The Texas Supreme Court delivered some bad news for The Boeing Company on Friday morning when it issued an opinion clearing the way for the Southwest Airlines Pilots Association to sue the company for damages caused by its alleged misrepresentations about the airworthiness of the 737 MAX.
The justices unanimously determined that the Railway Labor Act does not preempt the claims brought by SWAPA. Boeing had argued that because deciding the case requires interpretation of the collective bargaining agreement between Southwest Airlines and its pilots, the claims were preempted. SWAPA argued, and the court agreed, that the RLA does not preempt its suit because the act only applies to claims between airline carriers and employees, and Boeing is not either of those.
But the justices diverged 7-2 on another key issue in the case relating to whether the pilots’ assignment of their individual claims to SWAPA, a 9,000-member labor union, was void as against public policy. The claims were assigned after Boeing argued that the union lacked “associational standing” to bring the claims.
A trial court agreed with Boeing and dismissed SWAPA’s claims with prejudice. SWAPA took the case to the Fifth Court of Appeals in Dallas and that court determined that while SWAPA lacked associational standing, the claims should be dismissed without prejudice, allowing the union to bring the claims in another lawsuit.
The Texas Supreme Court majority affirmed the lower appellate court’s ruling. Justice Jeff Boyd, writing for the majority, explained that the court has previously determined assignments of claims that “tend to increase or distort litigation” violate public policy and are void because they “mislead the jury, promote unethical collusion among nominal adversaries, and create the likelihood that a less culpable defendant will be hit with the full judgment.”
Justice Boyd wrote that in this case, the majority saw “no reason to conclude that the pilots’ assignments run afoul of public policy.”
“The claims and damages that SWAPA seeks are ‘property-based and remedial,’ as opposed to the kind of ‘personal and punitive’ claims that are generally unassignable in Texas,” he wrote. “And SWAPA is in a unique position as the party that actually negotiated the [collective bargaining agreement] on its members’ behalf and allegedly relied on Boeing’s misrepresentations.”
Even with the court’s ruling, the union could face an uphill climb to prove and collect any damages in the case. Justice Boyd wrote that the majority opinion doesn’t decide “whether and how SWAPA can pursue and try the thousands of individual claims its members assigned to SWAPA” and that to prevail on any one pilot’s claim, the union must “establish that the pilot suffered an “injury in fact” as a result of Boeing’s alleged wrongful conduct.
“To recover damages on a pilot’s claim for tortious interference or misrepresentations, for example, SWAPA must establish that each individual pilot relied on alleged misrepresentations and suffered a particular amount of damages as a result,” the opinion reads.
Justice Boyd wrote that in order to prevail on the claims, the union has to prove Boeing’s “liability to the individual member who assigned it and the damages that member sustained.”
“In short, SWAPA may not rely on the assignments as a means to circumvent the statutory and procedural requirements for associational standing,” he wrote.
Initially, in May 2024, the Texas Supreme Court declined to hear the case, but after Boeing asked the court to reconsider, the justices agreed in January and heard oral arguments in the case in March.
Justice Jane Bland authored a partial dissent, joined by Justice Rebeca Huddle, writing that she agrees with the majority that the RLA does not preempt SWAPA’s claims, but she diverges from her colleagues on remanding SWAPA’s claims for damages to the trial court.
Over 13 pages, Justice Bland explained that in her view, Business Organizations Code Section 252.007 clearly bars SWAPA from seeking monetary damages on behalf of its individual members because the union will have to show evidence of the individual damages suffered by its members in order to prevail.
“The Court cites no case before today permitting a nonprofit association to act as the assignee of thousands of its members’ damages claims,” she wrote. “With the Court’s opinion in hand, nonprofit organizations are free to become clearinghouses for mass torts — with none of the protections that other mass-action vehicles afford.”
Justice Bland warned that the ruling could lead to the proliferation of “new associations” forming to bring claims and that those associations could enact agreements that would reserve a portion of its members’ damages for the association.
“That is assuming, of course, that the association diligently pursues such claims, which it has no obligation to do as an assignee. As in this case, nonprofits will become vehicles for third-party litigation financing, the costs of which the assignment requires SWAPA’s individual members to bear,” she wrote. “The Court is nevertheless content to ground its holding in the fact that the assignments do not violate public policy because — in an optimistically omniscient view — a labor association’s involvement will not protract the litigation or drive up its costs.”
SWAPA’s lead lawyer on appeal is David Coale of Lynn Pinker Hurst & Schwegmann.
Boeing’s lead lawyer on appeal is Anne Johnson of Tillotson Johnson and Patton.
The case number is 22-0631.