Scerba v. Allied Pilots Ass'n

• Decision Date: 10 December 2013
• Docket Number: 13 Civ. 3694 (LAK) (AJP)
• Parties: LARRY SCERBA, et al., Plaintiffs, v. ALLIED PILOTS ASSOCIATION, Defendant.
• Court: U.S. District Court — Southern District of New York

LARRY SCERBA, et al., Plaintiffs, v. ALLIED PILOTS ASSOCIATION, Defendant.

13 Civ. 3694 (LAK) (AJP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

December 10, 2013

REPORT AND RECOMMENDATION

ANDREW J. PECK, United States Magistrate Judge:

To the Honorable Lewis A. Kaplan, United States District Judge:

Plaintiffs bring this action against the Allied Pilots Association ("APA"), their collective bargaining representative, for breach of the duty of fair representation and violation of the Railway Labor Act ("RLA"). (Dkt. No. 1: Compl. ¶¶ 149-67.) Presently before the Court is defendant APA's motion to dismiss the action as time-barred pursuant to Fed. R. Civ. P. 12(b)(6). (Dkt. No. 13: Notice of Motion.)

For the reasons set forth below, APA's motion should be GRANTED and the case should be dismissed as time-barred.

FACTS

Plaintiffs are sixty-nine senior airline pilots (the "Pilots") employed by American Airlines, Inc. prior to November 1, 1983, who were covered by Supplement B to the Collective Bargaining Agreement ("CBA") between American and defendant Allied Pilots Association ("APA"), the certified collective bargaining representative for American's pilots. (Dkt. No. 1: Compl. ¶¶ 1, 5-76; Dkt. No. 14: APA Br. at 2.)

Supplement B

In 1983, the Pilots agreed to certain concessions to alleviate economic conditions that threatened American's survival. (Dkt. No. 1: Compl. ¶¶ 2, 85, 88 & Ex. A: Supp. B Preamble; Dkt. No. 14: APA Br. at 2; Dkt. No. 17: Scerba Opp. Br. at 2.) In consideration for these concessions, the APA and American entered into Supplement B to the CBA on November 4, 1983. (Compl. ¶¶ 2, 86 & Ex. A: Supp. B Preamble; APA Br. at 2; Scerba Opp. Br. at 2.) "The intent of Supplement B was to ensure that the [P]ilots who had ensured the survival of the airline would not later become victims as a disfavored minority as more junior pilots assumed a majority position." (Scerba Opp. Br. at 2; accord Compl. ¶ 3.)

At issue in American's underlying bankruptcy proceeding and in this action are the following provisions of Supplement B:

1. The Company [American] agrees that it will take no action, at any time, by way of notice, negotiations or otherwise, to diminish the pay or the retirement benefit programs in effect on the date hereof for pilots hired prior to November 1, 1983, and that such pilots shall enjoy such pay and pension benefits for so long as they are qualified under applicable governmental regulations and the provisions of the Collective Bargaining Agreement to perform flying duties, on an approved leave of absence, or disability retirement, and this Agreement shall remain in effect for such period of time.

2. This Agreement as provided herein shall remain in effect so long as any pilot with job security remains in the active employ of the Company as a flight crew member or retains recall rights. The parties hereto, as well as the persons bound hereby, irrevocably waive the right to serve any Section 6 notice, under the Railway Labor Act, of an intended change which, if adopted, would have the effect of modifying any of the provisions contained in this Agreement or otherwise to require bargaining as to such provisions, provided, however, that this Agreement may be changed by unanimous agreement between the parties and a majority of the pilots with job security and guarantee of employment as provided herein.

3. Neither the Company nor the Allied Pilots Association, their successors, assigns or affiliates, shall challenge, contest, or question the legality, validity, or enforceability of this Agreement, or any provision thereof, in any judicial, administrative, or other proceeding, and each of the parties shall participate in defending the legality, validity, and enforceability of this Agreement in any judicial, administrative, or other proceeding involving any of its provisions.

(Compl. Ex. A: Supp. B §§ B.1-B.3, emphasis added; see Compl. ¶¶ 3-4, 89-100; APA Br. at 2; Scerba Opp. Br. at 2-3.)

Timeline: American's Bankruptcy Proceedings and Negotiations With the APA

American filed for Chapter 11 bankruptcy on November 29, 2011. (Dkt. No. 1: Compl. ¶ 103; Dkt. No. 14: APA Br. at 3; Dkt. No. 17: Scerba Opp. Br. at 3.) "[I]mmediately after filing its bankruptcy petition," American notified the Pilots that they were no longer entitled to lump-sum retirement benefit payments. (Compl. ¶ 111; APA Br. at 3.)

On March 22, 2012, the Pilots demanded that American and the APA negotiate with them concerning this adverse change to their retirement benefits, as required by Supplement B. (Compl. ¶¶ 98, 106; APA Br. at 3; Scerba Opp. Br. at 3-4.) American and the APA refused to negotiate with the Pilots, and on March 27, 2012, American moved for leave to reject the CBA (including Supplement B) under § 1113 of the Bankruptcy Code.¹ (Compl. ¶¶ 107-10; APA Br. at 3; Scerba Opp. Br. at 4; Ch. 11 Dkt. No. 2035: 3/27/12 Notice of § 1113 Motion.)²

On March 30, 2012, plaintiff Larry Scerba, unrepresented by the APA, filed a class RLA grievance on behalf of the Pilots (the "Scerba Class Grievance") complaining that American had violated Supplement B. (Compl. ¶¶ 139-40, 142; Scerba Opp. Br. at 6, 17.)³

On April 3, 2012, the Pilots filed objections to American's § 1113 motion, arguing that "American and APA have already violated the provisions of Supplement B during the Section 1113 negotiation process." (APA Br. Ex. 1: Pilots 4/3/12 Obj. to § 1113 Motion at 2.) The Pilots objected on the following bases:

American Airlines, as part of its current Section 1113 motion, is proposing changes that would diminish the existing pay and/or benefit programs in a manner that would adversely affect pilots hired prior to November 1, 1983 (Supplement B pilot beneficiaries). Through these proposals and resulting negotiations with APA, American Airlines has violated the procedural provisions of Supplement B by engaging in efforts to modify or eliminate Supplement B without consulting and negotiating with the covered pilots. Moreover, American Airlines has also already violated Supplement B substantively by advising covered pilots that, if they retire now, they are no longer entitled to a lump-sum retirement option.

These ongoing efforts to modify or eliminate Supplement B through this bankruptcy process, in the manner described herein, not only runs afoul of therequirements of 11 U.S.C. § 1113, but at the same time these actions would expose [American] and the APA to hybrid duty of fair representation ("DFR") liability.

(APA Br. Ex. 1: Pilots 4/3/12 Obj. to § 1113 Motion at 2-3, emphasis added; see APA Br. Ex. 2: Pilots 4/19/12 Reply Obj. to § 1113 Motion; APA Br. at 5 & n.3.)

In April and May 2012, United States Bankruptcy Judge Sean H. Lane held a trial on American's § 1113 motion. (Compl. ¶ 113; APA Br. at 3; Scerba Opp. Br. at 4.) Despite Supplement B's requirement that the APA "participate in defending the legality, validity, and enforceability of [Supplement B] in any judicial, administrative, or other proceeding," the APA failed to defend Supplement B in any way during the § 1113 trial. (Compl. ¶¶ 4, 115-17, 156 & Ex. A: Supp. B § B.3; APA Br. at 3; Scerba Opp. Br. at 4.)

On June 26, 2012, while awaiting Judge Lane's § 1113 decision, American proposed a "'Last, Best and Final Offer'" to the APA including a provision stating that the "'APA need not agree to the abrogation of Supplement B, but shall not oppose any future [American] efforts to abrogate Supplement B.'" (Compl. ¶ 120; see also Compl. ¶¶ 4, 119, 157; APA Br. at 3; Scerba Opp. Br. at 4.) On June 27, 2012, the APA Board of Directors approved American's proposal as a tentative agreement. (Compl. ¶¶ 121-22; APA Br. at 3; Scerba Opp. Br. at 4-5.)

On August 15, 2012, Judge Lane denied American's § 1113 motion without prejudice on grounds unrelated to the Pilots' objections. See In re AMR Corp., 477 B.R. 384, 394 (Bankr. S.D.N.Y. 2012).⁴ Judge Lane rejected the Pilots' objections on the merits (APA Br. at 5-6), holding:

Before the Trial, these Supplement B Pilots filed an objection to the Motion on grounds that American failed to negotiate in good faith. Specifically, they argue that the "sweeping" Section 1113 changes proposed by American violate the express terms of Supplement B, which prohibits any modification to the Supplement B Pilots' pension and benefits except in instances of "unanimous agreement between the parties and a majority of the [covered] pilots . . . ." The Supplement B Pilots have interpreted this provision to be a "'permanent guarantee' of employment and financial security for pre-1983 pilots." The Supplement B Pilots further argue that, in the absence of the majority consent of Supplement B pilots described above, any agreement between American and the APA to modify benefits would be a breach of the duty of fair representation by the APA and American.

. . . .

. . . [T]he Court overrules both objections on the merits for several reasons. As a threshold matter, there is nothing in Section 1113 itself that supports the notion that a collective bargaining right can exist in perpetuity. Indeed, the case law says otherwise. In [a 1992 case], the Second Circuit permitted debtors to reject an agreement containing a lifetime job guarantee for certain employees, sadly observing

The typographers' union [asked the court] what such guarantees mean, if they are not honored. All but 15 of these employees, under the debtor's proposal, will lose their jobs over time. To this question there is no convincing answer except perhaps that nothing is forever today.

Moreover, the underlying purpose of Section 1113 is to promote negotiations among the parties towards new collective bargaining agreements; the notion that these supplemental agreements exist in perpetuity is antithetical to Section 1113's purpose. The position of the Supplement B . . . Pilots that their rights cannot be changed is also inconsistent with Section 1113's call for equal sacrifice from all employees.

Considering

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