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American Airlines Pilot Pension Settlement On Final Approach

Jan 27, 2017 / Media Coverage / Law360 — Brian Amaral

A federal judge in Boston said Friday that she was likely to give final approval to a roughly $6 million settlement between American Airlines pilots and their pension plan over military leave benefits.

U.S. District Judge Indira Talwani said she wasn’t likely to deviate much from the proposed settlement, which includes 1,270 class members and would be paid out with $500,000 in cash and nearly 137,000 shares of American Airlines Group Inc. stock. Attorneys’ fees were pegged at 25 percent of the total.

The pilots, mainly reservists, had said that American Airlines’ pension plan didn’t contribute enough to their retirement plans while they were serving in the military. The suit took some maneuvering, according to the pilots’ lawyers: American Airlines couldn’t be sued because it had gone through bankruptcy. Instead, the pension plan itself and its fiduciaries were sued under the Uniformed Services Employment and Reemployment Rights Act.

“It’s an outstanding recovery,” said Peter Romer-Friedman of Outten & Golden LLP after Judge Talwani’s fairness hearing in Boston. “We’re really happy about this settlement.”

Under USERRA, American Airlines had to keep contributing to the pilots’ pensions while they were on active duty. But, according to the suit, the pension plan used the wrong formula to make the contributions.

The pension plan took the average contribution of the three pilots who were more senior than the military pilot in question and paid that to his or her pension. Instead, it should have looked back over the pilot’s own past 12 months of work before leaving for military service to determine how much he or she would get, the pilots argued.

The settlement will pay the pilots according to their lawyers’ formula and will include interest.

Judge Talwani said she would likely fiddle with some small parts of the settlement. For example, she said she’d likely reject some costs that were billed to the settlement fund, like taxis and lunches.

“I don’t think paying for your lunch is a good idea,” she said, while adding that the vast majority of the expenses would fly.

She also said she’d likely hold back about 10 percent of the attorneys’ fees until the full settlement is paid out.

Attorneys for the pilots explained that they would sell the American Airlines shares — procured from a fund in the bankruptcy court that was set aside for possible lawsuits like this one — and pay them out through the pension plan.

Because the stock price will fluctuate before the shares are liquidated, it's not clear exactly how much the settlement fund will be, but none of it reverts back to American Airlines, the pilots' lawyers said. The pilots estimated in their proposed settlement that even after capital gains taxes, the total would be about $6.2 million. 

The pilots are represented by Matthew Z. Crotty of Crotty & Son Law Firm PLLC, Peter Romer-Friedman of Outten & Golden LLP, R. Joseph Barton and Jason M. Leviton of Block & Leviton LLP and Thomas G. Jarrard.

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The case is Allman v. American Airlines Inc. Pilot Retirement Benefit Program Variable Income Plan et al., case number 1:14-cv-10138, in the U.S. District Court for the District of Massachusetts.

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