Appeal from the United States District Court for the Northern District of California; D. Lowell Jensen, District Judge, Presiding; DC# C-87-2273-DLJ; DC# CV-87-2273-DLJ.
Beezer and Noonan, Circuit Judges, and Jones*fn** District Judge
On October 1, 1984 Western Airlines, Incorporated (Western) and the Association of Flight Attendants (AFA) entered into an "early-out" agreement which gave permanent flight passes to flight attendants who voluntarily left Western's employment between September 1, 1984 and December 31, 1986 for reasons other than cause. A successor clause in the early-out agreement stated in pertinent part as follows: "Pass and reduced-rate transportation . . . shall mean pass and reduced rate transportation on Western Airlines, Inc. [or] any . . . merged company or companies. . . ."
The agreement split the early-out participants into two groups. Attendants with more than fifteen years of service and their spouses were assigned an F-1 pass -- the same pass which Western issued to its active employees with more than five years service and to its retirees with more than fifteen years of service. The F-1 pass entitled eligible children and parents of the attendants up to eight passes per year, depending on the attendant's length of employment. Attendants with ten to fifteen years of experience and their spouses were given an H-1 pass -- the same pass which Western issued to its active employees with less than five years of service and to its retirees with less than fifteen years of service.
The F-1 and H-1 cards entitled qualifying flight attendants and their spouses to an unlimited number of passes on Western's system. F-1 cardholders had boarding priority behind paying passengers and company officials; boarding among the F-1 cardholders depended upon arrival time at the gate. H-1 cardholders boarded behind all F-1 cardholders; boarding priority among H-1 cardholders also depended upon arrival time at the gate.
On April 1, 1987 Western merged with Delta Airlines, Incorporated (Delta). The pass systems of the two airlines differed significantly so perfect integration was impossible. Delta issued to its active employees an SA-3 pass which gave them boarding priority behind corporate officials. Delta issued to its retirees an SA-3B pass which gave them boarding priority behind active employees. Unlike Western's system, boarding within each Delta class was determined by seniority.
Delta gave all Western employees who became active Delta employees SA-3 passes; Western retirees were given SA-3B passes. Delta did not have any type of early-out arrangement with its employees so Delta created a new pass, the SA-4B pass, for the participants of Western's early-out program. The SA-4B pass entitled the early-outs and their spouses to an unlimited number of passes; parents and children of the early-outs were given up to eight passes a year. However, four distinct characteristics of the SA-4B class gave rise to dispute: (1) early-outs boarded behind all active Delta employees and retirees; (2) tickets could not be obtained at the gate; (3) a service charge was enacted; and (4) travel was restricted to Western's previous route structure.
On May 6, 1987, Marilyn Wiley and three other former Western flight attendants sued Delta in Federal Court in San Francisco, alleging that Delta's modifications to Western's early-out program violated the Employee Retirement Income Security Act (ERISA) and the terms of the early-out agreement. Specifically, the Wiley plaintiffs challenged the four provisions mentioned above. They sought injunctive relief restoring their alleged contractual rights and monetary damages for any travel expenses caused by the modifications. Forty-two former Western attendants filed a similar action, the Eaton action, in Seattle on May 28, 1987.
Both courts summarily determined that the early-out agreement constituted a welfare benefit plan subject to ERISA, 29 U.S.C. § 1002(1). The Wiley court reserved for trial the questions whether Delta's modifications to the early-out program were permissible under ERISA or the early-out agreement, and whether Delta could alter the agreement pursuant to the Railway Labor Act's merger rules. The Wiley court also denied class certification, subject to reconsideration.
On November 21 and 22, 1988, District Judge Lowell Jensen heard the Wiley case. The case was tried pursuant to a forty-six page stipulation of facts which Delta and Wiley's counsel had agreed to on November 8, 1988. Under the stipulation the plaintiffs agreed inter alia that the maximum relief they sought was the boarding priority of Delta's retirees; they further agreed that the merger clause did not require "an acquiring carrier to expand the early-out travel privileges to the carrier's entire route. . . ."
Meanwhile, in Seattle, District Judge William L. Dwyer ordered mediation in the Eaton case. On December 15, 1988, an experienced Seattle labor attorney, H. Clemens Barnes, conducted the mediation which was attended by Delta's attorneys, the Eaton plaintiffs' attorney and five of the Eaton plaintiffs.
On January 31, 1989, while the Wiley court's ruling was still pending, counsel for Delta and counsel for the Eaton and Wiley plaintiffs entered into a tentative settlement agreement. The agreement gave the early-outs and their spouses an unlimited number of passes to travel on Delta's domestic system, which included the continental United States, Alaska, Hawaii, Mexico, Puerto Rico, the Bahamas, and Bermuda, but it denied them access to Delta's trans-Atlantic and trans-Pacific routes; it placed the early-outs in Delta's retiree class; it promised them the same pass privileges as retirees; it dismissed all claims for damages; and it denied any protection under ERISA. The agreement also eliminated the service charge and allowed the early-outs to obtain passes without going through Delta's pass bureau. Finally, the agreement gave plaintiffs' counsel $85,000 in attorneys' fees.
The agreement was subject to both courts dismissing the actions with prejudice and to a class being certified by the Wiley court under Federal Rules of Civil Procedure 23(b)(1) and 23(b)(2). On February 15, 1989 the Wiley court tentatively certified the class and ordered the parties to send notice of the tentative agreement and class settlement to the 612 potential class members. The court set a Rule 23(e) fairness hearing date for May 19, 1989.
Seventy-eight potential class members filed objections with the court prior to the fairness hearing; ten potential class members filed favorable comments. Sixty-four flight attendants organized themselves into a group, the Bowen/Reiser group, to oppose the ...