Brotherhood of Locomotive Engineers & Trainmen v. Union Pacific Railroad ( 2017 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-1563
BROTHERHOOD OF LOCOMOTIVE ENGINEERS AND TRAINMEN
(GENERAL COMMITTEE OF ADJUSTMENT, CENTRAL REGION), et
al.,
Plaintiffs-Appellants,
v.
UNION PACIFIC RAILROAD COMPANY,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 C 2730 — Edmond E. Chang, Judge.
____________________
ARGUED SEPTEMBER 14, 2017 — DECIDED NOVEMBER 17, 2017
____________________
Before WOOD, Chief Judge, and RIPPLE and HAMILTON, Cir-
cuit Judges.
WOOD, Chief Judge. Labor-management relations in the
railroad industry have been subject to a distinctive regulatory
regime ever since the Railway Labor Act (RLA or Act) took
effect in 1926. See 45 U.S.C. §§ 151–88. No one wants to see the
2 No. 17-1563
nation’s transportation network brought to a standstill be-
cause of labor conflict. The RLA therefore is designed to sub-
stitute bargaining, mediation, and arbitration for strikes.
Embedded in the Act is a strong preference for arbitration,
as opposed to judicial resolution of disputes. If a
disagreement arises over the formation or amendment of a
collective bargaining agreement (CBA), it is considered a
“major” dispute under the Act, and it must be decided by a
court. See Consolidated Rail Corp. v. Ry. Labor Execs.’ Ass’n, 491
U.S. 299, 302–03 (1989). If, on the other hand, it relates only to
the interpretation or application of an existing agreement, it
is labeled “minor” and must go to arbitration. Id. at 303. In the
case before us, the Union Pacific Railroad (the Railroad)
issued a modified disciplinary policy for its engineers without
first sitting down at the bargaining table with their union, the
Brotherhood of Locomotive Engineers and Trainmen (the
Union). The Union argues that the Railroad could not take
this step before bargaining and that its unilateral action
violates the RLA. It also contends that the dispute itself is a
major one not suitable for arbitration.
Observing that the playing field is tilted heavily in favor
of arbitration, the district court agreed with the Railroad that
the dispute is minor, and it accordingly dismissed the lawsuit
in favor of arbitration. Although the Union has made a
number of good points, we conclude that there is at least a
non-frivolous argument that interpretation of the agreement
between the parties, not change, is at stake. We therefore
affirm the district court’s decision dismissing the suit for lack
of subject-matter jurisdiction.
No. 17-1563 3
I
Our summary of the underlying facts can be brief. The
Brotherhood of Locomotive Engineers and Trainmen is com-
posed of three unions that represent engineers employed by
the Railroad, which is itself an amalgamation of several for-
mer railroad carriers. As a result, the Railroad is a party to
multiple overlapping CBAs with different groups of employ-
ees.
The current dispute originates from the Railroad’s deci-
sion in 2015 to modify a set of disciplinary rules; the new pol-
icy was set forth in something called MAPS, which stands for
Managing Agreement Professionals for Success. Before that
time, the same subset of the Union’s members was subject to
disciplinary rules contained in a mid-1990s agreement,
known as UPGRADE. In the years before 2015, the Railroad
made several changes to UPGRADE over the Union’s objec-
tions. When it shifted from UPGRADE to MAPS it again did
not consult the Union. Around the time MAPS was being
rolled out, however, the Railroad polled members of the Un-
ion about what changes they would like to see in the existing
disciplinary rules.
Another subset of the Union’s members is party to an
agreement called the 1995 Southern Pacific Agreement, a CBA
that also establishes disciplinary rules. The Railroad became
subject to this agreement when it absorbed the former South-
ern Pacific Western Lines.
II
The RLA allows employers to use either of two methods
for changing “rates of pay, rules, or working conditions of []
employees”: first, they may act in any way permitted by an
4 No. 17-1563
existing CBA; or second, they may go through the bargaining
and negotiation procedure prescribed in section 156 of the
Act. See 45 U.S.C. § 152 Seventh. In other words, the central
topics of rates of pay, rules, and working conditions are sub-
ject to mandatory bargaining. Both parties agree that MAPS
is a disciplinary policy that falls within the scope of “rules”
and “working conditions” and is thus subject to these limits.
The Union sees this case as straightforward, in its favor.
Since MAPS is subject to RLA section 152 Seventh and it was
implemented without going through the section 156
procedures, the Union reasons, the Railroad changed a
mandatory subject of bargaining without the necessary
participation of the Union. But matters are not that simple.
Critically, the Union overlooks the fact that even in the
absence of negotiation, changes are permitted if authorized
by contract. For the same reason, the primary case on which
the Union relies is inapposite. That case holds that the courts,
rather than arbitrators, are the proper forum for cases in
which a carrier unilaterally changes conditions of
employment. See Airline Pilots Ass’n Int’l. v. Nw. Airlines, Inc.,
199 F.3d 477, 479–80 (D.C. Cir. 1999) (airline industry, to which
the RLA also applies). But a change is “unilateral” only if it
was accomplished without contractual authority; if it is made
under the aegis of a contract, it would not (by definition) be
unilateral. Thus, Airline Pilots is helpful to the Union only if
we find that the present dispute lies outside the boundaries of
the agreement between it and the Railroad. If it is covered
somehow by that agreement, any disputes concerning MAPS
are properly characterized as minor and must be taken to an
arbitrator.
No. 17-1563 5
Before moving to the relevant contractual issues, we must
briefly change tracks. The Railroad also offers a simple way to
resolve the case before us: silence in the CBA, it insists, is
enough to give the carrier carte blanche. We cannot accept
such a sweeping proposition. First, such a rule cannot be
squared with the RLA. There is no ambiguity in the statute:
any change to pay, rules, or conditions must be authorized by
contract or as the result of bargaining. The Railroad tries to
avoid the plain language of the statute by pointing to past ar-
bitration awards that have found, in particular situations, that
contractual silence equals authority. Even if the awards use
this language, however, as a structural matter they cannot
support any broad legal proposition. Arbitrators’ jurisdiction
is strictly limited to interpreting the contract before them, and
the force of any decision can go no further than what the con-
tract at issue allows. 45 U.S.C. § 153 First (i). Contractual si-
lence may give carriers freedom to make changes to matters
not affecting rates of pay, rules, or working conditions. See
Chicago & N.W. Transp. Co. v. Ry. Labor Execs.’ Ass’n, 908 F.2d
144, 151 (7th Cir. 1990). But contract and bargaining are the
only options for subjects covered by section 152 Seventh.
The RLA casts federal courts in an unfamiliar role—that of
taxonomist—when a railroad carrier claims contractual au-
thority to make changes to one of the mandatory subjects of
bargaining. Bhd. of Maint. of Way Emps. v. Atchison, Topeka &
Santa Fe Ry. Co., 138 F.3d 635, 638 (7th Cir. 1997). Whether the
court has jurisdiction to resolve the underlying contractual
dispute depends on whether it is “major” or “minor.” These
are terms of art. Chicago & N. W. Transp. Co., 908 F.2d at 148.
As we indicated earlier, major disputes pertain to the
creation of new contracts affecting any mandatory subject of
6 No. 17-1563
bargaining or modifications of existing contracts that have the
same effect. Federal courts have jurisdiction to enjoin a carrier
from making that type of change if the change is neither
authorized by a CBA nor the result of the statutorily defined
bargaining and mediation procedures. Consolidated Rail, 491
U.S. at 302–03. The injunction halts the proposed new rule
from taking effect and thus preserves the status quo during
bargaining. If bargaining is unfruitful, the union may resort
to economic self-help. Id. at 311. In contrast, minor disputes
“aris[e] out of the grievances or out of the interpretation or
application of agreements concerning rates of pay, rules or
working conditions.” 45 U.S.C. § 152 Sixth. Minor disputes are
subject to compulsory arbitration before the National
Railroad Adjustment Board, leaving federal courts without
jurisdiction. Consolidated Rail, 491 U.S. at 303–04. Critically, a
minor change may take effect immediately, even if it must
later be undone by order of the arbitrator.
A primary goal of the RLA is to avoid disruptions to com-
mercial use of the railways. Accordingly, in making the choice
between major and minor, there is a large thumb on the scale
in favor of minor, and hence arbitration. Id. at 310–11. The bur-
den on a railroad to convince the court that its changes are
only an interpretation or application of an existing CBA is
quite low. If the railroad articulates an argument that is “nei-
ther obviously insubstantial or frivolous, nor made in bad
faith,” the court lacks jurisdiction to do anything but dismiss
the case and allow arbitration to go forward. Id. at 310. And
because a CBA, unlike a private contract, is a “generalized
code to govern a myriad of cases which the draftsmen cannot
wholly anticipate,” id. at 311–12 (internal citation omitted),
the major-minor dichotomy treats interpretation or applica-
No. 17-1563 7
tion of express and implied contractual terms indistinguisha-
bly. Thus, the relevant terms of an agreement are not only
those that are written down; they also include the parties’
practice, usage, and custom as they carry out their agreement.
Bhd. of Maint. of Way Emps., 138 F.3d at 641.
III
Better-than-frivolous is a low bar, but a bar nonetheless,
and the Railroad must make some showing to clear it. Naked
assertions of a past practice are not enough. Nor may a rail-
road lie its way to arbitration. There must be a basis in the
record to support the conclusion that the railroad, or the un-
ion as the case may be, put the relevant practice into effect. If
the union were to produce evidence that foreclosed the car-
rier’s interpretation, it might succeed in showing that the rail-
road’s position is obviously insubstantial. But none of that has
occurred here. Union Pacific has come forward with two es-
sential pieces of evidence: (1) a written CBA governing disci-
plinary policy and (2) a history of making pertinent changes
in the disciplinary procedures outlined in the governing CBA.
UPGRADE is the written CBA at issue. As we noted
earlier, the UPGRADE agreement preceded MAPS. Whatever
else MAPS may be, therefore, it cannot be seen as a brand new
contract. The existence of UPGRADE supports a finding that
the Union and the Railroad here are at odds not about an
implied-in-fact contract but rather an implied-in-fact term to a
written contract. That distinguishes this case from those in
which a court had to decide whether there was any extant
agreement governing the parties’ relationship with respect to
the contested matter. Cf. Granite Rock Co. v. Int’l Bhd. of
Teamsters, 561 U.S. 287, 297 (2010) (resolving whether the
parties’ arbitration clause had been properly ratified by the
8 No. 17-1563
time in question); Janiga v. Questar Capital Corp., 615 F.3d 735,
737 (7th Cir. 2010) (resolving whether a document qualified as
a contract). Here, we need to see what past practices tell us
about any implied terms in UPGRADE.
The Railroad’s General Director of Labor Relations sub-
mitted a declaration in which he maintained that the Railroad
had made “many” changes to UPGRADE, including updates
to “safety rule violations, adding conference opportunities,
and adjusting the severity of the penalty based on employees’
unsafe behavior.” Phillips Declaration ¶ 10. The Union denies
that it ever acquiesced to any such changes to UPGRADE.
Bagby Declaration ¶ 14; Hannah Declaration ¶ 35. But the Un-
ion does not dispute that historically the Railroad has made
changes to the practices covered by the parties’ agreement. At
oral argument, counsel for the Union conceded that Phillips’
declaration accurately represented that pertinent fact. The
Railroad’s declaration is enough to show that its position is
not frivolous, though it may or may not prevail. Wading
through the competing declarations to determine the actual
authority the Railroad had to modify the disciplinary policies,
based on past practices, is a job for the arbitrator.
The Union argues in the alternative that MAPS must be a
change in policy rather than an application of existing con-
tractual authority because it conflicts with the terms of a sep-
arate agreement—Article 18 of the Southern Pacific Western
Lines Agreement. Article 18 requires the following:
No. 17-1563 9
Information concerning discipline more than five (5)
years old contained in personnel records will be ex-
punged with the exception of suspension or dismissal
involving violations of [Federal Railroad Administra-
tion] regulations or Safety Rules, which were upheld in
arbitration.
MAPS imposes a “three-strike” policy that counts prior li-
cense revocations as strikes. The Union argues that since
MAPS allows the Railroad to escalate punishment based on
past license revocations, then license revocations must be “in-
formation concerning discipline.” Further, since nothing in
MAPS distinguishes between revocations more or less than
five years old, it contends that MAPS and Article 18 cannot
coexist. It concludes that MAPS implements a change in dis-
ciplinary policy, not just an interpretation or application of an
existing policy, and thus the dispute over its implementation
is major.
Again, the Railroad has a non-frivolous argument for the
compatibility of the two policies. This in turn (if accepted by
an arbitrator) would mean that MAPS has not changed the
prior rules. In the Railroad’s view, license revocations fall
within Article 18’s exception for violations of the Federal
Railroad Administration (FRA) regulations. License
revocations are a possible consequence of violating a federal
regulation. See 49 C.F.R. § 240.307. Though on its face Article
18’s exception might appear to cover all discipline, matters
“upheld in arbitration” could be seen to apply only to
violations of safety rules, as opposed to violations of FRA
regulations. The recourse for an engineer who has had her
license stripped is not arbitration, but rather review by the
Locomotive Engineer Review Board. 49 C.F.R. § 240.401(b). It
10 No. 17-1563
is impossible for a license revocation ever to be upheld in
arbitration.
We stress again that we are not resolving these disputes.
We conclude only that the Railroad’s arguments are better
than frivolous. It will be up to the arbitrator to decide if they
carry the day.
IV
Finally, we address whether the Railroad’s direct dealing
with the Union’s members violates one of the provisions of
the RLA that confers federal jurisdiction independent of the
major-minor dichotomy. Bhd. of Ry., Airline & S.S. Clerks,
Freight Handlers, Express & Station Emps. v. Atchison, Topeka &
Santa Fe Ry. Co., 847 F.2d 403, 408 (7th Cir. 1988). Direct deal-
ing is one such violation. Nonetheless, jurisdiction is limited
to exceptional circumstances. Id. And federal courts should be
particularly wary of finding jurisdiction when the carrier
plausibly understands a CBA to permit its conduct. Id. at 409.
Typically, jurisdiction for specific violations of the RLA is con-
fined to cases in which arbitration is an ineffective or unavail-
able remedy or the carrier has been alleged to have intended
to weaken the union. Id. at 411.
This is not a case in which arbitration would be ineffective
or unavailable. The Railroad had a basis for believing that it
was under no obligation to bargain with the Union when it
replaced UPGRADE with MAPS. Polling union members
about these matters does not significantly undercut the
Union’s role if the Union’s role had been contracted away to
begin with. If the Railroad’s interpretation is wrong, the
arbitrator will tell it so, and it will be compelled to negotiate
with the Union. The facts also do not support a finding that
No. 17-1563 11
the Railroad was out to weaken the Union. All it is alleged to
have done is ask union members about their policy
preferences. The Union has not pleaded anything
extraordinary about this case nor any exceptionally
detrimental consequences.
V
Union Pacific must do very little to show that this dispute
is minor. It has passed that low bar and shown that the proper
forum for further proceedings under the RLA system is
arbitration. We therefore AFFIRM the judgment of the district
court.