Amicus Curiae Brief — Eastern Pilots Merger Committee v. Continental Airlines, Inc

MOTION FILED (1)

AUG 4.2 2002 ___No. 02-58 :

IN THE

Supreme Court of the Anited States

EASTERN PILOTS MERGER COMMITTEE,

Petitioner,

Vv.

—————_ “

CONTINENTAL AIRLINES, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

MOTION FOR LEAVE TO FILE BRIEF

AMICUS CURIAE AND BRIEF AMICUS CURIAE OF

THE ALLIED PILOTS ASSOCIATION

IN SUPPORT OF PETITIONER

DAVID PALMER DEAN *

JESSICA RACHEL ARONS

JAMES & HOFFMAN, P.C.

1101 17th Street, N.W.

Washington, D.C. 20036

* Counsel of Record (202) 496-0500

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

® << v0

IN THE

Supreme Court of the United States

No. 02-58

EASTERN PILOTS MERGER COMMITTEE,

Petitioner,

Vv.

CONTINENTAL AIRLINES, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

MOTION FOR LEAVE TO FILE BRIEF

AMICUS CURIAE OF THE

ALLIED PILOTS ASSOCIATION

The Allied Pilots Association (“APA”) is the collective

bargaining representative for 12,000 pilots at American Air-

lines, Inc. (“AA”), the largest airline in the world. APA

moves for leave to file the attached brief amicus curiae

in support of the Petition for Certiorari. Petitioner granted

consent. Respondent’s counsel refused APA’s request

for consent.

APA views the issues in this case from the perspective of a

labor organization with ongoing obligations under the Rail-

way Labor Act (“RLA”) to negotiate successorship rights and

remedies for its pilots, and the further obligation to resolve

disputes over the interpretation and application of its labor

agreement through the adjustment board process mandated by

the RLA. In addition, AA pilots now include 2,000 pilots

who formerly flew for Trans World Airlines, Inc. (“TWA”).

Those pilots participated in section 1113 procedures under the

Bankruptcy Code before AA purchased TWA’s assets out of

bankruptcy in April 2001.

_ APA shares petitioner’s concern: the panel decision below

grants airline management the same relief from collectively

bargained obligations that management should have achieved,

if at all, through the procedure for rejecting collective

bargaining agreements prescribed in section 1113. The deci-

sion thus effectively negates both procedural and substantive

employee protections mandated by the Bankruptcy Code, in

fuvor of ad hoc inquiry by a bankruptcy court.

The panel decision also, however, in remarkably clear

terms, infringes upon the exclusive jurisdiction of RLA

adjustment boards to decide disputes growing “out of the

interpretation or application” of labor agreements, including

the jurisdiction to determine contractual remedies. 45 U.S.C.

§ 184. _The panel decision thereby violates this Court’s

rulings in Hawaiian Airlines v. Norris, 512 U.S. 246, 252-53

(1994), and Consolidated Rail v. Railway Labor Executives’

Ass'n, 491 U.S. 299, 303 (1989) (“Conrail”). Both cases

clearly mandate primary and exclusive adjustment board

jurisdiction over the interpretation of disputed contractual

terms. Inadvertently or not, the panel decision opens the

doors of federal courts to issues of contract interpretation

formerly reserved for adjustment boards.

Because the airline industry faces unprecedented financial

instability in the wake of September 11, 2001, including the

potential bankruptcy of several carriers that AA may be

interested in buying; because APA is currently negotiating a

new labor agreement with AA, including expanded succes-

sorship rights; because AA, a Delaware corporation, is based

in Dallas and thus peculiarly subject to the circuit split over

bankruptcy law identified in the Petition for Certiorari; and

because the appropriate jurisdiction of RLA adjustment '

boards is a continual concern, and repeated subject of liti-

gation, for APA and its pilots,’ the APA asserts an interest in

this proceeding and urges this Court to grant APA’s motion

for leave to file this brief amicus curiae.

Respectfully submitted,

DAVID PALMER DEAN *

JESSICA RACHEL ARONS

JAMES & HOFFMAN, P.C.

1101 17th Street, N.W.

Washington, D.C. 20036

* Counsel of Record (202) 496-0500

' See, e.g., Whitaker v. Am. Airlines, 285 F.3d 940 (11th Cir. 2002)

(challenged discharge of probationary employee not a minor dispute);

Veta v. Am. Airlines, No. 95-56299, 1997 U.S. App. LEXIS 4049 (9th Cir.

Feb. 3, 1997) (challenged discharge of acquired airline’s employee a

minor dispute); Anderson v. Am. Airlines, 2 F.3d 590 (Sth Cir. 1993)

(allegation of retaliation for filing state workers’ compensation claim not a

minor dispute); Renneisen v. Am. Airlines, 990 F.2d 918 (7th Cir. 1993)

(challenge to contract’s validity not a minor dispute); Davies v. Am.

Airlines, 971 F.2d 463 (10th Cir. 1992) (state law wrongful termination

claim not a minor dispute); Chandler v. Am. Airlines, No. 91-5079, 1992

U.S. App. LEXIS 6796 (10th Cir. Apr. 10, 1992) (claimed breach of

collective bargaining agreement a minor dispute); Allied Pilots Ass’n v.

Am. Airlines, 898 F.2d 462 (Sth Cir. 1990) (alcohol testing policy subject

to mandatory arbitration because minor dispute).

TABLE OF CONTENTS

TABLE OF AUTHORITIES ..........:ssessssssessreeteseessneeees

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

ARGUMENT .........sccsssssssssesseceseeeneessnsensceeennsessnsensneenees

I.

Il.

BY RE-AFFIRMING CONTINENTAL I!

BASED ON THAT PANEL’S INTERPRE-

TATION OF DISPUTED REMEDIAL

TERMS IN A LABOR AGREEMENT, THE

PANEL BELOW VIOLATED WELL

ESTABLISHED PRECEDENTS OF THIS

A. Under the Railway Labor Act, interpretive

disputes over labor agreements are subject

to exclusive adjustment board jurisdiction,

and resulting awards may be set aside only

on statutorily prescribed grounds..........++++++.

B. Whereas Continental I misapplied a prop-

erly stated rule of law, Continental II

directly conflicts with this Court’s prior

decisions and should be reversed...........++++

1. Background ........scssesesssssersereereerenereesers

2D. Continental ..........ccccccccsscoscsccccceseesesseoes

3. Continental II ...........scscccrscccsccsecceeeeseeceees

CONTINENTAL II CREATES UNCER-

TAINTY OVER MATTERS THAT ARE

CURRENTLY VITAL TO NATIONAL BAR-

GAINING IN THE AIRLINE INDUSTRY ......

CONCLUSION ..........cscessscesseeesressnsessrescensennasessnsssnseoenss

17

19

il

TABLE OF AUTHORITIES

CASES Page

Air Line Pilots Ass’n v. E. Airlines, 632 F.2d

1321 (St Cae. ISG) nccccsinisnitnbininsasnsenienninneintinies 8

Andrews v. Louisville & Nashville R.R., 406 U.S.

SRO OND T ED cacssinvitrssnissninnctiiniitnanialianiieeninnaid 6

Bhd. of Locomotive Eng’rs v. Louisville &

Nashville R.R., 373 U.S. 33 (1963).........ccceeeeeees 9

Consol. Rail Corp. v. Ry. Labor Executives’

Ass’ n, 491 U.S, 299 (1989).....crcccccrscessceee 2,5, 6, 7, 14

E. Air Lines v. Air Line Pilots Ass’n, 130

L.R.R.M. (BNA) 2284 (11th Cir. 1988)............ 16

Elgin, Joliet & E. Ry. v. Burley, 325 U.S. 711

(TOAD) nttiisssacinnevenesstinensiaiiaininneniainailaias 5, 6, 14

English v. Burlington N. R.R., 18 F.3d 741 (9th

Cid, IPG) nccssrnieitisiassiinisensisinitinsssiiieliinatliabadilialianionaa 8

Gen. Comm. of Adjustment v. CSX R.R., 893 F.2d

SB6 (38 Cie. BOD) cscesriscinnenctninihanetaiciiinianainn 7, 8, 14

Hawaiian Airlines v. Norris, 512 U.S. 246 (1994)... 2, 5,6

Hunt v. Northwest Airlines, 600 F.2d 176 (8th

CO, UTD cececnccesccdiinsivecnstantniiicneeenniasiteninadiasins m

In re Continental Airlines, Inc., 279 F.3d 226 (3d

COP, BEIGE) sscciivasusnssnccscdssinedaseusessisiinebesipeniaibmanimseide passim

In re Continental Airlines, Inc., 125 F.3d 120 (3d

Cle, FRITS vcracasensctnetcbitnnieiccteictaiaiiiaaiaaaiiaie passim

In re Ionosphere Clubs, Inc., 114 B.R. 379

(Bankr. S.D.N.Y. 1989), aff'd, 922 F.2d 984

(AG CAR, TR cisuisicseitidiciasstainaaindiaiimiabiamdiiiais 13

In re Torwico Elecs., 8 F.3d 146 (3d Cir. 1993)... 9

Loveless v. E. Airlines, 681 F.2d 1272 (11th Cir.

6

Ohio v. Kovacs, 469 U.S. 274 (1985) .........cccseeeeeee 9

Union Pac. R.R. v. Sheehan, 439 U.S. 89

(EFT scvinvnctaecciteeinisinnabaaipuiniadaiiamaeaianls 8

ill

TABLE OF AUTHORITIES—Continued

Page

Union Pac. R.R. v. United Transp. Union, 3 F.3d

Re scainithccitehaniiubistitinepntaiibilianidbb ata 8

United Steelworkers of Am. v. Enterprise Wheel

& Car Corp., 363 U.S. 593 (1960) ......ccccccseeees 7, 16

STATUTES

ak ioe Bt TILT aici gtineidiaianmidiinianbiaianiniaaieds 2,9, 14

5 Srsreiee UF it icesicsinieaiessinibesetedadiensneeidelniaideclidmahimenas 13

0 Mien Wb i instrsisnciicaiinesicheenieasiisnnntaeibaiabiig 4, 14, 17, 18

ese Ie eee onndibiaieeichesbaceniceieeatecetithcanceitnndsisbaeas a ae

iP GPAs OE Cate WMIUE Cl Pascrisnncscnannnseusinsiesbtiihebuntiainie 5

Ge Shean Bae FUE CN chciancsnsinsierenstntentinsnsnnsion 3, 8,9, 15

SD UA & DS, FRE CD vccnecesesseseccnresenessnsnnvensen 3, 6, 8, 15

A EE Be OI sedsictsinsissnesctseniniinnnntasecdainisiniennas 5

Fa Nida PEE eh estealsnisitendhehtedhiaieiteatinbieiieiiaiaiiect 5,6

MISCELLANEOUS

148 Cong. Rec. S4939-41 (daily ed. June 4,

TD cesecrticleeiiibiiaitietimiatinn hiatal dice 17-18

Air Transportation Safety and System Stabil-

ization Act, 49 U.S.C. § 40101 note (Supp.

STE \srctasnictaconiistshetiinsiaeihbeibniiablicititedpsenibtiandiaaiaeniaed 17

Allegheny-Mohawk Merger, 59 CAB 22 (1972).... 1]

Decision Eastern Air Lines Pilots System Board

of Adjustment (Elkouri), ALPA Case No. 1-86,

Se AEIy Ft cccnciatsctonqnssenapishbemtnenvenonte 11-13, 16

National Mediation Board website, http://www.

nmb.gov/activ-rpts/odarch. htm] ............ccsscseeeees 6, 18

IN THE

Supreme Court of the Anited States

No. 02-58

EASTERN PILOTS MERGER COMMITTEE,

Petitioner,

Ve

CONTINENTAL AIRLINES, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF AMICUS CURIAE OF THE

ALLIED PILOTS ASSOCIATION

IN SUPPORT OF PETITIONER

The Allied Pilots Association (“APA”) files this brief

amicus curiae contingent on the Court granting the above

motion.’

' The APA General Counsel’s office authored this brief amicus

curiae in whole. The Eastern Pilots Merger Committee (“EPMC”)

contributed funds toward APA’s attorney fees and expenses. In addition,

APA counsel provided advice to the EPMC on its Petition for Certiorari.

2

SUMMARY OF ARGUMENT

The panel decision below (“Continental IT’) found that an

earlier panel’s decision in the same case (“Continental I’) .

had “interpreted” a collective bargaining agreement

(“Agreement”) between Eastern Air Lines, Inc. and the Air

Line Pilots Association (“ALPA”) to construe “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.” Appendix to the Petition for

Certiorari (“Pet. App.”) 6a-7a. Based on the foregoing

rationale, Continental II declined to reconsider the earlier

panel’s holding that the pilots’ rights to sen_ority integration

constituted “claims” under section 101(5) of the Bankruptcy

Code, 11 U.S.C. § 101(5).

Continental II conflicts with well established precedents of

this Court. Those precedents mandate exclusive adjustment

board jurisdiction over disputed terms of labor agreements in

industries covered by the Railway Labor Act (“RLA”)—

disputes growing “out of the interpretation or application of

agreements covering rates of pay, rules, or working con-

ditions.” Hawaiian Airlines v. Norris, 512 U.S. 246, 252-53

(1994); Consol. Rail Corp. v. Ry. Labor Executives’ Ass’ n,

491 U.S. 299, 303 (1989) (“Conrail’’). Continental II

erroneously approved court, rather than adjustment board,

resolution of disputed remedial terms of the Agreement.

Correcting this error in Continental II would require

more than adopting the rationale previously set forth in

Continental I to maintain the same result. Unlike Continental

Il, Continental I correctly stated this Court’s holding in

Conrail, and disclaimed any need to interpret the Agreement.

~ But Continental I then misapplied the RLA by ignoring the

? Continental I was reported as In re Continental Airlines, Inc., 125

F.3d 120 (3d Cir. 1997). Continental II was reported as In re Continental

Airlines, Inc., 279 F.3d 226 (3rd Cir. 2002)

ee

3

limitations on a court’s power to set aside adjustment board

awards prescribed in 45 U.S.C. § 153, First (p) and (q).

Rather, Continental I found, prospectively, that “any”

adjustment board award based on the pilots’ seniority rights

would give rise to a right of payment. Continental I thus

effectively set aside any award of specific performance, even

if based on an otherwise valid adjustment board deter-

mination that the parties had contracted exclusively for

specific performance. Accordingly, neither Continental I nor

Continental II is viable. While Continental I’s misapplication

of the RLA to the facts did not warrant this Court’s review,

Continental II’s direct violation of this Court’s precedents

requires reversal, and a consequent reconsideration of the

result in Continental I.

The errors in both Continental I & II flow from the panels’

erroneous resolution of the issue identified in the Petition for

Certiorari. The panels below did not require rejection of the

Agreement, but sought to set aside or interpret away any right

to specific performance that might arise from the Agreement.

But the RLA, as construed by this Court, permits lower courts

neither to interpret disputed contract terms nor to set aside

adjustment board awards except on the narrow bases

prescribed in that Act. Absent rejection, the contract must be

given effect through the adjustment board mechanism.

By creating a circuit split over bankruptcy law, and

violating this Court’s precedents on the appropriate role of

courts in interpreting labor agreements under the RLA, the

panel decision undermines current collective bargaining in

the airline industry. The panel decision creates uncertainty

over the enforceability of successorship rights and seniority

integration just as many carriers and their employees must

adjust, and negotiate responses, to the financial instability in

the industry following September 11, 2001. Increased

instability in airline labor relations at this time is clearly an

issue of national import.

OE

4

Because Continental II conflicts with this Court’s

established precedents, creates a circuit split over bankruptcy

law, and concerns issues of vital national importance,

EPMC’s Petition for Certiorari should be granted.

ARGUMENT

The APA joins Petitioner in respectfully urging this Court

to review the judgment below for the reason set forth in the

Petition for Certiorari: to resolve a circuit conflict over the

effect of an employer’s failure to reject a collective

bargaining agreement under section 1113 of the Bankruptcy

Code. The APA writes separately, however, to emphasize

that the panel’s effective nullification of section 1113 also led

the panel to violate this Court’s well established precedents

under the RLA.

In light of the financial difficulties in the airline industry

precipitated by the events of September 11, 2001, the

conflicts created by the panel decision assume particular

national import. The decision undermines the effect of

collectively bargained successorship and seniority integration

clauses in bankruptcy just as several large employee groups,

including the APA, are seeking to reach new contracts in the

wake of September 11. By forcing unions to seek new and

expanded protections against the negative effects of mergers,

the panel decision contributes to already volatile labor

relations in the airline industry.

5

I. BY RE-AFFIRMING CONTINENTAL I BASED

ON THAT PANEL’S INTERPRETATION OF

DISPUTED REMEDIAL TERMS IN A LABOR

AGREEMENT, THE PANEL BELOW VIOLAT-

ED WELL ESTABLISHED PRECEDENTS OF

THIS COURT

A. Under the Railway Labor Act, interpretive

disputes over labor agreements are subject to

exclusive adjustment board jurisdiction, and

resulting awards may be set aside only on

statutorily prescribed grounds

The RLA establishes a comprehensive framework for

resolving labor disputes in the rail and airline industries.

Pursuant to that scheme, the statute divides contractual

disputes into two classes. The first class concerns disputes

over the creation of new collective bargaining agreements or

attempts to change the terms of existing agreements.

Adopting language traditionally used in the rail industry, this

Court has termed such disputes “major disputes.” Norris, 512

U.S. at 252; Conrail, 491 U.S. at 302-03; Elgin, Joliet & E.

Ry. v. Burley, 325 U.S. 711, 723 (1945). Major disputes are

subject to a lengthy process of bargaining and mediation, and

failing agreement, parties may resort to economic force.

Conrail, 491 U.S. at 302-03.

In contrast, the RLA establishes a “mandatory arbitral

mechanism to handle disputes ‘growing out of grievances or

out of the interpretation or application of agreements

concerning rates of pay, rules, or working conditions.’”

Norris, 512 U.S. at 248 (citing 45 U.S.C. § 153, First (i)).’

* Enacted in 1926, the RLA was extended-to the airline industry in

1936. See 45 U.S.C. §§ 181-88. Although § 201 of the RLA, 45 U.S.C. §

181, extends all provisions of the RLA to the airlines save 45 U.S.C.

§ 153, “congressional intent requires identical court treatment of airline

board decisions under section 184 and railroad board decisions under

section 153, and this has been the continuing policy of the courts.” Hunt

6

In the airline industry, the Act mandates that carriers and

employee representatives establish “boards of adjustment” to

arbitrate such disputes. 45 U.S.C. § 184. This Court termed

such disputes “minor disputes.” Elgin, 325 U.S. at 723

(“minor disputes” relate, inter alia, “to the meaning or proper

application of a particular provision with reference to a

specific situation”).

Adjustment board jurisdiction to resolve minor disputes is

compulsory, binding and exclusive. Conrail, 491 U.S. at

303-04 & n.4; Andrews v. Louisville & Nashville R.R., 406

U.S. 320, 322-25 (1972) (“the notion that the grievance and

arbitration procedures provided for minor disputes in the

Railway Labor Act are optional, to be availed of as the

employee or the carrier chooses, was never good history and

is no longer good law”). The reasons for this rule are well -

established and have been articulated repeatedly by this

Court.* First, of course, the statute demands it. 491 U.S. at

303-04 & n.4; 406 U.S. at 322-25. But in addition, this Court

has recognized the special competence of industry arbitrators

to resolve such disputes based on custom and practice in the

industry—and in particular to formulate remedies:

The federal policy of settling labor disputes by

arbitration would be undermined if courts had the final

v. Northwest Airlines, 600 F.2d 176, 178 (8th Cir. 1979); see also

Loveless v. E. Airlines, 681 F.2d 1272, 1275 (11th Cir. 1982) (“A court

may overturn the decision of an airline system adjustment board only on

the basis of one of the grounds listed in 45 U.S.C. § 153, First (q)”); see

generally Norris, 512 U.S. 246 (1994).

* One reason that appears central to this Court’s supervisory

responsibilities is important but rarely mentioned. Opening the doors of

federal courts to RLA contract interpretation issues would likely inundate

the lower courts with such cases. In the railroad industry alone, the

National Mediation Board reports 6,643 currently pending cases before

government-funded adjustment boards as of July 26, 2002. See “Weekly

Activity Report,” National Mediation Board website, http://www.nmb.

gov/activ-rpts/odarch.html (last visited Aug. 6, 2002).

——a

7

say on the merits of the awards. . . . [T]he arbitrators

under these collective agreements are indispensable

agencies in a continuous collective bargaining process.

They sit to settle disputes at the plant level—disputes

that require for their solution knowledge of the custom

and practices of a particular factory or of a particular

industry as reflected in particular agreements.

* * * *

When an arbitrator is commissioned to interpret and

apply the collective bargaining agreement, he is to bring

his informed judgment to bear in order to reach a fair

solution of a problem. This is especially true when it

comes to formulating remedies. There the need is for

flexibility in meeting a wide variety of situations.

United Steelworkers of Am. v. Enterprise Wheel & Car Corp.,

363 U.S. 593, 596-97 (1960).

There can be no question that the exclusive jurisdiction of

RLA adjustment boards extends not just to the substantive

rights under a labor agreement, but to nonfrivolous disputes

over agreed remedies for violation of those rights as well. A

core holding of Conrail was that the burden on the party

seeking to invoke adjustment board jurisdiction is “light.”

If the party “asserts a contractual right to take the contested

action, the ensuing dispute is minor if the action is arguably

justified by the terms of the parties’ collective-bargaining

agreement. Where, in contrast, the [party’s] claims are

frivolous or obviously insubstantial, the dispute is major.”

Conrail, 491 U.S. at 307. By making a nonfrivolous assertion

of right to a particular remedy under a labor agreement, a

party meets its burden to vest the adjustment board with

jurisdiction to decide that issue.

Thus, for instance, in General Committee of Adjustment v.

CSX Railroad., 893 F.2d 584 (3d Cir. 1990), where a railroad

sought to sell a line without bargaining over its effects, the

8

court dismissed a union complaint seeking to enjoin the sale

by noting that “[t]he merits of [the] issue [of the impact on

union jobs] will be before the Adjustment Board as will the

question of what remedy may be appropriate if it decides for

the Union.” Jd. at 592. Citing Conrail, the court declined to

retain jurisdiction pending arbitration, noting that “[iJn minor

disputes, the Board has full authority to resolve the matter

and can grant a complete and adequate remedy to the

prevailing party.” /d. at 593.°

Buttressing the exclusive jurisdiction of adjustment boards

to decide interpretive disputes in the first instance, judicial

review of adjustment board decisions is “among the

narrowest known to the law.” Union Pac. R.R. v. Sheehan,

439 U.S. 89, 91, 93 (1979) (quoting the circuit court below,

and noting that “[w]e have time and again emphasized” that

the statutory language specifying three “limited” and

“specific” grounds for review “means just what it says”).

RLA subsections 3, First (p) and (q) permit federal courts

to set aside adjustment board decisions on only three bases:

(1) failure of the Adjustment Board to comply with the

requirements of the RLA; (2) failure of the Adjustment Board

to conform or confine itself to matters within the scope of

its jurisdiction; or (3) fraud or corruption. 45 U.S.C. § 153,

First (p) & (q).°

> See also Air Line Pilots Ass’n v. E. Airlines, 632 F.2d 1321, 1323

(Sth Cir. 1980) (“The Supreme Court has recognized the need for

flexibility in the formulation of arbitration remedies. As long as the

award is essentially drawn from the essence of the agreement, it is valid

and effectively etched in stone”).

© In addition, some courts have reviewed adjustment board awards on

due process or public policy grounds. See, e.g., English v. Burlington

N. R.R., 18 F.3d 741 (9th Cir. 1994) (due process); Union Pac. R.R. v.

United Transp.-Union, 3 F.3d 255 (8th Cir. 1993) (public policy). This

Court has not yet spoken on these additional bases.

9

Nor may a party circumvent the remedial powers of an

adjustment board through methods of review outside the

RLA. Bhd. of Locomotive Eng’rs v. Louisville & Nashville

R.R., 373 U.S. 33, 38-39 (1963) (“BLE”). In BLE, the

National Railroad Adjustment Board refused the parties’

request to clarify the scope of a remedial award mandating

“pay for time lost as the rule is construed on the property.”

Id. at 34. The carrier sued for injunctive relief when the

union threatened a strike to enforce its interpretation of the

disputed term. This Court affirmed the lower courts’

judgment that the union was limited to the judicial

enforcement procedure established in § 3, First (p) of the

RLA, 45 U.S.C. § 153, First (p), and could not strike to

enforce its interpretation. /d. at 35-36. The Court based its

holding on the principle that “the process of decision through

the Adjustment Board cannot be challenged collaterally by

methods of review not provided for in the statute.” /d. at 38.

B. Whereas Continental I misapplied a properly

stated rule of law, Continental II directly conflicts

with this Court’s prior decisions and should

be reversed

Continental I & II both concern, in central part, how

Eastern pilots’ rights to seniority integration were treated in

the bankruptcy court. Whether those rights constituted

bankruptcy “claims” under the Bankruptcy Code depends on

whether they gave rise to a “right of payment.” 11 U.S.C.

§ 101(5). Continental I analyzed this Court’s and its own

precedents construing § 101(5) and concluded that the “right

to payment” is “essentially, an obligation to pay money.”

Pet. App. 74a-77a (citing Ohio v. Kovacs, 469 U.S. 274

(1985); In re Torwico Elecs., 8 F.3d 146 (3d Cir. 1993)). To

decide whether the pilots’ claim constituted a bankruptcy

claim, the Continental I court concluded, “the issue we must

decide is whether monetary payment is an alternative for the

equitable remedy of seniority integration.” Pet. App. 77a.

10

The Continental I panel found that monetary payments

were an alternative remedy to seniority integration, but

appeared to disclaim any need to interpret the Agreement to

resolve this issue, asserting it was merely deciding how the

pilots’ claims under the Agreement would be “treated” in -

bankruptcy after an arbitral award was rendered:

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 [Labor Protective Provisions] 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.

Pet. App. 83a.

The Continental II panel, however, insisted that the first

panel had looked to the labor agreement to resolve this central

issue, by interpreting the seniority provisions of that

Agreement:

In Continental I, this court, as did the bankruptcy court

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

Pet. App. 6a-7a (emphasis supplied).

Turning first, briefly, to Continental I, we show below that

if an award were rendered for specific performance, based on

a finding that the parties had agreed to specific performance,

the court would not be free to set the awarded remedy aside,

as the Continental I court effectively did, except on narrow

=

11

statutory grounds not present here. In turn, we show that

whether the remedial terms of the Agreement’s seniority

integration provisions themselves gave rise to a right of

payment, as asserted in Continental II, is clearly a contested

and nonfrivolous issue. As such, it is one over which an

arbitrator would have exclusive jurisdiction and over which

an arbitrator had already asserted jurisdiction pursuant to

clear language in the parties’ Agreement. Whereas the

Continental I court erred, sub silencio, by failing to account

for, or misapplying, the RLA’s explicit strictures on court

review of adjustment board awards, the Continental II court

expressly trenched on adjustment board jurisdiction and the

relevant precedents of this Court.

1. Background

In February 1986, in anticipation of a “possible sale or

bankruptcy” of Eastern Air Lines, Eastern and its pilots

entered into a labor agreement to slash labor costs and

provide successorship labor protection for pilots. Pet. App.

217a-20a (Decision Eastern Air Lines Pilots System Board of

Adjustment (Elkouri), ALPA Case No. 1-86, dated Sept. 22,

1989). An Eastern adjustment board (“System Board”’) found

that this Agreement incorporated a subset of the LPPs first

drafted by the Civil Aeronautics Board in Allegheny-Mohawk

Merger, 59 CAB 22, 45-49 (1972), specifically sections 2a, 3

and 13 of these standard LPPs. Pet. App. 250a. The

provisions grant, in relevant part, a right to fair and equitable

seniority integration in the event of a merger and refer “any

dispute” over that integration to “final and _ binding”

arbitration:

Section 3. Insofar as the merger affects the seniority

rights of the carriers’ employees, provisions shall be

made for the integration of seniority lists in a fair

and equitable manner, including, where applicable,

agreement through collective bargaining between the

12

carriers and the representatives of the employees

affected. In the event of failure to agree, the dispute

may be submitted by either party for adjustment in

accordance with section 13.

* * * *

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

controversy . . . arises with respect to the protections

provided herein, which cannot be settled by the parties

within 20 days after the controversy arises, it may be

referred by any party to an arbitrator selected from a

panel of seven names furnished by the National

Mediation Board for consideration and determination.

The parties shall select the arbitrator from such panel by

alternatively striking names until only one remains, and

he shall serve as arbitrator. Expedited hearings and

decisions will be expected, and a decision shall be

rendered within 90 days after the controversy arises,

unless an extension of time is mutually agreeable to all

parties. The salary and expenses of the arbitrator shall

be borne equally by the carrier and (i) the organization

or organizations representing the employee or employees

or (ii) if unrepresented, the employee or employees or

group or groups of employees. The decision of the

arbitrator shall be final and binding on the parties.

(b) The above condition shall not apply if the parties

by mutual agreement determine that an alternative

method for dispute settlement or an _ alternative

procedure for selection of an arbitrator is appropriate in

their particular dispute. No party shall be excused from

complying with the above condition by reason of having

suggested an alternative method or procedure, unless

and until that alternative method or procedure shall

have been agreed to by all the parties.

Pet. App. 245a-46a (emphasis supplied).

13

Although other provisions of the Allegheny-Mohawk LPPs

provide a right of payment to affected pilots in the event of a

merger, the System Board found that the Agreement included

none of these rights to pecuniary allowances. Pet. App. 244a-

45a. After reviewing the negotiating history, the Board

rejected carrier arguments to undercut the equitable right to

seniority integration, asserting its view that “the Board should

not issue any award in this case which is not definitely

intended and calculated to recognize meaningful LPP

protection for pilots as a matter of contractual right.” Pet.

App. 247a. As the Board had noted earlier, “even without the

pecuniary allowances . . . the protection of seniority itself by

application of sections 3 and 13 is of such critical importance

that this without more does constitute meaningful protection

under the February 23 Agreement. . . . Sections 3 and 13 are

the ‘heart’ of the Allegheny-Mohawk LPP’s ‘because they

control seniority.’” Jd. at 245a (adopting testimony).

After Continental’s parent corporation acquired Eastern in

1986, the parties disputed various aspects of the LPPs,

including whether a “merger” between Continental and

Eastern had occurred. ALPA initiated the dispute resolution

process provided for in the Agreement. After filing for

bankruptcy, both carriers attempted to avoid arbitrating the

dispute by appealing to § 362 of the Bankruptcy Code. 11

U.S.C. § 362. Those attempts ultimately failed. See In re

Ionosphere Clubs, Inc., 114 B.R. 379, 381 (Bankr. S.D.N.Y.

1989), aff d, 922 F.2d 984 (2d Cir. 1990); Continental I, Pet.

App. 87a. The parties proceeded to arbitration under section

13 of the LPPs before Arbitrator Richard Kasher, who

concluded that he had jurisdiction both to determine if a

merger had occurred, and if so, to fashion the proper

remedies. Pet. App. 94a-95a.

Meanwhile, to safeguard its interests, ALPA filed proofs of

claim in the Continental bankruptcy proceeding, asserting,

inter alia, the pilots’ equitable rights to seniority integration

14

and also seeking money damages for the time period after

merger and before seniority integration was achieved. Pet.

App. 93a-94a. In response, Continental filed an adversary

proceeding, seeking a declaration that, at best, all of ALPA’s

claims were “general, dischargeable, pre-petition, unsecured

claims” compensable with monetary damages. The clear

predicate to Continental’s position, under the Bankruptcy

Code, was that a breach of the equitable right to seniority

integration under the Agreement gave rise to a “right of

payment.” 11 U.S.C. § 101(5).

2. Continental I

As noted above, the Continental I panel identified as a core

issue in bankruptcy whether the right to seniority integration

under the LPPs gave rise to a right of monetary payment. Pet.

App. 53a. The Continental I panel noted the “tension

between bankruptcy law and labor law,” and was careful to

disclaim any bankruptcy court jurisdiction over the

“disposition of the merits of the underlying LPP dispute.”

Pet. App. 52a, 69a. Rather, the panel cited to this Court’s

holdings in Conrail and Elgin, and noted specifically that the

courts could not decide “what remedy is appropriate if the

agreement is interpreted to require recovery of a remedy”

(citing Gen. Comm. of Adjustment, 893 F.2d at 592-93). Pet.

App. 68a-69a. Moreover, the panel recognized that

Continental’s failure to reject the Agreement under § 1113

meant that Continental’s duty to arbitrate the disputed LPP

provisions remained intact. Pet. App. 87a.

Having properly stated much of the relevant law, the

Continental I panel proceeded to misapply it. The panel

framed the issue, in essence, as whether an adjustment board

award for seniority integration, once rendered, might be

enforceable by money damages. But rather than turn to the

RLA provisions pertinent to enforcement of board awards,

the panel examined a number of cases, none of which were

15

RLA cases. Ignoring § 153, First (p) and (q), the panel

concluded that the courts had previously enforced monetary

awards as an alternative to the equitable remedy of

reinstatement. Pet. App. 78a-81a. The panel principally

relied on one Ninth Circuit case in which that court upheld an

arbitral award for money damages in lieu of seniority

integration. The Ninth Circuit court based its decision on the

arbitrator’s finding that the labor agreement at issue not only

permitted such a remedy, but arguably required it, since an

award of seniority integration would exceed the arbitrator's

jurisdiction under a contract term that prohibited him from

deciding any jurisdictional dispute with another union. Pet.

App. 79a. Little wonder, then, that the Continental II panel

believed that the Continental I panel had also based its

decision on an interpretation of the Agreement.

Clearly, none of these precedents cited in Continental |

support setting aside an adjustment board award of specific

performance under the RLA, if based on an arbitral finding

that the parties had agreed to such an award as an exclusive

remedy. The non-RLA cases shed no light on the appropriate

treatment of awards under § 153, First (p) and (q). The Ninth

Circuit case cannot support setting aside an arbitral award, if

based on the same sort of arbitral interpretation to which that

court deferred. As shown above, the sole grounds for setting

aside such an award are spelled out in § 153, which the panel

entirely failed to address.

’ The panel attempted to buttress its holding by reference to the

language of the Agreement, and by reference to its own conclusion, based,

apparently, only on some general sense of the panel that “the particular

circumstances of this case might make the enforcement of the equitable

remedy of seniority integration impractical,” citing “employee morale”

and the effect on “employer-employee relations.” Pet. App. 78a n.10,

82a-83a. The panel’s additional rationales fail, however, for at least three

reasons. First, the panel had already recognized that the adjustment board

had exclusive jurisdiction to interpret the remedial terms of the

16

3. Continental II

Clearly, the contractual question on which the Continental

II panel focused—whether the parties intended to provide for

a right of payment concurrent with or in lieu of seniority

integration—is a classic interpretive dispute over contractual

terms. As shown above, under the RLA, such disputes are

committed to the exclusive jurisdiction of adjustment boards.

The basic negotiating history for the provisions is spelled out

in the System Board opinion that found that the parties had

agreed to “meaningful protection” in the form of LPPs, Pet.

App. 242a, and by the Eleventh Circuit Court of Appeals

opinion that found the existence of a labor agreement

between ALPA and Eastern. E. Air Lines v. Air Line Pilots

Ass’n, 130 L.R.R.M. (BNA) 2284, 2291 (11th Cir. 1988).

Whether ALPA knowingly traded away millions of dollars in

wage and work rule concessions on the verge of Eastern’s

sale or bankruptcy, in return for an unsecured right to front

pay ultimately dischargeable in bankruptcy, is a question of

fact and intent that the RLA wisely commits to arbitral

jurisdiction. Clearly the Petitioners have a nonfrivolous

argument that ALPA could not conceivably have intended

such a trade.

Moreover, the dispute over whether the provisions include

a right to payment in lieu of specific performance is a

“dispute . . . with respect to the protections” provided by the

Agreement. Pet. App. 68a-69a. Second, the principal language on which

the panel relied was never part of the Agreement. See Pet. App. 78a n.10

(citing “section 1” of the LPPs); Pet. App. 250a-51la (adjustment board

finding that the Agreement incorporated only sections 2(a), 3 and 13, and

possibly 2(d) of the LPPs). Third, the effect and manner of seniority

integration is precisely the kind of question best left to an arbitrator

schooled in the industry and the detailed custom and practices of the

particular “shop,” and not to the unsupported reflections of appellate

judges. See Enterprise Wheel & Car Corp., 363 U.S. at 596-97.

17

LPPs that the parties themselves expressly agreed to submit

to final and binding arbitration. See supra pages 11&12.

The errors in both Continental I & II flow from the same

source. That source is the panels’ erroneous resolution of the

issue identified in the Petition for Certiorari: the effect of the

carrier’s failure to proceed under section 1113. Continental

Airlines did not reject the Agreement, yet sought to reduce

seniority rights under the Agreement to bankruptcy claims,

dischargeable in the bankruptcy proceeding. Petition for

Certiorari at i. Rather than require Continental to follow the

procedures of section 1113 to avoid the obligations of the

Agreement, the panels purported to set aside or interpret away

any right to specific performance that might arise from the

Agreement. As shown above, this Court has construed the

RLA to prohibit such court interference with the

interpretation or enforcement of labor agreements. Absent

rejection, the contract must be given effect through the RLA’s

adjustment board mechanism.

II. CONTINENTAL II CREATES UNCERTAINTY

OVER MATTERS THAT ARE CURRENTLY

VITAL TO NATIONAL BARGAINING IN THE

~ AIRLINE INDUSTRY

By creating a circuit split over bankruptcy law, and

violating this Court’s precedents on the appropriate role of

courts in interpreting labor agreements under thé RLA, the

panel decision in Continental IT undermines current collective

bargaining in the airline industry. One result may be

increasing instability in airline labor relations at a time when

the country can least afford it.

In the wake of the events of September 11, the airline

industry has entered a period of prolonged and severe

financial difficulty. Several carriers face potential bank-

ruptcy. See, e.g., Air Transportation Safety and System

Stabilization Act, 49 U.S.C. § 40101 note (Supp. 2002); 148

18

Cong. Rec. $4939-41 (daily ed. June 4, 2002) (statements of

Sens. Bond, Hutchison, Allen, Snowe, Kennedy, Carnahan).

Management in the post-September 11 period has been

forced to consider potential merger, acquisition and/or

bankruptcy options. |

At the same time, the National Mediation Board has, since

mid-June 2002, docketed for mediation open contract

negotiations between the APA and American, between the

Teamsters and Continental over their mechanics contract,

between the Teamsters and Continental Micronesia over the

Fleet and Passenger Service contract, between the Teamsters

and Southwest Airlines over their mechanics contract and

between ALPA and Mesaba Aviation, Inc. See “Weekly

Activity Report,” National Mediation Board website, http://

www.nmb.gov/activ-rpts/odarch.html (June 21, 2002, June 28,

2002 & July 1, 2002).

By creating new uncertainty over the enforceability of

successorship rights, the panel decision below “raises the bar”

for unions seeking employee protections in the event of

mergers and bankruptcy. The plain language of section 1113

provides that the Bankruptcy Code shall not be construed to

alter labor agreements absent the bargaining mandated by

section 1113. 11 U.S.C. § 1113(f). The panel decisions

below alter the Agreement to nullify any right to specific

performance of seniority integration, even though Continental

never engaged in the prescribed bargaining. The implication

for unions is that contract terms that were formerly adequate

under section 1113 to protect workers, or at least guarantee

bargaining, are now subject to ad hoc nullification-by a |

bankruptcy judge. Unions must seek expanded protections

for mergers and bankruptcy at the same time that carrier

management is forced to seek flexibility in navigating

those same possibilities. The potential conflict increases

the chances of national disruption. attendant on failed

negotiations—solely because of the uncertainties created by

the Third Circuit panels below.

19

CONCLUSION

For all the reasons set forth above, the APA respectfully

requests that this Court. grant certiorari in this matter and

reverse the panel decision below.

Respectfully submitted,

DAVID PALMER DEAN *

JESSICA RACHEL ARONS

JAMES & HOFFMAN, P.C.

1101 17th Street, N.W.

Washington, D.C. 20036

* Counsel of Record (202) 496-0500