A federal judge has grounded a United Airlines employee’s attempt to sue the airline over the way it handled millions of dollars in Covid relief funds.
In May 2020, Kenneth England filed a class action breach of contract complaint against United, alleging that although the carrier obtained $5 billion in payroll support through the federal Coronavirus Aid, Relief and Economics Security Act, conditional on a promise to hold off on furloughs and pay reductions until Oct. 1, 2020, it nonetheless mandated 20 days of unpaid leave for administrative employees between May 16 and Sept. 30, 2020.
United moved to dismiss the complaint, arguing the employee is a third party to its agreement with the U.S. Treasury Department and, although a beneficiary of that deal, has no standing to sue. U.S. District Judge Martha Pacold granted the motion in an opinion issued Sept. 13.
England said United secured the first $2.5 billion in relief — part of $25 billion the CARES Act set aside for airlines — on May 4. His complaint quoted the relief package’s conditional language dictating that “To be eligible for financial assistance under this subtitle, an air carrier … shall enter into an agreement with the Secretary, or otherwise certify in such form and manner as the Secretary shall prescribe, that the air carrier … shall refrain from conducting involuntary furloughs or reducing pay rates and benefits until Sept. 30, 2020.”
The breach of contract claim focuses on that agreement, part of the Payroll Support Program, with England asserting affected “employees are intended third party beneficiaries” under federal common law, according to Pacold. In February, Pacold ordered England to prove he was furloughed and to argue his pursuit of an injunction wasn’t moot with the passage of the deadline for 20 unpaid days in September 2020.
“England confirmed that he suffered a pay reduction as a result of the Unpaid Time Off Program,” Pacold wrote, “but conceded that his request for injunctive relief was moot.”
United cited a 2011 U.S. Supreme Court opinion, Astra USA v. Santa Clara County, a lawsuit concerning prescription drug price caps. The opinion held public hospitals and community health centers could not bring a lawsuit over an agreement between the Department of Health and Human Services and the drug makers who signed agreements under the federal program.
“Astra does foreclose this suit,” Pacold wrote, explaining the drug price law gave HHS the power to enforce the agreements if pharmaceutical companies overcharged, but did not create a path for third parties to sue.
Pacold further explained the U.S. Seventh Circuit Court of Appeals followed Astra by determining government contracts without negotiable terms don’t confer third-party beneficiary status on any party, such as under the Home Affordable Mortgage Program.
Since the PSP only mirrors CARES Act language, Pacold continued, “permitting a third-party suit to enforce the PSP Agreement would render ‘meaningless’ the absence of a private right of action to enforce United’s statutory obligations.” Allowing such a lawsuit against one carrier, she said could interfere with the treasury department’s role in administering and monitoring the funding across the industry.
England argued the CARES Act lacks a regulatory enforcement program. Pacold acknowledged the legislation underlying Astra established more “complex regulatory programs,” but said the CARES Act has its own procedures and noted other courts reached similar conclusions concerning other treasury programs.
Pacold dismissed the complaint without prejudice, giving England permission to amend his complaint, to try again to establish he has standing to sue.
England has been represented in the case by attorneys Douglas Werman, Maureen Ann Salas, Sarah Jean Arendt and Michael M. Tresnowski, of the firm of Werman Salas, of Chicago.
United Airlines has been represented by attorneys Ann-Marie Woods, Donald J. Munro and Douglas W. Hall, of Jones Day, of Chicago and Washington, D.C.