New Haven Inclusion Cases

PETITIONER: New Haven Inclusion Cases
LOCATION: Nolin River Reservoir

DOCKET NO.: 915
DECIDED BY: Burger Court (1970-1971)
LOWER COURT:

CITATION: 399 US 392 (1970)
ARGUED: Mar 30, 1970
DECIDED: Jun 29, 1970

Facts of the case

Question

Media for New Haven Inclusion Cases

Audio Transcription for Oral Argument - March 30, 1970 in New Haven Inclusion Cases

Warren E. Burger:

-- 915, 916, 917, 920, 921, 1038 and 1057, the New Haven Railroad Inclusion Cases.

Whitney North Seymour:

Mr. Chief Justice, may it please the Court.

Warren E. Burger:

You may defer a moment if you wish Mr. North Seymour until we see that all counsels are at ease.

You may proceed now Mr. Seymour.

Whitney North Seymour:

Thank you sir.

I am going to open for the appellants on our side.

I represent the trustee Manufacturers Hanover Trust Company under the represent the First Mortgage Bonds.

I will be followed by Mr. Migdal who represents the Bond Holders Committee and he will be followed Mr. Auerbach who represents the Trustee.

A little later on, I'll explain the division of argument after I've gotten started.

The bonds outstanding of this Railroad consist of $76 million of first mortgage bonds with about $24 million of accrued interest, and $53 million of second mortgage bonds.

I thought there were three classes of bonds?

Am I mistaken?

Whitney North Seymour:

The Harlem River divisional bond will be paid off so that there is only a permanent two classes.

I see.

Whitney North Seymour:

The Court already has some familiarity with these matters in the Penn-Central Merger case, the inclusion report of the Commission, which I will have occasionally, refer to was before the Court at the time it decided the Penn-Central Merger case.

The New Haven filed a petition for reorganization in the Connecticut District Court in 1961 and that reorganization has continued since.

Judge Robert Anderson was in charge of the reorganization from the beginning and continued to be after his appointment to the Court of Appeals.

It was -- and is a somewhat unusual type of reorganization from the very beginning because the Railroad had been running deficit since at least 1956.

It was apparent that the only way to keep the Railroad running was to have some kind of a merger or sale to another railroad in existence.

And during the time of reorganization, that is from 1961 down through the 1968 at which time the Penn Central took over the New Haven and paid over the considerations subject to review of the problem of price.

The reorganization had accumulated some $65 million of charges and claims ahead of the bonds as a result of reorganization expenses and borrowings and so on.

This process continued, I think there is no dispute because of the determination on the part of a judge and the trustees and the trustees’ counsel and the Commission to keep the Railroad running and a proper feeling on the part of Judge Anderson and the others that New England required the continuation of this Railroad.

I think Your Honors are familiar enough with its physical circumstances, so that help me to go into those that runs from Massachusetts, Rhode Island, Connecticut and New York and these both are a railroad which takes commuter traffic and interstate traffic of a more general in character.

It's clear I think that from the very beginning, the trustees were seeking to find a railroad with which there might be a merger of the New Haven or an acquisition of the New Haven and that from the very beginning while this search went on, there was no prospect that the road could have been abandoned or liquidated because of the concern of everyone to keep it running.

In 1961, the trustees approached the Pennsylvania and the New York Central on behalf of New Haven to see if they were interested in some acquisition and in 1962, they reported that the only salvation for this Railroad was some kind of a merger or acquisition.

And in the same month, March 1962, the Pennsylvania and the Central asked approval of their merger under Section 52 of the Commission.

In June 1962, the trustees intervened in the merger case to seek inclusion.

There were negotiations in 1964 between Penn Central and the trustees which were unknown to the bondholders and which ultimately resulted in an agreement which was disposed for the first time in a report of a Commission Examiner, an agreement under which the merged corporation would acquire the New Haven assets for certain specified considerations.

The Commission approved the merger and required Penn Central to include both passenger and freight operations and said in its order, “All upon such fair and equitable term as the parties may agree subject to the approval of a Bankruptcy Court and the Commission.”

In October 1966, the trustees and Penn Central filed their agreed purchase agreement as a first step in the plan of reorganization.