In re Continental Airlines, Inc.
| Decision Date | 12 October 2000 |
| Docket Number | Bankruptcy No. 90-932 (MFW) through 90-984 (MFW). Adversary No. A-99-412 (MFW). |
| Citation | 257 BR 658 |
| Parties | In re CONTINENTAL AIRLINES, INC., et al., Debtors. James Baldridge, William Mann, and Larry Dunn, individually, and as representatives of a class of persons similarly situated who are referred to as the L.P.P. Claimants, Plaintiffs, v. Continental Airlines Holdings, Inc., Continental Airlines, Inc., and System One Holdings, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — District of Delaware |
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Jon A. Geier, Paul Hastings Janofsky & Walker, LLP, Washington, DC, James L. Patton, Jr., Robert S. Brady, Matthew P. Denn, Young Conaway Stargatt & Taylor, LLP, Wilmington, DE, for Continental Airlines, Inc.
Myles J. Tralins, Tralins & Associates, Miami, Fl, Bruce E. Jameson, Prickett Jones & Elliott, Wilmington, DE, for LPP Claiments.
The issue before the Court is whether the Plaintiffs' claims are limited by 11 U.S.C. § 502(b)(7). We hold that they are and, consequently, deny the Plaintiff's Motion for Summary Judgment.
This Court has jurisdiction over these proceedings pursuant to 28 U.S.C. §§ 1334 and 157(b)(1), (b)(2)(A), (B) and (O).
On February 23, 1986, Eastern Airlines ("Eastern") and the Air Lines Pilots Association ("the Pilots' Union")3 ratified a collective bargaining agreement ("the CBA"), which included the Labor Protective Provisions ("the LPP"). The LPP provides essentially that upon a merger with any other airline, the Eastern pilots will be integrated with the other airline's pilots in such a way as to preserve their seniority. One day later, Texas Air Corporation, the parent of Continental Airlines, Inc. ("the Debtor" or "Continental") acquired Eastern. After Continental acquired Eastern, the Pilots' Union sought enforcement of the LPP. Continental refused to integrate the Eastern pilots, and the Pilots' Union sought arbitration. Continental subsequently filed bankruptcy in December, 1990.
The Eastern pilots raised objections to the Debtor's proposed Plan of Reorganization because they asserted that they were entitled to specific performance of the LPP. Continental asserted that the Eastern pilots' rights constituted claims in bankruptcy which could be treated and discharged by the Debtor's Plan of Reorganization through payment of the claim, rather than the equitable remedy of specific performance. The Bankruptcy Court agreed and confirmed the Debtor's Plan. The District Court affirmed. That issue was appealed to the Court of Appeals for the Third Circuit which held that the Eastern pilots' equitable claims for seniority integration could be converted into money damages and discharged by the Debtor's Plan. 125 F.3d at 131-36.
Since the Third Circuit decision, a group of the Eastern pilots, the Plaintiffs herein, initiated this adversary proceeding in which they seek a declaration that their claims are not limited by section 502(b)(7) of the Bankruptcy Code. In their motion for summary judgment, the Plaintiffs argue that the Debtor is bound by the law of the case, including statements made by this Court and the Third Circuit which, they allege, mandate that the Plaintiffs are to be "made whole." The Plaintiffs also argue that section 502(b)(7) does not apply because they are not "employees" of the Debtor and the CBA is not an "employment contract."
At the hearing on the Plaintiffs' motion, an individual Eastern pilot, J. Trigg Adams, appeared and asked to be heard. Neither the Debtor nor the Plaintiffs objected and we allowed Mr. Adams to make a statement and file a brief in support of the Plaintiffs' Motion for Summary Judgment. Because Mr. Adams is pro se, we interpret his pleadings liberally. Mr. Adams joins in each of the Plaintiffs' arguments and raises an additional argument: the Debtor's bad faith and abuse of the bankruptcy system.4
The Debtor's brief responds to each of the Plaintiffs' arguments, but the Debtor did not have the opportunity to respond to the arguments contained in Mr. Adams' brief.
I. DISCUSSION
The Plaintiffs argue that the Third Circuit's August 29, 1997, opinion and this Court's June 28, 1999, decision have created law of the case which binds this Court to a determination that the Debtor must "make the Plaintiffs whole."
The law of the case doctrine provides that when a court decides a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case. See Deisler v. McCormack Aggregates, Co., 54 F.3d 1074 (3d Cir.1995); In re Resyn Corp., 945 F.2d 1279, 1281 (3d Cir.1991); Devex Corp. v. General Motors Corp., 857 F.2d 197, 199 (3d Cir.1988). Therefore, if either this Court or the Third Circuit has decided the issue, we should not revisit the issue. In this instance, we do not find the law of the case applicable.
The Plaintiffs assert that when the Third Circuit stated that "seniority integration is a `make whole' remedy, the purpose of which is to restore the employee to the economic status quo," it was deciding the amount which the Eastern pilots were entitled to receive as claims in bankruptcy. 125 F.3d at 135. We disagree.
In its decision, the Third Circuit's focus was whether a monetary remuneration would satisfy the Eastern pilots' claims for specific performance. Id. at 124. The Third Circuit initially addressed whether a non-monetary remedy could be converted to a "claim" as defined by section 101(5) of the Bankruptcy Code. After reviewing Ohio v. Kovacs, 469 U.S. 274, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985), and In re Torwico, 8 F.3d 146 (3d Cir.1993), the Third Circuit stated that the issue which it had to decide was "whether a monetary payment was an alternative to the equitable remedy of seniority integration." Id. at 133. The Court concluded that it was and, therefore, held that the Eastern pilots had "claims" which may be dischargeable under the Bankruptcy Code.
However, the Third Circuit was careful to note that it did not intend to suggest what award should be granted to the Eastern pilots, or its amount, and its holding was "limited to how the claim should be treated in bankruptcy." Id. at 136. In other words, the Third Circuit's holding was that the Eastern pilots had "claims" as defined by the Code, which may be treated and discharged in bankruptcy. The Third Circuit did not address the issue of whether the Code otherwise limits the size of those claims, including any limitation under section 502(b)(7).
In fact, by the very nature of the Third Circuit's ruling, it specifically did not assure the Plaintiffs that they would receive payment in full. By concluding that the Eastern pilots held "claims" under the Bankruptcy Code, the Third Circuit ruled that those claims were subject to compromise in the plan confirmation process. In fact, the Third Circuit was aware that those claims would not be paid in full under the Debtor's confirmed Plan of Reorganization.5
Thus, the Third Circuit's conclusion that the Eastern pilots' claims in bankruptcy were a "make whole" remedy for their right to seniority integration was not a decision that their claims had to be paid in full in the Debtor's Plan. Similarly, we have not previously addressed or decided that issue. We therefore conclude that the doctrine of the law of the case does not bar us from considering whether section 502(b)(7) applies.
Section 502(b)(7) provides:
11 U.S.C. § 502(b)(7) (emphasis added).
The Plaintiffs assert that section 502(b)(7) does not apply for two reasons: the CBA was not an employment contract, and the Plaintiffs were never "employees" of the Debtor.
The Plaintiffs cite a number of cases in support of their argument that the CBA is not an employment agreement. See, e.g., John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 550, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964); United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578-79, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) (). Mr. Adams' brief suggests that a collective bargaining agreement cannot, per se, be an employment contract.6
However, the Supreme Court has stated that:
Collective bargaining between employer and the representatives of a unit, usually a union, results in an accord as to terms which will govern hiring and work and pay in that unit. The result is not, however, a contract of employment except in rare cases.
J.I. Case Co. v. Nat'l Labor Relations Board, 321 U.S. 332, 334-35, 64 S.Ct. 576, 88 L.Ed. 762 (1944) (emphasis added).
J.I. Case requires us to determine on a case-by-case basis whether a collective bargaining agreement constitutes an employment agreement. See, e.g., Heheman v. E.W. Scripps Co., 661 F.2d 1115, 1118-19, 1123 (6th Cir.1981) (...
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