These plaintiffs say no. And, even if they are, plaintiffs say, they should be allowed to do so if they’re not violating any program or promotional offer terms.

At issue in a recently-filed putative class action in the Northern District of California is American Airlines’ frequent flier – or loyalty – program.  AAdvantage members earn “miles” which can then be redeemed for various program benefits, including flights, upgrades, car rentals and more. Members earn miles in various ways, including by flying with AA, engaging in other qualifying activities, buying miles and, most significantly here, obtaining and using an AA-branded credit card acquired through one of AA’s card issuer promotional partners.  Members could earn significant miles as an enrollment bonus and then for using the card. According to plaintiffs, applying for and receiving multiple co-branded cards through the same card issuer did not violate AAdvantage program terms.  And, so, plaintiffs did just that, and accrued over a half million miles each, including with significant enrollment bonuses.

However, plaintiffs allege, AA unilaterally terminated their accounts and “seized” those miles, even those already used by plaintiffs to book flights.  “Effectively, AA seized all bonus miles, regardless of how they were accrued, including those miles for which AA does not even allege were earned through fraud.”

The case is at its earliest stages, and the facts are undoubtedly in dispute, but there’s still good learning here for loyalty program sponsors. 

(1)          Everyone knows that there’s a lot of gaming (or, if you prefer, maximizing earn) in loyalty programs, especially in ones offering rich rewards.  Indeed, the internet is full of travel bloggers who tell people how to do just that. Thinking through the hoops that members are likely to be willing to jump through to earn points is a worthwhile exercise.  It may be that a sponsor is more than happy to let members earn as many points as they can so long as they’re taking an action that is financially beneficial to the company or its partners.  Or they may not: it will depend on the economics of the program and who is paying for what. 

(2)          If the risk-reward calculus means that capping earn in some way is important (like, limiting the number of enrollment bonuses someone can earn), sponsors and their promotional partners should state the restriction early and often: in the up-front marketing (clearly and conspicuously) for specific promotional offers and in the terms themselves.  Sponsors and their partners should be able to actually enforce those restrictions. At a minimum, sponsors should ensure that the terms provide for some latitude to address unforeseen and unforeseeable circumstances, whether by modifying the terms for the program or taking action against suspected fraud. 

(3)          “Seizing” members’ already-earned miles (if that’s what AA actually did) is a bold move and not a step to be taken lightly, especially if there isn’t an explicit prohibition in the terms against the conduct at issue.  Sponsors should always consider other less draconian measures before exercising the nuclear option. Invalidating the miles/points earned through the card enrollment bonuses (if allowed for by the program terms) or terminating participation and stopping future earn are certainly less dramatic steps.

As we’ve blogged about earlier, lawsuits involving loyalty and reward programs are few and far between. A successful program  -- and one not likely to inspire a class action -- requires careful design as well as consumer-friendly execution. What’s considered gaming to a sponsor may just be smart and permissible behavior for a consumer looking to maximize the benefits of her spend. 

Nachison v. American Airlines, Case 5:24-cv-00530-PCP (N.D. CA. 01/29/24 )