UNION PACIFIC RAILROAD COMPANY F/K/A SOUTHERN PACIFIC TRANSPORTATION COMPANY, PETITIONER v. SURFACE TRANSPORTATION BOARD AND UNITED STATES OF AMERICA, RESPONDENTS SOUTHERN PACIFIC EMPOWERED EMPLOYEES COMMITTEE, INTERVENOR
No. 02-1340
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 12, 2003 Decided February 3, 2004
On Petition for Review of an Order of the Surface Transportation Board
Clifford A. Godiner argued the cause for petitioner. With him on the briefs was Rodney A. Harrison.
Bills of costs must be filed within 14 days after entry of judgment. The court looks with disfavor upon motions to file bills of costs out of time.
Marilyn R. Levitt, Attorney, Surface Transportation Board, argued the cause for respondents. With her on the brief were Robert H. Pate III, Assistant Attorney General, U.S. Department of Justice, John J. Powers and Robert J. Wiggers, Attorneys, Ellen D. Hanson, General Counsel, Surface Transportation Board, and Craig M. Keats, Deputy General Counsel.
Before: HENDERSON, ROGERS, Circuit Judges, and WILLIAMS, Senior Circuit Judge.
Opinion for the court filed by Senior Circuit Judge WILLIAMS.
Separate opinion filed by Circuit Judge HENDERSON concurring in the judgment.
WILLIAMS, Senior Circuit Judge: In an arbitration over benefits for workers adversely affected by a rail merger, the arbitrators decided the core liability issues against the carrier. The Surface Transportation Board declined to set aside or modify the award. The carrier appeals (now in the form of Union Pacific as successor by merger to the original acquiring firm). Applying the highly deferential standard of review that the Board claims is applicable, we find the Board‘s decision arbitrary and capricious and reverse.
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The statutes governing the type of rail merger in question require the Board to condition any approval on the merged carrier‘s agreement to provide labor protection benefits.
In 1993 a task force headed by Thomas Matthews, the carrier‘s Senior Vice President and Chief Administrative Officer, recommended that the carrier outsource the functions of its merged MIS department. It proceeded to do so, engaging a completely separate firm, Integrated Systems Solutions Corporation (“ISSC“), to perform the department‘s functions. Many of the MIS employees moved to ISSC. A dispute arose between the carrier and some noncontract, nonunion MIS employees over whether this outsourcing was subject to the New York Dock conditions imposed in 1988. In December 1993 four such employees, together with the Southern Pacific Empowered Employees Committee (“SPEEC,” pronounced “speak“), a self-described “voluntary organization” purporting to represent such employees, invoked arbitration under Article IV of the New York Dock conditions.
The parties agreed to bifurcate the arbitration, initially addressing only those issues applicable to all claimants. After a lengthy and unexplained delay, the panel issued a decision on March 20, 2000 (the “2000 Award“), finding that the MIS outsourcing was causally related to the 1988 merger in a manner bringing it within the reach of New York Dock‘s provisions, and that the named complainants and SPEEC-represented individuals were “employees” rather than management for purposes of New York Dock eligibility. See generally Newbourne v. Grand Trunk W. R.R. Co., 758 F.2d 193, 195 (6th Cir. 1985). The carrier appealed to the Board; while that appeal was pending, the panel issued a second decision on February 10, 2001, rejecting the carrier‘s claim
On September 17, 2002 the Board issued the decision now at issue (“Board Decision“). It applied its highly deferential “Lace Curtain standard“—established in review of an arbitration over a “lace curtain allowance,” which is awarded for expenses incurred “preparing a newly-purchased home for occupancy.” Chicago & N. W. Transp. Co.—Abandonment (Lace Curtain), 3 I.C.C.2d 729, 730 n.2 (1987), aff‘d sub nom. International Bhd. of Elec. Workers v. I.C.C., 862 F.2d 330 (D.C. Cir. 1988). As the Board said:
Under the Lace Curtain standard, we limit our review of arbitrators’ decisions to “recurring or otherwise significant issues of general importance regarding the interpretation of our labor protective conditions.” . . . We do not review issues of causation, the calculation of benefits, or the resolution of other factual questions in the absence of egregious error.
Board Decision at 6. See also Lace Curtain, 3 I.C.C.2d at 735 (citing Loveless v. Eastern Air Lines, Inc., 681 F.2d 1272, 1275-76 (11th Cir. 1982)).
Finding that the carrier had “failed to make the requisite showing under our Lace Curtain standards,” the Board “denied” the carrier‘s request that it “review” the award. Board Decision at 10. Although the wording may suggest that “review” is purely discretionary, the Board‘s 10-page, single-spaced opinion in reality expresses a conclusion that the arbitrator‘s decision contained no error cognizable under Lace Curtain.
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Jurisdiction
The Board argues that we lack jurisdiction to hear Union Pacific‘s appeal because its Decision was not final.
Here, there is little practical concern pointing against review. There is no suggestion that the Board‘s decision is tentative or interlocutory; rather, it completes the liability phase of a proceeding that the parties agreed to bifurcate. See Hart Surgical, Inc. v. UltraCision, Inc., 244 F.3d 231, 235 (1st Cir. 2001) (“[T]he definiteness with which the parties have expressed an intent to bifurcate is an important consideration.“); Trade & Transp., Inc. v. National Petroleum Charterers, Inc., 931 F.2d 191, 195 (2d Cir. 1991) (“[I]f the parties have asked the arbitrators to make a final partial award as to a particular issue and the arbitrators have done so, the arbitrators have no further authority, absent agreement by the parties, to redetermine that issue.“); see generally Role Models Am., Inc. v. White, 317 F.3d 327, 331 (D.C. Cir. 2003) (“To be final, an action need not be ‘the last administrative [action] contemplated by the statutory scheme.‘” (citation omitted)). And the Board itself decided to review the panel‘s award despite SPEEC‘s argument that the award was not a “final arbitration decision” for purposes of
Standard of review
The carrier argues that we should review the arbitration panel‘s decision directly, rather than limiting our inquiry to whether the Board acted arbitrarily and capriciously in the application of its Lace Curtain standard. Compare Association of American Railroads v. Surface Transp. Bd., 162 F.3d 101, 112 (D.C. Cir. 1998) (Sentelle, J. concurring in part and dissenting in part) (stating that the court may be required to directly review the arbitrator‘s decisions when the Board has applied Lace Curtain review), with Swonger v. Surface Transp. Bd., 265 F.3d 1135, 1139-40 (10th Cir. 2001) (stating without explicitly deciding that judicial review is limited in this situation to whether the Board properly declined to review the arbitration panel‘s decision). In Association of American Railroads the Board had issued an order, under a cognate labor protection provision,
Whether the Board can finesse a litigant out of its statutory right to judicial review under standard APA principles presents a serious question. Compare International Bhd. of Elec. Workers v. ICC, 862 F.2d 330, 336 (D.C. Cir. 1988) (noting that, had the ICC not elected to mandate arbitration, “all disputes over employee protective conditions would have remained solely within the primary jurisdiction of the agency“). And we note that although this court has repeatedly rejected claims that the Board‘s Lace Curtain standard of review is too broad in scope, see, e.g., United Transp. Union v. ICC, 43 F.3d 697 (D.C. Cir. 1995); Railway Labor Executives’ Ass‘n v. United States, 987 F.2d 806, 811-12 (D.C. Cir. 1993) (per curiam); International Bhd. of Elec. Workers, 862 F.2d at 332, we have never before addressed the argument that the standard is too narrow, or that the resulting layers of deference unlawfully place the arbitration result beyond judicial review. See
Merits
While Union Pacific attacks much of the arbitration panel‘s 2000 Award, we find that as to two aspects the Board‘s nonchalant complaisance was arbitrary and capricious and require that the Board order, and of course the underlying award, be set aside.
In finding that the 1993 MIS outsourcing was causally related to the 1988 merger the panel relied solely on a declaration by Charles Lamb, the carrier‘s Director of Labor Relations. See 2000 Award at 13 (“We believe the Lamb Declaration is pivotal.“); Lamb Declaration, at Joint Appendix 225-28. After ruling out “but for” causation as sufficient to link the merger to the outsourcing, see 2000 Award at 11 (“Not every adverse action following such a transaction necessarily is caused by the transaction. . . . The nexus or connection must be primary and direct rather than secondary and indirect.“), the panel found that:
Lamb states unequivocally in his Declaration that he gave the [New York Dock] notice pertaining to the 1992 transaction and intended thereby to preserve the Carrier‘s option of outsourcing the MIS Department which he considered to have been authorized by the ICC in the 1988 merger-control proceeding. We believe that statement clearly links the outsourcing to the merger-control transaction such as to establish sufficient causal nexus between the transaction and the outsourcing of the MIS Department.
2000 Award at 14. The Board “decline[ed] to review the . . . causation finding” because “[t]he Panel found that Witness Lamb‘s testimony about the carrier‘s meaning and intent of the 1992 notice and agreement was more credible than the
But in fact the Lamb Declaration doesn‘t support the panel‘s conclusion. First, the panel found that Lamb “considered” the 1993 outsourcing “to have been authorized by the ICC in the 1988 merger-control proceeding.” 2000 Award at 14; see also Lamb Declaration at 3 (“To the extent that outsourcing would subsequently consolidate or impact on the MIS department employees, such effects were clearly authorized under the ICC transaction approval. . . .“). But it is undisputed that the carrier did not begin to study the outsourcing of its MIS department until 1990, see 2000 Award at 3, and that the task force which recommended outsourcing was not appointed until 1992, see id. at 4. Thus, the ICC‘s merger authorization could not have specifically contemplated the 1993 MIS outsourcing; nothing Lamb “considered” could change that.
Nor do Lamb‘s other statements support the panel‘s finding that the 1988 merger caused the 1993 outsourcing. Lamb‘s declaration said that the carrier‘s 1992 New York Dock notice was intended “to embrace all clerical, non-operating positions, including the MIS employees,” Lamb Declaration at 2, and that the carrier wanted “to preserve the broadest authority granted us under the ICC transaction approval to consolidate our clerical positions, thereby establishing the Carrier‘s unfettered regulatory authority and discretion to implement any subsequent consolidations or personnel actions impacting on our clerical personnel, including the MIS employees, arising from the D&RGW-SP transaction,” id. at 2-3. Rather than showing that the 1993 outsourcing was causally related to the 1988 merger, this opaque statement says only that the carrier wrote its 1992 New York Dock notice as broadly as possible so that it could implement “any subsequent consolidations or personnel actions . . . arising from the D&RGW-SP transaction.” Id. at 2. It thus begs the question the arbitration panel was to answer: whether the 1993 outsourcing in fact was a consolidation or personnel action directly “arising from” the Denver & Rio Grande/Southern Pacific merger. Compare Brotherhood of
Not only did the Lamb Declaration not adduce a single fact tending to establish a causal relation between the 1988 merger and 1993 outsourcing, but the timing and character of the transactions undermine any such idea. Thomas Matthews—who was primarily responsible for the outsourcing and who did not join the carrier until 1991, three years after the merger—explained that the outsourcing was done for financial reasons entirely unrelated to the merger. See Matthews Declaration at 1-2. No evidence was offered contradicting those reasons. Given that an outsourcing is on its face utterly different from a consolidation, and that the merged carriers had already consolidated their computer systems, it would take some specific evidence to establish causality, rather than the vague, question-begging conclusions offered by Lamb.
In American Train Dispatchers Ass‘n v. CSX Transportation, Inc., the Board explained that under its Lace Curtain standard it would vacate arbitration awards “when there is egregious error,” meaning that the award is “irrational, wholly baseless and completely without reason, or actually and indisputably without foundation in reason and fact.” 9 I.C.C.2d 1127, 1130-31 (1993) (internal quotations and citation omitted). But here the arbitration panel found the Lamb Declaration to be “pivotal” even though it provided no support whatever for a finding of causation, and all other evidence pointed away from such a finding. We conclude therefore that the arbitration panel‘s finding that the 1993 outsourcing was causally related to the 1988 merger was “actually and indisputably without foundation in reason and fact,” and that the Board acted in an arbitrary and capricious manner in not “reviewing” the 2000 Award, even under the Board‘s generous Lace Curtain standard of review.
Although this error is reason enough to vacate the Board‘s order, the Board and arbitrators committed a second plainly
We do not question for a minute the Board‘s view that non-union employees seeking New York Dock benefits may agree to be represented by a single lawyer or firm. See Board Decision at 6-7. Further, we may assume that such employees may enter into binding agreements among themselves about the allocation of costs, etc. But both arbitrators and Board appear to have been willfully blind to the effects of their decisions allowing SPEEC to operate behind an impenetrable veil. SPEEC‘s complete opacity as to just who it represented put the carrier in a classic heads-I-win-tails-you-lose position. If SPEEC‘s approach were valid, the preclusive effects of any judgment would be thoroughly asymmetrical. Just as victory has a thousand fathers while defeat is an
As the award and the order are also subject to vacation on substantive grounds, this procedural error can entail no immediate additional remedy. In the event of further New York Dock claims by MIS employees, it will remain for the Board in the first instance to determine the preclusive effects of this judgment. The panel noted and apparently accepted as probative a declaration by a founding member of SPEEC to the effect that 287 MIS employees attended an initial SPEEC meeting, that a majority at that meeting “designated SPEEC to represent them,” and that “such majority made a financial contribution” to fund the arbitration proceeding.
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The Board‘s decision is accordingly reversed.
So ordered.
I concur in the majority‘s holding that the arbitration panel committed egregious error in finding the 1993 MIS outsourcing causally related to the 1988 merger and that the Surface Transportation Board therefore acted arbitrarily and capriciously in denying review of the erroneous arbitration award. I do not join the majority‘s discussion of what it terms the “second plainly egregious error” of the arbitration panel, upheld by the board—namely, failing to require SPEEC to identify the employees it represented. Maj. op. at 10–12.* Whether or not the majority is correct that this failure was “procedural error,” there is, as the majority apparently recognizes, no need to address the issue in light of our having found egregious error in the panel‘s substantive decision. See maj. op. at 12 (“As the award and the order are also subject to vacation on substantive grounds, this procedural error can entail no immediate additional remedy.“). In the unlikely event that an employee makes a future New York Dock claim related to the 1993 outsourcing (notwithstanding our substantive holding in favor of Union Pacific), at that time, as the majority indicates, the Board might have occasion to decide whether the claim is barred by collateral estoppel because the claimant was a party to this arbitration with a full and fair opportunity to litigate the causality issue. See maj. op. at 12 (“In the event of further New York Dock claims by MIS employees, it will remain for the Board in the first instance to determine the preclusive effects of the judgment.“); Kremer v. Chem. Constr. Corp., 456 U.S. 461, 480-481 (1982) (collateral estoppel applies only when party against which earlier decision is asserted had “‘full and fair opportunity’ to litigate that issue in the earlier case“) (quoting Allen v. McCurry, 449 U.S. 90, 95 (1980); Montana v. United States, 440 U.S. 147, 153 (1979); Blonder-Tongue Labs. v. Univ. of Ill. Found., 402 U.S. 313, 328-29 (1971)) (footnote omitted); see e.g., Bhd. of Locomotive Eng‘rs v. CSX Transp. Inc., 9 I.C.C.2d 713, 723 (1993) (finding no collateral estoppel because employees were