Union Pacific 2001 Annual Report Download - page 34

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Item 3. Legal Proceedings
Southern Pacific Acquisition
On August 12, 1996, the STB served a decision (the Decision) approving the acquisition of control of Southern Pacific
by UPC, subject to various conditions. The acquisition was consummated on September 11, 1996. Various appeals were
filed with respect to the Decision, and all such appeals were ultimately consolidated in the U.S. Court of Appeals for the
District of Columbia Circuit, and all of the appeals have since been withdrawn or denied.
Among the conditions to the STB's approval of the Southern Pacific acquisition was the requirement that the STB
retain oversight jurisdiction for five years to examine whether the conditions imposed under the Decision remain effective
to address the competitive harms caused by the merger. On July 2, 2001, the Railroad filed its fifth comprehensive
summary with the STB. Interested parties were required to file comments concerning the fifth annual oversight
proceeding by August 21, 2001, and replies were due on September 4, 2001. On December 20, 2001, the STB issued a
decision concluding the fifth and final oversight proceeding and announcing the end to the formal oversight process. The
STB will continue to have authority to enforce the conditions it imposed on the merger to ensure they are implemented
in a manner that effectively preserves pre-merger competition.
Shareholder Litigation
A purported derivative action was filed by nine individuals, seven of whom are members of the Teamsters, on behalf of
the Corporation on June 21, 2001, in the Chancery Court of Shelby County, Tennessee, naming as defendants current
and certain former directors of the Corporation and various present and former officers and employees of Overnite, as
well as Overnite, and, as a nominal defendant, the Corporation. The derivative action alleges, among other things, that
the named defendants breached their fiduciary duties to the Corporation, wasted its assets and mismanaged the company
by opposing the efforts of the Teamsters to organize the employees of Overnite. Plaintiffs claim that the "anti-union"
campaign allegedly waged by the defendants cost millions of dollars and caused a substantial decline in the value of
Overnite. On July 31, 2001, defendants filed a motion to dismiss the action on various grounds. The Corporation,
Overnite and the individual defendants believe that the claims raised by the plaintiffs are without merit and intend to
defend them vigorously.
Labor Matters
The General Counsel of the National Labor Relations Board (NLRB) is seeking a bargaining order remedy in 11 cases
involving Overnite where a Teamsters' local union lost a representation election. A bargaining order remedy would
require Overnite to recognize and bargain with the union as if the union had won instead of lost the election and would
be warranted only if the following findings are made: (1) the petitioning Teamsters' local had obtained valid authorization
cards from a majority of the employees in an appropriate unit; (2) Overnite committed serious unfair labor practices; and
(3) those unfair labor practices would preclude the holding of a fair election despite the application of less drastic
remedies. In these 11 cases, an administrative law judge and the NLRB ruled that the bargaining order remedy is
warranted. Overnite appealed the NLRB's ruling to the United States Court of Appeals for the Fourth Circuit. By a two-
one decision, the Fourth Circuit initially enforced the first four bargaining orders. Last year, the full Fourth Circuit agreed
to rehear that case. On February 11, 2002, the full Fourth Circuit ruled in Overnite's favor on the bargaining order
remedy in the first four cases and remanded the cases to the NLRB for new representation elections. The time for seeking
review in the United States Supreme Court has not yet expired. Appeal of the seven cases had been held in abeyance
pending this decision and now will be heard by the Fourth Circuit if the NLRB does not withdraw the bargaining orders
on its own. Overnite believes that Supreme Court review of the first four cases in unlikely and that there is no substantial
basis to distinguish the seven remaining cases from the four recently decided by the Fourth Circuit. In a twelfth case, the
administrative law judge found that a bargaining order remedy was not warranted.