Brotherhood of Locomotive Eng v. Union Pacific Railroad Compan ( 2018 )

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
AS AMENDED ON PETITION FOR REHEARING JANUARY 11, 2018
____________________
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 disagree-
ment arises over the formation or amendment of a collective
bargaining agreement (CBA), it is considered a “major” dis-
pute 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 inter-
pretation or application of an existing agreement, it is labeled
“minor” and must go to arbitration. Id. at 303. In the case be-
fore us, the Union Pacific Railroad (the Railroad) issued a
modified disciplinary policy for its engineers without first sit-
ting down at the bargaining table with their union, the Broth-
erhood 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 num-
ber of good points, we conclude that there is at least a non-
frivolous argument that interpretation of the agreement be-
tween the parties, not change, is at stake. We therefore affirm
the district court’s decision dismissing the suit for lack of sub-
ject-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 originating from several sources. One is a
written agreement referred to as the 1996 System Agreement-
Discipline Rule. Another is a mid-1990s agreement, known as
UPGRADE. The parties do not agree on the genesis of
UPGRADE, but the record indicates that it was developed
with input from both labor and management. In the years be-
fore 2015, the Railroad made several changes to its discipli-
nary policies over the Union’s objections. When it shifted to
MAPS it again did not consult the Union. Around the time
MAPS was being rolled out, however, the Railroad polled
members of the Union 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.
4 No. 17-1563
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
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 proce-
dures, 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 Un-
ion 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 inappo-
site. 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 out-
side the boundaries of the agreements between it and the Rail-
No. 17-1563 5
road. If it is covered somehow by those agreements, any dis-
putes concerning MAPS are properly characterized as minor
and must be taken to an arbitrator.
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
6 No. 17-1563
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 cre-
ation of new contracts affecting any mandatory subject of bar-
gaining 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 au-
thorized by a CBA nor the result of the statutorily defined bar-
gaining 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 bar-
gaining. 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 Rail-
road Adjustment Board, leaving federal courts without juris-
diction. 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 can articulate an argument that is
“neither 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
No. 17-1563 7
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-
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.
Naked assertions of a past practice are not enough. Nor may
a railroad lie its way to arbitration. There must be a basis in
the record to support the conclusion that the railroad, or the
union 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) CBAs governing disciplinary
policy and (2) a history of making pertinent changes in the
disciplinary procedures outlined in the governing CBAs.
Some of the disciplinary policies that the parties have been
following have their source in a written agreement: the 1996
System Agreement-Discipline Rule, to which the Union refers
as UPGRADE. UPGRADE itself was the product of negotia-
tions between the Union and the Railroad. In addition, the
Union and the Railroad are parties to other collective bargain-
ing agreements, some of which also cover the subject of disci-
pline. As we noted earlier, these agreements preceded MAPS.
Whatever else MAPS may be, therefore, it cannot be seen as a
8 No. 17-1563
brand new contract. The existence of these agreements sup-
ports a finding that the Union and the Railroad here are at
odds not about an implied-in-fact contract but rather an im-
plied-in-fact term to a 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
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 the prior agreements.
The Railroad’s General Director of Labor Relations sub-
mitted a declaration in which he maintained that the Railroad
has “implemented and updated various other policies that in-
terface with or related to employee discipline.” Phillips Dec-
laration ¶ 9. The Railroad has made “many” changes to
UPGRADE itself, 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 Union 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 dec-
larations to determine the actual authority the Railroad had
No. 17-1563 9
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:
Information concerning discipline more than
five (5) years old contained in personnel records
will be expunged with the exception of suspen-
sion or dismissal involving violations of [Fed-
eral Railroad Administration] 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, there is a non-frivolous argument for the compati-
bility of the two policies. If accepted by an arbitrator, it would
lead to the conclusion 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
10 No. 17-1563
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 arbi-
tration” could be seen to apply only to violations of safety
rules, as opposed to violations of FRA regulations. The re-
course for an engineer who has had her license stripped is not
arbitration, but rather review by the Locomotive Engineer Re-
view Board. 49 C.F.R. § 240.401(b). It 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 arguments on the Railroad’s side
are better than frivolous. The Union has the right to file a
claim through the usual “minor dispute” procedures, as the
Railroad concedes, and by the same token the Railroad will
have the right to raise any appropriate defenses. It will be up
to the arbitrator to decide which position carries 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.
No. 17-1563 11
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 Un-
ion’s role if the Union’s role had been contracted away to
begin with. If the Railroad’s interpretation is wrong, the arbi-
trator will tell it so, and it will be compelled to negotiate with
the Union. The facts also do not support a finding that 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
The parties have advanced extreme positions in this case.
The Railroad contends that unwritten rules supersede the
RLA and it may unilaterally implement disciplinary policies.
The Union trivializes a documented history of changes to dis-
ciplinary policies—some of which can be found in its own
declarations. Neither extreme persuades us. Union Pacific
must do very little to show that this dispute is minor. It has
passed that low bar and shown that this is a “minor” dispute
that qualifies for RLA arbitration. It is time for the courts to
bow out and allow that process to go forward. We therefore
AFFIRM the judgment of the district court.