesot a l aw?18 MS. ROSENBAUM: Gener al l y, t he covenant of19 good f ai t h cannot be wai ved. I t hi nk t he quest i on of20 whet her t he pr i nci pl e t hat t he covenant can' t be wai ved21 i s i t sel f an ext er nal pr i nci pl e of l aw i s a much har der 22 quest i on t han t he quest i on here of whether t he covenant 23 i t sel f -

24 J USTI CE KAGAN: But i f i t can' t be wai ved, 25 i t sur e seems as t hough i t i s oper at i ng i ndependent l y of



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1 t he par t i es' r easonabl e expect at i ons. 2 MS. ROSENBAUM: Agai n, I t hi nk you need t o3 separ at e out t he pr i nci pl e t hat i t can' t be wai ved f r om4 t he under l yi ng pr i nci pl e of what t he covenant i s doi ng, 5 whi ch i s gi vi ng ef f ect t o t he bar gai n t hat t he par t i es6 ent er ed i nt o based on l ooki ng at t he r easonabl e7 expr essi on - - t he r easonabl e expect at i ons of t he8 par t i es. 9 J USTI CE GI NSBURG: I n Wol ens - - and t hi s i s

10 a case that you r el y on and t hat al l owed r oom f or 11 cont r act cl ai ms - - t he expr essi on was "sel f - i mposed12 under t aki ng. " And t he ai r l i ne says: We di dn' t i mpose, 13 we di dn' t t ake on t hi s obl i gat i on, but t he l aw r eads i t 14 i nt o ever y cont r act whet her we want i t or not . 15 How i s i t sel f - i mposed i f t he par t y has no16 say, t hat i t ' s goi ng t o appl y anyway?17 MS. ROSENBAUM: Wel l , t he t er ms of t he18 cont r act ar e t he sel f - i mposed under t aki ng, and t hen t hi s19 i s t he t ool t hat ' s bei ng used t o under st and and20 i nt er pr et t he t ool s of t he - - t er ms of t he cont r act and21 t hen t o enf or ce t hem. And t hi s i s a wi del y used t ool t o22 i nt er pr et t er ms of cont r act s, par t i cul ar l y when t her e23 ar e di scret i onar y t er ms wi t hi n a cont r act . That ' s24 somet hi ng t hat ' s done i n t he vast maj or i t y of t he25 St at es, and i n f act t he di scret i onar y - - t he cases wher e



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1 t her e ar e di scr et i onar y t er ms wi t hi n a cont ext i s t he2 qui nt essent i al appl i cat i on of t he covenant of good3 f ai t h. A l ot of t he ear l y covenant of good f ai t h cl ai ms4 i nvol ved out put s or r equi r ement s cont r act s wher e t he5 speci f i c amount i n t he cont r act was not set and t he6 covenant was appl i ed t o t hat sor t of si t uat i on. And7 schol ar s, i n t al ki ng about t he covenant , of t en8 speci f i cal l y not e t hat i t appl i es t o di scr et i onar y9 t erms.

10 J USTI CE ALI TO: Wel l , how do you account f or 11 t he f act t hat i n many St at es t he covenant of good f ai t h12 and f ai r deal i ng i s r ead i nt o most cont r act s, but i s not 13 r ead i nt o empl oyment cont r act s? 14 MS. ROSENBAUM: I t hi nk t hat t hat ' s a15 si t uat i on t hat St at es st r uggl e wi t h gi ven t he at - wi l l 16 empl oyment doct r i ne and t hey' ve vi ewed t he covenant and17 t he at - wi l l empl oyment doct r i ne as bei ng i n conf l i ct 18 wi t h each ot her . 19 Here, t hough, t he covenant and t he cont r act 20 or any ot her pr i nci pl e ar e not i n conf l i ct wi t h each21 ot her . The covenant i s not bei ng used t o over r i de any22 t er ms i n t he cont r act . I t i s bei ng used t o hel p gi ve23 meani ng t o t he ter ms i n t he cont r act and t o i dent i f y24 what t he i mpl i ci t r est r i cti ons ar e. 25 J USTI CE ALI TO: Wel l , doesn' t t hat



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1 di scr epancy show si mpl y t hat t he St at e has di f f er ent 2 pol i ci es wi t h r espect t o t hose t wo t ypes of cont r act s?3 MS. ROSENBAUM: I - - I don' t t hi nk t hat i t ' s4 appl yi ng di f f er ent t ypes of pol i cy. I t hi nk i t ' s 5 i nt er pr et i ng t he cont r act and what t he cont r act means6 di f f er ent l y i n di f f er ent s i t uat i ons. 7 J USTI CE KAGAN: I mean, i t mi ght be, r i ght , 8 because peopl e have di f f er ent expect at i ons i n t hose two9 di f f er ent si t uat i ons, and t hat t he at - wi l l empl oyment i s

10 so per vasi ve and so cust omary and so sweepi ng that t he11 pol i cy, t he r ul e of an i mpl i ed covenant of good f ai t h12 doesn' t appl y t here because we t hi nk everybody expect s13 i t not t o appl y t her e. 14 MS. ROSENBAUM: Exact l y. And I do t hi nk15 t hat cour t s wi l l somet i mes say the covenant doesn' t 16 appl y when what t hey mean i s t hat i f t he covenant di d17 appl y and t he cour t wer e l ooki ng at t he r easonabl e18 expect at i ons of t he par t i es based on t he cont r act , t her e19 woul d be no r easonabl e expectat i ons -

20 J USTI CE ALI TO: An at - wi l l empl oyment 21 cont r act i s a cont r act t hat gi ves t he empl oyer sol e22 di scr et i on as t o whet her t o r et ai n an empl oyee. And23 her e we have a cont r act t hat says t hat t he ai r l i ne has24 sol e di scr et i on t o det er mi ne whet her t o t er mi nat e25 somebody f r om t he f r equent f l yer pr ogr am. So what i s



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1 t he di f f er ence?2 MS. ROSENBAUM: Wel l , i t ' s a di f f er ence i n3 t he cont ext and what t he t er m "sol e di scr et i on" means i n4 di f f er ent cont ext s i s goi ng t o var y based on t he5 cont ext , and based on what someone ent er i ng i nt o that 6 cont r act r easonabl y woul d have expect ed t hat cont r act t o7 mean based on t he t erms of t he cont r act . 8 So i n t he empl oyment context , an empl oyee, 9 gi ven the wi de acknowl edgment of t he at - wi l l empl oyment

10 doct r i ne, mi ght not expect t hat t hey coul d onl y be11 t er mi nat ed f or cause. 12 J USTI CE BREYER: Wel l , you woul d13 agr ee - - i t ' s t he same quest i on I asked t he gover nment ; 14 I woul d l i ke your answer . I i magi ne t hat you woul d15 agr ee t hat a St at e says the f ol l owi ng: We r ead16 i nt o - - l i ke common l aw cour t s used t o do al l t he t i me, 17 f or a t r anspor t at i on company we bel i eve t he pr i ce must 18 be f ai r and r easonabl e, and a cont r act i n our St at e f or 19 t r anspor t at i on pr i ces has t o set a f ai r and r easonabl e20 pr i ce and I per sonal l y t hi nk many f ar es are not 21 r easonabl e. They ar e t oo hi gh. Al l r i ght . And22 t her ef or e we have subst i t ut ed t he j udges and t he St at es23 f or set t i ng pr i ces i nst ead of t he par t i es. 24 Al l r i ght . You agr ee t hat woul d be25 preempt ed?



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1 MS. ROSENBAUM: We agr ee t hat t hat does2 not -

3 J USTI CE BREYER: Al l r i ght . Now, so what i s4 your st andar d f or di st i ngui shi ng what i s and i s not 5 pr eempt ed wher e the St at e uses i t s cont r act l aw t o i mpl y6 a f ai r and r easonabl e ter m?7 MS. ROSENBAUM: I t hi nk our st andard i s ver y8 si mi l ar t o t he one t hat t he Uni t ed St at es sai d. I t ' s9 about whet her t he covenant i s goi ng t o - - whet her t he

10 cl ai m i s l ooki ng at whet her t he par t i es br eached t he11 cont r act or whet her i t ' s l ooki ng at whet her t he cont r act 12 i t sel f vi ol at ed t he l aw. 13 So i t ' s a quest i on of whet her t he cl ai m i s14 actual l y i nt er pr et i ng t he cont r act , and t r yi ng t o get at 15 what t he par t i es - - what t hei r agr eement was, or whet her 16 t he cl ai m i s r eal l y t hat t he cont r act as t he par t i es17 agr eed t o i t vi ol at ed t he l aw. 18 J USTI CE GI NSBURG: Suppose t he supr eme cour t 19 of t he St at e had an opi ni on t hat sai d we' r e goi ng t o be20 candi d about t hi s. The covenant of f ai r deal i ng and21 good f ai t h, i t ' s not i n t hi s cont r act, but we wi l l r ead22 i t i nt o ever y cont r act . That i s, i f t he St at e supr eme23 cour t sai d, i t ' s ext er nal l y i mposed, t hi s i s a r ul e t hat 24 we wi l l r ead i nt o ever y cont r act because of t he pol i cy25 i n our St at e t hat peopl e shoul d deal wi t h each ot her



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1 f ai r l y. Suppose t hat was t he cont r ol l i ng deci si on of2 t he Mi nnesot a Supr eme Cour t . Then you' r e out ; i s t hat 3 r i ght ?4 MS. ROSENBAUM: Yes. I f a Stat e says t hat 5 i t ' s i mposi ng ext er nal not i ons of pol i cy, t hat woul d6 f al l on t he ot her si de of t he l i ne dr awn i n Wol ens, 7 whi ch l ooked at enf or ci ng t erms of t he agr eement ver sus8 i mposi ng ext er nal St at e pol i ci es. But t hat -

9 J USTI CE KAGAN: That woul d be wei r d, i sn' t 10 i t , because i n such a St at e, t her e mi ght be a cont r act 11 wher e t he par t i es r easonabl y di d expect t hi s i mpl i ci t 12 t er m t hat l i mi t s somet hi ng, a ver y br oad conf er r al of13 di scret i on t o oper at e. And yet , j ust because t hi s St at e14 supr eme cour t has f r amed i t s argument i n a part i cul ar 15 ki nd of way, t hey don' t get t he benef i t of t hat . 16 MS. ROSENBAUM: I t hi nk i t woul d depend on17 how t he cl ai m was f r amed and how t he cour t i nt erpr eted18 t hat cl ai m and whet her i n i nt er pr et i ng t hat cl ai m, t he19 cour t was l ooki ng at t he reasonabl e expect at i ons of t he20 par t i es based on t he t erms of t he cont r act and based on21 t hei r desi r e t o be bound by an enf or ceabl e cont r act . Or 22 whet her i t t hought i t was i mposi ng - - over r i di ng t he23 par t i es' cont r act and i mposi ng ext er nal not i ons of24 f ai r ness. 25 CHI EF J USTI CE ROBERTS: And t hat ' s no



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1 cl ear er t han t he - - t he gover nment ' s vi ew, and i t seems2 t o me t o be a par t i cul ar pr obl em when you' r e t al ki ng3 about t he obj ect i ves of t he ADA t o say t hat t he r ul e4 var i es f r om St at e t o St at e. Par t i cul ar l y si nce, of5 cour se, we' r e deal i ng wi t h ai r l i nes t hat go t o a l ot of6 di f f er ent St at es. I mean, i t seems t o me t hat t he7 l oosest St at e f r om t he poi nt of vi ew of t he pr eempt i on8 i s goi ng t o set t he st andar d. 9 MS. ROSENBAUM: I don' t t hi nk t hat - - t hat

10 t he r ul e i t sel f i s var yi ng f r om St at e t o St at e. I t hi nk11 t hat t he r ul e woul d be t he same across St ates. That 12 when a cl ai m i s -

13 CHI EF J USTI CE ROBERTS: Yes. I t ' s a general 14 r ul e t hat i t depends upon t he par t i cul ar ci r cumst ances. 15 That ' s t he same r ul e, but i n i t s appl i cat i on, i t 16 cer t ai nl y var i es f r om St at e t o St at e. 17 MS. ROSENBAUM: I don' t t hi nk t hat i t 18 necessar i l y woul d because i n al l t he St at es, a cl ai m19 t hat ' s seeki ng t o get at t he expect at i ons and i nt ent s of20 t he par t i es woul d not be preempted wher e as one i mposi ng21 ext er nal not i ons of f ai r ness woul d. 22 J USTI CE BREYER: That i sn' t what your -

23 your compl ai nt t hat I t hi nk - - par agr aph 56, whi ch I 24 t hi nk i s t he key par agr aph says, t hat t he - - under 25 t he - - t he l aw i s, "The cont r act l aw t hat you want t o



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1 enf or ce i s even wher e a par t y to a cont r act i s gi ven2 absol ut e di scret i on, i t must exer ci se t hat di scret i on i n3 good f ai t h i n a manner consi st ent wi t h t he r easonabl e4 expect at i ons of t he ot her par t y or par t i es. " 5 Now, t hat ' s, I t hi nk, what t hey' r e obj ect i ng6 t o. Because t her e, i t sounds t o me l i ke I go i n t o, you7 know, get a t i cket , my r easonabl e expect at i on i s t hey' r e8 not goi ng t o charge me what t hey' r e goi ng t o char ge, you9 know. I mean, i t ' s unbel i evabl e. But t her e - - but , you

10 see, t hat ' s my reasonabl e expect at i on, and I ' m t he ot her 11 par t y. 12 And so t hat cl ause sounds as i f you coul d, 13 under St at e cont r act l aw, gover n t he pr i ce accor di ng t o14 my r easonabl e expectat i on, namel y, t he consumer, t hat 15 mi ght be a gr eat i dea, but I don' t t hi nk t hat ' s t he i dea16 behi nd t hi s act. That ' s what - - what - - t hat ' s what I 17 j ust r ead you. So what do you say about t hat ?18 MS. ROSENBAUM: Wel l , I t hi nk t here' s a19 di f f er ence bet ween expect at i ons, subj ect i ve expect at i ons20 and r easonabl e expectat i ons. And t he concept of21 r easonabl e expectat i ons i n t he compl ai nt i s - - i s an22 obj ect i ve st andar d of what - - based on t hi s cont r act and23 based on t he cont ext , what - - how t he cont r act shoul d be24 i nt er pr et ed and what i mpl i ci t t er ms t her e ar e i n t he25 cont r act t hat need t o be i nt er pr et ed and t hen enf or ced



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1 and t hat can, i n f act , be br eached by the ot her par t y. 2 J USTI CE SCALI A: Ms. Rosenbaum, i n - - i n our 3 deci si on i n t hi s case, do you t hi nk we shoul d appl y the4 pr esumpt i on agai nst pr eempt i on of St ate l aw?5 MS. ROSENBAUM: I t hi nk you shoul d appl y t he6 pr esumpt i on agai nst pr eempt i on of St ate l aw because i t 7 does appl y. 8 J USTI CE SCALI A: But t he whol e pur pose of9 t he ADA was to pr eempt St ate l aws. I mean, I can

10 under st and appl yi ng t hat pr esumpt i on t o ot her st at ut es11 whi ch say nothi ng about pr eempt i on. The whol e pur pose12 of t he ADA was t o der egul at e ai r l i nes, was t o say t her e13 was goi ng t o be no Feder al r egul at i on. Let t he f r ee14 mar ket handl e i t and t her e be wi l l be no St at e15 r egul at i on. And you want us t o appl y a pr esumpt i on16 agai nst pr eempt i on t o t hat st at ut e?17 MS. ROSENBAUM: I do t hi nk t he presumpt i on18 appl i es. I don' t t hi nk i t ' s necessar y t o any out come i n19 t hi s case. Because whet her or not i t appl i es i n Wol ens, 20 t hi s Cour t hel d t hat cl ai ms ar e about hol di ng ai r l i nes21 t o t he terms of t hei r agr eement are not pr eempt ed and22 t hat ' s what t he covenant of good f ai t h cl ai m i s about . 23 J USTI CE GI NSBURG: Wel l , i t ' s one t hi ng t o24 r ead t he t er ms i n t he agr eement . I t ' s anot her t hi ng t o25 say i t ' s an under l yi ng pr emi se t hat good f ai t h and f ai r



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1 deal i ng wi l l cont r ol . Ar e you t aki ng i ssue wi t h t he2 good f ai t h and f ai r deal i ngs st andar d bei ng amor phous, 3 bei ng suscept i bl e t o di f f er ent i nt er pr et at i ons by4 di f f er ent j udges, by di f f er ent j ur i es?5 MS. ROSENBAUM: I t hi nk t her e i s a f ai r 6 amount of uni f or mi t y acr oss t he St at es i n how t hey7 act ual l y appl y t he covenant of good f ai t h, and i n t er ms8 of appl yi ng i t as an i nt er pr et at i on of t he cont r act , and9 t hen especi al l y i n cases wher e one par t y i s cl ai mi ng

10 t hat al l of t hei r per f or mance under t he cont r act i s i n11 t hei r sol e di scret i on and t hat t hey' r e f r ee not t o12 per f or m under t he cont r act at al l , you know, essent i al l y13 wher e t he cont r act woul d be i l l usory i n appl yi ng t he14 covenant speci f i cal l y under t hose ci r cumst ances t o15 ensur e t hat t her e i s meani ngf ul per f or mance that ' s16 r equi r ed under t he cont r act . 17 J USTI CE GI NSBURG: I s an empl oyment at - wi l l 18 cont r act i l l usor y?19 MS. ROSENBAUM: I don' t bel i eve t hat ' s an20 i l l usor y cont r act. But I t hi nk r at her t han i t bei ng21 i mpor t ant whet her t her e ar e speci f i c requi r e - - whet her 22 speci f i cal l y t hi s cont r act i s i l l usor y, I t hi nk t he f act 23 t hat one par t y i s cl ai mi ng t hat i t had no dut y to24 per f or m under t he cont r act shows t hat t he cont r act had25 r easonabl e i mpl i ci t l i mi t at i ons i n i t . That t he par t i es



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1 woul d have reasonabl y expect ed t hat t hey were2 cont r act i ng t o ther e bei ng some sor t of per f or mance3 under t he cont r act . 4 And, i n f act , t he pr i nci pl es at i ssue her e5 ar e r emar kabl y si mi l ar t o t he pr i nci pl es t hat wer e at 6 i ssue i n Wol ens i t sel f . And t hi s Cour t t her e r ecogni zed7 t hat t hose wer e cont r act const r uct i on i ssues. 8 J USTI CE GI NSBURG: That ' s because t he9 cont r act was si l ent . Her e i t i sn' t . Her e t he cont r act

10 says "sol e di scr et i on. " I n Wol ens, t he quest i on was11 r et r oact i vi t y, and t he cont r act sai d not hi ng one way or 12 t he ot her about i t . 13 MS. ROSENBAUM: Wel l , i n Wol ens, t he14 quest i on was an expr ess r eservat i on of r i ght s and t he15 cont r act di dn' t say whet her or not i t appl i ed16 r et r oact i vel y. So t he quest i on was whet her t her e wer e17 i mpl i ed l i mi t at i ons on t he expr ess r eser vat i on of18 r i ght s. 19 J USTI CE SCALI A: Woul d t hi s cont r act produce20 a di f f er ent r esul t i f i t di d not cont ai n t he wor ds "i n21 i t s sol e di scr et i on"?22 MS. ROSENBAUM: The i nt erpr etat i on of t he23 cont r act mi ght be di f f er ent , but t he r easonabl e24 expect at i ons -

25 J USTI CE SCALI A: Wel l , you' d - - you' d - -



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1 you' d st i l l appl y t he ver y same doct r i ne of2 r easonabl eness, r i ght ? So t he wor ds " i n i t s sol e3 di scr et i on" become super f l uous. 4 MS. ROSENBAUM: I t hi nk t here may be a5 l ar ger amount of def er ence t hat ' s gi ven t o t he ai r l i ne6 i n t hat a part y woul d r easonabl y expect woul d be gi ven7 t o t he ai r l i ne because of t he sol e di scr et i on l anguage. 8 And t hat ' s obvi ousl y a quest i on f or t he mer i t s, what 9 exact l y i s t he meani ng of t he sol e di scr et i on l anguage.

10 J USTI CE SCALI A: Yes. I guess di f f erent 11 St at es wi l l t r eat t hat di f f er ent l y as wel l , r i ght ?12 MS. ROSENBAUM: I t hi nk quest i on i s l ess13 St at e- by- St at e and r eal l y mor e case- by- case and14 cont ext - by- cont ext of what does sol e di scr et i on l anguage15 mean when used - - and where do you appl y l i mi t at i ons on16 i t . 17 J USTI CE SCALI A: I f i nd i t har d t o bel i eve18 t hat you' r e doi ng not hi ng but i nt er pr et i ng a cont r act 19 when you - - you gi ve i t t he same out come, whether i t 20 says i n i t s sol e di scr et i on or does not say i n i t s sol e21 di scr et i on. I - - I f i nd i t har d t o gr asp how what 22 you' r e doi ng i n t hat - - i n t hat case i s si mpl y23 i nt er pr et i ng t he cont r act . 24 MS. ROSENBAUM: I don' t t hi nk t hat t here25 woul d necessar i l y be t he same out come i n ever y si ngl e



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1 si t uat i on, whet her or not t he cl ai m - - whet her or not 2 t he cont r act sai d "sol e di scr et i on" or not . Ther e may3 be mor e def er ence gi ven t o the ai r l i ne because of t he4 di scret i onar y t er m; but i n bot h si t uat i ons, t he quest i on5 woul d be, what does t hi s cont r act mean? And cont r act s6 i ncl ude bot h t hei r expr ess t er ms and t hei r i mpl i ed t er ms7 and t he covenant of good f ai t h i s goi ng t o i nt er pr et i ng8 i mpl i ed t er ms, t o i dent i f yi ng t hem wi t hi n t he cont r act 9 and t hen enf or ci ng t hem wi t hi n t he cont r act .

10 I f an ai r l i ne wer e abl e t o j ust i nser t "sol e11 di scret i on" or "sol e j udgement " wi t hi n i t s cont r act , i t 12 woul d be abl e t o ent i r el y ci r cumvent t he r ul e t hat t hi s13 Cour t set f or t h i n Wol ens. J ust by addi ng "sol e14 di scret i on" t o i t s cont r act , i t woul d never be hel d t o15 any cont r act ual dut i es or r equi r ement s. 16 J USTI CE ALI TO: May I ask you a quest i on17 about somet hi ng sl i ght l y di f f er ent ? An ami cus br i ef18 submi t t ed i n suppor t of your posi t i on by Cal i f or ni a and19 some ot her St at es poi nt s out at some l engt h t hat t her e20 ar e now a l ot of f r equent f l yer pr ogr ams i n whi ch a l ot 21 of mi l es are earned by maki ng pur chases other t han22 f or - - f or f l i ght s and i n whi ch mi l es can al so be spent 23 f or t hi ngs ot her t han f l i ght s. Do we have t o wor r y24 about t hat i n t hi s case?25 MS. ROSENBAUM: We t hi nk t hat t hat ' s anot her



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1 r eason why t hi s cl ai m i s not pr eempt ed, i s because i t 2 has t o do wi t h member shi p i n a f r equent f l yer pr ogr am, 3 r at her t han bei ng - - r at her t han, l i ke i n Wol ens, havi ng4 t o do speci f i cal l y wi t h access to f l i ght s or -

5 J USTI CE ALI TO: What ar e t he f act s r el at i ng6 t o t hi s par t i cul ar pl an? Can you ear n mi l es by doi ng7 t hi ngs ot her t han f l yi ng? Can you spend mi l es on t hi ngs8 ot her t han f l yi ng?9 MS. ROSENBAUM: Ther e ar e not ver y many

10 f act s i n t he r ecor d about t he pl an, but t he cont r act 11 does ref er t o ai r l i ne mi l es - - sorr y, t o ai r l i ne12 par t ner s f r om whom one coul d ear n mi l es and then use13 mi l es al so. 14 J USTI CE GI NSBURG: The pl ai nt i f f -

15 MS. ROSENBAUM: Del t a, whi ch i s mer ged16 i nt o -

17 J USTI CE GI NSBURG: And t he pl ai nt i f f used18 t he f r equent f l yer pr ogr am, what ever el se i t mi ght be19 used f or , he used i t t o get l ower pr i ces on f l i ght s, 20 r i ght ?21 MS. ROSENBAUM: He di d, yes. And t hat i s22 somet hi ng i n t he r ecor d. But -

23 J USTI CE SCALI A: Why does - - i t r el at es t o24 pr i ces. Even i f you get cr edi t f or mi l es f r om st ayi ng25 i n cer t ai n hot el s, i t st i l l has the ef f ect of l ower i ng



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1 t he pr i ce f or your ai r l i ne t i cket . And l i kewi se, i f you2 can use your f r equent f l yer mi l es t o get cheaper hot el 3 r ooms, t hat ef f ect i vel y l ower s t he pr i ce of your ai r l i ne4 t i cket , doesn' t i t ? I mean, i t doesn' t seem t o me t o5 make any di f f erence whether t he onl y t hi ng you get f r om6 t he f r equent f l yer mi l eage i s, you know, i s ai r f ar es or 7 ot her goodi es. They ar e al l pr i ce. 8 MS. ROSENBAUM: Thi s i s a cl ai m j ust about 9 hi s member shi p i n t he pr ogr am over al l , and t hat i s a

10 member shi p wher e peopl e who have the same cl ai m as hi m11 coul d be ear ni ng mi l es on t hei r cr edi t car d, spendi ng12 mi l es on hot el r ooms. And once t her e i s a cl ai m wher e13 someone can br i ng i t who has no r el at i onshi p wi t h ai r 14 t r avel whatsoever , where t hey can br i ng t he exact same15 cl ai m, i t ' s har d t o see how t hat cl ai m i s r el at ed t o16 pr i ces, r out es, or ser vi ces of ai r t r avel . And t her e' s17 cer t ai nl y been no showi ng her e t hat -

18 J USTI CE SCALI A: I ' m sor r y. You ar e t al ki ng19 about a si t uat i on where you can assi gn your mi l eage t o20 somebody el se who can get t he hot el r oom?21 MS. ROSENBAUM: No, I ' m sayi ng22 t hat someone -

23 J USTI CE SCALI A: The per son who get s t he24 di scount f or t he hot el r oom i s t he per son who bought t he25 ai r l i ne t i cket , r i ght ?



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1 MS. ROSENBAUM: Or t he person who used thei r 2 credi t car d t o r ecei ve f r equent f l yer mi l es. 3 J USTI CE GI NSBURG: Your poi nt i s t hat you4 can get f r equent f l yer mi l es by pur chases ot her t han5 ai r pl ane t r anspor t at i on. 6 MS. ROSENBAUM: Yes. And t hen al so use t hem7 f or pur poses ot her t han ai r l i ne t r anspor t at i on. 8 Repor t edl y, more mi l es ar e earned now on t he gr ound than9 on f l i ght , t hr ough means other t han t r avel t han

10 actual l y t hr ough -

11 J USTI CE BREYER: I di dn' t see anyt hi ng i n12 t he compl ai nt about anythi ng ot her t han ai r l i nes. 13 MS. ROSENBAUM: He, hi msel f -

14 J USTI CE BREYER: I s t her e anyt hi ng i n your 15 compl ai nt t hat t al ks about anyt hi ng ot her t han ai r l i nes?16 MS. ROSENBAUM: No, t her e i sn' t . He, 17 Rabbi Gi nsber g hi msel f , ear ned and used hi s mi l es -

18 J USTI CE BREYER: No, I know. But I mean, 19 what we ar e taki ng about i s what Count 2 of t he20 compl ai nt says. I t hi nk t hat ' s t hei r obj ect i on. But as21 f ar as Count 2 of t he compl ai nt says, i t ' s about ai r l i ne22 mi l es, I t ake i t , and ai r l i ne mi l es ar e used on23 ai r l i nes, et cet er a. 24 MS. ROSENBAUM: Wel l , hi s cl ai m -

25 J USTI CE BREYER: Wel l , i f t her e i s somet hi ng



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1 el se i n t hi s compl ai nt , t el l me and I wi l l have t o2 f i gur e out whether we go beyond the compl ai nt . 3 MS. ROSENBAUM: Hi s cl ai m i s about hi s4 member shi p i n t he pr ogr am i t sel f . And t he pr ogr am5 i t sel f can be used, i ncl udi ng t he accrued mi l es t hat ar e6 ear ned under t he pr ogr am, can be used f or pur poses7 besi des ai r l i ne f l i ght s. 8 J USTI CE BREYER: Does i t say t hat i n t he9 compl ai nt ?

10 MS. ROSENBAUM: No. 11 J USTI CE BREYER: No. 12 MS. ROSENBAUM: I t does not speci f i cal l y13 say, but t he cont r act does r ef er t o t he ai r l i ne par t ner s14 and thi s was deci ded -

15 J USTI CE BREYER: And an ai r l i ne par t ner , I 16 t ake i t , i s anot her ai r l i ne?17 MS. ROSENBAUM: No, I t hi nk ai r l i ne par t ner s18 can be the peopl e wi t h whomt hey part ner wi t h, t o whom19 t hey sel l t hei r mi l es. 20 J USTI CE BREYER: So i f I want t o f i nd out 21 about t hat i n t he r ecor d, wher e do I l ook?22 MS. ROSENBAUM: Thi s was deci ded on a mot i on23 t o di smi ss, so al l t her e i s, i s t he compl ai nt , but t her e24 i s -

25 J USTI CE BREYER: Al l t her e i s, i s t he



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1 compl ai nt and i t doesn' t t al k about i t i n t he compl ai nt . 2 What I ' m t hi nki ng about , obvi ousl y, i s we mi ght pr eser ve3 t hat quest i on f or anot her day. 4 MS. ROSENBAUM: The compl ai nt does i ncl ude5 t he cont r act , t hat does r ef er t o t he par t ner s, but does6 not , I don' t t hi nk, def i ne exact l y who t he par t ner s ar e. 7 But t hi s Cour t doesn' t have t o r each t he8 quest i on of whet her or not t he cl ai m r el at es t o pr i ces, 9 r out es, and ser vi ces, because i t can deci de t hi s case

10 based on t he l i ne dr awn i n Wol ens of whether or not t hi s11 cl ai m enf or ces t he t er ms of t he - - enf or ces t he t er ms of12 t he cont r act , whi ch under Mi nnesot a l aw t he covenant of13 good f ai t h does. Cases i n Mi nnesot a have r ef er r ed t o14 t hi s as a br each of cont r act cl ai m. And I want t o15 r espond t o J ust i ce -

16 J USTI CE SCALI A: What you say woul d appl y t o17 ot her cont r actual obl i gat i ons of t he ai r l i nes, r i ght ?18 So i f t he ai r l i ne says you have t o get of f t he pl ane i f19 t he f l i ght at t endant t el l s you t o do so, t her e i s goi ng20 t o be a good f ai t h obl i gat i on at t ached t o t hat , so you21 can chal l enge, chal l enge t hose deci si ons i n cour t ?22 MS. ROSENBAUM: Wel l , t her e are separat e23 r egul at i ons t hat appl y t o saf et y under t he ADA, so -

24 and separ at e pr eempt i on doct r i nes t hat appl y t o saf et y25 under t he ADA. But besi des that , t hi s woul d appl y t o



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1 mat t er s besi des - - t o mat t er s besi des f r equent f l yer 2 mi l es and ot her sol e di scret i on, i ssues i n whi ch t he3 cont r act l eaves an i ssue t o t he sol e di scret i on of t he4 ai r l i ne. 5 I do want t o r espond t o J ust i ce Kennedy' s6 quest i on about whet her someone can go t o t he Depar t ment 7 of Tr anspor t at i on. The Depar t ment of Tr anspor t at i on8 does have aut hor i t y over unf ai r and decept i ve pr act i ces9 by ai r l i nes, but t hi s i s - - t hat ' s very di f f erent t han

10 t he cl ai m t hat we' r e pur sui ng her e. That ' s a cl ai m by11 an ai r l i ne - - sor r y, by the gover nment , t hat doesn' t 12 gi ve remedi es t o t he speci f i c consumer who was hur t . 13 And t hat al so l ooks at whet her t he pr act i ce i s unf ai r or 14 decept i ve. And our cl ai m her e i sn' t t hat t hi s was an15 unf ai r pr act i ce. The cl ai m her e i s t hat t hi s i s a16 pr act i ce or t hese wer e act i ons t hat vi ol at ed t he17 cont r act and what ' s bei ng appl i ed her e ar e cont r act l aw18 pr i nci pl es about i nt er pr et i ng t he covenant of good19 f ai t h. 20 And the same t hi ng was t r ue al so i n Wol ens. 21 At t he t i me of Wol ens, t he Depar t ment of Tr anspor t at i on22 had t he same abi l i t y t o pur sue cl ai ms f or unf ai r or 23 decept i ve pr act i ces, but t he Cour t r ecogni zed t hat t hat 24 di d not over r i de the need f or t her e to be a cont r act 25 di sput e r esol ut i on r egi me by t he St at e cour t s. And



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1 t hat ' s t he same - - t he same i s t r ue her e whet her or not 2 t he cont r act t er m at i ssue i s expr essed or i mpl i ed. 3 And over al l , l i ke i n Wol ens, t hi s i s cl ai m4 wher e i f t hese sort of cl ai ms wer e pr eempt ed i t woul d5 under cut t he ef f i ci ency of cont r act s and t he compet i t i ve6 mar ket pl ace t hat over al l t he ADA i s meant t o pur sue. 7 Peopl e need t o be abl e t o r el y on t hei r cont r act s. They8 need t o be abl e t o r el y on t he f act t hat t he ot her par t y9 t o t hei r cont r act wi l l i nt er pr et t hat cont r act i n good

10 f ai t h accor di ng t o t he r easonabl e expect at i ons of t he11 par t i es wher e they wi l l gi ve t hem t he per f or mance t hey12 r easonabl y t hought t hat t hey were secur i ng when t hey13 ent er ed i nt o t he cont r act . 14 Under Nor t hwest ' s posi t i on her e, t hough, 15 t hat i t has t he di scr et i on not t o per f or m at al l , peopl e16 won' t be abl e t o r el y on t he secur i t y of t hei r 17 cont r act s. And i t ' s har d t o i magi ne t hat when Congr ess 18 enact ed t he Ai r l i ne Der egul at i on Act i t meant t o19 under cut t he ef f i ci ency of cont r act s i n t hat way. 20 CHI EF J USTI CE ROBERTS: I don' t t hi nk i t 21 hel ps your argument t o say that your posi t i on pr omotes22 t he pur poses of t he ADA, because t he whol e poi nt of23 t hat , of t he pr eempt i on pr ovi si on, i s t hat ' s f or t he24 Feder al gover nment t o det er mi ne, not f or di f f er ent st at e25 l aws, what pr omotes t he pur poses of t he ADA.



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1 MS. ROSENBAUM: Wel l , one t hi ng t hi s Cour t 2 sai d i n Wol ens was t hat havi ng - - bei ng abl e - - f or 3 peopl e t o be abl e t o t r ust t hei r cont r act s was somet hi ng4 t hat pr omoted t he pur poses of t he ADA. And we t hi nk5 t hat i s t r ue whet her t he ter ms t hat ar e bei ng r el i ed on6 ar e expr essed t er ms of cont r act s or , l i ke her e, t he7 i mpl i ci t under st ood t er ms of t he cont r act t hat t he8 cont r act i s goi ng t o be per f or med i n good f ai t h. 9 Unl ess t he Cour t has any ot her quest i ons,

10 t hank you. 11 CHI EF J USTI CE ROBERTS: Thank you, counsel . 12 Thr ee mi nut es, Mr . Cl ement . 13 REBUTTAL ARGUMENT OF PAUL D. CLEMENT14 ON BEHALF OF THE PETI TI ONERS15 MR. CLEMENT: Thank you, Mr . Chi ef J ust i ce. 16 Fi r st j ust a coupl e of l oose ends. The17 concessi on t hat I was r ef er r i ng t o bef or e i s on Page 1518 and 16 of t he r ed br i ef , I t hi nk i t was r ei t er at ed at 19 t he podi um. 20 Al so t hi s argument t hat somehow f r equent 21 f l yer mi l es progr ams have changed or somethi ng and ar e22 di f f er ent because t her e ar e par t ner s, t he same ar gument s23 wer e made by t he pl ai nt i f f s i n Wol ens i n t hei r br i ef t o24 t hi s Cour t t hat somehow t hese don' t r el at e to pr i ces and25 r out es and ser vi ces because you have r ent al cars and



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1 hot el s as par t ner s. So I t hi nk t hi s Cour t has al r eady2 cr ossed t hat br i dge. 3 Thr ee -

4 J USTI CE ALI TO: I don' t want t o t ake up your 5 r ebut t al t i me, but i f t he f act s wer e t hat under a6 par t i cul ar pr ogr am 90 per cent of t he mi l es wer e ear ned7 by pur chasi ng t hi ngs other t han f l yi ng and 90 per cent of8 t he mi l es wer e spent on t hi ngs other t han f l yi ng, 9 woul dn' t t hat be ver y di f f er ent ?

10 MR. CLEMENT: I ' m not sure i t woul d be11 di f f er ent i n a cl ai m br ought agai nst t he ai r l i nes. I 12 mean, maybe i f you want t o sue the cr edi t card part ner , 13 t he ADA has nothi ng t o do wi t h t hat . But I woul d say14 t hat i f you' r e sui ng an ai r l i ne, t he Ai r l i ne15 Der egul at i on Act speaks t o i t . But i f t he Cour t want t o16 r eserve THAT, I suppose i t coul d. 17 I do want t o make - - under scor e t hat t he18 i mpl i ed covenant doct r i ne i s ver y di f f er ent f r om ot her 19 i nt er pr et at i ve t ool s. I t i s non- wai vabl e and, I t hi nk, 20 i n a wor l d wher e you ar e t r yi ng t o det er mi ne the21 di f f er ence bet ween sel f - i mposed under t aki ngs and t hi ngs22 i mposed by St at e l aw, non- wai vabi l i t y i s a huge st r i ke23 agai nst i t bei ng vol unt ar y. I t al so j ust i s, you can24 br i ng i n separ at e i mpl i ed covenant cl ai ms. You know, no25 one - - I ' ve never hear d of a cont r a pr of er ent em cl ai m,



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1 but i mpl i ed covenant cl ai m i s r out i nel y br ought as a2 separ at e cl ai m. I t j ust shows you r eal l y can enl ar ge3 t he bargai n i n ver y real ways, and t he St ates make4 pol i cy deci si ons about whet her t o have i t . Texas 5 doesn' t have i mpl i ed covenant s as a general mat t er at 6 al l . 7 Some St at es have a val i d publ i c pol i cy. 8 They have di f f er ent vi ews about at - wi l l empl oyment 9 cont r act s. And when Congress want ed t o i mpose a dut y of

10 good f ai t h and f ai r deal i ng on t he f r anchi se agr eement s11 bet ween car manuf actur ers and aut omobi l e deal ers, t hey12 passed a st at ut e. I t ' s j ust st at ut or y and pol i cy13 or i ent ed i n a way t hat nor mal r ul es of const r uct i on ar e14 not . 15 Now, J ust i ce Br eyer , I cer t ai nl y agr ee wi t h16 your f our pr emi ses. I f I had t o st at e a st andar d, I 17 woul d say t he st andar d i s t hat t he i mpl i ed covenant i s18 onl y not preempted when i t does no more than pr ovi de a19 r ul e of const r uct i on f or t he expr ess t er ms of t he20 cont r act . But , of cour se, i f t hat ' s al l i t does, t hen21 t her e' s not hi ng t o be gai ned by sayi ng t hose cl ai ms are22 not pr eempt ed because you can st i l l j ust get t o t he same23 pl ace by ci t i ng Cardozo and Lady Duf f - Gordon. 24 And t her e' s a l ot t o be gai ned by adopt i ng a25 mor e pr ophyl act i c r ul e because t he cl ai ms t hat ar e



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( Wher eupon, at 11: 12 a. m. , t he case i n t heabove- ent i t l ed mat t er was submi t t ed. )



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Northwest Airlines, Inc. et al. v. Ginsberg (Oral Argument Transcript)

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