# Brief for Appellant — United States Railway Ass'n v. Connecticut General Insurance > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0162%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for Appellant - **Published:** January 1, 1974 - **Citation:** 419 U.S. 893 ## Text — ' 28 \s In Tut BITES. Supreme Court of the United States OCTOBER nn. 1974 um Appeal from the District Court for the hastern District of Pennss lyani BRIEF OF APPRELEANI LCNITED STATES RATEWAY ASSOC TATION * „ TABLE OF CONTENTS TABLE OF AUTHORITIES SUMMARY OF ARGUMENT Introduction: The Rail Crisis and the Rail Aet A. The Rail Act Is Designed To Provide New So- lutions to New Problems that Created the Rail Crisis * 1. The Rail Act Provides a Thorough Planning 2. The Rail Act Provides Resources Not Avail- B. The Rail Act Provides Solutions to the Problems that Have Made It Impossible To Reorganize TABLE OF CONTENTS—Continued 3. Elimination of Uncompensated Passenger 4. Increased Revenues —— — of New Finaneing The Court Below Should Have Denied Equitable Relief and Dismissed the Complaints as to the “Taking” Issues on the Ground that Plaintiffs Have an — — at Law Under the A. Repeal of the Jurisdiction of the Court of Claims Under the Tucker Act To Award Just Compensation for Any Taking of Private Property for Public Use May Not Be In- ferred from Later Statutes that Do Not Ex- pressly Repeal or Modify that Act and Do Not Provide an Equivalent Remedy B. The Rail Act Does Not Show an Intent To Deprive the Court of Claims of Its Tucker Act Jurisdiction To Hear „ Just Compensation ä — Gow an Intent To Deprive the Court of Claims of its Tucker Act Jurisdiction To Hear Any Case Claiming Just Compensation Even in the Absence of a Tucker Act Remedy — — — Operation of the Rail Act A. The Court Below Misconstrued Section 304 (t) of the Rail Act B. The 304(f) Injunction Was Unwarranted 61 III. TABLE OF CONTENTS Continued C. It Was Error To Declare Section 303 of the 328 Unconstitutional on Its 1 D. The District Court Should Not Have En- —— 2 2 ey ae oe Under Section 209 (¢) nnn There Is No Factual or Legal Basis for Conclud- ing that the Rail Act Will Cause an “Erosion Taking” of Private 2 for Which Just Compensation Will Be Due A. Plaintiffs Have Not Shown that Any Erosion Will Occur . B. Railroad Creditors and Shareholders Do Not Have a Constitutional Right To Be Held Harmless from Erosion During the Period Reasonably Necessary 7 > — and Save the Railroad 1. The Earliest Decisions Under Section 77 Established that Some Erosion Is Per- missible Pending Reorganization .__. 2. This Court Reviewed and Reconfirmed this Rule in the New Haven litigation . 3. External, as Well as Internal, Sources of Aid Must Be Considered in Assessing the Penn Central’s Future Prospects 4. The Public Interest in Implementing the Act Clearly Outweighs * Forseeable Burden on Investors 75 CASES: TABLE OF AUTHORITIES 5 Amell v. United States, 384 U.S. 158 (1966) American Communications Association, CIO v. Douds, 339 U.S. 382 (1950) American Power & Light Co. v. ‘SEC, 329 U.S. 90 (1946) Armstrong v. ‘United States, 364 U.S. 40 (1960)... Brooks-Scanlon Co. v. Railroad Commission, 251 U.S. 396 (1920) 70, 78, 83, 94, Bullock v. Railroad Commission, 254 U.S. 513 — Clement v. United States, 140 F. ‘Supp. 573 (Ct. Cl. 1956) 51 Communist Party v. ‘Subversive Activities Control Board, 367 U.S. 1 (191) 63-64 Continental Bank v. Chicago, Rock Island & P. Ry., 294 U.S. 648 (1938 22, 78-79, 84-85, 93 Crowell v. Benson, 285 U.S. 22 (1932) * 65 Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) 65-66 Eastport Steamship Corp. v. United States, 372 F.2d 1002 (Ct. Cl. 1967) 43 63 64 48 8 2 88 & & Eccles v. Peoples Bank, 333 U.S. 426 (1948) Electric Bond & Share Co. v. SEC, 303 U.S. 419 (1933535 Fawcett v. C.. R., 149 F.2d 433 (2d Cir. 1945) Federal Sugar Refining Co. v. United States, 30 F.2d 254 (2d Cir. 1929), rev'd on other grounds sub nom. Johnson v. United States Shipping Board Emergency Fleet Corp., 280 U.S. 320 (1930) FTC v. A. P. ‘Paper Co., 328 U.S. 193 (1946) Fleming v. Rhodes, 331 U.S. 100 (1947) Flemming v. Nestor, 363 U.S. 603 (1960) Fletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810) Fort Berthold Reservation v. United States, 390 F.2d 686 (Ct. Cl. 1968) 4 Gibson v. United States, 166 U.S. 269 u) 8 Glidden Co. v. Zdanok, 370 U.S. 530 (1962) 3 SER 88988 * TABLE OF AUTHORITIES—Continued Page Gould v. United States, 301 F.2d 557 (D.C. Cir. 1962) 59 H. K. Hele v. United States, 100 Ct. Cl. 289 (1943) 47 Hadacheck v. Sebastian, 239 U.S. 394 (1915) &3 Harlem Valley Transportation Association v. Staf- ford, 360 F.Supp. 1057 (S.D.N.Y. 1973), aff'd, No. 73-2496 (2d Cir., June 18, 1974) 34 Hooe v. United States, 218 U.S. 322 (1910) 46 Hurley v. Kincaid, 285 U.S. 95 (1932) 41, 44-45, 59, 60, 69 In re Boston & Maine Corp,, 484 F.2d 369 (ist Cir. 1973) N 79. 93 In re Florida East Coast Ry., 137 F.Supp. 693 (S.D. Fla.) aff'd per curiam, 227 F.2d 518 (5th Cir. 1955) 36 In re New York, NH. & H.R. R. 378 F.2d 635 (2d Cir. 1967) 63, 88 In re New York, VH. 4 H.R. R., 281 F.Supp. 65 (D. Conn. 1968) 89-90 In re New York, NH. & H.R. R. 289 F.Supp. 451 (D. Conn. 1968) 87, 90-92, 94, 95 In re New York, NH. & H.R. R.. 304 F.Supp. 793 (D. Conn. 1969) 88, 94 In re New York, NH. &HRR., 304 F.Supp. 1121 (D. Conn. 1969) 82 In re Penn Central Transportation Co., 494 F.2d 270 (34 Cir.), petition for cert. filed, 42 U.S.L.W. 3633 (U.S. May 8. 1974) (No. 73- 8 85 In re Penn Central Transportation Co., Bky. No. 70-347, Order No. 1 (E.D. Pa., June 21, 19700 67-68 In the Matter of Reading Co., Bky. No. 71-828 (E.D. Pa., July 1, 1974), appeal pending, No. 74-7 (Spec. Ct. R.R.R.A., filed Aug. 20, 1974) 79-80 International Longshoremen’s & Warehousemen's Union, Local 37 v. Boyd, 347 U.S. 222 (1904) 64 Jackson v. United States, 230 U.S. 1 (1913) 83-84 TABLE OF AUTHORITIES—Continued Page Jacobs v. United States, 290 U.S. 13 (19333 43, 45 Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123 (1951) 63 Kennedy v. Silas Mason Co., 334 U.S. 249 (1948). 63 Kent v. Dulles, 357 U.S. 116 (1958) . 66 Malone v. Bowdoin, 369 U.S. 643 (1962) 45 Marine Insurance Co. v. United States, 410 F.2d BQ QUE SSS a 51 Mercantile National Bank v. Langdeau, 371 U.S. 555 (1963) 48 Nagano V. McGrath, 187 F.2d 759 (7th Cir. 1951), aff'd, 342 U.S. 916 (1952) 48 New Haven Inclusion Cases, 399 U.S. 392 (1970) 22, 57, 59, 63, 70, 79, 88, 92-93 New York, VH. & H.R.R. Bondholders v. United States, 289 F Supp. 418 (S.D.N.Y. 1968) 88. 92 Penn-Central Merger Cases, 389 U.S. 486 (1968). 22, 84, 88-89 Phelps v. United States, 274 U.S. 311 (1927 59 Phillips v. Commissioner, 283 U.S. 589 (1931) 59 Poe v. Ullman, 367 U.S. 497 (1961) 63 Portsmouth Harbor Land & Hotel Co. v. United States, 260 U.S. 327 (1922) „%% 45 Public Affairs Press v. Rickover, 369 U.S. 111 —— ˙˙.iwA2ꝛ˙*n RN 63 Railroad Commission v. Eastern Tezas R. R., 264 US. 79 (1924) 78 Ralston Steel Corp. v. United States, 340 F.2d 663 (Ct. Cl.), cert. denied, 381 U.S. 950 (1965) 43 Reconstruction Finance Corp. V. Denver & Rio Grande W. R. R., 328 U.S. 495 (1946) 22, 86, 93 Richard v. United States v. Stone Corral Irriga- tion Dist., 282 F.2d 901 (Ct. Cl. 1960) . 45 Richmond Screw Anchor Co. v. United States, 275 U.S. 331 (1928) 65 St. Joe Paper Co. v. Atlantic Coast Line R. R., 347 U.S. 298 (1954) — Shapiro v. Thompson, 394 U.S. 618 (1969) — 3 TABLE OF AUTHORITIES—Continued Simon v. United States, 113 Ct. Cl. 182 (1949) Steel Hill Development, Inc. v. Sanborton, 469 F. 2d 956 (ist Cir. 1972) Tempel v. United States, 248 U.S. 121 (1918) . Twenty Per Cent Cases, 87 U.S. 179 (1873) United States v. Babcock, 250 U.S. 328 (1919) United States v. Causby, 328 U.S. 256 (1946) United States v. Darby, 312 U.S. 100 (1941) United States v. Dickinson, 331 U.S. 745 (1947) United States v. Goltra, 312 U.S. 203 (194) United States v. National Dairy Products Corp., 372 U.S. 29 (1963) United States v. Pfitech, 256 U.S. 547 (1921) United States v. Raines, 362 U.S. 17 (1960) United States v. Thayer-West Point Hotel Co., 329 U.S. 585 (197 United States v. Thirty-Seven (37) Photographs, 402 U.S. 363 (1971) United States v. United States Fidelity 4 Guar- anty Co., 309 U.S. 506 (1940) United States Civil Service Commission V. National Association of Letter Carriers, AFL-CIO, 413 U.S. 548 (1973) 48, 65 Van Schaick v. McCarthy, 116 F.2d 987 (10th Cir. es 86 West Coast Hotel Co. v. ‘Parrish, 300 U.S. 379 3 96 Wright v. Vinton Branch of the Mountain Trust Bank, 300 U.S. 440 (1937) 48 Yearsley v. . A. Ross Construction Co., 309 U.S. 18 (1940) . N 43-44, 45, 60 Youngstown Sheet & Tube Co. V. ‘Sawyer, 343 U.S. —— — 416. 96 2 8 8 * 5 e 2 § CONSTITUTIONAL PROVISIONS AND STATUTES: U.S. Constitution: Art. I, § 8, cl. 3 (Commerce Clause) 3 Vill TABLE OF AUTHORITIES—Continued Page ee ee) Cay Sen - J. 14, 62 Admiralty Act of 1920: 46 U.S.C. §§ 741 et seq. a Bankruptcy Act: Section 77, 11 U.S.C. §205 — 5. passim Interstate Commerce Act: Section 1, 49 U.S.C. 81 SS Section 5, 49 U.S.C. §5 . Judicial Code: 28 U.S.C. 88 1252 3 E 1 3 123i(a) ........... 2 2202 . 2 2282 2 2284 2 2516 59 National Environmental Policy Act of 1969: 42 U.S.C. §§ 4321, 4331-35 — Rail Passenger Service Act of 1970, as amended: 45 U.S.C. §§ 501 et seq. 1 38 Regional! Rail Reorganization Act of 1973: Pub. L. 93-236, 87 Stat. 985, 45 U.S.C. 1 701-93 — I. passim Tucker Act: 2US.C. $1492 0 8, pein TABLE OF AUTHORITIES—Continued Other Statutes: Page Pub. L. 65-182, 40 Stat. 704, 705 (July 1, 1918), as amended 28 U.S.C. § 1498 65 Pub. L. 93-5, 87 Stat. 5 (Feb. 9, 1973) 31 Pub. L. 93-240, 87 Stat. 1048 (Jan.2,1974) 28. 47 Pub. L. 93-305, 88 Stat. 195 (June 8, 1974) 28. 47 ADMINISTRATIVE PROCEEDINGS: ICC Order, Ex Parte No. 293 (Jan. 14, 1974) 23 Penn Central Transportation Co. Reorganization, Corp. Reorg. Rep. (Penn Central), Document No. 95, at 1102:86 (ICC Finance Docket No. 26241, Sept. 28, 1973) 35, 37 LEGISLATIVE MATERIALS: Conference Report, H.R. Rep. No. 93-744, 93d Cong., Ist Sess. (1973) 27, 32 H.R. Rep. No. 93-620, 93d Cong., Ist Sess. (1973) 24, passim S. Rep. No. 93-601, 93d Cong., Ist Sess. (1973) 24, 30, 31,53 119 Cong. Rec. H9731-32 (daily ed. Nov. 8, 1973) 54. 57 H9742 (daily ed. Nov. 8. 1973) ) 4 H9743 (daily ed. Nov. , 1973). 53 H9756 (daily ed. Nov. 8. 1973) 56 111,876 (daily ed. Dec. 20, 1973) 52. 56 $22,483 (daily ed. Dec. 11, 1973) — 34 $22,485 (daily ed. Dec. 11, 1973) 53, 56 $22,820 (daily ed. Dec. 13, 1973) 56 $23,778 (daily ed. Dec. 21, 1973) * 53 $23,780 (daily ed. Dec. 21, 1973) 50-51 S23,782-4 (daily ed. Dec. 21, 19733 34, 53, 55 Hearings on H.R. 6591, H.R. 4897, H.R. 5822, H.R. 5385, H.R. 6880, H.R. 7373 and H.J. Res. 50 be- fore the House Comm. on Interstate and Foreign Commerce, 93d Cong., Ist Sess. (1973) 31 * In THE Page Supreme Court of the United States Hearings on S. 1031, S. 2188 and H.R. 9142 before OCTOBER TERM, 1974 the Senate Comm. on Commerce, 93d Cong., Ist Sess. (1973) 31 Secretary of Transportation, Northeastern Fall- road Problem, A Report to the Congress, March N 26, 1973 1 ' 31. 33, 36 0. 74-167 Secretary of Transportation, Rail ‘Service in the Midwest and Northeast Region, Feb. 1, 1974 33 Special Staff of Senate Comm. on Commerce, 92d Cong., 2d Sess., The Penn Central and Other UNITED STATES RAILWAY ASSOCIATION, Railroads, A Report to the Senate Comm. on Commerce (Comm. Print 1972) 24 Appellant, Statement of Secretary Brinegar in Hearings he- v. fore the Surface Transportation Subcomm. of Se ae Se eee SS CONNECTICUT GENERAL INSURANCE CORPORATION, et al., 2, at 258 ( 30, 1973) ae 23-24 N — Appellees. MISCELLANEOUS: Coleman, /s Railroad Accounting Off the Track?, TABLE OF AUTHORITIES—Continued 130 J. Accountancy 64 (Oct. 1970) 3 77 On Appeal from the Distriet Court for the 3A Collier on Bankruptcy “ 63.16 (14th ed. rev. Eastern District of Pennsylvania J. Moore) ; 82 5 Collier on Bankruptcy © 77.20 (14th ed. rev. 1. ——A ee 82 Frankfurter, Som- ‘Reflections on the Reading of BRIEF OF APPELLANT Statutes, 47 Colum. I. Rev. 527 (1947) 54-55 UNITED STATES RAILWAY ASSOCIATION Iron Age, June 25, 1970 a — 81 Iron Age, July 22, 1974 én 81 Note, Takings and the Public Interest in Railroad Reorganization, 82 Yale I. J. 1004 (1973) 85 This is an appeal from the decision of a three-judge L. — at aime 28 Law of Eminent 2 — 11 —— Court sitting in the Eastern Domai ial D ts: Richard strict vania, which held unconstitutional 388 8 1 Nixon 8 (Jan. 34 certain sections of the Regional Rail Reorganization Act Spychalski, Imperfections in ‘Railway Line Aban- of 1973, Public Law 93-236, 45 U.S.C. §§ 701-93 (the donment Regulation and Suggestions for their “Rail Act” or “Act”). Appellant is the United States Correction, 40 ICC Prac. J. 454 (1973 35 Railway Association (“USRA” or the Association“), a “government corporation” formed pursuant to Section 201 of the Rail Act. OPINIONS BELOW The opinion and concurring opinion in the district court and its order of June 25, 1974, are reprinted in the Joint Appendix (“JA”)* at JA 9-83. The opinions are not yet officially reported. JURISDICTION These cases were brought pursuant to 28 U.S.C. §§ 1331 (a), 1337, 2201 and 2202, seeking a declaratory judg- ment that the Rail Act is void for repugnance to the United States Constitution and seeking an injunction against the enforcement, operation and execution of the Rail Act. Three-judge courts were convened pursuant to 28 U.S.C. §§ 2282 and 2284. By consent of the parties, two of the actions originally brought in the District of Columbia were transferred to and consolidated for disposition before the three-judge court in the Eastern District of Pennsylvania. The order appealed from, declaring certain provisions of the Rail Act null and void as violative of provisions of the Constitution and enjoining Appellant from taking certain actions pursuant to the Rail Act, was entered on June 25, 1974 in all of the cases. No order has been issued respecting a rehearing. Notice of Appeal to this Court was filed in the United States District Court for the Eastern District of Pennsylvania on July 17, 1974. JA 386. Appellant’s Jurisdictional Statement was filed A Joint Documentary Submission (“J. Doc.“) has been filed with this Court. ’ * on August 23, 1974. This Court has jurisdietion pursuant to 28 U.S.C. §§ 1252 and 1253. See Shapiro v. Thomp- son, 394 U.S. 618, 625 (1969); United States v. Raines, 362 U.S. 17, 20 (1960); Fleming v. Rhodes, 331 U.S. 100, 102-04 (1947). CONSTITUTIONAL PROVISIONS AND STATUTES INVOLVED Article I, Section 8, Clauses 3 and 4 of the United States Constitution provide: “The Congress shall have Power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; “To establish an uniform Rule of Naturalization, and uniform Laws on the — of Bankruptcies throughout the United States, . The Fifth Amendment to the United States Constitu- tion provides in pertinent part: “No person shall. . . be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The Regional Rail Reorganization Act of 1973, Pub. L. 93-236, 87 Stat. 985, 45 U.S.C. §§ 701-93, is set forth at JA 391-431. The Tucker Act, as amended, 28 U.S.C. § 1491, pro- vides in pertinent part: “The Court of Claims shall have jurisdiction to render judgment upon au 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 con- 4 tract with the United States, or for liquidated or unliquidated damages in cases not sounding in 3 QUESTIONS PRESENTED 1. Whether the court below erred in granting injunc- tive relief on Plaintiffs’ claims that the Rail Act may effect a taking of their property without just compensa- tion, when Plaintiffs have adequate remedies at law in- cluding a suit in the Court of Claims under the Tucker Act, 28 U.S.C. § 1491. 2. Whether the court below breached its duty to con- strue statutes so as to save their constitutionality when it construed the Rail Act, despite its silence on the sub- ject, as amending the Tucker Act by implication so as to bar any suit in the Court of Claims to recover any difference between the consideration provided in the Rail Act and the “constitutional minimum” expressly recog- nized in the Rail Act—a construction of the Rail Act which led the court to declare certain provisions of the Rail Act unconstitutional. 3. Whether the court breached its duty to construe statutes so as to save their constitutionality when, after holding that the Rail Act impliedly amended the Tucker Act to bar a remedy for constitytional claims of the rail estates, the court (a) construed Section 304(f) of the Rail Act to authorize USRA to forbid discontinuance of rail service or abandonment of rail properties even if the “erosion” of the railroad estate should pass the limits beyond which operations can no longer be constitu- tionally required without compensation—a construc- tion of Section 304(f) which led the court to hold Section 304(f) unconstitutional; and (b) construed Section 303 of the Rail Act, which expressly requires a “constitutional minimum” con- sideration for transfers of rail property, to exclude consideration for erosion beyond constitutional limits —a construction of Section 303 which led the court to hold Section 303 unconstitutional. 4. Whether the court below erred in first enjoining all Defendants from taking any action under Section 304(f) to require continuation of rail service that would result in “erosion” beyond constitutional limits and there- after nullifying other provisions of the Rail Act solely for their failure to provide explicitly for just compensa- tion for the very “erosion” beyond constitutional limits that the court had already enjoined Defendants from causing. 5. Whether, in any event, an injunction unconditionally prohibiting USRA from certifying any Final System Plan for reorganized rail service to a federal court was a necessary or appropriate remedy to prevent the possibility of erosion beyond constitutional limits that the court had already enjoined USRA and all other Defendants from causing. STATEMENT OF THE CASE Eight major railroads operating in the Northeast/ Midwest region of the United States are now in reor- ganization proceedings pursuant to Section 77 of the Bankruptcy Act, 11 U.S.C. § 205. Because of the serious threat that this rail crisis presented to the welfare of the region and of the United States, and because of the inability of the procedures and resources of Section 77 to resolve the underlying problems of these railroads, Congress enacted the Regional Rail Reorganization Act of 1973, which became law on January 2, 1974. Plaintiffs below are creditors and the sole shareholder of the largest of the railroads now in reorganization, Penn Central Transportation Company (“Penn Central”). They brought these actions seeking declaratory judg- ments that the entire Rail Act is unconstitutional on its face on a large number of grounds, and further seeking injunctions against the implementation of all of its pro- visions. JA 161-75. The Trustees of the property of Penn Central Transportation Company, Debtor (“Penn Central Trustees”) intervened as Defendants. JA 191. Both sides filed Motions for Summary Judgment. JA 221-25. This appeal is taken from a final judgment granting in part Plaintiffs’ Motions for Summary Judg- ment and denying Defendants’ Motions. JA 9-83. The Rail Act Reorganization Process The following five steps required by the Rail Act are essential to an understanding of the proceedings be- low. In the Introduction to the Argument there is a fuller discussion of the statutory provisions intended by Congress to achieve “the reorganization of railroads in this region into an economically viable system capable of providing adequate and efficient rail service to the region.” Section 101(b) (2). (1) Each nited States district court having jurisdic- tion of a railroad in the region in reorganization under Section 77 (“Reorganization Court”) was required to determine within 180 days of enactment whether its railroad should be reorganized pursuant to the Rail Act. Section 207(b). Such determinations (which are described below under the heading “Reorganization Court Proceed- ings”) have been made and are now under review by a special United States district court of three judges (“Special Court”) which was authorized by the Rail Act, Section 209(b), and which has been formed in the Dis- trict of Columbia. - ‘ (2) A new government corporation, Appellant USRA, is required to prepare a “Final System Plan” for re- structuring the rail properties of the railroads being reorganized pursuant to the Rail Act into a “financially self-sustaining rail service system.” Sections 201, 202, 204-06. A central feature of the Final System Plan will be the transfer of designated rail properties to a new, for-profit corporation called Consolidated Rail Corporation (“Conrail”) in exchange for all the securities of Con- rail, plus up to 8500 million of USRA obligations guar- anteed by the United States. Sections 206(d)(1), 210. (3) USRA is required to submit a proposed Final System Plan to Congress within 450 days of enactment (i. e., by March 28, 1975). Section 208(a). The Plan becomes “effective” if neither House of Congress disap- proves it within sixty continuous session days after sub- mission. Section 208. The Plan is then transmitted by USRA, within 90 days after its effective date, to the Special Court, which has exclusive jurisdiction of all “proceedings with respect to the Final System Plan.” Section 209. The Special Court is then directed to order the trustees of each railroad in reorganization to transfer to Conrail all right, title and interest in the rail prop- erties designated in the Final System Plan. Section 303 (b). (4) The Special Court is directed then to determine whether the exchange of rail properties for Conrail se- curities, USRA obligations and such “other benefits” as the Rail Act provides, is fair and equitable to the estate of each railroad in reorganization. Section 303ic). If the Special Court finds that the transfer is not fair and equitable “in accordance with the standard of fairness and equity applicable to the approval of a plan of re- organization or a step in such a plan under Section 77 of the Bankruptcy Act,” the Court is directed to order a reallocation of the Conrail securities, and or to order the issuance of additional Conrail securities and USRA obligations (subject to an overall $500 million limitation on USRA obligations used for this purpose), and/or to enter a judgment against Conrail. Id. Section 303 does not authorize the Special Court to enter a judgment against the United States. Section 303 does, however, recognize that the consideration to be transferred in exchange for the rail properties must equal the “con- stitutional minimum” and directs the Special Court to make necessary adjustments so that this “constitutional minimum” is not exceeded. The judgment of the Special Court may be appealed directly to this Court. Section 303 (d). (5) Section 304 of the Rail Act provides that railroads in reorganization subject to the Act may discontinue service over, and may “abandon”—i.ec., dispose of as they wish—any rail properties not designated for trans- fer under the Final System Plan. In the interim, how- ever, Section 304/f) permits a railroad in reorganization to discontinue service on or to abandon lines of railroad only with the consent of USRA. Reorganization Court Proceedings Section 207(b) of the Rail Act required each Re- organization Court to decide, in two stages, whether its railroad should be reorganized pursuant to the Rail Act. First, each Reorganization Court was to decide, within 120 days of the Rail Act’s enactment, whether (a) its railroad is reorganizable on an income basis within a reasonable time under Section 77 of the Bankruptcy Act and if so whether (b) the public interest would be better served by continuing the reorganization under Section 77 than by proceedings under the Rail Act. If a Re- organization Court made both affirmative findings, it was authorized to keep its railroad out of all subsequent Rail Act proceedings. Railroads not eliminated at the “120-day” stage went through the second stage, or “180- day” proceeding, in which each Reorganization Court was to order that reorganization proceed under the Rail Act unless it found that the Rail Act “does not provide a process which would be fair and equitable to the estate of the railroad in reorganization.” On the date of enactment, eight major railroads were in reorganization in the region. In addition, fifteen of Penn Central's railroad subsidiaries (“Secondary Debtors”) were considered separately from Penn Central in distinct “120-day” and “180-day” proceedings in the Penn Central Reorganization Court. Hence, the major railroads and the Secondary Debtors required nine de- terminations by the Reorganization Courts under Section 207 (b. On May 1, 1974, two railroads—the Boston & Maine and the Erie Lackawanna—were kept out of the Rail Act procedures on the “120-day” grounds that they are reorganizable on an income basis under Section 77 and that the public interest would be better served by con- tinuing under Section 77. These determinations have not been appealed. In the remaining seven cases, the railroads were not taken out of the Rail Act at the 120- day stage. In six of these cases, the Reorganization Courts found that the railroads were not reorganizable on an income basis under Section 77. Certain of the Secondary Debtors were found to be reorganizable on an income basis under Section 77 but the Court was unable to conclude that the public interest would be better 1 were and are the only operating railroads in reorganiza- tion in the United States, except for a tiny carrier, the Cadillac and Lake City Railroad. The Cadillac and Lake City, which is also in region, has been excluded from further proceedings under the on the ground that it is separately reorganizable on an income is under Section 77 and the public interest would be better served by continuing under Section 77. 10 served by reorganization under Section 77 than by pro- ceedings under the Rail Act. These seven cases were therefore the subject of the subsquent “180-day” proceedings in the respective Reor- ganization Courts. On July 1, 1974, six days after the decision of the three-judge Court below in the present ease, two Reorganization Courts, having before them Reading Company and The Ann Arbor Railroad Com- pany, ordered that their reorganizations proceed under the Rail Act. In the remaining five proceedings, which dealt with Penn Central, Secondary Debtors, Lehigh Valley Railroad Company, The Central Railroad Com- pany of New Jersey, and The Lehigh and Hudson River Railway Company, the Reorganization Courts con- cluded, wholly or in substantial part on the basis of the decision below in the present case, that the Rail Act does not provide a fair and equitable process and de- clined to order reorganization under the Rail Act. Section 207(b) provides that appeals from Reorgani- zation Court orders pursuant to that section shall be made to the Special Court. It further provides that there shall be no appeal from the decision of the Special Court. These seven 180-day determinations are all on appeal to the Special Court, which is required by See- tion 207(b) of the Rail Act to render its decision within 80 days after the appeals were taken, a period which expires on September 29, 1974. Appellant USRA and other parties intend to suggest to the Special Court that it render its decision at that time but stay its mandate pending the determination by this Court of the issues on this appeal. These five determinations were made by three courts: the Penn Central, Secondary Debtors, and Lehigh Valley reorganizations are all before Judge um in the Eastern District of Pennsylvania. Judge Fullam was aiso a member of the court below. In the case of The Central Railroad of New Jersey, the 80-day period expires on September 26, 1974. ee ee RS ee 11 Proceedings Below Plaintiffs in the court below challenged the constitu- tionality of the Rail Act on a number of grounds. A primary contention was that the consideration provided in the “Final System Plan” for required transfers of rail property pursuant to that Plan will or may, despite the statutory requirement that the consideration be equal to the “constitutional minimum standard of fairness and equity,” fall below constitutiona! requirements so that the transfers will constitute a taking of Plaintiffs’ prop- erty for less than just compensation in violation of the Fifth Amendment. This contention was rejected by the court below as premature. JA 9 at 23-25. Plaintiffs also contended below that a taking of their property without just compensation will result from a combination of the allegedly required continuation of rail operations pending implementation of the Fina! System Plan with the alleged “erosion” beyond constitutional limits of the Penn Centra! estate during this period. Appellant USRA contended below that, (i) on any theory of “erosion,” the record before the court below did not permit a determination of the amount of erosion suffered by any railroad estate or a determination that any rail- road estate has reached the “constitutional limit” be- yond which operations cannot be required to continue without an adequate remedy at law for compensation; (ii) railroad creditors and owners can constitutionally be required to sustain a reasonable burden of interim erosion while efforts are being made to restructure the railroad on a profitable basis: and (iii) in any event Plaintiffs were not entitled to an injunction or a declara- tory judgment of unconstitutionality because, if it should ultimately be determined that the Rail Act had caused an erosion of their interests beyond constitutional limits, Plaintiffs would have an adequate remedy at law in the Court of Claims under the Tucker Act for any claimed shortfall in their compensation. 12 The court below determined that the present existence of operating losses in the Penn Central system made the erosion issue “ripe for adjudication.” JA 9 at 40. The court did not define erosion, nor did it decide whether the Penn Central or any other railroad has yet reached the constitutional limit of erosion, nor did it attempt to define the constitutional limit. The court said only that, “we are persuaded that a significant possibility exists that a point of erosion either has been or may soon be reached so that it can be said that plaintiffs’ contention of interim unconstitutional tak- ing by continued loss operations is ripe for adjudi- cation.” Id. Without resolving the factual issues further, the court then turned to the relevant statutory issues. The court apparently read Section 304(f), which requires a railroad in reorganization to obtain the approval of USRA be- fore it discontinues rai! service or abandons rail lines dur- ing the planning process, as authorizing USRA to with- hold approval even if a court has determined that “ero- sion” has gone beyond constitutional limits and even if an adequate remedy at law for compensation is barred by the Rail Act. The court then concluded that the Rail Act did bar an adequate remedy at law. It explicitly rejected the con- tention of Appellant, of the other Government Parties, and of the Penn Centra! Trustees that if the constitu- tional limit of permissible uncompensated erosion should be passed, Plaintiffs would have an adequate remedy at law in the Court of Claims under the Tucker Act for just compensation. JA 9 at 53. The court construed the Rai! Act. despite its silence on the subject, as precluding the Court of Claims from taking jurisdiction of any suit for compensation for actions taken under the authority of the Rail Act. The court also apparently decided that the power of the Special Court, pursuant to Section 303. — 13 to determine whether transfers of rail properties are fair and equitable to the estate of each railroad in reor- ganization and to award the “constitutional minimum,” does not include the power to remedy erosion beyond con- stitutional limits. Id. at 53, 82. Based on this analysis, the court below held Section 3040 “null and void as violative of the Fifth Amendment of the United States Constitution, to the extent that it would require continued operation of rail services at a loss in violation of the constitutional rights of the owners and creditors of a railroad.” Id. at 82-83. The court did not define such constitutional rights, but it ined all Defendants, “from taking any action to enforce the provisions of Section 304(f) with respect to any abandon- ment, cessation or reduction of service which has been or may hereafter be determined by a court of competent jurisdiction to be necessary for the pres- ervation of rights guaranteed by the United States Constitution.” Id. at 82. Technically, this order has effect only if some other court (presumably a Reorganization Court) determines that an abandonment, cessation, or reduction of service is constitutionally required. The court below went on to declare that Section 303 of the Rail Act, relating to transfers of rai! properties pursuant to the Final System Plan, is “null and void as contravening the Fifth Amendment of the United States Constitution insofar as it fails to provide compensation for interim erosion pending final implementation of the Final System Plan „ A In addition, without explanation, the court enjoined USRA, unconditionally, from certifying any Final Sys- 14 2352225 Cat pumas & Get ee e). Plaintiffs made a third challenge to the Rail Act on the ground that it is not uniform“ within the meaning of Article I, Section 8, Clause 4, of the Constitution, providing that Congress shall have the power to enact “uniform Laws on the subject of Bankruptcies through- out the United States.” The court below rejected this contention except as to one sentence of Section 207(b). Id. at 83. That sentence provides that if any Reorganiza- tion Court determines, in the “180-day proceedings,” that the Act does not provide a fair and equitable process for the reorganization of its debtor and therefore that the debtor shall not be reorganized in accordance with the Act, then the Reorganization Court shall dismiss the Section 77 proceedings. Since the court’s ruling nullifying A ~ 7 does not materially affeet the nistration Rail Act, we do not a this part of the court’s order. — SUMMARY OF ARGUMENT The * Act provides varied and substantial new resources meet a rail crisis that is centered i - ond Witness ten Gomme Ge aden ac an entire nation. These resources can be used to create a self-sustaining rail service system that will meet the needs of the public. The creation of that system will resolve the several present railroad reorganization pro- ceedings and will afford fair and equitable treatment to the creditors and shareholders of the bankrupt railroads. The Rail Act has been attacked on the nd under some hypothetical circumstances 22 2 — to these private interests would not be assured. The Act itself, with its commitment of major new public resources, its revamping of the regulatory framework, 15 and its imaginative adaptation of traditional railroad re- organization procedures and principles, provides ample refutation of the Act’s detractors. The short answer to their contentions, however, is that if, despite all of the resources that Congress pledged and all the care it de- voted to legislating a constitutional solution to the rail crisis, the Act should require the use or transfer of rail properties for less than the “constitutional minimum” consideration that the Act expressly recognizes to be due, a suit for just compensation in the Court of Claims under the Tucker Act is an adequate and proper remedy at law, and no injunction is justified. Tucker Act. In the court below, Plaintiffs sought (a) a declaration that the Rai) Act is unconstitutional on its face and (b) an injunction against its implementa- tion. Their primary contention was that the Rai! Act will cause a “taking” of their “property” for “public use” without “just compensation” in violation of the Fifth Amendment to the Constitution of the United States. The court below should have responded to that challenge by denying the relief sought and dismissing the complaints on the ground that if Plaintiffs should ever wish to present such a claim, they will have an adequate remedy at law in the form of a suit for just compensation in the United States Court of Claims under the Tucker Act, 28 U.S.C. 81491. Decisions of this Court have clearly established that since just compensa- tion remains available in a suit under the Tucker Act, it is inappropriate ever to enjoin duly authorized federal action on the ground that it may constitute a taking for less than the just compensation that must be paid. The same decisions establish that this adequate legal remedy makes it unnecessary and inappropriate for a court of equity, when asked for such an injunction, even to in- quire into whether a taking in fact has occurred or will occur. 16 The court below, however, ruled that the Rail Act bars a Tucker Act remedy for claims arising under the Rail Act. The court assumed that the existence of such a remedy depends on the intention of Congress, when it passed the Rail Act, to make a Tucker Act remedy available. Hence, the court stated the question as whether there was an “implied remedy at law,” JA 9 at 41, and concluded that to “read a Tucker Act remedy into the Rail] Act” would be “judicial legislation on a grand, if not arrogant, scale.“ Id. at 53. In fact, the Tucker Act stands by itself as a century- old bulwark both against inadequately compensated tak- ings of property and against unwarranted prior restraint by courts of equity against the efforts of Congress to provide for the needs of the nation. The Tucker Act, by itself, confers jurisdiction on the Court of Claims to hear money claims arising under the Constitution of the United States, including claims for just compensation for the public use of private property. This remedy is available for any claim of taking (including claim of a taking of the use of property) that results from au- thorized federal action. It is not necessary, when Con- gress passes later substantive legislation which someone alleges to have caused a taking, that Congress have in- tended a taking, or have provided a remedy, or have explicitly or implicitly preserved the availability of the Tucker Act remedy in the later legislation. The only question properly before the court below on this issue was whether the Rail Act repealed the jurisdie- tion of the Court of Claims pro tanto as to affected rail estates. This it clearly did not do. The Rail Art nowhere mentions either the Tucker Act or the Court of Claims, although it contains thirteen separate provisions explicitly modifying or repealing other federal statutes, including an entire section entitled “Relationship to Other Laws.” While it is clear from the statute and its legis- EPS Ce 0 — 17 lative history that Congress did not expect that the con- sideration provided under the Rail Act would be ju- dicially determined to be less than the “constitutional minimum” that the Rail Act expressly recognizes to be due, there is nothing in the Rail Act or its legislative history to suggest that Congress intended to deny the traditional Court of Claims remedy to anyone asserting such a claim. The questionable inference, drawn by the court below, that the Rail Act implicitly repealed a basic grant of jurisdiction to a federal court, was especially inappropri- ate in light of its consequences: ta) to impute to — gress a deliberate nace to - „ — 42 r iring transfers of rail p " vane Ming thet might judicially be determined to be less than the “constitutional minimum” Congress itself recognized and by barring any remedy to recover the shortfall, and (b. to strike down portions of a major federal statute that the Court apparently would have upheld if it had drawn the opposite inference. The action of the court below thus violated the basic precept of constitutional litigation that a statute shall be inter- preted, where possible, so as to save rather than destroy its constitutionality. ion 30 Apart from its rejection of the Tucker ot saan: oo district court’s resolution of the merits of the “taking” allegations was also erroneous. One of Plaintiffs’ allegations was that Section 304(f ) of the Rail Act, which forbids railroads in reorganization from discontinuing service or abandoning rail lines during the rail planning process without the approval of USRA, has caused and or will cause a “taking” of Plaintiffs property in the form of “erosion” of railroad estates through continued rail operations. The court below did not decide whether “erosion” amounting to a “taking’ has occurred or will occur. Indeed, the court neither de- 18 fined “erosion” nor specified the constitutional limits beyond which erosion becomes a taking and cannot be compelled unless an adequate remedy for just compensa- tion is available. Instead, the court took the following extraordinary steps: (a) it decided that the constitu- tionality of Section 304(f) was ripe for adjudication even though the constitutional limit of erosion had not been found to have been reached and might not ever be reached; (b) it interpreted Section 304(f) as barring discontinuances and abandonments even though the re- sult would be erosion beyond constitutional limits for which the court had ruled no adequate remedy was available; (c) it declared Section 304 /f, as so construed. unconstitutional as applied to these hypothetical circum- stances; (d it enjoined USRA, now, from interfering with any discontinuance or abandonment that another court may hypothetically find constitutionally required ; and (e finally, it declared other portions of the statute unconstitutional, without explanation, because they do not specifically provide a remedy for the very erosion beyond constitutional limits that the court itself had al- ready done more than necessary to prevent. The court, based on its ruling that the Rail Act barred an adequate remedy at law, declared Section 304(f) “null and void as violative of the Fifth Amendment to the extent that it would require continued operation of rail serivees at a loss in violation of the constitutional rights of the owners and creditors of a railroad.” JA 9 at 82-83. The court then enjoined the Defendants “from taking any action to enforce the provisions of Section 304(f) of the Regional Rail Reorganiza- tion Act of 1973, with respect of any abandonment, cessation, or reduction of service which has been or may hereafter be determined by a court of compe- tent jurisdiction to be necessary for the preserva- tion of rights guaranteed by the United States Con- stitution.” Id at 82. 19 If this were all the court below had done, its order would be merely gratuitous. The court did not need to interpret Section 304(f) as permitting USRA to such constitutional rights as a later court may declare. It did not need to strike down the section, or to enjoin USRA, now, from violating constitutional rights declared by a hypothetical later court. Even if the court correctly construed the Rail Act as denying an adequate remedy at law, the entire resulting problem could have been resolved by interpreting Section 304 (f) as conferring authority only within the bounds permitted by the Constitution. If, as the court below hypothesized, some later court finds that an abandonment, cessation or reduction of railroad service is required to preserve constitutional rights, there is no reason to assume now that USRA will act in violation of that hypothetical de- termination or that the later court would not be able itself to issue such injunctive and other orders as may be necessary to enforce the constitutional rights it has declared. ion 303. The court below did not stop at en- * — action under Section 304 f '. It also declared that Section 303 of the Rail Act, which provides for the conveyance of rail properties to Conrail pursuant to the Final System Plan and for the valuation of those prop- erties and the consideration therefor . contravening the Fifth Amend- —— = — States Constitution insofar as it fails to provide compensation for interim erosion pending final implementation of the Final System Plan pursuant to the statute.” JA 9 at 82. holding void a section of the statute that is „ enney Rae for incidental references) in the court’s opinion, was wholly unnecessary and erroneous even on the court’s view of the Tucker Act and erosion issues. In the first place, the court below did not de- termine that an erosion taking, requiring just compensa- tion, either has occurred or would occur if the process of the Act were allowed to go forward unimpeded. Con- sequently, even on the court’s view of the facts, the erosion question may never arise. More important, by its treatment of Section 304(f), the court below itself eliminated any possible objection to Section 303. The court enjoined all Defendants from taking action under Section 304(f) that would conflict with any future judicial determination that service should be discontinued or property abandoned in order to avoid erosion beyond constitutional limits. In fact, no Reor- ganization Court or other court has yet determined that the constitutional limit has been reached in the case of its railroad. If any Reorganization Court or other federal court determines that the constitutional limit has been reached, it will presumably order selective or total discontinuance of rail service or abandonments of rail lines. As noted above, (a) once the court below held that the Rail Act bars an adequate remedy at law, it should not have interpreted Section 304(f) of the Rail Act to purport to give USRA authority to prevent dis- continuances or abandonments in such circumstances, (b the Reorganization Court or other federal court making such determination would obviously have power, should it for some reason be necessary, to enjoin USRA from interfering with its orders issued on constitutional grounds, and (c) in any event, the court below itself enjoined USRA from interfering with such hypothetica! future constitutionally required discontinuances or aban- donments. Consequently, if there was ever any possibility that the Act would cause any railroad estate to reach the constitutional limit of erosion and yet require such railroad to continue to operate beyond that point, this defect has been anticipatorily remedied by the court be- low. There was no need to declare Section 303 uncon- stitutional for failing to provide just compensation for 21 an erosion taking caused by the Rail Act when the pos- sibility of any such taking has been more than adequately eliminated. Certification of the Final System Plan. a > low did not stop even with this second ruling. Pore on to enjoin USRA from certifying any Final — Plan to the Special Court. . 4 in the opinions below that offers an — or — ruling prohibiting the central step contempla = Act. oO Gates ae ee e 8 reached, it may be possible for the affected railroad, USRA, and ethers including Congress snd the Special Court to devise a basis for continuing rail service — ject to adequate compensation in the Final System fn otherwise. If that is not possible, the Reorganization Court (or another appropriate court) a: Oe Se tinuance or abandonment, as necessary, on constituti — grounds. If it be presumed that USRA would — any such order, USRA has now been enjoined from ng 80. rr could the certification of a Final System Plan by to the Special Court be an unconstitutional step; nor could an injunction against this step serve in any — to remedy any defect in the Rail Act found by the cou below. \ I ion of erosion requires Calculation of Erosion. Calculation a comparison between the consequences to creditors and reholders reorganization under the Rail Act with — — of some other alternative now avail- record case does not permit a determina- — 28 — of a long and expensive liquida- tion — — OH, Ge ay cies See able alternative. Nothing in the record demonstrates — proceedings under the Rail Act, including the 5 tion of going- concern values in a railroad system su to the present economic environment, the ability to obtain state, local and private support for important but un- profitable rail services, the abandonment and transfer of unprofitable lines in a prompt and orderly manner, fed- eral assumption of labor protection costs, substantial di- rect and indirect cash subsidies and the use of federally guaranteed debt, will yield creditors and shareholders less than they can receive from any available alternative. Moreover, the Rock Island.“ Denver & Rio Grande,’ Penn-Central Merger and New Haven Inclusion’ cases make it clear that even if it could be shown that interim operations will lead to a less satisfactory result for claimants than some alternative available now, a reason- able burden of “erosion” may constitutionally be imposed while efforts are made to restructure their railroads into a viable going concern. The “property” of railroad creditors and owners is inherently subject to the right of the public to make reasonable efforts to preserve es- sential rail operations on a self-sustaining basis. There is no reason to assume, at this time, that the implementa- tion of this major federal program in accordance with the very tight time schedule provided in the Act itself will subject creditors or shareholders to an unconstitu- tional erosion of their property. *Continental Bank v. Chi , Rock ees (1988). hicago Island & P. Ry., 294 US. 5 Reconstruction Finance C v. i 328 U.S. 495 (1946). orp. v. Denver & Rio Grande N. K. K. Penn - Central Merger Cases, 389 U.S. 486 (1968). Neu Haven Inclusion Cases, 399 U.S. 392 (1970). — GD ae x —ͤ— 23 ARGUMENT Introduction: The Rail Crisis and the Rail Act Eight major railroads* operating in the Northeast Midwest Region of the United States are now in re- organization proceedings pursuant to Section 77 of the Bankruptcy Act, 11 U.S.C. £205. The resulting threat to the welfare of the Region and of the United States,” *Seven are Class | railroads: the Penn Central, Reading, Erie Lackawanna, Central of New Jersey, Lehigh Valley, Boston & Maine, and Ann Arbor. Of these, the Erie Lackawanna and Boston & Maine were found by their Reorganization Courts to be separately reorganizable under Section 77, and consequently will not be reor- ganized under the Rail Act. A Class I railroad is defined by the Interstate Commerce Commission (“ICC”) as a railroad with 85 million or more of annual revenue. ICC Finance Dockets show these seven to be the only Clase I railroads in the nation in re- organization. In addition to these Class | railroads, one significant (lass II rail- road. the Lehigh 4 Hudson River, is in reorganization in the Region. As noted above, a second, tiny Class II railroad, the Cadillac and Lake City, is also in reorganization in the Region but has been found to be separately reorganizable and will not be re. organized under the Rail Act. See p. 9 note 1 supra. The 160 Finance Dockets disclose that the only Class II railroad in re- organization outside the Region ceased all operations in 1968 and sold substantially all of its lines in 1969. * The Act defines “Region” as “the States of Maine, New Hamp- shire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, Ohio, Indiana, Michigan, and Illinois; the District of Columbia; and those portions of contiguous States in which are located rail properties owned or operated by railroads doing business primarily in the aforementioned e diet ions 4 determined by the ice by order Section 102(13) ICC Order, Ex Parte No. 293, approved January 14, 1974, delineated areas near Louisville, Ken- tucky St. Louis, Missouri, and Kewaunee and Manitowoc, Wiscon- sin, as included in the Region. As used herein, the term “Region” refers to the area defined in the statute and by the ICC „A 1970 Department of Transportation study concluded that within eight weeks of a complete shutdown of the Penn Central, GNP for the nation would drop by 2.7% and for the Northeast by 5.2%. Nearly two million Penn Central and other affected employees would be laid off. Statement of Secretary Brinegar in Hearings be- | i 5 that the railroads’ problems in the 1970’s are not pri- marily problems of capital structure but arise from shifting economic trends and are in part the result of regulatory policies make the limited resources of ™ See S. Rep. No. 93-601, gad Cong, Ist Sess. (“Sena Report” 6-7 (1973). As the House Committee stated, — which Cong. Ist Sess. (“House Report") 29 — No. 93-620, 93d of several railroads into a single con- solidated unit. 1. The Rail Act Provides a Thorough Planning and Review Process (a) USRA, with the assistance of the Secretary of Transportation (“Secretary”) and the Rail Services Planning Office (“RSPO”), a new office created by the Rail Act within the ICC is to prepare a Final System Plan for restructuring the operations of the railroads in reor- ganization.” A central feature of the Final System Plan will be the transfer of designated rail properties of rail- roads in reorganization to Conrail, a private corporation for profit to be created, pursuant to Section 301, to own and operate the restructured system. The Final System Plan will provide for the issuance to the transferor es- tates of securities of Conrail, plus up to $500 million of USRA obligations guaranteed by the United States. Sec- tions 206(d) (1), 210. It may also provide for transfer to and consideration from profitable railroads, Section 206 (ce) (1) (b+ and 206/d)(2),” and may provide for addi- tional Government obligations, subject to approval by joint resolution of Congress. Sections 206% . (i), and 210 0b). Sections 202, 204, 205, and 206. The statutory deadlines in Sections 204 and 205(d)(1) for preliminary reports by the Secre- tary and RSPO have been met. These transfers are subject to expedited review by USRA and the ICC, whose rulings are not reviewable by any court. Section 2061 d)(3). (b) Following publication of and hearings on a preliminary system plan, USRA must submit a proposed Final System Plan to the ICC and Congress within 450 days after enactment e., by March 28, 1975). See- tions 207 e, 208(a). The Plan becomes effective if neither house of Congress disapproves it within 60 con- tinuous session days. Section 208. Within 90 days after it becomes effective, the Final System Plan is to be transmitted to the Special Court created pursuant to See- tion 209 of the Rail Act. Section 209 (e, The Conrail securities and USRA obligations designated in the Final System Plan as consideration for rail properties to be transferred to Conrail under the Pian, and the considera- tion from any profitable railroad purchasing property, must be delivered to the Special Court within ten days after the Plan is transmitted. Section 303(a). Within a further ten days, the Special Court is to order the transfer of the rail properties designated in the Plan. Section 303 0b e The Special Court is then to determine whether the exchange of rail properties for securities and “other benefits” is fair and equitable to the estate of each railroad in reorganization “in accordance with the stand- ard of fairness and equity applicable to the approval! of a plan of reorganization or a step in such a plan under Section 77 of the Bankruptcy Act.” Section 303(c) (1)(A). Congress recognized that, for the exchange to be “fair and equitable,” the value of the consideration for the transferred properties had to equa! the “constitutional minimum,” and directed the Special Court to make any adjustment needed so as not to exceed this “constitu- tional minimum.” Sections 303(¢)(1)(B), (e¢) (3). The Special Court is required, if it finds that the is not fair and equitable, to order a reallocation of the Conrail securities, and or to order the issuance of addi- tional Conrail securities or USRA obligations, and or to enter a judgment against Conrail. Section 303 ( % (2). A finding, determination, order, or judgment of the Special CU, ts ð̊ la ay ˙ 27 Court under Section 303 may be appealed directly to this Court. Section 303d). 2 The Rail Act Provides Resources Not Available in Section 77 Reorganizations Section 77 was designed primarily to provide a pro- cedure for the recapitalization of a single railroad. It does not provide any means of trimming rail operations to meet changed economic and competitive conditions, or any means of compensating employees whom the railroads are obligated to employ but who are unneeded in a slimmer system. It does not provide any government financial assistance. It does not provide any specific means of transferring rail properties either to other rail- roads which might put them to more profitable rail use | or to governments or other entities for rail or non-rail use. Finally, it provides no means of coordinating the reorganizations of two or more railroads in the same area. The Rail Act was designed in part to supplement Section 77 in these respects. The center of the Rail Act is its provision for a planning process leading to a re- structuring of rail operations and the abandonment of excessive facilities. At the same time, the Act includes special features, funded by up to $250 million of au- thorized federal appropriations, to protect employees who might be adversely affected. Title V. Four additional forms of financial support provided by the Rail Act deserve special mention: (a) USRA is authorized to issue $1.5 billion in Government-guaranteed obligations. Of this sum, up to $1 billion may be issued to Conrail, of which not less than The differing Senate and House approaches and their resolu- tion are described in the Conference Report, H.R. Rep. No. 93-744, 93d Cong. Ist Sess. (“Conference Report“ 61-68 (1973). 28 half must be used by Conrail for rail rehabilitation and modernization. Section 210 0b). Additional amounts above this revolving $1.5 billion ceiling may be issued if ap- proved by joint resolution of Congress. Id. The Act permits Conrail’s obligations to USRA to be on terms dif- ferent from the terms of USRA’s government-guaranteed obligations. Thus, $1 billion in financing can be made available to Conrail on terms more favorable than are ordinarily available in the commercial market. (b) The Secretary, with USRA’s approval, is au- thorized to enter into agreements (involving the issuance of up to $150 million in USRA obligations) for the ac- quisition, maintenance, or improvement of property that will be included in the Final System Plan. Section 215. e To meet emergency needs pending implementa- tion of the Final System Plan, the Secretary is further authorized to make payments not exceeding $85 million 4 trustees of railroads in reorganization. Section : (d) The Secretary and USRA may provide to pub- lie agencies (within a $180 million authorization) sub- sidies for continuing non-economic service and loans for the acquisition and modernization of rail properties. Since these funds are to be made available on a 70-30 matching basis, the assistance under these programs is actually approximately $250 million. To overcome the difficulty of severing and transferring properties in the traditional Section 77 process, Con- The court below stated, JA 9 at 32, that only $25 milli i amount had been appropriated. The current he is — 2 See Foreign Assistance and Related Programs Appropriations Act of 1974, Pub I. 93-240 (Jan. 2, 1974) ($35 million) ; Second Sup- 939392 Act, 1974, Pub. L. 93-305 (June 8. 1974) See Interstate Commerce Act § 5, 49 U.S.C. 5; Paper Co. v. Atlantic Coast Line K.K., 347 U.S. 298 A1 * — , ⏑ ] ¶ rr e gress provided that the Final System Plan could require rail properties of the railroads in reorganization to be sold for their fair value pursuant to the Final System Plan to (i) profitable railroads in the Region, (ii) the National Railroad Passenger Corporation (“Amtrak”) for rail passenger service, (iii) state, regional, or local transportation authorities for commuter and intercity rail services, and (iv) various recipients for other public purposes, including highways, conservation, education, and recreation. As already mentioned, railroads in re- organization will also be able, subject to USRA’s ap- proval, to dispose of unneeded rail properties for the best price under simplified abandonment and termination procedures.” The Act also provides for the possibility that Congress will authorize USRA to guarantee Conrail ob- ligations, Section 206(i), or to issue obligations in excess of the $1.5 billion limit in order to implement the Final System Plan, Sections 206(h) and 210(b). Finally, the Rail Act reflects Congress’ recognition of the need to coordinate the reorganization of adjoining and competing railroads in reorganization: “{Njo one Court can restructure the entire system under Section 77.”" Congress therefore created a new agency——-USRA —to formulate “essentially a railroad reorganization plan which would consolidate parts of [the] bankrupt carriers into a new for-profit carrier.“ and, to review and ap- prove the Plan, it created a single new court—the Special Court—with all the powers of a Section 77 court.” — — Soc tion 206(c). Section 304. „House Report at 29. 0 Jd. at 23-24. Section 209 0b B. The Rail Act Provides Solutions to the Problems that Have Made It Impossible To Reorganize the Penn Central Under Section 77 All Plaintiffs in this case have claims against the Penn Central estate, and the Penn Central Trustees have intervened as Defendants. Consequently, although Plain- tiffs challenged the Rail Act as unconstitutional on its face, the Penn Central reorganization proceeding pro- vides an essential backdrop against which their conten- tions must be evaluated. The Penn Central entered reorganization under Section 77 on June 21, 1970. During the first 30 months of re- organization, the Penn Central Trustees identified and attempted to satisfy four conditions which they judged necessary to a successful Section 77 reorganization : {1) rationalization of the physical plant by elim- inating excess capacity; (2) elimination of unnecessary labor expense; (3) full compensation for all passenger service: and (4) inereased freight traffic and revenues.” Since the primary focus of the Act was on the Penn Central. this and the following section of this Brief present examples of how and why Congress thought the Rail Act was a reasonable approach to the Northeast/Midwest problem. Although the ex- amples are drawn specifically from the Penn Central reorganization proceeding, it is clear that Congress considered many of the Penn Central's problems to be shared by other Northeast/Midwest rail- roads. See Senate Report at 6-14; House Report at 25-29. The first three conditions were identified in the Preliminary Report of Trustees Concerning Premises for a Reorganization (February 10, 1971), J. Doc. 1 at 3. As for the fourth condition. a September 1971 report concluded that a study of Penn Central's revenue-producing potential was necessary. Second Report of Trustees on Status of Reorganization Planning (September 17. 1971) (“September 1971 Report“ . J. Doc. 3 at 14-18. In February 1972 the Trustees reported that a successful reorganization re- quired, inter alia, attaining a certain projected volume of freight 31 The Penn Central Trustees reported for the first time on January 1, 1973, that they believed substantial gov- ernment financial assistance was essential in order to achieve service improvements that would attract the necessary increases in freight traffic and revenues. Seven days after the Penn Central Trustees February 1973 Report quantified this needed assistance at $600- $800 million. Congress passed Joint Resolution 59 di- recting the Secretary to submit within 45 days “a full and comprehensive plan for the preservation of essential rail transportation services in the Northeast .. . - * Aft- er studying various measures to relieve the rail crisis during the remainder of 1973, Congress approved the Rail aff Reorganiza- traffic and revenue increases. Report of Trustees on 2 tion Planning February 15. 1972) (“February 1972 Report”). J. Doe. 4 at 1. a atin These f conditions were made especially eit in 2 enn Central Trustees’ Plan for Reorganization April 1. 1972) (“April 1972 Reorganization Plan J. Doc. 5 at 1, and were reiterated in. „% Trustees’ Interim Report of October 1, 1972 (“October 1972 Report”). J. Doc. 7 at 1: Trustees’ Interim Report of January 1. 1973 (“January 1973 Report”), J. Doe. 8 at 1; and Trustees Report on Reorganization Planning April 5, 1974) (“April 1974 Report”). J. Doe. 10 at 4. Penn Central Trustees’ January 197% Report. J. Doc. & at I penn Central Trustees’ Interim Report of February 1, 197% (“February 197% Report”). J. Doe. Sat 2 ; ; his require- „pub I. 93-5, 87 Stat. 5. The Seeretary satisfied t ana Northeastern Railroad Problem, A Report to the Con- gress, submitted to Congress on March 26. 1972 (“Northeastern Railroad Problem”). * i 17. May & 9, 10, 21, 30, and 31, and June 6 and ee 1 . Committee on Interstate and Foreign Cor. merce held hearings on H.R. 6591, H.R. 4897, HR 5822, HRK 5585. HMR 6880, H.R. 7373, and HJ. Res. 50. On February 2. March 2. May 30 and 1. and June 4, 15. 21. and 22, 1978. the Senate —— mittee on Commerce held hearings on S. 1031, and. oe. 15. 16, and 19, 1973, it held hearings on S. 2188 and — N Out of these hearings evolved the 1973 Act. The House and Se te Reports are dated November 4 and December 6, 1973. respectively, Bankruptey Act. The Reorganization Court described the Penn Central's situation in part as follows: i | ; i 721 i ; . 7 , i 17 . : ö 8 5 71 4 The accomplishment of the very task the Penn C Reorganization Court found impossible under my —the creation of a viable system—is described in the Rail Act as the first goal of the Final System Plan. Section 206(a)(1). To achieve this goal, the Act provides the resources and mechanisms—unavailable in Section 77— that are necessary. 1. Elimination of Excess Capacity The Penn Central Trustees,” the Department of Trans- and the Conference Report is dated (in the House) December 20 and in the Senate) December January 2. 1974. 26, 1973. Enactment occurred on * In re Penn Central Transp. Co., Bky. No. 70-347, M and Order No. 1543 (E.D. Pa., May 2, 1974), JA 84 at 102. The Penn Central Trustees’ February 1972 at 2, proposed “(i) taking advantage of the be ine Doc. 4 — the Penn Central Reorganization Court,” and Congress have all recognized that the Northeast railroads, and the Penn Central in particular, are bur- dened by an excessive physical plant. By January 1. 1973, the Trustees had filed applications with the ICC to abandon over 3.000 miles of lines which they deemed to be uneconomic, of which the ICC had th income by 1976 could not be achieved. The problem plant redundancy also includes the operation of duplica- tive facilities by two railroads in an area that can sup- port only one, a problem that the Rail Act can ameliorate but ae efficiency made possible in theory by the 1968 merger but never realized in fact, (ii) abandonment of those freight lines which have neither busines nor public service justification, and (iii) mak ing appropriate arrangements for continuing those freight lines found to be essential to the public service but inoperable on a sound business basis.” See also Trustees’ January 1973 Report. J. Doe. &: Trustees’ April 1974 Report, J. Doc. 10. Northeast Region, February 1, 1974 (“Secretary's Rail Serwiee Report”). Memorandum and Order No. 1543, supra, JA 84 at 88. House Report at 27. penn Central Trustees’ January 1973 Report, J. Doc. Sat 3. „ Secretary's Rail Service Report, supra at 3, concludes that 96% of the 1972 freight carloads carried on the railroads in reorgan!- zation could have been accommodated on 75% of the 1972 route mileage. tion Courts. In general, Section 77 makes no provision for restructuring rail operations, and discontinuance of service and abandonment of property could be accom- plished only on a line-by-line basis following standard ICC procedures. The Act turns the process around by per- mitting USRA to select the services and properties that are to be kept in operation, with essentially automatic diseontinuance and abandonment of everything else. That process goes far to explain why there is a reasonable prospect of creating a viable Conrail under the Act even though the Penn Central and other railroads now in reorganization cannot b made viable in Section 77 proceedings. (a) Abandonments have been difficult, and have not been accomplished with sufficient speed, because of the need to comply with ICC and National En.ironmenta! Policy Act procedures.” The Act dispenses with the need for both, and permits USRA—in the absence of reason- able objection from affected state or local governments— to authorize prompt interim abandonments. Sections 304 (f) and 601(c). A core system could not be established by the Penn Central Reorganization Court because it has no authority See Harlem Valley Transp. Ass'n Stafford, 360 F. Supp. 1057 (S. D. N. V. 1973), aff'd, No. 73-2496 (2d Cir., June 18, 1974). Be- tween the district court's decision in that case in July 1973 and the court of appeals’ affirmance in June 1974, there was a de facto moratorium on almost all abandonment applications pending before the ICC. The economic burden imposed on railroads by lengthy abandon- ment procedures is emphasized in House Report at 27 and 55 and in the debates at 119 Cong. Rec. S22.483 (daily ed. Dec. 11, 1973) (remarks of Senator Hartke) and 119 Cong. Rec. S23,782-83 (daily ed. Dec. 21, 197%) (remarks of Senator Hartke). In addition, the advantageous procedures for abandonments contained in the Act were stressed by the President when he signed the bill into law. 10 Presidential Documents: Richard Nixon 8 (Jan. 2, 1974). a — to order the restructuring of the debtor’s rail operations.” Even a final reorganization plan under Section 77 would be dependent on piecemeal abandonments, each subject to ICC approval.” The Act, on the contrary, permits the selection of properties that have going-concern value and permits the prompt discontinuance of service, without ICC action, on all lines and properties not so selected.” (b) Excessive duplication of plant and service among competing carriers could not be effectively dealt with by the Section 77 reorganization process because of the difficulty of negotiations between carriers that are in reorganization,” the need for ICC approval of mergers and consolidations “ and the ICC’s lack of authority under Section 77 to authorize mergers not initiated by the debtor,” antitrust law considerations, and, of course, Section 77 makes no provision for a comprehensive restruc- turing of rail operations as part of the reorganization process. Discontinuance of service and abandonment of lines can be ac- complished, during Section 77 proceedings, only by ICC proceed ngs on a line-by-line basis. For example, abandonments that would require the closing of some line segments which, viewed individually, appear viable, but whose continuation reduces the carrier's over- all earnings from what they could be if the carrier were allowed to concentrate its traffic on fewer routes may not be possible within present ICC regulatory guidelines. Spychalski, Imperfections in Railway Line Abandonment Regulation and Suggestions for their Correction, 40 1CC Prac. J. 454, 456-57 (1973). No such constraints limit the broad power of USRA to exclude rail lines from the Con- rail system. * See Penn Central Transportation Co. Reorganization, Corp. Reorg. Rep. (Penn Central), Document No. 95, at 1102:86, 104 (ICC Finance Docket No. 26241, Sept. 28, 1973). Sections 304(a) and 601(b). Operations may be continued on a fully subsidized basis. See Section 304(c). See House Report at 29. Interstate Commerce Act § 5, 49 U.S.C. § 5. „See St. Joe Paper Co. v. Atlantic Coast Line R.R., 347 US. (1954). That case states “that those who in the absence of § 77 would wield the corporate merger powers must initiate and work each reorganization court's lack of jurisdiction over other carriers in reorganizations under the supervision of other judges. The Act offers an entirely different framework. USRA will have final control, subject only to review by Congress, over the design of the intramodal environment in which Conrai! will compete.” USRA can encourage — where 1 can support it, but USRA can con competition among carriers in reorganization and duplication of facilities where necessary to produce a viable system. N b e Transfer of the burden of uneconomic but significant lines to the states, localities, and private inter- ests affected was difficult under Section 77 but becomes possible under the Act. The Penn Central Trustees, as early as February 15, 1972, expressed the hope that lines that were producing losses for the Penn Central but were asserted to be important to particular localities and shippers could be continued, under contracts with those localities and shippers that would make Penn Cen- tral whole.” Penn Central, however, had little bargaining leverage because the alternative of selective discontinuance of service was a very remote possibility. The Depart- ment of Transportation's proposals for the Northeast rail problem included the suggestion that “states and local communities will be given the opportunity to ensure the continuation of rai! service if they find it necessary and are willing to subsidize the deficits fully.” “* Under See- out the merger now.” /d. at 309 n. 12. “The implication is plain the efllcers and directors of the Debtor are the ence naattin' a, initiate and work out a merger.” In re Florida East Coast Ry., 137 F. Supp. 693, 694 (S.D. Fla). aff’ curiam, (Sth Cir. 1955). * ä See Sections 207 and 208. * Penn Central Trustees’ February 1972 Report, J. Doc See also Trustees’ February 1973 Report, J. Doc. 9 at 1. oes “ Northeastern Railroad Problem, supra at 48 (emphasis added 37 tion 304 of the Act, service on lines not included in the Final System Plan may be terminated promptly unless the service is fully subsidized or the lines are purchased and operations are provided for by the purchaser.” 2. Elimination of Unnecessary Labor Expense The Penn Central Trustees and the Reorganization Court identified elimination of excess |abor costs for rail- way operating personnel as another requirement for a successful reorganization.“ This problem involves both crew size on operating lines and labor protection in connection with necessary abandonments. Title V of the Rail Act offers labor protection in connection with neces- sary abandonments, and authorizes $250 million of federal assistance to pay the cost of this protection. Section 509. 3. Elimination of Uncompensated Passenger Service The third condition for a successful reorganization of the Penn Central is the elimination of the burden of pas- senger service for which the railroad is not fully com- pensated.“ One of the major issues in litigation between the Penn Central and Amtrak has been whether Penn Central should receive a return on investment as part of its compensation for the use by Amtrak of its rail prop- * See Section 304(a)-(d). Fe. Memorandum and Order No. 1543, supra, JA 84 at 88; Penn Central Trustees’ February 1972 Report, J. Doc. 4 at 2; Trustees’ April 1972 Reorganization Plan, J. Doc. 5 at 1; Trustees’ January \973 Report, J. Doc. 8 at 3. „See, „, Penn Central Transportation Co. Reorganization, supra, Corp. Reorg. Rep. (Penn Central) at 1102:104-06; Penn Central Trustees’ January 1973 Report, J. Doc. 8 at 3; Trustees’ October 1972 Report, J. Doc. 7 at 3-4. * See, %. Memorandum and Order No. 1 supra, JA Penn Central Trustees’ February 1972 J. Doe. 4 at 5. erties in the Boston-Washington corridor. The Rail Act provides for the sale or lease to Amtrak of those rail! properties. Sections 206% 10, GO1id).” As pointed out above, the Act further provides for a system of subsidies, involving matching federal grants authorized at $180 million for two years to state, local, or regional authorities, to ensure the continuation of rail services, including passenger services. Sections 401 and 402. This USRA authority should enhance the prospects that other governmental! entities will subsidize uneconomic commuter passenger operations. Also, USRA can make loans to state, local, or regional transportation authorities to acquire rail properties and to modernize their prop- erties. Section 403. 4. Increased Revenues Through Application of New Financing The Penn Central Trustees have noted that the Penn Central has been caught in “a vicious civele.” In order to become viable it needed to increase the volume and efficiency of freight traffic and operations, but inade- quate revenues and lack of horrowing capacity made un- attainable the necessary substantial additions and im- provements to the physical plant as well as substantial catch-up maintenance. The Act offers a means by which Conrail can break the circle. Section 210 provides, in effect. $1 billion in federally guaranteed obligations of USRA to enable Con- rail to borrow funds on the favorable interest and pay- ment terms enjoyed by the United States. Half of this cum wust be used to rehabilitate and modernize the phy- © The methed of compensation for services provided to Amtrak is covered by the Rail Passenger Service Act of 1970, as amended, 45 U.S.C. $8 501 ef seq. “Penn Central Trustees’ January 1973 Report, J. Doc. 8 at 2. See also Trustees’ April 1974 Report, J. Doc. 10 at 3. — sical plant, and USRA may make available the remaining half, if necessary, for that purpose. The Act, clearly, is broadly responsive, and in many ways more than responsive, to the concerns expressed by the Penn Central Trustees when they first outlined their views on the necessary government financial assist- ance.” They themselves, of course, have acknowledged the soundness and responsiveness of the Act as it relates to the creation of a self-sustaining rail service system: “The basic concept of the Act is, in the Trustees’ judgment, sound. The Act envisions the transfer to a new entity ‘Consolidated Rail Corporation, CRC) of those Penn Central lines, and ines of other bankrupt carriers, which, following a thorough planning process, are found to offer the prospect of a viable rail network in the Northeast. Provision is made for public support or abandonment of those lines not deemed essential in the restructuring proc- ess. Provision is also made for government-guar- anteed financing of improvements to the plant being conveyed to CRC. The Act embodies a labor pro- tection arrangement, satisfactory to both labor and industry, whereby Federal funding is available to certain employees whose services would not be re- quired after the restructuring.” “ ‘In the interim period before implementation of the Final System Plan. USRA is avtherived to issue up to £150 million in obligations to finance agreements with the Penn Centra! and other railroads in reorganization for the maintenance and improve: ment of rail properties. Section 215. In addition, $85 million in subsidies is authorized for the continued provision of essential transportation services. Section 215. Penn Central Trustees’ February 1973 Report, J. Doc. 9 at 1-2. Penn Central Trustees’ April 1974 Report. J. Doc. 10 at 4. The Penn Central Reorganization Court shares the Trustees’ view that “the basic approach of the statute is fundamentally sound.” Memo- rundum in Support of Findings and Order No. 1596, In re Penn Central Transportation Company, Debtor (E. D. Pa., July 2, 1974 JA 124 at 148. (“Penn Central ‘180-Day’ Decision“ I. The Court Below Should Have Denied Equitable Relief and Dismissed the Complaints as to the “Taking” Issues on the Ground that Plaintiffs Have an Adequate Remedy at Law Under the Tucker Act Plaintiffs alleged in the court below that implementa- tion of the Rail Act would cause, or threatened to cause, a “taking” of their property for public use without just compensation, contrary to the Fifth Amendment to the Constitution. They alleged two sorts of “takings” : first, they contended that there would or might be a trans- fer of rail properties pursuant to the Final System Plan for less than the constitutionally required consideration (alleged “permanent taking”); second, they contended that by allegedly requiring Penn Central to continue op- erating its railroad until! the implementation of the Final System Plan, the Rail Act would or might cause an “in- terim” or “erosion” taking for which just compensation would be due. Appellant believes that when the processes of the Rail Act have run their course, no such taking, of either kind, will be found to have occurred. The ultimate determina- tion of this question, however, will depend on facts not of record in this case, events in the future including the actions of USRA and other governmental bodies, and the resolution of many large and complex statutory and con- stitutional issues whose exact scope will depend on the course of events. Appellant urged the court below to follow the decisions of this Court in similar cases and decline to inquire into the merits of the taking allegations, on the ground that provided for railroad estates under the Rail Act, plain- tiffs have an adequate legal remedy in the form of a suit in the Court of Claims under the Tucker Act. The rule of law for which Appellant contended can — — 41 stated: an equity court may never enjoin congressionally authorized, otherwise proper federal action on the ground that it may cause a taking for which compensation may be due, because a plaintiff always has another forum, the Court of Claims, in which he can obtain just com- pensation if his claims are upheld. This is the teach- ing of Hurley v. Kineaid, 285 U.S. 95 (1932), and ac- counts for the fact that, so far as we are aware, no fed- era! court has issued such an injunction between the decision in Hurley and the present case. The court below did not question the principle that equitable relief should be denied, without further inquiry, when there exists an adequate remedy at law. Nor did the majority question the fact that the Tucker Act remedy, if available to railroad estates, would be an ade- quate remedy.” Rather, it ruled that the Court of Claims would not have jurisdiction over any claim for a taking allegedly caused by the Rail Act because the Rail Act does not explicitly make a Tucker Act remedy available. It said that to “read a Tucker Act remedy into the [Rail] Act” would be “judicial legislation on a grand, if not arrogant scale.” JA 9 at 53 The court below, we respectfully submit, put the Tuck- er Act question the wrong way around. The century-old Tucker Act needs no supplemental implementing legis- lation, judicial or otherwise. The remedy is available unless later legislation repeals or modifies it. Nothing in the Rail Act repeals or modifies the Tucker Act and nothing in the Rail Act provides a basis from which re- peal or modification can be inferred, especially when the consequence of the inference is to invalidate a major federal statute. The Tucker Act is the basic jurisdictional statute for suits seeking just compensation from the United States The adequacy of the remedy is discussed below at pp. 58-60. for takings of private property for public purposes. There is no need for Congress, every time it passes sub- stantive legislation that might lead to a taking of private property, to make an explicit or implicit new grant of authority in order for the Court of Claims to exercise its historic jurisdiction. No court, so far as we have been able to discover, has ever required such a supple- mentary grant of jurisdiction, and no case suggesting such a notion was cited by the court below. The question, properly framed, is whether Congress, in the Rail Act, took away the Court of Claims’ jurisdiction with respect to claims based on actions authorized by the Rail Act. The court below found a congressional intent to bar a Tucker Act remedy, not in the words of the Rail Act, which is silent, nor even in the reports of the con- gressional committees, none of which discuss the point. Rather, the entire decision rests on several exchanges among individual members on the floor of the Senate and House. But these exchanges, more thoroughly discussed below, show only a congressional intent to restructure Northeast Midwest rail services in a manner that Con- gress believed would not result in any taking or transfer of property for less than the “constitutional minimum” value that the Rail Act expressly recognizes to be due. There is no basis in these exchanges for concluding that Congress intended to bar the normal Tucker Act remedy if, contrary to Congress’ expectation, the steps taken pur- suant to the Rail Act should require transfers for a con- sideration that the Special Court and this Court on re- view! determined to be less than the “constitutional min- imum.” Nevertheless, the court below read these portions of the legislative history as showing an affirmative intent in the Rail Act to deny the constitutionally required remedy even if the consideration provided for the transfers under the Fina! System Plan is eventually found to be less than 43 the “constitutional minimum.” In so doing, as we show below, that court engaged in the very type of judicial legislation from which it professed to abstain. A. Repeal of the Jurisdiction of the Court of Claims Under the Tucker Act To Award Just Compensa- tion for Any Taking of Private Property for Public Use May Not Be Inferred from Later Statutes that Do Not Expressly Repeal or Modify that Act and Do Not Provide an Equivalent Remedy The Tucker Act, 28 U.S.C. § 1491, confers jurisdiction on the Court of Claims: “to 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 im- plied contract with the United States, or for liqui- ~~ or unliquidated damages in cases not sounding n tort.” Section 1491 is the Court of Claims’ “general jurisdie- tional statute.” Ralston Steel Corp. v. United States, 340 F.2d 663, 668 n.5 Ct. Cl), cert. denied, 381 U.S. 950 (1965); Simon v. United States, 113 Ct. Cl. 182, 190-91 (1949); see also Eastport Steamship Corp. v. United States, 372 F.2d 1002, 1007-08 (Ct. Cl. 1967) (dictum), and Jacobs v. United States, 290 U.S. 13 (1933). One is not required to seek in any later act, no matter how significant, a renewed grant of jurisdiction to the Court of Claims to hear a suit “founded” upon the later act or upon any constitutional claim thereunder, including any claim for just compensation for an alleged taking. The Court of Claims has such jurisdiction under 28 U.S.C. § 1491 unless Congress has in the later act withdrawn it. In Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940), for example, plaintiffs sought damages against 44 a government contractor for land erosion alleged to have been caused by performance of a government construc- tion contract. The statute authorizing the construction contract was silent on claims of government liability to third parties. The Court held that the defendant con- tractor could not be held liable for carrying out a con- tract authorized by Congress and found it unnecessary to determine the merits of plaintiffs’ argument that they were entitled to recover compensation from the defend- ant for what amounted to a governmental taking of their property. If a taking had occurred, the Court said, an adequate remedy for compensation existed by way of suit in the Court of Claims, because “in the case of a taking by the Government of pri- vate property for public use . it cannot be doubted that the remedy to obtain compensation from the Government is as com ve as the require- ment of the Constitution ... Id. at 22 (Mr. Chief Justice Hughes). Hurley v. Kineaid, 285 U.S. 95 (1932), is even more directly in point and is, we submit, dispositive of this case. Hurley involved a statute authorizing a flood con- trol project and providing for condemnation of any land in the path of planned diversion channels. Plaintiff sought to enjoin work on the project, alleging that his land had not been condemned although his land was in the path of the planned diversion channels. Although the authorizing statute expressly provided that the United States shall have “|nJo liability of any kind . . for any damage from or by floods” (id. at 102 n.2), a unanimous Court, speak- ing through Mr. Justice Brandeis, held that injunctive relief should have been denied. The Court reasoned that if the acts alleged did constitute a taking, just compen- sation under the Tucker Act was an available and ade- quate remedy at law. Hurley shows how reluctant courts have been to infer that later statutes bar the Tucker Act remedy; the Court 45 found that remedy available despite a statutory provi- sion expressly barring Government liability for flooding. Hurley also is living proof of Chief Justice Hughes’ state- ment in Yearsley that if the Government takes property. the remedy to obtain compensation “is as comprehensive as the requirement of the Constitution 309 U.S. at 22), and demonstrates that a congressionally directed taking cannot be enjoined because a Tucker Act remedy is always available until Congress affirmatively withdraws it. pensation was made at or before the time of taking. Armstrong v. United States, 364 U.S. 40, 48-49 1960 United States v. Dickinson, 331 US. 745 1947 United States v. Causby, 328 US. 256 (1946); Jacobs v. United States, 290 U.S. 13 1933 Forte mouth Harbor Land & Hotel Co. v. United States, 260 U.S. 327. 330 (1922); Richard v. United States v. Stone Corral Irrigation Dist., 282 F.2d 901, 904 Ct. CL 1960). See also Malone v. Bowdoin, 369 U.S. 643, 647 n. 8 (1962) dictum For example, in Causby, supra, this Court held that the Court of Claims could award com- pensation on a claim, based directly on the taking clause of the Fifth Amendment, that low and frequent flights —— —— “The earlier cases, such as Portsmouth Harbor, reached the result on an implied contract theory. “If the acts amounted to a taking, without assertion of an adverse right, a centract would be implied whether it was thought of or not.” 260 U.S. at 330. A similar rationale was used in Yeersley. Later cases, such as Causby, find the Government's promise to pay in the Constitution itself. Thus it is not necessary to find a promise to pay implied in the legislation which authorizes the taking. Nothing in these cases supports the suggestion that they are limited to situations where Congress did not attempt to prescribe any consideration for the property taken, and Yearsley and Hurley show that no such limited reading is proper. 328 U.S. at 260 (footnote omitted). Of course, the result is different (a) im cases in which there was a mere trespass (“sound- img im tort”) rather than a taking, „ Tempel v. United States, 248 U.S. 121, 129 (1998), LIAN of 47 With respect to the Court of Claims in particular, Con- gress’ intent to limit its jurisdiction “must be evidenced expressly or by necessary implication.” . E. Hele v. United States, 100 Ct. Cl. 289, 294 (1943) ‘statute pro- viding that reasonable value of improvements on tracts occupied by the United States “be determined by the courts of the Canal Zone” did not oust Court of Claims of jurisdiction over suit brought under predecessor of 28 U.S.C. £1491 for breach of contract arising from failure to pay reasonable value’. See also United States v. Pfitach, 256 U.S. 547 1921 Moreover, the fact that Congress authorized a limited amount of appropriations and made a limited amount of government-guaranteed obligations available as part of the consideration for acquisition of rai] properties, in the belief that the Rail Act would not require the transfer of property for less than the “constitutional minimum,” does not indicate that Congress intended to withdraw a remedy if such transfers should occur. In Fort Berthold Reservation v. United States. 390 F.2d 686 Ct. ©). 1968). the Court of Claims held that acquisition of Indian lands under a statute containing a provision fixing a per-acre payment was a taking, for which the Court of (aims could award compensation above the statutory vided a constitutionally adequate remedy by suits in admiralty. The case thus inst rates only that where the United States creates „ wicht against tert and provides a special and constitutionally adequate remedy, it may make that remedy exclusive. See United States Vv. Babcock, 250 U.S. 328 (191%) * The court below also relied on th. facts that authorizations for emergency assistance under Section 213 of the Rail Act are limited in amount and that Congress had appropriated less than half of the authorized amount. in fact, Congress has now appropriated al- most all of the authorized amount. See Foreign Assistance and Related Programs Appropriations Act. 1974. Pub. I. 93-240. &7 Stat. 1048 (Jan. 2. 1974) ($35 million); Second Supple: sental Ap- propriations Act. 1974, Pub. I. 93-305, 88 Stat. 195 (June 8, 1974) ($39.8 million). per-acre limit. The specification of a per-acre price Congress was held not to oust the Court of Claims jurisdiction to award a larger amount as pensation. constitutionality. For more than a century this precept has been invoked to save the constitutionality of statutes where First Amendment rights are involved, United States Civil Service Commission v. National Association of Letter Carriers, AFL-CIO, 413 U.S. 548, 571 (1973): American Communications Association, CIO v. Douds, 339 U.S. 382. 407 (1950); and to construe in a consti- tutional manner statutes affecting “existing contracts, rights of actions, or . . . vested rights,” Twenty Per Cent Cases, 87 U.S. 179, 187 (1873), as well as the Bank- ruptey Act itself, Wright v. Vinton Branch of the Moun- tain Trust Bank, 300 U.S. 440, 461 1937 B. The Rail Act Does Not Show an Inter i To Deprive the Court of Claims of Its Tucker Act Jurisdiction To Hear Any Case Claiming Just Compensation When Congress intended the Rail Act to override other important federal statutes, it did not rely on judicial inference and conjecture. For example, in Section 601 of the Rail Act. entitled “Relationship to Other Laws,” Congress explicitly declared the antitrust laws to be in- The decision below also violates the rule of construction that repeal of a siatute is not to be inferred unless there is no other reasonable way to construe the subsequent statute. F.., Amell v. United States, 284 U.S. 158 (1966); Mercantile Nat'l Bank v. Langdeau, 371 U.S. 555 (1963); FTC v. AP.. Paper Co., 328 U.S. 198 (1946); Nagano v. McGrath, 187 F.2d 759, 766-67 (7th Cir. 1951). aff'd by an equally divided court, 342 U.S. 916 (1952): Faweett v. C1.R., 149 F.2d 433, 435 (2d Cir. 1945). — ee ee — — applicable to the actions taken to formulate the Final System Plan (Section 601(a)); it declared portions of the Interstate Commerce Act and the Bankruptcy Act to be inapplicable to the extent inconsistent with the Rail Act (Section 601(b)); and it declared certain pro- visions of the National Environmental Policy Act of 1969 inapplicable to actions authorized by the Rail Act before the effective date of the Final System Plan. Section 601 1e. Congress also provided that a railroad in reorganization could disecntinue service or abandon rail property only in accordance with the Rail Act, not withstanding provision of any other Federal law. the consti- tition or law of any State, or decison or order of or the pendency of any proceeding before any eral or State court, agency, or authority.” Section 304(f). In all, the Rail Act contains no fewer than 13 provisions repealing or making inapplicable provisions of various laws or excluding the jurisdiction of federal courts on various subjects.” There is, of course, no explicit provision relating to the Tucker Act. One searches the Rail Act in vain for a sentence such as “The Court of Claims shall have no jurisdiction over any action alleging that the property of any person has been taken pursuant to this Act with- out just compensation.” The fact that Congress gave meticulous and explicit attention to modifying other laws should at least make one pause before concluding that Congress, without saying so, amended the Tucker Act and implicitly removed the traditional remedy should actions taken pursuant to the Rail Act give rise to a claim for just compensation for a taking of property. elm addition to those cited in the text, see Sections 202(a). 20806 (2), 206(d)(3), 207(b), 209(a), 209(b), 303(b)(2), 303 (d and 304(c). of an intent to amend the Tucker Act. The court below apparently inferred an intent to repeal the Tucker Act from Section 209(b), providing that all judicial proceedings with respect to the final system plan” shall be consolidated before the Special Court, and from the further provision in Section 303 (d) for appeal from the Special Court's determinations and findings directly and exclusively to this Court.“ In the first place, as a matter of language, a suit against — — roy" for compensation for erosion that rs et's processes work is not, on ee to the final system plan.“ More fundamentally, the } 8 = 12 2 5 f 1 2 8 by a diversity of legal proceedi tion, with different theories canceling each out very often, and not resolvable until you get to the Supreme Court, and sometimes not even Here, by exercising the authority we first exercised "JAY at 46-49, 51. 51 in the Judiciary Act of 1789, we have provided for consolidating these proceedings and appointing a special court for the purpose. I think it is a very, very gifted position, for which the Committee is en- titled to great credit.” 119 Cong. Ree. 823.780 (daily ed. Dec. 21. 1973 The function of the Special Court is to prevent a multiplicity of suits in different courts on such questions as the value of the rail properties transferred to Conrail and of the consideration received by the transferors.” A subsequent suit against the United States in the Court of Claims would neither infringe upon the Special Court's functions nor invalidate the congressional purpose in consolidating the valuation proceedings. Indeed, if the Special Court (and the Supreme Court on review) found the values of the rail properties transferred to be greater than the values of the consideration provided therefor. so that the consideration fel! below the “constitutional minimum,” these values would presumably be binding on the private parties in any subsequent Court of Claims suit.” Whether or not these determinations were tech- nically binding on the United States. they would still be dispositive, as a practical matter, of the same issues in the Court of Claims. The court below also referred to Section 303 (c. which specifies how the Special Court shall determine “fair and equitable” compensation and states the means not including a judgment against the United States) by which the Special Court could remedy any deficiency, as show- ing an intent to bar subsequent claims under the Tucker House Report at 52 See Marine Insurance Co. v. United States, 410 F 2d 764 ‘Ct. Cl. 1969) Clement v. United States. 140 F Supp. 573 Ct. Cl. 1956). * See United States v. United States Fidelity & Guaranty Co. 309 U.S. 506 (1940). Act.” But the court below ignored the provisions of Section 303 that equate “fair and equitable” with “constitutional minimum.” Those provisions require the Special Court to determine whether the value of the con- sideration to be received by each rail estate is “fair and tion 303% show beyond doubt that Congress intended to provide compensation out of the mum — no more and no less. It cannot be fairly con- strued to mean that Congress intended to provide less the Supreme Court on review) should ultimately find that the value of the consideration available for award under Section 303% to any rail estate is less than the con- stitutional minimum,” Congress intended to deny the traditional Tucker Act remedy for the difference. Com- pare Fort Berthold Reservation v. United States, supra, holding that a statutory per-acre price for transferred lands did not bar the Court of Claims from awarding compensation above the statutory price. To infer here that the statutory consideration is exclusive even if be- low the “constitutional minimum recognized in the statute is to suggest that Congress deliberately intended to act in an unconstitutional manner.” ~ JA 9 at 50-51. “Such an inference would contradict the flat statement of Rep- resentative Adams, for example, that consideration other than Conrail common stock was to be “at the lowest possible limit to meet the constitutional guarantees.” 119 Cong. Rec. H11,876 (daily ed. Dec. 20, 1973). Hi rik i f i fi . f + I li Hh 0 iil eel ö i i 0 4., Senate at 18: House Report at 54; 119 Cong. 2 daily n (remarks of Senator Hartke id. at S23.778 (remarks of Senator Beall); 119 Cong. Rec. 522.485 (daily ed. Dec. 11, 1973) (remarks of Senator Hartke); 119 Cong. Rec. H9743 daily ed. Nov. 8 1973) (remarks of Representative Kuykendall ). — House Report at 54. The intent to act constitutionally appears as well from other passages in the House Report, such as: — 4 — problems interwoven into the various bank- ruptcies involved.” Id. at 29; see id. at 47. { Footnote continued on page 54 54 The House Report also stated at 55: “The Committee is of the opinion that provisions of this title of the Act, and especially the provision for deficiency judgment and payment of obligations of the Association provided in the preceding subsec- tion, are more than adequate to guarantee that the creditors of the bankrupt railroad will receive all that they may Constitutionally claim.“ Congress plainly intended to provide constitutionally adequate compensation to the owners of the rail prop- erties transferred to Conrail. Whether the consideration specifically provided in the Act will be adequate for that purpose is both premature and, for the purpose of this argument. beside the point. There is nothing in the legislative history to support the view that if the con- sideration is eventually found by the Special Court ‘and by this Court on review) to be less than “fair and equit- able — , less than the “constitutional minimum Congress intended to foreclose a Court of Claims remedy for the difference. The few statements on the floor of the Senate and House quoted by the court below to show that Congress intended to bar subsequent claims under the Tucker Act prove no such thing. They reinforce the view that Con- ~ | Continued | See also 119 Cong. Rec. H972%1-"%2 daily ed. Nov. K. 197%) (remarks of Representative Adams); id. at H9742 ‘remarks of Representa- tive Kuykendall) . “In both of the above quotations, as Section Me clearly shows, the Committee regarded “fair and equitable” as effectively synonymous with the “constitutional minimum.” See also House Report at 2. 31. 43. The majority opinion below professed to be guided in construing the Rail Act by Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. I. Rev. 527 (1947). Mr. Justice Frankfurter reflections included the following at 542: Foot note continued on page 55 | it f 17 ct A fi . 14 1 rc i Toe 11115 TRL fell ff 1 745 under the Act would be sufficient" to prevent such a claim from being “sustained in the Court of Claims.” (Emphasis added. No different light on what Congress meant is cast by the portion of House debate set forth in the opinion below at JA 9 at 49. The dialogue focuses on “the deficiency judgment” and whether Section 303 would keep “the Federal court,” i. e., the Special Court, from having “the key to the Treasury” in “the court proceed- ings. Because the context of this dialogue was not brought to the attention of the court below, that court may have gravely misconstrued its meaning. Neither the Senate nor the House bil] contained a counterpart to Section 303% 2 (C), providing for a deficiency judg- ment in money against Conrail.’ This provision was added in conference; the subsequent House discussion seems clearly intended to explain it and to assure mem- bers that any such money judgment against Conrail would not be a judgment against the United States. Representative Kuykendall’s several references to “the Federal Court” and “the court proceedings” are, we submit, clearly references to the Special Court and its authority added in Section 303(c}(2)‘(C). Representa- tive Adams’ careful response that there was a limit to authorizations “under the bill“ was entirely correct. As we read the dialogue, he was not asked and did not volunteer a view as to whether there could be liability of the United States otherwise than “under the bill“ Senator Hartke expected Conrail to be profitable, as is dem- onstrated by his comments cited at p. 53 note 67 supra. "2119 Cong. Rec. H11,876 (daily ed. Dec. 20, 1973). See Section 303(c)(2) of the Senate bill, 119 Cong. Rec. $22,820 ‘daily ed. Dec. 13, 1973) and Section 502(d) of the House bill, 119 Cong. Rec. H9756 daily ed. Nov. 8, 1973). Both versions authorized the Special Court to award additional Conrail or USRA securities to railroads in reorganization, but neither authorized the entry of a money judgment against either. 57 if, despite Congress’ expectation to the contrary, the consideration available under Section 303(c) were ju- dicially determined to be less than the “constitutional minimum.” Indeed, the dialogue itself stressed Mr. Adams’ concern that any amount other than Conrail securities “was to be at the lowest possible limit to meet the constitutional guarantees.” (Emphasis added.) Earlier Mr. Adams had stated his view that the con- stitutional minimum in a reorganization is liquidation value, and asserted that “we have done everything pos- sible in the legislative history . . to make certain that no more than the constitutional minimum for liquida- tion as defined by the Supreme Court will be paid by the new corporation Mr. Adams, we submit, was contrasting a congressional commitment to considera- tion equal to liquidation value for non-rail purposes which he regarded as constitutionally necessary and was willing to support—with an open-ended commitment es- timated at up to $15 billion as the cost of “nationaliz- ing“ the properties, as some members of Congress had urged.” We do not believe that this Court can fairly read the language in the dialogue about keeping “the Federal Court” from having “the key to the Treasury” as refer- ring to claims against the Government for the amount, if any, by which the value of the consideration trans- 119 Cong. Rec. H9732 (daily ed. Nov. 8, 1973) (emphasis added). Appellant does not accept the view that liquidation value is the constitutional minimum. Creditors and shareholders would appear to be entitled to liquidation value only if they have an underlying constitutional right to liquidate. Whether there is a constitutional right to liquidate an essential railroad that is, or can be made, viable has never been decided. The issue was expressly reserved by this Court in New Haven Inclusion Cases, 399 U.S. 392. 489-490 (1970). Id. at H9731. ferred under the Act might some day be found by the Special Court (and on appeal by this Court) to fal! below the “constitutional minimum.” The inference that Cong ess intended to bar a claim under the Tucker Act for this difference does not square with its express recognition in Section 303(c) of the need to provide the “constitutional minimum.” To summarize, there are two possible ways to read the Rail Act in relationship to the Tucker Act. One is to agree with the court below that even if the Special Court should ultimately find the consideration available to be paid for rail properties under the Act to be less than the “constitutional minimum,” Congress intended to bar a Tucker Act claim for the difference. A second is to conclude that Congress, believing that the value of the consideration available under Section 303 would in fact equal the “constitutional minimum,” never ad- dressed itself in the Rail Act to the question of what would happen if the Special Court found to the con- trary. We respectfully submit that the first reading, if it is possible, is not plausible since it requires the con- clusion that Congress, in a statute expressly and repeat- edly recognizing the existence of a “constitutional mini- mum,” also decided to bar a claim to obtain that mini- mum. We further submit that wnder the second reading, the Tucker Act remedy must be found to remain avail- able, and the Rail Act must be found constitutional. D. The Tucker Act Remedy ls Adequate Having concluded that Congress meant to repeal or modify the Tucker Act, the majority of the court below did not examine the adequacy of the Tucker Act remedy. However, the concurring judge questioned the due process adecnacy of relegating claimants to the and complex” procedures of the Rail Act and then, if there —— ——— —ä—ũĩä— — — should remain a basis for a claim against the United States, to the Court of Claims.” No rule of due process holds that a process that results in full and complete compensation is unconstitutional merely because it may be lengthy and complex.” Three points deserve mention. First, even in a con demnation case, which reorganization under the Rail Act is not, it is unquestionably constitutional to complete a “taking” before a judicial determinaticn of the required amount of compensation.” Second, a Court of Claims award of compensation for an inadequately compenstated taking under the Rail Act would be a “perfect” remedy: although interest is not generally recoverable against the United States in the absence of a statute or contract expressly authorizing it,” interest on a just compensation award runs from the date of the taking.” Third, as we have noted above, a Tucker Act suit after the Special Court ‘and the Supreme Court on review) had *JA 9 at 81. These doubts were not so serious as to prevent the same judge from concluding in the Penn Central “180-Day” Decision at JA 124 at 148 that: agree with the Trustees that the basic approach of the stat- ute is fundamentally sound. If I were persuaded that Congress had intended to permit recourse to a Tucker Act remedy in the event that implementation of the RRRA [Regional Rail Reor- ganization Act] proved violative of constitutional rights, an affirmative § 207(b) finding might be permissible.” See Phillips v. Commissioner, 283 U.S. 589, 596-99 (1931). ™ Hurley v. Kincaid, 285 U.S. 95 (1932). Moreover, as indicated in the discussion below of the New Haven Inclusion litigation. there is precedent in the reorganization field fon transfer before valuation or payment. 28 U.S.C. § 2616; United States v. Goltra, 312 U.S. 203, 207-08 (1941); Gould v. United States, 301 F.2d 557, 558-59 (D.C. Cir. 1962). United States v. Thayer-West Point Hotel Co, 329 U.S. 585, 588 (1947); Phelps v. United States, 274 U.S. 341, 344 (1927). found the relevant values would not, as a practical mat- ter, require retrial of these issues. Il. Even in the Absence of a Tucker Act Remedy the Court Below Should Not Have Enjoined the Operation of the Rail Act Even if the court below correctly construed the Rai! Act to bar a Tucker Act remedy for erosion beyond constitutional limits, each element of its order was er- roneous. The order rested on other misconstructions of the statute. It anticipated problems that may not arise and can be remedied at the time if they do. Moreover, even on the district court’s stated view of both the law and the facts, the relief it granted, relief whose most crucial features were wholly unexplained, was super- fluous. The court below held that the erosion issue was “ripe for adjudication,” but it did not in fact decide whether or to what extent the asset values available to satisfy pre-reorganization creditors have declined during the Penn Central reorganization or will decline in the future. Nor did the court decide the extent to which pre-reorganiza- tion creditors may be required to accept such “erosion” during the reorganization process, on account of the public interest in continued rail service, where, as here, there is a reasonable prospect of reorganizing the rail- road on a self-sustaining basis. We argue, in Part III below, that the extent of any erosion problem cannot — Concerns that Congress might not appropriate funds to pay a judgment do not vitiate the adequacy of a Tucker Act suit. No such concern was mentioned in Yearsicy and Hurley, supra. More- over, in concluding that the Court of Claims is an Article III court, Mr. Justice Harlan rejected an argument to the contrary based on that court's inability to enforce its judgments, saying “there seems to be no sound reason why the Court of Claims may not rely on the good faith of the United States,” Glidden Co. v. Zdanok, 370 U.S. 530, 571 (1962). None of the other opinions in that case chal- lenged his view. 61 be determined on the present record and without refer- ence to the benefits of reorganization under the Rail Act, and that in any event a reasonable erosion burden may be imposed on persons who invest in a railroad while and substantial public efforts are made to create a “self-sustaining rail service system.” Our argument here is that even if it is assumed that the constitutiona! limit of erosion—the point beyond which service may not be required without an adequate remedy at law for com- pensation—may be reached before implementation of the Final System Plan, and even assuming that the court below correctly read the Rail Act to bar an adequate remedy at law, the orders issued by the court below were nevertheless unwarranted and erroneous. A. The Court Below Misconstrued Section 304(f) of the Rail Act Before passage of the Rail Act, Section 1(18) of the Interstate Commerce Act required any railroad (whether or not in reorganization) to obtain ICC ap- proval for discontinuance of rail service on any line of track, or for the abandonment of such rail properties. This procedure was replaced, with respect to railroads in reorganization in the Region, by Section 304 of the Rail Act. Section 304, whose primary purpose is to provide a more efficient means for a substantial reduction and streamlining of the Northeast’ Midwest rail system, per- mits the Region’s railroads, without the approval of any entity, to discontinue service over and to abandon (i.¢., liquidate as they wish) all rail properties = 49 U.S.C. 61018) provides in pertinent part: “(No carrier by railroad subject to this chapter shall abandon all or any portion of a line of railroad, or the operation there- of, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandonment.” not designated for transfer pursuant to the Final System In order, however, to facilitate a planning process that is required to be completed within 450 days after enactment, Section 304(f) provides as follows: “After the date of enactment of this Act, no rail- road in reorganization may discontinue service or abandon any line of railroad other than in accord- ance with the provisions of this Act, unless it is ee SS & SS Seen as ate no affected State or or regional transportation authority reasonably opposes such action, notwith- standing any provision of any other Federal law tbe constitution or law of any State, or decision ( order of, or the pendency of any proceeding befoe y Federal or State court, agency, or authority.” As we read the opinions and order of the court below, all of the court’s objections to the Rail Act (except one 1 flow from its interpretation of that Sec- The district court interpreted Section 304(f) as au- thorizing the required continuation of rail operations after the (hypothetical! point has been reached at which con- tinuation of service can no longer be constitutionally required without compensation. Having construed the section to authorize an unconstitutional action in a hy- pothetica! situation, the court declared the section to that extent unconstitutional on its face. In the first place, the court reached its troublesome construction prematurely. Having concluded that the The one exception is the court's holding that the irement, in Section 207(b), that Section 77 proceedings be dismisned im the case of certain railroads not being reorganized under the Rail Art. violates the requirement of Article I. Section 8, Clause 4, of the Constitution that bankruptcy laws shall be uniform throughout the United States. USRA does not agree with this ruling but, in view of the fact that the ruling has no material effect on USRA’s planning process, USRA has not appealed on this que: ion. — — erosion issue was “ripe for adjudication,” the court pro- ceeded not to adjudicate whether the constitutional limit of erosion had been or would be reached, nor to define the limit. Instead, the district court proceeded as if the erosion limit had in fact passed, when in fact it remains possible that the issue will never arise. The objections to premature decision of hypothetical legal issues, particularly on an incomplete factual! record, are too familiar to be repeated at length here. The district court itself recognized the dangers in another context. JA 9 at 23. Suffice it to say that the objections to premature decision are especially forceful where there is a major question of statutory construction which re- lates directly to the constitutionality of the statute and the decision is adverse to constitutionality. E.g., Poe v. Ullman, 367 U.S. 497, 502-03 (1961); Communist Party „Courts do not review issues, especially constitutional issues, until they have to.” Joint Anti-Fascist Refugee Comm. . McGrath, 341 U.S. 123, 154-55 (1961) Frankfurter, J., concurring). A court should stay its hand when the injurious impact of the challenged condition depends on the “concurrence of .. . contingent events . too speculative to warrant anticipatory judicial determinations,” Eccles w Peoples Bank, 333 U.S. 426, 432 (1948). Courts, moreover, do not adjudicate “matters of serious public concern” on a record that is not “adequate and full-bodied.” Public Affairs Press Vv. Rickover, 269 U.S. 111, 112-13 (1962). Kennedy v. Silas Mason Co. 334 U.S. 249, 256 (1948). The courts reviewing the inclusion of the New Haven in the merged Penn Central illustrated these rules by refusing to decide issues that were premature or where the factual record was in- complete. E.g.. In re New York, VH AH ARK. 378 F 2d 635, 640 (2d Cir. 1967): “Since we thus are by no means certain the plan the Com- mission and the court will approve .. will contain the features to which appellants object, we think it improper to pass upon their objections at this tim [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0162%3A2. Public record. Not legal advice.