Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. 82 C 3066 - Marvin E. Aspen, Judge.
Before BAUER, WOOD and CUDAHY, Circuit JudgesOpinion
This is the second appeal heard by this panel arising out of various disputes between United Independent Flight Officers, Inc., ("UIFO"), United Air Lines, Inc. ("United"), and the Air Line Pilots Association, International ("ALPA"). Plaintiff UIFO is a corporation whose members include current and former United flight deck crew members (i.e. pilots, co-pilots and navigators - collectively, "pilots"). Defendant ALPA is the collective bargaining representative of the pilots of United and so of members of UIFO. The ten individual plaintiffs are members of UIFO and current or retired pilots for United.*fn1
This case is a challenges to the terms of, and amendments to, one of United's pilot benefit plans, and the negotiations leading to those terms and amendments. The plan in issue is the United Air Lines, Inc., Pilots' Fixed Benefit Retirement Income Plan, also known as the A Plan. The Fixed Benefit Plan was created in 1941 and substantially modified in 1965 and 1972, and was also amended at other times, including 1977, 1979 and 1981. Plaintiffs claim that as a result of these changes they were disparately treated in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), the Age Discrimination in Employment Act (the "ADEA"), 29 U.S.C. § 621 et seq., and the Railway Labor Act (the "RLA"), 45 U.S.C. § 151 et seq., as made applicable to air carriers by 45 U.S.C. § 181. Plaintiffs appeal the district court's grant of summary judgment for defendants on Count I of the complaint, which alleges a breach of fiduciary duty under section 404 of ERISA, 29 U.S.C. § 1104, and Count IV, which alleges a breach of the duty of fair representation implied under the RLA. Plaintiffs also appeal the district court's denial of class certification and of their post-judgment motion to add parties plaintiff. The district court's order is reported at 572 F. Supp. 1494 (N.D.Ill. 1983). We affirm.
In order to understand the nature of this dispute, it is necessary to begin in 1941 when United created a voluntary fixed benefit plan for its pilot employees. All employees were eligible to participate in the plan, but in order to participate an employee had to contribute a certain amount annually from his take-home pay. If an employee participated, United contributed the additional funds necessary to fund the plans' benefit obligations. If the employee did not contribute, neither did United. Retirement benefits were accrued only for those periods during which the employee participated. Apparently many pilots participated at some time during this period, but few participated for the entire period of their eligibility.
In 1965 the first of the several changes which resulted in the disparities of which plaintiffs complain took place. The pilots' fixed plan became currently funded entirely by United, and participation was determined by years worked (less the first probationary year). These changes were prospective, so that after 1965 all pilots were participants in the plan, but none had to contribute to it. Pilots with pre-1965 periods of non-participation were not given participation credit for those earlier years. Contributions of pilots who had participated prior to 1965 were not refunded, but their participation credit was continued.
The second major revision of the fixed benefit plan took place in 1972. The basis for benefit calculation was changed from career average earnings to final average earnings, based on an average of the five consecutive years with the highest total earnings of a pilot's final ten years of employment. The point of this change was to more closely match pension benefits to the cost of living at time of retirement, which could be done by tying benefit levels to later, and presumably higher-paying, years. The benefit accrual formula adopted was 1.2% times final average earnings using the highest consecutive five years of a pilot's last ten years of employment times years of participation (1.2% X FAE(5) X years of participation). Once again, pre- 1965 pilot contributions were not refunded and pilots were not given participation credit for all pre-1965 years of eligibility whether or not they had contributed. The participation credit for those pilots who had contributed prior [sic] to 1965 was, of course continued.
In 1976, the plan was amended to comply with the then recently enacted ERISA. Plaintiffs assert that these changes "were so extensive as to warrant the conclusion that the plan which is the subject of this action did not actually exist in its present form until this redrafting process was completed." UIFO Br. 4. Apparently they intend us to conclude that the post-1976 plan is a different arrangement rather than a modified continuation of a previously existing arrangement. However, all their assertion really entails is that changes were made. In addition, the multiplier was raised from 1.2% to 1.25% in 1977 and further increased to 1.3% in 1979.
In early 1981 the 1979 agreement between United and ALPA governing the terms and conditions of employment of United pilots was set to expire. On March 20, 1981, negotiations for a successor labor agreement had not been completed, so United and ALPA agreed to extend the 1979 agreement with certain immediate wage improvements, an agreed that any improvements to the United pilot pension or disability plans resulting from these continuing negotiations would be made retroactive to February 1, 1981. Negotiations continued and the new "Basic Agreement" covering wage and work issues was signed on August 14, 1981. However, agreement had not been reached on any pension improvements, so the parties agreed to continue negotiating and that any improvements would be retroactive. In addition, the parties agreed that if no agreed that if no agreement could be reached on the pension issues by August 1, 1982, the 1981 Basic Agreement would be subject to reopening.
Continued negotiations were successful, and on June 24, 1982, a "Supplemental Agreement modified and improved the fixed benefit plan by increasing the multiplier from 1.30% to 1.39% and basing the final average earnings calculation of the income of the pilot's three consecutive years with highest income out of his or her final ten years employment rather than on the income of five such years. The effect of these changes was to increase the benefit payable to the pilot. However, since the change increased the value of a year of participation in the plan, it also increased the absolute - though not the relative - difference in retirement benefits between pilots who had participated in the plan for different periods of time. Once again, pre-1965 contributions were not returned and pilots were not given credit for voluntary nonparticipation prior to 1965.
Of central importance in this case is the manner in which the issue of contribution return and nonparticipation service credit ("CR/NPSC") was raised among the pilots and within ALPA, and dealt with in negotiations between ALPA and United. Although there had been some dissatisfaction with the terms of the plans, the dispute over CR/NPSC did not heat up until the spring of 1979. At that time the unionized ground crews struck and obtained CR/NPSC modifications to their pension plans. United Subsequently granted CR/NPSC to non-unionized ground crew employees to keep their plan competitive with that of the unionized ground crews, but at the same time dissolved the non-union variable plan and rolled its assets into the non-union fixed plan. At a June 1, 1979, negotiating meeting with United concerning the 1979-81 contract, ALPA proposed CR/NPSC, but ALPA's formal contract proposal presented on June 7th did not mention the issue. Thus CR/NPSC was not pursued in the 1979 negotiations, and the 1979 collective bargaining agreement did not obtain CR/NPSC. Sometime in 1979 United's actuary estimated the cost of CR/NPSC for the pilots at $36 million.
Also in 1979, ALPA's pension consultant considered the possibility of CR/NPSC. In a letter to ALPA, he recommended that the pilots consider and bargain to obtain CR/NPSC, because the ground crew unions had obtained it. His letter also recognized and explained certain inequities which would result from obtaining CR/NPSC. Supp.App. Item 5, R. 216, Brand Ex. 6.
In January of 1980 a petition was circulated among the pilots of United which requested that the Management Executive Committee of ALPA (the "MEC") obtain CR/NPSC from United. The petition did not mention what the signers would be willing to trade off to get CR/NPSC. The petition was signed by 946 of United's 5806 pilot employees, and was presented to the MEC. The MEC voted to approach United about CR/NPSC before the next negotiations, and did so. United refused to consider CR/NPSC except as part of the next regular negotiations, scheduled for early 1981. United did contact its actuary, who determined the change in unfunded liability which would be created by the proposal. The figure $70 million or $4.6 million for each of 30 years, was larger than the actuary's 1979 estimate, and was passed on the ALPA.
During the summer of 1980 UIFO was formed. In November of that year ALPA presented United with an opening list of contract improvements it hoped to obtain in the upcoming negotiations over the 1981 collective bargaining agreement. Included as item 12 (of 13) in the list of benefit improvements was CR/NPSC, although ALPA wanted participation credit for furlough time as well as for pre-1965 voluntary non-participation. In February, 1981, the MEC resolved to make CR/NPSC its "highest priority" among benefit issues in the current negotiations. The "directive" to this effect was, according to UIFO, countermanded by the MEC officers and negotiating committee. UIFO Br. 7. There is no dispute that at this time any consensus which had existed with respect to CR/NPSC proposal was placed "on the back burner" by the ALPA negotiators. Following the procedures of previous negotiations, they concentrated on wage and work issues and put off consideration of pensions until those were settled.
In May, 1981, the MEC met in Seattle. At this time it voted to request United to change the assumption rates of the plan, on which were based United's levels of contribution and unfunded liability for the fixed benefit levels. (United refused, but some time later did change the assumption rates.) The MEC also developed the "Seattle Plan," which dropped the CR/NPSC proposal. Instead, the Seattle Plan proposed benefits be paid on a years of service basis, with a minimum benefit (60% of FAE) for pilots with 25 or more years of service. The plan also included an actuarial reduction for years of voluntary non-participation in years in years prior to 1965 and a buy-back provision for non-participating pilots (which would allow pilots who in years prior to 1955 had been ...