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April 11, 1973

REA Express, Inc., Plaintiff,
Brotherhood Of Railway, Airline And Steamship Clerks, Freight Handlers, Express And Station Employees, AFL-CIO, Defendant

Edward Weinfeld, District Judge

The opinion of the court was delivered by: WEINFELD


Plaintiff, REA Express, Inc. (REA), a carrier engaged in the express transportation of property by railroad, air and truck, and subject to the provisions of the Railway Labor Act, *fn1" and the Interstate Commerce Act, *fn2" commenced this action against the Brotherhood of Railway, Airline and Steamship lerks, Freight Handlers, Express and Station Employees, AFL-CIO (BRAC), the collective bargaining representative of its employees, *fn3" upon two causes of action. The first charges that BRAC called a nationwide strike against REA to coerce the resignation of REA's management, the continuation of certain payments believed to be illegal and for other unlawful purposes. The complaint further alleges that BRAC's activities constitute a continuing pattern of conduct in resorting to illegal strike action in violation of the no strike requirements of its agreement with REA and the Railway Labor Act. The second cause of action alleges that since April 29, 1971, BRAC has refused to bargain in good faith in that it insisted upon demands which are improper under the Railway Labor Act, including demands (a) for the abolition of the Special Board of Adjustment; (b) for preferential and discriminatory treatment of employees located in the New York area; (c) that REA's president resign; (d) that certain payments be made which are believed to be illegal; and (e) for benefits that would violate the Economic Stabilization Act.

 Thereafter, plaintiff served an amended complaint setting forth a third cause of action, alleging in substance that it made its final and best offer of settlement upon BRAC's representation that this would be submitted to its membership for final acceptance or rejection by a vote; that plaintiff, in reliance upon such representation, changed its position to its detriment and to the defendant's benefit; that contrary to its representation, BRAC failed to submit the offer to its membership; that an independent vote taken of the membership indicated that a majority desired to accept REA's final proposal; that BRAC's action in ordering the strike in the light of the expressed views of a majority of its employees to the contrary constituted, not only a violation of the agreement to submit the final proposal to BRAC's membership for a determinative vote, but also a failure to exert every reasonable effort to make an agreement and to avoid a strike and the attendant interruption of commerce. Plaintiff seeks a judgment enjoining BRAC's alleged unlawful strike; it also seeks punitive damages, attorneys' fees and damages claimed to have been sustained as a result of alleged illegal or unauthorized work stoppages; also a declaratory judgment as to the propriety of BRAC's demands in collective bargaining; and finally an order directing BRAC to submit to its membership REA's final offer for acceptance or rejection.

 The Temporary Restraining Order

 After negotiations between the plaintiff's and defendant's representatives, which had been carried on intermittently over an eighteen-month period, had failed to achieve an agreement, BRAC's International President called a nationwide strike of its 16,000 members, effective on October 20, 1972. Plaintiff commenced this suit and applied for a temporary restraining order, which, after a hearing on notice to the defendant and its attorneys, was granted on October 23. In a brief memorandum, accompanying the temporary restraining order, this Court found that although plaintiff's showing of probable success was limited, its claims raised substantial and difficult issues which merited further inquiry, and that pending such inquiry the harm to plaintiff and to others warranted the temporary injunction. *fn4" The Court found, among other matters, that if the injunction were not granted, a strike would most likely force plaintiff into bankruptcy; also it would result in the permanent loss of jobs to thousands of its employees, the impairment of pension and other payments to many retired former employees, and inconvenience to shippers and the public at large.

 The Preliminary Injunction Hearing

 Thereafter, extensive testimony was received in support of and in opposition to plaintiff's application for a preliminary injunction. During the course of the hearings an issue arose as to a strike ballot of defendant's membership previously taken by plaintiff on its own initiative. The Court suggested and the parties agreed that a poll be taken of BRAC's members to ascertain their views as to whether they preferred to accept REA's last offer or to resume the strike, merely for informational purposes and without prejudice to the rights of the parties. Pending the balloting, during which there may have been unexpressed hopes that differences might be composed, the temporary restraining order was continued by consent. The poll, conducted under the auspices of the National Mediation Board (the Board) was not completed until February 1973, and the returns indicated that 56.4% of those voting opted for rejection of the company's offer and in favor of a strike. *fn5" Thereafter, the hearing on the motion for a preliminary injunction was resumed on March 22, 1973. The Court, in view of the extensive record which probed into all issues, ordered, pursuant to Rule 65(a) (2) of the Federal Rules of Civil Procedure, that the trial of the action on the merits be advanced and consolidated with the hearing on the application for the preliminary injunction. *fn6" Additional testimony was received on March 30, when the matter was submitted for final decision.

 The Period From April 1, 1971 To April 6, 1972

 The written agreement between the parties as to hours, wages and working conditions by its terms was to continue in effect until June 30, 1971, and thereafter until changed or modified in accordance with the provisions of the Railway Labor Act. On April 1, 1971, BRAC, under a provision of the agreement, served two notices on REA pursuant to section 6 of the Railway Labor Act; *fn7" the first proposed a broad range of modifications in the existing contracts as to rates of pay, hours and working conditions, and the second proposed revisions in health and welfare benefits. All changes were to become effective July 1, 1971 for a period of three years. The wage increases proposed by BRAC were 20%, effective July 1, 1971; 15%, effective July 1, 1972; and 15%, effective July 1, 1973. The notices brought into play the machinery under the Railway Labor Act, intended, among other purposes, to achieve the "prompt and orderly settlement of all disputes concerning rates of pay, rules, or working conditions" *fn8" between the carrier and the Union. That purpose has not been realized to date, more than two years after BRAC served its section 6 notices, and in the light of the contentions advanced by the parties a detailed chronology of events is required to set the matter in proper focus.

 On April 8, 1971, REA acknowledged receipt of BRAC's section 6 notices, suggested a conference on April 29, and advised that it would at a future date serve notice of its counterproposals to be considered concurrently with those of BRAC. The parties met on April 29, at which time the ground rules were discussed, and some time was spent on BRAC's first notice. On May 28 REA served its section 6 notice of proposed revisions in the existing agreements, which were "general in nature"; on June 15 it submitted specific proposals.

 Prior to the exchange of the section 6 notices, the parties were involved in a dispute as to REA's claim that it had the right unilaterally to make changes in its Over-The-Road (OTR) Operations in northeastern United States. BRAC invoked the services of the National Mediation Board, but mediation was interrupted by litigation between the parties relative to that dispute. *fn9" As a consequence of a Board mediator's report on the OTR mediation, on June 14, 1971 the Board docketed BRAC's section 6 notices and notified the parties that a mediator would be assigned to the dispute; each party was requested to furnish a brief statement as to the status of each item in the section 6 notices. *fn10" REA protested to the Board that the docketing was premature and prejudicial to REA's interest; that the dispute involving the northeast OTR runs was unrelated to the April 1, 1971 section 6 notices; in general, REA urged that the parties had not had an opportunity, as required by section 2 First of the Railway Labor Act "to exert every reasonable effort to make and maintain agreements" and settle their disputes. *fn11" Consequently, it requested the Board to rescind its decision to docket the case at that time. BRAC, to the contrary, urged the Board to commence immediate mediation activity.

 The Board instructed the parties to appear at a conference on July 1, 1971. On July 1 and 2 meetings were held, participated in by representatives of BRAC, REA and two Board mediators. Subsequently, as agreed, private meetings were held on July 7, 8, 12 and 13, attended only by BRAC and REA representatives, at which various proposals contained in the section 6 notices were considered after being broken down into categories of (a) major economic proposals; (b) minor economic proposals; and (c) non-economic proposals. While some progress was made as to non-economic proposals, an impasse was reached with the wage increase issue, the principal stumbling block. The Union negotiators insisted that some discussion take place concerning the economic proposals before continuing negotiations on the non-economic items. REA's representatives maintained that the Company could not present any wage offer until it had secured agreement on rule changes designed to increase efficiency and to effect savings.

 The management of the Company, the third and most recent in a series of changes over a five-year period, took the position that the Company was in such dire financial straits that to comply with the Union demands in any substantial measure, without working rule changes and implementation of a consolidation program, would force it into bankruptcy. The Union, then represented principally by R. J. Devlin, an International Vice President, and a negotiating committee of Express General Chairman *fn12" (Chairmen) were dubious that REA's financial picture was as bad as represented. They contended that the current wage rates were much below those of employees doing similar work in substantially the same industry, and that REA's employees were working at the same wage level since June 30, 1970, when an increase came into effect under the existing contract. Further, it was charged that the Company had been mismanaged by the present and prior executives; that a group, which most recently had acquired stock control of REA, had failed to provide necessary capital; that keeping the same wage rates meant in effect that the employees were subsidizing a private enterprise that was undercapitalized. The persistent position of REA's president that it was on the verge of bankruptcy, which in the view of the Express General Chairmen was at variance with statements contained in a letter from management to its employees, led them to suggest that the best interests of REA would be served by his resignation. Management in turn charged negotiations were stalled due to resentment by the Chairmen because of the elimination of monthly payments under what is referred to as the Merchant Agents Agreement, which management contended was illegal and the Chairmen contended otherwise. *fn13" The blunt fact is that the attitude of each negotiating team toward the other was not exactly that of mutual respect and confidence -- to the contrary, it was one of marked hostility.

 Indeed, there had been such deterioration in the conduct of negotiations that Tom Kole, the President of REA, enlisted the intervention of C. L. Dennis, the Union's International President, who thereafter played an active and leading role in negotiations. On or about July 14, 1971, the two top executives met in the presence of other representatives of each of the parties, and Kole, upon his representation that REA was financially unable to grant any wage increase, requested of Dennis a fourteen-month deferment in the processing of BRAC's section 6 notices, as well as its consent to operational changes aimed to ease the financial impact upon REA of any wage increase. While these and other matters were explored, no commitment was made to defer the processing of the Union's section 6 notices.

 On September 20 the Board's mediator resumed participation in the matter and conferred with the parties. On October 4, at a conference between R. J. Devlin and Stanley Aiges, REA's Vice President in charge of Labor Relations, Aiges stated that several outside groups were interested in merging with REA and buying into the Company and presented a number of proposals in the hope of getting what he termed a "quick" settlement. The testimony is in conflict as to what transpired at this meeting. Aiges testified that Devlin in effect rejected the proposals out of hand, stating that no agreement could be reached until payments under the Merchant Agents Agreement were resumed *fn14" and the vacation issue and the Company's consolidation plan resolved. Devlin's version is that Aiges pressed for a quick answer; that for about the eighth time he, Devlin, was told that if the proposals were not agreed to, a bankruptcy petition would be filed, or alternatively that REA would close down operations west of the Mississippi River or the New York City operation. He further testified that he informed Aiges that time was required to study the proposals with the full membership of the negotiating committee, and that the Union did not intend to be "black jacked" into any agreement. The two contending groups met thereafter on October 12 and 13 *fn15" and the recently advanced proposals were considered at those meetings, also attended by the mediator. Again there was a heated session without an agreement, with management stating that in the absence of an accord, it intended to take ...

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