In re Mesaba Aviation, Inc.

• Decision Date: 23 October 2006
• Docket Number: Bankruptcy No. 05-39258,Adversary No. 06-3428.
• Citation: 350 B.R. 112
• Parties: In re MESABA AVIATION, INC., d/b/a Mesaba Airlines, Debtor. Mesaba Aviation, Inc., Plaintiff, v. Aircraft Mechanics Fraternal Association, et al., Defendants.
• Court: U.S. Bankruptcy Court — District of Minnesota

350 B.R. 112

In re MESABA AVIATION, INC., d/b/a Mesaba Airlines, Debtor.

Mesaba Aviation, Inc., Plaintiff, v. Aircraft Mechanics Fraternal Association, et al., Defendants.

Bankruptcy No. 05-39258, Adversary No. 06-3428.

United States Bankruptcy Court, D. Minnesota.

October 23, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Alan L. Kildow, DLA Piper Rudnick Gray Cary, Michael F. McGrath, Michael L. Meyer, Will R. Tansey, Ravich Meyer Kirkman & McGrath Nauman, Minneapolis, MN, Kenneth B. Hipp, Lynne T T Toyofuku, Marr Hipp Jones & Wang LLLP, Honolulu, HI, for Debtor.

ORDER GRANTING PRELIMINARY INJUNCTION IN FAVOR OF PLAINTIFF

GREGORY F. KISHEL, Chief Judge.

This adversary proceeding came on for hearing on October 17, 2006, on the Plaintiff's motion for a preliminary injunction. The Plaintiff appeared by the following counsel: Timothy R. Thornton, of Briggs and Morgan, Minneapolis (arguing), Michael L. Meyer and Will R. Tansey, of Ravich Meyer Kirkman McGrath & Nauman, Minneapolis, and Kenneth B. Hipp, Marr Hipp Jones & Wang, LLLP, Honolulu. The Defendants appeared by the following counsel, each organizational defendant's counsel also noting an appearance for the individual defendants associated with that organization: for the Air Line Pilots Association, International ("ALPA"), James L. Linsey and Joseph J. Vitale, of Cohen, Weiss and Simon, LLP, New York, and James M. Jorissen, of Leonard, O'Brien, Spencer, Gale, & Sayre, Ltd., Minneapolis; for the Association of Flight Attendants-CWA, AFL-CIO ("AFA"), Robert S. Clayman, of Guerrieri, Edmond, Clayman & Bartos, P.C., Washington, D.C., and Joel D. Nesset of Henson & Efron, P.A., Minneapolis; and for the Aircraft Mechanics Fraternal Association ("AMFA"), Nicholas P. Granath, of Seham, Seham, Meltz & Petersen, LLP, Minneapolis, and Lucas Middlebrook, of Seham, Seham, Meltz & Petersen, LLP, New York. The National Mediation Board, as intervenor, appeared by Roylene A. Champeaux, Assistant United States Attorney, Minneapolis. Though not a named party, the Unsecured Creditors' Committee in the Plaintiff's Chapter 11 case appeared by counsel Tim J. Robinson, of Squire, Sanders & Dempsey, LLP, Columbus, and Thomas J. Lallier, of Foley & Mansfield, PLLP, Minneapolis.

The following memorandum of decision on the motion is based on the evidence received at the hearing, certain documentary exhibits received in associated proceedings in BKY 05-39258 as noted herein, and briefing and argument submitted by counsel.

INTRODUCTION

The Plaintiff ("the Debtor") is a debtor-in-possession in a pending case for reorganization under Chapter 11. Via this adversary proceeding, it requests equitable and declaratory relief against the organizational defendants, which are three labor unions that represent over 1,100 of the Debtor's employees, plus certain of their officers and employees.¹ Most specifically, it seeks an injunction against the Unions' exercise of self-help, i.e., striking, in the wake of the Debtor's court-authorized rejection of its collective bargaining agreements with the Unions pursuant to 11 U.S.C. § 1113, and the Debtor's subsequent imposition of modified terms of employment, i.e., reductions in the amount of employee compensation and benefits. At this point, the Debtor moves for a preliminary injunction under Fed.R.Civ.P. 65(a), as incorporated by Fed. R. Bankr.P. 7065.

The Debtor is a carrier subject to the Railway Labor Act, 45 U.S.C. § 151 et seq. ("the RLA"). The Unions are the authorized bargaining agents for, respectively, the mechanics, the flight attendants, and the pilots whom the Debtor employs. The Debtor's relationship with each union was subject to the terms of a collective bargaining agreement and the RLA's governance when the Debtor filed for Chapter 11.

The Debtor argues that, upon its rejection and imposition, the intertwining of substantive law under the Bankruptcy Code, specifically § 1113 and the RLA, deprives the Unions of a present right to strike. It then argues that that circumstance overrides those terms of the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq. ("NLGA"), that otherwise deprive the federal courts of jurisdiction to enjoin a union's right to self-help — thereby making its requested relief available in this forum. In turn, the Unions maintain that the NLGA trumps all authority cited by the Debtor, as to them individually or collectively, because no other law prevents them from striking. Thus, the Unions argue, they must be free to strike as a response to any imposition of modified terms by the Debtor.

These arguments frame up the several issues presented on the Debtor's motion. There is almost no on-point case law authority treating most of the issues, as they arise from the very specific facts and postures of the parties at bar. There is none at all as to at least one issue.

PROCEDURAL HISTORY

1. The Debtor filed a voluntary petition under Chapter 11 in this Court on October 13, 2005.

2. In late November, 2005, the Debtor's management approached representatives of the Unions, requesting the Unions' consent to modifications of the terms of compensation and benefits and various "work rules" under the several collective bargaining agreements. The Debtor was seeking to substantially reduce its ongoing labor costs, as a part of its reorganization in bankruptcy. The Debtor made these overtures to initiate a so-called "pre-1113 process," trying to get these costs reduced via voluntary concessions from the Unions without having to seek formal authorization from the Bankruptcy Court to reject the collective bargaining agreements under 11 U.S.C. § 1113. By late January, 2006, the "pre-1113 process" had not resulted in agreements to modify the terms of employment.

3. On February 3, 2006, the Debtor filed its motion under § 1113, seeking authority to reject the collective bargaining agreements and to impose the modified terms of employment it had proposed, without the Unions' consent. After an expedited discovery process and continuing efforts by the Debtor and the Unions to reach a consensual modification, the motion came on for an evidentiary hearing. The hearing ultimately spanned one calendar month, from late February to late March, 2006, consuming fifteen days of actual time in-court.

4. After the record was closed on the motion, the Debtor continued to negotiate with one or more of the Unions. Pending that negotiation, the Debtor and all of the Unions stipulated to successive extensions of the due date for the Court's decision on the motion that was otherwise applicable under 11 U.S.C. § 1113(d)(2). When the parties would no longer stipulate to an extension, the Court rendered its decision on May 18, 2006. The Court found that the Debtor had met its burden on most of the recognized elements of § 1113, but denied the motion on three stated grounds. The decision was later reported as In re Mesaba Aviation, Inc., 341 B.R. 693 (Bankr.D.Minn.2006).

5. The parties continued their negotiations after that. At the same time, the Debtor took action to address the three deficiencies in its case for § 1113 relief, as a hedge against the failure of negotiation.

6. After the post-decision negotiations did not produce consensual modifications, the Debtor filed a second motion under § 1113, on June 12, 2006. This motion came on for an evidentiary hearing that ultimately consumed three days of in-court time, on June 26-28, 2006. During the hearing, the Debtor produced unrebutted evidence that there had been no change in its financial position and business prospects from those that prevailed at the time of the first hearing.

7. After the record was closed on the second motion, the parties continued to negotiate. On July 14, 2006, the Court rendered decision on the second motion, holding that the Debtor had remedied the defects of its first motion, had now proved up all of the elements of § 1113, and was now entitled to reject and impose. That relief was accorded by an order entered on the same date.

8. The Unions took an appeal from that order to the United States District Court. After an expedited administration of the appeal, the District Court (Davis, J.) rendered a decision on September 13, 2006, currently reported as ___ B.R. ___, 2006 WL 2739046. The District Court affirmed this Court on all but two issues that had been treated in the July 14 order, reversed as to those two issues alone, and remanded for further proceedings consistent with its opinion.

9. In the meantime, the Debtor had continued efforts toward negotiation with one or more of the Unions. It continued them after the District Court's decision. Those efforts did not produce consensual modifications of any union's collective bargaining agreement.

10. On September 29, 2006, the Debtor filed a motion to reopen the record on its second motion, to address the two issues on which the District Court had remanded. At a hearing that consumed two days of in-court time, the Court granted the motion, reopened the record, and received evidence and argument on those issues.

11. After the record was closed on that stage of the § 1113 proceedings, the Court scheduled a hearing for October 12, 2006, to read a decision onto the record. In the meantime, the Debtor continued to negotiate with at least one of the Unions. On October 12, over the objections of the Debtor and its Unsecured Creditors' Committee, the Court granted the Unions' request to defer the rendering of decision until Monday, October 16, 2006, to allow the Debtor and the Unions to engage in intensive negotiations over the following weekend. At the AFA's counsel's request, the Court ordered the Debtor's counsel to execute a "reservation of rights" letter in favor of the AFA, to preserve the AFA's right to raise a technical but substantial issue in further proceedings if no accord was reached. The Court ordered this in deference to the AFA's professed willingness to...