Karas et al v. Allied Pilots Association et al

MOTION to Dismiss for Lack of Jurisdiction

D.D.C.November 23, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA JOHN KARAS, et al., Plaintiffs, v. Civil Action No. 1:16-cv-01971-RC ALLIED PILOTS ASSOCIATION, et al., Defendants. DEFENDANT AMERICAN AIRLINES, INC.’S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION AND MOTION FOR JUDGMENT ON THE PLEADINGS Pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(h)(3), and 12(c), Defendant American Airlines, Inc. (“American”) respectfully moves this Court for an order dismissing Plaintiffs’ Complaint in its entirety, as to both American and US Airways, Inc. (“US Airways”), for lack of subject-matter jurisdiction and for failure to state a claim for relief. The grounds for this Motion, as set forth more fully in the accompanying Memorandum of Points and Authorities, are as follows: 1. Count One of Plaintiffs’ Complaint, which alleges a cause of action for breach of the duty of fair representation (“DFR”), should be dismissed for failure to state a claim. Plaintiffs cannot state a claim for breach of DFR against American or US Airways, because only employees’ unions - not employers like American or US Airways - owe a duty of fair representation Case 1:16-cv-01971-RC Document 62 Filed 11/23/16 Page 1 of 5 -2- to employees. Moreover, even if Plaintiffs could establish that their current or former union breached its DFR to Plaintiffs, Plaintiffs do not allege any affirmative misconduct on the part of American or US Airways - a necessary prerequisite to potentially holding an employer liable for a union’s breach of DFR. 2. Plaintiffs’ claims in Count Two, for breach of “various merger implementation provisions” contained in agreements between American, US Airways and Plaintiffs’ union(s), should be dismissed for lack of subject-matter jurisdiction because those claims raise disputes involving the interpretation or application of collectively-bargained agreements. Under the Railway Labor Act (“RLA”), 45 U.S.C. §§ 151 et seq., such “minor disputes” must be resolved in accordance with the arbitration procedures set forth in the agreements. 3. Plaintiffs’ claim in Count Three, for declaratory relief under the federal McCaskill-Bond statute and its incorporation of Section 13 of the Allegheny-Mohawk Labor Protective Provisions (“LPPs”), should be dismissed for failure to state a claim. Plaintiffs’ Complaint is based on Section 13(a) of the Allegheny-Mohawk LPPs, but ignores that the US Airways-American seniority-integration arbitration was lawfully conducted in accordance with Section 13(b). The latter provision authorizes an airline and employee union(s) to agree on “an alternative Case 1:16-cv-01971-RC Document 62 Filed 11/23/16 Page 2 of 5 -3- method for dispute settlement” and not adhere to the specific procedures in Section 13(a). 4. Plaintiffs’ claim in Count Four, for injunctive relief under McCaskill-Bond, should be dismissed for lack of subject-matter jurisdiction because the claim is moot in light of the arbitration panel’s decision and American’s subsequent implementation of the integrated seniority list. Additionally, Plaintiffs’ allegations regarding data errors in the seniority-integration process raise “minor disputes” subject to mandatory arbitration and fail to state a claim under McCaskill-Bond in any event. 5. Plaintiffs’ sub-class claim in Count Two, for salary and vacation-accrual enhancements under Letter G of the collective bargaining agreement, should be dismissed for lack of subject-matter jurisdiction because it raises a “minor dispute” which can only be resolved by the appropriate arbitration tribunal in accordance with the RLA. For the above reasons, American respectfully submits that this Court should grant its Motion and dismiss Plaintiffs’ Complaint in its entirety as to both American and US Airways. Case 1:16-cv-01971-RC Document 62 Filed 11/23/16 Page 3 of 5 -4- Dated: November 23, 2016. O’MELVENY & MYERS LLP By: /s/ Chris A. Hollinger (admitted pro hac vice) Two Embarcadero Center 28th Floor San Francisco, CA 94111-3823 Telephone: (415) 984-8700 Facsimile: (415) 984-8701 E-mail: chollinger@omm.com Robert A. Siegel (D.C. Bar No. 1004474) Tristan Morales 1625 Eye Street, NW Washington, DC 20006 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 E-Mail: rsiegel@omm.com E-mail: tmorales@omm.com Attorneys for Defendant American Airlines, Inc. Case 1:16-cv-01971-RC Document 62 Filed 11/23/16 Page 4 of 5 -5- CERTIFICATE OF SERVICE I hereby certify that, on November 23, 2016, I caused a copy of the foregoing Motion and its attachments to be electronically filed via the Court’s ECF system. Notice of this filing will be sent to all parties of record by operation of the Court’s electronic filing system. I also certify that a courtesy copy of this filing was served by electronic mail on the following party who does not currently receive electronic notification of court filings: Patrick J. Boyd; THE BOYD LAW GROUP, PLLC; 370 Lexington Avenue; Suite 1705; New York, NY 10017; pboyd@theboydlawgroup.com. Mr. Boyd is Plaintiffs’ counsel. /s/ Chris A. Hollinger Chris A. Hollinger Case 1:16-cv-01971-RC Document 62 Filed 11/23/16 Page 5 of 5 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA JOHN KARAS, et al. Plaintiffs, v. ALLIED PILOTS ASSOCIATION, et al. Defendants. Civil Action No. 1:16-cv-01971-RC DEFENDANT AMERICAN AIRLINES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION AND MOTION FOR JUDGMENT ON THE PLEADINGS Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 1 of 29 TABLE OF CONTENTS Page -i- STATEMENT OF FACTS ............................................................................................................ 4 Plaintiffs’ Lawsuit .............................................................................................................. 4 US Airways-American Merger .......................................................................................... 5 The MOU And Protocol Agreement .................................................................................. 6 JCBA ................................................................................................................................ 7 Seniority-Integration Arbitration And Integrated Seniority List ....................................... 8 ARGUMENT ................................................................................................................................. 9 I. COUNT ONE, FOR ALLEGED BREACH OF THE DUTY OF FAIR REPRESENTATION, SHOULD BE DISMISSED PURSUANT TO RULE 12(c) BECAUSE PLAINTIFFS HAVE NOT ALLEGED ANY AFFIRMATIVE CONDUCT BY AMERICAN WHICH WOULD PERMIT AMERICAN TO BE HELD LIABLE FOR ANY BREACH OF THE DUTY OF FAIR REPRESENTATION BY THE PLAINTIFFS’ UNION(S) ............................................................................................................ 10 II. COUNT TWO, FOR ALLEGED BREACHES OF CONTRACT, SHOULD BE DISMISSED PURSUANT TO RULES 12(b)(1) AND 12(h)(3) BECAUSE PLAINTIFFS’ CLAIMS ARE SUBJECT TO THE MANDATORY AND EXCLUSIVE ARBITRAL JURISDICTION OF RAILWAY LABOR ACT BOARDS OF ADJUSTMENT................................. 13 III. COUNT THREE, FOR DECLARATORY JUDGMENT UNDER MCCASKILL-BOND, SHOULD BE DISMISSED FOR FAILURE TO STATE A CLAIM ............................................................................................... 16 IV. COUNT FOUR, FOR INJUNCTIVE RELIEF UNDER MCCASKILL- BOND, SHOULD BE DISMISSED ON MOOTNESS GROUNDS AND FOR FAILURE TO STATE A CLAIM .............................................................. 19 A. Count Four Should Be Dismissed Pursuant To Rules 12(b)(1) And 12(h)(3) Because The Seniority-Integration Process Has Now Been Completed And Plaintiffs’ Claim Is Moot ............................................... 20 B. Count Four Should Also Be Dismissed Pursuant To Rule 12(c) For Failure To State A Claim For Relief Under McCaskill-Bond ................. 22 CONCLUSION ............................................................................................................................ 23 Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 2 of 29 TABLE OF AUTHORITIES Page(s) -ii- Cases Akiachak Native Cmty. v. U.S. Dep’t of Interior, 827 F.3d 100 (D.C. Cir. 2016) .................................................................................................21 Allegheny-Mohawk Merger Case, 59 C.A.B. 19 (1972) .......................................................................................................17 *Am. Airlines Flow-Thru Pilots Coalition v. Allied Pilots Ass’n, No. 15-cv-03125-RS (Doc. No. 37) (N.D. Cal. Dec. 17, 2015) ..............................................11 Am. Postal Workers Union, Local 6885 v. Am. Postal Workers Union, 665 F.2d 1096 (D.C. Cir. 1981) ...............................................................................................12 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................................10 Ass’n of Flight Attendants-CWA v. Delta Air Lines, Inc., No. CV-08-2009-RWR, 2010 WL 5300534 (D.D.C. Dec. 21, 2010) .....................................19 *Bhd. of Locomotive Eng’rs v. Louisville & Nashville R.R. Co., 373 U.S. 33 (1963) ...................................................................................................................14 Bhd. of Maint. of Way Emps. Div./IBT v. Nat’l R.R. Passenger Corp., Civil Action No. 16-1109 RC, 2016 WL 6783199 (D.D.C. Nov. 16, 2016) .......................8, 14 Ctr. for Envtl. Sci. v. Cowin, No. 115CV01852LJOBAM, 2016 WL 1267572 (E.D. Cal. Mar. 31, 2016), reconsideration denied, No. 115CV01852LJOBAM, 2016 WL 3196774 (E.D. Cal. June 8, 2016) ......................................................................................................................9 Davenport v. Int’l Bhd. of Teamsters, 981 F. Supp. 6 (D.D.C. 1997), aff’d and remanded, 166 F.3d 356 (D.C. Cir. 1999) ........................................................................................................................................11 U.S. ex rel. Doe v. Staples, Inc., 932 F. Supp. 2d 34 (D.D.C. 2013) .............................................................................................9 Elgin, Joliet & E. Ry. Co. v. Burley, 325 U.S. 711 (1945) .................................................................................................................14 *Flight Attendants in Reunion v. Am. Airlines, Inc. (“FAIR”), 813 F.3d 468 (2d Cir. 2016)...............................................................................................16, 22 Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 3 of 29 TABLE OF AUTHORITIES (continued) Page(s) -iii- *Gullaksen v. United Air Lines, 68 F. Supp. 3d 66 (D.D.C. 2014) .............................................................................................13 Jung v. Ass’n of American Medical Colleges, 339 F. Supp. 2d 26 (D.D.C. 2004) .............................................................................................9 Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221 (D.C. Cir. 1993) .................................................................................................8 Montanans for Multiple Use v. Barbouletos, 542 F. Supp. 2d 9 (D.D.C. 2008) .........................................................................................9, 10 Nat’l Airlines Acquisition, 95 C.A.B. 584 (1982) ...............................................................................................................23 *Nat’l Football League Players Ass’n v. Pro Football, Inc., 56 F.3d 1525 (D.C. Cir. 1995), vacated in part on other grounds, 79 F.3d 1215 (D.C. Cir. 1996) ..............................................................................................................21 *Newdow v. Roberts, 603 F.3d 1002 (D.C. Cir. 2010) ...............................................................................................21 *Oakey v. US Airways Pilots Disability Income Plan, 723 F.3d 227 (D.C. Cir. 2013) .................................................................................................14 Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36 (D.C. Cir. 2000) .....................................................................................................8 *Rakestraw v. United Airlines, Inc., 765 F. Supp. 474 (N.D. Ill. 1991), aff’d in relevant part, rev’d in part, 981 F.2d 1524 (7th Cir. 1992) ........................................................................................................11 *Sibley v. Alexander, 916 F. Supp. 2d 58 (D.D.C. 2013) ...........................................................................................22 Tax Analysts v. IRS, 214 F.3d 179 (D.C. Cir. 2000) .................................................................................................19 Tefera v. OneWest Bank, FSB, 19 F. Supp. 3d 215 (D.D.C. 2014) ...........................................................................................12 Thomas v. Republic Airways Holdings, Inc., No. 11-cv-01313-RPM, 2012 WL 683525 (D. Colo. Mar. 2, 2012) .......................................17 Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 4 of 29 TABLE OF AUTHORITIES (continued) Page(s) -iv- True the Vote, Inc. v. Internal Revenue Serv., 831 F.3d 551 (D.C. Cir. 2016) ...........................................................................................20, 21 United States v. Philip Morris USA, Inc., 787 F. Supp. 2d 68 (D.D.C. 2011) .............................................................................................9 Statutes 28 U.S.C. § 1404(a) .........................................................................................................................4 45 U.S.C. §§ 151 et seq. ................................................................................................................2 49 U.S.C. § 42112(a) .......................................................................................................................1 Other Authorities Railway Labor Act (Chris A. Hollinger, ed., 3rd ed. 2012) ..........................................................14 Rules Fed. R. Civ. P. 12(b)(1).......................................................................................................... passim Fed. R. Civ. P. 12(b)(6)........................................................................................................9, 10, 12 Fed. R. Civ. P. 12(c) .............................................................................................................. passim Fed. R. Civ. P. 12(h)(3).......................................................................................................... passim Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 5 of 29 Plaintiffs, a sub-set of former US Airways, Inc. (“US Airways”) pilots now employed by American Airlines, Inc. (“American”) following the merger between those two airlines in 2013, principally claim that an arbitration conducted before a neutral three-member panel pursuant to the McCaskill-Bond Amendment to the Federal Aviation Act, 49 U.S.C. § 42112(a) (“McCaskill-Bond”), to integrate the US Airways pilot seniority lists with the American pilot seniority list, was not “fair and equitable.” At the time Plaintiffs filed their Complaint in February 2016, they literally had no clue as to the ultimate outcome of the seniority-integration process they claimed was unfair: the full complement of 19 days of evidentiary hearings had been completed, but the arbitration panel had not yet issued its decision. The decision (the “SLI Award”), including the integrated seniority list, has since been issued (on September 6, 2016), and implemented by American (effective October 1, 2016). In light of these developments, Plaintiffs’ claims seeking to enjoin the seniority-integration process have been mooted and should be dismissed for lack of subject-matter jurisdiction pursuant to Rules 12(b)(1) and 12(h)(3) of the Federal Rules of Civil Procedure. Additionally, these and all of Plaintiffs’ other seniority-related claims are subject to dismissal for failure to state a claim pursuant to Rule 12(c). First, Plaintiffs’ claim in Count One against American and US Airways, for breach of the duty of fair representation (“DFR”), should be dismissed pursuant to Rule 12(c) because an employer does not owe a duty of fair representation to its employees. That duty belongs to the employees’ union and, even if Plaintiffs could allege/establish that their current union, Defendant Allied Pilots Association (“APA”), or Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 6 of 29 -2- their former union, Defendant US Airline Pilots Association (“USAPA”), had breached its DFR to Plaintiffs in connection with the seniority-integration process, the DFR claim against American and US Airways should still be dismissed; Plaintiffs have not alleged any affirmative misconduct on the part of American or US Airways and thus, as a matter of law, Plaintiffs cannot establish any basis for holding American or US Airways liable for any alleged breach of DFR by their union(s). Second, Plaintiffs’ claims in Count Two, for breach of “various merger implementation provisions” of the four-party Memorandum Of Understanding Regarding Contingent Collective Bargaining Agreement (“MOU”) and the Seniority Integration Protocol Agreement (“Protocol Agreement”) should be dismissed for lack of subject- matter jurisdiction pursuant to Rules 12(b)(1) and 12(h)(3). Under the Railway Labor Act (“RLA”), 45 U.S.C. §§ 151 et seq., those claims, which raise disputes involving the interpretation or application of collectively-bargained agreements, must be resolved in accordance with the arbitration procedures set forth in the agreements. Third, Plaintiffs’ claim in Count Three, for declaratory relief under McCaskill- Bond, should be dismissed for failure to state a claim. Plaintiffs’ lone allegation is that the US Airways-American seniority-integration process failed to comply with procedural requirements regarding the parties to arbitrations under Section 13 of the Allegheny- Mohawk Labor Protective Provisions (“LPPs”), which were incorporated into statutory law by McCaskill-Bond. The procedural requirement invoked by Plaintiffs, however, is found in Section 13(a) of the Allegheny-Mohawk LPPs, whereas it is undisputed that the US Airways-American seniority-integration arbitration was conducted pursuant to Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 7 of 29 -3- Section 13(b). The latter provision of the Allegheny-Mohawk LPPs expressly permits an airline and the employees’ union(s) to agree on “an alternative method for dispute settlement” - which is what happened here and what makes the requirements of Section 13(a) totally irrelevant to the lawfulness of the US Airways-American seniority- integration process. Fourth, Plaintiffs’ claim in Count Four, for injunctive relief under McCaskill- Bond, should be dismissed for lack of subject-matter jurisdiction because the claim is moot in light of the issuance of the SLI Award and implementation of the integrated seniority list. Count Four is deficient for other reasons as well. Plaintiffs’ conclusory allegations as to supposedly-uncorrected data errors in the seniority-integration process raise disputes under the MOU that are subject to mandatory and exclusive arbitration and, in any event, do not rise to the level of a cognizable claim under McCaskill-Bond. 1 Finally, Plaintiffs’ claim in Count Two on behalf of a putative sub-class of approximately 63 pilots, that American breached Letter G of the joint collective bargaining agreement (“JCBA”) by failing to give them certain pay and vacation enhancements, should be dismissed for lack of subject-matter jurisdiction. This claim is a textbook contract-interpretation dispute which can only be resolved by the appropriate arbitration tribunal in accordance with the RLA. 1 Count Five is a request for attorney’s fees and expenses, and does not state a claim against American or US Airways. Count Five should be dismissed with the rest of Plaintiffs’ Complaint. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 8 of 29 -4- Accordingly, Plaintiffs’ Complaint should be dismissed in its entirety as to American and US Airways pursuant to Rules 12(b)(1), 12(h)(3), and 12(c) of the Federal Rules of Civil Procedure. STATEMENT OF FACTS 2 Plaintiffs’ Lawsuit Plaintiffs, on behalf of themselves and a putative class of pilots (the “East Pilots”) who worked for US Airways prior to its merger in 2005 with America West Airlines, Inc. (“America West”) contend that various airline and union entities have violated their rights under the RLA, McCaskill-Bond, and the JCBA. The main focus of Plaintiffs’ Complaint is their claim that the arbitration process used to integrate the East Pilots seniority list with the seniority list of the US Airways pilots who formerly worked for America West (the “West Pilots”) and the seniority list of the pre-merger American pilots was not “fair and equitable.” A putative sub-class of approximately 63 East Pilots also assert that they are entitled to certain pay and vacation enhancements under Letter G to the JCBA. Plaintiffs filed their Complaint on or about February 15, 2016 in the United States District Court for the Northern District of New York. The case was transferred to the District of Columbia on October 6, 2016, pursuant to 28 U.S.C. § 1404(a). The Plaintiffs have sued: (i) American; (ii) US Airways; (iii) the APA, which is currently the collective 2 The Statement of Facts herein is based on the well-pleaded factual allegations in Plaintiffs’ Complaint, which are accepted as true for purposes of the instant motion only, as well as the exhibits attached to the Complaint. American’s motion also relies upon materials of which this Court may take judicial notice, and extrinsic evidence germane to the Court’s subject-matter jurisdiction. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 9 of 29 -5- bargaining representative for all of American’s pilots (including Plaintiffs); (iv) the East Pilots Seniority Integration Committee (“EPSIC”), which is a merger committee appointed by the APA to represent the interests of the East Pilots in the seniority- integration process; (v) USAPA, which was Plaintiffs’ collective bargaining representative prior to the US Airways-American merger and until September 16, 2014, when it was replaced by the APA; and (vi) the USAPA Merger Committee, a merger committee appointed by USAPA which participated in the seniority-integration process until it withdrew from that process on June 29, 2015. Two other pilot merger committees which participated in the seniority-integration proceeding, the West Pilots Seniority Integration Committee and the pre-merger American Airlines Pilots Seniority Integration Committee, are not parties to this action. Plaintiffs assert claims for: (1) breach of DFR under the RLA; (2) breach of contract under the JCBA, MOU, and Protocol Agreement; (3) declaratory judgment under McCaskill-Bond; (4) injunctive relief under McCaskill- Bond; and (5) attorneys’ fees under the common benefit doctrine. US Airways-American Merger American is a major domestic and international airline. (Complaint [“Compl.”] [Doc. No. 1], ¶ 21.) The merger transaction involving American and US Airways became effective on December 9, 2013, when US Airways Group, Inc., the corporate parent of US Airways, became a wholly-owned subsidiary of American Airlines Group Inc. (“AAG”). At that time, American also was a wholly-owned subsidiary of AAG. On Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 10 of 29 -6- December 30, 2015, US Airways was merged with and into American, with American remaining as the surviving corporation and a wholly-owned subsidiary of AAG. 3 The MOU And Protocol Agreement Prior to and for months after the US Airways-American merger, the Company, APA, and USAPA engaged in discussions regarding the seniority-integration process at issue in this case. (Compl. ¶ 35.) In anticipation of the merger, US Airways, American, APA, and USAPA had negotiated the MOU in December 2012/January 2013. (See Compl. ¶ 40; Ex. B.) Section 10 of the MOU provided for “a seniority integration process consistent with McCaskill-Bond [to] begin as soon as possible after the Effective Date [of the MOU].” (Compl. Ex. B § 10(a).) The MOU provided further that the “integrated seniority list resulting from the McCaskill-Bond process shall be final and binding on APA and USAPA (and/or the certified bargaining representative of the combined pilot group), the company(ies) and its (their) successors (if any), and all of the pilots of American/New American Airlines and US Airways.” (Id. § 10(c).) The MOU contemplated arbitration “[i]f, on the date ninety (90) days following the Effective Date [of the MOU], direct negotiations have failed to result in a merged seniority list acceptable to the pilots at both airlines.” (Compl. Ex. B § 10(a).) The Company was to “be part[y] to the arbitration, if any, in accordance with McCaskill- Bond . . . [and to] provide information requested by the merger representatives for use in 3 US Airways no longer exists as a separate legal entity. Where applicable, American and US Airways are sometimes collectively referred to as the “Company.” Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 11 of 29 -7- the arbitration.” (Id. § 10(f).) The Company also agreed to “remain neutral regarding the order in which pilots are placed on the integrated seniority list.” (Id. § 10(d).) The MOU contemplated further that the parties would enter into a “Protocol Agreement consistent with McCaskill-Bond and this Paragraph 10 [of the MOU] . . . [to] set forth the process and protocol for conducting negotiations and arbitration, if applicable.” (Compl. Ex. B § 10(f).) The parties to the MOU began their Protocol Agreement negotiations after the consummation of the merger and eventually reached agreement on or about September 4, 2014. (Compl. ¶¶ 46-47.) The Protocol Agreement provided that “[t]he Arbitration Board shall have the authority to establish a fair and equitable integrated seniority list as required by the McCaskill-Bond Act . . . .” (Compl. Ex. C § 7.) JCBA During 2014 and January 2015, the Company and APA engaged in negotiations for a JCBA that would be applicable to both the pre-merger American and the pre-merger US Airways pilots. 4 As part of these negotiations, the Company and APA agreed in Letter G to provide a length of service credit, for pay and vacation accrual purposes, for certain pilots from American and US Airways who had been furloughed from their mainline carrier after September 11, 2001. (See Compl. ¶¶ 60-62; Ex. A.) 4 By this time, USAPA had been decertified as the union for the pre-merger US Airways pilots and replaced by the APA. (See Compl. ¶ 48.) Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 12 of 29 -8- Seniority-Integration Arbitration And Integrated Seniority List In accordance with the Protocol Agreement, the seniority-integration arbitration began in September 2015 with “[t]he interests of the three pilot groups . . . represented respectively by separate American, East, and West Merger Committees created by the [APA].” (Compl. ¶ 86; SLI Award at 2 [attached hereto as Exhibit A].) 5 As stated by the arbitration panel, the “arbitration was conducted in accordance with the requirements of the 2007 McCaskill-Bond amendments,” and “Evidentiary hearings were held in Washington D.C. during the period September 29, 2015-January 15, 2016, at which the respective Committees were represented by Counsel and offered full opportunity to submit oral and documentary evidence, including direct testimony and expert opinions, all subject to cross-examination and rebuttal.” (SLI Award at 2.) The arbitration panel issued its decision on September 6, 2016, and, in accordance with the Protocol Agreement, American accepted the decision and thereafter implemented the integrated seniority list effective October 1, 2016. (See Declaration of Mark R. Myers [Doc. No. 58 Att. 2] ¶ 33.) 6 5 The SLI Award has been filed with the United States District Court for the District of Columbia in Case No. 1:16-mc-01956 (see also Doc. No. 48), and is therefore an appropriate subject for judicial notice. See Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 n. 6 (D.C. Cir. 1993). 6 Where, as here, the defendant challenges the factual sufficiency of the plaintiff’s jurisdictional allegations, the Court should consider the extrinsic evidence presented by the parties. Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000); Bhd. of Maint. of Way Emps. Div./IBT v. Nat’l R.R. Passenger Corp., Civil Action No. 16-1109 RC, 2016 WL 6783199, at *3 (D.D.C. Nov. 16, 2016). In this motion, American relies upon extrinsic evidence with respect to mootness and arbitrability, both of which relate to the Court’s subject- matter jurisdiction and therefore warrant consideration of material outside the pleadings. See, e.g., Bhd. of Maint. of Way Emps. Div./IBT, 2016 WL 6783199, at *4 (district court considers extrinsic evidence in determining whether dispute is “minor dispute” under RLA and outside Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 13 of 29 -9- ARGUMENT American moves to dismiss Plaintiffs’ Complaint pursuant to Rules 12(b)(1), 12(h)(3) and 12(c) of the Federal Rules of Civil Procedure. Rule 12(h)(3) states that “[i]f the court determines at any time that it lacks subject- matter jurisdiction, the court must dismiss the action.” A motion to dismiss under Rule 12(h)(3) “must be treated as a challenge to subject matter jurisdiction under Rule 12(b)(1), which ‘may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment.’” United States v. Philip Morris USA, Inc., 787 F. Supp. 2d 68, 73 (D.D.C. 2011) (quoting Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006)). To survive American’s Rule 12(b)(1) motion to dismiss, the Plaintiffs must establish that this Court has subject-matter jurisdiction over their claims. See, e.g., U.S. ex rel. Doe v. Staples, Inc., 932 F. Supp. 2d 34, 38 (D.D.C. 2013). Rule 12(c) provides that, “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Montanans for Multiple Use v. Barbouletos, 542 F. Supp. 2d 9, 13 (D.D.C. 2008). A Rule 12(c) motion is analyzed using the same standard that governs a Rule 12(b)(6) motion to dismiss, Jung v. Ass'n of American Medical Colleges, 339 F. Supp. 2d 26, 35-36 (D.D.C. 2004), and should be granted where “no material issue of fact remains to be solved, and [the movant] court’s subject-matter jurisdiction); Ctr. for Envtl. Sci. v. Cowin, No. 115CV01852LJOBAM, 2016 WL 1267572, at *3 n.6 (E.D. Cal. Mar. 31, 2016), reconsideration denied, No. 115CV01852LJOBAM, 2016 WL 3196774 (E.D. Cal. June 8, 2016) (jurisdictional challenge based on mootness allows court to “examine extrinsic evidence”). Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 14 of 29 -10- is clearly entitled to judgment as a matter of law.” Barbouletos, 542 F. Supp. 2d at 13. Under the standard governing Rule 12(b)(6) motions, a complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Mere conclusory statements do not suffice,” id., and, after disregarding any and all conclusory statements, this Court must determine if any remaining well-pleaded factual allegations “plausibly suggest an entitlement to relief.” Id. at 681. Allegations which show “the mere possibility of misconduct” do not establish that “the pleader is entitled to relief.” Id. at 679. Thus, even where allegations taken as true “are consistent with” actionable conduct, the complaint still must be dismissed if those allegations are “more likely explained by, lawful . . . behavior.” Id. at 680 (internal citations omitted). I. COUNT ONE, FOR ALLEGED BREACH OF THE DUTY OF FAIR REPRESENTATION, SHOULD BE DISMISSED PURSUANT TO RULE 12(C) BECAUSE PLAINTIFFS HAVE NOT ALLEGED ANY AFFIRMATIVE CONDUCT BY AMERICAN WHICH WOULD PERMIT AMERICAN TO BE HELD LIABLE FOR ANY BREACH OF THE DUTY OF FAIR REPRESENTATION BY THE PLAINTIFFS’ UNION(S). In Count One, Plaintiffs allege - in the most conclusory of fashions - that Defendants American, US Airways, APA, EPSIC, and the USAPA Merger Committee breached the duty of fair representation to Plaintiffs by failing to adequately represent Plaintiffs’ interests in the seniority-integration process. (See Compl. ¶¶ 122-127.) Count One should be dismissed as to American and US Airways for the simple reason that the Company has no duty of fair representation to Plaintiffs or any other employees. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 15 of 29 -11- Although a union, such as APA and USAPA, owes a DFR to all of the employees it represents, employers have no such duty. See, e.g., Davenport v. Int’l Bhd. of Teamsters, 981 F. Supp. 6, 8-9 (D.D.C. 1997) (“the duty of fair representation creates no independent obligation that runs to the employer”), aff’d and remanded, 166 F.3d 356 (D.C. Cir. 1999); Am. Airlines Flow-Thru Pilots Coalition v. Allied Pilots Ass’n, No. 15- cv-03125-RS, Slip Op. (Doc. No. 37) at *4 (N.D. Cal. Dec. 17, 2015) (“[A]merican itself does not directly owe a duty of fair representation to [the pilots]”) (attached hereto as Exhibit B). And, while employers may in very limited circumstances be held derivatively liable if they have colluded in a union’s breach of its DFR, no such allegations have been or can be made here - where American and US Airways did nothing more than fulfill their contractual obligation under the MOU “to remain neutral regarding the order in which pilots are placed on the integrated seniority list.” (Compl. Ex. B § 10(d).) The decision in Rakestraw v. United Airlines, Inc., 765 F. Supp. 474, 493 (N.D. Ill. 1991), aff’d in relevant part, rev’d in part, 981 F.2d 1524 (7th Cir. 1992), is instructive. There, the district court dismissed plaintiffs’ claim that an airline had colluded in a union’s breach of its DFR by accepting the union’s request to switch the order of two groups of pilots on the seniority list. The district court found that, even though the airline was well-aware of the animosity between the union and the disfavored group of pilots, there was no “evidence that [the airline] acted in bad faith or discriminated against plaintiffs in accepting [the union’s] proposal.” Id. The reasoning of Rakestraw is soundly based in labor policy. Unless evidence (or, in the case of a Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 16 of 29 -12- Rule 12(b)(6)/Rule 12(c) motion, well-pleaded allegations) of actual employer misconduct is required, an employer would have an affirmative obligation to supervise a union in every instance where the union exercised its representational responsibilities. See Am. Postal Workers Union, Local 6885 v. Am. Postal Workers Union, 665 F.2d 1096, 1108-09 (D.C. Cir. 1981). Here, Plaintiffs do not specifically allege any affirmative conduct by American or US Airways reflecting a discriminatory intent or hostility towards the Plaintiffs. Although they allege that American, US Airways (and others) “refuse[d] to abide by the MOU and the Protocol Agreement with respect to seniority integration” (Compl. ¶ 125), the plain terms of both agreements required American and US Airways to remain neutral during the seniority-integration process. 7 Thus, Plaintiffs’ allegation that American and US Airways, along with the APA, EPSIC and USAPA Merger Committee, were “unable or unwilling to provide” the “full and fair representation of their interests by a bargaining agent committed to such interests” (Compl. ¶¶ 124, 123 [emphasis added]), merely reaffirms that American and US Airways complied with their neutrality obligation during 7 The MOU provides: “During the McCaskill-Bond process, including any arbitration proceeding, US Airways, American or New American Airlines, or their successors (if any), shall remain neutral regarding the order in which pilots are placed on the integrated seniority list . . . .” (Compl. Ex. B § 10(d).) The Protocol Agreement provides: “The parties to the seniority integration before the Arbitration Board will be the Merger Committees and American; provided, that the participation of American shall conform to Paragraph 10.d of the MOU.” (Compl. Ex. C § 9.) In deciding a motion under Rule 12(b)(6)/Rule 12(c), “a court may consider ‘the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint,’ or ‘documents upon which the plaintiff's complaint necessarily relies even if the parties do not produce the document.’” Tefera v. OneWest Bank, FSB, 19 F. Supp. 3d 215, 220 (D.D.C. 2014) (quoting Busby v. Capital One, N.A., 932 F. Supp. 2d 114, 133-34 (D.D.C. 2013)). Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 17 of 29 -13- the seniority-integration process and did not impermissibly second-guess the positions and conduct of the various merger committees which had been established to represent the interests of the various groups of pilots. Plaintiffs’ allegations do not state a claim that American or US Airways engaged in independent discriminatory conduct towards Plaintiffs or otherwise colluded in any alleged breach of DFR by Plaintiffs’ union(s). Count One should therefore be dismissed as to American and US Airways. See, e.g., Gullaksen v. United Air Lines, 68 F. Supp. 3d 66, 71 (D.D.C. 2014) (“Nowhere in the Complaint do plaintiffs plead actual facts to support an allegation of collusion between ALPA and United.”) (Leon, J.). II. COUNT TWO, FOR ALLEGED BREACHES OF CONTRACT, SHOULD BE DISMISSED PURSUANT TO RULES 12(B)(1) AND 12(H)(3) BECAUSE PLAINTIFFS’ CLAIMS ARE SUBJECT TO THE MANDATORY AND EXCLUSIVE ARBITRAL JURISDICTION OF RAILWAY LABOR ACT BOARDS OF ADJUSTMENT. In Count Two, Plaintiffs allege that American and the APA breached contractual obligations to Plaintiffs by: (1) failing to provide “salary and vacation adjustments” under Letter G of the JCBA for their time spent on furlough from other airlines; and (2) failing to comply with “various merger implementation provisions” of the MOU and Protocol Agreement. (Compl. ¶¶ 128-135.) Plaintiffs cannot establish subject-matter jurisdiction over their breach-of-contract claims, because, under the RLA, those claims fall squarely within the mandatory and exclusive arbitral jurisdiction of the boards of adjustment. Count Two of Plaintiffs’ Complaint should, accordingly, be dismissed as to American and US Airways pursuant to Rules 12(b)(1) and 12(h)(3) of the Federal Rules of Civil Procedure. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 18 of 29 -14- Under the RLA, a “minor dispute” is a grievance or other matter involving the interpretation or application of a collective bargaining agreement. See Elgin, Joliet & E. Ry. Co. v. Burley, 325 U.S. 711, 722-23 (1945). 8 Federal courts lack jurisdiction to adjudicate the merits of a minor dispute because, under the RLA’s statutory scheme, a minor dispute falls within the “mandatory, exclusive, and comprehensive” jurisdiction of the appropriate arbitral board of adjustment. See, e.g., Bhd. of Locomotive Eng’rs v. Louisville & Nashville R.R. Co., 373 U.S. 33, 36-38 (1963); Oakey v. US Airways Pilots Disability Income Plan, 723 F.3d 227, 230, 235-38 (D.C. Cir. 2013); Bhd. of Maint. of Way Emps. Div./IBT, 2016 WL 6783199, at *4; see also The Railway Labor Act, Ch. 9.I.A.1 (Chris A. Hollinger, ed., 3rd ed. 2012) (claims for breach of collective bargaining agreement are subject to exclusive jurisdiction of system board of adjustment). Plaintiffs’ breach-of-contract claims against American and US Airways must be dismissed because they unquestionably raise minor disputes subject to the mandatory and exclusive jurisdiction of a board of adjustment. First, Plaintiffs allege that 63 legacy US Airways pilots “have been and continue to be denied the salary and vacation accrual adjustments that was [sic] contractually obligated by Letter G and the JCBA.” (Compl. ¶ 130.) Plaintiffs’ Letter G claim is, by its very own terms, based on the alleged “failure of APA and American Airlines to 8 A “major dispute,” on the other hand, involves a situation “where there is no . . . agreement or where it is sought to change the terms of one, and therefore the issue is not whether an existing agreement controls the controversy.” Elgin, Joliet, 325 U.S. at 723. The Plaintiffs’ allegations in this case do not involve a major dispute. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 19 of 29 -15- comply with their contractual obligations.” (Id. ¶ 131.) Plaintiffs’ Letter G claim is, thus, a textbook example of a minor dispute under the RLA: a dispute which is grounded in the interpretation or application of a collectively-bargained agreement and which lies within the exclusive jurisdiction of an RLA arbitration tribunal. Indeed, Plaintiffs’ current union, the APA, has filed a grievance on Plaintiffs’ behalf seeking the same salary and vacation accrual adjustments under Letter G that are sought by Plaintiffs in Count Two of their Complaint; that grievance is currently pending. (See Declaration of Mark R. Myers [Doc. No. 58 Att. 2] ¶¶ 20-29.) Second, Plaintiffs allege that American and the other Defendants “have also disregarded various merger implementation provisions of the Protocol Agreement and MOU[,] thereby breaching their contractual obligations under those agreements.” (Compl. ¶ 132; see also id. ¶ 125.) Plaintiffs’ conclusory assertion that “various merger implementation provisions” have been breached is accompanied by a lone specific allegation that “the Defendants are allowing pilot seniority lists other than the Status Quo Lists to be used” in the seniority-integration process. (See id. ¶ 133.) Yet, as Plaintiffs’ own Complaint acknowledges (see id. ¶¶ 44, 133), the MOU is the source of any obligation to use the “Status Quo Lists.” These contractual claims thus require interpretation of the MOU, and, in accordance with the RLA, both the MOU and the Protocol Agreement mandate arbitration to resolve such disputes. 9 9 The MOU provides for a “specially-created one-person System Board of Adjustment” to arbitrate disputes arising under the MOU. (See Compl. Ex. B § 20.) The Protocol Agreement established an Arbitration Board with the authority “to resolve any dispute regarding the Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 20 of 29 -16- III. COUNT THREE, FOR DECLARATORY JUDGMENT UNDER MCCASKILL-BOND, SHOULD BE DISMISSED FOR FAILURE TO STATE A CLAIM. In Count Three, Plaintiffs seek a declaratory judgment that “the SLI arbitration is fundamentally flawed and unfair and in violation of McCaskill-Bond’s requirement that seniority integration be fair and equitable,” and that “integration of the seniority lists of US Airways and American pilots is governed by and must be completed pursuant to Section 13(a) of the Allegheny-Mohawk LPPs and McCaskill-Bond.” (Compl. ¶¶ 147, 148.) Count Three fails to state a claim that American violated McCaskill-Bond’s requirement for a “fair and equitable” seniority integration when it accepted and implemented the integrated seniority list issued by a panel of three neutral arbitrators following an arbitration hearing that featured merger committees representing each of the pilot groups at post-merger American. Enacted by Congress in 2007, McCaskill-Bond generally requires airlines to provide for “the integration of seniority lists in a fair and equitable manner,” in accordance with Sections 3 and 13 of the labor-protective provisions (“LPPs”) imposed by the Civil Aeronautics Board in the Allegheny-Mohawk merger case prior to deregulation of the airline industry in 1978. See Flight Attendants in Reunion v. Am. Airlines, Inc. (“FAIR”), 813 F.3d 468, 472 (2d Cir. 2016) (quotation marks and citation omitted). Section 3 of the Allegheny-Mohawk LPPs, in turn, required that “provisions shall be made for the integration of seniority lists in a fair and equitable manner, interpretation and application of this Protocol Agreement arising prior to issuance of the final award . . . .” (Compl. Ex. C ¶ 7.) Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 21 of 29 -17- including, where applicable, agreement through collective bargaining between the carriers and the representatives of the employees affected. In the event of failure to agree, the dispute may be submitted by either party for adjustment in accordance with section 13.” Allegheny-Mohawk Merger Case, 59 C.A.B. 19, 45 (1972). Section 13 of the Allegheny-Mohawk LPPs provided as follows: a. In the event that any dispute or controversy (except as to matters arising under Section 9) arises with respect to the protections provided herein which cannot be settled by the parties within 20 days after the controversy arises, it may be referred by any party to an arbitrator selected from a panel of seven names furnished by the National Mediation Board for consideration and determination. The parties shall select the arbitrator from such panel by alternatively striking names until only one remains, and he shall serve as arbitrator. Expedited hearings and decisions will be expected, and a decision shall be rendered within 90 days after the controversy arises, unless an extension of time is mutually agreeable to all parties. The salary and expenses of the arbitrator shall be borne equally by the carrier and (i) the organization or organizations representing employee or employees or (ii) if unrepresented, the employee or employees or group or groups of employees. The decision of the arbitrator shall be final and binding on the parties. b. The above condition shall not apply if the parties by mutual agreement determine that an alternative method for dispute settlement or an alternative procedure for selection of an arbitrator is appropriate in their particular dispute. No party shall be excused from complying with the above condition by reason of having suggested an alternative method or procedure unless and until that alternative method or procedure shall have been agreed to by all parties. (Emphasis added.) Congress expressly incorporated Sections 3 and 13 of the Allegheny-Mohawk LPPs into McCaskill-Bond. See Thomas v. Republic Airways Holdings, Inc., No. 11-cv-01313- RPM, 2012 WL 683525, at *2 (D. Colo. Mar. 2, 2012) (Under McCaskill-Bond, “[S]ections 3 and 13 of the CAB’s labor protective provisions in the Allegheny-Mohawk merger became statutory law.”). Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 22 of 29 -18- Plaintiffs’ claim in Count Three is based on the assertions that McCaskill-Bond “require[s] arbitration to be between the carrier and the collective bargaining agent(s),” and that the seniority-integration process in the US Airways-American merger violated that supposed requirement because “there are multiple committees negotiating seniority list integration issues.” (Compl. ¶¶ 144, 145.) Plaintiffs’ Complaint reflects a fundamental misunderstanding of McCaskill-Bond and the Allegheny-Mohawk LPPs. Under Allegheny-Mohawk, if the parties to a seniority-integration process are unable to reach a negotiated agreement pursuant to Section 3 on how the pre-merger seniority lists are to be integrated, they have two options for generating an integrated seniority list. Pursuant to Section 13(a), any party may refer the controversy to “an arbitrator selected from a panel of seven names furnished by the National Mediation Board” for an arbitration to be conducted in accordance with the specific requirements in Section 13(a). But, Section 13(b) provides a second option, stating that: “The above condition [i.e., Section 13(a)] shall not apply if the parties by mutual agreement determine that an alternative method for dispute settlement or an alternative procedure for selection of an arbitrator is appropriate in their particular dispute.” (Emphasis added.) The parties are free under Section 13(b) to agree on “an alternative method for dispute settlement” - a method other than the arbitration described in Section 13(a) - and Plaintiffs have conceded that the Protocol Agreement in this case was executed in accordance with Section 13(b). (Compl. ¶ 97.) Accordingly, Plaintiffs miss the mark with their conclusory assertion that Section 13 “require[s] arbitration between the carrier and the employee groups or their representatives, if unionized, not between the employee Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 23 of 29 -19- groups or union representatives themselves.” (Compl. ¶ 99.) Plaintiffs do not allege that an arbitration conducted by agreement of the parties pursuant to Section 13(b) is subject to any such requirement - nor could they, given that Section 13(b) expressly authorizes the parties to “determine . . . an alternative method for dispute settlement.” Accordingly, even if there is a private right of action under McCaskill-Bond, 10 Plaintiffs’ contention that the seniority-integration arbitration in this case violated the statute on account of the involvement of multiple employee committees fails to state a claim for relief. IV. COUNT FOUR, FOR INJUNCTIVE RELIEF UNDER MCCASKILL- BOND, SHOULD BE DISMISSED ON MOOTNESS GROUNDS AND FOR FAILURE TO STATE A CLAIM. In Count Four, Plaintiffs allege that the EPSIC, APA and USAPA “have failed or refused to advocate or articulate the[ir] interests or positions,” that “[i]ncorrect and inconsistent date of hire data for East Pilots continues to be used for seniority list integration,” and that “[t]hese actions have rendered the [seniority list integration] arbitration process fundamentally flawed, unfair and in direct contravention of the chief directive of McCaskill-Bond that airline industry seniority integration be fair and equitable.” (Compl. ¶¶ 151, 152, and 153.) Plaintiffs contend further that they “have no adequate remedy at law should such arbitration proceed toward final resolution” and “shall be irreparably harmed should the Court not enjoin the Defendants from proceeding 10 McCaskill-Bond contains no express provision for a private cause of action, and “violation of a federal statute alone is inadequate to support a private cause of action.” Tax Analysts v. IRS, 214 F.3d 179, 185 (D.C. Cir. 2000). Accord Ass’n of Flight Attendants-CWA v. Delta Air Lines, Inc., No. CV-08-2009-RWR, 2010 WL 5300534, at *1 (D.D.C. Dec. 21, 2010) (expressing skepticism about the existence of a private right of action under McCaskill-Bond, but finding it unnecessary to decide the issue) (Roberts, J.). Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 24 of 29 -20- with the Arbitration.” (Id. ¶¶ 154 & 155.) Thus, according to Plaintiffs, they are entitled to an order “enjoining this [seniority list integration] arbitration proceeding and vacating any resolution of same,” and requiring American, US Airways and the APA “to comply with the requirements of Section 13(a) of the Allegheny-Mohawk LPPs.” (Id. ¶¶ 156 & 157.) Assuming, arguendo, there is a private cause of action under McCaskill-Bond (but see note 10, supra), Count Four should be dismissed pursuant to Rules 12(b)(1) and 12(h)(3) of the Federal Rules of Civil Procedure because it is moot and pursuant to Rule 12(c) because it fails to state a valid claim for relief. A. Count Four Should Be Dismissed Pursuant To Rules 12(b)(1) And 12(h)(3) Because The Seniority-Integration Process Has Now Been Completed And Plaintiffs’ Claim Is Moot. Although Plaintiffs asserted in their Complaint that they “are further entitled to an expedited hearing in order to prevent the extinguishment of any of their rights during the pendency of this action” (Compl. ¶ 158), they never sought interim judicial relief to prevent the completion of the seniority-integration arbitration. Because the arbitration has now been completed and the resulting integrated seniority list has been implemented by American, Plaintiffs’ request for an injunction against the seniority-integration proceeding should be dismissed as moot. “[T]he courts of the United States, pursuant to Article III of the Constitution, have no jurisdiction to act unless there is ‘a case or controversy.’” True the Vote, Inc. v. Internal Revenue Serv., 831 F.3d 551, 558 (D.C. Cir. 2016). “[E]ven where a case once posed ‘a live controversy when filed, the [mootness] doctrine requires’ the Court ‘to Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 25 of 29 -21- refrain from deciding it if events have so transpired that the decision will neither presently affect the parties’ rights nor have a more-than-speculative chance of affecting them in the future.’” Id. (quoting Clarke v. United States, 915 F.2d 699, 700-01 (D.C. Cir. 1990)). Here, when Plaintiffs filed their Complaint on February 15, 2016, the evidentiary hearings in the seniority-integration arbitration had been completed, but the arbitrators had not yet issued their decision. The arbitration panel has since issued its award, and, as of October 1, 2016, American implemented the resulting integrated seniority list. In discussing the restrictions the mootness doctrine places on “the jurisdiction of the federal courts,” the D.C. Circuit recently highlighted one of its previous decisions involving facts analogous to the instant case, where a request by the National Football League Players Association (“NFLPA”) to enforce an arbitration award was deemed moot after “the only relief for which the appellants prayed and which the District Court could have granted-suspension of [certain football] players for the remainder of the 1993-94 season-became impossible to grant” because the season had ended. See Akiachak Native Cmty. v. U.S. Dep't of Interior, 827 F.3d 100, 106 (D.C. Cir. 2016) (discussing Nat'l Football League Players Ass'n v. Pro Football, Inc., 56 F.3d 1525, 1529 (D.C. Cir. 1995), vacated in part on other grounds, 79 F.3d 1215 (D.C. Cir. 1996)). In this case, as in the case involving the NFLPA, Plaintiffs’ claim has been rendered moot by the occurrence of intervening events and Count Four no longer contains a live controversy for this Court to address. See, e.g., Newdow v. Roberts, 603 F.3d 1002, 1008 (D.C. Cir. 2010) (finding challenge to religious elements in 2009 Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 26 of 29 -22- inauguration ceremony moot after inauguration had occurred and prayers and oath had been spoken); Sibley v. Alexander, 916 F. Supp. 2d 58, 63 (D.D.C. 2013) (holding that citizen’s claims seeking to enjoin District of Columbia electors from casting electoral votes for President were mooted by casting of the electoral votes). B. Count Four Should Also Be Dismissed Pursuant To Rule 12(c) For Failure To State A Claim For Relief Under McCaskill-Bond. Even if a private right of action does exist under McCaskill-Bond (but see note 10, supra) and Count Four is not entirely moot, 11 it does not in any event state a claim for relief under the statute. Plaintiffs do not and cannot allege that the integrated seniority list failed to satisfy the “basic rule” of McCaskill-Bond, which requires “merging the seniority lists, rather than putting employees of the acquired carrier at the bottom of the acquiring carrier’s list.” FAIR, 813 F.3d at 473. The plain terms of the MOU and Protocol Agreement set forth a process to “merg[e] the seniority lists” of pilots from pre- merger American, US Airways, and America West through an arbitration before a panel of three neutral arbitrators, rather than simply placing the pilots “of the acquired carrier at the bottom of the acquiring carrier’s list.” And the process worked. Plaintiffs cannot state a claim that American, US Airways or any of the other parties to the seniority- integration process violated McCaskill-Bond when American accepted and implemented 11 As demonstrated in Section IV.A, supra, the crux of Count Four is a challenge on Plaintiffs’ part to the manner in which the seniority-integration proceeding was being conducted and their attempt to block completion of the seniority-integration arbitration. That ship has sailed. To the extent the lone reference in Paragraph 156 of the Complaint to “vacating any resolution of” the seniority-integration arbitration renders a portion of Count Four not moot and potentially viable, Plaintiffs’ claim for injunctive relief should, to that extent, be dismissed for failure to state a claim as set forth in this Section IV.B. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 27 of 29 -23- an integrated seniority list established by a panel of neutral arbitrators following an arbitration where pilot merger committees advocated for the interests of the pilot groups at pre-merger American, US Airways, and America West. See Nat’l Airlines Acquisition, 95 C.A.B. 584, 594 (1982) (noting that Civil Aeronautics Board had a “long-held, and judicially approved, view that ‘absent a showing of bad faith, the adoption by a carrier of an integrated seniority list proposed by the collective bargaining representatives of the employees involved amounts to the carrier having made ‘provisions . . . for the integration of seniority lists in a fair and equitable manner’”). To the extent Plaintiffs contend that American, US Airways or any other party to the seniority-integration proceeding failed to adhere to the provisions of the MOU or Protocol Agreement, those contentions raise minor disputes that must be resolved in accordance with the arbitration provisions in the applicable agreements. (See Section II, supra.) CONCLUSION For all the foregoing reasons, Defendants American Airlines, Inc. and US Airways, Inc. respectfully request that the Court dismiss Plaintiffs’ Complaint as to them in its entirety. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 28 of 29 -24- Dated: November 23, 2016. Respectfully submitted, By: /s/ Chris A. Hollinger Chris A. Hollinger O’MELVENY & MYERS LLP Two Embarcadero Center, 28th Floor San Francisco, CA 94111-3823 Telephone: (415) 984-8700 Facsimile: (415) 984-8701 E-mail: chollinger@omm.com Robert A. Siegel (D.C. Bar No. 1004474) Tristan Morales 1625 Eye Street, NW Washington, DC 20006 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 E-Mail: rsiegel@omm.com E-mail: tmorales@omm.com Attorneys for Defendant American Airlines, Inc. Case 1:16-cv-01971-RC Document 62-1 Filed 11/23/16 Page 29 of 29 ARBITRATION PROCEEDINGS BEFORE THE MCCASKILL-BOND BOARD OF ARBITRATION ********************************************************* In the Matter of the Seniority Integration Involving Pilots of NEW AMERICAN AIRLINES ********************************************************* BOARD OF ARBITRATION Dana Edward Eischen Ira F. Jaffe M. David Vaughn APPEARANCES AMERICAN AIRLINES: O’MELVENY & MYERS LLP By: Robert A. Siegel, Esq. Tristan Morales, Esq. Paul D. Jones, Esq. Senior VP and General Counsel APA: JAMES & HOFFMAN, P.C. By: Steven K. Hoffman, Esq. Edgar N. James, Esq. Daniel M. Rosenthal, Esq. Mark R. Myers, Esq., Attorney, APA AAPSIC: ALLISON SLUTSKY & KENNEDY, P.C. By: Wesley A. Kennedy, Esq. Ryan M. Thoma, Esq. EPSIC: BAPTISTE & WILDER, P.C. By: William R. Wilder, Esq. Roland P. Wilder, Jr., Esq. WPSIC: BREDHOFF & KAISER, P.L.L.C. By: Jeffrey R. Freund, Esq. Roger Pollak, Esq. Joshua B. Shiffrin, Esq. ASU ALUMNI LAW GROUP By: Marty Harper, Esq. Kelly J. Flood, Esq. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 1 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 2 of 60 I. PRELIMINARY STATEMENT This arbitration concerns the creation of a single integrated seniority list (“ISL”) for the pilots of the New American Airlines following the merger of American Airlines (“American”) and US Airways (“US Air”). At the present time, the pilots of US Air are divided into two groups: legacy US Air pilots (“East Pilots”) and legacy America West Pilots (“West Pilots”). For reasons discussed below, prior to the merger of American and US Air, the East Pilots and West Pilots were unsuccessful in their efforts following the 2005 merger of US Air and America West to achieve a single ISL covering all of the merged US Air’s flying. The interests of the three pilot groups were represented respectively by separate American, East, and West Merger Committees created by the Allied Pilots Association (“APA”), the certified bargaining representative for all three pilot groups following the merger of American and US Air. A. Procedures Evidentiary hearings were held in Washington, D.C. during the period September 29, 2015-January 15 2016, at which the respective Committees were represented by Counsel and offered full opportunity to submit oral and documentary evidence, including direct testimony and expert opinions, all subject to cross-examination and rebuttal. The evidentiary record was closed following receipt of the stenographic transcript and post-hearing briefs dated March 28, 2016. Thereafter, the Arbitration Board convened in Executive Session and, after careful consideration of the record and extensive consultation, we render this Opinion and Award. The Technical Assistance Team (“TAT”) created jointly by the Committees provided this Board with expert technological help by performing numerous calculations at our direction and verifying Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 2 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 3 of 60 the mathematical accuracy of the outputs. We express our sincere gratitude for that invaluable assistance, but emphasize that the role of TAT was limited only to those described calculations. B. Decisional Standards and Guidelines This arbitration was conducted in accordance with the requirements of the 2007 McCaskill-Bond amendments to the Transportation Act, 45 U.S.C. §42112. That statute applies the Allegheny-Mohawk Labor Protective Provisions (“LPPs”) (59 CAB 19, Appendix B, 45, 1972) to transactions involving two or more air carriers resulting in the combination of crafts or classes under the Railway Labor Act (45 U.S.C. § 151, et seq).1 The two directly applicable Allegheny-Mohawk LLPs, §§ 3 and 13, require integration of the respective seniority lists by the merged carrier, in a “fair and equitable manner”; through a dispute resolution process of negotiations and mediation culminating, if necessary, in arbitration. (59 CAB 19, Appendix B, 45, 1972): * * * Section 3. Insofar as the merger affects the seniority rights of the carriers’ employees, provisions shall be made for the integration of seniority lists in a fair and equitable manner, including, where applicable, agreement through collective bargaining between the carriers and the representatives of the employees affected. In the event of failure to agree, the dispute may be submitted by either party for adjustment in accordance with section 13. * * * 1 Between 1972 and the passage of the Airline Deregulation Act of 1978, the CAB used the Allegheny-Mohawk LPPs as the standard set of provisions in airline mergers. When deregulation became imminent, the CAB began deferring labor protection issues to collective bargaining, unless there were “special circumstances” or the CAB determined that LPPs were “necessary to prevent labor strife that would disrupt the nation’s air transportation systems.” Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 3 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 4 of 60 Section 13. (a) In the event that any dispute or controversy (except as to matters arising under section 9) arises with respect to the protections provided herein which cannot be settle by the parties within 20 days after the controversy arises, it may be refined by any party to an arbitrator selected from a panel of seven names furnished by the National Mediation Board for consideration and determination. The parties shall select the arbitrator from such panel by alternatively striking names until only one remains, and he shall serve as arbitrator. Expedited hearings and decisions will be expected, and a decision shall be rendered within 90 days after the controversy arises, unless an extension of time it is mutually agreeable to all parties. The salary and expenses of the arbitrator shall be borne equally by the carrier and (i) the organization or organizations representing employee or employees or (ii) if unrepresented, the employee or employees or group or groups of employees. The decision of the arbitrator shall be final and binding on the parties. (b) The above condition shall not apply if the parties by mutual agreement determine that an alternative method for dispute settlement or an alternative procedure for selection of an arbitrator is appropriate in their particular dispute. No party shall be excused from complying with the above condition by reason of having suggested an alternative method or procedure unless and until that alternative method or procedure shall have been agreed to by all parties. * * * By incorporating Sections 3 and 13 of the Allegheny-Mohawk LPPs, McCaskill- Bond establishes the duty of the surviving or combined carrier and the representatives of its employees to provide the fair and equitable seniority list integration process. Aside from stating that “fair and equitable” processes include “agreement through collective bargaining” between the carriers and the representatives of the employees affected, neither the LPPs themselves nor CAB interpretations of them provide any specific criteria for what constitutes a “fair and equitable” integration process. However, the CAB has acknowledged the reality that “no single way could be devised that would meet all situations. Whatever the method used ... some employees will be disadvantaged and some will gain.” See National Airlines Acquisition, Arbitration Board, 97 C.A.B. 570, 572 (1982). Thus, in this case, three separate and distinct Seniority Integration Committees, each representing a separate cadre of the APA- Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 4 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 5 of 60 represented pilots now employed by New American Airlines, presented the Board with competing proposals for the integration of the pilots covered by this arbitration. At all times pertinent to this case, the pilots employed by American have been represented for purposes of collective bargaining by the APA, under terms and conditions of employment set forth in various collectively bargained agreements (“CBAs”) between APA and AA. Effective, September 16, 2014, the APA was certified by the National Mediation Board as the single representative of all American Airlines pilots, including the former US Air pilots who are now employed by the post-merger “New American Airlines.” Prior to that date, the representation status of pilots employed by the former US Air was quite a bit more complicated. II. THE PRE-MERGER CARRIERS American Airlines Group, Inc. is an airline holding company headquartered in Fort Worth, Texas. It was formed December 9, 2013, in the merger of AMR Corporation, the parent company of American Airlines, and US Airways Group, the parent company of US Airways. As of December 9, 2013, both American and US Airways were mainline carriers with long histories as end products of previous mergers and other transactions. Each of these mainline carriers had several hubs and multiple domiciles, with networks that provided domestic and international service on both narrow-body and wide-body aircraft. America West Holdings Corporation was an Arizona-based company whose primary holding was America West Airlines. Prior to its 2005 merger with legacy US Airways (East”), America West (“West”) was a domestic carrier operating primarily narrow-body aircraft focused on the Western United States, with limited overseas operations such as service from Phoenix to Hawaii. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 5 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 6 of 60 American Airlines The Aviation Corporation was formed in 1929 for the purpose of acquiring scores of small regional airmail aviation companies to form a new national passenger carrier. Some 82 such companies, including Charles Lindbergh’s Robertson Aircraft Corporation of Missouri, were incorporated into American Airways, Inc. Other acquired companies included Southern Air Transport in Texas, Southern Air Fast Express (SAFE) in the western United States and Universal Aviation in the Midwest (which operated a transcontinental air/rail route in 1929), Thompson Aeronautical Services (which operated a Detroit-Cleveland route beginning in 1929), and Colonial Air Transport. Renamed American Airlines, Inc. in 1934, the newly formed carrier operated a transcontinental route network serving 72 cities, mostly in the Northeastern, Midwestern, and Southwestern United States. American gained its first Caribbean routes through a merger with Trans Caribbean Airways in 1970. It expanded those routes throughout the early 70s and acquired other Caribbean routes in the 70’s and 80’s from Pan American, Eastern and Braniff. Over the next several decades, American developed extensive international service to Europe, primarily through London’s Heathrow. In 1984, American introduced the American Eagle system, a network of regional airlines offering service from small communities to large cities through connections to and from American Airlines hubs in Chicago, New York, Dallas-Fort Worth, Los Angeles and Miami. In addition, American acquired and merged the assets and routes of four other carriers: American/TCA (1974); American/AirCal (1987); American/Reno Air (1999); and American/TWA (2001). Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 6 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 7 of 60 TWA and American Airlines In early 2001, TWA, then in bankruptcy, and American Airlines entered into an agreement under which American purchased TWA’s assets. ALPA represented TWA’s pilots, and the TWA/ALPA CBA required “the fair and equitable seniority integration of employees in the event of a merger or acquisition of TWA.” The American/APA CBA required pilots from an acquired carrier to be placed at the bottom of the American seniority list. American offered to hire nearly all of TWA’s union-represented employees, but only if the TWA ALPA-MEC waived their scope and successorship provisions, including the seniority integration provision. Initially, ALPA refused to agree to this request. After TWA moved to reject its CBA with ALPA under § 1113(c) of the Bankruptcy Code, the ALPA MEC consented to the waiver, in exchange for various alternative protections, and the deal closed on April 10, 2001. As an inducement for the waiver, American agreed that it would use its “reasonable best efforts” with APA to secure a fair and equitable process for seniority integration of the American and TWA pilots. After several months of unsuccessful negotiations between APA and the TWA-ALPA MEC, APA and American Airlines executed an agreement on November 8, 2001. That agreement imposed the default seniority integration formula on slightly more than half of the former TWA pilots, giving them American seniority dates of April 10, 2001, while the remainder were placed higher on the list. A few months later, the NMB found that American and TWA were sufficiently integrated to be a single employer for collective bargaining purposes, with APA as the representative. As of December 2013, American Airlines was a mainline “legacy” airline, with an extensive domestic and international route structure, numerous hubs, and a varied fleet Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 7 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 8 of 60 of narrow-body, small wide-body and large wide-body aircraft. AMR Corporation, the parent company of American Airlines and American Eagle Airlines was headquartered at DFW International Airport. US Airways US Airways began in 1939 with All American Aviation Inc., a Pittsburgh- headquartered airmail carrier serving the Ohio River valley. In 1949 the company switched from airmail to passenger service and was renamed Allegheny Airlines. After absorbing Lake Central Airlines in 1968 and Mohawk Airlines2 in 1972, Allegheny developed into one of the largest mainline air carriers in the northeastern United States. Following the passage of the 1978 Airline Deregulation Act, Allegheny changed its name to US Air and expanded its route network into the southeastern United States. By 2002, the Company was a wholly owned subsidiary of US Airways Group, Inc., along with three wholly owned regional air carriers: Allegheny Airlines, Piedmont Airlines, and PSA. US Airways group completed the purchases of San Diego-based Pacific Southwest Airlines (PSA) in 1988 and Winston-Salem-based Piedmont in 1989. The PSA acquisition gave US Air hub presence on the West Coast, while the Piedmont acquisition gave US Air additional East Coast hubs in Baltimore and Charlotte. In the early 1990s, US Air expanded its service to Europe with wide-body service to London, Paris and Frankfurt from its four primary US hubs. In early 1997, US Air changed its name to US Airways and consolidated its headquarters in Arlington, Virginia, near DCA, with Pittsburgh International Airport serving as its maintenance and operations headquarters. It also invested in a new 2 The CAB’s approval of that merger was conditioned upon the Allegheny-Mohawk LLPs that eventually came to govern this McCaskill-Bond ISL arbitration. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 8 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 9 of 60 terminal at its hub in Pittsburgh, purchased the remains of Trump Shuttle and, through the end of the decade, expanded its flying to Europe. US Airways also began providing regional jet and turbo-prop aircraft service between smaller communities and its hubs by contracts with subsidiary airlines. The network of wholly owned subsidiaries and affiliated regional carriers comprised US Airways Express, which flew with the US Airways banner and logo and also used the Company’s code for listing their flights in computerized reservations systems3. Via these code-sharing agreements, the US Airways Express “participating affiliate carriers” fed additional passengers to hubs in the US Airways system. US Airways’ Mid-Atlantic Division In the wake of the precipitous decline of airline business following 9/11, US Airways and ALPA reached a Restructuring Agreement (“RA”) in late Summer 2002. The RA lowered pilot costs, created employment opportunities, and extended the 1998 CBA to December 31, 2008. Among other new provisions were Scope Rule amendments that, in return for preferential hiring of imminently furloughed pilots into vacancies at the regional carriers, allowed increased utilization of regional subsidiaries and affiliates (“US Air Express”) to fly greater numbers of small jets (“SJs”) to feed the Company’s system. In addition, the RA also provided for the creation of a new US Airways regional carrier named Mid-Atlantic Airways (“MDA”). Under the terms of the RA, any pilots who were furloughed from the Company and flew for MDA would not receive any longevity credit for pay and benefit purposes under the 1998 Agreement, as amended by 3 By use of this “code-sharing,” connecting flights appeared to be online connections rather than to interline connections and were displayed more favorably in reservations systems. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 9 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 10 of 60 the RA, for their MDA service time. The terms of the RA also made it clear that furloughed US Airways pilots could bypass MDA vacancy offers without forfeiting their recall rights under the amended and extended 1998 CBA. The 1998 Agreement as amended by the RA and various letters of agreement, including Letter 84, infra, was referenced by the Company and ALPA as the “Mainline Agreement.” For a number of reasons, primarily the Company’s late-2002 bankruptcy, MDA was brought into being as a new division within US Airways Group and not as the originally contemplated wholly-owned subsidiary of the Company. The applicable provision of “Letter 84”, dated December 13, 2002, reads as follows: The Company may operate MDA as a separate division within mainline - US Airways, Inc. with such operation limited to Large SJs. Wages, benefits and work rules will match the AA Eagle pilots’ agreement, (except that the following provisions of the Agreement, as amended by the Restructuring Agreement and this Letter of Agreement, will apply: Sections 1, 19, 20, 21, 25, and 29, and the Accelerated Arbitration of Selected Cases Letter of Agreement), beginning with the AA Eagle wage rates in effect on January 1, 2003.4 In March of 2005, the Company announced the sale of the MDA aircraft to Republic Airlines, but winding down the operation and transferring all the aircraft took another two months. The last MDA flights operated on May 28, 2006 and, effective May 31, 2006, all remaining MDA pilots were furloughed. When the Company declined to credit MDA pilots with longevity for their MDA Service, ALPA filed a grievance in May 2007. Grievance No. MEC 07-05-05 (Denial of Longevity Pay) was ultimately arbitrated before a System Board of Adjustment chaired by Arbitrator Gerald Wallin. By decision dated February 22, 2012, the System Board denied that grievance, with a majority opinion reading, in parts most pertinent, as follows: 4 MDA flying time is thus at least conceptually differentiated from time flown by a furloughed US Airways pilot in a job at one of the wholly-owned subsidiaries of US Airways or code-share US Air Express subcontractor affiliate under the US Airways “Jets for Jobs” program. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 10 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 11 of 60 . . . [T]he grievance seeks to obtain longevity credit for pay and benefit purposes under the Agreement for the pilots who flew at Mid-Atlantic Airlines (“MDA”) during the years 2003 through 2006. This was a time frame during which most of those pilots had been furloughed from the Company. The Company has refused to credit MDA pilots with longevity credit for the time they spent flying for MDA. For purposes of this dispute, longevity (also referred to as seniority for pay and benefit purposes) may be defined as the amount of active service time a pilot has accumulated since originally entering pilot training for the Company. In accordance with Section 23(A) of the [Mainline] Agreement. . . time spent on furlough from the Company does not generate longevity credit. * * * The weight of the evidence convincingly establishes that furloughed Mainline pilots remained in that furlough status while they worked for MDA. Given that fact, the clear language of Mainline Agreement Section 23(A) precludes those pilots from receiving longevity credit for the time they spent working at MDA. Although not all of the MDA pilots were furloughed from Mainline because they came to MDA from other sources, there is no language in the Mainline Agreement that would operate to treat them better than the pilots who were furloughed from Mainline. * * * Although the parties did not complete the negotiation of a contract book for MDA pilots, they did make some progress toward that end. A tentative agreement for the Seniority section of the contemplated contract was reached on June 22, 2005. However, after careful review of the language of the section, we could find no text that provided for any kind of longevity accrual for MDA pilots for purposes of the Mainline Agreement. Finally, we come to the discussion of Letter 84. Careful review of the letter shows that it provides virtually unassailable support for our determination. The letter provides for an expansion of flying to be performed under the Mainline Agreement. Indeed, it explicitly provides that the Mainline Agreement will apply except as specifically modified by the letter. . . . Letter 48 clearly and unmistakably shows that where the parties intended to have a new flying operation enjoy all of the benefits of the Mainline Agreement, they knew how to say so in writing and provided explicit language to achieve that purpose. They did not write such language for MDA flying. Instead, as previously noted, they provided that MDA pilots would be covered by an entirely different collective bargaining agreement. America West America West was founded in 1981 in Tempe, Arizona, and commenced operations at Phoenix Sky Harbor airport in 1983. Prior to its 2005 merger with US Airways, America West was the second largest low-cost carrier in the United States. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 11 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 12 of 60 America West filed for Chapter 11 protection in 1991, and exited in July 1994. At the time US Airways entered its second bankruptcy in 2004, America West was operating out of hubs in Phoenix and Las Vegas, with a fleet of narrow-body and small wide-body aircraft providing domestic service, with additional service to Hawaii from Phoenix. Even before the second bankruptcy filing by US Airways in 2004, US Airways Group had explored a possible merger with America West, as the two airlines had complementary networks and similar labor costs. On May 19, 2005, America West Holdings Corporation announced it would acquire the Arlington, Virginia-based US Airways Group. On September 13, 2005, America West’s shareholders approved the merger and on September 16, 2005, the US Bankruptcy Court approved the US Airways Chapter 11 Plan of Reorganization, thus clearing the way for the merger to be closed on September 27, 2005. The merged company adopted the better-known US Airways name, but America West CEO Doug Parker became CEO, with the merged company now based in America West’s former corporate offices in Tempe, Arizona. US Airways began consolidating its merged operations under that brand in 2006. But operations were not fully integrated until September 2007, when government approval was obtained to allow the airlines to operate under the US Airways certificate, thus ending the 24-year history of America West Airlines. In 2008, US Airways management closed its Las Vegas domicile, leaving the West Pilots based only in Phoenix. East operation expansion and West operation shrinkage, coupled with attrition among the East Pilots, resulted in the eventual recall to service of all of the East Pilots furloughed at the time of the America West merger. In addition, more than 500 pilots were hired into the East operation following the merger of US Air and America West while almost no new pilots were hired into the West operation; albeit these new Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 12 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 13 of 60 hires as well as some active West Pilots were later furloughed. III. THE NICOLAU AWARD AND RELATED DEVELOPMENTS The Nicolau Board ISL Arbitration America West and legacy US Airways merged just as US Airways exited bankruptcy protection in 2005. Prior to that merger, the Air Line Pilots, International (“ALPA”) represented both US Airways and America West Pilots but each group had a separate seniority list and collective bargaining agreement (“CBA”). America West was the younger and more prosperous of the two airlines and most of the 1,900 West Pilots had been hired more recently than the 5,100 legacy-US Airways pilots. Most significantly, no West Pilots were on furlough at the time of the merger, but some 1,700 East Pilots (about one-third of all East Pilots) were in furlough status at that time. Against this background, on September 23, 2005, the two ALPA Master Executive Committees (“MECs”) and the two air carriers entered into a Transition Agreement, which established three conditions to be met before operational integration of the airlines: (1) creation of an integrated seniority list; (2) a single CBA; and (3) a single FAA operating certificate. Since ALPA then represented both groups, the Transition Agreement further provided that then-current ALPA internal merger policy would be used for integration, and that the integrated list would be subject to ratification as part of the new CBA. The East and West Merger Representatives were unable to reach a negotiated or mediated agreement on seniority integration. In general terms, East wanted seniority rights based on date of hire (including service for predecessor carriers), including for all of the East Pilots who were then on furlough; West wanted those furloughees placed at Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 13 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 14 of 60 the bottom of the list and the rest of the pilots merged based on ratios which intermingled a substantial number of first officers with captains. Following that intractable impasse, a Board of Arbitration chaired by George Nicolau conducted ISL arbitration under the applicable provisions of the ALPA Merger Policy. In that arbitration, the East Pilots proposed a seniority list ordered by date of hire, adjusted for length of service, which would have pushed most of the West Pilots far down the seniority list and placed a number of furloughed East Pilots above active West Pilots. For their part, the West Pilots proposed a list based on pilot rank and career prospects, with comparatively less weight for length of service and ratios intermingling first officers and captains. In May 2007, the Nicolau Board majority issued an Award that placed about 500 senior East Pilots at the top of the seniority list (attributing that priority to specialized experience with wide-body aircraft that America West had not flown prior to the merger) and placed about 1,700 furloughed East Pilots at the bottom of the list. The Nicolau Award then went on to blend the rest of the East and West Pilots generally according to relative positions on their original seniority lists. When the palpably dissatisfied East Pilots petitioned to revisit the Nicolau Award, ALPA attempted to facilitate a compromise. However, those efforts foundered after the East MEC representatives withdrew from the Joint Negotiating Committee, thus freezing negotiations for a single CBA. Consistent with its obligation under the Transition Agreement, ALPA subsequently presented the Nicolau Award to the airline for acceptance, and US Airways accepted the Award in December 2007. The Nicolau Award list has never been implemented because no single collective bargaining agreement has been negotiated between US Airways and the labor Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 14 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 15 of 60 organizations that represented the pilots of that Carrier. At the time of the events leading to the present merger, the East and West Pilots continued to operate in their pre-merger systems, on their pre-merger seniority lists, under their separate pre-merger CBAs (the 1998 US Airways CBA, as modified in US Airways’ two bankruptcies; and the 2003 America West CBA). Even after the pilots of both those US Air groups became subject to the other terms of the New American/APA Joint Agreement in 2015, US Airways flight operations have been conducted under the separate pre-merger East and West seniority lists. Post Nicolau Award Developments East/West Litigation When ALPA submitted the Nicolau Award to the carrier, a group of East Pilots opposed to implementation created the US Airline Pilots Association (“USAPA”). In April 2008, USAPA was certified by the NMB as the bargaining representative of the combined (East and West) US Airways pilot group. US Airways, 35 NMB 135 (2008). Thereafter, USAPA refused to agree to include the Nicolau Award in a combined collective bargaining agreement. Instead, in early September 2008, USAPA made a new proposal based on a date-of-hire seniority list with 10-year conditions and restrictions. That was the last seniority proposal by either party in the negotiations. On September 8, 2008, individual West Pilots sued USAPA and the carrier in federal court on claims of breach of duty of fair representation and breach of contract. Following a jury and a bench trial, the district court found a DFR breach and ordered USAPA to negotiate a collective bargaining agreement with US Airways based on the Nicolau Award. Addington v. US Airline Pilots Association, No. CV 08-1633-PHX- NVW, 2009 WL 2169164, at *30. On appeal by USAPA, the Ninth Circuit initially Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 15 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 16 of 60 overturned that decision on ripeness grounds in June 2010. When US Airways sought a declaration of the parties’ respective rights and obligations concerning USAPA’s proposal to ignore the Nicolau Award, the Addington court observed: [I]f USAPA wishes to abandon the Nicolau Award and accept the consequences of this course of action, it is free to do so. By discarding the result of a valid arbitration and negotiating for a different seniority regime, USAPA is running the risk that it will be sued by the disadvantaged pilots when the new collective bargaining agreement is finalized. An impartial arbitrator’s decision regarding an appropriate method of seniority integration is powerful evidence of a fair result. Discarding the Nicolau Award places USAPA on dangerous ground. US Airways never did agree to the September 2008 USAPA proposal, no joint CBA was ever negotiated, and the Nicolau Award was never implemented. Even after the December 2013 merger with American and complex four-party negotiations leading to the MOU and other agreements making this ISL arbitration possible, the US Airways East and West pilot groups continue to work in separate, fenced operations under their separate seniority lists. By January 1, 2013, nearly a year before the merger, the American Pilots represented by APA commenced working under a new pre-merger, standalone CBA (“the 2012 CBA”), which established their compensation and working conditions at the industry standard. By contrast, because of the Nicolau Award imbroglio, the East Pilots continued to work under the 1998 US Airways CBA modified by concessionary bargaining during US Airways’ two bankruptcies, and the West Pilots under the 2003 America West CBA. The MOU and the Protocol Agreement On or about February 8, 2013, American, US Airways, and the respective pre- merger bargaining representatives of the pre-merger pilot groups - APA then representing American Pilots and USAPA then representing US Airways (East and Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 16 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 17 of 60 West) Pilots - entered into a Memorandum of Understanding Regarding Contingent Collective Bargaining Agreement (“MOU”) in anticipation of the merger announced 10 months later. The MOU provided, inter alia, for “[a] seniority integration process consistent with [the] McCaskill-Bond [Act].” At the insistence of USAPA, the text of Paragraph 10(h) of the final MOU specified: “US Airways agrees that neither this Memorandum nor the JCBA shall provide a basis for changing the seniority lists in effect at US Airways other than through the process set forth in Paragraph 10.”5 On or about September 4, 2014, the carriers, APA and USAPA entered into a Seniority Integration Protocol Agreement (“Protocol”) establishing the procedural framework for the seniority integration. Among other things, the Protocol anticipated that APA would be certified by the National Mediation Board (“NMB”) as the single bargaining representative of the combined pilot craft and class. It also provided for the continuation by APA of the Merger Committees (including the AAPSIC) established by APA and USAPA. The Protocol provided for a Preliminary Arbitration Board to determine whether APA could and should designate a separate Merger Committee to represent the interests of the West Pilots in the ISL seniority integration process. The NMB certified APA as the single bargaining representative on September 16, 2014. Pursuant to paragraph 10.a. of the MOU, the seniority integration dispute was submitted to arbitration and this Arbitration Board was selected pursuant to the MOU. The Preliminary Arbitration Board consisting of Joshua Javits, Shyam Das, and Stephen Crable, entered an Award on January 9, 2015. The Preliminary Arbitration Board held 5 As noted, the September 23, 2005 US Airways/America West Transition Agreement (Letter of Agreement 96 to the 1998 US Airways CBA) had provided for continued separate operation of the East and West pilot groups until the implementation of a “single collective bargaining agreement including an integrated seniority list.” Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 17 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 18 of 60 that APA had the authority to designate a West Merger Committee, and that it was proper for APA to do so. Pursuant to the Preliminary Arbitration Board’s order, APA designated a separate West Pilots Merger Committee, which then began full participation as a Party in this arbitration. Addington Redux Following the agreement of American, APA and USAPA to the MOU and Protocol, which form the basis for this ISL arbitration, the District Court in Addington denied the West Pilot’s deferred DFR claims and granted USAPA summary judgment. By late June 2015, the American Airlines Pilots Seniority Integration Committee, the USAPA Merger Committee, and the West Pilots’ Merger Committee were each set to participate in ISL arbitration hearings scheduled to begin on June 29, 2015. On Friday June 26, 2015, virtually the eve of the opening day of this arbitration, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit issued its decision in Addington v. US Airline Pilots Association, 791 F.3d 967 (9th Cir. 2015). The Court vacated and reversed the trial court order granting summary judgment for USAPA and remanded the case to the District Court, with instructions to enter judgment enjoining USAPA from participating in the seniority integration arbitration proceedings, except to the extent that USAPA would advocate for the Nicolau Award as the basis to merge the seniority of the East Pilots and West Pilots.6 When the USAPA Merger Committee permanently withdrew from this arbitration process in response to that Ninth Circuit decision, this Board adjourned the June 29, 2015 hearing and convened a conference with Counsel to reassess the situation. 6 However, the Court also expressly declined to order that the unmodified Nicolau Award be used by this Board to order the seniority of the East and West Pilots in the arbitration. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 18 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 19 of 60 On July 5, 2015, the Board rescheduled the hearings to commence September 29, 2015 and directed that APA exercise its best efforts to designate a Merger Committee to represent the East Pilots. Pursuant to the Arbitration Board’s decision, the US Airways (East) Pilots Seniority Integration Committee (“EPSIC”) was designated by APA and has participated fully in these proceedings. The record also contains a Supplement to the Protocol Agreement, an updated set of Stipulations and updated procedural Ground Rules, all of which were approved by the Arbitration Board. (See Appendix I) Section II of the updated Ground Rules provides: “The issues and the Board’s authority shall be as set forth in Paragraph 7 of the Protocol Agreement,” which, in turn provides: The Arbitration Board shall have the authority to establish a fair and equitable integrated seniority list as required by the McCaskill Bond Act; provided, that any such integrated seniority list shall comply with the conditions set forth in paragraph 10.b. of the MOU. The Arbitration Board shall also have authority to resolve any dispute regarding the employment data exchanged pursuant to paragraphs 3 and 4 above; to resolve all procedural matters regarding the arbitration; and, subject to paragraph 8.b. below, to resolve any dispute regarding the interpretation and application of this Protocol Agreement arising prior to issuance of the final award under paragraph 13 below. IV. GENERAL PRINCIPLES OF HYBRID ISL MODELING7 Longevity or “date-of-hire” integration consists of constructing an ISL by ranking employees solely based on the length of service used for competitive bidding, pay, and benefit purposes at their respective pre-merger carriers. The Category and Status integration method characteristically constructs the new seniority list by means of a ratio premised upon rank (Captain or First Officer) and aircraft type; with the goal that each individual’s pre-and post-merger percentile ranking on his/her seniority list remain constant and that each group be credited with the proportions of flying that each 7 The following is a discussion of technical issues involved generally in seniority list building. It is not intended and should not be construed to express or imply support for any particular method or any particular proposal in this case. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 19 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 20 of 60 pre-merger carrier contributed to the merged operations. As a consequence of technological advances, it has become practical to construct a hybrid seniority list by integrating a category and status-based list with a longevity- based list, thereby creating an integrated list that adjusts for some of the inequities frequently encountered in lists that were created using only one of those separate modalities. The sequential steps in building each model are performed by computer programs and algorithms specifically designed for those purposes, using data and assumptions that are input at the direction of the Arbitration Board. Building a Category and Status ISL 1) Select the measurement period and methodology for determining the number of pilots at each airline in each category and status, e.g., B-787 CAs , B-737 FOs. Since merging airline rarely have identical fleets, different aircraft types with similar missions and performance characteristics are grouped together. 2) In each category and status for each aircraft in a grouping, the pilot counts are compared to each other to determine the ratio in that particular group. 3) For each aircraft grouping, create a fraction for each airline, using the actual count of pilots at each airline as the denominator and the airline with the highest pilot grouping count as the numerator in BOTH fractions; e.g. Airline A: 15/15=1.oo and Airline B: 15/8=1.875. 4) The first slot for each airline is assigned the value of its respective function (“score”) and in each subsequent slot that score value is incremented by the appropriate fraction, continuing until all slots are assigned a value in increasing order; e.g. Airline A: Slot 1=1, Slot 2=2, etc. and Airline B: Slot 1=1.875, Slot 2=3.75, etc. 5) Sort the two lists of slots together by their score values, from smallest to largest. After the slots are created assign the active pilot names in seniority order to create the integrated group list. [Implicit in this ordering is the “stovepipe” assumption, by which the pilots are integrated in seniority order according to total group count at their premerger airline, not by the actual job each holds. The stovepipe methodology assumes that pilots will bid the category and status that is most highly compensated, ignoring considerations such as individual pilot preference, domicile location, whether the position is that of a lineholder or reserve pilot, and whether the position will fly internationally or domestically.] Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 20 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 21 of 60 6) Continue this process until all the groupings are completed in integrated order, then stack each grouping’s integrated list from top to bottom to form the new integrated Category and Status list. [Each inactive pilot, e.g., a pilot who is a long term disabled or management pilot, who was “pulled” from each list prior to the ratio calculations is “plugged” back into the merged list, slotted one number senior to the pilot who was junior to him/her on their original seniority list.] 7) Pilots hired after the Constructive Notice Date (“CND”) are placed below the most junior pre-CND pilot in order of their hire dates. Building a Longevity Based ISL 1) Calculate each active pilot’s longevity at his/her pre-merger airline as of the selected measurement dates. [Total number of days between each pilots’ original hire or training date and the “snapshot date”, minus the number of days appropriately not counted; e.g., furlough time, employment in other than flight crew service at the pre- merger airline.] 2) Choose the pilot with the most longevity and place him/her in the number 1 position on the ISL. 3) Choose the pilot with the next most longevity and place him/her in the number 2 position on the ISL. 4) Continue until reaching the pilot with the least longevity. 5) Pilots hired after the CND are placed below the most junior pre-CND pilot in order of their hire dates. 6) Additional adjustments to placement may be made in some cases because of pilots who are not actually in longevity order on the pre-merger lists due to the effects of prior integrations (which may have been done on other than a pure longevity basis) in order to address potential “blocker” situations. Building a Hybrid ISL 1) a) Create a merged Category and Status List, using Steps 1-6 of the methodology described above, but do not take the last step of placing pilots hired after the CND below the most junior pre-CND pilot. [See Step 7 below.] b) Assign the most junior pilot on that Category and Status List 1 point, the next most junior pilot 2 points, etc., all the way up the merged Category and Status List. 2) a) Create a merged Longevity List, using Steps 1-5 of the methodology describe above, but do not take the last step of placing pilots hired after the CND below the most junior pre-CND pilot. [See Step 7 below.] Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 21 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 22 of 60 b) Assign the most junior pilot on that Longevity List 1 point, the next most junior pilot 2 points, etc., all the way up the merged Longevity List. 3) Using a weighted average of each pilot’s scores on those respective lists (Category and Status/Longevity weights as directed by the Arbitration Board) combine each pilots’ two scores to give him/her a hybrid final score. 4) Sort the Hybrid scores from highest to lowest. 5) Assign the final ISL numbers according to these Hybrid scores, sorted in descending order, assigning each such number to a particular pilot group. 6) Place pilots from each pilot group in order of their legacy seniority into the hybrid score ordered ISL list. 7) Pilots hired after the CND are placed below the most junior pre-CND pilot in order of their hire dates. V. PRE-MERGER STATUS OF AIRLINES AND PILOT GROUPS: IMPACT OF THE MERGER ON PILOT CAREER EXPECTATIONS As of the Snapshot Date, both US Air and American were profitable. Neither carrier was in any immediate economic distress. However, the long-term prospects for both airlines, each standing alone, were guarded at best. In today’s environment, size and route structure are crucial to competitive success. Neither American nor US Air, standing alone, was in a position to be a strong competitor to Delta/Northwest and United/Continental, on the one hand, or with low cost carriers, on the other. American Airlines For many years, American Airlines has been a prestige mainline carrier. As of the snapshot date, American Airlines had a sound domestic route network and hubs and a large and diversified international schedule. It had also developed a good alliance network, a strong frequent flyer program, and valuable Joint Business Arrangements involving such products as affinity credit cards. AA had more long-haul international routes with more flying opportunities available for bid by its pilots than were available Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 22 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 23 of 60 for bid by East or West Pilots at US Air. Significantly, in advance of the merger, pilot compensation for American was raised to industry standard, comparable to other legacy airlines. However, as of the snapshot date, American’s domestic hubs were increasingly threatened and it had a relatively small presence in the important and profitable Eastern domestic market. American faced strong competition from United and Delta, both recently merged megacarriers, as well as strong price pressure from low-cost carriers in three of its four major hubs. The near monopoly American had long enjoyed at DFW was being challenged by Southwest, following the expiration of Wright Amendment restrictions at Dallas-Love Field. All of these strictures combined to limit AA’s ability to increase ticket prices and boost profitability. AA’s fleet as of the snapshot date was significantly older than those of United and Delta and was relatively fuel inefficient. It would require modernization - at significant cost - in order to be competitive going forward. The Carrier’s standalone financial condition would have limited that option. American’s competitive position steadily eroded between 2006 and 2013. During that period, American Airlines’ network shrank by 12%, as measured by Available Seat miles (“ASM”), and its pilot work force suffered as a result of those reductions. The number of pilots employed by AA went from a high of 12,297 in 2002 to 7,890 in 2013. As of the Snapshot Date and even in the face of a recovering airline industry, AA had furloughed 500 more pilots than it had recalled or hired. Over the several years leading to its bankruptcy, American burned through significant cash reserves. From 2006 until the end of the 3rd quarter of 2013 American Airlines lost $1.5 billion and, by the end of November 2011, AA’s market capitalization Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 23 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 24 of 60 had fallen to under $50 million. American entered a strategic bankruptcy as a way to stem its negative cash flow and preserve its assets. The Company became profitable upon emerging from bankruptcy, but American’s utilization of that process was insufficient to adequately restructure its finances to reverse the Company’s longer-term economic position. American’s proposed stand-alone plans in bankruptcy failed to win support and were assessed as not viable. The Plans failed to provide a fundamental redirection of the Company; and the modernization and expansion of the fleet described in the plan was unlikely to be realized to the full extent necessary to a successful turnaround. Indeed, prior to the Snapshot Date, American’s system-wide Available Seat Miles (“ASMs”) were flat, and its domestic ASMs actually shrank slightly. Prior to and during the bankruptcy, American had sought and obtained collective bargaining agreement concessions from employee labor organizations, which eased AA’s financial difficulties short term. However, as of the snapshot date, American had entered into the 2012 Agreement with APA, which effectively granted its pilots industry standard wages and benefits. The improvement in wages had the effect of stabilizing its work force, but essentially negated any significant cost advantage that it might otherwise have had over United and Delta. We are persuaded that it was unlikely that American Airlines ever would have prospered after the bankruptcy as a standalone airline. It was the merger with US Air that effectively reversed that situation. US Airways Premerger US Air had a significant domestic presence in profitable East Coast corridor markets. However, it was geographically limited to hubs at PHX, PHL, CLT, and DCA and faced strong competition from low cost carriers. Phoenix gave US Air only limited access to western markets. Although it had alliances with some major foreign Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 24 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 25 of 60 carriers, US Air enjoyed only a limited international presence. The international flying opportunities for US Air pilots were limited. They flew limited types of aircraft on limited routes from a small number of hubs. Since emergence from bankruptcy in 2008, US Airways had been profitable with comparatively low ASM costs and high revenue per ASM. From 2012 through the third quarter of 2013, US’s operating margin was second only to Delta’s and, just prior to the merger, the market capitalization of US Airways was higher than that of American. Moreover, US Air’s fleet, as compared to American’s, was newer, more fuel efficient, and better positioned for route expansion if competitive forces were to permit. However, much of the financial success of US Airways prior to the merger was the result of its pilots and other employees being paid significantly lower wages than those at other major carriers. West Pilots worked under a contract whose wage rates were far below industry standards and which were unchanged since 2003. The US Air pilot contract in effect at the snapshot date was put into place in the 1990s. By the Snapshot Date, US Air pilots were earning half of what they had previously earned, with significantly lower wages and benefits than industry standard. While East Pilots assert that negotiation of industry standard contracts with a stand-alone US Air would have been possible, the evidence does not persuade the Board that would have been likely. Longer term, it is difficult to project how the eroded contracts could have maintained a stable pilot work force. Efficacy of the Merger It is clear that, as of the snapshot date, AA and US Air as separate carriers were significantly disadvantaged in market competition with megacarriers Delta and United. Moreover, both AA and US Air were vulnerable to assault by LCCs at most of their bases. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 25 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 26 of 60 Neither was likely to grow and prosper as separate carriers. It was clear that a merger was the best hope of both airlines and, except for each other, there was no alternative practical partner for either. Had American and US Air remained separate, both would likely have experienced economic difficulties and contractions in route structures and equipment, which would have translated into decreased flying opportunities and reduced career expectations for both groups of pilots. Making a virtue of necessity, US Air and AA agreed to merge, at a time when the latter was still in bankruptcy. The combination of these two carriers has been exponentially stronger than its parts, exceeding all reasonable expectations. The merger resulted in vastly higher capitalization, significantly improved long-term financial viability, better route structures, higher passenger volumes, and an improved competitive position for the merged Company. Each Carrier played an indispensable part in the creation and success of the merged Company. It would be incorrect to give more weight to the contributions of either to the merged entity or to credit one more than the other for bringing the merger to conclusion. The synergies of more and better-distributed hubs and route structures increased the economic strength and stability of the merged entity in ways that neither could have achieved by itself. These improvements placed New American in a far stronger competitive position. The merger created opportunities for modernization and expansion that would not have been available to either separately and positioned the New American Airlines to be in a strong competitive position with United and Delta, on the one hand, and the LCCs on the other. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 26 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 27 of 60 Impact of Merger on Pilot Equities It is clear that all of the pilot groups have experienced improved career expectations relative to their reasonable pre-merger expectations as a result of improved compensation and benefits, more and better flying opportunities, and increased long- term competitiveness and financial stability. Improved finances have enabled modernization and expansion of the merged carrier’s fleet. Those improvements have readily discernible positive impact on pilot career expectations across the board. However, as noted next in greater detail, the evidence clearly establishes that the career expectations of US Air pilots - both East and West - were raised more, on balance, by the merger than those of legacy American pilots. This is the primary reason why the Board determined that it is fair and equitable to credit AA Pilots more heavily in the seniority integration methodology used to create our ISL. In the first instance, the evidence persuades the Board that American’s larger, more diversified, better balanced and more desirable (long haul and international) flying provided gains in flying for US Air pilots greater than the gains to American pilots resulting from their access to US Air flying. However, it is in the area of pilot compensation that US Air pilots most tangibly, immediately and significantly improved their career expectations as a result of the merger. As of the snapshot date, American pilots had negotiated and were working under the standalone 2012 CBA. That agreement, which American pilots brought to the merger, placed them at industry-standard wages and benefit levels, where they have been since January 12, 2013. As indicated, US Air pilots were, as of the snapshot date, working under far less favorable wages and benefits. East Pilots were working under the 1998 US Airways East CBA, as amended, which had been modified during two Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 27 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 28 of 60 bankruptcy proceedings to extract concessions. That outdated agreement provided sub- standard compensation for pilots, and lacked provision for pay raises for the duration of the CBA. By the same token, West pilot wages and benefits were set forth in the outdated 2003 America West CBA, which placed their compensation at historically low levels for the industry. As can be seen from the table below, the merger afforded both East and West Pilots very significant increases in compensation (40% increases in the hourly rates in many instances) - that were so significant that they amounted to the equivalent of multiple upgrades to many pilots. Category and Status AA Hourly Rates 2016 2013 East Hourly Rates West Hourly Rates Group IV Captain $260 $213 $160 Group III Captain $221 $181 $144 $142 Group II Captain $205 $168 $125 $142 Group IV FO $177 $145 $109 Group III FO $150 $123 $98 $94 Group II FO $139 $114 $85 $94 Group I Captain $101 Group I FO $59 After it emerged in 2005 from its second bankruptcy, US Airways was a viable airline based on its low-cost business model which baked in its sub-standard pilot compensation. Indeed, the cost savings from the sub-standard contracts contributed to that situation. The unstable foundation of US Air’s profitability and the ongoing dispute Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 28 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 29 of 60 regarding the Nicolau Award made future increases in compensation and benefits for pilots problematic and increases to industry standard wages and benefits unlikely. The intractable conflict over implementation of the Nicolau Award prevented East and West Pilots from achieving a merged collective bargaining agreement, and resulted in both pilot groups continuing to work under inferior contracts. The East and West Pilots speculate, without persuasive evidentiary support in the record, that US Air’s profitability would have permitted negotiation of an industry standard contract even in the absence of the merger. We find that the occurrence, timing and success of such a contract or contracts was highly uncertain, at best. What the record does plainly establish, however, is the merger with American brought US Air pilots under the 2012 American-APA CBA, rescued them from the stalemate they had themselves created, and immediately and dramatically raised their wages and benefits to industry standards. The record further demonstrates that, after the merger was approved, US Airways paid $192 million to legacy US pilots in connection with the MOU that covered the period Feb. 2013 through December 2013. Because these substantial improvements in the wages and benefits paid to US Air pilots were the result of what American pilots brought to the merger, the American pilots are entitled to significant credits in our assessment of the equities when constructing the ISL. That said, the equities attributable to American pilots as a result of their better contracts must be diluted somewhat because the merger also protected from later erosion the industry standard wages and benefits achieved by the American pilots. It is clear that, while both airlines needed the merger in order to prosper on a long-term basis and to compete against the other major carriers, and while all pilot groups Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 29 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 30 of 60 benefitted greatly from the merger, the US Air pilots were the greater beneficiaries, a factor which must be taken into account in our constructing the ISL. VI. THE PARTIES’ PROPOSALS The following summaries of the competing ISL proposals presented by the Merger Committees in this arbitration were extrapolated from their respective pre- hearing and post-hearing briefs and the record at the hearings. A. The East Pilots’ Seniority Integration Committee The East Pilots Committee proposed that the hybrid weighted integrated seniority list should be constructed with greater weight given to length of service, under a formula of 55 percent to length of service and 45 percent to category and status. The East Committee ordered its proposed category and status groups as follows: 1. Group IV Captain 2. Group III Captain 3. Group II Captain 4. Group IV First Officer 5. Group III First Officer 6. Group I Captain 7. Group II First Officer 8. Group I First Officer 9. Pilots without positions as of the Snapshot date For all pilots on the premerger East Pilot seniority list who flew in the Mid- Atlantic division, the East Committee counted that time toward the pilot’s length of service. For pilots who were integrated into either the American system or US Airways system pursuant to a seniority integration, if the pilot’s date of hire at his predecessor airline was not recognized in the seniority integration (as occurred for example with the pilots of Reno Air and Trans World Airlines at American and Trump Shuttle at US Airways), then the East Committee assigned an effective seniority date based on the Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 30 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 31 of 60 American or US Airways original pilot immediately senior to that integrated pilot. The overwhelming demographic of pilots in this proceeding having an actual date of hire with either American or US Airways (East and West) allows use of this traditional method for previously integrated pilots. No West Pilot was placed on the West seniority through prior seniority integration so this “blocker” placement process was not necessary for West Pilots. As did all of the Merger Committees, the East Committee proposed that the Board’s Award incorporate those Conditions and Restrictions agreed to by all the Parties in the amended MOU, as set forth in the Parties’ amended stipulations of January 15, 2016 (attached hereto as Appendix 1). In addition, the East Committee proposed the following fences on certain Group IV positions: Group 4 Position Condition A. For a period of five years beginning with the Bid Period in which the Integrated Seniority List is first implemented, Group 4 Captain positions shall be first awarded to Legacy American Airlines pilots and Legacy US Airways (East) Pilots in a ratio of 2.48:1 so as to maintain a minimum number of Group 4 Captain positions of 454 among Legacy American Airlines Pilots and a minimum number of 183 Group 4 Captain Positions among Legacy US Airways (East) Pilots. Any Group 4 Captain positions in excess of the number required to maintain these minimum numbers of positions will be governed by the ISL and any applicable bidding conditions under the JCBA. These minimum numbers of positions shall be maintained in the event of a system reduction of Group 4 Captains. In the event of a system reduction of Group 4 Captain positions below 637 positions, reduction of Group 4 Captain positions shall occur among Legacy American Airlines Pilots and Legacy US Airways (East) Pilots in a ratio of 2.48:1. B. For a period of five years beginning with the Bid Period in which the Integrated Seniority List (ISL) is first implemented, Group 4 First Officer positions shall be first awarded to Legacy American Airlines Pilots and Legacy US Airways (East) Pilots in a ratio of 2.46:1 so as to maintain a minimum number of Group 4 First Officer positions of 826 among Legacy American Airlines Pilots and a minimum number of 336 Group 4 First Officer positions among Legacy US Airways (East) Pilots. Any Group 4 First Officer positions in excess of the number required to maintain these minimum numbers of positions will be governed by the ISL and any applicable bidding conditions under the JCBA. These minimum numbers of positions shall be maintained in the event of a system reduction of Group 4 First Officer positions. In the event of a system reduction of Group 4 Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 31 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 32 of 60 First Officer positions below 1,162 positions, reduction of Group 4 First Officer positions shall occur among Legacy American Airlines Pilots and Legacy US Airways (East) Pilots in a ratio of 2.46:1. Such protected positions will exist first in the respective legacy bases. If insufficient numbers of protected positions exist in the respective legacy bases, only then may pilots be awarded protected positions outside their respective legacy bases. Finally, the East Committee proposed that the Board adopt the following Implementation Condition that was proposed by each of the Merger Committees: Implementation Condition Effective as soon as practicable, and in no event later than the first day of the third flying month following the issuance of the award, the Company shall apply the ISL issued by the Board, including any attendant conditions and restrictions (the “ISL”) as the Pilot System Seniority List for all American Airlines Pilots (i.e. American Airlines and US Airways pilots) provided for by Section 13.G. of the Joint Collective Bargaining Agreement between American Airlines and the Pilots in the Service of American Airlines (“JCBA”) and shall apply the ISL to all events as to which system seniority is applicable under the JCBA. B. The West Pilots’ Seniority Integration Committee The West Committee proposed that the East and West Pilots be integrated based upon the Nicolau Award, updated to December 9, 2013, and that the resulting merged US Air pilot group be merged with the American pilot group using a Hybrid Longevity/Category and Status ISL, weighting Longevity at 35% and Category and Status at 65%, with minimal conditions and restrictions. The West Committee’s proposal urged adoption of the following eight (8) separate category and status tiers, seven of which generally mirror the aircraft groupings (Groups I-IV) for wage scale purposes in the New American JCBA. The last tier was reserved for furloughees, who brought no jobs with them to the merger and are conventionally assigned to the last category and status tier (or its equivalent). In decreasing order of desirability, those eight (8) tiers are: Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 32 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 33 of 60 Tier 1 Group IV-Large Wide Body Captains All B-777s, All A-330s Tier 2 Group III - Small Wide Body Captains B-757, All B-767s Tier 3 Group II- Narrow Body Captains All B-737s, A-319, A-320, A-321, MD-80 Tier 4 Group IV - Large Wide Body First Officers All B-777s, All A-330s Tier 5 Group III- Small Wide Body First Officers B-757, All B-767s Tier 6 Group II-Narrow Body First Officers/Embraer 190 Captains) All B-737s, A-319, A-320, A-321, MD-80 EMB-190 (CA) [The Embraer 190 captains are grouped with narrow body first officers because their wage rates are comparable and Embraer 190 first officers are in a group of their own as their wage rates are too far below the lowest first officer rate in the next aircraft grouping to be included in that tier.] Tier 7 Group I-Embraer 190 First Officers EMB-190 (FO) Tier 8 Furloughees [Note: The West Committee emphasizes that, “under this approach, furloughees are not themselves placed at the bottom of the ISL, since pilots always remain in the same order that they appear on their legacy seniority lists. Instead, the bottom furlough tier represents the “non-job” positions that the pilot groups bring to the merger, equal to the number of furloughees contained throughout the list, in the same manner that the top large wide-body Captain tier represents the number of large wide-body Captain positions, even though the actual pilots in that part of the list may not be flying as large wide-body Captains.”] The West Committee did not count towards longevity any time spent by American pilots at American Eagle or time spent by East Pilots flying at the Mid-Atlantic Division of US Air. As to the question of what periods of absence from mainline revenue flying ought to be deducted from a pilot’s service between hire date and the snapshot date, the West Committee proposed that only periods of furlough time should be Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 33 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 34 of 60 deducted from pilots’ longevity and that leaves of absence for military service, disability or management flying should not reduce longevity. In its post-hearing brief, the West Committee proposed the following “solution” to the matter of the “Letter T” pilots at American: 1. 400 Letter T pilots will be included in the status-and-category and longevity lists that are used in the hybrid SLI method. The 400 pilots will consist of the 239 Letter T pilots who have returned as of 11/17/15, and the 161 most senior remaining Letter T pilots. 2. The remaining 765 Letter T pilots will be pulled out from the list of active pilots. 3. The bottom tier of the status-and-category list will consist of a ratio of 400 L- AA to 33 L-US pilots. 4. The 765 Letter T pilots that had been pulled in Step 2 will be plugged into the list at the same time and in the same manner as other inactive pilots. In addition to those Conditions and Restrictions mandated by the MOU and the Implementation Condition reproduced above in the summary of the East Committee’s proposal, the West Committee proposed one other condition with regard to “dual-list” pilots who, as of the commencement of the proceedings on September 29, 2015, had recall rights at both American Airlines and US Airways: Any pilot who had recall rights at both American Airlines and US Airways as of September 29, 2015 should be placed on the ISL in both positions that he [or she] will hold and should be allowed to maintain the ability to choose between his two positions on the ISL for thirty days following the issuance of an ISL or until his recall rights expire, whichever period is longer. Upon choosing a position on the ISL, the pilot will forfeit his [or her] other position. C. The American Airlines Pilots’ Seniority Integration Committee The AAPSIC proposed that longevity play no role in the Board’s creation of the New American pilot ISL. AAPSIC proposed that the East and West Pilot seniority lists as of December 9, 2013 be integrated based on the Nicolau Award, updated to December 9, 2013. The AAPSIC proposed that this combined US Airways seniority list then be integrated with the December 9, 2013 American seniority list, on an “adjusted category Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 34 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 35 of 60 and status basis,” utilizing the active pilot jobs as of December 9, 2013 (with inactive pilots as of December 9, 2013 “pulled and plugged”). Further, based upon its assessment of equities flowing from the 2012 AA/APA CBA and the JCBA, the AAPSIC Merger Committee proposed that “the category and status rankings be adjusted to reflect the superior equities of pre-merger American jobs in the same category and status groupings.” Specifically, the AAPSIC proposal reduced the US Air jobs in the Category and Status List by 75%. That adjusted Category and Status List would then be subject to “a one-time adjustment immediately prior to implementation of the ISL, to account for pre-merger American Pilots returning to active status from “Letter T” status between December 9, 2013 and the implementation date.” In addition to the Implementation Condition urged by all of the Merger Committees and those Conditions and Restrictions required by the MOU, AAPSIC proposed: 1) fences allocating Group IV Captain and First Officer positions until the amendable date of the JCBA (January 1, 2020); 2) fences governing the US Airways Pilots’ exercise of “stand-in-stead” and displacement rights until the same date; and 3) a proviso extending the term of those fences in the event that the current mandatory retirement age of 65 is raised during the term of those fences. VII. THE BOARD’S HYBRID ISL Rationale of the Board’s Hybrid Methodology The Board is persuaded that a two-step hybrid approach is the most appropriate way to integrate the three pilot groups; first we create a single hybrid ISL for the East and West Pilot groups and then we create a hybrid ISL integrating that combined US Air Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 35 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 36 of 60 group with the AA group. A number of factors, many of which are described below, have led the Board to this view. Although the essentially fenced East and West flying at US Air means there are three separate pilot groups involved in this arbitration, the question before this Board relates to integration of the pilots of two carriers - US Air and AA. The unfortunate fact that the US Airways Group never was able to integrate the flying of the East and West pilot groups after the merger of America West and US Air requires that we now merge the seniority of those two pilot groups as part of this proceeding. Seniority integration of the East and West pilot groups is a necessary predicate to effective integration of the US Air and AA Pilots. But that does not change the fact that there are only two carriers whose pilots seniority this Board ultimately must integrate in this proceeding. For various reasons, the flying for the two US Air groups has remained separate after 2005. But the contributions of US Air to the 2013 merger with AA - in terms of money, management, routes, slots, equipment, domiciles, reputation, and other factors - are attributable, as of December 9, 2013, to the East and West pilot groups collectively. In short, the contributions that US Air makes to the New American Airlines are combined equities attributable to both the East and West pilot groups. Longevity as a factor recognizes the “sweat equity” that pilots who have flown for longer periods have invested in their carrier. “Seniority” is all about using length of service as the currency for competitive selection and bidding of available flying opportunities and priority entitlement to many non-wage benefits. It also recognizes that more senior pilots are likely to be older and closer to retirement age and, therefore, will enjoy the benefits of a merger for a shorter period of time than will younger pilots with longer career paths. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 36 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 37 of 60 However, the equipment category flown (narrow/wide body, short/long haul) and pilot rank or status (Captain or First Officer) are also significant equities to be measured in most pilot seniority integrations. That is so because category and status are the primary components of individual earnings calculations under the formula that has prevailed in the airline industry since 1934. Moreover, comparably bigger and better aircraft and longer routes on one of the merging carriers are commonly recognized equities in evaluating one pilot group’s career expectations and contributions to the merged carrier’s flying as superior to that of another group. Intuitively, pilot career expectations are premised upon both length of service and category and status (equipment flown and pilot rank). Until recently, the traditional methods for integrating the seniority of pilot groups consisted of Date of Hire integration or Category and Status integration. Some of those integrations took place pursuant to ALPA Merger Policy or another policy that specified particular weight to be given to length of service or to category and status. Most earlier cases used one or the other of those two traditional models or applied offsetting combinations to different portions of the ISL with any perceived negative effects of such list creations further moderated by the use of one or more conditions and restrictions. As explained in greater detail, supra, with the advancement of computerized tools and algorithmic programming, it is now possible, by means of a hybrid methodology, to blend longevity with category and status in much more nuanced ways across the integrating pilot groups. Step 1-Integrating US Air East and West Pilots All involved recognize that the “elephant in the room” in this case is the 2007 Nicolau Award and its long contrail of controversy and litigation, which we discuss Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 37 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 38 of 60 elsewhere in this Opinion. No good purpose is served by this Board delving any deeper into that history or commenting upon tactics and behaviors, all of which have been described and documented amply in numerous proceedings before other tribunals. Revisiting the Nicolau Award to determine whether that Award or some other integration would have been a fair and equitable method of integrating the America West and US Air pilot groups as of their merger commencement date some ten years ago is not the charge of this Board. This Board is tasked with integrating the East, West and AA pilot groups in mid 2016, based on considerations of fairness and equity as of December 9, 2013. By contrast, the Nicolau Award presented an experienced arbitration panel’s best judgment of a fair and equitable basis to integrate the seniority of the East and West pilot groups in 2007, based upon facts and considerations of fairness and equity as of May 2005. Since 2005 (and 2007), however, many of the relevant facts and circumstances and equities that must be weighed and balanced by this Board to achieve a fair and equitable ISL have changed, some dramatically. To be sure, our consideration of the current state of relevant facts includes recognition that there were various gains and injuries that resulted from the failure to integrate the East and West pilot groups prior to this ISL arbitration. Based on the undisputed demographics of the East and West groups, it is also evident beyond cavil that negotiation, let alone US Air pilot ratification, of a joint collective agreement between US Air and ALPA or USAPA that incorporated the Nicolau Award ISL - one of the preconditions to the Nicolau Award becoming effective - was never a reasonable possibility. Whether USAPA breached its duty of fair representation to the West Pilots, as well as the consequences attaching to any such breach, are matters beyond the scope Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 38 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 39 of 60 of this Board’s jurisdiction or authority. The courts have uniformly declined to impose, enforce or direct implementation of the Nicolau Award. Based upon all of the foregoing, the Board is not persuaded that updating and implementing the integrated list of the Nicolau Award ISL is legally mandated, necessary, or appropriate, given the facts and circumstances extant on our snapshot date of December 9, 2013. In sum, despite advocacy by both the West Pilots and American Pilots Committees for the Nicolau Award as the basis for the integration of the East and West Pilots, we are not persuaded that an updated Nicolau Award would fairly and equitably integrate the East and West Pilots as of December 9, 2013. Nor, in our considered judgment would use of a Length of Service method or a Category and Status method, standing alone, fairly and equitably integrate the seniority lists of the East and West pilots. An integration methodology using length of service or longevity as the sole criterion would result in the West Pilots being unable to maintain even their present position on a stovepipe basis. Just as the Nicolau Award no longer reflects the currently applicable equities, it would be inequitable and unfair to impose upon the West Pilots the very method for integration of their seniority with that of the East Pilots that they have consistently rejected and successfully resisted for the last decade. On the other hand, use of a pure Category and Status methodology would give East Pilots inadequate credit for their demonstrably greater “sweat equity” service and no credit at all for the extremely high rate of near term retirement attrition they bring to the table. This not only is analytically unfair, but also fails to account accurately for reasonable and legitimate career expectations of younger pilots. Similarly, a pure Category and Status integration model focuses upon the flying allocated to East and West as of December 9, Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 39 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 40 of 60 2013, and does not fairly and equitably allocate flying opportunities among and between the East and West Pilots before integration of the collective US Air group with the American pilots. The Board is convinced that a Hybrid methodology provides the most appropriate basis upon which to integrate the seniority of the East and West Pilots who were hired prior to the constructive notice date of the merger between US Airways and America West (May 19, 2005). However, the 55% Longevity/45% Category and Status Hybrid mix urged by the East Pilots Committee would give the East Pilots an unjustifiably disproportionate advantage in the merged US Airways list. Further, the East proposal for fence conditions and restrictions limiting the ability of West Pilots to obtain positions in East domiciles serves only to render their proposed modality more unreasonable. After careful analysis and modeling many alternatives through the TAT, we conclude that a fair and equitable method for integrating the seniority of the East and West Pilots is the Hybrid methodology, weighted at 15% for Longevity and 85% for Category and Status. In reaching that finding, we have considered and tested various hybrid percentages and how they place the East and West Pilots on the potential ISL. We also considered how, over time, different possible hybrid formulations would allocate flying opportunities to legacy East and West Pilots following the integration of the resulting US Air pilot list with the AA pilot list. Those reviews confirm our view that a Hybrid list constructed on the basis of 15% Longevity and 85% Category and Status yields a fair and equitable US Air ISL. In recognition of the impact of the failure to have integrated the seniority of the East and West pilots prior to December 9, 2013, we have adjusted the category and Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 40 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 41 of 60 status credited to the East and West pilots for purposes of arriving at a combined US Air pilot list to remove from the category and status rankings consideration of additional jobs that were created after May 19, 2005 - the CND for the merger of US Air and America West.8 The pilots hired by US Air after May 19, 2005 (“Third Listers”) were placed on the bottom of the US Air list in order of their dates of hire in recognition of the fact that, irrespective of where they actually flew, they were hired not by US Air (East) or by America West, but by the merged US Air. Step 2-Integrating the US Air and American Pilots After the East and West Pilots are integrated into a single list as of December 9, 2013, it is then necessary to merge that list with the certified December 9, 2013 seniority list of American pilots to arrive at the integrated ISL for the New American Airlines. The Board believes that the Hybrid methodology is also the most fair and equitable model in this case for building the final ISL. For several reasons, the Hybrid ISL method is decidedly preferable in this case to a list based wholly on longevity or one based wholly on category and status. The Board rejects the AAPSIC proposal that the US Air and AA pilot groups be integrated on a straight category and status basis (with the category and status to be attributed to US Air pilots reduced by 75%). In our judgment, a straight Category and Status integration method would fail to give any recognition to the significant US Air pilot equity of very high age 65 retirement rates for former East Pilots over the short and medium term after implementation of our ISL even if one disregarded the inappropriate 8 While the adjustments utilized by the East Committee TAT Members and the West Committee TAT Members are similar, we find that the methodology used by the West Committee TAT Members is more equitable and consistent with our instructions to the TAT. The adjustment contained in the West Committee TAT’s calculations is, therefore, used in the ISL directed herein by the Board. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 41 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 42 of 60 reduction factor urged by AAPSIC. The advanced chronological age and high longevity of many East Pilots, when compared to both the West Pilots and the AA Pilots, translates into an equity that has been recognized in many prior ISL arbitrations. (See, e.g., Delta-Northwest (Bloch, Eischen, Horowitz) (2008) in which the arbitration board gave credit for imminent retirements by use of a modified pull and plug process for certain Northwest pilots.) Relatively higher attrition accelerates the expectations of junior pilots to move up into higher category and status flying when the more senior East Pilots retire. Employment of a 100% Category and Status integration methodology would unfairly quash both the reasonable near term career expectations of senior East Pilots to maintain Category and Status and longer term promotion expectations of advancement on the part of junior pilots. While we are not persuaded to use a 100% Category and Status model, we recognize that justifiable equity claims of the American pilot group support use of a significant Category and Status component in our Hybrid model. Indeed the overall equities of the case persuade us that the American pilots are entitled to a meaningful, but not an overwhelming advantage in the construction of the ISL. Among other things, the flying contributed by American is significantly superior to that contributed by US Airways in several important respects. First, the jobs and flying were compensated at significantly higher rates of pay. Many US Air pilots received the equivalent of category promotions simply on the basis of the significantly higher rates of pay that they now receive as a direct result of the merger. While one should not assume that the below market rates received by the East and West Pilots would continue indefinitely, absent the merger there was no indication that they would have been rectified in the short term. Second, the flying in the Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 42 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 43 of 60 American system includes a much greater percentage of generally more desirable and higher paid international flying. The domestic route system is also more diverse and contains a larger proportion of longer duration flights. These facts must also be considered when evaluating both career expectations pre-merger and what constitutes a fair and equitable division of post-merger flying for the New American Airlines. The “plus” that should be accorded to the American pilots is significant, but nowhere near as overwhelming as was contained in the AAPSIC proposal. We decline to modify the true category and status numbers and will continue to use the Snapshot Date fleets notwithstanding later changes that may be to the relative advantage of American. After examining a number of different potential hybrid formulas, in combination with a number of potential conditions and restrictions, we find that a 15% Longevity/85% Category and Status will produce results that are fair and equitable with the need for only a limited Board-created condition and restriction. Thus, our Group IV Captain condition and restriction is designed to protect the legitimate equity interests of the East Pilots in Group IV Captain flying and higher. When aged, the ISL is projected to create some “losses” of certain flying opportunities by East Pilots over time. That result, however, is largely unavoidable and the losses in flying to East Pilots following the dates on which the more senior East Pilots retire do not appear to deviate meaningfully from the reasonable career expectations of that pilot group in the absence of the merger. Prior to the integration of East and West flying, the East Pilots gained virtually all of the greater diversity of flying and domiciles and expansion of new flying generated following the US Air-America West 2005 merger. West Pilots remained effectively fenced out of and unable to access former East flying or new post-merger flying. Following the integration of East and Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 43 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 44 of 60 West along with their collective integration with American as part of the implementation of the ISL, East Pilots remain substantially more senior and will continue to fly the vast majority of Group IV Captain flying and other more desirable flying for some years following implementation. Over time, however, as the more senior East Pilots retire, the West Pilots will receive an increasing proportion of that more desirable flying. Stated differently, any decrease in Group IV Captain flying by the East Pilots as a group is largely a function of their longevity and age and is a byproduct of use of a system that provided the group with parallel advantages from 2005 to the early 2020s and not a consequence of our chosen ISL methodology. The fact that the ISL, when aged, will result in a shift of more desirable flying from the East Pilots to the West Pilots, is both fair and equitable and is part of the balancing of equities that the Board has taken into consideration when it chose the particular ISL integration method (inclusive of the conditions and restrictions) in this case. The Hybrid method described above was used to determine the positions on the ISL of those pilots who were hired prior to the Snapshot Date. The Board placed those post-CND pilots who were hired after the Snapshot Date below those pre-CND pilots based upon the seniority ordering that was agreed to by the Carrier and APA and reflected in their letter agreement of June 20, 2016. The Board also updated the ISL, prior to its issuance, to address those pilots who are no longer employed as a result of death, termination, retirement, and resignation since the Snapshot Date. Such updating of the ISL is customary in seniority integration arbitrations. Updating the pre-merger seniority lists after the ISL has been populated will have no effect upon the relative group priorities directed by the ISL. This step, Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 44 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 45 of 60 which has been used in prior arbitrations without controversy, ensures that the ISL integrates pilots who actually remain employed by the merged carrier without affecting the equities determined as of the Snapshot Date for the various pilot groups. 9 Updating the pre-merger seniority list before populating the ISL, which has occasionally been done in prior mergers, would in this case be unfair and inequitable given the large disparity in retirement rates since the Snapshot Date among the three pilot groups. Use of such a dynamic updating in this case would disproportionately and unfairly benefit the East pilot group at the expense of the West Pilots and legacy American Pilots. Technical Issues Related to the Building of the Integrated Seniority List There are a number of technical issues relative to the building of the ISL in this case, some of which were disputed by the Parties. As to others, there appeared to be unanimity of approach. We note their disposition simply so that the methodology used to build the ISL in this case may be better understood.10 1) Longevity. The dates of hire on the legacy lists include credit for mainline flying at airlines that were merged into legacy US Airways and legacy American (Air Cal, Reno, TWA, Trump Shuttle, Allegheny, Mohawk, Piedmont, and Empire). Longevity, as used in the hybrid model, is a group equity that is credited to the group and may be reallocated among pilots when determining ordering in the integrated list. Longevity runs from dates of hire to December 9, 2013, but is reduced by periods of furlough (both 9 We are unpersuaded that a similar updating of the list is necessary or fair and equitable in Step 1 in which the US Air seniority list and America West seniority lists are merged. To do so would inappropriately impact the equities with respect to the US Air pilot group and the America West pilot group. 10 The computer software used to develop the ISL varies from the general description of the Category and Status, Longevity, and Hybrid methods in a number of respects. None of those differences are material in terms of the overall construction of the ISL and were consistent with our direction to the TAT regarding the methodology to be used in developing the ISL in this case. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 45 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 46 of 60 voluntary and involuntary, whether at US Airways or American or America West or at a predecessor mainline carrier). No reduction is made for furlough time at TWA because no reliable records exist with respect to that time. For reasons set forth in detail in the February 22, 2012 Wallin Award (Grievance No. MEC 07-05-05-Denial of Longevity Pay) System Board of Adjustment decision, discussed fully elsewhere in this Opinion, the Board is not granting any longevity credit for time spent by pilots flying for the Mid- Atlantic Division of the US Air Group. Service at American Eagle, as non-mainline service, is similarly excluded from longevity, with the limited exception of time spent flying at American Eagle after the date on which, pursuant to the Award of Arbitrator Nicolau in Flow 01-08, the pilot should have been offered the opportunity to return to flying at mainline American. 2) Pilots on the build list who lacked a position are given scores in accordance with the hybrid build model used in the United-Continental arbitration, not zeroes. 3) Inactive pilots are treated as “pull and plug” pilots - i.e., they are pulled from the lists entirely (i.e., are not scored or considered for any other purpose) and then are plugged back into the final list in the position immediately senior to the pilot who was immediately junior to them on the legacy seniority list. 4) All pilots who on the snapshot date were on sick leave status (AA), on STD status (West) or on MED status (East) are treated consistently and as active pilots. 5) Pilots who are on more than one legacy list (e.g., on both the East and West lists) are treated as on the list on which they had the earliest date of hire and are not treated as furloughed pilots if they were flying as of 12-9-13. 6) Letter T pilots are treated in the following fashion. The 239 pilots who returned as of November 17, 2015, and the 161 most senior Letter T pilots remaining as of that same Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 46 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 47 of 60 date are treated as active. The remaining Letter T pilots were treated as inactive pilots (i.e., were pulled and plugged). Time spent by Letter T pilots on furlough at American is treated as furlough time and, therefore, reduces their longevity. 7) With respect to the small number of pilots who were on both the US and AA seniority lists as of 12-9-13, the pilots are initially included on both lists (with longevity measured separately based upon their creditable time with US and AA respectively and without any changes being made to the category and status calculations as a result of their being on more than one list). After integration, these pilots are then awarded the number on the ISL that was lowest (i.e., most senior), and the ISL is then adjusted with respect to junior pilots at the carrier in which their position was deleted before the ISL was finalized. 8) With respect to category and status, the following categories are used in stovepipe order: Captain, Group IV; Captain, Group III; Captain, Group II; First Officer, Group IV; First Officer, Group III; Captain, Group I; First Officer, Group II; First Officer, Group I; and finally those pilots without positions. 9) Constructive Notice Pilots - i.e., those pilots who were hired after December 9, 2013, regardless of whether they were assigned to American, East, or West flying - are ordered on the basis of their dates of hire as provided in the June 20, 2016 letter of agreement between the Carrier and APA. 10) The final step is to update the ISL after it has been fully developed and populated to remove individuals who no longer were employed as of June 1, 2016. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 47 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 48 of 60 VII. CONDITIONS AND RESTRICTIONS Stipulated Conditions and Restrictions Our review of many prior ISL arbitration decisions teaches that elaborate conditions and restrictions unduly complicate implementation of an Integrated Seniority List. The interminable disputes they generate tend to breed animosity that corrodes flight crew relations. Our Award seeks to achieve its goals of fairness and equity primarily through the construction and creation of the ISL itself. Our Award incorporates the conditions and restrictions agreed upon in Sections 10.b. and 10.i. of the MOU and the Parties’ Stipulations and adds only a standard and necessary fence condition and restriction of limited reach and duration. All other proposed conditions and restrictions are rejected as not necessary to the creation of a fair and equitable ISL. No Bump-No Flush and Other Agreed Upon Restrictions Paragraph 10.b. of the Memorandum of Understanding Regarding Contingent Collective Bargaining Agreement (“MOU”) provides that: The panel of arbitrators may not render an award unless it complies with the following criteria: (i) the list does not require an active pilot to displace any other active pilot from the latter’s position; (ii) furloughed pilots may not bump/displace active pilots; (iii) except as set forth in Paragraphs 12 and 13 below, the list does not require that pilots be compensated for flying not performed (e.g., differential pay for a position not actually flown); (iv) the list allows pilots who, at the time of implementation of an integrated seniority list, are in the process of completing or who have completed initial qualification training for a new category (e.g. A320 Captain or 757 First Officer), or who has successfully bid such a position but have not been trained because of conditions beyond their control (such as a company freeze), to be assigned to the positions for which they have been trained or successfully bid, regardless of their relative standing on the integrated seniority list; and (v) it does not contain conditions and restrictions that materially increase costs associated with training or company paid move as specified in the JCBA. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 48 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 49 of 60 Paragraph 10.b. includes several restrictions, all of which are incorporated in our Award. The Supplement C Restriction The Parties stipulated that the decision of the Board would include the following condition and restriction: Nothing in the Award may modify the decision of the arbitration panel in Letter of Agreement 12-05 of the 2012 CBA, as implemented in Supplement C of the American/APA Joint Collective Bargaining Agreement, which shall continue to govern the relationship between the Legacy AA Pilots and former TWA pilots. A brief history of this condition and restriction follows. In 2001, the Company agreed to acquire certain assets, flying, and pilots from TWA. For most purposes, the majority of TWA pilots were placed on the AA seniority list in accord with their date of hire at American Airlines (i.e., junior to the American Airlines pilots then on the seniority list) in order of their TWA seniority. The Company and the Union recognized the effects that such placement would have upon the former TWA pilots and AA Pilots and agreed to provisions that: 1) provided TWA pilots preferential flying opportunities in the St. Louis domicile on small wide-body and narrow-body aircraft; and 2) gave preferential flying to AA Pilots on large wide-body (Group IV) aircraft. These terms were contained in Supplement CC of the AA-APA collective bargaining agreement. Supplement CC contained minimum guarantees of the amount of reserved flying that the Company was obligated to provide in St. Louis and contained certain triggers for the termination of that reserved flying based upon the dates when certain named pilots would have sufficient seniority to be able to hold a four-part bid in certain equipment and positions in the Company’s operations outside of St. Louis. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 49 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 50 of 60 During the bankruptcy process, on March 27, 2012, the Company requested that the Bankruptcy Court allow the Company to terminate the 2003 AA-APA collective bargaining agreement including Supplement CC. The Company maintained that the terms of Supplement CC required it to continue flying in and out of St. Louis that was no longer efficient or necessary to take place at that location, with the effect of costing the Company millions of dollars annually in additional costs. The Bankruptcy Court ultimately approved the Company’s rejection of the collective bargaining agreement and Supplement CC. A new collective bargaining agreement was bargained and approved by the Bankruptcy Court that included a Letter of Agreement, LOA 12-05, which provided for the Company and the Union to attempt to negotiate certain substitute protections for the former TWA pilots and, failing agreement, to engage in an interest arbitration over the matter. LOA 12-05 contained certain limitations on the provisions that the arbitration panel could impose. On July 22, 2013, an Award (Richard I. Bloch, Ira F. Jaffe, and Stephen B. Goldberg, Arbitrators) issued that provided, in essence, that: 1) 260 narrow body Captain positions and 86 small wide body Captain positions - the same numbers that were required by Supplement CC when it was abrogated on September 7, 2012 - would be protected positions for former TWA pilots; 2) TWA pilots were permitted to bid large wide body First Officer positions, but any positions so held would count towards the reserved CA positions; 3) the Award addressed the particular aircraft types covered by the protections and the circumstances under which the protections, which were in domestic flying, could be extended to encompass international flying; 4) the Award permitted the Company to determine the location of the new protected flying positions; the protections related to the ability to hold the Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 50 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 51 of 60 positions, but declined to award the former TWA pilots any additional preference above and beyond that attainable through the exercise of their seniority and contractual rights to select the particular flying in category at the new domiciles; 5) the Award continued without significant change the duration of the fenced flying, keeping the same measuring pilots and the same triggers, although it appears that the provisions of Supplement C negotiated to implement the award may have modified those provisions from what was contained in the award; 6) citing to the MOU, the award noted that “any subsequent agreement or arbitration with respect to integration of seniority . . . will not serve to modify the alternative guarantees and preferences awarded in this matter by the Panel”; and 7) provided for certain transition provisions. The Parties thereafter negotiated Supplement C to implement the interest arbitration panel’s decision, making a number of clarifying changes in light of changes to the fleet and other circumstances. Of particular significance in terms of this dispute was the agreement that: a) the following positions count towards the Narrow Body CA guarantees for the former TWA pilots: Captain S80; Captain B-737; Captain A320; and First Officer on Group IV or Group V aircraft; b) the following positions count towards the Small Wide Body CA guarantees for the former TWA pilots: Captain B-767; Captain, Group IV aircraft; Captain, Group V aircraft; and c) a provision that allowed the former TWA pilots to use their seniority to bid Group IV and V positions. As of July 2015, the Supplement C protected positions were placed by the Company in B-767 flying in MIA and S80 flying in DFW and SLT. It is sufficient for us to note that nothing in this Award is intended to modify the provisions of Supplement C which constitutes an additional condition and restriction relative to the use of integrated seniority. It should be noted that: a) the protected Supplement C positions are included Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 51 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 52 of 60 in the count of AA pilot positions as of the ISL snapshot date; and b) the former TWA pilots, notwithstanding the priority granted to them to fly in certain NB and SWB aircraft as Captains and First Officers, will be otherwise integrated in the ISL in the same positions that they would occupy as if the special protections of Supplement C did not exist. This ISL Award explicitly recognizes and incorporates as a condition and restriction the provisions of Supplement C to the AA-APA Agreement and further states that those conditions and restrictions are to continue until they lapse according to the terms of Supplement C. Although it was mandated by agreement of the Parties, we find that condition and restriction to be fair and equitable in light of the history that led to Supplement C and have taken into consideration the effects of Supplement C on the East and West Pilots when making our Award. The Group IV Captain Fences The East and American Pilots each urged that the Board impose restrictions on Group IV Captain and First Officer positions based upon the numbers of pilots who were holding those positions as of the snapshot date. Each group, however, approached the proposed restriction in significantly different ways. The distribution of Group IV Captain and First Officer positions as of the snapshot date were as follows: Pilot Group Category and Status Number of Active Pilots American Group IV - Captain 454 US Air East Group IV - Captain 183 American Group IV - First Officer 826 US Air East Group IV - First Officer 336 The percentage of total Group IV Captain positions held by American Airlines pilots was 71.3% (454/637). The percentage of total Group IV Captain positions held by Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 52 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 53 of 60 US Air East Pilots was 28.7% (183/454). The ratio of American Airlines Group IV Captains to US Air East Group IV Captains was 2.48 to 1. The percentage of total Group IV First Officer positions held by American Airlines pilots was 71.1% (826/1162). The percentage of total Group IV First Officer positions held by US Air East Pilots was 28.9% (336/1162). The ratio of American Airlines Group IV First Officer to US Air East Group IV First Officers was 2.46 to 1. The record suggests that the amount of Group IV flying, both to date and in the foreseeable future, for the New American Airlines should exceed the amounts of Group IV flying available on the snapshot date. The Board is disinclined to implement conditions and restrictions beyond those necessary to ensure that the ISL will yield a fair and equitable outcome. Moreover, providing conditions and restrictions that last for extended periods of time delays the time when a fully integrated workforce will be achieved. Group IV Captain flying is the apex of the flying that existed as of the Snapshot date and ensuring for the foreseeable future that the AA and East pilot groups maintain the opportunity to continue to equitably share in that flying is critical to an ISL being fair and equitable. We do not extend the benefit of the Group IV Captain condition and restriction to the West Pilots, who do not presently have the ability to fly in Group IV aircraft. The West Pilots will attain substantial rights to fly Group IV aircraft, both in the First Officer position which is not encumbered by our condition and restriction and as time progresses into the Captain position through their ability to exercise their ISL seniority. Projections of the operation of the ISL persuade us that the condition and restriction we impose will balance appropriately the interests of all three pilot groups in terms of both the short term and longer term ability to bid and fly as Group IV Captains. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 53 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 54 of 60 Without a Group IV Captain restriction, the East Pilots will unfairly lose significant numbers of Group IV Captain positions. The East Pilots are older, on average, than the AA or West Pilots and will have greater turnover due to retirements. Thus, whether viewed as an equity of maintaining promotional opportunities for East Pilots or simply ensuring that East Pilots who are presently flying as Group IV Captains retain the ability to do so, we are persuaded that a limited restriction and condition that protects Group IV Captain positions is appropriate. After consideration of the projections associated with the aging of the ISL we have chosen, the equities relative to AA and US as they relate to what each group brought to the merged carrier in terms of flying, and examining the ISL and projections as to the distribution of flying on a stovepipe basis to all of the various categories and statuses, we conclude that the appropriate Group IV restriction is one that: 1) protects Group IV Captain positions only (and then only for AA and East Pilots); and 2) guarantees the Snapshot date number of Group IV Captain positions for East and AA Pilots out of the overall Group IV flying available through December 31, 2020, when the condition and restriction ends. So long as there are at least 637 Group IV Captains, the restriction will reserve for legacy American pilots 454 Group IV Captain positions and will reserve 183 Group IV Captain positions for the East Pilots. For purposes of this guarantee, any AA or East Pilots who are able to hold a higher position (e.g., a Group V Captain job) will be counted towards the guarantee levels. The Board appreciates that, after December 31, 2020, the distribution of Group IV Captain flying will likely change and the West Pilots likely will be able through the exercise of seniority to hold many of the Group IV Captain positions held prior to that time by the East Pilots. The Board has carefully considered this, along with all other Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 54 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 55 of 60 relevant factors, in determining that the ISL will operate both initially and over time in a fair and equitable manner. The proposal of the AAPSIC to reduce the number of guaranteed positions on behalf of the US Air pilots by 75% due to the greater equities that are brought to the merger by reducing the guaranteed positions for East Pilots by 75% is denied. This reduction is wholly disproportionate to the advantage that should accrue to the AA Pilots as a group and would run counter to the reason that we have adopted this condition and restriction in the first instance - to avoid what otherwise would be a severe loss of the higher compensated and more desirable flying by the East Pilots. Should the number of Group IV Captain positions decrease below the number of positions covered by the guarantee, then the numbers of these guaranteed positions will be reduced pro-rated between the AA and East Pilots based upon the ratio of 454 to 183 for as long as the total number of Group IV Captain positions is insufficient to cover the total number of guaranteed Group IV Captain positions. All Conditions and Restrictions are Integral It should be noted that all of the conditions and restrictions adopted by the Board are integral to our determination of the fairness and equity of the adopted ISL. VIII. ISL IMPLEMENTATION Although unable to agree on much else in their position statements, the three Merger Committees have proposed a nearly-identical condition regarding the timing of ISL implementation, described by the AAPSIC Committee as follows: [T]he AAPSIC proposes that, effective as soon as practicable, and in no event later than the first day of the third flying month following the issuance of the award, the Company shall apply the ISL issued by the Board, including any attendant conditions and restrictions (the “ISL”) as the Pilot System Seniority Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 55 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 56 of 60 List for all American Airlines Pilots (i.e. American Airlines and US Airways pilots) provided for by Section 13.G. of the JCBA, and shall apply the ISL to all events as to which system seniority is applicable under the JCBA. The Company promptly staked out a Protocol Agreement-based jurisdictional objection to that proposal in a September 23, 2015 threshold “motion pursuant to Section III.D.3 of the (Revised) Procedural Ground Rules, for resolution by this Board at or near the beginning of the hearing.” The Board invited and received letter briefs on that issue from all Parties to these proceedings. The Board noted that the final version of the Protocol Agreement does not contain a freestanding paragraph addressing the timing of ISL implementation. Instead, implementation of the ISL is mentioned only in Paragraph 14, which grants the Board retained jurisdiction that specifically includes “resolving disputes which may arise regarding the interpretation, application or implementation of the Award.” (Underscoring added) Upon due consideration, the Board opened its October 12, 2015 ISL hearings with the announcement that efficient allocation of resources for the Board and the Parties was best served by reserving receipt of evidence on the merits of particular implementation dates until it was known whether a dispute actually exists over the implementation date. We held that any potential dispute over the precise timing of implementation is better determined once the ISL award has issued. Only then will the Parties be able to assess how long the implementation process may take and whether there remains a dispute over implementation that this Board must consider and resolve. For all of those reasons, the Implementation Condition proposed by the Committees is not included in our ISL Award. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 56 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 57 of 60 IX. DISPUTE RESOLUTION PROCEDURES The Parties reached agreement as to the procedures for the resolution of disputes concerning the interpretation or application of the Award through a Dispute Resolution Committee (“DRC”) Those procedures, attached hereto as Exhibit B, are adopted by the Board, incorporated herein and made a part hereof. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 57 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 58 of 60 NEW AMERICAN AIRLINES APA PILOTS SENIORITY INTEGRATION ARBITRATION AWARD A. The Integrated System Seniority List The ISL for the pilots at American Airlines, Inc. shall be the List attached to this Award as Exhibit A. B. Conditions and Restrictions 1. These conditions and restrictions are an integral part of the Integrated Seniority List (“ISL”) and shall remain in full force and effect until expiration by their terms. 2. This Award incorporates and is governed by the provisions of Paragraph 10(b) of the Memorandum of Understanding Regarding Contingent Collective Bargaining (MOU): (i) The ISL does not require any active pilot to displace any other active pilot from the latter’s position; (ii) Furloughed pilots may not bump/displace active pilots; (iii) Except as set forth in [MOU] Paragraphs 12 and 13 below, the ISL does not require that pilots be compensated for flying not performed (e.g., differential pay for a position not actually flown); (iv) The ISL allows pilots who, at the time of implementation of an integrated seniority list, are in the process of completing or who have completed initial qualification training for a new category (e.g., A320 Captain or 757 First Officer), or who have successfully bid such a position but have not been trained because of conditions beyond their control (such as a company freeze), to be assigned to the positions for which they have been trained or successfully bid, regardless of their relative standing on the integrated seniority list; and (v) The ISL does not contain conditions and restrictions that materially increase costs associated with training or company paid move as specified in the JCBA. 3. In accordance with MOU Paragraphs 10(i) and 28 of the MOU nothing in this Award shall modify the decision of the arbitration panel in Letter of Agreement 12- 05 of the 2012 CBA, as implemented in Supplement C of the American/APA Joint Collective Bargaining Agreement, which shall continue to govern the relationship between the Legacy AA Pilots and former TWA Pilots. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 58 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 59 of 60 4. Following implementation, Group IV Captain flying will be subject to the following condition and restrictions: a. Flying at the Captain position on Group IV aircraft will be allocated through December 31, 2020, as follows: i) to the extent that there are 637 or more Captain positions on Group IV aircraft, former American pilots are guaranteed to hold 454 of those Captain positions and former US Air (East) pilots are guaranteed to hold 183 of those Captain positions; ii) to the extent that there are fewer than 637 Captain positions on Group IV aircraft, the guarantees in a) decrease ratably on the basis of former American pilots holding 454/637 of those positions (rounded to the nearest full pilot) and former US Air (East) pilots holding 183/637 of those positions (rounded to the nearest full pilot); and iii) any Group V Captain positions held by former American pilots or former US Air (East) pilots count as occupied Group IV Captain positions for purposes of these guarantees. This condition and restriction will terminate, effective 11:59 p.m. on December 31, 2020. To the extent that there is Group IV Captain flying over and above these guaranteed positions, that flying is unaffected by this condition and restriction. 5. Each Merger Committee will promptly advise the other of the discovery of clerical or other errors that may affect the construction of the ISL. Any pilot erroneously omitted from the ISL shall be inserted into the ISL senior to the pilot from his or her pre-merger list previously junior to him or her. In the event of an inadvertent error in the construction of the ISL or an unintended omission of a pilot from the ISL, the Merger Committees may agree upon and make an appropriate correction. 6. This Arbitration Board retains jurisdiction to resolve any unresolved disputes as to the implementation, interpretation, and/or application of this Award, including the conditions and restrictions that are part of this Award. This Arbitration Board also retains jurisdiction to resolve any unresolved disputes between the Merger Committees as to the correct placement of a pilot on the ISL in accordance with the Board’s Award. Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 59 of 60 New American Airlines Pilots Seniority Integration Arbitration Page 60 of 60 7. Post-Award disputes over the interpretation or application of the ISL shall be resolved pursuant to the Dispute Resolution Procedures attached to this Award as Exhibit B. September 6, 2016 Dana Edward Eischen Board Member Ira F. Jaffe Board Member M. David Vaughn Board Member Case 1:16-cv-01971-RC Document 62-2 Filed 11/23/16 Page 60 of 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U n it ed S ta te s D is tr ic t C o u rt N o rt h er n D is tr ic t o f C al if o rn ia UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA AMERICAN AIRLINES FLOW-THRU PILOTS COALITION, et al., Plaintiffs, v. ALLIED PILOTS ASSOCIATION, et al., Defendants. Case No. 15-cv-03125-RS ORDER GRANTING MOTION TO DISMISS, WITH LEAVE TO AMEND I. INTRODUCTION This motion to dismiss presents the question of what plaintiffs must prove (and, therefore, what facts they must plausibly plead) to hold an employer jointly liable with a union for breach of the union’s duty of fair representation. The named plaintiffs in this putative class action are five individual pilots and an unincorporated association of more than 150 similarly-situated pilots who originally were employed by “American Eagle”-a collective name for several regional affiliates of American Airlines. In 1997, American Eagle pilots became employees of American Airlines by virtue of a so-called “Flow-Thru Agreement” executed among the airline companies and the affected unions. Plaintiffs, who refer to themselves and the putative class members as “Flow- Thru-Pilots” (FTPs), acquired certain rights under that agreement with respect to when and how they would be offered positions flying for American Airlines, and what their seniority status would be among American Airlines pilots. The FTPs also came under the representation of the union for American Airlines pilots, defendant Allied Pilots Association (“The Union”). Case 3:15-cv-03125-RS Document 37 Filed 12/17/15 Page 1 of 6Case 1:16-cv-01971-RC Document 62-3 Filed 11/23/16 Page 1 of 6 ORDER GRANTING MOTION TO DISMISS CASE NO. 15-cv-03125-RS 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U n it ed S ta te s D is tr ic t C o u rt N o rt h er n D is tr ic t o f C al if o rn ia Plaintiffs contend that the Union has subsequently discriminated against them and all other FTPs in connection with (1) the integration of former TWA pilots into the American Airlines workforce in the early 2000s, and (2) the more recent and ongoing absorption of former US Airways pilots into American Airlines employment. In essence, plaintiffs allege that the Union has placed the interests of former TWA and US Airways pilots above those of the FTPs in subsequent bargaining with American Airlines, with resulting negative impacts to the FTPs’ seniority status, service credits, pay, and other benefits. The Union has answered the First Amended Complaint, and is not party to the present motion. American Airlines (hereafter “American”) moves to dismiss the First Claim for Relief, which asserts breach of the Union’s duty of fair representation primarily in connection with the alleged preferences given to former TWA pilots, and which seeks to hold American liable for past and future damages on grounds that it “joined with [the Union] in discriminating against FTPs.” 1 American contends that even assuming a union has negotiated agreements with the intent or effect of discriminating against some of its members, the employer may not be held liable absent allegations (and ultimately proof) that the employer itself engaged in discriminatory conduct against the plaintiffs when the agreements at issue were negotiated. While neither party points to any controlling legal precedent, American’s argument is persuasive that it cannot be liable for breach of a duty that ultimately is owed by the Union, merely because it entered into agreements with the Union allegedly knowing of the discriminatory effects and/or intent against FTPs. As the complaint alleges no facts showing discriminatory conduct or other breach of duty by American itself, the motion to dismiss will be granted, with leave to amend. II. LEGAL STANDARD A complaint must contain “a short and plain statement of the claim showing that the 1 American does not challenge its inclusion as a defendant in the Second Claim for Relief, which seeks to enjoin it from using any “integrated seniority list” that may result from the currently- ongoing process to merge the US Airways workforce into American. Case 3:15-cv-03125-RS Document 37 Filed 12/17/15 Page 2 of 6Case 1:16-cv-01971-RC Document 62-3 Filed 11/23/16 Page 2 of 6 ORDER GRANTING MOTION TO DISMISS CASE NO. 15-cv-03125-RS 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U n it ed S ta te s D is tr ic t C o u rt N o rt h er n D is tr ic t o f C al if o rn ia pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed factual allegations are not required,” a complaint must have sufficient factual allegations to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 566 U.S. 652, 678 (2009) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard asks for “more than a sheer possibility that a defendant acted unlawfully.” Id. The determination is a context-specific task requiring the court “to draw in its judicial experience and common sense.” Id. at 1950. A motion to dismiss a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal under Rule 12(b)(6) may be based on either the “lack of a cognizable legal theory” or on “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). When evaluating such a motion, the court must accept all material allegations in the complaint as true, even if doubtful, and construe them in the light most favorable to the non- moving party. Twombly, 550 U.S. at 570. “[C]onclusory allegations of law and unwarranted inferences,” however, “are insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at 555 (“threadbare recitals of the elements of the claim for relief, supported by mere conclusory statements,” are not taken as true). III. DISCUSSION The First Amended Complaint sets out in considerable detail the circumstances that plaintiffs contend constituted improper and discriminatory treatment of the IFPs in agreements reached between the Union and American. The sole basis advanced for holding American liable, however, appears at paragraph 39: [American] has entered into the agreements with [the Union] alleged Case 3:15-cv-03125-RS Document 37 Filed 12/17/15 Page 3 of 6Case 1:16-cv-01971-RC Document 62-3 Filed 11/23/16 Page 3 of 6 ORDER GRANTING MOTION TO DISMISS CASE NO. 15-cv-03125-RS 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U n it ed S ta te s D is tr ic t C o u rt N o rt h er n D is tr ic t o f C al if o rn ia in paragraphs 23 and 27 knowing that these agreements would adversely affect and discriminate against FTPs and knowing that [the Union] intended to discriminate against FTPs in such agreements. (Emphasis added.) As an initial matter, it is arguable that these averments of American’s “knowledge” of discriminatory intent by the Union, and discriminatory effect of the agreements, would be too conclusory even assuming mere knowledge of the Union’s alleged breach of its duties were a sufficient basis for imposing liability against American. For purposes of this motion, however, plaintiffs may be given the benefit of the doubt that the facts they have alleged are sufficient to support inferences that: (1) American knew that the agreements the Union was negotiating had discriminatory negative effects on the FTPs; (2) American knew the Union intended those effects, and even; (3) American knew such conduct by the Union was a violation of its duty to the FTPs of fair representation. The question remains whether American can be held liable simply because it entered into the agreements with that knowledge, even though American itself does not directly owe a duty of fair representation to FTPs. Plaintiffs rely heavily on Richardson v. Texas & N.O. R. Co., 242 F.2d 230 (5th Cir. 1957), in which the employer railroad was held to face potential liability for entering into collective bargaining agreements with a union that discriminated against employees on the basis of race. Although language in Richardson supports plaintiffs’ argument that an employer can be liable if it “join[s] in causing or perpetuating a violation” of a union’s duty, the case arose in very different factual circumstances, and is not controlling law here. Plaintiffs also point to other out-of-circuit authority, Bennett v. Local Union No. 66, 958 F.2d 1429 (7th Cir. 1992), for the proposition that an employer can be held jointly liable where the union and the employer each “actively participated in the other’s breach.” Bennett, however, was a “hybrid breach of contract/duty of fair representation action brought under section 301 of the Labor Management Relations Act,” 958 F.2d at 1433. The opinion expressly stated, “[t]o prevail against either the Company or the Union, the plaintiff must establish both that the Case 3:15-cv-03125-RS Document 37 Filed 12/17/15 Page 4 of 6Case 1:16-cv-01971-RC Document 62-3 Filed 11/23/16 Page 4 of 6 ORDER GRANTING MOTION TO DISMISS CASE NO. 15-cv-03125-RS 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U n it ed S ta te s D is tr ic t C o u rt N o rt h er n D is tr ic t o f C al if o rn ia Company breached the collective bargaining agreement and that the Union breached its duty of fair representation.” Id. at 1433. Thus, while there may be some overlap, even in a hybrid action an employer’s liability is primarily based on its own duties under the collective bargaining agreement, rather than some form of vicarious liability for the union’s breach. Here, where there is no allegation of any breach of the collective bargaining agreement, there is even less basis for imposing liability against the employer. For its part, American places great emphasis on the district court decision in Rakestraw v. United Airlines, Inc., 765 F. Supp. 474 (N.D. Ill. 1991), aff’d in part, rev’d in part, 981 F.2d 1524 (7th Cir. 1992). There, the airline employer was found not liable for “collusion” in the union’s breach of duty, where the evidence failed to show it acted in “bad faith or discriminated against plaintiffs in accepting [the union’s] proposal” for a contract that severely disadvantaged a particular subgroup of pilots. See 765 F. Supp. at 493-94. While Rakestraw is at most persuasive, not controlling, authority, it does support the notion that merely agreeing to a union’s contractual demands, even with knowledge that the union may not be advocating for all its members fairly, is not a sufficient basis for imposing liability on an employer. In the absence of Ninth Circuit authority on point, the issue boils down to the more general and basic question of when it may be appropriate to hold one entity liable for another’s breach of duty. Under such general principles, conduct that rises to the level of “collusion” almost certainly suffices. Plaintiffs have not shown, however, that it would be appropriate to impose liability where the employer is charged with nothing more than having acceded to the demands of the Union, even with knowledge of facts from which it might be inferred that the Union was not fulfilling its duty of fair representation to all of its constituents. A union does not automatically breach the duty of fair representation every time it negotiates for contracts in which some of its members are treated differently than others. At least outside contexts such as discrimination against protected classes, the onus should not be on the employer to evaluate and consider whether distinctions a union draws among its members are appropriate. Thus, something more than merely acceding to union demands must be alleged and Case 3:15-cv-03125-RS Document 37 Filed 12/17/15 Page 5 of 6Case 1:16-cv-01971-RC Document 62-3 Filed 11/23/16 Page 5 of 6 ORDER GRANTING MOTION TO DISMISS CASE NO. 15-cv-03125-RS 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 U n it ed S ta te s D is tr ic t C o u rt N o rt h er n D is tr ic t o f C al if o rn ia proven to impose liability on an employer for “colluding” in a breach of what ultimately remains the union’s duty. IV. CONCLUSION American’s motion to dismiss the first claim for relief insofar as that claim is directed at American is granted. American will remain in this action as a defendant, subject to plaintiffs’ prayer for injunctive relief under the second claim for relief. The detailed allegations of the First Amended Complaint, and the nature of the arguments they offered in opposition to the present motion, strongly suggests that their attempt to hold American liable in damages under the first claim for relief fails because this order rejects the legal premise of the claim, rather than because there are facts supporting liability that exist, but which they did not plead. Nevertheless, plaintiffs will be given the opportunity to amend the first claim for relief to attempt to state a claim against American Airlines, taking into account the preceding discussion. At the hearing, counsel for the Union stated on the record a willingness to stipulate to plaintiffs amending the second claim for relief as well. If plaintiffs wish to do so, they should confirm such a stipulation with both defendants, and then may include such amendments in a Second Amended Complaint, which should be filed no later than January 22, 2016. IT IS SO ORDERED. Dated: December 17, 2015 ______________________________________ RICHARD SEEBORG United States District Judge Case 3:15-cv-03125-RS Document 37 Filed 12/17/15 Page 6 of 6Case 1:16-cv-01971-RC Document 62-3 Filed 11/23/16 Page 6 of 6 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA JOHN KARAS, et al., Plaintiffs, v. Civil Action No. 1:16-cv-01971-RC ALLIED PILOTS ASSOCIATION, et al., Defendants. [PROPOSED] ORDER GRANTING DEFENDANT AMERICAN AIRLINES, INC.’S MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION AND MOTION FOR JUDGMENT ON THE PLEADINGS The motion of Defendant American Airlines, Inc. (“American”) to dismiss Plaintiffs’ Complaint, as to both American and Defendant US Airways, Inc. (“US Airways”), for lack of subject-matter jurisdiction and for judgment on the pleadings has been presented to the Court. After consideration of all of the papers submitted and any oral arguments by counsel, and all other matters presented to the Court in this action, the Court GRANTS American’s motion as to all counts of the Complaint. Counts Two and Four are dismissed for lack of subject-matter jurisdiction. The Court does not have subject-matter jurisdiction over Plaintiffs’ claims in Count Two for breach of “various merger implementation provisions” in the MOU and Protocol Agreement and for breach of Letter G to the JCBA, because those claims raise disputes involving the interpretation or application of collectively-bargained agreements, and, under the Railway Labor Act (“RLA”), 45 U.S.C. §§ 151 et seq., must be resolved exclusively in accordance with the arbitration procedures set forth in the agreements. Case 1:16-cv-01971-RC Document 62-4 Filed 11/23/16 Page 1 of 4 -2- The Court does not have subject-matter jurisdiction over Plaintiffs’ claim in Count Four for injunctive relief under McCaskill-Bond because the claim is moot in light of the arbitration panel’s decision and the subsequent implementation of the integrated seniority list. Additionally, Plaintiffs’ claims regarding alleged data errors in the seniority- integration process raise disputes that are subject to mandatory arbitration under the RLA and do not, in any event, state a valid claim for relief under McCaskill-Bond. Counts One and Three are dismissed for failure to state a claim. Count One, which alleges a breach of the duty of fair representation (“DFR”), fails because only employees’ unions - not employers like American - owe a DFR to employees. And even if Plaintiffs could establish that their current or former union breached its DFR to them, Plaintiffs’ claim still fails because they do not allege any affirmative misconduct on the part of American or US Airways. Count Three, which seeks declaratory relief under McCaskill-Bond, fails because Plaintiffs mistakenly invoke Section 13(a) of the Allegheny-Mohawk Labor Protective Provisions (“LPPs”) whereas the US Airways- American seniority-integration arbitration was conducted lawfully pursuant to Section 13(b) of the Allegheny-Mohawk LPPs, which permits an airline and the employees’ union(s) to agree on “an alternative method for dispute settlement.” Count Five does not state a claim against either American or US Airways. Case 1:16-cv-01971-RC Document 62-4 Filed 11/23/16 Page 2 of 4 -3- Therefore, IT IS HEREBY ORDERED that American’s Motion to Dismiss and Motion for Judgment on the Pleadings is granted. Dated: __________________ ____________________________________ Hon. Rudolph Contreras United States District Court Judge District of Columbia Service List Counsel for Defendants American Airlines, Inc. and US Airways, Inc.: Chris A. Hollinger O’MELVENY & MYERS LLP Two Embarcadero Center, 28th Floor San Francisco, CA 94111-3823 Robert A. Siegel Tristan Morales O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006 Counsel for Defendants Allied Pilots Association and East Pilots Seniority Integration Committee: Steven K. Hoffman Evin F. Isaacson JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW, Suite 950 Washington, DC 20036 Case 1:16-cv-01971-RC Document 62-4 Filed 11/23/16 Page 3 of 4 -4- Counsel for Defendants US Airline Pilots Association and USAPA Merger Committee: Bryan O’Dwyer Gary Silverman O’DWYER & BERNSTIEN, LLP 52 Duane Street, 5th Floor Paul O’Dwyer Way New York, NY 10007 Counsel for Plaintiffs: Patrick J. Boyd THE BOYD LAW GROUP, PLLC 370 Lexington Avenue, Suite 1705 New York, NY 10017 Case 1:16-cv-01971-RC Document 62-4 Filed 11/23/16 Page 4 of 4