Petition for Writ of Certiorari — Former Eastern Pilots Granted Right to Substitute Counsel v. Continental Airlines, 216 B.R. 1049 (1998) (No. 97-1036)
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Supreme Court, U.S.
» FILED
97 1036 DE 19 1997
No. OFFICE OF THE CLERK
IN THE
Supreme Court of Che United States
OCTOBER TERM 1997
The Former Eastern Pilots Granted the Right to
Substitute Counsel,
Petitioners,
V.
Continental Airlines,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
John A. McGuinn
Counsel of Record
Schmelizer, Aptaker & Shepard, P.C.
2600 Virginia Avenue, N.W.
Suite 1000
Washington, D.C. 20037
(202) 333-8800
Attorney for the Petitioners
Baimar Legal Publishing Services, Washington, DC (202) 682-9800
i
QUESTIONS PRESENTED
1. Whether the Court of Appeals ignored the exclusively
equitable remedy of airline pilot seniority integration through
labor arbitration in airline mergers when it concluded that such
remedy was a “claim” under Section 101(5) of the Bankruptcy
Act which could be reduced to a monetary award in
circumstances where the bankrupt estate has few, if any, assets.
2. Whether the Court of Appeals grossly misapplied
Section 1113(f) of the Bankruptcy Act and ignored the policy
of the National Labor Relations Act favoring arbitration of
labor disputes by its holding on the one hand that Continental
had not sought relief from the LPP provisions in the collective
bargaining agreement pursuant to §1113(f) and had a duty to
arbitrate the LPP issue, and its further ruling that substitution
of a non-existent monetary award for the seniority list
integration promised by the LPPs did not constitute an
alteration of those provisions.
il
LIST OF PARTIES
The parties to the proceedings below were the
petitioners, the former Eastern pilots granted the right to
substitute counsel, the LPP Claimants and the respondent
Continental Airlines.
The petitioners, the former Eastern pilots granted the
right to substitute counsel are some of the members of the
Eastern Pilots Merger Committee. There are no parent
companies, subsidiaries or affiliates of the petitioners.
ili
TABLE OF CONTENTS
Pages
Bales corgd lal dlicd ue cchcbiscdescnsitndlevvedsceusasoas l
Te en bconmeose 2
So dL cc, css ccnacdWbeyeccesecterosocecereees 2
OMAR OR BANE CASES ois. cococscscaconcrceseseesareccoressesees 2
Eastern Agrees to Labor Protection Provisions............... 2
Texas Air Acquires Eastern And Starts A Process To
Negate The ALPA Collective Bargaining
PUPOOMICTE PMG TIS LPP sii. issesc ss. eciicccceccesoeseseess 3
The LPP Dispute Is Arbitrated ......................c.ccccccsseceseee. 4
BRMD Weette OF EPPS TO PHONE, ..0...0......0.cccsecceccecccscossesesess 5
Texas Air Orchestrates The Transfer Of Work And
Assets From Eastern To Continental....................... 6
Department of Transportation Requires Texas Air to
nas eas cicxossassnscevcocosees 6
ALPA Commences LPP Arbitration To Obtain
Eastern Pilot Seniority Integration On
Continental Pilot Seniority List.......0...cceeeseeeee 7
Second Circuit Court of Appeals Holds That The
Automatic Stay Provision Does Not Bar
LPP/Seniority Integration Arbitration Because
Eastern Did Not Seek Reiief From Collective
Bargaining Agreement Pursuant to Section
EET TEES OR, Ra 5 Sa Ce 8
The LPP/Seniority Integration Arbitration Proceedings
Begin Before Arbitrator Kashet...............c.ccssssssssesssesseeeees 8
The Final Effort To Derail The Kasher Arbitration
And Deprive Eastern Pilots Of Their LPP
BA Nphidbab haben iaiiateiiciernciteysksstinssssoheusisunsvrsavess 9
IV
‘TRAD EOOCRRIIG TIE siaaibcbbiissthisbitiaenernvesivesscreccessnensecsonee 9
REASONS FOR GRANTING THE WRIT..................0:000 i]
L. TED ERT OF RS TRGIIE aides cass cre ccccesctcctecnne, 11
2. The Court Of Appeals Misapprehended Or
Grossly Misapplied The Claim Provision Of
The Bankruptcy Act In Depriving The Former
Eastern Pilots Of Their Labor Protection
Provision Promise Of A Fair And Equitable
Seniority Integration With The Continental
PPR aiciosksiathin ciiabsssanesitnhonnbionscusetcbebiteihineaddecss 12
3. The Decision Of The Court Of Appeals On
The Claim Issue Unlawfully Usurps The
Authority Of The LPP Arbitrator.........0..........00 20
III ciiincss ps sxvscminesessipitarsabdpaitiossinecaiadutie aabinasidbeidaoes 22
Vv
TABLE OF AUTHORITIES
Cases: Pages
Air Line Pilots Ass'n v. U.S. Department of Transp.,
Oe Falk ttt (Oe Coed I Sieh dd heieniensdanenenntannnnies 6,11
Allen v. Autauga County Bd. of Educ., 685 F.2d 1302
CE I) Reach hisiihndind aii bins maatashcenuigdervenavaneress 18
Bingman v. Natkin & Co., 937 F.2d 553 (10th Cir. 1991)..... 18
Brunneman v. Terra Int'l, 975 F.2d 175 (Sth Cir. 1992)....... 18
Darnell v. Jasper, 730 F.2d 653 (11th Cir. 1984)..........0...0.. 18
Eastern Air Lines, Inc. v. Air Line Pilots Ass'n. Int'l, 861
Fe ee UE ies BD cccspnacinaseo kotadndvislodpipasiebdenmessnenetens 3
Ellis v. Ringgold School Dist., 832 F.2d 27 (3d Cir. 1987),
cert. denied, 494 U.S. 1005, 110 S.Ct. 1298 (1990)... 17
Ford v. Nicks, 866 F.2d 865 (6th Cir. 1989)... eee 18
Grogan v. Garner, 498 U.S. 279 (1991) ........cccceseccsseecesseeeees 12
Harper v. General Grocers Co., 590 F.2d 713 (8th Cir.
UT iaisicihasetiuint Tava teins c eid in ipa Ahscladeas stiches cia iocamtaaintacalivencbebidbaumiin 18
In re Ionosphere Clubs, 114 B.R.379 (S.D.N.Y. 1990),
aff.d in part, rev'd in part by 922 F.2d 984 (2d Cir.
1990), cert. denied, 502 U.S. 808,112 S.Ct.50 (1991)........ 9
In re Ionosphere Clubs, 922 F.2d 984 (2d Cir. 1990),
_ cert. denied, 502 U. S. 808,112 S.Ct. 50 (1991) ............ 8,20
In re Lewis, 845 F.2d 624 (6th Cir. 1988).............cccceeeeeeeeeeee 18
In re Udell, 18 F.3d 403 (7th Cir. 1994) oo. eeeeeeeeeeeeee 18
Maxfield v. Sinclair Int’l, 766 F.2d 788 (3d Cir. 1985),
cert. denied, 474 U.S. 1057,106 S.Ct. 796 (1986) ........... 17
People Express Pilot Merger Committee v. Texas Air Corp.,
(D.N.J. 1989), aff'd without opinion, 958 F.2d 364 (3d
Ce pe aa con Lrcnsaocndipieiichani startuindlasinulidinidateinecgnatanscheedyeess 19
Rodgers v. Western-Southern Life Ins. Co., 12 F.3d 668
OI I BI te cede lens oer aeid a nbddd ns easagensoetanebenonts 18
Squires v. Bonser, 54 F.3d 168 (3d Cir. 1995)................. 16,17
vi
Cases: Pages
United Steelworkers of America v. Enterprise Wheel and
2 ge Me ee te, | Re eeemenenrer 21
United Steelworkers of America v. Warrior & Gulf
Navigation Co., 363 U.S. 574 (1960)... ceeeeeeeeteeees 21
Van Waters & Rogers, Inc. v. Int’l Brotherhood of
Teamsters Local Union 70, 913 F.2d 736 (9th Cir. 1990)....... 14
Welborn v. Reynolds Metals Co., 868 F.2d 389 (11th Cir.
ST i scaieliahicessbtinedesietshuinscbamiaasssinisceiccetcinstaibcsitailtlebaasinlidaaiaiian 18
Statutes:
RTPI TUITE. ss cenessinishasesuahagishinaiashiniinvaieipaaieisnaneniiantia 2
0 Oi TIE oicecccessinionss<nuppisvetenniampinivenaasenttenninat 16
Bankruptcy Act, 1 1 U.S.C. §101, ef seq. .....eeeeeeeeeeeee Passim
ERNE PUTIN TILK, oc sssuinsnncessstesnsvinsesqnmieaiaetehenatentenoicinteniiias 16
PENT JIS occ csnscisnvesncsqusnssuniieaitionteinineteesetnidipeandans 10,16
Miscellaneous:
Aviation Week and Space Technology, 3/10/97, Vol. 146,
Bs UNG PE aiccowasuinissoseevescnnaitenniistaiitiieetiiainainanidiiiiaasciabaealdaads 14
Congressional Record, Vol. 124, p.32,393 (1978)...........04 13
May 10, 1996 Aviation Daily, Volume 324, No. 30, p. 246....... 12
Jan. 22,1997 Aviation Daily, Volume 327, No. 14, p. 121... 12
May 5,1997 Aviation Daily, Volume 328, No. 30, p. 249.... 14
Oct. 17,1997 Aviation Daily, Volume 330, No. 12, p. 99..... 12
No.
IN THE
Supreme Court of Che United States
OCTOBER TERM 1997
The Former Eastern Pilots Granted the Right to
Substitute Counsel,
Petitioners,
v.
Continental Airlines,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
The petitioners, the former Eastern pilots granted the
right to substitute counsel, respectfully pray that a writ of
certiorari issue to review the judgment and opinion of the
United States Court of Appeals for the Third Circuit entered
in the above-entitled proceeding on August 29, 1997.’
Opinions Below
The decision of the Court of Appeals for the Third Circuit
is reported at 125 F.3d 120, and the unpublished opinion is
reprinted in the Appendix (hereinafter “A”), at A-2-35.
The decision of the District Court is unreported and the
unpublished opinion is reprinted in the Appendix at A-36-73.
On September 10, 1997, the LPP Claimants, also appellants in the
proceedings below, filed a petition for rehearing with the Court. The
Third Circuit issued an order on September 23, 1997, denying the petition
for rehearing. The Order is reprinted at A-1.
2
Jurisdiction
The decision of the Court of Appeals for the Third
Circuit was entered on August 29, 1997. The order of the
Court denying rehearing was entered on September 23, 1997.
The jurisdiction of this Court to review the judgment of the
Court of Appeals is invoked under 28 U.S.C. §1254.
Statutes Involved
The statutes that are involved in this case are:
1. Section 101(5) of the Bankruptcy Act, 11 U.S.C.
§101, et seq., which defines a “claim” in bankruptcy as
follows:
(A) right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or
unsecured; or
(B) right to an equitable remedy for breach of
performance if such breach gives rise to a right to
payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or
unsecured.
2. Section 1113(f) of the Bankruptcy Act which
provides as follows:
No provision of this title shall be construed to
permit a trustee to unilaterally terminate or alter any
provision of a collective bargaining agreement prior
to compliance with the provisions of this section.
STATEMENT OF THE CASE
Eastern Agrees to Labor Protection Provisions
On February 23, 1986, Eastern and ALPA entered into a
new collective bargaining agreement. In exchange for
granting Eastern massive economic concessions, including
3
reduction in benefits and a 20% reduction in pay, ALPA
obtained labor protection provisions (LPPs). In the evening
hours of that date, the parties executed a memo containing the
following language: “2. LPP’s & Takeover Similar to TWA —
need to work out between EAL/ALPA legal counsel.” The
next day, Frank Lorenzo, Chairman of Texas Air, who was on
the verge of acquiring Eastern, was briefed by Al Gibson,
Eastern Airlines’ chief negotiator, by telephone on the terms of
the new Eastern-ALPA agreement, including specifically the
provision for LPPs. At the conclusion of the briefing, Lorenzo
told Eastern officials, “Congratulations, Al, sounds like a good
deal to me.”
Texas Air Acquires Eastern And Starts A Process
To Negate The ALPA Collective Bargaining Agreement
And The LPPs
On February 24, 1986, Texas Air Corp., which already
owned Continental, acquired Eastern and began a massive
effort, together with Eastern, to negate various portions of the
recently-concluded bargaining agreement, including the LPPs.
On August 6, 1986, ALPA filed a grievance protesting
Eastern’s refusal to recognize the LPPs.
Before this grievance, Eastern had filed suit in the U.S.
District Court for the Southern District of Florida alleging that
no valid collective bargaining agreement existed between
ALPA and Eastern. After receiving the August 6, 1986
grievance, Eastern amended its suit to allege that “no
agreement presently exists between ALPA and Eastern with
respect to [LPPs].” Eastern Air Lines, Inc. v. Air Line Pilots
Ass’n, Int’l, 861 F.2d 1546, 1549 (11th Cir. 1988).
After substantial litigation between Eastern and ALPA
regarding the enforceability of the LPP agreement, the
Eleventh Circuit affirmed the district court’s summary
judgment decision in ALPA’s favor and directed Eastern to
submit the LPP dispute to arbitration, stating “They [the LPP
claims] must now be arbitrated in accordance with the
provisions of the Railway Labor Act.” 861 F.2d at 1555.
4
The LPP Dispute Is Arbitrated
Pursuant to the order of the court, the LPP grievance
proceeded before the Eastern-ALPA System Board of
Adjustment, with Professor Frank Elkouri serving as
neutral chairperson.
Professor Elkouri in his decision of September 22,
1989, found that the provisions of the agreement provided
for “meaningful LPP protection for pilots as a matter of
contractual right.”
Specifically, Professor Elkouri held that the agreement
of February 23, 1986, contained only Sections 2(a), 3 and
13 of the Allegheny-Mohawk LPPS.”
Section 2(a) provides as follows:
The term “merger” as used herein means joint
action by the two carriers whereby they unify,
consolidate, merge, or pool in whole or in part
their separate airline facilities or any of the
operations or services previously performed by
them through such separate facilities.
Section 3 provides as follows:
Insofar as the merger affects the seniority rights
of the carriers’ employees, provisions shall be
made for the integration of seniority lists in a
fair and equitable manner, including, where
applicable, agreement’ through collective
bargaining between the carriers and_ the
representatives of the employees affected. In the
event of failure to agree, the dispute may be
submitted by either party for adjustment in
accordance with section 13.
(Emphasis added.)
* The standard for labor protective provisions was first imposed by
the Civil Aeronautics Board in the 1972 merger between Allegheny and
Mohawk Airlines.
5
Section 13(a) provides as follows:
Section 13(a). In the event that any dispute or
controversy (except as to matters arising under
section 9) arises with respect to the protections
provided herein, which cannot be settled by the
parties within 20 days after the controversy arises, it
may be referred by any party to an arbitrator selected
from a panel of seven names furnished by the
National Mediation Board for consideration and
determination. The parties shall select the arbitrator
from such panel by alternatively striking names until
only one remains, and he shall serve as arbitrator.
Expedited hearings and decisions will be expected,
and a decision shall be rendered within 90 days after
the controversy arises, unless an extension of time is
mutually agreeable to all parties. The salary and
expenses of the arbitrator shall be borne equally by
the carrier and (i) the organization or organizations
representing the employee or employees, or (ii) if
unrepresented, the employee or employees or group
or groups of employees. The decision of the
arbitrator shall be final and binding on the parties.
The Value of LPPs To Pilots
Seniority is central to a pilot’s career. For example, it
determines the position the pilot flies (second officer, first
officer or captain), with the resultant pay and retirement
income consequences; the aircraft the pilot flies (smaller,
narrow bodied aircraft or the larger equipment); the
monthly schedule the pilot flies (shorter routes with many
take-offs and landings or the longer routes); the number of
days off in the monthly schedule; the amount and choice of
vacation time.
In short, seniority determines a pilot’s quality of work
and life itself. These are some of the reasons pilots generally
Section 13(b) is not relevant to this case.
6
place a unique value on the seniority integration aspects of
LPPs and why the Eastern pilots in particular made so many
monetary concessions to gain LPPs.
Texas Air Orchestrates The Transfer
Of Work And Assets From Eastern To Continental
After Texas Air acquired Eastern, it started a process of
transferring assets from union-organized Eastern to its other
airline subsidiary, non-union Continental. This strategy had a
devastating impact on employment of pilots at Eastern. From
1986 to 1988, pilot employment at Eastern declined by
16.8%, whereas pilot employment at Continental increased by
125.2% during the same time period.
In fact, on June 16, 1988, Robert J. Snedeker, then
Senior Vice President of Texas Air, stated that:
Texas Air anticipated that Continental “would
cherry-pick the core parts of the Eastern system and
become in effect the substitute carrier.” Mr.
Lorenzo himself made remarks susceptible of a
Similar interpretation at a December 2, 1986
meeting of Continental’s non-union pilots ....
Department of Transportation Requires Texas Air
to Honor LPPs
From the time that Texas Air announced its proposed
acquisition of Eastern, ALPA insisted that the Department of
Transportation (DOT) condition any such acquisition on the
imposition of LPPs. When the DOT declined to do so, ALPA
challenged the approval in the U.S. Court of Appeals for the
District of Columbia Circuit. The DOT’s rationale for
declining to impose LPPs as a condition of the merger was the
ability of the unions and the carriers to voluntarily negotiate
LPPs, as Eastern and ALPA had done in the current case.
The court decided in Air Line Pilots Ass’n v. U.S.
Department of Transp., 838 F.2d 563, 567 (D.C. Cir. 1988),
that the DOT’s general rationale for denying LPP protection
was proper, but noted that the DOT
7
acted in an arbitrary and capricious manner in
failing to consider the possibility that these
bargained-for [LPP] protections might be lost after
the acquisitions were approved."
“ This possibility seems most troublesome when a
smaller, unionized carrier is acquired by a larger,
non-unionized carrier, since the acquired carrier’s
employees presumably will have no representative
to assert their interests following the acquisition.
The Court of Appeals remanded the case to the DOT to
consider that issue.
In that remanded proceeding, the DOT found as follows:
The Department accepts the stipulation filed of May 6,
1988, by Texas Air Corporation and Eastern Air
Lines whereby Eastern Air Lines stipulates and
_ represents that the Labor Protective Provisions which
may be contained in any Eastern Air Lines collective
bargaining agreement will not be extinguished by either
(i) ..., or (ii) a corporate or operational merger between
Eastern Air Lines and another carrier owned and
operated by Texas Air corporation that leaves Eastern
Air Lines employees unrepresented for collective
bargaining purposes.
ALPA Commences LPP Arbitration To Obtain Eastern
Pilot Seniority Integration On Continental Pilot
Seniority List
Because ALPA was aware that the inter-corporate
transfers from Eastern to Continental through Texas Air
constituted a “merger” within the meaning of Section 2(a) of
the LPPs, it requested in March 1989 that Frank Lorenzo,
Chairman of Texas Air and Eastern, meet with ALPA to
discuss integration of Eastern pilots into the Continental pilot
seniority list. When this request was declined, ALPA
requested that the National Mediation Board (NMB) proffer a
list of seven arbitrators from which a neutral arbitrator would
be chosen. By this time, however, Eastern had already filed
8
for bankruptcy on March 9, 1989. Eastern took the position
in the bankruptcy court that the automatic stay of litigation
provision prevented the LPP arbitration.
Second Circuit Court of Appeals Holds That
The Automatic Stay Provision Does Not Bar
LPP/Seniority Integration Arbitration Because
Eastern Did Not Seek Relief From
Collective Bargaining Agreement Pursuant to Section 1113
In the same fashion as Continental did in this case,
Eastern went before the bankruptcy judge in the Southern
District of New York and moved that the LPP/seniority
integration arbitration be stayed pursuant to the automatic stay
provisions of the Bankruptcy Act. ALPA opposed the motion
on the ground that Eastern had not sought relief from the
provisions of the Eastern-ALPA agreement pursuant to
Section 1113 of the Bankruptcy Act. The bankruptcy court
agreed with Eastern and stayed the LPP/seniority integration
arbitration. The district court reversed the bankruptcy judge
and the U.S. Court of Appeals for the Second Circuit agreed
with the district court in In re Ionosphere Clubs, 922 F.2d 984
(2d Cir. 1990), cert. denied, 502 U.S. 808, 112 S.Ct. 50
(1991).
The LPP/Seniority Integration Arbitration Proceedings
Begin Before Arbitrator Kasher
Shortly after the decision of the Second Circuit referred
to above, Arbitrator Kasher, the arbitrator selected by the
National Mediation Board pursuant to Section 13 of the LPPs,
convened a pre-hearing proceeding on April 8, 1991, where
ALPA and Eastern, but not Continental or any attorneys then
representing groups of Continental pilots, participated. The
Continental parties were invited to participate, but declined to
do so.
On August 4, 1992, Arbitrator Kasher issued a 22-page
decision in which he found, over Eastern’s objection, that the
LPP Section 13 forum was the appropriate one “for hearing
9
the issues related to the Association’s petition for a seniority
integration proceeding and other remedies which might be
available.” He also rejected Continental’s argument that the
automatic stay provision barred the arbitration on the basis of
the district court’s decision in Jn re Ionosphere Clubs, 114
B.R. 379 (S.D.N.Y. 1990), aff'd in part, rev'd in part by 922
F.2d 984 (2d Cir. 1990), cert. denied, 502 U.S. 808, 112 S.Ct.
50 (1991) (J.A. 352-353).
Arbitrator Kasher scheduled another pre-hearing
conference on the LPP/seniority integration dispute on
February 3, 1993 where various parties aired their views on
the issues to be arbitrated. Again, the Continental parties
were invited to participate but declined to do so.
The Final Effort To Derail The Kasher Arbitration
And Deprive Eastern Pilots Of Their LPP Rights
On February 4, 1993, just one day after Arbitrator
Kasher’s re-opened hearing, Continental appeared in this case
before Bankruptcy Judge Balick pursuant to an adversary
proceeding commenced in that court on November 15, 1991,
and a motion for partial summary judgment filed on January
29, 1992, seeking to halt the on-going Kasher LPP/seniority
integration arbitration. In a second motion for summary
judgment dated December 18, 1992, Continental assumed that
Continental was bound by and breached the LPPs contained
in the Eastern-ALPA collective bargaining agreement (A-34
& 67).
On February 11, 1993, Judge Balick granted the
injunction against the continuation of the Kasher arbitration
which she made permanent in confirming Continental’s plan
of reorganization on April 16, 1993.
The Decisions Below
With respect to the issues presented in this petition for
certiorari, both the district court and the Court of Appeals
held that the effort by the former Eastern pilots to vindicate
their LPP rights to seniority integration through labor
10
arbitration constituted a “claim” under Section 101(5) of the
Bankruptcy Act, thereby permitting such rights to be reduced
to a monetary award.
The district court first noted that monetary damages were
available for violations of the Railway Labor Act (A-62).
Then noting that a violation of the Railway Labor Act was not
alleged in the case, the district court held that “Courts
generally view front pay as an ‘alternative’ to reinstatement,”
citing some Title VII and duty of fair representation cases
(Ibid.). The district court acknowledged that the practical
result of its conclusion was that:
... the right to arbitrate the LPP dispute may be of
limited practical utility to the LPP Claimants. Any
award that might be granted by the arbitrator would
be an unsecured pre-petition claim and may come
after the assets of the bankruptcy estate have been
wholly depleted.
(A-70, n.31)
Like the district court, the Court of Appeals held that the
LPP right of seniority integration through labor arbitration
was similar to a wrongful discharge case, holding,
We find support for the proposition that monetary
awards are a viable alternative to the equitable
remedy of seniority integration in wrongful
discharge cases where we have enforced awards of
monetary damages in lieu of reinstatement.
(A-28)
The Court of Appeals even speculated that money
damages might be preferable to seniority integration because
seniority integration “could potentially result in the
displacement of many Continental pilots,” allegedly causing
“an environment rife with hostility and low employee morale,
not to mention a detrimental effect on employer-employee
relations.” (A-30).
Despite these findings, both the district court and the
Court of Appeals professed that their ruling on the “claim”
1]
issue should not suggest or dictate the nature of the
arbitrator’s award (A-70, n.30; 20, n.8; 30).
Moreover, the Court of Appeals held that even though
Continental did not seek relief from the LPP provisions of the
collective bargaining agreement pursuant to Section 1113(f)
and was bound to arbitrate the LPP dispute, the substitution of
a nonexistent monetary award for the contractually-required
seniority list integration did not constitute a termination or
even an alternation of the LPP provisions of the agreement
(A-34, n.15).
REASONS FOR GRANTING THE WRIT
1. The Importance of the Issue
Prior to deregulation of the airline industry in the late
1970’s, labor protection provisions, guaranteeing, inter alia, a
fair and equitable integration of pilot seniority lists by
impartial arbitration, if necessary, were routinely imposed by
the then Civil Aeronautics Board in cases of mergers between
airlines starting with the Allegheny-Mohawk merger in 1972.
After deregulation, the bargaining parties were advised that
the government would not routinely impose LPPs in airline
mergers and that the bargaining parties themselves should
incorporate LPPs in their collective bargaining agreements if
mutually agreed. See Air Line Pilots Ass'n v. U.S.
Department of Transp., 838 F.2d 563 (D.C. Cir. 1988). Since
deregulation, most of the unionized air carriers and their pilot
unions have incorporated LPPs - or, as in this case, a part of
the LPPs - into their collective bargaining agreements.
Also since deregulation, there have been several cases
where airlines have gone through Chapter 11 bankruptcies. In
the case of Continental, it has gone through two such
bankruptcies. Also since deregulation, there have been many
airline mergers, several involving Continental itself (see n.5
infra).
Thus the issue of whether the fair and equitable seniority
integration/arbitration aspect of the LPPs can be relegated to a
12
“claim” in bankruptcy, resulting in a total career loss and also
generally resulting in little or no payment is an issue of vital
(literally a lifetime career) concern to every airline pilot flying
today and the hundreds of thousands that will follow them.
2. The Court Of Appeals Misapprehended Or
Grossly Misapplied The Claim Provision Of The
Bankruptcy Act In Depriving The Former
Eastern Pilots Of Their Labor Protection
Provision Promise Of A Fair And Equitable
Seniority Integration With The Continental
Pilots
The overarching purpose of the Bankruptcy Act is io
give the debtor “a new opportunity in life with a clear field yor
future effort, unhampered by the pressure and discouragement
of preexisting debt” - often referred to as the ‘fresh start”
policy. See Grogan v. Garner, 498 U.S. 279, 286 (1991).”
To this end, Congress enacted Section 101(5) of the
Bankruptcy Act providing for the discharge in bankruptcy of
“claims” as that term is defined in subsections A and B and
quoted above.
The legislative history of the distinction between money
claims, equitable claims that give rise to money claims, and
pure equitable claims that do not give rise to money claims,
discloses the following:
Section 101(5)(B) represents a modification of the
House-passed bill to include [in] the definition of
“claim” a right to an equitable remedy for breach of
performance if such breach gives rise to a right to
payment. This is intended to cause the liquidation
4
Not only is Continental well into the fifth year of its “fresh start, ”
but it has been highly profitable, showing, for example, a net profit of
$223,545,000 in 1995 alone (May 10, 1996 Aviation Daily, Volume 324,
No. 30, p. 246); a net profit of $319 million in 1996 (Jan. 22, 1997
Aviation Daily, Volume 327, No. 14, p. 121); and a net profit of $110 in
just the third quarter of 1997 Oct. 17, 1997 Aviation Daily, Volume 330,
No. 12, p. 99).
13
or estimation of contingent rights of payment for
which there may be an alternative equitable remedy
with the result that the equitable remedy will be
susceptible to being discharged in bankruptcy. For
example, in some States, a judgment for specific
performance may be satisfied by an alternative right
to payment, in the event performance is refused; in
that event, the creditor entitled to specific
performance would have a “claim” for purposes of a
proceeding under title 11. On the other hand,
rights to an equitable remedy for a breach of
performance with respect to which such breach
does not give rise to a right to payment are not
“claims” and would therefore not be susceptible to
discharge in bankruptcy.
124 Cong. Rec. 32,393 (1978) (remarks of Rep. Edwards); id.
at 33,992 (remarks of Sen. DeConcini) (emphasis added).
As the literal wording of Sections 2(a), 3 and 13 of the
LPPs disclose, the sole remedy provided in the event of
merger is seniority integration, to be achieved, if necessary,
by labor arbitration. There is no language permitting any
inference that money damages are a remedy or alternative
remedy to seniority integration.
In perhaps its most egregious error, the Cour. Appeals
held that money damages were an alternat- iedy to
seniority integration by relying on Section | oi the LPPs
which provides that,
The fundamental scope and purpose of the
conditions hereinafter specified are to provide for
compensatory allowances to employees who may be
affected by [a] proposed merger ....
(A-26, 30, n.10 & 12).
The problem with this analysis is that Professor Elkouri
found in his arbitration award that only Sections 2(a), 3 and
13 of the standard LPPs were incorporated in the Eastern
collective bargaining agreement. The Court of Appeals thus
fa
relied On a provision of the LPPs not even contained in the
Eastern contract.
Next, t'se Court of Appeals relied on a case cited by no
party to the appeal process, Van Waters & Rogers, Inc. v. Int’!
Brotherhood of Teamsters Local Union 70, 913 F.2d 736 (9th
Cir. 1990) (A-26-28). That case, which did not even involve
the Bankruptcy Act, held that where a union seeking seniority
integration in arbitration was precluded from obtaining that
relief by a collective bargaining agreement with a different
union, the arbitrator acted appropriately by granting money
damages to persons represented by the grievant union. The
Court of Appeals concluded from its analysis of this case that,
Rather, it [money damages] serves as a substitute or
the performance of an equitable remedy that cannot
otherwise be enforced.
A-28 (emphasis added).
The italicized portion of the above quote is a factor that
is totally absent in this case. There is simply no competing
factor that precludes enforcement of seniority integration, and
there is no money available for those pilots denied seniority
integration. The record shows in fact that Continental has
hired 131 pilots from January to April 1997 (Aviation Daily,
5/12/97, Vol. 328, No. 30, p. 249), and had further plans for
substantial “off the street” hiring in the remainder of 1997 and
through 1998 Aviation Week and Space Technology, 3/10/97,
Vol. 146, No. 10, p. 48).
If the Court of Appeals was referring to its rank
speculation at A-30 that seniority integration might “create an
environment rife with hostility and low employee morale, not
to mention a detrimental effect on employer-employee
relations,” such speculation was wholly misplaced.* As the
district court held:
Indeed, Continental Airlines has recently absorbed pilots from New
York Air, Frontier Airlines and People Express Airlines through LPP
seniority integration with none of the adverse consequences speculated by
15
In making his or her decision [on seniority
integration] the arbitrator could take into account
Continental’s financial condition so as to prevent a
slide back into bankruptcy. Because an arbitrator
could structure the integration of seniority lists in a
way that would not unduly risk Continental's
continued progress or the investments of third
parties, this court will decide whether the asserted
right to seniority constitutes a claim in bankruptcy.
(A-54) And again responding to Continental’s in terrorem
arguments apparently accepted by this Court of Appeals, the
district court held that,
The present consequences of seniority list
integration would certainly be less drastic. In
addition, the arbitrator is not required to integrate
the seniority lists strictly by “date of hire.” An
arbitrator would be charged with integrating the
lists in a fair and equitable manner. If a strict “date
of hire” integration scheme would be inequitable, an
arbitrator would not order it.
(Ibid., n. 12)
Failing to cite any cases involving the seniority list
integration, rbitration provisions of the LPPs, the Court of
Appeals analogized the LPP claims of the Eastern pilots to
“wrongful discharge cases where we have enforced awards of
money damages in lieu of reinstatement” (A-28), This was
also the rationale of the district court (A-62).
The Eastern pilots involved here were not discharged.
They lost jobs, they allege, by reason of an operational merger
of Eastern with Continental, and they are not supplicants
seeking reinstatement, but rather the pilot seniority integration
contractually sealed in sections 2(a), 3 and 13 of the LPPs.
the Court of Appeals, and has, in the process, become a highly profitable
carrier.
16
Title VII, moreover, which is the statutory authority for
most of the wrongful discharge cases cited by the Court of
Appeals, expressly provides that the court may order
“reinstatement ... with or without back pay ..., or any other
equitable relief as the court deems appropriate” (42 U.S.C.
§2000e-5(g); emphasis added). There is no comparable
statutory or judicial provision for alternate or varying
remedies to seniority integration pursuant to LPPs in a
collective bargaining agreement under the Railway Labor Act
or the Federal Aviation Act. In the absence of statutory
provisions permitting “other relief,” as found in the anti-
discrimination laws, there is simply no legal basis for holding
that relief other than the purely equitable seniority integration
mandated by the LPPs is appropriate.
Assuming arguendo that it is proper for a bankruptcy
court or district court to appropriate Title VII or other laws
into the vindication of LPP rights under the Railway Labor
Act and the Federal Aviation Act, the Court of Appeals
nevertheless misstated the law under Title VII and other anti-
discrimination statutes.
The law under these anti-discrimination statutes is not
that front pay is an alternative to reinstatement, but rather that
reinstatement is the preferred and presumptively appropriate
remedy, and that front pay in lieu of reinstatement can only be
granted in “exceptional” cases.
Thus most recently in Squires v. Bonser, 54 F.3d 168 (3d
Cir. 1995), the Third Circuit itself stated:
Reinstatement advances the policy goals of make-
whole relief and deterrence in a way which money
damages cannot.
54 F.3d at 172-173 (emphasis added).
And further:
[T]he court should deny reinstatement in a first
amendment wrongful discharge case on the basis of
equity only in exceptional circumstances.
54 F.3d at 173 (emphasis added).
17
Finally, the Court ruled
In order to deny reinstatement, more than the ordinary
tensions accompanying an unconstitutional discharge
lawsuit must be present. The fact that reinstatement
might have “disturbing consequences” “revive old
antagonisms”, or “breed difficult working conditions”
usually is not enough “to outweigh the important first
amendment policies that reinstatement serves...”
54 F.3d at 175
In this case the Court of Appeals seeks to distinguish the
Squires case on the basis that a constitutional violation was
involved (A-29, n.11), requiring “the compelling need to
enforce reinstatement to remedy the violation.” What less
compelling need is there in this case where the careers of
hundreds of pilots are at stake?
Thus not only is reinstatement the preferred and
presumptively appropriate remedy for such discharges
because money damages cannot make the dischargee whole,
but reinstatement should be ordered in all but the
“exceptional” case, and finally that an exceptional case is not
made out by simple antagonism or hostility of the employer or
the employers’ employees. This effectively disposes of
Continental’s self-stimulated and self-serving claims of
alleged hostility of the Continental pilots toward the Eastern
pilots’ contractually-mandated LPP right to be integrated into
the Continental pilot seniority list, a rampant speculation
which the Court of Appeals amazingly embraced (A-30).
For other cases on point see, e.g. Ellis v. Ringgold School
Dist., 832 F.2d 27, 30 (3d Cir. 1987), cert. denied, 494 U.S.
1005, 110 S.Ct. 1298 (1990) (“Reinstatement is the preferred
remedy to avoid future lost earnings”, and that reinstatement
with seniority is presumptively appropriate); Maxfield v.
Sinclair Int’l, 766 F.2d 788, 796 (3d Cir. 1985), cert. denied,
474 U.S. 1057, 106 S.Ct. 796 (1986) (“Reinstatement is the
preferred remedy to avoid future lost earnings ....”).
18
Other circuit courts of appeal have also ruled that front
pay is not an “alternative” to reinstatement, but rather that
reinstatement is clearly the preferred remedy for a
discriminatory discharge and that front pay in lieu of
reinstatement can only be ordered in the exceptional case.
Brunneman v. Terra Int'l, 975 F.2d 175, 180 (Sth Cir. 1992);
Ford v. Nicks, 866 F.2d 865, 875 (6th Cir. 1989); In re Lewis,
845 F.2d 624, 630 (6th Cir. 1988); Rodgers v. Western-
Southern Life Ins. Co., 12 F.3d 668, 678 (7th Cir. 1993), Harper v.
General Grocers Co., 590 F.2d 713, 716 (8th Cir. 1979) (“An
award of retroactive seniority which places a victim of
discrimination in that position in the seniority system that
would have been his had the discriminatory act not
occurred, is generally appropriate to redress a violation of
Title VII’), Bingman v. Natkin & Co., 937 F.2d 553, 558
(10th Cir. 1991), Welborn vy. Reynolds Metals Co., 868
F.2d 389, 391 (llth Cir. 1989); Darnell v. Jasper, 730
F.2d 653, 655 (11th Cir. 1984).
The case of Allen v. Autauga County Bd. of Educ.,
685 F.2d 1302, 1306 (11th Cir. 1982), often quoted by
other courts of appeal, best explains the rationale for the
presumptive rule of reinstatement as opposed to front pay
and the fact that backpay and front pay address one
remedial concern and restoration of a job with lateral
seniority addresses an entirely separate remedial concern.”
This rule of presumptive reinstatement is justified
by reason as well as precedent. When a person
loses his job, it is at best disingenuous to say that
money damages can suffice to make that person
whole. The psychological benefits of work are
intangible, yet they are real and cannot be ignored.
(Emphasis added.)
* See In re Udell, 18 F.3d 403, 409 (7th Cir. 1994), where the court
ruled that where the equitable relief and money damages sought addressed
“entirely separate remedial concerns,” the equitable relief should not be
considered a “claim” under the Bankruptcy Act.
19
Similarly, these Eastern pilots maintain that losing their
pilot jobs at Eastern cannot be compensated by mere money
damages (even if real money damages were available). For
what is involved is work — a life-long career — with all its
tangible and intangible benefits, such as the sheer love of
flying, travel benefits, a secure retirement, the self esteem and
self worth derived from a job well done, the emotional
fulfillment of career advancement from second officer to first
officer and finally, after years of preparation on a mature
airline, to a captain position. All of these are basic and
essential elements animating and driving the human spirit of a
pilot. To claim that they can be “reduced” to nonexistent
front pay is not only “disingenuous,” but an unwarranted
insult to all professional airline pilots.
Finally, on this point, there is federal judicial precedent,
specifically involving LPPs and, ironically, Texas Air,
holding that the sole remedy for this company’s reneging on
its commitment of LPP seniority integration to the pilots of
People Express is for the court to order seniority integration
arbitration. In People Express Pilot Merger Committee v.
Texas Air Corp., (D.N.J. 1989), aff'd without opinion, 958
F.2d 364 (3d Cir. 1992), Judge Politan ordered Texas Air to
integrate the People Express pilots into the Continental pilot
seniority list, after severely criticizing Texas Air for
acknowledging its LPP obligation in one forum (the DOT)
while denying those obligations in another forum (the court).
This case is instructive for three reasons. First, it
demonstrates Texas Air’s pattern of repudiating its LPP
commitments. Second, it demonstrates that the only remedy
for failure to abide by LPP commitments is an order to submit
the seniority integration issue to arbitration. It is obvious that
in the People Express case, Texas Air had not yet conjured up
its “front pay as an alternative to seniority integration” shell
game. And third, it demonstrates that courts will enforce
seniority integration with respect to a carrier like Continental
which knowingly acquires assets from another carrier which
is subject to an LPP agreement like Eastern, and then turns
around and fails to do so.
20
3. The Decision Of The Court Of Appeals On The
Claim Issue Unlawfully Usurps The Authority Of
The LPP Arbitrator
Both the district court (A-70, n.30) and the Court of
Appeals (A-20, n.8 & 30) profess that their decision on the
issue Of whether the pilot seniority list integration/arbitration
issue is a “claim” under bankruptcy laws does not dictate or
even suggest the decision that the arbitrator may make on the
merits of seniority integration.
The Court of Appeals went further in agreeing with ~
petitioners that Continental’s failure to reject the collective
bargaining agreement pursuant to Section 1113(f) of the
Bankruptcy Act “operates to preclude the application of other
bankruptcy code provisions to the advantage of debtor ... to
permit them to escape the terms of a collective bargaining
agreement ...” (A-32-33). In this respect, the Court of
Appeals agreed with the Court of Appeals for the Second
Circuit In re Ionosphere, 922 F.2d 984 (2d Cir. 1990), cert.
denied, 502 U.S. 808.
Further, the Court of Appeals held that Continental had a
duty on the merits to arbitrate the LPP issue (A-34-35).
Yet, in a footnote (A-34, n.15), the Court of Appeals
makes the astounding assertion without benefit of authority
that “substitution [by monetary damages] of the equitable
remedy [seniority integration] in no way amounts to an
alteration of the terms of the collective bargaining
agreement.”
The Court of Appeals is literally stating that the
substitution of monetary damages (which all parties agree is
nonexistent or practically nonexistent) with full seniority
integration and a career job at Continental does not even
“alter” the clear command of the LPPs that there shall be a
fair and equitable integration of seniority lists.
This is Alice-in-Wonderland jurisprudence.
In addition, the decision of the Court of Appeals is
totally at odds with the overriding labor relations policy
21
favoring arbitration of labor disputes and the deference to be
accorded to labor arbitrators. See United Steelworkers of
America v. Warrior & Gulf Navigation Co., 363 U.S. 574,
578, 581 (1960) (“For arbitration of labor disputes under
collective bargaining agreements is part and parcel of the
collective bargaining process itself;” and “the labor arbitrator
performs functions which are not normal to the courts; the
considerations which help him fashion judgments may indeed
be foreign to the competence of courts”). In a related case,
this Court warned the federal judiciary, including the
bankruptcy courts, that “the refusal of courts to review the
merits of an arbitration award is the proper approach to
arbitration under collective bargaining agreements.” United
Steelworkers of America v. Enterprise Wheel and Car Corp.,
363 U.S. 593, 596 (1960).
By converting the purely equitable remedy of seniority
integration into a meaningless “claim” for money damages,
the Court of Appeals has impermissibly intruded into the
collectively bargained arbitration process and decreed that
any award of an arbiirator granting any type of relief,
including seniority integration, is subject to review on the
merits by the bankruptcy court. And further, that any such
arbitration award will be totally changed into a money award
in an estate without assets. Labor arbitration was never meant
to provide an “empty bucket.”
22
CONCLUSION
For the foregoing reasons, the petitioners respectfully
request that the petition for certiorari be granted.
Respectfully submitted,
John A. McGuinn
Counsel of Record
Schmeltzer, Aptaker &
Shepard, P.C.
2600 Virginia Avenue, N.W.
Suite 1000
Washington, D.C. 20037
(202) 333-8800
Attorney for the Petitioners
A- |
CONTINENTAL AIRLINES, INC.,
Appellant No. 96-7038
(Caption amended in accordance with Clerk’s Order dated 3/4/96)
SUR PETITION FOR REHEARING
PRESENT: SLOVITER, Chief Judge, BECKER, STAPLETON,
MANSMANN GREENBERG, SCIRICA, COWEN, NYGAARD,
ALITO, ROTH, LEWIS, McKEE, and MICHEL,” Circuit Judges.
The petition for rehearing filed by appellant, LPP
Claimants, in the above-entitled case having been submitted
to the judges who participated in the decision of this court and
to all other available circuit judges in regular active service,
and no judge who concurred in the decision having asked for
rehearing, and a majority of the circuit judges in regular
active service not having voted for rehearing by the court en
banc, the petition for rehearing is denied.
BY THE COURT,
/s/
Circuit Judge
Date: SEP 23 1997 CC.i @aL JG.
| 2 a Re A
M.T.
R.B.
*
Honorable Paul R. Michel, Circuit Judge for the United States Court
of Appeals for the Federal Circuit, sitting by designation, whose vote is
limited to panel rehearing only.
A-2
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Filed August 29, 1997
Nos. 96-7028 and 96-7038
IN RE: CONTINENTAL AIRLINES,
Debtor
AIR LINE PILOTS ASSOCIATION
V.
CONTINENTAL AIRLINES
LPP CLAIMANTS; EFFECTIVE DATE COMMITTEE,
Claimants
HONORABLE JOHN STONITSCH,
Trustee
LPP CLAIMANTS,
Appellant No. 96-7028
(Caption amended in accordance with
Clerk’s Order dated 3/4/96)
IN RE: CONTINENTAL AIRLINES,
Debtor
AIR LINE PILOTS ASSOCIATION
Vv.
CONTINENTAL AIRLINES
LPP CLAIMANTS; EFFECTIVE DATE COMMITTEE,
Claimants
HONORABLE JOHN STONITSCH,
Trustee
CONTINENTAL AIRLINES, INC.,
Appellant No. 96-7038
(Caption amended in accordance with
Clerk’s Order dated 3/4/96)
ON APPEAL FROM THE
UNITED STATES DISIRICT COURT
FOR THE DISTRICT OF DELAWARE
(D.C. Civil No. 93-cv-00163)
ARGUED MARCH 13, 1997
BEFORE: MANSMANN, LEWIS and
MICHEL, Circuit Judges.
(Filed August 29, 1997)
Honorable Paul R. Michel, Circuit Judge for the United States Court
of Appeals for the Federal Circuit, sitting by designation.
A-4
Jon A, Geier (ARGUED)
Paul, Hastings. Janofsky & Walker
1299 Pennsylvania Avenue, N.W.
10th Floor
Washington, DC 20004
Laura D. Jones
Robert S. Brady
Young, Conaway, Stargatt & Taylor
Post Office Box 391
Rodney Square North, | 1th Floor
Wilmington, DE 19899-0391
Attorneys for Continental Airlines
Michael J. Isaacs
Agostini, Levitsky & Isaacs
623 King Street
Post Office Box 2323
Wilmington, DE 19899
Myles J. Tralins (ARGUED)
Tralins & Associates
One Biscayne Tower
2 South Biscayne Boulevard
Suite 3310
Miami, FL 33131
Attorneys for LPP Claimants
John A. McGuinn (ARGUED)
Schmeltzer, Aptaker & Shepard
2600 Virginia Avenue, N.W.
Suite 1000
Washington, DC 20037
Attorney for Eastern Pilots
Merger Committee
ee ee eer
A-5
OPINION OF THE COURT
LEWIS, Circuit Judge.
In this appeal and cross-appeal, we are confronted with a
tension between bankruptcy law and labor law. The dispute
arose when the Air Line Pilots Association, Inc. (“ALPA”),
collective bargaining agent for Eastern Air Lines’ (“Eastern’’)
pilots, filed proofs of claim in bankruptcy court against
Continental Airlines Holdings, Inc. and Continental Airlines,
Inc. (“Continental”). These claims were based on alleged
seniority integration rights stemming from a pending labor
arbitration dispute and were filed following Continental’s
acquisition of Eastern and subsequent refusal to bargain over
the seniority integration of Eastern’s pilots.
The bankruptcy court determined that the claims could
be satisfied by monetary awards in lieu of specific
performance and enjoined scheduled arbitration proceedings
to enforce the seniority rights under the collective bargaining
agreement. The district court affirmed the bankruptcy court's
determination relating to the claims, but vacated the
injunction. Two groups of former Eastern pilots, the LPP
Claimants and the Group of 31, both of which are no longer
represented by ALPA, appealed to this court.’
Resolution of this dispute requires us to determine: (1)
whether the bankruptcy claims that the LPP Claimants and the
Group of 31 seek to enforce constitute “claims” within the
meaning of the bankruptcy code and thus are satisfiable, in
1 . 9 . 2 ;
“LPP Claimants” refers to a group of former Eastern pilots whose
claims in this appeal are based on certain “labor protective provisions”
(LPPs) contained in the collective bargaining agreement. The “Group of
31” is a group of former Eastern pilots, who originally were part of the
“LPP Claimants” group and who have retained separate counsel for
purposes of this appeal. See discussion infra Part 1.D. While both groups
claims were filed in bankruptcy court by ALPA on their behalf, these two
groups are no longer represented by ALPA. See discussion infra note 5.
A-6
the alternative, by a monetary award; and (2) whether the
arbitration of a labor dispute that may give rise to the right to
seniority integration under a collective bargaining agreement
can be enjoined, where the debtor has not explicitly rejected
the agreement. We conclude that the rights to seniority
integration do constitute “claims” within the meaning of the
bankruptcy code. Accordingly, we find that the right to
seniority integration gives rise to a right of payment and that
any equitable remedy recovered against Continental via
arbitration of the underlying labor dispute may be satisfied
through an award of monetary damages. We further conclude
that the district court properly vacated the injunction barring
arbitration of the underlying labor dispute. Thus, we will
affirm.
I.
A. The Underlying LPP Dispute
On February 23, 1986, following intense negotiations,
Eastern and its pilots’ union, ALPA, ratified a collective
bargaining agreement. On February 24, 1986, the Texas Air
Corporation (“Texas Air’), parent corporation to Continental,
acquired Eastern. Believing that the acquisition constituted a
“merger” within the meaning of certain “labor protective
provisions” (LPPs) contained in the collective bargaining
agreement, ALPA requested a meeting with Texas Air,
Eastern, and Continental to discuss the integration of
Eastern’s and Continental’s seniority lists. Under the LPPs,
Eastern’s pilots secured protection of their seniority rights in
the event of a merger between Eastern and another airline
carrier through the integration of Eastern’s seniority lists with
the merging carrier’s list. Specifically, the LPP terms
provide:
Section 2(a). The term “merger” as used herein means
joint action by the two carriers whereby they unify,
consolidate, merge, or pool in whole or in part their
separate airline facilities or any of the operations or
A-7
services previously performed by them through such
separate facilities.
* *
Section 3. Insofar as the merger affects the seniority
rights of the carriers’ employees, provisions shall be
made for the integration of seniority lists in a fair and
equitable manner, including, where applicable,
agreement through collective bargaining between the
carriers and the representative of the employees affected.
In the event of failure to agree, the dispute may be
submitted by either party for adjustment in accordance
with section 13.
* *K *
Section 13(a). In the event that any dispute or
controversy . . . arises with respect to the protections
provided herein, which cannot be settled by the parties
within 20 days after the controversy arises, it may be
referred by any party to an arbitrator selected from a
panel of seven names furnished by the National
Mediation Board for consideration and determination.
(Labor Protective Provisions, sections 2(a), 3, and 13(a)).°
Despite ALPA’s requests, both Eastern and Continental
refused to bargain with ALPA about the integration of the
seniority lists. Consequently, ALPA requested the National
Mediation Board to proffer a list of seven arbitrators from
which a neutral arbitrator could be chosen to determine
whether an alleged merger occurred between Eastern and
Continental that triggered the LPP seniority integration
The LPPs were based on the standard Allegheny-Mohawk LPPs,
which were designed to provide “displacement and dismissal allowances
to employees adversely affected by [merger] transaction{s], the equitable
integration of seniority lists, and binding arbitration of disputes relating to
the LPPs.” (Decision of the Eastern Air Lines Pilots System Board of
Adjustment). See Air Line Pilots Ass'n v. Dept. of Transp.-838 F.2d 563,
565 (D.C. Cir. 1988) (citing Allegheny-Mohawk Merger Case, 59 C.A.B.
22 (1972)).
i
A-8
provision (LPP dispute). Eastern, however, filed for
bankruptcy in March, 1989, and refused to submit to
arbitration pursuant to the bankruptcy code’s section 362
automatic stay provision. 11 U.S.C. § 362 (providing that
petitions filed pursuant to Chapter 11 operate as a stay of the
commencement or continuation of judicial, administrative, or
~ other actions or proceedings against the debtor). In
bankruptcy court, ALPA sought relief from the automatic stay
to compel Eastern to arbitrate the LPP dispute. The
bankruptcy court denied ALPA’s petition. After much
litigation, however, the Court of Appeals for the Second
Circuit held that the section 362 automatic stay provision did
not preclude arbitration in this instance. See In re lonosphere
Clubs, Inc., 922 F.2d 984 (2d Cir. 1990).
ALPA and Eastern proceeded to arbitration in April,
1991, commencing with a pre-hearing conference before
Richard R. Kasher (Kasher Arbitration). In this proceeding,
ALPA sought prospective integration of seniority lists, back
pay from the effective date of the merger to the date of the
arbitration award, and front pay from the date of the
arbitration award to the date that the Eastern pilots would
complete training and begin flying for Continental. Prior to
the pre-hearing conference, Arbitrator Kasher solicited brief
Statements of position from the parties to the dispute, and
from all potential parties. Eastern consistently maintained
that the LPP dispute was not properly within the arbitrator’s
jurisdiction.’ Continental filed a statement informing
Arbitrator Kasher that it had filed a Chapter 11 petition for
reorganization in December, 1990. Therefore, it maintained
that the arbitration pursued by ALPA was stayed under
section 362 of the bankruptcy code and could not proceed
without the express approval of the bankruptcy court.
* Eastern maintained that only the System Board of Adjustment had
jurisdiction to determine whether a merger occurred that triggered the
LPPs. On the merits, Eastern contended that if the arbitration proceeded,
the Arbitrator should conclude that no merger occurred.
eo in thi
s
8
A-9
In August, 1992, Arbitrator Kasher issued a decision
concluding that he had jurisdiction over the LPP dispute, and
could render a determination of the appropriate remedies
under the circumstances. Kasher, relying on the bankruptcy
court’s determination in Jn re lonosphere Clubs, Inc., 114
B.R. 379 (Bankr. S.D.N.Y. 1990), specifically rejected
Continental’s suggestion that the arbitration was barred by the
automatic stay. Kasher scheduled hearings on the merits of
the dispute, to commence in February, 1993.
B. The Bankruptcy Court Proceedings
In September, 1991, while the initial Kasher Arbitration
decision was pending, ALPA, on behalf of its members, filed
proofs of claim against Continental in Delaware Bankruptcy
Court. Their claims were based on the asserted right to
seniority integration under the LPPs and specified an
unliquidated amount as the debt for which Continental was
obligated. In response, Continental initiated an adversary
proceeding in bankruptcy court against ALPA, seeking
injunctive and declaratory relief relating to the proofs of
claim. In that action, Continental filed a Partial Objection To
Allowance of Claims and a Motion for Partial Summary
Judgment on its Partial Objection. In both motions,
Continental contended that the seniority integration that the
claimants sought was not feasible because it would be
detrimental to Continental’s successful reorganization. Thus,
Continental sought a declaration that the claims were, at best,
“general, dischargeable, pre-petition, unsecured claims,”
compensable by an award of monetary damages.
* Prior to the Kasher Arbitration decision, Continental filed an initial
motion for partial summary judgment, seeking a preliminary injunction.
Continental argued that the arbitration should be enjoined to protect the
jurisdiction of the bankruptcy court over the administration of its estate. It
also maintained that the automatic stay provision of the bankruptcy code
precluded the arbitration from proceeding. Finally, Continental contended
that it was not a party to the collective bargaining agreement between
Eastern and ALPA and that it could not be bound by the result of any
arbitration over the LPPs.
| i
A-10
ALPA and the LPP Claimants each filed a separate
response to Continental’s Partial Objection and Motion for
Partial Summary Judgment.’ ALPA contended that, contrary
to Continental’s argument, the claims pursued were not
general, unsecured pre-petition claims that could be converted
to a payment of money damages. ALPA also argued that only
an arbitrator had jurisdiction to determine the appropriate
remedy under the LPPs. The LPP Claimants essentially
maintained that an arbitration proceeding was the appropriate
forum to determine the issue of whether a merger occurred
that triggered the LPPs, and that the proper remedy was
integration of Eastern’s seniority lists with Continental’s lists.
In February, 1993, the bankruptcy court Judge, in two
orders, granted Continental’s Partial Objection To Allowance
of Claims and its related motion for partial summary
judgment, determining that there was no genuine issue for
trial and that Continental was entitled to judgment as a matter
of law. In re Continental Airlines, Inc., et al., Nos. 90-932
through 90-984 (Bankr. D. Del. Feb. 11, 1993) (order granting
motion for partial objection to allowance of claims); Jn re
Continental Airlines, Inc., et al., No. 91-153 (Bankr. D. Del.
Feb. 11, 1993) (order granting motion for partial summary
judgment). Addressing the jurisdictional argument asserted
by ALPA, the bankruptcy court concluded that the issue of
whether any award granted to ALPA would constitute
general, unsecured, pre-petition claims was a core matter
under the bankruptcy code. Thus, it concluded that it had
jurisdiction to resolve the matter. Jn re Continental Airlines,
Inc., et al, Nos. 90-932 through 90-984, slip op. at 1-2 (order
granting motion for partial objection to allowance of claims);
In re Continental Airlines, Inc., et al, No. 91-153, slip op. at 2
(order granting motion for partial summary judgment). The
* ALPA’s representation of the LPP Claimants ceased after the LPP
Claimants instituted actions in federal court against ALPA. The actions
alleged causes of action for the breach of the duty of fair representation
and defamation arising out of the publication and dissemination of a
“blacklist” and for alleged violations of the civil provisions of RICO.
A-ll
court then determined that the equitable remedy of seniority
integration constituted a “claim” within the meaning of § 101(5)
of the bankruptcy code. Accordingly, the court concluded that
the remedy could be converted to an award of money damages.
In re Continental Airlines, Inc., et al, Nos. 90-932 through 90-
984, slip op. at 3-4 (order granting motion for partial objection to
allowance of claims); Jn re Continental Airlines, Inc., et al., No.
91-153, slip op. at 3-4 (order granting motion for partial
summary judgment). Finally, the court determined that any night
of payment asserted by ALPA was, at best, a general,
dischargeable, unsecured claim that was entitled to no
administrative priority. Jn re Continental Airlines, Inc., et al.,
Nos. 90-932 through 90-984, slip op. at 4-5 (order granting
motion for partial objection to allowance of.claims); Jn re
Continental Airlines, Inc., et al, No. 91-153, slip op. at 5 (order
granting motion for partial summary judgment).
In April, 1993, Continental’s Second Amended Joint Plan
of Reorganization was confirmed by the bankruptcy court. The
court’s confirmation order incorporated its prior rulings from the
two orders issued in February, 1993. Essentially, it clarified that
any valid claims based on the LPPs would give rise to a right of
payment dischargeable in bankruptcy and that no right to
injunctive, equitable or other prospective relief would flow from
any valid claim based on an award under the LPPs. In re
Continental Airlines, Inc., et al,, Nos. 90-932 through 90-984
(Bankr. D. Del. April, 1993) (Findings of Fact, Conclusions of
Law and Order Confirming the Debtors’ Revised Second
Amended Joint Plan of Reorganization). The court also
enjoined the arbitration of the LPP dispute. Continental’s plan
of reorganization was consummated in late April, 1993.
C. The ALPA/Continental Settlement
ALPA and the LPP Claimants appealed the bankruptcy
court’s February and April, 1993 orders to the district court.
While the appeals were pending, ALPA and Continental settled
the LPP dispute. The Settlement Agreement, ultimately
approved by the bankruptcy court, finally resolved all of
ALPA’s claims including those pursued in Continental’s
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bankruptcy proceeding and those based on the enforcement of
the LPPs in the Kasher Arbitration. Under the terms of the
agreement, ALPA agreed to withdraw its appeals to the
district court. The Setthkement Agreement also provided an
option to the “pilots formerly employed by Eastern” who
were no longer represented by ALPA, and who had filed
proofs of claim in the bankruptcy proceeding, to participate in
the settlement. Approximately two-thirds of these pilots did
SO.
D. The District Court Proceedings
Prior to the ALPA/Continental settlement, Continental
filed a motion to dismiss ALPA’s and the LPP Claimants’
appeals. Continental argued that the appeals from the
confirmation order were moot because: (1) the plan of
reorganization had been substantially consummated; (2) it
was not feasible for the plan to be undone; and (3) any
alteration to the plan’s fundamental terms would be
inequitable. After the settlement, Continental filed a second
motion to dismiss the appeals as moot, contending that the
LPP Claimants had no individual right to maintain their
claims based on the LPPs because ALPA, as the exclusive
bargaining representative of the Eastern pilots, had full
authority to settle the LPP grievance. Thus, Continental
argued, the pilots were bound by the settlement agreement.
In a comprehensive memorandum opinion, the district
court addressed the issues appealed by ALPA and the LPP
Claimants and presented in Continental’s motions to dismiss.
As to the first motion to dismiss, the court concluded, inter
alia that ALPA’s and the LPP Claimants’ appeals relating to
the claim for administrative priority was moot. In support of
its conclusion, the court emphasized the substantial
consummation of the plan. Specifically, the court noted that
s Although the ALPA/Continental settlement agreement provided that
ALPA would dismiss its appeal to the district court, ALPA failed to do so
prior to the district court’s disposition. Ultimately, ALPA did withdraw
its claims against Continental. ALPA is not a party to this appeal.
oy URS Yop
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the investment leading to the consummation of the plan was
based on an overall limit on administrative claims and a
determination that ALPA and the LPP Claimants were not
entitled to equitable relief. Jn re Continental Airlines, Inc., et
al., No. 93-163 (D. Del. Nov. 29, 1995). As to Continental’s
second motion to dismiss as moot, the court determined that it
could not consider the merits of whether the LPP Claimants
had standing under the LPPs to pursue seniority integration
individually. Specifically, the court concluded that this issue
should be determined by the arbitrator. Therefore, the court
refused to dismiss their claims based on their alleged lack of
standing to assert the contractual right. /d. at 22-25. The
court also rejected Continental’s argument that the LPP
Claimants were bound by the ALPA/Continental settlement.
Id. at 23.
Turning to the merits of the appeals, the court affirmed
the orders of the bankruptcy court in all respects, except for
the bankruptcy court’s injunction of the arbitration
proceedings. /d. at 26-45. Relating to the injunction, the
court concluded that the bankruptcy court’s failure to
adequately set forth the reasons for the issuance of the
injunction and to describe the acts restrained in its order, as
mandated by Federal Rule of Civil Procedure 65(d), was fatal
to the validity of the injunction. /d. at 34-37. Although it
vacated the injunction, the district court refused to remand the
matter to the bankruptcy court with instructions to strike the
injunction. Rather, the court concluded that under section
1113 of the bankruptcy code, the bankruptcy court could not
enjoin the arbitration even if the requirements of Rule 65(d)
were met. Jd. at 37-40.’
The LPP Claimants appealed the district court’s order.
Continental cross-appealed on the issues of the mootness of
The court reached this issue only after determining that in spite of
the invalidity of the injunction under Rule 65(d), the statutory injunction
under 11 U.S.C. § 524, referenced by the bankruptcy court in its order,
survived. /n re Continental Airlines, Inc., et al, No. 93-163. slip op. at 37,
(D Del. Nov.29, 1995).
Pd
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the claims and the dissolution of the injunction. On appeal, the
Group of 31, a group of former Eastern pilots who previously
had been represented by counsel for the LPP Claimants, have
obtained substitute counsel, and have filed a separate brief. For
purposes of brevity, the Group of 31 and the LPP Claimants will
be referred to collectively as “the Claimants” where permissible.
The district court had jurisdiction under 28 U.S.C. § 158(a).
We exercise jurisdiction of the appeal and the cross-appeal from
the district court’s order pursuant to 28 U.S.C. § 158(d).
Il.
Our review of the district court’s determination is plenary.
d Brown vy. Pennsylvania State Employees Credit Union, 851 F.2d
81, 84 (3d Cir. 1988); see In re lonosphere Clubs, Inc., 922 F.2d
984, 988 (2d Cir. 1990). We exercise the same review of the
district court’s decision as that exercised by the district court.
Brown, 851 F.2d at 84. The bankruptcy court’s findings of fact
are reviewable only for clear error. /d. Legal determinations are
subject to plenary review. /d.
Before we reach the merits of the parties’ claims, we must
address Continental’s two challenges to the Claimants’ appeals
contending that the appeals should be dismissed. First,
Continental maintains that the LPP Claimants’ notice of appeal
is defective for lack of adequate identification of the parties to
the appeal under Federal Rule of Appellate Procedure 3(c).
Next, Continental argues that the Claimants’ lack standing to
assert claims for individual seniority integration under the LPPs
and that the appeals should be dismissed as moot.
A. Appellate Jurisdiction
Continental requests that the LPP Claimants’ appeal be
dismissed pursuant to Federal Rule of Appellate Procedure 3(c)
for failure of their notice of appeal to identify each member of its
group participating in this appeal. The notice of appeal filed by
the LPP Claimants simply identifies the appellants as “the LPP
Claimants.” Continental argues that this identification is
insufficient, emphasizing that a number of the LPP Claimants
participated in the Continental/ALPA settlement and,
a nee
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consequently, waived their claims on appeal. Continental
contends that the notice of appeal did not specify those
members who did not waive their claims and who are
appealing from the district court’s order. We reject this
argument, and conclude that the LPP Claimants notice of
appeal adequately identifies the appellants.
The requirements of Rule 3(c) are jurisdictional. Torres
v. Oakland Scavenger Co., 487 U.S. 312, 320-21, 108 S. Ct.
2405, 2411, 101 L.Ed.2d 285 (1988). In Torres, the Supreme
Court explained that permitting a court to exercise jurisdiction
Over parties not named in a notice of appeal would be
equivalent to extending the time prescribed to file a notice of
appeal, a power not granted to the court. /d. at 315. Thus, the
failure of a notice of appeal to name a party constitutes a
jurisdictional bar to the appeal, and thus a failure of that party
to appeal. Dura Systems, Inc. v. Rothbury Investments, Ltd.,
886 F.2d 551, 554 (3d Cir. 1989).
Generally, rules of procedure should be liberally
construed. Torres, 487 U.S. at 316. In Torres, the Supreme
Court emphasized that, “mere technicalities should not stand
in the way of consideration of a case on its merits.” /d.
(internal quotations omitted). Thus, in the context of Rule
3(c), jurisdiction may be appropriate if a litigant’s actions are
functionally equivalent to the requirements of Rule 3(c).
Masquerade Novelty v. Unique Industries, 912 F.2d 663, 665
(3d Cir. 1990). We have applied this construction numerous
times to support a finding of jurisdiction in the absence of
strict, technical compliance with the requirements of Rule
3(c). See id. (where the contents of documents filed within
the time prescribed to file a notice of appeal contain the
information required by Rule 3(c), the party will be deemed to
have complied with the rule and the case will not be
dismissed for lack of appellate jurisdiction); Dura Systems,
Inc., 886 F.2d at 554-55 (Consent Order filed by the
appellants within the time prescribed to file a notice of appeal
served as the “functional equivalent” of what Rule 3(c)
required such that the technical failure of the actual notice of
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appeal was not a bar to jurisdiction); see also In re Bertoli,
812 F.2d 136 (3d Cir. 1987) (litigant’s filing of a “Notice of
Motion for Certification of An Interlocutory Appeal” in the
district court within the thirty-day time period allowed to file
a notice of appeal was sufficient to satisfy Rule 3(c) where the
litigant failed to file an actual notice of appeal; the document
communicated an intention to appeal and identified the
judgment appealed from and the court to which the appeal
was taken).
The purpose of Rule 3(c)’s identification requirement is
to provide notice to the court and the opposing parties of the
identity of the appellants. Torres, 487 U.S. at 318; Dura
Systems, Inc., 886 F.2d at 555. Since ALPA and the LPP
Claimants filed their appeals in the district court, the LPP
Claimants have been identified as a group of former Eastern
pilots, no longer represented by ALPA, seeking to enforce
their seniority integration rights under the LPPs. When
ALPA settled its claims with Continental, both Continental
and ALPA, via the settlement agreement, granted the LPP
Claimants the opportunity to participate in the settlement.
Continental was well aware of the individuals who elected to
exercise this option. The settlement agreement specifically
required those pilots electing to participate in the settlement to
execute one of two forms indicating an intent to participate in
the settlement and to return the form to Continental. Those
individuals who opted to settle their claims waived their right
to appeal. Thus, the group of LPP Claimants dwindled to an
identifiable, discrete entity made up of those individual pilots
who chose not to participate in the settlement.
The term “LPP Claimants” has been subject to a
common understanding among all parties to this litigation
relating to the individuals comprising the group.
Accordingly, we conclude that the LPP Claimants’ notice of
appeal sufficiently identifies the entity such that Continental,
as well as this Court, is adequately apprised of the identity of
the appellants such that appellate jurisdiction is proper. In so
doing, we follow the Supreme Court’s directive to construe
A-17
Rule 3(c) liberally and to avoid a construction that would
permit “mere technicalities” to bar the consideration of this
case on the merits. Masquerade Novelty, 912 F.2d at 666
(quoting Dura Systems, 886 F.2d at 555).
B. Whether the Claimants’ Appeals are Moot
Continental argues that the Claimants’ appeals are moot,
relying on ALPA’s settlement of its LPP dispute with
Continental. Essentially, Continental maintains that the claim
settled by ALPA was a “group” claim. Thus, Continental
argues, when ALPA settled the dispute, it settled the claim on
behalf of the entire group on whose behalf it filed the
bankruptcy claims, including the Group of 31 and the LPP
Claimants. According to Continental, then the relevant
question is whether “if [individual rights to seniority
integration arbitration under the LPPs] existed at all, [those]
rights survived ALPA’s settlement of the group grievance.”
In the district court, Continental challenged the LPP
Claimants’ individual standing under the LPPs to prosecute
their rights to seniority integration. The district court declined
to consider the merits of this argument, explaining that the
issue constituted a “minor” dispute under the Railway Labor
Act, 45 U.S.C. §§ 151-163, and was subject to the jurisdiction
of the arbitrator. We conclude that because the Claimants’
individual rights to prosecute their claims for seniority
integration have not been established under the LPPs, we need
not address whether the Claimants’ individual rights to
seniority integration survived ALPA’s settlement of the
dispute.
The right to seniority integration under the LPPs turns on
whether a “merger” between Eastern and Continental occurred
within the meaning of the LPPs. This determination depends
on the meaning, interpretation and proper application of the
LPPs. In turn, the issue of standing to maintain an individual
claim for seniority integration under the LPPs is a “minor”
dispute under the Railway Labor Act, 45 U.S.C. §§ 151-163.
See Consolidated Rail v. Labor Executives, 491 U.S. 299, 302
(1989) (“major disputes seek to create contractual rights,
A-18
minor disputes to enforce them”) (quoting Elgin, J & E. Ry.
Co. v. Burley, 325 U.S. 711, 723, 65 S. Ct. 1282, 1289-90, 89
L.Ed. 1886 (1945) (minor disputes are those relating either to
the meaning or proper application of a particular provision
with reference to a _ specific situation)); Chicago &
Northwestern Transp. v. Local Union 214, 829 F.2d 1424,
1427 (7th Cir. 1987). Accordingly, the issue of standing is
subject to the exclusive jurisdiction of the arbitrator, and the
district court properly concluded that its role relating to this
issue was to protect the jurisdiction of the arbitration board.
Consolidated Rail 491 U.S. at 304 (“the [National Railroad
Adjustment] Board . . . has exclusive jurisdiction over minor
disputes. Judicial review of the arbitral decision is limited.”);
Chicago & Northwestern Transp., 829 F.2d at 1428.
Consistent with the federal courts’ role relating to minor
disputes, i.e., to protect the jurisdiction of the arbitration
board, federal courts cannot inquire into the merits of an
underlying dispute except to the extent necessary to determine
its proper characterization as minor or major. Chicago &
Northwestern Transp., 829 F.2d at 1428. Nor may the courts
decide what remedy is appropriate if the agreement is
interpreted to require recovery of a remedy. General Com of
Adj., United Transp. Union v. CSX R.R., 893 F.2d 584, 592-
93 (3d Cir. 1990). Thus, the district court properly concluded
that it could not consider the merits of Continental’s argument
that the Claimants did not have standing under the LPPs. As
the Claimants’ right to prosecute their claims for seniority
integration have not been established under the LPPs, we find
that we need not address Continental’s argument that their
individual rights did not survive ALPA’s settlement of the
LPP dispute.
C. Merits of the Appeal
1. Bankruptcy Court’s Jurisdiction
Before we determine whether the bankruptcy court
properly determined the status of the Claimants’ claims, we
must address the Claimants’ contention that the bankruptcy
A-19
court did not have Jurisdiction over the matter. The
Claimants maintain that because the LPP dispute arose wholly
outside the bankruptcy context, the matter is a “non-core”
dispute over which the bankruptcy court did not have
jurisdiction. The flaw in the Claimants’ argument is that they
confuse the disposition of the merits of the underlying LPP
dispute with the treatment of their claims in bankruptcy. The
bankruptcy court had exclusive jurisdiction over the latter.
A bankruptcy court has jurisdiction over all “core
proceedings arising under title 11, or arising in a case under
title 11.” 28 U.S.C. § 157(b)(1) (1993); In re Wood, 825 F.2d
90, 95 (Sth Cir. 1987). Section 157(b) does not define “core
proceedings.” However, the phrase has been interpreted to
apply to those rights that are created by federal bankruptcy
law:
If the proceeding involves a right created by the federal
bankruptcy law, it is a core proceeding . . . If the
proceeding is one that would arise only in bankruptcy, it
is also a core proceeding; for example, the filing of a
proof of claim or an objection to the discharge of a
particular debt.
In re Wood, 825 F.2d at 97. See Beard v. Braunstein, 914
F.2d 434 (3d Cir. 1990) (acknowledging the standard for
“core proceedings” articulated in Wood).
There can be no dispute that the issue as to whether the
bankruptcy claim could be satisfied by a monetary award is a
“core bankruptcy matter.” By filing a proof of claim against
Continental’s estate in bankruptcy court, the Claimants
“invoke[d] the special rules of bankruptcy concerning
objections to the claim, [and] estimation of the claim.” Wood,
825 F.2d at 97. Further, the issue decided by the bankruptcy
court was how the claim would be treated in bankruptcy.
Thus, the bankruptcy court was well within its authority to
exercise jurisdiction over the issue of the status of the
bankruptcy claim. Our conclusion is consistent with
principles that govern the disposition of issues when
bankruptcy law and labor law intersect. See L.O. Koven &
A - 20
Brothers, Inc. v. Local Union No. 5767, 381 F.2d 196, 205
(3d Cir. 1966) (“Questions involving an interpretation of the
Bankruptcy Act should be decided by the court, while
questions involving an interpretation of the collective
bargaining agreement should if feasible be decided by the
arbitrator.”); see also Garland Coal & Mining Co. v. United
Mine Workers, 778 F.2d 1297, 1304 (8th Cir. 1985) (“Once
the arbitrator has decided the liability issue, the case should
be returned to the bankruptcy court to decide the questions of
allowability and priority of claims.”). Accordingly, we
conclude that the bankruptcy court had jurisdiction to
determine whether the Claimants’ claims could be satisfied by
a monetary award in lieu of specific performance."
For the same reasons. we reject the Group of 31's efforts to invoke
the Norris-LaGuardia Act, 29 U.S.C. § 101, ef seq., to implicate the
bankruptcy court’s jurisdiction to determine how the claims will be treated
in bankruptcy. Section | of the Norris-LaGuardia Act provides:
No court of the United States as defined in this chapter, shall have
jurisdiction to issue any restraining order or temporary or permanent
injunction in a case involving or growing out of a labor dispute,
except in a strict conformity with the provisions of this chapter; nor
shall any such restraining order or temporary or permanent injunction
be issued contrary to the public policy declared in this chapter.
29 U.S.C. § 101.
The Group of 31 contends that despite the district court’s order
vacating the injunction the ruling that the remedy in arbitration can be
“reduced” from full seniority integration to a claim for front pay “is as
clearly an injunction and interference with the Kasher arbitration as was
the bankruptcy court’s blanket injunction against the continuation of the
arbitration.” The conversion of the equitable remedy to front pay, upon
successful challenge at the arbitration proceedings, only affects the
administration of the claim in bankruptcy. It does not operate to enjoin the
arbitrator, nor does it dictate any particular remedy. Cf. Lukens, 989 F.2d
at 677 (order directing an arbitrator not to preside over any newly ordered
arbitration and deeming prior arbitration ineffectual involved operated as
an injunction). Thus, we will not disturb the bankruptcy court’s exercise
of jurisdiction over the matter.
Similarly we reject the Claimants’ argument that the determination
whether the equitable remedy can be converted to a payment of money
A - 21
2. Whether the Equitable Remedy Constitutes a Claim
Under the Bankruptcy Code
The LPP Claimants’ and the Group of 31’s primary
contention on appeal is that the right to the equitable remedy
of seniority integration under the LPPs cannot be converted
into a claim for money damages. The Claimants emphasize
that they seek specific performance under the LPPs, and they
vehemently argue that the payment of money damages is not a
viable alternative to the equitable right to seniority
integration.
The district court rejected the Claimants’ argument,
holding that seniority integration under the LPPs gave rise to
a “right of payment” within the definition of a “claim” under
the bankruptcy code. In support of its conclusion, the district
court further determined that money damages are a viable
alternative to seniority integration.
The bankruptcy code defines “claim” as
(B) right to an equitable remedy for breach of
performance if such breach gives rise to a right to
payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or
unsecured.
damages is inconsistent with the district court’s conclusion that the
individual right to seniority integration under the LPPs involves a “minor”
dispute, subject to the exclusive jurisdiction of the arbitrator. See
discussion, supra Part II.B. We discern no inconsistency between the
bankruptcy court’s exercise of jurisdiction to determine the status of the
bankruptcy claim and the district court’s characterization of the issue of
the Claimants’ standing under the LPPs as a “minor” dispute. The
bankruptcy court’s ruling related only to the manner in which the
Claimants’ claims in bankruptcy would be treated if a right to seniority
integration is established. This ruling, unlike the standing issue, does not
turn on an interpretation of the LPPs. Thus, the bankruptcy court's
determination of the status of the claims and the district court’s refusal to
consider the merits of the standing issue was not inconsistent.
A - 22
11 U.S.C. § 101(5). The term “claim” as defined in the
bankruptcy code is construed broadly to permit debtors to
meet all of their legal obligations in bankruptcy and to enable
holders of claims to participate in the bankruptcy proceedings.
See Ohio v. Kovacs, 469 U.S. 274, 279, 83 L.Ed.2d 649, 105
S. Ct. 705 (1985) (“Congress desired a broad definition of
claim.”); see, e.g., Pennsylvania Dep’t of Public Welfare v.
Davenport, 495 U.S. 552, 558 (1990) (debtors’ obligation to
pay restitution as a condition of probation which arose out of
a criminal conviction for welfare fraud constituted a “debt”
within the meaning of the bankruptcy code that gave rise to a
“claim” under the code).
Under section 101(5), an equitable remedy can be
deemed a “claim” if that remedy “gives rise to a right of
payment.” We are guided as to what constitutes a “right of
payment” under the bankruptcy code by the Supreme Court’s
analysis in Ohio v. Kovacs. In Kovacs, the petitioner, the
State of Ohio, obtained an injunction ordering the respondent,
William Kovacs, to clean up a hazardous waste site. After
Kovacs failed to comply with the injunction, the State
obtained the appointment of a receiver, who was directed to
take possession of al! of Kovacs’ assets and property and to
clean up the waste site. Subsequent to the appointment of the
receiver, Kovacs filed for bankruptcy. In response, the State
filed a complaint in bankruptcy seeking a declaration that
Kovacs’ obligation under the injunction was _ not
dischargeable in bankruptcy because it was not a liability on a
“claim” under the bankruptcy code.
The Supreme Court held that the obligation imposed by
the injunction had been converted to an obligation to pay
money that was dischargeable in bankruptcy. Kovacs, 469
U.S. at 283. Critical to the Court’s conclusion was its
determination that the appointment of a receiver had ,
dispossessed Kovacs of the property and therefore, had
removed Kovacs’ ability to cooperate with the receiver and
remove the waste from the site in compliance with the
injunction. Specifically, the Court stated:
a ene nnn ene
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The injunction surely obliged Kovacs to clean up the
site. But when he failed to do so, rather than prosecute
Kovacs under the environmental laws or bring civil or
criminal contempt proceedings, the State secured the
appointment of a receiver, who was ordered to take
possession of all of Kovacs’ nonexempt assets . . . and to
comply with the injunction . . . . As wise as this course
may have been, it dispossessed Kovacs, removed his
authority over the site, and divested him of assets that
might have been used by him to clean up the property . . .
Although Kovacs had been ordered to “cooperate” with
the receiver, he was disabled by the receivership from
personally taking charge of and carrying out the removal
of wastes from the property. What the receiver wanted
from Kovacs after bankruptcy was the money to defray
cleanup costs .. Had Kovacs furnished the necessary
funds, either before or after bankruptcy, there seems little
doubt that the receiver and the State would have been
satisfied.
Id. at 283. Thus, the Court concluded that under the
circumstances, the clean up order had been converted into an
obligation to pay money. /d. at 283.
In In re Torwico Electronics, Inc., 8 F.3d 146 (3d Cir.
1993), we addressed the issue whether a regulatory obligation
directing a Chapter 11 debtor to develop a plan to ameliorate
an ongoing environmental hazard could be converted into a
“claim” in bankruptcy. In that case, Torwico Electronics, a
manufacturing business, filed for Chapter 11 bankruptcy and
listed the New Jersey Department of Environmental
Protection and Energy (the “Department”) as a creditor with a
disputed and unliquidated claim. After Torwico filed its
petition for bankruptcy, the Department performed an on-site
inspection of Torwico’s property and found hazardous waste,
for which it issued a notice of violation to Torwico. Two
months later, the deadline for filing proofs of claim in
Torwico’s bankruptcy case passed. The Department had
failed to file any proof of claim by this deadline.
A-24
The Department, seeking to enforce Torwico’s
obligation under state and federal environmental laws, issued
an Administrative Order requiring Torwico to submit a
written closure plan for the hazardous site and assessing a
monetary penalty for failure to take action under the earlier
notice of violation. The Order specifically stated: “All
obligations are imposed pursuant to the police powers of the
State of New Jersey, intended to protect the public health,
safety, welfare, and environment.”
In bankruptcy court, both parties sought summary
judgment. Torwico maintained that the obligation constituted
a “claim” under the bankruptcy code and that the State’s
failure to file a timely proof of claim was fatal to the State’s
position that Torwico was responsible for the obligation. The
State, however, argued that the claims involved were
regulatory obligations, not bankruptcy claims, and that
Torwico was obligated to remedy the violations addressed in
the Order pursuant to state and federal law.
Turning our attention to the Supreme Court’s analysis in
Kovacs, we explicitly noted that this case was unlike Kovacs
in that the State was not demanding that Torwico pay money
to it, but rather was requesting it to take action to ameliorate
an ongoing hazard. Torwico Electronics, 8 F.3d at 150. Next,
we shifted our focus to the nature of the obligation imposed
by the Order and concluded that it was not an order for breach
of an obligation that gave rise to the right of payment.
Specifically, we noted:
The state here found that the seepage pit was a
continuing problem that was leaking hazardous material
into the surrounding environment. Thus, the state is not
asserting a “repackaged claim for damages”; rather there
is an ongoing and continuing threat and . . . an obligation
on the part of the debtor to “ameliorate ongoing pollution
emanating from accumulated wastes” . . . The state has
no “right to payment” here. What it has is a right to
force the debtor to comply with applicable
environmental laws by remedying an existing hazard.
a i
A-25
Id. (quoting In re Chateauguay, 944 F.2d 997 1008 (2d Cir.
1991))”
Kovacs indicates, and Torwico Electronics implies, that a
right of payment under the bankruptcy code is, essentially, an
obligation to pay money. Thus, the issue we must decide is
whether monetary payment is an alternative for the equitable
remedy of seniority integration. See Matter of Udell, 18 F.3d
403, 407 (7th Cir. 1994) (“{an]} example of a ‘claim’ is a right
to an equitable remedy that can be satisfied by an ‘alternative’
right to payment”). The district court answered this question
affirmatively, and we agree.
We begin our analysis by noting that here, when ALPA
filed its proof of claim in bankruptcy court, it enumerated the
claim as one for money damages, in addition to specific
performance, arising out of the underlying LPP labor
arbitration dispute. Indeed, in its supplemental pre-hearing
statement filed at the arbitration, ALPA specifically noted that
it sought “damages in the form of back pay and front pay
against . . . Continental . . . in addition to integrated pilot
positions.” This is not the end of our inquiry, however.
Consistent with the analyses in Kovacs and Torwico
Electronics, we are compelled to examine the nature of the |
remedy sought and to ascertain whether it can give rise to a
right of payment. We conclude that it does.
In Torwico Electronics, we were persuaded by, and explicitly
applied, the approach adopted by the Court of Appeals for the Second
Circuit in In re Chateauguay, 944 F.2d 997 (2d Cir. 1990). In that case,
the court addressed the issue of what constituted a claim in the context of
the bankruptcy of an entity that operated hazardous waste sites. There. the
court stated:
Where an order imposes obligations distinct from any obligation to
stop or ameliorate ongoing pollution, the order presents a claim if
the government could have done the work itself and then sought
reimbursement: under such circumstances there is a breach of an
obligation that gives rise to a right of payment.
In re Chateauguay, 944 F.2d at 1008.
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Unlike the obligation at issue in Torwico Electronics,
seniority integration is not a remedy tailored to enforce
compliance with any federal or state laws or regulations. The
source of the remedy is a provision contained in an
agreement. By its contractual nature, it is clear that the
remedy was not created to enforce compliance with any
particular mandate. Rather, by its terms, seniority integration
is a discrete remedy, specifically created to protect a group of
employees." Thus, the remedy is a vehicle by which to
provide a benefit or compensation to individuals who are
covered by the explicit terms of the agreement and who, by
the agreement’s terms, are entitled to enforce the remedy.
Although the collective bargaining agreement is silent as
to the remedy following a breach of the agreement, it is
reasonable to conclude that a “corollary right to payment of
liquidated damages” would flow from a breach giving rise to
the equitable remedy under the LPPs. See Matter of Udell, 18
F.3d at 408 (holding that a right to an equitable remedy for
breach of performance is a claim if the same breach also gives
rise to a right of payment with respect to the equitable remedy
or if the right to payment is an alternative to the right to an
equitable remedy). See generally Chauffeurs, Teamsters, Etc.
v. Terry, 494 U.S. 558, 108 L.Ed.2d 519, 110 S. Ct. 1339
(1990) (claim based on breach of a collective bargaining
agreement is comparable to a breach of contract claim for
which a legal award of money damages in the form of back
pay is permitted); Stewart v. KHD Deutz of America Corp., 75
F.2d 1522 (11th Cir. 1996) (breach of [collective bargaining
claim] claim is most analogous to a claim for breach of
contract). The Court of Appeals for the Ninth Circuit's
° ‘The LPPs specifically state:
Section |. The fundamental scope and purpose of the conditions
hereinafter specified are to provide for compensatory allowances to
employees who may be affected by [a] proposed merger . . . .
(Labor Protective Provisions, section 1).
Ne
A -27
opinion in Van Waters & Rogers, Inc. y. Int’l Brotherhood of
Teamsters, 913 F.2d 736 (9th Cir. 1990), is instructive.
In that case, the court upheld an award of monetary
~ damages for breach of a contract mandating seniority
integration. There, Van Waters, a seller and distributor of
chemicals, purchased its competitor, McKesson. Pursuant to
the acquisition, Van Waters agreed to assume the terms and
conditions of a collective bargaining agreement that existed
between McKesson and its employees’ union, Local 70.
Although the collective bargaining agreement contained a
Seniority integration clause triggered by a purchase or sale of
McKesson, Van Waters refused to honor the terms of the
Clause after the purchase was complete. Accordingly, Local
70 filed a grievance based on Van Waters’ failure to integrate
the seniority of the former McKesson employees with Van
Waters’ seniority list.
Arbitration of the dispute was complicated by two
additional factors. First, Van Waters maintained a collective
bargaining agreement with another union, Local 287. Second,
the collective bargaining agreement between Local 70 and
McKesson/Van Waters contained a clause precluding the
arbitrator from determining any jurisdictional dispute arising
between Local 70 and any other union. The effect of the
latter factor was that any ruling on a jurisdictional dispute
would be outside of the scope of the arbitrator’s authority. As
seniority integration of Local 70’s employees would affect the
seniority of Van Waters’ employees and create a potential
conflict between the two unions, resolution of the dispute
implicated the arbitrator’s authority to resolve the dispute.
At the arbitration hearing, the arbitrator granted Local
70’s grievance demanding that the seniority of the former
McKesson employees be considered as integrated. However,
the arbitrator declined to enforce seniority integration to avoid
any jurisdictional dispute. Instead, the arbitrator ruled that the
employees would receive damages for any wages and other
benefits lost due to Van Waters’ failure to consider their
seniority. In so ruling, the arbitrator noted that the Local 70
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agreement contained a provision that permitted the recovery
of damages by employees arising out of an employer’s failure
to require a purchaser to assume the obligations of the
collective bargaining agreement. The Ninth Circuit upheld
the arbitrator’s award, concluding that the arbitrator properly
fashioned a monetary award to the former McKesson
employees “for the breach of the terms of Local 70’s
collective bargaining agreement.” Jd. at 742.
Van Waters illustrates that a monetary damage award can
be enforced as an alternative to, or can arise with respect to,
the equitable remedy of seniority integration. The award is
not cumulative, nor does it address a separate remedial
concern. Rather, it serves as a substitute for the performance
of an equitable remedy that cannot otherwise be enforced.
See Van Waters, 913 F.2d at 741 (“if violated, [the seniority
rights provided under the collective bargaining agreement]
could be remedied by an award of damages rather than
specific performance.”).
We find support for the proposition that monetary
_ awards are a viable alternative to the equitable remedy of
seniority integration in wrongful discharge cases where we
have enforced awards of monetary damages in lieu of
reinstatement. Much like reinstatement, seniority integration
is a “make whole” remedy, the purpose of which is to restore
the employee to the economic status quo that would exist but
for the employer’s conduct. See Franks v. Bowman Trans.
Co., 424 U.S. 747, 766 (1976).
Although we have recognized that reinstatement is the
preferred remedy to address cases of wrongful discharge, we
have enforced monetary awards as a viable alternative where
reinstatement is impractical. See Maxfield v. Sinclair
International, 766 F.2d 788 (3d Cir. 1985) (front pay is an
appropriate alternative to reinstatement where the relationship
between the parties may be so damaged by animosity that
reinstatement is impracticable and the remedial purposes of
the statute would be frustrated if front pay were not available
as an alternative remedy); Goss v. Exxon Office Systems Co.,
A-29
747 F.2d 885 (3d Cir. 1984) (same); see also Ellis v. Ringgold
School District, 832 F.2d 27 (3d Cir. 1987) (reinstatement
may be denied when animosity between the parties makes
such remedy impracticable). Cf. Squires v. Bonser, 54 F.3d
168 (3d Cir. 1994) (special circumstances indicating that
tensions between the parties exceed those which normally
accompany reinstatement or indicating “irreparable”
animosity among the parties involved justifies denial of
reinstatement).'' Similar to the conditions that can result from
the enforcement of reinstatement, disruption to the work
environment, irreparable damage to work relationships, and
hostility and animosity are all very probable conditions that
can result from the enforcement of seniority integration.
Considering the similarity in purpose between the two
remedies, the rationale underlying the enforcement of an
alternative remedy to fulfill their remedial purposes, and the
Similarity in the impracticality of enforcing the remedies
under particular circumstances, we are certain that a money
damage award is an appropriate alternative to seniority
integration.
Moreover, we are convinced that the particular
circumstances of this case might make the enforcement of the
: Squires is distinguishable. That case involved an employee who
challenged the district court’s failure to direct reinstatement to his former
position after a jury sustained a First Amendment constitutional challenge
to his employer’s failure to reappoint him. Reversing the district court’s
decision not to reinstate the employee, we stated, “[t]he fact that
reinstatement might have disturbing consequences, revive old
antagonisms, or breed difficult working conditions usually is not enough
to outweigh the important first amendment policies that reinstatement
serves [absent] probable adverse consequences [that] weigh so heavily that
they counsel the court against imposing this preferred remedy.” Squires,
54 F.3d at 175 (quoting Banks v. Burkich, 788 F.2d 1161, 1165 (6th Cir.
1988)). Thus, it is clear that our decision to remand with instructions to
reinstate the appellant was driven by the constitutional nature of the claims
and the compelling need to enforce reinstatement to remedy the violation.
As the claims here do not involve constitutional concerns, we cannot
conclude that any remedy short of seniority integration will not suffice to
remedy the alleged violation.
:
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equitable remedy of seniority integration impractical such that
an alternative money damage award would be appropriate.
The seniority integration sought by the LPP Claimants and the
Group of 31 could potentially result in the displacement of
many Continental pilots. Such displacement has the potential
to create an environment rife with hostility and low employee
morale, not to mention a detrimental effect on employer-
employee relations." The circumstances indicate that
seniority integration would not be a feasible remedy and that
an alternative remedy of monetary damages would be
appropriate. Therefore, we conclude that the right to seniority
integration gives rise to a “right of payment” such that the
remedy constitutes a “claim” dischargeable in bankruptcy.
We take care to note the boundaries of our holding. It is
not our purpose to suggest the award the arbitrator should
grant, if an award is warranted upon disposition of the LPP
dispute. Our holding is limited to how the claims should be
treated in bankruptcy. Simply put, we hold that any claim
based on an award of seniority integration arising out of the
resolution of the LPP dispute will be treated as a claim in
bankruptcy giving rise to a right of payment. As such, the
right to seniority integration is satisfiable by the payment of
money damages.
We note that nothing about the imposition of monetary damages as a
substitute for seniority integration frustrates the remedial purpose of the
LPPs. Cf. Franks, 424 U.S. at 771 (in a Title VII case, “the denial of
seniority relief to victims of illegal racial discrimination in hiring is
permissible ‘only for reasons which, if applied generally, would not
frustrate the central statutory purposes of eradicating discrimination
throughout the economy and making persons whole for injuries suffered
through past discrimination.’”). Indeed, the LPPs set forth as its scope and
purpose “to provide for compensatory allowances to employees who may
be affected by the proposed merger of ” the carriers. See discussion supra
note 2. An award of monetary damages is consistent with the articulated
scope and purpose, and is therefore appropriate.
a
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D. Arguments of Appellee/Cross-Appellant Continental
1. Dissolution of the Injunction
Continental challenges the district court’s ruling vacating
the injunction against the continuation of the Kasher
Arbitration on two grounds. First, it argues that contrary to
the district court’s conclusion, the permanent injunction,
imposed by the Plan of Confirmation, complied with the
mandate of Rule 65(d).'" Next, it contends that if the
permanent injunction did not comply with Rule 65(d), the
Statutory injunction referenced in the bankruptcy court’s
confirmation order survived the permanent injunction and is
valid. We need not decide whether the permanent injunction
failed to comply with the mandate of Rule 65(d). We
conclude that even assuming that the statutory injunction
survived the permanent injunction and is not subject to the
requirements set forth in Rule 65(d), Continental’s failure to
reject the collective bargaining agreement consistent with the
mandate of section 1113 of the Code renders the injunction
invalid.
Section 12.19 of the plan of reorganization provided:
12.19 Injunction Relating to Eastern Claims. This Joint Plan
permanently enjoins, and the Confirmation Order shall constitute and
provide for a permanent injunction against, any Person or entity,
including without limitation, (i) any present or former employee of
Eastern . . . (ii) any labor union or collective bargaining representative
acting or purporting to act on behalf of any such employees or former
employees . . . from commencing, conducing or continuing any suit,
arbitration, action or other proceeding in any place or forum against
any Debtor. . . . This injunction shall apply, without limitation, to any
suit, arbitration, action or proceeding.
(Debtors’ Revised Second Amended Joint Plan of Reorganization, § 12. 19).
Federal Rule of Civil Procedure 65(d) states:
Every order granting an injunction and every restraining order shall set
forth the reasons for its issuance; shall be specific in terms; shall
describe in reasonable detail, and not by reference to the complaint or
other document, the act or acts sought to be restrained. . . .
Fed.R.Civ.P. 65(d).
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The Confirmation Order issued by the bankruptcy court
specifically incorporated the statutory injunction prescribed
by the bankruptcy code. The order states:
In accordance with section 524 of the Bankruptcy Code...
this Order:
(ii) Operates as an injunction against the commencement or
continuation of an action, the employment of process, or an
act, to collect, recover or offset any such debt or Claim as a
personal liability of the Debtors... .
(Findings of Fact, Conclusions of Law and Order Confirming
The Debtors’ Revised Second Amended Joint Plan of
Reorganization).
Assuming, as the district court did and as Continental
argues, that the section 524 statutory injunction is not subject
to the requirements of Rule 65(d), we conclude that the
district court properly vacated the injunction against the
Kasher Arbitration. Section 1113 of the Code provides:
(a) The debtor in possession, or the trustee if one has
been appointed under the provisions of this chapter. . .
may assume or reject a collective bargaining agreement
only in accordance with the provisions of this section.
11 U.S.C. § 1113(a). The provision outlines the procedure
that a debtor or appointed trustee must follow to successfully
reject a collective bargaining agreement, including, but not
limited to: (1) the submission of a proposal to an authorized
representative of the employees affected by the terms of the
agreement prior to the filing of an application to reject the
agreement, 11 U.S.C. § 524(b)(1)(A); and (2) good faith
attempts to reach a “mutually satisfactory modification” of the
agreement, 11 U.S.C. § 524(b)(2).
The intent behind section 1113 is to preclude debtors or
trustees in bankruptcy from unilaterally terminating, altering,
or modifying the terms of a collective bargaining agreement
without following its strict mandate. In re Ionosphere, 922
F.2d at 989-90. Moreover, the provision operates to preclude
A - 33
the application of other bankruptcy code provisions to the
advantage of debtors and trustees to permit them to escape the
terms of a collective bargaining agreement without complying
with the requirements of section 1113. See id.
Continental does not dispute that it did not follow the
requirements set forth in section 1113 to reject the collective
bargaining agreement. Instead, Continental suggests that the
imposition of the injunction was consistent with the
bankruptcy court’s authority to determine the administrative
priority and status of the bankruptcy claims. Thus, it argues,
section 1113 cannot divest the bankruptcy court of
jurisdiction to exercise this authority and impose the
injunction. We disagree."
The injunction allowed Continental to avoid its
obligation to arbitrate the merger dispute under the LPPs. In
In re Ionosphere, the Court specifically held that the
application of the section 362 automatic stay provision to
effectuate this result in the absence of the debtor’s compliance
with the requirements of section 1113 was impermissible, as
its application would allow a debtor unilaterally to avoid its
obligation to arbitrate.” In re lonosphere, 922 F.2d at 993.
Here, the enforcement of the statutory injunction in the face
of Continental’s failure to follow the requirements of section
1113 is no different. As the enforcement of the injunction
would have the effect of permitting Continental to escape its
duty to arbitrate under the collective bargaining agreement,
we decline to enforce the statutory injunction in the absence
“* We have not been required previously to address the applicability of
arbitration under collective bargaining agreements when the employer is
in bankruptcy, although the issue was raised in a case we decided last
year. See Antol v. Esposto, 100 F.3d 1111, 1121 n.4 (3d Cir. 1996) (“{Wle
need not decide that interesting issue here.”). This case however requires
us to do so.
A - 34
of Continental’s compliance with the requirements to reject
the collective bargaining agreement."
2. Duty to Arbitrate
Finally, we reject Continental’s argument that it has no
duty to arbitrate the LPP dispute. Throughout this litigation,
Continental has premised its arguments on the assumption
that it is bound by the LPPs and has a duty to arbitrate the
LPP dispute. In so doing, Continental reaped enormous
benefits: (1) it was able to obtain a ruling that the claim based
on seniority integration could be treated as a right to payment
in bankruptcy, satisfiable by a monetary award; and (2) in
turn, it received backing from investors for its plan of
reorganization, which was critical to plan confirmation by the
bankruptcy court.” Now, Continental maintains that there has
7 Despite our conclusion that failure to comply with section 1113 bars
an injunction of the arbitration, we reject the Claimants’ contention that
the substitution of a monetary damage award, in lieu of seniority
integration is not permitted under section 1113 because it alters or
modifies the terms of the collective bargaining agreement. The
bankruptcy court’s determination of the administrative priority and status
of the claims was not based on an interpretation of the LPPs. Nor did it
predetermine the appropriate remedy warranted under the LPPs, thus
“nullifying” the agreement and infringing on the arbitrator’s jurisdiction.
Substitution of the equitable remedy in no way amounts to an alteration or
termination of the terms of the collective bargaining agreement.
16 ° ° ° o,° °
It is apparent that Continental assumed this position in efforts to
obtain judicial confirmation of its plan of reorganization. In its Motion for
Partial Summary Judgment, Continental stated:
1. [Debtors] make this Motion For Partial Summary Judgment On
Their Partial Objection to Claims Based On Certain Alleged Labor
Protective Provisions Involving The Air Line Pilots Association,
International (“ALPA”) And Eastern Air Lines, Inc. (“Eastern”) in
order to ensure that they will be able to reorganize successfully and,
more specifically, to satisfy a condition of the Investment Agreement
dated November 9, 1992 (“Investment Agreement’’), by and among [the
investors] and the Debtors. In addition to monetary damages, these
claims seek to require Continental to hire several thousand Eastern Air
Lines pilots, which if granted would necessitate the displacement of an
equal number of incumbent Continental pilots. Debtors seek in this
A - 35
been no determination that it is bound by the LPPs and that
the case should be remanded to the district court for a
determination on the merits of its duty to arbitrate the dispute.
In light of the overwhelming advantage that Continental
derived from maintaining the position that it was bound by the
collective bargaining agreement, and thus, had a duty to
arbitrate the LPP dispute, we refuse to allow Continental to
repudiate that representation and return to the district court to
litigate the issue whether it is bound by the agreement. See
EF Operating Corp. v. American Bldgs., 993 F.2d 1046, 1050
(3d Cir. 1993) (“one cannot Casually cast aside
representations, oral or written, in the course of litigation
simply because it is convenient to do so... a reviewing court
may properly consider the representations made in the
appellate brief to be binding as a form of judicial estoppel,
and decline to address a new legal argument based on a later
repudiation of those representations.”). Accordingly, we
conclude that Continental is bound by its prior representations
that it has a duty to arbitrate the LPP dispute.
Ii.
For the foregoing reasons, we affirm the district court’s
decision in all respects.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
Motion a legal determination that the “LPP Claims” . . . are. at best,
dischargeable, prepetition general unsecured claims within the meaning
of the Bankruptcy Code Section 101(5).
A - 36
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Bankruptcy Court
Case Nos. 90-932 through 90-984
In re: CONTINENTAL AIRLINES, INC. et ai.,
Debtors,
AIRLINE PILOTS ASSOCIATION, INTERNATIONAL,
and LPP CLAIMANTS,
Appellants,
v.
CONTINENTAL AIRLINES, INC. et ai.,
Appellees.
C.A. No.: 93-163, 93-164, 93-177,
93-178, 93-250, 93-255, 94 - 496
Consol. 93-163 LON
ORDER
NOW, THEREFORE, for the reasons set forth in the
Court’s Memorandum Opinion issued this date,
IT IS ORDERED that:
1. The appeal originally captioned 93-163 is denied,
and the bankruptcy court’s Order is affirmed.
2. The appeal originally captioned 93-164 is denied,
and the bankruptcy court’s Order is affirmed.
3. The appeal originally captioned 93-177 is denied,
and the bankruptcy court’s Order is affirmed.
A - 37
4. The appeal originally captioned 93-178 is denied,
and the bankruptcy court’s Order is affirmed.
5. The appeal originally captioned 94-496 is denied,
and the bankruptcy court’s Order is affirmed.
6. The appeals originally captioned 93-250 and 93-255
are granted in part and denied in part. The bankruptcy court’s
Order of April 16, 1993, is affirmed, except the permanent
injunction contained in Section 12.19 of the Plan of
Reorganization is hereby vacated.
11229/95 /s/
Joseph J. Longobardi, D. J.
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Bankruptcy Court
Case Nos. 90-932 through 90-984
In re: CONTINENTAL AIRLINES, INC. et al.,
Debtors,
AIRLINE PILOTS ASSOCIATION, INTERNATIONAL,
and LPP CLAIMANTS,
Appellants,
v.
CONTINENTAL AIRLINES, INC. et al.,
Appellees.
C.A. No.: 93-163, 93-164, 93-177,
93-178, 93-250, 93-255, 94 - 496
Consol. 93-163 LON
Stephen W. Spence, Esquire, Phillips, Goldman & Spence,
Wilmington, Delaware, Attorney for Claimant-Appellant Air Line
Pilots Association; Michael J. Isaacs, Esquire, Agostini, Levitsky
& Isaacs, Attorney for Claimant-Appellant LPP Claimants.
Laura D. Jones, Esquire, Young, Conaway, Stargatt & Taylor,
Wilmington, DE; Attorneys for Debtors-Appellees.
MEMORANDUM OPINION
November 29, 1995
Wilmington, Delaware
Se
A - 39
Ish.
LONGOBARDI, District Judge
I. FACTUAL BACKGROUND
This bankruptcy appeal involves claims against the
debtor, Continental Airlines, Inc. (“Continental”), by two
parties: the Air Line Pilots Association, International
(“ALPA”) and a group of approximately six hundred former
Eastern Airline Pilots (“LPP Claimants”). The claims arise
out of labor protective provisions (“LPPs”) included in a
collective bargaining agreement executed by Eastern Air
Lines, Inc. (“Eastern”) and ALPA.
The collective bargaining agreement was signed at 2:45
a.m. on February 24, 1986. Eastern Air Lines v. Airline Pilots
Ass'n Int'l, 670 F.Supp. 947, 949 (S.D. Fla. 1987), aff'd 861
F.2d 1546 (llth Cir 1988). The collective bargaining
agreement simply provided, “LPP’s & Takeover Similar to
TWA -- need to work out between EAL /ALPA legal
counsel.” In an arbitration decision dated September 22, 1989,
a panel of the Eastern-ALPA System Board of Adjustment
chaired by Professor Frank Elkouri interpreted that language
to encompass sections 2(a), 3, and 13 of the standard
“Allegheny-Mohawk LPP’s.””
In accordance with those LPPs, if Eastern and another
carrier were to “unify, consolidate, merge, or pool in whole or
in part their separate airline facilities or any of the operations
Or services previously performed by them” in a manner
affecting the seniority rights of the Eastern pilots, “provisions
shall be made for the integration of seniority lists in a fair and
equitable manner.” Provisions for seniority integration were
to have been made through collective bargaining, but if
collective bargaining failed to yield results, then the dispute
"At one time, the Civil Aeronautics Board (“CAB”) required merging
airlines to adopt these form LPPs as a condition of approving a merger.
Since deregulation, the Department of Transportation generally leaves the
issue of LPPs to collective bargaining.
A -40
was to be referred to an arbitrator selected from a panel of
seven arbitrators furnished by the National Mediation Board.
The LPPs further provided that the expenses of the arbitrator
were to be shared equally by the carrier and either (1) the
organization representing the employees or (2) if
unrepresented, the employee or group of employees.
Shortly after the collective bargaining agreement
between Eastern and ALPA was signed, Texas Air
Corporation (“Texas Air’) acquired Eastern. Eastern Air
Lines v. Airline Pilots Ass'n Int’l, 861 F.2d at 1548. Texas Air
was Continental’s corporate parent company. ALPA and the
LPP Claimants allege that after Texas Air acquired Eastern,
Eastern and Continental merged or combined in a way that
triggered the LPPs. Continental asserts that all of the events
constituting an alleged merger occurred before Continental
filed for bankruptcy on December 3, 1990, while ALPA
contends that the merger continued after the bankruptcy
filing. (D. I. 9 at 12). ALPA relies on events which occurred
on February 14, 1991, to show that the merger of Eastern and
Continental continued after December 3, 1990. The
bankruptcy court, however, dismissed these factual
allegations, first offered at oral argument, stating “Defendants
have not, as required by Fed.R.Civ.P. 56(e), set forth specific
facts by affidavits or as otherwise provided by the Rule
showing that there is a genuine issue for trial.”
Despite the requests of ALPA, Eastern and Continental
refused to bargain over the integration of seniority lists.
ALPA then attempted to arbitrate the LPP dispute with the
National Mediation Board. On March 9, 1989, however,
Eastern had filed a petition for reorganization under Chapter
11 of the Bankruptcy Code. Eastern cited the Bankruptcy
Code’s automatic stay of litigation and refused to participate
in the arbitration. The United States Court of Appeals for the
Second Circuit held that Eastern must submit to arbitration
: Since June 6, 1990, Texas Air has been known as Continental
Airlines Holdings, Inc.
A-41
because “[a]pplication of the automatic stay to ALPA’s attempt to
invoke [the arbitration] provision of the collective bargaining
agreement would allow Eastern unilaterally to alter the collective
bargaining agreement by avoiding its obligation to arbitrate.” Jn
re Ionosphere Clubs, Inc., 922 F.2d 984, 992-93 (2d Cir. 1990),
cert. denied, 502 U.S. 808 (1991).
Continental filed a petition for Chapter 11 bankruptcy in
Delaware on December 3, 1990. Subsequently, ALPA initiated an
arbitration against Eastern regarding the LPP dispute before
Richard R. Kasher (“Kasher Arbitration”). ALPA claimed to be
entitled to three types of damages for the alleged breach of the
LPPs. (D. I. 9 at 9). ALPA sought (1) the prospective integration
of seniority lists; (2) back pay from the effective date of the
merger to the date of the arbitration award; and (3) front pay from
the issuance of the arbitration award to the date that the Eastern
pilots would complete training and begin revenue flying for
Continental. The only money that may still be available to Satisfy
the claims for monetary relief is a reserve of unallocated stock.
(See D. I. 15, Exhibit I, pp. 25-26). ALPA claims that equitable
relief remains viable because Continental is once again a healthy,
operating airline capable of integrating seniority lists if so ordered
by an arbitrator. :
On April 8, 1991, Arbitrator Kasher held a pre-hearing
conference. He invited Continental, Texas Air, and others to file
brief statements of position prior to that conference. Continental
filed a statement arguing that the Bankruptcy Act automatically
Stayed all legal proceedings, including the Kasher Arbitration, as
of December 3, 1990. Thus, argued Continental, the Kasher
arbitration could not proceed without the express permission of
U.S. Bankruptcy Judge Helen S. Balick. (Kasher Arbitration
(“KA”), op., at 20). Eastern argued that the determination of
whether the LPPs had been triggered should be made by the
System Board of Adjustment rather than by Arbitrator Kasher,
a Section 13 LPP Arbitrator.’ (KA at 4).
* “Section 13 LPP Arbitrator” refers to an arbitrator appointed
pursuant to section 13 of the Allegheny-Mohawk LPPs.
A-42
Arbitrator Kasher decided that he had jurisdiction to
ascertain whether Eastern and Continental had “merged”, and if
they had, to determine the appropriate remedies. (KA at 17, 20-
21). He found that ALPA’s claim did not “meet the standard
indicia of a ‘grievance”” which would have been submitted to the
System Board of Adjustment. (KA at 20). Arbitrator Kasher
found that ALPA “does not appear to have alleged, before this
Arbitrator, that Eastern violated a specific term or condition in the
collective bargaining agreement. . . .” (KA at 20). Therefore, in
accordance with Section 13 of the LPPs, Arbitrator Kasher
asserted his jurisdiction to hear the LPP claims.
On April 16, 1993, Judge Balick entered an Order
confirming Continental’s Joint Second Plan of Reorganization, as
Modified (“Plan of Reorganization”). The Plan of Reorganization
took effect on April 27, 1993. In the Plan of Reorganization, the
bankruptcy court permanently enjoined any arbitration involving
the LPPs, including the Kasher Arbitration.
An important piece of the Plan of Reorganization was the
investment of $450 million dollars into Continental. One of the
conditions of that investment was a judicial determination that
ALPA and the LPP claimants were not entitled to prospective
relief for any breach of the LPPs. Another condition of the
investment was an overall limit on administrative claims. (D. L.
15, Exhibit C). When the bankruptcy court confirmed
Continental’s Plan of Reorganization, it noted that the $450
million investment was “crucial to the feasibility of the
[Reorganization] Plan.” (D. I. 15, exhibit 1.
In confirming the Plan of Reorganization, the bankruptcy
court relied on orders it had entered on February 11, 1993, in
which the court had found that the LPP claims were, at most,
general unsecured prepetition claims which could be fully
satisfied without the granting of equitable relief.’ Neither ALPA
* Continental and ALPA had stipulated that “in making its findings
concerning feasibility . . . the Bankruptcy Court may rely and base its
findings upon its Order, dated February 11, 1993, regarding ALPA’s LPP
claims.
A - 43
nor the LPP Claimants moved to stay the confirmation order. While
others did move for a stay, Judge Balick denied those motions. On
April 27, 1993, the Plan of Reorganization was substantially
consummated with the investment by Air Canada and Air Partners
of $450 million, the consensual restructuring of approximately $1.7
billion of secured debt and $5.4 billion of lease obligations, and the
commitment of four classes of unsecured creditors to exchange
approximately $3 billion in general unsecured claims for stock in a
reorganized Continental.
On March 24, 1994, ALPA and Continental settled nearly all
litigation, grievances, arbitration, and bankruptcy claims that had
previously been brought by ALPA (“‘Settlement Agreement’’). The
Settlement Agreement was approved by the bankruptcy court on
July 19, 1994. As part of that Settlement Agreement, ALPA agreed
to withdraw its appeals with prejudice.*
The Settlement Agreement specifically states, however, that
ALPA’s waiver of its LPP claims has no effect upon “any claims
or rights of any pilot who has filed a claim for such in the
Delaware Bankruptcy Proceedings and does not participate in this
Settlement Agreement.” (D. I. 50, item 3, { 8 (B)). The LPP
Claimants did file claims in the Delaware bankruptcy proceedings
and did not participate in the Settlement Agreement.
Il. PROCEDURAL POSTURE
A. Orders
ALPA and the LPP Claimants appeal from four orders
issued by the bankruptcy court. The first two orders, issued on
February 11, 1993, granted partial summary judgment in favor of
Continental. The first Order held that (1) ALPA’s LPP claims
constitute “claims” within the meaning of the Bankruptcy Code
because they “can be satisfied by money damages in the form
of back pay and/or front pay;” (2) “the LPP claims are, at best,
general unsecured prepetition claims and are dischargeable”
because the transactions relied upon by ALPA to prove the
5
ALPA has not yet withdrawn its appeals.
A-44
merger of Continental and Eastern occurred prior to December
3, 1990; and (3) the LPP claims are not entitled to
administrative priority. ALPA and the LPP Claimants appeal
from this Order. (Civ. A. 93-177 and 93-178). The second
Order of February 11, 1993, restated many of the conclusions
of the first Order and provided that the first Order was binding
upon the LPP Claimants, in addition to ALPA. ALPA and the
LPP Claimants appeal this second Order. (Civ. A. 93-163 and
93-164).
The following issues are presented by the appeals of the
February 11, 1993, Orders:
(1) Whether the Bankruptcy Court has the power to
determine the appropriate remedy for Continental’s breach of
the Labor Protective Provisions?
(2) Whether the Bankruptcy Court erred in ruling
that Continental’s obligation to integrate the former Eastern
pilots into the Continental pilot seniority list constitutes a
“claim” that is dischargeable pursuant to Section 101(5) of the
Bankruptcy Code?
(3) Whether the Bankruptcy Court erred in ruling
that no portion of ALPA’s claim is entitled to administrative
priority?
(D. I. 1).°
The third Order, entered on April 16, 1993, confirmed
Continental’s Plan of Reorganization. The Plan of Reorganization
contained a permanent injunction enjoining ALPA and the LPP
Claimants from submitting the LPP dispute to arbitration. In
addition, the Plan of Reorganization expressly incorporated the
February 11, 1993, Orders. Both ALPA (Civ. A. 93-250) and the
6
ALPA requests that the court “determine that the bankruptcy court
lacked jurisdiction to determine the appropriate remedy for Continental’s
breach of LPPs because, pursuant to the terms of the LPPs, only an
arbitrator can determine the appropriate remedy.” (D. I. 9 at 6). In the
alternative ALPA argues “that the future employment with seniority that
ALPA seeks constitutes a right to equitable relief that cannot be settled as
a general unsecured claim.” (D. I. 9 at 6).
A -45
LPP Claimants (Civ. A. 93-255) appeal from the bankruptcy
court’s confirmation of the Plan of Reorganization. Because the
April 16, 1993, Order incorporates the February 11, 1993, Orders,
the appeal of the April 16 Order presents those same issues. In
addition, the following questions are raised: (1) whether the
bankruptcy court erred by “re-adjudicating and incorporating”
prior orders that were on appeal; and (2) whether the bankruptcy
court erred in permanently enjoining ALPA and the LPP
Claimants from arbitrating the LPP dispute. (Civ. A. 93-255, D. I.
1).
The fourth Order, issued on September 9, 1994, denied
the LPP Claimants’ motion for an extension of time to appeal
the Bankruptcy Court’s July 19, 1994, Order which approved
ALPA-Continental Settlement Agreement. The bankruptcy
court stated in its Order of July 19, 1994, that
“[a]ppproximately two-thirds of the pilots have elected to
participate in the Settlement, so that the Settlement disposes
of the greatest bulk of claims, and greatly reduces the costs of
litigation.” (Civ. A. 94-496, D. I. 9 at A-79). Furthermore,
the court held, “Those who objected [to the settlement] had
the clear recourse of refusing to participate in the Settlement
and retaining their claims. Approximately a third of the pilots
did so.” (Civ. A. 94-496, D. L. 9 at A-79). On August 15,
1994, Continental notified this court, and by carbon copy the
LPP Claimants, that it intended to file a motion to dismiss the
appeal of the LPP Claimants on the grounds that ALPA’s
settlement of the underlying claims was binding upon them.
(Civ. A. 94-496, D. L. 9 at A-82). For the first time, the LPP
Claimants had reason to believe that their LPP claims had
been settled despite their non-participation in the Settlement
Agreement. On August 18, 1994, the LPP Claimants filed a
motion to extend the time to file a notice of appeal. The
Bankruptcy Court denied this request. The LPP Claimants
appeal that denial. (Civ. A. 94-496).
A - 46
B. Motions
On May 18, 1993, Continental filed a motion to Dismiss the
pending Appeals of ALPA and the LPP Claimants as moot (“First
Motion to Dismiss as Moot”). In that motion, Continental asserted
that because the LPP Claimants and ALPA failed to move to stay
the bankruptcy court’s confirmation order approving Continental’s
Plan of Reorganization and because parties who invested in
Continental did so in reliance on the February 11 Orders which
were incorporated into that confirmation order, the court cannot
now grant effective relief to ALPA or the LPP Claimants. As such,
Continental argues that the appeals should be dismissed as moot.
(D. I. 14).
On September 12, 1994, Continental filed another motion to
dismiss the appeals of ALPA and the LPP Claimants as moot.’ In
the brief accompanying that motion Continental argued that ALPA
represented the LPP Claimants in the Kasher Arbitration, which
was the forum in which the LPP dispute was to be decided. (D. I.
49). ALPA has settled the LPP dispute with Continental. That
Settlement Agreement was approved by the bankruptcy court on
July 19, 1994. Therefore, argues Continental, ALPA and the LPP
Claimants no longer have standing to prosecute the LPP dispute.
First, this court will address Continental’s mootness
motions. Then, each point of the appeals will be resolved
seriatim.
Ill. DISCUSSION
A. Motions
1. First Motion to Dismiss as Moot
The issue presented by this motion is whether it is
impossible or inequitable for this court to grant effective relief
to the appellants. The United States Supreme Court has held
that where “an event occurs while a case is pending on appeal
that makes it impossible to grant ‘any effectual relief
” This is the motion to which Continental had referred in its letter of
August 15, 1994.
A - 47
whatever’ to a prevailing party, then the appeal must be
dismissed.” Church of Scientology of Cal. v. United States,
506 U.S. 9, ___ , 113 S. Ct. 447, 449 (1992) (quoting Mills v.
Green, 159 U.S. 651, 653 (1895)). This is a constitutional
restriction on the power of an appellate court. A federal court
has “no authority” to declare rules of law that cannot affect
the matter in issue. Jd. Numerous Courts of Appeals have
applied Church of Scientology under the rubric of
constitutional mootness. In re Best Products Co., 68 F.3d 26,
30 (2d Cir. 1995); Brooks vy. Georgia State Board of
Elections, 59 F.3d 1114, 1118-19 (11th Cir 1995); Nasatka v.
Delta Scientific Corp., 58 F.3d 1578, 1580-81 (Fed. Cir.
1995); National Football League Players Ass’n, 56 F.3d
1525, 1528 (D.C. Cir. 1995); In re Grand Jury Subpoenas
Dated December 7 and 8, 40 F.3d 1096, 1099 (10th Cir.
1994), cert. denied sub nom. Nakamura v. United States, 115
S.Ct. 1957 (1995).
The Third Circuit Court of Appeals has held that an
appeal will be dismissed as moot when, during the pendency
of an appeal, events occur which prevent the appellate court
from granting effective relief. In re Joshua Slocum Ltd., 922
F.2d 1081, 1085 (3d Cir. 1990); In re Highway Truck Drivers
& Helpers Local Union No. 107, 888 F.2d 293, 297 (3d Cir.
1989); In re Cantwell, 639 F.2d 1050, 1053 (3d Cir. 1981); Jn
re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143, 150 n.
6 (3d Cir. 1986).
In the case of In re Swedeland Dev. Group, Inc., 16 F.3d
552, 559 (3d Cir. 1994), the Court of Appeals discussed
“mootness predicated on statutory and prudential
considerations.” In-a footnote, however, the court mentioned
that the appeal of one of the orders “may have been moot in
the district court on Article III constitutional grounds”
because the court could “perceive of no relief which [could]
be granted [upon] reversal.” Swedeland Dev. Group, 16 F.3d
at 559 n. 5. The court applied Church of Scientology, stating
that an appeal is not moot if a court can fashion some form of
meaningful relief, even if it is not full relief. The court noted
A - 48
that its decisions in Cathcart and Cantwell were in accord
with Church of Scientology. See Swedeland Dev. Group, 16
F.3d at 560. In a previous decision, the Court of Appeals had
ruled that the inability to grant effective relief was a
constitutional barrier to the exercise of appellate jurisdiction.
See In re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143,
150 n.6 (3d Cir. 1986).
The Second Circuit Court of Appeals has delineated
constitutional mootness from equitable mootness in the
bankruptcy context. The Second Circuit has found that where
no effective relief whatsoever can be granted to the prevailing
party, the appeal must be dismissed by virtue of the “case or
controversy” requirement of Article III of the Constitution. Jn
re Best Products, 68 F.3d at 30. Even where relief “could
conceivably be fashioned,” however, the case should be
dismissed as moot if to grant the relief would be inequitable.
Id. (quoting In re Chateaugay Corp., 988 F.2d 322, 325 (2d
Cir. 1993)). In sum, if relief is impossible, the Constitution
demands dismissal of the appeal. If relief is possible but
inequitable, then equity compels dismissal. See also In re
Spirtos, 992 F.2d 1004, 1006-07 (9th Cir. 1993) (appellate
court must be able to fashion relief that is both effective and
equitable); In re Public Serv. Co. of New Hampshire, 963
F.2d 469, 473 (Ist Cir.), cert. denied sub nom. Rochman v.
Northeast Utils. Serv. Co., 113 S.Ct. 304 (1992) (case may be
ruled moot if, in light of intervening events, granting the
requested relief would be either inequitable or impracticable).
Equitable mootness in bankruptcy proceedings “centers
on the important public policy favoring orderly reorganization
and settlement of debtor estates by affording finality to the
judgments of the bankruptcy court.’” Jn re Public Service Co.
of New Hampshire, 963 F.2d 469, 471-72 (Ist Cir. 1992)
(quoting Jn re Revere Copper & Brass, Inc., 78 B.R. 17, 23
(S.D.N.Y. 1987)). The doctrine in the bankruptcy context
requires the balancing of many factors, including (1) whether
A-49
substantial consummation of the bankruptcy plans" or a
comprehensive change in circumstances has occurred; (2)
whether the appellant has obtained a stay pending appeal; and
(3) the nature of relief sought by appellant. In re Combined
Metals Reduction Co., 557 F.2d 179 (9th Cir. 1977).
In addition to these factors, courts have considered
whether the relief requested might have a negative effect on
third parties not before the court or would affect the
reemergence of the debtor as a revitalized entity. In re Public
Service Co. of New Hampshire, 963 F.2d 469, 474 (Ist Cir.
1992); In re Club Assocs., 956 F.2d 1065, 1069 n.11 (11th Cir
1992); Matter of Block Shim Dev. Co.-Irving, 939 F.2d 289,
291 (Sth Cir. 1991). In Miami Center Ltd. Partnership v. Bank
of New York, 838 F.2d 1547, 1555 (11th Cir.), cert. denied,
488 U.S. 823 (1988), the court also considered “the passage
of time.” One bankruptcy court thought the primary
consideration to be “the relative fault of the interested parties
in creating the resulting unfortunate situation.” In re B. Cohen
& Sons Caterers, Inc., 147 B.R. 369, 378 (Bankr. E.D.Pa.
1992). In sum, invoking the doctrine of equitable mootness
requires some consideration of all of these factors.
The first factor to be considered is whether substantial
consummation of the bankruptcy plan or a comprehensive
change in circumstances has occurred. Substantial
consummation, according to the Bankruptcy Code, means:
"Where the court cannot grant the relief requested without disturbing
consummated transactions, a bankruptcy appeal will be dismissed as moot.
In re Delaware and Hudson Ry. Co., 129 B.R. 388, 395 (D.Del. 1991) (J.
Latchum). The Second Circuit has held that substantial consummation will
not moot the appeal if (1) a court can still order some effective relief; (2)
such relief will not affect the emergence of the debtor from bankruptcy as
a healthy corporate entity; (3) relief would not unravel intricate
transactions and create an unmanageable situation for the bankruptcy
court; (4) the parties adversely effected have notice of the appeal and an
opportunity to participate; and (5) the appellant pursued a stay if the
failure io do so created a situation in which it would be inequitable to
reverse the order. Jn re Chateaugay, 10 F.3d 944, 952-53 (2d Cir. 1993).
A -50
(A) transfer of all or substantially all of the property
proposed by the plan to be transferred; (B)
assumption by the debtor or by the successor to the
debtor under the plan of the business or of the
management of all or substantially all of the property
dealt with by the plan; and (C) commencement of
distribution under the plan.
11 US.C.A. § 1101(2). The existence of substantial
consummation is not the end of the inquiry, but one step in the
determination of whether effective relief can be granted. In re
AOV Indus., Inc., 792 F.2d 1140, 1148-49 (D.C. Cir. 1986),
vacated in part on other grounds, 797 F.2d 1004 (D.C. Cir.
1986). Judge Farnan of this court has already found substantial
consummation of Continental’s Bankruptcy Plan. See In re
Continental Airlines, Inc., Civ. A. 93-195, D. L. 55 (D.Del.
December 30, 1993) (memorandum opinion), rehearing
denied, Civ. A. 93-195, D. I. 70 (D.Del. September 1994). This
court agrees that the Plan of Reorganization has been
substantially consummated.
The second inquiry is whether the appellant sought a stay
of the order from which it appeals. An appellant has no
obligation to seek a stay pending appeal. Matter of T & H
Diner, Inc., 108 B.R. 448, 451-52 (D.N.J. 1989. Furthermore,
the failure to obtain a stay pending appeal does not alone moot
the appeal when effective relief remains available. Jn re Public
Service Co. of New Hampshire, 963 F.2d 469, 473 (ist Cir.
1992); In re Club Assocs., 956 F.2d 1065, 1070 (11th Cir
1992); United Merchants, 138 B.R. at 429. However, there are
“a myriad of circumstances” in which obtaining a stay is
necessary tO preserve a party’s position and avoid the
progression of events and circumstances that might moot the
appeal. Jn re Highway Truck Drivers & Helpers Local 107, 888
F.2d 293, 298 (3d Cir. 1989). Here, neither ALPA nor the LPP
Claimants sought a stay of the orders from which they appeal.
The Plan of Reorganization went forward and was substantially
consummated.
A-51
A third aspect to the equitable balancing of interests
concerns the relief requested by the parties. The appellants
request several different remedies. ALPA and the LPP
Claimants ask this court to find that the bankruptcy court had
no jurisdiction to determine that their claims for equitable
relief could be satisfied by money damages. The appellants
also seek a ruling that any damages flowing from the LPP
claims are entitled to administrative priority as wages, at least
to the extent that those damages represent back and front pay
that would have been earned while Continental was in
bankruptcy. In essence, the LPP claimants want to take their
claims to an arbitrator who would be empowered to grant both
eguitable and monetary relief, and then to recover any money
damages that reflect post-petition back and front pay as an
administrative priority.’ This full measure of relief would
jeopardize the Plan of Reorganization and could destroy the
substantial post-bankruptcy progress of Continental.
The fourth step of the equity analysis requires the court
to consider the potential effect of the requested relief on third
parties not before the court. The relevant third parties are
those who invested in Continental in reliance on the orders
from which ALPA and the LPP Claimants appeal. The
prevailing party may treat a bankruptcy court order as final,
whether or not an appeal is pending. T & H Diner, 108 B.R. at
451-52. Thus, Continental and its investors were not wrong to
rely on the orders now on appeal. In the case of In re Holywell
Corp., 901 F.2d 931, 933 (11th Cir 1990), cert. denied, Miami
Center Lid Partnership v. Bank of New York, 498 U.S. 1041
(1991), a bank purchased property in reliance on the
bankruptcy court’s determination of an interest rate. The court
of appeals refused to tamper with the interest rate, because it
“would strike at a crucial element of the reorganization plan”
on which the investor had relied. Jd. at 934. Yet, investors
9
Because the LPP Claimants are not parties to the Kasher Arbitration,
which has been settled, the LPP Claimants would essentially be starting
anew in their efforts to integrate the seniority lists.
A -52
should consider the risk that a bankruptcy order will be
reversed:
We conclude that all parties proceeded to
implement the plan with knowledge that the district
court’s determination was subject to reversal upon
appeal. Thus, although challenging the plan or
seeking a stay pending appeal was preferable,
tenant’s failure to do so does not render this appeal
moot.
In re Flagstaff Realty Assocs., 60 F. 3d 1031, 1036 (3d Cir.
1995).
In the case of Jn re Information Dialogues. Inc., 662 F.2d
475, 476-77 (8th Cir. 1981), the Eighth Circuit recognized the
tension between providing appropriate appellate review of
bankruptcy court orders and allowing reorganizations to go
forward in reliance on those orders. See also, Club Assocs.,
956 F.2d at 1065 (test for mootness balances “equitable
considerations of finality and good faith reliance on a
judgment” against “the right of a party to seek review of a
bankruptcy court order”). The court in Information Dialogues
held that where substantial elements of the reorganization
plan have been implemented, where effective relief may not
be able to be granted, and where the appellant has failed to
request a stay of the confirmation order, the equities favor
dismissal. Jd.
Another important consideration is whether the relief
requested would affect the re-emergence of the debtor as a
revitalized entity. Continental has emerged from bankruptcy.
The airline is doing well. Granting the requested relief could
put Continental back into bankruptcy, jeopardizing the
successes of the past several years.
A final consideration is whether the passage of time
would make any reversal of the bankruptcy court inequitable.
The orders considered in this appeal were entered well over
two years ago. Continental has relied on those orders in its
reorganization. Outside investors have relied on those orders
in deciding to invest in Continental. In bankrupicy
A - 53
proceedings the passage of time often brings changed
circumstances. Having neglected to move for a stay, ALPA
and the LPP Claimants cannot avoid the consequences: a
substantially consummated Bankruptcy Plan built upon the
reliance of third party investors.
When determining whether an appeal has been rendered
moot, the district court must scrutinize each individual claim
to determine whether effective relief may be granted. Matter
of Andrucetti, 975 F.2d 413, 418 (7th Cir. 1992); In re AOV
Indus., Inc., 792 F.2d 1140, 1149 (D.C.Cir. 1986). Hence, an
evaluation of each of the issues on appeal follows.
The administrative priority claim is dismissed for
mootness.” The $450 million investment was conditioned
upon an overall limit on administrative claims and upon a
judicial determination that ALPA and the LPP Claimants
were not entitled to equitable relief. That investment was, in
the words of the bankruptcy court, “crucial to the feasibility
of the [Reorganization] Plan.” To reverse the bankruptcy
court on this matter could jeopardize the Plan of
Reorganization and Continental's successful emergence from
bankruptcy. Any relief this court might be able to fashion
would be inequitable to Continental and its third party
investors.
The challenge to the bankruptcy court’s jurisdiction will
not be dismissed as moot. An objection to subject matter
" To the extent that the administrative priority claim is later found not
to have been moot, this court holds that the appellants’ claims are not
entitled to administrative priority for the reasons expressed by Judge
Latchum in Jn re Continental Airlines, Inc. 148 B.R. 207 (D.Del. 1992).
"This fact distinguishes this case from in re AppleTree Markets, 1993
U.S. Dist LEXIS 8411 (S.D.Tex. May 24, 1993). In that case, the court
found that “an explanation of how the various transactions consummated
in reliance on the confirmed Plan or the survival of AppleTree as a viable
business would be affected by a successful appeal of the order rejecting
the CBAs” was “[nJjotably absent” from the debtor's motion. /d. at *7. In
the present case, a successful appeal on the issue of administrative priority
would demolish a cornerstone of the Investment Agreement.
A - 54
jurisdiction may be raised at any time. Booth v. United States,
990 F.2d 617, 620 (Fed. Cir. 1993); Huddleston v. Nelson
Bunker Hunt Trust Estate, 109 B.R. 197, 201 (N.D. Tex.
1989), aff'd, 935 F.2d 1290 (Sth Cir. 1991). If the bankruptcy
court had no jurisdiction, then its order is void. See Williams
v. Life Sav. and Loan, 802 F.2d 1200 (10th Cir. 1986).
Therefore, this court must determine whether the bankruptcy
court had jurisdiction to determine that the equitable relief
requested could be satisfied by a money judgment.
The question of whether the equitable right to seniority
list integration gives rise to a right of payment, making it a
claim in bankruptcy, is not moot. While one condition of the
Settlement Agreement was a judicial determination that the
appellants were not entitled to equitable relief, the conclusion
that equitable relief may be granted would not give rise to the
same draconian consequences as would a finding that the LPP
claims are entitled to administrative priority. If this court were
to find that the right to seniority list integration did not give
rise to a right of payment, then the arbitrator would be free to
order the fair and equitable integration of seniority lists. In
making his or her decision, the arbitrator could take into
account Continental’s financial condition so as to prevent a
slide back into bankruptcy. Because an arbitrator could
structure the integration of seniority lists in a way that would
not unduly risk Continental’s continued progress or the
investments of third parties, this court will decide whether the
asserted right to seniority list integration constitutes a claim in
bankruptcy.
* Continental argues that a “forced ‘date of hire’ seniority integration
would entail up to $100 million in retraining costs” and the “displacement
of thousands of Continental pilots.” The court notes that this argument was
made prior to the Settlement Agreement. The present consequences of
seniority list integration would certainly be less drastic. In addition, the
arbitrator is not required to integrate the seniority lists strictly by “date of
hire.” An arbitrator would be charged with integrating the seniority lists in
a fair and equitable manner. If a strict “date of hire” integration scheme
would be inequitable, an arbitrator would not order it.
=
A-55
The other issues raised on appeal are not moot. If the
bankruptcy court erred by incorporating the February orders
into the April order, this court would not be required to strike
down the entire Plan of Reorganization, but could fashion
more limited relief. In addition, if the bankruptcy court
erroneously granted the permanent injunction against
arbitration, the remedy would be to vacate the injunction and
allow arbitration to go forward. In light of the arbitrator’s
duty to achieve a fair and equitable result, the court feels
confident that an arbitrator could fulfill that duty without
jeopardizing the reorganization. Finally, Continental’s First
Motion to Dismiss as Moot does not encompass the appeal of
the LPP Claimants for additional time to appeal the approval
of the Settlement Agreement.
In sum, the claim for administrative priority for back and
front pay which arose after Continental’s petition for
bankruptcy was filed is moot. All other claims survive
Continental’s First Motion to Dismiss as Moot.
2. Second Motion to Dismiss as Moot.
The issue raised in the Second Motion to Dismiss as
Moot is whether the Settlement Agreement signed by ALPA
moots the LPP dispute, thereby mooting the appeal of both
ALPA" and the LPP Claimants. Continental argues that it has
settled with the only party Capable of asserting the right to
seniority list integration, so the LPP dispute is now moot.
While the parties dispute whether ALPA represents the LPP
Claimants, representation is irrelevant.'* The issue is whether
* Continental does not seek to enforce the promise made by ALPA to
withdraw its appeal. This court sitting as an appellate court, will not do so
sua sponte.
“ If ALPA was not the collective bargaining representative of the LPP
Claimants, then it could not settle the claims of the LPP Claimants. If
ALPA was the collective bargaining representative of the LPP Claimants.
then while ALPA had the power to settle the claims of the LPP Claimants.
the language of the Settlement Agreement makes clear that ALPA did not
settle those claims.
A - 56
individual pilots can assert a right to seniority list integration
under the collective bargaining agreement, and if so, whether
the Settlement Agreement disposes of those rights.
The reply brief of Continental demonstrates that the
Settlement Agreement had no effect at all on the rights of the
LPP Claimants:
The settlement was plainly intended to leave
individual pilots in the same position they were
prior to the settlement -- no better, no worse.
(D. I. 55 at 2). The language of the Settlement Agreement,
and the briefs of the other parties, support this statement.
Thus, Continental cannot seriously claim that the settlement
mooted the appeals. Rather, Continental asserts that the
seniority integration rights were group rights that could only
be asserted by ALPA, and the individual LPP Claimants never
had standing to bring the LPP claims."
The substantive issue is, as previously noted, whether the
LPP Claimants have individual rights to seniority integration
under the LPPs. Before reaching that issue, however, this
court must decide that it, rather than an arbitrator, has the
power to make that determination. This depends upon
whether seniority is a “major dispute” or a “minor dispute.”
As stated by the Supreme Court, “major disputes seek to
create contractual rights, minor disputes to enforce them.”
Consolidated Rail Corp. v. Railway Labor Executives’ Ass'n,
491 U.S. 299, 302 (1989). A minor dispute “relates either to the
meaning or proper application of a particular provision. . . ” Jd.
at 303 (quoting Elgin J. & E.R. Co. v. Burley, 325 U.S. 711,
723 (1945)); see also United Transp. Union v. Conemaugh &
Black Lick R.R. Co., 894 F.2d 623, 628 (3d Cir. 1990) (“minor
dispute concerns the meaning and application of provisions of
the negotiated agreement”). The burden of showing that a
“ Continental does not claim that the LPP Claimants have no standing
on appeal. Because the second February 1993 Order specifically bound the
LPP Claimants, they have standing to appeal that order.
a
A -57
dispute is minor is “relatively light.” General Comm. of
Adjustment, United Transp. Union, Western Maryland Ry. Co.
v. CSX R.R. Co., 893 F.2d 584, 591-(3d Cir. 1990). When in
doubt, courts construe the dispute as minor. Jd.; Air Line
Pilots Ass’n v. Eastern Air Lines, 869 F.2d 1518, 1521-22
(D.C. Cir. 1989); Chicago & North Western Transp. Co. v.
International Bhd. of Elec. Workers, Local Union No. 214,
829 F.2d 1424, 1428-29 (7th_Cir. 1987).
The LPP dispute is a minor dispute. The controversy
involves whether the Eastern and Continental have “merged”
within the meaning of the LPPs which are part of the
collective bargaining agreement. A district court’s role in
minor disputes is limited to protecting the jurisdiction of the
arbitration board. Chicago & North Western Transp. Co. v.
International Bhd. of Elec. Workers, Local union No. 214,
829 F.2d 1424, 1428 (7th Cir. 1987). The federal court cannot
consider the merits of the underlying dispute or the remedy
that might be appropriate. General Comm. of Adjustment,
United Transp. Union v. CSX Railroad Co., 893 F.2d at
592-93; Air Line Pilots Ass’n v. Eastern Air Lines, 869 F.2d
1518, 1521 (D.C.Cir. 1989). 3
The issue of whether the LPP Claimants have individual
rights to seniority integration under the LPPs is not properly
before this federal district court."* Therefore, this court will
not dismiss the claims of the LPP claimants based on their
alleged lack of standing to assert the contractual right to
seniority integration.”
© Jurisdiction may lie with an adjustment board in accordance with its
normal jurisdiction over minor disputes, or jurisdiction may lie with a
Section 13 LPP Arbitrator as provided by the LPPs. The issue of which of
those two fora is appropriate is not properly raised in this appeal.
’ There is administrative precedent for the proposition that the LPP
Claimants may individually assert their seniority rights. See, e.g., In re
North Central-Southern Merger Case, 82 C.A.B. 1, 1979 WL 21508, *63,
Orders 79-6-7, 79-6-8 (May 15, 1979) (“labor protective provisions
represent a formula for protecting individual employees” from hardships
A - 58
B. Standard of Review
The bankruptcy court’s conclusions of law are subject to
de novo review. Meridian v. Alten, 958 F.2d 1226, 1229 (3d
Cir. 1992); Matter of Spencer, 115 B.R. 471, 473 (D.Del.
1990). The factual findings of the bankruptcy court may not
be set aside unless clearly erroneous. Bankruptcy Rule 8013;
Landon v. Hunt, 977 F.2d 829, 830 (3d Cir. 1992).
C. Merits of the Appeals
1. Jurisdiction of Bankruptcy Court
ALPA and the LPP Claimants argue that the Bankruptcy
Court did not have the power to determine that the LPP
claims could be satisfied by monetary awards rather than by
specific performance directing the equitable integration of the
Eastern and Continental seniority lists. The appellants claim
that the collective bargaining agreement provided for such
decisions to be made by an arbitrator from the National
Mediation Board.
As an initial matter it must be noted that the Bankruptcy
Court did not hold that ALPA and the LPP Claimants were
not entitled to equitable relief. Rather, the court held that any
right to equitable relief could be reduced to money damages
as an alternative to specific performance. Contrary to ALPA’s
assertions, the Bankruptcy Court did not encroach upon the
jurisdiction of the arbitrator to determine an appropriate
remedy for a breach of the LPPs. The bankruptcy court
simply decided that any equitable remedy could be reduced to
a right of payment, thereby making the right to seniority list
integration a “claim” in bankruptcy.
This was within the jurisdiction of the Bankruptcy Court.
The determination of whether the right to the integration of
seniority lists is a “claim” under 11 U.S.C. § 101(5)(B) is a
“core” bankruptcy matter. See 28 U.S.C. § 1334; 28 U.S.C. §
157; In re Leco Enters., Inc., 144 B.R. 244, 248 (S.D.N.Y.
involved with merger. “The spouses as individuals are clearly entitled to
the benefit of the labor protective conditions’).
A-59
1992) (cases arising under Title 11 are “at the core of the
jurisdiction of the bankruptcy courts”). It arises directly under
the Bankruptcy Code. There can be no question, therefore,
that the Bankruptcy Court properly exercised its jurisdiction.
2. “Claim” Under Section 101(5)
Having decided that the Bankruptcy Court properly
exercised its jurisdiction to determine that the alleged righ
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