Opinion
Civil No. 03-4183 (MJD/JGL)
November 4, 2003
Craig Brandt, Stephen Snyder and John Nichols, Gray, Plant, Mooty, Mooty Bennett, P.A., for Plaintiffs. Thomas Tinkham and Andre Hanson, Dorsey Whitney, LLP for Defendant.
MEMORANDUM AND ORDER
I.
INTRODUCTION
This matter is before the Court on Plaintiffs' motions for preliminary injunction and expedited consideration, and Defendant's motion to dismiss for lack of subject matter jurisdiction. In the underlying matter, Plaintiffs seek a declaratory judgment, which would entitle them to ownership of a block of stock in Prudential Financial, Inc ("Prudential"). The stock is related to an annuity that provides retirement benefits for Plaintiffs.
II. BACKGROUND
Plaintiffs are either former pilots of Republic Airlines, Inc. ("Republic") or beneficiaries of former Republic pilots. In December 1986, Republic Airlines entered into group annuity contract with Prudential for the benefit of its pilots and their beneficiaries. The annuity was intended to provide payment for benefits that Republic pilots were due under the Republic Airlines, Inc. Pilots Retirement Income Plan ("RIP"), which was terminated in 1985. Over $250,000,000 was paid to Prudential to purchase the annuity contract. In 1986, Defendant merged with Republic, acquired Republic's assets and extinguished Republic's stock. Defendant also became the contract-holder of the annuity contract.
Prior to 2001, Prudential was a mutual insurance company. Rather than having shareholders who owned stock, Prudential policy holders possessed membership interests in the company. Thus, as a policy holder, prior to demutualization, Defendant possessed a membership interest in Prudential. In 2001, Prudential reorganized, changing its structure from a mutual insurance company to a stock company. As part of that process, Prudential exchanged membership interests for Prudential stock. After demutualization, Defendant received 1, 551, 271 shares in exchange for its membership interests in the mutual company. Plaintiffs contend that because they are entitled to the proceeds of the annuities, and because their contributions were used to purchase the annuities, they are the rightful owners of the shares.
Over the relevant time period, pilots represented by the Air Line Pilots Association ("ALPA") entered into several collective bargaining agreements ("CBAs"). Language of those CBAs addresses the eventuality of payments such as those received from Prudential. First, the RIP states that in the event that the RIP is terminated, any residual assets will be returned to the employer. Second, in 1985, an amendment to the RIP added section 8.11, which provided that any future payments flowing from a group annuity contract must be made for the benefit of the pilots. Third, a settlement agreement resulting from an earlier dispute regarding residual assets called the "Nelson settlement" provided that funds related to the Prudential annuity which were received by Republic would be paid to the pension plan. Finally, "zipper" clauses from CBAs entered into in 1989, 1993 and 1998 integrate prior agreements and essentially extinguish pilots' rights to any funds received from Prudential aside from their annuity payments.
On March 12, 2002, pursuant to the Railway Labor Act ("RLA"), the Air Line Pilots Association ("ALPA") filed a grievance against Defendant, disputing ownership of the stock that is the subject of this action. While Plaintiffs contend that ALPA cannot represent members of the plaintiff class that are retirees or spouses of retirees, ALPA does not differentiate between retirees and non-retirees in its submissions to the arbitrator of the grievance. The grievance proceeding has been stayed pending the resolution of this matter.
On July 18, 2003, Plaintiffs commenced this lawsuit, alleging that Defendant wrongfully retained the block of Prudential Shares. In their complaint, Plaintiffs asserted state law theories of conversion, breach of fiduciary duty, constructive trust, resulting trust, unjust enrichment, breach of contract, money had and received and replevin. Plaintiffs moved for a preliminary injunction that would have required Defendant to surrender title to the shares and for expedited consideration of their declaratory judgment action. Defendants than moved to dismiss for lack of subject matter jurisdiction.
III. DISCUSSION
A. Legal Standard
For the purposes of the Defendant's motion to dismiss, the Court takes all facts alleged in Plaintiffs complaint as true. Westcott v. Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). Further, the Court must construe the allegations in the complaint and reasonable inferences arising from the complaint favorably to Plaintiffs. Morton v. Becker. 793 F.2d 185, 187 (8th Cir. 1986). A motion to dismiss will be granted only if "it appears beyond doubt that the Plaintiff[s] can prove no set of facts which would entitle [them] to relief." Id.; see Conley v. Gibson. 355 U.S. 41, 45-46 (1957). A motion to dismiss for lack of jurisdiction under Rule 12(b)(1) motion is subject to the same standard as a Rule 12(b)(6) motion. Osborn v. United States. 918 F.2d 724, 729 n. 6 (8th Cir. 1990).
B. Railway Labor Act
The arguments of both Plaintiffs and Defendant require application of the RLA. To decide if the Court has subject matter jurisdiction over the instant matter, the Court must determine if the RLA requires Plaintiffs' claims to be submitted to arbitration.
"Congress' purpose in passing the RLA was to promote stability in labor-management relations by providing a comprehensive framework for resolving labor disputes." Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 252, 114 S.Ct. 2239, 2243 (1994). The RLA applies to air carriers. 45 U.S.C. § 181. "Under the RLA, a dispute is classified as either major, involving the creation of new contractual rights, or minor, involving the interpretation and enforcement of existing CBAs." Bhd. of Maint. of Way Emps. v. Burlington N. Santa Fe R.R., 270 F.3d 637, 638 (8th Cir. 2001). Parties are required to arbitrate minor disputes under the RLA and thus, disputes involving duties and rights created or defined by a CBA are pre-empted by the RLA. Gore v. Trans World Airlines. 210 F.3d 944, 949 (8th Cir. 2000).
"The RLA requires air carriers and unions to establish a system board of adjustment (the Board) to resolve" minor disputes. Jenisio v. Ozark Airlines, Inc. Ret. Plan for Agent Clerical Employees. 187 F.3d 970, 972-73 (8th Cir. 1999); 45 U.S.C. § 184. "The Board has mandatory, exclusive, and comprehensive jurisdiction over minor disputes, and the remedies provided by the Board are the "complete and final means" for settling minor disputes." Id. at 973 (quotation omitted). A party shoulders a light burden in showing that the Court does not have subject matter jurisdiction over a claim to which the RLA applies, and "there is a presumption that disputes are minor and thus arbitrable."Id. (citation omitted). "The RLA's arbitration requirement applies to pension disputes . . . if the pension plan is (1) itself a CBA or (2) maintained pursuant to a CBA." Id. (quotation and citation omitted). "A pension plan is maintained pursuant to a CBA when it is incorporated by reference in that CBA." Jenisio v. Ozark Airlines, Inc. Ret. Plan for Agent Clerical Employees, 187 F.3d 970, 973 (8th Cir. 1999) (citation omitted). "However, `mere mentioning' of the pension plan in the CBA does not constitute incorporation by reference." Id.
If arbitration of an issue is required by the RLA, state claims relating to that issue will be pre-empted. See Norris. 512 U.S. at 252, 114 S.Ct. at 2243. "[T]he RLA's mechanism for resolving minor disputes does not pre-empt causes of action to enforce rights that are independent of the CBA." Norris. 512 U.S. at 256, 114 S.Ct. at 2246. "[S]ubstantive protections provided by state law, independent of whatever labor agreement might govern, are not pre-empted under the RLA." Id. at 257, 114 S.Ct. at 2246. But if resolving a state law claim depends on an interpretation of a CBA, the claim is pre-empted.Gore, 210 F.3d at 949. "[A] mere need to reference or consult a collective bargaining agreement during the course of state court litigation does not require preemption." Id.
To decide whether Plaintiffs' claim is pre-empted by the RLA, the crucial question for the Court is whether the dispute between the parties requires interpretation of a CBA. The Court must decide whether Plaintiffs' claim "is inextricably intertwined with consideration of the terms of the labor contract." Gore. 210 F.3d at 949 (quotingAllis-Chalmers Corp. v. Lueck, 471 U.S. 202, 213, 105 S.Ct. 1904, 1912 (1985)).
Language from several of the CBAs addresses the eventuality of payments from an insurance company in Prudential's position. First, the RIP provides that in the event that the RIP was terminated, residual assets must be returned to the employer. It also provides that in certain circumstances, residual assets should be distributed to employees. Second, section 8.11 of the amended RIP provides for future payments to be made for the benefit of the pilots:
Any dividends or similar credits payable by an insurance company that issues an annuity contract under the Plan shall be paid to the Fund. . . . Any such payments payable after the termination of the Plan shall instead be paid to the Republic Airlines, Inc. Defined Contribution Plan For Pilots . . . If the Defined Contribution Plan is not in existence at the time of any such payments are to be made, the payments shall be made for the benefit of Company Pilots as may be agreed by the Company and the Association.
Third, the Nelson settlement specifically addresses amounts received by Prudential:
Any and all refunds, credits or other amounts received by Republic from the Prudential Insurance Company of America ("Prudential") after November 1, 1986 relating to annuity purchases by Republic for Republic's pilots in connection with the termination of the Republic Airlines, Inc. Pilots Retirement Income Plan shall be paid, within 21 days after receipt of the same, by Republic to the Republic Airlines Inc. Defined Contribution Pension Plan for Pilots.
The 1989, 1993 and 1998 zipper clauses, which were part of CBAs that addressed pension issues, state that they supersede any prior agreements. Thus, these zipper clauses purport to cut off any right pilots have to Prudential payments.
The CBAs involved in this case go beyond a "mere mentioning" of the annuity contract at issue here. Jenisio, 187 F.3d at 973. The agreements address what to do with payments from Prudential. The RIP provides for payment of residual assets to either the employer or the employees. More specifically, section 8.11 addresses payments flowing from an annuity. The Nelson settlement even addresses amounts received from a Prudential annuity. Finally, the zipper clauses also directly address the rights of pilots to receive future payments. The clarity of this language leads the Court to conclude that these agreements must be examined and interpreted in order to determine which party is entitled to the demutualization proceeds. The Court need not address the effect of these CBAs, but concludes that because they must be interpreted at all, the RLA requires that this matter be argued before Systems Board of Adjustment.
Plaintiffs counter that the annuity contract, the central agreement at issue in this case, is not a CBA. The Court agrees, but concludes that the annuity contract is not the only agreement that must be interpreted in order to determine who owns the demutualization proceeds.
The Court concludes that interpretation of CBAs renders the instant dispute minor, and the RLA requires that it be submitted to arbitration before the Systems
Board. See Gore. 210 F.3d at 949 (stating that "[u]nder the RLA, parties are obligated to arbitrate minor disputes.")
C. Motions of the Parties
1. Defendant's motion to dismiss
Because the Court concludes that it does not have subject matter jurisdiction over the instant matter, dismissal pursuant to Fed.R.Civ.P. 12(b)(1) is proper. Jenisio, 187 F.3d at 973 (affirming district court's dismissal claim based on minor dispute pursuant to the RLA). The Court thus need not decide address Defendant's other bases for dismissal.
2. Plaintiffs' motion for preliminary injunction
Because the Court concludes that that it does not have subject matter jurisdiction over this matter, the Court must deny Plaintiffs' motions for preliminary injunction and expedited consideration.
Accordingly, based on all the files, records and proceedings herein, IT IS HEREBY ORDERED that
1. Defendant's motion to dismiss for lack of subject matter jurisdiction is GRANTED; and
2. Plaintiffs' motions for preliminary injunction and expedited consideration are DENIED.