The End of the Road for Eastern Airlines Pilots? Third Circuit Blocks Pilots Groups' Efforts to Force Continental Airlines Pilots to Arbitrate Claims Discharged in Continental Bankruptcy
Cont’l Airlines, Inc. v. Eastern Pilots Merger Comm. (In re Cont’l Airlines, Inc.), 484 F.3d 173 (3d Cir. 2007) (Circuit Judge Julio M. Fuentes)
In their third visit to the United States Court of Appeals for the Third Circuit, a group of former pilots of Eastern Airlines appealed from a decision of the United States District Court for the District of Delaware enjoining them from proceeding to arbitration with debtor Continental Airlines and its pilots. Because the Eastern pilots sought arbitration under their former collective bargaining agreement (the “CBA”) with Eastern Airlines (which became an obligation of Continental Airlines when it merged with Eastern), and the debtors’ obligations under the CBA had been discharged, the debtors would not be compelled to appear at an arbitration in which no award against them would be possible. The Continental pilots were not a party to the CBA, and could not be bound by its arbitration provision.
In a decision that perhaps brings finality to the quest of former Eastern Airlines pilots to receive compensation for seniority rights that they lost when Continental Airlines merged with Eastern Airlines, the Third Circuit has held that the former Eastern Airlines pilots cannot enforce their former collective bargaining agreement against Continental’s pilots.
In 1986, the pilots employed by the former Eastern Airlines entered into a collective bargaining agreement. The CBA provided that, in the event that Eastern merged with another airline, the Eastern pilots would maintain their seniority rights. Eastern shortly thereafter merged with Continental, but Continental refused to integrate the Eastern pilots into the Continental seniority scheme, and further refused to bargain with the Eastern pilots over this issue.
In two prior published opinions, the Third Circuit held that the CBA gave the Eastern pilots a right to payment, and that the right to payment was discharged in Continental’s bankruptcy case. In re Cont’l Airlines, Inc., 125 F.3d 120 (3d Cir. 1997); In re Cont’l Airlines, Inc., 279 F.3d 226 (3d Cir. 2002).
Following the second of the two prior proceedings, the Eastern pilots petitioned the National Mediation Board to resume arbitration under the CBA. Continental moved for a contempt order against the pilots. The pilots asserted at the hearing on this motion that the Continental pilots were also the object of the Eastern pilots’ claim, and that although they might not be able to recover from the debtors, they would seek to recover from the Continental pilots. The Bankruptcy Court denied the motion and ruled that the discharge injunction did not preclude arbitration from going forward against other parties, such as the Continental pilots. The District Court reversed this decision and enjoined the Eastern pilots from pursuing arbitration.
In the instant appeal, the Eastern pilots contended that, despite the CBA being discharged, they were still entitled to compel the appearance of Continental and its pilots at arbitration to determine whether the Eastern pilots could recover damages from the Continental pilots.
The Third Circuit affirmed the District Court order, finding that, because of the discharge injunction, the Court would not compel Continental’s appearance at an arbitration at which no recovery against it was possible.
As to the Continental pilots, the Eastern pilots argued that, under the CBA, an arbitrator might allow an award because Continental’s pilots hold positions that were promised to the Eastern pilots. The Third Circuit rejected this argument, finding that a party can only be required to submit to arbitration if it has contracted for it. The CBA, however, was a contract between the former Eastern pilots and the airline, with the Eastern pilots’ seniority rights a creation of the CBA. Because the Continental pilots were not a party to the CBA, they were not bound by its terms, including the arbitration provision. Therefore, they could not be compelled to arbitrate.
The Eastern pilots also argued that, under the Railway Labor Act, they had a right to arbitration because in the first Continental matter before the Third Circuit, the Court decided that the dispute between the two groups of pilots was a “minor dispute” within the meaning of the RLA, and therefore subject to arbitration. However, because the Eastern pilots had since relinquished all relief against Continental, the Court determined that the arbitration provision of the CBA was no longer relevant, and that there was no route to arbitration.
The Eastern pilots also contended that, under the Norris-LaGuardia Act, the District Court lacked jurisdiction to enter the injunction barring arbitration. The Court also rejected this argument, finding that, in order to constitute a “labor dispute” within the meaning of the Norris-LaGuardia Act, the employer-employee relationship must be the matrix of the controversy. However, the Third Circuit found that this dispute involved one group of employees asserting claims against another under a CBA that no longer governs any employer-employee relationship.
Finally, the Court rejected the Eastern pilots argument that assuming jurisdiction, the District Court improperly enjoined arbitration. The prior Continental proceedings discharged the Eastern pilots’ claims against Continental, and the discharge could not be avoided by claiming that they would request an award against Continental’s pilots.
