Gillikin v. ATLANTIC & EAST CAROLINA RAILWAY CO.

Citations: 120 S.E.2d 847; 255 N.C. 228; 1961 N.C. LEXIS 578Docket: 305

Court: Supreme Court of North Carolina; July 7, 1961; North Carolina; State Supreme Court

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Southern Railway Company sought approval from the Interstate Commerce Commission (ICC) on February 12, 1957, to acquire control of Atlantic and East Carolina Railway Company through stock ownership, as permitted under Section 5(2) of the Interstate Commerce Act. The Act requires ICC approval for mergers or acquisitions between carriers, mandating fair arrangements to protect affected railroad employees. Specifically, the ICC's approval must ensure that employees do not face worse employment conditions for four years post-transaction, limited to their prior duration of employment with the carrier. The ICC approved Southern's acquisition in Finance Docket No. 18698, effective February 27, 1957, with stipulated conditions. During the hearing, employee organizations from the Coast Line and East Carolina intervened, initially opposing the application due to potential harm to employees. However, the objections from the East Carolina employees were withdrawn after Southern agreed to adhere to specific protective conditions.

Approval of the acquisition of control by Southern Railway Company over Atlantic and East Carolina Railway Company is granted, subject to conditions aimed at protecting adversely affected railway employees, consistent with prior cases, specifically the Chicago, N. W. Ry. Co. Merger. The acquisition was finalized on September 19, 1957, and a supplemental order from the Interstate Commerce Commission (ICC) on September 29, 1958, allowed for the intervention of the Railway Labor Executives’ Association. This association sought further hearings to address the adverse effects on employees due to the acquisition, requesting the imposition of protective conditions similar to those in Oklahoma Ry. Co. Trustees Abandonment. Southern Railway acknowledged that employees have been adversely affected since the acquisition, and disputes have arisen regarding their entitlement to protection under the existing conditions. The ICC recognized that the current employee protection measures are inadequate, lacking provisions for dispute resolution, and determined that employees should benefit from established procedures for settling controversies related to their protections, as is standard in similar proceedings.

The petition for reconsideration and a supplemental order has been granted. The previous order on reconsideration from February 12, 1957, is modified to stipulate that the Southern Railway Company's acquisition of control over the Atlantic and East Carolina Railway Company is subject to conditions protecting railway employees, similar to those established in the Oklahoma Ry. Co. Trustees Abandonment case. The remainder of the petition for further hearing, reconsideration, and supplemental order has been denied. 

The plaintiff presented evidence from two Interstate Commerce Commission (ICC) decisions: the May 29, 1946 decision on the Chicago, North Western Railway Company's merger, which allowed the merger under specific conditions to protect employees for four years, and the May 17, 1944 decision regarding the Oklahoma Railway Company's abandonment, which approved the abandonment and joint purchases by the Atchison, Topeka and Santa Fe Railway Company and the Chicago, Rock Island and Pacific Railway Company, while instituting conditions to ensure the unification of railroad facilities as mandated by section 5(2)(f) of the act.

Conditions for employee protections following the abandonment of operations and related transactions include the following: Employees displaced due to these changes will receive a monthly displacement allowance if they cannot secure a position with equal or greater compensation based on their seniority rights. This allowance is calculated as the difference between their previous and current monthly compensation, determined by averaging their earnings and paid time over the last 12 months prior to displacement. The protective period for this allowance lasts from the displacement date until four years after the effective date of the order, but not exceeding the duration of their prior employment with the carriers.

Additionally, dismissed employees—those losing their positions due to seniority exercises resulting from the approved transaction—are entitled to a monthly dismissal allowance equivalent to one-twelfth of their compensation from the last 12 months of employment before being dismissed. This allowance is provided during the protective period while they remain unemployed, with the exception that Oklahoma employees must accept suitable employment offers in Oklahoma City from the Santa Fe or Rock Island to qualify for the allowance.

Any unresolved disputes regarding these protective conditions can be escalated to an arbitration committee within 30 days, with the committee's formation and operational procedures agreed upon by the parties involved.

Plaintiff, an employee of Atlantic from September 20, 1955, to October 4, 1957, served as a lead mechanic for diesel engines, earning $1.83 per hour. Following his layoff, he did not receive any job offers from Atlantic or Southern and earned $2,640.20 over the next ten months, which included unemployment compensation; had he remained employed, he would have earned $3,148.40, resulting in a loss of $508.20 due to the layoff. H. P. Edwards, who was president and general manager of Atlantic from September 1, 1939, until August 31, 1957, testified that the maintenance department, critical for railroad operations, employed the plaintiff as a machinist. He indicated that the plaintiff's job would not have ended but for Southern's acquisition of Atlantic, which led to a reduction in mechanical department employees from 14 to 5. Following the acquisition, Southern sold machinery and reduced maintenance operations at the New Bern facility. Edwards noted a decline in employees over the past ten years and that Atlantic had not operated steam locomotives for six months before the acquisition. Marjorie M. Edwards, a clerk in the car accounting office, also testified that her employment ended on October 1, 1957, following the purchase of Atlantic's stock by Southern, and referenced a letter regarding her lost compensation for October 1957.

The investigation reveals that the individual was employed as a Clerk in the Car Accountant's office, a position covered by an agreement with the Brotherhood of Railway and Steamship Clerks. The job was eliminated due to the transfer of responsibilities to the Superintendent of Car Service at Southern Railway Company in Atlanta. Consequently, the individual is entitled to protection under an Interstate Commerce Commission Order, similar to that previously established in the Chicago and Northwestern Railway Company Merger case. Instructions have been issued to ensure this protection is granted. However, any unemployment compensation received since the job's abolition will be deducted from future payments.

A subsequent letter from L.G. Tolleson, dated December 30, 1957, outlines the information required to calculate the monthly dismissal allowance. Once this information is received, a draft or voucher will be prepared to cover the net dismissal allowance for October, November, and December 1957, with ongoing monthly payments to follow, contingent upon signed statements regarding employment status.

The testimony from defendant's witness, Archie Adams, indicates he was employed by Atlantic as a trainmaster and general foreman since October 1, 1957. He reported issues with obsolete equipment and parts at the New Bern facility and noted that the shop was not efficiently set up for the work required under a contract with the U.S. Army. After consulting with Army Transportation officials, he was permitted to transfer certain work to a shop in Knoxville if needed. Following a layoff on October 5, 1957, he streamlined operations by consolidating staff and equipment into one building and initiated the procurement of air-jacks for maintenance tasks.

Two 50-ton mechanical jacks requiring four men operate for 30 to 40 minutes, contrasting with air-jacks that take two men and 2 to 3 minutes. Atlantic argues against the judgment allowing a $508.20 recovery to the plaintiff, asserting that it was not involved in the proceedings where the Interstate Commerce Commission imposed employees' protection conditions, which were specifically tied to Southern's application for control over Atlantic. The conditions imposed on Southern do not apply to Atlantic, as established in McDow v. Louisiana Southern Ry. Co. Additionally, the plaintiff acknowledges he cannot sustain his action against Atlantic, agreeing that the judgment against it should be reversed.

Southern presents five assignments of error regarding evidence admission but does not substantiate these claims in its brief, leading to their abandonment. Southern's main argument is that the court erred in allowing recovery based on conditions meant to protect employees from job loss due to unification or consolidation, rather than from modernizations causing job abolishment. Southern claims that Mrs. Marjorie M. Edwards was protected under these conditions due to her job being consolidated with Southern's Atlanta employees, while the plaintiff's job loss resulted from modernization, excluding him from the protection scope. Southern's arguments regarding the plaintiff's evidence and the court's decisions are deemed unconvincing.

Southern's application under the Interstate Commerce Act, 49 U.S.C.A. § 5(2), pertained to its acquisition of control over Atlantic through stock ownership, rather than a merger of properties or franchises. The Interstate Commerce Commission (ICC), in approving Southern's application, was mandated by 49 U.S.C.A. § 5(2)(f) to ensure a fair arrangement to protect Atlantic's affected employees. This included conditions to prevent any deterioration in their employment status for four years following the order's effective date, with the stipulation that protection would not extend beyond the duration of the employee's prior employment. Section 5(2)(f), part of the Transportation Act of 1940, was designed primarily to safeguard employees during railroad consolidations. 

In Brotherhood of Maintenance of Way Employes v. United States, the court addressed whether the conditions set for employee protection during a merger met the requirements of Section 5(2)(f). The plaintiffs argued that any outcome short of continued employment violated the statute. However, a three-judge court determined that the statute allowed for compensatory protection rather than necessitating each employee's retention. This ruling was upheld by the U.S. Supreme Court on May 1, 1961, which affirmed the long-standing administrative interpretation of the statute, indicating that it was aligned with congressional intent. Justice Douglas dissented, advocating for a stricter interpretation that would require four years of protection for each employee.

Southern's acquisition of control over Atlantic through capital stock ownership was authorized by the Commission, which imposed protective conditions for Atlantic's employees based on precedents from the North Western case. On July 25, 1958, the Commission allowed the Railway Labor Executives' Association to intervene and request a hearing to address the negative impact of Southern's acquisition on Atlantic's employees, seeking to impose similar protective conditions as in the Oklahoma case. Southern acknowledged that the acquisition had led to the displacement and adverse effects on Atlantic's employees, leading to disputes over their protection under the imposed conditions.

On September 29, 1958, the Commission modified its earlier order, stipulating that Southern's approval to acquire control over Atlantic would be subject to the same employee protections established in the Oklahoma case. The conditions from the North Western case were broadly interpreted to protect Atlantic's employees from worsening employment conditions due to Southern's acquisition for a specified period. The Oklahoma case provided similar protections, including an arbitration procedure.

Evidence presented indicated that Southern assumed control of Atlantic on October 1, 1957. A specific employee, who was with Atlantic from September 20, 1955, to October 4, 1957, was laid off on the latter date and received no further employment offers from either Atlantic or Southern. Over ten months following his layoff, he earned $2,640.20, compared to an expected $3,148.40 had he remained employed, resulting in a loss of $508.20. His termination was directly linked to Southern's acquisition, which also led to the closure of Atlantic's New Bern maintenance shops.

Southern's acquisition of Atlantic led to the plaintiff losing his job shortly thereafter, which constituted a violation of conditions set by the Commission designed to protect Atlantic's employees. This occurred despite the plaintiff's job elimination being attributed to Southern's modernization efforts. The trial judge found that Southern gained control of Atlantic through capital stock ownership rather than through a merger or consolidation, influencing his negative response to a related issue. However, this response was deemed unnecessary, as the findings on other issues confirmed the plaintiff's right to recover $508.20 from Southern under Section 5(2)(f). The defendants did not contest the amount of recovery nor challenge the jurisdiction of the State court, which appeared to be valid. The arbitration process referenced in the Oklahoma case was considered optional, with no evidence of an arbitration committee being formed. All of Southern's errors were dismissed, resulting in a reversal of the judgment against Atlantic and an affirmation of the judgment against Southern, with the recovery amount modified to be solely from Southern.