A federal bankruptcy court ruled yesterday that approximately $4 million held by the Professional Air Traffic Controllers Organization in what it called a trust fund for its members belongs instead to the union's creditors.
The decision came in a suit filed by the Air Transport Association, a trade association of airlines, which argued that the $4 million was part of the defunct union's assets that should be distributed to its creditors.
Patco filed for bankruptcy in July, 11 months after calling a strike that led to the firing of 11,500 of its members. Under the bankruptcy proceedings, the union's assets are to be distributed by a court-appointed trustee to the union's creditors. The union contended that the $4 million was a subsistence trust fund which would be disbursed to union members at some point.
The nation's airlines are owed an estimated $33 million as a result of fines levied against the union for violating an injunction barring a strike. The bankrupt union's creditors also include the U.S. government, which is owed about $1 million.
"To permit the return of the trust monies to members of the union that have acted in clear defiance of established law would be to reward Patco members for their illegal action," Bankruptcy Judge Roger M. Whelan said in a 16-page decision.
Whelan wrote that a trust fund is "void and of no effect" when the purpose of it is to defeat a public policy or where it's prohibited by law. "It is clear to the court that recognition of the trust fund, created as it was to thwart a clear and express public policy against strikes by government employes, would result in a perversion of valid, stated government objectives in defining union activities," he wrote.
ATA said in a statement yesterday that the decision upheld "the important principle that union strike funds designed to aid in an unlawful strike must be available to pay damages caused by that illegal strike." Whatever funds are paid ultimately to ATA from the bankruptcy estate will be earmarked for the benefit of ATA member airlines and will offset partially the losses caused by the strike, the group said.