Regional Rail Reorganization Act Cases – Oral Argument – October 23, 1974

Media for Regional Rail Reorganization Act Cases

Audio Transcription for Opinion Announcement – December 16, 1974 in Regional Rail Reorganization Act Cases

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Warren E. Burger:

We’ll hear argument first this morning in 74-165 and the related cases, Blanchette and Others against Connecticut.

General Insurance Corporation is the first of the group.

So Mr. Solicitor General, you may proceed whenever you are ready.

Robert H. Bork:

Mr. Chief Justice, may it please the Court.

This is a direct appeal by the United States other federal parties, United States Rail Association and the trustees of the property of the Penn Central Transportation Company.

A three-judge District Court determined that the Regional Rail Reorganization Act of 1973 is constitutionally deficient in significant aspects.

The United States support the constitutionality of that Act.

There is also a cross appeal here by the trustee of the New Haven Railroad to have the act declared unconstitutional on grounds rejected by the District Court.

The appellees here on our appeal comprise the sole shareholder and the major creditors of the Penn Central Transportation Company, a railroad that will be important in any reorganization effective under the Rail Act.

Time for argument is divided equally between the supporters of the act and the opponents of the act.

The supporters have divided our time as follows.

Mr. Cutler who represent the Rail Association and I will divide an hour and 13 minutes, though we hope to reserve some if it for rebuttal.

Mr. Cutler will deal with the issues raised by the cross appeal.

I will deal with the issues raised by our appeal.

And Congressman Adams has been seated five minutes to support the act on somewhat different grounds with those advanced by Mr. Cutler and myself.

Mr. Horsky for the Penn Central Trustees, who supports our position in part and opposes it in part perhaps now supports it will use the remainder of our time, plus some of the other sides time.

He is in effect a bridge between the two sides.

This litigation is crucial to the success or failure of Congress’s plan to reorganize and to make viable the real network in the northeast.

And the case bears, I think, as you look at the briefs a circus appearance of enormous complexity.

But I think, it is quite simple in its basic concepts.

The core issue before us is whether the Rail Act will work in uncompensated taking of the shareholders and creditors’ property in violation of the Fifth Amendment to the Constitution.

The three-judge District Court vowed that it would.

The three-judge Special Court created by the Rail Act itself has more recently held that it would not and that the statute was therefore constitutional.

It will be useful to sketch, I think, the real crisis in the northeastern United States.

The main features of the act that its Congress has response to that crisis and the holding of the District Court which emasculates Congress’ effort.

By 1973, seven major railroads in the northeast were attempting to reorganize under Section 77 of the Bankruptcy Act.

Those proceedings were proven unsuccessful due to the seemingly insoluble financial difficulties of the roads.

The imminence of financial collapse and the possible liquidation of this northeast rail network, threatened the immeasurable damage to the economy and to the national defense.

Congress responded with the Rail Reorganization Act we have before us.

The primary purpose of that act is to create a new, profitable, privately owned rail system in the northeast and most importantly to do that rapidly, much more rapidly than is the custom under reorganization under Section 77 of the Bankruptcy Act.

Robert H. Bork:

Within 180 days of the statutes enactment, each Court having jurisdiction over a railroad and reorganization was required to order that the reorganization proceed under the new Rail Act.

Unless it first, one, found that the railroad was recognizable on an income basis within a reasonable time and that the public interest would be better served by that form of reorganization.

Or two, found that the Rail Act does not provide a process which will be fair and equitable to the estate of the railroad and reorganization in which case the reorganization is to be dismissed.

Appeal from this 180-day decision by the reorganization courts lies to a Special Court created by the act and that Court is composed now of Judges Friendly, McGowan, and Thompson.

Five of the reorganization courts found that the Act did not provide a fair inequitable process, two founded that it did.

The appeals were taken and the Special Court has now found that the reorganization act does provide a fair and equitable process and that decision explicitly includes that the termination of the Act will not work an uncompensated taking.

The Act also establishes United States Rail Association, which is a public nonprofit corporation and it is required to formulate a final system plan that will establish and maintain a financially self-sustaining rail system adequate to the needs of the northeast.

The centerpiece of this final system plan is to be a new for profit corporation, a consolidated rail corporation, Conrail.

The bulk of the rail properties will go to Conrail, although, some maybe sold under the final system plan to profitable railroads in the area, to Amtrak, and to state and local transportation authorities.

This plan is to be laid before Congress within 450 days of the passage of the Rail Act, although, the rail association has now requested to Congress a 120-day extension of that deadline.

The final system plan becomes effective, if it is not disapproved by either House within 60 session days.

Within 90 days after that, the plan is to be certified to the Special Court.

The Special Court will then order the transfer out of the rail properties from the bankrupt estates to Conrail and have the securities and obligations and benefits of Conrail transferred back to the bankrupt estates.

Subsequently, it will determine the fairness and the equity of the consideration given in return to these states and that consideration, a package of securities and benefits given is not to exceed the constitutional minimum.

Now that consideration given to the bankrupt estates, the rail estates, is to consist of stock and securities of Conrail and up to $500 million of the association’s obligations, which are held by Conrail and which are federally guaranteed and other benefits under the act such as payments for labor termination and so forth.

If this consideration exceeds the constitutional minimum, the Court must order the excess returned.

It may reallocate the consideration among the transfer or rail estates and if necessary, it may enter a deficiency judgment in the estates’ favor against Conrail or against profitable railroads that receive property from these — the bankrupt estates.

The entire judgment of the Special Court on the evaluation issue is then reviewable by this court.

Now, although the constitutionality of this statutory scheme was being litigated in various reorganization courts.

These cases were brought in District Courts, not reorganization courts by the Penn Central Shareholder and by the major creditors.

They were consolidated by the judicial panel on multidistrict litigation in the three-judge District Court.

Now, that Court from which we appeal determined as follow.

It said first, that the question whether the final transfer of rail properties from the rail estates to Conrail would affect an unconstitutional taking was not yet right for adjudication.

William O. Douglas:

There is nothing here from that Special Court?

Robert H. Bork:

Nothing here, the Special Court opinion is available

William O. Douglas:

Yes.

Robert H. Bork:

And I believe the briefs now refer to it.

But there is no appeal here from the Special Court.

William O. Douglas:

Well, it cannot be on here.

Robert H. Bork:

Under the statute, it is not considered an appeal.

William O. Douglas:

That’s another question.

Robert H. Bork:

That could be another question Mr. Justice Douglas.

I trust it will not become one in this case.

Second, there is the problem of interim erosion which the three-judge District Court of the bankrupt estates — three of the Courts that the interim erosion that is the losses incurred by these railroads in continuing service prior to the final transferred date might amount to a taking in the Fifth Amendment since they thought that taking may have occurred or may soon occur, at least there was a possibility and therefore, that issue of interim erosion is right for adjudication.

The Court therefore enjoined the rail association from acting under Section 304 (f) of the Rail Act, to prohibit any reduction of service that is requested and that maybe determined by a Court to be necessary to prevent an unconstitutional taking of property.

Third, the Court enjoined the enforcement of Section 20 (b), which requires the dismissal of the reorganization proceeding under certain circumstances that stage of the case has passed and I think that ruling has now essentially become irrelevant.

Potter Stewart:

Although, you the federal parties did appeal that, didn’t they?

Robert H. Bork:

They did appeal in the Special Court has held that the Act was fair and equitable, so we are passed the stage at which a dismissal of a reorganization pursuant to 207 (b) is a possibility.

Potter Stewart:

Let say, what’s — why was the point of that provision of the statute making that providing for dismissal of the 77?

Robert H. Bork:

That is not entirely clear to me that particular point of dismissing the reorganization in the event that this Act did not provide a fair and equitable process.

Potter Stewart:

Its kind of — kind of a non-secretor or something —

Robert H. Bork:

Perhaps the Court —

Potter Stewart:

What one wonders about is its purposes, is there any legislative history showing what the reasons wants to do it —

Robert H. Bork:

There is Justice — I do not have it.

Perhaps, Mr. Cutler maybe able to answer the question of that, but in any event, I think 207 (b) is effectively behind this because no such dismissals occurred and under the ruling of Special Court would not as –.

Finally, the Court without particularly stating any reasons enjoined the associations from certifying a final system plan for judicial review under the provisions of Section 209 (c).

Now, this injunction against certifying a final system plan to the Special Court respectively prevents the consummation of the congressional plan or creating this new Conrail and that means in effect that the statute is at that stage understands still and cannot under going to affect.

Now, there have been many contentions here and I think for most of them perhaps rely upon the briefs.

The briefs have been perhaps some 10 to 12 inches thick.

But I wish to say at the outset that after further analysis since we have submitted our briefs and after considering the Special Court opinion, we have modified the position taken in our briefs.

We now think that this appeal turns almost entirely upon the Tucker Act question.

That was the — of person’s whose property is taken to go into the Court of Claims to get compensation.

Byron R. White:

I take it then you think it — absolutely essential with that issue be decided?

Robert H. Bork:

I do, Mr. Justice White.

Potter Stewart:

Would that means that you in effect concede constitutional invalidity of the statute and the absence of that remedy?

Robert H. Bork:

In effect, we say Mr. Justice Stewart, that we do not think there will be an unconstitutional role and I think the Special Court is quite persuasive about the unlikelihood of a interim or role amounting to the Constitution I think.

We also don’t — but we also think that the Conrail is likely to be a financially viable for railroad and that there will be no unconstitutional taking at the final transfer.

But we must conceive that we can give no absolute guarantee on either of those voice and there —

Potter Stewart:

In the absence of the Tucker Act remedy in the event of such unconstitutional taking then —

Robert H. Bork:

Yes and I would not put at Mr. Justice Stewart that the Act would then become unconstitutional at large.

Robert H. Bork:

I think a better result would be to continue the injunctions at the 304 (f) and as to 303, the final transfer provisions.

So, that Congress could then if there were no Tucker Act remedy available.

Congress could then consider whether it wanted to provide the Tucker Act remedy or whether it wanted in some other way to deal with the statute in order to keep this reorganization plan which is really our only Government on —

Potter Stewart:

You mean, what?

Robert H. Bork:

The timetable.

I beg your pardon.

Potter Stewart:

I didn’t hear what you just said.

Robert H. Bork:

Well, I was referring to the enormous complexity —

Potter Stewart:

Oh, I did not catch your word.

Robert H. Bork:

And heroic effort.

Potter Stewart:

I beg your pardon.

William O. Douglas:

Is this change in position and traceable for the fact that this is a corporation as a federal instrumentally?

Robert H. Bork:

No.

William O. Douglas:

In your judgment?

Robert H. Bork:

Mr. Justice Douglas, it is not — it is simply that — oh, you mean the fact that the change of position is not even that.

No, because we thought that there before we admitted the possibility, the conceptual possibility of a taking.

We — what we thought it factually so unlikely is not to be in the case given the financial situation.

William O. Douglas:

Well, do you agree that with the three-judge court that the question of whether the transfer of the properties as such was a taking that is not right?

Robert H. Bork:

The question —

Byron R. White:

Or you are focusing wholly on the erosion —

Robert H. Bork:

No, I am not.

Byron R. White:

Or in terms of the necessity to decide the Tucker Act question?

Robert H. Bork:

No, I am not Mr. Justice White.

I think that we cannot tell know whether or not the final transfer will effect — will in fact affect a taking.

Byron R. White:

And that is true even without — even assuming no erosion?

Robert H. Bork:

That is true.

Byron R. White:

So, the three-judge court you are suggesting is wrong and that — in the saying that wasn’t right?

Robert H. Bork:

I want to make a distinction between this.

The three-judge court is right to the extent it says, “We cannot tell now whether or not there will in fact, would be a taking at the final transfer.”

However, I think we can tell now —

Byron R. White:

And you say that same is true with erosion, with respect to erosion?

Robert H. Bork:

We cannot tell for a fact that there will be erosion.

However, we can tell that it is.

We cannot guarantee there will not be a taking and I think it would be legally difficult to say that, creditors must gamble and go down to the wire with no possibility of compensation, if they loose, and discover at the final — after the final transfer date that there had been a taking, and if no compensation was available.

Byron R. White:

In a sense, this is sort of an — the absence of an issue that is justiceable at this time or right this issue isn’t it?

Because, you simply cannot ascertain as of today whether or not there will be an unconstitutional erosion of whether or not the Conrail securities will be adequate?

Robert H. Bork:

That is correct.

That issue is not right.

However, it is I think not premature to decide that that possibility exists.

Byron R. White:

Yes.

Robert H. Bork:

And that therefore, the Tucker Act issue is a criminal issue in this case.

Byron R. White:

Yes.

William H. Rehnquist:

Mr. Bork, what if the govern — what if Congress pass a law saying that, five years from now, we are going to build such and such reclamation project and describe the lands that we are going to be taking and said that instead of paying these people for the lands and money, we’re going to pay them in Conrail stock.

Could they come in now rather than five years and get some sort of an adjudication as to the constitutionality of that plan?

Robert H. Bork:

Only if one assumes that the Conrail stock, if one gets reason to know that the Conrail stock would in fact be an adequate compensation from what they gave up.

I would think they could not.

William H. Rehnquist:

But wouldn’t a typical answer this court be that there will be time enough to decide that when the Government actually takes your property?

Robert H. Bork:

Well I think not Mr. Justice Rehnquist.

If there was also an distinction that there was no Tucker Act remedy available, so that deciding it then will do no good because there is no way you be compensated.

Byron R. White:

You may end up never thinking about it.

Robert H. Bork:

That is correct, but here, it is quite likely that–

Byron R. White:

But what’s the — what is the compulsion beside at them but when the property is taken under any, then it is just —

Robert H. Bork:

Oh, well in this case.

This Act provides that this property will be transferred from the rail estates to this Conrail to other profitable railroads to Amtrak, to state and local transportation authorities.

And then, some years will passed while we litigate the issue of whether or what those rail estates got back was adequate compensation.

Should it prove not to be adequate compensation?

At that point, there is now way this — there maybe no way these creditors can be made whole.

Warren E. Burger:

Well, are you suggesting Mr. Solicitor General, that if the worst happens.

If the worst happens, that three or four or five years from now, there is no judicial remedy if it where then judicially determined that there had been a taking and that it was uncompensated or inadequately compensated?

Robert H. Bork:

If Section 303 of this Act, Mr. Chief Justice, does not turnout to provide adequate compensation and if it should turnout that they have no Tucker Act remedy available, there would have been an uncompensated taking in violation of the Fifth Amendment.

Warren E. Burger:

And could there be a judicial remedy for that when that point was reached?

Robert H. Bork:

No.

There could not because the Section 303 specifically limits the Special Court in what it can do and it can add nothing to the benefits provided by the Act, the stock and securities of Conrail, and a deficiency judgment.

Warren E. Burger:

Do you think that would have something to do with the appeal ability provisions, the review ability of the Special Courts?

Robert H. Bork:

Well, the Act specifically provides that that evaluation decision is appealable to this Court.

There is no problem about appealability of that.

Potter Stewart:

But again, we can’t on appeal, we couldn’t appropriate money.

Robert H. Bork:

That’s quite true, Mr. Justice Stewart.

Potter Stewart:

My Brother Rehnquist question really should be a — to be an analog, I should suppose a legislation passed by Congress that would definitely appropriate certain property and say that the payment for this property will be ex-shares of Conrail stock and that there will be no Tucker Act remedy, no other thing given for the property and that is the analog that you have —

Robert H. Bork:

That’s quite right.

William H. Rehnquist:

But if that were the — supposing following up my Brother Stewart’s question.

Why couldn’t the presumed victims or non-beneficiaries if you want to call it that up, the provision.

If they can go into a three-judge District Court now and seek injunction of the enforced of that.

Why can’t they also wait until the properties actually taken and go into a three-judge District Court?

Robert H. Bork:

Because Mr. Stewart is in fact raising the analogy of a statute which said, “In the end of five years, we will flip a coin, if it is heads, you get paid off in full, if it is tails, you get nothing, if you get nothing, there is no Tucker Act remedy and you are just out of your property.”

William H. Rehnquist:

Okay, and the question is whether —

Robert H. Bork:

If you wait —

William H. Rehnquist:

Whether you must wait under that statute and go in the — until your property is taken and go in to a three-judge District Court and then join our constitutional or whether you can do it five years in advance.

Robert H. Bork:

Well, Mr. Justice Rehnquist, it would seem to me its trifle it adds with a jurisprudence to tell a man that there is a 50/50 chance his property will be taken under the statute and that if it is, he will have no remedy and he may not try to enjoin the statute in advance, but must go forward and take his 50/50 chance.

William H. Rehnquist:

Well, I can conceive of a statute which was totally it adds with our jurisprudence.

But if it doesn’t go into effect till five years from now.

That does not mean you can come to Court now and enjoin its operation.

Robert H. Bork:

Well, the statute is in effect now and the mechanism leading toward this result is in full swing, and if these parties, I hate to be making there case, but if these parties has to wait until that date, they are without remedy, and I do not think that that –.

William H. Rehnquist:

If they had a three-judge District Court remedy now.

Why don’t they — why won’t they have it then?

Robert H. Bork:

Because the three-judge District Court remedy then, will do them no good.

William H. Rehnquist:

Why can’t they enjoin the taking at that time?

Robert H. Bork:

Oh, I mean why won’t we wait on separate — Mr. Justice Rehnquist, we will be in no better position at that time to know anything about this case.

William H. Rehnquist:

But at least the taking will be much more immanent?

Robert H. Bork:

The taking will be immanent, but we will not know whether the compensation to be paid is adequate or not because this statute provides that the property will be taken before evaluation proceedings begin and it will be some years after, this is enormously complex evaluation proceedings or at least lengthy one.

Robert H. Bork:

It will be some years after the taking occurs before anybody knows whether they are to be compensated.

Byron R. White:

Well, that’s, that’s — its going to be years, whether is that right but it’s not?

Robert H. Bork:

That’s true, but at least, we will know with the Tucker Act that the compensation will be there.

Byron R. White:

So, you’ll be happy while you’re waiting?

Robert H. Bork:

They may not feel happy while they are waiting Mr. Justice White, but their constitutional rights will not have been infringed.

We should do something some degree —

Byron R. White:

Would be and won’t be infringed either if they get paid enough for that designed in Tucker Act.

Robert H. Bork:

That is true, but can’t be sure they will.

Byron R. White:

I’m sure they wont.

I guess it is the question when — we are just arguing as my Brother Powell said about winning something right the decision.

Robert H. Bork:

Yes, but I think we are, but I think that’s -I think the right in this issue will not change in this case until it is too late.

Byron R. White:

It will change for you.

Robert H. Bork:

I’ve always thought that Tucker Act was right.

We never argued that.

I do not think the question of whether a taking will in fact occur can be known now and it isn’t right.

But the possibility that will occur is clearly present and therefore it seems to me the Tucker Act issue is clearly right.

The — if the Tucker Act has been limited so that there can be no compensation either for interim erosion or interim erosion.

Then, we would agree that if the injunction under — about Section 304 which prevents the rail association from denying abandonments — when a taking point has occurred should either be made in effect or preferably the statute should be read to deny the rail association.

The power to refuse abandonments at a point when the Courts hold an unconstitutional take is occurring.

And if the Tucker Act has been limited, we agree that an injunction against certification of a final system plan to the Special Court should remain in effect.

I think that’s preferable to striking down the entire Rail Act on the theory of unconstitutionality because leaving those injunctions in effect, would give Congress a time to reconsider the Tucker Act issue and time to reconsider the possibility of making changes in the Rail Act to obviate these difficulties.

Because this is an enormous effort by the Congress and I think that ought not be tossed aside wholesale without giving Congress time.

Warren E. Burger:

I suppose you would agree that the issue of constitutionality can’t be resolved here with any of you to even the probability that Congress would remedy any defects in the future.

Robert H. Bork:

No, Mr. Justice — Mr. Chief Justice, but I think these two injunctions or reading the statute in those ways would effectively protect the creditor interest against an unconstitutional taking.

And also, give Congress the option to reconsider what it wishes to do.

But, we agree in the taking as unlikely in the constitutional sense and having made those concessions and put myself on the wrong side counsel table for this period of time.

I now would likely to address our case.

We think the judgment of three-judge court ought to be reversed.

Nonetheless, because we think it is perfectly plain that the Tucker Act remedy is available and was not repealed by the Rail Act.

There is therefore, no basis for these injunctions requiring abandonments when erosion reaches the point of a taking or for injunction against certification of the final system plan.

Robert H. Bork:

The Tucker Act provides impertinent part the Court of Claims shall have jurisdiction to render judgment upon any claim against the United States founded upon just Constitution.

Now, that’s a general branch of jurisdiction in the Court of Claims and it is available for any taking under the Fifth Amendment, unless it is withdrawn by Congress.

The three-judge District Court, we think, misstated the issue as whether Congress intended to grant a Tucker Act remedy.

I don’t think Congress did deliberately intend to grant a Tucker Act remedy in the Rail Act.

The Special Court correctly opposed the issue as whether Congress in the Rail Act intentionally barred the Tucker Act remedy.

The rule is that the Tucker Act is available for a taking into the Constitution unless it is removed, not unless it is start off and granted.

The United States cause the — is a case for the taking of an easement over a chicken farm by a low flying aircraft.

It is a case where Congress did not intend a taking and a case where Congress did not intend compensation.

Those factors were irrelevant.

The Tucker Act was available because a taking had occurred by lawful authorized action of the Government.

It seems to be perfectly plain therefore, that these appellees have a Tucker Act remedy unless the Rail Act specifically withdraws it.

There is no explicit limitation of the Tucker Act anywhere in this enormously detailed 39 page rendered statute.

The Tucker Act is not even mentioned in the statute and that would seem surely be very oversight if repeal was intended.

I think, we must therefore examine the act to see if there is a clearly implied repeal.And in doing so, we have employed two canons of construction.

Now, appellee’s counsels have had some fun with the use of these canons of construction as I would by their side of the case.

But these are canons long known to the law and they binding up on Congress in drafting statute because that’s how they know how the statute will be interpreted as they are indispensable to Courts in interpreting statutes.

I sight just two.

The first is that repeals by implication are not favored in our law.

The second is that when there are two admissible constructions of a statute, that construction which will save the constitutionality in the statute is favored over that which condemns the Act.

There’s no doubt that the opponents of the Rail Act here are asking for a partial repeal of the Tucker Act by implication.

They also urge reconstruction of the Rail Act that they say does result in its unconstitutionality.

They have their own canon of construction and they are precisely the opposite of those that the law recognizes.

Now the strength of this presumption against complied repeals, I think it’s much greater in the Tucker Act area than perhaps it is elsewhere and that shown I think by two cases.

I would like to mention.

The first is Hurley against Kincaid and the second is Lynch against United States.

Although, decisions of this Court retain their vitality as I think they do.

Then, I think they are completely dispositive of the Tucker Act question here.

The Special Court in Judge Friendly’s opinion said that Hurley against Kincaid did not support our position as strongly as we had urged, but it went on the note that there was case called Lynch, which we had not sited which did support our position.

We oblige as we accept the gift of Lynch but we continue to believe that Hurley against Kincaid has pertinence here as well.

In that case, the point of Kincaid conceded to enjoin the construction of flood way that threatened his land.

Robert H. Bork:

In Section 3 of the Flood Control Act under which the Government was proceeding stated that, no liability of any kind shall attach to rest upon the United States for any damage from replied floods.

Section 4 of the Act provided for advance compensation for the taking of land by condemnation of necessary lands and easements.

Now, the parties advance as here a wide variety of factual legal contentions.

But the Supreme Court held simply that the injunction should not issue because the event that taking occurred, the complainant can recover just compensation under the Tucker Act in compensation of the law, an enactment law.

Hurley against Kincaid now stands at a minimum where two prepositions that a statutory program may not be enjoined in anticipation of a taking where the Tucker Act is available.

And this is a case I suppose that goes to the question of whether the rightness of a tucker issue is clear.

A statutory program may not be enjoined in anticipation of a taking where a Tucker Act remedy is available.

And secondly, that the repeal of the Tucker Act is not to be implied from the presence in the program statute of an alternative method of compensating those whose property is taken.

These prepositions are highly relevant here.

The — those who seek to enjoin the operation of the Rail Act argued that the implied repeal of the Tucker Act is to be found in Section 303 of the Rail Act.

Among other places, tried Section 303 provides modes of compensating the bankrupt estates or rail properties transferred under the final system plan.

And they say that, the existence in the Rail Act of alternative modes of compensation implies the absence of any other form of compensation.

I think that would be a thin argument for repeal of the Tucker Act at best.

The Court has asked to find an imply appeal for the purpose of destroying the constitutionality of the very statute to which the repeal is attributed.

So far as we know, no case has ever found an implied repeal in order to impute to the statute itself an intention to commit suicide.

If there is any doubt on this issue, I think Hurley against Kincaid lays into rest.

The Flood Control Act provided its own means of property acquisition and compensation for taking to find an implied repeal in Hurley against Kincaid would be much easier because all that would have happen would have been an injunction would have been issue and slow the progress of the work until a condemnation occur.

So, that only inconvenience was involved in finding an implied repeal there.

Here, to find an implied repeal is to find the Act unconstitutional in major aspects and bring the program to a complete all.

Lynch against United States, the case found by Judge Friendly reinforces rather than replaces Kincaid in our argument.

In that case, actions were brought for proceeds of Government insurance policies.

The insured in each case has become totally disabled while the policies were enforced.

Under the policies terms in such circumstances, compensation must be given to pay the premiums of the policies.

The compensation was not given and the insurance died.

United States demurred to this lawsuit on the ground that Section 7 of the Economy Act, Section 17 of the Economy Act of 1933 stated specifically, all laws granting or pertaining to yearly renewable term insurance are hereby repealed, a much more explicit and clear repealer than anything to found in this case.

This Supreme Court held that as applied to contract rights, that repealer was a taking of property forbidden by the Fifth Amendment.

But the Congress of course, did have the power to withdraw its consent to suit against United States.

And the Government argued here that it was obvious that when Congress took away the right, it should be presumed to have contended to takeaway the remedy which it seems to be a rather plausible argument.

Nevertheless, this Court refused to read the statute is taking away the remedy in the absence of a multi-explicit direction.

It said, “There is no separate provision in Section 17 dealing with the remedy and it does not appear that Congress wish to deny the remedy, if the repeal of the contractual right was held void under the Fifth Amendment.

Robert H. Bork:

Now Judge Friendly points out the exact application of this reasoning to our case by saying, “Translated into the terms of this case.

There is no separate provision in the Rail Reorganization Act dealing with the Tucker Act remedy and it does not appear that Congress wished deny this remedy, if the Act should be held to involve a possible taking that would require the award of a just compensation under the Fifth Amendment.

So Lynch demonstrates, I think the Court is not willing to find the repeal of the Tucker Act remedy unless Congress specifically states that what — that’s what wants a much stronger indication in the Economy Act than there is here.

Now, these conclusions from Hurley and Lynch which I think are dispositive of this case are strengthened by examining the Rail Act, its text, its structure, its legislative history, and finally views now pressed upon us by the compress it upon you by some members of the House of Representatives.

The tax to the Rail Act I submit yields only one implausible explanation.

The Tucker Act is not mentioned and yet, there are 13 provisions in the Rail Act which deal with the relationship of other statutes to the Rail Act.

Congress went through quite specifically repealing in part, modifying in part, and dealing with the relationships of other statutes.

In 13 places and I refer you to Section 601, which deals with major statutes and specifically entitle a relationship to other statutes.

And it seems quite peculiar to say that, Congress took meticulous care to spell out the repeal of advertising requirements having to do with the entry of Government contracts.

But did not think it was worth mentioning that it was contemplating the uncompensated taking of property.

That is not just improper statutory construction.

I think it is bizarre statutory construction.

If we look to the structure of the Act, we see the same thing.

Section 304 (f) shows that very few abandonments are to be permitted.

But eventhough there are steady losses because these lines must be preserved for inclusion in the final system plan.

Byron R. White:

Is that the same sort of an argument that we would use if you were asked why the three-judge court had any power at all in this case?

Robert H. Bork:

Well, I’m not quite sure about either the same kind of argument I would use.

I think the three-judge — his referring to the fact that —

Byron R. White:

Well, that the Special Court apparently thought it had and perhaps it does.

How to consider the same questions that we are talking about now.

And perhaps Congress intended that to be the exclusive avenue for review point?

Robert H. Bork:

It made that question of Congress’ intent there is unclear, but I think there are separate reasons for saying that the three-judge District Court did have jurisdiction.

And therefore, that this Court has jurisdiction.

I’ll be willing to address myself to that — I beg your pardon?

Byron R. White:

The issue isn’t raised by anyone, case is it?

Robert H. Bork:

Not that I know.

Byron R. White:

How do you classify that?

Robert H. Bork:

In order to find a repeal of the Tucker Act, we have to be asked to belief that the Congress knowingly insisted upon continued operations knew that they might cause losses and for that reason repeal the Tucker Act because it did not want to compensate.

The same thing is true of the final system, final transfer provisions in Section 303.

We are asked to believe that Congress knowingly required to transfer and knew might conceivably fall short of just compensation and yet intended that that should occur not to compensate.

Robert H. Bork:

Indeed, there is no reason here to impute any implied repeal of the Tucker Act to Congress except to impute the Congress a desire not to pay as it turned out that there was no constitutional taking and I do not think that kind of intent ever ought to be imputed to Congress, unless Congress makes that imputation unavoidable by specific language.

Maybe that Congress never even thought about the Tucker Act.

I think that’s quite likely, but if it mandated a course of behavior that results in the taking that is enough to make the Tucker Act remedy available.

I won’t follow the legislative history because the legislative history shows no more than that Congress was not thinking about the Tucker Act and Congress thought that Section 303 would provide adequate compensation, but if they are wrong, we think the Tucker Act is available.

Now, I want to spend a moment addressing myself because there is nothing left in this case it seems to me in Tucker Act point except, we are offered the views of a number of Congressmen as to what they intended when they ask the Tucker Act.

And Congressman Brooke Adams will speak for them here.

I have no doubt whatever sincerity of their views and I have no doubt whatever is to the accuracy of their statement of their intention.

But I object to their consideration of statement of intention on the grounds that they didn’t wait when worker radical reconstruction in the constitutional relationship between Congress and this Court.

This Court discerns like it have been intended in the statute were debates from the records.

It should not look to what individual Congress say they intended afterwards when those intentions were never expressed to the Senate, to the House that adopted the bill or to the President who signed in the law.

We do not know what the results would have been if the Tucker Act issue have been explored in Congress or relayed before the President.

But even if there were a brief here from a majority of both houses, my argument would be the same.

The Constitution provides for a legislative process and perhaps, if the minority — if these views and issues had been aired, perhaps the minority would have convinced the others on this issue.

And it is simply wrong to take views expressed afterwards which never went though the legislative process and visit by the Constitution.

If a present statement of prior legislative intent were given effect, I think we might have to have a different kind of trial when we went into legislative history.

We might have to examine or take affidavits from Congressman as to what they thought about issues, in fact when they voted on the law.

As to many statutes, that would be impossible.

I suggest to that in all of it would be improper.

We are becoming getting dangerously close at that stage to the method of statutory analysis which was rejected by this Court and by Chief Justice Marshall in Fletcher against Craig and he answer when broad case.

Now, I make this argument solely out of concern for the law and the proper processes of interpreting statutes.

If I am wrong, if my submission is rejected, I would be sorry for the law but I would quite glad for my position in this case because I think Congressman Adams’ brief.

If we are to consider his statement of what Congress intended supports the position I have been arguing.

He said on page 17, The Tucker Act was not considered by the Congress in creating the Rail Act.

It is a jurisdictional statute often used to settle private claims that was neither repealed nor engrafted onto the Act to create a possible deficiency judgment against the Government.

That seems to me, if you consider this expose fact those statements of legislative intent to be precisely in line with our contention that when Congress doesn’t consider the Tucker Act, but does something that affects a taking that Tucker Act remains unavailable remedy.

Now, Congressman Adams and others expressed a fear that we are and they would giving the rail estates the key to the treasury.

There’s no basis for that concern.

That Congress and not the Department of Justice controls the first and should this Court agree that the Tucker Act remedy remains available here.

Congress may have wishes the following date repeal the Tucker Act that it applies to this case or make any other amendments to the Rail Act that it wishes.

The final disposition of this entire matter is for Congress, whichever way this case goes, are we talking is to discern the legal situation as Congress has left it so far.

Robert H. Bork:

Now, I would like to close at hypothetical, I think illustrates the strength of our position.

Suppose our position were emerged in the Tucker Act issue because but suppose this litigation did not occur now.

But we went down the road for five years and discover that they have been occurred.

These creditors sue us in the Court of Claims and the Government comes in and demurs on the grounds that the Rail Act has impliedly repealed the Tucker Act.

It is true we have taken your property but then we are terribly sorry, but there is nothing can be done about it because we can find in an implied repeal of the Tucker Act in the Rail Act.

I submit to you that that argument wouldn’t stand a chance in the Court of Claims or in this Court.

The cases were not implied repeal under those circumstances would be seen to be artificial then unjust and fully unpersuasive.

But the legal issues are precisely the same in that case as they are in this case and we submit that they should be decided the same way.

Warren E. Burger:

Thank you, Mr. Solicitor General.

Mr. Cutler.

Mr. Chief Justice and may it please the Court.

The New Haven Trustee, the cross appellant attacks the procedures of the Rail Act for the final transfers of properties pursuant to the final system plan and he argues that these procedures are unconstitutional under the Fifth Amendment.

In our brief as appellee, we argue that the court below correctly rejected this attack as premature.

But now that the Special Court has rejected the same attack on its merits and the statute purports to barred direct review of that decision, we agree with the Solicitor General and with Mr. Horsky who will argue the point in more detail.

That it would be inappropriate exercise of these Court’s discretion to reach and decide these issues on this appeal.

As to the Tucker Act, it seems to us it is really an academic point anyway because if you rich the Tucker Act issues on erosion.

Whatever you decide as to that will necessarily, we believe, decide the availability of the Tucker Act as to the final transfers.

While it’s quite true that the other issues that Mr. Justice White suggested could be raised at some later date in other three-judge court proceeding.

Some of the damage would already have been done.

The Congress and the Bankruptcy Courts are now preceding to carryout their responsibilities in resolving the eastern rail prices under the tight timetables of the Act.

There would be a critical waste of time and resources it now seems to us and a possible danger of large claims against the United States for whatever erosion, the unconstitutional limits might have occurred in the interim.

If the final transfer provisions of this Act are later, some later date, held unconstitutional by this Court.

Now, the New Haven Trustee argues that these provisions are unconstitutional on numerous grounds of which I have time to take up only three.

The first is that, the Act requires the transfers to occur before the adequacy of the consideration is judicially bad.

While the resources provided by the Act to provide the consideration and their view maybe inadequate so that the constitutional minimum may never be received.

The provision for a transfer first and the for judicial evaluation later is the critical genius of the Rail Act in our view because in that way, Congress broke the procedural logjam for devising and approving a railroad reorganization plan that has plague the ICC and the judiciary for decades.

Some — a procedure that took so much time, some 15 years in the Missouri Pacific case that even if the solution could be evolved, it would no longer be relevant to the problem to which it was addressed.

But by this method of transfer first, Congress made it possible for the rail entity to start business within some two years after the passage of the Act for the railroad estates to be relieved of the so called “erosion burden” of providing rail service at that time and for the time consuming process of adjudicating evaluations and distributing proceeds, first to the rail estates, and then among the various creditor classes in each state could take its course after rather than before the new entity starts business.

A transfer first followed by evaluation judicially later was of course the last ditch procedure finally adopted by Judge Anderson in the New Haven cases.

And no one found constitutional fault in that procedure since inadequate judicial assurance of compensation was thought to be available from Penn Central.

Here, we say this much more solid assurance in the Rail Act and the Tucker Act.

If the Special Court cannot itself provide the constitutional minimum out of the over $2 billion of resources that are provided under this Act, inadequate remedy under the Tucker Act remains available for the reasons given by the Solicitor General and approved by Judge Friendly in his Special Court of opinion.

Now the New Haven Trustee, unlike his co-plaintiff, Connecticut General, concedes that the Rail Act did not bar a suit under the Tucker Act.

What he argues is that under the Youngstown case, the Steel Seizure case, a Tucker Act suit if he brought one or the rail estate brought one would not succeed on its merits because the statute requiring the transfers, the Rail Act in his view is unconstitutional.

But there can’t be any doubt that those required transfers first are precisely what Congress has authorized.

And if the right to sue under the Tucker Act is left intact by the Rail Act as the New Haven Trustee concedes, there are just no basis for calling the Rail Act itself unconstitutional and the transfers that it requires unauthorized.

Youngstown is very different as Judge Friendly points out at page 102 of his opinion because there, the President seizure of the steel plants had nothing authorized let alone commanded by the Congress.

The New Haven Trustee second point is that the Rail Act is not a valid exercise of the bankruptcy power but it is a condemnation wolf masquerading in bankruptcy sheep’s clothing.

He urges that the so called “cram down power”, previously upheld by this Court under Section 77, cannot constitutionally be invoked to cram down on all creditor classes as distinguished from only one or two.

But as the Rock Allen case suggest and as the Special Court rule, Section 77 does not exhaust the limits of the bankruptcy power.And there doesn’t seemed to be any constitutional reason why Congress cannot cram down still further, if it deems that this is the only way of assuring continued rail service by a viable private firm particularly whereas here in east, viability requires the consolidation into one new system of properties from several bankrupt railroads each with their own myriad classes of creditors.

So, long as the constitutional minimum consideration is assured, rail creditors have no constitutional right merely by withholding their consent to a plan to insist on condemnation and public ownership instead.

Third, the new Haven Trustee argues that Congress cannot constitutionally exercise its bankruptcy in commerce powers in combination.

So, as to require rail estates to accept the securities of the reorganized firm as part of this fair and equitable constitutional minimum and, if any balance is required to accept Government guaranteed user obligations, which are provided in this Act up to at least $500 million, and perhaps more, and other benefits under the Rail Act, and if still needed a claim under the Tucker Act itself.

He argues that if there is any possible need for Government compensation, then the entire transaction is a taking of property for public use and entitles the rail estates to payment entirely in cash.

But as the Special Court held, the Constitution we say does not bar Congress from exercising its powers in combination, so as to minimize the drain in the federal treasury.

Section 77, itself is an exercise of both the bankruptcy and the commerce powers.

As the Special Court put it, Congress is not required to steer the ship of state into the cellar of nationalization for cash or the cribbed these of a rail shutdown.

Congress can steer in between, if a viable reorganized entity with significant earning power can be created.

There’s no taking of property for public use to the extent that valuable securities of the new entity are given in exchange for the rail properties transfer.

After fair value of those properties is judicially determined to be less than the fair value of the securities is judicially is determined to be less than the fair value of the properties transfer.

And the transfer of the properties is still congressionally and judicially compelled, then there maybe a taking to the extent of the shortfall, but only to that extent.

At this point of course, we do not know whether there will be a shortfall, But if one is judicially determined, Congress has provided, as I said, at least $500 million of Government guaranteed securities for direct transfer to the rail estates to preserve the power to provide more and it is going to review this final system plan before it gets to Court, and it is also providing other benefits under the Act, and it is left, we say the Tucker Act remedy available for any balance.

I should take a moment on Mr. Justice Douglas’s question about Conrail as a federal instrumentality.

And we would say Mr. Justice Douglas that it is not, it is a private corporation and while it is true that so long as the majority of its debt has been advanced or guaranteed by the Government.

That a majority of the directors maybe named by the President.

Those directors will have the same duty as any other directors to all of the shareholders, namely these creditors in other States and the duty to make a profit.

Byron R. White:

Mr. Cutler, does the — do the obligations of the association that are issued to Conrail that maybe — and maybe issued to the railroads in exchange for their properties, do those obligations represent loans from the association of Conrail?

They do represent loans to the association Mr. Justice White, but the loans are within the discretion of use wherein the Congress when it approves the plan and they can be stock subordinated loans far behind the claims of these creditors.

Byron R. White:

But they would superior to any stock in if they serve it that Conrail issued to the railroad?

They would presumably have to be at least slightly superior to any stock that issued.

But of course Conrail is not confined to issuing stock.

It is of course able to issue debt securities which can be handed to these creditors secured by Williams on the very properties on which they now —

Byron R. White:

Well, do they extend them as the associations of securities are issued, then that the stock that has been issued is less valuable?

Not necessarily sir, because the obligations of user federally guaranteed $500 million of them can be turned over directly to the rail estates of course.

Byron R. White:

Without or without being assure or guaranteed?

There would be debt obligation from Conrail but it could be a 100-year debt at 2% as far as the statute goes.

Moreover, another $500 billion of those obligations could be turned over to Conrail for direct expenditure by Conrail to approve its properties in a way that would enhance the value of the entire estate and finally, a third $500 billion — million could be used to enable Amtrak to buy part of the northeast corner, which Conrail would have had in its hands and Conrail would receive that cash.

As in closing, I just want to say that the real issue here is whether Congress can combine these powers to reduce the drain on the federal treasury.

That’s what Congress has tried to do in order to make payment at least in part in securities of the reorganized entity.

While the creditors of course, are trying to force nationalization in which case, they believe although, we would dispute it that they would be entitled not only to cash but to some higher value than either the growing concern value of these securities or liquidation value if that’s more.

And that’s why you find the Government parties arguing as some think contrary to their interest that this statute is constitutional because the Tucker Act remedy is available.

And why the creditors arguing, obviously contrary to their interest that it is unconstitutional because no Tucker Act remedy is available for them.

Thank you very much.

Warren E. Burger:

Thank you, Mr. Cutler.

Mr. Adams.

Brockman Adams:

Thank you Mr. Chief Justice, may I please the Court.

The reason that I am here this morning is that the primary intent of this statute was contrary to some of the statements of Government counsel, not ever to be a taking.

The properties are never taken from the individuals.

But instead, we have tried logically to extend the powers of the reorganization statute is set forth and interpreted by this Court in the New Haven Inclusion cases.

The whole history of this statute was for us to try to create a buyer where none existed.

Make an offer to these reorganization courts, give all of the stock in exchange for the assets that are transferred.

So, that the original creditors are crammed down, yes.

But they receive full interest in this corporation, plus $2 billion worth of Government advantages.

And when they are finished with this and the Court values at some later time.

If there has been a mistake in the manner in which the process operated, then these parties can sue as Justice White was asking in his question, “Is there a right to sue for some failure, maybe we hold the party too long,” then, they could.

But the two primary issues are these.

How long can hold these parties?

That was what concerned the lower court in this case.

We think they can be held during this limited period of time.

And if they can be held during that period of time and you adjust what they received in terms of stock or you set a different date for transfer.

Brockman Adams:

Then, their erosion problems are taken care off in that fashion.

The second problem however and the one we are concerned about with the so called “Tucker Act argument,” which I think is a rehearing is whether or not this statute in its process provides for a deficiency judgment against the United States.

And our problem very simply in Congress and it is stated in our brief in the appendix and it runs through all of the other briefs.

This was discussed great length in Congress and the Congress wanted to go only so far in granting funds to reorganize this process, and they did that.

Now, as far as the cost the case is concerned, Hurley versus Kincaid and the other Tucker Act cases, we did not try to repeal the Fifth Amendment or certainly repeal the Tucker Act jurisdictional statement.

That issue will depend upon the facts after this process is over whether an individual party has been injured by a lawful act of the United States.

But the key issue before the Court this morning is, “Is this process lawful?”

Can we use the reorganization process?

Can we under the logical extension of this Court’s ruling in the Denver Rio Grand case and in the New Haven Inclusion cases go through this process with this people?

We think that the Congress did this properly and we hope this Court will hold that the statute — its process is constitutional, that the cram down of stock for assets is valid.

Byron R. White:

And you would say that they shouldn’t reach the Tucker Act matter or should say that we should reach it and say, it is unavailable?

Brockman Adams:

I think you should that if the Tucker Act requires a deficiency judgment as part of this process to make it constitutional.

Then, we have reached the Tucker Act and this Act does not provide that.

If you decide however, that there maybe some place down the line and the lawful process a mistake, then you reach and say, the Tucker Act case will have to be decided, when and if some party can decide that they have created a case on the merits.

Now, that decision is what we consider —

Byron R. White:

So, you do anticipate a situation, where the Tucker Act would be available?

Brockman Adams:

Oh, yes.

Let us say for example that after this is all over and this is the three-judge court’s problem.

That if a party comes in and says, “You held us beyond the constitutional limit on erosion and at that point, we are of the opinion that it went just too long, It was unreasonable.”

But that is a specific individual case at that point.

Byron R. White:

So, the Tucker Act you would think would be available message?

Brockman Adams:

And of course, we did not repeal the matter.

I thank the Court.

Warren E. Burger:

Thank you, Mr. Adams.

Mr. Horsky

Charles A. Horsky:

Mr. Chief Justice, may it please the Court.

I appear as the Solicitor General has stated for the trustees of the property of the Penn Central Transportation Company, the debtor.

We are here before the Court as appellants because we agree that the Act with a minor exception that all come to is valid and we disagree basically, with the appellees on that issue.

We are closer I think today this morning to agreeing with the position of the Solicitor General and the Government parties that were a week ago.

But there may still be some differences and in some respects, we agree with the appellees.

Byron R. White:

Who’s make the —

Charles A. Horsky:

Let me explain.

Byron R. White:

Who’s make the move, Mr. Horsky?

Charles A. Horsky:

The Solicitor General.

The reply brief filed a few days ago in which the Solicitor General took the position that the issues were available and before the Court has made vast difference in our position.

First, let me say a few things in general.

The trustees believe that the basic concept of this Act is a sound concept.

As the Solicitor General has said, the rail crisis at the northeast railroads created a situation which was clearly beyond the power of the trustees or the reorganization courts or Section 77 to resolve.

The compulsory restructuring of all of these bankrupt railroads in the northeast under the Act is certainly a potential solution to a very serious natural problem.

There are good many imponderables in the Act it will have to be resolved in the months and then, the years that are coming down the road.

And the remains as I think, everyone would concede they have possibility that the quite disparate goals that the Act requires.

That is, that there would be a profitable Conrail created and that it would be adequate to serve the rail needs of the northeast are not both realizable.

But the effort certainly is worthwhile and should be continued.

Second and particularly important is the agreement we have now with the Solicitor General that issue before the Court as to the constitutionality of the Act is properly before the Court and should be resolved.

Let me take the –it should be resolved, part of it first because I cannot overestimate, cannot overstate the importance of having a decision in these cases on the constitutional questions, unless and until this Court decides whether the process — whether this key is constitutional.

The plain fact is that the situation, the rail situation in the northeast is going to get worse.

On the Penn Central alone, there are thousands of miles of track that are so badly in need of repair, the trains can move over them only at reduced speeds, 10 miles an hour.

And there are many thousands of cars and many thousands of locomotives that are not usable because there is no money to repair them.

The Act in Section 215 reports to provide a $150 million of temporary money for improvement while this planning process is going on.

As a practical matter, that $150 million will continue to be unavailable until the constitutional doubts about the Act have been resolved.

Moreover and particularly important from the point of view of my clients, the trustees, they themselves are unable so long as constitutional doubts exist.

To know how they should use the limited cash resources that they have in connection with the operation and maintenance repair of this railroad.

If the estate, if the Penn Central State has no reasonable chance of reasonable prospect of compensation for interim erosion.

Common prudence on the part of the trustees would suggest that the cash they do have be used at the maximum extent possible to prevent the continuing approval of the administration claim such as taxes.

The decision on the constitutional issue will really relive both the public and the trustees of the burden of the present situation.

I agree fully with what Mr. Cutler has said about it, but I would like to emphasize it in space, it’s terribly important.

Third, we agree with the Solicitor General as to what the constitutional issue is, “Is the Tucker Act available?”

Now I appreciate, but the fact that we all say that you want to decide the case, it doesn’t mean that you will.

You’ve got to persuaded that the issue is right for decision and that it is appropriate that you decide it now.

I think it is and let me say a few words briefly on that.

Charles A. Horsky:

The areas the Solicitor General has indicated to you two quite discreet Fifth Amendment problems.

One is whether, the compensation available under the Act where the rail properties which will be compelled, which the Penn Central will be compelled to convey to Conrail will be adequate.

The second is whether, there will be because of the extent the length of time that the planning process takes an unconstitutional taking by way of interim erosion of the Penn Central state because it will continue to operate as it does now at huge, huge annual losses.

On the first of these issues, the court below said the issue was premature.

We’ve set out in our brief, pages 48 to 54, the reasons why we think the lower court was in error as to its reasons for believing premature and the Government parties have adopted our argument as theirs and their replied brief.

But without going into the details of that argument, let me emphasize this point.

Under the doctrines as I understand, cases like the Ashwander case with Poe and Ullman, this issue is right for decision.

There is not any doubt but the — there will be under this statute a conveyance of properties from Penn Central estate to Conrail.

There was a suggestion, which hasn’t been mentioned here, but perhaps would just confuse you.

But there has — was a suggestion that you could litigate this question before the Special Court, just before the transfer took place after the plan had been finally approved.

The Special Court said in its opinion that that was not possible in the time that they have, which might be as little as 10 days.

They certainly couldn’t under to decide whether or not there was constitutional consideration provided in the plan for the properties that would be conveyed.

The fact is that this conveyance is going to happen and that there is no other Court, no other procedure by which we can find out whether or not that the process is constitutional, whether the Tucker Act apply.

Now the other point, which I think is even more important, it — but perhaps sounds a little bit like blackmail, but it is important than the less.

The Special Court has ruled as you will find if you read its opinion, that the mandatory conveyance features, what I am talking about are constitutional, not standing alone but only because there is a Tucker Act remedy.

Consequently, if this Court and it indicated that if there wasn’t a Tucker Act remedy, it would be forced to operate under the statute to remove the estates from the operation of the Act, because it would find that the process of the act was not fair and equitable.

Consequently, if this Court does not provide the assurance — let me go back.

The Special Court also said, “It was holding its final decision in advance pending the decision of this Court as it was entirely proper Court to do.”

But if this Court therefore does not provide the assurance that the Tucker Act remedy is available.

The Special Court has very strongly intimated that what it will do, will be to decide that the process of the Act is not fair and equitable.

And that will therefore, discharge all the railroads including Penn Central from the operation of the Act and the act will abort.

So, for practical reasons and I think for very good legal reasons, we strongly urge that you come to the question of the Tucker Act and decide it.

Now, I do not think you have to get into as much trouble with respect to interim erosion problem.

That’s the second of the problems that are raised by the Fifth Amendment.

The court below reached it on that basis by holding that there was such likelihood that that there would be a point reached or the continued compulsory operation of the estate at loss would be unconstitutional that they ought to decide whether it was appropriate to do that and whether there was Tucker Act remedy.

Now, the conclusion of the court is to whether that s likely is subject to vat amount of writing in these briefs.

There’s controversy over, what constitutes erosion.

There is controversy over, how you measure erosion.

There is controversy over, what the various measurement shows as to what the erosion has been in the past and what it will be in the future.

There is uncertainty to be sure as to how long the planning process will last.

Charles A. Horsky:

The timetable itself as the Solicitor General has indicated has been extended ones by four months by Senate joint Resolution 250, which is on the President’s desk now for signature having pass both Houses.

And I have no doubt it would be signed by President Ford, shortly.

And there is the possibility under the Act that Congress may reject the plan provided by USRA.

It has 60 days within which it can be veto either House can veto the plan.

At that point, although there is a tight time schedule up to that point.

At that point, there is no time schedule for USRA to submit the next one.

It has to do it, but it can take it sweet time about it, the next month and the next month after that.

So, that nobody can be sure how long Penn Central will be continuing to operate its rail properties.

All of these mean that there is disagreement to a degree over the likelihood or the degree of likelihood that there will be a point of unconstitutionality.

But everybody agrees that it will be that there is some possibility of it and in that event, only a Tucker Act will save the statute.

And I further agree with what Mr. Cutler said.

If you find that the Tucker Act is available on either the unconstitutional erosion or on the improper taking, you have answered the question.

Because nobody has suggested that the Tucker Act is available for some of the takings under the statute, but not for all of them.

Well, so much for the Tucker Act.

I don’t believe that I need to add anything to what the Solicitor General has said about the nature of the argument on that question.

But I would like to make a couple of comments, which I think the Solicitor General did not make and which I think irrelevant.

I perhaps, do not correctly read judge Aldisert’s opinion below but I sense in this comment he said that if he found there were Court of Claims remedy, it would be, “Judicial legislation on a grand if not arrogant scale.”

I think, I sense in that a feeling that what he was afraid of was that the possibility of a Court of Claims judgment if there were jurisdiction in the Court of Claims would be huge.

It might be hundreds of millions of dollars or even more than that and of that was one of the reasons why he thought that he could not appropriately say that the Court of Claims judgment was available.

If that is true, if there is any relevance to the question of the availability of the Tucker Act as to the size of the potential judgment against United States, there are a couple of considerations which the Court should have in mind.

The first is that, a decision now by the Court that a Court of Claims remedy would be available to remedy any inadequate compensation in the taking by the compulsory transfer is no sense as the Solicitor General has said an ex post facto argument.

The Congress can deal with that in two ways.

In the first place, it has to look at the plans that come from USRA.

If it gets the first plan and the financial viability of Conrail looks pretty shaky or they are not sure that it is going to be adequately funded or adequately profitable.

They can send USRA back to the drawing boards because they would say, “We do not want to take the chance that this one might cause a very large Court of Claims judgment.”

And they can continue to do that until they are satisfied that what the plan provides will either minimize or eliminate the possibility of a Tucker Act judgment of any substantial size.

And secondly of course as the Solicitor General says, they can repeal or amend the statute.

But I think it — this is a fair comment.

I believe that it is probably true that this statute with the combination of the power of the Congress to reject the plans it does not like, so it gets a plan it wants combined with the sort of combination, reorganization, condemnation features of the plan with the Tucker Act remedy at the end is probably the least expensive way for Congress to preserve an important national asset which is now no longer able to preserve itself.

Or to put it boldly, I think Congress would prefer a Tucker Act remedy to the requirement that nationalize this railroads.

Charles A. Horsky:

Let me make one other comment which is important to us in terms of the Tucker Act in which the Solicitor General has not mentioned.

In the court below and in this Court, the appellees as Mr. Cutler has pointed out, that even if you have a Tucker Act it really is not adequate, it is not enough.

We disagree basically with the appellees on that point but we do have some concern that if the Court finds, that there is a Tucker Act remedy, that we can maintain a suit in the Court of Claims, that we have an adequate remedy on the Court of Claims and not a chancy one.

We set out the whole argument at pages 63 to 67 of our brief, but let me illustrate the problems.

In the court below in the argument before the three-judge court, I expressed some concern that the Government did not recognize that we had to have an adequate Court of Claims remedy.

For example, that the Government did not recognize that the fact that the trustees were trying to accommodate to the public interest and we are trying to accommodate to the statute by keeping the railroad running rather than trying to stop it, would not be urged against them in the Court of Claims as a waiver of their right to have remedy for unconstitutional erosion if that occurred.

In response, the counsel for the Government gave me that assurance and we have quoted the language of that assurance in our brief.

In the briefs in this Court, both in the briefs of the Government parties and in the briefs of the United States Railway Association, there is a suggestion now that — well, the trustees may not — may forfeit any right to unconstitutional erosion because they are not diligent in applying for permission to stop.

And they sight Section 304 (f) which permits interim erosion with the permission of the USRA.

The theory apparently is that unless we apply to stop the whole system and USRA denies us that right.

We may have waived our right to compensation.

Just — it seems to me so painted that Section 304 (f), which I will not burden the Court with the dissertation on does not contemplate that USRA would be permitted pending the preparation of a final system plan to authorize the abandonment of the termination of operations in the liquidation of the entire Penn Central system.

Indeed, as the Special Court noted, USRA does not really have the power all by itself to do that anyway because any reasonable objection by a state, local or regional transit authority will inhibit USA’s permission to make any abandonment’s.

And plainly it seems to me, no application by Penn Central Trustees to stop operations on the whole system would be entertained by USRA and it would be futile to make the application.

If the Solicitor General and Mr. Cutler still share the view that we are subject to that obligation before we can protect our rights to interim erosion.

I hope the Court will disabuse them of that position in their opinion.

Now, let me turn to another point as I have indicated, the trustees do agree with the appellees here.

That absent to Tucker Act remedy, this statute can not be sustained.

I don’t propose to argue that position in detail because it is adequately argued in our briefs and it is adequately taken care off in Judge Friendly’s opinion in the Special Court.

But I do have a few comments on the appropriate relief, if the Court determines that there is no Tucker Act remedy and that the statute therefore should not be sustained.

I think under those circumstances —

Byron R. White:

Is it conceivable that the Court could determine that there is no Tucker Act remedy and that nonetheless the statute —

Charles A. Horsky:

Is constitution.

I’m going to relay on the appellees to convince you that that is not the case.

I am assuming — I’d like to talk just for a moment as to the remedy in the event should determine that the statute is not constitutional because there is no Tucker Act remedy.

Potter Stewart:

It is also conceivable of course, that the Court could hold the Act as not constitutional despite a Tucker Act remedy.

I mean, there are other attacks constitutionality’s —

Charles A. Horsky:

That’s right.

I have —

Potter Stewart:

Come down and a — the payment in securities rather than cash and all sorts of it, like that.

Charles A. Horsky:

I have one point like that myself that I would come to, but let me take on premise what I think the appropriate relief should be.

I think the lower court in an essence structured it correctly as the Solicitor General said, the first paragraph of the order just enjoin USRA from certifying the final system plan of the Special Court.

That doesn’t stop the planning process.

It permits it indeed to go on right to the conclusion, so that the Congress will have whenever it has to deal with the statute again a completed plan before it.

What it does is to interpose the court order, the stop order at the last possible point before the inexorable process of the act would transfer the property from the Penn Central estate.

Paragraph 2 of the order dealt with the Section 304 (f) problem and I think it appropriately said don’t have any inhibition upon the power of the reorganization court to take whatever actions are necessary to protect the constitutional rights of the creditors.

But let me come to the third one, on which I disagree with the Solicitor General.

This is the paragraph of the order that you inquired by Justice Stewart, Section 207 (b) of the Act, which requires the reorganization court in the event that it finds that the process of the Act is not fair and equitable to dismiss the proceeding.

It is possible that that Section will never come act operation, but it is also possible as I have indicated that if this Court finds that there is no Tucker Act remedy, the Special Court will affirm the decision of Judge Fullam, who found that the process was not fair and equitable, and the question will be does Judge Fullam have to dismiss the Section 77 proceeding.

Now, it is a very curios little piece of the statute.

We suggested in the court below that the only possible rational basis for it and it has no legislative history was as an interim device to add a really quite unpleasant consequence to the decision by the reorganization court that the statute —

Potter Stewart:

What if really make all that difference there would be an equity receivership I guess that —

Charles A. Horsky:

It would presumably be an equity receiver.

We can live under equity receivership.

But all of the problems, all of the ancient law that you have to go back to find out exactly how you operate under an equity receivership, would have to be brought to surface and explore and I frankly do not know the extent —

Byron R. White:

The only thing that will be deprived of is a liquidation type reorganization plan?

Charles A. Horsky:

You’d be deprived of the entire —

Potter Stewart:

You wouldnt be deprived of that.

Charles A. Horsky:

Apparently of Section 77, whatever it gives you.

Byron R. White:

In order to carry out liquidation?

Charles A. Horsky:

In order to carry out reorganization or liquidation — a New Haven type reorganization or a sale in pieces or various other kinds.

Byron R. White:

Yes, but you do not reach this unless you find the railroad isn’t reorganizable as a profitable railroad?

Charles A. Horsky:

Well, it is not reorganizable as a profitable.

That’s — That has been decided by Judge Fullam in the so-called 120-day hearings and nobody disputes that.

But reorganization on an income basis is not the only basis upon where you can reorganize railroad and all the statute does is to say, “Look Mr. Reorganization Court, if you find the process of this Act not fair and equitable, you got to rid of Section 77 proceedings.”

Now let me, it’s not — it isn’t part of the statute, but USRA did not even appeal that part of the order.

They do not care whether this operates or not.

We do, we are operating under Section 77 and it would just be inconvenient and perhaps worse than that if we had to transfer it to an equity receivership, it might be alright but raises problems that we’d rather not face if we do not have to.

Now, the basis upon which the lower court entered that part of the order held this Section unconstitutional or was it violated the Uniformity Clause of the Constitution.

The appellees have a general attack on the statute on that basis that very — a good many Sections, indeed probably the whole Act ought to be strong enough on the ground that it is not uniform because it applies only in a region.

Charles A. Horsky:

We don’t agree with that.

But on this particular one, this particular Section, I think it is valid one as two judges in the court below did.

This is simply a state that these particular bankrupt railroads and this particular part of the United States must be denied the advantages of Section 77 under particular circumstances.

If a railroad on the west coast, tomorrow files a Section 77 petition, that petition is not defeasible under some — under the circumstances of this Act because of any circumstances like this.

The Penn Central petition is defeasible under this Act.

William H. Rehnquist:

But Judge Friendly’s basis for sustaining that by the Court of special appeals or the Special Court was that in effect Congress was including all presently bankrupt railroads in the system, and if — and it seems to me that if you make that argument with respect to your point, Mr. Horsky, that Judge Friendly would rule against you?

Charles A. Horsky:

Well, I am not sure because it seems that you have here a situation where the problem is imminent as between debtors.

You have debtor on the west coast whose Section 77 petition is not going to be dismissed because of this condition.

You have Penn Central which where it is going to be dismissed or maybe dismissed because of this.

The two railroads are treated differently.

Now perhaps, you can treat debtors, debtor better on the west coast different than a debtor on the eats coast.

But you can’t do it under the Bankruptcy Act, under the uniformity I should think.

This is certainly not the Commerce Clause.

In any event, we hope that you will sustain the —

Potter Stewart:

Do you agree that if the constitutionality of these pro — the provisions of the Act now at issue are upheld in this litigation and in view of what the Special Court has done, then this point wouldn’t arise.

Charles A. Horsky:

This point would be moved.

Potter Stewart:

That’s correct, isn’t it?

Charles A. Horsky:

Yes.

The Special Court will then finally and definitively reverse Judge Fullam and hold that the process of the Act is fair and equitable, and no circumstances the — about Section just doesn’t come into our brief.

Thank you very much.

Warren E. Burger:

Thank you, Mr. Horsky.

Mr. Craco.

Louis A. Craco:

Mr. Chief Justice, may it please the Court.

I regret the necessity of disturbing the congenial set of agreements and concessions with which previous counsel had approached this rostrum, and to take issue with virtually all counsel who have appeared before me.

I represent the appellant and the appellees in Connecticut General, secured creditors of the Penn Central Transportation Corporation and we appear in support of the injunction issued below, and the declaratory relief of which it was course of relief declaring the Act in significant part to be unconstitutional.

I hope in by taking immediate issue with the notion that the tasks of the creditors or for that matter, the stockholders represent my brother Mr. Berger or for the New Haven Trustee, here again, represent by Mr. Auerbach is to force a nationalization of the Penn Central Transportation Company or to impose a collision with either seller or this.

It is our task, it seems to me, to suggest that this particular remedy fashioned by this particular Congress, for this particular set of problems represents a reach in excess of the constitutional grasp of the Congress and we do not mean to suggest that a proper solution to these problems is beyond the width or wisdom of the national legislature.

The root position that we take and I take it that this now is conceded to be the issue is that if the Tucker Act be not available, the Rail Act is unconstitutional and that it furnishes no assurance that the bankruptcy estates will receive fair compensation, either for the rail properties ultimately conveyed or for the interim erosion sustained until such conveyance.

We argue that the Tucker Act is not available on a fair reading of the statute and that the Rail Act in this respect was properly enjoined below.

Let me take up initially the preposition raised by Mr. Justice Rehnquist as to whether all these troublesome and questions need to be reached now or whether sufficient to the days the eagle there up.

Louis A. Craco:

We submit that these questions are right now Mr. Justice Rehnquist, for a number of reasons that I would like to touch on quickly and likely.

First of all, as other counsel in particular the Solicitor General has observed, the Act is enforced now and there is nothing whatsoever contingent about the inexorable operations of the Act between now and the date of conveyance.

Secondly, notwithstanding the provisions of Section 303 with regard to ultimate compensation, erosion in the interim will be sustained and that is occurring now.

The court below found it likely that those — that that interim erosion would arise to the level of unconstitutionality during that interim period and the protection that we require and the assurance that we require for compensation as to those matters it seems to us matures daily.

William H. Rehnquist:

Well, that I can see that might be a basis for attacking the abandonment’s or the anti-abandonment provisions, but why would that afford a basis for attacking the ultimate compensation the fact that interim erosion occurs?

Louis A. Craco:

By itself, it might not.

We take it together, however, with the contention made here that the ultimate conveyance and compensation mechanisms are sufficient onto themselves to compensate for the erosion which is being endured.

And if they are not, then the impact of the interim erosion argues for consideration of adequacy of compensate or mechanism now.

Furthermore however, under Section 209 of the Act and under Section 303 (b) (2) of the Act the last sentence, the Act specifically excludes future review of the compensatory mechanisms by injunctive procedures, so that the remedy that Mr. Justice Rehnquist suggested as possibly being available on some future date, is attempted to be precluded by those provisions of the Act.

And most particularly the Special Court is given no discretion under the Act but to orders the conveyances upon the certification of the final system plan.

If there are any doubts about the statutory intent from that, the Senate reported at page 33, it says it, one little word after the other that the Special Court is given no discretion to withhold those conveyances.

The fifth point, I would make on the question of rightness Mr. Rehnquist is that, all of the objectionable features to which all allude in a moment of the Act are no mean knowable now and nothing implicit in the passage of time or what might transpire during the passage of time, can change the legal characteristics of those features of the Act.

And finally, we would content that and this is close to the heart of our case that, the constitutional vice of the Act, is that it imposes upon the private sector, the creditors, the stockholders, the unsecured creditors, the entire risk of the success or failure of this operation during the interim.

The entire risk of loses in the interim, the entire risk of in adequacy of compensation in the end, the entire risk of the difficulties of obtaining a final system plan that can work, the entire risk of conjec — congressional rejection or in pass, and it is our preposition that when our property, for the property of the estate in which we have claims is requisition in the public interest for a continued or final operation for a public purpose.

It is constitutionally impermissible to impose those risks upon us without just compensation and all those risks are discernable now, though, absence of assurance is discernable now and we think, the issue which that risks presents is right now.

I’ve said that the Act precludes assurance of fair value and I would like to tell the Court that I’ve post to address two issues.

First, touching lightly in the light of the Solicitor General’s concession on why we believe the act is constitutionally vicious in the absence of a Tucker Act remedy and then touching somewhat or heavily I hope, on the question of whether the Tucker Act is there to rescue the Act.

I say, I’ll touch lightly on these questions recognizing the possibility that Mr. Justice Stewart raised that the Act could be conceivably considered by this Court.

Sustainable in the absence of the Tucker Act because I think the Solicitor General’s argument on the point as a quasi appellee for the moment was persuasive and perhaps, sufficient to the occasion.

That in the absence of the Tucker Act the show is substantially over.

But let me touch on four characteristics of the Act that it seems to me condemn it as a constitutional enactment.

First, there are no provisions in the Act.

I mean, literally none at all.

That provide for a payment of the interim erosion sustained by the estates until such time as the conveyances occur.

And we submit that that imposes upon the estates both the risk and indeed a very likely certainty of unconstitutional erosion on the estate and of the claims against the estate as their interest might appear.

The second consideration and I think this is — it’s important to frame this in terms of the about intention, to frame this Act like unto the New Haven inclusion prospect.

The Second consideration in that context is that, there are no provisions in the Act.

Again, literally none, which create what the New Haven Inclusion case characterized as an intrinsic value for the Conrail stock.

In the New Haven Inclusion case, Judge Anderson had after negotiations endorsed in $87.50 per share value for the stock in the Penn Central, nothing establishes such value here.

We’ll be gone though that assurance was there.

Louis A. Craco:

We have in this situation substantial evidence in the record with regard to the liquidation values of the Penn Central estate and we have maximum obligation or authorities which fall measurably short of that amount.

And so, we are left with consideration in the form of a package of securities as to which as I say, there is no intrinsic value supplied by the Act.

The third feature and this I take it to be conceded as a constitutionally impermissible feature of the Act in the absence of the Tucker Act on page 39 of the Federal appellee brief is that, there is no traditional determination of the fairness and equitableness of the consideration prior to the irrevocable execution of the conveyances.

As I say to the Solicitor General, has conceded that that constitutional entitled and exists.

The Special Court has rejected the invitation of the Solicitor General to extract such an opportunity in the short time between certification of the final system plan and the maturing of its obligation to convey.

And that’s the Special Court’s opinion on page 68.

Not only does this absence of an opportunity to determine an advance, whether the consideration is going to be fair and equitable to the estates.

Constitute in itself, constitutionally impermissible feature of the Act.

But I think, it radically distinguishes this case from all the cram down Presidents.

Most particularly the Rio Grand case and the visitation on the cram down provision which I happen to think is best laid out in Mr. Justice Douglas’ dissent in the Sancho Paper case.

The heart and soul of the cram down provision is that prior to the imposition of a plan of reorganization upon dissenting interest of shareholders.

The Court upon its informed discretion with the aid of the Interstate Commerce Commission shall determine that the plan is fair and equitable.

That is shall determine that consideration at a time when it has the power to do something about it.

And the vice of this Act and the distinction from all prior considerations of cram down is that, there is no judicial intervention to ensure that result.

And finally and favorably, there is no underwriting provision in this Act.

The New Haven plan as you will all undoubtedly recall included a deep pocket in which the Penn Central had undertaken to make good any excess of value that might judicially be found in excess of the intrinsic value of the stock or the marketable value of the stock at the time that the stock was received.

And at 399 U.S. particularly at pages 486 and following, the opinion of the Court, lays heavy emphasis on the importance of that underwriting provision.

What that meant was it they’re stood behind the commitment of the plan that was presented to you, and irrevocable contractual commitment, to make good on any consideration that might be required in excess of that provided by the immediate features of the plan.

And it is our position that that underwriting provision is utterly absent, deliberately absent, from this Act.

Section 303 (c) which is the compensatory provision of the Act provides the exhaustion of the constitutional minimum of one’s rights in a deficiency judgment against Conrail, the point that I will come back to in my discussion with Tucker Act.

But most particularly, the conference report which is set out in the legislative materials furnished to you by the Solicitor General.

At page 56, it makes clear of an — any further clarity were necessary from the statutory language that the provisions of the Act with respect to the terms and conditions of the securities issue.

“Shall not include any form of federal guarantee of the value of the corporation stock.”

In other words, the underwriting provision which this Court found to be essential to the survival of the New Haven plan is explicitly precluded by the conference report and fairly excluded by the statutory scheme here.

So, those positions taken separately and most particularly those positions taken in the aggregate, lead us to the conclusion that this Act is valid over the Fifth Amendment.

I speak now, not of the questions of uniformity.

I’m not going to address myself to the questions of due process.

It seems to me that those have been adequately briefed over or will be dealt by my brother.

But the point of the fundamental on fairness of the Act in acquiring private property or a public purpose without, and a short compensation upon the hypothetical allegation that attracts the experience of the New Haven.

It’s simply wrong as a matter of law and wrong as a matter of history.

Louis A. Craco:

Now that underwriting, which the statute does not in terms provide and the constitutional deficiency which the Act does suffers is sought to be repaired here by the introduction into the mix of the Tucker Act.

The reason why the Solicitor General and the Trustee of the Penn Central, both acknowledge to you quite candidly I think, that the Act is unconstitutional in the absence of the Tucker Act is because they recognized the necessity for that character of underwriting which the New Haven found essential, and which the Act does not appear to provide.

Potter Stewart:

That was a found essential on the context of other not it was fair and equitable plan wasn’t it?

Louis A. Craco:

That’s right, sir.

Potter Stewart:

And whether or not it was constitutional.

Is there a difference in the test?

Louis A. Craco:

No —

Potter Stewart:

One higher and one lower or are they equivalent?

Louis A. Craco:

I think to these purposes of they are the same.

The position that you took in that case, dealt with the fairness and equitableness of the plan in the 77 since because it was in entirely voluntary arrangement.

We say that the same standards at minimum applied to a situation, where there is no voluntary character to the arrangement but where it’s entirely in an exact of statute.

Nobody has negotiated the terms of Section 303 (c), they are there.

But I think the constitutional obligation of fairness is at least as owners in this case, as the fairness and equitable I suppose it was found there.

As your opinion indicated in that Court, at page 488, it would be unfair to require the conveyance of the New Haven assets for what might turn out to be a fraction and their worth.

And that on fairness, we think it’s the heart of the political ethic of the Fifth Amendment and is applicable here.

When we say, when we talk about the availability of the Tucker Act, it seems to me we’re in parallel of a certain ambiguity and I want to try before recess to indicate, what we think that ambiguity might be and the nature of the analysis that, I will hopefully address after lunch.

There are two aspects to the availability on the Tucker Act.

The first is, its legal availability as a substitute for assurances lacking under the Act.

A true constitutional panacea as the Solicitor General would set.

And the second question arising under the rule of the availability of the Tucker Act is whether as a matter of law of remedy, it is available as an adequate remedy of law sufficient to have required the court below to stay its hand from injunctive relief.

And that raises some different considerations from the issue of pure or legal availability.

It will be my contention when we return and I’d say that we’re about to leave, that the availability of the Tucker Act is a femoral on both considerations.

That the remedial structures of Section 303 of the Act, do not impliedly repeal the Tucker Act.

They simply displaced the Tucker Act in regard to the circumstances.

Warren E. Burger:

And that amounts to a repealer or does it not in your terms?

No, sir.

I think what it does —

Louis A. Craco:

Preemption sort of the —

We can get into a semantic this course here but I think that there’s a difference between repealer which is not likely to be implied, which is not to be implied and to strike down in Act on a one handn and a preclusive effect of an exhaustive and complete remedial Section which while not repeal in a Tucker Act.

It simply exhaust the remedies of the Tucker Act would not — will otherwise be available for.

Louis A. Craco:

We think as I say, the Section 303 is so complete on its terms and so utterly consistent with the purpose and policy of the Act that it be complete on its term that the Tucker Act is not fairly understood to be available here as a matter of law.

Potter Stewart:

That’s true in the flooding case I think.

Louis A. Craco:

I don’t think it was true in the same sense and it seems to us that in that case, there were radical distinctions which I oppose to address, both the flooding case, the Lynch case and Hurley —

Warren E. Burger:

But if this Court says it holds that the Tucker Act is not repealed and controls what is that do to your position in this respect?

Louis A. Craco:

Then, you have to reach the second question as to whether or not the punitive existence of a Tucker Act remedy here provides a remedy which is sufficiently certain and clear as to have required abstention from the injunction below.

Warren E. Burger:

You mean, when I pursue that after lunch.

Louis A. Craco:

I will.

Thank you.

Warren E. Burger:

Mr. Craco, you may continue.

You have — now, I don’t know exactly how much time.

Louis A. Craco:

I think I have about 10 minutes in modest encroaching rights on my brother.

Warren E. Burger:

Very well.

Louis A. Craco:

Mr. Chief Justice, may it please the Court.

In dealing with the Tucker Act, let me go directly to the cases in which our adversaries find solace, are Hurley and Lynch.

I’ll touch on them briefly because I think in the distinction between those two cases which I think is a cardinal distinction, lies a material inside into the character of this case.

First of all, let me say that I would like to rely on the area addition and the analysis of Judge Friendly in the Special Courts opinion beginning at about page 94 and footnote 101 on the Hurley case.

Plainly, that is the case in which Congress evidenced an indisposition to be beset by damages for consequential liability for consequential damages, arising from floods incident to a flood control program.

It said nothing of the question of what remedy it would or would not afford for taking if in fact the taking occurred.

And the Court goes no further than to say, that upon the discovery of an actual taking of the — by the way in this position of the Court to entertain of the Congress — to entertain claims for consequential flood damage is not meant to cut off recourse to the Courts under the Tucker Act for clear and present taking.

In common with the Lynch case and this is the key, it seems to made distinction between those cases and this.

In common with the Lynch case, Hurley had no provision in the Act with respect to remedial characteristics of the statutory scheme.

The Solicitor General quoted to your language which I think is at the heart of the matter in — from Lynch, its at 292 U.S.586 and their, the Court in identifying why the abrogation constitutional or not of contractually rights did not infer an abrogation of the remedies, said this, “There is no separate provision in Section 17 referring to the Economy Act, dealing with the remedy.”

Now, those cases —

Potter Stewart:

That was the insurance case?

Louis A. Craco:

That’s the insurance case.

Now both of those cases, it seems to me, proceed in the absence of a remedial provision.

This case proceeds in the presence of an exhausted remedial provision and that is the distinction that I want to emphasize.

It brings me to the first of the two twin arguments that I indicated that I would make that as a matter of law, the Tucker Act is not available here because there are remedial mechanisms provided for in Section 303 (c) of the Act which are on their phase and by any fair construction in the interplay of Sections, preclusive of recourse to any other remedy.

The remedies provided by Section 303 (c) are supposed to provide the estates with everything that they are entitled to get.

The statutory languages that they are to provide for the recovery of the constitutional minimum, which I take it to be stingy, rather it for that which just compensation required.

Louis A. Craco:

They command further and this is of importance, regurgitation by the estates of any excess over of the minimum constitutional value.

Their exclusivity is hedged about by two other provisions of the Act, Section 209 of the Act which prevents any injunctive recourse by any other Court and Section 303 (b) (2), which provides that no other Court may enjoin the conveyances.

So, that this Court that is the Special Court, is invested with the entire scope of remediation under the Act.

And that remediation is made by the terms of the Act, coextensive with the constitutional entitlement of the estates.

In other words, it is not contemplated by the remedial provisions of the Act that they’ll be anything left over to which in a State might be entitled that it could go any place else to recover and the catch all the bag, at the end of the remediation provision, a place where you get everything that you’re entitled to if you don’t get it from the stock, if you don’t get it from the user bonds, is a deficiency judgment against Conrail, and no where else.

As I indicated to you this morning, the language of the statute which turns you face towards Conrail for the full remediation of your rights is buttress by the language of the conference committee report which indicated in as many words, that there was to be no federal guarantee of the value of the stock and precludes by inference that which the statute precludes in terms.

This arises from no elaborate cannon of construction.

This arises from a fair reading of the statutory terms and the interplay of the statutory structure itself.

And we suggest that the recourse to the cannons of construction advanced to you by the Solicitor General today is designed to avoid the plain meaning of the provisions of the Act and to — rather than to elucidate an obscure meaning.

Warren E. Burger:

On such an important question Mr. Craco, it would have been very simple for Congress to have made that clear in one sentence that Tucker Act is out of the picture, would it not?

Louis A. Craco:

I think it would have and obviously this issue would not be here if they had done so.

Justice Frankfurter indicated that statutory interpretations tend to come to this Court with some patent on both sides to the question.

But we think that they did not for one clear reason.

They didn’t think of the issue in those terms.

They were trying to construct a reorganization statute and it is not the common learning of reorganization cases that you look to the Tucker Act for your ultimate recourse.

Warren E. Burger:

You’re suggesting indirectly that if there were some hypothetical way to take a poll of all the 435 members of the House and all the members of the Senate that majority of them never gave this subject in any thought one way or the other?

Louis A. Craco:

I think that’s very likely so in and for two reasons.

If you looked at what they did do, they were talking the language or reorganization.

And they were talking it in the context of warnings from the secretary of transportation that if they started talking about takings, they might very well run into an interpretation in this Court or some other that they had in fact affected in a domain statute.

So, I think they saw assiduously discipline themselves to the language of reorganization and so carefully tried to track the experience of the New Haven, that they avoided any of the redirect that might have implied in any way, that a right might us accrue under the Tucker Act from which they were precluding a remedy.

I think that’s the only fair construction of the purpose and policy of the Act taken at large, part from the provisions of the Act themselves.

If you look at Section 101, Sub 6 of the Act, it’s the last of the purpose on provisions of the Act and it’s very clear.

What they said about to do and let’s be heard clear about this because it governs both arguments I have.

What they said about to do, was to try to find out whether they could effect a rescue of the Northeast Rail system by a modest investment of federal funds at the least cost to the taxpayer, with the language that they use.

And it seems to us that what they did in fact was ratio the amount of funds that were to be available.

That’s instinct in the legislative —

Thurgood Marshall:

Well, assuming that they didn’t intend to do anything with the Tucker Act, the Tucker Act is still there?

Louis A. Craco:

The Tucker Act is still there unless they precluded its application by another remedial statute which they did in fact enact and it’s our position that they did that in this case.

Thurgood Marshall:

Well, I thought you’re argument was that the remedies provided here were different from the remedies to Tucker Act.

Louis A. Craco:

That’s right, different and exhausted.

Thurgood Marshall:

So, how could they be precluded the Tucker Act, if they are different?

Louis A. Craco:

It’s different, it’s exclusive, and it’s exhausted.

Thurgood Marshall:

But what do you have that says it’s exclusive?

Louis A. Craco:

The inference from the language of Section 303 (c) that says that if the provisions of the Act do not provide the constitutional minimum to the estates, then, the Court shall enter a deficiency judgment against Conrail.

Now, the constitutional minimum is presumably the content of the cause of action you haven’t under the Tucker Act.

Thurgood Marshall:

And if there’s any other provision in Congress, it wouldn’t apply.

Louis A. Craco:

I’m sorry sir.

Thurgood Marshall:

Any other provision of Congress as action wouldn’t apply, is that your position?

Louis A. Craco:

I think it’s?

I think they intended and did turn you away from other provisions of Congress that would provide a remedy in the absence of the remedial legislation that they enacted here and told the estates to have their complete constitutional —

Thurgood Marshall:

So you say that they?

Louis A. Craco:

On Conrail.

Thurgood Marshall:

What they did but to say that the Tucker Act does not apply.

Louis A. Craco:

In effect, yes.

Thurgood Marshall:

How can you say that without the Congress is just — without mention it, they would appeal it?

Louis A. Craco:

Because as I said before —

Thurgood Marshall:

All limited.

Louis A. Craco:

I don’t think that they were talking language of condemnation at all.

And they were talking language of reorganization and in so talking, did not mention the Tucker Act.

The things that they did mention by the way, the other repealers that they have, are all directly related to the implementation of the final system plan.

They have nothing to do with the remedial features of the Act at all.

But I think it’s important to understand the question of adequacy as well as availability and if I may turn —

Warren E. Burger:

On that score, what would — what’s your view?

What would happen if Conrail could not pay the deficiency judgment?

Louis A. Craco:

That’s — that gets me to adequacy right away.

The simple answer to that Your Honor is that, the practical consideration underlying this entire discussion of the availability of the Tucker Act has a surreal quality about it because you get to the deficiency judgment under the Tucker Act.

Only if your deficiency judgment against Conrail has been exhausted and returned unsatisfied.

The hypothesis, which necessarily assumed that the security packages that you’ve been afforded prior to that time, have been exhausted and are substantially without value.

The notion by the Tucker Act remedy arises at all for a sliver of value on top of a package of given values be lies the fact that it arises as it deficiency at all, only when Conrail can’t respond to it’s own judgment.

And if that juncture I suggest to you you’re into a situation, where the Conrail situation has collapsed.

Louis A. Craco:

This remedy —

Warren E. Burger:

That’s what some people who are concern about it, is it not?

Louis A. Craco:

Yes, it is.

Warren E. Burger:

Then why I’m curious, as to why you characterized others a sliver, sliver of value?

Louis A. Craco:

Because at that point, the stock will be without value of Conrail can’t respond to a judgment for no more than the asset value of its operating assets.

The bonds which are secured by its assets will not be a substantial value and if that point the deficiency which will ensue will be greater than the — than any hypothetical difference between the existing value and what the Special Court awards.

The point is, that much more are likely in any real world than a Tucker Act remedy in the Court of Claims is at Conrail Section 77 and going to the question of whether the Tucker Act remedy can ever be adequate.

It assumes an acquiescence of protracted acquiescence by the Congress in the ongoing process of this Act, at a time when they’ve indicated that they want their investment to be limited and that protracted acquiescence I suggest to you, they have advanced no disposition to entertain.

We think that the Act on the Tucker Act is not a plain remedy.

It’s not a certain remedy.

It doesn’t even get reached until after all the processes of the Rail Act are exhausted and until Conrail has collapsed.

And those we say, in addition to the reasons why under the structure of the Act, the remedies are unavailable at all.

Make the putative remedy in adequate as a matter of the law of remedies.

And on those grounds perhaps surprisingly, we suggest that it is unavailable and argued at the court below quite properly rejected its availability, thank you.

Warren E. Burger:

Very well.

Thank you, Mr. Craco.

Mr. Berger.

David Berger:

Mr. Chief Justice, may it please the Court.

I represent the Penn Central Company which is the sole stockholder of the railroad and reorganization here.

We agree with Mr. Craco’s analysis of the Act and we also agree that under the statutory scheme, the entire risk here is being imposed upon the claimants in the reorganization proceeding.

Now, Mr. Cutler has stated that Congress can stir the ship of state in between seller and corruptors But the stockholders and the creditors in this reorganization proceeding should not we submit, take the risk of being torpedoed during that extremely, precarious voyage.

And these points up the uniquely precarious position of the Penn Central Company as a sole stockholder it represents 160,000 shareholders, a significant portion of whom in Judge Fullam’s words do not readily fit the image of sophisticate investors.

Moreover, Penn Central Company has a massive unsecured plan conceding $41 Million.

And as such under the absolute priority rule, Penn Central Company is at the bottom of totem poll.

I would suggest that enter an erosion may hurt some of the claimants.

But interim and continuing erosion must hurt my client Penn Central Company.

In short, Penn Central Company is hurt the first and its hurt the worst.

Now, no one in this litigation is contended that Penn Central Company had or has no equity.

The trustees figures reveal at the put value at the day of reorganization was some $16, 066 Million of the equity.

And as of the date when the Act took effect, this had dropped the $684 Million.

Byron R. White:

What was the first date, the date of merger?

David Berger:

No, the date of the petition for reorganization, Your Honor, 6/21/1970.

Potter Stewart:

Oh, yes.

David Berger:

And on the date when the Acts of the facts, it then already drop the $684 Million and using the Solicitor General’s figures coming from his brief, he says that, the current liquidation value of the estate of apparently exceeds the valid claims against it by a minimum amount of $1.3 Billion what she contends is adequate to cushion this secured creditors.

The secured creditors don’t agree but it’s certainly is not adequate to secure to constitute a cushion with respect to the unsecured creditors or the stockholders.

Now dealing with the past erosion, the briefs and their many, many, many pages on this point, I think this comment is warranted, may it please the Court.

The facts are undisputed.

Only the interpretation is different.

We think that Government’s interpretation mistakenly minimizes the past erosion.

We would prefer and we think it’s correct to rely upon the trustees figures.

After all, the trustees or officers of the Court, they certainly have no motive to misinterpret the figures and moreover, looking at the history of the reorganization for the past four years, the trustees have supported in the public interest to continue rail operations of Penn Central even at this huge loses.

And indeed, they have steadfastly resisted claimant’s attempts to terminate the reorganization proceedings under Section 77 (j)

William H. Rehnquist:

Is that in the position of your client in the reorganization court Mr. Berger that the operations are ought to be terminated?

David Berger:

We have since petition in the Court terminates the rail operation, yes Your Honor.

Now, their figure show that the accumulation of post bankruptcy priority claims at the minimum amounts to $745 Million to which they had a very conservative figure of $40 Million for the physical decline in the value of the assets or making a total of $785 Million.

Now, we submit by the purposes of this case.

It is not necessary at this time for the Court to quantify past erosion of the penny.

The secured creditors say that this past erosion exceeds $785 Million and we agree.

The undisputed facts stipulated in this record, may it please the Court, is that $851 Million was lost in the Penn Central rail operations from the date of reorganization to the date of the enactment of this Act.

Now, we submit the clear witness and not in this record to work defining of the court below and the reorganization court that the point of constitutionally impermissible erosion has either been reached or will soon be reached.

And thus, the case in this juncture, in this posture, presents a question very like that presented in Chicago and Rock island, 294 US 648-677, sited with approval by Mr. Justice Stewart in the New Haven Inclusion cases.

That it presents a question addressed not to the power of the Court but to its discretion.

A matter I submit peculiarly within the discretion of the lower court and a matter in the words of Rock Island ordered by this Court not subject to the interference of an appellate court unless discretion will be improvidently exercised, it certainly no evidence of that.

Now I would say that, erosion in the order of $785 Million to 800 Million in the language of Government Attorney Dausch obviously has either in the stockholder’s account and on check this continued erosion will not be into the stockholder’s attempt or will devour it.

Clearly, this record justifies what the reorganization court said and it said that “The creditors and the stockholders of the Penn Cent have exhibited commendable patience and restraint in supporting the continued operation of the railroad during reorganization and it cost of nearly $1 Billion.”

My duty representing the stockholders I submit, is to try to prevent the wound arising from this massive erosion from having fatal consequences, to prevent the Government from conducting this railroad experiment at Penn Central Company’s expense with the result of physically killing Penn Cent.

Now, a word about future erosion and I think that’s in misnomer, its — we used that phrase in the briefs.

Right now, it’s happening as we argued the case.

This erosion is continuing right now.

The enforcement of Section 304 (f) inexorably will cause continued erosion, as a trustee characterize it today, huge loses during the planning period from January 2, 1974 until the consummation of a final system plan if that should ever happened.

David Berger:

Now, how long will this be?

Well, we now know that it can’t be for a period less than two years because of the 120-day extension.Realistically, I think we’re talking about three to five years.

And I would point it out, that there is no limit to the number of final plans Congress may reject.

Indeed, there’s no assurance that Congress will ever approve a final plan.

It seems to me, that unless there is clear explicit protection against these huge ongoing loses which the lower court as demanded reorganization court estimates would run from between $200 Million per year for one year, $400 Million for two year and if we take in 1976 as part of the planning process, $600 Billion that unless we — there is clear express — explicit protection against those huge ongoing loses, resulting from the continued, mandated, Penn Central rail operations, as mandated by 304 (f) that the Act must be declared unconstitutional.

Now in looking at the Act, I would say that the suggestion in the Government brief that there is some protects and against this interim erosion is just unsupportable.

As a Special Court has held Section 303, just doesn’t provide any compensation whatsoever for interim loss.

And I find no support for the contention that there is any kind of protection or provision for compensation for interim the losses.

References made in the brief to Section 213, but I would point out that this grant provision of the statute provides for a total of $85 Million for all railroads, not merely Penn Central.

The Department of Transportation and as shown by the letter of Mr. Barnum attached of the trustees brief say, in Annex A.

It dependently takes the position that these fines cannot be used to stem further erosion.

In order to get grants, the railroads must agree to maintain the service at present levels.

So, no abandonment or discontinuance are all possible to come under Section 213, so that’s clearly of no withheld.

And that brings us then to Section 215.

If we looked at that, we find that Section 215 provides only for loans not for grants and these loans are restricted in their use for acquisition, maintenance, rehabilitation of rail properties in the final system plan.

No one knows, no one can know.

It’s totally unknowable now or in the near future what rail properties will be in this final system plan.

Total authorization under 215 for the loans is $150 Million for all railroads.

And I think the use of binocular, the clincher is that the law explicitly provides that any loan under Section 215 is and will be a charge against the estate, so that any compensation that might be given to the estate for the ultimate taking will have to be reduced by amount of a loan.

I submit a summary that Penn Central Company interest are already been terribly ruined about a billion dollars up to the first three-year and being eroded at the rate of about $200 million a year.

It seems to me, that inconsumable to put the burden of further interim losses on the estate during the two, three, four, five-year period until the final system plan will have been consummated the words of Judge Anderson paraphrasing Camden the New Haven case.

The public has had it’s buy from June 21, 1970 to December 31, 1973, a huge buy, $851 million of rail losses.

I submit that the public is not entitled to another huge buy of four to $600 million.

This would bring the total close to a billion any half.

It seems to me again paraphrasing Judge Anderson, Penn Central’s duty to the public has been more than amply fulfill.

If this huge losses from mandated coerced rail operations must be continued, that can only be done to at the public expenses mandated by Fifth Amendment.

We associate ourselves with Mr. Craco and with the argument which my brother Mr. Auerbach will make and we say that not to defy the constitutional question is really to decide it and to decide it wrongly.

In conclusion, I would address myself to this question.

Would not a definitive the size of whole name by this Court that the Tucker Act remedy exists to be a sufficient answer to my fears about interim and continuing erosion, I think not.

This Court as Mr. Justice Stewart suggested cannot provide a real response to a money judgment of the Court of Claims.

David Berger:

We can see that whether Congress undertook by this Act to provide that the Tucker Act remained as a remedy is a matter clearly within the province of this Court.

It would therefore be appropriate for the Court to determine that the claimants have an effect and subjected to an eminent demand taking for which there’s must be just compensation under the Fifth Amendment, but with difference this Court cannot provide the money.

If the estimates of continuing entire erosion or anywhere near correct and we submit they are, in three years this with a loan amount to $600 million with the existence of a Tucker Act remedy, afford that kind of assurance which the Fifth Amendment mandates of just compensation.

William H. Rehnquist:

Well, on you’re theory Mr. Berger, then an individual against to whom there was an inversed condemnation ought to have a right to enjoin that rather than simply suing in the Court of Claims, because you can’t be sure that Congress will appropriate the money?

David Berger:

I think that this becomes a matter of agreement, Justice Rehnquist.

We’re talking about the $10,000.00 piece of property that’s being flooded or some chickens like the Cosby case where planes flew to low.

There’s no reason to believe that Congress won’t appropriate the money.

But now I think, but realistically speaking and I don’t want to repeat what Mr. Craco has urged on the Court.

It seems to me, in the light of a legislative history here that we’re going to have some difficulty.

In fact, I would quote the language of Mr. Adams.

Speaking of movements I think that is been mass movement of some kind.

Here’s what he says in his brief, if this Court should decide at this time, that a mechanism of the deficiency judgment against the United States under the Tucker Act is necessary to make this Act to constitutional, the Act must fall since the legislative history of the language of the Act that clear that no deficiency judgment against the US is authorized by the Act.

Now facts this case, therefore in some other case, where you don’t have this kind of situation, where you don’t have this kind of legislative history, where you don’t have this kind of potential very large claim arising from admittedly huge losses, there would perhaps being no problem about an appropriation by the Congress but I submit in this instance there is a very serious fact.

And therefore, the only real practical way to remedy this is to send it back to Congress, and give Congress an opportunity to correct the constitutional defect.

Warren E. Burger:

Mr. Burger is there ever ?

David Berger:

Excuse me, Mr. Chief Justice.

Warren E. Burger:

Is there ever any assurance that a judgment in the Court of Claims will be divided for by the Congress when let say an Indian tribe gets a $50 or $100 million judgment or someone else gets a $50 million judgment?

David Berger:

I wish all my clients were Indians but I seem that they are very well.

But they’re not, all is stock all is not an Indians here, that’s number one.

Secondly, the largest is that our research indicates largest judgment the Court of Claims that’s been from which an appropriation that made us $40 million.

We’re talking about lastly larger sums here and my fear is as express by Mr. Craco that the total statutory scheme excludes any greater federal, fiscal intervention than that provided for in the law.

Warren E. Burger:

Well, your answer to my question I think it is that there is no assurance?

David Berger:

There is —

Warren E. Burger:

Congress will provide the money to pay any judgment in the Court of Claims.

David Berger:

Except, except a realistic one, sir.

History shows that were a judgment is of that nature that Your Honor indicated, Congress does normally appropriate —

Lewis F. Powell, Jr.:

Mr. Burger I was simply going to ask you if you would take off what you a guide realistically as the possible alternatives here.

I think, we all assumed there is no single course of action that appeals to everyone but it seems to be a consensus that an income reorganization in the normal census not visible.

I take it you would not really be eager for a liquidation under the hammer.

You suggest going back to Congress but there’s no assurance that Congress will come forth with what you might regard is more generous proposal.

Lewis F. Powell, Jr.:

What are the alternative, realistically?

David Berger:

Realistically, may I please Your Honor, Mr. Justice Powell.

Stated by the Government Counsel in the Court of law that Penn Central and I quote “Is an irreplaceable national asset but that doesn’t give the Government the right to treated as though it belongs to the Government or the National Government as such right now.”

And I would suggest, if this location that would occur, if the rail operation would be terminated is so great, that the Congress should have an opportunity to decide what he wishes to do.

Now, if Congress says that it just doesn’t care and look back this location occurs, then, there are number of practical alternatives including dismembering of that the railroads selling all parts to the different railroads making transactions with regions if not, with the United States but wherever regional authority, which will include the 17 States through which the railroad runs.

And also but we and finally, dismembering those parts which cannot practically be continued to be operated as well.

Thank you.

Warren E. Burger:

Mr. Auerbach

Joseph Auerbach:

Mr. Chief Justice and may it please the Court.

It is fallen into my lap among my brother to discuss with the Court questions of the significant of the New Haven Inclusion cases as they bear upon the issues here and the cause of appeal which the Haven Trustee took in this matter, with respect to the affect of the ultimate conveyances required by the Act which the Law of Court considered premature before addressing myself to those two points, however, I would like to mention briefly as a matter which is a reason during this course of the day, as to which I think the Court would want to be advised.

First, the question was asked whether the opinion of the Special Court was appealable and could come before this Court.

As we stated in our replied brief here at page 48, “We intend to file with the Court as soon as possible and that will be very shortly, a petition for writ of certiorari under the Ulrich pact.”

We hope to raise some of the questions.

We think the Special Court did deal with certain matters in the unconstitutional way.

Now obviously, the decision of the Court here and the issues now before it might move out entirely.

But the fact is we do intend to file and raise those issues with this Court notwithstanding the last sentence of Section 207 (b).

Another question was asked this morning replies comment.

The question was, whether dismissal of the reorganization is a possibility.

The New Haven Trustee filed a petition and motion under Section 77 (g), which is the prescribed method under the rail reorganization statute.

For dismissal of the reorganization and for the part of the Penn Central Trustee’s as receivers on October 9, 1973 something over a year ago.

That motion and petition were not heard until May 1974.

They were reheard again by Judge Fullam in September of this year but before and he has not yet active but it can’t act now because the Special Court has enjoined a dismissal.

Another ground for a petition of certiorari.

The third point which I would like to refer of this nature is a question with respect to Section 207 (b) by one of the justices this morning to which the Solicitor General replied, I think Section 207 (b) is effectively behind us.

The fact is, The New Haven Trustee now has pending in the Third Circuit, appeals from both the 120-day findings and the 180-day findings headed by Judge Fullam which have the triggering Sections for the action by the Special Court.

In which, we argued that an Article three courts such as Special Court is, could not enter the kind of opinions which we call it advisory opinions in the absence of any record as to what the final system plan would be or knowing — and now what the consideration of the other issues which they dealt with would ever be that’s the Third Circuit Court, and Judge Hastie said as the Chief Judge in that Court had notified the parties they would reserve the decision.

Again, pending decision of this Court because if this Court, in fact, the reverse is the lower court in it’s holding that was premature to consider the outcome of constitutionality that would moot those issues as well or couldn’t those issues as well.

So, we do have three separate things pending which depend on how the Court acts here.

Going now to do the questions which I wish could address myself principally namely, the significance of The New Haven Inclusion cases and why the Court should take — should grant our request on the cross of appeal.

I think it’s clear from the legislative history.

Joseph Auerbach:

I can refer for example to the Congressional record of the house from November 8, 1973, where states in the debate in Mr. Adams, “This is a constitutional reorganization proceeding in out of condemnation.”

And he speaks in that same Section, “The statutory reorganization use in this bill follows that adopted by the Supreme Court in The New Haven Inclusion cases.”

Now, we think Congress even in attempting to carry out what has been described in his day as a heroic measure was wrong.

They did not understand the New Haven Inclusion cases.

It is a decision of this Court.

It is in case in which my file has a long history.

We think the Congress, if he had understood The New Haven Inclusion cases, could not have been acted the statute, could not have provided what it did, and we would not be face with the constitutional issues that we are now faced because the attempt could not be more clear whether it be in 104-member motion that was filed in the Court last week to make oral argument here as in my guy curiae that Congress did not intend to see this property.

Now in fact they may have, whether they intended or not.

But if that’s the case, we rely on Youngstown as the basis of the decision here that you can’t say that Tucker Act applies.

There is anomaly here that Judge Friendly was amused by.

We have the Government saying, it’s a good cause of action against the United States.

You have the credit to say, “There isn’t a cause of action against the United States?”

And it comes down, I think to the question asked a few moments ago by Mr. Rehnquist.

We think and it’s a fact that we maybe wrong but we think we’re talking about billions and the very idea that the Indian case which was some $40 million to be a President for relying the fact that Congress is our obligations.

Many, many years down the road and we maybe speaking of a dozen years down the road is something which is creditors.

We think the Court should not oppose upon us and which, we could not consent to as being the best interest to those people whom we represent as by judiciaries.

Because of this melding of these issues, I would like with Court’s indulgence to review in some length, the history of The New Haven Inclusion case both before reach this Court and in this Court.

The New Haven reorganization proceedings commence in 1961.

Mr. Smith, the appellant cause appellant here is the sole remaining custody of that reorganization.

In 1967, barely six years which in reorganization terms pretty rapid.

We were before this Court on the question whether and this is the title of the case of The Penn Central merger cases.

Whether in the Penn Central merger cases, certain New Haven bond holders were entitled to insist that their consideration be determined before the merger could be carried out.

And with Mr. Justice Brennan as I recall that argument, return to counsel for Penn Central and he said, “His Penn Central willing to pay whatever is finally judicially determined.”

I may at this point, point out the ICC had already made the determination which the creditors were objecting too.

And when Mr. Justice Brennan asks that question, counsel with the Penn Central said, “Yes,we will pay whatever the Court determines finally.”

Thus in colloquial terms, we haven’t open-end transaction and the Court refused to grant the request of the New Haven bond holders that the merger be held up, but should the merger can go ahead.

Now, there’s the first mistake Congress made.

Congress thought because the Court in the New — Penn Central merger cases as the foundation for the New Haven Inclusion cases permitted the conveyances to be made required to be made as a matter of fact.

But before the consideration was finally determined that they could do the same under the statute and the statute clearly does that.

We don’t even know the plan is when conveyance is, until the very moment when the conveyances are made but the New Haven Inclusion cases don’t say that nor the Penn Central merger cases.

Joseph Auerbach:

What they say is that, where the consideration must be paid and the parties agreed to be bound to pay whatever the Court determines, it may proceed that’s not the case under the statute.

The next phase, it came before the Court and the phase I mentioned was 1967.

The Penn Central merger was carried out on February 1, 1968 and the next phase come before the Court was the consideration in the New Haven Case.

And that’s the opinion called “the New Haven Inclusion cases” and in that case Mr. Justice Stewart grabbed the opinion.

Just eight days after the Penn Central had itself filed for reorganization.

Now, this opinion —

Potter Stewart:

I can promise you, I didn’t write the opinion that they —

Joseph Auerbach:

Well, I regret to hear that Mr. Justice because I thought it was mass full opinion.

But the opinion eight days after the Penn Central when it reorganization, made note of the fact of the reorganization and then had to deal with the consideration question in the light of the issues created by the reorganization.

And what it happen was the case as it came to the Court base upon the ICC findings at the early had been objected to by the bank holders and with the approval of Judge Anderson had a shock turn in its form of consideration.

Judge Anderson said, “I won’t disagree that the stock indeed maybe worth $87.50 a share but I cannot agree that constitutionally the creditors are obliged.”

Now to assume that it will be worth $87.50 a share at infront of indefinite period.

Therefore, I would require an underwriting for 10 years that stock must at some point reach $87.50 so, the shareholders can get out of that would be the New Haven shares shareholders that holding that stock and get out and to caught in the New Haven Inclusion cases is it that’s no good enough.

It’s not good enough, it’s just doesn’t give the assurance that creditors have in order to be paid properly or to know there going to be paid properly for their property.

And the Court remanded the case with that specific question to be determined which was the fashion a payment which in the words of the opinion would produce the proposal liquidation value of the properties which had been conveyed.

Now, the next phase of that case and despite on it’s an academic thing because we don’t have any further decisions.

But the next phase after that decision which occurred in June 29, 1970.

The phase was Judge Anderson comply add of orders which he thought would tell the Interstate Commerce Commission how do you expect them to proceed on the remand.

That was appeal by the Penn Central Trustee’s.

The Court appeals for the Second Circuit reversed Judge Anderson indicated that the entire amount had to be taken off in connection with the Penn Central Merger because it’s bearing upon that and I’ll go back to the commission.

Mr. Smith comply with back to the commission that would have been in the spring of 1971 and at this time, we still have never had a hearing before the commission which ended in order to say, “We can’t do this and we know what’s going to happen to the Penn Central.”

Now, this brings us therefore right up to what’s happening with this new statute.

The New Haven bondholders have now waited 13 years since they were enjoined by Judge Anderson from foreclosing on their liens.

They’ve waited more than six years since the property was required to be conveyed by the commission and approved by this Court.

They waited more than four years since the Court determine the final consideration, that’s not an issue.

The value of the property in that New Haven Inclusion cases determination has never been questioned.

That’s, that’s the value of the property, a $175 million but they waited one of four years to be paid for.

If the Rail Act is constitutional, this is what they must cope with.

They will not know until 1976 or let me interject for a moment.

The New Haven Trustee has a lien on the property which he conveyed to Penn Central.

Joseph Auerbach:

We have a legal lien, in addition, and our enjoined from foreclosing it.

In addition, Judge Fullam granted what he called an “indeterminate lien,” indeterminate as to amount so the question would be remained open whether the New Haven Trustees is entitled the more it’s just a bond which he holds on the eventual payment.

And we conceived that to be an aid of the remand from this Court.

But if the Rail Act is constitutional as I say, they won’t know the 1976 whether the property which they handle lien on is going to be required to be conveyed to Conrail and if it’s required to be conveyed Conrail it gets conveyed free of The New Haven Trustee’s lien.

And he must then just look to the Penn Central Estate without a lien for the payment from the very properties which this Court said in 1970, the bondholders entitle to have the proposal liquidation value for.

William O. Douglas:

So, the Act, the lien doesn’t follow up proceeds?

Joseph Auerbach:

No, Mr. Justice Douglas, it does not follow it.

William O. Douglas:

I mean, the new Act?

Joseph Auerbach:

The new Act, no.

The consideration which Conrail pays as fix by USRA goes into the general pot of the debtor for — whose property was and it was taken.

Byron R. White:

But the various types for that pot will be still had some requisites on some priority basis?

Joseph Auerbach:

Well, Mr. Justice White, the problems —

Byron R. White:

The reorganization proceeding isn’t going to be dismissed?

Joseph Auerbach:

I wish I could ask that easily.

The problems are not the reason.

The reason is the concept of the statute is to bring together five railroads and pieces of five and if — and to illustrate the piece of Railroad A which went in, namely Penn Central is combined with the piece of the Central as New Jersey which is subject to it too, and each of those pieces were subject to a lien.

And now, you come to the old problems of the sovereigns evaluations.

We just don’t know where it will stand in our liens doesn’t follow except an equitable sentence.

Byron R. White:

But the Special Court when ask to decide to the value of very pieces that the various estates convey?

Joseph Auerbach:

Yes.

Yes, they would.

They would.

Byron R. White:

And to know that the — so, that there’s going to be some securities directed in the direction of the Penn Central Estate bound to which the you have a prior claimants?

Joseph Auerbach:

Well, I don’t know if you have a prior claim.

They’re bound to be securities —

Byron R. White:

Well, I know but you’re going to be — you all are just made in your own security a creditors.

Joseph Auerbach:

We all remained as secured creditors of Penn Central whose security has been conveyed out free of lien.

And that’s what happens on the conveyance thing —

Byron R. White:

He retained your position in the estate, I suppose?

Joseph Auerbach:

Yes, but, we know now what our value is to Penn Central.

Joseph Auerbach:

We don’t know our value is to the Conrail system for the reason the carriers.

Byron R. White:

We don’t know now —

Joseph Auerbach:

I beg your pardon sir?

Byron R. White:

We don’t known now.

Joseph Auerbach:

No, and we won’t know.

You see that the conveyance secures presumably something after two years but the evaluation may not occur for now to ten.

And that is why I would point out to you that when we talk about time, we have 30 years.

I think we have to assume in New Haven that 20 years had been total will be the time for —

Byron R. White:

Let’s assume is that absolutely certain, no question whatsoever that sooner or later there would be enough money or value in the Penn Central Estate to pay you off at least but nobody else.

Joseph Auerbach:

Yes, Mr. Justice.

Byron R. White:

Would you been — Would you have some claim that wasn’t being satisfied?

Joseph Auerbach:

No, of course not.

Of course not, if the Penn Central Trustee’s came to us today and check —

Byron R. White:

I know but you have — what I mean is that you weren’t — your claim doesn’t displaced you still have as much as the prior claim as a proceeds.

Joseph Auerbach:

Well, —

Byron R. White:

You had to the properties.

Joseph Auerbach:

Before I answer that directly.Let me illustrate by —

Byron R. White:

The Rail Act may not say so, but that’s going to — that’s the Lee Ads bankruptcy law.

Joseph Auerbach:

Well, yes Your Honor but the question with the bankruptcy law applies is one which I can illustrate for you under this, this very case and what I would call this on, I know the Solicitor General use that word this morning but I think I’m entitle to use it too.

In this very case we have this situation, the New Haven properties which are owned by Penn Central essentially the Boston to New York or a large part of the Boston to New York portion of the northeast card, the balance of being to New York to Washington portion.

The Statute, the Rail Act in no less than three places talks about creating or convene to Amtrak properties in that northeast card.

The statute provides in Section 211 (a) that USRA may make loans to Amtrak which would buy the properties from Conrail.

Now, the very properties which we would of convey, have been required to convey feebly into Conrail would be sold for cash by Conrail to Amtrak under the statute.

Now, the question I have and I try to ask you a question Mr. Justice is, can we impose a lien on that cash?

I would be very much surprise with under the bankruptcy law, we could.

Byron R. White:

How come it was given — how come it was given the New Haven Estate to gain profit.

You’re going to have appropriate claims in it and assuming that there is enough money in there.

You may at least use or at least to a — I suppose that there’s a need to have claims the bankruptcy to that for state plan, are you not suppose to illustrates this but — in you?

Joseph Auerbach:

Oh, indeed they are and we — oh, indeed they are Your Honor.

They are ahead of all the secured creditors.

Joseph Auerbach:

The United States as creditors ahead of us.

All the taxing authorities, the payments have not been made on rentals.

This sums up with — well over half billion now in this administration claims.

I can’t really answer your question except hypothetically, if there is enough fair for us then there is enough the for us.

But whether there will be, I can’t answer.

Byron R. White:

But the — but the — your relative decisions that this is going to be distributed by the rail?

Joseph Auerbach:

Well, the Rail Act is not protected.

I have to say that to you.

I can’t answer how Judge Fullam in a contest among creditors for what we think would be a very sharply reduced part, what he will be able to do.

Byron R. White:

They want actually the Bankruptcy Act may not actually a more than —

Joseph Auerbach:

Well, Bankruptcy Act right now would protect us, if Section 77 would be in carried out.

For example, we have a Section 77 (g) this motion that’s been pending.

If in fact and it seems to me, that the findings have been made by the Special Court established this, and if in fact, we pass the stage where there can be reorganization of Penn Central then there is a constitutional right to have the 77 (g) motions granted, and if is that constitutional right and it goes into liquidation, the equity receivers must keep those properties intact and liquidate — whether they do it on mass or separately.

They would have to protect this — them of the Bankruptcy Act.

Byron R. White:

Special Court decides on this?

Joseph Auerbach:

About to be sure and the Special Court decide against his only on the concept Mr. Justice White, that the Tucker Act applied didn’t decide against this otherwise.

Now as it happens, we think constitutionally, the Court must consider the statute but without the Tucker Act if this is a constitutional statute and I would argue that the detail of our brief, we think it’s unconstitutional.

You don’t even reach the Tucker Act as we see it till you pass the point of constitutionality and Judge Friendly, I think did.

We think he was incorrect in that respect.

If I may in the few minutes I have left, I’d like to turn the reasons why particularly of you, of some of the question asked by justices this morning.

It’s not premature now, to rule on the question raised with respect to constitutionality of the ultimate conveyance not just the interim erosion and very briefly, the Court now knows the Rail Act compels a conveyance of that property free of lien.

The properties would be included without notice or opportunity for hearing on the part of the owners or the judges who supervised the trustee’s in the Section 77 proceedings.

The Congress of the Section 208 has an absolute right of determination of what will go into that final system plan by rejecting plans that have put to it.

Fourth, the Special Court is required without notice or opportunity for hearing to order the conveyances that are provided in the final plan.

Fifth, the trustee’s are required are ordered by the statute to convey those properties free of lien without any choice.

Sixth, the Rail Act for did specifically, and I think that was mentioned in response to the — to a question from Justice Rehnquist, that did specifically, that any enjoining of those conveyances.

Seventh, the amounts provided under the statute and now, wholly known to the Court.

You know what it is Congress says could be paid and no more.

Eight, the review of Congress as to any Court ordered revision under Section 206 (i) of the Act gives it the right to reject all capital structures that a Special Court or reorganization court would be necessary the premises.

Warren E. Burger:

Thank you, Mr. Auerbach.

Warren E. Burger:

Mr. Solicitor General and your brother —

Robert H. Bork:

Mr. Chief Justice, I have nothing further, unless there are some questions.

Warren E. Burger:

I observed that there are none thank you, gentlemen.

The case is submitted.