Vaughn v. Kristjansson
| Decision Date | 14 May 2010 |
| Docket Number | Docket No. 08-4173-cv. |
| Citation | 604 F.3d 703 |
| Parties | Jerry L. VAUGHN, John Anderton, Stephen Lee Avery, John R. Baganz, David W. Baughman, John Beglin, David D. Bentley, Gregory B. Blair, Bryan F. Bogdan, Richard E. Bowden, Robert D. Boyd, Terry E. Brock, Tim R. Bronson, Jordan Brown, Margaret Bruce, Mark F. Butler, Jerry E. Callahan, Gene Carswell, Carl C. Chappell, Bruce B. Clark, Daryl Ray Click, Terry Lee Collette, Robert Converse, Robert D. Coons, Marshall P. Copeland, Jack R. Cosper, Mitchell Cowan, James Richard Cunningham, Michael R. Davis, Gerard M.J. Donovan, Robert W. Dowgialo, Todd Michael Edwards, James Eng, Gerard P. Fenzel, Thomas Carter Fitzpatrick, James Clyde, Paul R. Flood, Fred Freshwater, Ronald J. Gabor, Michael S. Galbraith, Michael W. Gillis, Ronald H. Gordan, Ronald F. Gorr, Richard T. Graves, James Grizzard, Donald Gunter, Robert Hale, Boyd Hunt Harris Jr., Jeffrey Charles, Hathorn, Gary M. Henderson Sr., Michael J. Hinchliffe, Dale A. Hopta, Gary K. Huss, Robert Inscoe, David H. Jacobson, David Johnson, Dennis R. Johnson, Gale Denning Johnson Jr., Walter Johnston, Sigurdur V. Kristjansson, Ira Josephson, Richard A. Kertz, Richard W. Krishock, George T. Kuhn, Philip S. Laudenslager, Robert Lee, Edward J. Leviker, Richard K. Libby, Daniel C. Littlefield, Richard Lytle, Larry L. Martin, Sidney G. Matlock, Larry D. McCarroll, Stanley W. McKee, Woody Menear, Arthur H. Middleton, William Mio, Gary Malloy, Roger L. Moore, Cindy Munn, Michael Mychalishyn, Robert B. Nairn, James R. Nash, George Neely, Jim Newark, David Ordorica, Andrew S. Orochena, Richard T. Osborne, Carlisle C. Owen, Tom N. Park Jr., William W. Patterson, Irwin Pentland, William Puckett, David Reno, Shaul Ringler, John G. Ross, John V. Sabel, Kenneth Sager, Donald Sammons, Ron Schilling, F. Theodore Schott III, Richard Scoskie, James E. Sharkey, Russell J. Shaw, Larry E. Shuck, Albert B. Smith, Doug A. Stansbury, Robert R. Starr, Chesley B. Sullenberger III, Paul M. Summerville, Richard H. Tabler, Randall H. Tomb, Tom Trebby, Daniel James Von Bargen, Steve Wadecki, James Raymond Wagner, James N. Walther, Darrell W. Ward, Leonard Ware, Jerry Wayne, Floyd Bertram Wells, Robert W. Williams and Michael Wade Wright, Plaintiffs-Appellants,v.AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Duane E. Woerth, as President of Air Line Pilots Association, International, William Pollock, Michael D'Angelo, Tom Simmons, Dan Scola, Lyle Newman, Don Baier, Paul Hocking, Ray Belz, Bruce Limpitlaw, Doug Mowery, Michael Tosi, Tim Baker, Richard Moseley, Kim Snider, John Brookman, U.S. Airways, Group, Inc., and U.S. Airways, Inc., Defendants-Appellees.Retirement Systems of Alabama and Retirement Systems of Alabama Holdings, LLC., Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
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Todd E. Duffy (James E. Atkins, Dennis J. Nolan, on the brief), Duffy & Atkins LLP, New York, NY, for Appellant.
James L. Linsey (Eyad Asad, Clay Warner, on the brief) Cohen, Weiss and Simon LLP, New York, NY, for Appellee.
Before: POOLER, HALL, and LIVINGSTON, Circuit Judges.
Plaintiffs-Appellants, more than 100 U.S. Airways, Inc. (“US Airways”) pilots, over or approaching the age of sixty, appeal from a July 24, 2008 Memorandum and Order of District Court Judge Sandra Townes of the Eastern District of New York dismissing their Fourth Amended Complaint against Defendants-Appellees, the Air Line Pilots Association, International (“ALPA”) and Duane Woerth, former president of ALPA.1 Vaughn v. Air Line Pilots Ass'n, Int'l, 395 B.R. 520 (E.D.N.Y.2008).
In this opinion, we address only plaintiffs' duty of fair representation claims, having addressed their remaining claims in a summary order issued simultaneously with this opinion. The district court dismissed all three of plaintiffs' fair representation claims, concluding that plaintiffs failed to show that ALPA had breached its duty of fair representation and that, for certain claims, plaintiffs failed to show causation between ALPA's actions and their injuries. We now affirm.
This case arises against the backdrop of the September 11, 2001 terrorist attacks and the subsequent financial troubles of the airline industry. For all times relevant to this action, ALPA was the labor organization that represented U.S. Airways pilots.2 Under the collective bargaining agreement in effect in 2001, U.S. Airways maintained a defined benefit plan (“DB Plan”) for the pilots that guaranteed them a certain level of pension benefits upon retirement. Although the contributed funds were invested, and thus subject to gains and losses, each pilot's promised benefits remained constant. Pursuant to the Employee Retirement Income Security Act (“ERISA”), the plan was required to have sufficient funding to pay 80% of promised benefits at all times. If the plan's funding dropped below 80%, U.S. Airways was required to make contributions to bring it to the required level.
Between 1999 and 2001, the DB Plan was either over-funded or fully funded and, therefore, U.S. Airways was not required to make any contributions. In 2002, however, U.S. Airways reported that, because of poor stock market performance, the plan was only funded at 64%. At the same time, U.S. Airways publicly announced that it was experiencing serious financial difficulties caused in part by the September 11 terrorist attacks.
In the spring and summer of 2002, U.S. Airways approached ALPA's U.S. Airways Master Executive Council (“MEC”) to request substantial concessions from the pilots on wages and benefits, claiming that such concessions were necessary to stave off bankruptcy. The MEC agreed to the concessions. At the same time, U.S. Airways obtained tentative approval of a $1 billion loan package guaranteed by the Air Transportation Stabilization Board (“ATSB”), which was conditioned on U.S. Airways demonstrating that it could achieve certain revenue and cost reduction targets over a seven-year period. See In re U.S. Airways Group, Inc., 296 B.R. 734, 737 (Bankr.E.D.Va.2003).
Despite the pilots' concessions, U.S. Airways filed for bankruptcy under Chapter 11 on August 11, 2002. Id. at 737. Seeking a “fast track” reorganization, U.S. Airways obtained a $500 million loan from Retirement Systems of Alabama (“RSA”), which also agreed to invest $240 million in U.S. Airways once it exited bankruptcy in exchange for a 37% interest in the company. Id. at 738. However, U.S. Airways's financial condition continued to deteriorate in the wake of reduced passenger revenue and increased fuel costs and it determined that it could not meet the revenue targets upon which the ATSB and RSA loans were conditioned. Id.
As a result, U.S. Airways again approached ALPA and asked for additional concessions from the pilots. Among the concessions was modification of the DB Plan. Without conducting an independent audit to assess the financial health of the DB Plan, ALPA agreed to its modification in addition to other wage and benefit cuts. When confronted by its failure to conduct an audit, ALPA erroneously stated to its members that it could not compel the company to disclose the financial condition of the DB Plan. In fact, the collective bargaining agreement explicitly gave ALPA the right to conduct such an audit.
Unfortunately, this second round of concessions failed to solve the DB Plan's deficit, which, according to U.S. Airways, was projected at $1.7 billion over the next seven years. Id. U.S. Airways and ALPA pursued several potential solutions, including asking the IRS for a waiver of funding obligations and the Pension Benefit Guaranty Corporation for restoration funding. Id. at 738-39. After these efforts failed, U.S. Airways and ALPA conducted confidential negotiations that produced an agreement in which U.S. Airways agreed to negotiate and create a follow-up pension plan if the DB Plan had to be terminated. Id. at 739. The terms of this agreement were to remain confidential if and until the DB Plan was terminated, although ALPA members soon learned of the agreement, interpreting it as ALPA's tacit consent to the DB Plan's termination.
In January 2003, U.S. Airways petitioned the bankruptcy court to “distress terminate” the DB Plan under ERISA. Over ALPA's objection, the bankruptcy court ruled that U.S. Airways met the requirements for a distress termination recognizing that the $1 billion loan guarantee from ATSB was dependent on resolution of the pension funding deficit. Id. at 744-46. Following the ruling, the two parties began negotiating the termination of the DB Plan and the creation of a follow-up plan. An actuary retained by ALPA to audit the plan verified U.S. Airways' calculations concerning the plan's current and projected shortfall. During negotiations, several ALPA members received letters from two union officials, assuring the pilots that they would have an opportunity to vote on any proposal to terminate the DB Plan and implement a new plan.3 However, on March 22, 2003, without any vote, U.S. Airways and ALPA agreed to replace the DB Plan with a new defined contribution plan (“DC Plan I”).
Under the DC Plan I, U.S. Airways was required to make contributions at different rates for each pilot based on a complex formula aimed at helping pilots achieve a target benefit amount upon retirement. The formula provided for greater contributions to pilots approaching the mandatory retirement age of 60 than to younger pilots who had more time to accrue contributions. However, the higher contributions to older pilots were still limited to 100% of the pilot's salary, meaning that regardless of the higher contributions, pilots close to 60 were less likely to meet the targeted retirement amount than younger pilots. Plaintiffs also allege that under the plan, older pilots would also receive a significant amount of their contributions subject to immediate taxation whereas...
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