SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE.
Before the Court is the motion of Defendant American Airlines, Inc. seeking to dismiss the modified supplemental class action complaint in the above-captioned adversary proceeding. Plaintiffs are American Airlines' pilots who previously worked at TWA. At American, Plaintiffs enjoyed special job opportunities at the St. Louis hub until those opportunities ended when the pilots' collective bargaining agreement was abrogated in American's bankruptcy. Plaintiffs allege that their union — the APA — breached its duty of fair representation in ten ways regarding Plaintiffs' loss of those special opportunities, including failing to bargain for Plaintiffs in connection with the lost opportunities, failing to replicate the lost opportunities, and failing to fairly represent Plaintiffs in an arbitration to provide substitute job protections. Unhappy with the results of that arbitration, they seek a declaration voiding the arbitrators' award, among other things.
For the reasons set forth below, the Court dismisses the first four claims in light of the prior proceedings before this Court to abrogate the pilots' collective bargaining agreement under Section 1113 of the Bankruptcy Code and the Court's subsequent approval of a new agreement. But the Court denies the rest of the motion, finding that Plaintiffs have stated claims regarding the conduct of the arbitration, the merits of which require further factual development.
As it must on a motion to dismiss, the Court assumes to be true all the facts in the complaint. In April 2001, American acquired the assets of former airline TWA, including its unionized employees. Plaintiffs' Modified Supplemental Class Action Complaint [ECF No. 48] ("MSCompl.") ¶ 1. Given the acquisition, American and the APA negotiated and executed an addendum to their collective bargaining agreement entitled "Supplement CC," which provided terms for integrating legacy TWA pilots into American's pilot seniority list. MSCompl. ¶ 8. Supplement CC completely subordinated the seniority of about 1,200 legacy TWA pilots to that of all American pilots. MSCompl. ¶ 9. The seniority of the remaining 1,100 legacy TWA pilots was reduced by Supplement CC, and they were reintegrated into American's seniority list at their reduced seniority level. MSCompl. ¶ 9. But to compensate for this loss of seniority, Supplement CC constructed a "protective `fence' in St. Louis," which created a minimum number of Captain and First Officer positions in St. Louis and granted the legacy TWA pilots preferential bidding for these positions. MSCompl. ¶ 10. So, while reducing the seniority of legacy TWA pilots put them at a relative disadvantage for purposes of bidding against 8,000 American pilots for positions on other routes, the protective fence guaranteed a certain number of desired positions on
The APA has "long desired to terminate Supplement CC, and the protective fence in St. Louis it provided" for the legacy TWA pilots. MSCompl. ¶ 46. American knew of the APA's hostility toward legacy TWA pilots after May 2012. MSCompl. ¶ 52. A former APA president promised as part of his election platform to remove the St. Louis fence without restoring seniority to the legacy TWA pilots. MSCompl. ¶ 46. After American filed for Chapter 11 bankruptcy protection in November 2011, it represented that it would "close its St. Louis base and eliminate the protective fence by the end of 2012." MSCompl. ¶¶ 12-13. The legacy TWA pilots contended that either their pre-integration seniority should be restored or the protective fence maintained. MSCompl. ¶ 15.
At some point, American proposed sending this issue to arbitration, and "initially proposed a seemingly fair dispute resolution mechanism as to the [legacy] TWA pilots['] issue that did not limit the arbitrators' remedy." MSCompl. ¶ 53. But American and the APA later agreed that the arbitrators would be powerless to restore the legacy TWA pilots' seniority. MSCompl. ¶ 53. Thus, the "APA, in collusion with American, agreed that American [could] close the St. Louis base, and that... an arbitrator [would] decide what if any protection should be afforded" to the legacy TWA pilots. MSCompl. ¶ 15. But "under no circumstance [could] the arbitrator modify the [legacy] TWA pilots' seniority at American." MSCompl. ¶ 15. This agreement would be implemented later through the collective bargaining agreement process. MSCompl. ¶ 16.
Plaintiffs' original complaint in this case alleged that the APA breached its duty of fair representation by agreeing with American to take seniority off the table as a possible remedy in the arbitration, regardless of the ultimate result of that arbitration. See Krakowski v. Am. Airlines, Inc. (In re AMR Corp.), 2014 WL 2508729, at *1 (Bankr.S.D.N.Y. June 3, 2014). In June 2014, however, this Court granted the APA and American's motions to dismiss the original complaint. Id. at *6. In the June decision, the Court concluded that the Plaintiffs had not alleged sufficient facts to plausibly show that the seniority restriction on the Supplement CC arbitration — in and of itself — fell outside the APA's legitimate union objectives. Id. at *4. In reaching its June decision, the Court observed that the Plaintiffs' seniority had been lost more than a decade before when American acquired TWA and that the results of the arbitration were unknown. Id. at *4-5.
The parties refer to events in the main bankruptcy case.
In its motion, American seeks dismissal on a variety of grounds. It argues that some of Plaintiffs' claims are precluded by the Section 1113 process before this Court or already rejected by a prior decision issued in this adversary proceeding. American also contends that Plaintiffs cannot challenge the results of the arbitration by filing a duty of fair representation claim but must instead seek to directly vacate the arbitration award.
To survive a motion to dismiss under Rule 12(b)(6), a plaintiff's complaint must plead "enough facts to state a claim to relief that is plausible on its face."
"A union `has a duty to represent fairly all employees subject to the collective bargaining agreement.'" Vaughn v. Air Line Pilots Ass'n, Int'l, 604 F.3d 703, 709 (2d Cir.2010) (quoting Spellacy v. Airline Pilots Ass'n-Int'l, 156 F.3d 120, 126 (2d Cir.1998)). This duty requires adequate, honest, and good faith representation. Air Line Pilots Ass'n, Int'l v. O'Neill, 499 U.S. 65, 75, 111 S.Ct. 1127, 113 L.Ed.2d 51 (1991) (citing Restatement (Second) of Trusts § 174 (1959) (trustee's duty of care) (additional citations omitted)). It applies across many contexts, including when challenges are leveled at a union's contract administration, contract enforcement, negotiation efforts, or "instances in which a union is acting in its representative role, such as when the union operates a hiring hall." O'Neill, 499 U.S. at 77, 111 S.Ct. 1127 (citing Breininger v. Sheet Metal Workers, 493 U.S. 67, 87-89, 110 S.Ct. 424, 107 L.Ed.2d 388 (1989) (additional internal citations and quotations omitted)). It has been referred to as the "statutory duty of fair representation," but the "doctrine was judicially developed in Steele [v. Louisville & Nashville R. Co.] and its progeny," and is more precisely described as "grounded in federal statutes." See Vaca v. Sipes, 386 U.S. 171, 177, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967) ("The statutory duty of fair representation was developed over 20 years ago in a series of cases involving alleged racial discrimination....") (citing Steele v. Louisville & Nashville R. Co., 323 U.S. 192, 204, 65 S.Ct. 226, 89 L.Ed. 173 (1944)); see also O'Neill, 499 U.S. at 76, 111 S.Ct. 1127 ("This description of the `duty grounded in federal statutes' has been accepted without question by Congress and in a line of our decisions spanning almost a quarter of a century.") (citations omitted); Int'l Bhd. of Elec. Workers v. Foust, 442 U.S. 42, 47, 99 S.Ct. 2121, 60 L.Ed.2d 698 (1979) ("The right to bring unfair representation actions is judicially implied from the statute and the policy.... Our function, therefore, is to implement a remedial scheme that will best effectuate the purposes of the Railway Labor Act....") (citations and quotation marks omitted); Breininger v. Sheet Metal Workers Int'l Ass'n Local Union No. 6, 493 U.S. 67, 79, 110 S.Ct. 424, 107 L.Ed.2d 388 (1989) (explaining an unfair representation claim is a "creature of labor law" and "part of federal labor policy").
To prove a breach of the duty of fair representation, plaintiff must satisfy two elements. Nikci v. Quality Bldg. Servs., 995 F.Supp.2d 240, 246 (S.D.N.Y. 2014) (quoting White v. White Rose Food, 237 F.3d 174, 179 (2d Cir.2001)); Vaughn, 604 F.3d at 709. First, the plaintiff must show "that the union's `conduct toward a member of the bargaining unit is arbitrary, discriminatory, or in bad faith.'" Id. (quoting White Rose Food, 237 F.3d at 179); Vaughn, 604 F.3d at 709 (conduct consists of action or inaction). A union's conduct is arbitrary if "`in light of the factual and legal landscape at the time of the union's actions [or inactions], the union's behavior is so far outside a wide
Second, the plaintiff must show "`a causal connection between the union's wrongful conduct and [the plaintiff's] injuries.'" Barr, 868 F.2d at 43-44 (quoting White Rose Food, 237 F.3d at 179); Vaughn, 604 F.3d at 709.
Duty of fair representation cases "are matters to be decided by the courts in the first instance." See, e.g., Ferro v. Ry. Exp. Agency, Inc., 296 F.2d 847, 851 (2d Cir.1961) (citing Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); Boivin v. Cent. Vermont Ry., Inc., 1982 WL 177535, at *8 (D.Vt. Feb. 16, 1982) ("It is clear that a federal district court has subject matter jurisdiction over an employee['s] claim against a union for breach of duty of fair representation.") (citing O'Mara v. Erie Lackawanna R.R. Co., 407 F.2d 674 (2d Cir.1969) aff'd sub nom, Czosek v. O'Mara, 397 U.S. 25, 90 S.Ct. 770, 25 L.Ed.2d 21 (1970)). Thus, an employee does not need to exhaust other administrative remedies prior to bringing a duty of fair representation claim. Czosek, 397 U.S. at 28, 90 S.Ct. 770 ("And surely it is beyond cavil that a suit against the union for breach of its duty of fair representation is not within the jurisdiction of the National Railroad Adjustment Board or subject to the ordinary rule that administrative remedies should be exhausted before resort to the courts....") (citations and footnotes omitted)).
An employee bringing a breach of duty of fair representation claim against his union can add his employer as a defendant by alleging the employer's knowledge of or complicity in the union's breach. See Long Island City Lodge 2147 etc. v. Ry. Express Agency, Inc., 217 F.Supp. 907, 910 (S.D.N.Y.1963) (National Railroad Adjustment Board lacks primary jurisdiction over employees' hostile discrimination claim against union and employer). This approach bypasses a fruitless arbitration process in which two collusive parties, the employer and union, could strike a bargain at the employee's expense. See Sullivan v. Air Transp. Local 501 TWU, 2004 WL 2851785, at *2 (E.D.N.Y. Dec. 6, 2004) (citing Glover v. St. Louis-S.F. Ry. Co., 393 U.S. 324, 328-29, 89 S.Ct. 548, 21 L.Ed.2d 519 (1969) (additional citations omitted)); see also Boivin, 1982 WL 177535, at *4 (citing O'Mara, 407 F.2d at 674).
The Railway Labor Act (the "RLA") separately addresses finality and judicial
45 U.S.C. § 159 Third.
As a general matter, if an employee disagrees with a "final and binding" arbitration award and can show that his union breached its duty of fair representation in a way that "seriously undermine[d] the integrity of the arbitral process," then that arbitration award is no longer final or binding. United Parcel Service, Inc., v. Mitchell, 451 U.S. 56, 61, 101 S.Ct. 1559, 67 L.Ed.2d 732 (1981) (quoting Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 567, 96 S.Ct. 1048, 47 L.Ed.2d 231 (1976)) ("[I]f it seriously undermines the integrity of the arbitral process the union's breach also removes the bar of finality"). Such a tainted award may be vacated. See Hines, 424 U.S. at 572, 96 S.Ct. 1048 (quoting Margetta v. Pam Pam Corp., 501 F.2d 179, 180 (9th Cir.1974)) ("`To us, it makes little difference whether the union subverts the arbitration process by refusing to proceed ... or follows the arbitration trail to the end, but in so doing subverts the arbitration process .... In neither case, does the employee receive fair representation.'").
While the Hines decision involved the Labor Management Relations Act of 1947, 29 U.S.C. §§ 141 et seq., the duty of fair representation exception to finality and remedy of vacatur of a tainted final and binding arbitration award is similarly available under the RLA. See, e.g., Barnett v. United Air Lines, Inc., 738 F.2d 358, 362 (10th Cir.1984) ("If an employee can establish that his union breached its implied duty of fair representation, then even a binding decision of the board can be set aside if the breach seriously undermined the integrity of the arbitral process.") (citing Hines, 424 U.S. at 567, 96 S.Ct. 1048); Del Casal v. E. Airlines, Inc., 634 F.2d 295, 299 (5th Cir.1981) (applying Hines, but declining to vacate the System Board's final and binding conclusions because the facts did not show that the union's breach of its duty of fair representation seriously undermined the integrity of the arbitral process). Indeed, many courts assume the application of this duty of fair representation exception to final and binding awards under the RLA without discussion. See, e.g., Del Casal, 634 F.2d at 299 (citing Hines for existence of duty of fair representation exception and, without further discussion, applying it to determine that "[h]ere, the union's breach ... did not
The Plaintiffs allege that the "APA violated its duty to fairly represent the plaintiffs and the putative Class" in ten ways. MSCompl. ¶ 48(A)-(J). These alleged breaches cover three general categories: 1) failing to bargain about the termination of Supplement CC and agreeing to terminate Supplement CC without securing equivalent job protections, MSCompl. ¶¶ 48(A)-(B); 2) precluding the Supplement CC arbitrators from addressing seniority and failing to pursue something to "replicate" the Supplement CC job protections, MSCompl. ¶¶ 48(C)-(D); and 3) claims that the Supplement CC arbitration was not procedurally appropriate or fair, including problems with the selection of the arbitrators, the participants, and the lawyers, MSCompl. ¶¶ 48(E)-(J). Plaintiffs further allege that American knew of and colluded with the APA in these breaches. MSCompl. ¶¶ 52-53.
In its first two claims, Plaintiffs complain that the APA failed to bargain on their behalf as to the termination of Supplement CC and that APA agreed with American to terminate Supplement CC without securing equivalent job protections. MSCompl. ¶¶ 48(A)-(B). But these claims cannot survive given the Section 1113 proceedings in American's bankruptcy. As those proceedings make clear, the APA collective bargaining agreement — including Supplement CC — remained in effect until American received Court approval to reject the collective bargaining agreement, including Supplement CC. APA opposed the termination of the collective bargaining agreement at every turn, as did the Supplement CC Pilots.
Plaintiffs seek to avoid the consequences of the Section 1113 proceedings by arguing that the APA breached its duty of fair representation before the Section 1113 proceedings began. More specifically, they allege that before American was even authorized to reject Supplement CC, the APA had agreed — without bargaining on Plaintiffs' behalf — that American can close the St. Louis base and that an arbitrator will decide what protections, if any, should
In re AMR Corp., 477 B.R. at 403 n.9.
In claims three and four, Plaintiffs complain that the APA falsely represented to the Bankruptcy Court that the intent of the LOA 12-05 arbitration was to "replicate" Supplement CC's job protections and that the APA wrongly agreed with American to preclude the LOA 12-05 arbitrators from modifying the former TWA pilots' seniority. MSCompl. ¶ 48(C) & (D).
Turning to the first allegation, the Court concludes that the representation about "replicate" is not a basis for a duty of fair representation claim. The actual terms of LOA 12-05 were presented to the Court as part of the request to approve the new collective bargaining agreement. See Mot. for Order Authorizing Entry into Collective Bargaining Agreement and Settlement Letter and Approving Settlements in Connection Therewith ("Mot. Authorizing New CBA"), Ex. B, at 527-28 [ECF No. 5626]. The intent of LOA 12-05 was clear from its written terms: "The Company and the APA agree that a dispute resolution procedure is necessary to determine what alternative contractual rights should be provided
The word "replicate" is not used anywhere in LOA 12-05. Rather, it was used by counsel in a court hearing as a short-hand description of the terms of the agreement. This informal description does not trump the written terms of the agreement, which was provided to all interested parties at the time of the hearing. See LOA 12-05, filed Dec. 7, 2012; Hr'g Tr., Dec. 19, 2012 [Case No. 11-15463, ECF No. 6282] (hearing on Motion Authorizing New CBA); cf. White v. Wash. Pub. Power Supply Sys., 692 F.2d 1286, 1289 n. 1 (9th Cir.1982) ("It is settled that to the extent a trial court's oral decision is inconsistent with a formal written order, the formal order controls"); Cashco Fin. Servs. v. McGee (In re McGee), 359 B.R. 764, 774 n. 9 (9th Cir.2006) ("[A] judgment is rendered only when it is set forth in writing, not when it is orally pronounced in court.") (quoting 11 Fed. Prac. & Proc. Civ. 2D Section). Indeed, it was clear at the hearing that the term "replicate" could not to be taken literally as the parties represented that American intended to close the St. Louis base and, therefore, the job protections for TWA Pilots at that base would no longer exist. Hr'g Tr. 31:8-33:10, Dec. 19, 2012 [Case No. 11-15463, ECF No. 6282] (Mr. James: "[T]he company is closing St. Louise [sic] as a result of the abrogation of Sup[plement] CC and we said there was protected flying that we promised those pilots back in 2001 and so we're going to... let ... three respected neutrals decide how to replicate those [p]rotections."); see also LOA 12-05 ("This letter confirms ... the planned closure of the STL base...."). Given that fact, it would be impossible to make an exact copy or duplicate of those St. Louis protections. See American Heritage Dictionary, 1480 (4th ed.2000) (defining "replicate" as "to repeat, duplicate, or reproduce"); Random House Dictionary, 1634 (2d ed.1987) (defining "replicate" as "[t]o duplicate, copy, reproduce, or repeat").
Taking judicial notice of the proceedings before this Court that are part of this bankruptcy case, the Court categorically rejects Plaintiffs' reliance on the term "replicate" as an independent basis for any rights asserted by the Plaintiffs. Cf. In re Applin, 108 B.R. 253, 258 (Bankr.E.D.Cal. 1989) ("[T]o be given conclusive effect, the putative admission would have to be deemed a judicial admission.... Some degree of formality is entailed. The court has discretion to accept or reject the ... admission. Judicial admissions are not made upon ambiguous ... comments by counsel and are not made upon inconsistent pleas.") (citations and quotation marks omitted); see id. at 259 ("An inadvertent statement by counsel is more likely to be treated as an evidentiary admission ... [which is] mere evidence ... not conclusive, and may be contradicted by other evidence.").
For different reasons, the Court also dismisses the claim in paragraph 48(D) of the Modified Supplemental Complaint.
Original Complaint ¶ 28. The June decision dismissed this claim. In that decision, the Court rejected the Plaintiffs' position that the only satisfactory remedy in the arbitration required modifying the seniority of the legacy TWA pilots. In re AMR Corp., 2014 WL 2508729, at *4 (Bankr. S.D.N.Y. June 3, 2014). The Court recognized that "[r]eopening seniority affects all pilots at American that are represented by the APA, not just the Plaintiffs," which required the APA necessarily to balance the interests of the Plaintiffs and all the other pilots that the APA represents. Id. The Court concluded that the Plaintiffs had not alleged anything to infer that the APA's exercise of its discretion on that issue was discriminatory. Id. at *4-5. As this issue has already been ruled upon, the Court dismisses this claim. See Aramony, 254 F.3d at 410 (discussing the doctrine of law of the case).
In its remaining claims, Plaintiffs raise duty of fair representation claims relating to how the arbitration was conducted. The allegations range from complaints about how the arbitrators, lawyers, and participants in the arbitration were selected to the positions taken by the APA during the arbitration. MSCompl. ¶¶ 48(E)-(J). American lumps these claims together as "allegations concerning the conduct of the interest arbitration proceeding within the parameters of LOA 12-05," and asserts that "as a result of those allegations what Plaintiffs are seeking is to vacate the [interest arbitration] award." Hr'g Tr. 86:17-87:2, Sept. 4, 2014 (Counsel for American, Mr. Fritts). American argues that the "Railway Labor Act prescribes the only way to" impeach an arbitration award, which is enumerated in Section 159 Third. See Motion to Dismiss, at 13; see also 45 U.S.C. § 159 Third. As Plaintiffs did not seek relief under Section 159 Third, American contends that these claims must be dismissed.
The Court disagrees. In fact, the case law recognizes that a duty of fair representation
American contends that Plaintiffs' fair representation claim must be dismissed given the participation of former TWA pilots in the arbitration. See AMR's Letter Response [ECF No. 63] (citing, among other things, Del Casal v. E. Air Lines, Inc., 465 F.Supp. 1254 (S.D.Fla.1979), aff'd, 634 F.2d 295 (5th Cir.1981)). But the Del Casal case is distinguishable. In Del Casal, the plaintiff had a union-provided attorney assist with his initial grievance process and the attorney later submitted plaintiff's grievance to the System Board of Adjustment. Id. at 1256. But after discovering the plaintiff was not a member of the union, the attorney stopped working with plaintiff and recommended that he retain a private attorney to assist with the upcoming System Board hearings. Id. at 1256. The plaintiff pursued a duty of fair representation claim against the union for discontinuing his representation, and the Del Casal court agreed the union breached the duty of fair representation. Id. at 1259. But the plaintiff decided to continue with the System Board hearings after retaining new non-union counsel of his choosing. Id. Because the plaintiff failed to allege the union attorney "could have adduced additional evidence in appellant's favor" beyond that found by his privately retained attorney, his complaints about the integrity of the Board's process based on his legal representation were "mere conjecture and invalid." Del Casal, 634 F.2d at 300. Having litigated his position, therefore, the court rejected his wrongful discharge claim that was based on the allegedly defective arbitration process. By contrast, the Plaintiffs here allege they were effectively shut out of the arbitration, including the selection of the Pilots Committees who participated in the arbitration and the retention of counsel for those committees. See MSCompl. ¶¶ 26-36.
For the reasons stated above, the Court grants the Motion in part, and denies it in part, dismissing the allegations in ¶ 48(A)-(D) from the Modified Supplemental Complaint without prejudice. The Defendants shall settle an order on three days' notice. The proposed order must be submitted by filing a notice of the proposed order on the Case Management/Electronic Case Filing docket, with a copy of the proposed order attached as an exhibit to the notice. A copy of the notice and proposed order shall also be served upon opposing counsel.