WHEREAS Section 40 Part 5 Paragraph A-1 of the ALPA Administrative manual reads as follows: Section 40 ALPA Administrative Manual – Collective. As required by the ALPA Administrative Manual, Section 40, all such funds are subject to careful deliberation to mitigate any future legal challenges. That process continues. Any such monies will be included in the Tentative Agreement (TA) as an attached Letter of Agreement (LOA).
MEMORANDUM OPINION AND ORDER
GARY FEINERMAN, District Judge.
James Barnes, Phillip Whitehead, Walter Clark, David Bishop, and Eric Lish, on behalf of themselves and two putative sub-classes of United Airlines pilots, the first consisting of management pilots and the second of pilot instructors, allege in this suit that Air Line Pilots Association, International ('ALPA'), unlawfully discriminated against them in allocating $225 million of retroactive pay that United provided to its pilots after ALPA and United entered into a collective bargaining agreement in late 2012. Doc. 29. The amended complaint alleges that ALPA breached its duty of fair representation to both sub-classes under the Railway Labor Act ('RLA'), 45 U.S.C. § 151 et seq., and, in the alternative as to the management pilots only, that ALPA unjustly enriched itself in violation of Illinois law by accepting the management pilots' payment of dues and contract maintenance fees. Ibid. ALPA moved to dismiss the case in its entirety under Federal Rule of Civil Procedure 12(b)(6) or for summary judgment under Rule 56, Doc. 32, and Plaintiffs requested additional discovery under Rule 56(d), Doc. 57 at 30-31. ALPA's motion is denied, and Plaintiffs will be allowed to take additional discovery limited to the potentially dispositive issue set forth below.
Background
Because both sides have presented evidence outside the pleadings to support their respective positions, Docs. 35, 38, 51-52, 60, and because ALPA's motion cannot be resolved solely on the materials that may be considered under Rule 12(b)(6), the court will treat the motion as having been brought under Rule 56. See Fed. R. Civ. P. 12(d). The following facts are stated as favorably to Plaintiffs, the non-movants, as permitted by the record and Local Rule 56.1. See Hanners v. Trent,674 F.3d 683, 691 (7th Cir. 2012). Certain relevant background facts also will be drawn from the amended complaint.
ALPA is a labor organization that represents the flight deck crew members and pilot instructors employed by United. Doc. 52 at ¶ 2. Prior to 2010, United pilots worked under a concessionary collective bargaining agreement ('2003 Agreement') that had been negotiated by ALPA in 2003, at a time when United was in bankruptcy. Doc. 29 at ¶ 12. The 2003 Agreement's term ended on January 1, 2010, but the RLA required the pilots to continue working as though it were still in force until a new agreement could be negotiated and executed. Ibid. Negotiations for the new agreement began in 2010 and lasted nearly three years. Id. at ¶ 13. During that time, United pilots' salaries were effectively frozen under the pay scale set forth in the 2003 Agreement. Id. at ¶ 14. Also during that time, United merged with Continental Airlines. Id. at ¶ 13.
At the end of 2012, ALPA and United agreed on a new collective bargaining agreement ('2012 Agreement'), which applies to both United and Continental pilots. Ibid. During negotiations, ALPA demanded that the new agreement include retroactive pay ('retro pay') to compensate all pilots for lost earnings caused by the three-year delay in reaching the new agreement. Id. at ¶ 14; Doc. 38-7 at 3. This demand was consistent with ALPA policy as reflected in the ALPA Administrative Manual, which provides that '[i]n order to prevent costly procrastination by airline managements during contract negotiations, ALPA advocates the retention of a retroactivity factor effective from the contract amendable date,' Doc. 60 at ¶ 27, and the Policy Manual for ALPA's United Airlines Master Executive Council, which provides that '[a]ll future Agreements between United Airlines and ALPA shall contain retroactive application of any pay raises or retirement or benefit improvements to the amendable date of the contract,' id. at ¶ 28.
As memorialized in Letter of Agreement 24 ('LOA 24'), United agreed to pay $400 million to settle ALPA's demand for retro pay and to finalize the 2012 Agreement. Id. at ¶ 29; Doc. 38-2 at 12-33. The purpose of the $400 million payment was to restore to the maximum extent possible the wages that the pilots would have earned had there not been a delay in negotiating a new contract from the amendable date of the 2003 Agreement. Doc. 60 at ¶ 29. An intra-union arbitration allocated $225 million to the United pilots and $175 million to the Continental pilots. Id. at ¶ 30; Doc. 38-2 at 15. ALPA allocated the $225 million retro pay among the United pilots through a complex formula, the details of which are irrelevant for present purposes. Doc. 38-3; Doc. 38-7 at 3-6.
Most United pilots function most of the time as line pilots, whose work consists of flying customers from one location to another. Doc. 29 at ¶ 19. A small minority of United's pilots work as pilot instructors or management pilots. Ibid. During the relevant time period, Bishop and Lish worked as pilot instructors, and Barnes, Whitehead, and Clark worked as management pilots. Doc. 52 at ¶ 1. They claim that ALPA allocated the $225 million in retro pay in a manner that unfairly discriminated against the management pilots and pilot instructors; again, the details of that argument are unimportant for present purposes. Doc. 29 at ¶¶ 30-39, 47-52.
LOA 24 provides that any disputes concerning the allocation methodology are subject to the dispute resolution process set forth in Section 40, Part 3.J of the ALPA Administrative Manual. Doc. 38-2 at 13. Under that provision, an aggrieved party may challenge an allocation decision before the Executive Council, Doc. 38-5 at 4-6, and '[t]he Executive Council decision shall be final and binding and the decision of [ALPA] regarding the allocation, unless an appeal to an expedited arbitration process is filed within seven (7) working days,' id. at 6. The arbitration process 'may be invoked' by, among others, 'a pilot or pilots who invoked and pursued the review process to a conclusion before the Executive Council.' Ibid. Section 40, Part 3.J refers to the dispute resolution process as '[a]n expedited dispute resolution procedure, including arbitration as the final step . . . with the means to resolve a dispute over allocation decisions, without the need for expensive, lengthy, and risky litigation.' Id. at 2.
Numerous pilot instructors and management pilots—including Barnes and Whitehead— invoked the dispute resolution process to challenge the retro pay allocation before the Executive Council. Doc. 52 at ¶ 10; Doc. 60 at ¶¶ 36-39. The Executive Council upheld the allocation. Doc. 38-6. Some pilot instructors and management pilots then appealed the Executive Council's decision to arbitration; in so doing, they proposed to ALPA that: (1) the parties jointly select the arbitrator; (2) the arbitrator be instructed to make an independent decision without giving deference to either side; (3) the parties be allowed to take some discovery; and (4) the arbitration proceed on behalf of a class of affected individuals. Doc. 60 at ¶ 37. ALPA refused to accept these proposals. Ibid. The arbitrator upheld the allocation in an Opinion and Award dated May 21, 2013. Doc. 38-7.
Discussion
The RLA provides that '[e]mployees . . . have the right to organize and bargain collectively through representatives of their own choosing.' 45 U.S.C. § 152, Fourth. 'The RLA was enacted to encourage collective bargaining by . . . parties in order to prevent, if possible, wasteful strikes and interruptions of interstate commerce.' Air Line Pilots Ass'n, Int'l v. United Air Lines, Inc.,802 F.2d 886, 895 (7th Cir. 1986) (quoting Detroit & Toledo Shore Line R.R. v. United Transp. Union,396 U.S. 142, 148 (1969)) (internal quotation marks omitted). Congress amended the RLA in 1936 to cover the airline industry. See id. at 894 n.5; 45 U.S.C. § 181. The Supreme Court has held that the RLA requires unions to fairly represent union members. See Steele v. Louisville Nashville R.R. Co.,323 U.S. 192, 202-03 (1944) (holding that the RLA 'impose[s] on the bargaining representative of a craft or class of employees the duty to exercise fairly the power conferred upon it in behalf of all those for whom it acts'). The RLA thus 'affords an employee an implied right of action against his union for breach of the duty of fair representation.' Steffens v. Bhd. of Ry., Airline & Steamship Clerks, Freight Handlers, Express & Station Emps.,797 F.2d 442, 445 (7th Cir. 1986).
As noted above, Plaintiffs claim that ALPA violated its duty of fair representation by unfairly allocating the $225 million in retro pay among the United pilots. ALPA seeks judgment on the ground that it satisfied its duty of fair representation by providing Plaintiffs (and the putative sub-classes) with a dispute resolution mechanism for resolving their challenge to the allocation. Doc. 34 at 16-17. To support its submission, ALPA notes that the Executive Committee and then the arbitrator upheld the allocation, and it cites § 153 First (q) of the RLA, 45 U.S.C. § 153 First (q), for the proposition that 'an arbitration award [may] be disturbed [only] if there is a violation of the RLA, arbitral fraud, corruption[,] or if the award was beyond the jurisdiction of the arbitrator.' Doc. 34 at 17. That provision indeed allows a court to 'disturb an arbitration award only if the arbitrator did not comply with the Railway Labor Act, exceeded the arbitral jurisdiction, or committed fraud,' which the Seventh Circuit has called 'one of the most deferential standards of judicial review in all of federal law.' Bhd. of Locomotive Eng'rs and Trainmen, Gen. Comm. of Adjustment, Cent. Conference v. Union Pac. R.R. Co.,719 F.3d 801, 803 (7th Cir. 2013).
Plaintiffs correctly respond that § 153 First, by its terms, applies only to disputes between employees (either individually or as part of a union) and a carrier, and not to disputes between a union and its own members. See Czosek v. O'Mara,397 U.S. 25, 27-28 (1970) ('And surely it is beyond cavil that a suit against the union for breach of its duty of fair representation is not within the jurisdiction of the National Railroad Adjustment Board [established by § 153 First] or subject to the ordinary rule that administrative remedies should be exhausted before resort to the courts.'); Conley v. Gibson,355 U.S. 41, 44 (1957) ('But § 3 First (i) by its own terms applies only to `disputes between an employee or group of employees and a carrier or carriers.' This case involves no dispute between employee and employer but to the contrary is a suit by employees against the bargaining agent to enforce their statutory right not to be unfairly discriminated against by it in bargaining.') (internal citation omitted). The point is immaterial, however, because Air Wisconsin Pilots Protection Committee v. Sanderson,909 F.2d 213 (7th Cir. 1990), provides that a standard of review materially identical to the § 153 First (q) standard governs judicial review of arbitrations in the airline industry between a union and its members.
In Sanderson, the plaintiff pilots claimed that ALPA violated its duty of fair representation regarding the merger of pilot seniority lists following the merger of Air Wisconsin and Mississippi Valley Airlines. Id. at 214. ALPA directed each airline's pilots to choose two representatives to negotiate the merger of the seniority lists and, if the negotiations broke down, which they did, the dispute was to be submitted to an intra-union board of arbitrators whose award was to 'be final and binding on all parties to the arbitration and . . . defended by ALPA.' Id. at 214-15. The arbitrators made their decision, and the plaintiffs, a group of Air Wisconsin pilots, asked the federal court to overturn the award, arguing that ALPA violated its duty of fair representation to them. Id. at 215-16. The Seventh Circuit rejected this claim, holding that ALPA satisfied its duty 'by establishing, long before the case arose, a fair process for determining seniority in an airline resulting from a merger,' and that although '[t]he plaintiffs disagree violently with the result of the arbitration in this case . . . [they] have not pointed to any features of the process—whether the method of selecting the arbitrators, or their background, or the procedures they employed—as being unfair.' Id. at 216. The Seventh Circuit then noted that 'ALPA's belief that such arbitrations should be final and binding . . . would not have prevented the pilots from challenging the arbitration award in court, if the award were infected by fraud or by a serious conflict of interest or were inconsistent with the terms of reference to arbitration.' Ibid. Although the Seventh Circuit did not support that last point with a direct citation to § 153 First (q)—after all, that provision did not apply, as the arbitration was between a union and its members rather than between the union and the airline—it did cite Brotherhood of Locomotive Engineers v. Atchison, Topeka & Santa Fe Railway,768 F.2d 914, 921 (7th Cir. 1985), which itself applied that provision and its very deferential standard.
Sanderson's discussion of that point was a dictum, as the plaintiff pilots there did not challenge the arbitration award on grounds of fraud or conflict of interest. See Sanderson, 909 F.2d at 216. This court does not and could not properly consider itself bound by that dictum. See Cole Energy Dev. Co. v. Ingersoll-Rand Co.,8 F.3d 607, 609 (7th Cir. 1993) (holding that 'the lower court . . . is not bound by the higher court's dicta,' even under the law of the case doctrine); Robinson v. Bergstrom,579 F.2d 401, 405 (7th Cir. 1978) ('both discussions [in two Seventh Circuit cases] are dicta, and therefore were not binding on the district court'), overruled on other grounds, Polk Cnty. v. Dodson,454 U.S. 312 (1981), as recognized by Gibson v. City of Chicago,910 F.2d 1510, 1514 (7th Cir. 1990). But the Sanderson dictum was a considered dictum, and just as the Seventh Circuit follows considered dicta announced by the Supreme Court, see Reich v. Cont'l Cas. Co.,33 F.3d 754, 757 (7th Cir. 1994), this court chooses to follow the dictum from Sanderson. Among other reasons, the dictum fully accords with the substantial deference that the Seventh Circuit invariably gives to labor and other employment-related arbitration awards in a variety of contexts. See Evans v. U.S. Postal Serv., 219 F. App'x 527, 529 (7th Cir. 2007) ('[the employee] must accept the arbitral result as final, for there is a strong policy against courts upsetting arbitral decisions, particularly in the area of labor law'); Ganton Techs., Inc. v. Int'l Union, United Auto., Aerospace and Agric. Implement Workers of Am., U.A.W., Local 627,358 F.3d 459, 462 (7th Cir. 2004) ('Judicial review of an arbitrator's decision is limited. The Court may not consider the disputants' arguments afresh, nor may it overturn the arbitrator's decision on the ground that the arbitrator committed serious error. Rather, the role of the reviewing court is to determine whether the arbitrator's award draws its essence from the collective bargaining agreement, and only if there is no possible interpretative route to the award, so [that] a noncontractual basis can be inferred, may the award be set aside.') (citations and internal quotation marks omitted); Dean v. Sullivan,118 F.3d 1170, 1171 (7th Cir. 1997) ('[T]he potential grounds for refusing enforcement [of the arbitration decision] are extraordinarily narrow. This limited form of judicial review guards against the risk of runaway arbiters. It certainly does not license a federal judge to consider the disputants' arguments afresh.') (citing United Steelworkers of Am. v. Enter. Wheel and Car Corp.,363 U.S. 593, 597 (1960)); Pierce v. Commonwealth Edison Co.,112 F.3d 893, 895 (7th Cir. 1997) ('Dragging the union into this case would be a waste of everyone's time and money because, even if the union were to appear as a plaintiff, the decision of the arbitral panel would be invulnerable. It heard evidence and found facts that establish just cause for discharge. Although Pierce believes that the findings are not correct, judges lack the authority to review arbitrators' findings that are free of any taint of fraud or corruption—and no such taint is alleged to exist.'); Chi. Typographical Union No. 16 v. Chi. Sun-Times, Inc., 935 F.3d 1501, 1505 (7th Cir. 1991) ('Unless the award was procured by fraud, or the arbitrator had a serious conflict of interest—circumstances that invalidate the contractual commitment to abide by the arbitrator's result—his interpretation of the contract binds the court asked to enforce the award or to set it aside.'); Thomas v. United Parcel Serv., Inc.,890 F.2d 909, 915 (7th Cir. 1989) ('The courts have adopted an unwavering attitude of deference to arbitral decisions, particularly in the labor context, because of the federal labor policy encouraging the private settlement of labor disputes.') (citations omitted).
Plaintiffs argue in the alternative that the arbitrator's decision deserves no deference because the ALPA Administrative Manual did not explicitly label the arbitration ruling 'final and binding,' thus distinguishing the arbitration here from the one in Sanderson. Doc. 57 at 26-27. The argument fails to persuade. The Seventh Circuit has held that 'the finality of an arbitration . . . should be judged by substance and effect, not by superficial technicalities.' Olson v. Wexford Clearing Servs. Corp.,397 F.3d 488, 491-92 (7th Cir. 2005) (internal quotation marks omitted); see also Publicis Commc'n v. True N. Commc'ns, Inc.,206 F.3d 725, 729 (7th Cir. 2000) ('courts go beyond a document's heading and delve into its substance and impact to determine whether the [arbitration] decision is final'). Section 40, Part 3.J of the ALPA Administrative Manual provides that '[t]he Executive Council decision shall be final and binding and the decision of [ALPA] regarding the allocation, unless an appeal to an expedited arbitration process is filed within seven (7) working days.' Doc. 38-5 at 6. It is true that the Manual says that the Executive Council's decision is 'final and binding,' and that it does not explicitly say the same thing about the arbitrator's decision. But the only plausible reading of the Manual is that the arbitrator's decision is final and binding as well; if the Executive Committee's decision is final and binding unless that decision is appealed to an arbitrator, then why would the Manual make the arbitrator's decision, which reviews and by necessity post-dates the Executive Committee's decision, anything less than final and binding? The Manual drives home the point by referring to the entirety of the dispute resolution process as '[a]n expedited dispute resolution procedure, including arbitration as the final step . . . with the means to resolve a dispute over allocation decisions, without the need for expensive, lengthy, and risky litigation.' Id. at 2 (emphasis added). The 'final step' of an intra-union process where the intermediate step is 'final and binding' unless the final step is pursued is, by necessity, also final and binding. See Idea Nuova, Inc. v. GM Licensing Grp.,617 F.3d 177, 180 (2d Cir. 2010) ('such [`final and binding'] language [is] not essential; there [are] equivalent ways of expressing agreement to binding arbitration') (internal quotation marks omitted); Dow Corning Corp. v. Safety Nat'l Cas. Corp.,335 F.3d 742, 746 (8th Cir. 2003) (in determining whether arbitration was binding or non-binding, noting that 'federal policy favors arbitration, and that normally means binding arbitration'); McKee v. Home Buyers Warranty Corp. II,45 F.3d 981, 985 (5th Cir. 1995) (same); Townsend v. McNeill, 1972 WL 891, at *3 (N.D. Ill. Sept. 8, 1972) (holding that where a committee decision was the final step in a dispute resolution process but was not explicitly labeled 'final and binding,' '[t]he parties . . . were quite clear that the decision of the Joint Committee was to be `final' and the Court will honor the intentions of the parties').
There is one wrinkle: only some of our five plaintiffs pursued the dispute resolution process. ALPA argues that the other plaintiffs need to exhaust their internal union remedies, Doc. 34 at 16, while Plaintiffs respond that exhaustion would be futile given the arbitrator's prior decision and therefore is unnecessary, Doc. 57 at 27-29. The court is inclined to agree with Plaintiffs, but at this point the issue is moot. At oral argument on ALPA's motion, the court engaged in this colloquy with Plaintiffs' counsel:
2/26/2014 Tr. at 39. Thus, even assuming that the fair representation claims of the plaintiffs who did not participate in the dispute resolution process are not barred on exhaustion grounds, those plaintiffs still must overcome the same hurdle faced by the plaintiffs who did participate— showing that the arbitration is not entitled to deference under Sanderson.
ALPA concedes, as it must, that Plaintiffs are entitled to discovery on the integrity of the arbitration—that is, on whether the arbitration was tainted by fraud or corruption, whether the arbitrator suffered from a conflict of interest, and any other matter pertinent to the inquiry envisioned by Sanderson. Doc. 59 at 15-16. Because the deference to be accorded the arbitrator's decision is potentially case dispositive of Plaintiffs' RLA fair representation claims, there is no need to reach ALPA's other arguments on those claims, and nor is there any need at this point for discovery on the other issues in the case, such as whether ALPA owed the management pilots a fair representation duty in the first place and whether ALPA's allocation of the $225 million in fact unfairly discriminated against United pilot instructors and management pilots. And if ALPA ends up prevailing on the RLA claims, then at that point the court will decide whether to retain or relinquish jurisdiction over the state law unjust enrichment claim. Doc. 29 at ¶ 10 (premising jurisdiction over the state law claim on the supplemental jurisdiction statute, 28 U.S.C. § 1367(a), and not on the diversity statute, 28 U.S.C. § 1332).
Conclusion
For the foregoing reasons, ALPA's motion to dismiss or for summary judgment is denied. Defendant shall answer the amended complaint by September 4, 2014. The parties shall engage in discovery limited to the matters set forth above.
MEMORANDUM OPINION AND ORDER
Garry Scott Feinerman, United States District Judge.
![Manual Manual](http://docplayer.net/docs-images/40/3277257/images/page_3.jpg)
United Airlines pilots James Barnes, Philip Whitehead, and Walter Clark, on behalf of themselves and a class of United management pilots, allege that Air Line Pilots Association, International ('ALPA') unlawfully discriminated against them in its allocation of $225 million of retroactive pay ('retro pay') provided to United pilots after ALPA and United entered into a collective bargaining agreement in late 2012. Doc. 29. The management pilots claim that ALPA breached its duty of fair representation to them under the Railway Labor Act ('RLA'), 45 U.S.C. § 151 et seq., and, in the alternative, that ALPA unjustly enriched itself in violation of Illinois law by accepting their payment of dues and fees. Ibid. Earlier in the litigation, the court denied ALPA's motion to dismiss and/or for summary judgment, ruling that Plaintiffs were entitled to limited discovery on the question whether ALPA, consistent with Air Wisconsin Pilots Protection Committee v. Sanderson,909 F.2d 213, 215-16 (7th Cir.1990), complied with its fair representation duty by providing a fair process for arbitrating disputes over the retro pay allocation. Docs. 83-84 (reported at 2014 WL 4057419 (N.D. Ill. Aug. 14, 2014)). The court then denied ALPA's motion for judgment on the pleadings as to the management pilots' claims, Docs. 188-189 (reported at 141 F.Supp.3d 836, 2015 WL 5821577 (N.D.Ill. Sept. 30, 2015)), and certified the management pilot class, Docs. 190-191 (reported at 310 F.R.D. 551, 2015 WL 5822436 (N.D.Ill. Sept. 30, 2015)). Familiarity with the court's prior opinions is assumed.
Now before the court is ALPA's summary judgment motion, which argues under Sanderson that the RLA fair representation claim fails because ALPA provided a fair process for arbitrating disputes over the retro pay allocation. Doc. 160. The motion is denied.
Background
The following facts are stated as favorably to Plaintiffs, the non-movants, as the record and Local Rule 56.1 allow. See Hanners v. Trent,674 F.3d 683, 691 (7th Cir.2012). In considering ALPA's summary judgment motion, the court must assume the truth of those facts, but does not vouch for them. See Smith v. Bray,681 F.3d 888, 892 (7th Cir.2012).
The general background of this case is set forth in the court's prior opinions. To summarize, United and ALPA in late 2012 entered into a collective bargaining agreement, the 2012 United Pilot Agreement ('2012 UPA'), which provided retro pay to compensate pilots for working at depressed pay rates during the nearly three years of negotiations over the new agreement. Doc. 29 at ¶¶ 14-16. The retro pay did not fully compensate United pilots for what they would have earned during the negotiating period had the 2012 UPA pay rates taken effect upon the expiration of the predecessor CBA in 2010. Id. at ¶ 17. As a result, ALPA had to allocate the retro pay among its various pilot groups. Ibid.
ALPA's administrative manual sets forth the procedures under which ALPA's Master Executive Councils ('MECs'), the bodies that manage bargaining and other decisions for ALPA members at different airlines, allocate lump sums among members. Doc. 170 at ¶ 5. Section 40.3.J of the manual allows an MEC to negotiate an allocation formula as part of a collective bargaining agreement, which the United MEC did in this case. Id. at ¶¶ 6, 9. Section 40.3.J establishes a dispute resolution procedure that pilots dissatisfied with an MEC's allocation may invoke with the consent of the ALPA President or MEC Chairperson. Id. at ¶¶ 5, 10.
The dispute resolution process works as follows. First, ALPA's Executive Council, which consists of ALPA officers and Executive Vice Presidents elected by pilot representatives from all ALPA-represented carriers, reviews the challenged allocation in as 'expeditious a manner as is appropriate,' and either upholds the allocation or orders it modified. Id. at ¶¶ 11-12. A pilot seeking to challenge an Executive Council decision may invoke arbitration, subject to the Executive Council's approval. Id. at ¶ 13. The ALPA President determines the process for selecting an arbitrator. Id. at ¶ 14. The arbitrator, who has authority to decide procedural issues, must consider the Executive Council's decision but is not bound to follow it. Id. at ¶ 15. ALPA bears the costs incurred by the Executive Council and the arbitration proceeding, while the pilots bringing the appeal bear their own costs. Id. at ¶ 16.
United's merger with Continental and the December 2012 ratification of the 2012 UPA left ALPA with $225 million of retro pay to allocate among legacy United pilots. Id. at ¶¶ 17-20. In mid-January 2013, the United MEC Chairperson notified the pilots of the MEC's allocation and of the Section 40.3.J dispute resolution process. Id. at ¶ 23. Shortly thereafter, numerous management pilots, including Barnes and Whitehead, challenged the allocation before the ALPA Executive Council. Id. at ¶ 25; Doc. 176 at ¶ 3. Following a hearing, the Executive Council upheld the allocation. Doc. 170 at ¶ 31.
On March 6, 2013, ALPA informed United pilots of their right to appeal via arbitration the Executive Council's decision, and some management pilots, including Barnes and Whitehead, appealed. Id. at ¶¶ 36, 44. ALPA's President selected Richard Bloch, an experienced labor arbitrator and past president of the National Academy of Arbitrators, as the arbitrator. Id. at ¶¶ 33-34. Citing alleged unfairness about certain of the arbitration procedures, several pilots, including Barnes and Whitehead, declined to participate. See id. at ¶¶ 37, 40-42, 46; Doc. 176 at ¶¶ 48-49. After an arbitration hearing, Bloch affirmed the Executive Council's decision and thus the retro pay allocation. Doc. 162-2; Doc. 170 at ¶¶ 59-60.
Discussion
Section 153 First (q) of the RLA, 45 U.S.C. § 153 First (q), allows '[a] reviewing court [to] ... disturb an arbitration award only if the arbitrator did not comply with the Railway Labor Act, exceeded the arbitral jurisdiction, or committed fraud.' Bhd. of Locomotive Eng'rs & Trainmen, Gen. Comm. of Adjustment, Cent. Conference v. Union Pac. R.R. Co.,719 F.3d 801, 803 (7th Cir.2013). Although § 153 First by its terms applies only to disputes between employees and a carrier, see Czosek v. O'Mara,397 U.S. 25, 27-28, 90 S.Ct. 770, 25 L.Ed.2d 21 (1970); Conley v. Gibson,355 U.S. 41, 44, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), Sanderson holds that a standard of review materially identical to the § 153 First (q) standard governs judicial review of arbitrations in the airline industry between a union and its members:
909 F.2d at 216 (citations omitted). Although Plaintiffs challenge several aspects of the dispute resolution process that ALPA employed in this case, they must show only a single instance of 'fraud' or 'serious conflict of interest' — or, to be more precise, they must show that a reasonable trier of fact could find such a single instance — to survive ALPA's present summary judgment motion.
Plaintiffs contend that '[t]he arbitration at issue here was unfair because it vested one party, ALPA, with sole authority to select the arbitrator.' Doc. 168 at 18. They are correct. In Chicago Teachers Union, Local No. 1 v. Hudson,475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986), nonmembers of a public employee union brought suit to challenge the union's procedures for determining the service fee they were charged, see Abood v. Detroit Board of Education,431 U.S. 209, 97 S.Ct. 1782, 52 L.Ed.2d 261 (1977), to defray the union's collective bargaining, contract administration, and grievance adjustment costs. Much like ALPA's procedure here, the dispute resolution procedure in Hudson began with review by the union's Executive Committee, followed by review by the union's Executive Board, and ended with arbitration before an arbitrator selection by the union's President from a list maintained by the state board of education. 475 U.S. at 296, 106 S.Ct. 1066. The Supreme Court held that '[t]he third step — review by a Union-selected arbitrator — is ... inadequate because the selection represents the Union's unrestricted choice from the state list.' Id. at 308, 106 S.Ct. 1066. In so holding, the Supreme Court quoted with favor the Seventh Circuit's observation in the decision under review that 'the `most conspicuous feature of the procedure is that from start to finish it is entirely controlled by the union, which is an interested party, since it is the recipient of the agency fees paid by the dissenting employees.' Ibid. (quoting Hudson v. Chi. Teachers Union Local No. 1,743 F.2d 1187, 1194-95 (7th Cir.1984), aff'd,475 U.S. 292, 106 S.Ct. 1066, 89 L.Ed.2d 232 (1986)). The Supreme Court added:
Id. at 308 n. 21, 106 S.Ct. 1066.
In a parenthetical buried in a footnote, ALPA suggests that Hudson is inapposite here because it was decided under the First Amendment — as noted, the union there was a public employee union — while the present case arises under the RLA. Doc. 175 at 12 n.4. This argument fails to persuade. In justifying and enforcing the RLA fair representation duty, the Supreme Court regularly invokes constitutional concerns. See, e.g., Vaca v. Sipes,386 U.S. 171, 181-82, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967) (noting that 'the congressional grant of power to a union to act as exclusive bargaining representative, with its corresponding reduction in the individual rights of the employees so represented, would raise grave constitutional problems' if unchecked, and that 'the duty of fair representation has stood as a bulwark to prevent arbitrary union conduct against individuals stripped of traditional forms of redress by the provisions of federal labor law'); Steele v. Louisville & Nashville R.R. Co.,323 U.S. 192, 202, 65 S.Ct. 226, 89 L.Ed. 173 (1944) ('We think that the Railway Labor Act imposes upon the statutory representative of a craft at least as exacting a duty to protect equally the interests of the members of the craft as the Constitution imposes upon a legislature to give equal protection to the interests of those for whom it legislates. Congress has seen fit to clothe the bargaining representative with powers comparable to those possessed by a legislative body both to create and restrict the rights of those whom it represents, but it has also imposed on the representative a corresponding duty.') (citation omitted); see also Frandsen v. Bhd. of Ry., Airline & S.S. Clerks,782 F.2d 674, 679 (7th Cir.1986); Baker v. Amsted Indus., Inc.,656 F.2d 1245, 1249 (7th Cir.1981). Hudson itself observed that Abood, which held that the First Amendment did not prohibit 'a public employer to designate a union as the exclusive collective-bargaining representative of its employees, and to require non-union employees, as a condition of employment, to pay a fair share of the union's cost of negotiating and administering a collective-bargaining agreement,' had its roots in '[e]arlier cases ... constru[ing] the Railway Labor Act to permit a similar arrangement without violating the Constitution.' 475 U.S. at 301 & n. 8, 106 S.Ct. 1066. And in the decision the Supreme Court affirmed in Hudson, the Seventh Circuit noted: 'Although the Supreme Court in Abood suggested that an internal union procedure might be an appropriate method of protecting objectors' rights, see 431 U.S. at 240, 97 S.Ct. 1782, it was merely repeating a suggestion that had been made under a case under the Railway Labor Act. That act, as it has been interpreted, both imposes on the union a duty to represent dissenters fairly and creates remedies for violation of that duty.' Hudson, 743 F.2d at 1195 (citing Bhd. of Ry. & S.S. Clerks v. Allen,373 U.S. 113, 122, 83 S.Ct. 1158, 10 L.Ed.2d 235 (1963)) (citation omitted).
In this particular context, then, there is sufficient congruence between RLA fair representation standards and constitutional standards that Hudson governs this RLA case. See Baker, 656 F.2d at 1249 ('It early became apparent that majority representatives in the sphere of industrial relations were no less capable of misusing their considerable authority than their counterparts in the political arena. Therefore, in rough analogy to the limits imposed on legislative power by the equal protection clause of the Constitution, the courts have imposed on majority representatives a responsibility equal in scope to their authority, the responsibility and duty of fair representation.') (internal quotation marks omitted); Miller v. Air Line Pilots Ass'n,108 F.3d 1415 (D.C.Cir.1997) (applying Hudson to a suit by nonmembers against ALPA). Accordingly, ALPA's unilateral ability to select the arbitrator hearing the retro pay allocation challenge defeats its argument that it complied with its RLA fair representation duty, as interpreted in Sanderson, by providing a fair process for resolving disputes over the allocation — or so a reasonable trier of fact could conclude. See Chavarria v. Ralphs Grocery Co.,733 F.3d 916, 927 (9th Cir. 2013) (in a wage-and-hour case, deeming 'unconscionable' under state law an arbitration provision that allowed one party to unilaterally select the arbitrator); McMullen v. Meijer, Inc.,355 F.3d 485, 494 (6th Cir.2004) (holding under the Federal Arbitration Act that a procedure that 'grants one party to the arbitration unilateral control over the pool of potential arbitrators... inherently lacks neutrality' and violates the procedural standards for arbitration set forth in Gilmer v. Interstate/Johnson Lane Corp.,500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)); cf. Ping v. Nat'l Educ. Ass'n,870 F.2d 1369, 1373 (7th Cir.1989) ('In this case, the selection of the arbitrator did not represent the defendants' unrestricted choice. Instead, the arbitrator was selected by the American Arbitration Association, according to their own internal selection rules, without any input by the defendants. That procedure clearly meets the requirement [in Hudson] that the selection of the arbitrator not represent the untrammeled choice of the unions.').
It bears mention that the union in Sanderson (ALPA, incidentally) almost certainly did not unilaterally select the arbitrators tasked with resolving the dispute giving rise to that case. The Seventh Circuit's opinion does not directly address the matter, other than observing that a 'board of arbitrators' — not a single arbitrator — made the award. 909 F.2d at 215; see also Complaint at ¶ 17, Air Wis. Pilots Protection Comm. v. Sanderson, 1989 WL 58273 (N.D.Ill. Apr. 10, 1989) (No. 87 C 3382) (alleging that the arbitration took place 'before a Board of Arbitration chaired by Arbitrator Rolf Valtin') (reproduced at Doc. 105-1 at 11). The Seventh Circuit noted that although the Sanderson plaintiffs 'disagree[d] violently with the result of the arbitration,' they did 'not point[] to any features of the process,' least of all 'the method of selecting the arbitrators[,]... as being unfair.' Id. at 216. It is inconceivable that the Sanderson plaintiffs would have abstained from challenging the fairness of the selection process had ALPA selected the arbitrators unilaterally.
Moreover, both sides of the arbitration in Sanderson were pilot groups that ALPA acknowledged representing, see id. at 214-15, meaning that ALPA, as it admits, 'had no interest' in that arbitration's outcome, Doc. 175 at 13. By contrast, ALPA here asserts that it did not even represent the management pilots for purposes of collective bargaining; one of ALPA's arguments for why it did not violate any duty to fairly represent the management pilots is that it did not represent them in the first place and thus owed them no duty at all. Doc. 34 at 10-12; Doc. 97 at ¶¶ 9, 19, 24, 26-28, 42; Doc. 133 at 17-19; Doc. 156 at 12-14; see 141 F.Supp.3d at 844-45, 2015 WL 5821577 at *7 (where the court rejected that argument for purposes of ALPA's Rule 12(c) motion). And because the retro pay allocation was zero-sum — distributing any monies from a finite pot to one group necessarily reduced the other groups' possible shares — ALPA's interest in upholding its allocation — an allocation that, viewing the facts in the light most favorable to Plaintiffs, would tend to favor the groups that ALPA believed it was representing — made its interests adversarial to the management pilots' interests. Thus, even more so than in Sanderson, a fair dispute resolution process in this case required an arbitrator whom ALPA did not unilaterally select.
ALPA's contention that it lacked 'a plain financial interest in the outcome' in the retro pay arbitration, Doc. 175 at 12, fails not only because (a reasonable factfinder could conclude that) it had an interest in favoring the pilot groups whom it acknowledged representing over the management pilots, but also because an arbitral reversal of the retro pay allocation could have had financial repercussions for ALPA. If Bloch had invalidated ALPA's allocation, ALPA would have been left with two unpalatable options: disburse from its coffers to the management pilots the monies they should have been allocated, or renege on its announced allocation, resulting in a lower share for non-management pilots than they had been promised and risking their ire. United is the world's fourth largest airline by passengers carried and second largest public airline by revenue. See International Air Transport Association, World Air Transport Statistics 2014, at 41 (2015), https://perma.cc/US3W-DUZ9; 'The World's Biggest Public Companies,' Forbes (2015), http://perma.cc/HQS8-Z7SR. Despite ALPA's protests that its financial interests in the allocation and ensuing arbitration have 'no basis in reality,' Doc. 175 at 13, ALPA's continuing representation of United pilots is surely a financial and reputational boon for ALPA — and, as the Seventh Circuit noted in Sanderson, airline pilots may switch unions if they become unhappy with the incumbent. 909 F.2d at 215 (noting 'some of [the Air Wisconsin pilots] tried to replace ALPA as the collective bargaining representative ... with a newly created union').
ALPA retorts that '[a]bsent facts to the contrary, courts presume that a designated arbitrator will decide a case impartially.' Doc. 161 at 19; Doc. 175 at 11. The cases cited by ALPA to support this proposition concern System Boards of Adjustment, tribunals mandated by the RLA that have representatives from both the carrier and the union; it is hardly surprising that those cases hold that the composition of tribunals mandated by the RLA does not violate... the RLA. See Del Casal v. Eastern Airlines, Inc.,634 F.2d 295, 299 (5th Cir. Unit B 1981); Cunningham v. United Airlines, Inc., 2014 WL 441610, at *6 (N.D.Ill. Feb. 4, 2014), aff'd on other grounds sub nom. Cunningham v. Air Line Pilots Ass'n, Int'l,769 F.3d 539 (7th Cir.2014). ALPA's argument misses the point in any event. The key here is not how Bloch would or would not or did or did not decide the dispute, but rather the process by which he was selected. Had ALPA appointed Jim Holderman, Wayne Andersen, David Coar, or Mark Filip (all retired district judges of the Northern District of Illinois) as arbitrator, its unilateral selection authority still would have rendered the process infirm under Hudson. As the Seventh Circuit put it in the decision affirmed by the Supreme Court in Hudson:
743 F.2d at 1195 (citations omitted). It therefore does not matter that, as ALPA contends, Doc. 161 at 20-21, Bloch was bound by the Code of Professional Responsibility for Arbitrators of Labor-Management Disputes of the National Academy of Arbitrators. Cf. Merit Ins. Co. v. Leatherby Ins. Co.,714 F.2d 673, 680 (7th Cir. 1983) ('Although we have great respect for the Commercial Arbitration Rules and the Code of Ethics for Arbitrators, they are not the proper starting point for an inquiry into an award's validity ... The arbitration rules and code do not have the force of law.').
Finally, ALPA unpersuasively argues that because 'scores of challenging pilots... appealed to arbitration,' it was infeasible to have a '`joint' selection process' for the arbitrator. Doc. 175 at 11. An unfair process cannot be saved by invoking administrative ease. See Albers v. Comm'r, 414 U.S. 982, 985, 94 S.Ct. 279, 38 L.Ed.2d 225 (1973) ('[E]ase of administration is too high a price to pay for the presumably unforeseen and undeniably harsh consequences.'); Vlandis v. Kline,412 U.S. 441, 451, 93 S.Ct. 2230, 37 L.Ed.2d 63 (1973) ('The State's interest in administrative ease ... cannot, in and of itself, save the conclusive presumption from invalidity under the Due Process Clause.'); Lister v. Hoover,706 F.2d 796, 801 (7th Cir.1983) (recognizing that certain 'values are substantial enough to outweigh the defendants' interest in avoiding administrative expense and bother'). Indeed, accepting ALPA's argument would lead to perverse results. Because the most important union decisions are likely to attract the deepest opposition and greatest number of challengers, holding that a large number of challengers eliminates or mitigates a union's duty to ensure that an arbitrator is selected fairly would allow the union to inoculate its most questionable, controversial, or otherwise consequential actions. Such a holding would remove that essential procedural protection in the very instances where it is needed most.
Conclusion
To summarize, a reasonable factfinder could conclude that ALPA's unilateral selection of Bloch as the arbitrator to hear the retro pay allocation challenge 'infected' the arbitration process with 'a serious conflict of interest.' Sanderson, 909 F.2d at 216. ALPA's summary judgment motion is accordingly denied.