Continental Airlines, Matter of
| Decision Date | 19 January 1993 |
| Docket Number | No. 89-2943,89-2943 |
| Citation | 981 F.2d 1450 |
| Parties | 142 L.R.R.M. (BNA) 2398, 124 Lab.Cas. P 10,595, 28 Collier Bankr.Cas.2d 538 In the Matter of CONTINENTAL AIRLINES, et al., Debtors. Joseph E. O'NEILL, et al., and James Stephens, et al., Appellants, v. CONTINENTAL AIRLINES, INC., Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Janet Napolitano, Marty Harper, Randolph J. Haines, Allen R. Clarke, Lewis & Roca, Phoenix, AZ, and William Schweinle, Jr. and Reginald H. Wood, Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., Houston, TX, for O'Neill, et al.
James R. O'Donnell, Jeannette M. McAllister and Leon V. Komkov, Butler & Binion, Houston, TX, for Stephens, et al.
Charles L. Warren and David Callet, Akin, Gump, Hauer & Feld, John J. Gallagher, Paul, Hastings, Janofsky & Walker, DC, for Continental Airlines, Inc.
Appeals from the United States District Court for the Southern District of Texas.
Before POLITZ, Chief Judge, BROWN and JOHNSON, Circuit Judges.
This case arises, like so many others before it, out of the bankruptcy proceedings of Continental Airlines, Inc. (Continental). However, unlike many of those other cases, we reach the merits of this case over two years after the parties argued the case before this court. These two groups of pilots brought their individual furlough pay claims after Continental Airlines filed petitions under Chapter 11 of the United States Bankruptcy Code on September 24, 1983 in the United States Bankruptcy Court for the Southern District of Texas. On June 27, 1986, Bankruptcy Judge T. Glover Roberts signed an order granting Continental's motion for summary judgment, disallowing the pilots' furlough pay claims and estimating the claims at zero. On August 4, 1989, the district court affirmed, and the pilots appealed. In the meantime, Continental filed a second Chapter 11 bankruptcy petition on December 3, 1990 in the United States Bankruptcy Court for the District of Delaware, which stayed all judicial actions against the airline pursuant to 11 U.S.C. § 362(a). We issued an opinion on March 15, 1991 holding that the pilots' appeal was stayed in light of the 1990 bankruptcy proceedings. Matter of Continental Airlines, 928 F.2d 127 (5th Cir.1991). On August 4, 1992, the Delaware bankruptcy court issued an order granting the parties' joint motion for limited relief from the stay, in order that we might render our decision in this case. 1
The pilots appeal 1) the district court's holding that a furlough had not occurred on September 24-27, 1983, 2) the district court's holding that a post-filing rejection of the collective bargaining agreement relieved Continental of furlough pay obligations, 3) the district court's estimation of the furlough pay claims at zero, and 4) the district court's refusal to require recusal of the bankruptcy judge and to vacate the bankruptcy judge's decision. We hold that on the construction of the collective bargaining agreement between the parties, a furlough of the pilots occurred on September 24-27, 1983, and therefore, we reverse the bankruptcy court's order granting summary judgment in favor of Continental. Because no genuine issues of material fact exist and the pilots are entitled to judgment as a matter of law, this is one of those rare cases in which granting summary judgment in favor of Continental was improper, and we grant summary judgment in favor of the pilots. Additionally, we hold that Continental's rejection, with the approval of the bankruptcy court, of the collective bargaining agreement between the parties did not serve to relieve Continental of its obligations under the agreement. Finally, we hold that Judge Roberts' failure to stand recused constituted a violation of 28 U.S.C. § 455(a), and we therefore remand the portion of the bankruptcy court's order estimating the pilots' claims at zero value to the bankruptcy court for calculation of the pilots' claims by a new bankruptcy judge.
On September 24, 1983, the president of Continental Airlines sent a memorandum to all employees announcing that the company would be seeking protection from creditors under the Chapter 11 reorganization provisions of the United States Bankruptcy Code. See 11 U.S.C. §§ 1101-1174. The memorandum stated that Continental would be reducing the size of its operations and would therefore be required to furlough many of the company's employees. 2 The furloughs became effective one and one half hours later, at 5:00 p.m., when Continental filed its Chapter 11 petition. Continental suspended all domestic passenger service and a portion of its international service until September 27, 1983, when the company resumed a limited portion of its domestic operations using substantially fewer pilots than it had employed before filing for bankruptcy. On October 1, 1983, the ALPA commenced a strike against Continental.
A number of Continental pilots filed individual claims for furlough pay pursuant to the collective bargaining agreement between Continental and ALPA, commonly referred to as the "Red Book." The pilots claimed that they were entitled to furlough allowances totalling $32.6 million as a result of the three-day shutdown. The Stephens Group and the O'Neill group together represent 482 of the 1069 pilots who filed claims. The two groups claim that they collectively are entitled to $1.5 million in furlough pay.
Continental moved for summary judgment disallowing the furlough claims and estimating the claims at zero value. The two groups of pilots filed oppositions to which Continental replied. The bankruptcy court granted Continental's motion for summary judgment and estimated the pilots' claims at zero. The district court affirmed the bankruptcy court's order. The pilots appeal.
The memorandum sent to all employees on September 24, 1983 stated that the required employee furloughs would apply to specific personnel, including "1) management, clerical and maintenance employees ... and 2) all personnel at stations and reservations offices to be closed indefinitely." The memorandum went on to state that "[p]ilots, flight attendants, agents, clerical and reservations personnel located or based at the 'open cities' [would] be subject to emergency work rules established by the Company ..."
Continental, relying in part on the language of the September 24 memorandum, argues that the pilots were not put on furlough during the three-day shutdown. Continental contends that other employees were furloughed, but that the pilots were subject to emergency work rules, which was evidenced by the fact that when Continental resumed reduced domestic operations on September 27, Continental officials began calling pilots on the phone to ask them to return to work.
The pilots claim that despite the language in the September 24 memorandum, Continental's three-day suspension of service constituted a furlough for which they are entitled to furlough allowance under the terms of the Red Book. Section 23 of the Red Book covers pilot furloughs. Part 3 contains furlough rules and Part 4 provides for furlough pay according to the pilot's period of time in active service. The Red Book, however, does not define "furlough."
Both the pilots and Continental argue that whether the pilots were placed on furlough on September 24, 1983 is a matter of contract interpretation. The pilots argue that they were placed on furlough as that term was contemplated in drafting the furlough provisions of the Red Book. Continental argues that the furlough provisions of Section 23 are not self-effectuating, pointing to other provisions in the Red Book which Continental argues belie the pilots' claim that the furlough provisions of the Red Book are applicable to the three-day shutdown. Continental contends that Section 4 of the Red Book, containing a minimum flight pay guarantee for pilots, Section 25, detailing flight rescheduling, and Section 3, Part 6, regarding trip cancellation, are the provisions applicable to the three-day shutdown.
The bankruptcy court found that the pilots were not furloughed on September 24 as that term is used in the Red Book. In Re Continental Airlines Corp., 64 B.R. 882, 887 (Bankr.S.D.Tex.1986). The court pointed to the specific clauses in the collective bargaining agreement providing for short-term cancellation of flights. The court also stated that the agreement contemplates a partial reduction in force at specific bases triggering the furlough provisions, not a total shutdown. The court examined the reasons behind the three-day shutdown, and concluded that application of the furlough provisions in this case would lead to an absurd result.
The district court affirmed the bankruptcy court's finding that no furlough had taken place. The court stated that nothing in the September 24 memorandum indicated that Continental intended to furlough the pilots. The court also found that certain sections of the Red Book expressly contemplated temporary cancellation of flights. In response to the pilots' argument that the shutdown was not temporary, the court pointed to Continental's actions in telephoning the pilots and requesting them to come back to work as indicating that Continental attempted to do everything possible to build back its operations. The district court asserted that the pilots' strike prevented Continental from expanding its services after the three-day shutdown. Because the court concluded that the flight cancellations were temporary, the court held that Section 3, Part 6 and Section 25, Part 2 of the Red Book applied. The court stated that these provisions provided a separate contractual means of dealing with temporary cancellation of flights, belying the pilots' contention that the three-day cancellation constituted a furlough. The court concluded that requiring Continental to pay the furlough allowance would result in a windfall for the pilots.
The fact remains that as of 5:00 p.m. on September...
To continue reading
Request your trial
-
Eubanks v. Hale
...v. Martin, 466 F.2d 593, 600 (7th Cir.1972); Garner v. Memphis Police Dept., 8 F.3d 358, 366 (6th Cir.1993); In re Continental Airlines, 981 F.2d 1450, 1458-59 (5th Cir.1993); Uzzell v. Friday, 547 F.2d 801, 805 (4th Cir.1977), vacated on other grounds, 438 U.S. 912, 98 S.Ct. 3139, 57 L.Ed.......
-
Gulfport Energy Corp. v. Fed. Energy Regulatory Comm'n
...as a pre-petition claim and receive the priority provided to general unsecured creditors."); O'Neill v. Cont'l Airlines, Inc. (In re Cont'l Airlines ), 981 F.2d 1450, 1459 (5th Cir. 1993) ("[The rejection statute] speaks only in terms of ‘breach.’ The statute does not invalidate the contrac......
-
In re Mirant Corp.
...§ 365(g) ("[T]he rejection of an executory contract ... constitutes a breach of such contract...."); see also In re Continental Airlines, 981 F.2d 1450, 1459 (5th Cir.1993) ("[Section] 365(g)(1) speaks only in terms of `breach.' The statute does not invalidate the contract, or treat the con......
-
In re Dow Corning Corp., Bankruptcy No. 95-20512.
.... . . would unduly delay the administration of the case." 11 U.S.C. § 502(c)(1). See O'Neill v. Continental Airlines, Inc. (In re Continental Airlines, Inc.), 981 F.2d 1450, 1461 (5th Cir.1993) ("In order for the estimation process of § 502(c) to apply, . . . fixing the claim must entail un......