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USX CORP. v. PENNSYLVANIA DEPT. OF LABOR & INDUS.

October 1, 1986

USX CORPORATION and TRISTATE EMPLOYERS ASSOCIATION, Plaintiffs
v.
PENNSYLVANIA DEPARTMENT OF LABOR AND INDUSTRY; JAMES W. KNEPPER, JR., SECRETARY OF PENNSYLVANIA DEPARTMENT OF LABOR AND INDUSTRY; PENNSYLVANIA OFFICE OF EMPLOYMENT SECURITY; EARL H. BROWN, DEPUTY SECRETARY FOR EMPLOYMENT SECURITY; and R. BUDD DWYER, TREASURER, COMMONWEALTH OF PENNSYLVANIA, Defendants


William W. Caldwell, U.S.D.J.


The opinion of the court was delivered by: CALDWELL

William W. Caldwell, U.S.D.J.

 I. Introduction.

 Plaintiffs, USX Corporation (USX) and Tristate Employers Association, have filed a complaint, accompanied by a motion for preliminary injunction, seeking to enjoin the payment of unemployment compensation to USX's Pennsylvania employees following a work stoppage at USX's steel plants located in the state. The action was brought pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 and 42 U.S.C. § 1983. Plaintiffs invoke our federal question jurisdiction pursuant to 28 U.S.C. § 1331. Essentially, they argue that portions of the Pennsylvania unemployment compensation law violate the due process clause of the fourteenth amendment because unemployment compensation may be paid to the workers before a judicial determination of its propriety, and the compensation may not be recoupable. Defendants are the Pennsylvania Department of Labor and Industry, James W. Knepper Jr., Secretary of Labor and Industry, the Pennsylvania Office of Employment Security, Earl H. Brown, Deputy Secretary for Employment Security, and R. Budd Dwyer, Treasurer of the Commonwealth of Pennsylvania. *fn1" A hearing was held on the motion for injunctive relief, the parties have briefed the issues, and the motion is accordingly ripe for disposition. *fn2"

 II. Factual Background.

 From the complaint, and hearing testimony, the background of this litigation can be fairly characterized as follows. USX operates a number of steel producing facilities throughout Pennsylvania by way of its USS Division. The collective bargaining agreement between USX and the United Steelworkers of America (Union), representing USX's steelworker employees, expired on July 31, 1986 with extensive, but fruitless, negotiations occurring up to that time for a renewal of the agreement. On August 1, 1986, a work stoppage began at the Pennsylvania plants. USX contends that the work stoppage is a strike which disqualifies the workers from receiving unemployment compensation. *fn3" The Union has taken the position that the work stoppage is a lock out.

  The approximately 6,200 members of the Union employed by USX began applying for unemployment compensation shortly before or after July 31, 1986, depending upon when their employment was suspended. Both sides made presentations to the Office of Employment Security (OES) concerning the nature of the work stoppage. USX was not given an opportunity to cross-examine those presenting evidence on behalf of the workers. On August 21, 1986, OES issued two "Notices of Determinations", concluding that the work stoppage was a lock out and that the workers were entitled to unemployment compensation. *fn4" USX has appealed that determination to the Unemployment Compensation Board of Review (Board) and the hearings, before a referee, have been scheduled for October 15, 16, 17, 1986. If the referee affirms the decision of OES, USX may appeal to the Board itself, and subsequently to the Pennsylvania Commonwealth Court. In the meantime, workers have begun receiving unemployment compensation. Plaintiffs estimate that eligibility will be exhausted within twenty-six weeks, and payment of benefits of approximately thirty million dollars would have been made before USX can obtain judicial review of the agency's decision concerning the nature of the work stoppage.

 III. Discussion.

 A. The Court Has Jurisdiction to Grant Injunctive Relief and Abstention Is Inappropriate.

 Before disposing of the merits of plaintiffs' motion, we will deal with arguments raised by the defendants concerning our power to enter injunctive relief.

 1. The Tax Injunction Act Is Not a Total Bar to this Action.

 The defendants argue that we have no jurisdiction to enter injunctive relief because of the Tax Injunction Act. That statute provides as follows:

 
The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.

 28 U.S.C. § 1341.

 The defendants contend that the statute is designed to protect state tax administration from interference by federal courts. Since the unemployment compensation law is a state tax measure, and USX has a plain, speedy and efficient remedy in state court, the Act applies and prohibits injunctive relief.

 Plaintiffs take issue with the contention that Pennsylvania's remedy is "plain, speedy and efficient" since the crux of their due process claim is that under the statute, unrecoupable payments may have been made to claimants before they can obtain judicial review of the Department's decision. We need not reach this issue, however, because plaintiffs are correct when they argue that their suit, at least in part, is not one to enjoin the collection of a tax.

 As we understand the complaint, plaintiffs claim a due process violation arising from the statutory authorization to pay unemployment compensation upon an initial determination of eligibility but before judicial review of the propriety of the administrative action. Further, the statutory scheme has no adequate means of recouping these payments if they are paid in error, so that plaintiffs' property rights may be implicated in their subsequent contributions to the unemployment compensation fund. To avoid this result they seek to prohibit payment of benefits as one way of meeting their constitutional objections to the state statute. We do not perceive this challenge as an attempt to interfere with the collection of the unemployment tax or its administration, see generally, Harvey & Harvey, Inc. v. Delaware Solid Waste Authority, 600 F. Supp. 1369 (D. Del. 1985). *fn5"

 2. The Norris-LaGuardia Act Does Not Bar Injunctive Relief.

 The Union and the steelworker defendants argue that jurisdiction is divested by the Norris-LaGuardia Act which, provides, in pertinent part, as follows:

 
No court of the United States shall have jurisdiction to issue any restraining order or temporary or permanent injunction in any case involving or growing out of any labor dispute to prohibit any person or persons participating or interested in such dispute (as these terms are herein ...

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