Ginsberg v. Northwest, Inc.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

S. BINYOMIN GINSBERG, Rabbi, an 
individual and on behalf of all
others similarly situated,
Plaintiff-Appellant, No. 09-56986
v. D.C. No.
NORTHWEST, INC., a Minnesota  3:09-cv-00028-JLS-
corporation and a wholly-owned NLS
subsidiary of Delta Air Lines, Inc.; OPINION
DELTA AIR LINES, INC., a Delaware
corporation,
Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of California
Janis L. Sammartino, District Judge, Presiding

Argued and Submitted
June 9, 2011—Pasadena, California

Filed August 5, 2011

Before: Robert R. Beezer, Stephen S. Trott, and
Pamela Ann Rymer, Circuit Judges.

Opinion by Judge Beezer;
Concurrence by Judge Rymer

10231
 GINSBERG v. NORTHWEST, INC. 10233

COUNSEL

Thatcher A. Stone, New York, New York; Harold M. Hewell,
Hewell Law Firm, San Diego, California, for the plaintiff-
appellant.

Richard T. Williams, Holland & Knight LLP, Los Angeles,
California; Christopher G. Kelly, and Judith R. Nemsick, Hol-
land & Knight LLP, New York, New York, for the
defendants-appellees.
10234 GINSBERG v. NORTHWEST, INC.
OPINION

BEEZER, Circuit Judge:

Plaintiff brought suit against an airline alleging a common
law breach of contract under the implied covenant of good
faith and fair dealing. The district court held that Plaintiff’s
claim was preempted by the Airline Deregulation Act
(“ADA”), 49 U.S.C. § 41713(b)(1), and dismissed the claim
pursuant to Fed. R. Civ. P. 12(b)(6). We conclude that the
ADA does not preempt this common law contract claim, and
reverse the district court.

When Congress passed the ADA, it dismantled a federal
regulatory structure that had existed since 1958. By including
a preemption clause, Congress intended to ensure that the
States would not undo the deregulation with regulation of
their own. Congress’s “manifest purpose” was to make the
airline industry more efficient by unleashing the market forces
of competition — it was not to immunize the airline industry
from liability for common law contract claims. Congress did
not intend to convert airlines into quasi-government agencies,
complete with sovereign immunity.

The purpose, history, and language of the ADA, along with
Supreme Court and Ninth Circuit precedent, lead us to con-
clude that the ADA does not preempt a contract claim based
on the doctrine of good faith and fair dealing.

Background

Plaintiff S. Binyomin Ginsberg was an active member of
“WorldPerks,” a frequent flier program offered by Defendant
Northwest Airlines, Inc. (“Northwest”). Ginsberg began his
WorldPerks membership in 1999, and by 2005 he had
obtained Platinum Elite Status. Northwest revoked Ginsberg’s
WorldPerks membership on June 27, 2008. Ginsberg
attempted several times to clarify the reasons behind North-
 GINSBERG v. NORTHWEST, INC. 10235
west’s decision to revoke his membership. Ginsberg alleges
that Northwest revoked his membership arbitrarily because he
complained too frequently about the services. Northwest sent
Ginsberg an email on November 20, 2008, detailing the basis
for Northwest’s decision to revoke Ginsberg’s membership.
In that email the Northwest representative quotes from Para-
graph 7 of the General Terms and Conditions of the World-
Perks Program, which provides that Northwest may determine
“in its sole judgment” whether a passenger has abused the
program, and that abuse “may result in cancellation of the
member’s account and future disqualification from program
participation, forfeiture of all mileage accrued and cancella-
tion of previously issued but unused awards.”

Ginsberg initially filed suit on January 8, 2009, asserting
four causes of action: (1) breach of contract; (2) breach of the
implied covenant of good faith and fair dealing; (3) negligent
misrepresentation; and (4) intentional misrepresentation.
Northwest moved to dismiss the complaint pursuant to Fed.
R. Civ. P. 12(b)(6), arguing that the ADA preempted the
claims. The district court dismissed, with prejudice, Gins-
berg’s claims for breach of the implied covenant of good faith
and fair dealing, negligent misrepresentation, and intentional
misrepresentation, concluding that the ADA preempted them
“ ‘because they relate to airline prices and services.’ ” The
district court also dismissed the general breach of contract
claim without prejudice, finding that the claim was not pre-
empted, but that Ginsberg had failed to allege facts sufficient
to show a material breach.

Ginsberg only appeals the district court’s conclusion that
the ADA preempts a claim for breach of the implied covenant
of good faith and fair dealing.

Standard of Review

“Dismissals under Fed. R. Civ. P. 12(b)(6) for failure to
state a claim are reviewed de novo.” Kahle v. Gonzales, 487
F.3d 697, 699 (9th Cir. 2007).
10236 GINSBERG v. NORTHWEST, INC.
Analysis

Based on our case law, Supreme Court precedent, and the
ADA’s legislative history and statutory text, we conclude that
the ADA does not preempt state-based common law contract
claims, such as the implied covenant of good faith and fair
dealing. Although Ginsberg’s claim may still fail on the mer-
its, the district court erred when it dismissed the claim under
the preemption doctrine. Doing so was a misapplication of the
law because the ADA was never designed to preempt these
types of disputes.

A. Preemption Doctrine

The key to understanding the scope of the ADA’s preemp-
tion clause is to determine what Congress intended to achieve
when it enacted the ADA. “Preemption may be either express
or implied, and is compelled whether Congress’ command is
explicitly stated in the statute’s language or implicitly con-
tained in its structure and purpose.” FMC Corp. v. Holliday,
498 U.S. 52, 56-57 (1990) (internal quotation marks omitted).
This inquiry “begin[s] with the language employed by Con-
gress and the assumption that the ordinary meaning of that
language accurately expresses the legislative purpose.” Id. at
57 (internal quotation marks omitted).

In Medtronic, Inc. v. Lohr, the Supreme Court advised that
preemption provisions ought to be narrowly construed for two
reasons:

First, because the States are independent sover-
eigns in our federal system, we have long presumed
that Congress does not cavalierly pre-empt state-law
causes of action . . . . Second, our analysis of the
scope of the statute’s pre-emption is guided by our
oft-repeated comment . . . that the purpose of Con-
gress is the ultimate touchstone in every pre-emption
case.
 GINSBERG v. NORTHWEST, INC. 10237
518 U.S. 470, 485 (1996) (internal quotation marks omitted).

Indeed, preemption analysis “must be guided by respect for
the separate spheres of governmental authority preserved in
our federalist system.” Alessi v. Raybestos-Manhattan, Inc.,
451 U.S. 504, 522 (1981). When the question of preemption
implicates “a field which the States have traditionally occu-
pied, we start with the assumption that the historic police
powers of the States were not to be superseded by the Federal
Act unless that was the clear and manifest purpose of Con-
gress.” Medtronic, 518 U.S. at 485 (internal citation and quo-
tations omitted).

To determine what Congress’s “manifest purpose” was, we
must first consider the ADA’s unique history. Under the Fed-
eral Aviation Act of 1958, the Civil Aeronautics Board
(“CAB”) had regulatory authority over interstate air transpor-
tation. Pub. L. No. 85-726. But the Board’s power in this field
was not exclusive, for the statute also contained a “savings
clause,” clarifying that “[n]othing . . . in this chapter shall in
any way abridge or alter the remedies now existing at com-
mon law or by statute, but the provisions of this chapter are
in addition to such remedies.” 49 U.S.C. § 1506 (1964),
amended and renumbered as 49 U.S.C. § 40120(c) by Pub. L.
103-272, 108 Stat. 745, 1118 (1994). Because the 1958 Act
did not expressly preempt state law, this clause allowed states
to regulate airlines, leading to economic distortions. See, e.g.,
California v. CAB, 581 F.2d 954, 956 (D.C. Cir. 1978) (con-
cluding that states may regulate intrastate airfares, even if
such regulations interfere with interstate prices).

[1] By 1978 Congress had concluded that state-by-state
regulation was inefficient and that deregulation, along with
market forces, could better promote efficiency, variety, and
quality in the airline industry. See H.R. Rep. No. 95-1779, at
53 (1978) (Conf. Rep). But seeing that states could just as
easily “undo federal deregulation with regulation of their
own,” Morales v. Trans World Airlines Inc., 504 U.S. 374,
10238 GINSBERG v. NORTHWEST, INC.
378 (1992), Congress included a preemption clause in former
section 1305(a)(1), which now reads as follows:1

[A] State, political subdivision of a State, or political
authority of at least 2 States may not enact or enforce
a law, regulation, or other provision having the force
and effect of law related to a price, route, or service
of an air carrier that may provide air transportation
under this subpart.

At the same time, Congress retained the “savings clause,”
thereby preserving common law and statutory remedies. Since
1978, the scope of this preemption clause has been hotly
debated, but never fully resolved.

B. Supreme Court and Ninth Circuit Precedent

The Supreme Court has encountered the ADA’s preemp-
tion clause at least three times since 1990. In Morales, the
Court considered whether the ADA preempted the States
“from prohibiting allegedly deceptive airline fare advertise-
ments through enforcement of their general consumer protec-
tion statutes.” 504 U.S. at 378. The Court concluded that
because advertising has such a direct link to pricing and rates,
the ADA preempted restrictions against deceptive advertising.
Id. at 388-89. The Court therefore reasoned that the advertis-
ing restrictions at issue had the “forbidden significant effect”
on rates, routes, or services. Id. at 388. Because the regula-
tions were inconsistent with the ADA’s deregulatory purpose,
they were preempted under former § 1305(a)(1). But in the
next breath the Court cabined its holding to those laws that
actually have a direct effect on rates, routes, or services.

The Court went to great lengths to make clear that its hold-
1
The clause was initially located in the ADA itself at 49 U.S.C.
§ 1305(a)(1), but was amended and incorporated into the Federal Aviation
Administration Authorization Act of 1994. 49 U.S.C. § 41713(b).
 GINSBERG v. NORTHWEST, INC. 10239
ing was narrow, and that the ADA only preempts laws that
have a direct effect on pricing:

In concluding that the . . . advertising guidelines are
pre-empted, we do not . . . set out on a road that
leads to pre-emption of state laws against gambling
and prostitution as applied to airlines. Nor need we
address whether state regulation of the nonprice
aspects of fare advertising (for example, state laws
preventing obscene depictions) would similarly “re-
late to” rates; the connection would obviously be far
more tenuous. . . . [S]ome state actions may affect
airline fares in too tenuous, remote, or peripheral a
manner to have a preemptive effect.

504 U.S. at 390 (internal citations omitted).

We echoed this view in Air Transport Association of Amer-
ica v. City & County of San Francisco, where we concluded
that Congress did not intend for the ADA to preempt state
laws forbidding employment discrimination, even if these
laws have an economic effect, because employment discrimi-
nation laws are not directly related to pricing, routes, or ser-
vices. 266 F.3d 1064, 1072-73 (9th Cir. 2001).

The Court considered the ADA’s preemption clause for a
second time in American Airlines, Inc., v. Wolens, 513 U.S.
219 (1995). In a fact pattern similar to this case, the plaintiffs
in Wolens were members of a frequent flyer program and
brought suit against an airline. Id. at 224-25. The plaintiffs
challenged certain program modifications that devalued cred-
its the members had already earned, and claimed that the
devaluation constituted a breach of contract and a violation of
Illinois’s Consumer Fraud and Deceptive Business Practices
Act. Id. The court concluded that § 1305(a)(1) clearly pre-
empted the consumer fraud claim because it was a state-
imposed regulation that related to the price, routes, or services
of air carriers. Id. at 222. But the Court allowed the breach of
10240 GINSBERG v. NORTHWEST, INC.
contract claim to go forward, making clear that the ADA “al-
lows room for court enforcement of contract terms set by the
parties themselves.” Id. “In so doing, the Court held that Con-
gress did not intend to preempt common law contract claims.”
Charas v. Trans World Airlines, Inc., 160 F.3d 1259, 1264
(9th Cir. 1998) (en banc) (discussing the scope of
§ 1305(a)(1) after the Wolens decision).

[2] The Court in Wolens drew a clear distinction between
the consumer fraud claim, which was based on a proscriptive
law targeting primary conduct, and actions that “simply give
effect to bargains offered by the airlines and accepted by air-
line customers.” Wolens, 513 U.S. at 228. Because this dis-
tinction — between state laws that regulate airlines and state
enforcement of contract disputes — is crucial, we quote the
Court at length:

We do not read the ADA’s preemption clause, how-
ever, to shelter airlines from suits alleging no viola-
tion of state-imposed obligations, but seeking
recovery solely for the airline’s alleged breach of its
own, self-imposed undertakings. As persuasively
argued by the United States, terms and conditions
airlines offer and passengers accept are privately
ordered obligations “and thus do not amount to a
State’s ‘enact[ment] or enforce[ment] [of] any law,
rule, regulation, standard, or other provision having
the force and effect of law’ within the meaning of [§]
1305(a)(1).” Brief for United States as Amicus
Curiae 9. Cf. Cipollone v. Liggett Group, Inc., 505
U.S. 504, 526, 112 S. Ct. 2608, 2612, 120 L. Ed. 2d
407 (1992) (plurality opinion) (“[A] common-law
remedy for a contractual commitment voluntarily
undertaken should not be regarded as a ‘requirement
. . . imposed under State law’ within the meaning of
[Federal Cigarette Labeling and Advertising Act]
§ 5(b).”).
 GINSBERG v. NORTHWEST, INC. 10241
The ADA, as we recognized in Morales . . . was
designed to promote “maximum reliance on compet-
itive market forces.” . . . Market efficiency requires
effective means to enforce private agreements. See
Farber, Contract Law and Modern Economic The-
ory, 78 Nw.U.L.Rev. 303, 315 (1983) (remedy for
breach of contract “is necessary in order to ensure
economic efficiency”) . . . . As stated by the United
States: “The stability and efficiency of the market
depend fundamentally on the enforcement of agree-
ments freely made, based on the needs perceived by
the contracting parties at the time.” Brief for United
States as Amicus Curiae 23. That reality is key to
sensible construction of the ADA.

Wolens, 513 U.S. at 228-30 (internal footnote omitted) (alter-
ations in original) (emphasis added). In sum, the Court con-
cluded that a state does not “enact or enforce any law” when
it uses its contract laws to enforce private agreements.2

[3] After drawing this distinction, the Court then pointed
out institutional limitations that demonstrate the ADA cannot
preempt breach of contract claims, including those based on
common law principles such as good faith and fair dealing. In
particular, the Department of Transportation is not equipped
to adjudicate these types of claims. First, the DOT’s own reg-
ulations “contemplate that . . . contracts ordinarily would be
enforceable under ‘the contract law of the States.’ ” Wolens,
513 U.S. at 230 (citing 47 Fed. Reg. 52129 (1982)). Second,
2
Two concurrences in Wolens also provide insight into the Court’s rea-
soning. Justice O’Connor wrote that “[m]any cases decided since Morales
have allowed personal injury claims to proceed, even though none has said
that a State is not ‘enforcing’ its ‘law’ when it imposes tort liability on an
airline.” 513 U.S. at 242 (O’Connor, J., concurring in the judgment in part,
dissenting in part). And Justice Stevens emphasized that the ADA’s pre-
emption clause would not bar common law claims such as negligence or
fraud. 513 U.S. at 235-36 (Stevens, J., concurring in part, dissenting in
part).
10242 GINSBERG v. NORTHWEST, INC.
the DOT is not equipped with either “the authority [or] the
apparatus required to superintend a contract dispute resolution
regime.” Id. at 232. Although before 1978 the CAB adjudi-
cated contract disputes, when Congress deregulated the airline
industry it dismantled this apparatus and never replaced it.
Therefore, if common law contract claims were preempted by
the ADA, a plaintiff literally would have no recourse because
state courts would have no jurisdiction to adjudicate the
claim, and the DOT would have no ability to do so. Effec-
tively, the airlines would be immunized from suit — a result
that Congress never intended. This also means that “the law-
makers indicated no intention to establish, simultaneously, a
new administrative process for DOT adjudication of private
contract disputes.” Id. Consequently, the Court flatly refused
to “foist on the DOT work Congress has neither instructed nor
funded the Department to do.” Id. at 234. We agree.

The Supreme Court considered § 1305(a)(1) for a third
time in Rowe v. New Hampshire Motor Transport Ass’n, 552
U.S. 364 (2008). In Rowe a group of transport carrier associa-
tions challenged a Maine statute that regulated the shipment
of tobacco into the state. Id. at 369. The Court concluded that
the ADA preempted Maine’s statute because the latter “pro-
duces the very effect that the federal law sought to avoid;
namely, a State’s direct substitution of its own governmental
commands for ‘competitive market forces.’ ” Id. at 372.
Invoking Morales, the Court emphasized that “state enforce-
ment actions having a connection with, or reference to carrier
‘rates, routes, or service,’ are pre-empted.” Id. at 370 (quoting
Morales, 504 U.S. at 384 (alteration omitted)). Indeed, com-
pared to either Wolens or Morales, the link in Rowe was more
directly related to “routes, rates, or services” because it regu-
lated primary activity that fell under the ADA, thereby frus-
trating Congress’s “manifest purpose” to deregulate the
industry.

[4] And finally, we addressed a similar question in West v.
Northwest Airlines, Inc., 995 F.2d 148 (9th Cir. 1993). There,
 GINSBERG v. NORTHWEST, INC. 10243
the plaintiff brought suit against Northwest for breach of the
covenant of good faith and fair dealing under Montana law.
Id. at 149. The district court granted summary judgment to
Northwest, stating that the claim was preempted by the ADA.
On appeal we reversed, concluding that a claim for breach of
the covenant of good faith and fair dealing was “too tenuously
connected to airline regulation to trigger preemption under the
ADA.” Id. at 151. Although this case was pre-Wolens, we
conclude it is still good law.

Indeed, in Charas, a post-Wolens decision, we emphasized
that Congress’s “clear and manifest purpose” in enacting air-
line deregulation “was to achieve just that — the economic
deregulation of the airline industry.” Charas, 160 F.3d at
1265. The only purpose of the preemption clause is to prevent
state interference with the mandate of deregulation. Id. at
1261 (noting that when Congress enacted the ADA it “in-
tended to preempt only state laws and lawsuits that would
adversely affect the economic deregulation of the airlines and
the forces of competition within the airline industry.”).

Additionally, that Congress did not intend for § 1305(a)(1)
to preempt state common law contract claims is evident from
another provision: the savings clause, which preserves com-
mon law remedies. Because the ADA’s preemption clause
does not explicitly preempt common law breach of contract
claims, we turn to the rest of the statute’s language to “ ‘as-
certain and give effect to the plain meaning of the language
used,’ but must be careful not to read the preemption clause’s
language in such a way as to render another provision super-
fluous.” Charas, 160 F.3d at 1264 (quoting Hughes Air Corp.
v. Public Utils. Comm’n, 644 F.2d 1334, 1337 (9th Cir.
1981)).

In Charas we concluded that, taken together, the savings
clause and preemption clause “evidence[ ] congressional
intent to prohibit states from regulating the airlines while pre-
serving state tort remedies that already existed at common
10244 GINSBERG v. NORTHWEST, INC.
law, providing that such remedies do not significantly impact
federal deregulation.” Id. at 1265. Similar logic would apply
to state contract remedies that already existed at common law,
such as the implied covenant of good faith and fair dealing.
See Wolens, 513 U.S. at 232-33 (explaining that the preemp-
tion clause, “read together with the . . . savings clause,” would
permit “state-law-based court adjudication of routine breach-
of-contract claims”).

Moreover, we also may look to “the pervasiveness of the
regulations enacted pursuant to the relevant statute to find
preemptive intent.” Montalvo v. Spirit Airlines, 508 F.3d 464,
470 (9th Cir. 2007). As the Supreme Court pointed out in
Wolens, the DOT is not equipped to handle contract disputes,
and its regulations suggest that Congress did not intend to
occupy this particular field of law. This stands in contrast, for
example, to airline safety, where agency regulations demon-
strate “an intent to occupy exclusively the entire field of avia-
tion safety.” Id. at 471.

[5] A claim for breach of the implied covenant of good
faith and fair dealing does not interfere with the deregulatory
mandate. Although Northwest argues that a common law
breach of contract claim, like one based on the doctrine of
“good faith and fair dealing,” would enlarge the contract’s
terms — savings clause, notwithstanding — the Supreme
Court rejected this argument in Wolens. There, the Court
explicitly allowed “state-law-based” claims to go forward
because that was the purpose of retaining the savings clause.
Wolens, 513 U.S. at 232. The Supreme Court reasoned that
state-law-based contract claims would not frustrate the
ADA’s manifest purpose: “[b]ecause contract law is not at its
core ‘diverse, nonuniform, and confusing,’ we see no large
risk of nonuniform adjudication inherent in ‘state-court
enforcement of the terms of a uniform agreement prepared by
an airline and entered into with its passengers nationwide.’ ”
Id. at 233 n.8 (internal citation and alteration omitted).
 GINSBERG v. NORTHWEST, INC. 10245
[6] As we pointed out in Air Transport Association of
America v. City and County of San Francisco, “[w]hat the
Airlines are truly complaining about are free market forces
and their own competitive decisions.” 266 F.3d 1064, 1074
(9th Cir. 2001). In upholding a local law forbidding employ-
ment discrimination, the Ninth Circuit reasoned that “[i]n this
deregulated environment, airlines can decide whether or not
to make large economic investments at the San Francisco air-
port . . . . That economic decision may mean the Airlines will
have to agree to abide by the [city’s anti-discrimination] Ordi-
nance[ ].” Id. Similarly, here, Northwest is free to invest in a
frequent flier program; however, that economic decision
means that the airline has to abide by its contractual obliga-
tions, within this deregulated context, pursuant to the cove-
nant of good faith and fair dealing. Like the ordinance at issue
in Air Transport Association, state enforcement of the cove-
nant is not “to force the Airlines to adopt or change their
prices, routes or services — the prerequisite for ADA preemp-
tion.” Id.

C. The Implied Covenant of Good Faith and Fair Deal-
ing Does Not “Relate to” Prices, Routes, or Services

Finally, the district court concluded that the ADA preempts
Ginsberg’s claim for breach of the covenant of good faith and
fair dealing because the claim would “relate to” both “prices”
and “services.” We disagree.

First, the district court uses an overly broad definition of
what relates to “prices.” In Wolens all the justices — includ-
ing the dissenters — agreed that the ADA does not preempt
common law tort claims such as personal injury and wrongful
death, even though airline costs and fares would be affected
by how restrictive a particular state’s law may be. Wolens,
513 U.S. at 234-35. Similarly, here, the link is far too tenuous,
and effectively would subsume all breach of contract claims.
See All World Prof’l Travel Servs., Inc. v. Am. Airlines, Inc.,
282 F. Supp. 2d 1161, 1171 (C.D. Cal. 2001) (“[C]laims must
10246 GINSBERG v. NORTHWEST, INC.
adversely impact economic deregulation of the airlines and
the forces of competition within the airline industry in order
to be preempted by the ADA. . . . Allowing [the claims to pro-
ceed] will not have the effect of regulating American’s pric-
ing policies, commission structure or reservation practices.”).

Second, the district court’s broad understanding of the “re-
lating to” language is also inconsistent with the ADA’s legis-
lative history. In 1977, the CAB’s proposed preemption
language stated that “[n]o State . . . shall enact any law . . .
relating to rates, routes, or services in air transportation.”
Hearings on H.R. 8813, Subcomm. on Aviation of the House
Comm. on Pub. Works & Transp., 95th Cong., 1st Sess. pt.
1, p. 200 (1977). In its explanatory testimony the CAB’s rep-
resentatives never suggested that the “relating to” language
created a broad scope for preemption. Rather, the CAB
explained that the preemption clause was “added to make
clear that no state or political subdivision may defeat the pur-
poses of the bill by regulating interstate air transportation.
This provision represents simply a codification of existing law
and leaves unimpaired the states’ authority over intrastate
matters.” Id. at 243.

The “relating to” language that Congress eventually
enacted came from the House version of the bill. But in its
Committee Report, the House also made clear that the pre-
emption provision simply “provid[ed] that when a carrier
operates under authority granted pursuant to title IV of the
Federal Aviation Act, no State may regulate that carrier’s
routes, rates, or services.” H.R. Rep. No. 95-1211, at 16
(1978). This understanding is more narrow than the district
court’s conclusion. And, in fact, the Senate’s version did not
even contain the “relating to” language at all. S. 2493,
§ 423(a)(1), reprinted in S. Rep. No. 95-631, p. 39 (1978).
The Senate Report clarified that this section “prohibits States
from exercising economic regulatory control over interstate
airlines.” Id. at 98. Finally, the Conference Report adopted the
House bill and its explanation, which it described in narrow
 GINSBERG v. NORTHWEST, INC. 10247
terms. H.R. No. 95-1779, at 94-95 (1978) (Conf. Rep.). This
history suggest that Congress intended the preemption lan-
guage only to apply to state laws directly “regulating rates,
routes, or services.” The district court’s broad reading of the
statute’s language simply finds no support in the legislative
history.

[7] Third, the district court’s understanding of “services” is
inconsistent with the our decision in Charas. In Charas, the
en banc court considered the meaning of “services” in the
wake of Wolens, and defined the term within the context of
“rates” and “routes,” to refer

to such things as the frequency and scheduling of
transportation, and to the selection of markets to or
from which transportation is provided (as in, “This
airline provides service from Tuscon to New York
twice a day.”)

....

Congress used “service” in § 1305(a)(1) in the public
utility sense — i.e., the provision of air transporta-
tion to and from various markets at various times.

Charas, 160 F.3d at 1265-66. In Charas we also rejected the
airlines’ argument that “services” included fringe benefits
such as the dispensing of food and drinks, or flight attendant
assistance and explicitly warned against an expansive under-
standing. “To interpret ‘service’ more broadly is to ignore the
context of its use; and, it effectively would result in the pre-
emption of virtually everything an airline does. It seems clear
to us that that is not what Congress intended.” Id. at 1266.
The district court’s understanding of “services” departs from
this court’s understanding of that term. A claim for breach of
good faith and fair dealing does not relate to “services”
because it has nothing to do with schedules, origins, destina-
tions, cargo, or mail.
10248 GINSBERG v. NORTHWEST, INC.
Conclusion

[8] Nothing in the ADA’s language, history, or subsequent
regulatory scaffolding suggests that Congress had a “clear and
manifest purpose” to displace State common law contract
claims that do not affect deregulation in more than a “periph-
eral . . . manner.” Morales, 504 U.S. at 390. We conclude that
a claim for breach of the implied covenant of good faith and
fair dealing is not preempted by the ADA.

Accordingly, we REVERSE and REMAND to the district
court to reconsider the merits of plaintiff’s claim.

RYMER, Circuit Judge, concurring in the judgment:

I join the court’s holding because it is compelled by West
v. Northwest Airlines Inc., 995 F.2d 148 (9th Cir. 1993).
There we determined that the plaintiff ’s claim for breach of
the covenant of good faith and fair dealing was not preempted
because state contract law was “too tenuously connected” to
airline prices and services. See id. at 151. Ginsberg similarly
alleges a breach of the implied covenant of good faith and fair
dealing. Thus, his claim survives preemption under West.

Whether West is “clearly irreconcilable” with American
Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), is a very close
call. See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003)
(en banc). The Court, in Wolens, held that a breach of contract
claim may relate to prices and services, depending on the
facts alleged. See 513 U.S. at 226. The breach claim in that
case related to prices and services because the alleged facts
referenced ticket-pricing and access to flights. Id. West’s rule
for contract claims seems out of step with the Supreme
Court’s holding. This rule also places us in tension with the
Seventh Circuit. See Travel All Over the World, Inc. v. King-
dom of Saudi Arabia, 73 F.3d 1423, 1433 (7th Cir. 1996)
 GINSBERG v. NORTHWEST, INC. 10249
(“Morales does not permit us to develop broad rules concern-
ing whether certain types of common-law claims are pre-
empted by the ADA. Instead, we must examine the
underlying facts of each case to determine whether the partic-
ular claims at issue ‘relate to’ airline rates, routes or ser-
vices.”).

That being said, the “clearly irreconcilable” requirement
presents a high threshold, one I can’t say with certainty has
been met here. West’s application of the “relates to” require-
ment was based on the interpretation provided in Morales v.
Trans World Airlines, Inc., 504 U.S. 374 (1992). See West,
995 F.2d at 151. Wolens affirmed Morales’s interpretation of
that clause. See Wolens, 513 U.S. at 226. As a three-judge
panel, we are not free to disagree with West’s understanding
of Morales, even if the later decision in Wolens suggests that
Morales’s interpretation of “relates to” was broader than the
West panel believed.

If West were not in the picture, we would be faced with the
Wolens inquiry of whether Ginsberg’s claim alleges a viola-
tion of a state-imposed obligation or a self-imposed undertak-
ing. See Wolens, 513 U.S. at 228. This is a difficult question
because, in some sense, an implied covenant of good faith
represents both types of obligations. It is a covenant between
the parties, suggesting a self-imposed undertaking, but is
implied into the contract by the state, indicating a state-
imposed obligation. The answer is important for airlines who
otherwise may be required to defend contract actions under a
variety of state laws whenever they enact changes in their fre-
quent flyer programs. We need not resolve this difficulty
today because of West’s insulation, at least for the time being,
of state contract claims from ADA preemption.