Amicus Curiae Brief — Pennsylvania v. United States

§u the Supreme Court of the United States

OCTOBER TERM, 1972

No. 71-1596

COMMONWEALTH OF PENNSYLVANIA, ET AL.,

PETITIONERS

v.:

UNITED STATES OF AMERICA, ET AL.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

BRIEF FOR THE INTERSTATE COMMERCE

COMMISSION, AMICUS CURIAE, IN SUPPORT OF

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A,

5a-6a) is not yet reported. The order of the district

court (Pet. App. A, la-3a) is also unreported.

JURISDICTION

The judgment of the court of appeals (Pet. App.

_ A, 10a-1la) was entered on March 10, 1972. The

_ petition for a writ of certiorari was filed on June 8,

' 1972. This Court’s jurisdiction is invoked under 28

p US.C. 1254(1).

2

QUESTION PRESENTED

The major issue in this case warranting consider-

ation by this Court is whether the court below erred

in holding that a railroad reorganization court has

jurisdiction to review an order of the Interstate Com-

merce Commission authorizing abandonment of a por-

tion of the railroad’s line, and in enjoining all parties

from instituting or maintaining a suit for review of

that Commission order in a three-judge district court

convened in another district pursuant to the Urgent

Deficiencies Act.

STATUTES INVOLVED

The statutes involved are Section 1(18)-(20) of

the Interstate Commerce Act, 49 U.S.C. 1(18)-(20) ;

Section 77(0) of the Bankruptcy Act, 11 U.S.C. 205

(0); and Sections 1398(a) and 2325 of the Judicial

Code, 28 U.S.C. 1898(a) and 2325 (Pet. App. B,

1b-4b).

STATEMENT

The Central Railroad Company of New Jersey

(CNJ) filed a petition for reorganization on March

22, 1967, in the United States District Court for the

District of New Jersey (the reorganization court).

On May 25, 1971, the Trustee of CNJ filed 30 appli-

cations with the Commission requesting authority to

abandon 30 line segments under Sections 1(18) and

1(20) of the Interstate Commerce Act, 49 U.S.C.

ae

1(18) and 1(20).. These applications include CNJ’s

entire Pennsylvania operations as well as certain of

its New Jersey lines. By an order dated August 20,

1971, the Commission summarily authorized CNJ to

abandon 10 of the 30 lines. The remaining applica-

tions were set for further proceedings before the

Commission.”

Petitioners, who opposed ‘the abandonment in the

Commission proceeding, filed a complaint on Septem-

ber 24, 1971, in the Middle District of Pennsylvania

seeking to enjoin and set aside the Commission’s or-

der authorizing the 10 abandonments. Before that

suit could be prosecuted, however, the reorganization

court, in response to a petition for instructions filed

by the Trustee of CNJ, issued an order (Order No.

445) directing the Trustee to suspend all of CNJ’s

Pennsylvania operations by April 1, 1972, even if

the abandonment applications were stil] pending be-

fore the Commission and further enjoining essentially

all parties from instituting or maintaining any ac-

tion affecting CNJ’s Pennsylvania operations in any

court other than the reorganization court.

* The applications were docketed as F.D. No. 26659 and subs

1-29 thereunder.

2Of the remaining 20 applications, the Commission, in a

decision served June 2, 1972, approved 13 and denied 5 such

applications. CNJ had withdrawn 2 applications in their

entirety. The matter is now pending before the Commission

on petitions for reconsideration.

4

Petitioners’ application to the reorganization court

for leave to proceed in the Pennsylvania suit was

denied, and the Pennsylvania suit has been continued

pending this Court’s decision herein. Thereafter, by

order No. 451, the reorganization court authorized

the Trustee to implement the 10 abandonments ap-

proved by the Commission.

On appeal, the Court of Appeals for the Third

Circuit affirmed the orders of the reorganization

court. Petitioners’ applications for stay pending ap-

peal were denied by the court of appeals, and by Mr.

Justice Stewart on March 27, 1972.

ARGUMENT

The petition presents an important question of

Federal court jurisdiction which is likely to recur in

other railroad reorganization proceedings, and which

appears to be in conflict with prior decisions of this

Court as well as those of other lower Federal courts.

1. At the present time, twelve of the Nation’s

railroads are in reorganization proceedings in various

district courts throughout the country. Several of

the proceedings—including those involving the Penn

Central,’ the Reading,* and the Lehigh Valley "—are

3 In the Matter of Penn Central Transportation Company,

Bankruptcy No. 70-347, E.D. Pa.

+ In the Matter of the Reading Company, Bankruptcy No.

71-828, E.D. Pa.

5 In the Matter of Lehigh Valley Railroad Company, Bank-

ruptcy No. 70-432, E.D. Pa.

—

5

in courts located within the Third Circuit. The deci-

sion of the court below has already been cited by a

major creditor in the New Hope and Ivyland reor-

ganization proceeding, seeking an order directing the

Trustee of that railroad to suspend operations, and

the issue of the reorganization court’s power to re-

view an abandonment order and to enjoin review by

other courts can similarly: be expected to arise in

other reorganization proceedings. Plainly, this is a

matter of sufficient importance to warrant plenary

consideration by this Court.

2. The question presented is important to the lower

Federal courts in defining their respective jurisdic-

tions, and cannot be resolved without guidance from

this Court. The reorganization court’s orders are in

no way binding on the three-judge district court in

the Middle District of Pennsylvania and thus both

courts could have proceeded simultaneously. The fact

that the Pennsylvania court has Stayed its hand

here does not detract from the possibility that it

could have acted and reached a different result than

the reorganization court. See New Haven Inclusion

Cases, 399 U.S. 392, 419 (1970).

3. The decision of the court below is in conflict

with this Court’s decision in Thompson v. Texas

Mexican R. Co., 328 U.S. 134 (1946). In Thompson,

this Court held that “[e]larriers being reorganized

* In the Matter of New Hope and Ivyland Railroad Company,

Debtor, Bankruptcy No. 70-324, E.D. Pa., Motion of South-

eastern Pennsylvania Development Fund for Order Directing

Trustee To Suspend Operations, filed August 1, 1972.

es STEEP TOE GIN ia i al

<a E

6

under §77 of the Bankruptcy Act are not exempt

from” the provisions of §1(18) of the Interstate

Commerce Act, which requires that no carrier may

abandon all or any part of its operations unless and

until the Commission has issued an order authoriz-

ing it todo so. (328 U.S. at 144). And, in language

directly applicable to the case at bar, this Court em-

phasized that “[i]f the order of the Commission were

challenged, its review could of course be had only in

the manner provided by statute. See El Dorado Oil

Works v. United States, 328 U.S. 12.” (328 US.

at 151, fn. 11). The “manner provided by statute”

is, of course, that such orders are only “reviewable

by a district court of three judges.” (El Dorado,

328 U.S. at 19). Here, in contrast, the reorganiza-

tion court has asserted jurisdiction to review the Com-

mission’s abandonment order, and has enjoined the

parties from seeking review before a three-judge

court, as provided by statute. Plainly, this is con-

trary to this Court’s Thompson decision.

Other lower courts dealing with similar issues

have consistently followed the rationale of this Court

in Thompson, holding that orders of the Commis-

sion in cases involving passenger train discontinu-

ances of a railroad in reorganization (which are

analogous to abandonment cases) are subject to re-

view only by a statutory three-judge court and not

by the reorganization court. In Commonwealth of

Pennsylvania v. United States," a three-judge dis-

* Civil Action No, 70-1156, Western District of Pennsyl-

vania, Memorandum Opinion Sur Interlocutory Injunction,

ae

trict court in Pittsburgh denied a motion by the

Penn-Central Transportation Company to transfer a

passenger train discontinuance case to Penn-Central’s

reorganization court. And in In re Penn-Central

Transportation Company, 446 F.2d 1109, 1113 (3rd

Cir. 1971), the Third Circuit itself indicated that

“matters relating to train discontinuance are not or-

dinarily heard by the reorganization court.”

The Commission’s decision authorizing 10 of the

30 line abandonments requested by CNJ was ren-

dered exclusively under the provisions of the Inter-

state Commerce Act. Accordingly, judicial review of

the Commission’s decision must, as this Court held

in Thompson, be before a three-judge district court

in conformance with the statutory scheme for re-

viewing the transportation decisions of the Commis-

sion, and the court below was without jurisdiction

to alter this mode of judicial review. Compare Calla-

way v. Benton, 336 U.S. 132, 142 (1949), where

this Court observed that “Congress did not give the

bankruptcy court exclusive jurisdiction over al] con-

troversies that in some way affect the debtor’s estate

-. + What it did give is exclusive jurisdiction of the

debtor and its property wherever located.”

Arguments that the decision of the court below is

supported by New Haven Inclusion Cases, 399 U.S,

392; and Chicago & North Western Ry. Co. v. United

Conclusion of Law No. 8, dated October 12, 1970, vacated

as moot sub nom. Baker v. Pennsylvania, 401 U.S. 902 (1971).

That case was rendered moot by the passage of the so-called

Railpax legislation during the litigation.

PNG ee

: e.,

States, 52 F. Supp. 65 (N.D. Ill. 1943), affirmed

per curiam 320 U.S. 718, are plainly in error. Those

cases dealt with the reorganization court’s exclusive

jurisdiction to review the Commission’s decisions on

plans of reorganization; they did not involve review

of other decisions of the Commission affecting the

railroad, such as abandonment decisions.* With re-

spect to abandonment of the debtor’s line, § 77(0) of

the Bankruptcy Act provides that the trustee shall

initially determine what lines should be abandoned

in the interest of the debtor’s estate and shall pre-

sent to the reorganization judge petitions for author-

ity to abandon. The judge after notice and hearing

may:

upon order... authorizing any such abandon-

ment or sale, but only with the approval and

authorization of the Commission when required

by the Interstate Commerce Act... (emphasis

added)

The quoted portion of §77(0) clearly shows that:

(1) Congress specifically did not grant any excep-

tion to a reorganizing railroad so far as abandon-

ment of line is concerned; and (2) the procedure to

be followed in the abandonment proceeding is as “re-

quired by the Interstate Commerce Act.” Properly

read, § 77(0) provides that the trustee and the re-

®In the present case, the Commonwealth of Pennsylvania

filed a motion with the Commission to consolidate the CNJ

plan of reorganization and its abandonment applications. That

motion was opposed by the Trustee of CNJ and denied by the

Commission.

——

9

organization court should be “concerned only with

the economic effect of the abandonment on the debt-

or’s estate and reorganization, and that questions of

the effect on public interest are to be left to the In-

terstate Commerce Commission.” In re Boston and

Maine Corporation, 317 F. Supp. 1249, 1252 (D.

Mass. 1970); and In re Fonda, J. & G.R. Co., 95

F, 2d 397, 400 (2nd Cir. 1938). Accordingly, ques-

tions of public interest, which pervade an applica-

tion to abandon rail lines, are to be considered and

reviewed under the substantive standards of the In-

terstate Commerce Act and the procedural scheme

of the Urgent Deficiencies Act.

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be granted.

Respectfully submitted.

FRITZ R. KAHN,

General Counsel,

BETTY JO CHRISTIAN,

Associate General Counsel,

JAMES F. TAO,

Attorney,

Interstate Commerce Commission,

Washington, D.C. 20428.

September 1972.

woues. GOVERNMENT PRINTING OFFICE; 1972 470011 145

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