Railway Labor Executives Ass'n v. Pittsburgh & Lake Erie R. Co.

• Decision Date: 14 October 1988
• Docket Number: No. 87-3853,87-3853
• Citation: 858 F.2d 936
• Parties: 129 L.R.R.M. (BNA) 2673, 110 Lab.Cas. P 10,822 RAILWAY LABOR EXECUTIVES ASSOCIATION v. PITTSBURGH & LAKE ERIE RAILROAD CO., a Delaware Corp. Pleco, Inc., a Delaware Corp. S. Henry G. Allyn, Gordon E. Neuenschwander, G. Gray Garland, Bernard B. Smyth, Beloit Corp., a Wisconsin Corp., Chicago West Pullman Transportation Corp., an Illinois Corp., and P & LE Railco, Inc., an Illinois Corp. Appeal of RAILWAY LABOR EXECUTIVES ASSOCIATION ("RLEA").
• Court: U.S. Court of Appeals — Third Circuit

Page 936

858 F.2d 936

129 L.R.R.M. (BNA) 2673, 110 Lab.Cas. P 10,822

RAILWAY LABOR EXECUTIVES ASSOCIATION v. PITTSBURGH & LAKE ERIE RAILROAD CO., a Delaware Corp. Pleco Inc., a Delaware Corp. S. Henry G. Allyn, Gordon E Neuenschwander, G. Gray Garland, Bernard B. Smyth, Beloit Corp., a Wisconsin Corp., Chicago West Pullman Transportation Corp., an Illinois Corp., and P & LE Railco Inc., an Illinois Corp. Appeal of RAILWAY LABOR EXECUTIVES ASSOCIATION ("RLEA").

No. 87-3853.

United States Court of Appeals Third Circuit.

Argued June 8, 1988.

Decided Oct. 14, 1988.

John O'B. Clarke, Jr., Richard S. Edelman (argued), Highsaw & Mahoney, Washington, D.C., for appellant.

Richard L. Wyatt, Jr., Ronald M. Johnson (argued), Brett A. Perlman, Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., G. Edward Yurcon, Vice President--Law, Pittsburgh & Lake Erie R. Co., Pittsburgh, Pa., for appellees Pittsburgh & Lake Erie R. Co., Pleco, Inc., Henry G. Allyn, Gordon Neuenschwander, Bernard B. Smyth, and Beloit Corp.

Thomas R. Johnson, Stephen M. Olson, David J. Strasser, Kirkpatrick & Lockhart, Pittsburgh, Pa., for appellees Chicago West Pullman Transp. Corp. and P & LE Railco, Inc.

Before BECKER, STAPLETON and GREENBERG, Circuit Judges.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

This appeal is the third that we have faced within the past year arising out of challenges by appellant Railway Labor Executives' Association (RLEA) to a proposed sale of assets by appellee Pittsburgh & Lake Erie Railroad Company (P & LE). In Railway Labor Executives' Ass'n. v. Pittsburgh & Lake Erie R.R., 831 F.2d 1231 (3d Cir.1987), petition for cert. filed, 56 U.S.L.W. 3759 (U.S. Mar. 24, 1988) (No. 87-1589), we held that the district court had no jurisdiction to enjoin a strike by RLEA unions because Congress did not intend that the Norris-LaGuardia Act, 29 U.S.C. Secs. 101-15, yield to the revised Interstate Commerce Act (ICA), 49 U.S.C. Secs. 10101-11917. In Railway Labor Executives' Ass'n v. Pittsburgh & Lake Erie R.R., 845 F.2d 420 (3d Cir.1988), petition for cert. filed, 56 U.S.L.W. 3839 (U.S. May 17, 1988) (No. 87-1888), we held that the expedited approval of the proposed sale by the Interstate Commerce Commission (ICC) under the ICA does not relieve P & LE from its duty to bargain under the Railway Labor Act (RLA), 45 U.S.C. Secs. 151-188, over the effects of the proposed sale. In this case, RLEA contends that the proposed sale of assets would violate Pennsylvania's version of the Uniform Fraudulent Conveyance Act (PFCA), Pa.Stat.Ann. tit. 39, Secs. 351-363 (Purdon 1954). We agree with the district court conclusion that it lacked jurisdiction. We will reverse its order of dismissal, however, and remand to the district court with instructions that it in turn remand these proceedings to the state court.

I.

The factual background to this dispute is fully set out in our prior two opinions; we summarize here only the allegations of the complaint and the procedural history relevant to this appeal. P & LE has been experiencing financial difficulties over the last several years. As a result, P & LE entered into an agreement on July 8, 1987 to sell most of its assets, including its rail lines and operating properties, to P & LE Railco, Incorporated (Railco), a noncarrier, and a wholly owned subsidiary of appellee Chicago West Pullman Transportation Corporation (CWPT). P & LE notified its unions of the proposed sale.

RLEA, an unincorporated association of the chief executive officers of nineteen railway labor unions, including the unions that represent P & LE's employees, took several actions to preserve the alleged rights of its members. One of the actions RLEA took was to file this suit in Pennsylvania state court in October, 1987, claiming that the proposed sale of assets would be a fraudulent conveyance in violation of the PFCA and was only the most recent in a continuing series of the transactions which violate that Act. Named as defendants in addition to P & LE, Railco and CWPT, were Pleco, Inc., P & LE's parent, and several stockholders, officers and directors of Pleco. In its complaint, RLEA asserts that the employees are creditors within the meaning of the PFCA because of P & LE's obligations to the employees for accrued but unpaid wages, vacation pay, labor protection pay, life, health and insurance premiums, pension plan premiums, and pending grievance claims. In addition, RLEA asserts that the unions are creditors because of the P & LE's obligations to the unions for union dues. RLEA contends that the proposed sale would be a fraudulent conveyance, inter alia, because the transaction would not involve fair consideration and would render the P & LE insolvent, and because it is an intentional attempt to defraud creditors. RLEA further contends that the proposed sale has been arranged for the benefit of some creditors to the prejudice of employee and other creditors. RLEA seeks a declaration that all of the transactions described in the complaint violate the PFCA, a preliminary and permanent injunction barring distribution of the proceeds of the sale until RLEA's claims are provided for, a receivership to administer and distribute those proceeds, damages arising from the PFCA violations, subordination to RLEA's claims of creditors who were preferred under the fraudulent conveyances, and such other relief as the court may find appropriate.

Before answering the complaint, the defendants removed the case to the federal district court and then moved to dismiss on the ground that RLEA's claim was preempted by the RLA and the ICA. RLEA opposed the motion to dismiss and moved to remand the case to the state court. The district court granted P & LE's motion to dismiss and denied RLEA's motion to remand. It found that RLEA's claim involved a "minor dispute" under the RLA and that the only proper forum for resolving this dispute was arbitration culminating, if necessary, in a determination by the National Railway Adjustment Board (NRAB). As a result, the district court held 680 F.Supp. 192 that it and the state court lacked jurisdiction. This appeal was taken from the order of dismissal. ¹

II.

The threshold issue is one of subject matter jurisdiction. There are several avenues of analysis in this setting that might lead to the conclusion that the district court had no jurisdiction. The district court concluded that the RLA made the NRAB the exclusive forum for resolving a dispute of this kind and, accordingly, that it and the state court lacked jurisdiction. Defendants also urge, in the alternative, that the ICA makes the ICC the exclusive forum for resolving a dispute of this kind. Wholly apart from these forum preemption issues, however, given the exclusive reliance of RLEA's state court complaint on state law, the district court may have lacked jurisdiction under well established principles of removal law. More specifically, under the "well pleaded complaint" rule, there is no removal jurisdiction in this case and a remand is required unless it can be said that the RLA or the ICA "completely preempts" RLEA's state cause of action. Although the defendants argued that the doctrine of complete preemption bestowed jurisdiction on the district court, that court did not address the issue.

We address the well pleaded complaint rule and the complete preemption doctrine in Section IIA. We conclude that the district court lacked jurisdiction under these applicable principles of removal law. As we explicate in Section IIB, we also conclude that the district court should have addressed the removal issue first and remanded to the state court, leaving the issues of forum preemption for determination by the state court. In Section IIC, we emphasize that our holding is a narrow one and identify the issues that we leave for resolution by the state court. Among those issues is the question of whether the rules of law provided by the PFCA are preempted by federal law. As we shall see, this "ordinary preemption" issue concerning the applicable principles of substantive law is distinct from the "complete preemption" issue discussed in Section IIA and the "forum preemption" issues discussed in Section IIB.

A.

RLEA's complaint relies solely on state law. Under 28 U.S.C. Sec. 1441, only state court actions over which "the district courts of the United States have original jurisdiction, may be removed by the defendant." As the asserted basis of federal jurisdiction in this case is 28 U.S.C. Sec. 1331 ("federal question" jurisdiction), the "well-pleaded complaint rule" applies. In order for a case to be removable under Sec. 1441 and Sec. 1331, the well-pleaded complaint rule requires the federal question be presented on the face of the plaintiff's properly pleaded complaint. See Gully v. First National Bank, 299 U.S. 109, 112-13, 57 S.Ct. 96, 97-98, 81 L.Ed. 70 (1936). In addition, under this rule,

a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the complaint, and even if both parties concede that the federal defense is the only question truly at issue.

Caterpillar, Inc. v. Williams, --- U.S. ----, 107 S.Ct. 2425, 2426, 96 L.Ed.2d 318 (1987).

The Supreme Court, however, has fashioned an "independent corollary," to the well-pleaded complaint rule, known as the "complete preemption doctrine." The complete preemption doctrine holds that "Congress may so completely preempt a particular area, that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). In such cases, "any complaint that comes within the scope of the federal cause of action [created by the federal statute] necessarily 'arises under' federal law," Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 24, 103 S.Ct. 2841, 2854, 77...