Opinion
No. CV 08-1633-PHX-NVW (consolidated), CV08-1728-PHX-NVW.
February 17, 2009
ORDER
Plaintiff pilots brought suit on their own behalf and on behalf of a proposed class of similarly situated pilots alleging that Defendant US Airline Pilots' Association ("USAPA") breached its duty of fair representation. Both parties requested a jury trial in their initial pleadings (docs. # 86, 88), but the West Pilots now oppose USAPA's request, arguing that USAPA has no Seventh Amendment right to a jury trial here. In order to facilitate the prompt resolution of this case, the court has asked counsel to brief the jury trial issue at this stage. That briefing is now complete. (Docs. # 159, 161, 169.) Although no jury trial would be warranted if the plaintiffs sought only injunctive relief, such a trial will be granted because their case includes a claim for compensatory damages.
Fed.R.Civ.P. 38(d) provides that "A proper demand [for a jury trial] may be withdrawn only if the parties consent." This consent requirement does not extend to demands that are not "proper," that is, where no right to a jury trial exists.
I. Factual Background
A summary of Plaintiffs' allegations follows, as stated in a previous order of this Court. See Addington v. USAPA, 588 F. Supp. 2d 1051, 1055-57 (D. Ariz. Nov. 20, 2008) [Doc. # 84].
This case concerns two sets of pilots. One set, the West Pilots, were employed as pilots of America West Airlines, Inc. ("America West") before May 2005. The other set, the East Pilots, were employed by US Airways, Inc. ("US Airways") at the same time. The terms "East Pilots" and "West Pilots" refer only to pilots who were on the seniority lists of their respective airlines at that time. Both groups of pilots were then represented by the same labor union, the Air Line Pilots Association ("ALPA").
Toward the end of 2003, America West and the West Pilots negotiated a collective bargaining agreement effective January 2004 (the "2004 CBA"). That agreement provided that in the event of a merger where America West was not the surviving carrier, America West would make reasonable efforts to have the surviving carrier "integrate the two Pilot groups in accordance with [ALPA's] Merger Policy."
In May 2005, America West agreed to merge with US Airways. The merger agreement provided that US Airways would succeed both air carriers in the combined enterprise. A few months later, US Airways (now acting as a successor to both airlines), entered into a multilateral contractual agreement with the East Pilots and the West Pilots. This agreement was called the Transition Agreement, and it affected the collective bargaining relationships among the parties. Though the East Pilots and the West Pilots were both represented by ALPA, the Transition Agreement was signed by Master Executive Councils of both pilot groups.
The allegations show that the negotiations and the resulting contract were designed to resolve the tension between competing interests of the East Pilots and the West Pilots. Some terms of the Transition Agreement benefited the East Pilots, some benefited the West Pilots. The Agreement provided generally that, until the two airlines achieved operational integration, only America West pilots would fly on pre-merger America West aircraft and on western flights that were current and announced as of the time of the agreement. A parallel provision existed for the East Pilots as to pre-merger US Airways aircraft and eastern flights. Subject to the Transition Agreement, US Airways could continue to operate each airline separately, in accordance with the terms of each carrier's collective bargaining agreement.
The Transition Agreement provided that during separate operations the parties were to adopt a single integrated seniority list "in accordance with ALPA Merger Policy," and the parties were bound to accept the list if it complied with certain criteria. However, this new seniority list would not be effective until the two operations were integrated. The Transition Agreement also specified that during separate operations any newly hired pilots would be placed on a third seniority list and made junior to all pilots on the America West and old US Airways seniority lists. US Airways had a significant number of pilots on furlough status at the time of the merger, so the parties agreed that America West could not hire new pilots until all furloughed US Airways pilots had been offered recall. Separate operations under separate seniority lists would continue until two events took place: the completion of an integrated seniority list and the negotiation of a single collective bargaining agreement. Within twelve months thereafter, operations would be consolidated under a single Federal Aviation Administration operating certificate and the single seniority list would govern.
Pursuant to ALPA Merger Policy, the two groups of pilots attempted to create a single integrated seniority list through mediation. This attempt failed. Pursuant to the same policy and the Transition Agreement, the East Pilots and the West Pilots brought the matter to binding arbitration in October 2006, and arbitrator George Nicolau issued his decision in May 2007, which included a new seniority list (the "Nicolau Award"). This list gave the West Pilots seniority over the East Pilots who were on furlough at the time of the merger, gave 517 East Pilots seniority over all West Pilots, and blended the seniority of the West Pilots and the remaining East Pilots. The arbitrator considered the arguments of both sides and explained why he considered this award fair and reasonable under the circumstances. US Airways was a much older airline than America West, and for that reason the West Pilots would have fallen lower on a merged date-of-hire list than they would have under the Nicolau Award. However, at the time of the merger, US Airways had dim economic prospects. The company was insolvent and operating in bankruptcy reorganization, and it had 1,751 pilots on furlough status. America West, by contrast, was in stronger financial condition, and all of its pilots were on active status. The arbitrator concluded that the superior employment prospects of the West Pilots justified a superior position in the seniority list. At the same time, he declined to give the West Pilots the full seniority that they requested. On December 20, 2007, US Airways accepted this seniority list.
The East Pilots were unhappy with the results of the arbitration. In response, they used their majority status to form a new union, USAPA. On April 18, 2008, the National Mediation Board certified USAPA as the exclusive collective bargaining representative of all pilots employed by US Airways. USAPA has shown itself to be hostile to the arbitrated seniority list. During the campaign to start USAPA, its proponents expressly promised that the new union would not follow the Nicolau Award. USAPA has refused its duty under the 2004 CBA and the Transition Agreement to bargain for implementation of the Nicolau seniority list. In the meantime, US Airways has fallen on hard times and has furloughed some West Pilots ahead of East Pilots who would have been junior to them if the Nicolau Award had been implemented.
The named West Pilots brought this class action alleging that USAPA breached its duty of fair representation by, among other things, causing the breach of contractual duties to honor the Nicolau Award. They seek injunctive relief and "damages to compensate Plaintiffs for the value of lost wages and benefits caused by the injuries alleged herein." They have moved to certify a class that seeks only injunctive relief and the restitution of union dues and fees paid to USAPA.
II. Analysis
The Seventh Amendment protects a litigant's right to a jury trial only if a cause of action is legal (as opposed to equitable) in nature and involves a matter of "private right." Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42 n. 4 (1989). In this case, the fair representation claim is legal in nature because it rests on contract-related claims and seeks legal relief in the form of compensatory damages.
The Supreme Court has established a three-part test to determine whether the Seventh Amendment right attaches. Only the first two parts are relevant here: "First, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature. The second stage of this analysis is more important than the first." Id. at 42 (internal quotation marks and citations omitted).
A. Nature of the Claim
A claim that the union breached its duty of fair representation is analogous to an equitable claim against a trustee, historically a creature of equity. Chauffeurs, Teamsters Helpers, Local No. 391 v. Terry, 494 U.S. 558, 567-68 (1990). Nonetheless, this characterization does not end the inquiry because "[t]he Seventh Amendment question depends on the nature of the issue to be tried rather than the character of the overall action." Id. at 569.
Here, the West Pilots allege that the union has failed in its duty by causing the breach of numerous contractual arrangements. As this Court understands the allegations, these agreements established a framework for the fair resolution of seniority issues. By arbitrarily disparaging them, the union has jettisoned its duty of fair representation. In fact, this consolidated action originally included contract-based claims against other defendants: state-law claims which have already been dismissed as preempted and federal labor law claims which have been dismissed for failure to exhaust administrative remedies. Seventh Amendment analysis in a fair representation action does not turn on the ability of the plaintiff to maintain separate legal claims. Terry, 494 U.S. at 569-70 n. 6.
Thus, as a historical matter, this lawsuit includes both legal and equitable aspects. The duty in this case is most analogous to a trustee's duty, enforceable in equity. But the liability itself is a function of contractual issues, which are legal in nature. See id. at 569-70 (breach of contract); Germain v. Conn. Nat'l Bank, 988 F.2d 1323, 1328-29 (2d Cir. 1993) (intentional interference with contract). "The first part of our Seventh Amendment inquiry, then, leaves [the Court] in equipoise as to whether respondents are entitled to a jury trial." Terry, 494 U.S. at 570.
B. Nature of Remedy
The second stage of the inquiry leaves no doubt that the Plaintiffs' case involves legal claims. Plaintiffs seek two primary forms of relief. First, they seek an injunction ordering USAPA "to negotiate and implement a single collective bargaining agreement that fully implements the Nicolau List." Second, they seek "damages to compensate Plaintiffs for the value of lost wages and benefits caused by the injuries alleged herein." In their Motion for Class Certification (doc. # 120), Plaintiffs make clear that their class action limits their proposed class's monetary claim to a refund of union dues and fees.
"It goes without saying that an injunction is an equitable remedy." Weinberger v. Romero-Barcelo, 456 U.S. 305, 311 (1982). If the injunction were the only relief Plaintiffs sought, this Court would be inclined to hold that no jury trial right exists. The fundamentally equitable nature of that remedy would establish the equitable character of the fair representation issue under Terry. Plaintiffs seek other relief, however, which is legal, and the Constitution requires a jury to decide issues common to legal and equitable claims.
Plaintiffs' claims for lost wages against the union are legal in nature because they are compensatory. "The backpay sought by [Plaintiffs] is not money wrongfully held by the Union, but wages and benefits they would have received from [US Airways]" had the union not breached its duty. Terry, 494 U.S. at 570-71. "Such relief is not restitutionary" because the union is not unjustly enriched by the employer's failure to pay wages. Id. at 571. This type of relief is "clearly different" from equitable backpay, where the employer is made to return (rather than replace) moneys rightfully belonging to the plaintiff. See id. at 572.
It is of no moment that as a matter of historical practice, courts of equity would grant monetary awards against trustees who breached their fiduciary duties. In Terry, the Court considered and rejected this very argument. Id. at 571 n. 8. The monetary relief sought here is in the nature of compensatory damages, as illustrated above. It is this general character of the remedy that guides this analysis, not the niceties of eighteenth-century chancery. Indeed, historical reality compels this pragmatic approach because the line separating law from equity jurisdiction was not clearly drawn even in those ancient days. See Terry, 494 U.S. at 577 (Brennan, J., concurring); 3 W. Blackstone, Commentaries 436-37 (1st ed. 1765-1769). Thus, "[t]he second part of [Seventh Amendment] analysis . . . should not replicate the abstruse historical inquiry of the first part, but requires consideration of the general types of relief provided by courts of law and equity." Terry, 494 U.S. at 571 n. 8 (internal quotation marks and citation omitted).
Plaintiffs argue that the chief thrust of their complaint is equitable, and that their motion for class certification limits class remedies to injunctive and restitutionary relief. This contention is without force. Regardless of the limited nature of Plaintiffs' class action, the amended complaint still seeks a damages remedy on behalf of the named Plaintiffs. And even if the first trial in this case only addresses the liability facts, the Supreme Court has made it clear that the jury right cannot be impaired "by any blending with a claim, properly cognizable at law, of a demand for equitable relief in aid of the legal action, or during its pendency." Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 510 (1959). The Court continued, "[O]nly under the most imperative circumstances, circumstances which in view of the flexible procedures of the Federal Rules we cannot now anticipate, can the right to a jury trial of legal issues be lost through prior determination of equitable claims." Id. No imperative circumstances exist here. The issue of USAPA's liability vel non in law and equity must be tried to a jury. If subsequent or separate factual issues respecting equitable relief arise, it may be that those issues are tried to the bench.
It is not now necessary to decide whether, in the absence of Plaintiffs' lost wage claims, the claims for a refund of class members' union dues and fees would require a jury trial. A preliminary analysis reveals doubts surrounding this particular monetary claim. First, it is unclear whether the Plaintiffs have adequately alleged recovery of dues and fees as a form of relief in their First Amended Complaint. Second, it is unclear what legal grounds the Plaintiffs can claim as a basis for a refund of dues and fees in a fair representation case. At the moment, it is enough to say that the named Plaintiffs' claim for compensatory damages supports the Seventh Amendment right.
B. The Ramey Decision
One district court has reached a contrary conclusion on similar, but not identical facts. See Ramey v. Dist. 141, Int'l Ass'n of Machinists Aerospace Workers, 473 F. Supp. 2d 365, 373 (E.D.N.Y. 2007). Like this case, Ramey involved a fair representation action seeking injunctive and monetary relief. Unlike this case, the union in Ramey was not said to have caused a breach of contract. Equally important is that decision's characterization of backpay damages claims against the union as "incidental" to injunctive relief sought. See id. at 373. Ramey held that no jury right attached to such damages because they "merely make the injunction fully effective." Id. In this respect, it is necessary to depart from Ramey's reasoning.
In Terry, the Supreme Court noted that a monetary award "incidental to or intertwined with injunctive relief may be equitable." 494 U.S. at 572 (internal quotation marks and citation omitted); see also Wooddell v. Int'l Bhd. of Elec. Workers, Local 71, 502 U.S. 93, 97-98 (1991) (summarizing this aspect of Terry). The authority underlying this statement undercuts its apparent force, however. In neither case Terry cites were plaintiffs allowed to try "incidental" claims for legal damages without a jury. See Tull v. U.S., 481 U.S. 412, 424 (1987); Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 291-92 (1960). Each case simply reaffirmed the rule that the Seventh Amendment requires no jury for equitable awards of restitution. Terry itself articulates no new standard for "incidental" damages of a legal nature; it scarcely reaches the question because the plaintiff had sought no equitable relief at all. See 494 U.S. at 571.
When Terry is read in the larger context of Seventh Amendment doctrine, it does not support the broad reading put forth in Ramey. It has long been the rule that a showing that legal damages are "incidental" to an injunction, on its own, is not sufficient to escape the Seventh Amendment mandate. Justice Black wrote to this effect in Dairy Queen, Inc. v. Wood, finding the argument so repellent that he disposed of it at the threshold before the substantive facts of the case were presented. 369 U.S. 469, 470-73 (1962). Such an exception was not an intended result of the merger of law and equity; practice taught that it would pose a great threat to Seventh Amendment rights. Id. at 471-72. "[A]fter the adoption of the Federal Rules, attempts were made indirectly to undercut [the Seventh Amendment] by having federal courts in which cases involving both legal and equitable claims were filed decide the equitable claim first. . . . [A]ny issue common to both the legal and equitable claims was finally determined by the court and the party seeking trial by jury on the legal claim was deprived of that right as to these common issues." Id. at 472.
Beacon Theatres corrected this trend, Justice Black explained, by holding that "where both legal and equitable issues are presented in a single case, `only under the most imperative circumstances, circumstances which in view of the flexible procedures of the Federal Rules we cannot now anticipate, can the right to a jury trial of legal issues be lost through prior determination of equitable claims.' That holding, of course, applies whether the trial judge chooses to characterize the legal issues presented as `incidental' to equitable issues or not." Id. at 472-73 (citing Beacon Theatres, 359 U.S. at 510-11). Years later, the Court put it more bluntly: "[W]here equitable and legal claims are joined in the same action, there is a right to jury trial on the legal claims which must not be infringed either by trying the legal issues as incidental to the equitable ones or by a court trial of a common issue existing between the claims." Ross v. Bernhard, 396 U.S. 531, 537-38 (1970). Drafting in the slipstream of Dairy Queen, the Ninth Circuit restated the rule: "[E]xcept under most imperative circumstances, a right to a jury trial on legal issues may not now be denied to a federal litigant . . . because the legal issues are `incidental' to the equitable issues. . . ." DePinto v. Provident Sec. Life Ins. Co., 323 F.2d 826, 835-36 (9th Cir. 1963) (footnote omitted).
The Ramey decision does not distinguish Dairy Queen. Neither Terry nor Woodell purports to revisit it; Terry simply noted that the plaintiffs could not call their damages claims "incidental" because they sought no equitable relief at all. The Ninth Circuit continues to invoke Dairy Queen as good law. See, e.g., Danjaq LLC v. Sony Corp., 263 F.3d 942, 962 (9th Cir. 2001); Granite State Ins. Co. v. Smart Modular Techs., Inc., 76 F.3d 1023, 1027 (9th Cir. 1996).
Even if the legal claims are assumed to be incidental, the case at bar presents no "imperative circumstances" that weigh against the use of a jury.
IT IS THEREFORE ORDERED that Defendants' Request for a Jury Trial (docs. # 88, 159) is granted.