Opposition Brief — Pennsylvania v. Nash

LIBRARY Files

SUPREME COURT, U.S r—EB 28 19%

IN THE WICHAEL RODAK, JR. QUBAK

Supreme Court of the United State:

October Term, 1973.

No. 73-894.

COMMONWEALTH OF PENNSYLVANIA and

PENNSYLVANIA PUBLIC UTILITY COMMISSION,

Petitioners,

v.

JOHN F. NASH, et al,

Respondents.

BRIEF FOR RESPONDENTS IN OPPOSITION.

Wu R. Travs,

Duane, Moreis & Hecxkscuer,

1600 Land Title Building,

Philadelphia, Pa. 19110

Attorneys for Respondents.

International Printing Co., 711 So. S0th St., Phila., Pa. 19143 — Tel. (215) 72-2711

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REASONS FoR DENYING THE WRIT OF CERTIORARI ........--

I. The Decision Below Concluding That the District

Court Was Within the Bounds of Its Discretion in

Dismissing the Petitioner’s Complaint Is Clearly

Correct and There Is No Conflict of Decision ......

II. There Is No Important Issue of Federal Law In-

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CASES CITED.

Page

Asbury v. C & O Ry., 314 F. Supp. 310 (DC 1970) ........ 5

Commonwealth of Pa. v. Penn Central Transp. Co., 348 F.

Supp. 28 (M. D. Pa. 1972) .......--seeeeeeeeeeeee 4, 5, 6,7

In Re Long Island R. R., 92 F. Supp. 85 (E. D. N. Y. 1950) 5

Meyers v. Jay Street Connecting Railroad, 259 F. 2d 532 (2d

Che, TET) occ ccccccwcccccccccccccceccccsccssccces 4

New Haven Inclusion Case, 1970, 399 U. S. 392 ........... 5,7

STATUTES.

Page

49 U. S. C. Section 1(18) .........cccccccccccccccccccces 4

49 U. S.C. Section 1(20) ......... cece e ence eee e eee eeeee 4

QUESTION PRESENTED.

May a United States District Court properly decline

to exercise jurisdiction to grant injunctive relief which

would have required a railroad in reorganization under

Section 77 of the Bankruptcy Act to expend substantial

funds on the grounds that the reorganization court, having

concurrent jurisdiction, is the more appropriate forum as

it is more conversant with the financial condition of the

Debtor and bears the ultimate responsibility for its re-

organization, therefore, enabling it to reach a more in-

formed decision.

Brief for Respondents in Opposition

STATUTES INVOLVED.

Section 1(18) of the Interstate Commerce Act, 49 USC

Section 1(18) (the ‘‘Act’’) provides in relevant part that a

railroad shall not ‘‘abandon all or any portion of a line of

railroad, or the operation thereof, unless and until there

shall first have been obtained from the Commission a cer-

tificate that the present or future public convenience and

necessity permit of such abandonment.’’

Section 1(20) of the Act provides in relevant part that

any abandonment contrary to the provisions of Section

1(18) ‘‘may be enjoined by any court of competent juris-

diction at the suit of . . . any commission or regulating

body of the State or States affected, or any party in

interest.”’

The full text of the statutes are set forth in Appendix

‘*A’’ attached hereto.

STATEMENT.

Lehigh Valley Railroad Company (the ‘‘Debtor’’) filed

its Petition for reorganization under Section 77 of the

Bankruptcy «Act on July 24, 1970. The Respondents were

subsequently appointed as Trustees and have operated the

property of the Debtor since August 12, 1970 subject to the

jurisdiction and control of the reorganization court.

Prior to February 28, 1973 the Debtor conducted

freight operations over the Montrose Branch running 26

miles through sparsely populated country in northern

Pennsylvania from Tunkhannock, Pennsylvania to Mont-

rose, Pennsylvania, delivering approximately six cars on

each of two deliveries per week. Over a period of years the

railroad has experienced an increasing number of derail-

ments. In November, 1973 derailments became very fre-

quent but with the onset of winter and ground frost, the

Debtor was able to continue operations over this line as the

frozen ground stopped the track from moving which had

Brief for Respondents in Opposition 3

been the cause of most of the derailments. In late Feb-

ruary, 1973 with the onslaught of spring conditions and

thawing ground, a substantial majority of the trains op-

erating over this line experienced derailments. The Debtor

embargoed the line effective at 12:01 a.m. on February 28,

1973 due to dangerous track conditions, giving written

notice to the Pennsylvania Public Utility Commission. On

March 9, 1973 the Commonwealth of Pennsylvania and the

Pennsylvania Public Utility Commission instituted an

action in the United States District Court for the Middle

District of Pennsylvania seeking an injunction requiring

the Debtor to expend the funds necessary to restore the

Montrose Branch to safe operable condition.

The hearing on the Complaint was held on March 15,

1973 at which evidence was given that the restoration of

the Montrose Branch would require the expenditure of some

$96,000 before a train could operate over it without sub-

stantial threat of derailment.

The Debtor, with approval of the reorganization court,

filed an application for abandonment of the Montrose

Branch with the Interstate Commerce Commission on or

about March 15, 1973, which application is still pending.

The District Court, after hearing testimony, declined

to exercise jurisdiction and dismissed Petitioners’ Com-

plaint, leaving the door open for Petitioners to seek in-

junctive relief in the reorganization court.

The Court of Appeals affirmed on September 7, 1973,

emphasizing that the District Court order did not constitute

a bar to the bringing of an action in the reorganization

court as the District Court did not adjudicate any of the

merits raised by the Complaint. The Court of Appeals

decision concluded that the reorganization court was better

equipped to deal with the merits of the Debtor’s claims re-

lating to the abandonment of the Montrose Branch and that

therefore the District Court was within the bounds of its

discretion in dismissing the Complaint.

Brief for Respondents in Opposition

REASONS FOR DENYING THE

WRIT OF CERTIORARI.

I, The Decision Below Concluding That the District Court

Was Within the Bounds of Its Discretion in Dismissing

the Petitioner’s Complaint Is Clearly Correct and There

Is No Conflict of Decision.

The original suit was filed by the Commonwealth of

Pennsylvania and its Public Utility Commission in the

United States District Court for the Middle District of

Pennsylvania for a mandatory injunction to require the

Lehigh Valley Railroad Company to expend substantial

funds to restore the Montrose Branch to operable condition.

The suit was brought under two sections of the Inter-

state Commerce Act. Section 1(18) of the Act, 49 USC

Section 1(18), provides in relevant part that a railroad shall

not ‘‘abandon all or any portion of a line of railroad, or the

operation thereof, unless and until there shall first have

been obtained from the Commission a certificate that the

present or future public convenience and necessity permit

of such abandonment.’’ Under Section 1(20) of the Act,

49 USC Section 1(20), any abandonment contrary to the

provisions of Section 1(18) ‘‘may be enjoined by any court

of competent jurisdiction at the suit . . . any commission

or regulating body of the State or States affected, or any

party in interest.’’

Respondents do not contest that the lower court had

jurisdiction to grant an affirmative injunction under 49

USC Section 1(20). Commonwealth of Pennsylvania v.

Penn Central Transp. Co., 348 F. Supp. 28 (M. D. Pa. 1972);

Meyers v. Jay Street Connecting Railroad, 259 F. 2d 532

(2d Cir. 1958).

The language of Section 1(20), however, is permissive

and gives the District Court discretion to decide whether or

PX MLL RENE aT A RT BT PERERA NEI RTTELE NEI TE

Brief for Respondents in Opposition 5

not restoration should be compelled by injunction. In Re

Lang Island R. R., 92 F. Supp. 85 (E. D. N. Y. 1950);

Asbury v. C é O Ry., 314 F. Supp. 310, 312 (D. C. 1970) ;

Commonwealth of Pennsylvania v. Penn Central Trans-

portation Co., supra, 30.

In this case the District Court, after a lengthy hearing

and on the basis of the facts stated in its Order, simply

refused to exercise this discretion in favor of either of the

parties on the ground that the reorganization court, which

was also a court of competent jurisdiction within the mean-

ing of Section 1(20) of the Act, could exercise a more in-

formed discretion, being more conversant with the financial

condition of the railroad and bearing ultimate responsibility

for its reorganization. The refusal to exercise jurisdiction

in these circumstances was clearly proper. See New Haven

Inclusion Case, 1970, 399 U. S. 392, 419-430; Commonwealth

of Pennsylvania v. Penn Central Transportation Company,

M. D. Pa. 1972, supra, p. 31.

The ultimate decision of whether it is in the interest

of the public convenience and necessity to restore the

Montrose Branch will be made by the Interstate Commerce

Commission acting on the Lehigh Valley’s abandonment

application. The decision which the Petitioners would de-

mand the lower court to make in this case would require

the court to balance the equities between the interests of

the shippers seeking to restore service and the expenditure

of funds from the estate of the Debtor that might prove to

be wasted in the event the Interstate Commerce Commis-

sion approves the Debtor’s abandonment petition. This

balancing of the equities was recognized in In Re Long

Island R. R., 92 F. Supp. 85 (E. D. N. Y. 1950); Asbury v.

C € O Ry., 314 F. Supp. 310, 312 (D. C. 1970); and Com-

monwealth of Pennsylvania v. Penn Central Transporta-

tion Co., 348 F'. Supp. 28 (M. D. Pa. 1972). In all of these

. ‘

Seer ets ic a tte la a la lal

6 Brief for Respondents in Opposition

cases the lower court refused to require an expenditure of

funds to restore railroad services while an application was

pending before the Interstate Commerce Commission to

abandon such services fearing that such an order would

result in a waste of funds if the Interstate Commerce Com-

mission subsequently permitted abandonment.

The District Court in this case was reluctant to balance

the equities that would be required if it were to consider

the merits of Petitioners request for an injunction as it

was neither conversant with the financial condition of the

Debtor nor the progress of its reorganization proceedings

and did not have before it all the interested parties to the

reorganization proceedings. The court recognized the pos-

sibility that the expense to be incurred in the restoration

and operation of the Montrose Branch might prove to be a

complete waste of the assets of the Debtor in the event that

the Interstate Commerce Commission determined that the

public interest and necessity would best be served by

abandoning the Montrose Branch and that no expenditures

could be made by the Trustees of the Debtor without the

approval of the reorganization court, Commonwealth of

Pennsylvania v. Penn Central Transportation Co., supra,

p. 31. In light of the issue that was presented to the District

Court which would require it to assess the burden upon the

Debtor’s estate that would result from an order compelling

the Debtor to repair the Montrose Branch, the District

Court was correct in dismissing Petitioners’ Complaint as

the Debtor’s reorganization court was clearly the most ap-

propriate forum to make such a determination.

II. There Is No Important Issue of Federal Law Involved.

Petitioners have failed to present any facts in their

Petition to support their contention that ‘‘The Third Cir-

cuit has decided an important question of federal law which

ag ENR APETOME ATARI PITRE FAN TIN RI ETI

Brief for Respondents in Opposition 7

should be settled by this court’’ (Petition, Page 5). Peti-

tioners have misstated the holding of the Lower Court de-

cision when they state on Page 5 of their Petition that,

‘*The decision below requires that public agencies sue in a

railroad reorganization court to prevent unlawful cessation

of railroad service, rather than in the courts of traditional

statutory venue’’,

The decision of the District Court and the decision of

the Third Circuit Court of Appeals did not state that in all

situations where a railroad in reorganization has ceased

railroad service a petition to enjoin the cessation of service

must be filed in the reorganization court. The District Court

merely held that under the facts of the particular situation

the reorganization court could be considered the more ap-

propriate court in which to hear the Petitioner’s request for

an injunction. No general rule limiting jurisdiction of the

court’s of traditional statutory venue was propounded by

either the District Court or the Third Circuit Court of

Appeals. In fact, the District Court Judge in his order

specifically referred to the case of Pennsylvania v. Penn

Central Transportation Co., M. D. Pa. 1972, 348 F. Supp.

28 (Petitioner’s Appendix B2) wherein the District Court

for the Middle District of Pennsylvania found that in the

particular fact situation presented to it concerning a re-

quested injunction against a railroad in reorganization the

court would assume jurisdiction even though the reorgani-

zation court would have been the more appropriate forum.

Therefore, since no general principle of law has been

determined by the opinion of the lower court and the Third

Circuit Court of Appeals and this Court has previously

dealt with the manner in which the issue of concurrent

jurisdiction involving railroad reorganization court should

be decided, New Haven Inclusion Cases, 399 U. 8S. 392

(U. S. 1969) there is no important issue of federal law in-

volved in this case.

:

4

ose ean se 90 8S NETNAMES VALOR

8 Brief for Respondents in Opposition

CONCLUSION.

For all the foregoing reasons, the Petition for Writ of

Certiorari should be denied.

Respectfully submitted,

Wim R. Travs,

for Duane, Morris & Hecxsoner,

Co-Counsel for Respondents, John F.

Nash and Robert C. Haldeman,

Co-Trustees of the Lehigh Valley

Railroad Company, Debtor.

Brief for Respondents in Opposition

APPENDIX A.

Statutes Involved. —

(18) After ninety days after this paragraph takes ef-

fect no carrier by railroad subject to this part shall under-

take the extension of its line of railroad, or the construction

of a new line of railroad, or shall acquire or operate any line

of railroad, or extension thereof, or shall engage in trans-

portation under this part over or by means of such addi-

tional or extended line of railroad, unless and until there

shall first have been obtained from the Commission a cer-

tificate that the present or future public convenience and

necessity require or will require the construction, or op-

eration, or construction and operation, of such additional or

extended line of railroad, and no carrier by railroad subject

to this part shall abandon all or any portion of a line of

railroad, or the operation thereof, unless and until there

shall first have been obtained from the Commission a cer-

tificate that the present or future public convenience and

necessity permit of such abandonment. Nothing in this

paragraph or in section 5 shall be considered to prohibit

the making of contracts between carriers by railroad sub-

ject to this part, without the approval of the Commission,

for the joint ownership or joint use of spur, industrial,

team, switching, or side tracks.

(20) The Commission shall have power to issue such

certificate as prayed for, or to refuse to issue it, or to issue

it for a portion or portions of a line of railroad, or extension

thereof, described in the application, or for the partial ex-

ercise only of such right or privilege, and may attach to the

issuance of the certificate such terms and conditions as in

its judgment the public convenience and necessity may re-

quire. From and after issuance of such certificate, and not

10 Brief for Respondents in Opposition

before, the carrier by railroad may, without securing ap-

proval other than such certificate, comply with the terms

and conditions contained in or attached to the issuance of

such certificate and proceed with the construction, opera-

tion, or abandonment covered thereby. Any construction,

operation, or abandonment contrary to the provisions of

this paragraph or of paragraph (18) or (19) of this section

may be enjoined by any court of competent jurisdiction at

the suit of the United States, the Commission, any com-

mission or regulating body of the State or States affected,

or any party in interest; and any carrier which, or any

director, officer, receiver, operating trustee, lessee, agent, or

person, acting for or employed by such carrier, who know-

ingly authorizes, consents to, or permits any violation of the

provisions of this paragraph or of paragraph (18) of this

section, shall upon conviction thereof be punished by a fine

of not more than $5,000 or by imprisonment for not more

than three years, or both.