Freitas v. Republic Airways Holdings, Inc., Case No. 11-C-358

• Decision Date: 10 November 2011
• Docket Number: Case No. 11-C-358
• Parties: ANTHONY J. FREITAS, KENNETH A. KRUEGER, DONALD TILL, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, Plaintiffs, v. REPUBLIC AIRWAYS HOLDINGS, Inc., and MIDWEST AIRLINES, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

ANTHONY J. FREITAS, KENNETH A. KRUEGER,DONALD TILL, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, Plaintiffs,

v.REPUBLIC AIRWAYS HOLDINGS, Inc., and MIDWEST AIRLINES, Inc., Defendants.

Case No. 11-C-358

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

Dated: November 10, 2011

DECISION AND ORDER

The plaintiffs, former Midwest airline pilots and their certified representatives under the Railway Labor Act ("RLA"), bring this action to compel Republic Airways Holdings, Inc. ("RAH") and Midwest Airlines, Inc. ("Midwest") to participate in grievance resolution proceedings before the Midwest-Air Line Pilots Association ("ALPA") System Adjustment Board. Plaintiffs move for summary judgment. For the reasons that follow, this motion is granted with respect to Midwest, but denied with respect to RAH.

I. BACKGROUND

RAH is an airline holding company incorporated in Delaware. In July 2009, RAH acquired Midwest, and Midwest became a wholly owned subsidiary of RAH.¹ RAH alsoowns Chautauqua Airlines, Inc., Shuttle America Corporation ("Shuttle"), Republic Airline Inc. ("RA"), and Frontier Airlines, Inc. ("Frontier"). Anthony Frietas, Kenneth Krueger and Donald Till were actively employed as Midwest pilots until Midwest stopped flying routes in November of 2009.

For a relatively brief period of time after Midwest was acquired by RAH, Midwest continued to operate as a separate air carrier, providing air transportation services under its own DOT and FAA operating certificates with its Boeing 717 aircraft fleet. The B-717s were operated by the Midwest pilots pursuant to the Midwest-ALPA CBA. However, on November 3, 2009, Midwest returned the last of its B-717 aircraft and laid-off its remaining pilots. Midwest provided no transportation services and employed no active pilots since this date. By November 13, 2009, the last of the B-717s were returned to Boeing, and Midwest no longer had any aircraft on its DOT and FAA operating certificates. After Midwest ceased operations, RA d/b/a Midwest Airlines continued to operate flights under the Midwest brand and "YX" code using RA E-170 and E-190 aircraft and RA crews. The Midwest brand was discontinued effective October 1, 2010.

Some of the former Midwest pilots were offered employment at Chautauqua, RA, Shuttle and Frontier. The pilots that accepted offers of employment are considered employees of the applicable carrier. Approximately 37 former Midwest pilots are employed at one of the RAH subsidiary carriers. Except for several pilots who retired or resigned since Midwest ceased operations, the rest of the former Midwest pilots remain on furlough status and are not actively employed by any RAH-affiliated carrier. The total number of Midwestpilots on furlough is 344. In the Matter of Int'l Bhd. of Teamsters, Airline Div., 38 NMB 138, 147 (2011); D. 1-1.

At the time of the acquisition, Midwest pilots were represented by ALPA and covered by a collective bargaining agreement between Midwest and ALPA. On April 7, 2011, the National Mediation Board found that "Chautauqua, Shuttle, RA, Frontier, and Lynx are operating as a single transportation system (Republic Airlines et al./Frontier) for the craft or class of Pilots for representation purposes under the RLA" and that the "former Midwest Pilots are included in the single transportation system." 38 NMB 138, 157. On June 28, 2011, the NMB certified the International Brotherhood of Teamsters ("IBT") as "duly designated and authorized to represent for the purposes of the RLA, as amended, the craft of class of Pilots, employees of Republic Airlines et al./Frontier, its successors and assigns." In the Matter of the Representation of Employees of Republic Airlines, et al./Frontier Pilots, 38 NMB 245, 246 (2011); D. 20-1. Upon being certified, the IBT intervened and replaced ALPA as co-plaintiffs in this lawsuit.

The grievances at issue involve the following provisions of the collective bargaining agreement between ALPA and Midwest. Section 1.B.1 (the "scope" clause) provides, with certain exceptions, that "all commercial flight operations (whether revenue, non-revenue, scheduled or non-scheduled) conducted by the Company will be flown by pilots whose names appear on the Midwest Airlines, Inc., Pilot Seniority List." Section 1.D.1 through 1.D.3 (the "successorship" clause(s)) provides as follows:

1. This Agreement shall be binding on any successor, including but not limited to any merged company or companies, purchaser,assign, assignee, transferee, receiver, administrator, executor, and/or trustee of the Company, if any.

2. Neither the Company nor an affiliate of the Company . . . will conclude any agreement for a Successorship Transaction unless the Successor agrees in writing to assume and be bound by the Agreement, . . . and to employ the pilots on the Midwest Airlines, Inc., Pilot System Seniority List in accordance with the provisions of the Agreement.

3. The term "Successorship Transaction" shall mean a transfer . . . to the successor of the ownership and/or control of all or substantially all of the equity securities and/or assets of the Company.

a. In the event of a Successorship Transaction which results in an operational merger in which the Successor is an air carrier or any person or entity that controls or is under the control of an air carrier, the Successor shall provide the Company's pilots with the seniority integration rights provided in Sections 3 and 13 of the Labor Protective Provisions specified by the Civil Aeronautics Board in the Allegheny-Mohawk merger ("Allegheny-Mohawk LPPs") . . .

Finally, Section 27.B (the "Retirement Coverage" clause) provides that retiree health insurance coverage "will remain in effect for pilots, their spouses, dependents, and surviving spouses, for the duration of the Agreement. The cost for retiree medical benefits will be the same terms as is presently or hereafter made available to other crafts and classes of Midwest Airlines, Inc. employees. The Company will, prior to any increase in monthly insurance costs, notify the Association and provide an opportunity to discuss such change prior to the implementation of such change."

On November 23, 2009, ALPA filed a grievance (the "scope" grievance) with Midwest alleging as follows:

The Company's decision to discontinue its own flying and transfer former Midwest flying to Republic Airlines and Frontier Airlines, which conduct such flying as a d/b/a Midwest operation performed solely under those carriers' respective certificates, and not pursuant to a codeshare with now-idled Midwest, constitutes a violation of Section 1.B.1. [of the Midwest/ALPA collective bargaining agreement] in that commercial flight operations conducted by the Company will be operated by pilots other than those on the Midwest Airlines, Inc., Pilot System Seniority List. This action also violates Section 1.C.1. [of the collective-bargaining agreement, which permits subcontracting of flying under certain conditions] in that the Company has failed to satisfy all requisite elements for subcontracting to occur.

On December 30, 2010, ALPA expanded its grievance by serving both Midwest and RAH with an amended and supplemental grievance (the "amended scope & successorship" grievance). This grievance raised three claims:

First, Midwest's and RAH's decision to operate on or after November 3, 2009, as a 'virtual airline' through its subsidiary Republic Airlines, Inc. d/b/a Midwest Airlines, and then to integrate its Midwest operations with the operations of its other subsidiary, Frontier Airlines, deprived the pilots holding seniority on the Midwest Airlines, Inc., Pilot System Seniority List of their contractual rights under the Agreement to perform all flying by Midwest and RAH. That violation, as alleged in the November 23, 2009 Grievance began on November 3, 2009, and is a continuing contract violation. In addition to depriving Midwest pilots of employment, this violation has further[] injured them in that it has deprived them of placement on the integrated seniority list, which is currently being devised, where their equities would have placed them if RAH had honored its obligations under the Agreement and continued to use pilots holding seniority on the Midwest Airlines, Inc., Pilot System Seniority List to perform Midwest flying.

Second, the Agreement is binding on RAH as the successor to Midwest under Section 1.D.1 of the Agreement, and, thus, pilots holding seniority on the Midwest Airlines, Inc., Pilot System Seniority List are entitled to the benefits provided by that Agreement whenever performing any service for RAH or any of its operating subsidiaries. At present, RAH and representatives of the RAH pilots are devising an integrated seniority list. Once that list is effective, it will entitle pilots holding seniority on it to positions in the integratedoperations and elsewhere within the RAH system. At the same time, Midwest pilots are entitled to the benefits of the Association/Midwest Agreement when performing services for RAH. RAH, however, has taken the position that the Association/Midwest Agreement is no longer of any force and effect. This position has deprived, and continues to deprive, Midwest pilots of the benefits to which they are entitled under the Agreement.

Third, there are certain aspects of the Agreement that create vested rights in the Midwest pilots, such as longevity and recall, which are binding on RAH as the successor to Midwest Airlines. RAH is denying the Midwest pilots it hired between November 3, 2009 and today of those vested rights, first by not recalling them in seniority order and second by treating those who have been hired as new-hires without any credit for their service as Midwest pilots for pay and benefit purposes. That violation is continuing.

In addition to the relief requested in the November 23 scope grievance, ALPA requested the following relief in the amended scope & successorship grievance: (1) an Award declaring that RAH is the successor...