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AIR LINE PILOTS ASSN. INTL. v. EASTERN AIR LINES

December 19, 1988

AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Plaintiffs,
v.
EASTERN AIR LINES, INC., Defendant. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, AFL-CIO, et al., Plaintiffs, v. EASTERN AIR LINES, INC., et al., Defendants; TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO, et al., Plaintiffs, v. EASTERN AIR LINES, INC., Defendant. & TRUMP SHUTTLE, INC., Intervenor



The opinion of the court was delivered by: PARKER

 BARRINGTON D. PARKER, SENIOR UNITED STATES DISTRICT JUDGE

 In separate verified complaints alleging violations of the Railway Labor Act ("RLA" or "Act"), 45 U.S.C. §§ 151 et seq. (1987), the Air Line Pilots Association, International ("ALPA"), the International Machinists & Aerospace Workers ("IAM") and Local 553 Transport Workers Union of America ("TWU") have sued Eastern Air Lines, Inc. ("Eastern") and request both injunctive and declaratory relief. In a joint motion for a preliminary injunction, filed on November 18, 1988, the three unions seek to halt the proposed sale of Eastern's Air Shuttle ("Shuttle") operations to Trump Shuttle, Inc. ("Trump Shuttle" or "Trump"). *fn1" They claim that Eastern's proposed sale of the Shuttle to Trump violates both Eastern's status quo and collective bargaining obligations under the RLA, triggers a "major dispute" under the RLA because the proposed action was not based on any express or arguable contractual right or consistent past practice, and was undertaken with the express intent of undermining the unions and violates the statutory obligation to refrain from interfering with certified bargaining representatives.

 The motion was fully presented and contested by able counsel for the parties. The memoranda of points and authorities and the arguments of counsel have been considered. For the reasons stated below the Court determines that the sale of the Shuttle should not be halted. Accordingly, plaintiffs' motion for a preliminary injunction is denied. The Court's required findings of fact and conclusions of law are presented in the discussion which follows.

 I. FACTUAL FINDINGS

 Plaintiffs serve as the certified collective bargaining representatives of Eastern's employees. ALPA is the representative for Eastern's pilots. The ALPA-Eastern collective bargaining agreement expired on July 1, 1988, and the parties are currently engaged in contract negotiations. 45 U.S.C. § 156.

 The IAM is the representative for Eastern's mechanics, baggage handlers, and other ground service personnel. The most recent IAM-Eastern agreement expired on December 31, 1987. Contract negotiations were started in October 1987, and for more than a year, the two have been engaged in negotiations for a new agreement before the National Mediation Board. 45 U.S.C. § 155, First. ALPA and the IAM have been parties to successive collective bargaining agreements for more than 40 years.

 Local 553 of TWU is the bargaining representative for Eastern's flight attendants. The Local and Eastern's management have had successive collective bargaining agreements for many years. Their current agreement remains in effect through this month. They exchanged formal notices of their intent to renegotiate the entire agreement in October 1988. 45 U.S.C. § 156.

 A.

 Eastern is the nation's sixth largest air carrier and a wholly-owned subsidiary of the Texas Air Corporation ("Texas Air"). It provides scheduled passenger and cargo service out of hubs located in Atlanta, Miami, Philadelphia, and San Juan, Puerto Rico. It also operates passenger and other services extending through Central and South America.

 Eastern operates a shuttle service, on an hourly basis, between LaGuardia Airport, New York City, and both Logan Airport, Boston, and National Airport, Washington, D.C. The Shuttle has operated for more than 25 years and is a well-established and profitable division of Eastern Air Lines. It provides employment for approximately 700 full-time employees, including 200 pilots, 146 machinists and approximately 250 flight attendants. It has no single permanent group of employees, rather, Eastern's workers bid for positions on basis of seniority. An employee's assignment to the Shuttle on a month-to-month basis depends upon the bids of more senior employees.

 The Shuttle division employs 2.3% of Eastern's 30,500 employees, utilizes 6.7% of the company's 255 aircraft, accounts for approximately 1.5% of the company's total available seat miles ("ASM's"), and generates approximately 4.3% of the total operating revenue. The division accounts for approximately 2.9% of Eastern's total assets at net book value, and approximately 7% of its assets at fair market value.

 The Shuttle's traffic is virtually limited to passengers who travel only between the three named cities. The passengers do not continue to other Eastern destinations. In recent years the Shuttle's market share has declined, primarily because of competition from Pan American which has penetrated the New York, Boston, and Washington shuttle market.

 B.

 In early 1988, Eastern sought to dispose of the Shuttle when it attempted to spin off the division to Air Shuttle, L.P., a newly formed subsidiary of Texas Air. The transaction was challenged by the IAM. IAM v. Eastern Air Lines, Inc., 1988 U.S. Dist. LEXIS 3335, 127 L.R.R.M. (BNA) 3078 (D.D.C. 1988). The IAM sought relief and in March 1988, Judge Pratt of this Court found Eastern in contempt of an earlier July 1987 ruling. He enjoined the carrier from taking any steps to spin off the Shuttle operation, pending exhaustion of the dispute resolution procedures of the RLA. His ruling was subsequently vacated on procedural grounds. IAM v. Eastern Air Lines, Inc., 270 U.S. App. D.C. 352, 849 F.2d 1481 (D.C. Cir. 1988). Meanwhile, Eastern withdrew its proposed plans.

 This Memorandum Opinion involves Eastern's second attempt to dispose of the Shuttle when on October 12, 1988, Texas Air officials publicly announced a Purchase and Sale Agreement ("Agreement") between Eastern and Trump Shuttle, Inc. The Agreement provided for sale of the Shuttle division for $ 365 million in cash to be paid at the closing.

 Trump Shuttle was formed in October 1988, by Donald J. Trump. He is the sole stockholder, board chairman and chief executive officer of Trump Shuttle which was formed to effect the purchase from Eastern. Mr. Trump is a successful entrepreneur engaged in real estate developments, hotel operations, and a variety of other enterprises.

 C.

 The Agreement provides that the Shuttle may not be resold to any of Eastern's six principal competitors (American, Delta, Northwest, United, USAir, or TWA) for a period of ten years. It also provides that for five years after the sale, Eastern will retain a right of first refusal if Trump decides to sell the Shuttle to those airlines, or if other potential purchasers attempt to buy it. The Agreement further provides that Trump Shuttle shall continue to participate in Eastern's OnePass, frequent flyer program for three years, and that for twelve years thereafter, Trump shall not participate in the frequent flyer program of any other airline.

 Deposition testimony and declarations from various witnesses showed that following the sale, Eastern would continue to have substantial flight operations, assets and employees through the LaGuardia, Logan, and National airports. Expert witnesses, James F. Chadbourne and Daniel M. Kasper, agreed that the Shuttle sale would not have a significant impact on Eastern's non-shuttle operations.

 Of great concern to plaintiffs is the impact of the Shuttle sale on Eastern's employees. Mr. Trump made it clear in his testimony on behalf of Trump Shuttle, that he extended to Eastern employees an opportunity to work for his company, that he would recognize the three unions, and support the present collective bargaining agreements. The October 12 Agreement provides, inter alia, that Mr. Trump will offer guaranteed employment, in order of seniority, to Eastern's employees in the same numbers presently utilized, will establish wages and work rules identical to those in effect at Eastern -- with full credit for seniority, and will not change existing wage rates and work rules without compliance with the Railway Labor Act. Employees would not be hired from any other source unless an insufficient number of Eastern's employees were willing to accept the employment offers. The Agreement also requires Trump to recognize Eastern's unions as the bargaining representative and as Captain John Bavis, an Eastern pilot and ranking ALPA official, testified to "assume as a successor" all rights and obligations of Eastern under any labor contract or the Railway Labor Act, "to the full extent permitted by law." Tr. Dec. 2, 1988, at 111, 113 (Bavis). No Eastern employee is required to accept the offer of employment; the choice is entirely optional. Id. at 119 (Bavis).

 Mr. Trump's job offers have been accepted by more than a sufficient number of Eastern employees to fully staff the Shuttle. Thus, no employee furloughs are likely as a result of the transaction. Employees who choose not to accept the employment option with Trump may remain with Eastern, employed and treated in accord with the seniority-based employment provisions of their respective collective bargaining agreement.

 D.

 The record shows that historically, Eastern has had a record of selling assets and eliminating services without prior bargaining with the unions. Such changes have taken place within the framework of the existing agreements. Captain John Bavis and others, whose deposition testimony or declarations are a part of this record, readily admitted that the following operations were terminated without union bargaining: The 1986 hub in Charlotte, North Carolina, the Moonlight Special between Houston and Chicago, operating between 1984-1987, the Military Airlift Command operations (MAC flights) from 1974-1977, the Montreal, Canada-New York City shuttle operating in the mid-1970s, and the 1980-86 Contract Maintenance Center in Miami.

 Several union witnesses testified that the above situations could be distinguished from the Shuttle sale since the Shuttle offered unique and unusual opportunities and personal conveniences for many. However, their testimony while interesting, did not alter the fact that past practices support a finding that significant changes affecting personnel and airline facilities have been made unilaterally by management without collective bargaining over such changes. Nor was their testimony sufficient to overcome the substantial corroboration of such practices otherwise found in the record, upon which the Court has relied.

 The impact of the sale to Trump Shuttle pales in comparison to the impact of the September 1988 schedule change. The latter included the elimination and reduction of two major hub services, termination of all services to 14 cities, closure of a pilot domicile center, and disposition of more than 30 aircraft. But even more interesting, is the comparison between several particular items.

 Elimination of the Shuttle involves approximately 700 employees, compared with the more than 3,000 affected by the fall schedule. The Shuttle sale results in a curtailment of only 62 departure flights per day from three cities, compared with a net curtailment of 143 daily flights under the fall schedule. Beyond the 62 departures, Eastern will continue its regular flight service to and from Boston, New York, and Washington, D.C., even though the Shuttle division is eliminated. Clearly, the fall schedule resulted in a reduction of far more services. Only 17 aircraft are eliminated by the Shuttle close down, compared to 30 from the fall schedule changes. Finally, there is a decrease of only 1.5% of total available seat miles as compared with the 15.4% decrease associated with the fall schedule.

 Our Circuit Court recognized the fall schedule as changes consistent with past practices and consistent with the provisions of the Railway Labor Act. The changes resulting from the Trump sale are far less drastic than those resulting from the fall schedule. Several witnesses offered testimony presenting what they considered to be important distinctions from the Shuttle transaction. Their testimony, while not entirely ...


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