In re Ionosphere Clubs, Inc.
| Decision Date | 06 April 1992 |
| Docket Number | No. 90 Civ. 6706 (RJW).,90 Civ. 6706 (RJW). |
| Parties | In re IONOSPHERE CLUBS, INC. and Eastern Airlines, Inc., Debtors. Martin R. SHUGRUE, Jr., Trustee for the Estate of Eastern Air Lines, Inc., Plaintiff-Appellee, v. AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Charles H. Copeland and Jack N. Mogus, Defendants-Appellants. |
| Court | U.S. District Court — Southern District of New York |
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Weil, Gotshall & Manges, New York City (Bruce R. Zirinsky, Laura M. Sillins, Matthew A. Cantor, of counsel), Verner, Liipfert, Bernhard, McPherson and Hand, Chartered, Washington, D.C. (Joseph L. Manson, of counsel), for appellee.
Cohen, Weiss & Simon, Richard M. Seltzer, Mary T. Connelly, New York City, for appellants.
Appellants Air Line Pilots Association, International ("ALPA"), Charles H. Copeland and Jack N. Mogus appeal from an order of the United States Bankruptcy Court for the Southern District of New York (Lifland, C.B.J.), entered August 14, 1990, as amended on September 13, 1990. The order (1) granted appellee Martin R. Shugrue (the "Trustee"), Trustee for the Estate of Eastern Airlines, Inc. ("Eastern") relief, pursuant to section 1113(e) of Title 11, United States Code (the "Bankruptcy Code"), from certain provisions of the Collective Bargaining Agreement ("CBA") adopted by Eastern and ALPA in February 1986, and (2) preliminarily enjoined appellants, pursuant to section 105(a) of the Bankruptcy Code, from prosecuting two actions against Eastern commenced in the United States District Court for the Southern District of Florida.
For the reasons that follow, the order of the bankruptcy court is vacated and the matter is remanded.
ALPA is an unincorporated labor organization and the authorized collective bargaining representative under the Railway Labor Act, 45 U.S.C. § 151 et seq. ("RLA"), for all airline pilots employed by Eastern. Prior to its institution of the instant bankruptcy proceedings, Eastern was a corporation engaged in the business of providing air transportation service in interstate and foreign commerce and was a "carrier" subject to the RLA.1
At all times relevant to this litigation, the relationship between Eastern and ALPA was governed by the CBA.2 Under the CBA, contractual grievances were subject to arbitration before the ALPA-Eastern System Board of Adjustment (the "System Board"). Similarly, disputes regarding pension rights were subject to arbitration before the ALPA-Eastern Pension Dispute Board (the "Pension Board"). According to ALPA, these arbitration procedures were not only mandated by the CBA, but were also required under the RLA and, in the case of the Pension Board, by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq.
On March 4, 1989, the International Association of Machinists and Aerospace Workers ("IAM") began a primary strike against Eastern. ALPA honored the IAM picket lines and engaged in a sympathy strike. On March 9, 1989, Eastern and its affiliate, Ionosphere Clubs, Inc., filed a petition for reorganization under Chapter 11 of the Bankruptcy Code.
In June 1989, Eastern filed an application to reject the CBA pursuant to section 1113 of the Bankruptcy Code. Section 1113 permits a debtor to modify or reject a collective bargaining agreement under certain circumstances. After ALPA invoked the mediation services of the National Mediation Board ("NMB"), pursuant to section 5 of the RLA, 45 U.S.C. § 155, Eastern withdrew this first § 1113 application.
Eastern filed a second § 1113 application in April 1990, which was adjourned following the appointment of the Trustee later that same month. On July 9, 1990, the NMB terminated its mediation efforts and issued a proffer of arbitration to Eastern and ALPA, pursuant to section 5, First of the RLA, requesting that the parties submit their dispute to binding interest arbitration. ALPA accepted, but Eastern rejected the proffer of arbitration. This rejection triggered the RLA's statutory cooling-off period, after which Eastern would have been entitled to unilaterally implement changes to the terms of the CBA. 45 U.S.C. § 155, First. The Trustee subsequently withdrew the pending motion to reject the CBA.
On July 19, 1990 ALPA filed a lawsuit in the United States District Court for the Southern District of Florida, seeking an injunction preventing Eastern from implementing any unilateral changes to the CBA and directing Eastern to bargain in good faith with ALPA (the "Bad Faith Lawsuit").
Eastern notified ALPA on January 12, 1990 that it considered all efforts to prosecute grievances and pension disputes to be in violation of the automatic stay of the Bankruptcy Code, 11 U.S.C. § 362. It advised ALPA that Eastern would no longer participate in the System Board or the Pension Board, except for those grievances and pension disputes it consented to arbitrate. Eastern notified ALPA that it would be willing to resolve certain grievances that would not be burdensome to Eastern's Chapter 11 estate or that would involve only de minimis monetary recoveries. Only those grievances that Eastern has agreed to process have subsequently gone forward before the Boards.
Appellants commenced an action against Eastern and certain Eastern employees on or about July 9, 1990, in the United States District Court for the Southern District of Florida, seeking to enjoin Eastern from refusing to participate in the operation of the System Board and the Pension Board (the "Grievance Lawsuit"). (The Bad Faith Lawsuit and the Grievance Lawsuit are collectively referred to as the "Florida Lawsuits.")
On or about August 1, 1990, the Trustee commenced an adversary proceeding in the bankruptcy court, seeking a declaratory judgment that the CBA was no longer in effect as of August 10, 1990 and that the Trustee was authorized to make unilateral changes to the CBA beginning on August 11, 1990. Alternatively, the Trustee seeks an order authorizing him to reject the CBA in accordance with section 1113(a) of the Bankruptcy Code. The complaint also requests a ruling that the Florida Lawsuits were commenced in violation of the automatic stay and an order enjoining appellants from continuing to prosecute the Florida Lawsuits and from commencing any other action against appellees in any court or forum other than the bankruptcy court. In addition, the complaint seeks an order directing that ALPA and any individual pilots with grievances or pension disputes file any claims against Eastern with the bankruptcy court or forfeit those claims.
Contemporaneous with the commencement of the adversary proceeding, the Trustee filed a motion seeking preliminary relief in the form of (1) an order authorizing the Trustee to implement certain wage, work rule and other changes to the CBA on an interim basis pursuant to section 1113(e) of the Bankruptcy Code and (2) a temporary restraining order and preliminary injunction enjoining appellants from proceeding with the Florida Lawsuits pending a determination of the merits of the adversary proceeding in the bankruptcy court.
On August 1, 1990, the bankruptcy court granted a temporary restraining order enjoining appellants from proceeding with the Florida Lawsuits and set a hearing date for the motion. On August 7, 1990, Bankruptcy Judge Blackshear denied ALPA's motion for a stay of the temporary restraining order pending appeal. Subsequently, on August 8, 1990, Judge Miner of the Court of Appeals for the Second Circuit denied ALPA's petition for a stay of the order pending appeal.
The hearing on the Trustee's motion was held on August 13 and 14, 1990. At the hearing, ALPA objected to the proposed modifications to the CBA, stating that they did not constitute the type of emergency, temporary relief contemplated by section 1113(e). After hearing testimony from the Trustee and two Eastern officials, Judge Lifland ruled from the bench, granting the Trustee's motion in all respects. That same day, the bankruptcy judge issued a written decision and an order and judgment authorizing implementation of interim modifications to the CBA and issuing a preliminary injunction pursuant to § 105(a) of the Bankruptcy Code. Decision on Motions Pursuant to § 1113(e) ("Decision") and Order and Judgment ("Order"), both dated August 14, 1990. The bankruptcy court found that the Trustee's proposed modifications of the CBA were necessary to avoid irreparable harm to Eastern's estate and that the Bad Faith Lawsuit would, if successful, prevent Eastern from making those changes. Decision at 13. The bankruptcy court also concluded that a preliminary injunction enjoining the Grievance Lawsuit was warranted because a decision in the adversary proceeding might render that action moot. Id. at 14-15.
Following the granting of his motion, the Trustee moved, on September 10, 1990, for certain changes to the order permitting the interim modifications to the CBA. The Trustee requested, inter alia, that the pilots' wages, which had been substantially reduced under the bankruptcy court's order, be raised somewhat so as to spread out savings from wage reductions over a longer period of time. In support of this second motion, the Trustee submitted evidence that the wage reductions had produced bitter complaints among the working pilots and that many had threatened to quit the company as a result. At the hearing on the motion, ALPA renewed its objection that interim modifications to the CBA authorized by the bankruptcy court do not conform to the requirements of § 1113(e). On September 14, 1990, the bankruptcy court amended the Order to incorporate the changes requested by the Trustee. This appeal followed.
Appellants raise a host of issues on this appeal, many of which do not appear to have been argued before the bankruptcy court. The following three...
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