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05/03/85 Brotherhood of Locomotive v. Te Commerce Commission and

May 3, 1985







Before reaching the statutory issues, we must consider two threshold issues: timeliness and issue preclusion.






et al., Intervenors

Nos. 83-2290, 83-2317

Petitions for Review of Orders of the Interstate Commerce Commission. 1985.CDC.92


Wright and Mikva, Circuit Judges, and Mackinnon, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge WRIGHT.

Dissenting opinion filed by Senior Circuit Judge MACKINNON.


Two unions -- the Brotherhood of Locomotive Engineers and the United Transportation Union -- object to the Interstate Commerce Commission's interpretation of labor issues arising from ICC's approval of a railroad consolidation.

The unions claim that, when the dust settled from the consolidation, certain railroads had effectively squeezed them out of their previous role in determining the crew used on particular routes. At the time, in early 1983, the unions objected and argued that the railroads' actions violated statutory labor protections. Since the railroads responded that ICC had given them full crew selection rights in the consolidation

In two decisions ICC rejected the unions' arguments. It maintained that the railroads' intentions on crew selection had been clear in the consolidation as approved and that ICC's authority to exempt transactions from legal obstacles, 49 U.S.C. § 11341(a) (1982), immunized these crew selection prerogatives from later attack.

The unions now petition this court to vacate those ICC decisions. Four railroads -- the Denver & Rio Grande Western , the Missouri-Kansas-Texas , the Missouri Pacific , and the Union Pacific -- are intervening in support of the Commission.

Because we find that ICC made no semblance of a showing that the exemption was necessary, as required by the exemption authority section, we vacate the ICC decisions. I. BACKGROUND

A. Legal Framework

This case presents the intersection of two statutory mandates -- ICC's exclusive authority to approve rail consolidations under the Interstate Commerce Act and the statutory protection for rail labor employees under both the Railway Labor Act and the Interstate Commerce Act. The unions argue that (1) ICC did not show a necessity for waiving the Railway Labor Act in the exercise of its Interstate Commerce Act approval authority, and (2) ICC cannot waive the Interstate Commerce Act's labor protection conditions in the exercise of that approval authority. Ultimately, we find the Railway Labor Act argument dispositive, and we vacate the ICC decisions on that basis. To fully understand the texture of this dispute, however, it is necessary to examine the Interstate Commerce Act labor protection conditions as well.

*fn1. ICC's approval authority. Under the Interstate Commerce Act, ICC has exclusive authority to approve certain consolidations and mergers. 49 U.S.C. § 11341 et seq. (1982). The Act enumerates the types of transactions to which ICC's approval authority applies, id. § 11343, and the considerations that must guide ICC, id. § 11344. Most significantly for this appeal, "[a] carrier, corporation, or person participating in that approved or exempted transaction is exempt from the antitrust laws and from all other law, including State and municipal law, as necessary to let that person carry out the transaction, hold, maintain, and operate property, and exercise control or franchises acquired through the transaction." Id. § 11341(a). Thus ICC has the power to approve a transaction and exempt its participants from legal obstacles that would impede its fruition.

In the exercise of this authority to exempt consolidations from the constraints of applicable statutes, ICC has certain ultimate constraints on its broad authority. First, there is a necessity component to the plenary authority: the statute specifies that ICC may exempt transactions from applicable laws "as necessary" for completion of the transaction. Second, as with any agency action, ICC's exercise of its authority must comport with the requirements of reasoned decisionmaking. See generally United States v. ICC, 396 U.S. 491, 24 L. Ed. 2d 700, 90 S. Ct. 708 (1970).

*fn2. Labor protection requirements. Statutory protections for railroad employees have received considerable congressional attention. Two important statutory vehicles for the current labor protection requirements are the Railway Labor Act, 45 U.S.C. § 151 et seq. (1982), and the Interstate Commerce Act's labor protection section, 49 U.S.C. 11347.

The Railway Labor Act creates a highly structured system for administering and resolving labor disputes. In passing the Railway Labor Act Congress sought, in part, "to avoid any interruption to commerce . . ., to forbid any limitation upon freedom of association among employees . . ., [and] to provide for the prompt and orderly settlement of all disputes concerning rates of pay, rules, or working conditions" 45 U.S.C. § 151a. The statute specifies eleven general duties of rail carrier, id. § 152. It also creates a variety of mechanisms to settle rail labor disputes -- a National Railroad Adjustment Board, id. § 153, a National Mediation Board, id. §§ 154-155, and a system of arbitration, id. §§ 157-159. The statute gives special attention to changes in rates of pay, rules, and working conditions. It provides that employers give employees the opportunity for negotiation and mediation before implementing such changes. Id. § 156; see also id. § 152, Seventh duty. The Railway Labor Act thus stands as an important structure for maintaining labor peace and fairness.

The Interstate Commerce Act labor protection section, 49 U.S.C. § 11347, affords employees substantial protection from the effects of mergers and consolidations. Such labor protection conditions have a long history. See New York Dock Railway v. ICC, 609 F.2d 83, 86-90 (2d Cir. 1979). In its current version the section provides that, in the exercise of its approval authority, "the Interstate Commerce Commission shall require the carrier to provide a fair arrangement at least as protective of the interests of employees who are affected by the transaction as the terms imposed under this section before February 5, 1976 . . .." 49 U.S.C. 11347 (emphasis added). ICC has specified the particular conditions that must be observed for

this Section 11347 requirement. The conditions for protecting labor in a merger are known as New York Dock conditions, see New York Dock Railway, 360 ICC 60 (1979), aff'd sub nom. New York Dock Railway v. ICC (supra). The conditons for protecting labor in transfers of trackage rights are known as Norfolk & Western conditons, see Norfolk & Western Railway Co., 354 ICC 605 (1978), modified by Mendocino Coast Railway, Inc., 360 ICC 653, 664 (1980), aff'd sub nom. Railway Labor Executives' Ass'n v. United States, 219 U.S. App. D.C. 23, 675 F.2d 1248 (D.C. Cir. 1982). These conditions include negotiation and mediation for dismissal and displacement of employees, 354 ICC at 610-611, 360 ICC at 85; dismissal and displacement compensation, 354 ICC at 611-612, 360 ICC at 86; and a system of arbitration, 354 ICC at 613, 360 ICC at 87-88. Generally, the conditions provide that "the rates of pay, rules, working conditions and all collective bargaining and other rights, privileges and benefits . . . of railroads' employees under applicable laws and/or existing collective bargaining agreements or otherwise shall be preserved unless changed by future collective bargaining agreements or applicable statutes." 354 ICC at 610, 360 ICC at 84. ICC has thus established conditions for discharging its statutory responsibility to protect labor benefits in the midst of consolidations.

In short, ICC has authority to approve certain transactions, even to the extent of exempting the transactions from other laws. At the same time, the Railway Labor Act structures, rail labor relations, and the Interstate Commerce Act's labor protection section gives rail employees a measure of protection from the effects of rail transactions.

B. The Current Dispute

This dispute has three important stages: (1) ICC's consolidation approval in 1982; (2) the post-approval conflict over crew selection; and (3) the two ICC decisions in 1983.

1. ICC approval for the consolidation. In 1982 UP and MP applied to ICC for approval of a consolidation under ICC's exclusive authority.1 Several railroads and several unions (including the petitioners) objected to the proposed consolidation. On October 20, 1982 ICC approved the consolidation, but it also approved the application of two railroads for "trackage rights"2 over specified MP routes to ameliorate possible anticompetitive effects. D&RGW received trackage rights for one route (Pueblo, Colorado to Kansas City, Missouri), and MKT received trackage rights for several other routes. See Union Pacific-Control-Missouri Pacific, 366 ICC 459 (1982), affirmed in part and remanded in part sub. nom. Southern Pacific Transportation Co. v. ICC, 237 U.S. App. D.C. 99, 736 F.2d 708 (D.C. Cir. 1984) (per curiam), cert. denied, 469 U.S. 1208, 105 S. Ct. 1171, 105 S. Ct. 1172, 84 L. Ed. 2d 322, 53 U.S.L.W. 3597 (1985). These are the four railroads who are intervening in support of the ICC decisions -- the two who received ICC approval of their consolidation (UP and MP) and the two who received trackage rights for MP routes as conditions of that approval (D&RGW and MKT).

In their applications for trackage rights D&RGW and MKT both commented on crew selection. D&RG specified that it could, at its option, use its own crews when it used the newly granted trackage rights, Finance Docket No. 30,000 (Sub-No. 18) (DRGW-8) (cited in ICC Decision of October 25, 1983, Joint Appendix 164); MKT specified that it would use its own crews, Finance Docket No. 30,000 (Sub-No. 25) (MKT-25) (cited in ICC Decision of October 25, 1983, JA 164).

In granting the trackage rights ICC did not mention crew selection. The Commission primarily addressed the neef for the trackage rights to prevent possible anticompetitive effects from the consolidation. 366 ICC at 566-568, 572-578. Indeed, the Commission denied part of MKT's application for trackage rights because it did not agree that these trackage rights were needed to promote competition. Id. at 570-572. Notably, ICC emphasized that its general trackage rights approval was subject to the Norfolk & Western conditions that protect workers' rights in trackage rights situations. 366 ICC at 654; id. at 621-622. This statement was ICC's only reference to labor arrangements in the use of trackage rights.

2. The crew assignment controvesy. After the consolidation became effective, the railroads began performing their approved trackage rights operations. D&RGW temporarily used MP crews on the MP routes, but claimed that it would soon use its own crews. Exhibit A to BLE's Petition for Clarification of ICC's October 20, 1982 deision, JA 6. MKT, meanwhile, began using its own crews. UTU's Petition for Reconsideration of ICC's denial of BLE's Petition for Clarification at 3, JA 74. The unions objected. They claimed that the unions representing MP employees had an established right to a role in crew assignment and that the railroads were changing that condition without consulting them. Both D&RGW and MKT, however, claimed that the ICC approval of their applications gave them a right to use their own crews and that ICC's exemption authority immunized this right from later legal challenge. MP's Reply to BLE's Petition for Clarification at 11, JA 24. UTU's Petition for Reconsideration at 3-4, JA 74-75.

D&RGW also made an additional argument. The Atchison, Topeka & Santa Fe Railway Company had challenged D&RGW's temporary use of MP crews in the trackage rights as anticompetitive and impermissible. On November 24, 1982 and January 18, 1983 ICC issued decisions rejecting the challenge and upholding D&RGW'S plans, including the preliminary decision to use existing MP crews. The Commission noted the D&RGW had the choice of using its own crews; the Commission did not mention any lurking labor relations issues. ICC Decision, November 24, 1982, at 3 (D&RGW brief, Appendix B); ICC Decision, January 18, 1983, at 3 (id., Appendix C). In response to the unions' challenge, D&RGW claimed that these ICC decisions settled the validity of its crew selection plans. Reply of D&RGW to BLE's Petition for Clarification, JA 9-10.

Initially, the two unions responded to the railroads' position on crew selection in different ways. The United Transportation Union threatened to strike over the crew assignment issue. MP sought an injunction preventing the threatened strike. On March 1, 1984 the District Court for the Eastern District of Missouri issued such an injunction. Missouri Pacific R. Co. v. United ...

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