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

• Decision Date: 12 June 2018
• Docket Number: Case No. 11-15463 (SHL),Adv. No. 13-01283 (SHL)
• Parties: In re: AMR CORPORATION, et al., Reorganized Debtors. JOHN KRAKOWSKI, et al., Plaintiffs, v. AMERICAN AIRLINES, INC., et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

In re: AMR CORPORATION, et al., Reorganized Debtors.

JOHN KRAKOWSKI, et al., Plaintiffs,
v.
AMERICAN AIRLINES, INC., et al., Defendants.

Case No. 11-15463 (SHL)
Adv. No. 13-01283 (SHL)

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

June 12, 2018

Chapter 11

(Confirmed)

MEMORANDUM OF DECISION

APPEARANCES:

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 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.

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

SEAN H. LANE UNITED STATES BANKRUPTCY JUDGE

Before the Court are the Defendants' motions for summary judgment [ECF Nos. 111-1, 114]¹ with respect to the Plaintiffs' modified supplemental class action complaint filed on behalf of the Plaintiffs and all persons similarly situated (the "Complaint") [ECF No. 48]. Plaintiffs John Krakowski, Kevin Horner, and M. Alicia Sikes are former Trans World Airlines ("TWA") pilots that are now employed by American Airlines, Inc. ("American"). The Complaint alleges that the Allied Pilots Association ("APA")—the pilots' union at American—breached its duty of fair representation to the Plaintiffs and that American colluded in that breach.²

As part of American's bankruptcy restructuring, the company sought and received authority to reject its then-existing collective bargaining agreement with APA (the "Old CBA"). See Plaintiffs' Response to American's Statement of Material Facts ("Resp. to American SMF") ¶ 3 [ECF No. 122]. American subsequently negotiated a new collective bargaining agreement with APA (the "New CBA") that eliminated certain job protections that legacy TWA pilots like the Plaintiffs had held under the Old CBA. See Resp. to American SMF ¶¶ 2-4. At the same time, American and APA entered into a letter agreement that contemplated an arbitration

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proceeding to create new job protections for these legacy TWA pilots as an alternative to those lost under the New CBA. See Resp. to American SMF ¶¶ 4-6.

The Court has issued two prior decisions in this adversary proceeding granting dismissal of many of the claims asserted by the Plaintiffs against the Defendants. See Krakowski v. American Airlines, Inc. (In re AMR Corp.), 536 B.R. 360 (Bankr. S.D.N.Y. 2015); Krakowski v. American Airlines, Inc. (In re AMR Corp.), 2014 WL 2508729 (Bankr. S.D.N.Y. Jun. 3, 2014).³ The Plaintiffs' remaining claims allege breaches of APA's duty of fair representation with respect to the procedures used to conduct the arbitration, and assert that American colluded in those breaches. See generally Krakowski, 536 B.R. 360; Compl. ¶¶ 48(E)-(J), 57. For the reasons set forth below, the Court grants the Defendants' motions for summary judgment and denies the Plaintiffs' related motion to amend the Complaint. [ECF No. 134].

BACKGROUND

A. The Collective Bargaining Agreement and Establishment of the Arbitration

In 2001, American acquired the assets of TWA. See Resp. to American SMF ¶ 1. Shortly thereafter, American and APA executed an agreement entitled "Supplement CC" that integrated the TWA pilots into American's pilot group. See Resp. to American SMF ¶ 2. Supplement CC modified American's pilot seniority list to include the former TWA pilots, but stripped these former TWA pilots of much of the seniority earned while at TWA. See Resp. to

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American SMF ¶ 2. But it also constructed a "protective fence" at American's St. Louis pilot base, which created a minimum number of captain positions for legacy TWA pilots and provided them with preferential bidding for first officer positions. See Resp. to American SMF ¶ 2.

In November 2011, American filed for protection under Chapter 11 of the Bankruptcy Code. See Resp. to American SMF ¶ 3. As part of its reorganization, American sought and obtained the Court's permission to abrogate its obligations under the Old CBA, including Supplement CC, pursuant to Section 1113 of the Bankruptcy Code. See Resp. to American SMF ¶ 3; In re AMR Corp., 477 B.R. 384, 393-95 (Bankr. S.D.N.Y. 2012); In re AMR Corp., 478 B.R. 599, 601-02 (Bankr. S.D.N.Y. 2012); In re AMR Corp., 2012 WL 3834798 (Bankr. S.D.N.Y. Sept. 5, 2012), aff'd, 523 B.R. 415 (S.D.N.Y. 2014), aff'd, 622 Fed. App'x 64 (2d Cir. 2015). In December 2012, American and APA came to an agreement on the New CBA, which included a side letter of agreement numbered 12-05 ("LOA 12-05"). See Resp. to American SMF ¶¶ 4-5. Later that month, the Court entered an order approving the New CBA. See Resp. to American SMF ¶ 10.

The New CBA, including LOA 12-05, was voted on and ratified by APA membership, including the legacy TWA pilots. See Resp. to American SMF ¶ 8. Approximately 81% of the participating pilots at American's St. Louis domicile voted in favor of the New CBA. See Resp. to American SMF ¶ 9. Significantly, about 85% of the legacy TWA pilots at American were APA members in St. Louis at the time of the vote. See Resp. to American SMF ¶ 9.

LOA 12-05 provided that American "will have the right, in its sole discretion, to decide whether to close the existing STL pilot base," and 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

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the STL base."⁴ Resp. to American SMF ¶ 5 (quoting Am. Ex. A, LOA 12-05 at 1 [ECF No. 117-1]). With respect to the dispute resolution process, LOA 12-05 stated that the parties would "engage in final and binding interest arbitration" 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." Resp. to American SMF ¶ 6 (quoting Am. Ex. A, LOA 12-05 at 1, 2 [ECF No. 117-1]). Under LOA 12-05, the arbitrators were to "decide what non-economic conditions should be provided to TWA Pilots," but "[i]n no event shall the arbitrators have authority to modify the Pilots' System Seniority List . . . or impose material costs beyond training costs on the Company." Resp. to American SMF ¶ 7 (quoting Am. Ex. A, LOA 12-05 at 2 [ECF No. 117-1]).

During the relevant time period, the APA Board was composed of two members from each of several geographic pilot "bases," including the St. Louis base, who were elected by APA members at their respective bases and served as advocates for those pilots. See Resp. to APA SMF ¶¶ 9-10. During the period relevant to this case, nearly all of APA's members at the St. Louis base—at least 93%—were legacy TWA pilots. See Resp. to APA SMF ¶ 11. In 2012, the APA Board members that were elected from the St. Louis base were Captain Keith Bounds and Captain Douglas Gabel, both of whom were legacy TWA pilots. See Resp. to APA SMF ¶ 12. During 2012, Captain Gabel reached his term limit as an APA Board member and Captain

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Marcus Spiegel, a legacy TWA pilot, was elected by the St. Louis base to replace Captain Gabel. See Resp. to APA SMF ¶ 17.

APA attorney Edgar James, Esq. negotiated the language of LOA 12-05 on behalf of APA. See Resp. to APA SMF ¶ 18. In doing so, he consulted frequently with Captains Gabel, Bounds and Spiegel from the St. Louis base. See Resp. to APA SMF ¶ 19. Indeed, Captain Gabel "was involved in the formation of LOA 12-05 from the early drafts in February 2012 through the final agreement." See Resp. to APA SMF ¶ 19 (quoting Pl. Ex. 4, Decl. of Douglas J. Gabel ¶ 13 [ECF No. 97-4]). While Captains Gabel and Bounds opposed the limitation on changes to seniority contained in LOA 12-05, it is undisputed that they approved all of the other language of LOA 12-05, including the language identifying Arbitrator Bloch as the principal arbitrator. See Resp. to APA SMF ¶¶ 20, 39-40; Resp. to American SMF ¶ 8. Additionally, American and APA both agreed that Arbitrator Bloch should serve as the principal arbitrator because he was a prominent Railway Labor Act arbitrator that was familiar to airline industry practitioners. See Resp. to American SMF ¶ 6.

In January 2013, American and APA entered into a protocol agreement regarding the LOA 12-05 arbitration (the "Protocol Agreement"). See Resp. to American SMF ¶ 11. The Protocol Agreement stated that the LOA 12-05 arbitration would "provide for party status and 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 . . . ." Resp. to American SMF ¶ 14 (quoting Am. Ex. B, Protocol Agreement ¶ 1 [ECF No. 117-2]).

The representative committee of legacy AA Pilots (the "AA Pilots Committee") was chaired by Captain Mark Stephens and also included Captain Michael Mellerski, Captain James Eaton, and Captain Drew Engelke. See Resp. to American SMF ¶ 15. Captain Stephens chose

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the other members of the AA Pilots Committee. See Resp. to APA SMF ¶ 34. The representative committee of legacy TWA Pilots (the "TWA Pilots Committee") was chaired by Captain Gabel and also included Captain Dave Williams, Captain John Swanson, First Officer Cary Bouchard, and First Officer Thomas Duncan, all of whom were legacy TWA pilots. See Resp. to American SMF ¶ 16; Resp. to APA SMF ¶ 25. Captain Gabel was chosen as the chair of the TWA Pilots Committee by Captains Bounds and Spiegel, the two legacy TWA pilots that were then serving as the elected representatives from the St. Louis base. See Resp. to APA SMF ¶ 24. Captain Gabel chose the other members of the TWA Pilots Committee. See Resp. to APA SMF ¶ 25.

American was not consulted or otherwise involved in selecting the members of...