The management of the debtor reported on August 15, 1979 that employee terminations had resulted in cost savings that were expected to be improved by additional and continued lay-offs and job abolishments. (Transcript, August 15, 1979, at 14, 44-45). Thus, it is clear that the debtor began reducing its work force as early as June 1979, pursuant to recommendations of the Peabody management consulting firm and the NJDOT, in an effort to reorganize on an income basis. Although the debtor showed less of a loss in 1979 ($ 170,845.00) than in previous fiscal years during this proceeding, unfortunately management's efforts were not sufficient to make this railroad profitable. It is significant to note, however, that attempts to rationalize the labor force led to the debtor's best financial performance.
Losses, while reduced, nonetheless continued to reflect the inability of this railroad to turn itself around. As indicated above, gross revenues were also declining to an annual figure of approximately $ 2,000,000. The Peabody report assumed that with only 52 employees, profitability could be achieved, provided gross revenues remained in the range of $ 2,500,000. Thus, even as rationalization proceeded, the assumptions underlying the Peabody analysis were undercut.
Testimony adduced at the September 23 hearing confirms the fact that less employees are needed as the volume of business declines. Although the debtor had only 25 employees as of August 29, 1980, it was able to accomplish this 58 percent reduction of its work force over a period of 9 months with no adverse impact on its operational capacity. This reduction of approximately 34 employees from January to September 1980 was possible through significant attrition in the clerical area, additional mechanization within the track maintenance department, and the general decline in business.
Of the 25 persons employed by the debtor on August 29, 1980, 23 were hired by the New NYS&W. One employee died over the Labor Day weekend; consequently, only one of the people employed by the Trustee on the date he ceased operation was not hired by the new carrier. That person not employed by New NYS&W is receiving benefits from Delaware Otsego.
By posting of notice, or publication, well in advance of August 29, 1980 every employee knew or should have known of the pending negotiations between the Trustee and various interested parties, and the likelihood of the sale of the debtor's abandoned line to a new carrier.
In addition, RLEA had actual knowledge of events as they transpired by reason of its active participation in this proceeding. Despite this fact, there is no proof that RLEA ever made formal demand on either the Trustee, Delaware Otsego, or New NYS&W to engage in collective bargaining on the various aspects of termination of existing employees and reassignment of forces to the new carrier. Were RLEA, or any other responsible labor organization to have made such a demand, it seems unlikely that numerous individual employees would have felt it necessary, prior to August 29th, to initiate contact with the Trustee regarding either separation settlements, or their continued employment by the new carrier. As a result of those negotiations, and after being advised that the cash received from the Trustee or Delaware Otsego would be in full settlement of any and all claims which they could have against either the Trustee or Delaware Otsego, between 15 and 18 employees executed documents which on their faces appear to be general and complete releases of all of their claims. See Exh. T-1 and T-2. These releases are valid in all respects, and there is no evidence that they were not knowingly and willingly executed by the releasors. None of the employees who negotiated with the Trustee about settlement and separation complained of the results reached.
The aforementioned employees who executed releases left the Trustee's employment voluntarily, and in so doing, manifested an unwillingness to work for the new carrier.
In July 1980, for the first time in 15 years the Railroad required physicals of all employees; those employees averaged 50 years of age. To require physicals is not a violation of any collective bargaining agreement which has been placed before the Court; rather, such physicals are, according to an employee-witness, a beneficial way to ensure the safety of employees performing physical labor. Three of the existing employees failed the physical; one was subsequently restored after one day, but then voluntarily left the Trustee's employ and executed a release. Thus, two employees were terminated in July, 1980, for failing the physical.
Although the job titles of the debtor's former employees may have changed, their duties have not. No employee is performing work which he would rather not do, or that is beyond his physical capacity. Hourly wage rates of the employees of the new carrier are equal to or higher than those paid by the Trustee. New NYS&W does not pay time and one-half for overtime. However, all fringe benefits are provided by the new carrier, and are equal to, or superior to those which were provided by the Trustee.
Former employees of the debtor are being given priority in filling positions on the new carrier which may be required in connection with rehabilitation of the line.
In light of the foregoing, this Court must evaluate the necessity for imposing labor protection conditions upon the estate. This analysis shall proceed in the context of the conclusion previously reached that the disposition of the assets of the debtor constitutes a court-authorized abandonment consistent with Section 17(a) of the Milwaukee Act.
The Milwaukee Act shifted the authority over the issue of labor protection from the ICC to this Court. Both section 17(a) of the Milwaukee Act, dealing with abandonments, and section 17(b) of the same Act, dealing with the sale or transfer of lines, provide that a reorganization court shall see to it that employees are protected according to 49 U.S.C. § 11347. Contrary to this Court's conclusion that this case is a section 17(a) abandonment, RLEA contends that section 17(b) of the Milwaukee Act applies to this case, and that the minimum level of labor protection which this Court must apply are those standards articulated in New York Dock R. Co. v. United States, 609 F.2d 83 (2nd Cir. 1979), or Oregon Short Line Railroad Abandonment, 360 I.C.C. 91 (1979).
Discussion of the statutory framework governing this case is somewhat complicated by the codification and restatement, without substantive change, of the Interstate Commerce Act, P.L. 95-473 (October 17, 1978), 49 U.S.C. § 10101 et seq. Under that statute, applications to abandon a line of railroad were filed with the Commission under 49 U.S.C. § 10903, which was formerly section 1(18) of the Act. On the other hand, applications for consolidation, merger or purchase of property of a carrier by another carrier were filed under 49 U.S.C. § 11343, which was formerly section 5(2) of the Act. 49 U.S.C. § 11347, referred to in the Milwaukee Act as the statute to which this Court should look for guidance in the area of labor provisions, on its face applies only to the "consolidation/merger" type of case, initiated under 49 U.S.C. § 11343 (formerly section 5(2)).
The policy behind the important distinction between abandonments and consolidation/merger cases was explained by the Interstate Commerce Commission in Okmulgee Northern Railway Company Abandonment, 320 I.C.C. 637, 639-640 (1964):
The congressional purpose in enacting section 5(2)(a) in its present form was to facilitate voluntary merger and consolidation in the national transportation system. County of Marin v. United States, 356 U.S. 412, 416-418, 78 S. Ct. 880, 881, 2 L. Ed. 2d 879 (1958). As indicated by the history of the legislation, Congress was much concerned with the survival of railroads that were in weak condition and with the steps which might be taken to promote carriers' survival. The great dependence previously placed on competition among railroads to invigorate our railroad economy, was to be moderated where necessary for such survival, and, in the interest of the maintenance and development of an economic and efficient railroad system, consolidation was to be made easier... That section 5 contemplates rail merger and unification of properties and operations as a step in continuing the enterprise as distinguished from situations where, as here, the one carrier is abandoning its entire line and operations is made clear by the decision in Schwabacher v. United States, 334 U.S. 182 (68 S. Ct. 958, 92 L. Ed. 1305) (1948) ... As distinguished from section 5(2) which governs the unification of continuing enterprises, section 1(18) was intended and designed to cover abandonments, acquisitions and extensions of lines of railroad. 320 I.C.C. 639-640.
The total cessation of operations and liquidation ordered by this Court is a complete abandonment. I.C.C. v. Chicago & Northwestern Transportation Co., supra; I.C.C. v. Chicago, Rock Island & Pacific Railway Company, supra. Does an abandonment carry with it the mandatory requirement that labor protection conditions be imposed? The answer appears to be clearly: No.
Rather than being required to do so, this Court has discretion whether or not to impose labor protection provisions. In re Chicago, Rock Island & P. R. Co., No. 75-B-2697, Order No. 248 (N.D.Ill. filed June 2, 1980). In the exercise of its discretion, it is appropriate for the Court to consult ICC rulings issued while that agency had authority over the issue of labor protection, in determining the standards and factors to be applied to a total abandonment of a carrier. See Udall v. Tallman, 380 U.S. 1, 16, 85 S. Ct. 792, 801, 13 L. Ed. 2d 616 (1965); Lehigh & N. E. R. Co. v. I. C. C., 540 F.2d 71, 80 (3d Cir. 1976). As will become apparent, in cases of total abandonment, prior to the passage of the Milwaukee Act, the ICC had consistently refused to impose any labor protective provisions at all. Further, after passage of the Milwaukee Act, the only Court faced with the issue has also refused to impose labor protection in a case of total abandonment, such as obtains in the within matter. Rock Island, supra. For the reasons which follow, no labor protection will be imposed in this case, upon either the Trustee, the New NYS&W or Delaware Otsego.
The ICC has characterized abandonment applications under former section 1(18) of the Interstate Commerce Act, (which would be applicable here but for the passage of the Milwaukee Act), as falling into three general groups:
(1) Abandonment of entire properties by carriers which are no longer able to continue the struggle for survival because of highway competition or other conditions depriving them of sufficient means of livelihood; (2) Partial abandonments by generally unprosperous carriers in the effort to reduce expenses and thereby preserve service to the public on their remaining lines; and (3) Abandonment of main lines, branch lines, or parts of lines by carriers, not in extremis, where abandonment is warranted and desirable as a benefit to the transportations system, but, in the language of the court, results also in a private benefit for the railroad in the form of savings realized by discontinuing uneconomic service. Chicago, A. & S. R. Receiver Abandonment, 261 I.C.C. 646, 651 (1956).