346 B.R. 333 (Bkrtcy.S.D.N.Y. 2006), 05-17930, In re Northwest Airlines Corp.

Docket NºBankruptcy No. 05-17930(ALG).
Citation346 B.R. 333
Party NameIn re NORTHWEST AIRLINES CORPORATION, et al., Debtors. Northwest Airlines Corporation, et al., Plaintiffs, v. Association Of Flight Attendants-CWA, et al., Defendants.
Case DateAugust 17, 2006
CourtUnited States Bankruptcy Courts, Second Circuit

Page 333

346 B.R. 333 (Bkrtcy.S.D.N.Y. 2006)

In re NORTHWEST AIRLINES CORPORATION, et al., Debtors.

Northwest Airlines Corporation, et al., Plaintiffs,

v.

Association Of Flight Attendants-CWA, et al., Defendants.

Bankruptcy No. 05-17930(ALG).

Adversary No. 06-1679 (ALG).

United States Bankruptcy Court, S.D. New York.

Aug. 17, 2006

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[Copyrighted Material Omitted]

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Arnold & Porter, LLP, By Brian P. Leitch, Esq. Tim Atkeson, Esq., Denver, Colorado, By Kent A. Yalowitz, Esq., New York, New York, Cadwalader, Wickersham & Taft LLP, By Bruce R. Zirinsky, Esq., New York, New York, for debtors.

Guerrieri, Edmond, Clayman & Bartos, P.C., By Jeffrey A. Bartos, Esq., Washington, D.C., By Edward James Gilmartin, Esq., Washington, D.C., for the Association of Flight Attendants-CWA, AFL-CIO.

Cohen, Weiss & Simon, LLP By Richard M. Seltzer, Esq., New York, New York, for the Air Line Pilots Association, International.

Otterbourg, Steindler, Houston & Rosen, P.C., By Brett H. Miller, Esq., Lorenzo Marinuzzi, Esq., New York, New York, for the Official Committee of Unsecured Creditors.

MEMORANDUM OF OPINION AND ORDER

ALLAN L. GROPPER, Bankruptcy Judge.

Introduction

Before the Court are two motions relating to the Court's grant of authority to Northwest Airlines Corporation and its affiliated debtors (the "Debtors") to reject a collective bargaining agreement with their flight attendants, now represented by the Association of Flight Attendants-CWA ("AFA"). Pursuant to § 1113 of the Bankruptcy Code, the Debtors have rejected the collective bargaining agreement and implemented terms and conditions of employment consistent with the proposal made to the flight attendants on March 1, 2006, the last proposal that was on the table prior to the Court's decision authorizing rejection. After the decision was rendered but before the rejection became final, the parties made a further attempt to reach agreement, and although the Debtors were able to reach agreement with the AFA leadership on July 17, 2006, the agreement failed to be ratified by the union's membership. Following the failed ratification vote, the Debtors instituted the terms and conditions that the Court had authorized in its rejection decision, and AFA followed with notice of its intent to engage in strike activity. AFA also moved for an order requiring the Debtors to substitute the terms and conditions of the agreement it failed to ratify in July for those contained in the March 1 Agreement and the Court's § 1113 order, and the Debtors moved for a preliminary injunction enjoining AFA from engaging in strike activity or any other form of economic self-help.

As an airline, Northwest Airlines Corporation is subject to the Railway Labor Act, 45 U.S.C. § 151 et seq. ("RLA"). With respect to the Debtors' motion for injunctive relief, this is apparently a case of first impression regarding a union's right to take job action against an RLA carrier in Chapter 11 following the carrier's rejection of the union's collective bargaining agreement under § 1113 of the Bankruptcy Code.

Background

The Debtors filed Chapter 11 petitions in this Court on September 14, 2005. By motion dated October 12, 2005, the Debtors sought an order pursuant to § 1113(c) of the Bankruptcy Code permitting rejection of their collective bargaining agreements with six unions, including

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the authorized representative of the flight attendants at that time, the Professional Flight Attendants Association ("PFAA"). The Debtors settled with three of the smaller unions without litigation. After evidentiary hearings, comprising a total of ten days of testimony, and protracted negotiations, the Debtors also reached agreements with the Air Lines Pilots Association, International ("ALPA") and the International Association of Machinists and Aerospace Workers ("IAM"), and agreements were eventually ratified by the unions' memberships. At each stage of the proceedings the Court, with the parties' concurrence, delayed closing the record on the § 1113 hearing and then delayed issuing a decision in order to afford the parties additional time to reach a consensual resolution.

Notwithstanding the success of the other negotiations, the Debtors have been unable to reach agreement with their 9,000 flight attendants. On March 1, 2006, the Debtors and the PFAA leadership reached an agreement (the "March 1 Agreement") that was then submitted to the PFAA membership for an extremely lengthy process of ratification, but the flight attendants voted down the accord by a margin of 4:1. As a consequence, the pending § 1113 Motion was put before the Court for decision. Prior to the Court's ruling on the § 1113 motion, the parties entered into a stipulation dated June 13, 2006, providing that the Debtors would not impose new terms and conditions of employment before June 30, 2006, pursuant to either their rights under § 1113(d) 1 or a decision authorizing rejection under § 1113(c). The stipulation also provided that the PFAA would not engage in any work stoppage or other self-help activity prior to the imposition of new terms and conditions without giving at least fifteen days' notice to the Debtors.

On June 29, 2006, the Court issued an opinion, finding that under § 1113, rejection of the PFAA collective bargaining agreement was "necessary" to the Debtors' ability to reorganize, that the union did not have "good cause" to refuse to accept the proposal incorporated in the March 1 Agreement, and that the balance of the equities clearly favored rejection. In re Northwest Airlines Corp., 346 B.R. 307, 313-16, 2006 WL 1776455, *1-2, (Bankr.S.D.N.Y.2006). At the hearings on the § 1113 motion, the Debtors had argued that an order allowing them to reject the PFAA collective bargaining agreement should authorize them to impose the terms and conditions of a proposal made to PFAA on February 22, 2006, the last offer on the table before the March 1 Agreement with the PFAA leadership had been reached. However, the Court held that in assessing the good faith and good cause requirements under § 1113, under the circumstances then present, it would require the Debtors to impose the terms of the March 1 "tentative agreement." Accordingly, the Court held that, following a fourteen-day period for further negotiations, the Debtors could institute terms and conditions of employment for the flight attendants not materially different from those described in the March 1 Agreement. Thereafter, on July 5, 2006, the Court entered an order authorizing the Debtors to implement such terms and conditions on July 17, 2006.

Concurrently, the flight attendants held a contested representation election with

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respect to their union representation, and following a vote, AFA succeeded PFAA as the flight attendants' certified bargaining representative on July 7, 2006. AFA immediately commenced bargaining, picking up where the PFAA had left off, and after ten days of non-stop negotiations, AFA reached a new tentative agreement with the Debtors on July 17, 2006 (the "July 17 Agreement"). In light of this new agreement, the Debtors refrained from imposing the new terms and conditions of employment that had been authorized by the Court's July 5 order. The July 17 Agreement was then sent out for an expedited vote by the AFA membership and apparently received the support of the AFA leadership. However, on July 31, 2006, the July 17 Agreement was also voted down, albeit by a much closer vote of 55% to 45%. 2

Acting pursuant to the Court's § 1113 order, on July 31, 2006, the Debtors then unilaterally put into effect new terms and conditions of employment, substantially in accord with those of the March 1 Agreement. In response, on the same day, AFA gave the Debtors fifteen days' notice of its intention to engage in work stoppages and other self-help activity. It also filed a motion seeking an order that if the Debtors imposed any new terms and conditions of employment under § 1113, they should be obligated to substitute the terms of the July 17 failed Agreement for those of the March 1 failed Agreement. On the next day the Debtors filed the instant motion to enjoin the threatened strike activity, as well as any other form of self-help activity by AFA. ALPA (together with AFA, the "Unions") has intervened on the side of AFA. The Debtors have also opposed AFA's motion to require that the July 17 terms be substituted for the March 1 terms.

The Court held a one-day hearing on the issues raised by both parties. The testimony made it clear that the self-help strategy that AFA contemplates would have a seriously adverse effect on the Debtors' prospects for reorganization and on the traveling public generally. AFA has planned a course of action under its trademarked and aptly named acronym, CHAOS ("Create Havoc Around Our System"). As it has been applied or threatened against other carriers, CHAOS results in sporadic and relatively brief work stoppages that are designed to create havoc with an airline's scheduling of flights and to cause the public to lose confidence in the ability of the airline to provide reliable service. At the same time, the program is designed to prevent the airline from attempting to replace striking workers or take other effective responsive action. The evidence of record is that the threat of CHAOS would likely cause the Debtors serious injury, perhaps leading to their liquidation, and that it would be highly detrimental to the interest of the public in a sound and reliable transportation system. 3

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As noted above, AFA gave the Debtors the required fifteen days' notice of its intent to take job action on July 31, 2006, allowing them to take such action on August 15, 2006. On August 11, 2006, in light of the terrorist threat...

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3 practice notes
  • 359 B.R. 491 (Bkrtcy.S.D.N.Y. 2007), 05 B 17923, In re Delta Air Lines, Inc.
    • United States
    • Federal Cases United States Bankruptcy Courts Second Circuit
    • February 7, 2007
    ...of the pilot agreement. Only three reported decisions have decided the issue thus framed. In In re Northwest Airlines Corporation, 346 B.R. 333 (Bankr.S.D.N.Y. August 17, 2006), pending in this Court, the Bankruptcy Court concluded based on the NLGA that the Court does not have jurisdiction......
  • 483 F.3d 160 (2nd Cir. 2007), 06-4371, In re Northwest Airlines Corp.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • March 29, 2007
    ...in turn frees the employees to take job action." Nw. Airlines Corp. v. Ass'n of Flight Attendants-CWA (In re Nw. Airlines Corp.), 346 B.R. at 344. On appeal, the district court reversed and granted the preliminary injunction. Judge Marrero held that Northwest had not unilaterally chang......
  • 350 B.R. 112 (Bkrtcy.D.Minn. 2006), 05-39258, In re Mesaba Aviation, Inc.
    • United States
    • Federal Cases United States Bankruptcy Courts Eighth Circuit
    • October 23, 2006
    ...338 (S.D.N.Y.2006), on appeal from the decision of the United States Bankruptcy Court for that district, In re Northwest Airlines Corp., 346 B.R. 333 The outcome on appeal in Northwest Airlines was in favor of the debtor-employer; the union in question--the AFA--was enjoined by the District......
3 cases
  • 359 B.R. 491 (Bkrtcy.S.D.N.Y. 2007), 05 B 17923, In re Delta Air Lines, Inc.
    • United States
    • Federal Cases United States Bankruptcy Courts Second Circuit
    • February 7, 2007
    ...of the pilot agreement. Only three reported decisions have decided the issue thus framed. In In re Northwest Airlines Corporation, 346 B.R. 333 (Bankr.S.D.N.Y. August 17, 2006), pending in this Court, the Bankruptcy Court concluded based on the NLGA that the Court does not have jurisdiction......
  • 483 F.3d 160 (2nd Cir. 2007), 06-4371, In re Northwest Airlines Corp.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • March 29, 2007
    ...in turn frees the employees to take job action." Nw. Airlines Corp. v. Ass'n of Flight Attendants-CWA (In re Nw. Airlines Corp.), 346 B.R. at 344. On appeal, the district court reversed and granted the preliminary injunction. Judge Marrero held that Northwest had not unilaterally chang......
  • 350 B.R. 112 (Bkrtcy.D.Minn. 2006), 05-39258, In re Mesaba Aviation, Inc.
    • United States
    • Federal Cases United States Bankruptcy Courts Eighth Circuit
    • October 23, 2006
    ...338 (S.D.N.Y.2006), on appeal from the decision of the United States Bankruptcy Court for that district, In re Northwest Airlines Corp., 346 B.R. 333 The outcome on appeal in Northwest Airlines was in favor of the debtor-employer; the union in question--the AFA--was enjoined by the District......