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Railway Labor Executives' Association v. United States

decided: May 21, 1984.


Petition by Railway Labor Executives' Association to review an order of the Interstate Commerce Commission declining to reopen two decisions which refused to impose labor protective conditions in connection with the abandonment and sale of terminal railroads in the New York Harbor area. Petition denied.

Friendly, Timbers and Meskill, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

Petitioner, Railway Labor Executives' Association ("RLEA"), is an association of the chief executive officers of twenty-one national labor organizations which represent virtually all of the country's organized railroad employees. It here petitions us to review and modify orders of the Interstate Commerce Commission ("ICC" or "Commission") relating to three small terminal railroads, Brooklyn Eastern District Terminal ("BEDT"), New York Dock Railway ("NYD") and New York Cross Harbor Railroad Terminal Corporation ("NYCH"), purchaser of NYD, operating in the New York Harbor area. Petitioner's grievance is that BEDT and NYD were allowed to cease and NYCH to begin operations without the imposition of labor protective conditions.

It may be useful to begin with a few words regarding the economic background of this case, which, though not detailed in the record, was well known to the parties, to the Commission, and, in considerable degree, to the courts in this circuit and to the Special Court under the Regional Rail Reorganization Act, see, e.g., Schuler v. Patton, 416 F. Supp. 1252 (Special Ct. 1976); New York Dock Ry. v. Consolidated Rail Corp., 434 F. Supp. 1245 (Special Ct. 1977). The bays and rivers that have made New York a great port and have added to its scenic splendor have posed serious problems for the railroads serving it, for the States of New York and New Jersey, and for the Port of New York Authority, which was formed pursuant to interstate compact, see 42 Stat. 174 (1921), in an effort to meet them. The problem was encapsulated by the United States Railway Association, created by the Regional Rail Reorganization Act of 1973, 87 Stat. 985, when it said in proposing its Final System Plan for the bankrupt railroads of the Northeast, Vol. II, p. 10, that "New York Harbor is the only port on the Eastern seaboard where, because of lack of direct rail access, carfloat operations are required to serve docks and other locations." After World War II these carfloat operations were carried on by six trunk line railroads, the Long Island Railroad and four relatively small independent companies, viz., BEDT, NYD, Bush Terminal and Jay Street Connecting Railroad. These operations were gradually discontinued until only BEDT and NYD remained. Confronted by serious operating losses, the two surviving carriers were faced with the necessity of ceasing operation, although, as will be seen, NYD succeeded in finding a new carrier, NYCH, ready to assume its services if able to make a fresh start.

The BEDT case

On May 2, 1983, BEDT, having earlier published a Notice of Intent to Abandon Service, pursuant to 49 C.F.R. § 1152.20, alerting all interested parties, including its employees, of the procedure they must follow if they wished to protest the abandonment and to request an investigation, filed an application pursuant to 49 U.S.C. § 10904 to abandon its entire line of railroad in Kings and Queens Counties, New York, as well as to terminate rail and marine operations within the Port of New York and its interchange with Conrail at Greenville, New Jersey. The application stated that BEDT was a subsidiary of NYD Properties, Inc., which also owned 100% of the stock of NYD. The application stated the reasons for the abandonment as including the relocation of industry away from New York City, the disruption of the historic rate parity for the Port of New York by a lowering of rates to New Jersey destinations, and the consequent election of businesses on BEDT's line to truck goods from New Jersey rail termini or utilize trucking entirely rather than use BEDT's more expensive carfloat operation. BEDT's annual carloadings had dropped 91% in the period 1973-82. Business in the first three months of 1983 had dropped by 62% from the corresponding period in 1982 and by 88% from the corresponding period in 1981. BEDT had been unsuccessful in its efforts to improve productivity by getting the unions' agreement to change outdated and costly work rules and practices. BEDT's facilities on land required considerable modernization and rehabilitation and its marine equipment required extensive renewal, the total cost of which, it was estimated, would exceed $3 million. Operations for 1982 had resulted in a loss of $120,251. Cash and cash equivalents as of December 31, 1982, had declined to $8,636; current assets, excluding amounts due from affiliated companies, were only $381,873, as against current liabilities, excluding amounts due to NYD Properties, Inc., and affiliated companies, of $418,933. BEDT had, in recent years, been forced to sell corporate assets to meet current obligations.

RLEA submitted a letter to the Commission stating that granting the application "may well have an adverse effect" on BEDT's employees, as well as employees of other railroads, and therefore protested approval of the application and prayed that it be denied. It requested the Commission to conduct an investigation and hold oral hearings, without indicating what either would be expected to produce. The letter further asked that if the Commission determined to approve the application, it should impose conditions for the protection of employees as set forth in Oregon Short Line R.R. -- Abandonment, 360 I.C.C. 91 (1979), "modified as to conform to the requirements of 49 U.S.C. Sections 10903(b)(2) and 11347."*fn1 Exercising the discretion confided by 49 U.S.C. § 10904(c)(2), the Director of the Commission's Office of Proceedings issued an order declining to institute an investigation and stating that a decision would be issued by July 5, 1983, as required by that section. RLEA did not appeal the Director's decision within the 10 days provided by 49 C.F.R. §§ 1011.7(b)(1) and 1152.25(e)(2).

On July 15, 1983, an employee review board of the Commission, acting under authority delegated in 49 U.S.C. § 10305, issued a decision granting a certificate of abandonment. The board found that "BEDT is operating at a loss and, since no new traffic source has been shown, . . . no reasonable potential exists for making the line profitable." With respect to the labor protective conditions sought by RLEA and two other labor organizations, the board stated that the Oregon Short Line conditions "are not appropriate for an entire line abandonment unless evidence shows that the applicant railroad has a corporate affiliate which will continue carrier operations or that applicant has a corporate parent which will realize significant benefits as a result of abandonment", citing authorities that will be discussed hereafter. It found that while BEDT was affiliated with NYD, the latter was discontinuing operations pursuant to the decision discussed below, and that there was no evidence of record to show that the corporate parent, New York Dock Properties, Inc., would realize significant benefits as a result of the abandonment. Accordingly, no labor protective conditions would be imposed. Under 49 C.F.R. § 1152.25(e)(2), the board's decision was administratively final.

The NYD and NYCH cases

The history of the NYD and NYCH cases is somewhat more complicated.

NYD published a Notice of Intent to Abandon Service on April 8, 1983, concurrently with BEDT. The abandonment was to be of all of NYD's rail and marine service. This was followed on May 2, 1983, by an application for a certificate of abandonment. For reasons similar to those alleged by BEDT, NYD's carloadings had dropped 77% in the ten year period 1973-82. Its business for the final three months of 1983 was 36% less than in the corresponding period of 1982 and 56% less than in the corresponding period of 1981. Like BEDT, NYD alleged that it had endeavored unsuccessfully to get the agreement of labor unions to change outdated and costly work rules and practices; that its physical facilities required modernization, rehabilitation and renewal at a cost of nearly $12 million, which greatly exceeded its earning or borrowing potential; and that in recent years it had been forced to sell corporate assets to meet current obligations. It had a loss of $244,511 in 1982, with an aggregate retained deficit of $3,209,777. Its balance sheet as of December 31, 1982, showed current assets, exclusive of amounts due from NYD Properties and affiliated companies, of $877,574, as against current liabilities, exclusive of amounts due to affiliates, of $2,422,538.

RLEA submitted a letter of protest of the same tenor as the one filed in response to BEDT's abandonment petition. Once again, the Director of the Office of Proceedings determined that no investigation was necessary, and RLEA did not appeal the determination within the time provided by the Commission's rules.

At this point the history of NYD's application diverges from that of BEDT. On June 3, 1983, NYCH, a newly organized corporation, applied for a certificate under 49 U.S.C. § 10901*fn2 to conduct the operations which NYD was seeking leave to abandon. Incorporated in the application was a request, under 49 U.S.C. § 10505,*fn3 for exemption from provisions of the Interstate Commerce Act (the "Act") that would require a filing fee, a public hearing, authorization of the securities it proposed to issue to get into business,*fn4 and the filing of environmental and energy information.

On July 8, 1983, one week before the deadline fixed in § 10904(c)(2) of the Act for the Commission to rule on BEDT's and NYD's abandonment applications, RLEA petitioned the ICC to consolidate the BEDT, NYD and NYCH cases for the purpose, among others, of considering the imposition of labor protective conditions on NYCH. In a decision also rendered on July 8 and served July 15, Division 1 of the Commission dealt with the applications of NYD and NYCH. Treating NYCH's limited application for an exemption as one for a full exemption from § 10901, it granted such exemption. It went on to state that since the exemption would enable NYCH to substitute its services for NYD's, "NYD's abandonment application is no longer appropriate and will be dismissed." Taking note of a request of the Brotherhood of Locomotive Engineers that it impose the labor protective conditions contained in New York Dock Ry. -- Control -- Brooklyn Eastern District Terminal, 360 I.C.C. 60 (1979), and require NYCH to grant first preference to NYD and BEDT employees, it remarked that under 49 U.S.C. § 10505(g) it could not by exemption relieve a carrier of obligations to protect employees, but observed that the imposition of protective conditions in a proceeding under 49 U.S.C. § 10901 was discretionary and ruled that no need had been shown for their imposition. Thereafter, the Commission denied RLEA's July 8 petition on the grounds that it had not been timely filed and that the statutory deadlines would not have permitted granting the relief sought.

The Petition to Reopen

On July 29, 1983, RLEA petitioned the Commission to reopen*fn5 the two decisions served on July 15, one granting BEDT's abandonment application and the other disposing of NYD's and NYCH's applications in the manner noted. It complained of the Commission's refusal to investigate and to impose employee protective conditions. During the pendency of the petition BEDT abandoned operations and NYCH took over the operations formerly conducted by NYD. NYCH advised the ...

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