In re Ionosphere Clubs, Inc.
| Decision Date | 14 March 1990 |
| Docket Number | 89 B 10049 (BRL),Bankruptcy No. 89 B 10448 (BRL),Adv. No. 90-5591A. |
| Citation | 111 BR 423 |
| Parties | In re IONOSPHERE CLUBS, INC. and Eastern Air Lines, Inc., Debtors. EASTERN AIR LINES, INC., Plaintiff, v. Moreton ROLLESTON, Jr., J.P. Tristani, Bobby E. Morrow, Robert M. Wilber, Jr., Roger Wyatt, Moreton Rolleston III, Kenneth W. McDonald, Fred Kruger, Tom Welch, Paul White, Roger W. Tracy, William R. Conaway, George Hill, Frederick H. Mesmer, Lawrence A. Link, Ted Birke, James Hughes, William C. Hodgson, Jr., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
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Weil, Gotshal & Manges by Howard B. Comet, New York City, Weil, Gotshal & Manges by Zack A. Clement, Houston, Tex., for debtors.
Akin, Gump, Strauss, Hauer & Feld by Joel M. Cohn, Washington, D.C., Sp. Labor Counsel, for debtors.
Kramer, Levin, Nessen, Kamin & Frankel by Adam Harris, New York City, for Official Committee of Unsecured Creditors.
This adversary proceeding (the "Rolleston Adversary Proceeding") filed by Eastern Air Lines, Inc. ("Eastern") to enjoin defendant Moreton Rolleston, Jr. ("Rolleston") and 17 formerly striking Eastern Pilots (collectively the "Rolleston Plaintiffs") from proceeding in an action filed in the Federal District Court in Georgia entitled Tristani et al. v. Eastern Air Lines, Inc. et al., No. 1:90-CV-318-JTC (N.D.Ga., filed February 12, 1990) (the "Rolleston Lawsuit"), is the latest in a series of lawsuits and proceedings involving similar, if not identical, issues and subject matter. See, In re Ionosphere Clubs, Inc., slip op. No. 89 Civ. 8250 (MBM) at 4-5, 1990 WL 5203 (S.D.N.Y. January 24, 1990).
On March 4, 1989, the International Association of Machinists and Aerospace Workers, AFL-CIO ("IAM") initiated a strike against Eastern. Thereafter, both the Air Line Pilots Association, International ("ALPA") and Local 553, Transport Workers Union of America, AFL-CIO ("TWU") initiated a sympathy strike. As a result thereof, on March 9, 1989, Eastern and its affiliate, Ionosphere Clubs, Inc. ("Ionosphere"), each filed a voluntary petition for relief under Chapter 11, Title 11 of the Bankruptcy Code (the "Code"). Since their bankruptcy filing, Eastern and Ionosphere have continued to operate their businesses and manage their properties as debtors-in-possession pursuant to §§ 1107(a) and 1108 of the Code. In re Ionosphere Clubs Inc., 108 B.R. 901, 908 (Bankr.S.D.N.Y.1989).
In re Ionosphere Clubs, Inc., 105 B.R. 761, 761-62 (Bankr.S.D.N.Y.1989).
"Since the Petition Date, Eastern has had to rebuild its airline in the face of the Unions' strikes." In re Ionosphere Clubs, Inc., 105 B.R. 773, 774 (Bankr.S.D.N.Y. 1989). ALPA's strike forced the cancellation of over 90% of Eastern's scheduled flights. Over 95% of Eastern's pilots joined the strike, initially reducing Eastern's pilot workforce from over 3,500 pilots to 214 pilots. In order to rebuild its operations, Eastern has found it necessary to recruit, hire, train and place in active service new hire pilots as permanent replacements for its striking pilots. In re Ionosphere Clubs, Inc., 105 B.R. at 774. "Eastern has carefully calculated to rebuild its flight schedules on a reliable basis in order to regain the confidence of the travel agencies and the flying public." In re Ionosphere Clubs, Inc., 105 B.R. at 775. "Eastern has made demonstrable progress toward a substantial resumption of its operations." Id. As of November 1, 1989, Eastern had restored 73% of its pre-strike level of operations (based upon flights per day).
On November 22, 1989, ALPA notified Eastern that its sympathy strike had been concluded and that the approximately 2,000 striking pilots were willing to return to work. At that time, Eastern had outstanding a pilot bid to insure proper staffing for future scheduled operations. Section 28 of the Agreement establishes a procedure by which pilots may exercise their seniority to determine their assignment to a particular domicile (geographic base), category position (captain, first officer and second officer) and aircraft equipment type (e.g., Boeing 727). Section 28 establishes fixed periods within which Eastern must conduct annual and semi-annual bids in order to assign pilot positions projected in its operational plans. When conditions necessitate modifications to Eastern's business plan outside of these fixed periods, the Agreement provides for an optional bid to effectuate any adjustments to pilot positions. Document 28 attached to the Agreement provides for the use of "flow bids" to make minor adjustments to Eastern's crew resources between standard § 28 bids.
Eastern asserts that no provision of the Agreement requires that striking pilots be eligible to participate in § 28 bids during a strike, or that such pilots have a right to displace active pilots or to return to their pre-strike category positions upon the conclusion of a strike. Eastern also maintains that at the time of ALPA's offer to return to work, Eastern had in active service sufficient replacement pilots, reinstated former striker pilots, and pilots who elected not to strike, to fill all the positions covered by the outstanding pilot bid. Consequently, Eastern claims that it did not have, and currently does not have, any vacant pilot positions available for the unreinstated former strikers.
On December 11, 1989, Eastern moved by order to show cause pursuant to §§ 105 and 362(a)(3) of the Code, and Bankruptcy Rule 7065, and filed a summons and complaint entitled Eastern Air Lines, Inc. v. ALPA (In re Ionosphere Clubs, Inc.), No. 89-6590A (Bankr.S.D.N.Y. filed Dec. 11, 1989) (the "ALPA Adversary Proceeding"). Eastern requested a temporary restraining order and preliminary injunction enjoining ALPA and Eastern's Master Executive Council ("MEC") from prosecuting, or directly or indirectly assisting (through financial assistance or otherwise) any individual pilot in prosecuting any group or individual grievance or any judicial complaint, other than a complaint filed in this Court, (a) arising out of Eastern's refusal to permit striking pilots or formerly striking pilots to bid on the pilot bids issued on May 3, July 19, October 13, and November 6, 1989, including specifically a series of grievances filed by ALPA during and since the end of its strike or (b) arising out of Eastern's refusal to return formerly striking pilots to their pre-strike category positions.
By its complaint in the ALPA Adversary Proceeding, in addition to the injunctive relief summarized above, Eastern also sought a declaratory judgment that (a) any grievances challenging Eastern's refusal to permit striking or formerly striking pilots to bid on annual, semi-annual, optional or flow bids are without merit as a matter of fact and law; (b) Eastern is not required to displace in any respect any active pilots currently flying in revenue service in order to make their positions available to returning strikers; and (c) Eastern may continue in effect the temporary work rule changes that it implemented after the commencement of ALPA's strike for a reasonable period of time.
On December 11, 1989, this Court granted Eastern's request for a temporary restraining order pending a preliminary injunction hearing scheduled for December 15, 1989. On December 13, 1989, ALPA filed a motion to withdraw the reference and then to have the District Court for the Southern District of New York transfer that case to the District Court for the Southern District of Florida where another Eastern/ALPA lawsuit is currently pending involving the displacement of returning strikers by trainees. ALPA's withdrawal/transfer motion was assigned to District Judge Mukasey. On December 15, 1989, Judge Mukasey entered an order staying ALPA's prosecution of its bid grievances and staying prosecution of Eastern's adversary complaint, pending determination of ALPA's motion to withdraw the reference. After briefs and oral argument on ALPA's motion, Judge Mukasey entered an order on December 29, 1989, lifting his stay as to the prosecution of Count II of Eastern's complaint in the ALPA Adversary Proceeding, which involves the application of § 362(a)(3) of the Code to ALPA's prosecution of its bid grievances.
Subsequently, on January 24, 1990, Judge Mukasey issued a lengthy opinion essentially denying ALPA's motion to withdraw the reference and motion to transfer with respect to all of the issues presented in the ALPA Adversary Proceeding, including the central underlying issue of whether unreinstated strikers had any right to displace Eastern's current pilot work force. See, In re Ionosphere Clubs, Inc., slip op. No. 89 Civ. 8250 (MBM) (S.D.N.Y. January 24, 1990). Judge Mukasey's decision is controlling in giving this Court the jurisdiction to decide (i) whether efforts to assert pilot bid grievances violate the automatic stay, and (ii) the merits of the asserted bid grievances. Id. at 25-26. An important basis for Judge Mukasey's decision was that the issues presented in the ALPA Adversary Proceeding are crucial to Eastern's ability to reorganize, a fact admitted by ALPA during oral argument. As Judge Mukasey noted:
. . . ALPA concedes that these disputes involve potentially staggering cost to Eastern. At oral argument ALPA\'s counsel agreed that the outcome of these disputes `will determine...
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