Appendix — Eastern Pilots Merger Committee v. Continental Airlines, Inc

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Suprenie Voun, U.S.

*)) FILED

02- 58 JUN 2 8 2002

No.

Jn The |

Supreme Court of the Anited States

EASTERN PILOTS MERGER COMMITTEE,

Petitioner,

CONTINENTAL AIRLINES, INC.,

Respondent.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Third Circuit

APPENDIX TO PETITION

FOR A WRIT OF CERTIORARI

DAVID L. SHAPIRO CAROL CONNOR FLOWE

1675 Massachusetts Ave. Counsel of Record

Cambridge, MA 02138 DAVID N. WYNN

(617) 495-4618 ARENT FOX KINTNER PLOTKIN

& KAHN, PLLC

1050 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 857-6054

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

OR CALL COLLECT (402) 342-2831

APPENDIX TABLE OF CONTENTS

Appendix A:

In re Continental Airlines, Inc., No. 00-3505, reported

at 279 F.3d 226 (3d Cir. 2002) decided January 25,

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Appendix B:

Judgment of the Third Circuit in Jn re Continental

Airlines, Inc., No. 00-3505, entered January 25,

SPT sonvonviensshasinninedsDaeouimesusinieidenuusmaneninvaemeess

Appendix C:

Memorandum Order from the United States Dis-

trict Court for the District of Delaware, dated

September 12, 2000 from the United States Dis-

trict Court for the District of Delaware....................

Appendix D: "

In re Continental Airlines, Inc., Bankruptcy Nos.

90-932 to 90-984(MF'W), reported at 236 B.R. 318

(Bankr. D. Del. 1999) decided June 28, 1999 ...........

Appendix E:

In re Continental Airlines, Inc., Nos. 96-7028, 96-

7038, reported at 125 F.3d 120 (3d Cir. 1997)

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Appendix F:

Memorandum Order from the United States Dis-

trict Court for the District of Delaware, dated

November 29,1995 from the United States Dis-

trict Court for the District of Delaware....................

Page

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APPENDIX TABLE OF CONTENTS - Continued

Appendix G:

Findings of Fact and Conclusions of Law and Order

Confirming the Debtors’ Revised Second Amend-

ed Joint Plan of Reorganization, As Modified,

Under Chapter 11 of the United States Bank-

ruptcy Code and Granting Related Relief, from

the United States Bankruptcy Court for the Dis-

trict of Delaware, dated April 16, 1998 .....................

Appendix H:

Decision of Eastern Airlines Pilots System Board of

Adjustment in Eastern Air Lines, Inc. and The

Air Line Pilots Association, L.D. Schulte Griev-

ance, ALPA Case No. 1-86.................ccccccssscccssccscscceees

Appendix I:

Denial of Sur Petition for with Suggestion for

Rehearing En Banc by the Third Circuit Court of

Appeals in Jn re Continental Airlines, Inc., No.

00-3505, dated April 2, 2002... ceeeeeeeeeeeeeeeeees

Appendix J:

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Appendix K:

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Page

APPENDIX A

279 F.3d 226

169 L.R.R.M. (BNA) 2257, 39 Bankr.Ct.Dec. 8

United States Court of Appeals,

Third Circuit.

In re CONTINENTAL AIRLINES, INC., Debtor.

Eastern Pilots Merger Committee, Appellant,

Continental Airlines, Inc., Patricia A. Staiano, Trustee.

No. 00-3505.

Argued Dec. 11, 2001.

Filed Jan. 25, 2002.

Carol Connor Flowe (argued), Arent, Fox, Kintner,

Plotkin & Kahn, PLLC, Washington, DC, John J. Gibbons,

Gibbons, Del Deo, Dolan, Griffinger & Vecchione, PC,

Newark, NJ, David L. Shapiro, Cambridge, MA, James F.

Harker, Herlihy, Harker & Kavanaugh, Wilmington, DE,

Charles M. Tatelbaum, Cummings & Lockwood, Naples,

FL, Attorneys for Appellants.

‘James L. Patton, Jr. (argued), Robert S. Brady, Young,

Conaway, Stargatt & Taylor, LLP, Wilmington, DE, Attor-

neys for Appellees.

Before: BARRY and ALDISERT, Circuit Judges, and

FULLAM, District Judge.

* The Honorable John P. Fullam, United States District Judge for

the Eastern District of Pennsylvania, sitting by designation.

OPINION OF THE COURT

ALDISERT, Circuit Judge.

Eastern Pilots Merger Committee (“EPMC” or “Appel-

lants”) appeals from a judgment of the district court

affirming an order entered by the bankruptcy court enforc-

ing a Reorganization Plan in favor of Appellee, Continen-

tal Airlines, Inc. This appeal requires us to decide two

questions: (1) whether the district court erred in interpret-

ing the decision in Jn re Continental Airlines, Inc., 125

F.3d 120 (3d Cir.1997) (“Continental I”), as encompassing

Appellants’ post-confirmation rights under a collective

bargaining agreement of Eastern Airlines, Inc.; and (2) if

this court’s decision in Continental I is so interpreted,

whether that decision should be reconsidered.

Because the facts and procedural history have been

set forth in detail in Continental I, we discuss here only

the bare adjudicative facts underlying our discussion of

the legal issues presented.

This dispute centers around an action which took

place on February 23, 1986, when Eastern Airlines, Inc.

and its pilots’ union, the Air Lines Pilot Association

(“ALPA”), ratified a collective bargaining agreement (“the

Agreement”) that included certain Labor Protective

Provisions (“LPP’s”). Under these LPP’s, Eastern’s pilots

secured protection of their seniority rights in the event of a

merger between Eastern and another airline carrier by

requiring the integration of Eastern’s seniority list with

the merging carrier’s list. The next day, Texas Air Corpora-

tion, parent corporation of Continental, acquired Eastern.

Subsequently, Continental initiated a Chapter 11 reor-

ganization proceeding.

ALPA filed protective proofs of claim (“Claims”) in

Continental’s bankruptcy, contending that because “a

merger between Eastern and another airline carrier

[Continental]” had taken place, its members were entitled

to specific performance of seniority rights under the LPP’s,

together with money damages. Thereafter, Continental’s

Second Amended Joint Plan of Reorganization was con-

firmed by the bankruptcy court. The court’s confirmation

order essentially clarified that any valid claims based on

the LPP’s would give rise to a right of financial payments

that would be dischargeable in bankruptcy. It also pro-

vided that Claimants had no right to injunctive, equitable

or other relief.

After appealing the bankruptcy court’s order to the

district court, ALPA settled with Continental, but the LPP

Claimants continued their appeal. Unsuccessful in the

district court, several groups, including the present Appel-

lants, appealed to this court. We ruled that the bankruptcy

court had jurisdiction to decide how the Claims would be

treated in bankruptcy, i.e., that “the bankruptcy court was

well within its authority to exercise jurisdiction over the

issue of the status of the bankruptcy claim[s].” In re

Continental Airlines, Inc., 125 F.3d at 131. And critically

important, we determined that the Claims could be con-

verted to money damages. Jd. at 136.

The Supreme Court denied a Petition for a Writ of

Certiorari. LLP Claimants v. Continental Airlines, 522

U.S. 1114, 118 S.Ct. 1049, 140 L.Ed.2d 113 (1998).

In response to the commencement of a separate

lawsuit brought by Appellants in the United States Dis-

trict Court for the District of New Jersey (the “New Jersey

Action”), Continental filed a Reorganized Debtors’ Motion

for Order Compelling Compliance with Order Confirming

Plan of Reorganization and for Sanctions (“the Compliance

Motion”) in the bankruptcy court seeking to halt the New

Jersey Action. The airline sought a determination that the

Confirmation Order barred the New Jersey Action because

all potential relief relating to the LPP’s had been ad-

dressed in the bankruptcy proceeding. The bankruptcy

court agreed with Continental, stating:

[S]ince we find that the decision of the Third Cir-

cuit affirmed the ruling that all claims of the

Eastern Pilots are discharged by the Confirma-

tion Order, we conclude that the Confirmation

Order does bar the New Jersey Action instituted

by EPMC. Continental is entitled to sanctions

against EPMC for its knowing and willful viola-

tion of the Confirmation Order.

In re Continental Airlines, Inc., 236 B.R. 318, 332

(Bankr.D.Del.1999).

The bankruptcy court had interpreted Continental I to

mean that all remedies for breach of the LPP’s, whether

before or after bankruptcy, had been reduced to claims for

payment in the bankruptcy proceeding and had been

discharged by the Confirmation Order.

On appeal, the district court held that Continental I

precluded any post-confirmation relief. According to the

court, “although the [Agreement] survived the bankruptcy

process, [A]ppellants’ demand for specific performance of

the seniority integration clause did not.” In re Continental

Airlines, Inc., No. 99-795, 2000 WL 1425751, at *3 (D.Del.

- Sept.12, 2000). Furthermore, the district court stated that

the bankruptcy process would be “meaningless” if the

teachings of Continental I did not require that any claim

for prospective relief through specific performance be

discharged. Id. at *2. Thereafter, EPMC appealed.

Appellants repeatedly emphasize that the members of

the EPMC have a post-confirmation right to enforce the

LPP’s contained in the Agreement because Continental

failed to reject the Agreement in accordance with the

requirements of 11 U.S.C. § 1113. Building on this major

premise, Appellants then argue that because Continental

failed to properly reject the Agreement, it was assumed by

operation of law. Appellants direct our attention to a

number of cases, including Jn re Roth American, Inc., 975

F.2d 949 (3d Cir.1992), in which we stated:

The Union contends that since Roth Ameri-

can has not sought to reject the collective bar-

gaining agreement under section 1113, Roth

American has “assumed” the collective bargain-

ing agreement by operation of law, and that Roth

American thus is bound by all of its terms. We

agree with the Union... .

Id. at 957. Appellants then argue that under 11 U.S.C.

§ 365, if the Agreement is assumed it must be assumed

cum onere, and any breach of the Agreement must be

cured. Appellants’ Brief at 13-14 (citing National Labor

Relations Bd. v. Bildisco & Bildisco, 465 U.S. 513, 531-

532, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984)). From the

foregoing premises they urge us to conclude that because

the Agreement “rides through the bankruptcy” as if the

bankruptcy had never occurred, the LLP provisions

continue to be an unsatisfied obligation on the reorganized

debtor as to all seniority rights. Id. (citing Bildisco &

Bildisco, 465 U.S. at 546 n. 12, 104 S.Ct. 1188 (Brennan,

J., concurring)).

Il.

Distilled to its essence, the argument states that

because Continental did not follow the statutory proce-

dures for rejecting an executory contract as set forth in 11

U.S.C. § 1113, somehow Appellants are entitled to the

injunctive relief post-confirmation that it sought and was

denied during the bankruptcy proceedings. There is a

glaring defect in Appellants’ argument because its basic

assumption is flawed. The reality is that the Agreement

has never been rejected. This makes their entire rejection

argument irrelevant to the motion to enforce the Reor-

ganization Plan.

In the various proceedings arising out of the Plan,

proceedings on all levels of the judicial hierarchy, includ-

ing this court, no court has proceeded on the basis that the

Agreement had been rejected. In the case at bar, which

seeks enforcement of the Plan, neither the bankruptcy

court nor the district court so suggested. Nor do we do so

here. Rights granted by the bankruptcy court, affirmed by

the district court and discussed by us in Continental I, did

not arise out of thin air. They were based on the Agree-

ment. We made that crystal clear when this case was

previously before us: “Therefore, we conclude that the

right to seniority integration [set forth in the Agreement]

gives rise to a ‘right of payment’ such that the remedy

constitutes a ‘claim’ dischargeable in bankruptcy.” Jn re

Continental Airlines, Inc., 125 F.3d at 136.

In Continental I, this court, as did the bankruptcy

court and the district court, did not reject the Agreement.

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We interpreted it. We construed the seniority provisions of

the Agreement as a basis of providing a right of payment

in lieu of injunctive relief after considering a variety of

factors to include feasibility. The rejection-of-the-

Agreement issue raised by Appellants is irrelevant here

because the legal basis for the relief awarded — arbitration

to determine entitlement to, and if so, the amount of

. damages — was based on an interpretation of the Agree-

ment. What was involved here was a simple categorical

deductive syllogism: All claims for seniority relief must be

based on the Agreement; Appellants make a claim for

seniority relief; therefore, Appellants’ claims for seniority

relief are based on the Agreement.

ITI.

We believe the critical question for decision in this

appeal to be uncomplicated: Did this court in Continental I

adjudicate only claims for pre-petition seniority rights or

did our holding include also rights arising post-

confirmation? The answer is not difficult. When Appel-

lants appeared before us in Continental I by written brief

and oral argument, and responded specifically to questions

put to them by the court, and when they filed their Peti-

tion for a Writ of Certiorari to the Supreme Court, their

arguments were clear and unequivocal: They demanded

complete relief under the Agreement for the past, present

and future.’

‘ For example, in the Eastern Pilots’ brief presented to us in

Continental I, they argued:

The cases have thus uniformly held that where the

creditor is seeking to require the debtor to take some future

(Continued on following page)

action, as opposed to seeking money, the courts have held

that the debtor’s obligation is not dischargeable .. .

The present case is likewise one in which these Eastern

pilots are not attempting to get money from Continental,

but are simply seeking to require Continental to take the fu-

ture action of seniority integration if the arbitrator orders it.

Joint Appendix at 1033.

The Pilots reasserted this argument in their reply brief stating:

[I]t cannot be argued in the present circumstances that

there is any viable claim for such monetary relief ... What

is left is the purely equitable relief of seniority integration.

* * *

And is not a pilot’s career spanning a life’s work worth

at least a company’s covenant not to compete? If a com-

pany’s covenant not to compete cannot be “reduced” to

money damages and discharged in bankruptcy, how can any

court claim that a pilot’s life-long career can be “reduced” to

non-existent money damages?

Id. at 764-765.

The transcript of oral argument in Continental I also indicates that

Appellants were seeking post-confirmation as well as pre-petition relief:

JUDGE MANSMANN: Okay; they get an arbitration

award and Continental says, “You're a little bit too late; we

have gone through this whole reorganization; there isn’t

anything here for you. Now what do you do?”

MR. MCGUINN: There is something there for them.

There are jobs there for them. They can be put on the Con-

tinental seniority list and that’s all they are seeking in this

case, to get an arbitration for seniority integration under

the LPPs that they were promised 11 years ago.

* * *

MR. MCGUINN: I just want to make sure that you

are not substituting “money damages” for “seniority integra-

tion” because you have to understand, pilots, their whole ca-

reer is based on seniority. Simply, reinstatement without

seniority integration is fairly meaningless. Seniority inte-

gration is what is provided for in the LPPs; that’s what we

bargained for; that’s what we want to get after 11 years.

(Continued on following page)

We understood clearly what was before us then, and

we adjudicated accordingly:

The circumstances indicate that seniority in-

tegration 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

* * *

MR. MCGUINN: I think you are talking about a ca-

reer, a career of a pilot, where he goes from flight engineer

or second officer to first officer to captain, who builds up a

retirement, who has the sheer love of flying, and all of this

has been denied that pilot because of what is going on in

this Bankruptcy Court and what is going on with these judi-

cial pronouncements that are totally contrary to Norris-

LaGuardia, totally contrary to 1113, where Congress has

repeatedly, since the 1930s, said, “Please, Judiciaries, stay

out of labor disputes; let them be resolved in arbitration.”

Id. at 641-644 (emphasis added).

Finally, Appellants’ Petition For Certiorari to the Supreme Court

reinforces the broad scope of relief they sought:

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 avail-

able). 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 of-

ficer 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 non-

existent front pay is not only “disingenuous,” but an unwar-

ranted insult to all professional airline pilots.

Id. at 417.

10a

constitutes a “claim” dischargeable in bank-

ruptcy.

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 LLP 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 in-

tegration 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.

In re Continental Airlines, Inc., 125 F.3d at 136 (emphasis

added).

Suffice it to say that when we said “any claim based

on an award of seniority integration,” we meant precisely

what we said. With apologies to Gertrude Stein, “any

claim” means any claim. If we intended to limit the Claim

to pre-petition activity, we would have said so. And if

Appellants desired the Claim to be so limited, they, too,

would have said so in their written briefs or at oral argu-

ment or in their Petition for a Writ of Certiorari to the

Supreme Court. But they did not.

Appellants ‘expressly requested global, open-ended

relief on their terms. As Roscoe Pound would have phrased

it in his felicitous expression, they wanted “specific re-

dress” in the form of a mandatory injunction, not “substi-

tuted redress” in the form of money damages.’ We hold

? Roscoe Pound, The Theory of Judicial Decision, 36 HARV. L.

REV. 641, 647 (1923).

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that the proposition now urged upon us by Appellants has

been decided and is totally controlled by our decision in

Continental I. The relief defined in that case is the only

remedy available to Appellants.

IV.

The preclusive effects of former adjudication have

been discussed and determined in varying and occasion-

ally conflicting terminology over the past hundred years.

In early years, these concepts were referred to collectively

by most commentators as the doctrine of res judicata. 18

CHARLES ALAN WRIGHT, ARTHUR R. MILLER &

EDWARD H. COOPER, Federal Practice and Procedure

§ 4402, at 6-7 (1981 and 2000 Supp.). As the law devel-

oped, a distinction was made between “pure” res judicata

and what came to be known as collateral estoppel. In 1979,

the Court explained the distinction:

Under the doctrine of res judicata, a judg-

ment on the merits in a prior suit bars a second

suit involving the same parties or their privies

based on the same cause of action. Under the

doctrine of collateral estoppel, on the other hand,

the second action is upon a different cause of ac-

tion and the judgment in the prior suit precludes

relitigation of issues actually litigated and neces-

sary to the outcome of the first action. 1B J.

MOORE’S FEDERAL PRACTICE p 0.405[1], pp.

622-624 (2d ed.1974); e.g. Lawlor v. National

Screen Serv. Corp., 349 U.S. 322, 326, 75 S.Ct.

865, 99 L.Ed. 1122; Commissioner v. Sunnen, 333

U.S. 591, 597, 68 S.Ct. 715, 92 L.Ed. 898; Crom-

well v. County of Sac, 94 U.S. 351, 352-353, 24

L.Ed. 195.

12a

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 99

S.Ct. 645, 58 L.Ed.2d 552 (1979).

Today, however, the modern nomenclature for these

two doctrines is “claim preclusion” and “issue preclusion,”

respectively:

Claim preclusion generally refers to the ef-

fect of a prior judgment in foreclosing successive

litigation of the very same claim, whether or not

relitigation of the claim raises the same issues as

the earlier suit. Issue preclusion generally refers

to the effect of a prior judgment in foreclosing

successive litigation of an issue of fact or law ac-

tually litigated and resolved in a valid court de-

termination essential to the prior judgment,

whether or not the issue arises on the same or a

different claim. See restatement (Second) of

Judgments §§ 17, 27, pp. 148, 250 (1980); D.

Shapiro, Civil Procedure: Preclusion in Civil Ac-

tions 32, 46 (2001).

New Hampshire v. Maine, 532 U.S. 742, 121 S.Ct. 1808,

1814, 149 L.Ed.2d 968 (2001).

These two doctrines-share the “dual purpose of pro-

tecting litigants from the burden of relitigating an identi-

cal issue with the same party or his privy and of

promoting judicial economy by preventing needless litiga-

tion.” Parklane Hosiery Co., 439 U.S. at 326, 99 S.Ct. 645.

The doctrine of the law of the case is similar in that it

limits relitigation of an issue once it has been decided.

However, this doctrine is concerned with the extent to

which the law applied in decisions at various stages of the

same litigation becomes the governing legal precept in

later stages. 18 JAMES WM. MOORE ET AL., MOORE’S

onde ial

13a

FEDERAL PRACTICE p 134.20 (3d ed.1999). The Court

has defined the law of the case as a precept that “ ‘posits

that when a court decides upon a rule of law, that decision

should continue to govern the same issues in subsequent

stages in the same case.’ This rule of practice promotes the

finality and efficiency of the judicial process by ‘protecting

against the agitation of settled issues.’” Christianson v.

Colt Indus. Operating Corp.,-486 U.S. 800, 816, 108 S.Ct.

2166, 100 L.Ed.2d 811 (1988) (citing Arizona v. California,

460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983),

and citing 1B JAMES WM. MOORE ET AL., MOORE’S

FEDERAL PRACTICE p 0.404[1], p. 118 (1984)).

Writing in 1967, Professor Allan D. Vestal identified

distinct situations in which a ruling or decision has been

made in a case and the same legal problem arises a second

time in the same case. Two of these situations are when:

(1) an appellate court may rule on a matter and then the

same legal question may be raised in the trial court after

the case has been remanded to that court for further

proceedings; and (2) an appellate court may rule on a

matter and then the same legal question may be raised in

the same appellate court when the case is appealed a

second time.* The appeal before us fits squarely within the

second situation identified by Professor Vestal.

We do not believe that it is necessary to determine

which of the foregoing doctrines prevents Appellants from

relitigating an issue that was unambiguously identified,

properly presented and ably and vigorously argued by

extremely able counsel of all parties. We are satisfied that

* Allan D. Vestal, Law of the Case: Single Suit Preclusion, 12

UTAH L. REV. 1, 4 (1967).

14a

under any of these precepts, Appellants are bound by our

previous decision and are precluded from avoiding its

mandate.

Although Appellants argue alternatively that this

panel should reconsider the holding of Continental I, we

lack the power or authority to overrule a decision of a

previous panel.‘

Nor are we inclined to initiate a suggestion for rehear-

ing en banc. :

* * *

We have considered all contentions presented by the

parties and conclude that no further discussion is neces-

sary.

The judgment of the district court will be affirmed.

* “It is the tradition of this court that the holding of a panel in a

reported opinion is binding on subsequent panels.

Thus, no subsequent panel overrules the holding in a published opinion

of a previous panel. Court en banc consideration is required to do so.”

3D CIR. 1.0.P. 9.1.

15a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 00-3505

IN RE CONTINENTAL AIRLINES, INC.,

Debtor

EASTERN PILOTS MERGER COMMITTEE,

Appellant

CONTINENTAL AIRLINES, INC.

PATRICIA A. STAIANO, Trustee

Appeal from the United States District Court

for the District of Delaware

(D.C. No. 99-CV-00795)

District Judge: Honorable Sue L. Robinson

Argued: December 11, 2001

Before: BARRY and ALDISERT, Circuit Judges, and

FULLAM’, District Judge.

* The Honorable John P. Fullam, United States District Judge for

the Eastern District of Pennsylvania, sitting by designation.

16a

JUDGMENT

This cause came on to be considered on the record

from the United States District Court for the District of

Delaware and was argued on December 11, 2001.

On consideration whereof, it is now hereby AD-

JUDGED and ORDERED that the judgment of the district

court entered September 15, 2000, be and the same is

hereby affirmed.

Costs taxed against Appellant.

Attest:

/s/ Marcia M. Waldron

Clerk

Dated: January 25, 2002

Certified as a true copy and issued in

lieu of a formal mandate on April 10,

2002

Teste: /s/ Marcia M. Waldron

Clerk, United States Court of Appeals

for the Third Circuit

17a

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

CONTINENTAL AIRLINES, ) Bankruptcy Case

Dias ) No. 90-932

EASTERN PILOTS ‘ Adversary No. 99-47

MERGER COMMITTEE, , tae

Appellant, ) No. 99-795-SLR

v. :

CONTINENTAL AIRLINES, )

Appellee. )

MEMORANDUM ORDER

At Wilmington this 12th day of September, 2000,

having reviewed the papers submitted in connection with

the above referenced appeal from an order of the United

States Bankruptcy Court for the District of Delaware

dated June 28, 1999 (D.I. 9911); and having heard oral

argument on the same;

IT IS ORDERED that the decision of the bankruptcy

court is affirmed, for the reasons that follow:

1. This court has jurisdiction over the appeal pursu-

ant to 28 U.S.C. § 158(a)(1). The bankruptcy court’s

findings of fact are reviewed for clear error, while its

conclusions of law are subject to plenary review. See In re

Cohn, 54 F.3d 1108, 1113 (3d Cir. 1995).

2. The focus of the instant appeal is the proper

interpretation of a previous ruling in this case by the

United States Court of Appeals for the Third Circuit in In

oe as

18a

re Continental Airlines, 125 F.3d 120 (3d Cir. 1997). The

Third Circuit, of course, is the only authoritative inter-

preter of its decisions. Nevertheless, this court is bound to

give meaning to such in the context of the record pre-

sented.

3. According to the Third Circuit, 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 Hold-

ings, 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 deter-

mination relating to the claims, but vacated the injunc-

tion. The Third Circuit ultimately held “that any claim

based on an award of seniority integration arising out of

the resolution of the [labor arbitration] 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.” Jd. at 136.

4. The Third Circuit prefaced its holding with the

following language: “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 [labor arbitration] dispute. Our holding

19a

is limited to how the claims should be treated in bank-

ruptcy.” Id. In other words, “any equitable remedy recov-

ered against Continental via arbitration of the underlying

labor dispute may be satisfied through an award of mone-

tary damages.” Jd. at 124.

5. Rather than pursue their right to arbitrate under

the collective bargaining agreement, appellants instead

filed suit in the United States District Court for the

District of New Jersey. In said suit, appellants sought the

following declaratory relief:

Notwithstanding the continued existence in full

force and effect of the Collective Bargaining

Agreement, Continental maintains that the sole

remedy of the Plaintiffs is to have their proofs of

claim liquidated from the Continental bank-

ruptcy estate, thus denying the Plaintiffs their

legal rights under the Collective Bargaining

Agreement. The Plaintiff, on the other hand,

claim a separate, distinct and concurrent remedy

of enforcement of the Collective Bargaining

Agreement that has survived Continental’s

bankruptcy plan of reorganization, confirmation

and consummation.

If the present controversy is not resolved by

a declaration of the rights of the parties, sub-

stantial additional time and expense will be ex-

pended by the parties and the arbitrator in a

lengthy arbitration and subsequent judicial re-

view of the arbitrator’s award. A prompt declara-

tion of the parties’ rights prior to the arbitration

is in the interest of justice.

(D.I. [8/16/00 letter from Harker])

eee EE —_

20a

6. Continental filed suit in the bankruptcy court to

enjoin the New Jersey litigation, which relief was granted.

More specifically, the bankruptcy court concluded “that the

decision of the Third Circuit affirmed the ruling that all

claims of the Eastern Pilots are discharged by the Confir-

mation Order... .” (D.I. 9911)

7. The Third Circuit, of course, did not specifically

hold that the pilots’ claims for prospective relief were

- discharged by the confirmation order. However, the bank-

ruptcy process would be meaningless if the Third Circuit's

decision were not interpreted to require such. The pilots,

through their bankruptcy proofs of claim, demanded

specific performance of their seniority integration rights.

Continental, the bankruptcy court, the district court, and

the Third Circuit all recognized that specific performance

was not feasible in the context of Continental’s plan of

reorganization. See, eg., id. at 136. The Third Circuit

specifically held that the pilots’ claims (for specific per-

formance) “will be treated as a claim in bankruptcy giving

rise to a right of payment.” Id. The tension between

bankruptcy law and labor law identified by the Third

Circuit at the outset was resolved by the Third Circuit's

recognizing the arbitration proceeding as the appropriate

forum to determine the pilots’ substantive rights (i.e.,

whether they have seniority integration rights), while

maintaining the bankruptcy court’s jurisdiction to deter-

mine the “manner in which the [claims] in bankruptcy

would be treated if a right to seniority integration is

established.” Jd. at 131 n.8. Indeed, the Third Circuit's

2la

use of prospective phraseology’ reflects the fact that the

pilots have yet to establish their seniority rights through

arbitration. Finally, the Third Circuit has rejected appel-

lants’ argument that the failure of Continental to comply

with 11 U.S.C. §1113 has revived appellants’ right to

specific performance under the agreement:

Despite our conclusion that failure to comply

with section 1113 bars an injunction of the arbi-

tration, we reject the Claimants’ contention that

the substitution of a monetary damage award, in

lieu of seniority integration, is not permitted un-

der section 1113 because it alters or modifies the

terms of the collective bargaining agreement.

The bankruptcy court’s determination of the ad-

ministrative priority and status of the claims

was not based on an interpretation of the

[agreement]. Nor did it predetermine the appro-

priate remedy warranted under the [agreement],

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 col-

lective bargaining agreement.

Id. at 137 n.15.

9. In sum, although the collective bargaining agree-

ment survived the bankruptcy process, appellants’ demand

for specific performance of the seniority integration clause

* For example:

“(T]he right to seniority integration gives rise to a ‘right of

payment’ such that the remedy constitutes a ‘claim’ dis-

chargeable in bankruptcy.” Jd. at 136 (emphasis added).

“[T]he right to seniority integration is satisfiable by the

payment of money damages.” Jd. (emphasis added).

22a

did not. Therefore, the order of the bankruptcy court shall

be affirmed.

10. With respect to the imposition of sanctions, the

bankruptcy court has broad discretion to enforce its

orders, e.g., through the use of sanctions, and its decision

to do so in this case is not clearly erroneous.

/s/ Sue L. Robinson

United States

District Judge

23a

APPENDIX D

236 B.R. 318

162 L.R.R.M. (BNA) 2780, 34 Bankr.Ct.Dec. 728

United States Bankruptcy Court,

D. Delaware.

In re CONTINENTAL AIRLINES, INC., et al., Debtors.

Bankruptcy Nos. 90-932 (MFW) to 90-984 (MFW).

June 28, 1999.

Jon Geier, Paul Hastings Janofsky & Walker, Wash-

ington, DC, Counsel for Continental Airlines, Inc. James

L. Patton, Jr., Young Conaway Stargatt & Taylor, LLP,

Wilmington, DE, Co-Counsel for Continental Airlines, Inc.

Charles M. Tatelbaum, Cummings & Lockwood, Naples,

FL, Counsel for Eastern Pilots, Merger Committee. James

Harker, Herlihy Harker & Kavanaugh, Wilmington, DE,

Co-Counsel for Eastern Pilots, Merger Committee. Myles

J. Tralins, Tralins & Associates, Miami, FL, Counsel for

LPP Claimants. Kate Stickles, Prickett Jones Elliott

Kristol & Schnee, Wilmington, DE, Co-Counsel for LPP

Claimants.

OPINION’

MARY F. WALRATH, Bankruptcy Judge.

Before the Court are two Motions, both of which

require that we apply the decision of the Court of Appeals

‘ This Opinion constitutes the findings of fact and conclusions of

law of the Court pursuant to Federal Rule of Bankruptcy Procedure

7052, which is made applicable to contested matters by Federal Rule of

Bankruptcy Procedure 9014.

24a

for the Third Circuit in this case. In re Continental Air-

lines, 125 F.3d 120 (3d Cir.1997). The first is the Motion of

a group of Eastern pilots, the Labor Protective Provision

Claimants (“the LPP Claimants”), to expunge the claims of

certain other Eastern pilots (“the Other Eastern Pilots”)

for failure to timely exercise their right to arbitration. The

second is the Motion of the Debtor to enforce the Confir-

mation Order (as affirmed by the Third Circuit) which

reduced all the Eastern pilots’ claims for specific perform-

ance of their collective bargaining agreement to claims for

monetary damages discharged by the provisions of the

Plan.

We heard argument on the Motions on January 14,

1999. The parties submitted post-trial memoranda and an

appendix of related documents on February 25, 1999.

I. JURISDICTION

This Court has jurisdiction over these Motions, which

are core proceedings pursuant to 28 U.S.C. § 1334 and

§ 157(b)(1), (b)(2)(A), (B) and (O).

II]. FACTUAL BACKGROUND’

- On February 23, 1986, Eastern Airlines (“Eastern”)

and its pilots’ union, the Air Lines Pilot Association

(“ALPA”), ratified a collective bargaining agreement. On

? Among the Other Eastern Pilots are 310 pilots represented by the

Eastern Pilot Merger Committee (““EPMC”). It is unclear, however,

whether EPMC represents all claimants who may be affected by the

Motion. -

* ‘The facts set forth are derived largely from the Third Circuit's

Opinion.

25a ;

February 24, 1986, Texas Air Corporation, the parent of

Continental Airlines, Inc. (“Continental”) acquired East-

ern. ALPA asserted that the acquisition was a merger

requiring integration of the Eastern and Continental

pilots’ seniority lists under the Eastern collective bargain-

ing agreement. When Eastern and Continental refused to

bargain with ALPA on the issue, ALPA initiated arbitra-

tion.

In March 1989, Eastern filed bankruptcy and asserted

that the automatic stay precluded-ALPA from proceeding

with the arbitration. After protracted litigation, the Court

of Appeals for the Second Circuit held that the automatic

stay did not preclude arbitration. In re Ionosphere Clubs,

Inc. , 922 F.2d 984 (2d Cir.1990).

ALPA and Eastern thereafter proceeded with arbitra-

tion before Richard R. Kasher (Mr. Kasher, and any

successor is referred to herein as “the Arbitrator”). ALPA

sought prospective integration of the Eastern and Conti-

nental pilots’ seniority lists and back pay until the integra-

tion was completed.

In the meantime, Continental filed bankruptcy in

December 1990. ALPA (and individual Eastern Pilots) filed

unliquidated proofs of claim in that proceeding. Continen-

tal filed objections and sought a declaration that the

claims were general unsecured prepetition dischargeable

claims compensable by an award of monetary damages.

ALPA disagreed and asserted that the pilots were entitled

to specific performance of the collective bargaining agree-

ment, namely, seniority integration. In addition, ALPA

asserted that only the Arbitrator had jurisdiction to

determine whether a merger had occurred as defined by

26a

the collective bargaining agreement and the appropriate

remedy thereunder.

In February 1993, the Bankruptcy Court sustained

Continental’s objection to the ALPA claim. In April 1993,

the Bankruptcy Court confirmed Continental’s Second

Amended Joint Plan of Reorganization. In the Confirma-

tion Order, the Bankruptcy Court stated that any claims

under the collective bargaining agreement gave rise to a

right of payment dischargeable in bankruptcy and that no

right to injunctive or other equitable relief was available.

The Confirmation Order consequently enjoined the arbi-

tration proceedings. ALPA and the LPP Claimants ap-

pealed the February and April orders. While the appeals

were pending, ALPA settled with Continental. The Settle-

ment Agreement was ultimately accepted by approxi-

mately two-thirds of the Eastern pilots who had filed

claims in the bankruptcy case.

The LPP Claimants, who had not accepted the settle-

ment, continued the appeals. The District Court affirmed

the Bankruptcy Court’s Orders in all respects except the

injunction of the arbitration proceedings. In re Continental

Airlines, Inc., No. 93-163 (D.Del. Nov. 29, 1995). Specifi-

cally, the District Court held that the claims of the pilots

were dischargeable and that the Plan which so provided

was confirmable. Id., slip op. at 27-32. The District Court

concluded, however, that the Bankruptcy Court’s injunc-

tion was invalid because the Bankruptcy Court failed to

set forth in sufficient detail the reasons for the injunction.

Id. at 35-37. The District Court did not remand that issue,

however, because it held that section 1113 of the Bank-

ruptcy Code precluded issuance of the injunction. Jd. at 42.

27a

Cross-appeals were filed by the LPP Claimants‘ and

Continental. On August 29, 1997, the Third Circuit issued

its decision. The Court affirmed the Bankruptcy Court and

District Court decisions holding that the Eastern pilots’

equitable claims for seniority integration could be con-

verted into money damages. 125 F3d at 131-35. Conse-

quently, those claims could be treated, and discharged, in

the Continental Plan of Reorganization. Jd. at 135-36.

However, the Court also held that the Bankruptcy Court

could not enjoin the arbitration proceedings (since the

collective bargaining agreement requiring arbitration had

not been rejected). Id. at 136-38.

III. DISCUSSION

A. Law of the Case

We start our consideration of the Motions by noting

that both require us to interpret the decision of the Third

Circuit in this very case. In rendering our decision, we are

bound by the doctrine of the law of the case to “implement

both the letter and the spirit of the mandate, taking into

account the appellate court’s opinion and the circum-

stances it embraces.” Casey v. Planned Parenthood of

Southeastern Pennsylvania, 14 F3d 848, 857 (3d Cir.1994)

(quoting Bankers Trust Co. v. Bethlehem Steel Corp., 761

F.2d 943, 949 (3d Cir.1985)).

Law of the case rules have developed “to main-

tain consistency and avoid reconsideration of

matters once decided during the course of a sin-

gle continuing lawsuit.” Charles A. Wright et al.,

* Subsequently, a splinter group of the LPP Claimants (EPMC)

obtained separate counsel and both prosecuted the appeal for the pilots.

28a

18 Federal Rules and Practice § 4478 (1981). Of

these rules, the most compelling is the mandate

rule. This fundamental rule binds every court to

honor rulings in the case by superior courts. As

the Supreme Court has stated, “In its earliest

days this Court consistently held that an inferior

court has no power or authority to deviate from

the mandate issued by an appellate court.”

Briggs v. Pennsylvania R. Co., 334 U.S. 304, 306,

68 S.Ct. 1039, 1040, 92 L.Ed. 1403 (1948). The

statutory authority for the power of the appellate

courts dates from the first Judiciary Act of 1789

and is now found in 28 U.S.C. § 2106.

Casey, 14 F.3d at 856 (footnotes omitted).

The mandate rule applies, however, only to those

issues that were decided by the appellate court.

Sanford Fork & Tool, 160 U.S. at 256, 16 S.Ct. at

293. On remand, a trial court is free to “make

any order or direction in further progress of the

case, not inconsistent with the decision of the

appellate court, as to any question not settled by

the decision.” Bankers Trust Co., 761 F.2d at 950.

“(I]t may consider, as a matter of first impres-

sion, those issues not expressly or implicitly dis-

posed of by the appellate decision.”

Id. at 857.

While the issues before us are not on remand from the

Third Circuit, they do require that we implement its

ruling.

B. Motion to Strike Claims

The Motion of the LPP Claimants seeks an Order

disallowing (for purposes of distribution under Continental’s

29a

Confirmed Plan) the claims of the Other Eastern Pilots for

failure to timely invoke their right to arbitration’ Conti-

nental supports the Motion to Strike.*

1. Jurisdiction

As an initial matter, EPMC asserts that this Court

does not have jurisdiction to decide the Motion to Strike. It

asserts that the Third Circuit affirmed the District Court

determination that the Arbitrator has exclusive jurisdic-

tion to decide whether the individual pilots have any

claim. This includes, EPMC asserts, whether those claims

are time-barred under applicable labor law.

In response, the LPP Claimants assert that since the

Third Circuit held that any claim which the pilots may

have under the seniority integration provision was a claim

cognizable, and dischargeable, in this bankruptcy case, the

Bankruptcy Court has jurisdiction to determine and allow

those claims. They also point to the expansive retention of

* The LPP Claimants assert that they alone timely invoked

arbitration after the Third Circuit decision. They advise that they have

had settlement discussions with Continental but are unable to settle

their claims unti] the Other Eastern Pilots’ claims are determined or

disallowed.

* EPMC initially raised an objection to the standing of the LPP

Claimants to press the Motion to Strike, because the Confirmed Plan

prohibits any party except Continental from objecting to any claims.

(Appendix to Debtor’s Memorandum of Law, Tab 1 at § 11.1.) Even in

the absence of an express provision in the Confirmed Plan, EPMC

asserts that one creditor does not generally have a right to object to the

claim of another creditor, unless the trustee or debtor refuses to act.

See, e.g., In re Thompson, 965 F.2d 1136, 1147 (ist Cir.1992); In re

Morrison, 69 B.R. 586, 589 (Bankr.E.D.Pa.1987); In re Charter Co., 68

B.R. 225, 227 (Bkrtcy.M.D.Fla.1986). EPMC’s standing objection is

mooted, however, by the joinder of Continental in the Motion to Strike.

30a

jurisdiction provisions of the Confirmed Plan and Confir-

mation Order to support their position. (See Appendix to

Debtor’s Memorandum of Law, Tab 1 at Section 15.1, and

Tab 3 at p 53.)’

The latter argument is without merit. If a court does

not have jurisdiction over a dispute, it cannot create that

jurisdiction by simply stating it has jurisdiction in a

confirmation or other order. See, e.g., United States Trustee

" Section 15.1 of the Plan provides:

15.1 Retention of Jurisdiction. From and after the Effective

Date, the Bankruptcy Court shall retain and have exclusive

jurisdiction over the Chapter 11 Case for the following pur-

poses:

to determine any and all objections (a) to the allowance of

Claims;

to determine all controversies, suits (e) and disputes that

may arise in connection with the interpretation enforcement

or consummation of this Joint Plan or in connection with

the obligations of the Debtors, NewCal, and the NewCal

Subs under this Joint Plan, ... And to enter such orders as

may be necessary or appropriate to implement any distribu-

tions to holders of Allowed General Unsecured Claims.

to administer and enforce the (q) injunctions contained in

Sections 12.4, 12.19, and 14.3 of this Joint Plan, and any re-

lated injunction or decree contained in the Confirmation

Order.

Paragraph 35 of the Confirmation Order provides:

Notwithstanding confirmation of the Plan, this Court re-

tains exclusive jurisdiction over the Debtors’ Chapter 11

cases pursuant to and for the purposes of (a) section 105(a)

and 1127 of the Bankruptcy code, (b) Section 15.1 of the

Plan, and for such other purposes as may be necessary or

useful to aid in the confirmation and consummation of the

Plan and its implementation.

3la

v. Gryphon at the Stone Mansion, Inc., 216 B.R. 764, 768

(W.D.Pa.1997) (“a retention of jurisdiction provision within

a confirmed plan does not grant a bankruptcy court

jurisdiction”); Walnut Associates v. Saidel, et al., 164 B.R.

487, 495 (E.D.Pa.1994) (“the bankruptcy court cannot

obtain the power to reserve jurisdiction beyond that which

is necessary to effectuate the plan of reorganization

merely by inserting a provision in the plan or order of

confirmation reserving jurisdiction”); In re BankEast

Corp., 132 B.R. 665, 667 (Bankr.D.N.H.1991) (“while the

court may properly retain jurisdiction over postconfirma-

tion matters ... it may not expand its jurisdiction merely

by asserting it in a reorganization plan”).

Similarly, where a court lacks subject matter jurisdic-

tion over a dispute, the parties cannot create it by agree-

ment even in a plan of reorganization. See, e.g., In re

Almarc Corp., 94 B.R. 361, 365 (Bankr.E.D.Pa.1988) and

cases cited therein. Thus, the fact that Continental’s Plan

and the Confirmation Order provided for a broad retention

of jurisdiction does not decide the issue. We must deter-

mine independently whether we retain jurisdiction over

the issues presented.

Post-confirmation, a bankruptcy court has limited

jurisdiction. Under the express language of section 1142,

the court may “direct the debtor and any other necessary

party to execute or deliver ... any instrument required to

effect a transfer of property dealt with by a confirmed

plan, and to perform any other act, including the satisfac-

tion of any lien, that is necessary for the consummation

of the plan.” 11 U.S.C. § 1142(b). However, courts routinely

find that the bankruptcy courts have no jurisdiction over

the affairs of the post-confirmation debtor and its

creditors, particularly with respect to claims arising

32a

post-confirmation. See, e.g., In re Fairfield Communities,

Inc., 142 F.3d 1093, 1095-96 (8th Cir.1998) (bankruptcy

court lacks jurisdiction over post-confirmation claims); Jn

re Greenley Energy Holdings of Pennsylvania, Inc., 110

B.R. 173, 184 (Bankr.E.D.Pa.1990) (bankruptcy court has

post-confirmation jurisdiction only over those matters

whose resolution is necessary for consummation of the

plan); In re Iberis International, Inc., 72 B.R. 624, 626

(Bankr.W.D.Wis.1986) (assumption of executory contract

does not confer jurisdiction on the bankruptcy court over

post-confirmation breaches of that contract).

EPMC asserts that this Court lacks jurisdiction to

hear the Motion to Strike the Other Eastern Pilots’ claims

because, it asserts, those claims are based on post-

confirmation breaches of the collective bargaining agree-

ment, which the Third Circuit held was never rejected

(and therefore passed through the bankruptcy case unaf-

fected). The LPP Claimants and the Debtor counter that

the claims are based on pre-petition breach of the agree-

ment and, therefore, the Court has jurisdiction to hear the

Motion.

With respect to the Bankruptcy Court’s jurisdiction to

address the issue at hand, the Third Circuit’s opinion

provides guidance. The Third Circuit expressly rejected

the Claimants’ assertion that the Bankruptcy Court lacked

any jurisdiction over their claims. 125 F.3d at 130-31. With

respect to the treatment of those claims under the Plan of

Reorganization, for example, the Third Circuit coacluded

that the issue was a core matter, within the Bankruptcy

Court’s jurisdiction. Id. See also 28 U.S.C. § 157(b)(1). The

Third Circuit held specifically that:

33a

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 mat-

ter.” ... Further, the issue decided by the bank-

ruptcy 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 princi-

ples that govern the disposition of issues when

bankruptcy law and labor law intersect. Accord-

ingly, we conclude that the bankrupicy court had

jurisdiction to determine whether the Claimants’

claims could be satisfied by a monetary award in

lieu of specific performance.

125 F.3d at 131 (citations omitted).

However, that conclusion must be reconciled with the

Third Circuit’s holding, in that same opinion, that the

arbitration provision of the collective bargaining agree-

ment was binding on Continental and that the Bankruptcy

Court did not have the power to enjoin arbitration of the

Eastern pilots’ claims thereunder.’ Jd. at 136-38.

Upon reviewing the basis of the Motion to Strike, we

conclude that the issue raised by the LPP Claimants (and

Continental) is one which the Arbitrator must decide. The

Motion to Strike is not premised on any provision of the

Bankruptcy Code or Rules. For example, the Motion to

Strike is not based on a failure of the Other Eastern Pilots

to timely file a proof of claim in accordance with the

* The Third Circuit concluded that the arbitration provision of the

collective bargaining agreement was still applicable because that

agreement had never been rejected under the applicable provisions of

the Code. 125 F.3d at 137; see 11 U.S.C. § 1113.

34a

Federal Rules of Bankruptcy Procedure. See, e.g., F.R.B.P.

3001-3005. But see Pioneer Investment Services Co. v.

Brunswick Assocs., L.P., 507 U.S. 380, 113 S.Ct. 1489, 123

L.Ed.2d 74 (1993) (proof of claim filed beyond bar date

may be allowed if excusable neglect found).

Nor is the Motion to Strike based on disallowance or

reduction of the claims under any provision of the Bank-

ruptcy Code. See, e.g., 11 U.S.C. § 502(b); In re Main, Inc.,

207 B.R. 832, 837 (Bankr.E.D.Pa.), aff’d in relevant part,

No. 97-3739, 1997 WL 560119 (E.D.Pa. Aug. 26, 1997)

(claim of landlord for unpaid rent must be reduced in

accordance with section 502(b)(6) even though state court

had already determined amount in final judgment). In

those circumstances, the Bankruptcy Court clearly has

jurisdiction to allow or disallow a claim.

In contrast, the Motion to Strike the Other Eastern

Pilots’ claims is premised on a principle of labor law: that

an action to compel arbitration of labor issues must be

filed within six months of the refusal to arbitrate. While

normally the Bankruptcy Court can, and will, apply non-

bankruptcy federal and state law to the merits of a claim

during the claim objection process, in the case of claims

subject to arbitration provisions (in law or contract) the

Third Circuit has generally favored deferring to arbitra-

tion. See, e.g., Hays & Co. v. Merrill Lynch, 885 F.2d 1149

(3d Cir.1989). In this case, the Third Circuit has mandated

that the merits of these claims be decided by the Arbitra-

tor. 125 F.3d at 130. The Third circuit has, for example,

held that the individual pilots’ standing to prosecute

claims for seniority integration is an issue subject to the

exclusive jurisdiction of the arbitrator. Id.

SR,

LSTA SRG RADE DO. BOR lat

aii Foe (ee Rin Re ida we As

35a

We couclude that the issue of whether. the claims of

the Other Eastern Pilots were timely and properly as-

serted in the arbitration process is similarly within the

exclusive jurisdiction of the Arbitrator. The Motion to

Strike those claims on that basis is consequently denied.

C. Motion to Enforce Confirmation Order

By its Motion to Enforce Confirmation Order, Conti-

nental seeks a determination that the Confirmation Order

bars an action instituted by EPMC in the United States

District Court for the District of New Jersey (“the New

Jersey Action”) seeking a declaratory judgment that

Continental is obligated to comply, post-confirmation, with

the terms of the collective bargaining agreement, includ-

ing the integration of the seniority lists.

1. Jurisdiction

EPMC asserts as an initial matter, that this Court

lacks jurisdiction to decide the Motion to enjoin the New

Jersey action. EPMC asserts that the Third Circuit deci-

sion, which affirmed the District Court’s holding that the

Bankruptcy Court could not enjoin arbitration, precludes

this Court from enjoining the New Jersey Action.

The Third Circuit decision did not so state. That Court

held that the Bankruptcy Court could not enjoin the

arbitration proceeding; it did not hold that the Bankruptcy

Court could not enjoin other actions.

* The New Jersey Action is captioned Doyle Addington et al. v.

Continental Airlines, Inc., No. 98-4858 (MTB).

36a

However, as noted above, we must determine inde-

pendently whether we have jurisdiction to decide the

Motion. It is axiomatic that a court possesses the inherent

authority to enforce its own orders. See, e.g., Kokkonen v.

Guardian Life Ins. Co. of America, 511 U.S. 375, 379-80,

114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (court has ancillary

power to vindicate its authority and effectuate its decrees);

Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123,

115 L.Ed.2d 27 (1991) (“Courts of justice are universally

acknowledged to be vested, by their very creation, with

power to impose ... submission to their lawful man-

dates”).

In the bankruptcy context, courts have specifically,

and consistently, held that the bankruptcy court retains

jurisdiction, inter alia, to enforce its confirmation order.

See, e.g., North American Car Corp. v. Peerless Weighing &

Vending Machine Corp., 143 F.2d 938, 940 (2d Cir.1944)

(“We have, therefore, pointed out the existence of such

complementary and auxiliary jurisdiction of the court to

protect its original confirmation decree, prevent interfer-

ences with the execution of the plan, and otherwise aid in

its operation”); Gryphon at The Stone Mansion, 216 B.R. at

768 (“courts will exercise jurisdiction over post-

confirmation disputes if the matter sufficiently affects

creditors’ recoveries under a plan of reorganization”);

Walnut Associates, 164 B.R. at 492 (bankruptcy court

retains jurisdiction over post-confirmation administration

of the estate until the final decree is entered); Almarc, 94

B.R. at 364 (bankruptcy court retains jurisdiction “to

protect its [confirmation] decree, to prevent interference

with the execution of the plan, and to aid otherwise in its

operation”). Furthermore, Rule 3020(d) of the Federal

Rules of Bankruptcy Procedure states “Notwithstanding

whos, RRC SERRE SS BABS RIAA wick AN SN li SN

37a

the entry of the order of confirmation, the court may issue

any other order necessary to administer the estate.”

EPMC asserts, as significant, the fact that the Plan

has been substantially consummated.” However, we do not

view that as a fatal flaw. In the case of Donaldson uv.

Bernstein, 104 F.3d 547, 551 (3d Cir.1997), the Third

Circuit held that the bankruptcy court retained jurisdic-

tion to hear an adversary case after the chapter 11 plan

had been confirmed and substantially consummated. In

fact, in Donaldson, the chapter 11 case had been closed

and later reopened, before the adversary proceeding was

even filed. Id. at 551-52. The Third Circuit held that even

the closing and reopening of the case did not divest the

bankruptcy court of jurisdiction to hear the adversary

proceeding, which was premised on the alleged fraud of

the principals of the debtor in causing the debtor to

default on the confirmed plan. Jd. at 551-53.

Consequently, we do not find significant the fact that

the Plan may have been substantially consummated in

this case. That fact does not divest us of our inherent

jurisdiction to enforce the Confirmation Order issued by

this Court.

2. Procedural Flaw

EPMC also asserts, as a preliminary matter, that

Continental’s Motion must be denied because it seeks an

injunction without filing an adversary proceeding. It

* Continental had argued, in a motion to dismiss the appeal as

moot, that the Pian had already been substantially consummated. 125

F.3d at 127. The District Court held that substantial consummation of

the Plan had occurred. Id. Ps

38a

points to Rule 7001 of the Federal Rules of Bankruptcy

Procedure which requires the commencement of an adver-

sary proceeding (as opposed to proceeding by motion

pursuant to Rule 9014) if injunctive relief is sought.

This is correct as a general proposition. See, e.g., In re

Adams, 106 B.R. 811, 833 (Bankr.D.N.J.1989) (request for

injunctive relief by motion is procedurally defective; such

relief requires the commencement of an adversary pro-

ceeding by filing a complaint); Matter of Endicott, 79 B.R.

439, 440 n. 1 (Bankr.W.D.Mo.1987) (a proceeding “to

obtain an injunction or other equitable relief”? must be

commenced as an adversary proceeding); In re Entz, 44

B.R. 483, 485 (Bankr.D.Ariz.1984) (court cannot grant

injunctive relief on motion of a party; an adversary com-

plaint is required).

However, it is inapplicable to the case at bar. In this

case, Continental is not seeking an injunction, it is merely

seeking to enforce an injunction already in place — that

created by sections 1141 and 524 of the Bankruptcy Code

and the express terms of the Confirmation Order.” Rule

" Section 1141 of the Bankruptcy Code provides generally that a

confirmed plan of reorganization binds the debtor and all creditors

affected by its terms. 11 U.S.C. § 1141. More specifically, section 1141

provides that confirmation of a plan of reorganization discharges the

debtor from any pre-confirmation debt (the exceptions to this general

rule are not implicated by the facts of this case). Id. The effect of

discharge is to enjoin permanently a creditor from collecting the

discharged debt. 11 U.S.C. 524(a). See also In re Gehri, No. CC-95-1841-

MEVRU, 1996 WL 862565, at (9th Cir. BAP Sept. 30, 1996) (“upon

confirmation [of a chapter 11 plan] the automatic stay [of section 362] is

replaced by the permanent injunction of [section 524]”); In re Polysat,

Inc., 152 B.R. 886, 893-94 (Bankr.E.D.Pa.1993) (effect of discharge

under section 1141 is an injunction against collection of the debt as a

personal liability of the debtor).

Steam, cscs RN i ie em penn arenes enna

MS eM eT OL ee ME ee ee ae ee ee ee ee en ea me rt es aamMeer ce

ts done

39a

7001(7) requires the commencement of an adversary

proceeding “to obtain an injunction or other equitable

relief.” Thus, we conclude that, on the basis of the plain

language of Rule 7001(7), an adversary proceeding is not

necessary where the relief sought is the enforcement of an

injunction previously obtained, as in the case of enforce-

ment of the discharge injunction.

The case cited by EPMC, In re Sykes, 53 B.R. 107

(Bankr.W.D.Va.1985) is inapplicable. In Sykes, the Court

denied a motion to reinstate the automatic stay of section

362 (after the plan had been confirmed) to prevent the sale

of certain real property owned by the debtor. Apparently,

in that case, neither the plan nor the confirmation order

contained any provision enjoining the sale. In contrast, in

this case the Confirmation Order (and the Plan) contain

express language enjoining lawsuits such as the New

Jersey Action.” (See Appendix to Debtor’s Memorandum of

Law, Tab 1 at § 12.19, Tab 3 at pp. 41-43.) Thus, Sykes is

distinguishable.

Consequently, we conclude that the issue is properly

before us on the Motion of Continental to enforce the

Confirmation Order.

3. Merits

Turning to the merits of the Motion, we are convinced

that the relief requested in the Motion is compelled by the

Third Circuit’s decision. Continental asserts that EPMC is

violating the Confirmation Order by filing and prosecuting

“ The Third Circuit vacated the injunction language only to the

extent that it barred arbitration. 125 F.3d at 137-38.

40a

the New Jersey Action. EPMC responds that its action

does not violate the Confirmation Order because its action

is premised on its post-confirmation rights under the

collective bargaining agreement, not on its pre-

confirmation claims under that agreement. (See Motion to

Strike and/or Opposition to Reorganized Debtors’ Motion

for Order Compelling Compliance with Order Confirming

Plan of Reorganization and for Sanctions at p 4.)

However, the Third Circuit squarely decided this issue

when it concluded that “Simply put, we hold that any

cluim 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.” 125 F.3d at 136 (emphasis

added). Consequently, the Third Circuit concluded that

those claims were discharged by the Plan. Id.

Even if the language of the Third Circuit were not so

explicit, we believe that its decision could not be read as

EPMC wishes: that the Court cecided only that the pre-

confirmation claim for seniority integration could be

discharged in the Plan and Confirmation Order, leaving

the post-confirmation claims for enforcement under the

terms of the collective bargaining agreement. If that were

so, the Eastern pilots would not have been contesting

confirmation of the Plan as vigorously as they did. They

would have let the Plan be confirmed and, the day after

confirmation of the Plan, would have demanded seniority

integration.

In fact, most of the argumerts that EPMC now makes

are identical to those that it made at the Confirmation

hearing, at the District Court l:vel and before the Third

4la

Circuit on appeal. EPMC specifically articulated the

question before the Third Circuit as: “the issue thus is

whether the [labor protective provision] rights, which

provide for seniority integration only and do not expressly

or by implication mention money damages as an alterna-

tive to seniority integration, nevertheless ... can be

reduced to claims for front pay. ...” (Appendix of Submit-

ted Documents, Tab 9 at 39 (emphasis added). See also

Appendix of Submitted Documents, Tab 6 at 17-21.) The

inclusion of the argument as to front pay clearly impli-

cated post-confirmation claims. That argument was made

by EPMC in the Third Circuit three years after confirma-

tion of the Plan. Thus, EPMC clearly understood that post-

confirmation claims were being affected by the Confirma-

tion Order which it sought to reverse on appeal.

Further, it is clear that EPMC’s arguments were

expressly rejected by the Third Circuit. Now that the

Third Circuit has decided that issue against EPMC, it

seeks to limit that decision to the issue of pre-confirmation

claims. In fact, the Third Circuit’s decision was as broad as

the Eastern pilots feared (and Continental now urges). As

framed by the Third Circuit: “[T]he issue we must decide

is whether monetary payment is an alternative for the

equitable remedy of seniority integration.” Jd. at 133. The

Court concluded yes. Id.

In its analysis, the Court made it clear that the

monetary award was in substitution for prospective

seniority integration (that is, post-confirmation) as well as

for the failure to integrate the pilot lists in the past (i.e.,

pre-confirmation). The Court, in reviewing analogous case

law, stated that: ©

42a

We find support for the proposition that mone-

tary awards are a viable alternative to the equi-

table 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 con-

duct. Although we have recognized that rein-

statement is the preferred remedy to address

cases of wrongful discharge, we have enforced

monetary awards as a viable alternative where

reinstatement is impractical.

Id. at 135 (emphasis added) (citing Maxfield v. Sinclair

International, 766 F.2d 788 (3d Cir.1985) (front pay is

appropriate alternative to reinstatement where animosity

makes reinstatement impractical)).” See also, Van Waters

& Rogers, Inc. v. Int’l Brotherhood of Teamsters, 913 F.2d

736 (9th Cir.1990) (upholding arbitrator’s award of money

damages in lieu of seniority integration).

In applying those principles to the instant case, the

Third Circuit stated:

Moreover, we are convinced that the particular

circumstances of this case might make the en-

forcement of the equitable remedy of seniority in-

tegration impractical such that an alternative

money damage award would be appropriate. The

seniority integration sought by the [Claimants]

* The Court distinguished Squires v. Bonser, 54 F.3d 168 (3d

Cir.1995), where reinstatement was ordered despite animosity of the

parties because of First Amendment implications. 125 F.3d at 135 n. 11.

The Court found no similar constitutional concerns in this case. Id.

43a

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 men-

tion a detrimental effect on employer-employee

relations. The circumstances indicate that sen-

iority 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.

Id. at 136 (footnote omitted) (emphasis added).

Clearly, the Third Circuit’s decision did not contem-

plate that the Eastern pilots would retain their right to

seniority integration after confirmation of the Continental

Plan. Rather, the Court concluded that any right to senior-

ity integration (without distinguishing between pre or

post-confirmation) gave rise to a claim for money damages

which was discharged by the Confirmation Order.

The Third Circuit explained the effect of its ruling:

We take care to note the boundaries of our hold-

ing. It is not our purpose to suggest the award

the arbitrator should grant, if an award is war-

ranted 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 integra-

tion arising out of the resolution of the LPP dis-

pute will be treated as a claim in bankruptcy

giving rise to a right of payment. As such, the

44a

right to seniority integration is satisfiable by the

payment of money damages.

Id. (emphasis added).

_ Thus, although the Third Circuit upheld the District

Court’s dissolution of the injunction against arbitration

and found that Continental had a duty to arbitrate the

Eastern pilots’ dispute, it concluded that any claim which

the Arbitrator might award was convertible to money

damages and dischargeable under Continental’s Plan. Jd.

at 136-38. The Court expressly rejected EPMC’s current

assertion that conversion of the right to seniority integra-

tion into a right to monetary damages alone was barred by

section 1113. Jd. at 137 n. 15.

In fact, the Eastern pilots recognized that the impact

of the confirmation decision (and the Third Circuit's

affirmance) was much more expansive than EPMC now

argues. In their Petition for Writ of Certiorari, the LPP

Claimants asserted that:

The Third Circuit’s ruling authorizes Continental

to ignore the “substantive provisions of the

agreement” by removing “the heart of the . . . [la-

bor protective provisions]” which “control senior-

ity” from the collective bargaining agreement... .

Transforming the jobs protected as a result of the

merger through operation of the terms of the col-

lective bargaining agreement into a money dam-

ages claim in the bankruptcy effectively destroys

the collective bargaining agreement itself as no

45a

employees covered by the agreement will have

the right to a job.

(Appendix of Submitted Documents, Tab 2 at 17-18."*)

The Petition for Writ of Certiorari filed by EPMC is

similar:

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 bar-

gained arbitration process and decreed that any

award of an arbitrator granting any type of re-

lief, 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.”

(Appendix of Submitted Documents, Tab 1 at 21 (emphasis

added)).”

The Supreme Court denied certiorari and the decision

of the Third Circuit is law of the case and may not now be

reargued.* It appears that the New Jersey Action is

* Although designated as Tab 1 in the Appendix of Submitted

Documents, the Petition for Writ of Certiorari filed by the LPP Claim-

ants is actually found at Tab 2 in the Appendix.

* Although designated as Tab 2 in the Appendix of Submitted

Documents, the petition for Writ of Certiorari filed by the Former

Eastern Pilots Granted the Right to Substitute Counsel is actually

found at Tab 1 in the Appendix. EPMC is the successor to the Former

Eastern Pilots Granted the Right to Substitute Counsel.

* See Part III.A at p. 5, supra, for a discussion of the law of the

case doctrine.

46a

nothing less than a collateral attack on the Third Circuit

decision. EPMC asserts that the New Jersey Action “seeks |

only a declaration that the arbitrator has authority to |

determine the appropriate remedy for breach of the

collective bargaining agreement postconfirmation.” (Sup-

plemental Memorandum of Eastern Pilots Merger Com- :

mittee at 11.) This is disingenuous, that suit seeks a i

declaration that the Arbitrator can enter an order for

specific performance and that such an order is enforceable

notwithstanding the terms of the Confirmation Order. The

Third Circuit specifically dealt with both these issues. It

held that the arbitration can proceed, but that any order

entered by the Arbitrator on the Eastern pilots’ claims

would be converted to a money judgment and discharged

by the terms of the Plan of Reorganization and Confirma-

tion Order. It is the latter decision which the New Jersey

Action appears to seek to relitigate and change. This the

Eastern pilots may not do.

4. Sanctions

Continental seeks an award of sanctions against

EPMC for violation of the Confirmation Order and the

discharge injunction contained in sections 1141 and 524 of

the Code. We conclude that such an award is merited.

To obtain sanctions for civil contempt, three elements

“must be established: (1) a valid order of the court must

exist; (2) the person to be charged with contempt must

have actual knowledge of the order; and (3) the person

must have disobeyed the order. In re Baker, 195 B.R. 309,

317 (Bankr.D.N.J.1996) (quoting Roe, et al. v. Operation

Rescue, 54 F.3d 133, 137 (38d Cir.1995)).

47a

As one court has explained:

The confirmation order and discharge injunction

are critical elements of the fresh start that is af-

forded to debtors in the Bankruptcy Code. It is

essential that creditors respect these court orders

and permit debtors to benefit from the rights and

protections to which they are entitled. Unlike

section 362(h), which provides a specific statu-

tory basis for an award of actual damages and

attorneys’ fees when a creditor violates the

automatic stay, there is no remedial provision

within the discharge provisions of sections 524 or

1141. Nevertheless, the court may take remedial

measures to enforce these provisions and vindi-

cate the rights of a discharged debtor in the

event a creditor ignores these essential protec-

tions afforded to debtors. See Matter of Miller, 81

B.R. 669, 672 (Bankr.M.D.Fla.1988).

Bankruptcy courts have frequently sanc-

tioned creditors for willfully violating the dis-

charge injunction. In some cases, the court has

simply found that the debtor is entitled to com-

pensation. /n re Braun, 141 B.R. 133 (Bankr.N.D.

Ohio 1992) (awarding attorneys’ fees, compensa-

tory damages and punitive damages for willful

violation of § 524). More frequently, courts have

found the offending party in contempt. There are

two separate grounds for such findings of con-

tempt. Since §524(a) is an injunction, some

courts have applied the longstanding bankruptcy

rule that willful violations of injunctions, such as

the automatic stay, give rise to contempt and

sanctions. See Behrens v. Woodhaven Ass’n, 87

B.R. 971, 976 (Bankr.N.D.Tl1.1988) (awarding ac-

tual damages and attorneys’ fees). The more

common approach, however, has been to find the

48a

party in contempt based on the bankruptcy

court’s authority under 11 U.S.C. § 105. In re

Barbour, 77 B.R. 530 (Bankr.E.D.N.C.1987) (con-

tempt power authorizes awarding damages and

attorneys’ fees or willful violation of § 524); In re

Miller, 81 B.R. 669 (Bankr.M.D.Fla.1988) (attor-

ney who willfully violated permanent injunction

found in contempt and held liable for damages

incurred by debtor); Kimco Leasing, Inc. v. Knee,

144 B.R. 1001 (N.D.Ind.1992).

In order to be found in civil contempt, the of-

fending party must have knowingly and willfully

violated a definite and specific court order. In re

Ryan, 100 B.R. 411, 417 (Bankr.N.D.I11.1989).

In re Thomas, 184 B.R. 237, 240-41 (Bankr.M.D.N.C.1995)

(footnotes omitted). Accord, In re Aspen Limousine Service,

Inc., 198 B.R. 341, 349-51 (D.Col.1996); In re Kennedy, 80

B.R. 673 (Bankr.D.Del.1987) (courts have inherent con-

tempt powers to enforce compliance with their lawful

orders). See F.R.B.P. 9020.

In this case, there is a valid, final order: the Confir-

mation Order, which was affirmed by the Third Circuit.

That Order barred any action to enforce any claim dis-

charged by the Confirmation Order. (See Appendix to

Debtor’s Memorandum of Law, Tab 3 at p. 12, p. 42.)

Section 524 also provides “an injunction against the

commencement or continuation of an action, the employ-

ment of process, or an act to collect, recover or offset any

[discharged' debt as a personal liability of the debtor. ...”

11 U.S.C. § 524(aX(2). The Third Circuit held that any

claim for seniority integration under the collective bar-

gaining agreement was discharged by the Confirmation

Order. 125 F.3d at 136. Thus, the first element necessary

for an imposition of sanctions is found.

49a

Second, EPMC had actual knowledge of that Order,

and its effect. EPMC was a party to the appeal and vigor-

ously, but unsuccessfully, sought to overturn the Confir-

mation Order. The second element is met.

Third, EPMC has violated the Order by commencing

the New Jersey Action which seeks to enforce a claim

discharged by the Confirmation Order. In direct contra-

vention of the Confirmation Order and Section 524, EPMC

commenced the New Jersey Action to enforce the seniority

integration provisions which the Third Circuit expressly

held were discharged by the Confirmation Order. In doing

so, EPMC has acted with utter contempt toward the

orders of this Court, the District Court and the Third

Circuit. The third element necessary for a finding of

contempt and award of sanctions is met.

Consequently, we conclude that EPMC is in contempt

of the Confirmation Order, as affirmed by the Third

Circuit. As a sanction, we will direct EPMC to pay the

attorneys’ fees and costs incurred by Continental in

defending the New Jersey Action and in prosecuting the

Motion to enforce the Confirmation Order. Counsel for

Continental shall file a statement detailing such fees and

costs within thirty days of our decision; EPMC may

comment on the reasonableness within twenty days

thereafter. We will then make an appropriate award.

IV. CONCLUSION

We conclude that, while this Court has exclusive

jurisdiction to allow the claims of the Other Eastern Pilots

against Continental, the Third Circuit has mandated that

the issues surrounding those claims (who had standing to

press the claims, the validity of the claims, and whether

50a

they are time-barred) must first be resolved by the Arbi-

trator. We, therefore, deny the Motion to Strike the claims

of the Other Eastern Pilots.

Further, since we find that the decision of the Third

Circuit affirmed the ruling that all claims of the Eastern

Pilots are discharged by the Confirmation Order, we

conclude that the Confirmation Order does bar the New

Jersey Action instituted by EPMC. Continental is entitled

to sanctions against EPMC for its knowing and willful

violation of the Confirmation Order.

Pn ane cy ee yee

5la

APPENDIX E

125 F.3d 120

156 L.R.R.M. (BNA) 2193, 31 Bankr.Ct.Dec. 579,

Bankr. L. Rep. P 77,557

United States Court of Appeals,

Third Circuit.

In re: CONTINENTAL AIRLINES, Debtor.

AIR LINE PILOTS ASSOCIATION,

CONTINENTAL AIRLINES,

LPP Claimants; Effective Date Committee, Claimants,

Honorable John Stonitsch, Trustee. ae

LPP Claimants, Appellant No. 96-7028

In re: CONTINENTAL AIRLINES, Debtor.

AIR LINE PILOTS ASSOCIATION,

: CONTINENTAL AIRLINES,

LLP Claimants; Effective Date Committee, Claimants,—

Honorable John Stonitsch, Trustee.

Continental Airlines, Inc., Appellant No. 96-7038*.

Nos. 96-7028, 96-7038.

Argued March 13, 1997.

Decided Aug. 29, 1997. —

Jon A. Geier (Argued), Paul, Hastings, Janofsky &

Walker, Washington, DC, Laura D. Jones, Robert S. Brady,

Young, Conaway, Stargatt & Taylor, Wilmington, DE,

Attorneys for Continental Airlines.

i Caption amended in accordance with Clerk’s Order dated 3/4/96.

52a

Michael J. Isaacs, Agostini, Levitsky & Isaacs, Wil-

mington, DE, Myles J. Tralins (Argued), Tralins & Associ-

ates, Miami, FL, Attorneys for LPP Claimants.

John A. McGuinn (Argued), Schmeltzer, Aptaker &

Shepard, Washington, DC, Attorney for Eastern Pilots

Merger Committee.

Before: MANSMANN, LEWIS and MICHEL, . Circuit

Judges.

LEWIS, Circuit Judge.

OPINION OF THE COURT

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 bank-

ruptcy 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.

Honorable Paul R. Michel, Circuit Judge for the United States

Court of Appeals for the Federal Circuit, sitting by designation.

53a

The bankruptcy court determined that the claims

could be satisfied by monetary awards in lieu of specific

performance and enjoined scheduled arbitration proceed-

ings 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 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 consti-

tute “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

* “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 I.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.

54a

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.

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 acquisi-

tion constituted a “merger” within the meaning of certain

“labor protective provisions” (LPPs) contained in the

collective bargaining agreement, ALPA requested a meet-

ing 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 integra-

tion 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 services previously performed

by them through such separate facilities.

2K * *

Section 3. Insofar as the merger affects the sen-

iority rights of the carriers’ employees, provisions

55a

shall be made for the integration of seniority lists

in a fair and equitable manner, including, where

applicable, agreement through collective bargain-

ing 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.

* * *

Section 13(a). In the event that any dispute or

controversy ... arises with respect to the protec-

tions 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 arbi-

trator selected from a panel of seven names fur-

nished 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 Continen-

tal refused to bargain with AI.PA about the integration of

the seniority lists. Consequently. ALPA requested the

National Mediation Board to proffer a list of seven arbitra-

tors 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 provision (LPP dispute). Eastern, however,

* 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 equita-

ble 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, Intern. v. U.S. Dept. of

Transp., 838 F.2d 563, 565 (D.C.Cir.1988) (citing Allegheny-Mohawk

Merger Case, 59 C.A.B. 22 (1972)).

56a

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 in-

stance. See In re Ionosphere 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 proceed-

ing, 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 consis-

tently 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

* 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.

Le TF RP EE ee ee eee.

ee ae ee ne

57a

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.

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 In re Ionosphere

Clubs, Inc., 114 B.R. 379 (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 Arbitra-

tion 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 as-

serted 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

58a

Objection.‘ In both motions, Continental contended that

the seniority integration that the claimants sought was

not feasible because it would be detrimental to Continen-

tal’s successful reorganization. Thus, Continental sought a

declaration that the claims were, at best, “general, dis-

chargeable, pre-petition, unsecured claims,” compensable

by an award of monetary damages.

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

pe converted to a payment of money damages. ALPA also

argued that only an arbitrator had jurisdiction to deter-

mine 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.

‘ Pnor 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 administra-

tion 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 bargain-

ing agreement between Eastern and ALPA and that it could not be

bound by the result of any arbitration over the LPPs.

* 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.

59a

In February, 1993, the bankruptcy court judge, in two

orders, granted Continental’s Partial Objection To Allow-

ance 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); In 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 con-

cluded that the issue of whether any award granted to

ALPA would constitute general, unsecured, prepetition

claims was a core matter under the bankruptcy code.

Thus, it concluded that it had jurisdiction to resolve the

matter. In 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 grant-

ing motion for partial summary judgment). The court then

determined that the equitable remedy of seniority integra-

tion 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); In re Conti-

nental 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 right of payment

asserted by ALPA was, at best, a general, dischargeable,

unsecured claim that was entitled to no administrative

priority. In re Continental Airlines, Inc., et al., Nos. 90-932

2 ————eco'r_rereore

60a

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 grant-

ing 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. Jn 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 bank-

ruptcy courts 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 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

6la

Settlement 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 settle-

ment. Approximately two-thirds of these pilots did so.

D. The District Court Proceedings

Prior to the ALPA/Continental settlement, Continen-

tal filed a motion to dismiss ALPA’s and the LPP Claim-

ants’ 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 main-

tain 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 settle-

ment 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

* 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.

62a

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 empha-

sized the substantial consummation of the plan. Specifi-

cally, the court noted that 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. In

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. Id. at 22-25. The

court also rejected Continental’s argument that the LPP

Claimants were bound by the ALPA/Continental settle-

ment. Id. at 23.

Turning to the merits of the appeals, the court af-

firmed the orders of the bankruptcy court in all respects,

except for the bankruptcy court’s injunction of the arbitra-

tion proceedings. Jd. 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. Id. at 34-37. Al-

though it vacated the injunction, the district court refused

to remand the matter to the bankruptcy court with in-

structions to strike the injunction. Rather, the court

concluded that under section 1113 of the bankruptcy code,

63a

the bankruptcy court could not enjoin the arbitration even

if the requirements of Rule 65(d) were met. Id. at 37-40.’

The LPP Claimants appealed the district court’s order.

Continental cross-appealed on the issues of the mootness

of 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 appropriate.

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).

{I.

Our review of the district court’s determination is

plenary. Brown v. Pennsylvania State Employees Credit

Union, 851 F.2d 81, 84 (3d Cir.1988); see In re Ionosphere

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. Jd. Legal determinations are subject to plenary

review. Id.

" 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. In re Continental Airlines, Inc., et al., No. 93-163,

slip op. at 37, (D.Del. Nov. 29, 1995).

64a

Before we reach the merits of the parties’ claims, we

must address Continental’s two challenges to the Claim-

ants’ 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 Proce-

dure 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 identi-

fies 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, consequently, waived

their claims on appeal. Continental contends that the

notice of appeal did not specify those members wno 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

(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 extend-

Nt el ty SAT Me Be ani SINS ht Rr one thd eal,

ORB AN MV raty LAB BE 8 IE

65a

ing the time prescribed to file a notice of appeal, a power

not granted to the court. Id. at 315, 108 S.Ct. at 2407-08.

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, 108 S.Ct. at 2408. In

Torres, the Supreme Court emphasized that, “mere techni-

calities should not stand in the way of consideration of a

case on its merits.” Jd. (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 informa-

tion 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 appel-

lants 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 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

66a

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, 108

S.Ct. at 2409; 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 settle-

ment agreement, granted the LPP Claimants the opportu-

nity 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 partici-

pate in the settlement and to return the form to Continen-

tal. 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 par-

ticipate 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. Accord-

ingly, we conclude that the LPP Claimants’ notice of

appeal sufficiently identifies the entity such that Conti-

nental, as well as this Court, is adequately apprised of the

identity of the appellants such that appellate jurisdiction

67a

is proper. In so doing, we follow the Supreme Court’s

directive to construe 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, Conti-

nental 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 chal-

lenged 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 argu-

ment, 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.

68a

The right to seniority integration under the LPPs

turns on whether a “merger” between Eastern and Conti-

nental 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, 109 S.Ct.

2477, 2480, 105 L.Ed.2d 250 (1989) (“major disputes seek

to create contractual rights, minor disputes to enforce

them”) (quoting Elgin, J & E. Ry. Co. v. Burley, 325 US.

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 & North Western Transp.

Co. v. Local Union 214, 829 F.2d 1424, 1427 (7th Cir.1987).

Accordingly, the issue of standing is subject to the exclu-

sive 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. Con-

solidated Rail, 491 U.S. at 304, 109 S.Ct. at 2481 (“the

[National Railroad Adjustment] Board ... has exclusive

jurisdiction over minor disputes. Judicial review of the

arbitral decision is limited.”); Chicago & North Western

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 & North Western Transp., 829

F.2d at 1428. Nor may the courts decide what remedy is

LAD Dao Raa Soh an RI AE joe

69a

appropriate if the agreement is interpreted to require

recovery of a remedy. General Committee 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 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 juris-

diction 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 (5th Cir.1987). Section 157(b) does not

define “core proceedings.” However, the phrase has been

70a

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 ex-

ample, the filing of a proof of claim or an objec-

tion to the discharge of a particular debt.

In re Wood, 825 F.2d at 97. See Beard v. Braunstein, 914

F.2d 434 (8d 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 consis-

tent with principles that govern the disposition of issues

when bankruptcy law and labor law intersect. See L.O.

Koven & Brother, Inc. v. Local Union No. 5767, 381 F.2d

196, 205 (3d Cir.1967) (“Questions involving an interpreta-

tion of the Bankruptcy Act should be decided by the court,

while questions involving an interpretation of the collec-

tive 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

T7la

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, et seg., to implicate the

; bankruptcy court’s jurisdiction to determine how the claims will be

; treated in bankruptcy. Section 1 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 re-

straining order or temporary or permanent injunction be is-

sued 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 in-

terference with the Kasher arbitration as was the bank-

ruptcy 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 pro-

ceedings, 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 in-

effectual, operated as an injunction). Thus, we will not dis-

turb the bankruptcy court’s exercise of jurisdiction over the

matter.

Similarly we reject the Claimants’ argument that the de-

termination whether the equitable remedy can be converted

to a payment of money damages is inconsistent with the dis-

trict court’s conclusion that the individual right to seniority

integration under the LPPs involves a “minor” dispute, sub-

ject to the exclusive jurisdiction of the arbitrator. See

(Continued on following page)

eerie

72a

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

discussion, supra Part II.B. We discern no inconsistency be-

tween the bankruptcy court’s exercise of jurisdiction to de-

termine the status of the bankruptcy claim and the district

court’s characterization of the issue of the Claimants’ stand-

ing 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 con-

sider the merits of the standing issue was not inconsistent.

| em

73a

payment, whether or not such right to an equita-

ble remedy is reduced to judgment, fixed, contin-

gent, matured, unmatured, disputed, undisputed,

secured, or unsecured.

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 (1985)

(“Congress desired a broad definition of claim.”); see, e.g.,

Pennsylvania Dep’t of Public Welfare v. Davenport, 495

U.S. 552, 558, 110 S.Ct. 2126, 2130-31, 109 L.Ed.2d 588

(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 peti-

tioner, 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 injunc-

tion, the State obtained the appointment of a receiver, who

was directed to take possession of all 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.

74a

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, 105 S.Ct. at 709-10. 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 compli-

ance with the injunction. Specifically, the Court stated:

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 as-

sets 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 tak-

ing 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 satis-

fied.

Id. at 283, 105 S.Ct. at 709-10. Thus, the Court concluded

that under the circumstances, the clean up order had been

converted into an obligation to pay money. Jd. at 283, 105

S.Ct. at 709-10.

' eee teil

_ _———————————

YON st (ak uate tae haha

75a

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 De-

partment of Environmental Protection and Energy (the

“Department”) as a creditor with a disputed and unliqui-

dated 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.

The Department, seeking to enforce Torwico’s obliga-

tion 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 consti-

tuted 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

ea re rh EA gl es

i SUEESUSGS Ss <cTFESS SS a

76a

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 Electron-

ics, 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 pol-

lution 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.

Id. (quoting In re Chateaugay Corp., 944 F.2d 997, 1008

(2d Cir.1991)).’

* 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 Chateaugay Corp., 944 F.2d 997 (2d Cir.1991). In that

case, the court addressed the issue of what constituted a claim in the

(Continued on following page)

77a

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 alterna-

tive 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 specifi-

cally 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.

context of the bankruptcy of an entity that operated hazardous waste

sites. There, the court stated:

Where an order imposes obligations distinct from any obli-

gation 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 cir-

cumstances there is a breach of an obligation that gives rise

to a right of payment.

In re Chateaugay Corp., 944 F.2d at 1008.

78a

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 inte-

gration 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 (1990) (claim based on breach of a collective bargain-

ing agreement is comparable to a breach of contract claim

* The LPPs specifically state:

Section 1. The fundamental scope and purpose of the condi-

tions hereinafter specified are to provide for compensatory

allowances to employees who may be affected by [a] pro-

posed merger. ...

(Labor Protective Provisions, section 1).

79a

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.3d 1522 (11th Cir.1996) (breach of [collective

bargaining claim] is most analogous to a claim for breach

of contract). The Court of Appeals for the Ninth Circuit’s

opinion in Van Waters & Rogers, Inc. v. 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 con-

tained a seniority integration clause triggered by a pur-

chase 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 collec-

tive bargaining agreement with another union, Local 287.

Second, the collective bargaining agreement between Local

70 and McKesson/Van Waters contained a clause preclud-

ing 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 jurisdic-

tional dispute would be outside of the scope of the arbitra-

tor’s authority. As seniority integration of Local 70’s

employees would affect the seniority of Van Waters’ em-

ployees and create a potential conflict between the two

;

80a

unions, resolution of the dispute implicated the arbitra-

tor’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 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 2

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 collec-

tive bargaining agreement.” Id. 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 sepa-

rate 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

8la

have enforced awards of monetary damages in lieu of

reinstatement. Much like reinstatement, seniority integra-

tion 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 Transp. Co., 424 U.S. 747, 766, 96 S.Ct. 1251,

1265, 47 L.Ed.2d 444 (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 F2d 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., 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.1995) (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

" 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 constitu-

tional 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,

(Continued on following page)

82a

from the enforcement of reinstatement, disruption to the

work environment, irreparable damage to work relation-

ships, and hostility and animosity are all very probable

conditions that can result from the enforcement of senior-

ity 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 appro-

priate alternative to seniority integration.

Moreover, we are convinced that the particular cir-

cumstances of this case might make the enforcement of

the 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 dis-

placement has the potential to create an environment rife

with hostility and low employee morale, not to mention a

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.1986)). 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 reinstatemont 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.

83a

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, 96 S.Ct. at 1267 (in a Title VII

case, “the denial of seniority relief to victims of illegal racial discrimina-

tion in hiring is permissible ‘only for reasons which, if applied gener-

ally, 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.

84a

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 injunc-

tion and is valid. We need not decide whether the perma-

nent injunction failed to comply with the mandate of Rule

* 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 la-

bor union or collective bargaining representative acting or

purporting to act on behalf of any such employees or former

employees ... from commencing, conducting or continuing

any suit, arbitration, action or other proceeding in any place

or forum against any Debtor, ... This injunction shall ap-

ply, without limitation, to any suit, arbitration, action or

proceeding.

(Debtors’ Revised Second Amended Joint Plan of Reorgani-

zation, § 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 E

be restrained... . #

Fed.R.Civ.P. 65(d).

. bn Bibel, oe eta

BRE RS Sevens

85a

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), Conti-

nental’s failure to reject the collective bargaining agree-

ment consistent with the mandate of section 1113 of the

Code renders the injunction invalid.

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 com-

mencement or continuation of an action, the em-

ployment of process, or an act, to collect, recover

or offset any such debt or Claim as a personal li-

ability of the Debtors. .. .

(Findings of Fact, Conclusions of Law and Order Confirm-

ing- 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.

86a

11 U.S.C. § 1113(a). The provision outlines the procedure

that a debtor or appointed trustee must follow to success-

fully 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. § 1113(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 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 collec-

tive bargaining agreement. Instead, Continental suggests

that the imposition of the injunction was consistent with

the bankruptcy court’s authority to determine the admin-

istrative 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.“

* We have not been required previously to address the applicabil-

ity of arbitration under collective bargaining agreements when the

employer is in bankruptcy, although the issue was raised in a case we

(Continued on following page)

87a

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 compli-

ance with the requirements of section 1113 was impermis-

sible, as “its application would allow a debtor unilaterally

to avoid its obligation to arbitrate.” In re Ionosphere, 922

F.2d at 993. Here, the enforcement of the statutory injunc-

tion in the face of Continental’s failure to follow the

requirements of section 1113 is no different. As the en-

forcement of the injunction would have the effect of per-

mitting Continental to escape its duty to arbitrate under

the collective bargaining agreement, we decline to enforce

the statutory injunction in the absence of Continental’s

compliance with the requirements to reject the collective

bargaining agreement."

decided last year. See Antol v. Esposto, 100 F.3d 1111, 1121 n. 4 (3d

Cir.1996) (“(W]e need not decide that interesting issue here.”). This

case, however, requires us to do so.

Despite our conclusion that failure to comply with section 1113

bars an injunction of the arbitration, we reject the Claimants’ conten-

tion 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.

88a

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 been no determina-

tion 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.

** 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 spe-

cifically, 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 mone-

tary 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 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).

.89a

In light of the overwhelming advantage that Conti-

nental 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

+. @ reviewing court may properly consider the represen-

tations 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 represen-

tations.”). Accordingly, we conclude that Continental is

bound by its prior representations that it has a duty to

arbitrate the LPP dispute.

ITT.

For the foregoing reasons, we affirm the district

court's decision in all respects.

90a

APPENDIX F

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

In re: ) Bankruptcy Court

CONTINENTAL AIRLINES, ) Case Nos. 90-932

INC. et al., ) through 90-984

Debtors, )

AIRLINE PILOTS ‘

ASSOCIATION, ) C-A. No.: 93-163, 93-164,

INTERNATIONAL, and 93-177, 93-178, 93-

LPP CLAIMANTS, 250, 93-255, 94-496

Appellants, ) Consol. 93-163 LON

Vv. )

CONTINENTAL AIRLINES, ?

INC. et al., )

Appellees. )

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.

9la

MEMORANDUM OPINION

November 29, 1995

Wilmington, Delaware

/s/ Joseph J. Longobardi

LONGOBARDI, District J udge

I. FACTUAL BACKGROUND

This bankruptcy appeal involves claims against the

debtor, Continental Airlines, Inc. (“Continental”), by two

parties: the Air Line Pilots Association, Internationa]

(“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), affd 861 F.2d 1546 (11th Cir. 1988). The collec-

tive 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.”

‘ At one time, the Civil Aeronautics Board (“CAB”) required

merging airlines to adopt these form LPPs as a condition of approving a

(Continued on following page)

92a

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 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. Continen-

tal 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. Since deregulation, the Department of Transportation gener-

ally leaves the issue of LPPs to collective bargaining.

* Since June 6, 1990, Texas Air has been known as Continental

Airlines Holdings, Inc.

93a

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 Conti-

nental continued after December 3, 1990. The bank-

ruptcy 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 Conti-

nental refused to bargain over the integration of senior-

ity 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 reor-

ganization 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

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.” In 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 bank-

ruptcy in Delaware on December 3, 1990. Subsequently,

ALPA initiated an arbitration against Eastern regard-

ing 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

94a

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 equita-

ble 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 Ka-

sher 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 Ad-

justment rather than by Arbitrator Kasher, a Section 13

LPP Arbitrator.® (KA at 4).

Arbitrator Kasher decided that he had jurisdiction

to ascertain whether Eastern and Continental had

“merged”, and if they had, to determine the appropriate

* “Section 13 LPP Arbitrator” refers to an arbitrator appointed

pursuant to section 13 of the Allegehny-Mohawk, LPPs.

95a

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, 1998, Judge Balick entered an Order

confirming Continental’s Joint Second Plan of Reorgani-

zation, as Modified (“Plan of Reorganization”). The Plan

of Reorganization took effect on April 27, 1993. In the

Plan of Reorganization, the bankruptcy court perma-

nently 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 Conti-

nental. One of the conditions of that investment was a

judicial determination that ALPA and the LPP claim-

ants 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.I. 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 I).

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

96a

the LPP claims were, at most, general unsecured prepe-

tition claims which could be fully satisfied without the

granting of equitable relief.‘ Neither ALPA 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 con-

sensual 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 bank-

ruptcy 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

* 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.

* AL

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