United Transp. Union v. Dakota, Minnesota E. R.R. Corp.

Full title: UNITED TRANSPORTATION UNION, Plaintiff, v. DAKOTA, MINNESOTA EASTERN…

Court: United States District Court, D. South Dakota, Southern Division

Date published: Aug 6, 2004

Civ 04-4101 (D.S.D. Aug. 6, 2004)

Opinion

Civ 04-4101.

August 6, 2004

MEMORANDUM OPINION AND ORDER

LAWRENCE PIERSOL, Chief Judge, District

Plaintiff, United Transportation Union (Union) has filed a complaint for declaratory and injunctive relief under the Railway Labor Act (RLA), 45 U.S.C. § 151 et seq. (Doc. 1). Union has also filed a motion for a preliminary injunction and supporting memorandum (Doc. 5, 6). Defendant, Dakota, Minnesota Eastern Railroad Corp., (DME), has filed a motion to dismiss and a document entitled "Memorandum in Opposition to Motion for Preliminary Injunction and in Support of Motion to Dismiss or in the alternative for Summary Judgment" (Doc. 22, 23). The Court held a hearing on the motion for preliminary injunction on July 20, 2004.

FACTUAL BACKGROUND

Union is the duly designated representative under the Railway Labor Act (RLA). DME is a carrier by rail transporting goods in interstate commerce, and is a "carrier" as defined by the RLA. (Doc. 24). Section 1.24 of the April 1, 2003, collective bargaining agreement between the parties provides:

a. Except as provided in paragraph (b) below, all crews will consist of an engineer and a conductor.

b. Brakemen may be assigned to crews as required by the company's operations.

Prior to June of 2004, DME leased and operated three "business cars" or passenger cars which it had used primarily for the promotional purposes of educating and entertaining citizen groups, government officials, legislators, potential customers and other interested parties in connection with DME's proposal to build a rail line into the Powder River Basin in Wyoming. DME President and Chief Executive Officer Kevin Schieffer testified that the business cars had been unutilized or underutilized in the last three years, and that the business cars were now used primarily for employee excursions. Schieffer testified that now it was not economically feasible to run the business cars with DME crews.

On May 4, 2004, Schieffer sent a letter to Phil Craig, General Chairperson of the Union, proposing a number of options for running the business cars, one of these options being to allow qualified managers to handle business car operations. Craig objected to the use of the qualified managers as being in violation of Section 1.24 of the Collective Bargaining Agreement, and maintained that there could be no unilateral implementation of the matter since it was subject to a pending notice under Section 6 of the Railway Labor Act. Craig advised that the Union was open to negotiations on the issue. Shieffer admits in his affidavit of July 15, 2004, "The United Transportation Union (UTU) has long taken the view that DME must use UTU members to operate these trains, dating back to original discussions in 1997." Shieffer's testimony at the hearing was consistent with his affidavit. Craig testified that since he started working for DME in 1986, and up until June of 2004, all crews had consisted of an engineer and a conductor, consistent with Section 1.24 of the April 1, 2003, collective bargaining agreement. Craig also testified that previous "non-revenue runs," such as hospital trains, had been operated consistent with Section 1.24 of the April 1, 2003, collective bargaining agreement.

On June 15, 2004, DME entered into agreements with Cedar American Rail Holdings, Inc., (Cedar American) to sublease its business cars and lease a DME locomotive when necessary to operate a business car train. On June 25, 2004, DME entered into an agreement with Cedar American for Cedar American's "operation of non-revenue non-common carrier movements over the rail lines" of DME. Cedar American operated its first business car train over portions of the DME on June 26, 2004, with qualified managers of Cedar American acting as the crew members. At that time a rested crew of Union members was available and ready to go to work at Huron, South Dakota, the starting point of the June 26, 2004, excursion. Cedar American operated this business car train a total of three times within the week after June 26, 2004.

Cedar American is a wholly owned subsidiary of DME. Cedar American is a holding company that is associated with both DME and the Iowa, Chicago and Eastern Railroad Corporation(ICE), and provides administrative and executive services common to both DME and ICE. ICE has a different union than Plaintiff Union. At no time has Cedar American been an operating railroad. Cedar American has no collective bargaining agreement with DME and employs no Union members. Cedar American has the same corporate headquarters as DME, and the department heads of Cedar American also have jurisdiction over DME. Schieffer testified that both entities are "under common control, no question about that." The qualified managers of Cedar American who act as crew members of the business car train are salaried, whereas the DME crew members who operated the business car train are all hourly workers. After the qualified managers of Cedar American operated the business car train in June of 2004, the Union initiated this action.

ISSUE

WHETHER THE DISPUTE OVER CEDAR AMERICAN'S QUALIFIED MANAGERS ACTING AS CREW MEMBERS OVER THE BUSINESS CARS IS A MAJOR DISPUTE SO AS TO ALLOW THIS COURT TO EXERCISE SUBJECT MATTER JURISDICTION TO ENJOIN VIOLATION OF THE STATUS QUO?

General Principles

One purpose of the RLA is to prevent disruption of the Nation's rail service by requiring both the union and the railroad to negotiate whenever a dispute arises. 45 U.S.C. § 152. In the event of a major dispute, the parties are required to undergo a lengthy process of bargaining and mediation, and the parties are obligated to maintain the status quo. Consolidated Rail Corp. v. Railway Labor Executives' Ass'n, 491 U.S. 299, 302 (1989). In maintaining the status quo, the railroad may not implement contested changes in pay, rules or working conditions. See 45 U.S.C. § 152 Seventh and § 156. The federal district courts have subject-matter jurisdiction to enjoin violations of the status quo pending completion of the required bargaining and mediation without the customary showing of irreparable injury. See Detroit Toledo Shore Line R.R. Co. v. United Transportation Union, 396 U.S. 142 (1969).

If, however, the dispute is categorized as a minor dispute, or a dispute arising "out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions," the dispute is subject to compulsory and binding arbitration before the National Railroad Adjustment Board or an adjustment board established by the employer and unions representing the employees, and these boards have exclusive jurisdiction over minor disputes. Union Pacific R. Co. v. Sheehan, 439 U.S. 89, 93 (1978). When the dispute is minor, a party may make small alterations in working conditions unilaterally, pending resolution of the dispute in mediation. Alton Southern Lodge No. 306 Brotherhood Railway Carmen v. The Alton Southern Ry. Co., 849 F.2d 1111, 1113-114 (8th Cir. 1988).

A determination of whether a dispute is major or minor depends on whether the dispute is arguably comprehended within the parties' agreement. Brotherhood of Maintenance of Way Employees, Lodge 16 v. Burlington Northern R.R. Co., 802 F.2d 1016, 1022 (8^th Cir. 1986). The Court must, therefore, determine the terms of the parties' agreement, and this includes both the written collective-bargaining agreement and the past practices of the parties. Id. The Eighth Circuit has stated, however, that in order for a past practice to rise to the level of an implied agreement, it must have "`ripened into an established and recognized custom between the parties.'" Brotherhood Ry. Carmen v. Missouri Pac. R.R. Co., 944 F.2d 1422, 1429 (8^th Cir. 1991) (quoting Alton, 849 F.2d at 1114). The Eighth Circuit has also concluded that in order for a past practice to rise to the level of an implied agreement, the practice must be with the knowledge and acquiescence of the employees.

The Supreme Court has explained, "Where an employer asserts a contractual right to take the contested action, the ensuing dispute is minor if the action is arguably justified by the terms of the parties' collective-bargaining agreement. Where, in contrast, the employer's claims are frivolous or obviously insubstantial, the dispute is major." Consolidated Rail Corp., 491 U.S. at 305. There is no bright line for differentiating between major and minor disputes and the issue is often a question of degree which turns upon the facts of each case. United Transportation Union v. Kansas City Southern Ry. Co., 172 F.3d 582, 585 (8^th Cir. 1999). When the circumstances surrounding a dispute are ambiguous, the courts favor construing the disputes as minor. Id. at 1113. The formal demarcation between major and minor disputes, however, does not depend on a determination of the importance of the particular issue presented or the likelihood that the particular controversy would would prompt the exercise of economic self-help. Consolidated Rail Corp., 491 U.S. at 305. Although it has been described as a "light burden," see Sheetmetal Workers' Int'l Assoc. v. Burlington Northern R.R. Co., 893 F.2d 199, (8^th Cir. 1990), DME has the burden of establishing that the dispute is minor.

Analysis

DME contends that the dispute is arguably comprehended within Section 2.1(c) of the Agreement, which provides:

The Company reserves the right to alter, modify or issue new policies or procedures that are not in conflict with those contained herein, and to otherwise operate its business in any manner that is not in conflict with those contained herein, and to otherwise operate its business in any manner that is not in conflict herewith.

DME contends that terminating its operation of business car trains and allowing Cedar American to operate such trains is comprehended in the agreement, because this change in operation is not in conflict with any term of the parties' agreement.

In support of its argument, DME relies on the cases of Sheetmetal Workers' Int'l Assoc. v. Burlington Northern R.R. Co., 893 F.2d 199 (8^th Cir. 1990), and Brotherhood Railway Carmen v. Missouri Pac. R.R. Co., 944 F.2d 1422 (8^th Cir. 1991). In the Sheetmetal Workers' case the Union unsuccessfully sought to enjoin the Burlington Northern Railroad from using employees of a wholly owned subsidiary to repair and maintain locomotives used by the railroad to generate electricity for the railroad. The Eighth Circuit concluded that the dispute was minor after considering the railroad's argument "that its long-standing practice of utilizing shipper-owned and third-party owned freight cars, maintenance of which is performed by non-BN personnel, as well as its operation of Amtrak locomotives, maintenance of which is also performed by non-BN personnel, has broadened the scope clause of the [labor] agreement" to allow the arrangement with the wholly owned subsidiary. 893 F.2d at 204.

In the Brotherhood Ry. Carmen case, the Union brought suit when the railroad leased tracks to a third party to permit the third party's employees to make minor repairs to third party's freight cars that were being operated by the railroad. The Eighth Circuit concluded that the dispute was minor after considering the carriers' claim of numerous instances of past practice involving numerous leases of track to third parties at numerous locations where the third parties were allowed to repair types of rail cars other than the freight cars involved in the Brotherhood Ry. Carmen case. 944 F.2d at 1429.

DME maintains that prior to June 2004, the "train crew on these business car trains consisted of an engineer and conductor and generally several managers serving as conductors, engineers or in other capacities — generally tending to the cars and passenger safety and comfort needs." It is true that the type of past practice relied on by a carrier need not be identical to the practice in controversy to satisfy the carrier's burden of showing arguable contractual justification for the practice in controversy. See Consolidated Rail Corp., 491 U.S. at 305; Brotherhood Ry. Carmen, 944 F.2d at 1429. The past practice of having qualified managers accompany an engineer and conductor on the business car trains, however, is dissimilar to the practice in controversy regarding a factor that is critical to the present dispute — the replacement of the union train crew by nonunion managers. The dispute at hand is not arguably contemplated within the parties' agreement.

The fact that crews for three passenger cars and the engine to pull them are at issue, as opposed to the entire revenue producing portion of the railroad, does not make this a minor dispute. If DME's position is taken to its logical conclusion all of the railroad could be run by managers operating as engineers, conductors and brakemen.

In support of its position that the dispute in issue is a major dispute, the Union relies on case law which holds that a carrier cannot evade its duties under either a collective bargaining agreement or the Railway Labor Act by directing business to an entity within its corporate family which is not obligated by the existing collective bargaining agreement. See Brotherhood of Locomotive Engineers v. Springfield Terminal Ry., 210 F.3d 18 (1^st Cir. 2000); Burlington Northern R.R. Co. v. United Transp. Union, 962 F.2d 1266 (7^th Cir. 1988); Butte, Anacoda Pac. Ry. Co., v. Brotherhood of Locomotive Firemen and Enginemen, 268 F.2d 54 (9^th Cir. 1959). See also, Brotherhood Ry. Carmen, 944 F.2d at 1425 n. 3. The Court finds this case law persuasive.

The fact that the passenger cars in question are now subleased by a wholly owned subsidiary makes no difference in the analysis of whether the dispute is major or minor. The wholly owned subsidiary, Cedar American, need not be shown to be a sham from its inception for the Union to get the relief requested. Nor does the Court find the creation of Cedar American to be a sham. Defendant DME was candid in the testimony presented that although the Cedar American managers are paid by Cedar American, they are wholly under the control of DME, office in the same place, and provide management services for both DME and Cedar American.

When moving passenger cars for the benefit of DME, Cedar American is the alter ego of DME. Cedar American is acting at the direction of DME, and for the benefit of DME. The fact that the running of the passenger cars is not directly revenue producing is apparently the reason that an attempt can be made to have the managers be the crew for the railroad. Neither the practice of the parties nor their Agreement allows for or contemplates such an anomaly. It is undisputed that a legally rested crew was available in Huron, South Dakota on June 26, 2004. Defendant DME, by its own actions and through the actions of its alter ego, has changed the policies of the Agreement between DME and United Transportation Union.

In conclusion, the Court finds the arguments of the Defendant DME to be obviously insubstantial. Having determined that the dispute is major, the Court will enjoin the violation of the status quo pending the required process of bargaining and mediation.¹ Accordingly,

1 The injunction does not prohibit the wholly owned subsidiary from using the passenger cars for the benefit of the Iowa, Chicago Eastern Railroad (ICE), with the crew for that use being whatever crew is in keeping with whatever the collective bargaining agreement is between that railroad and its union, that railroad and its union not being before the Court. ICE is wholly owned by the Defendant DME and the testimony was that the union for ICE is a different union than the Plaintiff, United Transportation Union.

IT IS ORDERED:

1. That Plaintiff's Motion for Preliminary Injunction (Doc. 5) is granted; and

2. That pending the required process of bargaining and mediation under the Railway Labor Act, Defendant DME is enjoined from using its qualified managers or the qualified managers of Cedar American to operate business or passenger trains over the rail lines of DME.