Pilots, Machinists Unions Sue Eastern, Lorenzo
Eastern Airlines’ pilots and machinists unions Monday sued the airline and its chairman, Frank Lorenzo, charging that “fraudulent empire building, misrepresentations, extortion and other criminal means including asset stripping and asset shifting” had damaged the carrier’s employees and shareholders.
In their civil racketeering lawsuit, the unions charged that the defendants were leaving Eastern “in precarious financial condition and without means to survive.”
The union action was a countersuit--filed in U.S. District Court in Miami--to a suit brought by Texas Air against the unions in May, 1988, almost a year before the Miami-based airline was struck by its unions and filed for bankruptcy. The machinists struck last March 4, and the pilots walked out in sympathy. Five days later, Eastern filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
“This (case) is partially in answer to their claim against us,” said Ronald W. Cole, an Eastern pilots spokesman who is one of the defendants in Texas Air’s suit. “Eastern is being dismantled, and we are taking action to shed the light of day on all of these appalling transactions. Eastern is suffering from the battered child syndrome. It is being mugged by its parent.”
Eastern is attempting to rebuild as a smaller carrier than it was before the strike and has sold a number of assets, most notably its East Coast air shuttle operation, which was bought by New York hotel magnate Donald J. Trump.
170-Page Countersuit
The Texas Air suit seeks $1.5 billion from the unions, charging that the unions’ efforts to “smear the company’s name” had caused it to lose $500 million. Under the civil provisions of the Racketeering Influenced and Corrupt Organizations Act, or RICO, plaintiffs can seek treble damages. The suit seeks multimillion-dollar damages and relief.
Besides Eastern and Lorenzo, the unions’ countersuit named the following defendants: Eastern President Phil Bakes, parent firm Texas Air Corp., Continental Airlines (which is also owned by Texas Air) and Jet Capital Corp., a holding company owned in part by Lorenzo that has a minority interest in Texas Air.
The unions said in their 170-page countersuit that Texas Air has engaged in criminal activities that included a “pattern of racketeering activity in violation of the securities laws, the mail and wire fraud statutes . . . and RICO.”
Eastern spokesman Robin Matell said the unions’ countersuit has “attempted to collect claims that they have pleaded against Texas Air and its affiliates in dozens of other suits and in administrative proceedings over the last decade and packaged them under a single RICO case. These include arguments that have already been rejected.”
