As American Seniority Ruling Looms, US Airways Pilots Settle Claims - TheStreet

The end of the U.S. Airline Pilots Association, created in 2007 to oppose a controversial seniority ruling, came clearly into view on Tuesday, as a U.S. District Court Judge in Charlotte distributed the bulk of the union's treasury to pilots who had long opposed its existence.

Judge Robert Conrad approved a settlement agreement that awarded $5.5 million to pilots who worked for America West Airlines before a 2005 merger with US Airways. They composed about a third of the 5,200 US Airways pilots, and were forced into a union that opposed a seniority ruling that generally benefitted them.

The ruling leaves about $1.6 million in the USAPA treasury.

As the union winds down, some money could be returned to members, assuming it is not awarded to a pilot group, opposed to the settlement, which has filed a case against USAPA and others in U.S. District Court in Binghamton, N.Y.

"We intend to move rapidly toward dissolution," said USAPA President Steve Bradford following the hearing. "As soon as possible, we need to go out of business."

Bradford said American Airlines (AAL) - Get Report , which merged with US Airways in 2013, may have have to pay USAPA another $1.3 million to cover merger-related expenses, depending on the outcome of an arbitration hearing. That would increase the pot to $3.2 million.

At the hearing, teams of attorneys for both sides backed the settlement, which took shape in a three-day mediated negotiating session in January. Three groups of pilots from the former US Airways, known as "the east," opposed the settlement for a variety of reasons, but Conrad ruled against them.

"Such a small number of the classes -- involving over 5,000 class members -- have filed any objection at all," Conrad said during his ruling following the 90-minute court session.

"This is an appropriate stopping point for eight years of litigation," Conrad said. "USAPA is no longer certified {and} US Airways no longer exists."

Rather, a 2013 merger with American means its union, the Allied Pilots Association, now represents 15,000 pilots from American, US Airways and America West.

Phoenix attorney Marty Harper, who represented America West pilots from the start of the constant stream of litigation that accompanied most of USAPA's existence, said the settlement was achieved with "close cooperation from east pilots.

"I think it's an overall good solution for everybody," Harper said.

Phoenix attorney Kelly Flood, also representing America West pilots, said the group had not only paid dues to USAPA for eight years but also had paid additionally to fund the court battles.

Of the $5.5 million settlement, $3.6 million was designated to repay legal expenses and $1.9 million was designated to refund some dues payment, but Harper said the exact breakdown will be determined by the west pilot group. "We had a good group of west pilots to represent," he said. "They were dedicated to make sure their views were articulated."

Objections to the settlement were raised by Anthony Riolo, a retired Charlotte pilot who said he had not been adequately informed of the terms; by the group of former US Airways pilots, many of whom flew for the subsidiary MidAtlantic Airways, which contends in the Binghamton case that USAPA leadership breached its duty of fair representation to members; and by Patrick Brown, a Charlotte-based US Airways pilot who said USAPA leaders acted in their own interest, rather than their members' interest, by settling.

Among the issues resolved by the settlement were lawsuits alleging that union leaders were personally responsible for union expenditures. Brown said USAPA settled in order to remove that threat. He said former east pilots accounted for 68% of USAPA's members but gave up 75% of union funds in the settlement.

Harper said everybody gave up something. The "$5.5 million was a number that was negotiated pretty hard," he said. "Over the three days, they came close to walking out a couple of times, and we came really close to walking at the end of the second day.

"I'm not sure either side was happy with it, but it did get the job done," he said.

Harper said that in the negotiations, he substantially reduced the amount he initially claimed for expenses. He declined to specify that amount.

Conrad said that while "reasonable minds can differ about the amount of the settlement, it's not the court's function to substitute its judgment" for what once adversarial attorneys for the two sides negotiated. Among its benefits, the settlement eliminated the need for attorneys to rack up additional fees in continued litigation, he said.

The settlement "allows USAPA to begin the process of dissolution and distribution of assets to its members," Conrad said.

Nevertheless, the battle over pilot seniority at American Airlines is far from over. In fact, it is  about to ratchet higher.

Shortly, a panel of three arbitrators is expected to release a seniority list for the American/US Airways merger.

"Any day now, there is a new seniority list coming down," said Brian O'Dwyer, who represents USAPA. "If history is any guide, the minute that decision comes down, somebody will be aggrieved {and} litigation will ensue."

Tuesday's settlement, he said, means that USAPA will not have to be involved in more litigation.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.