# Brief for Appellee — Robert W. Blanchette et al., v. Connecticut General Insurance Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0165%3A05 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for Appellee - **Published:** January 1, 1974 - **Citation:** 419 U.S. 102 ## Text — 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 27 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 iy 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 om 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 67 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 ~ 1 Grande Cases Do Not Furnish Suppor 8 76 78 78 107 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 IV 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, 66 85 77 — 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 .. — 1 4 8 * = * 1 2 er eee 37 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. 38 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- . 39 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]. ho > 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 40 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 . 2 + 41 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- 42 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 (c) While an obligation on the part of the United 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 (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 48 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- 49 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. 50 “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. 51 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 52 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 53 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). 54 686 (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. 55 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 56 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- 57 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 75 7 * - 59 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- 61 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 62 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- 63 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. 64 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. 65 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 66 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 67 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. 70 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). ; 71 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). 72 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 73 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) 74 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 75 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- ists in © to ing any additional amounts 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. 76 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 77 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). 78 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 79 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- 86 703 (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 82 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), 83 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 the fi. nal plan, t may be necessary to dismiss the re- organization.” 494 F. 2d at 282 m. 9. Columbus Option Appeals thus required the Court of Appeals to meet the issue of whether secured creditors of a railroad can constitutionally be required by Con- gressional enactments to bear the brunt of protecting the public's undoubted interest in a viable rail trans- portation system. The Court of Appeals held as follows: “We also take notice that it is highly likely that some form of rail trans ion system, publicly or privately owned, will almost certainly survive even if the present proceedings under §77 are dismissed. But such judicial notice cannot serve to mg? the wer of the reorganization court and the ICC to subject the property of secured creditors to a tak- ing.. Congress, in devising a —s solution, wil be bound by the fifth amendment to pay the fair value of the Penn Central properties at the time any new rail transportation entity takes them. Id at 282-83. In holding that Third Avenue and Jersey Central, su- pra, applied not only to pre-January 2, 1974 §77 pro- 84 ceedings, but also to the post-RRRA situation, the Court of Appeals made it clear that the “Brooks-Scan- lon-Louisville Joint Stock Land Bank-Third Avenue-Jersey Central’ learning is not “obsolete.” On the contrary: _ “They [the Jersey Central, Third Avenue, Rock Island, — — Brooks-Scanton line of cases] spell out the findings which must be made to insure that the re- organization court is not engaged in an intentional uncompensated taking.” 494 F. 2d at 279." The New Haven Trustee submits that the evidence in the record establishes beyond any doubt that the erosion of the Penn Central estate which will neces- sarily occur during the planning processes of the RRRA will vastly exceed the $85 million of grants au- thorized by §213 of the RRRA. The court below noted that: “It becomes quickly apparent that the limited amount of these funds - available to railroads in re- organization in the region - have not been specially designated to meet challenges of unconstitutional erosion.” (JA 31). Accordingly, based on the Stipulation as to Factual Matters (JA 317-23), an inadequately compensated in- terim taking for use of Penn Central's rail properties he United States and USRA downgrade the significance of three decisions of the Court — Brooks-Scanlon Co. v. RR. —— 251 U 8. 396 (1920), Bullock N N Commission of Florida, 254 US. 513 (1921), and Railroad Commisson v. Eastern Texas RR, 264 U.S. 79 (1924)—on the du- bious ground that the uz of the enterprise determined the applicable in- terpretation of the Fourteenth Amendment's due process clause. See United States’ brief at 19, n. 11; USRA's brief at 78 n. 96. The Brooks- withdraw their invested capital and der . 3 capital " + more productive since the 1980 s upholding the constitutionality of acts of Congress reg- — 4 1 = — 4 — on Commission v. Hope Natural sas Co, , \ in New H T so Appellant Brief at 91 n. 84. 2 * 85 was established. Plaintiffs were entitled to an in- junction to prevent its continuance. Whether uncompensated erosion of the Penn Cen- tral estate is currently taking stockholders’ property, unsecured creditors’ property, or secured creditors’ property is a factual issue which the Court does not have to reach in deciding whether the decision below was correct, for the simple reason that uncompensated erosion through deficit operations must affect some- one. Whoever is currently affected by erosion, be he secured creditor, unsecured creditor or stockholder, is a person entitled to the protection of the Fifth Amendment. Columbus Option Appeals declares that, if the erosion is incurred intentionally to benefit the public, the public s representatives (the United Siates) must assume the burden. Parties representing secured creditors with liens on property of Penn Central and its Secondary Debtors and non-bankrupt leased lines (New Haven Trustee and the Connecticut General plain- tiffs), as well as unsecured creditors and stockholders (Penn Central Company, plaintiff), are now squarely before this Court asserting that their interests are being eroded by deficit rail operations. Since one or more parties with standing are before the Court, and one or more of chem must be suffering from the erosion of the Penn Central estate, no matter how large the value of the estate may be, it follows that one or more plain- tiffs is suffering that degree of irreparable economic injury which satisfies the Article III concept of stand- ing and justifies a court exercising its equitable powers so as to prevent an unconstitutional taking of plain- tiffs’ properties. (. Association of Data Processing Service Organizations v. Camp, 397 U.S. 150 (1970); Flast Ce- hen, supra. 86 B. The New Haven Reorganization Does Not Furnish Precedent for the Government's Contention that Cred- itors of Penn Central Must Continue to Endure Further Uncompensated Erosion Without Limit in Time or Amount The United States’ brief (at 21-27) and USRA’s brief (at 87-93) argue that continued erosion of the Penn Central estate is justified by the historical pre- cedent of the New Haven reorganization. Significantly, the Government's argument that the RRRA does not effect an interim taking of Appellees’ property relies upon a theory that derives from a purported analogy between the facts of the New Haven reorganization and those of the Penn Central reorganization. The factual analysis of the New Haven precedent con- tained in the United States’ and USRA'’s briefs is, how- ever, matenally incorrect. In early 1962, only six months after the New Ha- ven filed for reorganization under §77, the New Ha- ven Trustees filed a report with the New Haven Re- organization Court to the effect that the New Haven could not be reorganized other than through inclusion in a major trunk line system. The merger of the Penn- sylvania and New York Central Railroads, proposed shortly thereafter, afforded such an opportunity, by reason of the authority of the ICC to condition its ap- proval of any such merger by requiring inclusion of the New Haven in the merged system,“ The New Ha- ven Trustees, without any opposition from New Ha- “Inclusion in the merged Penn Central was warranted, independent of New Hens status as a carner in reorganization under §77, on the ground that the merger would otherwise have made the New Haven’s situation wholly untenable due to diversion to New York Central's rail lines in New England of substantial freight traffic historically inter- changed between the New Haven and the Pennsylvania Railroad. 87 ven creditor interests, recommended that application be made for inclusion of New Haven in the merged Penn Central System as being in the best interest of the New Haven estate, as well as the public interest, and sought the court's authority to pursue inclusion.” Throughout the course of the New Haven re- organization proceedings, it was the publicly stated po- sition of the New Haven Trustees that i was in the best interest of the New Haven s creditors for railroad operations to be continued until inclusion in Penn Central was achieved and that, compared to the in- clusion terms potentially available, liquidation was a less favorable route for the creditors. Contrary to the situation now prevailing in the Penn Central re- organization, which finds creditors opposing in clusion” in Conrail to the point of constitutional fit: igation, the New Haven’s creditor interests, without exception, considered that inclusion in the new trunk line system to be created by the merger of the Pennsyl- vania and New York Central Railroads was in the creditors’ best interest. The creditors’ favorable view of inclusion was based upon the fact that Penn Central was the combination of two profitable compamies with combined assets in excess of 20 times the assets of the New Haven, and also upon the expectation that the merger itself would add substantially to the profit. i similarity between the decision of the New Haven's Trustees and creditor o pursue inchuwon a being in the best emterest of the estate, as well as the public interest, and ¢ + compulsion of the RRRA requinng mandatory conveyances to Conrail against the united opposition of Penn Central creditors. Congress, in §207(b), has sought to simulate the factual circumstances of the New Haven expenence by dele- gating to the Penn Central Reorganization Cour the decision to petmit or not permit, conveyance of assets to Conrail. The analogy breaks n when one considers that the New Haven Reorganization Court was not acting sua sponte, but merely approving 2 business decision, of the New Haven Trustees with the concurrence of the New Haven creditors. ability of the constituent railroads.“ Thus, the fact that the New Haven continued to operate in the reasonable expectation that the securities of Penn Central to be received upon the inclusion would provide New Ha- In must be kept in mind that the ICC, in approving the merger of the Pennsylvama and New York Central Railroads, ed » 4 = accepted the evidence tory served and more and better service, all to the ultimate benef of the „ 327 LO.C. 475, 501-02. The Secunties and Exchange Commission, in its Staff Report to the Special Subcommittee on Investigations of the House Committee on In- terstate and Foreign Commerce, The Financial Collapse of the Penn Central Company (August, 1972), stated the pout as follows: Larger than projected and would be realized sooner than anticipated, he ” SEC Staff Report at 173-175. The earnings reports released by Penn Central in the immediate post-merger penod gave support to the false optimism then prevalent: ven's creditors with value at least equal to the available ahernative of liquidation has no bearing on the ques- tion of how long and under what circumstances Penn Central can be compelled by Congressional enactment to continue to operate and to incur further massive erosion by reason of deficit rail operations. By con- trast, the Penn Central Trustees have advised the Court unequivocally that the continued deficit oper- ation of the railroad for the account of their estate can no longer be constitutionally justified. See Penn Cen- tral Trustees’ brief at 30-47. The Penn Central Trust- ees have also advised this Court that “there is nothing within the four corners of the Act which assures the Penn Central estate of the just compensation required by the Constitution for the taking of its properties.” d at 61. The United States’ Brief (at pp. 22-27) discusses several opinions entered by the various courts which reviewed the terms of the New Haven’s proposed in- clusion in the merged Penn Central system as though they were entered in the context of the New Haven bondholders’ having opposed inclusion in Penn Cen- tral. That discussion incorrectly pictures the pro- cedural setting of those judicial decisions, and at- tempts to derive a rule of law that is without foundation in the opinions upon which the United States relies. In 1967, the Court refused to approve con- summation of the Penn Central merger until the 1CC afforded adequate traffic protection to certain eastern railroads not to be included in the merger. Baltimore © Ohio R.R. v. United States, 389 U.S. 372 (1967). Because of that decision, it was generally recognized that, at the least, the Penn Central merger would be con- siderably delayed and there was concern whether the 90 merger might abort.“ In this context of doubt whether the Penn Central merger would ever come to pass, carrying with it the possible frustration of the New Haven Trustees’ and creditors’ hopes, the New Haven Trustees petitioned the New Haven's Reorganization Court for in- structions, and some of the bondholders then cross-pe- titioned to dismiss the New Haven reorganization pro- ceedings and liquidate the railroad.” Shortly after the motions were argued, the ICC on June 9, 1967 issued supplemental reports in both the Pennsylvania-Central and Norfolk & Western merger cases, curing the de- fects found by the Court in the Baltimore & Ohio case, wpra. Expedited review by a three-judge District Court and the Court followed. Significantly, during that re- view penod, the New Haven bondholders whose §77(g) motion was sub jude took a position di- ametrically opposed to the one which might be in- ferred from the United States’ brief. Instead of press- ing for termination of the reorganization and for liquidation, as are the creditors in Penn Central, the New Hens bondholders in 1967 were urging the prom ptest possible inclusion of New Haven in the pro- posed Penn-Central system. “For im a decision of the Coun of Appeals for the Second Circun, two months after the Supreme Court decision, Judge nend observed: “As a result of the decision in Baltimore © Ohio N N v. U mited States. supra, and us probable sequelae, u 1s by no means certain that there ever will be a Penn Central in which the New Haven can be in- cluded. At the very best the time table envisioned by the Trustees in , 1966... has been thrown badly out of hiker.” Jn re New York, NH & H. R.A. 378 F. 2d 635, (2d Cir. 1967). “As Judge Anderson later noted: “The cross-petitioners asked either for an immediate take-over of the New Haven by the Penn Central, once the merger was approved, or for the termination of the reorganization and hquidation of the Railroad.” In re New York, NH. H RR. (Order No. 441), 281 F. Supp. 65, 66 (D. Conn. 1968) (emphasis added). 91 Thus, the pertinent issue when the New Haven in- clusion was first before the Court in December, 1967, was created by the New Haven bondholders’ dis- satisfaction with the terms of inclusion fixed by the ICC (which objections, going both to valuation of properties and valuation of securities, were later sus- tained in substantial part by ‘he “oun + The pro- cedural context in which the Wed an at- tempt by the Penn Centra: - den the New Haven bondholders <-‘. al review of the ICC's decision by offer oe with in- clusion only on the basis ‘ ned terms. This took the form of a reiv: a! of “oun and Central managements to agree to carry out the inclusion be- fore the exact terms were finally adjudicated. The is sue was thus not whether the New Haven should be liquidated rather than kept alive until m could bein- cluded in Penn Central, as the Governmental Appel- lants assert. The oft-citted reference in Mr. Justice Fortas opin- ion to “Procrustean measures’ was not, as would ap- pear from the United States Bnef (at 23-24), in te- sponse to an attempt to shut down the New Hens operations in disregard of the public interest in order to benefit creditors. Instead, the Court's “Procrustean measures” passage referred to an attempt by certain New Haven bondholders to gain a bargaining ad- vantage in order to deal with the intransigence of the Penn and Central managements. This attempt by a small segment of New Haven bondholders was op- posed by the New Haven Trustees on the ground that it could well backfire and frustrate the ultimate in- clusion of the New Haven in Penn Central that had long been sought by the creditors. The New Haven ® Penn Central Merger Cases, supra, 389 U.S. at 510-11. 92 Trustees therefore opposed the attempt by these bondholders to postpone the Penn Central merger un- til the Penn and Central managements agreed to in- clusion terms more favorable than those fixed by the 1006 The New Haven Trustees argued to the Court that the risk of frustration of the merger was not warrantea from a New Haven standpoint so long as Penn Central would be committed by the act of merging to pay such inclusion terms as were finally set by the judicial pro- cess. This issue was raised directly in the argument before the Court, ana counsel for the Pennsylvania and New York Central Railroads thereupon orally agreed that the merged company would be so bound.” It was in light of Penn Central's agreement that the price would be “open-ended” on the “up side,” and in the total absence of any indication that the post- merger judicial review of the ICC's terms of inclusion would not be sufficient to guarantee fairness and eq- uity, that Mr. Justice Fonas referred to the attempt by some bondholders to delay the merger as calling for “Procrustean measures.” Thus, the quotation from the Court's opinion (United States’ brief, at 23-24) does not provide support for the conclusions which the Government would have the Court now draw from it. The same is true with regard to Judge Anderson's decisions, quoted in the United States’ brief (at 24-25); and in USRA’s brief (at 88-93). 1 wy became subject to a serious cash drain that began in 1967. only source of cash potentially available was Penn Central, which, by the act of merging, would be committed to lend the necessary funds to the New Haven Trustees, as well as to as- sume about one-half of the New Haven post- but pre-inclusion operating losses. Funds were proj to be in early 1968, so post of the merger have defeated inclusion. This was a result perceived by all concerned to be detrimental to the New Haven estate. “See colloquy between Mr. Justice Brennan and counsel for Penn Central, q in in re New York, NH. & H. RR. (Decison on Re- orgamzation Plan), 289 F. Supp. 451, 460 (D. Conn. 1968). 93 In the first place, the United States is in factual er- ror when it says: “The New Haven creditors thereupon petitioned the reorganization court to dismiss the pro- ceedings . . .” (United States brief at 24). As noted above, the cross-petition for dismissal of the reorganization had been filed prior to the decision of this Court in Penn Central Merger Cases, at a time when the Penn Central merger seemed doomed to lengthy postponement, if not frustration. While the cross-petition was sub judice, the Court had decided the Penn Central Merger Cases less than nine months after its initial decision in the Baltimore S Ohio case rejecting the merger. Circumstances having so changed since the filing of the cross-petition, and a majority of the New Haven bondholders having continued to recog- nize that inclusion in Penn Central was preferable to liquidation, the New Haven Reorganization Court properly concluded that, with the merger having al- ready taken place and inclusion hopefully close at hand, and with Penn-Central obliged to pay judically approved terms, dismissal of the reorganization and liquidation of the New Haven’s rail operations would have been not only an unsound exercise of judicial dis- cretion but a counter-productive move from the stand- point of the New Haven bondholders. /n re New York, NH. & H. RR. (Order No. 441), supra, 281 F. Supp. at 68-69.7° However, circumstances later changed again, and the New Haven Reorganization Court responded The cross-petitioners are apparently the only ones who seek liq- uidation. Neither the trustees for any of the series of bonds nor any other creditors have joined in the cross- petitions. “It would be an abuse of discretion and error on the part of this court to entertain and approve of action by the cross-petiioners de- signed to scuttle the entire ization proceeding when such a course .. . would . be of no it to the creditors. . 1A i. i 4 promptly and properly to that change. Judge An- derson first concluded that the inclusion terms fixed by the ICC in its Second Supplemental Report, 331 LCC. 643 (Nov. 16, 1967) were inadequate and necessitated a remand to the ICC for further proceedings, with the probability that further lengthy judicial review pro- ceedings would follow the ICC's order on remand. This problem was aggravated by cash attrition due to worsening deficit rail operations (both passenger and freight). The cash then on hand was virtually ex- hausted even after giving effect to financial assistance which Penn Central was required to furnish the New Haven. Judge Anderson then concluded on August 10, 1968, on constitutional grounds, that he could not condone additional priority borrowing necessary to continue New Haven's rail operations into 1969. Sig- nificantly, the decision that railroad operations would cease was reached notwithstanding existing assurances both that the New Haven would ultimately be in- cluded in the merged Penn Central system and that the inclusion would necessarily be on terms found to be fair and equitable after judicial review. By contrast, the RRRA provides no assurance that there will ever be an “inclusion,” i.e., a Congressionally approved fi- nal system plan and, even if there is one, that its terms will ever be judicially approved as fair and equitable. Of the several decisions involving the New Haven reorganization that are cited by the United States, the one which fairly may be cited for its bearing on the in- stant situation is Judge Anderson's August 10, 1968 opinion at 289 F. Supp. 451, 459: “In view of the history of this deficit operation from the time of the fling of the petition under §77 and even before, the size of the losses, the long period of time necessarily involved in seeking to work out a solution, short of liquidation, through inclusion in the Penn-Central, the present con- 95 dition of the Railroad and the rate of loss and out- flow of cash in the recent past and in the fore- seeable future, this court finds that the continued erosion of the Debtor's estate from operational losses after the end of 1968 will clearly constitute a taking of the Debtor's rty and consequently the interests of the rs, without just com- pensation. It is therefore constitutionally im- rmissible, and obviously no reorganization plan which calls for such a taking can be approved.” The foregoing passage was cited favorably by the Court in the New Haven Inclusion Cases, supra, 399 U.S. ar 491. The New Haven Trustee recognizes that §77 is constitutional insofar as it permits a reasonable time during which the public interest is afforded its “one bite at the apple” in the form of a reasonable attempt to reorganize the enterprise. That chapter of the Penn Central reorganization is covered by the penod from June 21, 1970 to January |, 1973, the date when the Penn Central Trustees advised Judge Fullam that Penn Central could not be reorganized absent ex- traordinary amounts of governmental grants.“ A sec- ond bite at the apple has taken place since January |, 1973 and is continuing while this case is sub judice. The principle advocated by the United States here results in the so-called balancing process between public and private interests becoming a never-ending nibbling at the apple, so long as it can be said that Congress and the agencies of the executive branch are con- scientiously continuing to attempt the formulation of a solution. Further, the United States adds a corollary: if a reorganization proceeding reaches the point where reorganization under existing law must finally be rec- "The Trustees’ January |, 1973 and February |, 1973 Reports (J-D.S. 8, 9) estimated that governmental grants (not loans) in the amount of $600 million to $800 million were necessary. 96 ognized as impossible, Congress is permitted to amend the reorganization law and, if it does, the balancing process starts all over again. Presumably, if its second attempt to solve the rail crisis proved inadequate to meet constitutional safeguards, Congress could enact still another statute designed to provide a public inter- est “solution” to the continuing and unsolved problem of Penn Central rail operating deficits, while requiring creditors to absorb further operating losses. Under the Government theory, this procedure could be repeated, ad infinitum, or until the problem was finally recog- nized by the Congress to be hopeless absent nation- alization of the railroad. With this theory, the United States brushes aside (and indeed denies) the erosion already incurred by the Penn Central estate during more than four years of §77 proceedings; and it treats as irrelevant the spe- cific findings made by the Penn Central Re- organization Court in its May 2, 1974 Opinion and Or- der No. 1543 in connection with the findings required by the first sentence of §207(b) of the RRRA (JA 84- 103). According to the United States, the four years during which private claimants’ legal rights have been subordinated to the public interest count for nothing, because a new statute may offer, it is argued, as little as two more years (and several hundreds of millions of dollars) of additional erosion before private creditors are finally accorded some measure of relief from the duty to continue to finance the public interest. It is significant that the United States and USRA fail to address the implications from the fact that, as early as February 10, 1971, the Penn Central Trustees publicly stated that governmental assistance was ur- gently needed by Penn Central in order for it to meet 97 four “conditions to viability” as a private enterprise.” Virtually nothing was done by the Congress, the ICC or any other agency of the government to assist the achievement of these four conditions.” When the Trustees said in their January |, 1973 Report that re- organization of Penn Central on an income basis was impossible, it took fully one year for the enactment of the RRRA—a solution which, as the New Haven Trustee has argued in his brief as Cross-Appellant, has proved to be both unconstitutional as a matter of law, and wholly inadequate as a matter of economics. Trustees’ Report dated February 10, 1971. DS. 1). USRA’s Het at 30 describes the four conditions to viability. ' no mention is made of any steps taken by the gov- ernment to assist the Trustees during the nearly two years between that Report and the January l. 1973 Trustees’ Report (J. DS. 8). It is also noteworthy that when it did take action, Congress aggravated the Penn Central's problems by preventing a solution of the crew-consist issue. By contrast, in the New Haven the States of Massachusetts, Rhode Island, Connecticut and New York in 1965 agreed on con- tributions totaling approximately $5,500,000 per year, which was one- third to one-fourth the New Haven net operating loss. See /n re New York, V & HH RR. (Order No. 441), supra, 281 F. Supp. at 66. The United States, however, provided only $12,500,000 of loan guarantees to New Haven, and nothing by way of grant. 98 C. The Rock Island and Denver & Rio Grande Cases Do Not Furnish Support for the Government's Theory The attempt of the United States and USRA to draw support for their argument from the Rock /s- land™ and Denver S Rio Grande” cases (United States’ brief at 20-22; USRA's brief at 84-86) is similarly un- persuasive. In the Rock Island case, the §77 petition had been filed on June 7, 1933, shortly after en- actment of §77 on March 3, 1933.7 The case was promptly heard by the Rock Island's reorganization court, which issued an order on November 22, 1933 denying a petition by secured creditors for permission to foreclose on a pledge. The District Court's decision was affirmed by the Court of Appeals on July 23, 1934, 72 F. 2d 443 (7th Cir. 1934). Certiorari was granted, 293 U.S. 550, 551 (1934), and the case was argued February 12. 1935 and decided April |, 1935, at which point the debtor's §77 proceedings had con- sumed but 22 months. But the Court in 1935 thought that 22 months was perilously close to being an excessive penod in which to restrain creditors from the exercise of their normal remedies, justifying the /ong delay on the basis of its having been caused by the con- stitutional test litigation launched by the creditors: “If this /ong delay were without adequate excuse, the retention of the injunction for the long period which has intervened since it was granted could not he justified.” 294 U.S. at 685 (emphasis added). The United States’ brief (at 21) quotes a portion of the text in which the foregoing quotation appears. The portion omitted from the quotation in the United Continental lil. Nat. Bank v. Chicago, RA. & Pac. Ry., supra. Reconstruction Finance € orp. . Denver HUN NK N. supra. 47 Stat. 1474. 99 States’ brief, indicated by asterisks, includes these words: Until they [doubts concerning the constitutional validity of §77] are finally resolved, the con- summation, or even the preparation, of any defi- nite plan is plainly impracticable.” The omission is significant. In Penn Central's case, more than four years have elapsed since the §77 filing on June 21, 1970. The ICC had three plans for re- organization submitted to it commencing as early as June 28, 1973; it rejected all of them on September 28, 1973. The ICC at the same time formulated no plan of its own, as was its statutory duty under §77. Instead, although the ICC indicated it would hold fur- ther hearings on a plan for Penn Central, in the year since its first Report it has not done so. The New Ha- ven Trustee’s §77(g) motion to dismiss Penn Central's §77 proceedings has been pending before the Penn Central Reorganization Court since October 9, 1973.” Even more significant, however, is the absence of any assurance that resolution of the instant cases, con- cerning the constitutional validity of the RRRA, will lead to the consummation, or even the preparation of any definitive plan for reorganization of Penn Central. This conclusion is equally true on the assumption that the RRRA is found here to be defective under the Fifth Amendment, on the one hand, or if the RRRA is upheld on the basis of a finding of a Tucker Act rem- edy, on the other. In the latter event, there would be a drawn out valuation proceeding under §303(c) which, it is understood, the Government recognizes as tre- quiring a time-table of 5 to 10 years, including appel- late review here; and that period would be followed by Not until May 6, 1974 was a hearing held on the motion; a further hearing was held September 19. 1974. 41 100 a Court of Claims action, perhaps consuming another two years. A penod would then follow in which Con- gress’ decision would be taken as to whether or not it would appropriate the funds needed to meet any judgment certified to it pursuant to 28 U.S.C. §2518. Then, and only then, would a plan for the re- organization of Penn Central dealing with its creditors’ nights be filed with the ICC. Additional time would be required for the ICC's administrative hearings on such a plan, its report and order thereon, and judicial re- view of its report and order by the Penn Central Re- organization Court (which would have also the duty of adjudicating a large number of proofs-of-claim, and such matters as the remand issues from New Haven /n- clusion Cases, supra). Assuming that the distributive phase could be completed in three years, a plan for re- organization of Penn Central must reasonably be es- timated to require a minimum of 10 to 15 years if the RRRA to be implemented. It must further be emp- hasized that this estimate is premised on the assump- tion that Congress will not veto the first final system plan filed with it by USRA. A Congressional veto of one or more final system plans, together with the time required for Congress to respond to a Tucker Act judgment, might well stretch the process into the twenty-first century. The injunction against mortgage creditors ex- ercising their normal foreclosure remedies contained in Order No. | has been in effect for over four years. Moreover, some of the creditors’ liens which are thus restrained may not even be primarily or railroad prop- erties. The Rock Island decision is limited to the sound proposition that a reasonable delay during which ex- ercise of creditors’ rights is deferred is constitutionally permissible. Conceptually and practically, Rock Island cannot be deemed to support the United States’ con- 101 tentions with regard to the effect of the RRRA upon Penn Central's secured creditors.” The reliance of the United States and USRA on the Demer C Rio Grande case, (United States’ brief at 21; USRA's brief at 86) is likewise unwarranted: 1. The Denver & Rio Grande filed under §77 on November |, 1935. As of December 31, 1935 its cur- rent assets were $5,966,667 (of which $1,257,943 was cash). By December 31, 1944, current assets had in- creased to $32,665,501 (of which $19,142,627 was cash). The total deferred liabilities (including unpaid accrued interest) from November |, 1935 was $55,310,152. See 328 U.S. 500, at 513-14. In addition to the increase in current assets of $26,698,834, the Court's opinion (328 U.S. at 514-15) states that a net capital addition of approximately $30,000,000 was made out of internally generated funds, principally in the purchase of $43,000,000 of new locomotive and freight cars to handle increased war-time business, net of $13,000,000 of book value of equipment retired *USRA's brief at 85 u 106 sets out an oblique attack on the Third Carcun’s Columbus Option Appeals decison, supra, on the ground that it in. volves a factual misreading of the Rock Island decision. The New Haven Trustee agrees that the Rock Island decision did not turn on the value of Sr ee ee ee the Note in 82 Yale I. J 1004, 1112 (1973), which appears to be without support. The Third Circuit's decision in Columbus Option Appeals is in no way dependem upon the commentator’s misreading of the Rock Ivand ij | : : ; F FE ! i ! rf | 3 i g i | 1 ö i f i 102 from use. Since the book value of the railroad’s assets increased by $56.7 million, in the Denver S Rio Grande case there was no erosion during its nine years of §77 reorganization.” 2. The Denver & Rio Grande had income available for fixed charges in every year of its operation under §77. The amount of such income varied from a low of 82.893.255 during the 3 years 1936-38 to $5,019,436 in 1941. 328 U.S. at 514. In the following war-time years, income available for fixed charges was 817.044.420 (1942), $11,573,668 (1943) and $8,157,880 (1944). 328 U.S. at 514, n. 18. The total net income available for fixed charges during the re- organization (through December 31, 1944) amounted to $49,420,972. 328 U.S. at 542 (dissenting opinion of Frankfurter, I). This income exceeded accrued inter- est on senior secured claims by approximately $9,500,000. Te. 3. The fact that the holders of the General Mon- gage Bonds of the Denver & Rio Grande (the so-called “Jumor Generals”) received only common stock of a par value equal to 10% of their claims hardly provides a precedent for the RRRA. All other secured creditors of Denver & Rio Grande received mortgage bonds and common stock of a par value equal to their claims, in- cluding interest accrued thereon. The Junior General's contract nghts made them subordinate to all other se- cured claimants of the Denver & Rio Grande estate. In Penn Central's case, by contrast, book value of railroad physical assets declined from $2,889,.799,000 at Dec. 31, 1970 to $2,618, 390,000 at Dec. 31, 1973, a reduction of $271,409,000. 1973 Form R.! " Schedule 200A; 1970 Form A Report, Schedule 200A. At Dec. 31. 1973, accrued administration expenses amounted to a sum in excess of $546,000,000. Stip. Fact, 1912-15. Thus the indicated erosion. com in the same manner as in the Denver & Rie Grande case, is $817 milhon as of Dec. 31, 1973. See Pan T-H, % for a discussion of the erosion evidence. 103 Under the “rule of absolute priority” of Boyd.” Los An- geles Lumber™ and Consolidated Rock Products™ the holders of Jumor Generals could not reasonably have expected to receive treatment pars passw with the other secured claimants unless there was found to be an equity for the common stock. The ICC valued the Denver & Rio Grande’s assets in accordance with the capitalization of earnings method prescribed by Fel such valuation showed that the common stock was without value, and the Junior Generals had only a partial equity. While this factual conclusion itself was controversial (see opinion of the Court of Appeals for the Tenth Circun, 150 F. 2d 28; dissenting opinion of Frankfurter, I. 328 U.S. at 536-49), the dispute in Dm, C Rie Grande concerned the application of ac- knowledged rules of statutory construction and con- stitutional interpretation to a disputed factual situation. In the case of Penn Central, the hopeless rail de- lieus are factually acknowledged, and the dispute con- cerns the proper application of constitutional pnn- ciples to a novel statute. The RRRA was designed to create a “reorganization” when the facts indicate that no reorganization in the accepted legal definition of that word is possible. The Demer © Rio Grande de- cision provides no assistance in meeting the issue whether the RRRA exceeds Congress’ Bankruptcy Clause powers, and offends the Fifth Amendment, by subjecting Penn Central's claimants to the reduction of their equity by continued erosion and to an ultimate deprivation of the property secunng their claims with- out just compensation. Northern Pacifu Ry. v. Boyd, 228 US. 482 | 1913). *\ Cave v. Los Angeles Lumber Products Co., 908 US. 106 (1939). *?( onsolidated Rock Products Co. v DuBow, 312 U.S. 510 (1941) 104 D. The Court Below Correctly Construed §304(f) of the RRRA to Require tae Affirmative Assent of USRA to any Termination of Rail Operations The USRA Brief asserts (at 61-66) that the cour below failed to construe §304(f) correctly, arguing that a narrow construction of that section would have en- abled the court to defer reaching the constitutional is- sues presented by the RRRA.™ On the issue of the proper construction of §304(f), it is necessary that this subsection be read in the light of §304 as a totality (see JA 416-17), for it has no meaning separate and apart from the balance of §304. It is apparent on the face of §304 that, if the provi- sions limiting the nght to abandon even rail segments which are not included in the final system plan, par- ticularly the provisions found in §304(c)(2), are to be made effective, then such lines must not be discon- tinued or abandoned before the date the final system plan becomes effective. And, obviously, it was not the intent of Congress to permit interim discontinuance or abandonment of the rail segments which are included in the Conrail system by designation in the final sys- tem plan.“ Thus, the area of possible interim discontinuances and abandonments permitted under §304(f) is con- fined to a particular rail line whose current traffic is so In his cross-appeal, the New Haven Trustee has dealt with the rea- sons why the constitutional issues are not premature, and why this case is governed by Epperson v. Arkansas, 393 U.S. 97 (1968) and Roe v. W ade, 410 U.S. 113 (1973), rather than by Poe „ Ullman, 367 U.S. 497 (1961). See New Haven Trustee's Cross-A Brief at 24-36. USRA's con- tentions as to prematunty, accordingly, are not further addressed here. “See letter dated April 26, 1974 from Rep. Brock Adams to W. Barnum, Under Secretary of Transporation, reprinted in full in Penn Central Trustees’ Brief, Appendix R. at 7a-9a. 105 insignificant that a State would be unwilling to indicate ames Sak by tie ote e support. This is the true meaning of the phrase in §304(f): “unless no affected State or local or regional transportation authority reasonably opposes such action.” Significantly, the USRA brief does not advance any contrary interpretation of §304(f). Rather, USRA, without citing any authority in point, seems to suggest that the RRRA ought to read with a judicial gloss that it is not to be taken seriously in the event a literal in- terpretation would require “erosion beyond con- stitutional limits” (USRA brief at 64). Cases such as United States v. National Dairy Products Corp., 372 U.S. 29 (1963), cited in USRA's brief (at 64-65) stand for a different proposition entirely: when a statute is at- tacked as being “void for vagueness,” but its meaning is pla [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0165%3A05. Public record. Not legal advice.