RAILWAY LABOR EXEC. ASS'N v. CHESAPEAKE WESTERN

Decision Date13 June 1990
Docket NumberCiv. A. No. 89-1157-A.
Citation738 F. Supp. 1544
CourtU.S. District Court — Eastern District of Virginia
PartiesRAILWAY LABOR EXECUTIVES' ASSOCIATION, et al., Plaintiffs, v. CHESAPEAKE WESTERN RAILWAY, et al., Defendants.

COPYRIGHT MATERIAL OMITTED

John O'B. Clarke, Jr., Highshaw, Mahoney & Clarke, P.C., Washington, D.C., for plaintiffs.

Jeffrey S. Berlin, Andrew D. Koblenz, Mark E. Martin, Elizabeth H. Liebschutz, Amy R. Doberman, Richardson, Berlin & Morvillo, Washington, D.C., for defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

Introduction

This Railway Labor Act ("RLA") dispute, brought by fourteen labor unions and the Railway Labor Executives' Association ("RLEA") against a group of railroads, grows out of the railroads' sale, lease, and abandonment of various of the railroads' spur lines. Plaintiffs contend that defendants violated their duties under the RLA (i) to exert every reasonable effort to settle all disputes, maintain agreements and bargain only with designated employee representatives; (ii) to give written notice to bargain with its employees' representatives regarding defendants' decision to enter into intra-corporate leases and trackage rights agreements; and (iii) to comply fully with RLA bargaining and status quo obligations triggered by Section 6 notices when defendants discontinued operations and implemented lease transactions and trackage rights agreements. The defendant railroads deny plaintiffs' contentions and contend instead that the Court lacks subject matter jurisdiction because the parties' dispute is arguably over the interpretation and application of existing labor agreements and the RLA requires that such so-called "minor disputes" be resolved exclusively by arbitration. Defendant railroads further counterclaim for a permanent strike injunction to prevent the unions and RLEA from "attempting, by strike, work stoppage, or otherwise, to force the railroads1 to complete the process of bargaining" with the unions in connection with the Section 6 notices served by the unions prior to "selling, leasing, or otherwise disposing of" railroad lines.

The parties filed cross-motions for summary judgment and, as there were no disputed issues of material fact, the Court, on February 16, 1990, ruled that it lacked subject matter jurisdiction because plaintiffs' complaint indeed presented a "minor dispute" under the RLA. Accordingly, the Court dismissed the labor plaintiffs' claim and left the parties to their RLA arbitration remedy. Arbitration proceedings are currently ongoing.2 As an alternative basis for summary judgment, the Court also concluded that the Interstate Commerce Commission ("ICC") has exclusive jurisdiction over transactions authorized and conducted pursuant to 49 U.S.C. § 11343. Finally, the Court held in abeyance defendants' request for an injunction to prevent plaintiffs from engaging in self-help or striking over the minor dispute. An appropriate order issued reflecting these rulings.3 The Court gave the parties leave to file further briefs regarding the propriety of the Court's granting injunctive relief. Both parties filed briefs and the Court heard oral argument. As defendants represented that no strike was then imminent, the Court, by Order dated May 15, 1990, declined to grant injunctive relief. This Memorandum Opinion records the Court's reasons for its February 16 and May 15 decisions.4

Background

Plaintiffs consist of the RLEA, an unincorporated association of the chief executive officers of seventeen national and international railway labor unions of the United States, and fourteen individual rail labor unions that represent defendants' employees for the purposes of collective bargaining. These entities are collectively referred to as the "labor plaintiffs."

Defendants are transportation holding companies and common carriers by rail5 that operate rail lines in the Mid and South Atlantic region of the United States and within this Court's jurisdiction. Norfolk Southern Corporation ("NS") is the holding company that controls Norfolk and Western Railway Company ("NW") and Southern Railway Company ("Southern"). NS operates these railroads as a coordinated system often referred to as the "NS system." Chesapeake Western Railway Company ("CW"), a subsidiary of NW, is also part of the system.

This dispute was spawned by a series of sales and leases of certain NS track lines. While the details of these transactions are not material to the disposition of the case, a brief summary is included as explanatory background.

1. The "Thoroughbred Short Line" Program

NS has determined that some lines within its railroad system have so little traffic originating and terminating on them that they are unprofitable to operate. Other NS lines are marginally profitable today, but would require substantial capital investment for continued operation. NS has therefore determined that it must dispose of these two categories of lines by way of sale, lease or abandonment. If the lines are not disposed of to an entity who will continue their rail service, shippers and others served by the lines may lose their access to rail service.

By October, 1987, NS had identified approximately 2700 miles of unprofitable or marginally unprofitable lines. NS further determined that 1500 miles of this total had no potential for profitable operation by anyone and had to be abandoned. The remaining 1200 miles were judged to have the potential for profitable operation by "short line" operators. NS therefore decided to lease these lines, typically for 20 year periods, on terms requiring relatively low initial investments by the short line operators and providing incentives for the operators to maintain the flow of traffic connecting with the NS system. Specifically, the leases are designed to establish a rental obligation that produces a reasonable return based on the line's liquidation value, but also to provide for a credit against rental payments for every rail car interchanged with NS. This credit is calculated so that if the new operator produces traffic equal to the traffic on the line in recent years, the operator pays no rent at all. This leasing program, entitled the "Thoroughbred Short Line" ("TSL") program, was approved by NS management in early 1988, and implemented immediately.

The first TSL lease, consummated in November 1988, involved 72 miles of line in Virginia. Since the initial lease, NS and its subsidiaries have completed 14 such leases, involving an aggregate of approximately 810 miles of line.6 Additional TSL leases are planned. Generally, the TSL leases have been carried out pursuant to ICC authorization. A provision of the Interstate Commerce Act ("ICA"), 49 U.S.C. § 11343, governs, inter alia, transfers of rail lines from one carrier to another. Ordinarily, transactions subject to § 11343 may be carried out only after the participants receive prior ICC approval. Under 49 U.S.C. § 10505, however, the ICC exempts certain transactions from the prior approval requirement of § 11343. Exemptions were sought and obtained for all TSL leases subject to § 11343. In all such cases, 49 U.S.C. § 10505(g) requires that the ICC impose extensive "employee protective conditions," required by 49 U.S.C. § 11347 on these transactions. These conditions, often called the "Mendocino Coast"7 conditions, provide an array of compensatory benefits for employees adversely affected by a line sale or transfer transaction. In two of the lease transactions, including the CCR lease, the lessees were companies that were not already classified as "carriers" under the ICA. These transactions with "non-carriers" were not subject to § 11343 but, instead, were governed by 49 U.S.C. § 10901. The ICC generally does not impose employee protective conditions on transactions authorized under § 10901 and did not do so in this case.

2. Other Sales and Leases to Unaffiliated Parties

The largest line disposition planned by NS was the "Ohio/P & WV" transaction. This transaction involved NW's sale of approximately 440 miles of line owned in Ohio and the sublease of approximately 121 miles of line in Ohio, West Virginia, and Pennsylvania now leased by NW from the Pittsburgh and West Virginia Railroad ("P & WV"), a company not affiliated with NS. The purchaser/sublessee in the transaction, Wheeling Acquisition Corporation ("Wheeling") is also not affiliated with NS. Wheeling was a "non-carrier" under the ICA and, as such, was initially subject to ICC authorization under § 10901. On January 12, 1990, Wheeling filed the statutorily required "Notice of Exemption" with the ICC. The labor plaintiffs sought unsuccessfully to block this transaction. See supra note 4. Wheeling commenced operations as a "carrier" on May 18, 1990.

3. NS Intra-corporate Transactions
a. The CW Lease

On January 24, 1989, Southern and CW gave notice to the ICC of their intention to engage in an intra-corporate lease8 of Southern's rail lines between Harrisonburg and Mount Jackson, Virginia to CW. In addition to that lease, Southern noted its proposed abandonment of operations on 5.1 miles of rail line between Mount Jackson and Edinburg, Virginia. In February, the ICC noted that the intra-corporate lease was "specifically exempted from prior ICC review and approval" and that on or about March 15, 1989, Southern and CW would implement the lease and Southern would discontinue its operations on the Mount Jackson to Edinburg line. On April 15, 1989, Southern abolished the train and engine crew positions staffing its Strasburg to Harrisonburg freight train and the "mobile agent" and "agent-operator" positions headquartered at Harrisonburg. Then, two days later, Southern transferred operations between Mount Jackson and Harrisonburg to CW. Since April 17, 1989, CW employees have performed all work on the leased line. Prior to that time, Southern employees performed all the work on the leased lines. Defendant railroads claim CW...

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