William H. Rehnquist: We'll hear argument next in No. 89-1027, Norfolk and Western Railway Company v. American Train Dispatchers Association and a companion case. Mr. Berlin, please proceed. It is BERL-in and not Ber-LIN I take it?
Jeffrey S. Berlin: Either way is fine, Mr. Chief Justice.
Speaker: Well, good. Okay. [Laughter]
Jeffrey S. Berlin: Mr. Chief Justice, and may it please the Court: This case presents an important question of Federal law. The provision in issue is a section of the Interstate Commerce Act, 49 U.S.C., section 11341(a). That section applies to a railroad participating in a consolidation that has been approved by the Interstate Commerce Commission. It provides that such a railroad is exempt from all other law to the extent necessary to let the railroad carry out its consolidation. The question before this Court is whether this exemption protects the railroad from claims that are based on the railroad's contracts and are asserted exclusively under Federal law. The particular contracts involved here are labor agreements, and the particular law is the Railway Labor Act. Since 1920 in a series of statutes, Congress has encouraged the nation's railroads to merge and consolidate under the supervision of the Interstate Commerce Commission. To this end, Congress has given the ICC exclusive jurisdiction over matters with in its authority and given to railroads participating in approved consolidations a broad exemption from other legal restraints. This exemption originated in the Transportation Act of 1920, was reenacted in 1933, reenacted in 1940, and took its present form in 1978 when it was recodified without substantive change. CSX Transportation and Norfolk Southern are two of today's large railroad systems. Each system was formed when two previously separate railroad systems were placed under common control with ICC approval. On receipt of that approval, these railroads set out to achieve the traditional purposes of mergers and consolidations, which include the realization of greater economies and efficiencies through the combination of facilities, the elimination of redundant facilities, the bringing control of various operations into single locations, and otherwise taking advantage of economies of scale that the consolidations make possible. Now as part of carrying out their consolidations, CSX Transportation and Norfolk Southern each sought to transfer work from one of their previously separate properties to the other. CSX Transportation had a freight car heavy repair shop at Way Cross, Georgia and another, same kind of shop, at Raceland, Kentucky. CSXT didn't need to retain both shops, and the facility at Raceland was larger and more modern and it had substantial excess capacity. Therefore, CSXT proposed to bring to Raceland the freight heavy repair work that was previously done at Way Cross. Norfolk Southern proposed to make a slightly different kind of operational change. Norfolk Southern operates more than 2,000 locomotives. Previously the distribution of locomotives... their assignment to specific trains and facilities... was handled separately on each of Norfolk Southern's two constituent railroads. Now, Norfolk Southern proposed to bring all of this work to one location where one of the railroads would administer the work for the whole Norfolk Southern system. The unions in each case resisted the railroad's proposed changes contending that these changes were inconsistent with provisions of their existing labor agreements and also that the Railway Labor Act gave the unions the right to insist that the changes not be made until either the unions had agreed to them or the railroads had exhausted the Railway Labor Act's virtually endless process for the negotiation of changes to existing agreements. The ICC held that the railroad's proposed changes were exempt by virtue of section 11341(a) from claims asserted under the Railway Labor Act, including claims based on labor agreements. The Commission found that the railroad's actions were subject to the processes of the ICC's employee protective conditions, which had been imposed on both consolidations as required by a different section of the Interstate Commerce Act, section 11347. The protective conditions confer on employee a generous array of compensatory benefits including a guarantee of wage protection for as long as 6 years if they are affected by the consolidation. And the protective conditions also establish a procedure for the negotiation and, if necessary, arbitration of an agreement to govern the manner in which a railroad may implement its approved consolidation if the implementation will cause employees to be dismissed or displaced or will require a rearrangement of the work force. And it was that procedure that was followed in these cases and which led to the ICC's decision. The court of appeals reversed. It held that the exemption from all other law reaches only positive legislative enactments and is ineffective against claims asserted under contracts. The court reasoned that because labor agreements are a form of contract, the statutory exemption does not apply to them and to the claims asserted by the unions in these cases. Now that decision of the court of appeals was surely incorrect. Contractual obligations are binding only because of the law and an exemption from law bars enforcement of those obligations. This Court held in 1948 in Schwabacher that the statutory exemption covers claims based on contracts.
John Paul Stevens: Mr. Berlin, can interrupt to ask you a question about the statutory language? The exemption is necessary to let that person carry out the transaction; hold, maintain, and operate property; and exercise control and so forth. Which of the predicates are you relying on? Is it necessary to carry out the transaction, the necessary to operate their property, or the necessary to exercise control?
Jeffrey S. Berlin: Both transfers of work, Justice Stevens, were part of... first part of carrying out the approved transaction. So the person carrying out the transaction in each case was the railroads. An exemption from claims that--
John Paul Stevens: You say that the merger of the repair facilities 4 or 5 years later was essential to the merger of the two railroads?
Jeffrey S. Berlin: --That's not how we put it, Justice Stevens. The statute requires that the railroad be carrying out its approved transaction... that is, the consolidation of the railroads... and that the exemption then be necessary to let that carrying out proceed, so that it is the--
John Paul Stevens: So that any amalgamation of facilities anytime in the future would be exempt from all law?
Jeffrey S. Berlin: --No, Justice Stevens, the exemption does not reach to any conceivable amalgamation in the future. The--
John Paul Stevens: Then why does it reach to this one?
Jeffrey S. Berlin: --In this case, the railroads were carrying out the traditional purposes, that is, the combining of extra facilities or the centralization of control. The court recognized many years ago in Texas v. United States in 1934 that the broad congressional purpose in giving exclusive authority to the ICC over consolidations requires that the scope of the exemption be interpreted broadly as that purpose. Now, here the railroads were doing what are paradigmatic changes in their work force. The combination of two facilities--
John Paul Stevens: Do they have to be paradigmatic changes? Why doesn't it cover any change that will increase the efficiency of the combined operation as opposed to two separate operations?
Jeffrey S. Berlin: --It covers a great many such changes.
John Paul Stevens: How do we know which ones it covers? That's the heart of my question.
Jeffrey S. Berlin: These are the easy cases, Justice Stevens. I don't mean to duck the question, but I want to start with my--
John Paul Stevens: Well, the easiest case is legal objections to the transaction itself. That's the easiest one, which even the court of appeals would recognize.
Jeffrey S. Berlin: --Certainly.
John Paul Stevens: But this is... theoretically you could have merged the two legal entities and continued to operate the two separate car facilities... repair facilities.
Jeffrey S. Berlin: Oh, certainly, and that situation occurred for some years, but it was... it is always anticipated when complex entities such as these railroad systems engage in mergers and other consolidations that there will over time be operational changes to realize the efficiencies and economies that Congress wants the railroads to achieve under the--
John Paul Stevens: What if an executive of one of the corporations had a contract with tenure to it that he was no longer needed because you've already got one chief executive officer. Could you fire him without worrying about the contract? Not a collective bargaining agreement... ordinary private contract. You don't need this guy anymore.
Jeffrey S. Berlin: --Such a situation could certainly be within the reach of the exemption.
John Paul Stevens: I know it could be, but do you think it is?
Jeffrey S. Berlin: Yes. But let me say that the working out of this exemption before we can get to a situation where we say everything may be... the exemption may sweep so broadly that virtually all contracts could be covered by it. Surely that is too broad a statement of what this exemption does. Before an action of a railroad... combined railroad... is going to enjoy the protection of the exemption, that action first must be a part of... they must encompassed within the approved consolidation in the first instance. Second, the railroad must be carrying out what was approved, and third, the exemption must be necessary to the carrying out. Now, one qualification that whenever we talk about hypotheticals involving employees is that the labor protective conditions provide compensation for employees who are affected. Chief executive officer would not enjoy that.
John Paul Stevens: The case would be equally strong without the labor protective provisions, wouldn't it?
Jeffrey S. Berlin: Yes, it would. But Congress has shown by providing a compensatory mechanism in the labor protective conditions which it requires the ICC to impose on these transactions that the statutory exemption is going to affect employees. The court recognized in Lowden in 1939 that consolidations inevitably will cause employees to lose their jobs, suffer reductions in their wages, and lose their seniority rights which are defined by contracts. And when that happens the employees are going to be compensated. Now, the enactment of the protective conditions legislation for the first time in 1940 was part of a major legislative review of the ICC's authority and the scope of the exemption in the Transportation Act of 1940. When Congress first put that statutory foundation under labor protection which the ICC had just begun... recently begun at that time... putting into effect on its own, Congress looked at the entire range of questions that bear on this issue. For example, Congress had to decide whether to reenact the general exemption from all other legal restraints, as it was then phrased in the law. And Congress did so. Congress passed up at the time the opportunity that was suggested to it to reenact a temporary measure that had been in effect in Title I of the Emergency Railroad Transportation Act of 1933 that prevented these things.
William H. Rehnquist: Mr. Berlin, looking at that same statutory language that Justice Stevens was asking you about, at what stage and by whom is a finding of necessity made?
Jeffrey S. Berlin: The... Justice Stevens in his concurrence in the BLE case in 1986 suggested that any tribunal that is called upon to assess whether a competing claim may be asserted may be the one called upon, may have to determine whether the exemption is necessary to the carrying out of the transaction. In this case, however, it comes up, Mr. Chief Justice, through the actual procedures of the protective conditions which Congress has directed be put into place.
William H. Rehnquist: Well, did the court of appeals in this case rest any of its decision on the conclusion that this was not necessary?
Jeffrey S. Berlin: No, it did not, Mr. Chief Justice. The court of appeals didn't reach the issue of carrying out and it didn't reach the issue of necessity. All the court of appeals held is that claims based on labor agreements may never come within the scope of the statutory exemption. That's the--
William H. Rehnquist: Even though everyone would concede that the action overriding those kinds was necessary?
Jeffrey S. Berlin: --Even assuming that were the case, that's right. What the court of appeals did was rely on its conclusion that the exemption from all other law pertained only to positive statutory enactments. The court cut a wedge through the middle of the Railway Labor Act and distinguished between contract claims, which is what it... what the court perceived to be asserted in this case and other types of claims that might be brought under the Railway Labor Act or rest on the Railway Labor Act. We submit and have discussed our briefs that that distinction is illusory, that claims arising under labor agreements are only assertable because of the Railway Labor Act as labor agreements in the railroad industry are creatures of the Railway Labor Act. The contracts carry out the RLA commands, and it's only the RLA that makes them enforceable. And so we think that one thing this Court should do as it visits the issue is hold that the exemption reaches claims assert... that it may reach claims asserted under labor agreements, and as part of that, that it reaches claims asserted under the Railway Labor Act. That is, there's no way to just sever this out and say that's as far as the case should go.
Byron R. White: What claims under the collective bargaining agreements had to be overridden here?
Jeffrey S. Berlin: Well, Justice White, one of the difficulties is in pinning down precisely what the specific claims were in both cases. In the CSX case, the employees on the Seaboard property, the property in which that Way Cross shop was located, had what is called the Orange Book collective bargaining agreement which had been negotiated in connection with an earlier merger that resulted in that Seaboard Railroad. They contended that the Orange Book contractually barred the merged railroad from moving work... their work... from Raceland... from Way Cross, Georgia, where it was covered by the Orange Book to the property at Raceland, Kentucky, which was not in that original Orange Book merger. So they said that the Orange Book was a bar itself, a contractual bar. By way of example in the Norfolk Southern case involving the transfer of employees who perform work known as distribution of locomotive power, the employees were to be moved... or the work was to be moved and employees given an opportunity to follow it from a property where one union had a contract that covered that work to the other property where the work was done by management officers of the other company. And the employees in that case contended that their agreement barred the transfer, although the specifics were always unclear to us, and also that before the transfer could be accomplished, the railroad had to negotiate with the union over the terms of the transfer. That is that the Railway Labor Act conferred on their employees through their union the right to insist on negotiation before such a change could be made. Below, the railroads thought they were at issue over the question of claims based on the Railway Labor Act, encompassing but broader than claims simply asserted on specific labor agreements.
Byron R. White: Was this a... if the unions had had their way, would this have been a major dispute or minor dispute?
Jeffrey S. Berlin: The unions contended that the minor... the major dispute rules applied. That is that a change... a unilateral change in working conditions was under way and that they had the right to insist on the bargaining process be followed.
Byron R. White: Okay.
Jeffrey S. Berlin: Again--
Antonin Scalia: Mr. Berlin, as I recall your brief, you're not arguing, although I guess you'll settle for purposes of this case, that it's only RLA contracts that are superseded by this legislation. You believe that any contractual commitment is.
Jeffrey S. Berlin: --Justice Scalia, the question that the court took on certiorari is whether the exemption applies to claims based on agreements that are asserted under Federal law. Now we would be quite content, I assure you--
Antonin Scalia: Well, some of your argumentation... well, I forget which brief and which of your co-petitioner... which brief is which... but one of them makes the argument that of course if there is a commitment to bondholders that would stand in the way of a merger, that would be overridden by the ICC's action. Is that your position?
Jeffrey S. Berlin: --Yes, such a claim, Justice Scalia, is surely within the scope of the exemption. The court as much as said so in Schwabacher.
Antonin Scalia: And that's not an RLA agreement?
Jeffrey S. Berlin: No, that's right. With the Court's permission I'd like to save the rest of time for rebuttal.
William H. Rehnquist: Very well, Mr.-- --Counselor, I would like to ask you one question. I take it the necessity clause of 13... of 341 has to comply with the minimum requirements of 347... of 11347?
Jeffrey S. Berlin: Justice Kennedy, any action that the... the answer is yes. If employees are to be affected, that is, displaced or dismissed or somehow have their work arrangements changed, even if the statutory exemption does apply as we say it does, those employees receive the compensatory and procedural protections of the protective conditions that are imposed by the ICC under section 11347.
Anthony M. Kennedy: Is that of relevance in our interpreting the scope and effect of... 11341?
Jeffrey S. Berlin: We do not depend on the protective conditions to sustain our reading of the exemption.
Anthony M. Kennedy: Don't we have to interpret the act according to its whole design, all of its sections? And what I'm getting at is whether or not we shouldn't really have the Commission's interpretation of 11347 in front of us in order to make this determination.
Jeffrey S. Berlin: Well, Justice Kennedy, the Commission... well, first the statutory exemption predates the protective conditions by almost 4 years... 40 years... statutorially and almost that much before the ICC began imposing them on its own authority. The... but the ICC said when it heard these cases on remand from the court of appeals and rendered a decision under the protective conditions that its decision was... in deciding it was bound to apply the reading that the court of appeals gave to 11341(a)'s exemption provision. And in a later decision last summer, the ICC has made clear that if this Court reverses the court of appeals on the exemption, the ICC will have to revisit its decision on the protective conditions. So the ICC sees 11347's scope as dependent, at least in part, on whether there is an exemption out there. And we say that the... that that's clearly right, that the congressional action most recently in 1976 relating to employee protection, was done against the background of 56 years of this preexisting exemption and it bears that way, rather than the other. The availability of the protective conditions and their compensation and procedural protection is important in that recognizes the congressional attention to the interests of employees but by no means necessary to the existence of the exemption.
John Paul Stevens: Mr. Berlin, I have to interrupt, too. You're saying, if I understand you, if you say you must comply with 11347, that that statute is not an other law within the meaning of 11341.
Jeffrey S. Berlin: 0 [inaudible].
John Paul Stevens: Because otherwise you'd be exempt from it.
Jeffrey S. Berlin: That... that's right. I think it's part of the same statute and Congress expects the ICC and the railroads to comply with it even in exempt situations.
John Paul Stevens: 347 is not another law?
Jeffrey S. Berlin: I think it's not, but even it were, an exemption from it would never be necessary because Congress has said that.
William H. Rehnquist: Thank you, Mr. Berlin. Mr. Minear, we'll hear now from you.
Jeffrey P. Minear: Mr. Chief Justice, and may it please the Court: The issue in this case is whether section 11341(a) of the Interstate Commerce Act exempts a participant in a Commission-approved transaction from its contractual obligations. We submit that section 11341(a) does exactly that. We based our conclusion squarely on the language of the statute. Section 11341(a) states that a carrier participating in an approved transaction is exempt from the antitrust laws and from all other law as necessary to carry out the transaction. That exemption is easily sufficient to embrace those laws governing contractual obligations.
William H. Rehnquist: Well, one wouldn't have to read it that way as an original proposition had it not been for Schwabacher. At least that's my view that you could say law means governing law, not contracts which come into... into existence as a result of that law.
Jeffrey P. Minear: Well, with all respect, Your Honor, I think that that would be a difficult proposition. The reason is this. Contracts derive their force only from the fact that they're enforceable through law. What is actually being exempted here is the enforcement of those laws. A naked promise without the background of law behind it would not be subject to this provision. But there would be no need for the exemption as well. Now, this Court recognized as you note that principle in Schwabacher, that in fact contractual obligations are subject to the 11341(a) exemption. In that case the court held that the Commission's approval of a railroad merger could deprive dissenting shareholders of their contract rights under State law. The same is true in this case. Section 11341(a) preempts the union's rights--
John Paul Stevens: One of the issues in that case was what did the State law require.
Jeffrey P. Minear: --Not exactly, Your Honor. I think the question there... to give you the background on this case. The dissenting shareholders argued that they're entitled to accrued dividends under the corporate charter and that that was enforceable through Michigan law. The Commission--
John Paul Stevens: Even if the amount were greater than the reasonable value of the shares in the exchange.
Jeffrey P. Minear: --That is correct.
John Paul Stevens: And there had been no determination of whether they would be entitled to it or not.
Jeffrey P. Minear: That is correct. And the court held that the Commission should rule on that issue and its ruling would be dispositive. And it's noted, for example, that first the Commission must consider the public interest in approving that transaction--
John Paul Stevens: It would be dispositive of the State law question of whether they're entitled to 100 cents on the dollar on the accrued dividends.
Jeffrey P. Minear: --What it would effectively do is prevent them from enforcing their contractual rights under State law. That is the effect of the exemption. It prevents enforcement of law. But the same is true in this case. As I said, section 11341(a) preempts the union's rights under the collective bargaining agreements to the extent that enforcement of those rights would prevent the railroad from carrying out the approved transaction. Indeed if it were otherwise many of these transactions could simply not take place. Now, the unions do not quarrel with our basic position as section 11341(a) can preempt the enforcement of contractual rights. Nor do they quarrel with the result in Schwabacher. Instead the unions argued the contract in this case should be treated differently, because the Commission, in their view, has no authority or control over labor matters. Now there are two fundamental problems with this position. First, the union's argument is to whether the Commission has authority, control, or jurisdiction over labor matters are beside the point. Section 11341(a) by its terms exempts a participant in a Commission-approved transaction from all law to the extent necessary to carry out the transaction. The exemption does not depend on whether the Commission has jurisdiction over the subject matter of that law. Second, the union's assertion is simply not correct. The I... the Interstate Commerce Act requires the Commission to consider and address labor matters when approving a proposed merger. Indeed, as this Court recognized in Lowden v. The United States, mergers almost invariably affect collective bargaining agreements, and the Commission must consider those effects when evaluating the proposed transaction. Moreover, there is no need to read into section 11341(a) an implied exception for labor contracts, because the Interstate Commerce Act contains other provisions. They are designed specifically to protect rail labor from hardships that might result from a merger. First, as I've mentioned, the Commission must consider the interests of rail labor when deciding whether the proposed transaction is in the public interest. Second, the Commission must address the terms of the merger transaction--
John Paul Stevens: May I ask you a question similar to the one I asked the... Mr. Berlin?
Jeffrey P. Minear: --Yes, sir.
John Paul Stevens: Supposing one of the two railroads had long-terms leases on its executive offices and they wanted to consolidate their executive offices, could they cancel the lease?
Jeffrey P. Minear: It depends... the Commission looks at this in two parts.
John Paul Stevens: Well, what does the statute provide?
Jeffrey P. Minear: Well, the Commission... the statute provides that they would be exempt from their enforcement of those contracts to the extent necessary to carry out the transaction.
John Paul Stevens: Well, let's assume it's necessary and just the same number of dollar savings that you get out of consolidating two car repair facilities.
Jeffrey P. Minear: Well, the Commission will look at this in two steps. First, it will ask whether this proposed activity of the railroad is a part of the approved transaction. This is essentially a matter of interpreting the transaction itself.
John Paul Stevens: Not interpreting the contract... how do you interpret the transact without interpreting the contract?
Jeffrey P. Minear: Well, the contract... you're talking about--
John Paul Stevens: In other words, the contract doesn't provide for the cancellation on my executive office leases and this contract doesn't provide for the consolidation of the car repair facilities, does it?
Jeffrey P. Minear: --The... it was a finding by the arbitrator that in fact the transaction did contemplate--
John Paul Stevens: Well, I understand it contemplated it. But was there a contractual requirement that these--
Jeffrey P. Minear: --As part of the transaction, no, but I do not believe that's necessary and the Commission does not believe that that's necessary. Rather they look to whether this was a contemplated activity under the transaction. Once it makes that--
John Paul Stevens: --Supposing they could prove that they contemplated merging the office space in the two headquarters' offices?
Jeffrey P. Minear: --Well, that's--
John Paul Stevens: But there's nothing said about it in the contract.
Jeffrey P. Minear: --There's nothing... this again is a matter that the arbitrator decided in this case. It's not that the question's presented squarely here.
John Paul Stevens: Well, what's your view about my hypothetical?
Jeffrey P. Minear: My view of your hypothetical is that this would be submitted to the appropriate tribunal. They would determine first whether it was a part of the approved transaction. If so, the next question would be--
John Paul Stevens: Well, what if appropriate tribunal decides whether the lease on some property on Wall Street is part of the transaction?
Jeffrey P. Minear: --Well, the... tribunal is going to make that determination by looking at the terms of the transaction, implied and in fact.
John Paul Stevens: What tribunal? I'm asking what tribunal makes that determination?
Jeffrey P. Minear: It will be the tribunal that has been asked to enforce the contract lease most likely. The parties--
John Paul Stevens: Like the New York State Court would do.
Jeffrey P. Minear: --New York State Court, for example. They would examine the transaction and make a determination whether this was contemplated under the transaction, whether it was implied in fact in the transaction, and they'd make the second determination of whether this interferes with carrying out whether the enforcement of the lease interferes with the carrying out of that particular activity under the transaction.
Byron R. White: Well, didn't the arbitration committee decide that this shop consolidation was actually authorized by the Commission's 1980 order?
Jeffrey P. Minear: Yes, they did imply they found it implied in the terms of the transaction. It was not like the--
Byron R. White: Well, then the Commission affirmed that.
Jeffrey P. Minear: --And the Commission did affirm that as well.
Byron R. White: So this was actually contemplated or authorized by our 1980 order.
Jeffrey P. Minear: Yes, and the court of appeals did not reach that issue, so it's not part of this case. The issue before this case is the interpretation--
Byron R. White: Well, so as it comes to us, it was authorized?
Jeffrey P. Minear: --Yes, that is correct. Now, as I was saying the... not only is the public interest considered in the course... the labor interests considered in the course of the public interest evaluation of the Commission. In addition, the Commission must add to the terms of the merger special provisions that are specifically designed to protect rail labor for dislocations that might result from carrying out the merger. And then finally, as we've talking about, section 11341's exemption applies only to the extent that is necessary to permit implementation for the transaction. In some the expressed terms of the act provide ample protection for rail labor. There's simply no need for this Court to create additional protections that are not part of the legislative scheme. I'd like to reserve the remainder of my time for petitioners' rebuttal.
William H. Rehnquist: Thank you, Mr. Minear. Mr. Mahoney?
William G. Mahoney: Mr. Chief Justice, and may it please the Court: The union respondents agree that the sole issue before this Court is whether section 11341(a) standing alone overrides contracts including collective bargaining agreements. But the petitioners and the Federal respondents acknowledge that, regardless of how this Court rules on that specific question, the disputes between the parties will not be resolved. In its reply brief at page 3, Norfolk Southern states that the decision here will be useful as a guide to the ICC for, quote, "it will matter in the application of the ICC's authority to administer employee protective conditions under section 11347 whether the railroads are already exempt from the Railway Labor Act and labor agreements to the extent necessary to permit them to carry out the approved consolidation. " And Norfolk Southern continues, "The Interstate Commerce Commission has made clear that it will have to reconsider its remand decision if this Court agrees with the petitioners and the Federal respondents as to the extent of the section 11341 exemption. " In short, it is Norfolk Southern's position that should this Court agree with it, 11341(a) will preempt 11347. It is our position that section 11341(a) standing alone should not be read as overriding collectively bargaining agreements. But if such an interpretation is applied to it, section 11347 must then be considered because the exemption of 11341 extends only to railroads that are prevented from carrying out a merger or a control transaction as approved and conditioned, and section 11347 supplies the conditions. In Texas against The United States this Court held that the scope of the immunity is measured by the purpose which Congress had in view--
Byron R. White: I think the railroad said that the... is it their position that the protective provisions don't apply at all if they win? I thought they... the protective provisions will at least guarantee 6 months... 6 years of pay--
William G. Mahoney: --They will, but strip them of their contract rights--
Byron R. White: --Isn't the real issue whether they not only can transfer the work, but transfer the employees to the new location?
William G. Mahoney: --No, I don't think that's the issue, Your Honor. The issue is whether--
Byron R. White: Well, it was, though. There was an issue that was--
William G. Mahoney: --No, the issue about the transfer, which was tried before the arbitrators in both cases, and in both cases the arbitrators found that these transfers were authorized by the Commission, because the Commission said they were authorized by the Commission and the arbitrators considered themselves an agent.
Byron R. White: --The first part of my question was do you understand the railroads to contend that the protective provisions do not apply in the sense that they object to 6 months... 6 years' worth of pay?
William G. Mahoney: No, Your Honor.
Byron R. White: No, they do not.
William G. Mahoney: No. They don't object to that, but what they want to do is--
Byron R. White: No, but they want to transfer... they want to transfer the employees to the new location so they can work.
William G. Mahoney: --Well, they want to absolve themselves of the contractual obligations they have under such as the Orange Book, which the arbitrator found they did not have to move. The arbitrator found that the Orange Book, for example, restricted the... prohibited the transfer of work and prohibited transfer of employees beyond the old SCL property. And he said, well, the Commission says this is necessary in order to carry out this transaction, and this is an approved transaction so we'll move the work, but we don't have to move the employees. And the Commission turns right around and says, oh, that's egregious error, because that places this in conflict with our order, our 5-year-old merger order which didn't say anything about the Raceland, Way Cross shops at all and couldn't have. Nobody knew it was going to happen in those days. What they have done is they have extended the term transaction... approved transaction... to every single thing that the carrier wants to carry out as a result of the transaction. And that's what the protection is there for: to protect employees--
Antonin Scalia: If you have a labor contract that... would... with the rail unions that say there will be no consolidations of facilities.
William G. Mahoney: --Yes, Your Honor.
Antonin Scalia: Then the ICC could decree mergers until the cows come home and nothing would happen except that technically there would be one company operating inefficiently instead of two.
William G. Mahoney: No, under the Railway Labor Act, Your Honor, there would... something would happen and what would happen--
Antonin Scalia: What would happen?
William G. Mahoney: --Well, it might take awhile but it would happen, and that would be that at the end of the procedures of the Railway Labor Act they could put whatever they wanted into effect.
Antonin Scalia: At the end of the procedures of the Railway Labor Act?
William G. Mahoney: They could put whatever they wanted into effect. And right now the emergency board is hearing cases which contains the railroad's position that they want this authority to make these moves. They don't have it. They want it. They've placed it before the emergency board as their bargaining proposition under section 6. Their--
Antonin Scalia: But it is your position that all a railway labor union has to do is put in its contract with management that there shall be no consolidation of facilities without the consent of the union and, in effect, whatever the ICC decrees, no matter how specific it gets for that matter about a merger or a consolidation, it will not be effective because it cannot override that contractual obligation.
William G. Mahoney: --Your Honor, in the first place, I think--
Antonin Scalia: I think it can take a yes or no. Is that your position or not?
William G. Mahoney: --No, it is not.
Antonin Scalia: All right. Why not?
William G. Mahoney: It's not my position because if you had a contract, I would judge, that was directly opposed to an order of the Commission, you could override the contract as the court said the Congress could do in L&N against Motley when they outlawed passes. But you can't... you wouldn't outlaw the obligation... there is in our contractual obligation that obviously the other party paid for. The railroad is not going to give that sort of a benefit away.
Antonin Scalia: I don't understand. I don't understand what you're saying.
William G. Mahoney: Well, there's an obligation... a contract obligation as this Court said in L&N against Motley... that they might not... they might take away specific performance, but they just can't wipe out all--
Antonin Scalia: Oh, I see, so what you're saying is, well, the new company would be permitted to merge facilities as the ICC has said but they will have to pay compensation to the union for that.
William G. Mahoney: --They would have to go back and make that determination--
Antonin Scalia: Which would probably be compensation in the amount of the efficiency that they were trying to eliminate, right? I mean the wages of all of the people who would have otherwise been eliminated.
William G. Mahoney: --Well, you have to look at... 11347 requires two things it seems to me. It requires the things that Mr. Berlin was saying... the compensation, the 6 years' protection and money... but it also expressly says preservation of wages, rules, and working conditions. Preservation of collective bargaining and collective bargaining agreement rights.
Antonin Scalia: Well, to the extent that that governs, I don't think the railroads are arguing that they aren't bound by that. They're just arguing about whether 41 permits them to, apart from the guarantees that are made in the legislation, override a contract. And your position is that if the labor union has an inefficiency built into a contract, it cannot be eliminated by the ICC.
William G. Mahoney: It can.
Antonin Scalia: Well, not without compensation. I--
William G. Mahoney: Not without compensation, correct. Yes, Your Honor.
Antonin Scalia: --Okay, you want to say it can be eliminated with compensation. I regard that as not being eliminable.
William G. Mahoney: I think there's a constitutional difference--
Antonin Scalia: I mean, you could buy back anything from the unions. I mean, management can go in and say, let's eliminate this if we'll give you this much money.
William G. Mahoney: --If it will sell [inaudible] so sure. That's true.
Antonin Scalia: ICC for that.
William G. Mahoney: It is our position rather that it is the overall view of Congress in regulating rail transportation was to ensure the adequate, safe, efficient, and uninterrupted flow of interstate commerce by rail and to accomplish that, the Congress enacted three basic statutes and a number of ancillary statutes. The Interstate Commerce Act, the Railway Labor Act, and the Federal Railroad Safety Act. And the... as this Court said in Schwabacher, the Interstate Commerce Act governs issuance of securities, car supply, joint use of terminals, abandonments, and so forth, and also governs all financial transactions governing combinations of railroads. Its only relationship to employees is to consider their interests in reaching public interest findings and to impose minimum standards to protect employees against the effects of its orders. The second element, the Railway Labor Act, as this Court noted, was a complementary regime to the Interstate Commerce Act. You noted that in Pittsburgh and Lake Erie. And this act governs labor relations. It governs the making and maintaining of agreements effecting rates of pay, rules, and working conditions. And section 7 first to the Railway Labor Act provides that if there is a controversy regarding those matters and a party refuses to submit that to arbitration, he shall not be construed... it shall not be construed as a violation of any legal obligation imposed upon such party by the terms of this act or otherwise. And that is precisely what the Commission says the employees must do now. They must submit their contracts to arbitration, changes in their contracts to arbitration. Elimination of their contracts and their right to representation to arbitration. The third part of these... of this tripartite statutory arrangement is the Safety Act, administered by the Federal Railroad Administration. Now, the petitioners and the Federal respondents stressed the exclusive and plenary nature of the Interstate Commerce Act, that it is the supreme law of the land. And so it is, but so is the Railway Labor Act and so is the Safety Act in their specific spheres of governance. And there's no doubt that any State law that intrudes upon that exclusive sphere of the Interstate Commerce Act is preempted by the supremacy clause as implemented by 11341. And that was the situation in Schwabacher, where this Court held the State law chartering the railroad and was preempted to the extent it conflicted with the Interstate Commerce Act because Congress had occupied the field by giving complete control of the capital structure of railroads to the Interstate Commerce Commission, just as the Railway Labor Act is supreme, plenary, and exclusive in the governance of the making and maintaining of agreements affecting rates of pay, rules, and working conditions. Now the impact of these statutes do overlap, and when they do they must be accommodated, giving as full effect as possible to the meaning and purpose of each. For example, the safety laws certainly impact. They're expensive. They impact upon the efficiency of railroads, the flexibility of railroads. The Railway Labor Act does the same thing. But Congress says each of those things... each of those statutes are necessary in a public interest. There has never been before 1983 a court or of the Commission or an arbitrator ever to hold that any provision of the Railway Labor Act or a collective bargaining agreement to be in conflict with any provision of the Interstate Commerce Act or an ICC order. It's never happened, but in 1983, the Commission, in the R.G.W. case, held that conflict existed, and in 1985 it held that, by virtue of 11341, its orders and not the Railway Labor Act or labor contracts governed employee/management relations in connection with an approved transaction. And by an approved transaction the Commission meant that any action made operationally or economically feasible or desirable by the merger. In other words, any result of the merger. The Commission made no attempt at accommodation of the two statutes at all or the separate complementary purposes, not did it even acknowledge that prior to 1983, no conflict had ever been held to exist. The Commission just invaded the Railway Labor Act's sphere of governance, declared the existence of a conflict, and proclaimed itself the winner.
Antonin Scalia: Mr. Mahoney, can I ask you something about section 11347?
William G. Mahoney: Yes, sir.
Antonin Scalia: I had assumed that the reason it provides that the arrangement and the order approving the transaction must require that the employees of the affected rail carrier will not be in a worse position related to their employment as a result of the transaction during the 4 years following the effective date. I assumed when I read it that the reason for that was without it, their employment rights could be altered. Are they not talking about contractual rights of employment there?
William G. Mahoney: We're not and they never were and they never had been, Your Honor.
Antonin Scalia: What... what--
William G. Mahoney: What they meant was they could abolish jobs, could always abolish jobs, cut back your work forces--
Antonin Scalia: --Even if you had a contractual... I mean, if there were a commitment to have so many jobs on a particular run?
William G. Mahoney: --Oh, no, Your Honor.
Antonin Scalia: No?
William G. Mahoney: No. No, those were never changed by these agreements. But they were changed by agreement. They were never changed by statute... by requirement of the Commission. As a matter of fact, prior to 1983, we didn't even reach the question of contracts. The protective arrangements, if you look at the protective arrangements in all the agreements, they don't provide for any compensation for loss of contracts rights. They provide for compensation for loss of jobs, for being required to transfer, and so forth. And this was all done by agreement. And agreements were always made. I don't recall in 40 years of practice before the Interstate Commerce Commission under the Railway Labor Act that there was ever not an agreement as a result of a merger. There were a number of agreements... a number of mergers that took place and are still in existence in which there are different agreements on different sections of the railroad, like the Burlington Northern, because they never got together and put all of the agreements together, but they set it up as divisions. But I don't recall anytime--
Antonin Scalia: I see. So you think what this means is that if there were a, let's say, a station master who would have served at a particular location, even though he could contractually have been transferred but in fact he was serving where he lived, this provision means that even though you had a contractual right to transfer him, you won't... you won't transfer him for 4 years?
William G. Mahoney: --No, it doesn't mean that. If you have a contractual right to transfer him, you can transfer him, give him seniority anywhere, and he's got to exercise that seniority or he gets no protection.
Anthony M. Kennedy: Is the reading of the section that the railroad and the union can reach an agreement with respect to the effects of the merger on the employees, but that this is a minimum standard that the ICC must insist upon.
William G. Mahoney: Yes, Your Honor.
Anthony M. Kennedy: Is that what you're saying?
William G. Mahoney: That's exactly right. As in the original language of 52(f), the third sentence says, notwithstanding the foregoing, the parties may reach whatever reasonable agreement they wish. And that has always been the case. Now the... because they have taken over an area... this is a little unusual. It's not like Schwabacher, it's not like any of the cases that I've read... Daniel... the Daniel case, Seaboard case or any of those, because here there is a direct invasion of another complementary regime which Congress designed to govern rail transportation in the United States. It's a direct invasion of that. There's never been any conflict before. The Commission declared the conflict, created the conflict, and then said, we win.
William H. Rehnquist: Well, Mr. Mahoney, certainly the antitrust laws are set aside.
William G. Mahoney: Oh, yes, Your Honor. And that's done explicitly.
William H. Rehnquist: Well, so why shouldn't all... well, why shouldn't all other law after the antitrust laws include other Federal laws?
William G. Mahoney: I think all... you can set aside all other law, but this you had to find first of all it seems to me an explicit conflict. There has to be some... no chance at accommodation. Here, there is accommodation.
William H. Rehnquist: Do you think... do you think in Schwabacher there was a conflict?
William G. Mahoney: Not with any Federal law, Your Honor. No, it was a conflict with State law.
William H. Rehnquist: Well, was there a conflict with State law?
William G. Mahoney: It preempted that, yes.
William H. Rehnquist: Well, why shouldn't Federal law be equally preempted?
William G. Mahoney: Because where Congress has enacted complementary regimes of law to govern the same subject matter, such as rail transportation in the United States, it seems to me that before one of those can be interpreted to supersede or preempt the other, there should be... it should be a very clear conflict and no possible way of accommodating and allowing both of those laws to proceed.
William H. Rehnquist: I can certainly understand the merit of that argument if neither law said anything with respect to the other. But here the ICA says that people... a participant in this transaction are exempt from the... I mean, it deals with conflict and says that this law prevails, as I read it.
William G. Mahoney: That's true, Your Honor, but the... it's only exempt insofar as necessary to carry out an order as conditioned. And the condition is 11347 and 11347 says preserve all collective bargaining agreements and collective bargaining rights. I don't see how anyone can get out of that circle. It's there. You can't ignore it. If you're going to determine--
William H. Rehnquist: But now you're not arguing the Railway Labor Act as having to be adjusted and compromised along with the ICA. You're saying that this act itself.
William G. Mahoney: --That's correct, Your Honor.
William H. Rehnquist: Those are two different arguments really.
William G. Mahoney: Well, the railway... I'm saying that the Railway Labor Act as a separate regime is not invaded... cannot be invaded or should not be invaded by 11341 unless there's an absolute conflict that can't be avoided.
William H. Rehnquist: Okay.
William G. Mahoney: But at the same time if you're going to say that, yes, you can read 11341 that way, then you have to go to 11347 because 11340 exempts only those carriers in carrying out transactions as conditioned. They have to carrying them out as conditioned. And one of the conditions is a minimum level of preserving all collective bargaining agreements.
Anthony M. Kennedy: But 11347 doesn't say that? Does it, or am I wrong?
William G. Mahoney: 11347 says--
Anthony M. Kennedy: What is the language that you... you told the Chief Justice that 11347 says that all existing and collective bargaining contracts have to be preserved, and I just don't see that in the section, unless I'm missing something.
William G. Mahoney: --Section 11347, Your Honor, says that they must... that the Commission must impose as a minimum level of protection the protections that were imposed by the Secretary of Labor for the protection of employees in the Amtrak case, when Amtrak was created. And you go to that statute and you find in that statute the precise sections 2 and 3 of the New York Dock Conditions, which the Commission just adopted, not adapted, by adopted from the Secretary and put them in, and those become the requirements of law.
Anthony M. Kennedy: But do those refer to the collective bargaining contracts?
William G. Mahoney: They say... section 2 says they must be... preserve all collective bargaining and collective bargaining rights, privileges and benefits. And section 3 says you must preserve... no employee shall lose any protective agreement like the Orange Book, and he has the right to elect between his protective agreement and the conditions imposed by the Commission. And that if he picks one, when that one expires he can then go to other one. That's what section 3 says. The Commission doesn't even mention that and wipes out the Orange Book. So it's a... it does... we respectfully submit, Your Honor, as we've pointed out at... I think you'll find that on... 11347 is on 5a and then the New York Dock Conditions is sections 2 and 3... or [inaudible].
William H. Rehnquist: 11347 just covers the period for 4 years after the date of the final action of the Commission, doesn't it?
William G. Mahoney: No. No, Your Honor, that covers the period for 6 years from the date the employee is affected. The employee could be affected 3, 4, 5, 6 years later. And from the date of his adverse effect, then he is protected for 6 years forward of that date.
William H. Rehnquist: Well... didn't I... it must say that in something that's not before me, because although the first part certainly says 4 years.
William G. Mahoney: The first part of what, Your Honor?
William H. Rehnquist: The first part of 11... unless I'm simply dealing with a typographical... 11347.
William G. Mahoney: 11347 is... we've printed it out on page 4a of our appendix. On a rail carrier involved in a transaction which... for approval, which is sought under 11344, the ICC shall require the carrier to provide a fair arrangement at least as protective of the interest of employees who are affected by the transaction as the terms imposed under this section before February 5, 1976. That was the old New Orleans conditions which were the Washington Agreement upon which it was superimposed for the first 4 years Oklahoma conditions, and that was because the Oklahoma--
William H. Rehnquist: Yes, but then go on to the last sentence of 11347 at the top of page 5a of your appendix. There it does say, will not be in a worse position related to employment as a result of transaction during the 4 years following the effective date of the following action of the Commission.
William G. Mahoney: --That's correct, Your Honor. But--
William H. Rehnquist: How long ago did the Commission act in this case?
William G. Mahoney: --The problem is... the Commission acted in this case in 1980, but here it says you not only have to impose... the conditions that were imposed before February 5, but the terms established under 405 of the Rail Passenger Service Act. And that's what we were talking about a moment ago. The terms established under 405 of the Rail Passenger Service Act are... as set forth in sections 2 and 3 of the New York Dock condition. I mean, that's what this entire case is about, that-- One of the conditions is preserve collective bargaining right and collective bargaining agreement rights, and that's what they didn't do here. That's what they... that's what they simply... they simply wiped out. The employees, for example, the ATDA... the employees represented by the ATDA, the American Train Dispatchers Association, on the Norfolk and Western Railroad, they were required to go to another railroad controlled by Norfolk Southern, which was the Southern Railroad. And when they went to the Southern Railroad, when they got there, they no longer had representation under their... under the law... under the statute, and they no longer had a contract. No contract protection. Now, they may think... someone might say, well, they were much better off. Well, maybe they were and maybe they weren't. That isn't the point. The point is that they didn't have any contract protection anymore and they didn't have any representation anymore. And the fellows at Way Cross they were sent from the old SCL railroad in Way Cross, Georgia, up to Raceland, a commonly controlled CSX-controlled railroad, another railroad. These aren't the same railroads. These are separate railroads under common control. CSX controlled both railroads that... you go there. When they go there, they were under a different contract with different rules and different working conditions. And half of them have this contract right which the arbitrator found required them to stay in... on SCL property for life, lifetime employment or lifetime full compensation in lieu of employment.
William H. Rehnquist: Not required them to stay, but required the railroad to keep them if they'd wanted.
William G. Mahoney: Or prohibited them from moving. I'm sorry. I misspoke myself. Prohibit them from moving. They could stay there with lifetime employment or lifetime protection, compensation... full compensation in lieu of employment, and the Commission now says to them, not any more. If you stay there, you're going to get nothing. If you want that lifetime protection, move to Raceland. You've got to get off the SCL property. That's the contract violation and for which they would get nothing. And the Commission has said--
Byron R. White: Didn't the Commission say that the promise of lifetime employment was also abrogated, or not?
William G. Mahoney: --Well, only if... no, if they moved. The Commission said that if they moved, the carriers said that they would give them a lifetime protection if they moved. But of course they could say next week, let's move again. It became sort of worthless. But nevertheless, if they stayed, which they had the right to do according to the arbitrator, who interpreted the agreement. If they stayed there, then they got no protection at all of any kind.
Antonin Scalia: Mr. Gallagher, why isn't that one in that a separate section? I thought this case just involved 11341, and I thought the court below held that there simply is no power under that to alter the contractual arrangements.
William G. Mahoney: That's correct.
Antonin Scalia: You're making the argument that under 11347, there is a specific preservation of those contractual arrangements. That may be, but that wasn't what the court below--
William G. Mahoney: That's correct, Your Honor. He never reached--
Antonin Scalia: --had before it.
William G. Mahoney: --But all... my point is here that if you say that 11341, or lean to the proposition that 11341 supersedes contracts or overrides contracts, then you have to look at 11347, because 11347... 11341 only extends protections or exemptions to those carriers.
Antonin Scalia: So we could tell the court of appeals below you're wrong about 22341, remand, and tell them to consider 11347, if we think that 11341 says nothing about not impairing--
William G. Mahoney: Well, that's correct, Your Honor, you could do that, Your Honor.
Antonin Scalia: --We could do that.
William G. Mahoney: And unfortunately that, we think, would be a terribly unjust thing to do in these cases, simply because these people have been deprived of these rights for 5 years, 8 years, 10 years. The Commission is... the Commission is now interpreting contracts, interpreting collective bargaining agreements. I cited a couple in a couple of footnotes. Where they're now interpreting agreements to see if they violate the Commission orders or whether the orders violate the contract. That's unheard of. They are now doing what the National Railroad Adjustment Board has exclusive authority to do. They've never done that before. It's never... no contract has ever been held or eliminated or modified by any order including the only three cases they ever cite, which is a '63 Eighth Circuit case which upheld a contract; a Burlington Northern case in '75 with their supervisors, which also upheld the contract; and the statement that the ICC made in 1974 when the trustee of the Erie-Lackawanna wanted to get out from under a contract. He wanted to get out from under the contract. He went back to the Commission and said, we want out from under this attrition agreement, and we came in and opposed it on two grounds and fortunately I raised the question. One was that you don't have authority to do that, ICC, and the other was you shouldn't do it anyway because they haven't approved their case. And the ICC said, well, yeah, we got the authority because our '63 court of appeals said we did. But we're not going to exercise that authority because they didn't make their case. So there's never been a contract upset until now, until the Commission, who has found this conflict and who started upsetting contracts. And, Your Honors, we don't want to go back and start all over again on this on another 4 years. There might not be enough of the employees left to bother with. And besides that, the Commission has recognized... in this remand decision, they recognized that since their decision this has caused such enormous deterioration in the labor/management relations in this industry and it has. And that is one of things that they're supposed to avoid and this Court said in Lowden that you should avoid if possible. And they have created this terrible upset among these employees and management. Because management likes it. There's no bargaining anymore. Why should they bargain with us anymore? All they have to do is say, the Commission says this consolidation 10 years down the road has been authorized. And if you have a consolidation you've got to move from A to B, naturally. That's by definition. So it's necessary. It's an authorized, necessary consolidation. The contracts go out the window and everything is moved. There's no way to prove that isn't necessary. It is by definition necessary to go from A to B if you're going to consolidate A with B. And that's the great problem that we face, and we think that what they have done is they've taken 11347, which is clearly... no question it was designed as a shield to protect employee rights against ICC orders, convert it into a sword, and cut out their contract rights. If there are no other questions, Your Honors, I conclude my argument. Thank you very much.
William H. Rehnquist: Thank you, Mr. Mahoney. Mr. Minear, I believe you reserved 2 minutes for rebuttal.
Jeffrey P. Minear: Thank you, Mr. Chief Justice. I think it's important to emphasize the that issue in this case is the construction of 11341(a) and in particular the meaning of the phrase, "the antitrust laws and any other law. " The unions have raised at great length the question of the meaning of section 11347. That is an issue that is presently before the Commission on remand in this case. It is an issue that will be addressed after this Court addresses this issue of 11341. We do not think it's necessary for the Court to interpret 11347 in this proceeding. In fact, it would be quite improvident to do so. Beyond that the unions have not raised any issue beyond the... that reaches the plain language of the statute here. We think that the plain language controls 11341(a) covers all law including all laws related to enforcement of contract. Thank you.
William H. Rehnquist: Thank you, Mr. Minear. The case is submitted.
Speaker: The honorable court is now adjourned until Monday next at ten o'clock.