In re Ionosphere Clubs, Inc.
| Decision Date | 11 September 1989 |
| Docket Number | 89 B 10449 (BRL).,Bankruptcy No. 89 B 10448 (BRL) |
| Citation | 105 BR 765 |
| Parties | In re IONOSPHERE CLUBS, INC. and Eastern Air Lines, Inc., Debtors. AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Movant, v. EASTERN AIR LINES, INC., Respondent. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Weil, Gotshal & Manges, New York City, for debtors; Bruce R. Zirinsky, of counsel.
Akin, Gump, Strauss, Hauer, & Feld, Washington, D.C.; David Callet, of counsel.
Kramer, Levin, Nessen, Kamin & Frankel, New York City, for Official Creditors' Committee; Kenneth Eckstein, Adam Harris, of counsel.
Cohen Weiss and Simon, New York City, for Airline Pilots Ass'n; James L. Linsey, Russell Hollander, Richard Seltzer, of counsel.
The Air Line Pilots Association, International ("ALPA") seeks an Order declaring that the System Board of Adjustment's decision issued on March 8, 1989 is unaffected by the automatic stay which was triggered by Eastern Air Lines Inc.'s ("Eastern") filing for Chapter 11 on March 9, 1989 or, in the alternative, seeks an Order lifting the stay to permit the System Board of Adjustment (the "System Board") to finalize its award in Eastern/ALPA System Arbitration Case No. 1-86.
ALPA additionally seeks relief from the stay and requests this Court to direct Eastern to submit to arbitration a new and separate dispute concerning whether there has been a merger of Eastern and Continental Air Lines Inc. ("Continental") which would trigger the application of the System Board's decision in Case No. 1-86.
The current disputes between Eastern and ALPA arise over a nebulously phrased, handwritten provision of the 1986 ALPA/Eastern Collective Bargaining Agreement (the "Agreement") which refers to the Labor Protective Provisions ("LPP's"). This provision provides as follows:
LPP\'s & Takeover Similar to TWA— Need to Work Out Between EAL/ALPA Legal Counsel. (the "LPP Provision").
LPP's were imposed by the Civil Aeronautics Board ("CAB") in mergers up through the 1970's. In many instances CAB imposes a set of LPP's which was first applied in the merger of Allegheny and Mohawk Airlines. This set of LPP's became known as the Allegheny-Mohawk LPP's which provides for elaborate financial guarantees to employees affected by the merger of the two airlines, including pay protection for six years, relocation allowances and moving expenses. In addition, the LPP's establish a process whereby each airline's seniority rosters would be integrated if the merger affected seniority rights.
Shortly after ALPA ratified the Agreement, ALPA and Eastern disagreed over the meaning of the LPP provision. This disagreement caused ALPA to file a grievance on August 6, 1986 and then to submit the grievance to the System Board for resolution on September 5, 1986. Eastern refused to process ALPA's grievance or to submit the grievance to the System Board. Instead, Eastern responded by filing an action on June 10, 1986 in the District Court for the Southern District of Florida alleging that ALPA was attempting to change its existing rates of pay, rules and working conditions in violation of the parties' Agreement. On July 10, 1986 Eastern amended its filing, alleging that no valid collective bargaining existed between the Union and Eastern, and further amended its complaint on September 9, 1986 to incorporate the LPP grievance which had been submitted to arbitration before the System Board. The United States District Court for the Southern District of Florida held that ALPA and Eastern entered into a valid and binding collective bargaining agreement and Ordered Eastern to submit the LPP grievance. Eastern Air Lines, Inc. v. ALPA, 670 F.Supp. 947, 958 aff'd 861 F.2d 1546 (11th Cir.1988).
Subsequent to the Eleventh Circuit's ruling, the LPP grievance was submitted to Arbitrator Frank Elkouri2. Hearings were conducted throughout 1988 and post-hearing briefs were mailed by both parties. The five members of the Board met on February 7, 1989 for discussion of the case in executive session. The Board members agreed at this session that Arbitrator Elkouri would "prepare a proposed decision, and that the Board members would have two weeks (from the date of the letter transmitting that proposed decision) in which to request another executive session." (See, ALPA's Motion, Exhibit G, at 1, Proposed Decision Case No. 1-86.) Accordingly, on Saturday, March 4, 1989 Arbitrator Elkouri mailed copies of his proposed decision to other members of the System Board and stated in his cover letter that "if no request for another executive session reaches me by March 18, I will send signed copies of the proposed decision to the Board Members at that time." (See, Eastern Airline's Memorandum of Law, Exhibit 1.) On Wednesday, March 8, 1989, after an ex parte communication from ALPA Board member Larry Wells concerning Eastern's imminent bankruptcy filing, Arbitrator Elkouri, in contravention of the established deliberative protocol for achieving a decision, signed the previously unsigned proposed decision and transmitted it to Mr. Wells by FAX. The signatures of ALPA's two System Board members were attested to by a notary on March 9, 1989, at 9:30 a.m.. (The Agreement does not require that the signatures of the System Board members be notarized.) (See, Order Fixing Date and Time of Hearing at 8.) However, on March 9, 1989 at 9:23 a.m. Eastern had already filed a petition for reorganization.
It should be noted that Arbitrator Elkouri's final decision and award in Eastern/ALPA System Board Case No. 1-86, finds that the 1986 Agreement contains certain LPP's as they exist in the Allegheny-Mohawk Agreement. Specifically, Arbitrator Elkouri found that the 1986 Agreement embodies those LPP's found in B 2(a), 3 and 13 of the Allegheny-Mohawk LPP's.3 (See, Order Fixing Date and Time of Hearing, Exhibit G to ALPA's moving papers.) The award did not address the disagreement between Eastern and ALPA about whether the provisions of Sections 3 had been "triggered". Id. (emphasis added).
On March 29, 1989 ALPA requested that Mr. Frank Lorenzo, Chairman of Texas Air Inc. ("Texas Air"), meet with ALPA to integrate the seniority lists of Eastern and Continental pilots. ALPA alleged that Texas Air integrated Eastern and Continental operations thereby requiring the integration of seniority lists of both companies pursuant to §§ 2 and 3 of the Allegheny-Mohawk LPP's. Andy Childers, Continental's Staff Vice President, and Charles Goolsbee, Senior Vice President of Texas Air, replied that there is no reason to discuss the integration of the seniority lists of the pilots of Eastern and Continental Airlines because the two airlines operate as separate entities. (See, Order Fixing Time and Date of Hearing, Exhibit I, at 4-5.)
By letter dated May 8, 1989, John J. Bavis, Jr., Chairman of the Eastern-ALPA Master Executive Council, requested that the National Mediation Board ("NMB") proffer a list of arbitrators from which a neutral party would be chosen to settle disputes arising out of the System Board's purported "decision" in Case No. 1-86. By letter dated May 12, 1989, counsel for Eastern responded to Captain Bavis stating that the automatic stay voided the System Board's purported "decision." Eastern's counsel also noted that the "decision" was issued in clear violation of System Board procedure and that the dispute "as to whether a merger had taken place would be resolved pursuant to the parties' conventional grievance procedures, and not under Section 13 of the Allegheny-Mohawk LPP's." (See, Eastern's Memorandum, Exhibit 4 (May 12, 1989 letter from Eastern's counsel to NMB) at 2 n. 1.)
On May 15, 1989, Captain Bavis attempted to file a grievance based upon Eastern's refusal to recognize and implement the award of the System Board of Adjustment in ALPA Case No. 1-86. In response, Eastern asserted that the arbitration award circumvented regular procedures and violated the automatic stay provisions. Eastern also asserted that "because of the award in ALPA Case # 1-86 is void and without effect, . . . Eastern declines to conduct an "Investigation and Hearing" as requested in your May 15, 1989 letter." (See, Order Fixing Time and Date of Hearing, Exhibit J at 1-2.)
I. Whether the automatic stay pursuant to § 362 of the Code is applicable to the System Board's informally issued award in Case No. 1-86 allegedly issued on March 8, 1989, but notarized on March 9, 1989 at 9:30 a.m.
II. Whether the automatic stay should be lifted to permit the System Board to issue its opinion in the arbitration proceeding in Case No. 1-86.
III. Whether the automatic stay should be lifted regarding the commencement of a new and separate arbitration concerning whether there has been a merger of Eastern and Continental which would trigger, inter alia, the application of the System Board's decision in Case No. 1-86.
Section 362(a)(1) of the Code provides for an automatic stay which springs into effect upon the filing of a petition for reorganization. In re Ionosphere Clubs, Inc., 105 B.R. 761, 763 (Bankr.S.D.N.Y.1989), citing In re Colin, Hochstin Co., 41 B.R. 322, 324 (Bankr.S.D.N.Y.1984). The stay precludes the "commencement or continuation" of all proceedings...
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