In re Ionosphere Clubs, Inc.
| Decision Date | 10 April 1990 |
| Docket Number | No. 89 Civ. 6989 (RWS),89 Civ. 7563 (RWS).,89 Civ. 6989 (RWS) |
| Parties | In re IONOSPHERE CLUBS, INC. and Eastern Air Lines, Inc., Debtors. AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Appellant, v. EASTERN AIR LINES, INC., Appellee. |
| Court | U.S. District Court — Southern District of New York |
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Cohen, Weiss and Simon, New York City (Peter D. DeChiara, Russell Hollander, James L. Linsey, Richard B. Miller, Richard M. Seltzer, of counsel), for appellant.
Weil, Gotshal & Manges, New York City (Bruce R. Zirinsky, Zack A. Clement, Sandra E. McFarland, of counsel), Akin, Gump, Strauss, Hauer & Feld, Washington, D.C. (John J. Gallagher, Joel M. Cohn, of counsel), for appellee.
The Air Line Pilots Association, International ("ALPA") has appealed from two decisions of the Bankruptcy Court. The first decision denied its application for relief from the automatic stay to permit it, and to require respondent Eastern Airlines, Inc. ("Eastern"), to submit to arbitration a dispute over whether there has been a merger of the operations or facilities of Eastern and Continental Air Lines Inc ("Continental"). A finding that such a merger has occurred would trigger labor protective provisions, including certain seniority rights, contained in the collective bargaining agreement between ALPA and Eastern.
The second decision, made upon Eastern's application, enjoins ALPA from proceeding with a lawsuit initiated in the federal court in the Southern District of Florida. ALPA alleged in that action that certain leases of aircrafts, complete with crews, that Eastern had entered into with Continental (the "wet-leases") violated the collective bargaining agreement between it and Eastern. ALPA sought by the lawsuit to enjoin Eastern from continuing with "wet-leasing."
Both appeals present for resolution whether the Bankruptcy Code's automatic stay provision governs proceedings brought against a debtor-in-possession to enforce a collective bargaining agreement where the debtor has yet to obtain or seek an order under section 1113 of the Bankruptcy Code altering or relieving it of its obligations under such agreement. The conclusion, as set out below, is that enforcement of the stay under the circumstances here would circumvent the procedures implemented by Congress when it passed section 1113. Therefore, the orders of the Bankruptcy Court are reversed.
ALPA is an unincorporated labor organization and the authorized collective bargaining representative under the Railway Labor Act ("RLA"), 45 U.S.C. section 151 et seq., for all airline pilots (captains, first officers, and second officers) employed by Eastern. ALPA represents the Eastern pilot group through a coordinating council known as the Eastern Master Executive Council ("MEC").
Eastern is a corporation engaged in the business of providing air transportation service in interstate and foreign commerce and is a "carrier" subject to the RLA, 45 U.S.C. section 151, First. Eastern's principal place of business and its corporate headquarters are located in Miami, Florida. Its common stock is owned by Texas Air Corporation ("Texas Air"), which directs, controls, and manages the operations of Eastern and also those of Continental Air Lines, Inc. ("Continental"). Frank Lorenzo is Chairman of the Board of Directors for Texas Air, Eastern and Continental. Texas Air, in turn, is controlled by Jet Capital Corporation ("Jet Capital"). Lorenzo owns approximately 50.7% of the stock of Jet Capital and is its controlling stockholder.
The Official Committee of Unsecured Creditors (the "Committee") consists of numerous creditors of Eastern who have filed claims in the Chapter 11 proceeding, including ALPA. The Committee opposes ALPA's appeal.
In In re Ionosphere Clubs, Inc., 105 B.R. 765 (Bankr.S.D.N.Y.1989) ("Ionosphere I"), the Honorable Burton R. Lifland determined that the automatic stay of the Bankruptcy Code, 11 U.S.C. § 362, should not be lifted to permit ALPA to arbitrate, under either the auspices of the National Mediation Board or the System Board of Adjustment, a dispute over the interpretation and application of the labor protective provisions embodied in ALPA's and Eastern's collective bargaining agreement. ALPA appealed that decision, and argument was heard on December 8, 1989. Post-argument submissions occasioned by a decision of this court issued on January 24, 1990, were made by the parties in late January and early February, 1990.
In Eastern Air Lines Inc. v. Airlines Pilots Association, International, 105 B.R. 773 (Bankr.S.D.N.Y.1989) ("Ionosphere II"), Judge Lifland determined that the automatic stay barred ALPA from proceeding with a lawsuit it had filed in federal court in Florida against Eastern, by which ALPA sought to enjoin Eastern from engaging in the practice of wet-leasing. ALPA contended in that suit that Eastern's wet-leasing violated the terms of the collective bargaining agreement and the Railway Labor Act. Judge Lifland granted Eastern's application to enjoin ALPA from prosecuting the action. ALPA appealed that decision and, following extensive briefing, argument was heard on March 16, 1990.
This court has jurisdiction over these appeals under 28 U.S.C. § 158(a).
Eastern and ALPA, as authorized representatives of the Eastern pilots, have for several years been parties to collective bargaining agreements governing the terms and conditions of pilot employment at Eastern. By letter of agreement dated March 20, 1982, ALPA and Eastern established a System Board of Adjustment ("System Board") of four members, two company members and two union members, to determine disputes arising under their labor contracts. The operation of such boards is contemplated under Title II of the Railway Labor Act ("RLA"), 45 U.S.C. § 184. Under the terms of the arrangement, in the event that the four members of the System Board are unable to reach agreement within 30 days from the final submission of a grievance, either party may notify the System Board that a fifth member of the System Board is desired. The System Board thereupon selects a neutral from the panel of arbitrators (agreed to by both the parties) listed in the System Board Agreement. The selected neutral acts as the Chairman of the five member Board. A decision by a majority of the five member System Board is final and binding on both parties. In accordance with the RLA, the Letter Agreement provided that the System Board would have jurisdiction to resolve all disputes "growing out of grievances or out of interpretation or application of any of the terms of the Pilots' Agreement."
In 1986, Eastern and ALPA became parties to a new collective bargaining agreement dated February 23, 1986 (the "Eastern/ALPA Agreement" or "Agreement"). That Agreement was reached in the early morning hours of February 24, 1986, after months of intensive negotiations, during which Eastern was simultaneously bargaining with the International Association of Machinists ("IAM") and, against the possibility the labor talks would not result in favorable terms, negotiating terms of acquisition with Texas Air. In its entirety, the Eastern/ALPA Agreement that was concluded consisted of four handwritten pages. In addition to the phrases representing new areas of agreement, the handwritten pages incorporated by reference the parties' expired agreement.
Although able to reach this Agreement with ALPA, Eastern was unable to come to terms with the IAM, settlement with which Eastern concluded was essential to its survival in its then existing form. Eastern thereafter was acquired by Texas Air.
Eastern and ALPA negotiators reconvened several days after concluding that labor contract in an effort to expand the cryptic references in the Agreement to encompass all material terms of the new areas addressed. The parties were unable to agree on the material terms of six phrases, one of which was the provision phrase which referred to Labor Protective Provisions ("LPPs"). That provision, in its entirety, read: "LPP's & Takeover: Similar to TWA — need to work out between EAL/ALPA legal counsel."
On August 6, 1986 ALPA filed a grievance in connection with the disagreement over the LPP provision and submitted the grievance to the System Board on September 5, 1986. This grievance was designated as Eastern/ALPA System Board of Adjustment Arbitration Case No. 1-86 ("Arbitration Case No. 1-86"). Three months prior to then, on June 10, 1986, Eastern had filed suit in the Southern District of Florida to compel ALPA to resume bargaining on the LPP provision rather than arbitrate. After substantial litigation between Eastern and ALPA regarding the enforceability of the Eastern/ALPA Agreement, Eastern and ALPA were directed to submit the LPP controversy to arbitration. Eastern Air Lines Inc. v. ALPA, 670 F.Supp. 947 (S.D. Fla.1987), aff'd, 861 F.2d 1546 (11th Cir. 1988). In accordance with that determination, the grievance was submitted to the System Board. Arbitrator Frank Elkouri (the "Arbitrator"), a well-known expert in the field and the author of How Arbitration Works, was appointed as the fifth Board member and chairperson.
On April 19, 1988 hearings began on Arbitration Case No. 1-86. The purpose of that arbitration was to have the System Board define for the parties the precise terms of the labor protective provisions ("LPPs"). Eight days of hearings and substantial post-arbitration briefs spread over eight months. On February 7, 1989 by executive session of the System Board, it was agreed that the Arbitrator would proceed to prepare a proposed decision, following distribution of which the other Board members would have two weeks to review and, if desired, to request another executive session at which to modify or finalize the decision.
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