U.S. Supreme Court U.S. v. LOWDEN, 308 U.S. 225 (1939)

[Page 308 U.S. 225, 233]

affecting the private interests of those immediately concerned in the maintenance of the existing nationwide railway system, the railroad security holders and employee. The security holders are usually, though not always favorably affected by economies resulting from consolidation. [Footnote 1] But the Commission has estimated in its report on unification of the railroads that 75% of the savings will be at the expense of railroad labor. Not only must unification result in wholesale dismissals and extensive transfers, involving expense to transferred employees, but in the loss of seniority rights which, by common practice of the railroads are restricted in their operation to those members of groups who are employed at specified points or divisions. It is thus apparent that the steps involved in carrying out the Congressional policy of railroad consolidation in such manner as to secure the desired economy and efficiency will unavoidably subject railroad labor relations to serious stress and its harsh consequences may so seriously affect employee morale as to require their mitigation both in the interest of the successful prosecution of the Congressional policy of consolidation and of the efficient operation of the industry itself,2 both of which are of public concern within the meaning of the statute.

[Page 308 U.S. 225, 234]

One must disregard the entire history of railroad labor relations in the United States to be able to say that the just and reasonable treatment of railroad employees in mitigation of the hardship imposed on them in carrying out the national policy of railway consolidation, has no bearing on the successful prosecution of that policy and no relationship to the maintenance of an adequate and efficient transportation system. As was pointed out by Commissioner Eastman in his concurring opinion in this case the protection afforded to employees by the challenged conditions is substantially that provided in event of consolidation by an agreement entered into in May, 1936, between 219, the great majority of the railroad lines of the country, and 21 labor organizations. [Footnote 3] He also directed attention to the fact that the Committee of Six, three of whom were railroad executives, in their report to the President of December 23, 1938, recommended that the federal agency passing upon railroad consolidation 'require as a prerequisite to approval a fair and equitable arrangement to protect the interests of ... employees',4 and that this report had been ap-

[Page 308 U.S. 225, 235]

proved by the directors of the Association of American Railroads.

We can hardly suppose that the railroads, in entering into this agreement and endorsing this recommendation left out of account their own interest in the maintenance of transportation service or that their interest in this respect differs or is separable from that of the public interest. In fact, before this action by the railroads the Commission itself had taken the view that the welfare of dismissed employees must be considered in passing upon proposed consolidations,5 and in its sixth annual report in 1892 it declared in recognition of the same principle, that 'relations existing between railway corporations and their employees are always of public interest.' [Footnote 6] The Federal Coordinator of Railroads, in his fourth annual report to Congress in 1936, recommended the enactment of a comprehensive system of dismissal compensation, stating that such a system 'would enhance the safety or efficiency of railroad service.' H.Doc. No. 394, 74th Cong.2nd Sess., p. 56. 7

[Page 308 U.S. 225, 236]

aid to the maintenance of a service uninterrupted by labor disputes, but that it promotes efficiency, which suffers through loss of employee morale when the demands of justice are ignored. Title 3 of the Transportation Act of 1920, 45 U.S.C.A. 131 et seq. [Footnote 8] which was enacted at the same time as the provisions reenacted in substance in 5(4)(b), set up a 'Labor Board' to decide railroad labor disputes involving grievances, rules and working conditions, and declared in 301 'it shall be the duty of all carriers and their officers, employees, and agents, to exert every reasonable effort and adopt every available means to avoid any interruption to the operation of any carrier growing out of any dispute between the carrier and the employees or subordinate officials.' Congress has passed successive measures for arbitration of railroad disputes between railroad employees and employers, all aimed at the prevention of interruptions of railroad service through such disputes, and culminating in the passage of the Railway Labor Act of 1926, 44 Stat. 577, and in its amendments in 1934, 48 Stat. 1185, 45 U.S.C., 151-163, 45 U.S.C.A. 151-163; Texas & New Orleans Railroad Co. v. Brotherhood of Railway and Steamship Clerks, , 50 S.Ct. 427; Virginian Railway Co. v. System Federation, 300 U.S. 515, 57 S.Ct. 592. By the Wagner Labor Relations Act of 1935, 49 Stat. 449,

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the public interest as defined by the statute is without rational basis. Cf. South Carolina Highway Dept. v. Barnwell Bros., 303 U.S. 177, 189, 191 S., 58 S.Ct. 510, 515, 517; United States v. Carolene Products Co., 304 U.S. 144, 147, 58 S.Ct. 778, 781; Pittman v. Home Owners' Loan Corp., , 60 S.Ct. 15, decided November 6, 1939.

If we are right in our conclusion that the statute is a permissible regulation of interstate commerce, the exercise of that power to foster, protect and control the commerce with proper regard for the welfare of those who are immediately concerned in it, as well as the public at large, is undoubted. Second Employers' Liability Cases, supra, 223 U.S. page 47, 32 S.Ct. page 173, 38 L.R.A.,N.S., 44; Dayton-Goose Creek Ry. Co. v. United States, 263 U.S. 456, 478, 44 S.Ct. 169, 172, 33 A.L.R. 472; United States v. Carolene Products Co., supra, 304 U.S. page 147, 58 S.Ct. page 781; Mulford v. Smith, , 59 S.Ct. 648. Nor do we perceive any basis for saying that there is a denial of due process by a regulation otherwise permissible, which extends to the carrier a privilege relieving it of the costs of performance of its carrier duties, on condition that the savings be applied in part to compensate the loss to employees occasioned by the exercise of the privilege. That was decided in principle in Dayton-Goose Creek Railway Company v. United States, supra. There it was held that the Fifth Amendment U.S.C.A.Const. does not forbid the compulsory application of income, attributable to a privilege enjoyed by a railroad as a result of Commission action, to specified purposes 'in the furtherance of the public interest in railway transportation.' 422(10), Transportation Act, 41 Stat. 490, 49 U.S.C.A. 15a. Moreover we cannot say that this limited and special application of the principle, fully recognized in our cases sustaining workmen's compensation acts, that a business may be required to carry the burden of employee wastage incident to its operation, infringes due process. Second Employers' Liability Cases, supra; New York Central R. Co. v. White, 243 U.S. 188, 37 S.Ct. 247, L.R.A.1917D, 1 Ann. Cas.1917D, 629; Mountain Timber Co. v. Washington, 243 U.S. 219, 37 S.Ct. 260, Ann.Cas.1917D, 642; Cudahy Packing Co. v. Paramore, 263 U.S. 418, 44 S.Ct. 153, 30 A.L.R. 532.

Reversed. Footnotes

Footnote 1 In several cases the Commission has disapproved proposals for consolidations and for acquisition of control because of a failure to deal fairly with minority stockholders. Nickel Plate Unification, 105 I.C.C. 425; Unification of Southwestern Lines, 124 I.C.C. 401. In others it has approved the proposal on condition that these objections be removed. Buffalo, Rochester & Pittsburgh R.R. Control, 158 I.C.C. 779; Buffalo & Susquehanna R.R. Corp. Control, 162 I.C.C. 656; Upper Coos R.R. Control, 166 I.C.C. 76; Springfield Terminal R.R. Co. Control, 166 I.C.C. 90; Denver & Salt Lake R.R. Co. Control, 170 I.C.C. 4; Saint Louis Southwestern R.R. Co. Control, 180 I.C.C. 175. See United States v. Chicago, Milwaukee, St. P. & Pac. R. Co., 282 U.S. 311, 337, 51 S.Ct. 159, 166.

Footnote 2 On several occasions strikes of railroad employees affected by consolidations of plant facilities have threatened. To avoid interruption of transportation service an Emergency Board was invoked in 1929 under the Railway Labor Act of 1926, 45 U.S.C.A. 151 et seq., to arbitrate the dispute between the railroad and the employees of the Texas & Pacific Railway Company. The Board awarded the employees compensation for loss from depreciation of the value of their homes (cf. Clause 4 in the order here involved). The Board, after extensive hearings, found that such a requirement was reasonable in view of the fact that railroads themselves had on several prior occasions compensated the employees affected. 28 Monthly Labor Review, 1191 (1929). See also 43 Monthly Labor Review, 867 ( 1936) where dismissal compensation was agreed upon in similar circumstances under threat of a strike.

Footnote 3 The Chicago, Rock Island & Pacific System, represented here by appellee, was a party to this agreement. 42 Monthly Labor Review 1503 ( 1936); 57 Traffic World 995 (1936).

Footnote 4 Report of Committee appointed September 20, 1938, by the President of the United States, to submit recommendations upon the general transportation situation (December 23, 1938).

Footnote 5 Consolidation of Railroads, 185 I.C.C. 403, 427; Unification of Lines in Southern New Jersey, 193 I.C.C. 183, 198; St. Paul Bridge & Terminal Railway Co. Control, 199 I.C.C. 588. For later cases to the same effect, see Associated Railways Company Acquisition and Securities, 228 I. C.C. 277, 336; Louisiana & Arkansas Ry. Co., Merger, 230 I.C.C. 156; Louisiana & Arkansas Ry. Co., Merger, 233 I.C.C. 37; Louisiana & Arkansas Ry. Co. Control, 233 I.C.C. 123.

Footnote 6 Sixth Annual Report of Interstate Commerce Commission (1892), p. 323.

Footnote 7 For a similar conclusion, see J. Douglas Brown, et al., Railway Labor Survey, Social Science Research Council, Division of Industry & Trade (1933), 1, 94; Robertson, The Stake of Railroad Labor in the Transportation Problem, 187 Ann.Am.Acad. 88 (1936).

Footnote 8 This Act resulted from the experiences of the Director-General in operating the railroads during the World War period. Sharfman, The Interstate Commerce Commission, Vol. I, p. 181. The Director-General recognized the necessity of maintaining a loyal and devoted personnel in the interest of uninterrupted service. Thirty-third Annual Report of the Interstate Commerce Commission (1919), p. 4. In agreements executed by the Director-General with several railroad unions, provision was made for protection of seniority rights and for free transportation for the employee, his family and household goods (cf. Clause 3 of order here involved), when consolidations of facilities were ordered by the Director- General. See Agreement between the Director-General of Railroads and the Brotherhood of Railway and Steamship Clerks, Freight Handlers, Express and Station Employees (1920), Rule 77.