Petition for Writ of Certiorari — Frontier Pilots Litigation Steering Committee v. Texas Air Corp.

oF

No, 93-

IN THE

Supreme Court of the United States

OCTOBER TERM 1993

FRONTIER PILOTS LITIGATION

STEERING COMMITTEE,

Plaintiffs-Appellants

V.

TEXAS AIR CORPORATION,

CONTINENTAL AIRLINES, INC.

PEOPLE EXPRESS, INC., JOHN ADAMS

and JOHN DOES | through 10,

Defendants-Appellees.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Third Circuit

PETITION FOR WRIT OF CERTIORARI

Kenneth A. B. Roberts, Jr.

KENNETH A. ROBERTS, P.C.

555 East 8th Avenue

Denver, Colorado 80203

(303)839-5161

James P. Anellii

FRIEDMAN, SEIGELBAUM

Seven Becker Farm Road

Roseland, New Jersey 07068

(201)992-1990

October 6, 1993 Attorneys for Petitioners

Balmar Legal Publishing Services, Washington, D.C., (202) 682-9800

—————————— NT

i

QUESTIONS PRESENTED FOR REVIEW

1. Whether it is proper for the District Court, applying

Colorado law, to summarily dismiss an uncertified class action

lawsuit without taking into consideration and applying control-

ling Colorado precedent which negates summary disposition.

2. Whether it is proper for the District Court to summarily

dismiss an uncertified class action lawsui. under F.R.C.P. 56

when discovery on the Rule 56 issues remains outstanding and

unanswered by the moving party in defiance of existing Court

orders authorizing discovery.

3. Whether it is proper for the District Court to invoke the

doctrines of res judicata and collateral estoppel to summarily

dismiss an uncertified class action lawsuit when the cause of

action in the pending case has never been actually litigated or

decided and was not ripe for adjudication in the prior proceed-

ings.

4. Whether it is proper for a District Court in an uncer-

tified class action lawsuit to summarily adjudicate disputed

issues of personal knowledge of a few members of the class and

apply those contested findings to the entire class so as to invoke

summary disposition.

5. Whether the members of an uncertified class action

lawsuit seeking damages in excess of $500 million have been

deprived of fundamental due process rights by a summary

dismissal under Rule 56, without benefit of discovery, which

applies the doctrines of res judicata and collateral estoppel to a

cause of action which the Plaintiff class never knew existed prior

to the initiation of the proceedings below.

il

PARTIES TO THE PROCEEDING

The Plaintiff is the Frontier Pilots Litigation Steering Com-

mittee, a committee of former Frontier Pilots incorporated under

the laws of the State of Colorado and composed of individuals

who are either currently employed by Continental Airlines as a

result of job offers they accepted from Continental Airlines in

the fall of 1986 or who were initially employed by Continental

Airlines in 1986 but thereafter ceased such employment, or who

signed a Job Preservation and Litigation Settlement Agreement

(“JPA”). All members of the class are pilots formerly employed

by Frontier Airlines, Inc.

The Defendants are Texas Air Corporation, Continental

Airlines, Inc., People Express, Inc., John Adams, and John Does

1 through 10.

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TA +s 3. OF CONTENTS

PARTIES TO THE PROCEEDING ......... il

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SUMMARY OF ARGUMENT ...........

fe eran ene eee

I. THE DISTRICT COURT DENIED THE

PLAINTIFF CLASS FUNDAMENTAL

DUE PROCESS BY IGNORING

CONTROLLING COLORADO

PRECEDENT WHICH WOULD

HAVE DEFEATED THE BASIS FOR

SUMMARY JUDGMENT ......... 6

A. The Controlling Colorado Decision

of Berger v. Security Pacific Information

Systems, 795 P.2d 1380 (Colo. App. 1990)

Defeated the Basis for Summary Judgment

by Placing an Affirmative and Full Duty

of Disclosure on a Prospective Employer

in Connection with Prospective Employees’

FutureEmployment ........... 8

II. THE DISTRICT COURT DENIED THE

PLAINTIFF CLASS FUNDAMENTAL

DUE PROCESS BY DENYING THE

PLAINTIFF CLASS ANY DISCOVERY

WHATSOEVER .........-..-.. 1]

N Mm NY WN

iV

A. To Grant a Party Discovery - and Then to

Take it Away Once an Opposing Party

Has Filed for Summary Judgment on

the Very Issues on Which Discovery

is Sought - Is the Very Essence of a

Due Process Violation ..........

B. Summary Judgment in Advance of

Discovery is Error under Pronounce-

ments by the Third Circuit and

TRG 6-3 28 6 eee eee

[l. THE DISTRICT COURT’S APPLICATION

OF THE RES JUDICATA/COLLATERAL

ESTOPPEL DOCTRINES IN ORDER TO

ENTER SUMMARY JUDGMENT BASED

ON DISPUTED GENUINE ISSUES OF

MATERIAL FACT WAS A DENIAL OF

FUNDAMENTAL DUE PROCESS

IV. THE DISTRICT COURT’S IMPUTATION

OF DISPUTED KNOWLEDGE TO THE

PLAINTIFF CLASS IN ENTERING

SUMMARY JUDGMENT WAS A

DENIAL OF FUNDAMENTAL DUE

POUIRAEEO oc 84 0k 8 eee

CERVULARGAN 26 6s 6s 6 cw eee

14

16

20

23

"

TABLE OF AUTHORITIES

Cases

Altergott v. Yeager,

543 P.2d 1293, 1296 (Colo. App. 1975)

Anderson v. Liberty Lobby, Inc..

477 U.S. 242, 257 (1986) ...........

Arnold Pontiac GMC, Inc. v. General Motors C orp..,

786 F.2d 564, 568 (3d Cir. 1986) ...... .

Baker v. Paine Weber, Jackson and C urtis, Inc..,

637 F. Supp 419, 422 (D.N.J. 1986)

Bang v. Ward, 12 N.J. Misc. 415, 420.

FT AOE Gee) ws. Te ke

Banquet Arab v. Bulk Oil.

726 F. Supp. 1411, 1422 (S.D.N.Y. 1989)

Berger v. Security Pacific Information S ystems,

795 P.2d 1380 (Colo. App. 1990) .......

Celotex Corp. v. Catrett,

477 U.S. 317, 322 (1986) ...........

Chipollini v. Spencer Gifts, Inc..

814 F.2d 893, 900 (3d Cir. 1987) .......

Costlow v. United States.

552 F.2d 560, 563-64 (3d Cir. 5 er SoD

Dean Whitter Reynolds Inc. v. Byrd,

470 U.S. 213 (1985)... 2... 0.00222.

Dowling v. City of Philadelphia,

855 F.2d 136, 139 (2d Cir. ee

First Chicago International v. United

Exchange Co., Ltd., 836 F.2d 1375.

1380 (D.C. Cir. 1985)... 2.0000

Page(s)

15

v1

In re Parkinson,

102 B.R. 141, 142 (C.D. Il. 1988) ......

Mannington Mills v. Longoleum Industries,

610 F.2d 1059 (3d Cir. 1979) .........

Martin v. Malhazt,

830 F.2d 237, 256 (D.C. Cir. 1986) ......

Matsushita Electric Industrial Co. v. Zenith Radio

Corp., 475 U.S. 574 (1986) ..........

Noyola v. Texas Department of Human Resources,

846 F.2d 1021, 1023 (Sth Cir. 1988) .....

Pomeroy v. Waitkus,

S17 P.28 FPO, aee Cee. TSTS) . vw cee

Reiver v. Murdough and Walsh, P.A.,

625 F.Supp. 998, 1004 (D. Del. 1985)

Sames v. Gabel,

732 F.2d 49, 51 (3d Cir. 1984) ........

Spurling v. Hoffman-LaRoche, Inc.,

118 F.R.D. 392, 398 (D.N.J. 1988) ......

Other Authorities

OF Te EE. 90k 35 fers See

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tS ot J.) PRP ee eae aera a

No.93-_

IN THE

Supreme Court of the United States

OCTOBER TERM 1993

FRONTIER PILOTS LITIGATION

STEERING COMMITTEE,

Plaintiffs-Appellants

Pa

TEXAS AIR CORPORATION,

CONTINENTAL AIRLINES, INC.

PEOPLE EXPRESS, INC., JOHN ADAMS

and JOHN DOES | through 10,

Defendants-Appellees.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Third Circuit

PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

The Letter Opinion and Order of the United States District

Court for the District of New Jersey entered on September 25,

1992 is reprinted in the Appendix at pages Al-A37.

The Judgment Order of the United States Court of Appeals

for the Third Circuit on appeal from the United States District

Court for the District of New Jersey entered June 10, 1993 is

reprinted in the Appendix at pages B1-B2.

The Judgment Order of the United States Court of Appeals

for the Third Circuit on Petition for Rehearing En Banc entered

July 8, 1993 is reprinted in the Appendix at pages C1-C2.

i ie

2

JURISDICTION

Jurisdiction of this Honorable Court is invoked under 28

U.S.C. § 1254(1). The Judgment Order of the Court of Appeals

was entered on July 8, 1993.

STATEMENT OF THE CASE

From late 1985 through most of 1986, Frontier Airlines was

a wholly owned subsidiary of People Express, Inc. (“PEI”). On

August 28, 1986, PEI caused Frontier to file for bankruptcy in

the United States Bankruptcy Court for the District of Colorado

seeking reorganization pursuant to Chapter 11 of the Federal

Bankruptcy Code.

Shortly thereafter, Texas Air Corporation (“TAC”), lead

by Frank Lorenzo, made public negotiations to acquire all of

Froniier’s outstanding stock and assets and to reemploy

Frontier’s employees at Continental Airlines, a wholly owned

subsidiary of TAC. Lorenzo’s representatives conducted

negotiations with Frontier’s pilots, the Plaintiff class in this case,

between September 15, 1986 and October 1, 1986.

As part of those negotiations, Lorenzo’s representatives

prepared a document entitled Job Preservation and Litigation

Settlement Agreement (“JPA”). The purpose of the JPA was

ostensibly to integrate the Frontier pilots into Continental

through a seniority arbitration. However, the JPA contained

numerous preconditions to that process, including requirements

that the arbitration be biased against the Frontier pilots and that

the class waive millions of dollars in bankruptcy claims which

they held against PEI (which TAC was acquiring as part of the

transaction) and others, including Continental and Frontier. The

JPA was ultimately executed in October of 1986 and a seniority

arbitration based on its terms (the “Nicholau arbitration’) oc-

curred the following year. It was through this process that the

class of Plaintiffs in this action were integrated into Continental

Airlines and suffered over $500 million in damages as described

?

3

in Proofs of Claim filed in the Continental bankruptcy proceed-

ings in 1991 by the Plaintiff class herein.

In April of 1989, almost two years after the Nicholau

arbitration was concluded, and in connection with an action

brought against Continental by the People Express pilots,

Continental’s representatives admitted the existence of another

arbitration and seniority agre ment entitled Labor Protection

Agreement (“LPA”).! The purpose of the LPA, which had been

drafted prior to Continental’s negotiations with the Frontier

pilots, was also to provide for seniority integration procedures

into Continental Airlines. However, unlike the JPA, the LPA

contained no preconditions to the arbitration and required no

waiver of claims, and was, over-all, a far Superior arbitration and

integration agreement for the Plaintiff class.

The LPA was neither adequately disclosed nor explained

to the Frontier pilots during their negotiations and, in fact, was

described by Lorenzo’s representatives as a “non-existent” and

“meaningless” document having no affect on the Frontier pilots’

employment prospects. These representations were false, and

were intended to induce the Plaintiff class into signing the JPA

in lieu of the LPA.

When Continental’s representatives later admitted in April

of 1989 in the PEX case that the LPA did exist and was intended

to govern seniority integration into Continental Airlines, and

having been deprived of its salutary benefits during the Septem-

| The case of PEX Pilots Merger Committee v. Texas Air Corporation,

et al. Civil Action No. 87-1155, United States District Court for the District

of New Jersey (the “PEX” case) was filed by former pilots of People Express

Airlines seeking to compel arbitration and integration into Continental under

the terms of the LPA. It was in conjunction with this action that Continental

ultimately admitted in April of 1989 that the LPA was a binding agreement

intended to govern employment and integration procedures through which

employees of PEI and its subsidiaries (including the Plaintiff class) would

become pilots at Continental.

4

ber 1986 negotiations, all former Frontier pilots affected by the

concealment and non-disclosure of the LPA filed suit on Sep-

tember 19, 1989 in the United States District Court for the

District of New Jersey (the case below) alleging claims of

fraudulent inducement, misrepresentation, and tortious inter-

ference with contract. The case below was brought as a class

action, but was dismissed before formal class certification could

be obtained.

In late 1990, while the case below was pending and Court-

ordered discovery remained outstanding, the corporate Defen-

dants herein filed for Bankruptcy protection, and the case below

was stayed. On October 2, 1991, pursuant to an evidentiary

hearing on the merits, the United States Bankruptcy Court for

the District of Delaware lifted the automatic stay “for cause”

under 11 U.S.C. § 362(d)(1) and ordered the Plaintiff class’

damages case and limited discovery to proceed before the

District Court.?

Refusing to allow any discovery whatsoever, and imputing

knowledge of the LPA to the Plaintiff class, which the class

disputed, the District Court summarily dismissed the Plaintiffs’

class action lawsuit under F.R.C.P. 56 on res judicata and

collateral estoppel grounds. The District Court ruled that the

Frontier pilots should have raised an LPA - based fraud claim

in conjunction with the Nicholau arbitration and Frontier

bankruptcy proceedings which pre-dated the April 1989 dis-

closures. The District Court’s dismissal was upheld without

explanation by the United States Court of Appeals for the Third

Circuit.

Basis for Federal Jurisdiction Below

The District Court’s jurisdiction was based on 28 U.S.C. §

1332.

2 One of the findings which the Bankruptcy Court was required to make

in lifting the Automatic Stay “for cause” was a “probability of prevailing on

the merits.” See e.g.,1n re Parkinson, 102 B.R. 141, 142 (C.D. IU. 1988).

5

SUMMARY OF ARGUMENT

The crucial issue before this Court is whether it was proper

for the District Court to summarily dismiss the Plaintiff’s class

action lawsuit, before the class was even certified, and thereby

deprive the Plaintiff class of their day in Court, on the basis of

a res judicata/collateral estoppel argument that the Plaintiff

class should have litigated an LPA-based fraud Claim in arbitra-

tion and bankruptcy proceedings which pre-dated the dis-

closures which gave rise to the claims below.

The District Court’s res judicata/collateral estoppel ruling

was predicated on its finding that the Plaintiff class (as yet

uncertified) had “sufficient knowledge” about the facts to raise

an LPA-based fraud claim in the Nicholau arbitration and Fron-

tier bankruptcy proceedings which preceded the LPA dis-

Closures in 1989. Affidavits were introduced into evidence

before the District Court by members of the Plaintiff class

Stating that they had-no basis to believe that an LPA-based fraud

claim even existed until April of 1989 when Continental ad-

mitted, for the first time, both the existence and the intended

affect of the LPA. Affidavits of counsel who represented the

Frontier pilots in the Nicolau arbitration proceedings conducted

pursuant to the JPA were introduced Stating that no LPA fraud

Cause of action existed or could have been legitimately pursued

in Conjunction with those arbitration proceedings.

Controlling precedent under Colorado law. which the Dis-

trict Court was obliged to follow,3 was introduced which re-

quired the Defendants to make a full and complete disclosure of

all material information affecting the Plaintiffs’ employment

prospects during the September 1986 negotiations, and

evidence was introduced that the Defendants had concealed, and

then later misrepresented, both the existence and the intended

affect of the LPA from September of 1986 through April of

The District Court stated that “Colorado law governs this case,” App.

at p. A-20, but failed to apply that law to the issues. See infra at Section I.

6

1989. Finally, evidence was introduced that the LPA-based

fraud claim at issue in these proceedings had never been actually

litigated or decided in either the Nicholau arbitration or the

Frontier bankruptcy proceedings, thereby rendering the

doctrines of res judicata and collateral estoppel inapplicable as

a matter of law.

ARGUMENT

In entering summary judgment in favor of the Defendants,

the District Court: (1) completely disregarded controlling

Colorado precedent which precluded the basis for summary

judgment; (2) deprived the Plaintiff class of any discovery

whatsoever on the very issues on which the Defendants were

seeking summary judgment; and (3) imputed personal

knowledge to members of the Plaintiff class - hotly disputed by

those same individuals - to enable the District Court to conclude

that the Plaintiff class knew or should have known of the basis

for an LPA-based fraud claim long before either the LPA or its

intended affect were truthfully disclosed by the Defendants.

I. THE DISTRICT COURT DENIED THE

PLAINTIFF CLASS FUNDAMENTAL DUE

PROCESS BY IGNORING CONTROLLING

COLORADO PRECEDENT WHICH WOULD

HAVE DEFEATED THE BASIS FOR

SUMMARY JUDGMENT

The parties agreed and the District Court ruled that the

issues would be controlled by Colorado law.4 However, the

District Court completely disregarded the controlling Colorado

decision on misrepresentation in employment negotiations,

which, had it been followed, would have precluded the basis for

the Defendants’ summary judgment motion by holding the

Defendants responsible for their failure to adequately disclose

the existence and intended affect of the LPA during employment

negotiations with the Plaintiff class.

’ App. at p. A-20.

7

The District Court found that the Plaintiff class had “suffi-

cient knowledge about the facts to raise their fraudulent induce-

ment claim in the Colorado state courts” because a few members

of the Frontier negotiating committee had allegedly discussed

the existence of the LPA with their labor lawyer and allegedly

knew its intended affect.» On the basis of this finding, the

District Court ruled that the Plaintiffs should have raised an

LPA-based fraud claim in connection with the Nicholau arbitra-

tion which took place under the terms of the JPA in 1987 (and

which was later appealed to the Colorado courts) and the Fron-

tier bankruptcy proceedings ongoing since 1986.

However, the Plaintiff class introduced evidence that

during the September 1986 negotiations giving rise to the ex-

ecution of the JPA, the LPA had been inadvertently disclosed

by Lorenzo’s representatives, immediately described as a non-

existent (because it was unsigned) document, and just as imme-

diately retrieved leaving no copies extant. Affidavit testimony

was introduced by several former Frontier pilots that they had

relied on the Defendants’ representations concerning the non-

existence of the LPA and that they had no reason to believe that

an LPA-based fraud claim even existed until April of 1989 when

Continental’s representatives admitted - for the first time - that

the LPA was, in fact, designed and intended to be a fully binding

and applicable agreement governing arbitration and seniority

integration into Continental Airlines.®

App. at p. A-26. Those same individuals submitted affidavits Stating

that they relied on the Defendant’s misrepresentations that the LPA did not

exist.

6

The LPA, by its terms, applied to all of “the employees of the air carrier

subsidiaries of PEI with regard to their seniority interest in the event of any

future merger of airline operations involving any air carrier subsidiary of

PEI....” Frontier Airlines was an air carrier subsidiary of PEI, and the former

Frontier pilots were therefore employees of an air carrier subsidiary of PEI.

Frontier Airlines was ultimately merged with Continental Airlines, and the

District Court had previously found that the former Frontier pilots were

8

Affidavit testimony was also introduced - and never

rebutted - that the Plaintiff class’ labor lawyer never saw the

LPA during the September 1986 negotiations, and Affidavits

were submitted by the Plaintiff class’ arbitration attorneys that

there was no basis to believe that a legitimate LPA-based fraud

cause of action existed prior to April of 1989. :

A. The Controlling Colorado Decision of Berger v.

Security Pacific Information Systems, 795 P.2d

1380 (Colo. App. 1990) Defeated the Basis for

Summary Judgment by Placing an Affirmative

and Full Duty of Disclosure on a Prospective

Employer in Connection with Prospective

Employees’ Future Employment

To establish a claim for fraudulent concealment and non-

disclosure under Colorado law, the “Plainuff must show that the

Defendant had a duty to disclose the information.” Berger v.

Security Pacific Information Systems, 795 P.2d 1380, 1383

(Colo. App. 1990). Under Berger, an employee’s prospective

employer has a duty to disclose all material information regard-

ing the employee’s future employment prospects and the

employer’s own financial situation. A “duty of full disclosure

arises” whenever an employer’s “representations concerning its

own financial prospects and the prospective employee’s future

“affected employees” of that merger. The District Court later applied the

LPA to the former Frontier pilots and compelled them to arbitrate under it in

an Order issued on August 7, 1989 in the PEX case. (supra, note 1) The

District Court had previously ruled in the PEX case that the same Defendants

in this action were “legally estopped from denying” the application of the

LPA. Whereas the District Court allowed the PEX pilots the full benefits of

the LPA, the District Court refused to extend that same relief to the former

Frontier pilots on the grounds that they already had a seniority integration

under the arbitration provisions of the JPA. This ruling in the PEX case, by

the same District Court Judge who later dismissed the Plaintiffs’ claims in

the case below, completely disregarded the former Frontier pilots’ claims that

the concealment and non-disclosure of the LPA had constituted a fraud upon

them.

«ill

9

employment prospects reasonably induce a false impression as

to those material factors in the mind” of the prospective

employee. /d. at 1384. Although Plaintiff’ s counsel personally

handed a copy of the Berger decision to the District Court, and

extensively argued its application below, the District Court

made no reference to or mention of the Berger decision in its

Order.

(1) The Facts of Berger

The Plaintiff in Berger was terminated some ei ght months

after a project she had been hired to manage was discontinued.

The Plaintiff contended that her prospective employer “‘had

fraudulently failed to disclose a substantial, known risk that the

project would be discontinued in the near future.” /d. at 1382.

The jury awarded the Plaintiff both actual and punitive damages

on her fraudulent concealment claim and the Colorado Court of

Appeals affirmed.

Although the Defendant in Berger contended, as did the

Defendants in this case, that “it had no duty to disclose informa-

tion... to a prospective employee,” the Berger court rejected that

contention and held that a prospective employer has a duty of

full disclosure as to all material information conceming a

prospective employee’s future employment, particularly where

the prospective employer knows that its prospective employee

is operating under a false impression because of the employer’s

lack of full disclosure. This duty of disclosure includes the duty

to disclose even the known risk of future contingencies. /d. at

1382 - 85.

The Berger decision is on all fours with the facts of this

case. Frank Lorenzo’s representatives concealed both the exist-

ence and the intended affect of a separately negotiated arbitra-

tion and seniority integration agreement (the LPA) from the

Plaintiff class during employment negotiations which ultimately

resulted in a different, heavily preconditioned arbitration and

seniority integration agreement (the JPA) being executed.

10

When the LPA was inadvertently disclosed in those negotia-

tions, Lorenzo’s representatives retrieved all copies extant and

later denied the agreement’s very existence through Apmil of

1989. The Defendants should have fully disclosed the LPA,

acknowledged its existence and intended affect, and answered

all pertinent inquiries as to its application with full disclosure

and candor rather than denials and misrepresentations. /d. at

1382-85.

The District Court’s finding that the Plainuff class alleged-

ly knew all about the LPA in September of 1986 notwithstand-

ing this lack of disclosure is directly contrary to the application

of the Berger case, as well as the Affidavits presented by

members of the class that they did not know about the LPA’s

significance until April of 1989. The Defendants acknowledged

that they initially concealed and then later withdrew all copies

of the LPA, and further admitted that they continued to deny

both the LPA’s existence and application until April of 1989.

Had the LPA been fully disclosed and made available to

the Plaintiff class as required under Berger, the Plaintiff class

would not, as their Affidavits attested, have agreed to the

onerous arbitration terms of the JPA. The Defendants did not,

by their own admission, comply with Berger's duty of full

disclosure until April of 1989, all public comments preceding

that date being to the effect that the LPA neither existed nor

granted anyone any arbitration or seniority rights. After the

Defendants’ acknowledgment of the LPA in April of 1989, the

United States District Court for the District of New Jersey ruled

in a separate proceeding that the LPA would be enforced and

arbitration thereunder compelled, and that the same Defendants

in this action would be “legally estopped” from denying its

intended affect.’

uy Supra at note 1.

11

fl. THE DISTRICT COURT DENIED THE

PLAINTIFF CLASS FUNDAMENTAL DUE

PROCESS BY DENYING THE PLAINTIFF

CLASS ANY DISCOVERY WHATSOEVER

Despite the existence of two separate Orders authorizing

discovery entered by both the District Court and the United

States Bankruptcy Court, the Defendants refused to produce

requested information and documents relating to the existence

of genuine issues of material fact in dispute between the parties,

specifically whether the Defendants had concealed and mis-

represented the LPA during the 1986 employment negotiations

with the Plaintiff class. Most important, however, the discovery

sought by the Plaintiffs and authorized by the referenced Court

Orders went to the very issues on which Summary judgment was

entered, to-wit, whether the Plaintiff class knew or should have

known of the existence of an LPA-based fraud claim prior to

April of 1989.

As described above, the Plaintiff class submitted Affidavits

that Defendants failed to make an appropriate and adequate

disclosure of either the LPA or its intended affect on the Plaintiff

class’ prospective employment rights during the September,

1986 negotiations. The Defendants argued that several class

members knew or should have known of the existence and

significance of the LPA during those employment negotiations

by virtue of the inadvertent disclosure, and therefore could have

and should have raised an LPA-based fraud claim in the sub-

sequent arbitration and bankruptcy proceedings. It was on this

basis that the District Court entered summary judgment under

the doctrines of res judicata and collateral estoppel.

12

A. To Grant a Party Discovery - and Then to Take

it Away Once an Opposing Party Has Filed

for Summary Judgment on the Very Issues on

Which Discovery is Sought - Is the Very

Essence of a Due Process Violation

The Plaintiff class sought all documents and internal

records relating to the September 1986 negotiations, the drafting

and negotiation of the LPA, and the basis for the Defendants’

summary judgment argument under the doctrines of res judicata

and collateral estoppel. In February of 1990, the District Court

ordered written discovery to proceed, the production of docu-

ments to take place, and a deposition schedule to be worked out

among the parties. The Plaintiff class served written Inter-

rogatories and document production requests on the Defendants

pursuant to that Court Order. The Defendants refused to answer

the requested discovery and, up to and including the District

Court’s dismissal, never answered a Single interrogatory or

responded to a single request for production of documents.

In October of 1991, when the Bankruptcy Court lifted the

automatic stay and authorized this action to proceed before the

District Court, counsel for the Plaintiff class represented that the

class’ monetary damages case could be presented if the Defen-

dants responded to the outstanding discovery requests and

without the necessity of depositions “‘at this time.” At that time

no summary judgment motion was pending, and the Bankruptcy

Court subsequently authorized such discovery to proceed.®

8

The District Court later denied the Plaintiff class’ request to take

limited depositions to rebut the allegations in the Defendants’ summary

judgment motion, ruling that “no amount of discovery would save the

Plaintiffs’ claims at this juncture.” App. at pps. A35-A36. Even though the

District Court’s dismissal was predicated on the alleged personal knowledge

of certain members of the Plaintiff class, and the alleged disclosure of the

LPA in the September 1986 employment negotiations (which was strenuously

disputed by those involved), the District Court erroneously concluded that

testimonial evidence of those involved would be irrelevant to whether the

LPA was adequately disclosed and understood by the Plaintiff class.

13

Plaintiffs sought compliance with the discovery orders

entered by the District Court and the Bankruptcy Court, but the

Defendants steadfastly refused to comply. After the summary

judgment motion was filed, both Plaintiffs’ litigation and

bankruptcy counsel filed F.R.C.P. 56(f) Affidavits Stating that

the outstanding discovery was necessary to a defense to the res

judicata/collateral estoppel argument because it would develop

evidence that the Defendants had conspired to withhold per-

tinent information concerning the LPA and its intended affect

on the Plaintiffs’ employment prospects during the September

1986 negotiations. It was further anticipated that evidence that

the Defendants had effectively concealed and misrepresented

the LPA through 1989 would demonstrate that the Plaintiff class

was unaware of the basis for, and therefore had no ability to

raise, an LPA-based fraud claim prior to 1989.

The District Court ruled that “Plaintiffs” request for dis-

covery is meritless and that no additional facts could be dis-

covered that would prevent the application of the doctrines of

res judicata and collateral estoppel to Plaintiffs’ claims in this

action."? This ruling was improper because it presupposed,

without any legal basis, that evidence of the Defendants’ con-

cealment through 1989 of the existence and affect of the LPA

would have had no bearing on the argument that Plaintiff class

Should have been on notice of an LPA-based fraud claim prior

to 1989. To the contrary, this was the sole issue in dispute.

By ignoring its own prior Order authorizing discovery -

which had never been answered - as well as the Bankruptcy

Court’s Order authorizing discovery - likewise never answered

- the District Court deprived the Plaintiff class of even the most

basic and fundamental due process considerations, e. g., to fully

develop through discovery the basis for and rebuttal to the

argument on which their claims could be dismissed. This was

9

App. at p. A35.

14

contrary to both the state of the law in the Third Circuit and that

enunciated by this Honorable Court.

B. Summary Judgment in Advance of

Discovery is Error under Pronouncements

by the Third Court and This Court

It is well settled that a “reasonable opportunity to complete

discovery before grappling with a summary judgment motion is

the norm.” Martin v. Malhazt, 830 F.2d 237, 256 (D.C. Cir.

1986). In the Third Circuit decision of Sames v. Gabel, 732 F.2d

49, 51 (3d. Cir. 1984), it was held that a District Court commits

error in granting a moving party’s summary judgment motion

while the non-moving party’s Interrogatories remain un-

answered:

This Court has criticized the practice of granting

summary judgment motions at a time when pertinent

discovery requests remain unanswered by the moving

party. [We] have said that where the facts are in

possession of the moving party a continuance of a

motion for summary judgment for purposes of dis-

covery should be granted almost as a matter of

course... /B]y acting on the motion for summary judg-

ment... without reference to what might be developed

in discovery... the Court erred.!° [emphasis added]

~<A premature grant of summary judgment while discovery remains

outstanding is generally considered by the Third Circuit to constitute revers-

ible error. See e.g., Dowling v. City of Philadelphia, 855 F.2d 136, 139 (3d

Cir. 1988) (the Court is obliged to give a party opposing summary judgment

an adequate opportunity to obtain discovery); Spurling v. Hoffman-LaRoche,

Inc., 118 F.R.D. 392, 398 (D. NJ. 1988) (summary judgment “must await a

time until Plainuffs have received a decent opportunity to conduct their own

discovery”); Chipolliani v. Spencer Gifts, Inc., 814 F.2d 893, 900 (3d Cir.

1987); Arnold Pontiac GMC, Inc. v. General Motors Corp., 786 F.2d 564,

568 (3d Cir. 1986)(the grant of summary judgment “before the Plaintiff has

had a full opportunity for discovery... may constitute reversible error’);

Mannington Mills v. Longoleum Industries, 610 F.2d 1059 (3d Cir. 1979);

Costlow v. United States, 552 F.2d 560, 563-64 (3d Cir. 1987).

15

In Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257

(1986), this Court held as follows:

[T]he Plaintiff must present affirmative evidence in

order to defeat a properly supported motion for sum-

mary judgment. This is true even where the evidence

is likely to be within the possession of the Defendants,

as long as the Plaintiff has had a full opportunity to

conduct discovery. We repeat, however, that the

Plaintiff, to survive the Defendant’s motion, need

only present evidence from which a jury might return

a verdict in his favor. If he does so, there is a genuine

issue of fact that requires a trial. [emphasis added]

In Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986), this

Court restated the proposition that summary judgment should

properly be considered only “after adequate time for discovery”

has been undertaken by the parties. Federal District Courts are

“bound by the Supreme Court’s determinations” that summary

judgment motions are premature unless the parties “have been

given adequate opportunity for discovery.” Noyola v. Texas

Department of Human Resources, 846 F.2d 1021, 1023 (Sth Cir.

1988) (citing Anderson v. Liberty Lobby, Inc. and Celotex Corp.

v. Catrett). See also, Reiver vy. Murdough and Walsh, P.A., 625

F.Supp. 998, 1004 (D. Del. 1985)(a “request for such con-

tinuance [to complete discovery] is to be granted as a matter of

course.’’); First Chicago International v. United Exchange Co.,

Ltd., 836 F.2d 1375, 1380 (D.C. Cir. 1985)(reversing entry of

summary judgment and holding that “summary judgment is

proper only after Plaintiff has been given adequate time for

discovery.”’).

The District Court’s erroneous conclusion that no amount

of discovery could possibly affect its entry of summary judg-

ment on res judicata/collateral estoppel grounds not only com-

pletely ignored the Rule 56(f) Affidavits filed by Plaintiffs’

counsel, but also disregarded both its prior Order and that of the

16

Bankruptcy Court expressly authorizing that very same dis-

covery. To grant a party discovery - and then to take it away

once an opposing party files a summary judgment motion on the

very issues on which discovery is sought - is the very essence

of a fundamental due process violation.

fil. THE DISTRICT COURT’S APPLICATION

OF THE RES JUDICATA/COLLATERAL

ESTOPPEL DOCTRINES IN ORDER TO ENTER

SUMMARY JUDGMENT BASED ON DISPUTED

GENUINE ISSUES OF MATERIAL FACT WAS A

DENIAL OF FUNDAMENTAL DUE PROCESS

One clear, compelling and overriding theme runs through

the facts in this case: That the Plaintiff class never knew they

had and never previously litigated any LPA-based fraud claim

prior to the filing of the proceedings below. The Defendants’

argument - and ultimately the District Court’s conclusion - that

the Plaintiff class knew or should have known or was somehow

on notice of an LPA-based fraud claim in September of 1986

was Categorically disputed by Affidavits, Declarations, and

Statements by members of the Plaintiff class and their counsel.

The District Court’s conclusion that res judicata/collateral es-

toppel operated to bar the Plaintiff class’ claims was based on

the assumption that the class must have known or somehow been

on notice of an LPA-based fraud claim in September of 1986.

No single issue was more hotly disputed or categorically con-

tested before the District Court.

Both res judicata and collateral estoppel presuppose the

existence of a claim or cause of action. It is axiomatic that a

party cannot be held to have litigated - or had the opportunity to

litigate - a claim which has not yet arisen. The claims below

were filed within a matter of months of the Defendants’ dis-

closures in April of 1989 relative to the LPA and even the

District Court implicitly acknowledged that none of the

Plaintiffs’ claims were barred by statute of limitations. Rather,

17

the District Court simply imputed personal knowledge of facts

and events which the Plaintiff class strongly denied in order to

reach the conclusion that they should have brought their LPA-

based fraud claim earlier, specifically either in conjunction with

the Nicholau arbitration and subsequent court proceedings or

the Frontier bankruptcy proceedings. This argument cannot, as

a matter of law, survive an objective analysis.

The District Court determined that res judicata held that

“an existing judgment is conclusive of the rights of the parties

in any subsequent suit on the same claim.”!! The District Court

stated that res judicata requires an identity of parties and issues

and applies only where there has been a final judgment on the

merits in a prior suit involving the same parties or their privies

to a subsequent suit based on the same cause of action.!2

The District Court held that collateral estoppel applied to

the final decision of the Court on an issue actually litigated and

determined as conclusive of that same issue in any subsequent

suit, and that collateral estoppel, unlike res judicata, did not

apply to matters which could have been litigated but which were

not.!3

While correct as far as it went, the District Court’s anaylsis

ignored the guiding principle, as articulated by Justice Brennan

in Bang v. Ward, 12 N.J. Misc. 415, 420, 97 A.2d 147 (1953),

that only “when a party is afforded a fair opportunity to litigate

a Claim or cause of action . . . and suffers a final judgment .. on

the merits” is res judicata applicable. It is undisputed that no

final judgment “on the merits” of an LPA-based fraud claim has

ever been rendered in any court at any time.

The District Court predicated its res judicata/collateral

estoppel analysis on a finding that the Plaintiff class was on

App. at pps. A20-A21.

* wo

13 Jd. at pps. A26-27.

ee

18

“notice” of the LPA (and therefore apparently a fraud claim

arising under it) in September of 1986, long before the claim

(and hence a fair opportunity to litigate it) ever arose. In

essence, the District Court concluded that the Plaintiff class was

obliged to raise an LPA-based fraud claim prior to the

Defendants’ acknowledgement of the agreement’s very exist-

ence, and that their failure to do so was of preclusive affect. This

was a manifest injustice.

It was uncontested that neither the Nicholau arbitration and

subsequent court proceedings nor the Frontier bankruptcy

proceedings involved the same claim at issue below or adjudi-

cated the merits of the LPA. Both proceedings were instituted

several years prior to the disclosure of the LPA in April of 1989,

neither proceeding adjudicated the rights of any parties relative

to the LPA, and the merits of LPA-based fraud claim were never

ruled on in either proceeding.

The purpose of the Nicholau arbitration, which com-

menced in early 1987, was to integrate the former Frontier pilots

into Continental Airlines. A fraud claim which did not arise

until April of 1989 could not have been decided, for res judicata

purposes, in the Nicholau arbitration proceedings. Moreover,

in Dean Whitter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985) this

Court “pointed out that arbitration awards do not have the status

of res judicata in Federal court proceedings.” See, Baker v.

Paine Weber, Jackson and Curtis, Inc., 637 F. Supp. 419, 422

(D.N.J. 1986).

The District Court’s erroneous conclusion that the Plaintiff

class could have raised an LPA fraud claim in the arbitration

was also contrary to the Affidavits of members of the Plaintiff

class and their counsel that no such cause of action existed or

could have been legitimately pursued prior to April of 1989.

There was no identity of issues because the Nicholau arbitration

involved the JPA, and not the LPA; nor was the same cause of

action involved in the arbitration as is involved in the proceed-

19

ings below: The JPA arbitration sought to integrate the Plaintiff

class into Continental Airlines, whereas the proceedings below

involved a common law fraud claim based on the Defendants’

concealment, non-disclosure, and misrepresentation of the LPA

during employment negotiations.

The inapplicability of collateral estoppel in such a proceed-

ing follows a fortiorari. Collateral estoppel applies only to a

cause of action which was actually litigated in a prior proceed-

ing, not a claim which could have been litigated but was not.

Pomeroy v. Waitkus, 517 P.2d 396, 399 (Colo. 1973).!5 The

District Court completely disregarded was the fact that no final

judgment on the merits of this requested relief was ever entered

by either the Colorado Supreme Court or the Bankruptcy Court.

After the April 1989 disclosure of the LPA, the Plaintiff class

petitioned the Colorado Supreme Court and the Bankruptcy

Court to hear a claim under the LPA: both courts denied the

Plaintiff class’ request. Neither court ever actually decided an

LPA fraud issue or rendered a final judgment on the merits of

an LPA fraud claim,!® thereby rendering collateral estoppel

unavailable as a matter of law. Jd.

14 The District Court erroneously concluded that the issues in the

Nicholau arbitration and the proceedings below were identical because the

Plainuff class had argued in the JPA arbitration that they were fraudulently

induced into signing the JPA based on mistepresentations by Continental.

While it is true that the Plaintiff class argued that various other misrepresen-

tations occurred relative to the JPA, at no time was any Claim advanced that

the JPA was fraudulently induced by virtue of the concealment and mis-

representation of the LPA because that claim had not yet arisen. Under

Colorado law, a Plaintiff who is on notice of one kind of fraud in a prior

proceeding is not precluded from asserting fraud on a different basis in a later

proceeding for money damages. Altergott v. Yeager, 543 P.2d 1293, 1296

(Colo. App. 1975) cert. denied 116 Colo. 379 (1976).

15

The District Court acknowledged, but never properly applied the rule

that Federal Courts must look to state law in determining the preclusive effect

of an earlier state court or administrative proceeding. App. at p. A20.

The Colorado Supreme Court. in hearing an appeal from the JPA-

based Nicholau arbitration, did enter a final judgment on the Nicholau

16

20

Thus, with no other recourse and no other available

remedy, the Plaintiff class filed their Complaint in the District

Court below approximately five months after the April 1989

disclosure and the refusal by the Colorado Supreme Court and

the Frontier Bankruptcy Court to hear such a claim. It was the

proceeding below which raised, for the first time, a cause of

action based on fraud for the concealment and misrepresentation

of the LPA, and it is this action - and only this action - which

has ever undertaken to adjudicate an LPA-based fraud issue.

That adjudication was derailed when the District Court ruled

that res judicata and collateral estoppel operated to bar the

determination of an LPA-based fraud cause of action in this case.

IV. THE DISTRICT COURT’S IMPUTATION OF

DISPUTED KNOWLEDGE TO THE PLAINTIFF

CLASS IN ENTERING SUMMARY JUDGMENT

WAS A DENIAL OF FUNDAMENTAL DUE

PROCESS

The District Court repeatedly found that the facts concern-

ing the knowledge of the Plaintiff class relative to the sig-

nificance and affect of the LPA was “uncontroverted” and

“undisputed.”!’ In fact, nothing was more controverted and

disputed in the proceedings below then the allegations by the

Plaintiff class that they neither knew about nor were on notice

of the LPA’s significance and intended affect prior to April of

1989. As noted above, this position was supported by numerous

Affidavits, Declarations, and Statements by members of the

Plaintiff class and their counsel in the prior proceedings on

which the District Court relied in entering summary judgment.

No trial has ever been held on the Plaintiff class’ claims,

and no prior proceedings have ever adjudicated any cause of

arbitration itself. At no time, however, did any Colorado court ever decide

any issues relative to the LPA or enter any final judgment on the LPA fraud

claim.

sd App. at p. A26.

21

action for fraud under the LPA. No undisputed or uncon-

troverted evidence was ever introduced below that members of

the Plaintiff class knew about, were on notice of, or understood

the significance or intended affect of the LPA, which the

evidence showed to have been systematically concealed and

misrepresented from September of 1986 through April of 1989.

In essence, the District Court placed itself in the position

of an omnipresent and omniscient entity having absolute (and

quite different) knowledge of events which transpired years

before. It was entirely improper for the District Court to circum-

vent a determination by the jury as to the knowledge which the

Plaintiff class possessed - or did not possess - during 1986

employment negotiations, which went not to the procedural

viability of the class’ claims, but rather to the substance and

contested merits of the class’ fraud allegations, which have

never been heard.

A. The District Court had no Proper Basis on Which

to Summarily Conclude and Impute Disputed

Knowledge of Facts in September of 1986 to the

Plaintiff Class Which the District Court Itself

Found to Have Been Misrepresented Through

April of 1989.

The Defendants admitted concealing and misrepresenting

both the existence and the affect of the LPA from September of

1986 through April of 1989, a course of conduct characterized

by the District Court (in the PEX case) as a “180-degree turn-

about” preceeded by a “convoluted” and “incredible . . . tortur-

ing of documents.” ® The District Court ruled:

18

The District Court made these findings as part of its April 24, 1989

ruling in the PEX case that the LPA was binding on the corporate Defendants

below and required seniority arbitration of the People Express, Frontier, and

Continental pilots into Continental Airlines. The Court ruled: “To permit the

corporate Defendants the right to legitimately evade their legal obligations

under [the LPA] would constitute a manifest injustice. ‘To allow a party to

22

I daresay that the admission [that the LPA did exist

and was intended to be binding] came at the last day

of testimony, after a year and a half of haggling in

Court here where the corporate Defendants had urged

that there was no LPA agreement, but if there was an

LPA agreement it was unsigned, and, therefore, not

enforceable. A 180-degree turnabout by the corporate

Defendants in this matter. [emphasis added]

A statement in a business transaction “while stating a truth

so far as it goes, the maker knows or believes to be materially

misleading because of its failure to state qualifying matters is a

fradulent misrepresentation.” Banquet Arab vy. Bulk Oil, 726

F.Supp. 1411, 1422 (S.D.N.Y. 1989). Admittedly, the Defen-

dants below know that their representations to the Plaintiff class

in September of 1986 that the LPA did not exist were materially

misleading and untrue.

No consideration was given by the District Court to its own

rulings (in the PEX case) that the LPA had been misrepresented

by the Defendants up to and including the “180-degree turn-

about” which occurred in April of 1989. In short, the District

Court charged the Plaintiff class with knowledge of facts in 1986

which the District Court itself found to have been mis-

represented through 1989. This was a violation of the class’

fundamental night to due process and an opportunity to be heard

on the merits.

assert the existence of a contract on the 17th floor of this Courthouse but to

assert the non-existance of the the same contract on the 3rd floor, would be a

self-serving act, par excellence, which should not be countenanced’ and will

not be countenanced by this Court.”

23

CONCLUSION

No parties have been more diligent or more vigilant in

asserting their legal rights then the Plaintiff class in this case.

Within a matter of months of the first LPA admissions in Apmil

of 1989, the Plaintiff class filed suit in the proceedings below to

litigate - for the first and only time - a claim of fraud under the

LPA. There was no credible evidence and no uncontroverted

facts tending to indicate that the Plaintiff class simply ignored

an Opportunity to raise an LPA-based fraud claim prior to 1989,

and overwhelming evidence that the claim did not even exist

until 1989 at the earliest.

Summary judgment is a drastic remedy which is never

proper except where there is a complete absence of disputed

facts and the Court concludes that no reasonable juror could find

for the non-moving party on the basis of the evidence presented.

Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475

U.S. 574 (1986).

Accordingly, the Petitioners submit that a writ of certiorari

should issue forthwith.

Respectfully submitted,

Kenneth A. B. Roberts, Jr.

KENNETH A. ROBERTS, P.C.

555 East 8th Avenue

Denver, Colorado 80203

(303)839-5161

James P. Anelli

FRIEDMAN, SEIGELBAUM

Seven Becker Farm Road

Roseland, New Jersey 07068

(201)992-1990

Attorneys for Petitioners

Al

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

CHAMBERS OF Filed September 25, 1992

NICHOLAS H. POLITAN

JUDGE

LETTER OPINION AND ORDER

ORIGINAL ON FILE WITH CLERK OF THE COURT

James P. Anelli, Esq.

FRIEDMAN & SIEGELBAUM

7 Becker Farm Road

Roseland, NJ 07068

Attorneys for Plaintiffs

Andrew T. Berry, Esq.

MC CARTER & ENGLISH

100 Mulberry Street

4 Gateway Center

Newark, NJ 07102

Michael J. Madigan, P.C.

Michael J. Mueller, Esq.

AKIN, GUMP, HAUER & FELD, LLP

1333 New Hampshire Avenue, N.W.

Suite 400

Washington, DC 20036

Attomeys for Defendants

Re:Frontier Pilots Litigation Steering Committee

v. Texas Air Corp., et al

Civil Action No. 89-3879

Dear Counsel:

This matter comes before the court on defendants Con-

tinental Airlines, Inc.’s (“Continental”) and Texas Air

Corporation’s (“Texas Air” or “TAC”) (now “Continental Air-

A2

lines Holdings, Inc.” or “CTA’’) (collectively “Continental’s’’)

motion for summary judgment pursuant to Rule 56 of the

Federzi Rules of Civil Procedure. Plaintff, Frontier Pilots

Litigation Steering Committee (“FAL Commitiee”), has cross-

moved to amend its Complaint. In addition, plaintiff has ap-

pealed Magistrate Judge Hedges’ Order, dated March 6, 1992,

der ying plaintiff’s request for discovery pursuant to

Fed R.Civ.P. 56(f). Based on the reasons set forth below,

defendants’ motion for summary judgment is GRANTED and

plaintiff’s cross-motions are DENIED.

This case concerns the relationship of the Job Preservation

and Litigation Settlement Agreement (“JPA”) and the Labor

Protection Agreement (“LPA”) to one overall transaction:

Continental’s acquisition of People Express and Frontier Air-

lines and the integration of their respective pilot groups into

Continental Pilot Seniority List. An explanation of the long and

tortured history of this litigation is necessary to fully understand

the issues currently before the court.

From late 1985 through most of 1986, Frontier was a

wholly-owned subsidiary of People Express, Inc. (“PEI’’). (See

App. 85). ! Frontier suspended all flight operations on August

24, 1986, never to start up again and it terminated virtually all

employees at that time. (See App. 22 at § 4.6; App. 23 at § 5.1;

App. 81, 90 n.19, 99, 101, 207-08, and 630). On August 28,

1986, Frontier and its affiliates filed for bankruptcy relief in the

United States Bankruptcy Court for the District of Colorado in

l

As the defendants have correctly noted in their memorandum in support

of their motion for summary judgement, the facts and supporting documents

in this litigation are virtually identical to those involved in the companion

case recently litigated before this court and the United States Court of Appeals

for the Third Circuit. People Express Pilots Merger Committee v. Texas Air

Corp., et al, Civ. No. 87-1155 (NHP) (the “PEX case”). As such, defendants

have attached the relevant portions of the Joint Appendix from the appeal of

that case. Page references to the Joint Appendix herein are designated as

“App.___.”

A3

Denver seeking reorganization relief pursuant to Chapter 11 of

the Federal Bankruptcy Code. (See App. 22 at § 4.6). In addition.

Frontier surrendered its operations specifications to the Federal

Aviation Administration. (See App. 81 n.1, 90 n.19).

Shortly thereafter, Texas Air expressed an interest in ob-

taining the assets of the non-operating Frontier and acquiring

PEI’s three remaining operating air carriers (People Express

Airlines, Inc., Britt Airways, and Provincetown-Boston Air-

lines, Inc.) (See App. 81, 165, 728,732). On September 15, 1986

TAC and PEI entered into an Agreement and Plan of Merger to

accomplish this goal. (See App. 15-16, 17-77, 99-131, 614). On

the same day, as part of the same transaction, TAC, FAL. and

two of FAL’s affiliates, entered into an Asset Purchase Agree-

ment pursuant to which TAC agreed to purchase substantially

all of the remaining assets of Frontier and its affiliates. (See App.

52-77). An additional part of that transaction was an Option

Agreement whereby TAC was given the right to purchase all of

the outstanding stock of Frontier’s parent, Frontier Holdings,

Inc. (See App. 43-51). Both of these agreements concerning

Frontier were conditions to the TAC-PEI Merger Agreement. 2

(See App. 32-33 at §§ 6.11; App. 38-39 at §§ 7.3(e), (k): App.

84).

On September 19, 1986, TAC and PEI filed a Joint Ap-

plication for Expedited Exemption or For Approval of Acquisi-

tion of Control (“DOT Joint Application ”) with the United

States Department of Transportation. (See App. 78-98). The

application was designed, inter alia, to “provide for the re-

employment of more than 4,000 pilots, flight attendants, agents

Although the closing of the Frontier Asset Purchase Agreement was a

condition to the consummation of the TAC-PEI Merger Agreement, the

implementation of the Asset Purchase Agreement was not conditioned on the

TAC-PEI merger taking place. (See App. 93, 160). If TAC acquired

Frontier's assets but the merger with PEI was not consummated, only half as

many Fronter pilots would have been hired: and there would have been no

seniority integration with Continental pilots. (See /d.)

A4

and dispatchers who were recently terminated by Frontier. . . .”

(See App. 81; accord App. 83, 86). Included with the DOT Joint

Application were two documents referencing a mediation and

arbitration process. The first document was the unsigned, two-

page Labor Protection Agreement (“LPA’’). (See App. 15-16,

955). The LPA provided as follows:

WHEREAS, TAC and PEI have this date entered a

Merger Agreement pursuant to which, subject to cer-

tain conditions and approvals, PEI will become a

wholly-owned subsidiary of TAC, and

WHEREAS, TAC and PEI desire to provide as-

surances to the employees of the air carrier sub-

sidiaries of PEI with regard to their seniority interests

in the event of any future merger of airline operaticn

involving any air carrier subsidiary of PEI,

NOW, THEREFORE, IT IS HEREBY AGREED

AS FOLLOWS:

Following consummation of the aforesaid Merger

Agreement, in the event of a future merger of airline

operations involving any air carrier subsidiary of

People Express, Inc., provision shall be made for fair

and equitable seniority integration procedures, for

affected employees. . ., which shall include as a final

step, if necessary in the absence of agreement, a final

and binding decision by a Neutral Mediator who shal!

be a member of the National Academy of Arbitrators.

... The procedures shall be conducted, and the Neutral

selected, by a Seniority Integration Committee . . . on

each carrier participating in the merger. The commit-

tees shall consist of three members each, separately

selected by the employees. . . on each participating

carrier. The surviving merged carrier may participate

as a party to the selection and the proceedings, but in

no event shall any final solution be reached which is

AS

not acceptable to each Committee (by majority vote),

unless_such solution is imposed by the Neutral

provided for herein. The Seniority Integration Com-

mittee, or the Neutral, shall have no authority to alter

or vary the employment policies of the employing

Carrier.

(See App. 15-16) (Emphasis supplied).

Defendants contend that, on at least two occasions between

September 15, 1986 and October 2, 1986, the Frontier pilots

were shown the LPA during the protracted and intense negotia-

tions with Continental concerning the terms of their seniority

integration to be conducted under a separate arbitration docu-

ment. (See App. 405-06).

The second document filed with the DOT that mentioned

the arbitration was the unsigned Frontier-Continental Job

Preservation Agreement (“JPA”), also referred as the “Union

Agreement”. (See App. 99-131). The draft JPA provided, inter

alia, that Continental would acquire certain assets of Frontier

while simultaneously extending job guarantees or severance

payment and/or airline flight passes to former Frontier

employees; in exchange, at least 75% of the FAL pilots were

required to waive claims (except certain bankruptcy claims)

against Frontier and others. (See App. 34 at § 6.17: App. 39 at

§ 7.3(1); App. 99-131). The draft JPA provided, in pertinent

part, as follows:

WHEREAS, Frontier Airlines ceased airline opera-

tions on August 24, 1986 and thereupon terminated

all active employees and filed a voluntary petition in

bankruptcy pursuant to Chapter 11 of the U-S.

Bankruptcy Code on August 28, 1986: and

WHEREAS, the Union Parties desire . . . to induce

CAL to enter this Agreement, to induce TAC to

acquire Frontier’s assets and to induce CAL to offer

A6

employment to former Frontier employees as

provided herein:

NOW, THEREFORE, IT IS HEREBY AGREED

AS FOLLOWS:

8(c) (3) Integrated Seniority List. As soon as deter-

mined practicable by Continental, former Frontier

pilots shall be merged into Continental's pilot System

Seniority List pursuant to fair and equitable seniority

integration procedures, which shall include as a final

step, if necessary in the absence of agreement, a final

and binding decision by a Neutral Mediator, who shall

be a member of the National Academy of Arbitrators.

The procedures shall be conducted, and the Neutral

selected, by two Seniority Integration Committees, of

three members each, one committee selected by the

former Frontier pilots, the other committee selected

by the Continental Pilot Operations on behalf of the

non-Frontier incumbent pilots of Continental . . . .Con-

tinental may participate as a party to the selection and

proceedings, but in no event shall any final solution

be reached which is not acceptable to each Committee

(by majority vote) unless such solution is imposed by

the Neutral provided for herein. Said Neutral shall

take special notice of the non-operating status of

Frontier Airlines immediately prior to the date of this

Agreement and the limited employment prospects for

Frontier employees resulting therefrom. Said Neutral

shall have no authority to alter or vary the employ-

ment policies of Continental.

(See App. 99-100, 117-18) (Emphasis supplied).

The JPA was a fundamental basis to the September 15,

1986 transaction.* Pursuant to the TAC-PEI merger agreement,

3

Although the JPA was in draft form when it was filed with the DOT on

September 19, 1986, the TAC-PEI Merger Agreement required that the JPA

|

A7

PEI was required to seek to have the FAL Pilots’ Union ALPA.

and other unions enter into the Union Agreement and implement

its terms. (See App. 32-34 at § § 6.12 and 6.17). PEI and its

subsidiaries were prohibited from entering into any agreement

with the FAL Pilots that would “be inconsistent with the Union

Agreement” without TAC’s consent. (See App. 25-26 at §

5.14), (kK), (m)). Both TAC and PEI, and their subsidiaries, were

required to agree to labor protective provisions (“LPPs”) “no

more onerous than the undertakings agreed to in the Union

Agreement,” (See App. 29 at § 6.2). Indeed, TAC was per-

mitted to withdraw from the deal had the government issued any

order, or PEI entered into any agreement, imposing “labor

protective provisions more onerous than the undertakings

agreed to in the Union Agreement.” (See App. 37-38 at § 7.3(a),

(c), (f). In parallel fashion, the Frontier Asset Purchase Agree-

ment provided that, upon closing of the asset acquisition, TAC

intended to extend offers of the asset acquisition, TAC intended

to extend offers of employment to FAL Pilots (upon the terms

and conditions set forth in the proposed ‘Union Agreement’.”

(See App. 52). The Asset Purchase Agreement contained the

same condition found in the main Merger Agreement prohibit-

ing the imposition of LPPs. (See App. 67 at § 8.4) The DOT

Joint Application recited the JPA as being the first labor condi-

tion to effectuation of the TAC-PEI Merger Agreement and

explained that imposition of LPPs more onerous than those in

the JPA would cause the entire transaction to fail. (See App. 87,

88 n.18, 93, 95, 96-97; App. 121-22 at § 12).

Between September 15, 1986 and October 1, 1986, Con-

tinental engaged in intense negotiations over the JPA with the

Frontier Pilots, their counsel, their collective bargaining repre-

sentative (ALPA), and ALPA’s counsel. (See App. 194, 269,

276, 308, 325-26, 342, 405-06). As Arbitrator George Nicolau

remain in “substantially” the sarne form after negouations with the pilots.

(See App. 32-33 at § 6.12).

A8

later found, the Frontier Pilots were “represented by able and

experienced counsel and [were] themselves sophisticated bar-

gainers.” (See App. 184; accord App. 195). The FAL Pilots

“vigorously protested” the “non-operating status” language of

the JPA underlined above, and Continental, with equal vigor,

refused to withdraw that language. (See App. 195-95). On

October 2, 1986, the Frontier Pilots approved the JPA by unan-

imous vote at a union conducted meeting. (See App. 325, 342,

438). The International executed the JPA on October 6, 1986,

and the requisite number of waivers by individual Frontier Pilots

was received by October 15, 1986. (See App. 440-45). On

October 15, 1986, CAL and PEI executed a signed copy of the

JPA. (See App. 132-47). Treatment of seniority for competitive

purposes (bidding, etc.) was addressed in § 8(b), which incor-

porated by reference at “Side Letter No. 2” with the Frontier

Pilots. (See App. 143). That Side Letter included, at § 3,

substantially the same language for integration of the Frontier

Pilots that had previously appeared in § 8(c) (3) of the draft JPA

set forth above. (See App. 149-50, 182). The absence of LPPs

more onerous than those agreed to by Continental in the October

15, 1986 JPA remained a condition to consummation of the

TAC-PEI merger. (See App. 234-35; App. 260 at ¥ (iv); App.

261 at 4§ (iii), (v); App. 263; App. 273-74 at (vi)).

The DOT tentatively approved the proposed agreements

on October 15, 1986. (See App. 159-63). The DOT found that

no LPPs should be imposed, citing Frontier’s termination of

operations, TAC’s agreement to hire a significant number of

Frontier employees, the Merger Agreement’s clause permitting

TAC to withdraw if LPPs were imposed, and the likelihood that

TAC in fact would do so. (See App. 162-63). The Denver

Bankruptcy Court approved the Frontier agreements, including

Side Letter No. 2, on October 17, 1986. (See App. 243, 412).

The DOT gave final approval to the agreements on October 24,

1986, reciting the same factors it had previously addressed in its

October 15, 1986 Order. (See App. 164-70, 243). On October

A9

30, 1986, TAC exercised the option to acquire Frontier’s stock.

thus making it a wholly-owned subsidiary of TAC. (See App.

243, 263). Between October 31, 1986 and November 15, 1986.

TAC consummated the acquisition of Frontier’s assets. (See

App. 243; App. 261 at (ii); App. 263). The TAC-PEI Merger

Agreement was approved by the shareholders of People Ex-

press, who specifically ratified the October 15, 1986 JPA durin g

a shareholders’ vote conducted on December 29, 1986. The

TAC-PEI merger was ultimately consummated on December

30, 1986. (See App. 615, 956).

The Frontier Pilots then selected a Merger Committee as

did the Continental Pilots. With the assistance of counsel, the

Frontiers Pilots negotiated with the Continental Pilots in an

effort to reach a voluntary agreement regarding their seniority

integration. These attempts, however, were unsuccessful. (See

App. 327 atq7.) On January 7, 1987, the two Committees, along

with Continental, executed a document outlining arbitration

procedures consistent with Side Letter No. 2. (See App. 303-

QS). Paragraphs I and [1.3 of the procedures document stated

that the decision of the Neutral would be “final”. (/d.)

THE FAL LITIGATION

The seniority integration dispute between the FAL and Cal

Pilots was submitted to arbitration pursuant to the JPA, Side

Letter No. 2, and the negotiated procedures document. Ar-

bitrator George Nicolau conducted eleven (11) days of formal

hearings from March to May 1987. (See App.. 172, 308).4 The

transcript of the hearing totaled 2,691 pages, and nearly 200

exhibits were introduced into the record in the Nicolau arbitra-

tion. (See App. 172, 313). There was a mediation of the various

issues involved in the integration of the two pilot groups both

4 ' . 4 rae

Arbitrator Nicolau was experienced in airline labor relation and was

selected by the Frontier and Continental Senior Integration Committees under

the procedures document.

Al0

before and after the arbitration proceedings; however, the

mediation efforts proved unsuccessful. (See App. 172). On

June 15, 1987, Arbitrator Nicalau issued his 57 page final

Opinion and Award (“Nicolau Award ”’) (see App. 171-222).

Arbitrator Nicolau rejected virtually all of the Frontier Pilot’s

arguments advanced during that arbitration.’ (See App. 187,

329, 344-45). Nicolau’s award ordered that, following im-

plementation of his list, “the future job bidding status, furloughs,

and recall rights of Continental pilots, including former Frontier

pilots, shall be determined on the basis of said List and

Continental’s Pilot Employment Policy.” (See App. 221 at §

1.E accord App. 219).

The former FAL pilots, dissatisfied with Nicolau’s

decision, filed a petition to vacate the Nicolau Award in the

District Court for the City and County of Denver, Colorado on

September 4, 1987. In the Matter of the Seniority Integration

of Continental Airlines and former Frontier Airline Pilots, 87

Cv. 17810 (Colo.Dist.Ct.). See App. 307-10; App. 330-31 at 9§

12-13; App. 345-46. This case was filed pursuant to the

Colorado Uniform Arbitration Act, Colo. Rev. Stat. §§ 13.22-

201 et seq. The Frontier Pilots were represented in that proceed-

ing by Mr. McGuinn. (See App. 309). In general, the Frontier

Pilots argued that the arbitration that they had been guaranteed

by the JPA. (See App. 314, 316, 319-21). Frontier also con-

——_————_ —-— laa

During the arbitration before Arbitrator Nicolau, the Frontier Pilots

relied upon their asserted versions of the bargaining history of the JPA and

Side Letter No. 2, as opposed to the language of the JPA. (See App. 184).

Arbitrator Nicolau rejected their approach, noting that “it was their respon-

sibility, given the evidence they had, to insist that the [fact in dispute] be

memorialized in the JPA.” (See App. 191). With respect to another dispute,

Nicolau made the same observation: “if they [the FAL Pilots] wanted [a

provision}, it was up to them to obtain that [provision] in writing. They were

not, by any means first-timers in negotiations. They knew the risks. They

knew the critical importance of words written into an agreement.” (See App.

195).

All

tended that Arbitrator Nicolau failed to take into account

evidence with respect to the negotiation of the JPA. (See App.

308 at ¥§ 4,6). On June 30, 1988, the Colorado State District

Court (Flowers, J.) dismissed Frontier’s petition. (See App 323;

App. 331 at § 14; defendants’ Exhibit C in support of their

motion for summary judgment (transcript of bench ruling)).

The FAL pilots appealed that decision to the Colorado Court of

Appeals on the same grounds. (See App. 396-97, 399-400).

The District Court’s decision was subsequently affirmed by the

Colorado Court of Appeals on December 21, 1989. (See

defendant’s Exhibit D in support of motion for summary judg-

ment).

On March 26, 1990, the FAL pilots filed a petition for

certiorari with the Colorado Supreme Court maintaining that

the Nicolau Award should be vacated and that they should be

permitted to proceed with a seniority integration based upon the

LPA and for “such other and further relief as may be ap-

propriate’. (See defendants’ Exhibit E. at § 12, filed in support

of their motion for summary judgment). The FAL Pilots argued

that this relief should be granted as a result of the alleged

misrepresentations by Continental’s negotiators during the JPA

negotiations concerning the LPA and statements to the DOT.

Id., passim. The Colorado Supreme Court denied Frontier’s

petition on August 13, 1990, thereby terminating all direct

attacks on the Nicolau Award. (See defendants’ Exhibit F in

support of their motion for summary judgment.)

THE PEX LITIGATION

Against the background of Arbitrator Nicolau’s decision,

the FAL Pilots claimed that they feared they would lose what

they had secured to the PEX Pilots if this court were to award

an arbitration under the LPA in the PEX case. (See App. 354,

355 at { 17). Thus, although Frontier had previously refrained

from intervening in the PEX litigation,® they concluded in

© The PEX litigation was commenced by the People Express Pilots on

April 1, 1987 before this court. The Complaint did not raise any issue relating

Al2

September 1988 “that it would be prudent to intervene in [the

PEX] case in order to insure the Frontier Pilot’s right to par- |

ticipate in a People Express-Continental Arbitration”. (See

App. 332 at § 16; accord App. 347). On October 20, 1988, |

Frontier finally moved to intervene as a defendant in the PEX

case, and they were again represented by Mr. McGuinn. (See |

App. 337). The FAL Pilots explained their position in their |

moving papers as follows:

The Frontier pilots are now integrated into the

Continental pilot workforce ....

The Steering Committee, acting on behalf of the

Frontier pilots, seeks a very limited role in this litiga-

tion. The Committee seeks only to ensure that the

Frontier pilots are entitled to be represented by the

Steering Committee in any subsequent arbitration

between the Peoples Express pilots, Continental, and

the remaining Continental pilots... .

While the seniority rights of the Frontier pilots at

Continental were already decided in a prior arbitra-

tion proceeding, the Frontier pilots must be repre-

sented during the Continental-People Express

arbitration to protect their existing seniority rights . .

. . All pilots employed by Continental are part of a

single, integrated workforce ....

(App. 339-40) (Emphasis supplied). This rationale for interven-

tion was corroborated by the Affidavit of Robert L. Williams,

the FAL Pilots’ merger chairman:

The purpose for the Steering Committee’s motion

to intervene in the People Express Merger Committee

litigation is solely to ensure that the Frontier pilots will

to the FAL Pilots Oua. FAL Pilots, but rather sought an arbitration to

integrate the PEX Pilots in to the Continental Pilot Seniority List (which, at

the time the FAL Pilots had intervened, already included the FAL Pilots).

a

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be entitled to be represented ina People Express-Con-

tinental arbitration concerning pilot seniority rights .

... The Frontier pilots must be represented durin g that

arbitration in order to prevent any encroachment on

the seniority rights and other terms and conditions of

employment currently held by the Frontier pilots.

(App. 333-34 at 9§ 18-19) (Emphasis supplied).

“The Frontier pilots are now integrated into the Continental

pilot workforce. .. . The Steering Committee, acting on behalf

of the Frontier pilots, seeks a very limited role in this liti gation.”

(App. 339) (Emphasis added).

Based on the above representations of the FAL pilots I

granted FAL’s motion to intervene and held as follows:

Pursuant to an arbitration award filed in June of

[1987], the Frontier pilots became fully integrated

into the Continental pilot work force. However. the

arbitrator’s opinion and award is currently being chal-

lenged by the Frontier pilots in the Colorado Court of

Appeals. The list established by the arbitrator

remains in effect pending resolution of the appeal by

the Colorado Court. The pilots now seek to intervene

in this litigation to prevent a possible change in their

existing Seniority possible change in their existing

seniority Status that may result from this litigation.

* KK x

Therefore, to ensure that the Frontier pilots; inter-

ests in this judicial proceeding are adequately repre-

sent, I will grant their motion for intervention.

* * * *

{T]he Frontier pilots intervened in this action to

preserve their relative seniority status on the Con-

tinental integrated pilot list. Their interest in main-

taining that status, whether it be by convincing this

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Court that arbitration is not required, or at a joint

arbitration with People Express pilots, is a com-

monality shared by all Continental pilots. Thus, for

the sole purpose of having their seniority status

remain unchanged by an arbitration with People Ex-

press, the Frontier pilots and Continental pilots have

identical claims in this action.

| am aware of the appeal of the Frontier-Continental

arbitration now pending in the Colorado Court of

Appeals. There the Frontier pilots and Continental

pilots are clearly adversaries. The Continental pilots

seek to maintain the existing seniority structure while

the Frontier pilots seek the benefits of restructuring.

In the instant case, however, both pilot groups are

interested in maintaining their existing seniority

status relative to People Express pilots.

(App. 370, 374, 376-77). (Emphasis supplied). Accord App.

388.

On March 9, 1989, prior to the trial in the PEX litigation,

the FAL Pilots first advanced their argument that Continental

had committed “actionable misrepresentation and fraud” during

the negotiation of the JPA by failing to advise the FAL Piiots

about their supposed rights under the LPA. (See Defendants’

Exhibit G at § 12). This argument was made in an attempt to

secure a role in any LPA-based arbitration and to avoid the

results of the Nicolau arbitration.

Following a bench trial in the PEX case, I granted the PEX

pilots’ request for arbitration in a bench ruling of April 24, 1989.

After rendering that decision, I requested a new round of briefing

on the issue of why the FAL Pilots as fully integrated Continen-

tal pilots, should not be bound by the Nicolau Award. (See App.

963-64). In responding to my inquiry, the FAL Pilots argued

on May 11, 1989 that:

Al5

The Nicolau Award should have absolutely no

preclusive effect and that the LPA arbitrator should

expressly not take that Award into account in any

respect. . . . Continental is estopped from making any

argument of issue preclusion because it engaged in

fraud and misrepresentation with respect to the repre-

sentations or lack thereof regarding the LPA.

(See Defendants; Exhibit H at § 28). The FAL Pilots further

Stated that they “would prefer an early resolution by this court

of any claim of res judicata. . . .[T]he Frontier pulots would

prefer that this court consider the merits of any contention

regarding the effect of the Nicolau Award. A pre-arbitration

determination would be preferable from a practical standpoint.”

(See App. 435-36).

Upon consideration of this and other arguments advanced

in the papers, I issued an August 7, 1989 Order restricting The

FAL Pilots to the JPA arbitration results as follows:

The Frontier Pilots Litigation Steering Committee’s

participation in this arbitration shall be circumscribed

by the Final Award of Arbitrator George Nicolau,

dated June 15, 1987. FAL may not asset a position

inconsistent with the Arbitration Award but shall, for

the purposes of this arbitration, be deemed bound by

that award. The Award of Arbitrator Nicolau is cur-

rently under appeal. In the event, at any time proir ro

the Final Arbitrator’s Award in this matter, the

decision of Arbitrator Nicolau shall be reversed or

modified, any party may make application to this

Court, on short notice, to consider the impact of that

determination upon this arbitration proceeding.

(See App. 474).

On November 2 ,1989, the FAL Committee filed an ap-

plication in the PEX case requesting this court to modify its

Al6

Order Compelling Arbitration to remove the restriction because

the JPA was allegedly procured by either intentional mis-

representation or mutual mistake of fact or law, or, alternatively,

under the doctrine of equitable estoppel. (See Defendants’

Exhibit J). The FAL Committee failed, however, to inform this

court that it had previously filed the instant litigation on Sep-

tember 19, 1989. The FAL Pilots raised the following argu-

ments in their motion to modify:

Thus, at the very same time that the corporate defen-

dants were promising the DOT that the Frontier pilots

would . .. be entitled to a ‘fair and equitable’ seniority

integration, as evidenced by the joint application and

the LPA [filed with the Department of Transporta-

tion], they misrepresented the import of documents

they filed with the DOT to the Frontier pilot commit-

tee and instead presented that committee with the

JPA’s Side Letter No. 2.....

Plainly put, the corporate defendants stonewalled the

FAL pilot committee on the legal significance of the

LPA up to the point that the FAL pilot committee

reasonably believed that the JPA, with its onerous

Side Letter No. 2, was the only game in town, and that

the stark alternatives were either the JPA with Side

Letter No. 2 or no job for any pilots.

(See Defendants’ Exhibit J, at §§ 12, 15, submitted in support of

defendants’ motion for summary judgment). This court denied

the FAL Committee’s motion to modify. (See Defendants’

Exhibit L).

Pursuant to my Order Compelling Arbitration in the PEX

litigation, hearings commenced before Arbitrator Jerome Ross

on May 7, 1990. Arbitrator Ross Conducted 73 days of hearings

and he reviewed extensive briefs submitted by the parties. The

hearings were concluded and the record was closed with oral

arguments on April 29, 1991. On August 13, 1991, Arbitrator

Al7

Ross rendered a 135 page Opinion and Award (“Ross Award”)

integrating the Pilot Seniority Lists of People Express Airlines

and Continental Airlines (which had already included the former

Frontier pilots by virtue of the Nicolau Arbitration Award).

Subsequently, the FAL Pilots filed « petition in this court

to vacated the Ross Award. Thereafter, I affirmed the Ross

Award by Order, dated November 22, 1991, and in an Opinion

that followed on November 26, 1991. In relevant part, this court

stated as follows:

In my view, to the extent that Arbitrator Nicolau

integrated the FAL pilots with the Continental pilots,

the FAL and the Continental pilots became one body.

Essentially, they had the same interests to protect.

They each had a position on a pilot seniority list which

they had attained as a result of the Nicolau Arbitration

Award. I refused to allow the FAL pilots to argue for

a change of their position on the seniority list vis-a-vis

the Continental pilots in the arbitration proceedings

before Arbitrator Ross. If I permitted such conduct,

then I would be encouraging a collateral attach on the

award issued by Arbitrator Nicolau before the

Colorado Supreme Court could issue a final deter-

minator on that award.

However, I permitted the FAL pilots to participate

in the Ross arbitration in an effort to allow them to

protect whatever position they had attained as a result

of the Nicolau Award vis-a-vis the People Express

pilots who were to be integrated by virtue of Ar-

bitrator Ross’ Award. Moreover, my Order, dated

August 7, 1989, provided that any party may make

application tc this court, on short notice, to consider

the impact, if any, of a reversal or modification of the

Nicolau Award issued prior to the completion of the

Ross arbitration proceedings. Since the Colorado

Al8

arbitration Supreme Court has already affirmed the

Nicolau Award, I refuse to change my position and

collaterally overrule the Nicolau Award.

(See People Express Merger Committee, etc. v. Texas Air Cor-

poration, et al, Civil Action No. 87-1155, Opinion dated

November 26, 1991 at ¥§ 19-20).

The United States Court of Appeals for the Third Circuit

affirmed this court’s Opinion in a per curiam Judgment Order,

dated February 13, 1992. The Third Circuit’s ruling confirmed

this court’s determination that the FAL Pilots were not third-

party beneficiaries of the LPA and that they properly were bound

to their arbitration under the JPA. Having litigated this issue

once in the Colorado state court system and again in the federal

court in the PEX litigation, the FAL Pilots now focus their efforts

on the instant law suit.

The FAL Pilots filed their original Complaint in this law

Suit on September 19, 1989.’ The original two-count Complaint

included claims of misrepresentation and breach of contract of

third-party beneficiary contract. The gravamen of the FAL

Pilots’ misrepresentation claim (Count 1) is that Continental

fraudulently induced them to sign the JPA, a different arbitration

contract, by representing to them that the LPA was a “meaning-

less document”. The crux of the FAL’s contract claim (Count

2) is that this court allegedly held them to be third-party

beneficiaries of the PEX case.®

7

Initially, Frontier failed to advise anyone about this case and did not

attempt to serve any of the defendants. When this court threatened to dismiss

their law suit, the FAL Pilots finally served Continental and Texas Air on

January 15, 1990, two day prior to the expiration of the 120 days permitted

under Rule 4(j) of the Federal Rules of Civil Procedure.

* Approximately one full year after this litigation had been instituted, the

FAL Committee took the opposite position before the federal district court in

Colorado, i.e., the FAL Committee claimed that this court had “failed to

resolve the issue as to whether the LPA or the JPA [was] the operative

document for the [FAL Committee] for the arbitration ordered by the New

Al9

THE FAL PILOT’S PROPOSED

AMENDED COMPLAINT

The FAL pilots allege that the most recent version of their

complaint is based on “new matters” and “[a]dditional facts and

documents [that] have recently come to the attention of plaintiff

and its counsel through discovery and related arbitration

proceeds. See FAL Application at {§ 2, 4. No where do

plainuffs state what these supposed “additional facts” are. |

have thoroughly reviewed the proposed Amended Complaint

and I find that it is based entirely on information known to

plaintiffs before they filed this law suit on September 19, 1989,

and, long before I entered my August 7, 1989 Order Compelling

Arbitration. The only “news event” are that the PEX arbitration

was completed as directed by this court’s Order, and the Ross

Award was affirmed by the Third Circuit Court of Appeals. The

proposed Amended Complaint refers to these events as “new

facts”. See § 38 of plaintiff's proposed Amended Complaint.

The principal differences between plaintiff’ s original Com-

plaint and the proposed Amended Complaint ar in form and not

in substance. This superficial change in draftman’s language

cannot operate to save plaintiff’s claims. As much, 1 HEREBY

DENY PLAINTIFF’S REQUEST FOR LEAVE TO FILE

THEIR PROPOSED AMENDED COMPLAINT. It is well

settled in the law that a party cannot amend a complaint while

there is a motion for summary judgment pending, or soon to be

filed, that is likely to be successful. See Kennedy v. Josephthal

& Co., Inc., 635 F. Supp. 399, 405 & n.1. (D.Mass 1985), aff d,

814 F.2d 798 (1st Cir. 1987); Turner v. Parsons, 620 F. Supp.

138, 139, 143 (E.D.Pa. 1985), aff d, 787 F.2d 584 (3d Cir. 1985),

cert denied, 476 U.S. 1160 (1986); 6 C. Wright & A. Miller,

Federal Practice and Procedure § 643, at 643-45 n.26 (1990

Jersey Court,” and the FAL Committee thus argued that the Colorado district

court should decide that issue. Former Frontier Pilot Litig. Steer. Comm. v

Frontier Airlines, Inc., 117 B.R. 588, 590 (D.Colo. 1990).

say A20

Ed.) (Citations omitted)? Assuming arguendo, the FAL pilots

were permitted leave to file their proposed Amended Complaint,

their Complaint would nonetheless be dismissed as a matter of

law for the same reasons discussed below.

PLAINTIFF’S CLAIM FRAUDULENT

MISREPRESENTATION (COUNT 1)

As previously stated, the basis of plaintiff's misrepresen-

tation claim is that Continental fraudulently induced them to

sign the JPA, a different arbitration contract, by representing to

them that the LPA was a “Meaningless document” and should

be ignored. Defendants contend that this claim is barred under

the applicable doctrines of res judicata and collateral estoppel.

I agree.

Res judicata, or claim preclusion, “refers to the effect of a

judgment in foreclosing litigation of a matter that has never been

litigated, because of a determination that it should have been

advanced in an earlier suit.” Miora v. Warren City School

District Board of Education, 465 U.S. 75, 77 n. 1 (1984).

“Federal courts must look to state law in determining the

preclusive effect of an earlier state court or administrative

proceeding.” Pittman v. La Fontaine, 756 F. Supp. 834 (D.N.J.

1991) (citing McNasby v. Crown Cork & Seal Co., 888 F.2d

270, 275 (3rd Cir. 1989), cert. denied, 110 S.Ct. 1783 (1990)).

This is a diversity action and counsel for beth parties agree

that Colorado law governs this case under the governmental

interest analysis employed by New Jersey courts in determining

which state’s law to apply. See System Operations, Inc. v.

Scientific Games Dev. Corp., 555 F.2d 1131, 1137 (3d Cir.

1977). Under Colorado Law, res judicata refers to claim

preclusion, and the doctrine holds that an existing judgment is

9 As previously noted, Continental moved for summary judgment on the

basis of plainuff's original complaint before any of the three subsequent

motions to amend filed by the FAL pilots.

| |

A21

conclusive of the rights of the parties in any subsequent suit on

the same claim. Pomeroy v. Watkus, 517 P.2d 396, 399 (Colo.

1973). The doctrine of res judicata bars relitigation not only of

all issues actually decided, but of all issues that might have been

decided. /d. In addition, the doctrine of res judicata requires

an identity of parties or their privies. /d.!° Res judicata applies

if there has been: (1) a final judgment on the merits; (2) a prior

suit involving that same parties or their privies; and (3) a

subsequent suit based on the same cause of action. Jd. (See also

Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 963-64 (3d Cir.

1991); United States v. Athlone Industries, Inc., 746 F.2d 977,

983 (3d Cir, 1984)).

As the Third Circuit of Appeals remarked in Athlone, the

doctrine of res judicata is expansively applied:

[W]e indicated a predisposition towards taking a

broad view of what constitutes identity of causes of

action — ‘an essential similarity of the underlying

events giving rise to the various legal claims.’ We,

therefore, do not adhere to any mechanical application

of a single test but instead focus on the central purpose

of the doctrine of res judicata. We are thus in keeping

with ‘[t]he present trend in the direction of requiring

that a plaintiff present in one suit all the claims for

relief that he may have arising out of the same trans-

action or occurrence.

Athlone, 746 F.2d at 984 (quoting 1B Moore’s Federal Practice

§ 0.41[1] at 359 (2d Ed. 1983)). In conducting this inquiry, the

court should “focus on ‘whether the acts complained of were the

same, whether the material facts alleged in each suit were the

same, and whether the witnesses and documentation required to

prove such allegations were the same.’. . . a mere difference in

10 The court notes that the substantive law of res judicata is the same

under both federal and Colorado state law.

A22

the theory of recovery is not dispositive.” Lubrizol, supra, 929

F.2d at 963.

Application of the doctrine of res judicata set forth above

precludes the FAL pilots from pursuing this action. First, there

has been at least one final judgment on the merits. In this regard,

the FAL pilots have unsuccessfully challenged the Nicolau

Award at each and every level of the Colorado state courts. As

such, there have been three final judgments-on the merits of the

FAL case. In the final appeal filed by the FAL pilots, the

Supreme Court of Colorado denied certiorari. Second, the FAL

litigation was clearly a prior suit involving the same parties as

this case. Third, under the majority rule, adopted by both the

Third Circuit Court of Appeals and the Supreme Court of

Colorado, there is no doubt that the two cases must be viewed

as the same cause of action. In this respect, although the FAL

pilots portray their complaint as presenting “new” legal claims

based on unspecified “‘new facts’’, they cannot escape the “‘es-

sential similarity of the underlying events”. Althone, supra, 746

F.2d at 984. Both cases concern the same transaction and the

legal effect of the same document. Specifically, both cases

involve the integration of the former FAL pilots as part of the

1986 airline acquisitions, and their dissatisfaction with their

JPA-based arbitration. (See App. 308 at J 6; Plaintiff’s original

Complaint at ¥§ 20, 21; Plaintiff’s proposed Amended Com-

plaint at §§/ 26, 28). Is it clear that, both cases, the FAL pilots

are complaining of the same acts of Continental; the material

facts are the same; and the witnesses and documentation re-

quired to prove the allegations are virtually identical.

Accordingly, all of the FAL pilot’s current legal theories

either were or should have been litigated in the FAL litigation

in Colorado. In this regard, I note that, in their brief to the

Colorado-trial level court to vacate the Nicolau Award, the FAL

pilots argued that the Nicolau Award was invalid, inter alia,

because the “elements of fraud. let alone misrepresentation, are

A23

omnipresent.” (See Defendant’s Exhibit P in support of their

motion for summary judgment at J 74). The FAL pilots further

argued that Arbitrator Nicolau had “fail[ed] to take cognizance

of evidence presented by the Frontier pilots, including critical

uncontroverted evidence with respect to the negotiations of the

Job Preservation Agreement... .” (See App. 308 at § 6). In

other filings in the FAL action, the FAL pilots made the same

factual made the same factual allegations that they advance here,

i.é., that misrepresentations concerning the LPA and the DOT

filings by Continental’s negotiations in the JPA negotiations,

mislead the former FAL pilots to approve the JPA, and that they

~ were not accorded the arbitration to which they claim they were

entitled under the LPA.

At oral argument on defendants’ motion for summary

judgment conducted on July, 27, 1992, Kenneth A. B. Roberts,

Jr., current counsel for plaintiff, argued that the FAL pilots could

not have asserted their common law fraud claim in the FAL

litigation in the Colorado state courts in 1987 because they did

not have the basis to assert it. Mr. Roberts further argued that

the basis for the common law fraud claim did not arise until this

court ruled on April 24, 1989, that the PEX pilots were entitled

to arbitration under the LPA agreement. This argument is

Clearly without merit. In this regard, the court notes that, on the

evening of September 15, 1986, at approximately 6:00 p.m., the

FAL pilot negotiating team met with Continental’s negotiators,

Mr. John Adams and Jack Gallagher, Esq. (See Defendants’

Exhibit MM atp. 280). Mike Abram, the attorney for FAL pilots

during the JPA negotiations, was in attendance at the September

15, 1996 meeting. (See Defendants’ Exhibit MM at p. 281).

During this meeting, Continental presented the FAL pilot

negotiators with the first draft of the JPA, with the LPA attached

to the back. (See Defendants’ Exhibit N at 9§ 3-4; Defendants’

Exhibit NN at 11842, 12265-66). The FAL pilots reviewed the

LPA at that time. (See Defendants’ Exhibit NN at 12266).

A24

On the morning of September 16, 1986, the FAL pilot

negotiators met with Mr. Abram and discussed the LPA, includ-

ing the statements allegedly made by Continental about the LPA

the evening before. (See Defendants’ Exhibit NN at 1 18842-43;

Exhibit OO at 3). Frontier Captain Robert L. Williams referred

to the “LPA statements” as a “major area of concern” at the

meeting with Mr. Abram. (See Defendants’ Exhibit OO at p.3).

Pursuant to this court’s request on July 27, 1992, the FAL

pilots have filed the transcript of Mr. Abram’s deposition, taken

in connection with a legal malpractice action filed against Mr.

Abram by the Frontier pilots in the Supreme Court of the State

of New York, County of New York. In his deposition, Mr.

Abram disputes the testimony of his former clients, asserting

that he was unaware of the LPA until several months later. This

tesumony cannot help the FAL pilots avoid summary judgment

in this case for two reasons. First, as the FAL pilots’ counsel,

Mr. Roberts, conceded at the July 27, 1992 hearing, it is the

tesumony of the FAL pilots that is relevant, and not Mr. Abram’s

testimony. (See transcript of oral argument conducted on July

27, 1992 at pp. 20-21). As illustrated above, the FAL pilots did

see the LPA at the September 15th meeting and admit that Mr.

Abram was in the same room. They could have spoken to Mr.

Abram about it at that meeting, and, in fact, Frontier Captain

Williams has testified that they spoke to Mr. Abram about the

LPA the next day. The FAL pilots cannot create “a genuine

issues of material fact” by advancing the adverse testimony of

their former lawyer, whom they are currently suing. Second,

and perhaps more important, assuming arguendo that Mr.

Abram was unaware of the LPA until several months after the

September 15, 1986 meeting, he was surely aware of the relevant

facts concerning the LPA when his clients filed a petition to

vacate the Nicolau Award in the District Court in Colorado on

September 4, 1987, nearly one year later.

A25 °

Moreover, the court notes that, on March 29, 1987, on the

second day of the Nicolau arbitration, the FAL pilots placed into

evidence the excerpt from the DOT filing which contained

Texas Air’s comments regarding labor protection provisions

(“LPPs”). (See Defendants’ Exhibit KK). Mr. Lieber was the

counsel for the FAL pilots who put the exhibit into evidence;

Captain Williams was the sponsoring witness. (See Defendants’

Exhibit LL; Exhibit MM at 249-52). These factors demonstrate

that the FAL pilots could have made their fraud argument to the

Colorado state courts.

At the July 27, 1992 hearing, Mr. Roberts, the FAL pilot’s

counsel, argued that they could not have advanced their

fraudulent inducement argument in the Colorado state courts

because it is not one of the grounds for challenging an arbitration

award pursuant to the Colorado Uniform Arbitration Act, Colo.

Rev. Stat. §§ 13.22 et seg. (See transcript of hearing of p.17).1!

In support of their argument, the FAL pilots have cited two

Sections 13-22-214 and 11-22-215 and have suggested that

those are the “only grounds for challenging an arbitration award.

” (See plaintiff's opposition to defendants’ motion for

summary judgment at p. 53). Counsel for plaintiff has either

failed to conduct thorough research or has been less than candid

with this court. In this regard, § 13-22-203 of the Colorado

Uniform Arbitration Act, which the FAL pilots failed to cite,

provides an exception to the general enforceability of arbitration

clauses “upon such grounds as exist at law or in equity for the

revocation of any contract.” Accordingly, contrary to plaintiff’s

assertions, a party may oppose confirmation of an arbitration

award if that party claims that the arbitration clause was

fraudulently induced. See National Camera, Inc. vy. Love, 744

P.2d 94 (Colo. App. 1982).

1! Mr. Lieber advanced the same argument in his declaration submitted

along with plaintiff's supplemental brief in opposition to defendant’s motion

for summary judgment. (See Lieber declaration at § 5, 10).

A26

The uncontroverted facts set forth above clearly establish

that the FAL pilots knew the contents of the LPA; their lawyers

had seen the DOT filings; their lawyers discussed both the LPA

and the DOT filings with them; and they, thereafter, relied upon

their lawyer to sign the JPA. In the final analysis, the undisputed

facts establish that the FAL pilots had, contemporaneously with

the PEX pilots, sufficient knowledge about the facts to raise their

fraudulent inducement claim in the Colorado state courts. The

FAL pilots filled their petition to vacate the Nicolau Award in

the Colorado trial-level court on September 4, 1987. Instead of

advancing their LPA argument at that time, they choose to wait

until they filed their petition for certiorari with the Colorado

Supreme Court. Having chosen that course, they have arrived.

at their final destination. For reasons set forth above,

PLAINTIFF’S CLAIM OF FRAUDULENT MISREPRESEN-

TATION IS BARRED BY THE DOCTRINE OF RES

JUDICATA.

Moreover, I find that plaintiff's claim of misrepresentation

is barred by the doctrine of collateral estoppel. The related

doctrine of collateral estoppel refers to issue preclusion. The

doctrine holds that the final decision of a court on an issue

actually litigated and determined is conclusive of that issue in

any subsequent suit. Collateral estoppel applies to a cause of

action different from that involved in the original controversy

but does not apply to matters which could have been litigated

but were not. Pomeroy v. Waitkus, 517 P.2d 396, 399 (Colo.

1973). Collateral estoppel is broader than res judicata in that it

applies to a cause of action different from that involved in the

original controversy. /d. In determining whether the doctrine

of collateral estoppel may be invoked, a court must consider the

following four (4) factors:

(1) was the issue decided in the prior adjudication

identical with the one presented in the action in ques-

tion?

A27

(2) was there a final judgment on the merits?

(3) was the party against whom the plea is asserted

a party or in privity with party to the prior adjudica-

tion?

(4) did the party against whom the doctrine asserted

have a full and fair opportunity to litigate the issue in

the prior adjudication?

In applying the doctrine of collateral estoppel to this case,

the court notes that, on March 31, 1989, the FAL Committee

petitioned the Denver Bankruptcy Court to vacate the JPA on

the ground that the LPA gave them superior rights and that the

JPA had been fraudulently induced. (See App. 411 at § 1;

defendants’ Exhibit Q at 5-7, 17-32). The Bankruptcy Court

denied that motion on April 7, 1989, see App. 415-22, and the

District Court dismissed the FAL Committee’s appeal on

August 8, 1990. Former Frontier Pilot Litigation Steering

Comm. v. Frontier Airlines, Inc., 177 B.R. 588 (D.Colo. 1990).

In addition, as previously noted, the FAL pilots argued both

before Arbitrator Nicolau and the Colorado trial court that the

Nicolau Award was invalid because the FAL pilots were

fraudulently induced into signing the JPA while the legal import

of the LPA was misrepresented to them. Applying the elements

of collateral estoppel to this case, first, it is evident that the issue

decided in the Colorado Bankruptcy Court and in the Nicolau

Arbitration is identical with the issue presented in this case.!2

Second, there was a final judgment on the merits in the Colorado

Supreme Court on the direct appeal from the Nicolau Award and

in the Colorado District Court on the appeal from the Denver

Bankruptcy Court to vacate the JPA. Third, the FAL pilots, the

part against whom defendants seek to assert the doctrine of

collateral estoppel, were a party to the prior adjudications in the

Colorado state courts. Fourth, and finally, the FAL pilots had a

12 The issue is, of course, whether the FAL pilots were fraudulently

induced into signing the JPA based on the misrepresentations by Continental.

A28

full and fair opportunity to litigate the fraudulent inducement

issue in the prior adjudication in Colorado. Accordingly,

PLAINTIFF’S CLAIM OF FRAUDULENT MISREPRESEN-

TATION IS ALSO BARRED BY THE DOCTRINE OF COL-

LATERAL ESTOPPEL.

The court further notes that at oral argument on July 27,

1992, counsel for plaintiff relied heavily on a decision of the

Colorado Court of Appeals in Altergott v. Yeager, 543 P.2d 1293

(Colo. App. 1975), cert. denied, 116 Colo. 379 (1976). In

Altergott, plainuff Ruby Altergott filed an amended compliant

against the defendants, Harold Yeager and his brothers Albert

and Victor, claiming damages as a result of fraudulent repre-

sentations made to her by the defendants.!3 The prolonged and

tortured history of events leading up the A/tergott action began

when Harold Yeager was adjudged to be the father of a child

born to Ruby Altergott on September 27, 1943. Altergott in-

Stituted a paternity action on December 31, 1943, which ul-

timately resulted in a jury verdict and judgment for plaintiff

entered on January 6, 1948. That judgment awarded plainuff

damages of $47.50 per month and directed back payments due

from the date of the birth of the child to be paid in a lump sum

at once. The monthly payment of $47.50 was to be continued

for a period not to exceed 18 years from the birth of the child.

On the day after the birth of the child, Harold, by quit claim

deeds, conveyed all his right, title and interest in two parcels of

land, which he then owned in the County of Boulder, to his

brother Albert and his now deceased brother Herman. On

December 10, 1946, Albert and Herman, in response to gar-

nishee summons and interrogatories served upon them, filed

their answers under oath asserting “that they did not have in their

possession or under their control any property of Harold Yeager

13 Albert and Victor Yeager were sued as co-executors of the Estate of

Herman Yeager, Dec’d; additionally, Albert and Harold were sued in-

dividually.

A29

or in which he is interested.” Altergott, 543 P.2d at 1295. They

further asserted to their answers “that they did not know of any

property, real or personal, in which Harold Yeager had an

interest, and the title to such property was not recorded in his

name.” /d. In her complaint, Altergott contended that “such

statements were false, were known to be false when made, and

were made with an intent that [plaintiff] rely upon them to her

damage.” /d.

After the jury verdict was returned in the paternity action,

in August 1948, Altergott filed a complaint against Harold,

Albert and Herman, claiming that the real property previously

conveyed by Harold to Herman and Albert was conveyed for

the purpose of avoiding legal liability to support Harold’s son.

Harold answered this complaint and stated that “he had no

property subject to levy under execution, and that he had no

property subject to levy under execution, and that he had no

right, title or interest in or to the real estate described in the

complaint and disclaimed any interest therein.” Jd. at 1295.

Altergott claimed that this statement was false, was known by

Harold to be false, and was made for the purpose that she rely

upon it. in her amended complaint, Altergott also claimed that

on November 10, 1948, Herman and Albert Yeager filed their

verified answer to garnishee summons, and claimed that “they

did not have in their possession or under their control any

property of Harold . . . or any property in which [he] was

interested,” and that these statements were knowingly false and

made for the purpose of defrauding plaintiff. /d.

On December 8, 1948, Harold offered to settle and satisfy

the judgment rendered in the paternity action for the sum of

$5,000 which was to be a “‘complete settlement of all obligations

for support, maintenance and education of the child and the

plaintiff personally.” Altergott relied upon the previously made

false statements of Albert, Herman and Harold Yeager, and

entered into stipulation and agreement of settlement which

A30

approved by the court on December 8, 1948. As part of the

settlement agreement, the court dismissed the money judgment

rendered in the paternity suit and also dismissed with prejudice

the suit instituted by plaintiff Ruby Altergott in August 1948.

On August 4, 1965, Herman died and Harold Yeager filed

a claim against Herman’s estate asserting that Harold was the

equitable owner, pursuant to an oral trust agreement with

Herman, of 28.98% of all property held in Herman’s name.

Following a hearing, the court with jurisdiction over the estate

held on April 2, 1971, that an oral agreement was made in 1946

between Herman, Albert, and Harold where by, upon comple-

tion of a program of work to which they all agreed, Harold’s

respective interest in the overall joint farming operations would

be 20%; that legal title to the interest of Harold Yeager was at

all times held in the name of Herman Yeager; and that Harold's

20% interest in the entire farming operation of the brothers

constituted 28.98% of interest in the property held in the name

of Herman Yeager with certain irrelevant exceptions.

During the course of hearings on the claim, Altergott was

subpoenaed in March 1972 to testify as a witness, and it was at

that time that Altergott allegedly first learned of the oral agree-

ment between the defendants and Harold concerning Harold’s

ownership interest in real property. Altergott, 543 P.2d at 1296

(emphasis supplied). It was as a result of that knowledge that

Altergott filed her complaint in the Colorado trial court on June

2, 1972.

Defendants moved for summary judgment based upon the

ground that Altergott’s 1972 action constituted a collateral

attack on the judgment of dismissal in the paternity action and

the dismissal of the law suit filed by Altergott in 1948.

The trial court granted summary judgment and found, as a

fact, that the fraud Altergott complained of in 1972 was intrinsic

to the action instituted by her in August 1948, and was clearly

presented to the court in that action. /d. at 1296. On appeal, the

- A3l

Colorado Court of Appeals held that plaintiff was not collateral-

ly attacking a prior judgment which had been dismissed with

prejudice as part of a settlement, since plaintiff accepted the

judgement of dismissal as valid in proceeding on the theory of

an affirmance of the settlement contract fraudulently procured.

The Court of Appeals further held that the issue of fraudulent

misrepresentation was not involved in the prior action, not

litigated therein. /d. at 1296-97.

The Court of Appeals further noted that, in the prior action

in 1948, Altergott sought to set aside the quit claim deeds of

1943 executed by Harold to his brothers as a fraud upon Harold’s

creditors. While the fraud alleged by Altergott in 1948 was the

conveyance by Harold for the purpose of avoiding liability to

support his son, the Colorado Court of Appeals emphasized that

the fraud alleged in Altergott’s 1972 case was the secret oral

agreement made in 1946 and the false representations made by

defendants in 1946 which induced her to settle her claim for

child support. /d.. (Emphasis in original). The Court of Ap-

peals found that the fraud alleged by Altergott in 1972 was

extrinsic to the prior actions, and not intrinsic as the trial court

found. /d. at 1927.

The Frontier pilots’ reliance on Altergott is misplaced

because this case is clearly distinguishable from the facts in

Altergott. In this case, there is one alleged fraudulent mis-

representation which occurred during the negotiations of the

JPA in 1986. Moreover, in this case, plainuff’s claim of

fraudulent misrepresentation arises from one event or transac-

tion, namely the negotiation and execution of the JPA agreement

as a condition to the merger between Texas Air and People

Express. While Ruby Altergott was unaware, and could not

have known about the 1946 oral trust agreement until a court

ruling in 1971, Frontier pilots, plaintiff in this case, were parties

to the JPA negotiations and, as such, were fully aware of all the

facts which comprised their alleged fraudulent misrepresenta-

A32

tion claim in 1986. Moreover, alleged fraud which Frontier

advances in this case is intrinsic to the prior actions in the

Colorado state courts, and not extrinsic, like the fraud alleged

by Altergott. I also emphasize that, unlike Ruby Altergott, the

plaintiff in this action was represented during the JPA negotia-

tions by experienced and extremely competent legal counsel

who were well trained and battle-tested in the field of labor

negotiations. Accordingly, PLAINTIFF’S RELIANCE ON

ALTERGOTT 1S MISPLACED AND CANNOT PREVENT

THE DISMISSAL OF THEIR MISREPRESENTATION

CLAIM.

Assuming arguendo, that the FAL pilots’ misrepresenta-

tion claim was not barred by the doctrine of res judicata and

collateral estoppel, I find that the claim also fails on the merits.

As previously stated Colorado law governs this case. In tort

cases, New Jersey courts utilize a flexible governmental interest

analysis in determining which state’s law to apply. System

Operations, Inc. v. Scientific Games Dev. Corp., 555 F.2d 1131,

1137 (3d Cir. 1977). In this case, Colorado has the most

significant interests. In this regard, Colorado is where the JPA

was negotiated, where the Nicolau Award had its greatest impact

and where the Award has already been challenged. New Jersey,

on the other hand, had not relationship or connection to the

negotiation of the JPA or the Nicolau arbitration.

In their Complaint, the Frontier pilots allege that defen-

dants misrepresented the legal significance of the LPA during

the negotiations of the JPA. (See Plaintiff’s original Complaint

at § 16). This claim must fail for two reasons::

First, by plaintiff's own admission, defendants did not

allegedly misrepresent any fact. On the contrary, defendants’

statements represent an expression of an opinion as to the legal

validity and the significance of the LPA.

Second, assuming arguendo, that defendants’ statements

could somehow be construed as statements of fact, plaintiffs had

A33

no reasonable right to rely on such statements as a matter of law.

In this regard, Colorado has long held that:

A representation of what the law will or will not

permit to be done, is one upon which the party to

whom it is made has no right to rely, and if he does

sO, it is his own folly, and he cannot ask the law to

relieve him from the consequences. The truth or

falsehood of such a representation can be tested by

ordinary vigilance and attention. It is an opinion in

regard to the law, and is always understood as such.

Metzger v. Baker, 24 P.2d 748, 749 (Colo. 1933) (quoting Fish

v. Cleland, 31 Ill. 238, 243 (1930). See also, Two, Inc. v.

Gilmore, 679 P.2d 116 (Colo. App. 1984). Statements concern-

ing the “legal effect of a course of a conduct or a document are

not actionable.” 1 Colorado Law Annot. 489, 490.

An alleged misrepresentation concerning the validity of a

document fails if the party to whorn the statement was made has

an opportunity to inspect the document and determine its legal

effect for himself. See Peden v. Birkle, 148 P.913 (Colo. App.

915); 1 Colorado Law Annot. 489, 493. See also Amoco Oil cu.

v. Ashcraft, 791 F.2d 519 (7th Cir. 1986) (Misrepresentation

about the meaning of a document is not actionable because a

party can protect itself by reading the document). In this case,

the FAL pilots have conceded, the record reflects, that they had

the opportunity to inspect the LPA, and that it was available to

their lawyer. Moreover, they had an ample opportunity to

determine the legal effect of the LPA for themselves. Accord-

ingly, the FLA pilot’s claim of fraudulent misrepresentation

must fall on the merits as well.

aaa aaaa ia aaa itn

A34

THE FAL PILOT’S CLAIM FOR BREACH OF

CONTRACT OR THIRD-PARTY BENEFICIARY

CONTRACT (COUNT 2)

In Count 2 of their Complaint, plaintiff advances a claim

for breach of contract. The gravemen of the FAL pilots’ breach

of contract claim is that this court supposedly found them to be

third-party beneficiaries of the LPA in the PEX litigation. To

the contrary, I declined to hold that the FAL pilots were third-

party beneficiaries of the LPA; and I allowed them to participate

in the Ross Arbitration under the LPA only to protect the

position that they already attained by virtue of the Nicolau

Arbitration conducted pursuant to the JPA. In addition, and

claim for breach of contract is similarly barred by the doctrines

of res judicata and collateral estoppel. With respect to the

doctrine of res judicata, plaintiff has both directly and indirectly

advanced this claim in the Nicolau Arbitration proceedings and

in the appeal of that Award in the Colorado state courts. As-

suming arguendo, that plaintiff did not actually raise the breach

of contract claim in the Colorado state courts, I nonetheless find

that they could have been and should have been raised since all

the relevant facts were known to the plaintiff at that time.

Accordingly, plaintiff's BREACH OF CONTRACT CLAIM IS

BARRED BY THE DOCTRINE OF RES JUDICATA.

With respect to the doctrine of collateral estoppel, a careful

review of the record in the FAL litigation reveals that, on

numerous occasions, the FAL pilots raised and actually litigated

the very issues which form the core of their breach of contract

claim. Specifically, the record is replete with arguments made

by the FAL pilots to Arbitrator Nicolau and the Colorado state

courts that they were third-party beneficiaries of the LPA, and,

as such, should have been integrated into the Pilot Seniority List

under the terms of the LPA agreement. These issues were raised

and rejected by Arbitrator Nicolau and the Colorado state courts

A35

and, as such, must be rejected here under the doctrine of col-

lateral estoppel.

Assuming arguendo, the LPA could be construed to apply

to FAL pilots, the breach of contract claim must fail because no

breach occurred. The FAL pilots freely entered into the JPA

agreement to obtain offers of employment or severance pay.

Nothing in the LPA prevented the former FAL pilots and

Continental from reaching that specific agreement; the LPA

clearly contemplated a document like the JPA in order to give

effect and life to its statement that “provision shall be made for

fair and equitable seniority integration procedures.” ACCORD-

INGLY, PLAINTIFF’S CLAIM OF BREACH OF CON-

TRACT IS HEREBY DISMISSED WITH PREJUDICE.

The court now addressed plaintiff’s appeal of Magistrate

Judge Hedge’s order, dated march 6, 1992, denying plaintiff’s

request for limited discovery pursuant to Rule 56(f) of the

Federal Rules of Civil Procedure. I find that Magistrate Judge

Hedge’s Order is neither clearly erroneous nor contrary to law.

See Cipollone v. Ligget Group, Inc., 785 F.2d 1108 (3d Cir.

1986). Moreover, based upon my de novo review of the record.

I find that plaintiff’ s request for discovery is meritless and that

no additional facts could be discovered which would prevent the

application of the doctrines of res judicata and collateral estop-

pel to plaintiffs’ claims in this action.!4 The court further notes

that the FAL pilots’ request to take depositions is in direct

contradiction to their representations before Judge Balick of the

Bankruptcy Court presiding over Continental’s Chapter 11

Reorganization. Specifically, on October 2, 1991, J udge Balick

heard argument from the FAL pilots concerning the conditions

for permitting this case to go forward. Mr. Roberts, the FAL

pilots’ current counsel, stated that the FAL pilots did not need

'4 1 also note that plaintiffs have conducted extensive discovery and are

quite familiar with all the facts by virtue of their participation in the FAL

litigation, and this litigation.

A36

any depositions and would not seek any if the automatic stay

were lifted. !5 Regardless of the fact that Mr. Roberts has taken

a new position concerning depositions, it is evident that no

amount of discovery could save plaintiffs’ claims at this junc-

ture. ACCORDINGLY, THE FAL PILOTS’ APPEAL OF

MAGISTRATE JUDGE HEDGES’ ORDER, DATES

MARCH 6, 1992, IS HEREBY DENIED. !®

1S The colloquy between Judge Balik and Mr. Roberts was as follows:

Q. And am I right that your saying that you would take no depositions

in connection with your case?

A. ...[T]hey’re not necessary to put the case on.

Q. You're not going to seek to take depositions, if the stay is lifted?

A. We have no plans at this time to take any depositions.

(See transcript of hearings conducted on October 2, 1991 at p. 91).

16 At the conclusion of oral argument on July 27, 1992, I permitted both

parties to file supplemental papers with respect to defendant's motion for

summary judgment. Plaintiff took this opportunity to make another request,

albeit an informal one, for leave to take limited depositions. Not only was

this application improperly filed under the Federal Rules of Civil Procedure,

but it is totally without merit. Plaintiffs already have the deposition of their

former counsel, Mr. Abram, in connection with their legal malpractice action

against him. Moreover, this informal request to take limited depositions is

nothing more than another 1 Ith hour attempt to avoid the inevitable, namely,

the entry of summary judgment in favor of defendants and against the FAL

pilots.

A37

CONCLUSION

Based on the reasons set forth above, defendants’ motion

for summary judgment is hereby GRANTED and plaintiff's

entire Complaint is hereby DISMISSED WITH PREJUDICE.

Plaintiff's cross-motion to amend is DENIED. In addition,

plaintiff's appeal of Magistrate Judge Hedges’ Order, dated

march 6, 1992, is HEREBY DENIED. THIS CONCLUDES

THE ENTIRE CASE AND THE CLERK OF THE COURT IS

HEREBY DIRECTED TO CLOSE THE FILE IN THIS MAT-

TER.

SO ORDERED:

/s/

NICHOLAS H. POLITAN

U.S.D.J.

Bl

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 92-5592

FRONTIER PILOTS LITIGATION

STEERING COMMITTEE,

Appellant,

V.

TEXAS AIR CORPORATION;

CONTINENTAL AIRLINES, INC.;

PEOPLE EXPRESS, INC.,

JOHN ADAMS and JOHN DOES | through 10

On Appeal from the United States District Court

for the District of New Jersey (D.C. Civil No. 89-3879)

District Judge: Honorable Nicholas H. Politan

Argued June 7, 1993

(Filed June 10, 1993)

BEFORE: GREENBERG, NYGAARD, and, LEWIS, Circuit

Judges

JUDGEMENT ORDER

After consideration of all contentions raised by the appel-

lant, it is

ADJUDGED and ORDERED that the judgment of the

district court be and is hereby affirmed.

Costs taxed against appeilant.

B2

BY THE COURT:

/s/

Greenberg, Circuit Judge

ATTEST:

/s/

P. Douglas Sisk

P. Douglas Sisk, Clerk

Cl

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 92-5592

FRONTIER PILOTS LITIGATION

STEERING COMMITTEE,

Appellant,

V.

TEXAS AIR CORPORATION;

CONTINENTAL AIRLINES, INC.;

PEOPLE EXPRESS, INC.;

JOHN ADAMS AND JOHN DOES | through 10

On Appeal from the United States District Court

for the District of New Jersey

D.C. Civil No. 89-3879

SUR PETITION FOR REHEARING

BEFORE: SLOVITER, Chief Judge, and BECKER,

STAPLETON, MANSMANN, GREENBERG,

HUTCHINSON, SCIRICA, COWEN, NYGAARD,

ROTH, and, LEWIS, Circuit Judges

The petition for rehearing filed by the appellant in the

above captioned matter having been submitted to the judges who

participated in the decision of this court and to all the other

available circuit judges of the court in regular active service, and

no judge who concurred in the decision having asked for rehear-

ing, and a majority of the circuit judges of the circuit in regular

active service not having voted for rehearing by the court in

banc, the petition for rehearing is denied.

C2

BY THE COURT:

iS

Greenberg, Circuit Judge

DATED: JULY 8, 1993