Chicago, M., St. P. & Pac. R. Co., Matter of

• Decision Date: 17 August 1981
• Docket Number: 80-1348,80-1545 and 80-1546,Nos. 80-1347,s. 80-1347
• Parties: In the Matter of CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC RAILROAD COMPANY, Debtor. Consolidated Appeals of RAILWAY LABOR EXECUTIVES' ASSOCIATION, Intervenor. State of Wisconsin Department of Transportation, State of South Dakota, Port of Pend Oreille, Pend Oreille Valley Railroad Company, Inc., and Seattle and North Coast Railroad Company, Intervening Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1149

658 F.2d 1149

In the Matter of CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC

RAILROAD COMPANY,

Debtor. Consolidated Appeals of RAILWAY LABOR EXECUTIVES' ASSOCIATION,

Intervenor. State of Wisconsin Department of

Transportation, State of South Dakota, Port of Pend Oreille,

Pend Oreille Valley Railroad Company, Inc., and Seattle and

North Coast Railroad Company, Intervening Appellees.

Nos. 80-1347, 80-1348, 80-1545 and 80-1546.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 8, 1980.

Decided Aug. 17, 1981.

John O'B Clarke, Jr., Washington, D. C., for intervenor.

Lawrence S. Adelson, Chicago, Ill., Mark J. Fritz, Billig, Sher & Jones, P. C., Ellen A. Efros, Washington, D. C., for respondent.

Before SPRECHER and WOOD, Circuit Judges, and BROWN, Senior District Judge. ^*

HARLINGTON WOOD, Jr., Circuit Judge.

In this consolidated appeal, intervenor Railway Labor Executives' Association ("RLEA") presents three distinct but related issues concerning the implementation of labor protection conditions to be imposed in the Section 77 reorganization of the Chicago, Milwaukee, St. Paul & Pacific Railroad Company ("Milwaukee"). These appeals involve the propriety of the reorganization court's interpretation of the nature, extent, and timing of employee benefit payments required by Section 5 of the Milwaukee Railroad Restructuring Act ("MRRA"), Pub.L. No. 96-101, 45 U.S.C. § 901 et seq. (Supp. III 1979). We affirm.

I.

The first of the three major issues raised by RLEA concerns the adequacy of the level of labor protective conditions imposed upon the Milwaukee by the reorganization court. ¹ RLEA argued below that the normal levels of protection ninety days notice and final negotiation of an implementing agreement were required by Section 5 of the MRRA. The special master and the reorganization court correctly rejected RLEA's arguments. The modified Appendix B conditions (those adopted by the reorganization court) are as protective as statutorily required, are consistent with both the scheme and language of the MRRA, and are in accord with Interstate Commerce Commission ("ICC") and judicial precedent.

The ICC has developed, over the years, a set of labor protective provisions to be imposed in the usual case of an abandonment, transfer, or sale. The provisions currently require carriers to give ninety days advance notice of an intended transaction and to negotiate an implementing agreement prior to the transaction's consummation. See Oregon Short Line Railroad Abandonment Goshen, 360 I.C.C. 91 (1979) ("Oregon Short Line III"); New York Dock Railroad Control Brooklyn Eastern District Terminal, 360 I.C.C. 60 (1979) ("New York Dock II"). The ninety days notice and prior negotiation provisions represent the minimum levels of employee protection in the usual abandonment or 49 U.S.C. § 11343 proceeding. ² Id.; Mendocino Coast Railway, Inc. Lease and Operate California Western Railroad, 360 I.C.C. 653, 654-56, 662 (1980), petition for review pending sub nom., RLEA v. I.C.C., D.C.Cir. Nos. 78-2157 and 80-1274 ("Mendocino"); Seaboard Coast Line Railroad Co. Abandonment, 360 I.C.C. 257, 258 (1979). See 44 Fed.Reg. 28909 (May 17, 1979). The railroad is precluded from consummating the proposed transaction until such an agreement is effected. See Oregon Short Line III, supra, 360 I.C.C. at 91.

Under the scheme recommended by the special master and ultimately approved by the reorganization court, all affected Milwaukee employees are to be protected by the special master's "Appendix B" conditions, which slightly modify the customary levels of protection. Appendix B allows the transaction to be completed after ten days notice even if the implementation agreement is not yet negotiated or finalized. However, Appendix B requires that any employee who is injured as a result of completion of a transaction before final negotiation of an implementing agreement must be made whole.

Under Sections 5(a)(1) and 5(b)(1) of the MRRA, 45 U.S.C. §§ 904(a)(1) and 904(b)(1) (Supp. III 1979), the reorganization court must also provide a fair arrangement at least as protective of the interests of employees as that required under 49 U.S.C. § 11347 (1976 and Supp. III 1979). Section 11347 requires the carrier to provide a fair arrangement at least as protective of the interests of employees as the terms imposed under Section 11347 prior to February 5, 1976 (the date the section was amended) as well as those established under Section 405 of the Rail Passenger Service Act of 1970 ("RPSA"), 45 U.S.C. § 565 (1976 and Supp. III 1979).

A.

RLEA argues here that the minimum levels apply in all abandonments including those which are the subject of these appeals. Accordingly, RLEA submits that if Section 11347 requires a notice and negotiation provision more protective of the employees' interests than those allowed under Appendix B in order to comply with the requisite minimum levels, then the Appendix B conditions imposed by the reorganization court are defective under Section 5 of the MRRA. It follows, RLEA says, that the court could remove neither the ninety day nor the prior negotiation requirements in its attempt to tailor protection under Section 5(a)(1). Our task therefore is to ascertain the required levels of protection to which Congress was referring when it included, within the MRRA, reference to the provisions imposed under the predecessors to Section 11347 as well as under Section 405 of the RPSA.

RLEA avers that the decision in New York Dock Railway v. United States, 609 F.2d 83, 94-95 (2d Cir. 1979), supports its position that a ninety day notice period and final negotiation prior to consummation represent the requisite statutory minimum degree of protection contemplated by Section 11347. However, New York Dock was a normal case involving the transfer of control between two carriers. The Second Circuit there affirmed the ICC's imposition of employee protective provisions which included the ninety day advance notice requirement and final negotiation of an implementation agreement prior to consummation. The case at bar is anything but normal.

As noted above, the ICC has often fashioned protective conditions designed to fit the unique circumstances of a particular case. The New York Dock court recognized this by stating: "(i)t is beyond challenge that within its discretion the ICC may fashion employee protective conditions that are tailored to the special circumstances present in individual cases." Id., 609 F.2d at 91-92. In other words, the statutory minimum levels are "(s)ubject of course to any modifications shown to be needed because of the facts of a particular case." Oregon Short Line III, supra, 360 I.C.C. at 97.

Contrary to RLEA's assertions, the statutory minima necessary in the usual abandonment are not required in unusual instances as present here. The Milwaukee is a bankrupt carrier, in a crisis situation, and is subject to embargo orders. In such circumstances, the courts have modified the customary conditions. In total abandonment cases for small railroads, for example, no employee protection has been imposed under 49 U.S.C. § 10903(b)(2) (Supp. III 1979), which contains identical language requiring provisions for labor protection at least as beneficial as established under Section 11347. See Wellsville, Addison & Galeton Railroad Corp. Abandonment, 354 I.C.C. 744 (1978). In cases approving trackage rights and leases under Section 11347, the ICC imposes a twenty day notice period and does not require prior final negotiation of an implementing agreement. See Mendocino, supra, 360 I.C.C. at 653; Norfolk and Western Railway Co. Trackage Rights Burlington Northern, Inc., 354 I.C.C. 605, 607 (1978).

The ICC, in two recent decisions, has also found alteration of the customary conditions to be proper. In Oregon Short Line IV, 360 I.C.C. 666, 674-75 (1980), the ICC found that imposition of Oregon Short Line III levels was not required to comply with the similar mandate of 49 U.S.C. § 10903 (Supp. III 1979) which contains identical language to Section 5(a)(1) of the MRRA. The ICC also upheld as adequate, under similar provisions contained in 5(b) of the MRRA, an employee protection agreement negotiated between the trustee, other carriers, and the Milwaukee's unions which provided for only ten days notice and required no final negotiation. Burlington Northern Inc. Purchase (Portion) Chicago, Milwaukee, St. Paul & Pacific Railroad Co., 363 I.C.C. 298 (1980).

Section 405 of the RPSA, in addition, which required establishment of protective conditions no less than those found in Section 5(2)(f) (now codified in Section 11347) was held to neither mandate ninety days notice (twenty days notice was allowed) nor final negotiation of an implementing agreement. Congress of Railway Unions v. Hodgson, 326 F.Supp. 68 (D.D.C.1971). There, the court held that the shortened notice provision was equivalent to traditional ICC prescribed labor protection under the RPSA, and therefore rejected the contention that the failure to require the ninety day notice standard rendered the labor protection inadequate. The court also noted that the prescribed conditions fully protected employees from any adverse effect from consummation of related transactions prior to final negotiation of an implementing agreement, especially in light of a provision there which ensured that all affected employees would be made whole from any injury.

RLEA mistakenly contends that the 1976 amendment to Section 5(2)(f) (now codified at Section 11347) overruled Hodgson insofar as its interpretation of the Section is concerned. This is so, RLEA says, because to read Hodgson now as representing a valid expression of the minimum levels of protection required by Section 11347 would necessitate reading Congress' subsequent reference to Section 5(2)(f) out of Section 11347. To the contrary, a review of the legislative history of the Section and an evaluation of the Congressional...