Rakestraw v. United Airlines, Inc.

Citation: 981 F.2d 1524Docket: Nos. 91-2285, 91-2416, 91-2417, 91-2502, 91-2503, 91-2535 and 91-2957

Court: Court of Appeals for the Seventh Circuit; December 27, 1992; Federal Appellate Court

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A legal question arises regarding whether a union's duty of fair representation under the Railway Labor Act prevents it from adjusting seniority in a manner that favors certain employees. Two cases involving the Air Line Pilots Association (ALPA) highlight this issue: one stemming from TWA's acquisition by a larger carrier, and another from a strike followed by the hiring of replacement pilots. In the first case, pilots from a smaller carrier argue for additional seniority protections to counterbalance the advantage given to longer-service pilots from TWA when their seniority lists were merged. The second case involves pilots hired during a strike who believe they should have received seniority from their start date rather than their training date, to safeguard their positions against striking pilots.

Judge Lindberg ruled that the union's merging of seniority lists did not violate its duty of fair representation, while Judge Conlon determined that the union's uniform seniority rule violated the vested rights of the replacement pilots. The union had made significant concessions valued at $200 million to obtain a seniority structure that favored the airline's interests and maintained a seniority system supported by management, which prioritized loyalty during the strike. 

The document references previous court opinions and clarifies that specific details are less relevant to the broader interpretation of the union's obligations. Additionally, it recounts the financial struggles of TWA in 1985 and the negotiations that led to a wraparound agreement, which established conditions for any merger of pilot seniority lists during subsequent acquisitions, including the acquisition of Ozark Airlines by TWA in 1986. The TWA pilots’ preference was to add Ozark pilots at the end of their seniority list while still being open to dovetailing seniority for all pilots based on their hire dates.

A merger based on the date of hire would disadvantage Ozark's pilots, placing them lower on the seniority list, leading them to demand protections. The proposed method of merging seniority lists would prioritize TWA's pilots, significantly impacting Ozark's pilots' positions. A deadlock arose between TWA’s pilots, who insisted on a date-of-hire merger, and Ozark’s pilots, who sought protective measures. The Air Line Pilots Association (ALPA) has a policy for arbitration in such disputes, but Hank Duffy, ALPA’s president, opted for mediation instead. TWA announced it would operate Ozark’s planes with its own pilots, focusing on acquiring Ozark’s assets rather than its workforce. Facing the threat of unemployment, Ozark's pilots ultimately accepted the date-of-hire merger, voting 329 to 35 in favor. ALPA later established seniority “cells” to protect Ozark’s pilots, though this arrangement also caused dissatisfaction among them.

ALPA sought additional protections for Ozark's pilots during the merger process, but their efforts were unsuccessful in litigation against federal regulators. A class of former Ozark pilots accused ALPA of violating its duty of fair representation under the Railway Labor Act and the Labor-Management Reporting and Disclosure Act, arguing that ALPA and TWA breached the wraparound agreement. Most claims highlighted ALPA’s deviation from its usual merger policy and accusations that Duffy favored TWA's pilots under threat of secession from ALPA. After a lengthy advisory period, the district court granted summary judgment to ALPA and TWA, which was later remanded due to procedural errors. The appellate court confirmed that ALPA's actions were not arbitrary and that the wraparound agreement benefitted TWA’s pilots exclusively, denying third-party beneficiary status to Ozark’s pilots. The situation remains contentious as TWA is now in bankruptcy, impacting the longevity of many former Ozark pilots at TWA. The bankruptcy judge has allowed the appeal to proceed, following the lifting of the automatic stay.

United Airlines did not hire pilots from 1979 until 1984, when it began recruiting trainees during 1984-85 in anticipation of expansion. Unlike previous practices, hiring was contingent upon trainees reporting for flight duty rather than starting training. The airline was negotiating a two-tier wage structure and aimed to hire new pilots at a lower pay rate, while trainees received tentative seniority numbers based on their training start date. Negotiations with the Air Line Pilots Association (ALPA) stalled, leading to a strike called for May 17, 1985. United instructed the 570 trainees who completed their program to report for work that day, threatening non-compliant trainees with permanent disqualification from employment. Only 25 reported, with six more joining later, while replacements were hired at significantly higher salaries. 

These replacements, termed "fleet qualified," received premium wages but were ranked lower in seniority compared to those who worked during the strike. United also hired another group of trainees during the strike, leading to a total of 539 new pilots. The strike concluded on June 15, 1985, without a new agreement, allowing striking pilots to return with their original seniority. ALPA contended that United's refusal to hire unreported members of the Group of 570 constituted illegal discrimination for honoring the picket lines, prompting litigation. Judge Bua ordered United to hire any interested members of this group with seniority from May 17. Subsequently, these trainees were placed on a preferential hire list. However, a ruling in 1986 determined that the Group of 570 was not protected under the Railway Labor Act, as they were not considered employees until they officially reported for duty.

The court opinion noted that United Airlines' guaranteed salaries for fleet qualified pilots did not violate the Railway Labor Act, but identified some discriminatory practices within United's position bidding. Following an injunction, United threatened to terminate pilots from the Group of 570, who were hired under the court’s order, while the pilots, constrained by the Act, could not strike in response. The Air Line Pilots Association (ALPA) accepted a deal allowing the retention of strikers with a seniority date of November 9, 1985, which corresponded to the preferential hire list mandated by the injunction. ALPA agreed not to contest United's decisions or raise issues related to the Group of 570's seniority in future negotiations, and all members of the Group signed releases absolving United and ALPA from liability, which were deemed valid by the Colorado Supreme Court.

The situation led to frustration among pilots as the replacements received better positions and salaries. ALPA's leadership promised aggressive actions against the replacements and the Group of 539, leading to harassment of the 219 replacement pilots with support from ALPA leadership. This discord prompted negotiations between ALPA and United, ultimately resulting in a new collective bargaining agreement in April 1991. ALPA received favorable seniority dates for the Group of 570, effectively retroactive to May 17, 1985, while the fleet qualified replacements retained salaries but lost preferred positions.

A group of 103 fleet qualified replacements sued, alleging ALPA's violation of its duty of fair representation and breaches of previous agreements by both the union and United. The district court consolidated the preliminary injunction request with the trial and ruled in favor of the defendants on most claims, except for the duty of fair representation. Judge Conlon found that ALPA had harbored animosity against the fleet qualified pilots, unfairly altering seniors' status relied upon by the plaintiffs and confirmed that ALPA discriminated against them during the negotiation of the 1991 agreement.

A rational basis exists for determining seniority for the 570 as of May 17, 1985, but the issue is settled by the 1987 agreement between ALPA and United, which serves as a permanent resolution. ALPA acted in bad faith by attempting to alter the seniority rights of the 539 in the 1991 collective bargaining agreement. Once a dispute over seniority is resolved, the union's duty of fair representation prohibits reopening the issue, as this would unfairly favor one group over another. Negotiation inherently involves compromise; unions often secure better outcomes for some members at the expense of others, and such outcomes do not invalidate the agreement. A bargaining representative is allowed a range of reasonableness, provided it acts in good faith and with honest intent towards all represented employees.

The concept of "good faith and honesty of purpose" is complex when a union must balance competing employee interests. A union breaches its duty of fair representation if its actions are deemed arbitrary, discriminatory, or in bad faith, as established in Vaca v. Sipes. The Supreme Court's ruling in ALPA v. O’Neill clarified that this standard applies not only to administering agreements but also to negotiating them. The challenge lies in defining what constitutes arbitrary, discriminatory, or bad faith conduct, as these terms are not self-explanatory. Case law indicates that a union cannot strip seniority from employees without valid justification, such as retaliation against dissenters or using internal politics. Employees have the right to choose their representation or oppose unionization, and unions cannot penalize members who prefer individual decision-making. Thus, a union's obligation not to neglect or penalize dissenters raises further considerations regarding fair representation.

A forbidden penalty arises when groups within a union claim they have been unfairly treated or penalized during negotiations, such as the merger of seniority lists. Ozark’s pilots argue they were disadvantaged due to their minority status, while the union contends that all pilots received equal treatment. Similarly, United's fleet qualified pilots assert they were penalized for replacing striking workers, but the union maintains that seniority is based on overall service time and that it can offset benefits given to certain groups. The text highlights that negotiations inherently result in winners and losers, as seen in various case law. 

It discusses how different compensation structures can benefit specific age groups or health statuses, creating perceived inequities among workers. Unions must represent collective interests, yet individuals may perceive their losses as intentional penalties due to their minority status. This tension challenges the union's ability to resolve internal disputes and fulfill its democratic duty to represent the majority. 

Citing cases like Humphrey and Steele, it emphasizes the expectation that unions act democratically. The text references the negotiation of collective bargaining agreements that have resulted in seniority arrangements favoring certain groups, while still being deemed reasonable by the courts. The discussion raises questions about the union's liability in negotiations that may appear to favor management or specific employee groups, particularly in the context of the striking pilots' claims against their union's actions.

The union involved operates without traditional locals, as highlighted in O’Neill, which suggests that surrendering to management is permissible if the union still gains some benefits. When unions fiercely advocate for labor, they risk being accused of acting in "bad faith" towards strike breakers who support management. The union's duty as a bargaining representative requires it to demonstrate complete loyalty to all members, including those who cross picket lines, creating a tension between representing strikers and replacements. Economic confrontations between unions and management often involve strikes and lockouts, with unions seeking to reclaim benefits offered to replacements. The legality of unions prioritizing strikers over replacements is examined, with the courts affirming that unions can reward loyal members post-strike without violating their duty to represent all interests fairly. The O’Neill case established that a union's discretion in protecting strikers, unless arbitrary or in bad faith, should be respected, equating union decision-making to legislative choices, which are subject to deferential judicial scrutiny. This legal framework suggests that rational distinctions made by unions or legislatures, even if they appear discriminatory, are permissible if they serve a legitimate interest.

Knowledge of the impacts of a rule on different groups does not constitute a discriminatory motive, as established in Personnel Administrator of Massachusetts v. Feeney. Unions are permitted to advocate for labor interests, even if it adversely affects investors and consumers, requiring collective action to be effective. Managers often employ divide-and-conquer strategies to weaken labor solidarity, and labeling unions as acting in "bad faith" for countering these tactics undermines their essential role. While unions cannot resort to violence or negotiate wage scales that favor union members over others, they are generally allowed to decide their collective interests through majority vote.

The practice of dovetailing seniority lists in mergers, treating employees from both firms equally, aligns with labor’s collective interests. Endtailing, where employees from a smaller firm only gain seniority from the acquisition date, has been upheld in courts. Claims that such practices violate union duties have been rejected, reinforcing that majority preference for equal treatment does not constitute discrimination against a minority. This perspective applies to the Ozark-TWA case, where former Ozark pilots argued that the union (ALPA) deviated from its merger policy promoting equal treatment. However, even if ALPA did not adhere strictly to this policy, such deviation does not necessarily entail liability. The merger policy, akin to common law, evolves over time and is not static. ALPA sought to avoid litigation by bridging gaps between the pilots of both airlines, and arbitration is recognized as a form of litigation. The union's agreement was essential for a formal merger of seniority lists, especially as TWA’s pilots had significant leverage in the acquisition process.

TWA had no need for Ozark's pilots and was unlikely to jeopardize its own pilots by favoring Ozark's in a merger transaction. ALPA's merger policy could not force TWA to reach an agreement, and attempts to negotiate through representatives rather than resorting to litigation were made. Duffy's judgment in this approach did not breach the duty of fair representation. The Ozark pilots' claims, rooted in various legal frameworks, failed due to their own approval of the merger and the new collective bargaining agreement. ALPA's consent to the wraparound agreement was given only after the Ozark pilots voted in favor of the merger with integrated seniority lists. The argument that their approval was coerced due to TWA's actions, such as transferring planes and furloughing pilots, did not negate their choice to support the merger. Economic pressure from TWA was deemed permissible; invalidating the pilots' vote would undermine future union agreements. The Ozark pilots' assertion of exclusion from the TWA pilots’ voting was illogical, as they had initially boycotted the vote due to their belief in a binding agreement with Ozark. The TWA pilots’ affirmative votes would have prevailed regardless of the Ozark pilots’ positions. The eventual approval of the agreement by the Ozark pilots, despite their earlier grievances, was a voluntary decision that could not be retracted based on dissatisfaction with circumstances. The union's actions towards the seniority of the Group of 570 were influenced by a desire for retribution against strike-breakers, impacting the seniority of other pilots, but the district judge's factual findings supported the union's willingness to accept this outcome.

The district court determined that a retaliatory motive was irrelevant in assessing the rationale for granting seniority to the Group of 570 as of May 17, 1985. It acknowledged that the Air Line Pilots Association (ALPA) had mixed motives—while it sought to disadvantage replacement pilots, it also aimed to reinstate long-standing seniority arrangements that United Airlines had previously honored. The court questioned whether the union would have insisted on granting seniority to the Group of 570 had replacement pilots not been involved, suggesting that a bad motive alone does not invalidate a collective bargaining agreement that benefits workers as a whole.

The court noted that the 219 fleet-qualified pilots and the 320 trainees were treated equally under the seniority arrangement, which aligned with United's pre-strike practices. It posited that both United and ALPA could have reached an agreement to grant seniority based on training dates. It emphasized that hostility during strikes is common, and unions may need to advocate for their members' interests, including those of strike-breakers, to facilitate resolution. 

Plaintiffs argued that a change in circumstances after ALPA's 1987 actions created vested rights that could not be altered by the union. The legal system recognizes that employees often perceive their seniority as a property right, and it seeks to avoid disruptions to their expectations of employment security and assignment desirability.

Seniority is not an inherent right of employees but a construct of collective bargaining agreements. Upon expiration of these agreements, employers may use different criteria, such as merit, for job assignments and layoffs. Seniority is a negotiable topic within collective bargaining. A union cannot arbitrarily alter seniority rosters without a justifiable reason that benefits the overall employee group. The Air Line Pilots Association (ALPA) had valid objectives in altering seniority, namely to mitigate the advantages of replacements and to maintain a longstanding seniority system. Management's agreement to these changes was justified by significant labor concessions and the need to address operational issues among pilots.

ALPA's 1987 commitment not to challenge United's actions legally or in negotiations does establish certain contractual rights but does not modify the union's duty of fair representation or create enforceable rights for the affected group. Only the parties to the agreement can renegotiate terms. If the 1987 agreement granted enforceable rights to the Group of 539, any disputes must be arbitrated under the Railway Labor Act, although this group has not pursued such procedures.

Future labor relations will involve ongoing negotiations and accommodations, with any promises made typically lasting only until the next collective bargaining agreement unless vested rights are involved. ALPA's pledges have implications for collective bargaining, as they remove certain topics from mandatory negotiation, allowing United to reject any seniority-related negotiations for the Group of 570.

Parties cannot reach an impasse on permissive subjects of collective bargaining, meaning disagreements on such topics cannot justify a strike or lockout. To progress on permissive subjects, a party must provide something of value in exchange. In this case, ALPA made significant concessions for changes to the seniority table, benefiting United by allowing it to expand operations and create more pilot positions. 

Several claims were reviewed, notably by fleet qualified pilots asserting that United breached their contracts by placing them behind the Group of 570. However, the contracts did not address seniority, and United fulfilled its commitments regarding permanent employment and salary. Any oral statements about seniority were merely predictions, not guarantees, as the contracts specified that only written promises were binding. 

United's prior assertion that certain Group of 570 members would not return to work post-strike was also not included in the written agreements and was temporarily stayed by a district judge. Claims of wrongful interference by ALPA in United's contracts with replacement pilots are unfounded since unions inherently disrupt direct employer-employee negotiations. Additionally, there was no conspiracy between United and ALPA to breach fair representation duties; preferences among employee groups are permissible. 

United's actions were aimed at reducing costs and internal conflict, not hostility toward fleet qualified pilots. The district court's decision in the Ozark-TWA case is affirmed, while the judgment in the United case is reversed regarding the injunction against the 1991 collective bargaining agreement's seniority provisions, with the remaining aspects of the judgment upheld.