Assn Amer RR v. STB

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 1, 1998 Decided December 11, 1998

No. 97-1384

Association of American Railroads and

Wisconsin Central Ltd.,

Petitioners

v.

Surface Transportation Board and

United States of America,

Respondents

Transportation Trades Department, AFL-CIO, et al.,

Intervenors

Consolidated with

No. 97-1397

On Petition for Review of an Order of

the Surface Transportation Board

---------

Thomas J. Litwiler argued the cause for petitioners. With

him on the joint briefs were Robert H. Wheeler and Kenneth

P. Kolson.

Henri F. Rush, General Counsel, Surface Transportation

Board, argued the cause for respondents. With him on the

joint brief were Joel I. Klein, Assistant Attorney General,

U.S. Department of Justice, John J. Powers, III, and Robert

J. Wiggers, Attorneys; and Louis Mackall, V, Attorney,

Surface Transportation Board.

Mitchell M. Kraus, Lawrence I. Willis and Clinton J.

Miller, III were on the joint brief for intervenors Transporta-

tion Trades Department, AFL-CIO, and United Transporta-

tion Union.

Before: Wald, Sentelle and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Separate opinion dissenting from Part II filed by Circuit

Judge Wald.

Separate opinion concurring in Parts I, II and IV and

dissenting from Part III filed by Circuit Judge Sentelle.

Tatel, Circuit Judge: Petitioners challenge the Surface

Transportation Board's initial implementation of the ICC

Termination Act's labor protection provisions for employees

affected by short-line rail acquisitions. Agreeing with peti-

tioners, we hold that the Board's order extending "severance

pay" not just to employees who lose their jobs, but also to

employees displaced to lower-paying jobs, violates the statute.

We agree with the Board that its method of calculating

severance payment offsets represents a reasonable interpre-

tation of an ambiguous statutory term, and that it has author-

ity under Circuit precedent to require mandatory arbitration

of labor protection disputes.

I

In 1995, Congress abolished the Interstate Commerce

Commission and replaced it with the Surface Transportation

Board. See ICC Termination Act of 1995, Pub. L. No.

104-88, 109 Stat. 803 (1995) (codified at 49 U.S.C.A. s 10101

et seq. (1997)). Congress strictly confined the new agency's

authority to impose labor protection conditions on Class II

(mid-size) railroads involved in short-line rail acquisitions.

See 49 U.S.C.A. s 10902 (1997)). Under the prior statutory

scheme, the ICC had authority to require railroads seeking

expedited agency approval of rail line acquisitions to provide

"a fair and equitable arrangement to protect the interests of

the railroad employees affected." Railroad Revitalization and

Regulatory Reform Act, Pub. L. No. 94-210, sec. 402(a),

s 5(2)(f), 90 Stat. 31, 62 (1976) (amending Interstate Com-

merce Act). Pursuant to this authority, the ICC developed a

standard basket of labor protection requirements known as

the New York Dock conditions. These requirements included

up to six years of income protection for terminated or dis-

placed rail employees, training and relocation allowances,

advance notice to labor unions, and mandatory arbitration.

See New York Dock Ry.-Control-Brooklyn Eastern Dist.

Terminal, 360 I.C.C. 60, aff'd sub nom. New York Dock Ry. v.

United States, 609 F.2d 83 (2d Cir. 1979). The ICC Termi-

nation Act specifies certain mandatory labor protection condi-

tions, but expressly deprives the new Board of discretion to

impose other labor protection conditions. See 49 U.S.C.A.

s 10902(c) (the Board "may require compliance with condi-

tions (other than labor protection conditions) the Board finds

necessary in the public interest"). The labor protections

mandated for mid-size railroads are as follows:

The Board shall require any Class II rail carrier which

receives [expedited approval of a rail line acquisition] to

provide a fair and equitable arrangement for the protec-

tion of the interests of employees who may be affected

thereby. The arrangement shall consist exclusively of

one year of severance pay, which shall not exceed the

amount of earnings from railroad employment of the

employee during the 12-month period immediately pre-

ceding the date on which the application for such certifi-

cate is filed with the Board. The amount of such sever-

ance pay shall be reduced by the amount of earnings

from railroad employment of the employee with the

acquiring carrier during the 12-month period immediate-

ly following the effective date of the transaction....

Id. s 10902(d).

In the first proceedings under new section 10902(d), peti-

tioner Wisconsin Central (a Class II railroad) sought expedit-

ed Board approval of its acquisition of two short rail lines

from Union Pacific. Running for 17.8 miles, the lines provide

local service between Hayward Junction and Hayward, Wis-

consin, and terminal service in the pocket between Wausau

and Schofield. To comply with section 10902(d)'s mandatory

labor protection requirement, Wisconsin Central proposed

making severance payments to each of the nine rail employ-

ees who would lose their jobs with Union Pacific in amounts

equal to their railroad earnings during the previous twelve

months. Severed employees rehired by Wisconsin Central

would, as authorized by section 10902(d)'s offset provision,

have their severance pay reduced each month by their Wis-

consin Central earnings. See Wisconsin Central Ltd.-

Acquisition Exemption-Lines of Union Pacific R.R. Co.,

Finance Docket No. 33116, at 2 (STB Nov. 15, 1996), avail-

able in 1996 WL 681474.

Announcing that "[t]he labor protective arrangement that

results from this proceeding may be used as a model for

conditions we impose governing the minimum labor protective

arrangements we require with respect to acquisitions by

Class II railroads," the Board sought public comment on

"whether [Wisconsin Central's] proposed arrangement meets

the statutory requirements, and on whether and to what

extent we should establish and/or oversee the procedural

aspects of labor protective arrangements under this statute."

Id. at 1. The Transportation Trades Department of the

AFL-CIO ("TTD") urged the Board to define "affected"

employees broadly to include displaced as well as terminated

employees, to calculate the offset on the basis of the number

of hours worked during the previous twelve months, to im-

pose a 90-day notice requirement before consummation of

proposed line acquisitions, and to require arbitration of dis-

putes. See Wisconsin Central Ltd.-Acquisition Exemption-

Lines of Union Pacific R.R. Co., Finance Docket No. 33116,

at 3 (STB Apr. 16, 1997), available in 1997 WL 186804.

Petitioners Wisconsin Central and the Association of Ameri-

can Railroads submitted comments arguing that the ICC

Termination Act limits the Board's oversight role to assuring

compliance with the statute's straightforward one-year sever-

ance pay requirement for employees who lose their jobs with

the selling rail carrier, that it authorizes no protection for

displaced employees, and that it deprives the Board of au-

thority to impose additional "procedural" labor protection

requirements, including arbitration. See id. at 2-3.

The Board adopted virtually all of TTD's proposals. First,

it "agree[d] with TTD that affected employees should be

defined not only as including employees losing positions with

the selling carrier, but also to cover those employees who, in

order to continue working on the selling carrier, must exer-

cise seniority and employees of the selling carrier who are

adversely affected by those other workers' exercise of seniori-

ty." Id. at 5 (emphasis added). In other words, the Board

extended labor protection to employees forced by an acquisi-

tion to transfer to different--and presumably lower-paying--

jobs elsewhere on the selling carrier. Second, the Board

adopted TTD's suggestion that "the employee's earnings

should be based on the same number of hours worked during

each comparable month before and after the transaction."

Id. at 5 & n.7. Finally, it required arbitration of disputes,

permitting appeal pursuant to the substantially deferential

Lace Curtain standard, under which the Board reviews recur-

ring or otherwise significant issues of general importance and

reverses an arbitrator's decision only for egregious error.

See id. at 5-6 (citing Chicago & North Western Transp. Co.-

Abandonment-Near Dubuque & Oelwein, Ia., 3 I.C.C.2d 729

(1987) (Lace Curtain), aff'd sub nom. International Bhd. of

Elec. Workers v. ICC, 862 F.2d 330 (D.C. Cir. 1988)).

Subject to these conditions, the Board approved Wisconsin

Central's acquisition of Union Pacific's rail lines. With re-

spect to TTD's suggestion for an advance notice requirement,

the Board noted that Wisconsin Central had already satisfied

any such requirement and postponed the issue for another

proceeding, eventually imposing a 60-day notice requirement.

See Acquisition of Rail Lines Under 49 U.S.C. 10901 and

10902-Advance Notice of Proposed Transactions, Ex Parte

No. 562 (STB Sept. 2, 1997), available in 1997 WL 555638.

We sustained that requirement in Association of American

Railroads v. STB, No. 97-1624, 1998 WL 791857 (D.C. Cir.

Nov. 17, 1998).

Wisconsin Central and the American Association of Rail-

roads now petition for review, challenging each element of the

labor protection conditions the Board imposed on Wisconsin

Central's proposed line acquisition. Specifically, they argue

that the extension of severance pay to displaced employees,

the calculation of earnings based on time worked, and the

arbitration requirement run counter to the plain meaning of

section 10902(d). Taking up each argument in turn, we

review the Board's interpretation of the ICC Termination Act

under Chevron's two-step analysis. See Chevron U.S.A. v.

National Resources Defense Council, 467 U.S. 837 (1984).

We ask first "whether Congress has directly spoken to the

precise question at issue. If the intent of Congress is clear,

that is the end of the matter; for the court, as well as the

agency, must give effect to the unambiguously expressed

intent of Congress." Id. at 842-43. But "if the statute is

silent or ambiguous with respect to the specific issue, the

question for the court is whether the agency's answer is

based on a permissible construction of the statute." Id. at

843.

II

We begin with petitioners' challenge to the Board's inclu-

sion of displaced employees within section 10902(d)'s "sever-

ance pay" requirement for "affected" employees. In defense

of its position, the Board relies on section 10902(d)'s require-

ment of "a fair and equitable arrangement for the protection

of the interests of employees who may be affected" by line

sales. According to the Board, the class of employees "affect-

ed" by line sales includes, but is not limited to, employees

whose employment relationship is severed; displaced employ-

ees are also "affected" by line sales. The Board reads section

10902(d)'s second sentence--"[t]he arrangement shall consist

exclusively of one year of severance pay"--not as a limitation

on the class of employees protected by the Act (as petitioners

urge), but rather as a limit on the amount of compensation

that "affected" employees may receive. In other words, all

affected employees, whether severed or displaced, must re-

ceive one year of severance pay.

We cannot square the Board's position with the statute's

plain language. To begin with, section 10902(d)'s use of the

term "severance pay" indicates that Congress intended to

limit the class of covered employees to those whose employ-

ment with the selling carrier was terminated as a result of a

transaction. Webster's defines "severance pay" as "an allow-

ance usu[ally] based on length of service that is payable to an

employee on severance." Webster's Third New Internation-

al Dictionary (1993). "Severance" means the "termination of

a contractual association (as employment)." Id.; see also

Black's Law Dictionary (6th ed. 1990) (defining severance pay

as "[p]ayment by an employer to employee beyond his wages

on termination of his employment"). Making clear Con-

gress's understanding that the "arrangement" applies to sev-

ered employees, the conference report describes section

10902(d)'s arrangement as: "Class II rail carriers acquiring a

line under this section are subject to a mandatory 1 year

severance pay requirement for severed employees...." See

H.R. Conf. Rep. No. 104-422, at 180 (1995) (emphasis added),

reprinted in 1995 U.S.C.C.A.N. 850, 865 ("Conference Re-

port"). During floor debate, moreover, several members

described the arrangement now contained in section 10902(d)

as providing one year of severance pay for severed employees.

See, e.g., 141 Cong. Rec. H12,301 col. 2 (daily ed. Nov. 14,

1995) (Rep. DeFazio) (explaining the provision as "one [year]

of severance for the employees who lose their jobs"); id. at

H12,302 col. 1 (Rep. Rayhall) (characterizing the provision as

a "dramatically reduced 1 year of severance pay, when the

employee is eligible, in the event he or she loses a job as a

result of a merger or other transaction of that nature"); id. at

H12,303 col.1 (Rep. Johnson) (describing the provision as

providing that "[e]mployees who lose their jobs get a 1 year

severance").

Not only does the use of the term "severance pay" demon-

strate Congress's intention to apply the "arrangement" to

severed employees, but section 10902(d)'s limiting language

and structure make it equally clear that Congress left no

room for the Board to extend benefits to other employees.

Mirroring the first sentence's requirement of "a fair and

equitable arrangement for the protection of the interests of

employees who may be affected," section 10902(d)'s second

sentence provides quite specifically that "[t]he arrangement

shall consist exclusively of one year of severance pay." Be-

cause section 10902(d) defines the arrangement for the pro-

tection of affected employees as consisting exclusively of one

year of severance pay, and because severance pay is paid only

to employees who actually lose their jobs, the Board has no

authority to extend severance pay to displaced employees.

Confirming this interpretation, section 10902(d)'s third sen-

tence requires that "[t]he amount of such severance pay shall

be reduced by the amount of the earnings from railroad

employment of the employee with the acquiring carrier."

The only employees who could possibly have "earnings ...

with the acquiring carrier" are employees who lose their jobs

on the selling carrier as a result of the line sale and then take

jobs on the acquiring carrier.

The legislative evolution of section 10902(d) also confirms

that Congress intended to limit protection to severed employ-

ees. The Interstate Commerce Act, as amended in 1940,

contained only the first sentence of what has now become

section 10902(d)--"[T]he Commission shall require a fair and

equitable arrangement to protect the interests of the railroad

employees affected." Transportation Act of 1940, ch. 722,

sec. 7, s 5(2)(f), 54 Stat. 899, 906 (1940) (amending Interstate

Commerce Act). It was on the basis of this language that the

ICC developed the extensive New York Dock protections,

which covered both severed and displaced employees. See

New York Dock Ry., 609 F.2d at 87-90. As originally intro-

duced in Congress, the ICC Termination Act eliminated all

substantive labor protections. See H.R. 2539, 104th Cong.,

141 Cong. Rec. H12,266-96. Concerned about "employees

who lose their jobs because of a merger," members who

favored labor protection focused on the harm caused by

layoffs and the loss of jobs, and urged a compromise that

would "leave the essential employee protections in place."

141 Cong. Rec. H12,258 col.1 (statement of Rep. Vento)

(emphasis added); see also, e.g., id. at 12,260 col.1 (statement

of Rep. Oberstar) (urging protection for "railworkers ...

[who] lose their jobs due to mergers and line sales"). Al-

though Congress eventually incorporated the Interstate Com-

merce Act's "fair and equitable arrangement" language into

the final bill, it added the requirement that "the arrangement

shall consist exclusively of one year of severance pay." See

Conference Report at 179-80. The addition of the words

"shall consist exclusively of" to the previous Act's "fair and

equitable arrangement" shows that Congress intended to

deprive the new Board of authority to impose New York

Dock-style conditions for the benefit of displaced employees.

We also think it significant that to accommodate its inter-

pretation of the statute, the Board found it necessary not just

to ignore the Act's plain language, but to change it. The

Board realized that extending section 10902(d)'s offset provi-

sion to displaced employees could "create the anomaly where

an affected employee electing not to work for WCL, but

remaining with UP, would double his previous year's income."

Wisconsin Central Ltd.-Acquisition Exemption-Lines of Un-

ion Pacific R.R. Co., supra, at 5. The Board therefore ruled

that the severance payment offset applies to "earnings from

the employee's railroad employment" irrespective of whether

the selling or acquiring railroad is the employer. In other

words, the Board rewrote the statute to read: "The amount

of such severance pay shall be reduced by the amount of the

earnings from railroad employment of the employee with the

acquiring carrier during the 12-month period immediately

following the effective date of the transaction...."

Judge Wald argues that interpreting section 10902(d) to

exclude displaced employees "doesn't make sense." Dissent-

ing Op. at 5 (Wald, J.). Although she (and the Board) may be

correct that displaced employees deserve protection, Con-

gress could just as sensibly have decided to limit benefits only

to employees whose employment with the selling carrier is

actually terminated. Indeed, we recently rejected an agen-

cy's attempt to redraft a statute in order to avoid what the

agency characterized as the "absurd results" that would flow

from the statute's language because we found it "not incon-

ceivable that Congress meant what the statute says." See

Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1072 (D.C. Cir.

1998).

Finding Congress's intent clear from the statute's lan-

guage, structure, and legislative history, we have no need to

proceed, as the Board urges, to Chevron's second step.

III

Petitioners next challenge the Board's interpretation of

section 10902(d)'s requirement that severance pay shall be

"reduced by the amount of earnings from railroad employ-

ment of the employee with the acquiring carrier during the

12-month period immediately following the effective date of

the transaction." According to petitioners, calculating "the

amount of earnings" is mechanical and self-executing, leaving

no room for Board interpretation; employees' severance pay-

ments must be reduced by their one-year aggregate earnings

on the acquiring carrier. Finding the term "earnings" ambig-

uous, the Board interprets the offset provision in a way that

matches earnings in the year following the line sale to earn-

ings in the prior year based on the number of hours worked.

Earnings from the acquiring carrier that are attributable to

hours worked in excess of hours worked in the previous year

are in effect considered extra earnings and excluded from the

offset calculation.

The Board adopted this proposal in response to TTD's

suggestion that "the monthly comparison [should be] 'apples

to apples'; i.e., the comparison [should be] made for the same

number of hours worked in a month so that the employee who

works at a position at a lower hourly rate for more hours does

not lose protective benefits and reduce the carrier's obli-

gations by working more hours for less pay." See Comments

of TTD, Wisconsin Central Ltd.--Acquisition Exemption--

Lines of Union Pacific R.R. Co., Finance Docket No. 33116,

at 14-15 (filed with STB Jan. 15, 1997). TTD illustrated its

point with the following example: If a severed employee

earned $2,500 monthly for 160 hours of work with the selling

carrier and then earns $2,500 monthly for 320 hours of work

with the acquiring carrier, the employee would be entitled to

a monthly severance payment of $1,250 under the Board's

"apples to apples" approach but would receive no benefits

under petitioners' interpretation.

This issue is quite different from the Board's extension of

severance benefits to displaced employees, where Congress's

use of the term "exclusively," together with the statute's

structure and legislative history, demonstrated that the

Board had exceeded its statutory authority. See supra at 6-

10. In contrast, Congress has not "directly spoken" to the

question of precisely how the earnings offset should be calcu-

lated. Although section 10902(d) limits the offset to the 12-

month period following the transaction, the statute contains

no definition of "earnings." Are "earnings" based on gross

earnings or net earnings? Are overtime earnings "earnings"?

How do payroll deductions for health insurance and employer

contributions to pension benefits count in the employee's

"earnings"? Neither legislative history nor any other tool of

statutory construction aids us in ascertaining Congress's in-

tent with respect to the measurement of earnings under this

statute.

Had Congress intended to limit the term earnings in the

way that petitioners and Judge Sentelle read it, it could have

used the words "full" or "total" prior to "earnings." As

Congress demonstrated in section 10902(d)'s second sentence,

where it used the words "[t]he arrangement shall consist

exclusively of one year of severance pay," it knows how to

limit the Board's authority to interpret statutory language.

Although Congress knew of the ICC's practice of calculating

earnings offsets based on comparable hours worked, it left

"earnings" unmodified in the new statutory scheme. We

therefore read section 10902(d) as a "legislative delegation to

[the] agency" to elucidate the statute's earnings offset provi-

sion. Chevron, 467 U.S. at 844.

Moving to Chevron's second step, we cannot say that the

Board's "apples to apples" approach represents an impermis-

sible construction of the offset requirement. The Board

crafted its interpretation of earnings to respond to a practical

problem identified by TTD--that acquiring carriers paying

lower wages could avoid making severance payments by

simply requiring employees to work more hours than they

had in the previous year. TTD argued that this adverse

incentive could potentially "destroy the effectiveness of the

protection imposed by Congress" and "lead to abuse by

employers and dangerous situations for tired employees."

Intervenor-Respondents' Br. at 17, 18. Whether this

amounts to a serious problem or whether the Board has

fashioned the best solution is for the Board to decide, not us.

Our deference to an agency's reasonable interpretation of its

governing statute "is a product both of an awareness of the

practical expertise which an agency normally develops, and of

a willingness to accord some measure of flexibility to such an

agency as it encounters new and unforeseen problems over

time." International Bhd. of Teamsters v. Daniel, 439 U.S.

551, 566 n.20 (1979). And unlike the Board's extension of the

severance pay arrangement to displaced employees, which

compelled it to disregard explicit statutory language to ac-

commodate its interpretation, here the Board ignores no

words in the statute, but merely interprets the term "earn-

ings."

IV

Petitioners next claim that the Board unlawfully delegated

resolution of disputes arising under section 10902(d) to pri-

vate arbitrators. According to petitioners, because the stat-

ute nowhere authorizes arbitration, the Board cannot require

it.

Circuit precedent forecloses petitioners' argument. In

Brotherhood of Locomotive Engineers v. ICC, we considered

a similar argument (in that case advanced by the labor union)

that "the Commission, by submitting the labor disputes to

arbitration ... failed to exercise its 'primary jurisdiction' in

accordance with [the section requiring the Commission to

impose labor protective conditions]." 808 F.2d 1570, 1579

n.75 (D.C. Cir. 1987). Holding that "[a]rbitration is a legiti-

mate method of resolving labor disputes and does not divest

the Commission of its jurisdiction," we declined to "mandate

that the Commission adjudicate disputes that it properly

determines to be arbitrable." Id. We reached a similar

result in International Brotherhood of Electrical Workers v.

ICC, supra. Observing that "[n]othing in the Act either

requires or forecloses the agency's use of arbitration in

employee disputes," we concluded that "[t]he ICC acted

within its sound discretion in electing to use arbitration; had

it not done so, all disputes over employee protective condi-

tions would have remained solely within the primary jurisdic-

tion of the agency." 862 F.2d at 336. Because the ICC

Termination Act makes no change with respect to the Board's

inherent authority to require arbitration, IBEW and Brother-

hood of Locomotive Engineers control here.

V

We grant the petition for review and hold that the Board's

order requiring compensation of displaced employees violates

section 10902(d) of the ICC Termination Act. We sustain the

Board's interpretation of earnings based on comparable hours

worked and its requirement of mandatory arbitration as

permissible constructions of the statute.

So ordered.

Wald, Circuit Judge, dissenting from Part II: I disagree

with the panel that the statutory provision for severance pay

for rail workers who lose their jobs as a result of short-line

acquisitions under section 10902(d) is unambiguously limited

to workers who after the acquisition will no longer work for

the selling railroad. In my view, the text of the relevant

provision is decidedly ambiguous, the legislative history sheds

no appreciable additional light on its meaning, and I would

therefore proceed to a Chevron step two analysis, which

defers to the Surface Transportation Board's ("the Board")

reasonable determination that all employees who lose their

jobs as a result of a short-line acquisition--including those

who go on to other less well-paying employment with the

selling carrier--are entitled to some amount of severance pay.

The ICC Termination Act first authorizes the Board to

require a covered rail carrier to "provide a fair and equitable

arrangement for the protection of the interests of employees

who may be affected" when one Class II railroad buys a short

line from any other railroad. 49 U.S.C. s 10902(d). The next

sentence goes on to define the meaning of that "arrange-

ment": "The arrangement shall consist exclusively of one

year of severance pay...." Id. Thus, the second sentence

tells the Board what the arrangement is but does not delimit

who is entitled to receive it. The Board is left to decipher

which "employees [ ] may be affected thereby."

Under the ruling of Chevron U.S.A. Inc. v. Natural Re-

sources Defense Council, Inc., 467 U.S. 837 (1984), the panel

finds that Congress has unequivocally made its intention clear

that only employees of a short line who leave the employment

of the seller of that line altogether are eligible for severance

pay. It reasons that since "severance pay" is the only

available remedy for "employees who may be affected" by an

acquisition, it must follow that only "severed employees" are

eligible for "severance pay." This of course is essentially a

tautology. The panel then elaborates a bit by quoting a

dictionary definition that defines "severance" as "termination

of a contractual association (as employment)," see Majority

Opinion ("Maj. Op.") at 7. Building on this somewhat scraw-

ny framework, the panel extrapolates that a "severed employ-

ee" can only be one terminated from his employment relation-

ship with the particular employer who used to own the short

line and cannot mean someone who has been severed from his

former job but still works for the former owner of the short

line. Yet nothing in the statute's text, its history, or even the

dictionary definition of severance pay suggests that limitation.

Rather, "severance pay"--certainly in the context of this

statute--is an ambiguous term not confined to employees

"whose employment with the selling carrier was terminated

as a result of a transaction." Maj. Op. at 7. The ICC

Termination Act, as originally introduced in the House, elimi-

nated all labor protective conditions, known as New York

Dock conditions, traditionally imposed by the ICC in mergers

and line acquisitions. A compromise struck on the floor of

the House of Representatives between those who favored

some labor protection and those who opposed it resulted in

adoption of the Whitfield Amendment, which we now con-

strue. There was no indication in the floor debate preceding

the amendment's passage that lawmakers had achieved any

meeting of the minds as to what exactly "severance pay"

encompassed. Instead, the entire discussion addressed the

compromise in terms of the shortening of the post-acquisition

period during which salary protection was available, from six

years under New York Dock, to one year under the amend-

ment. See 141 Cong. Rec. H12,297-306 (daily ed. Nov. 14,

1995). The issue of just who qualified as an "employee

affected" so as to merit "severance pay" was never directly

confronted.

The panel's restrictive definition of the term "severance

pay" had never been employed as a term of art by the ICC,

nor was it a definition unequivocally embraced by members of

Congress who debated the amendment. Under the New

York Dock regime, an acquiring railroad was required to

make two types of allowances--"displacement allowances"

and "dismissal allowances." The former allowance was for

employees who were placed in worse positions with respect to

their compensation as a result of a rail transaction, regardless

of whom they worked for after the transaction; the latter was

for employees who lost their jobs entirely because of a

transaction. See New York Dock Ry.-Control-Brooklyn

Eastern Dist. Terminal, 360 I.C.C. 60 app. III (Feb. 9, 1979).

The term "severance pay" was often used by the ICC and

reviewing courts to describe the combination of these two

allowances. See, e.g., Santa Fe Pacific Corp.-Control-South-

ern Pacific Transp. Co., Finance Docket No. 30400 (Sub-No.

21) (I.C.C. June 12, 1992), available in 1992 ICC Lexis 114;

Indiana R.R. Co.-Merger, 6 I.C.C. 969 (1990); see also

Railway Labor Exeuctives Ass'n v. ICC, 999 F.2d 574, 575 n.2

(D.C. Cir. 1993); Brotherhood of R.R. Signalmen v. ICC, 63

F.3d 638, 639 (7th Cir. 1995). Indeed some members of

Congress also used the term "severance pay" as shorthand

for the old New York Dock salary protections in debating the

Whitfield Amendment. See 41 Cong. Rec. H12,302 col. 1

(statement of Rep. Nadler); id. at H12,304 col. 3 (statement

of Rep. Traficant); id. at H12,305 col. 2 (statement of Rep.

Oberstar); id. at H12,306 col. 1-2 (statement of Rep. Spratt)

(under old regime "Congress gave the ICC discretion to

require 6-year severance payments to rail workers displaced

by mergers or acquisitions").1 Both allowances were calculat-

ed on a monthly "time paid for" basis, which is the payment

calculation scheme the Board has proposed for implementing

the term "earnings" in section 10902(d) and which as part of

the majority in Part III of the opinion I accept.2

__________

1 Notably, the seminal ICC case discussing the evolution of the

New York Dock conditions describes the employees who were

eligible for displacement and dismissal allowances as "severed and

dismissed employees." Oregon Short Line R.R. and Union Pacific

R.R. Co.-Abandonment Portion Goshen Branch, 354 I.C.C. 76 (July

22, 1977), available in 1977 ICC Lexis 75, *15.

2 Of course, I do not accept the argument in Part III that the

term "severance pay" is patently unambiguous on the one hand, but

that we should defer to the Board's experience in administering

"earnings"--an ambiguous term--on the other. Rather, we should

interpret both terms guided by "an awareness of the practical

expertise which an agency normally develops, and of a willingness

to accord some measure of flexibility to such an agency as it

encounters new and unforeseen problems over time." Internation-

The panel argues that the Board has to rewrite the statute

to provide for offsets to severance pay for employees who

take lower paid positions in their old company in order to

avoid giving them a windfall. Inevitably, as Judge Sentelle

complains in his dissent, we do a bit of rewriting with respect

to the term "earnings" in section 10902(d), Maj. Op. at 10, in

order to arrive at a "fair and equitable arrangement." What

is one judge's rewriting is another's gap-filling. In this case I

believe that Congress probably focused on an offset for

employment with the acquiring railroad in order to create an

economic incentive for the acquiring railroad to hire workers

displaced from the acquired line. Under the ICC regime,

when Class II carriers were granted exemptions from labor

protections, the average percentage of employees with the

selling carrier who went to work for the new operator was 85

percent. See 41 Cong. Rec. H12,303 col. 1 (statement of Rep.

Shuster). Congress may well have wanted to keep that

figure high by alleviating the new company's financial burden

when that happened. When the Board later defined those

included in the severance pay eligible group, it made the

offset accommodation to make sure that affected employees

played on a level field whether they took new jobs with their

old company or went to work for the new one.

Finally, and most important, the panel's rejection of the

Board's interpretation creates a distinct and I believe inequi-

table anomaly in the treatment of affected railroad workers.

Under the panel's interpretation, when an acquiring railroad

(A) buys a line (line B) from the selling railroad (B), the

following employees are entitled to severance pay: any work-

er dismissed from line B who takes a lower-paying job with

A; any worker dismissed from line B who takes a lower-

paying job with any railroad other than B (in this case, A will

have to pay the former B worker his full wages for a year

with no offset); and any worker who keeps his same job but

at a lower rate of pay on line B but who is now an employee

of A. The only "employee[ ] who may be affected" by the

__________

al Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 566 n.20

(1979), cited in Maj. Op. at 13.

acquisition who will not get any severance pay is one who

loses his job on line B and takes a different lower-paying job

with B. But presumably if that employee by dint of seniority

bumps another worker in railroad B from his job, the bumped

employee will be considered "severed" and will be entitled to

severance pay. Such a disparity doesn't make sense and

there is no signal from Congress that this is what it intended.

For these reasons, I would defer to the Board's reasonable

interpretation of section 10902(d) as to who is eligible for

"severance pay," as well as the other challenged parts of its

ruling.

Sentelle, Circuit Judge, concurring in Parts I, II and IV

and dissenting from Part III: I fully concur with the opinion

of the court in Parts I and II. Indeed, I find the legal

reasoning in Part II to be a commendably clear and unassail-

ably correct application of Chevron analysis. My difficulty

with the majority's opinion lies in the fact that the cogent

reasoning of Part II commands an opposite result than that

reached by the court in Part III. I, therefore, respectfully

dissent from the court's decision approving the Board's con-

struction of the term "earnings."

I.

As the court declares, "we review the Board's interpreta-

tion of the ICC Termination Act under Chevron's two-step

analysis." Maj. op. at 6 (citing Chevron U.S.A. Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837

(1984)). As the court further notes, it is our duty to "ask first

'whether Congress has directly spoken to the precise question

at issue. If the intent of Congress is clear, that is the end of

the matter; for the court, as well as the agency, must give

effect to the unambiguously expressed intent of Congress.' "

Id. at 6 (quoting Chevron, 467 U.S. at 842-43). Only if the

statute is " 'silent or ambiguous with respect to the specific

issue' " before us do we proceed to the second step of

determining " 'whether the agency's answer is based on a

permissible construction of the statute.' " Id. (quoting Chev-

ron, 467 U.S. at 843). In the ICC Termination Act, 49 U.S.C.

s 10101 et seq. (1997), Congress provided that the Surface

Transportation Board "shall require any Class II rail carrier"

receiving the expedited acquisition approval applicable in this

case "to provide a fair and equitable arrangement for the

protection of the interests of employees ... affected there-

by." Id. s 10902(d). Had Congress stopped there, there

would obviously be a broad ambiguity as to the meaning of "a

fair and equitable arrangement" and it might well be that we

would uphold everything the Board did in this case. But, as

the court's opinion demonstrates, Congress did not stop

there.

Congress went on to specify precisely what it meant by "a

fair and equitable arrangement." As the court's opinion says,

"[t]he ... Act specifies certain mandatory labor protection

conditions, but expressly deprives the new Board of discretion

to impose other labor protection conditions." Maj. op. at 3

(citing 49 U.S.C.A. s 10902(c) (the Board "may require com-

pliance with conditions (other than labor protection condi-

tions) the Board finds necessary in the public interest")). As

the court notes, this language is not only crystal clear, it is

obviously expressive of the deliberate intent of Congress

reached after debate and compromise. See id. at 8-9. In

other words, Congress had determined and stated what it

deemed to be the "fair and equitable arrangement" it was

requiring. Therefore, there was no need for this court to

reason beyond the first step of Chevron. Congress had

determined what the Board could require a railroad conduct-

ing an expedited acquisition to provide to affected employees,

and the Board was without discretion to expand it. I fear

that the court departs from that unassailable reasoning in

Part III.

Just as Congress clearly capped the required payments

under s 10902(d) at "one year of severance pay," Congress

also clearly defined the method of computation of that benefit.

The exclusive benefit "shall not exceed the amount of earn-

ings from railroad employment of the employee during the

12-month period immediately preceding" the date of applica-

tion, which "shall be reduced by the amount of earnings from

railroad employment of the employee with the acquiring

carrier during the 12-month period immediately following the

effective date of the transaction...." 49 U.S.C. s 10902(d)

(emphasis added). Instead of following the congressional

formula, the Board has adopted, and the court today allows, a

computation in which the payment is not "reduced by the

amount of earnings ... during the 12-month period" but

instead allows reduction only for amounts computed monthly

based not on the earnings of the affected employee, but

rather on the per-hour return for the hours worked by that

employee. Shortly put, Congress expressly mandated a re-

duction in the severance pay "by the amount of earnings from

railroad employment" of the employee with the acquiring

carrier during the relevant 12-month period. The Board,

instead of following this plain mandate, reduces only when a

reduction appears to it proper under a monthly computation

based not on the earnings from railway employment, but on

the hourly rate of the wage earner. The court, abandoning

its allegiance to the clearly expressed intent of Congress

demonstrated in Part II, approves this unwarranted assertion

of authority under a misapplication of the Chevron doctrine.

The court justifies its move to Step II of Chevron by

declaring that "Congress has not 'directly spoken' to the

question of precisely how the earnings offset should be calcu-

lated." Maj. op. at 11. To support this proposition, the

majority offers the silence of the statute on whether earnings

includes such things as "payroll deductions for health insur-

ance and employer contributions to pension benefits." Id.

This, however, ignores the Supreme Court's plain language in

Chevron. The deference we afford an agency under that

decision arises when "the statute is silent or ambiguous with

respect to the specific issue." 467 U.S. at 843 (emphasis

added). Granted, the statute is ambiguous on what to do

with medical and pension benefits. The statute is not ambig-

uous on the question of whether the severance pay "shall be

reduced by the amount of earnings from railroad employment

of the employee with the acquiring carrier during the 12-

month period immediately following the effective date of the

transaction." 49 U.S.C. s 10902(d). It shall. There is no

ambiguity as to whether the earnings to be used are monthly,

hourly or annual. They are annual. They are not monthly

computed, and they are not hourly adjusted. The payment is

to be reduced by what the employee earns from railroad

employment during the next 12-month period. That was the

expressed intent of Congress. That should be the end of our

analysis on this question.

The majority further purports to find the ambiguity it

seeks in the language of s 10902(d) which requires "that the

Board fashion a 'fair and equitable' severance arrangement."

Maj. op. at 11. Granted, that phrase taken out of the context

of the statute may look ambiguous. But phrases in a statute

are not without context. As the majority clearly demon-

strates in Part II, Congress defined what it meant by a "fair

and equitable" arrangement. It said what that arrangement

consists of. It consists of severance pay "reduced by the

amount of earnings from railroad employment of the employ-

ee with the acquiring carrier during the 12-month period

immediately following the effective date of the transaction."

49 U.S.C. s 10902(d). The Board seizes the power of Con-

gress when it seeks to redefine that "fair and equitable

arrangement," and this court today aids and abets it. I

therefore dissent from that part of the opinion.

II.

I have thus far been silent as to Part IV of the majority

opinion. I do concur in that section, but in doing so I wish to

comment separately on what I understand the court not to be

doing. As the majority notes, the Board requires the submis-

sion to arbitration of disputes regarding the application and

implementation of the s 10902(d) conditions. The Board does

so without any discernible explanation, rationale, or basis for

its decision that it has the power to issue this requirement or

the ability to make such delegation to a private arbiter. It

cannot be gainsaid that the submission of a dispute to arbitra-

tion is normally a voluntary act, either at the time of the

dispute or at an earlier time in a contract providing for such

arbitration. It is equally undeniable "that when Congress

has specifically vested an agency with the authority to admin-

ister a statute, it may not shift that responsibility to a private

actor." Perot v. Federal Election Comm'n, 97 F.3d 553, 559

(D.C. Cir. 1996); National Small Shipments Traffic Confer-

ence, Inc. v. ICC, 725 F.2d 1442, 1450 (D.C. Cir. 1984) (ICC

may delegate certain ministerial functions to staff but deci-

sion making must remain with commission); Krug v. Lincoln

Nat'l Life Ins. Co., 245 F.2d 848, 852 (5th Cir. 1957) (adminis-

trative agency cannot delegate quasi-judicial functions); Rel-

co, Inc. v. Consumer Prod. Safety Comm'n, 391 F. Supp. 841,

845 (S.D. Tex. 1975) ("administrative adjudications" may not

be delegated). That said, I nonetheless agree with the major-

ity that we must uphold the Board's unexplained delegation in

this case.

The reason for our anomalous holding is well set out by the

majority. That is, circuit precedent forecloses the opposite

result. In both Brotherhood of Locomotive Engineers v. ICC,

808 F.2d 1570 (D.C. Cir. 1987), and International Bhd. of

Elec. Workers v. ICC, 862 F.2d 330, 336 (D.C. Cir. 1988), we

upheld similar delegations by the Board of disputes not

submitted to voluntary arbitration by agreement of the par-

ties. Circuit precedent binds us unless and until it is over-

ruled by this court sitting en banc or by the higher authority.

Save Our Cumberland Mountains, Inc. v. Hodel, 826 F.2d 43,

49 (D.C. Cir. 1987), vacated in part, 857 F.2d 1516 (D.C. Cir.

1988) (en banc). I, therefore, concur in the majority's deter-

mination that binding precedent requires us to uphold the

Board's otherwise unsupported decision to delegate these

disputes to private arbitration. I do not, however, under-

stand our decision to be providing any precedent for any

other agency to act. Our precedent speaks by its terms and

binds by its terms, and I do not think we are today intending

to create a precedent empowering any other administrative

agency to delegate disputes before it to private actors without

the consent of the parties.

I find one other aspect of the delegation troubling. The

Board's position seems to be that the decision of the private

arbitrators would be reviewed by the Board only under the

restrictive "Lace Curtain" standards. See Chicago and

Northwestern Transp. Co.-Abandonment-Near Dubuque and

Oelwein, IA, 3 I.C.C.2d 729 (1987) (Lace Curtain), aff'd sub

nom. International Bhd. of Elec. Workers v. ICC, 862 F.2d

330 (D.C. Cir. 1988). The Board reiterated this proposition at

oral argument. As I understand the Lace Curtain standard,

the Board will only review the arbitrator's decision for "recur-

ring or otherwise significant issues of general importance

regarding the interpretation" of labor protection conditions,

and will not review decisions dealing with factual questions.

Id. at 736. The Administrative Procedure Act entitles admin-

istrative litigants before the Board or any other administra-

tive agency to a review of the final agency decision under an

arbitrary and capricious standard in which the reviewing

court will subject fact findings to a substantial evidence

review. See McCarty Farms, Inc. v. STB, Nos. 97-1632 and

98-1307, 1998 WL 726248, at *7 (D.C. Cir. 1998); MD

Pharm., Inc. v. Drug Enforcement Admin., 133 F.3d 8, 16

(D.C. Cir. 1998) (explaining the standard of judicial review

under the Administrative Procedure Act, 5 U.S.C.

s 706(2)(A), (E)). I do not understand our decision today to

be a statement that the Board can apply the Lace Curtain

standard to involuntary arbitrations and thereby finesse a

litigant out of that statutory right. If in future cases the

Board attempts such a bypass of the statutory right, it may

be that we will be required to directly review the arbitrator's

decisions on such matters as final agency decisions, see

International Bhd. of Elec. Workers, 862 F.2d at 337-38, or

that some other remedy can be found. In any event, I do not

read today's decision as approving the Board's standard of

review.

III.

For the reasons set forth above, I concur in the decision of

the majority as to the construction of the term "severance

pay" but not as to its computation. As to that latter portion

of the decision, I dissent.