# Appendix — Robert W. Blanchette et al., v. Connecticut General Insurance Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0165%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1974 - **Citation:** 419 U.S. 102 ## Text JOINT APPENDIX Nos. 74-165 w 74-166 In THE _Pupreme Court of the Hutte States 74-16 Octoser Term, 1974 74-168 UNITED STATES OF AMERICA, ET AL., APPELLANTS, V. CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL., APPELLEES. UNITED STATES RAILWAY ASSOCIATION, APPELLANT, V. CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL., APPELLEES. ROBERT W. BLANCHETTE, RICHARD C BOND AND JOHN H. McARTHUR, AS TRUSTEES OF THE PROPERTY OF PENN CENTRAL TRANSPORTATION COMPANY , DEBTOR, APPELLANTS, V. CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL., APPELLEES. RICHARD JOYCE SMITH, AS TRUSTEE OF THE NEW YORK, NEW HAVEN AND HARTFORD RAILWAY COMPANY, DEBTOR, APPELLANT, v. Ur STATES OF AMERICA, ET AL., APPELLEES. ON APPEAL FROM THE UNITED STATES DISTRICT COURT POR THE EASTERN D&STRICT OF PENNSYLVANIA (i) TABLE OF CONTENTS Stipulation as to the Record and Joint Appendix Opinions below (with orders). a. Opinions of 3-judge court, dated June 25, 1974. b. Opinion of Judge Fullam in Penn Central 120-day proceeding, dated May 2, 1974 c. Opinion of Judge Fullam in secondary debtors 120-day proceedings, dated May 2, 1974 d. Opinion of Judge Fullam in Penn Central 180-day proceeding, dated July 2, 1974 e Opinion of Judge Fullam in secondary debtors 180-day proceeding, dated July 2, 1974 Papers in Connecticut General, et al. v. USRA, et A. Docket No. 74-189: a. Docket entries d. Complaint, dated January 25, 1974 . c. Order adding parties — dated February 4, 1974 1 d. Answer of defendants, dated March 4, 1974 . e. Motion of Penn Central Trustees for leave to intervene, dated April 3, 1974 . f. Answer of Penn Central Trustees, dated April 3, 1974. f 183 157 161 176 178 191 192 (ii) g. Order granting the Trustees leave to intervene, dated April 19, 1974 h. Stipulation as to the record, dated April 15, 1974 a i. Affidavit of Louis A. Craco, dated April 16, 1974, together with attachments j. Plaintiffs’ motion for summary — dated April 16, 1974 . : k. Intervenors’ motion for summary — dated April 16, 1974 . ‘ 1. Defendants’ motion for summary — dated May 24, 1974 m. Affidavit of John W. Ingram, dated May 23, 1974 (as amended) Papers in Smith v. United States, et al., Docket No. 74-1107: a. Docket entries d. Complaint, dated January 25, 1974 . c. Answer of all defendants, dated March 11, 1974 d. Motion of Penn Central Trustees for leave to intervene, dated April 3, 1974. e. Answer of Penn Central Trustees, dated April 3, 1974 f. Order granting Penn Central Trustees leave to intervene, dated May 3, 1974 . 197 221 224 226 316 (iii) g. Stipulation of plaintiff and defendants as to factual matters, dated April 1974 . h. Caption of stipulation as to record, noting that it is identical to item 3h i. Caption of affidavit of John W. Ingram, dated May 23, 1974 (as amended), noting that it is identical with item 3m . j. Motion by plaintiff to strike affidavit of John W. Ingram, dated June 3, 1974 k. Plaintiff's motion for summary — dated April 29, 1974 . ; I. Intervenors’ motion for summary 2 dated May 10, 1974 m. Defendants’ motion for summary — dated May 24, 1974 , n. Caption of Jerome E. Sharfman, dated May 10, 1974, together with Exhibit A thereof, noting that it is not printed but appears in the Joint W Sub- mission as Item 60 ; 5 0 0 Papers in Penn Central Co. v. Brinegar, et al., Docket No. 74-1149: a. Docket entries b. Complaint, dated January 1974 c. Answer of all defendants, dated March 6, 1974 325 325 326 328 331 332 336 337 341 350 (iv) d. Motion of Penn Central Trustees for leave to intervene, dated April 3, 1974 . e. Answer of Penn Central Trustees, dated April 3, 1974. f. Caption of affidavit of John W. Ingram, dated May 23, 1974 (as amended), noting that it is identical with item 3m . ; g. Order granting Penn Central Trustees leave to intervene, dated May 16, 1974 h. Plaintiff's motion for summary 3 dated May 22, 1974 i. Intervenors’ motion for summary — dated May 20, 1974 8 ; j. Defendants’ motion for summary — dated May 31, 1974 : k. Caption of stipulation as to the record, 2 that it is identical to item 3h . , ee 1. Stipulation of plaintiff and defendants as to factual matters, dated June 4, 1974 . m. Supplementary Joint Documentary Submission of plaintiff, defendants and intervening defend- ants, together with Exhibits A and B, dated May 31, 1974 ene All notices of appeal . The text of the * Rail . Act of 1973 N 1 358 359 365 367 369 . 370 376 384 391 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA CONNECTICUT GENERAL INSURANCE CORPORATION, er ai., ) ) Plaintiffs, ) Civil Action v. ) No. 74-189 ) UNITED STATES RAILWAY ASSN.., ) et al., Defendants. ) RICHARD JOYCE SMITH, Trustee ) of The New York, New Haven and ) Hartford Railroad Company, ) Plaintiff, ) Civil Action v. ) No. 74-1107 ) UNITED STATES OF AMERICA, et A. ) Defendants. ) PENN CENTRAL COMPANY, Plaintiff, Civil Action v. No. 74-1149 CLAUDE S. BRINEGAR, et . Defendants. ee ee —— — STIPULATION AS TO RECORD AND JOINT APPENDIX The parties to the above captioned cases stipulate as follows: 2 I Contents of Joint Appendix The Joint Appendix printed for the use of the Court and all parties will contain: This stipulation Opinions below (orders included): l. 2. b. Opinions of 3-judge court, dated June 25, 1974 Opinion of Judge Fullam in Penn Central 120- day proceeding, dated May 2, 1974 Opinion of Judge Fullam in secondary debtors 120-day proceedings, dated May 2, 1974 Opinion of Judge Fullam in Penn Central 180- day proceeding, dated July 2, 1974 Opinion of Judge Fullam in secondary debtors 180-day proceeding, dated July 2, 1974 Papers in Connecticut General, et al v. USRA, et al., Docket No. 74-189: a. b. C. Docket entries Complaint, dated January 25, 1974 Order adding parties plaintiff, dated February 4, 1974 Answer of defendants, dated March 4, 1974 Motion of George P. Baker, Robert W. Blanchette and Richard C. Bond, as Trustees of the Property of Penn Central Transportation Company, Debtor, for leave to intervene, dated April 3, 1974 3 f. Answer of Penn Central Trustees, dated April 3, 1974 g. Order granting the Trustees leave to intervene, dated April 19, 1974 h. Stipulation as to the record, dated April 15, 1974 i. Affidavit of Louis A. Craco, dated April 16, 1974, together with stipulation of facts at- tached thereto and dated April 15, 1974 (in- cluding Exhibits A and B thereto), affidavit of C. C. Shannon (Exhibit C to Craco affi- davit), and letter of Claude S. Brinegar (Ex- hibit E to Craco affidavit) j. Haintiffs motion for summary judgment, dated April 16, 1974 k. Intervenors’ motion for summary judgment, dated April 16, 1974 I. Defendants’ motion for summary judgment, dated May 24, 1974 m. Affidavit of John W. Ingram, dated May 23, 1974 (as amended by affidavit of May 30, 1974) Papers in Smith v. United States, et al., Docket No. 74-1107: a. Docket entries b. Complaint, dated January 25, 1974 c. Answer of all defendants, dated March 11, 1974 4 . Motion of George P. Baker, Robert W. Blanchette and Richard C. Bond, as Trustees of the Property of Penn Central Transportation Company , Debtor, for leave to intervene, dated April 3, 1974 . Answer of Penn Central Trustees, dated April 3, 1974 Order granting Penn Central Trustees leave to intervene, dated May 3, 1974 Stipulation of plaintiff and defendants as to fac- tual matters, dated April 1974 . Caption of stipulation as to record, noting that it is identical to item 3h Caption of affidavit of John W. Ingram, dated May 23, 1974 (as amended), noting that it is identical with item 3m Motion by plaintiff to strike affidavit of John W. Ingram, dated June 3, 1974 . Plaintiffs motion for summary judgment, dated April 29, 1974 Intervenors’ motion for summary judgment, dated May 10, 1974 . Defendants’ motion for summary judgment, dated May 24, 1974 . Caption of affidavit of Jerome E. Sharfman, dated May 10, 1974, together with Exhibit A thereof, noting that it is not printed but ap- pears in the Joint Documentary Submission as Item 60 5 Papers in Penn Central Co. v. Brinegar, et al. Docket No. 74-1149: a. b. C. Docket entries Complaint, dated January 1974 Answer of all defendants, dated March 6, 1974 Motion of George P. Baker, Robert W. Blanchette and Richard C. Bond, as Trustees of the Property of Penn Central Transportation Company, Debtor, for leave to intervene, dated April 3, 1974 Answer of Penn Central Trustees, dated April 3, 1974 Caption of affidavit of John W. Ingram, dated May 23, 1974 (as amended), noting that it is identical with item 3m Order granting Penn Central Trustees leave to intervene, dated May 16, 1974 Plaintiff's motion for summary judgment, dated May 22, 1974 Intervenors’ motion for summary judgment, dated May 20, 1974 Defendants’ motion for summary judgment, dated May 31, 1974 Caption of stipulation as to the record, noting that it is identical to item 3h Stipulation of plaintiff and defendants as to factual matters, dated June 4, 1974 6 m. Supplementary joint documentary submission of plaintiff, defendants and intervening defendants, together with Exhibits A and B, dated May 31, 1974 All notices of appeal The text of the Regional Rail Reorganization Act of 1973 Material From the Record to Be Lodged With the Clerk in Ten Copies All items in joint documentary submission (items 1 through 61 inclusive), except items 32, 33, 59 and 61, which are printed in Joint Appendix Report of Secretary of Transportation, dated Feb- ruary |, 1974, pursuant to Section 204 Report of Rail Services Planning Office (ICC), dated May 2, 1974, pursuant to Section 205(d)(1) Transcript of record of 120-day hearing in Penn Central Transportation Company case, pp. 11,106- 11,270 Transcript of hearing before 3-judge court on mo- tions for summary judgment List of applications for abandonment filed by Penn Central Transportation Company with the United States Railway Association 7 Response by United States Railway Association to abandonment applications. /s/ Louis A. Craco Attorney for plaintiffs in Connecticut General, et al. v. USRA, Docket No. 74-189 /s/ Joseph Auerbach Attorney for Richard C. Smith, plaintiff in Docket No. 74-1107 David Beger David Berger, Attorney for plaintiff Penn Central Company in Docket No. 74-1149 L. William R. Perlik Attorney for defendant United States Railway Association . James F. Dausch Attorney for defendants Brinegar, Stafford, Schultz, Interstate Com- merce Commission and United States of America / Charles A. Horsky Attorney for intervening defendants Dated: July 31, 1974 Opinions of United States District Court for the Eastern District of Pennsylvania And Related Opinions by the Penn Central Reorganization Court 9 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA [Caption omitted in printing] Before: ALDISERT, Circuit Judge, and FULLAM and BECHTLE, District Judges. OPINION OF THE COURT ALDISERT, Circuit Judge. These cases present the question whether an injunction should issue restraining the enforcement of certain provi- sions of the Regional Rail Reorganization Act of 1973, Public Law 93-236, 45 U.S.C. 43-744, because of con- stitutional infirmities. Three-judge courts have been con- vened pursuant to 28 U.S.C. 2282. 2284, and the mat- ters are consolidated for disposition on cross-motions for summary judgment. The Connecticut General plaintiffs are owners f mortgage bonds and are corporate trustees or successor corporate trustees under indentures, mort- gages and deeds of trust of the Penn Central Transporta- tion Company and certain of its lease lines which together comprise the “Penn Central System. Plaintiff, Richard mme following plaintiffs own the approximate principal amounts of mortgage bonds of Penn Central and of certain Lessors secured by mortgages on rail properties and other properties of Penn Cen- tral and certain Lessors set forth opposite their respective names: a. Connecticut General Insurance Corporation n 8 31,025,000 b. Connecticut Mutual Life Insurance Company. ..... . 9,985,000 (Cont'd) 10 Joyce Smith, Trustee of the property of The New York, New Haven and Hartford Railroad Company, Debtor, is the registered holder of divisional mortgage bonds of Penn Central Transportation Company.? These bonds are se- cured by a divisional mortgage comprising a first lien at- taching certain real property, railroad tracks and improve- ments of the Penn Central Transportation Company. Plaintiff, Penn Central Company, is the owner of 100% of the stock in and is a creditor of the Penn Central Transportation Company, Debtor. The defendants are the United States Railway Associa- tion, a corporate entity established under Section 201 of the Act, 45 U.S.C. Vi; the Secretary of Transportation; the Chairman of the Interstate Commerce Commission; the Secretary of the Treasury; and the United States of America. Penn Central Trustees, Intervening Defendants, are presently operating the Penn Central Railroad under Section 77 of the Bankruptcy Act, II U.S.C. 205, in this court at Bankruptcy No. 70-347. (Footnote | cont'd) c. The Equitable Life Assurance Society of the United States . . . $147,509,000 d. Metropolitan Life Insurance „ e. The Prudential Insurance Company MGM «cc ee ee ss 2 Plaintiff, Richard Joyce Smith, Trustee of the property of The New York, New Haven and Hartford Railroad Company, Debtor in reorganization under Section 77 of the Bankruptcy Act (“New Haven Trustee” and “New Haven respectively) is the registered holder of $34,025,800 principal amount of 5% Divisional Mortgage Bonds (“Bonds”) of Penn Central Transportation Company, Debtor. While plaintiffs challenge the constitutionality of the 1973 Act with a galaxy of arguments, their central con- tentions may be summarily outlined: 1. The 1973 Act ultimately requires a permanent taking of their property for which they are entitled to be paid in cash instead of stocks and other securities; that the conveyance procedures offend procedural due process; and that a deficiency judgment against Conrail provides no assurance that just compensation would be paid. 2. The 1973 Act violates the geographical uniform- ity requirement of Article I, Section 8, Clause 4 of the United States Constitution. 3. The 1973 Act effects an interim taking of their property by requiring continued rail operation pending implementation of the Final System Plan. I. Before consideration of these contentions, a short sum- mary of the Act is necessary. The judicial panel on multi- district litigation described it as “an heroic attempt by Congress to solve a complex and deeply rooted problem. Eight major railroads in the Northeast and Midwest are undergoing reorganization pursuant to Section 77 of the Bankruptcy Act. Of these eight, seven are the only Class I railroads, those with $5 million or more of annual rev- enue, in the United States in reorganization. “Reasons cited for this [Northeast railroad] crisis were competition from 90 million automobiles and multiple schedules of competitive jet air service which directly competed with passenger transportation. The decline of railroad freight business also diminished the passenger carrying capabilities 12 of the railroads. Traditional railroad freight business was lost to inland water way operations, pipelines and trucks. Moreover, government policy tended ‘to favor non-rail transportation and perpetuate a regulatory climate that [was] hostile to experimentation.” Water, air and high- way transportation were successfully aided through public investment, at little or no user cost while railroads had to make such investments on their own.” Congress first responded to the rail crisis with the Emer- gency Rail Services Act of 1970, 45 U.S.C. 8661, ef seg. authorizing the Secretary of Transportation to guarantee up to one hundred twenty-five million dollars in certifi- cates issued by trustees of railroads in reorganization un- der Section 77. However, detailed treatment of the rail- roads’ particular difficulties did not emerge until the enact- ment of the 1973 Act. As stated in the defendants’ brief: The 1973 Act represents Congress’ comprehen- sive response to the long-range problems of railroads that own or operate most of the trackage in the Northeast and Midwest, and which therefore constitute a vital segment of the U.S. railroad system and an important segment of the U.S. economy. The Act requires the United States Rail- way Association . to design a | Final System] Plan for reorganized rail services in the Re- gion . and provides, among other things, 3 In re Central Railroad Company of New Jersey, 485 F. 2d 208, 217 (Aldisert, J., dissenting) (footnotes omitted), citing, inter alia, Staff Report, “The Penn Central and Other Railroads,” Senate Com- mittee on Commerce, December, 1972, at 220-222. 13 that a new private railroad, the Consolidated Rail Corporation (“Conrail”) shall acquire, own and operate rail properties pursuant to the Final System Plan. (Brief, 10-11) Congress also provided in the 1973 Act several kinds of financial assistance, new in form and substantial in amount, each in- tended to assist in creating and implement- ing the overall plan for rail transportation service in the Region and the Conrail por- tion of that plan in particular. Four of these additional resources deserve special mention. (i) Substantial obligational author- ity is conferred on USRA. To carry out its purposes under the Act (principally to plan the new rail system and to provide part of the consideration for rail properties acquired by Conrail under the Act), USRA is author- ized to issue $1.5 billion in securities to be guaranteed by the Secretary of Transporta- tion. Section 210. Of this sum, not more than $1 billion may be issued to Conrail, of which not less than half must be used by Conrail for rail rehabilitation and modern- ization. Section 210(b). Additional amounts may be issued if approved by joint resolu- tion of Congress. /d (ii) The Secretary of Transportation, with USRA’s approval, is au- thorized to enter into agreement for the ac- quisition, maintenance or improvement of property that will be in the Final System Han; for this purpose, the Act provides ob- ligational authority of $150 million. Section 14 15 215. (iii) To meet emergency needs pending Central reorganization court has already determined that implementation of the Final System Plan, the Penn Central is not reorganizable “on an income basis Secretary of Transportation is further author- within a reasonable time under Section 77 of the Bank- ized to make payments not exceeding $85 ruptcy Act.” The next step under the Act is the “180- million to the trustees of railroads in reorgan- day determination by that court as to whether “such ization. Section 213. (iv) Finally, the Secre- railroad shall be reorganized by means of transferring tary of Transportation and the Association some of its rail properties to the Corporation“ This may provide subsidies for continuing non- hearing was held on June 10, 1974, but no findings have economic service and loans for the acquisition yet been made. and modernization of rail properties. Sec- tions 402 and 403. (Footnote 4 cont'd) reorganized by means of transferring some of its rail (Brief, 12-13). properties to the Corporation pursuant to the provi- f Act. Because of t blic inter- Section 207(b)* of the Act sets forth the procedure by — tps Don of — * which a railroad becomes subject to the transfer provisions region pursuant to a system plan devised under the contained in the Final System Plan. The Section 77 Penn provisions of this Act, each such court shall order that the reorganization be proceeded with pursuant to this Act unless it (1) has found that the railroad 4 SEC. 207 is reorganizable on an income basis within a reason- — able time under section 77 of the Bankruptcy Act (11 U.S.C. 205) and that the public interest would (b) APPROVAL. — Within 120 days after the be better served by such a reorganization than by a date of enactment of this Act each United States dis- reorganization under this Act, or (2) finds that this trict court or other court having jurisdiction over a Act does not provide a process which would be fair railroad in reorganization shall decide whether the and equitable to the estate of the railroad in reor- railroad is reorganizable on an income basis within ganization in which case it shall dismiss the reorgan- a reasonable time under section 77 of the Bankruptcy ization proceeding. If a court does not enter an Act (11 U.S.C. 205) and that the public interest would order or make a finding as required by this subsec- be better served by continuing the present reorganiza- tion, the reorganization shall be proceeded with pur- tion proceedings than by a reorganization under this suant to this Act. An appeal from an order made Act. Within 60 days after the submission of the re- under this section may be made only to the special port by the Office, under section 20%d\1) of this court. Appeal to the special court shall be taken title, on the Secretary's report on rail services in the within 10 days following entry of an order pursuant region, each United States district court or other court to this subsection, and the special court shall com- having jurisdiction over a railroad in reorganization plete its review and ren det its decision within 80 days shall decide whether or not such railroad shall be after such appeal is taken. There shall be no review (Cont'd) of the decision of the special court. 16 Within 420 days after January 2, 1974, a Final System Han must be prepared by the executive committee of the Association and submitted for approval by its Board of Directors. Section 207(c). Yet final review of the Plan remains with Congress. Section 208(a). A Special Court has been created to “exercise the powers of a district judge in any judicial district with respect to such proceedings and such powers shall include those of a reorganization court. The Special Court shall have the power to order the conveyance of rail properties of railroads, leased, op- erated, or controlled by a railroad in reorganization in the region.” Section 209%b).5 The Association is required to deliver a copy of the Final System Plan to the Special Court. Section 209(c).® Thereafter, the Special Court shall order the trustees to > Members of the Special Court selected by the judicial panel on multi-district litigation, as provided by Section 20%b), are Circuit Judges Henry J. Friendly and Carl McGowan, and District Ju dge Rosel C. Thomsen. 6 SEC. 209 (c) Delivery of Plan to Special Court. — Within 90 days after its effective date, the Association shall deliver a certified copy of the final system plan to the special court and shall certify to the special court (1) which rail properties of the respective rail- roads in reorganization in the region and of any railroad leased, operated, or controlled by such railroads in reorganization are to be transferred to the Corporation, in accordance with the final system plan; (Cont'd) 17 convey to Conrail “forthwith . all right, title and m- terest in the rail properties. Section 303(b).’ (Footnote 6 cont'd) (2) which rail properties of the respective rail- roads in reorganization in the region or railroads leased, operated, or controlled by such railroads in reorganization are to be conveyed to profitable railroads, in accordance with the final system plan; (3) the amount, terms, and value of the securi- ties of the Corporation (including any obligations of the Association) to be exchanged for those rail properties to be transferred to the Corporation pursuant to the final system plan, and as indi- cated in paragraph (1) of this subsection; and (4) that the transfer of rail properties in ex- change for securities of the Corporation (includ- ing any obligations of the Association) and other benefits is fair and equitable and in the public interest. 7 SEC. 303 (a) Deposit With Court. Within 10 days after delivery of a certified copy of a final system plan pursuant to section 20%c) of this Act (1) the Corporation, in exchange for the rail properties of the railroads in reorganization in the region and of railroads leased, operated, or controlled by railroads in reorganization in the region to be transferred to the Corporation, shall deposit with the special court all of the stock and other securities of the Corporation and obligations of the Association designated in the final system plan to be exchanged for such rail properties, (2) each profitable railroad operating in the region purchasing rail properties from a railroad in reorganization in the region, or from a rail- (Cont'd) After the conveyance, the Special Court reviews the terms of the exchange as set forth in the Final System Plan. In (Footnote 7 cont'd) road leased, operated, or controlled by a tail. road in reorganization in the region, as provided in the final system plan shall deposit with the special court the compensation to be paid for such rail properties. (b) Conveyance of Rail Properties. (1) The special court shall, within 10 days after deposit un- der subsection (a) of this section of the securities of the Corporation, obligations of the Association, and compensation from the profitable railroads op- erating in the region, order the trustee or trustees of each railroad in reorganization in the region to convey forthwith to the Corporation and the respec- tive profitable railroads operating in the region, all right, title, and interest in the rail properties of such railroad in reorganization and shall itself or- der the conveyance of all right, title, and interest in the rail properties of any railroad leased, oper- ated, or controlled by such railroad in reorganiza- tion that are to be conveyed to them under the final system plan as certified to such court under section 20%(d) of this Act. (2) All rail properties conveyed to the Corpo- ration and the respective profitable railroads operat- ing in the region under this section shall be conveyed free and clear of any liens or encumbrances, but subject to such leases and agreements as shall have previously burdened such properties or bound the owner or operator thereof in pursuance of an ar- rangement with any State, or local or regional trans- portation authority under which financial support from such State, or local or regional transportation authority was being provided at the time of enact- ment of this Act for the continuance of rail passen- 19 remedying any inadequacy of consideration which it finds, that court is permitted to reallocate Conrail’s securities (Footnote 7 cont'd) ger service or any lien or encumbrance of no greater than 5 years, duration which is necessary for the contractual performance by any person of duties related to public health or sanitation. Such con- veyances shall not be restrained or enjoined by any court. (3) Notwithstanding anything to the contrary contained in this Act, if railroad rolling stock is in- cluded in the rail properties to be conveyed, such conveyance may only be effected if the profitable railroad operating in the region or the Corporation to whom the conveyance is made assumes all of the obligations under any conditional sale agree- ment, equipment trust agreement, or lease in re- spect to such rolling stock and such conveyance is made subject thereto; and the provisions of this Act shall not affect the title and interests of any lessor, equipment trust trustee, or conditional sale vendee or assignee under such conditional sae agreement, equipment trust agreement or lessee under section 77(j) of the Bankruptcy Act (11 USC. 2050). (4) Notwithstanding anything to the contrary contained in this Act, if a railroad in reorganization has leased rail properties from a lessor that is neither a railroad nor controlled by or affiliated with a railroad, and such lease has been approved by the lessee railroad’s reorganization court prior to the date of enactment of this Act, conveyance of such lease may only be effected if the Corpora- tion or the profitable railroad to whom the convey- ance is made assumes all of the terms and condi- tions specified in the lease, including the obligation to pay the specified rent to the non-railroad les- sor. (Cont'd) 20 21 among the various bankrupt estates, to order the provi- sion by Conrail of further securities of Conrail or obli- gations of the Association as designated in the Final System Plan and, ultimately, to enter a deficiency judg- (Footnote 7 cont'd) (Footnote 7 cont'd) (c) Findings and Distribution. — (1) After the rail properties have been conveyed to the Corporation and profitable railroads operating in the region under subsection (b) of this section, the special court, giving due consideration to the findings contained in the final system plan, shall decide (A) Whether the transfers or conveyances — (i) of rail properties of each railroad in reorganization, or of each railroad leased, operated, or controlled by a rail- road in reorganization, to the Corpora- tion in exchange for the securities and other benefits accruing to such railroad as a result of such exchange, as provided in the final system plan and this Act, and (ii) of rail properties of each railroad in reorganization, or of each railroad leased, operated, or controlled by a rail- road in reorganization, to a profitable railroad operating in the region, in ac- cordance with the final system plan. are in the public interest and are fair and equi- table to the estate of each railroad in reor- ganization in accordance with the standard of fairness and equity applicable to the ap- proval of a plan of reorganization or a step in such a plan under section 77 of the Bank- tuptcy Act (11 USC. 205), or fair and equi- table to a railroad that is not itself in reor- ganization but which is leased, operated, or controlled by a railroad in reorganization; and (Cont'd) (B) whether the transfers or conveyances are more fair and equitable than is required as a constitutional minimum. (2) If the special court finds that the terms of one or more exchanges for securities and other benefits are not fair and equitable to an estate of a railroad in reorganization, or to a railroad leased, operated, or controlled by a railroad in reorganiza- tion, which has transferred rail properties pursuant to the final system plan, it shall — (A) enter a judgment reallocating the securi- ties of the Corporation in a fair and equitable manner if it has not been fairly allocated among the railroads transferring rail properties to the Corporation; and (B) if the lack of fairness and equity cannot be completely cured by a reallocation of the Corporation's securities, order the Corporation to provide for the transfer to the railroad of other securities of the Corporation or obliga- tions of the Association as designated in the final system plan in such nature and amount as would make the exchange or exchanges fair and equitable; and (C) if the lack of fairness and equity cannot be completely cured by reallocation of the Cor- poration's securities or by providing for the trans- fer of other securities of the Corporation or ob- ligations of the Association as designated in the final system plan, enter a judgment against the Corporation. (3) If the special court finds that the terms of one or more conveyances of rail properties to a prof- (Cont'd) ie) -- ment against Conrail should these steps prove insufficient to pay the estates their “constitutional minimum.” (Footnote ~ cont d) itable railroad operating in the region in accordance with the final system plan are not fair and equitable, it shal! enter a judgment against such profitable rail- road. if the special court finds that the terms of one or more conveyances or exchanges for securities or other benefits are fairer and more equitable than is required as a constitutiona) minimum. then 11 shall order the return of any excess secunties. obligations. or compensanon to the Corporation or a profitable railroad so as not to exceed the constitutional mini- mum standard of fairness and equity. (4) Upon making the findings referred to in this subsec uon. the special court shal] order distribution of the securities. obligations. and compensation de- posited with it under subsection (b) of this section to the trustee or trustees of each railroad in reorgan- ization in the region who conveyed right, tide, and interest in rail properties to the Corporation and the respective profitable railroads under such subsection. (d) Appeal. — A finding or determination en- tered pursuant to subsection (c) of this section may be appealed directly to the Supreme Court of the United States in the same manner that an injunction order may be appealed under section 1253 of ttle 28. United States Code: Provided, That such ap- peal is exclusive and shal) be filed in the Supreme Court not more than 5 days after such finding or determination is entered by the special court. The Supreme Court shal) dismiss any such appeal within 7 days after the entry of such an appeal if it deter- munes that such an appeal would not be in the in- terest of an expeditious conclusion of the proceed- ings and shal) grant the highest pnonty to the de- terminauion of any such appeals which 11 determines not to dismiss We first dispose of plaintiffs’ threshold contention that the possible future conveyance of rail properties to Con- rail in consideration for Conrail stock and securities con- stitutes a Fifth Amendment taking without payment of just compensation. Plaintiffs argue that the provision for compensation for the conveyance of Penn Central assets renders the Act unconstitutional on its face because the compensation provided in the Act is not payable in money or other legal tender, because the purported safety valve in a deficiency judgment against Conrail provides no assurance that just compensation will be paid, and because these procedures offend procedural due process. We do not meet these Fifth Amendment questions be- cause we are persuaded that these issues are premature. “Courts do not review issues, especially constitutional is- sues, until they have to. Joint Anti-Fascist Refugee Com- mittee v. McGrath, 341 U.S. 123, 154-55 (1951) (Frank- furter, J., concurring). It has been said that a number of jurisprudential rules underlie this general principle. The doctrines of “standing”, “ripeness”, “finality” and “moot- ness all serve “the primary conception that federal judi- cial power is to be exercised to strike down legislation only at the instance of one who is himself immedi- ately harmed, or immediately threatened with harm, by the challenged action.” Poe v Ullman, 367 U.S. 497, 503-04 (1961). We believe that the present circumstances do not present a nipe controversy because the basis of 8 in addition to the mandatory conveyance provision of the Act, Congress provided that the conveyances be made “free and clear of any liens and encumbrances” subject to limited exceptions. Section 303 bY 2). 24 plaintiffs’ complaint depends on the “concurrence of f. contingent events too speculative to warrant anticipa- tory judicial determinations.” Eccles v. Peoples Bank, 333 U.S. 426, 432 (1948). Before the plaintiffs may be harmed by the mandatory conveyances, certain contingencies must occur. First, the Penn Central reorganization court must decide “whether or not such railroad shall be reorganized by transferring some of its rail properties to the Corporation pursuant to the provisions of this Act.” Section 207(b). Although the court conducted a hearing on June 10, 1974, no find- ings have been made. Second, the board of directors of the Association must deliver the Final System Plan adopted by the Association to both Houses of Congress and to the Committee on Interstate and Foreign Commerce of the House of Representatives and the Committee on Commerce of the Senate for approval. Section 208(a).? Third, after Congressional approval, the conveyances take place only at the direction of the Special Court within ten days after de- posit of the consideration by Conrail. Section 303(b). SEC. 208(a) GENERAL. — The Board of Directors of the Association shall deliver the final system plan adopted by the Association to both Houses of Congress and to the Committee on In- terstate and Foreign Commerce of the House of Representatives and the Committee on Commerce of the Senate. The final system plan shall be deemed approved at the end of the first period of 60 caiendar days of continuous session of Con- gress after such date of transmittal unless either the House of Representatives or the Senate passes a resolution during such period stating that it does not favor the final system plan. 25 Thus, before plaintiffs can be exposed to the alleged harm, there must be a judicial determination by a Section 77 reorganization court followed first by Congressional ac- tion, and finally judicial action by the Special Court. Faced with this triple contingency, the plaintiffs cannot be said to have been exposed to harm. Until these con- tingencies occur, only an abstract issue appears; and ab- stract issues do not invoke the jurisdiction of the courts.” McCahill v. Borough of Fox Chapel, 438 F.2d 213, 215 (3d Cir. 1971). “As is well known, the federal courts es- tablished pursuant to Article III] of the Constitution do not render advisory opinions. United Public Workers of America v. Mitchell, 330 U.S. 75, 89 (1947) (footnote omitted). We are persuaded that the teachings of Communist Party of United States v. Subversive Activities Control Board, 367 U.S. 1 (1961), and Albertson v. Subversive Activities Control Board, 382 U.S. 70 (1965), control the issues dealing with the ultimate conveyance of railroad proper- ties. In Communist Party the Court ruled that the mere possibility of Section 7(h) of the Subversive Activities Control Act and a regulation issued thereunder affecting the officers of the Party was not sufficient to present a live controversy. “The duties imposed by those provisions will not arise until and unless the Party fails to register. At this time their appearance is wholly contingent and conjectural.” 367 U.S. at 106. However, when the Party members subsequently appealed from an order directing them to register under the Act, the Court ruled in Albert- son that the claims were ripe for adjudication. Accord- ingly, we conclude that plaintiffs’ contention that the con- veyance of the rail properties offends the due process clause is not ripe for adjudication. 26 Article I, Section 8, Clause 4 requires uniform Laws on the subject of Bankruptcies throughout the United States.” Plaintiffs contend that because the Act must be geographically uniform in application, Hanover National Bank v. Moyses, 186 U.S. 181 (1902), it is facially un- constitutional because it provides that only rail properties of railroads in reorganization in the “Region” may be de- signated for transfer to Conrail. Section 206(c)(d). By definition the Region is limited to seventeen northeastern and midwestern states, the District of Columbia, and cer- tain portions of contiguous states. 0 The defendants’ answer to these arguments is that, inso- far as the Act is an exercise of the bankruptcy process, it is uniform: all Class I railroads in reorganization are in 10 The Act is entitled “Regional Rail Reorganization Act of 1973.” Section 101(b) states: (b) PURPOSES. — It is therefore declared to be the purpose of Congress in this Act to provide for — (1) the identification of a rail service system in the midwest and northeast region which is ade- quate to meet the needs and service requirements of this region and of the national rail transporta- tion system Section 10A 13) declares that “ ‘Region’ means the States of Maine, New Hampshire, 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 lo- cated rail properties owned or operated by railroads doing business primarily in the aforementioned jurisdictions (as determined by the Commission by order 27 fact located within the defined Region, and there is no discriminatory treatment of creditors within or without the Region. Alternatively, defendants contend that the Region was defined for purposes of statutory provisions based on Congress’ power under the commerce clause, which is not subject to requirement of uniformity. The court is divided on this issue. Judges Fullam and Bechtle are of the view that certain provisions of §207(b) (see ante page 10, n. 4) offend the constitutional require- ment of uniformity. These provisions mandate disrnissal of the Section 77 proceeding if the procedures of the Act are rejected. Their analysis and conclusions are set forth in Part II of Judge Fullam’s separate opinion. For my part, without reaching defendants’ alternate con- tention that the Act finds constitutional support under the commerce clause, | am persuaded that, in the context of the circumstances of this case, the Act does not offend Article I, Section 8, Clause 4. Hanover Bank instructs that Itlhe laws passed on the subject [of bankruptcies] must, however, be uniform throughout the United States, but that uniformity is geo- graphic and not personal. 186 U.S. at 188. We believe that the Founding Fathers’ requirement of uni- formity was mandated to prevent Congressional geograph- ical discrimination of creditors or debtors. But the 1973 Act is geographically uniform with respect to creditors’ claims. No provision of the Act restricts the right of any creditor wheresoever located to obtain relief because of regionalism. If there is a facial geographic restriction, it would apply to regional or non-regional debtor railroads only. However, that is not this case. We are not con- fronted with a proper case or controversy involving a constitutional challenge to the Act brought by a debtor 28 railroad inside or outside the Region. The challenge is brought by creditors within the Region whose claims are treated alike. Accordingly, instructed by the rule of United States v. Raines, 362 U.S. 17, 21 (1960) that “one to whom application of a statute is constitutional will not be heard to attack the statute on the ground that impliedly it might also be taken as applying to other persons or other situations in which its application might be uncon- stitutional”,'' | do not reach the question of whether the 11 The very foundation of the power of the federal courts to declare Acts of Congress unconstitutional lies in the power and duty of those courts to de- cide cases and controversies properly before them. This was made patent in the first case here exer- cising that power the gravest and most delicate duty that this Court is called on to perform.” Marbury v. Madison, | Cranch 137, 177-180. This Court, as is the case with all federal courts, “has no jurisdiction to pronounce any statute, either of a State or of the United States, void, because irre- concilable with the Constitution, except as it is called upon to adjudge the legal rights of litigants in actual controversies. In the exercise of that ju- risdiction, it is bound by two rules, to which it has rigidly adhered, one, never to anticipate a question of constitutional law in advance of the necessity of deciding it; the other never to formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied.” Liver- pool, New York & Philadelphia & S. Co. v. Commis- sioners of Emigration, 113 US. 33, 39. Kindred to these rules is the rule that one to whom application of a statute is constitutional will not be heard to at- tack the statute on the ground that impliedly it might also be taken as applying to other persons or other situations in which its application might be unconsti- tutional. United States „ Wurzbach, 280 US. 396 Heald v. District of Columbia, 259 US. 114, 123; (Cont'd) 29 Act may not survive a constitutional attack brought by a debtor railroad located outside the Region. Thus, | would hold that as to plaintiff-creditors, the Act does not offend the uniformity requirements of Article I, Section 8, Clause 4. (Footnote 11 cont'd) Yazoo & Mississippi Valley R. Co. v. Jackson Vine- gar Co., 226 US. 217; Collins „ Texas, 223 US. 288, 295-296; New York ex rel. Hatch v. Reardon, 204 U.S. 152, 160-161. J Voeller v. Neilston Ware- house Co., 311 US. 531, 537; Carmichael v. South- em Coal & Coke Co., 301 US. 495, 513, Virginian R. Co. v. System Federation, 300 US. 515, 558; Blackmer v. United States, 284 US. 421, 442; Rob erts & Schaefer Co. v. Emmerson, 27\ US. 50. . 55, Jeffrey Mfg. Co. v. Blagg, 235 US. 571. 576; Tyler v. Judges of the Court of Registration, \79 US. 405; Ashwander v. TVA, 297 US. 288, 247-348 (concurring opinion). In Barrows v. Jackson, 346 US. 249, this Court developed various reasons for this rule. Very significant is the incontrovertible proposition that it “would indeed be undesirable for this Court to consider every conceivable situation which might possibly arise in the application of com- plex and comprehensive legislation.” /d at 256. The delicate power of pronouncing an Act of Con- gress unconstitutional is not to be exercised with reference to hypothetical cases thus imagined. The Court further pointed to the fact that a limiting construction could be given to the statute by the court responsible for its construction if an applica- tion of doubtful constitutionality were in fact con- cretely presented. We might add that application of this rule frees the Court not only from unnec- essary pronouncement on constitutional issues, but also from premature interpretations of statutes in areas where their constitutions application might be cloudy. 362 US. at 20-22 (footnote omitted). 30 IV. Finally plaintiffs contend that the Act effects a taking of their property by compelling operation of Penn Central's rail properties at an irreversible loss during the period be- fore adoption of the Final System Han. 12 They urge that “the Act is unconstitutional in that I) it denies them their present right to terminate their investment in a hopelessly losing railroad; and 2) it provides no assurance that plain- tiffs will in all events be paid just compensation on account of such forced continued operations. 13 12 Section 304(f) of the Act provides for interim abandonment if certain conditions are met: 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 authorized to do so by the Association and unless no affected State or local or regional transporta- tion authority reasonably opposes such action, not- withstanding any provision of any other Federal law, the constitution or law of any State, or decision or order of, or the pendency of any proceeding before any Federal or State court, agency, or authority. At oral argument the Penn Central Trustees represented that requests for abandonment were filed with the office of the Associ- ation, but as of June 3, 1974 — over five months after the effec- tive date of the Act — the office of the Association was not yet fully functioning. '3 Connecticut General Plaintiffs’ Brief, 30. The Penn Central Company contends that an unconstitutional taking of the Penn Central railroad’s property occurred on January 2, 1974; that the compul- sory continuation of operations during the interim period without payment of just compensation abridges the Fifth Amendment; and that since the debtor estate is being continually depleted, plaintiff, as an unsecured creditor, is presently being injured. Penn Central Company's Memorandum in Support of its Motion for Summary Judgment, 10-14. 31 That Congress expected losses during implementation of the Final System Plan is evidenced by Section 213 which provides that the Secretary of Transportation may make payments for certain specific interim losses: (a) Emergency Assistance. — The Sec- retary is authorized, pending the implementa- tion of the final system plan, to pay to the trustees of railroads in reorganization such sums as are necessary for the continued pro- vision of essential transportation services by such railroads. Such payments shall be made by the Secretary upon such reasonable terms and conditions as the Secretary establishes, except that recipients must agree to maintain and provide service at a level no less than that in effect on the date of enactment of this Act. (b) Authorization for Appropriations. — There are authorized to be appropriated to the Secretary for carrying out this section such sums as are necessary, not to exceed $85,000,000, to remain available until ex- pended. '4 It becomes quickly apparent that the limited amounts of these funds — available to railroads in reorganization in the region — have not been specially designated to meet challenges of unconstitutional erosion. Moreover, the full statutory authorization has not been appropri- ated nor is there total agreement between the Secretary 14 Significantly there is no explicit reference to the Court of Claims. 32 33 of Transportation and the trustees and creditors as to the million, which required approval by the Section 77 reorgan- nature of the payments to be made under Section 213 and ization court. In approving the trustees’ petition the court those to be made under Section 215."5 Congress has only observed: appropriated $35 million of the $85 million authorized. By February 19, 1974, a tentative, partial solution was reached between the trustees and the Secretary as to $10.8 15 SEC. 215. Prior to the date upon which rail properties are conveyed to the Corporation under this Act, the Secretary, with the approval of the Association, is authorized to enter into agreements with railroads in reorganization in the region (or railroads leased, operated, or controlled by rail- roads in reorganization) for the acquisition, main- tenance, or improvement of railroad facilities and equipment necessary to improve property that will be in the final system plan. Agreements entered into pursuant to this section shall specifically iden- tify the type and quality of improvements to be made pursuant to such agreements. Notwithstand- ing section 210(b) of this title, the Association shall issue obligations under section 210(a) of this title in an amount sufficient to finance such agreements and shall require the Corporation to assume any such obligations. However, the Association may not issue obligations under this section in an ag- gregate amount in excess of $150,000,000. The Secretary may not enter into any agreements un- der this section until he issues regulations setting forth procedures and guidelines for the administra- tion of this section. The Corporation shall not be required under title Ili of this Act to compensate any railroad in reorganization for that portion of the value of rail properties transferred to it under this Act which is attributable to the acquisition, maintenance, or improvement of such properties under this section. Section 215 of the Act authorizes the advance of up to $150 million for the purpose of in- terim acquisition, maintenance and improve- ment of rail assets which would eventually be conveyed to the new operating corporation contemplated by the statute, as part of the final system plan (increases in value resulting from such expenditures are not to be re- flected in the consideration to be paid for such transfers, and the obligation to repay is to be assumed by the new corporation). The Secretary has thus far declined to approve any grants under $213, and is not yet in a position to implement 8215. To meet the present emergency, the Secretary is apparently willing to use 213 funds, but not on a grant basis. The proposal contem- plates that, instead of providing funds to the Trustees to meet operating expenses, the Sec- retary will, in effect, transfer funds equal to certain current installments due on equip- ment, and in return acquire a pro tanto in- terest in the Trustees’ equity in that equip- ment. Meanwhile, it is contemplated that the parties will attempt to determine the extent to which 215 funds can appropri- ately be made available to relieve future cash shortages. 34 A hearing on the Trustees’ petition was held on February 26, 1974. The creditor in- terests all expressed, in varying degrees, their conviction that the proposed financing was contrary to the intent of the Regional Rail Reorganization Act of 1973, and also would violate the constitutional rights of the credi- tors. The New Haven Trustee flatly opposes the transaction. Substantially all of the other creditor interests, and the Trustees, expressed their willingness to have the Court approve the transaction, so long as it was clearly under- stood that this would not create a precedent for similar approvals in the future, and that all parties expressly reserved their rights to press all constitutional and legal arguments at the forthcoming hearings on the issues involved in $207 of the Reorganization Act and in all other proceedings involving their rights under, and the constitutionality of, the statute. As all parties recognize, unless these funds are provided immediately, the Trustees will be forced to default in the payments due on equip- ment in which they have an equity in excess of $70 million. Section 77(j) of the Bankruptcy Act severely restricts the power of a reorgani- zation court to preclude equipment creditors from exercising the rights granted under the fi- nancing documents. No other source of cash to meet these installments l. as been suggested (and it is difficult to imagine any alternative source which would not involve repayment, 35 and thus the same constitutional issues as in the present proceeding).'® 16 In re Penn Central Transportation Co., Debtor, Memorandum in Support of Order No. 1480 (March |, 1974) (pp. 1-3). Immediately after the enactment of the 1973 Act, the Trustees applied to the Secretary of Transportation for a grant under Section 213, to meet a projected cash shortfall of approximately $12 million anticipated to occur by March |, 1974. There were three difficulties: (1) the grants were supposed to be made pursuant to regulations pre- scribed by the Secretary, and the Secretary had not yet prescribed any regulations; (2) The Act requires, as a condition of any such grant, that the recipient agree to maintain rail service at the level of January 2, 1974, and there were problems of interpretation on that, as well as questions about whether the Trustees could make any such commitment in good faith, or without violating the constitutional rights of creditors; and (3) It was the firm position of the Secreiary of Transportation that the preferred vehicle for interim financing, would be loans for capital improvements under Section 215, rather than grants under Section 213. There were, however, many problems standing in the way of use of any Section 215 money. (These funds, to be used for capi- tal improvements and acquisitions, are in effect loans made to Con- rail, in advance of its coming into existence.) In addition to the fact that such capital improvements were to be limited to the rail properties which would be designated in the Final System Plan, and which were therefore not presently identifiable, there would be no money available under Section 215 until United States Railway As- sociation had been formed and could issue government-guaranteed debt securities. By February 19, 1974, a proposal for a patchwork solution had been worked out between the Trustees and the Department of Trans- portation. The DOT would put up $10.8 million, by directly meeting certain installment payments due on equipment, and would be subro- gated, pro tanto, to the Trustees’ equity in that equipment. In ef- fect, the Trustees would sell a part of their equity in certain rail equipment to the Department of Transportation, but with the right (Cont'd) 36 A. Our first responsibility is to determine whether the in- terim erosion issue is presently ripe for adjudication. The predicate of this issue is that, absent permissive interim abandonment, the Act mandates continued operations of Penn Central until the Final System Plan is adopted. Plain- tiffs contend that a compulsory interim operation for a vir- tually indefinite length of time at large operating losses continues to erode the Penn Central estate so as to con- stitute a condemnation of the assets without fair and just compensation. To decide whether this contention presents a ripe, and therefore justiciable, issue requires an overview of the Penn Central operations. A statement of opera- tional losses being sustained by Penn Central, while under Section 77 reorganization, is revealed in the stipulations filed by the parties. During the period that began June 21, 1970, until December 31, 1973, Penn Central sus- tained ordinary net losses in an amount which approxi- mates $851,000,000.00."7 (Footnote 16 cont'd) to redeem it by paying back the money without interest. A hearing was held on this proposal on February 26, 1974, and the Section 77 reorganization court approved it, over the objections of various credi- tors, by Order No. 1480. In a Supplemental Memorandum and Order (No. 1509) the court denied a motion for reconsideration. The orders are now under appeal. Thus, of the $35 million thus far appropriated under Section 213 of the Act, $10.8 million has been expended to purchase a part of Penn Central's equity in some of its equipment. 7 During this same period, the Penn Central trustees expended in operating rail properties approximately $137,500,000 of non-recurring cash items as follows: Trustees’ Certificate Drawdowns $ 100,000,000 Tenants Tax Escrow Account 3,100,000 Proceeds from New Haven Property Sale 9,100,000 (Cont'd) 37 It is also stipulated that for the two months ended Feb- ruary 28, 1974, Penn Central had a deficit in net railway operating income, a deficit in total income, a deficit in income available for fixed charges and deficit net income, as those items are determined in accordance with account- ing regulations of the Interstate Commeice Commission. As previously stated, the Penn Central reorganization court has ruled that the railroad is not “reorganizable on an in- come basis within a reasonable time under section 77 of the Bankruptcy Act.” (Footnote 17 cont'd) Sale of Freight Cars to PALE 7,300,000 MB IA. Settlement 9,100,000 Proceeds from sale of stock of Madison Square Garden Corp. 2,400,000 Proceeds from sale of securities held in Contingent Compensation Fund 6,500,000 TOTAL $137,500,000 They expended $2,100,000 in proceeds from sale of mortgaged properties in connection with the Selkirk Yard improvement and $15,700,000 in proceeds from the “Agnes” Flood Loan. They expended in operating rail properties approximately $157,000,000 in income derived from Penn Central's non-rail prop- erties . They deferred payment of approximately $241 000,000 in state and local taxes, of which some $44 million to $48 million is alloca- ble to the pre-reorganization period. These taxes ($241 000,000) are included in the ordinary net losses. They deferred payment of approximately $101 ,000,000 in rentals on leased line properties. The deferred leased line rentals are included in the ordinary net losses. 38 The book value — and we emphasize that this is not a market value or liquidated value — of total assets is re- corded as $4,419,917,759 as of December 31, 1971."8 The trustees report that as of December 31, 1971, 26,254 claimants filed Proofs of Claim, claiming a gross amount of 83.348.620, 840“ Fifty-one secured creditors filed timely proofs of claim in the amount of $1,062,734,988. Ten indenture trustees filed claims in the amount of $963,135,138. Thirty-five individual bondholders claimed $81,911,646. Six claimants filed claims arising from con- ditional purchases of equipment and property in the amount of $17,688,204. An accountants’ report indicates that on June 21, 1970, the long-term debt in respect of mortgage bonds and collateral trust bonds, exclusive of railroad equipment obligations, was $687,692,000.% This, of course, is only a partial listing of the claims." A single 18 Annual Report to ICC, 1971, p. 8. 19 Trustees’ Plan for Reorganization, April 1, 1972, Attachment 5, pp. 6-7 (Doc. No. 3033). The trustees estimate an aggregate lia- bility of $1,583,076,820 from the filed claims. 20 Ibid, at 14-15. 21 In addition to the filed claims there is the matter of priority claims incurred against the estate during the Section 77 reorganization proceedings: E. Growth in priority claims against the estate. Deprived of an adequate cash flow, the Penn Central estate has accumulated substantial priority claims ahead of all pre-bankruptcy interests. Con- servatively estimated, these priority claims already aggregate at least $300 million. On a status quo (Cont'd) 39 unsecured creditor in these proceedings, the Penn Central Company, claims an approximate amount of $41,800,000. The Court of Appeals for the Third Circuit suggests: “If, as some of the reports filed by the trustees suggest, it is already clear that such a reorganization is not feasi- ble, l then this reorganization is already at the point where the erosion of the estate in deficit operations must cease and a liquidation alternative must be considered if II See, eg. Trustees’ Interim Report of Febru- ary |, 1973; Memorandum accompanying July 2, 1973 Plan of Reorganization of the Penn Central Transportation Company and Other Railroad Cor- porations (June 29, 1973)."22 (Footnote 21 cont'd) assumption, another $100 million would be added in 1973. As a result, the value of the estate has already been substantially eroded and the Trustees are presently unable to prevent continuing erosion. In addition to these items, there is a priority charge of some $200 million a year for interest and amor- tization of equipment debt and equipment lease ren- tals which must continue to be serviced out of future cash resources whether or not such charges are earned. There is, simply, not enough cash to cope with continuing claims and to embark upon the capital improvement programs which would permit a con- tinuation of service improvements. Not only is the ability to preserve earning power jeopardized, but Penn Central's essential public services cannot be sustained on this basis. *_* © * 2 Trustees Interim Report of January |, 1973, p. 4 (Doc. No. 4911). 22 In the Matter of Penn Central Transportation Co., Debtor, (Columbus Option Cases), 494 F.2d 270, 283 (3d Cir. 1974). 40 the secured creditors or other interested parties insist upon such consideration.” Over a year ago the Section 77 reorganization Court warned: “1. Erosion. While the precise calculations have not been fully developed, the record justifies the conclusion that post-reorganization deferrals and unpaid administration claims have already eroded the Debtor’s estate to the ex- tent of about $500 million. Whether the constitutional limit has been exceeded depends primarily upon how the remaining assets are to be valued; and this in turn may well depend upon how those assets are to be used at the conclusion of this reorganization. Under any view of the matter, it seems clear that the point of unconstitutional- ity is fast approaching, if it has not already arrived... . On the basis of the record to date, it appears highly doubt- ful that the Debtor could properly be permitted to continue to operate on its present basis beyond October 1, 1973.” In re Penn Central Transportation Company, 355 F. Supp. 1343, 1344, 1346 (E.D. Pa. 1973). Cognizant of massive operational losses of $851,000,000 during the present reorganization proceedings, and cogni- zant also that unsecured creditor as well as secured cred- itor interests are squarely before this court, we are per- suaded 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 uncon- stitutional taking by continued loss operations is ripe for adjudication. Having determined that there is a contro- versy ripe for adjudication, we now examine the merits of plaintiffs’ contention. The defendants acknowledge that if a point is reached where continued loss operations during the interim amount 41 to an unconstitutional taking,” the Act does not explicitly provide for the payment of just compensation. They in- sist, however, that plaintiffs have an implied remedy at law — a suit in the Court of Claims under the Tucker Act, 28 U.S.C. 81491, for just compensation from the United States. The Tucker Act confers jurisdiction on the Court of Claims: to render judgment upon any claim against the United States founded either upon the Constituticn, or any Act of Congress, or any regulation or an executive department, or upon any express or implied contract with the United States, or for liquidated or un- liquidated damages in cases not sounding in tort. 23 [T}here are limits beyond which . . . [the] public interest cannot be served without violating the con- stitutional prohibition against appropriation of pri- vate property for public use without just compen- sation. New Haven Inclusion Cases, 399 U.S. 392, 90 S. Ct. 2054, 26 L.Ed.2d 691 (1971); cf Brooks- Scanlon Co. v. Railroad Commission of Louisiana, 251 US. 396, 40 S. Ct. 183, 64 L.Ed. 323 (1920). These limitations are measured both in terms of the amount of erosion of the Debtor's estate which can be permitted to occur before impairing liquidation value, and in terms of the length of time that is reasonable for assessing the ultimate prospects of achieving sufficient profitability to support a valid recapitalization of the enterprise. In Re Penn Central Transportation Company, 347 F. Supp. 1346, 1366 (E.D. Pa. 1972). 24 The district courts have concurrent jurisdiction of claims not exceeding $10,000. 28 U.S.C. $1346. 42 The applicability of the Tucker Act is vital to the de- fendants’ position. At oral argument counsel conceded that if a point was reached at which continued manda- tory operations created losses of such an amount as to constitute a Fifth Amendment taking, the operators would then be entitled to just compensation, and that without an implied Court of Claims remedy, the 1973 Act would be unconstitutional as to these plaintiffs.* 25 JUDGE ALDISERT: All right now, Mr. Cutler, assuming an unconstitutional taking by means of con- tinued interim operation, without a Tucker Act rem- edy, would the 1973 Act be unconstitutional? MR. CUTLER: You are saying assuming that a point might be reached before the consummation of the new plan in which the constitutionally permis- sible point of erosion had been reached, before that could be carried out? JUDGE ALDISERT: Yes, sir. MR. CUTLER: And that a Tucker Act rem- edy was not available? JUDGE ALDISERT: Yes. MR. CUTLER: | think | would answer that, Judge Aldisert, by saying under those circumstances, Congress would then have decreed a taking by the provision of this Act for which it had removed any adequate remedy at law by way of the Tucker Act suit. In that case, the Act as a whole would prob- ably be unconstitutional. We would agree with that. We think it would be possible at that point though to save most of the Act by construing | think it is 303 where the court is required to trans- fer the properties before it has passed on the value of what is to be given in exchange, by construing that as unconstitutional, that particular provision, (Cont'd) 43 The defendants concede that the United States, as sov- ereign, may not be sued without its consent. [Il he terms of its consent to be sued in any court define that (Footnote 25 cont'd) and saving the rest of the statute under the severa- bility clause, which would have the result that the court could delay the transfer until after it had passed on the values, and as to erosion, if the in- terim or the final point, the limit of constitution- ally permissible erosion, had been reached before the plan was consummated, then | suppose Judge Fullam, as the reorganization judge, and the other judges wou'd be free, since the compulsory trans- fer would have been struck down as unconstitu- tional, to terminate the proceedings, if they thought that was appropriate R. 68-69. Penn Central Trustees have expressed a similar position: B. Interim Erosion. Moreover, there is the further objection to the Act already referred to - the lack of any assurance that the estate will be compensated for erosion during the many months which must elapse before Penn Central's rail prop erties are conveyed. Financial erosion — the accu- mulation of real estate taxes, interest on secured debt, leased line rentals and a variety of adminis- trative expenses — continues to accumulate at the expense of the owners. Physical erosion, as noted above, is likewise continuing, as the rail properties of the debtor continus to suffer from inadequate maintenance. The Trustees have been advised that a Tucker Act remedy may be available to them to recover these erosion losses. The Trustees will attempt to secure a Supreme Court ruling that, if a constitu- tionally impermissible level of erosion was reached (Cont'd) 44 court's jurisdiction to entertain the suit.” United States v. Sherwood, 312 U.S. 584, 586 (1941). Consent to be sued must be established in an act of Congress, and such an act, “since it is a relinquishment of a sovereign immunity, must be strictly interpreted.” bid, at 590; see, United States „ King, 395 U.S. 1, 4 (1969). Specifically defendants urge that a statutory grant of consent to a suit against the United States for any unconstitutional taking by reason of interim losses is conferred on the Court of Claims by im- plication because the Regional Rail Reorganization Act of 1973 shows no affirmative Congressional intent to deprive (Footnote 25 cont'd) by January 2, 1974, the date the Act became law, a taking of Penn Central's rail properties occurred at least by that date, and that a Tucker Act remedy exists for erosion occurnng thereafter. Section 304 (f) of the Act provides that “after the date of en- actment of this Act, no railroad in reorganization may discontinue service or abandon any line of rail- road other than in accordance with the provisions of this Act. While the planning agency, the United States Railway Association, may authorize a service to be discontinued or a line to be abandoned (unless local authonties reasonably object), this man- date by Congress has the effect of requiring Penn Central to continue operations — notwithstanding the losses it will incur — until a final system plan is implemented. Again, however, the Trustees are advised that unless and until the Supreme Court has ruled that the United States can be required to re- imburse the Penn Central estate for its interim losses, they cannot as fiduciaries rely exclusively on a Court of Claims recovery. Trustees’ April 3, 1974 Report on Reorganization Planning, pp. 5. 6 (Doc. No. 7304). 45 that court of its Tucker Act jurisdiction in cases where claims for unconstitutional takings are made. The plaintiffs counter with a reference to the legislative history to demonstrate that there was a specific intention to limit the obligations of the United States to the express provisions and explicit limitations contained in the Act. Thus the issue is joined, and the solution turns on the vex- ing problem of statutory construction. We cannot demean the importance of proper statutory construction in the precise matter at hand. On proper statutory construction stands or falls the constitutionality of important provisions of the statutory schema. The de- fendants, joined by the intervening Penn Central trustees, mount a formidable argument, reminding us that when “the validity of an act of the Congress is drawn in ques- tion, and . a a serious doubt of constitutionality is raised, it is a cardinal principle that . . [courts] will first ascer- tain whether a construction of the statute is fairly possi- ble by which the question may be avoided.” United States v. Thirty-Seven Photographs, 402 "U.S. 363, 369 (1971), citing Crowell u Benson, 285 U.S. 22 (1932) (emphasis supplied). See also, American Communications Assn, C0 „ Douds, 339 U.S. 382, 407 (1950); United States Con- gress of Industrial Organizations, 335 U.S. 106, 120-2! (1948). The Penn Central trustees emphasize that “the Act contains no fewer than thirteen provisions repealing or making inapplicable the provisions of various laws or excluding the jurisdiction of federal courts on various sub- jects. Since none of these thirteen provisions excludes a Tucker Act remedy — although, as plaintiffs themselves argue, Congress was intensely aware of the possibility of such a remedy — Congress must be deemed to have de- liberately rejected the readily available option of including * 47 such an exclusionary provision in the Act. 209 mandates the empaneling of the Special Court and the consolidation before it of ‘all judicial proceedings with re- On their part the plaintiffs also tum to the text of the spect to the final system plan’. Section 303(c) endows the Act, describing it as “a preemptive system of judicial par- ticipation [with] respect to the final system plan. Section (Footnote 26 cont'd) atempts to exclude a Tucker Act remedy for just compensation for the properties so taken. 26 Penn Central Trustees’ Brief in Opposition to Plaintiffs’ Mo- tion for Summary Judgment, p. 6. The thirteen repealing or jurisdiction-excluding provisions in the Act are found in Sections 202(a), 20HcK 2), 206(dK3), 207(b), 20%a), 2OAb), 303(b) (2), 303d), 304(c), 304(f), 601(aK 2), 601(b) and 601(c). Sections 202(a\ 10) and 20%cX 2) exempt United States Railway Association (USRA) and the Rail Services Planning Office, respectively, from the pro- visions of Section 3709 of the Revised Statutes, 41 US.C., Section 5. Section 206(d\3) provides that certain determinations by USRA aad the ICC shall not be reviewable in any court. Section 207(b) pro- vides that appeals from orders made under that sub- section may be taken only to the Special Court, whose decisions are not subject to further review. Section 207(b) also in effect repeals part of the ju- risdiction created by Section 77 of the Bankruptcy Act by requiring dismissal of Section 77 proceed- ings in certain circumstances. Section 20%a) provides that the final system plan shall become effective after review by Congress “notwithstanding any other provision of law” and is “not subject to review by any court except in accord- ance with this section.” Here Congress provides that no court may review the contents of the final system plan — the document which establishes what railroad properties shal] be taken and that the plan is to become effective notwithstanding any other provi- sions of law. Obviously nothing here purports or (Cont'd) Section 20%b) authorizes the Judicial Panel on Multi-District Litigation to create a Special Court and to consolidate therein all judicial proceedings with re- spect to the final system plan, and to issue rules for the conduct of the Panel's functions. The section goes on to provide that “no determination by the panel [on Multi-District Litigation] under this sub- section may be reviewed in any court.” Here again Congress demonstrated that it well knew how to ex- clude jurisdiction of federal courts when it wished to do so. Section 303(b\ 2) provides that mandatory conveyances ordered pursuant to the Act by the Special Court “shall not be restrained or enjoined by any court.” Section 303(d) provides that, af- ter the Special Court enters its orders with respect to compensation which are authorized by prior subsections of Section 303, an appeal may be taken to the Supreme Court and “that such ap- peal is exclusive.” This makes a single appeal to the Supreme Court the only means by which in- terested parties may question whether the Special Court has properly performed the functions as- signed to it by Section 303. Since those func- tions do not include consideration of any ques- tion whether the compulsory conveyance pursuant to the Act constitutes a taking of property or the amount of just compensation due therefor, section 303(d) in no way attempts to exclude a Tucker Act remedy for such a taking. To the contrary, Section 30d) yet again demonstrates (Cont'd) 48 Special Court with the duty to review the consideration to be received for the properties conveyed and ultimately the (Footnote 26 cont'd) that Congress was fully aware of the necessity of excluding various types of jurisdiction and did so expressly when it wished to do so. Section 304(c) provides that railroad aban- donments permitted under the section may be made “notwithstanding any provision of the In- terstate Commerce Act or of other laws. Sec- tion 304(f) provides that the inhibition on interim abandonments imposed by that subsection prevails “notwithstanding any provision of any other Fed- eral law, the constitution or law of any State, or decision or order of, or the pendency of any pro- ceeding before any Federal or State court, agency, or authority.” Section 601(aX2) provides that “the anti- trust laws are inapplicable with respect to any action taken to formulate or implement the final system plan where such action was in compliance with the requirements of such plan.” Section 601(b) similarly makes inapplicable the provisions of the Interstate Commerce Act “whenever a pro- vision of any such act is inconsistent with this Act.” And Section 601(c) provides that certain provisions of the National Environmental Policy Act of 1969 “shall not apply with respect to any action taken under authority of this Act before the effective date of the final system plan.” These provisions are contained in Title VI of the Act, in a subtitle headed “Relationship to Other Laws.” If Congress had wished also to exclude the appli- cation of the Tucker Act, it obviously would have added such an exclusion to the very explicit pro- vision of Section 601 excluding the applicability of various other laws.” lbid., at 6-9 (footnote omitted). 49 authority under Section 303(cM2C) to enter a deficiency judgment against Conrail. The exclusive appeal from the Special Court's findings is provided in Section 303(d).”?’ The legislative history reveals that Senator Vance Hartke, who would later be one of the Managers of the bill on the part of the Senate, observed that if Congress did not act by providing the creditors with stock in Conrail, “there is the distinct possibility . that a number of these people could make a claim against the Government which could be sustained in the Court of Claims. Especially significant in the legislative history of the Act are the remarks recorded during the discussion on the con- ference report accompanying H.R. 9142 in a colloquy be- tween two of the “Managers on the Part of the House Mr. Dan] Kuykendall “Mr. Speaker, I would like to ask the gentleman from Wash- ington one point, and that is the matter of the deficiency judgment. There was a lot of colloquy in the original debate which expressed fears that the Federal Court had the key to the Treasury. “Will the gentleman give us his interpreta- tion of the guarantees we have to keep that from happening in the court proceedings?” Mr. [Brock] Adams. “Mr. Speaker, there is a definite limitation on the total amount that can be authorized under this 27 Connecticut General's Brief, 59-60. 28 119 Cong. Rec. S. 23783-84 (1973). 50 51 bill. Any amounts that go beyond that, or the shifting of the way in which it is spent, is to be approved by an Act of Congress, to be signed by the President... . [I]t was the clear intent of the managers that any amount other than common stock [of Section 210 describes the maximum obligational authority of the Association, and the authorization for appropriation is limited to “such amounts as are necessary to discharge the obligations of the United States arising under this sec- tion.” (Emphasis supplied.) Judicial review is delineated with specificity in Sections 20%a) and 303 with no men- Conrail] was to be at the lowest possible tion of the Court of Claims. limit to meet the constitutional guarantees.” *- * * (Footnote 30 cont'd) Mr. Kuykendall. “There is no way the for purposes of preparing the reports and exer- Federal Court may assess the taxpayers or this Congress on the judgments of the credi- tors, is that correct?” cising other functions to be performed by him under this Act such sums as are necessary not to exceed $12,500,000, to remain available un- til expended. ‘Mr. Adams. “The gentleman is cor- (b) OFFICE. — There are authorized to rect. be appropriated to the Commission for the use , of the Office in carrying out its functions un- Mr. Kuykendall. “There is no way der this Act such sums as are necessary, not to they can assess the Congress for the money?” exceed $5,000,000, to remain available until ex- pended. The budget for the Office shall be sub- = Adams. “The gentleman is cor- mitted by the Commission directly to the Con- rect. gress and shall not be subject to review of any kind by any other agency or official of the United States. Moneys appropriated for the Of- fice shall not be withheld by any agency or of- ficial of the United States or used by the Com- mission for any purpose other than the use of the Office. No part of any other moneys ap- propriated to the Commission shall be withheld by any other agency or official of the United States to offset any moneys appropriated pursu- We are persuaded that the legislative history supports the conclusion that Congress intended that financial obligations be limited to the express terms of the Act. Article I, Sec- tion 9, Clause 7 provides that no money shall be drawn from the Treasury of the United States except in conse- quence of an appropriation made by law. Section 213(bd), supra, and Section 214™ entitled “Authorization for Ap- propriations place an express ceiling on expenditures. ant to this subsection. 29 (c) ASSOCIATION. — There are author- 119 Cong. Rec. H. 11876 (1973). ized to be appropriated to the Association for 30 purposes of carrying out its administrative ex- penses under this Act such sums as are neces- sary, not to exceed $26,000,000, to remain (Cont'd) available until expended. SEC. 2144a) SECRETARY. — There are authorized to be appropriated to the Secretary 52 We were taught by Justice Frankfurter that the trouble- some phase of [statutory] construction is the determina- tion of the extent to which extraneous documentation and external circumstances may be allowed to infiltrate the text on the theory that they were part of it, written in ink dis- cernible to the judicial eye. John Chipman Gray often quoted a sermon by Bishop Hoadley that “|w]|hoever hath an absolute authority to interpret any written or spoken laws, it is he who is truly the law-giver to all intents and purposes, and not the person who first wrote or spoke them. For this court to interpret the Act in a manner contrary to its explicit terms, contrary to the express representations of the dill's managers at the conference committee discus- sions, and to construe this Act in a manner which will ex- pose the United States Treasury to presently incalculable, but, in any event, substantially formidable claims would be a flagrant violation of the separation of powers doc- trine. If we did this, the judiciary would truly have be- come the “‘law-giver” for substantial federal appropriations, this in itself would raise serious constitutional problems. 3! Frankfurter, Some Reflections on the Reading of Statutes, 47 COLUM. L. REV. 527, 529 (1947). Justice Frankfurter also reminded us that “Mr. Justice Holmes reached meaning easily, as was true of most of his results, with em- phasis on the language in the totality of the enactment and the felt reasonableness of the chosen construction. He had a lively aware- ness that a statute was expressive of purpose and policy, but in his reading of it he tended to hug the shores of the statute itself, with- out much reinforcement from without,” supra, at 532. 32 Gray, NATURE AND SOURCES OF THE LAW, 102, 125, 172 d Ed 1921). 53 To accept the government defendants’ contention would require judicial legislation on a grand, if not arrogant, scale. Justice Holmes told us “I recognize without hesitation that judges do and must legislate, but they can do so only in- terstitially; they are confined from molar to molecular mo- tions Jo read a Tucker Act remedy into the Act would be a movement of the mass and not simply the particles. We simply lack such power. Vv Accordingly, we hold that Section 304(f), in requiring mandatory interim operations without providing a legal remedy to furnish fair and just compensation for an ero- sion of property beyond constitutional limits, offends the Fifth Amendment; that Section 303, the only provision of the Act pertaining to valuation of the railroad estate, in failing to provide a remedy for any unconstitutional erosion caused by mandatory interim operations under Section 304(f), is also defective; that because the effect of Section 207(b) precludes a form of liquidation under Section 77 of the Bankruptcy Act, it is constitutionally defective as set forth in Part II of the separate opinion of Judge Fullam; and that because of these conclusions the United States Railway Association must be enjoined from certifying a Final System Plan to the Special Court pursuant to Section 209%c). 33 Southern Pacific Co. „ Jensen, 244 US. 20S. 221 (1917) (Holmes, J., dissenting). 54 An appropriate decree will issue (1) enjoining the United States Railway Association, the Secretary of Transportation, the Chairman of the Interstate Commerce Commission, and the Secretary of the Treasury from enforcing the Regional Rail Reorganizational Act of 1973 in a manner inconsistent with this holding and (2) declaring as null and void desig- nated sections of the Act. /s/ Ruggero J. Aldisert Ruggero J. Aldisert United States Circuit Judge 55 a FULLAM, J. In view of the number and complexity of the issues which have been presented in this case, it should occa- sion little surprise that there is a lack of total agreement among judges on all issues. With respect to the issues actually decided by the majority, | am in general agree- ment, although to some extent for slightly different rea- sons. But the majority fails to reach a number of issu*s which I feel must be faced, not only because they are indeed ripe for decision, but because the principal con- clusion expressed by the majority — that the Regional Rail Reorganization Act of 19731 is unconstitutional be- cause it fails to provide compensation for interim erosion during the planning period necessarily depends upon an evaluation of the nature and validity of the Act’s pro- visions concerning mandatory conveyance of rail proper- ties to Conrail. In short, | believe the majority has at- tempted to isolate an issue which cannot be isolated. I. Prematurity Plaintiffs challenge the facial constitutionality of the Act on a variety of grounds, not all of which are neces- sarily ripe for decision. In considering which issues must be faced at this time, it is important to keep in mind the distinctions between concepts of standing, ripeness, and the need for injunctive relief. Unquestionably, one or more of the parties to these lawsuits have standing to raise every issue which has been presented. That is, the statute affects these parties in ! The Regional Rail Reorganization Act of 1973 is referred to in this Opinion as the Act, the RRRA, or the statute. 56 particular, as distinguished from the public at large, in substantial ways. They thus meet the tests of Associa- tion of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150 (1970), and Flast v. Cohen, 392 U.S. 83 (1968). The question of whether all of the constitutional issues are ripe for decision requires us to analyze the inevitabil- ity of the alleged unconstitutional impact, whereas the immediacy of the alleged threat bears upon the propriety of injunctive relief. By July 1, 1974, each of the reorganization courts will have made, or failed to make, findings pursuant to 2070) of the Act. Under the statute, the effect of these find- ings or non-findings (as affirmed or reversed by the Spe- cial Court within 80 days thereafter) will be either that the statutory processes will inexorably apply to these es- tates, or that the 8 77 proceedings will be dismissed. The plaintiffs assert that the §207(b) proceedings themselves are unconstitutional on due process grounds. Surely this challenge is now ripe for decision; indeed, the defendants do not contend otherwise. As set forth in Judge Aldisert’s scholarly opinion, the existence and inevitability of staggering losses from con- tinuing rail operations pose an immediate threat to the constitutional rights of the owners and creditors of the bankrupt estates. Plaintiffs contend that the effect of $8304(f) and 303 of the Act is to mandate continued loss operations for an indefinite period without hope of re- imbursement, in derogation of both the taking and due process clauses of the Fifth Amendment. Since the ma- jority has concluded that the ultimate conveyance issues are not now ripe for decision, the fact §304(f) has been in force since January 2, 1974, and continues to require in- 57 terim operations and losses, undoubtedly makes the in- terim erosion challenge ripe for decision. Plaintiffs challenge the entire Act as a violation of the uniformity requirement of the bankruptcy clause, Article I. Section 8, Clause 4 of the Constitution. Again. this issue is undeniably ripe for decision. Finally, plaintiffs pose a series of challenges to the sta- tutory provisions which contemplate the mandatory trans- fers of rail assets to Conrail or to existing solvent car- riers, at prices to be determined by the Special Court af- ter the event, and to be paid in the form of a to-be-de- termined mixture of Conrail securities, undefined “other benefits,” and possibly a limited amount of guaranteed obligations of USRA. Whether some or all of these “ultr mate conveyance issues are now ripe for decision is a more difficult question. Judge Aldisert views the posst- bility that a conveyance may never take place because of action taken by the reorganization court under $207 (b, the Congress, and the Special Court, as rendering in- appropriate consideration of any of the ultimate convey- ance issues. For me, the decision of this issue ts not so simple. No one doubts, and in fact the parties have stipulated, that Penn Central rail properties will be included in the Final System Plan. Equally certain is the fact that USRA will deliver to Congress a Final System Plan which is to become effective 60 sessiondays thereafter. In order to prevent the Plan from taking effect, one House of Con- gress must act affirmatively by passage of a resolution ex- pressing disapproval of the Plan, §208(a). Section 208(b) makes it the continuing duty of USRA to present final system plans to the Congress until one becomes effective. | cannot equate Congress’ reservation of the right to veto the first Final System Plan, or even the second or third, to a sit- 58 uation in which Congressional action is necessary as a pre- condition to a Final System Plan becoming effective. | believe this Court must assume that the Act means what it says, and that the expressed intent of Congress would be carried out. Once a Final System Plan is effective, ie. when the 60-day Congressional action period exp... the Special Court is required under §303(b) to order conveyance of the property. There remains no discretionary role to be played by the Special Court, or any other court, at that point. Therefore, it is clear that if the reorganization court does not make $207(b) findings that remove the railroad from the RRRA, conveyances are certain, save only amendment or repeal of the RRRA. Of course, the possibility of future legislative and executive action is al- ways present during the judicial evaluation of the con- stitutionality of a statute, and does not render such ad- The last potential exit would be a finding by the te- organization court that the RRRA “does not provide a process which would be fair and equitable to the estate of the railroad in reorganization,” $207(b). In this event. there would be no conveyance under the Act. In my view, this possibility does not raise an issue of ripeness, but rather, a question more akin to abstention. Under $207(b), the reorganization court will have to consider at least some of the cluster of discrete issues concerning the ultimate conveyance provisions of the Aci, including some of the constitutional issues raised by these cases. This is so because the reorganization court must consider the RRRA in ts entirety in order to ascertain whether the process is fair and equitable to the estates. Moreover, it is highly improbable that a reorganization court could successfully reject the statute as unfair or in- 59 equitable under $207(b) for reasons of less than constitu- tional magnitude. Indeed. the government's position at the June 10 hearing in the reorganization court was that nothing short of unconstitutionality would justify rejec- tion of the Act under $207(b). Thus, the issue is essen- tially whether it is preferable for the three-judge court to rule on the constitutional issues surrounding the con- veyance provisions, either directly or in conjunction with plaintiffs’ due process attack on $207(b), before the re- organization courts act under $207(b). The policies embodied in 28 U.S.C. $2282 appear ap- plicable in this case. Enforcement of major federal legis- lation is sought to be enjoined. As a practical matter, a decision by the reorganization court under §207(b) that a constitutional infirmity requires the Act to be found not fair and equitable would be equivalent, for ali practical purposes, to an injunction that might issue as a result of this three-judge court litigation: and a contrary decision would be equivalent to denial of an injunction. It is pref- erable that the deliberate and collegial judgment of this three-judge court should determine the constitutionality of the RRRA’s conveyancing provisions. It is significant that the government has not contended that the §207(b) hearings operate to render any of the constitutional claims premature. This is not to say that with respect to many of key consti‘utional claims the government's contention that there is not an adequate factual record for constitutional adjudication is not sound. Rather, the point is that the government's contentions in this regard should be consid- ered by the Court at this time. Another aspect of the RRRA’s impact that warrants consideration, is the relationship of the availability of the 60 RRRA's processes to the pending petitions to terminate rail services and to dismiss the Penn Central's § 77 pro- ceeding. Obviously, the RRRA is an important factor to be weighed by the reorganization court in assessing validity of the petitioners’ contentions that operations can no longer be constitutionally required. This consequence in and of itself would seem to justify present considera- tion by this Court of the constitutional issues deferred by the majority. Irrespective of the validity of the foregoing observations, | am satisfied that, in the final analysis, many of the con- stitutional issues concerning the mandatory conveyance features of the Act are necessarily ripe for decision at this time because of their relationship to the issues of in- terim erosion. While it is not necessary to determine whether or not the contemplated transfers would amount to takings in the constitutional sense, requiring advance assurance of payment in cash or equivalent, | am per- suaded that the constitutional validity of uncompensated interim erosion cannot be properly decided except in the light of the constitutionality of the ultimate result which implementation of the Act would produce. Stated otherwise, the fact that the statute does not pro- vide compensation for interim erosion as such would not necessarily render the statute unconstitutional if there is reasonable present assurance that the end result of the Statutory process would be the receipt of consideration for the assets and other benefits in amounts equaling at least liquidation value plus interim erosion.” 2 Counsel for the government pressed the point that under the conveyance provisions the Special Court could include in its valua- tion of Penn Central's property an amount sufficient to compen- sate the estate for unconstitutional interim erosion. Record 98-99. 61 ll. Uniformity The Act in its entirety is challenged as violative of the uniformity requirement of Article |, Section 8, Clause 4 of the Constitution. With one minor exception discussed below, | believe that the Act can (and therefore must) be construed in such a way as to render it constitutional. But | reach this result by a somewhat different route than does Judge Aldisert. Professor Warren tells us: any N tional law which deals with inability to pay debts and which is uni- form throughout the country is a law ‘on the subject of bankruptcy, Charles War- ren: Bankruptcy in United States History (Harv.U.Press 1935), at p. 8. For more than half a century, attempts to achieve na- tional bankruptcy legislation were severely hampered by the widely held belief that the Constitution required that bankruptcy litigation must be uniform in its application to all classes (ibid. p. 61). However, the Supreme Court eventually decided that the requirement was geographical. Hanover Netional Bank v. Moyses, 186 U.S. 181, 190. It has been stated that the uniformity requirement is wholly satisfied when existing ob- ligations of a debtor are treated alike by the bankruptcy administration throughout the country, regardless of the state in which the bankruptcy court sits.” Vans- ton Bondholders Protective Committee v. Green, et al, 329 U.S. 156, 172 (Frank- furter, J., concurring). 62 Taken literally, that statement would seem to vindicate the statute here involved, since this Act unquestionably permits all claims against the affected bankrupt railroads to be treated alike, irrespective of the situs of particu- lar creditors or particular courts. But bankruptcy legis- lation affects debtors as well as creditors, and it seems doubtful that the qu, ed language was intended to sug- gest that different treatment based upon the geographi- cal location of the debtor would be permissible under the uniformity clause. The fact is, the Supreme Court has never had occasion to consider a statute which was not geographically uni- form. The few reported decisions have all dealt with variations in state laws respecting property rights (eg exemption), or the application of nationwide standards to particular factual situations determined by courts. See Wright v. Vinton Branch of the Mountain Trust Bank of Roanoke, 300 U.S. 440 (1937). While Congress’ power to classify debtors is not open to question at this late date, see In re Baltimore & Ohio RR. Co, 29 F.Supp. 608 (D. Md. 1939), cert. denied 309 U.S. 654 (1940); In re Chicago, Rock Island & Paci- fic K, 72 F.2d 443, 450 (7th Cir. 1934), aff'd 294 US. 648 (1935), that power may not be exercised on the basis of geography. I cannot accept the notion that only those debtors not affected by the statute can have standing to challenge the lack of geographical uniformity. In my view, every rail- road subject to the statute has standing to make that chal- lenge, and so do creditors of such railroads. The Penn Central interests are not complaining that the Act is val- idly applied to others and not to Penn Central; the con- tention is that an invalid, non-uniform statute is being applied to Penn Central. 63 Neither do | accept the government defendants’ argu- ment that the statute is in fact uniform because all Class | railroads now in reorganization are located in the region defined in the statute. The statute is not limited to Class I railroads, and it is not, apparently, limited to railroads which were in reorganization on the effective date of the Act.“ But | do find it possible to uphold the statute as an exercise of Congress’ powers under the commerce clause. The essential features of an exercise of the bankruptcy power are that it deals with adjustment of the respective right: of embarrassed debtors and their creditors, and that impairment of the obligation of contracts is permissible. Continental Illinois Bank & Trust Co. v. Chicago, Rock Island & Pacific Ry. Co., 294 U.S. 648 (1935), Hanover National Bank v. Moyses, supra. Stated otherwise, recourse to the bankruptcy clause to justify Congressional action is necessary only if that action impairs the obligation of contracts. For the most part, the statute under discussion adds nothing, in that respect, to the powers already granted to reorganization courts under the geographically uniform and admittedly valid provisions of 877 of the Bankruptcy Act. To some extent, those powers are transferred to the Special Court, but this is surely permissible under Arti- cle Il] of the Constitution. The ultimate dispositions of the respective rights of debtors and creditors are to be made under $77. Authority to order conveyances free 3 By implication, it appears that the statute could not affect a railroad unless it was in reorganization on January 2, 1974, or entered reorganization within 180 days thereafter. Whether there are any railroads in the latter category does not appear. 64 and clear of liens, and to “cram down” a plan of reor- ganization, already exists under $77, and is not newly created or added by the 1973 Act.“ Therefore, in my view, since the principal provisions of the 1973 Act which depend upon the bankruptcy power for their validity are merely repetitive of similar provisions in existing, valid, laws, the statute as a whole does not violate Article |, Section 8, Clause 4 of the Con- stitution. There is, however, one provision of the Act which is clearly an exercise of Congressional power derived solely from the bankruptcy clause, and which cannot be found in existing, uniform, legislation. I refer to the provisions of §207(b) which mandate dismissal of the §77 proceed- ing if the procedures of the Act are rejected. At first blush, this might seem relatively innocuous: Since the particular debtors have been found to be incapable of re- organizing “on an income basis under §77, dismissal of the §77 proceeding might be thought to follow as a mat- ter of course. But a §77 proceeding may properly lead to results other than a normal income-based reorganization of a railroad as a railroad. The New Haven Inclusion case, 399 U.S. 392 (1970), stands as a prime example of a type of reor- ganization designed to produce permanent withdrawal of the debtor from common carrier operations. There, the 4 As discussed in Part IV. infra, the RRRA does sharply alter these existing bankruptcy powers have traditionally been exercised. Although the question is a close one, | have concluded that these departures are not necessarily a sufficient basis for invalidating the entire Act on uniformicy grounds. 65 rail assets were disposed of, with a view toward reorganiz- ing the enterprise as an investment holding company. The plan of reorganization was approved by the ICC, the reorganization court, and the Supreme Court. It thus appears that $77 can be used to produce a form of liquidation, at least where the plan contemplates that the bulk of the rail properties will continue to be oper- ated as a railroad by someone. The provisions of $207 (b) of the Act seem to preclude that kind of recourse to $77. Since this partial repeal of $77 of the Bankruptcy Act applies only to debtors in the geographical region specified in the statute, and since that feature of the Act is plainly a law “on the subject of bankruptcy.” | am forced to conclude that the Act is, in that one respect, violative of Article I. Section 8, Clause 4 of the Consti- tution. Indeed, it seems probable that that same portion of $207(b) is vulnerable on due process and equal protec- tion grounds, and perhaps on the ground of separation of powers as well. III. Underlying Principles and Background In order to evaluate the constitutional permuissibility of interim erosion in light of the constitutional adequacy of the end result, it is helpful to review briefly the legal theories underlying the reorganization provisions of the Bankruptcy Act, and their application to the Penn Cen- tral proceedings apart from, and in relation to, the RRRA itself. A. Reorganization of financially embarrassed debtors pur- suant to a plan that is feasible, fair and equitable is bene- ficial to both public and private interests. Underlying the 66 reorganization process is the simple economic fact that the intangible values inherent in a going concern will be lost if individual creditors are completely free to exercise their rights to foreclose on the physical assets of the en- terprise. “One of the purposes of §77B was to avoid the consequences to the debtor and credi- tors of foreclosure, liquidation and forced sales with their deflationary effects.” Case Los Angeles Lumber Products, 308 US. 106, 124 (1939) (Douglas, J.)° See also R C. Denver 4 Rio Grande Western RR (o. 328 U.S. 495, 508 (1945). If the reduction in values as- sociated with forced sales can be avoided, and going con- cern values wholly or partially preserved, many junior in- terests which would have been wiped out by liquidation (junior secured, unsecured and equity interests) may par- ticipate in the plan. See generally, Blum, The Law and Language of Corporate Reorganization, 17 Univ. of Chi- cago L.R. 565 (1950). The medium of exchange is, of course, new corporate securities of the surviving entity. Allocation of the new securities poses both practical and theoretical problems. The theoretical difficulty in- volves the method of recognizing the respective priorities of the various claimants. Section 77(e)(1) is the pertinent Statutory provision: 5 $77B was a general corporate reorganization statute enacted in 1934, one year after $77, but superseded in 1938 by Chapter X of the Chandler Act. 67 “The judge shall approve the plan if satis- fied that: (1) It complies with the provisions of subsection (b) of this section [77], is fair and equitable, affords due recognition to the rights of each class of creditors and stockhold- ers, does not discriminate unfairly in favor of any class of creditors or stockholders, and will conform to the requirements of the law of the land regarding the participation of the various classes of creditors and stockholders.” As Mr. Justice Douglas observed, in Case Los Angeles Lumber Products, supra: “The words ‘fair and equitable’. are words of art which prior to the advent of §77B had acquired a fixed meaning through judicial in- terpretation in the field of equity receivership reorganization.” 30é U.S. at 115. The substance of the fair and equitable test is derived from Northern Pacific Ry. Bord. 228 U.S. 482 (1913), in which the Supreme Court established what has become known as the absolute priority rule. Simply put, the ab- solute priority rule requires that “once a hierarchy of in- terest is established, each class must receive 100% satisfac- tion before the next lower class may participate at all.” Friendly & Tondel, The Relative Treatment of Securities in Railroad Reorganizations under 477, 7 Law & Contem- porary Problems 420, 423 (1940). Yet, claims may be satisfied in whole or in part by securities of a character inferior to those originally owned by the claimant, so long as junior claimants are not permitted to participate unless and until the senior claimants receive under the plan the equitable equivalent to their entire panoply of rights un- der their original debt instruments. Consolidated Rock 68 Products v. DuBois, 312 U.S. 510 (1941); Ecker v. West- ern Pacific RR Corp., 318 U.S. 448 (1943); Group of Institutional Investors v. Chicago, Minneapolis, St. Paul & Pacific RR Co., 318 U.S. 523 (1943). Basic to the application of the absolute priority rule is the valuation of the enterprise and the determination of value of the security underlying purportedly secured claims. Both e) and the Supreme Court's pronouncements in the Consolidated Rock Products, Ecker, and Institutional Investors cases require that earning power or income- generating capacity of the debtor be the measure of a railroad’s value. Once the earning power has been estab- lished, the aggregate capitalization of the new capital struc- ture is derived from the earning power. Although 877 does not contain an explicit requirement that the reorgan- ization plan be feasible (in the sense that the new capi- tal structure is such that a viable entity will survive the reorganization process), the Interstate Commerce Coniinis- sion’s duty under $77(d) to formulate a plan that is in the public interest has been read to include this require- ment. Group of Institutional Investors v. Chicago, Min- neapolis, St Paul & Pacific RR Co, 318 U.S. 523, 544- 45 (1943). Congress has invested the judiciary with powerful tools for the effectuation of 877 reorganizations. Preservation of the status quo can be insured by the prudent exercise of the stay provisions of §77(j). Trustees’ certificates hav- ing priority over secured debt may be issued pursuant to $77(c3) to obtain interim working capital. Executory contracts may be rejected by the trustee or in the plan of reorganization $77(b). Rail and non-rail properties may be sold free and clear of liens under §77(0) (subject to the limitation imposed in this Circuit by /n re Penn Central 69 Transportation Co., 458 F.2d 1030 (3d Cir. 1973)). Under certain circumstances, funds held subject to the liens of mort- gage indentures may be used for working capital or addi- tions and betterments to the plant, Central RR of New Jersey v. Manufacturers Hanover Trust Co., 421 F.2d 604 (3d Cir. 1970); In re Third Avenue Transit Co., 198 F.2d 703 (2d Cir. 1952). And notwithsta ding lack of majority support, an approved plan may be confirmed under the cram-down provision of e), RTC. Denver & Rio Grande Western R.R. Co., 328 U.S. 495 (1946). More- over, the expertise of the Interstate Commerce Commis- sion is made an integral part of a 877 reorganization proc- ess by the assignment to the Commission of the task of formulating the plan, ascertaining the values of railroad property, and evaluating the public interest aspects of the proposed uses of a 877 debtor’s transportation property. The reorganization process fosters the public interest as well as the private interests of owners and creditors. The economic inefficiency of dismantiing a potentially produc- tive enterprise is avoided, and investor confidence is re- stored. Moreover, §77 is designed to promote the public interest in preservation of a sound rail transportation sys- tem. Continental Illinois Bank & Trust Co. v. Chicago, Rock Island & Pacific Ry. Co., 294 U.S. 648, 676 (1935). The Regional Rail Reorganization Act of 1973 repre- sents the Congressional response to the unfortunate fact that the processes and concepts of 877 outlined above proved inadequate to deal with the current plight of rail- roads in the Northeast. Section 77 is adequate only when a railroad’s revenues are, or can reasonably be predicted to be, in excess of operating expenses. 70 Historically, railroad reorganizations have been precipi- tated by the circumstances that fixed charges were unreal- istically high in relation to long-term earning capacity. The solution was to scale down and stretch out the debt structure so that fixed charges could be met from net op- erating revenues without exhausting those revenues. Penn Central and most of the other bankrupt northeast- ern carriers do not generate net operating revenues, but in- cur large operating deficits. They cannot achieve reorgani- zation on an income basis under 77. As a matter of simple maximization of values, if there is no “going concern” value in the usual sense, there is no justification for continuing a reorganization proceeding,® © ‘The significant advantage of $77 over the equity receivership is the substitution of the Interstate Commerce Commission's valuation procedures for the foreciosure sale of the equity receivership as the mechanism for determining who has an interest in the debtor's estate See generally S. EC, Report on the Study and Investigation of the Work, Activities, Personnel and Functions of Protective and Reor- ganization Committees, Part VIII (1940). But clearly, the Ne) procedires are assumed to result in a valuation in excess of that which would be obtained by the foreclosure sale. As Mr. Justice Douglas observed in R.F.C. v. Denver & Rio Grande Western R N Co., 328 US. 495, 509 (1946): “Liquidation in depression periods meant that large portions of debts, as well as stock interests in the properties, would be irretrievably lost to the hold- ers, while reorganization on a capitalization that estimated what normal income would support meant the salvage of sound values. We see no more constitutional impediment to the elimination of claims against railroad debtors by the Interstate Commerce Commission's determination of values, (Cont'd) 71 unless either or both of the following conditions are estab- lished: (1!) a reasonable prospect that, because of stream- lining, consolidations, and other changes in circumstances, earning power and profitability can be restored; or (2) a reasonable prospect that the public need for preserving the debtor's railroad is such that it will be appropriated for public use, and that the values inherent in its assem- blage as an operating railroad will be recognized and paid for. Cf Port Authority Trans. Hudson Corp. v. Hudson Rapid Tubes, 20 N.Y. 2d 457, 231 N.E. 734, cert de- nied 309 U.S. 1002 (1967). If Penn Central were not a railroad and were being re- organized under Chapter X. presumably a liquidating plan of reorganization would be pursued, 6A Collier € 10.02, at pp. 421-23, or the proceeding would be converted to a straight bankruptcy proceeding or dismissed under $236 of the Act. But railroad corporations are not eligible for relief under the straight bankruptcy provisions. Section 77(g) does permit dismissal of the case, but the implica- tions of such a dismissal are not clear. Presumably, such a dismissal would be immediately followed. by an equity receivership and the relatively cumbersome and unsatisfac- tory liquidation measures available in such a proceeding. As discussed in Part II of this Opinion, a plan of reor- ganization providing for the partial or total liquidation of a $77 debtor's rail assets might well be accomplished un- der 477. The language of eb) provides that: (Footnote 6 cont'd) with judicial review as to the sufficiency of the evidence and compliance with statutory standards. than we do to their elimination by an accepted bid in a depression market.” 72 Ine plan may provide for] the sale of all or any part of the property of the debtor either subject to or free from any lien at not less than the fair upset price.” The New Haven plan can be characterized as a liquidat- ing type of reorganization plan. However, in its October 1973 report to the Penn Central reorganization court (Doc- ument No. 6336), the ICC expressed the view that such a liquidation could not be regarded as a plan of reorganiza- tion under 477, apparently on the basis of a perceived dif- ference in the degree of assurance of continued operation of the railroad by someone. It is against this background, and in light of the accrued and continuing post-reorganization losses summarized in Judge Aldisert’s Opinion, that the provisions of the Act are to be considered. IV Analysis of the Pertinent Provisions of the Statute It is desirable at the outset to attempt to characterize the Act in terms of some familiar legal model or category. To the extent that the statute can thus be labeled, „ as 4 reorganization statute of as an eminent domain statute, the constitutional implications emerge with reasonable clar- ity. Unfortunately, the Act does not fit comfortably into any familiar category. From the terminology employed in the statute, and much of the legislative history, it would appear that a reorganiza- tion-type statute was intended. But on the basis of its to- tal impact, such a characterization is somewhat misleading. Perhaps the best description of the essential character of the statute appears in $207(b): 73 “Each United States district court or other court having jurisdiction over a railroad in reorganization shall decide whether or not such railroad shall be reorganized by means of transferring some of its rail properties to the Corporation pursuant to the provi- sions of this Act.” It bears emphasis that the Act does not affect the reo ganization process of ) directly. Upon completion of all of the procedures contemplated by the Act, it will still be necessary for the parties to the Penn Central pro- ceeding to complete the process of adjustment of credi- tors claims, and of proposing, processing and consummat- ing a plan of reorganization that is fair and equitable in accordance with the requirements of $77. What the Act does is provide a mechanism for consummating, insofar as the Debtor's rail assets are concerned, what would be in effect a liquidating reorganization plan, if the properties are transferred to Conrail (and perhaps other solvent rail- roads) pursuant to the Final System Plan. In connection with such a partial liquidation scheme, the §77 role of the Interstate Commerce Commission is largely eliminated, as is participation and voting by creditors. Essentially, the Act provides a buyer for some or all of the Debtor's rail properties, an expedited mechanism for terminating rail services over the balance of the Debtor's properties, and expedited proced res for achieving the transfer and sale. Thus, the Act «an be viewed as a reorganization stat- ute in the sense that it provides for disposal of some or all of the Debtor's rail properties in a manner analogous to dispositions authorized by §77(0) of the Bankruptcy Act during the course of a reorganization and outside a 74 reorganization plan, or pursuant to §77(b)5) of the Bank- ruptcy Act as part of a reorganization plan. The obvious difference, however, is that under o) a sale must be found to be “in the interest of the debtor's estate and of ultimate reorganization” and the price must be adequate, and under §77(b)(5) the sale price must be at least equal to a fair upset price established by the reorganization court. It is noteworthy that, in the New Haven Inclusion case, supra, the reorganization court viewed the conveyance of the New Haven’'s properties to Penn Central as having been made pursuant to Webs) Although the [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_0165%3A02. Public record. Not legal advice.