Kehoe v. Southern Railway Co.

OPINION AND ORDER

LARKINS, District Judge:

SUMMARY

This cause comes before the Court as a civil action founded in contract. The contract was allegedly based on certain employee protective provisions embodied in various orders issued by the Interstate Commerce Commission.

The action was begun in the Superior Court of Lenoir County, North Carolina, by the plaintiff, who is a former employee of Atlantic and East Carolina Railroad Company (hereinafter referred to as Atlantic). Plaintiff brought the suit against Atlantic, a corporation chartered under the laws of the State of North Carolina, and against the Southern Railway Company (hereinafter referred to as Southern), a Virginia corporation. The action was thereafter removed to this Court after plaintiff took a voluntary judgment of nonsuit against Atlantic, the North Carolina defendant.

Jurisdiction is, therefore, based on diversity of citizenship and requisite statutory amount in controversy.

The Court proceeded to hear the testimony of the parties and witnesses without the intervention of a jury at the November 29, 1965 Term of this Court at New Bern, North Carolina. Interrogatories, exhibits and depositions were also entered in the record for consideration by the. Court. Counsel then offered memorandum of facts and law, which have been considered by the Court. The nature of the case is as follows, as is developed from all that entered into the record, and as appears from the arguments of counsel.

Plaintiff insists that Southern and Atlantic contracted together to protect the employment interests óf plaintiff at the time defendant was authorized by the Interstate Commerce Commission to acquire the controlling stock interests of Atlantic. This employment protective provision agreement was made a part of the Interstate Commerce Commission proceedings and orders.

Plaintiff states that he was discharged by Southern on October 4, 1957, as a re-suit of Southern’s acquisition of Atlantic. He contends his discharge was in violation of the terms of the employee protective provisions which are part of the interstate Commerce Commission Order allowing the acquisition. The plaintiff prays for the recovery of a monetary judgment as compensation for lost salary, together with interest, damages for lost property as a result of his decreased income, attorneys’ fees and the costs 4, ,, .. of the action.

Defendant answered admitting plaintiff’s job was abolished. But defendant also insists the job was no longer needed, the lack of the need for plaintiff’s job * not resulting from the acquisition, however, but as a result of the modernization of Atlantic’s maintenance facilities in New Bern. Defendant states plaintiff is not entitled, therefore, to relief under the employee protective provisions of the Order of the Commission, and prays the action be dismissed.

FINDINGS OF FACT

Atlantic operates carrier properties under a lease from the Atlantic and North Carolina Railroad Company, the lease expiring in 1994. The Atlantic interests extend from Goldsboro, North Carolina, to Morehead City, North Carolina, an Atlantic Ocean port. This is an operation extending over a distance of some ninety-six miles.

On October 22, 1954, Southern filed a petition with the Interstate Commerce Commission wherein it sought to acquire control of Atlantic and its leasehold interests. This seeking of control of Atlantic was to be accomplished through the acquisition of Atlantic’s capital stock, Approval of the acquisition was sought by the parties pursuant to the provisions of Section 5(2) of the Interstate Commerce Act, Title 49 U.S.C.A. Sec. 5(2).

Section 5(2) of the Act provides in pertinent parts:

“Unifications, mergers, and acquisiUons 0f control.

“(a) it shall be lawful, with the approval and authorization of the Corn-mission, as provided in subdivision (fo) 0f this paragraph_

. , « for two or ™re earners to con-flldate or mer^e ^eir Properties or franchises, or any part thereof, into one corporation for the ownership, management, and operation of the Properties theretofore m separate ownershlp; or ,for any <fnf ’ or tw° or ™re ITtly’ purchase’ lease, or contract to operate the prop- ’ . ^ „ f, erties, or any part thereof, of another; or * * * to acquire control of another carrier through ownership of its stock or otherwise- or

ij y ,y, .Jj.

"(f) a condition of its approval, under this paragraph, of any transaction involving a carrier or carriers by railroad subject to the^ provisions °f this chapter, the Commission shall require a fair and equitable arrangement to protect the interests of the railroad employees affected. In its order of approval the Commission shall include terms and conditions providing that during the period of four years from the effective date of such order such transaction will not result in employees of the carrier or carriers by railroad affected by such order being in a worse position with respect to their employment, * *

This acquisition through purchase of stock was ultimately approved by the Interstate Commerce Commission on September 19, 1957. Certain prescribed conditions for the protection of the interests of Atlantic employees who might be adversely affected as a result of the acquisition were imposed upon Southern, as required by the above-stated statute, The effective date of the Commission’s Order allowing the acquisition was February 27, 1957.

Subsequently, by a Supplemental Order dated September 29, 1958, the Commission replaced the employee protective provisions it had originally imposed, and which were known as the “Northwestern Conditions” (from Chicago N. W. Ry. Co. Merger, 261 I.C.C. 672 (1946)), with conditions the Commission had imposed in Oklahoma Ry. Co. Trustees Abandonment, 257 I.C.C. 177 (1944), and known as the “Oklahoma conditions.”

“4. If, as a result of the abandonment of operation herein permitted and the purchases et cetera, herein authorized, hereinafter referred to as the trims-action, any employee * * * is displaced, that is, placed in a worse position with respect to his compensation and rules governing his work conditions, and so long thereafter as he is unable, in the exercise of his seniority rights under existing agreements, rules, and practice, to obtain a position producing compensation equal to or exceeding the compensation he received in the position from which he was displaced, he shall be paid a monthly displacement allowance equal to the difference between the monthly compensation received by him in the position in which he is retained and the monthly compensation received by him in the position from which he was displaced. The latter compensation is to be determined by dividing separately by 12 the total compensation received by the employee and the total ting for which he was paid during the last 12 months in which he performed services immediately preceding the date of his displacement as a result of this transaction (thereby producing average monthly compensation and average monthly time paid for in the test period.) If his compensation in his retained position in any month is less than the aforesaid average compensation in the test period, he shall be paid the difference, less compensation at the rate of the position from which he was displaced for time lost on account of his voluntary absences in his retained or current position, but if in his retained position he works in any month in excess of the average monthly time paid for in the test period, he shall be compensated for the excess time at the rate of pay of the retained position; provided, however, that nothing herein shall operate to affeet in any respect the retirement on pension or annuity rights and privileges in respect of any employee; provided, further, that if any employee elects not to exercise his seniority rights he ghall be entitled to no allow_ ane6) * * •>:•_ rpbe perj0{j durjng which this protection is to be given, hereinafter called the protective period, sha.ll extend from the date on which the employee was displaced to the expiration of 4 years from the effective date of our order herein; * * *.

^f, as a result of the transaction herein approved, any employee, hereinafter referred to as a dismissed employee, of the carriers is deprived of employment with said carriers because the abolition of his position or the ^oss thereof as the result of the exerc*se seniority rights by an employee whose Position is abolished as a result of the transaction herein approved, he sha11 be accorded a monthly dismissal allowance equivalent to one-twelfth of the compensation received by him in the last 12 months of his employment in which he earned compensation prior to the date he is first deprived of em-Payment as a result of this transaction. This allowance shall be made durin£ the Protective period to each dismissed employee while unemployed,

“The dismissal allowance of any dismissed employee who is otherwise employed shall be reduced to the extent that his combined monthly earnings in such other employment, any benefits received under any unemployment insurance law, and his dismissal allowanee exceed the amount upon which his dismissal allowance is based. Such employee, or his representative, and the carriers, should agree upon a procedure by which the carriers shall be currently informed of the wages earned by such employee in employment other than with the carriers, and the benefits received.

“The dismissal allowance shall cease prior to the expiration of the protective period in the event of the failure of the employee without good cause to return to service after being notified by the carriers of a position, the duties of which he is qualified to perform and for which he is eligible, or in the event of his resignation, death, retirement on pension, or dismissal for good cause.”

Plaintiff, E. B. Kehoe, first began working for Atlantic in 1945. He was continuously employed by Atlantic thereafter, until October 4, 1957. The last position held by him was in the maintenance shops in New Bern, as a machinist, doing general machine work.

When Southern acquired Atlantic, an inspection of the latter’s machine shops and repair facilities was made by Southern’s new management personnel. As a result of what they saw, internal improvements were undertaken with most of Atlantic’s equipment being sold and discarded. More efficient and new types of equipment were introduced by Southern. Also, a more efficient method of repair operations was introduced. One entire shop was closed down and certain types of major repairs were funneled into Southern’s main repair shops. Major repairs to diesel engines were no longer made at the New Bern shops, but were allocated to Southern’s Atlantic shops through means of exchanging engines between the two companies.

As a result of these economies and changes in procedures, fewer maintenance and repair employees were needed by Southern in the Atlantic shops at New Bern. Therefore, plaintiff was one of those employees whose position was abolished, and he was discharged.

CONCLUSIONS OF LAW

Plaintiff was an employee within the protective provisions of Section 5(2) (f) of the Act, and according to the Orders of the Commission. This is conceded by defendant. Further, his employment was terminated and he was put in a worse position within the meaning of the “Oklahoma conditions,” which are controlling in this case, after the acquisition by Southern.

It is defendant’s contention, however, that plaintiff was not deprived of employment for reasons which are protected by the “Oklahoma conditions.” Rather, it is defendant’s position that plaintiff’s position was abolished as a result of new economies and more efficient methods of operations. It is for these reasons, defendant insists, that plaintiff lost his job and is not entitled to relief. Defendant’s position is untenable and without merit.

It is a play on words to suggest an employment position was abolished as a result of more economic and more efficient methods of operations being introduced by Southern, but insisting at the same time that the position was not abolished as a result of Southern’s acquisition of Atlantic. This case is clearly controlled by the law as enunciated in Gillikin v. Atlantic & East Carolina Ry. Co. and Southern Ry. Co., 255 N.C. 228, 120 S.E.2d 847 (1961).

In Gillikin, supra, Parker, J., (now Chief Justice) in speaking for the Court, concluded that if Southern had not acquired Atlantic the changes which took place would not have otherwise occurred. It further appeared that the changes were those which caused plaintiff to be adversely affected within the meaning of the controlling “Oklahoma conditions.” In other words, despite defendant’s insistence that these changes or modernizations were done for economy reasons, thereby affecting plaintiff’s economic position, the fact remains plaintiff found himself unemployed as a result of Southern’s acquisition. The only way these modernizations and changes can be explained as occurring is by recognizing the fact that they are a result of Southern’s acquisition of Atlantic. Thus, when a plaintiff finds himself in an adverse position as a result of changes which would not have resulted but for Southern’s acquisition, it would seem that the acquiring party should be liable. Gillikin v. Atlantic & East Carolina Ry. Co. and Southern Ry. Co., supra; and Brotherhood of Maintenance of Way Employees v. United States, 366 U.S. 169, 81 S.Ct. 913, 6 L.Ed.2d 206 (1961).

ORDER

Therefore, it is ordered that plaintiff’s prayer for monetary relief be, and the same is hereby allowed.