Petition for Writ of Certiorari — Smith v. Baker

454

In The

Supreme Court of the United

OCTOBER TERM, 1971

No.

In the Matter of

The New York, New Haven & Hartford Railroad

Company, Debtor

LAwRrENCE W. IANNoTTI, Successor Trustee

Under the First and Refunding 4% Mortgage Bonds,

dated as of July 1, 1947, of The New York, New Haven

and Hartford Railroad Company, Debtor, Petitioner,

vs.

Georce P. Barker, Ricuarp C. Bonn, JERvis LANGDON, Jr.

and WILLARD WirTz, Trustees of the Property of Penn

Central Transportation Company, Debtor;

Manufacturers Hanover Trust, as Mortgage Trustee, and

Penn Central Transportation Company, Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

LAWRENCE W. IANNOTTI,

Irnvinc S. ScCHLOss,

205 Church Street,

New Haven, Connecticut

Of Counsel

TYLER, Cooper, GRANT, BOWERMAN & KEEFE,

205 Church Street, New Haven, Connecticut

Dated: May 6, 1972.

THE MACK CO., NORTH HAVEN, CONN.

SB BS a Eg a aa CS ot a

~~

TABLE OF CONTENTS

Opinions BELow .....

Nb ek Ae oh SNS EN Ml

QUESTIONS PRESENTED 2s

STATEMENT OF THE CasE

REASONS For GRANTING THE WRIT ..............

I. Jurisdictional Issues 000.

II. Construction of this Court’s mandate

ASTER ENT te a aT eee

—

ii

TABLE OF CITATIONS

CASES PAGE

Baltimore & O. R.R. Co. vs. United States, 386 U.S. 372

RUSE ce Siae at lta anne s eam arm 4

Benton vs. Callaway, 165 F.2d 877 (5th Cir. 1948), aff'd,

eC icine ectnibesincninrentss 12

In re Chicago, M. St. P. & R.R. Co., 145 F.2d 299 (7th

Cir. 1944), cert. denied sub nom., Park vs. Group

of Institutional Investors, 318 U.S. 523 (1945) ... 18

In re New York, New Haven & Hartford Railroad Co.,

331 F. Supp. 212 (D. Conn. 1971) .. oi . 2

In re New York, New Haven & Hartford Railroad Co,

330 F. Supp. 131 (D. Conn. 1971) 20 . 2,79

In re New York, New Haven & Hartford Railroad Co.,

304 F. Supp. 793 (D. Conn. 1969) .. : 6

In re Penn Central Transportation Co, ‘No. 11- 1582

and No. 71-1734 (3rd Cir. Jan. 3, 1972) (unreported) 10

New Haven Inclusion Cases, 399 U.S. 392 (1970) ........ 3, 4,6

New York, N.H. & H. R.R. Co. First Mortgage 4% Bond-

holders Committee vs. United States, 305 F. Supp.

Ee ID nines ihieeestsntteserso 6

Ohio Oil Co. vs. Thompson, 120 F.2d 831 (8th Cir.),

_ | cert. denied, 314 U.S. 658 (1941) .. a 18

Penn Central Merger & N.W. Inclusion Cones, 389 U. s.

486 (1969) .. ars ds 4

Re Sanford Fork é Tool Co, 160 U. S. 247 (1895) - 18

Rogers vs. Hill, 289 U.S. 582 (1933) . as 17

Swann vs. Charlotte-Mecklenburg Bd. of Edue., 402 U. S.

RSENS Suc MENU respon Ste NO er 17

Textile Workers Union vs. Lincoln Mills, 353 U.S. 448

Warren vs. Palmer, 310 U.S. 132 (1940)... ..... 3, 10, 12, 18

iii

PAGE

CONSTITUTIONAL PROVISIONS

United States Constitution, Amendment V....._. i, 5

STATUTES

28 U.S.C. § 1254(1) (1970) ee 2

28 U.S.C. § 2101 (C) (1970) oo cnssesssstisnemen 2

Bankruptcy Act § 77(a), 11 U.S.C. § 205(a) (1970)... 3,13

Interstate Commerce Act § 5, 49 U.S.C. § 5, (1970) ... 3, 14, 15

RULES

pee 4i(D) Fed. Ro Ae Pl ...

— ——_ RL PIN SAN EI Si Ne LT

In The

Supreme Court of the United States

OCTOBER TERM, 1971

No.

In the Matter of

The New York, New Haven & Hartford Railroad

Company, Debtor

LAWRENCE W. IANNoTTI, Successor Trustee

Under the First and Refunding 4% Mortgage Bonds,

dated as of July 1, 1947, of The New York, New Haven

and Hartford Railroad Company, Debtor, Petitioner,

vs.

GeorcE P. Barker, RicuArp C. Bonn, Jervis LANcpon, Jr.

and WILLARD WirTz, Trustees of the Property of Penn

Central Transportation Company, Debtor;

Manufacturers Hanover Trust, as Mortgage Trustee, and

Penn Central Transportation Company, Respondents.

PETITION FOR WRIT OF CERTIORARI

_TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

OPINIONS BELOW

The decision of the United States Court of Appeals for

the Second Circuit (hereinafter referred to as the “Court of

Appeals”) was issued on March 17, 1972. The decision is

still unreported and has been reprinted at pages A-5-A-26 of

the Appendix attached to the New Haven Trustee’s petition

for a writ of certiorari. in the interest of preserving the

— RT ' OEM D NOT INES VOPR IRE NN RENE RS PNM NANT

2

assets of the New Haven estate, separate and redundant ap-

pendices have not been printed and reference is made to the

single Appendix.

The Court of Appeals’ decision reversed the decision en-

tered by the United States District Court of Connecticut

(hereinafter referred to as the “New Haven Reorganization

Court”). That court’s Memorandum of Decision is reported

as In re New York, New Haven & Hartford Railroad Co., 330

F. Supp. 131 (D. Conn. 1971); and its Order of Remand, re-

ported as In re New York, New Haven & Hartford Railroad

Co., 331 F. Supp. 212 (D. Conn. 1971). The Memorandum

of Decision is reprinted at pages A-26-A-61 and the Order of

Remand at pages A-62-A-69 of the Appendix.

JURISDICTION

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1) (1970), and this petition is timely filed in accord-

ance with 28 U.S.C. § 2101(c) (1970).

The Court of Appeals’ decision was entered March 17, 1972,

but its mandate has not issued because, on April 6, 1972, the

Court of Appeals granted petitioner New Haven Trustee a

thirty-day stay in which to file his petition for 2 writ of cer-

tiorari in accordance with Rule 41(b) of the Federal Rules of

Appellate Procedure. Petitioner herein, though not a party

to the Motion for a Stay of Mandate, has filed his petition

for a writ of certiorari within the thirty-day period specified

by Rule 41(b).

.

QUESTIONS PRESENTED

Following this Court’s decision in the New Haven Inclusion

Cases, 399 U.S. 392 (1970), the case was remanded to the

New Haven Reorganization Court which entered an Order

imposing an equitable lien and constructive trust upon the

former New Haven assets conveyed to the Penn Central

Transportation Company (hereinafter referred to as “Penn

Central”) as part of the New Haven’s inclusion into the

Penn Central. Upon appeal, the Court of Appeals reversed

this decision on the grounds that the New Haven Reorganiza-

tion Court lacked jurisdiction over the subject matter. The

questions presented are:

1. Whether, in light of the Penn Central’s filing of a

petition of reorganization eight days prior to the entry of this

Court’s decision in the New Haven Inclusion Cases, the New

Haven Reorganization Court retained jurisdiction, under Sec-

tion 77(a) of the Bankruptcy Act, 11 U.S.C. § 205(a) (1970),

§ 5 of the Interstate Commerce Act, 49 U.S.C. § 5 (1970),

and this Court’s mandate, to impose an equitable lien and con-

structive trust to safeguard the constitutional rights of the

New Haven bondholders or whether the Penn Central Reor-

ganization Court in the Eastern District of Pennsylvania alone

had jurisdiction over the subject matter.

2. Whether, under Warren vs. Palmer, 310 U.S. 132 (1940),

the Court of Appeals erred in holding that exclusive juris-

diction over the New Haven reorganization now resides, and

has resided since Penn Central filed its petition for reorgani-

zation, in the Penn Central Reorganization Court.

3. Whether the New Haven Reorganization Court acted

in accordance with this Court’s mandate.

ae $7 Py RRR AMRIT Se HOTT 1 oF year oN eR

a

4. Whether the Court of Appeals had jurisdiction to re-

view the New Haven Reorganization Court’s implementation

_.of this Court's mandate or whether jurisdiction to construe its

mandate resides in this Court alone.

STATEMENT OF THE CASE

On three prior occasions, various aspects of the Penn

Central merger and the New Haven’s inclusion into the Penn

Central have come before this Court. Baltimore & O. R. R. Co.

vs. United States, 386 U.S. 372 (1967); Penn Central Merger

& N. W. Inclusion Cases, 389 U.S. 486 (1969); New Haven

Inclusion Cases, 399 U.S. 392 (1970).

The New Haven has been in reorganization in the New

Haven Reorganization Court since July 7, 1961, under Section

77 of the Bankruptcy Act. On December 2, 1968, the Inter-

state Commerce Commission (hereinafter referred to as the

“ICC”) certified a plan of reorganization to the New Haven

Reorganization Court providing for the inclusion of the New

Haven into the Penn Central. In light of the desperate state

of the New Haven’s finances, the filing of objections and the

scheduling of a hearing were expedited. In Order No. 559,

-dated December 24, 1968, the New Haven Reorganization

Court ordered the inclusion of the New Haven into the Penn

Central effective December 31, 1968. See New Haven Inclu-

sion Cases, supra. To permit speedy inclusion, Order No. 559

provided that the determination of the amount and the nature

of the consideration to be paid by Penn Central for the New

Haven assets would be postponed pending further litigation.

The New Haven Reorganization Court retained jurisdiction te

5

decide the terms of the inclusion,’ and, upon review of the

ICC's findings as to the liquidation value of the former New

Haven assets, held it was understated by approximately $29

million. Troubled by the disparity between the settled liqui-

dation value of approximately $174 million and the uncertain

value of the consideration proffered by the Penn Central, th:

New Haven Reorganization Court devised an underwriting

plan designed to ensure that the New Haven estate received

fair and equitable treatment end compensation in an amount

which would protect the New Haven bondholders’ rights under

the Fifth Amendment of the United States Constitution. The

court stated:

“This court adheres to the position that due process and

just compensation provisions of the Fifth Amendment

prohibit the imposition of a further period of erosion of

assets on the New Haven. It has ruled that any erosion

additional to that accumulated through 1968 would be

*Sections J and K of Order No. 559 provided as follows:

“J. The conveyance of the Debtor's assets by the New Haven

Trustees and the payment of consideration by Penn Cen-

tral Company, as provided herein, shall be without pre-

judice to the right of any party to contest the fairness

and adequacy of the consideration and the other terms of

the inclusion of the Debtor's operation in Penn Central

Company.

“K. The Court hereby reserves jurisdiction to adjudicate all

operations [sic] and claims for equitable treatment here-

tofore filed herein except that all objections to the inclu-

sion of the Debtor's operations in Penn Central Company

as of December 31, 1968 are hereby overruled and de-

nied.”

ae SEE 9s

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6

constitutionally impermissible as a taking without just

“The nub of the unfairness and inequity is not the

87% [the value credited to each share of Penn Central

common stock] fixed for present calculations, but the

fact that the purchaser is getting assets of sure present

value while the seller is asked to gamble for its payment

on the future of the Penn Central.” In re New York,

New Haven & Hartford Railroad Co., 304 F. Supp. 793,

801, 809 (D. Conn. 1969).

Almost simultaneously, the ICC’s evaluation was appealed to

a three-judge District Court convened under § 5 of the In-

terstate Commerce Act to rule on the fairness of the terms of

_ the Penn Central-New Haven merger. That court found that

the ICC had underestimated the New Haven estate’s value by

approximately $990,000 and adopted the New Haven Reor-

ganization Court's underwriting plan. New York, N.H. & H.

R.R. Co. First Mortgage 4% Bondholders’ Committee vs. United

States, 305 F. Supp. 1049 (S.D.N.Y. 1969). Those decisions

were then appealed to this Court.

In the New Haven Inclusion Cases, 399 U.S. 392 (1970),

this Court held that the three-judge District Court should have

deferred to the New Haven Reorganziation Court and affirmed

the New Haven Reorganization Court's decision in all respects,

including its determination that further erosion of the New

Haven estate would violate the bondholders’ constitutional

rights, except that it found the underwriting plan to be un-

realistic in light of the intervening Penn Central bankruptcy.

The Court noted that the final decision regarding the consid-

eration to be paid the New Haven estate would have to be

reached thereafter by “the Commission and the appropriate

7

federal courts”, 399 U.S. at 489, and the case was remanded

to the New Haven Reorganization Court.

Upon remand, the New Haven Reorganization Court, act-

ing pursuant to its jurisdiction under this Court’s mandate and

as a § 77 and a § 5 court, imposed an equitable lien upon the

former New Haven assets and a constructive trust upon the

excess income from the so-called Grand Central Terminal

properties. Creation of these security devices was justified

on the grounds that the New Haven estate required interim

protection to ensure receipt of fair and equitable treatment

and adequate compensation as required by the Constitution

and this Court's decision. The New Haven Reorganization

Court held:

“This court has the exclusive jurisdiction to determine

the effect of the Supreme Court's mandate in the New

Haven Inclusion Cases, and this court must decide what

is to be done to implement it. The full price required to

be paid for the New Haven’s assets was decided, but the

terms of the payment were not; and this court alone must

review and determine what means, pursuant to the Su-

preme Court's mandate, are proper. The I.C.C. cannot

adjudicate the issues of law now before this court, for

these lie outside its jurisdiction . . .

“So here, the Commission has no jurisdiction to de-

cide the legal questions of the New Haven’s status,

whether as that of a stockholder or creditor, including

the type of creditor, and the further related question as

to whether or not the New Haven estate has a full se-

curity interest in its former properties for the balance of

the purchase price. These are legal questions which are

for this court's determination in construing the Supreme

Court's mandate. In the circumstances of this case or-

dinary sense and logic call for a resolution of these para-

ties

8

mount issues before remand of the case to the I.C.C. in

order that it may proceed with prior knowledge of how

the legal questions have been adjudicated . . .

“It should clearly be borne in mind, however, that this

court claims only the power to declare the existence of an

equitable lien on the conveyed property, including a con-

structive trust to the extent of the capitalized value of

one-half of the excess income from the Grand Central

properties, for the balance due ou the purchase price.

With the property in the possession of the Trustees of

the Penn Central and with the duties of operation resting

on that company’s Trustees, the New Haven reorganiza-

tion court does not under present circumstances assert

the power to enforce such a lien. The declaration of a

lien will have no adverse impact on the ability of the

Penn Central to operate as a railroad, and the Penn

Central reorganization court will remain wholly in con-

trol of the effect, if any, of such a lien on the opera-

tions of the railroad and on its reorganization plan

formulation. . . .

“It is this court’s position that the nature and form

(including whether or not it should be treated as secured)

of the indebtedness of Penn Central to the New Haven

for the assets transferred, long before Penn Central went

into reorganization, and at a time when both the New

Haven, as debtor, and Penn Central were solely under

the jurisdiction of this court, are matters within the ex-

clusive jurisdiction of this court. Both the New Haven

and Penn Central reorganization courts have the duty

and jurisdiction to protect the New Haven’s constitution-

al right not to have the equity imposed security of the

transferred properties further confiscated in the public

interest. The Penn Central reorganization court has ex-

clusive jurisdiction over any action by the New Haven

Trustee to enforce his equitable lien and also over the

9

form of the consideration and its time and manner of pay-

ment as they may be affected by a fair and equitable plan

of reorganization of the Penn Central.” 330 F. Supp. at

136-37, 141-42, A-28-A-29, A-30-A-31, A-39.

In light of the Penn Central Trustees’ position that the New

Haven should be content with what it had procured, the

New Haven Reorganization Court emphasized that, absent

some form of security, the intervening Penn Central bank-

ruptcy would result in the Penn Central Trustees’ receipt of

the New Haven’s former assets at a fraction of their worth.

The Penn Central Trustees also maintained that they were em-

powered to use the former New Haven assets to run the

Penn Central and to offset its operating losses. Under these

circumstances, the likelihood of further erosion of the New

Haven estate and the diminution of the New Haven bond-

holders’ security prompted the New Haven Reorganization

Court to take action which, as a court of equity, it felt in

good conscience impelled to do. Declaration of the equit-

able lien and constructive trust was also justified as imple-

mentation of this Court’s mandate and decision

Following the New Haven Reorganization Court’s issuance

of its Memorandum of Decision and one day prior to the entry

of its Order of Remand, the Penn Central Reorganization

Court entered its Order No. 296 enjoining the New Haven

interests from enforcing any claim against Penn Central arising

out of the New Haven inclusion and instructing the Penn

Central Trustees to appear in the New Haven Reorganization

Court to object to the entry of any order which would interfere

with the Penn Central Reorganization Court’s exercise of juris-

diction over its debtor. For reasons not relevant to this peti-

tion, Order No. 296 was remanded for modification by the

10

United States Court of Appeals for the Third Circuit, In re

Penn Central Transportation Co., Nos. 71-1582 and 71-1734

(3rd Cir. Jan. 3, 1972) (unreported). On remand, the injunc-

tive provisions of Order No. 296 were conitinued and remain

in effect.

On December 31, 1971, the Penn Central Reorganization

Court entered Order No. 546, declaring 2 tentative lien, in-

determinate in amount and priority, in favor of the New Haven

estate. That Order, entered while the New Haven Reor-

ganization Court's decision was on appeal to the Second Cir-

cuit, has been appealed to the Third Circuit on the ground

that it constitutes an impermissible collateral attack on a deci-

sion of a court of concurrent jurisdiction.

On March 17, 1972, the Second Circuit reversed the New

Haven Reorganization Court on the grounds that it had lacked

subject matter jurisdiction to declare the equitable lien and

constructive trust. The Court of Appeals held, in light of

this Court’s decision in Warren vs. Palmer, 310 U.S. 132 (1940),

that the New Haven Reorganization Court's prior jurisdiction

under § 77 and § 5, its in personam jurisdiction over the Penn

Central Trustees, and its jurisdiction under this Court's man-

date could not prevail in light of the literal language of § 77(a)

vesting exclusive jurisdiction in the Penn Central Reorganiza-

tion Court. The Court of Appeals commented, despite no

such evidence in the record, that the declaration of an equit-

able lien and constructive trust could impair formulation of a

plan of reorganization for the Penn Central. The Court of

Appeals then remanded the case to the ICC where the New

Haven reorganization would become a part of the larger

Penn Central proceedings, review thereafter to be had only in

the Penn Central Reorganization Court.

11

Judge Mansfield concurred in the remand to the ICC but

dissented from so much of the Court of Appeals’ decision as

held that the New Haven Reorganization Court would no

longer have a role in the determination of the amount and

form of consideration to be paid for the former New Haven

assets. His dissent capsulizes the basic tenants of petitioner’s

jurisdictional argument. Judge Mansfield pointed out that the

New Haven Reorganization Court continues to function as a

§ 77 and § 5 court and “[{a]s such it has a vital interest in the

final determination of the terms and conditions of the New

Haven’s inclusion into the Penn Central.” Id. at 2201 A-2L

Turning to this Court's order of remand, Judge Mansfield

noted that this Court did not remand to the Penn Central Re-

organization Court, which it could have done under § 77(a)

if the New Haven were to be treated merely as a subsidiary of

the Penn Central. Judge Mansfield disagreed with the ma-

jority’s interpretation of Warren vs, Palmer and noted that

none of the considerations which governed that decision was

present in this proceeding, After all, he noted, the New

Haven Reorganization Court acquired possession under § 77

over the New Haven assets long before the Penn Central Re-

organization Court; it reserved jurisdiction over precisely the

issues involved in this litigation; and neither forum appears

better equipped to determine the final terms and conditions

of the New Haven’s inclusion into the Penn Central. Finally,

he emphasized that there was no reason to believe that the

two reorganization courts would not cooperate in their re-

view of a plan of reorganization for the two railroads and he

stated his conviction that, when a plan of reorganization is for-

mulated, “. . . the Supreme Court would appreciate having

the recorded views of the Connecticut Court, which has be-

12

come a resnected veteran in this protracted and complicated

matter.” Id. at 2205, A-24.

REASONS FOR GRANTING THE WRIT

Though its facts are unique, this case raises several difficult,

general and far-reaching problems of bankruptcy law, railroad

reorganization procedure, and federal procedure meriting this

Court's attention. As another stage of the Penn Central mer-

ger and New Haven inclusion, which this Court has continually

supervised to ensure fair and equitable treatment for all of

the parties involved, the Court of Appeals’ decision, if left

undisturbed, may frustrate this Court's prior efforts and may

further deplete the New Haven bondholders’ security be-

yond constitutional limits. As a result, this Court's decision

in the New Haven Inclusion Cases may prove an empty, un-

enforceable $174 million judgment.

I, JURISDICTIONAL IssuES

Although the question of the proper interrelationship be-

tween § 77 courts of concurrent jurisdiction has only arisen

in this Court in Warren vs. Palmer and, by dictum, in Benton

vs. Callaway, 165 F.2d 877, 882 (5th Cir. 1948), aff'd, 336 U.S.

132 (1949), resolution of the respective roles of the New

Haven and Penn Central Reorganization Courts is a matter

of great public importance. These two proceedings each in-

volve hundreds of millions of dollars and the future of rail

transportation in the Washington-Boston corridor. Further-

more, six major railroads in the northeastern part of the coun-

13

try’ are presently in reorganization courts extending over three

federal judicial circuits. The need for guidelines is pressing

in light of the possibility of future conflicts.

Warren vs. Palmer remains the only yardstick fashioned by

this Court to resolve jurisdictional disputes between § 77

courts. -As Judge Mansfield noted, that case dealt with (1)

leased lines, jurisdiction over which this Court held was gov-

erned by § 77(c)(6) of the Bankruptcy Act and (2) the

need to concentrate responsibility for the physical operations

of the lines in question. Neither of those factors obtains here.

Unlike Warren vs, Palmer, the jurisdictional questions in this

case cluster around § 77(a) and only one court here, the

Penn Central Reorganization Court, oversees the operations of

a functioning railroad, Furthermore, the Court of Appeals

misconstrued Warren vs, Palmer, which left the two District

Courts there considerable scope to exercise both their ex-

clusive and concurrent jurisdiction. What this Court did not

hold in Warren vs, Palmer was that the New Haven Reorgan-

ization Court, in that case, had pre-empted the field as the

Court of Appeals apparently believed. The Court of Appeals’

reliance upon the literal language of § 77(a) was equally mis-

placed, another aspect of the lesson of Warren vs. Palmer to

which the Court of Appeals failed to give adequate weight.

For, as this Court emphasized, § 77(a)’s language constitutes

only the beginning of the inquiry.

Following the decision in Warren vs. Palmer, as the New

Haven Reorganization Court noted in its Memorandum of De-

* The Boston & Maine Railroad, the New Haven, Penn Central,

the Reading Railroad, the Central Railroad of New Jersey,

and the Lehigh Valley Railroad.

ae Ae

14

cision, cooperation between those two reorganization courts

and, latterly, the Penn Central Reorganization Court resulted

in the completion of the Boston & Providence reorganization.

The Court of Appeals’ decision is consonant, therefore, with

neither the letter of Warren vs. Palmer nor the experience

and needs of District Court judges sitting as reorganization

courts.

The position taken by the New Haven Reorganization Court

and by petitioner in the Court of Appeals, and which com-

ports with Warren vs. Palmer, is that the Penn Central Re-

organization Court has the responsibility of determining the

priority of the New Haven estate’s claim in the Penn Central

reorganization proceedings and in deciding on a form of con-

sideration for the former New Haven assets which will be

fair to other Penn Central creditors. The New Haven Reor-

ganization Court, on the other hand, must review the ICC’s

plan of reorganization for the two railroads in order to de-

termine whether it is fair and equitable to the New Haven

estate and its creditors. In addition to being consistent with

Warren vs. Palmer, this view eliminates any jurisdictional con-

flict, though it does raise the possibility of a difference of

opinion to be resolved on appeal. However, as Judge Mans-

field noted, in all likelihood the two courts will cooperate.

That responsibilities should be allocated along these lines is

underscored by the fact that the New Haven Reorganization

Court is the only court with jurisdiction to review the terms

of the Penn Central-New Haven merger under § 5 of the

a

15

Interstate Commerce Act.’ The merger aspects of this case

notwithstanding, the facts reveal dramatically the basic ques-

tions of bankruptcy law which they raise — the outer bounds

of a bankruptcy court’s ability to dispossess another court of

jurisdiction and the extent to which a prior reservation of

jurisdiction, jurisdiction under a remand from a higher court,

and in personam jurisdiction over the parties enable a court

with previously existing jurisdiction to retain it.

This issue is not merely academic. The Penn Central re-

organization is not proceeding either smoothly or swiftly, and

both major creditors and the Penn Central Trustees them-

selves have expressed reservations about the likelihood the

Penn Central can be reorganized. Dismissal of the reorgani-

zation is by no means impossible. If dismissal occurs, and

the New Haven reorganization has been converted into a

segment of the Penn Central proceeding, the Court of Ap-

peals’ decision would leave the New Haven reorganization in

limbo. Return to the New Haven Reorganization Court

would, in retrospect, have produced a wasteful and inefficient

* In relevant part, § 5 provides that:

(d) The Commission shall have authority in the case of a

proposed transaction under this paragraph involving a rail-

road or railroads, as a prerequisite to its approval of the

proposed transaction, to require, upon equitable terms, the

inclusion of another railroad or other railroads in the terri-

tory involved, upon petition by such railroad or railroads re-

questing such inclusion, and upon a finding that such inclu-

sion is consistent with the public iaterest. (Emphasis added).

The three-judge court was convened pursuant to 28 U.S.C.

§ 2325 (1970).

REDEEMER ES BENE 7, ANE IRR SF IE RCT ee

16

transfer of jurisdiction, but that involves the heroic assump-

tion jurisdiction would somehow revest. Retention of jurisdic-

tion by the Penn Central Reorganization Court would be pre-

sumably untenable since the basis for its jurisdiction would

have disappeared with the dismissal. The New Haven would

be a railroad in reorganization without a reorganization court.

In general then, the outcome of the jurisdictional dispute

in this case does not turn upon issues of fact. None of the

courts which have passed on this issue has found as a matter

of fact that the declaration of an equitable lien and construc-

tive trust has interfered or will interfere with the Penn Central

Trustees’ operation of their railroad or the Penn Central Re-

organization Court’s proceedings. The Penn Central Trustees

have not experienced any difficulties in disposing of real estate

formerly owned by the New Haven and even the constructive

trust on the excess income from the Grand Central Terminal

properties has not produced operational difficulties for, as the

Penn Central Trustees stated in petitioning for permission to

sell some of the Grand Central real estate, the properties and

income “are not required by the [Debtor's] Trustees in the

operations of the Debtor's railroad or in the conduct of the

Debtor's transportation business.” Attachment to Order No.

605 (E.D. Pa. Mar. 13, 1972).

This case requires, therefore, a legal interpretation of

§ 77(a) and a decision which will mediate or eliminate future

conflicts, which only this Court can provide.

II. CONSTRUCTION OF THIS CouRT’s MANDATE.

This case also raises several questions regarding the proper

implementation of this Court’s mandate, which provided that

17

the causes be “remanded to the United States District Court

for the District of Connecticut for further proceedings in con-

formity with the opinion of this Court.” The Opinion thus

became a part of the mandate. Rogers vs. Hill, 289 U.S. 582,

587 (1933). The New Haven Reorganization Court ruled

that its decision merely restated and implemented this Court’s

mandate, that it was the proper forum because the ICC can-

not adjudicate legal rights, and that the remand itself con-

ferred jurisdiction. The Court of Appeals disagreed on all

counts and held that the New Haven Reorganization Court

was jurisdictionally unable to do more than forward the mat-

ter to the ICC. Resolution of this issue is vital because the

Court of Appeals’ decision would, if generally applied, limit

the discretion and nullify the jurisdiction of District Courts on

remand. To the extent prior case law exists, the Court of

Appeals’ decision is inconsistent with it. See Textile Workers

Union vs¢ Lincoln Mills, 353 U'S. 448, 456-57 (1957); Swann

vs. Charlotte-Mecklenburg Bd. of Educ., 402 U.S. 1, 15-16

(1971). The breadth of a District Court’s discretion and the

imaginativeness with which it should fashion a remedy to en-

force a decision by this Court are general problems of federal

procedure and the management of the federal judiciai system

to which only this Court can provide definitive answers.

If the New Haven Reorganization Court was acting within

its discretion in declaring an equitable lien and a constructive

trust, then the opinion of the Court of Appeals raises yet an-

other difficult question — whether it had jurisdiction to re-

view and reverse the New Haven Reorganization Court or

whether jurisdiction lies only in this Court. Petitioner sub-

mits that the New Haven Reorganization Court accurately

read this Court’s decision in the New Haven Inclusion Cases

pil cn Netee scene MRL ce hg LL sk De A aera, trace nt ney oat

18

to mean that the New Haven Reorganization Court's valua-

tion was correct, that its underwriting plan had been under-

mined by intervening events, and that on remand it ought to

design a new form of security device for the New Haven es-

tate. Petitioner contended in the Court of Appeals that juris-

diction lay only in this Court and this position is consist-

ent with an extensive line of case law. Re Sanford Fork &

Tool Co., 160 U.S. 247, 258 (1895); Ohio Oil Co. vs. Thomp-

son, 120 F.2d 831, 834 (8th Cir.), cert. denied, 314 U.S. 658

(1941); see the remarkably similar case of In re Chicago, M.

St. P. & P. RR. Co., 145 F.2d 299, 304 (7th Cir. 1944), cert.

denied sub. nom., Park vs. Group of Institutional Investors, 318

U.S. 523 (1945). Again, the factual situation of this case

poses dramatically the entire congeries of questions concern-

ing the District Court’s proper role on remand from this Court.

Determination of the forum in which review of a District

Court’s actions upon remand is to be had is an important ques-

tion of federal procedure which only this Court can resolve. -

Finally, the New Haven Reorganization Court's Memoran-

dum of Decision was based upon the postulate that judicial

action was required since the ICC could not adjudicate the

parties’ legal rights. The Court of Appeals brushed this as-

pect of the New Haven Reorganization Court's decision aside,

but the New Haven Reorganization Court's opinion raises an

issue upon which this Court has not definitely spoken; namely,

the jurisdictional relationship between an expert administra-

tive agency and a reviewing court to adjudicate parties’ legal

rights. For if the New Haven Reorganization Court had

jurisdiction under this Court's mandate and if the ICC is not

empowered to pass upon legal issues, then the basic premise of

the Court of Appeals decision is incorrect and a re-evaluation

19

of the interrelationship between court and commission needs

to be undertaken, preferably by this Court.

CONCLUSION

For these reasons, a writ of certiorari should issue to re-

view the judgment and opinion of the United States Court of

Appeals for the Second Circuit.

Respectfully submitted,

LAWRENCE W. [ANN

205 Church Street,

P. O. Box 1936,

New Haven, Connecticut 06509.

Invinc S. ScHLOss,

205 Church Street,

P. O. Box 1936,

New Haven, Connecticut 06509.

Of Counsel.

TyLer, Cooper, GRANT, BOWERMAN & KEEFE,

205 Church Street,

P. O. Box 1936,

New Haven, Connecticut 06509.