How Are Dividend Miles Calculated? — Frequent Flier Lawsuit Moves Forward

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On August 23, 2013, a federal court judge in Chicago ruled that US Airways must answer a lawsuit claiming the airline is “misleading and deceiving millions of its members” by improperly calculating miles flown for its loyalty rewards program Dividend Miles. (Annette Kwok v. U.S. Airways Group Inc. et al., Case No. 1:13-cv-02068, U.S. District Court for the Northern District of Illinois (Chicago)).

The COMPLAINT
Dividend Miles program member Annette Kwok of Washington, D.C. claims the airline breached its contract with her and similarly situated customers by crediting them with fewer miles than they had actually flown in conflict with the terms of its program membership guide.

Kwok alleges that the Dividend Miles Membership Guide is ambiguous as to how frequent flier miles are calculated, i.e. one section states:

“[miles are] based upon the distance from origin to final destination for direct flights”

but a different section provides that:

“[t]he number of Preferred-qualifying miles you’ll earn is based on actual miles, or actual segments flown on qualifying paid tickets, whichever is greater.”

The Complaint goes on to mention that US Airways, in its 2013 10K report, states:

“Revenue passenger mile (‘RPM’) — A basic measure of sales volume. One RPM represents one passenger flown one mile.” [Complaint’s emphasis]

Kwok claims she has been denied being awarded her actual miles flown. For an example, Kwok cited the carrier’s decision to award her 313 miles for a flight from Washington’s Reagan National Airport to Bradley International Airport near Hartford, Connecticut, instead of the actual 398 miles from origin to destination.

Kwok adds another example in paragraph 31 of her Complaint:

“Upon information and belief, US Airways regularly awards members 600 miles for flights between Chicago O’Hare International Airport and Charlotte/Douglas International Airport. The actually [sic] miles flown, however, exceed 600 miles for most, if not all, flights between these two airports, based on flight data from public sources such as http://flightaware.com/. In one instance, US Airways Flight No. 1940 that departed from [ORD] on March 13, 2013 actually flew 925 miles [to CLT]. Upon information and belief, US Airways owes each member on that flight at least 325 miles for that flight alone.” [travelblawg’s emphasis]

US Airways, in filing a Motion to Dismiss the action, argued their Guide is not ambiguous and they have their own ability to interpret the Guide and counts miles based on point-to-point distance and not the flight’s actual route.

The RULING
According to the court’s Memorandum denying the airline’s Motion to Dismiss:

“While it is possible that this [is] how defendants intended frequent flier miles to be calculated, the [membership] guide never makes this specification and indeed includes language in another section that states that the number of miles earned is based upon ‘actual miles,’” Judge Leinenweber said. “Thus, it is clear that the provision at issue can (and in fact has been) reasonably construed to have more than one meaning.” [travelblawg’s emphasis]

The judge similarly rejected US Airways’ contention that it has the ability to alter the contract terms unilaterally.

“While they claim that the guide has a provision which grants them the ability to change or discontinue all aspects of the dividend miles program with or without notice, the same provision states that ‘members are encouraged to visit usairways.com/dm for current program updates,” the judge said.

Lastly, the denial of the Motion to Dismiss affirms the proper legal standard for this stage of litigation:

“Defendants fail to assert that they have satisfied such conditions and again fail to realize that at this stage in the litigation, plaintiff does not need to prove her case or the parties’ actual contractual intent. Instead, all she needs to do is make sufficient allegations, which when taken as true, put the defendants on notice of her claim. Plaintiff has met this burden. Accordingly, the court denies defendants’ motion to dismiss,” Judge Leinenweber said. [travelblawg’s emphasis]

The TAKEAWAY
Say what you mean, and mean what you say! — The hole that US Airways dug for itself is not uncommon among all types of industries when they do not take the proper steps to review and edit advertising, handbooks, guides, website information, etc. Sure, the “heavy” legal jargon often found in the terms and conditions of agreements (often unilateral, “take it or leave it” consumer contracts) often has less pitfalls, likely because they are so long and will put you to sleep. Rather, it’s the poster displayed to customers at the business, to take an example, that may make a promise or contain ambiguous language that may be relied upon by a customer. And when challenged, courts have a trend to (1) protect the customer and (2) interpret a contract [or any “promise”] against the drafter.

Here, the court was not deciding the merits of Ms. Kwok’s complaint, just that she has a viable claim to proceed. … Not that US Airways has any other [$11 billion merger] litigation to deal with at the moment. [tongue firmly planted in cheek]=

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