Court Blocks UAL's Move to Dismiss Pilot Pension Suit

July 13, 2007 (PLANSPONSOR.Com) - A federal judge in Chicago has turned aside efforts by UAL Corp., parent of United Airlines, to quash a pilots' lawsuit over how hard the pilots' union attempted to preserve the pilots' pension during UAL's recent bankruptcy.

U.S. District Court Judge Matthew Kennelly of the Northern District of Illinois rejected UAL’s argument that the reorganization plan protected the union, the Air Line Pilots Association (ALPA) from any “act or omission” arising from UAL’s financial restructuring, according to a Bloomberg news report.

Kennelly’s ruling came in a suit filed on behalf of about 1,700 United pilots who claim the union misallocated among its membership $550 million in convertible notes given to it by UAL in exchange for termination of the company’s pilot pension plan obligations (See  ALPA Agrees not to Fight UAL Pension Termination ). The union favored younger pilots over those with “senior status” when it created its allocation, according to the class-action suit filed in December on behalf of now-retired pilot John Mansfield, Bloomberg reported.

The company got permission to get involved in the Mansfield suit and a second suit covering 2,000 pilots originally filed in Portland but also transferred to Kennelly, fearing they might undermine the finality of its reorganization plan, the airline said in court documents, Bloomberg reported (See  United Pilots Sue over Payout Dispute ).

Pilots with senior status were defined in the Mansfield complaint as those who were flying as of December 30, 2004, and had more than 17 years of service in United’s pension plan. Those pilots lost about $130 million, a plaintiffs’ lawyer told Bloomberg. Pilots in the Portland case may have suffered as much as $70 million in damages, he said.

The cases are Mansfield v. Air Line Pilots Association International, 06cv6869, and Hudson v. Air Line Pilots Association, 07cv590, U.S. District Court, Northern District of Illinois, Eastern Division (Chicago).