Amicus Curiae Brief — Gumport v. Sterling Press, Inc., 116 S. Ct. 1016 (1996) (No. 95-945)

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No. 95-945

+

IN THI

Sipreme Court of the United States

OcTOBER I ’

G

B t |

Pp,

‘ |

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF AMICUS CURIAE LLOYD T. WHITAKER,

TRUSTEE OF THE BANKRUPTCY ESTATE

OF OLYMPIA HOLDING CORPORATION

f/k/a P*I*E NATIONWIDE, INC.,

IN SUPPORT OF PETITIONER

KIM D. MANN *

SHAWN, MANN & NIEDERMAYER,

Lakak.

1850 M Street, N.W.

Sulte 2380

Washington, D.C. 20036-5803

(202) 331-7900

Attorney for Lloyd T. Whitaker,

Trustee of the Bunkruptcy Estate

of Olympia Holding Corporation

f k: al P*]*F Nationwide : I C.

* Counsel of Record

WASHINGTON, D.C. 20001

WILSON - Epas PRINTING Co... INC. - 789-0096

QUESTIONS PRESENTED

1. What is the meaning of the words “limiting” and

“affecting” in section 9 of the Negotiated Rates Act of

1993 (“Rates Act”), Pub. L. No. 103-180, 107 Stat

2053 (uncodified), which provides that “Nothing in this

Act (including any amendment made by this Act) shall

be construed as limiting or otherwise affecting application

of title 11, United States Code, relating to bankruptcy;

title 28, United States Code, relating to the jurisdiction

of the courts of the United States (including bankruptcy

courts; or the Employee Retirement Income Security Act

of 1974”?

2. Is a forfeiture that is conditioned on the shutdown

of a for-compensation business a forfeiture that is condi-

tioned on the “financial condition” of the business within

the meaning of the anti-forfeiture provisions of the Bank-

ruptcy Code, 11 U.S.C. $$ 363(1), 541(c)(1)(B)?

(i)

women

TABLE OF CONTENTS

QUESTIONS PRESENTED

TABLE OF AUTHORITIES

INTEREST OF AMICUS CURIAE

STATEMENT

ARGUMENT pedeciaiidiesieds

I. THIS CASE RAISES FUNDAMENTAL IS.

IT.

SUES OF STATUTORY INTERPRETATION

THE “ABSURDITY” AND “REPEAL-BY-

IMPLICATION” ARGUMENTS HAVE NO

MERIT Biblasikeas

THE ANTI-FORFEITURE AND FILED RATE

ITT.

ISSUES THE PETITION PRESENTS ARE

BOTH IMPORTANT ....__ mrs

A. Forfeiture Clauses Are in Widespread Use

B. Congress Has Declined To Repeal the Filed

|

['V. EACH OF THE CONFLICTING CIRCUIT

COURT INTERPRETATIONS OF RATES

ACT SECTION 9 IS UNTENABLE

A. Seventh Circuit 0000000000 :

SB. Mighth Cirenit ................................

Te

V. RATES ACT SECTION 9 RESULTED FROM

CONCERNS AT LEAST AS COMPELLING AS

THOSE THAT LED TO RATES ACT SEC-

| a AUER a URES

AES

ESS ASIII

AS Se

Page

wt

ur

la

8a

iv

TABLE OF AUTHORITIES

CASES Page

Board of Governors of the Federal Reserve System

v. Dimension Financial Group, 474 U.S. 361

bE SER ee Ee FOR 6

In re Government Securities Corp. 972 F.2d 328

(llth Cir. 1992), cert. denied 507 U.S. ——,

122 L.Ed.2d 744 (1993) . 11

In re Gull Air, Inc., 390 F.2d 1255 (ist Cir.

ED csticieees 10

In re Jones Truck Lines, Inc., 57 F.3d 642 (8th

| Re Oe ease Pee ee Cn ae vee ee 7,9, 18

In re Transcon Lines (Gumport v. Sterling Press),

58 F.3d 1492 (Sth Cir. 1966) .....................--.......--. passim

In re Transcon Lines (Gumport v. ICC), 147 B.R.

770 (Bankr. C.D. Cal. 1992) .. ok ete eee 11

In re Transcon Lines (Gumport 1 v. ICC), 178 B.R.

228 (Bankr. C.D. Cal. 1995)... 11

Matter of Daugherty Construction, Inc., 188 B. R.

et Re ee 11

Matter of Lifschultz Fast Freight Corp., 63 F.3d

621 (7th Cir. 1995) ....... RA REE een seseeeddy 9, 12, 18

Potomac Electric Power Co. v. Director, OWCP,

mt Be, te A dae aoe EE 9

Tennessee Valley Authority v. Hill, 487 U.S. 153

PUD <cecaciceichanccsonbiicossngtcemebtapentcsediadecaeiteabcsoas wie dbeale 8

STATUTES

11 U.S.C.

RRS ane nrences Arte IO PPLE 10

ERE OR ned RENE ENA Ae mW passim

ig bE) | ERR Seep etcmmaee AON Be oS pee 2

NE EP IE ci. cetincsesestesnitenocccinonedoetentves cess PAS8iM

II din tick-escsisteodedleceascotemmntcaouloteata nade aeaiiiecammanie 10

28 U.S.C.

ee ee ae 13

v

TABLE OF AUTHORITIES—Continued

Page

ICC Termination Act of 1995, Pub. L. No. 104-88

I 12

Multiemployer Pension Plan Amendments Act of

1980, Pub. L. No. 96-364, 94 Stat. 1208, 29 U.S.C.

|” RAREREER CORES: Tene 2

Negotiated Rates Act of 1998, Pub. L. No. 103-180,

107 Stat. 2044 (amending title 49)

Rates Act section 2 (codified at 49 U.S.C.

a eesansnanneies .. passim

Rates Act section 2(e@) (4) 20.0... ....ooocccccccccccceeeeee 12

Rates Act section 9 (uncodified) ............. RAE) passim

Rates Act section 4(b) 2000000000 cee. a 12

Sn UT 12

Trucking Industry Regulatory Reform Act, Pub.

L. No. 103-311, 108 Stat. 1683 (amending title

NR ae ee ee ee ee ee : 12

RULES

Rules of the House of Representatives, Rule X 5

LEGISLATIVE MATERIALS

Negotiated Rates Isswe and Proposed Legislative

Solutions: Hearing before the Subcommittee on

Surface Transportation of the House Committee

on Public Works and Transportation, H.R. Doc.

No. 103-18, 103d Cong., Ist Sess. (1993) ............ passim

H. Rep. No. 359, 103d Cong., Ist Sess. (1993) .......... 4,7

OTHER MATERIALS

Warren, Gorham & Lamont, Bankruptcy Law

Letter, Vol. 15, No. 1 (Jan. 1995) 0... 3, 4, 5, 6, 7

King, Collier Lending Institutions and the Bank-

4 At. SEs) | Seine een 11

IN THE

Supreme Court of the United States

OcTouer Term, 1995

No. 95-945

LEONARD GUMPORT, TRUSTEF OF THI

BANKRUPTCY ESTATE OF TRANSCON LINES.

Petitioner,

y

STERLING Press, INC...

Respondent

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF AMICUS CURIAE LLOYD T. WHITAKER,

TRUSTEE OF THE BANKRUPTCY ESTATE

OF OLYMPIA HOLDING CORPORATION

f/k/a P*I*E NATIONWIDE, INC.

IN SUPPORT OF PETITIONER

INTEREST OF THE AMICUS CURIAE

Amicus curiae Lloyd T. Whitaker, trustee of the bank-

ruptcy estate of Olympia Holding Corporation, formerly

known as P*I*E Nationwide, Inc. (“P*I*E”), files this

brief in support of petitioner Leonard L. Gumport,

trustee of the bankruptcy estate of Transcon Lines

(“Transcon”). All parties have consented to the filing

of this brief pursuant to Supreme Court Rule 37.2(a).

As required by that rule, the parties’ consent letters are

filed with the Clerk of the Court.

=)

-

P*I*E was once one of the larger interstate motor

freight carners in the United States. P*I*E formerly had

more than 17,000 employees and annual revenues in ex-

cess of $963,000,000. On October 16, 1990, P*I*E

filed a petition for relief under Chapter |! of the Bank-

ruptcy Code. Amicus Lioyd T. Whitaker was appointed

Chapter 11 trustee on December 26, 1990 and converted

the case to a Chapter 7 liquidation on March 11, 1991.

As with most bankrupt motor carriers, the principal

asset of the P*I*E bankruptcy estate consists of pending

claims to recover unpaid freight charges that former cus-

tomers owe P*I*E. P*I*E had undercharged many of its

customers. Consequently, many had paid less than the

applicable filed tanff rate. Unless the Trustee recovers

these undercharges, the P*I*E estate will not be able to

pay the claims of P*I*E’s former employees and their

pension funds, even though a portion of those claims are

entitled to priority under § 507(a)(3)-(4) of the Bank-

ruptcy Code, 11 U.S.C. $ 507(a)(3)-(4).

As with Transcon, P*I*E was a signatory to collective

bargaining agreements that required P*I*E to make pen-

sion contributions to multi-employer pension plans.

Under ERISA as ainended in 1980, P*I*E’s shutdown

triggered withdrawal liability of more than $100,000,000

to those plans. See Multiemployer Pension Plan Amend-

ments Act of 1980, Pub. L. No. 96-364, 94 Stat. 1208

(codified at 29 U.S.C. §§ 1381-1461). The P*I*E

bankruptcy estate can not pay that withdrawal liability

without collecting the undercharges thousands of P*I*E’s

former customers still owe the estate.

STATEMENT

In January 1995, prior to the Ninth Circuit’s opinion

in In re Transcon Lines, 58 F.3d 1432 (1995) (“Trans-

con”), and prior to the Seventh and Eighth Circuits’

divergent interpretations of section 9 of the Rates Act,’

1 See Transcon Petition at 27-28. The Negotiated Rates Act of

1998, Pub. L. No. 108-180, 107 Stat. 2044. Unless otherwise stated,

—V—V3n—

3

an impartial, expert commentator predicted the issues

presented in Transcon’s Petition would and indeed should

reach this Court: *

{T]he whole debate raises fundamental issues about

the proper approach to statutory interpretation.

While fascinating as an academic matter, the issue

has too much practical impact for such uncertainty

to continue. Perhaps billions of dollars are at stake.

The Supreme Court has already taken several swings

at the freight undercharge issue in the 1990s. The

Court may well have another turn at the undercharge

plate in the near future, as the NRA debate works

its way through the courts.

Warren, Gorham & Lamont, Bankruptcy Law Letter, Vol.

15, No. 1, at 3 (Jan. 1995) (“Law Letter’). This com-

mentator explained how the tension between sections 2

and 9 of the Rates Act raises these fundamental issues of

statutory interpretation:

The primary purpose of the NRA was to stop the col-

lection of undercharge claims by defunct motor car-

riers. The difficult issue that has plagued the courts

is how to square Sections 2 and 9 of the NRA. As

noted above, Section 9 plainly subordinates the NRA

to the Bankruptcy Code. Section 2, however, would

radically alter the rights of bankruptcy trustees of

carriers by making it much more difficult to collect

undercharges.

Stating that section 9 resulted from “a fascinatine

behind-the-scenes tale of committee power struggles and

all capitalized terms have the definitions specified in Transcon’s

Petition.

2 The importance of the issues was also evident to the Ninth

Circuit’s Chief Judge. At the conclusion of oral argument in the

Ninth Circuit and prior to filing its decision, Chief Judge Wallace

stated: “Somehow I feel that this was a moot court this morning

and that no matter who wins or loses that there’s another court

that you all have your eye on... .” Tape of oral argument of

October 6, 1994 in Ninth Cir. No. 94-55425.

4

ambiguous compromises,” this commentator further ex-

plained:

In short, the Public Works Committee of the House

assumed responsibility for the anti-undercharge legis-

lation. The Judiciary Committee, however, asserted

legislative jurisdiction, arguing that the bill implicated

bankruptcy law and procedure and the division of

adjudicatory responsibility between the courts and ad-

ministrative agencies. To keep the Judiciary Com-

mittee from taking over the bill and holding hearings

on it, the Public Works Committee added a new Sec-

tion 9 to the NRA, which as enacted provides:

Nothing in [the NRA]. . . shall be construed

as limiting or otherwise affecting application of

title 11, U.S.C., relating to bankruptcy; title 28,

U.S.C., relating to jurisdiction of the courts

of the United States (including bankruptcy

courts) ....

Law Letter, at 2; see Appendices A and B hereto.’

As stated, the Ninth Circuit filed its opinion in Trans-

con following publication of these comments, but never-

theless Transcon fails to address the fundamental issues

of siatutory construction this case presents. Instead, the

Ninth Circuit declares in conclusory terms that section 9

of the Rates Act “is clear,” but without ever explaining

(a) why it is so clear that the words “limiting or other-

wise affecting” in section 9 mean only “amending,” or

(b) how it justifies deciding, as it did, to limit the scope

of the term “financial condition” in the Bankruptcy Code

in order to avoid “potential conflicts” with section 2 of

8 See also The Negotiated Rates Issue and Proposed Legislative

Solutions thereto: Hearing before the Subcommittee on Surface

Transportation of the House Committee on Public Works and Trans-

portation, H.R. Doc. No. 103-18, 103d Cong., Ist Sess. 319-22 (1993)

(“Hearings”) (1992 demands for sequential referral to Judiciary

Committee) and H.R. Rep. No. 359, 103d Cong., Ist Sess. 7, 13-17

(1993) (1993 correspondence regarding demands of Judiciary Com-

mittee for sequential referral).

5

the Rates Act despite section 9’s express prohibition

against “limiting” the Bankruptcy Code. See Transcon

Petition, at 13a, 20a. As the Transcon Petition correctly

notes at 27-28, neither the Seventh nor Eighth Circuits

agrees with the Ninth Circuit's interpretation of section 9,

and all three circuit courts misinterpret its meaning be-

cause all three disregard section 9’s language and legisla-

tive history. Because millions, possibly billions, of dollars

are at stake, as are the rights of thousands of employees

to receive their unpaid wage and pension claims, and

because the integrity of the legislative process and its

committee rules are in jeopardy, this Court should grant

Transcon’s petition.

ARGUMENT

I. THIS CASE RAISES FUNDAMENTAL ISSUES OF

STATUTORY INTERPRETATION

The proper interpretation of section 9 of the Rates Act

raises “fundamental issues” about the proper approach to

interpretation of statutes. See Law Letter, at 3. That

fundamental issue involves giving effect to the legislative

compromise two congressional committees, with concur-

rent jurisdiction over a pending bill, have struck to ensure

its enactment.

As reflected by Rule X of the Rules of the House of

Representatives, Congress allocates committees legislative

jurisdiction of all bills affecting specific subject matter.

See Transcon Petition, at 132a-134a. This rule ensures

that the committee (and staff) with the requisite expertise

has an opportunity to review a bill before it is enacted.

As in the case of the Rates Act, a committee may refrain

from demanding referral of a bill when another committee

includes in the bill a guarantee that the bill wili not limit

or affect laws within the allocated legislative jurisdiction

of the other committee. This path of compromise is one

alternative rules-driven accommodation that must occur

whenever a congressional committee sponsors a bill to

alter the substantive law of an area outside its own juris-

6

diction, It must be prepared either to permit the other

committee(s) with jurisdiction to hold hearings on that

bill or, as in the case of the Rates Act, to amend the bill

to avoid the substantive overlap with the other commit-

tee’s jurisdiction. Failure of the sponsoring committee

to navigate either course of accommodation prevents the

congressional committee with the requisite expertise and

staff from hearing and reviewing the proposed legislation.

The legislative product of accommodation through amend-

ment generates confusing, deceptive statutory language

and conflicting, ambiguous legislative history when the

compromise occurs at the eleventh hour in the legislative

process and the resulting language and history are re-

viewed in isolation without giving effect to all the words

of the statute. The legislation tends to be self-

contradictory; specific provisions altet substantive law

while others disclaim any intent to change that law.

This Court has warned lower courts about how to in-

terpret legislative compromises. As this Court stated in

Board of Governors of the Federal Reserve System v.

Dimension Financial Group, 474 U.S. 361, 374 (1986):

Invocation of the “plain purpose” of legislation at

the expense of the terms of the statute itself takes no

account of the processes of compromise and, in the

end, prevents the effectuation of congressional intent.

In Transcon, the Ninth Circuit pays lip service to Board

of Governors, but fails to heed its lesson in statutory

construction, failing to give proper effect to the fruits of

the “fascinating behind-the-scenes tale of committee

power struggles and ambiguous compromises.” Law

Letter, at 2.

In this case, the Public Works Committee initially

sought to use its legislative jurisdiction of title 49 (trans-

portation) to adopt provisions that would have the sub-

stantive effect of limiting and affecting title 11 (bank-

ruptcy) and title 28 (jurisdiction), matters entrusted to

the Judiciary Committee. The Judiciary Committee pro-

7

tected its jurisdiction of tiiose matters. It insisted on the

addition of section 9 to the Rates Act for the express

purpose of preventing the Rates Act from either “limit-

ing” or “affecting” title 11 or 28. See Law Letter, at 2;

Transcon Petition, at 5-10. By narrowly construing the

Rates Act’s section 9 and by using the Rates Act's section

2 as an excuse for narrowly interpreting the words “finan-

cial condtion” in title 11, the Ninth Circuit unravels the

legislative compromise and defeats the purpose and defies

the language of section 9 of the Rates Act.‘ See Trans-

con Petition, at 28.

Today, if the Ninth Circuit's decision stands, the Public

Works Committee has successfully limited the jurisdiction

of bankruptcy courts under title 28 and limited the anti-

forfeiture provisions of title 11 while purporting to amend

only title 49, despite adding express disclaimers of such

limitations in section 9 of the Rates Act. Tomorrow,

other congressional committees and special interests may

target this Court and its jurisdiction for curtailment,

circumventing the Judiciary Committee through similarly

* Notwithstanding the express language of Rates Act's section 9,

the Eighth Circuit concluded that section 9 merely prevents the

Rates Act from impairing the jurisdiction of courts, delineated in

title 28, not the substantive provisions of the Bankruptcy Code,

which appear in title 11. See In re Jones Truck Lines, Inc., 57

F.3d 642, 646 (8th Cir. 1995) (“Jones’’).

The Eighth Circuit focused on statements made in the Con-

gressional Record on November 15, 1993 by Mr. Brooks, Chair of

the Judiciary Committee. See 189 Cong. Rec. H9603 (Nov. 15,

1993). However, as the typeface of those statements reflect, they

were not actually spoken, but were appended after the fact. See id.

By that time, Mr. Brooks had already received written assurances

from the proponent of the Rates Act that: “we do not intend in

this legislation to affects [sic] either the Bankruptcy Code or the

jurisdiction of the bankruptcy courts.” H.R. Rep. No. 359, 103rd

Cong., 1st Sess., at 16 (1993). Mr. Brooks addressed only jurisdic-

tional issues on the floor of the House because the text of proposed

section 9 did not mention title 28 (but did mention title 11) when

favorably reported earlier in the day by the Public Works Com-

mittee. See H.R. Rep. No. 359, supra, at 13.

8

deceptive legislation that disclaims any intent to limit

or affect title 28 or other laws within the purview of that

committee.

Il. THE “ABSURDITY” AND “REPEAL-BY-IMPLICA-

TION” ARGUMENTS HAVE NO MERIT

In Matter of Lifschultz Fast Freight Corp., 63 F.3d

621 (7th Cir. 1995) (“Lifschultz”’), the Seventh Circuit

noted that lower courts have found that section 2 of the

Rates Act repeals by implication any contrary provision

of the Bankruptcy Code. 63 F.3d at 626-27. The repeal-

by-implication argument is untenable in light of this

Court’s decision in Tennessee Valley Authority v. Hill,

437 US. 153 (1978) (“TVA”). In TVA, Chief Justice

Burger explained the role of courts in resolving conflicting

federal legislation where a subsequent federal law con-

flicts with a prior enactment. In that case, the Endangered

Species Act proscribed the completion of a dam, while

a subsequently enacted appropriations bill authorized ex-

penditure of funds to complete the dam. Noting that “re-

peals by complication are not favored,” 437 U.S. at 189,

the Court concluded that the subsequent appropriations

bill did not repeal the prior Endangered Species Act and,

accordingly, the dam could not be completed even though

Congress had specifically appropriated funds for that pur-

pose by subsequent statute.

In stressing that carriers subject to section 2 of the

Rates Act are almost exclusively in bankruptcy, the Sev-

enth Circuit in Lifschultz implied that it would be absurd

if section 2 did not forfeit the undercharge claims of

such carriers. The “absurdity” principle fails to support

permitting section 2 to override the anti-forfeiture pro-

visions of the Bankruptcy Code for three reasons. First,

the factual basis of this argument is mistaken; many non-

operating carriers are not in bankruptcy.® Second, under

5 The Seventh Circuit justified section 2’s forfeiture on the

ground that: “The class of carriers and claims treated by the Act

9

the decisions of this Court, the mere fact that section 2

has an unexpected result does not justify rewriting either

section 9 of the Rates Act or the anti-forfeiture provisions

of the Bankruptcy Code. See Potomac Electric Power

Co. v. Director, OWCP, 449 U.S. 268, 284-85 (1980)

(when a statute has “compelling” language that produces

“incongruities,” then “the federal courts may not avoid

them by rewriting or ignoring that language”). Third, the

express terms of 11 U.S.C. §§ 363(/) and 541(c)(1)(B)

contemplate they can and will invalidate an otherwise

“applicable law” (§ 363(/)) or “applicable nonbank-

ruptcy law” (§ 541(c)(1)(B)) seeking to modify the

property rights of a debtor based on its financial condi-

tion. The claim of “absurdity” is really an attack on the

anti-forfeiture policies Congress mandated in §§ 363(/)

and 541(c)(1)(B). In enacting those provisions, how-

ever, Congress plainly understood that ill-advised legis-

lators would occasionally enact laws that forfeited assets

of debtors based on their financial condition. Armed

with that knowledge and understanding, Congress decided

that these subsequently enacted laws should be unen-

forceable, unless they duly amended title 11, which the

Rates Act explicitly does not do.

is almost entirely comprised of bankrupt carriers.” Lifschultz,

63 F.3d at 625. In contrast, the Ninth Circuit in Transcon justified

section 2’s forfeiture of the undercharges of non-operating carriers

on the ground that “many” shutdown carriers have remained

“solvent and financially healthy” by suing their former customers.

Transcon Petition, at 19a-20a.

Neither analysis is correct. The legislative record does not re-

flect any “solvent” or “financially healthy” shutdown carrier is

suing its former customers (which would seem a counterproductive

business tactic for a solvent and financially healthy carrier). See

Hearings, 296-305. Similarly, the legislative record also reflects

that of 140 known shutdown carriers, only 70 have filed bankruptcy.

Id. The Eighth Circuit adds to the confusion by insisting that

section 9 of the Rates Act, which expressly refers to title 11 and

title 28, only addresses jurisdictional issues, exclusively a title 28

matter. See Jones, 57 F.3d at 646.

10

The argument that Transcon’s position nullifies the Rates

Act is overblown. The anti-forfeiture provisions of the

Bankruptcy Code merely prevent section 2 of the Rates

Act from forfeiting the undercharges of non-operating

carriers that are debtors in bankruptcy cases. Under

Transcon’s position, each provision of the Rates Act still

serves a vital purpose: (1) section 2 of the Rates Act will

forfeit the undercharge claims of those non-operating car-

riers that did not or do not file bankruptcy (including

A-Line),° and bankruptcy courts will remain free, under

11 U.S.C. §§ 305(a), 1112(b), to dismiss the bankruptcy

cases of those non-operating carriers engaging in abusive

collection practices or failing to make substantial distribu-

tions to their creditors; and (2) the remaining provisions

of the Rates Act, §§ 3-9, all have full operative effect

since none is conditioned on the non-operating financial

condition of the carrier.

Ill. THE ANTI-FORFEITURE AND FILED RATE IS-

SUES THE PETITION PRESENTS ARE BOTH

IMPORTANT

A. Forfeiture Clauses Are in Widespread Use

Because the effect of section 2 of the Rates Act is by

no means unique, the Ninth Circuit’s opinion has impli-

cations far beyond the estates of bankrupt motor carriers.

Government agencies, insurers, joint venturers, franchisors,

and lenders make widespread use of forfeiture provisions

(without employing the Bankruptcy Code’s trigger phrase,

“financial condition”) to rid themselves of entanglements

with any entity suffering a business reversal or shutdown,

even though its assets are most needed at that time to com-

pensate employees and other creditors. See, e.g., In re

Gull Air, Inc., 890 F.2d 1255 (1st Cir. 1989) (gov-

® The legislative record reflects that of the 140 carriers that have

shut down since 1980, approximately 70 of these carriers have not

filed bankruptcy. See Hearings, 297-304; see also supra, note 5.

Section 2 applies to this 50 percent.

11

ernment regulation that forfeit airline’s landing slot based

on non-use); Jn re Transcon Lines (Gumport v. ICC),

147 B.R. 770, 775 (Bankr. C.D. Cal. 1992) (regulations

of ICC that attempted to prevent non-operating carriers

from collecting undercharges);* Matter of Daugherty Con-

struction, Inc., 188 B.R. 607, 609 (Bankr. D. Neb.

1995) (example of standard form partnership agreement

providing for dissolution of partnership upon bankruptcy

or dissolution of any partner); King, Collier Lending In-

stitutions and the Bankruptcy Code 42.51, at 2-177

(1993) (example of standard form loan agreement speci-

fying as an event of default the “Debtor ceas[ing] to

conduct its business as the same is now conducted in

the ordinary course of its business”); see also In re Gov-

ernment Securities Corp., 972 F.2d 328, 329 (11th Cir.

1992) (forfeiture of benefits of fidelity bond if company

is taken over by a liquidator), cert. denied 507 USS.

, 122 L.Ed.2d 744 (1993).

Accordingly, in light of the widespread use of such

forfeiture provisions, the extent to which these provisions

may be enforced in bankruptcy cases, notwithstanding

11 U.S.C. §§ 363(/) and 541(c)(1)(B), will have great

significance beyond the trucking business.*

7 See also In re Transcon Lines (Gumport v. ICC), 178 B.R. 228

(Bankr. C.D. Cal. 1995) (awarding attorneys fees against the ICC

for its unjustified conduct in promulgating regulations to prevent

non-operating carriers from collecting undercharges). The district

court affirmed this decision in an unpublished opinion, and the ICC

recently filed an appeal from the judgment of the district court.

® Uncontroverted and undisputed expert testimony in Transcon’s

case showed that the Rates Act forfeited Transcon’s assets based

on its “financial condition.” S. Chelliah, an accountant certified in

the United States and chartered in the United Kingdom, submitted

a declaration that, “when used to describe a motor carrier of prop-

erty, the words ‘no longer transporting property’ refer to and

describe the financial condition of the motor carrier, and . . . such

financial condition would have to be disclosed in an audited financial

statement of the motor carrier of property in order for the finan-

12

B. Congress Has Declined To Repeal the Filed Rate

Doctrine

Despite the extensive criticism and controversy that

surrounds the filed rate doctrine, Congress has repeatedly

declined to repeal it. Indeed, except for section 2(a)

of the Rates Act targeting shutdown carriers, the Rates

Act, in sections 2(e)(4), 4(b), and 7, reaffirms the filed

rate doctrine and directs the ICC to adopt regulations

implementing it. In 1995, in the “Trucking Industry Reg-

ulatory Reform Act,” Pub. L. No. 103-311, 108 Stat.

1683, Congress modifies the filed rate doctrine, but directs

that the tariffs that collective rate-making bureaus file

with the ICC continue to have effect. Finally, on De-

cember 30, 1995, President Clinton signed into law the

“ICC Termination Act of 1995,” Pub. L. No. 104-88,

abolishing the ICC, but, significantly, not abolishing the

filed rate doctrine even though Congress could readily

have done so if a consensus had existed for accomplishing

that result.

IV. EACH OF THE CONFLICTING CIRCUIT COURT

INTERPRETATIONS OF RATES ACT SECTION 9

IS UNTENABLE

A. Seventh Circuit:

Stating that section 9 of the Rates Act is ambiguous,

the Seventh Circuit ruled it would enforce the specific pro-

visions of the Rates Act’s section 2, even if enforcement

would affect bankruptcy cases under title 11, except when

there was a “direct” conflict with the provisions of the

Bankruptcy Code. See Lifschulz, 63 F.3d at 625. The

Seventh Circuit overlooked the direct conflict between the

forfeiture provisions of section 2 of the Rates Act and

the Bankruptcy Code: (1) section 2 of the Rates Act

cia] statement to conform with generally accepted accounting prin-

ciples for the presentation of financial information.” See Appellant’s

Excerpts of Record, Vol. 3, pp. 542-48, filed May 20, 1994 in Ninth

Cir. No. 94-55425.

13

forfeits between 80 and 100 percent of the undercharges

of a motor freight carrier that shuts down its business,

while (2) sections 363(b) and (/) of the Bankruptcy

Code permit use of a bankrupt carrier’s property outside

the ordinary course of business and regardless of any

applicable law that purports to forfeit property of the

debtor based on its financial condition.

B. Eighth Circuit:

The Eighth Circuit ruled section 9 of the Rates Act

was merely “a response to concerns that portions of the

[Rates Act] would transfer jurisdiction over bankrupt

carriers to the ICC.” Jones, 57 F.3d at 646. This con-

clusion conflicts with the language and legislative history

of section 9 of the Rates Act. Its language expressly

prohibits section 2 of the Rates Act from “limiting or

otherwise affecting” either title 11 or title 28: the statutory

provisions on bankruptcy jurisdiction appear only in title

28. See 28 U.S.C. §§ 157 and 1334. As a part of the

legislative compromise, the Public Works Committee de-

liberately agreed with the Judiciary Committee that the

Rates Act would amend neither title 11 nor title 28,

not just title 28. See, Appendices A and B hereto. The

Eighth Circuit arrived at the opposite conclusion, focusing

only on comments of legislators to include title 28 in sec-

tion 9 of the Rates Act at a time in the legislative process

when section 9 of the Rates Act already clearly excluded

title 11. See supra, note 4.

C. Ninth Circuit:

Contradicting the Seventh Circuit’s conclusion that sec-

tion 9 of the Rates Act is “susceptible to two interpre-

tations,” Lifschultz, 63 F.3d at 625, the Ninth Circuit in

Transcon ruled the words “limiting” and “affecting” are

merely synonmys for the word “amending.” Transcon,

58 F.3d at 1438. The Ninth Circuit then used section

2 of the Rates Act as a basis for arriving at a narrow

14

definition of the words “financial condition” in 11 U.S.C.

$§ 363(/) and 541(c)(1)(B). Transcon, 58 F.3d at

1440. The Ninth Circuit thereby violated the explicit

command of section 9 of the Rates Act that the Act shall

not be construed as “limiting or otherwise affecting”

title 11.

V. RATES ACT SECTION 9 RESULTED FROM CON-

CERNS AT LEAST AS COMPELLING AS THOSE

THAT LED TO RATES ACT SECTION 2

Advocates of forfeiting undercharges invariably criticize

the filed rate doctrine and the litigation it has spawned.

However, if the filed rate doctrine was so clearly without

purpose, Congress could have altered section 2 of the

Rates Act to specify a 100-percent forfeiture of all under-

charges and further to specify that section 2 is not subject

to the limitations of section 9 of the Rates Act. Congress

did not do so, despite vitriolic attacks on the filed rate

doctrine, because of the eifective, compelling opposition

from the Judiciary Committee, bankruptcy trustees, pen-

sion funds, and labor organizations. See Appendices A

and B hereto; see also Hearings, at 148-63, 169-74.

For example, during the 1993 hearings on the pro-

posed Rates Act, representatives of Transcon and the

Central States pension funds testified as quoted in Trans-

con’s Petition at 7-8. In addition, a labor representative

testified during those hearings to the continuing need of

former trucking employees for strict enforcement of the

filed rate doctrine:

Thousands of employees, including members of my

local, did not receive wages, severance, vacation pay

and other monies owed to them when their carrier

employers went bankrupt. Contributions were not

made to their pension and health and welfare plans.

The aggregate debts owed to employees and their

pension, health and benefit plans are enormous, prob-

ably in the hundreds of millions of dollars.

15

Hearings, at 149 (testimony of R. Ken Hall). Faced with

this testimony, the proponents of the Rates Act had good

reason to accede to the Judiciary Committee’s demand

that section 9 be added to the Rates Act. See Appendices

A and B hereto; see also Transcon Petition, at 7-8.

CONCLUSION

For the foregoing reasons, and in addition to the rea-

sons stated in Transcon’s Petition, this Court should

issue a writ of certiorari to review the judgment of the

Ninth Circuit Court of Appeals.

Respectfully submitted,

Kim D. MANN *

SHAWN, MANN & NIEDERMAYER,

L.L.P.

1850 M Street, N.W.

Suite 280

Washington, D.C. 20086-5803

(202) 331-7900

Attorney for Lloyd T. Whitaker,

Trustee of the Bankruptcy Estate

of Olympia Holding Corporation

f/k/a P*I*E Nationwide, Inc.

* Counsel of Record

APPENDICES

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APPENDIX A

TEXT OF NOVEMBER 10, 1993 LETTER FROM THE

CHAIR OF THE JUDICIARY COMMITTEE TO THE

CHAIR OF THE COMMITTEE ON PUBLIC WORKS AND

TRANSPORTATION

November 10, 1993

The Honorable Norman Mineta

Chairman

Committee on Public Works and Transportation

2165 Rayburn House Office Building

Washington, D.C. 20515

Dear Mr. Chairman:

Yesterday, the Committee on Public Works and Trans-

Portation approved H.R. 2121, the Negotiated Rates Act

of 1993.

Among other things, the legislation specifies procedures

for the resolution of undercharge claims in pending and

future bankruptcy case. Under the legislation, disputes

and issues currently within the jurisdiction of the Federal

courts (and the bankruptcy courts) would be subject to

resolution by the Interstate Commerce Commission in-

stead. This contravenes and directly intersects with bank-

ruptcy law, which mandates that the courts supervise and

manage a debtor’s affairs and the disposition of claims

after a debtor has entered bankruptcy. A related bill, S.

412, has been approved by the Senate and is pending be-

fore the Committee on Public Works and Transportation.

As you are aware, under Rule X of the Rules of the

House of Representatives, the legislation, as currently

drafted, implicates two separate areas of subject matter

clearly within the jurisdiction of the Committee on the

Judiciary; bankruptcy law and procedure and the proper

division of adjudicatory responsibility between courts and

administrative agencies.

The Committee on the Judiciary has had no oppor-

tunity whatsoever to review the legislation and consider

2a

its impact on the bankruptcy system, administrative law

and the jurisdiction of the Federal courts. Such an op-

portunity is essential if the Committee is to carry out its

mandate to ensure the integrity and consistency of the

Code in these areas of the law.

For these reasons, absent an amendment to strike or

modify the implicated provisions and accompanying leg-

islative history, I would feel compelled to seek a sequen-

tial referral of H.R. 2121 and any similar legislation. In

addition, should these or similar provisions be included

in legislation scheduled for conference, I would request

that Members of the Committee on the Judiciary be

named as conferees for the consideration of such

provisions.

Norm, I know and appreciate your understandable de-

_ Sire to move the legislation to the Floor for consideration

before the close of the first session. I would therefore

hope that we can work together cooperatively as we have

done so often in the past—in order to bypass the need for

a formal-request by my Committee for a sequential re-

ferral of H.R. 2121.

Meanwhile, with best wishes, i am

Sincerely,

's/ Jack Brooks

JACK BROOKS

Chairman

cc: The Honorable Nick Rahall

Chairman

Subcommittee on Surface Transportation

Committee on Public Works and Transportation

The Speaker

H-204 Capitol

Washington, D.C. 20515-6501

3a

APPENDIX B

TEXT OF NOVEMBER 15, 1993 LETTER FROM THE

CHAIR OF THE COMMITTEE ON PUBLIC WORKS AND

TRANSPORTATION TO THE CHAIR OF THE JUDICI-

ARY COMMITTEE

November 15, 1993

Hon. JACK BROOKS

Chairman, Committee on the Judiciary

Rayburn House Office Building, Washington. DC.

DEAR MR. CHAIRMAN: Thank you for your letter

on H.R. 2121, the Negotiated Rates Act of 1993.

Because of your Committee’s jurisdiction over Federal

courts and bankruptcy, I recognize your right to request

a sequential referral of H.R. 2121. However, and in ac-

cordance with your letter, | am pleased that we were

able to agree on language clarifying that we do not in-

tend in this legislation to affects [sic] either the Bank-

ruptcy Code or the jurisdiction of the bankruptcy courts.

Based on our agreement, it is my understanding that you

will not pursue your request for a sequential referral.

I further recognize that in pursuing referral, your ac-

tion will in no way be construed as a waiver of any juris-

diction your Committee has related to this issue. I will

gladly include our exchange of correspondence on this

matter in the Record during House consideration of H.R.

2121 and in any report by the Committee on Public

Works and Transportation on H.R. 2121.

Sincerely yours,

NORMAN MINETA,

Chair, Committee on Public

Works and Transportation.