In the Matter of the Central Railroad Company of New Jersey, Debtor. Appeal of State of New Jersey

The CENTRAL RAIL- the Matter of OF NEW ROAD COMPANY JERSEY, Debtor. JERSEY, Appeal OF NEW of STATE 73-1006. No.

Appeal OF PENN- of COMMONWEALTH Pennsylvania Public SYLVANIA Utility Commission, No. 73-1027. 73-1006 and 73-1027.

Nos. Appeals,

United States Court Third Circuit.

Argued March May

Reargued 23, 1973. Aug. 27,

Decided 7, 1974. Denied Jan.

Certiorari See 94 S.Ct. 870.

209 Jersey, by way rejoinder, of Co. of New denying request assert for dis- could result continuance in an unconsti- taking property. tutional Resolution appeal requires of this this Court to ad- dress these contentions. Atty. Gen., Stephen Skillman, Asst. J., appellant Trenton, in No. 73- for N. I. 1006. Jersey Railroad of New The Central MacDougall, Sp. P. Asst. Gordon 2 (Central) many of the railroads one Washington, C., appel- Gen., for Atty. D. presently in the un- Northeast

lants No. 73-1027. reorganization dergoing pursuant to sec- Goodstein, Zamore, Goodstein, Jacob I. Bankruptcy tion Act. 77 The Krones, City, for New York Mehlman & prior entry lines, Central’s to into reor- Mortgage Protective Bondholders 31/4% ganization, from extended the Newark- Committee. City Jersey area Northeastern New Roger Pitney, Ward, Hardin & C. Jersey west northeast corner of 3 Newark, J., Kipp, for Manufacturers N. Pennsylvania (the region”) “hard coal Co., indenture trustee. Hanover Trust Jersey, and south New end- Southern Bay. near the Delaware Weiss, Stanley Carpenter, Bennett & Morrissey, Newark, J., trustee N. for majority of The the customers served J. Central R. R. Co. of N. in the the Central are located North- metropolitan Jersey ern In New area. J., SEITZ, VAN DU Before C. region, provides ship- Central GIBBONS, ALDISERT, SEN, ADAMS, sig- industry ping and, services HUNTER, ROSENN, III and JAMES nificantly ap- appeal, for this carries Judges. WEIS, Circuit day.4 proximately 25,000-30,000 a riders majority The vast of these riders Judge: ADAMS, Circuit use the travel commuters who train May judge presiding a over a district into from western and suburbs southern reorganization, pursuant railroad Sec- Jersey City. Many of or these Newark Act,1 permit Bankruptcy tion using York, commuters continue New of the to discontin- the Trustees transportation public other facilities. loss-producing ue or he a must Jersey a has for New The State of his until withhold authorization years provided subsidies to number applied to Trustees have federal transport com- several agencies regulatory permission entry Jersey. muters New Since terminate the service? into of the Central answers that State New March, 1967, has received that railroad permitting the ad- discontinuance ranging annual subsidies from the state any thwart ministrative review would high $5,100,000 ih 1972 to a system attempt es- create viable granting $4,400,000 in low of 1970. to the economic life of the sential subsidy pursuant gion. has been made the Central R. The Trustees of Reorganization Court, issued Decem U.S.C. 20, 1971. The Order was affirmed ber begun railroads which have court-su- Other Court, R. In Matter of Co. of Central pervised reorganizations include Penn Jersey, (3d 1972). F.2d Cir. New Central, Lehigh River, Reading, Hudson & one-way trip. Valley, Lackawanna, Hope Lehigh A rider Erie Ivyland, train to work & A commuter who rides the New Haven and the Boston & evening morning from work Maine. would be counted riders. two Pennsylvania 3. The service of Central pursuant was terminated to Order No. between rail- tion of entered into all service as Janu- contracts acting ary 21, order the state 1973. The district court’s road and Many Operating Agency. appealed panel of was Court and a Commuter prescribed relying on a cur- the contracts are the Court brief the terms July opinion permitting suspension the railroad iam statute. Pennsylvania operations,9 for the Central and state contracted the Central’s the passenger service of to continue furnish affirmed the the district decision through The railroad June 1973. court. according obligated to trains was run Jersey The of and the State New compensa- agreed upon an and schedule Pennsylvania10 Commonwealth of filed paid tion to be the state on the was petitions rehearing for before the Court the basis of railroad’s “avoidable loss” granted petitions En The were Banc. preceding year.5 for the Article Seven- argument and En the Court provided: teenth the contract May 23, Banc had was 1973.10a party right passenger “Each reserves to can- termination service agreement any cel this at stayed the end pending been resolution of this upon day’s notice appeal.11 calendar month is incum Such resolution now party.” upon to the other bent us. Alleging subsidy paid II. inadequate compensate was The Trustees contend first railroad, petitioned Trustees must court we affirm the district reorganization permission for court because the Court the doc is bound right their exercise under cancellation trines of “law of the case” and stare the contract and all their to terminate decisis per to follow its earlier decision passenger Jersey. in services New mitting suspension service court, Pennsylvania.12 The district order dated This contention is 20, 1972,7 long December merit, based on an oral without for it has opinion earlier,8 granted delivered rule in this Circuit made decisions petition, Trustees’ by panels ordered termina- similar cases13 of this Court figure computed by Pennsylvania’s 5. The “avoidable 10. loss” interest the termination determining particular whether a cost arises from the existence four trains passenger day Philadelphia Newark, be avoided if service discon- between were operated jointly by Beading tinued. are Railroad compensation Pennsylvania’s argument program, Under “full cost” Central. parallels expenses Jersey’s, the railroad is reimbursed for New reference all future operating only. passenger Jersey involved will be to New just not those which are attributable exclu- Judge 10a. Maris did not sit with the Court sively to that service. temporary En because Banc illness. Thus, system under the full cost the rail- Gorbey Judge did not sit district since compensated pro road manage- rata judges not en banc are authorized sit on expenses, depreciation ment and debt serv- rehearings Appeals. Court items, directly ice. These if not related to Times, July 1, 1973, provision See N.Y. 11. col. service, would be uncompensated 8. under “avoidable loss” program. 12. In R. New Jer- Matter of Central Co. of By statute, changed New 1972). sey, (3d 455 F.2d Cir. compensation past year within similarity case cause 13. The of this with the “avoidable loss” to “full cost.” Pennsylvania involving is not terminations Appendix at 25a. great permit sufficiently invocation against “preclusion” New Appendix doctrine Order No. at 435a. Jersey. R. Co. v. Central Scarano Appendix at 423a. 1953), (3d Jersey, indi- F.2d 510 Cir. necessary greater congruence In Matter of Central R. Co. cates Jer- sey, (3d 1972). (The operative. 455 F.2d 989 Cir. the doctrine to be panel Judges consisted of Circuit Maris and Judge Gorbey.) Aldisert and District However, portions wheth thereof.16 panels are or binding but on other or is not denominat er termination is controlling Banc. En on the Court abandonment, prior administrative En ed an Indeed, the Court it is appears dis approval before a mandated by ear- precedents established Banc overseeing a trict court reexamined.14 panel lier decisions im may permit of an the discontinuance Pennsylvania addition, case region’s component portant of a appeal. distinguishable from this service.16a suspension of former decision authorized pending ICC services certain 77(o) provides that Section applications for abandonment action on may permit district abandonment argua- service, which action was of such portions of “lines of railroad.” of lines case, bly unduly delayed. In the pertinent part: It states in ap- however, not filed have the Trustees “(o) trustees, The trustee or or plications state with the ICC either time, to time shall determine what regulatory authorities. portions lines or of lines of debtor, property and what other of the III. if any, should or be abandoned sold of the earlier decision must A review during pendency proceed- of the begin an examination rail- with ings in the interest the debtor’s es- reorganization proceed road statute reorganization tate and of ultimate relationship explication be- of the to unduly adversely but without or af- agencies and a dis- tween administrative fecting public interest, and shall supervising reor- a railroad trict court judge petitions, to the ganization under statute. parties may which other in interest authority join, permit for or abandon termination The decision any property; upon sell such or- by in De- the district was made judge hearing cember, time, der of the made after a the Trust- 1972. At pursuant sought to such notice approval reasonable for ter- had not ees publication judge or passenger otherwise as the any mination of fo- service may parties interest, direct au- rum No other than the district court. thorizing any such abandonment or action had been commenced before sale, approval regulatory but Jersey agencies; no New authorization of the when proceedings Commission initi- had been abandonment required chapter 49, of Title 1 ated before Commerce Interstate 1920, February or as amended Commission.15 may it hereafter amended. passenger serv A termination ”17 may square not fall ice is an action that ly 77(o) within the ambit statutes As section makes rail- clear, if the subject jurisdiction lines control of railroad abandonments road to the of the e.g., (1946), Utility 14. See ex rel. Reed v. An- United States with Board of Public Com’rs derson, (3d Jersey 1972), States, F.Supp. 461 F.2d over- v. 739 Cir. United 158 ruling, Zeiler, (D.N.J.1958), prob juris noted, F.2d United States v. 427 98 357 U.S. (3d 1970). (1958), moot, Cir. dismissed as 359 U.S. (1958). 79 S.Ct. 3 L.Ed.2d 932 reorganization plan 15. A had been filed August, purposes present appeal, the Trustees with the ICC 16a. For plan, pending But such is still this Court has assumed the district ICC, power permit included continued serv- court would have the termi- ice, not termination of such service. Brief nation if of certain services such termi- Appellants approved by appropri- at 2. nation had been agency. ate administrative e.g., 77(o), 16. See § Section 11 U.S.C. (o). Compare Co., (o). v. R. 17. 11 Smith Hoboken U.S.C. 328 U.S. 90 L.Ed. 1123 S.Ct. ICC, may place ganization permission no abandonment take carry for out approval agency.18 without the of that the same terminations. The district court, gave re- “ruled that him the 77§ If the termination of serv- sponsibility disposing petition abandonment, ice is not denominated an having evidence, and, on merits taken subject or if the Central’s service is not gave very relief which the Trust- purview ICC,19 require- applied Department had ees approval ment of ICC mandated sec- orderly process which was still 77(o) appear tion apply. not to consideration.”23 The Appeals Court of U.S. Nonetheless, may the district court the Second Circuit permit be free to termination without versed,24 Supreme and the affirm- Court prior approval. administrative ed that reversal. Jersey developed its own ad- agencies regulate ministrative holding that the district court su- conduct of certain within the pervising the did not Approval appropriate state. agency power permit terminations required under New derogation regulatory state any law before be procedures,25 Supreme Court, speak- approval If discontinued.20 strong- Frankfurter, Justice unduly withheld de- ly emphasized importance pre- layed, provision special under a recourse serving control in in- state the first may be to had the ICC.21 stance : Supreme explicitly Court has judicial history “In view of the compliance stated that regulatory with a state’s receiverships railroad and the extent program required of rail- judicial to which 77 made de- action § reorganization. undergoing roads pendent approval by the Interstate Palmer v. Massachusetts involved an Commission, it Commerce would vio- attempt by the Trustees of the New Ha- respect late the traditional of Con- passenger gress ven Railroad to terminate for local interests and for the eighty-eight service to the stations in process imply power administrative to region. Boston single To judge disregard effectuate such a in a to state termination, required Trustees, the as law over local activities of a carrier began law, proceedings governance Congress state of which has Department Massachusetts Public withheld even from the Interstate hearings were Commission, Utilities. While except part Commerce as being conducted, applied to complete plan reorganization Trustees of a judge supervising the district reor- for an insolvent road.” recently public This has at Court discussed some N.J.S.A. 27 :lA-24. Were involved, application funds not length, (o) gen the role of subsection in the be must made Utility eral In scheme of section See Matter Board of Public Commissioners. N. Transportation (Sale Penn Central Co. J.S.A. 48:2-13. Properties), (3d Park Avenue 484 F.2d 323 (2). 21. 49 U.S.C. 13a 14, 1973). Cir. filed im June Whether port case, limiting that 22. 308 extensive sales U.S. 60 S.Ct. 84 L.Ed. 93 dispositions pursuant reorganiza (1939). made a plan, tion would abandonments made affect Massachusetts, 23. Palmer v. 308 U.S. plan approval following not a ICC but 34, 36, (1939). 60 S.Ct. L.Ed. 93 reorganization question ais not involved in Massachusetts, 24. Converse v. 101 F.2d 48 the resolution of this case. (2d 1939). Cir. opera- may 19. It be that since the contended pursuant plan subject intrastate, they Terminations made tions are approval. do not need state ICC control. 77(f), 205(f). U.S.C. Section If, here, is of as is true the termination (cita- provided S.Ct. at 38 26. 308 U.S. service under contract omitted). involving approval public funds, tion of the Com- necessary. Operating Agency be muter would necessary stop they assert, the fi- argued crisis now that the It be railroad, drain on nancial confronting the eastern magnitude an un- to such risen changes about great have come that taking property. generally, constitutional economy in the require industry particular, a: taking argument reached Underlying that result different However, fact is blunt principle that an Palmer. is the basic owner right ultimately subse- Court, undercut property not been retains Palmer Supreme losing property quent decisions from a withdraw that ques- into vitality right appears called Indeed, has its been nor venture.30 such taking tion. fundament provision.31 Operation aspect Massachu- of Palmer v. One services, compen adequately if not more strongly has, fact, reiterat- setts point, sated, would, at some so substan Cases.27 Inclusion ed in the New Haven There, remaining tially reduce the assets emphasized Supreme Court railroad that the continuation would con agen- regulatory important role of a taking. stitute a ICC,28 cy, administration reorganiza- of railroads resurrection might The Trustees contend that a re- tion.29 quirement they seek relief now appropriate case, from the would re- the district delay passen- sult in further approved termination the termination having required any delay ger that ready would an al- exacerbate without ap- They to an critical situation. proposal first be submitted might argue agency. regulatory further resort to propriate Unless agencies 77(o) likely or New section most is not controlled case provide ap- frustration, Massachusetts, it would and therefore Palmer v. empty formality. pear was would an action be that district court’s the proper. not However, the fact remains that the sought Trustees not have relief from the IV. agency. having appropriate There been The termination Trustees contend that application made, no there can be no permitted time, be at this without must showing delay32 or that frustration33 termination, agency consideration. Such would be the result. inevitable 392, 2054, the creditors’ assets. The 27. Note states that 399 U.S. 90 26 L.Ed.2d S.Ct. practice Supreme (1970). approved 691 was the argues approving, Court and so the play 28. The can a role in ICC termination substantially meaning Court has altered the proceedings committed first instance taking clause. regulatory agencies. See to state 49 U.S.C. (2). See Brooks-Scanlon 31. 13a That to Co. v. Railroad § section was added the Comm., 1958, 396, 183, permit 251 U.S. 40 64 L.Ed. statute to ICC action in the S.Ct. (1920) ; 323 Texas event Railroad Comm. of v. adverse actions. Co., Thus, Eastern Texas R. 264 44 U.S. S.Ct. there was no role for the ICC at the (1924). 68 time v. L.Ed. 569 of Palmer Massachusetts. may adopt Cases, It noted that the New Haven Inclusion 399 U.S. be ICC disposition procedures (1970). expediting new ed the S.Ct. 26 L.Ed.2d 691 applications for abandonment of lines. See Takings Note, See and the Public Interest Pennsylvania v. United Commonwealth States, Reorganization, Yale L.J. Railroad F.Supp. (M.D.Pa. filed June (1973). prac- Note describes 4, 1973). tice New Haven Railroad’s followed opera- Trustees unsuccessful before Were wherein the continued agency, had to the state recourse could be value of the tion of the railroad reduced the pursuant (2). physical plant ICC to 49 U.S.C. 13a road and thus eroded against question v. on the Co. it of Brooks-Scanlon before The cases objection required it Comm. its strenuous and Railroad Railroad Comm.34 go on, empty to form such cannot Texas R. Co.35 make of Texas v. Eastern may not be re clear that a railroad required.”37 quired in the face to remain business position the Commission With confiscatory Both of these losses. being clear, Supreme Court could however, attempts cases, dealt with state, then leave railroad each railroad to busi required be the forms “Whatever case, entirely. ness In give local law it cannot all their Trustees do not seek abandon power Court or do Commission operations. they Rather ask what the of the United Constitution terminate service. forbids, States which is what or- In contradistinction to the situation now injunction der and the attempt.”38 us, the involve at earlier cases Texas, In Eastern the railroad was at- tempts by unprofitable venture tempting to abandon the intrastate serv- state-granted renounce their franchise ice the railroad. Interstate service Here, completely. the Trustees would already abandoned, had after such permit have the district court them approved by abandonment had been state-grant aspects select those of their ICC.39 privilege they accept ed choose with here, however, not Trustees allowing any impose out the state to fur sought any administrative review what- ther burden on the exercise Thus, soever. no there can be clear privilege.36 agencies statement re- would Further, two these cases do not decide they quire is, service continued as seeking whether in to terminate a serv- attempt impose confiscatory would ice, may, approval the Trustees quirements, they not court, by-pass of the district the state grant suitable relief. procedures. and federal administrative clearly Palmer v. Massachusetts states Brooks-Scanlon, underly- the action agencies may that administrative ing the case was an order of the Rail- disregarded. requir- road Commission of Louisiana “Continuance of state control over company operate a lumber will, these local services it approved by railroad on schedules urged, impair bankruptcy Commission. With the Commission hav- ing already acted, reorgani- power to court’s formulate a having mandated plan approval zation for the of the In- confiscatory services, continuation of the terstate Commerce Commission. Such Supreme Court that held rail- embarrassments either to the time due formally petition road need not the Com- required orderly for exhaustion of the permission mission for to terminate. procedure state or to the financial Court, through Holmes, Justice stat- may losses that be involved in the con- ed: duly tinuance of local services until unlikely “[I]t seems state, that after the by may easily terminated be plaintiff exaggerated. Commission has signif- called the It is not without 396, 183, 34. 251 77(g), U.S. 205(g), S.Ct. 64 L.Ed. 323 11 U.S.C. § the Trustees (1920). proceedings dismissed, ask could that thus, perhaps, resulting in the ul- railroad’s 79, 247, 35. 264 U.S. 44 S.Ct. 68 L.Ed. 569 timate withdrawal from the railroad busi- (1924) . ness. 36. See Fort Smith Traction Co. v. Bourland, 400, 37. 251 at at U.S. S.Ct. 330, 249, 267 U.S. 45 S.Ct. 69 L.Ed. 631 (1925) Ry. . But see Norfolk & Western 38. Id. Virginia, Co. v. West 236 U.S. 35 S.Ct. (1915). 59 L.Ed. Under section U.S. S.Ct. 247. plight of the bondholders of this years reor- no four that after icance railroad, other railroads whose plan Haven ganization for the New being reorganizations by Perhaps conducted it is no yet evolved. has many amenability courts of this Circuit. to state that less true being spects, equity it is their which is the for- as incentive laws will serve reorganization plans these railroads. Such a used sustain mulation most unfortunate. The dis- by situation is which, approval Commis- on senting graphic paints authority. opinion most supplant sion, state do picture possible con- against and colorful of this serious any event, in- But, in Yet, provide dition. Court this observance conveniences due feelings and other creditors re- such bondholders must balance law we state only the confines of communities, lief within Section the dislocation of local over-riding encompasses the enactment which and the of their habits single procedure agencies mandated Con- expert state gress, opinions Supreme and the Court judge. .”40 interpreting that statute. Therefore, holds this Court judicial body not this Court Were termination legislative body, but a it could fashion court ordered the district cannot be perhaps system equitable for fi- reorganization supervising the a rail nancing vitally inherently yet un- needed termi road section unless such under profitable Indeed, rail services. appro approved by the nation has been rapidly approaching when both time is agency.41 priate legislative federal and state bodies must responsibility. squarely meet that Such V. however, prescribed role, is not our as holding preclude does not This Court’s might enticing assignment such be. as ailing permitting district courts from Instead, apply the is to statute our task Rather, railroads to terminate services. Congress enacted unless such statute it holds inexorably with the Constitu- conflicts require seeking termina- The record in this case does not tion. procedures. tions to follow certain Ad- hap- that such conflict demonstrate procedures herence to such is not an ex- least, yet.42 pened here —at Rather, ercise in formalism. such ad- Therefore, judgment of the dis- important herence concerns. reflects two and the will be reversed case trict court First, application appropriate proceedings consistent remanded preserves agency the balance be- opinion. powers in tween federal and state Second, field. administrative review as- APPENDIX agency sures that an with substantial expertise, state or feder- Bearing Trial Court Statements al, provide appropriate will Question “Taking” amalgam public concerns transport rights private property and way unless some . is achieved. fully compensate found

Having passenger opera- result, however, its debtor for reached this express operations disquiet the Court must tions that such over reorganization, at 40. 308 vised the U.S. S.Ct. which illustrate point taking, of a .in that the sense of decide, time, 41. This Court need not at this process, yet has due been established in n whether such termination order should be justify proceeding this as to a deviation so granted appeared if there to the district from the mandate of Section 77. state- delay court to be undue the administra- court’s ments are contained the district agency. tive opinion on the Trustees’ motion to cancel petition passenger Appen- and on the There is set forth in the contract attached Company Trust dix series statements of Manufacturers Hanover the distin- guished judge operations super- terminate all of the Central. and able trial who improve- they that all indicate necessity must cease. Other- being made, that ment is an erosion run into we will wise is not railroad condition in an that will result of assets bad, taking as the too insofar bondhold- of the unconstitutional security 442a (Emphasis is concerned.” ers’ property.” debtor’s added) 429a ALDISERT, to ter- Judge, “CNJ this asks Court Circuit subsidy WEIS, Judge, joins (dis- con- minate the whom Circuit senting). as of

tract December all and at that time terminate I would affirm order the dis- passenger of the debtor services trict and reaffirm the action of date, p. m. on that 11:59 panel first considered this unless, prior thereto, suitable reorgani- appeal.1 I would hold that arrangements can be made with jurisdiction zation and court had act the State to riage car- continue the its order did not constitute (Empha- passengers,” abuse discretion. added) 431a sis my approach Because differs substan- “Perhaps parties should tially majority, from it be- pay spir- a little attention to the general necessary comes first to outline particular para- it behind that facing contours the crisis our nation’s graph. Perhaps between now passenger today. deem carriers I the cancellation time understanding be- such an to be essential parties comes effective the can problem the solution of the of this case. get together per- to the end that haps particular carrier can I. operate freight continue both legal majority opinion essay As a Jersey.” State of New 433a appears And it would have sound. acceptable if written some three decades sight “We cannot lose ago when railroads whose progress fact some judicial lines circuit run been made and that conditions segment private were a viable try; indus- subsequent to March of 1971 emergency at a time fed- when helped have rather than hin- subsidy legislation eral and the estate, dered the and conse- Jersey support commuter’s New quently security those who hold legislation yet were not on statute interests in the estate.” 439a I books. But this believe changes “We had some that a federal court look at should here, they changes are all this problem commuter railroad I very beneficial, perspective. think are This a 1973 recognition and will perspective be of benefit to the includes of five es- generally. tate And I have ref- critical factors: erence to a few of them that Although only per cent all were mentioned here.” 440a mileage belongs bankrupt go essentially “And I could railroads, all of this is with a located few you others. But all to 88 heard Northeast. Some 80 what they trackage they But are. cent all railroad the three are all in- dications, they judicial in the circuit is activity, are all states of Judges Judge temporarily 1. Circuit ill. District Judge Maris Maris and was District Gorbey, original bane other to sit on en rehear- panel, members are authorized of the appeals. ings did not Judge sit on the en in the courts of bane. cease, reorganization.2 forced to unless service financial process recognized, financial was forth- federal assistance life is fact of 1973 Once coming. majori- Reasons cited this crisis credulity accept it strains competition 90 million auto- were implication ty’s Com- the Interstate multiple com- Commission, government and mobiles schedules a merce jet petitive direct- air charged supervision of these with ly competed trans- capability with railroads, capacity portation.3 railroad bringing decline about “resurrection freight reorganization.” (Majority diminished business also in miracle, passenger carrying Putting capabilities spiritual of the 213.) aside a freight brought railroads. railroad about Traditional that resurrection can waterway lost only business was to inland aid. federal and state financial unwilling operations, pipelines Although majority More- and trucks. seem government over, recognize Congress policy this, tended fa- and the “to legislature transportation perpet- vor non-rail have. and regulatory uate a climate that [was] majority approach experimentation.” 2. The this case Water, hostile to air highway Passenger transportation Rail Act of were suc- if the Service cessfully public aided had never invest- U.S.C. 541-548 §§ ment, legislative at little or no enacted. user cost while rail- been That was a roads had to policy make declaration of such investments on national proclaiming inter-city their own.4 intercity freight question tiny nation’s Without we face a short-term intercity passengers, fraction of in rail- rail crisis Northeast. Six of longer bankrupt- primary roads were no rail carriers in in form of this area are transportation cy, in the United and the Penn States dominant one—the Cen- liq- verge tral —is on the of Court ordered prevent in uidation order further ero- Correcting sion of the creditors’ estates. problem coop- mining/forestry/agricultural require . . . this short-term will sectors, long primary public-spirited which have been the erative and all action generators parties freight traffic, Congress, have declin- Adminis- involved— importance, regulators, ship- tration, labor, creditors, ined relative their rates growth generally lagging pers, (My emphasis.) behind the over- and the courts. expansion. Department Transportation (DOT) all rate of economic Faster Re- growth port Congress, rates of in have come manufactur- Northeastern Railroad ing, Problem, but railroads have been unable March submitted adjust Secretary Transportation response their attract this traffic service to (and revenue) 59-2, Page needed to offset the rela- S.J.Res. tive losses sustained due to the slower History, Legislative Report No. 71- House growth bulk-goods in the low-value sec- Cong. Admin.News, p. 1580. U.S.Code & tors. (1970). Meanwhile, transportation other modes of part technological Report, —in because of their 4. Staff “The Penn and Oth- Central Railroads,” advances, part provision er Senate Committee on Com- because government pro- merce, infrastructure —have December at 220-222 : increasingly tough competition for . In 1929 vided . . the railroads were waterway oper- country’s The inland the railroads. form of commercial dominant freight pipelines transportation, hauling and the have diverted some ators most of traveling moving people have taken bulk traffic the trucks most of the large higher-valued public manufactured share of means cities. Reflect- between sides, goods preeminent transport traffic. both Pinched from their role weakened, position generally the railroads’ railroads were sound coming making greatest health, earnings harm with their their with the respected goods equity widely since here the debt and manufactured area securities growth output (and thus rates of forms of investment. traffic) (and prom- By posture . have been the fastest Moving yields future) radically so and the railroads only different. ise to be was also, cent of the the most Here little than 40 substantial. years Congress op- For three Amtrak has been But was careful to distin- erating guish inter-city inter-city lines, lines, with federal fi- between outright sup- by come under federal nancial financial assistance use of port, and commuter lines —the grants, 601; guarantee of 45 U.S.C. § service appeal' involved in this loans, 602; —which emergency and U.S.C. § supervision. come under state assistance, 621.5 U.S.C. § appropriations Actual federal to Amtrak Passenger service on intrastate grants $210,000,000 to date have been traditionally commuter lines has not guaranteed $100,000,000 subject regulation. and loans. federal though, competition dependent heavy freight dustries intense on because move- (speed, reliability, diminishing importance service ments. The factors schedule of the etc.) agricultural, substantial, forestry mining often even more so and industries Northeast, post- than in the tariffs .... and the to a shift type economy, industrial also hurt. regulatory existing government On the side controls, important developments at the One of State well as the Fed- the most level, affecting railroads, particularly eral continue to be more oriented to in the protection Northeast, transport quo growth intercity was status trucking barge than to the creation of an and environment fa- industries. Before the change large, ap- trucks, vorable advent of .... Such efficient the rails proaches put require sympathetic climate, had down thousands of miles of line promptly proposals serving virtually every one that reacts and were and economi- cally important willingness permit reflects a ex- sector of the Northeast. perimentation. regulation Existing But is al- exhaustive network of modern highways years most a contradiction built in these essential recent has tied the big slow, together cumbersome, passive, features. cities It and enabled the motor protective qualities capture deep- and carriers to reflect most of the short haul — ly ingrained legal standards, commodity and medium cumulative hall non-bulk traf- regulatory attitudes, quo fic from the and a rails. status out- permeates transport look that the entire time, competi- At the same motor carrier environment. tion, diverting with its constant threat of traffic, helped place ceiling The views of the Senate staff has committee Department Transpor- Thus, though rail are echoed rates. even the amount freight tation : traffic carried the railroads expanded economy expand- as the meager From start about ed, average rail revenue ton-mile industry rapidly Nation’s moved ahead percent in 1970 was two less than in 1958. following the Civil War. decade Although piggyback the introduction greatest expansion railway trackage service and tri-level auto cars in the late By 1890, nearly was 1880’s. two- 1950’s allowed the railroads to recover or railway mileage place. thirds of our was in traffic, retain some medium haul it was Railway mileage peaked in 1916 when enough to enable them to hold their 254,000 railway there were miles against own the trucks. United States. industry matured, As Railroads have its overall also suffered in recent growth years drastically government policies rate slowed and actually Northeast it has declined have favored non-rail since modes. This has (cid:127) permitted improve 1947. The root of the decline lies in the these modes to their changing regulato- productivity quality railroads’ economic and of service. ad- ry industry’s inability dition, many governments environment and the state and local adapt adequately changes. higher have taxed railroads at a rate than industries, currently pay other and rails strong competition As devel- intermodal higher proportion gross of their revenues

oped, intercity freight the railroads’ in taxes than do motor carriers. passenger markets suffered. Coal’s losses oil, transported primarily Report, 2, supra, which is DOT Northeastern note pipeline, was another to the rail- 9-11. blow particu- roads. Northeastern railroads appropriation lar II were hard hit after World War 5. Section 601 authorizes an $40,000,000 $225,000,000 in- the losses to the South West regulated compensate passen- generally to rail carriers for is service Commuter ger up pro- utility public to the full commission. service cost state viding appeal service than on is such rather in this service The commuter present It also avoidable loss exception. basis. no payment on a current basis authorizes financial aid Amtrak federal on a basis. rather than reimbursement inter-city lines, not is to available which changes These are necessitated lines, being it commuter be available to rulings in connec- Federal court cent sup upon to the states came incumbent reorganization of the tion with the beleagured port lines much commuter Pennsylvania It Central Railroad. gov the federal the same manner likely ba- the full of service cost support in of the came to the ernment required sis will become standard ter-city will under lines. “[Amtrak] prerequisite al- as a for the courts providing responsibility for take lowing process of a future, passenger and of the provide to to continue original go beyond the it be free to will passenger service. State, particularly system, where basic willing regional, authorities or local provide serv to assistance II. financial they The same fac which desire.” ice litigation I turn to the at hand. now in 2 caused tors described purely simply push This and case inter-city problems lines caused pull squabble and between the Trustee in commuter lines. crunch Jersey and State of New CNJ legislation Thus, Jersey to enacted New over subsi- the amount commuter commuter serv continued rail subsidize dy. commuter The railroad needs more (1973 Supp.). 1A-18 27 N.J.S.A. ices. subsidy state. The state Jersey’s total commuter For New subsidies, paying “avoidable loss” subsidy $14,948,913, amounts to although legislature has authorized subsidy to amounts CNJ payment “full cost.” The techni- $5,115,101.7 up by cal roadblocks thrown State subsidy Jersey New thus far 5. The paying responsibility avoid its now —the based on an “avoidable loss” has been prior of a or insistence resort determining figure computed by whether agencies federal administrative —were particular if cost would avoided Judge Augelli cast aside the dis- passenger discontinued. service were parties trict He court. ordered the legislature Jersey order “[i]n New agreement come to an he would else improve serv- to conserve order abandonment. When necessary public use ice statutory implement failed to author- State,” payment in this authorized ity, the court issued the order. the full cost of serv- “of such original panel of this court affirmed. P.L.1966, 18 of .” ice. Section rehearing majority On have now re- July 18, (C. 27:1A-18) effective c. 301 placed the roadblocks so that New Jer- introductory Significantly, sey get during can ride use- a free legislation declares: statement less, excruciatingly delayed futile changes proceeding expense bill law This administrative at the operating mortgagees the commuter allow bondholders years. subsequent Pennsylvania’s § 602 loans Under 7. For fiscal 1972-1973 com- July guaranteed up $150,000,000 included: muter subsidies up 1, 1973, $200,000,000 thereafter. $4,872,350 Penn Central may aggre- Emergency guarantees loans and Reading 4,333,333 gate $200,000,000 under administrative SEPTA 300,000 expenses Legislative History, supra, note at 4737. Pennsylvania one cent not contributed support for CNJ.

commuter may delay being taken, procedures abandon- other property is now whose my forcing years the while process ments for view, of law. due without —all provide at a the service railroad to delay example envisioned of the An loss . .9 expressed a majority’s action was Pennsylvania in brief Commonwealth Asking appeal in court.8 another this III. resumption of service court to order trackage had which on Penn Central disagreement may Whatever there permanently damaged by Hurricane been Agnes, reorganizing specifics rail- on Pennsyl- the Commonwealth thing appears roads, one clear: “Cur- to wait until court not vania asked this public policy rent deficient. Govern- final I.C.C. determination: “The ICC required variety ment action will a in judicial thereof— review decision—and industry of efforts so is better years As recent distant.” are several respond changing able to circum- Department of 26, 1973, the March and or- stances. structure complained Transportation (DOT) to ganization along private of the sector Congress delay in inherent about public policy fail with too often proceedings associated abandonment transpor- public to meet needs for rail 10 Railroad Prob- with “Northeastern tation.” lem”: Significantly, Department regulatory poli- Federal and state Transportation reported Congress on made it difficult cies have 1973, 13, March a a recommendation for changing adapt eco- railroads to grant $93,000,000 federal for Amtrak competitive conditions. nomic and operating to underwrite for fiscal losses Act seems The Interstate Commerce 1974, guarantees, an increase in loan especially in modification need of open-ended authorization not to exceed regulatory incorporation relief $500,000,000. judgment “It following areas. that, both Amtrak and DOT 1. Abandonment grants other than time, federal and loan guarantees there is no source prevent Lengthy or procedures often operating which can fund Amtrak its unnecessarily ef- hinder a railroad’s capital requirements. losses and meet its lines or other to abandon branch forts in FY FY Given losses 1972 and longer even variable that can no cover position 1973 Amtrak is not in a to issue rebuttals, briefs, Hearings, costs. Indeed, there can be no discontinuance Baker, Pennsylvania v. 8. Commonwealth type until (Common- case of this the ICC has au- 1973) (3d Cir., 475 F.2d 1394 it. thorized brief, 13). wealth Decisions of the Commission under Section 2, Report, supra, note 9. DOT Northeastern three-judge are Dis- 13a reviewable at 22. pursuant 1336, trict Court to Sections report, comprehensive on the In a more 2321-2325 and of the Judicial (Amtrak) Passenger dated Act Rail Service (28 U.S.C.). a three- Code Decisions of explained: 15,1973, DOT March by ap- judge District Court are reviewable wholly operating of a train In the case peal Supreme pursuant to 28 Court state, single seek must Amtrak within process This review U.S.C. Section appro- permission from an discontinue years much or three can add as as two per- seeking authority priate during period Amtrak of time ICC. from the discontinue mission to provide an uneconomic must continue findings case, the ICC such patronized low service. discontin- authorize make in order to must pro- The discontinuance Recommendation: and, slightly while different uance changed avoid continu- cedure should be proceeding pendency of the state service, an ex- uneconomic authority seeking to dis- Amtrak from bar period litigation. tended more than from the ICC continue Report, 104-105. DOT Amtrak placed days, limit is no time there Report, supra, at 189. note delay Staff power discontinuance. ICC’s being phase railroading Federal 1939 as incur debt without stock guarantees.” viable in I cannot read Section- 77(o) Bankruptcy Act, of the 11 U.S.C. Jersey Department Similarly, the New arbitrarily im- strictures imple Transportation, a statement posed by majority. The rationale menting “plans preservation for the Massachusetts, Palmer v. 308 U.S. improvement commuter rail (1939), S.Ct. L.Ed. 93 was articu- following system” reported road passen- lated era when American expenditures :12 ger part private were a industry, de- sector of American and not Operating Assistance pendent for survival on infusion massive Amt. Amt. Contract Contract inter-city lines and federal monies Riscal 1973 1961-72 Riscal Railroads I monies for commuter lines.14 51,600 9,847,642 Central Penn $ $ 9,106,000 44,843,260 recognize juris- Erie Lackawanna also that as insofar ICC Railroad 5,115,101 Central 42,290,774 concerned, diction DOT has announced Penn-Reading S.L. 676,212 “Amtrak, Congressional 2,471,798 that under charter, substantially the differs Totals $99,453,474 $14,948,913 provided individual rail carriers which prior May 1, service DOT to 1971.” Hopelessly dependent upon such cur- re- recommended elimination ICC rent massive aid from federal and state view of discontinuances of service sources, problems 1973 railroad cannot system quired the considered basic and clarifica- in the context of condi- years ago.13 tions 40 jurisdiction I cannot oth- read Su- tion lack of over preme relating Court decisions to this aspects operations.16 The er Amtrak Report, supra, 4, 11. Staff note at 100. (Emphasis supplied.) DOT, Northeastern Report, supra, 2, note at 11. Pamphlet, Jersey Department 12. The New Transportation, it “What ... 9, Report, supra, at note 15. DOT Amtrak does,” what it 1929, 20,000 passen- 13. “In there some were Report, supra, note DOT Amtrak ger trains in the United States. Nine thou- 107-09. disappeared by sand of these had Additionally, DOT as found : Here in 1970 there are than less bankrupt industries, bank- other Unlike presently proc- over 100 of these are in the rupt allowed to have not been railroads proceedings ess of discontinuance operations. reorganize and modernize their Many Interstate Commerce Commission. dismantled, equipment is not Plant existing passenger operating trains are sold, properties nor land and other heavy continuing under deficits. way go businesses other regretfully recognizes large committee that a Despite liquidated. bankruptcy are promise number of them hold no for finan- large miles in receiver- of road number Leg- in cial success the foreseeable future.” average percent ship, only an 0.4 History, supra, islative at 4736-4737. mileage an- total been abandoned road year. reported peak Congress: nually Rail 14. DOT has to since ' industry’s history bankruptcies as have not treated is rife with bank- ruptcies. sign industry expect, larg- As had fundamental one problems over-capacity (such a non- est number of them resulted from the Depression growtli industry) point which needed correction. Great when at one opportuni- 1930’s, they percent Nor been used as of all miles railroad ty receivership. help problems allow- were in correct At per- roads, time, percent bankrupt mileage or all some of major go operated belongs bankrupt haps parts them, out of railroads— Instead, essentially deemed all were existence. railroads located Northeast. economy However, important dis- to be to the two situations too different companies bankrupt felt in that It was carded. reducing simply by earnings viable 1930’s still around could be made had some merging did, they reorga- could, them with their debt structure fact policy patchwork Today This roads. healthier nize. the outlook is less favorable. however, report Railroad, difficulties of this staff Senate Committee reorganiza- ap long speaks “changes in the current Commerce antedate operating proach” tion. The “Attention CNJ has been with section 77. overhauling given should be the Act substantial annual deficits since 1958. margin authority provides it The table lists those so that sufficient addressing problems transportation deficits.18 The deficit first ten for the approximated problems.” it months million. as well as financial And of 1972 $8 very reasons seems me same CNJ’s trustee tells us: why “Amtrak . differs substan dispute There is no between the tially carriers from the individual rail parties history about CNJ’s of defi- May 1, provided prior to cits; and, indeed, the State 1971,” apply equal vigor to CNJ. Jersey apparently believes CNJ upon dependent federal Amtrak fi perilous position a more nancing; CNJ, upon financ Subsequent than does the Trustee. ing. governmental financing, This so hearing, on December survival, essential to modern railroad Jersey Department the New of Trans- constitutes critical difference. portation report issued a on “The Jer- Therefore, can said to differ CNJ sey Central Situation” which con- “substantially” pre-1971 from the car following tained the statement: ; riers and because of difference the this Complete collapse of the factors which controlled Palmer in 1939 Central Jersey Railroad applicable as an are not in inde- here pendent disrup- carrier with resultant IV. operations, tion of both reorganization pur- in CNJ has been freight passenger, appears and to be Bankruptcy suant to Section massively inevitable without increas- Act since March 1967. The financial ing public support.19 essentially has maintained the same rail- pointed The Administration has out in place road network which was in in Reports three successive Economic geared Congress one which was to the environment (1970, 1971, 1972) that econom- economy early a/nd competitive late 19th and changed ic and of conditions have century. 20th considerably regulation began since in gradual broadening The of the Interstate changes and that have not been ade- regulatory Commerce Act to increase quately con- regulations gov- reflected in the impact trols has had a similar erning restrictive freight transportation. surface continuing on the railroads. The Department decline Transportation The of be- industry, of the as an the finan- regulatory lieves that reform is fundamen- plight cial of in the railroads the North- any plan tal to restructure the rail- east, inflexibility response and the roads of the Northeast. competitive marketplace conditions in (Emphasis supplied.) DOT Northeastern have, part, brought in about Report, supra, footnote at 11-13. regulatory restrictions Interstate Report, supra, 17. Staff note at 189. Commerce Act. Regulatory practices adversely have af- 2,010,269 $ 1958 — many ways. They fected railroads have 2,872,258 1959— permitted, encouraged, even abuses 4,186,307 1960— pricing freight “value of service” car 7,141,924 1961— ways utilization that have led a seri- 7,410,306 1962— transportation ous misalloeation re- 6,098,233 1963— Probably important, regu- sources. 8,254,389 1964— latory practices produced rigid have a 6,665,192 1965— pricing which, par- structure rails 7,451,052 1966— ticular, prevented respond- them from 13,616,041 1967— changing to the needs aof market. 7,951,641 1968— addition, regulations imped- outmoded 9,381,372 1969— efficiency given ed within a mode 14,848,200 1970— stricting competition by discouraging 7,695,058 1971— abandonment uneconomic branch Appellee’s brief, lines. change it found that court The American economics subsidy con- imperative a and the new railroad’s role therein and the was specific negotiated railroad, between CNJ circumstances tract this may longer gov- if Jersey. found no New be considered Jersey subsidy ernmentally regulated private industry, contract New continue, 77(o) designed the railroad which It with CNJ were was to serve. $500,000 copartner month. is a continue to lose with the will state New Jersey quasi-govern- “an quasi-private, such losses to be The court found enterprise. providing that will result mental erosion of assets And it taking of the debtor’s unconstitutional commuter because finding of property.”20 Jersey upon If State New it. insists erroneous; clearly fact, it I do find There is sufficient evidence of a na- disagree law, do not if a conclusion of I policy tional railroad enunciated in the with it. Passenger Rail Act Service of 1970 sufficient of a evidence state railroad V. policy Jersey op- in the New commuter Palmer, relied on doctrine erating legislation agency persuade simply apply majority, to a cannot policy me that dictates being as described the ICC railroad provide state or federal ad- must no extremis,” “in where equate subsidy services or private longer part of the survives the carrier serv- terminate those upon dependent completely sector, but policy application makes ices. This subsidy program in commuter 77(o) to situation such as that CNJ had to furnish unnecessary. 77(o) envisions Section through 1972. million from 1961 dollars part discretionary of some action the given the to this: comes down The issue the ICC or state commission on basis sup- perilous of a state of assets erosion public necessity. of and convenience legislative ported railroad, and a state sup- commanding policy cost “actual VI.

port,” court without ais power of service to order abandonment inexorably the fatal de- This leads to a into to enter the state refuses where majority’s approach: fect in- its subsidy “avoidable other than contract sistence there exhaustion of stat- be causing refusal is loss” when the state’s utory to administrative remedies either $500,000 a month? to lose the railroad may or the there ICC PUC before power un- has that The district court judicial face a consti- In the of relief. 205(a): 77(a), der 11 U.S.C. confiscation, of tutional claim of because have . shall [T]he eroding assets, constantly calculated may to in addition exercise acknowledging month, $500,000 at section, by powers conferred proceedings is resort to administrative States of United which a court time-consuming process, elaborate, an appointed a if it had would have had taking years pages (ante, possibly property equity of of receiver 9), requirement n. of initial purpose. any debtor for agency must resort to an administrative majority con- purpose; on a strict for the The relies reason have some some 77(o) by seems which to struction of exercise administrative discretion of bare, prerequisite agency expertise. quire to abandonment Laid as a reason of approval problem of ascertain “the and authorization is to the heart I heretofore under have what still abides [ICC] Commission.” discretion con- this sec- circumstances observed that the strictures moribund by fronting considerably diluted tion have been CNJ. Appendix, 429a. problems neces- itself has conceded the consideration of and of The ICC new phase sity problems, remedial action” new old and to im- for some “drastic entailing pose generation proceeding upon abandonment ideas of one Pennsylvania: another.” certain CNJ lines warning But the of Pound has overriding we factor jurisprudential Modern heeded. ings teach- faced, is that CNJ since accepted adoption have Pound’s reorganization under been debtor in Ihei’ing’s question thesis: first “[T]he Bankruptcy Act United be, op- how should will a rule or decision for the District District Court States practice?”24 Obviously, I erate Jersey. position has con- Its deep misgivings about result tinuously have other deteriorated, as majority. At the same reached serving met- York the New recognize time, quick I am to it is con- ropolitan area. CNJ now interpret-law, for the court to not to During and in extremis. sidered legislate. “Legislation reg- is enacted amounted since losses have legal ulate the social environment million month. Un- than $1 living society. Gény points [But, as] circumstances, form some der the out, apply it or unforeseen substan- im- remedial action became drastic changed times, tially of other conditions perative.21 though statutory original pur- even longer of CNJ dire financial condition pose served, apply no is to me- controverted the State chanically an no abstract formula sug- Jersey. legisla- no longer The state offered represents the will gestion by two brief, then, nor either of the essence, ture .... arguments the ICC this case that legislation oral principle words of contain a ability fashion regulation legislators has the PUC intended specifically any other than relief apply contemplated norms their Judge Augelli: increase ordered succeeding if own and times. But there subsidy or abandon the service. change is a substantial in the social condition the statute [and economic] Why then, the stubborn demand designed regulate, ad- the mechanical futility? principle exercise What judication by reference to statute’s justified this? current law has ever wording may, literal alone under the by philosophy condemned Roscoe The changed conditions, to an irre- amount jurisprudence Pound as mechanical application legal sponsible rule of a de- justified application of have blind would by legislative by intent vised neither nor “Legal systems Palmer this case: 25 deciding court.” periods science have their in which Roger Traynor us: decays tells degenerates, system in which technicality, a scientific into responsibility keep the law ju- jurisprudence becomes mechanical straight high is a It not one. should 22 risprudence.” Palmer’s The effect of keep- reduced to task of be mean application to straight these circumstances ing it and narrow. We “petrifaction be in words by Pound’s cliché that not be misled should subject systematized legislature [that] . . . policy is for a matter tends to cut off initiative individual for There is al- and not ways the courts. future, independent legisla- stifle an area covered not 288, Pound, supra, 21. ICO Conclusions at In cited the Mat- 23. at 606. Company ter of Central Railroad Pound, supra, at 610. Debtor, Jersey, Pennsylvania, Appellant, 486 Law-Making 1124, (3d Cir., 73-1110, Tate, Function fn. F.2d 1126 3 No. (1968). Sept. 20, 1973). 211, Judge, 228 filed 28 La.L.Rev. Pound, Jurisprudence, Mechanical 8 Col. (1908). D.Rev. 605-607

225 remedy, and does ob must revise administrative the courts in which tion ones, it would come to no tain when new old or formulate rules n Lodge futility.” ap- policy than an exercise process an is often in that 1858, of Govern considera- American Federation propriate basic and even a Paine, U.S.App. Employees v. ment 141 tion.26 882, (1970). 152, 896 D.C. 436 F.2d Transporta Department Both the plaintiff requirement ex that a “The tion to the Commit staff Senate remedies haust administrative graphically delin tee on Commerce have presupposes judicial applying for relief changes in rail eated the fundamental remedy one.” an effective is industry which have occurred es road Pennsylvania Bank Nat’l Northeastern sentially II in na since World War Inc., Steel, and Trust Co. v. Sandvick especially tion affected (M.D.Pa.1971). F.Supp. 651, 655 4). (Ante, This criti Northeast. note States, 395 also, See McKart v. United plus data, cal of the new enactment 1657, 23 L.Ed.2d 89 S.Ct. U.S. passenger policy national (1968); Davis, Administrative K. Congress in 1970 and the new New Jer (1958) at “Whether Law 20.07 § legislative sey policy as reflected discretionary. If require is exhaustion agency persuade commuter me that remedy pursuing administrative 77(o) interpreted strictures as requirement may futile, would be apply Palmer circum do not Co. City Trust Bank Farmers waived. stances of case. Schnader, 34; 54 S.Ct. 291 U.S. v. sum, what divides this court Davis, (1934); see 3 78 L.Ed. Schaefer, what Illinois Justice Walter V. Treatise, 20.07, at Law Administrative Supreme Court, has as a dif- described rel. Mar (1958).” ex United States judge’s unspoken in “the notion ference Penitentiary, Lewisburg Warden, rero v. as to the function of he his If court. Cir., (3d page 659 483 F.2d passive views the role 1973). willing delegate one, he will be sponsibility change, and he will not VII. greatly delegated care whether au- Theoretically, this. it comes to Thus thority is exercised or not. If he views agencies have discre- the administrative society the court as an instrument of de- disap- authority approve or tionary signed to reflect in mo- its decisions the Ac- prove request abandonment. rality community, he will more realistically tually their discretion likely precedent to look teeth and extremis non-existent, because against to measure it the ideals and the go compel it to “To condition of CNJ. aspirations of his time.” to take would be . on at a loss compensa agree just property We can that resort to an admin- without process part of due istrative not mandated tion which is controlling gained principle nothing the there is “[w]hen is to be The law. many applied cases from the of in the exhaustion administrative that is same constitutionality of a rate remedies and the harm from the contin- the yields a ued depend of rul- it existence the administrative on whether held to is ing great.” of is Commission Wolff v. Selective Service return.” Railroad fair Compa 16, 817, Local Board No. 372 F.2d 825 Texas Railroad Eastern Texas v. (2d 1967). 85, 247, 249, 68 Cir. ny, 79, exhaustion 44 S.Ct. “[T]he U.S. 264 quirement contemplates (1923).28 an efficacious L.Ed. 569 Traynor, Open Citing Railroad v. Questions Some on the Co. Brooks-Scanlon 399, Appellate Louisiana, 396, Courts, Work of 251 State 24 of U.S. U. of Commission Chicago 211, (1957). 323; 183, L.Rev. Bullock v. Rail- 219 L.Ed. 40 64 S.Ct. 513, Florida, 254 U.S. of road Commission 380; Schaefer, Policy, 193, 520, ex 65 L.Ed. State Precedent 34 Univ. 41 S.Ct. 823; Cunningham Jack, (1966). s. c. F. of v. 113 23 rel. Chi.L.Rev. statutory 77(o) ality purpose 77(o). majority’s of cannot The the inter- If pretation 77(o) correct, applied be to a resort the situation where is then body hopeless, an a force administrative statute is unconstitutional as gesture Mortgage form useless which exalts over Bondholders’ 314% my interpretation substance. Manufac- This is Protective Committee 77(o), Company, turer not Hanover Trust indenture albeit one that does rest wording general only trustee mort- literal of the statute. But of the CNJ’s gage finding precedent there for a is recent non-liter bond issue. Given the a interpretation 77(o). oper- monthly $500,000, al Re Section from this loss ation, cently court, speaking monthly also the overall loss of Judge interpreted by ICC, Adams, $1,000,000 CNJ of Section found 77(o) emphasizing by to mean that New the trustees of Penn the admission Jer- sey “complete authority collapse had no Central to sell real that of the Cen- es though tate, approved Jersey even the reor tral as an inde- Railroad ganization notwithstanding pendent disrup- court, with carrier resultant explicit language freight operations, of that section sanc tion of both tioning Judge empha passenger, appears the sale. Adams inevitable massively increasing public grapple sized “the that Court had had to fi- without problem presented with support,” here considering wherein the new nancial proposi policy, section statute states national and state railroad appear tion if recognizing any that read in vacuo would that resort PUC incompatible congressional act, or the know- ICC would be useless only manifested directive entire that viable alternatives suggest (1) statute.”29 I Jersey, the same subsidies (2) services, considerations influenced an the in- abandonment depart ap terpretation 77(o) court from an vacuo as articulated proach appli in Penn Central majority should makes uncon- that statute cable I do deprives here. this court believe stitutional in that the bond- it should abe strict constructionist with mortgagee proc- holders and due spirit CNJ and a free constructionist in it their ess of law because confiscates terpreting very section, 77(o) same property. in Penn court Central. As the examined Congressional there, policy it should majority our is to state that task vigor equal have with examined the apply “inexorably the statute until it overall national and New and that conflicts with Constitution” policy of 1973. happened here “such conflict has [not] Indeed, disagree- interpretation yet.” I my My believe least, is —at not as which, majority one under these I believe circum- ment with preserve stances, will the constitution- the conflict is now at hand.30 281; impossible any Colony 145 Fed. Iowa v. Old to afford relief Trust Co., (8 Cir.) ; presence 215 F. even in of an Northern Pa unconstitutional taking penul- Dustin, 492, 499, property. Suddenly, cific R. R. Co. v. U.S. theory 1092; paragraph, entirely S.Ct. timate new L.Ed. Commonwealth Fitchburg advanced, 42, stating Co., Gray augmented 180, 190; v. R. R. footnote Dodge City, etc., Ry. Co., point taking, State v. sense of 53 Kan. “the yet process, so 36 P. 755. due has not been established justify mandate as to a deviation from the Transportation In Matter of Penn Central of Section 77.” (Morgan Guaranty Trust, Appellant), Co. suggests reading A fair of this footnote (3d Cir., 72-2116/26, F.2d Nos. fil- majority have now embraced 14, 1973). ed June separate conceptual underpinnings this say majority pages They dissenting opinion. 30. The devote of an seem sixteen setting extremely opinion reorganization court erudite forth an rea- affirmance because, although why appropriate it sons strictures as inter- not was Section 77 prevent preted by Palmer make it taken an unconstitutional v. Massachusetts action expressed majority an idea whose

time has come. the dis- order of

I affirm the

trict court. Henry Barto-

In the Matter of Salvadore Bartolotta, Bankrupt. lotta, Sal a/k/a Henry BARTOLOTTA,

Salvadore a/k/a Bartolotta, Bankrupt, Appellant, Sal

v.

Jerry LUTZ, Greenhouses, Lutz d/b/a Appellee. No. 73-2282

Summary Calendar.* Appeals,

United States Court of Fifth Circuit. 1, 1973.

Oct. talcing My place. difficulty accepting mortgagee’s taken bondholder's such property, premature the order was a notion is manifest. because precise I think this is too serious a matter ex- unconstitutional tak- moment. yet super- liad not alt over arrived. form substance. Under vision of federal courts —from 1967 Supporting interesting concept eight (as the first months of 1972 limited compilation excerpts of bench comments record) sixty-two this case lost —CNJ emphasize per Thus, verba de futuro. reports: million dollars. “CNJ ICC apparently appellate what divides this court During considered in extremis. now emphasis placed grammatical is the to be and since 1970 its losses have amounted to reorganization tense utilized court per (Ante, than month.” $1 million certain oral statements: had that court used 224.) page praesenti They chilling. verba de another result would statistics These brute cry action; legal principle, for an exercise in out for be mandated. Stated as a logomachy. suggests (1) powerless prevent an unconstitu- Cir., Enterprises, Inc. v. Isbell *Rule taking, (2) prevent Casualty Company tional it can act to York et Citizens Cir., Part. I. confiscation after the confiscation F.2d al.

Case Details

Case Name: In the Matter of the Central Railroad Company of New Jersey, Debtor. Appeal of State of New Jersey

Court Name: Court of Appeals for the Third Circuit

Date Published: Jan 7, 1974

Citation: 485 F.2d 208

Docket Number: 73-1006 and 73-1027

Court Abbreviation: 3rd Cir.