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In re Penn Central Transportation Co.

decided: July 16, 1971.

IN THE MATTER OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR (TWO CASES). APPEAL OF CONGRESS OF RAILWAY UNIONS, IN NOS. 71-1366 AND 71-1386. APPEAL OF RAILWAY LABOR EXECUTIVES' ASSOCIATION, IN NOS. 71-1367 AND 71-1387. APPEAL OF COMMONWEALTH OF PENNSYLVANIA ET AL., IN NO. 71-1403


McLaughlin, Aldisert and Gibbons, Circuit Judges.

Author: Aldisert

Opinion OF THE COURT

ALDISERT, Circuit Judge.

These consolidated appeals contest two orders promulgated by the United States District Court for the Eastern District of Pennsylvania, sitting as a railroad reorganization court, Penn Central Transportation Company, debtor.

Order No. 232 prohibits the appellants*fn1 from "instituting or maintaining any litigation directly affecting the continuance or discontinuance of passenger trains covered by the Act" in any court other than the reorganization court, or "without first obtaining leave" of the court to do so. The order followed an application by Penn Central for relief after appellants had instituted an action in the United States District Court for the Western District of Pennsylvania seeking to enjoin the discontinuance of certain trains contemplated by the National Rail Passenger Corporation (Amtrak), a corporate body created by the Rail Passenger Service Act of 1970, (1a) P.L. 91-518, 45 U.S.C. ยง 501 et seq. (Railpax).

Order No. 242 denied leave requested, pursuant to Order 232, by appellants Railway Labor Executives' Association and Congress of Railway Unions to join Penn Central in a civil action brought on April 23, 1971, in the United States District Court for the District of Columbia challenging the labor protective provisions adopted pursuant to the Act.

Order No. 232

Because appellants question the jurisdiction of the reorganization court to promulgate this order and argue, assuming jurisdiction to lie, that exercise of that jurisdiction was in this case an abuse of discretion, it is necessary briefly to review the genesis of this order.

On September 30, 1970, the Interstate Commerce Commission authorized Penn Central to discontinue 16 passenger trains. An action was brought by appellants*fn2 in the Western District of Pennsylvania to review the decision. A three-judge court was convened, and an interlocutory injunction was issued, enjoining the discontinuance. Penn Central appealed the injunction order to the Supreme Court, which, in Baker v. Pennsylvania, 401 U.S. 902, 91 S. Ct. 875, 27 L. Ed. 2d 801 (1971), vacated the judgment, ruling that the matter had become moot.*fn3 Thereafter, appellants filed a second action in the Western District of Pennsylvania at No. 71-282 seeking to prevent any passenger service discontinuance until May 1, 1971, Amtrak's beginning date. This action was necessitated, according to appellants, because "despite the Supreme Court's ruling, Penn Central threatened to discontinue the trains. This defiant attitude on the part of the Trustees caused these public parties to institute suit * * * on March 19, 1971."

On April 2, 1971, Penn Central obtained from the reorganization court a rule to show cause why appellants should not be enjoined from proceeding with the Western District action because the subject matter was "subsumed in the issues presented before" the reorganization court on a petition by trustees for authority to issue trustee certificates pursuant to arrangements under the Act.*fn4

After hearing, the reorganization court found that the Western Pennsylvania litigation would hamper Penn Central organizational efforts and, by Order No. 232, enjoined appellants from proceeding in that action. This appeal followed.

Appellants urge that no jurisdiction lies in the reorganization court to enjoin matters relating to train discontinuances. Alternatively, they argue that exercise of jurisdiction here was an abuse of discretion. As recognized by the statutory court, a reorganization court does not have "exclusive jurisdiction over all controversies that in some way affect the debtor's estate," Callaway v. Benton, 336 U.S. 132, 69 S. Ct. 435, 93 L. Ed. 553 (1949), and may not oust the authority of administrative agencies charged with the responsibility of regulating service. Palmer v. Massachusetts, 308 U.S. 79, 60 S. Ct. 34, 84 L. Ed. 93 (1939).*fn5 But the teachings of these cases do not preclude the reorganization court from "[enjoining] the prosecution of any suit which would take from it the decision of any question which it has the duty to decide in connection with the reorganization or which would hamper it in any way in exercising the power imposed upon it." In re Imperial "400" National, Inc., 429 F.2d 671, 677 (3rd Cir. 1970).

Our inquiry, therefore, resolves itself to a single issue: would the persistence of the Western District proceedings relating to the discontinuance of passenger service trains, now limited to an interpretation of the Rail Passenger Service Act of 1970,*fn6 hamper the reorganization court in exercising the power imposed on it by the bankruptcy law?

The reorganization court found that "at least for the present" it should retain control of such litigation. Upon an examination of the reasons set forth by the reorganization court, we have concluded that this was no abuse of discretion. We recognize, as did the court below, that matters relating to train discontinuances are not ordinarily heard by the ...


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