The Chicago West Pullman Corp., whose bid to purchase the Pittsburgh & Lake Erie Railroad touched off a landmark court battle, has urged the railroad to appeal the recently decided case to the Supreme Court.

At the same time, the company warned the P&LE that it still intends to acquire the railroad when the smoke clears from the court battle.The railroad, however, maintains the sales contract expired months ago, and that it plans to continue liquidating the company.

The 3rd U.S. Circuit Court of Appeals last week affirmed a lower court ruling that the P&LE's labor unions had a right to participate in any sales negotiations.

The union lawsuit, begun soon after the September announcement that the P& LE would be sold to Chicago West Pullman for some $75 million, has blocked the sale and frozen many of the railroad's assets pending negotiations between the company and the unions.

The court rulings giving the workers standing in the sale talks remove what has been the primary reason so many branch lines have been sold as short- line railroads: steep reduction in labor costs based on an ability to abrogate existing contracts.

P&LE management has refused to discuss its plans; the railroad has been trimming its operations and selling off assets. P&LE officials again failed to return telephone calls Thursday.

An injunction prohibits the P&LE from liquidiating and throwing all of its 750 unions workers on the street.

We are disappointed with the decision . . . There is no doubt an appeal is needed just to clarify what the company sees is a conflicting ruling in a federal court in Chicago, said Robert E. Smith, president of CPW subsidiary CWP Railco Inc., in a statement issued Thursday in Pittsburgh.

At the same time, he said, our sales agreement directs the P&LE to provide the assets free and clear. As we understand the (court) opinion, it obligates the P&LE to bargain with its unions and keep the 'status quo' while the bargaining process is pending. Thus the P&LE is prevented from transferring its assets to us until it has completed these negotiations.

In late January, a P&LE spokesman said the deal with Chicago West Pullman was not an open-ended agreement, and it has expired.

That statement came one day after Mr. Smith warned P&LE President Gordon E. Neuenschwander not to liquidate the company, because CWP believed its sales agreement was still binding.

The P&LE has become the showcase for a major labor-management battle over the spin off of branch lines to new owners.