Mairose v. Federal Exp. Corp.

Decision Date24 July 2001
Citation86 S.W.3d 502
PartiesSteve MAIROSE, et al., v. FEDERAL EXPRESS CORPORATION.
CourtTennessee Court of Appeals

Kenneth Roberts, Larry Kelly, Denver, CO; Robert L.J. Spence, Jr., M. Scott Willhite, Memphis, TN, for appellants.

R. Larry Brown, Colby S. Morgan, Memphis, TN; E. Scott Smith, Andrew D. McClintock, Atlanta, GA, for appellees.

ALAN E. HIGHERS, J., delivered the opinion of the court, in which DAVID R. FARMER, J., and HOLLY KIRBY LILLARD, J., joined.

OPINION

ALAN E. HIGHERS, J.

This appeal arises from a breach of contract claim brought by the Appellants against the Appellee. Following a six week jury trial, the jury entered a verdict in favor of the Appellants. The Appellee filed a motion for a judgment notwithstanding the verdict and, in the alternative, a motion for a new trial. The Chancery Court of Shelby County granted the Appellee's motion for a judgment notwithstanding the verdict and, in the alternative, granted a conditional new trial.

The Appellants appeal the grant of the Appellee's motion for a judgment notwithstanding the verdict and the grant of a conditional new trial by the Chancery Court of Shelby County. For the reasons stated herein, we affirm in part, reverse in part, and remand this case for a new trial in accordance with this opinion.

I. Facts and Procedural History

The Appellee, Federal Express Corporation ("Fed Ex"), is a multi-billion dollar corporation `which provides air and ground overnight express delivery services. Prior to the acquisition which is the subject of this appeal, FedEx delivery routes were limited mainly to the United States, and FedEx employed approximately 1,000 pilots ("pilots" or "crewmembers").

Employment conditions of the pilots are established by the Flight Crewmember Handbook ("FCH"). (Exhibit 1). The FCH is "a legal and binding agreement between each flight crewmember and Federal Express Corporation." FedEx and the pilots agree that the FCH is an individual contract between FedEx and each pilot. The FCH governs pilots' seniority, which regulates pilots' pay rates, flight schedules, vacations, and retirement benefits. FedEx operates under a date-of-hire seniority system so that the seniority number a pilot receives on his first date of employment establishes his position on the FedEx master seniority list. The goal of a FedEx pilot is to advance higher on the list, closer to the number one position.1 A pilot advances on the list when pilots ahead of him on the list resign, retire, or are terminated. The FCH establishes the following provisions for seniority:

1-85 Crewmember Seniority

1-86 Seniority will begin to accrue on the date a pilot is employed by the Company as a crewmember and begins Initial Training and Basic Indoctrination. It will continue to accrue during his entire employment period.

1-88 As of October, 1972, and henceforth, the date of employment as a crewmember will establish a crewmember's position on the Master Seniority List. Effective June 1, 1981, when two or more crewmembers are employed on the same date, they will be placed on the Master Seniority List according to the highest number represented by the last four digits of their social security number, i.e. the crewmember having the highest number (9999) will receive the lowest seniority number. When two or more crewmembers are employed on the same data and have the same last four digits, their relative seniority position will be determined by drawing lots.

1-89 A crewmember will retain his seniority until he resigns or retires from the Company, or is terminated under any provision of this manual.

1-90 Seniority will govern all crewmembers in cases of promotion or demotion, retention in case of a reduction in personnel, assignment or reassignment due to expansion or reduction in schedules or equipment, and choice of Vacancies.

In July, 1988, a revision was made to the FCH which added section 1-96 to address the status of the pilots' seniority if FedEx acquired another airline.

1-96 In the event the Company acquires or merges with another airline employing Flight Crewmembers, any such crewmembers selected for retention will be awarded seniority in accordance with FCH 1-85, Crewmember Seniority, with the exception of FCH 1-88.

On December 16, 1988, FedEx entered into an agreement with Tiger International ("Tiger") which called for the acquisition of a majority interest in Tiger, of which Flying Tiger Line was a wholly owned subsidiary, by FedEx. By acquiring Tiger, FedEx acquired Tiger's international routes, allowing FedEx to deliver internationally. After entering into the agreement, FedEx immediately notified its pilots of the acquisition. The Tiger pilots became FedEx employees on August 7, 1989, referred to as "T-Day."

The acquisition agreement contained a provision that stated that FedEx would adopt labor protective provisions ("LPPs"). The relevant sections of the LPPs, sections three and thirteen, state, in pertinent part:

Section 3. Insofar as the merger affects the seniority rights of the carriers' employees, provisions shall be made for the integration of seniority lists in a fair and equitable manner, including, where applicable, agreement through collective bargaining between the carriers and the representatives of the employees affected. In the event of failure to agree, the dispute may be submitted by either party for adjustment in accordance with Section 13.

* * * *

Section 13. (a) In the event that any dispute or controversy ... arises with respect to the protections provided herein which cannot be settled by the parties within 20 days after the controversy arises, it may be referred by any party to an arbitrator selected from a panel of seven names furnished by the National Mediation Board for consideration and determination.

FedEx claims that had it not agreed to adopt the LPPs, specifically sections three and thirteen, the acquisition of Tiger would not have occurred.

FedEx immediately recognized that there could be a conflict between section 1-96 of the FCH and the LPPs unless section 1-96 was eliminated or suspended from the FCH before the acquisition. FedEx claims that the FCH was at all material times expressly amendable. The introduction section to the FCH states, in pertinent part:

This Handbook sets forth the work rules and policies regarding flight crewmembers employed by Federal Express Corporation ... these work rules and policies are in effect as of the date of publication of this Handbook, are a commitment on all parties involved, and remain in effect until formally revised (ref FCH Revision Procedure).

The FCH designates two methods by which a work rule or policy of the FCH can be modified: the revision process and the bulletin process. The revision process is a permanent change to the FCH. The bulletin process is a temporary change to the FCH. The bulletin process cannot be used to effectuate a permanent change to the FCH. A Notice of Exception bulletin, one of three types of bulletins, permits exceptions to certain provisions of the FCH.

Where an operational need exists, either as a singular occurrence or one which spans a temporary and specific period of time, the Revision Committee may issue a bulletin to except certain provisions of the FCH in order to accommodate this need. A Notice of Exception must specify an effective date and will include a date of initiation and expiration. A Notice of Exception is in no way intended to abrogate the provisions in the FCH or to make arbitrary changes in its content without the use of the Revision Process.

The Revision Committee proposed a revision to section 1-96 which intended to delete section 1-96 from the FCH. The Flight Advisory Board ("FAB") approached flight management and proposed, in place of a revision, a bulletin to section 1-96 which would suspend application of section 1-96 for purposes of the Tiger acquisition only. On August 4, 1989, the Revision Committee approved a bulletin exception, Bulletin 89-25, to section 1-96 of the FCH. (Exhibit 1). Bulletin 89-25 provides, in pertinent part:

The existing provisions of FCH 1-96 shall remain unchanged except for the purpose of the merger of the Federal Express/Flying Tigers Flight Deck Crew-members Master Seniority Lists. The terms of a fair and equitable merged Federal Express/Flying Tigers Flight Deck Crewmember Master Seniority List(s) including any and all conditions, restrictions and priorities applicable thereto and deemed a part thereof, shall be constructed in accordance with Sections 3 and 13 of the LPPs and are incorporated herein.

The pilots argue that the bulletin process could not be used to abrogate their seniority under the master seniority list. The pilots also argue that seniority was not adjustable, revisable, or modifiable under the FCH because it was not considered a "work rule or policy." Additionally, the pilots argue that the FAB never had the authority to bind them to a bulletin exception to section 1-96.

The FedEx and Tiger Merger Committees were unable to negotiate an integrated seniority list pursuant to section three of the LPPs. Pursuant to section thirteen of the LPPs, the Merger Committees selected an arbitrator, George Nicolau ("Ni-colau") to merge the two pilot seniority lists. Representatives of FedEx and the Merger Committees executed a Tripartite Agreement which stated that the Merger Committees had authority to represent the pilot groups of FedEx and Tiger and that Nicolau's award would be binding. After thirty-one days of arbitration hearings, Nicolau created a merged seniority list and issued an opinion and award on May 26. 1990. A copy of the opinion and award was delivered to each pilot. The merged seniority list became effective, for bidding purposes, in July, 1990. FedEx claims that the pilots took no immediate legal action to challenge the arbitration award until the...

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