# In Re Penn Central Transportation Company

> Special Court under the Regional Rail Reorganization Act · September 30, 1974 · 384 F. Supp. 895

URL: https://www.frixlaw.com/law-library/cases/1370968

## Case

- **Court:** Special Court under the Regional Rail Reorganization Act
- **Decided:** September 30, 1974
- **Citations:** 384 F. Supp. 895
- **Precedential status:** Published
- **Opinion:** Opinion
- **Judges:** Friendly, Presiding Judge, and McGowan and Thomsen, Judges
- **Cited by:** 80 later opinions in the Frix Law Library

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## Opinion text

384 F.Supp. 895 (1974)
In the Matter of PENN CENTRAL TRANSPORTATION COMPANY, Debtor.
In the Matter of The UNITED NEW JERSEY RAILROAD AND CANAL CO. and Other Secondary Debtors of Penn Central Transportation Company, Debtor.
In the Matter of LEHIGH VALLEY RAILROAD COMPANY, Debtor.
In the Matter of The CENTRAL RAILROAD COMPANY OF NEW JERSEY, Debtor.
In the Matter of The LEHIGH AND HUDSON RIVER RAILWAY COMPANY, Debtor.
In the Matter of READING COMPANY, Debtor.
In the Matter of The ANN ARBOR RAILROAD COMPANY, Debtor.
Nos. 74-8, 74-12, 74-11, 74-6, 74-10, 74-7 and 74-9.
Special Court. Regional Rail Reorganization Act.
Argued August 27 and 28, 1974.
Decided September 30, 1974.
*896 *897 *898 *899 *900 Before FRIENDLY, Presiding Judge, and McGOWAN and THOMSEN, Judges.
FRIENDLY, Presiding Judge:
We have here a number of appeals from orders of district courts under the second sentence of ง 207(b) of the Regional Rail Reorganization Act of 1973 (generally hereafter the Act), 87 Stat. 985 (1974), which subsection we quote in its entirety in the margin. [1] The district *901 courts made the orders in the reorganization proceedings under ง 77 of the Bankruptcy Act which were before them. Appendix A to this opinion lists the various appellants and appellees and counsel for them.
In the first five cases in the caption โ€” those dealing with the Penn Central, the Penn Central secondary debtors, the Lehigh Valley (LV), the Central Railroad of New Jersey (CNJ), and the Lehigh & Hudson River Railway (L&H) โ€” the respective judges [2] concluded that the Act "does not provide a process which would be fair and equitable to the estate of the railroad in reorganization . . . ." [3] In the cases of the Reading and the Ann Arbor, Judge Ditter in the District Court for the Eastern District of Pennsylvania and Judge Pratt in the District Court for the Eastern District of Michigan took a contrary view and ordered that reorganization should proceed under the Act. [4]
Broadly speaking, the parties who are appellants in the first five cases โ€” the United States, the Interstate Commerce Commission, the United States Railway Association (USRA), and railroad labor organizations โ€” are appellees in the last two, whereas creditor and stockholder interests support the orders in the first five cases and attack those in the Reading and Ann Arbor proceedings. [5] The Penn Central trustees support the Act only if the Supreme Court rules that a remedy under the Tucker Act is available. See Parts VII and VIII infra. In two other ง 77 proceedings which the Judicial Panel on Multi-district Litigation referred to us by its order of March *902 1, 1974, [6] those concerning the Erie-Lack-awanna, in the District Court for the Northern District of Ohio, and the Boston & Maine, in the District Court for the District of Massachusetts, the respective judges [7] entered orders under the first sentence of ง 207(b), finding that "the railroad is reorganizable on an income basis within a reasonable time under section 77 of the Bankruptcy Act (11 U.S.C. 205) and that the public interest would be better served by continuing the present reorganization proceedings than by a reorganization under this Act." [8] Since these conclusions have not been contested by anyone, the Erie-Lackawanna and Boston & Maine cases are not before us. [9] The court wishes to express its appreciation to counsel for their cooperation in limiting the number and size of briefs by allowing most of the major legal issues to be presented in the Penn Central appeal by counsel for the United States and its agencies; the Penn Central Trustees; institutional investors, indenture trustees, certain creditors, and shareholders of the Penn Central; and the New Haven trustee as a large creditor and stockholder of Penn Central.
The Act was a Congressional response to the threat to the national welfare posed by the bankruptcy of the railroads in the northeastern United States we have listed. The most dramatic was the bankruptcy of the Penn Central on June 21, 1970, little more than two years after consummation of its widely heralded merger. [10] These bankruptcies differed from earlier railroad insolvencies in an essential respect. Whereas earlier insolvencies had typically been caused by inability to meet fixed charges or debt maturities, [11] the causes of current railroad *903 bankruptcies in the northeastern region went much deeper; the roads were unable to pay taxes and operating expenses, even with substantial undermaintenance of plant which, in turn, led to revenue losses and increased expense, particularly for freight car hire. [12] Although it was at first believed that the problems of the Penn Central could be overcome within the existing legal framework, [13] early in 1973 the Penn Central Trustees reported to the reorganization court that substantial governmental assistance, later quantified as between $600 and $800 million, was needed to improve Penn Central's plant and equipment in such a manner as to secure the traffic increases on which a successful income-based reorganization would depend. Trustees' Interim Report of February 1, 1973, at 1; Trustees' Interim Report of January 1, 1973, at 2 (submitted to Judge Fullam in In re Penn Cent. Trans. Co., Bky. No. 70-347, (E.D.Pa.1974)).
Congress thereupon passed a joint resolution, 87 Stat. 5 (1973), directing the Secretary of Transportation to submit within 45 days "a report which . . . provides a full and comprehensive plan for the preservation of essential rail transportation services in the Northeast. . . ." Id. at 6. The Secretary rendered a report on March 26, 1973. In the meantime, however, Judge Fullam had entered an order directing the Penn Central Trustees to file either a plan of reorganization or a proposal for liquidating the road. In re Penn Cent. Transp. Co., 355 F.Supp. 1343 (E.D.Pa., 1974). While acknowledging that "the legislative and executive branches of government must be looked to for solutions" of the problems of Penn Central, id. at 1345 , he found those problems to be so severe that "the point of unconstitutionality is fast approaching, if it has not already arrived," id. at 1344 , and suggested that it was "highly doubtful that the Debtor could properly be permitted to continue to operate on its present basis beyond October 1, 1973." Id. at 1346 . Spurred by Judge Fullam's warning, see House Report at 27, Congress engaged in the extensive consideration which led to passage of the Act.
While the Act is titled a reorganization statute, its drafters acknowledged that the northeastern railroad problem cannot be solved simply by resort to the traditional procedures available under ง 77 of the Bankruptcy Act and the Interstate Commerce Act, 49 U.S.C. ง 1 et seq. (1970). See House Report at 29. The Act therefore contains provisions, of which more hereafter, designed to eliminate duplicative trackage of one or more railroads and also to permit abandonment of unprofitable mileage without the delays and uncertainties characteristic of proceedings under ง 1(18) of the Interstate Commerce Act, to provide governmental assistance in meeting the *904 onerous labor protective conditions imposed by the Interstate Commerce Commission or provided in collective bargaining agreements, to assist in the sale of passenger facilities to the National Railroad Passenger Corporation (Amtrak) or state, local or regional authorities, and to provide funds for rehabilitation and modernization of neglected physical plant and for subsidy of non-economic service. Recognizing the existence of new problems, Congress devised imaginative and innovative solutions, in an endeavor to avoid the national disaster that would result from cessation of the bulk of railroad operations in the north-east.
The basic scheme of the Act is as follows: It relates to railroads in reorganization under ง 77 of the Bankruptcy Act in a region defined in ง 102(13), which may be generally described as the north-eastern United States from the Canadian border on the north to Virginia, West Virginia, and the Ohio River on the south, and from the Atlantic Ocean on the east to Michigan and Illinois on the west. [14] The Act provides for two new entities. One is the United States Railway Association (USRA), a government nonprofit corporation of the District of Columbia. See generally Title II. USRA is vested with powers and duties of three major sorts: One is to develop a "final system plan," ง 202(a)(1), determining, inter alia, which rail properties of the bankrupt railroads that are to be reorganized under the Act shall be conveyed to Consolidated Rail Corporation (hereafter described), sold to profitable railroads operating within the region, purchased, leased, or otherwise acquired from the Corporation by Amtrak, purchased or leased from the Corporation by states or public transportation authorities for providing rail passenger service, or devoted to other public purposes; which rail properties of profitable railroads operating in the region may be offered for sale to the Corporation or other profitable railroads operating in the region; and what the consideration will be. ง 206(c), (d). The second is authority to issue obligations, not more than $1.5 billion of which shall be outstanding at any one time, guaranteed by the Secretary of Transportation, whose possible uses are described below. ง 210. A third is the power to make loans to assist in carrying out the Act. ง 211. The other new entity is a for-profit corporation, Consolidated Rail Corporation (Conrail), see generally Title III, established under the laws of a state, which "shall not be an agency or instrumentality of the Federal Government." ง 301(b). Conrail is to acquire and operate the rail properties provided for conveyance to it in the "final system plan." ง 302(a), (b).
After proceedings here unnecessary to detail, USRA is to submit to Congress a final system plan within 450 days of enactment of the Act. งง 207(c), 208(a). This shall be deemed approved unless, within 60 calendar days of continuous session of Congress after submission, either house of Congress passes a resolution of disfavor; in that event USRA is to submit a revised plan to which similar procedures apply. ง 208(a), (b). The goals of the final system plan, the factors to be considered in its formulation, and its content are described in ง 206, which we set out in the margin. [15] *905 *906
*907 Section 209(c) provides:
Delivery of Plan to Special Court โ€” Within 90 days after its effective date, the Association shall deliver a certified copy of the final system plan to the special court and shall certify to the special court โ€”
(1) which rail properties of the respective railroads in reorganization in the region and of any railroad leased, operated, or controlled by such railroads in reorganization are to be transferred to the Corporation, in accordance with the final system plan;
(2) which rail properties of the respective railroads in reorganization in the region or railroads leased, operated, or controlled by such railroads in reorganization are to be conveyed to profitable railroads, in accordance with the final system plan;
(3) the amount, terms and value of the securities of the Corporation (including any obligations of the Association) to be exchanged for those rail properties to be transferred to the Corporation pursuant to the final system plan, and as indicated in paragraph (1) of this subsection; and
(4) that the transfer of rail properties in exchange for securities of the Corporation (including any obligations of the Association) and other benefits is fair and equitable and in the public interest.
Section 303(a) directs that, within 10 days after the action specified in ง 209(c), Conrail shall deposit with this court all of its stock and other securities and obligations of USRA designated in the final system plan to be exchanged for the rail properties to be conveyed to Conrail, and each profitable railroad operating in the region purchasing rail properties of the various bankrupt estates in accordance with the final system plan shall similarly deposit the compensation to be paid by it. Within 10 days after such deposit, this court shall, ง 303(b),
(1) . . . order the trustee or trustees of each railroad in reorganization in the region to convey forthwith to the Corporation and the respective profitable railroads operating in the region, all right, title, and interest in the rail properties of such railroad in reorganization and shall itself order the conveyance of all right, title, and interest in the rail properties of any railroad leased, operated, or controlled by such railroad in reorganization that are to be conveyed to them under the final system plan as certified to such court under section 209(d) of this Act.
Section 303(b) further provides:
(2) All rail properties conveyed to the Corporation and the respective profitable railroads operating in the region under this section shall be conveyed free and clear of any liens or encumbrances, but subject to such leases and agreements as shall have previously burdened such properties or bound the owner or operator thereof in pursuance of an arrangement with any State, or local or regional transportation authority under which financial support from such State, or local or regional transportation authority was being provided at the time of enactment of this Act for the continuance of rail passenger service or any lien or encumbrance of no greater than 5 years' duration which is necessary for the contractual performance by any person of duties related to public health or sanitation. Such conveyances shall not be restrained or enjoined by any court.
*908 (3) Notwithstanding anything to the contrary contained in this Act, if railroad rolling stock is included in the rail properties to be conveyed, such conveyance may only be effected if the profitable railroad operating in the region or the Corporation to whom the conveyance is made assumes all of the obligations under any conditional sale agreement, equipment trust agreement, or lease in respect to such rolling stock and such conveyance is made subject thereto; and the provisions of this Act shall not affect the title and interests of any lessor, equipment trust trustee, or conditional sale vendee or assignee under such conditional sale agreement, equipment trust agreement or lease under section 77(j) of the Bankruptcy Act (11 U.S. C. 205(j)).
(4) Notwithstanding anything to the contrary contained in this Act, if a railroad in reorganization has leased rail properties from a lessor that is neither a railroad nor controlled by or affiliated with a railroad, and such lease has been approved by the lessee railroad's reorganization court prior to the date of enactment of this Act, conveyance of such lease may only be effected if the Corporation or the profitable railroad to whom the conveyance is made assumes all of the terms and conditions specified in the lease, including the obligation to pay the specified rent to the non-railroad lessor.
After the conveyances, this court must undertake an extensive process of hearing and decision described in ง 303(c), which we set forth in the margin. [16] *909 That decision may be appealed directly to the Supreme Court, which, however, "shall dismiss any such appeal within 7 days after entry of such an appeal if it determines that such an appeal would not be in the interest of an expeditious conclusion of the proceedings and shall grant the highest priority to the determination of any such appeals which it determines not to dismiss." ง 303(d).
In addition to these provisions bearing directly on the reorganization process, other important provisions should be mentioned. The Secretary of Transportation is authorized, pending implementation of the final system plan, to pay to the trustees of railroads in reorganization such sums as are necessary for the continued provision of essential transportation services; these are to be "upon such reasonable terms and conditions as the Secretary establishes, except that recipients must agree to maintain and provide service at a level no less than that in effect on the date of enactment of this Act." ง 213(a). [17] The sum of $85 million was authorized to be appropriated for this purpose, ง 213(b). The Secretary, with approval of USRA, is also authorized, in the period prior to the conveyance to Conrail, to enter into agreements, to be financed by obligations not exceeding $150 million, with "railroads in reorganization" as defined in ง 102(12), [18] for the acquisition, maintenance or improvement of railroad facilities and equipment necessary to improve property that will be in the final system plan, ง 215; as we read the section, these advances are not debts of the estates of the borrowing railroads, although they must be assumed by Conrail. USRA is also authorized to make loans (or in some instances guarantees of loans) to Conrail, Amtrak, and other railroads in the region (including a railroad in reorganization which has been found to be reorganizable under ง 77) for purposes of assistance in the implementation of the final system plan; upon direction by the Secretary, to a state or local or regional transportation authority which has made an offer to purchase any rail properties of a railroad in reorganization under the Act in an amount not exceeding 70% of the purchase price and also to provide additional assistance not to exceed 70% of the cost of restoring or repairing such rail properties to conditions enabling safe and efficient rail transportation; and to a railroad which connects with a "railroad in reorganization" and requires financial assistance to avoid having to invoke ง 77. ง 211. [19] The Act also has a program, at present limited to *910 two years, for subsidies for continuation of rail service on lines not included in the final system plan. ง 402. As much as $90 million may be appropriated for this purpose during each of the two years of the program's operation. ง 402(i)(1). Any state taking advantage of the loan program of ง 211 with respect to the purchase of rail properties, discussed above, forfeits its right to a continuation subsidy. ง 403(a). Conrail, USRA (where applicable), and railroads acquiring operation of railroads in reorganization under the Act are to be reimbursed, in an amount not exceeding $250 million, for the cost of complying with employee protective conditions, ง 509; this should contribute to the viability of Conrail [20] and should attract purchasers for properties not to be included in that system. [21] Finally, there are new procedures governing the discontinuance of rail service and abandonment of rail property. ง 304.
A three-judge court, convened pursuant to 28 U.S.C. งง 2282 and 2284, has entered a declaratory judgment that the Act was unconstitutional, as applied to the Penn Central reorganization, in three respects:
(1) Section 303, insofar as it fails to provide compensation for interim erosion pending final implementation of the final system plan, is in contravention of the Fifth Amendment;
(2) Section 304(f), relating to interim abandonments, violates the Fifth Amendment insofar as it would require continued operation of rail services at a loss in violation of the constitutional rights of owners and creditors;
(3) So much of ง 207(b) as requires the reorganization courts to dismiss pending ง 77 proceedings under the circumstances set forthin ง 207(b) violates the uniformity clause of the Constitution, Art. I, Section 8, Clause 4. [22]
Connecticut General Insurance Corp. v. United States Railway Ass'n, 383 F. Supp. 510 (E.D.Pa.1974). The case has been appealed to the Supreme Court, with all briefs to be filed by mid-October 1974.
We have concluded that the Act does "provide a process which would be fair and equitable" to the reorganization estates. That conclusion rests, in considerable measure, on our belief, contrary to that of the Connecticut General court, that Congress did not withdraw the ability of parties having a claim that the Act deprives them of a right "founded . . . upon the Constitution" to seek redress in the Court of Claims under the *911 Tucker Act, 28 U.S.C. ง 1491 (1970). The Tucker Act issue, however, is before the Supreme Court in the appeal in the Connecticut General case. Because of that and also because, apart from that, our decision on that issue might not have preclusive effect upon the Government, we shall mold our order so as to enable us to make whatever modifications, if any, the Court's decision may render appropriate.
This opinion will consider major issues common to all appeals, although the factual discussion of "erosion" and the "viability" of Conrail will be built primarily on the record in the Penn Central case. We do this since Penn Central comprises some 94% of the operated rail mileage and 87% of the railroad operating revenues of the roads here before us [23] and also because the Penn Central factual record, although by no means wholly satisfactory, comes nearer to being so than those in the other cases. An opinion by Judge McGowan will deal with special issues raised by the appeals as to leased lines which are secondary debtors in the Penn Central proceedings. Judge Thomsen's opinion will discuss special considerations raised in other appeals. All of us join in all three opinions.
I. JURISDICTION.
The New Haven trustee, a large holder of divisional mortgage bonds and stock of Penn Central and also a creditor for the substantial amount of consideration for the New Haven remaining unpaid when Penn Central entered ง 77, see New Haven Inclusion Cases, 399 U. S. 392, 483-489 , 90 S.Ct. 2054 , 26 L.Ed. 2d 691 (1970), mounts a number of challenges to our jurisdiction. These are as follows:
The first claim is that the 180-day order does not constitute a decision of a case or controversy because ง 207(b) of the Act has no requirement for adversary pleadings. [24] Such lack of adversary pleadings is scarcely unprecedented in bankruptcy. To cite one example, a court may dismiss a petition under Chapter X of the Bankruptcy Act if not satisfied that the petition has been filed in good faith, ง 141, although no one has asked it to do so. The court may also approve the petition ex parte, "a judicial determination of law and fact," 6 Collier on Bankruptcy, ถ 6.02 at 1001 (Moore ed. 1971). In these cases it was reasonable to expect that USRA and perhaps other parties would support reorganization under the Act while others would oppose. Cf. Fong Yue Ting v. United States, 149 U.S. 698, 729 , 13 S. Ct. 1016 , 37 L.Ed. 905 (1893) (deportation hearing); Tutun v. United States, 270 U.S. 568, 575, 577 , 46 S.Ct. 425 , 70 L.Ed. 738 (1926) (naturalization hearing). To say that there was a live controversy, see Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-241 , 57 S.Ct. 461 , 81 L.Ed. 617 (1937); Goosby v. Osser, 409 U.S. 512, 516-517 , 93 S.Ct. 854 , 35 L.Ed.2d 36 (1973), in each of these cases would be something of an under-statement. If more were needed, the ง 77 proceedings, in which all the orders here sub judice were entered, themselves constitute the necessary case or controversy. See Burco, Inc. v. Whitworth, 81 F.2d 721 (4th Cir.), cert. denied, 297 U. S. 724 , 56 S.Ct. 670 , 80 L.Ed. 1008 (1936).
The trustee next claims that the Act contravenes Article III because the *912 finding in clause (1) of the third sentence of ง 207(b) "and that the public interest would be better served by such a reorganization [under ง 77] than by a reorganization under this Act" is legislative rather than judicial. It is argued that the district courts had no jurisdiction to make such a finding and, consequently, we have no jurisdiction to review it. Cf. Mitchell v. Maurer, 293 U. S. 237 , 55 S.Ct. 162 , 79 L.Ed. 338 (1934). As the cases stand, the only ones where anything turned on such a finding were those of the twelve Penn Central secondary debtors which Judge Fullam found to be reorganizable on an income basis under ง 77 but concerning which he was unable to find that the public interest would be better served thereby. See Judge McGowan's opinion. In all other cases the district court found that the road was not reorganizable under ง 77 and these findings are beyond successful challenge; [25] there was therefore no occasion for it, or for us, to consider whether reorganization under ง 77 would better serve the public interest.
The question whether a given decision is legislative or judicial is not susceptible of solution by a litmus paper test. Admittedly the Act does not in terms set out what criteria the judge should apply. But each district judge was familiar with the course of the proceedings under ง 77, with the problems that would be faced in endeavoring to continue thereunder, with the important benefits potentially afforded by the Act, and also with its problems. We do not see why the decision whether it was better to proceed under ง 77 or under the Act was any more legislative than a decision under ง 328 of the Bankruptcy Act that a proceeding under Chapter XI "should have been brought under Chapter X of this Act," an issue which the Supreme Court has thrice implicitly determined that an Article III court could properly decide. SEC v. U. S. Realty & Improvement Co., 310 U.S. 434 , 60 S.Ct. 1044 , 84 L.Ed. 1293 (1940); General Stores Corp. v. Shlensky, 350 U.S. 462 , 76 S.Ct. 516 , 100 L.Ed. 550 (1956); SEC v. American Trailer Rentals Co., 379 U.S. 594 , 85 S.Ct. 513 , 13 L.Ed.2d 510 (1965). The type of decision required also does not seem essentially different from that demanded under Fed.R. Civ.P. 23(b)(3) whether "a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Several provisions of ง 77 require the reorganization court to make determinations of the public interest. See ง 77(c)(6) (lessor's duty to operate upon rejection of lease); ง 77( o ) (abandonment or sale of lines); In re Boston & Maine Corp., 455 F.2d 1205 (1st Cir. 1972) (application of ง 77( o )). The power of the courts to apply similarly broad standards has repeatedly been sustained, United Steelworkers of America v. United States, 361 U.S. 39 , 80 S.Ct. 1 , 4 L.Ed.2d 12 (1959); United States v. First Nat'l City Bank, 386 U.S. 361 , 87 S.Ct. 1088 , 18 L.Ed.2d 151 (1967). See also Wright v. Vinton Branch of Mountain Trust Bank, 300 U.S. 440 , 462 n. 6, 57 S.Ct. 556 , 81 L.Ed. 736 (1937). As intimated in Hart & Wechsler, The Federal Courts and the Federal System 237-38 (2d ed. 1973), we think these decisions, as well as Federal Radio Comm'n v. Nelson Bros. Co., 289 U.S. 266 , 53 S.Ct. 627 , 77 L.Ed. 1166 (1933), *913 have drained all vitality from Federal Radio Comm'n v. General Electric Co., 281 U.S. 464 , 50 S.Ct. 389 , 74 L.Ed. 969 (1930), which is relied on by counsel for the Penn Central Secondary Debtor Indenture Trustees, who also raise the point here under discussion.
The New Haven trustee also argues that we are being asked to render an advisory opinion because if we find the Act in part defective Congress may repair it, whereas if we hold the Act constitutional on the grounds that it leaves creditor and stockholder interests free to sue the United States under the Tucker Act for any deficiency in compensation or for unconstitutional erosion, Congress subsequently may eliminate that remedy.
The former possibility is in no way troubling. A decision condemning the present statute would not be deprived of effect by Congress' taking steps to meet the court's objections. as it has frequently done. See, e.g., the amendment of the Frazier-Lemke Act, sustained in Wright v. Union Central Life Ins. Co., 311 U.S. 273 , 61 S.Ct. 196 , 85 L.Ed. 184 (1940), in order to overcome the defects that had led to condemnation of the act of June 28, 1934, 48 Stat. 1289 , in Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555 , 55 S.Ct. 854 , 79 L.Ed. 1593 (1935). McGrath v. Kristensen, 340 U.S. 162 , 71 S. Ct. 224 , 95 L.Ed. 173 (1950), seems sufficient to dispose of the trustee's second suggestion. See generally Hart & Wechsler, The Federal Courts and the Federal System, Note on the Court of Claims and the Problem of Legislative Revision 98 (2d ed. 1973). [26]
Another contention raised by the New Haven trustee is that we are somehow deprived of jurisdiction because Congress passed the Act in the face of a pending motion by the trustee to dismiss the Penn Central reorganization proceeding under ง 77(g). But Congress did not purport to strip the reorganization court of power to decide the motion; it simply created new legislation which might lead that court to consider it the part of wisdom not to decide the motion until the feasibility of proceeding under the new Act had been explored and then to render a decision consistent with the result of that exploration. We know of no principle whereby the making of a motion in a pending case can strip the Congress of its power to enact legislation creating an alternative solution which the court might deem worthy of consideration. Cf. Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. (59 U.S.) 421, 15 L.Ed. 435 (1855).
Finally the New Haven trustee contends that the last sentence of ง 207(b) prohibiting review of our decisions on appeals from the 180-day orders deprives us of jurisdiction. Much of the learned discussion, including extensive quotations from Professor Henry M. Hart, Jr.'s remarkable article, The Power of Congress to Limit the Jurisdiction of Federal Courts: An Exercise in Dialectic, 66 Harv.L.Rev. 1362 (1953), falls by the wayside in light of the possibility of obtaining Supreme Court review of the constitutionality of the Act by appeal from the decision of the three-judge court in the Connecticut General case, see generally Choper, The Supreme Court and the Political Branches: Democratic Theory and Practice, 122 U.Pa. L.Rev. 810, 852-55 (1974), unless the trustee is justified in fearing that because the Act requires us to render our decision before the Supreme Court will have heard the Connecticut General appeal, our judgment may have a preclusive effect on the Court โ€” an issue discussed in Part II B below. In any event unconstitutionality of this provision *914 would not have the effect of depriving us of jurisdiction; it would simply entitle the Supreme Court to disregard this limitation if its appellate jurisdiction were invoked.
II. COLLATERAL ESTOPPEL.
We deal here with two issues in the law of judgments which Congress could hardly have expected to arise.
A. The effect upon this court of the decision of the three-judge court in the Connecticut General case.
Several opponents of the Act contend that the decision of the three-judge court in the Connecticut General case has preclusive effect upon this court with respect to the three issues there decided and other points on which the court necessarily ruled in reaching those conclusions. The argument runs as follows: Collateral estoppel normally applies to issues of law as well as to issues of fact. ALI, Restatement of Judgments 2d ง 68 (Tent.Draft No. 1, March 28, 1973). But see Vestal, Res Judicata/Preclusion 250 (1969). And "[t]he federal rule is that the pendency of an appeal does not suspend the operation of an otherwise final judgment as res judicata or collateral estoppel, unless the appeal removes the entire case to the appellate court and constitutes a proceeding de novo," 1B Moore, Federal Practice ง 0.416 [3] at 2252 (1974), citing many cases; ALI, Restatement of Judgments 2d ง 41f at 5-6 (Tent.Draft No. 1, March 28, 1973), although, of course, the matter may be reopened if there is a reversal. The conclusions of the three-judge court allegedly thus preclude relitigation in the Penn Central and Penn Central secondary debtor cases by USRA, the United States, the Interstate Commerce Commission, and the Penn Central trustees, each of whom was a party to the Connecticut General case, of issues there decided. Furthermore, under the rationale of Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313 , 91 S.Ct. 1434 , 28 L.Ed.2d 788 (1971), these parties would also be precluded from relitigating those issues in any other case.
We believe it would be wrong for this court to refuse to consider relevant issues of law simply because they were also decided by the Connecticut General court. There are many parties โ€” labor organizations and public bodies โ€” supporting the validity of the Act who were not parties to that case, and we perceive no basis for use of collateral estoppel against them. See Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, supra, 402 U.S. at 329 , 91 S.Ct. 1434 . Moreover, Congress envisioned a special role for this court which, in contrast to the Connecticut General court, can look at all the proceedings rather than only at one, and has available more ample factual records. We do not think Congress intended that in the cases which it put before us, raising issues of such major public importance, our review of the decisions of the district courts under the second sentence of ง 207(b) should be trammeled by the decision of another court, although we, of course, treat its ruling with respect. Compare Denver Build. & Constr. Trades Council v. NLRB, 87 U.S.App.D.C. 293 , 186 F.2d 326, 330-32 (1950), rev'd on other grounds, 341 U.S. 675 , 71 S.Ct. 943 , 95 L.Ed. 1284 (1951).
B. The effect of our decision on Supreme Court review of the Connecticut General case.
We have already referred to the fear, expressed by the New Haven trustee, that our judgment, which the final sentence of ง 207(b) expressly makes unreviewable, [27] might preclude a contrary *915 ruling by the Supreme Court on the appeal in the Connecticut General case. We feel certain that it will not. Any decision by this court is essentially interlocutory โ€” either allowing reorganization to proceed under the Act or requiring further action in the proceedings under ง 77. Although finality in the sense of 28 U.S.C. ง 1291 is not always required for issue preclusion, see Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80 , 87-90 (2d Cir. 1961), cert. denied, 368 U.S. 986 , 82 S. Ct. 601 , 7 L.Ed.2d 524 (1962); Zdanok v. Glidden Co., 327 F.2d 944, 955 (2d Cir.), cert. denied, 377 U.S. 934 , 84 S.Ct. 1338 , 12 L.Ed.2d 298 (1964); ALI Restatement of Judgments 2d, ง 41g, at 6-7, the circumstances here would dictate strongly against reliance on that principle so as to preclude decision on the issues in Connecticut General by the highest court in the land. As we have recently seen, great cases often demand departures from procedural rules which serve a useful purpose in the ordinary run of litigation but would lead to an unjust result in the case at hand. United States v. Nixon, 418 U.S. 683 , 94 S. Ct. 3090 , 41 L.Ed.2d 1039 (1974) (refusing to apply general rule that the denial of a motion to quash a subpoena is not appealable unless the person subpoenaed subjects himself to contempt). Similarly, while the rule that there can be no preclusion where "[t]he party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment by an appellate court in the initial action . . . .", ALI, Restatement of Judgments 2d, supra, ง 68.1(a), does not generally require a second appellate review, the issues here are of such importance that the inability to secure Supreme Court review of our decision should prevent its having preclusive effect on that Court. While the provision of ง 207(b) requiring us to render our decision within 80 days after appeals have been taken renders it infeasible for us to stay these proceedings pending a Supreme Court decision, as suggested by some of the parties and in the amicus brief of the New York State Department of Transportation, we shall mold our judgment so that we can reflect any changes appropriate in light of the Court's determination. We also state, for whatever bearing it may have, that the last thing we have in mind is to impair in any way the Court's freedom of action in the Connecticut General appeal.
III. THE REQUIREMENT OF UNIFORMITY
Article I, ง 8, Clause 4 of the Constitution empowers the Congress
To establish a uniform Rule of Naturalization, and uniform laws on the subject of Bankruptcies throughout the United States:
The purpose behind the grant of the bankruptcy and naturalization powers was to enable the new central government to eradicate the opportunities for fraud and forum-shopping engendered by varying state insolvency and naturalization laws, see The Federalist No. 42, at 308 (Law ed. 1961); Story, Commentaries on the Constitution, ง 1109 (1833). It was thus rather natural for the framers to suggest that an important advantage of federal supersession would lie in uniformity. While the primary reason for use of this adjective was very likely promotional rather than normative, we agree that in giving the bankruptcy power to Congress the framers intended to prevent its use in a manner that would in some degree continue the evils it was meant to end. That, however, is a long way from construing the adjective so as to hobble Congress by forcing it into nationwide enactments to deal with conditions calling for remedy only in certain regions. Such appears to be the clear intimation of *916 Wright v. Vinton Branch of Mountain Trust Bank, 300 U.S. 440 , 463 n. 7, 57 S.Ct. 556 , 81 L.Ed. 736 (1937), upholding a provision in the amended Frazier-Lemke Act permitting bankruptcy courts to determine whether the Act should continue to apply in particular localities. See also Hanover Nat'l Bank v. Moyses, 186 U.S. 181, 189-190 , 22 S.Ct. 857 , 46 L.Ed. 1113 (1902).
However, we are not required to rest our decision on such considerations. The uniformity required by Article 1, ง 8, Clause 4, is geographical, not temporal. Cf. Hanover Nat'l Bank v. Moyses, supra . If the Act had been written to apply only to railroads that were in proceedings for reorganization under ง 77 on the date of its enactment, objection on the ground of lack of uniformity would not have been even arguable. While the Act does not say in ipsissimis verbis that it applies only to such railroads, ง 207(b) and the elaborate timetable provided in the Act make plain that such was the intent of Congress. Every such railroad was within the region defined in ง 102(13) of the Act, with the single exception of the Tennessee Central Railroad Company; this small railroad has not operated since August 31, 1968, substantially all of its lines have been sold to other railroads, and the only unresolved questions concern the distribution of certain funds still retained by the railroad. See In re Tennessee Central Ry., 304 F.Supp. 789 (M.D.Tenn.1969). Clearly the Tennessee Central is not a candidate for reorganization under the Act. Even if it were, the uniformity clause would not be offended by a statute dealing only with railroads in ง 77 proceedings at the time of its enactment whose rail lines and other properties were then in operation. Yet such a statute would have had precisely the same inclusions and exclusions as the Act. The only provision in the Act that would have required change if the statute had been drafted in either of the ways we have suggested is ง 206(c)(1)(B), providing that an offer of rail properties for sale may be made only "to a profitable railroad operating in the region . . . ." But if Congress had worded the statute in either of the forms discussed, the commerce power would have permitted it, despite the uniformity clause, to limit sales to railroads whose operations were in the general geographical area served by the seller, in order to minimize the disruption of competitive balance elsewhere. Since what Congress did was not in violation of the Constitution, we decline to hold its action to have constituted a breach of the uniformity clause simply because it used words readily intelligible to its members and the public rather than circumlocutions that would have had exactly the same effect.
IV. FAIR AND EQUITABLE PROCESS โ€” GENERAL CONSIDERATIONS
The task set for us by Congress is to review the decisions of the reorganization courts that the Act does not or, as held in the Reading and Ann Arbor cases, does "provide a process which would be fair and equitable to the estate of the railroad in reorganization . . . ." [28]
A few conclusions emerge rather clearly and rapidly from the statutory text. We are free, indeed bound, to look down the road, without the same concern for considerations of prematurity or ripeness that would be material in other contexts. If the process in its present or future operation is unconstitutional, *917 we must, of course, condemn it unless the unconstitutional provision can be properly excised under the separability clause, ง 604. [29] Beyond this, however, a process not condemned by the Constitution still may not be "fair and equitable."
At this point agreement ceases. Some parties have suggested that courts must look at the process without regard to the facts. We do not believe Congress intended this; [30] in any event we find such a feat beyond our capacities. The parties also differ over how our telescope should be tilted. The Government parties say that, since Congress presumably did not intend to do anything unfair or inequitable, Brief of Appellants at 45-50, In re Penn Central Transp. Co., No. 74-8 (joint brief for Nos. 74-8, 74-12, 74-11, 74-6, 74-10) (hereinafter cited as Appellants' Joint Brief), we should sustain the Act notwithstanding any doubts about the ultimate viability of Conrail. Id. at 62 n. 105, 76. Others, especially the investors, say that, if there is any significant possibility that the Act might operate so as to deprive them of legal rights, we must condemn it since, as they also argue, there will be no later opportunity for us or anyone else to do this within the Act's framework. Joint Brief of Certain Appellees at 85-91, In re Penn Central Transp. Co., No. 74-8 (hereinafter cited as Appellees' Joint Brief).
The correct view must lie between these extremes. Congress cannot be held to a standard of perfection which few institutional arrangements could pass. Indeed, there is a certain incongruity between the high demands which the investors make of the Act and the unhappy position they, or in any event most of them, occupied when it was enacted. The idea that billions of dollars of liquidation proceeds of these bankrupt railroads are lurking just around the corner is unrealistic in the last degree. On the other hand, it can hardly suffice that the Act might provide fair treatment under optimum conditions which are very unlikely to occur. This is true even on our view with respect to the ultimate applicability of the Tucker Act. If, as the investors assert, the outcome of proceedings under the Regional Rail Reorganization Act were certain to be that, after much further "erosion," they would be handed a package of essentially worthless Conrail securities and then have to sue in the Court of Claims, it would scarcely be fair and equitable, even though it might be constitutional, to make them wait many years for their due. We therefore think it necessary and desirable to discuss the main complaints of the opponents on their merits and not rest entirely on our view of the applicability of the Tucker Act.
One minor complaint which may be dismissed here and now is the *918 attack on the following provision of ง 207(b), see note 1 supra :
Because of the strong public interest in the continuance of rail transportation in the region pursuant to a system plan devised under the provisions of this Act, each such court shall order that the reorganization be proceeded with pursuant to this Act unless it (1) has found that the railroad is reorganizable on an income basis within a reasonable time under section 77 of the Bankruptcy Act (11 U.S.C. 205) and that the public interest would be better served by such a reorganization than by a reorganization under this Act, or (2) finds that this Act does not provide a process which would be fair and equitable to the estate of the railroad in reorganization. . . .
Some of the opponents complain that the language in this provision, combined with the difficulties of obtaining or developing certain facts about the ultimate shape of Conrail, the mix of consideration, or the potential profitability of railroads in reorganization, renders the Act "unfair, inequitable and unconstitutional." Brief of Secondary Debtor Indenture Trustees at 19, In re United N. J. R. R. &. C. Co. and Other Secondary Debtors of Penn Cent. Transp. Co., No. 74-12. See Appellees' Joint Brief at 114. While this provision creates a presumption in favor of reorganization under the Act, as Judge Fullam correctly recognized below, In re Penn Cent. Transp. Co., 382 F.Supp. 856, 862 , supra, mem. op. we fail to see why it is unconstitutional, or unfair and inequitable, for Congress to declare a preference for one mode of reorganization rather than another and to place the burden of persuasion on those who challenge its judgment. This comes nowhere near the "conclusive presumption," which the Supreme Court has recently condemned as violative of the Due Process Clause. See Stanley v. Illinois, 405 U.S. 645 , 92 S.Ct. 1208 , 31 L.Ed.2d 551 (1972); Vlandis v. Kline, 412 U.S. 441, 446, 452 , 93 S.Ct. 2230 , 37 L.Ed.2d 63 (1973); Cleveland Bd. of Educ. v. LaFluer, 414 U.S. 632 , 94 S.Ct. 791 , 39 L.Ed.2d 52 (1974).
V. EROSION OF INVESTORS' RIGHTS
A major criticism by opponents of the Act is that, by forcing continued operation at allegedly hopeless losses until the conveyance to Conrail or other carriers of the rail properties included within the final system plan without provision for compensation of those losses, it contravenes the principles laid down in a line of cases beginning with Brooks-Scanlon Co. v. Railroad Comm'n, 251 U.S. 396 , 40 S.Ct. 183 , 64 L.Ed. 323 (1920), and including Bullock v. Railroad Comm'n, 254 U.S. 513 , 41 S.Ct. 193 , 65 L.Ed. 380 (1921), and Railroad Comm'n v. Eastern Texas R. R., 264 U. S. 79, 84 , 44 S.Ct. 247 , 68 L.Ed. 569 (1924). The gist of these cases was compressed in two statements of Mr. Justice Holmes in Brooks-Scanlon, 251 U.S. at 399 , 40 S.Ct. at 184 :
. . . A carrier cannot be compelled to carry on even a branch of business at a loss, much less the whole business of carriage . . . . If the plaintiff be taken to have granted to the public an interest in the use of the railroad, it may withdraw its grant by discontinuing the use when that use can be kept up only at a loss.
Although the continued vitality of these decisions was challenged in the New Haven Inclusion Cases , the lower courts rejected the attack, see New York, N. H. &. H. R. R. First Mortgage 4% Bondholders' Committee v. United States, 289 F.Supp. 418, 440-441 (S.D.N.Y.1968); In re New York, N. H. & H. R. R., 304 F.Supp. 793, 802-804 (D.Conn.1969), modified and aff'd sub nom. New Haven Inclusion Cases, 399 U.S. 392 , 90 S.Ct. 2054 , 26 L.Ed.2d 691 (1970); New York, N. H. & H. R. R. First Mortgage 4% Bondholders' Committee v. United States, 305 F.Supp. 1049, 1055 (S.D.N. Y.1969), vacated on other grounds sub nom. New Haven Inclusion Cases, 399 U.S. 392 , 90 S.Ct. 2054 , 26 L.Ed.2d 691 *919 (1970), and the principle has been recognized in connection with the reorganization of the Penn Central. In re Penn Cent. Transp. Co., 494 F.2d 270, 278-283 (3 Cir.), petition for cert. filed, 42 U.S. L.W. 3633 (U.S. May 8, 1974) (No. 73-1672). While we in no way disagree with the Brooks-Scanlon principle, we think the advocates of the erosion argument, which constituted the principal ground for the Connecticut General decision, have failed to analyze the issue with sufficient precision.
Although the fundamental principle of Brooks-Scanlon remains unimpaired, the right to withdraw the grant has been procedurally qualified in two ways. [31] One is that the reorganization court must be allowed a reasonable time to determine whether management can be improved, the property can be restructured so as to restore its earning power, or a disposition more consistent with the public interest than liquidation can be found. [32] Under the rule of Continental Illinois Nat'l Bank & Trust Co. v. Chicago, R. I. & P. Ry., 294 U.S. 648 , 55 S.Ct. 595 , 79 L.Ed. 1110 (1935), where creditors' remedies, the exercise of which might seriously impair formulation of an effective plan of reorganization, were held in abeyance during a period in which the value of the collateral could decline, the estate of a railroad may be made to suffer interim losses for a reasonable period during which a feasible plan of reorganization may be developed. The key finding prerequisite to such postponement of creditors' remedies is the likelihood of successful reorganization, variously described in analogous contexts as "probably feasible" and highly likely. Cf. Central R. R. Co. of N. J. v. Manufacturers Hanover Trust Co., 421 F.2d 604 , 606, 608 (3d Cir. 1974); In re Third Avenue Transit Corp. v. Lehman, 198 F.2d 703, 706 (2d Cir. 1952); In re Penn Cent. Transp. Co., supra, 494 F.2d at 276 . Opponents of the Act, claiming that Conrail has no prospects of viability and that there are no other means for adequately protecting claimants' rights, conclude that the Act necessarily thereby provides a process which is not fair and equitable to the bankrupt estates. If we were convinced that they were correct on the viability question and if no other procedural consideration intervened, we might be inclined to agree. As we note in the next part, however, the evidence on Conrail's prospects is not so wholly negative as these opponents suggest. There is in any event another and still more pertinent procedural consideration.
This is that liquidation cannot commence until public bodies, acting under statutory authority, have had a reasonable opportunity to consider and act upon the proposed abandonment, as ง 77( o ) prescribes with respect to the ICC. This is true even when the Constitution requires that a certificate of abandonment must ultimately issue, since such proceedings give other parties, notably public authorities, a final opportunity to come up with plans that may prevent serious injury to the public interest. Such is the teaching of Palmer *920 v. Massachusetts, 308 U.S. 79, 88 , 60 S.Ct. 34 , 84 L.Ed. 93 (1939) ("[T]he power of the district courts to permit abandonments is specifically conditioned on authorization by the Commission"); New York, N. H. & H. R. R. First Mortgage 4% Bondholders Committee v. United States, supra, 305 F.Supp. at 1055 (while railroads with no reasonable hope of future earnings had a constitutional right to cease operations and liquidate, it could not do so until ICC issued abandonment certificate); and finally and most important, the New Haven Inclusion Cases, supra, 399 U.S. at 461 , 90 S.Ct. 2054 . Such administrative review "assures that an agency with substantial expertise . . . will provide that the appropriate amalgam of public concerns for rail transport and private rights of property is achieved." In re Central R. R. Co. of N. J., 485 F. 2d 208, 215 (3d Cir. 1973) (en banc). It follows that the Act does not unconstitutionally erode the rights of the investors except as it may impair the power of the reorganization court, on a proper showing, to direct the trustee to apply for the approvals needed for a cessation of operations or the power of an administrative agency to grant such approval. [33]
The opponents contend that the Act does contain a provision of the latter sort, which makes futile any attempt to move the reorganization courts to authorize discontinuance or abandonment applications. The provision is ง 304(f), which reads as follows:
Interim Abandonment. โ€” After the date of enactment of this Act, no railroad in reorganization may discontinue service or abandon any line of railroad other than in accordance with the provisions of this Act, unless it is authorized to do so by the Association and unless no affected State or local or regional transportation authority reasonably opposes such action, notwithstanding any provision of any other Federal law, the constitution or law of any State, or decision or order of, or the pendency of any proceeding before any Federal or State court, agency, or authority.
But for the second "unless" clause, this provision would simply substitute USRA for the ICC as the federal agency authorized to permit abandonments or discontinuance of service under งง 1(18) and 13a of the Interstate Commerce Act. [34] The Government parties claim that this is precisely the effect and that ง 304(f) will facilitate rather than impede abandonments and discontinuances since it substitutes informal action for the evidentiary hearings required by ง 1(18) and, to some extent, by ง 13a. This is standing the section on its head. While we do read ง 304(f) as eliminating any need for approval by the ICC or state agencies and thus facilitating interim abandonment or discontinuance to *921 that extent, see note 34 supra, the standard to be applied by USRA is very strict. Instead of determining whether "the present or future public convenience and necessity permit of such abandonment," ง 1(18), or applying the similar standards of ง 13a (discontinuance of service), USRA may not permit interim abandonment or discontinuance if any affected state or local or regional transportation authority "reasonably opposes such action." The test is not whether the opposition is sound but whether there is a reasonable basis for it. [35] The rather strict limitation on interim abandonments or discontinuances contained in ง 304(f) is a complement of the provision that abandonments and discontinuances of property and service not contained in the final system plan may take effect "notwithstanding any provision of the Interstate Commerce Act (49 U.S.C. 1, et seq.) or the constitution or law of any State or the decision of any court or administrative agency of the United States or any State." ง 304(c). Opportunity to speak against such abandonments and discontinuances is confined to provisions in the Act for comments to USRA on the preliminary system plan, ง 207(a)(1), for public hearings to be held thereafter by the Rail Services Planning Office, ง 207(a)(2), and for Congressional review of the final system plan, ง 208(a), during which local interests presumably will be aired. In order to avoid large inroads on the time of USRA as a consequence of abandonment applications in what was conceived as a rather short interim period and especially to prevent the premature arousing of local opposition, [36] Congress confined interim abandonments or discontinuances to those which were not opposed or concerning which opposition would be unreasonable. [37]
On its face such a change in the standards for abandonment or discontinuance for over a year might indeed seem serious. [38] But the issue must be viewed in a practical frame, namely, by comparing the prospects afforded by ง 304(f) with those that would have prevailed in its absence. An affidavit filed with us by an attorney for the ICC states that for the year ending June 30, 1973, the average time for handling abandonment applications where an oral hearing was held was 15 months from the date of filing and 11 months from the date when the Commission designated the case for hearing on proof that required local notice, 49 C.F.R. ง 1121.5, had been given. [39] *922 Moreover, when Congress passed the Act, the Commission had placed a freeze on all abandonment applications because of the injunction issued in Harlem Valley Transp. Ass'n v. Stafford, 360 F. Supp. 1057 (S.D.N.Y.1973), subsequently affirmed, 500 F.2d 328 (2d Cir. 1974), requiring the ICC staff to prepare a NEPA impact statement, 42 U.S. C. ง 4332(2)(C), prior to the hearing. Although we are advised that the moratorium has now been lifted, the Commission had a backlog of 325 abandonment applications on July 30, 1974, in which NEPA impact statements must be prepared prior to hearing. Penn Central alone had 141 applications pending Commission action. The Commission, we were told, has augmented its staff with environmental experts and formulated new procedures to satisfy Harlem Valley, but the implementation of the new procedures will hardly be without friction. The log jam that would be created by a flood of applications for large scale or total abandonments by the carriers here in question boggles the mind. A statement of the environmental consequences of abandonment of large parts of the Penn Central alone would doubtless rival that for the construction of the Alaska Pipeline, which spread over 6 volumes and cost $9 million to prepare. Wilderness Society v. Morton, 156 U.S. App.D.C. 121, 479 F.2d 842, 846-847 (D.C. Cir.), cert. denied, 411 U.S. 917 , 93 S.Ct. 1550 , 36 L.Ed.2d 309 (1973). And, unlike the Alaska Pipeline statement, such a statement in a Penn Central abandonment case would become a subject for cross-examination and rebuttal in an evidentiary hearing. [40] See, e. g., Pennsylvania v. United States, 361 F.Supp. 208, 212 (M.D.Pa.1973). We thus believe that even if abandonment applications had been authorized by the reorganization courts and filed early in 1974, the chance of favorable action by the Commission on any large-scale abandonments within 620 days would have been exceedingly poor. Such force as exists in the erosion argument thus rests primarily on the risk that, due to administrative delays, see notes 38 supra and 73 infra, or to Congressional disapproval of the final system plan, ง 208(a), and the theoretically possible infinite regression provided by ง 208(b), the period prior to conveyance to Conrail might prove to be much longer.
For such merit as this argument may have, a ready cure would be to hold ง 304(f) unconstitutional insofar as it denies the right of access to the ICC and state regulatory agencies, or, if that were not regarded as sufficient, to rule, in the language of the order in Connecticut General, that ง 304(f) may not be applied "with respect to any abandonment, cessation or reduction of service which has been or may hereafter be determined by a court of competent jurisdiction to be necessary for the preservation of rights guaranteed by the United States Constitution." Indeed, that gloss has already been superimposed by the Connecticut General order and will remain in effect unless erased by the Supreme Court. We are thus in a situation where there are only two possible outcomes, and authoritative decision between these will likely be made before the year-end. [41] One is that ง 304(f) will be ruled not to be unconstitutional; *923 the other is that the Court will enter whatever order is needed to prevent that subsection's operating in an unconstitutional manner. [42] This would seem to mean that ง 304(f) cannot pose any problem from the date of the Court's decision and, for the practical reasons already mentioned, we do not believe it will have injured any of the estates in the interval between January 2, 1974, and that date.
We believe, however, that further observations on the erosion problem will be helpful since excision or modification of ง 304(f) is not a particularly attractive solution. Much of the discussion by the opponents and the reorganization courts that have condemned the Act on this ground concerns losses and erosion prior to its enactment. This appears to be relevant only in two ways. The first is evidentiary, as providing some basis for predicting future erosion. The other is that the longer erosion has been in process and the greater it has been in amount relative to the value of the estate, the less are the limits that can be tolerated for the future. Opponents of the Act thus did not satisfy their burden merely by showing past losses; they were required to show (1) that there would be significant erosion while the processes of the Act were at work, and (2) that the Act provided no adequate means of compensation.
Since, as indicated above, operation of railroads undergoing ง 77 reorganization at an actual loss is a relatively recent phenomenon, it is not surprising that the courts have had little occasion to define just what items constitute unconstitutional "erosion".
There is no disagreement that at least four items qualify for inclusion โ€” the issuance of trustees' certificates with liens superior to those of mortgage bonds, accumulation of property taxes which similarly prime such liens, accumulation of administration expenses which are entitled to priority over secured creditors, and use of cash or property held as security for liens to pay operating expenses. [43] We have not been pointed to convincing evidence in the Penn Central record that any of these developments is likely in the 620 days prior to conveyance on the optimum schedule provided in the Act, in light of the grants for emergency assistance authorized by ง 213(a), the provisions of ง 215, and the 10% freight rate increase, effective June 5, 1974, authorized in Nationwide Increase of Ten Percent in Freight Rates and Charges, 1974 [Ex parte No. 305], 39 Fed.Reg. 20256 (1974), earmarked for capital improvements and deferred maintenance except as needed for increased material and supply costs other than fuel. [44] An affidavit *924 of Ernest Varalli, employed by the Penn Central Trustees as Assistant Vice President โ€” Budget Planning, submitted at the 120-day hearing, prior to the Ex parte 305 increases, estimated that, through 1975, an additional $118 million in taxes on the Penn Central might accrue. However, this accrual would be more than offset by an increase in freight operating revenues. The income statement submitted by the Penn Central Trustees to the reorganization court for the period January 1 to July 31 shows a substantial improvement for 1974 over 1973, which itself showed a reduction in the annual deficit of net railway operating income from the $236.5 million experienced in 1970 to $92.7 million. Freight railway operating revenues increased by almost 13.5%. Indeed for the month of July 1974, after taking account of tax accruals and equipment hire, there was positive net railway operating income of more than $2.2 million. [45] There was also testimony before Judge Fullam as to the effect of Ex parte 305 on revenues through the first quarter of 1975. Some $88 million in additional revenues would be available through the end of 1974, an additional $42 million during the first quarter of 1975, and presumably at least an equivalent amount during the second. Barring an economic catastrophe, there is thus little likelihood that during 1975 Penn Central will experience any of the four items of erosion we have recognized. [46]
When we go beyond these four items, any semblance of agreement as to what constitutes impermissible erosion ends. The Government parties object strenuously to what they term the income statement method of determining erosion; the investors defend this, although contending that the excess of the results produced by this method over others is not significant. Resolution of the controversy would require, among other things, a determination of the proper method for valuation of the properties to be conveyed to Conrail or other railroads and an estimate of the likely disposition of those not so conveyed. If liquidation value is the proper test, we confront the fact that of the total value of roughly $3.5 billion (excluding the so-called Park Avenue properties in New York City) as of May 30, 1973, found in a report of Day & Zimmerman commissioned by the Penn Central Trustees, [47] over $2.6 billion represented land values, which would not be decreased by continued loss operations except for the items previously mentioned. The salvage value of other items will decrease as a result of continued use but not necessarily as much as the depreciation charges. Indeed, the scrap value of some assets, e. g., steel scrap, have increased in recent years considerably more than the overall inflation rate. Moreover, with the beneficial effects of rate increases going beyond cost inflation and of applying such increases and ง 215 funds to catch-up *925 maintenance, which are discussed in Part VI, it would not be unreasonable to expect, subject to the important reservations in note 44 supra, that Penn Central could earn, or nearly earn, its depreciation charges in 1975. [48]
The investor interests and the Penn Central Trustees, in addition to challenging much of what has just been said, [49] complain that even income statement erosion does not tell the whole story. Net railway operating income does not reflect any charges for the use of capital (save those in equipment leases), such as interest on funded debt and leased line rentals. Bondholders, they assert, are hurt by long continued refusal to pay for the use of their capital as well as by a decrease in the value of the assets available for repayment; yet no one predicts that Penn Central can resume full payment of interest on debt or of leased line rentals prior to the conveyance to Conrail. Agreeing that deprivation of a return on capital obligations entitled to consideration in a reorganization is a matter of serious concern, we think it can be tolerated somewhat longer than an actual whittling away of asset values by continued operation, so long as there is a reasonable prospect of a successful reorganization.
The upshot of our analysis thus is that, aside from the legal and practical considerations at the beginning of this part, the factual showing of likely unconstitutional erosion subsequent to January 2, 1974, in the Penn Central case was not so strong as would lead us to condemn the Act on that score, even apart from the Tucker Act remedy, if there were fair assurance that the final system plan would be consummated approximately as scheduled and that the investors would receive adequate consideration for properties sold to Conrail. The difficulty is that such assurance does not exist. [50]
The Government parties answer that, apart from a remedy under the Tucker Act or the possible excision or reformulation of ง 304(f), this court could compensate for any unconstitutional erosion in the final system plan, either by fixing a valuation date prior to the date of conveyance or by a specific award, ง 303(c)(2)(B), or a deficiency judgment against Conrail under ง 303(c)(2)(C). The earlier valuation date method would hardly be satisfactory even if permissible, [51] since this would not cure erosion with respect to rail properties that were not conveyed. It would be permissible for the final system plan to *926 provide or for us to direct that compensation for erosion should be made in the case of any railroad some of whose properties are conveyed. However, if, as the opponents urge, the consideration now authorized is inadequate as compensation for the properties themselves, enlarging the amount of claims that may be made against it would be of no avail.
In summary, we think the erosion claims are largely met by the points that, to such extent, if any, as ง 304(f) may constitute a problem, this can be eliminated by the Supreme Court before any legally cognizable damage has been done. We think also that, at least for the Penn Central and the Reading, see note 50, the erosion likely during the interim period has been considerably exaggerated, assuming that the conveyance occurs approximately as scheduled. However, reasonably entertained doubts that USRA will be able to meet its prescribed schedule, see note 38 supra, or that Congress may not accept USRA's initial effort would require reformulation or excision of ง 304(f) (as imposed, for example, by the Connecticut General court) unless a Tucker Act remedy exists. Given the availability of a Tucker Act remedy, no such action would be necessary. Absent such remedy, on the other hand, we think that the Act would be unconstitutional in any event, for reasons now to be discussed.
VI. THE COMPELLED CONVEYANCE AND THE ADEQUACY OF THE CONSIDERATION
In our view the most serious challenge to the fairness of the Act is this: Section 303 directs that within 10 days after the deposit of the securities and other compensation to be paid under the final system plan, which deposit is to be made within 10 days after delivery to us of a certified copy of the plan, this court shall "order the trustee or trustees of each railroad in reorganization in the region to convey forthwith to the Corporation and the respective profitable railroads operating in the region, all right, title, and interest in the rail properties of such railroad in reorganization and shall itself order the conveyance of all right, title, and interest in the rail properties of any railroad leased, operated, or controlled by such railroad in reorganization that are to be conveyed to them under the final system plan as certified to such court under section 209(d) of this Act." ง 303(b)(1). The conveyances are to be "free and clear of any liens or encumbrances," subject to various qualifications set forth in ง 303(b)(2), (3) and (4), and "shall not be restrained or enjoined by any court." It is only after making these orders that this court is to engage in the process described in ง 303(c). [52] We were horrified to learn that one of the Act's principal advocates had estimated this process as requiring from 5 to 10 years. 119 Cong.Rec. H 9742 (daily ed. Nov. 8, 1973). While we do not mean it to take that long, it will necessarily be time consuming. [53]
At argument counsel for USRA referred to this provision for enabling Conrail to get off to a reasonably quick start as "the genius of the Act." Certainly it is the only mechanism, short of condemnation, that would permit Conrail to begin operation within any reasonable time. Reorganizations under ง 77, with the seemingly interminable proceedings before the Commission and the battledore-and-shuttlecock between it and the reorganization courts, have dragged on for years. [54] It was for this reason that *927 Congress rejected the suggestion of the Secretary of Transportation, Letter from Claude S. Brinegar to Hon. Warren G. Magnuson, Nov. 14, 1973, in Sen. Rep.No.93-601, 93rd Cong., 1st Sess. 133 (1973), U.S.Code Cong. & Admin.News 1973, pp. 3242, 3294 [hereinafter cited as Senate Report], that this court should pass on the sufficiency of the consideration before rather than after the conveyances. See Senate Report at 15; House Report at 54-55 ("It is the intent of the Committee [on Interstate and Foreign Commerce] that the rail properties designated in the Final System Plan be conveyed first, and that any and all litigation concerning the amount or type of payment or consideration take place thereafter. The timely implementation of the Final System Plan cannot be obstructed by controversy over the payment for the properties.")
What the supporters find to be genius, the opponents consider to be evil genius. They assert that, except for eminent domain, there is no precedent for a regime of conveying first and valuing later. And they regard the exception as furnishing no support for the Act since it rests on the assurance that government will provide "a full and perfect equivalent of the property taken," Monongahela Navigation Co. v. United States, 148 U.S. 312, 326 , 13 S.Ct. 622, 626 , 37 L.Ed. 463 (1893), which they say the Act does not. The Act thus fails as a bankruptcy statute because of the absence of judicial determination of fairness prior to the required exchange, as in the "cramdown" provision of ง 77(e) sustained in R. F. C. v. Denver & R. G. W. R. R., 328 U.S. 495 , 533, 66 S. Ct. 1282 , 90 L.Ed. 1400 (1946), and as an eminent domain statute because of the lack of assurance of full payment.
Although the argument is forceful, [55] we would not accept it if we were certain that this court had been given the means to rectify any unfairness inherent in the final system plan. Congress did not have to choose between the Scylla of outright condemnation and subsequent nationalization and the Charybdis of a collapse of rail transportation in the most heavily industrialized section of the country. [56] What was said with regard to the New Haven in the Penn-Central Merger and N & W Inclusion Cases, 389 U.S. 486, 510-511 , 88 S.Ct. 602, 614 , 19 L.Ed.2d 723 (1968), applies here with exponential force:
While the rights of the bondholders are entitled to respect, they do not command Procrustean measures. They certainly do not dictate that rail operations vital to the Nation be jettisoned despite the availability of a feasible alternative. The public interest in not merely a pawn to be sacrificed for the strategic purposes or protection of a class of security holders whose interests may or may not be served by the destructive move.
Congress evidently thought it had created the means to assure against any unfairness in the final system plan. It spoke in terms of "a constitutional minimum," ง 303(c)(1)(B), 303(c)(3), and apparently considered it had provided USRA or, failing that, this court with the means adequate to provide for the payment of this. Seemingly it reasoned somewhat as follows: Congress is entitled to insist on the continued operation of rail lines earning or capable of earning *928 a profit. [57] The very first goal of the final system plan is "the creation, through a process of reorganization, of a financially self-sustaining rail service system in the region." ง 206(a)(1). The owners of the hypothetically profitable properties conveyed to Conrail will receive all its securities plus up to $500 million in Government guaranteed obligations, [58] along with other benefits. They will thus retain all the earning power with which they parted, plus the added sweetener of having part of the consideration in Government guaranteed obligations. [59]
We think the reasoning, while understandable, was too simplistic. [60] The mere fact, if it be one, that Conrail might make some profit would not necessarily give its securities a value sufficient to render them fair compensation. [61] In order to be assured of fairness this court must be confident that it would either have knowledge at the time of conveyance that the securities and other benefits would equal the "constitutional minimum," something manifestly impossible since neither side of the equation could be accurately determined, [62] *929 or the power to summon whatever additional resources are needed. This proposition is reinforced by the question, discussed below, whether Conrail will be a profitable railroad at all.
Unhappily the options afforded us by ง 303(c)(2) do not fulfill the latter requirement. The first, ง 303(c)(2)(A), a reallocation of securities among the various railroads, while of possible value to some smaller lines, is meaningless with respect to Penn Central, which is bound in any event to receive the lion's share of the securities. [63] The second, a power to "order the Corporation to provide for the transfer to the railroad of other securities of the Corporation or obligations of the Association as designated in the final system plan in such nature and amount as would make the exchange or exchanges fair and equitable," has more usefulness but not enough. [64] What would be truly useful, power to increase the amount of obligations of the Association, is expressly conditioned, ง 210(b), at least if the final system plan had provided for the maximum of $500 million, on a joint resolution adopted by the Congress. Since an increase in the amount of common stock would add substantially nothing to its value, all that would be left for us would be to increase the amount of debt or to provide that more of this should be secured. While experience with railroad reorganization plans, under the Public Utility Holding Company Act, and in other contexts has demonstrated that an alteration in mix to provide a more attractive capital structure can add to total market value, [65] such alterations cannot be relied upon to cure any major deficiency. [66]
The final tool given us, ง 303(c)(2)(C), is seemingly a rather curious one, namely, to "enter a judgment against the Corporation" for the deficiency between the value of the securities *930 of Conrail, obligations of USRA, and other benefits and the fair value of the properties conveyed. [67] If this were unsatisfied, as it almost certainly would be if in any substantial amount unless Congress promptly stepped up with additional funds, see remarks of Rep. Shoup, 119 Cong.Rec. H9247 (daily ed. Nov. 8, 1973), the levy of execution would largely strip all value from everything but the USRA obligations and any secured debt that had been issued. In order to avoid the levy of execution, Conrail would probably seek reorganization under ง 77. Perhaps what Congress had in mind was that such a judgment would enable the bankrupt estates to get back what they had conveyed; it thereby assumed that the Act would be fair and equitable. [68] But since we would not be entering the judgment for some years, levy of execution, even if permitted to occur, would return the properties only after the accrual of new prior claims, the possible incurring of senior debt, and perhaps further erosion [69] while we might not go quite so far as Judge Fullman, who characterized the deficiency judgment as *931 "essentially circuitous," in his concurring opinion in Connecticut General Ins. Corp. v. U.S.R.A., supra, or as "relatively pointless," in his Penn Central decision here under review, we do agree that it fails to supply an adequate tool with which to cure any deficiency in the consideration.
Confronted with all this, the Government parties contend that if this court were convinced that the plan was fundamentally unfair, it could refuse to direct the conveyance provided for in ง 303(b). We agree that, absent a Tucker Act remedy, we would have power, indeed a duty, to take such a course, deriving not from the Act [70] but from the Constitution. But this does not cure the defect. Unlike ง 304(f), ง 303(b) cannot be excised under the separability clause, ง 604. Compare Hill v. Wallace, 259 U.S. 44, 70-72 , 42 S.Ct. 453 , 66 L.Ed. 822 (1922); Williams v. Standard Oil Co., 278 U.S. 235, 241-245 , 49 S.Ct. 115 , 73 L.Ed. 287 (1929); Railroad Retirement Board v. Alton R.R., supra, 295 U.S. at 361-362, 55 S.Ct. 758 . See also Carter v. Carter Coal Co., supra . As counsel for USRA rightly said, it is the very heart of the Act. If we should refuse to order the conveyance, no alternate procedure is available under the Act; USRA would have to return to Congress for possible new legislation. The situation would revert to that of 1973, with operations having been compelled for another two years and no solution in sight. Beyond all this there is the problem that, when we are obliged to act or not to act in compliance with ง 303(b), we shall have only the meagre and one-sided information furnished pursuant to ง 206(f), the outraged cries of investors, and the conflicting answers of the Government to assist us in our deliberations with respect to valuation problems of unprecedented complexity. We therefore decline to hold that an opportunity, which derives from the Constitution but which we would necessarily have to exercise in haste and without adequate information or opportunity for hearing and deliberation, [71] is sufficient to cure a defect which would otherwise require us to hold that the Act "does not provide a process which would be fair and equitable to the estate of the railroad in reorganization." Absent a showing that the Government guaranteed obligations, the securities of Conrail, and "other benefits" clearly would provide fair compensation, [72] we would thus be compelled *932 to affirm the five decisions so holding and reverse the two decisions holding the contrary but for our view that a remedy under the Tucker Act is not foreclosed.
As we will now develop, there was no such showing. To the contrary the investors showed Conrail's prospects to be sufficiently doubtful that, taking into account the limited nature of the powers of rectification which Congress has conferred upon us, we would not find the processes of the Act to be fair and equitable, absent a Tucker Act remedy. On the other hand, as we will also show, they did not demonstrate such a certainty of failure as to make it unfair and inequitable, as they contend, to compel them to resort to the processes of the Act if recourse to the Tucker Act remains open.
The investors in Penn Central mounted an elaborate case, hereafter summarized, to show that Conrail would be, as sharply put, "another Penn Central," with much talk of promise but little reality. Somewhat surprisingly the Government parties declined the gambit except to the extent of vigorous cross-examination. Their basic position is that, since no one can tell what form Conrail will take until the final system plan becomes effective, [73] it is inappropriate and premature to speculate on its viability and the courts should have faith that if USRA cannot formulate a plan that will create "a financially self-sustaining rail service system in the region," ง 206(a)(1), it will report its inability to Congress, which "could well . . . at that stage . . . right any apparent constitutional wrong, or . . . provide any additional resources determined necessary at that time to assure Conrail's viability."
While we do not need to decide this, the reorganization courts and this court perhaps could rely on such a presumption in the absence of contrary evidence, although the practical compulsion on USRA to bring forth a plan will be exceedingly *933 heavy. But when, as in the Penn Central proceeding, the opponents came forward with evidence that what would seem the most probable form of Conrail would be a dismal failure, the supporters could not rely on a mere presumption of Conrail's viability. [74]
While the opponents in Penn Central offered a quantity of evidence, it will be sufficient to discuss the presentation by Mr. John W. Ingraham, a vice president and senior credit officer of First National City Bank of New York (Citibank). Mr. Ingraham had been assigned since July 1, 1970, "to oversee recovery efforts on behalf of 48 lending banks and 5 participating banks in a $300 million Credit Agreement dated as of April 1, 1969 with Penn Central Transportation Company under which Citibank acts as Agent"; he had available and made use of various studies commissioned by the Penn Central trustees, the reports of those and other trustees to the reorganization courts, materials from the August-September, 1973, Penn Central hearing before the I.C.C., the 120-day hearings before the reorganization court for both Penn Central and the secondary debtors, and other material. [75]
Mr. Ingraham's study assumed a 15,000-mile system made up mainly of Penn Central but also comprising mileage of the other railroads here before us (excluding the L & H, a Class II railroad with 115 miles of operating trackage, about 0.5% of the total for these roads in 1973) โ€” a shrinkage of some 8,000 miles. [76] The analysis was made on the basis of January 1, 1974, constant dollars; Ingraham thought that estimates made on what seems the more realistic basis of continued inflation would yield even worse results. [77]
The nub of Ingraham's analysis was this: He assumed for the first year of Conrail's operation โ€” roughly 1976 โ€” freight revenues equivalent to those of the bankrupt roads increased by 10%. He estimated further increases over the base year of 20%, 30%, and 40%, respectively, for the third, sixth and ninth years of operations. He thus assumed a compound annual growth rate for freight volume over nine years of 3.8%, which he characterized as optimistic in view of the historical figure of 2.5%, but he apportioned a large part of the total 40% in growth to early years in order to provide Conrail more income in *934 years when it was most needed. These assumptions produced negative net railway operating income from freight service in each year unless Conrail was able to reduce its operating ratio (the ratio of operating expenses to operating revenues expressed as a percentage) below 75%. Even a 70% operating ratio, which Ingraham considered unattainable, produced net railway operating income from freight service of only $56, 62, 70 and 90 million in the four years for which he projected figures. Deductions of interest charges, including amounts ranging from $35 to $31 million for acquisition bonds at an assumed interest rate of 7% (but not for leased line rents), and for "catch-up" maintenance, and passenger service losses produced deficits even at a 70% operating ratio until the ninth year and even in that year the net income was only $51 million. The most vital schedule in the analysis was one showing that at a 75% (or greater) operating ratio and excluding certain items, e. g., passenger service losses (estimated at $55 million per annum), Conrail would have the cash required for cash expenditures only in its first year of operation, when it would have the benefit of an assumed $300 million working capital loan, and that cash deficits would rise in the third, sixth, and ninth years to $15, 160 and 186 million, respectively. Even at a 70% operating ratio the positive cash balance before the excluded items would be only $109 and $105 million in the first and third years of operation and would turn to negative figures of $31 and $51 million in the sixth and ninth. The adverse changes in the later years are the result of a number of factors, including amortization requirements on new equipment debt, on rehabilitation bonds, and on acquisition bonds (only partially counteracted by a reduction of principal payments on old equipment debt), exhaustion of the $300 million of borrowed working capital, the institution of a $125 million common stock dividend in the sixth year. [78]
We have no doubt that Mr. Ingraham made a thoughtful and conscientious analysis. On the other hand, like all predictions, his rested on assumptions and some of these may well have been too pessimistic.
The first main attack by the supporters of the Act is that he underestimated freight revenues. As stated, he estimated a 10% increase in freight revenues for 1976 over 1973; apparently this was on the basis of two years' growth in volume and changes in commodity mix. Most of this 10% increase, it is argued, has already become available as a result of the 10% rate increase which was granted in Ex parte 305, effective June 5, 1974, subsequent to the preparation of Ingraham's analysis for the Penn Central case. [79] The effect of the increase cannot be brushed aside, it is said, on the ground that Ingraham's revenue estimates were based on January 1, 1974, *935 dollars, for the roads had already received 1974 increases to compensate for inflation, 3% in Ex parte 299, 4% in Ex parte 303, and 3% as a fuel surcharge, and the bulk of the 10% of Ex parte 305 was intended not to counterbalance inflation, but to enable the roads to catch up with deferred maintenance. [80] If one combines an effective increase until Ex parte 305 expires on June 30, 1975 (absent Commission action to retain it), of 9.5% due to Ex parte 305, [81] the other freight rate increases granted in 1974, and the increase of 4.1% per annum as a result of freight volume increases, commodity mix shifts, and changes in unit revenues postulated in a study (in the Penn Central record) by Temple, Barker & Sloane, consultants to the trustees, 1976 freight revenues would be increased from Ingraham's $2,195 million to $2,594 million. [82] So much of this as was represented by rate increases rather than by traffic growth would translate itself automatically into a reduction of operating ratio if expenses were held constant โ€” an assumption consistent with the concept that increased expenses due to further inflation would be met by additional rate increases. To take a simple example, if a 10% rate increase could be translated into 9.5% added revenues, Penn Central's 1973 freight operating ratio of 80.3% would become 73.3% (80.3 ๗ 109.5 = 73.3). While this reduction would not be attained to the extent that the catch-up maintenance program required greater operating expenses, [83] that program would have other favorable effects which Ingraham allegedly did not adequately consider.
The other major attack is on the expense side. One of the most serious effects of the bankruptcies of the Penn Central and other railroads and the deferred maintenance both before and after bankruptcy has been the growth of net rents for equipment. This has been due to two different factors. The financial *936 plight of the roads has forced them to finance new purchases by leases rather than the traditional equipment trusts. This markedly decreases net railway operating income since all such rents are deducted as expenses even though a large portion represents an increase in capital; moreover, the total outlay is greater than the interest and amortization charges under equipment trust obligations. Even more important, the lack of an adequate number of serviceable owned freight cars, with consequent added dependence on the fleets of other roads and private owners, and the delay in handling such cars due to "slow orders" on many miles of track and other inefficiencies resulting from deferred maintenance have resulted in vastly increased per diem charges. In 1970 the Penn Central paid a total of $79,448,000 for net car hire expenses, but by 1973 that figure had grown by $43,189,000 to $122,637,000. Car lease rental expenses grew during the same period from $36,028,000 to $66,703,000. Moreover, in 1973 Penn Central had a net debit balance in its incentive per diem accounts of $10,944,000. Schedule 376 of Annual Reports Form A (1970), Form R-1 (1973). The magnitude of these factors is shown by the fact that in 1973 Penn Central's net rents for equipment constituted 14.8% of freight operating revenues as compared, e. g., with 2.5% for the Chesapeake & Ohio, 3.7% for the Norfolk & Western, 9.4% for the Seaboard Coast Line, 7.3% for the Southern, and 5.3% for the Louisville & Nashville. With the benefit of the Ex parte 305 increase insofar as it generates revenues for capital expenditures and ง 215 loans, [84] Penn Central and the other bankrupt railroads should be able to make substantial progress in decreasing net equipment rents before the conveyance to Conrail, and Conrail, with another $500 million of loans available solely for rehabilitation and modernization of rail properties conveyed, ง 210(b), should be able to do better still. Ingraham's estimates that Conrail would start in year 1 with a 14.3% ratio of net rents to freight revenues, and would be able to reduce this only to 12.9%, 11.5% and 10.3% in the third, sixth and ninth years of operation do not appear to be substantiated in the record and may well be too pessimistic. To the extent that rehabilitation can be carried on before the conveyance to Conrail, post-conveyance expenditures and the large borrowings postulated by Ingraham as needed for rehabilitation and new equipment rising to a net of $2,228 billion in year 9, with attendant requirements of $272 million for amortization and interest, would be reduced.
There are still other favorable factors that might make a 70% freight operating ratio, computed on Ingraham's basis, much more reasonable than he assumed. The 1973 freight operating ratio of the five roads was 80.9% and the expenses reflected in the ratio included elements of inflation thought by the ICC to justify 10% in the three rate increases granted in 1974 before Ex parte 305. The Wyer-Dick estimates of 1973, which are in the Penn Central record, forecast savings in operating expenses of the order of $300 million from a 15,000-mile Penn Central core system, without significant loss of revenue; this would imply a freight operating ratio of 64% before taking into account the effect of *937 catchup maintenance on expenses, which Ingraham handled as a separate item in the cash flow rather than as an expense entering into the operating ratio. As was acknowledged by Charles C. Shannon, President of the consulting firm, Wyer, Dick & Company, and witness for the investors, during cross-examination, there is a rule of thumb commonly used by the ICC that increased volume can be handled at a 50% marginal operating ratio. A prime objective of the Act is to produce operating economies by eliminating unprofitable and duplicating mileage; [85] we should not lightly assume that this will not be achieved. [86] Also noteworthy are the Act's provisions which should assure against passenger service losses and provide a return (whether by lease or sale) on Penn Central's substantial investment in the portion of the Boston-Washington corridor properties that are used by Amtrak for passenger service. [87]
Some idea of the effect of taking into account these and other factors is conveyed by the affidavits of two transportation experts, Gerald W. Fauth, Jr., and James S. Krull, submitted by appellees other than the Government in the Ann Arbor case to refute the conclusions in Mr. Ingraham's affidavit submitted to the Ann Arbor court by opponents. Using operating ratios ranging downward from 73% in year 1 (1976) to 69% in year 9 (1984), Mr. Fauth arrived at positive net railway operating income for Conrail in every year ranging upward from $139.6 million in 1976 to $1026.4 million in 1984, and net income after taxes ranging upward from $42.4 million in 1976 to $638.5 million in 1984. Excess of cash sources over uses would range upward from $141 million in 1976 to $696 million in 1984 โ€” after providing for dividends of $69 million in years 6 and 9 on an estimated $1,370 million of stock, an amount Mr. Fauth viewed as more realistic in light of valuation studies. See note 78 supra. Mr. Fauth's analysis accepted Mr. Ingraham's analytic framework in large part but, in disagreement with him, reflected the following factors: the availability of additional revenues as a consequence of Ex parte 305 and other rate increases for use in capital improvement programs and other purposes; a greater growth factor for freight volume; consequently higher railway operating revenues for year 1; substantially reduced net car hire and equipment lease rents to reflect the anticipated rehabilitation program and the industry average; and availability and use of cash in excess of current cash needs. Mr. Krull's analysis led him to conclusions as to the viability of Conrail generally in line with Mr. Fauth's.
Counsel for the investors in Penn Central objected to our considering the Fauth and Krull affidavits in the Ann Arbor because he had no opportunity to cross-examine. But we cannot close our eyes to material that has come to our attention in examining the records in all these cases. These proceedings, after all, are not mere private litigation; and it would be anomalous in the last degree for us to hold that Conrail was viable for purposes of the Ann Arbor case but not for that of the Penn Central. At the very least the Fauth and Krull affidavits can be taken as quantifying points scored in Ingraham's cross-examination and as showing that qualified experts can reasonably reach markedly different conclusions depending on their assumptions. If Fauth's estimate, or Krull's estimate based on a 70% operating ratio, should be realized, the value of the Conrail shares, under normal market conditions, along with the $500 million *938 of Government guaranteed bonds, could well equal the value of the properties conveyed on the basis of Day & Zimmermen's April 1973 $1.87 billion liquidation value estimate for a 15,000-mile Penn Central system [88] โ€” without consideration of the other benefits conferred by the Act.
We are not suggesting any certainty that such heartening results will be obtained, even though we have not yet mentioned such elements as the recovery of traffic lost to competing railroads or other modes of transportation as a result of the deficiencies in the track and equipment of the bankrupt roads; the elimination of such crazy-quilts of industrial trackage as that in Philadelphia, vividly described in the DOT report; [89] and others too numerous to mention. As heretofore suggested, see note 44 supra, much will depend on a quickened response to inflation by the Commission and on Conrail's ability to pass on increased rates without loss of traffic to competing modes of transportation which, although perhaps even more subject to inflationary pressures, may find it desirable not to increase some rates to the same degree. Obviously Conrail's management will have to be markedly different from Penn Central's prior to bankruptcy. Even more will depend on the general economic condition of the country. We have a deep sense of unreality in discussing projections of what Conrail will do in 1985 or even in 1976 when the prospects for 1975 are so uncertain and gloomy. As to this, we can say only what we did before โ€” that if an economic calamity should occur, the investors would be in no position to liquidate immediately and would surely resist computation of liquidation value on the basis of what they would urge to be spot depression prices.
The upshot is that the investors cast sufficient doubts on Conrail's prospects that it would be unfair and inequitable to remit them solely to the inadequate remedies provided in ง 303(c)(2). On the other hand, there is a sufficient possibility of the viability of Conrail that it is not unfair and inequitable to require them to await the processes of the Rail Reorganization Act if a remedy under the Tucker Act is ultimately available.
VII. AVAILABILITY OF A REMEDY UNDER THE TUCKER ACT
The alignment of the parties with respect to the availability of a remedy under the Tucker Act for any unconstitutional erosion or for inadequacy of compensation is rather different from what one would have expected. The *939 United States, which normally opposes with vigor the right to assert claims against the Government in any doubtful case, along with USRA and the Interstate Commerce Commission, stoutly contend that a supplemental remedy under the Tucker Act is available, [90] although they doubt that resort to it will be necessary. In contrast the investor groups who would benefit from such a remedy strongly contend that it does not exist. Only the Penn Central trustees take the positions seemingly in line with their interests, namely, that the Tucker Act remedy exists and that the Act would be unconstitutional without it. The three-judge court in the Connecticut General case held that the remedy was not available, and those reorganization courts which considered the issue reached the same conclusion, most relying directly on that holding without engaging in further extended analysis. Recognizing the point to be close, we disagree.
Our disagreement is rooted in a belief that the Connecticut General court may not have framed the issue properly. As said in Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 170 , 67 S.Ct. 237, 243 , 91 L.Ed. 162 (1946),
Putting the wrong questions is not likely to beget right answers even in law.
The Connecticut General court apparently viewed the availability of a Tucker Act remedy as depending on whether the "Congress intended that the financial obligations of the United States be limited to the express terms of the Act." Subsequently, Judge Fullam, a member of the Connecticut General court, put the issue in the 180-day decision in In re Penn Central Transportation Co., 382 F.Supp. 851 , supra, here under review, as being whether in adopting the Act "Congress had intended to permit recourse to a Tucker Act remedy in the event that implementation of the [Act] proved violative of constitutional rights . . .", apparently requiring an affirmative showing of such intent. If that were the true issue, we would agree that affirmative intent cannot be found. But, as hereafter developed, the true issue is whether there is sufficient proof that Congress intended to prevent such recourse. The Act being admittedly silent on the point, the issue becomes whether the scheme of the Act, supplemented by the legislative history, sufficiently evidences a Congressional intention to withdraw a remedy that would otherwise exist.
The Tucker Act, 28 U.S.C. ง 1491, confers jurisdiction on the Court of Claims:
[T]o render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.
If the United States eliminates or substantially impairs an owner's use of his property or requires him to convey it, there is a "taking," which gives rise to *940 a claim under the Constitution, whether or not the United States so intended. This is the teaching of United States v. Causby, 328 U.S. 256 , 66 S.Ct. 1062 , 90 L.Ed. 1206 (1946), and of other cases too numerous to require citation. The investors' claim here is that the Act does precisely this, by forcing a conveyance of certain rail properties to Conrail at less than fair compensation and by requiring loss operations to continue while the required proceedings are being prosecuted. Such claims would be cognizable in the Court of Claims as claims founded upon the Constitution, unless the Act by fair implication withdraws such jurisdiction. In order for this negative implication to prevail the evidence must be weighty since, as will subsequently be developed, several rules of construction operate to sustain that court's jurisdiction if a fair basis exists for doing so.
The strongest argument that Congress intended to withdraw the Tucker Act remedy that would otherwise be available is based on the existence of a set of provisions in the Act limiting the amount of certain obligations guaranteed by the United States that may be issued by USRA. The total amount of USRA obligations guaranteed by the Government which may be issued is limited to $1.5 billion, of which not more than $1 billion may be issued to Conrail and not more than $500 million may be used for acquisition purposes, [91] ง 210(b), except as this amount may be increased by a joint resolution of Congress. The only authorizations for appropriations are those contained in ง 210(f) โ€” appropriations to the Secretary of Transportation for such amounts as are necessary to discharge the obligations of the United States with respect to guaranteed obligations of USRA authorized by the Act โ€” and in ง 214 โ€” appropriations for expenses of the Secretary, the Rail Services Planning Office, and USRA. Such provisions, it is urged, are inconsistent with an open-ended liability in the Court of Claims.
The argument is reinforced by the limited nature of the powers conferred on this court by ง 303(c) discussed in Part VI of this opinion. As there explained, if this court finds that the terms of exchange of rail properties for securities are not fair and equitable to any reorganized estate and cannot be cured by reallocation of Conrail securities (including authorized obligations of USRA) among the various estates, or by changing the amount or the mix of such securities, the only further tool available for us is to "enter a judgment against the Corporation." The manifold problems of such a judgment, previously analyzed, could have been avoided by allowing us to enter judgments against the United States, a potential remedy that Congress did not afford us. Putting the matter in another way, since this court would hardly direct the entry of a deficiency judgment against Conrail, with all its inherent difficulties, if inadequacy of the compensation could be cured by a judgment against the United States in the Court of Claims, Congress apparently did not intend the latter.
The Government parties and the Penn Central trustees seek to answer these contentions on the basis that Congress was so convinced of the constitutional adequacy of the Act, which made available some $2 billion of Government monies, that it never considered the possible need for a suit in the Court of Claims. This belief was expressly stated in the House Report at 54-55. [92] There is no *941 evidence in the text or scheme of the Act that if Congress had recognized possible constitutional inadequacy of compensation, it would have preferred that the Act be struck down, with consequent serious disarray, rather than that additional monies be expended to rectify the inadequacy. Congress clearly intended to meet the constitutional standard of fairness and equity, ง 303(c)(3), yet the only operative provision in this regard authorizes this court to reduce payments to the bankrupt estates if we find that these and other benefits "are fairer and more equitable than is required as a constitutional minimum." Id. We should not lightly assume that had Congress considered the problem, it would have placed itself in the morally indefensible position of affording redress if the final system plan provided too much but denying it if the plan provided too little.
The view that Congress did not intend to withdraw jurisdiction under the Tucker Act but simply failed to consider the issue is reinforced by reference to ง 601, entitled "Relationship To Other Laws." This section specifically declares that the antitrust laws are inapplicable to any action taken to formulate or implement the final system plan, ง 601(a) (2), that the Interstate Commerce Act and the Bankruptcy Act are inapplicable whenever inconsistent with the Act, ง 601(c), and that ง 102(2)(C) of the National Environmental Policy Act of 1969 shall not apply to any action taken under authority of the Act before the effective date of the final system plan, ง 601(b). Ten other sections of the Act rule out, in whole or in part, the applicability of various statutes. [93] Yet there is no provision withdrawing the jurisdiction of the Court of Claims, under its general jurisdictional statute, for any constitutional claim resulting from operation of the Act.
With the arguments premised on the general scheme and text of the Act thus somewhat in balance, those parties who contend that no Tucker Act remedy exists rely on two pieces of legislative history, one from each side of the Capitol. The one from the Senate side is quite equivocal. In explaining the Conferences Report, Senator Hartke, who was a Senate manager, said:
It we did nothing while continuing to mandate rail service, there is the distinct possibility in view of the prior action of Congress that a number of these people could make a claim against the Government which could be sustained in the Court of Claims.
119 Cong.Rec.S. 23,783-84 (daily ed. Dec. 21, 1973).
However, these remarks are not inconsistent with the view that the Senator was so convinced that the bill, as amended in conference, contained such adequate compensation provisions that a suit in the Court of Claims could not prevail, particularly in view of what he had characterized as a "rather slim" chance of the creditors getting their money through liquidation, [94] rather than as meaning that such a claim could not be maintained. On the House side, reliance is placed on a colloquy between two of the House managers on the Conference Committee in the debate on that Committee's report, 119 Cong.Rec. 11,876 (daily ed. Dec. 20, 1973), which we set forth in the margin. [95] Literally, *942 at least, this colloquy concerns only the deficiency judgment against Conrail, and the powers of this court โ€” not the residual power which the Court of Claims would possess unless this was explicitly or implicitly withdrawn. [96]
Battle over the weight to be given to statements on the floor of Congress, even by sponsors of legislation, has been waged for many years. [97] The banner of those favoring such use has tended to advance, if for no other reason than the frequent lack of other material illuminating Delphic enactments. But it is one thing to rely on such statements, often themselves of debatable meaning, when resolution of the issue will allow a statute to stand with one meaning or another, and quite a different thing when such reliance may cause the statute to fall. Apart from the principles of construing to avoid unconstitutionality or even serious constitutional doubt, which are hereafter discussed, such reliance in this case would amount to saying that the members of Congress who heard or read the statements and the many more who did not would have opted for a construction that entailed serious danger of imperiling many months of diligent and constructive Congressional effort on a problem of vital consequences to the nation rather than take the slightest chance of the courts being able to order a further payment by the United States in such amounts, if any, [98] *943 as would be necessary to save the statutory plan. We have been cited to no decision in which a court has resorted to statements on the floor of Congress in order to consign an ambiguous statute to destruction. [99]
If, as we believe, the Act can fairly be read as not withdrawing the remedy under the Tucker Act that would otherwise exist, even though a contrary reading might be somewhat more natural, several principles of statutory construction and at least one Supreme Court decision require us to adopt the former view.
One such principle is that repeals by implication are not favored. Graham v. Goodcell, 282 U.S. 409, 424-426 , 51 S.Ct. 186 , 75 L.Ed. 415 (1931); FTC v. A. P. W. Paper Co., 328 U.S. 193, 203-204 , 66 S.Ct. 932 , 90 L.Ed. 1165 (1946); Amell v. United States, 384 U. S. 158, 165-166 , 86 S.Ct. 1384 , 16 L.Ed. 2d 445 (1966). As recently said in Morton v. Mancari, 417 U.S. 535, 550 , 94 S. Ct. 2474, 2483 , 41 L.Ed.2d 290 (1974):
The courts are not [free] to pick and choose among congressional enactments and when two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.
A new statute will not be read as wholly or even partially amending a prior one unless there exists a "positive repugnancy" between the provisions of the new and those of the old that cannot be reconciled. Wood v. United States, 16 Pet. (41 U.S.) 342, 362-363, 10 L.Ed. 987 (1842); Mercantile National Bank v. Langdeau, 371 U.S. 555, 565-566 , 83 S. Ct. 520 , 9 L.Ed.2d 523 (1963). See Red Rock v. Henry, 106 U.S. 596, 601-602 , 1 S.Ct. 434 , 27 L.Ed. 251 (1882); United States v. Borden, 308 U.S. 188, 198-203 , 60 S.Ct. 182 , 84 L.Ed. 181 (1939); Fawcett v. Commissioner, 149 F.2d 433, 434 (2d Cir. 1945). This principle rests on a sound foundation. Presumably Congress had given serious thought to the earlier statute, here the broadly based jurisdiction of the Court of Claims. Before holding that the result of the earlier consideration has been repealed or qualified, it is reasonable for a court to insist on the legislature's using language showing that it has made a considered determination to that end. See FTC v. A. P. W. Paper Co., supra, at 203-204, 66 S.Ct. 932 .
A second body of principles relates to possible conflict between a statute and the Constitution. When a statute is ambiguous, "construction should go in the direction of constitutional policy," United States v. Johnson, 323 U.S. 273, 276 , 65 S.Ct. 249, 250 , 89 L.Ed. 236 (1944), here the Fifth Amendment right of a person whose *944 property is taken to just compensation. When one admissible construction will preserve a statute from unconstitutionality and another will condemn it, the former is favored even if language, see Twenty Per Cent Cases, 87 U.S. 179, 187 , 22 L.Ed. 339 (1873); American Communications Ass'n v. Douds, 339 U. S. 382, 407 , 70 S.Ct. 674 , 94 L.Ed. 925 (1950), and arguably the legislative history point somewhat more strongly in another way. As said in United States Civil Service Comm'n v. National Ass'n of Letter Carriers, AFL-CIO, 413 U.S. 548, 571 , 93 S.Ct. 2880, 2893 , 37 L.Ed.2d 796 (1973), a court's "task is not to destroy the Act if we can, but to construe it, if consistent with the will of Congress, so as to comport with constitutional limitations." Indeed the same rule has been held to prevail even when a construction less favored but not excluded by the language and history will avoid a serious constitutional doubt. See United States v. Jin Fuey Moy, 241 U.S. 394 , 36 S.Ct. 658 , 60 L.Ed. 1061 (1916); Richmond Screw Anchor Co. v. United States, 275 U.S. 331, 346 , 48 S. Ct. 194 , 72 L.Ed. 303 (1928); Lucas v. Alexander, 279 U.S. 573, 577 , 49 S.Ct. 426 , 73 L.Ed. 851 (1929); Crowell v. Benson, 285 U.S. 22, 62 , 52 S.Ct. 285 , 76 L.Ed. 598 (1932); United States v. Rumely, 345 U.S. 41, 45 , 73 S.Ct. 543 , 97 L.Ed. 770 (1953).
Going further, the Government parties contend that Hurley v. Kincaid, 285 U.S. 95 , 52 S.Ct. 267 , 76 L.Ed. 637 (1932), "is even more directly in point and is . . . dispositive." [100] While the argument has a surface plausibility, analysis shows that the Court was not obliged to and did not face a problem so difficult as that which has arisen here.
Kincaid, an owner of land in the Boeuf River Basin brought a suit against the United States, the Secretary of War, and others, which sought to enjoin the construction of the Boeuf Floodway under the Mississippi Flood Control Act, 45 Stat. 534 (1928). He alleged that construction of the Flood-way would increase the depth of flood water on his lands, that the Flood Control Act required the Government to condemn or to otherwise acquire flowage rights over the property before proceeding with the project, and that starting work before acquiring such rights constituted a taking without just compensation in violation of both the Act and the Constitution. The district court found it unnecessary to reach the constitutional issue since it held that ง 4 of the Act required the Government to condemn or to otherwise acquire either Kincaid's property or rights over that property, before commencing construction of the floodway. It enjoined the defendants, with the exception of the Government which it earlier had held immune from suit, 35 F.2d 235 (W.D.La.1929), from continuing work on the project until compensation had been paid. 37 F.2d 602 (W.D.La.1929). The court of appeals affirmed in a short per curiam opinion, 49 F.2d 768 (5th Cir. 1931). The Supreme Court held that it was improper to have granted an injunction since Kincaid had an alternative remedy at law, an action for just compensation under the Tucker Act. The Court indicated that it was not material whether defendants had in fact violated their duty under the Flood Control Act to acquire flowage rights over Kincaid's land prior to construction of the project since the Fifth Amendment requires only that the individual be compensated after the taking, not before, 285 U.S. at 103-104, 52 S.Ct. 267 .
Two sections of the Flood Control Act were directed to the question of damages *945 and of compensation for taking of land. Section 3 provided in part that:
. . . No liability of any kind shall attach to or rest upon the United States for any damage from or by floods or flood waters at any place: Provided, however, That if in carrying out the purposes of this [Act] it shall be found that upon any stretch of the banks of the Mississippi River it is impracticable to construct levees, either because such construction is not economically justified or because such construction would unreasonably restrict the flood channel, and lands in such stretch of the river are subjected to overflow and damage which are not now overflowed or damaged by reason of the construction of levees on the opposite banks of the river it shall be the duty of the Secretary of War and the Chief of Engineers to institute proceedings on behalf of the United States Government to acquire either the absolute ownership of the lands so subjected to overflow and damage or floodage rights over such lands.
Section 4 provided in part that:
The United States shall provide flowage rights for additional destructive flood waters that will pass by reason of diversions from the main channel of the Mississippi River. . . .
The Secretary of [War] may cause proceedings to be instituted for the acquirement by condemnation of any lands, easements, or rights of way which, in the opinion of the Secretary of [War] and the Chief of Engineers, are needed in carrying out this project, the said proceedings to be instituted in the United States district court for the district in which the land, easement, or right of way is located. . . . The provisions of sections [5 and 6 of the River and Harbor Act of July 18, 1918,] are [hereby] made applicable to the acquisition of lands, easements, or rights of way needed for works of flood control. . . .
The apparent strength of the case from the standpoint of the Government parties lies in the fact that the first part of the quoted portion of ง 3 seems to indicate that Congress did not intend to compensate the individuals whose property was damaged by floods, yet the Court ruled that the Tucker Act was still applicable so that Kincaid might receive compensation for any of his property that was taken by increased flooding from construction under the Act. However, when one considers the "no liability" provision in the context of the legislative history of the Act analyzed in detail in the margin, [101] it is clear that *946 the provision was not intended to apply to Kincaid's claim. There was a general consensus in Congress that property owners whose land was actually damaged as a result of the Project should be compensated for the value of what was taken, but a corresponding fear that, under the bill as passed by the Senate and as introduced in the House, the Government might be held liable for immense amounts of flood damage in the future even though this did not result from the reallocation of flood waters by the Project, and the "no liability" clause was inserted only to protect against this.
Viewed in the light of this legislative history, the Hurley case stands simply for the propositions that when there is a taking, the failure of Government officials to institute condemnation proceedings provided for in the statute authorizing the taking does not prevent an owner from suing under the Tucker Act, [102] and that he should be remitted to that remedy, [103] but not for the broader proposition apparently asserted here by the Government parties that in the absence of an express repeal of the remedy, even an expressed intention to avoid liability will not alone suffice to withdraw access to the Court of Claims.
While Hurley v. Kincaid thus does not provide the strong support for their position that the Government parties assert, such support is furnished by another Supreme Court decision not cited by them. This is Lynch v. United States, 292 U.S. 571 , 54 S.Ct. 840 , 78 L.Ed. 1434 (1934), which Professor Henry M. Hart, Jr., correctly cited for the position that:
. . . where constitutional rights are at stake the courts are properly astute, in construing statutes, to avoid the conclusion that Congress intended to use the privilege of immunity, or of withdrawing jurisdiction, in order to defeat them. [104]
At issue in Lynch and its companion case, Wilner v. United States, were policies for yearly renewable term insurance issued during World War

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1370968. Public record. Not legal advice.