# Brief for Appellant — 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%3A03 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for Appellant - **Published:** January 1, 1974 - **Citation:** 419 U.S. 102 ## Text In THE Supreme Court of the Anited OCTOBER TERM, 1974 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 TRUSTEFS OF THE PROPERTY OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR, APPELLANTS, . CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL., APPELLEES RICHARD JOYCE SMITH, AS TRUSTEE OF THE PROPERTY OF THE NEW YORK, NEW HAVEN AND HARTFORD RAILWAY COMPANY, DEBTOR, APPELLANT, *. UNITED STATES OF AMERICA, TAL. APPELLEES ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA BRIEF FOR APPELLANTS ROBERT W. BLANCHETTE, RICHARD C. BOND and JOHN H. McARTHUR, TRUSTEES OF THE PROPERTY OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR CHARLES A. HORSKY BRICE M CLAGETT Covington & Burling 888 Sixteenth Street, NN Washington, D.C. 20006 PAUL R._ DUKE JOHN F. DePODESTA Penn Central Transportation Company Six Penn Center Plaza Philadelphia, Pa 19107 Attorneys for Appellants Per August 23, 1974 Central Trustees JURISDICTION . OPINIONS BELOW QUESTIONS PRESENTED STATUTES INVOLVED . STATEMENT Regional Rail Reorganization Act Penn Central Proceeding Constitutional Litigation SUMMARY OF ARGUMENT ARGUMENT . I. THE ACT DOES NOT EXCLUDE A TUCKER ACT REMEDY FOR ANY TAKING OF PROPERTY ACCOMPLISHED PURSUANT TO THE ACT . I THE COURT BELOW WAS CORRECT IN CON. CLUDING THAT NO COURT OF CLAIMS REMEDY EXISTS, THEN ITS CONCLUSION THAT THE ACT IS UNCONSTITUTIONAL WITH RESPECT TO INTERIM EROSION IS ALSO CORRECT . A. Deficit Rail Operations May Not Constitionally Be Required Without, at Least, the Assurance of Successful and Prompt Reorganization B. The Act, While Requiring Continuance of Deficit Rail Operations, Contains No Provisions Compen- sating the Penn Central Estate for the Erosion Incurred Thereby . (ii) Page Ill. THE CONSTITUTIONAL ADEQUACY OF THE ACT'S PROVISIONS FOR COMPENSATION FOR THE PER- MANENT TAKING CONTEMPLATED IS RIPE FOR (1) The 180-Day Decision. .......... 4 (2) Congressional “Approval” ......... Si (3) The Mandatory Nature of the Conveyance... . 52 IV. THE ACT'S PROVISIONS REGARDING COMPENSA- TION FAIL TO ASSURE THAT FIFTH AMENDMENT STANDARDS WILL BESATISFIED .... 54 V. THE EXISTENCE OF AN ADEQUATE COURT OF CLAIMS REMEDY SAVES THE CONSTITUTION- r a ae ee A. An Adequate Court of Claims Remedy Cures the Fifth Amendment Problem ........ 63 B. With the Exception of One Readily Severable Provision, the Act Is Not in Violation of the “Uniformity” Requirement of Article |, Section 8, Clause 4 of the Constitution . ....... & APPENDIX: Constitutional and Statutory Provisions 143 ANNEX A: Letter of John W. Ingram, Federal Railway Administrator, to R.D. Timpany, May 10,1974 . . 3a ANNEX B Letter of Brock Adams, MC. to John W. Barnum, April 26,1974. MOW F ANNEX C Extracts from Proposed Amendments to Senate Commerce Committee Working Paper No. | r e 5 (ui) TABLE OF CITATIONS Page Cases: Albert Hanson Lumber Co. v. United States, , Ff S&S fF re “SS i a Amell vy. United States, 384 U S. 1 (1968) . E Almota Farmers Elev. 4 Whse Co. vy. United States, ee , ee American Communications Association v. Douds, CC sg . Aris Gloves, Inc. vy. United States, on ð „ Baltimore & Ohio R.R. ». United States, 298 US. 349(1936) ..... is Barnidge v. United States, 108 n 295 Oh Ce. 2 N Battaglia v. General Motors Corp., re te ee eS et a ae eg oO v. Hill, 281 U.S. 673 (1930) . .. Sy a —— — Oe United States, 302 F. Supp. 1O9S(EDN.Y.1969)......... 8 Sa 32,34 251 US. 396(1920) ... p „ „„ „ re Bullock v — off Poste 254 US. $13(1921) .... eee Campbell v. Alleghany Corp. , 75 * 1990, cert. denied, 296 US. 581 (1935). .. ... on Catlin vy. United States, 324 US.229(1945) ..... . 17,26 City of New York vy. United States, 337 F. Supp. ISO(EDNY.1972) 356. 55 City of Oakland v. United States, | 24 F.2d 959 (9th Cir.), cert. denied, 316 US. 679(1942). .........@B (iv) Cases (Cont'd) Commercial Station Post Office, Inc. v United States, 48 F.2d 183 (8th Cir. 1931). Goss Continental Bank v. Chicago, RJ. 4 U Ry. 294 US. 648 (1935) Cook . United States, \15 F. 24 463 (Sth Cu 1940) . Coombs, Trustee, v. United States, 321 US. 770 (1944) Cotton Land Co. United States, 75 F. Supp. 232 (Ct. Cl. 1948) Crozier v. Krupp, 224 US. 290(1912) DeSalvo v. Arkansas Louisiana Gas Co., 239 F. Supp. 312 (ED. Ark. 1965) Eastport Steamship Corp. v. United States, 372 F.2d 1002 (Ct. Cl. 1967) Ex parte Cohen, 191 F.2d 300 (9th Cir. 1951), cert. denied, 342 US. (1952) Eyherabide v. United States, 345 F.2d 565 (Ct. Cl. 1965). Fawcett v. CR. 149 F.2d 433 (2d Cu. 1945) Federal Sugar Refining Co. v. United States, 30 F.2d 254 (2d Cir. 1929) (L. Hand, J). u. Johnson v. r Wenn Freight Corp. 280 US. 320 (1930) Feldwin Realty Co. v. United States, 169 F. Supp. 73 (DN 1959) . Fort Berthold Reservation » United States, 390 F.2d 686 (Ct. Cl. 1968) Foster v. United States, 98 F Supp. 349 (Ct. Cl. 1951) . FTC v. A.P.W. Paper co. 328 US. 193 (1946) . Georgia v. Pennsylvania R. R. 324 US. 439 (1945) Glidden v. Zdanok, 370 U.S. 530(1962) . 14-15 16-17 (v) Cases (Cont'd) Graham 4 Foster v. Goodcell, 282 US.409(1931) . . 21 Great Falls Mfg. Co. v. Attorney General, 124 U.S. 581 (1888) ; Hanover National Bank v. Moyses, 186 US. 5 181 (1902) . Hariem Valley Transportation Ass'n v. Stafford , No. 73-2496, 2d Cir. June 18, 1974 28 68 Hecht Co. v. Bowles, 321 US. 321(1944). . . . 52 Hele v. United States, 100 Ct. Cl. 289 (1943) 16 Hove v. United States, 218 U.S. 322 (1910) 2% Hurley v Kincaid, 285 US. 95 (1932) 15 In re Baltimore & Ohio R.R., „ Supp. G00 0D. ts. 1 1939), cert. denied, 309 US. 654 (1940) . 1 — In re California P. R.R., 4 F. Cas. 1060 e Co. sg he ere oe ore ee In re Central RR. of New Jersey, e In re New York, VH 4 H RR. 304 F. Supp. 793 (D. Conn 1969). . 35.55, 66 In re New York, VH. 4 H RR. 281 F. Supp. 65 (D. Conn. 1960) 356. 37 In re New York, VH 4H RR. 289 F. Supp. 451 (D. Conn. 1968) . . . . . 35,36,37,55 In re New York, VH & H. RR. 16 F. Supp. 504 (D. Conn. 1936). . ........ & In re Penn Central Transportation CY. 372 F. Supp. 1123 (E.D.Pa.1974) .... . > ee? In re Penn Central Transportation Co. (Columbus oun Appeals), 494 F.2d 270 (3d Cir. 1974), petition for cert. field, 42 US. L. Week 3633 (U.S. May, 1974), No. 73-1672 30, 36, 55 In re Penn Central Transportation Co. — a. a G6 le 6 “ee bem ae (vi) Cases (Cont'd) In re Port Authority Trans-Hudson Corp., 20 N.Y.2d, 457, 285 N.Y. Supp.2d 24, cert. denied sub nom. Port Authority Trans-Hudson v. Hudson Rapid Tubes one 390 US. 1002 (1968) . ; In re Spier Aircraft Cp. 137 F.2d 736 (34 Cir. 1949, In re Third Ave. Transit Corp. 198 F.2d 703 (2d Cir. 1952) Jacobs v. United States, 290 US. 13 (1933) Jay Street Connecting R R. v. United States, 174 F. Supp. 609 (E.D.N.Y. 1959) Johnson v. Emergency Fleet Corp. 280 US. 320 (1930) . Joslin Mfg. Co. „ City of Providence, 262 U.S. 668 (1923) Katzenbach v. McClung, 379 US. 294 (1964) Lee v. United States, 58 F.2d 879 (D.C. Cir. 1932) Leidigh Carriage Co. v. Stengel, 95 F. 637 (6th Cir. 1899) Louisville Joint Stock Land Bank v. — 295 US. 555 (1935) Maryland v. Wirtz, 392 US. 183 (1968) . Mercantile Nat'l Bank V Longdean, 371 US. 555 (1963) Miller v. United States, 57 F 2d 424 (Age. DC. 1932) . Monongahela Navigation Co. » United States. 148 US. 312 (1893) Nagano v. McGrath, 187 F.2d 759 (7th C Cir. 1980, aff'd, 342 US. 916 (1952) : New Haven Inclusion Cases, 399 US. 392 (1970). New York, NH. AH XN. Bondholders’ Committee v. United States, 289 F Supp. 418 (S DNV. 1968) . 17 10, 13, 36, 37, 38, 39, 40, 47, 55, 58, 59, 66, 70 . 35,55 (vii) Cases (Cont'd) New York, VII. & H RR. First Mortgage 4% Bondholders’ Committee . United States, — 1049 (S.D.N.Y. 1969) . New York, VH & H RR. First Mortgage 4% Bondholders’ Committee v United States, 289 F. * 418 (S.D.N.Y. 1968) . ' Olsen v. United States, 292 US. 246 (1934) Poe » Uliman, 367 U.S. 497 (1961) Portsmouth Harbor Land & Hotel Co. United States, 260 U.S. 327 (1922) Potomac Electric Power Co. v. United States, 85 F.2d 243 (D.C. Cir.), cert. denied, 299 US. 565 (1936) Railroad Comm'n of Texas v. Eastern Texas R.R., 264 US. 79 (1924) . Reconstruction Finance Corp. v. — R.R., 328 US. 495 (1946) J, Richard v United States, 282 F 2d 901 ac Cl. 1960) Rosenberg v. United States, 346 US. 273 (1953) . Silesian-American Corp. v. Clark, 332 US. 469 (1947) . Silesian-A merican Corp. v. Markham , 156 F.2d 793 (2d Cu 1946) Sioux Tribe of Indians vy. Unite States, 1 1962) 8 * ent Rico Sugar Co. v. uted Same, 2d 622 (Ct. Cl. 1964), cert. denied, ) US. 964 (1965) 3 United States, 471 F 2d 381 (Sth Cir. 1973) Thomason v. United States, 184 F.2d 105 (9th Cir. 1050 United States v. Causby, 328 US. 256 (1946) . United States v. a 335 U.S. 106 (1948) 1 35. 85 15 . 27,28 14. 15 (viii) Cases (Cont'd) United States v Delaware & Hudson Co. 213 US. 366 (1909) j United States v Dow, 357 US. 1701998 . United States vy. 40.75 Acres of Land, 76 F. Supp. 239 (ND. Il. 1948) . United States v Klein. 80 US. 128 (1871). United States v. New River Collieries, 262 US. 341 (1923) United States v Pfitsch, 256 U S. $47(1921) United States v Reynolds, 397 US. 14(1970) . United States v. — 402 U.S. 363 (197) United States Nat'l Bank v. Pamp, 83 F.2d 493 (8th Cu. 1936) Vanhorne’s Lessee vy. Dorrance, 2 US. (2 Dall.) 304 (1795) . Vanston Bondhoiders Protective Committee v. Green, 329 US. 156 (1946) Wright v. Vinton Branch, 300 US. 440 (1937) Yearsiey v. W.A. Ross Construction Co. 309 US. 18(1940). .. . . . . Youngstown Sheet and Tube Co. v jin 343 US. 579 (1952) N Statutes Bankruptcy Act, Section 77, 11 USC. 15 4. 5, 8, 13, 18-19, n 1.37.39, 45, $2, 62, 69, 70 The Foreign Assistance and Related Programs Appropriation Act of 1974 (P. L. 93-240) Indian Claims Commission Act 43 15 (ix) Statutes (Cont'd) Interstate Commerce Act, Section 1(18) . n 42 USC. §4331. Rail Services Act of 1973, Report No. 93-601 of the Senate Committee on Commerce 130 (93d Cong. Ist Sess. 1973) . r 45 USC. §§701-793 . j 23 2, 3,4, 15, 71 Section 102 (13) 70 202(a) . . . 202 (a) (10) „ ae 204 () . 4 D eal, ey — r eR me ~ W6(ay(i). . . .. 3 587 D 57 Z 57 D Be ots Web ee al . $7 r 61 206 (d) (3) 18 ra 57 207 (b) 4,5, 7, 18, 48, 49, 80 69, 70, 71 208 ee 25,41 Z 51 208 (b) „ D 18. 19. 20 D 5, 19, 49, $2 1 „ wae 1 a ee ee 42, 43, 44, 45 215 43, 44,45 . · A wc ace wie to W 3, 7. 19. 20 303 (b)(1) . $2 (x) Page Statutes (Cont'd) Section 303(b)(2). 18, 19, 53 Bt)... ae 303 (c) (1) (B). 20 24. 29, 54, 60 303 (c) (2) (B). . 9 323 20. 60 303 (a) 18. 19. 20 304(c) . —, * 304(f) . 3. 7, 18, 44, 45, 46 305 0 41 401 = 402... 58 402(f) . . 38 . 21 601 (a)(2) . 18, 20 601 (b) . 18, 21 601 ic) . 18, 21 604. 21, 70 Title V . 61 Title VI . 21 Section 3709, Revised Statutes, 41 USC. 8 18 Second Supplemental — 1974 (PL. 93-305) . f ö 43 3, 8. 9, 10, 12, 14. 15, 16, 18, 20, 21, Tucker Act, 22, 24, 25, 27, 28, 29, 30, 34, 39, 46, 28 USC. $1491. . 48, 49, 50, 52, 54, 61, 62, 64, 67 28 USC. §§1252 and 1253 . 2 § § 2282 and 2284 . 2 United States Constitution: Art. I. Section 8, Clause 4 3.7. 13, 68, 71 Fifth Amendment 3, 6, 8, 14, 16, 23, 24, 25, 30, 31, 42, . 48, 54, 63, 64, 65 (xi) Legislative Materials: Conference Report, H.R. Rep. No. 93-744, p. 56 (93d Cong. Ist Sess. 1973) . al Conference Report, H.R. Rep. No. 93-1070 (93d Cong. 2d Sess. 1973) . Congressional Record, May 14. 1974, 5. 8. 7958 H.R. Rep. No. 93-260 of the Committee on Interstate and Foreign Commerce, p. 53 (93d Cong., Ist Sess. 1973) . : Note, r 68 Harv. L. Rev. 527 (1956) . 41.60 UNITED STATES OF AMERICA, ET AL., APPELLANTS, . CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL. APPELLEES. UNITED STATES RAILWAY ASSOCIATION, APPELLANT, * CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL., APPELLEES. ROBERT W._ BLANCHETTE. RICHARD C. BOND AND JOHN H. MC ARTHUR, AS TRUSTEFS OF THE PROPERTY OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR, APPELLANTS, *. CONNECTICUT GENERAL INSURANCE CORPORATION, ET AL. APPELLEES. RICHARD JOYCE SMITH, AS TRUSTEE OF THE PROPERTY OF THE NEW YORK, NEW HAVEN AND HARTFORD RAILWAY COMPANY, DEBTOR, APPELLANT, * UNITED STATES OF AMERICA, ET AL. APPELLEES. ON APPEAL FROM THE UNITED STATES DISTRICT COURT POR THE EASTERN DISTRICT OF PENNSYLVANIA BRIEF FOR APPELLANTS ROBERT W. BLANCHETTE. RICHARD C. BOND and JOHN H. McARTHUR, TRUSTEES OF THE PROPERTY OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR These cases are before the Court on appeal from a judgment of a three-judge district court sitting in the Eastern District of Pennsylvania entered on June 25, 1974. 2 That court held unconstitutional certain provisions of the Regional Rail Reorganization Act of 1973, Public Law 93- 236, 45 U.S.C. §§ 701-793 (the Act). JURISDICTION The judgment of the three-judge court in the Eastern District of Pennsylvania, convened pursuant to 28 U.S.C. §§ 2282 and 2284, was entered on June 25, 1974 (Joint Ap- pendix (J.A.), pp. 82-83). On July 2, 1974, the Penn Central Trustees filed in the District Court a notice of appeal to this Court (J.A. p. 384). Timely notices of appeal were also filed by the other appellants (J.A. pp. 385-90). The jurisdiction of this Court is invoked under 28 U.S.C. §§ 1252 and 1253. Probable jurisdiction has not yet been noted; appellants’ briefs are being lodged with the clerk prior to the noting of probable jurisdiction pursuant to a motion by all parties to advance causes for argument, filed in this Court on August 23, 1974. OPINIONS BELOW The opinion of Circuit Judge Aldisert for the three-judge court is printed at J.A. pp. 9-54, and a separate opinion of District Judge Fullam is printed at J.A. pp. 55-81; the order of the three-judge court is printed at J.A. pp. 82-83. These opinions and order have not yet been reported. QUESTIONS PRESENTED 1. Did the court below properly conclude that appellant Trustees could not maintain an action in the Court of Claims to recover any amount due the estate for fair and just compensation for (a) the rail properties the estate would be required to convey to Consolidated Rail Cor- 3 poration, and (b) any erosion of the Penn Central estate beyond constitutional limits? 2. Did the court below properly conclude that, because the Act does not provide just compensation for erosion of the Penn Central estate beyond constitutional limits, Sec- tion 303 of the Act, relating to the valuation of the Penn Central rail properties; Section 304f) of the Act, requiring continued rail operation by Penn Central; and Section 20%c), authorizing the certification of the final system plan to the Special Court, offend the Fifth Amendment and are unconstitutional absent a remedy against the United States in the Court of Claims? 3. Did the majority of the court below properly decline to decide whether the Act is unconstitutional, absent a Court of Claims remedy, in that it requires transfer of Penn Cen- tral's rail properties to Consolidated Rail Corporation without the assurance of compensation which would satisfy the requirements of the Fifth Amendment? 4. If the court below was in error in declining to reach that question, or if the issue is otherwise now ripe for decision, is there adequate assurance that the consideration specified in the Act to be paid to the Penn Central estate for such rail properties will satisfy Fifth Amendment requirements? 5. If a Court of Claims remedy exists, does it save the constitutionality of the Act? STATUTES INVOLVED Article I, Section 8, Clause 4 of the Constitution, the Fifth Amendment to the Constitution, and the Tucker Act (28 U.S.C. § 1491) are set forth in the Appendix to this brief. The Regional Rail Reorganization Act of 1973, P.L. 93-236, 45 U.S.C. §§ 701-793, is printed at J.A. pp. 391 et seq. 4 STATEMENT These actions challenge the constitutional validity of various provisions of the Regional Rail Reorganization Act of 1973 (45 U.S.C. §§ 701-793) (the Act), which was signed by the President on January 2, 1974. Regional Rail Reorganization Act The Act represents an attempt by the Congress to deal with the problems presented by the fact that a number of major railroads in the Northeast and Midwest are in reorganization pursuant to Section 77 of the Bankruptcy Act. In general, tie Act creates a new Government cor- poration, the United States Railway Association (USRA); charges it with responsibility, subject to Congressional ap- proval, to design a ſinal system plan” for restructured rail freight service in the Northeast and Midwest regions; creates a new private corporation, Consolidated Rail Cor- poration (Conrail), to acquire, own and operate the rail properties desi ated in the final system plan; and, subject to certain preliminary findings required by Section 207(b) of the Act, requires the railroads in reorganꝭ · ation to con vey to Conrail such of their rail properties as are designated in the final system plan in return for certain securities and other consideration specified in the statute. Section 207(b) of the Act requires each reorganization court to make certain decisions which ultimately deter- mine whether the railroad in reorganization under its jurisdiction will be made subject to the compulsory- conveyance provisions of the Act. First, each reorganization court is directed to determine, within 120 days of January 2, 1974 (the 120-day hearing), whether the raiiroad in reorganization can be reorganized on an income basis within a reasonable time under Section 77 of the Bankrupt- 5 cy Act and whether the public interest would be better ser- ved by such reorganization than by reorganization under the Act. If both determinations are affirmative, that railroad ceases to be a railroad in reorganization within the meaning of the Act, is no longer subject to the compulsory- conveyance and other mandatory provisions of the Act, and continues its reorganization efforts under Section 77. Second, if the railroad has not been excluded from the Act as a result of the 120-day hearing, each reorganization court is required by Section 207(b) to find, within 180 days of January 2, 1974 (the 180-day hearing), whether the Act provides a process which would be fair and equitable to the estate of the railroad in reorganization.” If the court finds that it would not, again the railroad ceases to be a railroad in reorganization within the meaning of the Act and is no longer subject to the compulsory-conveyance and other mandatory provisions of the Act. In that event, Sec- tion 207(b) directs the reorganization court to dismiss the reorganization proceedings. The decisions of the reor- ganization courts are reviewable, under Section 207(b), in the Special Court — a district court of three judges created pursuant to Section 20%b) of the Act. Section 207(b) provides that there shall be no review of such decisions of the Special Court. Penn Central Proceeding These actions relate to the application of the Act to the estate of Penn Central Transportation Company, Debtor, in reorganization under Section 77 of the Bankruptcy Act (Penn Central). The 120-day decision by the Reorganization Court on May 2, 1974 found that Penn Central was not reorganizable on an income basis within a reasonable time. The opinion and order of the Reorganization Court appear at J.A. pp. 84-103. 6 The 18C day hearing held with respect to Penn Central resulted in a finding by the Reorganization Court that the of the Act was not fair and equitable to the Penn Central estate. The opinion and order of the Reorgani- zation Court on this issue appear at J.A. pp. 124-52. That decision has been appealed by the Government parties and others to the Special Court. The appeals will be argued before the Special Court on August 27 and 28, 1974. Under Section 207(b) of the Act, the Special Court is required to announce its decision by September 29, 1974. The issues argued before the Reorganization Court, and now before the Special Court, are essentially the same con- stitutional questions which these actions present to this Court for decision. Constitutional Litigation Shortly after the Act became law, the first of these ac- tions was filed G. A. p. 161). The complaint alleged, inter alia, that the Act worked a permanent taking of the proper- ty of the Penn Central estate without assurance that the payment of just compensation required by the Fifth Amend- ment would be made; that the Act contravened the Fifth Amendment in failing to provide compensation for the erosion of the Debtor’s estate during the interval between the enactment of the Act and the ultimate conveyance of rail properties to Conrail, during which period the Act required the railroad to continue operations; and that the ‘Jurisdiction of the Reorganization Court to male the 120-day and 180-day decisions has been challenged by the Trustee of the New Haven Railroad, a creditor and stockholder of Penn Central. Appeals by the New Haven Trustee from both decisions are now pending before both the Special Court and the Court of Appeals fr the Third Circuit. 7 Act violated the uniformity requirement of Article I. Sec- tion 8, Clause 4 of the Constitution. Similar allegations were made in the other two complaints (I A. pp. 261, 341). Appellant Trustees intervened as parties defendant in each of the three actions (J. A. pp. 191, 309, 358). On June 3, 1974, the cases were submitted to the court below on cross-motions for summary judgment. The de- fendants, including appellant Trustees, asserted that there could be no deficiencies in just compensation as plaintiffs alleged, because the estate in reorganization would in any event be made whole by way of suit in the Court of Claims, both for any deficiency in the compensation received from Conrail for rail properties and for any claims they might have if it were determined that an unconstitutional erosion of the estate had taken place or would take place prior to the date of the mandatory conveyance. Defendants also denied that the act violated the uniformity requirement of Article I. Section 8, Clause 4 of the Constitution. On June 25, 1974, the court below filed an opinion and entered an order enjoining and holding null and void three provisions of the Act (J A. pp. 9-83). All of the judges agreed that the Act was unconstitutional in failing to provide compensation for interim erosion which would be suffered by the Penn Central estate during the planning period, and that an action against the United States in the Court of Claims was not available to remedy this deficiency. On that basis the court enjoined enforcement of, and declared null and void, Section 304f) of the Act, which requires continued rail operations during the planning period, and declared Section 303 of the Act null and void insofar as it fails to provide compensation for interim erosion. Because of these conclusions, the court enjoined USRA from certifying a final system plan to the Special Court pursuant to Section 20%c) (J.A. p. 82). A majority of the court also held Section 207(b) of the Act null and void 8 so far as it mandated dismissal of the Section 77 proceeding if reorganization under the Act is foreclosed. The court also concluded that the questions whether the mandatory conveyance of rail properties to Conrail pur- suant to the Act would violate Fifth Amendment rig Ats. and whether a suit in the Court of Claims would be available to remedy any deficiency in this respect, were premature, since the 180-day decision as to Penn Central had not yet been made, the final system plan had not yet been approved by Congress, and the conveyance would have to be ordered by the Special Court (J.A. pp. 23-25). Judge Fullam, in his concurring opinion, believed that these issues were ripe for decision. SUMMARY OF ARGUMENT If the consideration paid pursuant to the Act for the mandatory conveyance of Penn Central’s properties proves constitutionally inadequate, or if interim erosion passes the point of constitutional permissibility and therefore involves a taking of property even apart from the ultimate man- datory conveyance, then the Trustees would have a remedy in the Court of Claims for just compensation. The Tucker Act, which provides that remedy, clearly applies. The text of the present Act — although containing thirteen provisions repealing various types of federal-court jurisdic- tion and excluding application of other federal laws — con- tains nothing which repealed the Court of Claims’ jurisdic- tion under the Tucker Act for a taking or otherwise precluded a remedy there. Nor can any implied repeal of the Tucker Act be found in the Act — especially when to find such an implied repeal 9 would require holding the Act unconstitutional. The Court will, of course, make every effort to construe an act of Congress in a way that makes it constitutional rather than unconstitutional. The legislative history shows no intent to exclude a Tucker Act remedy in the event that the Act resulted in a taking of property. Congress indeed attempted to structure the Act so that it would be held not to involve any taking, and at least some Congressmen thought that it had suc- ceeded in that attempt. But on that question the intent of Congress is irrelevant: it is for the courts, not Congress, to determine whether or not governmental actions expressly directed by Congress amount to a taking of property for which just compensation is due. Congress specifically recognized that the consideration for Penn Central's properties would be subject to a constitutional minimum. And the fact that Congress has not yet ap- propriated funds to pay a Court of Claims judgment is no ground for holding that the Act excluded Tucker Act jurisdiction; the same situation habitually applies with respect to Court of Claims litigation. The court below was correct in its holding that, absent a Tucker Act remedy, the Act is unconstitutional in requiring continuing erosion of the Penn Central estate, for an in- definite period, without any provision for compensating Penn Central’s owners for the taking of property suffered thereby. Such erosion has already been massive — in the hundreds of millions of dollars — and no one can guaran- tee that, if Penn Central is irrevocably subjected to reorganization under the Act, erosion has not already passed or will pass the point at which it becomes un- 10 constitutional. Indeed there is a distinct likelihood that that point has already been passed. The applicable case law, including the recent precedents established in the New Haven reorganization, establishes that deficit rail operations may not constitutionally be required without, at least, the assurance of successful and prompt reorganization. Since a decision to make Penn Cen- tral subject to the Act is irrevocable, the process of the Act cannot be allowed to go forward without an assurance that, if erosion passes the point of unconstitutionality, the estate will be compensated therefor. The Act itself provides no assurance either of a successful and prompt reorganization or of any compensation for erosion. Hence, if there is no Tucker Act remedy, the Act cannot be sustained. The majority of the court below erred in its holding that it is premature to decide whether the Act is constitutionally defective, absent a Tucker Act remedy, in failing to assure just compensation for the taking of property caused by a mandatory conveyance of Penn Central property to Conrail pursuant to a final system plan. The majority believed that issue was premature because a mandatory conveyance was subject to three contingencies: (1) a “180-day”’ decision making Penn Central subject to the process of the Act; (2) Congressional approval of a final system plan; and (3) an order of the Special Court directing the mandatory con- veyance. None of these “‘contingencies’’ affects the reality that, unless the Act is at this stage found defective, the mandatory conveyance will in fact take place, and there will be no future opportunity to challenge either its con- stitutionality or its fairness and equity. —— (1) The 180-day decision has now been made. While the Reorganization Court refused to subject Penn Central to the process of the Act, it did so essentially by deciding the same constitutional questions now before this Court, holding, inter alia, that the Act fails to assure just com- pensation for the mandatory conveyance of Penn Central property to Conrail. These questions are now before the Special Court, which like the Reorganization Court will doubtless base its holding on essentially constitutional grounds, and which will presumably structure its order to permit modification in the light of what this Court decides. Since there is no appeal from the Special Court's decision, the present cases are the only opportunity for an authoritative decision of these important constitutional questions. All the parties are faced with imminent harm, whichever way the Special Court decides, if that decision should be constitutionally incorrect. And an erroneous ex- clusion of Penn Central from reorganization under the Act would do violence to the public interest, which plainly dic- tates such reorganization if the Act is not inconsistent with the preservation of adequate constitutional remedies. (2) The lower court was in error; the Act contains no requirement that Congress approve the final system plan. The plan becomes effective automatically unless either House of Congress disapproves it within 60 days. And even if Congress should disapprove the first plan, further plans must be submitted until one of them is not disapproved. Since that plan will necessarily provide for a mandatory conveyance of Penn Central property to Conrail there is no possibility, other than through a change in the statute, that the constitutiona! question before this Court will be mooted or its essential contours altered. (3) The Special Court shall“ order the conveyance within ten days of the submission of the final system plan to 12 it. Its order is a ministerial act, and is noi subject to appeal. The Act plainly was structured to exclude any exercise of discretion by the Special Court at the mandatory- conveyance stage. Thus the Special Court's order is not a “contingency” which makes decision by this Court premature. Indeed, since the Special Court will then have no choice, this action presents the last opportunity for any court to decide whether a mandatory conveyance can be allowed to go forward, on the basis of a Tucker Act remedy, in spite of the limitations in the Act on the form and amount of the consideration to be paid therefor. The Special Court cannot authoritatively decide that question in the cases presently before it, since a decision by it with respect to Court of Claims jurisdiction would have no bin- ding effect. IV. The Act cannot be sustained, absent a Tucker Act remedy, unless it assures that the consideration to be paid for Penn Central's properties is equal to the “constitutional minimum” which the estate must receive. However the con- stitutional minim um be defined, there can be no assurance that the consideration paid under the Act will equal it. That consideration is required to be, for the most part, securities of Conrail. But at the present time there can be no assuran- ce that Conrail securities will have any value at all, let alone a value equal to the minimum constitutionally required. Nor can there be any assurance that the other consideration permitted by the Act will make up any inadequacy. V. If the availability of an adequate Tucker Act remedy is established by this Court's decision, the constitutionality of the Act can be sustained. For the remedy to be adequate, it 13 must be clear that Penn Central will be entitled to a Court of Claims judgment for any deficiency in the compensation paid for the properties mandatorily conveyed, and also for any loss caused by erosion if such erosion has passed, or passes, the point at which continued loss operations become unconstitutional if for the account of the estate. The Court of Claims judgment need only be for a deficiency — for the amount still owing after taking account of the non-cash consideration paid under the Act — so long as that consideration is valued only at its cash value on the date of its receipt. Otherwise the Act would offend the con- stitutional requirement that compensation for a taking be paid in cash or cash equivalent. Valuing speculative railroad securities at an intrinsic value in excess of their value when received — the device which proved so disastrous in the New Haven reorganization — must be ex- cluded. With one exception, the Act does not violate the “uniform rules of bankruptcy” clause of the Constitution. The Act is, as the Court below held, based on the commerce clause as well as on the bankruptcy clause, and in addition makes a reasonable classification of debtors based on the unique current railroad crisis in the Northeast. The ex- ception is the provision which would deny to Northeastern railroads excluded from the Act, but to no others, the op- portunity to reorganize under Section 77 on an other-than- income basis. That is an indefensible geographical discrimination and must be stricken, but it is readily severable. 14 ARGUMENT THE ACT DOES NOT EXCLUDE A TUCKER ACT REMEDY FOR ANY TAKING OF PROPERTY ACCOMPLISHED PURSUANT TO THE ACT. The Tucker Act provides (28 U.S.C. § 1491): “The Court of Claims shall have jurisdic- tion to render judgment upon any claim against the United States founded either upon the Constitution, or any act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated er unliquidated damages in cases not sounding in tort.” An action by the Trustees for just compensation for the ies taken pursuant to the Act would be founded upon the Fifth Amendment to the Constitution. Successful actions pursuant to the Tucker Act based on takings of property are, of course, legion. While in a few early cases the courts took the view that an action for a taking could be maintained only if a contract to pay could be implied in fact, the weight of authority has been, and recent cases have consistently held, that the Fifth Amendment itself creates a right to just compensation for any taking and the Tucker Act provides the necessary waiver of immunity which con- fers jurisdiction. See United States v. Causby, 328 U.S. 250 (1946); Jacobs v. United States, 290 U.S. 13 (1933); Feldwin Realty Co. v. United States, 169 F. Supp. 73, 76 (D.N.J. 1959): Aris Gloves, Inc., v. United States, 420 F.2d 1386, 1391 (Ct. Cl. 1970); Eyherabide v. United Stutes, 345 F.2d ee 15 565 (Ct. Cl. 1965). It is not a necessary element of an action under the Tucker Act that the Government intended to pay for or even that it intended to take the property involved; so long as a taking in fact occurred the Court of Claims has jurisdiction and the payment of just compensation will be required. United States v. Causby, supra; Yearsley v. W. A. Ross Construction Co., 309 U.S. 18, 21 (1940); Hurley v. Kincaid, 285 U.S. 95, 104 (1932); Portsmouth Harbor Land & Hotel Co. v. United States, 260 U.S. 327 (1922); Sioux Tribe of Indians v. United States, 31S F.2d 378 (Ct. Cl. 1963); Richard v. United States, 282 F.2d 901 (Ct. Cl. 1960); Foster v. United States, 98 F. Supp. 349 (Ct. Cl. 1951); Cotton and Co. v. United States, 75 F. Supp. 232 (Ct. Cl. 1948). The fact that the Rail Act provides a means of securing some consideration for the properties to be taken does not eliminate the Court of Claims’ jurisdiction to award a judgment against the United States to fill any gap between the value of the consideration awarded pursuant to the Act and the just compensation required to be paid for the properties taken. Where a statutory provision for deter- mining compensation is constitutionally inadequate, par- ties are not precluded from availing themselves of other statutory rights such as those under the Tucker Act. C/. DeSalvo v. Arkansas Louisiana Gas Co., 239 F. Supp. 312 (E. D. Ark. 1965). Fort Berthold Reservation v. United States, 390 F.2d 686 (Ct. Cl. 1968), was brought under a provision of the Indian Claims Commission Act creating in the Commission jurisdiction of claims in law or equity arising under the Constitution — a provision substantially identical, of course, to the Tucker Act provision at issue here. 390 F.2d at 690, n. 1. The act of Congress authorizing the taking in question had expressly provided for com- pensation at a stated dollar amount per acre. The Court of Claims had no difficulty in finding that a taking had oc- 16 curred within the meaning of the Fifth Amendment to the Constitution, and that the jurisdictional provision quoted above authorized an action against the United States to recover the difference between the value of the land thus taken and the amount received by the owners pursuant to the Congressional directive. The case is virtually on all fours with the present situation. The general jurisdiction conferred upon the Court of Claims by the Tucker Act has been held precluded only in those instances where it has been very clearly withdrawn, such as where another court or agency has expressly been given exclusive jurisdiction to award the same relief as the Court of Claims could otherwise provide. See Johnson v. Emergency Fleet Corp., 280 U.S. 320 (1930); United States v. Pfitsch, 256 U.S. 547 (1921); Thomason v. United States, 184 F.2d 105 (9th Cir. 1950); Cook v. United States, 115 F.2d 463 (Sth Cir. 1940); Eastport Steamship Corp. v. United States, 372 F.2d 1002, 1007-08 (Ct. Cl. 1967); South Puerto Rico Sugar Co. v. United States, 334 F.2d 622, 626 (Ct. Cl. 1964), cert. denied, 379 U.S. 964 (1965); Hele v. United States, 100 Ct. Cl. 289, 294 (1943). But all that Congress has provided in the Act is a means for determining the value of the properties taken and the value of the securities to be issued as compensation. The Special Court is not empowered by the Act to render a judgment against the United States should the value of the securities prove inadequate to compensate the railroad estates for the properties taken; thus, the Special Court has not been empowered to determine or to award the just com- pensation which the Constitution requires. Such a judg- ment can only be rendered by the Court of Claims. Repeals by implication of the jurisdiction of federal courts are not lightly to be implied, and will be held to have occurred only on a clear and convincing showing. Federal i7 Sugar Refining Co. v. United States, 30 F.2d 254, 255 (2d Cir. 1929) (L. Hand, J.), aff'd, Johnson v. United States Shipping Board Emergency Freight Corp., 280 U.S. 320 (4930). Especially is this the case where a holding that jurisdiction has been repealed by implication would neces- sarily result, as the court below correctly held it would result, in a holding that the Act is in whole or in part un- constitutional. See, e. g.. Catlin v. United States, 324 U.S. 229, 241 (1945). The Court should of course make every ef. fort to construe an act of Congress in a way that makes it constitutional rather than unconstitutional. Eg. United States v. Thirty-seven Photographs, 402 U.S. 363, 369 (1971); American Communications Association v. Douds. 339 U.S. 382, 407 (1950); United States v. Congress of In- dustrial Organizations, 335 U.S. 106, 120-121 (1948); United States v. Delaware & Hudson Co., 213 U.S. 366, 407-08 (1909). If Congress in enacting the present Act had withdrawn a Court of Claims remedy, then, as the Court below recog- nized, the Act would be at least in part unconstitutional, since neither title nor possession to property sought to be taken may be given in the absence of a reasonable, certain and adequate provision for obtained just compensation. *Repeals of statutes by implication are never favored; the party urging such a repeal has a strong burden ot persuasion; a law is not to be held repealed by implication unless no other reasonable construction can be found, and unless the new statute is so repugnant to the old one that they cannot be reconciled. E.g.. Amel. United States, 384 U.S. 158 (1966); Mercantile Nat'l Bank v. Longdean. 371 U.S. 5585 (1963): Rosenberg v. United States, 346 U.S. 273 (1953); FTC v. A.P.W. Paper Co., 328 U.S. 193 (1946); Georgia v. Pennsylvania NR. R., 324 U.S. 439 (1945); Ex parte Cohen, 191 F.2d 300 (9th Cir. 1951), cert. denied, 342 U.S. 947 (1952); Nagano v. McGrath, 187 F.2d 759 (7th Cir. 1951), aff'd, 342 U.S. 916 (1952); Fawcett v. CI. K. 149 F.2d 433 (2d Cir. 1945). United States v. Dow, 357 U.S. 17, 21 (1958); Joslin Mfg. Co. v. City of Providence, 262 U.S. 668, 677 (1923); Miller v. United States, 57 F.2d 424 (App. D.C. 1932); Stringer v. United States, 471 F.2d 381, 384 (Sth Cir. 1973). But in the present case, there is no difficulty — no straining of either the text or the legislative history of the Act — involved in holding that it did not unconstitutionally attempt to exclude a Tucker Act remedy for a taking. If Congress had so intended, it would have been easy to ex- clude such a remedy by a simple and express provision. In fact, as the court below conceded (J.A. p. 45), the Act con- tains no fewer than thirtcen provisions repealing or making inapplicable the provision of various laws or excluding the jurisdiction of federal courts on various subjects. Since none of these thirteen provisions excludes a Tucker Act remedy — although Congress was made aware of the possibility of such a remedy — Congress must be deemed to have deliberately rejected the readily available option of in- cluding such an exclusionary provision in the Act. The thirteen repealing or jurisdiction-excluding provisions in the Act are found in Sections 202(a), 20XcX2), 206(dX3), 207(b), 20%a), 20%b), 3OHbK2), 3OH%d), IOKc), 304(f), 601(aX2), 601(b) and 601(c). Sections 202(aX10) and 20ScX2) exempt United States Railroad Association (USRA) and the Rail Services Plan- ning Office, respectively, from the provisions of Section 3709 of the Revised Statutes, 41 U.S.C. Section 5. Section 2000) provides that certain determinations by USRA and the ICC shall not be reviewable in any court. Section 207(b) provides that appeals from orders made under that subsection 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 jurisdiction created by Sec- 19 tion 77 of the Bankrupty Act by requiring dismissal of Sec- tion 77 proceedings in certain circumstances. Section 20%a) provides that the final system plan shall become effective after review by Congress “notwithstanding any other provision of lad and is not subject to review by any court except in accordance 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 shall be taken — and that the plan is to become effective notwithstanding any other provisions of law. Obviously nothing here i urports or attempts to ex- clude a Tucker Act remedy for just compensation for the properties so taken. Section 20%b) authorizes the Judicial Panel on Multi- District Litigation to create a Special Court and to con- solidate therein all judicial proceedings with respect 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 subsection 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 30XbX2) provides that mandatory conveyances ordered pursuant to the Act by the Special Court shall not be restrained or enjoined by any court.” Section 303d) provides that, after the Special Court enters its orders with respect to compensation which are authorized by prior sub- sections of Section 303, an appeal may be taken to the Supreme Court and that such appeal is exclusive. This makes a single appeal to the Supreme Court the only means by which interested parties may question whether the Special Court has properly performed the functions allocated to it by Section 303. Since those functions do not include consideration of any question whether the com- 20 pulsory conveyance pursuant to the Act constitutes a taking of property or the amount of just compensation due therefor,’ Section 303d) in no way attempts to exclude a Tucker Act remedy for such a taking. To the contrary, Sec- tion 30Xd) yet again demonstrates that Congress was fully aware of the necessity of excluding various types of jurisdic- tion and did so expressly when it wished to do so. Section 304c) provides that railroad abandonments per- mitted under the section may be made “notwithstanding any provision of the Interstate Commerce Act or of other laws. Section 304(f) provides that the inhibition on interim abandonments imposed by that subsection prevails 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.” Section 601(aX2) provides that the antitrust laws are inapplicable with respect to any action taken to formulate or implement the final system plan where such action was The Special Court is charged by Section 30McK2NC) with entering a judgment against Conrail if a lack of fairness and equity cannot be completely cured by the other means made available to the court. What is conspicuously absent is any authorization for the Special Court to decide whether a judgment against Conrail does completely ensure fair- ness and equity. ie. whether it meets the “constitutional minimum standard (Section N,, for just compensation. Since that fun- damental question is carefully and deliberately excluded from the Special Court's jurisdiction, the provisions of Section 303d), creating a single appeal to the Supreme Coir. fro... the Special Court's decision of the matters it is authorized to ec is | 1 no way inconsistent with the preservation of remedies for at. gin de Court of Claims pursuant to the Tucker Act. If the court below meant to intimate otherwise by its observation (J. A. p. 51) that “judicial review is delineated with specificity in Sections 20%a) and 303 with no mention of the Court of Claims. its reasoning is plainly unsound. 21 in compliance with the requirements of such plan. Section 601%) similarly makes inapplicable the provisions of the Interstate Commerce Act whenever a provision of any such act is inconsistent with this Act. And Section 601(c) provides that certain provisions of the National En- vironmental 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 sub-title headed “Relationship to Other Laws. If Congress had wished also to exclude the application of the Tucker Act, it obviously would have added such an exclusion to the very explicit provisions of Section 601 excluding the ap- plicability of various other laws. Given the absence of any explicit provision excluding the Tucker Act remedy, plus the necessary implication from the provisions discussed above that the Tucker Act was not rendered inapplicable, plus the strong reluctance which the Court must feel in finding a repeal by implication when that would render the Act in whole or in part un- constitutional.“ the legislative history would, at least, have “If the Act were construed to repeal Tucker Act jurisdiction without substituting (as of course it does not substitute) a fully equivalent and adequate remedy ensuring just compensation, the repeal of jurisdiction should be held unconstitutional. ‘|W hile Congress has the undoubted power to give, withhold and restrict the jurisdiction of courts other than the Supreme Court, it must not so exercise that power as to deprive any person of life, liberty, or property without due process of law or to take private property without just compensation. Battaglia v. General Motors Corp., 169 F.2d 254, 257 (2d Cir. 1948); see also Graham & Foster v. Goodcell, 282 U.S. 409, 431 (1931); Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281 U.S. 673, 682 (1930); United States v. Klein, 80 U.S. 128, 144-45 (1871). Thus even if the Court should determine that some provision of the Act repeals Tucker Act jurisdiction, it should strike down that provision alone pursuant to the separability clause of the Act, Section 604. 22 to show clearly and conclusively that Congress intended to exclude a Tucker Act remedy to warrant this Court in so holding. The legislative history shows no intent whatever to ex- clude a Tucker Act remedy in the event that the Act was held to effect a taking of property. Congress did indeed at- tempt to structure the Act so that no taking would occur. But Congress’ intent on that point is wholly irrelevant, since the law is clear that the determination of whether a taking has occurred is a purely judicial function, and that no in- tent of Congress to effect a taking or to pay therefor is necessary, but only that Congress intend that the acts occur which in law constitute a taking. See cases cited at p. 15, supra. What is entirely absent from the legislative history is any intent to preclude the jurisdiction of the Court of Claims in the event that it should be judicially determined that Congress had been unsuccessful in its desire to avoid a taking. Senator Hartke, one of the managers of the bill, specifically adverted to the possibility of a successful Court of Claims suit if the bill was not structured to avoid a taking. 119 Cong. Rec. S. 23783-84 (1973), quoted in part by the court below, J.A. p. 49. The remarks by Con- gressman Adams relied on by the court below (J.A. pp. 49- 50) amount to, at most, (I) a correct declaration that the Act itself contained no provision for a remedy against the United States, and (2) an erroneous legal judgment that Congress had been successful in structuring the Act so that there would be no taking, and hence no recovery in a Court of Claims action. Congress had, in addition, been warned by Claude S. Brinegar, Secretary of Transportation, that the provisions of the Act would not succeed in avoiding a taking and that further amendments were necessary to accomplish that 23 result. On November 14, 1973 Secretary Brinegar wrote the Senate Committee on Commerce warning that the draft bill then before the committee would be held to effect a com- pulsory taking of railroad property under the Fifth Amend- ment to the Constitution. Rail Services Act of 1973, Report No. 93-601 of the Senate Committee on Commerce, 130 (93d Cong., Ist Sess. 1973), J.A. pp. 214-20. Secretary Brinegar assumed as axiomatic (and as we have shown his assumptions were correct) that Congress could be held to have effected a taking without intending it, and that if a taking did occur, a remedy for the constitutionally required compensation would be available. The Secretary declared that the only way to avoid a taking would be to provide an option by which a conveyance under the Act could be avoided by the courts; that such an option would have to be one other than an “illusory” option; and that for an option to be other than illusory it would have to be an option to be exercised at a time when all aspects of the final system plan were known and could be assessed, including, in particular, the compensation to be received and the factors bearing on the value thereof. The Secretary concluded that “in order to avoid con- demnation, it is necessary to give the special court the right to turn the final system plan down with respect to each of the railroads in reorgantzation. Senate Report, supra. at 133, J.A. p. 220. Again, “if this is to be deemed a reorganization [as opposed to a condemnation], the court must have the opportunity to say no to the final system plan at a time when all the relevant facts can be presented to it. /bid. Accordingly, the Secretary transmitted amend- ments which would have provided for a hearing before the special court, after presentation to it of the final system plan, after which the court would determine whether the plan was fair and equitable with respect to each estate and, if not, would remand each case to its reorganization court. 24 with the result that the compulsory conveyance to Conrail would be avoided. See Proposed Amendments, Annex C hereto, pp. 10a-12a, infra. Congress, placed fully on notice by the Secretary of what would be necessary to avoid a taking, (1) chose not to accept the amendments he proposed, and (2) having been made in- tensely aware that, if the Secretary were right, a Tucker Act remedy would exist, nonetheless deliberately refrained from adding to the many other repealing and jurisdiction- excluding provisions of the Act any provision making the Tucker Act inapplicable. Thus, while under the relevant case law it is not at all necessary that Congress realize that it is effecting a taking for a taking to be held to have oc- curred as a result of its actions, in this instance Congress knew exactly what it was doing and must be deemed to have opened the way for the one remedy which would make its action constitutional: i.e., a remedy for just compensation under the Tucker Act. Congress’ attempt to structure the procedures estab- lished by the Act as a “reorganization,” while doubtless related to its desire to avoid a taking if at all possible consistently with its other objectives, indicates no intent to exclude a Tucker Act remedy. Indeed, by its reference in Section 30XcKX1XB) to the constitutional minimum of compensation required, Congress rec ognized that there is such a constitutional minimum which must be met; and, of course, it was well aware that the Tucker Act creates jurisdiction of claims against the United States in all ac- tions founded upon the Constitution. Congress was obviously further aware that the plentiful case law establishing a “constitutional minimum” in railroad reorganization rests upon the doctrine that, if the constitutional minimum is not met, there is a taking of property for which the Fifth Amendment to the Con- 25 stitution requires that just compensation be paid. See pp. 54-S6, infra. The bankruptcy power, like the other great substantive powers of Congress, is subject to the Fifth Amendment.” Louisville Joint Stock Land Bank v. Rad- ford, 295 U.S. 555, 589 (1935). For the above reasons, we think it plain that the Act can- not and should not be construed to repeal the Tucker Act pro tanto or to exclude the undoubted jurisdiction of the Court of Claims to entertain actions against the United States, founded upon the Constitution, for takings of property without just compensation. We would in addition point out, however, that if the Court entertains any doubt as to Congress’ intention on this score, it will not, by holding in favor of the existence of the Tucker Act remedy, compel the expenditure of any public funds contrary to the desire of Congress. If, after such a holding, Congress believes that its intent has been frustrated or that the price for continuation of rail service in the Northeast is too high if it must meet constitutional standards, Congress will have more than adequate time, prior to any compulsory con- veyance under the Act, to repeal the Act or to amend it so as to avoid a taking of property. The earliest time at which compulsory conveyances under the Act could be made is September 1975. This gives Congress ample time to con- sider whether it still wishes such conveyances to proceed af- ter it is fully on notice of the legal consequences thereof. Moreover, under Section 208 of the Act, Congress must review the final system plan in any event, and will have the opportunity to disapprove or to amend the final system plan, or to amend the Act, if it is unwilling to pay the cost of the taking. There is no risk whatever that unintended or undesired obligations will be incurred. In this sense the present situation is closely analogous to cases where a condemnation proceeding is instituted either 26 without a Congressional appropriation of funds or where Congress has imposed limitations on expenditures for the project in question which would or might be exceeded by a judgment in the condemnation action. In such situations the courts have uniformly held that the condemnation proceeding should go forward to judgment, and if Congress proved unwilling to appropriate the necessary funds the condemnation might be abandoned at any time prior to the actual taking. E.g., Barnidge v. United States, 101 F.2d 295, 298 (8th Cir. 1939); Commercial Station Post Office. Inc., v. United States, 48 F.2d 183, 185 (8th Cir. 1931); United States v. 40.75 Acres of Land, 76 F. Supp. 239, 245 (N. D. III. 1948). In Catlin v. United State, 324 U.S. 229, 241 (1945), the Court went further and, in order to save a taking statute from possible unconstitutionality, con- strued it as giving the Government, upon transfer of title, “only a defeasible title in cases where an issue concerning the validity of the taking arises. ... The alternative con- struction, that title passes irrevocably, leaving the owner no opportunity to question the taking’s validity ..., would raise serious question concerning the statute's validity. Youngstown Sheet and Tube Co. v. Sawyer, 343 U.S. 579 (1952), and Hooe v. United States, 218 U.S. 322 (1910), fur- nish no support for the conclusion of the court below. Youngstown involved a seizure of property carried out by the President without any Congressional authority; the Court simply held that such a seizure was not a taking by the United States for which just compensation would lie, but merely an illegal individual act which could be en- joined. Similarly, in Hooe, the Civil Service Commission had occupied the basement of a privately owned building even though Congress had repeatedly refused to appropriate money to pay the rent therefor, and a statute in force provided that ‘hereafter no contract shall be made for the rent of any building ... until an appropriation therefor 27 shall have been made in terms by Congress, and that this clause be regarded as notice to all contractors or lessors of any such building or any part of building. 218 U.S. at 331. The Court naturally held that there had been no taking by the United States, but merely an unauthorized trespass by officials, which could not create a claim against the United States. 218 U.S. at 335-36. “The taking of private property by an officer of the United States for public use, without being authorized, expressly or by necessary implication, to do so by some act of Congress, is not the act of the Government.” 218 U.S. at 336. Here, to the contrary, there is no dispute that Congress has fully and expressly authorized the acts which in law constitute a taking, and under established and unquestioned doctrine that is enough to constitute a taking by the United States for which just compensation is required. See p. 15, supra, and authorities there cited. Far more similar to the present situation is Silesian- American Corp. v. Clark, 332 U.S. 469 (1947), where the taking statute at issue (the Trading with the Enemy Act) contained no provision for compensation, but where the Court declined to hold it unconstitutional on that ground, We must assume that the United States will meet its obligations under the Constitution. Consequently, friendly aliens will be compensated for any property taken 332 U.S. at 480. See also the circuit court opinion, Silesian- American Corp. v. Markham, 156 F.2d 793, 796-97 (2d Cir. 1946) L. Hand, J.). A Tucker Act remedy adequate to save the con- stitutionality of the Act cannot be excluded on the ground that no appropriation has yet been enacted to pay a judgment of the Court of Claims. The court below may have feared (cf. I. A. pp. SO-S2) that Congress could either simply ignore such a judgment or that, once this Court has held a 28 Tucker Act remedy available, Congress could withdraw the jurisdiction of the Court of Claims to hear any claim arising from implementation of the Act. That Congress could con- stitutionally so legislate is at best highly questionable in view of the authorities cited at p. 21, supra, n. 4. Be that as it may, if such possibilities were enough to render takings unconstitutional, then every taking would be invalid and would have to be enjoined except those in which full payment was made, or at least an appropriation voted, prior to the taking itself. That is not the law; the contention that it is has been repeatedly and unanimously rejected by the courts. See cases cited at p. 26, supra; see also, e. g. Glid- den v. Zdanok, 370 U.S. 530, 569-72 (1962); Silesian- American Corp. v. Clark, 332 U.S. 469 (1947); Albert Han- son Lumber Co. v. United States, 261 U.S. 581, 586-87 (1923); Crozier v. Krupp, 224 U.S. 290, 306 (1912); Great Falls Mfg. Co. v. Attorney General, 124 U.S. 581 (1888); Jn re Spier Aircraft Corp., 137 F.2d 736 (3d Cir. 1943), cert. denied sub nom. Coombs, Trustee, v. United States, 321 U.S. 770 (1944); City of Oakland v. United States, 124 F2d 959 (9th Cir.), cert. denied, 316 U.S. 679 (1942); Poto- mac Electric Power Co. v. United States, 85 F.2d 243 (D.C. Cir.), cert. denied, 299 U.S. 565 (1936); Lee ». United States, 58 F.2d 879 (D.C. Cir. 1932); Commercial Station Post Office, Inc., v. United States, 48 F.2d 183, 185 (8th Cir. 1931); Note, The Constitutional Status of the Court of Claims, 68 Harv. L. Rev. 527, 531 & n. 33 (1950). We fail to understand the court below's characterization of Court of Claims jurisdiction as “an implied remedy” (J.A. p. 41), its apparent belief that the jurisdiction was somehow repealed unless Congress indicated an affirmative intent to preserve it, or its view that simple recognition of a statutory remedy available for over a century would somehow amount to judicial legislation (J. A. p. 53). The 29 cases previously cited demonstrate that it is not necessary that the Act specifically mention a Tucker Act remedy in order for such a remedy to exist. Clearly the remedy does exist absent a Congressional withdrawal of jurisdiction from the Court of Claims. The court below did not find, nor could it have found, that Congress withdrew jurisdiction from the Court of Claims. It based its decision, rather, on the absence of any reference in the Act to the availability of a remedy in that court. But no such reference was required. Moreover, the court did not give proper weight to Section JO eki) of the Act, which plainly recognizes that the compensation to be received for properties conveyed must satisfy the constitutional minimum. To hold the Act un- constitutional rather than affirming the availability of a Court of Claims action is to conclude that the intention of Congress to provide constitutionally acceptable com- pensation should be ignored merely because Congress omit- ted specifically to refer to the only means by which that in- tention can be carried out: the Tucker Act. That conclusion is erroneous. Doubtless the court below would never have been led to such a view of the law were it not for its concern that a Court of Claims recovery in this case might be substantial. If the dollar amount possibily involved were less, the Court of Claims’ obvious jurisdiction would hardly be a matter of controversy. But to ignore both Congressional enactments and every pertinent legal principle because of such a con- cern is judicial legislation” if anything is. For the reasons stated, the Act does not exclude a Tucker Act remedy for just compensation for any and all takings of property effected by the Act, including both the permanent taking resulting from compulsory conveyances of rail properties to Conrail and any temporary taking resulting from the compelled continuation of losing rail operations 30 past the point where erosion becomes unconstitutional if for the account of the estate. IF THE COURT BELOW WAS CORRECT IN CONCLUDING THAT NO COURT OF CLAIMS REMEDY EXISTS, THEN ITS CONCLUSION THAT THE ACT IS UNCONSTITUTIONAL WITH RESPECT TO INTERIM EROSION IS ALSO CORRECT. The court below held that the failure of the Act to provide any compensation to the Penn Central estate for interim erosion, during the lengthy, indeed unlimited.“ planning period while continuance of rail operations is required, is unconstitutional as a taking of property without adequate provision for the just compensation re- quired by the Fifth Amendment. We believe that, if the court below was correct in also concluding that the Act precludes any remedy in the Court of Claims under the Tucker Act by which compensation for such erosion could be obtained, its conclusion as to the unconstitutionality of the Act with respect to erosion is plainly correct. The Penn Central Reorganization Court reached a similar conclusion in its 180-day decision, holding the Act not fair and equitable” with respect to the Penn Central (J.A. pp. 124-51) because of, inter alia, its failure to provide compensation for interim erosion. Similar views have also been suggested by the Court of Appeals for the Third Cir- cuit in Jn re Penn Central Transportation Co. (Columbus Option Appeals), 494 F.2d 270, 283 (1974), petition for cert. filed, 42 U.S.L. Week 3633 (U.S. May 8, 1974), No. 73- See p. 41, infra, n. 13. 31 1672: and were foreshadowed in early 1973 by the Penn Central Reorganization Court. In re Penn Central Tran- sportation Co. 55 F. Supp. 1343, 1344, 1346 (1973).’ The court below correctly held that it was not necessary to decide when the point of unconstitutionality had been or would be reached in order to hold that the Act's failure to provide for interim erosion contravenes the Fifth Amend- ment. Likewise, no findings were necessary as to the amount of erosion which has taken place up to the present time. That it has been massive is indisputable. The Govern- ment conceded * in the Reorganization Court that since the Section 77 petition was filed in June 1970 the financial erosion alone — new obligations which prime all pre- bankruptcy claims — consists of Trustees’ certificates ($100 million), accrued and deferred state and local taxes (8195 million, which will increase by the end of 1975 by another $118 million), and an increase in current liabilities of 5185 million — a total of between $457 and $480 million, with $118 million more inevitable. So far as unsecured creditors — and equity holders — are concerned, one must The court said: “If, as some of the reports filed by the Trustees suggest, it is already clear that such a reorganization is not feasible, 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 the secured creditors or other interested parties insist upon such consideration. Since that statement was made, the Penn Central has been found, in the “120-day” decision, to be not reorganizable on an income basis within a reasonable time. J.A. p. 103. The court said: Under any view of the matter, it seems clear that the point of unconstitutionality 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." * Argument of May 6, 1974, on Motion of New Haven Trustee to Dismiss Section 77 Petition, Tr. 12, 284-12, 288. 32 add as much as $104 million in deferred mortgage and collateral bond interest, subject to the possibility that not all of these obligations are fully secured. And added to all that is the continuing — indeed escalating — physical erosion of the Penn Central rail plant.’ The court below, af- ter analysis of the evidence before it, concluded that the Penn Central estate between June 21, 1970 and the end of 1973 had sustained ordinary net losses in the amount of $851 million (J.A. p. 36). While there may be some offsets, as, for example, possible increases in Penn Central’s net equity in equipment as payments are made on certain equipment obligations, offsets are minor in comparison. The Government is in error in asserting that an alleged — and unquantified — appreciation in the value of non- rail assets can be considered in the offset category. This Court has made it clear that the public interest cannot com- pel the continuation of deficit rail operations even though non - carrier operations of the enterprise in question generated a profit that more than offset the carrier losses. Brooks-Scanlon Co. v. Railroad Comm'n of Louisiana, 251 U.S. 396 (1920). Moreover, using possible gains in the value of some assets to offset the erosion from rail losses would be unfair in Penn Central’s situation. The numerous classes of claimants to the Penn Central estate hold claims represen- ting quite different interests in different assets. For exam- ple, some of the secured creditors have liens primarily on rail assets while others have liens primarily on non-rail assets. Continued railroad losses take the property of claimants primarily entitled to payment from the rail assets See Report of Trustees dated April 3, 1974, Item 10, Joint Documentary Submission (J.D.S ). Ten copies of the Joint Documen- tary Submission, which supplements the Joint Appendix, have been lodged with the Clerk 33 while preventing claimants primarily entitled to payment from non-rail assets from collecting their debt. While each class of claimants is affected differently by a required con- tinuance of rail operations, the result is unfair to all claimants. The Government’s arguments based on appreciation of assets, both rail and non-rail, essentially amount to the con- tention that the creditors can be made to suffer the entire burden of inflation by being endlessly delayed from any satisfaction of their claims while the face amount thereof steadily declines in real value. If the creditors’ claims had been satisfied when due, or were satisfied today, they of course would be free to invest the proceeds in short-term or non-fixed-dollar-amount securities so as to avoid inflation losses, and also to obtain the higher rates of interest prevailing in an inflationary period. If the Government is correct that inflationary paper increases in asset value can cancel out erosion from income-statement losses (even though, on its theory, there is n> way the creditors can realize any asset value), then — if inflation is great and rapid enough — there is no erosion at all, and on the Government's theory the creditors can be forced to wait in- definitely, receiving nothing, while the value of their claims is effectively confiscated. We submit that no court could ac- cept so unconscionable a theory. Finally, all the Government's contentions as to methods com puting erosion, which we dispute, are beside the point. The Government has conceded in its brief to the Special Court there has been very substantial erosion, and nowhere denies that it will continue. And the Government stops short of contending that such erosion necessarily fails and will continue to fail to reach constitutional proportions. These concessions require, we submit, that the Court can- not find the Act constitutional unless it holds that, if 34 erosion has reached or reaches constitutional proportions, a Tucker Act remedy is available. The court below unanimously held 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 un- constitutional taking by continued loss operations is ripe for adjudication” (J. A. p. 40). That holding is plainly correct and requires that the statute be held un- constitutional unless a remedy for suci: erosion is provided. Since the Act requires continuation of losing rail operations wholly without regard to whether erosion has passed the point of unconstitutionality, it is necessarily unconstitu- tional (absent a Court of Claims remedy) whether the point of unconstitutionality has been passed already or whether that point will be reached in the future. A. Deficit Rail Operations May Not Con- stitutionally Be Required Without, at Least, the Assurance of Successful and Prompt Reorganization. The present situation in regard to the Penn Central is un- precedented only in terms of scale and public importance; it is by no means unprecedented in principle. In the words of Mr. Justice Holmes. II the [railroad] be taken to have granted to the public an interest in the use of the railroad, it may withdraw its grant by discontinuing the use when that use can be kept up only at a loss. Brooks-Scanlon Co. v. Railroad Comm'n of Louisiana, 251 U.S. 396, 399 (1920), cited with approval in Bullock v. Railroad Comm'n of Florida, 254 U.S. 513 (1921). In Railroad Comm'n of Texas v. Eastern Texas R.R., 264 U.S. 79 (1924), the Supreme Court again empha- sized the right to cease an operation which can only be 35 conducted at a loss: And if at any time it develops with reasonable certainty that future operation must be at a loss, the company may discontinue operation and get what it can out of the property by dismantling the road. To compel it to go on at a loss, or to give up the salvage value, would be to take its property without the just compensation which is a part of due process of law. 264 U.S. at 85. The doctrine of these cases was reaffirmed several times in the New Haven reorganization proceedings, wherein the courts concluded that the Constitution gave the New Haven the right to cease operation and to liquidate. See New York, N.H. & H.R.R. Bondholders’ Committee v. United States, 289 F. Supp. 418, 440-41 (S. D. N. V. 1968); In re New York, N.H. & H.R. R., 289 F. Supp. 451, 454, 459-60 (D. Conn. 1968). On remand the Interstate Commerce Commission argued that there was no constitutional right to compel liquidation of a railroad operating at a loss and that the Commission could require continued operation for as long as the public interest demanded. 334 I. C. C. 25 (1968). On further review both the reorganization court and the three- judge court rejected that argument and again recognized the constitutional rights of the New Haven creditors. See New York, N. H. & H.R.R. First Mortgage 4% Bond- holders’ Committee v. United States, 30S F. Supp. 1049, 1055 (S.D.N.Y. 1969); In re New York, N.H. & H.R.R., 304 F. Supp. 793, 801-04 (D. Conn. 1969). Judge Anderson's opinion was particularly emphatic: “This Court, therefore, concludes that Brooks-Scanion and subsequent cases, reaf- firming the validity of its holding, are still ap- plicable and determinative. The Commission is unable through a groundless construction of statutes, as noted above, to eliminate the constitutional guarantees applicable to this 36 case. And it may not arrogate to itself a vast expansion of power through a strained in- terpretation of Supreme Court decisions.” 304 F. Supp. at 804. This Court affirmed Judge Anderson's conclusions and or- der. New Haven Inclusion Cases, 399 U.S. 392, 489-95 (1970). Other cases have also acknowledge that Brooks-Scanion set forth the basic constitutional standard. See, e.g., In re Penn Central Transportation Co. (Columbus Option Appeals), 494 F.2d 270, 278-82 (3d Cir. 1974), petition for cert. filed, 42 U.S.L. Week 3633 (U.S. May 8, 1974), No. 73-1672; In re Cen- tral R.R. of New Jersey, 485 F.2d 208 (3d Cir. 1973); City of New York v. United States, 337 F. Supp. 150, 160 (E.D.N.Y. 1972); Brooklyn Eastern District Terminal v. United States, 302 F. Supp. 1095, 1099 (E.D.N.Y. 1969); Jay Street Connecting R.R. v. United States, 174 F. Supp. 609, 615(E.D.N.Y. 1959). Even when there may be some hope for a reorganization of the railroad which will restore it to viability, the prohibition against the taking of property without payment of just compensation limits the time during which operations at a loss may be required in the public interest. The rights of creditors may be invaded only for a reasonable time, New Haven Inciusion Cases, supra, 399 U.S. at 484-93; In re New York, N.H. & H.R.R., supra, 289 F. Supp. at 459, and even then only if there is solid prospect that within a reasonable time a reorganization will be ef- fected. In re Third Ave. Transit Corp., 198 F.2d 703 (2d Cir. 1952); In re New York, N.H. & H.R. R., 281 F. Supp. 65 (D. Conn. 1968). A “reasonable time, in such circumstances, must be determined in light of the particular facts of each 37 reorganization. See New Haven Inclusion Cases, supra, 399 U.S. at 490-93. In this connection, a review of the facts in the New Haven proceeding is instructive. Early in that proceeding, it became clear that the New Haven could not survive as an independent railroad, and that the only alter- native to liquidation was its inclusion in a larger rail system. In 1962 the New Haven petitioned for inclusion in the proposed merger of the New York Central and Penn- sylvania Railroads. The Trustees’ decision to seek inclu- sion was supported by the New Haven's creditors. The Commission authorized the merger of Penn and Central in 1966, but conditioned its order upon the inclusion of New Haven in the merged system. Inclusion did not, however, promptly occur. Extensive litigation over the price to be paid for New Haven's assets ensued. In 1967, after the New Haven's petition for in- clusion had been approved, two of the several active bond- holder groups filed a motion to dismiss the Section 77 proceeding. This motion the reorganization court denied in February, 1968, relying primarily on its hope that final ap- proval and implementation of the first step of the New Haven plan was near at hand. In re New York, N.H. 4 H.R. R.. 281 F. Supp. 65, 69 (D. Conn. 1968). The court's hope, however, was not realized. Both the reorganization court and the three-judge court reviewing the Commission's action approving inclusion found grounds for reversal. The result was that, only six months after it had denied the motion to dismiss, the reorganization court on its own motion ruled that if inclusion were not effected by year's end it would no longer permit the New Haven to continue its operations at a loss and would entertain a motion to dismiss the proceeding. In re New York VH. & H.R. R. 289 F. Supp. 451 (D. Conn. 1968): 38 This court finds that the continued erosion of the Debtor's estate from operational losses after the end of 1968 will clearly constitute a taking of the Debtor's property and con- sequently the interests of the bondholders, without just compensation. It is therefore constitutionally impermissible, and obviously no reorganization plan which calls for such a taking can be approved. Id. at 459. The reorganization court thus ruled that it must call a halt even though an ultimate solution was assured. The court’s drastic action produced results — the inclusion of New Haven in the Penn Central on December 31, 1968 — and subsequently was specifically approved by the Supreme Court in the New Haven Inclusion Cases, supra, 399 U.S. at 415. The New Haven precedent therefore establishes that railroad owners and creditors may be compelled to suffer erosion only if there is a feasible, assured means for reorganizing the railroad, and even then only if that reorganization is effected within a reasonable period. It is plain that the courts would never have tolerated erosion to the extent or for the length of time they did in New Haven if the inclusion remedy had not been available, and if the course pursued by the New Haven Trustees in seeking in- clusion had not had the consent and support of the New Haven’s creditors in the early years of the proceeding. In the present situation, the Government has relied in the Special Court on such cases as Continental Bank v. Chicago, RJ. 4 P. Ry. 294 U.S. 648 (1935), and Recon- struction Finance Corp. v. Denver & R.G.W.R.R., 328 U.S. 495 (1946), in arguing that the Act's failure to provide for erosion is constitutional. That reliance is wholly 39 misplaced In those cases it was unquestioned that the respective railroads were viable; indeed they had been earning net operating income during the reorganization proceedings, and no one contended that the fair market value of the properties was greater than their going- concern value, nor did anyone propose liquidation as in the best interests of the estate or even of any particular creditor. The problem in those early reorganizations, as is well known, was the scaling down of debt so that the level of fixed charges would be manageable in terms of the level of earnings; none of them presented problems or issues remotely comparable to those involved here. And, as we have seen, the New Haven litigation clearly establishes that, while some erosion is tolerable in certain circumstances, there is a point beyond which continued loss operations become unconstitutional if for the account of the estate. Whether that point has yet been reached with respect to the Penn Central, or when it will be reached, is not necessary to determine in this proceeding. But since no one can deny the possibility of unconstitutional erosion, a determination that any such erosion is not for the account of the estate but is compensable under the Tucker Act is essential to make it possible to hold the Act — which requires continuing erosion — constitutional. The Government will presumably argue, as it has argued in the Special Court, that the Act provides sufficient he issue in Continental Bank. which involved the customary Sec- tion 77 injunction against sales of collateral, arose at the very outset of the reorganization proceedin, and the injunction could at any time be dissolved upon application and proper notice and showing. 294 U.S. at 685. In Denver. the issue was whether erosion that had already oc- curred, apparently without objection, should be borne by senior or See pp. 54-SS, infra. 40 assurance of an ultimately successful reorganization, through the Conrail device, as to justify some continued erosion at the expense of the estate and its creditors. There are at least three answers. First, we think that, once the owners of the railroad’s estate squarely raise the issue and seek to exercise their rights, it is highly questionable whether continued loss operations may be required solely in the public interest without some form of compensation for the consequent erosion of their property. See New Haven Inclusion Cases, 399 U.S. at 402-93.“ Second, the Act provides no assurance of any successful reorganization at all, let alone within any definite time limit. (See p. 41, in- fra, n. 13.) Third, an analysis of the provisions and ob- jectives of the Act with respect to Conrail (pp. 57-61, infra) makes it dubious in the extreme that Conrail will ever produce income, let alone that it will be sufficiently profitable to pay dividends giving its stockholders — chiefly the present Penn Central creditors — any return remotely comparable to the fair value of the properties they would be forced to surrender. For these reasons, there is no con- stitutional basis on which loss operations can be required indefinitely at the expense of the estate. In New Haven, moreover, the estate was guaranteed the value of its properties as of December 31, 1966, a date prior to the first objection by any creditor. New Haven Inclusion Cases, 399 U.S. at 492. Thus the estate was wholly protected from any physical erosion caused by de- terioration of its properties. Absent a remedy in the Court of Claims, the Act fatally infringes the constitutional rules discussed above in re- quiring continued rail operations for an indefinite time without any provision compensating the estates in reor- ganization for the resulting erosion. The Government has argued in the Special Court that nothing in the Act precludes that court, in determining the compensation to be paid the bankrupt estates under Sec- tion 30Xc) of the Act, from making an allowance for any unconstitutional erosion that may have been suffered. That the Special Court could make such an award is by no means clear from the text of Section 30Xc), which is at least equally compatible with the construction that the court may allow only compensation for the value of the properties at the time of their conveyance. But even if the Govern- While time limits are specified in the Act for the steps up to and including the mandatory transfer of properties if either House of Congress does not disapprove the final system plan, there are no limitations whatever on how many plans Congress may disapprove, and no time limitation on USRA in preparing plans subsequent to disap- proval of the first such plan. Section 208. Thus, if either House disap- proves any aspect of the first plan submitted, the purportedly tight time schedule established by the Act collapses altogether, and the period for which Section 30S%f) requires loss operations to continue is without limit. Ihe legislative history is clear: the value of the consideration must equal the fair and equitable value of the rail properties as of the date of the conveyance,” and the court is required to return any excess in the amount of the consideration Regional Rail Reorganization Act of 1973, H.R. Rep. No. 93-260 of the Committee on Interstate and Foreign Commerce, p. 53(93d Cong. Ist Sess. 1973). 42 ment is right, the Special Court would be powerless to grant effective and adequate compensation for erosion, just as it would be powerless to award effective compensation for the value of the properties. As shown at pp. 56-61, infra, the Special Court is severely limited in the types and amount of compensation it can award, including, as a last resort, a judgment against Conrail which may well be worthless. Since the Special Court will have no power to enter a judg- ment against the United States, it is apparent that it will be powerless to award just compensation under the Fifth Amendment for any taking of property that may occur by virtue of the Act, whether with respect to interim erosion or otherwise. The Act affords no prospect for compensating the estate for the erosion which it has already suffered, and only con- jecturally can it mitigate even the continuing physical erosion of those properties inclusion of which in the final system plan can reasonably be anticipated. Section 213 of the Act provides authorization of $85 million to be made available to the Secretary of the Department of Tran- sportation for payment to trustees of railroads in reorganization of such sums as are necessary for the con- tinued provision of essential transportation services by such railroads. These funds, supplied to the Penn Central Trustees thus far in the amount of $20.6 million (J.D.S. Items 22, 31),'* represented emergency assistance to keep Penn Central in operation on a day-to-day basis, not to stem erosion.“ In any event, the amount authorized is obviously The second grant, approved April 30, 1974 C. D. S. Item 31), was in effect a drawing account for $18 million. The Trustees actually drew down $9.8 million. The Federal Railroad Administrator, to whom authority to make grants under Section 213 has been delegated by the Secretary of Tran- sportation (39 F.R. 8919), in response to a request for a Section 213 (continued) 43 inadequate, even if the full amount had been appropriated, which it has not. Section 215 authorizes the Secretary, with the approval of USRA, to enter into agreements with railroads in reorganization for the acquisition, improvement or main- tenance of property which will be included in the final system plan, to be financed by obligations of USRA in a maximum amount of $150 million, which must be assumed by Conrail when it comes into existence. Any values which are created by the use of these funds are to be deducted from the purchase price when the properties are conveyed to Conrail. These funds, depending on how they were used, could possibly arrest some of the physical erosion of the estate. However, they clearly are not available to com- pensate the estate for the interim financial erosion which has occurred and which is continuing.“ It should be added that, although the final grant agreement under Section 213 '* (continued) grant from the trustee of the Central Railroad of New Jersey to protect against further erosion of the estate. advised the trustee on May 10, 1974: In our opinion, the granting of financial assistance to protect against further erosion of the estate, is not in accordance with the pur- pose for which funds under Section 213 of the Act have been ap- propriated. (A copy of the letter is attached to this brief as Annex A.) Also, the conference report on the appropriation under Section 213 (H. Rep. No. 93-1070, 93d Cong., 2d Sess. p. 20) stated: The purpose of the cash assistance is to keep the bankrupt lines running until the final plan of the new system is drawn up and implemented. Ine Foreign Assistance and Related Programs Appropriation Act of 1974 (P.L. 93-240) appropriated $35 million. The Second Sup- plemental Appropriation Act of 1974 (P. L. 93-305) appropriated an ad- ditional $39.8 million, for a total which is $10.2 million less than the amount authorized. Capital improvements can ultimately affect losses by reducing ex- penses, but the lead time in making such improvements is such that any benefits would be of little or no immediate significance. 4a required Penn Central to submit proposals for the use of Section 215 funds by May 15, 1974 (Par. Ich), Item 15, J.D.S.), which was done, no Section 215 funds have yet been made available (by issuance and sale of USRA obligations), and no proposals under Section 215 for Penn Central properties have been approved. The Act, moreover, forbids, for all practical purposes, any mitigation of the interim erosion by way of terminating unprofitable operations. Congress made clear its intention in effect to freeze the level of operations existing on January 2, 1974, in order to give USRA the maximum amount of choice as to what would be in the final system plan. When it made grant funds available by Section 213 to keep the bankrupt railroads running during the planning period, it decreed 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.“ Again, in Section 304(f), it provided that after January 2, 1974, no railroad in reorganization may discon- tinue service or abandon any line of railroad other than in accordance with the provisions of this Act, unless it is authorized to do so by the Association [USRA] and unless no af- fected State or local or regional transpor- tation authority reasonably opposes such ac- tion. The Association has, thus far at least, not authorized any abandonments, and indeed does not appear to have established any policies to guide disposition of aban- donment requests. Items 64 and 65 of the Joint Documen- tary Submission are, respectively, the requests for ap- provals of abandonments which the Penn Central Trustees have submitted to USRA, aad the USRA response that it was, in effect, not yet ready to deal with them. 45 There are, moreover, questions of interpretation of the Act which have not yet been resolved. The apparent grant of authority to USRA to authorize abandonments under Section 304(f) may supersede the authority of the Interstate Commerce Commission under Section 1(18) of the In- terstate Commerce Act, or it may require that both the In- terstate Commerce Act and Section 3049 be complied with. Since USRA has not acted on any applications, the issue has not yet been litigated, as no doubt it will be. As is apparent from what has already been said, USRA has given no indication of the standards or policies it will apply in exercising its authority under Section 304(f). State, local and congressional sources have been adamant in the view that USRA should seldom, if ever, authorize any in- terim abandonments. When the second grant agreement under Section 213 between the Trustees and the Federal Railroad Administrator was shown to contain a provision requiring the Trustees to apply to USRA for permission to abandon a line whenever requested to do so by the Secretary of Transportation, it was vigorously criticized by Congressman Adams, who had been an active sponsor of the Act, as completely contrary to the intent of Congress in adopting Sections 213, 215 and 304(f) of the Act. He ad- ded: “*... our intention was to preserve the status quo or rail service in the Northeast during this critical time and to allow full public comment on abandonment procedures. A similar criticism of the provision in the grant agreement was made by Public Counsel of the Interstate Commerce Commission (Cong. Rec., May 14, 1974, p. S 7958). Prior to the Act, but subsequent to the filing of the petition under Section 77, the Penn Central Trustees had actively pursued a program of abandonments of un- A copy of Mr. Adams letter is attached to this brief as Annex B. 46 profitable lines, which they regarded as one of the four essential requisites of a successful reorganization. See e. g.. Trustees’ Report of July 1, 1972 C. D. S. Item 6). From June 21, 1970, to the end of 1973, the Interstate Commerce Commission had approved the abandonment of 1,511 miles of line.“ On January 3, 1974 — the date of enactment of the Act — applications to abandon 2,222 additional miles were pending before the Commission. There has been no action on any application since that date.“ The most serious erosion problem created by the Act is not the complete standstill it has imposed, at least so far, on applications for abandonment of particular rail lines whose unprofitability is undoubted. No one contends that Penn Central could be made profitable solely by abandonment of lightly used (in many cases unused) branch lines. The problem of viability is, rather, a problem of the Penn Cen- tral system as a whole; and the infirmity of the Act, absent a Tucker Act remedy, is that it requires continuation of that system’s operations during a lengthy, indeterminate planning process without a y assurance either of ultimate viability or of compensation to the estate for the erosion suffered in the meantime. If such compensation is not assured by a Tucker Act remedy, continuation of rail operations on the present basis cannot be sustained. Application to abandon some 90 miles were pending at the In- terstate Commerce Commission on June 20, 1970. It would be inaccurate to attribute the lack of ICC activity during the past seven months entirely to Section 304f). Since 1973 the Com- mission has been engaged in litigation concerning the procedures it must follow under the National Environmental Policy Act (42 U.S.C. § 4331). See Harlem Valley Transportation Ass'n v. Stafford. No. 73- 249%, 2d Cir. June 18, 1974. That problem has recently been resolved, and the Commission must now confront the question of what authority it has in the light of Section 304f). 47 The Government will doubtless argue that the Act provides sufficient prospects for a successful reorganization of Penn Central through conveyance of rail properties to Conrail, within a sufficiently short period of time, as to warrant a requirement that the Penn Central estate bear the burden of continuing erosion until the process can be completed. For the reasons already indicated, this argument represents a misinterpretation of the New Haven litigation and other applicable law. An additional defect in the argument is that, for the reasons set forth at pp. 57-61, infra, it is impossible to conclude at the present time that reorganization through the Conrail device has any reasonable prospects of success or viability. Conrail cannot presently be said to provide any prospect of a successful reorganization even remotely comparable to the assured in- clusion in the Penn Central system which was held to warrant, for a time, continued New Haven loss operations. Congress may never permit a Conrail system to come into existence at all; if it does permit it, the system may be hopelessly unviable from the outset; even if it is operationally viable, there is no assurance that the estates will be adequately compensated for the properties they would convey to it. Such shadowy, tentative and amorphous prospects can furnish no justification whatever for an in- definite compelled continuation of Penn Central rail ser- vice, which will result in the simple confiscation of the property of Penn Central and its creditors. 48 THE CONSTITUTIONAL ADEQUACY OF THE ACT’S PROVISIONS FOR COMPENSATION FOR THE PERMANENT TAKING CONTEMPLATED THEREBY IS RIPE FOR DECISION. The majority of the court below declined, on the ground of prematurity, to decide the question whether the Act in- fringes the Fifth Amendment on the ground that, absent a Tucker Act remedy, the Act does not assure to the Penn Central estate the just compensation which the Con- stitution requires for the ultimate mandatory conveyance of its property to Conrail. The majority held that a decision on this issue was premature because three contingencies would have to be satisfied before the conveyance could take place: (I) the ““180-day”’ decision with respect to Penn Cen- tral; (2) approval of the final system plan by Congress, and (3) an order by the Special Court directing that the con- veyance take place (J.A. p. 24). We think it clear, as did Judge Fullam (JA. pp. 57-60), that none of these con- tingencies makes decision of the issue presently premature. (1) The 180-Day Decision The 180-day decision has been made since the decision of the court below was entered. On July 1, 1974, the Penn Cen- tral Reorganization Court, after hearing pursuant to Sec- tion 207(b), found that the process of the Act was not fair and equitable to the Penn Central estate (J.A. p. 152). Essentially, the decision rested on the same constitutional objections to the adequacy of the compensation provided by the Act which are presented by the present cases before this Court. The issues dealt with in the Reorganization Court’s opinion — erosion, assurance that ultimate compensation will be adequate, and the Tucker Act remedy — are all squarely before this Court in the present litigation. — — — he 49 The Reorganization Court’s 180-day decision is now on appeal to the Special Court. The same issues are all pre- sented there. The Special Court’s decision, which is not appealable (Section 20%b)), will either irrevocably commit Penn Central to reorganizing under the Act or will ir- revocably withdraw Penn Central from operation of the Act. For this Court to decline decision of the ultimate- compensation issue would mean that the Special Court's crucial decision as to whether or not Penn Central will reorganize under the Act will necessarily be made without any authoritative decision by this Court of some of the critical constitutional questions which all parties agree must determine the Special Court’s disposition. For example, if the Special Court agrees with the Reorganization Court that the Act fails to provide the assurance of just compensation, and that no Tucker Act remedy is available, then the Penn Central will irrevocably be denied reorganization under the Act, even though the Special Court may be wrong. Unquestionabl there is a vital public interest in Penn Central’s reorganizing under the Act if that is constitutionally permissible. The Act itself affirms (Section 207(b)) the strong public interest in the continuance of rail transportation in the region pursuant to a system plan devised under the provisions of this Act. For this Court now to defer decision would mean that this vital public interest might be wholly frustrated because of an erroneous determination by a lower court that a remedy which saves the constitutionality of the Act does not exist. Conversely, if the Special Court holds that a Tucker Act remedy is available and that it saves the constitutionality of the Act, and therefore irrevocably commits the Penn Cen- tral to reorganization under the Act, it is possible that years later the Court of Claims or this Court — which of course would not be bound by a Special Court decision concerning Court of Claims jurisdiction — might determine that the 50 Special Court was wrong on that point and that no Tucker Act remedy is available. It would then be discovered that the Penn Central estate had been unconstitutionally deprived of its property — but the deed would have been irrevocably done long previously. Thus there is fully satisfied here the requirement that federal judicial power is to be exercised to strike down legislation . . . only at the instance of one who is himself im- mediately harmed, or immediately threatened with harm, by the challenged action.” Poe v. Ullman, 367 U.S. 497, 503-04 (1961). The Penn Central Trustees, whose interest is to reorganize under the Act if an adequate Tucker Act remedy exists, are threatened with a Special Court decision irrevocably excluding Penn Central from the Act on a ground which we believe erroneous: i. e., that there is no Tucker Act remedy to assure just compensation for a man- datory conveyance of property under the Act. And both the Trustees and the Penn Central creditor parties are faced with an unconstitutional confiscation of their property if the Special Court erroneously determines that the Act is fair and equitable even without a Tucker Act remedy, or if it holds that a Tucker Act remedy exists and on that basis irrevocably orders Penn Central reorganization under the Act, but it is later authoritatively held in other proceedings that a Tucker Act remedy does not exist. Under Section 207(b) of the Act, the Special Court must announce its decision by September 29, 1974, before these cases can be submitted to this Court. Of course, in the unlikely event that the Special Court were to exclude Penn Central from the Act without regard to the constitutional questions before this Court, or without allowing for ad- justments in its decision in the light of this Court’s sub- sequent action, the cases here could be mooted. No party in the Special Court is urging such a course of action. The 51 Penn Central Trustees are urging the Special Court to af- firm the Reorganization Court's 180-day decision, with a condition that if this Court subsequently affirms an adequate Tucker Act remedy it will amend its decision ac- cordingly. It surely is to be expected that, whatever the Special Court decides, its order will leave room for modification in the light of this Court's decision. We shall of course promptly inform this Court of the Special Court's action when that occurs. (2) Congressional “Approval” The majority below was apparently under the erroneous impression that the Act makes Congressional approval a prerequisite to effec veness of the final system plan (J.A. pp. 24, 2S), and such Congressional approval was one of the three contingencies which the majority held to make con- sideration of the mandatory-conveyance issue premature. In fact no Congressional approval is required by the Act. As Judge Fullam's opinion pointed out (J A. p. 57), under Sec- tion 20&a) the plan takes effect unless either House of Congress affirmatively acts to express disapproval. If Congress takes no action within 60 days, the plan becomes effective. No case that we know of has ever held that decision of a legal question is premature because that question might be mooted by some subsequent action of Congress. Moreover, as Judge Fullam also pointed out (J.A. pp. 57- 58), even if Congress disapproves a final system plan, USRA is subject to a continuing duty to present revised plans until one becomes effective through the absence of Congressional «ction to veto it. Thus the clear mandate of the Act is that a final system plan will become effective; and, since no one disputes that any final system plan under the Act must provide for the mandatory conveyance of Penn Central properties to Conrail, the adequacy-of- $2 compensation issue is not premature, regardless of whether it is the first plan or a subsequent one which becomes ef- fective. The majority below might have had a point if the con- stitutional issue here presented depended in some way on the content of the final system plan which eventually becomes effective. But there is no such dependence. Because of the provisions of the Act limiting com- pensation, any final system plan must necessarily fail to provide the assurance of just compensation which is essen- tial, absent a Tucker Act remedy, to make the Act con- stitutional. (3) The Mandatory Nature of the Conveyance The third “contingency” offered by the majority below to avoid decision is the order of the Special Court under Sec- tion 30XbX1) requiring conveyance of Penn Central proper- ty to Conrail. The majority may have believed, though it nowhere stated, that the Special Court would have discretion to refuse to order the conveyance if it believed there was some problem with the adequacy of the con- sideration. We think it quite clear, as did Judge Fullam J. A. p. 58), that the Special Court’s action under Section Jbl) is mandatory and ministerial, and thus cannot be regarded as a contingency. While the Special Court is granted, by Section 20%b), the powers of a district judge in Section 77 proceedings — in- cluding those of a reorganization court, which would ap- pear to afford it general equity powers — the Act expressly states that the special court shall . . order the transfer. Although such words are not always given a mandatory meaning when adressed to a court of equity, Hecht Co. v. Bowles, 321 U.S. 321 (1944), there are other strong in- dications in the Act that Congress intended that the Special —— —— ö¶ 6—J—ᷓ—ꝓ—ũ—i — — $3 Court would be performing, at that stage, no more than a ministerial act. The Act sets up specific, tight time schedules obviously designed to bring Conrail to operating status as quickly as possible. This purpose is emphasized by the last sentence of Section 30XbX2): Such conveyance [by the Special Court] shall not be restrained or enjoined by any court. A decision by the Special Court to accomplish what all other courts are forbidden to do by refusing to order the transfer, once the process of the Act had reached that point, would not only cause delay, but would leave the whole process up in the air. There is no provision in the Act for appellate review, by this Court or a Court of Appeals, of such a decision of the Special Court; this strongly indicates that ordering the transfer was intended as a ministerial act, since all other initial decisions by the Special Court were made subject to judicial review. Nor is there any provision in the Act by which to revise the final system plan at that stage, as there is if it is initially rejected by Congress (Sec- tion 20&b)). Moreover, because the time is so short (10 days), the Special Court would have to act on its own motion or have, at most, a summary proceeding prior to taking any such action. (If the Special Court could refuse to order the transfer, the erosion problem would become even more aggravated, since the erosion would be incurred without any assurance of light at the end of the tunnel in the form of a man- datory transfer for which at least some compensation would be due.) Even if the Special Court had some discretion in ordering the conveyance — which under the Act it plainly does not have — it is undisputed that its action is not subject to review in this or any other court. If, therefore, the Special Court is to have any guidance from this Court on the con- stitutional issues which would be before it in the highly unlikely event it determined that it had discretion, that 54 guidance must come in a decision of the present cases. If that guidance is not given, the same dilemma, desired by no one, would exist as will exist if the Special Court must act now in the absence of a decision here: it would have to in- clude Penn Central under the Act, or alternatively to ex- clude it, on constitutional grounds on which its opinion might well be wrong, with no opportunity for anyone to find out whether it was wrong or not. Such a result would irretrievably injure the parties, and would do violence to the public interest as well. IV. THE ACT'S PROVISIONS REGARDING COMPENSA- TION FAIL TO ASSURE THAT FIFTH AMENDMENT STANDARDS WILL BE SATISFIED. The provisions of the Act dealing with the consideration which would be received by the Penn Central estate — ab- sent a Tucker Act remedy — for the rail properties it would be required to transfer to Conrail must be assessed against the body of law which establishes that when properties of a railroad in reorganization are transferred by Government decree to a new owner, free and clear of liens and claims of the former owner, the Fifth Amendment fixes a minimum to the amount of consideration the owners must receive. In- deed, Section 30XcK1XB) recognizes that the Constitution sets a minimum in such circumstances. No one denies that a constitutional minimum exists, though there are disagreements as to its definition. But however the con- stitutional minimum is defined (with one exception, see p. 60, infra), it is clear that the Act fails to assure that it will be met. We believe that the constitutional minimum is the fair market value” of the properties in question, free of any “This term is more satisfactory than the often-used liquidation value. because the latter is sometimes improperly read as recognizing (continued) — on 55 obligation of continued railroad use. See New Haven In- clusion Cases, 399 U.S. 392, 489-495 (1970); In re Penn Central Transportation Co., 372 F. Supp. 1123 (E.D. Pa. 1974); New York, N.H. & H.R.R. First Mortgage 4% Bond- holders’ Committee v. United States, 305 F. Supp. 1049 (S.D.N.Y. 1969); In re New York, NH. 4 H.R. R. 304 F. Supp. 793, 798-804 (D. Conn. 1969); In re New York, N.H. & H.R.R., 289 F. Supp. 451, 454-455, 459-460 (D. Conn. 1968); New York, N.H. & H.R.R. First Mortgage 4% Bond- holders’ Committee v. United States, 289 F. Supp. 418, 440-441 (S.D.N.Y. 1968). Fair market value is the constitutional minimum be- cause, as these and other cases have established, if a rail- road has neither earnings nor the reasonable prospect of earnings, its owners have a constitutional right to withdraw their property from operation by them as a railroad and to realize the value obtainable from its sale. See also Railroad Comm'n of Texas v. Eastern Texas R.R., 264 U.S. 79 (1924); Bullock v. Railroad Comm'n of Florida, 254 U.S. 513 (1921); Brooks-Scanion Co. v. Railroad Comm'n of Louisiana, 251 U.S. 396 (1920); In re Penn Central Trans- portation Co. (Columbus Option Appeals), 494 F.2d 270 (3d Cir. 1974), petition for cert. filed, 42 U.S.L. Week 3633 (U.S. May 8, 1974), No. 73-1672; In re Central R. R. of New Jersey, 485 F.2d 208 (3d Cir. 1973); City of New York, v. * (continued) only values for non-rail uses. To the extent that the highest and best values of particular rail properties of the estate may be for continued rail use in the hands of others, the estate is plainly entitled to those values in the event of a per-parcel sale (“liquidation”) or a con- stitutional substitute therefor. This is true whether the value is created by prospective profitability of those properties in the hands of others or by a demand for reasons other than profitability, such as a public- interest need determining offers by public bodies. 56 United States, 337 F. Supp. 150, 160 (E.D.N.Y. 1972); Jay Street Connecting R.R. v. United States, 174 F. Supp. 609, 615 (E.D.N.Y. 1959); In re Port Authority Trans-Hudson Corp., 20 N.Y.2d 457, 285 N.Y. Supp. 2d 24, cert. denied sub nom. Port Authority Trans-Hudson v. Hudson Rapid Tubes Corp., 390 U.S. 1002 (1968) The provisions of the Act fail to assure that the owners of the Penn Central estate will receive the constitutional minimum value of the rail properties which it would be required to convey to Conrail.”” The Penn Central estate would receive stock and perhaps other securities of Conrail and possibly, if the final system plan so provided, some share of the $500 million of Government-guaranteed obligations of USRA which Conrail can acquire, pre- sumably by mortgaging its properties as security. (It is possible, however, that little or none of the $500 million may be available, since it may be allocated towards com- pensating non-bankrupt lesssor railroads which are not subject to the Act and whose property may concededly not „Such tentative information as to the value of the Penn Central estate as is presently available is referred to in Items 4 (pp. 11-13), 40 and 58, Joint Documentary Submission (J.D.S.). The studies there treated are in the process of further analysis and refinement. No estimate of the value of the estate is relevant to disposition of the present litigation, because (1) no one knows how much of that estate would be taken by Conrail; (2) no one knows the amount, nature or value of the consideration that will be made available; therefore there is nothing against which to measure the value of whatever properties would be taken. Neither is any such estimate relevant to the erosion question: even if the value of the estate should be found to exceed the sum of all claims against it, the stockholders’ equity would be suffering erosion, and their rights with respect to erosion are no less than those of creditors. See, g Brooks-Scanion Co. v. Railroad Comm'n of Louisiana, supra. 57 be taken pursuant to the eminent-domain power without payment in cash or cash equivalent.“ It is a fair inference that the Act contemplates, and that the final system plan will provide, that most of the con- sideration is to be in the form of Conrail common stock. Section 206(i) instructs USRA to “minimize any actual or potential debt burden” on Conrail. But there can be no assurance that any substantial value can be ascribed to Conrail common. Its worth will depend entirely on the earning power prospects of Conrail, which will, in turn, depend on a wide variety of factors, including the many decisions which must be made by USRA in constructing the final system plan and the extent to which those decisions will be acceptable to Congress. Indeed, the goals which are to be achieved in the final system plan are not easily made compatible. By Section 206(aX1) the system is to be “financially self-sustaining,” yet by Section 206(aX2) it is also to be adequate to meet the rail transportation needs and service requirements of the region. By Section 206(aXS5) it is to provide for reten- tion and promotion of competition in the provision of rail and other ion services in the region. and by Section 206(aX8) it is to minimize job losses and associated increases in unemployment and community benefit costs in areas of the region presently served by rail service. The inherent conflict between the goal of financial self- sufficiency and the other goals is well illustrated by the divergent approaches taken by the Department of Tran- sportation in its Report pursuant to Section 204a) (J. D. S. At a pre-trial hearing in the Special Court, counsel for the Govern- ment conceded that, in requiring conveyances from non-vankrupt lessor railroads to Conrail, the Government would be exercising 58 Item 62) and by the ICC’s Rail Services Planning Office in its Report pursuant to Section 20SaX1) (J.D.S. Item 63). The latter reflects the same public pressure for retention of even unprofitable rail services that will be felt in Congress when that body considers a USRA plan. In any event, given these disparate criteria, the political bodies which must make the final decisions on Conrail may design a rail system with some prospects for viability — though predictions as to earning power of a to-be-created system are fraught with difficulty ** — or they may go far in the direction of rendering the system unviable as a profit- making entity in order to meet the demands of com- munities and industries for continued rail service.“ Depen- ding on the totality of the choices made by political bodies influenced by non-financial considerations, the equity securities of Conrail may be worth little or nothing. No one knows, or can even make a responsible guess, as to the size or configuration of the final system which Conrail will acquire. No one knows the extent to which USRA will be required, by the pressures which are so evident in the hearings held by the Rail Planning Office of the ICC,”’ to enlarge the system to a point where its viability vill be precarious and its common stock virtually or entirely **When the Pennsylvania and New York Central railroads were merged in 1968, the courts believed that the merger would produce benefits of more than $80,000,000 annually. New Haven Inclusion Cases, 399 U.S. at 400. A little over two years later, Penn Central was in bankruptcy. That some unprofitable branch lines may be continued by way of the subsidy provisions of Sections 401 and 402 will reduce only slightly the pressure to include them in the Conrail system. The subsidies require local funds, and the Federal support is assured for only two years. Section 402(f). ee the Report of the Office (J. D. S. Item 63), passim. — 59 worthless. While there are strong indications that Conrail will not be viable, the assumptions as to the size and con- firguration of the final system on which that estimate rests may or may not be accurate; no one can tell. Moreover, as the Reorganization Court pointed out (J.A. pp. 137-39), no one knows what standard of valuation will be applied to the rail properties to be acquired by Conrail, which may be decided by the Supreme Court sometime in the future to have been so wide of the mark as (because of the resulting judgment against Conrail) to destroy the assumed viability of Conrail entirely.“ Similarly, no one knows how USRA will value Conrail’s stock, and other securities, or indeed what securities it will authorize. USRA's decision as to what Conrail and USRA securities should be authorized is apparently not subject to any judicial review, since Section 30HXcX2KXB) provides that the Special Court is limited, in its allocation of such securities among the estates in reorganization, to securities designated in the final system plan.” The Reorganization Court’s opinion points up another major uncertainty as to the value of Conrail stock. Both the legislative history of the Act and arguments before that court by Government counsel suggest that USRA may proceed on the assumption that the value of the Conrail common stock — i.e., the capitalized value of its prospec- tive earnings — necessarily and automatically establishes the value of the rail assets conveyed to Conrail. If that is in error, as we believe it is“ and this Court ultimately so Ihe heart of ... a determination jof the validity of a plan of reorganization] is a finding of fact . . as to the value of the debtor's property. New Haven Inclusion Cases, 399 [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%3A03. Public record. Not legal advice.