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Leu v. Norfolk & Western Railway Co.

decided: May 8, 1987.

JAMES W. LEU, ET AL., INDIVIDUALLY AND AS REPRESENTATIVE OF A CLASS, PLAINTIFFS-APPELLANTS,
v.
NORFOLK & WESTERN RAILWAY COMPANY, DEFENDANT-APPELLEE



Appeal from the United States District Court for the Southern District of Illinois, No. 85 5172, William L. Beatty, Judge.

Author: Ripple

Before WOOD, Jr., COFFEY and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge. This action is before the court pursuant to 28 U.S.C. ยง 1291 as an appeal of a final judgment of the United States District Court for the Southern District of Illinois. On February 6, 1986, the district court granted the defendant's motion to dismiss the plaintiffs' second amended complaint, and plaintiffs' appeal. The complaint was dismissed under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction and, alternatively, dismissed with prejudice under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. For the reasons set forth in this opinion, we affirm the district court's dismissal of the action for lack of subject matter jurisdiction.

I

Background

A. The Complaint

Appellants are former employees of the appellee, Norfolk and Western Railway Company (N & W). They sustained personal injuries while on-duty with the railroad and either agreed to monetary settlements or received payments in satisfaction of judgments against N & W under the Federal Employers' Liability Act (FELA) on or after March 1, 1961.

In their complaint in this litigation, appellants alleged that N & W fraudulently reduced the settlement funds by deducting a lien asserted against N & W by the Wabash Memorial Hospital Association (WMHA) for medical serviced provided by WMHA to appellants in connection with the injuries. The former employees asserted that the railroad had a lawful responsibility to pay the hospital bills and that, because of the deduction of the alleged WMHA lien, they were deprived of funds to which they were entitled. In the second amended complaint,*fn1 upon which this appeal is premised, this contention is expressed in two causes of action, one alleging fraud,*fn2 the other alleging conversion.*fn3

B. The Decision of the District Court

The district court dismissed appellants' second amended complaint for lack of subject matter jurisdiction. It reasoned that "the sole source of this alleged 'responsibility' [to pay medical expenses] was the provisions of the collective bargaining agreements between N & W and Plaintiffs' rail unions entered into under the auspices of the Railway Labor Act." Leu v. Norfolk & W. Ry., No. 85 5172, mem. op. at 2 (S.D. Ill. Feb. 6, 1986) [hereinafter cited as Mem. op.]; R.19 at 2.*fn4 The court ruled that "state law tort claims that are inextricably intertwined with the interpretation of collective bargaining agreements in the railroad or airline industry are preempted because Congress has vested exclusive [sic] jurisdiction to interpret such agreements in the National Railroad Adjustment Board ("NRAB") under Section 3 of the RLA." Id. at 3. Thus, the court held that it was deprived of subject matter jurisdiction over the claims because resolution of the claims "would be substantially dependent upon [its] analysis of the terms of the N & W collective bargaining agreements." Id. at 4.

The district court then rejected the appellants' arguments that the court should entertain their claims despite the preemption of their tort claims. Appellants had argued that any claim they might have under the collective bargaining agreement or section 3 of the Railway Labor Act (RLA) would be time-barred. The court answered that "plaintiffs' failure to pursue their contract remedies in the proper forum in a timely fashion cannot somehow imbue this Court with subject matter jurisdiction it otherwise lacks." Id. at 5. Appellants also had argued that they were unable to pursue their contract remedies under the RLA because they had resigned their employment with N & W. To this argument the court responded, "Former railroad employees not only are able but in fact are required to pursue any claims they might have arising out of a collective bargaining agreement through the exclusive 'minor dispute' resolution process set forth in Section 3 of the RLA." Id. at 6.

As an alternate basis for its holding, the court then dismissed the fraud an conversion causes of action with prejudice for failure to state a claim. The court relied on the requirement of Fed. R. Civ. P. 9(b) that in all averments of fraud, the circumstances constituting fraud "shall be stated with particularity." The court held that appellants' "conclusory, non-specific allegations of fraud against N & W do not contain the requisite particularity." Id. at 8. The court also held that appellants' action for conversion could not be maintained because it was essentially a claim for the deprivation of property as a result of an alleged breach of contract. Id. at 9.

II

Discussi ...


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