Krakowski v. Am. Airlines, Inc. (In re AMR Corp.)

• Decision Date: 14 April 2017
• Docket Number: Adv. No. 14–01920 (SHL),Case No. 11–15463 (SHL)
• Citation: 567 B.R. 247
• Parties: IN RE: AMR CORPORATION, et al., Reorganized Debtors. John Krakowski, Kevin Horner and M. Alicia Sikes, individually and on behalf of those similarly situated, Plaintiffs, v. American Airlines, Inc., et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

567 B.R. 247

IN RE: AMR CORPORATION, et al., Reorganized Debtors.

John Krakowski, Kevin Horner and M. Alicia Sikes, individually and on behalf of those similarly situated, Plaintiffs,

v.American Airlines, Inc., et al., Defendants.

Case No. 11–15463 (SHL)

Adv. No. 14–01920 (SHL)

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

Signed April 14, 2017

JACOBSON PRESS & FIELDS P.C., Counsel for Plaintiffs, 168 North Meramec Avenue, Suite 150, Clayton, Missouri 63105, By: Allen P. Press, Esq.

O'MELVENY & MYERS LLP, Counsel for Defendant 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: Edgar N. James, Esq., 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 Defendants' motions to dismiss [ECF Nos. 40, 41]¹ the second amended complaint (the "Second Amended Complaint") [ECF No. 33] that was filed by Plaintiffs John Krakowski, Kevin Horner, and M. Alicia Sikes on behalf of themselves and all persons similarly situated against Defendants American Airlines, Inc. ("American") and the Allied Pilots Association (the "APA"), which is the pilots' union at American. The Plaintiffs are former Trans World Airlines ("TWA") pilots now employed by American. For the reasons set forth below, the Court grants the Defendants' motions to dismiss.

BACKGROUND

The factual background of this case is set forth in the Court's most recent decision in this case, familiarity with which is assumed. See Krakowski v. Am. Airlines, Inc. (In re AMR Corp.) , 538 B.R. 213 (Bankr. S.D.N.Y. 2015) (the " September 2015 Decision"). The parties and events involved have been the subject of extensive litigation before this Court in several cases, resulting in numerous other written decisions. See Krakowski v. Am. Airlines, Inc. (In re AMR Corp.) , 536 B.R. 360 (Bankr. S.D.N.Y. 2015) ; Krakowski v. Am. Airlines, Inc. (In re AMR Corp.) , 2015 WL 2414750 (Bankr. S.D.N.Y. May 19, 2015) ; Krakowski v. Am. Airlines, Inc. (In re AMR Corp.) , 2014 WL 2508729 (Bankr. S.D.N.Y. June 3, 2014). The Court takes judicial notice of these decisions, as they provide much needed context for the motions now before the Court.²

In April 2001, American acquired the assets of TWA. Second Amended Compl. ¶ 16. Shortly thereafter, American and the APA executed Supplement CC, which modified the pilot seniority list at American to include the former TWA pilots, while it stripped them of much of their existing seniority at TWA. Id. ¶¶ 17-19. Under Supplement CC, roughly half of these former TWA pilots were placed at the bottom of American's seniority list, while others were integrated into the list but retained only a fraction of the seniority that they held at TWA. Id. ¶¶ 18-19.

To compensate for this loss of seniority, Supplement CC created a "protective fence" in TWA's former hub at St. Louis. Id. ¶ 20. The protective fence set aside a minimum number of Captain and First Officer positions in St. Louis for which these former "legacy" TWA pilots were given preferential bidding. Id. "Thus, while reducing the seniority of legacy TWA pilots put them at a relative disadvantage for purposes of bidding against a much larger number of American pilots for positions on other routes, the protective fence guaranteed a certain number of desired positions on routes from St. Louis with bidding advantages for legacy TWA pilots." Krakowski , 2015 WL 2414750, at *1 ; see also Second Amended Compl. ¶ 20.

In November 2011, American filed for Chapter 11 protection. Second Amended Compl. ¶ 34. American subsequently obtained the Court's permission to abrogate its then-existing collective bargaining agreement (the "Old CBA") with the pilots and their union (the APA) under Section 1113 of the Bankruptcy Code. Id. ¶ 36; see also In re AMR Corp. , 477 B.R. 384, 454 (Bankr. S.D.N.Y. 2012) (finding that the Debtors established that changes were necessary to the collective bargaining agreement and rejecting many of the APA objections, but denying the Debtors' motion under Section 1113 of the Bankruptcy Code without prejudice because the Debtors failed to show that certain proposed changes were justified by either reference to the Debtors' business plan or the practices of the Debtors' competitors); In re AMR Corp. , 478 B.R. 599, 602 (Bankr. S.D.N.Y. 2012) (granting the Debtors' renewed motion under Section 1113 of the Bankruptcy Code ). The Old CBA was void as of September 5, 2012. Second Amended Compl. ¶ 37.

American and the APA subsequently negotiated a new collective bargaining agreement for its pilots, which took effect on January 1, 2013 (the "New CBA"). Id. ¶¶ 39, 44. At the same time, American and the APA entered into a letter agreement to continue using the same pilot seniority list that had been utilized under the Old CBA ("LOA 12-05"). See New CBA at LOA 12-05;³ Second Amended Compl. ¶ 39. LOA 12-05 provided that "[American] and [the] APA agree that the [legacy] TWA pilots' existing seniority placements on the Pilots' System Seniority List are final and shall continue pursuant to Section 13 of the CBA notwithstanding the termination of Supplement CC and any preferential flying rights associated with those seniority placements." See New CBA at LOA 12-05-1. Under the New CBA, therefore, American and the APA effectively agreed to use the same seniority list that was utilized under the Old CBA and Supplement CC, which meant that the Plaintiffs and other former TWA pilots remained at a lower seniority level than their actual years of service at TWA. Second Amended Compl. ¶¶ 39, 40. But the New CBA did not include the protective fence that had existed under Supplement CC. Id. ¶ 39. Instead, "[t]he APA and American agreed to appoint an arbitrator to decide how these [legacy TWA] pilots should be compensated for the loss of the ‘protective fence’ in St. Louis. But the APA and American also agreed that, when awarding relief, the arbitrator would not be allowed to revisit the issue of these pilots' loss of seniority in 2001." Krakowski , 2014 WL 2508729, at *1.

In their first amended complaint (the "First Amended Complaint") [ECF No. 1-9], the Plaintiffs raised a variety of claims based on the treatment of these legacy TWA pilots. Count I of the First Amended Complaint asserted that through the continued use of the seniority list under the Old CBA, American breached the terms of the New CBA. See First Amended Compl. ¶¶ 38-40. Count II asserted that by agreeing to use the old seniority list, the APA had breached its duty of fair representation to former TWA pilots now at American. See id. ¶¶ 49-50. Count III asserted that American had colluded in the APA's breach of its fiduciary duty. See id. ¶¶ 52-53.

In the September 2015 Decision, the Court dismissed Counts I and III in their entirety. See Krakowski , 538 B.R. at 225. As to Count I, the Court held that American's use of the old seniority list did not breach the terms of the New CBA. See id. at 218-21. On Count III, the Court found the Plaintiffs' conclusory allegations insufficient to state a claim for collusion against American, but ruled that the Plaintiffs could amend their complaint to adequately plead a claim against American for collusion in the APA's alleged breach of its duty of fair representation. See id. at 224-25.

As to the remaining claim for breach of the duty of fair representation against the APA, the Court dismissed the portion of Count II that relied upon the breach of contract claim asserted in Count I. See id. at 222-23. The Court, however, left open two other theories of liability under Count II. See id. at 223-24. These theories alleged that the APA breached its fiduciary duty to the legacy TWA pilots based on two actions:

Agreeing to a System Seniority List that mirrors the prior list created under Supplement CC and acknowledged by the APA in 2001 to be unfair to the former TWA pilots; and

Agreeing to a System Seniority List that treats the former TWA pilots differently (and worse) than the pilots of other airlines acquired by American.

First Amended Compl. ¶ 49; see also Second Amended Compl. ¶ 42.

The Court noted that these claims did not relate to the alleged breach of the New CBA but instead concluded that they could be construed to assert a claim during the discrete period of time after the abrogation of the Old CBA in September 2012 and before the Defendants agreed to enter into the New CBA in December 2012 (the "Post-Abrogation Period"). Krakowski , 538 B.R. at 223-24. With respect to these surviving claims, the Court stated,

[w]hile not expressly set forth in the Complaint, it appears that the Plaintiffs argue that the APA should not have agreed to use the old seniority list for former TWA pilots once the Old CBA was abrogated because the old seniority list was unfair once the corresponding job protections in Supplement CC had been eliminated. ... Drawing all reasonable inferences in favor of the Plaintiffs, therefore, the Court finds that the two remaining claims under Count II are distinct from the contract claim and survive independently.

Id. at 223 (emphasis added). The Court characterized these surviving claims as the APA having "violated its duty by agreeing to use the old seniority list immediately after the Old CBA was abrogated even though the job protections of Supplement CC were gone." Id. at 224 (emphasis added).

The Court also distinguished the surviving aspects of Count II from the claims asserted in the related case of Krakowski v. Am. Airlines, Inc., et al. , Adv. Proceeding No. 13-01283 ("Krakowski I "), which involves the same parties. In Krakowski I , the Plaintiffs initially alleged that the APA violated its duty...