Berry v. Pulley, 2012 ONSC 1790
COURT FILE NO.: 97-CV-135179 CP
DATE: 20120725
ONTARIO
SUPERIOR COURT OF JUSTICE
A Proceeding Instituted Pursuant to the Class Proceedings Act, 1992, S.O. 1992, c.6
BETWEEN:
PATRICK BERRY, JAMES DELUCE, JEFFREY KARELSEN, ROBERT JAMES SIMERSON and ERNEST ZURKAN
Plaintiffs
– and –
CHRIS PULLEY, TOM FRASER, JAMES GRIFFITH, PETER WALLACE, GEORGE COCKBURN, DENIS BELHUMEUR, GREG MUTCHLER, GARY DEAN, YVES FILION, HOWARD MALONE, KEVIN VAILLANT and GORDON GREIG
Defendants
– and –
KENT HARDISTY representing THE AIR LINE PILOTS ASSOCIATION
Third Party Defendant
Russell Raikes, John Goudy and Peter Merchant, for the Plaintiffs
Steve Waller, Dougald E. Brown and Craig Stehr, for the Defendants
Brian Shell and Christopher Donovan, for the Third Party Defendant
Reasons for decision
PEPALL J.
TABLE OF CONTENTS
Re-opener Letter and LOUs 17 and 18. 24
CLRB 1989 and 1990 Single Employer Decisions. 31
November 1989 Special Convention. 34
Reactivation of Merger Discussions. 34
March 1, 1991 Declaration of Merger 39
Merger Policy Procedure Followed. 41
Discussions with Air Canada. 44
Merger Declaration Between the Two Mainline Airlines. 48
1993 Canada Collective Agreement 48
Air Canada and NWT Air Merger Agreement 50
Reactivation of Merger Efforts. 51
Motion to Delay, Postpone or Cancel Merger 53
Further Discussions with Air Canada Management 56
Postponement of Arbitration Dates. 56
Commencement of Arbitration. 57
Developments at Air Canada. 59
Air Canada Pilot Reaction to the March 28, 1995 Award. 64
Special MEC Merger Advisory Committee (SMMAC) 68
April 11 to 12, 1995 CALPA Board Meeting. 72
1995 Collective Bargaining. 75
CALPA's Communications with Air Canada and Air Ontario. 75
Air Canada MEC and SMMAC Meetings With Air Canada. 76
August 1995 Air Canada MEC Newsletter 80
August 31, 1995 Air Ontario MEC Letter 85
CALPA Remits Matter to Mr. Picher 86
Single Employer Application and Unfair Labour Practice Complaints. 88
Air Line Pilots Association. 89
Proceedings in this Action. 90
1. Tort of Unlawful Conduct Conspiracy. 98
(a) Agreement or Common Design. 99
(c) The Conduct Must be Directed Towards the Plaintiff. 102
(d) Knowledge that Damages Were Likely to Result 102
(e) Conduct Caused Injury. 102
(ii) Plaintiffs' Conspiracy Claim.. 103
(iii) Common Issues Relating to Conspiracy. 104
Conspiracy Issue (c) Was the conduct of Defendant Pulley and the sub-classes unlawful? 109
2. Intentional Interference with Economic Interest 127
(b) Interference by Unlawful Means. 129
(ii) Plaintiffs' Intentional Interference Claims. 130
(iii) Common Issues Relating to Intentional Interference with Economic Interests. 130
(iv) Positions of the Parties on Intentional Interference Claim.. 131
3. Breach of Fiduciary Duty. 133
(ii) Plaintiffs' Breach of Fiduciary Duty Claim.. 136
(iii) Common Issues Relating to Breach of Fiduciary Duty Claim.. 136
(iv) Positions of the Parties on Breach of Fiduciary Duty Claim.. 137
4. Negligent Misrepresentation. 141
(b) Untrue, Inaccurate or Misleading Representation. 143
(ii) Plaintiffs' Negligent Misrepresentation Claim.. 144
(iii) Common Issue Relating to Negligent Misrepresentation. 145
5. Remaining Common Issues. 151
Schedule A: List of Common Issues. 154
Background
[1] In 1937, the pilots of Trans-Canada Airlines established the Canadian Airline Pilots Association ("CALPA"). This trade union eventually represented 4000 pilots in Canada including Air Canada pilots, pilots in regional airlines wholly or partially owned by Air Canada and pilots in other Canadian airlines such as Canadian Airlines International Ltd. As stated in the preamble to CALPA's Constitution, it was organized for the purpose of uniting all airline pilots for the protection of their interests and the promotion of their general welfare.
[2] Unity became elusive and CALPA ceased to be the exclusive bargaining agent for the Air Canada pilots on November 14, 1995 when these pilots voted to leave CALPA and join a new union known as the Air Canada Pilots Association ("ACPA"). The facts of this case revolve around the events that precipitated that departure.
[3] As a result of the deregulation of the airline industry, throughout the mid 1980s and early 1990s, Air Canada acquired an interest in numerous regional airlines in Canada. These included Air Ontario Inc. ("Air Ontario"), Air Alliance, Air Nova, Air BC and Northwest Territories Air Ltd. ("NWT Air") (hereinafter referred to as "Air Canada Connectors", "Connectors", or “Feeders”). Although wholly or partially owned by Air Canada, each of its Connector airlines and Air Canada itself was a separate company and each group of pilots employed by a Connector airline was in a separate bargaining unit. Separate collective agreements governed the employees in each bargaining unit. That said, Air Canada as the parent company was in a position to potentially control the independent labour negotiations relating to the pilots working for each of the Connector airlines in the Air Canada family. Significantly, it had the power to transfer routes and flying from one group of pilots to another.
[4] The origin of this action arose from a concern by Air Canada pilots that Air Canada routes and flying time were being transferred to Air Canada's newly acquired Connector airline companies. Pilots from the airlines in the Air Canada family were in essence being forced to compete with one another. A request was made to CALPA that its President declare a merger of pilot seniority lists pursuant to CALPA's policy on merger. The definition of merger in that policy was extremely broad and encompassed corporate entities whose operations had not in fact been merged. The merger process resulted in an arbitration before Michel Picher and a March 28, 1995 Award that addressed an integrated pilot seniority list. A major dispute arose with respect to this Award ultimately culminating in the decertification of CALPA as the bargaining agent for the Air Canada pilots.
[5] The dispute between the parties has involved numerous court, Canada Labour Relations Board ("CLRB") and Canadian Industrial Relations Board ("CIRB") hearings spanning about 16 years. These Reasons attempt to outline this painful history garnered from in excess of 43 volumes of documents, months of evidence, evidence to be read into the court record from about 30 transcripts and testimony from approximately 20 witnesses.
Parties
[6] This action is a class proceeding. The Plaintiff class consists of 171 pilots who on March 28, 1995 were employed by Air Ontario and were members of a bargaining unit represented by CALPA. Patrick Berry, James Deluce, Jeffrey Karelson, Robert James Simerson and Ernest Zurkan were appointed as the representative Plaintiffs for the Plaintiff class. The Plaintiffs' claims are against a Defendant class comprised of approximately 1,617 pilots who in the period March 28, 1995 to November 14, 1995 were employed by Air Canada, and who were members of CALPA on March 28, 1995. The Plaintiffs allege that the members of the Defendant class and seven Defendant sub-classes committed the torts of conspiracy, interference with economic interests, and negligent misrepresentation. They also allege that members of the Defendant class owed a fiduciary duty to the members of the Plaintiff class and that that duty was breached. The claim for inducement of breach of contract was abandoned by the Plaintiffs.
[7] On the certification of the action as a class proceeding on March 13, 2001 by Cumming J., the Defendant class was sub-divided into seven sub-classes on the basis that "either none of the Defendants within a sub-class are liable or all will be proven to be liable." The sub-classes and the representative Defendants for those sub-classes are as follows:
Sub-class 1: Defendants who were members of the Air Canada Master Executive Council ("MEC"). Tom Fraser and Peter Wallace were appointed as the representative Defendants. There are 9 members in this sub-class.[^1]
Sub-class 2: Defendants who were Merger Representatives of the Air Canada pilots. Howard Malone was appointed as the representative Defendant. There is 1 member in this sub-class.
Sub-class 3: Defendants who were members of the Special MEC Merger Advisory Committee ("SMMAC") of Air Canada pilots. Gary Dean and Yves Filion were appointed as the representative Defendants. There are 4 members in this sub-class.
Sub-class 4: Defendants who were members of the Negotiating Committee of Air Canada pilots. Denis Belhumeur and Greg Mutchler were appointed as the representative Defendants. There are 5 members in this sub-class.
Sub-class 5: Defendants who were members of the Local Executive Council of Local Councils 1, 7, 11 and 14 of Air Canada pilots. Greg Cockburn was appointed as the representative Defendant. There are 10 members in this sub-class, plus those in sub-class 1.
Sub-class 6: Defendants who did not hold positions on the Air Canada MEC, Local Executive Councils, the Negotiating Committee of Air Canada pilots, the SMMAC or a position as a Merger Representative at any time between March 28, 1995 and November 14, 1995, but who acted to prevent implementation of the Picher Award by communicating directly or indirectly with representatives of Local Executive Councils, the Air Canada MEC, the Negotiating Committee or Merger Representatives to encourage or direct them to reject the Picher Award, to refuse to negotiate the Picher Award or to use any means to stop the implementation of the Picher Award or who communicated to Air Canada their opposition to the implementation of the Picher Award. James Griffith and Kevin Vaillant were appointed as the representative Defendants. No numbers were given.
Sub-class 7: Defendants who took no steps to encourage implementation of the Picher Award in the face of the clear intention of Chris Pulley and the members of sub-classes 1 to 6 to reject the Picher Award and who do not fall in other sub-classes. Gordon Greig was appointed as the representative Defendant. No numbers were given.
[8] On May 20, 2011, Perell J. granted an Order approving a settlement between members of the Plaintiff class and Defendant sub-class 7 in which the action was dismissed as against each member of sub-class 7 who delivered a statutory declaration on or before November 1, 2011.
[9] The Third Party Defendant is Kent Hardisty, representing the Air Line Pilots Association ("ALPA"). ALPA is a U.S.-based union that represents pilots in collective bargaining. On February 1, 1997, CALPA was merged with ALPA and ALPA became the successor bargaining agent for the Air Ontario bargaining unit formerly represented by CALPA. Pursuant to CALPA's Administrative Policy, the Defendants seek indemnification from the Third Party for conduct found to be tortious. The Third Party Defendant denies that the actions of the Defendants were tortious and if this Court finds that they were, the Third Party action will address whether CALPA's Administrative Policy did in fact encompass indemnification for tortious conduct. By agreement of the parties, the Third Party Defendant did defend the main action but the Third Party Claim was not tried before me. If necessary, the Third Party claim would have to be tried.
[10] The common issues to be tried are addressed by subject matter in the body of these Reasons and are reproduced again in Schedule A attached hereto.
The Airlines
[11] Air Ontario, Air Alliance, Air Nova, Air BC and NWT Air were Connector airline companies.
[12] Between 1985 and 1995, Air Canada acquired various percentages of these Connector airline companies. By 1987, it held a 75% interest in Air Ontario and an 85% interest in Air BC. In 1988, it held a 75% interest in Air Alliance. In 1990, it held a 100% interest in Air Nova. By October 1994, it owned 100% of each of Air Ontario, Air Nova and Air Alliance, and by 1995, 100% of Air BC. It also owned NWT Air. The pilots who flew for each of these companies were, for the most part, members of CALPA.
[13] At times relevant to this action, Canadian Airlines International Ltd. and its subsidiary, Canadian Regional Airlines, were competitors of Air Canada. Their pilots were also members of CALPA.
[14] In 2001, Air Nova, Air BC, Air Ontario and Canadian Regional Airlines were amalgamated to become Air Canada Regional, which by the following year was known as Air Canada Jazz.
[15] Until the creation of Air Canada Jazz in 2001, each Connector airline company hired its own pilots and managed its own crew and flight operations.
[16] Both Air Canada and Air Canada Jazz sought protection under the Companies' Creditors Arrangement Act[^2] ("CCAA") in April 2003. As a result of the CCAA restructuring, a new parent company was formed known as ACE Aviation. It owned Air Canada and Jazz as separate, stand-alone companies. Jazz was subsequently sold. As of the date of trial, the two companies operated as stand-alone companies.
CALPA Constitution
[17] All members of the Plaintiff class and the Defendant class were members of CALPA. Collective agreements between Air Ontario and CALPA contained the terms and conditions of employment of members of the Plaintiff class and collective agreements between Air Canada and CALPA contained the terms and conditions of members of the Defendant class.
[18] CALPA had a Constitution and an Administrative Policy to which all members were bound. Given the relevance of these documents and the emphasis placed on them by the parties, I will review their provisions in some detail. They do provide the context for this dispute. In them, CALPA is frequently referred to as the Association.
Code of Ethics
[19] The CALPA Constitution commenced with a Code of Ethics. It stated that CALPA enjoined its members to mould their professional acts to conform with the principles set forth in the Code of Ethics and that an airline pilot would endeavour to conform to the Code of Ethics. The Code specifically stated:
An airline pilot will conduct his affairs with other members of the profession and with the Association in such a manner as to bring credit to the profession and the Association as well as to himself …
He will at all times conduct his affairs with the Association and its membership in accordance with the rules laid down in the Constitution of the Association.
[20] The Code of Ethics went on to state:
To an airline pilot, his profession is dear, and he will remember that his own character and conduct reflect honour or dishonour upon the profession. [^3]
Objectives
[21] The objectives of CALPA were found in section 3 of the Constitution. They included determining and seeking adoption of fair rates of compensation, optimum working conditions and uniform principles of seniority for the airline piloting profession. The Constitution was applicable to and governed all members except as otherwise provided in the Constitution.
Misdemeanours
[22] Section 7 addressed misdemeanours. It stated that any member was subject to expulsion or such other disciplinary action as the Association may fix if found guilty of: wilful violation of the Constitution; disobeying or failing to comply with the decision of the Board of Directors, the Convention, his Master Executive Council or his Local Council; improperly disclosing confidential matters of the Association; initiating legal action against the Association or a member thereof before exhausting all remedies provided in the Constitution; acting in any manner to circumvent, defeat or interfere with: (1) collective bargaining between the Association and an employer, or (2) existing collective bargaining agreements; and doing any act contrary to the best interests and standing of the Association or its members.
Organizational Structure
[23] The Constitution described the organizational structure of CALPA.
[24] The Local Council was the basic participatory unit of the Association and it had authority to decide all matters of a purely local nature. It consisted of members who were employed by the same airline company or the same division of an airline company and who were based at the same location. The Air Canada pilots had Local Councils in Montreal, Toronto, Winnipeg and Vancouver in the years 1988 to November 1995. The Air Ontario pilots had four Local Councils until 1990 at which point they just had two, one in Toronto and one in London, Ontario. Each Local Council had an elected Local Executive Council ("LEC") that was its governing body and which included a Chairman and at least one Vice Chairman. It was to meet monthly and was charged with the management of the Local Council's affairs and business in accordance with the Constitution. LECs were elected for two year terms. The Constitution provided for votes at meetings of Local Council. A Local Council could not adopt rules and regulations for the management of their affairs that were inconsistent with the Constitution. Amongst other things, the LEC Chairman was to represent Council members and act on their behalf in all matters as outlined in the Constitution and Policy Manuals, be responsible for implementing and administering the policies of the Association as they pertained to his Council, and be a member of his airline's Master Executive Council. The Vice Chairman and the Local Executive Councilmen were to assist the Chairman in implementing and administering the policies of the Association as they pertained to their Council. The Local Executive Councilmen were also to represent the opinions, attitudes and direction of their Council members at LEC meetings.
[25] The Master Executive Council ("MEC") functioned as the highest governing body in all matters affecting, exclusively, the active membership of its particular airline.
Subject to the discharge of its responsibilities as the highest governing body in all matters affecting exclusively the Active membership of its particular airline, the activities of the MEC are to be governed according to the demands made upon it from time to time by the individual Local Councils under its jurisdiction, all normal or routine business being handled by the individual Local Councils.[^4]
[26] The MEC consisted of the Chairmen and Vice Chairmen of the LECs. The Chairman of the MEC was elected by members of the MEC for a two year term. Consistent with the language employed for the LECs, the MEC could adopt rules and regulations for the conduct of the meetings and the management of the affairs of the MEC as deemed proper, but not inconsistent with the Constitution, Policies and Regulations of the Association.
[27] The Chairman of the MEC was the Association's representative to the airline for the purpose of implementing the objectives and policies of the Association and was responsible for the negotiation and administration of the collective agreements between the Association and his airline.[^5] A representative of the Industrial Relations Department of CALPA would assist with the negotiation of the collective agreements. Ultimately, however, the collective agreement was an agreement between CALPA and the airline company.
[28] The Board of Directors of CALPA was to direct the policy of the Association as decided by the Convention Assembly. When the Convention Assembly was not in session, the Board was vested with the administration of the Association in accordance with the Constitution. The Board could intervene in the affairs of an MEC or LEC or a Local Council if any of these bodies were contravening the Constitution or policies of the Association, subject to ratification by Convention Assembly.
[29] The CALPA Board consisted of the President who was the Chairman of the Board, two Vice Presidents, the MEC Chairmen and four regional representatives. Each member of the Board had one vote except for the Chairmen of each MEC who had one vote for every one thousand members of his airline company or portion thereof. For this reason, the Air Canada MEC Chairman had two votes on the Board of Directors. Votes on the Board of Directors were not allocated on a per capita basis. The two Air Canada MEC representatives could therefore be out-voted on the Board by the Connectors. In addition, there was no limitation on the issues on which Board representatives could vote, even if the issues did not directly affect their airline pilots. So, for example, a Canadian Airlines International Ltd. MEC Chair could vote on matters affecting pilots employed by its rival airline, Air Canada.
[30] The President and Chairman of the Board was the CEO of, and principal spokesman for, the Association. Amongst other things, he would sign all collective agreements and letters of understanding and maintain effective relations with Presidents of the airline companies to facilitate the attainment of the Association's objectives and policies. Subject to the direction of the Constitution and Policy Manuals and his MEC, amongst other things, the MEC Chairmen were to be responsible for liaison between the Board and the pilots of their airlines.
[31] The Constitution also contained explicit provisions for the removal from office of the various officers.
[32] The Convention Assembly was the highest governing body of the Association. It consisted of Convention Delegates who represented their Local Councils. They were chosen and had voting accreditation based on a formula reflecting the size of the Local Council. The Convention Assembly was "vested with the control of the Association, its general management and policies. Its decisions shall be binding upon the Association, the Board of Directors, the Officers and members in all categories."[^6] The Convention Assembly was to meet every other year in November. In addition, a majority of the Board could call a Special Meeting of the Convention Assembly. The membership could also cause a Meeting of Convention Assembly to be called. At Convention Assembly, questions were to be determined by a simple majority of accredited votes cast. In addition, a roll call vote could be requested at Convention in which case the vote reflected the number of members of a Local Council. Again, all member airline delegates could vote regardless of whether the issue affected their airline pilots. So, for example, the Connector and Canadian Airlines International Ltd. delegates could outvote the Air Canada Convention delegates at Convention Assembly on issues that only related to the Air Canada family.
Amendments
[33] The Constitution included an amendment formula. Any amendments to the Policy Manual could be made by simple majority vote of Convention delegates or their proxies.
Policies
[34] A Policy Manual entitled "Administrative Policy" and the Technical Policy Manual were considered to be "the authority by which the affairs of the Association were managed and the vehicle by which the Constitution is made effective."[^7] The Administrative Policy went on to state:
It should be borne in mind that while most policies contained in the Manuals are firm directives, some may represent desirable goals which, for one reason or another, are incapable of being realized at any particular time.[^8]
(i) Communications
[35] The Administrative Policy addressed communications. Generally, communications with an airline relating to any amendment or alteration of an employment agreement and communications with the major executive officers of any airline on the subject of Association policy were to be processed through the Association President or his designated representatives. A member who by-passed established CALPA channels was subject to discipline under the Constitution.
[36] Minutes of Local Council, LEC and MEC meetings were to be maintained and a copy sent to CALPA Headquarters. LEC and MEC Chairmen were to communicate regularly with members of their Council by newsletters and bulletins. This was to keep members aware of the role their Association was taking.
(ii) Negotiations
[37] Section III of the Administrative Policy dealt with negotiations. All negotiations were to "be carried on individually with each carrier and separate contracts maintained and no industry bargaining entered into." All negotiating proposals had to be approved by the airline MEC. The MEC of each airline pilot group would elect a Negotiating Committee when required. The Committee was charged with formulating bargaining positions for its pilots.
[38] Before an agreement could be concluded, the MEC and/or the Negotiating Committee would return the contract to the membership for ratification unless the MEC chose not to in exceptional circumstances.
[39] A majority of members of the airline affected had to vote affirmatively before there could be a strike. Additionally, there had to be a majority vote by members of CALPA's Board of Directors.
(iii) Seniority
[40] The Administrative Policy specifically addressed seniority. It was to be based on the date a pilot was hired by an airline company ("date of hire"). In addition, the Policy stated:
Seniority shall govern all pilots in case of promotion and demotion, their retention in case of reduction in force, their assignment or reassignment due to expansion or reduction in schedules, their re-employment after release due to reduction in force, and their choice of vacancies, provided that a pilot's qualifications are sufficient for the operation to which he is to be assigned. In the event that a pilot is considered by the Company not to be sufficiently qualified, the Company shall immediately furnish such pilot written reasons therefore.[^9]
[41] As such, layoffs or furloughs were not to affect a pilot's seniority.
[42] Seniority was extremely important to a pilot. As Air Ontario's Captain Campbell testified, "Seniority isn't everything but it's all we have." It influenced career opportunities including promotions and layoffs, the type of aircraft flown, flight destinations, residence, status, and work schedules. If an airline, such as Air Canada, flew from more than one base, the company decided where a pilot was to be based. Typically under a collective agreement, a seniority number would be assigned to each pilot. Based on seniority, the pilot would then bid on his or her base, equipment (i.e. aircraft) and status. The bigger and faster the plane, the more money a pilot would earn. Similarly, a captain would earn more than a first officer. Pilots also bid on their schedules and vacation time based on seniority.
(iv) Merger
[43] Section IV of the Administrative Policy that was in effect in January 1995 is at the core of this case. It addressed mergers. The President of CALPA could declare a merger of pilot seniority lists if he believed that a merger or consolidation of one airline with another was pending. In addition, in the event of a change in circumstances, the President could dissolve a merger.
It is Association policy that when, in the opinion of the President, a merger or consolidation of one member airline with another is pending, the pilot seniority lists of the affected airlines shall be integrated. For the purpose of this policy the President may determine that sale, takeover, purchase of shares, transfer of all or part of an airline or its assets, establishment or purchase of associated or related companies or subsidiaries shall be considered a merger or consolidation. The President shall establish an effective date for activation of this policy upon which he shall notify the Master Executive Councils of the affected airlines that it is their responsibility, as representatives of the affected pilots, to activate the following procedures for the integration of their pilot seniority lists.[^10]
[44] As is clear from this language, the Merger Policy could affect several airline companies. Of course, the companies themselves were not bound by the union's declaration of merger. Following the declaration:
(i) the MECs of each affected airline company were to notify their airline management of the Association's Merger Policy: "Upon receiving notification, the Master Executive Council Chairman of each affected airline will notify his airline management of the Association's Merger Policy and will obtain agreement from the airline that all questions of pilot seniority shall be determined by the Association through its established procedures." The Policy was silent on what would happen if an airline refused to agree.
(ii) Each of the MECs would appoint two people to be their Merger Representatives. They would have the authority to act for and on behalf of the pilots of their respective airlines for the purpose of compiling a single integrated pilot seniority list.
(iii) The President would convene a meeting of the Merger Representatives of the affected airline companies who were to then negotiate in good faith and attempt to compile an integrated pilot seniority list.
(iv) Any tentative integrated list had to be approved by each of the affected MECs.
(v) Absent progress, mediation could be invoked by the President.
(vi) If the foregoing procedures still did not result in an integrated pilot seniority list, arbitration in accordance with detailed procedures was mandatory. The Policy expressly provided that, "The decision of the Arbitration Board shall be final and binding on all parties to this arbitration." The Arbitration Board could include in its Award a provision to retain jurisdiction for the limited purpose of resolving disputes which might arise prior to or in the course of the implementation of the Award with regard to its meaning or interpretation.
(vii) After the Award and reasons were given, the integrated pilot list was to be accepted by the Association.
[45] On the issue of implementation of an Arbitral Award, the Administrative Policy stated:
…within five days, or a time period specified by the President, of an agreement between the Merger Representatives or mediation, or from the date that the Arbitration Award and reasons are handed down, the integrated pilot seniority list shall be accepted by the Association.
The intent of the Association will be to negotiate the integrated pilot seniority list as the seniority list to be used by the successor airline.[^11]
Prior to the Association meeting with the successor airline to initiate negotiations, the President shall call a meeting of the Master Executive Councils involved, within 10 days of acceptance of such a merged list, to discuss the procedure to be followed for implementation of the merged list and a common collective agreement between the Association and the successor airline.
[46] The Merger Policy contemplated only one common collective agreement that would contain the merged list, not multiple collective agreements.
[47] The Administrative Policy did not particularize how the integrated or merged seniority list was to be implemented, nor did it say anything about the CLRB,[^12] which had ultimate jurisdiction, on the issue of merger or consolidation of bargaining units. Captain Campbell, who was the Air Ontario MEC Chairman from 1990 to 1997, testified that if the successor airline accepted the merged list, it would be implemented and form part of the collective agreement, and if the successor airline refused to accept the merged list, the pilots would strike or CALPA would file a common or single employer application under the Canada Labour Code[^13] before the CLRB. The Administrative Policy itself was silent on the need to strike and the need to file a common employer application.
[48] The single employer provision of the Canada Labour Code states:
- (1) Where, on application by an affected trade union or employer, associated or related federal works, undertakings or businesses are, in the opinion of the Board, operated by two or more employers having common control or direction, the Board may, by order, declare that for all purposes of this Part the employers and the federal works, undertakings and businesses operated by them that are specified in the order are, respectively, a single employer and a single federal work, undertaking or business.
[49] Such an application could therefore result in a declaration that Air Canada was the employer of the Air Ontario pilots as well as the Air Canada pilots.
[50] Even if the Merger Policy contained in the Administrative Policy were followed, there was no guarantee that the merged seniority list would be implemented. Put differently, it was foreseeable that the list might not be implemented.
1986 Merger Declaration
[51] The history of this dispute commences with Air Canada's purchase of all or part of the Connector airlines that came to be part of the Air Canada family of airlines and the resultant 1986 CALPA merger declaration.
[52] In 1986, Air Canada increased its shareholdings in Air Ontario Ltd., Air Ontario's predecessor, to 75%, and acquired a 50% and 85% interest in each of Austin Airways Ltd. ("Austin Airways") and Air BC respectively. As of December 1986, CALPA was the bargaining agent for the pilots of Air Canada and Air Ontario Ltd. The pilots of Austin Airways were non-unionized.
[53] In 1986, the Air Canada MEC was concerned about the prospect of a transfer of Air Canada flying to Air Ontario Ltd., Austin Airways, and Air BC, and resultant Air Canada pilot job losses. Based on the CALPA Merger Policy, the Air Canada MEC Chairman, Captain Nick Servos, asked the President of CALPA, Captain Norm Foster, to declare a merger to merge the pilot seniority lists for the pilots of Air Canada, Air Ontario Ltd. and Austin Airways.
[54] Although written a couple of years later in June 1988, the then CALPA President, Captain Bindon, effectively captured the philosophy behind the Merger Policy:
Some dozen years ago, the Air Canada pilot group established the principle with Air Canada management that where the Company purchases another, the labour groups will be merged to ensure the survival of both. This was achieved by a near strike under the very capable leadership of Captain Norm Foster (then with Nordair), who understood that failure to merge would allow a "divide and conquer" scenario to prevail permitting the Company to play one group off against the other. This is not to say that today's recalcitrant management won't balk at the concept of merger, but rather to advise that ultimate acceptance is assured by the precedent. The only assurance of a stable future, then, is for a merged list where every pilot could use seniority to acquire the flying and level of job security accorded by his or her number.
[55] From a cost perspective, one could see how transferring flying to cheaper regional pilots might be attractive to a parent company such as Air Canada. Michel Picher, who eventually was appointed as arbitrator in this pilot seniority list merger dispute, described the issue this way:
The substitution of a connector flight on a route previously serviced by Air Canada, or vice versa, directly impacts the work opportunities of the pilots of the parent company or the connector airline, as the case may be. Moreover, from an economic standpoint, the ability of the parent company to make such substitutions, while bargaining at different tables with pilots who, although represented by the same union, may be pitted against each other in competition for work, is a primary reason for the merger declaration that has led to this arbitration.
[56] In the decision of Air Nova Inc. v. ALPA,[^14] the Chairman of the CLRB described the circumstances as follows:
Since it would be open to Air Canada as the unique shareholder of all of the airlines to control the line, the aircraft, the schedule and thus the employees involved in the operation of any equipment, it is apparent that seniority within the individual companies was not a reliable form of employment protection, at least for pilots involved in the flying of the Connector aircraft.
[57] One must also not lose sight of the fact that a merger of seniority lists would provide Connector pilots with the opportunity to earn higher incomes. As the Plaintiff Patrick Berry testified, he would have the opportunity to advance his career, his pay, benefits and pension plan. The opportunities at Air Canada were much broader than at the Connectors.
[58] On December 5, 1986, the CALPA President declared a merger with respect to Air Canada, Air Ontario Ltd. and Austin Airways, as requested by Air Canada MEC Chairman Servos. One week later, the President made a similar declaration of merger to merge the pilot seniority lists for Air Canada and Air BC. At that time, the pilots at Air BC were represented by the Teamsters Union.
[59] Both of these proposed mergers of seniority lists were in the absence of any operational merger. In other words, the lists were proposed to be merged even though the corporate airline entities that were wholly or partially owned by Air Canada were operated independently. According to an Air Canada MEC newsletter, this was the first time that an integration of pilot seniority lists would be attempted absent the merger of operations of the carrier companies. As First Officer Chris Pulley, an Air Canada pilot and a named Defendant, wrote in the July 29, 1988 Air Canada MEC newsletter: "At present, the carriers remain separate and distinct with arm's length management, separate employee groups and attached collective bargaining rights."
[60] The Air Ontario Ltd. MEC newsletter dated January 10, 1987 described for its pilots the impediments associated with the proposed merger relating to Air Ontario Ltd., Austin Airways and Air Canada:
Any completed Merger is still a long way off with many obstacles to overcome. Managements of the respective Companies must agree in time that a Merger has in fact taken place, a merged Seniority list or "award" must be agreed upon by all three Merger Committees, and lastly, a common Collective Agreement including all three pilot groups must be negotiated and signed before one single pilot group could exist.
[61] Following the CALPA declarations of 1986, none of the affected airline companies agreed to be bound by the merger declarations. Indeed, Air Ontario Ltd. advised CALPA that the merger declaration was totally irrelevant to Air Ontario Ltd.
[62] In March 1987, CALPA applied to the CLRB for the right to represent the Austin Airways pilots and in July of that year, CALPA was certified as the bargaining agent for the Austin Airways pilots.
[63] On May 8, 1987, William Deluce, president of Air Ontario Ltd., announced the company's intention to merge the operations of Air Ontario Ltd. and Austin Airways into a single entity which would then be known as Air Ontario Inc. As this description suggests, this was an operational merger. The flying operations of Air Ontario Ltd. and Austin Airways were duly merged into a new company, Air Ontario Inc.
[64] CALPA proceeded to attempt to negotiate a single collective agreement and an integrated seniority list for the merged entity, Air Ontario. The other merger negotiations that were the subject matter of the 1986 merger declarations were deferred so that the integration of the seniority lists for the former Air Ontario Ltd. and Austin Airways pilots could be completed. An agreement to merge these lists was reached by the pilots on January 13, 1988.
[65] The collective bargaining negotiations with Air Ontario were unsuccessful. A strike vote was held and a lengthy strike ensued. During that time, Air Canada used Air Canada equipment and pilots to fly routes usually serviced by Air Ontario. A tentative agreement was reached on April 25, 1988. This was the first collective agreement entered into with Air Ontario that covered both the former Air Ontario Ltd. and Austin Airways pilots. The seniority lists of the pilots from the two former entities were merged.
[66] Once these two seniority lists were merged and a collective agreement had been negotiated with Air Ontario, the Air Ontario pilots were ready to resume the negotiations relating to the Air Canada pilots under the 1986 declaration of merger.
Re-opener Letter and LOUs 17 and 18
[67] In addition to encouraging CALPA's President to declare a merger pursuant to the Merger Policy, Air Canada's MEC wrote to Air Canada itself and expressed concern about Air Canada's acquisition of the various Connector airlines. Air Canada responded by letter dated May 20, 1987. Its Senior Director of Labour Relations, George Smith, wrote that Air Canada agreed to enter into negotiations with the Association for the purpose of negotiating issues which may be relevant to Air Canada's relationship with Air Ontario, Austin Airways and Air BC. While generally speaking, negotiations are not permitted during the unexpired term of a collective agreement, namely the closed period, Air Canada agreed to enter into negotiations with the Air Canada MEC and CALPA at this time. Pursuant to this re-opener letter, CALPA was entitled to give notice to Air Canada and to negotiate with Air Canada even though the collective agreement was in force.
[68] In December 1987, Air BC and Air Ontario announced their intentions to acquire jet aircraft. Previously within the Air Canada stable of airlines, only Air Canada pilots had flown jets. As mentioned, by December 1987, Air Canada held a majority interest in each of these two companies.
[69] Consistent with the terms of the re-opener letter, in March 1988, the Air Canada MEC formed a special committee to negotiate provisions with Air Canada to protect Air Canada pilots from the transfer of flying to the Connector airlines in which Air Canada held an interest. In an April 7, 1988 Air Canada MEC newsletter, First Officer Merger Representative Chris Pulley wrote of the proposed acquisition of jet aircraft by Air BC and Air Ontario:
… The issue is now, 'what will happen to our careers in the medium term if we don't merge?' The feeder airlines obtaining jet aircraft has put some doubt into the future of Air Canada's domestic short and medium haul operations despite announcements by the company as to how we will not be affected. I suggest that any armchair capitalist in our pilot group should recognize the threat that we now face, absent merger with our feeder carriers.
With the acquisition of jet aircraft by Air Ontario and Air BC, the scope of our pilots affected has widened to include the approximately 400 DC-9 pilots on our list.
[70] Following negotiations between members of the Air Canada MEC and Air Canada management, two agreements entitled Letter of Understanding 17 ("LOU 17") and Letter of Understanding 18 ("LOU 18") were reached. LOUs 17 and 18 were developed to address the problem of the Air Canada pilots' loss of flying to the Connector airlines wholly or partially owned by Air Canada. Each was described as a scope agreement. Such an agreement consisted of a clause in a mainline carrier's collective agreement with its pilots that restricted the number of seats and size of aircraft that affiliated companies could operate. In light of the acquisition of regional carriers by mainline carriers in the airline industry in the 1980s, scope clauses were not unusual in the industry at this time.
[71] LOU 17 restricted the size of aircraft that could be flown by Air Canada's Connector airlines according to weight and seat capacity. The Air Canada MEC and Air Canada agreed that its Connector airlines would not fly aircraft having more than 85 seats. The Connectors were not flying such aircraft at the time. LOU 17 also provided protection for Air Canada pilots against any furlough (i.e., lay-off) that resulted directly from the transfer of flying from Air Canada to a Connector airline owned or controlled by Air Canada.
[72] LOU 18 consisted of a "move-up" provision. A move-up clause described a process whereby pilots from the Connector carriers could get employment at Air Canada. LOU 18 provided that a minimum of 40% of new pilots hired at Air Canada would be from its Connector airlines. While LOU 18 required Air Canada to give preferential hiring opportunities to its regional pilots, it limited the company's obligation to 40% of new pilots hired. Significantly, any Connector pilot hired by Air Canada pursuant to LOU 18 went to the bottom of Air Canada's seniority list and forfeited any seniority accrued at his Connector airline. In contrast to the insulated treatment of the Air Canada pilots on the seniority list, as between pilots at the Connector airlines joining Air Canada's seniority list, LOU 18 contemplated a merged seniority list based on date of hire.
[73] Ron Young worked at CALPA from 1988 to 1995, and became its Senior Director of Industrial Relations. After LOU 17 and 18 had been negotiated but not finalized, he was asked to participate in the meetings with Air Canada, as Air Canada wanted the union to "clear" the LOUs. Mr. Young said to the Air Canada representative that LOU 17 seemed to represent a merger (or words to that effect) and Mr. Young understood the Air Canada representative to concur. On the other hand, Mr. Young was concerned that the LOUs would affect the willingness of the Air Canada pilots to continue with the merger process that was the subject of the 1986 merger declarations. Captain Pat Maloney, the Air Canada MEC Chairman, told Mr. Young that LOU 17 would distance the Air Canada pilots and Air Canada from the effects of a merger. In spite of all of this, LOUs 17 and 18 were "cleared" or agreed to by CALPA.
[74] Under the CALPA Constitution, all collective agreements and letters of understanding had to be signed by the President of CALPA. In 1988, the president of CALPA was Captain Norm Bindon. Initially, he refused to sign LOUs 17 and 18. He was concerned that LOU 17 appeared to negatively impact the career prospects of the Connector pilots. Furthermore, like Mr. Young, he was concerned that LOUs 17 and 18 might affect the Air Canada MEC's willingness to continue with the mergers that had already been declared by CALPA.
[75] President Bindon expressed these concerns at the CALPA Special Board of Directors meeting on July 19, 1988. A vote was held to determine whether LOU 17 only affected the pilots of Air Canada. The Board of Directors, whose representatives outnumbered those from the Air Canada MEC, overwhelmingly voted that LOU 17 affected more than just the Air Canada pilots. The Board determined that no further negotiations were to take place on the LOUs. The Air Canada MEC was most unhappy with this development. In response, it reiterated its support for the LOUs, requested that a Special Convention be held, and threatened to withhold dues from CALPA.
[76] In a July 25, 1988 newsletter sent to Air Canada pilots, Captain Pat Maloney referred to LOUs 17 and 18 as the Air Canada pilot protection plan. He wrote:
It is the position of the Air Canada MEC that the Air Canada pilots, and not the BOD [Board of Directors], should decide if they want this package. Although not spelled out in any CALPA policy, the BOD feels that the above package will jeopardize mergers. I feel the CALPA BOD are incorrect and do not have the right to establish policy on the assumptions that something may or may not happen to mergers as a result of these LOUs.
[77] In a further Air Canada MEC newsletter dated July 29, 1988, Captain Maloney wrote:
It is essential that all pilots understand where we are going at this time. There has been criticism that there is no intention to carry out the merger process with Air Ontario. As an airline working with the CALPA constitution and policy manual, we have an obligation to follow the policy manual. It can be argued that policy is just policy, and can be modified, but it is the MEC's intention to work within the CALPA policy as it is written.
At a recent meeting of the CALPA Board of Directors, it was acknowledged that CALPA Policy assumes that industrial action is necessary to implement our merger policy. Members of the Board have been advised that it is felt Air Canada pilots would not support industrial action to bring anyone onto our list. The MEC position is that the final decision on the implementation of the list will be made by the Air Canada pilots.
It should be noted therefore that at this very early date, members of CALPA's Board including the Air Ontario MEC Chairman, were advised that (1) the Air Canada pilots would not support a strike as a means to effect merger; and (2) the Air Canada pilots would have the final say on implementation of a merged seniority list.
[78] In that same newsletter, First Officer Chris Pulley, who was now the Air Canada MEC Merger Committee Chairman, explained the merger process for the Air Canada pilots. The Merger Representatives would attempt to negotiate a common seniority list failing which mediation and then arbitration would ensue. First Officer Pulley wrote that each side paid for its own legal counsel. He also observed that the decision of the CALPA arbitration board was final and binding on all parties to the arbitration. He described the alternatives available to obtain a common collective agreement in the event that the companies, namely Air Canada and Air Ontario, did not accept the merged list in negotiations with CALPA. The first was to try and get the company to recognize that the airlines should be merged by seeking a common employer application before the CLRB. If successful, Air Canada would be declared to be the common employer of both Air Canada and Air Ontario. He acknowledged that CALPA had been made aware that this option would not be successful. He described the second option as direct negotiation with Air Canada to obtain the common employer recognition. Direct negotiation would permit the use of all normal remedies used to reach a settlement in collective bargaining including industrial action – a strike. He observed that the CALPA policy was an internal policy and not Canadian labour law.
[79] He wrote that, unlike in the U.S. where the union policy stipulated that there had to be a merging of operations before a declaration of merger, the CALPA merger policy did not require a merger of operations beforehand. Rather, the Merger Policy created a merged carrier when the “implementation process” was complete. This would be the first time that an integration of pilot seniority lists would be attempted absent the merging of operations of two carriers. "At present, the carriers remain separate and distinct with arm’s length management, separate employee groups and attached collective bargaining rights." He stated that Air Canada had structured its business relationships with the feeder carriers to ensure that a common employer application would probably not have been successful. He also noted that during recent negotiations with Air Canada, "we learned it was Air Canada's position that they would not merge operations willingly" and that the MEC expected that industrial action would be required to implement the Merger Policy.
[80] Ultimately, the dispute relating to LOUs 17 and 18 was resolved. At the CALPA Board of Directors meeting held in August 1988, the Board passed a motion that the Air Canada MEC did not exceed its jurisdiction in negotiating LOUs 17 and 18 given the newsletter which the Air Canada MEC had published and the agreements between the President and the Air Canada MEC Chairman, which "firmly shared the Air Canada MEC's good faith to proceed with the merger between Air Ontario and Air Canada." Although not identified in the motion, the newsletter reference was to the aforementioned July 29, 1988 newsletter. The same motion called for the President of CALPA to send a disclaimer letter to Air Canada stating that in signing LOUs 17 and 18, CALPA was not to be taken to have abandoned the merger process. Captain Maloney objected to the disclaimer letter being sent but the motion passed nonetheless.
[81] CALPA President Bindon accordingly wrote on November 3, 1988 to the then President and CEO of Air Canada, Mr. Jeanniot, reiterating that it was CALPA's intention to continue to implement its Merger Policy with respect to Air Ontario and Air Canada.
Further Merger Activity
[82] On September 6, 1988, President Bindon wrote to the MEC Chairmen for Air Ontario and Air Canada advising that upon receipt of their individual seniority lists, he would convene a meeting of the Merger Representatives. In addition, on November 1, 1988, Merger Representative Chairman First Officer Pulley wrote to Michael Tritt, Air Canada's Director of Labour Relations for Flight Operations, advising of the merger declaration relating to Air Canada and Air Ontario and requesting more current seniority data on the Air Canada pilots.
[83] In October 1988, Captain Maloney sent an Air Canada MEC newsletter to all Air Canada pilots in which he reviewed the merger process, expressed reservations about the degree of support for merger, and informed pilots that a survey would be conducted to determine the Air Canada pilots' views on merger. Captain Maloney wrote:
In the past, the premise has been that some decision should be made on behalf of the pilots, because it was assumed that the pilots didn't understand the situation and did not know what is best. I do not share that belief. The direction set in 1986 may or may not be the direction you would like to go. There have been insinuations that there is a hidden agenda in the survey. There is no hidden agenda in the survey and the direction given by the Air Canada pilots to the MEC will be followed. I feel that such a vital and controversial issue requires pilot input.
[84] A survey was conducted of the Air Canada pilots and more than one thousand replies were received, representing a 60.6% return. Normally a maximum return expected was 40%. Of those received, 82.2% felt that the merger process should be reversed. 89.9% of Air Canada pilots felt that a merger should only be declared on receipt of a majority vote by Air Canada pilots.
Merger Placed in Abeyance
[85] CALPA held its biennial Convention in Montreal in November 1988. At the Convention itself, the Air Canada MEC delegates asked that the Air Canada/Air Ontario merger be added as an agenda item. There had been no advance warning of this request. At the Convention, the Air Canada MEC delegates then proposed a motion that the merger be placed in abeyance. The Air Ontario delegates were caught by surprise and opposed the motion but they were outvoted. Captain Linthwaite of Air Ontario did not understand why the Air Canada pilots would vote to put merger in abeyance. He felt that Air Ontario was benefiting from Air Canada playing one group of airline pilots off against another. "Things were good for us," Captain Linthwaite said.
[86] The Air Ontario MEC reported to its pilots in its December 22, 1988 newsletter:
It is very clear to us that the Air Canada pilot group would not support industrial action at this time to force the Company to accept any list we negotiated and therefore any merger we might achieve now would be put on the shelf when it reached the implementation stage.
[87] The Air Ontario pilots therefore knew that the Air Canada pilots would not support a strike as a means to effect a merger of seniority lists.
[88] Air Canada learnt of the motion to place the 1986 merger process in abeyance, and George Smith, Senior Director of Labour Relations, wrote on January 4, 1989 that "it has been Air Canada's consistent position that no merger took place between Air Canada and Air Ontario when Air Canada acquired an equity position in Air Ontario."
[89] In November 1989, the Air BC MEC sent out a newsletter stating:
At this time it is probably an understatement to say that none of the MECs involved have an "educated" solid commitment from their pilot groups one way or another. Proper education of the philosophy, implementation and resolve necessary … is the very initial and primary step in gathering a consensus. From personal experience, there is probably not one Chairman or Vice Chairman that does not know some pilots that have a somewhat distorted view of mergers. Let's educate and then let the pilots decide!
CLRB 1989 and 1990 Single Employer Decisions
[90] The International Association of Machinists and Aerospace Workers ("IAM") represented approximately 8,000 ground handling, sales and maintenance employees at Air Canada and at some of the Connector airlines. In 1988, it applied to the CLRB for a declaration that Air Canada, Air Ontario Ltd., Air Nova and Air BC constituted a "single employer" pursuant to s. 35 of Canada Labour Code.
[91] As set out in C.U.P.W. v. SVN Enterprises Ltd.,[^15] a single employer application involves a two-step test. First, the following five objective criteria must be met:
(1) two or more enterprises, i.e., businesses;
(2) under federal jurisdiction;
(3) associated or related;
(4) of which two but not necessarily all are employers; and
(5) the businesses are being operated by employers having common direction or control over them.
[92] Second, the Board must be satisfied that a labour relations purpose would be served by the declaration sought. This is an exercise of the Board's discretion. "When the Board addresses the issue of discretion, the question ceases to be whether common control exists; it becomes whether common control contributes to the erosion of bargaining rights."[^16]
[93] The labour relations purpose associated with a section 35 declaration has been described as follows:[^17]
The purpose of a single employer declaration has traditionally been considered to be remedial in nature. The declaration is designed to prevent the erosion or undermining of bargaining rights or the avoidance of obligations under the Code through corporate restructuring or other business arrangements. The purpose has been expanded somewhat to take into account the benefits to be derived from a rationalization of bargaining units which will promote sound labour relations and prevent or minimize disruption caused by inter-unit or corporate reorganizations. …
On the other hand, section 35 is not intended to be used as a means of enhancing existing bargaining rights … Nor should the Board be persuaded to issue such a declaration where the sole purpose or effect is to strengthen one party's hand or tip the balance of bargaining power in favour of one side or the other.
[94] Additionally, s. 35 may be applied "to restructure bargaining units if such restructuring promotes other valid labour relation objectives."[^18]
[95] Various unions representing different employee groups intervened in IAM's application to the CLRB, including the International Union of Operating Engineers representing Air BC maintenance employees, Canadian Union of Public Employees (Airline Division) representing flight attendants, Canadian Auto Workers representing ground personnel, Canadian Brotherhood of Railway, Transport and General Workers representing Air BC pilots and flight attendants, and the Canadian Air Line Dispatchers' Association representing Air Canada dispatchers. They all opposed the application. CALPA also intervened. It did not support the application. Rather, it adopted a stance that the CLRB characterized as "qualified opposition". At page 6 of the decision, it was noted that "CALPA would not go as far as saying that a declaration pursuant to section 35 would be warranted in the circumstances."
[96] On December 29, 1989, the Board dismissed the application.[^19] It concluded that all five of the aforementioned pre-conditions in the first part of the test had been met, including the existence of common control by Air Canada. In the decision at paragraphs 78 and 79, Vice Chairman Brault wrote, "The activities of Air Ontario, to name one, are monitored with a decisive eye at some level or another by Air Canada… Air Canada's purpose in taking important positions in these Connectors was after all precisely aimed at securing some form of control."
[97] Based on the evidence before it, however, the Board found that the second part of the two-part test had not been met. IAM's bargaining rights had not been negatively affected. The Board held that, "Our finding is not that this could never happen. Had IAM negotiated in good faith with Air Canada some form of job security only to find that Air Canada actually rendered it inoperable by pulling the strings at Air Nova, for instance, then the situation would not be the same."
[98] CALPA itself applied for a declaration that Air Ontario and Air Alliance constituted a single employer and then asked the Board to extend the declaration to include Air Canada. On June 19, 1990, the Board issued a decision dismissing the application, stating amongst other things that there was no labour relations purpose for making a single employer declaration.
November 1989 Special Convention
[99] Although the subject of merger of pilot seniority lists had been put in abeyance at the November 1989 Convention, there continued to be interest in its pursuit.
[100] A Special Convention Assembly was held in November 1989. The Air Ontario delegates moved to add to the agenda a request that the Convention Assembly reconsider the Air Ontario and Air Canada pilot merger for reactivation. The Air Canada and Air Ontario MECs agreed instead to meet to discuss both merger and LOUs 17 and 18 and the motion was withdrawn.
Reactivation of Merger Discussions
[101] On January 11, 1990, the Air Canada and the Air Ontario MECs met. Captain Pat Palmer had replaced Captain Maloney as the Air Canada MEC Chairman, Captain Maloney having completed his two-year term. The Air Canada MEC minutes of the meeting report that it was the opinion of the Air Ontario MEC that, with the right merger educational programme, the idea of a merger would probably be more acceptable to both pilot groups. Captain Palmer advised that the Air Canada MEC did not have an official position on mergers at that time.
[102] In April 1990, the Air Canada MEC reactivated Merger Committees at each base and an MEC Merger Committee was also established.
[103] Air Canada Local Council 11 (Toronto) wrote in its March 1990 newsletter that:
Merger is on the Agenda for the March General Meeting. The Executive of Council 11 require your direction for the April MEC meeting. We are not attempting to reopen the issue. The discussion will be of a philosophical nature to demonstrate that there is consistent direction with this critical issue.
[104] In March 1990, Air Canada Local Council 11 voted against a motion made in favour of pursuing merger. Indeed, the motion was soundly defeated. Kevin Vaillant, an Air Canada pilot and representative Defendant of sub-class 6, spoke out against merger, noting that the risk was not worth it. One could not guarantee the outcome of an arbitration. He felt that he had everything to lose and nothing to gain. Although he had been identified as surplus and expected to be furloughed, he thought that he would eventually be recalled and he wanted to ensure that his seniority at Air Canada would not be adversely affected by a merger of seniority lists.
[105] Ultimately, on September 24, 1990, the Local Council 11 Merger Committee provided an interim report to its LEC stating that the general consensus was to pursue scope enhancement rather than merger.
[106] On September 7, 1990, the Air Canada MEC sent out a newsletter to Air Canada pilots advising that an information package outlining the merger options and scope clause enhancement would be distributed shortly. The newsletter stated:
The MEC needs and wants pilot input into this matter. Make your views known to your LEC, or Merger Committee members. Your opinion is crucial!
[107] The Air Canada Local Council 14 (Montreal) was anti-merger unless Air Canada pilot seniority remained unaffected. Yves Filion, an Air Canada pilot and representative Defendant of sub-class 3, attended Montreal Local Council meetings and consistently voiced his opposition to merger. He opposed merger because he did not feel that merger with the Connectors would solve problems of joint job security. He expected to be furloughed and wanted to be able to resume his career progression using his existing seniority when he was recalled. He had no interest in having access to the flying currently being done by the Connector pilots since he wanted a career as a mainline pilot. He also felt that the Air Canada furloughs had primarily resulted from Air Canada's replacement of its three pilot aircraft with the more efficient two pilot aircraft and not from the transfer of flying to the Connector airlines. He was of the view that it made no sense to try and force a fake merger before there was either a single employer determination or an operational merger.
[108] The Winnipeg Local Council Merger Committee felt that merger was not a possible solution due to a reluctant management and an unwillingness by the Connector MECs to consider anything but an integrated seniority list based on date of hire. It recommended enhancement to LOU 17. No official Merger Committee meeting took place in Vancouver.
[109] As of September 1990, First Officer Pulley's understanding was that the Air Canada MEC was not going to pursue merger until there was a clear direction from the Air Canada pilots one way or the other.
Air Canada Layoffs
[110] Despite the provisions of LOU 17, Air Canada continued to transfer flying from the mainline carrier to its Connector airlines throughout 1989 and 1990. This was described in a March 15, 1990 Air Canada MEC newsletter as a "constant pattern of station closures and route abandonments with corresponding increases in feeder flying." It was evident that LOU 17 was not providing the protection that had been hoped for.
[111] The early 1990s saw a significant global decline in both international and domestic airline traffic. Air Canada was not exempt from this downturn in activity and continued to transfer flying to its Connector airlines where there were better economies of scale – the equipment was smaller and the costs of flying, including pilot costs, were lower.
[112] On October 9, 1990 Air Canada announced massive layoffs affecting more than 3,300 employees. This included approximately 236 Air Canada pilots. There were no corresponding layoffs at the Connector airlines in which Air Canada held an interest.
[113] On October 16, 1990, an Air Canada MEC newsletter set forth a synopsis of the development of the Connector network over the past five years and alternatives available to Air Canada pilots. It stated that, "An industrial merger as contemplated by the CALPA Merger Policy requires the unmitigated resolve of the pilots on both sides of the fence to dictate to management who will operate the combined fleet of equipment and what the working conditions will be." The newsletter described the entire merger process and repeated much of the information contained in the July 1988 newsletter. The newsletter stated:
During negotiations with Air Canada for LOUs 17 and 18, it was recognized that Air Canada would not merge operations willingly. The MEC expects that industrial action may be required to implement the CALPA Merger Policy.
[114] On November 10, 1990, Air Canada MEC Chairman Captain Palmer sent an email to the members of the Air Canada MEC stating that the MEC should demonstrate "leadership" and recommended that the Air Canada MEC direct the CALPA President to declare the merger of Air Canada, Air BC, NWT Air, Air Ontario, Air Alliance and Air Nova. He stated that the message he was getting from Air Canada pilots was that the Air Canada MEC should take a stand. In spite of Captain Maloney's previous message to the Air Canada pilots that their direction to the MEC would be followed, no new poll of the Air Canada pilots was taken to see if their position opposing merger as expressed in the fall of 1988 had changed.
[115] As a member of the Air Canada MEC, First Officer Pulley expressed some concerns. Among other things, he was worried that the MEC was proceeding without pilot direction. On November 15, 1990, Captain Palmer wrote to First Officer Pulley stating:
We probably don't have a clear direction from the pilots on merger/scope/compassionate transfer etc. … if the MEC believes this is the way to go, then let's do it and not keep putting it off hoping that someone or something is going to do it for us. If we're expected to provide leadership to our membership, we must accept the accountability that goes along with it. We must remember, the 236 pilots is only the first wave. The next one, without any economic crisis intervening, will most likely be in 1993 when Air Canada must decide whether to renew its leases on the 25 DC-9's. I bet they won't. That's another 300 pilots surplus. I don't believe there is a right or wrong here. But we must do what we feel is in the best interests of our pilots. And it must be timely.
[116] The Air Canada MEC members decided in favour of pursuing a merger declaration without first polling the Air Canada pilots. This decision would prove to have long-lasting repercussions.
1990 Convention
[117] In November 1990, CALPA held its regular biennial Convention.
[118] Captain Palmer, in his capacity as the Air Canada MEC Chairman, asked Captain Rod Campbell, the Air Ontario MEC Chairman, to meet with him privately in one of the meeting rooms at the conference. Captain Palmer then told Captain Campbell that they were declaring a merger. This was music to Captain Campbell's ears. He testified that "whether we wanted a merger or not, they were going to have a merger." He knew it was the ultimate solution to the problem. Captain Campbell described this meeting as being akin to talking with his father. Captain Palmer was a large man with a very forceful personality. Captain Palmer wanted to proceed with the merger sooner rather than later. Captain Campbell responded that his Air Ontario pilots had been through a lot. The parties had to be deadly serious and prepared to follow through with their commitment. He said they needed a firm commitment before going through with it; otherwise he would not proceed. Captain Palmer gave Captain Campbell his firm 100% that he was committed and that the Air Canada MEC and their pilots were also committed to do this. Captain Campbell testified that he relied on Captain Palmer's commitment.
[119] Captain Steve Linthwaite attended the 1990 Convention as an Air Ontario representative, although he was not a member of the Air Ontario MEC. He was present when Captain Palmer made an impassioned speech favouring merger. He testified that the regionals were very cautious and proceeded with trepidation and that, "We'd seen that movie before." The Air Ontario group of pilots was hesitant and they wanted to ensure a full commitment. Captain Linthwaite's understanding after the Convention was that the Air Canada pilots were committed to merger.
[120] On November 23, 1990, Captain Palmer and the MEC Chairmen from Air Ontario, Air BC and Air Nova signed a letter stating that they "commit to announce the position of their pilot groups with respect to merger on March 1, 1991. It is understood that on this day, March 1, 1991, that one or all MECs may request the President to initiate the merger process as per the CALPA Merger Policy." The purpose of delaying the announced declaration of merger was to allow the pilot groups to go back to their members to educate them on what had transpired. The letter was signed by the MEC Chairmen whose pilots were represented by CALPA at the time (and therefore not Air Alliance and NWT Air). The letter was drafted by Ron Young of CALPA and he witnessed the signatures. It is not disputed that Captain Palmer had the authorization of the Air Canada MEC to sign this letter.
[121] On November 29, 1990, Captain Palmer sent a newsletter to all Air Canada pilots advising them that the Air Canada MEC had decided to commit to a merger with their feeder groups effective March 1, 1991. The letter of commitment dated November 23, 1990 was attached to the newsletter. He wrote that the Air Canada MEC felt there was very little room to renegotiate LOU 17 and that the only alternative was to declare the merger. He wrote:
It is understood by all of us that this decision will not be agreeable to all of you. However, we feel it is incumbent upon us to provide a sense of leadership; to propose a plan for the future which we feel will provide the maximum amount of protection in times of retrenchment and cost cutting. Base meetings with Captain and First Officer Merger Representatives will be provided during the next several weeks to fully discuss all the ramifications of this decision.
[122] He also noted that the 236 pilots who had been identified as surplus would be unaffected.
[123] At Air Canada Local Council 11 (Toronto), the Merger Committee Chairman reported that the reaction to the MEC's decision was a "great deal of anger and frustration at the prospect of a merger." The mood was described as hostile. Kevin Vaillant of the Toronto Local Council recounted that Captain Palmer "took a lot of flack" and said that the surplus Air Canada pilots would be unaffected so as to quell an uprising.
[124] A lot of opposition to the position taken by the Air Canada MEC was voiced at the Montreal base as well.
[125] The Air Ontario MEC also sent out a newsletter reporting on events to its pilots on December 11, 1990 and included a copy of the November 23, 1990 letter.
[126] As mentioned, Captain Palmer's merger declaration statement to Captain Campbell was music to Captain Campbell's ears. A merged list for Air Ontario pilots presented potential opportunities to fly larger planes and to enhance their incomes. Many Connector pilots, including Air Ontario pilots, had applied for jobs at Air Canada in the past and had been unsuccessful.
March 1, 1991 Declaration of Merger
[127] At the request of the MEC Chairmen for Air Canada, Air Ontario, Air Nova, Air BC, Air Alliance and NWT Air, on March 1, 1991, CALPA's then President McInnis declared a merger of the pilot seniority lists in accordance with the CALPA Merger Policy:
I am pleased to advise that according to your unanimous wishes I hereby declare a merger of the affected pilot seniority lists on March 1, 1991 in accordance with CALPA Administrative Policy Manual, Section IV, Subsection A, Mergers.
Further, in order to allow the pilot groups to adequately prepare to become parties to the CALPA Merger Policy, the policy activation date shall be April 15, 1991.
[128] At the time of the declaration, neither Air Alliance nor NWT Air was a CALPA represented airline. CALPA put out a press release on the merger noting that it was agreed that "the 1900 airmen of Air Canada will combine forces with approximately 800 pilots of Air BC, NWT Air, Air Ontario, Air Alliance and Air Nova." In the CALPA press release, Captain Palmer was quoted as saying:
We must be prepared for whatever may happen to all our airlines. The purpose of a merged seniority list is to integrate all of these pilots under one umbrella with the successor airline Air Canada. It only makes good sense, economic sense to have one pilot group managed by Air Canada instead of six different groups being administered by six companies all performing similar tasks.
[129] On March 5, 1991, Captain Campbell notified Air Ontario of the merger declaration. Air Ontario's reply was negative: "The carriers that have been referred to in your letter have not merged and therefore, remain as separate corporate entities. Because we do not acknowledge the merger, we are not agreeable to providing any information for this purpose." According to Captain Robert Saunders, an Air BC pilot and Merger Representative and later a Vice-President of CALPA, Air BC also was not supportive.
[130] Air Canada wrote in August 1991 that it was most concerned.
An examination of possible mechanics of such a merger indicates that there are many potential economic costs to Air Canada in addition to the possible pilot dislocation, especially were the seniority lists to be dovetailed. Air Canada believes the disruption of the merger process, let alone an actual merger, will cause a significant competitive disadvantage. All of this is unacceptable to Air Canada, and as no apparent benefit has been identified by CALPA, Air Canada will not support the merging of seniority lists.
Assessments
[131] CALPA did not pay all expenses associated with the merger process. As a result, the MECs for each airline had to raise funds from their pilots. Monies were deducted from the wages of pilots after an assessment ballot was completed and a majority of each airline's pilots voted in favour of the deduction.
[132] The Air Canada pilots had money deducted from their wages to pay for the cost of merger related expenses. By 1993, the Air Canada pilots had collected approximately $1 million in payroll assessments for merger expenses.
[133] As early as 1989 and prior to Captain Campbell's 1990 meeting with Captain Palmer, money was deducted from the wages of the Air Ontario pilots to pay for merger related expenses. Air Ontario merger related expenses up to November 15, 1995 amounted to $238,000 of which $150,280 relate to the Plaintiffs' claims.
Merger Policy Procedure Followed
[134] On March 28, 1991, CALPA President McInnis convened a meeting of the Merger Representatives from each of the MECs. The purpose of the meeting was to review the Merger Policy. At the meeting, the various stages of the merger process were addressed, including negotiation, mediation, arbitration and implementation. The Merger Representatives were advised that arbitration under the Merger Policy was final and binding. President McInnis urged the Merger Representatives to try to reach a compromise and to avoid arbitration. CALPA would provide for the process in the policy manual and would do all it could to make sure the process was successful; however, it would not guarantee the outcome.
[135] Mr. Young of CALPA addressed the group and spoke on the topic of implementation of a merged seniority list and the obligations contained in the policy manual. He told the meeting that following an agreement, or an arbitration in the absence of agreement, a negotiating committee of all parties would be formed. After reaching a consensus, the committee would make a presentation to Air Canada. The merger process would continue to completion either by implementation through negotiation with Air Canada or by a single employer application to the CLRB under s. 35 of the Canada Labour Code. Although the notes of Air Canada Merger Representative Captain Servos suggest otherwise, there was no agreement or acknowledgment that implementation of the merged seniority list would depend upon whether the Air Canada pilots liked the final list that was produced. Captain Servos was not a witness at the trial. That said, for reasons described subsequently, I conclude that a collective agreement incorporating an integrated seniority list would have to be ratified by the Air Canada pilots.
[136] John Keenan, CALPA's lawyer, told the group that once the matter was placed in the hands of an arbitrator, the decision would be final and binding. Implementation then would be handled by CALPA. All pilot groups would be involved in negotiating with the Company in an attempt to implement the Award. Air BC's Merger Representative, Captain Robert Saunders, testified that the discussion on implementation was that they would try to implement the result but there was no discussion of the details.
[137] Negotiations among the Merger Representatives for the Air Canada, Air Ontario, Air Nova, Air BC, Alliance Airways and NWT Air MECs took place from July 9 to 11, August 20 to 21, October 8 to 9 and November 6 to 7, 1991.
[138] The Connector position on construction of the seniority list was that the lists should be integrated or merged based on a pilot's date of hire by his airline. This was referred to as the "date of hire" position. The Connectors also proposed certain protective clauses or "fences" that would provide protection for Air Canada pilots hired before a certain date but would not encompass all Air Canada pilots on the list.
[139] In contrast, the position of the Air Canada Merger Representatives was that Connector pilots should be added to the bottom of the combined or merged seniority list. This meant that all of the Connector airline pilots would be placed below the most junior of Air Canada pilots on the list. This was referred to as the "end tail" position. The Air Canada Merger Representatives also sought "full flush down", meaning that in the event of a furlough, the most junior Air Canada pilots would be entitled to bid into positions occupied by Connector pilots. Under this arrangement, Connector pilots would bear the brunt of furloughs.
[140] Notes of the negotiations were taken by the various attendees. Air BC's Captain Robert Saunders' notes of the July 10, 1991 meeting record that the Air Canada Merger Representatives had said that:
An arbitrated list is not binding on the company.
i.e. if the Air Canada pilot group is not happy with the list from an arbitration they will probably not make any attempt to implement it.
[141] He did not recall the Air Canada Merger Representatives raising the failure to poll pilots individually as an issue, but on June 20, he contacted Mr. Keenan, CALPA's lawyer, as to whether the list could be challenged. He understood from Mr. Keenan that only the President of CALPA could stop the merger and none of the parties could back out.
[142] In a similar vein Captain Monty Allen, an Air Ontario Merger Representative, recorded that at the meeting of Merger Representatives of August 20 to 21, 1991, Captain Servos, an Air Canada Merger Representative, had said that:
If Air Canada pilots don't like lists then it probably won't be implemented.
Any date-based list will be torpedoed by the Air Canada pilots.
[143] Taylor Sebastian, the First Officer Merger Representative for Air Ontario, attributed such comments to positioning for negotiation purposes.
[144] At the meetings, the Air Canada Merger Representatives advised that they were confident that Air Canada would accept an end tail merger list. Captain Servos maintained that he had a good working relationship with Captain Charlie Simpson, the Vice President of Flight Operations for Air Canada. He told Taylor Sebastian that he would invite Captain Simpson for a barbeque and get the merger done. According to First Officer Sebastian, Captain Servos would use implementation as a threat to try and get the others to agree to an end tail list.
[145] Captain Steeves, an Air Nova Merger Representative, was reported as having said "other mergers forced – this not forced – therefore implementation unlikely." He also was reported to have said that "the likelihood of an arbitrated list being implemented is zero." In addition, Captain Saunders of Air BC recorded "arbitration – at present not worth it – AC pilots hold the hammer." He testified that he understood that the hammer that Air Canada pilots held was the right to vote down a collective agreement. According to Captain Saunders, the Air Canada pilots also comprised two-thirds of the total voting pilot group. He recognized that they had to work with the Air Canada pilots, and without them it would be very, very difficult to implement the list.
[146] The Air Canada Merger Representatives never represented that they would implement the list even if the Air Canada pilots did not like it.
[147] The participants were deadlocked. The Merger Representatives were unable to reach an agreement on a negotiated seniority list.
[148] On November 12, 1991, the Air Ontario Merger Representatives and Captain Campbell wrote to CALPA President McInnis requesting that the President invoke mediation as provided for in CALPA's Merger Policy.
Discussions with Air Canada
[149] In August 1991, George Smith who was, as mentioned, Air Canada's Senior Director of Employee Relations, wrote to Captain Palmer expressing Air Canada's lack of support for a merger of seniority lists.
[150] As also mentioned, in 1991, Michael Tritt was the Director of Labour Relations – Flight Operations at Air Canada. He was responsible for the day to day administration of Air Canada pilot collective agreements on behalf of Air Canada management. He also participated in negotiations with the pilot groups.
[151] On December 2, 1991 he met with Captain Palmer to discuss "seniority merger/CALPA" issues. On December 3, 1991, he did a detailed memo to file on his discussions with Captain Palmer. His memo recorded what the company was prepared to look at including changes to LOUs 17 and 18 and a new LOU 18A and what Captain Palmer had intimated to him might be required.
[152] On December 12, 1991 Mr. Tritt recorded that Captain Palmer advised that the Air Canada MEC would be prepared to look at no new jets at the Connector airlines, a limitation on seats and a list in which all regional pilots would go to the bottom of the current Air Canada seniority list. He had advised Mr. Tritt that he required a quick response as he was being pressured to begin the seniority list mediation process.
[153] On December 20, 1991, Mr. Tritt did another memo to file that reflected his discussions with Captain Palmer concerning the latest "company position relative to the seniority list merger issue". Air Canada was prepared to review a seat limitation of 70 seats for the regionals, 70% of new hires would come from the regionals and regional pilots would be at the bottom of the Air Canada pilot seniority list. In addition, the seniority merger issue would not be an issue in the upcoming 1992 CALPA negotiations. Captain Palmer told Mr. Tritt that he was sure this would not be enough to resolve the issue but he would discuss the offer with his MEC. He did not expect that this would put the merger process into abeyance.
Mediation
[154] CALPA President McInnis appointed Captain Ken Maley as mediator pursuant to the CALPA Merger Policy. He was a past president of CALPA and had been a pilot with Canadian Airlines International Ltd. In a newsletter to the Air Canada pilots dated February 20, 1992, Captain Gary Dean, the new Air Canada MEC Chairman, advised that due to the intractable position of the Connectors and their consistent rejection of objective data, mediation would likely be a fruitless exercise. It is fair to say that the Air Canada MEC position had also remained unchanged since negotiations started in 1991.
[155] Captain Dean had been supportive of a merger, but his support was based on the list being acceptable to Air Canada pilots as their support was required to implement the collective agreement. End tail was therefore the only workable solution in Captain Dean's mind. He repeatedly told Connector representatives, including Captain Campbell, that the list had to be acceptable to his constituents for them to implement it. He felt it was a no-brainer that they could not negotiate something the Air Canada pilots would not accept. Otherwise, the collective agreement would go to a vote and would be voted down. Captain Dean thought that ultimately reason would prevail.
[156] The mediation before Captain Maley commenced on March 4, 1992. That day, the Connector Merger Representatives advanced a tentative proposal in which they would accept an end tail list with certain terms.
[157] The Air Canada Merger Representatives advised the Air Canada MEC of the offer in a telephone conference call. In the call, Captain Dean reported that a meeting was to take place with Captain Simpson, Air Canada's Vice President of Flight Operations, immediately after the call and that he expected there would be a new scope offer made by Air Canada which might include a no jets clause, meaning that only Air Canada would fly jets subject to certain limited exceptions. The notes of the March 4, 1992 conference call state:
To open the discussion further, on the possible offer by the company, Captain Dean asked the MEC members taking part in the call what their response would be if Captain Simpson offered us a deal that we could not refuse. He also stated that if the Air Canada pilots accepted the feeders' offer the door to a scope clause would be closed, and with it, a commitment made to take labour action if necessary to achieve implementation with the company of any merged list.
[158] Captain Dean and members of the Air Canada MEC had a second conference call. The minutes reveal that Captain Dean reported on discussions he had had with Captain Simpson and Barry Corbett, Vice President of Human Relations at Air Canada. From these discussions, it was clear to Captain Dean that Air Canada would fight any sort of merged list whether it be end tail or not. In the conference call, Captain Dean advised the Air Canada MEC members that they had to choose between continuing along the arbitration route and be faced with the possible risks, or use the contract extension issue as a lever with Air Canada management to get "the best deal possible for our pilots with the use of a scope clause."
[159] The consensus of the Air Canada MEC was that scope enhancement was the preferable way to proceed. The reasons given for the MEC's decision were:
the concern over the length of time involved in the arbitration process and the inability to prevent the transfer of more Air Canada flying during this time period.
the unlikelihood of getting Air Canada to implement any kind of merged list and as a consequence of this, the lack of support by Air Canada pilots to take industrial action to achieve this – especially with the economic state of the airline industry at this time.
[160] The implications of this decision for the Air Canada MEC were discussed in the conference call and recorded in a memo:
Could be faced with legal action from other members of the Association, and could also face the possibility of withdrawing from the Association.
[161] Captain Dean advised his MEC that:
… there was nothing to prevent the Air Canada pilots, after having received a Scope Clause from the Company, continuing along the merger route and obtaining a merged list. This list would then be put on the shelf and used only in the event the Company reneged on the Scope Clause Agreement.
[162] The discussions between Captain Dean and Air Canada management and the Air Canada MEC's decision to pursue scope were not communicated to CALPA National or to the Connector MEC Chairmen. The Connector Merger Representatives withdrew their offer of an end tail list with terms at the mediation session held on March 5, 1992. Not surprisingly, the mediation was unsuccessful.
[163] In spite of the Air Canada MEC's decision to pursue scope enhancement with Air Canada, at the CALPA Board of Directors' meeting held June 24, 1992, Captain Dean submitted a written statement in which he advised:
It is the intention at this time of the Air Canada MEC to proceed in accordance with CALPA administrative policy in the merger between Air Canada and Connector airlines.
Continued resolve on the Air Canada MEC part in achieving a completed merger will depend on the demonstration of the Board's responsiveness to our concerns, and our requirement for a fair and just arbitration.
[164] President McInnis invoked arbitration pursuant to the CALPA Merger Policy. The Board of Directors gave the parties until July 31, 1992 to identify a mutually acceptable arbitrator, failing which the President would write to the Federal Government to ask for assistance in the selection of an arbitrator.
Merger Declaration Between the Two Mainline Airlines
[165] In July 1992, news reports surfaced of a potential merger of operations between Air Canada and Canadian Airlines International Ltd., Canada's two principal mainline carriers. In September 1992, the MEC Chairmen of Air Canada and its Connectors jointly requested that their merger process be placed in abeyance pending the outcome of the potential merger between Air Canada and Canadian Airlines International Ltd.. The CALPA President agreed and also agreed not to send the letter to the Government requesting assistance in the selection of an arbitrator. At the Board of Directors meeting held in September 1992, the Air Canada/Connector seniority list merger was placed on hold.
[166] On October 9, 1992, the CALPA President declared a pending merger of seniority lists of the two mainline airlines. After it became clear that Air Canada would not acquire Canadian Airlines International Ltd., he dissolved the declaration of merger on June 24, 1993. In the process, the relationship between the Air Canada MEC and the Canadian Airlines International Ltd. MEC was damaged. To use the description of David Edward, a retired Air Canada captain, the two groups had a confrontational relationship.
1993 Canada Collective Agreement
[167] Hollis Harris was the Chairman, President and CEO of Air Canada from February 1992 to August 1996. Prior to joining Air Canada, Mr. Harris had been President of both Delta Airlines and Continental Airlines in the United States. Indeed, he had spent his entire career in the airline industry.
[168] Captain Dean had a good relationship with him. Mr. Harris had what he called "an open door policy", an approach he had used at Delta and elsewhere. He was willing to talk to all of the Air Canada people no matter which department they were in. Captain Dean spoke or met with him at least twice a month during Captain Dean's tenure as Air Canada MEC Chairman. Captain Dean repeatedly raised with Mr. Harris the transfer of Air Canada flying to the Connector airlines and the effect this had on Air Canada pilots.
[169] In 1993, the collective agreement governing Air Canada and the Air Canada pilots had to be negotiated. On March 4, 1993 Captain Dean and members of the Air Canada MEC met with Mr. Harris and other Air Canada executives at Air Canada's headquarters in Montreal. Air Canada was in dire financial straits and asked the Air Canada pilots to take a five percent rollback in wages as part of a financial restructuring of the airline and as part of the new collective agreement.
[170] One week later, Mr. Dean met with Mr. Harris to discuss the request. Mr. Harris proposed improvements to scope as a means of gaining Air Canada pilot acceptance of the five percent rollback.
[171] Mr. Harris also told Captain Dean that if he would give him a "competitive rate," Mr. Harris could afford to order regional jets to be flown by the Air Canada pilots. The regional jet was a 50 seat aircraft, comparable to the Dash 8s flown by the Connector airlines.
[172] Following this meeting, Captain Dean came into the collective bargaining negotiations and advised that the Air Canada pilots were going to be flying new equipment known as regional jets. Mr. Young of CALPA cautioned Captain Dean that flying the regional jets would have long-term implications for the Air Canada pilots.
[173] For his part, Captain Dean quickly arranged for research to be done and came up with an industry leading pilot rate to fly the regional jets. These rates were comparable to, and in some instances less than, the rates being paid to Connector pilots flying somewhat comparable equipment. Mr. Young advised Captain Dean that there was now an overlap in the flying and rates of pay between the Air Canada pilots and the Connector pilots. He warned Captain Dean that with the agreement with Air Canada regarding the regional jets, Captain Dean had just lost the merger arbitration with the Connectors. Even though only Air BC and Air Nova flew jets, Mr. Young was of the view that flying these small regional jets would put the Air Canada pilots in the same business as the Connectors and this would constitute evidence of integration of the operations. Mr. Young also told Captain Dean that this might result in a recall of some Air Canada pilots on furlough sooner rather than later. Mr. Young understood that Captain Dean was doing this so as to bring the furloughed pilots back to work. The proposed rates of pay for the regional jets were negotiated into the 1993 Air Canada pilots' collective agreement by CALPA. As part of the collective bargaining negotiations, Air Canada agreed to further restrict the size and weight of aircraft that could be flown by its Connector airlines and to also give the Air Canada pilots a no jets clause. The 1993 collective agreement governing Air Canada and its pilots ultimately included a reduction in the size of the aircraft that could be flown by the Connectors from 85 seats to 70 seats. It also provided that save for any existing jet aircraft then being flown by Air BC and Air Nova, the Connector airlines in the Air Canada family would not fly jets. As such, Air Canada would fly jets and the Connector airlines would be restricted to propeller planes.
[174] The 1993 collective agreement was ratified by a vote by the Air Canada pilots. In the September 1, 1993 Air Canada MEC newsletter, Captain Dean wrote:
With the recently settled Air Canada contract including a more restrictive Scope Agreement, and the corporation's intent to order Regional Jet aircraft for the Air Canada fleet, it is clear that Air Canada pilots are now active players in the Connector business.
Our collective interests as airline professionals can be realized best through a merger of our respective groups. In retrospect, the last few years have indicated consistently to all parties that common representation and a single seniority list is an appropriate and self-serving goal.
[175] He went on to write that he was optimistic that the next few months would produce a fair and agreeable common seniority list.
Air Canada and NWT Air Merger Agreement
[176] NWT Air was a small regional airline. It had only two or three airplanes and a dozen or so pilots. In May 1993, the Merger Representatives of the MECs of Air Canada and NWT Air reached an agreement on how their two seniority lists should be merged. The merged list was a dovetailed list with the NWT Air pilots being interwoven among the Air Canada pilots based on date of hire. It was therefore not an end tail list. The agreement and the merged list were approved by the Air Canada MEC but were not subject to ratification by the Air Canada pilots. CALPA's President McInnis formally accepted the Air Canada/NWT Air merger agreement on May 13, 1993.
[177] The Air Canada MEC attempted to negotiate this agreed list into the 1993 Air Canada collective agreement, but Air Canada refused to agree. Mr. Harris was the Air Canada CEO at this time. He directed his management team to reject the merged list even though NWT Air had only a few airplanes and pilots and even though the Air Canada MEC wanted to implement the list. Mr. Harris' rejection of this merged list was consistent with his general opposition to a single seniority list for any of the Connector pilots and the mainline Air Canada pilots. It should be noted that as early as 1993, Air Canada was looking to divest itself of NWT Air.
[178] On August 10, 1993, CALPA filed an application for a single employer declaration pursuant to s. 35 of the Canada Labour Code with the CLRB with respect to Air Canada and NWT Air. The Air Canada MEC supported the application and Captain Dean was of the view that it would be successful. In March 1994, at the instance of the Air Canada MEC, the application was postponed indefinitely.
Reactivation of Merger Efforts
[179] The Air Canada and Canadian Airlines International Ltd. merger having been dissolved, on August 13, 1993, President McInnis reactivated the merger discussions between the Air Canada MEC and the Connector MECs. The MEC Chairmen agreed to a further period of negotiation to try and reach agreement on a merged seniority list.
[180] To assist with the negotiations, Captain Maley was again appointed as mediator and the mediation took place in October and November 1993. This time, the Air Canada Merger Representatives offered to have 90 Connector pilots dovetail on to the Air Canada pilots' seniority list, provided that the rest of the list would be end tail. First Officer Pulley advised that the list would not be implemented if the Air Canada pilots did not like it, but Captain Saunders thought this was just posturing. The Connectors stuck to their date of hire position. Again, no agreement was reached.
[181] On November 15, 1993, President McInnis wrote to the Federal Government, this time requesting assistance in designating a single arbitrator to handle the arbitration under the CALPA Merger Policy.
[182] Captain Dean knew that if the merger negotiations proved unsuccessful, the next step in the merger process was arbitration. Kent Hardisty, the Air BC MEC Chairman, reported to his MEC that Captain Dean had made it clear that the Air Canada MEC would attempt to delay an arbitration that was not equitable to the Air Canada pilots and therefore unimplementable.
[183] Captain Dean had concerns about the arbitration process. There was a risk that the Air Canada pilots could lose and end up with a dovetailed list rather than an end tail list. On October 16, 1993, he wrote to his MEC to advise that "alarm bells" should be ringing and that under the constitutional policy, Air Ontario could insist on arbitration regardless of the Air Canada MEC's position. "An arbitrated list (favourable to Air Canada or not) can provide Air Ontario with needed support before the CLRB for their sole application for common employer."
[184] In the Air Canada MEC newsletter of December 15, 1993, Captain Dean reported to the Air Canada pilots on roadshow briefings on the activities of the MEC over the past two years. He stated that the outgoing MEC was unanimous in its desire to achieve a beneficial Connector merger agreement for Air Canada pilots but noted that the Air Canada pilots were divided in their approach to merger: a) some furloughed pilots opposed the merger and preferred to rely on the new scope provisions negotiated in 1993; b) the new junior group of Air Canada pilots were adamant that a merger be achieved as soon as possible; and c) the third group was comprised of pilots senior enough not to be concerned one way or the other but who recognized that the current layoffs would have largely been avoided had an earlier merger occurred. He also wrote that the Air Canada pilots were facing a wasteful arbitrated settlement because any unsuitable list would not have pilot support and would not be implemented.
[185] By December 1993, Captain Dean was receiving daily if not weekly communications on merger from Air Canada pilots. Of those who contacted him, he estimated that about 90% were against merger.
[186] In late January 1994, Michel Picher was appointed as the arbitrator. He was a very experienced arbitrator. On February 15, 1994, he established hearing dates of June 21 and September 7 to 9, 1994.
Motion to Delay, Postpone or Cancel Merger
[187] In February 1994, Captain Dean and First Officer Pulley wrote another newsletter that described the history that gave rise to the merger, the negotiations and the positions taken. The newsletter noted that the intent to merge was declared at Convention in 1990. It was a collective statement to Air Canada that the pilots were tired of one group of pilots being played off against another. In the newsletter, Captain Dean wrote that the MEC supported the move to arbitration to resolve the seniority dispute, stating that, "The concept that we have been trying to negotiate with the Connectors is similar to that of insurance."
[188] The newsletter solicited feedback from the Air Canada pilots as the Merger Representatives and Merger Committee were preparing for the arbitration.
[189] There was some unrest amongst the Air Canada MEC members. On February 6, 1994, Captain George Cockburn, the newly-elected Air Canada LEC Chairman from Montreal, wrote to the Air Canada MEC members that he was opposed to any Connector merger including an end tail list, and suggested a move to cancel LOU 18 immediately. In an email dated December 7, 1994, he suggested that Captain Dean feel out Mr. Harris as to what the company's reaction would be if CALPA's position on the subject of Connector merger were to change. He wrote, "Could we expect support against the hostile merger in the form of an attempt to declare common employer status by the Connector carriers?"
[190] On March 2, 1994, Captain Dean met with Mr. Harris. Captain Dean’s minutes record that Mr. Harris:
clearly and emphatically indicated that it would not be financially feasible to retain connectors if ‘National CALPA’ and ‘other groups’ proceeded in seniority integrations/common employer. Does not see this as an AC pilot objective. Sought rationale why we were proceeding in this fashion. Offered alternatives without re-opening contract. Understands that the AC MEC considers current arrangements as common employer.
[191] Captain Dean wrote a memo to the Air Canada MEC in which he sought input and advised that, "We must take immediate action to avoid the impending arbitration of the seniority list."
[192] Although Captain Dean had been a supporter of the philosophy of merger, he felt that the Air Canada MEC lacked membership motivation to complete the process. It was impossible to proceed with a merger that its constituency did not favour. Captain Dean testified that he had a belief that he had a moral and legal duty to represent his member pilots. In the Christmas 1993 to March 1994 timeframe, he concluded that the Air Canada MEC should not pursue merger. He had thought that the Connectors would come to an understanding of the Air Canada MEC's end tail position but they had not.
[193] He wrote to President McInnis to request an emergency meeting of all MEC Chairmen who were party to the Air Canada/Connector merger although he did not identify the purpose of the proposed meeting. President McInnis obliged and on March 3, 1994, he wrote to the Connector MEC Chairmen requesting their attendance at an emergency meeting on March 10, 1994. Captain Campbell asked President McInnis to obtain details from Captain Dean as to what he wished to discuss. Captain Dean responded to President McInnis on March 7, 1994, stating:
As much as it would be of assistance to Captain Campbell to be aware of the specific details of the upcoming MEC chairmen's meeting, I will not be aware of these myself until immediately prior. Nevertheless, it will be of great interest to all, I am sure, to discuss the current state of affairs regarding the Air Canada MEC's direction concerning the merger process.
[194] On March 10, 1994, prior to the CALPA emergency meeting, the Air Canada MEC met and passed a unanimous motion to "pursue a course of discovery to find means to postpone, delay or cancel the proposed merger of the Air Canada and Air Canada Connector pilot seniority list." The motion referred to "a strong, negative reaction by Air Canada pilots" to the proposed merger. In the same meeting, the Air Canada MEC decided to conduct a comprehensive evaluation of the available options under the CALPA Constitution and to do a poll of active Air Canada pilots and of those on furlough. A significant majority of both groups supported the motion to postpone, delay or cancel the proposed merger.
[195] Later, at the meeting with the Connector MEC Chairmen, the Air Canada MEC advised of the Air Canada MEC decision taken earlier that day and proceeded to ask President McInnis to dissolve the merger. Captain Campbell was shocked and furious. He said it was not the time to get cold feet. President McInnis refused to dissolve the merger. The minutes record the CALPA President's reaction:
Captain McInnis explained what his responsibilities were re: merger. He stressed that CALPA does not guarantee the results of a merger but merely the process, and that the process is very important. For clarification, Captain McInnis stated that in his opinion the President does not have the power to dissolve a merger, and explained his interpretation of the clause that was changed in the Merger Policy, which has led people to assume that he can. Captain McInnis added that whether or not to merge is the MECs' decision not his, but in his opinion not a lot has changed since the decision was originally made to enter into this merger.
[196] On March 11, 1994, Captain Dean wrote to John Keenan, legal counsel to CALPA, to obtain advice on, amongst other things, pursuing the motion to postpone, delay or cancel the proposed merger; the constitutional or legal requirements of the Air Canada MEC to represent its members in the face of "perceived disagreeable Constitutional or Administrative Merger Policy"; and the liability of Air Canada MEC members to CALPA misdemeanour charges.
[197] Mr. Keenan responded by stating that the objectives of the Air Canada MEC motion were not in themselves objectionable, assuming the means were lawful "bearing in mind your obligations to your members under the Constitution." He advised Captain Dean that the decisions of an MEC in respect of merger would not override the Board. The LECs and the MEC had to represent the opinions and direction of their members forcefully and ably vis-à-vis the President and if necessary, the Board of Directors, in order to convince them to delay the merger timetable. If the President refused to delay the merger timetable, the MEC Chairman would have carried out all of his Constitutional obligations on behalf of his members. What else could be done involved ethical or policy decisions that were beyond the realm of the advice Mr. Keenan was providing. On the issue of exposure to misdemeanour charges, if individual members alleged inadequate representation, he advised that the MEC had an obligation to represent the views of Local Council and the Air Canada MEC Chairman had an obligation to represent the views of his MEC at a Board meeting. But if unsuccessful, certain actions by the MEC and its Chairman could be in violation of the Constitution.
[198] No disciplinary charges under CALPA's Constitution and Administrative Policy were ever laid against the Air Canada MEC.
Further Discussions with Air Canada Management
[199] Meanwhile, Captain Dean continued to pursue his direct discussions with Air Canada management. On March 15, 1994, Captain Dean wrote to Captain Wayne McLellan, Vice President of Flight Operations at Air Canada, setting out an agenda for a meeting to be held on March 16, 1994. The agenda proposed by Captain Dean included discussion of Air Canada MEC's internal CALPA merger activity. Captain Dean subsequently advised Captain McLellan of the Air Canada MEC's desire to discontinue the CALPA merger process.
[200] On April 21, 1994, Captain Dean and First Officer Pulley met with J.J. Bourgeault, Air Canada's Chief Operating Officer. From that meeting, they understood Mr. Bourgeault to indicate that Air Canada was a common employer given the decision of the CLRB on the IAM common employer application and that Air Canada did not accept CALPA's concept of a merger of operations because of the impact that such a merger would have on other unions such as the IAM and CAW. First Officer Pulley testified that Mr. Bourgeault indicated that if it were the pilots alone, Air Canada would be fine and that they were planning some backroom consolidation. Mr. Bourgeault was not called as a witness so no explanation or interpretation of what he meant by these comments attributed to him was offered in evidence.
Postponement of Arbitration Dates
[201] In May 1994, Captain Dean again asked President McInnis to cancel the merger given that the Air Canada MEC did not wish to continue with the process. He also asked that the arbitration dates be cancelled or postponed. On May 19, 1994, President McInnis indicated that he had decided to postpone the June and September arbitration dates until after the November 1994 Convention. Captain McInnis indicated that he had changed his mind "based on reduced support".
[202] His decision was reversed by the Board of Directors at their meeting on June 15 and 16, 1994. Canadian Airlines International Ltd. MEC Chair, Captain John Dunlop, moved the motion overturning the President's decision and it was seconded by Captain Campbell. A majority of the directors voting were from Canadian Airlines International Ltd. and airlines other than Air Canada.
[203] In an email dated June 17, 1994, Captain Dunlop wrote to Captain Dean:
Notwithstanding the Air Canada MEC's on again, off again commitment to a merger and current assertion that there is now no Air Canada membership support for merger with your Connector pilots, failing a change of circumstance, you are morally and constitutionally committed to lie in the bed your pilots have made for themselves. Notwithstanding your current mandate which mitigates against CLRB or industrial action to force a common collective agreement on your employer, your MEC has, by its previous agreement, committed itself to a merger of seniority lists and the subsequent negotiation of a common collective agreement. To accept any other interpretation makes a mockery of CALPA, its constitution and its Merger Policy. From where I sit, it seems to me you are determined to prove to all that "the rule of might makes Air Canada right."
[204] Captain Dean resigned as MEC Chairman in September 1994 and was replaced by Chris Pulley. Mr. Pulley was the first First Officer to ever become Chairman of the Air Canada MEC.
Commencement of Arbitration
[205] The June arbitration dates had been lost, however, and new dates were set for September 8 and December 17 to 21, 1994.
[206] The arbitration before Mr. Picher commenced on September 8, 1994. The Air Canada MEC raised some preliminary objections. It submitted that:
• the decision of the Board of Directors to overrule the decision of CALPA President McInnis to suspend the arbitration was beyond its jurisdiction;
• Mr. Picher was without jurisdiction to arbitrate the merger of seniority lists because there had been no operational merger of Air Canada and the Connectors; and
• the lack of any operational merger justified a postponement until such time as an operational merger was imminent due to problems of implementation of any merged list.
[207] On September 22, 1994 Mr. Picher rejected the Air Canada MEC's preliminary objections. He determined that he had no jurisdiction to review the Board of Directors' decision or the CALPA President's declaration of merger. The Board of Arbitration was not the arbiter of the internal procedures and workings of the Association. A democratic trade union was by nature a highly political body, and interpretation of its Constitution and policy manuals properly resided in the Convention Assembly. He went on to indicate that if he had jurisdiction to review the President's declaration of merger, he would conclude that Captain McInnis did not err in declaring a merger in circumstances where there was no operational merger. The Merger Policy intended a broad, purposive approach to the definition of what might constitute a merger or consolidation. He also ruled that it was unnecessary to obtain the employers' acceptance to be bound by a merged list in advance of the arbitration. Difficulties associated with implementation of the merged list did not constitute reason to adjourn the proceeding. He noted that to do so would provide a veto of the process to the employer. The process of meaningful negotiation with the employer or employers occurred only after the issue of the merged seniority list had been resolved internally by CALPA.
[208] The arbitration was set to resume in December 1994.
LOU 17 Grievance
[209] The furloughs announced by Air Canada in October, 1990 commenced in 1993. CALPA grieved the furlough of Air Canada pilots as constituting a contravention of LOU 17. CALPA stated that the furloughs were the direct result of the transfer of flying by Air Canada to its Connector airlines contrary to the provisions of LOU 17. Air Canada rejected the grievance and the Board of Directors of CALPA approved proceeding to arbitration.
[210] The LOU 17 grievance asked, amongst other things, that the routes transferred to the Connector airlines be restored to the Air Canada pilots. The Air Ontario and Air Alliance MECs sought to intervene in the arbitration even though the grievance arose under the Air Canada collective agreement. Their position was that the relief requested would have an impact on the Connector pilots who were flying the affected routes. Intervenor status was granted as requested in June 1994.
Developments at Air Canada
[211] On August 22, 1994, Captain McLellan wrote to Captain Dean and advised that Air Canada anticipated recalling some of the furloughed pilots because the regional jets Air Canada had ordered had begun to arrive. He indicated that the company anticipated recalls of approximately 10 pilots per month starting in January 1995 although the pace could accelerate.
[212] By early 1995, Air Canada was ready to embark on a significant expansion of its pilot ranks. All of the furloughed pilots were being recalled and the company anticipated hiring many new pilots. They were to be hired directly and exclusively from the ranks of the Connector airlines as provided for in LOU 18. Captain McLellan arranged for a notice to be posted in crew rooms to encourage Connector pilots to apply for these new positions. CALPA's new President, Captain Laing, wrote to Captain McLellan on March 15, 1995 reminding him of the merger declaration and the hearing before Mr. Picher.
[213] Change was occurring in the airline industry. In February 1995, the Governments of Canada and the United States entered into an Open Skies Agreement similar to an agreement that had existed between the United States and Europe for a number of years. The Agreement was intended to allow Canadian and American airlines to fly into new destinations in the United States and Canada on a more frequent basis. Ever since he had joined Air Canada, Mr. Harris had been a keen supporter of an Open Skies Agreement. He recognized the opportunity that Open Skies provided to Air Canada to increase its transborder flying.
[214] Prior to the Open Skies Agreement, Canadian and American carriers were restricted in the amount of flying that could be done in each other’s country. These restrictions limited the number of available destinations for Canadian carriers into the United States and the number of flights that could be flown. Furthermore, the airlines were limited to certain city pairings. Approximately 80% of the flying into Canada went to a small number of urban destinations: Montreal, Toronto, Winnipeg, Calgary and Vancouver.
[215] The Open Skies Agreement contained time-limited transitional protections that favoured Canadian carriers. These protections prevented American carriers from increasing the volume of flights to Montreal and Vancouver until 1996 and until 1997 for flights to and from Toronto. This protection enabled Canadian carriers to take advantage of the Open Skies Agreement without fear of competition from their larger American counterparts.
[216] Air Canada changed its fleet configuration by acquiring new aircraft including the regional jets which permitted routes to be serviced by larger aircraft at peak times and by the smaller regional jet at non-peak times. In addition, Air Canada moved away from a hub and spoke network to point-to-point service. As explained by the Plaintiffs' expert, Dr. D'Cruz, whose evidence I will discuss in more detail subsequently, with a hub and spoke configuration, carriers have large urban centres such as New York City or Toronto, known as hubs, to which large planes may be flown. Smaller planes then take customers to smaller destinations, known as spokes. The flight was therefore multi-legged. With a point-to-point configuration, as its description implies, a passenger travels directly from one city of origin to another destination. This was more desirable for passengers, and especially for business and leisure travellers. It permitted passengers to fly directly from their Canadian base to their ultimate destination without the inconvenience of layovers and switching aircraft. Air Canada was able to offer this service with little competition from Canadian Airlines International Ltd., which at the time was saddled with an enormous debt load and aging aircraft.
[217] In 1993, Air Canada ordered 24 regional jets with an option for 24 more, some of which were intended to service the transborder market under the Open Skies Agreement. They were acquired by Air Canada at a cost of $16 million per airplane and therefore represented an initial investment of $384 million. The regional jet began to appear as part of the Air Canada fleet in the latter part of 1994 and increased its presence in 1995 as the order was completed. According to the Plaintiffs' expert, Dr. D'Cruz, Air Canada's strategic planning in 1994 to 1996 was focused on taking advantage of the Open Skies opportunities and in his opinion, it would have been disastrous to that strategic plan if Air Canada had been faced with a disruption of service resulting from pilot industrial action or, in other words, a pilot strike. He stated that it would have been "suicidal" for Air Canada to face a pilot strike in 1995. Mr. Harris also admitted in cross-examination that a pilot strike in 1995 would have had a significant financial impact on Air Canada. As will be discussed subsequently, however, any strike would have been shortlived.
November 1994 Convention
[218] In November 1994, CALPA had its regular biennial Convention. The Air Canada MEC did not seek to place the merger in abeyance or to cancel it nor did it seek to amend or alter the Merger Policy. In addition, it did not appeal the Board of Directors' decision which overruled President McInnis' decision to delay the merger process. This may have been because the Air Canada pilot representatives would have been outvoted.
December 1994 Arbitration
[219] The arbitration was held on December 17 to 21, 1994 before Mr. Picher. Mr. Picher suggested that Air Canada be invited to send representatives to the hearing as observers but the Air Canada MEC rejected this proposal. Its counsel, Mr. Katz, wrote:
… we submit with all due respect that the implementation of the Award should be dealt with in accordance with the CALPA Merger Policy and that attendance of an employer representative at the arbitration hearings would impede CALPA's ability to secure implementation of the Award and impair CALPA's negotiating position on any number of other matters as well.
CALPA Merger Policy, like that of the Airline Pilots' Association in the United States, reflects the judgment of several generations of pilot union leaders as to the manner in which most effectively to represent affected pilots in connection with airline mergers. Their judgment is that implementation can be more constructively dealt with by a unified pilot group subsequent to the completion of the sometime contentious seniority integration arbitration proceedings.
[220] The Air Canada and Connector MECs participated fully in the arbitration and were represented by experienced counsel. Again, the Air Canada MEC advanced an end tail or bottom of the list approach to seniority list merger. They were asked by Mr. Picher to consider submitting a compromise position but declined to do so.
[221] The Connector MECs advanced a date of hire approach to seniority list merger. One of the reasons the Connector pilots wanted a seniority list based on date of hire was that they would be protected in the event of any subsequent mergers.
[222] They too were asked by Mr. Picher to consider submitting a compromise position. In response, their position was to incorporate a "top blocker" on the seniority list and only dovetail the bottom 15% of the Air Canada seniority list. Air Canada's P. J. O'Hara would serve as the top blocker. Air Ontario pilots would therefore only bid below him for seniority relating to base, equipment and status.
[223] On March 18, 1995, CALPA President Laing sent an email in anticipation of the release of Mr. Picher's Award. He stated that his office was "fully committed to delivering this merger. There is absolutely no room for second thoughts nor cold feet." He anticipated opposition from "the manipulations of a vocal minority" and "parochial interests". As for the merger, he stated, "I will not tolerate a challenge to its legitimacy."
[224] On March 23, 1995, Air Canada MEC Chairman Pulley wrote to his MEC commenting on the economics associated with the Connectors’ business and the need for the Air Canada MEC to negotiate with the Connectors. He wrote on the subject of a common employer declaration: "In the long run---all a Common Employer Filing does is force the employer to bargain. The IAMAW proved that Air Canada is a Common Employer. The CLRB did not make the declaration because the collective bargaining rights of the IAMAW had not been eroded. Neither have ours---to date. …In as much as taking direction from our pilots is concerned---we made their pitch before Mr. Picher. As officials of the Association---we have no alternative but to support the policies of the union that we have all agreed upon."
March 28, 1995 Picher Award
[225] On March 28, 1995, Mr. Picher released his Award (the "Award") and gave detailed reasons for his decision. He noted that Air Canada was the one controlling employer and in the interests of CALPA and all its members, a single seniority list was essential. It had to be fair though. His decision contemplated two lists: one for seniority and another for bidding on base, equipment and status. He concluded that at the junior end of the Air Canada operation, a meaningful segment of work was comparable to that of the Connectors, as were wages. LOU 17 was evidence of that overlap. He directed that the integrated seniority list be based on date of hire; however P.J. O'Hara, an Air Canada pilot, would act as a "top blocker" for bidding on base, equipment, and status. This meant that Connector pilots senior to P.J. O'Hara would be treated as immediately junior to him for bidding purposes. For integration purposes, the dates of hire for the pilots in all groups were to be the dates settled between the MECs during the merger process or as may be determined by the arbitrator.
[226] In his reasons, Mr. Picher indicated that roughly 85% of all Air Canada pilots would be unaffected by the merger of seniority lists for the purposes of bidding on base, equipment and status. Only the most junior 249 pilots (or 15%), 243 of whom were presently furloughed, would be affected for bidding on base, equipment and status, and even those pilots would have a significant number of Connector pilots junior to them on the bidding list. Moreover, these pilots would be protected by the no-flush/no-bump provision on their return from furlough. This meant that the most junior Air Canada pilots could not be displaced from their current equipment, base or status by Connector pilots who were above them on the bidding list. Only 60 Connector pilots were senior to P. J. O'Hara but as a result of the top blocker provision in the Award, they could not bid against Air Canada pilots above O'Hara for base, status or equipment. All Connector pilots would bid below P.J. O'Hara. This was the so-called "fence."
[227] The Award did not contain a merged list with seniority dates, but invited the parties to try and fashion two lists. One list was to be used only for seniority and the other for "equipment bidding". The arbitrator reserved jurisdiction to resolve any dispute that might arise.
Air Canada acts, quite properly, in its own best interests and its continued success is much to be desired. However, the abiding reality which every pilot must understand when thinking about this merger is that there is but one Company, there is but one employer. A failure of Air Canada pilots to understand and appreciate that reality will result in everyone paying a great price. The lessons of the furlough and of the regional jet rates should not be forgotten. A single seniority list, supported by all pilots, is the best, perhaps the only, long-term protection against the pattern of divide and conquer that has marked the past.[^20]
[228] Mr. Picher's decision was silent with respect to bidding on schedules and vacation. A reader of the Award might have thought that seniority would govern the monthly bidding for schedules. As stated by the Plaintiffs, the Award did "leave open the possibility that a Connector pilot could bid into a vacancy and thereafter exercise his earlier seniority date to outbid Air Canada pilots for schedule and vacation."[^21] This was subsequently clarified in Mr. Picher's November 7, 1995 supplementary award in which he stated that it was his intention that the Air Canada pilots above P.J. O'Hara would be unaffected for all bidding purposes including scheduling.
[229] Mr. Picher cautioned the Air Canada pilots to be mindful of the circumstances that gave rise to the declaration of merger in the first place and the prospect that such conditions could arise again in the future. He urged the Air Canada pilots to see the fairness with which the Award was constructed rather than focusing on the fact that a small percentage of Air Canada pilots would be affected. He wrote:
There is no reason to believe that the implementation of the merged seniority list which will result from this award, based on a final compromise proposal, will encounter any difficulty if it has the understanding and support of the Air Canada pilots.[^22]
[230] He wrote that Air Canada pilots would misconceive the process if they were to view the Award as a loss to them.
Air Canada Pilot Reaction to the March 28, 1995 Award
[231] The Air Canada pilots did view the Award as a loss to them. On April 3, 1995, First Officer Pulley wrote to President Laing stating that the Air Canada MEC found Mr. Picher's Award and decision to be unacceptable. Two days later, he wrote again this time asking President Laing to defer acceptance of Mr. Picher's Award so as to obtain clarification on the meaning of the Award. He wrote, "We submit that formal acceptance of the Award by you without the requested review may create insurmountable problems for all parties concerned."
[232] Unfortunately, President Laing rejected that request and on April 5, he purported to formally accept Mr. Picher's decision, although as there was no list yet, there could be no acceptance as contemplated by the wording of the Merger Policy. That acceptance was communicated to all of the MEC Chairmen of the affected airlines.
[233] On April 27, 1995, Koskie & Minsky LLP, acting on behalf of the Air Canada MEC, sent a letter to Mr. Picher requesting an explanation of twelve separate issues.
[234] On April 5, 1995, while away on holidays, Air Canada MEC Chairman Pulley issued a newsletter putting into question the legitimacy of the merger process and stating that Mr. Picher had irreparably altered the career of every Air Canada pilot. "Never in the history of Air Canada has there been a group of pilots who have been so devastatingly affected by their employer and their professional association." The newsletter noted First Officer Pulley's responsibility "to represent the best interests of ALL Air Canada pilots" and invited the membership to "work within our organization to find solutions that will meet our collective goals."
[235] The Air Canada pilots did not respond positively to these developments. On April 5, 1995, an Air Canada Council 14 (Montreal) meeting was held. At that meeting, as at Toronto and Winnipeg, motions were passed directing that the Air Canada MEC reject the Picher Award. In addition, Montreal passed a unanimous motion that: the MEC refuse to negotiate any agreement with Air Canada that would result in any Air Canada pilot on the current seniority list being junior to any regional pilot; the MEC commit that any proposed changes to the Air Canada pilots' collective agreement dealing with the merger issue be subject to ratification by Air Canada's general pilot membership; the MEC appoint a Seniority Protection Committee for the purpose of exploring any and all means to nullify the Picher Award; and the LEC recognize a local Seniority Protection Committee as a duly appointed Council 14 LEC Committee. The Montreal Council 14 motion therefore called for the establishment of Seniority Protection Committees both at the Montreal base and at the MEC level.
[236] A Montreal-based committee was established but no such committee was ever established at the MEC level. The Montreal Committee drafted a "Declaration of Solidarity" petition and proceeded to collect pilot signatures. The petition stated:
We the pilots of Air Canada are united in our complete rejection of the Picher Award. Access to the Air Canada pilots' System Seniority List dated 01 January 1995 will continue as in the past, from the bottom of the list.
[237] Based on the Committee's tally, 77.4% of the Air Canada pilots in the bargaining unit (1269 out of 1639) signed the petition. The authenticity of the signatures on the Declaration could not be verified. For instance, some names appeared twice. The signed Declaration was ultimately presented to Mr. Harris.
[238] As mentioned, Captain Kevin Vaillant is the representative Defendant of sub-class 6. He had commenced working for Air Canada in May 1988 at which time he joined CALPA. At that time, he had no recollection of anything being said about the Merger Policy or that he would be personally bound by the Constitution or CALPA's policies. He considered CALPA to be a service organization in a sense. He first read the Merger Policy in 1991 at the time of the merger declaration. He first heard of the theory that he had violated the Constitution in 1997 when this lawsuit was filed.
[239] He was one of the 240 Air Canada pilots who were laid off in May 1993 and recalled in the spring of 1995. At that time, he was a First Officer. While on furlough, he earned no income from Air Canada and had no financial assistance from CALPA. He became an inactive CALPA member. At the time he had two children, ages ten and seven. Being on furlough, he retained a spot on the Air Canada seniority list. The value of this to him was that he would get a first right of recall and could pick up his career and continue with his advancement. He testified, and I accept, that he did not wish something adverse for the Connector pilots. They could apply to Air Canada but they just could not have his career. Captain Vaillant did not want First Officer Pulley to participate in the list construction meetings. He also testified that he wanted Mr. Harris to refuse to accept or negotiate the Picher Award. He did not want the Connector pilots to get what they might have gotten under the Picher Award. This sentiment was in the context of Captain Vaillant's desire to protect his job.
[240] Captain Vaillant was unhappy with the Picher Award and advised Mr. Harris of his discontent by letter dated March 30, 1995. He also signed the Declaration of Solidarity understanding that the signatures would go to the Air Canada MEC. No one from CALPA ever told him he was breaking any CALPA rules by signing the Declaration.
[241] The purpose of the poll to postpone or cancel the merger was so that it could be taken to the CALPA Board of Directors so that the merger process could be stopped. The rejection of the poll by the Board garnered previously inevident support from senior Air Canada pilots and this became a factor in forming a new union.
[242] Captain Vaillant started to solicit support for a new union to effectively represent his interests, but on the basis that CALPA would be given a second chance in the fall of 1995. President Laing was upset about the solicitation by Captain Vaillant but CALPA did not threaten misdemeanour charges.
[243] Captain Vaillant understood that while the Constitution did allow an MEC to ratify a collective agreement, the CALPA Constitution was subject to the law and could not deprive Air Canada pilots of their right to ratify their collective agreement. Any seniority list would have to be negotiated into a collective agreement. This was the Air Canada pilots' "trump card". While in 1992, the Air Canada MEC had ratified the collective agreement, it was in circumstances where the old collective agreement was simply extended.
[244] Yves Filion was also an Air Canada pilot and as mentioned, the representative Defendant from sub-class 3. He joined both Air Canada and CALPA in 1985. He had no recollection of anything having been said about CALPA's Merger Policy at that time. He first read the Merger Policy when the Picher Award was made. He was on furlough for 18 months in the 1992-1994 timeframe when he was a First Officer.
[245] He was against merger from the start and regularly voiced his concerns to CALPA representatives. He felt that he would have about 200 pilots ahead of him in seniority and he would get nothing in return. He questioned how the Picher list could be implemented for six companies and in the absence of a common employer declaration.
[246] First Officer Filion moved the motion to form the Seniority Protection Committee at Council 14 in Montreal. The memo sent to all Council 14 members stated:
Locally, a special Seniority Protection Committee has been formed to find solutions to the problem. Members of this official Council #14 committee will be canvassing the Flight Planning area soliciting support from all Air Canada pilots. Please give them your support and consider adding your name to the growing list of fellow pilots who consider the merger an outright raid of the Air Canada seniority list.
He signed the Declaration of Solidarity and understood that it was to go to Air Canada management. The message given to Captain Dean was to prevent the implementation of the Award.
[247] Like Captain Vaillant, other Air Canada pilots sent letters to Mr. Harris complaining about the Award.
[248] Captain Fraser, an Air Canda MEC member and a member of sub-class 1, testified that he understood that his duty was to represent the interests of the Air Canada pilots. They directed the MEC to reject the Picher Award and he considered it his duty to do so. He was clearly directed not to implement the Award and to try and reach some other accommodation.
Special MEC Merger Advisory Committee (SMMAC)
[249] To use the Plaintiffs' counsel's choice of words, in the aftermath of Mr. Picher's Award of March 1995, Captain Dean resurfaced. On April 6, 1995, he wrote to First Officer Pulley suggesting a number of considerations for the Air Canada MEC, including, as a secondary consideration, decertification of the bargaining agent.
[250] The Air Canada MEC met on April 18, 1995. Captain Dean and lawyers, Allen Turnbull and D. Dolan from the law firm Baker McKenzie, attended for part of the MEC meeting. Mr. Turnbull provided a comprehensive review of the avenues available to the Air Canada pilots following the Picher Award. Mr. Turnbull reported that there was not much chance of successfully reversing Mr. Picher's decision in court; the Air Canada pilots' internal options were better. In that regard, he was recorded as stating that:
The Award is not worth the paper it is written on unless Air Canada agrees to put it into your agreement [i.e. collective agreement]. Air Canada was not part of the Arbitration – they did not agree to be bound by the Arbitration.
[251] He told those present at the meeting that the Air Canada MEC had an obligation to represent the bargaining rights of the pilots in their bargaining unit. As far as the Constitution was concerned, the bargaining unit for the Air Canada pilots was the MEC and it was bound by the Local Councils' direction. The advice received from Mr. Turnbull was that there was nothing stating that the Air Canada MEC had to put the Award into the collective agreement. In his view, there was a conflict in the various CALPA policies. The Connector pilots were not in the Air Canada bargaining unit and the CALPA Constitution stated that the Air Canada MEC had to represent the members of their bargaining unit.
[252] In the notes of the meeting, it is recorded that Mr. Turnbull also explained the motives of the airlines in operating the airlines separately and not agreeing to a merger. He observed that Air Canada management had not agreed to anything; they held the cards and there was no obligation on them to accept the Award. He is noted as having said, "As far as Air Canada is concerned they could be faced with Common Employer Status if they should choose to accept some modified form of the Award. As far as the Company is concerned this goes beyond just the pilots." Furthermore, even if Air Canada accepted the Award, the Air Canada MEC did not need to recommend accepting a collective agreement with implementation of the Award included in it. "Nothing could be proved to say why pilots turned down the agreement."
[253] He was not sure that the Connector MECs would be successful in obtaining a single employer declaration. He was reported to have said:
Not sure they could prove problem lies with employers as opposed to their just wanting superior jobs from the Air Canada pilots. … Don't think it is a foregone conclusion that the Board would declare this Common Employer status. Don't feel the Board would try to force Air Canada to put the Picher Award into the Collective Agreement.
[254] The notes of the meeting prepared by Captain Dean also show that he and the MEC were advised by Baker McKenzie that the chances of success on an appeal or judicial review of Mr. Picher's decision were very low. In addition, Baker McKenzie provided advice on the significance of the open period, that is, the last three months of the collective agreement, which continues until there is a legal contract, strike or lockout. "If this process takes 6 months, this would be the window for the membership to move if they chose to move out of CALPA." During this time, the Air Canada pilots could legally leave CALPA to join another union.
[255] At the Air Canada MEC meeting on April 18, 1995, the MEC unanimously passed a motion noting the unequivocal direction received from the Air Canada membership "to cease any efforts regarding implementation of the Picher Award." The MEC proceeded to establish the Special MEC Merger Advisory Committee ("SMMAC"). The MEC was trying to offload some of the work that had arisen as a result of the Air Canada pilots’ reaction to the Award.
[256] SMMAC was therefore a committee of the Air Canada MEC. Its mandate was to "review, consult with appropriate parties and provide options for MEC consideration and approval concerning the protection of Air Canada pilots' seniority and to discuss and liaise with appropriate legal, government, company, CALPA or other parties as deemed necessary." Captain Dean became the Chairman of SMMAC. The other members were Captain Gordon Paler, Captain John Wright and First Officer Filion. First Officer Pulley was an ex officio member.
**[257] **Consistent with it being a committee of the Air Canada MEC, SMMAC kept the MEC informed of its activities.
[258] On May 3, 1995, Baker McKenzie provided Captain Dean with an opinion on the CLRB and the subject of single employer applications. In the memo, the lawyers noted that the power of the CLRB to make a single or common employer declaration was discretionary:
The Board has decided that it would refuse to issue a common employer declaration where the employer's corporate structure did not, and was not meant to, undermine the union's bargaining rights; because of the delay in the application being initiated; and because of the motive behind the application. Specifically, the Board has refused to make a common employer declaration where to do so would enhance a union's bargaining rights.
The Board has previously refused to make common employer declarations in respect of Air Canada and its Connectors. The situation between Air Canada and its Connectors would not appear to have materially changed since those decisions.
Based on our knowledge of the circumstances, which may not be complete, there is a reasonable basis to believe that the Board would once again refuse to issue a common employer declaration.
… The Air Canada pilots are concerned that the Board could, in a common employer declaration, order Air Canada to include the Picher integrated seniority list in a new collective agreement. The Board in the BC Tel[^23] case, states it cannot do so.
To in effect order Air Canada to include any specific terms and conditions in a new collective agreement would be an "undisguised act of compulsory interest arbitration," something that the Board is only authorized to do in very limited and specific circumstances which solely rise in "first contract" collective bargaining.
That is not the situation faced by Air Canada. As a result, the Board would seem to lack jurisdiction to order Air Canada to include the Picher seniority list in any collective agreement.
[259] This, therefore, was the understanding of Captain Dean and the other members of SMMAC and the Air Canada MEC at the time.
Withdrawal of LOU 17
[260] On May 10, 1995, SMMAC met with the Air Canada MEC. Captain Dean presented a detailed report in which SMMAC recommended that:
(a) the Air Canada MEC would want to be an intervenor on any single employer application; and
(b) the Air Canada MEC withdraw the LOU 17 grievance or perhaps make some other agreement with the Company on this. He attached the opinion letter of Baker McKenzie dated May 3, 1995.
[261] On the subject matter of the LOU 17 arbitration, Captain Dean wrote:
With respect of the provisions which must be satisfied for a successful Common Employer Declaration, it becomes obvious that special attention must be accorded current CALPA activity including a pending arbitration of the LOU 17 Grievance.
The continued proceedings regarding this grievance present a dilemma for the MEC. Should the MEC win this arbitration – it illustrates it has clearly been an abuse of the Collective Agreement pertaining to staffing, and workforce, by the abrogation of provisions of LOU 17 as it pertains to the Connector Network.
Conversely, if the MEC loses the case, it identifies problem areas pertaining to the above which current contractual language does not cover, and which allow the employer latitude to act in a manner which negatively affects some employee groups. Both of these results support the underlying rationale for a successful common employer application.
[262] He went on to suggest that the Air Canada MEC may wish to withdraw from the LOU 17 grievance arbitration at this time. In the read-ins from his Examination for Discovery, Captain Dean testified that SMMAC recommended withdrawal because of the risk that it would show whipsawing by Air Canada in support of a common employer application.[^24] First Officer Pulley advised Mr. Young that the Air Canada pilots' position on merger would be weakened if the grievance were won. It was preferable to not have the grievance adjudicated.
April 11 to 12, 1995 CALPA Board Meeting
[263] Although he was directed by the Air Canada MEC not to attend the April 1995 Board of Directors meeting because of the Picher Award, First Officer Pulley attended nonetheless. He did so after reviewing the CALPA Constitution. In cross-examination he admitted that he was aware that his obligations as an MEC Chairman and Vice President of CALPA included implementation of the policies of CALPA. He also told the Air Canada MEC that they were bound by the CALPA Merger Policy.
Construction of Lists
[264] On April 20, First Officer Pulley warned Captain Laing, CALPA's President, against a headlong rush to implementation. He subsequently wrote that he had advised President Laing of the tenuous position of the relationship between CALPA and the pilots of Air Canada. He suggested that President Laing take the appropriate time necessary to fully analyze the consequences of his current course of action and stated that serious consequences would flow from errors in judgment at this time. He asked President Laing to postpone the meeting scheduled for April 21, 1995 until after the regular Air Canada MEC meeting scheduled for the next week had taken place.
[265] In spite of this request, President Laing proceeded with the meeting of April 21, 1995. It had been convened for the purpose of constructing the seniority and bidding lists as required by Mr. Picher's March 28, 1995 Award. First Officer Pulley attended the meeting as the sole Air Canada pilot representative but refused to participate in the meeting. He was present as an observer only. His lack of participation at the April 21, 1995 meeting was at the direction of the Air Canada MEC. In cross-examination, he acknowledged that he had a duty to implement the policies of the Association including the Merger Policy. He also told his MEC that it was bound by the Merger Policy.
[266] At the meeting, a date of hire seniority list was constructed using data from lists provided in 1994 as part of the Picher arbitration proceedings. Those lists were not current because of retirements and therefore they had to be updated. In addition, some pilots had the same seniority dates. Lotteries were held to determine the seniority of those pilots. A draft seniority list was compiled and was made available to the representatives present at the end of the meeting to take back to their respective MECs for confirmation of accuracy. The attendees ran out of time and so the bidding list was not compiled at the meeting.
[267] First Officer Pulley obtained a disk containing the draft date of hire seniority list at the conclusion of the April 21, 1995 meeting. He knew that that list was not in its final form and that further work was required. In addition, the bidding list had not been prepared. He had no recollection of anyone at the meeting saying not to distribute the proposed list. He posted and sent to each base an Air Canada MEC letter addressed to all Air Canada pilots dated April 21, 1995 attaching the proposed merged seniority list. He stated that it was contemplated by the CALPA Merger Policy that the list would be presented to Air Canada for implementation into the collective agreement. He also arranged for the list to be posted in the crew rooms at each of the Air Canada bases. He did not advise the Air Canada pilots that this was a draft list and that there was still a bidding list to be constructed that would contain a fence that protected 85% of the Air Canada Pilots.
[268] On May 1, 1995, First Office Pulley wrote to Captain Laing advising that the vast majority of Air Canada pilots had provided direction to unconditionally reject the Picher Award as unacceptable. At the direction of the Air Canada MEC, he would not attend the list construction meeting scheduled for May 2, 1995. At that second list construction meeting, neither an Air Canada MEC representative nor an Air Canada Merger Representative was in attendance.
[269] Another list construction meeting was held on July 4, 1995. First Officer Pulley and the Air Canada MEC did briefly attend this time. They asked that the meeting not proceed in light of their request that same day for the calling of a Special Convention. They left before the meeting addressed finalization of the seniority list. On July 4, 1994, the seniority list was finalized and circulated to all of the MEC Chairmen of the affected airlines. The list was never approved nor accepted by the Air Canada MEC.
[270] In early August 1995, Captain Saunders compiled and provided to President Laing the second list required by Mr. Picher's Award, namely the bidding list. President Laing circulated the bidding list to all MEC Chairmen for the affected airlines but again the Air Canada MEC did not approve or accept that list.
[271] Given the lack of agreement, President Laing forwarded the seniority and bidding lists to Mr. Picher for his review and approval. As set out in his March Award, Mr. Picher retained jurisdiction with respect to any disputes on the compilation of the lists.
1995 Collective Bargaining
[272] The Air Canada collective agreement expired on April 1, 1995. The Air Canada MEC would be represented in its collective bargaining negotiations by a Committee consisting of Air Canada pilots and an advisor from CALPA National. Mr. Young would serve as an advisor to the MEC and the Negotiating Committee. Mr. Young noted that if the union advanced proposals with which a majority of the members of a bargaining unit disagreed, members would not strike. Mr. Harris delegated the collective bargaining for Air Canada to Captain McLellan and Air Canada's labour relations people. After the release of Mr. Picher's Award, First Officer Pulley and the MEC directed the MEC Negotiating Committee not to discuss the Picher Award or the topic of a merged seniority list in collective bargaining negotiations with the Company. Those instructions were reiterated in a further email from First Officer Pulley on April 23, 1995. Accordingly, there were no proposals or discussions on a merged seniority list with Air Canada management during the collective bargaining that took place in 1995.
[273] The collective agreements for Air Ontario, Air Alliance and Air Nova were also coming open for collective bargaining in the spring of 1995, but not that of Air BC. The Air Ontario collective agreement expired on May 31, 1995, but would remain in force if notice were given before March 31, 1995. Such notice was given by President Laing on March 30, but on May 9, 1995, the Air Ontario MEC suspended negotiations pending developments with the Picher Award. It would have been illegal for the Air Ontario pilots to go on strike in these circumstances. They of course had no bargaining rights with Air Canada.
CALPA's Communications with Air Canada and Air Ontario
[274] In an April 20, 1995 letter sent to Mr. Harris, President Laing asserted CALPA's right to negotiate a merger directly with Air Canada and reminded Mr. Harris that CALPA was the certified bargaining agent for the Air Canada pilots. He acknowledged in the letter that Air Canada had not embraced the fact that a merger had taken place. He stated that he expected that CALPA’s internal problems would be resolved through its internal procedures. Mr. Harris responded by inviting President Laing to meet with Captain McLellan to provide further information and clarification.
[275] Accordingly, on May 5, 1995, President Laing and Mr. Young attended a meeting with Captain McLellan. The meeting ended when they attempted to deliver interim proposals rather than provide further information. President Laing subsequently sent the proposals in writing. One of the proposals was that Connector pilots take employment at Air Canada without undergoing new hire testing and medical requirements.
[276] Captain McLellan responded to the proposals on May 9, 1995, reiterating that Air Canada did not consider itself bound by the Picher Award and expressing its position that no merger had occurred.
[277] In correspondence dated May 16, 1995 from President Laing to Captain McLellan, President Laing again stated that CALPA had the right to negotiate merger of seniority lists with Air Canada pursuant to LOU 17. He threatened that CALPA would proceed under the appropriate provisions of the Canada Labour Code to ensure compliance.
[278] Captain McLellan responded on May 19, 1995 stating that Air Canada's "bargaining relationship with the Association relates only to our pilots. We are not prepared to engage in discussions affecting our pilots outside the scope of our established relationship with the Association. …We simply do not see as a legal or practical matter how these discussions can be conducted without the participation of the Air Canada MEC."
[279] On May 26, 1995, President Laing wrote to the President of Air Ontario, Steven Smith, stating that all Air Ontario pilots leaving for Air Canada were not quitting but were already employed by Air Canada. Mr. Smith responded that Air Ontario would govern itself in accordance with the Air Ontario collective agreement and that any Air Ontario pilot leaving for Air Canada would be deemed to have terminated his employment.
[280] CALPA never said that the Air Canada MEC had a duty to implement the Award with Air Canada.
Air Canada MEC and SMMAC Meetings With Air Canada
[281] Meanwhile, the Air Canada MEC was also meeting directly with Air Canada management. Between April to June, 1995, First Officer Pulley regularly told Mr. Tritt that he did not want Air Canada to get involved in the issue of the list as it was an internal CALPA issue and process. He never indicated that the Air Canada MEC wished to negotiate or implement a merged seniority list based on the Picher Award. After the Award was issued in March, First Officer Pulley spoke with Mr. Harris, Captain McLellan and Mr. Sass Wilfred of Air Canada and told them that: the Award was the result of internal union policy; the pilots had one opinion and the MEC would deal with it. If the MEC had a proposal, they would come back and discuss it with Air Canada. Mr. Young acknowledged that there was nothing suspicious or surprising about an MEC Chairman speaking with management in his absence. On April 27, 1995, a meeting took place with SMMAC and Captain McLellan to explore options to reach a solution with respect to the Award. On May 10, 1995, a SMMAC report was tabled that set out options as contemplated by its mandate. Captain Dean and other SMMAC representatives met with Captain McLellan on May 15, 1995 and made a presentation on the Award. The notes of that presentation indicated that implementation of the Award was not an objective of the Air Canada MEC at this time and was not supported by about 80% of the Air Canada pilots. If appropriate, the current Air Canada MEC position was to intervene in a common employer application and illustrate that the employer had not undermined the collective agreements. The potential risk of a s. 35 CLRB application for Air Canada included its applicability to other employee groups.
[282] The SMMAC members left the meeting with the understanding that Air Canada was interested in proceeding with more talks, however, ultimately the company encouraged the Air Canada pilot representatives to engage in internal discussions on the issue of merger.
[283] Air Canada would have been aware of the Air Canada pilots' reaction to the Award, as the majority of Air Canada management received copies of the Air Canada MEC newletters.[^25]
LOU 40
[284] In May or June, LOU 40 was prepared in draft by SMMAC. Captain Dean was the genesis of LOU 40. It was a complicated proposal that contemplated "an affiliation of pilots' seniority lists from which to grant preference of employment" when new pilots were required at Air Canada. Separate bargaining units, seniority lists and operations would be maintained. According to First Officer Filion, LOU 40 was to be an alternative to a merged seniority list as a consequence of which, the Picher Award would be put aside. SMMAC's plan was to try and get Air Canada's approval and then propose it to the Connector MECs.
[285] In a memo from Captain Dean to First Officer Pulley dated June 21, 1995, he described a meeting with Mr. Tritt of Air Canada. He wrote, "We pointed out that one of the important reasons we have developed this proposal is to 'immunize' ourselves and Air Canada against a common employer application." He also noted Mr. Tritt's lack of authority and doubted that the proposal would be accepted by Air Canada's executives.
[286] On July 21, 1995, Captain McLellan wrote to First Officer Pulley advising that while Air Canada did not agree with certain features of LOU 40, they remained ready to discuss the proposal with the appropriate representatives at any time. The Air Canada MEC was ultimately unsuccessful in securing Air Canada’s agreement to LOU 40.
Formation of ACPA
[287] In April or May of 1995, some Air Canada pilots began discussing the formation of a new union. Captain Dave Edward became the founding President and Captain Tom Jerrard was the founding Secretary Treasurer of the Air Canada Pilots Association ("ACPA"). Captain Edward did not hold any elected or appointed position with CALPA and none of the members of the Air Canada MEC were involved in the formation of ACPA. The same was true for members of the Air Canada LECs.
[288] In May 1995, ACPA started to solicit membership support. Its position was that: CALPA was undemocratic; Air Canada pilots paid the largest share of dues but had no proportional vote or voice; there was no provision for roll call voting at the Board of Directors' meetings; and CALPA had a significant financial deficit and other financial management issues.
[289] Captain Fraser testified that by 1995, CALPA was polarized into four groups: pilots from Air Canada, the Connectors, Canadian Airlines International Ltd. and the Canadian Regional airlines. He noticed a profound voting pattern – if Air Canada representatives voted in favour or against a Board proposal, all the other airline representatives voted to the contrary.
[290] On June 14, 1995, First Officer Pulley advised the Board of Directors that a group of Air Canada pilots would be announcing their intent to ultimately have the Air Canada pilots withdraw from CALPA.
[291] When ACPA's membership drive became known in mid-June 1995, President Laing wrote to First Officer Pulley on June 16 asking that the Air Canada MEC take steps to repudiate this group without delay. First Officer Pulley then sent an email to the Air Canada MEC, SSMAC and the Negotiating Committee warning the members to be careful as to how they conducted their business. He suggested that they refrain from signing up with ACPA and paying its membership fees.
[292] On June 22, 1995, CALPA and the Air Canada MEC Negotiating Committee suspended collective bargaining negotiations with Air Canada. The reason for the suspension was the announcement that ACPA was seeking the right to represent the Air Canada pilots.
[293] On July 4, 1995, ACPA filed an application for certification as bargaining agent for the Air Canada bargaining unit.
[294] On July 7, 1995, First Officer Pulley wrote to Captain Dean, SSMAC and the Air Canada MEC advising that he had informed the Air Canada MEC legal counsel of its intent not to pursue legal action in response to Mr. Picher's decision. He wrote: "The objective has been to buy time – it has been successful." He wished to keep CALPA as the Air Canada pilots’ bargaining agent. He was trying to get the pilots to settle down and he did not join, nor encourage others to join, ACPA.
[295] No appeal or judicial review was ever taken of the Picher Award.
[296] On July 7, 1995, the Air Canada MEC requested that a Special Convention be held and on July 31, 1995, the dates of September 6 to 8, 1995 were selected by the CALPA Board for that Convention. Captain Campbell was of the view, and I accept, that this was requested by First Officer Pulley to try and save CALPA and to discuss the issues affecting the Air Canada pilots. First Officer Pulley thought that a response from CALPA would take some "wind out of the sails" of ACPA prior to the vote. I accept that First Officer Pulley was trying to save CALPA.
[297] On July 7, 1995, ACPA filed an application for certification as bargaining agent for the Air Canada bargaining unit.
[298] On July 8, 1995, First Officer Pulley and Captain Campbell met to see if anything could be done to remedy the conflict. On July 13, 1995, First Officer Pulley wrote to President Laing, telling him that the request for a Special Convention was a "lifeline" for CALPA.
[299] On August 9, 1995, President Laing sent the integrated seniority list and the integrated bidding list to Mr. Picher.
[300] The CALPA Board of Directors subsequently charged both Captain Edward and Captain Jerrard with misdemeanour charges under the CALPA Constitution. Captain Edward was served on August 25, 1995. He wrote to President Laing suggesting that delivery of his defence wait until November after the decertification vote. No further proceedings against him or Captain Jerrard ensued.
August 1995 Air Canada MEC Newsletter
[301] In late August 1995, First Officer Pulley wrote a newsletter entitled "Air Canada MEC Response to the Picher Award Part V". He commenced by stating that he was in an untenable position. He noted the Article of CALPA's Constitution and Policies that stated that the MEC Chairman shall represent the members of his airline and act on their behalf in all matters as outlined in the Constitution; be responsible for the implementation of the Association's Policies as they pertain to his MEC; be responsible for the negotiation of the collective agreement; and be the Association's representative to the airline for the purpose of implementing the objectives and policies of the Association.
[302] The direction of the Air Canada pilots was to reject the Award but this of course differed from the Association's objective. Therein lay First Officer Pulley's dilemma. He also identified the Air Canada pilots' dilemma: "You will have to make a decision as to the appropriate course of action – the collective goals of our union – which we participate in – or the protection of the individual self-interests of our junior pilots." He went on to write:
This is an appropriate time for the group responsible in part for the outcome contained in Mr. Picher's Award to accept its accountability. The Air Canada MEC was a driving force in starting this process with the Connectors at Convention, November 1990. Different individuals, but nevertheless, an Air Canada MEC.
You may have witnessed from your experience with elected representatives in CALPA – many pilots that run for elected office on occasion have their own agenda. The MEC in 1990 wanted to resolve the issue once and for all. Air Canada's announcement on October 9, 1990 to furlough roughly 230 pilots was the definitive crisis that led to the Declaration of Merger with the Connectors in March 1991.
The MEC of the day was concerned then about keeping jobs for our junior pilots that were going to the Connectors as a result of Air Canada's retrenchment …
This is nothing more than an intra-generational battle over diminishing opportunity for a major airline career in Canada.
[303] He noted that it was the corporate decisions of Air Canada management which had caused the Air Canada MEC to react in the manner it did in 1990 in declaring the intent to merge with the Connector carriers.
As with the initial declaration of the merger by the Air Canada MEC – the avenues sought to extricate ourselves from the process and the position advanced in the arbitration before Mr. Picher – we are ultimately responsible for the outcome with which we are now faced – not CALPA.
The backgrounds of the various legal counsel who represented the parties in the seniority arbitration had an impact in the outcome. They are all experienced in labour law – as is Mr. Picher. They understand the travail of labour to deal with the changes in an industry and the dynamics intrinsic with the right to bargain collectively. Mr. Picher makes reference to this grounding on pages 70 - 72 of his final award. Viewed in that context – Mr. Picher got it right.
[304] In his August 1995 newsletter, First Officer Pulley advised the Air Canada pilots that:
Recent strategic actions by the Air Canada MEC have virtually secured your privilege should you choose to make the ideal a reality… Therefore without the unmitigated resolve of the Air Canada pilots – there will be no merger or corporate restructuring.
[305] First Officer Pulley testified in cross-examinations that the actions of the Air Canada MEC had secured the ability of the Air Canada pilots to vote to leave CALPA.
Air Canada's Position
[306] Mr. Harris testified, and I accept, that he was responsible for deciding whether Air Canada would agree to a merger of pilot seniority lists, bargaining units or collective agreements and that he never delegated that responsibility to anyone else in the company.
[307] He did not read the March 1995 Picher Award but was briefed on it by his two senior Flight Operations officers. He was adamant that he would never accept that kind of an integrated seniority list of Air Canada and Connector pilots. To use his words:
To have an integrated seniority list that would be used to handle the operations of Air Canada, would not work, and it would be a safety factor, more than that, it would have been a financial disaster for Air Canada…
…We wouldn't be able to efficiently run the operation.
…I know we could not operate the main line carrier with a seniority list that had all the Connector pilots on it.
He understood that Mr. Picher had recommended that the seniority lists be integrated based on date of hire. He did not recall that there were restrictions in the Award to deal with bidding. He was unaware that some junior Air Canada pilots could outbid more senior Connector pilots.
[308] While at Delta, Mr. Harris had had experience with the acquisition of Northeast Airlines and Western Airlines both of which had unionized pilots and whose flight operations, pilot seniority lists and collective agreements were merged with those of Delta. He had concerns on how performance and security measures would be met by all the new team members and their counterparts at Delta. About 300 Western Airlines pilots sued Delta and ALPA because the merged pilot seniority list had been too readily accepted. Mr. Harris was unaware of any mainline airline that had agreed to a merger of the seniority lists of the pilots of the mainline airline and its connectors. Similarly, he was unaware of any mainline airline that had agreed to merge the flying operations of the mainline airline and its connectors. Lastly, he was unaware of any mainline airline that had agreed to a single collective agreement covering both the mainline pilots and the Connector pilots.
[309] When he received President Laing's letter of April 18, 1995 advising of the Picher Award and indicating that CALPA intended to implement the list with Air Canada in direct negotiations between CALPA and Air Canada as soon as possible, he replied by letter dated April 19, 1995. He wrote:
This arbitration, as you know, was to deal with an internal CALPA issue, and Air Canada was not a party to the arbitration nor bound in any way by its outcome.
Our position remains that no merger has in fact taken place, and, accordingly, there is no justification for the acceptance by us of a merged list; nonetheless we are always prepared to meet with the Air Canada MEC on issues which our pilots wish to raise with us.
[310] Mr. Harris was very forceful in his evidence that he would not implement the Picher Award seniority list. He testified, and I accept, that the first paragraph of his letter reflected his very strong opposition to the outcome. As for the second paragraph, he would meet with the Air Canada pilots but he testified, and I accept that, "I had already made up our mind that we would not accept Picher, because it was going to be detrimental to Air Canada….There was never any doubt in my mind that we had to reject it." He testified, and I accept, that had all of the Air Canada pilots gone on strike to back a demand that the company accept the Picher Award seniority list, Air Canada would not have agreed to it and would have filed or pursued a legal process to stop the strike. He said that Air Canada would have done whatever was necessary to not let it happen. Air Canada would not have agreed to negotiate a common collective agreement among mainline and Connector pilots "because you cannot be operating several flight operations which aren't integrated with a seniority list that is integrated." Air Canada was not prepared to merge the Connector flight operations with those of the mainline. Mr. Harris would not permit the Air Canada collective bargaining negotiators to override his decision on the Picher Award. In addition, he would not agree to a merged list in the absence of a common collective agreement and a merger of operations. He would not compromise as he felt that this would be backing him into something he did not want. He did not want a merged seniority list. Furthermore, he did not like protective fences being incorporated into a seniority list.
[311] Mr. Tritt, Air Canada's Director of Labour Relations for Flight Operations participated in negotiations with the Air Canada pilot group. He testified that Air Canada was always prepared to meet to discuss issues with Air Canada pilots and this would include a merged seniority list.
[312] That said, relative to Mr. Harris, Mr. Tritt was very junior in the Air Canada organizational structure. He did not have direct contact with Mr. Harris, reported to the Vice President of Human Resources, and had a dotted reporting line to Captain McLellan. In his testimony, he also confirmed that in 1995, he had no authority to agree to a merged seniority list for Air Canada pilots, a single collective agreement for all pilots, or a single bargaining unit for all pilots. Mr. Harris had that authority.
[313] According to Mr. Tritt, a dovetail list was of concern to Air Canada because it would impose increased training costs. The pay scales for Air Canada were formulaic whereas those of the Connector airlines were flat. If the formulaic scale were introduced into the regional airlines, it would make them more costly to operate. The Connector airlines had a different role from that of the mainline airline. Mr. Tritt acknowledged that fences in a seniority list normally reduce training costs.
[314] The Plaintiffs read in as part of their case testimony from Captain Dean in which he stated that Air Canada was adamantly opposed to any type of a merger that was not operational.[^26] It was his view that Air Canada was not in any way interested in implementing a merged list.[^27]
[315] Air Canada's negative reaction to a merged seniority list would not have come as a surprise to the Plaintiffs. As Captain Campbell testified in connection with the September 1994 Picher decision, everyone clearly understood at the time that Air Canada would not accept the list.
August 31, 1995 Air Ontario MEC Letter
[316] On August 31, 1995, James Hayes, the lawyer acting on behalf of the Air Ontario MEC, sent a letter to all members of the CALPA Board of Directors and to Convention Delegates. He wrote:
Certain Air Canada pilots have gone so far as to threaten the continued existence of CALPA by filing an application for certification to displace CALPA as the bargaining agent of Air Canada…
The Air Ontario and other regional pilots could simply abandon their position and give way to what they believe to be the unreasonable dictates of the Air Canada pilots in order to buy peace in the family. Alternatively they could choose to embark upon litigation with the objective of ensuring compliance with the CALPA constitution and obtaining damages for any losses sustained by their members. Additionally, litigation could be instigated before the CLRB which would insert the Air Canada corporate group directly into this problem. These are not desirable choices…
the Air Ontario pilots serve notice that they will pursue any and all available avenues in the superior courts and/or before the Canada Labour Relations Board to protect their position. We have instructions if necessary to proceed against CALPA, its subordinate bodies and any relevant individuals personally and to seek recompense for economic loss.
1995 Special Convention
[317] The Air Canada MEC identified four subjects for discussion at the Special Convention: representation of membership; financial management and objectives; the Merger Policy; and the voting structure of the Board of Directors. The reason for the Special Convention was to find a solution to the dilemma posed by the Award.
[318] The Special Convention was held September 6 to 8, 1995. Each of the aforementioned four items was discussed at the Special Convention. The Air Canada pilots proposed changes to the Merger Policy. It was decided that these changes would be considered by a committee and brought back at a subsequent convention. No motion was made at the Convention that the merger be placed in abeyance or be cancelled, although the Convention did have the authority to do so.
[319] Discussions did take place between the MEC Chairmen to try and find a solution to the merger issue and a tentative agreement was reached. First Officer Pulley took the tentative agreement to the Air Canada MEC but its members rejected it. First Officer Pulley then resigned as the Air Canada MEC Chairman and as its Merger Representative and from the Board of Directors. Captain Cockburn, the previous Chairman of Local Executive Council 14 and a representative Defendant of sub-class 14, then became the Air Canada MEC Chairman.
[320] In September 1995, the CLRB ordered that a representation vote be held by mail ballot to determine whether CALPA or ACPA would be the bargaining agent for Air Canada pilots.
CALPA Remits Matter to Mr. Picher
[321] On October 9, Mr. Picher attempted unsuccessfully to mediate a resolution.
[322] On October 12, 1995, President Laing wrote to Mr. Picher about the seniority list that he had sent to Mr. Picher on August 9. In essence, President Laing acknowledged that the March 28, 1995 Award did not qualify as one capable of acceptance under paragraph 7 of the CALPA's Merger Policy. He wrote:
I am advised that two of the key issues raised in the course of and prior to that [October 9] meeting have been the following:
Firstly, with respect to the so called "Laing List." This list was intended to represent only the parties' conceptualization of what a list constructed according to your Award would look like. It was an attempt to construct a working document for you pursuant to your direction in point 8 of your Award and was not meant to usurp in any way your final jurisdiction to issue a list.
If there had been a consensual list officially accepted by all the parties resulting from that exercise, then matters would likely have been different. However, it is our understanding that disputes remain and accordingly your work under our Merger Policy is not completed. Indeed, it is our understanding that your Award under subsection 5-Arbitration - of the CALPA Merger Policy includes, by necessary intentment, the drafting and finalizing of a list. This is the "integrated pilot seniority list" which is to be "accepted by the Association" pursuant to paragraph 7 of said policy.
[323] In furtherance of mediation and negotiation efforts, on November 1, 1995, the Air Canada MEC and the Connector MEC Chairmen signed an agreement stating that Mr. Picher would not "issue a final award and merged seniority list in pursuance of the CALPA Merger Policy, until the giving of notice by any party or ACPA to terminate the agreement."
[324] Captain Linthwaite testified that parties were looking to save CALPA and that the seniority list contemplated by the Award that was accepted by President Laing in April, 1995 should be seen as binding. While the parties were trying to save CALPA, I do not accept his position. I find that there was no final list as contemplated by the Merger Policy in April, 1995. This is reflected in the communications of President Laing and the Connector MECs. The list was also amended. Clearly the final list was that described in Mr. Picher's November 7, 1995 Award.
Finalized List
[325] Mr. Picher released his Supplementary Award on November 7, 1995. In this Supplementary Award, he commented on the status of his March Award as follows:
… The final matter to be dealt with is the extent of bidding protection which will be accorded to Air Canada pilots senior to P.J. O'Hara. It should be stressed that the Award of March 28, 1995 makes no mention, and no final disposition, of the issues of vacation and schedule bidding. More importantly, that Award specifically reserves to the Arbitrator the jurisdiction to determine the placement of pilots on the seniority list, and in so doing to determine their dates of hire for that purpose…
As indicated in paragraph 2 of the Award, the matter was remitted to the parties for them to settle the dates of hire for the pilots in all groups. In the event that they should be unable to do so, as has occurred, the dates of hire remain to be determined by the Arbitrator. Paragraph 4 of the Award contemplated the possibility of a consensus being established in respect of the bidding rights should the settled dates of hire place any Connector pilots in positions senior to P.J. O'Hara. No such list has been settled, and the issue now becomes whether the Arbitrator should fashion the list so as to assign date of hire positions to any Connector pilots who would be senior to P.J. O'Hara.
Connector airline pilots whose date of hire in Connector service would precede that of O'Hara, approximately 63 in number, shall be given amended date of hire positions immediately junior to Air Canada pilot P.J. O'Hara, in accordance with their own relative seniority based on their actual date of hire.
[326] Although President Laing had accepted the March Picher Award that did not contain a list, CALPA never officially accepted the finalized November 7 merged seniority list as contemplated by the Merger Policy. Given subsequent events, not surprisingly, CALPA did not pursue implementation of the November Supplementary Award including calling a meeting of the MECs involved.
Certification of ACPA
[327] A vote was held on November 9, 1995 to certify ACPA as the new bargaining agent for the Air Canada pilots. A substantial majority of the Air Canada pilots voted in favour of ACPA and on November 14, 1995, ACPA was certified as the new bargaining agent for the Air Canada pilots and CALPA was subsequently decertified as their bargaining agent. On November 23, 1995, CALPA notified all Air Canada pilots of their expulsion from CALPA. ACPA and Air Canada subsequently negotiated a collective agreement.
Single Employer Application and Unfair Labour Practice Complaints
[328] As far back as July 29, 1988, First Officer Pulley wrote in the Air Canada MEC newsletter that "Air Canada has structured its business relationships with the feeder carriers to ensure that any application for a common employer declaration between Air Canada and the feeders would probably not have been successful."
[329] On March 20, 1996, CALPA initiated an application before the CLRB for a declaration that Air Canada and its five Connector airlines constituted a single employer pursuant to s. 35 of the Canada Labour Code and to consolidate the six pilot bargaining units into one.
[330] On March 22, 1996, CALPA initiated two unfair labour practice complaints, one against Air Canada and the other against ACPA. On April 2, 1996, ACPA brought an unfair labour practice complaint as against CALPA. These three unfair labour practice complaints were heard together with the single employer application.
[331] ACPA (representing 2,200 Air Canada pilots), CUPE (representing 4,550 flight attendants), CAW (representing 3,400 sales and service personnel), IAMAW (representing 8,400 maintenance and overhaul department employees), CALDA (representing 47 flight dispatchers), and Western Canada Council of Teamsters (representing 265 customer service agents and 170 flight attendants) intervened on the single employer application. All but IAMAW were opposed to the application. Air Canada was also opposed.
[332] On December 22, 1999, the Board released its 54 page decision. The Board determined that there had been no significant changes in the airline industry since its 1989 decision in the single employer application filed by IAMAW against Air Canada that would warrant reversing the decision. The Board was of the view that the union was trying to accomplish through a Board ruling what it could not accomplish at the bargaining table – implementation of the Picher Award.
[333] The first part of the single employer test, namely the fact of common control and direction, was assumed by the Board but the Board found that Air Canada's transfer of flying to the Connectors did not undermine the bargaining rights of the Connector pilots. As such, the second part of the test was not met and the Application was dismissed. No judicial review application was ever brought.
[334] In addition, the Board ruled that the unfair labour practice complaints be dismissed given the absence of evidence.
Air Line Pilots Association
[335] As noted, the Air Line Pilots Association ("ALPA") is a U.S. based union that represents pilots in collective bargaining. On February 1, 1997, CALPA was merged into ALPA.
Proceedings in this Action
[336] This action was commenced on November 4, 1997 under the Class Proceedings Act, 1992.[^28]
[337] In 1998, the Defendants brought a motion for summary judgment that eventually made its way to the Supreme Court of Canada. The Plaintiffs had asserted a breach of contract claim relating to the Defendants' failure to accept and advance the Picher Award. The breach of contract claim was dismissed but the tort claims were permitted to proceed. At the Court of Appeal, Sharpe J.A. observed that denying a right of action in contract did not result in a wrong without a remedy. Remedies could be pursued before the CIRB and the CALPA Constitution contained a code to deal with obligations imposed by the Constitution.
[338] The Supreme Court of Canada held that there is no contract as between union members. Rather, each union member has a contractual relationship with the union itself. All members have the right to speak out against the manner in which union affairs are conducted. This is a members' right of dissent. The Plaintiffs' breach of contract claim could not be sustained but the tort claims were permitted to continue.
Expert Evidence
Dr. Joseph D'Cruz
[339] The Plaintiffs called Dr. Joseph R. D'Cruz as an expert in strategic analysis and the global airline industry. He is a Professor of Strategic Management at the Rotman School of Management at the University of Toronto.
[340] He provided expert opinion evidence in respect of: the implications of the Open Skies Agreement on Canadian airline carriers in the 1994 to 1997 period; the strategic response to the Open Skies Agreement and performance of Canadian airline carriers including Air Canada; and the implications of a labour disruption at Air Canada by pilots in 1995 to 1996 as it related to the opportunities and market conditions in the airline industry at the time.
[341] It was his opinion that it would be "suicidal" for Air Canada to take actions that would lead to a strike by its pilots and that the company's interests would be best served by doing everything in its capacity to avoid a pilot strike.
[342] He noted that Air Canada was positioning itself to benefit from the Open Skies Agreement between Canada and the United States that was ratified in February 1995 and to become a major player in the trans-border Canadian and United States air travel market. As noted earlier, under the Agreement, carriers from both countries were permitted to serve all points in either country and to make changes to fares without prior approval. American airlines were not permitted to add new services to Montreal or Vancouver until February 1997 and to Toronto until February 1998. According to Professor D'Cruz, this was done to allow protection of Canadian carriers from their much larger American competitors. Air Canada therefore had a relatively narrow window of opportunity before it faced direct additional competition from its American rivals.
[343] In 1996, Air Canada was in negotiations to become a founding member of the Star Alliance Group; also that year, Air Canada formed alliances with United Airlines and Continental. A major part of Air Canada's transformation was its conversion from a hub and spoke configuration to a point-to-point network using its own aircraft and those of its subsidiaries as well as co-sharing arrangements with United Airlines.
[344] To effect this transformation, Air Canada had to establish new bases in the United States and change its fleet configuration to add regional jets and aircraft with seating capacity and fuel economies that were better suited to the emerging point-to-point network. Canada's share of trans-border air travel grew rapidly in the months following the Open Skies Agreement.
[345] The 1991 recession had a severe impact on the domestic airline industry. The decline continued until 1993. The market did not surpass pre-recessionary levels until 1996. At the same time, Air Canada was responding to the emerging threat from West Jet, a lower fare carrier. In addition, Air Canada was in the middle of strategic change in its trans-Atlantic operations, migrating from a hub and spoke network to a point-to-point network for service to Europe.
[346] As for Pacific routes, Canadian Airlines International Ltd. was not in good financial shape and unlikely to be able to expand in the Pacific market or to exploit the Open Skies Agreement to the same degree as Air Canada. This therefore also gave Air Canada a window of opportunity.
[347] For all of these reasons, it was Professor D'Cruz's view that it would have been very detrimental for Air Canada to do anything to trigger a strike by pilots. A strike would destroy Air Canada's trans-border strategy in the face of a domestic business that was not that profitable, an unprofitable trans-Atlantic business, and a Pacific business that was not large.
[348] In cross-examination Professor D'Cruz acknowledged that he did not examine the outcome of collective bargaining between Air Canada and the unions in the 1995 and 1996 time period as this was not his area of expertise. He agreed that a strike of one or two days would not be such a threat to Air Canada. He acknowledged that if Air Canada were convinced that a strike by Air Canada pilots would be illegal and it could be shut down by the CLRB, the threat of a strike would be a really minor issue and would not be regarded as having a significant impact on Air Canada's trans-border strategy.
Dr. Gordon Sick
[349] Dr. Gordon Sick is a financial economist. He is currently a Professor of Finance at the Haskayne School of Business at the University of Calgary. He was called by the Plaintiffs to give evidence on the methodology by which damages should be assessed and the measure of damages suffered by the Plaintiff class.
[350] He opined that being in the same bargaining unit and having a combined seniority list would allow the Connector pilots to transition from low paying jobs on the small and slow planes used by the Connectors to the higher paying jobs of the jets used by Air Canada as their seniority progressed over time.
[351] The methodology he had used had been previously used by him to calculate future pilot incomes. He compared the present value of lifetime earnings that Air Ontario pilots could expect if they had joined the Air Canada seniority list as developed by Mr. Picher to those expected given that they did not. He measured the damages as the sum for all Plaintiff Class members of the present value of lost income from 1996 to each pilot's retirement date. To calculate damages, he considered: the jobs available with or without a merged list at Air Canada and Air Ontario, Air Alliance, Air BC and Air Nova; pay tables in contracts that prevailed in 1995 between Air Canada and ACPA and between Air Ontario and ALPA; the age demographics of the pilots; and seniority dates. He observed that the future earnings of a pilot are a function of the jobs available to all pilots, the pay earned for a specific job and years of service by the pilot, and the pilot's seniority which determines the ability to hold a specific job.
[352] Dr. Sick calculated the damages for the Class of 171 Plaintiffs. He measured the damages as the difference between the Class-aggregate present value, discounted (or compounded) to mid-year 2010, of the difference between the earnings of the Air Ontario pilots on the merged Air Canada/Connector seniority list and the Air Ontario seniority list in isolation. He made certain assumptions. He assumed that 1996 was the first year of damages and in so doing, gave some time to implement the list. He concluded that a real discount rate of 4% reflected market expectations in 1995. Ignoring taxes, the measure of damages ranged from $137,962,583 to $172,453,229 depending on the contribution of Air Canada or Air Ontario to pensions and benefits of the pilots. He did not actually have data on the company contribution to pensions and benefits but estimated it as ranging from 0% in the case of the $137,962,583 figure to 25% in the case of the $172,453,229 figure.
[353] If one assumed an employer pension and benefits contribution of 15%, the amount necessary to compensate the Plaintiff Class would be $149,357,301 with no adjustment for inflation. Adjusted for inflation, the number would be $197,894,166 as of June 2010.
[354] Dr. Sick noted certain qualifications or limitations to his report. He did not have information that had arisen between 1995 and the present; the information that he used was that which existed at the time of the Picher Award in 1995. The information he did not have included: (i) data on Air Canada's merger with Canadian Airlines International Ltd. in 2001; (ii) the merger of the Connector airlines to form Jazz in 2001 which changed the jobs available to Connector pilots and may have changed the compensation system; (iii) each of Air Canada, Air Ontario, and Jazz' new pilot contracts; (iv) early retirements experienced by pilots in all the airlines as this would have affected seniority progression; and (v) equipment fleet changes made by the airlines which would impact the jobs available to pilots. Dr. Sick also did not use the actual income figures for the Plaintiff Class in calculating the damages and he made assumptions on hours flown and equipment used.
[355] It should be noted that in 1995, the pilots at the Connectors were paid based on the type of equipment flown and their status, that is, Captain or First Officer. After 2000, Connector pilots were paid based on seniority and status. In 1995, the Air Canada pilots were paid based on status, hours flown, type of equipment, time of day and route. Seniority influenced some of those variables.
Richard McLaren
[356] The Plaintiffs tendered Professor Richard McLaren as an expert. He was called as a witness in the very early stages of the trial due to scheduling difficulties. He is a law professor at University of Western Ontario where he has taught since 1972. In addition, for over 30 years he has carried on practice as a union management labour relations arbitrator through his own company, Innovative Dispute Resolution Ltd. He was involved in arbitrations between 1994 and 1998 relating to Air Ontario and the CAW and two collective agreements. He has had labour arbitrations involving the effects of mergers on seniority but not in the context of the airline industry. He had been engaged in mergers of seniority lists in the trucking and hospital workplaces.
[357] The Plaintiffs sought to have him qualified to provide opinion evidence on: the applicable provisions and test for granting a declaration of single employer under the Canada Labour Code in the period 1995 to 1999; the significance of the opposition of ACPA on behalf of the Air Canada pilots to the application for single employer under section 35 of the Code; and alternative methods by which an integrated seniority list may have been implemented.
[358] The Defendants and the Third Party objected. The Defendants submitted that: Professor McLaren was not an expert on the matters on which his opinion was sought; the decision of the CIRB on CALPA’s common employer application is not subject to question or review and Professor McLaren’s opinion is therefore improper; Professor McLaren’s opinion was not logically relevant because the Merger Policy requires that the single integrated seniority list be incorporated into a common collective agreement and this was consistent with the Plaintiffs’ pleadings; and the proposed evidence was of minimal probative value.
[359] The Third Party submitted that: Professor McLaren was not qualified to be an expert on the subject matter on which he proposed to opine; his evidence did not meet the reliability requirement; and his evidence was on domestic law.
[360] On the issue of qualifications, a properly qualified expert is one "who is shown to have acquired special or peculiar knowledge through study or experience in respect of matters on which he or she undertakes to testify. The threshold for admissibility is not high: McLean (Litigation Guardian of) v. Seisel, 2004 9418 (ON CA).[^29]
[361] Professor McLaren had extensive first-hand experience with labour arbitrations and some experience with seniority mergers. Expertise may be acquired in a variety of ways including study and experience. The fact that he had considerable expertise in other fields did not detract from his familiarity with labour relations. Similarly, his lack of academic writings in the area of labour law was understandable given his explanation. In my view, he had the requisite expertise to testify on the matters proposed and could be qualified.
[362] That said, questions of domestic law are not matters upon which a court will receive opinion evidence: Sopinka, Lederman and Bryant, The Law of Evidence in Canada[^30] and Pente Investment Management Ltd. v. Schneider Corp., [1998] O.J. No. 6387.[^31] Judges are presumed to know the law and therefore the assistance of an expert on domestic law is unnecessary and inadmissable. In upholding Farley J.’s decision in Maple Leaf Foods Inc. v. Schneider Corp., 1998 5121 (ON CA),[^32] Weiler J.A. accepted his reasons for rejecting admission of certain expert reports. In his reasons, he:
declined to receive the experts’ reports on three bases: (1) that the opinions expressed related to domestic law, a matter upon which a court ought not to receive opinion evidence; (2) that there was no specialized and standardized body of conduct to study in this area; and (3) that he did not need the assistance of the experts in understanding the evidence or the concepts and principles involved.
[363] The first two issues on which Professor McLaren proposed to opine were issues of domestic law. It seemed to me that the court should not receive such opinion evidence and I declined to do so. The proposed expert evidence failed to meet the necessity requirement. Expert evidence is not admissible because it might be helpful to a court; rather, the evidence must be necessary in the sense that it provides information that is outside the experience and knowledge of the court. Evidence on domestic law also offends the absence of an exclusionary rule requirement. Accordingly, Professor McLaren was not permitted to opine on issues number one and two as proposed.
[364] Turning to the third issue, the primary objection advanced in this regard was based not on domestic law but on relevance. His opinion related to factual as opposed to legal determinations in issue in the trial. Professor McLaren proposed to opine on alternative methods whereby an integrated seniority list may be implemented. Counsel for the Defendants submitted that in light of the Plaintiffs’ pleadings, this was logically irrelevant.
[365] There was initially some confusion over the pleadings as the Trial Record provided to me was deficient. Under the circumstances and the early stage of the trial, I was not absolutely certain that the Plaintiffs' pleadings precluded the subject matter of the proposed testimony and it had some possible relevance to causation and the Plaintiffs' lost opportunity claim. I therefore permitted him to testify on alternative methods by which an integrated seniority list may have been implemented.
[366] Professor McLaren testified that a single seniority list with multiple employers could have been appended to collective agreements as a master list that contained provisions whereby someone in bargaining unit A could transfer to or from bargaining unit B and take seniority with him. Alternatively, there could have been an overarching master agreement containing the list that was referenced in the various collective agreements. Professor McLaren had experience with such a configuration in the trucking industry. He also understood that such an arrangement had been used in the U.S. with Republic Airlines. It should be noted, however, that based on the evidence before the Court, unlike Air Canada where aircraft size was a factor, pilot pay at Republic Airlines was based only on seniority.
[367] Both methods of implementing an integrated seniority list would have to be achieved through collective bargaining with employers. Both methods differed from that contemplated by the Merger Policy. These alternatives did not require a change in the scope of the bargaining units however.
Causes of Action
[368] The Plaintiffs have pleaded four causes of action: unlawful act conspiracy; intentional interference with economic interests; breach of fiduciary duty; and negligent misrepresentation. They have abandoned the claim for interference with contractual relations.
[369] The Defendants submit that the Labour Board has exclusive jurisdiction over the Plaintiffs' claims and they have in essence already been addressed. At their core, the Defendants state that the claims are concerned with the rights and obligations of members of a union that is the bargaining agent for employees in a specific bargaining unit. While I have some sympathy for the Defendants' position, the Supreme Court of Canada held that the Plaintiffs were at liberty to pursue their tort claims against the Defendants. Accordingly, it is appropriate that they be permitted to do so.
[370] I propose to address each of the four causes of action that are pleaded. First, I summarize the law, then I review the Plaintiffs' claim and the parties' positions, followed by discussion. The parties all confirmed that they did not differ on the constituent elements of each cause of action or the legal principles. Rather, they differed on the application of the law to the facts.
1. Tort of Unlawful Conduct Conspiracy
(i) Legal Principles
[371] There are two types of actionable conspiracy: lawful act conspiracy, also known as conspiracy to injure; and unlawful conduct conspiracy, also known as conspiracy to commit an unlawful act or unlawful act conspiracy: Canada Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 23 (SCC).[^33] This case only engages the second type, namely unlawful act conspiracy. As such, the Plaintiffs need not establish that the Defendants' predominant purpose was to injure the Plaintiffs. In Canada Cement Lafarge, Estey J. described unlawful act conspiracy:
[W]here the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result.[^34]
[372] For the Defendants to be liable for the tort of unlawful act conspiracy, it must be established that:
(a) they acted in combination, that is, in concert, by agreement or with a common design;
(b) their conduct was unlawful;
(c) their conduct was directed towards the Plaintiffs;
(d) the Defendants should have known that, in the circumstances, injury to the Plaintiffs was likely to result; and
(e) their conduct caused injury to the Plaintiffs: Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460.[^35]
[373] I will discuss each of these elements in turn.
(a) Agreement or Common Design
[374] Proof of an agreement is an essential requirement of the tort of conspiracy. The necessity for an agreement does not require a binding contract or a specific form: "Agreement is not used in the formal sense of a binding contract but rather in the sense of a joint plan or common design": Nicholls v. Richmond (Municipality), 1984 828 (BC SC).[^36] Conspiracy is a serious allegation and is not to be lightly inferred: Kaymar Rehabilitation Inc. v. Champlain Community Care Access Centre, 2010 ONSC 2248.[^37] The existence of an agreement can be proven either by direct evidence or by inference: Nicholls v. Richmond (Township).[^38]
[375] Conduct alone is insufficient, as is mere acquiescence: McKinlay Transport Ltd. v. Motor Transport Industrial Relations Bureau of Ontario, [1996] O.J. No. 461.[^39] As noted in Pontillo v. Zinger, 2010 ONSC 5537:
... one does not participate in a conspiracy by conduct. One participates in a conspiracy by conspiring, that is, by agreeing, either at the outset of the conspiracy, or during its course. Conduct can be evidence of agreement, but there is no tort of engaging in acts that further someone else's conspiracy.[^40]
[376] So, for instance in Posluns v. Toronto Stock Exchange, 1964 199 (ON SC),[^41] a Board of Governors voted to dismiss an employee. They had agreed upon nothing before voting. It was held that by so voting, they did not enter into an agreement. As such, the tort of unlawful act conspiracy was not established.
[377] The Court held:
… the directors of a corporation do not make an 'agreement' in the conspiracy sense by voting the same way. They individually make the same decision. In the popular sense, they are 'in agreement', but in the sense in which the law of conspiracy uses 'agree', they were not. Each simply expressed an individual opinion and the majority opinion prevailed.[^42]
[378] A simple synopsis of the agreement requirement is found in the B.C. Court of Appeal decision in Golden Capital Securities Ltd. v. Holmes, 2004 BCCA 565:[^43]
Thus, to prove a case in conspiracy, it is first necessary to plainly establish, directly or by inference, that there was an agreement between the defendants and one or more others. This does not mean an agreement in the contractual sense. A defendant must be shown to have agreed in the sense of having combined or conspired with one or more others to carry out a common design or a means of achieving a common objective, which is then implemented with resulting injury to the plaintiff.
(b) Unlawful Conduct
[379] The conduct may be unlawful if it constitutes a tort, a breach of contract or breach of legislation. Not surprisingly, a breach of fiduciary duty may also constitute unlawful conduct for the purposes of the tort of unlawful conduct conspiracy: GHL Fridman, The Law of Torts in Canada,[^44] and Levy-Russell Ltd. v. Techmotiv Inc., (1994), 13 B.L.R. (2d) 1.[^45] Fiduciary obligations may be owed by union officers to their union and a failure to abide by a union's constitution and bylaws by officers of a union has been held to amount to a disregard of a duty of loyalty and a breach of fiduciary duty owed to the union: U.F.C.W., Local 1252 v. Cashin, 1996 11537 (NL SC).[^46] See also Burley v. OPSEU, 2004 34769 (ON SC).[^47]
[380] Although dealing with the tort of interference with economic relations, in Reach MD Inc. v. Pharmaceutical Manufacturers Assn. of Canada, 2003 27828 (ON CA),[^48] Laskin J.A. held that an unlawful act included the making of a ruling that was beyond the powers of the party but he declined to decide the "outer limits" of the definition of unlawful means or act.[^49] The tort was made out because the actions of the defendant, a voluntary association that caused its members to stop advertising with the plaintiff, constituted unlawful means directed at third parties, which then caused them to injure the plaintiff. These actions were beyond the lawful authority that the defendant had under its constitution, and could be set aside by the Court at the behest of the three plaintiffs.[^50]
[381] The trial judge in Agribrands Purina Canada Inc. v. Kasamekas[^51] determined that an unlawful act included conduct that the defendant was "not at liberty" or "not authorized" to engage in, whether as a result of a law, a contract, a convention or an understanding. The trial judge had in part relied on Ontario Realty Corp. v. P. Gabriele & Sons Ltd., 2009 1807 (ON SC),[^52] in which Newbould J. determined that the broader definition was also appropriate for a claim of conspiracy.
[382] In light of the Court of Appeal's decision in Agribrands overturning the trial judge, it is fair to conclude that the broader definition afforded to the term "unlawful act" has not been accepted as good law.[^53] The Court of Appeal disagreed with the trial judge's reasons on the issue of the scope of unlawful conduct.
[383] The Court of Appeal made other observations. Goudge J.A. stressed that there must be unlawful conduct by each conspirator. The tort is designed to catch unlawful conduct done in concert, not to turn lawful conduct into tortious conduct. To constitute unlawful conduct, the conduct must be wrong in law. Quasi-criminal conduct and conduct in breach of the Criminal Code would constitute unlawful conduct, though not actionable. In addition, he noted the separate evolution of unlawful conduct in the context of the tort of civil conspiracy and that of intentional interference and cautioned against turning away from this separate evolution simply to achieve a unified theory for economic torts. He held, "What is required, therefore, to meet the 'unlawful conduct' element of the conspiracy tort is that the defendants engage, in concert, in acts that are wrong in law whether actionable at private law or not."[^54]
(c) The Conduct Must be Directed Towards the Plaintiff
[384] The predominant purpose of the defendant's conduct need not be to cause injury to the plaintiff, but the conduct must be directed towards the plaintiff in some manner.
(d) Knowledge that Damages Were Likely to Result
[385] A plaintiff must prove that the defendant knew or ought to have known that damages were likely to result to the plaintiff from the defendant's conduct. A constructive intent to injure the plaintiff is derived from the defendant's knowledge that injury to the plaintiff would ensue: Levy-Russell Ltd. v. Tecmotiv Inc.[^55]
(e) Conduct Caused Injury
[386] A plaintiff must establish that there was a causal connection between the loss suffered by the plaintiff and the defendant's conduct. In Canada Cement Lafarge v. British Columbia Lightweight Aggregate Ltd.,[^56] the Supreme Court of Canada stated:
I turn then to the third submission relating to the causation and remoteness aspects of the tort of conspiracy. The issue raised by this proposition is simply whether or not the loss suffered by the respondent was occasioned by any action or omission on the part of the appellants.
It is sufficient in my view to conclude on this branch of the appeal that there is no causal connection between the unlawful activities of the appellants and the commercial demise of the respondent.
(ii) Plaintiffs' Conspiracy Claim
[387] The Plaintiffs' conspiracy claim is that from March 28, 1995 until November 14, 1995, First Officer Pulley and members of the Defendant classes conspired with each other by expressly or impliedly entering into an agreement or agreements to prevent the implementation of the Picher Award. The particulars were that:
a) the Defendants did not take any steps to cause the negotiation in good faith of the merged seniority list with Air Canada;
b) the Defendants attempted to negotiate alternatives to the Picher Award with Air Canada, without the Plaintiffs' knowledge or consent;
c) the Defendants refused to be bound by the Award of arbitrator Picher dated March 28, 1995 and took steps in an effort to avoid being bound by it;
d) the Defendants refused to support and opposed the negotiation of the merged seniority list with Air Canada;
e) the Defendant classes instructed their representatives on the Air Canada MEC to reject the Picher Award, to refuse to negotiate it and to use any and all means to stop its implementation;
f) the Defendants failed to take steps to prevent their representatives from rejecting the Picher Award, from refusing to negotiate the Award or from using any and all means to stop the implementation of the Award when they knew that their representatives planned to do those acts;
g) the