Association of American Railroads v. Surface Transp. Bd.

• Decision Date: 11 December 1998
• Docket Number: 97-1397,Nos. 97-1384,AFL-CIO,s. 97-1384
• Parties: 159 L.R.R.M. (BNA) 3041, 333 U.S.App.D.C. 211 ASSOCIATION OF AMERICAN RAILROADS and Wisconsin Central Ltd., Petitioners, v. SURFACE TRANSPORTATION BOARD and United States of America, Respondents. Transportation Trades Department,, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 101

162 F.3d 101

159 L.R.R.M. (BNA) 3041, 333 U.S.App.D.C. 211

ASSOCIATION OF AMERICAN RAILROADS and Wisconsin Central

Ltd., Petitioners, v. SURFACE TRANSPORTATION BOARD and United States of America,

Respondents.

Transportation Trades Department, AFL-CIO, et al., Intervenors.

Nos. 97-1384, 97-1397.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 1, 1998.

Decided Dec. 11, 1998.

Thomas J. Litwiler argued the cause for petitioners. With him on the joint briefs were Robert H. Wheeler and Kenneth P. Kolson.

Henri F. Rush, General Counsel, Surface Transportation Board, argued the cause for respondents. With him on the joint brief were Joel I. Klein, Assistant Attorney General, U.S. Department of Justice, John J. Powers, III, and Robert J. Wiggers, Attorneys; and Louis Mackall, V, Attorney, Surface Transportation Board.

Mitchell M. Kraus, Lawrence I. Willis and Clinton J. Miller, III were on the joint brief for intervenors Transportation Trades Department AFL-CIO, and United Transportation Union.

Before: WALD, SENTELLE and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

Separate opinion dissenting from Part II filed by Circuit Judge WALD.

Separate opinion concurring in Parts I, II and IV and dissenting from Part III filed by Circuit Judge SENTELLE.

TATEL, Circuit Judge:

Petitioners challenge the Surface Transportation Board's initial implementation of the ICC Termination Act's labor protection provisions for employees affected by short-line rail acquisitions. Agreeing with petitioners, we hold that the Board's order extending "severance pay" not just to employees who lose their jobs, but also to employees displaced to lower-paying jobs, violates the statute. We agree with the Board that its method of calculating severance payment offsets represents a reasonable interpretation of an ambiguous statutory term, and that it has authority under Circuit precedent to require mandatory arbitration of labor protection disputes.

I

In 1995, Congress abolished the Interstate Commerce Commission and replaced it with the Surface Transportation Board. See ICC Termination Act of 1995, Pub. L. No. 104-88, 109 Stat. 803 (1995) (codified at 49 U.S.C.A. § 10101 et seq. (1997)). Congress strictly confined the new agency's authority to impose labor protection conditions on Class II (mid-size) railroads involved in short-line rail acquisitions. See 49 U.S.C.A. § 10902 (1997). Under the prior statutory scheme, the ICC had authority to require railroads seeking expedited agency approval of rail line acquisitions to provide "a fair and equitable arrangement to protect the interests of the railroad employees affected." Railroad Revitalization and Regulatory Reform Act, Pub. L. No. 94-210, sec. 402(a), § 5(2)(f), 90 Stat. 31, 62 (1976) (amending Interstate Commerce Act). Pursuant to this authority, the ICC developed a standard basket of labor protection requirements known as the New York Dock conditions. These requirements included up to six years of income protection for terminated or displaced rail employees, training and relocation allowances, advance notice to labor unions, and mandatory arbitration. See New York Dock Ry.-Control-Brooklyn Eastern Dist. Terminal, 360 I.C.C. 60, aff'd sub nom. New York Dock Ry. v. United States, 609 F.2d 83 (2d Cir.1979). The ICC Termination Act specifies certain mandatory labor protection conditions, but expressly deprives the new Board of discretion to impose other labor protection conditions. See 49 U.S.C.A. § 10902(c) (the Board "may require compliance with conditions (other than labor protection conditions) the Board finds necessary in the public interest"). The labor protections mandated for mid-size railroads are as follows:

The Board shall require any Class II rail carrier which receives [expedited approval of a rail line acquisition] to provide a fair and equitable arrangement for the protection of the interests of employees who may be affected thereby. The arrangement shall consist exclusively of one year of severance pay, which shall not exceed the amount of earnings from railroad employment of the employee during the 12-month period immediately preceding the date on which the application for such certificate is filed with the Board. The amount of such severance pay shall be reduced by the amount of earnings from railroad employment of the employee with the acquiring carrier during the 12-month period immediately following the effective date of the transaction....

Id. § 10902(d).

In the first proceedings under new section 10902(d), petitioner Wisconsin Central (a Class II railroad) sought expedited Board approval of its acquisition of two short rail lines from Union Pacific. Running for 17.8 miles, the lines provide local service between Hayward Junction and Hayward, Wisconsin, and terminal service in the pocket between Wausau and Schofield. To comply with section 10902(d)'s mandatory labor protection requirement, Wisconsin Central proposed making severance payments to each of the nine rail employees who would lose their jobs with Union Pacific in amounts equal to their railroad earnings during the previous twelve months. Severed employees rehired by Wisconsin Central would, as authorized by section 10902(d)'s offset provision, have their severance pay reduced each month by their Wisconsin Central earnings. See Wisconsin Central Ltd.-Acquisition Exemption-Lines of Union Pacific R.R. Co., Finance Docket No. 33116, at 2 (STB Nov. 15, 1996), available in 1996 WL 681474.

Announcing that "[t]he labor protective arrangement that results from this proceeding may be used as a model for conditions we impose governing the minimum labor protective arrangements we require with respect to acquisitions by Class II railroads," the Board sought public comment on "whether [Wisconsin Central's] proposed arrangement meets the statutory requirements, and on whether and to what extent we should establish and/or oversee the procedural aspects of labor protective arrangements under this statute." Id. at 1. The Transportation Trades Department of the AFL-CIO ("TTD") urged the Board to define "affected" employees broadly to include displaced as well as terminated employees, to calculate the offset on the basis of the number of hours worked during the previous twelve months, to impose a 90-day notice requirement before consummation of proposed line acquisitions, and to require arbitration of disputes. See Wisconsin Central Ltd.-Acquisition Exemption-Lines of Union Pacific R.R. Co., Finance Docket No. 33116, at 3 (STB Apr. 16, 1997), available in 1997 WL 186804. Petitioners Wisconsin Central and the Association of American Railroads submitted comments arguing that the ICC Termination Act limits the Board's oversight role to assuring compliance with the statute's straightforward one-year severance pay requirement for employees who lose their jobs with the selling rail carrier, that it authorizes no protection for displaced employees, and that it deprives the Board of authority to impose additional "procedural" labor protection requirements, including arbitration. See id. at 2-3.

The Board adopted virtually all of TTD's proposals. First, it "agree[d] with TTD that affected employees should be defined not only as including employees losing positions with the selling carrier, but also to cover those employees who, in order to continue working on the selling carrier, must exercise seniority and employees of the selling carrier who are adversely affected by those other workers' exercise of seniority." Id. at 5 (emphasis added). In other words, the Board extended labor protection to employees forced by an acquisition to transfer to different--and presumably lower-paying--jobs elsewhere on the selling carrier. Second, the Board adopted TTD's suggestion that "the employee's earnings should be based on the same number of hours worked during each comparable month before and after the transaction." Id. at 5 & n. 7. Finally, it required arbitration of disputes, permitting appeal pursuant to the substantially deferential Lace Curtain standard, under which the Board reviews recurring or otherwise significant issues of general importance and reverses an arbitrator's decision only for egregious error. See id. at 5-6 (citing Chicago & North Western Transp. Co.-Abandonment-Near Dubuque & Oelwein, Ia., 3 I.C.C.2d 729 (1987) (Lace Curtain), aff'd sub nom. International Bhd. of Elec. Workers v. ICC, 862 F.2d 330 (D.C.Cir.1988)).

Subject to these conditions, the Board approved Wisconsin Central's acquisition of Union Pacific's rail lines. With respect to TTD's suggestion for an advance notice requirement, the Board noted that Wisconsin Central had already satisfied any such requirement and postponed the issue for another proceeding, eventually imposing a 60-day notice requirement. See Acquisition of Rail Lines Under 49 U.S.C. 10901 and 10902-Advance Notice of Proposed Transactions, Ex Parte No. 562 (STB Sept. 2, 1997), available in 1997 WL 555638. We sustained that requirement in Association of American Railroads v. STB, No. 97-1624, 1998 WL 791857, 161 F.3d 58 (D.C.Cir. Nov. 17, 1998).

Wisconsin Central and the American Association of Railroads now petition for review, challenging each element of the labor protection conditions the Board imposed on Wisconsin Central's proposed line acquisition. Specifically, they argue that the extension of severance pay to displaced employees, the calculation of earnings based on time worked, and the arbitration requirement run counter to the plain meaning of section 10902(d). Taking up each argument in turn, we review the Board's interpretation of the ICC Termination Act under Chevron's two-step analysis. See Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). We ask first "whether Congress has directly spoken to the precise question at issue. If the intent of Congress is...