Krakowski v. Am. Airlines, Inc. (In re Amr Corp.), Case No. 11-15463 (SHL) (Confirmed)

• Decision Date: 08 March 2019
• Docket Number: Adv. Pro. No. 16-01138 (SHL),Case No. 11-15463 (SHL) (Confirmed)
• Citation: 598 B.R. 365
• Parties: IN RE: AMR CORPORATION, et al., Reorganized Debtors. John Krakowski, Kevin Horner and M. Alicia Sikes, Plaintiffs, v. American Airlines, Inc., and Allied Pilots Association, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

598 B.R. 365

IN RE: AMR CORPORATION, et al., Reorganized Debtors.John Krakowski, Kevin Horner and M. Alicia Sikes, Plaintiffs,

v.American Airlines, Inc., and Allied Pilots Association, Defendants.

Case No. 11-15463 (SHL) (Confirmed)

Adv. Pro. No. 16-01138 (SHL)

United States Bankruptcy Court, S.D. New York.

Signed March 8, 2019

JACOBSON PRESS & FIELDS P.C., Counsel for John Krakowski, Kevin Horner and M. Alicia Sikes, 168 North Meramec Avenue, Suite 150, Clayton, Missouri 63105, By: Allen P. Press, Esq., Lee Seham, Esq.

O'MELVENY & MYERS LLP, Counsel for American Airlines, Inc., Times Square Tower, 7 Times Square, New York, New York 10036, By: Mark W. Robertson, Esq., Sloane Ackerman, Esq. -and- 400 South Hope Street, Los Angeles, California 90071, By: Robert A. Siegel, Esq.

JAMES & HOFFMAN, P.C., Counsel for Defendant Allied Pilots Association, 1130 Connecticut Avenue, NW, Suite 950, Washington, DC 20036, By: Steven K. Hoffman, Esq., Darin M. Dalmat, Esq., Daniel M. Rosenthal, Esq.

MEMORANDUM OF DECISION

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court are the motions [ECF Nos. 14, 16]¹ of the Defendants American Airlines, Inc. ("American") and Allied Pilots Association ("APA") to dismiss the above-captioned adversary proceeding. Plaintiffs John Krakowski, Kevin Horner, and M. Alicia Sikes are former Trans World Airlines ("TWA") pilots that are now employed by American. See Complaint to Vacate Arbitration Award ¶¶ 2-4 [ECF No. 1] (the "Complaint"). Defendant APA is the union that represents American's pilots. See id. ¶ 6. The Plaintiffs seeks to vacate an award in an interest arbitration conducted under the Railway Labor Act, 45 U.S.C. §§ 151 et seq. (the "RLA"), to determine certain contractual rights under the collective bargaining agreement between American and APA. The Plaintiffs allege that their due process rights to a fair arbitration hearing were violated because of alleged bias on the part of the arbitrators.²

The Defendants seek dismissal of the Complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), asserting that the Plaintiffs lack standing to vacate the arbitration award, the action is time-barred under the RLA and the Plaintiffs have failed to state a claim for which relief can be granted. For the reasons set forth below, the Court grants the motions to dismiss based on the Plaintiffs' lack of standing and because the case is time-barred.

BACKGROUND

In November 2011, American filed for protection under Chapter 11 of the Bankruptcy Code. See Compl. ¶ 15. As part of its reorganization, American sought and obtained approval under Section 1113 of the Bankruptcy Code to abrogate its then-existing collective bargaining agreement with APA (the "Old CBA"). See id. ¶ 20; see also In re AMR Corp. , 477 B.R. 384, 454 (Bankr. S.D.N.Y. 2012) ; In re AMR Corp. , 478 B.R. 599, 602 (Bankr. S.D.N.Y. 2012). The Old CBA included a supplement, entitled Supplement CC, which modified American's pilot seniority list to incorporate former TWA pilots—including the Plaintiffs—that were brought into the company when American acquired the assets of TWA in 2001. See Compl. ¶¶ 9-10. Supplement CC stripped the former TWA pilots of much of the existing seniority that they had held at TWA. See id. ¶¶ 11-12. To compensate for the loss of seniority, Supplement CC created a "protective fence" that set aside a minimum number of Captain and First Officer positions at the St. Louis base, for which former TWA pilots were given preferential bidding. See id. ¶ 13. The Old CBA—including Supplement CC—was abrogated when the Debtors obtained the Section 1113 relief in September 2012. See id. ¶ 20.

In December 2012, American and APA came to an agreement on a new pilot collective bargaining agreement (the "New CBA"), which included a side letter of agreement numbered 12-05 ("LOA 12-05"). See id. ¶¶ 21-22. During the process of negotiating the New CBA, American represented that it intended to close the St. Louis base and eliminate the protective fence that had existed for the former TWA pilots. See id. ¶ 16. LOA 12-05 stated that "a dispute resolution procedure is necessary to determine what alternative contractual rights should be provided to TWA Pilots as a result of the loss of flying opportunities due to termination of Supplement CC and the closing of the STL base." LOA 12-05 at 1 (attached as Ex. 1 to APA Mem. in Supp. of Mot. to Dismiss [ECF No. 14-3] ); see also Compl. ¶ 22. Regarding the process, LOA 12-05 provided that "the Company and APA will engage in final and binding interest arbitration pursuant to Section 7 of the [Railway Labor Act]" in front of a panel "consist[ing] of three neutral arbitrators who are members of the National Academy of Arbitrators with Richard Bloch as the principal neutral." LOA 12-05 at 1-2; see also Compl. ¶ 24.

In January 2013, American and APA entered into a protocol agreement regarding the arbitration (the "Protocol Agreement"). See Compl. ¶ 31. The Protocol Agreement stated that the arbitration would "provide for party status at the hearings and for substantive presentations by: (1) American Airlines, Inc.; (2) a representative committee of AA Pilots ... and (3) a representative committee of TWA Pilots .... APA participation as a party ... shall not be for the purposes of advocating a substantive position but to facilitate an orderly process and resolution of the dispute." Protocol Agmt. § 1 (attached as Ex. 2 to APA Mem. in Supp. of Mot. to Dismiss [ECF No. 14-4] ).³ It further provided that "[w]hile party status for purposes of the Board's hearing proceedings shall be as specified in Section 1 of the Agreement, the ‘parties’ as to this Agreement and as used in the applicable Railway Labor Act provisions, shall be limited to AA and APA." Protocol Agmt. § 7. While the only parties to the arbitration were American and APA, APA established two committees to present evidence and arguments on its behalf: the APA AA Pilots Committee and the APA TWA Pilots Committee. See Compl. ¶ 38.

The Protocol Agreement also designated the members of the arbitration panel as Arbitrator Bloch—previously named under LOA 12-05—and Arbitrators Stephen Goldberg and Ira Jaffe. See Protocol Agmt. § 2; Compl. ¶¶ 25, 30. Arbitrator Goldberg is the president and founder of Mediation Research & Education Project, Inc. ("MREP"), an arbitration and mediation service focusing on labor/management disputes that serves as a referral service for its more than 60 members. See Compl. ¶¶ 26-27. MREP is a non-profit, but does receive fees for its services, as well as member contributions. See id. With respect to ex parte contacts, the Protocol Agreement specified that "[t]he Board may conduct informal ex parte discussions to the extent it deems such discussions useful in an attempt to obtain a voluntary resolution of the dispute." Protocol Agmt. § 4; see also Compl. ¶ 33.

The Protocol Agreement explicitly incorporated Sections 7, Third and Section 8 of the RLA. See Protocol Agmt. § 7. As to the finality of any award issued by the arbitrators, the Protocol Agreement provided that "[n]othing in this Agreement should be construed to require AA or APA to file a copy of the Board's award with a federal district court in order for the award to be final and binding .... The award shall be final and binding under Section 9 of the Railway Labor Act." Protocol Agmt. §§ 7-8.

The parties submitted their opening arbitration briefs in April 2013, and the arbitrators held seven days of hearings from April through June 2013. See Compl. ¶¶ 39-40. One of American's principal witnesses during the arbitration was Mark Burdette. See id. ¶¶ 29, 42. The arbitrators issued their opinion in July 2013, which the Plaintiffs assert most closely replicated American's proposal. See id. ¶ 43. American and APA then negotiated contract language based on the arbitrators' opinion. See id. ¶ 44. Mr. Burdette was one of America's principal negotiators during this process. See id. Issues arose during the drafting of the contract language, and on September 12, 2013 the arbitrators issued a "Ruling on Contract Language." Id. ¶ 45. A corresponding supplement to the new CBA, entitled Supplement C, was then approved. See id.

It subsequently came to light that Mr. Burdette and Arbitrator Goldberg communicated by email on an ex parte basis during the arbitration process. See id. ¶¶ 47-48. These communications included, among other things, congratulations shared between the two upon Arbitrator Goldberg's appointment to the panel,⁴ discussions regarding Mr. Burdette becoming a member of MREP,⁵ and Mr. Burdette's subsequent MREP membership.⁶ See id. ¶¶ 47-53. After the arbitrators issued their decision in the arbitration, Mr. Burdette also shared a mock award with Arbitrator Goldberg that Mr. Burdette had drafted with respect to the LOA 12-05 arbitration.⁷

See id. ¶ 54. Arbitrator Goldberg did not disclose these communications to the parties, nor did he share the fact that Mr. Burdette had become a member of MREP. See id. ¶¶ 48, 50, 57.

It also came to light that Arbitrator Bloch had ex parte communications with Thomas Reinert, American's counsel in the arbitration, during which Arbitrator Bloch proposed a possible settlement of the arbitration and asked Mr. Reinert to pass the proposal along to APA. See id. ¶¶ 58, 59.⁸

The Plaintiffs assert that they were denied their due process rights to a fair hearing because one or more of the arbitrators violated the Protocol Agreement and displayed bias or hostility towards one of the parties. See id. ¶¶ 60-61. Citing to the communications and business relationship between Arbitrator Goldberg and Mr. Burdette, the Plaintiffs contend that there was a conflict of interest between Arbitrator Goldberg and Mr. Burdette or that a reasonable person would believe that such a conflict of interest existed. See id. ¶¶ 61-65. Thus, the Plaintiffs contend that Arbitrator Goldberg was impermissibly biased in favor of Mr. Burdette during the...