Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Mansfield v. Air Line Pilots Association International

July 9, 2007

JOHN P. MANSFIELD, JR., MICHAEL W. BALLARD, JERRY H. GALLUD, MICHAEL GLAWE, DENNIS HOLMAN, RICHARD E. MILLER, JR., AND PAUL W. WHITEFORD, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
AIR LINE PILOTS ASSOCIATION INTERNATIONAL, DEFENDANT.
UNITED AIRLINES, INC., INTERVENOR.
BRUCE HUDSON, RAYMOND CHOP, ERIC PASSANNANTE, PLAINTIFFS,
v.
AIR LINE PILOTS ASSOCIATION INTERNATIONAL AND AIR LINE PILOTS ASSOCIATION UNITED AIRLINES MASTER EXECUTIVE COUNCIL, DEFENDANTS.
UNITED AIRLINES, INC. INTERVENOR.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs in these consolidated cases are pilots currently or formerly employed by United Airlines Inc. who contend, on behalf of themselves and two putative classes, that their union, the Air Line Pilots Association (ALPA), breached its duty of fair representation by the manner in which it distributed the proceeds of $550 million in convertible notes it received as part of United's bankruptcy. The Court granted United leave to intervene in both cases. United has moved to dismiss the Hudson claims, and the Hudson and Mansfield plaintiffs have each moved to certify a class. For the foregoing reasons, the Court denies United's motion to dismiss and grants plaintiffs' motions for class certification.

Facts

On December 9, 2002, United and its related corporations filed a voluntary petition to reorganize pursuant to Chapter 11 of the United States Bankruptcy Code. As part of its restructuring, United entered into negotiations with each of its unions to renegotiate its collective bargaining agreements in an effort to cut its costs. On January 1, 2005, United and ALPA entered into a letter agreement that set forth the terms of a modified collective bargaining agreement. Among other things, ALPA agreed not to oppose United's termination of the United Airlines Pilot Defined Benefit Pension Plan (the Plan) and agreed to waive any claim that such a termination would constitute a breach of the then-existing collective bargaining agreement. ALPA and United also agreed that if the Plan were terminated, United would provide ALPA with convertible promissory notes with a face value of $550 million for the benefit of ALPA's members. The purpose of the notes was to compensate the pilots who no longer would have the pensions they had expected. The letter agreement between ALPA and United gave ALPA discretion to determine how proceeds from the sale of the notes would be distributed, so long as the allocation was reasonable.

During 2005, ALPA, through its United Master Executive Council (MEC), debated how to allocate the proceeds of the $550 million notes it would receive if the Plan were terminated. By August 2005, ALPA had narrowed the options to three methods, referred to as GAP 1, GAP 2, and partial lump sum amount (PLSA). The GAP 1 method was based on the pilots' actual losses from termination of the Plan that would not be replaced with payments from the Pension Benefit Guaranty Corporation (PBGC).*fn1 The GAP 2 method projected a pilot's estimated losses assuming the Plan had continued and the pilot had worked until age sixty. The PLSA method involved distribution of the note proceeds according to the partial lump sum amount a pilot would have been entitled to under the Plan. By November 2005, the MEC had voted to remove the GAP 1 and PLSA allocation methods from consideration and was focusing only on GAP 2. At MEC's January 16-20, 2006 meeting, MEC formally selected the GAP 2 methodology. It also reached a decision regarding which pilots would be eligible to receive note proceeds. With regard to furloughed pilots, MEC decided that all furloughed pilots who accepted an offer of recall prior to United's bankruptcy exit date would be eligible to share in the note proceeds. Furloughed pilots who had not been offered or accepted an offer of recall would not be eligible to receive a share of the notes' proceeds.

On December 30, 2004, PBGC had announced its intention to terminate the Plan because it considered the Plan to be unable to meet its long term obligations, and shortly thereafter PBGC filed suit against United seeking a declaration that it could terminate the Plan. ALPA, United, and other parties opposed PBGC's proposed termination of the Plan. Judge Joan Humphrey Lefkow referred the matter to the bankruptcy judge overseeing United's bankruptcy. On October 28, 2005, the bankruptcy court entered an order terminating the Plan retroactive to December 30, 2004. After much legal wrangling, the details of which are not relevant for present purposes, ALPA appealed the decision of the bankruptcy court to the district court, and the case returned to Judge Lefkow. On June 13, 2006, Judge Lefkow approved PBGC's termination of the Plan, effective December 30, 2004.

After Judge Lefkow ruled that the Plan had been terminated, United issued the $550 million in promissory notes to ALPA. In July 2006, ALPA sold the notes for $545.5 million. In August 2006, ALPA made its first distribution of approximately $355 million, using the GAP 2 methodology it had adopted in January 2006. Consistent with its January 2006 decision, ALPA excluded from the distribution pilots who were furloughed as of the date of United's exit from bankruptcy.

United's plan of reorganization includes an exculpation clause, which provides that "no Exculpated Party shall have or incur, and each Exculpated Party is hereby released and exculpated from any Exculpated Claim, except for gross negligence or willful misconduct. . . ." An Exculpated Claim is "[a]ny Claim related to any act or omission in connection with, relating to, or arising out of [United's] restructuring." Plan of Reorganization at 7. The term Exculpated Party includes ALPA. See id. at 121.

Discussion

Three motions are before the Court. United has moved to dismiss the Hudson plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) based on the exculpation clause in the plan of reorganization. The Hudson and Mansfield plaintiffs have filed motions for class certification pursuant to Federal Rule of Civil Procedure 23.

1. Motion to Dismiss

United argues that the Hudson plaintiffs' amended complaint must be dismissed because the exculpation clause in United's plan of reorganization protects ALPA from a suit arising "in connection with, relating to, or arising out of" United's bankruptcy unless the complaint alleges gross negligence or willful misconduct. See Plan of Reorganization at 121. United contends that plaintiffs' claims arise out of the bankruptcy and do not allege gross negligence or willful misconduct. It points out that ALPA and United's letter agreement, which required United to provide the notes and ALPA to distribute them in a reasonable manner, was assumed by United and incorporated into the plan of reorganization. The Hudson plaintiffs contend that the exculpation clause is inapplicable to their claims because ALPA's allocation and distribution of the note proceeds does not fall within the scope of the clause.

The Court does not need to decide whether the exculpation clause is broad enough to encompass the Hudson plaintiffs claims to dispose of United's motion to dismiss. A claim for a labor union's breach of the duty of fair representation requires a showing that the union's actions were arbitrary, discriminatory, or in bad faith.Vaca v. Sipes, 386 U.S. 171, 190 (1967); see also United Steelworkers of America, AFL-CIO-CLC v. Rawson, 495 U.S. 362, 372 (1990). The Hudson plaintiffs allege just that. Amend. Compl. at ¶ 5. The Seventh Circuit has held that arbitrary union action "require[s] intentional union misconduct to show a breach of the duty of fair representation." Nat'l Labor Relations Bd. v. Local 139, Int'l Union of Operating Engineers, 796 F.2d 985, 993 (7th Cir. 1986); see also Dahnke v. Teamsters Local 695, 906 F.2d 1192, 1197-98 (7th Cir. 1990). Though the Seventh Circuit is apparently the only appellate court to require proof of intentional misconduct in breach of duty of fair representation claim, see Bennett v. Local Union No. 66, Glass, Molders, Pottery, Plastics and Allied Workers Int'l Union, AFL-CIO et al., 958 F.2d 1429, 1436 n.5 (7th Cir. 1992), it has expressly declined to revisit this standard. Id. at 1436.

The words "intentional" and "willful" are synonyms, for all practical purposes. WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY2617(1993). If plaintiffs are able to sustain their claim, a determination the Court cannot yet make, they will fall within the exception to the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.