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Barnes v. Air Line Pilots Association, International

United States District Court, N.D. Illinois, Eastern Division

August 14, 2014

JAMES BARNES, PHILLIP WHITEHEAD, WALTER CLARK, DAVID BISHOP, and ERIC LISH, individually and on behalf of all others similarly situated, Plaintiffs,
v.
AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Defendant.

MEMORANDUM OPINION AND ORDER

GARY FEINERMAN, District Judge.

James Barnes, Phillip Whitehead, Walter Clark, David Bishop, and Eric Lish, on behalf of themselves and two putative sub-classes of United Airlines pilots, the first consisting of management pilots and the second of pilot instructors, allege in this suit that Air Line Pilots Association, International ("ALPA"), unlawfully discriminated against them in allocating $225 million of retroactive pay that United provided to its pilots after ALPA and United entered into a collective bargaining agreement in late 2012. Doc. 29. The amended complaint alleges that ALPA breached its duty of fair representation to both sub-classes under the Railway Labor Act ("RLA"), 45 U.S.C. § 151 et seq., and, in the alternative as to the management pilots only, that ALPA unjustly enriched itself in violation of Illinois law by accepting the management pilots' payment of dues and contract maintenance fees. Ibid. ALPA moved to dismiss the case in its entirety under Federal Rule of Civil Procedure 12(b)(6) or for summary judgment under Rule 56, Doc. 32, and Plaintiffs requested additional discovery under Rule 56(d), Doc. 57 at 30-31. ALPA's motion is denied, and Plaintiffs will be allowed to take additional discovery limited to the potentially dispositive issue set forth below.

Background

Because both sides have presented evidence outside the pleadings to support their respective positions, Docs. 35, 38, 51-52, 60, and because ALPA's motion cannot be resolved solely on the materials that may be considered under Rule 12(b)(6), the court will treat the motion as having been brought under Rule 56. See Fed.R.Civ.P. 12(d). The following facts are stated as favorably to Plaintiffs, the non-movants, as permitted by the record and Local Rule 56.1. See Hanners v. Trent, 674 F.3d 683, 691 (7th Cir. 2012). Certain relevant background facts also will be drawn from the amended complaint.

ALPA is a labor organization that represents the flight deck crew members and pilot instructors employed by United. Doc. 52 at ¶ 2. Prior to 2010, United pilots worked under a concessionary collective bargaining agreement ("2003 Agreement") that had been negotiated by ALPA in 2003, at a time when United was in bankruptcy. Doc. 29 at ¶ 12. The 2003 Agreement's term ended on January 1, 2010, but the RLA required the pilots to continue working as though it were still in force until a new agreement could be negotiated and executed. Ibid. Negotiations for the new agreement began in 2010 and lasted nearly three years. Id. at ¶ 13. During that time, United pilots' salaries were effectively frozen under the pay scale set forth in the 2003 Agreement. Id. at ¶ 14. Also during that time, United merged with Continental Airlines. Id. at ¶ 13.

At the end of 2012, ALPA and United agreed on a new collective bargaining agreement ("2012 Agreement"), which applies to both United and Continental pilots. Ibid. During negotiations, ALPA demanded that the new agreement include retroactive pay ("retro pay") to compensate all pilots for lost earnings caused by the three-year delay in reaching the new agreement. Id. at ¶ 14; Doc. 38-7 at 3. This demand was consistent with ALPA policy as reflected in the ALPA Administrative Manual, which provides that "[i]n order to prevent costly procrastination by airline managements during contract negotiations, ALPA advocates the retention of a retroactivity factor effective from the contract amendable date, " Doc. 60 at ¶ 27, and the Policy Manual for ALPA's United Airlines Master Executive Council, which provides that "[a]ll future Agreements between United Airlines and ALPA shall contain retroactive application of any pay raises or retirement or benefit improvements to the amendable date of the contract, " id. at ¶ 28.

As memorialized in Letter of Agreement 24 ("LOA 24"), United agreed to pay $400 million to settle ALPA's demand for retro pay and to finalize the 2012 Agreement. Id. at ¶ 29; Doc. 38-2 at 12-33. The purpose of the $400 million payment was to restore to the maximum extent possible the wages that the pilots would have earned had there not been a delay in negotiating a new contract from the amendable date of the 2003 Agreement. Doc. 60 at ¶ 29. An intra-union arbitration allocated $225 million to the United pilots and $175 million to the Continental pilots. Id. at ¶ 30; Doc. 38-2 at 15. ALPA allocated the $225 million retro pay among the United pilots through a complex formula, the details of which are irrelevant for present purposes. Doc. 38-3; Doc. 38-7 at 3-6.

Most United pilots function most of the time as line pilots, whose work consists of flying customers from one location to another. Doc. 29 at ¶ 19. A small minority of United's pilots work as pilot instructors or management pilots. Ibid. During the relevant time period, Bishop and Lish worked as pilot instructors, and Barnes, Whitehead, and Clark worked as management pilots. Doc. 52 at ¶ 1. They claim that ALPA allocated the $225 million in retro pay in a manner that unfairly discriminated against the management pilots and pilot instructors; again, the details of that argument are unimportant for present purposes. Doc. 29 at ¶¶ 30-39, 47-52.

LOA 24 provides that any disputes concerning the allocation methodology are subject to the dispute resolution process set forth in Section 40, Part 3.J of the ALPA Administrative Manual. Doc. 38-2 at 13. Under that provision, an aggrieved party may challenge an allocation decision before the Executive Council, Doc. 38-5 at 4-6, and "[t]he Executive Council decision shall be final and binding and the decision of [ALPA] regarding the allocation, unless an appeal to an expedited arbitration process is filed within seven (7) working days, " id. at 6. The arbitration process "may be invoked" by, among others, "a pilot or pilots who invoked and pursued the review process to a conclusion before the Executive Council." Ibid. Section 40, Part 3.J refers to the dispute resolution process as "[a]n expedited dispute resolution procedure, including arbitration as the final step... with the means to resolve a dispute over allocation decisions, without the need for expensive, lengthy, and risky litigation." Id. at 2.

Numerous pilot instructors and management pilots-including Barnes and Whitehead- invoked the dispute resolution process to challenge the retro pay allocation before the Executive Council. Doc. 52 at ¶ 10; Doc. 60 at ¶¶ 36-39. The Executive Council upheld the allocation. Doc. 38-6. Some pilot instructors and management pilots then appealed the Executive Council's decision to arbitration; in so doing, they proposed to ALPA that: (1) the parties jointly select the arbitrator; (2) the arbitrator be instructed to make an independent decision without giving deference to either side; (3) the parties be allowed to take some discovery; and (4) the arbitration proceed on behalf of a class of affected individuals. Doc. 60 at ¶ 37. ALPA refused to accept these proposals. Ibid. The arbitrator upheld the allocation in an Opinion and Award dated May 21, 2013. Doc. 38-7.

Discussion

The RLA provides that "[e]mployees... have the right to organize and bargain collectively through representatives of their own choosing." 45 U.S.C. § 152, Fourth. "The RLA was enacted to encourage collective bargaining by... parties in order to prevent, if possible, wasteful strikes and interruptions of interstate commerce." Air Line Pilots Ass'n, Int'l v. United Air Lines, Inc., 802 F.2d 886, 895 (7th Cir. 1986) (quoting Detroit & Toledo Shore Line R.R. v. United Transp. Union, 396 U.S. 142, 148 (1969)) (internal quotation marks omitted). Congress amended the RLA in 1936 to cover the airline industry. See id. at 894 n.5; 45 U.S.C. § 181. The Supreme Court has held that the RLA requires unions to fairly represent union members. See Steele v. Louisville Nashville R.R. Co., 323 U.S. 192, 202-03 (1944) (holding that the RLA "impose[s] on the bargaining representative of a craft or class of employees the duty to exercise fairly the power conferred upon it in behalf of all those for whom it acts"). The RLA thus "affords an employee an implied right of action against his union for breach of the duty of fair representation." Steffens v. Bhd. of Ry., Airline & Steamship Clerks, Freight Handlers, Express & Station Emps., 797 F.2d 442, 445 (7th Cir. 1986).

As noted above, Plaintiffs claim that ALPA violated its duty of fair representation by unfairly allocating the $225 million in retro pay among the United pilots. ALPA seeks judgment on the ground that it satisfied its duty of fair representation by providing Plaintiffs (and the putative sub-classes) with a dispute resolution mechanism for resolving their challenge to the allocation. Doc. 34 at 16-17. To support its submission, ALPA notes that the Executive Committee and then the arbitrator upheld the allocation, and it cites § 153 First (q) of the RLA, 45 U.S.C. § 153 First (q), for the proposition that "an arbitration award [may] be disturbed [only] if there is a violation of the RLA, arbitral fraud, corruption[, ] or if the award was beyond the jurisdiction of the arbitrator." Doc. 34 at 17. That provision indeed allows a court to "disturb an arbitration award only if the arbitrator did not comply with the Railway Labor Act, exceeded the arbitral jurisdiction, or committed fraud, " which the Seventh Circuit has called "one of the most deferential standards of judicial review in all of federal law." Bhd. of Locomotive Eng'rs and Trainmen, Gen. Comm. of Adjustment, Cent. Conference v. Union Pac. R.R. Co., 719 F.3d 801, 803 (7th Cir. 2013).

Plaintiffs correctly respond that § 153 First, by its terms, applies only to disputes between employees (either individually or as part of a union) and a carrier, and not to disputes between a union and its own members. See Czosek v. O'Mara, 397 U.S. 25, 27-28 (1970) ("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 [established by § 153 First] or subject to the ordinary rule that administrative remedies should be exhausted before resort to the courts."); Conley v. Gibson, 355 U.S. 41, 44 (1957) ("But § 3 First (i) by its own terms applies only to disputes between an employee or group of employees and a carrier or carriers.' This case involves no dispute between employee and employer but to the contrary is a suit by employees against the bargaining agent to enforce their statutory right not to be unfairly discriminated against by it in bargaining.") (internal citation omitted). The point is immaterial, however, because ...


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