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BECKETT v. AIR LINE PILOTS ASSN.

February 12, 1992

CAPTAIN STEWART W. BECKETT, et al., Plaintiffs,
v.
THE AIR LINE PILOTS ASSOCIATION, INTERNATIONAL Defendants.



The opinion of the court was delivered by: THOMAS F. HOGAN

 Now before the Court are the parties' cross motions for summary judgment. The issues raised in the motions have been fully briefed by both parties, and the Court heard extensive oral arguments on December 12, 1991. *fn1" After carefully considering all pleadings submitted on the outstanding motions as well as the arguments made by counsel at the December 12, 1991 hearing, the Court shall grant the defendant's motion for summary judgment and shall deny the plaintiffs' motion for partial summary judgment for the reasons that follow.

 I. SUMMARY OF THE CASE

 Plaintiffs are a group of nonunion pilots employed by Pan American World Airways, Inc. ("Pan Am"). Defendant is the Air Line Pilots Association ("ALPA"), which is a labor organization within the meaning of the Railway Labor Act ("RLA"), 45 U.S.C. §§ 151-188 (1982) and represents, inter alia, all pilots employed by Pan Am, regardless of membership in the union. Pan Am is a common carrier within the meaning of the RLA.

 Over the course of time, ALPA has engaged in collective bargaining with Pan Am over the terms and conditions of employment with Pan Am on behalf of the pilots employed by Pan Am. This dispute arose because ALPA determined the nonunion members properly were charged service fees to support a sympathy strike at Eastern Airlines, and ALPA retained certain monies that were otherwise due individual nonunion pilots to cover those service fees when they became delinquent.

 The complaint alleges defendant breached its fiduciary duty to the plaintiffs by diverting for defendant's own use money held in trust for the plaintiffs, and that defendant violated Section 2 Eleventh of the Railway Labor Act by using the plaintiffs' money to support a sympathy strike against another airline without informing the plaintiffs of their right to object to the assessments against them and by resorting to self-help rather than exhausting its rights under the negotiated union security provision of the contract.

 II. FACTUAL FINDINGS

 A. Union Security Provision.

 The collective bargaining agreement between Pan Am and ALPA contains a union security provision that establishes an agency shop. The agency shop requires Pan Am's pilots to either join ALPA or pay a service fee to ALPA as a condition of employment. Pursuant to this provision, pilots who do not want to join the union are not forced to do so, but in lieu of joining, they must pay an appropriate service fee to cover the costs of representation.

 The service fee provision in the contract between Pan Am and ALPA establishes the service fee at "an amount equal to [ALPA's] regular and usual monthly dues, initiation fee, and periodic assessments, including MEC assessments, uniformly required of members." There is also a provision in the contract that states if a pilot is delinquent in paying the service charges, the treasurer shall notify the pilot of his delinquency and the possibility that the pilot would be subject to discharge if he failed to pay, and shall set a deadline date by which payment must be received. Also, if the pilot continues to refuse to pay his assessment, under the contract ALPA may certify in writing to Pan Am that the pilot should be terminated for failure to pay. The contract also contains a protest procedure by which a pilot who is subject to a discharge request can challenge that action.

 In December 1987, ALPA revised its procedure for ensuring that nonunion pilots had sufficient information to exercise their right to challenge nongermane expenditures under Chicago Teachers' Union v. Hudson, 475 U.S. 292, 89 L. Ed. 2d 232 , 106 S. Ct. 1066 (1986); Ellis v. Brotherhood of Railway, Airline and S.S. Clerks, Freight Handlers, Exp. and Station and Employees, 466 U.S. 435, 80 L. Ed. 2d 428 , 104 S. Ct. 1883 (1984); and International Association of Machinists v. Street, 367 U.S. 740, 6 L. Ed. 2d 1141 , 81 S. Ct. 1784 (1961). Under the revised procedures, each nonunion pilot covered by the agency shop provision was to be provided annually a copy of the rebate policy for objecting to financially supporting ALPA activities that are not germane to collective bargaining, and for challenging ALPA's determination of which activities are germane to collective bargaining. Each nonunion pilot was also to be provided with a statement of germane and nongermane expenditures with an explanation of the breakdown. Pilots who object to sharing the cost of nongermane activities receive a rebate of that portion of the service fee. If a pilot disagrees with the classification of germane activities or the calculation of his reduction, he is entitled to request arbitration.

 B. Strike at Eastern Airlines.

 On March 4, 1989, the International Association of Machinists and Aerospace Workers Union ("IAM") and its subordinate unions began a lawful strike against Eastern Air Lines. The Eastern strike was the result of serious labor disputes that had embroiled Eastern and all its unions from the time Texas Air Corporation, headed by Frank Lorenzo, acquired the airlines in 1986. ALPA subsequently sanctioned a "sympathy" strike by pilots in the Eastern Air Lines pilot bargaining unit. Sometime later, the ALPA Executive Committee and Executive Board adopted a resolution authorizing benefits for striking Eastern Pilots and assessing the ALPA membership to pay for those benefits. The resolution became effective when it was ratified by a majority of the ALPA membership. The membership voted on two separate, additional occasions to continue the benefits and assessments for the sympathy strikers.

 In May, 1989 ALPA began mailing notices demanding that the nonunion Pan Am pilots pay the Eastern strike assessments. In late May or early June, 1989 ALPA mailed its 1988 statement of germane and nongermane expenditures to the nonunion pilots. Because the statement referred only to 1988 expenditures, there was no reference to the Eastern strike assessments.

 From May 1989 through March 1990, there were eleven Eastern strike assessments ranging from $ 2400 a month to $ 1600. ALPA did not notify specifically the nonunion Pan Am pilots of their right to object or challenge the chargeability of the Eastern strike assessments. Although 46 of the 49 plaintiffs named in the original complaint were over 60 days delinquent in the payment of the assessments, ALPA only sent delinquency letters to five of the plaintiffs.

 C. Fagerland Settlement Monies and the Set-Off.

 Pan Am established a Fixed Benefit Retirement Benefit Plan for Pilots ("A Plan"), which was an employee pension plan covered by ERISA. Because of financial difficulties, on several occasions between 1980 and 1983 Pan Am obtained funding waivers allowing Pan Am to defer the contributions it was required to make to the plan. Then, on August 8, 1984, Pan Am announced that it unilaterally was discontinuing additional accruals of retirement pension credits under the A plan, retroactively to December 31, 1983.

 ALPA, through its Pan Am Master Executive Council ("Pan Am MEC"), filed grievances against Pan Am for failing to continue funding the plan and for freezing unilaterally the accrual of retirement credits, alleging that these actions by Pan Am violated Pan Am's obligations under the Railway Labor Act and the collective bargaining contract with ALPA. These grievances were pending until February 28, 1985 when Pan Am and the Pan Am MEC reached an agreement on a new collective bargaining agreement between Pan Am and the pilots. That agreement contained provisions relating to the plaintiff's pension rights and benefits. Specifically, the agreement provided that Pan Am would make a Savings Annuitization Payout to Pan Am pilots who were eligible participants in the A Plan. Under the agreement, Pan Am agreed to pay over a five year period, $ 35.125 million to eligible Pan Am pilots as determined by ALPA ($ 7.025 million payments in September 1986, 1987, 1988, 1989, 1990).

 Although ALPA and Pan Am both anticipated annual distributions to the pilots from the fund, actual distribution was delayed as a result of litigation by a group of pilots who had been participants in the A Plan but were no longer members of the Pan Am bargaining unit because they had been transferred to United Air Lines. Fagerland v. Air Line Pilots Association, et al., Civ. No. 86-3410 (D.D.C. December 19, 1989). In the Fagerland litigation, the transferred pilots were disputing the method ALPA used to determine each pilot's proportionate share of the annual payout. The parties to the Fagerland litigation agreed to place the $ 35.125 million fund into an interest bearing escrow account.

 In December, 1989, the parties to the Fagerland litigation entered into a settlement agreement and consent decree that provided that the fund would be transferred from the escrow account to an account to be established and administered by ALPA. Generally, the consent decree provided that the Fagerland class members were to receive a set sum of the money, and the remaining funds were to be distributed by ALPA to eligible pilots who were not Fagerland class members. Similar procedures were provided for the distribution of the September 1990 payment by Pan Am to ALPA.

 Although the Fagerland consent decree implied that the $ 35.125 million fund from the settlement was held by ALPA in trust for distribution, it is not clear that such a relationship precluded a set off of the delinquent fees. The consent decree stated in pertinent part

 any sums paid by Pan Am . . . are to be paid directly to ALPA, as trustee and agent for the pilots eligible to receive these funds. . . . ALPA, as trustee and agent, will distribute these payments to individual pilots [according to the established formula] . . . . The sums remaining from the final Pan Am payment shall be distributed to eligible pilots who are not plaintiff class members pursuant to the instructions of the Pan Am MEC.

 Although the plaintiffs argue that this created a trustee relationship, the plaintiffs were not parties to the litigation. On February 20, 1990, the Pan Am MEC passed the following resolution:

 BE IT RESOLVED that all PAA pilots who are delinquent in dues, service charge or assessment payments to ALPA or who are in arrears in their arrangement plan status as of February 20, 1990 or who have not applied for an arrangement plan by February 20, 1990 or who retired, including those pilots on Disability Status, with an obligation to ALPA shall receive their full payment ...


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