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Railway Labor Executives' Association v. Pittsburgh & Lake Erie Railroad Co.

argued: January 8, 1988.


On Appeal From the United States District Court for the Western District of Pennsylvania, D.C. Civil No. 87-1745.

Becker, Hutchinson and Cowen, Circuit Judges.

Author: Becker


BECKER, Circuit Judge.

In 1926, Congress enacted the Railway Labor Act ("RLA"), in order to prevent railroad strikes from crippling interstate commerce. See ch. 347, 44 Stat. 577 (1926), now codified as amended at 45 U.S.C. §§ 151-188 (1982); Detroit & Toledo Shore Line R.R. v. United Transp. Union, 396 U.S. 142, 148, 24 L. Ed. 2d 325, 90 S. Ct. 294 (1969). The RLA prohibits a railroad employer from changing "rates of pay, rules, or working conditions" while a dispute concerning changes in a collective bargaining agreement is being negotiated. 45 U.S.C. § 156 (1982).

In 1887, Congress enacted the Interstate Commerce Act ("ICA"), beginning almost a century of comprehensive regulation of interstate transportation in this country. See ch. 104, 24 Stat. 379 (1887). After successive expansions of the scope of the ICA, see, e.g., Transportation Act of 1920, ch. 91, 41 Stat. 456 (1920); Transportation Act of 1940, ch. 722, 54 Stat. 898 (1940), the trend of increasing regulation was broken in 1976 and again in 1980, when Congress passed the Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. No. 94-210, 90 Stat. 31, and the Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895. Most pertinent to this case, these Acts drastically reduced the amount of federal involvement in rail mergers and acquisitions, in an effort to implement a congressional policy favoring expedited approvals of sales of railroads, particularly railreads that are in danger of failing. See generally H.R. Conf. Rep. No. 1430, 96th Cong., 2d Sess., reprinted in 1980 U.S. Code Cong. & Admin. News 4110. Under this legislation, the Interstate Commerce Commission ("ICC" or "Commission") has the express power to impose so-called "labor protective" conditions on a sale. See, e.g., 49 U.S.C. §§ 10901(e), 11347 (1985).

This case presents an important question of first impression at the intersection of these two statutes: whether a railroad has a duty to refrain from completing a sale of its rail assets pending bargaining under the RLA over the effects of that sale on the employees' working conditions, when the ICC has granted expedited approval to the (proposed) sale without imposition of labor protective conditions.

The case arises in the context of an appeal from an order granting summary judgment for the plaintiff, Railway Labor Executives Association ("RLEA" or "the unions"), and granting a permanent injunction against the defendant, Pittsburgh & Lake Erie Railroad ("P & LE" or "the railroad"). Plaintiff RLEA is an unincorporated association of the chief executive officers of nineteen railway labor unions, including all fourteen unions that represent P & LE's employees. The district court, in granting sumary judgment, ordered the railroad to comply with the "major dispute" resolution procedures of the Railway Labor Act. Moreover, in spite of the fact that the ICC had already approved the proposed sale, the court enjoined the railroad from proceeding with its planned sale of its assets until those procedures had been exhausted, unless the sale agreement included provisions guaranteeing that the employees' current working conditions, including rates of pay, be maintained (the "status quo injunction").

We have little difficulty in concluding that the railroad's decision to sell its rail assets and the consequential elimination of a substantial number of rail jobs presents a so-called "major dispute" under the Railway Labor Act and, therefore, that the railroad must bargain over the effects of that decision. Under the RLA, the railroad must maintain the status quo, including the existence of current jobs and rates of pay, while the bargaining process is pending. We have much greater difficulty with the question of the effect of the ICA on this duty, for there is a strong tension between the policies of the two Acts and, unfortunately, Congress has stranded the courts at the crossing. P & LE contends that the policies expressed in the ICA, particularly as applied by the Interstate Commerce Commission in this case, should relieve the railroad of any obligations it has under the RLA. The unions, however, argue that the status quo injunction does not conflict with the Commission's approval and is, in fact, mandated by the RLA.

We confess to finding the solution proposed by each party to be unsatisfactory. Dominating our thinking, however, is a reluctance to impinge on a congressional statutory mandate (the RLA) without a clear congressional authorization (and we find none), or to find an implied repeal of the requirements of the venerable Railway Labor Act without an unavoidable conflict between the mandates of the two statutes (and such a conflict is not ineluctable). See Watt v. Alaska, 451 U.S. 259, 266-67, 68 L. Ed. 2d 80, 101 S. Ct. 1673 (1981). We are particularly reluctant to find such a repeal here, where Congress has so recently addressed itself to deregulating the rail industry, yet has not chosen to relieve management of any of the onerous burdens imposed by the RLA. Moreover, because the Commission's approval of the transaction was merely permissive, we do not view an injunction against the sale as an attack on the ICC's order; and because the approval stemmed from a process in which labor's interests are only one of fifteen factors considered by the Commission, we do not believe that Congress intended that rail labor rely solely on the ICC for protection, to the exclusion of labor's rights under the RLA. For these reasons, we conclude that Congress did not intend the Commission's approval of the transaction without the imposition of substantive labor protective conditions to relieve the railroad of its obligation to comply with the exclusive, congressionally-mandated RLA dispute resolution procedures.

We recognize that, arguably, in our effort to avoid impinging on the RLA, our decision instead has the effect of contravening the mandate of the ICA. We do nut believe that it does but, if we are mistaken, we still believe we have reached the correct result: plainly, if either a grant or a denial of the status quo injunction will conflict with a statutory mandate, we must reconcile the two statutes as much as possible and attempt to reach a result that will produce the minimum possible conflict with congressional intent. As we will demonstrate, any conflict with the ICA produced by the order to maintain the status quo is substantially less than the conflict with the RLA that would result from a denial of the injunction. We therefore choose the path of least destruction, and the one we deem most consistent with Supreme Court precedent. If Congress intended a different result -- and we concede that a different result might well be desirable -- it should have said so. We therefore will affirm the district court's order.


A. The Railway Labor Act

The Railway Labor Act is the product of a joint effort by labor and management representatives to channel labor disputes into construction resolution procedures as a means of avoiding interruptions to c ommerce and preventing strikes. See Detroit & Toledo Shore Line R.R. v. United Transp. Union, 396 U.S. 142, 148-49 & n.13, 24 L. Ed. 2d 325, 90 S. Ct. 294 (1969). There are two types of disputes that can arise under the RLA -- "major" disputes, which involve efforts to form or proposals to change collective bargaining agreement, and "minor" disputes, which require the interpretation or application of a specific provision of a collective bargaining agreements, and "minor" disputes, which require the interpreatation or application of a specific provision of a collective bargaining agreement.*fn1 See Detroit & Toledo Shore Line, 396 U.S. at 148; Elgin, J. & E. Ry. v. Burley, 325 U.S. 711, 722-28, 89 L. Ed. 1886, 65 S. Ct. 1282 (1945); International Ass'n of Machinists v. Northwest Airlines, 673 F.2d 700, 705-06 (3d Cir. 1982).

Major disputes "look to the acquisition of rights for the future, not to assertion of rights claimed to have vested in the past"; in minor disputes, "the claim is to rights accrued, not merely to have new ones created for the future." Elgin, J. & E. Ry., 325 U.S. at 723. Minor disputes are resolved through a formal grievance process that culminates in binding arbitration performed by the National Railroad Adjustment Board. RLA § 3, 45 U.S.C. § 153. Major disputes, on the other hand, are channeled into an exhaustive bargaining process, designed to force the parties into serious negotiation and to encourage compromise. RLA § 6, 45 U.S.C. § 156; see Detroit & Toledo Shore Line, 396 U.S. at 148-50.

When a minor dispute arises, the parties are not precluded from changing the status quo; management is free to implement its interpretation of the agreement, unless and until the interpretation is held invalid by the Adjustment Board. See, e.g., United Transp. Union v. Penn Cent. Transp. Co., 505 F.2d 542, 545 (3d Cir. 1974); Maine Cent. R.R. v. United Transp. Union, 787 F.2d 780, 781 (1st Cir.), cert. denied, 1075. Ct. 169 (1986); cf. Local 553, Transp. Workers Union v. Eastern Air Lines, 695 F.2d 668, 675 (2d Cir. 1983) (status quo injunction is available, pending arbitration of a minor dispute, only when necessary to prevent arbitration from becoming meaningless).

Major disputes, however, trigger a status quo obligation. Once a party proposes a change in the collective bargaining agreement, that party is required to serve notice of its intentions (a "section 6 notice"), and both parties must maintain the status quo until the RLA bargaining processes have been exhausted. See Detroit & Toledo Shore Line, 396 U.S. at 150-53; RLA § 6, 45 U.S.C. § 156 ("rates of pay, rules, or working conditions shall not be altered by the carrier until [bargaining and mediation have been exhausted]"); RLA § 2 Seventh, 45 U.S.C. § 156 ("rates of pay, rules, or working conditions shall not be altered by the carrier until [bargaining and mediation have been exhausted]"); RLA § 2 Seventh, 45 U.S.C. § 152. Those processes have been described by the Supreme Court as "almost interminable." 396 U.S. at 149. They operate as follows:

A party desiring to effect a change of rates of pay, rules, or working conditions must give advance written notice. § 6. The parties must confer, § 2 Second, and if conference fails to resolve the dispute, either or both may invoke the services of the National Mediation Board, which may also proffer its services sua sponte if it finds a labor emergency to exist. § 5 First. If mediation fails, the Board must endeavor to induce the parties to submit the controversy to binding arbitration, which can take place, however, only if both consent. §§ 5 First, T. If arbitration is rejected and the dispute threatens "substantially to interrupt interstate commerce to a degree such as to deprive any section of the country of essential transportation service, the Mediation Board shall notify the President," who may create an emergency board to investigate and report on the dispute. § 10. While the dispute is working its way through these stages, neither party may unilaterally alter the status quo. §§ 2 Seventh, 5 First, 6, 10.

Brotherhood of R.R. Trainmen v. Jacksonville Terminal Co., 394 U.S. 369, 378, 22 L. Ed. 2d 344, 89 S. Ct. 1109 (1969).

In the end, however, the process is merely conciliatory. Unlike minor disputes, which parties must submit to binding arbitrator, major disputes, will be resolved, through a series of seemingly endless negotiations, by the parties themselves, or will not be resolved at all; agreements will not be imposed upon the parties. Once the process is finally exhausted and it becomes clear that the parties will not reach agreement, the parties are released from their status quo obligations, and are free to resort to "self-help" -- management to implement its proposed changes, and the workers to strike. Id. at 378-80.

B. The Interstate Commerce Act and the ICC

The Interstate Commerce Act gives the ICC exclusive jurisdiction to approve and to regulate acquisitions of rail lines. See, e.g., 49 U.S.C. §§ 10901(a), l1343(a) (Supp. Ill 1985); Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318-20, 67 L. Ed. 2d 258, 101 S. Ct. 1124, (1981). Section 10901 of the Act governs the acquisition of rail lines by non-carriers. Such transactions may proceed only "if the Commission finds that the present or future public convenience and necessity require or permit the [acquisition] and operation of the railroad line." 49 U.S.C. § 10901(a). The ICC has discretion to condition its approval of a § 10901 transaction on the provision of "a fair and equitable arrangement for the protection of the interests of railroad employees who may be affected [by the transaction]." § 10901(e). However, pursuant to § 10505, the Commission will exempt any transaction from regulation under § 10901 when it finds that such regulation "is not necessary to carry out" national rail transportation policy, and is "not needed to protect shippers from the abuse of market power." 49 U.S.C. § 10505(a).

In a 1985 rulemaking proceeding, the Commission decided to exempt from regulation under § 10901 the entire class of transactions involving acquisitions by non-carriers. See Ex Parte 392 (Sub. No. 1), Class Exemption for the Acquisition and Operation of Rail Lines Under 49 U.S.C. 10901, 1 I.C.C.2d 810 (1985) [hereinafter Ex Parte 392 ] , review denied mem. sub nom. Ill. Commerce Comm'n v. ICC, 260 U.S. App. D.C. 38, 817 F.2d 145 (D.C. Cir. 1987). Under Ex Parte 392, an exemption becomes effective and a transaction is deemed approved after seven days following the filing of a notice by the acquiring entity, 49 C.F.R. § 1150.32(b); 1 I.C.C.2d at 820, unless a petition to revoke the exemption has been filed and granted or the transaction is stayed by the Commission. See 49 U.S.C. § 10505(d); 49 C.F.R. § 1150.34; 1 I.C.C. 2d at 815.


A. The Sale and the Requests to Bargain

P & LE owns and operates a railroad in western Pennsylvania and eastern Ohio. The railroad has suffered heavy financial losses over the past four years, and has accumulated a substantial amount of debt.*fn2 Unable to stem its losses and in an effort to avoid a bankruptcy proceeding, P & LE sought a buyer for its entire rail operations. On July 8, 1987 it entered into an agreement to sell all of its assets (except for some minor real estate holdings and 6,000 rail cars) for slightly more than $70 million to P & LE Railco, Inc. ("Railco"), a newly-formed subsidiary of the Chicago West Pullman Corporation created for the purpose of acquiring P & LE 's assets.*fn3 After the sale, Railco plans to operate P & LE 's rail lines, and P & LE expects to cease operation as a rail carrier.

On July 30, 1987 P & LE informed its unions of the planned sale. Although P & LE provided no details, it was apparent that Railco intended to operate with a substantially reduced workforce, and that as many as 500 of P & LE 's 750 rail employees would lose their jobs. Beginning on August 7, P & LE 's various unions requested that the railroad serve formal notices of its intentions on the unions, pursuant to section 6 of the RLA, 45 U.S.C. § 156, and that the railroad commence formal RLA bargaining over the effects of the proposed transaction on the employees. P & LE refused, claiming that RLA bargaining was not required because the transaction would be subject to the exclusive jurisdiction of the ICC, pursuant to the Interstate Commerce Act.

Given P & LE 's refusal, BEA filed a complaint on August 19, 1987 in the District Court for the Western District of Pennsylvania, seeking an order requiring the railroad to exhaust RLA bargaining procedures before proceeding with the sale. At about the same time, the unions began to serve section 6 notices, proposing substantial labor protection, including the preservation of all current jobs.

B. The ICC's Approval

On September 19, 1987, pursuant to 49 C.F.R. §§ 1150.31-34.*fn4 Railco filed a "notice of exemption" with the ICC, seeking exemption from the regulatory requirements of 49 U.S.C. § 10901.*fn5 BEA and other interested parties filed a petition to reject the exemption, and requested a stay of the transaction. The ICC denied the request for a stay on September 25, declaring that the transaction was governed by § 10901 and that RLEA had not shown a sufficient likelihood of prevailing on the merits to justify imposing labor protection prior to consummation of the sale. P & LE Railco, Inc. -- Exemption Acquisition and Operation -- Lines of the Pittsburgh and Lake Erie Railroad Co. and the Youngstown and Southern Ry. Co., ICC Finance Docket Nos. 31121, 31122, 31126 (Sept. 25, 1987).*fn6

In denying the request, the Commission explained that a stay would delay the transition between P & LE's and Railco's service, thereby possibly causing substantial harm to the parties, as well as to the shippers, employees and communities on the line. A stay of the transaction, the ICC further found, would force P & LE to suffer continued financial losses, and given those losses, "[i]t is unclear whether or how long it can continue operations." Id. at 4. The Commission, however, did order P & LE to maintain its corporate existence until the Commission completed review of any petitions for revocation. ICC Finance Docket Nos. 31121, 31122 (Oct. 13, 1987) (denial of petition for reconsideration). RLEA filed a petition for revocation on October 2, 1987, which is still pending.

C. The Strike and the Status Quo

On September 15, 1987, prior to Railco's filing of its notice of exemption with the ICC, the unions commenced a strike to force P & LE to comply with its duty to bargain under the RLA. P & LE then filed a counterclaim in the district court, seeking to enjoin the strike. The district court first denied a temporary restraining order, holding itself barred by the anti-injunction strictures of the Norris-LaGuardia Act ("NLGA"), 29 U.S.C. § 108 (1982), but then reversed itself in the wake of the ICC's refusal to stay the transaction. The district court held the strike to be an illegal attempt to force P & LE to provide labor protection in connection with the sale, in contravention of the ICC's approval of the sale without labor protective provisions. Finding that the strike frustrated P & LE 's efforts to complete the sale, the court enjoined the strike, holding that the ICC's exclusive jurisdiction over the transaction displaced the anti-injunction provisions of the NLGA. This court, however, summarily reversed on October 26, holding that "[t]he ICC's authority to consider the incidental effect of the transaction on labor and its discretionary authority to require provisions that protect employees" could not override the "strong national policy embodied in the [NLGA]." RLEA v. P & LE , 831 F.2d 1231, 1236 (3d Cir. 1987).*fn7 We therefore remanded the case for further proceedings. Id. at 1237.

On November 24, following remand, the district court granted summary judgment for RLEA holding that the instant dispute was a "major" dispute under the RLA, and that therefore P & LE must bargain over the effects on the employees of the proposed sale before implementing the transaction. The court rejected P & LE's argument that the ICC's exclusive jurisdiction over rail carrier transactions preempted the railroad's obligations under the RLA. The court held the RLA applicable, and issued a status quo injunction, enjoining the railroad from "altering the rates of pay, rules and working conditions in existence at the time [the unions served their] section 6 notices." J.A. 369. See 45 U.S.C. § 156. The court further made clear that the sale could not be consummated unless provisions were made for the maintenance of the status quo, i.e., maintenance of the employees' current jobs and rates of pay. J.A. 369-70.

P & LE filed an emergency motion with this court, seeking summary reversal of the injunction order. We denied the motion on December 10, 1987, however we expedited the appeal.*fn8


A. Does The Case Involve A Major Dispute?

P & LE argues, albeit weakly, that its dispute with RLEA is not a "major" dispute. See Brief of Appellant at 72; Reply Brief of Appellant at 4-10. Apparently, P & LE is contending that because it always has the "right" to go out of business, and because the sale of the railroad would not violate the collective bargaining agreements, no "change" in the agreement has been proposed and thus no major dispute has arisen. The argument, however, misses the mark.

The dispute in this case is not about the decision to sell the P & LE's rail lines; it is about the effects of that decision on the employees of the railroad.*fn9 P & LE does not deny that the sale, as it is now structured, will lead to a substantial reduction in the workforce on the rail line. This loss of jobs by possibly two-thirds of the employees clearly would require a "change in agreements affecting rates of pay, rules, or working conditions." RLA § 6, 45 U.S.C. § 156. Whenever a party intends to implement such a change, the RLA requires that the party submit to the major dispute resolution process and not alter the status quo. Id.*fn10

In the leading case of Detroit & Toledo Shore Line, the railroad notified its union that it intended to require certain employees to report to work at Trenton, Michigan instead of Toledo, Ohio. An Adjustment Board had already determined that the collective bargaining agreement would not prohibit such "outlying work assignments." 396 U.S. at 145-46. Yet, when the union served a section 6 notice on the employer proposing to amend the agreement to forbid all outlying assignments, the Supreme Court held that a major dispute had arisen and that the railroad was prohibited from implementing the new assignments until after the parties had exhausted the RLA bargaining process, even though implementation of these assignments would not violate the existing agreement. Id. at 148-55.

The Court explained that "the status quo extends to those actual, objective working conditions out of which the dispute arose." Id. at 153. Because the "actual working conditions" at the time the dispute arose did not include outlying assignments, "it was therefore incumbent upon the railroad by virtue of § 6 to refrain from making outlying assignments . . ., regardless of the fact that the railroad was not precluded from making these assignments under the existing agreement." Id. at 154.

P & LE has similarly proposed action which might not violate its agreements, yet it plainly would change the nature of those agreements. Moreover, even if that were not the case, P & LE's unions have proposed substantial changes to the agreements, and therefore P & LE must "preserve and maintain unchanged those actual, objective working conditions and practices, broadly conceived, which were in effect prior to the time the pending dispute arose and which are involved in or related to that dispute. " Id. at 153. Such objective conditions plainly include the very existence of the workers' jobs.

B. The Right to Go Out of Business And The Duty to Bargain Over Effects

P & LE makes a more powerful argument that, no matter how this dispute is categorized, an employer has no duty to bargain over its decision to go out of business, for such a decision is a quintessential management prerogative, hence it cannot be enjoined. The argument rests primarily on the Supreme Court's landmark decision in First ...

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