After Continental Airlines, Inc., filed a petition for reorganization under the Bankruptcy Code, it repudiated its collective bargaining agreement with petitioner Air Line Pilots Association, International (ALPA). An acrimonious strike ensued, during which Continental hired replacement pilots and reemployed several hundred crossover strikers. Two years into the strike, Continental announced in its Bid 1985-5 that it would fill a large number of anticipated vacancies using a system that allowed working pilots to bid for positions. Although ALPA authorized strikers to submit bids, Continental announced that all of the positions had been awarded to working pilots.
ALPA and Continental then agreed to end the strike, dispose of some related litigation, and reallocate the positions covered by the 85-5 bid. Striking pilots were offered the option of settling all outstanding claims with Continental and participating in the 85-5 bid positions' allocations, electing not to return to work and receiving severance pay, or retaining their individual claims against Continental and becoming eligible to return to work only after all of the settling pilots had been reinstated. Thus, striking pilots received some of the positions previously awarded to the working pilots.
After the settlement, some of the former striking pilots filed suit in the district court against ALPA, charging that the union had breached its duty of fair representation. The court granted ALPA's motion for summary judgment, but the court of appeals reversed.] STEVENS, J.... We granted certiorari to clarify the standard that governs a claim that a union has breached its duty of fair representation in its negotiation of a back-to-work agreement terminating a strike. We hold that the rule announced in Vaca v. Sipes, 386 U.S. 171,190 (1967)-that a union breaches its duty of fair representation if its actions are either "arbitrary, discriminatory, or in bad faith"-applies to all union activity, including contract negotiation.
We further hold that a union's actions are arbitrary only if, in light of the factual and legal landscape at the time of the union's actions, the union's behavior is so far outside a "wide range of reasonableness," Ford Motor Co. v. Huffman, 345 U.S. 330, 338 (1953), as to be irrational.... The union maintains, not without some merit, that its view that courts are not authorized to review the rationality of good faith, nondiscriminatory union decisions is consonant with federal labor policy. The Government has generally regulated only "the process of collective bargaining," H.K. Porter Co., v. NLRB, 397 U.S. 99, 102 (1970) (emphasis added), but relied on private negotiation between the parties to establish "their own charter for the ordering of industrial relations."
As we stated in NLRB v. Insurance Agents, 361 U.S. 477, 488 (1960), Congress "intended that the parties should have wide latitude in their negotiations, unrestricted by any governmental power to regulate the substantive solution of their differences." ... ... We have repeatedly noted that the Vaca v. Sipes standard applies to "challenges leveled not only at a union's contract administration and enforcement efforts but at its negotiation activities as well." Communications Workers v. Beck, 487 U.S. 735, 743 (1988) (internal citation omitted); ... As we acknowledged above, Congress did not intend judicial review of a union's performance to permit the court to substitute its own view of the proper bargain for that reached by the union.
Rather, Congress envisioned the relationship between the courts and labor unions as similar to that between the courts and the legislature. Any substantive examination of a union's performance, therefore, must be highly deferential, recognizing the wide latitude that negotiators need for the effective performance of their bargaining responsibilities.... For that reason, the final product of the bargaining process may constitute evidence of a breach of duty only if it can be fairly characterized as so far outside a "wide range of reasonableness," Ford Motor Co. v. Huffman, 345 U.S., at 338, that it is wholly "irrational" or "arbitrary." ...
A settlement is not irrational simply because it turns out in retrospect to have been a bad settlement. Viewed in light of the legal landscape at the time of the settlement, ALPA's decision to settle rather than give up was certainly not illogical. At the time of the settlement, Continental had notified the union that all of the 85-5 bid positions had been awarded to working pilots and was maintaining that none of the strikers had any claim on any of those jobs Given the background of determined resistance by Continental at all stages of this strike, it would certainly have been rational for ALPA to recognize the possibility that an attempted voluntary return to work would merely precipitate litigation over the right to the 85-5 bid positions.
Because such a return would not have disposed of any of the individual claims of the pilots who ultimately elected option one or option two of the settlement, there was certainly a realistic possibility that Continental would not abandon its bargaining position without a complete settlement. At the very least, the settlement produced certain and prompt access to a share of the new jobs and avoided the costs and risks associated with major litigation. Moreover, since almost a third of the striking pilots chose the lump-sum severance payment rather than reinstatement, see n. 1, supra, the settlement was presumably more advantageous than a surrender to a significant number of striking pilots.
In labor disputes, as in other kinds of litigation, even a bad settlement may be more advantageous in the long run than a good lawsuit. In all events, the resolution of the dispute over the 85-5 bid vacancies was well within the "wide range of reasonableness," 345 U.S., at 338, that a union is allowed in its bargaining.... The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent with this opinion. It is so ordered.
Case Questions
1. What is the "tripartite" standard announced in Vaca v. Sipes that applies to a union's duty of fair representation in contract negotiations?
2. When is a union's conduct in relation to contract negotiations "arbitrary" within the Vaca v. Sipes rule?
3. Was ALPA's settlement with Continental irrational? Explain.