Legal Decisions: ALPA v. TSA

Section 503(a) of the LMRDA prohibits unions  covered by its provisions from making loans to union officers in excess of $2,000. In Airline Pilots Association, International (ALPA) v. Trans States Airlines (TSA), a case decided by the U.S. Court of Appeals for the Eighth Circuit in May of this year, the court ruled that the union's advance of lost pay to a pilot and union officer, fired by TSA for union activity, did not violate the LMRDA prohibition on loans to officers. 

 

In March of 2005, the TSA fired Captain Paul Hopkins for misuse, abuse, and participation in the falsification of an employee pass travel ticket. Hopkins filed a grievance and ALPA's Executive Board determined that Hopkins was fired for his union activity as Chairman of ALPA's Local Executive Committee and as a captain representative. ALPA's Administrative Manual authorizes an advance of lost pay under these circumstances, which the union official would be obliged to repay only if he received a make-whole remedy from TSA. In this case, ALPA approved payment to Hopkins of 85 hours of flight-pay loss per month, which came to a pay-out of $161,798.87 between March 2005 and November 2007. 

 

The collective bargaining agreement between ALPA and TSA is covered by the Railway Labor Act, which provides for a System Board of Adjustment (the Board) to resolve grievances. ALPA grieved TSA's dismissal of Hopkins to the Board. TSA filed a counterclaim that the award violated public policy because, if it were enforced, it would require TSA to participate in a criminally sanctionable violation of the LMRDA provision against loans to union officers. The Board ruled against TSA and ordered it to pay Hopkins all of his lost pay, with interest.

 

The case was taken to Federal District Court, where TSA argued that the Board's reinstatement of Hopkins should be vacated for abuse of the arbitrator's discretion, because it would force TSA to engage in a criminal violation of LMRDA by making it the indirect means for the repayment of an illegal loan. The Federal District Court upheld the Board's decision.

 

TSA then appealed to the Eighth Circuit. However, ALPA argued that TSA lacked standing to appeal because, under the standing requirement for access to federal courts in Article III of the U.S. Constitution, it could not demonstrate that it "suffered an injury in fact" that is "traceable to the challenged action" and is "redressable by a favorable decision."  Moreover, ALPA argued that Section 503(a) was only intended to regulate the conduct of unions and their members, not the conduct of employers. Accordingly TSA's interest in this matter was only marginally related to the overall purpose of Section 503(a) and therefore did not meet the zone of interest test that has been established in a long line of federal cases. 

 

The Eighth Circuit rejected ALPA's argument on the issue of standing. It held that Congress's intent in enacting the LMRDA should be broadly interpreted to recognize that Congress established a public interest in ensuring that union officials fulfill their fiduciary responsibilities to their members. Accordingly, the court held that TSA's claims were not so marginally related to that public interest as to reasonably interpret that Congress intended to deny it standing in this matter as an employer. The court also ruled that, since a matter of public policy was implicated in the arbitrator's initial award, it could review the arbitrator's decision de novo (i.e. 'from the beginning,' as to the legality of ALPA's advance to Hopkins of lost pay) and was not bound to any collective bargaining agreement that would limit its review in such an instance, nor to the doctrine of collateral estoppel in a previous arbitration decision that had not been subject to judicial review. (There had been a prior arbitration involving another pilot where TSA had made its illegal loan argument. TSA lost the arbitration but did not appeal to federal court.)

 

The court then went on to consider whether ALPA's payments to Hopkins constituted a loan. Relying on one of the few federal court rulings on the term, the court accepted Black's Law Dictionary's definition of a loan as the "delivery by one party to and the receipt by another party of a sum of money, upon agreement, express or implied, to repay it with or without interest." The Board had ruled that ALPA's payment was not a loan as repayment was contingent upon Hopkins receiving a make-whole remedy for his lost pay.  The Eighth Circuit rejected that reasoning and ruled that the issue of whether or not a loan is repaid is irrelevant to the definition of the term.

 

However, the court did accept the Board's reasoning that ALPA's payment was more like an executive benefit to induce pilots to serve as officers in the union notwithstanding the risk that they may be fired by their employer for their union activity. ALPA's payment is analogous to an employer's salary continuation plan that protects the employee from some future event that prevents the employee from working (e.g. an injury or illness). Accordingly the court ruled that ALPA's payment to Hopkins was not an illegal loan under LMRDA and does not violate the public policy of Section 503(a).