In re Continental Airlines, Inc.

• Decision Date: 24 April 2007
• Docket Number: No. 05-1053.,No. 05-1096.,05-1053.,05-1096.
• Citation: 484 F.3d 173
• Parties: In re CONTINENTAL AIRLINES, INC., et al., Debtors. *Continental Airlines, Inc.; Continental Airlines Holdings, Inc. v. *The Eastern Pilots Merger Committee, Inc.; The Eastern Arbitration Group, Inc.; The Individual Members of the Eastern Pilots Merger Committee, Inc.; John O'B. Clarke, Jr.; The Individuals of the Eastern Arbitration Group, Inc. (District of Delaware Civil No. 04-cv-00031). Eastern Pilots Merger Committee, Inc.; Peter Crawford, Individually and as the Representative of All Similarly Situated Eastern Pilots; *Michael Weglarz, v. *Eastern Airlines, Inc.; Continental Airlines, Inc.; Air Line Pilots Association (District of Delaware Civil No. 04-cv-00071) *(Amended in accordance with the Clerk's Order dated 03/02/05). Eastern Pilots Merger Committee, Inc.; Peter Crawford; the Individual Members of the Eastern Pilots Merger Committee, Inc.; John O'B. Clarke, Jr., Appellants in No. 05-1053. Michael Weglarz, Appellant in No. 05-1096.
• Court: U.S. Court of Appeals — Third Circuit

484 F.3d 173

In re CONTINENTAL AIRLINES, INC., et al., Debtors.

*Continental Airlines, Inc.; Continental Airlines Holdings, Inc. v. *The Eastern Pilots Merger Committee, Inc.; The Eastern Arbitration Group, Inc.; The Individual Members of the Eastern Pilots Merger Committee, Inc.; John O'B. Clarke, Jr.; The Individuals of the Eastern Arbitration Group, Inc.

(District of Delaware Civil No. 04-cv-00031).

Eastern Pilots Merger Committee, Inc.; Peter Crawford, Individually and as the Representative of All Similarly Situated Eastern Pilots; *Michael Weglarz, v. *Eastern Airlines, Inc.; Continental Airlines, Inc.; Air Line Pilots Association

(District of Delaware Civil No. 04-cv-00071)

*(Amended in accordance with the Clerk's Order dated 03/02/05).

Eastern Pilots Merger Committee, Inc.; Peter Crawford; the Individual Members of the Eastern Pilots Merger Committee, Inc.; John O'B. Clarke, Jr., Appellants in No. 05-1053.

Michael Weglarz, Appellant in No. 05-1096.

No. 05-1053.

No. 05-1096.

United States Court of Appeals, Third Circuit.

Argued September 14, 2006.

Opinion Filed April 24, 2007.

John O'B. Clarke, Jr. (Argued), Highsaw, Mahoney & Clarke, P.C., Washington, D.C., for Appellants.

Michael Weglarz (Argued), Alpharetta, GA, Pro se.

Jon A. Geier, Paul, Hastings, Janofsky & Walker LLP, Washington, D.C., Robert S. Brady, Joseph M. Barry (Argued), Young, Conaway, Stargatt & Taylor, LLP, Wilmington, DE, for Continental.

Daniel M. Katz (Argued), Katz & Ranzman, P.C., Washington, D.C., for Air Line Pilots Ass'n.

Before FUENTES, FISHER, and McKAY,^* Circuit Judges.

OPINION OF THE COURT

FUENTES, Circuit Judge.

In 1986, airline pilots employed by the former Eastern Airlines entered into a collective bargaining agreement with their employer. The agreement stated that if Eastern merged with another airline, the Eastern pilots' seniority rights would be fairly integrated with those of the new airline. Shortly thereafter, Eastern merged with Continental but Continental refused to bargain with Eastern's pilots over seniority rights. When Continental entered bankruptcy proceedings, Eastern's pilots filed claims based on the collective bargaining agreement. In two prior appeals we determined that the collective bargaining agreement gave Eastern's pilots a right of payment that was discharged in Continental's bankruptcy.

With no relief remaining against Continental, Eastern's pilots have now turned their sights on Continental's pilots. They claim that the collective bargaining agreement compels Continental and its pilots into an arbitration to determine whether Eastern's pilots can recover damages from Continental's pilots. They contend that our prior decisions, the Railway Labor Act, and the Norris-LaGuardia Act compel this result. For the reasons that follow, we will affirm the District Court's decision that arbitration is precluded.¹

I. Background

A. Continental I

In 1986, Eastern Airlines ("Eastern") and the union representing its pilots, the Air Line Pilots Association (the "Pilots Association"), ratified a collective bargaining agreement ("CBA"). The CBA gave Eastern's pilots the right to arbitrate disputes over the agreement's labor protective provisions ("Labor Provisions"), which assured Eastern's pilots a fair integration of pilot seniority lists in the event that Eastern merged with another airline.

The day after the CBA was ratified, Texas Air Corporation, the parent company of Continental Airlines, Inc. ("Continental"), acquired Eastern. According to the Pilots Association, Texas Air Corporation then "merged" Eastern's operations into Continental's within the meaning of the CBA. As a result, the Pilots Association asserted that the Labor Provisions required integration of Eastern's seniority list with Continental's seniority list. After Eastern and Continental refused to bargain with the Pilots Association about integration of the lists, the Association initiated arbitration.

Four years later, in December 1990, Continental filed for Chapter 11 bankruptcy protection. On behalf of Eastern's pilots, the Pilots Association filed proofs of claims in the bankruptcy proceeding, asserting a right to seniority integration. When the Bankruptcy Court eventually confirmed Continental's plan of reorganization, it decided that any claim based on the CBA's Labor Provisions would be treated as a claim for payment that would be discharged in bankruptcy. Furthermore, it enjoined arbitration of the Labor Provision dispute.

On appeal, we held that Eastern's pilots could not specifically enforce a right to seniority integration. Instead, we agreed with the Bankruptcy Court that any claim based on seniority integration should be treated as one for payment, dischargeable in bankruptcy. Continental I, 125 F.3d at 136. Among the many reasons given, we expressed concern that specific enforcement of seniority integration "could potentially result in the displacement of many Continental pilots. Such displacement has the potential to create an environment rife with hostility and low employee morale, not to mention a detrimental effect on employer-employee relations." Id. We determined that the "alternative remedy" of money damages was more appropriate than an actual integration of the lists. Id.

Nevertheless, we recognized in Continental I that we lacked jurisdiction to evaluate the underlying merits of the Labor Provision dispute. Assessment of the merits fell within the exclusive jurisdiction of an arbitrator. Id. at 130. Because of our limited jurisdiction, we did not assess whether an arbitral award was actually warranted, but only how any such award should be treated in bankruptcy. Id. at 130-36. In light of this limitation, we concluded it was error for the Bankruptcy Court to enjoin arbitration. We further concluded that, because Continental conceded that it was bound by Eastern's CBA in order to secure confirmation of its plan, it could not later disavow that position. See id. at 138. We thus rejected Continental's argument that, because it was not a party to Eastern's CBA, it was not bound to arbitrate a dispute arising under it. Id. Additionally, we held that since Continental failed to properly reject the CBA under 11 U.S.C. § 1113, it could not avoid its obligations through the Bankruptcy Court's injunction. Id. at 137.

B. Continental II

During the pendency of Continental I, the Pilots Association settled its dispute with Continental. Id. at 127. Not all of Eastern's pilots accepted this settlement, however, and the remaining pilots continued to pursue an award under the CBA, both within the bankruptcy and outside of it. Those pilots pursuing claims within the bankruptcy attempted to determine the amount of their entitlement in a class action before the Bankruptcy Court. The parties ultimately settled this suit and the Bankruptcy Court approved the settlement.²

The pilots who pursued claims outside the bankruptcy filed suit in the U.S. District Court for the District of New Jersey (the "New Jersey action") as the Eastern Pilots Merger Committee (the "Eastern pilots").³ In pursuing their case, these Eastern pilots entered into a stipulation ("Stipulation of Withdrawal") before the Bankruptcy Court in which they waived all claims against Continental in the bankruptcy proceeding and consented to a discharge of all relief under Continental's reorganization plan. In the New Jersey action, Eastern's pilots asserted that the CBA survived Continental's discharge, allowing the remaining pilots to specifically enforce seniority integration and to recover damages for Continental's failure to comply with the CBA.

In response to this suit, Continental filed a motion in Bankruptcy Court to halt the New Jersey action, asserting that all potential relief under the Labor Provisions had been addressed within the bankruptcy proceedings. Continental II, 279 F.3d at 228. To enforce Continental's plan of reorganization, the Bankruptcy Court enjoined the New Jersey action, holding that, under Continental I, all relief based on the Labor Provisions had been discharged by the plan. See id. at 228-29 (citing In re Continental Airlines, Inc., 236 B.R. 318, 332 (Bankr.D.Del.1999)); see also 11 U.S.C. § 524(a)(2) ("A discharge . . . operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor.").

In Continental II, we upheld the Bankruptcy Court's injunction, explaining that Continental I had interpreted the CBA as providing a right of payment dischargeable in bankruptcy. 279 F.3d at 230. Moreover, we held that this was the only relief available under the CBA, whether post- or pre-petition. Since the Eastern pilots were seeking relief outside these parameters, we affirmed the Bankruptcy Court's injunction of the New Jersey action.

C. Subsequent Proceedings

Following Continental II, the Eastern pilots, including an individual pilot named Michael Weglarz,⁴ petitioned the National Mediation Board ("NMB") for a list of arbitrators to resume arbitration under the CBA. Continental refused to participate in the arbitration and sent a notice to the NMB indicating that an arbitration would violate various court orders. Subsequently, Continental filed a motion with the Bankruptcy Court asking that the pilots seeking arbitration be held in contempt of its confirmation order.

At a hearing before the Bankruptcy Court, the Eastern pilots conceded that "[a]ny claim against Continental under the [Labor Provisions], be it post or pre-petition or however you want to look at it, is gone." (A442-43.) However, they argued, apparently for the first time, that "[t]he . . . claim is not just against Continental. . . . It's Continental and its pilots. They're a party to that contract as well." (A443.) The Eastern pilots would ask the arbitrator to "hold the Continental pilots monetarily liable . . . to the Eastern pilots...