Look for a run on the A-Fund, leading to an underfunded status, leading to no lump sum. According to the retirement plan, a divorce triggers distribution of retirement funds. Several pilots "divorced," got the lump sum, then remarried. CAL went after them.
Judge tosses suit saying pilots got sham divorces
October 19, 2009 - 501pm
By HARRY R. WEBER
AP Airlines Writer
ATLANTA (AP) - A federal judge Monday tossed out a Continental Airlines Inc. lawsuit accusing nine pilots of getting sham divorces so their ex-spouses could collect the pilots' retirement benefits while they kept flying.
U.S. District Judge Gray Miller said he can't condone the pilots' alleged actions.
But he ruled that the law doesn't allow Continental's pension administrator to consider the employees' motivation for getting divorced in deciding whether to distribute benefits.
Miller granted the pilots' motion to dismiss.
There was no immediate response from a spokeswoman for Houston-based Continental, which said it paid out between $10 million and $11 million in suspicious pension distributions. Some individual payments were as much as $900,000, according to court papers.
The airline said some of the pilots concealed the divorces from children and friends, then remarried their spouses after getting the money.
The pilots in question all obtained divorces from various states with domestic relations orders that assigned 100 percent, and in one case 90 percent, of their retirement benefits under the plan to their spouses.
The retirement plan qualified the domestic relations orders and, because the pilots were of retirement age when the alternate payees requested a lump-sum payout, the plan paid the benefits.
Miller said "the facts show--and the pilots do not seem to contest--that the pilots and their former spouses did not behave in a manner consistent with the breakup of a marriage."
He said many of the pilots continued to cohabitate, remarried soon after obtaining the lump-sum payout and all essentially conducted themselves as if the divorce had never happened.
But the judge said none of that was relevant to the issue at hand.
He said "the administrator may not refuse to qualify a domestic relations order based on criteria not present in the statute."
The judge added that "the court finds that the motivation or good faith of the divorce and resulting domestic relations order is not an enumerated requirement."
As of the time the suit was filed, eight of the pilots had been fired or quit. One was rehired after he promised to pay back the retirement money, the airline said--although he too was named as a defendant after failing to repay. The spouses were also named as defendants.
The airline and the committee that runs its pilots' retirement plan filed the lawsuit in federal court in Houston.
Continental asked the court to order the pilots to return the money and to declare that the company was not violating anti-discrimination laws in firing the pilots.
Continental charged that the pilots--seven men and two women--tried to take advantage of a loophole in a major federal pension law that in cases of divorce allows payment of benefits before the worker retires.
Several airlines have terminated pension plans and turned them over to the federal Pension Benefit Guaranty Corp., and the Continental pilots might have feared the same thing could happen at their carrier.
Continental said it began receiving "a significant number" of requests for lump-sum pension payouts to ex-spouses of working pilots beginning in late 2005, and by mid-2007 the airline learned that the couples usually remarried after getting the money.
Other pilots besides the nine named in the lawsuit apparently tried the same ploy, according to the lawsuit. In some cases, the company stopped payments before they were made.
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