Brief for Appellee — Robert W. Blanchette et al., v. Connecticut General Insurance Corp.

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—

In The Supreme Court of the Anited States

(HM TOBER TERM. 1974

NGT MKI REOROEANIZATION CASES

LNITED STATES OF AMERICA. of a \ppellants

COONNEC TICL TL GENERAL INS) CORP ia \ppellees

(No. 74-168

UNITED STATES RAILWAY ASSOCIATION. Appethan

CONNECTICUT GENERAL INS. CORP. of w Appellees

iNeo 74 lt)

ROBERT MN BLANCHETIE. RICHARD €. BOND ond

JOHN HH. MeAR THUR, as Trustees of the Properts of

Penn Central | ransportation ¢ ompany, Debtor, Appellants

CONNEC TICL | CGCENERAL INS. CORP t al \ppellees

(No. 74-165)

ON APPEALS FROM THE UNTIED STATES

IMSERICT COURT FOR THE FASTERN

IHSTRICT OF PENNSYIDANGA

BRIEF OF THE NEW HAVEN

TRUSTEE, AS APPELLEE

OF Counsel ten Mens

225 Franklin Street

Re fon Nee „5

6577

MORRIS Ki

CHARLES W. Momse, e

SULLIVAN & WORCESTER

225 Franklin Street

Boston, Masvachuwtt

Kurts Wt ere

54 Meadow Street

*. Haven, Connectu ul

nm 0%

Ih few Appell

Ruhard ] (¢ Smooth. lrudes

| the Property of the Ne dort

*. 0 i rH and A has

Campany, Debtor

91 401

Page

. (iv)

Constitutional Provisions and Statutes Involved |. 3

Counter-Statement of Questions Presented ...... 5

Counter-Statememt of the Case ................ 6

Summary of Argument 20

Argument:

|. THERE IS NO “ADEQUATE REMEDY

AT LAW” TO ASSURE PENSATION

FOR THE TAKING OF PENN CEN.

TRAL'S RAIL PROPERTIES CAUSED BY

IMPLEMENTATION OF THE RRRA __.. 25

A. Congress Has Not Provided for Just Com-

pensation for the pag TY Private Prop-

erty Mandated by the RRRA ........... 30

B. There Is No Original Jurisdiction in the

§2284 Cour to Enter a — ey .

mem that, if Implementation Mag

E. NA

in the Court of Claims ........ 33

D. The Doctrine of Remedy «a

Law Requires that t New Haven

Trustee Have an I Cause of

Action Against the United States Under

the Theory of the Armstrong Decision. 65

E.A Deficiency Judgment Against the

United States for a Shor Fall in Con-

sideration Would Not Guarantee Receipt

of Just Compensation or Constitute an

Adequate Remedy at Law, Particularly

Where There Is Assurance that Con-

gress Would A vate the Funds Nec-

essary to Pay a —— of the Coun of

Clai

————— ũ ˖m

Il. THE COURT BELOW WAS CORRECT

IN HOLDING THAT THE RRRA COM.

PELS PENN CENTRAL TO CONTINUE

RAIL OPERATIONS PAST THE POINT

OF UNCONSTITUTIONAL EROSION,

AND IN ISSUING AN INJUNCTION

AGAINST f) AS APPLIED TO Dis.

CONTINUANCE OF RAIL SERVICE

AND THE CERTIFICATION OF A FI.

NAL SYSTEM PLAN UNDER §20%c) ....

A. This Court's Decisions, as Interpreted

and by the Third Circuit in the

Option Case, Govern the In-

reer eee eee

Grande Cases Do Not Furnish Suppor

107

ee es

Appendix: Letter dated November 14, 1973

Brinega to Senators Magno snd ot

to -

ton relative to “Senate Working Paper

—— ——U—UAU—ͤ :

119

A-l

TABLE OF CITATIONS

Cases:

Aimota Farmers Elevater & Warehouse Co. v.

U' mted States, 409 U.S. 470 %%% „

Aptheker v. Secretary of State, 378 US. 500

Armstrong v. Unded States, WA US. 40 (1960) .

Assocration of Data Processang Service Or-

gamzations v. Camp, 997 U.S. 150 (1970) ..

Baker v. Carr, 69 U.S. 186 (1962)...

Baltimore S Olio RN ( mted States, Ae US.

A —˙ TE AD GF RS TEFL SR

Brooks-Scanlton Co. v. Railroad Commiuson, 251

r WAA LILLE I

Bullock H Commission of Flonda, 254 US.

. ———

Caw vo laA

US. 10601 © enéhnwetensedbbesdessees

Catlin v. United States, 324 U.S. 229 (1945) ...

Central Railroad Co. of New Jersey _v. Manu-

facturers Hanover Trust Co, 421 F. 2d 004

(3d Cir.) cert. demed, 398 U.S. 947 (1970) ..

Clark v. Uchersee Finanz Korporation, 332 U.S.

PD: eee

Consolidated Rock Products Co. v. DuBow, 312

Ce GOW GHGS cceccccccecvccccccceceses

Continental Ill. Nat. Bank v. Chicago, RA. C Pac.

Ry, 294 US. 647 (19385) .... 6.0... es.

Dugan v. Rank, 372 U.S. 609 (066)

E S.S. Corp. v. United States, 372 F. 2d

“thor . CL 1967) de

Epperson v. Arkansas, 393 U.S. 97 (1968) .....

Federal Power Commission v. Hope Natural Gas

Co, 320 U.S. 591 (1944) .. 0.

Flast v. Cohen, 392 U.S. 83 (1960)

Fort Berthold Reservation v. Umted States, 990 F.

2d 686 (Cr. Cl. 1960)

105-06

21, 64, 65,

—

Glidden Co. v. Zdanok, US. 590 (1962

Goldberg v. Damels, 231 US. 218 (1913)... ..

Goltra v. Weeks, 271 U.S. 536 (1% %/f ũꝗBrtI

Hooe v. Umted States, 218 U.S. 322 (1910

Hurley v. Kincaid, 285 US. 95 (1932) ........

In ve Boston Y Maine Corp, 484 F 2d 369 (ist

.. <neaccncuseocesswecess

In ve Boston Y Mame Corp. D. Mass. No. 70-

250 M. May 2, 1974) ©... 66 cnn

In ve City of New York (Fifth Avenue Coach

Lines), 18 N.Y. 2d 212, 219 NE. 2d 410,

dismissed sub. nom. Fifth Avenue Coach

— City of New York, 386 U.S. 778

In ve New York, NH. S HAR, 378 F. 2d 635

eee eee

In ve New York, NIL. HRA. (Order No. 441),

281 F Supp. 65 (D. Conn. 1968) .........

In ve New York, NH. S&S HRA. (Decenon on Re-

orgamzation Plan), 289 F. Supp. 451 (D.

11 K— 666s

In ve New York, NH. & HRR. buten on

Price to be Paid Debtor's Assets), YOA F

793, 304 F. Supp. 1136 (D. Conn.

In ve Penn Central Transportation Co. (Columbus

Appeals), 494 F. 2d 270 (3d Cir.

1974), petition for cert. filed, 42 US.L.W.

3633 (May 8. 16300 No! 75-1672 ———

In ve Penn Central Tra on Co. (Order No.

124), 325 F. Supp. 302 (ED. Pa. 1971)

In ve Penn Central Transportation Co. (Opimon

in Support 7 Order No. 830 ve © consist

Dispute), 347 F. Supp. 1356 (E. D. Pa. 1972)

In re Penn Central Tra ion Co. (Order No.

1137), 355 F. Supp. (sas (E.D. Pa. 1973) .

In re Penn Central Tra jon Co. (Order No.

1189), 358 F. Supp. 54 (EL. D. Pa. 1973) ..

Page

29, 34, 72-73

In re Port A ity Trans-Hudson Corp., 20

N.Y. 2d 457, 231 N.E. 2d 743, cert. demed

sub nom. Port Authority Trans-Hudson 1

— 1 Rapid Tubes Corp, 390 US. 1

...es

In re Third Avenue Transit Corp, 198 F. 2d 703

GG, GED 6c ccccccccvccecdsessccedec

Ivanhoe Irngation District v. McCraken, 357 U.S.

D —

Jacobs v. United States, 290 U.S. 13 (19333

Land v. Dollar, 330 U.S. 731 (1947) .........

Land v. Dollar, 184 F. 2d 245 (D.C. Cir. 1950)

Larson v. Domestic & Foreign Commerce Corp.,

$37 U.S. 682 (1909000) cee cece eens

Louisville Joint Stock Land Bank v. Radford, 295

Lynch v. United States, 292 U.S. 571 (1934) ...

Malone v. Bowdoin, 369 U.S. 643 (1962) ......

Mine Safety Appliances Co. v. Forrestal, 326 U.S.

2 ——

Mitchell v. Unated States, 287 U.S. 341 (1925) .

New Haven Inclusion Cases 399 U.S. 392

EEA 0

Northern Pacific Ry. v. Boyd, 228 U.S. 482

enen ese

Olsen v. Umited States, 292 U.S. 246 (1934) ....

Penn Central Merger Cases, 389 U.S. 486

neee des deset

Pewee Coal Co. v. Umited States, 341 U.S. 114

...es eee eee see

...alle eee eee

Pocono Pines Assembly Hotels Co. v. United States,

eee cédectces

Poe v. Uliman, 367 U.S. 497 (1961)

Railroad Commission v. Eastern Texas R.R., 264

Ss eT ED

54, 56, 57,

21 et passim

33, 75

57-59, 61

104

— —

„

vil

Reconstruction | mance Corp. v. Denver RU

R.R, 328 US. 495 (0 DP tbc seeds deat

Reesde v. Walker, 52 US. (11 How.) 271

„„ cbeeboceviccccccd cckscvcces

Roe v. Wade, 367 U.S. 497 (1961)

Silesian American Corp. v. Clark, 332 U.S. 469

D oö

Tempel v. United States, 248 U.S. 121 (1918) ..

United States v. Ansoma Brass S Copper (o. 218

eee. .

U' nited States v. Candelana, 271 U.S. 432 (1926)

ee |

United States v. Candelana, 16 F. 2d 559 (8th

e alt oth nde dees ot

United States v. Causby, 328 U.S. 256 (1946) ..

United States v. Dickinson, 331 U.S. 745 (1947)

United States v. Dollar, 196 F. 2d 551 (h Cir.

eee eee ee

U' nated States v. Fruchauf, 365 U.S. 146 (1961)

United States v. King, 395 U.S. 1 (1969) ......

U mated States v. Lee, 106 U.S. 196 (18827

United States v. National Dairy Products Corp.,

SIS UB. BO CUBED on ccccsccccccccsccces

U' nated States v. Nixon, 42 U.S.L.W. 5237 (U.S.,

EES CEE 62:00 pccscdeadbsceteotooucs

United States v. North Amerwan Transp. & Trad-

ing Co, 253 U.S. 330 (1920) .............

United States v. Raines, 362 U.S. 17 (1960) ....

United States v. Reynolds, 397 U.S. 14 (1970) ..

United States v. Sherwood, 312 U.S. 584 (1941)

United States v. Umted Mineworkers, 330 US.

D eo eee Relea eae ald 2 a

United States v. Zazove, 334 U.S. 617 (1948) ..

Vanhorne’s Lessee v. Dorrance, 2 U.S. (2 Dall.)

304 (Circuit Court Pa. 1795)

Yazoo © Mississippi Valley RR. v. Jackson Vin-

egar Co, 226 (Ps, 217 (1912) 17 3

Yea „ WA. Ross Construction Co, 309 U.S.

e eee

You Sheet & Tube Co. v. Sawyer, 343

ee.

29. 73. 74

104

27, 48, 49, 50

26 ef passim

26 1 passim

56, 57, 61

105

26 et passim

63-64

105

26, 42, 55

20 et passim

viii

ADMINISTRATIVE DECISIONS:

New York, NH. & HRRK, Second Supple-

mental Report, 331 LC.C. 643 (Nov. 16,

— 00 —— 4

Pennsylvama RR - Neu York Central RR. Re-

on 327 CC. 47

— — 88

Penn 1 2 Co. Reorganization,

zation Plans, Finance

— No. 26241 (Sept. 28, 1973) 8

CONSTITUTIONAL PROVISIONS AND STATUTES:

Constitution of the United States:

Article I. Sec. 8, Cl. 3 (Commerce Clause) . 3

Article I, Sec. 8, Cl. 4 (Bankruptcy Clause) 3. 11

rr 3 et passim

r V (Due Process and Takings

F ˙ ails a helm ore 3 et passim

Statutes:

Aa to Establish Indian Claims Commis-

sion, August 13, 1946, §24: 60 Stat.

„„. 54

Act of June 1, 1910; 36 Stat. 455 54

Bankruptcy Act:

Section 77, 11 U.S.C. §205:

rr 2

7200 C 47

„„

re 23 107

E Rail Service Act

"Usc. 662 SS 80-81

Interstate Commerce Act, 49 U.S.C. §§1 et seq:

EE ee eee ee 107

Judicial Code, 28 U.S.C.

n 4

ee es

—U —— — U

— ——— ee

Railway Labor Act, 45 U.S.C. §§151 ef seq. .

Rail ization Act of 1973,

Law 93-239, 87 Stat. 985, 45

U.S.C. §§701 et seq:

——* „„ „„ „ „ „ „ „ „ „„ eee

‚—G— ener * * eee

——— * *ũ 2233

—ͤ—ͤ— j ee ee ee

‚G—ͤ— A ũ ͤũͤũ*„mun„ * 0 * * ee

‚— UUUUU Uh ˖ 33

‚—UU — c 33333333333333333õ333333Võ᷑ꝛéumß

— —*ũ—·»k„ „„ „„ „„ „„ „„ „„ „ „

ee „„ „„ „„ „„ „ „ „ ee ee

‚G—ͤ—ͤ—U ***

—＋*ũõ“¹1VuIlI „„

‚— UU)d k 553

‚G—ͤ— Æ h

9 595 2ũ53?ÿ—“zwꝛ „ „ „ „ „ „„ „„

— 3 „*

Joint Resolution No. 59, Public Law

93-5, 87 Stat. 5 (Feb. 9, 1973) .........

Title 31, U.S.C:

Trading with the Enemy ct. 50 U.S.C.

App. §§1 ef seq:

LEGISLATIVE MATERIALS:

119 Rec $ 23783-4 (daily ed. Dec. 21,

1973) tRemarks of Sen. Hartke)

119 Rec. H 11876 (daily ed. Dec. 20,

1973 Colloquy bet Adams and

Kuykendall 3 1

120 — 8 meget ed. Sept. 16,

1974) (Introduction of S. to amend

Regional Rail Reorganization Act of 1973)

4, 27, 29, 72

27 et passim

49-50

46-47, 53, 66

18, 42

110

MISCELLANEOUS:

Letter dated Nov. 14, 1973 from Secretary of

Transportation Brinegar to Senators M -

nuson and Cotton, and attachments

Note, Takings and the Public Interest in Railroad

Reorgamzations, 82 Yale L. J. 1004 (1973)

Note, The Court of Claims: Judicial Power and

— — Review, 46 Harv. L. Rev. 677

Staff Report of the Securities and exchange

Commission to the Special Suixcommittee

on — of the House Committee

on Interstate oreign Commerce, The

Financial Collapse of the Penn Central Com-

pany (August, 1973) eee 5 esse ery

* 1 ＋ Seizure Case, House Doc. No. 534

azmgress, 2d Sess.) (U.S. Gov’ nt -

ing Office, 1952) —

——

——̃ 2 2

43, 62-63

— —ABᷣ— — —U

In The

Supreme Court of the United States

OCTOBER TERM, 1974

Nos. 74-165; 74-167; 74-168

REGIONAL RAIL REORGANIZATION CASES

UNITED STATES OF AMERICA, et al, Appellants

CONNECTICUT GENERAL INS. CORP. ¢f al, Appellees

(No. 74-168)

UNITED STATES RAILWAY ASSOCIATION, Appellant

CONNECTICUT GENERAL INS. CORP., , Appellees

(No. 74-167)

ROBERT MN BLANCHETTE, RICHARD C. BOND and

JOHN H. McARTHUR, as Trustees of the Property of

Penn Central Transportation Company, Debtor, Appellants

CONNECTICUT GENERAL INS. CORP., et al, Appellees

(No. 74-165)

ON APPEALS FROM THE

UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

BRIEF OF THE NEW HAVEN TRUSTEE,

AS APPELLEE

This brief is submitted on behalf of Appellee Rich-

ard Joyce Smith, Trustee of the Property of The New

York, New Haven and Hartford Railroad Company,

Debtor (the “New Haven Trustee” and “New Haven,”

respectively). Since July, 1961, the New Haven has

been in reorganization under §77 of the Bankruptcy

Act, II U.S.C. §205, United States District Court for

the District of Connecticut, No. 30226. However, since

December 31, 1968, New Haven's former railroad has

been operated by Penn Central Transportation Com-

pany (“Penn Central”), pursuant to the inclusion ap-

proved by this Court in New Haven Inclusion Cases, 399

U.S. 392 (1970). The Court (399 U.S. at 483-89) de-

clared that the New Haven Reorganization Court (An-

derson, J.) was correct in concluding that a plan which

allowed payment of a portion of the purchase price

for New Haven’s assets in the form of common stock

of Penn Central valued at a price of $87.50 per share

was not fair and equitable; stated that Judge An-

derson’s solution to this problem, a provision whereby

Penn Central would be required to “underwrite” the

$87.50 value of the 950,000 shares, was conceptually

sound but had become “unrealistic” by virtue of Penn

Central having filed for reorganization some eight

days prior to the Court's decision; and accordingly re-

manded the case to the Interstate Commerce Commis-

sion (“ICC”) and the appropriate federal courts for

further proceedings in accordance with its opinion.

The New Haven Trustee takes the position that the

only reasonable interpretation of the Court's opinion is

that the New Haven estate is to be treated as having a

secured claim as to the full unpaid amount of the pur-

chase price of the assets conveyed on December 31,

1968, secured by such assets. The issues on the re-

mand have yet to be adjudicated.' The New Haven

Trustee is presently owed $123,809,404 by Penn Cen-

tral, exclusive of interest, out of a total purchase price,

approved by this Court in the New Haven Inclusion

Cases, of $174,635,899. The New Haven Trustee's

standing in this case is predicated upon his unpaid se-

cured claim for the balance of the purchase price for

the assets conveyed to Penn Central on December 31,

1968.

The New Haven Trustee, together with other ap-

pellees here, prevailed in the court below as to certain

‘See New Haven Trustee's Brief as Cross-Appellant (in No. 74-166),

dated August 28, 1974, at 81-82, n. 76, for a discussion of the pro-

cedural history of the remand issue in the ICC and the federal courts.

of the constitutional questions presented for decision.’

The New Haven Trustee's present brief as Appellee is

in support of those portions of the order below which

enjoined the United States and USRA from enforcing

certain provisions of the Regional Rail Reorganization

Act of 1973.

CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVED

These cases involve the following constitutional

provisions and statutes:

United States Constitution:

Article 1, Section 8, Clauses 3 (Commerce

Clause) and 4 (Bankruptcy Clause)

Article I. Section 9, Clause 7 |

Fifth Amendment (Due Process and Takings

Clauses)

Pertinent extracts of the foregoing provisions are

set forth in Appellants’ briefs, except for Article I, Sec-

tion 9, Clause 7, which reads in pertinent part as

follows:

The appellants and their briefs to which this is addressed are as

1. United States Railway Association (“USRA™), Appellant in No. 74-

167, brief dated August 28, 1974,

2. United States of America, A al (“United States”), Appellants in

No. 74-168 (includes appeals filed by the United States, the 1OC, the

Chairman of the I and the Secretary of the Treasury), bref dated

August, ; and

. om W. Blanchette, Richard ( Bond and John H. McArthur,

as Trustees of Penn Central (“Penn Central Trustees”), Appellants in

No. 74-165, brief dated August 23, 1974.

;

eas in his Amicus Cunae Brief and Motion for Leave to

— 1974. The New Haven Trustee

„ cross-appeal (No. 74-166) ts from so

much of the order below as denied in part his claim for injunctive rehef

against of — of the Regional Rail Re-

organization Act of 1973, 45 U.S.C. §701 ef on the ground that such

provisions were repugnant to the Constitution.

“No money shall be drawn from the Treasury but

in Consequence of Appropriations made by

Law....”

Statutes of the United States:

Regional Rail Reorganization Act of 1973, Pub-

he Law 93-236, 45 U.S.C. §§701 ef seq. (JA

491-531") (hereinafter cited as “RRRA”).

Section 77 of the Bankruptcy Act, II U.S.C.

§205 7 oo to New Haven Trustee's

re as Cross-Appellant in No. 74-166, at Al-

12).

Tucker Act, 28 U.S.C. §1491 (Appendix to brief

of Penn Central Trustees, at la- 2a).

In addition to the foregoing statutory provisions,

pertinent extracts of which are found in the Joint Ap-

pendix or in the appendices to the briefs of Appel-

lants, the following additional statutory provisions are

necessanly involved in the decision of these cases to

the extent that the Tucker Act, 28 U.S.C. §1491, is re-

lied upon by Appellants:

31 U.S.C. §724a reads, in pertinent part, as follows:

“§724a. Appropriations for payment of judgments

— compromise settlements against the United

ates

“There are appropriated, out of any money in

the Treasury not otherwise appropri i and out

of the postal revenues, ively, such sums as

may on and after July 27, 1956 be necessary for

the payment, not otherwise provided for, as certi-

fied by the Com roller General, of final judg-

compromise settlements (not in

excess of $100,000, or its equivalent in foreign cur-

rencies at the time of payment, in any one case)

which are payable in accordance with the terms of

JA” followed by a reference refers to the Jor Appendix

condemned ae ee io he Cor a —

Documentary Submission (J. D. S % has also — ent —

ments therein are referred to by “J.D.S.” followed by the number of the

document.

— ae ———

sections 2414, 2517, 2672, or 2677 of Title 28. to-

ether with such interest and costs as may be spec-

ied in such judgments or otherwise authorized by

28 U.S.C. 62517 reads as follows:

“§2517. Payment of judgments

(a) Every final judgment rendered by the

Coun of Clauns — the United States shall be

id out of an 7 — iation therefor, on

— ＋ —— Office of a

certification of the judgment by the clerk and chief

judge of the court.

“(b) Payment of an yy ty ~~ t and of in-

terest thereon shall be a full discharge to the

United States of all claims and demands arising out

of the matters involved in the case or controversy.”

28 U.S.C. §2518 reads as follows:

92518. Certification of judgments for

appropnation

“The Secretary of the Treasury shall certify to

Cc for a jation only such judgments of

the rr

are entered upon mandate of the Supreme Court.

COUNTER-STATEMENT OF

QUESTIONS PRESENTED

1. Is there an remedy at law under the

Tucker Act (28 U.S.C. §1491) for an otherwise uncom-

pensated taking for public use of Penn Central's rail

properties and the New Haven Trustee's liens thereon

such that the constitutional issues posed by the RRRA

need not be reached?

2. If there is no such adequate remedy at law, was

the court below correct in enjoining enforcement of

the RRRA on the ground that, in failing to provide

just compensation for an interim taking for use, the

RRRA was repugnant to the Fifth Amendment to the

Constitution?

COUNTER-STATEMENT

OF THE CASE

Penn Central filed for reorganization under §77 of

the Bankruptcy Act on June 21, 1970. The early

stages of Penn Central's §77 proceedings were devoted

to an effort by the Penn Central Trustees to identify

the problems which had to be overcome in order to

achieve an earnings-based reorganization. The initial

cash crisis was temporarily alleviated by orders of the

Penn Central Reorganization Court permitting de-

ferrals of interest on debt (other than equipment

debt), of most leased line rentals and of real estate

taxes.’ In addition, acting pursuant to §77(c\(3), the

Penn Central Reorganization Court approved issuance

of $100 million of Trustees’ Certificates which, in or-

der to be marketable, required the guarantee of the

United States. See /n re Penn Central Transportation Co.

(Order No. 124), 325 F. Supp. 302 (E.D. Pa. 1971).

A series of ten reports of the Penn Central Trust-

= disclose the history of the Trustees’ efforts to

eve a private earnings—based reorganization of

— Cemral. The Trustees began by asserting that

enn Central could be reorganized if certain con-

ditions. not within their control, were met.’ Sub-

*Through December 31. 1973, the

ferred: interest, $104 million: — i on bn oe

$241 million. Stipulation as to Factual Matters pnnted

| ‘ ( at JA 317-24:

cee ee ne “See Co) Ge, 13, 1 me A oo ems

sequent reports spelled out a lack of success in achiev-

ing these conditions. Finally, in their January |, 1973

and February |, 1973 reports, the Trustees acknow!l-

edged that reorganization would not be possible with-

out a government grant (not merely financial assistance

by way of loans or guarantee of borrowings) on the or-

der of $600 to $800 million.

There followed an attempt by the Trustees to put

into effect certain crew-consist changes (which had

been the subject of exhaustive, but unproductive, pro-

ceedings under the Railway Labor Act), that resulted

in a strike by the United Transportation Union on

February 8, 1973. Congress responded by enacting

Senate Joint Resolution No. 59, which imposed a 90-

day moratorium on both the work-rule changes and

the strike.“

Shortly thereafter, acting - sponte, the Penn Cen-

tral Reorganization Court entered an opinion and or-

der regarding the status of reorganization efforts. /n re

Penn Central Transportation Ce, 355 F. Supp. 1343

(E.D. Pa. 1973). Judge Fullam on March 6, 1973 con-

cluded as follows:

“Whether the constitutional limit [of erosion] has

been exceeded depends primarily upon how the re-

maining assets are to be ; and this in turn

may well upon how those assets are to be

used at the conclusion of this reorganization. Un-

„ — oe 22 a seems clear that the

of unconstitutionality is fast approach fa

not already arrived. } „

hd essence of §77 of the Bankrur’ , Act is that

— e rg! remedies normally available to creditors

a eld in suspension for a reasonable time in

= — to permit rehabilitation of the enterprise.

7 ry u appears that there is % genuine like-

thood of ultimate success, the legal and constitutional

justification for restraining creditors from exercising their

normal remedies disappears. 48

“By the same token, however, this Co i

tl , , ourt cannot ig-

— — realities of the Debior's situation. On the

— — — record to date, it appears highly doubtful

at the Debtor could properly be permitted to continue to

operate on its present basis beyond October 1, 1973." 1d

at 1344-46 (emphasis added).° N N

4 There then followed proceedings before the ICC in

ugust, 1973 upon proposed plans of reorganization

of Penn Central filed by the New Haven Trustee in

June, 1973, and subsequently by the Penn Central

Trustees and Penn Central Company. The ICC's Re-

port dated September 28, 1973 rejected on various

—— all plans submitted for the reorganization of

— Central. e and declined to certify to the Re-

eye Court any plan of reorganization under

4 — essentially adopting the position urged by the

nit | States that reorganization of Penn Central had

to await a “solution” for the Northeast that would, in

turn, require Congressional action. ö

On October 9. 1973, the New Haven Trustee filed

a motion to dismiss Penn Central's §77 proceedings

Thus. by the time this appeal has been heard, Penn Central will

have been “permitted to i is”

— Cee ae Operate on its — —

The ICC's Repon dated September 28, 1973 j

‘ 3 is J.D.S. 54.

from the testimony in the ICC proceedings are set font in j.D2.

pursuant to §77(g), and sought a liquidating re-

ceivership, on the ground, infer alia, that the point of

unconstitutional erosion of the Penn Central estate

had commenced not later than January |, 1973.“ the

date of the Penn Central Trustees’ Report (J.D.S. 8).

On January 2, 1974, the RRRA was signed into law

by the President.’

On January 25, 1974, the New Haven Trustee filed

a complaint asserting that the RRRA was uncon-

stitutional on its face and as applied to Penn Central.

Named as defendants were the United States, USRA,

and Secretary of Transportation Brinegar (herein

sometimes referred to collectively as the “Gov-

ernmental Defendants”). The action was filed in the

United States District Court for the District of Col-

umbia, and was subsequently transferred, by consent,

to the Eastern District of Pennsylvania, where other

cases concerning the constitutionality of the RRRA

were pending. Pursuant to 28 U.S.C. §§2282 and

9984, a three-judge district court, consisting of Circuit

Judge Ruggero J. Aldisen and District Judges John P.

Fullam and Louis C. Bechtle, was constituted to hear

all these cases. The Penn Central Trustees, who inter-

vened as defendants, answered that the RRRA was

constitutional by virtue of the alleged existence of a

“Tucker Act remedy” under 28 U.S.C. §1491 to un-

J. DS. 13. As is pert — detail in Part I1-A of the Argu-

ment, this Motion and a petition seeking an equity rece:

have not been decided. No hearing was held on the §77(g) Motion unl

May 6, 1974. A previously filed petition of the New Haven Trustee,

seeking, inter alia, the fixing of a date for termination of operations

22 12) filed March 16, 1973, was never set down for hearing. By Or-

No. 1648, further proceedings have been conducted on the §77(g)

Motion and related petitions, including a further hearing on September

19, 1974.

„public Law 93-236, codified as 45 U.S.C. §§70! ef seq. Section refer-

ences to the RRRA are to the Section numbers in Public Law 93-236,

and not to the codification in 45 U.S.C.

derwrite” any constitutional defici i

te” any ficiency

aa * of issue, the New — bh

Prin 29. 1974 filed a motion for summ

ö a ud

— — of the legal issues raised by ——

e vernmental Defendants and the Penn Central

Trustees each th i ;

judgment.“ en filed counter motions for summary

the court enjoined all ies

b | parties “from

— . action to implement, 80 — —

) of the RRRA as purports to require dismissal of

sofar as it fails to i

; us to provide compensation for inter

erosion pending final implementation of the final —

his pom of

plaintiffs — 4 — was entered sua sponte, none of the

;

tem plan contemplated by the RRRA, and that §304(f)

of the RRRA is null and void as violative of the Fifth

Amendment to the Constitution insofar as it would re-

quire continued operation of rail services at a loss in

violation of the constitutional nghts of the owners and

creditors of Penn Central (Order, §4a, 4b; JA 82-83).

The coun also declared a portion of the third sentence

of §207(b) of the RRRA to be null and void as vio-

lative of Article I. Section 8. Clause 4 of the Con-

stitution for the reason that the RRRA ts not uniform

geographically throughout the United States and, to

the extent that the RRRA amends §77 of the Bank-

ruptcy Act, it is a law on the subject of bankruptcies

within the meaning of Article I. Section 8, Clause 4

(Order, Vac; JA 83).

Insofar as the Order denied in part, on grounds of

alleged prematunity, the injunction sought by the New

Haven Trustee against the implementation of the

compulsory conveyance provisions of the RRRA as

constituting an uncompensated taking in violation of

his Fifth Amendment rights, the New Haven Trustee

filed a cross- appeal.“

The instant appeals (docketed as Nos. 74-165, 74-

167 and 74-168) concern an issue which the court be-

low found was ripe for constitutional adjudication,'®

namely, whether the RRRA produces an uncom-

pensated, or inadequately compensated, governmental

taking of private property for use by reason of com-

pelling deficit rail operations to continue notwith-

standing the erosion of Penn Central's estate. The

court considered that the evidence established that

'*Docketed as No. 74-166. See Jurisdictional Statement filed August

23, 1974, and Brief of New Haven Trustee as Cross-Appellant dated Au-

gust 28, 1974.

'*Apparently the A in these cases do not challenge the de-

termination of the court that the interim taking and “Tucker Ac

remedy” issues are indeed ripe for adjudication.

substantial erosion of the Pen

taken place in four years of operations under §77, that

it was continuin

** g. and would i

tit utionalhj erode th d inevitably uncon-

classes of claimants represented by plaintiffs, who in-

Growth in priority claims against the estate Deprived

of an adequate cash flow

the Pe a

has accumulated substantial prioriey an ie

of all -bankru

. Ipicy interests. C :

— these priority claims sheedy semen vA

east $300 million. On Aggregate at

another $100 million a a Status quo assumption,

unable to prevent continuing erosion.” (Penn Cex.

tral Trustees’ Interim Repo

8 n f

J. DS. 8 at p.4; quoted at JA 35.3003. 21) * Sova,

The court also i

quoted with

erosion made in March, 1973 —

organization Court:

“Eros; ;

— ne precise calculations have not

1 yy * ped, the record justifies the c

a. Lat post-reorganization deferrals and —4

—— claims have already eroded — 5

bret a — to the extent of about 8500 il

. ¢ Fenn Central Transportation “ om pany 355

F. Supp.

40) Pp. 1343, 1344 (F. D. Pa. 1973) (quoted at JA

Pproval an estimate of

y the Penn Central Re-

The coun concluded:

he court below '

jon, the d to, and did not, make findings

as to the amount of erosion

or the 4 a », the class of persons now

pom 22 erosion would be — by erosion,

vun interpreting the Fifth A tonal under the de-

;

885 1.000.000 during the present reorganization

proceedings, and cognizant also that unsecured

creditor as well as secured creditor interests are

squarely before this court, we are persuaded that a

significant —— exists that a point of erosion

either has or may soon be reached so that it

can be said that plaintiffs’ contention of interim

unconstitutional taking by continued loss oper-

ations is ripe for adjudication.” (JA 40).'*

Reaching the merits of the interim taking issue, the

court first noted that the defendants acknowledged

that the RRRA “does not explicitly provide for the

payment of just compensation” (JA 41) in the event

that the point of unconstitutional erosion of the Penn

Central estate is determined by the Reorganization

Court to have been passed. On the issue whether there

is a constitutional limit on the permitted erosion of a

railroad’s estate by reason of required deficit rail oper-

ations, and the factors which enter into the de-

termination of whether that limit had been passed, the

court quoted a portion of the following observations of

the Penn Central Reorganization Court:

“Underlying the provisions of Section 77 of the

Bankruptcy Act is the principle that, in order to

vindicate the public interest in continued rail ser-

vice, the normal rights of creditors and investors

may be held in suspension for a reasonable time in

order to achieve reorganization, and upon re-

organization may be drastically altered if necessary.

"The $851,000,000 of losses covers only the period from June 21.

1970 to December 31, 1973. In addition, for the first six months of 1974,

Penn Central suffered a net loss of $103,579,392 (Trustees’ Report dated

August 5, 1974). Thus the total deficit of the Penn Central system dur-

ing four years of operations under §77 is some $955 million. This loss is

after employing in rail ions Penn Central's non-rail income of $157

million (Stip. Fact. $11). Thus, rail ions alone during the four

years have produced deficits totaling some $1.1 billion. This amount in.

cludes deferred interest and leased line rentals in default in excess of

$500 million. The deficit in income available for fixed charges as the re-

sult of railroad operations is accordingly some $600 milhon.

Nevertheless, there are limits beyond which this

public interest cannot be served without violating

the constitutional prohibition against appropriation

of private property for public use without just com-

nsation. New Haven Inclusion Cases, 399 U.S.

992 90 S.Ct. 2054, 26 L. Ed. 2d 691 (1971); .

Brooks-Scanlon Co. v. Railroad Commission of

Louisiana, 251 U.S. 396, 40 S. Ct. 183, 64 L.Ed. 323

(1920). These limitations are measured both in

terms of the amount of erosion of the Debtor's es-

tate which can be permitted to occur before im-

airing liquidation value, and in terms of the

length of time that is reasonable for assessing the

ultimate prospects of achieving sufficient profi-

ability to support a valid recapitalization of the en-

terpnse.” Jn re Penn Central ge gee Co. (Opin-

ion in Support of Order No. 830 re Crew-Consist

Dispute), 347 F. Supp. 1356, 1366 (E.D. Pa. 1972);

quoted in part at JA 41.

The court below fully concurred in the doctrine thus

expressed, for which unqualified authority exists in

decisions of this Court.“ that the “normal rights of

creditors and investors [in a railroad] may be held in

suspension for a reasonable time in order to achieve

reorganization,” so as to “vindicate the public interest.”

The decision of the court was based on the corollary

of that proposition: that the rights of railroad creditors

and investors may not be held in suspension for more

than the “reasonable” time required to determine

whether a successful reorganization can be achieved.

USRA conceded below that if “a point might be

reached before consummation of the new [final sys-

tem] plan in which the constitutionally permissible

point of erosion had been reached,” unless a Tucker

Act remedy existed and provided an adequate remedy

‘Continental Ill. Nat. Bank v. Chicago, R. & Pac. RN. 294 U.S. 648

(1935) (hereinafter cited as “Rock Island”); Reconstruction Finance Corp. v.

Denver & RCN NR. 328 U.S. 495 (1946) (hereinafter cited as “Denver

& Rio Grande"), Penn Central Merger Cases, 389 U.S. 486 (1968); New Ha-

ven Inclusion Cases, supra.

;

at law, “the Act as a whole would probably be uncon-

sututional.” (Colloquy between counsel and Judge Al-

disert, JA 42). In the light of this concession, and per-

tinent factual stipulations (JA 317-323), the court

reasonably concluded that the RRRA’s constitutionality

as respects the interim taking issue would necessarily

depend on the availability and adequacy of a Tucker

Act remedy which would provide compensation to the

Penn Central estate in respect of the interim taking of

its rail properties for public use.

The court disposed of the Appellants’ Tucker Act

remedy argument by a detailed analysis totally at vari-

ance with Appellants’ characterizations in their briefs

here.” Although the court’s opinion discusses argu-

ments made below by the Appellants and certain of

the Appellees, as to whether the RRR should be con-

strued as an implied repeal of the Tucker Act, the

court's opinion did not decide which of the views is

correct, presumably because a resolution oi these ques-

tions was not necessary to its decision?

Rather, the court held that the issue of adequate

remedy at law” necessarily turned on statutory inter-

pretation of the RRRA itself. That is, the issue was

See e.g., USRA's brief at 41, asserting that the court ruled “that the

Court of Claims would not have jurisdiction over any claim for a taking

allegedly caused by the Rail Act because the Rail Act does not explicitly

make a Tucker Act remedy available.” This incorrectly states the court's

opinion, as indicated in the text. Moreover, the New Haven Trustee ar-

gued below that the RRRA does not withdraw any jurisdiction conferred

by 28 U.S.C. § 1491; his argument here (as it was below) is based on lack

of a substantively valid cause of action even assuming the Coun of Claims

has jurisdiction. See Part | of Argument herein.

"JA 44-50. While the court's opinion contains an elaborate ex-

— < a eepenien nsdictional comentions of USRA and the

n Central Trustees, on the one hand, and of certain of the plaintiffs

ng °

Trustee, having stated below that the jurisdiction of the Court of Claims i

unimpaired by the RRRA, argued that a resolution of this issue was

whether it was the intent of Congress to create a stat-

utory scheme which was all-inclusive in the sense that,

except by following its prescribed procedures with re-

gard to judicial review, claimants to the estate of a rail-

road were to have no substantive cause of action in the

Court of Claims for the changes effected in their

property rights by implementation of the RRRA. The

court held that this was the effect of the RRRA on

these grounds:

(a) The provision of Article I, Section 9, Clause 7

of the Constitution that “No money shall be drawn

from the Treasury, but in Consequence of Appropn-

ations made by Law” (JA 50) requires that Congress,

not the federal courts, make the decisions as to

whether, when and in what amounts monies of the

United States Treasury shall be expended.

(b) The express ceilings on appropriations

(§§213(b) and 214) and on obligations of USRA (§210)

preclude, as a matter of statutory construction, the

possibility that Congress was willing to appropriate

money to compensate any railroad’s estate for interim

erosion. (JA 50-51).

view contained in §§209(a) and 303 of the RRRA (JA

51) precludes, as a matter of statutory construction,

that Congress granted the Special Court the power to

adjudicate, as part of its §303(c) proceedings, that a

constitutional “short fall” in consideration provided by

the RRRA is to be made up by a monetary judgment

against the United States which could be asserted in a

subsequent Court of Claims action.

The first sentence of §209(a) provides in pertinent

part:

“Notwithstanding any other provision of law, the final

system plan .. . is not subject to review by any court ex-

— —ñ—

me —

cept in accordance with this section.” (Emphasis

added.)

By citing this section (JA 51), the court interpreted

§20%a) to preclude any substantive cause of action

surviving the judicial review provided for in the sec-

ond sentence of §20%a), which reads as follows:

“After the final system plan becomes effective un-

der section 208 of this title, it may be reviewed with

respect to matters concerning the value of the rail

properties to be conveyed under the plan and the

value of the consideration to be received for such

properties.”

It is reasonably clear (even if not explicitly stated) that

the “review” rt med to in the second sentence of

§209%a) is solely that provided in §303(c) by the Special

Court, and in §303(d) by this Cour on review of the

Special Court's judgment. The difficult, problem of

Statutory construction is whether, in light of the first

sentence of §20%a), Congress intended that a person

aggnieved by the §303(c) judgment (as reviewed by this

Court under §303(d)) could seek to litigate essentially

the same issues again in the context of a suit for

money damages against the United States in the Court

of Claims. To answer that question, the court resorted

to the legislative history.

The legislative history confirmed the court's inter-

pretation of §209%a) that Congress did not intend that

a disappointed claimant at the conclusion of the pro-

ceedings in the Special Court and this Court, as con-

templated by §§303(c) and (d), could stant new lit-

igation by asserting a claim for money damages against

the United States in the Court of Claims, a claim

which might, if sustained, aggregate hundreds of mil-

lions or billions of dollars with respect to the Penn

Central claimants. The cour particularly noted the

following colloquy between the two “Managers on the

Part of the House” in the debate on the Conference

Committee Report:

Mr. [Dan] Kuykendall. “Mr. Some. I would like to

ask the leman from Washington one point,

and that is the matter of the deficency judgment.

There was a lot of uy in the original debate

which ex fears that the F Court had

the key to the Treasury.

“Will the gentleman give us his interpretation of

the guarantees we have to keep chet’ from hap-

pening in the court proceedings?

Mr. [Brock] Adams. “Mr. Speaker, there is a definite

limitation on the total amount that can be autho-

rized under this bill. Any amounts that go beyond

that, or the shifting of the way in which it is spent,

is to be a by an Act of Congress, to be

pp President. . . . [I}t was the clear intent

of the 1 that any amount other than com-

mon stock [of Conrail] was to be at the lowest

sible limit to meet the constitutional guarantees.

Mr. Kuykendall. “There is no way the Federal Court

may assess the tax or this Congress on the

judgments of the ors, is that correct?”

Mr. Adams. “The gentleman is correct.”

Mr. Kuykendall. “There is no way they can assess the

Congress for the money.”

Mr. Adams. “The gentleman is correct.” (119 Cong.

Rec. H. 11876 (1973), JA 49-50).

The cour below concluded:

“We are persuaded that the legislative hi su

nancial to t press term

of the Act.” (JA 500%¼ N = f

n is canon of statutory construction that where |i

ability of the United LN

‘footnote continued on ned page)

——

Concluding that the financial obligations of the

United States were intended by Congress to be “lim-

ited to the express terms of the Act,” the court was

compelled to find that the asserted availability of an

adequate remedy at law, to wit, a Tucker Act action

for a constitutional shon fall” at the conclusion of the

judicial proceedings under §§303(c) and (d), did not in

fact exist. It was in this context that the coun

observed:

“To read a Tucker Act remedy into the Act would

be a movement of the mass and not simply the par-

ticles. We simply lack such power.” (JA 53).

From this conclusion, and the Appellants’ con-

cessions below that the RRRA itself provided for no

compensation for the taking for interim use which

would inevitably (on the basis of the stipulated facts)

occur during the minimum of two or more years of

deficit rail operations mandated by the RRRA, the

court concluded:

“Accordingly, we hold that Section 304(f), in te-

quiring mandatory intenm ions without pro-

viding a legal remedy to furnish fair and just com-

pensation for an erosion of property beyond

constitutional limits, offends the Fifth Amend-

ment; that Section 303, the only provision of the

Act pertaining to valuation of the railroad estate, in

failing to provide a remedy for any uncon-

stitutional erosion caused by mandatory intenm op-

erations under Section 304(f), is also de-

fective... and that because of these conclusions

the United States Railway Association must be en-

joined from certifying a Final System Plan to the

pecial Court pursuant to Section 209%(c).” (JA 53).

‘footnote continued from preceding page’

expression of Congressional intent to a reading

—— the Treasury to a large liability. See Pine Hill Coal Co

„ Unated States, 259 U.S. 191, 196 (1922) (Holmes, I United States » Za-

we, 334 US. 602, 617 n. 24 (1948) (Vinson, C. J.)

SUMMARY OF ARGUMENT

Two main issues are presented by these appeals:

1. Is there an adequate remedy at law under the

Tucker Act such that the constitutional issues posed by

the RRRA need not be reached?

2. If there is no such adequate remedy at law, was

the court below correct in enjoining enforcement of

the RRRA for repugnance to the Fifth Amendment to

the Constitution?

On the first issue, the New Haven Trustee, as Ap-

pellee, submits that the court correctly disposed of Ap-

pellants Tucker Act remedy arguments:

A. The RRRA on its face clearly excludes any in-

tent on the pan of Congress to subject the United

States to monetary liability for the takings of private

property mandated by the RRRA.

B. No court has jurisdiction to render a declaratory

judgment that, upon a certain set of facts ensuing, the

United States will be liable to plaintiffs in an action in-

voking the jurisdiction of the Court of Claims under

the Tucker Act.

C. Not all cases over which the Court of Claims has

junsdiction to consider the merits involve valid causes

of action. A valid cause of action under the theory of

“inverse eminent domain” ires a statute which ex-

pressly authorizes the exercise of the eminent domain

power. The RRRA is not such a statute. The decision

of this Court in Youngstown Sheet & Tube Co. v. Sawyer,

343 U.S. 579 (1953) is controlling precedent to the ef-

fect that the remedy in the Court of Claims exists only

— ee Se ae oe

— a oe — — *

—

‘

if the statute is constitutional and authorizes the ex-

ercise of eminent domain powers. Such an inter-

pretation of Youngstown is necessary in order to recon-

cile Larson v. Domestic & Foreign Commerce Corp., 337

U.S. 682 (1949) and subsequent post-Larsen cases with

Hurley v. Kincaid, 285 U.S. 95 (1932) and other in-

verse eminent domain cases.

D. The doctrine of adequate remedy at law re-

quires that the New Haven Trustee have an inde-

pendent cause of action against the United States un-

der the theory of the Court's decision in Armstrong =

United States, 364 U.S. 40 (1960). Such a cause of ac-

tion would be based on divestment of the New Haven

Trustee's liens as a result of the implementation of

§303(b)(2) of the RRRA, and need not await the Spe-

cial Court's proceedings under §303(c).

E. A deficiency judgment against the United States

for the “short fall” in the consideration provided by

the RRRA would not in any event be an adequate rem-

edy at law since takings require payment of just com-

pensation entirely in money or its perfect equivalent.

Moreover, judgments entered by the Court of Claims

in amounts in excess of $100,000 cannot be enforced

against the United States Treasury without Con-

gressional a ion. The legislative history of the

RRRA shows that Congress did not intend to permit

the United States to pay any additional amounts of

government money to railroad estates beyond the

$500 million of potentially available debt obligations of

USRA backed by i United States guarantees

and the $85 million of grant funds authorized by §213

of the RRRA.

F. If the Court is in doubt as to whether the RRRA

is intended to be an eminent domain statute, it should

not render an advisory opinion that it may be sus-

tainable on the theory advanced by the Penn Central

Trustees that Congress has adequate time, if it dis-

agrees with the judicial interpretation, either to repeal

the RRRA or to vote to prevent any final system plan

from becoming effective pursuant to §208(a) of the

RRRA.

The coun’ below was correct in holding that the

RRRA requires Penn Central to devote its private

property to a public use without assurance of receiving

just compensation therefor:

A. Although railroad creditors may properly be re-

strained for a reasonable time in the exercise of their

contractual foreclosure or other remedies, it is not con-

stitutionally permissible for Congress to defer the ex-

ercise of those remedies endlessly. The court below

was correct in rejecting the Government's inter-

pretation of New Haven Inclusion Cases and Penn Cen-

tral Merger Cases, supra, and in following the reasoning

of the Third Circuit Coun of Appeals relative to the

issue of when a further restraint upon creditors

amounts to an intentional uncompensated taking.

B. The New Haven reorganization, when correctly

analyzed in the light of the facts of that proceeding,

the positions of the New Haven creditor parties, and

the procedural context in which the various judicial

decisions, including New Haven Inclusion Cases, supra,

were rendered, does not support the Government's

principal theory in support of the constitutionality of

the RRRA.

C. The Court's decisions in the Rock Island and

Denver & Rio Grande cases, supra, under §77, when cor-

rectly interpreted in the light of the facts of those

cases, do not support the constitutionality of the

RRRA.

D. Section 304(f) of the RRRA, properly inter-

preted, requires USRA, during the interim period pre-

ceding the effective date of a final system plan under

the RRRA, to deny Penn Central permission to termi-

nate rail operations on, or abandon, any rail segments

which might be included either in a final system plan

for conveyance to Conrail, or in lines as to which any

States or regional transportation authority will be pre-

pared to commit public funds for a rail service con-

tinuation subsidy beginning within a few months after

the effective date of the final system plan. Pending the

effective date of a final system plan, the scope of per-

missible discontinuances and/or abandonments under

§304(f) is negligible or non-existent. Prior decisions of

the Court indicate that a statute cannot be rewritten to

limit its applicability to a narrow area where it might

be constitutional. This rule is applicable a fortiori

where the plaintiffs below demonstrated that the

RRRA as written is unconstitutional as applied to

them.

E. Section 304(f) of the RRRA withdraws the juns-

diction of the reorganization court under §77(0) to or-

der abandonments of rail properties of a debtor rail-

road, and withdraws the court's equity jurisdiction to

order cessation of rail operations when necessary to

protect constitutional rights. Because of the policies

underlying 28 U.S.C. §§2282 and 2284, only a court as

there constituted can prevent this unconstitutional ap-

plication of §304(f) by enjoining its enforcement.

F. The court was correct in adjudging §303(c) of

the RRRA unconstitutional for failure affirmatively to

provide payment of just compensation for the erosion

being suffered by Penn Central during the period re-

quired to carry out the planning processes of the

RRRA.

G. The court was correct in enjoining USRA from

certifying a final system plan to the Special Court in

view of its holding on interim erosion and the failure

of §303(c) of the RRRA to provide just compensation

therefor. If USRA proves to be able to devise a final

system plan which does in fact provide just compen-

sation for the interim erosion suffered by Penn Cen-

tral during the period of the planning process, it can

apply to the §2284 court for appropriate modification

of the injunction in the light of the evidence then

presented to such court.

H. The evidence was more than sufficient to sup-

port the conclusion that the Penn Central estate has al-

ready suffered substantial erosion during the four

years of §77 proceedings, and that substantial erosion

is continuing during the planning process of the

RRRA. The court was not required to calculate the

amount of erosion with mathematical precision, or to

determine what claimants to the Penn Central estate

are currently being affected by erosion, because one or

more of the plaintiffs below are currently being in-

jured by erosion. Substantial deficits in income avail-

able for fixed charges, plus substantial accrual of pri-

ority administration claims that have accrued during

four years of 577 proceedings and are continuing to

accrue, are highly probative of massive on-going ero-

sion of the Penn Central estate. The Government in-

troduced no evidence that appreciation of the value of

balance sheet assets, even if arguendo such appreciation

is deemed a proper offset to erosion, has been realized

in amounts substantial enough to offset the erosion

which has occurred and is continuing.

‘

ARGUMENT

THERE IS NO “ADEQUATE REMEDY AT LAW”

TO ASSURE COMPENSATION FOR THE TAKING

OF PENN CENTRAL'S RAIL PROPERTIES

CAUSED BY IMPLEMENTATION OF THE RRRA

The New Haven Trustee agrees with Appellants

that the central issue in these cases is whether Con-

gress intended that a litigant in proceedings pursuant

to §§303(c) and (d) of the RRRA could, if dis-

appointed by the final judgment of the Special Court,

as affirmed or modified by this Court, start all over

again by suit against the United States in the Court of

Claims. Appellants contended below and contend here

that the Tucker Act creates a remedy both for an un-

compensated taking for interim use, and for an inad-

equately compensated permanent taking, of Penn

Central's rail properties. Thus, Appellants assert that

the Appellees have an “adequate remedy at law.

In summary, the New Haven Trustee's position on

the availability of a Tucker Act remedy issue is as

follows:

(i) The Tucker Act confers jurisdiction upon the

Court of Claims in an action for money damages by a

private person against the United States; and thereby

constitutes a waiver, but limited to the express terms

of 28 U.S.C. §1491, of the historic common law doc-

trine of sovereign immunity.

(ii) No court other than the Court of Claims has

original jurisdiction to decide that the United States is

liable in money damages for a taking of private prop-

erty under the Fifth Amendment. The bar to such de-

claratory judgments is the doctrine of sovereign im-

munity itself, as stated by the Court in the Sherwood™

and King“ cases. In fact, under the King decision, not

even the Court of Claims itself has jurisdiction to ren-

der such a declaratory judgment.”

(iii) The RRRA is silent as to any intent of Con-

gress partially to repeal 28 U.S.C. §1491 in cases aris-

ing under the RRRA. No such repeal is necessary,

however, to support the judgment below. That judg-

ment is based on there not being sufficient assurance

that a substantively valid cause of action would exist

against the United States for an “implied taking” to

make applicable the doctrine of “adequate remedy at

law.” The New Haven Trustee submits that the RRRA

cannot fairly be interpreted as allowing a substantively

valid cause of action to be asserted in the Court of

Claims to recover the constitutional “short fall” which

the RRRA itself fails to provide.

(iv) Cases such as Hurley v. Kincaid, supra, Yearsley v.

W. A. Ross Construction Co, 309 U.S. 18 (1940), United

States i Causby. 328 U.S. 256 (1946), and other cases

cited by Appellants“ are inapposite because they did

not arise in a context where Congress had specifically

provided for another court to render judgment as to the

value of the property being taken and the value of the

consideration provided under the law as compensation

therefor. The “implied takings” cases, of which the

Causby case, supra, is the most celebrated example, are

based on a theory of “inverse eminent domain,” and

are irrelevant to the decision of the issue here. The

question in the instant case is whether Congress in-

"United States v. Sherwood, $12 U.S. 584 (1941).

United States v. King, 395 U.S. 1 (1969).

*Although the United States has not cited the Sherwood King

cases in its brief as Appellant, it argued below that the Penn Central

Trustees’ cross-motion for summary based on the Tucker Act

— .

**See, ¢.g., cases cited in brief of USRA at 43-47.

N —

tended, in §§209(a) and 303(c) of the RRRA, that ail

issues concerning the value of rail properties required

to be conveyed under §303(b), and the consideration

therefor specified in the final system plan pursuant to

statutory guide lines contained in §206 of the RRRA,

should be definitively adjudicated solely by the Special

Court (§303(c)) and, on appeal from its judgment

(§303(d)), by this Court. If that question is answered in

the affirmative, there is no adequate remedy at law; if

in the negative, there could be a remedy at law for an

implied taking under the “inverse eminent domain”

theory. On the latter assumption only, a valid cause of

action could be asserted in the Court of Claims under

28 U.S.C. §1491. In that event, the only remaining is-

sues would be whether such a remedy is adequate (i)

as to the amount and (ii) in view of 31 U.S.C. §724a,

28 U.S.C. §2517, and Article I, Section 9, Clause 7 of

the Constitution, as to collectibility of the judgment.

(v) The court below concluded that there was no

Tucker Act remedy, relying on both the express words

of §20%a) and the legislative history. That decision

was correct. It is entirely consistent with the decision

of the Court in Silesian American Corp. v. Clark, 332

U.S. 469 (1947), involving a statutory scheme under

the Trading with the Enemy Act.“ whereby Congress

prescribed a taking of property of persons whose en-

emy alien status was yet to be determined, and pre-

scribed an elaborate administrative and judicial review

procedure to be followed by persons claiming to be

non-enemy aliens entitled to just compensation under

the Fifth Amendment. A litigant, such as the plaintiff

in the Sileuan American case, who pursued the adminis-

trative and judicial proceedings of §9(a) of the Trad-

ing with the Enemy Act and, if disappointed by the

District Court, appealed to the Court of Appeals, sub-

2740 Stat. 411 (Oct. 6, 1917), as amended by First War Powers Act of

1941, 55 Stat. 839 (Dec. 18, 1941), 50 U.S.C. App. §§1 ef seq.

ject to further review in this Court by certiorari, would

scarcely have been permitted to start all over again in

the Court of Claims. Since the Trading with the En-

emy Act does not specifically repeal 28 U.S.C. §1491

as to claims of unconstitutional takings by the Alien

Property Custodian, it follows that the Court of Claims

would have jurisdiction over such a case but would be

obliged to dismiss any complaint for want of merit.

From this it can be reasonably inferred that a sub-

stantively valid cause of action “upon any claim against

the United States founded either upon the Con-

stitution or any Act of Congress. (28 U.S.C. §1491)

must be one which is not only valid ab initio under the

Constitution but is not precluded by a law which pur-

ports to create an entirely different remedy cognizable

in a different court. When the procedural sections,

§§209(a) and 303(c) and (d) of the RRRA, are read

with the substantive sections, §§206 and 210-215, the

conclusion is inescapabie that Congress has af-

firmatively legislated that railroads whose rail proper-

ties are required to be conveyed pursuant to the

RRRA are to be compensated by securities of Conrail

and not in excess of $500 million of obligations of

USRA, as determined by the Special Court, and not by

a money judgment against the United States.

(vi) Even f there is a Tucker Act remedy under

the theory of inverse eminent domain, the remedy at

law would still be inadequate if it were limited, as Ap-

pellants contend, to a “short fall” remedy. No author-

ity exists for the analogous proposition, for example,

that the farmer whose lands were flooded in Hurley v.

Kincaid, supra, could constitutionally be paid partly in

stock of TVA, partly in bonds of the Federal Land

Bank, and the balance in money upon a judgment of

the Court of Claims. The Almots case. and a long line

**Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S.

470 (1973).

oe eS ee —"

of eminent domain cases cited in the New Haven

Trustee's brief as Cross- Appellant (at 56-59), stand for

the proposition that “just compensation” within the

meaning of the Fifth Amendment means money or its

perfect equivalent.

(vii) Glidden Co. v. Zdanok, 370 U.S. 530 (1962),

does not stand for the proposition that a litigant's rem-

edy at law under the Tucker Act can be assumed to be

adequate in spite of substantial doubts as to its col-

lectibility. Rather, it was early held in Reeside v. Walker,

52 U.S. (11 How.) 271 (1850), that no execution may

be issued by any court to the Treasurer of the United

States unless Congress has previously appropriated the

funds to pay such judgment; and Reeside v. Walker was

cited with approval in Glidden Co. v. Zdanok, supra. In

terms of appropriations, Congress has appropriated

only the following: up to $100,000 for any one judg-

ment rendered in the Court of Claims (31 U.S.C.

§724a); and $74,800,000 in appropriations pursuant to

§213 of the RRRA (of which some $28,000,000 has

thus far been committed)“ The possibility that Con-

gress would in fact appropriate funds, very likely to be

required in the hundreds of millions or billions, for the

purpose of paying Penn Central creditors is simply be-

yond the realm of reality. The Amicus Curiae brief filed

by Congressman Brock Adams on behalf of members

of Congress is eloquent for the shadow it casts.

See Foreign Assistance and Related Programs Appropnations Act,

1974, 87 Stat. 1048 (Jan. 2, 1974) ($35 million); Second oo

Appropriations Act, 1974, 88 Stat. 195 (June 8, 1974) ($39.8 million).

A. Congress Has Not Provided for Just Compensation

for the Taking of Private Property Mandated by the

RRRA

In §§206(d)(1) and 303(c) of the RRRA, Congress

has legislated the form of the consideration, which

USRA is legally authorized to provide in the final sys-

tem plan, to be exchanged for the property to be

taken from the estates of railroads pursuant to

§303(b). Thus, §206(d)(1) provides:

“All rail properties to be transferred to the Cor-

poration i. e., Conrail]. . by trustees of a railroad in

reorganization, or by any railroad leased, operated

or controlled by a railroad in reorganization in the

— shall be transferred in exchange for stock and

other securities of the Corporation (including obliga-

tions of the Association) and other benefits ac-

cruing to such railroad by reason of such transfer.”

(Em added).

Under §303(a)(1), Conrail is to deposit with the Special

Court “all of the stock and other securities of [Conrail]

and obligations of the Association designated in the fi-

nal system plan to be exchanged for such rail proper-

ties: under §303(c)(1), the Special Court shall test the

consideration in “accordance with the standard of fair-

ness and equity applicable to the approval of a plan of

reorganization or a step in such a plan under Section

77 of the Bankruptcy Act;” under §303(c)(2)(B), if the

Special Court finds that the standard of fairness and

equity is not met, it shall order additional amounts of

securities of Conrail or obligations of USRA specified

in the final system plan to be issued; and, finally, un-

der §303(c)(2)(C), if there is still failure to meet the

standard of fairness and equity, the Special Court shall

cure the lack of fairness and equity by entering a de-

ficiency judgment against Conrail—and not against

the sovereign which created Conrail. Further very

clear evidence of Congressional intent not to subject

the United States and its agencies to liability is found

in §206(i), where it is provided that any securities of

Conrai! “which purport to directly obligate the Asso-

ciation [i.e., USRA] shall not become effective without

affirmative approval, with or without modification, by

a joint resolution of the Congress.”

In any event, money is not even mentioned in the

RRRA as a possible medium of payment for the prop-

erties required to be conveyed by a railroad in re-

organization. The reason for excluding payment in

money is set out at length in the letter from Secretary

of Transportation Brinegar to Senators Magnuson and

Cotton.” The executive branch did not desire to pay in

money the price for a condemnation, as Secretary

Brinegar acknowledges would be necessary in the case

of a taking by eminent domain. Whether or not in-

fluenced by this advice, Congress in fact legislated

what is, in economic and legal effect a taking, while it

omitted any provision for a payment in money. The

omission of a provision for a money payment was in-

tentional and apparently was based upon the assump-

tion by the legislative draftsmen that the substance of

the transaction could be determined by the details of

the form provided in the legislation. Thus, it may be

inferred that Congress accepted Secretary Brinegars

advice that if the language of the legislation were lan-

guage of reorganization, and not language of a taking

by eminent domain, there could be a “traditional” re-

in pan: “The ahernative would be to have the Gov-

put up the cash or bonds [necessary to effect a taking by con-

demnation without recourse to the Corporation. That w clearly un.

(emphasis added).

organization patterned after the New Haven's in-

clusion in Penn Central. Conrail would thus be created

by Congress to be the inclusion “partner” of Penn

Central; and, as the “first step” of its “reorganization,”

Penn Central would be required to convey to Conrail

those of its rail assets which were designated by USRA.

The constitutional validity of this result is being

challenged here by the New Haven Trustee's cross-ap-

peal. For the purposes of the instant appeals, however,

it suffices to note that the legislative history establishes

the firm intent of Congress that the Treasury of the

United States should not be exposed to any financial

liability as guarantor of the securities to be issued by

Conrail in exchange for the rail properties of Penn

Central and other railroads required to be conveyed to

Conrail; and that USRA itself could not undertake vol-

untarih the role of a guarantor of Conrail’s securities

unless authorized to do so by a joint resolution of the

Congress.

B. There Is No Original Jurisdiction in the §2284 Court

to Enter a Declaratory Judgment that, if Implementation

of the RRRA Results in an Inadequately Compensated

Taking, the United States Will Be Liable in the Court of

Claims

No court, other than the United States Court of

Claims, has original jurisdiction to decide that the

United States is liable in money damages for a taking

of private property under the Fifth Amendment in the

case at bar. United States v. Sherwood, supra. And even

the Court of Claims itself has no subject-matter juris-

diction to issue declaratory judgments decreeing that,

if certain steps were followed, the United States would

be liable in futuro. United States v. King, supra. The juris-

dictional defense of the United States affirmed in the

King case is part and parcel of the doctrine of sov-

ereign immunity, and is not affected by procedural

statutes, such as 28 U.S.C. §2201 concerning the rem-

edy of declaratory judgments. The rule of law is clear:

the United States may not be sued save as it consents

to be sued; the terms of its consent to be sued in any

court define that court's jurisdiction to entertain the

suit; the consent to suit must be unequivocal and di-

rectly expressed; and a waiver of sovereign immunity

cannot be implied. United States v. King, supra; United

States v. Sherwood, supra, at 586, 589-91; Mine Safety Ap-

pliances Co. v. Forrestal, 326 U.S. 371 (1945); Lynch v.

United States, 292 U.S. 571, 581-82 (1934). The juris-

diction of the Court of Claims is clearly limited to

„There is one unimportant qualification: 28 U.S.C. §1346(2) grants

the District Courts concurrent junsdiction over claims of less than

$10,000 arising under the Constitution. If, contrary to what is being

done in the case of the RRRA, the United States were authonzed by stat-

ute specifically to exercise the sovereign’s power of eminent domain, the

District Courts would have jun ion under 28 U.S.C. §1358, and the

Court of Claims would have no such junsdiction.

„in the Lynch case, Mr. Justice Brandeis’ opimon for a unanimous

Court held that Congress retains the power at any time to withdraw the

(footnote continued on next page)

claims for the present recovery of money presently

due and owing from the United States. United States v.

King, supra; Glidden Co. v. Zdanok, supra.

_ Furthermore, even the question whether the RRRA

intended to exclude the possibility of railroad trustees

bringing suit in the Court of Claims against the United

States is a matter which only the Court of Claims can

initially resolve, since it has exclusive jurisdiction both

to determine its own jurisdiction and to adjudicate the

substantive merit, or lack thereof, of all dlaims for

money damages asserted againsi the United States of

the magnitude involved in this case. Thus, if the Court

of Claims were to determine that the RRRA violated

the Penn Central's Fifth Amendment rights, that it

had Junsdiction to hear the case, and that as a result of

implementing the RRRA a substantively valid cause of

action arose entitling Penn Central to recover judg-

ment against the United States in a specified amount

the United States could seek review of that decision in

this Court.’ If the Coun of Claims, on the other

hand, were to hold that it lacked jurisdiction to con-

sider the action because the RRRA itself constituted a

withdrawal by Congress of the limited waiver of sov-

ereign immunity otherwise available, or that, while it

et apnoea the — itself precluded a sub-

tie cause of action for money damages again

United States, the Penn — — —

wise seek review in this Court. These are the ways con-

(footnote continued from preceding page)

sovereign’s consent to be sued even though it would deprive individuals

Laced pena ‘er 2 cision which (the Court held, a pp. 579-580) was

— tyres ~ *

28 U.S.C. 61255. Two methods of review provided

cerhoran, and (2 i 10 ——

— ) certification by the Court of Claims of any question of

„ . 1

templated by law for exploration of the Tucker Act

remedy in the present context.™*

The Penn Central Trustees, as Appellants in these

cases, do not assert their “Tucker Act remedy” argu-

ment merely by way of asserting an “adequate remedy

at law” defense against the Appellees. The Trustees’

brief here makes it clear that the relief the Trustees

sought by their motion for summary judgment below

is no less than a declaratory judgment that:

“(a) If the market value of the consideration pro-

vided under the Act, determined as of the date of

payment of that consideration, falls below the just

compensation to which the Penn Central estate is

constitutionally entitled, the Court of Claims will

have jurisdiction over an action for a taking, and

must enter a judgment against the United States for any

remaining amount owing; the only defense open to

the United States in that court will be that the

value of the consideration paid under the Act is

sufficient in amount to constitute the full just com-

pensation necessary to satisfy the Fifth Amend-

ment; and

“(b) If it is determined that, by reason of the Act,

Penn Central loss ions for the account of the

estate were prolonged past the 11 of uncon-

stitutionality, the Court of Claims will have jurisdiction

to award just compensation to the estate for the taking

of property occasioned thereby; the only defense

open to the United States in that Court will be that

the erosion caused by Penn Central loss operations

did not become unconstitutional in amount before

the date of conveyance, or that the Special Court

has taken account of such erosion and awarded

consideration to the estate of sufficient value to sat-

isfy the Fifth Amendment.

“The Penn Central Trustees have thus far refrained from com-

mencing any action under 28 U.S.C. §1491 for the interim taking of

their properties produced by implementation of the RRRA.

“In other words, a bare holding that the jurisdiction of

the Court of Claims was not repealed by the Act would be

insufficient if the United States were to retain de-

fenses which, if successful, could frustrate a Tucker

Act remedy as ensuring just compensation to the

estate. Merely as one example, we think it clear

that the Government must be precluded from ar-

guing in a Court of Claims action that erosion is

not compensable on the ground that the Trustees

or the Reorganization Court somehow consented to

the continuation of rail operations for the account

of the estate, and that no taking occured for that

reason.

“Since it would be hazardous, if not impossible, to

uy to imagine every conceivable defense to a Court

of Claims action which ingenious Government

counsel might formulate, the only way to ensure

that the estate will receive just compensation is to

preclude all defenses other than those outlined

above.” Brief of Penn Central Trustees as Appel-

lants, at 63-64 (emphasis added).

By that position, the Penn Central Trustees urge

this Court to limit sharply the doctrine of the King and

Sherwood cases so as to enable them to support the con-

stitutionality of the RRRA. It is dear that. if this Coun

refuses to formulate such an exception to the King and

Sherwood doctrine, the Penn Central Trustees join the

Appellees in these cases in asserting that the RRRA is

unconstitutional and that the bare holding that Tucker

Act jurisdiction was not withdrawn by the RRRA is in-

sufficient to save the RRRA.*

Aside f remedy

the positions of the A and with the posi of

4 position of the New Haven

(as to interim erosion) and srry ye he —

‘ to the i com pensated

an — and. with — to ee with the New Ha-

see t rustees’ brief at 48-52, ing that

the issues of whether the RRMA effec s permercesn ene arene

tence or non-existence of a Tucker Aa

sation therefor are not premature and are ripe for decision

Mon ° 7 > — 1 4 8 * = * 1 2

er eee

The Penn Central Trustees’ argument that a

Tucker Act remedy exists produces an anomalous ju-

dicial review pattern. The Trustees must assume, nec-

essarily, that the Special Courts §303(c) decision, when

reviewed by this Court under §303(d), would be bind-

ing on the Court of Claims under a doctrine of res ju-

dicata or collateral estoppel. There would thus be, un-

der the Trustees’ approach, not one but two

declaratory judgments binding upon the Court of

Claims in anticipation of any Court of Claims action

being commenced: one by this Court on the present

appeals, and a second by the Special Court in —

§303(c) decision (which would be reviewed here un —

§303(d)). Apparently, therefore, the role thereafter :

the Court of Claims, under the Trustees approach,

would be limited to adjudicating whatever remaining

defenses could be deemed still open to the United

States.

In this Court, it is recognized that the doctrine of

stare decisis does not bar a revision or reversal of the

King and Sherwood decisions. It should be significant to

the Court, however, that the Appellees, the parties

with the greatest financial stake in the outcome of this

litigation, and presumably having the most to gain

from this Court’s entering a Tucker Act declaratory

judgment as urged by the Penn Central Trustees, do

not support that position. On the contrary, — *

recognize that under the Constitution, Congress has

the last word on appropriations. A declaratory judg-

ment as sought by the Penn Central Trustees will, it is

submitted, be at once a pyrrhic victory for the cred-

itors and an advisory opinion by the judicial branch

which is in no way binding upon Congress.

C. In the RRRA, Congress Intended to Preclude Any

Substantive Cause of Action for Money Damages Against

the United States in the Event that the Consideration

Specified in the RRRA Was Adjudged to Be Con-

stitutionally Inadequate

The Tucker Act is a jurisdictional statute, not a

statute which creates substantive rights or remedies.

The principal function of the limited grant of juns-

diction to the Court of Claims is to waive the defense

of sovereign immunity in cases within the jurisdiction

conferred. However, the jurisdictional grant (and

waiver of sovereign immunity) is broader in scope than

the nature of the valid actions which can be sustained

under it. That is to say, not all cases which may be

properly brought before the Court of Claims have sub-

stantive merit. The United States, USRA and the Penn

Central Trustees fall into error in assuming that, so

long as jurisdiction under the Tucker Act was not im-

pliedly withdrawn, a valid substantive cause of action

automatically exists merely because there is a claim

properly founded on the Constitution. While the text

of 28 U.S.C. §1491 may literally support that con-

struction, it is not one which is judicially sanctioned.

As the Court of Claims stated in Eastport S. Corp. .

United States, 372 F. 2d 1002 (Ct. Cl. 1967):

“Section 1491 of Title 28 of the United States Code

allows the Court of Claims to entertain claims

against the United States ‘founded either upon the

Constitution, or any Act of Congress, or any reg-

ulation of an executive department, or upon any

express or implied contract with the United States,

or for liquidated or unliquidated damages in cases

not sounding in tort.’ But it is not every claim in-

volving or invoking the Constitution, a federal stat-

ute, or a regulation which is cognizable here. The

claim must, of course, be for money. Within that

sphere, the non-contractual claims we consider un-

Section ivided into two somewhat

po —— in which the plainuff

on p Sao over to the Government, directly

1 Feilen and seeks return of all or part of that

— and those demands in which money has not

— paid but the plaintiff asserts that he is nev-

ertheless entitled to a payment from the — 2

— — — e the

been paid or taken), t . ~

sued rl id, exacted,

—— from = — in contravention — —

Constitution, a statute, or a regulation. 15 — —

ond group, where no such 2 2 —

made, the allegation must be that . = .

rovision of law relied upon grants the om.

— or by implication, a eS paid a

tain sum [citation and footnote omitted |.

— category includes the vaned liugations

in 2 = wee to hold that some —

rovision of law embodies a command to —

U ited States to pay the plaintiff some mon

— proof of contisions which he is said to meet.

Familiar examples are inverse eminent domain by 8

taking without formal r nited 1.

Causby, 328 U.S. 256, 66 S.Ct. 1062, 90 L.

( 1946) [other examples and citations omitted].

> f case, we have held, ‘a claimant w

4 entitled to money from — —

— because a statute or a regulation [or t 4 _

stitution] grants him — pad — 4 7 —

icati co .

— — FF hs 4 is not frivolous but ar-

guable’ [citation omitted]. —

* ims which cannot be brought within

oan ae 9 beyond this courts ——

even though they may intimately involve the ol

stitution, an Act of Congress, or an executive reg

ulation. This is the reverse of saying that this

is not concerned with any and all — hoe —

against the Federal Government, simply because

they rely upon (and in that sense are ‘founded

upon) an aspect of federal constitutional, statutory

— regulatory law. Where the claimant is not suing

or money improperly exacted or retained (the first

class defined above), the historical boundaries of

our competence have excluded those instances in

which the basis of the federal claim —be it the Con-

stitution, a statute, or a lation —cannot be held

» command, in itself and as correctly interpreted

— — ment of money to the claimant, but in

which some other principle of damages has to be

invoked for recovery. A federal criminal de-

fendant, for instance, who has been invalidly con-

victed or deprived of his liberty because of a vio-

lation of the Constitution or an Act of Congress

cannot obtain compensation under 28 USC

§1491 for his loss (although remedies may oc.

soutien 08 USE ta under the unjust —

ms (28 U.S.C. §§1495, 2513) or

the civil nghts legislation) [footnote omined *

“Under Section 1491 what one must

. > * I

—— — the constitutional cause or the tegen

which the claimant cites can fairly be interpreted as

mandating compensation by the Federal Gov-

ernment for the — 1 sustained. If not, this

+ td baw — = — Section 1491, al-

general principle —arisi

2 —＋ — tort law — might lead * —

* 0 i . * .

vision.” 372 F. 2d at 1007.09. *

The principles set forth in the £

11 Eastport St vh

decision define the question for decision — —

a substantively valid cause of action in the Court of

Claims if (a) the RRRA was not intended as an em-

inent domain statute, but (b) in fact is bound to result

in inadequately compensated takings of pnvate prop-

erty for public use if not enjoined. The issue is mol, as

suggested by some Appellants, whether there is an im-

plied repeal of the Tucker Act; the issue is the proper

statutory construction of the RRRA in light of the ju-

risdiction conferred by the Tucker Act, and the lim-

itation that valid causes of action against the United

States must be constructed upon statutory as well as

constitutional underpinnings.

The New Haven Trustee has not asserted at any

time that the jurisdiction of the Court of Claims under

28 U.S.C. §1491 was impliedly repealed by the RRRA.

Rather, his position is that Congress has acted in the

RRRA in a preclusionary fashion with respect to the

substantive cause of action. The Penn Central Trust-

ees have no substantive cause of action, under the

Tucker Act, for a taking for which they can invoke the

jurisdiction of the Court of Claims, because Congress

specifically and advisedly legislated the exclusive

means of paying compensation for the properties

made subject to mandatory conveyances under the

RRRA. Since no monies can be paid out of the Trea-

sury of the United States “but in Consequence of Ap-

propriations made by Law” (Constitution, An. I, Sec.

9, Cl. 7), the Congress has the last and only effective

word on whether there shall be any payment for a

taking.

This position is sustained by the text of the RRRA,

its legislative history, and applicable rules of

construction:

(a) The RRRA contains substantive provisions with

respect to compensation which appear undoubtedly to

have been intended by Congress to be exclusive,

namely, those contained in §§206(d)(1), 303(a)(1),

303(c)(1), 303(cK 2B), and 303/02. It likewise ex-

pressly made the §303(c) determinations of the Special

Court exclusive in §20%a), and withdrew the juris-

diction of all courts (including, presumably, courts

convened pursuant to 28 U.S.C. §2284) to restrain

conveyances pursuant to the final system plan after i

has been certified to the Special — cee lan

sentence). These compensation and jurisdiction provi-

sions seem wholly inconsistent with the construction

that Congress in enacting the RRRA intended that pri-

vate claimants to the estate of a railroad would be

given the opportunity to litigate once in the Special

Count, appeal that judgment to this Court, and, if not

satisfied with its judgment, commence a second round

of litigation in the Court of Claims.

(b) The doctrine of inclusio unius est exclusio alter

combined with the legislative history of the —

virtually requires the conclusion that Congress did not

— — subject the Treasury of the United States to

obligation to pay in legal tender for properties re-

—— — to Conrail under the authority

States to pay for properties taken can be implied from

2 cases so holding have involved statutes

— w ns Congress clearly did not attempt to prescribe

at the consideration to be issued for the taking as-

sume af < :

United — than a money judgment against the

“For exa .

Kuyhenddl quoted press ta nny between Reps. Adome and

which comes into play when a statute can fai :

* l fairly be

zing the executive branch to effect a taking wit er

4 „

}

(d) Where by proper statutory construction it is de-

termined that Congress has legislated that a taking

shall not be paid for in money by the United States,

the doctrine of separation of powers, and the respect

due to Congress’ decisions as to legislative matters,

prevent the judicial branch from permitting a taking

to proceed on the assurances of the executive branch

that the United States will be liable to the owners of

the property in the Court of Claims. See Youngstown

Sheet & Tube Co. v. Sawyer, supra (a taking by the execu-

tive d t was not authorized by Congress); Hooe

„ United States, 218 U.S. 322 (1910) (a taking by the

executive department was not authorized if the

amount exceeded limits set forth in Congressional

budget appropnations).

Hooe v. United States, supra, is precisely in point.

Youngstown, supra, is significant in this context because

the Court, in response to the contentions by the Gov-

ernment that the steel mill owners had an adequate

remedy at law for President Truman's unauthorized

seizure, cited Hooe as indicating substantial doubt

whether a remedy in fact existed in the Court of

Claims.

The facts in Hooe were as follows: Congress had

appropriated a fixed sum of money for a government

agency to lease part of a privately owned building.

„in this Court, the Secretary of Commerce argued that 28 U.S.C.

§1491, giving the Court of Claims jurisdiction “upon any claim against

the United States ... founded ... upon ... any regulation of an execu-

uve ” was applicable “regardless of the constitutional validity

of the ems taking,” and an adequate remedy at law. Bref

of Acting Attorney General and Sola General Periman, May, 1952, in

Sawyer v. Youngstown Sheet & Tube Co. (No. 51-745) at 70, 2 The Steel Sei-

zure Case 778. Youngstown is thus not distingui on the ground ar-

gued by USRA’s Brief at 46 u. 56. It is further significant that the Gov-

ernment in 1 relied upon Huriey v. Kincaid, and argued that

was a panacea for all cases of uncompensated takings. /d. at 7 71.

The agency negotiated a one-year lease covering all

floors except the basement, but the agency also oc-

cupied the basement. After the lease expired, the

landlord demanded more rent for the building, in-

cluding additional rent for the basement. The agency

agreed the request was reasonable, and promised to

seek a supplemental appropriation from Congress for

the additional rent. Based on this promise, the land-

lord permitted the agency to remain in the premises

even though it paid on a current basis only the rent

provided in the initial lease. This continued for three

more years, and Congress declined to approve any

supplemental appropriation. Suit was brought in the

Court of Claims. The Supreme Court held that the

United States was not liable to the plaintiff on the

ground that there was no cause of action based on im-

plied promise, or the Fifth Amendment taking clause,

because Congress had not authorized a taking at any

price, but only the use of private property at the rental

provided for in the Congressional appropriation. That

the Congress had not authorized the payment of any

rent for the basement area of the building was held to

bar any cause of action under a quantum meruit theory,

or a taking theory, because if private property was

“taken,” it was by action of the executive branch not

concurred in by the Congress.

Cases such as Hurley v. Kincaid, supra, involve a

Congressionally authorized taking where it is clear that

Congress expected to subject the United States to suit

for damages, a situation quite unlike the case at bar.

Hurley v. Kincaid involved a statute which authorized

the Government to acquire either fee title or an ease-

ment for the purpose of flooding privately-owned

lands in the event the Government determined that it

would be more feasible to allow flood waters to over-

flow such lands rather than to construct levees to con-

trol flood waters. The statute provided that “No li-

ability of any kind shall attach to or vest upon the

United States for any damage from or by floods or

flood waters at any place... .” However, a proviso to

that provision made it clear that the liability of the

United States precluded by the statute was liability in

an action in ton for consequential damages, not li-

ability for an actual taking of an easement for flood-

ing. In the K case, the Government resisted using

its eminent domain powers to take a flooding ease-

ment on the ground that it was unnecessary because

the government program would not subject Kincaid's

property to additional destructive flood waters. In the

District Court, the factual finding was made against

the Government that the plan would, in fact, cause ad-

ditional destructive flood waters to pass over Kincaid's

land. An injunction was accordingly issued, and was

affirmed by the Court of Appeals. This judgment was

reversed by this Court on the ground that:

“Kincaid concedes that the Act is valid and that it

authonzes those entrusted with its execution to

take his lands or an easement therein. ... If that

which has been done, or is contemplated, does con-

stitute such a taking, the complainant can recover

just compensation under the Tucker Act in an ac-

tion at law as upon an implied contract, since the

validity of the Act and the authority of the de-

fendants are conceded.” 285 U.S. at 103-04.

The differences between the RRRA and the statute

involved in Hurley v. Kincaid are numerous and signifi-

cant. First, unlike the statute at issue in Aincaid, the

RRRA contains no provision whatsoever expressly au-

thorizing the United States to take property or an

easement therein by eminent domain. Second, unlike

Kincaid, the RRRA includes express provisions man-

dating that payment for the properties required to be

conveyed take the form of stock and other secunties

of, and a deficiency judgment against, a corporation

created pursuant to the Act. Had the statute in Hurley

v. Kincaid provided that farmers whose land was

flooded would receive shares of stock in TVA, as de-

termined by a specially constituted court, and had this

Court held that, in addition, Kincaid had a remedy for

money damages against the United States in the Court

of Claims, then the case might be of some relevance to

the instant case. Third, Kincaid conceded, as the

Court noted, that the statute involved was a con-

stitutionally valid enactment;** the New Haven

Trustee and the other Appellees here make no such

concession.

These differences, it is submitted, are controlling.

In the RRRA, furthermore, unlike the statute involved

in Hurley v. Kincaid, no intention of Congress to effect

a compensable taking is expressed, even though the

RRRA defines with particularity the actions which gov-

ernment agencies are to cause to be done. While these

actions will have the legal effect of an uncompensated

or inadequately compensated taking, they do not ex-

press a Congressional intention to exercise the em-

inent domain power. The legislative history is clear

Congress was acting under a misapprehension as to

the extent of its Bankruptcy Clause powers. Congress

believed that invocation of the word “reorganization”

would have the legal effect of avoiding what is, in sub-

stance, a taking from being adjudged to be an exercise

of the eminent domain power. In the words of Senator

Hartke, floor manager for the bill in the Senate:

“We are providing that the creditors of this cor-

poration would be required to take common stock

“Had 28 U.S.C. §§2282 and 2284 been in effect at the time, it may

be questioned whether Kincaid would have persuaded a three-judge

court to issue an injunction in the light of that concession.

in the new quasi-government operation. In other

words, they are exchanging their present security

interest in the rail properties for common stock in

the new corporation.

“The railroad properties then become the .

ties of the new corporation free and clear 122

and encumbrances. In other words, the assets are

being transferred and the nghts are being changed.

The nonrailroad property will remain in the bank-

ruptcy court to be deal with by them. One can talk

about what is available if the railroad is liquidated

and put through the wringer, but even t the

chances of these creditors getting their money is

relatively slim, and this country cannot afford cessation

of rail service while the railroads are put through

the wringer. So what, in effect, is called the ‘cram

down’ — forces them to accept this kind of set-

tlement judges have ruled that this is fair.”

(Remarks of Senator Hartke; 119 Cong. Rec. S

> (daily ed. December 21, 1973); emphasis

This passage fairly summarizes Congressional in-

tent as regards authorizing any taking under the

RRRA. It constitutes (i) a recognition that Conrail is

indeed a “new quasi-government operation; (ii) a spe-

cification of an intent to free the rail properties of rail-

roads in reorganization from existing liens of cred-

itors; (iii) a statement of the policy underlying the

RRRA that “this country cannot afford cessation of

rail service while the railroads are put through the

wringer,” and (iv) an expression of the legal concept

accepted by Congress, to wit: that the “cram-down the-

ory” (presumably a reference to §77(e)) will force cred-

itors “to accept this kind of settlement” and that

“judges have ruled that this is fair.”

It is submitted that the legislative history is wholly

antithetical to any theory that the RRRA was intended

to be a Congressionally authonzed taking statute. In a

decision which predated his opinion in Hurley v.

Kincaid by seven years (and which is not cited in any of

the Appellants’ briefs), Mr. Justice Brandeis observed:

“There can be no recovery under the Tucker Act if

the intention to take is lacking. Tempel v. United

States, 248 U.S. 121. Moreover, the Act did not

confer authority to take a business. In the absence

of authority, even an intentional taking cannot sup-

port an action for compensation under the Tucker

Act. Umited States v. North American Transp. & Trad-

ing Co, 253 U.S. 330." Mitchell v. United States, 267

U.S. 341, 345 (1925).

As in Hooe v. United States, supra, Congress did not

intend in the RRRA to exercise the sovereign’s em-

inent domain powers to effect a compensable taking.

Rather, it intended to accomplish a non-compensable

taking in the belief that this could be achieved through

exercise of Bankruptcy Clause powers. The court be-

low has correctly found that Congress has violated the

Fifth Amendment nghts of creditors and stockholders

of Penn Central in the process. But that finding does

not convert Congress’ intent into one of effecting a

compensable taking by exercise of the eminent domain

power. The court below was, therefore, on sound

ground in refusing, as a matter of separation of pow-

ers, to impute to Congress an intent to effect a com-

pensable taking. Under the doctrine of the Hooe and

Mitchell cases, unless this Court is able to impute this

intent to Congress as a matter of fair construction of

the legislation, it cannot find that a substantively valid

Tucker Act action would come into existence at the

conclusion of the Special Court's §303(c) proceedings.

Likewise inapposite to the present decision is

Silesian American Corp. v. Clark, 332 U.S. 469 (1947),

cited by the Penn Central Trustees as a case “where

the ‘taking’ statute at issue (the Trading with the En-

emy Act) contained no provision for compen-

sation (Penn Central Trustees’ Brief at 27). This

characterization is inaccurate. Section %a) of that Act,

50 U.S.C. App. §%a), provides in pertinent part:

“Any person not an enemy or ally of an enemy

claiming any interest, nght, or title in money or

other property which 1 have been conveyed,

transferred, assigned, delivered, or paid to the

Alien Property Custodian or seized him here-

under... may file with the said custodian a notice

» Shp claim and the — t...may order

t yment, conveyance, transfer, assignment, or

222 to said — of the money or other

property so held by the Alien Property Cus-

todian....1f the President shall not so order

within sixty days... said claimant may institute a

suit in equity in the United States District

Cour ...to establish the interest, right. title, or

debt so claimed, and if so established the court

shall order the payment, conveyance, transfer, as-

signment, or delivery to said claimant of the money

or other property so held by the Alien Property

Custodian. . . .”

Further provisions of Sa) authorize the President

to order the sale of seized property of a person

claiming to be not an enemy or an ally of an enemy,

such sale to take place while the suit by a claimant ts

pending, and limit the recovery in the suit to the pro-

ceeds of the sale unless the claimant

“files with the court an election to waive all claims

to the net proceeds, or A thereof, and to

claim just compensation instead.“

Section 7(c) of the Trading with the Enemy Act, 50

U.S.C. App. §7(c), provides, in pertinent part:

“For a definitive interpretattom of the continued applicability of

§%a) in light of the 1941 amendment of §5(b), see Clark ( r Fi-

nanz-K orporation, 332 U.S. 480 (1947), decided the same day as ibe

Silesan Amencan case.

“The sole relief and remedy of any person havin

any claim to any money or other property . . . pai

over to the Alien Property Custodian ... or seized

by him shall be that provided by the terms of this

Act, and in the event of sale or other disposition of

such property . shall be limited to and enforced

against the net proceeds received therefrom . . . .”*!

The Trading with the Enemy Act does indeed

present some striking analogies to the RRRA, al-

though the facts in the Silesian American case are

hardly “simila: to the present situation.” Fenn Central

Trustees’ Brief at 27. One analogy is that Congress, al-

though it clearly authorized takings of private prop-

erty, did not want to create a situation in which the

Alien Property Custodian could by error subject the

United States Treasury to liability of millions or hun-

dreds of millions of dollars.” Hence Congress pro-

vided a different remedy: a person who claimed that

the Alien Property Custodian had misclassified him as

an enemy alien could (after exhausting his adminis-

trative remedies with the Custodian and the President)

bring suit in equity to recover his property.” Recog-

nizing, however, that the Government might find it

prudent to sell the property during the course of lit-

igation seeking its recovery, Congress provided that

*'It is noteworthy that in §7(c) of the Trading with the Enemy Act,

Congress expressly limited the substantive cause of action available to

sins. Conan chsioudy Uetivad rr

. Congress obvi that

Tucker Act jurisdiction. eae 5 2

“For example, the /nterhandel litigation was a claim by a Swiss Cor-

poration which asserted that was not comrolied by matlonale of Nes

Germany and was entitled to recover from the Alien Property Custodian

aoe ae ee — & Film © ion; the value of

t was measured in hundreds of millions of dollars.

ultimately settled in the 1960's. —

“The Tucker Act provides the Court of Claims with jurisdiction

only to render money judgments, and in this respect is an inferior rem.

edy to that provided in §%a) of the Trading with the Enemy Act.

the property could be sold. Not wishing to give the

claimant in effect a right to demand that the Gov-

ernment then pay him whichever was the greater, the

net proceeds of sale or just compensation (presumably

as of the date of taking), Congress provided for a limit

on the possible recovery to the net proceeds unless the

claimant filed a waiver agreeing to seek only just com-

pensation. The basic analogy to the RRRA in this

scheme is that Congress has created in each instance

an elaborate judicial machinery for determining issues

of value of property and the compensation to be paid

therefor. If there is a section of the RRRA which cor-

responds to ga) of the Trading with the Enemy Act,

it is §303(c), which vests jurisdiction (within limits) in

the Special Court to decide whether transfers made

under §303(b) are fair and equitable and, if not, pre-

scribing various substantive remedies, including the

power of the Special Court to order Conrail to provide

additional securities or to enter a deficiency judgment

against Conrail. If, and to the extent that, §303(c) is

perceived to parallel §§%a) and 7(c) of the Trading

with the Enemy Act, the intention of Congress in the

case of the RRRA to create or permit a substantive

cause of action against the United States in the Court

of Claims is made even more doubtful.

A lack of a substantive cause of action for takings

resulting from implementation of the RRRA would

mean that the United States would have a complete

defense in a Court of Claims action under the Tucker

Act: the defense would rely on Congress’ power to de-

clare when and under what circumstances, if at all, the

United States Treasury is subject to liability. That

power, of course, derives from the express words of

Article 1, Section 9, Clause 7:

‘No money shall be drawn from the Treasury, but

in Consequence of Appropriations made by

las

The same power was exercised by Congress in the

Trading with the Enemy Act to deny a person entitled

to Fifth Amendment protection a substantively valid

cause of action, or to limit his recovery if his action

could not, consistent with the Constitution, be denied.

Furthermore, Congress did not expressly repeal the

Tucker Act jurisdiction as to claims arising under SO)

of the Trading with the Enemy Act. Presumably, if

any claimant had filed a complaint in the Court of

Claims, it would have been dismissed not on juris-

dictional grounds but for want of a valid cause of ac-

tion. Such a claimant's cause of action would not have

been valid because (a) he had not exhausted adminis-

trative remedies, and upon discovering the claimant to

be a non-enemy alien the President would order his

property restored, or (b) if he had exhausted adminis-

trative remedies, he had not exhausted his judicial re-

medies in equity, or (c) if his property had been sold,

he was not entitled to just compensation but only to

the proceeds of the sale unless he signed the waiver.

Although §9%a) is not wholly clear on this point, if the

claimant signed the waiver, his claim for just compen-

sation would presumably be adjudicated by the District

Court ander Sa), from which he could appeal to the

Court of Appeals and, if not satisfied, petition this

Court for a writ of certiorari. It seems wholly untenable

that, after judgment in this Court affirming the Dis-

trict Court’s decision, such a claimant could start all

over again in the Cour of Claims under 28 U.S.C.

§1491.

If that correctly states the law as applied under the

Trading with the Enemy Act, it must be concluded

that the jurisdiction of the Court of Claims is broader in

scope than the area of substantively valid causes of ac-

tion. Like all courts, the Court of Claims has cases

presented to it that, for one reason or another, are

without substantive merit. Congress need not concern

itself with repealing jurisdictional legislation pertaining

to the Court of Claims when it perceives that no sub-

stantively valid cause of action could ever be estab-

lished, or when ii deliberately sets out to preclude the

same. The nub of the New Haven Trustee's position

on this point is that Congress intended to preclude a

Tucker Act cause of action by any person aggnieved by

the §303(c) decision of the Special Court, as reviewed

on appeal by this Court pursuant to §303(d).

The differences, as well as the analogies, between

the RRRA and the Trading with the Enemy Act are

revealing. Railroad creditors as a class are apparently

viewed as having a lesser degree of Fifth Amendment

rights than non-enemy aliens, since they can have

stock and other securities forced upon them, and “the

‘cram-down’ theory forces them to accept this kind of

Settlement. Unlike non-enemy aliens, railroad cred-

itors would not be allowed even to elect to receive the

proceeds of the sale of rail properties: for example, if

Conrail takes the Northeast Corridor rail properties

and sells them to Amtrak for $500 million as con-

templated by the RRR.“ Conrail keeps the proceeds.

Under the Trading with the Enemy Act, the non-en-

emy alien has a choice of accepting net proceeds of

the sale of his property or just compensation.“

Fort Berthold Reservation v. United States, 390 F. 2d

“See Senator Hartke’s remarks, quoted in full supra at 46-47.

“See §20HCK IMC) and lid) of the RRRA. USRA has advised the

2 ee — — 1974) that the “muss-

' 4500 million in §210 not accounted for by the $1 bilhon of USRA

' ions which may be issued to Conrail is intended to be allotted to

Amtrak for this purpose. |

‘Judge Fullam observed in his Secondary Detnor 180-day decision:

‘ertainly if Congress were to give Amtrak the eminent

DDr But

I find it difficuk to accept the theory that it is constitutionally per-

missible for the government to achieve that result by the RR A.

without providing the present owners of the property with cash or

its equivalent.” (JA 155).

686 (Ct. Cl. 1968) is cited in the Penn Central Trust-

ces Brief (at 16) as being “virtually on all fours with

the present situation.” Fort Berthold avose in the juris-

dictional comext of the Act of August 13, 1946, §24,

60 Stat. 1049, 1055, which created the Indian Claims

Commission with authonty to determine certain types

of Indian claims against the Unned States which had

occurred prior to the date of the Act, subject to a right

to appeal to the Court of Claims; and another provi-

sion’ gave the Court of Claims original jurisdiction to

determine similar claims thereafter arising. In Fort

Berthold, an earlier act of (Congresse had authorized

the taking of the claimants’ land and arbitrarily de-

creed the price ($2.50 per acre) to be paid therefor.

Except for the fact that Congress relented in 1946 and

extended to Indian claimants nghts similar to those

enjoyed by other Americans since 1887, and specifi-

cally refrained from imposing the six-year statute of

limitations applicable to Tucker Act suits (28 U.S.C.

§2501), these Indian claimants would have been with-

out any substantive remedy in the Coun of Claims or

any other court for any failure of earlier takings to

have accorded them just compensation. Because Con-

gress did relent in the case of Indian claims, these In-

dian claimants were afforded both an administrative

hearing and a nght to appellate judicial review in the

Court of Claims, and the Court of Claims upheld cer

tain of their claims some 58 years after the takings oc-

curred. If all inadequately compensated takings were

subject to suit in the Court of Claims based on 28

U.S.C. §1491, these claims could have been adju-

dicated long ago. It is submitted that reliance on Fort

Berthold by the Penn Central Trustees for construction

of the RRRA is wholly misplaced.

“Codified as 28 U.S.C. §1505 by Aa of May 24, 1949, « 139.

§8%a), 63 Seat. 102.

“Act of June |, 1910, 36 Stat. 455.

Yearsley v. W. A. Ross Construction Co., supra, is not in

point for the same reason as Hurley v. Kincaid, supra. In

Yearsley, private riparian owners brought an action for

damages to their land against a government contractor

working on a er improvement project. Chief Justice

Hughes said, “it is clear that if this authority to carry

out the project was validly conferred, that is, if what

was done was within the constitutional power of Con-

gress, there is no liability on the part of the contractor

for exercising its will.” (309 U.S. at 20-21). Chief Jus-

tice Hughes then discussed the case on the theory that

what the contractor had done “constituted a taking of

their [plaintiffs'] property for which compensation

must be made.” On this theory, he held the statute

valid since the Fifth Amendment does not require pay-

ment in advance of the taking,” and the plaintiffs had

a remedy in the Court of Claims, cating Hurley v.

Kincaid, supra.

Cases such as Hurley v. Kincaid and Yearsley must be

contrasted with cases such as Land v. Dollar, 330 U.S.

731 (1947), in which plaintiffs were the stockholders

of Dollar Steamship Lines, Lid. Facing difficult fi-

nancial straits, in 1938 plaintiffs entered into a con-

tract with the Maritime Commission under which they

delivered their stock to the Commission in exchange

for financial assistance and operating subsidies. In

1943, the plaintiffs demanded the return of the

shares, and the Maritime Commission refused on the

ground that it had acquired title to the shares. The

plaintiffs sued in equity to recover their shares. The

suit was dismissed by the district court as an uncon-

sented suit against the government. This Court re-

versed, holding that if the plaintiff's contentions were

proven, they would be entitled to equitable relief to se-

cure possession of their shares, cating United States v.

Lee, 106 U.S. 196 (1882) and a nes of cases which

followed Lee. If Hurley v. Kincaid stood for the proposi-

tion for which it is cited by Appellants, Land v. Dollar

should have been decided on the ground that the

plaintiffs were in the wrong court seeking the wrong

remedy, and they should have been remitted to an ac-

tion for damages under the Tucker Act for the value

of their shares taken by the Maruime Commission.

Land v. Dollar, supra, was then followed by two cases

which, if Appellants were correct, should also have

been decided by reference to Hurley v. Kincaid, supra,

but were instead decided on the basis of sovereign im-

munity. In its 1949 decision in Larson v. Domestic &

Foreagn Commerce Corp., supra, the Court reconciled two

divergent lines of sovereign immunity cases, one rep-

resented by l'nited States v. Lee, Land v. Dollar, and

Goltra v. Weeks, 271 U.S. 536 (1926), all holding on

their facts that sovereign immunity does not bar equi-

table relief, and the other represented by Goldberg v.

Damels, 231 U.S. 218 (1913), holding that sovereign

immunity is a bar. Chief Justice Vinson, for a majonty

of the Court, held that sovereign immunity was a bar

in a case where plaintiff did not claim that the statute

under which the government officer acted was itself

unconstitutional, thus confining the Ler doctrine to

cases of asserted unconstitutionality. Lee itself, how-

ever, should have been overruled expressly in Larson,

if Hurley v. Kincaid stands for the Appellants’ proposi-

tion that all governmental takings which violate the

Fifth Amendment are compensable in actions under

the Tucker Act, particularly since Lee predated the en-

actment of the Tucker Act. Mr. Justice Douglas con-

curred in the result in Larson, but would have limited

its holding to government procurement cases, thus

leaving the Lee line of cases otherwise in force. Mr.

Justice Frankfurter dissented on the ground that

Larson should have been governed by Lee, Land v. Dol-

lar and Goltra v. Weeks. Both the concurnng opinion

and the dissent in Larson are inconsistent with the rule

of law which Appellants claim is to be derived from

Hurley v. Kincaid.

The second of the post-1949 sovereign immunity

cases was Malone v. Bowdoin, 369 U.S. 643 (1962), in

which plaintiffs filed an action of ejectment against a

forest service officer of the United States claiming title

to land occupied by the officer. The District Court dis-

missed the case on grounds of sovereign immunity;

the Court of Appeals reversed, citing the Lee case.

This Court (by a 4 to 3 vote) reversed, and held that

the action was barred by sovereign immunity because

the case was governed by Larson. The opinion of the

majority, by Mr. Justice Stewart, has an important

bearing on the scope to be given to Hurley v. Kincaid,

supra:

“While it is possible to differentiate many of these

cases fe. g. Lee, Land v. Dollar| — their indi-

viduali facts, it is fair to say that to reconcile

completely all decisions of the Court in this field

prior to 1949 would be a Procrustean task.

“The Court's 1949 Larson decision makes it un-

necessary, however, to undertake that task

here

“While not expressly overruling United States v.

Lee, supra, the Court in Larson limited that de-

cision in such a way as to make it inapplicable to

the case before us. Pointing out that at the time of

the Lee decision there was no remedy by which the

—

| Id have pen

he taking of his land, the Court interpreted Lee as

mply ‘a specific application of the constitutional

o the doctrine of ign immunity.’

at 696. So construed, the Lee case has

ey -I that the hold-

ing [of property of the plaintiff] constitutes an uncon-

stitutional taking of property without just compensation.

Bendy Ty has been 1 in the present

case. S. at 646-48 (footnote itted: >

— 8 omitted: em

Since in the present case plaintiffs asserted that

their property (i.e., their liens which would

be divested pursuant to §303(b)(2)of the RRRA, and

their right to earn a return on their investment in such

mortgages) is threatened with an unconstitutional tak-

ing, it follows (on the basis of Malone v. Bowdoin) that

the plaintiffs in the instant cases meet the test estab-

lished by Malone v. Bowdoin and Larson for the appli-

cability of the Lee decision. And if the reasoning of the

dissent in Malone v. Bowdoin is followed, it is clear a for-

liori that the Appellees have established their right to

injunctive relief. Speaking for the dissent in Malone v.

Bowdoin, Mr. Justice Douglas would have limited the

Larson holding to government procurement cases. He

observed:

“If it [the United States] is aggrieved by the state or

federal court ruling on title, it can bring its arsenal

of power into play. Eminent domain—with the

power immediately to take possession — is available.

“If, however, the citizen must bow to the doctrine

of sovereign immunity, he is precluded from an

relief except a suit for under 28 U.S.C.

1346(b) or 28 U.S.C. §1346(a)(2), or 28 U.S.C.

1491. This places the advantage with an all-powerful

882

7 *

Government, not with the citizen” 369 U.S. at 650

(emphasis added).*°

It should be observed in the case of the RRRA,

that the alternative of the Government bringing “its

arsenal of power into play. Eminent domain — with the

power immediately to take possession—" is likewise

available. See New Haven Trustee's Brief as Cross-Ap-

pellant at 88-92.

Larson and Malone v. Bowdoin were also followed in

Dugan v. Rank, 372 U.S. 609 (1963), which is another

in the senes of flooding and npanan ownership cases

exemplified by Hurley v. Kincaid, supra.’ An action was

brought in Dugan to enjoin the United States from im-

pounding waters as part of a dam project thereby

making plaintiff's agricultural land less valuable. [he

District Court granted an injunction, holding that the

United States had consented to sun under the

McCarran amendment, 43 U.S.C. §666. The Court re-

versed, not on the ground of any adequate remedy at

law, but because the action was barred by sovereign

immunity, citing Larson and Malone v. Bowdoin, and the

McCarran amendment did not apply. Mr. Justice

Clark observed:

“The Court has on other occasions refused to construe an eminent

domain statute so narrowly that a Guzen would be left only with a em

edy in the Court of Claims. See ¢.g., Catlin v United States, 324 US. 229,

241 (1945):

“While the and the wording of the act [Declaration of Tak-

ing Ac of 26, 1931, 46 Seat. 1421] are not wholly free

from doult, we see no necessary inconsistency between the provi-

sions for transfer of utle upon filing of the declarauion and making

of the deposit and at the same time preserving the owner's pre-

existing right to question the validity of the taking... . The .

native construction, that title passes irrevocably, leaving the owner

no Opportunity to question the taking’s validity or one for which the

only remedy would be to accept the compensation which would be just uf the

lad would cause serous queshon concerning the statute's va-

lde (emphasis added).

„Other “flooding” cases include Jacobs „ Umied States, 290 US. 13

(1933); United States v. Dickinson, 331 U.S. 745 (1947). Cf. United States v

Causby, 328 U.S. 256 (1946) (low flights of military aircraft over a chicken

farm).

“Since the Government, through its officers here,

had the power, under authorization of Congress, to

seize the property of the respondents... . and this

wry of seizure was constitutionally permissible, as we

in run Irngation District v. McCracken, 357

U.S. 275 (1958)], there can be no question that this

case comes under the rule of Larson and Malone,

supra. The power to seize which was ed here

had no limitation placed upon it the Con-

gress. ...” 372 U.S. at 622-23 (emphasis added).

If the RRRA were worded differently, no doubt it

could have been sustained as a grant by Congress to

the executive branch to seize plaintiff's property (ie.

their mortgage liens and their right to earn a return

on their investment) as well as Penn Central's rail

properties. However, it is not so worded. Not a single

provision of the RRRA can fairly be interpreted as say-

ing that Congress expressly authorized USRA, if nec-

essary, to take by eminent domain the property of

Penn Central and of its mortgage lien creditors. On

the contrary, the Amicus Cunae brief filed in these

cases by Rep. Brock Adams (on behalf of 36 Con-

gressmen) states:

a Tucker Act, 28 U.S.C. 1491 (1970), waiver of

sovereign’s junsdictional immunity was enacted

to — adequate opportunity for expeditious

and orderly determination of claims — the

— The Tucker Act deals with the five

imued areas of liability to which the government

consents. The five areas do not purport to deal

with the upholding of other Acts of Congress. This

Court has never relied upon the presence of the

Tucker Act to u the ituti ;

a. oS — constitutionality of

“The logic employed in attempting .

the Rail Act is constitutional wal of + ae

Tucker Act remedy is indeed strained. h and

every act of Congress of a similar nature, irre-

spective of the amount of authonzation or the pro-

cess i for in any such act, could be con-

stit utionally upheld on the grounds that a future

Tucker Act remedy might be invoked. The intent

of Congress in passing the Tucker Act was not to

insure the constitutionality of potential uncon-

stitutional laws and such a precedent would be very

dangerous.

“The Tucker Act remedy in such cases as (d

States v. Causby, 328 U.S. 256 (1945), and Hurley v.

Kincaid, 285 U.S. 95 (1932), is based upon a lawful

government action inadvertently causing injury to a

private party which gives rise to a cause of action in

the Court of Claims. Such a lawful action by the-

Government may result in an le — — 1 1 0.

low-flying airplanes or flooding of property. In any

of these cases, however, the — — statutory ac-

tion was proper, ie, flying military airplanes or

carrying out a flood control project.” /d. at 17-18.

“The court should not at this time consider the

availability of a future Tucker Act remedy in con-

sidering the constitutionality of the Rail Act. Any

Tucker Act remedy must be based upon the facts

which show an implied taking or improper erosion

of creditor rights if and when the matter is

to the Court of Claims. Any nual

ucker Act remedy is, therefore, not ore this

Court. If this Court should decide at this time that a

mechamsm of a deficiency judgment against the C nie

States under the Tucker Act is necessary to make this Act

constitutional, then the Act must fall since the leg-

islative history and the language of the Act are

clear that no deficiency j t against the U.S.

is authorized by the Act.” Id. at 21-22 (emphasis

added).

Under the doctrine of United States v. Lee, Goltra .

Weeks and Land v. Dollar, supra, as limited by Larson

and Malone v. Bowdoin, supra, the Court is required to

assess whether the RRRA is constitutionally valid leg-

islation or whether it results in an inadequately com-

pensated taking (either permanent or interim or both)

of plaintiffs’ property nghts. It is submitted that the

answer to this question is that Congress did not pur-

port to exercise the sovereign’s eminent domain pow-

ers and, in any event, specifically intended not to per-

mit a deficiency judgment against the United States

Treasury. If, but only if, the Court can first read into

the RRRA an intent to exercise the power of eminent

domain, can the RRRA be sustained; and only in that

event would it follow that the United States has con-

sented to suit in the Court of Claims. If the RRRA is a

constitutional exercise of the eminent domain power,

the doctrine of adequate remedy at law would be ap-

plicable, and the limited exception to sovereign im-

munity which permits equity actions seeking to re-

strain the enforcement of an unconstitutional

enactment would be inapplicable. The Appellants,

however, would put the can before the horse. They

argue that the RRRA is constitutional because of the

availability of a Tucker Act remedy. The law is oth-

erwise: only if the RRRA is constitutional because the

Congress in fact intended to authorize the exercise of

the sovereign’s eminent domain power, would there be

a Tucker Act remedy. The Court below correctly held

that the RRRA is unconstitutional because Congress

did not authorize the exercise of the eminent domain

power, and accordingly held that there is no Tucker

Act remedy for any takings of private sed

by the RRRA. ord a ae ee

. In Youngstown, supra, counsel for the Government

similarly put the cart before the horse in arguing:

“Plaintiffs’ argument is that this [Tucker A -

edy is not available to them —— — —

yers acts are supported by statutory or con-

stitutional authority; hence, that the preliminary

question whether plaintiffs have an uate rem-

edy at law hinges on the very merits of the case.

We submit, on the contrary, that plaintiffs have a

remedy in the Court of Claims, and that therefore

the Court need not reach any of the constitutional

questions in order to decide that an injunction may

not issue.” Brief of Acting Attorney General and

Solicnor General Perlman, May, 1952, in Sawyer v.

Youngstown Sheet S Tube Co. (No. 51-745), at 55-56,

2 The Steel Seizure Case 763-64.

In these cases, the United States and USRA make

precisely the same argument in support of their

Tucker Act remedy defense. See United States brief at

39-48; USRA brief at 43-60." The rejection of this ar-

gument by the Court in Youngstown ts controlling pre-

cedent here. If Hurley v. Kincaid has the meaning as-

cribed to it by Appellants, then all six concurring

opinions and the dissenting opinion in Youngstown

were in error because the Justices never should have

reached the merits of the asserted lack of con-

stitutional authority to effect the seizure. If the Tucker

Act remedy cures all instances of temporary takings,

then the steel companies in Youngstown clearly had, as

government counsel claimed, a complete and adequate

remedy at law, similar to that upheld by this Court in

Pewee Coal Co. v. United States, 341 U.S. 114 (1951),

affirming 115 Ct. Cl. 626, 88 F. Supp. 426 (1950). See

also U'mited States v. Umited Mineworkers, 330 U.S. 258,

284-85 (1947) (seizure of coal mines by executive or-

der, directing owners to continue to operate for ac-

count of the Government, is a taking “in as complete a

„Much of the arguments of the United States and USRA are de

voted to a non-issue in this case) whether the RRRA impliedly effected a

repeal of the Court of Claims Tucker Act jurisdiction. The Court below

did not so hold, although such a contention was advanced by certain of

the plaintiffs. The New Haven Trustee a below, and asserts here.

that there has been no implied repeal of the Tucker Act junsdiction of

the Court of Claims.

sense as if the Government held full tithe and

ownership”). The only way in which the decision in

Youngstown can be reconciled with the Hurley v. Kincaid

line of cases is that the issue of adequate remedy at

law itself turns on constitutional and statutory author-

ity to exercise the eminent domain power. If the con-

sttutional and statutory authority be lacking, either

because Congress has rejected the idea of subjecting

the United States Treasury to the cost of a taking ( the

instant case), or because Congress prescribed a differ-

ent statutory route which the executive branch has de-

clined to follow (Youngstown), then there is no remedy

under the Tucker Act. This distinction is also the basis

upon which Youngstown can be reconciled with Larson

v. Domestic and Foreagn Commerce Corp., supra:

“There is no claim that [the administrator's] action

constituted an unconstitutional taking ... Only if

the Administrator's action was within his authority

could such a suit [in the Coun of Claims under the

Tucker Vet] be maintained.” 337 U.S. at 703 and

n. 27.9

This Court cannot avoid deciding whether the

RRRA represents a constitutional exercise of the em-

inent domain power, or an invalid exercise of the

Bankruptcy Clause power. If, but only if, the RRRA is

constitutional is it necessary to consider the nature of

any Tucker Act remedy for an inadequately compen-

sated taking.

“This distinction also helps to explain why the vendor in Armstrong

v. United States, supra, who was barred by sovereign immunity from en

forcing his lien by repossession and sale, had a remedy in the Coun of

Clams. There was no suggestion that the Department of the Navy, in or-

— the vessel to be transferred to the United States, was acting in ex-

cess of constitutional or statutory authority.

D. The Doctrine of Adequate Remedy at Law Requires

that the New Haven Trustee Have an Independent

Cause of Action Against the United States Under the

Theory of the Armstrong Decision

In Armstrong v. United States, supra, this Court in

1960 upheld a judgment of the Court of Claims that

the United States was liable for a taking of the interest

of a vendor who supplied materials to a contractor for

a nave. vessel. The vendor was entitled to a lien on the

property in the possession of the contractor, but when

title passed to the United States the lien created by

state law could not be enforced by reason of sovereign

immunity. United States v. Ansoma Brass S Copper Co.

218 U.S. 452 (1910). The Court held that Louisville

Joint Stock Land Bank i. Radford, 295 U.S. 555 (1935)

was applicable, 364 U.S. at 44, entitling the vendor to

assert that divestment of his lien is a taking of his

property, 364 U.S. at 48-49, saying:

“This [the destruction of the liens] was not because

their ny vanished into thin air. It was because

the Government for its own advantage destroyed

the value of the liens. Since this acquisition [of

property subject to the liens] was for a public

use in the circumstances of this case [the Gov-

ernment] did thereby take the property value of

those liens within the meaning of the Fifth Amend-

ment.. The Fifth Amendment's guarantee that

private property shall not be taken for a public use

without just compensation was designed to bar

the] Government from forcing some people alone

to bear public burdens which, in all fairness and

justice, should be borne by the public as a whole.”

If any of the “inverse eminent domain” cases are of

relevance in the case at hand, the case most clearly in

point is the Armstrong decision. However, the logic of

the Armstrong decision requires a completely different

type of Tucker Act remedy than that advocated by

Appellants: the New Haven Trustee, with a lien upon

property securing a claim for $124 million plus ac-

crued interest, should be entitled to judgment against

the United States for $124 million plus interest (upon

proof that the property subject to his liens is worth

that amount), in exchange for which the United States

should be subrogated to the New Haven Trustee's

claim against Penn Central. The logic of Armstrong re-

quires this result because the effect of §302(b)(2) of

the RRRA is to divest the lien created by state law and

to substitute nothing of comparable legal effect. If the

Court were to hold the Armstrong rationale applicable,

the New Haven Trustee would not have to await the

§303(c) judgment of the Special Court; rather, forth-

with upon divestment of his lien by the §303(b) order

of the Special Court, he would file his complaint in the

Court of Claims. The New Haven Trustees remedy at

law can scarcely be “adequate” unless Armstrong is held

by the Court to be applicable to the divestment of lien

legislated by §303(b) of the RRRA.

It may well be that Senator Hartke had the

Armstrong decision in mind when he stated:

“If we did nothing while continuing to mandate

rail service, there is the distinct possibility in view

of the prior action of Congress ſa reference to Sen-

ate Joint Resolution No. 59] that a number of these

people [Penn Central creditors] could make a claim

against the Government which could be sustained

in the Court of Claims.” 119 Cong. Rec. $23,783-

_— ed. Dec. 21, 1973) (quoted in part at JA

E. A Deficiency Judgment Against the United States for

a there Pel — } } ———

ipt o Compensation or Constitute an

22 Particularly Where There Is No As-

surance that Congress Would Appropriate the Funds

Necessary to Pay a Judgment of the Court of Claims

The New Haven Trustee has argued in his Brief as

Cross-Appellant that any exercise of the sovereign’s

power of eminent domain must be accompanied by

statutory provision for payment in money or its per-

fect equivalent of the just compensation value of the

properties taken (both permanently and for interim

use). See New Haven Trustee's Cross-Appellant Brief

at 52-83.

The Penn Central Trustees, as Appellants in these

cases, seem to agree with the New Haven Trustee as to

this legal conclusion, but attempt to avoid its force by

an invitation to the Court to declare now the operative

rules governing later judicial proceedings in both the

Special Court and the Court of Claims, arguing as

follows:

“If a fully adequate Court of Claims remedy is thus

catablished. the question remains whether the Act

nonetheless infringes the Fifth Amendment be-

cause the partial consideration there provided for is

to be paid in forms (g. Conrail securities) other

than cash. Even if a rt of Claims — is

available for the deficiency, which of course will be

owed in cash, arguably the form of compensation

specified in the Act is constitutionally inadequate

because of the rule that when property is taken —

blic purpose the Constitution requires paymen

in a 7 cash equivalent. Eg. Auel Farmers Elev.

& Whse. Co. v. United States, 409 U.S. 470 (1973);

United States v. Reynolds, 397 U.S. 14 (1970); Olsen v.

United States, 292 U.S. 246 (1934); Vanhorne’s Lessee

v. Dorrance, 2 U.S. (2 Dall.) 304 (1795). This prob-

an concerned the Reorganization Cour (JA 146

“We think that concern would be fully justified if

the Conrail securities and other consideration

tendered under the Act were valued on the basis of

some intrinsic value unrelated to their

market v on the date of their receipt by the es-

tates in reorganization. The estates would then be

receiving, as ion for a taking of

property, 2 or cash *

alent, but i alleged

merely ive securities the

value of which be realized only after many

years and only if the ial Court's is of

the ty of Conrail accurate. lt was a

similar in the Haven reorganization

which Judge Anderson to devise an ‘under-

writing plan’ to ensure that the New Haven estate

in fact recewed the cash equivalent of the intrinsic

value attributed to the Penn Central stock it was ac-

qu „ In ve New York, NH. & H. RR, 304 F.

22 304 F. Supp. 1136 (D. Conn.

That device was specif | approved by this

Coun, but for the unforeseen Penn Central bank-

ruptcy, in New Haven Incluson Cases, 3999 U.S. 392.

48 (1970): and the Court rejected the lower

court's findings as to ‘intrinsic value,’ since ‘the fair-

ness and equity that are the essence of a §77 pro-

ceeding f our approval of a payment for the

transferred New Haven properties that may be

mY a fraction of its purported value.” 399

S. at 488.

“No effective underwnti nis permissible un-

der the 1973 Act as — . We believe it

follows . that, or = —— tutional rule

with respect to or cas uivalent, the Special

Cour will be obliged to — any alleged in-

trinsic’ value and, instead, to value the securities

tendered to the estates in reorganization at no

more than their cash market value on the date they

are received by those estates.

“Even if the Act were held to lude such a

method of valuation by the Special Court - and we

know of no reason why that should be beid- then

a Tucker Act remedy is adequate if the Court of

Claims will be able to ensure constitutionally ade-

uate treatment to the Penn Central estate. We be-

leve it will be so able. If and when the Court of

Claims is asked to award a deficiency | nt

against the United States, on the ground that the

maximum consideration which the Special Court

could award was constitutionally im uate, the

Coun of Claims could and must, consistently with

the Constitution, enter judgment for that amount

which remains constitutionally owing. We think

that this Court can meet the argument that the Act

is unconstitutional because it fails to ensure the

cash or cash equivalent which the Constitution re-

quires only by holding that the partial con-

sideration to be under the Act must be

valued at no more than its cash value on the date

of its receipt.” Penn Central Trustees’ Bnet at 65-

67 (footnote omitted).

The evidence in this case (see Stipulation as to Fas-

tual Matters, at JA 317-23) establishes a high prob-

ability that the fair market value of secunties of Con-

rail, whether they be confined to common stock or also

comprise mortgage bonds, with or without fixed inter-

est provisions, will be nominal for the reason that Con-

rail will not have a demonstrable ability adequately to

cover its fixed charges. If the entire $500 million of

obligations of USRA, carrying a current market rate of

interest, and being guaranteed as to pnncipal and in-

terest by the United States, were to be issued to the re-

spective estates of Penn Central, its secondary debtors,

its non-bankrupt leased lines, and the five other rail-

road systems in reorganization subject to the RRRA,

then only a total of $500 million of current value will

assuredly pass to the estates of the owners of the rail

properties conveyed under §303(b) of the RRRA.

No findings have been made as to what these rail

properties are worth,” and no court has judicially de-

termined the amount of post-January 2, 1974 erosion

of the estates which would also be compensable in the

Court of Claims. It suffices for present purposes, how-

ever, to note that a deſiciency judgment as visualized

by the Penn Central Trustees necessarily will involve

hundreds of millions. if not billions, of dollars.

It is to be doubted that the United States and

USRA, despite their reliance on the Tucker Act rem-

edy, agree with the Penn Central Trustees on either

the valuation of the rail properties or the valuation of

Conrail’s securities. Thus, unless the Court accepts the

Trustees’ invitation to limit the Sherwood and King doc-

trine by issuing a declaratory judgment as to the the-

ory of valuation which will govern subsequent judicial

proceedings, it would appear that a Tucker Act rem-

edy, even if one exists, cannot be relied upon as an ad-

equate remedy at law.

The United States has heretofore argued in the

Special Court proceedings under §207(b), and there-

fore can be expected to argue in the later §303(c) pro-

ceedings, as follows: first, that the RRRA is nol an ex-

ercise of the sovereign’s power of eminent domain (see

Brief of the United States at 16-36), despite the con-

flict between that view and their argument that a

Tucker Act remedy exists for any taking found to

have occurred; second, that the rail properties of the

railroads have little or no liquidation value, because of

the difficulties which the railroads experience in ob-

“Even the method of valuation is a matter of dispute , see New Haven

Trustee's Bnef as Cross-A at 82. See also /n re Port Authority

Trans-H udson Corp, 20 N.Y. 2d 457, 231 N.E. 2d 734, cert. denied sub nom.

Port Authority Hudson Corp. v. Hudson Rapid Tubes Corp, 390 U.S. 1002

(1968); In re City of New York (Fifth Avenue Coach Lines), 18 N.Y. 2d 212.

219 N.E. 2d 410, dismissed sub nom. Fifth Ave. Coach Lines v. City of

New York, 386 U.S. 778 (1966). ;

taining permission to abandon; third, that USRA’s or

Conrail’s bonds, together with Conrail’s common

stock, have a value equal to or in excess of the rail

properties conveyed; fourth, that a deficiency judg-

ment against Conrail will represent value, dollar for

dollar, and does not duplicate alleged value of the

common stock of Conrail; fifth, that the undefined

“other benefits referred to in §206(d)(1) and

§303(c)1 MAM) have value sufficient to m_ke up any

remaining deficiency in consideration. If these argu-

ments fail to carry the day, the United States can be

expected to argue that only the “short fail” caused by

rejection of its valuation arguments is recoverable in

the Coun of Claims.

When, as and if the case finally moves to the Court

of Claims stage, the United States could be expected

to argue on grounds of sovereign immunity that it ts

not bound by any unfavorable decision in the Special

Court, even if sustained by this Court. See United States

v. Sherwood, supra; United States v. King, supra. Compare

United States v. Dollar, 196 F. 2d 551 (9th Cir. 1952),

where the Court of Appeals declined to give collateral

estoppel effect to Land v. Dollar, 184 F. 2d 245 (D.C.

Cir. 1950), in which, following a trial on the ments,

the Dollar plaintiffs received a judgment entitling them

to recover their shares of stock.’ The United States

could be expected to argue in the Court of Claims that

sovereign immunity makes non-binding all prior judg-

ments as to liability of the United States for a taking.

In the Court of Claims, the United States can be ex-

‘ted to raise at least the five lines of defense out-

lined above, and, presumably, other defenses as well.

„But cf. United States v. Candelana, 16 F. 2d 559, 562-63 (h Cir.

1926), which gave collateral estoppel effect to ( mited States v Candelaria,

271 U.S. 432 (1926). The Dollar tnigation was settled finally. See 344

U.S. 806, 807 (1952).

As Mr. Justice Black observed in Youngstown Sheet

& Tube Co. v. Sawyer, supra:

“Moreover, seizure and governmental operation of

these going businesses were bound to result in

many and future damages of such nature

as to difficult, if not incapable, of mea-

surement.” 343 U.S. at 585.

The situation presented by the RRRA calls for val-

uation of properties and secunties far more complex

than any valuations which would have been entailed

had this Court decided to remit the steel companies to

their remedy, conceded to exist by the Secretary of

Commerce, in the Coun of Claims. Moreover, the

United States and USRA do not in these cases concede

that the remedy exists, or what its measure would be;

they concede only that, in the contingency of a future

adverse court ruling on valuation, such a remedy

might exist. These cases are thus governed a fortiori by

the holding of the Court in Youngstown.

Appellant USRA (USRA's brief at 60, n. 81) sum-

marily dismisses what is perhaps the most significant

defect of the Tucker Act remedy argument: that Con-

gress under Article I, Section 9, Clause 7, of the Con-

stitution has the final word on whether any judgment

of the Court of Claims shall be paid. Congress, in 31

U.S.C. §724a, has made a blanket appropriation of

moneys to be paid to satisfy final judgments in the

Court of Claims of $100,000 or less, an amount pre-

sumably sufficient for cases such as Cause v. United

States, supra ($2,000 judgment). This amount is ob-

viously inadequate in the instant case, even if the ac-

tion were limited to recovery of the constitutional

“short fall,” and a fortion if it is not so limited.

USRA’s reliance upon Glidden Co. v. Zdanok, 370

U.S. 530 (1962) is misplaced. Glidden does not hold

that judgments of the Cour of Claims are capable of

being executed without Congressional appropnation.

On the contrary, in Glidden the Court held that the

inability of the Court of Claims to enforce its judg-

ments by execution directed to the Secretary of the

Treasury of the United States did not operate to de-

prive judgments of the Court of Claims of the finality

inherent in a “judicial” decree of an Article III

Court.” This is made plain by the following extracts

from the opimon:

“For claims in excess of $100,000 28 U.S.C. §2518

direas the Secretary of the Treasury to certify

them to Congress once review in this Court has

been foregone or sought and found unavailing.

This, then is the domain of our problem, for Art. J.

§9, cl. 7, vests exclusive responsability for appropriations

im Congress and the Court early that no execn-

tion may issue directed to the Secretary of the Treasury

until such an ion has been made. Reeside v.

Walker (U.S.) ow. 272, 291.

“A study concluded in 1933 found only 15 m-

stances in 70 years when Congress had refused to

ya} . Note, 46 Harv. IL. Rev. 677, 685-

B85 n. 63. This historical record, surely more fa-

“The case involved the constitutional validity of an act of Congress

declaring that the Court of Claims is an Arucle II] Court im the context,

not of a suit in the Coun of Claims, but rather of a sun im a District

Court which was reviewed by a pane! of the Court of Appeals for the

Second Carcun, which included a Court of Clanms judge stung by desig-

nation under 28 U S.C. §293(a).

‘The actual holding of (lidden was as follows:

“We conclude that the presence of the United States as a party de-

fendant to suits mamtained in the Coun of Clams and the Court of

Customs and Parent Appeals does not debar those Courts from ex-

ercising the judicial power provided for in Article IIL” 370 U.S. at

571.

“The Note at 46 Harv. I. Rev. 677 (1935) is entitled: “The Coun of

Claims: Judicial Power and Congressional Review.” Its firs sentence

reads as follows: “The acuion of Congress in ‘remanding’ the ‘case’ of

Pocono Pines Assembly Hotels Co. v. Umied States, to the Count of Claims

(footnote continned on next page)

vorable to prevailing parties than that obtaining i

private ligation, may well make ws dowlt whether the

capacity to enforce a judgment is always indispensable for

“If this Court may rely on the faith of state

governments or other public ies to to

Glidden thus leaves the matter exactly where it has

stood since Reeside v. Walker, supra, namely, that no

execution (in excess of the $100,000 provided for in

31 U.S.C. §724a) may be directed to the Secretary of

the Treasury until an appropriation has been made by

Congress under Ar. I. §9, Cl. 7.

The Court of Claims has never had occasion to is-

sue a judgment against the United States for hundreds

of millions or billions of dollars. As a practical matter,

it is almost unthinkable that prudent persons would

rely upon Congress’ willingness, which is particularly

doubtful in view of the legislative history of the

RRRA, to appropriate hundreds of millions or billions

of dollars to satisfy a judgment. It is at least as likely

that, if the Special Court entered the declaratory judg-

ment which the Penn Central Trustees seek, Congress

would interpose the sovereign immunity of the United

States. This it could do simply by expressly with-

— continmed foom — page)

raises importamt questions as to the nature of the deasions of that tnbu-

nal.” Pocono Pines, 69 C1. Cl. 91 (1930), held the United States liable to

plaintiff in the sum of $227,239.54. Congress reacted by passing a law.

46 Stat. 1G82 (1951) somanding the cans'to the Court af Chains ber

new inal, with instructions to report its conclusions to Congress. Plaintiff

petiuoned the Supreme Court for a wnt of mandamus or prohibition to

prevent a further action in the Court of Claims, which petition was de-

526 Court

drawing jurisdiction under 5149 to hear cases arising

under the RRRA.”* If this Court were to sustain the

constitutionality of the RRRA upon a Tucker Act rem-

edy theory, its judgment will not, in any event, have

the effect of final adjudication by the Court of Claims

that the United States is liable to the Penn Central es-

tate, or as to the amount of any such liability. If Con-

gress waited until after conveyance of the Penn Cen-

trals properties to Conrail pursuant to §303(b), and

then withdrew the jurisdiction of the Court of Claims

to hear any claim arising from implementation of the

RRRA, the only remedy of the Penn Central estate

would be a deficiency judgment against Conrail.

That this is the most likely result is indicated by the

Amicus Cunae brief of Rep. Adams:

“It would seem that some creditor appellees hope

and expect that if they can destroy the Act, they

will force the government to nationalize the Penn

Cenral which they hope would require the rail

properties to be taken under eminent domain pnn-

ciples which might result in a greater cash return

for them. One of the purposes of this brief amicus

curiae is to indicate the strong resistance — ex-

of queeenglins easy oo tase estates beyond that

provided in the Act.” /d. at 16.

See the opinion. of Mr. Justice Branders in Lynch v LU mated States,

supra.

F. This Court Should Not Render an Advisory Opinion

that a Tucker Act Remedy Saves the Constitutionality of

the RRRA if Congress Does Not Repeal or Amend the

Act

The Penn Central Trustees would have this Court

issue an advisory opinion as to the availability of the

Tucker Act remedy, even if it is not fully convinced

that Congress intended to exercise eminent domain

powers in enacting the RRRA:

“We would in addition poimt out, however, that if

the Court entertains any doubt as to Congress’ in-

tention on this score, uu will not, by holding in favor

of the existence of the Tucker Act remedy, compel

the expenditure of any publi funds contrary to the

desire of Congress. If, after such a holding, Con-

believes that its intent has been frustrated or

that the price for continuation of rail service in the

Northeast ts too high if must meet constitutional

standards, Congress will have more than adequate

time, pnor to any compulsory conveyance 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 Con-

gress ample time to consider whether it still wishes

such conveyances to proceed after it is fully on no-

tice of the legal ep thereof. Moreover,

under Section 208 of the Act, Congress must re-

view 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 — obliga-

tions will be incurred.” Penn Central Trustees’

Brief at 25.

This is, in effect, an invitation to the Court to pro-

long the agony of the Penn Central claimants for an

additional period of time in spite of the frank recog-

nition by the Penn Central Trustees that the result for

creditors might be that their estate would be further

diminished by hundreds of millions of dollars. Aside

from the propriety of such a proposal, adoption of this

proposal would involve the Court in the rendering of

an advisory opinion. The Court recently reviewed the

ongins of the rule against federal courts issuing advis-

ory Oprmons and made clear the reasons for the Art-

cle III prohibaions against them. Flav v. Cohen, 392

U.S. 83, 96-97 (1968).

In the instant cases, the plaintiffs did not seek a de-

claratory judgment that, upon thei mortgage lens be-

ing divested pursuant to §303(b)(2) of the RRRA, they

would be entitled to judgment against the United

States for a specific sum of money. Plaintiffs rather

sought to enjoin the implementation of the RRRA as

an invalid statute. Those who advocate a Tucker Aa

remedy approach are the defendants in these cases.

The Governmental Appellants do not take the position

that on the present record there could be a judgment

in any particular amount against the United States; on

the contrary, they can fairly be expected in future

court proceedings vigorously to resist both lability

and, if lability be established, the amount thereof.

The present posture of the cases means that the

Tucker Act remedy issue, despite all that has been

written about it, has not been presented with “that

clear concreteness provided when a question emerges

recisely framed and necessary for decision from a

clash of adversary argument exploring every aspect of

a multifaced situation embracing conflicting and de-

manding interests. Flav v. Cohen, supra, 392 US. at

96-97, quoting United States v. Fruchauf, 365 US. 146,

157 (1961). See also United States v. Nixon, 42 U.S.L.W.

5237, 5241 (U.S., July 24, 1974), quoting Baker v. Carr,

369 U.S. 186, 204 (1962).

THE COURT BELOW WAS CORRECT IN HOLD-

ING THAT THE RRRA COMPELS PENN CEN-

TRAL TO CONTINLE RAIL OPERATIONS PAST

THE POINT OF UNCONSTITUTIONAL ERO-

SION. AND IN ISSUING AN INJUNCTION

AGAINST §304(f) AS APPLIED TO DISCON-

TINU ANCE OF RAIL SERVICE AND THE CERTI-

FICATION OF A FINAL SYSTEM PLAN UNDER

S 20e

Ihe New Haven Trustee is wholly in accord with

the views of the Penn Central Trustees, set forth in

Section II of thew bref (pp 30-47), that, absent a

Tucker Act remedy, the RRRA requires Penn Central

to devote its pnvate property to a public use without

assurance of the receipt of just compensation therefor;

that on the undisputed facts the point of uncon-

sutuuional erosion of the Penn Central estate has al-

ready, or soon will be, passed; and that it was not nec-

essary for the court below, in ruling that the

implememation of the RRRA must be enjoined, to de-

termine that the point of unconstitutional erosion had

in fac, already been passed, or to define erosion, or to

assess its impact on Penn Central with mathematical

precision.

A. This Courts Decisions, as Interpreted and Applied by

the Third Circuit in the Columbus Option Case, Govern

the Interim Erosion Issue

The United States’ brief (at 16-37), and USRA's

brief (at 75-95), argue a theory of Fifth Amendment

interpretation of which the essence is that, because of

the peculiar public interest in railroads, it is con-

stitutionally permissible Sor Congress to defer the ex-

ercise of creditors’ normal remedies endlessly. The

only limit to the doctnne which these Appellants

would acknowledge is that there must be a showing

that the government is doing something which might

(without establishing whether it wi//) uluumately lead to

the creditors being relieved from any continuing obli-

gation to subsidize the public interest. The United

States advanced this theory without success in % r¢

Penn Central Transportation Co. (Columbus Option Ap-

peals), 494 F. 2d 270 (3d Cir. 1974), petition for cert

filed, 42 US.L.W. 3633 (CS. May 8, 1974), No. 73-

1672. There is no precedent which supports the Gov-

ernmental Appellants’ theory.”

The issues decided in Columbus Option Appeals, can

best be seen by starting with the contentions of the

parties as summanzed by (Circuit Judge Gibbons:

“They [the mortgage indenture trustees] object to

the sale of unmor capital assets secunng

prior liens ($100 millon of United States guar-

anteed Trustees’ Certificates] unless (1) the

ceeds of sale are applied in reduction of th

liens, or (2) under the equitable rule of marshaling

the prior liens are reduced pro tanto, or (3) the

court, before it permits expenditure of the pro-

ceeds, makes the findings required for a section

77% sale by Central Railroad Co. of New Jersey «

Manufacturers Hanover Trust Co., 421 F. 2d 604 (3d

Cir.), cert. demed, 398 U.S. 949 (1970) (Jersey Cen-

tral and In re Third Avenue Transat Corp., 198 F. 2d

“USRA's brief daims (at 93 n. | 16) that its imerpretation of the de-

asons from Rock Idand through New Haven Inclusen Caw: was adopied

im In re Boston & Maine Corp, 484 §. 2d 369, 374-75 (l Cir, 1973)... ~

The holding n that case does not furmsh support for the Appellants

theory: “... while... the secured creditors cannot be made to devore

Railroad has been found to be reorgamzable on an income basis within a

77. In re Boston & Maine Corp. D Mass. No. 70-

703 (2d Cir. 1952) (Third Avenue)” 494 F. 2d at

273.

“The United States acknowledges that by resorting

to first lien trustees certificates the trustees oper-

ating a railroad in reorganization can accomplish a

substantial diminution of the security of the rail-

road's secured creditors, but urges

(1) that such result violates neither section 77 nor

the fifth amendment,

(2) that its first lien is not, under the Emergency

Rail Services Act of 1970, subject to the mar-

shaling rule, and that the marshaling rule is not

constitutionally required, and

(3) that the principles of the Jersey Central and Third

Avenue cases are applicable only to property

mortgaged by the debtor to the protesting

creditor.

“Chief reliance for these positions is placed upon

the Penn Central Merger Cases, 389 ug 486 (1968)

and the New Haven Inclusion Cases, 399 U.S. 392

(1970).” 494 F. 2d at 275.

The United States thus made a three-pronged ar-

gument to the Court of Appeals which necessitated

the court's deciding whether “the substantial di-

minution of the security of the railroad’s secured cred-

itors,” that is to say, interim erosion, was or was not

authorized by §77 and the Fifth Amendment. By the

time the case was decided (February 6, 1974), the

RRRA had been enacted, and if the result of the de-

cision would have been in any way affected by the

“light at the end of the tunnel” claimed by the Gov-

ernment to be afforded by the RRRA, the Court of

Appeals was bound to give effect to the RRRA.

The United States relied in Columbus Option Appeals

on the Emergency Rail Services Act of 1970, 45 U.S.C.

5662 ("1970 Act”), as authority for the propositions

that:

“it [the United States}, as a superior lienholder, is

required to permit the sale of all the debtor's un-

mort capital assets and the application of the

proc thereof for deficit operation of the rail-

road even if this means that junior encumbrancers

must ultimately bear the entire cost of the trustees

certificates.” 494 F. 2d at 277.

The secured creditor parties in Columbus Option Ap-

peals urged that the 1970 Act had to be interpreted in

a wholly different manner in order that it not run

afoul of the Fifth Amendment clause. Therefore the

“interim taking” issue was squarely presented by the

1970 Aa, which was then interpreted by the Court of

Appeals contrary to the Government's contentions, on

the ground that such an interpretation was necessary) to

avoid Fifth Amendment taking issues,

Just as it does in this case, the United States urged

in Columbus Option Appeals that in Penn Central Merger

Cases and New Haven Inclusion Cases,

“the Coun laid down a new principle of con-

stitutional law. That new principle, they [the

United States and the Penn Central Trustees] urge,

is that secured investors in a railroad enterprise

take on obligations in relation to the public which

makes it appropriate that they run such nsk of ero-

sion of their investment as is necessary in the pub-

lic interest in order to preserve railroad service.” 4.

at 279.

This line of argument perforce required the court

to analyze the entire New Haven reorganization as it

pertained to Penn Central Merger Cases and New Haven

Inclusion id. at 279-82.

Judge Gibbons concluded as follows:

“The constitutionality of the erosion [of the New

Haven estate] which had taken place prior to the

valuation date [December 31, 1966] was never

resented to the Court in any proceeding in which

it could have upon that issue. The New Ha-

ven Inclusion Cases deade no more than that Penn

Central does not have to pay for erosion which

took place prior to its purchase of the assets.

... The Supreme Court merely approved the re-

organization court's application of settled fifth

amendment law. Nothing more was presented to it

in either of the cases on by the government

and the trustees.” 494 F. 2d at 282.

The Government next urged upon the Third Cir-

cuit the “light at the end of the tunnel” theory:

“The appellees suggest that we can take judicial no-

tice of legislative solutions for the north-

east rail transportation crisis which at the time of

argument were under active consideration in Con-

= and have since been enacted. They suggest,

urther, that such judicial notice can serve as a sub-

stitute for the findings required by the Third Ave-

nue and Jersey Central rules.” Id.

This line of argument required the panel to ad-

dress the possible effect of the RRRA:

“The Regional Rail Reorganization Act of

1973... enacted January 2, 1974, establishes the

United States Railway Association whose duty is to

prepare a final plan for acquiring and distributin

some of the assets of each bankrupt northeast rail-

road permitted by its reorganization court to par-

ticipate. If a reorganization court finds the Act

does not provide a process which would be fair and

equitable to the estate of the railroad, it may either

attempt a separate reorganization under §77 if it

finds the railroad is reorganizable on an income ba-

sis, or dismiss the ization proceeding. As-

suming that the Act wit ds constitutional scru-

17 see, eg N.Y. Times, Jan. 25, 1974, p. 43, cols.

5-7 (New Haven trustees’ suit challenging the Act),

and that the ure contemplated is not inter-

rupted, the 4— . assets — take place ap-

proximately 510 days after enactment. Loans and

emergency grants are available, but there is no in-

demnification against interim losses. Section 303(c)

of the Act contemplates that no more shall be paid

in compensation than is ‘fair and equitable’, which

is defined as the minimum constitutionally re-

22 In determining whether to participate in

the proceedings under the Act, the reorganization

court will have to be cognizant of the limitations

imposed by the fifth amendment. Unless adequate

protection against interim losses can be obtained ei-

ther in the form of emergency grants, loans under

which the Association bears the risk and burden of

loss at least ahead of secured creditors, or con-

stitutionally compelled compensation under

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