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WENZER v. CONRAIL

January 25, 1979

Samuel WENZER and Helen Wenzer
v.
CONSOLIDATED RAIL CORPORATION and R. T. Fox



The opinion of the court was delivered by: BECHTLE

Presently before the Court are the motions of defendants Consolidated Rail Corporation ("Conrail") and R. T. Fox ("Fox") to dismiss for lack of jurisdiction over the subject matter, pursuant to Fed.R.Civ.P. 12(b)(1), and to dismiss for failure to state a claim upon which relief can be granted, pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons stated below, the motions to dismiss for lack of jurisdiction over the subject matter will be granted as to Counts I and II of the amended complaint and the motions to dismiss for failure to state a claim upon which relief can be granted will be granted as to Counts III, IV, V and VI of the amended complaint (hereinafter referred to as "complaint").

 Plaintiffs Samuel and Helen Wenzer ("the Wenzers") instituted the instant suit against Conrail, Mr. Wenzer's employer, and Fox, the Vice President and Treasurer of Conrail, alleging actionable injuries arising out of adjustments in Mr. Wenzer's employment status. Mr. Wenzer was employed in the position of "Assistant Director Damage Prevention," earning $ 28,544 per year, until May 9, 1977. During the first five months of 1977, various persons in Mr. Wenzer's department, including Mr. Wenzer himself, were being investigated for malfeasance. Based upon this course of investigation, several of Mr. Wenzer's co-workers and associates were discharged on grounds of malfeasance. On May 9, 1977, allegedly on the basis of the same investigation, Mr. Wenzer was placed on "surplus" status, which is a statutorily created position mandated by the employee protection provisions of the Regional Rail Reorganization Act of 1973. 45 U.S.C. § 701, Et seq. (hereinafter referred to as "Rail Act of 1973"). While on surplus status, Mr. Wenzer was entitled to receive, and did receive, $ 21,744 per year and was not required to perform any services for Conrail.

 After receiving these benefits for approximately nine months, Mr. Wenzer was reassigned to active status in a position paying $ 18,600 per year. Pursuant to the statutory scheme, he received a "displacement allowance" sufficient to provide him with total compensation equal to the amount he received while on surplus status. Id., at § 775(b). Thus, Mr. Wenzer earned $ 18,600 and was awarded an additional $ 3,174 per year.

 The Wenzers brought suit in this Court, alleging jurisdiction under 28 U.S.C. §§ 1331 and 1337 and alleging diversity of citizenship and an amount in controversy in excess of $ 10,000, exclusive of costs and interest, pursuant to 28 U.S.C. § 1332(a). In Counts I and II of the complaint, the Wenzers allege that Mr. Wenzer is entitled to the highest position available commensurate with his ability and experience; that subchapter V of the Rail Act of 1973 imposes a duty upon Conrail to provide him with such a position; and, that an actionable breach of such duty occurred when Mr. Wenzer was placed on surplus status. In Counts III, IV and V, the Wenzers allege that Conrail is so closely identified with the United States Government that the acts of Conrail and its agents are to be considered "federal action" for the purposes of the First and Fifth Amendments. In Count III, the Wenzers allege that the defendants deprived Mr. Wenzer of his alleged statutory entitlement to the highest available position without due process of law, in violation of the Fifth Amendment. In Count IV, the Wenzers allege that the defendants deprived Mr. Wenzer of certain liberty interests in his good reputation by placing him on surplus status at the conclusion of the investigation, in violation of his Fifth Amendment right to due process of law. In Count V, the Wenzers allege that the defendants placed Mr. Wenzer on surplus status because of his association with certain disciplined co-workers and that, by doing so, they violated his rights of association as guaranteed by the First Amendment. In Count VI, the Wenzers allege that the actions of Conrail and Fox were intentional and wanton and caused extreme mental and emotional distress. By way of relief, the Wenzers demand money damages, as well as the reinstatement of Mr. Wenzer at the highest position available commensurate with his ability.

 The defendants move to dismiss the statutory counts (Counts I and II) on the ground, Inter alia, that the Court has no jurisdiction over the subject matter, because Congress created the exclusive remedy of arbitration for all disputes arising out of the employee protection scheme of the Rail Act of 1973. Secondly, defendants move to dismiss all counts for failure to state a claim upon which relief can be granted.

 Statutory Claims (Counts I and II)

 The Rail Act of 1973 was enacted to effectuate the reorganization and consolidation of bankrupt railroads in the Midwest and Northeast and to help channel fresh capital into the system. 45 U.S.C. § 701(b). Title V of the Rail Act, which was codified as subchapter V, Id., at § 771, Et seq., pertains to employee protection and is a comprehensive scheme to reduce the impact of the reorganization of the railroads on employees. S.Rep. No. 93-601, 93rd Cong., 1st Sess. (1973); 1973 U.S.Code Cong. & Admin.News, pp. 3242, 3258. The Wenzers claim that Mr. Wenzer is entitled to the highest level of employment available, commensurate with his abilities, pursuant to § 772 of Subchapter V. In opposition, the defendants argue that there is no statutory entitlement to such a position and that, in any event, this controversy is subject to the exclusive remedy of arbitration, as specified in § 775(i)(2), and that, therefore, this Court lacks subject matter jurisdiction to entertain plaintiffs' claims. The plaintiffs respond by arguing that § 775(i)(2) does not apply to this controversy and, even if it does, it is not mandatory.

 It is well settled that, when Congress creates a right, it can establish an exclusive remedy for the enforcement of that right. Tutun v. United States, 270 U.S. 568, 579, 46 S. Ct. 425, 70 L. Ed. 738 (1926); United States v. Babcock, 250 U.S. 328, 331, 39 S. Ct. 464, 63 L. Ed. 1011 (1919). Expressed in other terms, the specification of one remedy as exclusive necessarily excludes another. Switchmen's Union v. National Mediation Bd., 320 U.S. 297, 301, 64 S. Ct. 95, 88 L. Ed. 61 (1943). This principle was explained in Renegotiation Board v. Bannercraft Clothing Co., 415 U.S. 1, 94 S. Ct. 1028, 39 L. Ed. 2d 123 (1973), where the Supreme Court said:

 
It has been held that "where a statute creates a right and provides a special remedy, that remedy is exclusive." And "Congress for reasons of its own decided upon the method for the protection of the "right' which it created. It selected the precise machinery and fashioned the tool which it deemed suited to that end. . . . "

 Id., at 18, 94 S. Ct. at 1037-1038 (citations omitted). Plaintiffs do not oppose this principle but only oppose its applicability to the facts of this case. The arbitration clause of Subchapter V provides:

 
If any dispute arises between the Corporation and a noncontract employee regarding the interpretation or application of Any provision of this subchapter, the Corporation shall establish a resolution procedure with arbitration as the final step. Such resolution procedure shall be the Exclusive means available to the parties for resolving such dispute, and any arbitration decision rendered shall be final and binding on all parties. Either party may request arbitration, and the cost and expenses of such arbitration shall be shared equally by the parties.

 45 U.S.C. § 775(i)(2) (emphasis supplied). Plaintiffs argue that the language of § 775(i)(2) applies to some disputes, but not to all, and that disputes like the case at hand are in the category of disputes not subject to the section. The Court notes that Counts I and II allege a breach of Conrail's duty under 45 U.S.C. § 772(b). The Court also notes that § 772(b) is found within the same subchapter as the arbitration section. On the basis of the clear language of § 775(i)(2), we hold that a dispute arising out of § 772(b) is subject to the arbitration requirements of § 775(i)(2).

 Plaintiffs argue, in the alternative, that the arbitration provision is neither mandatory nor exclusive, but is simply an alternate remedy to be chosen by the employee if he deems it advantageous. In support of this seeming circumvention of the plain language ...


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