Air Line Pilots Ass'n, International v. Continental Airlines, Inc. (In re Continental Airlines Corp.)Air Line Pilots Ass'n, International v. Continental Airlines, Inc. (In re Continental Airlines Corp.)
Lead Opinion
Today’s case presents the question whether employees whose collective bargaining agreements are rejected in a Chapter 11 bankruptcy are entitled to future wages and benefits as contract rejection damages under
I. Facts
In 1983, Continental halted domestic flight operations and filed a bankruptcy petition under Chapter 11. Continental then filed a motion in bankruptcy court to reject its labor contracts with the Air Line Pilots Association, International (“ALPA”)
The bankruptcy court approved Continental’s rejection of its labor contracts with ALPA and UFA and ordered the rejection effective the date of the bankruptcy filing. ALPA and UFA then filed proofs of claim, in amounts of $408 million and $409 million respectively, for contract rejection damages under
In October of 1985, Bankruptcy Judge T. Glover Roberts, acting by agreement between Continental and ALPA, signed an “Order and Award” that was intended to settle all issues between Continental and ALPA, including the contract rejection damage claims. Because of objections raised by certain individual pilots, the court allowed pilots who did not participate in the settlement to file proofs of claim and pursue their derivative share of the claims originally filed by ALPA. A like settlement agreement was reached between Continental and UFA, with a procedure created which was similar to that for the pilots, allowing non-settling flight attendants to pursue their claims independently of UFA. In all, approximately 460 pilots and 14 flight attendants have filed proofs of claim seeking contract rejection damages under the procedures established by the bankruptcy court.
In a motion for partial summary judgment, Continental next asked the bankruptcy court to disallow contract rejection damages claims for the time that the employees were on strike. When that motion was granted on September 10, 1985 (“September 10 Order”), Continental filed an additional motion for summary judgment seeking to disallow the remaining claims for contract rejection damages. This was granted as to the claims of the flight attendants on May 8, 1986 (“May 8 Order”), and as to the pilots’ claims on June 26 of the same year (“June 26 Order”). The court reasoned that as the collective bargaining agreements did not guarantee employment, the claimants were not entitled to future wages and benefits as contract rejection damages. The orders were appealed to federal district court, which affirmed them.
II. Discussion
A. Failure to Stand Recused
The appellants contend that Judge Roberts, who shortly after making his May 8 and June 26 orders received and accepted an offer for partnership in the law firm representing Continental, should have stood recused from the case and that his failure to do so requires the reversal of those orders.
Several months before making his rulings in this case, Judge Roberts had announced his intentions to enter private practice and to stop handling the Continental bankruptcy cases to avoid conflicts of interest in the event he considered employment with any of the firms appearing before him. Shortly thereafter, Continental’s local bankruptcy counsel, Messrs. Shein-feld, Maley & Kay (“Sheinfeld”), discussed hiring Judge Roberts at a partnership meeting. Before his confirmation of Continental’s plan of reorganization, at least two Sheinfeld lawyers had asked Judge Roberts about his future employment plans. At about the same time, Judge Roberts was quoted as praising Continental’s President Frank Lorenzo in articles which appeared in Business Week and the Wall Street Journal.
In the present case there is no allegation that, prior to his rulings in this ease, Judge Roberts had sought employment with the Sheinfeld firm, or that he knew that the firm was actively considering him. The close coupling of Judge Roberts’s rulings with the employment offer and his acceptance of it, however, does create the appearance that he may have been pursuing employment with Sheinfeld while he was presiding over the case. As the Seventh Circuit noted in Pepsico, Inc. v. McMillen,
The appearance of equal justice requires that the judge not be exploring the prospects of employment with one lawyer or all lawyers appearing in a case before him. The dignity and independence of the judiciary are diminished when the judge comes before the lawyers in the case in the role of a suppliant for employment. The public cannot be confident that a case tried under such conditions will be decided in accordance with the highest traditions of the judiciary.
Id. at 461.
Continental contends that a judge cannot ' be expected to stand recused in a case when he is unaware that counsel for one of the parties appearing before him is considering him for employment. The Supreme Court, in Liljeberg v. Health Services Corp., responded to a similar contention:
Contrary to petitioner’s contentions, this reading of the statute does not call upon judges to perform the impossible — to disqualify themselves based on facts they do not know. If, as petitioner argues,§ 455(a) should only be applied prospectively, then requiring disqualification based on facts the judge does not know would of course be absurd; a judge could never be expected to disqualify himself based on some fact he does not know, even though the fact is one that perhaps he should know or one that people might reasonably suspect that he does know. But to the extent the provision can also, in proper cases be applied retroactively, the judge is not called upon to perform an impossible feat. Rather, he is called upon to rectify an oversight and to take the steps necessary to maintain public confidence in the impartiality of the judiciary. If he concludes that “his impartiality might reasonably be questioned,” then he should also find that the statute has been violated. This is certainly not an impossible task.
Although a violation of
The risk of injustice to the parties in allowing a summary judgment ruling to stand is usually slight. Such rulings are subject to de novo review, with the reviewing court utilizing criteria identical to that used by the court below. In cases where we would otherwise affirm such a ruling, little would be gained by vacating and remanding with instructions that it be essentially reinstated.
Next, we consider whether a failure to vacate the orders below would be likely to produce injustice in other cases. We seriously doubt that a failure to vacate the decisions of the bankruptcy court could be read in future cases as a nod of approval for Judge Roberts’s handling of the situation; rather, our ruling here should serve as a caution to other judges who are contemplating private employment following retirement. Moreover, were we to vacate the orders below for the
Finally, we consider whether the public’s confidence in the judicial process will be undermined if we hold Judge Roberts’s violation of
In fact, if we reverse and vacate a decision that we have already determined to be proper, the public will lose faith in our system of justice because the case will be overturned without regard to the merits of the employees’ claims. Judicial decisions based on such technical arguments not relevant to the merits contribute to the public’s distrust in our system of justice.
Parker v. Connors Steel Co.,
B. Contract Rejection Damages
Bankruptcy Code
In support of their contention that the district court erred in rejecting their damage claims, the appellants rely principally upon NLRB v. Bildisco & Bildisco,
1. Collective bargaining agreements
Unlike a contract of employment, ordinarily a collective bargaining agreement does not create an employer-employee relationship; and its rejection does not terminate an employment relationship. It neither obligates any employee to perform work nor requires the employer to provide work. It is simply “a generalized code to govern a myriad of cases which the draftsman cannot wholly anticipate_ The collective agreement covers the whole employment relationship. It calls into being a new common law — the common law of a particular industry or of a particular plan.” John Wiley & Sons, Inc. v. Livingston,
[Cjollective bargaining between employer and the representatives of a unit, usually a union, results in an accord as to the terms which will govern hiring and work and pay in that unit. The result is not, however, a contract of employment except in rare cases; no one has a job by reason of it and no obligation to any individual ordinarily comes into existence from it alone. The negotiations between union and management result in what often has been called a trade agreement, rather than in a contract of employment.
J.I. Case Co. v. National Labor Relations Board,
The collective bargaining agreement in the present case provides no guarantees of continued employment. Hence, even if the present agreement had not been cancelled, damages would only be available for the time Continental would have been able to continue in business. In rejecting all of the appellants’ damage claims, Judge Roberts relied upon a previous finding, not here appealed, “that had Continental not made its unilateral changes in pilot pay and work rules[ ] it would have been unable to continue its operations for very much longer for want of necessary cash,” and that absent the implementation of the September 27 Emergency Work Rules, “Continental would have run ... [out] of cash” and “would have had to shut its doors even before this hearing commenced,” that date being January 30, 1984. Recognizing that if Continental went out of business, the employees would have no damage claims under the agreement, Judge Roberts held that no damages should be available under
2. Effect of the strike
The appellants contend that contract rejection damages should be available for the time the employees were out on strike. As noted above, the purpose of
The cases relied upon by the appellants do not dictate a different outcome. For example, the appellants cite our decisions in Mungin v. Florida East Coast Railway Co.,
The plaintiffs’ reliance upon Mungin and Galveston Wharves in the present instance is misplaced. Continental’s rejection of the collective bargaining agreement, unenforceable from the time of the bankruptcy filing, involved no statutory violation.
Another case relied upon by the appellants, Carpenter Sprinkler Corp. v. NLRB,
III. Conclusion
The September 10 order of the bankruptcy court granting the debtor’s motion for partial summary judgment, which disallowed contract rejection damages for time periods the employees were out on strike, is AFFIRMED. The May 8 and June 26 orders of the bankruptcy court granting the debtor’s motion for summary judgment, which disallowed all contract rejection damage claims of the appellants, are VACATED and the cause REMANDED for proceedings consistent with this opinion.
Notes
. Judge Roberts was reported to have said concerning Frank Lorenzo: " "Who do you know with the guts to put half a billion dollars on the table and say he can do a turnaround’ of a company that is a prime candidate for bank-ruptcy_ If anybody can do it, Lorenzo can.” Frank Lorenzo, High Flier, Business Week, March 10, 1986 at 104, 107.
. The Eleventh Circuit noted in a similar situation:
As discussed previously, we agree with the district court that summary judgment was proper. It would, therefore, be ridiculous to remand this case and reassign it to another judge after we have already exercised plenary review and have concluded that summary judgment was proper.
Parker v. Connors Steel Co.,
. See Texas Lawyer, Dec. 1-5, 1986, at 1; Wall St. J., Oct. 6, 1986, at 24, col. 1.
. Although these cases were decided under the NLRA (the present contract is governed by the RLA), courts have often looked to decisions under the NLRA for guidance in RLA matters. See generally Trans World Airlines, Inc. v. Independent Federation of Flight Attendants,
. In a previous order not here appealed, the bankruptcy court held that Continental's action in rejecting its collective bargaining agreements did not constitute a constructive discharge. In re Continental Airlines Corp.,
. In Bildisco, the Supreme Court ruled that “the filing of the petition in bankruptcy means that the collective-bargaining agreement is no longer immediately enforceable, and may never be enforceable again.”
Dissenting Opinion
dissenting in part.
I join all Judge Gee’s cogent opinion save for what is, under the facts of this case, a relatively minor disagreement as to the employee-claimants’ entitlement to damages. During the period in which Continental could have continued to operate under its labor contracts, as indicated in part B1 of the majority opinion, I would allow the striking employees to recover amounts not
I agree that this is not a statutory violation or unfair labor practice act case. I also agree that the strikers were not constructively discharged. Nevertheless, under basic principles of contract law, when Continental clearly repudiated its labor contracts by unilaterally reducing the agreed rates of pay, the employees were no longer required to tender performance.
A hypothetical example will illustrate my point. On January 1, A hires B to perform all of A’s audit work, for as long during the year as A has need for such, with B’s compensation to be at the rate of $5,000 a month. Sometime in June, A informs B that, because A believes good auditors are available at $3,500 a month, B’s wages for the final half of the year will be only $3,500 a month. Accordingly, B then accepts, effective July 1, an offer for similar work from C which pays $4,000 a month for the July 1 to December 31 period, and A promptly hires a replacement for B who works throughout the same time for $3,500 a month. I would allow B to recover $6,000 from A. The majority would allow B no recovery. But if B had rejected C’s offer and had continued (without waiving his contract rights) to work for A at the reduced $3,500 a month level, the majority would presumably allow B to recover $9,000 from A, as it allows pre-strike recovery here.
I accordingly dissent from so much of the majority opinion as disallows all recovery for any striking employee during any of the time he or she was on strike.
. I note that the majority does not hold that the strike was illegal. If it were illegal, that would put the issue in a different context.
. If, in the latter situation, the majority, limited B’s recovery to $6,000 (on the theory that he could have mitigated his otherwise $9,000 damages by accepting C’s offer), then the majority could not consistently deny B all recovery in the former situation (where he accepts C's offer).