Demetris v. Transp. Workers Union of Am.
| Decision Date | 22 May 2017 |
| Docket Number | No. 15-15529,No. 15-15229,15-15229 |
| Parties | Daniel DEMETRIS; William Burke; Daniel Burstein; Patrick Collins; Richard Gorgas; Paul Herfel; Robert Marini; Abdul Morani; Paul Morrone; Robert Palacek, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO, Defendant-Appellee. Mark Letbetter; Mike McDonald; Rick Arnegard; William Bell; William Black; Lonnie Bradbury; John Breeden ; Roger Brown; Scott Brown; John Bynum; Mike Cody; John Crawford; Billie Cummins; George Danker; Don Draper; Michael Elmore ; Wade Faust; Jerry Frazier ; Kevin Gorremans; Mary Gorremans; James Hayden; Brenda Higley; Randy Holland; Jim Bob Jackson; Alan Keith; Earl Kuppinger; Soren Lohmar; Deborah McDaniel ; Johnny McDaniel; Mike McNamara ; Steve Nunn; Mike Reyes; George Rodriguez; Mike Sharp; Jerry Shupe ; Curtis Simer; Robert Sommers ; Ronald Swan ; Terrance Thomas; Bill Thorson ; Jim Troskey; James Wall; Larry Weber; Chokushin Urasaki; Steve Abshier; Ralph Bacon; Ronnie Bertrang; Traice Bryant; Dan Burke; Kevin Calman; Donald Caudle; Jerry Collard; Doug Creekmore; Hugh Cooper ; Barbara Dejear; Bryan Deshazo; Lidio A. Dobrich; David Elder ; John Eller ; Mike Eller; Ned Elzo; Ron Engles ; Donald Farris; Robert Flynn; Randy Forrester; Jesse Foster; Steve Fregara; Paul Goulet ; Marion Greenwalt; Phil Hallman; McKayla Harper; Scott Hermanson; Larry Holmes; Roger Kemp ; Daniel Kitchens ; Larry Lawson ; Jack Lofgren ; Patrice Manns; Edward W. Marraccini; Farren Mayfield; Gail Mayfield ; Greg McBride ; Frank Mefford; Ken Miller; Danny Moore; Gerald Murray; James Pottebaum; John Reed; Abraham Reichman; Sharon Ritter; Ben Roundtree; Gary Runyon ; Mary Runyon; Roger Schultz; Tim Sisney; Joseph W. Smith; Ronald Smith; Steve Ullrich; Susan Virdell; Mitch Wallace; Terry Walls; Kenneth Warren; Eric Whaley; Ray White; Glenda Wilkerson ; Mike Williams; Don Woodrich; Johnny Yeary; Sam York ; Steven Jones, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, Roy Haile, Petitioner-Appellant, v. Local 514, Transport Workers Union of America; Transport Workers Union of America, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Michael A. Caddell (argued), Cynthia B. Chapman, and Amy E. Tabor, Caddell & Chapman, Houston, Texas, for Plaintiffs-Appellants.
Connie K. Chan (argued) and Stephen P. Berzon, Altshuler Berzon LLP, San Francisco, California; Richard Edelman, Mooney Green Saindon Murphy and Welch PC, Washington, D.C.; for Defendant-Appellee Transport Workers Union of America, AFL-CIO.
Teague P. Patterson, Beeson Tayer & Bodine APC, Oakland, California; Caroline B. Lapish, Norman Wohlgemuth Chandler Jeter Barnett & Ray, Tulsa, Oklahoma; for Defendant-Appellee Local 514, Transport Workers Union of America.
Before: Diarmuid F. O'Scannlain, Ronald M. Gould, and Milan D. Smith, Jr., Circuit Judges.
We must decide whether a labor union's decision to distribute the proceeds of a bankruptcy settlement to all of its members unevenly violates its duty of fair representation.
American Airlines, Inc., and American Eagle Airlines, Inc. (collectively "American") filed for Chapter 11 bankruptcy in November of 2011. As part of its reorganization process, American sought to reject and to renegotiate its collective bargaining agreements. The Transport Workers Union of America, AFL-CIO ("TWU") represented mechanics, fleet service workers, and other laborers at American. American presented TWU with a new, proposed labor agreement on February 1, 2012.
After a series of negotiations, TWU agreed to new collective bargaining agreements that drastically cut pension and medical benefits for its members. Specifically, TWU: (1) made scope-of-the-work concessions to American regarding outsourcing and work-rules; (2) gave up non-accrued pension benefits; (3) gave up certain life insurance benefits and access to jointly-funded medical trust accounts; (4) agreed to release various pre-petition claims and grievances against American in exchange for a 3.1% stake in the equity that eventually would be granted to unsecured creditors as part of American's bankruptcy (such equity would also represent compensation for the scope and pension concessions won by American); and (5) agreed to release two grievances—referred to by the parties as the 29(d) grievances—as part of the consideration for the equity. In addition to surrendering the share in the equity, American agreed to raises in base-pay for TWU members as well as to a 401(k) program incorporating employer contributions.
TWU and American also entered into a "Me Too" agreement wherein American pledged to seek similar concessions from other labor groups. American also pledged to "discuss and agree upon a proportionate reduction in projected labor cost savings" with TWU if it failed to achieve similar concessions from other labor groups. This agreement eventually resulted in American awarding TWU an additional 1.7% of the equity given to unsecured creditors, bringing TWU's total stake to 4.8%.
In order to prevent mandatory layoffs for TWU members, TWU and American also negotiated an "Early Separation" program whereby more senior TWU members could choose voluntarily to leave American in exchange for lump-sum cash payments. Depending on seniority and contractual protections, TWU members who chose to participate in Early Separation could leave with between $5,000 and $22,500 in addition to regular severance pay, unused vacation pay, and an additional two-weeks' compensation.
The bankruptcy court approved the new collective bargaining agreements negotiated by American and TWU, which went into effect in September 2012. Members could opt for Early Separation in September and October of 2012 but not thereafter.
TWU formed a committee and retained a financial and economic advisor to determine the best method of distributing the equity in April of 2013, two months after American agreed to merge with US Airways Group, Inc., and the value of the equity became more discernable. The committee circulated its proposed distribution plan to TWU members in June and July of 2013.
a
The draft plan awarded a share of equity to members employed at American during a period beginning on November 29, 2011, and ending on July 26, 2013. Other than equity set aside to settle the 29(d) grievances, the plan excluded all members who took advantage of the Early Separation program from receiving any substantial portion of the equity. After receiving feedback from members, the committee voted to adopt the proposed plan on July 16, 2013. TWU's governing President's Council then approved the plan, and it became final and binding after TWU's president refused to exercise veto power. Equity distributions began in December 2013.
Before us are two consolidated, putative class-actions in which TWU members who took advantage of the Early Separation program allege that TWU breached its duty of fair representation by excluding them from the bulk of the equity distribution. All of the named plaintiffs in these consolidated appeals allege that they were employed by American and represented by TWU during American's bankruptcy, and all of the named plaintiffs took advantage of Early Separation. Collectively, these plaintiff-appellants are referred to as "Retirees." Because all of the Retirees opted for Early Separation, none received a share of the equity other than the portion set aside to compensate members for the settling of the 29(d) grievances.
In appeal No. 15-15229, Daniel Demetris and other Retirees had filed a duty of fair representation claim against TWU in the Northern District of California in December of 2013. A related case was filed the following month in the Northern District of Texas, but such action was dismissed and the lead plaintiff joined to the first action by the consent of the parties. In appeal No. 15-15529, Mark Letbetter and other Retirees had filed a similar action in Oklahoma state court against Local 514, Transport Workers Union of America and Transport Workers Union of America, AFL-CIO (Local 514), but the case was removed to federal court before being transferred to the Northern District of California in September of 2014. Both cases were assigned to the same district court judge and are now consolidated before us.
On February 4, 2015, the district court dismissed the Demetris duty of fair representation claims, finding such allegations implausible. The district court then dismissed the similar Letbetter claims in a single-page order on February 20, 2015, noting that Letbetter and other Retirees agreed that the rationale employed by the court in the Demetris case applied with equal force to their own duty of fair representation claims. This timely appeal followed.1
On appeal, Retirees argue that the district court erred in dismissing their duty of fair representation claims because TWU's equity distribution scheme was (1) arbitrary, (2) discriminatory, and (3) made in bad faith.
A
A union's duty of fair representation grows from its statutory right to exclusive representation. Because a union has exclusive statutory authority to represent its members, it has a corresponding legal obligation "to serve the interests of all members without hostility or discrimination toward any, to exercise its discretion with complete good faith and honesty, and to avoid arbitrary conduct." Vaca v. Sipes , 386 U.S. 171, 177, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967). This duty adheres to unions governed by the Railway Labor Act no less than to unions governed by the National Labor Relations Act. Id . ; see also Steele v. Louisville & N.R. Co ., 323 U.S. 192, 202–03, 65 S.Ct. 226, 89 L.Ed. 173 (1944).
A union breaches its duty of fair representation "when its conduct toward a member of the bargaining unit is arbitrary, discriminatory, or in...
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