Steve Mairose v. Federal Express Corporation ( 2006 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
APRIL 20, 2006 Session
STEVE MAIROSE, ET AL. v. FEDERAL EXPRESS CORPORATION
Direct Appeal from the Chancery Court for Shelby County
Nos. 104974-1, 104203-1, 105026-2, 105222-1, 106772-2 (Consolidated)
D. J. Alissandratos, Chancellor
No. W2005-01527-COA-R3-CV - Filed September 11, 2006
This is the second time this case has been on appeal. This case stems from an alleged breach of an
employment contract between an employer and its employees. In this appeal, we are asked to
determine (1) whether the chancery court erred when it dismissed eight of the ten plaintiffs from the
appeal as they had not perfected an appeal to the trial court’s judgment notwithstanding the verdict
that was reversed on appeal; (2) whether the chancery court erred when it found that the employer
had not breached its contract when it incorporated an integrated master seniority list that did not
“endtail” pilots from another corporation that merged into the employer; (3) whether, assuming that
a breach occurred, the employees waived their breach of contract claims by failing to object to the
alleged breach in a timely fashion; and (4) whether the chancery court erred when it awarded
discretionary costs for court reporter expense for hearings. On appeal, the employees contend that
the chancery court erred when it dismissed eight of the ten employees as they had not properly
perfected an appeal because the eight employees should be able to benefit from the appellate decision
regarding the remaining two employees. The employees also assert that the employer breached their
employment contract when it incorporated an integrated seniority list altering their seniority rights
and that they had not waived any claim for breach of contract because of their conduct. Finally, the
employees contend that the chancery court erred when it awarded discretionary costs for court
reporter expenses for hearings as rule 54.04(2) of the Tennessee Rules of Civil Procedure allow for
the recovery of court reporter expenses for depositions or trials only. The employer contends that
it did not breach the employment contract and that, assuming breach, the employees waived any
breach of contract claim because they failed to challenge the arbitration award that established the
integrated master seniority list in a timely fashion and that they failed to object to the breach of
contract in a timely fashion after the breach. We affirm the decision of the chancery court finding
that the employer had not breached its employee contract with its employees and affirm the decision
of the chancery court dismissing eight of the ten employees from the new trial as they had not
properly perfected an appeal to the chancery court’s original judgment notwithstanding the verdict.
Further, we affirm the chancery court’s award of discretionary costs.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed
ALAN E. HIGHERS, J., delivered the opinion of the court, in which DAVID R. FARMER , J., and HOLLY
M. KIRBY , J., joined.
Robert L. J. Spence, Jr., Memphis, TN; M. Scott Willhite, Jonesboro, AR, for Appellants
Connie Lewis Lensing, Richard C. Saxton, Edward J. Efkeman, Memphis, TN, for Appellee
OPINION
I. FACTS & PROCEDURAL HISTORY
This is the second time this case has been on appeal to this Court. In our first opinion
concerning this matter, we noted the following pertinent factual and procedural history:
The Appellee, Federal Express Corporation (“FedEx” [or
“Appellee”]), is a multi-billion dollar corporation which provides air
and ground overnight express delivery services. Prior to the
acquisition which is the subject of this appeal, FedEx delivery routes
were limited mainly to the United States, and FedEx employed
approximately 1,000 pilots (“pilots” or “crewmembers”).
Employment conditions of the pilots are established by the
Flight Crewmember Handbook (“FCH”). (Exhibit 1). The FCH is “a
legal and binding agreement between each flight crewmember and
Federal Express Corporation.” FedEx and the pilots agree that the
FCH is an individual contract between FedEx and each pilot. The
FCH governs pilots’ seniority, which regulates pilots’ pay rates, flight
schedules, vacations, and retirement benefits. FedEx operates under
a date-of-hire seniority system so that the seniority number a pilot
receives on his first date of employment establishes his position on
the FedEx master seniority list. The goal of a FedEx pilot is to
advance higher on the list, closer to the number one position. A pilot
advances on the list when pilots ahead of him on the list resign, retire,
or are terminated. The FCH establishes the following provisions for
seniority:
1-85 Crewmember Seniority
1-86 Seniority will begin to accrue on the date a pilot
is employed by the Company as a crewmember and
begins Initial Training and Basic Indoctrination. It
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will continue to accrue during his entire employment
period.
1-88 As of October, 1972, and henceforth, the date of
employment as a crewmember will establish a
crewmember’s position on the Master Seniority List.
Effective June 1, 1981, when two or more
crewmembers are employed on the same date, they
will be placed on the Master Seniority List according
to the highest number represented by the last four
digits of their social security number, i.e. the
crewmember having the highest number (9999) will
receive the lowest seniority number. When two or
more crewmembers are employed on the same data
and have the same last four digits, their relative
seniority position will be determined by drawing lots.
1-89 A crewmember will retain his seniority until he
resigns or retires from the Company, or is terminated
under any provision of this manual.
1-90 Seniority will govern all crewmembers in cases
of promotion or demotion, retention in case of a
reduction in personnel, assignment or reassignment
due to expansion or reduction in schedules or
equipment, and choice of Vacancies.
In July, 1988, a revision was made to the FCH which added
section 1-96 to address the status of the pilots’ seniority if FedEx
acquired another airline.
1-96 In the event the Company acquires or merges
with another airline employing Flight Crewmembers,
any such crewmembers selected for retention will be
awarded seniority in accordance with FCH 1-85,
Crewmember Seniority, with the exception of FCH
1-88.
On December 16, 1988, FedEx entered into an agreement with
Tiger International (“Tiger”) which called for the acquisition of a
majority interest in Tiger, of which Flying Tiger Line was a wholly
owned subsidiary, by FedEx. By acquiring Tiger, FedEx acquired
Tiger’s international routes, allowing FedEx to deliver
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internationally. After entering into the agreement, FedEx immediately
notified its pilots of the acquisition. The Tiger pilots became FedEx
employees on August 7, 1989, referred to as “T-Day.”
The acquisition agreement contained a provision that stated
that FedEx would adopt labor protective provisions (“LPPs”). The
relevant sections of the LPPs, sections three and thirteen, state, in
pertinent part:
Section 3. Insofar as the merger affects the seniority
rights of the carriers’ employees, provisions shall be
made for the integration of seniority lists in a fair and
equitable manner, including, where applicable,
agreement through collective bargaining between the
carriers and the representatives of the employees
affected. In the event of failure to agree, the dispute
may be submitted by either party for adjustment in
accordance with Section 13.
****
Section 13. (a) In the event that any dispute or
controversy . . . arises with respect to the protections
provided herein which cannot be settled by the parties
within 20 days after the controversy arises, it may be
referred by any party to an arbitrator selected from a
panel of seven names furnished by the National
Mediation Board for consideration and determination.
FedEx claims that had it not agreed to adopt the LPPs,
specifically sections three and thirteen, the acquisition of Tiger would
not have occurred.
FedEx immediately recognized that there could be a conflict
between section 1-96 of the FCH and the LPPs unless section 1-96
was eliminated or suspended from the FCH before the acquisition.
FedEx claims that the FCH was at all material times expressly
amendable. The introduction section to the FCH states, in pertinent
part:
This Handbook sets forth the work rules and policies
regarding flight crewmembers employed by Federal
Express Corporation . . . these work rules and policies
are in effect as of the date of publication of this
Handbook, are a commitment on all parties involved,
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and remain in effect until formally revised (ref FCH
Revision Procedure).
The FCH designates two methods by which a work rule or
policy of the FCH can be modified: the revision process and the
bulletin process. The revision process is a permanent change to the
FCH. The bulletin process is a temporary change to the FCH. The
bulletin process cannot be used to effectuate a permanent change to
the FCH. A Notice of Exception bulletin, one of three types of
bulletins, permits exceptions to certain provisions of the FCH.
Where an operational need exists, either as a
singular occurrence or one which spans a temporary
and specific period of time, the Revision Committee
may issue a bulletin to except certain provisions of the
FCH in order to accommodate this need. A Notice of
Exception must specify an effective date and will
include a date of initiation and expiration. A Notice of
Exception is in no way intended to abrogate the
provisions in the FCH or to make arbitrary changes in
its content without the use of the Revision Process.
The Revision Committee proposed a revision to section 1-96
which intended to delete section 1-96 from the FCH. The Flight
Advisory Board (“FAB”) approached flight management and
proposed, in place of a revision, a bulletin to section 1-96 which
would suspend application of section 1-96 for purposes of the Tiger
acquisition only. On August 4, 1989, the Revision Committee
approved a bulletin exception, Bulletin 89-25, to section 1-96 of the
FCH. (Exhibit 1). Bulletin 89- 25 provides, in pertinent part:
The existing provisions of FCH 1-96 shall remain
unchanged except for the purpose of the merger of the
Federal Express/Flying Tigers Flight Deck
Crewmembers Master Seniority Lists. The terms of a
fair and equitable merged Federal Express/Flying
Tigers Flight Deck Crewmember Master Seniority
List(s) including any and all conditions, restrictions
and priorities applicable thereto and deemed a part
thereof, shall be constructed in accordance with
Sections 3 and 13 of the LPPs and are incorporated
herein.
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The pilots argue that the bulletin process could not be used to
abrogate their seniority under the master seniority list. The pilots also
argue that seniority was not adjustable, revisable, or modifiable under
the FCH because it was not considered a “work rule or policy.”
Additionally, the pilots argue that the FAB never had the authority to
bind them to a bulletin exception to section 1-96.
The FedEx and Tiger Merger Committees were unable to
negotiate an integrated seniority list pursuant to section three of the
LPPs. Pursuant to section thirteen of the LPPs, the Merger
Committees selected an arbitrator, George Nicolau (“Nicolau”) to
merge the two pilot seniority lists. Representatives of FedEx and the
Merger Committees executed a Tripartite Agreement which stated
that the Merger Committees had authority to represent the pilot
groups of FedEx and Tiger and that Nicolau’s award would be
binding. After thirty-one days of arbitration hearings, Nicolau created
a merged seniority list and issued an opinion and award on May 26,
1990. A copy of the opinion and award was delivered to each pilot.
The merged seniority list became effective, for bidding purposes, in
July, 1990. FedEx claims that the pilots took no immediate legal
action to challenge the arbitration award until the filing of this
lawsuit. FedEx contends that the pilots continued to work for FedEx
and benefitted from the acquisition due to the opportunity to fly
international routes and make more money. The pilots argue that the
FedEx Merger Committee never had the authority to bind them to an
arbitration agreement.
The merged seniority list placed hundreds of Tiger pilots
ahead of FedEx pilots and caused FedEx pilots to fall hundreds of
positions on the master seniority list. The pilots argue that the Tiger
pilots were hired effective on T-Day such that they held junior dates
of hire to the FedEx pilots and should have been “end-tailed” on the
master seniority list in accordance with section 1-96 of the FCH. The
pilots claim that the loss of positions on the master seniority list
impacted their rates of pay, causing them to sustain damages for
which they were not compensated.
Beginning in May, 1994, approximately one hundred fifty
pilots filed complaints in five related cases against FedEx in the
Chancery Court of Shelby County. The pilots alleged that they
sustained damages when FedEx breached their contracts by
abrogating their seniority protections guaranteed in the FCH. The five
cases were consolidated. In September, 1996, the parties filed cross
motions for summary judgment. On January 20, 1997, the trial court
denied the pilots’ motion for summary judgment and granted FedEx’s
motion for summary judgment. The pilots filed a motion for
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reconsideration. On May 1, 1997, the trial court granted the pilots’
motion for reconsideration and denied FedEx's motion for summary
judgment.
On August 16, 1999, the parties submitted a joint pre-trial
order, which designated, for trial purposes, ten representative
plaintiffs from the consolidated cases. The following ten plaintiffs
were named: Pete Camerota (“Camerota”), Dana Cockrell
(“Cockrell”), Craig Covic (“Covic”), Ed Davis, Jr. (“Davis”), Charles
Hohensee (“Hohensee”), Gary Lovan (“Lovan”), Steve Mairose
(“Mairose”), Lance Nightwalker (“Nightwalker”), Jim Sullivan
(“Sullivan”), and David Tripp (“Tripp”[, and collectively with
Camerota, Cockrell, Covic, Davis, Hohensee, Lovan, Mairose,
Nightwalker, and Sullivan, the “Appellants”]). The jury trial
commenced on September 8, 1999. At the close of the pilots’ proof
on October 4, 1999, FedEx moved for a directed verdict. The trial
court granted FedEx’s motion for a directed verdict only with respect
to the pilots’ claims of good faith and fair dealing, activation pay, and
passover pay. The trial court stated that it would reserve its decision
on the remaining issues until after the jury made its determination.
On October 14, 1999, the jurors returned a verdict in favor of
the pilots, finding specifically:
1) The FCH was not properly changed, excepted to, in
accordance with its terms by Bulletin 89-25 to
effectively suspend the application of Section 1-96
and other relevant provisions involving
crewmembers’ seniority rights for the purpose of the
Tiger merger.
2) FedEx did violate, breach, the plaintiffs’
contractual rights under Section 1-96 and other
relevant provisions of the FCH involving
crewmembers’ seniority rights by abrogating and
incorporating into the FCH the merged seniority list
issued by Arbitrator Nicolau in May, 1990.
3) None of the plaintiffs were barred from recovering
money damages from FedEx. The plaintiffs did
sustain monetary damages. The plaintiffs did not
waive their right to challenge the arbitration process
and merged seniority list awarded due to any inaction,
ratification, or failure to file their objections or suits
for judicial relief within a reasonable time.
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4) The plaintiffs sustained damages for which they
should recover from August, 1989 to May, 1999.
5) Monetary damages should be awarded to each of
the ten plaintiffs for damages sustained by each for
breach of their FCH contract by FedEx in the
following amounts:
Camerota $ 462,730.00
Cockrell $ 299,738.00
Covic $ 377,763.00
Davis $ 393,427.00
Hohensee $ 501,417.00
Lovan $ 237,249.00
Mairose $ 391,257.00
Nightwalker $ 314,000.00
Sullivan $ 430,384.00
Tripp $ 231,192.00
On October 29, 1999, FedEx filed a motion for a judgment
notwithstanding the verdict and, in the alternative, a motion for a new
trial. On December 15, 1999, the trial court granted FedEx’s motion
for a judgment notwithstanding the verdict and, in the alternative,
granted a conditional new trial.
Mairose v. Fed. Express Corp., 86 S.W.3d 502 , 504-508 (Tenn. Ct. App. 2001) (footnotes omitted)
[hereinafter “Mairose I”].
In Mairose I, this Court was presented with several issues, including (1) whether all ten
plaintiffs involved in the original trial were proper parties to the appeal, (2) whether the trial court
applied the correct standard of review as to FedEx’s post trial motion for a judgment notwithstanding
the verdict, (3) whether the trial court erred when it granted FedEx’s motion for judgment
notwithstanding the verdict, and (4) whether the trial court erred when it granted FedEx’s motion
for a conditional new trial. Id. at 508. Upon review of these issues, we found that only two of the
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ten original plaintiffs properly appealed the trial court’s judgment notwithstanding the verdict, that
the trial court applied the wrong standard of review when it granted FedEx’s motion for judgment
notwithstanding the verdict, that, after reviewing the record, there was material evidence in support
of the jury verdict, and that the trial court’s grant of a conditional new trial proper. Id. at 508-13.
As such, we remanded the case to the chancery court for a new trial. Id. at 514.
On remand, the parties agreed to try the case on stipulated facts and exhibits. Prior to the
trial, FedEx filed a motion for summary judgment seeking to dismiss Camerota, Cockrell, Covic,
Davis, Hohensee, Nightwalker, Sullivan, and Trip, as plaintiffs in the new trial because they had not
properly perfected any appeal to the original judgment notwithstanding the verdict. Thereafter, the
chancery court granted the motion. On May 25, 2005, the chancery court entered its opinion on the
merits of the trial and found that FedEx had not breached its contract with the plaintiffs. The
chancery court ruled in the alternative that, even assuming breach, it found in the alternative that,
the plaintiffs, because of their conduct, had waived any breach of contract claim they had against
FedEx.
II. ISSUES PRESENTED
Appellants have timely filed their notice of appeal and present the following issues for review:
1. Whether the chancery court erred when it dismissed eight of the ten Appellants on the basis
that they were found by this Court in its 2001 decision not to have been properly designated
as parties to the appeal of the chancery court’s 1999 judgment notwithstanding the verdict
that was reversed on appeal;
2. Whether the chancery court erred when it found that Appellee did not breach the FCH with
Appellants;
3. Whether the chancery court erred when it found that, even assuming breach, Appellants’
breach of contract claims were barred because they waived those claims and agreed to
arbitrate their seniority and did not timely file a lawsuit for breach; and
4. Whether the chancery court erred when it awarded discretionary costs to Appellee.
For the following reasons, we affirm the decision of the chancery court finding that Appellee had not
breached the FCH and affirm the decision of the chancery court dismissing eight of ten Appellants
from the new trial granted by this Court in Mairose I as they had not properly perfected an appeal
to challenge the chancery court’s original judgment notwithstanding the verdict. Further, we affirm
the chancery court’s award of discretionary costs.
III. STANDARD OF REVIEW
This Court reviews findings of fact by a trial court sitting without a jury under a de novo
standard with a presumption of correctness for the findings. Tenn. R. App. P. 13(d). This Court
reviews a trial court’s conclusions of law under a de novo standard of review, affording no
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presumption of correctness to those conclusions. Johnson v. Johnson, 37 S.W.3d 892, 894 (Tenn.
2001) (citing Nutt v. Champion Int’l Corp., 980 S.W.2d 365, 368 (Tenn. 1998)).
IV. DISCUSSION
A. Motion to Dismiss
On appeal, Camerota, Cockrell, Covic, Davis, Hohensee, Nightwalker, Sullivan, and Trip
assert that the chancery court erred when it dismissed them as plaintiffs in the new trial granted by
this Court in Mairose I. Specifically, they allege that, despite their dismissal as appellants in
Mairose I due to the fact that they had not properly perfected their appeal from the trial court’s
judgment notwithstanding the verdict, this Court’s ruling in Mairose I pertaining to the remaining
appellants, Mairose and Lovan, should also apply to them as their interests were interdependent. We
disagree.
Generally, “[a] reversal is binding on the parties to the suit, but does not control the interests
of parties who did not join, or were not made parties, to the appeal . . .” 5 C.J.S. Appeal & Error §
961 (1993). However, when a non-appealing parties’ “rights and liabilities and those of the parties
appealing are so interwoven and dependent as to be inseparable, . . . a reversal as to one operates as
a reversal as to all.” Id. In such case, “[w]here less than all of the coparties appeal from a severable
judgment in which the interests of the parties are independent, only the part of the judgment
pertaining to appellants may be reversed.” Id. § 930; see also Rogers v. Bouchard, 449 S.W.2d 431,
438 (Tenn. Ct. App. 1969).
In Mairose I, this Court found that Camerota, Cockrell, Covic, Davis, Hohensee,
Nightwalker, Sullivan, and Trip had not properly appealed the chancery court’s judgment
notwithstanding the verdict. Mairose I, 86 S.W.3d at 510. As such, they were dismissed from the
appeal. Id. Thus, the chancery court’s initial ruling became final and was res judicata against the
parties unless their interests were so interwoven with Mairose’s and Lovan’s claims so as to allow
them to rely on Mairose’s and Lovan’s appeal from the chancery court’s judgment notwithstanding
the verdict.
We conclude that Camerota, Cockrell, Covic, Davis, Hohensee, Nightwalker, Sullivan, and
Trip may not rely on Mairose’s and Lovan’s successful appeal that granted them a new trial. In this
case, Appellants filed multiple suits alleging a breach of each one’s individual employment contract.
Mairose I, 86 S.W.3d at 507. These suits were consolidated because they arose from the same set
of facts. See id. Every individual plaintiff derived their cause of action from a breach of each
individual plaintiff’s employment contract with Appellee. Further, in its judgment notwithstanding
the verdict, the chancery court rendered a judgment in favor of Appellee against each individual
plaintiff. Thus, we find that the causes of action of Camerota, Cockrell, Covic, Davis, Hohensee,
Nightwalker, Sullivan, and Trip were not so interwoven and dependent on each other as to be
inseparable. Accordingly, we affirm the decision of the chancery court as to this issue.
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B. Failure to Challenge Arbitration Award
As a preliminary matter, we first must determine whether Mairose and Lovan1 were
precluded from bringing their breach of contract claims because they did not challenge the arbitration
award within the appropriate time limit.
On appeal, Appellee asserts that Mairose and Lovan are precluded from bringing their claims
because they failed to properly challenge the arbitrator’s award within the ninety day time limit for
making an application to the court to vacate an arbitration award pursuant to section 29-5-213 of the
Tennessee Code. Specifically, Appellee asserts that Mairose and Lovan had ninety days to vacate
an arbitration award on any ground and that, by failing to do so, Mairose and Lovan are precluded
from vacating the arbitration award. However, in the complaint, Mairose and Lovan do not
challenge the validity or effectiveness of the arbitration award. Rather, Mairose and Lovan contend
that when Appellee implemented the integrated master seniority list created by the arbitrator,
Appellee breached its employment contract, i.e. the FCH, with Mairose and Lovan. Mairose and
Lovan do not seek to vacate the integrated master seniority list; they seek damages for breach of the
FCH due to Appellee’s use of the integrated master seniority list.
Additionally, at oral argument, counsel for Appellee stated that the arbitrator had already
decided Mairose’s and Lovan’s breach of contract claims. We find this statement disingenuous.
During the arbitration, the arbitrator determined what he considered a fair and equitable integrated
master seniority list. The arbitrator did not determine whether by doing so would violate the terms
of the FCH. “An [arbitration] award is ordinarily effective as a merger or bar only with respect to
those matters which have been submitted and considered, or passed on, by the arbitrators.” See 6
C.J.S. Arbitration § 189 (2004). Accordingly, we conclude that Mairose’s and Lovan’s failure to
challenge the arbitration award within the ninety day time limit for making an application to the
court to vacate an arbitration award pursuant to section 29-5-213 of the Tennessee Code did not
preclude them from originally bringing their action to recover for Appellee’s alleged breach of the
FCH.
C. Breach of the FCH
On appeal, Mairose and Lovan argue that Appellee breached the FCH when it adopted an
integrated master seniority list in abrogation of the FCH’s policy on seniority. Specifically, Mairose
and Lovan argue that Appellee could not amend the seniority rights provisions under the FCH’s
revision/bulletin process as their seniority had been earned in such a way as to become vested or
accrued as opposed to amendable. The pilots contend that since their rights had vested, the
provisions of the FCH governing seniority were entitled to special protection and apparently
exemption from the other provisions of the FCH providing for amendment and revision of its terms.
1
W e note that this issue as well as the issue of breach of contract were brought on appeal by all of the
Appellants. However, as Camerota, Cockrell, Covic, Davis, Hohensee, Nightwalker, Sullivan, and Trip were properly
dismissed as to this action, we must consider both issues only as they apply to Mairose and Lovan.
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In fact, they claim that the seniority rights they had acquired were “incapable of being divested by
FedEx through any procedure in the contract.” Alternatively, Mairose and Lovan assert that, even
if Appellee could alter their seniority rights, the bulletin process notice of exception was not the
proper vehicle by which Appellee could do so. We disagree.
Seniority rights arise only out of contract or statute, as an employee has no inherent, natural,
or constitutional right to seniority in service. Haynes v. United Chemical Workers, CIO No. 288,
190 Tenn. 165, 170, 228 S.W.2d 101, 103 (Tenn.1950); Trailmobile Co. v. Whirls, 331 U.S. 40, 53,
67 S. Ct. 982, 988 (1947). Seniority does not arise from mere employment, independently of
contract. Haynes, 190 Tenn. at 170, 228 S.W.2d at 103. Accordingly, such rights can rise no higher
than the contractual relationship. 51A C.J.S. Labor Relations § 344 (2006). When an employee
acquires seniority rights under a contract, he is bound by the limitation that the contract may be
revised or abrogated, and therefore, any rights acquired under that contract would also be subject to
revision or abrogation by a subsequent valid amendment thereto. Lamon v. Georgia Southern &
F. Ry. Co., 212 Ga. 63, 67, 90 S.E.2d 658, 662 (Ga.1955) (citing Ford Motor Co. v. Huffman, 345
U.S. 330 (1953); Lewellyn v. Fleming, 154 F.2d 211 (10th Cir. 1946); Elder v. N.Y. Cent. R.R. Co.,
152 F.2d 361 (6th Cir. 1945)). Thus, seniority rights are not “vested” or “earned” through years of
employment such that they cannot later be terminated, lost, or bargained away. Oddie v. Ross Gear
& Tool Co., Inc., 305 F.2d 143, 149 (6th Cir. 1962).
The plain language of the introduction to the FCH unambiguously states that its provisions
are amendable. Specifically, the FCH provides that “[t]his Handbook sets forth the work rules and
policies regarding flight crewmembers” and that “these work rules and policies . . . remain in effect
until formally revised.” Chapter 1 is entitled “Personnel Practices” and contains subjects ranging
from pilots’ uniforms to discipline to pilot seniority. There are no exceptions setting forth different
procedures for amending different sections of the Handbook, or guarantees that certain provisions
will remain in effect. All provisions have the same status and are subject to revision in the same
manner. Therefore, under the terms of the FCH, the seniority provisions at issue were subject to
revision if the proper procedures were used.
Nevertheless, the pilots assumed that they had earned their seniority rankings, and therefore,
their seniority rights had vested and become irrevocable. In essence, they contend that the seniority
provisions in the FCH became irrevocable by virtue of their very content. They also point to FCH
language stating that “seniority will begin to accrue on the date a pilot is employed.” A similar
argument was presented in Cooper v. General Motors Corp., 651 F.2d 249 (5th Cir. 1981), where
employees who were once accorded seniority rights by a collective bargaining agreement alleged that
their rights were vested and could not be revoked by a later agreement. The court considered the
employees’ argument to be “devoid of support in federal labor law or contract law.” Id. at 250.
Because seniority rights owe their very existence to the parties’ agreement, they do not carry
permanent status, give an indefinite tenure, or extend rights created and arising under the contract,
beyond its life. Id. at 250-51. Whether any plaintiffs had relied on the old terms in accepting
positions was immaterial, because the parties had relied on a contract of limited duration, imminently
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subject to renegotiation. Id. at 251. The seniority rights previously conferred could be taken away
in a subsequent, validly made contract.
Also, in Tangren v. Wackenhut Services, Inc., 480 F. Supp. 539 (D.C.Nev. 1979), aff’d, 658
F.2d 705 (9th Cir. 1981), cert. denied, 456 U.S. 916 (1982), an existing seniority system was
modified in order to reduce discrimination against minorities. In examining the nature of seniority
rights, the court of appeals concluded, “it is settled that seniority rights are not vested property
rights.” Id. at 707. Therefore, the seniority rules at issue could be altered or amended to the
detriment of some employees by a good faith agreement between the company and union. Id.
In the case at bar, the pilots acquired their seniority rights pursuant to the terms of the FCH.
The terms of the FCH were amendable. Therefore, they had no “vested right” to their seniority
status. The rights were obtained subject to the possibility that the FCH would be amended from time
to time. They did not “accrue” in the sense that they could not subsequently be lost or terminated
by a properly enacted amendment.
Thus, as Mairose’s and Lovan’s seniority rights were not vested rights, our analysis turns to
whether Appellee properly amended the FCH pursuant to its terms to allow for a change in Mairose’s
and Lovan’s seniority rights due to Appellee’s merger with Tiger.2
“The interpretation of a contract is a matter of law that requires a de novo review on appeal.”
Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999) (citing Hamblen County v. City of
Morristown, 656 S.W.2d 331, 335-336 (Tenn. 1983)).
We conclude that Appellee properly amended the FCH. The introduction of the FCH clearly
stated that it could be amended through its revision process or its bulletin process. In this case,
Appellee chose to amend the FCH through the bulletin process notice of exception. Although
Mairose and Lovan assert that the bulletin process cannot be used to create a permanent change in
the FCH, under the FCH, a notice of exception may be used to except certain provisions of the FCH
for an operational need either for a single occurrence or for a stated period of time. In bulletin 89-
25, Appellee excepted provision 1-96 so as to not apply to its seniority list merger procedures with
Tiger, which was a single occurrence. Once the integration with Tiger was complete, provision 1-96
was no longer excepted, thus creating an expiration for the notice of exception. As such, we find
that the bulletin process could be used as it was in this case to amend the FCH to allow for the
seniority list merger procedures with Tiger.
2
Generally, this Court would first have to decide if the FCH was a binding agreement between the parties so
as to create a contractual right for seniority. W e do not have to do so in this case because the parties have previously
stipulated that the FCH was a binding agreement between them.
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Thus, we find that Appellee did not breach the FCH when it implemented the integrated
master seniority list created by Nicolau in arbitration. Accordingly, we affirm the chancery court’s
decision as to this issue.3
D. Discretionary Costs
Lastly, Appellants ask this Court to modify the chancery court’s order granting discretionary
costs to Appellee to exclude court reporter costs that were incurred from hearings.
Rule 54.04(2) of the Tennessee Rules of Civil Procedure states in pertinent part:
Costs not included in the bill of costs prepared by the clerk are
allowable only in the court’s discretion. Discretionary costs
allowable: reasonable and necessary court reporter expenses for
depositions or trials, reasonable and necessary expert witness fees for
depositions (or stipulated reports) and for trials, reasonable and
necessary interpreter fees for depositions or trials, and guardian ad
litem fees; travel expenses are not allowable discretionary costs.
Tenn. R. Civ. P. 54.04(2) (2005). Thus, while a trial judge has the discretion to award an amount for
allowable expenses, he or she does not have the discretion to identify allowable expenses and may
award discretionary costs only for those expenses identified in Rule 54.04(2) of the Tennessee Code.
See Miles v. Marshall C. Voss Health Care Ctr., 896 S.W.2d 773, 776 (Tenn. 1995); Shahrdar v.
Global Hous., Inc., 983 S.W.2d 230, 239-40 (Tenn. Ct. App. 1998).
Rule 54.04(2) of the Tennessee Rules of Civil Procedure allows for an award for reasonable
and necessary court reporter expenses for depositions or trials. In this case, the hearings were related
to the trial and were routine for the trial. As such, we find the court reporter expenses for those
hearings were reasonable and necessary court reporter expenses for trial. Accordingly, we affirm
the chancery court’s award of discretionary costs.
3
This Court is mindful that Appellee has also asserted on appeal that, if a breach occurred, Appellants failed
to notify Appellee in a timely fashion that they considered Appellee’s actions regarding the merger as a breach of the
FCH while they still reaped the benefits of the FCH. Appellee contends that this failure constitutes a waiver of any
breach by it. Because we find that there was no breach of the FCH, we need not discuss this issue.
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V. CONCLUSION
For the foregoing reasons, we affirm the decision of the chancery court finding that Appellee
had not breached the FCH and affirm the decision of the chancery court dismissing eight of the ten
Appellants as they did not properly perfect an appeal in Mairose I to the chancery court’s original
judgment notwithstanding the verdict. Further, we affirm the chancery court’s order awarding
discretionary costs to Appellee. Costs of this appeal are taxed to Appellants, Pete Camerota, Dana
Cockrell, Craig Covic, Ed Davis, Jr., Charles Hohensee, Gary Lovan, Steve Mairose, Lance
Nightwalker, Jim Sullivan, and David Tripp, and their surety, for which execution may issue if
necessary.
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ALAN E. HIGHERS, JUDGE
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