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Ferrick v. Baltimore and Ohio Railroad Co.

decided: July 12, 1971.


Staley and Adams, Circuit Judges and Garth, District Judge.

Author: Adams


In this case we are asked to rule that the District Judge erred in refusing to review an arbitration award challenged as being illegal because it was contrary to the provisions of the ICC ruling governing the proceedings, it was inconsistent with the facts as found by the arbitration committee, and it was incomplete, ambiguous, and capricious.

For the 21 years prior to the events giving rise to this litigation, the appellant, Miss Ferrick, was employed in the Regional Office of the Engineering Department of the Baltimore and Ohio Railroad Company (B & O), in Pittsburgh, Pennsylvania. As secretary to the Assistant Regional Engineer, she earned a monthly salary of $559. Because this was an "excepted" position, Miss Ferrick was not a member of the Brotherhood of Railroad Employees.

In 1962, the Chesapeake and Ohio Railroad Company (C & O) sought control of the B & O. The control agreement was approved by the Interstate Commerce Commission in Chesapeake & O. Ry.-Control Baltimore & O.R.R., 317 ICC 261 (1962). Appendix VIII to that decision [hereafter referred to as Control Conditions] specified certain "conditions for the benefit of employees of carriers."*fn1 Soon after C & O announced the proposed take-over, B & O eliminated its Regional Engineering Office in Pittsburgh and abolished Miss Ferrick's position. Shortly thereafter, her employment was terminated.

Prior to the termination, appellant sought other employment from B & O. However, she made it clear to those to whom she spoke that she was not interested in working for the department that was instrumental in abolishing her position, and that she would not accept employment paying under $500 per month. Furthermore, she maintained she was not required to transfer from Pittsburgh to another city in order to avoid forfeiture of her benefits.

When these negotiations foundered, appellant attempted to secure her protective benefits by arbitration under article I, section 6 of the Control Conditions. Because the parties could not agree upon a neutral member of the arbitration committee, they requested Judge Miller to make the selection.*fn2 After the appointment of a member of the University of Pittsburgh law faculty as the neutral arbitrator, a hearing was held, and on June 10, 1966, the arbitration committee announced its report.

The arbitration committee found that because the abolition of appellant's position was a result of the transaction between B & O and C & O, Miss Ferrick derived her rights from the Control Conditions. The committee determined she was a "dismissed" employee and was therefore entitled to benefits of $59 per month for the duration of the protective period. This figure was arrived at by subtracting from her 1963 salary ($559 per month) the amount of the salary of the job she refused ($500 per month).*fn3 Finally, the committee decided that Miss Ferrick could derive no benefits from the Agreement of May, 1936 (Washington Agreement), because article II of the Control Conditions applied only to union personnel.

Miss Ferrick next appealed to the National Railroad Adjustment Board.*fn4 That Board found that it had jurisdiction over the dispute, but dismissed the claim because the Control Conditions provided that the arbitration would be "final, binding, and conclusive."*fn5

Appellant then filed a complaint in the District Court for the Western District of Pennsylvania, asking for a declaration of her rights and reformation of the award. In ruling on defendants' motions for summary judgment, Judge Miller found that the case involved no genuine issue of material fact and that Miss Ferrick's assertions were, as a matter of law, without merit.

In Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123 (3rd Cir. 1969), we carefully considered the issue of the proper scope of judicial review of arbitration awards. Particular emphasis was placed upon the appropriate standard which courts should apply. After reviewing leading state and federal cases, including the Steelworkers trilogy,*fn6 with regard to both commercial and labor arbitration, and the differences in the policies which underlie each, we concluded:

"Bearing this in mind and perceiving that the Supreme Court's announced standards in reviewing commercial awards call for the exercise of judicial restraint, we must conclude that such a philosophy of restricted review compels even less judicial interference in matters arising from labor arbitration. At the very least this means that the interpretation of labor arbitrators must not be disturbed so long as they are not in 'manifest disregard' [Wilko v. Swan, 346 U.S. 427, 436, 98 L. Ed. 168, 74 S. Ct. 182 (1953)] of the law, and that 'whether the arbitrators misconstrued a contract' does not open the award to judicial review. [Bernhardt v. Polygraphic Co. of America, Inc., 350 U.S. 198, 203, 100 L. Ed. 199, 76 S. Ct. 273 (1955)].

"Accordingly, we hold that a labor arbitrator's award does 'draw its essence from the collective bargaining agreement' [United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 599, 4 L. Ed. 2d 1424, 80 S. Ct. 1358 (1960)] if the interpretation can in any rational way be derived from the agreement, viewed in the light of its language, its context, and any other indicia of the parties' intention; only where there is a manifest disregard of the agreement, totally unsupported by principles of contract construction and the law of the shop, may a reviewing court disturb the award." 405 F.2d at 1128.

In this case, however, there is no collective bargaining agreement upon which the arbitration is based. Rather, it is based upon the conditions imposed by the ICC upon the railroads in order to insure "a fair and equitable arrangement for protecting the interests of the employees of the applicant [C & O] and the B & O and any of their subsidiaries who may be adversely affected as a result of the transaction herein approved. . . ." 317 ICC at 289. Various proposals were considered by the Commission, Id, at 286-89, before arriving at the conclusion that the Control Conditions, as fashioned for this transaction, would "more than meet the minimum requirements of section 5(2)(f).*fn7 It is abundantly clear that the underlying purpose of the Control Conditions is the same as that of a collective bargaining agreement, and that the conditions were intended to supplement whatever agreements were then in force.*fn8 We ...

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