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Matter of Penn Cent. Transp. Co.

December 12, 1995

IN THE MATTER OF: PENN CENTRAL TRANSPORTATION COMPANY USX CORPORATION AND BESSEMER AND LAKE ERIE RAILROAD COMPANY, APPELLANTS


ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil Action No. 70-00347)

Before: BECKER, NYGAARD and ALITO, Circuit Judges

NYGAARD, Circuit Judge.

Argued July 24, 1995

Filed December 12, 1995)

OPINION OF THE COURT

Appellants, USX Corporation and the Bessemer and Lake Erie Railroad Company, sued the reorganized Penn Central Transportation Company (now known as American Premier Underwriters, Inc.) for contribution and indemnity based on Penn Central's participation with them in an antitrust conspiracy. Although appellants were held liable for nearly $600 million in damages from that conspiracy, see In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144 (3d Cir. 1993), the courts ruled that the direct claims against Penn Central were barred by its reorganization.

In response to the underlying lawsuit for contribution and indemnity, Penn Central filed a petition in its bankruptcy case to require the dismissal of the suit, alleging that the 1978 Consummation Order and Final Decree barred it. The district court granted the petition. In re Penn Central Transp. Co., No. 70-347 (E.D. Pa. Oct. 13, 1994). We will reverse.

I.

The Penn Central bankruptcy proceeding is more than a quarter-century old; and the facts of the antitrust conspiracy are even older. Andrew Carnegie built the Bessemer to link his Pittsburgh-area steel mills to raw materials sources, specifically iron ore, received from ore ships at Lake Erie ports. The railroad was a wholly-owned subsidiary of United States Steel Corporation (now USX Corporation) until 1989, when it was spun off. USX, however, retained liability for the antitrust claims at issue under its indemnity agreement with the Bessemer.

Beginning in 1956, the Bessemer and several other railroads, including the Penn Central's predecessors, entered into a joint ratemaking agreement, which was given limited immunity from antitrust attack under Section(s) 5(a) of the Reed-Bulwinkle Act, ch. 491, 62 Stat. 472 (1948). In 1970, the Penn Central filed a bankruptcy petition under 77 of the Bankruptcy Act of 1898. This action, and the bankruptcies of several other regional railroads, motivated Congress to pass the Regional Rail Reorganization Act of 1973, under which the Penn Central conveyed its rail assets to Conrail in 1976. In 1978, the district court entered its Final Decree and Consummation Order, which included a limitation or bar date for all claims against the debtor. The Consummation Order transferred the reorganized Penn Central's railroad property and discharged it from any further claims predicated upon its pre-consummation acts or conduct. The district court retained jurisdiction over any claims that might later be asserted against Penn Central.

In 1980, Pinney Dock and Litton filed antitrust complaints against the Bessemer, Penn Central and other railroads. The claims against Penn Central were held barred by the discharge. In re Penn Central Transp. Co. ("Pinney Dock"), 42 B.R. 657, 676 (E.D. Pa. 1984), aff'd, 771 F.2d 762 (3d Cir.), cert. denied, 474 U.S. 1033, 106 S. Ct. 596 (1985). Between 1982 and 1984, several plaintiffs filed suits under federal and Ohio antitrust law against the signatories to the Section(s) 5(a) agreement, including Penn Central and the Bessemer. These claims were consolidated as the "MDL 587" litigation. The district court dismissed Penn Central as a defendant, concluding that because the claims arose pre-consummation they were discharged. All remaining defendants except the Bessemer settled with plaintiffs. The Bessemer went to trial and lost. Judgment was entered against it in excess of $592 million, and paid by USX. The Bessemer and USX then filed complaints in federal and Ohio courts seeking indemnity and contribution from Penn Central, as the instigator, enforcer and primary beneficiary of the conspiracy.

II.

The predicate conduct of appellants' antitrust liability began before Penn Central filed its bankruptcy petition. Thus, Penn Central asserts that appellants' claims against it have been discharged by the Consummation Order and Final Decree. Appellants argue, however, that their claims seeking contribution and indemnity could not possibly have been filed before the 1978 bar date, because they were not sued ...


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