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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1996

## Text

, t
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.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386002_0942%3A3. Public record. Not legal advice.