Unpublished Disposition, 930 F.2d 921 (9th Cir. 1989)

Marilyn WILEY, Lois A. Rees, Angie Nunn, MicheleneStella-Otery, Plaintiffs-Appellees,v.DELTA AIRLINES, INC., Western Air Lines, Inc., Defendants-Apelleesv.Deborah BELCASTRO-BOWEN, Marleena Reiser, Alice MoloneyAdams, Craig Andrews, Pamela R. Bailey, Judith D. Beal,Pamela A. Brenot, Carol Bunce, Stephanie Cohen, Deborah L.Connor-Cook, Constance S. Cramer, Barbara D. Daly, Sheila J.Dickerson, Wendy Dillon, Joanne H. Doram, Debra DuBord,Sandra L. Foley, Connie M. Forde, Roberta May Freeman,Lawrence Hahn, Gail Louise Haller, Emily D. Heath, Carol A.Hogan, Marcella Hunt-Peterson, Barbara Jensen-Amdjadi,Carole Leavelle, Sharon Lessinger, Chrissie B. Lovold, SusanL. Magliano, Sharon D. Miller, Mary Ann Pearson, DianeReilly, Toby S. Sadasky, Anabelle Simmons, Cyndee RaeSinardi, Colleen Smith, Patricia L. Smith, Elise Stevens,Pamela Stevens, Rhonda J. Jennifer Terrio, Jo Anne Utz,Laraine Valdespino-Pozzo, Linda Johnson Walden, Janice M.Waller, Cynthia Weber, Cheryl Wendell, Gina Youngren, SandyYslas-Vanderburg, Kathi Zablocki, Objectors-Appellants.Marilyn WILEY, Lois A Rees, Angie Nunn, MicheleneStella-Otery, Plaintiffs-Appellees,Deborah Belcastro-Bowen, Appellant,v.WESTERN AIRLINES, INC, Delta Air Lines, Inc., Defendants-Appellees.

Nos. 89-16141, 89-16142.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 13, 1991.Decided April 15, 1991.

Before BEEZER and NOONAN, Circuit Judges, and JONES^* , District Judge.

MEMORANDUM^** 

FACTUAL BACKGROUND

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.

PROCEDURAL BACKGROUND

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 settlement; the Bowen/Reiser group comprises the objectors who have appealed.

On March 28, 1989 the Bowen/Reiser group filed a motion to suspend the fairness hearing and decertify the class. In particular the motion attacked Frederic Reed's declaration which stated: "All 42 plaintiffs whom I represent endorse the settlement agreement and believe it is a fair and equitable resolution of their claims." The Bowen/Reiser group allegedly learned through conversations with several Eaton plaintiffs that this statement was not true and that the agreement had been entered into without the plaintiffs' approval. On April 26, 1989, the district court held a hearing and denied the motion; the court expressed concern over the hearsay nature of the evidence and stated the Eaton plaintiffs could raise their concerns at the fairness hearing.

At the fairness hearing on May 19, 1989, the court heard oral testimony from twenty-six persons, all opposing the settlement. The court also heard argument from the objectors' attorneys and from the attorneys for the plaintiffs and Delta. On June 28, 1989 the district court entered an order approving of the settlement and certifying the class under Rules 23(a), 23(b) (1) & 23(b) (2).

In the order the court first discussed the requirements of Rule 23(a) and found that they had been satisfied. The court paid particular attention to the adequacy of representation by class counsel. The court also discussed the requirements of Rules 23(b) (1) & 23(b) (2) and determined that they too had been met. The court then discussed whether the settlement was "fundamentally fair, adequate, and reasonable." The court looked at each part of the agreement and described that which the plaintiffs had gained and that which they had lost. The court found that the compromises which each side had made were reasonable and concluded that the agreement was adequate and fair. Judge Jensen explained that he was in a unique position to make this determination because he had "heard the merits of the case fully litigated at trial prior to evaluating the settlement," and was in fact "prepared to issue a ruling on the merits of the action at the time the parties presented the proposed settlement agreement." In the end, Judge Jensen was "doubtful the plaintiffs could have achieved such an outcome" from the court.

On July 5, 1989 the district court entered an order vacating its prior summary adjudication and dismissed the action with prejudice. We affirm.

DISCUSSION

Appellants contend that the district court abused its discretion in accepting the settlement agreement and in certifying the class. They argue that the district court was required to, but did not, make a specific finding that the settlement was not the product of collusion, fraud or overreaching. They also argue that the district court abused its discretion because it approved of an agreement which had "stripped" appellants of their seniority status and which did not provide for damages, Trans-Atlantic and Pacific travel, or reduced-rate passes for parents. We are not persuaded by these arguments.

A. Standard of Review

"Class certification is a matter within the district court's discretion, and is reviewed to determine whether there has been an abuse of discretion and application of impermissible legal standards." Probe v. State Teachers' Retirement System, 780 F.2d 776, 779 (9th Cir.), cert. denied, 476 U.S. 1170 (1986) (citation omitted). However, because this class was certified after a tentative settlement agreement had been reached, we will examine the fairness of the agreement closely in making our determination whether the district court abused its discretion. Mars Steel Corp. v. Continental Ill. Nat. Bank & Trust Co. of Chicago, 834 F.2d 677, 680-81 (7th Cir. 1987); Weinberger v. Kendrick, 698 F.2d 61, 72-73 (2d Cir. 1982), cert. denied, 464 U.S. 818 (1983).

B. Collusion, Fraud and Overreaching

Relying primarily on Ficalora v. Lockheed California Co., 751 F.2d 995 (9th Cir. 1985), and Officers For Justice v. Civil Service Comm'n of the City and County of San Francisco, 688 F.2d 615 (9th Cir. 1982), cert. denied, 459 U.S. 1217 (1983), appellants contend the district court abused its discretion because it failed to make a specific finding that the agreement was not "the product of fraud or overreaching by, or collusion among the negotiating parties." Appellants misread Officers For Justice and Ficalora.