"The defendants are liable for damages because of their contemptuous acts of not obeying and ending the illegal sickout when ordered," Circuit Judge Robert Parker wrote in Thursday's decision.
The ruling comes a day after members of the Allied Pilots Association, or APA, overwhelmingly rejected a one-year contract extension that contained provisions for dropping the award.
"APA is now reviewing its legal options with counsel to determine our next steps," union president Rich LaVoy said in a telephone hotline recording Thursday. "We have not yet been in contact with senior management at American Airlines regarding this development, as the company's senior officers are out of the country at ... [a] board of directors' meeting."
The union would not discuss the issue further, and an American spokeswoman declined to comment.
Relations between American and its pilots' union reached a low during the sickout. Since then, both sides have attempted to work more cooperatively with each other. But not until the contract extension did the airline offer to drop the damage award.
"It was unfortunate that the fine was not settled separately," Brian Mayhew, the union's vice president, said shortly after announcing the vote Wednesday. "It was an issue that some of the members had a problem with.
"Both sides knew this wasn't going to be a slam-dunk anyway. You have to respect the membership's will."
American had sued the union, which represents close to 9,350 pilots, in February 1999 to end a sickout that resulted in the cancellation of nearly 6,700 flights and cost the airline $225 million.
Union members had launched the sickout to protest how pilots at newly acquired Reno Air Inc. were integrated into American's operations. The APA has argued that American needed the union's agreement or a waiver before taking control of Reno Air.
The union adopted a tough stance against the purchase, which it viewed as a threat to members' jobs and wages. Reno, a low-cost carrier based in Nevada, had paid its pilots significantly lower wages than American.
The union accused American of violating the pilots' contract because it did not draw pilots from the airline's seniority list to fly Reno planes on Dec. 23, 1998, the date American finalized the Reno purchase.
After months of negotiation, American conceded this point to the union in a November letter. Previously, the carrier had argued that although it took financial control of Reno on Dec. 23, 1998, it did not assume operational control until Aug. 31, 1999. At the time, American said the concession did not set a precedent for future acquisitions.
Shortly after American filed its lawsuit to end the sickout, a Dallas federal judge issued a temporary restraining order that called upon the pilots to return to work.
When flight cancellations rose the day after the order was issued, the judge found the union, Mr. Mayhew and Mr. LaVoy guilty of not promptly obeying his order and in April 1999 awarded $45.5 million to American.
In its appeal to the U.S. Fifth Circuit Court of Appeals in New Orleans, the union said it had not received a fair hearing and contested the evidence used to determine whether it had violated the temporary restraining order. It also asserted that the damage award was not permissible under the Railway Labor Act.
While Circuit Judge Parker agreed that the Railway Labor Act does not contain any provisions for damages, he wrote that the award stemmed from the union's violation of the restraining order, not from its violation of the law.
"The district court did not abuse its discretion in finding the defendants in civil contempt for violating the temporary restraining order," Judge Parker also wrote.
The union could ask the three-judge panel who heard the case to reconsider its decision. If that fails, it could request a review by the full Fifth Circuit court or appeal to the U.S. Supreme Court.
News of the ruling came after stock trading closed Thursday.