Daniel Demetris, et al v. Transp. Workers Union of Am.

Filing

FILED OPINION (DIARMUID F. O'SCANNLAIN, RONALD M. GOULD and MILAN D. SMITH, JR.) AFFIRMED. Judge: DFO Authoring, FILED AND ENTERED JUDGMENT. [10442522] [15-15229, 15-15529]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

DANIEL DEMETRIS; WILLIAM
BURKE; DANIEL BURSTEIN;
PATRICK COLLINS; RICHARD
GORGAS; PAUL HERFEL; ROBERT
MARINI; ABDUL MORANI; PAUL
MORRONE; ROBERT PALACEK,
individually and on behalf of all
others similarly situated,
Plaintiffs-Appellants,
v.
TRANSPORT WORKERS UNION OF
AMERICA, AFL-CIO,
Defendant-Appellee.

No. 15-15229
D.C. No.
3:13-cv-05566-VC

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DEMETRIS V. TWUA

MARK LETBETTER; MIKE
MCDONALD; RICK ARNEGARD;
WILLIAM BELL; WILLIAM BLACK;
LONNIE BRADBURY; JOHN
BREEDEN; ROGER BROWN; SCOTT
BROWN; JOHN BYNUM; MIKE
CODY; JOHN CRAWFORD; BILLIE
CUMMINS; GEORGE DANKER;
DON DRAPER; MICHAEL ELMORE;
WADE FAUST; JERRY FRAZIER;
KEVIN GORREMANS; MARY
GORREMANS; JAMES HAYDEN;
BRENDA HIGLEY; RANDY
HOLLAND; JIM BOB JACKSON;
ALAN KEITH; EARL KUPPINGER;
SOREN LOHMAR; DEBORAH
MCDANIEL; JOHNNY MCDANIEL;
MIKE MCNAMARA; STEVE NUNN;
MIKE REYES; GEORGE
RODRIGUEZ; MIKE SHARP; JERRY
SHUPE; CURTIS SIMER; ROBERT
SOMMERS; RONALD SWAN;
TERRANCE THOMAS; BILL
THORSON; JIM TROSKEY; JAMES
WALL; LARRY WEBER;
CHOKUSHIN URASAKI; STEVE
ABSHIER; RALPH BACON; RONNIE
BERTRANG; TRAICE BRYANT;
DAN BURKE; KEVIN CALMAN;
DONALD CAUDLE; JERRY
COLLARD; DOUG CREEKMORE;
HUGH COOPER; BARBARA
DEJEAR; BRYAN DESHAZO; LIDIO

No. 15-15529
D.C. No.
3:14-cv-04075-VC

OPINION

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DEMETRIS V. TWUA
A. DOBRICH; DAVID ELDER; JOHN
ELLER; MIKE ELLER; NED ELZO;
RON ENGLES; DONALD FARRIS;
ROBERT FLYNN; RANDY
FORRESTER; JESSE FOSTER; STEVE
FREGARA; PAUL GOULET;
MARION GREENWALT; PHIL
HALLMAN; MCKAYLA HARPER;
SCOTT HERMANSON; LARRY
HOLMES; ROGER KEMP; DANIEL
KITCHENS; LARRY LAWSON; JACK
LOFGREN; PATRICE MANNS;
EDWARD W. MARRACCINI;
FARREN MAYFIELD; GAIL
MAYFIELD; GREG MCBRIDE;
FRANK MEFFORD; KEN MILLER;
DANNY MOORE; GERALD
MURRAY; JAMES POTTEBAUM;
JOHN REED; ABRAHAM
REICHMAN; SHARON RITTER; BEN
ROUNDTREE; GARY RUNYON;
MARY RUNYON; ROGER
SCHULTZ; TIM SISNEY; JOSEPH W.
SMITH; RONALD SMITH; STEVE
ULLRICH; SUSAN VIRDELL; MITCH
WALLACE; TERRY WALLS;
KENNETH WARREN; ERIC
WHALEY; RAY WHITE; GLENDA
WILKERSON; MIKE WILLIAMS;
DON WOODRICH; JOHNNY YEARY;
SAM YORK; STEVEN JONES, on

3

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DEMETRIS V. TWUA

behalf of themselves and all
others similarly situated,
Plaintiffs-Appellants,
ROY HAILE,
Petitioner-Appellant,
v.
LOCAL 514, TRANSPORT
WORKERS UNION OF AMERICA;
TRANSPORT WORKERS UNION OF
AMERICA,
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of California
Vince G. Chhabria, District Judge, Presiding
Argued and Submitted December 13, 2016
San Francisco, California
Filed May 22, 2017
Before: Diarmuid F. O’Scannlain, Ronald M. Gould,
and Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge O’Scannlain

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SUMMARY*

Labor Law
The panel affirmed the district court’s dismissal of two
consolidated actions brought under the Railway Labor Act,
alleging a union’s breach of the duty of fair representation in
the decision to distribute the proceeds of a bankruptcy
settlement to all of its members unevenly.
American Airlines, Inc. and American Eagle Airlines, Inc.
filed for Chapter 11 bankruptcy and negotiated new collective
bargaining agreements with Transport Workers Union of
America, AFL-CIO, which represented mechanics, fleet
service workers, and other laborers. The new agreements cut
pension and medical benefits for union members and granted
the union a stake in the equity that would be granted to
unsecured creditors in the bankruptcy. The union and
American also negotiated an early separation program
whereby more senior union members could choose
voluntarily to leave American in exchange for lump-sum cash
payments.
Union members who took advantage of the early
separation program alleged that the union breached its duty
of fair representation by excluding them from the bulk of the
equity distribution. The panel held that there was no breach
of duty because the union’s conduct was not arbitrary,
discriminatory, or in bad faith.

*

This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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DEMETRIS V. TWUA
COUNSEL

Michael A. Caddell (argued), Cynthia B. Chapman, and Amy
E. Tabor, Caddell & Chapman, Houston, Texas, for
Plaintiffs-Appellants.
Connie K. Chan (argued) and Stephen P. Berzon, Altshuler
Berzon LLP, San Francisco, California; Richard Edelman,
Mooney Green Saindon Murphy and Welch PC, Washington,
D.C.; for Defendant-Appellee Transport Workers Union of
America, AFL-CIO.
Teague P. Patterson, Beeson Tayer & Bodine APC, Oakland,
California; Caroline B. Lapish, Norman Wohlgemuth
Chandler Jeter Barnett & Ray, Tulsa, Oklahoma; for
Defendant-Appellee Local 514, Transport Workers Union of
America.

OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether a labor union’s decision to
distribute the proceeds of a bankruptcy settlement to all of its
members unevenly violates its duty of fair representation.
I
A
American Airlines, Inc., and American Eagle Airlines,
Inc. (collectively “American”) filed for Chapter 11
bankruptcy in November of 2011. As part of its

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reorganization process, American sought to reject and to
renegotiate its collective bargaining agreements. The
Transport Workers Union of America, AFL-CIO (“TWU”)
represented mechanics, fleet service workers, and other
laborers at American. American presented TWU with a new,
proposed labor agreement on February 1, 2012.
1
After a series of negotiations, TWU agreed to new
collective bargaining agreements that drastically cut pension
and medical benefits for its members. Specifically, TWU:
(1) made scope-of-the-work concessions to American
regarding outsourcing and work-rules; (2) gave up nonaccrued pension benefits; (3) gave up certain life insurance
benefits and access to jointly-funded medical trust accounts;
(4) agreed to release various pre-petition claims and
grievances against American in exchange for a 3.1% stake in
the equity that eventually would be granted to unsecured
creditors as part of American’s bankruptcy (such equity
would also represent compensation for the scope and pension
concessions won by American); and (5) agreed to release two
grievances—referred to by the parties as the 29(d)
grievances—as part of the consideration for the equity. In
addition to surrendering the share in the equity, American
agreed to raises in base-pay for TWU members as well as to
a 401(k) program incorporating employer contributions.
2
TWU and American also entered into a “Me Too”
agreement wherein American pledged to seek similar
concessions from other labor groups. American also pledged
to “discuss and agree upon a proportionate reduction in

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DEMETRIS V. TWUA

projected labor cost savings” with TWU if it failed to achieve
similar concessions from other labor groups. This agreement
eventually resulted in American awarding TWU an additional
1.7% of the equity given to unsecured creditors, bringing
TWU’s total stake to 4.8%.
In order to prevent mandatory layoffs for TWU members,
TWU and American also negotiated an “Early Separation”
program whereby more senior TWU members could choose
voluntarily to leave American in exchange for lump-sum cash
payments. Depending on seniority and contractual
protections, TWU members who chose to participate in Early
Separation could leave with between $5,000 and $22,500 in
addition to regular severance pay, unused vacation pay, and
an additional two-weeks’ compensation.
3
The bankruptcy court approved the new collective
bargaining agreements negotiated by American and TWU,
which went into effect in September 2012. Members could
opt for Early Separation in September and October of 2012
but not thereafter.
TWU formed a committee and retained a financial and
economic advisor to determine the best method of
distributing the equity in April of 2013, two months after
American agreed to merge with US Airways Group, Inc., and
the value of the equity became more discernable. The
committee circulated its proposed distribution plan to TWU
members in June and July of 2013.

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a
The draft plan awarded a share of equity to members
employed at American during a period beginning on
November 29, 2011, and ending on July 26, 2013. Other than
equity set aside to settle the 29(d) grievances, the plan
excluded all members who took advantage of the Early
Separation program from receiving any substantial portion of
the equity. After receiving feedback from members, the
committee voted to adopt the proposed plan on July 16, 2013.
TWU’s governing President’s Council then approved the
plan, and it became final and binding after TWU’s president
refused to exercise veto power. Equity distributions began in
December 2013.
B
Before us are two consolidated, putative class-actions in
which TWU members who took advantage of the Early
Separation program allege that TWU breached its duty of fair
representation by excluding them from the bulk of the equity
distribution. All of the named plaintiffs in these consolidated
appeals allege that they were employed by American and
represented by TWU during American’s bankruptcy, and all
of the named plaintiffs took advantage of Early Separation.
Collectively, these plaintiff-appellants are referred to as
“Retirees.” Because all of the Retirees opted for Early
Separation, none received a share of the equity other than the
portion set aside to compensate members for the settling of
the 29(d) grievances.

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1

In appeal No. 15-15229, Daniel Demetris and other
Retirees had filed a duty of fair representation claim against
TWU in the Northern District of California in December of
2013. A related case was filed the following month in the
Northern District of Texas, but such action was dismissed and
the lead plaintiff joined to the first action by the consent of
the parties. In appeal No. 15-15529, Mark Letbetter and other
Retirees had filed a similar action in Oklahoma state court
against Local 514, Transport Workers Union of America and
Transport Workers Union of America, AFL-CIO (Local 514),
but the case was removed to federal court before being
transferred to the Northern District of California in
September of 2014. Both cases were assigned to the same
district court judge and are now consolidated before us.
2
On February 4, 2015, the district court dismissed the
Demetris duty of fair representation claims, finding such
allegations implausible. The district court then dismissed the
similar Letbetter claims in a single-page order on February
20, 2015, noting that Letbetter and other Retirees agreed that
the rationale employed by the court in the Demetris case
applied with equal force to their own duty of fair
representation claims. This timely appeal followed.1

1

In response to an unopposed motion by the appellants, we
consolidated the appeals on April 7, 2015. On appeal, Local 514 has
chosen to join in and incorporate by reference all arguments made by
TWU.

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II
On appeal, Retirees argue that the district court erred in
dismissing their duty of fair representation claims because
TWU’s equity distribution scheme was (1) arbitrary,
(2) discriminatory, and (3) made in bad faith.
A
A union’s duty of fair representation grows from its
statutory right to exclusive representation. Because a union
has exclusive statutory authority to represent its members, it
has a corresponding legal obligation “to serve the interests of
all members without hostility or discrimination toward any,
to exercise its discretion with complete good faith and
honesty, and to avoid arbitrary conduct.” Vaca v. Sipes,
386 U.S. 171, 177 (1967). This duty adheres to unions
governed by the Railway Labor Act no less than to unions
governed by the National Labor Relations Act. Id.; see also
Steele v. Louisville & N.R. Co., 323 U.S. 192, 202–03 (1944).
A union breaches its duty of fair representation “when its
conduct toward a member of the bargaining unit is arbitrary,
discriminatory, or in bad faith.” Marquez v. Screen Actors
Guild, Inc., 525 U.S. 33, 44 (1998). Plaintiffs bear the burden
of proving that a union breached such duty. Beck v. United
Food & Commercial Workers Union, 506 F.3d 874, 879 (9th
Cir. 2007).

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DEMETRIS V. TWUA

We address in turn each of the Retirees’ arguments that
TWU engaged in such arbitrary, discriminatory, and bad faith
conduct.2
1
Was the Union’s action arbitrary? Retirees contend that
TWU made a wholly irrational decision when it withheld the
bulk of the equity from any member who participated in Early
Separation. They claim that the Union’s decision was wholly
irrational because the contractual concessions exchanged for
the equity affected their rights just as much, if not more, than
members who chose to stay on at American. The distribution
plan, they argue, amounts to a large-scale grievance-trading
scheme because they gave up the same contractual
concessions as other workers but received no equity in return.
Union action “can be classified as arbitrary ‘only when it
is irrational, when it is without a rational basis or
explanation.’” Beck, 506 F.3d at 879 (quoting Marquez,
525 U.S. at 46). Indeed, union conduct will only be deemed
arbitrary if it is “wholly ‘irrational’” and “far outside [the]
‘wide range of reasonableness.’” Air Line Pilots Ass’n, Int’l,
v. O’Neill, 499 U.S. 65, 78 (1991) (quoting Ford Motor Co.
v. Huffman, 345 U.S. 330, 338 (1953)).

2

We review a district court’s decision to dismiss a duty of fair
representation claim de novo. McNamara-Blad v. Ass’n of Prof’l Flight
Attendants, 275 F.3d 1165, 1169 (9th Cir. 2002); see also Addington v. US
Airline Pilots Ass’n, 791 F.3d 967, 982 (9th Cir. 2015) (“Whether a
union’s conduct amounted to a breach of its duty of fair representation
presents a mixed question of law and fact that we review de novo.”).

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We have held, repeatedly, that a union’s conduct cannot
be arbitrary so long as the union exercises its judgment. See,
e.g., Beck, 506 F.3d at 879; Peterson v. Kennedy, 771 F.2d
1244, 1254 (9th Cir. 1985) (“In all in cases in which we
found a breach of the duty of fair representation based on a
union’s arbitrary conduct . . . the act in question did not
require the exercise of judgment . . . .”). Therefore, our
threshold inquiry in assessing any duty of fair representation
claim must be to determine whether the alleged conduct
involved judgment or whether such conduct was merely
ministerial or procedural in nature. Burkevich v. Air Line
Pilots Ass’n, Int’l, 894 F.2d 346, 349 (9th Cir. 1990). If the
challenged conduct involves “the union’s judgment, then ‘the
plaintiff[s] may prevail only if the union’s conduct was
discriminatory or in bad faith.’” Id. (quoting Moore v. Bechtel
Power Corp., 840 F.2d 634, 636 (9th Cir. 1988)).
Retirees do not plead that TWU distributed the contested
equity through a ministerial or procedural act. Rather, they
contend that TWU went through a deliberative decisionmaking process when it settled grievances and contractual
disputes in exchange for the equity. Such process utilized
input from committees, experts, and membership.
Specifically, Retirees allege that TWU created a committee
to develop the equity distribution plan, that TWU retained a
financial and economic advisor to help the committee create
such plan, that the final plan was presented to TWU
membership across the country, and that member feedback
was heard by TWU leadership. TWU approved of the final
distribution plan through successive votes in both the
committee charged with creating the distribution
methodology and the union’s governing council. This accords
with the district court’s finding, based on the pleadings, that
TWU gave careful consideration to its distribution plan.

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Because the union is alleged to have exercised its
judgment, we cannot deem such conduct “wholly irrational”
such that it violates the duty of fair representation. Beck,
506 F.3d at 880 (observing that “we cannot deem a union’s
exercises of judgment to be wholly irrational and thus
arbitrary”). Therefore, we are satisfied that the district court
did not err when it held that TWU’s equity distribution
scheme was not arbitrary.
2
Was the Union’s action discriminatory? Where
challenged union conduct involves the exercise of judgment,
such conduct can still violate the duty of fair representation
if we find it discriminatory or done in bad faith. Id. Retirees
argue that TWU discriminated against them because of their
lack of political power: in order to fend off raids by rival
unions, they claim that TWU maximized equity distributions
to voting members by withholding equity from members who
chose to leave American through the Early Separation
program. Retirees claim that TWU chose to discriminate
against them because other members would possess more
political power in any upcoming representation elections.
Unions have a duty not to discriminate impermissibly
among their members, but there is certainly “no requirement
that unions treat their members identically as long as their
actions are related to legitimate union objectives.” Vaughn v.
Air Line Pilots Ass’n, Int’l, 604 F.3d 703, 712 (2d Cir. 2010).
A union’s decision to discriminate against its members on an
impermissible basis will violate the duty of fair representation
only where the aggrieved members set forth “substantial
evidence of discrimination that is intentional, severe, and
unrelated to legitimate union objectives.” Amalgamated Ass’n

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of St., Elec. Ry. & Motor Coach Emps. of Am. v. Lockridge,
403 U.S. 274, 301 (1971).
We have previously held that unions cannot discriminate
against their members based on political animus or even
political expediency. Addington, 791 F.3d at 984–85. That is
to say, unions cannot make decisions solely “to advance one
group of employees over another.” Id. at 984 (quoting
Rakestraw v. United Airlines, Inc., 981 F.2d 1524, 1535 (7th
Cir. 1992)).
But Retirees pleadings lack facts from which we can
plausibly infer that TWU discriminated against them on the
basis of raw political power. See Eclectic Props. E., LLC v.
Marcus & Millichap Co., 751 F.3d 990, 996–97 (9th Cir.
2014) (holding that allegations are not plausible unless
plaintiffs allege “facts tending to exclude the possibility that
the [defendant’s] explanation is true.”). TWU’s distribution
plan benefitted members who died during the bankruptcy,
members who were unable to work due to on-the-job injuries,
and members who were on leaves of absence for disability,
military deployment, or who were absent under the Family
and Medical Leave Act. Such members would not be able to
vote in any upcoming representation elections, yet TWU
distributed equity to them regardless of their political value.
And absent from Retirees’ allegations are any overt
indications of political animus. See Addington, 791 F.3d at
985 (finding conduct discriminatory where the union
advocated for the challenged policies “as a way of
suppressing the minority” members). Retirees have not
directed us to any statements showing animus towards them
by TWU leadership or the committee responsible for drafting
the equity plan.

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Moreover, we cannot infer an intent to discriminate based
solely on the equity distribution plan in and of itself because
such distribution should be read in the complete context of
the bankruptcy settlement process. Retirees certainly pled
sufficient facts indicating that the concessions won by
American would affect their future economic well-being:
along with other TWU members, Retirees lost the ability to
accrue additional pension benefits as well as thousands of
dollars in medical benefits during each year of retirement.
But Retirees own pleadings demonstrate that TWU achieved
substantial raises for all members and new 401k benefits in
exchange for such concessions. Critically, TWU also
negotiated for cash payments for Retirees, all of whom who
opted to leave American voluntarily through the Early
Separation program rather than labor under the new collective
bargaining agreement ratified in 2012.
TWU could permissibly make decisions about the equity
against the backdrop of the broader bankruptcy settlement
without creating the inference that such actions were
motivated by political machinations. Even under normal
economic conditions, TWU would have no obligation to treat
all of its members the same, but “[t]his proposition is
especially true in the context of employer bankruptcy, which
can present unique challenges for a bargaining
representative.” Bondurant v. Air Line Pilots Ass’n, Int’l,
679 F.3d 386, 393 (6th Cir. 2012). Distributing equity to
members who did not already take advantage of the lumpsum cash payments offered through the Early Separation
program does not, without more, allow an inference of
political discrimination on the part of TWU.
Based on the facts alleged by Retirees and attested to in
documents attached to their complaint, we hold that the

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district court did not err when it found that allegations of
discrimination were implausible.
3
Did the Union act in bad faith? Retirees’ bad faith
allegation has two parts: first, they claim that the TWU
intentionally delayed disclosing the equity distribution plan
until after the deadline for choosing Early Separation; second,
they claim that TWU manipulated internal decision-making
procedures to ensure that equity went only to active members.
Both prongs of Retirees’ argument center around a letter
sent to TWU members by the union’s leadership in
September of 2012. The letter assures membership that “this
asset [the equity] belongs to you and will be distributed to
you.” The letter goes on to say that TWU “will provide
details on distribution over the next few weeks.” Retirees
argue that such communication created a duty to distribute an
equity distribution plan quickly so that members
contemplating Early Separation would know how such choice
might affect their stake in the equity. Likewise, they claim
that TWU broke faith with its members when it assured
Retirees that the equity belonged to them only to pull the rug
out in the final distribution plan.
To state a plausible claim that TWU breached its duty of
fair representation through bad-faith conduct, Retirees must
plead facts that, if true, show “substantial evidence of fraud,
deceitful action or dishonest conduct.” Beck, 506 F.3d at 880
(quoting Lockridge, 403 U.S. at 299). Unions owe their
members “complete good faith and honesty.” United Bhd. of
Carpenters and Joiners of Am. v. Metal Trades Dep’t, AFLCIO, 770 F.3d 846, 848 (9th Cir. 2014) (quoting Vaca,

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DEMETRIS V. TWUA

386 U.S. at 177). Even so, mere negligence and erroneous
judgment calls cannot, by themselves, support an inference of
bad faith. Stevens v. Moore Bus. Forms, Inc., 18 F.3d 1443,
1447–48 (9th Cir. 1994) (“[A]n error in judgment by the
union does not constitute bad faith.”).
Regarding Retirees’ first allegation of bad faith—that
TWU either deliberately misled members regarding the
equity or, at the very least, deliberately delayed disclosing the
distribution criteria—we find such claims implausible.
Retirees have not alleged that TWU had already formed its
plan for the equity before the October 2012 deadline for
choosing Early Separation. Rather, Retirees allege that TWU
did not even form the committee responsible for creating
distribution plans until after the deadline for choosing Early
Separation had passed.
Such allegations are inconsistent with a nefarious, badfaith effort to delay the formation of a distribution plan: the
committee presumably responsible for such scheme had not
even been formed when the allegedly bad-faith acts took
place. Even assuming that TWU’s September 2012 letter to
membership created a duty to create a plan for the equity
within the communicated timeframe, Retirees pleadings can
at most support the inference that TWU’s failure to perform
such duty constituted negligence. And negligent union
conduct does not rise to the level of bad faith. Peterson,
771 F.2d at 1259 (reiterating that “negligence is insufficient
to support a breach of the duty of fair representation suit
against a union”).
Similarly, allegedly misleading statements made by TWU
officials at various Locals during September of 2012 cannot
support an inference of bad faith. TWU disclosed the risks of

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taking advantage of the Early Separation program in the letter
sent to its members that same month. After assuring
membership that the equity would be distributed to them in
due course, TWU explicitly told those contemplating Early
Separation that “the equity piece is very much undetermined
at this point” and that it could not say, one way or another,
what role the equity should play in retirement planning.
And in a portion of the same letter titled “Who Will
Receive the Value of the Equity and In What form will it be
distributed?” TWU told its members that it would make
decisions about distributing the equity after the union
understood the worth of such equity and the form it would
take. TWU explicitly told its members—including
Retirees—that one of the variables it would consider in
distributing the equity was the “active status” of members.
Against the backdrop of such communication, informal
statements made during various Local meetings simply
cannot provide a basis for an inference that TWU engaged in
“fraud, deceitful action or dishonest conduct.” Lockridge,
403 U.S. at 299 (quoting Humphrey v. Moore, 375 U.S. 335,
348 (1964)).
Finally, we agree with Retirees that a union’s decision to
buck its own internal procedures may, in some circumstances,
support an inference of bad faith. See United Bhd. of
Carpenters, 770 F.3d at 852. Here, however, Retirees have
failed to put before us any internal rule or policy that TWU
violated during the equity distribution process.
III
The district court did not err when it dismissed Retirees’
allegations that TWU violated its duty of fair representation

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through conduct that was arbitrary, discriminatory, or done in
bad faith.
AFFIRMED.