Petition for Writ of Certiorari — Deford v. Soo Line Railroad

Supreme Court brief1989

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IN THE bios

Supreme Court of the United States

OCTOBER TERM, 1988

ROBERT F. DEFORD, RAILWAY LABOR

EXECUTIVES’ ASSOCIATION and

UNITED TRANSPORTATION UNION,

Petitioners,

Vv.

Soo LINE RAILROAD COMPANY, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

WILIAM G. MAHONEY

JOHN O’B. CLARKE, JR.*

RICHARD S. EDELMAN

HIGHSAW & MAHONEY, P.C.

Suite 210

1050 17th Street, N.W.

Washington, D.C. 20036

(202) 296-8500

TIMOTHY D. KELLY

3720 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

(612) 349-6171

Attorneys for Petitioners

Date: May 10, 1989 * Counsel of Record

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QUESTION PRESENTED

Does the complete pre-emption doctrine encompass fed-

eral statutes, such as the Railway Labor Act, 45 U.S.C.

$ 151, et seg., and the Interstate Commerce Act, 49 U.S.C.

£10101, et seg., where Congress has not provided alterna-

tive federal causes of action for a litigant whose inde-

pendent state law rights are asserted to be pre-empted by

such statutes? .

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TABLE OF CONTENTS

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D. The Court of Appeals Decision .............00000000......

DO EENEPEIONS ............................---- ee

I. THE PANEL DECISION IS INCONSISTENT

II.

WITH THE LIMITED SCOPE OF THE COM-

PLETE PRE-EMPTION DOCTRINE AND

WITH THIS COURT’S REASONING IN COM-

PLETE PRE-EMPTION CASES ........................

THE DECISION OF THE DIVIDED EIGHTH

CIRCUIT PANEL CONFLICTS WITH A

THIRD CIRCUIT DECISION IN A VIRTU-

ALLY IDENTICAL MATTER AND WITH

THE DECISIONS OF OTHER COURTS ........

(iii)

)

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—

TABLE OF CONTENTS—Continued

Page

III. EXPANSION OF THE COMPLETE PRE-

EMPTION DOCTRINE, AND THE RELATED

CONTRACTION OF SUBSTANTIVE STATE

LAW, IS A MATTER OF NATIONAL IMPOR-

PRUs TREES SAWOPCORMEEE fo clecccics sce veeptpcmeesees 21

CDT N EIEN oiscccnissicnceseteie sobs tisik aumgehecssmannnannaNaeleia sean 23

TABLE OF AUTHORITIES

Cases Relied Upon: Page

Avco Corp. v. Aero Lodge No. 735, IAM, 390 U.S

SE GN cos cece catecia pace 13, 14, 15, 16

Babcock v. Tam, 156 F.2d 116 (9th Cir. 1946) 16

Baker v. Geist, 457 Pa. 73, 321 A.2d 635 (1974) 16

Baltimore & Ohio R.R. v. Oberly, 837 F.2d 108

(3rd Cir. 1988) .........: 22

BBCA, Inc. v. United States, 630 F. Supp. 349

(D. Minn. 1986) 16

Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) passin

Chicago and North Western Transportation Co. v

Kalo Brick & Tile Co., 450 sng 311 (1981) 17-18

Cresenzi Bird Importers, Inc. v. New York, 658 F.

Supp. 1441 (S.D.N.Y. 1987) OPER eee 22

Ex Parte No. 392 (Sub-No. , Class Exe smoti on

for the gh pons and eee on of Rail Lines

under 49 U.S.C. 10901, 1 I.C.C. 2d 810 (1925),

aff'd sub nom. Illinois Commerce Commission v.

Interstate Commerce Commission, 817 F.2d 145

Pa ee OE AONE oro ec rscane 5

Franchise Tax Board v. Laborers Vacation Trust,

463 U.S. 123 (1983) . AO OSE re Se 13, 21

Gendron v. Chicago and Northwestern Tronepor-

tation Co., et al., N.D. Ill. No. 88 C 918, decided

Fe Ae, gti Dales 0 Oa Tea tiek Stee aaa ieee 21

Hayfield Northern Railroad Co., Inc. v. Chicago

& North Western Transportation Co., 467 U.S.

AE Siete eatcls ert Ai Rd Sb eee even eed 18

In re Chicago, Milwaukee, St. Paul & Pacific Rail-

road, 799 F.2d 317 (7th Cir. 1986), cert. denied,

ite SG eR | 5 ERRNO ahora 4

Interstate Commerce Commission v. Brotherhood

of Locomotive Engineers, 482 U.S. 270 (1987).. 18

Lingle v. Norge Div. Magic Chef. Inc., 486 U.S.

» We de Bee SEO CIOES) ... 9, 16,17

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58

TRS NEAL A pt Rapa nee -cahey eine le SRE LEA AAR IEE passim

Neubauca v. Clontier, 265 Minn. 539, 122 N.W.2d

EE Sg EAS Lt clear aie eae ret At SOAR SRE RARE 16

Order of Railway Conductors v. Pitney, 326 U.S.

Bh I eee Alb EE BS OPE 5 Re SL DSO 15

TABLE OF AUTHORITIES—Continued

Page

Price v. PSA, Inc., 829 F.2d 871 (9th Cir. 1987),

cert. denied, 108 S. Ct. 1732 (1988) .................. 21

Railway Labor Executives’ Association v. Pitts-

burgh & Lake Erie Railroad Co., et al., 858 F.2d

936 (Srd Cir. 1908) «ccc aa eee passim

Searboard Air Line Railroad v. Daniel, 339 U.S. 118

(GL) § Rene Ee eh Math Beste 18

Slocum v. Delaware, Lackawanna & Western R.R.,

$39 U.S. 239 (1960) 3c eae 15

Textile Workers v. Lincoln Mills, 303 U.S. 448

(1957) —. 2... concsinencvcsouunenale een ees 4,16

United States v. Gleneagles Inv. Ce., Inc., 565 F.

Supp. 556 (MLD. Pa. 30000... 22

United States v. Tabor Realty Corp., 803 F.2d 1288

(3rd Cir. 1986), cert. denied, sub nom. McClellan

Realty Co. v. United States, 107 S. Ct. 3229

(1967) .........1..casscssssseepeg eee 22

STATUTES AND OTHER MATERIALS:

Employee Retirement Income Security Act of

1974, 29 U.S.C. § 1001 et seq.

Section 502(a) (1) (B), 29 U.S.C.

§ 1132 (a) (1) CB) pee 2,14

Section 502(f), 29 U.S.C. § 1132(f) Cee ee 2, 9, 14

Interstate Commerce Act, 49 U.S.C. § 10101, et

BOQ. <..ccecaccsonsedesnvananedueeniieeel eee ee A 2

Section 10505, 49 U.S.C. § 105065 ........................ 5, 19

Section 10901, 49 U.S.C. § 10901 ....................... 4,19

Section 11341 (a), 49 U.S.C. § 11341 (a) ........... ; 18

Section 11343, 49 U.S.C. § 11848 ......................... 18

Labor Management Relations Act, 29 U.S.C. 151,

CO BOQ, ..0..vnennccencaicepceapensenuneect tian 2

Section 301 (a), 29 U.S.C. § 185(a) .................... passim

Minnesota Uniform Fraudulent Transfer Act,

Minn. Stat. Ann. $9 613.4167 2. 2,6

Pennsylvania Fraudulent Conveyance Act, 39 Pa.

C.S.A. § 3651, e€ a6@. Uo 16

Railway Labor Act, 45 U.S.C. § 151, et segq............. 2

Section 8, 45 U.S.C, £768 ee 15, 17

vii

TABLE OF AUTHORITIES—Continued

Page

H.R. Conf. Rep. No. 93-1280 (1974) ............--.------. 14

Bae Bee Oo. . 6 ) en SORE 2

BR USAC. © 1881 ..............--...-00.-200.-eece--nnnseonsnnnenoreenenes 12,13

28 U.S.C. § 1887 (a) .......-.--.-----..-----csccceeenecsenennensnnneeeres 12

ok gh SE) CLS i eecronr rr 3, 12, 138

a RE ciscaseecsninsssoses eee 7

28 U.S.C. § 2101(c) . el RET Ei 2

49 C.F.R. § 1150.35(a). (1989) . Fee RAR Rene 5

49 C.F.R. § 1150.35(e) (1989) 5)

49 C.F.R. § 1150.31(b) (1986) D

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

No.

ROBERT F. DEFORD, RAILWAY LABOR

EXECUTIVES’ ASSOCIATION and

UNITED TRANSPORTATION UNION,

Petitioners,

Soo LiNE RAILROAD COMPANY, et al.,

Respondents.'

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioners Robert F. Deford, the Railway Labor

Executives’ Association [hereinafter, “RLEA”], and the

United Transportation Union [hereinafter, “UTU’’] 2

respectfully request that this Court issue a writ of cer-

tiorari to review the judgment and opinion of the United

States Court of Appeals for the Eighth Circuit entered

Besides respondent Soo Line Railroad Coompany, the other

respondents are: Wisconsin Central Ltd., Dennis Cavanaugh, Ed-

ward A. Burkhardt, Thomas F. Power, and Robert H. Wheeler.

2 RLEA is a voluntary unincorporated association of the chief

executive officers of seventeen standard national labor organizations

which represents railroad employees in the United States. Petitioner

UTU’s president was a member of RLEA at the time this suit was

filed, but, as of mid-April 1989, he is no longer a member of

RLEA. Since the UTU is still participating in this action, it has

been listed as a petitioner. Appendix F hereto at 59a is a list

of RLEA’s present member organizations.

— ;

on February 9, 1989 in Deford v. Soo Line R.R., et al.,

867 F.2d 1080 (8th Cir. 1989).

OPINIONS BELOW

The opinion of the Court of Appeals for the Eighth

Circuit is reported at 867 F.2d 1080 and is reprinted

as Appendix A hereto at la-28a. The court’s judgment was

also entered on February 9, 1989; it is printed in Ap-

pendix C hereto at 35a-36a.

The August 20, 1987 ruling of the United States Dis-

trict Court for the District of Minnesota (Rosenbaum,

J.) was issued orally from the bench; there was no writ-

ten opinion. The relevant excerpts of the transcript of

proceedings are printed as Appendix B hereto at 29a-34a.

The District Court’s judgment is printed in Appendix D

hereto at 37a.

JURISDICTION

The United States Court of Appeals for the Eighth

Circuit entered its decision on February 9, 1989. Peti-

tioner has not sought rehearing and is filing this peti-

tion within the time prescribed by 28 U.S.C. § 2101 (c).

Petitioners seek to invoke the jurisdiction of this Court

under 28 U.S.C. § 1254(1).

STATUTES INVOLVED

The complaint underlying this action was brought

under the Minnesota Uniform Fraudulent Transfer Act

(hereinafter, “Fraudulert Transfer Act’’], Minn. Stat.

Ann. §§ 513.41-51, and was filed in Minnesota District

Court, Hennepin County. The complaint was removed

to the United States District Court for the District of

Minnesota, Fourth Division, pursuant to 28 U.S.C.

§1441(a), purportedly under the Railway Labor Act

(hereinafter, “RLA”], 45 U.S.C. § 151, et seq., and the

Interstate Commerce Act (hereinafter, “ICA”], 49

U.S.C. § 10101, et seg. Relevant portions of those stat-

utes are reprinted as Appendix E hereto at 39a-58a.

Petitioners have also reproduced in Appendix E, Section

301(a) of the LMRA, 29 U.S.C. § 185(a), and Sections

502(a) and (f) of ERISA, 29 U.S.C. § 1182(a and (f).

STATEMENT OF THE CASE

The complaint in this case challenged the sale of cer-

tain assets of respondent Soo Line Railroad Company

{hereinafter, ‘“Soo’] as a fraudulent transfer, and was

brought in a Minnesota court under that State’s Fraudu-

lent Transfer Act. The complaint was removed to the

District Court on the ground that enforcement of the

Fraudulent Transfer Act was pre-empted by two federal

statutes, the RLA and the ICA. A divided panel of the

Eighth Circuit held that the pre-emptive force of each

of those statutes was so great that the Minnesota court

lacked jurisdiction even to decide whether the state stat-

ute was indeed pre-empted. The divided panel then held

that each federal statute pre-empted the operation of the

state law.

The decision runs contrary to this Court’s careful de-

lineation in several cases of the narrow circumstances

and “unique” statutes which fall within the “complete

pre-emption doctrine” under which a purported state

cause of action is in reality a federal cause of action and

thus, subject to removal under 28 U.S.C. § i441. The

decision also conflicts with the decision of the United

States Court of Appeals for the Third Circuit in Rail-

way Labor Executives’ Association v. Pittsburgh & Lake

Erie Railroad Co., et al., 858 F.2d 936 (3rd Cir. 1988),

which held that neither federal statute has such complete

pre-emptive force. Additionally, the panel’s conclusion

that the RLA and ICA pre-empted the State’s Fraudulent

Transfer Act, requiring the dismissal of the complaint,

is contrary to prior decisions of this Court.

A. The Railroad Line Sale

Soo is a class one railroad and the nation’s tenth

largest rail system. Prior to the sale which gave rise to

this suit, respondent Soo operated a rail system of over

7,500 miles of track, including 1,960 miles of track in the

states of Wisconsin, Minnesota, Illinois and upper Michi-

gan known as the Lake States Transportation Division

(hereinafter, “Lake States”|.* Appendix A at 2a. On

April 2, 1987, Soo agreed to sell Lake States to Wis-

consin Central, Limited [hereinafter, ‘Wisconsin Cen-

tral”], a railroad formed solely to purchase and operate

Lake States. Wisconsin Central was not a rail carrier

prior to its formation and purchase of Lake States. Jd.

at 2a-3a.

This sale was structured as a _ leveraged buy-out

whereby Wisconsin Central contributed little equity in

its investment and borrowed virtually the entire pur-

chase price; Wisconsin Central’s lenders took a first lien

on all Lake States assets. Jd. at 3a-4a. As collateral for

the loan, Wisconsin Central pledged Lake States’ assets

that, up to that point, had been available to Soo’s un-

secured creditors. The particulars of the transaction are

unknown to petitioners since Soo refused to disclose them

in this proceeding and has published only fragmentary

information concerning the sale.

The Interstate Commerce Commission [hereinafter,

“TCC” or “Commission”’], which has jurisdiction of

transfers of railroad assets, has held that transactions

such as the subject transaction are governed by 49

U.S.C. § 10901, which requires ICC approval before such

3 Respondent Soo’s rail system in 1987 was a combination of the

Soo as it existed in 1984 and over 3,000 miles of trackage which

the carrier acquired on February 19, 1985, from the Chicago, Mil-

waukee, St. Paul & Pacific Railroad Company. In re Chicago, Mil-

waukee, St. Paul & Pac. R.R., 799 F.2d 317 (7th Cir. 1986), cert.

denied, 107 S. Ct. 2460 (1987). The vast majority of the Lake

States Division lines were Soo trackage prior to the Milwaukee

acquisition.

transactions can be consummated. However, the ICC

exercised its authority under 49 U.S.C. § 10505 and

exempted the entire class of transactions like the Soo-

Wisconsin Central transaction from prior regulation under

the ICA. Ex Parte No. 392 (Sub-No. 1), Class Exemp-

tion for the Acquisition and Operation of Rail Lines

under 39 U.S.C, 10901 [hereinafter, “Ex Parte 392’'|

1 I.C.C. 2d 810 (1986), aff'd sub nom. Illinois Commerce

Commission v. ICC, 817 F.2d 145 (D.C. Cir. 1987)

(table). See Appendix A at 16a. In accordance with the

ICC’s Ex Parte 392 procedures, Wisconsin Central filed

a notice of exemption on September 4, 1987.4 The ICC

stayed the effectiveness of the exemption through Octo-

ber 27, 1987 to investigate the transaction, but later lifted

the stay while continuing to review the matter. Jd. at 3a.

Petitioner Robert F. Deford is a union represented

employee of the Soo, who alleged in the complaint that

he has present and future matured and unmatured

claims for accrued but unpaid wages, vacation pay, in-

surance, and severance pay. Deford brought his com-

plaint on his own behalf, and on behalf of a class of

similarly situated Soo employees, as creditors seeking to

protect their claims under the Fraudulent Transfer Act.

Petitioner RLEA sought to protect the claims of its con-

stituent member organizations, and the employees they

represent, as creditors of the Soo with respect to wages,

welfare benefits, dues “check offs”, and other matured

and unmatured claims under various collective bargain-

ing agreements. Jd. at 4a-5a.

# Under the ICC regulations which existed when Wisconsin Cen-

tral filed its verified notice, the exemption was effective seven (7)

days after the notice was filed. 49 C.F.R. § 1150.31(b) (1986). On

February 29, 1988, the ICC modified its Ea Parte 392 regulations

to require that at least thirty-five (35) days’ advance notice be

given for sales such as the one in this case. 49 C.F.R. § 1150.35(a)

and (e) (1989).

B. The Complaint

On June 12, 1987, Deford and RLEA brought this

action in Minnesota state court against respondent Soo,

Wisconsin Central and several individuals,® asserting

fraudulent conveyance claims under Minnesota common

law and the Minnesota Uniform Fraudulent Transfer

Act, Minn. Stat. Ann. §§ 518.41-51. (See Appendix E

hereto, at 55a-56a. )

The complaint alleged that the sale of Soo’s Lake States

division:

—constituted an attempt to hinder, delay, or defraud

Soo’s Lake States employees and RLEA of their

rights as existing Soo creditors. Joint Appendix

in 8th Cir. No. 87-5376 [hereinafter, “J.A.”] (J.A.

at 26) ;

—was not fair consideration and left Soo with

unreasonably small capital for future operations

(J.A. at 27) ; and

—constituted a conspiracy to frustrate their rights

as ereditors and tortious interference with their

rights as creditors (J.A. at 33).

The complaint asserted that the purpose and effect of

the Lake States sale was to circumvent, not breach, Soo’s

obligations to empleyee and union creditors. (J.A. at 33).

C. The District Court Decision

On July 1, 1987, the defendant railroads, claiming

federal question jurisdiction, removed the action to the

United States District Court for the District of Min-

nesota and moved to dismiss the complaint, asserting

complete federal pre-emption by the RLA and ICA. On

5 At the time this suit was filed, respondent Dennis M. Cava-

naugh was Chairman and Chief Executive Officer of the Soo;

respondents Edward A. Burkhardt, Thomas Power, and Robert

H. Wheeler were officers or directors of Wisconsin Central; re-

spondent Richard B. Ogilvie has since died; and respondent “John

Doe” includes unknown investors or lenders, among others. J.A.

at 11.

July 10, 1987, plaintiffs moved under 28 U.S.C. § 1447

for a remand of the action to state court.

On August 20, 1987, United States District Judge

James M. Rosenbaum denied petitioners’ motion to re-

mand and granted the railroads’ motion to dismiss, rul-

ing that the fraudulent conveyance claims “are deter-

mined by their [collective bargaining] contracts with the

railroads, [and therefore] these claims are governed by

the Railway Labor Act.” (Appendix B at 32a). Find-

ing that rights created by the collective bargaining agree-

ments were “essential elements” of the fraudulent con-

veyance claims, Judge Rosenbaum concluded that the ar-

bitration panels of the National Railroad Adjustment

Board [hereinafter, “NRAB”], set up by the RLA to re-

solve so called “minor disputes” (disputes over the inter-

pretation or application of collective bargaining agree-

ments), are the exclusive fora for these claims:

Where, as in this case, the dispute arises out of

the employment relationship and, in the final anal-

ysis, involves an attempt to impose a right claimed

to be incident to that relationship, the statutory

forum is the NRAB.

Id. at 33a.

D. The Court of Appeals Decision

A divided panel of the Eighth Circuit, with Chief

Judge Lay dissenting, agreed with the district court that

the RLA completely pre-empts petitioners’ fraudulent

conveyance claims; the panel additionally held that the

ICA also completely pre-empted these state law claims.

1. RLA Pre-emption

While acknowledging that a defense of federal law,

including federal pre-emption, traditionally is not a basis

for removal, the court of appeals said that this action

involved “a significant exception to the general rule

known as the ‘complete pre-emption doctrine.’ ” Appendix

A at 7a. The court of appeals concluded that “the RLA

‘pervasively occupies’ the field of railroad labor disputes,

completely pre-empting state law claims arising out of

collective bargaining agreements.” Jd. at 8a. The court

of appeals found that this fraudulent conveyance claim

is a “minor dispute” within the exclusive jurisdiction of

the NRAB because “the creditors’ rights asserted are

based upon the terms of the collective bargaining agree-

ments .... éd@, at 1aa.

The court acknowledged that the Third Circuit “has

recently addressed this issue and reached the opposite

result.” Jd. at 10a. However, the panel majority chose

not to follow the Third Circuit’s decision, concluding that

the “history and purpose” of the RLA demonstrated that

Congress intended it to be a complete pre-emption stat-

ute. 7d. at lla. The panel majority then ruled that the

RLA pre-empted the complaint because “[t]he existence

and extent of the creditors’ rights asserted by Deford and

by the RLEA ... can be determined only by interpret-

ing the collective bargaining agreements.” Jd. at 12a.

The court did not, however, identify any question of

interpretation of any collective bargaining agreement

involved in these claims.®

2. ICA Pre-emption

The court of appeals also held that the ICA “so per-

vasively occupies the field of railroad governance that it

completely pre-empts Deford’s state law claims” and

to support that conclusion, the court relied upon the

®To support its conclusion that rail labor’s complaint was

actually one involving the interpretation of collective bargaining

agreements, the Eighth Circuit looked to RLEA’s suit against the

Soo and Wisconsin Central which was pending in the United States

District Court for the Northern District of Illinois (Civil Action

No. 87 C 5293, RLEA v. Soo) in which RLEA sought to enforce

the arbitration provisions of certain employee protective agreements

and the RLA’s prior notice, bargaining and status quo commands.

See, Appendix A at 12a-13a.

“nature and purpose of the ICA” as well as the authority

it confers on the ICC. Jd. at 15a-16a. Noting that the

ICC is authorized by the ICA to consider the financial

aspects of a sale of a railroad line, and the impact of

a sale on all employees, the court said that to “allow

Deford to now bring a state law action would be to dis-

regard the ICC’s authority and expertise in this matter.”

Id. at 17a. In short, maintenance of Deford’s state law

fraudulent conveyance claim was held by the court of

appeals to be inconsistent with the authority of the ICC.

The Eighth Cireuit said (id. at 18a) :

Consequently, the ICC provides a forum in which

Deford may seek further relief and review com-

plaints or requests for revocation of the class exemp-

tion and imposition of labor protective conditions

that might be submitted by Deford or the RLEA.

The Court concluded that “this action is a collateral at-

tack upon the ICC’s decision to exempt the Lake States

Division sale from regulation.” Jd. at 1a.

3. The Dissent

In his dissenting opinion, Chief Judge Lay disagreed

with the majority’s conclusion that the Fraudulent

Transfer action involved a minor dispute pre-empted by

the RLA because the claims were derived from obliga-

tions arising under collective bargaining agreements.

Judge Lay cited this Court’s decision in Lingle v. Norge

Div. of Magic Chef, Inc., 486 U.S. , 100 L. Ed.2d 410

(1988), which he said “recently addressed the error” of

the majority’s reasoning. Appendix A at 23a. He noted

that in Lingle, a case involving Section 301 of the Labor

Management Relations Act, 29 U.S.C. § 185, this Court

had “held ‘that an application of state law is pre-empted

by § 301 only if such application requires the interpreta-

tion of a collective-bargaining agreement.’” Id., quoting

Lingle, supra at 420 (emphasis in original). Judge Lay

observed that this Court had further held that:

“TA] state law claim may depend for its resolu-

tion upon both the interpretation of a collective-

bargaining agreement and a separate state law anal-

ysis that does not turn on the agreement. In such

a case, federal law would govern the interpretation

of the agreement, but the separate state law analysis

would not be thereby pre-empted.”

Id. at 24a, quoting Lingle, supra at 423 n.12. He con-

cluded that in the instant case, the RLA does not pre-empt

Deford’s complaint since (id.) :

Interpretation of the collective bargaining agree-

ment is required only to determine standing as a

creditor, and to determine the amount of damages.

The state statute creates an entitlement independent

of the collective bargaining agreement, and is not

pre-empted by the RLA.

As to the ICA, Judge Lay concluded that that statute

“is not as pervasive in scope as either section 301 of the

LMRA or section 502(a) of ERISA,” the only two stat-

utes which this Court has found to be complete pre-

emption statutes, and that the ICA therefore “does not

completely pre-empt state law.” Jd, at 24a-25a. Further-

more, Judge Lay noted that the ICC had exempted Wis-

consin Central’s purchase of Lake States from regulation

and thus “the ICC did not in fact reach the merits of

the fraudulent conveyance claims.” Appendix A at 27a.

Judge Lay concluded that any pre-emptive force of either

the RLA or the ICA “is not of the magnitude necessary

to completely pre-empt state law so as to create removal

jurisdiction.” Jd. at 28a.

REASONS FOR GRANTING THE WRIT

This case presents important issues concerning the cen-

tury-old jurisdictional framework governing removal of

federal question cases from state courts into federal

courts. In particular, this case involves the extent to

which a defendant in a state court proceeding may ask

a federal court to assert jurisdiction over state law

causes of action where the defendant raises a-federal

regulatory statute as a defense to enforcement of the

relevant state law. While this Court has recognized in

certain, narrowly drawn circumstances, that Congress

has so pervasively regulated a particular field of conduct

that any cause of action dealing with that regulated field

is necessarily one arising under federal law, the Eighth

Circuit has expanded this “complete pre-emption” doc-

trine without any clear showing of a congressional intent

to so pervasively occupy the field that state courts are

deprived of jurisdiction to consider the underlying pre-

emption issue. Indeed, in expanding this doctrine, the

court of appeals relied upon two federal statutes which

do not, on their faces, or in their legislative histories,

purport to have such pervasive effects. Petitioners re-

spectfully submit that this expansion of the complete

pre-emption doctrine is contrary to applicable decisions of

this Court, in particuiar Caterpillar Inc. v. Williams, 482

U.S. 386 (1987), and Metropolitan Life Insurance Co. v.

Taylor, 481 U.S. 58 (1987). Moreover, the Eighth Cir-

cuit’s decision is in conflict with a decision by the Third

Circuit in a case virtually identical to the one at bar—

RLEA v. Pittsburgh & Lake Erie R.R., 858 F.2d 936

(3rd Cir. 1988). As we explain below, this Court should

grant the writ to eliminate this conflict on an important

issue of federal-state relationships.

I. THE PANEL DECISION IS INCONSISTENT WITH

THE LIMITED SCOPE OF THE COMPLETE PRE-

EMPTION DOCTRINE AND WITH THIS COURT’S

REASONING IN COMPLETE PRE-EMPTION CASES

Federal courts are courts of limited jurisdiction and,

thus, unless Congress has given the United States Dis-

trict Courts jurisdiction to consider the subject matter of

a suit, those courts do not have such jurisdiction. As

relevant here, Congress has conferred original jurisdic-

tion on the district courts to consider civil actions “aris-

ing under the Constitution, laws, or treaties of the

United States” (28 U.S.C. § 1331), and, in particular,

original jurisdiction over any civil action “arising under

any Act of Congress regulating commerce... .” 28

U.S.C. § 1337(a). Federal question jurisdiction, more-

over may be invoked at the discretion of a defendant,

if a suit is filed in a State court for under 28

U.S.C. § 1441(a) “any civil action brought in a State

court of which the district courts of the United States

have original jurisdiction, may be removed by the...

defendants, to the district court of the United States for

the district . . . embracing the place where such action is

pending.” As this Court has emphasized before, however,

“a cause of action arises under federal law only when

the plaintiff’s well-pleaded complaint raises issues of fed-

eral law.” Metropolitan Life Insurance Co. v. Taylor,

supra, 481 U.S. at 63 (emphasis added). This well-

pleaded complaint “rule makes the plaintiff the master of

the claim; he or she may avoid federal jurisdiction by

exclusive reliance on state law.” Caterpillar Inc. v. Wil-

liams, supra, 482 U.S. at 392 (footnote omitted).

Frequently, defendants seek to involve the federal courts

in state law suits by asserting that the state law claim is

pre-empted by a federal law. However, since 1887, such

a defense does not authorize removal to federal court, for

as this Court has stated:

[I]t is now settled law that a case may not be re-

moved to federal court on the basis of a federal

defense, including the defense of pre-emption, even

if the defense is anticipated in the plaintiff’s com-

plaint, and even if both parties concede that the

federal defense is the only question truly at issue.

Caterpillar, 482 U.S. at 393. There is, nevertheless, one

important caveat to this “principle,” for a corollary to

the ‘“‘well-pleaded complaint rule” is that: “Congress may

so completely pre-empt a particular area, that any civil

complaint raising this select group of claims is neces-

sarily federal in character.” Metropolitan Life, 481 U.S.

at 63-64.

This exception—i.e., the “complete pre-emption” doc-

trine—is rare, and will be found to exist only where it

can be concluded that the “pre-emptive force of a statute

is so ‘extraordinary’ that it ‘converts’ an ordinary state

common-law complaint into one stating a federal claim

for purposes of the well-pleaded complaint rule.” Cater-

pillar, 482 U.S. at 393, quoting Metropolitan Life, 481

U.S. at 65. In the area of labor relations, complete pre-

emption has been found to exist under only two statutory

provisions—Section 30l(a) of the LMRA, 29 U.S.C.

$185(a), and Section 502(a)(1)(B) of ERISA, 29

U.S.C. § 1132(a) (1) (B). Metropolitan Life, supra; Avco

Corp v. Aero Lodge No, 735, IAM, 390 U.S. 557 (1968).

In this case, though, the Eighth Circuit has expanded

this select group of statutes, but has done so for reasons

which ignore both the purposes underlying the complete

pre-emption doctrine and the way in which Congress and

this Court have carefully limited the ability of the fed-

eral courts to intrude into state iaw causes of action.

This Court has emphasized in Metropolitan Life that

the “touchstone” of the complete pre-emption doctrine is

the intent of Congress to make causes of action touching

upon a particular area of regulation removable to the

federal courts. 48i U.S. at 66. Whether or not a partic-

ular cause of action under state law is pre-empted by the

federal regulation, even if such preemption is “obvi-

ous,” is not determinative (id.); rather, the crucial in-

quiry is whether Congress intended to make its regula-

tion “so powerful” as to displace any state cause of ac-

tion governing the same conduct as regulated by Con-

gress. Franchise Tax Board v. Laborers Vacation Trust,

463 U.S. 1, 23 (1983). If such an intent is present, then

the cause of action is “purely a creature of federal law”

(id.), and, thus, one arising under federal law within the

meaning of 28 U.S.C. § 1821.

In the two situations where this Court has found ‘“‘com-

plete pre-emption” in the labor relations area, there existed

clear manifestations of congressional intent. In Avco

Corp. v. Aero Lodge No. 735, IAM, supra, 390 U.S. at

559-60, this Court reiterated its earlier conclusion in

Textile Workers v. Lincoln Mills, 353 U.S. 448 (1957),

that Congress intended Section 301(a) of the LMRA to

give the federal courts the power to fashion “federal law,”

based on federal labor policies, when enforcing collective

bargaining agreements. Consequently, a suit to erforce

a collective bargaining agreement, even though brought in

a state court, is an action controlled by federa! substan-

tive law and, thus, removable to federal court. 390 U.S.

at 560.

Similarly, in Metropolitan Life, this Court looked to

congressional intent to determine if Section 502/(a) (1)

(B) of ERISA had a complete pre-emptive effect. After

observing that in “the absence of explicit direction from

Congress, th[e] question [of whether Section 502(a) (1)

(B) had such an effect] would be a close one” (Metro-

politan Life, 481 U.S. at 64), this Court examined

ERISA’s legislative history to ascertain that intent. Jd.

at 65-66. As this Court found, the civil enforcement pro-

vision of ERISA, Section 502(f), parallels $ 301 of the

LMRA by providing district courts with jurisdiction to

adjudicate claims for benefits under ERISA. Additionally,

the Conference Report on ERISA stated that all actions

brought under § 502(a) “are to be regarded as arising

under the laws of the United States in similar fashion

to those brought under § 301” of the LMRA. H.R. Conf.

Rep. No. 93-1280 at 327 (1974). That legislative history

was determinative, for:

No more specific reference to the Avco rule can be

expected and the rest of the legislative history con-

sistently sets out this clear intention to make § 502

(a)(1)(B) suits brought by participants or benefi-

ciaries federal questions for purposes of federal court

jurisdiction in like manner as § 301 of the LMRA.

Metropolitan Life, 481 U.S. at 66. No such indication of

congressional intent exists under either the RLA or ICA.

A. RLA Pre-Emption

This Court has long recognized that Section 3 of the

RLA, 45 “U.S.C. $153, gives the adjustment boards

created under that statutory provision “exclusive” juris-

diction to resolve disputes “growing out of grievances or

out of the interpretation or application of” collective bar-

gaining agreements between a railroad and its employees

—i.e., “minor disputes.” Slocum v. Delaware, Lacka-

wanna & Western R.R., 339 U.S. 239 (1950); Order of

Railway Conductors v. Pitney, 326 U.S. 561 (1946). Since

Congress has given the adjustment boards this jurisdic-

tion, no court, neither a state nor a federal court, has ju-

risdiction “to invade the jurisdiction conferred on the

Adjustment Board by the Railway Labor Act.” Slocum,

339 U.S. at 244."

Centering upon this intent of Congress to keep “minor

disputes” out of the courts, the Eighth Circuit concluded

that “the RLA’s preemptive force is so extraordinary that

it takes over the whole field of railroad labor disputes

arising from collective bargaining agreements.” Appendix

A at 10a. And to support that conclusion, the appellate

court equated Section 3 of the RLA to Section 301 of the

LMRA, adding that because Section 3 of the RLA “has

essentially the same function as section 301 of the LMRA”

(Appendix A at 10), this Court’s decision in Avco “should

also apply to the RLA.” Zd.

By equating Section 3 of the RLA to Section 301 of the

LMRA, the Eighth Circuit ignored the crucial differences

between the two statutory schemes. Section 3 of the RLA

‘Since no court has jurisdiction to resolve a dispute involving

solely the interpretation of an RLA collective bargaining agree-

ment, it follows that a suit to enforce such an agreement in state

or federal ceurt cannot be one “arising under” federal law.

gives the adjustment boards’ exclusive jurisdiction to in-

terpret railroad collective bargaining agreements, but, un-

like Section 301 of the LMRA, it does not give federal

courts jurisdiction to construe or to enforce such collec-

tive bargaining agreements; nor does it authorize those

courts to develop a body of federal law implementing our

national labor policies. See, Textile Workers v. Lincoln

Mills, supra, 353 U.S. at 456-57. Consequently, Section 3

of the RLA lacks the pervasive nature of Section 301

which this Court concluded in Avco showed a congres-

sional intent to make any suit to enforce an NLRA col-

lective bargaining agreement a federal cause of action.

But even in Section 301 cases, a state law claim is not

pre-empted, and thus, does not become a federal cause of

action, where the state claim is “independent” of the col-

lective bargaining agreement—i.e., where “resolution of

the state-law claim does not require construing the

collective-bargaining agreement.” Lingle v. Norge Divi-

sion of Magic Chef, Inc., 486 U.S. , 100 L. Ed.2d

410, 420 (1988). As Chief Judge Lay noted in his dissent

in this case, petitioners’ claims under the Minnesota

Fraudulent Transfer Act do not require the state court

to construe the coll.ctive bargaining agreements, but

rather, require the interpretation of the State’s statute.

Appendix A at 24a. Under that state statute, which is

the Uniform Fraudulent Transfer Act that has been en-

acted by many states, including Pennsylvania,* a plaintiff

seeking relief under that Act need not establish the validity

of a claim or have final judgment on a claim. F.9., Baker

v. Geist, 457 Pa. 73, 321 A.2d 635 (1974); Babcock v.

Tam, 156 F.2d 116 ‘9th Cir. 1946) ; see also, Neubauca v.

Clontier, 265 Minn. 539, 122 N.W.2d 623 (1963); BBCA,

Inc. v. United States, 630 F. Supp. 349 (D. Minn. 1986).

§ Pennsylvania Fraudulent Conveyance Act, 39 Pa. C.S.A. § 351,

et seq.; this Act was the state statute involved in RLEA v. Pitts-

burgh & Lake Erie R.R., supra.

However, even if the validity of the employees’ claims

were disputed, and the resolution of that dispute was

relevant to the ultimate application of the state statute,

that fact would not oust the state court of jurisdiction

over the Fraudulent Transfer claim. This is so, because

as this Court noted in Lingle (100 L. Ed.2d at 423 n.12) ;

|A]s a general proposition, a state law claim may de-

pend for its resolution upon both the interpretation

of a collective-bargaining agreement and a separate

state law analysis that does not turn on the agree-

ment. In such a case, federal law would govern the

interpretation of the agreement, but the separate

state law analysis would not be thereby pre-

empted....

Thus, whether or not Section 3 of the RLA is a complete

pre-emption statute required a much more thorough anal-

ysis than was employed by the Eighth Circuit. That

analysis should have examined the fact that the adjust-

ment boards have no power to construe or to enforce the

rights which the State’s Fraudulent Transfer Act gives

all creditors, whether they are employees or mortgagors,

since the complete pre-emption decisions of this Court are

all consistent with this principle: federal statutes displace

state-law claims only when the federal statute provides

a federal cause of action to replace the state claim. Con-

gress has provided no such substitute in the RLA to aid

employees or other creditors in protecting the security

for their claims.

B. ICA Pre-Emption

Although Congress has been regulating our nation’s

railroads through the ICA for over a century, no appel-

late court, until this case, has ever held that the ICA so

completely pre-empts state laws as to make a state cause

of action a federal cause of action. Indeed, while this

Court has observed that the ICA “is among the most per-

vasive and comprehensive of federal regulatory schemes”

(Chicago & North Western Transportation Co, v. Kalo

Brick & Tile Co., 450 U.S. 311, 318 (1981)), it has

stopped far short of finding a complete pre-emptive ef-

fect. Compare, Kalo Brick, 450 U.S. at 331-32 (state

cause of action precluded where ICC reached merits of

claim, but Court “reserve[d] for another day the ques-

tion whether such a cause of action lies when no applica-

tion is made to the Commission”), and, Hayfield Northern

R.R. v. Chicago & North Western Transportation Co., 467

U.S. 622 (1984) (ICA does not pre-empt state eminent

domain law which applied after carrier had exercised ICC

authority and abandoned line). Moreover, even where

Congress has expressly provided that an ICC order pre-

empts state law, such as in 49 U.S.C. $ 11341(a), this

Court has concluded that the forum called upon to enforce

that state law—i.e., the state court—has jurisdiction to

determine whether the state law is in fact pre-empted

by the ICA. Seaboard Air Line R.R. v. Daniel, 333 U.S.

118, 122-23 (1948); see also, ICC v. BLE, 482 U.S. 270,

300 n.13 (1987) (Stevens, J., concurring).

In short, if the ICA was a complete pre-emption statute,

that effect would have been recognized long-ago. The fact

that it has not been so noted shows that the Eighth

Circuit’s analysis was flawed.

The incongruity of the Eighth Circuit’s complete pre-

emption rulings is highlighted by its conclusion that two

distinct federal statutes, with decidedly different purposes,

each completely pre-empts the same state law. No pre-

vious case has held that there can be such dual pre-

emption by different statutes. In this Court’s previous

complete pre-emption cases, the parties whose state rights

were pre-empted had a single, obvious alternative forum

to air their grievance and a specific remedy authorized by

federal law. Here, to the contrary, neither the NRAB nor

the ICC is a forum dedicated or even charged to hear

fraudulent conveyance claims or to protect the interests

of railroad creditors.

—

Il. THE DECISION OF THE DIVIDED EIGHTH CIR-

CUIT PANEL CONFLICTS WITH A THIRD CIR-

CUIT DECISION IN A VIRTUALLY IDENTICAL

MATTER AND WITH THE DECISIONS OF OTHER

COURTS

As the panel acknowledged in its divided decision be-

low (App. A at 10a), its conclusion that the RLA is a

complete pre-emption statute was contrary to the Third

Cireuit’s analysis of a similar issue in RLEA v. Pitts-

burgh & Lake Erie R.R. [hereinafter, “P&LE”], 858

F.2d 936 (3rd Cir. 1988). Additionally, the panel’s con-

clusion that the ICA is a complete pre-emption statute is

also contrary to the Third Circuit’s P@LE decision which

concluded on identical facts that the ICA is not a com-

plete pre-emption statute. Because as we explain below,

the issues of whether the RLA and ICA completely pre-

empt rail labor’s ability to protect the creditor status and

security of employee claims is an important and recur-

ring issue in the rail industry today, this Court should

resolve this direct conflict between the circuits.

P&LE, like this case, involved a state law fraudulent

conveyance challenge to a railroad’s sale of assets to a

noncarrier pursuant to an exemption granted under 49

U.S.C. § 10505 from ICC regulation under 49 U.S.C.

$ 10901. Rail labor brought the P&LE case in state

court, but the railroad defendants removed that action

to federal district court and then moved to dismiss, alleg-

ing that the RLA and the ICA pre-empted the state

fraudulent transfer claims. As in this case, RLEA

sought a remand of the complaint to state court and op-

posed the motion to dismiss. RLEA was unsuccessful ini-

tially, for the district court agreed with the railroads,

denied the motion to remand, and dismissed the com-

plaint. That judgment was reversed by the Third Circuit

which held that the district court was without subject

matter jurisdiction and that the case must be remanded

to the state court where the railroads could assert their

pre-emption argument as a defense to the complaint. 858

F.2d at 944.

In P&LE, the Third Circuit relied heavily on this

Court’s analysis in Metropolitan Life and Avco to con-

clude that neither the ICA nor the RLA is a complete

pre-emption statute (858 F.2d at 939-942), noting that

this Court has relied upon the establishment of “civil en-

forcement provision[s]” in the LMRA and ERISA, as

well as “clear indication[s] of Congressional intention [s]

to permit removal despite the plaintiff’s exclusive reliance

on state law” in finding those statutes to be complete

pre-emption statutes. 858 F.2d at 942. The Third Circuit

also relied upon this Court’s decision in Caterpillar, not-

ing that this Court “emphasized that complete preemp-

tion is a distinct concept from ordinary preemption: ‘The

fact that a defendant might ultimately prove that a plain-

tiff’s claims are preempted under the NLRA does not

establish that they are removable to federal court.’”’ 858

F.2d at 941, quoting Caterpillar, 482 U.S. at 398.

Based upon its review of this Court’s precedent, the

P&LE Court held that the RLA is not a complete pre-

emption statute, stating “we find no evidence in the RLA

or its legislative history of a congressional intent to per-

mit recharacterization and removal of what purports to

be a state claim.” 858 F.2d at 939, 942.

The P&LE Court also held that the ICA is not a com-

plete pre-emption statute giving rise to federal court re-

moval jurisdiction. The court stated:

The ICA, like the RLA contains no civil enforcement

provisions creating a federal cause of action in favor

of one in the position of RLEA or the employee credi-

tors. Likewise, we find no affirmative evidence in the

ICA or its legislative history that Congress intended

state claims of this kind to be removable. Indeed,

we have found no case or commentary even suggest-

ing that there may be complete preemption under the

ICA. For these reasons, we hold that the district

court is without authority to recharacterize the state

cause of action pleaded by RLEA as a federal cause

of action arising under the ICA.

858 F.2d at 942. That decision, on both statutes, is in

direct conflict with the Eighth Circuit’s holdings and

reasoning.

The divided panel’s decision here regarding the pre-

emptive effect of the RLA also conflicts with the Ninth

Cireuit’s decision in Price v. PSA, Inc., 829 F.2d 871

(9th Cir. 1987), cert. denied, 108 S.Ct. 1732 (1988). In

Price, the defendant employer claimed that the plaintiff

employee’s state law wrongful discharge claims were

completely pre-empted by the RLA. The Price court,

using a complete pre-emption analysis similar to that

argued by petitioners below, held that the RLA is not a

complete pre-emption statute, and stated “Congress has

not indicated, as it did with LMRA § 301 and ERISA,

that the RLA is ‘so powerful as to displace entirely any

state cause of action.’” 829 F.2d at 876, quoting, Fran-

chise Tax Board v. Construction Laborers Vacation Trust,

supra, 463 U.S. at 23.°

In short, there is a square conflict among the circuits

on these important issues of law.

III. EXPANSION OF THE COMPLETE PRE-EMPTION

DOCTRINE, AND THE RELATED CONTRACTION

OF SUBSTANTIVE STATE LAW, IS A MATTER

OF NATIONAL IMPORTANCE AND CONCERN

This case arises because of the overly-leveraged nature

of Soo’s sale of Lake States to Wisconsin Central. The

®The Eighth Circuit’s decision on the pre-emptive effect of the

RLA and ICA also conflicts with a decision of the United States

District Court for the Northern District of Illinois in Gendron v.

Chicago & Northwestern Transportation Co. (unreported decision

rendered from bench by Shadur, J., April 7, 1988) (that decision is

reproduced herein as Appendix G.) Gendron involves, as here and

in P&LE, a challenge by a railroad creditor under the Illinois

Fraudulent Conveyance Act to a railroad’s ICC-exempted sale of a

portion of its line to a nonearrier. The district court recognized

the “importance of the issues” and stated that these “are obviously

recurring matters.” Relying on Price, 829 F.2d 871, the district

court held that the RLA is not a complete pre-emption statute.

The court also held that the ICA is not a complete pre-emption

statute. Appendix G at 65a.

leveraged buy-out, and indeed the overly leveraged buy-

out, are phenomena of our times. These transactions

take assets that, up to the point of sale, were available

to the seller’s unsecured creditors to satisfy claims, and

pledge them to the buyer’s lenders. In other words, the

subject assets are taken out of the reach of the unsecured

creditors of the seller, sometimes improperly. United

States v. Gleneagles Inv. Co., Inc., 565 F. Supp. 556

(M.D. Pa. 1983). As long as businesses, especially busi-

nesses in financial trouble, continue to engage in overly-

leveraged sales of assets, their unsecured creditors will

turn to fraudulent conveyance actions to protect their

rights. See, United States v. Tabor Realty Corp., 803

F.2d 1288, 1287 (3rd Cir. 1986), cert. denied sub nom.

McClellan Realty Co. v. United States, 107 S. Ct. 3229

(1987). This phenomenon is now spreading to the rail

industry (see, ICC Docket Ex Parte 480, served May 2,

1989), and for Class I railroads which find themselves

in financial trouble, these transactions seem attractive

and probably will continue. As long as they do, creditors

of the railroads will seek fraudulent conveyance relief

and will be confronted with ICA pre-emption arguments,

as well as RLA pre-emption arguments if they are cov-

ered by collective bargaining agreements.

But the most significant portent of the Eighth Cir-

cuilt’s decision goes beyond the RLA and ICA. If the

Eighth Circuit is correct, a dramatic expansion of the

complete pre-emption doctrine must occur. There are

numerous other examples of federally regulated indus-

tries, especially those under licensing statutes, where regu-

lated businesses will contend they are now free of state

law constraints applicable to every other business. Many

existing state laws may fall. F.g., Baltimore & Ohio R.R.

v. Oberly, 8837 F.2d 108 (3rd Cir. 1988) (state noise

control statute not pre-empted by Federal Noise Control

Act); Cresenzi Bird Importers, Inc. v. New York, 658

F. Supp. 1441 (S.D.N.Y. 1987) (license under federal

Endangered Species Act does not pre-empt regulation

under New York Wild Bird Law.)

In this case, Soo employees have been left without a

means to vindicate the state interest expressed in the

Fraudulent Transfer Act, for neither the adjustment

boards nor the ICC can consider or enforce those rights.

But more important to this writ, the courts of the State

of Minnesota have been deprived of their right to decide

in the first instance whether the State’s statute is pre-

empted by the federal laws. Neither congress nor this

Court has sanctioned such an expansion of federal juris-

diction, and due to the square conflict in the circuits on

this important issue, this Court should determine whether

the Eighth Circuit was correct in expanding the complete

pre-emption doctrine.

CONCLUSION

For the reasons set forth above, the writ should be

granted.

Respectfully submitted,

WILIAM G. MAHONEY

JOHN O’B. CLARKE, JR.*

RICHARD S. EDELMAN

HIGHSAW & MAHONEY, P.C.

Suite 210

1050 17th Street, N.W.

Washington, D.C. 20036

(202) 296-8500

TIMOTHY D. KELLY

3720 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

(612) 349-6171

Attorneys for Petitioners

Date: May 10, 1989 * Counsel of Record

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 87-5376

ROBERT F. DEFORD, on behalf of himself and all employ-

ees of Soo Line Railroad Company affected by the dis-

position of Lake States Transportation Division and

RAILWAY LABOR EXECUTIVES’ ASSOCIATION, on behalf

of itself and represented employees,

Appellants,

Soo LINE RAILROAD COMPANY, a Minnesota Corporation,

Soo LINE CORPORATION, a Minnesota corporation,

DENNIS M. CAVANAUGH, Wisconsin Central Ltd., an

Illinois corporation, EDWARD A. BURKHARDT, THOMAS

POWER, ROBERT H. WHEELER, JOHN DOE and RICHARD

B. OGLIVIE,

Appellees.

Appeal from the United States District Court

for the District of Minnesota

Submitted: May 12, 1988

Filed: February 9, 1989

——_.

Before LAY, Chief Judge, HENLEY, Senior Circuit

Judge, and JOHN R. GIBSON, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

This appeal is brought by Robert F. Deford, on behalf

of himself and all other employees of the Soo Line Rail-

road Company adversely affected by the sale of a portion

of Soo Line’s rail lines, and by the Railway Labor Execu-

tives’ Association (RLEA).' The district court? denied

a motion to remand the case to state court and dismissed

appellants’ complaint under Fed. R. Civ. P. 12(b) (1)

for lack of subject matter jurisdiction. The district

court, in statements from the bench, determined that the

case Was a “minor dispute” under the Railway Labor

Act (RLA), 45 U.S.C. $$ 151-188 (1982), and that the

RLA completely preempted Deford’s state law claims of

fraud, conspiracy, and tortious interference with credi-

tor’s rights, and required arbitration rather than court

adjudication. We affirm the district court’s judgment

denying remand to state court and dismissing the com-

plaint, and conclude that the district court properly

analyzed the preemptive effects of the RLA. We further

hold that under the circumstances of this case the Inter-

state Commerce Act (ICA), 49 U.S.C. $$ 10101-11917

(1982); is also an appropriate basis to preempt the state

law claims. ;

On April 2, 1987, Soo Line, a class I railroad with

approximately 7,750 miles of rail lines in twelve states,

agreed to sell a portion of its rail lines (1,960 miles)

known as the Lake States Division to Wisconsin Central

Ltd. Wisconsin Central, a recently formed Illinois cor-

poration, was not a carrier prior to the transaction. but

1RLEA is a voluntary, unincorporated association of the chief

executive offices [sic] of the standard national and international

railway unions in the United States. RLEA brings this action on

behalf of its constituent members and their unions.

* The Honorable James M. Rosenbaum, United States District

Judge for the District of Minnesota.

became a completely independent railroad upon the sale

of the Lake States Division. The structure of the sale

was a leveraged buyout, where Wisconsin Central. having

little equity in the investment, financed a substantial

portion of the purchase price. Wisconsin Central’s lender

then took first lien on all the assets of the Lake States

Division.

Sales such as these are governed by the Interstate

Commerce Act (ICA}, which provides for Interstate

Commerce Commission (ICC) regulation of railroad ac-

quisitions. To comply with the ICA, Wisconsin Central

was required to either obtain ICC approval of the sale

or receive an exemption from the ICC approval proce-

duves. Wisconsin Central filed a notice of exemption

with the ICC on September 4, 1987. The ICC stayed

the effectiveness of the notice of exemption through Octo-

ber 27, 1987 to investigate the acquisition and invited

comments by interested parties. After evaluating com-

ments by several labor organizations, including the

RLEA, the ICC lifted the stay but continued to review

the transaction. The sale became effective three days

later. The RLEA then filed a petition to revoke the

exemption, which the ICC denied on July 8, 1988.

Deford and RLEA brought this action in Minnesota

state court on June 12, 1987, asserting claims under

Minnesota common law and the Minnesota Uniform

Fraudulent Transfer Act, Minn. Stat. Ann. &§ 513.4)-

51.° Deford first alleged that the sale of the Lake States

* Deford and RLEA framed their complaint around Minn. Stat.

§$ 513.20-513.32. This statute, however, was repealed but rein-

stated in 1987 with minor changes. Because the changes are not

relevant here, we base our analysis on the new statute. The statute

provices in part:

513.44 Transfers fraudulent as to present and future creditors

(a) A transfer made or obligation incurred by a debtor is

fraudulent as to a creditor, whether the creditor’s claim arose

before or after the transfer was made or the obligation was

Division to Wisconsin Central was an attempt to de-

fraud Soo Line employees and the RLEA of their rights

and benefits as creditors, in the form of accrued but un-

paid wages, vacation pay, labor protection pay, insurance

premiums, and pension contributions. Deford further al-

leged that the transfer of proceeds from the sale was not

for fair consideration, leaving Soo Line with an unrea-

sonably small amount of capital for future operations.

Further, Deford stated that the sale proceeds will be

disbursed to shareholders and other creditors of Soo Line,

not to Soo Line employees. Thus, the position of the

plaintiffs as creditors of an undercapitalized post-sale

entity would be severely impaired. Deford also alleged

that the leveraged sale of Lake States Division is a

fraudulent conveyance as to those Soo Line employees

who will quit and join Wisconsin Central, because Wis-

incurred, if the debtor made the transfer or incurred the

obligation:

(1) with actual intent to hinder, delay, or defraud any

creditor of the debtor; or

(2) without receiving a reasonably equivalent value in ex-

change for the transfer or obligation, and the debtor:

(i) was engaged or was about to engage in a business or

a transaction for which the remaining assets of the debtor

were unreasonably small in relation to the business or trans-

action; or

(ii) intended to incur, or believed or reasonably should have

believed that he vr she would incur, debts beyond his or her

ability to pay as they became due.

% * *

513.45. Transfers fraudulent as to present creditors

(a) A transfer made or cbligation incurred by a debtor is

fraudulent as to a creditor whose claim arose before the

transfer was made or the obligation was incurred if the debtor

made the transfer or incurred the obligation without receiving

a reasonably equivalent value in exchange for the transfer or

obligation and the debtor was insolvent at that time or the

debtor became insolvent as a resuit of the transfer or obliga-

tion.

consin Central’s secured lenders will have superior claims

to Lake States assets. Finally, Deford alleged common

law claims of conspiracy to frustrate creditors’ rights

and tortious interference with creditors’ rights, arguing

that the purpose and effect of the transaction was to cir-

cumvent Soo Line’s labor agreement obligations to its

employees and union creditors.

Deford sougiit a declaration that the sale of the Lakes

[sic] States Division, the distribution of proceeds from the

sale, and the creation of any security interests on the

assets of the Lake States Division constituted a fraudu-

lent conveyance. Deford further sought an order that

the proceeds from the sale not be disbursed or pledged

until the rights of the plaintiffs are adequately provided

for, and that a receiver be appointed so that the sale

proceeds may be placed in trust for the benefit of Soo

Line employees and creditors.

Thereafter, the suit was removed to the United States

District Court of Minnesota on the grounds that federal

law preempted the state claims. Upon Deford’s motion

to remand and Soo Line’s motion to dismiss, the district

court concluded:

plaintiffs have asserted rights arising under certain

collective bargaining agreements and their contrac-

tual arrangements with the Defendant. * * *

[T]hese claims are governed by the Railway Labor

Act. * * * The application of this statute and the

necessity of its interpretation establish the exist-

ence of a federal question as an essential element of

the plaintiff’s cause of action providing the basis for

removal.

Deford v. Soo Line R.R. Co., No. “4-87-582, (D. Minn.

August 20, 1987). The district court further stated that

Deford could not avoid removal by failing to plead nec-

essary federal questions and that artful pleading by the

plaintiffs would not conceal the true nature of the com-

plaint. Finally, the district court held that the case in-

volved a “minor dispute’ which must be arbitrated ac-

cording to the procedures of the RLA, which provides

that the exclusive forum for a union dispute is the Na-

tional Railway Arbitration [sic] Board (NRAB). The

district court concluded that since the state court lacked

subject matter jurisdiction, the district court acquired

none upon removal. The suit was therefore dismissed for

lack of subject matter jurisdiction. Deford now appeals,

alleging error in the removal of the case to federal court

and the subsequent dismissal of the case.

Il.

The nature of the claims asserted by Deford have in es-

sence two purposes. The first is to protect the rights and

benefits of employees and the second is to raise questions

about the financial soundness of the conveyance of the

rail line from Soo Line to Wisconsin Central. These pur-

poses in turn involve consideration of the protections af-

forded the employees by the Railway Labor Act, and the

regulatory structures involved in approval of the transfer

under the Interstate Commerce Act.

The primary issue before us is whether removal of

Deford’s state fraudulent conveyance and common law

claims to federal court was proper, giving the district

court power to dismiss for lack of subject matter juris-

diction. To determine this, we must decide whether the

Railway Labor Act, the Interstate Commerce Act, or both

completely preempt the state law claims. Only if there is

complete preemption is removal justified, and it follows

that such preemption then dictates dismissal.

To remove a case to federal court under 28 U.S.C.

1441, the claim must “aris[e] under’ federal law. Ordi-

narily, a “right created by federal law must be an essen-

tial element of plaintiff’s cause of action,” and the essence

of the federal claim must appear on the face of the com-

plaint. Evans v. Missouri Pac. R.R. Co., 795 F.2d 57,

58 (8th Cir. 1986), cert. denied, U.S. , 107

S. Ct. 1886 (1987). Thus, a defense of federal law, in-

cluding the defense of federal preemption, is traditionally

not a basis for removal. Franchise Tax Board v. Con-

struction Laborers Vacation Trust, 463 U.S. 1, 4 (1983).

The Supreme Court. however, has fashioned a signifi-

cant exception to the general rule known as the “com-

plete preemption doctrine.” This rule states that when-

the preemptive force of a federal statute is “extraordi-

nary,” it “converts an ordinary state common law com-

plaint into one stating a federal claim for purposes of

the well-pleaded complaint rule.” Caterpillar, Inc. v.

Williams, US. , 107 S. Ct. 2425, 24380 (1987).

This exception prohibits a plaintiff from defeating re-

moval by failing to plead necessary federal questions in

a complaint and allows a defense of federal preemption

as a basis for removal.

The Supreme Court has specifically recognized the com-

plete preemption doctrine in two distinct areas. In Avco

Corp. v. Aero Lodge No. 735, Int'l Ass’n of Machinists

& Aerospace Workers, 390 U.S. 557 (1968), the Supreme

Court held that section 301 of the Labor Management

Relations Act (LMRA), 29 U.S.C. § 185, displaced any

otherwise applicable state law, even though the suit was

brought in a state court. Avco involved an employer who,

relying on state law, brought suit in a state court to

enjoin a union from violating a collective bargaining

agreement by striking. The court stated that when a

section 301 action is brought, “|s]tate law * * * will be

absorbed as federal law and will not be an independent

course of private rights.” Jd. at 560 (citing Tevtile

Workers v. Lincoln Mills, 353 U.S. 448 (1957)). Thus,

the claim was one arising under the laws of the United

States within the meaning of the removal statute. 28

U.S.C. § 1441 (b).

The Supreme Court extended the complete preemption

doctrine in Metropolitan Life Ins. Co. v. Taylor, 481 U.S.

58, 107 S. Ct. 1542 (1987), permitting removal based on

claims arising under section 502(a) of the Employee Re-

tirement Income Security Act (ERISA), which provides

for exclusive federal resolution of employee benefit dis-

putes involving a covered plan. The court stated that the

remedies of the federal “scheme would be completely

undermined if ERISA plan participants and beneficiaries

were free to obtain remedies under state law that Con-

gress rejected in ERISA.” 107 S. Ct. at 1547 (citing

Franchise Tax Board, 463 U.S. at 25-26) ).

Deford maintains that the complete preemption doc-

trine applies only to section 502(a) of ERISA and sec-

tion 301 of LMRA and that the district court erred in

finding that complete preemption applies to the RLA as

well. We recognize the Supreme Court has expressed re-

luctance to find this extraordinary preemptive power. I[d.

We are satisfied, however, that the reason underlying

Caterpillar, Avco, and Metropolitan do not limit the doc-

trine to only the two statutes recognized by the Supreme

Court. We believe that the fundamental question is

whether the RLA or the ICA so pervasively occupy the

field of railroad governance that a competing state law

claim necessarily invokes federal law.

IIT.

In analyzing the statutory scheme of the RLA, we

conclude that it “pervasively occupies” the field of rail-

road labor disputes, completely preempting state law

claims arising out of collective bargaining agreements.

The Railway Labor Act was enacted by Congress to pro-

mote stability in labor-management relations in the rail-

road industry. Union Pac. R.R. Co. v. Sheehan, 439 U.S.

89, 94 (1978). To effectuate this purpose the RLA pro-

vides for mandatory administrative grievance procedures

and remedies for “minor disputes” arising from the em-

ployment relationship between a railroad employee and

the carrier.* A minor dispute is one involving the inter-

pretation or application of an existing collective bargain-

ing agreement. The RLA grants to the NRAB exclusive

power to resolve all minor “disputes between an employee

or group of employees and a carrier * * * growing out

of grievances or out of the interpretation or application

of agreements concerning rates of pay, rules, or working

conditions * * *.” 45 U.S.C. § 153(i). NRAB decisions

in disputes arising out of collective bargaining agree-

ments are subject to limited judicial review in the fed-

eral courts. Once the administrative remedy with the

NRAB has been exhausted, the party may not relitigate

the issue in an independent judicial proceeding. Andrews

v. Louisville & Nashville R.R. Co., 406 U.S. 320, 325

(1972).

In compliance with the RLA requirements, federal

courts have routinely dismissed a wide variety of state

law claims, holding that statutory grievance procedures

under the RLA are the mandatory and exclusive federal

remedy for resolving minor disputes. “In enacting this

legislation * * * Congress considered it essential to keep

these so-called ‘minor disputes’ within the National Rail-

road Adjustment Board and out of the courts.” Union

Pacific R. R. v. Sheehan, 439 U.S. 89, 99 (1978) (em-

phasis added). See also Andrews, 406 U.S. at 325;

Brotherhood of Locomotive Eng’rs v. Louisville & Nash-

ville R.R. Co., 373 U.S. 38, 38 (1963) ; Landfried v. Ter-

4“The terms ‘major’ and ‘minor’ are not contained in the RLA,

but were articulated by the United States Supreme Court to dif-

ferentiate two types of disputes described in the Act which have

distinct avenues of relief.” Brotherhood of Locomotive Eng’rs

v. Boston & Maine Corp., 788 F.2d 794, 797 n.3 (1st Cir.), cert.

denied, —— U.S. ——, 107 S. Ct. 111 (1986) (citing Elgin Joliet

& E. Ry. Co. v. Burley, 325 U.S. 711 (1945)). Major disputes

relate to the “formation or modification of the collective bargaining

agreement,” and thus have no bearing whatsoever on this case.

The issue here is whether the minor dispute provisions of the RLA

apply to preempt plaintiffs’ state law causes of action.

10a

minal R. Assoc., 721 F.2d 254, 255 (8th Cir. 1988), cert.

denied, 466 U.S. 928 (1984); Gregory v. Burlington N.

R.R. Co., 6388 F. Supp. 538, 540-41 (D. Minn. 1986),

aff'd, 822 F.2d 1092 (8th Cir. 1987).

There is overwhelming case law to support our decision

that the RLA’s preemptive force is so extraordinary that

it takes over the whole field of railroad labor disputes

arising from collective bargaining agreements. In An-

drews, 406 U.S. at 321, the Supreme Court accepted the

RLA as an appropriate jurisdictional basis for removing

a case from state to federal court. Similarly, the Ninth

Circuit in Schroeder v. Trans World Airlines, Inc., 702

F.2d 189, 192 (9th Cir. 1983), held that a state action

against an employer for wrongful demotion was remov-

able to federal court because the nature of plaintiff’s com-

plaint was actually a grievance or dispute under the RLA.

See also Beers v. Southern Pac. Transp. Co., 703 F.2d 425,

427 (9th Cir. 1983) ; McKinney v. Int’l Ass’n of Machin-

ists & Aerospace Workers, 624 F.2d 745, 747 (6th Cir.

1980). The Seventh Circuit has even equated the RLA

with the LMRA to find complete preemptive powers in

the RLA. See, e.g., Leu v. Norfolk & W. Ry. Co., 820

F.2d 825, 830 (7th Cir. 1987); Graf v. Elgin, Joilet &

E. Ry. Co., 790 F.2d 1341, 1346 (7th Cir. 1986). Be-

cause section 153 of the RLA has essentially the same

function as section 301 of the LMRA, which also involves

settling collective bargaining disputes, these courts con-

cluded that the Supreme Court’s section 301 analysis in

Avco, recognizing complete preemption of state law claims,

should also apply to the RLA.

The Third Circuit, however, has recently addressed this

issue and reached the opposite result. See Railway Labor

Executives Ass’n v. Pittsburgh & Lake Erie R.R. Co., 858

F.2d 936 (3d Cir. 1988) (hereafter P&LE). In P&LE

the RLEA asserted a fraudulent conveyance action

against a railroad under a Pennsylvania statute similar

to the Minnesota statute at issue here. The court held

that the case was wrongfully removed to federal court

lla

because the complete preemption doctrine does not apply

to collective bargaining disputes arising under the RLA.

The P&LE court emphasized that because there is no af-

firmative indication of a congressional intention on the

face of the statute to permit removal, the RLA cannot

completely preempt state claims. In finding no congres-

sional intent, the court particularly stressed the absence

of a civil enforcement provision within the RLA under

which the plaintiff could assert his fraudulent convey-

ance action. Because the plaintiff’s state claim could not

be recharacterized as a comparable claim arising under

the RLA, no removal was permitted.

We believe that while the approach of the P&LE court

sheds some light on whether a federal statute “perva-

sively occupies” a field of law, it is unnecessarily narrow.

Not only must we look to affirmative congressional intent

and civil enforcement provisions, but we must also look

to such factors as the history amd purpose of the statute.

Recent case Jaw illustrating the federal nature of the stat-

ute and analogous statutes with complete preemptive

powers are also informative. Having analyzed the RLA

under this light, we conclude that it was Congress’ intent

that the RLA govern all railway labor disputes such as

those in this case arising from collective bargaining

agreements.

Having decided that the complete preemption doctrine

applies to collective bargaining disputes under the RLA,

we must now decide whether Deford’s Minnesota statu-

tory and common law claims require interpretation of the

collective bargaining agreement. Deford maintains on

appeal that the common law and fraudulent conveyance

claims alleged in his complaint do not fall within the

definition of a “minor dispute” requiring the interpreta-

tion of a colective bargaining agreement. To determine

if a claim is a minor dispute the key inquiry is “whether

evaluation of the * * * claim is inextricably intertwined

with consideration of the terms of the labor contract.

12a

If the state * * * law purports to define the meaning of

the contract relationship, the law is preempted.” Leu,

820 F.2d at 830 (citing Allis-Chalmers Corp. v. Lueck,

471 U.S. 202 (1985) ).

Deford attempts to avoid RLA preemption by assert-

ing that this action is not brought under any labor con-

tract or protective agreement. The existence and extent

of the creditor’s rights asserted by Deford and _ the

RLEA, however, can be determined only by interpreting

the collective bargaining agreements. Even on the face

of the complaint Deford predicates his claims upon en-

titlements to accrued but unpaid wages, vacation pay,

life and health insurance, pension contributions, and sev-

erance benefits arising “pursuant to continuing labor

contracts and employee protection agreements.” Simi-

larly, RLEA alleges entitlements “pursuant to the vari-

ous collective bargaining agreements.” In fact, all of

plaintiffs’ allegations regarding “creditors’ rights” and

“creditor obligations” are based entirely upon supposed

rights to unspecified and unquantified ‘“‘wages, benefits

and labor protection” pursuant to the labor agreements.

Deford and RLEA further assert as a basis for relief

that “[e]mployees who quit would waive their rights

under the Labor Agreements.” Indeed, a theme that

runs throughout the complaint is the defendants’ al-

leged “circumvention of the burden of the Labor Agree-

ments for Lake States’ employees” through the sale.

Moreover, RLEA has sued Soo Line and Wisconsin

Central in a separate action in federal district court in

Chicago specifically alleging that the transaction here

affects the rates of pay, rules and working conditions

under various collective bargaining agreements between

Soo Line and the unions. In its complaint, the RLEA

sought to require compliance with the RLA and to arbi-

trate under the labor conditions set forth in New York

Dock Ry.—Control—Brooklyn E.D. Terminal, 360 1.C.D.

[sic] 60 (1979), which are imposed by the ICC. See Com-

12a

plaint, Counts III and IV and prayers for relief in Rail-

way Labor Exec. Ass’n v. Soo Line R.R. Co., Civ. No.

87 C 52293 (N.D. Il. filed July 13, 1987). We may take

judicial notice of the pleadings filed in this proceeding.

Fed. R. Evid. 201. RLEA ignores these allegations here

when it maintains that no terms of collective bargaining

agreements are at issue.

Deford further tries to avoid removal by arguing that

the Minnesota fraudulent transfers act “imposes duties

and obligations on all creditors completely independent

of any collective bargaining agreement.” This statement,

however, mischaracterizes the nature of the fraudulent

conveyance statute. The Minnesota Uniform Fraudulent

Transfer Act is not substantive in nature, but instead

merely confers an alternate remedy for protecting pre-

existing creditor rights. The creditor rights a party

seeks co enforce must exist under independent law, such

as contract law. See Brill v. W. B. Foshay Co., 65 F.2d

420, 423 (8th Cir.), cert. denied, 290 U.S. 643 (1933)

(interpreting the Minnesota Fraudulent Transfer Act).

The purpose of the statute is to grant creditors addi-

tional enforcement possibilities when a debtor transfers.

his assets to a third party. In this case the creditors

rights asserted are based upon the terms of the collective

bargaining agreements and the Minnesota statute only

provides an additional method for enforcing the terms of

the agreements. We therefore affirm the district court’s

finding that Deford’s claims directly involve the collec-

tive bargaining avreements and constitute “minor dis-

putes” under the RLA.

Deford bases his argument against preemption on

Evans v. Missouri Pac. R.R. Co., 795 F.2d 57, 58 (8th

Cir. 1986), where we held that the federal preemption

defense in response to a state law claim is not a ground

for removal. Deford’s reliance on Evans is misplaced.

At ‘dispute in Evans was whether a complaint alleging

slander and damages pursuant to the Federal Employer’s

14a

Liability Act was a “minor dispute” arising under the

RLA. The Evans court found that the complaint pre-

sented no question which would require interpretation of

a collective bargaining agreement for their resolution

and was therefore not a minor dispute. Jd. The holding

of Evans in no way excludes the RLA from the complete

preemption doctrine.

Deford finally relies on several other Supreme Court

cases to support his argument against removal of his

claims under the RLA. These cases, however, can be

distinguished from the present facts. In Sears, Roebuck

& Co. v. San Diego County District Council of Carpen-

ters, 436 U.S. 180, 198 (1978), a suit seeking an injunc-

tion against a union’s peaceful picketing on the ground

that the picketing violated state trespass law was not

preempted by the NLRA. The Supreme Court specifically

determined, however, that the state trespass claim was

completely unrelated to a collective bargaining agree-

ment. In Lingle v. Norge Div. of Magic Chef, Inc.,

USS. , 108 S. Ct. 1877, 1878 (1988), the Court held

that section 301 of the LMRA did not completely pre-

empt a state retaliatory discharge claim. The Court stated

that a retaliatory discharge claim is a substantive state

claim, “which addresses purely factual questions pertain-

ing to the conduct of the employee and the conduct and

motivation of the employer.” Jd. at 1881. Neither of

these elements require a court to interpret the terms of

a collective bargaining agreement. Thus, preemption was

not warranted. The creditors rights asserted by Deford,

by contrast, directly involve the interpretation of collec-

tive bargaining agreements. Finally, in Farmer v.

United Brotherhood of Carpenters and Joiners of Amer-

ica, 480 U.S. 290 (1977), the Supreme Court held that

the NLRA did not preempt a state tort action for inten-

tional infliction of emotional distress arising in connec-

tion with alleged employment discrimination. The Court,

however determined that the claim was not preempted be-

cause it was based on abusive and outrageous action by

15a

the defendant. Jd. at 302. In this case there has been no

pleading of conduct in the transaction that reaches the

level of abusive or outrageous behavior found in Farmer.

We therefore find Deford’s arguments based on these Su-

preme Court cases unpersuasive.

In conclusion, Deford is essentially claiming that if the

sale of rail lines from Soo’ Line to Wisconsin Central is

not, in effect, unwound, the transaction will result in a

breach of Soo Line’s obligations under the existing col-

lective bargaining agreements. Thus, by asserting state

law claims, Deford seeks enforcement of the terms of the

collective bargaining agreements. The fraudulent con-

veyance act serves only as an enforcement mechanism.

We believe Deford is only trying to invoke a state law

remedy in place of the mandatory and exclusive reme-

dies of the Railway Labor Act, and we therefore affirm

the district court’s removal of the suit to federal court

and its subsequent dismissal of the case.

IV.

Additionally, we believe that the Interstate Commerce

Act, 49 U.S.C. $$ 10101-11917 (1982), so pervasively

occupies the field of railroad governance that it com-

pletely preempts Deford’s state law claims. As stated in

the previous RLA analysis, we must focus on the nature

and purpose of the ICA, illustrated by the language of

the statute and recent case law, to determine if the com-

plete preemption doctrine applies to the ICA. The ICA’s

primary purposes are to ensure fair shipping rates,

safety, fair wages and working conditions, and efficiency

in transportation, and to discourage monopolistic prac-

tices and labor strikes. See 49 U.S.C. §§ 10101, 10101a.

To promote these goals, the ICA generally requires that

before a railroad acquires or abandons a railway line,

the rail carriers involved must obtain approval by the

ICC, which may include the imposition of labor protec-

tive agreements on the railroad. 49 U.S.C. § 10901. Pur-

152

suant to section 10505, however, the ICC may exempt

any transaction from regulation under section 10901

when it finds that regulation “is not necessary to carry

out” national rail transportation policy, and is “not

needed to protect shippers from the abuse of market

power.” 49 U.S.C. §10505(a). In 1985, the ICC ex-

empted the entire class of transactions involving acquisi-

tion by “new carriers from the detailed approval proce-

dures under section 10901.”° See 49 U.S.C. § 10505;

Ex Parte No. 392, (Sub No. 1), Class Exemption for the

Acquisition and Operation of Rail Lines under 29 [sic]

U.S.C. § 10901, 1 1.€.2d [sic] 810 (1986), review denied

sub nom. Lilinois Commerce Comm’n v. ICC, 817 F.2d 145

(D.C. Cir. 1987) (Ex Parte No. 392). Obviously labor

protective agreements cannot be imposed when the trans-

action is exempt. The class exemption becomes effective

and the transaction is deemed approved seven days after

the acquiring entity files a verified notice with the ICC,

unless the ICC stays the transaction.

Here Wisconsin Central filed a notice of exemption

which was stayed by the ICC. After evaluating com-

ments by the RLEA and other interested parties, the ICC

lifted the stay, but continued to review the transaction.

After bringing this action in federal court, the RLEA

filed a petition to revoke the exemption and impose labor

protective conditions, which the ICC denied.

The broad grant of power given the ICC in governing

railway transactions is illustrated on the-face of the ICA.

The exclusivity of the ICC’s authority is expressly set

out in section 10501(d) which states: ‘The jurisdiction

of the Commission ... over transportation by rail car-

riers, and the remedies provided in this title with respect

to the rates, classifications, rules and practice of such

carriers, is exclusive.” In sections 1144, 1145, and 1166,

Congress granted to the ICC the power to require ex-

5A “new carrier” is a newly formed railroad not already sub-

ject to the ICA.

tensive informational reports from rail carriers, includ-

ing detailed financial data. The ICC in turn promul-

gated detailed regulations directing .ailroads to submit

comprehensive financial and other operating data. 49

C.F.R. Part 1201. In determining whether to approve a

transaction, the ICC is directed to consider both the fi-

nancial aspects of the sale of rail lines to the non-carrier

and the impact of the sale upon all employees involved.

See 49 U.S.C. $$ 10901'a!, (e). Furthermore, the ICC

has discretion to condition its approval of a section

10901 transaction on the imposition of labor protective

agreements containing a “fair and equitable arrange-

ment for the protection of the interests of railroad em-

plovees adversely affected by the transaction.” 49 U.S.C.

$10901(e). Thus, the ICC has obtained extensive infor-

mation concerning the sale of Lake States Division and

is uniquely qualified to evaluate the claims that Deford

and the RLEA have brought before it. To allow Deford

to now bring a state law action would be to disregard the

ICC’s authority and expertise in this matter.

Our decision is supported by the Supreme Court in

Chicago N. W. Transp. Co, v. Kalo Brick & Title [sic]

Co., 450 U.S. 311 (1981). In Kalo Brick, the Court con-

sidered the extent of preemption of state law under

former section 1/18) of the ICA, the predecessor of

section 10901, in the context of a railroad abandonment.

The plaintiff in Kalo Brick sought to collect damages in

connection with the resulting loss of railroad services. In

finding that the [CA preempted the state law claims, the

Court reasoned that when Congress has chosen to legis-

late pursuant to its constitutional powers, a court must

find state law preempted by federal regulation when the

state statute “stands as an obstacle to the accomplish-

ment and execution of the full purposes and objectives

of Congress.” /d. at 317 (quoting Hines v. Davidowitz,

312 U.S. 52, 67 (1941)). The Court further stated that

the ICA “is among the most pervasive and comprehensive

of federal regulatory schemes” and that ‘compliance with

18a

the intent of Congress cannot be avoided by mere artful

pleading” of state law claims “to gain * * * the re-

lief * * * denied by the Commission.” Jd. at 318, 324.

Also, the Court emphasized the exclusive nature of the

ICC’s jurisdiction and stated that “[t]he breadth of the

Commission’s statutory discretion suggests a congressional

intent to limit judicial interferences with the agency’s

work.” Id. at 321. Thus, it would be contrary to both the

letter and the spirit of Kalo Brick to allow Deford and

the RLEA to avoid the ICC’s approval of the transaction

pursuant to Ex Parte No. 392 by pleading a state law

claim. ~

Deford relies on Hayfield N. R.R. Co. v. Chicago &

N. W. Transp. Co., 467 U.S. 622 (1984), which denies

preemption by the ICA of state law claims. In this case,

however, the railroad received ICC approval to abandon

railway lines. Thereafter, another railroad initiated state

condemnation proceedings. The Supreme Court held that

the ICA did not preempt the state condemnation claims

because the ICC relinquished jurisdiction upon granting

abandonment, and the application of the state statute

would not obstruct the accomplishment of the ICA. Jd. at

634-35. Here, on the other hand, Deford and the RLEA

seek to regulate, through state law, the same aspects of

the same transaction that the ICC is evaluating. In addi-

tion, this matter does not involve an abandonment, which

puts the subject property outside the scope of ICC regula-

tion, but rather an acquisition of rail lines which brings

the new carrier, Wisconsin Central, within the ambit of

continued regulation under the ICA.®° Consequent!, the

ICC provides a forum in which Deford may seek further

relief, and reviews complaints or requests for revocation

of the class exemption and imposition of labor protective

conditions that might be submitted by Deford or the

6 Kalo Brick is distinguished from Hayfield in that it involved

a state law claim for damages arising from the ICC’s approval of

abandonment. In Hayfield, the suit concerned activities occurring

after the ICC had approved the abandonment.

— |

19a

RLEA. The ICC stated in its order of October 8, 1987

authorizing the class exemption that it would continue to

receive comments and to review the effects of the trans-

action. In its decision of July 8, 1988, the ICC analyzed

the many comments it received, specifically addressing

RLEA’s petition to revoke the exemption, and upheld its

decision to exempt the sale of Lake States Division.’ The

ICC stated, however, that although this was their final

decision on the issue, it still had jurisdiction to scrutinize

the transaction and subsequently to revoke the exemption

and impose labor protective conditions if warranted.

Finance Docket No. 31102, Wisconsin Central, Ltd.—

Exemption Acquisition and Operation—Certain Lines of

Soo Line Railroad Company, p. 12, served July 8, 1988.

Furthermore, the ICC has exclusive jurisdiction to ap-

prove the issuance of securities, including debt instru-

ments, by a carrier. 49 U.S.C. §11301(b)(1). Here

RLEA seeks to block Wisconsin Central’s plan to finance

its acquisition of the lines with debt instruments. The

ICC, however, has exclusive jurisdiction over such an is-

suance and any disputes arising from it. Jd. Thus, un-

like Hayfield, the ICC will continue to review all com-

plaints and to approve the issuance of securities. A state

law action would therefore obstruct ICC functions.

In essence, we believe that this action is a collateral

attack upon the ICC’s decision to exempt the Lakes [sic]

States Division sale from regulation. All of the claims

brought by Deford and the RLEA in this lawsuit have

been previously presented to the ICC for its consideration.

When Wisconsin Central, filed with the ICC a notice of

exemption under Ex Parte No. 392, the ICC invited com-

ments from any interested parties. The RLEA submitted

extensive comments opposing approval of the transaction

7The ICC’s July 8, 1988 order limited further discovery and

emphasized the restriction that would be placed upon it. It is also

of interest that the order referred to the RLEA’s purchase offer

for Lake States Division.

20a

which focused on the financial aspects of the transaction—

the same issues it raises under the guise of state fraudu-

lent conveyance law in this lawsuit. In addition to RLEA’s

comments, the ICC entertained comments from other par-

ties in considering its response to Wisconsin Central's

petition for exemption. In its decision of October 8, 1988

the ICC lifted the stay of the exemption and allowed Wis-

consin Central to acquire the Soo Line properties, but

stated that it would continue to exercise its exclusive pri-

mary jurisdiction.

After Wisconsin Central consummated the purchase

and began operating, the RLEA submitted a petition to

revoke the exemption. In the petition, RLEA contended

that because of the precarious financial position of Wis-

consin Central due to the leveraged buyout, the ICC should

exercise its discretion to revoke the exemption and impose

employee protective conditions. On July 8, 1988, the ICC

issued an order addressing these allegations. After a de-

tailed analysis, the ICC concluded that Wisconsin Cen-

tral’s financial position was stable and that it would not

revoke the exemption nor impose the employee protective

conditions. RLEA’s present attack on this transaction is

no more than an attempt to annul or set aside the ICC’s

decisions with respect to this rail transaction under the

exemption procedures. We therefore find it impossible to

grant the relief Deford and the RLEA seeks here without

impinging on the ICC’s order. We conclude that when

such a collateral attack is brought in state court under

the guise of state law, the ICA necessarily completely pre-

empts the state law claims and the suit is removable to

federal court.

The Supreme Court reached the same result in Venner

v. Michigan Central R.R., 271 U.S. 127 (1926). In Ven-

ner, the ICC, upon application by rail carriers, approved

an agreement between three railroads to acquire locomo-

tives and pay for them by issuing certificates. Plaintiff

brought an action in state court to enjoin the issuance of

P14

at ae C

certificates, which was later removed to federal court on

defendant’s motion. The federal court dismissed the ap-

peal as a collateral attack on the ICC’s order, holding the

appeal to be:

essentially one to annul or set aside the order of the

[ICC]. While the [complaint] does not expressly

pray that the order be annulled or set aside, it does

assail the validity of the order and pray that the de-

fendant [companies] be enjoined from doing what

the order specifically authorizes, which is equivalent

to asking that the order be adjudged invalid and set

aside.

Id. at 130. This language aptly fits the efforts of Deford

in this action. See also Railway Labor Exec. Ass’n v.

Staten Island R.R., 792 F.2d 7, 12 (2d Cir. 1986), cert.

denied, 479 U.S. 1054 (1987) (district court dismissed

claim alleging a violation under RLA because it impinged

on ICC order under class exemption proceedings).

In sum, we believe that the ICA demonstrates Congress’

intent to delegate to the ICC the exclusive responsibility

to evaluate all aspects, including financial viability, of rail

line transfers. The ICA provides both a forum and a set

of remedies that is exclusive and completely preempts

competing state law claims.

We have determined that both the RLA and the ICA

preempt Deford’s state law claims. In two recent cases,

we held that when there is a conflict between the RLA

and the ICA, the provisions of the ICA governing labor

protection agreements supersede the mandatory bargain-

ing requirements of the RLA. Burlington N. R.R. Co. v.

United Transp. Union, 848 F.2d 856, 863 (Sth Cir. 1988) :

Railway Labor Executives’ Ass’n v. Chicago & N. W.

Transp. Co., 848 F.2d 102, 104 (8th Cir. 1988).8

‘The Supreme Court has recently granted certiorari in Railway

Labor Exec. Ass'n v. Pittsburgh & Lake Erie R.R., 845 F.2d 420

22a

In this case, however, it is not necessary that we decide

which of the two statutes governs to the exclusion of the

other. We have found complete preemption from both and

removal is justified if there is complete preemption from

only one. Once the district court had jurisdiction, the

complete preemption which conferred jurisdiction was suf-

ficient to authorize dismissal on grounds of preemption.

We affirm the judgment of the district court.

LAY, Chief Judge, dissenting.

I respectfully dissent. Neither the Railway Labor Act

(RLA) nor the Interstate Commerce Act (ICA) justifies

removal under the “complete preemption doctrine.” The

doctrine is a narrow one. It allows removal when the pre-

emptive force of a statute is so “extraordinary” that it

completely displaces an area of state law.

The Supreme Court has been careful to limit the situa-

tions in which removal is appropriate. The Court has ap-

plied the doctrine in cases involving section 301 of the

LMRA, 29 U.S.C. §185(a), and section 502(a) of

ERISA, 29 U.S.C. § 1144. In Metropolitan Life Ins. Co.

v. Taylor, USS. , 107 S. Ct. 1542, 1548 (1987),

the Court examined the intent of Congress to determine

whether section 502(a) of ERISA permitted removal.

Justice Brennan, joined by Justice Marshall, concurred in

the unanimous opinion of the Court, but wrote separately

to emphasize the narrowness of the complete preemption

doctrine:

[OJur decision should not be interpreted as adopting

a broad rule that any defense premised on congres-

sional] intent to preempt state law is sufficient to es-

tablish removal justification. The Court holds only

that removal jurisdiction exists when, as here, ‘Con-

(3d Cir. 1988), which involves issues of preemption between the

ICA and RLA.

23a

gress has clearly manifested an intent to make causes

of action... removable to federal court.” (em-

phasis added). In future cases involving other stat-

utes, the prudent course for a federal court that does

not find a clear congressional intent to create re-

moval jurisdiction will be to remand the case to state

court.

Id. at 1548 (Brennan, J., concurring) (citation omitted)

(emphasis in original).

No interpretation of the collective bargaining agree-

ment is required here; therefore the RLA does not pre-

empt state law. I would further hold under the circum-

stances presented here the ICA does not contain such

extraordinary preemptive force as to invoke the complete

preemption doctrine.

The Railway Labor Act

The majority finds that the employees’ state law claims

exist only to the extent that the collective bargaining

agreement with the railroad creates entitlement to pay-

ment. The majority also finds that the interpretation of

the collective bargaining agreement must be submitted to

arbitration as a minor dispute under the RLA. The ma-

jority thus concludes that removal was proper under the

RLA and that there exists no jurisdiction over minor dis-

putes. The Supreme Court recently addressed the error

of these conclusions in Lingle v. Norge Div. of Magic

Chef, Inc., 486 U.S. , 108 S. Ct. 1877 (1988).

In Lingle, the Court held “that an application of state

law is pre-empted by § 301 of the Labor Management

Relations Act of 1947 only if such application requires

the interpretation of a collective-bargaining agreement.”

Id. at 1885 (footnote omitted) (my emphasis).

The Court then described when “interpretation” is

required:

A collective-bargaining agreement may, of course,

contain information such as rate of pay and other

24a

economic benefits that might be helpful in determin-

ing the damages to which a worker prevailing in a

state law suit is entitled. Although federal law would

govern the interpretation of the agreement to deter-

mine the proper damages, the underlying state law

claim, not otherwise pre-empted, would stand. Thus,

as a general proposition, a state law claim may de-

pend for its resolution upon both the interpretation

of a collective-bargaining agreement and a separate

state law analysis that does not turn on the agree-

ment. In such a case, federal law would govern the

interpretation of the agreement, but the separate

state law analysis would not be thereby pre-empted.

Id. at 1885 n.12 (citation omitted). The Court recognized

the state law claim even though plaintiff would have to

rely upon federal_law for the determination of a damage

award. The Court did not find that the state law claims

were preempted by section 301 of the NLRA, let alone the

complete preemption necessary for removal jurisdiction.

Here, plaintiffs assert claims under Minnesota common

law and the Minnesota Uniform Fraudulent Transfer Act,

Minn. Stat. Ann. $$ 513.41-51. As in Lingle, plaintiffs

base their claims on definitive state law.

The majority finds that the Minnesota statute is not

substantive, but that it seeks to enforce pre-existing

creditor’s rights which “exist under independent law, such

as contract law.” Supra at 13. Interpretation of the col-

lective bargaining agreement is required only to deter-

mine standing as a creditor, and to determine the amount

of damages. The state statute creates an entitlement

independent of the collective bargaining agreement, and

is not preempted by the RLA.

Interstate Commerce Act

The Interstate Commerce Act is not as pervasive in

scope as either section 301 of the LMRA or section 5021 a)

ob lp at

25a

of ERISA. Therefore, the ICA does not completely pre-

empt state law.

The general jurisdictional section of the ICA is contained

in 49 U.S.C. § 10501. This section grants the Interstate

Commerce Commission (ICC) jurisdiction over the

“transportation” of people and property, and over related

services. 49 U.S.C. § 10102(26). However, these sections

do not confer jurisdiction over the sale of existing rail

lines. Other sections of the ICA contain more specific

grants of jurisdiction.' However, none of these sections

is as pervasive in scope as are the two recognized areas

of complete preemption set forth in Taylor and Lingle.

The very structure and specificity of these sections tend

to deny that the whole field of transportation has been

extraordinarily preempted so as to justify removal

jurisdiction.

In Hayfield N.R.R. v. Chicago & N.W. Transp. Co., 467

-U.S. 622 (184), the Supreme Court considered whether

federal regulation of abandonment of rail lines was so

pervasive as to preclude state action. Jd. at 632-34. The

Court stated:

The first contention attempts to bring this case

within the narrow ambit of decisions in which this

Court has indicated that congressional legislation so

occupied the field of a particular subject area that

state regulation within that field would be improper

no matter how well state law comported with the

federal policies involved. This Court has repeatedly

affirmed, however, that “federal regulation of a field

of commerce should not be deemed preemptive of state

1 For example, 49 U.S.C. $$ 10901 (authorizing construction and

operation of railroad lines), 10902 (authorizing action to provide

adequate, efficient and safe facilities), 10903 (authorizing abandon-

ment and discontinuance of railroad lines and rail transportation),

11301 (authority of certain carriers to issue securities and assume

obligations and liabilities) and 11501 (ICC authority over inter-

state transportation) are such provisions.

26a

regulatory power in the absence of persuasive reasons

—either that the nature of the regulated subject

matter permits no other conclusion, or that the Con-

gress has unmistakably so ordained.”

Id. at 632 (citations omitted). The Court considered four

factors in finding no preemption. First, the Court found

Congress had not “unmistakably ordained” that states may

not exercise traditional power of eminent domain over

railroad property. Second, nothing in the Act referred to

federal preemption of disposition of abandoned lines.

Third, there was no indication that the subject matter

permitted “no other conclusion” than that it was governed

by federal, not state regulation. Finally, state law tra-

ditionally “governs the condemnation of ordinary real

property.” Jd. at 632. The Court also found that con-

demnation did not obstruct the objectives of section 10905.

Td. at 634-36.

This case is analogous to Hayfield. In Hayfield, the

Court focused on section 10905 instead of the general

jurisdictional statute, section 10501. This supports the

contention that not all railroad transactions are pre-

empted by federal law. The jurisdictional section at issue

in our case, section 10901 (jurisdiction for construction

and operation and exemptions for certain sales under Ex

Parte No. 392, 1 I.C.C. 2d 810 (Dee. 19, 1985)) is

nearly identical to section 10905. Section 10901(c) (1) is

identical to section 10905(c) except that it expresses

what the ICC “may” do instead of what it “shall” do.

The use of the word “may” tends to make section 10901

weaker than section 10905. Finally, conveyances of real

property and restrictions on corporate transactions are

generally matters of state concern. In Hayfield, not only

did the Supreme Court fail to hold the field to be so com-

pletely preempted as to create removal jurisdiction, but

it did not even find state law eminent domain preempted

by the federal abandonment provisions.

27a

The majority relies primarily on Chicago & N.W.

Transp Co. v. Kalo Brick & Tile Co., 450 U.S. 311 (1981).

The Supreme Court held that the ICA “precludes a ship-

per from pressing a state-court action for damages against

a regulated carrier when the [ICC], in approving the

carrier’s application for abandonment, reaches the merits

of the matters the shipper seeks to raise in state court.”

Id. at 331-32. However, this case is distinguishable from

the facts here because the ICC did not in fact reach the

merits of the fraudulent conveyance claims. Although the

ICC claims it has continuing jurisdiction to evaluate the

exemption granted by it to permit the sale, the ICC is not

required to examine the merits of plaintiffs’ claims, and

had not done so. See 49 U.S.C. $ 10901, Ex Parte No.

392, 1 1.C.C. 2d 810 (Dec. 19, 1985). -

In announcing its grant of class exemption permitting

sale without compliance with the more rigorous require-

ments of section 10901, the ICC stated:

Finally, it should be noted that the use of the ex-

emption process for approval of a transaction of this

scope has raised some concern. We continue to be-

lieve that the policy underlying the exemption pro-

cedure established in Ex Parte No. 392 (Sub-No. 1)

for the sales of lines to non-railroads remains valid

and on the whole has been extremely beneficial to the

shipping public. Nevertheless, it is true that the

larger transactions, however one might define them,

present issues which are at least somewhat less ap-

propriately dealt with by the exemption process. More

interests are more greatly affected, and the efficacy

and fairness of revoking the exemption in a later

proceeding becomes more questionable. Those diffi-

culties are clearly raised with this transaction.

Wisconsin Central Ltd., Finance Docket No. 31102, Slip.

op. at 3 (ICC Oct. 7, 1987). This indicates that the

ICC has not reached the merits of plaintiffs’ claims and

that it still had some apprehension over its grant of a

class exemption.

I would hold that any preemptive force of either the

RLA or the ICA is not of the magnitude necessary

to completely preempt state law so as to create removal

jurisdiction. I would reverse the district court’s decision

and remand with orders that the case be remanded to

state court.

A true copy.

Attest:

Clerk, U.S. Court of Appeals, Eighth Circuit

204

APPENDIX B

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

FOURTH DIVISION

Civil Case No. 4-87-582

ROBERT F.. DEFORD, et al.,

Plaintiff,

-VS-

S00 LINE RAILROAD Co., et al.,

Defendant.

TRANSCRIPT OF MOTION PROCEEDINGS HAD

BEFORE THE HONORABLE JAMES M. ROSENBAUM

MINNEAPOLIS, MINNESOTA

August 20, 1987

APPEARANCES:

Timothy D. Kelly and John Clarke for Plaintiffs

Patrick J. McPartland for Defendant Soo Line

and Cavanaugh

Thomas P. Kane and David Seykora for the

remaining Defendants

Also Present: Richard J. Flynn and

Terence M. Hynes

* * * *

80a

[61] THE COURT: Plaintiff’s motion to remand [62]

this action is denied. Defendant’s motion to dismiss is

granted. The Plaintiff’s assert the Federal Court is with-

out removal jurisdiction and the Defendant’s assert re-

moval to be proper, and dismissal is then appropriate

because the Federal Court lacks subject matter jurisdic-

tion.

The civil claim in which the United States District

Court has original jurisdiction is brought in State Court.

It of course may be remove [sic] by the Defendant to the

United States district Court, 28 United States Code,

Session [sic] 1441.

This case was removed by Defendant from the Henne-

pin County Court to this Court. The propriety of that

removal turns on whether this case falls within the

original federal question jurisdiction of this Court and

the Court concludes that it does.

A Defendant may remove a case to Federal Court if

the Plaintiff’s complaint establishes that the case arises

under federal law. A right or immunity created by the

Constitution of the United States must be an element and

an essential one, of Plaintiff’s cause of action. Cite

Franchise Tax Board versus Construction Laborers Va-

cation Trust, 103 Supreme Court 2841 at 2847, 1983.

The requirement that the Court’s federal question juris-

diction appear on the face of the Plaintiff’s [63] com-

plaint has been characterized as the well-pleaded complaint

rule.

In this case the Plaintiff's complaint alleges the De-

fendant’s actions Constitution [sic] a violation of the Min-

nesota Fraudulent Conveyance Act, Minnesota Statute

Session [sic] 513, as well as present Minnesota common

law claims; conspiracy to frustrate creditor’s rights and a

tortious interference with creditor’s rights. The Defend-

ants respond that Plaintiff’s cause of action is really one

of Federal Law because the complaint presents questions

which eequive interpretation of the Railway labor Act for

3la

their resolution. Defendants assert the Railway Labor

Act as well as the Interstate Commerce Act preempt

Plaintiff’s alleged state cause of action.

The argument has obviously much focused on the In-

terstate Commerce Act and it’s preemptive aspect, that

is because the parties appear to have tactitly agreed that

this dispute goes to the validity of and the viability of

the sale cf a portion of the Soo Line to Wisconsin Cen-

tral, Limited. That may well be the prime dispute but

the Minnesota cause of action and that before this Court

concerns rights arising under the present existing Labor

Act and the Plaintiff’s perception that it’s rights are in

jeopardy. This focus [64] lends the Court to conclude

that the Railway Labor Act provides a proper analytic

mode.

Under the well-pleaded complaint rule the Plaintiff is

generally considered master of his own complaint and is

free to dictate the forum in which to bring his action.

This principle is not, however, without limitation. And I

would cite AVCO Corporation versus Aero Lodge 735,

390 U.S. 557, and 88 Supreme Court 1235, 1968.

Plaintiff may not defeat removal by omitting to plead

necessary federal questions, citing Franchise Tax Board

at 2853. Artful pleading by the Plaintiff will not be

allowed to conceal the true nature of the complaint.

An independent corrollary of the well-pleaded complaint

rule is the complete preemption doctrine. Caterpillar

versus Cecil Williams, blank U.S. 55 U.S. Law Week

4804 and nine—I’m sorry, and 4805, June 9, 1987.

On occasion the United States Supreme Court has con-

cluded that the preemptive force of a statute is so ex-

traordinary that it converts an ordinary state common

law complaint into one stating a federal claim for pur-

poses of the well-pleaded complaint rule, that cite Cater-

pillar 55 U.S. Law Week at 4805 and Metro [65] Life

versus Taylor, 107 Supreme Court 1542, 1987.

a rap |

Once an area of state law has been completely pre-

empted any claim purportedly based on that preempted

state law is considered from it’s inception a federal claim,

therefore arising under feceral law. Citing Caterpillar

at 4806 and Franchise Tax Board at 2854.

In this case Plaintiffs have asserted rights arising un-

der certain collective bargaining agreements and their con-

tractual arrangements with the Defendant. They assert

at this time that these rights make them creditors but

the claims and the rights which they claim have accrued

to them are determined by their contracts with the rail-

road, these claims are governed by the Railway Labor Act.

The application of this statute, and I should cite the Rail-

way Labor Act is 45 U.S.C. 151 et. see. [sic] The applica-

tion of this statute and the necessity of its interpretation

establish the existence of a federal question as an essen-

tial element of the Plaintiff’s cause of action providing the

basis for removal.

The term by the Plaintiff that their rights make them

somehow creditors as a right and they are then creditors

under the Minnesota Statutes, represents an interesting

academic exercise but it takes [66] but an instant, and

the Court immediately determines that those rights are

completely defined by the Railway Labor Acts coverage of

the contracts in question.

The basic injury asserted in this case arises from the

employment relationship between the Plaintiffs and the

Defendant railroad. The existence and extent of any

rights Plaintiffs may have are dependant upon the in-

terpretation then of their Railway Labor Agreement. The

interpretation of a contract of employment with a rail-

road is exclusively under the RLEA |sic] and involves a

minor dispute according to that statute.

The Railway Labor Act requires matters involving

minor disputes to be brought to the railway—sorry, to

33a

the National Railway Adjustment Board, the NRAB, and

handled according to it’s grievance procedures, citing

Elgin, S&E [sic] versus Burley, 325 U.S. 711 at 722 and

3, 1945. That Act and the Railway Labor Acts preemp-

tion diverts both the state and the federal Courts of sub-

ject matter jurisdiction over minor disputes. Andrews

versus Louisville and Nashville, 92 Supreme Court 1562,

1972.

The NRAB has exclusive jurisdiction over disputes in-

volving collective bargaining agreements between carriers

and their employees. Choate versus Louisville, 715 F 2d

369 at 372, Seventh Circuit.

[67] Where, as in this case, the dispute arises out of

the employment relationship and, in the final analysis,

involves an attempt to impose a right claimed to be inci-

dent to that relationship, the statutory forum is the

NRAB. Railway Labor Executives versus Atchison To-

peka, 430 F2d 994 at 997, Ninth Circuit, 1979.

Plaintiffs cannot escape the exclusive governance of

the RLA by articulating their claims in terms of a State

Court action. See Leu versus Norfolk and Western Rail-

way, number 86-1377, slip opinion, Seventh Circuit, 1987.

Courts have viewed such attempts as end runs around the

RLA’s policy of channeling employment disputes toward

arbitration, Lancaster and Norfolk [sic] 773 F2d 807,

815, Seventh Circuit, 1985, cert. denied at 107 Supreme

Court 1607, 1987.

Plaintiffs here seek through their artful pleading to

make that and by their efforts to style their claim as one

arising under the Minnesota Fraudulent Conveyance Act

to make an end run around the scope of the RLA.

Because this case involves a dispute which must be

arbitrated following the procedures of the RLA, Minne-

sota state law is preempted from providing a basis for

this claim and from relief. Cite Schroeder versus TWA

702 F2d at 189, 192, Ninth Circit [sic], 1983.

34a

[68] Quoting, “If the state Court lacks jurisdiction of

the subject matter the Federal Court acquires none, al-

though it might be in a like suit, originally brought there

—it might, I’m sorry, in a like suit originally brought

there, have had jurisdiction. Labert Run Coal Company

versus Baltimore and Ohio, 42 Supreme Court 349, 351,

19—1922.

The Minnesota Supreme Court—sorry, the Minnesota

courts were without jurisdiction over the action between

the Plaintiffs and the Defendants, subsequently the United

States District Court acquired none, there being none to

pass once the District Court action from Minnesota was

removed.

This action is dismissed under Federal Rules of Civil

Procedure 12(b) (1), this Court lacking jurisdiction. Be

in recess.

(Recess )

35a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 87-5376

ROBERT F. DEFORD, on behalf of himself and all employ-

ees of Soo Line Railroad Company affected by the dis-

position of Lake States Transportation Division and

RAILWAY LABOR EXECUTIVES’ ASSOCIATION, on behalf

of itself and represented employees,

Appellants,

Soo LINE RAILROAD COMPANY, a Minnesota corporation,

Soo LINE CORPORATION, a Minnesota corporation,

DENNIS M. CAVANAUGH, Wisconsin Central Ltd., an

Illinois corporation, EDWARD A. BURKHARDT, THOMAS

POWER, ROBERT H. WHEELER, JOHN DOE and RICHARD

B. OGLIVIE,

Appellees.

Appeal from the United States District Court

for the District of Minnesota

[Filed Feb. 9, 1989]

36a

JUDGMENT

This appeal from the United States District Court was

submitted on the record of the district court, briefs of the

parties and was argued by counsel.

Upon consideration of the premises it is hereby ad-

judged and decreed that the district court’s judgment de-

nying remand to the state court and dismissing the com-

plaint is affirmed. The Court concludes that the district

court properly analyzed the preemptive effects of the RLA.

It is further adjudged and decreed that under the circum-

stances of this case the Interstate Commerce Act (ICA),

49 U.S.C. $$ 10101-11917 (1982), is an appropriate basis

to preempt the state law claims.

February 9, 1989

Order entered in accordance with opinion.

‘s/ Robert D. St. Vrain

Clerk, U.S. Court of Appeals, Eighth Circuit.

37a

APPENDIX D

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

FOURTH DIVISION

Civil No. 4-87-582

ROBERT F.. DEFORD, et al.

Vv.

Soo LINE RAILROAD COMPANY, et al.

ORDER

This matter is before the Court on plaintiffs’ motion to

remand this action to state court and defendants’ motion

to dismiss the complaint pursuant to Rule 12(b) (1) of

the Federal Rules of Civil Procedure. A hearing was

held on August 20, 1987. Based on the files, records, and

proceedings herein, and for the reasons set forth at the

hearing, IT IS ORDERED that:

1. The motion of plaintiffs Deford and Railway Labor

Executive Association to remand this action to state

court is denied.

2. The motion of defendants Soo Line Railroad Com-

pany and Wisconsin Central Limited to dismiss the com-

plaint pursuant to Rule 12(b) (1) of the Federal Rules

of Civil Procedure is granted.

Dated: August 21, 1987

/s/ James M. Rosenbaum

JAMES M. RoSENBAUM

United States District Judge

Filed Aug. 21, 1987

Il.

III.

IV.

VI.

38a

APPENDIX E

STATUTES RELIED UPON

Railway Labor Act, 45 U.S.C. § 151, et seq. (Ex-

cerpts)

A. Section 2 First, 45 U.S.C. § 152 First

B. Section 3, 45 U.S.C. § 153

Interstate Commerce Act, 49 U.S.C. § 10101, ef

seq. (Excerpts)

A. Section 10505, 49 U.S.C. § 10505

B. Section 10901, 49 U.S.C. § 10901

28 U.S.C. § 1441 (a)

Minnesota Uniform Fraudulent Transfer Act,

Minn. Stat. Ann. § 513.41, et seg. (Excerpts)

A. Section 513.44

B. Section 513.45

Employee Retirement Income Security Act, 29

U.S.C. § 1001, et seg. (Excerpts)

A. Section 502(a) and (f), 29 U.S.C. § 1132(a)

and (f)

Labor Management Relations Act, 29 U.S.C. § 151,

et seq. (Excerpts)

A. Section 301(a), 29 U.S.C. § 185 (a)

eee

39a

Statutes Relied Upon

I. Railway Labor Act, 45 U.S.C. § 151, et seg. (Ex-

cerpts)

A. Section 2 First

45 U.S.C. § 152 First

It shall be the duty of all carriers, their officers,

agents, and employees to exert every reasonable effort

to make and maintain agreements concerning rates of

pay, rules, and working conditions, and to settle all dis-

putes, whether arising out of the application of such

agreements or otherwise, in order to avoid any interrup-

tion to commerce or to the operation of any carrier grow-

ing out of any dispute between the carrier and the em-

ployees thereof.

B. Section 3

45 U.S.C. § 153

First. There is hereby established a Board, to be known

as the “National Railroad Adjustment Board’, the mem-

bers of which shall be selected within thirty days after

approval of this Act, and it is hereby provided—

(a) That the said Adjustment Board shall consist of

thirty-four members, seventeen of whom shall be

selected by the carriers and seventeen by such labor

organizations of the employees, national in scope, as

have been or may be organized in accordance with

the provisions of section 2 of this Act.

(b) The carriers, acting each through its boards of

directors or its receiver or receivers, trustee or trus-

tees or through an officer or officers designated for

that purpose by such board, trustee or trustees or

receiver or receivers, shall prescribe the rules under

40a

which its representatives shall be selected and shall

select the representatives of the carriers on the Ad-

justment Board and designate the division on which

each such representative shall serve, but no carrier

or system of carriers shall have more than one vot-

ing representative on any division of the Board.

subsection (h) of this section, the national labor

organizations, as defined in paragraph (a) of this

section, acting each through the chief executive or

other medium designated by the organization or as-

sociation thereof, shall prescribe the rules under

which the labor members of the Adjustment Board

shall be selected and shall select such members and

designate the division on which each member shall

serve; but no labor organization shall have more

than one voting representative on any division of

the Board.

(d) In ease of a permanent or temporary vacancy

on the Adjustment Board, the vacancy shall be filed

by selection in the same manner as in the original

selection.

(e) If either the carriers or the labor organizations

of the employees fails to select and designate repre-

sentatives to the Adjustment Board, as provided in

paragraphs (b) and (c) of this section, respectively,

within sixty days after the passage of this Act, in

case of any original appointment to office of a mem-

ber of the Adjustment Board, or in case of a va-

cancy in any such office within thirty days after such

vacany occurs, the Mediation Board shall thereupon

directly make the appointment and shall select an in-

dividual associated in interest with the carriers or

the group of labor organizations of employees, which-

ever he is to represent.

4la

(f) In the event a dispute arises as to the right of

any national labor organization to participate as per

paragraph (c) of this section in the selection and

designation of the labor members of the Adjustment

Board, the Secretary of Labor shall investigate the

claim of such labor organization to participate, and

if such claim in the judgment of the Secretary of

Labor has merit, the Secretary shall notify the Medi-

ation Board accordingly, and within ten days after

receipt of such advice the Mediation Board shall re-

quest those national labor organizations duly quali-

fied as per paragraph (c) of this section to partici-

pate in the selection and designation of the labor

members of the Adjustment Board to select a rep-

resentative. Such representative, together with a

representative likewise designated by the claimant,

and a third or neutral party designated by the

Mediation Board, constituting a board of three, shall

within thirty days after the appointment of the

neutral member, investigate the claims of the la-

bor organization desiring participation and decide

whether or not it was organized in accordance with

section 2 hereof and is otherwise properly qualified

to participate in the selection of the labor members

of the Adjustment Board and the findings of such

boards of three shall be tinal and binding.

(g) Each member of the Adjustment Board shall be

compensated by the party or parties he is to rep-

resent. Each third or neutral party selected under

the provisions of (f) of this section shall receive

from the Mediation Board such compensation as the

Mediation Board may fix, together with his neces-

sary traveling expenses and expenses actually in-

curred for subsistence, or per diem allowance in lieu

thereof, subject to the provisions of law applicable

thereto, while serving as such third or neutral party.

42a

(h) The said Adjustment Board shall be composed

of four divisions, whose proceedings shall be inde-

pendent of one another, and the said divisions as well

as the number of their members shall be as follows:

First division: To have jurisdiction over dis-

putes involving train- and yard-service employ-

ees of carriers, that is, engineers, firemen,

hostlers, and outside hostler helpers, conductors,

trainmen, and yard-service employees. This di-

vision shall consist of eight members, four of

whom shall be selected and designated by the

carriers and four of whom shall be selected and

designated by the labor organizations, national

in scope and organized in accordance with sec-

tion 2 hereof and which represent employees in

engine, train, yard, or hostling service; Pro-

vided, however, That each labor organization

shall select and designate two members on the

First Division and that no labor organization

shall have more than one vote in any proceed-

ings of the First Division or in the adoption of

any award with respect to any dispute sub-

mitted to the First Division: Provided further,

however, That the carrier members of the First

Division shall cast no more than two votes in

any proceedings of the division or in the adop-

tion of any award with respect to any dispute

submitted to the First Division.

Second division: To have jurisdiction over dis-

putes involving machinists, boilermakers, black-

smiths, sheet-metal workers, electrical worker's,

car men, the helpers and apprentices of all the

foregoing, coach cleaners, power-house employ-

ees, and railroad-shop laborers. This division

shall consist of ten members, five of whom shall

be selected by the carriers and five by the

national labor organizations of the employees.

43a

Third division: To have jurisdiction over dis-

putes involving station, tower, and telegraph

employees, train dispatchers, maintenance-of-

way men, clerical employees, freight handlers,

express, station, and store employees, signal

men, sleeping-car conductors, sleeping-car por-

ters, and maids and dining-car employees. This

division shall consist of ten members, five of

whom shall be selected by the carriers and five

by the national labor organizations of employ-

ees.

Fourth Division: To have jurisdiction over dis-

putes involving employees of carriers directly or

indirectly engaged in transportation of passen-

gers or property by water, and all other employ-

ees of carriers over which jurisdiction is not

given to the first, second, and third divisions.

This division shall consist of six members, three

of whom shall be selected by the carriers and

three by the national labor organizations of the

employees.

(i) The disputes between an employee or group of

employees and a carrier or carries growing out of

grievances or out of the interpretation or applica-

tion of agreements concerning rates of pay, rules,

or working conditions, including cases pending and

unadjusted on the date of approval of this Act, shall

be handled in the usual manner up to and including

the chief operating officer of the carrier designated

to handle such disputes; but, failing to reach an

adjustment in this manner, the disputes may be re-

ferred by petition of the parties or by either party

to the appropriate division of the Adjustment Board

with a full statement of the facts and all supporting

data bearing upon the disputes.

(j) Parties may be heard either in person, by coun-

sel, or by other representatives, as they may respec-

44a

tively elect, and the several divisions of the Adjust-

ment Board shall give due notice of all hearings to

the employee or employees and the carrier or carriers

involved in any disputes submitted to them.

(k) Any division of the Adjustment Board shall

have authority to empower two or more of its mem-

bers to conduct hearings and make findings upon dis-

putes, when properly submitted, at any place desig-

nated by the division: Provided, however, That ex-

cept as provided in paragraph (h) of this section,

final awards as to any such dispute must be made

by the entire division as hereinafter provided.

(1) Upon failure of any division to agree upon an

award because of a deadlock or inability to secure a

majority vote of the division members, as provided

in paragraph (n) of this section, then such division

shall forthwith agree upon and select a neutral per-

son, to be known as “referee”, to sit with the division

as a member thereof and make an award. Should the

division fail to agree upon and select a referee within

ten days of the date of the deadlock or inability to

secure a majority vote, then the division, or any

member thereof, or the parties or either party to the

dispute may certify that fact to the Mediation Board,

which Board shall, within ten days from the date of

receiving such certificate, select and name the referee

to sit with the division as a member thereof and

make an award. The Mediation Board shall be bound

by the same provisions in the appointment of these

neutral referees as are provided elsewhere in this

Act for the appointment of arbitrators and shall fix

and pay the compensation of such referees.

(m) The awards of the several divisions of the Ad-

justment Board shall be stated in writing. A copy

of the awards shall be furnished to the respective

parties to the controversy, and the awards shall be

final and binding upon both parties to the dispute.

45a

In case a dispute arises involving an interpretation

of the award the division of the Board upon request

of either party shall interpret the award in the light

of the dispute.

(n) A majority vote of all members of the division

of the Adjustment Board eligible to vote shall be

competent to make an award with respect to any

| dispute submitted to it.

(o) In case of an award by any division of the

Adjustment Board in favor of petitioner, the di-

vision of the Board shall make an order, directed to

the carrier, to make the award effective and, if the

award includes a requirement for the payment of

money, to pay to the employee the sum to which he

is entitled under the award on or before a day

named. In the event any division determines that

an award favorable to the petitioner should not be

made in any dispute referred to it, the division shall

make an order to the petitioner stating such de-

termination.

(p) If a carrier does not comply with an order of

a division of the Adjustment Board within the time

limit in such order, the petitioner, or any person

for whose benefit such order was made, may file in

the District Court of the United States for the dis-

trict in which he resides or in which is located the

principal operating office of the carrier, or through

which the carrier operates, a petition setting forth

briefly the causes for which he claims relief, and

the order of the division of the Adjustment Board

in the premises. Such suit in the District Court of

the United States shall proceed in all respects as

other civil suits, except that on the trial of such suit

the findings and order of the division of the Adjust-

ment Board shall be conclusive on the parties, and

except that the petitioner shall not be liable for costs

46a

in the district court nor for costs at any subsequent

stage of the proceedings, unless they accrue upon

his appeal, and such costs shall be paid out of the

appropriation for the expenses of the courts of the

United States. If the petitioner shall finally prevail

he shall be allowed a reasonable attorney’s fee, to be

taxed and collected as a part of the costs of the suit.

The district courts are empowered, under the rules

of the court governing actions at law, to make such

order and enter such judgment, by writ of man-

damus or otherwise, as may be appropriate to en-

force or set aside the order of the division of the

Adjustment Board: Provided, however, That such

order may not be set aside except for failure of the

division to comply with the requirements of this Act,

for failure of the order to conform, or confine itself,

to matters within the scope of the division’s juris-

diction, or for fraud or corruption by a member of

the division making the order.

(qi If any employee or group of employees, or any

carrier, is aggrieved by the failure of any division

of the Adjustment Board to make an award in a

dispute referred to it, or is aggrieved by any of the

terms of an award or by the failure of the division

to include certain terms in such award, then such

employee or group of employees or carrier may file

in the United States district court in which a petition

under paragraph (p) could be filed, a petition for

review of the division’s order. A copy of the petition

shall be forthwith transmitted by the clerk of the

court to the Adjustment Board. The Adjustment

Board shall file in the court the record of the pro-

ceedings on which it based its action. The court

shal! have jurisdiction to affirm the order of the di-

vision or to set it aside, in whole or in part, or it

may remand the proceeding to the division for such

further action as it may direct. On such review, the

47a

findings and order of the division shall be conclusive

on the parties, except that the order of the division

may set aside, in whole or in part, or remanded to

the division, for failure of the division to comply

with the requirements of this Act, for failure of the

order to conform, or confine itself, to matters within

the scope of the division’s jurisdiction, or for fraud

or corruption by a member of the division making

the order. The judgment of the court shall be sub-

ject to review as provided in section 1291 and 1254

of title 28, United States Code.

(r) All actions at law based upon the provisions of

this action shall be begun within two years from the

time the cause of action accrues under the award of

the division of the Adjustment Board, and not after.

(s) The several divisions of the Adjustment Board

shall maintain headquarters in Chicago, Illinois, meet

regularly,-and continue in session so long as there

is pending before the division any matter within its

jurisdiction which has been submitted for its con-

sideration and which has not been disposed of.

(t) Whenever practicable, the several divisions or

subdivisions of the Adjustment Board shall be sup-

plied with suitable quarters in any Federal building

located at its place of meeting.

(u) The Adjustment Board may, subject to the ap-

proval of the Mediation Board, employ and fix the

compensations of such assistants as it deems neces-

sary in carrying on its proceedings. The compensa-

tion of such employees shall be paid by the Media-

tion Board.

(vy) The Adjustment Board shall meet within forty

days after the approval of this Act and adopt such

rules as it deems necessary to contro] proceedings

before the respective divisions and not in conflict

with the provisions of this section. Immediately fol-

48a

lowing the meeting of the entire Board and the adop-

tion of such rules, the respective divisions shall meet

and organize by the selection of a chairman, a vice

chairman, and a secretary. Thereafter each division

shall annually designate one of its members to act

as chairman and one of its members to act as vice

chairman: Provided, however, That the chairman-

ship and vice-chairmanship of any division shall al-

ternate as between the groups, so that both the chair-

manship and vice-chairmanship shall be held alter-

wately by a representative of the carriers and a rep-

resentative of the employees. In case of a vacancy,

such vacancy shall be filled for the unexpired term

by the selection of a successor from the same group.

(w) Each division of the Adjustment Board shall

annually prepare and submit a report of its activi-

ties to the Mediation Board, and the substance of

such report shall be included in the annual report

of the Mediation Board to the Congress of the United

States. The reports of each division of the Adjust-

ment Board and the annual report of the Mediation

Board shall state in detail all cases heard, all ac-

tions taken, the names, salaries, and duties of all

agencies, employees, and offcers receiving compensa-

tion from the United States under the authority of

this Act, and an account of all moneys appropriated

by Congress pursuant to the authority conferred by

this Act and disbursed by such agencies, employees,

and officers. e -

(x) Any divigion of the Adjustment Board shall

have authority, in its discretion, to establish regional

adjustment boards to act in its place and stead for

such limited period as such division may determine

to be necessary. Carrier members of such regional

boards shall be designated in keeping with rules de-

vised for this purpose by the carrier members of the

Adjustment Board and the labor members shall be

49a

designated in keeping with rules devised for this

purpose by the labor members of the Adjustment

Board. Any such regional board shall, during the

time for which it is appointed, have the same au-

thority to conduct hearings, make findings upon dis-

putes and adopt the same procedure as the division

of the Adjustment Board appointing it, and its de-

cisions shall be enforceable to the same extent and

under the same processes. A neutral person, as

referee, shall be appointed for service in connection

with any such regional adjustment board in the same

circumstances and manner as provided in paragraph

(l) hereof, with respect to a division of the Adjust-

ment Board.

Second. Nothing in this section shall be construed to

prevent any individual carrier, system, or group of car-

riers and any class or classes of its or their employees,

all acting through their representatives, selected in ac-

cordance with the provisions of this Act, from mutually

agreeing to the establishment of system, group, or regional

board of adjustment for the purpose of adjusting and

deciding disputes of the character specified in this section.

In the event that either party to such a system, group, or

regional boards of adjustment is dissatisfied with such ar-

rangement, it may upon ninety days’ notice to the other

party elect to come under the jurisdiction of the Adjust-

ment Board.

If written request is made upon any individual carrier

by the representative of any craft or class of employees

of such carrier for the establishment of a special board

of adjustment to resolve disputes otherwise referable to

the Adjustment Board, or any dispute which has been

pending before the Adjustment Board for twelve months

from the date the dispute (claim) is received by the

Board, or if any carrier makes such a request upon any

such representative, the carrier or the representative

upon whom such request is made shall join in an agree-

50a

ment establishing such a board within thirty days from

the date such request is made. The cases which may be

considered by such board shall be defined in the agree-

ment establishing it. Such board shall consist of one

person designated by the carrier and by one person desig-

nated by the representative of the employees. If such

carrier or such representative fails to agree upon the

establishment of such a board as provided herein, or to

exercise its rights to designate a member of the board,

the carrier or representative making the request for the

establishment of the special board may request the Medi-

ation Board to designate a member of the special board

on behalf of the carrier or representative upon whom

such request was made. Upon receipt of a request for

such designation the Mediation Board shall promptly

make such designation and shall elect an individual as-

sociated in interest with the carrier or representative he

is to represent, who, with the member appointed by the

carrier or representative requesting the establishment of

the special board, shall constitute the board. Each mem-

ber of the board shall be compensated by the party he

is to represent. The members of the board so designated

shall determine all matters not previously agreed upon

by the carrier and the representative of the employees

with respect to the establishment and jurisdction of the

board. If they are unable to agree such matters shall be

determined by a neutral member of the board selected or

appointed and compensated in the same manner as is

hereinafter provided with respect to situations where the

members of the board are unable to agree upon an award.

Such neutral member shall cease to be a member of the

board when he has determined such matters. If with re-

spect to any dispute or group of disputes the members of

the board designated by the carrier and the representa-

tive are unable to agree upon an award disposing of the

dispute or group of disputes they shall by mutual agree-

ment select a neutral person to be a member of the board

for the consideration and disposition of such dispute or

5la

group of disputes. In the event the members of the board

designated by the parties are unable, within ten days

after their failure to agree upon an award, to agree upon

the selection of such neutral person, either member of

the board may request the Mediation Board to appoint

such neutral person and upon receipt of such request the

Mediation Board shall promptly make such appointment.

The neutral person so selected or appointed shall be com-

pensated and reimbursed for expenses by the Mediation

Board. Any two members of the board shall be competent

to render an award. Such awards shall be final and bind-

ing upon both parties to the dispute and if in favor of the

petitioner, shall direct the other party to comply there-

with on or before the day, named. Compliance with such

awards shal! be enforcible by proceedings in the United

States district courts in the same manner and subject to

the same provisions that apply to proceedings for enforce-

ment of compliance with awards of the Adjustment

Board.

II. Interstate Commerce Act, 49 U.S.C. $ 10101 et seq.

(Excerpts)

A. Section 10505

49 U.S.C. § 10505

‘a) In a matter related to a rail carrier providing trans-

portation subject to the jurisdiction of the Interstate

Commerce Commission under this subchapter, the Com-

uission shall exempt a person, class of persons, or a

transaction or service when the Commission finds that

the application of a provision of this subtitle—

(1) is not necessary to carry out the transportation policy

of section 10101a of this title; and

(2) either (A) the transaction or services is of limited

scope, or (B) the application of a provision of this sub-

52a

title is not needed to protect shippers from the abuse of

market power.

(b) The Commission may, where appropriate, begin a

proceeding under this section on its own initiative or on

application by the Secretary of Transportation or an

interested party.

(ec) The Commission may specify the period of time

during which an exemption granted under this section is

effective.

(d) The Commission may revoke an exemption, to the

extent it specifies, when it finds that application of a

provision of this subtitle to the person, class, or trans-

portation is necessary to carry out the transportation

policy of section 10101a of this title.

(e) No exemption order issued pursuant to this section

shall operate to relieve any rail carrier from an obliga-

tion to provide contractual terms for liability and claims

which are consistent with the provisions of section 11707

of this title. Nothing in this subsection or section 11707

of this title shall prevent rail carriers from offering al-

ternative terms nor give the Commission the authority

to require any specific level of rates or services based

upon the provisions of section 11707 of this title.

(f) The Commission may exercise its authority under

this section to exempt transportation that is provided by

a rail carrier as a part of a continued intermodal move-

ment.

(g) The Commission may not exercise its authority under

this section (1) to authorize intermodal ownership that

is otherwise prohibited by this title, or (2) to relieve a

carrier of its obligation to protect the interests of em-

ployees as required by this subtitle.

53a

B. Section 10901 _

49 U.S.C. § 10901

§ 10901. Authorizing construction and operation of rail-

road lines

(a) A rail carrier providing transportation subject to

the jurisdiction of the Interstate Commerce Commission

under subchapter I of chapter 105 of this title may—

(1) construct an extension to any of its railroad

lines;

(2) construct an additional railroad line;

(3) acquire or operate an extended or additional

railroad line; or

(4) provide transportation over, or by means of, an

extended or additional railroad line;

only if the Commission finds that the present or future

public convenience and necessity require or will be en-

hanced by the construction or acquisition (or both) and

operation of the railroad line.

(b) A proceeding to grant authority under subsection (a)

of this section begins when an application is filed. On

receiving the application, the Commission shall—

(1) send a copy of the application to the chief exec-

utive officer of each State that would be directly

affected by the construction or operation of the

railroad line;

(2) send an accurate and understandable summary

of the application to a newspaper of general

circulation in each area that would be affected

by the construction or operation of the railroad

line;

(3) have a copy of the summary published in the

Federal Register;

(c)

(d)

(4)

(5)

(1)

(2)

(1)

54a

take other reasonable and effective steps to pub-

licize the application; and

indicate in each transmission and publication

that each interested person is entitled to recom-

mend to the Commission that it approve, deny,

or take other action concerning the application.

If the Commission—

(A) Finds ‘public convenience and necessity, it

may—

(i) approve the application as filed; or

(ii) approve the application with modifi-

cations and require compliance with

conditions the Commission finds nec-

essary in the public interest; or

(B) fails to find public convenience and

necessity, it may deny the applica-

tion.

On approval, the Commission shall issue to the

rail carrier a certificate describing the construc-

tion or acquisition (or both) and operation ap-

proved by the Commission.

Where a rail carrier has been issued a certifi-

cate of public convenience and necessity by the

Commission authorizing the construction or ex-

tension of a railroad line, no other rail carrier

may block such construction or extension by re-

fusing to permit the carrier to cross its prop-

erty if (A) the construction does not unreason-

ably interfere with the operation of the crossed

line, (B) the operation does not materially in-

terfere with the operation of the crossed line,

and (C) the owner of the crossing line com-

pensates the owner of the crossed line.

55a

(2) If the carriers are unable to agree on the terms

of operation or the amount of payment for pur-

poses of paragraph (1) of this subsection, either

party may submit the matters in dispute to the

Commission for determination.

(e) The Commission may require any rail carrier pro-

posing both to construct and operate a new railroad

line pursuant to this section to provide a fair and

equitable arrangement for the protection of the in-

terests of railroad employees who may be affected

thereby no less protective of and beneficial to the

interests of such employees than those established

pursuant to section 11347 of this title.

III. 28 U.S.C. § 1441 (a)

Except as otherwise expressly provided by Act of Con-

gress, any civil action brought in a State court of which

the district courts of the United States have original juris-

diction, may be removed by the defendant or the defend-

ants, to the district court of the United States for the

district and division embracing the place where such action

is pending.

IV. Minnesota Uniform Fraudulent Transfer Act, Minn.

Stat. Ann. § 513.41, et seg. (Excerpts)

A. 513.44. Transfers fraudulent as to present and

future creditors

(a) A transfer made or obligation incurred by a

debtor is fraudulent as to a creditor, whether the

creditor’s claim arose before or after the trans-

fer was made or the obligation was incurred, if

the debtor made the transfer or incurred the

obligation: 3

(1) with actual intent to hinder, delay, or de-

fraud any creditor of the debtor; or

56a

(2) without receiving a reasonably equivalent

value in exchange for the transfer or obligation,

and the debtor:

(i) was engaged or was about to engage in a

business or a transaction for which the remain-

ing assets of the debtor were unreasonably small

in relation to the business or transaction; or

(ii) intended to incur, or believed or reason-

ably should have believed that he or she would

incur, debts beyond his or her ability to pay as

they came due.

513.45. Transfers fraudulent as to present creditors

(a) A transfer made or obligation incurred by a

debtor is fraudulent as to a creditor whose claim

arose before the transfer was made or the obli-

gation was incurred if the debtor made the

transfer or incurred the obligation without re-

ceiving a reasonably equivalent value in exchange

for the transfer or obligation and the debtor was

insolvent at that time or the debtor became in-

solvent as a result of the transfer or obligation.

V. Employee Retirement Income Security Act, 29 U.S.C.

§ 1001, et seg. (Excerpts)

A. Section 502(a) and (f), 29 U.S.C. § 1182(a)

and (f)

(a) Persons empowered to bring a civil action.

A civil action may be brought—

(1) by a participant or beneficiary—

(A) for the relief provided for in sub-

section (ec) of this section, or

(B) to recover benefits due to him un-

der the terms of his plan, to en-

force his rights under the terms

(f)

57a

of the plan, or to clarify his rights

to future benefits under the terms

of the plan;

(2) by the Secretary, or by a participant,

beneficiary or fiduciary for appropri-

ate relief under section 409;

(3) by a participant, beneficiary, or fidu-

ciary (A) to enjoin any act or prac-

tice which violates ay provision of this

title or the terms of the plan, or (B)

to obtain other appropriate equitable

relief (i) to redress such violations or

(ii) to enforce any provisions of this

title or the terms of the plan;

(4) by the Secretary, or by a participant,

or beneficiary for appropriate relief in

the case of a violation of 105(c¢) ;

(5) except as otherwise provided in sub-

section (b), by the Secretary (A) to

enjoin any act or practice which vio-

lates any provision of this title, or (B)

to obtain other appropriate equitable

relief (i) to redress such violation or

(ii) to enforce any provision of this

title; or

(6) by the Secretary to collect any civil

penalty «under subsection (i).

* * * *

Amount in controversy; citizenship of par-

ties. The district courts of the United

States shall have jurisdiction, without re-

spect to the amount in controversy or the

citizenship of the parties, to grant the re-

lief provided for in subsection (a) of this

section in any action.

58a

VI. Labor Management Relations Act, 29 U.S.C. § 141,

et seg. (Excerpts)

A. Section 301(a), 29 U.S.C. § 185 (a)

(a) Venue, amount, and citizenship. Suits for

violation of contracts between an employer

and a labor organization representing em-

ployees in an industry affecting commerce

as defined in this Act, or between any such

labor organizations, may be brought in any

district court of the United States having

jurisdiction of the parties, without respect

to the amount in controversy or without

regard to the citizenship of the parties.

59a

APPENDIX F

Railway Labor Executives’ Association

Member Organizations

American Railway & Airway Supervisors’ Association

(Division of TCU) ;

American Train Dispatchers’ Association ;

Brotherhood of Locomotive Engineers;

Brotherhood of Maintenance of Way Employes;

Brotherhood of Railroad Signalmen;

Brotherhood Railway Carmen (Division of TCU) ;

Hotel Employees and Restaurant Employees International

Union;

International Association of Machinists and Aerospace

Workers;

International Brotherhood of Boilermakers and

Blacksmiths;

International Brotherhood of Electrical Workers;

International Brotherhood of Firemen & Oilers;

International Longshoremen’s Association;

National Marine Engineers’ Beneficial Association;

Seafarers’ International Union of North America;

_Sheet Metal Workers’ International Association ;

Transport Workers Union of America;

Transportation * Communications Union (TCU).

60a

APPENDIX G

4 IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Docket No. 88 C 918

T. J. GENDRON, et al.,

Plaintiffs,

VS.

CHICAGO AND NORTH WESTERN

TRANSPORTATION COMPANY, et al.,

Defendants.

Chicago, Illinois

April 7, 1988

9:15 o’clock a.m.

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE MILTON I. SHADUR,

Judge

APPEARANCES:

For the Plaintiffs:

MR. JOEL F. HANDLER

For the Defendant

Chicago and North Western:

MR. STUART F. GASSNER

Gla

For the Defendant

Fox River Valley Railroad Corp.

MS. EILEEN A. KAMERICK

* * * *

[2] THE COURT: Right. Let me just say at the be-

ginning, that I am granting leave to both parties to cite

additional authority and to take all the filings, although

when I get these I sometimes wonder whcther we wouldn’<

be wiser to have a rule like that in the Supreme Court or

the Court of Appeals that says that on subsequent filings

all you do is cite and not argue what the significance is.

After all, I’m supposed to read them—and I do. But in

any event, leave is granted for all the filings up to this

point.

To my regret, the press of other matters has precluded

my issuing a written opinion on the current motions here.

It may be that I will be able to find some time and the

opportunity later to do that, confirming the principles and

the analysis, as well as the result, that I am about to teil

you. [3] Indeed I would prefer to do that, both because

of the interest and the importance of the issues. These

are obviously recurring matters, because this is not the

only effort that has been made here to assert this kind of

action, and I assume that it’s not going to be the last.

But for the present my oral opinion and ruling are going

to have to suffice for you.

The plaintiffs have quite deliberately shaped their Com-

plaint with care to assert only a state-based cause of ac-

tion. It should of course be emphasized, as a necessary

consequence of that, that kind of shaping may lessen a

plaintiff’s ability to prevail—that is, to be successful on

the merits of the claim. It seems to me that’s sort of pro

tanto circumscribed by the way in which the Complaint

is framed.

But in any event the defendants’ effort to remove the

action is under what has become known as the “artful

pleader” doctrine. Both sides recognize that. That doc-

62a

trine is essentially, I guess, a modern version of the prin-

ciple that’s become asssociated, at least in my mind, with

the great Illinois lawyer of the past, Abraham Lincoln.

I am sure all of you know, or should know, the Lincoln

story in which he asked: “If you call a dog’s tail a leg,

how many legs does the dog have?” And when the an-

swer was “Five,” he said, “No, it’s four, because calling

a dog’s tail a leg doesn’t make it so.”

In the kind of simplistic era of The Fair against [4]

Koehler, it was literally true that every plaintiff was the

master of his, her or its claim. Now of course some ex-

ceptions have been recognized to that concept where a

federal claim is necessarily implicit in the plaintiff's

action. But it appears to me that the defendants some-

what overstate tlos@ exceptions, which have been extra-

ordinarily limited by the Supreme Court. Both in Cater-

pillar against Williams at 107 Supreme Court 2425, and

before that in the same term in Metropolitan Life Insur-

ance against Taylor, 107 Supreme Court at 1542, it was

decided last year that federal pre-emption is a defense

that doesn’t confer federal jurisdiction unless that pre-

emptive force is what they call “so extraordinary that it

converts an ordinary state common-law complaint into one

stating a federal claim for purposes of the well-pleaded

complaint rule.” Because Caterpillar is one of the in-

creasingly rare unanimous Supreme Court decisions, be-

cause it states the operative principles so succinctly, and

because, of course, I couldn’t hope to improve on Justice

Brennan, I am going to read the portion of the framework

that I find controls here. This is at 107 Supreme Court

2429 to 2430.

“The presence or absence of federal-question juris-

diction is governed by the ‘well-pleaded complaint

rule,’ which provides that federal jurisdiction exists

only when a federal question is! presented on the face

of the plaintiff's properly pleaded complaint.

The rule makes [5] the plaintiff the master of the

claim: he or she may avoid federal jurisdiction by

exclusive reliance on state law...

“c

. It is now settled law that a case may not be

removed to federal court on the basis of a federal

defense, including the defense of pre-emption, even if

the defense is anticipated in the plaintiff’s complaint,

and even if both parties concede that the federal

defense is the only question truly at issue. .

“There does exist, however, an ‘independent corol-

lary’ to the well-pleaded complaint rule . . . known

as the ‘complete pre-emption’ doctrine. On occasion,

the Court has concluded that [sic] pre-emptive force

of a statute is so ‘extraordinary’ that it ‘converts an

ordinary state common-law complaint into one stating

a federal claim for purposes of the well-pleaded com-

plaint rule’ .... Once an area of state law has been

completely pre-empted, any claim purportedly based

on that pre-empted state law is considered, from its

inception, a federal claim, and therefore arises under

federal law ... (‘{I]f a federal cause of action

completely preempts a state cause of action any com-

plaint that comes within the scope of the federal cause

of action necessarily “arises under” federal law’).”

What is at work here, as I believe Caterpillar and

Metropolitan Life evidence, and indeed the prior case law

that they crystallize and apply, is a kind of pre-emption

“Animal [6] Farm”: Some pre-emptions are more equal

than others. What may be called “ordinary pre-emptions”

or maybe even “ordinarily extraordinary pre-emptions”

are only defenses that will not support the removal of a

complaint that’s consciously stated in state law. It should

be emphasized, of course, that the success or failure of a

pre-emption defense is not the determinant. If that were

true, pre-emption would create kind of self-fulfilling

prophecy. Courts would be compelled to look at the merits

of pre-emption in order to determine jurisdiction, which is

sort of a contradiction in terms.

Although I’m certainly loath to attempt to redefine con-

cepts that the Supreme Court appears to be picking out

by a line of decisions, to paraphrase Justice Frankfurter’s

once famous metaphor, what the courts look at is a kind

Hda

of “field pre-emption”—that is, a kind of “extraordinarily

extraordinary pre-emptive force.” All of this is really not

(although it may sound like it) a kind of play on words.

Let me remind counsel that in the very field in which the

“artful pleading doctrine” has been most forcibly advo-

cated and applied by the Supreme Court, Section 301 of

the Labor Management Relations Act, the Court has re-

quired materially more than an employee cause of action

against an employer in commerce. Allis-Chalmers against

Lueck and now Caterpillar have announced that subsan-

tially more is required. And although I know the risks

of predicting what the Supreme Court is going to do, it

[7] strikes me that there is at least a substantial chance

that they are going to consider Lingle against Magic

Chef, which was argued just last month and is going to

be decided this term, as beyond the pale in contrast to

what our own Court of Appeals has done.

Let me just say parenthetically that Oneida Indian

Nation, 414 US 661 at 675 is somewhat different. What

it says is that any claim to possession of Indian lands is

by definition a federal law claim, and therefore the only

source of those rights is federal law. That’s really a

different kind of animal from the one that we are looking

at either in the Labor Management Relations Act or in

ERISA.

Now although the artful pleader doctrine is at least

20 years old (I think AVCO came down in 1968), the

Court has really found only one statute besides certain

applications of the Labor Management Relations Act to

qualify for that kind of treatment. That’s the ERISA

claims, which draw from the same kind of principle.

Again I except Oneida, because that’s kind of a sport in

those terms. Once again, even in the ERISA situation it

was certain kinds of claims by certain classes of claim-

ants that give rise to this “extraordiary pre-emptive

force.”

What then I find defendants argue here, although they

certainly advance persuasive arguments for “claim pre-

65a

emption,” would really obliterate the line sought to be

drawn by [8] Caterpillar and Metropolitan Life and the

statutes that they rely on or exemplify. Let’s take a look

at the two things that the defendants rely on here.

First as to the Railway Labor Act, as you know, Price

) against PSA, a Ninth Circuit decision of last year, 829

F.2d 871, rejects that statute as falling in that kind of

“extraordinary pre-emption” category. And I find that

opinion quite persuasive, although in our own circuit the

Graf decision contains some perhaps inconsistent musings

by Judge Posner, really dicta once removed. But more

important than that, it would distort the plaintiffs’ claim

to put it under that rubric anyway. Both Allis-Chalmers

against Lueck and Caterpillar analysis show that the

sort of claim that is asserted would not apply the Rail-

way Labor Act. All that has to be done is to read those

opinions—and indeed, just read the recent argument as

reported in Law Week in Lingle against Norge Magic

Chef.

As for the Interstate Commerce

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