Court Opinion

ID: 7023524
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:55:07.700715+00
Date Added: 2024-06-11T16:10:39.222144
License: Public Domain

JUSTICE O’CONNOR, dissenting: In light of Lingle v. Norge Division of Magic Chef, Inc. (1988), 86 U.S. 399, 100 L. Ed. 2d 410, 108 S. Ct. 1877, decided after the order was entered by the trial court below, I respectfully dissent. I believe that a determination of plaintiffs’ claim in this case is substantially independent of rights and obligations embodied in the collective-bargaining agreement, as it requires no interpretation of the agreement. Therefore, I cannot adopt the majority’s conclusion that the Railway Labor Act preempts plaintiffs’ fraudulent conveyance action and provides the sole and exclusive remedy for plaintiffs’ claims here. In Lingle, the Court traced the history of preemption under section 301(a) of the Labor Management Relations Act of 1947 (LMRA) and concluded: “[E]ven if dispute resolution pursuant to a collective-bargaining agreement, on the one hand, and state law, on the other, would require addressing precisely the same set of facts, as long as the state-law claim can be resolved without interpreting the agreement itself, the claim is ‘independent’ of the agreement for §301 pre-emption purposes.” (Lingle, 486 U.S. at 409-10, 100 L. Ed. 2d at 421,108 S. Ct. at 1883.) That this is a practical, straightforward test, which preserves the consistency and integrity of the collective-bargaining process while not interfering with workers’ State and Federal substantive rights which are independent of the collective-bargaining process was recognized in Bettis v. Oscar Mayer Foods Corp. (7th Cir. 1989), 878 F.2d 192, 196, Douglas v. American Information Technologies Corp. (7th Cir. 1989), 877 F.2d 565, 569, and International Association of Machinists & Aerospace Workers, IAM Local 437 v. United States Can Co. (1989), 150 Wis. 2d 479,_, 441 N.W.2d 710, 711. The Lingle court went on to state that while a collective-bargaining agreement might contain information on rates of pay and other benefits that a court might resort to in determining damages under a State-law claim, the underlying State-law claim would not be preempted despite the fact that Federal law would govern the interpretation of the agreement with respect to the question of damages. Lingle, 486 U.S. at 413 n.12, 100 L. Ed. 2d at 423 n.12,108 S. Ct. at 1885 n.12. The majority’s response to Lingle is that it was decided under section 301 of the Labor Management Relations Act and is therefore irrelevant to the determination of any case brought under the RLA. The majority maintains that under Koehler v. Illinois Central Gulf R.R. Co. (1985), 109 Ill. 2d 473, 488 N.E.2d 542, which held that a suit for retaliatory discharge was preempted by the Railway Labor Act, plaintiffs’ fraudulent conveyance action is clearly preempted. While Koehler would appear to require that all State tort claims be preempted by the RLA irrespective of the nature of the claim, I belleve that Lingle requires us to examine the relationship between the State-law claim and the bargaining agreement in order to determine whether the State tort law “purports to define the meaning of the contract relationship” and is therefore preempted (see Allis-Chalmers Corp. v. Lueck (1985), 471 U.S. 202, 213, 85 L. Ed. 2d 206, 216-17, 105 S. Ct. 1904, 1912), or is sufficiently independent of the contract that it is not. (Lingle, 486 U.S. at 412-13, 100 L. Ed. 2d at 423, 108 S. Ct. at 1885.) Although Koehler states that the RLA preempts “employment-based disputes” (Koehler, 109 Ill. 2d at 480), the actual claim at issue in Koehler stemmed from a grievance. Koehler did not hold that the RLA preempted all State law; it held that a claim for retaliatory discharge was preempted where the suit was simply a reformulation in tort of a grievance. Koehler, 109 Ill. 2d at 480. While the RLA has been held to preempt State-law causes of action if the claim derives from the railroad employment relationship (see, e.g., Elgin, Joliet & Eastern Ry. Co. v. Burley (1945), 325 U.S. 711, 722-23, 89 L. Ed. 1886, 1894, 65 S. Ct. 1282, 1289-90; Leu v. Norfolk & Western Ry. Co. (7th Cir. 1987), 820 F.2d 825, 831), it is generally recognized that the RLA is not completely preemptive. See, e.g., Price v. PSA, Inc. (9th Cir. 1987), 829 F.2d 871, 874-76 (and cases cited therein); cf. Deford v. Soo Line R.R. Co. (8th Cir. 1989), 867 F.2d 1080, 1085. Various approaches have been used to determine whether a State-law claim is preempted by the minor dispute provisions of the RLA. In Stephens v. Norfolk & Western Ry. Co. (6th Cir. 1986), 792 F.2d 576, mod. (1986), 811 F.2d 286, the court stated that such claims should be evaluated in the following manner: “If the ‘action is based on a matrix of facts which are inextricably intertwined with the grievance machinery of the collective bargaining agreement and of the R.L.A.,’ exclusive jurisdiction of the NRAB preempts the action.” (Stephens, 792 F.2d at 580, quoting Magnuson v. Burlington Northern, Inc. (9th Cir. 1978), 576 F.2d 1367, 1369).) In Allis-Chalmers Corp. v. Lueck (1985), 471 U.S. 202, 85 L. Ed. 2d 206, 105 S. Ct. 1904, the Court held that a dispute must be more than merely “incident to” an employment relationship in order to be preempted. The Court stated: “[N]ot every dispute concerning employment or tangentially involving a provision of a collective-bargaining agreement, is preempted by §301 or other provisions of the federal labor law.” (Emphasis added.) Allis-Chalmers, 471 U.S. at 211, 85 L. Ed. 2d at 215, 105 S. Ct. at 1911. The Allis-Chalmers Court framed the test as “whether the [tort claim] *** confers nonnegotiable state-law rights on employers or employees independent of any right established by contract, or, instead, whether evaluation of the tort claim is inextricably intertwined with consideration of the terms of the labor contract.” Allis-Chalmers, 471 U.S. at 213, 85 L. Ed. 2d at 216, 105 S. Ct. at 1912. In a section 301 context, then, a court must inquire whether the labor agreement contains provisions governing the conduct that gave rise to the State claim. If it does so, the court must determine whether the State has articulated a standard sufficiently clear so as to avoid consideration of contract provisions and whether the State has shown an intent not to allow its prohibitions to be altered or waived by contract. (Miller v. AT&T Network Systems (9th Cir. 1988), 850 F.2d 543, 546-47.) In order to avoid preemption, a claim must be based on a genuine public policy, i.e., one expressed in State statute; and it must pose no threat to the collective-bargaining process. Young v. Anthony’s Fish Grottos, Inc. (9th Cir. 1987), 830 F.2d 993, 1001. While I recognize that Lueck and Lingle were brought under the LMRA and that the RLA and the LMRA differ in certain significant respects, it is clear that the Federal courts frequently rely on the reasoning of cases brought under the LMRA and other labor legislation in reaching results in actions brought under the RLA and vice versa. (See, e.g., Andrews v. Louisville & Nashville R.R. Co. (1972), 406 U.S. 320, 323, 32 L. Ed. 2d 95, 99, 92 S. Ct. 1562, 1564 (RLA case relying on LMRA cases); Leu v. Norfolk & Western Ry. Co. (7th Cir. 1987), 820 F.2d 825, 830 (concluding that the reasoning of Allis-Chalmers Corp. v. Lueck, brought under the LMRA, is applicable to determining whether a cause of action brought under State tort law actually arises under an RLA collective-bargaining agreement); see also Lancaster v. Norfolk & Western Ry. Co. (7th Cir. 1985), 773 F.2d 807; Minehart v. Louisville & Nashville R.R. Co. (6th Cir. 1984), 731 F.2d 342 (preemption case in context of National Labor Relations Act found applicable in context of RLA). Lingle, while brought under the LMRA, relied on the reasoning of Atchison, Topeka & Santa Fe Ry. Co. v. Buell (1987), 480 U.S. 557, 94 L. Ed. 2d 563, 107 S. Ct. 1410, an RLA case rejecting a claim that Federal labor law preempted a State statute and holding that a State-law claim can coexist with a Federal labor remedy. Having concluded that the principles set out in Lingle are applicable here, I believe the determinative issue is whether adjudication of a claim under the Illinois fraudulent conveyance act (Ill. Rev. Stat. 1987, ch. 59, par. 4) would require interpretation of the collective-bargaining agreement and therefore be subject to preemption under the RLA. I believe it does not. In order to state a claim under the fraudulent conveyance act, plaintiffs must set forth sufficient facts from which it can be inferred that plaintiffs are creditors of the railroad making the conveyance and that the transfer of property made between C&NW and FRVR will impair their rights as creditors. Both Gendron and RLEA have alleged that they are creditors of C&NW and that C&NW’s purpose in selling track and related property is to avoid the cost burden of paying certain wages and benefits. Whether these allegations state a cause of action for fraudulent conveyance can be evaluated without recourse to the collective-bargaining agreement. They are purely factual questions that pertain to the status of plaintiffs as creditors and the conduct and motivation of the defendant railroads in transferring the property in issue. In my view, the State-law remedy is independent of the collective-bargaining agreement in that “resolution of the state-law claim does not require construing the collective-bargaining agreement.” Lingle, 486 U.S. at 407, 100 L. Ed. 2d at 420, 108 S. Ct. at 1882. This result would not conflict with the national policy underlying the RLA, which is to avoid interruption of interstate railway transportation (see Elgin, Joliet & Eastern Ry. Co. v. Burley (1945), 325 U.S. 711, 722-23, 89 L. Ed. 1886, 1894, 65 S. Ct. 1282, 1289-90), as there is no suggestion or likelihood that an action brought under a State fraudulent conveyance action would jeopardize the stability of railway transportation. Equally important is that the issues raised by a fraudulent conveyance claim are squarely within the expertise of a court of law and outside the expertise of the National Railway Adjustment Board, whose sole function is to interpret negotiated agreements. (See Allis-Chalmers Corp. v. Lueck (1985), 471 U.S. 202, 219-20, 85 L. Ed. 2d 206, 220-21, 105 S. Ct. 1904, 1915; Southern Pacific Co. v. Joint Council of Dining Car Employees, Locals 456 & 582 (9th Cir. 1947), 165 F.2d 26.) The right to pursue a fraudulent conveyance action based on a leveraged buyout is outside the scope of an agreement that could be collectively bargained inasmuch as parties to a collective-bargaining agreement may not contract for something that is illegal under State law nor may they forego rights or obligations provided under State law that are independent of the labor contract. (International Association of Machinists & Aerospace Workers, IAM Local 437 v. United States Can Co. (1989), 150 Wis. 2d 479, 441 N.W.2d 710.) In summary, I believe that plaintiffs’ fraudulent conveyance action is a State-law claim not subject to preemption under the RLA, as the action requires no substantial interpretation of the collective-bargaining agreement and the right claimed would at most require tangential reference to the collective-bargaining agreement. I also am not persuaded that the Interstate Commerce Act preempts plaintiffs’ fraudulent conveyance claims. While the majority cites Deford v. Soo Line R.R. Co. (8th Cir. 1989), 867 F.2d 1080, 1091, to the effect that the State-law claim must necessarily be barred as it was brought to annul or set aside a valid ICC order, plaintiffs here have plainly stated that they are not seeking to bar the sale of the Duck Creek South line by attempting to set aside the ICC order. Nor are they seeking labor protective conditions, which they acknowledge that the ICC has the authority to impose on certain rail transactions. (See, e.g., New York Dock Ry.—Control—Brooklyn Eastern District Terminal (1979), 360 I.C.C. 60.) Rather, plaintiffs are seeking to bar what they allege to be the fraudulent form of the sale and to ensure that the sale takes place in a manner that does not violate the Illinois fraudulent conveyance act. The ICA does not have as broad a preemptive scope as certain other legislation related to labor. (See, e.g., Pilot Life Insurance Co. v. Dedeaux (1987), 481 U.S. 41, 46-47, 95 L. Ed. 2d 39, 46-47, 107 S. Ct. 1549, 1551-53 (discussing broad preemptive effect of ERISA).) While the ICA provides comprehensive regulation of common carriers by rail in interstate commerce, this regulation focuses primarily on the licensing and pricing of rail services. (See, e.g., 49 U.S.C. §10102 (1982).) Although the ICC has broad powers, it does not regulate every aspect of a railroad’s operations, and State action is not necessarily precluded. In short, in the absence of a specific statement of preemptive intent by Congress or persuasive reasons for finding such intent, preemption of State law by Federal statute or regulation is simply not favored. Hayfield Northern R.R. Co. v. Chicago & North Western Transportation Co. (1984), 467 U.S. 622, 632-34, 81 L. Ed. 2d 527, 536, 104 S. Ct. 2610, 2616-17; Chicago & North Western Transportation Co. v. Kalo Brick & Tile Co. (1981), 450 U.S. 311, 317, 67 L. Ed. 2d 258, 264-65, 101 S. Ct. 1124, 1130, citing Florida Lime & Avocado Growers, Inc. v. Paul (1963), 373 U.S. 132, 142, 10 L. Ed. 2d 248, 257, 83 S. Ct. 1210, 1217. The jurisdictional section at issue here, 49 U.S.C. §10901 (1982), provides that a newly formed carrier seeking to acquire and operate an existing rail line must obtain the prior approval of the ICC. That section also provides exemptions for certain sales under Class Exemption for the Acquisition and Operation of Rail Lines Under U.S.C. §10901 (1985), 1 I.C.C. 2d 810 (Ex Parte No. 392). Under the policy established by Ex Parte No. 392, transactions involving the acquisition of railroad lines by noncarriers are automatically exempted from licensing seven days after an application is filed without addressing the financial aspects of the sale or the impact on the railroad’s creditors. Nothing under section 10901 addresses the question of whether the ICC should consider the interests of the railroad’s unsecured creditors in making an exemption determination; in fact, such considerations are left to State common law. See Deford v. Soo Line R.R. Co. (8th Cir. 1989), 867 F.2d 1080, 1093, (Lay, C.J., dissenting). The majority relies principally on Chicago & North Western Transportation Co. v. Kalo Brick & Tile Co. (1981), 450 U.S. 311, 67 L. Ed. 2d 258, 101 S. Ct. 1124, in which the Supreme Court held that the Interstate Commerce Act precludes a shipper from pressing a State-court action for damages against a regulated carrier when the Interstate Commerce Commission, in approving the carrier’s application for abandonment, has reached the merits of the matters the shipper sought to raise in State court. (Kalo Brick, 450 U.S. at 327, 67 L. Ed. 2d at 271, 101 S. Ct. at 1135.) The ruling in Kalo specifically focused on the fact that the Commission had already addressed the merits of the issues the shipper sought to raise in the State court and noted that a shipper who was harmed had specific statutory remedies available. Circumstances here are distinguishable from those in Kalo, in that here the ICC did not reach the merits of the fraudulent conveyance issue, nor was it required to do so. (See 49 U.S.C. §10901 (1982); Ex Parte No. 392 (1985), 1 I.C.C. 2d 810.) Kalo Brick is further distinguishable in that here, there is no equivalent remedy for a creditor who is defrauded by a fraudulent conveyance of a railroad. The ICC revocation process is not comparable to the statutory remedies noted in Kalo Brick in that under Ex Parte No. 392, revocations are only granted in extraordinary circumstances that would justify the imposition of labor protective conditions and ICC exemptions are revoked only when regulation is necessary to carry out the transportation policy of section 10101(a). (49 U.S.C. § 10505(d) (1982).) Thus, even if the ICC were presented with facts evidencing a fraud on creditors, it would not be required to revoke the exemption and impose regulations absent some interference with national rail transportation policy. The railroads in their brief also relied on Ry. Labor Executives’ Association v. Staten Island R.R. Corp. (2d Cir. 1986), 792 F.2d 7, 11-12, in which the court dismissed the RLEA’s attempt to enjoin the sale of a railroad, finding that to do so would impinge on the plenary authority of the ICC to approve the sale in question. That case is distinguishable in that it involved the sale of a railroad pursuant to ICA section 10905, a forced sale provision requiring a financially ailing railroad to sell its assets as an alternative to abandonment. Since the ICC order had directed the seller to complete the sale, the court concluded that an injunction could not be granted without modifying the mandatory order and that such an attack could be made only on direct appeal from the ICC order. (Staten Island, 792 F.2d at 12.) Plaintiffs here are not seeking to stop the sale of the railroad, or in other respects interfere with the need for a “nondivided authority over interstate commerce” (Missouri Pacific R.R. Co. v. Stroud (1925), 267 U.S. 404, 408, 69 L. Ed. 683, 685, 45 S. Ct. 242, 245), but to delay the transaction until it is determined whether it conforms to State fraudulent conveyance law. In Terry v. Atlas Van Lines, Inc. (N.D. Ill. 1986), 679 F. Supp. 1467, an interstate carrier argued that it was exempt from the Illinois franchise disclosure act because the ICC had previously approved the acquisition of a majority of its stock and the franchise act improperly hindered the carriers’ exercise of its franchise agreements. The court found that requiring compliance with the franchise act would not interfere with what the ICC authorized the carrier to do. (Terry, 679 F. Supp. at 1473.) As in Terry, plaintiffs’ claims under the fraudulent conveyance act ultimately will not interfere with what the ICC authorized the railroads to do. I therefore conclude that the ICG’s authorization of the sale does not remove the transaction from the application of State laws which do not conflict with the ICC’s authority over national transportation policy. The railroads in their brief also assert that plaintiffs have failed to plead a fraudulent conveyance and that the injunctive relief sought by plaintiffs would constitute an equitable attachment, which is prohibited by Illinois law under Exchange National Bank v. Harris (1984), 126 Ill. App. 3d 382, 386-88, 466 N.E.2d 1079. They argue that a conveyance by a solvent debtor who retains sufficient property to pay his debts will not be set aside as a fraudulent conveyance. Illinois recognizes two types of fraudulent conveyance; those involving fraud in law, in which there is no consideration for the transfer (see, e.g., Gary-Wheaton Bank v. Meyer (1984), 130 Ill. App. 3d 87, 94, 473 N.E.2d 548), and fraud in fact, which involves a conveyance supported by consideration but which is nonetheless intended to defraud or hinder creditors. (Ill. Rev. Stat. 1987, ch. 59, par. 4; Alan Drey Co. v. Generation, Inc. (1974), 22 Ill. App. 3d 611, 618, 317 N.E.2d 673.) Whether a debtor is solvent is only one consideration in determining whether there is fraud in fact. Other considerations include whether the conveyance is characterized by secrecy and whether the debtor is conveying previously unencumbered assets. (Alan Drey, 22 Ill. App. 3d at 618.) A plaintiff alleging fraud in fact must plead and prove a specific intent to defraud creditors. Tcherepnin v. Franz (N.D. Ill. 1979), 475 F. Supp. 92, 96. Plaintiffs’ complaint alleges that the sale was cloaked in secrecy, that the consideration was inadequate and that C&NW will use the proceeds of the sale to pay debts other than those owed to plaintiffs. Plaintiffs have also sufficiently alleged that they are creditors of C&NW. The term “creditors” as applied to the fraudulent conveyance act is liberally construed to encompass “all parties who have demands, accounts, interests or causes of action for which they might recover any debt, damages, penalty, or forfeiture,” in actions in tort or contract. Bongard v. Block (1876), 81 Ill. 186, 187. The injunctive relief sought by plaintiffs is authorized by section 4 — 101 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 4 — 101), which provides: “[A] creditor having a money claim, whether liquidated or unliquidated, and whether sounding in contract or tort, may have an attachment against the property of his or her debtor *** (8) Where the debtor is about fraudulently to conceal, assign, or otherwise dispose of [the] *** property or effects, so as to hinder or delay *** creditors.” Exchange National Bank v. Harris (1984), 126 Ill. App. 3d 382, 466 N.E.2d 1079, does not bar the injunctive relief sought by plaintiffs. Harris involved an “equitable attachment”; an impermissible attempt to attach funds that were not the funds in controversy in certain pending litigation and which would not be the subject of any final adjudication of the matter. (Harris, 126 Ill. App. 3d at 388.) The injunctive relief sought by plaintiffs here, however, is expressly permitted under section 4 — 101(8) (Ill. Rev. Stat. 1987, ch. 110, par. 4 — 101(8)). The majority also concludes that plaintiffs’ civil conspiracy claim is preempted under the authority of Bartley v. University Asphalt Co. (1986), 111 Ill. 2d 318, 489 N.E.2d 1367. Bartley held that a plaintiff’s Illinois tort claims for retaliatory discharge and civil conspiracy were preempted by section 301 of the LMRA. Relying on Allis-Chalmers v. Lueck (1985), 471 U.S. 202, 220, 85 L. Ed. 2d 206, 221, 105 S. Ct. 1904, 1915, the court in Bartley noted that the plaintiff’s cause of action for civil conspiracy was substantially dependant upon analysis of the terms of the collective-bargaining agreement, in that the plaintiff had alleged the existence of the agreement, the violation of the terms of the agreement, a conspiracy to violate the agreement, and a breach of the duty to represent plaintiff adequately during proceedings established by the collective-bargaining agreement. The court’s finding that the civil conspiracy claim was preempted was based on its determination that the claim was “inextricably intertwined with consideration of the terms of the labor contract.” (Allis-Chalmers, 471 U.S. at 213, 85 L. Ed. 2d at 216, 105 S. Ct. at 1912.) Plaintiffs’ allegations here, in contrast, do not hinge on the existence of a collective-bargaining agreement, nor do they allege the violation of the agreement. Plaintiffs’ conspiracy claim addresses the alleged intent of the railroads to defraud plaintiffs by converting equity into debt, the proceeds of which will be channeled to various shareholders and other creditors. The analysis of plaintiffs’ civil conspiracy claim requires neither recourse to nor interpretation of the collective-bargaining agreement. In light of Lingle, I conclude that plaintiffs’ civil conspiracy claim is not preempted by Federal labor law. For the foregoing reasons, I respectfully dissent.