Underwood v. Venango River Corp.

• Decision Date: 28 May 1993
• Docket Number: No. 91-3739,91-3739
• Citation: 995 F.2d 677
• Parties: 143 L.R.R.M. (BNA) 2437, 61 USLW 2756, 125 Lab.Cas. P 10,710, RICO Bus.Disp.Guide 8302 Robert M. UNDERWOOD, John E. Reathaford, Ronald C. Poland, et al., Plaintiffs-Appellants, v. VENANGO RIVER CORPORATION, Illinois Central Gulf Railroad Company, Whitman Corporation, f/k/a IC Industries, Incorporated, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 677

995 F.2d 677

143 L.R.R.M. (BNA) 2437, 61 USLW 2756,

125 Lab.Cas. P 10,710,

RICO Bus.Disp.Guide 8302

Robert M. UNDERWOOD, John E. Reathaford, Ronald C. Poland, et al., Plaintiffs-Appellants, v. VENANGO RIVER CORPORATION, Illinois Central Gulf Railroad

Company, Whitman Corporation, f/k/a IC Industries,

Incorporated, et al., Defendants-Appellees.

No. 91-3739.

United States Court of Appeals, Seventh Circuit.

Argued June 5, 1992.

Decided May 28, 1993.

Kevin T. Hoerner (argued), Kassly, Bone, Becker, Dix, Reagan & Young, Belleville, IL, for plaintiffs-appellants.

Gregory S. Davis, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for Venango River Corp.

William J. Billeaud, St. Louis, MO, Kenneth Jonson (argued), Steptoe & Johnson, Washington, DC, for Illinois Central Gulf R. Co.

John P. Scotellaro, Kenneth E. Rechtoris, Bell, Boyd & Lloyd, Chicago, IL, for Whitman Corp.

Francis D. Morrissey, Thomas A. Doyle, Baker & McKenzie, Chicago, IL, William J. Billeaud, St. Louis, MO, Kenneth Jonson, Steptoe & Johnson, Washington, DC, for Harry Bruce, Henry Borgsmiller and Richard Bessette.

Before COFFEY and FLAUM, Circuit Judges, and WOOD, Jr., Senior Circuit Judge.

COFFEY, Circuit Judge.

The plaintiff-appellant Robert Underwood along with 217 other plaintiffs have alleged that the defendants committed acts of wire fraud and mail fraud in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq. The district court granted the defendants' motion to dismiss the plaintiffs' fourth amended complaint for lack of subject matter jurisdiction on the ground that the Railway Labor Act (RLA), 45 U.S.C. § 151, et seq., preempted the plaintiffs' claims. We affirm.

I. FACTS

The plaintiff-appellants are former employees of the Illinois Central Railroad Company (ICRR). ICRR is a wholly owned subsidiary of the Whitman Corporation (formerly IC Industries, Inc. (ICI)). In an effort to make the company more profitable, ICRR began to sell off some of its less profitable railway lines--including the Chicago-Kansas City line. On July 28, 1986, ICRR entered into a contract with the Chicago, Missouri & Western Railroad Company (CMW), a wholly owned subsidiary of the defendant Venango River Corporation, for the sale of the Chicago-Kansas City line. Pursuant to this sale, ICRR executed a traffic protection agreement in which it agreed to use its best efforts to maintain traffic volume to, from and over the 633-mile Chicago-Kansas City line at the previous level. Additionally, ICRR encouraged the plaintiffs to resign their positions and accept employment with CMW stating that their new employer would continue the present benefit package and job security that ICRR had offered. The plaintiffs resigned from ICRR and accepted employment with CMW, but about one year after the sale of the Chicago-Kansas City line, CMW filed for bankruptcy due to the unprofitability of the recently acquired lines.

With CMW's filing in bankruptcy, the plaintiffs lost the severance pay and seniority benefits they would have been entitled to had they remained with ICRR. The plaintiffs brought suit alleging that ICRR engaged in a pattern of racketeering and fraudulent misrepresentation in order to induce them to accept employment with CMW, thus depriving them of seniority rights and severance pay in violation of RICO.

The issues before this court are whether the Railway Labor Act (RLA) preempts the plaintiffs' RICO claim and whether the district court appropriately dismissed the RICO claim for lack of subject matter jurisdiction.

II. DISCUSSION

We review the grant of a motion to dismiss a complaint for lack of subject matter jurisdiction de novo. Gorski v. Troy, 929 F.2d 1183, 1186 (7th Cir.1991); see also Hubbard v. United Airlines, Inc., 927 F.2d 1094, 1096 (9th Cir.1991) (reviewing de novo the dismissal of a RICO claim that the trial court determined to be preempted by the Railway Labor Act).

A. Characterization of the Dispute

The RLA, 45 U.S.C. § 151, et seq., grants the National Railway Adjustment Board (NRAB) jurisdiction over all "disputes between an employee or group of employees and a carrier or carriers growing out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions...." Id. § 153 First (i) (emphasis added). The Supreme Court has determined that the NRAB has exclusive jurisdiction over "minor" disputes, Union Pacific R.R. v. Sheehan, 439 U.S. 89, 94, 99 S.Ct. 399, 402, 58 L.Ed.2d 354 (1978), because "Congress considered it essential to keep the so-called 'minor' disputes within the adjustment board and out of the courts." Id. A minor dispute is one that "may be conclusively resolved by interpreting the existing agreement." Consolidated Rail v. Railway Labor Exec. Ass'n, 491 U.S. 299, 305, 109 S.Ct. 2477, 2481, 105 L.Ed.2d 250 (1989); see also Atchison, Topeka & Santa Fe Ry. v. United Transportation Union, 734 F.2d 317, 321 (7th Cir.1984) ("whether the conflict can be resolved by reference to an existing agreement"). ¹ When in doubt, this court has construed disputes as minor. National Railway Labor Conf. v. International Ass'n of Machinists & Aerospace Workers, 830 F.2d 741, 746 (7th Cir.1987).

Clearly, the plaintiffs' claim for severance pay and seniority rights is based on an existing collective-bargaining agreement (CBA) and may be "conclusively resolved by interpreting the existing [CBA]." Consolidated Rail, 491 U.S. at 305, 109 S.Ct. at 2481. Accordingly, we are of the opinion that this is a minor dispute falling under the exclusive jurisdiction of the NRAB. Chicago & Northwestern Transportation Co. v. Railway Labor Executives' Ass'n, 908 F.2d 144, 157-58 (7th Cir.1990), cert. denied, 498 U.S. 1120, 111 S.Ct. 1073, 112 L.Ed.2d 1179 (1991), (holding that the impact of a sale of a railway line upon employees' severance and seniority benefits is a "minor" dispute).

B. Preemption under the RLA

Having concluded that the plaintiffs' claim is a minor one, we must now determine whether the plaintiffs' allegation of RICO violations removes this matter from the jurisdiction of the NRAB. The plaintiffs argue that federal statutes governing rights not found within the CBA fall outside of RLA preemption and may be adjudicated in federal courts. In this instance, the plaintiffs allege that RICO creates a substantive right for an employee to have his employer refrain from racketeering conduct that injures the employee. 18 U.S.C. § 1961(1) (prohibiting inter alia mail and wire fraud). The plaintiffs assert that an interpretation of the CBA is not at issue because the defendants' wrongful actions (a series of misrepresentations and fraudulent acts) occurred outside the workplace. Accordingly, the plaintiffs maintain that they are entitled to federal court jurisdiction because they have alleged violations that are beyond the realm of workplace practices governed by collective-bargaining agreements.

Initially, we must determine just what Congress' intention was regarding the scope of RLA preemption. Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 208, 105 S.Ct. 1904, 1910, 85 L.Ed.2d 206 (1985) (holding that Congress' intent is "the ultimate touchstone"). The plaintiffs herein attempt to determine Congress' intent through reliance on cases interpreting preemption provisions of federal statutes other than the RLA such as § 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185(a), and the National Labor Relations Act ("NLRA"), 29 U.S.C. § 158. We will examine the cases decided under those statutes as well as the cases interpreting the RLA. Only one circuit court has addressed the question before us of whether Congress intended the RLA to preempt RICO claims. In Hubbard v. United Airlines, Inc., 927 F.2d 1094 (9th Cir.1991), the Ninth Circuit held that the RLA preempted the plaintiff's RICO claim because the rights the defendant violated in that case originated in the CBA.

1. Preemption of state law claims under other federal statutes

In Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 108 S.Ct. 1877, 100 L.Ed.2d 410 (1988), the Supreme Court addressed the preemptive effect of § 301(a) of the LMRA, 29 U.S.C. § 185(a), on state law claims. In Lingle, an employee was released after filing a workers compensation claim. The employee brought a grievance before the arbitration board claiming that the company lacked "just cause" to discharge her. The Board found in her favor and ordered her reinstatement with full backpay. The employee sought additional relief and filed a claim in state court alleging a violation of the Illinois workers' compensation laws prohibiting retaliatory discharge. The suit was removed to federal court on the basis of diversity of citizenship. The Supreme Court ultimately ruled that

"while there may be instances in which the National Labor Relations Act pre-empts state law on the basis of the subject matter of the law in question, § 301 pre-emption merely ensures that federal law will be the basis for interpreting collective-bargaining agreements, and says nothing about the substantive rights a State may provide to workers when adjudication of those rights does not depend on the interpretation of such agreements. In other words, even if dispute resolution pursuant to a collective-bargaining agreement, on the one hand and state law, on the other, would require addressing precisely the same set of facts, as long as the state-law claim can be resolved without interpreting the agreement itself, the claim is 'independent' of the agreement for § 301 pre-emption purposes."

Lingle, 486 U.S. at 408-10, 108 S.Ct. at 1883 (footnotes omitted) (emphasis added). As we will discuss below, because the Supreme Court has interpreted the scope of the preemption clause in the RLA much more broadly than the preemption clause in the LMRA, cases decided under the LMRA do not serve as binding precedent for cases...