Zlatko Gvozdenovic Margarita Walinski Patricia Cargould Frank Perea, Individually and on Behalf of That Class of 1202 Former Pan Am Flight Attendants Now Employed by United Airlines, Inc., and as Members of the Pan Am Seniority Arbitration Committee v. United Air Lines, Inc. Stephen Wolf, Its President the Association of Flight Attendants, Afl-Cio, and Its President Susan Bianchi-Sand Au Rodney Pamela Greenleaf, as Members of the United Airlines Seniority Arbitration Committee Patricia Friend, Chairperson of the United Airlines Master Executive Council United Preacquisition Flight Attendants

Citations: 933 F.2d 1100; 137 L.R.R.M. (BNA) 2534; 1991 U.S. App. LEXIS 10445Docket: 1092

Court: Court of Appeals for the Second Circuit; May 22, 1991; Federal Appellate Court

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Plaintiffs-appellants, a class of 1,202 former Pan Am flight attendants now employed by United Airlines, appealed a judgment from the United States District Court for the Southern District of New York, which dismissed their class action suit against United Airlines and the Association of Flight Attendants (AFA). The suit, filed under the Railway Labor Act, Labor-Management Reporting and Disclosure Act, and the Federal Arbitration Act, sought to vacate an arbitral award and claimed damages for alleged breaches of statutory duties, improper dues assessments, and contract violations.

The appellants contended that the district court wrongly dismissed their petition to vacate the arbitration award, asserting they were not parties to the arbitration agreement and that the AFA failed to fairly represent them. They also claimed that their allegations regarding an illegal "closed shop," unlawful dues increases, and financial assistance to incumbent employees by United were improperly dismissed on statute of limitations grounds.

The court held that appellants, having voluntarily participated in the arbitration, were bound by its outcome, affirming the dismissal of their vacatur petition. Additionally, the court ruled that the claims regarding the AFA's duty of fair representation and unlawful financial assistance were time-barred. However, it determined that the claim regarding the unlawful dues increase was not barred by the statute of limitations but failed on its merits. The court ultimately affirmed the district court's judgment.

United Airlines committed to hiring at least 1,202 flight attendants from Pan Am's Pacific Division and to recognize their service with Pan Am, contingent on agreements with collective bargaining representatives. Negotiations with the Association of Flight Attendants (AFA) began on August 1, 1985, focusing on determining the seniority of the incoming flight attendants relative to United's existing employees. A Letter of Agreement was established on December 6, 1985, detailing employment terms and stipulating that seniority disputes would be arbitrated, with the arbitrator tasked to avoid diminishing any incumbent flight attendant's seniority. 

Following negotiations, conditional offers of employment were sent to Pan Am attendants in December 1985, assuring them of continued employment under their existing contract with Pan Am. Those who accepted United's offer officially became employees on February 11, 1986. To facilitate arbitration costs, United deposited $132,700 into accounts designated for the incoming and incumbent flight attendants. Committees from both the Independent Union of Flight Attendants (IUFA) and the United Master Executive Council (UMEC) were formed to represent their respective groups in arbitration, which began on June 27, 1986.

The arbitration centered on whether the new flight attendants would receive seniority based on their hire date or full credit for their prior service at Pan Am. The arbitrator, Arthur Stark, ruled on September 8, 1986, that the new flight attendants would be integrated into United's seniority list. A final decision on September 26, 1987, provided a formula for integration, granting partial credit for prior service at Pan Am. The integration placed the first 1,500 senior employees from the new list in alignment with United's existing list, followed by a ratio of 1:7.47 for subsequent Pan Am attendants. United subsequently updated its seniority list accordingly.

On December 28, 1987, four plaintiffs initiated a lawsuit against the AFA, later amending it on May 5, 1988, to include United as a defendant. The amended complaint included six allegations: two claims against the AFA for breaching its statutory duty of fair representation per RLA Section 2; unlawful imposition of union membership violating RLA Section 2 (Eleventh)(b); denial of equal rights under the AFA constitution per LMRDA Section 101(a)(1); breach of the AFA's constitution and the contract between United and Pan Am under New York law. The plaintiffs sought class action status to represent 1,202 former Pan Am flight attendants and later added claims against United for improper financial assistance under RLA Section 2 (Fourth). After discovery, both parties sought summary judgment, but on January 17, 1990, the district court denied these motions, directing a trial on the fair representation claim. 

A bench trial occurred on March 29-30, 1990, where Judge Griesa ruled that the Letter of Agreement was not void and that the no-reduction clause for seniority did not harm the 1,202 incoming flight attendants. Subsequently, he dismissed all claims related to the duty of fair representation. On August 17, 1990, Judge Griesa dismissed the remaining claims of unlawful union membership and illegal financing as barred by a six-month statute of limitations, while confirming the class action status. The appellants argued that the Letter of Agreement was void since it was made before their employment and union membership commenced; thus, they contended they were not bound by the arbitration outcome. However, legal precedents suggest that parties can imply consent to arbitration through their conduct, and the appellants' actions indicated a clear intent to arbitrate the dispute.

Active and voluntary participation in arbitration by appellants is evident, as they selected a committee for representation, withdrew funds for expenses, appointed counsel, and argued for full credit for their Pan Am employment. There is no indication that they objected to the arbitration process or sought judicial relief at any stage. The appellants' comparison to Saxis and Orion Shipping is inappropriate, as those cases pertain to commercial arbitration, while the Railway Labor Act (RLA) governs labor arbitration through collective bargaining between unions and employers. Under the RLA, collective bargaining agreements bind all current and future members of the bargaining unit, making the 1202 incoming flight attendants subject to the agreement’s arbitration provision, despite their absence during negotiations. They are considered third-party beneficiaries of the Letter of Agreement. The appellants’ reference to Beardsly v. Chicago, N. Western Transp. Co. is also flawed; unlike in Beardsly, where new hires were excluded from the arbitration process, appellants participated without objection. Additionally, the appellants claim the arbitrator's award should be vacated due to alleged fraud, stemming from a failure by the AFA to disclose a constitutional amendment regarding seniority integration. However, this amendment is deemed prospective and not applicable to the United-Pan Am merger, thereby rejecting the claim of fraud in the arbitration process.

Appellants argue that the AFA violated its duty to fairly represent all members, as mandated by the Railway Labor Act (RLA). While the district court examined this claim, it determined that the fair representation claim is barred by the statute of limitations, which the court applied similarly to more specific RLA violations. The precedent set in DelCostello v. International Bhd. of Teamsters establishes a six-month limitation period for such claims, starting from the date the AFA ratified the contested agreement on March 14, 1986. Since the action was filed on December 28, 1987, it is deemed time-barred.

Moreover, even if the claim were not time-barred, it lacks merit. The AFA, as the exclusive bargaining representative for United flight attendants, is obliged under the National Labor Relations Act to represent all employees, including Pan Am transferees, impartially and without discrimination. This obligation requires the AFA to act in good faith and avoid arbitrary conduct. The standard for reviewing a union's negotiation terms is highly deferential, only identifying a breach where the negotiated terms are deemed irrational or arbitrary.

The decision to submit the dispute to arbitration was not found to be arbitrary or discriminatory. The AFA faced conflicting interests among its members, and arbitration was considered a reasonable and equitable resolution. The appellants did not demonstrate that their interests were inadequately represented during the arbitration process.

In Cook v. Pan Am. World Airways, Inc., the court found no violation of the union's duty of fair representation, confirming that all employee groups were adequately represented. The district court determined that the 1202 incoming flight attendants and incumbent employees received equal treatment under the arbitration agreement. The appellants claimed that the requirement to join the AFA upon employment violated the Railway Labor Act (RLA) Section 2 (Eleventh)(a), which allows for union membership within sixty days. They also argued that immediate dues deductions breached the Labor-Management Reporting and Disclosure Act (LMRDA) Section 101(a)(3) and that bank accounts opened by United unfairly assisted incumbent flight attendants under RLA Section 2 (Fourth). 

The district court ruled that these claims were time-barred, as the appellants filed their suit more than six months after the relevant events. The court also dismissed the notion that ongoing hirings or financial withdrawals constituted continuing violations. Regarding the dues increase claim under LMRDA Section 101(a)(3), the court determined that New York's three-year statute of limitations for personal injury actions should apply, overruling previous reliance on the NLRA's six-month period. The rationale from Reed v. United Transp. Union was cited to support this finding, emphasizing that the appellants' claim related to an internal union issue that did not directly affect the employer-union relationship.

Reed's case highlights that while claims under section 411(a)(2) emphasize the importance of union democracy, all Title I claims aim to enhance union member rights rather than protect collective bargaining integrity. Although the section 411(a)(3) claim is not time-barred, it was rightfully dismissed due to insufficient evidence of illegal dues assessments. The claim regarding an 'unlawful dues increase' relies on a sixty-day grace period stipulated for newly-hired employees, which does not apply to those hired laterally due to a merger. The collective bargaining agreement defines 'newly employed flight attendants' as those who must apply for union membership within sixty days and be admitted after their probationary period. However, the incoming flight attendants were exempt from the probationary period under a Letter of Agreement and were required to pay union dues immediately upon employment. Consequently, the district court's dismissal of the appellants' complaint is affirmed in full.