# Petition for Writ of Certiorari — International Ass'n of Machinists & Aerospace Workers v. REA Express, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1976
- **Citation:** 423 U.S. 1073

## Text

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SUPREME COURT, UO PTT

IN THE

Supreme Court of the United States

Ocroper Term, 1975
No. 75-

>

INTERNATIONAL ASSOCIATION OF MACHINISTS and
Agrrospace Workers, Al*L-C1O,
Petitioner,
—_—V-
REA Express, Ixc., Debtor, REA Express, Ixc.,
Debtor-in-Possession,
Respondent.

,

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

SrepHen C. Viapeck
Vuapeck, Evias, Vuapeck &
Lewis, P.C,
Attorneys for Petitioner
1501 Broadway
New York, New York 10036
(212) 221-2550

and

Piato FE. Parrs

1300 Connecticut Avenue, N. W.
Washington, D. C. 20036
General Counsel, International
Association of Machinists and
Aerospace Workers, AFL-CIO
(202) 785-2525

StepHen C. ViapEcK

SHELDON ENGELHARD

Rosert L. Javuvtis

Of Counsel

ee

PPR

TABLE OF CONTENTS

i gente cn SMES RCN BRIELLE PT Se ON

A Na REI Sa ees OE Ts oa ae ia cs

Question Presented for Review .............e.ececececeeeceseeeneeenes

et EAT Re SOO PPL cy bare ci ayy

Reasons For GRANTING THE WRIT:

l.

be

The decision below conflicts with the national
labor policy of stabilizing labor relations through
the maintenance of collective bargaining agree-
ments in industries subject to the Railway Labor
,* ee ciitinecniaiadipuechtienbvanics aeaibcapteesaKieilonkio

The decision below conflicts with the national
labor policy of distinguishing collective bargain-
ing agreements from other types of contracts ....

The decision below conflicts with the clear con-
gressional intent of the Railway Labor Act to
require debtors-in-possession to follow its pro-
cedures in modifying or terminating collective
bargaining agreements ...0...................ccccceceeeeeeeeeeees

RNAS dt es One Nas eahs Near Sm SS Tae ay AS

om yg hty RIOTS PRR IP AULA ARNE eat egl se

ME ONE i Ne Se

11

INpex oO Crrarions

Cases:

Brotherhood of Loeomotive Eneimeers vo Baltimore &

VAG

Ohio RO Co, 82 LSS 284 Ces) rT
Chieaso & NOW. Ryo Conv. United Transportation

Union, 402 US. O70 CI8Th) 0
Detromt and Toledo Shore Line Railroad Company vy,

United Transportation Union, 896 US. Te (196e) 10
NLRB vy. Burns International Seeurity Serviees, Ine.

4006 US. 272 CINF2) 13
REA Express, Ine. v. Brotherhood of Railway and Air

line Clerks, 499 Pild 226 (oth Cir. 1972), eert. den.

409 US. 284 (172) i)
Shopmen’s Loeal Umon No. 455, et al. and NLRB v.

Kevin Steel Produets, Ine. 519 Bid Gos (2d Cir,

1979) S
Slocum vo Delaware, Lo & Wo OR. Coe. 389 US. 28e

(1990) Ww
Textile Workers Union of America vy. Lincoln Mills of

Alabama, 853 U.S. 448) (1997) 11
Umited Steelworkers Union of America v. Warrior &

Gulf Navigation Co., 368 U.S. S74 (1960) 1
STATUTES:

Bankruptey Act (11 U.S.C. §§T701, ef seq.) passim

Railway Labor Act (45 U.S.C. §S1SL, ef seg.) © passim

Meee SAROa

»

In THE
Supreme Court of the United States
Ocronern ‘Team, 1975

No. 75-

- >
INTERNATIONAL Association or Maciinists and
Arrospacek Workers, ABFL-CLO,

Petitioner,

—

REA Express, Ixc., Debtor, REA Express, [Ne.,
Debtor-in- Possession,
Respondent.

—

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

The petitioner, International Association of Machinists
and Aerospace Workers, AFL-CLO (“LAM”), respectfully
prays that a writ of certiorari issue to review the judgment
and decision of the United States Court of Appeals for the
Second Cireuit entered on August 27, 1975.

Opinions Below

The opinion of the Court of Appeals, not vet officially
reported (unofficially reported at 90 LRRM 2579), appears
in Appendix “A” hereto. The opinion and order of the
United States District Court for the Southern District of
New York, on appeal from a Bankruptey Judge of that
Court, entered on May 19, 1975, not yet officially reported
(unofficially reported at 88 LRRM 2495), appears in Ap-

NT estale Dale as

Gere

pendix “B” hereto. The opinion and order of Bankruptcy
Judge John J. Galgay of the District Court, entered on May
2, 1975, also not yet officially reported, appears in Appendix
“C” hereto.

Jurisdiction

The judgment of the United States Court of Appeals
for the Second Circuit was entered on August 27, 1975.
This petition was filed within ninety days of that date.
The jurisdiction of this Court is invoked pursuant to 28
U.S.C. §1254(1).

Question Presented for Review

Does $313(1) of the Bankruptcy Act allow a District
Court to permit a debtor-in-possession of the business of a
carrier subject to the provisions of the Railway Labor Act
to reject a collective bargaining agreement in disregard of
the requirements of the Railway Labor Act relating to the
alteration of the status quo by changing rates of pay, rules,
or working conditions of employees of a carrier where the
term “carrier,” as defined in the Railway Labor Act, clearly
includes a debtor-in-possession?

Statutes Involved

This matter primarily involves provisions of the Rail-
way Labor Act (45 U.S.C. §§151, et seg.) and of Chapter X1
of the Bankruptey Act (11 U.S.C. §§701, et seq.) as follows:

Section 2, First, of the Railway Labor Act (45 U.S.C.
$152, First) reads as follows:

3

“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
disputes, whether arising out of the application of
such agreements or otherwise, in order to avoid any
interruption to commerce or to the operation of any
carrier growing out of any dispute between the carrier
and the employees thereof.”

Section 2, Seventh, of the Railway Labor Act (45 U.S.C.
§152, Seventh) reads as follows:

“No carrier, its officers, or agents shall change the rates
of pay, rules or working conditions of its employees,
as a class, as embodied in agreements except in the
manner prescribed in such agreements or in section
156 of this title.”

Section 6 of the Railway Labor Act (45 U.S.C. $156)
seads as follows: ‘

“Procedure in changing rates of pay, rules, and work-
ing conditions.

“Carriers and representatives of the employees shall
give at least thirty days’ written notice of an intended
change in agreements affecting rates of pay, rules,
or working conditions, and the time and place for
the beginning of conference between the represen-
tatives of the parties interested in such intended
changes shall be agreed upon within ten days after
the receipt of said notice, and said time shall be
within the thirty days provided in the notice. In every

4

3
%
%

case where such notice of intended change has been
given, or conferences are being held with reference

b thereto, or the services of the Mediation Board have
3 been requested by either party, or said Board has
H proffered its services, rates of pay, rules or working
‘ conditions shall not be altered by the carrier until
¥ the controversy has been finally acted upon, as re-
3 quired by section 155 et this title, by the Mediation
5 Board, unless a period of ten days has elapsed after
iy termination of conferences without request for or
‘ proffer of the services of the Mediation Board.”

:

‘ Section 1, First, of the Railway Labor Act (45 U.S.C.
i S151, First) reads in pertinent part as follows:

: “The term ‘carrier’ includes any express company, * * *
Sa

subject © ime Interstate Commerce Act, * * * and any

receiver, trustee, or other individual or body, judicial
or otherwise, when in the possession of the business
of any such ‘carrier’ * * *.”

Section 313(1) of Chapter XI of the Bankruptey Aet
(11 U.S.C. §718(1)) reads in pertinent part as follows:

Ge et WBS fae tila Te BARA OPI

“Upon the filing of a petition, the court may * * *—

‘(1) permit the rejection of executory contracts of
the debtor, upon notice to the parties to such contracts
and to such other parties in interest as the court may
designate ;’.”

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Statement of the Case

The petitioner, LAM, is a labor organization which rep-
resents those employees of the respondent, REA Express,
Inc. ("REA"), who are engaged in the maintenance, ser-
vieing and repair of its mechanical and automotive, truck
and trailer equipment. REA is engaged in both the surface
and air transportation of freight, and is a “carrier” sub-
ject to all provisions of the Railway Labor Act (45 U.S.C.
SOIDL, et seq.) REA Express, Ine. v. Brotherhood of Rail-
way and Airline Clerks, 459 Ftd 2260 (oth Cir, 1972),
cert. den., 409 U.S. 892 (1972).

IAM and REA have been parties to collective bargaining
agreements governing the rates of pay, rules, and work-
ing conditions of the carrier's employees since a time
prior to the enactment of the Railway Labor Act. The
collective: bargaining agreement at issue in this matter
contains, among other items, provisions covering job
seniority, equal opportunity in employment, health and
welfare benefits and a detailed grievance procedure, The
procedures for the resolution of grievanees, culminating
in arbitration, are required by Section 3 of the Railway
Labor Act (45 U.S.C. $155).

The collective bargaining agreement at issue affects ap-
proximately 330 employees. According to its express terms
(Rule 59), the agreement was to “remain in effeet until
June 1, 1876, and thereafter changed or modified in acecord-
ance with the provisions of the Railway Labor Ac: as
amended.” Section 2, Seventh, of the Railway Labor Act
specifically controls the modification of collective bargain-
ing agreements subject thereto, and provides that such

6

agreements may not be changed by a carrier exeept in
accordance with the terms of the agreements or Section 6
of the Railway Labor Aet (45 UOS.C) S1S6)> Section 6
requires at least thirty days’ written notice ef an in
tended change in agreements, conferences between the
parties, and mediation by the National Mediation Board, if
necessary, ‘These mandatory procedures must be exhausted
before either a carmer or the representative of its em
plovees may inveke self-help to revise or terminate the
provistons of a collective bargaining agreement, Brother
hood of Locomotive Engineers v. Baltimore & Ohio R. Co.,
872 US. 284 (1968). ‘Phe procedures set forth in Section 6
of the Railway Labor Aet are appleable to any receiver,
trustee, or other individual or body, pudieml or otherwise,
When in the possession of the business of a carrier. Seetion
1, First, of the Railway Labor Act (4o US.C. S151, First).

On February 18, 1975, REA filed a petition with the Dis
triet Court pursuant to the provisions of Chapter XI, 6322
of the Bankruptey Aet (LE UAS.C. Q722, ef seq). By order
of that same date, the District Court authorized the debtor,
REA, to continue in the possession and operation of its
business, On February 24, L975, REA unilaterally reduced
the wages of emplovees covered under the LAM collectiv:
bargaining agreement by 10°, designating this action as a
wage deferral, No notice of this modification of the agree-
ment was served upon LAM as required by Section 6 of the
Railway Labor Act, nor were any of the other proceedures
contained in that section followed by REA.

On March 24, 1975, REA tiled a motion with the Bank.
ruptey Court, pursuant to Seetion 313(1) of the Bank
ruptey Aet (1L U.S.C. §713(1)), for an order permitting

— eae will
not result in profitable operations without a reduction in
existing payrolls. The eash flow projections for both
Plan A and Plan Be2 do not take into account any of the
one-time costs of implementation or the payment of exist-
ing debts. It is claimed, however, it will provide a basis
on which a successful operation may be predicated.

REA’s agreement with BRAC required a 150 wage in-
erease on April 80, 1973 and eight cents per hour cost of
living adjustment on February 3, 1974, a ten cents per hour
adjustment on July 1, 1974, a 10% inerease on October 1,
1974 and nine cents per hour adjustment on February 1,
1975. REA‘s agreement with TAM required similar’ in-
creases to those ¢ranted to BRAC,

In 1974 REA paid its employees approximately $101,000,-
000 in wages, $9,000,000 in vacation pay, and $3,000,000 in
holiday pay. Under the collective bargaining agreements
with BRAC and IAM, REA is required to pay supplemen-
tary unemployment. Accrued vacation benefits required
by the Union agreements total $11,000,000, In the event
BRAC members are layed-off they are entitled under their
collective bargaining agreement to $18.00 per day unem-
ployment benefits for some 781 days of which REA must
pay $5.30 per day per employee until Railroad Unem-
ployment benefits are exhausted and, thereafter, REA must
pay the full $18.00 per day. In 1974 these benefits cost
REA almost $600,000.

REA’s agreement with BRAC required comparability
increases which have not yet been implemented but if they
are will increase REA’s payroll costs.

Rule 12 of REA’s agreement with BRAC governs REA’‘s
right to effect the transfers and consolidations inherent in

24a

either Plan A or Plan B-2. Rule 12 may involve delays up
to at least 60 days, and it requires arbitration of any dis-
pute respecting a transfer or consolidation upon demand by
the Union. BRAC can not deny REA’s right to change
its operations, but it may compel arbitration of the ‘‘man-
ner of implementing the contemplated change’’. Em-
ployees who are laid-off are entitled to supplementary un-
employment benefits and those who elect to follow their
work are entitled to free movement of household goods,
free transportation, time-off to relocate and the like.

The implementation of Plan B-2 involves changes in
what are known as ‘‘over-the-road runs’’. Such changes
are governed by Rule 8 of the BRAC agreement which re-
quires consultations between REA and Union before such
changes may be effected.

DISCUSSION

REA asserts it is unable to effect the proposed consolida-
tion under its existing collective bargaining agreements by
reason of the delays inherent in following the procedures
thereby required and by reason of the costs to REA man-
dated such agreements. REA asserts it cannot meet its
eemtractual wage and fringe benefit obligations; it claims
‘* “amnet meet its obligations to suppliers as debtor in
peeeeesem: and it cannot incur substantial liabilities for
mem lenment and relocation benefits required by its agree-

= wth BRAC and IAM. It further claims it must
‘Fo »© ems om costs promptly and inexpensively.

i. os “ome it is unable to pay the wages presently
voter! oe ot eelleetive bargaining agreements with
ei) wet | 8M end the cost-of-living, comparability and
(ten Senet tech will, in the future, be required by those
VY api Deted Cok aes

f otter « eaye of REA is permitted to promptly imple-
nen! ether Man A or Plan B-2 and to maintain its union

OR DRS BO ei: RRA ME Tea DEAS

pe BiCO ene eee Ne

25a

payroll at existing levels it has a reasonable chance of
obtaining needed financing, restoring profitability and ef-
fecting a plan of arrangement with its creditors. It claims
it cannot accomplish these objectives unless its collective
bargaining agreements with BRAC and IAM are disaf-
firmed.

For all of the foregoing reasons, REA asserts that the
collective bargaining agreements between it and its unions
BRAC and IAM are onerous and burdensome,

The unions urge that the collective bargaining agree-
ments between REA and them are governed by the Rail-
way Labor Act, that REA is a ‘‘Carrier’’ subject to the
provisions of that statute and that it cannot change the
‘‘rates of pay, rules or working condition of its employees”?
except in the manner prescribed in the Act or in the col-
lective bargaining agreement itself. They claim REA
acted illegally in unilaterally reducing the wages paid to
its employees who are covered by the instant collective
bargaining agreements.

They fail to directly claim that these collective bargain-
ing agreements are not onerous and burdensome but say
if they are so are the terms of a great number of con-
tracts and agreements to which REA is a party, yet REA
has not sought to have this Court disaffirm any of its other
agreements.

Finally it claims that this Court has the power and should
compel REA to honor the terms of the labor agreement.

See. 313(1) of the Bankruptcy Act permits the rejection
of executory contracts of the debtor upon notice to the par-
ties to such contracts and to such other parties as the Court
may designate.

Assuming, without deciding that this Court has the
power to reject a collective bargaining agreement, it may
exercise that power if it finds the agreement to be executory

Na

YER RO

ses

et
a

26a

and ‘‘onerous and burdensome”’ to the debtor. Cf Shop-
men’s Local v. Kevin Steel Products, (2d Cir.) 74-215A.

Both labor agreements herein are executory within the
meaning of See. 315(1) since their expiration dates are
the end of 1975 and the middle of 1976.

This case turns then on the meaning of ‘‘onerous and
burdensome’’ in the context of a dispute wherein REA
claims the terms of the coliective bargaining agreements
are so oppressive, restrictive and expensive that it cannot
possibly survive in a Chapter XI proceeding unless these
agreements are scrapped, and impliedly, a more congenial
one negotiated.

Ordinarily the rejection of an executory contract is
based upon the debtor’s desire to end a commitment which
presents a financial drain on the company and thereby en-
able it to come out of a Chapter XI proceedings by the ac-
ceptance of a plan of arrangement by its creditors. It
does not mean that an agreement which, when entered into
was satisfactory, but because of changing economic cir-
cumstances, is now too expensive. The usual instance of a
contract appropriate for rejection is a lease of expensive
office facilities, say, on Park Avenue, and because of re-
duced staff and the change in the nature of the business,
such prestigious and expensive quarters are no longer
needed and its continued performance thereunder would be
a financial drain.

Another example would be the rejection of executory
contract involving the employment of dress designers
after the Chapter XI debtor changed the nature of its
operation from designing and manufacturing its own
dresses, to that of a jobber or contractor doing work for
other manufacturers who had their own designers,

Here, REA says, if it can reject and disaffirm these labor
contracts then it can embark on Plan A or Plan B-2 and
within a short time rehabilitate itself. It says the contin-

PINE eae TA ae sate See ele ee ee Ser noun Gers ttn i awe ee Oe ee eee ee We i he Cee Ser ke Meera eae Ne SOC Ure t: | un ea.) eee ty

27a

uance of the executory contracts is a financial drain as it
probably is, but it wants to retain its labor force to con-
tinue the operation of its business but at some level of
wages, working conditions and other provisions less than
those in the present agreements. To permit the rejection
of these contracts would destroy the ceonomic balance of
power each party enjoyed when the contracts were entered
into. The employees would be at a substantial disadvant-
age and be in the position where REA could dictate the
terms of any new agreement. Further See. 313(1) con-
templates upon the rejection of an exeeutory contract, the
party who suffers thereby is allowed to file a claim in the
proceeding for its provable damage. Apart from those
damages easily calculated such as past wages, vacation and
severance pay, how can a damage figure be placed on the
value of pension rights, welfare rights, seniority rights,
ete. to each of the affected employees. The Bankruptcy
Court is a Court of Equity and must balance these equities
in the exercise of its discretion.

The history of the hostility between management and
labor in REA since 1969 is the subject of an opinion in
REA EXPRESS Inc, vy. BRAC, 358 Fed Supp. 760, by
Hon. Edward Weinfeld. In it Judge Weinfeld recites the
long and difficult experiences of both parties in connection
with a threatened strike.

In that opinion, Judge Weinfeld made comments which
are illuminating and relevant in this proceeding.

‘That a carrier is in economic straights does not re-
quire its employees to carry the burden of its eco-
nomic problems.... REA is a private enterprise cor-
poration operating under a laissez-faire economy; the
circumstances that it cannot meet the demands of a
competitive system and may face bankruptcy does not
require its employees to accept a wage they deem in-
adequate and to surrender their right to strike. To

28a

hold that the employees assertion of their rights mani-
fests a failure to exert every reasonable effort to re-
solve all disputes and thereby constitutes a See. 2
First Violation is without validity. It suggests that
a court has the power to apply a coercive foree upon
the employees to yield to the earrier’s offer even
though they deem it inadequate—in effeet it would be
to impose upon them the financing of an under-eapital-
ized earrier when its own stockholders, here few in
number, refuse to make further investments and sup-
ply needed eapital.’’

In the matter of Overmeyer, Bankruptey Judge Roy
Babitt, Collier-Bankruptey Cases, Volume 1, pg 522, in
refusing to permit the rejection of a lease of real property

, stated:

‘Moreover, this debtor does not contend that the
warehouse is totally unprofitable; it merely states that
the profits generated from its operation are not suffi-
cient and that West Cash & Carry should now be told
that a contract under which it has performed its pact
4 for eight years is now to be negated, thereby foreing
West Cash & Carry to renegotiate a new contract of

lease or peremptorily remove its operation elsewhere.’’

After commenting on his power to do equity he goes on

a ‘*T conclude, in the exercise of my judgment, that this
: is not the kind of rejection purposed by Congress by
its language in See. 313(1). Nor would such rejection
be within the overall scheme of Chapter XT. Chapter
XI is not a guarantee that every plagued company
will sueeeed in Chapter XT rehabilitation, Jn re
Webcor, Inc. 392 F.2d 893 (7th Cir. 1968), cert. denied
393 U.S. 837 (1968), and it gives no basis to hold that
performing parties to agreements which years later
might have become less economically desirable than
they were at the beginning, are to be prejudiced in
their reliance on such agreements made with sophisti-
cated debtors under terms, one may assume, as advan-

Ri Sh? EB Ee 9 Sek Riv ns” La

IEA SOL MT eS i Soe MOET

29a

tageous to that debtor as could be when originally
negotiated.’’

The Court has been called on to decide this issue, It
has not been called on to weigh for the debtor or the
Unions, the consequences which might flow from adjudica-
tion, including possible termination of thousands of jobs
in these recession days, unemployment for a period of
time, loss of pension payments to former employees and
other disabilities. Surely both parties are sophisticated
enough to know where their interests lie.

I conclude that REA’s application to reject and dis-
affirm the collective bargaining agreements with BRAC
and IAM should be denied. In my judgement this is not
the kind of rejection or disaffirmance intended by Con-
gress nor would it be within the overall scheme of Chapter
XI.

As has been observed, Chapter XI is not a guarantee
that every plagued company will succeed in Chapter XI
rehabilitation. In re Webcor Inc. 392 F.2d 893 (7th Cir.
1968).

Regarding the Union’s demand that the Court order
that REA honor its collective bargaining agreements and
to pay 100% of the rate of wages called for therein, I de-
cline to do so,

The Unions have remedies available to them under such
agreements, and this court may await the administrative
grievance process, see Nathanson v. NLRB 344 US 25
(195).

In view of the financial conditions of the debtor in pos-
session detailed above, I feel the parties to the agreements
can evaluate the wisests course to follow in light of all the
circumstances. REA’s application for authority pursuant
to Sec. 313(1) of the Bankruptcy Act to disaffirm its execu-
tory contracts with BRAC and IAM is denied.

. ee ep Bag I eed ginal RN MARR TONY
: ae ae gar Me lec SIDE we AR Ne SS IE
Ga Ree

30a

The applications of BRAC and IAM seeking an order
of this Court directing REA to pay such sums as are due
and payable to employees who are members of their respee-
tive unions under the terms of existing labor agreements
between the parties is also denied at this time without
prejudice.

--

Ir Is So Orperep.

Jonn J. GALGAY
Dated: New York, New York
May 2nd, 1975

a ee ea a ee ied

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_1742%3A1. Public record. Not legal advice.