United States Court of Appeals
For the First Circuit
No. 99-1328
BROTHERHOOD OF LOCOMOTIVE ENGINEERS,
UNITED TRANSPORTATION UNION,
Plaintiffs, Appellees,
v.
SPRINGFIELD TERMINAL RAILWAY COMPANY,
AROOSTOOK AND BANGOR RESOURCES, INC.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Stahl, Circuit Judge
Cyr, Senior Circuit Judge,
and Lipez, Circuit Judge.
Thad B. Zmistowski, with whom Glen L. Porter and Eaton,
Peabody, Bradford & Veague, P.A., were on brief for appellants.
Clinton J. Miller, III, General Counsel, for appellee United
Transportation Union.
Harold A. Ross, with whom Ross & Kraushaar Co., L.P.A., was
on brief for appellee Brotherhood of Locomotive Engineers.
April 5, 2000
LIPEZ, Circuit Judge. This case requires us to decide
whether the district court properly issued a Railway Labor Act
("RLA") injunction barring a wood products company controlled by
owners of a railroad from doing switching work historically
performed by the railroad's unions. See 45 U.S.C. § 151 and
seq. The district court issued the injunction after finding that
the Brotherhood of Locomotive Engineers and United
Transportation Union (the "Unions") were engaged in a "major"
dispute with Springfield Terminal Railway Company
("Springfield") and that Springfield was using Aroostook and
Bangor Resources, Inc. ("ABR") to violate its collective
bargaining agreement. Springfield and ABR (the "appellants")
argue that ABR, although owned and controlled by Springfield's
owners, is an independent wood products company not subject to
the RLA and therefore not subject to the district court's order
that it stop performing switching for Springfield customers
while RLA mediation procedures are underway. We reject the
contention that ABR is not subject to the injunctive provisions
of the RLA, and we affirm both the district court's finding that
there was a "major" dispute between Springfield and its Unions
and the district court's injunction against ABR.
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I.
A. The Labor Dispute
We begin by sketching the facts of this labor dispute,
reserving for later a more detailed discussion of the district
court's findings. In doing so, "[w]e recite the facts in the
light most favorable to the district court's findings of fact."
Servicos Comerciales Andinos v. General Electric Del Caribe,
Inc., 145 F.3d 463, 466 (1st Cir. 1998).
In 1995 the Unions and Springfield negotiated a
collective bargaining agreement that governs the rates of pay,
rules, and working conditions for Springfield locomotive
engineers, conductors, and trainmen. The agreement specifically
provides that union employees "shall perform any and all
services under the direct control of the Carrier required for
the make up of trains and/or the movement of cars and trains
over and through the Carrier's trackage and in its business of
servicing industrial sidings."
One such "business of servicing industrial sidings" is
switching, a service that rail carriers often provide for their
customers on the customers' properties. Springfield employees
who are union members have historically provided this service to
many of Springfield's line-haul railway customers. Pursuant to
the collective bargaining agreement, the union members
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performing these switching services have been paid and treated
identically to engineers, conductors, and trainmen involved in
other aspects of Springfield's railway business.
In 1996 Springfield proposed that the union members
engaged in switching accept a twenty-six percent pay cut and less
favorable working conditions. Although the Unions' leaders
initially resisted, they eventually agreed to submit a proposed
pay cut to their respective memberships. The memberships of both
Unions rejected the changes in August 1996, opting instead to
maintain the more favorable terms of the collective bargaining
agreement. Despite the vote, Springfield persisted in seeking a
pay cut for switching work.
Unable to persuade the Unions to accept lower pay for
switching, Springfield took a series of steps in the spring of
1998 that resulted in ABR performing switching that had
previously been done by Springfield's unions. ABR is a non-
unionized company located along Springfield's railway lines
engaged primarily in the manufacture of clothes pins and other
wood products. Springfield executed an agreement with ABR in
April 1998 giving ABR joint use of some railway tracks, and
Springfield personnel trained two non-union ABR employees to use
a leased track-mobile to perform the switching at the ABR wood
products mill previously done by Springfield's union employees.
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While joint use agreements of this type are fairly common in the
railway industry, Springfield's next move was unusual. Shortly
after executing the joint use agreement, Springfield suggested to
ABR that it truck its switching equipment from place to place so
that it could perform switching work for various Springfield
railway customers that had previously used Springfield (and the
Unions) for switching. ABR agreed and by May of 1998 it was
providing switching services for Springfield customers Lincoln
Pulp & Paper ("Lincoln") and Passadumkeag Stud Mill, owned by
Champion International, Inc. ("Champion"). ABR also investigated
performing switching work for other Springfield customers.
Although nominally an independent corporation, ABR is
not unrelated to Springfield. Springfield is a wholly owned
subsidiary of Guilford Transportation Industries, Inc.
("Guilford"), a holding company that owns several railroads in
New England.1 Guilford, in turn, was closely held (at the time
of the dispute) by four individuals who also served as its
directors: David Andrew Fink, David Armstrong Fink, Richard Kelso
and Timothy Mellon. Both of the Finks and Mellon were also the
sole owners of ABR. The three companies shared the same four
directors at the time the dispute arose: all three ABR owners
1Guilford's holdings include the Maine Central Railway, the
Portland Terminal Company and the Boston & Maine Corporation.
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plus Richard Kelso. While David Andrew Fink served as President
of Springfield, his son, David Armstrong Fink, served as
President of ABR (as well as a Director of Guilford and, later,
as an Executive Vice-President at Springfield). It was David
Armstrong Fink who met with a Springfield vice-president involved
in the failed labor negotiations about the possibility of ABR
performing the switching work previously done by the Unions.
B. The Railway Labor Act
The Unions filed suit under the RLA, arguing that
Springfield was using ABR to violate the terms of its collective
bargaining agreement. Under the RLA, a district court has no
jurisdiction to rule on the merits of a labor dispute. Rather,
the court may only decide what type of statutorily mandated
dispute resolution procedure is appropriate, depending on the
category of the dispute. See Elgin, Joilet & E. Ry. v. Burley,
325 U.S. 711, 722-23 (1945). Minor disputes under the RLA are
those in which the carrier's challenged policies are at least
arguably permitted under the existing collective bargaining
agreement.2 If the dispute is "minor," the district court
2A minor dispute
contemplates the existence of a collective agreement
already concluded or, at any rate, a situation in
which no effort is made to bring about a formal change
in terms or to create a new one. The dispute relates
either to the meaning or proper application of a
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dismisses the case in favor of binding arbitration. Major
disputes, on the other hand, relate to carrier attempts to modify
rates of pay, rules or working conditions in a fashion not even
arguably covered by the collective bargaining agreement. 3 See
Brotherhood of Locomotive Eng'rs v. Boston & Maine Corp., 788
F.2d 794, 797 (1st Cir. 1986); Maine Central R.R., Co. v. United
Transp. Union, 787 F.2d 780, 782 (1st Cir. 1986). If the dispute
is "major," the Act provides for extensive, non-binding mediation
procedures.4 In major disputes— unlike minor disputes— the RLA
particular provision with reference to a specific
situation or to an omitted case. . . . In either case
the claim is to rights accrued, not merely to have new
ones created for the future.
Elgin, 325 U.S. at 723.
3A major dispute
relates to disputes over the formation of collective
agreements or efforts to secure them. They arise where
there is no such agreement or where it is sought to
change the terms of one, and therefore the issue is
not whether an existing agreement controls the
controversy. They look to the acquisition of rights
for the future, not to assertion of rights claimed to
have vested in the past.
Elgin, 325 U.S. at 723.
4 The dispute resolution procedures for major disputes
include a "rather elaborate machinery for negotiations,
mediation, voluntary arbitration, and conciliation." Detroit
and Toledo Shore Line R.R. Co. v. United Transp. Union, 396 U.S.
142, 148-49 (1969). For simplicity's sake, we will refer to all
of these processes as the major dispute "mediation" procedures.
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bars the carrier from implementing the contested change until the
mediation efforts are exhausted. See Detroit and Toledo Shore
Line R.R. Co. v. United Transp. Union, 396 U.S. 142, 150-53
(1969). To invest these status quo requirements with judicial
authority, the district court is permitted to issue an injunction
ordering the parties to maintain the pre-dispute status quo while
the mediation procedures take place. See Consolidated Rail Corp.
v. Railway Labor Executives' Ass'n, 491 U.S. 299, 303 (1989)
("The district courts have subject-matter jurisdiction to enjoin
a violation of the status quo pending completion of the required
procedures . . . .").
C. The District Court Proceedings
The Unions argued to the district court that the
arrangement between Springfield and ABR created a major dispute
because Springfield was seeking to modify the collective
bargaining agreement's rules on pay and working conditions for
those engaged in switching. The Unions claimed that Springfield
was using ABR to implement this contested change before RLA
mediation procedures were exhausted, thereby violating the RLA's
requirement that the carrier and union maintain the pre-dispute
status quo. The appellants objected, arguing, inter alia, that
Springfield had not done anything to alter the collective
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bargaining agreement and that ABR was acting independently in
performing switching work for Springfield customers.
On the basis of a stipulated record, the district court
ruled that the dispute was major under the RLA. In so
concluding, the court found that Springfield was attempting to
evade the collective bargaining agreement by "allow[ing] a
corporate relative not bound by the collective bargaining
agreement to perform work covered by the collective bargaining
agreement." The court also rejected the appellants' other
defenses: their assertion that the arrangement with ABR did not
alter the pay or working conditions of the Unions and their
assertion that the arrangement was covered by "implied terms" in
the collective bargaining agreement. The court then enjoined ABR
from performing industrial switching for Lincoln, Champion and
any companies for which Springfield currently provided switching
services, pending the outcome of the RLA mediation procedures.
ABR and Springfield appeal.5
5 The Unions have suggested that we lack jurisdiction over
this appeal because the Appellants filed their notice of appeal
before the injunction was formally recorded. We disagree.
When the district court entered its order on February 5,
1999, it asked the Unions to prepare the formal language of the
injunction, to present that language to the defendants, and to
file it with the court by February 19. The Unions did so, and
on March 2, 1999, the district court signed the injunction.
Prior to the court's approval of the injunction's language,
Springfield and ABR filed their notice of appeal.
A decision is final if it "ends the litigation on the merits
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II.
Appellants assert that there is no major dispute under
the RLA because Springfield made no changes at all to the
collective bargaining agreement. Rather, appellants claim,
Springfield's rail customers simply chose to use ABR for better
service of their switching needs. Since ABR is a company
independent from Springfield– a wood products shop and not a
railway– the district court erred in attributing ABR's actions to
Springfield, despite the nearly total overlap in ownership.
and leaves nothing for the court to do but execute the
judgment." Firestone Tire & Rubber Co. v. Risjord, 449 U.S.
368, 373 (1981) (internal quotation marks and citation omitted).
The Supreme Court has allowed appeals even when a district court
still anticipated "[f]urther rulings . . . in administering its
decree." Brown Shoe Co. v. United States, 370 U.S. 294, 308
(1962); see also Budinich v. Becton Dickinson & Co., 486 U.S.
196, 199 (1988) ("A question remaining to be decided after an
order ending litigation on the merits does not prevent finality
if its resolution will not alter the order or moot or revise
decisions embodied in the order."). At the time the appeal was
filed, the district court had already ruled that the dispute was
major and that a status quo injunction was needed. The fact that
wording had not been determined did not defeat the judgment's
finality.
Even if the filing of the appeal were premature, we would
still have jurisdiction. Federal Rule of Appellate Procedure
4(a)(2) provides that a "notice of appeal filed after the court
announces a decision or order but before the entry of the
judgment or order shall be treated as filed after such entry and
on the day thereof." Thus if a party files an appeal
prematurely, this rule preserves its effect. See FirstTier
Mortgage Co. v. Investors Mortgage Ins. Co., 498 U.S. 269, 273
(1991); Negran v. Hernandez, 145 F.3d 410,414 (1st Cir. 1998).
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We agree with Springfield that the dispute cannot be
labeled "major" simply because the collective bargaining
agreement required switching to be performed by the Unions. If
ABR was truly acting on its own, an injunction against ABR would
have been improper. The collective bargaining agreement is
between Springfield and the Unions; ABR is not a party.
Moreover, the RLA applies only to carriers; ABR is not a carrier.
See 45 U.S.C. § 151, First. Unless the district court properly
treated ABR as the alter ego of Springfield, and properly
disregarded the separateness of the two corporations by piercing
the corporate veil of ABR, it could not attribute ABR's conduct
to Springfield and enjoin ABR from switching Springfield
customers. We must therefore assess whether veil piercing was
appropriate.
In doing so, we must be clear about the sense in which
we are using these terms. See Note, Piercing the Corporate Veil:
The Alter Ego Doctrine under Federal Common Law, 95 Harv. L. Rev
853 (1982) (noting that the terms are amorphous). To pierce a
corporate veil means to disregard its corporate formalities. See
Black's Law Dictionary 1168 (7th ed. 1999) (noting that "piercing
the corporate veil" and "disregarding the corporate entity" are
the same thing). The veil may be pierced if one corporation is
not an independent entity, but rather the mere "alter ego" of
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another. 1 James D. Cox, Thomas Lee Hazen & F. Hodge O'Neal,
Corporations § 7.8 at 7.17 (1995);cf. Black's Law Dictionary 385
(7th ed. 1999) (defining "alter ego" as a "corporation used by an
individual to conduct personal business"). In this case, ABR is
Springfield's "alter ego" in the context of this labor dispute if
ABR is acting as a non-union branch of Springfield rather than as
an independent company. Likewise, when we speak of "piercing"
ABR's veil, we mean simply disregarding its corporate
separateness in the limited context where it is allegedly serving
as an alter ego.
A. Federal Common Law of Veil Piercing
We must determine whether state law or federal common
law governs the veil-piercing inquiry. In federal question
cases, such as this one, we look to federal choice of law
principles. See Texas Indus., Inc. v. Radcliff Materials, Inc.,
451 U.S. 630, 642 (1981); see also Edelmann v. Chase Manhattan
Bank, 861 F.2d 1291, 1294 (1st Cir. 1988). If the federal
statute in question demands national uniformity, federal common
law provides the determinative rules of decision. See United
States v. Kimbell Foods, Inc., 440 U.S. 715, 728 (1979).
National uniformity is essential in the interpretation
of labor law. Federal courts have fashioned a body of federal
common law to govern labor disputes, recognizing that harmonious
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labor relations are essential to interstate commerce. See, e.g.,
Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456 (1957).
This general principle holds true for the RLA, a statute
described as an industry-wide bargain between carriers and their
unions aimed at preventing disruptions to interstate commerce.
See Shore Line, 396 U.S. at 148-49; Trans World Airlines, Inc. v.
Independent Fed'n of Flight Attendants, 489 U.S. 426, 432 (1989)
(noting that "federal common labor law . . . may be helpful in
deciding cases under the RLA."). National uniformity is
particularly important in those RLA cases, like this one, that
"implicate the consensual processes which labor law was designed
to promote." International Ass'n of Machinists & Aerospace
Workers v. Aloha Airlines, Inc., 790 F.2d 727, 734 (9th Cir.
1986).
A common federal standard is particularly needed in RLA
veil-piercing cases. If courts were to rely on state law to
determine when veil piercing was appropriate, RLA collective
bargaining agreements might include some companies in one state
and other companies in a neighboring state. A railway with
operations in more than one state could find itself unable to
determine whether and when the RLA applied to it at all.
Likewise, a federal veil-piercing standard is required to prevent
carriers from using non-carriers (which are not themselves
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subject to the RLA) to circumvent federal labor law requirements.
Although state law creates the corporate form, "the question of
liability [for violation of federal regulations] is a federal
question. The policy underlying a federal statute may not be
defeated by an assertion of state power." Anderson v. Abott, 321
U.S. 349, 365 (1944)(piercing the veil); H.P. Lambert Co. v.
Secretary of the Treasury, 354 F.2d 819, 822 (1st Cir. 1965)
("However important it may be in other respects, the fiction of
the corporate entity cannot stand athwart sound regulatory
procedure.").
To say that federal common law applies in this case
does not fully resolve the matter. As we recently acknowledged,
the federal standard "for when it is proper to pierce the
corporate veil is notably imprecise and fact-intensive."
Crane v. Green & Freedman Baking Co., 134 F.3d 17, 21 (1st Cir.
1998); see also Note, supra, 95 Harv. L. Rev. at 852 (noting that
federal common law on veil piercing is amorphous and must be
flexibly applied). Federal courts are not bound by "the strict
standards of the common law alter ego doctrine which would apply
in a tort or contract action." Capital Tel. Co. v. FCC, 498 F.2d
734, 738 (D.C. Cir. 1974). Nor is there any "litmus test in the
federal courts governing when to disregard corporate form."
Alman v. Danin, 801 F.2d 1, 3 (1st Cir. 1986). Instead, the rule
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in federal cases is founded only on the broad principle that "a
corporate entity may be disregarded in the interests of public
convenience, fairness and equity." Town of Brookline v. Gorsuch,
667 F.2d 215, 221 (1st. Cir. 1981).
In Gorsuch we recognized that this principle must be
applied with sensitivity to the demands of the federal statute at
issue:
In applying this rule, federal courts will
look closely to the purpose of the federal
statute to determine whether the statute
places importance on the corporate form, an
inquiry that usually gives less respect to
the corporate form than does the strict
common law alter ego doctrine.
Id. (internal citations omitted); see also First National City
Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611,
630 (1983) ("[T]he Court has consistently refused to give effect
to the corporate form where it is interposed to defeat
legislative policies."); United Elect., Radio and Mach. Workers
of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1091 (1st Cir.
1992) ("[I]n federal question cases, courts are wary of allowing
the corporate form to stymie legislative policies"). Given the
need to consider the purposes of the federal statute, we have
crafted what we termed a "less rigorous" veil-piercing standard
tailored to ERISA cases in order to fulfill that statute's goals.
163 Pleasant St., 960 F.2d at 1092 ("The rationale for
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encouraging a modicum of corporate disregard in ERISA cases is
grounded on congressional intent."); see also Alman v. Danin, 801
F.2d 1, 4 (1st Cir. 1986) ("Indeed, deferring too readily to the
corporate identity may run contrary to the explicit purposes of
[ERISA].") Other Circuits too have considered the specific
legislative policies at issue and whether piercing the corporate
veil is necessary to further those policies. See Stotter & Co.
v. Amstar Corp., 579 F.2d 13, 18-19 (3rd Cir. 1978) (veil
piercing necessary to fulfill purposes of Clayton Act); Capital
Tel. Co., 498 F.2d at 738 (liberal veil piercing to fulfill
purposes of Communications Act of 1934); Kavanaugh v. Ford Motor
Co., 353 F.2d 710, 716-17 (7th Cir. 1965) (veil piercing
necessary to fulfill purposes of Dealers' Day in Court Act). We
must therefore consider the RLA status quo provisions to
determine when veil piercing is necessary to prevent frustration
of the RLA's purposes.
B. The Railway Labor Act and Veil Piercing
"[T]he major purpose of Congress in passing the Railway
Labor Act was to provide a machinery to prevent strikes." Texas
& N.O.R. Co. v. Brotherhood of Ry. & S.S. Clerks, 281 U.S. 548,
565 (1930) (internal quotation marks omitted). The risk of
strikes was considered to be "particularly acute in the area of
'major disputes,' those disputes involving the formation of
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collective agreements and efforts to change them." Shore Line
396 U.S. at 148. For these disputes, the railroad and union
representatives who drafted the Act favored non-binding
mediation. See id. at 148-49. To prevent strikes from breaking
out while mediation was underway, the Act required that both
parties maintain the pre-dispute status quo. See id. at 149. As
the Court noted in Shore Line, the Act's status quo provision was
"central to its design":
Its immediate effect is to prevent the union
from striking and management from doing
anything that would justify a strike. In the
long run, delaying the time when the parties
can resort to self-help provides time for
tempers to cool, helps create an atmosphere
in which rational bargaining can occur, and
permits the forces of public opinion to be
mobilized in favor of a settlement without a
strike or lockout. Moreover, since disputes
usually arise when one party wants to change
the status quo without undue delay, the power
which the Act gives the other party to
preserve the status quo for a prolonged
period will frequently make it worth while
for the moving party to compromise with the
interests of the other side and thus reach
agreement without interruption to commerce.
Id. at 150. The Act fashioned a fundamental compromise: during
the RLA mediation procedures, the union must refrain from
striking and the carrier must refrain from implementing the
contested policy.
The Shore Line Court emphasized that the status quo
provisions of the RLA must be applied flexibly to fulfill the
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statute's goal. In Shore Line, the carrier had argued that the
RLA required it to preserve the status quo only in those working
conditions explicitly covered by the parties' collective
bargaining agreement. See id. at 147-48. Since the collective
bargaining agreement was silent on the challenged practice, the
carrier argued that it should be allowed to continue this
practice while RLA mediation to modify the agreement was ongoing.
See id. The Court rejected this interpretation, calling it
"fundamentally at odds with the Act's primary objective -- the
prevention of strikes. . . . If the railroad is free at this
stage to take advantage of the agreement's silence and resort to
self-help, the union cannot be expected to hold back its own
economic weapons, including the strike." Id. at 154-55. The
Court therefore held that the status quo provision must be
"broadly conceived" to preserve the "actual, objective working
conditions out of which the dispute arose, irrespective of
whether these conditions are covered in an existing collective
agreement." Id. at 143.
The Court's effort to give practical meaning to the
status quo requirement would be circumvented if carriers could
use third parties to alter the collective bargaining agreement
while the dispute was ongoing. Thus courts have held that a
carrier may not hire an independent company to carry out the
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changes that the unions protest. See e.g., St. Louis S.W. Ry. v.
Brotherhood of R.R. Signalmen, 665 F.2d 987, 995 (10th Cir. 1981)
("There is nothing which leaves room for a suggestion that the
[RLA] can be avoided by employing a contractor to perform the
work."). In the same vein, the RLA is defeated if a carrier uses
a related corporation to alter the status quo. The RLA itself
acknowledges the possibility that carriers may attempt to use
affiliates to achieve their goals by giving courts jurisdiction
over railroads and those non-railroads that are "directly or
indirectly owned or controlled by or under common control with
any carrier by railroad. . . ." 45 U.S.C. § 151. While this
provision alone does not justify the issuance of an injunction
against a non-railroad corporation, it emphasizes that courts
must look beyond corporate formalities if the nominally
independent corporation is serving as the alter ego of the
carrier.
In several cases, courts have engaged in veil piercing
when the carrier used an affiliate to escape its collective
bargaining agreement and violate the status quo requirements of
the RLA. In Burlington Northern R.R. Co. v. United Transp. Union,
862 F.2d 1266 (7th Cir. 1988), the railroad, after failing to
convince a local union to accept smaller crews for a particular
train service, transferred the work to a subsidiary, Winona
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Bridge. Finding that the subsidiary was "serving as the alter
ego" of the carrier, the court held that "a carrier cannot evade
its duties under a collective bargaining agreement or the RLA by
directing business to an entity within the same corporate family
and not obligated by the existing collective bargaining
agreement." Id. at 1275. Similarly, in Butte, Anaconda &
Pacific Ry. v. Brotherhood of Locomotive Firemen and Enginemen,
the carrier argued that its major dispute mediation procedures
could be "terminated" after a wholly owned subsidiary began
performing the disputed work. 268 F. 2d 54, 59 (9th Cir. 1959).
The court acknowledged that there would no longer be a major
dispute if the work was performed by "an independent shipper, not
acting in concert with its carrier." Id. After assessing the
links between carrier and subsidiary, however, the court held
that the acts of the latter "must be regarded as the act of the
carrier. Otherwise, a carrier by interrelation with its shippers
would always have it within its power to circumvent the mediation
provision of the Railway Labor Act." Id. at 59-60.6
6
Other courts have also noted that a carrier cannot evade
the requirements of the RLA (which applies to air carriers as
well as railroads) by transferring work to a corporate relative
not party to the collective bargaining agreement. See Air Line
Pilots Ass'n, Int'l. v. Transamerica Airlines, Inc., 817 F.2d
510 (9th Cir.1987) (noting that a carrier would violate the RLA
status quo requirements if the union could prove that it
transferred work to a subsidiary to evade these requirements);
Air Line Pilots Ass'n, Int'l. v. Texas Intl' Airlines, Inc., 656
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Noting that neither Burlington nor Butte detail the
standard that must be applied in an RLA veil-piercing inquiry,
appellants claim that these cases support RLA veil piercing only
when the pierced corporation is a wholly owned subsidiary of the
carrier. We reject this reading. First, while these cases deal
with wholly owned subsidiaries, they do not state that veil
piercing is inappropriate for other types of corporate relatives.
In fact, Burlington speaks of piercing not just subsidiaries, but
of entities in the "same corporate family." 862 F.2d at 1275.
While alter ego liability may be most common in an ordinary
parent-subsidiary context, "the equitable doctrine of piercing
the corporate veil is not limited to the parent-subsidiary
relationship." C M Corp. v. Oberer Dev. Co., 631 F.2d 536, 538
(7th Cir. 1980). Indeed, "[t]he separate corporateness of
affiliated corporations owned by the same parent may be equally
disregarded under the proper circumstances." In re Bowen
Transps., Inc., 551 F.2d 171, 179 (7th Cir. 1977). Courts have
pierced the veil in cases involving "sibling" corporations, and
in cases involving even more intricately arranged corporate
structures. See Minnesota Power v. Armco, Inc., 937 F.2d 1363,
F.2d 16, 19 (2d Cir. 1981) ("Nor could TXI permissibly transfer
existing business flown by ALPA pilots to a newly formed
corporate alter ego for the purpose of displacing the work of
ALPA pilots.").
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1364 (8th Cir. 1991) (complex partnership scheme); cf. Century
Oil Tool, Inc. v. Production Specialties, Inc., 737 F.2d 1316,
1317 (5th Cir. 1984) ("[W]e see no relevant difference between a
corporation wholly owned by another corporation, two corporations
wholly owned by a third corporation or two corporations wholly
owned by three persons who together manage all affairs of the two
corporations."). The misuse of the corporate form to evade
federal regulatory requirements may be easier to prove, as an
evidentiary matter, when there is a straightforward parent-
subsidiary relationship. However, the RLA status quo provisions
could be thwarted if courts were categorically barred from
considering other types of corporate relationships that were
being used to avoid a collective bargaining agreement.
Of course, the corporate ties between the carrier and
the related corporation provide only a starting point for the
analysis.
Common ownership by itself is insufficient to pierce the veil.
See United States v. Bestfoods, 118 S. Ct. 1876, 1884 (1998)
("[A] parent corporation . . . is not liable for the acts of its
subsidiaries."). The record must include evidence that the
carrier used the related corporation for the purpose of evading
the collective bargaining agreement and the status quo
requirements of the RLA. In making this determination, no single
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factor is dispositive. The district court may consider the
chronology of events: if the carrier only transferred work to the
related corporation after unsuccessful union negotiations, that
fact may suggest that the carrier shifted the work in an effort
to avoid the RLA status quo provisions. See Burlington, 862 F.2d
at 1274 ("Thus Burlington plainly acknowledged that Winona Bridge
was Burlington's second choice, an alternative to unsuccessful
union negotiations."). That inference of evasion may be stronger
when the work shifted to the related corporation is distinct from
the related corporation's primary line of business. Other
factors may also be relevant, such as whether the carrier and the
related corporation fail to observe separate corporate
formalities, or whether the related corporation is
undercapitalized. See id. at 1276 n.6 (noting that subsidiary
had "no equipment or rail-service employees").
We emphasize, however, that the record need not portray
the related corporation as a "sham" business, expressly created
or operated primarily to defeat the RLA. In Butte, for example,
the subsidiary had been created and then operated as a separate,
legitimate business until the railroad used it to defeat the RLA
obligations. 268 F. 2d at 54. It would make little sense to
ignore current relationships and arrangements between
corporations, and thereby grant the railroad immunity from veil
-23-
piercing, in those cases where the related corporation being used
to defeat the RLA was originally formed (or simultaneously used)
for a legitimate purpose. It must be remembered that veil
piercing in the RLA context serves a different function than it
does in the ordinary state law veil piercing cases. In a typical
tort or contract case, the primary purpose of the veil-piercing
analysis is exposure of the assets of one corporation for payment
of the debts or obligations of a related corporation. In the RLA
major dispute proceedings, veil piercing operates only to block
the related corporation from assisting the carrier in altering
the collective bargaining agreement before mediation procedures
are exhausted. Indeed, there is no final judgment on the merits
against the related corporation: if the RLA mediation procedures
do not achieve a negotiated solution, the law will not block the
related corporation from engaging in the contested activities.
See Consolidated Rail Corp. v. Railway Labor Executives' Ass'n.,
491 U.S. 299, 303 (1989) ("Once this protracted process ends and
no agreement has been reached, the parties may resort to the use
of economic force."); Brotherhood of Locomotive Engineers v.
Baltimore & Ohio R.R., 372 U.S. 284, 291 (1963).
In this way, RLA veil piercing is similar to the well-
established practice of extending the scope of an injunction to
include non-parties acting in concert with parties to defeat the
-24-
injunction's purpose. See Fed. R. Civ. P. 65(d) (injunctions can
block activities of non-parties who act "in active concert or
participation" with enjoined parties). In RLA cases (unlike in
most cases where injunctions are sought), the substantive law
itself imposes the duty to maintain the status quo. In a major
dispute, the Act requires that "rates of pay, rules, or working
conditions shall not be altered by the carrier until the
controversy has finally been acted upon" through the Act's
mediation procedures. 45 U.S.C. § 156; see also Shore Line 396
U.S. at 150-53 (describing various status quo provisions in the
RLA). If in subsequent proceedings the district court determines
that the carrier is acting in concert with a related corporation
to violate these self-executing status quo provisions, the
injunction should be fashioned to reach the related corporation
as well.
With these principles in mind, we turn to the findings
of the district court.
C. The District Court's Findings
While we review the district court's legal conclusions
de novo, see Sierra Fria Corp. v. Donald J. Evans, P.C., 127 F.3d
175, 181 (1st Cir. 1997), we accept its factual findings unless
they are clearly erroneous. See Fed. R. Civ. P. 52(a). Moreover,
"[i]t is now settled beyond peradventure that findings of fact do
-25-
not forfeit 'clearly erroneous' deference merely because they
stem from a paper record." RCI Northeast Servs. Div. v. Boston
Edison Co., 822 F.2d 199, 202 (1st Cir. 1987). Whether the
evidence is sufficient to pierce the veil "is a question of law.
But given the issue's fact-intensive nature, the legal threshold
of evidentiary sufficiency is a relatively low one." Crane, 134
F.3d at 22. We must therefore review the record in the light
most favorable to the district court's findings. See Servicos
Comerciales Andinos v. General Elec. Del Caribe, Inc., 145 F.3d
463, 466 (1st Cir. 1998).
The district court decided the case on a stipulated
record containing deposition transcripts and affidavits from key
Springfield, ABR and union leaders. Not surprisingly, the
parties offered divergent views of the circumstantial evidence.
Springfield relied on ABR's formal corporate separateness from
the railroad, and emphasized the undisputed fact that ABR had
been formed prior to the labor dispute and was engaged in a
separate, legitimate business (paper products manufacturing). It
asked the court to view Springfield's suggestion to ABR that it
perform switching as merely a friendly business gesture from one
independent corporation to another, designed solely to promote
each company's efficiency. The Unions, by contrast, argued that
the same evidence showed that Springfield sought out ABR's
-26-
assistance only to thwart the RLA processes. In support of its
interpretation, the Unions emphasized common ownership of
Springfield and ABR, the chronology of events, and the fact that
the same Springfield managers involved in the failed labor
negotiations were instrumental in persuading ABR to perform
switching for Lincoln and Champion. In a case submitted for
judgment on a stipulated record, the district court resolves
disputed issues of material fact. See Boston Five Cents Sav.
Bank v. Secretary of the Dep't of Hous. and Urban Dev., 768 F.2d
5, 11-12 (1st Cir. 1985).
While the appellants (and our dissenting colleague)
continue to characterize Springfield's motivation as benign, the
district court plainly rejected the claim that ABR was acting as
an independent corporation. Rather, the court found that the
conduct of Springfield was analogous to that of the carrier in
Burlington, a case in which the carrier used a subsidiary alter
ego to violate its collective bargaining agreement and the RLA.
Noting that it could "look beyond the surface . . . to see
whether the disputed practice is in reality an attempt to evade
the collective bargaining agreement," the court concluded that
Springfield's arrangement with ABR was an "attempt[] to change
unilaterally the terms" of its deal with the Unions. The court
pointed to both the "close family relationship" among the
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corporations and the fact that the transfer of switching came
only after Springfield's "failed attempt to negotiate more
favorable terms for the work that ABR is now doing on a nonunion
basis." The court drew a distinction between Springfield
assisting ABR in taking over its own switching -- a fairly common
industry practice -- and Springfield's suggestion that ABR should
travel to other Springfield customers and perform the switching
work that the Unions had refused to do for lower pay.
While the evidence supporting the district court's
finding that Springfield used ABR to circumvent its collective
bargaining agreement with the Unions was circumstantial, there
was, contrary to the insistence of the dissent, sufficient
evidence to support that conclusion. First, the district court
properly noted that the overlap in ownership between Springfield
and ABR was almost total. Three of the four individuals who
owned Springfield (through the Guilford holding company) were the
sole owners of ABR. At the time the dispute arose, the three
corporations (Guilford, Springfield and ABR) had the same four
directors: specifically, the three owners of ABR, plus Richard
Kelso.
Although the "close family relationship" between ABR
and Springfield is not dispositive of the veil-piercing inquiry,
the district court also properly relied upon a chronology of
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events which supports an inference that Springfield was using ABR
to violate its collective bargaining agreement and defeat the RLA
status quo requirements. Notably, Springfield only invited ABR
to start performing switching for its customers after Springfield
was unable to convince the Unions to accept wage concessions.
Also, the Springfield vice-president who approached ABR, Sydney
Culliford, was described by one union leader as the key player in
the failed labor negotiations. Likewise, the ABR executive who
decided that the wood products shop should start switching for
Springfield customers was David Armstrong Fink, who in addition
to being President of ABR was also an owner of Guilford and
director of Springfield (and several months later, Springfield's
executive vice-president). It was not unreasonable for the
district court to conclude that the work was shifted to ABR after
the first round of failed negotiations as a way of pressuring the
Unions to accept wage concessions, and circumventing the RLA
strictures that bar these unilateral changes.7
7The dissent insists that RLA veil piercing requires
"fraudulent intent" or "moral culpability." Post at 40.
Without necessarily accepting that specific formulation of the
requirement, there is no question that a manipulation of the
corporate form to circumvent a federal regulatory scheme is
sufficiently blameworthy to meet this standard. See First Nat'l
City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S.
611, 630 (1983) ("[T]he Court has consistently refused to give
effect to the corporate form where it is interposed to defeat
legislative policies.")
-29-
The dissent argues that this reading of the evidence
must be rejected because ABR only performed switching for
Springfield customers Lincoln and Champion after they had already
(and independently) decided to stop using Springfield for
switching. However, the only evidence that Lincoln and Champion
had chosen to end their switching agreement with Springfield
before ABR was presented as an alternative comes from assertions
by Springfield managers and officers. The district court did not
credit this version of events in its opinion, and nothing
compelled it to do so. Springfield and ABR officials
participated together in discussions with Lincoln and Champion
over who should perform the switching. ABR President David Fink
(an owner of Springfield through Guilford) stated at his
deposition that he and Springfield's Culliford met together with
Lincoln managers to discuss how ABR could fulfill switching needs
previously performed by the Unions. Other evidence indicates that
even after ABR took over the day-to-day switching work, Lincoln
saw ABR as simply the non-union switching arm of Springfield. On
one occasion when Lincoln needed to change its switching
schedule, it wrote a letter to Springfield, not ABR, informing it
of its needs.
-30-
Moreover, even after Springfield directed8 switching
work to ABR, and even after this litigation was filed, it
continued to seek wage concessions on switching from the Unions.
See Burlington, 862 F.2d at 1276 n.6 ("If [carrier] and
[subsidiary] were truly distinct entities, further negotiation
would have been moot" following the decision to transfer work to
the subsidiary.). One union leader, Michael Twombley, claims
that Culliford– the Springfield Vice-President who had suggested
that ABR take over switching work to begin with– approached him
and asked the Unions to make a reasonable offer so that
Springfield could perform switching for International Paper mill
plants. A second union leader, Michael Maloof, was told by
Springfield's labor relations head, Roland Dinsdale, that
Springfield wanted union concessions so that it could win
switching business from the independent contractor, Rail Link.
Given that Springfield was still actively looking for
switching work, it is difficult to fathom why Springfield would
want to assist ABR if the latter were truly independent. Union
8
The dissent claims that it is wrong to suggest that
Springfield "directed" work to ABR, arguing that the district
court's opinion and record only prove that "Springfield
facilitated ABR's obtaining outside switching work." Post at 35
n.5. However, the district court plainly determined that
Springfield had directed the business to ABR, finding that
"Springfield Terminal's claim that it is not attempting to
change unilaterally the terms of the collective bargaining
agreement is totally implausible." As discussed above, the
record supports a finding that Springfield transferred some of
its switching to ABR.
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negotiator Maloof asked this very question when Dinsdale told the
Unions to accept wage concessions so that Springfield could
compete against switching bids being made by various independent
contractors. According to Maloof, Dinsdale told him that
Springfield was concerned with independent contractor bids, but
not with ABR, because Springfield controlled ABR.
Taken together, this evidence amply supports the
conclusions that ABR was not acting as an independent company in
providing switching services, that Springfield was attempting to
convert two of ABR's thirty-four employees into its non-union
switching arm, and that Springfield was using ABR as a lever
against the Unions, pressuring them to accept lower pay by
changing the status quo in the middle of negotiations. Given
that a central purpose of the RLA is to block such tactics, see
Shore Line, 396 U.S. at 148, the district court did not err in
enjoining ABR from switching Springfield consignees while
Springfield and the Unions completed the RLA mediation
procedures.
III.
In addition to the claims of improper veil piercing,
the appellants raise several miscellaneous objections to the
district court's major dispute determination.
A. Change in Pay, Rules or Working Conditions
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The appellants argue that the dispute was not major
because it failed to produce a change in "pay, rules or working
conditions" for the Unions. 45 U.S.C. § 152. According to
appellants, the Unions did not provide "any documented evidence
of any actual loss" and instead pointed only to "theoretical loss
of wages" and minor changes in the working conditions. Moreover,
the appellants claim that the Unions have actually benefitted
from any changes because Springfield's railway business has
increased and it has hired new union employees.
The appellants demand more loss than the law requires.
The mere "prospect of having work shifted to a replacement
subsidiary would constitute a change in the working conditions
and practices" sufficient to trigger a major dispute. Air Line
Pilots Ass'n Int'l v. Transamerica, 817 F.2d 510, 516 (9th Cir.
1987). In fact, even the loss of completely "new business,"
never performed by the unions, may be considered a change in the
working conditions if the unions traditionally performed work of
this type. See Burlington, 862 F.2d at 1276. Here, the Unions
have shown far more than the prospective loss of new switching
business. The exact switching work previously performed by Union
workers is now being performed by non-union ABR employees.
Moreover, because the Unions no longer perform this switching,
some members have had to report to different locations at
-33-
different times than they otherwise would have, a manifest change
in "working conditions."9
B. Implicit Term
The appellants claim that the district court erred in
rejecting its argument that the collective bargaining agreement
"implicitly" allowed the arrangement between Springfield and ABR.
If a carrier presents evidence that the challenged labor practice
has been knowingly acquiesced in by the union, the challenged
practice is treated as an implicit term of the collective
bargaining agreement and any dispute over the meaning of that
term is minor. See Maine Central R.R. Co. v. United Transp.
Union, 787 F. 2d 780, 782 (1st Cir. 1986). To take advantage of
the minor dispute provision, the carrier need only show that the
implicit contractual term defense is not "totally implausible."
Id. at 783.
The appellants argue that the Unions had previously
acquiesced to Springfield allowing several of its freight
customers to perform their own switching. The dissent too makes
9
The appellants also claim that any changes in pay, rules or
working conditions were caused by ABR, and that Springfield
cannot be held responsible for ABR's activities. As we stated
above, the district court properly concluded that Springfield
was using ABR to modify its collective bargaining agreement and
defeat the status quo provisions of the RLA. Springfield,
therefore, is responsible for changes in pay, rules and working
conditions.
-34-
much of this point, noting that even before ABR started switching
for Lincoln and Champion, Springfield had assisted several mill
customers (including ABR) in taking over their own switching. The
district court, however, ruled that Union acquiescence in those
instances was totally inapposite:
The companies have pointed only to past
practices where Springfield Terminal has
helped its customers take over their own
switching work. The unions, however, no
longer quarrel with ABR doing its own
switching. Instead, the unions complain
because Springfield Terminal, they say, is
essentially assisting ABR to act as a
railroad in doing nonunion switching work for
customers, specifically Terminal's customers,
who would otherwise be using Springfield
Terminal's union crews. There is not even
arguably any such past practice. I agree
with the unions that any purported reliance
on past practices to justify this new
arrangement is, therefore, obviously
insubstantial; this is not a minor dispute.
The record amply supports the district court's past practice
findings. The Unions have never accepted the idea that
Springfield could use ABR as its non-union switching arm.10
10Springfield also points out that on the one occasion it
used non-union employees to perform switching work, one union
ignored it and the other treated it as only a minor dispute.
This argument does nothing to prove union acquiescence to an
arrangement like that between Springfield and ABR. From the
record, it appears that the case Springfield points to involved
which employees (engineers or "carmen") were allowed to perform
the switching on one specific track, not whether a party related
to Springfield could essentially act as the carrier's non-union
switching arm.
-35-
IV.
For all of the above reasons, the judgment below is
affirmed.
Dissenting Opinion Follows
STAHL, Circuit Judge, dissenting. I believe the
majority misreads the record and misapprehends the federal law on
piercing the corporate veil. Consequently, I disagree with the
majority's conclusion that the lower court properly pierced
Springfield's corporate veil to enjoin ABR from doing switching
work previously performed by Springfield. Accordingly, I
dissent.
The majority's determination that ABR is subject to the
RLA depends necessarily on its affirming the district court's
holding that “the close family relationship” between ABR and
Springfield, Brotherhood of Locomotive Eng'rs v. Springfield
Terminal Ry., Civil No. 98-284-P-H, slip op. at 9 (D. Me. Feb. 5,
1999), justifies the conclusion that Springfield unilaterally
brought about a change in working conditions in violation of the
collective bargaining agreement by “direct[ing]” the Lincoln and
Champion switching work to ABR. See ante at 26. The majority
acknowledges, as do the Unions, that without finding ABR to be an
-36-
alter ego -- for which there is no record evidence 1 -- or a
piercing of the corporate veil, it could not hold ABR liable
under the RLA. In my view, the district court's conclusion is
not sustainable.
Before proceeding to discuss the issues before us, I
must contend with how the majority couches its factual
recitation. The majority states its intention to “begin by
sketching the facts of this labor dispute, reserving for later a
more detailed discussion of the district court's findings.” Ante
at 2. What follows, however, intermixes predicate facts in the
evidence with the actual findings the district court made. To an
uninformed reader, this intermixing of facts and the district
court's findings might well be quite confusing. The effect is to
bolster the majority's ultimate conclusion, which is not
sustainable based solely on the district court's findings, with
1
The burden of proof is on the party seeking to disregard
the corporate form. See National Soffit & Escutcheons, Inc. v.
Superior Sys., Inc., 98 F.3d 262, 265 (7th Cir. 1996); Publicker
Indus., Inc. v. Roman Ceramics Corp., 603 F.2d 1065, 1069 (3d
Cir. 1979) (“The burden of proof on this issue rests with the
party attempting to negate the existence of a separate
entity.”). In this case, aside from drawing the trial court's
attention to the overlap in ownership, the Unions failed to
present evidence that the court should pierce the corporate
veil. There is no evidence in the record, for example, as to
whether the various individuals' ownership shares in Guilford
and ABR are the same, similar, or very different.
-37-
bits and pieces of evidence from the record. I believe this
approach is unfortunate.2
The majority suggests that ABR made each decision
relating to switching solely to satisfy Springfield's goals.
Neither the district court's findings nor the record supports
such a contention. In early 1998, because its operations were
growing, ABR decided it needed to provide additional trackage for
the storing, loading, unloading, and switching of railroad cars
over the two sidetracks that it owned and over which it had
exclusive use. To satisfy its operational needs, it negotiated
with its line-hauling carrier, Springfield, a standard joint use
agreement, which is a contract by which a company obtains the use
of a railroad's tracks for its own operations. Under this
2This case was before the district court on a stipulated
record. When parties stipulate a record for decision, the
district judge must “decide any significant issues of material
fact that he discovers.” Boston Five Cents Sav. Bank v.
Secretary of the Dep't of Hous. & Urban Dev., 768 F.2d 5, 11-12
(1st Cir. 1985). Under such circumstances, we “receive[] the
decision under a 'clearly erroneous' factfinding standard.” Id.
at 12. We take the findings of the district judge, and compare
them with the record only to discover clear error. See Strahan
v. Coxe, 127 F.3d 155, 172 (1st Cir. 1997).
Because the majority agrees with the district court that
piercing the corporate veil in the case of a close family
relationship is appropriate, it is bound by the findings of the
district court, which it may review only for clear error.
However, this is not a case in which it is appropriate to scan
the entire record to bolster the district court's ultimate
conclusion. Based on the limited facts found by the district
court, I believe that its ultimate conclusion that piercing the
corporate veil was proper is in error.
-38-
agreement, ABR to complement its own two tracks obtained the
right to use four contiguous tracks owned and controlled by
Springfield.
It is evident from the record that ABR received no
special treatment from Springfield because this agreement was
identical to joint use agreements the railroad previously had
negotiated with other customers. Long before ABR negotiated its
agreement, Springfield had entered into similar joint use
agreements with S.D. Warren of Westbrook, Maine in August 1992;
Specialty Minerals, Inc. of Adams, Massachusetts in October 1996;
and Turners Island LLC of South Portland, Maine in October 1997.
In addition, Springfield had assisted several companies without
joint use agreements -- Merrill's Terminal of Portland, Maine in
1990; Hampshire Chemical of Nashua, New Hampshire in 1995; and
Fort James of Old Town, Maine in 1996 -- in taking over their own
switching. Like ABR, each company is a freight customer of
Springfield's, each had ceased using Springfield for intraplant
switching, and each had begun to perform its own switching.
Moreover, in each of these instances, the shipper made the
decision to do its own switching, and Springfield trained
employees of each company in the operation of the trackmobile, a
device used to move rail cars between tracks.
-39-
In April 1998, ABR, motivated by a desire to increase
its flexibility and efficiency in switching, decided to do its
own intraplant switching.3 The district court found that to
accomplish its goals, ABR leased from Maine Central Railway a
trackmobile, and two of ABR's employees received training in its
operation from two Springfield employees. See Brotherhood of
Locomotive Eng'rs, Civil No. 98-284-P-H, slip op. at 4. The
record is clear that this assistance was neither unusual nor
improper because it followed Springfield's normal practice when
current line-haul customers elected to do their own switching.
From Springfield's point of view, this assistance had a
legitimate business purpose because the more efficient a customer
became at switching, the more line-haul business that customer
could give to Springfield.
Around the time that ABR decided to do its own
switching, Lincoln and Champion complained that Springfield was
unable to meet their scheduling needs for switching. Lincoln and
Champion discussed with Springfield their intention to perform
their own switching. The majority contends that Springfield
3
When they filed their initial complaint, the Unions argued
that the court should enjoin ABR from engaging in switching even
at its own facility. The Unions later dropped this contention
and focused solely on ABR's switching for Springfield's
consignees. See Brotherhood of Locomotive Eng'rs, Civil No. 98-
284-P-H, slip op. at 1 n.1.
-40-
“directed” or “transferred” switching work to ABR. Ante at 26 &
n.8. Respectfully, I think this assertion misstates the record.4
It was only after Lincoln and Champion had decided to leave
Springfield5 that Sydney Culliford, Vice President of
4
I believe it is accurate in some sense to say that
Springfield facilitated ABR's obtaining outside switching work.
Culliford assisted ABR in its efforts to get Lincoln's and
Champion's business only after they made it clear to Springfield
that they intended to perform the work on their own. The
majority, however, uses the term “directed” in a pejorative
manner and states that Springfield “transferred” its switching
work to ABR. See ante at 26 n.8. Neither the findings of the
district court nor the record supports this assertion.
5
The district court indicated that Culliford “suggested that
ABR pursue switching contracts with Springfield Terminal's
customers.” Brotherhood of Locomotive Eng'rs, Civil No.
98-284-P-H, slip op. at 9. But the district court never
explicitly found that Lincoln or Champion would have used
Springfield for their switching absent ABR's entry into the
market.
To the extent the district court implicitly found that
Lincoln and Champion would have remained customers of
Springfield absent Culliford's suggestion, it committed clear
error. See Strahan, 127 F.3d at 172. Because of the undisputed
evidence in the record that Lincoln and Champion already had
decided to discontinue Springfield's switching services, any
finding or implication to the contrary by the district court or
by the majority is not based on record evidence.
The majority notes that “the only evidence that Lincoln and
Champion had chosen to end their switching agreement with
Springfield before ABR was presented as an alternative comes
from assertions by Springfield managers and officers” and that
“[t]he district court did not credit this version of events in
its opinion.” Ante at 25-26. While it is true that only David
Armstrong Fink and Culliford testified that Lincoln and Champion
already had decided to cease the use of Springfield for
switching, the Unions neither attempted to discredit them in
cross-examination nor presented evidence to the contrary.
Indeed, the district court never expressed doubt about the
veracity of this testimony. Therefore, the only conclusion the
-41-
Transportation for Springfield, suggested to David Armstrong Fink
that if ABR were not using its trackmobile to full capacity, it
could maximize its use by also performing switching services for
other industries that wished to do their own switching. Because
Lincoln and Champion already had decided that Springfield could
not meet their switching needs when they began to use ABR, it is
illogical to suggest that Springfield “directed” or “transferred”
this business to ABR. After all, a company cannot transfer
business it does not have.6
The Unions and the majority make much of Culliford's
suggestion. This suggestion, however, is unremarkable because it
does not indicate that either Springfield or ABR were using the
corporate form as a ruse. The record is devoid of evidence to
indicate that Culliford acted at the instruction of any of the
owners of Guilford or ABR when he made his suggestion to ABR
management. Culliford is neither an owner nor a director of
Guilford, Springfield, or ABR. More importantly, his suggestion
made legitimate business sense for both companies because ABR
record supports is that Lincoln and Champion already had decided
to leave Springfield.
6Taking the majority's logic to its ultimate conclusion, and
given the breadth of the injunction now in force, if a shipper
on the line were to call ABR and request that it do the
company's switching, that too would be prohibited under the
terms of the injunction simply because of the overlap in
ownership.
-42-
could maximize its use of switching capabilities otherwise
underutilized, and Springfield could ensure an expansion of its
line-hauling business. A helpful suggestion from one company to
another does not create an alter ego relationship or provide a
basis for piercing the corporate veil.7
The majority's assertion that the railroad's attempt to
renegotiate is further proof of collusion misses the mark.
Rather, Springfield's continued attempts to renegotiate its union
contract indicate that the railroad desired to save its switching
business if it could, but recognized the need to decrease its
costs to be competitive. A more realistic view than that
advanced by the majority is that if Springfield and ABR truly
were colluding, once Springfield “transferred” its switching work
to what the majority says is its alter ego, ABR, it would have
given up on trying to renegotiate the Union contract because its
goals already would have been realized.
The majority also misconstrues the applicable legal
standards. After explaining that federal law controls whether to
7The majority argues that because Springfield still engages
in switching work, “it is difficult to fathom why Springfield
would want to assist ABR if the latter were truly independent.”
Ante at 27. The majority sees collusion. Rather, and quite to
the contrary, Springfield did nothing to harm its switching
business by suggesting that ABR seek Lincoln's and Champion's
business because Springfield, which was unable to meet their
scheduling needs, already had lost them as customers.
-43-
disregard the corporate form, the majority misreads and
overstates that law. The majority contends that federal common
law allows courts in cases involving federal statutes to fashion
new, statute-specific rules for disregarding the corporate form.
I do not agree.
While the majority is correct that in ERISA cases, we
have crafted “a 'less rigorous' veil-piercing standard,” ante at
13, we have not crafted one that is standardless. Contrary to
the majority, which contends that veil piercing typically is
appropriate to effectuate legislation,8 this court always has
engaged in a more searching inquiry. See United Elec., Radio &
Mach. Workers v. 163 Pleasant St. Corp., 960 F.2d 1080, 1092-93
(1st Cir. 1992). Common ownership alone is insufficient to
8 The majority uses the purpose of the RLA, which is to
prevent strikes, to conclude that it is appropriate to pierce
the corporate veil to render the RLA applicable to nonrailroads.
But the majority fails logically to connect these ideas. It
cites Detroit & Toledo Shore Line Railroad v. United
Transportation Union, 396 U.S. 142 (1969), and implies that its
strong statements about the importance of the RLA justify
piercing the veil in all RLA cases. Shore Line, however, is
inapposite because that decision has nothing to do with piercing
the corporate veil. Rather, it involved a railroad and a union
that already were in mediation under the major dispute rules of
the Act. See id. at 145. During mediation, the railroad itself
implemented a new policy that changed a previously uncovered
condition in the collective bargaining agreement. See id. at
146-47. The Court's strong statements that allowing the
railroad's actions would defeat the Act's purposes, see id. at
155, neither bear weight in deciding whether to pierce the
corporate veil nor help to articulate what the federal standard
is.
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justify piercing the veil. See United Paperworkers Int'l Union
v. T.P. Property Corp., 583 F.2d 33, 35-36 (1st Cir. 1978); ante
at 19. Moreover, the mere existence of a parent-subsidiary
relationship is insufficient to justify piercing the veil.9 See
American Bell Inc. v. Federation of Tel. Workers, 736 F.2d 879,
887 (3d Cir. 1984) (“As [the First Circuit] has explained, there
is no policy of federal labor law, either legislative or judge-
made, that a parent corporation is bound by its subsidiary's
9 The district court, and the majority, relied on Burlington
Northern Railroad v. United Transportation Union, 862 F.2d 1266
(7th Cir. 1988), for the proposition that courts “can look
beyond the surface of purportedly similar transactions to see
whether the disputed practice before it is in reality an attempt
to evade the collective bargaining agreement.” Brotherhood of
Locomotive Eng'rs, Civil No. 98-284-P-H, slip op. at 9. I read
Burlington differently.
In that case, to implement a new program, Burlington, the
railroad, negotiated with the unions to change their collective
bargaining agreement, but the unions refused. See Burlington,
862 F.2d at 1269. In response, Burlington entered into a
trackage rights agreement with Winona Bridge, its wholly owned
subsidiary, which was not a party to the collective bargaining
agreement, and the unions sued to enjoin them. See id. The
issue was not whether the court should pierce Winona Bridge's
corporate veil; rather, it was whether the unions had acquiesced
in similar past activities. See id. at 1273. Such acquiescence
can be used to show that a dispute is “minor” under the RLA.
See Maine Cent. R.R. v. United Transp. Union, 787 F.2d 780, 782-
83 (1st Cir. 1986). The court found that while the unions had
acquiesced in Burlington's granting of trackage rights
generally, they never had acquiesced in its granting them “to a
wholly owned, five-employee subsidiary which utterly lack[ed]
any of the necessary equipment to service such a line.”
Burlington, 862 F.2d at 1273. The court, in other words, merely
narrowed the scope of the unions' previous acquiescence without
engaging in any alter ego analysis.
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labor contracts simply because it controls the subsidiary's stock
and participates in the subsidiary's management.” (citing United
Paperworkers, 583 F.2d at 35-36)). Instead,
[a] court using the federal standard should
consider (1) whether the parent and the
subsidiary ignored the independence of their
separate operations, (2) whether some
fraudulent intent existed on the principals'
part, and (3) whether a substantial injustice
would be visited on the proponents of the
veil pierce should the court validate the
corporate shield.
163 Pleasant, 960 F.2d at 1092-93. As the 163 Pleasant court
noted, “fraudulent intent is the sine qua non to the remedy's
availability.” Id. at 1093; see also id. at 1095 (“Veil piercing
cannot occur without some degree of moral culpability on the
parent corporation's part.”); American Bell, 736 F.2d at 886-87
(finding piercing appropriate only when “the corporations simply
acted interchangeably and in disregard of their corporate
separateness” (internal quotation marks and citations omitted)).
Of course, courts will raise questions when the purpose of
incorporation was to avoid a legislative dictate,10 see Note,
10For example, in Chicago, Milwaukee & St. Paul Railway v.
Minneapolis Civic & Commerce Ass'n, 247 U.S. 490 (1918), two
railways had incorporated a subsidiary that owned some switching
track solely to implement higher tariffs than they could collect
if they owned the tracks themselves. See id. at 500. The Court
noted that “courts will not permit themselves to be blinded or
deceived by mere forms or law but, regardless of fictions, will
deal with the substance of the transaction involved.” Id. at
501.
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Piercing the Corporate Law Veil: The Alter Ego Doctrine Under
Federal Common Law, 95 Harv. L. Rev. 853, 869 (1982), but “[t]he
true test must be whether the corporation was created for a
legitimate business purpose or primarily for evasion of a federal
policy or statute,” id. at 868.
This case presents no evidence of fraudulent intent 11
nor any evidence of a lack of corporate independence. ABR was
formed to operate a sawmill and a wood products plant. See
Brotherhood of Locomotive Eng'rs, Civil No. 98-284-P-H, slip op.
at 2. It is not a shill. It began its operations not after, or
as a result of, the railroad's failed negotiations with the
Unions, but in 1994, which was two years before the labor
contract even began. It began switching to satisfy its own
production needs. It shares with Springfield neither books,
funds, nor offices. It shares with Springfield no corporate
officers and with the exception of David Armstrong Fink, who is
the president of ABR and a vice-president of Springfield, no
common employees. Indeed, all it does share with Springfield is
some ownership congruence, but the record is silent on the degree
11I do not disagree with the majority's statement that
“manipulation of the corporate form to circumvent a federal
regulatory scheme is sufficiently blameworthy” to constitute
fraudulent intent. Ante at 25 n.7. My disagreement is with its
conclusion that such manipulation has occurred in this case.
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of that overlap because it fails to indicate what percentages of
each company the Finks and Mellon own.12
The majority buttresses its decision to pierce the
corporate veil with cases that are inapplicable to the facts
before us.13 To justify disregarding the corporate form in a case
12
Even if one accepts the facts as the majority relates
them, under its approach, the standards by which we pierce the
corporate veil will vary from one statutory context to the next
with little judicial guidance as to how those standards may
differ, and companies covered by these statutes will have no
ready basis upon which to understand what the law now is.
13
The majority cites two Seventh Circuit cases for the
proposition that courts often pierce the corporate veil outside
the parent-subsidiary context. See ante at 18 (citing C.M.
Corp. v. Oberer Dev. Co, 631 F.2d 536 (7th Cir. 1980); Central
Nat'l Bank of Mattoon v. Bowen Transps., Inc. (In re Bowen
Transps., Inc.), 551 F.2d 171 (7th Cir. 1977)). These cases,
however, lend no assistance. In In re Bowen, the court stated
that it did “not believe that the equitable doctrine of piercing
the corporate veil is limited to the parent-subsidiary
relationship.” 551 F.2d at 179; accord C.M. Corp., 631 F.2d at
539. The In re Bowen court then noted that “[t]he separate
corporateness of affiliated corporations owned by the same
parent may be equally disregarded under the proper
circumstances.” 551 F.2d at 179 (emphasis supplied); accord
C.M. Corp., 631 F.2d at 539. These cases refer not to the
circumstance presented -- that is, companies with mere ownership
congruence -- but to one in which a parent corporation owns many
affiliated corporations. Moreover, both cases make it very
clear that overlap in ownership alone is insufficient to pierce
the corporate veil. See C.M. Corp., 631 F.2d at 539 (noting
that stock control and common officers and directors “are not
sufficient by themselves to invoke the doctrine” because they
“exist in most parent and subsidiary relationships” (internal
citation and quotation marks omitted)); In re Bowen, 551 F.2d at
179 (“[A]lthough stock control and common directors and officers
are generally prerequisites for application of the doctrine
permitting the corporate veil to be pierced, that is not by
itself sufficient to bring the doctrine into operation.”).
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with mere ownership overlap, the majority relies entirely on
cases that involve wholly owned subsidiaries. See ante at 17-19
(discussing Burlington, 862 F.2d 1266; Butte, Anaconda & Pac. Ry.
v. Brotherhood of Locomotive Firemen & Enginemen, 268 F.2d 54
(9th Cir. 1959)). For example, in Butte, the railway was “a
wholly-owned subsidiary of Anaconda, and both corporations [were]
managed by the same staff of officers from president down to
secretary-treasurer.” Butte, 268 F.2d at 55. ABR is not a
subsidiary of Springfield or Guilford, and the companies are not
managed by the same personnel. In Butte, the officers who made
all major policy decisions for the subsidiary were also officers
of the parent, and as one might expect, their “controlling
consideration” always was “the ultimate effect” the decision
would have on the parent's profits. Id. No officers of ABR are
officers of Springfield or Guilford. While the majority
speculates that ABR's decisions were made for the sole benefit of
Springfield, no record evidence supports that conclusion.
The majority attempts to extend the rule from these
parent-subsidiary cases to this case, but does not satisfactorily
justify or explain the extension. The majority uses the fact
that Burlington, a Seventh Circuit case, employs the phrase “the
same corporate family” to justify piercing the veil in this case.
See ante at 18. All of the cases Burlington cites after this
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language, however, involve wholly owned subsidiaries. See
Burlington, 862 F.2d at 1275 (citing Burlington N. R.R. v. United
Transp. Union, 688 F. Supp. 1261, 1266-67 (N.D. Ill. 1988) (the
district court opinion); International Ass'n of Machinists &
Aerospace Workers v. Eastern Airlines, No. 87-1720, 1988 WL 25506
(D.D.C. Mar. 10, 1988), vacated and remanded on other grounds,
849 F.2d 1481 (D.C. Cir. 1988); Butte, 268 F.2d 54). Moreover,
every time the term “corporate family” has appeared in a Seventh
Circuit opinion, it has referred not to a mere overlap in
ownership, but to corporations within a parent-subsidiary
relationship. See In re Meyer, 120 F.3d 66, 69 (7th Cir. 1997);
Fitzgerald v. Chrysler Corp., 116 F.3d 225, 228 (7th Cir. 1997);
Northern Ind. Pub. Serv. Co. v. C.I.R., 115 F.3d 506, 514 (7th
Cir. 1997); In re Vicars Ins. Agency, Inc., 96 F.3d 949, 950 &
n.1 (7th Cir. 1996); Addis v. Holy Cross Health Sys. Corp., 88
F.3d 482, 484 (7th Cir. 1996); Kusak v. American Info. Sys.,
Inc., 80 F.3d 199, 201 (7th Cir. 1996); Central States, Southeast
& Southwest Areas Pension Fund v. Sherwin-Williams Co., 71 F.3d
1338, 1342 (7th Cir. 1995); Baeco Plastics, Inc. v. Inacomp Fin.
Servs., Inc., No. 94-3391 , 1995 WL 140720 (7th Cir. Mar. 29,
1995); First City Sec., Inc. v. Shaltiel, 44 F.3d 529, 531 (7th
Cir. 1995); Sears, Roebuck & Co. v. C.I.R., 972 F.2d 858, 860-61
(7th Cir. 1992); Fought v. Evans Prods. Co. Racine Pension Plan
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Agreement, 966 F.2d 304, 305 (7th Cir. 1992); Olympia Equip.
Leasing Co. v. Western Union Tel. Co., 786 F.2d 794, 802 (7th
Cir. 1986) (Easterbrook, J., concurring); Independence Tube Corp
v. Copperweld Corp., 691 F.2d 310, 317 n.5 (7th Cir. 1982),
rev'd, 467 U.S. 752 (1984); Photovest Corp. v. Fotomat Corp., 606
F.2d 704, 726 (7th Cir. 1979); Radiant Burners, Inc. v. American
Gas Ass'n, 320 F.2d 314, 324 (7th Cir. 1963). The same holds
true for First Circuit cases. See CPC Int'l, Inc. v. Northbrook
Excess & Surplus Ins. Co., 144 F.3d 35, 37 (1st Cir. 1998);
Donatelli v. National Hockey League, 893 F.2d 459, 466 (1st Cir.
1990); Barrett v. Continental Ill. Nat'l Bank & Trust Co., 882
F.2d 1, 3 n.2 (1st Cir. 1989); Pujol v. Shearson Am. Express,
Inc., 877 F.2d 132, 136 (1st Cir. 1989); San Francisco Real
Estate Investors v. Real Estate Inv. Trust of America, 701 F.2d
1000, 1001 (1st Cir. 1983); Ladd v. Brickley, 158 F.2d 212, 220
(1st Cir. 1946). The majority thus has little basis upon which
to hold that Burlington's use of the phrase “corporate family”
was meant to refer to anything other than the wholly owned
subsidiary at issue in that case. While arguably there may be
cases in which stockholders of a railroad form a nonsubsidiary
for the sole purpose of circumventing the collective bargaining
agreement, there is no record support for the contention that
this is such a case, nor should the parent-subsidiary argument be
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used to extend the doctrine here.
The majority cites Minnesota Power v. Armco, Inc., 937
F.2d 1363 (8th Cir. 1991), for the proposition that courts have
pierced the corporate veil in cases involving complex partnership
schemes. See ante at 18-19. Minnesota Power, however, does not
support the majority's contention even though it did involve a
complex partnership scheme. From 1978 through 1982, the Reserve
Mining Co. (“Reserve”) was the wholly owned subsidiary of Armco
and Republic Steel. See Minnesota Power, 937 F.2d at 1364. In
1982, Armco and Republic Steel changed Reserve into a partnership
and each took an equal share. See id. Armco then transferred to
its wholly owned corporate subsidiary, First Taconite, its
partnership interest. See id. The Eighth Circuit saw no clear
error in the district court's findings that (1) from 1978 through
1982, Reserve, which was Armco's and Republic Steel's wholly
owned corporate subsidiary, was Armco's alter ego and (2) from
1982 through 1986, First Taconite, which as Armco's wholly owned
corporate subsidiary owned a partnership interest in Reserve, was
Armco's alter ego. See id. at 1364, 1368. That court merely
held wholly owned corporate subsidiaries to be the alter ego of
their parent.
The majority also cites Century Oil Tool, Inc. v.
Production Specialties, Inc., 737 F.2d 1316 (5th Cir. 1984),
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quoting language that “we see no relevant difference between a
corporation wholly owned by another corporation . . . or two
corporations wholly owned by three persons who together manage
all affairs of the two corporations.” Id. at 1317. This case
dealt not with the RLA, but with whether two corporations with
the same ownership and control constituted a single entity under
Section 1 of the Sherman Act. See id. at 1316. In Century Oil,
the same three men owned and controlled both Gas Lift, which
manufactured “wireline tools and gas lift valves,” and Production
Specialties, which sold them. Id. at 1317. Each company existed
solely to benefit the other. In addition, “[b]oth corporations
operated from the same physical plant.” Id. The Unions concede
that ABR's principal business is unrelated to the railroad's and
that switching is incidental to its main business. And, while
the majority thinks it immaterial that ownership and control
between Springfield and ABR is not identical, the Century Oil
court would disagree. See id. at 1317 n.1 (“We address only the
question of the independence of two corporations under common
ownership. The point at which the ownership of two or more
corporations so loses its commonality as to furnish a plurality
of actors . . . is not before us.”). I remain unpersuaded by the
majority's expansion of responsibility to companies with only
some ownership congruence.
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Finally, the import of the court's decision today has
much significance for ABR. The RLA sets up separate procedures
depending on whether a dispute is major or minor. If the dispute
is minor, it will be resolved quickly through “compulsory and
binding arbitration.” Consolidated Rail Corp. v. Railway Labor
Executives' Ass'n, 491 U.S. 299, 303 (1989). In contrast, major
disputes endure “a lengthy process of bargaining and mediation”
during which “the parties are obligated to maintain the status
quo.” Id. at 302. Congress designed the major-dispute
procedures to prevent strikes. See Elgin, Joliet & E. Ry. v.
Burley, 325 U.S. 711, 725-26 (1945). The majority's resolution
of the major-minor issue will have little or no impact on the
Unions because no Union jobs have been lost as a result of
shippers doing their own switching; rather, Springfield in fact
has provided more Union jobs since losing some of its switching
business. The majority's conclusion, however, does not allow
ABR, a nonrailroad and a legitimate business, the right to expand
its switching operations to other entities that also desire
timely and flexible switching, nor does it regain for Springfield
the switching business it already has lost.
I respectfully dissent.
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Brotherhood of Locomotive Engineers v. Springfield Terminal Railway Co.
Court: Court of Appeals for the First Circuit
Date filed: 2000-04-05
Citations: 210 F.3d 18
Copy CitationsCombined Opinion