Greenfield and Montague Transp. Area v. Donovan

• Decision Date: 06 December 1984
• Docket Number: No. 84-1547,84-1547
• Citation: 758 F.2d 22
• Parties: 118 L.R.R.M. (BNA) 3253 GREENFIELD AND MONTAGUE TRANSPORTATION AREA, et al., Plaintiffs, Appellants, v. Raymond J. DONOVAN, Secretary, Dept. of Labor, et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 22

758 F.2d 22

118 L.R.R.M. (BNA) 3253

GREENFIELD AND MONTAGUE TRANSPORTATION AREA, et al Plaintiffs, Appellants, v. Raymond J. DONOVAN, Secretary, Dept. of Labor, et al Defendants, Appellees.

No. 84-1547.

United States Court of Appeals First Circuit.

Heard Dec. 6, 1984.

Decided March 29, 1985.

D. Christopher Ohly, Baltimore, Md., with whom Joseph S. Kaufman, Melnicove, Kaufman, Weiner & Smouse, P.A., Baltimore, Md., Edward W. Pepyne, Jr., Walder & Pepyne, P.C., Geoffrey A. Wilson, J. Nicholas Filler and Trudel, Bartlett, Barry, Filler & Wilson, Greenfield, Mass., were on brief for appellants.

Christine R. Whittaker, Washington, D.C., with whom Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., William F. Weld, U.S. Atty., Boston, Mass., and John F. Cordes, Civil Div., Dept. of Justice, Washington, D.C., were on brief for appellees.

Jeffrey Freund, Washington, D.C., with whom Bredhoff & Kaiser and Earle W. Putnam, Gen. Counsel, Amalgamated Transit Union, Washington, D.C., were on brief for Amalgamated Transit Union, amicus curiae.

Before CAMPBELL, Chief Judge, BOWNES, Circuit Judge, and MALETZ, ^* Senior Judge.

LEVIN H. CAMPBELL, Chief Judge.

Plaintiffs Greenfield and Montague Transportation Area ("GMTA") and Franklin Regional Transportation Authority ("FRTA") brought this action in the district court to enjoin the United States Department of Labor from acting as an arbitrator in a labor dispute between plaintiffs and certain aggrieved employees. The Department of Labor had been designated a "fall-back" arbitrator in the disputes resolution clause of the Rural Transportation Assistance Agreement between plaintiffs and the Commonwealth of Massachusetts. The district court dismissed the complaint holding that the Department's participation as an arbitrator was not subject to judicial review. We affirm but for a different reason.

I. FACTS

Plaintiffs are two local public transit authorities in Massachusetts. In 1978, both entities entered into agreements with the Massachusetts Department of Transportation which, in coordination with the United States Department of Transportation, administers a rural transit assistance program providing federal financial aid to local transit authorities under the Surface Transportation Assistance Act of 1978, 49 U.S.C. Sec. 1614 ("STAA"). Under these agreements, plaintiffs have been receiving federal funding for their operations.

As a condition of such assistance, STAA requires all grant applicants to make arrangements to protect the interests of employees affected by the federal funding. The Secretary of Labor is responsible for certifying that these arrangements are "fair and equitable" and that they meet the other requirements set out in section 13(c) of the Urban Mass Transportation Act of 1964, 49 U.S.C. Sec. 1609(c) ("UMTA"), ¹ which are applicable to rural grants under the STAA. A similar provision has been incorporated into Massachusetts law. See Mass.Gen.Laws ch. 161B, Sec. 8(k). ²

In practice, the Secretary prepares a "Special Section 13(c) Warranty" establishing the arrangements which the Secretary has decided in advance are sufficient to meet the requirements of the statute. This warranty is inserted into the agreements and has to be accepted or otherwise negotiated by the applicants before they receive any federal funds.

The "Special Section 13(c) Warranty" involved in this case, which appeared in the agreement between the Commonwealth and the federal Department of Transportation, and which was also included in plaintiffs' separate agreements with the former, contained a provision outlining the method for resolving any future labor disputes arising under the agreements. This provided that the Department of Labor would act as a fall-back arbitrator ³ in case the parties failed to reach an agreement on the procedure for settling a labor dispute. It read,

Any dispute or controversy arising regarding the application, interpretation, or enforcement of any of the provisions of this arrangement which cannot be settled by and between the parties at interest within thirty (30) days after the dispute or controversy first arises, may be referred by any such party to any final and binding disputes settlement procedure acceptable to the parties, or in the event they cannot agree upon such procedure, to the Department of Labor or an impartial third party designated by the Department of Labor for final and binding determination. The compensation and expenses of the impartial third party, and any other jointly incurred expenses, shall be borne equally by the parties to the proceeding and all other expenses shall be paid by the party incurring them.

From 1978 to 1981, pursuant to federal requirements that they provide special transportation for the elderly and the handicapped, plaintiffs provided these services to the elderly through an independent contractor, Mount Grace Regional Transportation Corporation ("Mt. Grace"). The contracts between plaintiffs and Mt. Grace also incorporated the terms of the Special Section 13(c) Warranty promulgated by the Secretary of Labor, including the quoted disputes resolution clause.

In 1981, both plaintiffs terminated their contracts with Mt. Grace. GMTA undertook to furnish directly the services formerly provided by Mt. Grace, and it subcontracted with FRTA to furnish similar services to that corporation as well. Thereafter, between May 29 and August 28, 1981, 16 persons employed or formerly employed by Mt. Grace filed claims with the Department of Labor, alleging that they had been adversely affected by the federal financial assistance received by GMTA and FRTA, that they were entitled to the protective benefits of the Special Section 13(c) Warranty, and that they had been unable to agree with plaintiffs upon any procedure to settle the dispute. They requested that the Department of Labor assume jurisdiction conforming to the grievance provisions of the agreement. The Secretary of Labor complied with this request, designating an employee to act as arbitrator.

Plaintiffs challenged the jurisdiction of the Labor Department, asserting that the UMTA did not authorize the Secretary, as part of the protective arrangements, to set himself up as "fall-back" arbitrator in mass transit labor disputes. They also claimed that the Mt. Grace employees were not entitled to the protection of the Special Section 13(c) Warranty. On June 14, 1982, and again on June 20, 1983, the Secretary of Labor rejected plaintiffs' jurisdictional challenge in interim determinations. The Secretary concluded that the dispute was properly handled by the Department of Labor under the terms of the agreement in light of the parties' failure to agree to any other procedure. The Secretary declined to address plaintiffs' second argument at that point, reasoning that it was not jurisdictional in nature. A hearing was scheduled.

Plaintiffs then filed the present action in the United States District Court of the District of Massachusetts asserting that the Secretary of Labor lacked authority under the UMTA to require them to submit to his arbitration and seeking declaratory and injunctive relief under the Administrative Procedure Act ("APA"), 5 U.S.C. Sec. 702, and the Declaratory Judgment Act, 28 U.S.C. Sec. 2201. By agreement, the arbitration proceedings were stayed pending the court's decision. (They have since been held.) The Mt. Grace employees filed a motion to intervene which was allowed by the district court.

On December 23, 1983, the Secretary moved to dismiss the complaint for lack of jurisdiction and failure to state a cause of action. The motion was referred to a magistrate, who recommended that it be allowed on the grounds that 1) the Secretary of Labor was being sued qua arbitrator and thus enjoyed arbitral immunity from the suit; 2) the Secretary of Labor's determination to act under the contract was not "agency action" reviewable under the APA and, in any event, was not final for review purposes; and 3) there was no federal question jurisdiction because the Secretary was acting under the contract and not under any federal law. Plaintiffs objected.

The district court dismissed the complaint, but on different grounds. Assuming that plaintiffs' allegations that the Secretary had exceeded his statutory authority in setting himself as a fall-back arbitrator did indeed present a substantial federal question, the court held that the Secretary's action was not reviewable under the APA because it was agency action committed to agency discretion by law.

GMTA and FRTA appeal from this decision, challenging both the reasoning adopted by the district court and that of the magistrate. The Secretary answers these contentions. Also, the Amalgamated Transit Union, AFL-CIO, has filed an amicus brief, urging affirmance on the grounds stated by the magistrate.

II. DISCUSSION

The district court relied on federal cases holding that the Secretary's decision whether or not to certify a particular arrangement as "fair and equitable" under section 13(c) of the UMTA is "committed to agency discretion" within the meaning of the APA, 5 U.S.C. Sec. 701(a)(2), and is not, therefore, reviewable by the courts. See Local Division 732, Amalgamated Transit Union v. Metropolitan Atlanta Rapid Transit Authority, 667 F.2d 1327, 1343 (11th Cir.1982); Kendler v. Wirtz, 388 F.2d 381, 383-84 (3d Cir.1968); City of Macon v. Marshall, 439 F.Supp. 1209, 1223 (M.D.Ga.1977). But see Amalgamated Transit Union v. Donovan, 582 F.Supp. 522, 528-29 (D.D.C.1984) (certification reviewable, but review is limited to abuse of discretion). Cf. Local Division 589, Amalgamated Transit Union v. Massachusetts, 666 F.2d 618, 634 (1st Cir.1981) (recognizing need for flexibility and discretion by the Secretary in section 13(c) certifications), cert. denied, 457 U.S. 1117, 102 S.Ct. 2928, 73 L.Ed.2d 1329 (1982). We agree with plaintiffs that those cases are not necessarily dispositive here. P...