It's not just Dragline who's found Luke — the authorities have finally caught up to them. He soon realizes that his friend is acting as an emissary for the authorities. Luke is given an opportunity — surrender peacefully and he won't be harmed. This is a change from what The Captain told him earlier in the film, that if he escaped one more time, he'd be shot.
This quasi-betrayal sets the movie on the path toward its denouement. If in the movie's heavy Christian allegorical work, Luke is a combination of Jesus Christ and Job, suffering immense physical punishments stoically for the inspiration of others and to make their lives better, then Dragline has become Judas, telling the authorities where he left Luke in the hope that the inevitable punishment they both face will be lighter. It's also a final gesture of belief and reverence toward a system that he still on some level thinks will be just, fair and protective.
Whether or not one interprets his final gesture as suicidal in light of the Walking Boss' previous warnings is almost immaterial as Luke goes to the door, opens it, and sarcastically echoes a speech of The Captain's. The "What we've got here is a failure to communicate," speech, which ended up coming in at 11th place on AFI's 100 Years...100 Quotes list, is abbreviated to its first line before Luke is shot by Godfrey. Dragline carries him out, surrenders, and finally snaps, choking the line boss.
Luke smiles one last time as he's driven away, bleeding out in the back of the squad car. Godfrey's mirrored sunglasses crunch symbolically under the car's tires. In death, Luke has done what he could not do in life — find freedom and beat the system.
