Opinion ID: 3028631
Heading Depth: 3
Heading Rank: 1

Heading: Continental I

Text: In 1986, Eastern Airlines (“Eastern”) and the union representing its pilots, the Air Line Pilots Association (the “Pilots Association”), ratified a collective bargaining agreement (“CBA”). The CBA gave Eastern’s pilots the right to arbitrate disputes over the agreement’s labor protective provisions (“Labor Provisions”), which assured Eastern’s pilots a fair integration of pilot seniority 1 Two published decisions of our Court have recounted much of the complex factual history of this case. In re Continental Airlines, Inc., 125 F.3d 120 (3d Cir. 1997) (“Continental I”); In re Continental Airlines, Inc., 279 F.3d 226 (3d Cir. 2002) (“Continental II”). Other parts of that history have been laid out in numerous court documents in the jointly filed appendix. There are no material disputes about these facts, only about their legal significance. As we did in Continental II, we recount only those facts relevant to the issues before us. See Continental II, 279 F.3d at 228. -4- lists in the event that Eastern merged with another airline. The day after the CBA was ratified, Texas Air Corporation, the parent company of Continental Airlines, Inc. (“Continental”), acquired Eastern. According to the Pilots Association, Texas Air Corporation then “merged” Eastern’s operations into Continental’s within the meaning of the CBA. As a result, the Pilots Association asserted that the Labor Provisions required integration of Eastern’s seniority list with Continental’s seniority list. After Eastern and Continental refused to bargain with the Pilots Association about integration of the lists, the Association initiated arbitration. Four years later, in December 1990, Continental filed for Chapter 11 bankruptcy protection. On behalf of Eastern’s pilots, the Pilots Association filed proofs of claims in the bankruptcy proceeding, asserting a right to seniority integration. When the Bankruptcy Court eventually confirmed Continental’s plan of reorganization, it decided that any claim based on the CBA’s Labor Provisions would be treated as a claim for payment that would be discharged in bankruptcy. Furthermore, it enjoined arbitration of the Labor Provision dispute. On appeal, we held that Eastern’s pilots could not specifically enforce a right to seniority integration. Instead, we agreed with the Bankruptcy Court that any claim based on seniority integration should be treated as one for payment, dischargeable in bankruptcy. Continental I, 125 F.3d at 136. Among the many reasons given, we expressed concern that specific enforcement of seniority integration “could potentially result in the displacement of many Continental pilots. Such displacement has the potential to create an environment rife with hostility and low employee morale, not to mention a detrimental effect on employer-employee relations.” Id. We determined that the “alternative remedy” of money damages was more appropriate than an actual integration of the lists. Id. Nevertheless, we recognized in Continental I that we lacked jurisdiction to evaluate the underlying merits of the Labor Provision dispute. Assessment of the merits fell within the exclusive jurisdiction of an arbitrator. Id. at 130. Because of our limited jurisdiction, we did not assess whether an arbitral award -5- was actually warranted, but only how any such award should be treated in bankruptcy. Id. at 130-36. In light of this limitation, we concluded it was error for the Bankruptcy Court to enjoin arbitration. We further concluded that, because Continental conceded that it was bound by Eastern’s CBA in order to secure confirmation of its plan, it could not later disavow that position. See id. at 138. We thus rejected Continental’s argument that, because it was not a party to Eastern’s CBA, it was not bound to arbitrate a dispute arising under it. Id. Additionally, we held that since Continental failed to properly reject the CBA under 11 U.S.C. § 1113, it could not avoid its obligations through the Bankruptcy Court’s injunction. Id. at 137.