                                                                                                                           Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-2-2001

Union RR Co v. United Steelworkers
Precedential or Non-Precedential:

Docket 97-3680




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Filed March 1, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 97-3680

UNION RAILROAD COMPANY

v.

UNITED STEELWORKERS OF AMERICA; UNITED
STEELWORKERS OF AMERICA - DISTRICT 10; UNITED
STEELWORKERS OF AMERICA - LOCAL 3263,
       Appellants

Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action Nos. 96-cv-02095)
District Judge: Honorable Donetta W. Ambr ose

No. 98-6511

UNITED STEELWORKERS OF AMERICA,
AFL-CIO-CLC,

       Petitioner

v.

UNITED STATES OF AMERICA;
and
SURFACE TRANSPORTATION BOARD,

       Respondents
Union Railroad Company ("URR") and
Bessemer and Lake Erie Railroad
Company ("B&LE"),

       Intervenors*
       *(See Clerk Order of
       2/16/99)

On Petition for Review of an Order of the
Surface Transportation Board enter ed in
STB Finance Docket No. 31363 (Sub-No. 3)

Argued January 25, 2000

Before: GREENBERG,** NYGAARD and
ROTH, Circuit Judges

(Opinion filed: March 1, 2001)

Jeffrey S. Berlin, Esquire (Ar gued)
Mark E. Martin, Esquire
Sidley & Austin
1722 Eye Street, N.W.
Suite 300
Washington, DC 20006

 Attorneys for Appellee/Intervenors

David R. Jury (Argued)
Assistant General Counsel
United Steelworkers of America
5 Gateway Center
Pittsburgh, PA 15222

 Attorney for Appellants/Petitioner
_________________________________________________________________

** After this case was argued, but prior to the issuance of this opinion,
Judge Greenberg took senior status on June 30, 2000.

                                 2
       Robert J. Wiggers, Esquire
       John J. Powers, III, Esquire
       United States Department of Justice
       Antitrust Division, Room 10535
       601 D Street, N.W.
       Patrick Henry Building
       Washington, DC 20530

        Attorneys for Respondent

       Henri F. Rush
       General Counsel
       Theodore K. Kalick, Esquire (Argued)
       Surface Transportation Board
       Office of General Counsel
       1925 K Street, N.W.
       Suite 600
       Washington, DC 20423

        Attorneys for Surface
       Transportation Board Respondent

OPINION OF THE COURT

ROTH, Circuit Judge:

These consolidated cases present the question whether a
federal district court has subject matter jurisdiction to
adjudicate challenges to changes to a collective bar gaining
agreement, made in connection with a rail mer ger
authorized by the Surface Transportation Board (STB). The
District Court and the STB concluded that the latter has
exclusive authority to resolve labor disputes arising out of
STB-approved rail consolidations. For the r easons set out
below, we will affirm the decision of the District Court and
deny the petition for review of the decision of the STB.

I. Factual and Procedural History

In 1988, Transtar, Inc., a transportation holding
company located in Monroeville, Pennsylvania, acquired
control of the Union Railroad Company and the Bessemer
and Lake Erie Railroad Company, along withfive other rail

                               3
carriers and one water carrier. This consolidation was
achieved pursuant to an Interstate Commerce Commission
(ICC) authorization (Control Order), which, under 49 U.S.C.
S 10505, exempted the transaction from the prior approval
requirements of 49 U.S.C. SS 10746, 11321, and 11343.1
Blackstone Capital Partners, L.P., and USX Corporation --
Exemption from 49 U.S.C. 10746, 11321 and 11343,
Finance Docket No. 31363, served Dec. 23, 1988. The ICC
found that exempting the transaction would "minimiz[e]
administrative expense" and "foster sound economic
conditions and encourage efficient management." Id. slip
op. at 2. When the ICC authorized a merger , it was required
by 49 U.S.C. S 11326 to impose labor pr otections for
affected employees. Here, the ICC complied with S 11326 by
applying the New York Dock employee protective conditions.

The New York Dock conditions ar e those adopted in New
York Dock Ry. - Control - Br ooklyn Eastern District
Terminal, 360 I.C.C. 60, 84 (1979), aff 'd. sub. nom. New
York Dock Ry. v. United States, 609 F .2d 83 (2d Cir. 1979).
Under New York Dock, changes r elated to authorized
transactions are accomplished through implementing
agreements negotiated between the rail carrier and
representatives of the employees. If the parties cannot agree
to the terms and conditions of the implementing agreement,
either party may unilaterally invoke an arbitration
proceeding to resolve the dispute.2
_________________________________________________________________

1. The ICC Termination Act of 1995, Pub. L. No. 104-88, 109 Stat. 803,
abolished the ICC (S 101, 109 Stat. at 804) and transferred its remaining
functions to the Surface Transportation Board (STB) effective January 1,
1996. The Act also resulted in the renumbering of various provisions of
the ICA. Following are the former section numbers that are relevant here
with the new numbers in brackets: S 10505[S 10502]; S 11341 [S 11321];
S 11347 [S 11326]. The new pr ovisions were re-enacted without
substantive change. In referring to the statute in this opinion, we will
employ the current section numbering.

2. More specifically, the New York Dock conditions provide compensatory
benefits to employees who are adversely af fected by a railroad merger or
control transaction, including protecting affected employees' wages for
up to six years. The New York Dock conditions also fix procedures for
making adjustments in workforces and labor agr eements that will permit
carriers to implement an authorized transaction. Article I, S 4 requires a

                               4
Prior to the 1988 consolidation, the Union Railr oad
Company and the Bessemer and Lake Erie Railr oad
Company (collectively, the Railroad) had maintained
separate accounting departments. The workers in each of
these departments worked solely for their respective
carriers and under separate collective bargaining
agreements. The clerical workers employed by Union
Railroad were members of the United Steelworkers of
America (USWA); the clerical workers of Bessemer and Lake
Erie were members of the Transportation Communications
International Union.

As part of the implementation of the 1988 Contr ol Order,
the Railroad sought to coordinate certain clerical work by
moving Union Railroad's accounting department to
Bessemer and Lake Erie Railroad. As requir ed by Article 1,
S 4, of the New York Dock conditions, the Railroad notified
the unions of its proposed coordination in a letter dated
September 3, 1996. The notice stated that nine new
positions would be established at Bessemer and Lake Erie
Railroad to perform the consolidated work; nine positions
at Union Railroad would thereby be eliminated. The notice
also explained that the nine former Union Railroad
employees would be incorporated into the existing
Bessemer and Lake Erie Railroad clerical seniority roster
according to their Union Railroad seniority rank.

The USWA, the Union Railroad clerical union, claimed
that the proposed coordination of work would violate a
scope rule contained in the United Railroad/USW A's
collective bargaining agreement, which forbade non-Union
Railroad employees from perfor ming its accounting work.3
_________________________________________________________________

carrier to give affected employees ninety days' advance notice of a
proposed transaction. The parties must begin negotiation of an
implementing agreement within ten days of the notice; after thirty days,
either party may submit the dispute to arbitration before an arbitrator
acting pursuant to STB authority. If the parties ar e unable to select an
arbitrator within five days, they may ask the National Mediation Board
to appoint one. The arbitration hearing must begin within twenty days of
the arbitrator's designation and the decision is to be rendered within
thirty days of the hearing. 360 I.C.C. at 84, 85.

3. The scope rule provided: "[If][a]ny person outside the bargaining unit
or any person not covered by the bargaining unit performs work in

                               5
The USWA maintained that changes to the scope rule must
be made pursuant to the Railway Labor Act (RLA), 45
U.S.C. SS 151 et seq. The USW A also argued that it was not
a party to any other agreement, such as the W ashington
Job Protection Agreement of 1936,4 that would authorize
the contemplated changes. Accordingly, the USW A asserted
that it considered the Railroad's letter of September 3,
1996, detailing the planned coordination, as a notice of
proposed changes in the collective bargaining agreement
under S 6 of the RLA.

On October 26, 1996, the Railroad responded by
providing formal notice that it was invoking arbitration
under Article I, S 4, of New York Dock. The USWA countered
in a letter dated November 1, 1996, that it could not be
compelled to arbitrate because the RLA allows changes to
existing collective bargaining agreements only if the
changes are arbitrated with the mutual consent of both
parties. 45 U.S.C. S 157. It would ther efore consider the
Railroad's invocation of arbitration under New York Dock as
a termination of voluntary negotiations underS 6 of the
RLA. The USWA further asserted that it would not aid in
the selection of a New York Dock arbitrator. The Railroad
subsequently requested the National Mediation Board
(NMB) to appoint a neutral referee to arbitrate the dispute.
The NMB appointed Arbitrator Witt.

On October 29, 1996, the USWA served the Railroad with
an RLA S 6 bargaining proposal, asking for numerous
_________________________________________________________________

violation of this section and the employee who otherwise would have
performed this work can reasonably be identified, the Company shall
pay such employee the applicable standard hourly rate for the time
involved or for four (4) hours, whichever is gr eater." This rule was
first
adopted in 1978 and subsequently revised in 1981.

4. The Washington Job Protection Agr eement was signed by many of the
nation's rail carriers and unions in 1936. It r equired carriers to
compensate employees dismissed or displaced as a r esult of railroad
mergers and to pay relocating costs. It also provided that carriers give
notice of consolidation to employees and to negotiate implementing
agreements for coordinating workfor ces. Disputes concerning the
interpretation of agreements were submitted to binding arbitration. See
New York Dock, 609 F. at 87.

                               6
changes to the collective bargaining agr eement. The
Railroad responded by filing this action, seeking declaratory
and injunctive relief under the Declaratory Judgement Act,
28 U.S.C. S 2001, and the RLA, 45 U.S.C. S 151. The
Railroad sought a declaration that the USW A's October 29,
1996, S 6 notice was premature because of a moratorium
clause in the existing collective bargaining agreement and
that self-help was not available.

The USWA filed its counterclaim on December 9, 1996,
seeking declaratory and injunctive relief pr eventing the
Railroad from carrying out its proposed coordination of
clerical workers through the New York Dock arbitration
procedure. Compelled arbitration of the dispute under this
procedure, the USWA claimed, would violate its rights
under the RLA. The USWA next filed a motion for summary
judgment, with respect to both the Railr oad's claim and its
counterclaim. The Railroad, in tur n, filed a motion to
dismiss the counterclaim for lack of subject matter
jurisdiction.

On November 24, 1997, the District Court found, inter
alia, that it lacked subject matter jurisdiction over the
USWA's counterclaim: "A review of the relevant case law
persuades me that the propriety of the Railr oad's invocation
of the New York Dock process must be resolved by the STB,
and by the Court of Appeals. I do not have jurisdiction over
these matters." Union Railroad Company v. United
Steelworkers of America, No. 96-2095, slip op. at 8 (WDPA,
Nov. 1997). The USWA timely appealed the District Court's
November 23, 1997, dismissal.5

While the action was pending in the District Court, the
New York Dock arbitration proceeded, with the USWA
preserving its objections to the arbitrator's jurisdiction. On
October 21, 1997, Arbitrator Witt issued her award (Witt
Award), which imposed, with a few modifications, the
implementing agreement that the Railroad had proposed.
On November 10, 1997, the USWA petitioned the STB for
an administrative review of the Witt A ward, pursuant to 49
_________________________________________________________________

5. The District Court has also granted USW A's motion for summary
judgment on the complaint, making the order appealed from a final
order.

                               7
C.F.R. S 1115.8. By a decision dated December 16, 1998,
the STB declined review of the Witt A ward. Union Railroad
Company and Bessemer and Lake Erie Railroad-
Arbitration Review - United Steel Workers of America, STB
Finance Docket No. 31363 (Sub-No. 3), served Dec, 16,
1998. The USWA filed a timely petition for review of the
STB decision.

II. Jurisdiction

The District Court dismissed the USWA's counterclaim
for lack of subject matter jurisdiction. We have jurisdiction
under 28 U.S.C. S 1291 to review thefinal judgment of the
District Court.

The STB had jurisdiction over the USWA's petition to
review the arbitral decision under 49 U.S.C.SS 10502,
11323, and 11326. Our jurisdiction over the USW A's
petition to review the STB's decision is based on 28 U.S.C.
SS 2321(a), 2342(5), and 2344.

III. Standard of Review

We exercise plenary review over the District Court's
dismissal of the USWA's counterclaim for lack of subject
matter jurisdiction. See Erienet, Inc. v. V elocity Net, Inc.,
156 F.3d 513, 514 (3d Cir. 1998).

We may not upset the decision of the STB unless we find
that it is arbitrary, capricious, or in excess of its statutory
authority. See National Small Shipments T raffic Conference,
Inc., v. United States, 887 F.2d 443, 445 (3d Cir. 1989).

IV. Discussion

A. The District Court Decision

The jurisdictional question at issue here--whether the
District Court had subject matter jurisdiction to adjudicate
the USWA's challenge to the Railroad's implementation of
its 1988 ICC-authorized consolidation--requir es us to
examine the relationship between the Railr oad Labor Act
and the Interstate Commerce Act. The USW A argues that
the RLA and the ICA are "co-equal" and complementary

                                 8
statutory schemes and that, therefore, the District Court
had general federal subject matter jurisdiction pursuant to
28 U.S.C. S 1331 to hear its counterclaim seeking
enforcement of its rights under the RLA. The Railroad
contends that the ICA is the exclusive statutory scheme for
dealing with railroad consolidations and that accordingly
the STB has exclusive jurisdiction to consider disputes
concerning changes to labor agreements which are
necessary to implement an STB-authorized consolidation.
We agree with the Railroad.

The RLA was passed in 1926 to encourage collective
bargaining between railroads and their employees, thereby
preventing strikes and interruptions to interstate
commerce. See Detroit and Toledo Shore Line Railroad Co. v.
United Transportation Union, 396 U.S. 142, 148 (1969). To
this end, the RLA establishes elaborate procedures for the
negotiation, enforcement, and modification of collective
bargaining agreements between railr oad carriers and
railroad labor unions. The RLA also imposes upon parties
the obligation to engage in good-faith negotiations and to
maintain status quo without resorting to self-help while the
RLA's remedies are being exhausted. The exhaustion of the
RLA's remedies is, however, "an almost interminable
process." Id. at 149. "[T]he procedures of the Act are
purposely long and drawn out, based on the hope that
reason and practical considerations will pr ovide in time an
agreement that resolves the dispute." Brotherhood of Ry. &
Steamship Clerks, etc. v. Florida East Coast Ry. Co. , 384
U.S. 238, 246 (1966).

The ICA, on the other hand, gives substance to what has
been, since the adoption of the Transportation Act of 1920,
the nation's policy of pursuing railroad carrier consolidation
as a means of promoting the health and efficiency of the
railroad industry: "[C]onsolidation of the railroads of the
country, in the interest of economy and efficiency, became
an established national policy . . . so intimately r elated to
the maintenance of an adequate and efficient rail
transportation system that the `public inter est' in the one
cannot be disassociated from that in the other ." United
States v. Lowden, 308 U.S. 225, 232 (1939); see also, St.
Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U.S. 298,

                               9
315-321 (1954). The ICA grants the STB exclusive authority
to approve mergers and acquisitions of transportation
carriers within its jurisdiction. 49 U.S.C. S 11323(a). It also
provides that STB-authorized consolidations ar e exempted
from "the antitrust laws and from all other law, including
State and municipal law, as necessary to let that rail
carrier . . . carry out the transaction." 49 U.S.C. S 11341(a).6
The authorization may take one of two forms. The STB
may, under 49 U.S.C. SS 11323-11324, affir matively
approve a merger, acquisition of control, or other rail
consolidation by determining that it is "consistent with the
public interest." U.S.C. S 11324(c). Alternatively, 49 U.S.C.
S 10505 allows the STB to authorize a consolidation by
granting an exemption for the prior approval r equirements
of SS 11323-11324.7 In either case, the STB is required to
impose labor protective measures for af fected employees as
a condition of consolidation authorizations. 49 U.S.C.
S 11326.

Our analysis of the relationship between the RLA and the
ICA begins with the most recent Supreme Court decision on
the subject, Norfolk and Wester n Ry. Co. v. American Train
Dispatchers' Ass'n., 499 U.S. 117, 132 (1991). There, labor
unions in two separate cases challenged ICC or ders that
relieved the railroad carriers from collective bargaining
_________________________________________________________________

6. 49 U.S.C. S 11321(a) provides:

         The authority of the Board under this subchapter is exclusive. A
       rail carrier or corporation participating in or r esulting from a
       transaction approved by or exempted by the Boar d under this
       subchapter may carry out the transaction, own and operate
       property, and exercise control or franchises acquired through the
       transaction without the approval of a State authority. A rail
carrier,
       corporation, or person participating in that appr oved or exempted
       transaction is exempt from the antitrust laws and from all other
       law, including State and municipal law, as necessary to let that
rail
       carrier, corporation, or person carry out the transaction, hold,
       maintain, and operate property, and exer cise control or franchises
       acquired through the transaction.

7. Exemption from the full approval pr ocess is appropriate when "the
transaction or service is of limited scope" or when "the application in
whole or in part of the provision is not needed to protect shippers from
the abuse of market power." 49 U.S.C.S 10505.

                               10
agreement obligations. The unions argued that S 11321(a),
which confers to transactions necessary for the
implementation of ICC-authorized consolidations immunity
from "all other law," does not abr ogate existing collective
bargaining agreements. Modification of such agreements,
the unions insisted, must be made pursuant to the RLA.

The Supreme Court disagreed: "RLA is a law that, under
[S 11321(a)], is superseded when an ICC-approved
transaction requires abrogation of collective-bargaining
obligations." Id. at 132 (citations omitted). This conclusion,
the Supreme Court explained, is consistent with the ICA's
overall statutory scheme. The ICA was designed to pr omote
"economy and efficiency in interstate transportation by the
removal of the burdens of excessive expenditure." Texas v.
United States, 292 U.S. 522, 534-35 (1934). Recognizing
that consolidations of carriers would result in employee
dismissals, transfers and other changes detrimental to
employees, the ICA mandated that the ICC impose
safeguards, like the New York Dock employee protective
conditions, to ensure that employee inter ests of the affected
parties are protected. Section 11321(a), in turn, guaranteed
that, once these interests are accounted for, the ICC would
be free from requirements, such as provisions of the RLA,
that might impede the consolidation. If the RLA wer e not
superseded by the ICA, the Court observed, "rail carrier
consolidations would be difficult, if not impossible, to
achieve," because "[t]he resolution process for major
disputes under the RLA would so delay the pr oposed
transfer of operations that any efficiencies the carriers
sought would be defeated." Dispatchers, 499 U.S. at 133
(citations omitted).8
_________________________________________________________________

8. The Union argues, based in part on our decision in Railway Labor
Executives' Ass'n. v. Pennsylvania & Lake Erie Railr oad Co., 845 F.2d
420 (3d. Cir. 1988), that the RLA and the ICA are co-equal and
complementary sources of legal rights. In that case, we focused on the
differing policy goals animating the RLA and the ICA. The former, we
stated, advances the policy of avoiding "disruptions in the railroad
industry by promoting collective bargaining and preventing strikes." Id.
at 436. The latter promoted the policy goal of"encourag[ing] the flow of
capital into the [rail] industry" and "expedit[ing] the approval process
so
that efficient transactions are not derailed by red tape." Id. In light of

                               11
Although Dispatchers did not directly address the
jurisdictional question at issue here, the Ninth and Fourth
Circuit Courts of Appeals have interpreted Dispatchers, and
the relationship between the RLA and the ICA that it
envisions, as compelling the conclusion that the ICC (now
the STB), not the district court, has the exclusive authority
to resolve labor disputes that arise fr om implementing an
ICC (or STB)-authorized transaction. Railway Labor
Executives' Ass'n. v. Southern Pacific T ransportation Co., 7
F.3d 902 (9th Cir. 1993); Nor folk & Western Ry. v.
Brotherhood of Railroad Signalmen, 164 F.3d 847 (4th Cir.
1998).

In Southern Pacific, the ICC appr oved a merger of certain
railroads pursuant to 49 U.S.C. S 11321(a) and, in
compliance with 49 U.S.C. S 11326, imposed the New York
Dock conditions to protect existing and future employees
from the adverse effects of the mer ger. When time came for
the merged railroad to coordinate work, it claimed, believing
that the coordination was incident to the mer ger, that the
changes should be implemented through the New York
Dock procedures. The union ther e, like the USWA in the
present case, countered that changes to the existing
collective bargaining agreement could be made only
through RLA procedures. The union br ought suit, claiming
that a New York Dock arbitration of its dispute without its
consent would violate its RLA rights.

The Ninth Circuit affirmed the district court's ruling that
it lacked subject matter jurisdiction over the suit. The court
stated that the Supreme Court's Dispatchers decision, while
not directly on point, was determinative:

       First of all, Dispatchers reiterates the proposition that
       under the ICA, "the Interstate Commerce Commission
_________________________________________________________________

these differences, we explained, the judiciary "must reconcile the two
statutes as much as possible and attempt to r each a result that will
produce the minimum possible conflict with Congressional intent." Id. at
423. But in invoking our decision in P&LE, the Union neglects to
acknowledge that we were without the benefit of the Supreme Court's
decision in Dispatchers. To the extent our observations on the
relationship between the RLA and the ICA conflict with those of the
Supreme Court in Dispatchers, ours must give way.

                               12
       [has] exclusive authority to examine, condition, and
       approve proposed mergers and consolidations of
       transportation carriers within its jurisdiction." Second,
       Dispatchers makes clear that under Section [11321(a)],
       the ICC has the effective power of exempting parties to
       a railroad merger from any pr ovision of the RLA, by
       approving the merger. It follows from these
       propositions that where a railroad which has been a
       party to an ICC approved merger claims that certain
       proposed actions are incident to that mer ger and
       exempt from RLA procedures under section [11321(a)],
       the ICC has exclusive authority to resolve a challenge
       to these claims.

Southern Pacific, 7 F.3d at 906 (internal citations omitted).
The court went on to state that the conclusion that
jurisdiction belongs to the ICC and not the district court
also comports with the policy objective underlying the ICA--
the promotion of economy and efficiency of interstate
transportation. See Dispatchers, 499 U.S. at 132; Texas v.
United States, 292 U.S. at 134. Integral to meeting this
objective is the authority vested in the ICC to substitute
RLA procedures with the expedited dispute resolution
prescribed by the New York Dock conditions. But, if parties
were allowed to litigate in federal district court the propriety
of invoking the New York Dock pr ocess, the ICC's ability to
meet this stated objective of facilitating rail consolidations
would be hindered: "We would invite a barrage of collateral
challenges to the ICC's authority which would be likely to
frustrate and delay the administration of mer gers in a way
that section [11321(a)] was clearly meant to avoid." Id. at
907.

The Fourth Circuit in Norfolk & W estern Ry. v.
Brotherhood of Railroad Signalmen, 164 F.3d 847 (4th Cir.
1998) reached the same conclusion. As in Southern Pacific
and the present case, the unions in Signalmen sought a
declaratory judgement in district court that changes to
collective bargaining agreements in connection with the
implementation of a STB-authorized rail consolidation must
be made pursuant to RLA procedures. The district court
dismissed the case for lack of subject matter jurisdiction.
The court of appeals found that the dismissal was pr oper.

                               13
Drawing on Dispatchers, the court held that within the
context of an STB-authorized merger,"any effort to
challenge changes in the collective bargaining agreements
proposed . . . must be presented in thefirst instance to the
STB under its exclusive jurisdiction and may not be
negotiated under the RLA."9Id. at 855.

The USWA argues that Dispatchers , Southern Pacific, and
Signalmen are inapposite because the consolidations in
those cases were authorized through the full approval
process of S 11323 while the merger here was achieved
through the abbreviated process ofS 10502. This
distinction is critical, according to the USW A, because the
_________________________________________________________________

9. The Eleventh Circuit came to the same conclusion--although by way
of a different rationale--in Brotherhood Ry. Carmen, Div. Of Transp.
Comm. Int'l Union (TCU) v. CSX Transp., Inc. , 855 F.2d 745 (11th Cir.
1988), a pre-Dispatchers case. Ther e, the ICC approved a merger of
certain rail carriers and incident to that appr oval imposed the New York
Dock conditions. The consolidated carrier then proposed to close down a
repair shop and transfer the work and employees to another facility.
Attempts between the carrier and the union r epresenting the affected
employees to negotiate an implementing agreement on the transfer failed
and the carrier sought arbitration of the dispute under New York Dock.
The union in turn filed an action in district court arguing, inter alia,
that
the implementing agreement was not gover ned by the New York Dock
procedures and that compulsory arbitration would violate the RLA. While
the action in district court was pending, a New York Dock arbitrator
considered the dispute and rendered a decision. Both parties appealed
the arbitrator's decision to the ICC. Before the appeal was heard by the
ICC, the district court granted summary judgment to the carrier.

A panel of the Eleventh Circuit vacated the district court's order,
finding that the district court lacked subject matter jurisdiction to
adjudicate the dispute. The court based its decision on Congress's grant
of exclusive jurisdiction to the courts of appeals to review ICC orders.
28
U.S.C. SS 2231(a), 2342(5). The court explained: "The arbitration opinion
and award . . . is authoritative only as an extension of the authority of
the ICC. . . . [T]he present lawsuit is, in effect, a collateral attack on
the
arbitration award; it is an attempt by [the union] to have the district
court set aside the arbitration award, rather than going through the
normal channels of appeal to the ICC and then to the Court of Appeals."
Id. at 745. By assuming jurisdiction over the dispute, the court ruled,
the district court improperly interfer ed with the normal appeals
procedure and encroached on the court of appeals' exclusive authority to
review ICC decisions. Id.

                               14
S 11321(a) exemption "from all other laws" applies only to
S 11323 transactions. This argument is based on the
language of S 11321(a), which provides that "[t]he authority
of the Board under this subchapter is exclusive." (emphasis
added). Section 10502 is not in the same subchapter as
S 11321. See Railway Labor Executive Ass'n v. United
States, 987 F.2d 806, 813 (D.C. Cir . 1993) ("That decision
[Dispatchers] is not applicable her e, however, because
S [11321(a)] applies to transactions exempted under
subchapter III, of which it is a part. The Commission
exempted the transaction at issue here underS [10502],
which is in subchapter I"). The USWA ar gues, therefore,
that when the STB is not given the power of making
exemptions--that is, when its actions are not taken
pursuant to S 11321(a)--there is no basis for granting
exclusive jurisdiction to the STB.

The USWA's argument misses the mark, confusing the
STB's scope of exemption under S 11321(a) with its
jurisdictional authority over disputes arising out of the
implementation of railroad consolidations. Although
S 11321(a) expressly can preempt the RLA, the STB's
jurisdictional exclusivity does not depend alone on
S 11321(a). Rather, the STB also finds jurisdictional
authority in the overall statutory design of the ICA.
Congress, in seeking to promote the economy and efficiency
of the rail industry, has given the STB considerable
authority over railroads, granting to it exclusive jurisdiction
to authorize railroad mergers and consolidations. 49 U.S.C.
S 11321(a). See Dispatchers, 499 U.S. at 119-20.

Among the matters which the ICA puts within the
exclusive jurisdiction of the STB is the relationship between
the railroad and its employees. Section 11324 mandates
that the STB consider when approving a mer ger "the
interest of the rail carrier employees af fected by the
transaction." 49 U.S.C. S 11324(b)(4). Mor e importantly,
S 11326 grants to the STB both the statutory authority and
the mandate to impose on the rail carrier, as a condition of
consolidation authorization, a "fair arrangement" that will
protect the employees affected by the consolidation. All this
demonstrates, as the Fourth Circuit noted in Signalmen,
that "to the extent that a transaction subject to the STB's

                               15
approval impacts collective bargaining agreements or the
relationship between railroads and their employees, the
STB has exclusive jurisdiction in the first instance to
consider the issues." 164 F.3d at 855. Thus, the exclusive
jurisdiction to resolve labor problems in a merger exists
independently of the S 11321(a) exemption of such a merger
from other laws.10

The USWA contends, however, that interpreting the ICA
as vesting the STB with exclusive jurisdiction to adjudicate
all issues concerning railroad-employee r elationships which
arise as a result of approved mergers is too sweeping. For
this argument, it relies on the Seventh Circuit's decision in
Harris v. Union Pacific Railroad, 141 F.3d 740 (7th Cir.
1998). There the court considered whether the ICA takes
away from the district court jurisdiction to consider civil
rights claims brought by two union members against a
railroad carrier. The ICC had appr oved Union Pacific's
_________________________________________________________________

10. To the extent that S 10502 mer gers may receive exclusive STB
resolution of employee relations issues but not S 11321(a) exemption
from "other laws," the justification for this result may be found in the
fact that S 10502 mergers by definition are of "limited scope."

That said, we note that the USWA's ef fort to draw a distinction
between an approved transaction under S 11321(a) and an exempted
transaction under S 10502 has been rejected by the ICC, which found
that S 11321(a) does apply to S 10502 transactions. In Rio Grande
Industries, Inc., et al. -- Trackage Rights-- Burlington Northern R.R.
Lines Between Kansas City, MO and Chicago, IL, ICC Finance Docket No.
31730, 1991 ICC LEXIS 57, served March 12, 1991, at *9-11, the ICC
held that immunity under S 11321(a) extends to transactions exempted
under S 10502. Accord Brother hood of Locomotive Engineers v. Boston &
Maine Corp., 788 F.2d 794, 799-801 (1st Cir. 1986).

The conclusion that S 11321(a) applies to both"approved" and
"exempted" transactions is consistent with polices behind the Staggers
Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895 (1980), which
broadened and liberalized S 10502 in furtherance of the ICA's goal of
revitalizing the railroad industry. See Coal Exporters Ass'n v. United
States, 745 F.2d 76, 80-82 (D.C. Cir . 1984). By increasing the ICC's
ability to exercise its power under S 10502, Congress indicated that the
S 10502 procedure was an equal and even preferred way of regulating
the railroad industry. See H.R. Rep. No. 96-1430, 96th Cong., 2d Sess.
105 (1980), reprinted in 1980 U.S.C.C.A.N. 4110, 4137.

                                16
acquisition of another carrier pursuant to S 11321(a).
Although the ICC imposed the New York Dock conditions, it
also permitted labor and management to negotiate different
conditions "in a labor agreement enter ed into prior to
consolidation, in which case protection shall be at the
negotiated level, subject to our review to assure fair and
equitable treatment of affected employees." Id. at 741
(quoting ICC order). The parties then r eached an alternative
agreement for separation benefits. To qualify for the
separation allowance, however, an employee on leave had to
return to work within twenty days. Neither the union nor
the management sought the ICC's review of the alternative
agreement.

The two plaintiffs in Harris wer e on maternity leave at the
time the labor agreement was posted; neither r eturned
within twenty days. Their applications for separation
benefits were denied. They then filed suit for sex
discrimination in district court. The court dismissed the
action for lack of subject matter jurisdiction. The Seventh
Circuit reversed, holding that the civil rights laws did not
put any obstacle in the way of the railroad mer ger at issue.
None of the relief sought by the plaintif fs would be
incompatible with the ICC's approval of the mer ger. It
would be pointless, therefore, to deny jurisdiction to the
district court in order to refer the civil rights issue to the
STB.

The USWA urges us to follow Harris by requiring that the
STB articulate in its approval of a mer ger the laws that are
necessary to displace. We do not read this result into
Harris. We conclude that a case involving civil rights issues,
arising from the application of a non-STB appr oved
agreement to two members of a class, is distinguishable
from the situation here where New York Dock arbitration
has authorized changes in the labor agreement, which
changes are necessary to implement the transaction. For
that reason, even if we were bound to follow the Seventh
Circuit, we would find Harris to be distinguishable.11
_________________________________________________________________

11. In a related argument, the USW A contends that it cannot be made
subject to the New York Dock pr ocedures because it was not a signatory
to the Washington Job Protection Agr eement of 1936. On the USWA's

                               17
We conclude that the ICA--in its language and overall
statutory design--reflects Congress's commitment to a
national transportation policy that favors the consolidation
of railroads. And Congress has decided that such a policy
is best pursued by freeing rail consolidations from the
burdensome delays and expenditures associated with RLA
procedures. Thus, the ICA and the RLA ar e not
complementary and co-equal statutory schemes, as the
USWA proposes. The RLA must yield to the ICA when it
impedes the implementation of a STB-approved
consolidation. Moreover, the STB has the exclusive
jurisdiction to adjudicate challenges to such an
implementation. Accordingly, we will affir m the District
Court's dismissal of the USWA's counter claim for lack of
subject matter jurisdiction.

B. The STB Decision

We now turn to the USWA's petition for review of the STB
decision of December 17, 1998. The standard the STB must
apply in reviewing arbitration decisions is pr ovided in
_________________________________________________________________

theory, only signatories to the Agreement have bargained away their RLA
right to refuse to arbitration under New York Dock procedures. Wefind
that this argument is without merit and agr ee with the District Court's
conclusion that the ICC's authority S under 11326(a) to impose labor
protections is "statutory in nature, and owe nothing to the WJPA."

Although the WJPA provisions are, in many respects, duplicated in the
New York Dock conditions, the two sets of labor protections derive their
authority from different sour ces and are not equivalent in scope. The
WJPA is a contract, the provisions of which bind only those carriers and
unions that consented to the Agreement. The New York Dock conditions,
on the other hand, arose as a result of Congressional mandate. As part
of the Transportation Act of 1940, Congr ess granted to the ICC express
statutory authority to impose employee protection upon approval of
railroad mergers. Pub. L. No. 76-785, 54 Stat. 898 (1941) (codified as
amended at 49 U.S.C. SS 10101-11901 (1998)). It is pursuant to this
statutory authority that the ICC developed the standard set of labor
protections contained in New York Dock. The ICC's authority to impose
the New York Dock conditions--and to make changes to labor
agreements pursuant to those conditions--derives, therefore, from the
ICA and reaches those carriers and unions who were not signatories to
the WJPA.

                               18
Chicago & North Western Transportation Company, 3 I.C.C.
2d 729 (1987) ("Lace Curtain"), af f 'd. sub. nom.
International Brotherhood of Electrical Workers v. ICC, 862
F.2d 330 (D.C. Cir. 1988). 49 CFR 1115.8. Under Lace
Curtain, the arbitrator's decision is given deference and the
STB will review "issues of causation, calculation of benefits,
or the resolution of factual questions" only if there is
egregious error. Review is thus limited to "recurring or
otherwise significant issues of general importance regarding
the interpretation of our labor conditions." 3 I.C.C. at 735-
36. Based on this, the STB declined to review and vacate
the Witt Award: "We find no reason to disturb the
arbitrator's award under the Lace Curtain standards. There
is no issue of first impression; and any issues that are
likely to recur have already been thor oughly resolved by us
and the courts. [The USWA] has not shown egregious error
or any other grounds requiring review of the arbitration
award here." Union Railroad Company and Bessemer and
Lake Erie Railroad -- Arbitration Review-- United Steel
Workers of America, STB Finance Docket No. 31363 (Sub-
No. 3), served Dec, 16, 1998, slip op. at 7-8.

The USWA presents in this appeal no challenges to the
factual determinations made by the arbitrator , relying solely
on the argument it made before the District Court that the
STB does not have exclusive jurisdiction to adjudicate the
USWA's RLA-based challenges to the implementation of the
1988 ICC-authorized consolidation. In light of our analysis
in the previous section, we cannot say that the Board's
conclusion that it has exclusive jurisdiction to consider
whether the ICA preempts the RLA was arbitrary,
capricious, or otherwise not in accordance with law. See
National Small Shipments Traffic Confer ence, Inc. v. United
States, 887 F.2d 443, 445 (1989). W e will, therefore, deny
the petition for review of the STB's decision not to review
the Witt Award.

V. Conclusion

For the foregoing reasons, we will affir m the judgment of
the District Court and we will deny the petition for review
of the decision of the Surface Transportation Board.

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A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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