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Hudson v. Air Line Pilots Association International

September 15, 2009

BRUCE HUDSON, RAYMOND CHOP, AND ERIC PASSANNANTE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
AIR LINE PILOTS ASSOCIATION INTERNATIONAL, DEFENDANT,
UNITED AIRLINES, INC., INTERVENOR.



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

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge

The plaintiffs in this case are pilots currently or formerly employed by United Airlines, Inc. (United) who contend, on behalf of themselves and a certified class, that their union, the Air Line Pilots Association International (ALPA), breached its duty of fair representation under the Railway Labor Act, 45 U.S.C. § 152 (RLA). Plaintiffs contend that ALPA breached its duty of fair representation by acting in an arbitrary manner, by discriminating against certain furloughed pilots based on a bias against them, and by acting in bad faith. The Court granted United leave to intervene in the case. ALPA, United, and plaintiffs have moved for summary judgment. For the following reasons, the Court denies United's and plaintiffs' motions and grants ALPA's motion.

Facts

On cross-motions for summary judgment, the Court construes facts and draws inferences "in favor of the party against whom the motion under consideration is made." In re United Air Lines, Inc., 453 F.3d 463, 469 (7th Cir. 2006).

1. ALPA and Furloughed United Pilots

ALPA is a labor union subject to the provisions of the RLA. It functions as the bargaining representative for pilots employed by United. The decisions challenged in this lawsuit were made by ALPA's United Airlines Master Executive Council (MEC). The MEC is comprised of fifteen United pilots who vote on issues collectively affecting United pilots, elected from eight local councils. The MEC appointed several pilots to serve on its Retirement and Insurance Committee (RIC). The RIC provided the MEC with substantive recommendations regarding employee compensation and benefits and also acted as a conduit for information between the MEC and outside consultants.

Following the September 11, 2001 terrorist attacks, United encountered financial difficulties. During the course of its financial troubles, United furloughed a number of its pilots. From 2001 to 2004, United furloughed nearly 2,200 pilots. In November 2004, United began periodically recalling back to work pilots who had been furloughed. Pursuant to their collective bargaining agreement, furloughed pilots had the option to bypass a recall offer one time, thereby deferring their return to United. A furloughed pilot could defer recall until there were no remaining furloughed pilots junior to him, at which time the pilot could accept recall or have his employment terminated. Many furloughed pilots deferred recall to accommodate personal concerns or to obtain more favorable work conditions (e.g., flying more desirable routes) by accepting recall at a later date. Upon return, furloughed pilots were required to attend a recall class and engage in flight training.

2. Distribution of the Proceeds of United Notes

In 2002, United filed for bankruptcy protection. As part as its efforts to reorganize in bankruptcy, United sought to terminate its pilots' defined benefit pension plan, known as the A Plan. In December 2004, the MEC approved a new collective bargaining agreement that provided that ALPA would not oppose United's efforts to terminate the A Plan. The new agreement created a defined contribution retirement plan for the pilots, known as the C Plan. United also agreed to issue $550 million of convertible notes to the pilots, though the agreement did not specify how the proceeds of those notes should be apportioned among the pilots. The agreement provided that "the Notes or the value of the Notes [were] to be distributed . . . as soon as reasonably practicable given tax, accounting, securities and market considerations." Pls.' Resp. to ALPA's Local Rule 56.1 Statement ¶ 19. The agreement also did not specify whether furloughed pilots would be eligible to share in the proceeds of the notes. A majority of United's pilots approved the new collective bargaining agreement. Plaintiffs do not challenge the adoption of the new agreement.

From January 2005 to January 2006, the MEC, with the aid of the RIC and outside actuarial consultants, met several times to analyze, discuss, and debate how the proceeds from the sale of the United notes should be allocated among United's pilots. This process included considering whether furloughed pilots would share in that distribution. The MEC's members also consulted with ALPA's attorneys during the allocation process, specifically inquiring about their legal duties, including the duty of fair representation.*fn1 In its meetings, the MEC received and discussed information pertaining to pilots' eligibility to share in the proceeds of the convertible notes, including, among other things, the status of furloughed pilots. Those meetings took place in January, July, September, October, and November 2005, before the MEC made a final decision in January 2006.

At the January 2006 MEC meeting, the RIC recommended that furloughed pilots with a recall date of February 1, 2006 or earlier should be eligible to receive note proceeds. During that meeting, the MEC discussed the administrative tasks necessary to distribute the note proceeds. Actuarial consultants informed the MEC that they needed to know the identity of participants in the note proceeds at least two months prior to distribution. United also required this information one month before distribution.

During the January 2006 meeting, the MEC also discussed uncertainty over whether furloughed pilots would choose to return to United. The MEC was aware that significant numbers of pilots at that point had bypassed their recall offers, creating doubt as to which pilots eventually would return to United and when they would do so. This was important because pilot service dates were required under the allocation methodology the MEC had selected to distribute the note proceeds. The MEC also discussed setting aside some of the proceeds of the notes to hold until it could be determined which furloughed pilots would return to work at United.

ALPA has presented evidence that its legal counsel advised the MEC that setting aside funds for furloughed pilots could cause two types of problems: (1) risk that the funds could be lost if United went back into bankruptcy; and (2) tax complications with the IRS. Though plaintiffs deny this contention, the evidence they cite does not refute it. See Pls.' Resp. to ALPA's Local Rule 56.1 Statement ¶ 37. For example, the deposition testimony plaintiffs cite details advice regarding whether furloughed pilots had to be included in or excluded from the distribution of the note proceeds. It does not, however, support plaintiffs' denial regarding bankruptcy and tax issues. Similarly, the deposition testimony of Jeffrey Barath, cited by plaintiffs for the proposition that the MEC's only concern was that United could fall back into bankruptcy and not tax issues, indicates that the MEC was concerned about and received advice regarding tax issues. ALPA's Local Rule 56.1 Statement, Ex. 19 at 413:15-415:22.

At the January 20, 2006 MEC meeting, a subcommittee of the MEC proposed the following resolution regarding the eligibility of furloughed pilots to participate in the ...


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