 |
:: Benway v. American Airlines |
Introduction
This case poses a straightforward issue of contact interpretation relating to American's frequent flyer program, the
AAdvantage Program. The undisputed facts on which American's Motion is based are set forth in the Motion for Summary
itself, and American will not burden the Court by reciting those facts again here. By way of background, however,
members if the AAdvantage Program accrue mileage credits, subject to the terms and conditions of the Program, to obtain
tickets to fly on American's domestic or international routes.
Plaintiff Benway alleges that, as a member of the AAdvantage Program, he had an irrevocable contractual right to redeem
his mileage credits under the award structure in effect at the time the miles were accumulated. He asserts that American
breached it's AAdvantage contract with him on February 1, 1995 by increasing from 20,000 to 25,000 the number of mileage
credits required to obtain a domestic coach class ticket - even though he received more than a year's advance notice of
that change.
Benway's breach of contract claim is utterly meritless. The written contract between Benway and American expressly and
unambiguously reserves to American the right to change the mileage levels and award structure at any time, even in ways
that would impact the "continued availability" of travel awards. The contract also expressly reserves to American the
right to terminate the Program entirely on six months notice, thereby reserving to American the lesser right to modify
the Program.
In light of the foregoing it is hardly surprising that Benway's Petition did not allege any specific contractual
language in which American expressly promised that AAdvantage members could always redeem mileage credits under the
award structure in effect when the mileage credits were accumulated. Nor is it surprising that Benway attached no
written contractual documents to his petition. The written documents forming the contract between Benway and American
specifically foreclose Benway's claim. Benway cannot prevail under the terms of the contract, or on any other basis.
Judgment should therefore be entered for American as a matter of law.
Argument
A. The written Program Materials Constituting The Contract Are Clear And Unambiguous.
"In determining whether summary judgment is proper based upon a contract, the trial court must first determine whether
the contract is ambiguous." Hussong V Schawn's Sales Enter., 1994 WL 700020 (Tex. App.-Houston [1st Dist.], March 9,
1995, n.w.h.); Reilly v. Rangers Management, Inc., 727 S.W. 2d 527, 529, 529 (Tex. 1987). If a winner instrument can be
given a definite and certain meaning , then it is not ambiguous and must be applied by the court as a matter of law. See
Phillips v. Montgomery, 701 S.W. 2d 616, 617 (Tex. App.-Dallas 1991, no Writ); Lyons v. Montgomery, 701 S.W. 2d 517, 518
(Tex. 1985); R & P Enter. v. LaGuarta, Garvel & Kirk, Inc., 596 S.W. 2d at 617-18 (summary judgment is proper when a
controversy can be resolved by construction of an unambiguous written contractual instrument, summary judgment is proper
- even prior to discovery. See National Union Fire Ins. Co. v CBI Indus. Inc., 38 Tex. Sup. Ct. J. 332, 335 (March 2,
1995); Cf. Phillips, 812 S.W. 2d at 617-18 (summary judgment is proper when a controversy can be resolved by
construction of an unambiguous document); see generally Tex. R. Civ. P. 166a(c) (American assumes for purposes of this
motion that Texas law applies to Benway's claims. Further, the Court should be aware that there are additional grounds,
not raised herein, why summary judgment for American is proper in this case. American believes, however, that this
controversy can and should be resolved through the Court's ruling on the threshold question of law raised in this
Summary Judgment Motion).
Here, the construction of the AAdvantage contract is straightforward. The plain meaning of the written program materials
constituting the contract between American and Benway expressly precludes Benway's claim.
B. The February 1995 Changes Constituted A Proper Exercise by American of the Reservation of Rights
Clause.
1. American Expressly Reserved the Right To Change The AAdavantage Program At Any Time In Ways Impacting
"Mileage Award Levels" and the "Continued Availability Of Awards."
In the Program materials, American expressly and unambiguously reserved the unilateral right to make precisely the
change Benway challenges in this case. The reservation clause specifically provides, in relevant part, that:
American Airlines may find it necessary to change AAdvantage program rules, regulations, travel awards and
special offers at any time. This means that American may initiate changes impacting, for example, partner affiliations,
rules for earning mileage credit, mileage levels and rules for the use of travel awards, continued availability of
awards, blackout dates and limited seating for awards, and the features of special offers. American Airlines reserves
the right to end the AAdvantage program with 6 months notice...
MarLett Aff.oe 3; see also Chemel Aff. oe 5 and Exhibits "A" through "I" thereto.
American's right to change AAdvantage rules "at any time" in ways "impacting...continued availability of awards" plainly
means that American could institute the change at issue here. An increase from 20,000 to 25,000 AAdvantage miles for a
domestic coach fare "PlanAAhead ticket is a charge in "mileage levels" which affects the "continued availability of
awards" that were previously available under a prior award structure. This language is not susceptible of more than one
reasonable construction, and compels judgment as a matter of law for American. See National Union fire Ins. Co., Tex.
Sup. Ct. J. at 335.
Benway's contrary position is implausible. Benway does not allege - nor could he allege - that American expressly
undertook or promised to allow him to redeem AAdvantage mileage credits at the award levels in effect when the mileage
credits were accumulated. On their face, the written Program materials contain no such express promise or
undertaking.
Indeed, Benway's interpretation reads the reservation of rights clause out of the contract. Benway claims a perpetual
contractual right to redeem mileage credits at the levels in effect when the miles were accumulated - even for miles
accumulated after American's announcement, more than one-year in advance, that a different award structure would be
implemented effective February 1, 19195 (See Petitionoe 18 (American is "contractually obligated to furnish...benefits to
which the accrued credits were entitled under the Program in effect when the credits were earned, accrued and
accumulated. American could not alter program benefits retroactively as to credits which had already by [sic] earned and
accumulated under the program); Petition oe 23 (seeking damages for "reduction of the value of benefits of mileage
credits earned after January 1, 1992 and prior to February 1, 1995 and retained as of that date"). Under Benway's
interpretation, American could never make a change implemented the "continued availability of awards." Furthermore, if
American gave advance notice of changes in the award structure, Benway would still be able to claim an award under the
levels in existence between the date of the notice of change and the effective date of the change. Thus, American would
have a strong incentive to give as little advance notice of changes as possible.
Benway cannot defeat summary judgment merely be arguing that he had a different understanding of the reservation of
rights clause. The Texas Supreme Court recently confirmed that "evidence of [the parties] intentions cannot be used to
create an ambiguity" if contractual language is clear. national Union fire Ins. Co., 38 Tex. Sup. Ct. J. at 334, n.5.
similarly, "not every difference in the interpretation of a contract...amounts to an ambiguity." Forbau v. Aetna Life
Ins., 876 S.W. 2d 132, 132, 134 (Tex. 1994) (emphasis in original). The written terms of the contract between Benway and
American cannot reasonably be interpreted to prevent American from making changes "at any time" that would impact the
"continued availability" of an AAdvantage award at the 20,000 mile level.
Nor can Benway defeat summary judgment by arguing that he should be able to resort to extrinsic evidence to support his
allegations. Extrinsic evidence is admissible only when a written contractual instrument is ambiguous. See R & P Enter.,
596 S. W. 2d at 519 (Tex. 1980). Extrinsic evidence to support his allegations. Extrinsic evidence is admissible only
when a written contractual instrument is ambiguous. See R & P Enter., 596 S.W. 2d at 519 (Tex. 1980). Extrinsic evidence
cannot be used to create ambiguity where - as here - a written instrument is clear. See id; accord Williford v Spies,
530 S.W. 2d 127, 130-31 (Tex. Civ. App.-Waco 1975, no writ) ("When the instrument by it's terms plainly and clearly
discloses the intention of the parties...the intention of the parties is to be ascertained by the court as a matter of
law from the language used in the writing and without aid from evidence as the attending circumstances"). (Benway could
only prevail if the clear language were modified, enlarged or rendered ineffective by operation of state law. That
result, however, was specifically foreclosed by the U.S. Supreme Court in American Airlines v. Wolens, 115 S. Ct. 817
(1995).
For all these reasons, discovery on the merits is not necessary and summary judgment is proper now. This case can and
should be decided on the face of the written Program materials that constitute the contract at issue. In these
circumstances - as the Texas Supreme Court recently made clear - summary judgment should be granted on the face of the
contract, and Benway should not be afforded an opportunity for discovery. See National union Fire Ins., 38 Tex. sup. Ct.
J. at 335.
2. American reserved the Right to Terminate The Program On Six Months Notice.
American's express reservation of the right to terminate the AAdvantage program entirely on six months notice provides a
second, independent reason why Benway's claim must fail as a matter of law. If American could terminate the Program
entirely on six months notice, it undoubtedly retained the right to take the lesser step of changing award levels after
more than one year advance notice.
In Texas, contractual provisions reserving to a contracting party the right to terminate a contract without cause are
fully enforceable. Juliette Fowler Homes, Inc. v. Welch Assoc. Inc., 793 S.W. 2d 660, 665 (Tex. 1990) ("When a contract
provides expressly that it is subject to termination upon notice, the general rule is that each party to the contract
has the legal right to cancel the contract."); see Wood Motor Co. v. Nebel, 238 S.W. 2d 181, 150 Tex. 86 (Tex. 1951);
see Hughes v. Cole, 585 S.W. 2d 865, 869 (Tex. Civ. App.-Tyler 1979, writ ref'd n.r.e.). Texas law also establishes that
a contraction party who retains the unilateral right to terminate a contract without cause thereby retains the lesser
power to modify the agreement as a condition of it's continuance. L. G. Balfour Co. v. Brown, 110 S. W. 2d 104, 110
(Tex. Civ. App-Fort Worth 1937, no writ) (modification changing commission rate constituted exercise of 30 day
termination provision). In such situations, the modification operates as a termination of the original contract and the
substation of a new contractual offer. Id.
These established principles bar Benway's claim. The undisputed facts show that American retained the right to terminate
the AAdvantage Program entirely on six months notice. It therefore retained the right to take the lesser step of
modifying the Program, at least if the modification met the contractual notice requirement for terminating the Program.
Here, as Benway's Petition admits, American provided more than one year advance notice of its modification of the
AAdvantage award structure. See Petition oe 7. American's modification must be treated as the equivalent of termination
of the old AAdvantage Program, and substitution of a new Program offer. Benway was free to accept or reject the terms of
that new Program offer, but he had no right to continue to insist on the old Program terms.
C. State and Federal authorities agree that reservation of rights clauses, like American's provide consumers with
adequate notice of an airline's right to make changes impacting previously accumulated mileage credits.
In 1988, the National Association of Attorneys General ("NAAG") issued Guidelines designed to ensure that consumers
would receive adequate notice that an airline had reserved the right to change its frequent flyer program in ways that
would affect previously accumulated miles. These Guidelines specifically distinguish between "vested miles" and
nonvested miles". Vested miles are miles accumulated prior to receiving adequate notice of an airline's reserved right
to make changes affecting previously accumulated miles. Nonvested miles are miles are miles accumulated after an airline
has given "adequate notice" of it's reserved right to make changes affecting even vested miles so long as they give at
least one year advance notice of the change. The Guidelines also provide that changes affecting nonvested miles can be
made at any time, so long as consumers have received adequate prior notice of an airline's reservation of the right to
make changes that would affect those miles.
The Guidelines further specify what NAAG believes would constitute adequate notice of an airline's reserved right to
make changes impacting previously accumulated mileage credits. NAAG specifically recommended the following language as
one example of adequate notice:
(Airline) reserves the right to change the program rules, regulations and mileage level. This means that
(Airline may raise mileage levels, add an unlimited number of blackout days, or limit the number of seats available, to
any or all destinations with notice.
NAAG Guideline 3.2.(3). See MarLett Aff.oe 3 and Exhibit "A" thereto.(The NAAG task force that drafted the Guidelines
specifically stated that "if" an airline wants to reserve the right to change the terms of it's program without giving
it's members one year's notice it can do so," if the airline gives "clear and adequate notice to the program members"
that the airline has reserved the right to make such changes, and if the changes, and if the changes are limited to
"mileage accrued after clear and adequate notice has been given." The language NAAG specified as "clear and adequate
notice" is the language of Guideline 3.2.(3) quoted in text. See Staff Analysis of Implementation of NAAG Guidelines, 54
ANTITRUST & TRADE REG.REP. 470, 473 (1988). A true and correct copy of this Staff Analysis is attached hereto for the
court's convenience.)
In the wake of this recommendation, and after consulting with NAAG, (see MarLett Aff.oe 4), American adopted
the reservation of rights clause at issue here, which provides that:
American Airlines may find it necessary to change AAdvantage program rules, regulations, travel awards and special
offers at any time. This means that American may initiate changes impacting, for example, partner affiliations, rules
for earning mileage credit, mileage levels and rules for the use of travel awards, continued availability of awards,
blackout dates and limited seating for awards, and the features of special offers. American Airlines reserves the right
to end the AAdvantage program with 6 months notice.
See MarLett Aff.oe 3; Chemel Aff.oe 5 Exhibits "A" through "I" thereto.
American's reservation of rights clause conforms in all material respects to the language of the reservation of rights
clause the chief state law enforcement officers concluded would give consumers adequate notice that an airline reserved
the right to make changes that would impact previously accumulated mileage credits. Indeed, American gave more detailed
notice than NAAG recommended.
Similarly, the United States Department of Transportation has consistently taken the view that airlines reserve the
right to make changes in their frequent flyer programs that will have "retroactive" effect on previously accumulated
mileage credits. For example, in response to a congressional the requirements for receiving frequent flyer awards," and
whether such "unilateral, retroactive changes" constitute "bait-and-switch tactics," the Department responded as
follows:
A review of airline frequent flyer program brochures indicates that air carriers do reserve the right to
restrict seat availability and to change blackout dates, awards and mileage levels at any time. The Department has also
found that airlines do provide members of their frequent flyer programs with direct notice of such changes. It appears
that what the airlines offer participants is not a specific award but a wide array of conditional benefits. Thus,
restrictions imposed at any time do not constitute "bait-and-switch" tactics, since a contract for a definite service is
never offered.
Hearings before the Subcommittee on Aviation of the Committee On Public Works and Transportation, House of
Representatives, 102nd Cong., 1st Sess., May 15 and 22, 1991, 41, at 54 (emphasis added) (attached as Exhibit "3" to
American's Motion for Summary Judgment)
A brochure for consumers published by the U.S. Department of Transportation titled "Fly-Rights: A Consumer Guide to Air
Travel" (10th Revised Edition, September 1994), makes the same point:
"Airlines reserve the right to make changes to their programs, sometimes on short notice. The number of
miles required for particular awards might be raised, requiring you to use your old mileage (i.e. your current balance)
under the more restrictive new rules. The airline may cease service on a route that you were particularly interested in
- or may drop the city you live in! The carrier may eliminate attractive frequent-flyer tie-ins with particular airlines
or hotel chains.
Cashing in your mileage frequently will limit your losses in case the carrier changes the rules, merges, or goes out of
business."
These state and federal authorities support American's position that in light of its reservation of rights clause,
American was free to make the February 1995 Changes without incurring any liability to its AAdvantage members.
D. Alternatively, American Is Entitled To Partial Summary Judgment On All Claims For Damages Based On AAdvantage
Mileage Credits Earned After December 1993.
As shown, American is entitled to judgment as a matter of law dismissing all of Benway's claims. Alternatively, given
the concessions in Benway's own pleadings, this Court should enter partial summary judgment dismissing all claims with
respect to mileage credits accumulated after December 1993.
The gravamen of Benway's claim is that he was induced to choose American over competing airlines based on his belief
that he would have a perpetual right to redeem his mileage credits at the mileage award levels in effect at the time the
credits were accumulation of mileage credits, induced Plaintiff...to increase and accumulate their mileage credits."
Petitionoe 20.
But there is no dispute that Benway knew as of December 1993 that American would change mileage award levels for a
"PlanAAdhead" domestic coach ticket effective February 1, 1995. Benway specifically pled that American announced that
change in December 1993. Petitionoe 7. The undisputed facts confirm that such notice was given then. Chemel Aff.oeoe 11 and
12 and Exhibit "O" thereto. Indeed, AAdvantage members, including Benway, received repeated reminders of that change
throughout 1994. Chemel Aff.oeoe 13 and 14 and Exhibits "P" through "W" thereto.
Benway, therefore, could not possibly have been "induced" to choose American after December 1993 based on any
expectation that he would have the right after February 1, 1995. He received specific notice that 25,000 mileage credits
would be required to obtain a "PlanAAdhead" domestic coach ticket after February 1, 1995. Even if Benway had any
reasonable expectation prior to American's December 1993 announced changes - and he did not - that expectation ended in
December 1993.
Benway does not claim that he can redeem mileage credits accumulated after February 1, 1995 under the award structure in
effect prior to February 1, 1995. His Petition implicitly concedes, as he must, that American did reserve the right to
change the award structure for mileage credits accumulated after the effective date of the change. Under his
interpretation of the contract, however, the old award structure would apply to all miles accumulated before the
effective date of the change, even after notice that the award structure would change on February 1, 1995. If that
interpretation were correct, American would have had no incentive or reason to give advance notice of the February 1,
1995 change. Indeed, under Benway's theory, American could have subjected all miles accumulated subsequent to December
1993 to the new award structure would go into effect immediately.
Thus, at a minimum, Benway cannot recover for the alleged diminution of the value on mileage credits he earned after
December 1993. Partial summary judgment should therefore be entered pursuant to Tex. R. Civ. P. 166a(e) dismissing all
damage claims for the alleged reduction in value of mileage credits earned after December 1993.
Conclusion
The motion for summary judgment should be granted.
Motion For Summary Judgment Of Defendant American Airlines, Inc.
To The Honorable Judge of This Court:
Now Comes American Airlines, Inc. ("American") and files this Motion for Summary Judgment ("Motion"), pursuant to Rule
166a of the Texas Rules of civil Procedure, and would respectfully show the Court as follows:
Introduction
This Motion for summary judgment is brought on the grounds that there is no genuine issue as to any material fact, and
that American is entitled to judgment as a matter of law. More particularly, (1) the AAdvantage contract, and
specifically the "reservation of rights" provision, is unambiguous as a matter of law (See Motion Point 1);and (2) the
modification to the AAdvantage Program which became effective February 1, 1995 was expressly permissible under the
reservation of rights provision as a matter of law, and therefore, implementation of that change did not constitute a
breach of contract as alleged in the Original Class Action Petition. (See Motion Points 2 and 3) Alternatively, American
is entitled to partial summary judgment as to claims for damages based on AAdvantage mileage credits earned after
December 1993. (See Motion Point 4).
Undisputed Facts
In support of this Motion for Summary Judgment, American relies upon Plaintiff's Original Class "Action Petition (the
"Petition") filed herein and the Affidavits of Bruce T. Chemel (the "Chemel Aff.") and Charles D. MarLett (the "MarLett
Aff.") which Affidavits are attached hereto as Exhibits "1" and "2" respectively. The summary judgment evidence
establishes the following undisputed facts:
1. American's frequent flyer program is known as the AAdvantage Program. See Chemel Aff., oe 1.
2. Under the AAdvantage Program, AAdvantage members accrue "mileage credits" when they, among other things, fly on
American. AAdvantage members can then trade in those credits, subject to the terms and conditions of the AAdvantage
Program, for travel award certificates. Award certificates, in truth, can be redeemed for tickets to fly on domestic or
international routes, or for upgrades to a higher level of service. AAdvantage members thus obtain airline service by
redeeming accrued mileage credits a rates set by American. An AAdvantage member has one year from the date of issuance
of a travel award certificate to redeem the award certificate for an AAdvantage ticket. An AAdvantage ticket is valid
for travel for one year from the date the ticket is issued. See Petition,oe 6; Chemel Aff.,oe 4.
3. The terms and conditions of the AAdvantage Program are set forth in the current AAdvantage Member Guide, which
includes the following "reservation of rights" language:
"American Airlines may find it necessary to change AAdvantage program rules, regulations, travel awards and
special offers at any time. This means that American may initiate changes impacting, for example, participant
affiliations, rules for earning mileage credit, mileage levels and rules for the use of travel awards, continued
availability of awards, blackout dates and limited seating for travel awards, and the features of special offers.
American Airlines reserves the right to end the AAdvantage program with six months notice...
Since 1988, all of the Member Guides have contained substantively identical reservation of rights language. Affidavit of
Charles D. MarLett ("MarLett Aff."),oe 3 see also Chemel Aff.,oe 5 and Exhibits "A" through "I" thereto.
4. Modifications to the terms and conditions of the AAdvantage Program are periodically published in AAdvantage
Newsletters. The same reservation of rights language that appears in the Member Guides is also contained in AAdvantage
Newsletters. AAdvantage Newsletters containing this reservation of rights language were mailed to J. Benway, AAdvantage
No. 1643874, and other AAdvantage members via United States mail in 1988 and thereafter. See Chemel Aff,oeoe 6,9,10 and
14, and Exhibits "J" through "N", "P" through "W" thereto.
5. In December 1993, American announced some changes in the AAdvantage Program, to take effect February 1, 1995 (the
"February 1995 Changes"). One of the changes announced was an increase from 20,000 to 25,000 miles in the ,mileage
credits required to claim a
Coach Class PlanAAhead award for travel within and between the 48 contiguous United States and Canada. Since the change
was not to take effect until February 1995, AAdvantage members were given more than one year in which to claim travel
award certificates at the 20,000 mile level. Moreover, by redeeming miles for award certificates prior to February 1,
1995, AAdvantage members could complete award travel at the lower 20,000 mileage level as late as January 31, 1997. See
Petition,oe 7; Chemel Aff., oe 11.
6. During the week of December 15, 1993, American mailed via United States mail notice of the February 1995 Changes to,
among others, all of its then AAdvantage Gold members (the "December 1993 Notice").
The December 1993 Notice provided in relevant part:
"American Increases Mileage Levels for Two Domestic AAdvantage Travel Awards
Effective February 1, 1995, we will increase the mileage requirements for two of our AAdvantage travel awards. At the
time, the mileage required for the Coach Class PlanAAhead award valid for travel within and between the U.S. 48 states
and Canada (Award Code P201) will increase from 20,000 AAdvantage miles to 25,000 miles.
Prior to February 1, 1995, you can claim these awards at the current mileage levels.
Once you claim an award certificate, it is valid for ticketing for up to one year from the date of issue. And, a ticket
is valid for up to one year from the date of ticketing. Therefore, it is possible for you to complete a award travel at
the current mileage levels as late as January 31, 1997."
J. Benway, AAdvantage Member No. 1643874, was among the AAdvantage members to whom the December 1993 Notice was sent.
Chemel Aff., oe 12 and Exhibit "O" thereto.
7. Notice of the February 1995 Changes was also given in substantially the same form as the December 1993 Notice in the
January/February 1994 AAdvantage Newsletter sent via United
states mail beginning January 19, 1994. J. Benway, AAdvantage Member No. 1643874, was among the AAdvantage members to
whom the January/February 1994 AAdvantage Newsletter was sent. Chemel Aff., oe 13 and Exhibit "P" thereto.
8. On February 1, 1995, American implemented the increase in miles required to claim a Coach Class PlanAAhead award for
travel within and between the 48 contiguous United States and Canada from 20,000 miles to 25,000 miles. Chemel Aff., oe
15.
9. AAdvantage members were given over to claim travel award certificates at the lower 20,000 mile level. Moreover,
AAdvantage members could complete award travel at the lowest 20,000 mile level as late as January 31, 1997. That is
because an AAdvantage member has one year from the date of issuance of a travel award certificate to redeem the
certificate for an AAdvantage ticket. An AAdvantage ticket is valid for travel for one year from the date the ticket is
issued. Chem Aff., oe 4,11,12 and 15.
Motion Points
1. The AAdvantage Program Reservation of Rights Clause is Unambiguous.
The meaning of an unambiguous contract is a question of law is properly determined by the Court on summary judgment. See
Reilly v. Rangers Management, Inc., 727 S.W. 2d 527 529 (Tex. 1987); Phillips v Union Bankers Ins. Co., 812 S.W.2d 616,
618 (Tex. App.-Dallas 1991, no writ). "If a written contract is so worried that it can be given a definite or certain
legal meaning, then it is not ambiguous." National Union fire Co. v. CBI Industries, Inc., 38 Tex. Sup. Ct. J. 332
(March 2, 1995). Further, parol evidence is not admissible to create an ambiguity. Id.
Here, the reservation of rights language in the AAdvantage Program contract expressly reserves to American the right to
"change AAdvantage program rules, regulations, travel awards and special offers at any time, "including the right to
"initiate changes impacting, for example, ...mileage levels and...continued availability of awards." The contract also
reserves to American "the right to end the AAdvantage program with six months notice."
2. The February 1995 Changes Made Pursuant To The Reservation Of Rights Clause Constituted A Proper Modification Or
Termination Of The Contract As A Matter Of Law.
The change in the mileage requirement from 20,000 miles to 25,000 miles for Coach Class PlanAAhead awards was a change
impacting "mileage levels" and the "continued availability of awards" as contemplated by the reservation of rights
clause. therefore, the February 1, 1995 Changes constituted a proper exercise of American's reservation of rights, and
did not constitute a breach of contract as a matter of law.
Further, this modification was, in legal effect, a termination of the pervious AAdvantage Program. See L.G. Balfour Co.
v. Brown, 110 S.W. 2d 104, 110 (Tex. Civ. App.-Ft. Worth 1937, no writ) (modification changing commission rate
constituted exercise of 30 day termination provision). "When a contract provides expressly that it is subject to
termination upon notice, the general rule is that each party to the contract has the legal right to cancel the
contract." Juliette Fowler Homes, Inc. v. Welsh Assoc. Inc., 793 S.W. 2d 660, 665 (Tex. 1990). Because American gave
more than six months notice of the February 1, 1995 Changes, the changes were proper and did not constitute a breach of
contract as a matter of law. See id. (enforcing sixty day notice provision).
3. State And Federal Authorities Have Recognized That A Reservation Of Rights Clause Such A The One Used By gives
Notice Of The Right To Make Changes Impacting Previously Accumulated Miles.
The National Association of Attorneys General (NAAG") and the United States Department of transportation (Dot") have
recognized that under a reservation of rights clause such as the AAdvantage Program clause, airlines may make changes to
their frequent flyer programs that affect mileage credits already accrued. See National Ass'n of Attorneys Gen. Task
Force on the travel Industry Guidelines and COMMENTARY, oe 3.2 (1988) (the "NAAG Guidelines") (recommending language that
would give adequate notice that airlines reserve the right to make future changes to their frequent flyer programs that
will impact mileage credits accumulated before notice of the changes); Hearings Before the Subcomm. on Aviation of the
House Comm. On Public Works and transportation, 102nd cong., 1st Sess., May 15 and 22, 1991, 11, at 51. (DOT recognition
that r=frequent flyer program brochures reserve the right to change awards and mileage level requirements at any time);
U.S. Odept of Trans., fly-Rights: Consumer Guide to Air travel (10th revised ed., Sept. 1994) (requiring the use of
previously accumulated mileage credits "under the more restrictive new rules."
4. Alternatively, American is Entitled to Partial summary Judgment as to Claims for Damages Based on AAdvantage
Mileage Credits earned After December 1993.
At A minimum, since notice of the February 1995 Changes was mailed to Benway in December 1993, no claim for damages may
be based on mileage credits accumulated after that date because Benway does not dispute
American's right to make changes affecting miles not yet earned or accumulated. See Petition, oe 18. Partial judgment
should therefore be entered dismissing all damage claims for any alleged redaction in the c=value of mileage credits
earned after December 1993.
Wherefore, American respectfully requests that this Court grant this Motion in all respects and enter summary judgment
dismissing Plaintiff's claims in their entirely. Alternatively, American requests that partial summary judgment be
entered with respect to claims for damages based upon mileage earned after December 1993.
^top
The Layman's Version of Benway v. American Airlines
Essentially this was the first class action lawsuit based on the changes
in 1995 of the 20,000-mile coach class award to 25,000 miles. This case served as a model for subsequent lawsuits
against other airlines who also changed their program award levels at the same time. The importance of this case is that
it confirmed that the American Airlines AAdvantage program had followed the posted guidelines for consumer
principles as issued by the Department of Transportation (DOT) and the National Association of Attorneys General (NAAG).
^top
Status of Benway v. American Airlines
Text of Final Judgment
On June 16, 1995, the Court entered an order granting defendant's motion for summary Judgment disposing of all
Plaintiff Joseph C. Benway's individual claims against Defendant American Airlines, Inc. Plaintiff Joseph C. Benway
thereafter moved on June 27, 1995, to voluntarily nonsuit his alleged class claims. Accordingly, the Court is of the
opinion that a final judgment should be rendered in favor of defendant American Airlines, Inc. against Plaintiff Joseph
C. Benway in his individual capacity on his individual claims.
It is therefore ordered that the individual claims of Plaintiff Joseph C. Benway against Defendant American Airline, Inc.
are hereby dismissed with prejudice and judgment is hereby rendered in favor of Defendant American Airlines, Inc. against
Plaintiff Joseph C. Benway, and that Plaintiff Joseph C. Benway take nothing by his individual claims against defendant
American Airlines, Inc.
Bottom Line
The court found that the American Airlines AAdvantage program followed all the established guidelines in announcing the
change from 20,000 to 25,000 miles for selected awards and other changes to their program and that they, in no way,
violated consumer principles.
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