Petition for Writ of Certiorari — Tee v. UAL Corp.

Supreme Court, vu.s.

rit ED

) 961568 un 2 1997

NO. __pppiee O€ THE CLERK

In The

Supreme Court of the United States

October Term, 1996

¢

BERNA KAHN TEE, et al.,

Petitioners,

UAL CORPORATION and UNITED AIRLINES, INC.,

Respondents.

:

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Second Circuit

¢

PETITION FOR WRIT OF CERTIORARI

+

Lewis B. GARDNER

Counsel of Record for Petitioners

J. RicHarp Hammett

BROWN McCarroii & Oaks

HARrTLINE

2727 Allen Parkway, Suite 1300

Houston, TX 77019

(713) 529-3110

(713) 525-6295 (Fax)

April 2, 1997

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

1. Does the Railway Labor Act (“RLA”) prohibit an

employer from entering into a binding agreement with a

union concerning wages and other employment terms for

the employer’s non-unionized employees?

ii

LIST OF ALL PARTIES

Berna Kahn Tee, Beverly Yager, Danny Ciccariello,

Frank Pagon and Jan Chase, and UAL Corporation and

United Airlines, Inc. were the only parties in the proceed-

ing before the United States Court of Appeals for the

Eleventh Circuit.

ili

TABLE OF CONTENTS

Page

i . A MUR IUN sino os ceun ch peed caweese cota 1

Il. THE BASIS FOR JURISDICTION.............. 1

SMEs EARRING PIV ECOG cocci eccecdsvecses 2

SY. STATEMENT OF THE CASE .........ccccscces 4

V. REASONS FOR GRANTING THE PETITION .. 7

A. The Railway Labor Act Protects the Right Not

to Join a Union and Must Be Read in Accor-

dance With this Court’s Precedents to Ensure

that Such Statutory Protection Is Not Super-

RN I RN ee ee ory veils pak babwakeuc

B. The Eleventh Circuit’s Opinion Cannot be

Squared With Established Labor Law Prece-

dents of Other Federal Circuits Prohibiting an

Employer From Imposing on Non-Unionized

Employees Wages and Other Employment

Terms Negotiated With A Union.............

C. The Eleventh Circuit Erred By Failing to Rec-

ognize that United’s Conduct was Unlawful

Because the Carrier “Treated” with the Unions

as if They Were the Collective Bargaining Rep-

resentatives of the SAM Employees..........

NG PEE eee wav buco k Ve tbueee o¥acbs divas

13

19

iv

TABLE OF AUTHORITIES

Page

CASES

Baton Rouge Bldg. & Const. Trades Council v. E.C.

Schafer Constr. Co., 657 F.2d 806 (5th Cir. Unit

Pe SOE Es eked hs he ice ee ee 22

Beisler v. Commissioner, 814 F.2d 1304 (9th Cir.

ROME Fo 54d 5 VS edie Ben oe Ce CR een 13

Black Grievance Comm. v. NLRB, 749 F.2d 1072

(3d Cir. 1984), cert. denied, 472 U.S. 1008

(EPO 5 sk hee ORS cere i cece ie ree 17, 18, 28

Brotherhood of R.R. Trainmen v. Jacksonville Ter-

minal Co., 394 U.S. 369 (1969).................... 15

Caminetti v. United States, 242 U.S. 470 ERWES Fb ec xs 13

Carry Cos. of IIl., Inc. v. NLRB, 30 F.3d 922 (7th

GSI sia eadn ops cneducee ROL ei 26

International Ladies’ Garment Workers’ Union v.

PUGANy DOO TSG. 208 COMBED ine cc ike ee 18

Kaynard v. Mego Corp., 633 F.2d 1026 (2d Cir.

EPUB 08 5190s 03 es as cae te eee CEE ks 25

Local 144, Hotel, Hosp., Nursing Home &

Allied Servs. Union v. NLRB, 9 F.3d 218 (2d

i. Rea Rp ria to mecrlangnnny <n echt Shr 8, 19, 25

Local One, Amalgamated Lithographers of Amer-

ica v. Stearns & Beale, Inc., 812 F.2d 763 (2d Cir.

idecad ECE ET Oe TOE eT a Pres giao en a eat aES 25

Medo Photo Supply Corp. v. NLRB, 321 U.S. 678

Sa SP rep Sr eteems oem teen at CURLS Oe teee e 16

Minnesota Mining & Mfg. Co. v. NLRB, 415 F.2d

BF Te SAR CO. 665 6 aed va ook kh ee 7, 19

Vv

TABLE OF AUTHORITIES - Continued

Page

Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S.

Fae CATMUE KAY 55 eos Code CECREROR Ce Fok 19

NLRB v. Clegg, 304 F.2d 168 (8th Cir. 1962)...... 15, 20

NLRB v. Exchange Parts Co., 375 U.S. 405 (1964)...... 27

NLRB v. International Union, United Auto., Air-

craft & Agric. Implement Workers, 320 F.2d 12

Cape Sg SO os toed arate ck cee etabeieceee 14

NLRB v. Stevens Ford, Inc., 773 F.2d 468 (2d Cir.

ROP SEN EN AN Gd Vache bes kak cee ber Tn cee on 14, 25

NLRB v. Tex-Tan, Inc., 318 F.2d 472 (Sth Cir. 1963) .... 19

National Airlines, Inc. v. International Ass’n of M.

& A.W., 416 F.2d 998 (5th Cir. 1969).............. 16

Russell v. National Mediation Bd., 714 F.2d 1332

(5th Cir. 1983), cert. denied, 467 U.S. 1204 (1984)....14

Sheraton-Kauai Corp. v. NLRB, 429 F.2d 1352 (9th

heat METAR ah ba ai pon chen eb os TERE Poe aad as 25

Sperry Sys. Mgmt. Div., Sperry Rand Corp. v.

NLRB, 492 F.2d 63 (2d Cir.), cert. denied, 419 U.S.

Ok RAPPERS 6 5 ASCE RRELIN HEC Hig UR eh akin 20, 21

Trans World Airlines v. Independent Fed’n of

Flight Attendants, 489 U.S. 426 (1989).............. 7

Vaca v. Sipes, 386 U.S. 171 5 y TREAD ar ce RM gey onhahe 8

Virginian Ry. Co. v. System Fed’n No. 40, 300 U.S.

oh Ue MANE BE SI Ty ic iG tay te ponte na 8 PRIS 8, 14

Virginia Sprinkler Co. v. Road Sprinkler, Fitters Local

Union No. 669, 868 F.2d 116 (4th Cir. 1989).. 23, 24, 25

Weich Scientific Co. v. NLRB, 340 F.2d 199 (2d Cir.

oe ) EARS GA peor Ge eae OL en MANIC UIA 22, 27, 28

vi

TABLE OF AUTHORITIES — Continued

Page

STATUTES

Pe UA ERD ob hae ies cate wade tck rere weds c34 2

Be La BE aah rh he ORDO as oe the enekeseiee 24

tk Coe Bs rey mere e are en ek er 16

SS TED Ue Pe ios aes bi SS bie oa ake eerddwes 4

Oe Shes Me Sky UN 0k 6 da FENN Oe RENE Oa eee et 4

Fras eh Sy RUN vd kN dnea nba sssedocaestkwukan 2, 6

ee oe a Pr ery rere pee ee err oe

OTHER

tee TAG k, PU Ak 6a ho csi eae eheawew na eeevese 1

Pe Fl, DR AE ss 65d ereedn reek en dekiownerienas 1

ute 40, FORAGE, sic ivine i icon i neeie cata eesbncans 1

Roger D. Hall, ESOP Efforts of the Air Line Pilots

Association, 7 Lab. Law 311, 313 (1991)............ 12

USAir Gets Proposal From 3 Labor Unions For Some

Concessions, Wall St. J., Feb. 7, 1995, A-6......4... 12

USAir Picks Wolf, Industry Veteran, as Chief in Bid

for Labor Cost Savings, Wall St. J., Jan. 17, 1996,

I. OPINIONS BELOW

On September 1, 1995, the Honorable Orinda D.

Evans, United States District Judge for the Northern Dis-

trict of Georgia, Atlanta Division (“District Court”),

issued an Order granting UAL Corporation’s and United

Airline Incorporated’s Motion to Dismiss Petitioners’

cause of action pursuant to Federal Rule of Civil Pro-

cedure 12(b)(6). The District Court’s Order is reproduced

in the Appendix at A-18.

On July 2, 1996, the United States Court of Appeals

for the Eleventh Circuit (“Eleventh Circuit” or “court

below”) issued its decision affirming the District Court's

Order. The Eleventh Circuit’s decision is reproduced in

the Appendix at A-31.!

On January 2, 1997, the Eleventh Circuit denied Peti-

tioners’ Petition for Rehearing and Suggestion for

Rehearing En Banc. The Eleventh Circuit’s decision is

reproduced in the Appendix at A-37.

Il. THE BASIS FOR JURISDICTION

The United States Circuit Court of Appeals for the

Eleventh Circuit issued its decision on July 2, 1996. On

July 22, 1996, Petitioners timely filed a Petition for

Rehearing and Suggestion for Rehearing En Banc (“Sug-

gestion for Rehearing”) pursuant to Federal Rules of

Appellate Procedure 35 and 40 and Eleventh Circuit Local

Rule 35-6. The Eleventh Circuit denied the Suggestion for

1 Page references to the Eleventh Circuit’s decision will be

cited hereinafter as “Opinion at __..”

Rehearing on January 2, 1997. Petitioners now file this

Petition for Writ of Certiorari with the Clerk of this Court

within ninety days of the Eleventh Circuit’s denial of the

Suggestion for Rehearing.

This Court has jurisdiction under 28 U.S.C. § 1254 (1).

Ill. STATUTORY PROVISIONS

TITLE 45, UNITED STATES CODE:

§ 152 Railway Labor Act, General Duties

Third. Designation of representatives

Representatives, for the purposes of this

chapter, shall be designated by the respective

parties without interference, influence, or coer-

cion by either party over the designation of

representatives by the other; and neither party

shall in any way interfere with, influence, or

coerce the other in its choice of representatives.

Representatives of employees for the purposes

of this chapter need not be persons in the

employ of the carrier, and no carrier shall, by

interference, influence, or coercion seek in any

manner to prevent the designation by its

employees as their representatives of those who

or which are not employees of the carrier.

Fourth. Organization and collective bargaining;

freedom from interference by carrier; assistance

in organizing or maintaining organization by

carrier forbidden; deduction of dues from wages

forbidden.

Employees shall have the right to organize

and bargain collectively through representatives

of their own choosing. The majority of any craft

or class of employees shall have the right to

determine who shall be the representative of the

craft or class for the purpose of this chapter. No

carrier, its officers, or agents shall deny or in

any way question the right of its employees to

join, organize, or assist in organizing the labor

organization of their choice, and it shall be

unlawful for any carrier to interfere in any way

with the organization of its employees, or to use

the funds of the carrier in maintaining or assist-

ing or contributing to any labor organization,

labor representative, or other agency of collec-

tive bargaining, or in performing any work

therefor, or to influence or coerce employees in

an effort to induce them to join or remain or not

to join or remain members of any labor organi-

zation, or to deduct from the wages of

employees any dues, fees, assessments, or other

contributions payable to labor organizations, or

to collect or to assist in the collection of any

such dues, fees, assessments, or other contribu-

tions: Provided, [t}hat nothing in this chapter

shall be construed to prohibit a carrier from

permitting an employee, individually, or local

representatives of employees from conferring

with management during working hours with-

out loss of time, or to prohibit a carrier from

furnishing free transportation to its employees

while engaged in the business of a labor organi-

zation.

IV. STATEMENT OF THE CASE

Petitioners brought this action to redress violations of

rights secured by the RLA. United Airlines, Inc.

(“United”) is a “carrier” as defined under the RLA, Sec-

tion 1, First, 45 U.S.C. § 151, First. Petitioners are putative

class members and are “employees” as defined under the

RLA, Section 1, Fifth, 45 U.S.C. § 151, Fifth. The allega-

tions of Petitioners’ Complaint are set forth below.

United’s employees are divided into several distinct

groups of workers, three of which are unionized: United's

pilots are represented by the Airline Pilots Association,

International (“ALPA”); its flight attendants are repre-

sented by the Association of Flight Attendants (“AFA”);

and its mechanics and related employees are represented

by the International Association of Machinists & Aero-

space Workers (“IAM”). Petitioners are all members of

the craft or class of Customer Service Employees of

United. This class of employees is part of a larger group

of United’s non-unionized salaried and management

employees (“SAM employees”).

In 1991, the IAM attempted to organize the Customer

Service Employees. In response to this and earlier unsuc-

cessful union organizing attempts, United vigorously

argued to its non-unionized employees that their employ-

ment interests would not be served by allowing a union

to intercede between them and United in regard to their

wages, benefits, and other terms and conditions of

employment. United urged the SAM employees to vote

against representation by the IAM, and the SAM

employees relied on United’s promises of unilateral treat-

ment by consistently rejecting union representation,

despite the relatively greater benefits and protections

negotiated by unions on behalf of other crafts or classes

of United’s employees.

In January 1993, United implemented a drastic cost

reduction program and slashed the wages of SAM

employees by five percent. During collective bargaining

with its three unions, United asked for wage, benefit, and

work rule concessions. ALPA, the IAM, and the AFA all

rejected United’s request, and on July 16, 1993, a coalition

of the unions proposed a restructuring plan predicated on

“employee investments” by the unions and the non-

unionized SAM employees. The AFA eventually dropped

out of the discussions, and on November 11, 1993, ALPA

and the IAM proposed that they and the SAM employees

make wage concessions with a present value of approxi-

mately $2.874 billion. After much negotiation, United,

ALPA, and the IAM agreed in a letter from the unions to

United’s Board of Directors (“Board”) to execute new

collective bargaining agreements reflecting newly negoti-

ated wage rates, benefits, and other terms and conditions

of employment. The unions then recited United’s agree-

ment to “establish appropriate employment terms for the

salaried and management employees as described in [the

agreement].”

Following a March 14, 1994 meeting, the Board voted

on March 24, 1994 to approve the definitive documenta-

tion for the recapitalization. In doing so, the Board

accepted the unions’ final proposals on previously unre-

solved issues, including the question of the nature of the

SAM employee concession package. Thus, United

accepted the unions’ final proposal regarding the SAM

employee concession package.

On March 25, 1994, United, ALPA, and the IAM

executed an Initial Plan of Recapitalization. On June 2,

1994, the parties amended the recapitalization plan, and

executed a final agreement (“Final Plan”). The Final Plan

included drastic wage and benefit reductions and work

rule changes for the SAM employees.

Immediately after obtaining the necessary approval

of the Final Plan by its stockholders on July 12, 1994,

United implemented the negotiated wage and benefit

reductions and work rule changes affecting the SAM

employees. The reductions are binding on United for five

years and nine months (future participation in the

“employee buy-out” by the AFA would change the length

of the time period for United’s binding commitment). The

reductions are judicially enforceable against United by

the ESOP Trustee, State Bank of Boston. Thus, by entering

into its agreement with ALPA and the IAM, United sacri-

ficed its right to deal with the SAM employees uni-

laterally for the entire length of the “investment” period

for SAM employees. Indeed, the Final Plan provides that the

only way for the SAM employees to opt out of the ESOP or

otherwise change the terms of their employment during the

“investment period” is to unionize and bargain for such

changes.

The District Court dismissed Petitioners’ Complaint

on September 1, 1995, for failure to state a cause of action.

The Eleventh Circuit affirmed the District Court’s ruling,

holding that Section 2, Third of the RLA, 45 U.S.C. § 152,

Third, did not provide a basis for Petitioners’ claim

because the Complaint did not make any of the following

allegations: :

ial

(1) that United considered the IAM or ALPA to

be the “representative” of the SAM employees;

(2) that United recognized the unions as acting

on behalf of the SAM employees;

(3) that the Final Plan prohibited the SAM

employees from selecting a collective bargaining

representative; or

(4) that United imposed unsatisfactory terms

and conditions of employment upon the SAM

employees for the purpose of influencing or

coercing them into choosing collective represen-

tation.

Contrary to the Eleventh Circuit’s reasoning, none of

these allegations is necessary for Petitioners to state a

viable claim under Section 2, Third of the RLA. As shown

herein, the decision of the court below creates an indefen-

sible precedent that gravely misconceives the nature of

federal labor law protection of the right to reject collec-

tive representation.

V. REASONS FOR GRANTING THE PETITION

This Court has viewed Section 2, Fourth of the RLA,

45 U.S.C. § 152, Fourth, from its inception as “addressing

primarily the precertification rights and freedoms of unre-

presented employees” to be free from company coercion.

Trans World Airlines v. Independent Fed’n of Flight Atten-

dants, 489 U.S. 426, 440 (1989) (emphasis added). A criti-

cal precertification right is that a labor organization

cannot bargain for employees whom it does not, in fact,

represent. Minnesota Mining & Mfg. Co. v. NLRB, 415 F.2d

174, 176 (8th Cir. 1969). Generally, a labor union owes a

duty to all members of the bargaining unit to represent

their interests in a fair, non-arbitrary, and non-discrimina-

tory manner. See, e.g., Vaca v. Sipes, 386 U.S. 171, 177

(1967). No such duty exists, however, when the union is

not the lawfully recognized or certified bargaining agent

for employees. Thus, to permit such a union to bargain

for those employees would violate their fundamental

right of self-determination. Local 144, Hotel, Hosp., Nurs-

ing Home & Allied Servs. Union v. NLRB, 9 F.3d 218 (2d Cir.

1993).

Although the Eleventh Circuit’s decision does not

create a direct conflict among the circuits on the particu-

lar issue raised by Petitioners’ claim, it does contravene

this Court’s declarations for more than a half-century that

employers may bargain only with unions duly recognized

or certified to represent employees concerning the wages,

benefits, and other employment terms for those

employees. Virginian Ry. Co. v. System Fed’n No. 40, 300

U.S. 515, 548 (1937). The holding of the court below also

undermines the common premise of several well-recog-

nized and heretofore unchallenged lines of federal labor

law authorities. As a result, the holding below conflicts in

principle with decisions of federal appellate courts in the

Second, Third, Fourth, and Fifth Circuits on a variety of

labor law issues, including accretion, “double breasting,”

the validity of pre-hire contracts in the construction

industry, and the question of an employer’s right to bar-

gain with minority unions.

Absent reversal of the Eleventh Circuit and clarifica-

tion by this Court of the federal labor law rights of non-

unionized employees, the holding below will have a dra-

matic impact on national collective bargaining practice.

Among other things, it will enhance the ability of power-

ful unions to dictate the wages, benefits, and other

employment terms of unrepresented employees, coercing

or encouraging them to unionize in violation of their

fundamental labor law right of self-determination.

This case arose out of the largest and most highly

publicized employee buyout of an American corporation.

Although it was a deal struck between United and the

unions representing the pilots and mechanics at that air-

line, the Final Plan also mandatorily includes approxi-

mately 24,000 non-unionized SAM employees, Petitioners

among them. According to the explicit terms of the Final

Plan, United cannot unilaterally change the wages and

benefits for these non-unionized employees during the

life of the agreement. In other words, United bound itself

to an agreement with unions that did not legally repre-

sent the SAM employees and thus owed them no duty of

fair representation in the negotiation and execution of the

Final Plan. Because United sacrificed its right to act uni-

laterally regarding the SAM employees, there is only one

way for those non-unionized employees to opt out of the

ESOP or to achieve any other change in their wages and

benefits during the life of the agreement. As the Final Plan

itself contemplates, that one way is for the SAM employees

to unionize and demand such change through collective

bargaining.

Accordingly, Petitioners challenge their mandatory

inclusion in the ESOP as the product of an unlawful

agreement between United and the unions because the

Final Plan coerces or influences the SAM employees to

choose collective representation in lieu of continuing

non-unionized status. Although Petitioners recognize

10

that their non-unionized status would have permitted

United to act unilaterally in the same fashion concerning

their wages and other employment terms, it is irrelevant

that United might have done so in the absence of the

enormous pressure that existed to reach agreements with

ALPA and the IAM concerning the pilots and mechanics.

The point critical to the development of federal labor law

is that an employer’s right to act unilaterally in regard to

non-unionized employees does not permit the employer

to enter into a binding agreement concerning such

employees with a union that does not legally represent

them and owes them no duty of fair representation. If the

right of unilateral action does permit such employer con-

duct, as the Eleventh Circuit incorrectly held, the

employees’ right to reject collective representation is

meaningless. Again, as the unlawful agreement in this

case indicates, the only choice for employees in that event

is to continue working under the unlawfully negotiated

employment terms or obtain their own union and bargain

for changes in the otherwise binding agreement reached

between the employer and the “third party” union. Thus,

the employer’s conduct undeniably and inherently

coerces or influences employees to choose collective rep-

resentation.

By way of illustration, the Eleventh Circuit’s reason-

ing leads to the following startling result: an employer

can encourage its non-unionized employees to reject col-

lective bargaining; the employees can follow the

employer’s lead and reject representation by a union one

day; and, the next day, in exchange for bargaining conces-

sions by the rejected union concerning employees it

already does represent, the employer can negotiate and

SST

11

reach agreement with the very same union concerning the

employment terms for the employees who rejected repre-

sentation by that union. Such a result frustrates the tradi-

tional expectations of non-unionized employees that their

employer will deal with them unilaterally in the labor

law sense (in other words, that their employer will not

bargain with a union that does not represent them). The

inherent and inevitable effect of the employer’s freedom

to bargain with the rejected union regardless of the

employees’ choice would be to coerce or encourage those

employees to unionize in order to avail themselves of the

protection afforded by a labor organization’s duty of fair

representation.

The Eleventh Circuit’s decision also upsets the long-

settled and reasonable expectations of labor negotiators

on both sides of the bargaining table. Having no legal

obligation to bargain and reach agreement with unions

concerning unrepresented employees, employers gener-

ally do not do so — at least not overtly as in this case.

Employers sometimes “wink” across the bargaining table

with implicit promises to take certain actions regarding

unrepresented employees in exchange for concessions

from the unions concerning their own lawfully repre-

sented constituencies. The Eleventh Circuit’s approval of

an explicit, highly publicized collective bargaining agree-

ment concerning wages and benefits for unrepresented

employees will now encourage conduct previously

assumed to be unlawful. Left undisturbed, therefore, the

Eleventh Circuit’s decision will pave the way to other

major transactions in which employers and unions bar-

gain and reach agreement concerning the unlawful bar-

gaining subject of wages and other employment terms for

12

non-unionized employees. The inevitable result will be to

force those same employees to choose collective represen-

tation as a defensive measure against unlawful agree-

ments between their employers and “powerful third

party” unions.

The impact will be widespread. ALPA and the IAM

are large national unions representing thousands of

employees at other major airlines, and the IAM repre-

sents thousands more employees in a variety of other

industries. Unions generally, and ALPA in particular,

openly advocate employee ownership as a means of

achieving the goals of their constituencies. Roger D. Hall,

ESOP Efforts of the Air Line Pilots Association, 7 Lab. Law.

31, 313 (1991). (Appendix at A-43). Not surprisingly,

therefore, after consummation of their deal with United,

ALPA and the IAM discussed with USAir Group Inc.

(“USAir”) the possibility of a similar transaction that

would include that carrier’s non-unionized employees.

USAir Gets Proposal From 3 Labor Unions for Some Conces-

sions, Wall St. J., Feb. 7, 1995. (Appendix at A-41). Mr.

Wolf, the chief negotiator for United who benefitted from

a generous golden parachute triggered by the agreement

at issue in this case, is now the chief executive officer of

USAir. USAir Picks Wolf, Industry Veteran, as Chief in Bid

for Labor Cost Savings, Wall St. J., Jan. 17, 1996. (Appendix

at A-47). In short, absent reversal of the Eleventh Cir-

cuit’s decision in this case, it is highly probable that

unions with sufficient clout will reach similar binding

agreements with favorably disposed executives of major

employers. Like the transaction in this case, those agree-

ments will violate the self-determination rights of hun-

dreds of thousands of employees who reasonably expect

13

that their non-unionized status prohibits employers from

doing exactly what United did in this case.

This Court can prevent that development with an

unequivocal declaration that the right to choose against

collective representation is entitled to the same protection

under federal labor law as the right to engage in coliec-

tive activity. More specifically, the Court can clarify that

while unions have the right to acquire ownership inter-

ests in employers as a means of pursuing the goals of

their memberships, the law prohibits employers from

acceding to demands by those unions to use the wages

and benefits of employees they do not represent to

accomplish the otherwise legitimate ends of collective

representation.

A. The Railway Labor Act Protects the Right Not

to Join a Union and Must Be Read in Accor-

dance With this Court’s Precedents to Ensure

that Such Statutory Protection Is Not Super-

fluous or Void.

As this Court has stated, the meaning of a statute

must first be sought in the language of the act itself, “and

if that is plain the sole function of the courts is to enforce

it according to its terms.” Caminetti v. United States, 242

U.S. 470, 485 (1917). Courts also may not construe stat-

utes in such a way as to render any part of them mean-

ingless or superfluous. Beisler v. Commissioner, 814 F.2d

1304, 1307 (9th Cir. 1987) (“We should avoid an inter-

pretation of the statute that renders any part of it super-

fluous or does not give effect to all of the words used by

14

Congress.”). The Eleventh Circuit’s decision in this case

violated this fundamental rule of statutory construction.

The plain language of the RLA protects the right not

to join a labor organization. See Russell v. National Media-

tion Bd., 714 F.2d 1332, 1341 (5th Cir. 1983), cert. denied,

467 U.S. 1204 (1984). Under the RLA, employees have

“the unfettered right to abstain from indulging in union

activity.” NLRB v. International Union, United Auto., Air-

craft & Agric. Implement Workers, 320 F.2d 12, 15 (1st Cir.

1963); see also NLRB v. Stevens Ford, Inc., 773 F.2d 468, 473

(2d Cir. 1985) (when group of employees constitutes

appropriate bargaining unit, “the employees have the

option of ‘going it alone,’ with or without a bargaining

representative, and there is no reason not to allow them

to exercise that choice.”). Yet the Eleventh Circuit's inter-

pretation of the RLA makes this explicit statutory guaran-

tee meaningless; under the analysis of the court below, an

employer is free to engage in collective bargaining with a

union concerning employees that the union does not even

represent, and, as in this case, can even “treat” with the

same union that the employer successfully persuaded the

employees to reject as their collective bargaining repre-

sentative. This statutory interpretation eviscerates RLA

protection of the right not to unionize and violates this

Court’s own precedents.

In Virginian Ry. Co. v. System Fed’n No. 40, 300 U.S.

515 (1937), this Court stated that the RLA “imposes the

affirmative duty to treat only with the true representative,

and hence the negative duty to treat with no other.” Id. at

548 (emphasis added). Virginian Railway's first duty is an

affirmative one to treat only with the true representative.

While it is true that this affirmative duty cannot arise in

15

the absence of a true representative, the Eleventh Circuit

ignored the second and distinct duty identified by the

Supreme Court — the duty to treat with no other. This

second negative duty is one that necessarily arises even

in the absence of a true representative. The apparent

conclusion of the court below that Virginian Railway is

limited to its facts, with the result that the duty to “treat

with no other” only arises in the presence of a true

representative, leads to the insupportable notion that the

RLA favors the right to collective representation over the

right to reject it. Although the court below acknowledged

that the RLA ensures the option to reject collective repre-

sentation, it incorrectly assumed that the very exercise of

that option extinguishes such siatutory protection. Thus,

the Eleventh Circuit incorrectly refused to recognize that

the RLA’s right to reject representation gives rise to a

necessary corollary of that right - one that prohibits the

carrier from entering into agreements with unions that

affect the terms and conditions of employment of non-

unionized employees. (Opinion at 6). See NLRB v. Clegg,

304 F.2d 168, 175 (8th Cir. 1962) (“An employer need not,

and indeed he must not, bargain with an uncertified

union . . . which loses its majority status as a result of

repudiation by the employees.”).

The Eleventh Circuit’s holding also cannot be recon-

ciled with Supreme Court case law under the National

Labor Relations Act (“NLRA”), as amended, 29 U.S.C.

§§ 151-169 (1947).2 United’s conduct in this case would be

2 NLRA decisions may be used to illuminate the scope and

intent of the RLA where, as here, substantially similar

provisions control both statutes. Brotherhood of R.R. Trainmen v.

16

unlawful under Section 8(a)(1) of the NLRA, 29 U.S.C.

§ 158 (a)(1). In Medo Photo Supply Corp. v. NLRB, 321 U.S.

678 (1944), the Supreme Court made it clear that “the

negative duty to treat with no other” is equally applicable

to cases involving direct negotiations between the

employer and its employees. The employer in Medo Photo

Supply Corp. was engaged in collective bargaining nego-

tiations with the union certified as its employees’ exclu-

sive bargaining agent. During the pendency of those

negotiations, the employer also negotiated directly with

its employees over their wages. The Court held that the

employer’s conduct violated the NLRA:

The obligation [to bargain] being exclusive, it

exacts “the negative duty to treat with no

other.” Petitioner, by ignoring the union as the

employees’ exclusive bargaining representative

[and] by negotiating with its employees con-

cerning wages at a time when wage negotiations

with the union were pending .. . violated

§ 8(a)(1) of the Act, which forbids interference

with the right of employees to bargain collec-

tively through representatives of their own

choice.

Id. at 683-84 (citations omitted). If, as the Supreme Court

held in Medo Photo Supply Corp., the “negative duty to

Jacksonville Terminal Co., 394 U.S. 369 (1969). This Court has

stated that the primary difference between the NLRA and the

RLA lies in the underlying policy on self-help; the RLA contains

a ban on self-help during the freeze imposed while the

procedures for the RLA rup_their course, while the NLRA

contains no such ban. National Airlines, Inc. v. International Ass'n

of M. & A.W., 416 F.2d 998, 1004 (5th Cir. 1969). This primary

distinction does not arise in this case.

ee ee ——— oo

eS ee

17

treat with no other” means that an employer may not

deal with its employees unilaterally once they have des-

ignated a union to represent them collectively, then the

converse must also be true: an employer may not treat

with a union over the collective employment terms of its

employees if those employees have rejected collective

representation.

The error in the Court of Appeals’ conclusion that

RLA protection ends as soon as employees choose not to

unionize is exemplified by the decision of the Court of

Appeals for the Third Circuit in Black Grievance Comm. v.

NLRB, 749 F.2d 1072 (3d Cir. 1984), cert. denied, 472 U.S.

1008 (1985). In that case, the employer, Philadelphia Elec-

tric Company (“PECO”), dealt for over forty years with

the Independent Group Association (“IGA”), an in house

labor union, concerning wages, hours, and other working

conditions of PECO employees. Although the IGA was

never recognized or certified to represent PECO

employees, the IGA enjoyed privileged status in the pre-

sentation and resolution of employee grievances at

PECO. Believing that the IGA was unresponsive to

alleged discriminatory practices on the part of PECO,

however, several black employees formed the Black

Grievance Committee (“BGC”). BGC representatives

eventually filed an unfair labor practice charge against

PECO for refusing to accord the BGC equal status to the

IGA in the presentation and resolution of individual

grievances.

Despite the fact that neither the IGA nor the BGC

was a recognized or certified union at PECO, the Third

Circuit held that PECO’s favoritism toward the IGA was

unlawful, reasoning that the right of self-determination

18

goes “beyond selection of an exclusive bargaining repre-

sentative, and includes the right to be free from interfer-

ence with any organizational activity.” Id. at 1076

(emphasis in original). Thus, the court rejected the argu-

ment that privileged treatment of one non-majority

union, with a refusal to treat another such union equally,

is permissible employer conduct under the NLRA.?

The black employees in Black Grievance Committee

were not materially different from the SAM employees in

this case. Neither group of employees had exercised their

right to engage in collective bargainin, through a certi-

fied or recognized bargaining representative, and, in both

cases, employers interfered with their rights of self-deter-

mination. Unlike the Eleventh Circuit in this case, how-

ever, the Third Circuit correctly recognized that statutory

protection of the right of self-determination is not extin-

guished by the exercise of that right in a particular fash-

ion.

The Eleventh Circuit’s holding assumes that an

employer’s right to make unilateral changes in the terms

and conditions of employment for its non-unionized

workforce is equivalent to the right to negotiate and

reach agreement concerning their employment terms

with the very union those employees rejected as their

3 An employer is free to bargain with a minority union

concerning members of the union only in the absence of an

exclusive agency for bargaining created by a majority of

employees in an appropriate unit. International Ladies’ Garment

Workers’ Union v. NLRB, 366 U.S. 731, 741 (1961) (Douglas, J.,

dissenting in part). That is not the situation in this case. The

SAM employees were not members of ALPA or the IAM.

19

representative. By definition, however, the right to act

unilaterally does not encompass the right to reach a bind-

ing bilateral agreement with unions not certified to repre-

sent employees. See NLRB v. Tex-Tan, Inc., 318 F.2d 472

(5th Cir. 1963)(finding that unilateral action by an

employer refers to conduct taken by the employer on its

own in the absence of an agreement with a union). C7.

Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984)

(holding that a manufacturer can be held liable for dam-

ages when it terminates a dealer pursuant to an agree-

ment with the dealer’s competitor in violation of the

federal anti-trust laws). United cannot hide behind its

right to act unilaterally when it has also breached an

obligation to act unilaterally in the federal labor law sense.

To hold otherwise is to find for the first time that unions

which do not represent a class or craft of employees, and

that therefore owe them no duty of fair representation,

can negotiate and reach agreement with an employer

concerning employment terms for those unrepresented

employees.

B. The Eleventh Circuit’s Opinion Cannot be

Squared With Established Labor Law Prece-

dents of Other Federal Circuits Prohibiting an

Employer From Imposing on Non-Unionized

Employees Wages and Other Employment

Terms Negotiated With A Union.

It is settled law that a labor organization cannot

bargain for employees whom it does not, in fact, repre-

sent. Minnesota Mining & Mfg. Co. v. NLRB, 415 F.2d 174,

176 (Sth Cir. 1969). To permit otherwise would violate the

employees’ fundamental right of self-determination. Local

20

144, Hotel, Hosp., Nursing Home & Allied Servs. Union v.

NLRB, 9 F.3d 218 (2d Cir. 1993) (“Local 144”). Thus, for

example, “an employer need not, and indeed he must not,

bargain with an uncertified union which loses its majority

status as a result of repudiation by the employees.” NLRB

v. Clegg, 304 F.2d 168, 175 (5th Cir. 1962) (emphasis

added).

There is no logical basis for a different result when,

as in this case, the union never acquired majority status

in the first place. See Sperry Sys. Mgmt. Div., Sperry Rand

Corp. v. NLRB, 492 F.2d 63 (2d Cir.), cert. denied, 419 U.S.

831 (1974). In Sperry Systems the Second Circuit held that

an employer would have violated the rights of unrepre-

sented California employees by complying with a union

demand to impose upon those employees the terms of a

collective bargaining agreement covering the company’s

unionized New York employees. The employer in that

case had a contract with a union (“Local 445”) certified by

the NLRB to represent the employer’s technical

employees at all plants in the New York metropolitan

area. Despite this geographically limited NLRB certifica-

tion, Article 1 of the collective bargaining agreement pro-

vided for application of the contract to all of the

employer’s plants, “wherever situated.” Id. at 65.

When the employer subsequently commenced opera-

tions in California with new employees whom it paid less

for work substantially similar to the work done by New

York employees, the union filed a grievance demanding

that the company apply the collective bargaining agree-

ment to the California employees. The employer refused

to honor an arbitration award instructing it to apply the

wage and benefit provisions of the New York contract to

21

the California employees; instead, it filed an unfair labor

practice charge against the union. Id. at 65-66. In the

meantime, the union lost a representation election among

the California employees. Id. at 66.

The Second Circuit agreed with the employer that the

New York union’s demand to bargain over the employ-

ment terms for the California employees violated the

rights of those employees. Id. at 67. Of particular rele-

vance here, the court held,

[R]egardless of the Union’s motive in seeking

enforcement of the arbitration award, it commit-

ted an unfair labor practice because the subject

of the wages and working conditions of the

Vallejo employees was not a permissible subject

of bargaining in the New York City unit. Section

7 of the Act guarantees employees the right to

organize and bargain collectively and the right

to refrain from such activities. Generally, an

employer commits the unfair labor practices of

interfering with employees’ § 7 rights and sup-

porting a union in violation of § 8(a) (1) and (a)

(2) when it imposes on employees of one unit

the contract and bargaining agent of another

unit.

Id. at 69.

Sperry Systems squarely supports the SAM

employees’ right to maintain their claims against United.

Like the California employees in Sperry Systems, various

groups of SAM employees rejected representation by the

very union with which United negotiated and reached

agreement concerning their wages and other employment

terms. In Sperry Systems, the employer properly refused

to impose the contract covering union-represented New

22

York employees upon the unrepresented California

employees. In this case, however, United unlawfully

agreed with the IAM and ALPA to impose the terms of

the collectively bargained ESOP upon SAM employees.

See also Welch Scientific Co. v. NLRB, 340 F.2d 199, 201, 203

(2d Cir. 1965) (employer committed unfair labor practice

by applying contract with union representing Chicago

employees to non-unionized New York employees).

The Eleventh Circuit’s decision in this case is also

inconsistent with a variety of other well-established labor

law doctrines. For example, under the rationale of the

court below, employers would be allowed to enroll in

multi-employer bargaining units (“MEBUs”) without the

consent of their non-unionized employees and negotiate

enforceable agreements with unions concerning them.

Employers, however, are not allowed to violate their

employees’ self-determination rights in that fashion.

Baton Rouge Bldg. & Constr. Trades Council v. E.C. Schafer

Constr. Co., 657 F.2d 806 (5th Cir. 1981). In Baton Rouge

Building & Construction, the Fifth Circuit held that certain

unenforceable pre-hire agreements* between the

employer and the unions did not become enforceable

merely because of the employer’s enrollment in a MEBU,

* “Section 8(f) of the NLRA authorizes pre-hire agreements

between employers and unions in the construction industry;

absent that statutory recognition of conditions peculiar to that

industry, such agreements would be barred as violative of

employee free choice.” Id. at 809. The existence itself of a

statutory exception for pre-hire agreements in the construction

industry illustrates the principle that an employer cannot

negotiate with a union concerning the wages and other

employment terms of unrepresented employees.

bu hgh AY vein CN caeee mh mtaneteyndie uta Meinl i eed

RS,

Aaa SRR BREESE EBS PO inti 0H

At LE Rae Sa OS BetN GSCI PM SI EE ead SAA

23

when the employer had acted on its own without the

support of a majority of its non-unionized employees.

Similarly, the agreement between United and the unions

in this case is unlawful to the extent that it governs the

wages and other employment terms for SAM employees.

In another context, this one involving a “double-

breasting” situation, the Court of Appeals for the Fourth

Circuit acknowledged in Virginia Sprinkler Co. v. Road

Sprinkler, Fitters Local Union No. 669, 868 F.2d 116 (4th Cir.

1989), that an employer would violate the self-determina-

tion rights of its non-unionized employees if it imposed

upon those employees wages and employment terms

negotiated with a union that they did not choose to

represent them. In that case, there was common owner-

ship of the unionized employer, Virginia Sprinkler Co.

(“Virginia Sprinkler”), and a separate, non-unionized

company, Virginia Pipe & Supply Co., Inc. (“Virginia

Pipe”). Virginia Sprinkler brought an action against the

union seeking a declaration that it was not obligated to

arbitrate a grievance filed by the union for alleged viola--

tions of a provision in a collective bargaining agreement

(“Article 3”) designed to protect the union from the

potentially adverse impact of the “doublebreasting” oper-

ation. Article 3 provided that the wage and fringe benefit

terms of the collective bargaining agreement would apply

to all work performed by Virginia Sprinkler as a single or

joint employer, under its own name or that of another,

within the territorial jurisdiction of the union. Virginia

Sprinkler argued that Article 3 was unenforceable

because an arbitrator’s decision in the union’s favor on

any grievance arising thereunder would impose the wage

24

and benefit provisions of the collective bargaining agree-

ment upon Virginia Pipe’s unrepresented employees, vio-

lating their right to refrain from collective bargaining

under Section 7, of the NLRA, 29 U.S.C. § 157.5 Id. at 119.

The Fourth Circuit recognized that Article 3 would

conflict with the Section 7 rights of the non-unionized

Virginia Pipe employees if interpreted to require the

imposition of collectively-bargained wage scales upon

those employees. Id. at 119-20. The court of appeals nev-

ertheless ordered Virginia Sprinkler to arbitrate the

union’s grievance because it agreed with the district court

that Article 3 was susceptible to an alternative interpreta-

tion which would avoid this conflict: Virginia Sprinkler

could pay its unionized employees as though they had

performed the work actually assigned to the non-union-

ized Virginia Pipe employees. Id. at 120. Under this read-

ing of Article 3, “Virginia Pipe’s non-unionized workers

would not receive the wages and benefits mandated by

the collective bargaining agreement and thus would in no

way be forced to accept anything negotiated by a union not of

their own choosing.” Id. (emphasis added).

Thus, the linchpin of the Fourth Circuit’s decision in

Virginia Sprinkler Co. was a plausible interpretation of

Article 3 that avoided “any possible conflict” with the

right of non-unionized employees to refrain from organi-

zational activity. Id. Under the Eleventh Circuit’s deci-

sion in this case, however, analysis of the facial validity of

Article 3 would have been unnecessary because the

° Like Section 2, Fourth of the RLA, Section 7 protects

employees’ rights to refrain from engaging in collective activity.

25

owner of Virginia Sprinkler would have been free to

agree with the union to impose the terms of the collective

bargaining agreement upon Virginia Pipe’s employees

under any circumstances. The decision by the court

below, therefore, is irreconcilable with the underlying

premise of the Fourth Circuit’s decision in Virginia Sprin-

kler Co.

For the same reason, the Eleventh Circuit’s reasoning

would make the accretion doctrine a meaningless concept

under federal labor law. Under the accretion doctrine, an

employer may incorporate a small group of employees

within an already existing collective bargaining unit,

without holding elections, provided that the added

employees (1) do not constitute a separate bargaining

unit, and (2) do not outnumber the employees who

belong to the existing bargaining unit. See NLRB v.

Stevens Ford, Inc., 773 F.2d 468, 473 (2d Cir. 1986); Kaynard

v. Mego Corp., 633 F.2d 1026 (2d Cir. 1980). In Local 144, 9

F.3d at 222-26, the Second Circuit held that an employer

committed an unfair labor practice by applying the terms

of a collective bargaining agreement covering represented

employees at one hospital to the non-unionized

employees of a newly purchased hospital, where

employees at the new hospital could not be accreted to

the existing single-facility bargaining unit. See also Local

One, Amalgamated Lithographers of America v. Stearns &

Beale, 812 F.2d 763 (2d Cir. 1987) (in the absence of a

single employer and single bargaining unit, it is a § 7

violation to impose the bargaining agreement of a union-

ized group on a non-signatory, non-unionized group);

Sheraton-Kauai Corp. v. NLRB, 429 F.2d 1352 (9th Cir.

1970) (holding unlawful an attempt to impose a collective

26

bargaining agreement on non-unionized employees of

newly purchased hotel added to an existing chain of

employer’s unionized Hawaiian facilities). The Eleventh

Circuit’s reasoning here would have obviated any need

even to examine the accretion question in these cases,

because, again, the employers would have been free in

any event to apply the terms of the collective bargaining

agreements to unrepresented employees.

C. The Eleventh Circuit Erred By Failing to Recog-

nize that United’s Conduct was Unlawful

Because the Carrier “Treated” with the Unions

as if They Were the Collective Bargaining Rep-

*-sentatives of the SAM Employees.

“Coercion” under the RLA and the NLRA is objec-

tive, and a finding of coercion does not depend upon an

employer’s intent. See, e.g., Carry Cos. of Ill., Inc. v. NLRB,

30 F.3d 922, 934 (7th Cir. 1994) (“The test for a violation of

§ 8(a)(1) is not whether an employer intended to interfere

with its employee’s activities, or whether any interference

or coercion actually occurred. Rather, it is whether the

employer’s actions ‘reasonably tended to interfere with

or coerce employees in the exercise of their protected

rights.’”). Thus, contrary to the Eleventh Circuit’s rea-

soning, it is irrelevant that Petitioners did not allege that

United imposed unsatisfactory employment terms and

conditions on the SAM employees for the purpose of

influencing or coercing their unionization, and United’s

conduct is not, as the court below stated, the same as

“[a]ny act whatsoever taken by an employer [that] might

influence an employee’s decision on union representa-

tion.” (Opinion at 8-9). Indeed, United has sent a direct

ces tat eth

27

message to its non-unionized employees that their right

to reject a union is utterly meaningless.

It is also entirely beside the point whether or not the

terms of the ESOP are satisfactory to the SAM employees.

An unassailable principle of labor law is that an

employer’s conferral of even more favorable terms and

conditions of employment can be as coercive as the impo-

sition of adverse terms. In NLRB v. Exchange Parts Co., 375

U.S. 405, 409 (1964), this Court stated in an analogous

context that “[e]mployees are not likely to miss the infer-

ence that the source of [increased] benefits conferred [by

employers] is also the source from which future benefits

must flow and which may dry up if it is not obliged.”

Similarly, non-unionized employees are not likely to miss

the inference that a union is the “source of benefits con-

ferred” when an employer negotiates with that union

concerning their wages and other employment terms. For

this reason, federal labor law prohibits employers from

doing so, regardless of the nature of the resulting agree-

ment. See Welch Scientific Co. v. NLRB, 340 F.2d 199 (2d

Cir. 1965).

In Welch Scientific Co., the Second Circuit held that an

employer unlawfully interfered with the self-determina-

tion rights of non-unionized employees in its New York

facility by applying to those employees the terms of a

contract with a union representing the employer’s Chi-

cago employees. In that case, the employer had given the

New York employees a nickel per hour raise pursuant to

agreement with the union. Citing Exchange Parts, the

court held that “the vice president’s announcement that,

as part of the contract with [Chicago] Local 325, the New

York employees would receive a five cent an hour raise

28

was likewise contrary to Section 8(a)(1).” Id. at 203. As

Welch Scientific Co. illustrates, the SAM employees did not

have to allege the imposition of adverse terms and condi-

tions of employment to state an actionable RLA claim

against United.

The court below also erred in concluding that RLA

protection does not apply because the SAM employees

lacked a “true [bargaining] representative.” (Opinion at

7). Under this rationale, employers would not be liable

for recognizing a minority union where no union has

exclusive bargaining status. This is not the law. See Black

Grievance Comm. v. NLRB, 749 F.2d at 1076. The dangerous

precedent set by the Eleventh Circuit is that employers

can negotiate with an uncertified union - even though the

union has no duty of fair representation to the non-

unionized employees — as if the union were the

employees’ collective bargaining representative. Supreme

Court review is therefore necessary to prevent the Elev-

enth Circuit’s decision from encouraging conduct by

e.nployers and unions directly at odds with the funda-

mental policies of federal labor law.

anita piney ciel

29

VI. CONCLUSION

For the foregoing reasons, Petitioners respectfully

request the Court to issue a Writ of Certiorari to review

the judgment of the United States Court of Appeals for

the Eleventh Circuit.

Respectfully submitted,

Lewis B. GARDNER

Counsel of Record for Petitioners

J. RicHarD HAMMETT

BROowN McCarroitit & Oaks

HARTLINE

2727 Allen Parkway, Suite 1300

Houston, TX 77019

(713) 529-3110

(713) 525-6295 (Fax)

April 2, 1997

risa inden clieaeS

Pr oe von Oe

ee Lee er a eR SO eg OE De Ses ee ee Ls Me ee Oe Ae oe

i sani t

A-1

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

BERNA KAHN TEE, BEVERLY

YAGER, DANNY CICCARIELLO,

JUDITH A. MURPHY, FRANK

PAGON, and JAN CHASE, on : CIVIL ACTION

peopel of ga CASE NO. 1 95-

all others similarly situated, ‘ CV-0054-ODE

Plaintiffs,

vs.

UAL CORPORATION and

UNITED AIRLINES, INC.,

Defendants.

COMPLAINT

(Filed Jan. 11, 1995)

Plaintiffs, BERNA KAHN TEE, BEVERLY YAGER,

DANNY CICCARIELLO, JUDITH A. MURPHY, FRANK

PAGON, and JAN CHASE, on behalf of themselves and

all others similarly situated, by their attorneys, file this

complaint seeking damages and declaratory and injunc-

tive relief. Plaintiffs allege upon knowledge with respect

to their own acts and upon information and belief as to

all other matters, as follows:

INTRODUCTION

1. This is an action brought by Plaintiffs on behalf,

of themselves and other similarly situated employees of

United Airlines, Inc. to redress violations of their rights

— ae

A-2

secured by the Railway Labor Act, 45 U.S.C. §151 et. seq.,

as amended (“RLA”).

2. Defendants UAL Corporation and its wholly

owned subsidiary, United Airlines, Inc., have knowingly

and flagrantly violated the RLA by bargaining and reach-

ing agreement with unions that do not represent Plaintiffs

and putative class members concerning their wages, ben-

efits and other terms and conditions of employment.

3. Defendants have bargained and entered into such

agreements in spite of their awareness that it was unlaw-

ful to do so, and in callous disregard of the fact that

Plaintiffs and putative class members have repeatedly

and consistently exercised their statutory rights to reject

union representation for collective bargaining purposes.

Defendants’ actions, therefore, constitute a wilful and

wanton violation of the RLA, Section 2, Third and Fourth,

45 U.S.C. §152, Third and Fourth.

4. As a direct and proximate result of Defendants’

unlawful acts, Plaintiffs and putative class members have

suffered substantial damages in the form of wage and

benefit reductions and work rule changes. They will con-

tinue to suffer such damages in the absence of the declar-

atory and injunctive relief sought herein.

THE PARTIES

CLASS REPRESENTATIVE PLAINTIFFS

5. Plaintiff Berna Kahn Tee is a resident of Miami, in

Dade County, Florida and was and is a member of the

craft or class of Customer Service Employees of United

Airlines, Inc. at all material times.

A-3

6. Plaintiff Beverly Yager is a resident of Key Largo,

in Monroe County, Florida and was and is a member of

the craft or class of Customer Service Employees of

United Airlines, Inc. at all material times.

7. Plaintiff Danny Ciccariello is a resident of Oak-

land Park, in Broward County, Florida and was and is a

member of the craft or class of Customer Service

Employees of United Airlines, Inc. at all material times.

8. Plaintiff Judith A. Murphy is a resident of Miami,

in Dade County, Florida and was and is a member of the

craft or class of Customer Service Employees of United

Airlines, Inc. at all material times.

9. Plaintiff Frank Pagon is a resident of Miami, in

Dade County, Florida and was and is a member of the

craft or class of Customer Service Employees of United

Airlines, Inc. at all material times.

10. Plaintiff Jan Chase is a resident of Miami, in

Dade County, Florida and was and is a member of the

craft or class of Customer Service Employees of United

Airlines, Inc. at all material times.

DEFENDANT

11. UAL Corporation is a corporation duly orga-

nized and existing under the laws of the State of Dela-

ware, with its principal place of business outside the

State of Georgia. It is a holding company, and its princi-

pal wholly-owned subsidiary is United Airlines, Inc., a

corporation also duly organized and existing under the

laws of the State of Delaware, with its principal place of

business outside the State of Georgia.

A-4

12. UAL Corporation at all material times exercised

complete and virtual control over United Airlines, Inc. in

regard to decisions affecting Plaintiffs’ wages, benefits,

and other terms and conditions of employment. At all

material times and for all purposes relevant to the claims

asserted herein, UAL Corporation and United Airlines,

Inc. were and are a single employer under the RLA. UAL

Corporation was and is alter ego of United Airlines, Inc.,

and/or UAL Corporation was and is an agent for United

Airlines, Inc. acting within the scope and authority of its

agency. Defendants are referred to collectively hereinafter

as “United.”

13. United is a “carrier” as defined under the RLA,

Section 1, First, 45 U.S.C. §151, First.

CLASS ACTION ALLEGATIONS

14. Plaintiffs bring this action pursuant to Rule 23 of

the Federal Rules of Civil Procedure on behalf of them-

selves and all similarly situated non-union employees of

United who were covered by the RLA and adversely

affected by United’s RLA violations, in connection with

the recapitalization and “empioyee buy-out” of the car-

rier implemented on July 12, 1994.

15. This action is properly maintainable as a class

action for the following reasons:

a. The class of employees for whose bene-

fit this action is brought is so numerous that

joinder of all class members is impracticable.

United has approximately 24,000 non-union

employees, the vast majority of whom are cov-

ered by the RLA and properly includable in the

6 ieee eos

in Ne Stila al iT PR atah ily oP! it. Geet saint cle byke ele

;

‘Diletta Stes tah

ee ao

rT ee eee et

ee Oe Tee Fie Sree

A-5

class. Members of the class are scattered

throughout the United States.

b. There are questions of law and fact

which are common to the members of the class

and which predominate over any questions

affecting any individual members. The common

questions include, inter alia, whether United vio-

lated the RLA by bargaining and reaching agree-

ments with unions that did not represent

Plaintiffs concerning their wages, benefits, and

other terms and conditions of employment.

c. Plaintiffs are long-term United

employees who will fairly and adequately pro-

tect the interests of the class. Plaintiffs’ claims

are typical of the claims of the class.

d. Plaintiffs are committed to the vigorous

prosecution of this action and have retained

competent counsel experienced in litigation of

this nature. Accordingly, Plaintiffs are adequate

representatives of the class and will fairly and

adequately protect the interests of the class.

e. The prosecution of separate actions by

individual members of the class would create a

risk of inconsistent or varying adjudications

with respect to individual members of the class,

which would establish incompatible standards

of conduct for the parties opposing the class.

f. United has acted and continues to act on

grounds generally applicable to the class,

thereby making appropriate final injunctive or

corresponding declaratory relief with respect to

the class as a whole.

A-6

16. For the reasons stated herein, a class action is

superior to other available methods for the fair and effi-

cient adjudication of this action.

JURISDICTION AND VENUE

17. The Court has subject matter jurisdiction over

this action pursuant to 28 U.S.C. §§ 1331, 1332 and 1337.

18. Venue is proper in this district pursuant to 28

U.S.C. §1391(b), as this civil action is one wherein juris-

diction is not founded exclusively on diversity of citizen-

ship.

19. Defendants are registered to do business and are

doing business within the Northern District of Georgia,

Atlanta Division, and may be served with process in this

action by serving its Registered Agent for service of

process, CT Corporation and/or Prentice Hall Corpora-

tion.

SUBSTANTIVE ALLEGATIONS

20. Plaintiffs and putative class members (collec-

tively “Plaintiffs”) are United employees and employees

as defined under the RLA, Section 1, Fifth, 45 U.S.C. §151,

Fifth.

21. During the last twenty years, several unions

have attempted unsuccessfully to organize for collective

bargaining purposes various crafts or classes of United

employees to which Plaintiffs belong.

22. One union that has made such unsuccessful

organizing efforts is the International Association of

ee aa tas

A-7

Machinists & Aerospace Workers (“IAM”). The IAM,

which already represented United’s mechanics and

related employees at all relevant times, made an unsuc-

cessful attempt as recently as 1991 to organize the craft or

class of Customer Service Employees to which many

Plaintiffs belong.

23. In response to each unsuccessful union organiz-

ing attempt, United vigorously sought to persuade Plain-

tiffs that their employment interests were best served by

allowing United to treat them unilaterally in regard to

their wages, benefits and other terms and conditions of

employment. Thus, United urged Plaintiffs to vote

against representation by the IAM and other unions, stat-

ing that it was unnecessary and counter-productive to

involve third parties in dealings between United and the

crafts or classes, of Plaintiffs to whom the organizing

efforts were directed.

24. In reliance upon United’s campaign efforts and

its representations that the carrier would strongly prefer

to treat them unilaterally, Plaintiffs rejected representa-

tion by the IAM and other unions.

25. Plaintiffs consistently rejected union representa-

tion, despite the relatively greater benefits and protec-

tions negotiated by unions on behalf of other crafts or

classes of United employees. While Plaintiffs loyally

maintained their non-unionized status, however, United

repeatedly made concessions in collective bargaining

with unions representing other crafts or classes of

employees which compromised the productivity of the

carrier, adversely affected its competitive position in the

A-8

airline industry, and jeopardized United’s long-term

future.

PREVIOUS HOSTILE TAKEOVER ATTEMPTS

BY UNITED PILOTS

26. In March 1987, United’s pilots, represented by

the Airline Pilots Association, International (“ALPA”),

attempted to purchase United by means of a heavily

leveraged Employee Stock Option Plan (ESOP). In

response to this attempt, United and the IAM included in

their collective bargaining agreement an anti-takeover

provision, which stated that if United offered an ESOP to

any group of unionized employees, it would be required

to offer a similar, but potentially far more advantageous,

plan to every other unionized group of employees.

27. ALPA challenged the anti-takeover provision in

federal court on the grounds that it violated the RLA.

Affirming the judgment of the federal district court, the

Seventh Circuit Court of Appeals decided that the anti-

takeover provision was indeed an RLA violation, because

it purported to govern terms and conditions of employ-

ment for the pilots without first negotiating with their

collective bargaining representative.

28. As a result of the 1989 decision of the Seventh

Circuit Court of Appeals, United was well aware that it is

unlawful for a carrier to negotiate with a union over

wages, benefits, and other terms and conditions of

employment for employees who are not represented by

the union. United knew, therefore, that it would be

unlawful to bargain with ALPA and the IAM regarding

Plaintiffs’ wages, benefits and other terms and conditions

A-9

of employment, especially in light of Plaintiffs’ consistent

rejection of collective bargaining representation.

THE 1994 ESOP NEGOTIATED AMONG UNITED,

ALPA AND THE IAM

29. Operating under collective bargaining agree-

ments that greatly hampered its productivity, and faced

with the urgent need to cut costs in an increasingly

competitive market, United implemented a drastic cost

reduction program in January 1993. The carrier then

asked its three unions for wage, benefit and work rule

concessions. ALPA, the IAM, and the Association of

Flight Attendants (“AFA”), representing the craft or class

of United flight attendants, all rejected this request.

Finally, in the Spring of 1993, unable to reach agreement

with the unions, the carrier invited them to consider a

“shared solution” to United’s problems.

30. On July 16, 1993, a coalition of the three United

unions proposed a restructuring plan predicated upon

“employee investments” by the unions and the non-

unionized salaried and management employees (“SAM”),

a category of employees to which Plaintiffs belong. As

originally proposed, the “investments” would produce an

aggregate of $3.345 billion in employee cost savings over

five years.

31. On August 25, 1993, after retention of financial

counsel and consideration of the carrier’s options by its

Board of Directors (the “Board”), United responded to the

unions’ July 16, 1993 proposal. United’s counter-proposal

included a condition that “there would be no other wage

rate, per diem, allowance/premium or benefit increases

A-10

during the investment period (other than step, longevity,

or comparable increases for non-contract [SAM]

employees or status/promotional increases).”

32. On September 30, 1993, the AFA dropped out of

the negotiations, disenchanted with United’s decision to

open a flight attendant domicile in Taiwan. United then

continued discussions with ALPA and the IAM (hereinaf-

ter the “Coalition”). The parties made no effort even to

include a SAM representative in the discussions. At one

point in the negotiations, Stephen M. Wolf, United’s erst-

while Chairman of the Board and Chief Executive Officer,

announced that he would represent the interests of non-

unionized employees. Mr. Wolf himself, in addition to

other senior management officials at United, realized a

personal benefit from the recapitalization worth tens of

millions of dollars.

33. Following another exchange of proposals, the

Coalition made a formal proposal on November 11, 1993.

It provided that ALPA, the IAM and SAM employees

would make wage concessions with a present value of

approximately $2.874 billion. The unions withdrew this

proposal when United sold its flight kitchen operations

over their objections. Negotiations quickly resumed,

however, and United’s Board met again on December 16,

1993 to discuss a “Revised Coalition Proposal.” At the

conclusion of this meeting, the Board instructed the car-

rier’s representatives to continue to negotiate open

issues.

34. An Agreement in Principle (“Agreement”) was

executed on December 22, 1993 by United, ALPA, and the

IAM. The Agreement, which was in letter form from

A-11

ALPA and the IAM to United’s Board, includes agree-

ment between the unions and United to execute new

collective bargaining agreements reflecting newly negoti-

ated wage rates, benefits, and other terms and conditions

of employment. The unions then recite United’s agree-

ment to “establish appropriate employment terms for the

salaried and management employees as described in

Exhibit E-3 [to the Agreement].”

35. Following execution of the Agreement, the par-

ties proceeded to draft definitive documentation. This

process culminated in the executicn by the IAM, ALPA,

and United of an Initial Plan of Recapitalization (“Initial

Plan”) dated March 25, 1994. In the meantime, in late

January, the IAM membership and ALPA’s duly autho-

rized bargaining committee each voted to ratify the

Agreement. Despite subsequent misrepresentations to

United stockholders and the public that all United

employee groups had approved the Agreement, no vote

was taken among SAM employees.

36. Certain significant issues remained unresolved

in the final days preceding execution of the Initial Plan.

On March 14, 1994, the Board met to discuss these issues,

which included certain issues relating to the investment

by SAM employees.

37. After the March 14, 1994 Board meeting, United

and the Coalition continued to discuss various issues,

including principally the SAM employees’ contribution.

38. On March 24, 1994, the Board met again to dis-

cuss the proposed transaction, focusing on issues that

had either been resolved since the March 14 Board meet-

ing or that remained unresolved, including the nature of

A-12

the SAM employee concession package. After discussion,

the Board voted to approve the definitive documentation

for the recapitalization, accepting the Coalition’s final

proposals on issues unresolved during the parties’ dis-

cussions in the interim between the March 14 and March

24 Board meetings, including the previously unresolved ques-

tion of the nature of the SAM employee concession package.

Thus, United accepted the Coalition’s final proposal

regarding the SAM employee concession package.

39. On June 2, 1994, the parties amended the Initial

Plan in certain immaterial respects. The Amended and

Restated Plan of Recapitalization (“Final Plan”) states on

page A-11 that “[t]he ESOP program is designed to

deliver equity ownership and voting power to the

employee groups in pre-negotiated proportions and at a

pre-negotiated pace.” The “employee groups” to which

the Final Plan refers include the SAM employee group to

which Plaintiffs belong.

40. The Final Plan negotiated and executed between

United and the Coalition of ALPA and the IAM, neither

one of which unions is duly certified to bargain with

United regarding Plaintiffs’ wages, benefits, and other

terms and conditions of employment, includes drastic

wage and benefit reductions and work rule changes

adversely affecting Plaintiffs.

41. On July 12, 1993, immediately following

approval of the Final Plan by its stockholders, United

implemented the negotiated wage and benefit reductions

and work rule changes affecting Plaintiffs.

42. United’s covenants in the Final Plan regarding

wage and benefit reductions for the SAM employee

Oe ee OT eee ager eS

A-13

group survived implementation of the Final Plan. The

covenants are binding upon United for a period of five

years, nine months, absent future participation in the

“employee buy-out” by the AFA-represented flight atten-

dants. If the flight attendants choose to participate,

United’s covenants are binding for a slightly reduced

period of time.

43. United’s covenants in the Final Plan regarding

wage and benefit reductions for the SAM employee

groups are also judicially enforceable against United by

the ESOP Trustee, State Bank of Boston.

44. By entering into its unlawful agreement with the

Coalition, United both violated its obligation to treat

Plaintiffs unilaterally and sacrificed its right to do so for

the entire length of the “investment” period for SAM

employees.

CLAIMS FOR RELIEF

COUNT I

45. Plaintiffs reallege and incorporate by reference

as if fully set forth herein the allegations set forth in

paragraphs 1 through 44 above.

46. Section 2, Third of the RLA provides that

“{rlepresentatives, for the purposes of this chap-

ter, shall be designated by the respective parties

without interference, influence, or coercion by

either party over the designation of representa-

tives by the other; and neither party shall in

anyway interfere with, influence, or coerce the

other in its choice of representatives. Represen-

tatives of employees for the purposes of this

A-14

chapter need not be persons in the employ of

the carrier, and no carrier shall, by interference,

influence, or coercion seek in any manner to

prevent the designation by its employees as

their representatives of those who or which are

not employees of the carrier.”

47. United violated Plaintiffs’ rights under Section

2, Third of the RLA, by bargaining and reaching agree-

ments with unions, which were not certified to represent

Plaintiffs for collective bargaining purposes, concerning

Plaintiffs’ wages, benefits, and other terms and condi-

tions of employment.

48. Plaintiffs have suffered substantial financial

injury as a direct and proximate result of United’s viola-

tions of Section 2, Third, and they will continue to suffer

such injury in the absence of the relief sought herein.

COUNT II

49. Plaintiffs reallege and incorporate by reference

as if fully set forth herein the allegations set forth in

paragraphs 1 through 44 above.

50. Section 2, Fourth of the RLA provides in perti-

nent part that

“[e]mployees shall have the right to organize

and bargain collectively through representatives

of their own choosing. The majority of any craft

or class of employees shall have the right to

determine who shall be the representative of the

craft or class for the purposes of this chapter. No

carrier, its officers, or agents shall deny or in

any way question the right of its employees to

join, organize, or assist in organizing the labor

a

.

%

dj

Pe eee a ee SN ae ee

te Nene rba,

isbrpxdh citokd cha

4

3

;

;

¥

&

é

9

A-15

organization of their choice, and it shall be

unlawful for any carrier to interfere in any way

with the organization of its employees, or to use

the funds of the carrier in maintaining or assist-

ing or contributing to any labor organization,

labor representative, or other agency of collec-

tive bargaining, or in performing any work

thereof, or to influence or coerce employees in

an effort to induce them to join or remain or not

to join or remain members of any labor organi-

TORO. +.

51. United violated Plaintiffs’ rights under Section

2, Fourth of the RLA, by bargaining and reaching agree-

ments with unions, which. were not certified to represent

Plaintiffs for collective bargaining purposes, concerning

Plaintiffs’ wages, benefits, and other terms and condi-

tions of employment.

52. Plaintiffs have suffered substantial financial

injury as a direct and proximate result of United’s viola-

tions of Section 2, Fourth, and they will continue to suffer

such injury in the absence of the relief sought herein.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for judgment against

Defendants as follows:

(i) For an order that this action is properly

maintainable under Fed.R.Civ.P. 23 (a) and 23

(b) (3), and appointing Plaintiffs to represent the

class of all similarly situated United employees;

(ii) For compensatory damages in an

amount to be determined at trial, together with

A-16

interest thereon, plus special, consequential and

incidental damages;

(iii) For preliminary injunctive relief to

restore the status quo pending prosecution of the

claims asserted herein, as authorized by the

RLA, and specifically to enjoin United’s con-

tinuing adherence to the wage and benefit

reductions and work rule changes affecting

Plaintiffs under the Final Plan;

(iv) For permanent injunctive relief

against United’s adherence to the wage and ben-

efit reductions and work rule changes affecting

Plaintiffs, for the length of the time period dur-

ing which United would otherwise adhere to

such unlawfully agreed to chauges under the

Final Plan;

(v) For punitive damages to deter United

from knowingly committing future flagrant vio-

lations of the federal labor laws in conscious

disregard of its employees’ rights;

(vi) For costs of suit and reasonable attor-

neys’ fees; and

(vii) For such other and further relief as

the Court may deem just and proper.

0 ti lnk Sh Mabe) al debra < claea ah a wiab Uae ind aa Sab aialidhcdt

A Pa niall oe ag tee Dat A hee Bh Shee de

A-17

DEMAND FOR JURY TRIAL

Plaintiffs hereby demand trial by jury in accordance

with Fed.R.Civ.P. 38(b).

OF COUNSEL:

Respectfully submitted,

HERMAN, ROOF, GARDNER

and BOCHER

By: Sheri L. Bocher

Lewis B. Gardner

GA State Bar No. 284335

Sheri L. Bocher

.GA State Bar No. 065119

COUNSEL FOR PLAINTIFFS

1201 Peachtree, Suite 1921

Atlanta, GA 30361

(404) 815-8301

(404) 815-8303 — fax

Lawrence J. McGuinness

Florida Bar No. 814611

Herman Roof Henry & Gordon, P.A.

SunBank International Center

One S.E. Third Avenue

Suite 2110

Miami, Florida 33131

(305) 377-2200

(305) 577-4234 — fax

A-18

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

BERNA KAHN TEE, BEVERLY _ :

YAGER, DANNY CICCARIELLO, :

JUDITH A. MURPHY, FRANK :

PAGO, and JAN CHASE, on : CIVIL NO.

behalf of themselves and all : 1:95-CV-0054-ODE

others similarly situated :

V.

UAL CORPORATION and

UNITED AIRLINES, INC.

ORDER

(Filed Sep. 1, 1995)

This action under Sections 2, Third and 2, Fourth of

the Railway Labor Act (the “RLA”), 45 U.S.C. §152

(Third), (Fourth), is before the court on Defendants’

Motion to Dismiss for failure to state a claim on which

relief can be granted. Because the court believes it can

adequately decide this matter based on the pleadings and

briefs of the parties, Plaintiffs’ motion for oral argument

is denied.

The court treats the following assertions in Plaintiffs’

complaint as true: Plaintiffs and putative class members

(collectively “Plaintiffs”) are United Airlines (“United”)

employees who qualify as “employees” under the RLA,

Section 1, Fifth, 45 U.S.C. §151 (Fifth). The various crafts

and classes of employees at United that Plaintiffs repre-

sent for purposes of this lawsuit, collectively known as

salaried and management employees (“SAM”), are not

CE A ER ATE RPh. Pt PE Be

A-19

members of a collective bargaining unit, despite organiz-

ing efforts by United’s unions. One union at United, the

International Association of Machinists and Aerospace

Workers (“IAM”), attempted to organize this group of

employees as recently as 1991.

In January 1993, United implemented a drastic cost

reduction program and asked its three unions for wage,

benefit and work rule concessions. This request was

rejected by the IAM, the Association of Flight Attendants

(“AFA”), and the Airline Pilots Association, International

(“ALPA”). In the spring of 1993, United invited its unions

to instead consider a “shared solution” to the problem.

(Compl. 429). In response, they proposed a restructuring

plan predicated upon “employee investment” by the

unions and the non-unionized employees. United offered

a counter-proposal on August 25, 1993, that included a

condition that “there would be no other wage rate, per

diem, allowance/ premium or benefit increases during the

investment period (other than step, longevity, or compa-

rable increases for non-contract [SAM] employees or sta-

tus/promotional increases).” (Compl. 131)

Although the AFA dropped out of the negotiations,

United continued discussions with the IAM and ALPA,

but without any SAM representative. At one point, Step-

hen M. Wolf, United’s Chairman of the Board and Chief

Executive Officer, announced that he would represent the

interests of the non-unionized employees. (Compl. 432)

A formal proposal was made on November 11, 1993,

that provided that ALPA, the IAM and SAM employees

would make wage concessions. An Agreement in Princi-

ple was executed on December 22, 1993, by United,

A-20

ALPA, and the IAM in the form of a letter from the two

unions to United’s Board of Directors. This included an

agreement to execute new collective bargaining agree-

ments reflecting the newly negotiated wage rates, bene-

fits and other terms of employment, and recited United’s

agreement to “establish appropriate terms for the salaried

and management employees as described in Exhibit E-3

[to the Agreement].” (Compl. 434).

The final agreement, known as the Initial Plan of

Recapitalization (“the Plan”), was executed by the Board

on March 25, 1994. The nature of the SAM employee

concession package was not finalized until this meeting.

The Plan was amended in immaterial respects on June 2

1994, before being approved by United’s stockholders on

July 12, 1994. United implemented the Plan immediately,

negotiating wage and benefit reductions and work rule

changes that adversely affected the terms and conditions

of Plaintiffs’ employment. These terms are binding on

United for approximately five years.!

Plaintiffs allege that, in negotiating with the IAM and

ALPA concerning the terms and conditions of SAM’s

employment, United violated Section 2, Third and Section

2, Fourth of the RLA. Defendants now move to dismiss

this action on the grounds that 1) it is barred by the

statute of limitations; and 2) Plaintiffs have failed to state

a claim upon which relief can be granted. The court finds

that it cannot conclude with certainty that this action is

untimely based upon the pleadings. Because Plaintiffs’

1 If the flight attendants choose to participate in the

program, these covenants are binding f

period of time. 8 for a slightly reduced

CS ee ge es

A-21

claims fall neither within the explicit language of the RLA

nor its parameters as interpreted by the courts, however,

the court agrees that Plaintiffs have failed to state a claim

on which they can be afforded relief under the law.

I. Timeliness cf Plaintiffs’ Complaint

The parties agree that the appropriate period of lim-

itation for a claim arising under the RLA is six months as

set forth in Section 10(b) of the National Labor Relations

Act. Railway Labor Executives’ Ass'n v. Southern Ry. Co, 860

F.2d 1038 (11th Cir.). The period begins to run “when the

plaintiff was or should have been aware of the acts con-

stituting the alleged violation.” Proudfoot v. Seafarer’s Int'l

Union, 779 F.2d 1558, 1559 (11th Cir. 1986).

Courts often look to the law developed under the

National Labor Relations Act for guidance in interpreting

similar provisions of the RLA. Brotherhood of R.R. Train-

men v. Jacksonville Terminal Co., 394 U.S. 369, 383 (1969).

Applying the same period of limitation to unfair labor

practices, the NLRB considers the six month period to

begin running only after the party adversely affected

receives “clear and unequivocal” notice of the violation of

the NLRA. Leach Corp., 312 N.L.R.B. 990, 991 (1993).

Defendants bear the burden of establishing that Plaintiffs

received the appropriate notice. Id.

Defendants argue that Plaintiffs’ must have known of

their cause of action no later than March 25, 1994, the

date on which Defendants completed their negotiations

with the unions and executed the Plan of Reorganization.

Plaintiffs, on the other hand, contend that their claims

arose when the Plan was approved and took effect on

A-22

July 12, 1994. Because Plaintiffs filed suit in January, 1995,

Defendants would have to show that Plaintiffs “clearly

and unequivocally” were aware by March, 1994, that

Defendants were negotiating over Plaintiffs’ terms of

employment. While the court agrees with Defendants that

in all likelihood Plaintiffs were or should have been

aware of United's activities prior to shareholder approval

of the Plan, there is nothing in the pleadings establishing

this fact. As such, the court must deny Defendants’

motion to dismiss on this ground.

II. Rule 12(b)(6) Motion

“A complaint may not be dismissed under

Fed.R.Civ.P. 12(b)(6) ‘unless it appears beyond doubt that

the plaintiff can prove no set of facts in support of his

claim which would entitle him to relief.’” Rosen v. TRW.

Inc., 979 F.2d 191, 194 (11th Cir. 1992) (quoting Conley v.

Gibson, 355 U.S. 41, 45-46 (1957)). “All well-pleaded facts

in plaintiff[’s] complaint and all reasonable inferences

drawn from those facts are taken as true.” Oladeinde v.

City of Birmingham, 963 F.2d 1481, 1485 (11th Cir. 1992)

(citation omitted), cert. denied, sina: SONS ee a, ee

153 (1993).

There is nothing in the plain language of the RLA

which provides Plaintiffs with a viable claim based on the

pleadings. Section 2, Third of the RLA provides:

[rlepresentatives, for the purposes of this chap-

ter, shall be designated by the respective parties

without interference, influence, or coercion by

either party over the designation of representa-

tives by the other; and neither party shall inter-

fere with, influence, or coerce the other in its

A-23

choice of representatives. Representatives of

employees for the purposes of this chapter need

not be persons in the employ of the carrier, and

no carrier shall, by interference, influence, or

coercion seek in any manner to prevent the des-

ignation by its employees as their representa-

tives of those who or which are not employees

of the carrier.

Nowhere in the pleadings, however, do Plaintiffs

allege that United at any time considered the IAM or

ALPA to be the “representatives” of SAM or attempted to

deal with them as such.? “Representative” is defined

under 45 U.S.C. §151 (Sixth) to mean “any person or

persons, labor union, organization, or corporation desig-

nated either by a carrier or group of carriers or by its or

their employees to act for it or them.” Id. There is no

allegation in the complaint that United recognized ALPA

or the IAM as acting for SAM, and in fact, the Plan of

Reorganization on which Plaintiffs rely expressly pro-

vides that ALPA and the IAM were acting as representa-

tives of the respective employee groups that they are

certified to represent.?

2 Even if Plaintiffs had alleged that United treated the IAM

or ALPA as SAM’s representative, the proper forum for redress

lies with the National Mediation Board which has exclusive

jurisdiction to resolve representation disputes. See International

Bhd. of Teamsters v. Texas Int'l Airlines, Inc., 717 F.2d 157 (5th Cir.

1983).

3 In their Complaint, Plaintiffs allege the existence of the

Plan of Reorganization and quote from it. Defendants’

placement of the entire text of this document before the court is

proper pursuant to a 12(b) motion given that it is central to

Plaintiffs’ case. Venture Assoc. Corp. v. Zenith Data Sys. Corp., 987

F.2d 429, 431 (7th Cir. 1993).

A-24

Similarly, Section 2, Fourth of the RLA provides:

“employees shall have the right to organize and

bargain collectively through representatives of

their own choosing. The majority of any craft or

class of employees shall have the right to deter-

mine who shall be the representative of the craft

or class for the purposes of this chapter. No

carrier, its officers, or agents shall deny or in

any way question the right of its employees to

join, organize, or assist in organizing the labor

organization of their choice, and it shall be

unlawful for the organization of its employees,

or to use the funds of the carrier in maintaining

or assisting or contributing to any labor organi-

zation, labor representative, or other agency of

collective bargaining, or in performing any

work thereof, or to influence or coerce

employees in an effort to induce them to join or

remain or not to join or remain members of any

labor organization... ”

Plaintiffs, however, do not allege that the Plan imple-

mented by United prohibits non-union employees from

selecting a collective bargaining representative under the

RLA.

What Plaintiffs do allege is that the statute creates a

right to reject representation, and that a “necessary corol-

lary” of this right is to prohibit the carrier from entering

into agreements with other unions that affect the terms

and conditions of employment of the non-unionized

employees. It seems, therefore, that Plaintiffs concede

that their cause of action is not covered by the direct

language of the statute and must instead be found

through court interpretation of the RLA. An examination

lees Ara A lig

A-25

of the cases relied on by Plaintiffs, however, reveals that

they also provide no legal basis for Plaintiffs’ claims.

Plaintiffs rely heavily on Air Line Pilots’ Association

International v. UAL Corp, 874 F.2d 439 (7th Cir. 1989), to

show that there is legal support for the position that

United may not bargain with one union over the terms

and conditions of employment of another under the RLA.

In that case, ALPA attempted to purchase United by

means of a heavily leveraged employee stock ownership

plan (“ESOP”). In an attempt to stop them, United and

the IAM included a provision in their collective bargain-

ing agreement that if United offered ESOP to any group

of unionized employees, it would be required to offer a

similar ESOP to every other unionized group of

employees. The Seventh Circuit held that in doing so,

United had bargained with the IAM over the employment

terms of employees represented by ALPA in violation of

the RLA. Because the stock was required to be issued in

proportion to the amount of wages and benefits each

employee group gave up, the “interests that the

employees acquire in the ESOP .. . will thus be substi-

tutes for wages,” i.e. ESOP conditions affected the terms

and conditions of employment of other unions.

Plaintiffs’ reliance on this case is misplaced. Because

United’s pilots had designated ALPA as their collective

bargaining agent, United had to deal exclusively with

ALPA concerning any terms or conditions of the pilot’s

employment under §2, First and §2, Ninth of the RLA. See

UAL Corp., 874 F.2d at 439. In contrast, SAM is non-union

and has no designated representative with whom United

must bargain. Thus, the basis for the decision in UAL

Corp., Sections 2, First and Ninth of the RLA, are lacking

A-26

in this case and the decision can provide no grounds for

granting Plaintiffs’ requested relief.

In support of their contention that the RLA forces an

employer to deal with non-unionized employees uni-

laterally, Plaintiffs also cite several cases which conclude

that because the RLA requires an employer to deal only

with the true representative of the employees, there is a

corresponding duty to deal with no other representative.

Virginia Ry. Co. v. System Federation No. 40, 300 U.S. 515,

548 (1936). This proposition, while undoubtedly true, pro-

vides no legal basis for Plaintiffs’ claims. Again, because

Plaintiffs rejected collective representation, they had no

“true representative” with whom United had to deal

under the RLA. Plaintiffs have not alleged, moreover, that

United treated its unions as representatives of Plaintiffs

in negotiating to set the terms and conditions of SAM’s

employment. On the contrary, United’s President stated

that he considered himself to be Plaintiff’s representative.

As such, the unions represented the interests of their

membership and United represented both its and its non-

unionized employee’s interests.

The Plaintiffs maintain that because collective bar-

gaining agreements prevent the employer from negotiat-

ing directly with the employees, it must be true that the

employer cannot negotiate with the union where the

employees have rejected collective bargaining. See Vir-

ginia Ry. Co., 300 U.S. 539-40; Medo Photo Supply Corp. v.

NLRB, 321 U.S. 678 (1943). The second proposition, how-

ever, does not follow from the first. An employer may not

deal directly with employees who are represented by a

union because it is prohibited from doing so under the

provisions of Section 2, First and 2, Ninth requiring the

A-27

employer to deal exclusively with the unions. Again,

there is no corresponding duty in this case because Plain-

tiffs have decided not to designate a collective bargaining

representative.

In short, there simply is no authority for the proposi-

tion that the RLA governs a carrier’s conduct in setting

employment terms for its unrepresented employees. It is

clear that §§2, Third and Fourth encompass the right to

reject collective representation. Brotherhood of Ry. & S.S.

Clerks v. Assoc. for the Benefit of Non-Contract Employees,

380 U.S. 650, 669 n.5 (1965); Russell v. National Mediation

Bd., 714 F.2d 1332, 1343-44 (5th Cir. 1983). The statute

does not portend to govern labor relations, however, once

employees assert this right.

In Williams v. Jacksonville Terminal Co., 315 U.S. 386

(1942), the non-unionized employees asked the employer

for a conference to negotiate an agreement concerning

working conditions and other related subjects. Subse-

quent to this request, the employer implemented an

accounting and guarantee plan without consulting the

union. While the union claimed this violated the first six

paragraphs of Section 2 of the RLA, the Court held other-

wise.

Because the carrier was, by the act, placed under

the duty to exert every effort to make collective

agreements, it does not follow that pending

those negotiations, where no collective bargain-

ing agreements are or have been in effect, the

carrier cannot exercise its authority to arrange

its business relations with its employees in the

manner shown in this record. As we have

stated . . . the Railway Labor Act dealt with

A-28

collective bargaining agreements only and not with

the employment of individuals.

Id. at 402 (emphasis added).4

In International Brotherhood of Teamsters v. Brotherhood

of Railway, Airline & S.S. Clerks, 402 F.2d 196, 202 (D.C.

Cir. 1968), cert. denied, 393 U.S. 848 (1968), the court held

that the N.L.R.B. had the implied power under the RLA

to decertify unions and represent to the employer that “a

particular group of employees has no representative to

carry on the negotiations contemplated by the Railway

Labor Act.” Id. at 202. While this seems to indicate that a

court could imply that the RLA governs Plaintiffs’ claims,

the court in Teamsters concluded that the determination

that there is no designated representative would

“relegatie] the carrier and its employees to employment

relationships and contracts not presently governed by the

Railway Labor Act.” Id. (emphasis added).

Although United’s salaried and management

employees apparently consider themselves as a unit for

purposes of this litigation, absent a collective bargaining

* The Eleventh Circuit in International Association of

Machinists and Aerospace Workers v. Transportes Aereos Mercantiles

Pan Americandos, 924 F.2d 1005 (1991), held that the RLA

precluded an employer from making unilateral changes once

negotiations toward a collective bargaining agreement had

begun. The court found that Williams had been limited by

Detroit & Toledo Shore Line Ry. Co. v. United Transportation Union,

396 U.S. 142 (1969) to apply only in those cases where “there is

absolutely no prior history of any collective bargaining or

agreement between the parties on any matter.” IAM, 924 F.2d at

1008 (quoting Detroit & Toledo, 396 U:S. at 15). As this condition

applies in this case, the court finds Williams to be relevant

precedent.

A-29

agreement, they remain a collection of individuals gov-

erned by individual employment contracts. While Sec-

tions 2 Third and Fourth of the RLA are intended to

protect the rights of individuals to form unions or reject

collective representation, they do not give employees

who have chosen to forego collective bargaining the

power to assert control over the manner in which the

employer determines the terms and conditions of their

employment.

Simply put, Plaintiffs have not alleged in the plead-

ings that United either recognized its unions as the collec-

tive representative of Plaintiffs or imposed unsatisfactory

terms and conditions on'SAM in an effort to influence or

coerce these non-unionized employees into unionizing.

Only by pleading these facts would Plaintiffs’ claims fall

within the statutory protection afforded to non-unionized

employees under the RLA. Because Plaintiffs’ claims have

support neither in the actual language of the statute nor

its interpretation by the courts, they have failed to state a

claim upon which relief can be granted. While the court

may sympathize with Plaintiffs that they were not given a

seat at the bargaining table, this does not alter the fact

that United was under no obligation to do so absent a

decision by SAM to designate a collective bargaining

agent.

ACCORDINGLY, Defendants’ Motion to Dismiss

[5-1] is GRANTED and Plaintiffs’ Motion for Oral Argu-

ment [20-1] is DENIED.

A-30

SO ORDERED, this 1 day of September, 1995.

/s/ Orinda D. Evans

ORINDA D. EVANS

UNITED STATES

DISTRICT JUDGE

Beker i Nae I thd Rel ib br DRIER as Rh 1 one

lA tae Bcd SE NOT

A-31 w

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 95-9209

Non-Argument Calendar

D. C. Docket No. 1:95-cv-54-ODE

BERNA KAHN TEE, BEVERLY YAGER,

DANNY CICCARIELLO,

FRANK PAGON, JAN CHASE, on behalf of

themselves and all others similarly

situated,

Plaintiffs-Appellants,

versus

UAL CORPORATION, and UNITED AIRLINES, INC.,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Georgia

(Filed July 2, 1996)

Before EDMONDSON, BIRCH AND CARNES, Circuit

Judges.

PER CURIAM:

Plaintiffs-Appellants appeal an order of the district

court dismissing their complaint for failure to State a

claim on which relief can be granted under Fed.R.Civ.P

12(b)(6).

In reviewing the district court’s dismissal of a com-

plaint under Fed.R.Civ.P. 12(b)(6), we accept as true all

facts pleaded in the complaint and all reasonable infer-

ences drawn therefrom. See In re Johannessen, 76 F.3d 347,

350 (11th Cir. 1996). Dismissal under Fed.R.Civ.P. 12(b)(6)

will be affirmed on appeal only when “it appears beyond

doubt that the plaintiff can prove no set of facts in sup-

port of his claim which would entitle him to relief.” Rosen

v. TRW, Inc., 979 F.2d 191, 194 (11th Cir. 1992), citing

Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

United Airlines (“United”) has four major employee

groups represented by unions under the Railway Labor

Act, 45 U.S.C. § 151 et seq. (the “RLA”). The pilots are

represented by the Air Line Pilots Association, Interna-

tional (“ALPA”), the flight attendants are represented by

the Association of Flight Attendants (“AFA”) and both

the mechanics and related employees and the ramp ser-

vice and related employees are represented by the Inter-

national Association of Machinists (“IAM”). Plaintiffs, six

non-union customer service representatives employed by

United, sought to bring a class action on behalf of

United’s remaining employees, none of whom are repre-

sented by a collective bargaining unit. Attempts by the

IAM to organize the customer service representatives and

reservation agents, as recently as 1991, had been rejected.

we Ntheds

A-33

The putative class was to include United’s customer ser-

vice representatives, reservation agents, office and cleri-

cal employees, and supervisory and management

employees (“Non-Union Employees”).

Plaintiffs brought this action to challenge an agree-

ment reached after negotiations between United and the

IAM and ALPA.! The agreement involved a significant

restructuring of United, employee ownership of United

through an Employee Stock Ownership Plan, and wage

and benefit reductions for approximately five years.

Plaintiffs claim United violated Section 2, Third and Sec-

tion 2, Fourth of the RLA in negotiating this agreement

with the IAM and ALPA, because the provisions of the

agreement affect terms and conditions of employment of

the Non-Union Employees.

Simply stated, Section 2, Third? seeks to secure the

right to designate a collective bargaining representative

without interference, influence or coercion. Section 2,

1 AFA had participated in early negotiations but dropped

out because of an unrelated issue which concerned flight

attendants.

2 RLA, §2, Third provides: “[rjepresentatives, for the

purposes of this chapter, shall be designated by the respective

parties without interference, influence, or coercion by either

party over the designation of representatives by the other; and

neither party shall in any way interfere with, influence, or

coerce the other in its choice of representatives. Representatives

of employees for the purposes of this chapter need not be

persons in the employ of the carrier, and no carrier shall by

interference, influence, or coercion seek in any manner to

prevent the designation by its employees as their

representatives of those who or which are not employees of the

carrier.”

A-34

Fourth? seeks to reinforce the prohibition against carrier

interference with employees’ free choice of representa-

tives and prohibits use of carrier funds to assist particular

labor organizations, thereby fortifying independent

unions rather than “company unions.”

The district court noted that Plaintiffs never alleged

that United considered the IAM or ALPA to be the Non-

Union Empioyees “representative” under RLA section 2,

Sixth or recognized the IAM or ALPA as acting for these

employees. Nor did Plaintiffs allege that the agreement

prohibits them from selecting a collective bargaining rep-

resentative.

The district court concluded that nothing in the plain

language of the RLA was implicated by the Plaintiffs

pleadings. Instead, Plaintiffs argue that the RLA creates a

right to reject representation and that a “necessary corol-

lary” of this right is a prohibition on the carrier from

entering into agreements with unions which affect the

° §2, Fourth provides in relevant part: [e]mployees shall

have the right to organize and bargain collectively through

representatives of their own choosing. The majority of any craft

or class of employees shall have the right to determine who

shall be the representative of the craft or class... . No carrier, its

officers, or agents shall deny or in any way question the right of

its employees to join, organize, or assist in organizing the labor

organization of their choice, and it shall be unlawful for any

carrier to interfere in any way with the organization of its

employees, or to use the funds of the carrier in maintaining or

assisting or contributing to any labor organization, labor

representative, or other agency of collective bargaining, or in

performing any work therefor, or to influence or coerce

employees in an effort to induce them to join or remain or not to

join or remain members of any labor organization. ... ”

POE iat,“ Reeginine tn wr Piha

A-35

terms and conditions of employment of non-union

employees.

We do not question that the RLA insures the option

to reject collective bargaining. See Brotherhood of Ry. & S.S.

Clerks v. Assoc. for the Benefit of Non-Contract Employees,

380 U.S. 650, 669 n. 5 (1965). Nor do we question that the

RLA mandates that the carrier only negotiate with the

true representative of an employee group and with no

other representative. See Virginian Railway Co. v. System

Federation No. 40, 300 U.S. 515, 548 (1936). But, as the

district court concluded, this idea does not address Plain-

tiffs’ contention. No “true representative” of the Plaintiffs

existed with whom United was obligated to negotiate

because the Non-Union Employees had rejected collective

representation. This situation is not one where an

employer’s agreement with one union necessarily had an

impact on the terms and conditions of employment of

other unionized employees who had a different true rep-

resentative. Such was the case in Air Line Pilots’ Associa-

tion International v. UAL Corp., 874 F.2d 439 (7th Cir. 1989),

upon which Plaintiffs rely. In such a situation, the

employer is required to deal with the true representative

of the affected union. Again, Plaintiffs did not have a

“true representative” with whom United was required to

deal.

In Williams v. Jacksonville Terminal Co., 315 U.S. 386,

402 (1942), the Supreme Court stated that “the Railway

Labor Act dealt with collective bargaining agreements

only and not with the employment of individuals.” While

later authority limits Williams as a precedent, (see Detroit

& Toledo Shore Line Ry. Co. v. United Transportation Union,

396 U.S. 142, 157-58 (1969); International Association of

A-36

Machinists and Aerospace Workers v. Transportes Aereos Mer-

cantiles Pan Americandos, 924 F.2d 1005, 1007-08 (11th Cir.

1991)), when, as is the case here, the plaintiffs allege no

interference whatsoever with the collective bargaining

rights afforded by the RLA and when the unions were not

treated or recognized as the representatives of plaintiffs,

Williams supports the district court’s conclusion that the

RLA does not govern the employer’s decisions as they

have an impact on the individual employees composing

the plaintiffs’ putative class.

In this case, Plaintiffs seek to come within the ambit

of the RLA by arguing that United’s acts might influence

or coerce the Non-Union Employees into unionizing. The

district court concluded - rightly we think —- that Plain-

tiffs did not allege in their pleadings that the agreement

imposed unsatisfactory terms and conditions on the Non-

Union Employees in an effort to influence or coerce them

into unionizing. Any act whatsoever taken by an

employer might influence an employee’s decision on

union representation. Just that some act was undertaken,

without more, does not support a claim under the RLA.

Accepting as true all facts pleaded in the complaint,

Plaintiffs have failed to state a claim on which relief can

be granted. No reversible error has been shown in grant-

ing United’s Fed.R.Civ.P. 12(b)(6) motion,

AFFIRMED.

:

e.

|

A-37

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 95-9209

Berna Kahn Tee, Beverly Yager,

Danny Ciccariello, Frank Pagon,

Jan Chase, on behalf of

themselves and all others

similarly situated,

Plaintiffs-Appellants,

versus

UAL Corporation, and

United Airlines, Inc.,

Defendants-Appellees.

On Appeal from the United States District Court for the

Nothern District of Georgia

(Filed Jan. 2, 1997)

ON PETITION(S) FOR REHEARING AND SUGGES-

TION(S) OF REHEARING EN BANC

(Opinion Se ee eee + See

Before: EDMONDSON, BIRCH and CARNES, Circuit

Judges.

PER CURIAM:

The Petition(s) for Rehearing are DENIED and no mem-

ber of this panel nor other Judge in regular active service

A-38

on the Court having requested that the Court be polled

on rehearing en banc (Rule 35, Federal Rules of Appellate

Procedure; Eleventh Circuit Rule 35-5), the Suggestion(s)

of Rehearing En Banc are DENIED.

ENTERED FOR THE COURT:

/s/ J.L. Edmonson

UNITED STATES CIRCUIT JUDGE

OW uit Bie at Biber S ee aed Mie the

A-39

Text of Sections 2, Third and 2, Fourth of the Railway

Labor Act, 45 U.S.C. § 151 et seq.

Ҥ 152. General duties

Third. Designation of representatives

Representatives, for the purposes of this

chapter, shall be designated by the respective

parties without interference, influence, or coer-

cion by either party over the designation of

representatives by the other; and neither party

shall in any way interfere with, influence, or

coerce the other in its choice of representatives.

Representatives of employees for the purposes

of this chapter need not be persons in the

employ of the carrier, and no carrier shall, by

interference, influence, or coercion seek in any

manner to prevent the designation by its

employees as their representatives of those who

or which are not employees of the carrier.

Fourth. Organization and collective bargaining;

freedom from interference by carrier; assistance in orga-

nizing or maintaining organization by carrier forbid-

den; deduction of dues from wages forbidden

Employees shall have the right to organize

and bargain collectively through representatives

of their own choosing. The majority of any craft

or class of employees shall have the right to

determine who shall be the representative of the

craft or class for the purpose of this chapter. No

carrier, its officers, or agents shall deny or in

any way question the right of its employees to

join, organize, or assist in organizing the labor

A-40

organization of their choice, and it shall be

unlawful for any carrier to interfere in any way

with the organization of its employees, or to use

the funds of the carrier in maintaining or assist-

ing or contributing to any labor organization,

labor representative, or other agency of collec-

tive bargaining, or in performing any work

therefor, or to influence or coerce employees in

an effort to induce them to join or remain or not

to join or remain members of any labor organi-

zation, or to deduct from the wages of

employees any dues, fees, assessments, or other

contributions payable to labor organizations, or

to collect or to assist in the collection of any

such dues, fees, assessments, or other contribu-

tions: Provided, That nothing in this chapter shall

be construed to prohibit a carrier from permit-

ting an employee, individually, or local repre-

sentatives of employees from conferring with

management during working hours without loss

of time, or to prohibit a carrier from furnishing

free transportation to its employees while

engaged in the business of a labor organization.

”

sal Ica is iS i saa anal s

as as . bess " . .

ER ARN CREATAS WR Saad btm

A-41

US Air Gets Proposal From 3 Labor Unions

For Some Concessions

By a Wall Street Journal Staff Reporter

ARLINGTON, Va. - Three of USAir Group Inc.’s

labor unions yesterday gave the company a joint proposal

offering substantial wage and benefit concessions, but

slightly less than the $500 million sought by the airline.

Members of the Air Line Pilots Association, the Inter-

national Association of Machinists and the Transport

Workers Union, as expected, offered to give up a portion

of their salaries in exchange for an equity stake in the

financially ailing carrier. But they lowered the overall

value of their concession package after the Association of

Flight Attendants refused to join the coalition last week.

AFA said it is meeting this week to work out a possible

concession proposal of its own.

The plan by the pilots and machinists requires that

all of USAir’s 45,000 workers, including nonunion

employees, participate in the concessions. Under the

terms of the proposal, ALPA would agree to annual wage

cuts of more than $180 million, or about 26% of its mem-

bers’ current pay and benefits. Pilots comprise about 30%

of USAir’s payroll, and have an average salary of about

$129,000. The machinists, who make up about 19% of

USAir’s payroll, would concede nearly 19% of their cur-

rent pay, which averages $49,000. The Transport Workers

Union, which represents only 172 employees, offered a

small percentage of concessions.

In return, workers would be given about 20% of

USAir’s common stock, as well as preferred stock, profit

sharing and representation on the board. While USAir

A-42

hasn't formally signed off on the deal, chief executive

officer Seth Schofield confirmed last week that the airline

could give the workers as much as a 20% equity stake.

A USAir spokesman said the company received the

coalition’s proposal, but said the airline would have no

comment on the details.

i

2

A-43

ESOP Efforts of the Air Line Pilots Association

Captain Roger D. Hall*

The Air Line Pilots Association has had a long his-

tory of involvement in employee ownership. Several of

these efforts have produced beneficial results while

others have not. One early attempt that worked well was

an employee stock ownership plan (ESOP) that was put

in place for the employees of Republic Airlines when that

airline was experiencing financial difficulties. This ESOP

existed for several years; and when it was finally termi-

nated with the acquisition of Republic by Northwest Air-

lines, the payout was very good.

There have been other attempts at employee owner-

ship. Employees at Continental attempted to put an ESOP

in place at the time Frank Lorenzo was trying to buy the

airline, but they were outmaneuvered by Mr. Lorenzo

and the effort failed. The employees of Eastern Airlines

had an ESOP in place that owned 25 percent of the airline

but it provided little protection when Frank Lorenzo

bought the carrier, and with the bankruptcy at Eastern it

is expected that the employees will receive little or noth-

ing at the end of the bankruptcy proceedings.

Another effort involved employees at TWA. The

TWA employees negotiated an ESOP as part of their

arrangement with Carl Icahn when he purchased the

airline. This ESOP was never established and it has been

* Captain Roger D. Hall, B.S., Bradley University, Peoria,

Illinois, was elected first vice president of the Air Line Pilots

Association in November 1986. He served in that position until

December 1990. Captain Hall has been with United Airlines for

25 years and now flies the Boeing 737 aircraft.

A-44

tied up in various lawsuits for some time. Whether it will

ever come to fruition or produce anything of tangible

value is problematic.

With this background in place, the remainder of this

discussion focuses on the effort started by the pilots at

United Airlines and eventually joined by the rest of the

work force. This effort has not yet been successful, and

perhaps it may never be, yet it has proven to be very

beneficial for all of the employees at United.

Back in the early 1980s, United Airlines’ management

and board of directors embarked upon a plan to acquire

numerous travel-related businesses. Over a period of

time this resulted in UAL Inc.’s (ALEGIS) owning Westin

Hotels, Hilton Hotels, Avis Car Rental, and numerous

other related small businesses. While such undertakings

may have been good for those companies and their

employees, they were working to the detriment of the

employees of United Airlines.

The reason for this was that each of these acquisitions

was draining cash away from the airline. It is commonly

known that airlines generate tremendous amounts of

cash, but they also require large cash expenditures to

replace older, inefficient equipment and to expand. Dur-

ing the diversification program, United was not replacing

aging equipment nor was it expanding. Other airlines

were doing both and, in fact, American Airlines, because

of its concentration on the airline business and expansion,

eventually surpassed United as the world’s largest air-

line.

A-45

During this diversification period, United’s manage-

ment was demanding that the employees negotiate con-

cessionary contracts so that the airline could prosper. It

seemed totally illogical that the employees were making

contract concessions to help the carrier, while manage-

ment was bleeding it dry of its cash resources to acquire

other businesses. Additionally, since management's

action would lead to the eventual decay of the airline,

these activities not only were detrimental to the interests

of the employees, but they were also detrimental to the

interests of the shareholders and the traveling public.

It was at this juncture that the pilots of United began

their efforts to acquire the company. Once the airline was

“put in play,” other stockholders bought large blocks of

stock and made certain demands upon the board. All of

this activity led the board to renounce the diversification

strategy and to sell the extraneous assets. It would have

been best for the airline if the employees had acquired

the airline and been able to use the proceeds from these

sales to purchase new aircraft and facilities but, unfor-

tunately, the proceeds were distributed to the share-

holders. One positive outcome, however, was that the

cash drain was halted and the resources were once again

available to meet the needs of the airline. In fact, new

aircraft were ordered and United began to expand so that

by mid-1990 it had regained its position as the largest

airline in the United States.

Another beneficial result of employees’ efforts to

acquire the company was that in this process the manage-

ment team that had led the airline down this destructive

path was replaced. It happens very seldom in this coun-

try that the employees of a company can cause the senior

A-46

management group to be replaced. While this was not

accomplished as a result of the employees’ efforts alone,

it was the employees who started the process that led to

this result and it would not have happened without their

activities.

While the employees’ ultimate objective - ownership

and the ability to influence the future of the company -

was not realized, the effort did achieve the noted impor-

tant results on behalf of the employees at United. I

believe that employee ownership efforts are valuable

tools for labor groups to use to achieve their objectives.

Even though these efforts may not accomplish the objec-

tive of ownership, there are other aspects of the attempt

which are beneficial

If ownership is desired, then the employee group

should consider acquiring a majority of the stock. Too

many situations occur in which minority ownership posi-

tions do not afford the employees any protection or input.

The employees make concessions, but the concessions

buy them very little in terms of the real reasons that

cause employees to consider an ownership position.

Finally, although the economic conditions are not right at

this time for major ownership deals, employee ownership

through an ESOP is a desirable goal and a useful nego-

tiating strategy when the climate improves; and we

intend to support our groups in their efforts to attain

ownership positions.

A-47

1/17/96 WS] A3

1/17/96 Wall St. J. A3

1996 WL-WSJ 3087232

The Wall Street Journal

Copyright (c) 1996, Dow Jones & Company, Inc.

Wednesday, January 17, 1996

USAir Picks Wolf, Industry Veteran, As Chief

in Bid for Labor Cost Savings

By Carl Quintanilla and Joann S. Lublin

Staff Reporters of The Wall Street Journal

Corrections and Amplifications

RICHARD FERRIS, a former chairman of UAL Corp.,

was responsible for the company’s purchase of Pacific

routes from Pan American World Airways in 1985. An

article Jan. 17 incorrectly stated the routes were bought

by Stephen M. Wolf, who succeeded Mr. Ferris as chair-

man in 1987 and who has just been named chairman of

USAir Group Inc. (WSJ Feb. 7. 1996)

USAir Group Inc. tapped Stephen M. Wolf, an indus-

try veteran who ran UAL Corp. until 1994, as its new

chairman and chief executive officer.

The nation’s sixth-largest airline said Mr. Wolf, 54

years old, will join the Arlington, Va.-based airline Mon-

day, succeeding Seth E. Schofield, a career employee of

USAir and its chief executive since 1991. Mr. Schofield,

who had come under fire for failing to obtain cost-saving

concessions from the airline’s unions, said four months

ago that he planned to step down after a successor was

named.

A-48

Mr. Wolf, a savvy strategist known for his iron-fisted

approach to labor, masterminded an employee buyout of

UAL’s United Airlines unit two years ago. USAir said Mr.

Wolf was its leading candidate since the start of its search

to replace Mr. Schofield. USAir’s directors approved the

appointment yesterday.

“He has clearly demonstrated his ability to lead a

major carrier and to add shareholder value in past execu-

tive positions,” said Mathias J. DeVito, a USAir director

and head of the five-member search committee. Added

Mr. Schofield: “He is ideally suited to carry on the

restructuring of USAir.”

With a resume that reads like a who’s who in avia-

tion, Mr. Wolf has emerged as a trouble-shooter who can

turn around ailing carriers, force wage concessions from

workers and develop international markets. USAir is in

need of a stern executive to help tame its strong unions

and pare its costs, which are among the highest in the

industry.

Mr. Wolf said he wouldn’t comment until he met with

USAir’s workers.

Mr. Wolf, a multimillionaire now living on a Virginia

horse farm, is expected to earn less than $600,000 a year

at USAir but receive stock options on more than one

million shares, according to one individual familiar with

the negotiations.

Headhunters for Heidrick & Struggles Inc. initially

contacted Mr. Wolf in early December. His interest in the

USAir job made him the front-runner candidate - even

A-49

though he spurned similar feelers from companies out-

side the airline industry, the knowledgeable individual

said. The search firm declined to comment.

But after 18 months in a consulting role, Mr. Wolf

“just wanted to re-engage,” this person continued. “He

was a football player without a football team.”

After joining United in 1987, Mr. Wolf built the car-

rier into a truly international company by buying Pacific

routes from Pan American World Airways and by launch-

ing flights across the Atlantic and to Latin America. He

transformed UAL into the largest employee-owned com-

pany in the U.S., wresting $4.9 billion in wages and

benefits from employees in exchange for majority owner-

ship.

Even so, union members demanded he leave the

airline as part of the buyout agreement. Part of the hard

feelings stemmed from the fact that he was granted a

hefty severance package totaling nearly $7 million -

including $4,350,000 in severance and $83,333 in “accrued

but unused vacation,” according to the company’s 1995

proxy statement.

His welcome at USAir may be as chilly as was his

exit from United. USAir’s unions have shown little

enthusiasm for the concessions that Mr. Schofield had

claimed were vital to the company. Negotiations that.

dragged on for more than a year fell apart last summer,

triggering Mr. Schofield’s decision to leave when a suc-

cessor could be found.

Since then, USAir’s financial fortunes have under-

gone surprising improvement — the company is expected

A-50

to be in the black for all of 1995, the first profitable year

since 1988. But that is expected to only stiffen the unions’

resolve to resist givebacks without substantial financial

returns.

The appointment of Mr. Wolf was announced after

the market closed yesterday. In New York Stock Exchange

composite trading, USAir stock closed at $12.625, up 12.5

cents.

But Mr. Wolf has proved himself skillful at winning

concessions from recalcitrant unions over the years. He

extracted concessions from workers at Tiger Interna-

tional, Inc., a cargo airline. He resurrected the old Repub-

lic Airlines as chairman before coming to United.

Republic, which was later acquired by Northwest Air-

lines, was bleeding cash until Mr. Wolf persuaded

workers to take a 15% pay cut, restructured its debt,

changed routes and revitalized its image by repainting its

planes.

“We were on death’s door,” said Bob Gibbons,

Republic’s former public relations manager. “But he got

us back on our feet.”

The search for Mr. Schofield’s replacement has been

marked by fits and starts. He initially announced his

intention to retire last September. But USAir halted the

hunt for two months while it engaged in fruitless take-

over talks with UAL and American Airlines’ parent AMR

Corp. USAir has said it won’t sell off the airline in pieces,

but it hasn’t ruled out another possible sale of the com-

pany sometime in the future.

A-51

Although it is a fraction of United’s size, USAir holds

several challenges that traditionally have intrigued Mr.

Wolf, associates say. It is in dire need of a turnaround — of

the bottom line and its reputation. It has little interna-

tional exposure. And if it tries to expand its partnership

with British Airways PLC, which owns 24.6% of USAir,

the task will require shrewd handling to avoid raising

congressional wrath over foreign ownership of air car-

riers.

“Steve is going back to what he does best,” observed

Felix Rohatyn, a managing director of Lazard Freres &

Co., in an interview. For Mr. Wolf, the challenge of run-

ning another airline “is like climbing Mt. Everest,” Mr.

Rohatyn Added.

Mr. Wolf joined Lazard Freres as a senior adviser

after leaving UAL. In that part-time role, the new USAir

chief has worked mainly in Paris advising Christian

Blanc, a chairman of Air France. Among other things, he

helped Mr. Blanc to recruit Rakesh Gangwall, a former

United executive, as an executive vice president.

Mr. Wolf has a close relationship with British Air-

ways and its chairman, Sir Colin Marshall. Mr. Wolf

nearly became a director of British Airways in 1989, when

the London-based carrier led a proposed employee

buyout of United. British Air, along with United’s man-

agement, its pilots union and Mr. Wolf, tried unsuc-

cessfully to buy the giant carrier in a $6.8 billion

leveraged buyout.

It is unclear how Mr. Wolf’s appointment will affect

the USAir executive suite. People familiar with the airline

said Mr. Wolf may turn to some of his former colleagues

A-52

at United. Several, including his right-hand man and

president, Jack Pope, left the Chicago-based carrier in the

wake of the buyout. It is understood that USAir’s board

voted only on Mr. Wolf’s appointment yesterday.

The appointment of Mr. Wolf brings to a close Mr.

Schofield’s 39-year career at USAir and his tumultuous

four-year reign as chairman. A former baggage handler

who still answers to his nickname, “Butch”, when called

by employees, Mr. Schofield was at the helm as the airline

encountered its most unprofitable years.

— Stephen M. Wolf’s Resume

1966 to 1981: Began his career with ~.'.AR Corp.'s

American Airlines, rising through the rar’.s to become

vice president, Western Division.

1981 to 1982: Moved to Pan American World Airways

as senior vice president, marketing.

1982 to 1983: President and chief operating officer at

Continental Airlines.

1984 to 1986: President and chief executive officer of

Republic Airlines. Convinces workers to give concessions

worth $100 million and virtually saves the airline from

collapse. Changes the colors of the planes, and prepares

the airline for an eventual sale to Northwest Airlines.

1986 to 1987: President and chief operating officer at

Tiger International Inc., parent company of air-cargo ser-

vice Flying Tiger. Convinced workers to give concessions

worth $50 million.

1987 to 1994: Joins UAL Corp., the parent of United

Airlines, as president and chief executive officer. Becomes

Pan muns Birt peat eee nme 8 Seperate

A-53

chairman in 1988. Masterminds the employee-buyout of

the company in 1994.