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February 25, 1969

RAILWAY EXPRESS AGENCY, INC., a/k/a R.E.A. Express, Defendant

The opinion of the court was delivered by: CURTIN

CURTIN, District Judge.

 On February 11, 1969, plaintiffs commenced an action in this court by an order to show cause seeking to enjoin the defendant from moving certain freight, baggage, and merchandise work from the Buffalo, New York, terminal to Albany, New York. Plaintiffs further sought the court to direct the defendant to comply with Rule 12 of an agreement between the defendant and the plaintiff if the court found such compliance necessary. A temporary restraining order was granted at that time to expire at 10 A.M. on the 13th of February, 1969. On February 13, application to extend the temporary restraining order was denied.

 On February 14, 18, and 19, a hearing was conducted in this court and the arguments of counsel considered. The following constitute this court's findings of fact and conclusions of law.

 The dispute between the plaintiff and defendant involves the moving of hub traffic from Buffalo, New York, to Albany, New York, by the defendant. A hub city in industry jargon describes a central transfer point in a certain region through which all freight passes before reaching its final destination point within that region. Hub traffic is traffic not originating in or delivered by the hub city pick-up and delivery service. The hub concept was instituted in early 1968, but was, in essence, nothing more than the gateway system which had been established many years before.

 Before February 15, 1969, the effective date of the change, the Buffalo terminal contained four departments: Air Express, Import-Export, City Pick-up and Delivery, and the Hub Operation. Under the plan moving the hub traffic to Albany, 140 regular positions are abolished and 30 more are affected adversely. This will leave about 115 positions in Buffalo to service the remaining three departments.

 The plan to move the hub traffic from Buffalo to Albany appears to have been contemplated by the defendant several months before the final decision to move was made. The defendant's business has declined sharply in the last ten years. Illustrative of this decline is that in 1959 there was a total of 70,000,000 air and surface shipments as compared to 45,500,000 in 1968. This decline in business has been most drastic since 1966, when the total air and surface shipments numbered 62,700,000. This decline in business is attributable to a number of factors. Today, the railroads run very few Railway Express cars nationally and, in the northeast region, no such cars are in operation. In 1966, when the rates and rules for its shipments were changed, the parcel post system became a strong competitor of the defendant. There has also been competition from the motor transport industry. Because of this, it is estimated that the shipment volume of the defendant will continue to decline in the near future.

 The number of defendant's employees has shown a steady decline nationwide. In December, 1966, there were approximately 32,500 employees; in December, 1968 about 25,000. It is further estimated that this number will continue to drop through 1969.

 Financially, the defendant has had net operating losses since 1967. On June 30, 1967, this loss was computed to be five million dollars; on June 30, 1968, 16.9 million dollars; and December, 1968, 17.2 million dollars. This December, 1968 figure represents the net operating loss for the six months prior to that date. The projected loss as of June, 1969 is estimated to be about 25 million dollars.

 The stock of the defendant is owned by 55 railroad companies. In 1967, an attempt was made to sell the corporation, but it was not successful. The direction of the company was then turned over to three trustees by the stockholder railroads. The trustees have complete authority to run the defendant company and the court understands that this authority is limited only to the extent that they may not sell the company.

 For some time it had been estimated that the defendant's largest business losses were occurring in the northeast region. On January 1, 1967, through certain accounting procedures, the defendant was able to confirm this estimate. It was established that approximately 85% of the defendant's losses was attributable to the northeast region.

 Buffalo was one of several hub cities in the northeast region. The Buffalo terminal on Curtiss Street near the old New York Central Terminal is rented from the Pennsylvania Central Railroad Corporation for $109,000 per year. The defendant's terminal is old and poorly designed for modern traffic. Much of its space is not used because it is unsuitable for the demands of piggyback, flexivan or motor truck traffic. It can handle about 800 pieces an hour. At present, the defendant is negotiating a lease for a different facility in Buffalo. This building would be located and designed to take care of the change in the hub traffic at a lesser rent expense. The Curtiss Street lease can be terminated on thirty days' notice.

 In distinct contrast to the Buffalo facility is the new Albany terminal constructed especially for the defendant by the Albany Port Authority. The annual rental is $63,000 and its capacity to handle up to 2400 pieces an hour indicates its suitability for efficient processing of modern traffic.

 The negotiations for the Albany lease were begun late in 1967 by the defendant. Construction was started in June, 1968 and the company began to use this building early in December, 1968.

 On January 21, 1969, Frank Leahy, a regional representative of the defendant, contacted William J. Head, General Chairman of the plaintiff, to inform him that the defendant intended to move the hub work from the Buffalo, New York, terminal to Albany, New York. At this first contact, Mr. Leahy explained the defendant's intention was to re-route the hub traffic to Albany, New York. Mr. Head responded that, in his opinion, Rule 12 of the agreement between the defendant and the union would apply in such a case, with certain benefits accruing to the employees who would be displaced in Buffalo but would have an opportunity ...

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