Petition for Writ of Certiorari — Maas v. Texas Air Corp., 113 S. Ct. 2963 (1993) (No. 92-1702)

In The

Supreme Court of the United States

October Term, 1992

¢

CARL A. MAAS, ET AL.,

Petitioners,

TEXAS AIR CORPORATION,

Respondent

Petition For Writ Of Certiorari

To The Court Of Appeals

For The First District Of Texas

PETITION FOR WRIT OF CERTIORARI

THOMAS W. REAVLEY

Counsel of Record

1301 West 25th Street

Suite 535

Austin, Texas 78705

(512) 476-2464

Counsel for Petitioners

COCKLE LAW BRIEF PRINTING CO. (800) 225 6964

OR CALL COLLECT (402) 42 2831

QUESTION PRESENTED FOR REVIEW

Whether a parent corporation’s obligations under a

contract guaranteeing its subsidiary’s performance of a

collective bargaining agreement are excused by the sub-

sidiary’s rejection of that agreement in the course of the

subsidiary’s bankruptcy?

LIST OF PARTIES

PETITIONERS:

Carl A. Maas, Jr.

Norman W. Adair

Robert D. Adams

John A. Adamski

J. Frank Anderson, Jr.

Chester L. Arnow

A. A. Arthur

David L. Baker

Sammy D. Balch

A. Newton Ball

James D. Bateman

Aubrey J. Battley

Jim H. Bausch

W. Thomas Baxter

Warren R. Beckman

Donald R. Bennett

Ronald E. Bennett

Peter R. Biberacher

Edward W. Birdwell

Robert C. Blainey

J. C. Blauvelt, Ill

Ronald A. Bloecher

Jonnny H. Boardman

Herb R. Boyer

Robert J. Brooke

James E. Brown, Jr.

Richard E. Byrant

Michael J. Burke

Robert G. Burnett

William R. Bynum

Harold E. Cameron

Joseph A. Cangilose

Richard P. Capp

Floyd E. Carpenter

Glenn L. Chonoski

Jann T. Christian

James G. Conger, Jr.

A. Charles Cook

Edward A. Cox

T. B. Crawford

Charles W. Croll

Robert C. Curtis

Philbrook S. Cushing

Joel N. Daniel

Joe C. David, Jr.

Joseph R. Dark

Tommie G. Dees

Pete B. Dennis

James C. Dixon

Paul R. Downing

Arthur L. Dozier

Foster E. Dudgeon

Anthony E. Eggers

Amrand Eknayan

William R. Elliott

Bobby J. Ellis

Jay W. Ellis

Richard F. Engle

James J. Erdos

Roger D. Erickson

Alexander Evans, III

Joe M. Faulkner

Donald J. Faull

Martin J. Fedigan

LIST OF PARTIES —- Continued

Harry Bryson Feild

Gary W. Ferguson

Homer W. Feuchter

Michael T. Finnegan

Douglas B. Fletcher

Bill L. Floyd

Robert A. Foley

Gary F. Forister

Jon I. Fox

James H. Gamble

Gerald E. Garner

John B. Gartner

C. E. Gillespie

Robert T. Gilmartin, Jr.

Walter A. Green

Dale R. Haas

Kenneth P. Haas

J. T. Haire

Levon Hambarzumian

Steven C. Hane

Harry G. Hansen

R. J. Hardin

James S. Harmon

Garn G. Harris

James R. Hartman

Larry L. Hartmen

Richard L. Harvey

O. C. Haworth

Rupert L. Hayes

Albert T. Helmick

Jack H. Henderickson

Charles E. Henry

Marden A. Hiett

Rogert E. Hines

Wm. J. Hopper

Sanford S. Howard

John E. Howell

Roy L. Huff

R. L. Hughes

Henry K. Jaeger

Suley Jarvits

Ronald Jennings

John Jensen

Donald G. Johns

James K. Johnson

Leslie N. Johnson

Peter A. Johnson

Karen M. Kahn

Allen L. Kelley

Thomas Kelley-Lusk

James R. Keltner

Fred W. Kenyon

Christopher R. Kern

James C. Ketner

L. D. Killough

Hi. R. Koch

John H. Koontz

Arthur J. Krum

John D. Labarre

Philip T. Landry

Gary P. Laplante

Ronald F. Lary

Harold E. Lawson

Robert E. Letson

Clarence W. Levingston, Jr.

Howard S. Loitwood, Jr.

James L. Losey

Lynn A. Lowe,

LIST OF PARTIES — Continued

J. D. Lowry

Lidle L. Lykins

Doug B. Mabry

Richard P. Mahoney

T. E. Martin

Kenneth J. Masat

Jon R. McBride

Jerry D. McNiece

Douglas B. Merz

Thomas R. Meyers

Denney E. Miller

John D. Milligan

James G. Milliman

Eric R. Moerman

David R. Monroe

Claude J. Montes

Larry G. Moore

Norman P. Morgan

Leon M. Morris

Frank E. Muckle

Rolfe L. Munson

John W. Murray

John C. Murray

Wayne C. Nash

Baxter L. Oakes

Jay L. Oliverio

Joseph E. O'Neill

Philip M. Orday

Robert A. O’Rorke

James H. Parkes

Jack E. Pendleton

T. A. Piroli

Gary W. Portizline

V. Curtis Powel!

John H. Prater

Robert E. Pries

Harold Provo

R. P. Quinn

Garland R. Reece

Thomas R. Reed

Max L. Reinig

Eugene Rene Robert

Harold S. Roberts

William A. Ros

T. W. Rowan

Arthur Rubens

Erwin K. Ruggles

Nich H. Ruysenaars, Jr.

Stanley S. Rynear

Fidel N. Sanchez

Joseph Sari

Robert E. Schaefer

J. V. Sclifo

Charies B. Scott

Larry L. Severson

Michael J. Shadwick

Charles A. Schaheen, Jr.

Larry A. Sheehan

Paul L. Shelton

Robert W. Shelton

Donald R. Sinclair

William M. Sines

Kenneth E. Smith

Larry R. Smith

Neil R. Smith

Richard Smith

Richard E. Smith

Richard M. Smith

Thomas L. Smith

Arthur J. Sparks

LIST OF PARTIES —- Continued

Ned P. Stark

William M. Steele

James D. Steinmetz

J. E. Stockstill

Jerry B. Street

Willaim G. Stromblad

Harvey L. Strong

Donald W. Taylor

Harvey L. Thompson

Stanley C. Titcomb

Gary N. Tjossem

William T. Todd

Duane E. Tuttle

Richard M. Ulmer

Harold C. Vanis

George C. Vermef, Jr.

Charles R. Walker

Richard N. Waiton

Maxwell R. Ward

Edward R. Warnock

Ronald R. Waters

Dennis J. Welkle

Robert G. Wensel

Clifford A. White

Neil L. Whittlesey

Elmer I. Wiesman

John David Williams

Gary A. Wilson

George Wolf

David V. Wood

Evan E. Wood

Carroll E. Wooten

Robert L. Young

Glenn W. Diefenderfer

Christopher D. Zwingle

Norman Sykes

Sidney P. Alexander

Theodore A. Alen

Jerry L. Becker

Paul Britton

Ridgely P. Brown

Robert L. Cady

Stanley E. Campbell

John K. Duncan

John K. Forsythe

John P. Frederick

Donald A. Henderson

Charles X. Hernett

Raymond O. Houchen

Craig S. Jacobsen

John M. Kretsinger

Ronald G. Kurtz

Raymond L. Lueke

George G. Lycan

William D. Maytun

Richard E. Mason

Carl J. Minkner

Vincent A. Monforte, Jr.

Billy R. Moody

Eddie J. Nash

William A. Olson

Frank Oster

James H. Payne, Jr

Harry T. Pearce

Charles D. Rice

Hugh E. Scott

Frederick H. Secord

Jackson C. Taylor

Kenneth W. Tiegs

Vi

LIST OF PARTIES —- Continued

Charles E. Turk

James L. Waters

RESPONDENT:

Texas Air Corporation,

now known as Continental Airlines

Holdings, Inc.

TABLE OF CONTENTS

Page

Question Presented for Review ............... i

Beek Me I 05 se en Oe eee elie ener ii

‘

Table of Contents*............... SAA erin ea ee vii

BO eee eee eer ee eee ]

ee ogo ote uae ee eee ee 2

Statutory Provisions Involved er ere 3

Statement of the Case............. ee . 3

Reasons for Granting the Writ 6

I. THIS CASE IS IMPORTANT TO THE

ENFORCEMENT OF NATIONAL LABOR

PRE ha nkk Ke cua ED eee Coa Peewee ics 6

I. THE STATE COURT HOLDING THAT BANK-

RUPTCY REJECTION OF THE CAL BASIC

AGREEMENT CANCELS THAT CONTRACT

IS CONTRARY TO 11 U.S.C. §365(a) AND ITS

CONSISTENT INTERPRETATION BY FED-

3 6S ot) 4 tn

SJ

Hl. THE STATE COURT’S RELIANCE ON THE

SIDE LETTER’S ARBITRATION CLAUSE AS A

BASIS FOR JUDGMENT AGAINST PETI-

TIONERS ON THE MERITS IS PLAINLY

WRONG AND DOES NOT CONSTITUTE AN

ADEQUATE STATE GROUND FOR ITS DECI-

PES 44 aR sce Vatueeteunekecwanw es fee 9g

IV. THERE ARE NO OTHER GROUNDS SUFFI-

CIENT TO JUSTIFY THE STATE COURT DECI-

ot A ree ae es 10

Conclusion....... 15

Vill

TABLE OF CONTENTS —- Continued

APPENDICES:

Appendix A:

Appendix

Appendix

Appendix

Appendix

Appendix

Appendix

Appendix

G:

H:

Page

Carl A. Maas, et al v. Texas Air

Corporation, No. 01-90-00189 (Tex.

App. — Houston [lst Dist.] March

Pe Ec tee ea ek eau App.

Order of Court of Appeals denying

Motion for Rehearing (April 25,

Ere 6 6a aces oka oe a App.

Order of Court of Appeals denying

Motion for En Banc Reconsideration

Et oh ey |) ee eee App.

Stipulation and Order, United

States Bankruptcy Court for the

District of Delaware, Case Nos.

90-932 through 90-984, Motion No.

92-118 Gune &, 1991). .........3 App

Notice of Order Denying Applica-

tion for Writ of Error, Supreme

Court of Texas, No. D-1168 (Novem-

ee Se et ee ae App.

Notice of Order Denying Motion for

Rehearing of Application for Writ of

Error, Supreme Court of Texas, No.

D-1168 (December 9, 1992)..... App.

Stipulation and Order, United

States Bankruptcy Court for the

District of Delaware, Case Nos.

90-932 through 90-984, Motion No.

92-118 (March 26, 1993)....... App.

Letter of Agreement Between Texas

Air Corporation and the Air Line

Pilots Association Internation-

Cd

Y

—"

17

TABLE OF AUTHORITIES

Page

CASES

Ackermann v. Ackermann Schuetzen Verein, 60 S.W.

366 (Tex. Civ. App. 1900, no writ) ................ 11

Dairyland County Mutual Insurance Co. v. Childress,

Coe Bee OF COs BPE cs a skeen ean e ee eaeus'es 11

E.C. Ernst, Inc. v. Manhattan Const. Co. of Texas, 551

F.2d 1026 (5th Cir. 1977), rehearing denied in

part, granted in part, 559 F.2d 268, cert. den. 434

as eRe ese RNa vi taken ee enT ee ee aioes 9

In re Continental Airlines Corp., 901 F.2d 1259 (5th

RS AA PEE eh) ee POO Ca Te ene or 14

In re Drexel Burnham Lambert Group, Inc., 138 B.R.

Der See ERRORS 6 os cas deseavesnnes caaee 8

Intern. Broth. of Teamsters v. IML Freight, Inc., 789

Pee eee MOUEe GRE BE h 5 4k oS ca aae ho kun ae 8

Lone Star Cotton Mills v. Thomas, 227 S.W.2d 300

(Tex. Civ. App. — El Paso 1979, writ ref’d n.re.).... 11

Lone Star Steel Co. v. Wahl, 636 S.W.2d 217 (Tex.

App. - Texarkana 1982, no writ)................ 14

NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984).....6, 8

O'Neill v. Texas Air Corporation, No. 89-2455, 1990

U.S. App. LEXIS 6297 (5th Cir. April 13, 1990) .... 13

Rudolph v. ABC Pest Control, Inc., 763 S.W.2d 930

(Tex. App. — San Antonio 1989, writ den.)....... 11

Spain v. Houston Oilers, Inc., 593 S.W.2d 746 (Tex.

Civ. App. — Houston [14th Dist.] 1979, no writ) ..... y

Texaco, Inc. v. Louisiana Land & Exploration Co., 136

Se es a ee re eee eee 8

TABLE OF AUTHORITIES — Continued

Page

STATUTES

AL Ee ey re oe eer rr ee 9

ee cat ech va un he cae hak ca bad eens 2

ee cs be Usiesw nck ck gaan engeusess L& 7

ee REPO C TTT PETE TEE CELT CPeT Tere ree 3

i Or. ces Se hee eV pakinkawd et eue ee ohe es5 4

RR A ree ee ae ee er rr 2

TEX. REV. CIV. STAT. ANN. art. 226, §§A, F......... 9

OTHER AUTHORITIES

Andrew, Executory Contracts Revisited: A Reply to

Professor Westbrook, 62 U.Colo.L.Rev. 1 (1991)....... 8

*

In The

Supreme Court of the United States

October Term, 1992

¢

CARL A. MAAS, ET AL.,

Petitioners,

VS.

TEXAS AIR CORPORATION,

Respondent.

¢

Petition For Writ Of Certiorari

To The Court Of Appeals

For The First District Of Texas

¢

PETITION FOR WRIT OF CERTIORARI

>

OPINIONS BELOW

This petition seeks review of the unpublished judg-

ment and opinion of the Court of Appeals for the First

District of Texas, which affirmed the judgment of the 80th

District Court of Harris County, Texas. Petitioners sought

damages on a contract claim against respondent, and the

state court of appeals affirmed summary judgment for

respondent based on its interpretation of 11 U.S.C.

§365(a) (permitting the debtor to reject executory con-

tracts in bankruptcy proceedings). The Supreme Court of

Texas denied petitioner’s application for writ of error,

which sought discretionary review of the decision of the

Court of Appeals.

JURISDICTION

This court has jurisdiction to review the opinion and

judgment of the Texas court of appeals pursuant to 28

U.S.C. §1257. The opinion and judgment of the court of

appeals were issued on March 14, 1991. The court of

appeals overruled petitioners’ motion for rehearing on

April 25, 1991. Petitioners filed their application for writ

of error with the Supreme Court of Texas on May 24,

1991. On June 8, 1992, the Delaware bankruptcy court

handling Texas Air Corporation’s Chapter 11 bankruptcy

proceedings granted petitioners limited relief from the

automatic stay: Petitioners were allowed to go forward

with the case in the Texas Supreme Court and “the appro-

priate lower appellate court, on remand, if applicable”.

The Supreme Court of Texas denied the application for

writ of error on November 4, 1992, and it overruled

petitioners’ motion for rehearing on December 9, 1992.

The prior modification of the bankruptcy automatic stay

did not permit petitioners to seek review in this Court;

petitioners had to file a request for further modification

of the stay. On March 26, 1993, the bankruptcy court

granted a further modification of the automatic stay to

permit this application for writ of certiorari. The exis-

tence of the automatic bankruptcy stay extended the time

for filing this petition until April 25, 1993, or 30 days after

termination of the automatic stay. 11 U.S.C. §108(c). This

petition is filed within the 30 day period and is therefore

timely.

STATUTORY PROVISIONS INVOLVED

11 U.S.C. §365(a) states:

Except as provided in sections 765 and 766 of

this title and in subsections (b), (c), and (d) of

this section, the trustee, subject to the court’s

approval, may assume or reject any executory

contract or unexpired lease of the debtor.

11 U.S.C. §365(g) provides:

Except as provided in subsections (h)(2) and

(i)(2) of this section, the rejection of an execu-

tory contract or unexpired lease of the debtor

constitutes a breach of such contract or lease... .

¢

STATEMENT OF THE CASE

This is a breach of contract case in which the Court of

Appeals sustained a defense based on its interpretation of

federal bankruptcy law.

In 1982 the Air Line Pilot Association, International

(“ALPA”) entered into a modification of its collective

bargaining agreement (the “Basic Agreement”) with Con-

tinental Airlines, Inc. (“CAL” or “Continental”). In

essence, the pilots conceded over $100 million in wage

and benefits rights in exchange for job security assur-

ances: CAL agreed that “[aJll present or future flying

performed in and for the service of Continental [was] to

be performed by pilots on the current Continental Pilot

Seniority List.”

However, ensuring performance of the Basic Agree-

ment was a Critical issue, and the Continental pilots were

not satisfied that the CAL contract would adequately

protect them. Therefore, at the same time the 1982 agree-

ment with CAL was executed, the pilots sought and

obtained, acting through ALPA, an agreement from Texas

Air Corporation (“TAC”), CAL’s parent, adding TAC’s

own promise that CAL would perform (the “Side Let-

ter”). This agreement with TAC provided:

3. TAC agrees that neither it nor any organiza-

tion in which it or its successors or affiliates

owns a controlling interest or exercises opera-

tional control shall conduct FAR Part 121 com-

mercial flight operations unless such flying shall

be performed by pilots on the CAL and TI Sys-

tem Seniority Lists... . App. 22.

The Side Letter was to “run concurrently with the

Duration section of the CAL Basic Agreement, as mod-

ified” (para. 6) and also provided for arbitration of dis-

putes that might arise under its terms. App. 22-23. The

“Duration section” of the CAL Basic Agreement stated

that the agreement “ .. . shall continue in full force and

effect until September 30, 1984.”

In September, 1983 CAL filed for bankruptcy under

Chapter 11 (11 U.S.C. §1101). CAL began implementing

new work rules inconsistent with the Basic Agreement

immediately following its bankruptcy filing. (The bank-

ruptcy court approved CAL’s rejection of the Basic Agree-

ment in june, 1984, but effective September 1983). The

pilots, acting through ALPA, went on strike, and CAL

responded by hiring non-Seniority List pilots, in violation

of both the Basic Agreement and the TAC Side Letter.

ALPA requested arbitration of the Side Letter in Decem-

ber 1983, but TAC refused.

In January, 1984, TAC filed a federal suit against

ALPA seeking a declaration that it did not have to arbi-

trate the Side Letter claim. In August, 1985, while this

suit was pending, CAL withdrew voluntary recognition

of ALPA as the pilots’ collective bargaining representa-

tive. Faced with these actions by CAL and TAC, peti-

tioners, approximately 280 of the 1700 striking pilots,

filed this suit in Texas state court based on TAC’s breach

of the Side Letter. Petitioners sought damages to compen-

sate them for lost wages and benefits resulting from

TAC’s breach.

The state trial court granted TAC’s motion for sum-

mary judgment on the merits and the state court of

appeals affirmed. The court of appeals held that the bank-

ruptcy rejection of the Basic Agreement caused termina-

tion of the Side Letter and also stated that petitioners’

claims were barred by the Side Letter’s arbitration clause:

The summary judgment question of liability on

this claim is answered by that provision that

“any Claim must be brought by arbitration.” As

a matter of law, this suit cannot be an available

remedy for these third party beneficiaries, or for

their agent for that matter.

The summary judgment is correct because

the “side letter” agreement has expired. “This

Letter of Agreement shall run concurrently with

the Duration section of the [Continental] Basic

Agreement, as modified,” says the side letter.

The [Continental-ALPA] contracts cancellation

by the bankruptcy court brought an end to the

“side letter” rights of all concerned. By its own

terms, it no longer is of any force or effect, and

no recovery is available under it.

... The contract has terminated, and had it

not, the only recovery would be by arbitration.

App. 7.

REASONS FOR GRANTING THE WRIT

I. THIS CASE IS IMPORTANT TO THE ENFORCE-

MENT OF NATIONAL LABOR POLICY.

When an employer seeks to reject a collective bar-

gaining agreement in the course of bankruptcy proceed-

ings, the policies behind national labor laws and the

bankruptcy statutes come into direct conflict. This Court

has previously emphasized the need to accommodate

both policies as much as possible: It has held that the

standard for bankruptcy court rejection of a collective

bargaining agreement is higher than the normal “busi-

ness judgment” standard. NLRB v. Bildisco & Bildisco, 465

U.S. 513 (1984).

In this case the employees, through their union, had

previously obtained an important protection beyond the

collective bargaining agreement: a contract with the

employer’s parent corporation obligating the parent to

have the employer subsidiary (and all other subsidiaries

in which it owned a controlling interest) operate under

the terms of the existing collective bargaining agreement.

When Continental filed for bankruptcy protection and

rejected its labor contract, its pilots had a significant

contract damage claim against the (at the time) non-

bankrupt parent. Yet the state court below dismissed this

claim on the basis of federal bankruptcy law without any

statutory or policy justification.

The importance of avoiding further unwarranted

restrictions on the employees’ ability to even the playing

field in anticipation of a subsidiary employer bankruptcy

justifies review by this Court.

II. THE STATE COURT HOLDING THAT BANK-

RUPTCY REJECTION OF THE CAL BASIC

AGREEMENT CANCELS THAT CONTRACT IS

CONTRARY TO 11 U.S.C. §365(a) AND ITS CON-

SISTENT INTERPRETATION BY FEDERAL

COURTS.

One key benefit of the 1982 Basic Agreement to the

Continental pilots was job security. Because of Continen-

tal’s prior history, its pilots also demanded and received

TAC’s separate promise that neither Continental nor any

other TAC subsidiary would violate the pilot seniority or

other provisions of the Basic Agreement. TAC guaranteed

Continental’s performance of the Basic Agreement by

delivering its own separate promise that Continental

would perform.

The state court held that Continental’s rejection of

the Basic Agreement in bankruptcy “canceled” and “ter-

minated” that contract and thereby relieved TAC from its

Side Letter obligations because the Side Letter was to run

concurrently with the Basic Agreement. This holding con-

flicts with federal law regarding the effect of an executory

contract’s rejection in bankruptcy proceedings. After a

thorough review of the historical and theoretical under-

pinnings of contract rejection under 11 U.S.C. §365(a),

one bankruptcy court recently held:

Rejection’s effect is to... [give the nondebtor

party a claim for money damages]. Rejection has

absolutely no effect upon the contract’s contin-

ued existence; the contract is not canceled, repu-

diated, rescinded, or in any other fashion

terminated.

In re Drexel Burnham Lambert Group, Inc., 138 B.R. 687, 708

(Bkrtcy.S.D.N.Y. 1992) (quoting Andrew, Executory Con-

tracts Revisited: A Reply to Professor Westbrook, 62

U.Colo.L.Rev. 1, 16 (1991)). Accord, Texaco, Inc. v. Louisiana

Land & Exploration Co., 136 B.R. 658, 663 (M.D.La. 1992).

The state court holding also ignores the modern func-

tional approach to contract rejection issues in bankruptcy

proceedings. The federal policies underlying the debtor’s

option to reject executory contracts are to benefit the

bankruptcy estate and to avoid unfairness or preference

among creditors. In re Drexel Burnham Lambert Group, Inc.,

supra, at 707-709. These policies do not include benefit-

ting a nonbankrupt parent corporation by relieving it

from its separate obligation to ensure or guarantee that

the debtor will honor its labor contract or to respond in

damages for a breach of that obligation. Even the bank-

rupt party is subject to a bankruptcy damage claim for

the injury to the nondebtor party caused by the contract

rejection. Intern. Broth. of Teamsters v. IML Freight, Inc., 789

F.2d 1460 (10th Cir. 1986); see NLRB v. Bildisco & Bildisco,

465 U.S. 513 (1984). The state court’s holding turns bank-

ruptcy law on its head by giving TAC, the nonbankrupt

parent, more protection than Continental itself received

by virtue of its own bankruptcy.

Ill. THE STATE COURT’S RELIANCE ON THE SIDE

LETTER’S ARBITRATION CLAUSE AS A BASIS

FOR JUDGMENT AGAINST PETITIONERS ON

THE MERITS IS PLAINLY WRONG AND DOES

NOT CONSTITUTE AN ADEQUATE STATE

GROUND FOR ITS DECISION.

At no time in this case has TAC ever asked for

enforcement of the arbitration provision in the Side Let-

ter. Although courts favor arbitration agreements, the

right to arbitrate can be waived if a party proceeds witha

court action without ever requesting an order to arbitrate.

E.C. Ernst, Inc. v. Manhattan Const. Co. of Texas, 551 F.2d

1026, 1039-40 (5th Cir. 1977), rehearing denied in part,

granted in part, 559 F.2d 268, cert. den. 434 U.S. 1067;

Spain v. Houston Oilers, Inc., 593 S.W.2d 746 (Tex. Civ.

App. -— Houston [14th Dist.] 1979, no writ). TAC waived

any arbitration rights by its decision to participate in this

suit without raising the issue.

However, if the state court meant its conclusion

regarding arbitration to be an alternate holding (as

opposed to dicta), it committed an even more basic error.

The remedy for disregarding an enforceable arbitration

provision is to order the parties to arbitrate and stay or

abate the suit pending the outcome of that arbitration.

TEX. REV. CIV. STAT. ANN. art. 226, §§A, F; 9 U.S.C. §§3,

4. The decision below does just the opposite: By affirming

a final judgment in favor of TAC, the court has con-

clusively barred any further proceedings, including arbi-

tration.

The only way to make sense of the state court’s

handling of the arbitration issue is to construe this dis-

cussion as dictum rather than an alternate holding. Since

10

the court concluded that the TAC Side Letter was no

longer in effect, it had no reason to order arbitration.

However, if, as petitioners believe, the court erred in its

interpretation of federal bankruptcy law, the decision

cannot stand on the Alice in Wonderland reasoning that

petitioners should lose their case because they must arbi-

trate it.

IV. THERE ARE NO OTHER GROUNDS SUFFICIENT

TO JUSTIFY THE STATE COURT DECISION.

Although the state court of appeals based its decision

solely on the effect of contract rejection under 11 U.S.C.

§365 and the Side Letter’s arbitration provision, respon-

dent has argued other grounds to support their judgment

in the courts below.

A. Petitioners Were Entitled to Sue on the Side

Letter as Third Party Beneficiaries under State

Law.

The Side Letter is an agreement between TAC and

ALPA. ALPA was petitioners’ union at the time the Side

Letter was signed and therefore legally obligated to rep-

resent petitioners. Petitioners and other Continental

pilots were the only possible beneficiaries of this contract;

ALPA had no plausible interest in the agreement apart

from the Continental pilots it represented. Petitioners are

entitled to sue on the Side Letter as third party creditor

beneficiaries because it was signed by ALPA exclusively

for the pilots’ benefit. Texas law does not require that

petitioners be named in the contract in order for them to

1]

bring suit. Dairyland County Mutual Insurance Co. v. Chil-

dress, 650 S.W.2d 770 (Tex. 1983); Rudolph v. ABC Pest

Control, Inc., 763 S.W.2d 930, 933-34 (Tex. App. - San

Antonio 1989, writ den.)

TAC has argued below that the terms of the Side

Letter only permit enforcement by ALPA. Paragraph 5

certainly permits ALPA to initiate enforcement (” ... the

Association may file a claim with TAC” App. 22), but no

language states that only ALPA may enforce the agree-

ment. In the absence of an explicit limitation on the rights

of the pilot beneficiaries to enforce the agreement, Texas

law permits them to do so. Members of labor unions and

other unincorporated associations are entitled to enforce

contracts made by the union or association for their bene-

fit. See Lone Star Cotton Mills v. Thomas, 227 S.W.2d 300,

306 (Tex. Civ. App. El Paso 1979, writ ref’d n.r.e.);

Ackermann v. Ackermann Schuetzen Verein, 60 S.W. 366,

367-68 (Tex. Civ. App. 1900, no writ)

B. Petitioners’ Claims Were not Waived in the

Court-Approved Settlement of the CAL Strike.

The bankruptcy court handling Continental’s bank-

ruptcy approved a settlement of the pilot’s strike in Octo-

ber 1985, after petitioners had filed this state court suit

for damages under the TAC Side Letter. The bankruptcy

court entered an Order and Award which gave the strik-

ing pilots three options. Pilots could (1) retain the right to

be recalled in seniority order and waive all claims, (2)

receive severance pay and waive all claims, or (3) retain

their claims against Continental and TAC, with no sever-

ance pay or right to be recalled in seniority order. This

12

third option, elected by many of the petitioners, is sum-

marized in a notice letter incorporated into the Order and

Award:

Each striking pilot retains the option of

declining to waive his claims in the claims reso-

lution process established by the Order and

Award. As set forth at Sec. III.B.3 “Individual

Claims” (p. 21) of the Order and Award, such a

pilot will retain all of his bankruptcy claims, and any

other claims against Continental, its employees and

affiliates; but ALPA is not permitted to provide

any support or assistance, direct or indirect, in

the prosecution of such claims; any power of

attorney previously granted to Cohen, Weiss &

Simon is revoked. (Emphasis added.)

At the same time, the Order and Award provided that

ALPA and TAC would dismiss their suit over the Side

Letter and that ALPA would waive claims arising under

the Side Letter. TAC argued below that ALPA’s waiver of

its claims under the Side Letter precludes petitioners

from asserting any claims under that agreement.

The essence of the settlement was individual pilot

choice. Rather than trying to impose a single resolution

for all the Continental pilots, ALPA and Continental pro-

posed a strike settlement that allowed the pilots either to

keep their damage claims against Continental and TAC,

or trade those claims for preferential recall or severance

benefits. Petitioners had state court suits against TAC on

the Side Letter pending at the time the settlement was

made and approved by the bankruptcy court. In this

context it is unreasonable to expand ALPA’s waiver of

rights against TAC to include waiver of al! pilots’ bene-

ficiary rights under the Side Letter. The only viable claim

petitioners got under Option 3 (since Continental was in

13

bankruptcy) was preservation of their claims as benefici-

aries of the Side Letter against TAC. To say that this

single benefit was simultaneously conferred and with-

drawn would make Option 3 under the court-approved

settlement a deceptive trap for pilots who relied on the

language that they would retain their claims against Con-

tinental’s affiliates. A more reasonable interpretation is

that ALPA waived only its right to pursue the Side Letter

claim in its own name and with its own participation, but

that petitioners who chose Option 3 retained the right to

continue their third party beneficiary claims that had already

been asserted in this state court suit.

TAC has previously cited O'Neill v. Texas Air Corpora-

tion, No. 89-2455, 1990 U.S. App. LEXIS 6297 (5th Cir

April 13, 1990) (unpublished), in support of its waiver

argument. In O'Neill the Fifth Circuit held that ALPA had

the exclusive right to enforce the TAC side letter and that

the O'Neill pilots’ claims under the Side Letter were not

preserved by the court-approved settlement. This deci-

sion is both mistaken and also distinguishable in part.

The Side Letter does not state that it may be enforced

only by ALPA or that the pilot beneficiaries have no

enforcement rights. Petitioners’ right to enforce the Side

Letter is governed by Texas third party beneficiary law,

and Texas law recognizes that members of unions or

other unincorporated associations may enforce agree-

ments made for the members’ benefit.

The O'Neill case is also distinguishable because the

Fifth Circuit determined that the O’Neill group of pilots

had not asserted or threatened any claims under the Side

Letter as of October 31, 1985, the date of the settlement

The court relied on this fact in concluding that the settle-

ment did not preserve claims of the O’Neill group under

14

the Side Letter and that those pilots were estopped to

deny ALPA’s authority to settle the O’Neill group’s

claims. However, petitioners filed this suit for damages against

TAC under the Side Letter on September 23, 1985 — prior to

the ALPA settlement.

C. Petitioners’ Damage Claims Against TAC Are

Not Barred by Their Participation in the Strike

Against CAL.

TAC argued below that petitioners have no damage

claims because they chose not to work for Continental

after it breached and repudiated the collective bargaining

agreement, citing In re Continental Airlines Corp., 901 F.2d

1259 (5th Cir. 1990), and various NLRB cases. All of these

cases involve the NLRB’s general policy of not awarding

back pay against an employer for the periods his

employees were on strike. These cases do not apply to

petitioners’ state law contract claims against TAC (which

has consistently denied that it was petitioners’ employer or a

carrier subject to the Railway Labor Act).

Petitioners’ claims may be subject to the general con-

tract defense of failure to mitigate damages. See Lone Star

Steel Co. v. Wahl, 636 S.W.2d 217 (Tex. App. - Texarkana

1982, no writ). However, that defense was never consid-

ered by the court below. Mitigation relates to the amount

of damages rather than liability. TAC’s breach of the Side

Letter excused further performance by petitioners. Their

decision not to continue working for Continental at a

fraction of their contract wage might or might not impact

the amount of their damages, but it is immaterial to

TAC’s liability and to the decision below.

+

15

CONCLUSION

For the foregoing reasons, Petitioners pray that this

Honorable Court grant this Petition for Writ of Certiorari

and, upon review, reverse the decision of the state court

of appeals and remand this case to said court for further

proceedings consistent with the decision of this Court.

Respectfully submitted,

THomasS W. REAVLEY

Counsel of Record

1301 West 25th Street

Suite 535

Austin, Texas 78705

(512) 476-2464

Counsel for Petitioners

App. |

APPENDIX A

Judgment Affirmed and Opinion filed March 14, 1991

(seal)

In The

Court of Appeals

For The

First District of Texas

NO. 01-90-00189-CV

CARL A. MAAS, et al, Appellants

V.

TEXAS AIR CORPORATION, Appellee

On Appeal from the 80th District Court

Harris County, Texas

Trial Court Cause No. 85-53556

OPINION

Appellants, 280 current and former Continental Air

lines, Inc. pilots (“the pilots”), appeal from a final take-

nothing summary judgment in favor of appellee, Texas

Air Corporation (“Texas Air”), the parent corporation of

Continental Air Lines (“Continental”). We affirm

In 1982, Continental and the pilots’ agent, the Air

Line Pilots’ Association (“ALPA”), modified their 1979

collective bargaining agreement. In exchange for wage

and benefit concessions, the pilots received job guaran-

tees including, among other things:

App. 2

1. All present or future flying performed in

and for the service of Continental to be per-

formed by pilots on the current Continental

Pilot Seniority List.

2. This Agreement is binding upon any suc-

cessors who shall employ the pilots on the Con-

tinental Pilot Seniority List regardless of the

nature of the transfer of control, including bank-

ruptcy.

ALPA wanted Texas Air to be a party to the Conti-

nental-ALPA modification. Because Texas Air was not an

air carrier under the Railway Labor Act, and was not the

employer of either Continental’s pilots or ALPA mem-

bers, Texas Air could not be a party to the modification.

As a result, on the same date the modification was

signed, ALPA and Texas Air signed a “side letter” in

which Texas Air agreed “to provide reassurances that it is

aware of and will abide by the Agreement made by

Continental with the ALPA. In the “side letter,” the par-

ties agreed, among other things:

1. Texas Air acknowledged it was aware of the

written agreement between Continental and the

Pilots Association and agreed to abide by that

agreement.

2. Flying to be performed by the pilots on the

Continental Seniority Lists in accordance with

the terms and conditions of the Continental-

Pilots Association Basic Agreement.

3. In the event a dispute arises concerning this

Agreement, the Pilots Association may file a

claim with Texas Air. In the event the matter is

not satisfactorily resolved, any claim is to be

settled by arbitration.

App. 3

One year later, in September 1983, Continental filed a

petition under chapter 11 of the Bankruptcy Code, ceased

domestic operations, implemented emergency work

rules, which included unilateral changes in pay, benefits

and conditions, and filed a motion to reject its collective

bargaining agreement with the ALPA, which the bank-

ruptcy court granted.

In response to Continental’s bankruptcy, and the

implementation of the emergency work rules, ALPA and

its pilots began a strike against Continental. Continental

then began using non-seniority list pilots for commercial

flight operations.

Pursuant to paragraph five of the “side letter,” the

pilots sent a letter to Texas Air claiming violation of the

“side letter” and demanded arbitration. Texas Air filed

suit in the United States District Court for the Southern

District of Texas seeking a declaration that ALPA’s

demand to invoke arbitration was null and void. ALPA

counterclaimed, demanding arbitration. There is conflict-

ing evidence concerning wither the court granted ALPA’s

request. In August 1985, Continental withdrew recogni-

tion of ALPA as the pilots’ bargaining representative.

On September 23, 1985, the pilots brought this suit

against Texas Air to recover damages for breach of the

“side letter” agreement.

On October 31, 1985, after this lawsuit between the

pilots and Texas Air was filed, ALPA and Continental

settled the strike by way of an “Order and Award,” which

defined the rights of striking pilots to future employment

by Continental. The Order and Award provided for one

of three options to be selected by each pilot and any pilot

App. 4

not selecting an option would automatically be relegated

to option 3. Option 1 permitted pilots to return to work in

seniority order and contained a waiver of all claims

against Continental and its affiliates. Option 2 permitted

pilots to resign and collect substantial severance benefits

and also contained a waiver of all claims against Conti-

nental and its affiliates. Option 3 permitted pilots to

return to work not in seniority order, at the end of the

seniority list. The pilots selecting this option were not

required to waive their claims against Continental and its

affiliates. According to the pilots, the Order and Award

did not purport to settle this litigation between the pilots

and Texas Air.

Texas Air, in its first amended original answer to the

pilots’ original petition, asserted 12 affirmative defenses:

lack of jurisdiction; res judicata; collateral estoppel; the

agreement is null and void; the agreement provides no

right to damages; the claim is barred by the statute of

limitations; accord and satisfaction; discharge in bank-

ruptcy; waiver; pilots received payment; release; no

agreement with individual pilots; and pilots have no

standing. The latter two defenses were not verified as

required by Tex. R. Civ. P. 93(1)(2).

On August 26, 1988, pursuant to Tex. R. Civ. P. 166a,

the pilots moved for summary judgment on the issue of

liability and requested, pursuant to Tex. R. Civ. P.

166a(d), a separate trial on the issue of damages. The

pilots claim their summary judgment evidence, affidavits

and exhibits, show that a valid agreement between Texas

Air and ALPA was entered into on August 18, 1982, Texas

Air breached that agreement, and the pilots incurred

actual damages.

App. 5

On October 31, 1989, pursuant to Tex. R. Civ. P.

166a(b), Texas Air moved for summary judgment, setting

forth the following grounds: the pilots’ claims are barred

by ALPA’s agreement to settle and waive all claims under

the “side letter;” the pilots may not recover any damages

under the “side letter;” the “side letter” terminated as of

the date of Continental’s bankruptcy filing.

On January 10, 1990, the trial court granted Texas

Air’s motion for summary judgment and denied all the

pilots’ claims.

When both parties move for summary judgment,

each party must carry his own burden as movant. James v.

Hitchcock Indep. School Dist., 742 S.W.2d 701, 703 (Tex.

App. — Houston [1st Dist.] 1987, writ denied). In addition,

the court may consider all the summary judgment evi-

dence in deciding whether to grant either motion. Dallas

County Appraisal Dist. v. Institute for Aerobics Research, 766

S.W.2d 318, 319 (Tex. App. — Dallas 1989, writ denied).

The court can rely on one party’s evidence to supply

missing proof in the other party’s motion. Seaman v. Sea-

man, 686 S.W.2d 206, 210 (Tex. App. —- Houston [1st Dist.]

1984, writ ref’d n.re). But, the court must indulge all

reasonable inferences and resolve all doubts in favor of

the losing party. University of Téxas v. Big Train Carpet, 739

S.W.2d 792 (Tex. 1987). Under rule 166a of the Texas Rules

of Civil Procedure, summary judgment may be rendered

only if the pleadings, depositions, admissions and affi-

davits show (1) that there is no genuine issue as to any

material fact; and (2) the moving party is entitled to

judgment as a matter of law.

App. 6

As the plaintiff/movant, the pilots had the burden to

show they were entitled to prevail on each element of

their cause of action as a matter of law. Texas Air, as

defendant/movant, had the burden to establish as a mat-

ter of law that there was no genuine issue of fact as to one

or more of the essential elements of the pilots’ cause of

action. Dallas County Appraisal Dist., 766 S.W.2d at 320. A

fact issue is presented when conflicting inferences may be

drawn from uncontroverted summary judgment proof. Id.

The side letter is the basis of this suit and its terms

are controlling of it. The parties to it are ALPA and Texas

Air; they are the designated, named parties, and the

expressed benefits and obligations are assigned to them

in written terms. In fact, and by federal statue, ALPA was

the representative of the Continental pilots in negotiating

the “side letter.” The pilots in this suit seek recovery as

third-party beneficiaries.

Terms of the side letter mandate affirmance of the

granting of the Texas Air motion for summary judgment.

By its terms it has expired, and under it only arbitration

is a remedy.

This suit seeks to recover damages for breach of the

“side letter.” Paragraph 5 of the Letter of Agreement

reads as follows:

In the event a dispute arises concerning this

agreement, the Association may file a claim with

[Texas Air]. [Texas Air] shall answer the claim in

writing within 10 days following receipt of the

claim. In the event the matter is not satisfac-

torily resolved, any controversy or claim arising

out of or relating to this agreement shall be settled

App. 7

by arbitration in accordance with the United

States Arbitration Act. 9 U.S.C. Section 1.

(Emphasis added.)

The summary judgment question of liability on this

claim is answered by that provision that “any claim must

be brought by arbitration.” As a matter of law, this suit

cannot be an available remedy for these third party bene-

ficiaries, or for their agent for that matter.

The summary judgment is correct because the “side

letter” agreement has expired. “This Letter of Agreement

shall run concurrently with the Duration section of the

[Continental] Basic Agreement, as modified,” says the

side letter. The [Continental-ALPA] contracts cancellation

by the bankruptcy court brought an end to the “side

letter” rights of all concerned. By its own terms, it no

longer is of any force or effect, and no recovery is avail-

able under it.

We need not look to third party rights or individual

rights of those who have “withdrawn” from ALPA,

because recovery is not possible by the very terms of the

contract on which suit is brought. The contract has termi-

nated, and had it not, the only recovery would be by

arbitration.

The judgment of the trial court is affirmed.

App. 8

/s/ Justice (Ret.) Stephen F. Preslar!

Former Appellate Justice Price? also sitting.

Chief Justice Evans not participating.

Do not publish. Tex. R. Civ. App. P. 90

Judgment rendered and opinion delivered Mar. 14, 1991

True Copy Attest:

/s/ Kathryn Cox

Kathryn Cox

Clerk of Court

1 Hon. Stephen F. Preslar, Chief Justice Retired, Eighth Dis-

trict of Texas at El Paso, sitting by assignment.

2 Hon. Frank C. Price, justice, former appellate, First Dis-

trict of Texas at Houston, sitting by assignment.

App. Yy

APPENDIX B

Court of Appeals

First Supreme Judicial District

ORDER

CARL A. MAAS, ET AL, APPELLANT

VS

TEXAS AIR CORPORATION, APPELLEI

01-90-00189-CV

On this day came on to be considered Appellant's

motion for rehearing. And such is hereby OVERRULED.

It is so ordered

PER CURIAM

Panel consisting of Justice Stephen F. Preslar and Justice

Frank C. Price.

Order entered April 25, 1991

Kathryn Cox, Clerk of the Court

App. 10

APPENDIX C

Court of Appeals

First Supreme Judicial! District

ORDER

CARL A. MAAS, ET AL, APPELLANT

VS.

TEXAS AIR CORPORATION, APPELLEE

01-90-00189-CV

On this day came on to be considered Appellant's

motion for en banc reconsideration. And such is hereby

DENIED.

It is so ordered.

PER CURIAM

EN BANC

Order entered April 25, 1991.

Kathryn Cox, Clerk of the Court

App. 11

APPENDIX D

IN THE UNITED STATES BANKRUPTCY COUR!

FOR THE DISTRICT OF DELAWARE

CONTINENTAL AIRLINES, INC., Case Nos. 90-932

BS Ailx, through 90-984

Debtors.

‘"ARL A. S, ET .

CARL A. MAAS, ET AL., M-92-118

Movants,

V.

CONTINENTAL AIRLINES

HOLDINGS, IN¢

Respondent

STIPULATION AND ORDER

IT IS HEREBY STIPULATED between Carl A. Maas,

et al. (“Movants”) and Continental Airlines Holdings, In

(“Respondent”) by and through their respective, under-

signed counsel, as follows:

WHEREAS Movants are two hundred eighty current

and former Continental Airlines pilots; and

WHEREAS Movants currently have an Application

for Writ of Error pending in the Supreme Court of the

State of Texas styled Carl A. Maas, et al. v. Texas Air

Corporation, No. D-1168; and

WHEREAS Movants have filed in this Court a Motion

for Order Granting Relief from Automatic Stay

(M-92-118), requesting that the Automatic Stay of 11

U.S.C. § 362(a) (“stay”) be modified in order to allow

App. 12

Movants to pursue their Application for Writ of Error in

the Texas Supreme Court; and

WHEREAS respondent has agreed to a modification

of the Stay to allow Movants to proceed with their Appli-

cation for Writ of Error in the Supreme Court of the State

of Texas as well as with proceedings in the appropriate

Texas lower appellate court, in the event the Texas

Supreme Court remands the case to such appellate court;

IT IS HEREBY AGREED this ___ day of __, 1992, that

the Automatic Stay under 11 U.S.C. Section 362(a) be

modified to allow Movants to proceed with their Applica-

tion for Writ of Error in the Supreme Court of Texas so as

to allow the Texas Supreme Court, or the appropriate

lower appellate court, on remand, if applicable, to reach a

determination as to the issues on appeal raised in the

Application for Writ of Error in Carl A. Maas, et al. v. Texas

Air Corporation, No. D-1168; and

IT IS FURTHER AGREED that Movants shall take no

further action at the trial level in Carl A. Maas, et al. v.

Texas Air Corporation, C.A. No. 85-53556 without first

obtaining additional relief from the automatic stay from

this Court.

JACOBS & CRUMPLAR, MORRIS, NICHOLS,

PA. ARSHT & TUNNELL

/s/ Douglas B. Canfield /s/ Luke W. Mette

ouglas B. Canfie Luke W. Mette

2 East 7th Street 1201 N. Market Street

P.O. Box 1271 P.O. Box 1347

Wilmington, DE 19899 Wilmington, DE 19899

(302) 656-5445 (302) 658-9200

Attorney for Movants Attorney for Respondent

Date: ___ Date: 6/5/92

App. 13

SO ORDERED THIS 8th day of

June, 1992.

/s/ Helen S. Balick

Helen S. Balick

United States Bankruptcy Judge

App. 14

APPENDIX E

THE SUPREME COURT OF TEXAS

P.O. Box 12248

Supreme Court Building

Austin, Texas 78711

John T. Adams, Clerk

November 4, 1992

Mr. Tom F. Coleman

Coleman, Bartlett

& Associates

1001 Fannin, Suite 1313

Houston, TX 77002

Mr. Thomas Lee Bartlett

Coleman, Bartlett

& Associates

1001 Fannin, Suite 1313

Houston, TX 77002

Mr. Russell H. McMains

Law Offices of

Russell H. McMains, Ir.

P.O. Box 2846

2600 One Shoreline Plaza

Corpus Christi, TX 78403

Mr. Richard P. Keeton

Mr. Solace H. Kirkland

Mayor Day Caldwell

& Keeton, L.L.P.

700 Louisiana

Suite 1900

Houston, TX 77002

RE: Case No. D-1168

Mr. Tom W. Reavley

1301 West 25th Street

Suite 525

Austin, TX 78705

Mr. David L. Monroe

Coleman, Bartlett

& Associates

1001 Fannin, Suite 1313

Houston, TX 77002

Mr. Richard H. Anderson

2929 Allen Parkway,

Suite 1466

Houston, TX 77019

Mr. Gary C. Miller

Mayor, Day, Caldwell

& Keeton, L.L.P.

1900 NCNB Center

700 Louisiana

Houston, TX 77002

Style’ CARL A. MAAS ET AL.

v. TEXAS AIR CORPORATION

ew.

App. 15

Dear Counsel:

Today, the Supreme Court of Texas denied the above

referenced application for writ of error with the notation,

“Writ Denied.”

Respectfully yours,

(OHIN T. ADAMS, CLERK

at: sr Tencha Damian

Tencha Damian, Deputy

App. 16

APPENDIX F

THE SUPREME COURT OF TEXAS

P.O. Box 12248

Supreme Court Building

Austin, Texas 78711

John T. Adams, Clerk

December 9, 1992

Mr. Tom F. Coleman Mr. Tom W. Reavley

Coleman, Bartlett 1301 West 25th Street

& Associates Suite 525

1001 Fannin, Suite 1313 Austin, TX 78705

Houston, TX 77002

Mr. Thomas Lee Bartlett

Coleman, Bartlett

& Associates

1001 Fannin, Suite 1313

Houston, TX 77002

RE: Case No. D-1168

Style: CARL A. MAAS ET AL.

v. TEXAS AIR CORPORATION

Dear Counsel:

Today, the Supreme Court of Texas overruled peti-

tioner’s motion for rehearing of the application for writ

of error in the above styled case.

Respectfully yours,

JOHN T. ADAMS, CLERK

BY: /s/ Tencha Damian

Tencha Damian, Deputy

App. 17

APPENDIX G

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

IN RE: Continental Case No.

Airlines, Inc., et al. 90-932-90-984

Jointly Administered

Debtors. Under Case No.

CARL A. MAAS, et al., ——

Movants wah ee as

ants, 92-118

V.

CONTINENTAL AIRLINES .-

HOLDINGS, INC.,

Respondent.

STIPULATION AND ORDER

IT IS HEREBY STIPULATED between Carl A. Maas,

et al. (“Movants”) and Continental Airlines Holdings,

Inc., (“Respondent”) by and through their respective

counsel, as follows:

WHEREAS Movants previously had an Application

for Writ of Error pending in the Supreme Court of the

State of Texas, styled Carl A. Maas, et al. v. Texas Air

Corporation, No. D-1168; and

WHEREAS Movants had filed in this Court a Motion

for Order Granting Relief From Automatic Stay

(M-92-118) requesting that the Automatic Stay of 11

U.S.C. § 362(a) (“Stay”) be modified in order for Movants

to pursue their Application for Writ of Error in the Texas

Supreme Court; and

App. 18

WHEREAS Respondent had agreed to a modification

of the stay to allow Movants to proceed with their Appli-

cation for Writ of Error in the Supreme Court of the State

of Texas as well as with proceedings in the appropriate

Texas lower appellate court, in the event the Texas

Supreme Court remanded the case to such appellate

court; and

WHEREAS the parties had entered into a Stipulation

and Order setting forth the agreement reached by the

parties, regarding the modification of the Stay, which

Stipulation and Order was approved by The Honorable

Helen S. Balick, United States Bankruptcy Judge on June

8, 1992; and

WHEREAS the Supreme Court of Texas has denied

Movants’ Application for Writ of Error, and on November

19, 1992, denied Movants’ Motion for Rehearing on the

Application for Writ of Error; and

WHEREAS Movants wish to file a Petition for a Writ

of Certiorari to the Supreme Court of the United States,

seeking review of the Order of Supreme Court of Texas

denying Movants’ Application for Writ of Error; and

WHEREAS Movants are prohibited from proceeding

with filing their Petition for Writ of Certiorari due to the

operation of the Automatic Stay of 11 U.S.C. § 362(a); and

WHEREAS Movants wish to have a further modifica-

tion of the Automatic Stay, to allow them to proceed with

filing a Petition for Writ of Certiorari to the Supreme

Court of the United States; and

App. 19

WHEREAS Respondent has agreed to a modification

of the Stay to allow Movants to proceed with their Peti-

tion for Writ of Certiorari in the Supreme Court of the

United States as well as with proceedings in the appropri-

ate Texas appellate courts, in the event that the Supreme

Court of the United States remands the case to such

appellate courts;

IT IS HEREBY AGREED this ___ day of __, 1993 that

the Automatic Stay under 11 U.S.C. § 362(a) be modified

to allow Movants to proceed with their Petition for a Writ

of Certiorari in the Supreme Court of the United States,

so as to allow the Supreme Court, or the appropriate

lower appellate courts, on remand, if applicable, to reach

a determination as to the issues on appeal raised in Carl

A. Maas, et al. v. Texas Air Corporation, No. D-1168; and

IT IS FURTHER AGREED that Movants shall take no

further action at the trial level in Carl A. Maas, et al. v.

Texas Air Corporation, C.A. No. 85-53556 without first

obtaining additional relief from the automatic stay from

this Court.

JACOBS & CRUMPLAR, MORRIS, NICHOLS,

P.A. ARSHT & TUNNEL

By: By:

/s/ Douglas B. Canfield /s/ Luke W. Mette

Douglas B. Canfield Luke W. Mette

2 East 7th Street 1201 N. Market St.

P.O. Box 1271 P.O. Box 1347

Wilmington, DE 19899 Wilmington, DE 19899

(302) 656-5445 (302) 429-9200

Attorney for Movants Attorney for Respondent

Date: 3-25-93 Date: 3/25/93

a

App. 20

SO ORDERED THIS 26th day of March, 1993

/s/ Helen S. Balick

HELEN S. BALICK

United States

Bankruptcy Judge

App. 21 |

APPENDIX H

Letter of

Agreement Between

Texas Air Corporation

and the

Air Line Pilots Association

International

WHEREAS, Texas Air Corporation (TAC) agrees to

provide reassurances that it is aware of and will abide by

the Agreements made by Continental! Air Lines, Inc.

(CAL) with the Air Line Pilots Association, International!

(ALPA) in connection with the Prosperity Plan and in

connection with the corporate reorganization involving

Continental, Texas International Airlines, Inc. (TI) and the

proposed Continental Air Corporation (CAC)

Now, therefore, the parties hereby agree as follows

1. TAC acknowledges that it is aware of the written

Agreements, including the Fence Agreement, made by

CAL with ALPA in connection with the Prosperity Plan

with CAL, TI and ALPA in connection with the corporate

reorganization involving CAL, TI, and CAC and will

abide by such agreements.

2. TAC agrees that neither TAC nor any organiza-

tion in which it or its successors or affiliates owns a

controlling interest or exercise operational control will

transfer aircraft operated by CAL, TI, or CAC, including

leasing or interchange arrangements with or to a new or

existing FAR Part 121 (other than CAL, TI or CAC) carrier

with respect to which TAC or its successors or affiliates

owns a controlling interest or exercises operational con-

trol.

a

App. 22

3. TAC agrees that neither it nor any organization in

which it or its successors or affiliates owns a controlling

interest or exercises operational control shall conduct

FAR Part 121 commercial flight operations unless such

flying shall be performed by pilots on the CAL and TI

System Seniority Lists (or a combined CAL-TI System

Seniority List) in accordance with the terms and condi

tions of the CAL and TI Basic Agreements, as modified,

or the Combined Agreement. This paragraph shall not

apply to New York Air, Inc.

4. ALPA acknowledges that TAC has taken the posi

tion that TAC is not a carrier subject to the Railway Labor

Act; TAC acknowledges ALPA‘s position to the contrary.

This Agreement shall be without prejudice to the position

of either party on this issue. In addition, this Agreement

shall be without prejudice to the position of the parties

with respect to ALPA’s System Board Submission No

DAL-61-80 and Air Line Pilots Association, International

v. Texas International Airlines, Inc., Civil Action No.

H-81-2200 (U.S.D.C., N. D. Texas).

5. In the event a dispute arises concerning this

Agreement, the Association may file a claim with TAC.

TAC shall answer the claim in writing within 10 days

following receipt of the claim. In the event the matter is

not satisfactorily resolved, any controversy or claim aris-

ing out of or relating to this Agreement or the breach

thereof, shall be settled by arbitration in accordance with

the United States Arbitration Act, 9 U.S.C. Section 1, et

seq., by one arbitrator to be selected by the alternate

striking method from a panel of three names (each of

whom shall be a member of the National Academy of

Arbitrators) to be provided by the American Arbitration

App 23

Association upon request of the Association within 30

days following rec eipt of TAC’s response, or in the

absence of a timely response by TAC within 60 days of

the filing of this claim. Said arbitration shall be con

ducted in accordance with the rules, than obtaining, of

said Association. The dispute shall be heard within 45

days following the submission of the dispute to the

American Arbitration Association

—

6. This Letter of Agreement shall run concurrently

with the Duration section of the CAL Basic Agreement, as

modified

IN WITNESS WHEREOF, the parties have signed this

Agreement this 18 day of Aug, 1982

TEXAS AIR CORPORATION

BY /s/ Francisco A. Lorenzo

Francisco A. Lorenzo

President

AIR LINE PILOTS ASSOCIATION

INTERNATIONAL

BY: /s/ J O'Donnell

J. J. O'Donnell,

President

Witness:

/s/ L. A. Baxter

L. A. Baxter, Chairman

Continental Airlines MEC

Witness:

/s/ Gary L. Casey

App. 24

Witness:

/s/ Louis J. Colombo

Witness:

/s/ \llegible ”

Witness:

/s/ Illegible

Witness:

/s/ J. McCarthney

J. McCarthney

Witness:

/s/

T. Mourning

Witness:

/s/

N. Miller

Witness:

/s/ R. Waters

R. Waters, Chairman

Texas International Airlines MEC