Petition for Writ of Certiorari — Renneisen v. American Airlines, Inc.

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In The

Supreme Court of the United States

October Term, 1993

6 es

PAUL F. RENNEISEN, THOMAS F. LETO,

LAWRENCE M. KAMPA, et al.,—

Petitioners,

AMERICAN AIRLINES, INC.,

Respondent.

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

Leon M. Despres*

THomMas H. GEOGHEGAN

Rosert C. Drizin

Despres, SCHWARTZ & GEOGHEGAN

77 W. Washington St., Ste. 711

Chicago, IL 60602

(312) 372-2511

R. Epwarp WILHOITE, JR.

LERNER & WILHOITE

1007 W. Webster Ave.

Chicago, IL 60614

(312) 477-1364

Attorneys for Petitioners

. Counsel of Record

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

OR CALL COLLECT (402) 342-283

QUESTION PRESENTED

Whether a collective bargaining agreement that

grants to a subgroup within the bargaining unit perma-

nent job security and pay and retirement benefit guaran-

tees that can never be reduced by subsequent agreement

between the employer and the bargaining representative,

but only by unanimous agreement between the employer

and the bargaining representative and a majority of the

subgroup, thereby providing members of the subgroup a

permanent right of veto as to these issues, violates the

exclusive representation requirements of section 2 of the

Railway Labor Act?

PARTIES TO THE PROCEEDING

The petitioners are Paul F. Renneisen, Thomas Frank

Leto, Lawrence M. Kampa, Jr., Arpad E. Horvath, Karl

Bork, Carl W. Battis and John H. N. Whatley. The respon-

dent is American Airlines, Inc.

ili

TABLE OF CONTENTS

Page

QUESTION PRESENTED........................... i

PARTIES TO THE PROCEEDING .................. ii

TABLE OF AUTHORITIES......................... iv

Se 1

sso oss 6 ke oe cc cece cceceeea. 2

STATUTES INVOLVED ............................ 2

EE Ee 3

REASONS FOR GRANTING THE PETITION....... 7

cc 20

TABLE OF AUTHORITIES

Page(s)

Cases

Abood v. Detroit Board of Education, 431 U.S. 209

Lf SECT E ETRE C EE Ee CE CPT Te ere eee ee 11

Emporium Capwell Co. v. Western Addition Commu-

nity Organization, 420 U.S. 50 (1975) ....... 10, 12, 15

j.l. Case Co. o. NLRB, 521 US. 332 (1944)......... , 13

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

Cn Te TRON SN pa te MAE enh 12, 15

NLRB v. Borg-Warner Corp., 356 U.S. 342 (1958)...... 16

Order of Railroad Telegraphers v. Railway Express

AGERE, SEA US. DORI sh hae eee eases. 11

Reichhold Chemicals v. NLRB, 953 F.2d 594 (11th

Oe ee ee ery or rye ere rere Serer 18

Seaboard World Airlines v. Transport Workers Union,

425 F.2d 0OB6 (20 Cie T97R) o.oo 5 ccc evccccinsssa 18

Toledo Typographical Union No. 63 v. NLRB, 907 F.2d

1220 (D.C. Cir. 1990), cert. denied, 111 S.Ct. 767

(EDUED x x ohn an pins neha eee ieee ee 16, 17, 18

Trans World Airlines, Inc. v. Independent Federation

of Flight Attendants, 489 U.S. 426 (1989)........... 15

Westinghouse Air Brake Co., 123 N.L.R.B. 859 (1959) .... 18

Wilford Auto Sales, Inc., 106 N.L.R.B. 1396 (1953). .18, 19

Wonder State Mfg. Co., 151 N.L.R.B. 904 (1965)....... 13

TABLE OF AUTHORITIES - Continued

Page(s)

STATUTES

a ee ee eee 6

Bo UDA. GB US ord 26 ow... ccc ce cance. 6

ee 2

28 U.S.C. §§ 1331 and 1337.......................... 6

a 6

dhe tg a a 6

tbl ei EO eer 5, 6, 8

45 U.S.C. § 152 (Fourth)............................. 2

45 U.S.C. § 152 (Ninth)............................ 3

In The

Supreme Court of the United States

October Term, 1993

PAUL F. RENNEISEN, THOMAS FE LETO,

LAWRENCE M. KAMPA, et al.,

Petitioners,

AMERICAN AIRLINES, INC.,

Respondent.

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

Petitioners Paul F. Renneisen, Thomas Frank Leto,

Lawrence M. Kampa, Jr., Arpad E. Horvath, Karl Bork,

Carl W. Battis and John H. N. Whatley respectfully

request that a writ of certiorari issue to review the judg-

ment and decision of the United States Court of Appeals

for the Seventh Circuit entered in this case.

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Seventh Circuit is reported at 990 F.2d 918, and is

included in the appendix at la. The memorandum opin-

ion and order for the United States District Court for the

Northern District of Illinois is included in the appendix at

18a. The report and recommendation of the magistrate

judge is included in the appendix at 36a.

JURISDICTION

The court of appeals entered judgment affirming the

decision of the district court on March 24, 1993. The court

of appeais denied petitioners’ petition for rehearing on

April 22, 1993. This Court has jurisdiction to review the

judgment below by writ of certiorari pursuant to 28

U.S.C. § 1254(1).

STATUTES INVOLVED

Section 2, Part Fourth, of the Railway Labor Act, 45

U.S.C. § 152 (Fourth), provides in pertinent part that

{e]mployees shall have the right to organize and

bargain collectively through representatives of

their own choosing. The majority of any craft or

class of employees shall have the right to deter-

mine who shall be the representative of the class

for the purposes of this Act. No carrier, its offi-

cers or agents, shall deny or in any way ques-

tion the right of its employees to join, organize,

or assist in organizing the labor organization of

their choice, and it shall be unlawful for any

carrier to interfere in any way with the organi-

zation of its employees, or to use the funds of

the carrier in maintaining or assisting or con-

tributing to any labor organization, labor repre-

sentative, or other agency of collective

bargaining, or in performing any work therefor,

or tc influence or coerce employees in an effort

to induce them to join or remain members of

any labor organization .. .

Section 2, Part Ninth, of the Railway Labor Act, 45

U.S.C. § 152 (Ninth), provides in pertinent part that

upon receipt of such certification the carrier

shall treat with the representative so certified as

the representative of the craft or class for the

purpose of this Act.

STATEMENT

1. Background. In 1983, American Airlines, Inc.

(“American”) entered into a collective bargaining agree-

ment (“Agreement”) with the Allied Pilots Association

(the “APA” or “Union”)! intended to reduce its pilot

labor costs and to allow American to compete more effec-

tively against the new, low-cost carriers that had entered

the air transport marketplace after the deregulation of the

airline industry in 1978. The Agreement imposed on the

pilots a two-tier wage structure, providing that current

(A-scale) pilots would receive lifetime job security and a

guarantee that wages and pension benefits would never

be reduced below November, 1983 levels and (B-scale)

1 The APA is recognized as the bargaining representative

for all cockpit personnel employed by American. Petitioners are

all members of the APA hired after November 1, 1983.

pilots hired after November 1, 1983 could be hired at

substantially lower market rates and without similar

guarantees. Smythe Decl., R. 31, ¢ 14.2 This wage struc-

ture was memorialized as Supplement B to the Agree-

ment.

Supplement B further provides that

2... . [T]he parties hereto, as well as the

persons bound hereby, irrevocably waive the

right to serve any Section 6 notice, under the

Railway Labor Act, of an intended change

which, if adopted, would have the effect of

modifying any of the provisions contained in

this Agreement or otherwise to require bargain-

ing as to such provisions, provided, however,

that this Agreement may be changed by unani-

mous agreement between the parties and a

majority of the pilots with job security and guar-

antee of employment as provided herein.

3. Neither the Company nor the Allied

Pilots Association, their successors, assigns or

affiliates, shall challenge, contest, or question

the legality, validity, or enforceability of this

Agreement, or any provision thereof, in any

judicial, administrative, or other proceeding,

and each of the parties shall participate in

defending the legality, validity, and enfor-

ceability of this Agreement in any judicial,

administrative, or other proceeding involving

any of its provisions.

2“R. __” refers to the item number in the record below.

C. Nothing contained herein shall be

deemed to restrict either party from negotiating

a change in the differentials between the respec-

tive pay or the retirement benefit programs of

the pilots in the employ of the company prior to

November 1, 1983 and those hired on or after

November 1, 1983, provided, however, that nei-

ther party will attempt to totally eliminate the

existing differentials.

App. at 57a.

Paragraph 2 was specifically designed to prevent the

anticipated B-scale majority from bargaining away the

A-scale benefits secured by Supplement B. Smythe Decl.

R. 31, { 13.

Since 1983, the parties, through collective bargaining,

have negotiated a series of reductions in the pay and

benefit differentials between A-scale pilots and B-scale

pilots. However, those differentials cannot be completely

eliminated. Indeed, although American and the APA sub-

sequently agreed to return to a unified wage scale based

on seniority, because pilots now start from the B-scale

wage base, the two-tier structure is effectively built into

American’s pay structure. Thus, the first five years of the

new seniority-based wage scale now provide dramati-

cally reduced wages to pilots relative to pre-1983 agree-

ments. Affidavit of Thomas Leto, R.60, FJ 11-17.

2. Proceedings Below. Plaintiffs filed this complaint

against American Airlines alleging that American vio-

lated section 2 of the Railway Labor Act, 45 U.S.C. § 152,

by entering into an agreement that is inherently destruc-

tive of collective bargaining and by treating with other

than the exclusive bargaining representative of Ameri-

can’s pilots. The complaint also alleges violations of sec-

tions 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2,

and section 510 of the Employee Retirement Income Secu-

rity Act (“ERISA”), 29 U.S.C. § 1140. Plaintiffs sought to

certify the case as a class action. The district court had

federal jurisdiction pursuant to 15 U.S.C. §§ 15 and 26, 28

U.S.C. §§ 1331 and 1337, 29 U.S.C. § 1132 and 45 U.S.C.

§ 152.

Plaintiffs subsequently filed a motion to certify the

class, a motion to strike and a motion for summary judg-

ment, based in part on the ground that Supplement B was

illegal on its face. American filed a cross-motion for sum-

mary judgment and a motion to dismiss arguing that

plaintiffs lacked standing to sue, that plaintiffs’ claims

were barred by the statute of limitations and that plain-

tiffs failed to state a claim for relief.

Several A-scale pilots then moved to intervene on the

side of American to protect the guarantees secured for

them by Supplement B. This motion was granted by the

Court (the APA did not appear in the case). The district

court stayed plaintiffs’ motion to certify the proposed

class.

Magistrate Judge Elaine Bucklo filed a Report and

Recommendation that recommended denying American’s

motion to dismiss the complaint for failure to state a

claim as to the RLA count. However, the Magistrate

Judge recommended granting American’s motion on

other grounds, namely, finding that Supplement B was

not inherently destructive of collective bargaining,

because Magistrate Judge Bucklo believed that the Union

was free to secure the same wage and benefit levels for

B-scale pilots as for A-scale pilots. Because the Magistrate

Judge had held that Supplement B was not inconsistent

with normal collective bargaining, she also recommended

denying the plaintiffs’ claims under the Sherman Act.

Both parties filed exceptions to the Report and Rec-

ommendation. On December 26, 1991, the district court

entered an opinion essentially adopting the Report and

Recommendation, and granting American’s motion to

dismiss and motion for summary judgment. However, as

to the veto of the A-scale pilots over majority union

action, the district court sua sponte decided that Supple-

ment B did not give the A-scale pilots any such veto. Ina

footnote, the district court also denied the plaintiffs’

motion to certify as moot.

Plaintiffs timely filed a notice of appeal. On March

24, 1993, the court of appeals affirmed the judgment of

the district court, with minor modifications, on the

ground that plaintiffs did not state a claim under the RLA

where American simply honors the terms of an agree-

ment with the APA that the APA itself has not challenged.

Plaintiffs timely filed a petition for rehearing that was

denied by the court on April 22, 1993.

REASONS FOR GRANTING THE PETITION

The court of appeals’ decision approves a collective

bargaining agreement whereby a subgroup of A-scale

pilots is given a permanent veto over any reduction in

wages and benefits guaranteed to them by Supplement B

to the Agreement, regardless of whether American and

ile ieee

the APA agree during subsequent contract negotiations to

make such changes, or whether the APA believes such

reductions to be in the best interest of the bargaining

unit. Thus, in order to modify the provisions of Supple-

ment B, American and the APA must also bargain with

the A-scale pilots. It is an open question whether such a

permanent waiver of the right to exclusive representation

within the bargaining unit, even with the consent of the

APA, violates federal labor law generally, and section 2 of

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

fically. Given the importance of this unresolved issue to

the maintenance of industrial peace, and the fact that the

permanent division of the bargaining unit required by

Supplement B is in clear conflict with prior Supreme

Court decisions, other courts of appeals, and longstand-

ing federal labor policy, this Court should grant the peti-

tion.

1. The court of appeals expressly held that Supple-

ment B does not give the A-scale pilots an illegal veto, or

require tripartite bargaining over fundamental contract

issues. App. at 14a. The court’s reasoning, however, is

demonstrably flawed. The court below placed great

weight on the fact that, as a now-majority of the Union,

the B-scale pilots could effectively bargain to within one

penny of the wage and benefit amounts provided to the

A-scale pilots in Supplement B. Even assuming that the

3 Plaintiffs do not argue that Supplement B gives the

A-scale pilots a veto as to all contract issues. Plaintiffs contend

only that Supplement B requires that American and the APA

bargain directly with the A-scale pilots if they wish to_reduce

the pay and benefit guarantees exclusively enjoyed by the

A-scale pilots.

mere existence of irrevocable differentials between the

two classes of pilots is not inherently divisive, see Affi-

davit of Clyde Summers, App. at 60a, { 14, the court

inexplicably ignores the converse, and arguably more

relevant, bargaining reality. What the APA may never do,

even if the B-scale pilots constitute the entire bargaining

unit minus one, is bargain with American to reduce the

wages or benefits guaranteed to the A-scale pilots. At that

point, all concessionary bargaining must occur solely at

the expense of the B-scale pilots, or with the express

agreement of a majority of the A-scale pilots.‘ In effect,

the A-scale pilots are able to extermalize part of their cost

of the Union’s striking a deal with American to the

B-scale pilots. Of course, the resulting discord between

the pilots inures to the benefit of American. And the

APA’s ability to bargain is thus significantly constrained.

Although conveniently ignoring the imperative of its

own syllogism, the court of appeals acknowledges that if

the Union’s B-scale majority believed the effects of Sup-

plement B to be damaging, it “could try to persuade a

majority of the A-scale pilots to vote away their rights

under the 1983 Agreement.” App. at 14a-15a (emphasis

added). Inherent in the necessity to persuade is the

4 The specter of union “give-backs” is more than hypotheti-

cal. American previously attempted to eliminate the lump-sum

distribution option in American’s fixed pension plan. After the

APA challenged American’s unilateral action, the System Board

of Adjustment determined that the termination violated the

Agreement only as to the A-scale pilots, who were protected by

Supplement B. Consequently, American restored the distribu-

tion option for the A-scale pilots. Second Smythe Decl., R. 57,

Exh. 2, { 8.

inability to impose. Yet this is precisely the ability funda-

mental to the notion of exclusive representation. Empo-

rium Capwell Co. v. Western Addition Community Org., 420

U.S. 50 (1975). If American and the Union must first

obtain the approval of the A-scale pilots when it comes to

bargaining on the issue of whether American can termi-

nate its pension plan, for example, and they must do so

according to the undisputed language of Supplement B,

then the APA obviously is not the exclusive representa-

tive of the bargaining unit as to this issue.5 The court of

appeals is simply wrong to conclude otherwise.

Plaintiffs recognize, as does the court below, that

many collective bargaining agreements provide superior

benefits, or special voting rights, to discrete classes of

workers within a bargaining unit. That is not the issue

here. A bargaining representative can consent to such a

bargaining structure if the interests of the bargaining unit

° The court of appeals also denigrates the value of the wage

and benefit guarantees in Supplement B, opining that as the

number of A-scale pilots declines over time, so does the value of

any A-scale concessions to American. This blunt calculus is not

so obviously true, given the vigor with which American has

defended even the penny differential between the two classes of

pilots, which strongly, and correctly, suggests that there is great

value in structure as well as result. The court fails to recognize

the deleterious effects such structural divisions have on union

harmony, and thus effective collective bargaining, ab initio. In

any event, whatever their distant value, when the lone A-scale

pilot remains active in the cockpit, it certainly is not true that the

value of such concessions is insignificant either today or in the

near future. Moreover, it simply is not the prerogative of the

federal judiciary to determine for the bargaining representative

the relative worth of its bargaining positions or the effectiveness

of its negotiating strategy.

are fully and fairly represented. However, as the court of

appeals correctly stated, “[t]he added wrinkle in plain-

tiffs’ case is temporal: the guarantees are permanent.”

App. at 15a. The difference is critical. The real issue is

whether the exclusive representative of a group of

workers may permanently concede a portion of its ability

to bargain on behalf of the members of the bargaining

unit to a subgroup within the unit, thus divesting itself of

the power to bargain bilaterally with the employer. The

court of appeals’ affirmative conclusion is contrary to

well-established Supreme Court precedent, the decisions

of other courts of appeals, and federal labor policy. For

this reason, the petition should issue.

2. This Court has consistently held that the “princi-

ple of exclusive union representation, which underlies

the National Labor Relations Act as well as the Railway

Labor Act, is a central element in the congressional struc-

turing of industrial relations.” Abood v. Detroit Board of

Education, 431 U.S. 209, 220 (1977) (footnote omitted). It is

also true that under certain circumstances an employer

may deal directly with members of the bargaining unit.

Order of Railroad Telegraphers v. Railway Express Agency,

321 U.S. 342, 347 (1944) (“[i]t may be agreed that particu-

lar situations are reserved for individual contracting,

either completely or within prescribed limits”); /./. Case

Co. v. NLRB, 321 U.S. 332, 338 (1944) (direct dealing may

be appropriate where there is great variation in the cir-

cumstances of employment or the capacity of employees).

However, an employer who bargains with individuals

within the bargaining unit without the consent of the

bargaining representative, even where a majority of the

See

members approve, violates federal labor law. Medo Photo

Supply Corp. v. NLRB, 321 U.S. 678, 684 (1944).

The issue before the court of appeals, and one which

has not been resolved by this Court, is whether a bargain-

ing representative may consent to waive irrevocably its

obligation to act as the exclusive representative of the

bargaining unit as to a subgroup within the unit. The

court of appeals held that the permanently independent

bargaining status conveyed to the A-scale pilots by Sup-

plement B, no matter that changing circumstances may

require that the Union and American “rebargain” the

deal, does not violate the exclusive representation

requirements of the RLA. The gist of the court of appeals’

decision is that the exclusive bargaining representative

may abdicate its responsibility to represent fully the

interests of the bargaining unit, without leaving itself any

future recourse to alter the agreement through collective

bargaining with the employer. This remarkable holding is

flatly inconsistent with the relevant decisions of this

Court.

The Supreme Court has, without wavering, upheld

the principle that exclusive representation is fundamental

to the collective bargaining process. Moreover, collective

rights “are protected not for their own sake but as an

instrument of the national labor policy of minimizing

industrial strife.” Emporium Capwell, 420 U.S. at 62. A

union “has a legitimate interest in presenting a united

front . .. and in not seeing its strength dissipated and its

stature denigrated by subgroups within the unit sep-

arately pursuing what they see as their separate inter-

ests.” Id. at 70. This is because, “[hJaving divided

themselves, the minority employees will not be in a posi-

tion to advance their cause unless it be by recourse seri-

atim to economic coercion, which can only have the effect

of further dividing them along racial or other lines.” Id. at

67. See also J.I. Case, 321 U.S. at 338 (practice and philoso-

phy of collective bargaining looks with suspicion on indi-

vidual advantages). This balkanization of power within

the bargaining unit, and its concomitant weakening of the

union, which the Court has consistently found objection-

able, is also the inevitable result of Supplement B. And

this Court has never sanctioned a collective bargaining

agreement that not only granted a subgroup within the

unit a veto as to certain issues, but also rendered the

bargaining representative unable to modify the agree-

ment within the normal course of collective bargaining,

and without the necessity of negotiating additionally

with a subgroup in the union.

The principle of exclusive representation is easily

vitiated if an employer, due to temporary organizational

weakness on the part of the union, or economic hardship

in a particular industry, for example, can fortuitously lock

in a permanent division in the bargaining unit. Cf. Wonder

State Mfg. Co., 151 N.L.R.B. 904, 912 n. 8 (1965) (violations

of the NLRA cannot be excused on the ground of private

inconvenience or economic and business exigencies). The

Railway Labor Act wisely contemplates that bargaining

units and employers will meet at reasonable intervals to

discuss terms and conditions of employment. This ability

to adjust the relationship between the parties to a collec-

tive bargaining agreement as circumstances change is a

structural mechanism that functions as a crucial safety

eee

valve in avoiding labor-management strife. It is the pro-

cess of periodic collective bargaining, where both sides

can engage in the unfettered rough-and-tumble of nego-

tiations, that protects the integrity of the result by insur-

ing that potentially divisive issues or subsequently

unworkable agreements are timely revisited. As indicated

above, this Court has consistently recognized the sound-

ness of the rationale underlying this policy.

The court of appeals, on the other hand, has given its

imprimatur to an agreement that intrudes profoundly,

and disfavorably, upon the collective bargaining process,

and the relationship between employees and their union.

The APA has absolved itself permanently of an obligation

that this Court has repeatedly held to be fundamental to

an employee’s right to bargain collectively — that his or

her interests be represented exclusively by the bargaining

representative. Under Supplement B, the APA simply

cannot “rebargain” the wage and pension benefit guaran-

tees at a point in the future without the consent of a

majority of the A-scale pilots.© And it is the permanence

of the veto that strips away the protections provided by

the RLA, and renders the Agreement invalid.

The court of appeals queried why it should blame

American for honoring a deal it made with the pilots’

the A-scale pilots are not individual guarantees, like ERISA-type

pension benefits, but collective guarantees that run only to the

A-scale pilots as a subgroup, effectively creating a de facto

minority union. That is, if a majority of A-scale pilots vote to

modify the guarantees, the individual dissenting A-scale pilots

have no otherwise enforceable individual rights under Supple-

ment B.

union in 1983, when the union is equally able to challenge

that deal. App. at 15a. The question is misplaced. First, it

is not clear that the APA is equally able to challenge

Supplement B. Supplement B commits the Union to par-

ticipate in defending the legality of the Agreement. More

importantly, as this Court recognizes, inherent in any

division of the bargaining unit is weakness and lack of

cohesion. See Emporium Capwell, 420 U.S. at 70. If it were

otherwise, Congress, and the courts, would be indifferent

to whether an employer treated with other than the bar-

gaining representative. Second, there is an independent

public interest in the protection of an employee's right to

bargain collectively through his or her exclusive repre-

sentative underlying federal labor law, and that interest

“may not be ignored by the employer, even though the

employees consent.” Medo, 321 U.S. at 687. Accordingly,

American and the APA may not, by mere agreement,

avoid the bargaining imperatives of the Railway Labor

Act. Significantly, section 4 of the RLA permits individual

plaintiffs to challenge agreements like Supplement B that

“strike a fundamental blow .. . to the collective bargain-

ing process itself.” See Trans World Airlines, Inc. v. Indepen-

dent Federation of Flight Attendants, 489 U.S. 426, 442

(1989). Similarly, in Emporium Capwell, this Court found a

failure to treat with the exclusive representative destruc-

tive of the employees’ right to bargain collectively. Here,

the potential entanglement of the employer into the rela-

tions between American’s pilots is even greater, and cer-

tainly sufficient to support plaintiffs’ cause of action.

Whether a collective bargaining agreement can, in

any case, provide the A-scale pilots a right to veto any

changes to Supplement B, while precluding forever any

possibility for the union to bargain collectively with

American to amend the Agreement, is an important ques-

tion of labor law that should be resolved by this Court.

The permanent tripartite bargaining scheme (as to Sup-

plement B issues) approved by the court of appeals “sub-

stantially modifies the collective-bargaining system

provided for in the statute by weakening the indepen-

dence of the ‘representative’ chosen by the employees. It

enables the employer, in effect, to deal with its employees

rather than with their statutory representative.” NLRB v.

Borg-Warner Corp., 356 U.S. 342, 350 (1958). This ability

renders the congressional scheme of collective bargaining

toothless. Accordingly, the decision of the court of

appeals is at odds with both the RLA and this Court's

jurisprudence.

3. The decision of the court below is also in conflict

with the decisions of other courts of appeals. In fact, no

other appellate court has held that an employer and a

union may permanently waive the union’s right and

obligation of exclusive representation. Rather, the federal

courts have applied methods of analysis that strongly

suggest that such a waiver is inconsistent with the policy

underlying federal labor law. In Toledo Typographical

Union No. 63 v. NLRB, 907 F.2d 1220 (D.C. Cir. 1990), cert.

denied, 111 S.Ct. 767 (1991), for example, the court held

that an employer could not bargain to impasse over its

ability to deal directly with individual employees as to

lifetime job guarantees. In two previous collective bar-

gaining agreements, the union had consented to such

direct dealing by the employer, and the employer insisted

that such a clause be included in the current agreement.

Although the union did not consent to the employer’s

demand, as here, the reasoning of the court in finding the

employer’s conduct in violation of the NLRA is equally

relevant in arguing against the extraordinary encroach-

ment upon the relationship between the pilots and their

union ratified by the court below. The court found the

disputed clause to be

particularly offensive to the principle of collec-

tive bargaining because it would put the

employer in a position to exert a highly divisive

force among the members of the bargaining unit

. The clause thus not only displaces the

Union from its representational role, it also

gives the Employer the opportunity to destroy

the cohesiveness of the Union’s membership.

Id. at 1224.

This is precisely the standard of inquiry followed by

the Supreme Court in determining whether an employer

is in violation of its obligation to treat exclusively with

the bargaining representative. The relevant question is

whether the agreement at issue would put the employer

in a position to be a highly divisive force among the

members of the bargaining unit. The flaw in the reason-

ing of the court below is that it stopped its analysis once

it concluded that the APA had consented, in 1983, to the

terms of Supplement B. Typically, where the parties to the

agreement have the power to “rebargain” through the

normal collective process, this determination would be

dispositive because the ability of the union to revisit its

prior agreement serves to attenuate the discord inherent

in any division of the bargaining unit. Here, however,

that ability is expressly proscribed by the terms of Sup-

plement B, which make permanent the veto rights of the

A-scale pilots. Thus, the process-dependent mechanism

regarded as crucial by both the Supreme Court and the

Toledo court to protect the right of employees to bargain

collectively is absent. The failure of the court below to

recognize this critical distinction, inconsistently with

other courts of appeals, is fatal to its analysis. See also

Reichhold Chemicals v. NLRB, 953 F.2d 594 (11th Cir. 1992)

(bargaining to impasse over employer's right to deal with

separate subgroups on certain issues unacceptably under-

mines union’s role as exclusive representative); Seaboard

World Airlines v. Transport Workers Union, 425 F.2d 1086

(2d Cir. 1970) (permanent waiver of right to bargain

further on any matter including guarantees to senior

navigators, does not violate the RLA where the agree-

ment could be altered by the written consent of the

parties).

4. The decision of the court of appeals is also con-

trary to longstanding federal labor policy. Although the

APA agreed with American that the A-scale pilots would

have an irrevocable veto over any reduction in the wage

and benefit amounts guaranteed in Supplement B, as

demonstrated above, the real question is whether Ameri-

can and the APA could enter into such an agreement.

Federal labor policy unequivocally says not. The National

Labor Relations Board has repeatedly held that “[jJust as

a certified union may not avoid its duty to represent all

employees in the certified unit, it may not relieve itself of

this obligation by bargaining away the corresponding

right acquired through certification.” Wilford Auto Sales,

Inc., 106 N.L.R.B. 1396, 1398 (1953); see also Westinghouse

Air Brake Co., 123 N.L.R.B. 859, 860 (1959) (union could

not bargain away its obligation to represent all the

ai alia iad

employees covered in the certified unit, either voluntarily

or involuntarily). Moreover, any agreement that purports

to deprive employees of their right to exclusive represen-

tation will not be given effect. Wilford Auto Sales, 106

N.L.R.B. at 1398.

As the affidavit of Professor Summers also makes

clear, the terms of Supplement B, which impose an

“unprecedented” two-tier structure on the APA, App. at

66a, “contradict[] the principle and purpose of exclusive

representation adopted by the Railway Labor Act.” App.

at 69a. Professor Summers forcefully concludes that by

giving the A-scale pilots a permanent veto over certain

union and employer decisions, thereby requiring tripar-

tite bargaining as to some issues, Supplement B renders

the Union unable to “develop the unity needed to act

effectively and responsibly,” splitting the APA into “two

antagonistic groups with adversarial interests.” App. at

66a. Not surprisingly, a collective bargaining agreement

that by its very structure creates such internal dishar-

mony is “contrary to the letter, the spirit and the purpose

of our statutory system of collective bargaining.” App. at

69a.

picasa ee pee enna,

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

Leon M. Despres*

THomas H. GEOGHEGAN

Rosert C. Drizin

Despres, SCHWARTZ & GEOGHEGAN

77 W. Washington Street, Suite 711

Chicago, IL 60602-2803

(312) 372-2511

R. Epwarp WILHoITE, JR.

LERNER & WILHOITE

1007 W. Webster Ave.

Chicago IL 60614

(312) 477-1364

Attorneys for Petitioners

* Counsel of Record

In The

United States Court of Appeals

For the Seventh Circuit

No. 92-1213

PAuL RENNEISEN, et al.,

Plaintiffs-Appellants,

AMERICAN AIRLINES, INC.,

Defendant-Appellee.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division. No. 90

C 5930 - Ilana D. Rovner, District Judge.

ARGUED NOoveMBER 3, 1992 -

Decip—ED Marcu 24, 1993

Before Cummincs and Manion, Circuit Judges, and

Woop, Jr., Senior Circuit Judge.

Cummines, Circuit Judge. In 1983, American Airlines

was losing money in the wake of airline deregulation and

rising fuel prices. In order to cut labor costs, it struck a

deal with the pilots’ union. The union, Allied Pilots Asso-

ciation, relinquished wage and benefit guarantees for

pilots not yet hired; in return American promised to

preserve the wages and benefits of current pilots. On

November 4, 1983, American and the union memorialized

their deal in an “Agreement” that divided the union into

A-scale pilots with wage and benefit guarantees, hired

before November 4, and B-scale pilots without guaran-

tees, hired afterwards. The Agreement further provided

that the A-scale pilots’ guarantees would not be

rebargained unless a majority of the A-scale pilots voted

to do so.

Plaintiffs are several B-scale pilots who sued Ameri-

can, claiming that the Agreement with the pilots’ union is

an illegal restraint on collective bargaining under Section

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

an illegal restraint of trade under Section 1 of the Sher-

man Act, 15 U.S.C. § 1. The RLA sends most disputes

between transit workers and their employers to arbitral

boards, so that district courts have limited jurisdiction

over RLA claims. Because plaintiffs could not show that

the Agreement struck “a fundamental blow to union or

employer activity and the collective bargaining process

itself” under Trans World Airlines, Inc. v. Independent Feder-

ation of Flight Attendants, 489 U.S. 426, 442, the district

court dismissed plaintiffs’ case for lack of jurisdiction.

Without the RLA’s support, plaintiffs’ other counts crum-

bled as well: the district court found that antitrust labor

exemptions barred plaintiffs’ Sherman Act claims, and

dismissed as moot plaintiffs’ motion to certify all B-scale

pilots as a class. Plaintiffs appeal these dismissals.

We conclude that plaintiffs have sued American

because they cannot persuade their own union to chal-

lenge an Agreement that gives more security to other

workers in the union. Accordingly, we hold that plaintiffs

have not stated a claim for which relief can be granted

a eneaeeeeenenennetmal

because RLA Section 2 does not give minority groups ina

union a cause of action against their employer for adher-

ing to agreements that the union decides not to challenge.

Although the district court erred in concluding that it

lacked jurisdiction to hear this case, its careful substan-

tive analysis supports our dismissal of plaintiffs’ case

under Fed.R.Civ.P. 12(b)(6) for failure to state a claim.

In 1983, American lay supine, pinned by rising fuel

costs and a fleet of aging, inefficient aircraft, while lower-

cost carriers empowered by airline deregulation pene-

trated deeper into its market share. American states that

between 1978 when deregulation began and 1983, its fleet

shrank by 10 percent, it furloughed 10 percent of its pilots

and it hired no new pilots (defendant’s brief at 3). Ameri-

can believed that fuel and capital improvement costs

(aircraft maintenance and replacement) were relatively

fixed industry-wide, but that labor costs were about 35

percent of its total budget, as against 20-25 percent for the

low-cost carriers. To halt its declining market share and

escape the threat posed by low-cost carriers, American

decided it needed to cut labor costs. To this end, it con-

summated agreements with all its unions, including the

pilots’ union.

The agreements shared a common premise: protect

the wages and benefits of current workers, but hire new

workers at “market” rates that matched more closely the

wages and benefits paid by low-cost carriers. American

Styled this a “two-tier” proposal; it reached two-tier

agreements with the mechanics’ union in February of

1983, and with the flight attendants’ and pilots’ unions in

November of 1983. The Agreement between the pilots’

union and American, dated November 4, 1983, provided:

A. JOB SECURITY ** *

The Company [American] will guarantee

employment and *** job security forever * **

to all pilots *** who were on *** active flight

payroll on November 1, 1983 * * *

* * *

B. PAY AND RETIREMENT BENEFIT PRO-

GRAMS FOR PILOTS HIRED PRIOR TO

NOVEMBER 1, 1983

1. The company agrees that it will take no

action ** * to diminish the pay or the retire-

ment benefit programs [of] pilots hired prior to

November 1, 1983 * * *

2. This agreement *** shall remain in effect

so long as any pilot with job security remains in

the [Company’s] active employ *** [but] this

Agreement may be changed by unanimous

agreement between the parties and a majority of

the pilots with job security * * *

* * *

C. Nothing contained herein shall *** restrict

either party from negotiating a change in the

differentials between the respective pay or the

retirement benefit programs of the [A-scale and

the B-scale] pilots ***, provided, however, that

neither party will attempt to totally eliminate

the existing differentials.

Under other provisions of the Agreement, the pilots relin-

quished a 7 percent wage increase and accepted a

reduced rate of vacation accruals. American promised to

recall all furloughed pilots, and to add 200 planes to its

fleet of 238. American’s plan to cut labor costs and make

capital investments in its fleet was an unqualified suc-

cess. Today American is a leader in the airline industry

Its success has allowed it to hire many new pilots -— 59

percent of its pilots in fact — since it negotiated the

Agreement with the pilots’ union.

Since 1983 the pilots’ union and American have met

four times to negotiate the differentials between A-scale

and B-scale pilots, most recently in 1991. American con-

tends that as of 1991, the differentials have for practical

purposes been eliminated, and that the A- and B-scale

designations function as an integrated seniority system

where senior B-scale pilots have effectively the same

wages and benefits as A-scale pilots. The seven plaintiffs

argue that differentials remain, and, more fundamentally,

that the pilots’ union is weakened and divided by the

Agreement, to the point that the Agreement unlawfully

restrains the pilots’ ability to bargain collectively in viola-

tion of the RLA.

' The pleadings, briefs and opinion below denote the con-

tested parts of the Agreement as “Supplement B”. Supplement B

is entitled “Agreement” and contains subheadings A, B and C,

so that we refer to it as “the Agreement” to avoid confusing it

with sub-heading B.

lll

Congress enacted the RLA in 1926 to ensure that

labor unrest would not disrupt transportation networks

so vital to the nation’s economy. The Act sought to give

labor and transportation companies a framework to

resolve disputes peacefully through protracted negotia-

tions and compulsory mediation rather than through

strikes. 45 U.S.C. § 151(a); Theodore Kheel, 9 Labor Law

§ 50.02. Congress extended the RLA to include air carriers

in 1936. 45U.S.C. § 181. The RLA focuses on establishing

certified representatives for employee groups in the

transportation industry, and on monitoring the process of

collective bargaining between the representatives and the

employers. Sections 3 and 4 of the RLA constitute an

administrative agency, the National Mediation Board

(NMB), to supervise “major” disputes about union repre-

sentation or contract formation, and an arbitral tribunal,

the National Railroad Adjustment Board (NRAB), to set-

tle “minor” disputes about the interpretation of existing

contracts. 45 U.S.C. §§ 153-155. See Consolidated Rail Corp.

v. Railway Labor Executives Ass'n, 491 U.S. 299, 302-303;

Brotherhood of Trainmen v. Chicago River & Indiana Railroad

Co., 353 U.S. 30, 35; Elgin, J. & E. Railway v. Burley, 325

U.S. 711, 723. The RLA also creates detailed procedures

for resolving disputes before the NMB or the NRAB;

Section 2 lays out general ground rules, and Sections 5-9

set forth the specific requirements applicable to media-

tion or arbitration. 45 U.S. C. §§ 152, 155-159.

Plaintiffs’ complaint alleges that the Agreement’s

thirty-year waiver of the right to rebargain A-scale guar-

antees violates parts First and Fourth of RLA Section 2.

Part First orders carriers and employees to make reason-

able efforts to settle disputes; part Fourth empowers

aan

tele

employees to bargain collectively through their represen-

tatives, and forbids carriers from “interfer[ing] in any

way with the organization of its employees.” Plaintiffs’

complaint also alleges that American violated part Ninth

of RLA Section 2 by bargaining separately with a party

(the A-scale pilots) that is not the pilots’ designated rep-

resentative. Part Ninth provides that disputes over the

identity of authorized representatives will be investigated

by the NMB, and that carriers must deal exclusively with

the certified representative of its employees.

Plaintiffs make three arguments about how the

Agreement works to undermine collective bargaining.

First, they complain that the Agreement forces B-scale

pilots to make all the concessions in contested areas such

as pension benefits and health-care costs because the

A-scalers have locked-in guarantees. Plaintiffs offer an

alternative statement of the same problem by asserting

that the Agreement gives A-scale pilots an illegal veto

Over any concessions the B-scale pilots might propose,

forcing tripartite bargaining on fundamental contract

issues. Second, plaintiffs challenge the Agreement’s term:

A-scale guarantees will exist until the last A-scale pilot

leaves American, which could take 30 years or more.

Since these guarantees are not subject to rebargaining

unless a majority of the A-scale pilots vote them away,

plaintiffs argue that this creates a 30-year waiver of the

right to bargain that is void under federal labor policy.

Third, plaintiffs assert that the Agreement serves no busi-

ness purpose today save to weaken the union; because it

has outlived whatever imperatives impelled its forma-

tion, it must be discarded.

The heart of plaintiffs’ complaint appears to be that

giving part of the union guaranteed benefits and wages

undermines the entire union’s ability to bargain as an

effective unit, regardless of the actual disparities between

the two groups. However, we did find one reference in

plaintiffs’ briefs to an existing disparity between A-scale

and B-scale benefits. In 1987, American tried to rescind a

“lump-sum distribution option” of the pilots’ pension

plan. After the A-scale pilots objected, an arbitrator

found that the Agreement barred American from revok-

ing the lump-sum option for A-scale pilots (plaintiffs’

brief at 11). Plaintiffs do not say whether American ulti-

mately revoked the option for B-scale pilots or whether

the differential still exists. Beyond this, the only concrete

disparity between A-scale and B-scale wages and benefits

seems to be that the former group of employees possesses

guarantees the latter lack.

IT.

Plaintiffs confront a threshold hurdle: does a district

court have jurisdiction under the RLA to hear this case?

The district court found it did not. Incredibly, plaintiffs’

jurisdictional statement asserts that “jurisdiction was not

disputed” (plaintiffs’ brief at 5). Because the district court

denied jurisdiction in part by evaluating the substance of

plaintiffs’ claims, plaintiffs may perhaps be forgiven for

plunging straight into the merits. But their briefs do not

offer independent discussion of this central issue, confid-

ing their arguments instead to invectives directed against

the Agreement. We stress as we have before that a district

court’s lack of subject matter jurisdiction cannot be cured

by agreement of the parties. Metropolitan Life Insurance Co.

v. Estate of Cammon, 929 F.2d 1220, 1222-1224 (7th Cir.

1991). Parties should address jurisdictional questions

directly in the materials they present to this Court -

especially when they lose on this ground below.

This Court’s previous encounters with the RLA

establish that “[t]he scope of federal courts’ jurisdiction

over RLA violations is limited * * * .” Brotherhood of

Railway Clerks v. Atchison, Topeka and Santa Fe Railway, 847

F.2d 403, 408 (7th Cir. 1988). The district court read Trans

World Airlines, Inc. v. Independent Federation of Flight Atten-

dants, 489 U.S. 426 (“TWA”), to counsel dismissal of plain-

tiffs’ claims, but TWA cannot support a denial of

jurisdiction in the present case. TWA reviewed conduct

that unions and employers engage in after they have

completed compulsory RLA mediation and failed to settle

their differences. Under the RLA, in major disputes

employers or unions may resort to what is called “self-

help” once negotiations break down. These efforts seek to

gain economic leverage over the bargaining opponent;

the union strikes, and the employer tries to wait out the

strike. One party may complain that the other’s tactics

violate some provision of the RLA. In TWA, for example,

the union asserted that the Employer violated RLA Sec-

tion 1 Fourth by offering certain seniority and placement

preferences to flight attendants who returned to work

before the strike was over. TWA held that the airline’s

actions did not interfere with employees’ right to bargain

collectively, and consequently did not violate Section 2

Fourth. Id. at 443. TWA did not find that the trial court

lacked jurisdiction to hear the union’s claims; the union

lost on the merits because the employer’s actions were

lawful. TWA therefore does not support the district

10a

court’s reasoning. It is not about jurisdiction, and its facts

concern post-mediation self-help challenged by a union,

rather than a collective bargaining agreement challenged

by a non-representative party as in the present case.

The district court cited TWA correctly for the proposi-

tion that Section 2 Fourth “address[es] primarily the pre-

certification rights and freedoms of unorganized

employees.” Id. at 440. TWA emphasized that Section 2

Fourth was designed to protect workers who had not yet

organized an RLA-certified union. But the district court

then transformed an observation about Section 2’s sub-

stantive focus into a heightened jurisdictional barrier,

concluding that where pre-certification conduct was not

at issue, “jurisdiction under Section 2 Fourth is limited to

actions *** that constitute ‘a fundamental blow to union

or employer activity and the collective bargaining process

itself.” ” 1991 Westlaw 285283 at 11, quoting TWA at 442.

This misconstrued TWA. That case said only that the RLA

was silent on the scope of allowable self-help, and that

courts should hesitate to “imply limitations on all but

those forms of self-help that strike a fundamental blow”

to collective bargaining — revealing that TWA offered this

phrase to help courts analyze the merits of self-help

actions, and not to determine if a court has jurisdiction in

the first instance. TWA at 442.

Other parts of TWA suggest the proper analysis to

determine whether a federal court has jurisdiction to hear

an RLA claim. TWA acknowledged that in some cases

self-help might run afoul of the RLA. By implication, a

party challenging self-help would lack a remedy unless a

federal forum were available, because self-help occurs

after parties have complied with the RLA’s mandatory

lla

dispute resolution scheme. TWA, 489 U.S. at 442. TWA’s

jurisdictional test can be found then in its statement that

“judicial intervention in RLA procedures [is] limited to

those cases where ‘but for the general jurisdiction of the

federal courts there would be no remedy *** .’” Id. at

441, quoting Switchmen v. National Mediation Board, 320

U.S. 297, 300. To determine whether the district court had

jurisdiction, we must ask whether plaintiffs would have a

remedy against American absent the jurisdiction of fed-

eral courts. If plaintiffs could bring their RLA claims

before the NMB or the NRAB, then the trial court lacked

jurisdiction because the RLA mandates a statutory forum

for plaintiffs’ claims.

Plaintiffs here have no remedy under the RLA except

a review in federal court, and hence the district court had

jurisdiction to hear their claims. This result follows Air

Line Pilots Association v. UAL Corporation, 874 F.2d 439,

444-445 (7th Cir. 1989) (“UAL”), which held that one

union had jurisdiction to challenge a second union’s col-

lective bargaining agreement as a violation of the first

union’s right to bargain. Much like the present case, the

pilots in UAL were not certified to challenge the collec-

tive bargaining agreement they protested. They claimed

that their employer had breached its duty to bargain

collectively with them by striking the agreement with the

other union. Also like the present case, the UAL pilots

brought a “major” attack on the validity of an existing

collective bargaining agreement, rather than a “minor”

grievance over an agreement’s interpretation. We noted

above that major disputes typically fall under the NMB’s

jurisdiction, while minor grievances are heard by the

NRAB. Here, however, plaintiffs could not bring a major

12a

dispute under Section 6 because they are not an RLA-

certified representative. 45 U.S.C. § 156. This in turn

suggests that the NMB would not hear their complaint

under Section 5.2 45 U.S.C. § 155. In sum, “where the

arbitral board cannot provide a remedy that will protect a

party from the consequences of [an RLA violation], the

district court has equitable jurisdiction to do so ***.” Id.

at 445.

Brotherhood of Railway Clerks v. Atchison, Topeka and

Santa Fe Railway, 847 F.2d 403 (7th Cir. 1988), supports

today’s analysis. That case affirmed that the district court

lacked jurisdiction because the RLA required the union

and the employer to bring their minor dispute before the

NRAB. Id. at 409; see Chicago River & Indiana Railroad, 353

U.S. at 39. The employer and the union disagreed as to

whether their collective bargaining agreement allowed

the employer to “buy” employees out of union-negotiated

contracts. We found that the NRAB had exclusive juris-

diction over the case because it involved the interpreta-

tion, not the validity, of a collective bargaining

agreement. Jd. Because the union had an arbitral remedy,

the district court lacked jurisdiction: “[i]n those disputes

in which the RLA’s extra-judicial dispute-resolution

mechanisms are capable of adequately protecting the

rights of the parties, federal courts may not interfere

2 UAL did not suggest that the NMB was the proper forum

to hear the pilots’ third-party challenge to a collective bargain-

ing agreement. 874 F.2d at 443-445. We follow UAL, therefore, in

assuming that the NMB does not take jurisdiction over com-

plaints that are not brought by certified representatives under

the RLA. If the NMB had statutory jurisdiction over the present

dispute, of course, the courts would lack jurisdiction.

13a

*** .” Id. Here plaintiffs seek to suspend a collective

bargaining agreement, and they cannot do so under Sec-

tion 6 because they are not a certified representative

under the RLA. Since neither the NMB nor the NRAB

offers a forum for their claims, the trial court had juris-

diction to hear the claims, just as it did in UAL. 874 F.2d

at 444-445.

We note that the district court also erred when it

implied that the present dispute was “minor” because it

was not “likely to lead to a pilots’ strike.” 1991 Westlaw

285283 at 18. We pointed out before that this is not the

test. UAL, 874 F.2d at 444. Minor disputes occur over

contract interpretation. See Chicago & North Western

Transportation Co. v. Railway Labor Executives Ass’n, 908

F.2d 144, 148 (7th Cir. 1990); National Railway Labor Confer-

ence v. International Ass'n of Machinists, 830 F.2d 741,

745-746 (7th Cir. 1987). Plaintiffs do not raise any issues

about how to interpret the Agreement; rather, they chal-

lenge its validity and seek an injunction to render it void.

This is a classic “major” dispute and therefore outside the

NRAB’s arbitral authority.

III.

After finding that it lacked jurisdiction, the district

court offered a careful substantive analysis of plaintiffs’

claims, and we read its opinion to support a conclusion

that the RLA does not offer plaintiffs any relief from the

Agreement. This case must be dismissed under

Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon

which relief can be granted RLA Section 2 was not

designed to give minority groups within a union a cause

14a

of action against their employer when they cannot per-

suade their own union to take actions they deem to be in

the union’s best interest. Since plaintiffs’ own union has

not challenged the Agreement, we cannot find that the

Agreement violates the union’s right under the RLA to

bargain collectively for its members.

The district court property rejected plaintiff’s claim

that the Agreement waives the right to bargain on funda-

mental contract iss\wes. As Judge Rovner pointed out, the

1983 Agreement expressly allows the union to seek

A-scale wages and benefits for the B-scale pilots: “Noth-

ing contained herein shall be deemed to restrict either

party from negotiating a change in the differentials

between the respective pay or the retirement benefit pro-

grams of the pilots *** hired on or after November 1,

1983, provided, however, that neither party will attempt

to totally eliminate the existing differentials.” The district

court read this to require a one-penny differential to

remain between A-scale and B-scale wages, and we agree.

The Agreement does not waive the right to bargain on

any significant issues that could support a cause of action

under RLA Section 2 Fourth.

The district court was also correct to find that the

Agreement does not give A-scale pilots an illegal veto

Over contract issues, and does not require tripartite bar-

gaining on fundamental contract issues. The court

observed that B-scale pilots comprise 59 percent of the

union’s membership, and as such can bargain and vote

for any contract within one penny of A-scale pay and

benefits. We again agree. Furthermore, if most B-scale

pilots agreed with plaintiffs about the damaging effects of

the Agreement, the B-scale pilot majority could try to

15a

persuade a majority of the A-scale pilots to vote away

their rights under the 1983 Agreement. As time passes

and B-scale pilots become an ever-larger percentage of

the union, the A-scale guarantees will fade into insignifi-

cance. Even if the existence of A-scale and B-scale groups

makes it more difficult for the union to agree on its

negotiating position today, plaintiffs’ arguments about

30-year tripartite bargaining are baseless because the

value of A-scale concessions to American can only

decline as the percentage of A-scale members shrinks.

Plaintiffs’ claims against American cannot succeed

because their own union and American are equally

“guilty” of adhering to the 1983 Agreement. One question

dooms plaintiffs’ case: why blame American for honoring

a deal it made with the pilots’ union ten years ago, when

the union is equally able to challenge that deal and Amer-

ican has nothing to gain by trying to revoke the A-scale

pilots’ guarantees? Plaintiffs in their briefs attack the

A-scale guarantees with particular ire. The guarantees

offer super-seniority to A-scale pilots. We see nothing

sinister and nothing contrary to the RLA or federal labor

policy in an agreement that permanently gives benefits to

a shrinking percentage of a union’s membership. Plain-

tiffs’ effort to compare locked-in benefits to a permanent

waiver of the right to bargain in the first instance borders

on outrageous. Many union agreements allocate superior

benefits to certain groups of workers. The added wrinkle

in plaintiffs’ case is temporal: the guarantees are perma-

nent. From the perspective of the union in 1983, however,

permanent guarantees for the 1983 pilots were far prefer-

able to negotiable guarantees. Plaintiffs now seek to

blame American for their union’s success ten years ago.

l6a

Air Line Pilots Ass'n v. O'Neill, 111 S.Ct. 1127, sug-

gests that American cannot be liable for honoring its

Agreement with the union. O'Neill holds that a union

does not breach its duty of fair representation unless it

acted “arbitrarily and irrationally” in reaching a settle-

ment with the employer, and “a settlement is not irra-

tional simply because it turns out in retrospect to have

been a bad settlement.” Jd. at 1136 (emphasis in original).

In O'Neill, at least, the Court was able to conclude with

the benefit of hindsight that the union had struck a bad

settlement. In the present case, however, A-scale pilots

moved to intervene to protect their rights under the 1983

Agreement,? and we are not persuaded that the 1983

Agreement was a bad deal for the union in the long run.

O'Neill suggests that plaintiffs should not be able to sue

American for adhering to an Agreement with the union

where the Agreement does not violate the union’s duty of

fair representation and it has not been challenged by the

plaintiffs’ own union.

United Independent Flight Officers, Inc. v. United Air-

lines, Inc., 756 F.2d 1262, 1269-1273 (7th Cir. 1985), fur-

nishes further evidence that an employer cannot be

vicariously liable for an Agreement that the union itself

has not challenged. There a pilot group sued its union for

breach of the duty of fair representation and named

United Airlines as a party to that breach. The pilot group

attacked the tax implications of a lump-sum pension dis-

tribution option that had been negotiated by the union

3 In a minute order dated December 21, 1990, the district

court allowed the group of A-Scale pilots to intervene for the

limited purpose of responding to motions.

17a

with the company; the benefits at issue and the parties’

alignment were very similar to the present case. The pilot

group lost because their claims were not timely; we found

that a six-month statute of limitations applied to duty of

fair representation claims. Id. United Independent Flight

Officers suggests that where a union has not challenged

an agreement, a minority group of employees cannot sue

their employer under RLA Section 2 for honoring an

agreement that does not violate the union’s duty of fair

representation.

For these reasons, we hold as a matter of law that

under RLA Section 2 First and Fourth, American does not

refuse to bargain or interfere with the union’s right to

bargain collectively when it honors the terms of an agree-

ment with a union that the union itself has not chal-

lenged. Since plaintiffs concede that their Sherman Act

claims must be dismissed if their RLA claims fail (plain-

tiffs’ brief at 26-27, reply brief at 23), their case has

expired. The district court’s dismissal of plaintiffs’ case is

AFFIRMED subject to the minor modifications noted in this

Opinion.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

18a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

PAUL F. RENNEISEN, THOMAS )

FRANK LETO, LAWRENCE M. _)

KAMPA JR., ARPAD E. )

HORVATH, KARL BORK, CARL )

W. BATTIS, AND JOHN H.N. )

WHATLEY, individually and on )

behalf of all similarly situated )

persons, )

)

Plaintiffs, No. 90 C 5930

a Hon. Ilana D.

AMERICAN AIRLINES, INC., a Rovner

corporation,

Defendant.

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

This unusual case involves a dispute between a group of

airline pilots hired after November 1, 1983 and their

employer, American Airlines (“American”), over the

effects of a union contract signed before the pilots were

hired. The contract, signed by American and the Allied

Pilots Association (APA), contained salary and pension

guarantees to pilots hired before, but not after, November

1, 1983. The plaintiffs, six post-1983 pilots, filed a three

count complaint against American alleging violations of

the Railway Labor Act (“RLA”), 45 U.S.C. § 151, et seq.,

the Sherman Act, 15 U.S.C. § 1, et seq., and the Employee

Retirement Income Security Act (“ERISA”), 29 U.S.C.

19a

§ 1140. The plaintiffs filed a motion to strike and a motion

for summary judgment.! American countered with a

motion to dismiss and a motion for summary judgment.

The Court then referred the case to Magistrate Judge

Elaine Bucklo for a report and recommendation. The

Court has received that report, and the Magistrate Judge

has recommended that American’s motion for summary

judgment and motion to dismiss be granted, and that

plaintiffs’ motion for summary judgment and to strike be

denied. Both parties have filed timely objections to the

report of the Magistrate Judge. After consideration, the

Court will adopt the report and recommendation of the

Magistrate Judge and grant dismissal and ey judg-

ment in favor of American.

Il. FACTS

In 1983, American was at a financial and operational

crossroads. Deregulation of the airline industry in 1978

brought a number of new, low-cost carriers into the air

transport marketplace. Due to the increased competition,

American experienced a reduction in its operating reve-

nues. At the same time, American’s fuel costs were

increasing for its aging, fuel-inefficient aircraft.

American’s projections for its future operations

reflected stagnant growth. In 1983, American operated

238 aircraft and projected that the fleet would consist of

no more than 250 aircraft by 1988. In order to compete

' The plaintiffs have also moved to certify as a class all

post-1983 American pilots. Because of the Court’s decision in

this case, that motion is denied as moot.

cl elle

20a

against the low-cost carriers, American decided that its

only course was to lower its labor costs and upgrade its

aircraft fleet. American presented the APA with two

options. American wanted either dramatic work rule and

wage concessions or a two-tier system which would guar-

anty [sic] pre-1983 pilots job security as well as pay and

pension benefits at the 1983 level but would provide

lower pay rates and benefits for future pilots. As part of

the agreement reached on November 4, 1983, which

implemented the two-tier approach, the APA agreed to

forego a seven percent wage increase due in November

1983 and to accept a reduction in the rate of vacation

accrual for pre-1983 pilots. American and the APA

entered into an agreement referred to as Supplement B. In

relevant part, this contract provides as follows:

WHEREAS, the Company and the Associa-

tion recognize the problems that have arisen as

a result of deregulation of the airline industry;

and

WHEREAS, the parties recognize that inno-

vative approaches must be used in order to

assure employees and management that the

Company shall remain competitive in a changed

economic environment; and

WHEREAS, the Company and the Associa-

tion acknowledge the contributions that each

has made over the past years to the status of the

Company as a leading air carrier; and

WHEREAS, the current pilot group through

the Association has made significant conces-

sions with respect to its established contract

21a

rights which are designed to permit the com-

pany to compete effectively over the indefinite

future; ;

NOW, THEREFORE, the parties hereby

agree to the following terms... :

A. JOB SECURITY

1. General

The Company will guarantee employment

and grant system job security forever as a pilot

to all pilots covered by the Basic Agreement

who were on the Company’s active flight pay-

roll on November 1, 1983... .

+ * *

B. PAY AND RETIREMENT BENEFIT PRO-

GRAMS FOR PILOTS HIRED PRIOR TO

NOVEMBER 1, 1983

1. The Company agrees that it will take no

action, at any time, by way of notice, negotia-

tions or otherwise, to diminish the pay or the

retirement benefit programs in effect on the date

hereof for pilots hired prior to November 1,

2. This Agreement as provided herein

shall remain in effect so long as any pilot with

job security remains in the active employ of the

Company. . . . [T]his Agreement may be

changed by unanimous agreement between the

parties and a majority of the pilots with job

security and guarantee of employment. . . .

* * *

22a

C. Nothing contained herein shall be deemed

to restrict either party from negotiating a change

in the differentials between the respective pay

or the retirement benefit programs of the pilots

in the employ of the Company prior to Novem-

ber 1, 1983 and those hired on or after Novem-

ber 1, 1983, provided, however, that neither

party will attempt to totally eliminate the exis-

ting differentials.

Thus, Supplement B provided for pay and pension

guarantees for pre-1983 pilots. Under a separate agree-

ment — one not challenged in this case — post-1983 pilots

were also to be paid lower “B-scale” rates, while pre-1983

— pilots “A-scale” pilots — received the higher, existing

contract rates.

In 1985, 1986, 1987 and 1991, the APA and American

met in collective bargaining and reduced the differentials

between the pre- and post-1983 pilots. For example, the

A-scales and B-scales have been merged into one

seniority based pay scale. In part because of these conces-

sions, American has hired 5,254 of its 8,877 pilots, or 59%

of the total, since 1983.

In their complaint, plaintiffs allege that Supplement

B is an illegal waiver of their right to bargain in violation

of Section 2, First, Fourth, and Ninth of the RLA, 45

U.S.C. § 152. According to the complaint, “B-scale pilots

could not seek parity even as an opening bid in negotia-

tions, (sic) the normal dynamics of a bargaining process

ensured that the outcome would always be substantially

below even ‘near-parity.’ ” Complaint 7 26. To bring this

cause of action within the language of Section 2, Fourth,

the complaint states that “Supplement B has allowed

23a

American to destroy the union’s community of interest to

such an extent that American could dominate or control

the A.P.A. insofar as it was the bargaining agent of the

B-scale pilots.” Complaint ] 25. According to the com-

plaint, American has allegedly refused to bargain in good

faith by insisting on Supplement B restrictions. Com-

plaint J 30. Furthermore, the complaint alleges that the

adoption and enforcement of Supplement B violates Sec-

tion 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.

Finally, the plaintiffs argue that Supplement B provides

unlimited bargaining rights to A-scale pilots but sharply

limits the bargaining rights of B-scale pilots for an indefi-

nite period in violation of ERISA.

III. REPORT OF THE MAGISTRATE JUDGE

On the plaintiffs’ RLA claim, the Magistrate Judge

addressed only Section 2, Fourth, 45 U.S.C. § 152, because

the plaintiffs’ claims based on alleged violations of Sec-

tion 2, First and Ninth did not add any rights not already

covered by Section 2, Fourth. The plaintiffs have made no

objection on this account. The Magistrate Judge con-

cluded that plaintiffs did not state a cause of action under

Section 2, Fourth. The Magistrate Judge interpreted Sup-

plement B to require that at most a one penny differential

must remain between the pay and benefits given to

A-scale pilots and B-scale pilots for the life of the agree-

ment, which expires with the retirement or death of the

last A-scale pilot or by agreement of a majority of active

24a

A-scale pilots, the APA and American.? According to the

Magistrate Judge, a thirty-year waiver in a labor contract

related to such “minutiae” is not a fundamental] attack on

the bargaining process or an attempt to destroy the union

in violation of Section 2, Fourth. (Report of Magistrate at

8, citing National Railroad Passenger Corp. v. Int’l Assoc. of

Machinists & Aerospace Workers, 915 F.2d 43, 51 (1st Cir.

1990)). In addition, the Magistrate Judge concluded that

the fact that one group has permanent protection for its

decision is not illegal. (Report of Magistrate at 8, citing,

Seaboard World Airlines, Inc. v. Transport Workers Union of

America, 443 F.2d 437 (2nd Cir. 1971)). The Magistrate

Judge concluded that because Supplement B does not

prohibit post-1983 pilots - who now constitute a majority

of pilots - from bargaining for any benefit they want,

plaintiffs have failed to state a claim under Section 2,

Fourth.

On the antitrust claim, the Magistrate Judge con-

cluded that both the statutory and non-statutory labor

exemptions to the antitrust laws require dismissal of the

claim. (Magistrate’s Report at 10, citing United Mine

Workers v. Pennington, 381 U.S. 657 (1965); Mid-America

Regional Bargaining Assn. v. Will County Carpenters District

Council, 675 F.2d 881 (7th Cir. 1982)). On the ERISA claim,

the Magistrate Judge stated that plaintiffs have not been

2 In their Statement of Undisputed Facts, the plaintiffs con-

cede that “[o]ver the thirty years, American and APA can

change the differential between the two tiers, and in theory, the

differential could be even a penny, but some differential must-

exist.” Plaintiffs’ Statement of Undisputed Facts, J 2. As stated

in the Report and Recommendation, the Magistrate Judge con-

sidered this statement even though the plaintiffs filed it iate.

25a

constructively discharged or received a similar employ-

ment injury and therefore have no such cause of action.

(Magistrate's Report at 12, citing Deeming v. American

Standard, Inc., 905 F.2d 1124, 1127 (7th Cir. 1990); Young v.

Standard Oil (Indiana), 660 F. Supp. 587, 597 (S.D. Ind.

1987), aff'd, 849 F.2d 1039 (7th Cir. 1988), cert. denied, 488

U.S. 981 (1988)). The plaintiffs have not objected to the

Magistrate Judge’s recommendation regarding the dis-

missal of the ERISA claim.

The Magistrate Judge recommended that American’s

motion for summary judgment and motion to dismiss be

granted and that plaintiffs’ motion to strike and motion

for summary judgment be denied.

IV. ANALYSIS

A. Jurisdiction Under Sections 2, Fourth

Regarding the RLA claim, the plaintiffs’ brief essen-

tially presents two objections. The first is that Supple-

ment B gives pre-1983 pilots an illegal veto power which

requires tripartite bargaining as to fundamental contract

issues. The second is that a thirty year waiver of the right

to bargain on any subject that is normally bargained for

at reasonable intervals amounts to an illegal indenture

under federal labor policy. American objects to the Magis-

trate Judge’s Report on the ground that plaintiffs have

not stated a claim under Section 2, Fourth of the RLA, as

assumed by the Magistrate Judge. Because the Court

agrees with the recommendation of the Magistrate Judge,

the Court need not address this objection by American.

26a

The first —- and in this case determinative — issue that

the Court must address in considering both of the plain-

tiffs’ objections to the Magistrate Judge’s recommenda-

tion regarding the RLA claim is whether the Court has

jurisdiction to hear this claim. The proper route for com-

plaining about a statutory violation — as the plaintiffs do

in this case - is a suit in federal district court, not a

proceeding before an adjustment board or other arbitral

body that would ordinarily review a minor dispute.* See

Air Line Pilots Assoc., Internat’l v. UAL Corp., 874 F.2d 439,

444 (7th Cir. 1989). Even so, review of RLA violations is

quite narrow and limited to exceptional circumstances.

Brotherhood of Ry., Etc. v. Atchison, T. & S. F. Co., 847 F.2d

403, 408-09 (7th Cir. 1988).

Plaintiffs in this case allege that American has vio-

lated Section 2, Fourth, which provides, in pertinent part:

No carrier, its officers or agents, shall deny or in

any way question the right of its employees to

3 This dispute is not major in the sense that it is likely to

lead to a pilots’ strike. Air Line Pilots Assoc., Int'l v. UAL Corp.,

874 F.2d 439, 444 (7th Cir. 1989). A major dispute relates to “the

formation of collective bargaining agreements or efforts to

secure them. They arise where there is no such agreement or

where it is sought to change the terms of one, and therefore the

issue is not whether an existing agreement controls a contro-

versy.” Elgin, ]. & E. R. Co. v. Burley, 325 U.S. 711, 723, 65 S. Ct.

1282, 1289 (1945). A minor dispute “contemplates the existence

of a collective agreement already concluded or, at any rate, a

situation in which no effort is made to bring about a formal

change in terms or to create a new one. The dispute relates

either to the meaning or proper application of a particular pro-

vision with reference to a specific situation or an omitted case.”

Id.

27a

join, organize, or assist in organizing the labor

Organization of their choice, and it shall be

unlawful for any carrier to interfere in any way

with the organization of its employees, ... or to

influence or coerce employees in an effort to

induce them to join or remain or not to join or

remain members of any labor organization... . ”

45 U.S.C. § 152, Fourth. Congress enacted this provision

as part of the 1934 amendments to the RLA. 48 Stat. 1185.

Given the language of the statute, the Supreme Court has

consistently viewed the 1934 amendments as addressing

primarily the precertification rights and freedoms of unor-

ganized employees. Trans World Airlines, Inc. v. Indepen-

dent Federation of Flight Attendants, 489 U.S. 426, 109 S. Ct.

1225, 1234 (1989). These amendments made more explicit

the employees’ freedom to organize and to make a choice

regarding their representatives without the coercive inter-

ference and pressure of a company union. /d. (citing Vir-

ginian R. Co. v. Railway Employees, 300 U.S. 515, 543, 57S.

Ct. 592, 597 (1937); Texas & N. O. R. Co. v. Railway Clerks,

281 U.S. 548, 50 S. Ct. 427 (1930)). “ ‘The 1934 Act was

directed particularly at control over the initial step in

collective bargaining - the determination of the

employees’ representatives.’ ” Trans World Airlines, 109 S.

Ct. at 1234 (quoting Switchmen’s Union of North America v.

National Mediation Bd., 320 U.S. 297, 317, 64S. Ct. 95, 97

(1943) (Reed, J., dissenting)); see also id. at 302, 64 S. Ct.

at 97 (opinion of the Court); International Assoc. of Machi-

nists v. Street, 367 U.S. 740, 759, 81 S. Ct. 1784, 1795

(1961)).

The reason for this focus on precertification is that

the RLA provides an exhaustively detailed procedural

28a

framework to facilitate the voluntary settlement of major

disputes. Trans World Airlines, 109 S. Ct. at 1234 (citing

Trainmen v. Jacksonville Terminal Co., 394 U.S. 369, 378, 98

S. Ct. 1109, 1115 (1969)). The effectiveness of these private

dispute resolution procedures depends on the initial

assurance that the employees’ putative representative is

not subject to control by the employer and on the subse-

quent assurance that neither party will be able to enlist

the courts to further its own partisan ends. Trans World

Airlines, 109 S. Ct. at 1234. Because of this, judicial inter-

vention in RLA procedures is limited to those cases

where but for the general jurisdiction of the federal

courts there would be no remedy to enforce the statutory

commands which Congress wrote into the RLA. Switch-

men’s, 320 U.S. at 300, 64 S. Ct. at 96.

In post-certification cases such as this one, jurisdic-

tion under Section 2, Fourth is limited to actions by an

employer that constitute “a fundamental blow to union or

employer activity and the collective bargaining process

itself.” Trans World Airlines, 109 S. Ct. at 1235. Such con-

duct must be “inherently destructive of union or

employer activity.” J/d.; National R.R. Passenger Corp., 915

F.2d at 51 (judicial intervention permitted if the employer

engaged in a fundamental attack on the collective bar-

gaining process or a direct attempt to destroy the union);

International Assoc. of Machinists & Aerospace Workers v.

Alaska Airlines, Inc., 813 F.2d 1038, 1040 (9th Cir.), cert.

denied, 484 U.S. 926, 108 S. Ct. 290 (1987) (same).

The plaintiffs’ argument then must be that Supple-

ment B is a fundamental blow to the collective bargaining

process and is inherently destructive to union activity.

Before addressing this argument, the Court must set out

29a

Specifically what Supplement B encompasses and does

not encompass. Supplement B 8ives job security to pilots

hired before November 1, 1983. Supplement B also guar-

antees to pilots hired before November 1, 1983 that their

salaries will never dip below 1983 levels and that their

pension plans cannot be reduced below 1983 levels. In

other words, the agreement provides a floor for certain

benefits to a discreet S§roup of workers.

Supplement B Places no bar on the APA negotiating

the same guarantees for pilots hired after 1983. In fact,

Supplement B expressly gives the APA the right to nego-

tiate the same benefits for such pilots. “Nothing con-

tained herein shall be deemed to restrict either pa rty from

negotiating a change in the differentials between the

respective pay or the retirement benefit programs of the

Pilots .. . hired on or after November 1, 1983, provided,

however, that neither Party will attempt to totally elimi-

nate the existing differentials.” In other words, as the

Magistrate Judge found, the APA can bargain for a salary

guarantee on behalf of the Post-1983 pilots at the 1983

level as long as a one penny difference remains between

the pre-1983 and post-1983 pilots. The same conclusion

applies to pension benefits.

Such a contract Provision is hardly the type of “fun-

damental blow” to the bargaining process that the

Supreme Court had in mind in Trans World Airlines, nor

does it match the feudalistic slave imagery that Supple-

ment B conjures up in the mind of the plaintiffs’ attorney.

(See Plaintiffs Objections at 6, 14, 15, 19, and 21). Supple-

ment B does not, as Plaintiffs contend, result in a thirty

year waiver of guaranteed pay levels or pension benefits

for post-1983 pilots. The agreement specifically provides

30a

for negotiations on such issues. Indeed, these negotia-

tions have been taking place over the last eight years and

the differentials have been narrowed if not effectively

erased. These issues are in no way waived by Supplement

Plaintiffs’ other argument is that Supplement B gives

pre-1983 pilots veto power and therefore requires tripar-

tite bargaining as to pay and pension benefits. Supple-

ment B does no such thing. Current contracts, like all past

contracts, are approved by a majority of the APA mem-

bers. If any group has veto power over a contract with

American it is the post-1983 pilots who currently com-

prise 59% of the Union members. This majority allows the

post-1983 pilots to bargain and vote for any pay or bene-

fit level or guarantee up to a one penny differential with

the pre-1983 pilots’ benefits level. The pre-1983 pilots

have no veto power whatsoever.

It is important to view Supplement B in the context of

the history of the original negotiations in 1983. The

pre-1983 pilots were faced with a difficult choice when

they agreed to Supplement B. To stay competitive, Ameri-

can needed significant wage concessions from the APA.

The choice was between deep cuts in pay and benefits, or

a salary freeze, with job guarantees and a slight reduction

in benefits. Of course, along with the second option went

a reduction in pay and benefits for future pilots. In choos-

ing the two-tier option, the pre-1983 pilots obviously

acted out of self-interest. But the pre-1983 pilots had

something that the post-1983 pilots never would have: an

expectation in a certain level of income and benefits

earned during their employment with American. See Sea-

board World Airlines, 443 F.2d at 439 (union performed

3la

rather than violated duty of fair representation when it

negotiated job security for airplane navigators with 13

years experience or more; new hires had no expectation

in a permanent job); see e.g. Conrad v. Delta Air Lines, Inc.,

494 F.2d 914, 916 (7th Cir. 1974) (union agreement permit-

ting employer to discharge probationary pilot without a

hearing is not hostile discrimination against a group of

employees outside the proper scope of a collective bar-

gaining agreement). In addition, the pre-1983 pilots were

part of the work force that had built the airline into a

major force in the airline industry and could legitimately

expect some reward for their efforts. Those pilots hired

after Supplement B went into effect joined American with

their eyes opened regarding pay scale and pension guar-

antees. Thus, the APA made a difficult choice in choosing

the two-tier option, but in doing so left the door open for

all but doing away with that option as it related to

post-1983 pilots at a later date.

Plaintiffs cite a number of early National Labor Rela-

tions Board cases to support their argument. National

Licorice Co. v. NLRB, 309 U.S. 350, 360 (1940); NLRB v. Reed

& Prince Mfg., Co., 118 F.2d 874, 883 (1st Cir. 1941);

Vanderbilt Products, Inc., 297 F.2d 833 (2nd Cir. 1961) (per

curiam), enf’g 129 N.L.R.B. 1323. According to plaintiffs,

National Licorice and Reed & Prince prohibit “any long-

term contract covering an issue like the union shop, since

that was an issue important to the union as an institu-

tion.” (Plaintiffs’ Objections at 12). These cases are distin-

guishable. First, this case does not involve a permanent

waiver of a fundamental topic of collective bargaining.

Supplement B is “long-term” only to the extent that the

APA, with its post-1983 pilot majority, is unwilling to

32a

bargain for 1983-level salary and pension guarantees for

post-1983 pilots.

Second, both National Licorice and Reed & Prince

involve employers who refused to bargain with the col-

lective bargaining representative of their respective

employees. See also Vanderbilt, 297 F.2d at 834 (insistence

on completely open shop with no union membership in

union contract was a “stalling tactic by a party bent upon

maintaining the pretense of bargaining”). In National Lic-

orice, the employer circumvented the union and coerced

its employees into signing a contract that relinquished the

individuals’ right to contract with the employer through

a union. This provision placed “illegal restraints on the

employees’ rights to organize and bargain collectively” in

plain conflict with public policy. 309 U.S. at 360. In Reed &

Prince, the employer insisted on a clause that would

permanently waive the union’s right to seek a closed

shop before signing a contract. By insisting on such a

provision, the NLRB was warranted in concluding that

the employer was not bargaining in good faith. 118 F.2d

at 883. The instant case does not involve an employer

who is unwilling to bargain, in fact the course of union

negotiations over the past eight years reveals that all

topics have been on the bargaining table. For example,

the two-tier salary scale, which is not at issue in this case,

has been modified into a single, seniority based pay scale.

As a matter of personnel policy, one can argue about

the wisdom of two-tier benefit programs. The plaintiffs’

expert, Professor Clyde Summers, does just that in his

affidavit, which the Court has carefully read. The prob-

lem the Court observes with Professor Summers’ opinion

33a

is that it is based on the same flawed reading of Supple-

ment B on which the plaintiffs rely. As the Court has

already explained, Supplement B does not waive negotia-

tions on any issue, nor does it give the pre-1983 pilots

veto power.

Amazingly, plaintiffs assert in their brief that

“Islignificantly, no one claims in this case that Supplement B

serves any legitimate employer need or purpose!” (Plaintiff’s

Objection at 5) (emphasis in Original). This statement may

be the result of historical and economic amnesia. In 1983,

American’s projected growth was stagnant. American

had hired few pilots in the past few years, and it owned

an aging fleet of airplanes. In the aftermath of deregula-

tion and Supplement B, American has been catapulted

into one of only three large surviving airlines. American

has bought numerous new airplanes and hired over 5,000

Pilots — post-1983 pilots - to fly them. Indeed, it is not far-

fetched to state that without these concessions there

would be no post-1983 pilots, let alone an American

Airlines. The 1983 concessions by the APA are in large

part responsible for these developments, and they are not

illegal under any reading of the RLA. Perhaps the only

recourse left to plaintiffs is with Congress and an amend-

ment of the RLA.

B. Antitrust

Plaintiffs object to the Magistrate Judge’s conclusion

that both the Statutory and nonstatutory labor exemp-

tions to the antitrust laws require dismissal of this claim.

According to the plaintiffs, they have “alleged that Sup-

plement B is an anti-trust violation affecting the labor

34a

market: it is a 30-year, indenture-type agreement imposed

on third parties (the B-scale pilots) who have no right to

‘re-bargain’ the deal for thirty years!” (plaintiff’s Objection

at 22) (emphasis in original). Plaintiffs concede that if

Supplement B is legal under the RLA, then there can be

no antitrust violation. (Plaintiffs’ Objection at 23). The

Court agrees with the Magistrate Judge that the agree-

ment is legal and therefore cannot form the basis for an

antitrust violation.

Vv. CONCLUSION

With the clarifications made above, the Court adopts

the Report and Recommendation of Magistrate Judge

Bucklo. Accordingly, the Court denies the plaintiffs’

motion for summary judgment and motion to strike. The

Court grants the defendant’s motion to dismiss and

motion for summary judgment.

ENTER:

/s/ Ilana D. Rovner

ILANA DIAMOND ROVNER

UNITED STATES DISTRICT

COURT

DATED: December 26, 1991

35a

United States District Court

NORTHERN DISTRICT OF ILLINOIS

Eastern Division

Renneisen JUDGMENT IN A

‘ CIVIL CASE

CASE NUMBER: 90 C

American Airlines

5930

Jury Verdict. This action came before the Court for a

trial by jury. The issues have been tried and the jury

has rendered its verdict.

Decision by Court. Fhis-eetion-eametotriatorhearing ; ; i

before-the-C The; ; ; ore ;

-o-diaedaionhen-t ical

IT IS ORDERED AND ADJUDGED with the clarifica-

tions made in its Memorandum, the Court adopts the

Report and Recommendation of Magistrate Judge Bucklo.

Accordingly, the Court denies the plaintiffs’ motion for

summary judgment and motion to strike. The Court

grants the defendant’s motion to dismiss and motion for

summary judgment.

December 26, 1991 H. STUART CUNNINGHAM

Date Clerk

/s/ Terry Charles

Terry Charles

(By) Deputy Clerk

36a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

PAUL F. RENNEISEN, THOMAS )

FRANK LETO, LAWRENCE M. _ )

KAMPA JR., ARPAD E. )

HORVATH, KARL BORK, CARL )

W. BATTIS, and JOHN H.N. )

WHATLEY, individually and on ) Case No. 90 C

behalf of all similarly situated ) 5930

persons, )

)

Plaintiffs,

AMERICAN AIRLINES, INC., a

corporation,

Defendant.

REPORT AND RECOMMENDATION

Paul F. Renneisen, Thomas Frank Leto, Lawrence M.

Kampa Jr., Arpad E. Horvath, Karl Bork, Carl W. Battis

and John H.N. Whatley,! pilots employed by American

Airlines, Inc. (“American”) brought suit against Ameri-

can alleging that a two-tiered wage and benefit scale put

in place in 1983 (“Supplement B”) which divided the

compensation levels between pilots already employed by

American (A-scale pilots) from those hired after Supple-

ment B became effective (B-scale pilots) violates certain

1 The complaint names these individuals as class represen-

tatives of all the pilots hired after the promulgation of Supple-

ment B. However, a ruling on class certification has been stayed

pending the outcome of these motions.

37a

provisions of the Railway Labor Act (“RLA”), 45 U.S.C.

§ 151, et seq., §§ 1 and 2 of the Sherman Act, 15 U.S.C. § 1,

et seq. and Section 502 of the Employee Retirement

Income Security Act (“ERISA”), 29 U.S.C. § 1140. Ameri-

can answered the complaint and asserted a variety of

affirmative defenses which plaintiffs moved to strike.

Subsequently, both parties moved for summary judg-

ment. American also moved to dismiss the complaint.

Those motions have been referred to me. I recommend

that plaintiffs’ motions to strike and for summary judg-

ment be denied and American’s motion for summary

judgment and motion to dismiss be granted.

FACTS?

Since 1963, American pilots have been represented by

the Allied Pilots Association (“Association”) which has

2 The facts set forth here are taken from American’s Local

Rule 12M Statement filed in support of its summary judgment

motion because plaintiffs failed to file a 12N Statement in

response, thereby admitting all of the statements in American's

12M Statement. U.S.Dist.Ct. Gen.R. 12M and 12N; Saribekian v.

Concrete Drilling & Sawing Co., No. 89 C 7902, 1990 U.S. Dist.

LEXIS 11997 (N.D. Ill. 1990). In addition, plaintiffs’ Local Rule

12M Statement failed to comport with the requirements of that

rule. On April 19, 1991, plaintiffs attempted to remedy their

deficiency in a supplemental memorandum and affidavit. At the

time I denied permission to file the supplemental materials on

the ground that this opinion was substantially completed. Other

matters intervened, however, and this opinion was not finished.

Accordingly, I have considered the memorandum and affidavit.

Nevertheless, the outcome is the same. The facts relied upon

herein have not been contradicted. Most of the additional facts

set forth in the April 19 supplement concern matters that are

barred by the statute of limitations, as hereafter discussed.

38a

negotiated successive bargaining agreements with Ameri-

can since that time. In 1983, American and the Associa-

tion negotiated an agreement which included Supplement

B. This agreement was made against the back drop of the

1978 deregulation of the airline industry which created an

influx of low-cost air carriers who competed with Ameri-

can in the marketplace, ultimately reducing American’s

operating revenues. In addition, fuel prices increased cre-

ating more problems for American because its aircraft

were older models and not fuel efficient.

By the time of the 1983 agreement, American pro-

jected a one percent annual growth rate through 1988,

resulting in little anticipated need for new pilots. Ameri-

can decided it could only guarantee future growth by

decreasing its labor costs, permitting it to upgrade its

fleet and compete with its low-cost competitors. During

negotiations with American which gave rise to Supple-

ment B, the Association preferred a two-tier wage scale

over wage concessions because the two-tier system recog-

nized the present pilots’ efforts in building American and

it allowed American to offer future pilots competitive

wages. However, Supplement B established differentials

in wages, pension and vacation benefits between the

B-scale and the A-scale pilots.

Supplement B provides that it may only be elimi-

nated by agreement between the Association, American

and a majority of the A-scale pilots, but the Association

may bargain for increased pay and benefits for the

B-scale pilots so long as the differentials are not totally

eliminated. Indeed, the differentials have been reduced as

39a

a result of negotiations in 1985, 1986 and 1987. In addi-

tion, after the tenth year of service (ninth year for cap-

tains), the A-scale and B-scale pay rates merge.

American’s Motion To Dismiss

Or For Summary Judgment

Count I

Plaintiffs allege that Supplement B is an illegal Waiver of

their right to bargain in violation of Section 2, First,

Fourth and Ninth of RLA, 45 U.S.C: § 152. American

contends that plaintiffs’ Section 2, Fourth claims fail to

state a claim for relief.

The RLA, passed in 1926 and extended to encompass

airlines ten years later, was a legislative attempt “to stabi-

lize industrial relations patterns and extend the periods

during which parties themselves could work out a peace-

ful solution to their disputes,” to avoid disruptions in

railway service (which served as the basic transportation

throughout the country at that time) and to avoid the dire

effects such disruptions had on the national economy. 9 T.

Kheel, Labor Law, § 50.02 (1990). To achieve its goal, the

RLA provides a detailed framework of dispute resolution,

most of which occurs in various non-judicial forums. E.g.,

3 American argues that plaintiffs lack standing to sue for

alleged violations of Section 2, First and Ninth, 45 U.S.C. § 152.

In view of the fact that American agrees that plaintiffs have

standing to assert a violation of Section 2, Fourth and the fact

that I conclude plaintiffs state a claim for relief under this

section, and plaintiffs do not allege that Section 2, First and

Ninth provide any rights that go beyond the claim recognized in

Section 2, Fourth, at least in the present context, I have not

considered the standing issue.

40a

45 U.S.C. §§ 153, 154, 155.4 Federal courts have neverthe-

less held that they have jurisdiction over a statutory

violation of the RLA. Air Lines Pilots Assoc. Int‘l. v. UAL

Corp., Int'l Assoc. of Machinists & Aerospace Workers, 874

F.2d 439, 444 (7th Cir. 1989); Railway Labor Executives’

Assoc. v. Boston & Maine Corp., 808 F.2d 150, 158 (1st Cir.

1986), cert. denied, 484 U.S. 830 (1987).

Section 2, Fourth, 45 U.S.C. § 152, Fourth, generally

gives employees the right to organize and bargain collec-

tively through their authorized representative without

any interference or coercion by the employer. The

Supreme Court has stated that the general purpose of

Section 2, Fourth (and all of the 1934 amendments) is to

address “precertification rights and freedoms of unor-

ganized employees.” Trans World Airlines, Inc. v. Indepen-

dent Federation of Flight Attendants, 489 U.S. 426, 109 S.Ct.

1225, 1234 (1989). Accordingly, judicial intervention is

limited in post-certification controversies under Section 2,

Fourth to cases in which

‘the employer’s conduct “has been motivated by

anti-union animus... or an attempt to interfere

with its employees’ choice of their collective

bargaining representative” . . . or constitutes

“discrimination or coercion” against the repre-

sentative . . . or involves “acts of intimidation

[which] cannot be remedied by administrative

means,” . ‘

4 The judiciary has formulated names for the different

types of disputes under the RLA (major and minor) which have

different dispute resolution processes and for which a federal

court may or may not have jurisdiction. See, e.g., Airline Pilots

Assoc. Int'l. v. UAL Corp., 874 F.2d 439, 443-44 (7th Cir. 1989).

4la

National Railroad Passenger Corp. v. Int'l. Assoc. of Machi-

nists & Aerospace Workers, 915 F.2d 43, 51 (1st Cir. 1990)

(citations omitted), quoting from Independent Union of

Flight Attendants v. Pan American World Airways, 789 F.2d

139, 142 (2d Cir. 1986), and cases quoted within. Judicial

intervention is also permitted where an employer wages

“a fundamental attack on the bargaining process” or

attempts to directly destroy the union. Id.

Here, plaintiffs contend that Supplement B destroys

the collective bargaining process because the two-tier

wage scale may never be overcome. As a result, say

plaintiffs, the B-scale pilots will always feel inferior to the

A-scale pilots, forcing the Association to represeni two

distinct groups with two distinct agendas, crippling the

Association’s ability to bargain effectively and violating

Section 2, Fourth. These allegations are sufficient to state

a claim for violation of Section 2, Fourth.

American alleges that plaintiffs’ claim is barred by

the six-month statute of limitations applicable to actions

for violation of Section 152 of the RLA. Brotherhood of

Locomotive Engineers v. Atchison, Topeka & Santa Fe Railway

Co., 768 F.2d 914 (7th Cir. 1985). Since Supplement B was

signed in 1983, the six-month period has long passed.

However, plaintiffs argue that Supplement B is invalid on

its face. In such cases, courts have held that the six-month

statute of limitations does not apply. E.g., Local Lodge No.

1424 v. N.L.R.B., 362 U.S. 411, 423 (1960); N.L.R.B. v. Local

1131, 777 F.2d 1131, 1140 (6th Cir. 1985).

Plaintiffs’ argument of facial invalidity is that under

Supplement B, one group of pilots, the A-scale pilots, are

forever protected from the possibility of having their jobs,

42a

pay and benefits eliminated or reduced below what was

in effect on November 1, 1983, in the course of collective

bargaining. Plaintiffs argue that even if there no longer

exists any wage differential, the guarantee which B-scale

pilots do not have - is illegal5 because the “inevitable

consequence . . . is internal union disharmony.” Plaintiffs’

Memorandum In Support Of Their Statement Of Issues

Not In Dispute, at 7. There is, however, nothing in Sup-

plement B that makes such disharmony “inevitable.” As

plaintiffs concede, they could bargain to have all pilots

have the same guarantees. They do not argue that a

collective bargaining agreement that achieved a 30-year

guarantee of jobs and benefits for all pilots hired by

American would be illegal. The only requirement in Sup-

plement B affecting future negotiations about B-scale

pilot benefits is that differentials not be totally elimi-

nated. (Supplement B, Part C). Thus, Supplement B, a one

penny differential must remain between some pay or

benefit given to the A-scale pilots and B-scale pilots for

the life of the agreement, which plaintiffs claim could be

as long as 30 years.®

Plaintiffs have cited no case, and I have found none,

that holds that a thirty-year waiver on the right to bar-

gain over a one cent pay differential, or any comparable

> There is some dispute as to whether pay and benefit

differentials continue to exist, but plaintiffs do not (and could

not) argue that the fact that a collective bargaining agreement

creates pay differences among different groups makes it illegal.

6 It expires with the retirement or death of the last A-scale

pilot or by the agreement of a majority of active A-scale pilots,

the Association and American.

43a

minutiae,” amounts to a “fundamental attack on the bar-

gaining process” or a direct attempt to destroy the union.

National Railroad Passenger Corp., supra, 915 F.2d at 51.

Furthermore, even if the possibility of a one cent differen-

tial is cognizable by the courts, the fact that one group

has permanent protection for its position does not make

the agreement illegal. E.g., Seaboard World Airlines, Inc. v.

Transport Worker Union of America, 443 F.2d 437 (2d Cir.

1971). Indeed, in Seaboard, an agreement proving perma-

nent security for some workers was upheld although it

prohibited bargaining to achieve the same security for

other workers. Here, there is no prohibition on the

B-scale plots (who now constitute a majority of the pilots)

bargaining for any benefit they want.

Plaintiffs argue that even if all that is prohibited by

Supplement B is elimination of a one cent pay differen-

tial, in fact the differential has in the past been, and

perhaps in the future may be, much greater. But here

plaintiffs run into the statute of limitations problem they

attempted to avoid by arguing facial invalidity. The fact

that they may be affected by a contract provision agreed

to at some time in the past does not avoid the statute of

limitations. E.g., IAM v. Aloha Airlines, 790 F.2d 727, 737

(9th Cir. 1986).

” Oddly, plaintiffs agree that courts should not “review the

reasonableness of the substantive terms (the ‘minutiae’) of the

collective bargaining agreement.” Plaintiffs’ Reply Memoran-

dum In Support Of Motion To Strike, at 7. See, e.g., Railway Labor

Exec. Ass’n v. Boston & Maine Corp., 664 F.Supp. 605, 616 (D. Me.

1987) and cases cited therein.

44a

Plaintiffs also argue that they have alleged a continu-

ing violation in that American continues to refuse to

bargain over the issues covered by Supplement B. In fact,

however, their complaint alleges no refusal to bargain

later than the 1987 contract negotiations, well beyond the

six-month statue [sic] of limitations. From the various

pleadings filed on these motions, however, it appears that

negotiations over a new contract have been going on for

some time, and that a new contract was signed in Febru-

ary, 1991, with some issues remaining for arbitration. An

examination of plaintiffs’ allegations with regard to these

negotiations, however, shows that plaintiffs do not claim

that American has refused to bargain over wages, bene-

fits or any other working conditions. Their claim is sim-

ply that American refuses to negotiate the elimination of

Supplement B (with its minimal one penny differential

requirement) itself. However, since I have concluded that

the only requirement left standing in Supplement B at

this date, the one penny differential, is insignificant and

not illegal on its face, plaintiffs cannot use the refusal to

bargain over this trifle as a pretext for reopening the

statute of limitations as to the effect of Supplement B. See,

e.g., Local Lodge No. 1424 v. N.L.R.B., supra, 362 U.S. at

416-17; N.L.R.B. v. Local 1131, supra, 777 F.2d at 1139-40

(6th Cir. 1985).8

Count II

Plaintiffs seek damages under various provisions of

the anti-trust laws contending that Supplement B illegally

8 Plaintiffs refer to disparities between American pilots and

pilots working for other airlines. Any such disparities cannot

form a basis for this action.

———————

45a

restrains competition in the labor market by foreclosing

the B-scale pilots’ rights to bargain away the differentials

causing them to be paid below market wages.

Both the statutory and nonstatutory labor exemp-

tions to the antitrust laws require dismissal of this claim.

As plaintiffs themselves acknowledge in their complaint,

{ 37, a collective bargaining agreement fixing wages and

benefit levels is immune from attack under the antitrust

laws. E.g., United Mines Workers v. Pennington, 381 U.S.

657 (1965); Mid-America Regional Bargaining Assn. v. Will

County Carpenters District Council, 675 F.2d 881 (7th Cir.

1982). Plaintiffs attempt to avoid this result by claiming

that Supplement B concerns an “illegal subject, i.e., the

waiver of the statutory right to bargain about wages and

pension benefits at reasonable future intervals.” Com-

plaint, J 38. I have found, however, that Supplement B is

not illegal and does not waive any such right to bargain

(other than over a single penny). Accordingly, both statu-

tory and nonstatutory labor exemptions are applicable.

E.g., Mid-America Regional Bargaining Assn. v. Will County

Carpenters District Council, supra.9

* Plaintiffs also argue that since they were not there when

Supplement B was negotiated, the statutory exemption is inap-

plicable. This argument has been rejected by the courts. E.¢.

Zimmerman v. National Football League, 632 F.Supp. 398, 405 (D.

D.C.) (“not only present but potential future players for a pro-

fessional sports league are parties to the bargaining relation.

ship”).

46a

Count III

Plaintiffs claim that Supplement B violates Section

501 of ERISA (29 U.S.C. § 1140) because it limits their

rights to pension benefits and discriminates against them

because it precludes their right to bargain for benefits

equal to or in excess of those of the A-scale pilots.

Section 510 provides in part:

It shall be unlawful for any person to discharge,

fine, suspend, expel, discipline or discriminate

against a participant or beneficiary for exercis-

ing any right to which he is entitled under the

provisions of an employee benefit plan .

29 U.S.C. § 1140. Thus, Section 510 protects the employ-

ment relationship giving rise to the individual’s pension

rights. Deeming v. American Standard, Inc., 905 F.2d

1124, 1127 (7th Cir. 1990).

This means that a fundamental prerequisite to a

§ 510 action is an allegation that the employer-

employee relationship . . . was changed in some

discriminatory or wrongful way.

Id. Courts have generally found that an employer

engages in discriminatory conduct under Section 510

when that conduct amounts to a constructive discharge.

Paul v. Valley Truck Parts, Inc., No. 88 C 7131, 1990 US.

Dist. LEXIS 4554 (N.D. Ill. 1990); Young v. Standard Oil

(Indiana), 660 F.Supp. 587, 597 (S.D. Ind. 1987), aff'd, 849

F.2d 1039 (7th Cir. 1988); cert. denied, 488 U.S. 981 (1988).

Here, plaintiffs offer nothing which would show that

they have been constructively discharged. Plaintiffs claim

they are being discriminated against because Supplement

B limits their ability to negotiate any increase in their

47a

pension benefits. The evidence demonstrates this is not

correct but at any rate, the right to negotiate the amount

of the benefit is not what Section 510 seeks to protect.

Deeming v. American Standard, Inc., supra, 905 F.2d at 1127

(Section 510 protects employment relationship against

employer’s interference with or discrimination against

attainment of a pension right). Plaintiffs do not allege nor

is there any evidence to suggest that American has

denied them or any B-scale pilot the right to receive

pension benefits.

Plaintiffs also contend that the differentials between

the two scales are discriminatory and therefore violate

Section 510. However, Section 510 provides no remedy for

a discrimination injury absent some employment injury.

Gladich v. Navistar Int’l Transp. Corp., 703 F.Supp. 1331,

1333 (N.D. Ill. 1989).

Accordingly, plaintiffs fail to state any claim under Sec-

tion 510 of ERISA.

Conclusion

I recommend that American’s motion for summary judg-

ment and motion to dismiss be granted and that plain-

tiffs’ motion for summary judgment be denied.

/s/ Elaine E. Bucklo

ELAINE E. BUCKLO

United States Magistrate

Judge

Dated: June 3, 1991

48a

Written objections to any finding of fact, conclusion of

law, or the recommendation for disposition of this matter

must be filed with the Honorable Judge Ilana Diamond

Rovner within ten (10) days after service of this Report

and Recommendation. See Fed.R.Civ.P. 72(b). Failure to

object will constitute a waiver of objections on appeal.

Copies have been mailed to:

AMY L. BECKETT

LEON M. DESPRES

THOMAS HOWARD

GEOGHEGAN

Despres, Schwartz &

Geoghegan

77 West Washington Street

Suite 711

Chicago, IL 60602-2985

Attorneys for Plaintiffs

CHARLES R. BOTH

Yablonski, Both & Edelman

1140 Connecticut Avenue,

N.W.

Suite 800

Washington, D.C. 20036

Attorney for Intervenor-

Defendants

JOEL H. KAPLAN

DAVID J. ROWLAND

Seyfarth, Shaw,

Fairweather

& Geraldson

55 East Monroe Street

Suite 4200

Chicago, IL 60603

GREGORY S. LEWIS

HARRY A. RISSETTO

Morgan, Lewis & Bockius

1800 M Street, N.W.

Suite 700

Washington, D.C. 20036

RICHARD A.

MALAHOWSKI

American Airlines, Inc.

Fort Worth Airport

P.O. Box 619616

Dallas, TX 75261-9616

Attorneys for Defendant

catia icaaiaiiaamaniaiiiial

49a

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

April 22, 1993.

Before

Hon. WALTER J. CUMMINGS, Circuit Judge

Hon. DANIEL A. MANION, Circuit Judge

Hon. HARLINGTON WOOD, JR., Senior Circuit Judge

PAUL RENNEISEN, et al.,

Plaintiffs-A ppellants,

No. 92 1213 vs.

AMERICAN AIRLINES, INC.

Defendant-Appellee.

Appeal from the

United States District

Court for the Northern

District of Illinois,

Eastern Division.

No. 90 C 5930

)

) Ilana D. Rovner, Judge.

)

ORDER

The plaintiffs’ petition for rehearing and motion to

correct opinion are hereby denied.

50a

CERTIFIED COPY

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

JUDGMENT - WITH ORAL ARGUMENT

Date: March 24, 1993

BEFORE: Honorable WALTER J. CUMMINGS, Circuit

Judge

Honorable DANIEL A. MANION, Circuit

Judge

Honorable HARLINGTON WOOD, Jr.,

Senior Circuit Judge

No. 92-1213

PAUL F. RENNEISEN, THOMAS F. LETO, LAWRENCE

M. KAMPA, JR., et al.,

Plaintiffs - Appellants

AMERICAN AIRLINES, INCORPORATED, a corporation,

Defendant -— Appellee

(Filed Apr. 30, 1993)

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division

No. 90 C 5930, Ilana D. Rovner, Judge

This cause was heard on the record from the above

mentioned District Court, and was argued by counsel.

On consideration whereof, IT IS ORDERED AND

ADJUDGED by this court that the judgment of the Dis-

trict Court is AFFIRMED, with costs, subject to the minor

5la

modifications, in accordance with the decision of this

court entered this date.

(1061-030690)

A True Copy

Teste:

Illegible

Clerk of the United States

Court of Appeals for the

Seventh Circuit

52a

ADDENDUM 1

SUPPLEMENT B

AGREEMENT

between

AMERICAN AIRLINES, INC.

and

THE AIR LINE PILOTS

in the service of

AMERIAN AIRLINES, INC.

as represented by

ALLIED PILOTS ASSOCIATION

THIS AGREEMENT is made and entered into in

accordance with the provisions of the Railway Labor Act,

as amended, by and between AMERICAN AIRLINES,

INC., hereinafter known as the “Company” and the AIR

LINE PILOTS in the service of AMERICAN AIRLINES,

INC., as represented by the ALLIED PILOTS ASSOCIA-

TION, hereinafter known as the “Association”.

WHEREAS, the Company and the Association recog-

nize the problems that have arisen as a result of deregula-

tion of the airline industry; and

WHEREAS, the parties recognize that innovative

approaches must be used in order to assure employees

and management that the Company shall remain compet-

itive in a changed economic environment; and

WHEREAS, the Company and the Association

acknowledge the contributions that each has made over

the past years to the status of the Company as a leading

air carrier; and

WHEREAS, the current pilot group through the

Association has made significant concessions with respect

53a

to its established contract rights which are designed to

permit the Company to compete effectively over the

indefinite future;

NOW, THEREFORE, the parties hereby agree to the

following terms, provided the provisions of the Basic

Agreement shall apply except as modified herein, and in

the event of a conflict, the provisions herein shall apply:

A. JOB SECURITY

1. General

The Company will guarantee employment and grant

system job security forever as a pilot to all pilots covered

by the Basic Agreement who were on the Company’s

active flight payroll on November 1, 1983, or on an Asso-

ciation Leave of Absence on that date, or on an approved

leave of absence on that date, provided that such pilot on

such leave of absence has a pilot seniority date more

senior that the least senior pilot with job security upon

his return to the active flight payroll.

2. Category Protection

a. In each contractual month the Company will

guarantee at each base, a number of captain and copilot

positions [regular, reserve, relief, supernumerary, desig-

nations and temporary assignments 24.D.1. (full month)].

This number will be equal to the number of captain and

copilot positions for the contractual months of November

and December 1983, or as established in the 1983 Flex

Protection Floor, whichever is greater.

54a

b. 1. Effective January 1, 1984, captain pay

positions and ___ copilot pay positions will be guar-

anteed throughout the system to the extent of the

number of pilots covered by paragraph 6. below.

2. In each calendar year that such category pay

protection is in effect, a recalculation will be made at the

end of the contractual months of June and December.

Such recalculation shall be made by dividing the number

of captain and copilot positions at each base [regular,

reserve, relief, supernumerary, designations and tempor-

ary assignments 24.D.1. (full month)] by the total number

of such positions [regular, relief, supernumary [sic], des-

ignations and temporary assignments 24.D.1. (full

month)] in the system to establish a ratio by base. Such

ratio shall be applied to the January 1, 1984 guaranteed

number in 2.a. above to determine the number of com-

pany obligations at each base for the six (6) subsequent

contractual months.

c. In the event of a base closing, the obligated posi-

tions of the closed base will be distributed among the

remaining bases.

d. In the event of a base opening, the obligated

positions for such newly opened base, as well as the

adjustment of the obligated positions of the remaining

bases will be determined in accordance with 2.b. above.

e. When the number of positions awarded at a base

in a contractual month is less than the obligated number

in category, then the pilot or pilots who selected all trip

selections, including reserve, in the next higher category,

but were not awarded a trip selection(s) in such category

55a

‘will receive the reserve guarantee for the lowest equip-

ment in the category involved. The number of pilots

eligible for such compensation will be the difference

between the positions awarded and the obligated

number. The pilot must be previously or currently quali-

fied in the category to be eligible for pay protection.

f. Such category protection will be afforded only to

pilots active on the payroll on November 1, 1983.

3. Job Security For Pilots Hired Prior To November

1, 1983 And On Furlough Status On That Date

Pilots on flight furlough status from the Company on

November 1, 1983 who retain recall rights and who are

subsequently recalled and reemployed as a pilot for the

Company shall receive the same job security and guaran-

tee of employment as afforded pilots in A.1. above, pro-

vided however, such job security and guarantee of

employment shall be provided only in order of seniority

on a one-for-one basis as pilots under A.1. above and as

flight engineers permanently leave the employ of the

Company. The number of pilots extended job security and

guarantee of employment under this provisions shall not

exceed the number of individuals on flight furlough sta-

tus on November 1, 1983.

4. Exceptions To Job Security

Notwithstanding the above provisions, the Company

may furlough in accordance with Section 25 of the Basic

Agreement any pilot with job security as provided herein

when that furlough is necessitated by any one or more of

the following conditions:

56a

a. An act of God,

b. A strike by any Company employee group,

c. A national emergency,

d. Involuntary revocation of the Company’s operat-

ing certificate or certificates,

e. A reduction in the Company’s operation resulting

from a decrease in available fuel supply caused by either

governmental action or by commercial suppliers being

unable to meet the Company’s demands.

This Agreement does not in any way limit the Com-

pany’s right to discharge or discipline a pilot for just

cause or disqualify a pilot due to medical reasons as

defined in the Basic Agreement effective this date.

B. PAY AND RETIREMENT BENEFIT PROGRAMS

FOR PILOTS HIRED PRIOR TO NOVEMBER 1,

1983

1. The Company agrees that it will take no action, at

any time, by way of notice, negotiations or otherwise, to

diminish the pay or the retirement benefit programs in

effect on the date hereof for pilots hired prior to Novem-

ber 1, 1983, and that such pilots shall enjoy such pay and

pension benefits for so long as they are qualified under

applicable governmental regulations and the provisions

of the Collective Bargaining Agreement to perform flying

duties, on an approved leave of absence, or disability

retirement, and this agreement shall remain in effect for

such period of time.

2. This Agreement as provided herein shall remain

in effect so long as any pilot with job security remains in

57a

the active employ of the Company as a flight crew mem-

ber or retains recall rights. The parties hereto, as well as

the persons bound hereby, irrevocably waive the right to

serve any Section 6 notice, under the Railway Labor Act,

of an intended change which, if adopted, would have the

effect of modifying any of the provisions contained in this

Agreement or otherwise to require bargaining as to such

provisions, provided, however, that this Agreement may

be changed by unanimous agreement between the parties

and a majority of the pilots with job security and guaran-

tee of employment as provided herein.

3. Neither the Company nor the Allied Pilots Asso-

ciation, their successors, assigns or affiliates, shall chal-

lenge, contest, or question the legality, validity, or

enforceability of this Agreement, or any provisions

thereof, in any judicial, administrative, or other proceed-

ing, and each of the parties shall participate in defending

the legality, validity, and enforceability of this Agreement

in any judicial, administrative, or other proceeding

involving any of its provisions.

C. Nothing contained herein shall be deemed to restrict

either party from negotiating a change in the differentials

between the respective pay or the retirement benefit pro-

grams of the pilots in the employ of the Company prior to

November 1, 1983 and those hired on or after November

1, 1983, provided, however, that neither party will

attempt to totally eliminate the existing differentials.

58a

IN WITNESS WHEREOF, the parties hereto have

signed this Agreement this the 4th day of November,

1983.

WITNESS:

/s/ illegible

WITNESS:

/s/ illegible

/s/ iliegible

/s/ illegible

FOR AMERICAN AIR-

LINES, INC.

/s/ C. A. Pasciuto

C. A. Pasciuto

Vice President

Employee Relations

/s/ D. E. Ehmann

Vice President-Flight

FOR THE AIR LINE

PILOTS IN THE SERVICE

OF AMERICAN AIRLINES,

INC. AS REPRESENTED

BY THE ALLIED PILOTS

ASSOCIATION

/s/ R. H. Malone

R. H. Malone

President

59a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

PAUL F. RENNEISEN,

THOMAS FRANK

LETO, et al.,

Plaintiffs, No. 90 C 5930

VS.

AMERICAN AIRLINES, INC.,

a corporation,

Defendant.

— Owe ae we

AFFIDAVIT OF CLYDE W. SUMMERS

CITY OF PHILADELPHIA __)

) SS:

COMMONWEALTH OF )

PENNSYLVANIA )

I, Clyde W. Summers, being duly sworn voluntarily

deposes and states as follows:

1, My name is Clyde W. Summers. I am Professor of

Law at the University of Pennsylvania. I have been in the

position since September, 1975.

I QUALIFICATIONS

2. I have been studying and teaching labor law and

labor relations for more than forty-five years. I received a

Doctor of Laws degree from the University of Illinois in

1942. I later did graduate work in law at Columbia Uni-

versity, specializing in labor law, and particularly in the

rights of union members in the internal processes of

60a

unions. I received degrees of Master of Laws and Doctor

of the Science of Laws from Columbia.

I have taught, among other subjects, a wide range of

courses and seminars on labor law, collective bargaining,

arbitration, internal union government, individual

employment rights and union democracy at the Univer-

sity of Toledo for six years, at the University of Buffalo

for six years, at Yale University for nineteen years, and at

the University of Pennsylvania for fifteen years. During

these years, my primary scholarly and research work has

been in labor law and labor relations. Within that field

my major research and writing has been on the internal

political processes of unions and union government, and

the democratic rights of union members.

3. I have published seven books and more than one

hundred law review articles, monographs, symposia con-

tributions, and other pieces on various aspects of labor

law. At least a third has been related to internal union

problems, and these articles include analysis of both legal

and practical aspects of union government. These include

the following:

“Democracy in a One Party State: Perspectives

from Landrum-Griffin” 42 Md.L.Rev. (1983)

“The Right to Join a Union”, 47 Col.L.Rev. 33

(1947)

“Legal Limits on Union Discipline,” 64 Harv. L.

Rev. 1049 (1951)

“Judicial Regulation of Union Elections, 30 Yale

L. F. 1221 (1961)

“Democracy in Labor Unions”, American Civil

Liberties Union, 1952

6la

Another third of my writings has related to problems

of collective bargaining, grievance processing and arbi-

tration. These include the following:

“Judicial Review of Labor Arbitration”, 2 Buff.

L. Rev. (1952)

Individual Grievances”, (Report of Committee

on Improvement of Administration of Collective

Agreements, Labor Law Section, ABA) 50 Nw. V.

L. Rev. 143 (1955)

“Ratification of Collective Agreements”, in Fron-

tiers of Collective Bargaining (Ed. N. Chamber-

lain)

“Bargaining in the Public’s Business: Principles

and Politics” 18 Univ. of Tol. L. Rev. 265(1987)

“Teamster Joint Grievance Committees: Griev-

ance Disposal without Adjudication,” Ind. Rel.

L. J. 313(1985)

4. In all of my research, I have always tried first to

learn what the grass roots practices were and to under-

stand the practical functioning of unions as political orga-

nizations engaged in collective bargaining. For me, the

question has always been how the law responded to the

realities of union and industrial life. For example, before |

wrote a legal article on “The Right to Join a Union,” |

researched and wrote “Admission Policies of Unions,” 61

Q. J. Econ. 66 (1946); and before I wrote “Legal Limits on

Union Discipline,” I wrote “Disciplinary Powers of

Unions,” 3 Ind. & Lab. Rel. Rev. 483 (1950), and “Disci-

plinary Procedures of Unions,” 4 Ind. & Lab. Rel. Rev. 1

(1950). When I wrote the monograph “Democracy in

Labor Unions,” for the American Civil Liberties Union |

had extensive discussions with union lawyers, union

62a -

leaders and others personally familiar with union prob-

lems.

The research for the article on “Judicial Regulation of

Union Elections” involved interviewing a large number

of union officers, members and lawyers representing

unions. The article on “Democracy in a One Party State”

was based on observance and involvement in union elec-

tions for 35 years.

5. For my teaching of labor relations and collective

bargaining, I have always tried to learn and understand

first hand the practical aspects of contract negotiations,

grievance handling and arbitration, and particularly the

decision-making processes of the union in collective bar-

gaining. Much of this understanding has come through

close personal contract [sic] with union members and

officers and with employers. Under the auspices of the

New York School of Industrial and Labor Relations, |

taught a number of night courses on collective bargaining

policies, grievance settlement, and arbitration principles

and procedures for union officers and employer represen-

tatives. Also, I taught at a number of union educational

conferences and seminars for union officers at Cornell.

All of these were taught as open discussions in which I

learned as much as I| taught.

6. I have been actively engaged in labor arbitration

for forty years, doing both grievance and contract arbitra-

tion in the public and private sector, and am on the panel

of arbitrators for the American Arbitration Association

and the Federal Mediation and Conciliation Service.

Many of these cases, and particularly fact-finding cases,

63a

involve a substantial aspect of mediation in finding a

mutually agreeable solution.

I served for several years as an alternate member on

the Connecticut State Labor Relations Board and the Con-

necticut State Mediation Board. I have served as fact-

finder in hospital disputes under Section 213 of the

LMRA and was on the panel of the Massachusetts Media-

tion Commission involving as dispute between the state

and several thousand of its employees. In Pennsylvania I

have served as mediator-arbitrator in resolving contract

disputes in local police departments.

7. In 1957 and 1958, I served as Chairman of the

New York Governor’s Commission on Improper Union-

Management Practices, and in 1958 was a member of

Senator John Kennedy’s Advisory Committee for drafting

legislation which eventuated in a modified form in the

Landrum-Griffin Act.

8. I have frequently been consulted by individual

union members and officers concerning internal union

disputes and problems. These include locals of the Auto

Workers, Machinists Union, Electrical Workers, Hotel and

Restaurant Employees, Service Employees, and Teamsters

Union. I was consulted by the opposition group in the

Mine Workers Union during its election contest, and after

the opposition won in a government supervised election,

I prepared draft constitutions for the national union, and

several of the districts, and the model local union consti-

tution. Those drafts were based on extensive discussions

with union officers, members and union lawyers.

64a

9. I have served as expert witness for the govern-

ment in proceedings to place various unions in trustee-

ship under the Racketeer Influenced and Corrupt

Organizations Act (RICO). These include:

United States v. Local 560, Int’l. Bhd. of Teams-

ters, 581 F. Supp. 279(D. N. J. 1984)

United States v. Local 30, United Slate, Tile and

Composition Roofers Assn., 686 F. Supp. 1139

(E.D.Pa.1988)

United States v. Int’l. Bhd. Teamsters, 88 Civ.

4486(S.D. N.Y. 1988)

I am now acting as consultant to the government and

potential expert witness in RICO cases involving New York

and New Jersey locals of the Longshoreman’s Union and

Local 54 of the Hotel and Restaurant Employees Union.

I have also served as an expert witness for unions and

for union members in a number of cases involving internal

union disputes and claims that the union has violated its

duty of fair representation. These include the following:”

Steelworkers v. Sadlowski, 457 U.S. 208(1982)

Young v. U.S. Postal Service, 86 Civ. 9492

(S.D.N.Y. 1989)

Baskin v. Hanley, Civil Action No. B-80-429(D.

Conn. 1989)

Wood v. General Teamsters Union, Local 406,

603 F. Supp. 992(D. Mich.1985)

U.S. v. Local 20, Int’l. Bhd. of Teamsters, 671 F.

2d 645(6th Cir. 1980)

Buchholtz v. Swift & Co., 608 F.2d 317(8th Cir.

1979)

EE ee

65a

II DOCUMENTS STUDIED

11. I have studied the various documents in the

above entitled case of Renneisen el al. v. American Airlines,

Inc., including the following, with attached exhibits:

Complaint

Defendant’s Statement of Material Facts As to

Which There Is No Genuine Issue

Defendants Response to Plaintiff’s Statement of

Facts

Declaration of Philip A Scythe

Declaration of Wlliamon [sic] A. Jessimain

Plaintiff’s Motion for Summary Judgment

Plaintiff's Memorandum of Law in Support of

Motion for Summary Judgment

Defendant’s Memorandum of Law in Opposi-

tion of Plaintiff's Motion for Summary Judg-

ment

Defendant’s Motion for Summary Judgment

Memorandum in Support of Defendants Motion

for Summary Judgement [sic]

Plaintiffs Reply Memorandum in Support of

Motion for Summary Judgment

III OPINION

12. After considering the above documents, it is my

opinion, based on my knowledge and experience con-

cerning the internal political processes of unions and the

66a

negotiation processes of collective bargaining that Sup-

plement B, negotiated in 1983, is destructive of the demo-

cratic processes of the union, denies the union the ability

to act as the statutory representative of all its members,

seriously obstructs the process of collective bargaining

and increases the likelihood that the parties will fail to

reach agreement.

13. Supplement B is an unprecedented two-tier

arrangement, which, to my knowledge, has no parallel in

American industry. Its effect is to divide the union mem-

bership into two categories for as long as any A-scale

pilots are employed, which may be for 25 or 30 years.

This division, with its two tiers, can not be eliminated by

the Union, by the Company or even by the two agreeing

to eliminate it. It can be eliminated only with the consent

of the surviving A-scale pilots. So long as one A-scale

pilot is employed, he can veto any proposal of the Union

and any agreement by the parties which is contrary to

paragraph B.

14. This permanent division of the Union, giving

one group with a shrinking minority, the power to veto

union decisions made by the majority through a demo-

cratic process is an obvious denial of union democracy

and is clearly contrary to the premises of Landrum-

Griffin Act. In practical terms it splits the union into two

antagonistic groups with adversarial interests. So long as

one group holds a veto power, the need of that group to

compromise is not felt and the Union can not develop the

unity needed to act effectively and responsibly. The

union’s democratic decision-making and its ability to

make an agreement is held hostage for 25 years to a

shrinking minority in the union.

67a

Even though the disparities may be narrowed, the

identification of two classes of members with one class

having a stated power to veto the decisions of the major-

ity has a divisive effect in the Union. There remains the

symbol of distinction and preference which creates a

sense of division. The Union is not a union but a frag-

mented disunity.

15. This permanent division of the union, with the

A-scale pilots holding a veto power, deprives the union of

its authority to make a binding agreement as required by

the practical needs of collective bargaining. The bargain-

ing must become three-cornered with the A-scale pilots

as a necessary party. This can obviously complicate the

bargaining process, depriving the union of the ability to

conclude an agreement Satisfactory to the majority of its

members.

16. The common experience of unions which have

given a group within the union a veto power over collec-

tive agreements is that it destroys cohesion and unity of

the union, making more difficult the arrival at collective

agreements which are acceptable to most or a majority of

the members. This has been true of the Auto Workers, the

Printers Union, the Musicians Union and various con-

struction unions. In my study of ratification of collective

agreements, I found that when a union required a double

majority, that is, separate majorities in each of two

groups, the likelihood that a’ contract negotiated by the

officers would be rejected was greatly increased. Minority

groups would use their ability to veto the contract in

order to extract special benefits for themselves at the

expense of the majority, and even force the majority to a

strike to obtain those special benefits.

68a

17. The process of negotiating an agreement

involves not only bargaining between union and manage-

ment representatives. It involves the union representative

bargaining with different interest groups within the

union, seeking cut the combination of achievable benefits

which will win the widest support among the members.

The very purpose of having a single bargaining represen-

tative is to make this internal compromise process possi-

ble. When any group has a veto power, this internal

negotiation and bargaining is frustrated because those

with the veto do not need to compromise. As a result, the

union representative may be required to seek a larger

package of benefits from management than would other-

wise be acceptable. This increases the likelihood of break-

down and economic conflict.

18. When one group has a veto power over certain

matters which would otherwise be subject to bargaining,

these subjects are in effect removed from the bargaining

table. The bargaining process is ultimately a complex

process of compromise and trading, in which each party

seeks a favorable, or at least acceptable, combination.

When some items are removed from the table, it reduces

the ability of the parties to put together an acceptable

combination. If pension or welfare benefits are not on the

table, combinations and compromises are to that degree

limited and the negotiation process may fail to find an

acceptable solution.

19. The experience of most employers parallels the

experience of unions. Two-tier arrangements may serve

an immediate need, but their continuation is productive

of tensions in the workforce, a resentment of unequal

69a

treatment, and a lack of cohesion and cooperation neces-

Sary for the most efficient and safe operation. Most

employers sooner or later come to realize that maintain-

ing artificial classes among employees and not treating

employees doing the same work equally undermines

morale and reduces productivity. For this reason, most

two-tier arrangements are eliminated after two to five

years. No agreements, to my knowledge, write such an

arrangement in stone, as here, so it can not be eliminated

by agreement for 25 years.

20. I find nothing in the documents which credibly

shows that this two-tier arrangement serves any useful

purpose for the Company. The only reason given by the

Company for insisting on its retention is that the union

wants it eliminated. Some of the A-scale pilots may, of

course want it continued because it gives them a veto

power over the majority, the very reason that it is

destructive of the collective bargaining process.

IV CONCLUSION

For the reasons stated above, it is my firm opinion

that Supplement B should be eliminated, for it has out-

lived its usefulness. Its continuation violates the principle

of democratic unionism articulated in Landrum-Griffin; it

contradicts the principle and purpose of exclusive repre-

sentation adopted by the Railway Labor Act; it frustrates

the process of collective bargaining and the ability of the

parties through negotiations to reach a peaceful solution

acceptable to the parties, and solutions which are mutu-

ally acceptable. It is contrary to the letter, the spirit and

70a

the purpose of our statutory system of collective bargain-

ing. It serves only to impede and frustrate the process of

negotiation, making the reaching of satisfactory agree-

ments more difficult.

Respectfully submitted,

/s/ Clyde W. Summers

Clyde W. Summers

Subscribed and sworn before me this fifteenth day of

February, 1991 in the County of Philadelphia, State of

Pennsylvania.

/s/ Gloria D. Watts

Notary Public

NOTARY SEAL

GLORIA D. WATTS, Notary Public

City of Philadelphia, Phila, County

My Commission Expires Oct. 24, 1994

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.