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December 7, 1962

W. P. KENNEDY, as President of the Brotherhood of Railroad Trainmen, et al., Plaintiffs,

The opinion of the court was delivered by: RYAN

This suit for money damages has been filed by the Brotherhood of Railroad Trainmen (B.R.T.) and its officers against the Long Island Rail Road Company (Long Island), twenty-two other railroads, the Association of American Railroads (A.A.R.), and a bank. The damages are alleged to have arisen from a labor dispute which culminated in a strike called and conducted by the B.R.T. against the Long Island for some twenty-six days during July and August of 1960. The complaint alleges that the strike was the proximate result of strike insurance obtained by the defendants which is claimed to violate three federal statutes; the Railway Labor Act, the Interstate Commerce Act, and the Sherman Act; and to constitute a tortious act under New York law.

The first phase of this suit -- that of liability -- was tried to the Court on two depositions and an agreed statement of facts, which, together with annexed exhibits, was admitted as plaintiffs' Ex. 1. There was reserved for later jury trial the determination of consequential damage, if any, should the question of liability be determined in favor of plaintiffs. *fn1"

Plaintiffs have charged that sometime prior to July 13, 1959, the vice-president in charge to the law department of the A.A.R. met with designated representatives of the other railroad defendants to evolve an illegal and secret conspiracy whereby the defendant railroads and others represented in the A.A.R. could pool portions of their assets and earnings for the purpose of making a portion of gross earnings of all the alleged conspirators available from a pool to assist any participating conspirator which might be affected by a work stoppage, thereby artificially strengthening the economic bargaining position of any individual conspirator in its collective bargaining activities with organized labor. Plaintiffs also allege that the purpose of said conspiracy was to promote and encourage lengthy work stoppages and lockouts in violation of the National Transportation Policy and in violation of the Railway Labor Act (45 U.S.C. §§ 151, 151a et seq.). Plaintiffs further charge that, as a further part of said conspiracy, the defendants agreed that the A.A.R. through its vice-president in charge of public relations, using illegally pooled earnings of the defendants, would embark upon an expensive and elaborate public relations program critical of the prevailing rules agreements between railway labor and the railroads, which program was designed to create a climate of public opinion which would accept a prolonged interruption in the rail transportation system in the United States whether by strike or lockout.

 The only question presented for determination is whether as a matter of law membership in the railroad industry strike insurance plan here present violates any of the statutes and is unlawful as charged.

 Plaintiffs argue that this 'strike insurance plan' violates the Railway Labor Act's requirement of good faith bargaining in that participation in the plan is so destructive of the appropriate mental set for collective bargaining as to amount to an absence of good faith as a matter of law. *fn2" Plaintiffs also urge that this absence of good faith is further evidenced by the fact that participation in the plan by the Long Island introduced an element of multi-party bargaining into the Long Island dispute.

 Plaintiffs continue in their reasoning that these duties imposed by Section 152 of the Act are rights legally enforceable under the Act by the carrier's employees by the filing of a civil suit to recover pecuniary damages as well as to obtain injunctive relief (Virginian Railway v. Federation, 300 U.S. 515, 57 S. Ct. 592, 81 L. Ed. 789), although admittedly the statute creates no such specific cause of action.

 Defendants invoke the Clayton and Norris-LaGuardia Acts (29 U.S.C.A. §§ 52, 101 et seq.) as protecting the activities complained of and deny any violation of the Railway Labor Act.


 The plaintiff B.R.T. is a labor organization representing approximately 200,000 employees of railroads throughout the country. As their bargaining agent, it authorizes and controls strikes by its membership and maintains 'Strike and Protective Funds' to pay strike benefits to its members when it conducts a strike, or when its members are unemployed because of a strike called by other labor organizations.

 Also named as plaintiffs are the two B.R.T. local lodges on the Long Island and the General Committee of the B.R.T. representing the Conductors, Ticket Collectors, Brakemen and Switchtenders employed by the Long Island as well as various officers of the B.R.T. The complaint alleges that these plaintiffs are suing in their own right and as representatives of classes of unnamed Long Island employees.

 The defendants are the Association of American Railroads, the Long Island and twenty-two other railroads. *fn3" Each of the defendant railroads furnishes transportation by rail, as defined in the Interstate Commerce Act (49 U.S.C. § 1).

 All defendant railroads are members of the A.A.R., an unincorporated association formed in 1934 to handle matters of common concern to the railroads, to represent the railroads before governmental bodies and to serve as a joint agency of the railroads in such matters as research, operations, traffic, accounting and finance. It maintains a Public Relations Department in charge of advertising and other activities in presenting information to the public, and a Law Department which handles legal matters of interest to the railroads.

 Although not determinative of the legality of the strike insurance plan under attack, the background and events leading up to its adoption are certainly relevant to the purpose and intent of the defendants in adopting the strike insurance plan and its effect.

 The strained financial condition of many of the American railroads for the past few years, and at present, is a matter of public knowledge and national concern.

 It is conceded by all that return on investment of the average road attained the level of 4% Only once in the six years (1954-1959) and dropped to 2.72% In 1959. The Long Island's earnings during this period were even lower; its rate of return in 1959 was only 0.72% And these meager earnings were realized by it only because it occupies a unique position as a railroad redevelopment corporation organized under special legislation of the State of New York. The principal business of the Long Island is carrying approximately 54 million commuter passengers annually, although it also carries some 20 million other passengers and 4 1/2 million tons of freight annually.

 In 1949, unable to meet its debts, it filed a petition in bankruptcy and was operated by Court-appointed trustees until 1954. A study of the Long Island by a public authority created by the New York legislature found that continuation of service by that road was essential in the public interest, and that its rehabilitation and continued service would be economically feasible only if payments of dividends and interest on indebtedness to its principal stockholder, the Pennsylvania Railroad, were suspended, its taxes reduced, and its passenger fares increased to cover its rising operating expenses plus the costs of a necessary program of rehabilitation. These provisions were incorporated into a plan of reorganization under which the Long Island qualified as a railroad redevelopment corporation under newly enacted state legislation.

 Under this railroad redevelopment legislation, the fares of the Long Island are adjusted so as to cover its operating expenses, interest and other fixed charges and an amount necessary to finance a $ 65,613,000 rehabilitation program, at the rate of approximately $ 5 million per year. Approximately 67% Of the total operating cost of the Long Island is made up of wages and benefits. Wages and benefits paid to employees represented by the B.R.T. increased 41%, from an average of $ 5641 per year per employee in 1954, to $ 7965 in 1959.

 Obviously, the poor financial condition of many railroads was seriously and adversely affected by labor difficulties which the history of those years reveals were not few in number. The labor peace hoped for by enactment of the Railway Labor Act and by the efforts of the statutory Presidential Emergency Board were not fully realized.

 Some strikes were conducted on a national level which, because of the economic and social results, brought into play Government action, *fn4" by way of seizure and injunction.

 Beginning in 1950, apparently there was a shift from the national strike to the selective or the so-called 'whipsaw' *fn5" strike against one or a few of the railroads.

 In 1950, the Firemen conducted a strike against only the Santa Fe, the Southern and portions of the Pennsylvania and New York Central.

 In 1950, the Switchmen conducted a strike against only five roads for 12 days and thereafter against the Rock Island alone until that road was seized by the Government. United States v. Switchmen's Union, 97 F.Supp. 97 (W.D.N.Y.1950).

 In 1951, the Firemen called a strike against the Baltimore & Ohio, Chicago & North Western, Louisville & Nashville and Terminal Railroad Association of St. Louis which was averted by the appointment of an Emergency Board. Thereafter, the Firemen, joined by the Engineers and the Conductors, conducted a strike against a portion of the New York Central and the Terminal Rail Road Association of St. ...

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