United Airlines urged an Illinois federal judge on Thursday to dismiss a putative class action accusing it of breaching its agreement with the federal government over $5 billion in payroll support funds amid the coronavirus pandemic, arguing the employee who filed the suit has no statutory rights to enforce the agreement.
United said there is no private right of action under the CARES Act that granted the funds for employee Kenneth England to sue under.
"Mr. England does not assert any statutory right under the CARES Act to enforce the [Payroll Support Program], nor does he allege that United breached any direct contractual obligation to him or any other employee," United said in its motion to dismiss the complaint. "Rather, he claims he can sue as an 'intended third-party beneficiary' of the PSP agreement between United and the U.S. government."
England alleged in the
May lawsuit that by taking the billions in federal relief, the airline agreed not to require its workers to take any temporary suspensions or unpaid leave or reduce pay or benefits for any reason until Sept. 30.
England said the company announced within weeks of agreeing to receive the funds the required furlough days for all management and administration employees, which he alleges is a breach of contract under federal common law.
On April 20, the
U.S. Department of the Treasury finalized its deal with United and other major airlines on the Payroll Support Program and made its first disbursal of funds. The program was created specifically for airlines and related contractors in March by Congress as part of the Coronavirus Aid, Relief, and Economics Security Act.
England noted that the coronavirus relief bill said for an airline to be eligible for the Payroll Support Program, it "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 or contractor shall refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020."
United's move violates the express terms of its agreement with the federal government, of which United's employees are intended third-party beneficiaries under federal common law, England said.
In the motion, United "emphatically" denied that it had breached the terms of the PSP agreement, and said it "has not furloughed any employees, nor has it reduced pay rates or benefits. And it is using every penny of the PSP funding to cover salaries, wages and benefits of its employees."
"But," the airline added, "there is no need to reach the merits of this case, because controlling legal authority forecloses the notion that Mr. England can sue under a 'third-party beneficiary' theory."
To support its argument, United cited a number of previous rulings by the
U.S. Supreme Court and various federal appellate courts, including the high court's 2011 ruling in
Astra USA Inc. v. Santa Clara 
, where it said the court "rejected — in circumstances virtually identical to those here — a third-party beneficiary claim to enforce an agreement with the federal government."
United quoted the high court's majority ruling that "absence of a private right to enforce the statutory . . . obligations would be rendered meaningless if . . . entities could overcome that obstacle by suing to enforce the contract's . . . obligations instead. The statutory and contractual obligations, in short, are one and the same."
The airline added, "There, like here, Congress passed a law that required participating entities to enter into a form agreement with a federal agency. There, like here, the pertinent terms of that form agreement were not negotiated, but merely incorporated the statutory obligations and the participants' agreement to abide by them. There, like here, the underlying statute had no private right to action."
Astra and its progeny held that the "clear intent" required to establish "intended beneficiary" status is lacking where Congress declined to establish a private right of action, United said.
United also argued among other things that the PSP agreement "expressly vests" the U.S. Treasury Department with the authority to decide if an airline has violated the agreement and to take any action it finds necessary, which is "subject to limited judicial review."
Counsel for the parties did not immediately respond to requests for comment.
England is represented by Douglas M. Werman, Maureen A. Salas, Sarah J. Arendt, Zachary C. Flowerree and Michael M. Tresnowski of
Werman Salas PC.
United is represented by Douglas W. Hall, Donald J. Munro, Ann-Marie Woods and Scott J. Mainquist of
Jones Day.
The case is England et al. v. United Airlines Inc., case number
1:20-cv-02877, in the
U.S. District Court for the Northern District of Illinois.
--Editing by Bruce Goldman.
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