In Re: Cont Airlines

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit

1-25-2002

In Re: Cont Airlines
Precedential or Non-Precedential:

Docket 0-3505

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Filed January 25, 2002

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-3505

IN RE CONTINENTAL AIRLINES, INC.,

Debtor

EASTERN PILOTS MERGER COMMITTEE,

Appellant

v.

CONTINENTAL AIRLINES, INC.

PATRICIA A. STAIANO, Trustee

Appeal from the United States District Court
for the District of Delaware
(D.C. No. 99-CV-00795)
District Judge: Honorable Sue L. Robinson

Argued: December 11, 2001

Before: BARRY and ALDISERT, Circuit Judges, and
FULLAM,* District Judge.

(Filed: January 25, 2002)

_________________________________________________________________
* The Honorable John P. Fullam, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
Carol Connor Flowe (argued)
Arent, Fox, Kintner, Plotkin &
Kahn, PLLC
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036

John J. Gibbons
Gibbons, Del Deo, Dolan, Griffinger
& Vecchione, PC
One Riverfront Plaza
Newark, N.J. 07102

David L. Shapiro
1575 Massachusetts Avenue
Cambridge, MA 02138

James F. Harker
Herlihy, Harker & Kavanaugh
1300 North Market Street
Suite 400
Wilmington, DE 19801

Charles M. Tatelbaum
Cummings & Lockwood
3001 Tamiami Trail North
Naples, FL 34103

ATTORNEYS FOR APPELLANTS

James L. Patton, Jr. (argued)
Robert S. Brady
Young, Conaway, Stargatt &
Taylor, LLP
11th Floor, Rodney Square North
P.O. Box 391
Wilmington, DE 19899-0391

ATTORNEYS FOR APPELLEES

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OPINION OF THE COURT

ALDISERT, Circuit Judge.

Eastern Pilots Merger Committee ("EPMC" or
"Appellants") appeals from a judgment of the district court
affirming an order entered by the bankruptcy court
enforcing a Reorganization Plan in favor of Appellee,
Continental Airlines, Inc. This appeal requires us to decide
two questions: (1) whether the district court erred in
interpreting the decision in In re Continental Airlines, Inc.,
125 F.3d 120 (3d Cir. 1997) ("Continental I "), as
encompassing Appellants' post-confirmation rights under a
collective bargaining agreement of Eastern Airlines, Inc.;
and (2) if this court's decision in Continental I is so
interpreted, whether that decision should be reconsidered.

Because the facts and procedural history have been set
forth in detail in Continental I, we discuss here only the
bare adjudicative facts underlying our discussion of the
legal issues presented.

This dispute centers around an action which took place
on February 23, 1986, when Eastern Airlines, Inc. and its
pilots' union, the Air Lines Pilot Association ("ALPA"),
ratified a collective bargaining agreement ("the Agreement")
that included certain Labor Protective Provisions ("LPP's").
Under these LPP's, Eastern's pilots secured protection of
their seniority rights in the event of a merger between
Eastern and another airline carrier by requiring
the integration of Eastern's seniority list with the merging
carrier's list. The next day, Texas Air Corporation, parent
corporation of Continental, acquired Eastern.
Subsequently, Continental initiated a Chapter 11
reorganization proceeding.

ALPA filed protective proofs of claim ("Claims") in
Continental's bankruptcy, contending that because"a
merger between Eastern and another airline carrier
[Continental]" had taken place, its members were entitled to
specific performance of seniority rights under the LPP's,
together with money damages. Thereafter, Continental's

3
Second Amended Joint Plan of Reorganization was
confirmed by the bankruptcy court. The court's
confirmation order essentially clarified that any valid claims
based on the LPP's would give rise to a right of financial
payments that would be dischargeable in bankruptcy. It
also provided that Claimants had no right to injunctive,
equitable or other relief.

After appealing the bankruptcy court's order to the
district court, ALPA settled with Continental, but the LPP
Claimants continued their appeal. Unsuccessful in the
district court, several groups, including the present
Appellants, appealed to this court. We ruled that the
bankruptcy court had jurisdiction to decide how the Claims
would be treated in bankruptcy, i.e., that "the bankruptcy
court was well within its authority to exercise jurisdiction
over the issue of the status of the bankruptcy claim[s]." In
re Continental Airlines, Inc., 125 F.3d at 131. And critically
important, we determined that the Claims could be
converted to money damages. Id. at 136.

The Supreme Court denied a Petition for a Writ of
Certiorari. LLP Claimants v. Continental Airlines, 522 U.S.
1114 (1998).

In response to the commencement of a separate lawsuit
brought by Appellants in the United States District Court
for the District of New Jersey (the "New Jersey Action"),
Continental filed a Reorganized Debtors' Motion for Order
Compelling Compliance with Order Confirming Plan of
Reorganization and for Sanctions ("the Compliance Motion")
in the bankruptcy court seeking to halt the New Jersey
Action. The airline sought a determination that the
Confirmation Order barred the New Jersey Action because
all potential relief relating to the LPP's had been addressed
in the bankruptcy proceeding. The bankruptcy court agreed
with Continental, stating:

[S]ince we find that the decision of the Third Circuit
affirmed the ruling that all claims of the Eastern Pilots
are discharged by the Confirmation Order, we conclude
that the Confirmation Order does bar the New Jersey
Action instituted by EPMC. Continental is entitled to
sanctions against EPMC for its knowing and willful
violation of the Confirmation Order.

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In re Continental Airlines, Inc., 236 B.R. 318, 332 (Bankr. D.
Del. 1999).

The bankruptcy court had interpreted Continental I to
mean that all remedies for breach of the LPP's, whether
before or after bankruptcy, had been reduced to claims for
payment in the bankruptcy proceeding and had been
discharged by the Confirmation Order.

On appeal, the district court held that Continental I
precluded any post-confirmation relief. According to the
court, "although the [Agreement] survived the bankruptcy
process, [A]ppellants' demand for specific performance of
the seniority integration clause did not." In re Continental
Airlines, Inc., No. 99-795, slip op. at 6 (D. Del. Sept. 12,
2000). Furthermore, the district court stated that the
bankruptcy process would be "meaningless" if the teachings
of Continental I did not require that any claim for
prospective relief through specific performance be
discharged. Id. at 4. Thereafter, EPMC appealed.

I.

Appellants repeatedly emphasize that the members of the
EPMC have a post-confirmation right to enforce the LPP's
contained in the Agreement because Continental failed to
reject the Agreement in accordance with the requirements
of 11 U.S.C. S 1113. Building on this major premise,
Appellants then argue that because Continental failed to
properly reject the Agreement, it was assumed by operation
of law. Appellants direct our attention to a number of cases,
including In re Roth American, Inc., 975 F.2d 949 (3d Cir.
1992), in which we stated:

The Union contends that since Roth American has not
sought to reject the collective bargaining agreement
under section 1113, Roth American has "assumed" the
collective bargaining agreement by operation of law,
and that Roth American thus is bound by all of its
terms. We agree with the Union . . .

Id. at 957. Appellants then argue that under 11 U.S.C.
S 365, if the Agreement is assumed it must be assumed
cum onere, and any breach of the Agreement must be

5
cured. Appellants' Brief at 13-14 (citing National Labor
Relations Bd. v. Bildisco & Bildisco, 465 U.S. 513, 531-532
(1984)). From the foregoing premises they urge us to
conclude that because the Agreement "rides through the
bankruptcy" as if the bankruptcy had never occurred, the
LLP provisions continue to be an unsatisfied obligation on
the reorganized debtor as to all seniority rights. Id. (citing
Bildisco & Bildisco, 465 U.S. at 546 n.12 (Brennan, J.,
concurring)).

II.

Distilled to its essence, the argument states that because
Continental did not follow the statutory procedures for
rejecting an executory contract as set forth in 11 U.S.C.
S 1113, somehow Appellants are entitled to the injunctive
relief post-confirmation that it sought and was denied
during the bankruptcy proceedings. There is a glaring
defect in Appellants' argument because its basic
assumption is flawed. The reality is that the Agreement has
never been rejected. This makes their entire rejection
argument irrelevant to the motion to enforce the
Reorganization Plan.

In the various proceedings arising out of the Plan,
proceedings on all levels of the judicial hierarchy, including
this court, no court has proceeded on the basis that the
Agreement had been rejected. In the case at bar, which
seeks enforcement of the Plan, neither the bankruptcy
court nor the district court so suggested. Nor do we do so
here.

Rights granted by the bankruptcy court, affirmed by the
district court and discussed by us in Continental I, did not
arise out of thin air. They were based on the Agreement. We
made that crystal clear when this case was previously
before us: "Therefore, we conclude that the right to
seniority integration [set forth in the Agreement] gives rise
to a `right of payment' such that the remedy constitutes a
`claim' dischargeable in bankruptcy." In re Continental
Airlines, Inc., 125 F.3d at 136.

In Continental I, this court, as did the bankruptcy court
and the district court, did not reject the Agreement. We

6
interpreted it. We construed the seniority provisions of the
Agreement as a basis of providing a right of payment in lieu
of injunctive relief after considering a variety of factors to
include feasibility. The rejection-of-the-Agreement issue
raised by Appellants is irrelevant here because the legal
basis for the relief awarded -- arbitration to determine
entitlement to, and if so, the amount of damages-- was
based on an interpretation of the Agreement. What was
involved here was a simple categorical deductive syllogism:
All claims for seniority relief must be based on the
Agreement; Appellants make a claim for seniority relief;
therefore, Appellants' claims for seniority relief are based on
the Agreement.

III.

We believe the critical question for decision in this appeal
to be uncomplicated: Did this court in Continental I
adjudicate only claims for pre-petition seniority rights or
did our holding include also rights arising post-
confirmation? The answer is not difficult. When Appellants
appeared before us in Continental I by written brief and oral
argument, and responded specifically to questions put to
them by the court, and when they filed their Petition for a
Writ of Certiorari to the Supreme Court, their arguments
were clear and unequivocal: They demanded complete relief
under the Agreement for the past, present and future.1
_________________________________________________________________

1. For example, in the Eastern Pilots' brief presented to us in
Continental
I, they argued:

The cases have thus uniformly held that where the creditor is
seeking to require the debtor to take some future action, as
opposed
to seeking money, the courts have held that the debtor's obligation
is not dischargeable . . .

The present case is likewise one in which these Eastern pilots are
not attempting to get money from Continental, but are simply
seeking to require Continental to take the future action of
seniority
integration if the arbitrator orders it.

Joint Appendix at 1033.

The Pilots reasserted this argument in their reply brief stating:

7
We understood clearly what was before us then, and we
adjudicated accordingly:
_________________________________________________________________

[I]t cannot be argued in the present circumstances that there is
any
viable claim for such monetary relief . . . What is left is the
purely
equitable relief of seniority integration.

* * * * *

And is not a pilot's career spanning a life's work worth at least a
company's covenant not to compete? If a company's covenant not to
compete cannot be "reduced" to money damages and discharged in
bankruptcy, how can any court claim that a pilot's life-long career
can be "reduced" to non-existent money damages?

Id. at 764-765.

The transcript of oral argument in Continental I also indicates that
Appellants were seeking post-confirmation as well as pre-petition relief:

JUDGE MANSMANN: Okay; they get an arbitration award and
Continental says, "You're a little bit too late; we have gone
through
this whole reorganization; there isn't anything here for you. Now
what do you do?

MR. MCGUINN: There is something there for them. There are jobs
there for them. They can be put on the Continental seniority list
and
that's all they are seeking in this case, to get an arbitration for
seniority integration under the LPPs that they were promised 11
years ago.

* * * * *

MR. MCGUINN: I just want to make sure that you are not
substituting "money damages" for "seniority integration" because
you have to understand, pilots, their whole career is based on
seniority. Simply, reinstatement without seniority integration is
fairly meaningless.

Seniority integration is what is provided for in the LPPs; that's
what
we bargained for; that's what we want to get after 11 years.

* * * * *

MR. MCGUINN: I think you are talking about a career, a career of
 a pilot, where he goes from flight engineer or second officer to
first
officer to captain, who builds up a retirement, who has the sheer
love of flying, and all of this has been denied that pilot because
of
what is going on in this Bankruptcy Court and what is going on

8
 The circumstances indicate that seniority integration
would not be a feasible remedy and that an alternative
remedy of monetary damages would be appropriate.
Therefore, we conclude that the right to seniority
integration gives rise to a "right of payment" such that
the remedy constitutes a "claim" dischargeable in
bankruptcy.

We take care to note the boundaries of our holding. It
is not our purpose to suggest the award the arbitrator
should grant, if an award is warranted upon
disposition of the LLP dispute. Our holding is limited to
how the claims should be treated in bankruptcy.
Simply put, we hold that any claim based on an award
of seniority integration arising out of the resolution of
the LPP dispute will be treated as a claim in bankruptcy
giving rise to a right of payment. As such, the right to
seniority integration is satisfiable by the payment of
money damages.
_________________________________________________________________

with these judicial pronouncements that are totally contrary to
Norris-LaGuardia, totally contrary to 1113, where Congress has
repeatedly, since the 1930s, said, "Please, Judiciaries, stay out
of
labor disputes; let them be resolved in arbitration."

Id. at 641-644 (emphasis added).

Finally, Appellants' Petition For Certiorari to the Supreme Court
reinforces the broad scope of relief they sought:

Similarly, these Eastern pilots maintain that losing their pilot
jobs
at Eastern cannot be compensated by mere money damages (even if
real money damages were available). For what is involved is work --
a life-long career -- with all its tangible and intangible
benefits,
such as the sheer love of flying, travel benefits, a secure
retirement,
the self-esteem and self-worth derived from a job well done, the
emotional fulfillment of career advancement from second officer to
first officer and finally, after years of preparation on a mature
airline, to a captain position. All of these are basic and
essential
elements animating and driving the human spirit of a pilot. To
claim
that they can be "reduced" to nonexistent front pay is not only
"disingenuous," but an unwarranted insult to all professional
airline
pilots.
Id. at 417.

9
In re Continental Airlines, Inc., 125 F.3d at 136 (emphasis
added).

Suffice it to say that when we said "any claim based on
an award of seniority integration," we meant precisely what
we said. With apologies to Gertrude Stein, "any claim"
means any claim. If we intended to limit the Claim to pre-
petition activity, we would have said so. And if Appellants
desired the Claim to be so limited, they, too, would have
said so in their written briefs or at oral argument or in their
Petition for a Writ of Certiorari to the Supreme Court. But
they did not.

Appellants expressly requested global, open-ended relief
on their terms. As Roscoe Pound would have phrased it in
his felicitous expression, they wanted "specific redress" in
the form of a mandatory injunction, not "substituted
redress" in the form of money damages.2 We hold that the
proposition now urged upon us by Appellants has been
decided and is totally controlled by our decision in
Continental I. The relief defined in that case is the only
remedy available to Appellants.

IV.

The preclusive effects of former adjudication have been
discussed and determined in varying and occasionally
conflicting terminology over the past hundred years. In
early years, these concepts were referred to collectively by
most commentators as the doctrine of res judicata. 18
CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER,
FEDERAL PRACTICE AND PROCEDURE S 4402, at 6-7 (1981 and
2000 Supp.). As the law developed, a distinction was made
between "pure" res judicata and what came to be known as
collateral estoppel. In 1979, the Court explained the
distinction:

Under the doctrine of res judicata, a judgment on the
merits in a prior suit bars a second suit involving the
same parties or their privies based on the same cause
of action. Under the doctrine of collateral estoppel, on
_________________________________________________________________

2. Roscoe Pound, The Theory of Judicial Decision, 36 HARV. L. REV.641,
647 (1923).

10
 the other hand, the second action is upon a different
cause of action and the judgment in the prior suit
precludes relitigation of issues actually litigated and
necessary to the outcome of the first action. 1B J.
MOORE'S FEDERAL PRACTICE P 0.405 [1],pp. 622-624 (2d
ed. 1974); e.g. Lawlor v. National Screen Serv. Corp.,
349 U.S. 322, 326; Commissioner v. Sunnen, 333 U.S.
591, 597; Cromwell v. County of Sac, 94 U.S. 351, 352-
353.

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5
(1979).

Today, however, the modern nomenclature for these two
doctrines is "claim preclusion" and "issue preclusion,"
respectively:

Claim preclusion generally refers to the effect of a prior
judgment in foreclosing successive litigation of the very
same claim, whether or not relitigation of the claim
raises the same issues as the earlier suit. Issue
preclusion generally refers to the effect of a prior
judgment in foreclosing successive litigation of an issue
of fact or law actually litigated and resolved in a valid
court determination essential to the prior judgment,
whether or not the issue arises on the same or a
different claim. See RESTATEMENT (SECOND) OF JUDGMENTS
S S 17, 27, pp. 148, 250 (1980); D. S HAPIRO, CIVIL
PROCEDURE: PRECLUSION IN C IVIL ACTIONS 32, 46 (2001).

New Hampshire v. Maine, 121 S. Ct. 1808, 1814 (2001).

These two doctrines share the "dual purpose of protecting
litigants from the burden of relitigating an identical issue
with the same party or his privy and of promoting judicial
economy by preventing needless litigation." Parklane
Hosiery Co., 439 U.S. at 326.

The doctrine of the law of the case is similar in that it
limits relitigation of an issue once it has been decided.
However, this doctrine is concerned with the extent to
which the law applied in decisions at various stages of the
same litigation becomes the governing legal precept in later
stages. 18 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE
P 134.20 (3d ed. 1999). The Court has defined the law of

11
the case as a precept that " `posits that when a court
decides upon a rule of law, that decision should continue to
govern the same issues in subsequent stages in the same
case.' This rule of practice promotes the finality and
efficiency of the judicial process by `protecting against the
agitation of settled issues.' " Christianson v. Colt Indus.
Operating Corp., 486 U.S. 800, 816 (1988) (citing Arizona v.
California, 460 U.S. 605, 618 (1983), and citing 1B JAMES
WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE P 0.404[1], p.
118 (1984)).

Writing in 1967, Professor Allan D. Vestal identified
distinct situations in which a ruling or decision has been
made in a case and the same legal problem arises a second
time in the same case. Two of these situations are when: (1)
an appellate court may rule on a matter and then the same
legal question may be raised in the trial court after the case
has been remanded to that court for further proceedings;
and (2) an appellate court may rule on a matter and then
the same legal question may be raised in the same
appellate court when the case is appealed a second time.3
The appeal before us fits squarely within the second
situation identified by Professor Vestal.

We do not believe that it is necessary to determine which
of the foregoing doctrines prevents Appellants from
relitigating an issue that was unambiguously identified,
properly presented and ably and vigorously argued by
extremely able counsel of all parties. We are satisfied that
under any of these precepts, Appellants are bound by our
previous decision and are precluded from avoiding its
mandate.

Although Appellants argue alternatively that this panel
should reconsider the holding of Continental I , we lack the
power or authority to overrule a decision of a previous panel.4
_________________________________________________________________

3. Allan D. Vestal, Law of the Case: Single-Suit Preclusion, 12 UTAH L.
REV. 1, 4 (1967).

4. "It is the tradition of this court that the holding of a panel in a
reported opinion is binding on subsequent panels. Thus, no subsequent
panel overrules the holding in a published opinion of a previous panel.
Court en banc consideration is required to do so." 3D CIR. I.O.P. 9.1.

12
Nor are we inclined to initiate a suggestion for rehearing en
banc.

* * *

We have considered all contentions presented by the
parties and conclude that no further discussion is
necessary.

The judgment of the district court will be affirmed.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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