664 Merger and Inclusion Cases, Nos. 433

CourtUnited States Supreme Court
Writing for the CourtFORTAS
Citation19 L.Ed.2d 723,88 S.Ct. 602,389 U.S. 486
PartiesMisc., and 664 Misc.MERGER AND N & W INCLUSION CASES. *
Decision Date15 January 1968
Docket NumberNos. 433,832,779,831,836,830,835,PENN-CENTRAL,668,834,833,778

389 U.S. 486
88 S.Ct. 602
19 L.Ed.2d 723
Nos. 433, 778, 779, 830, 831, 832, 833, 834, 835, 836, 668 Misc., and 664 Misc. PENN-CENTRAL MERGER AND N & W INCLUSION CASES.* Argued Dec. 4, 1967. Decided Jan. 15, 1968. ---------- * No. 778, Baltimore & Ohio Railroad Co. et al.

v.

United States et al.; No. 779, Norfolk & Western Railway Co. v. United States et al.; No. 830, Oscar Gruss & Son v. United States et al.;

No. 831, New York, New Haven & Hartford Railroad Co. First

Mortgage 4% Bondholders Committee et al. v. United States et al.; No. 832, Erie-Lackawanna Railroad Co. et al. v. United States et al.; No. 833, Boston & Maine Corp. v. United States et al.; No. 834, Reading Co. v. United States et al.; No. 835, City of Scranton et al. v. United States et al.; and No. 836, John Hancock Mutual Life Insurance Co. et al. v. United States et al., on appeal from the United States District Court for the Southern District of New York, argued December 4, 1967. No. 433, City of Pottsville v. United States et al., on appeal from the United States District Court for the Middle District of Pennsylvania; No. 663, Misc., Borough of Moosic v. United States District Court for the Middle District of Pennsylvania et al.; and No. 664, Misc., City of Scranton et al. v. United States District Court for the Middle District of Pennsylvania et al., on motions for leave to file petitions for writs of mandamus and/or certiorari to the United State District Court for the Middle District of Pennsylvania.

[Syllabus from pages 486-490 intentionally omitted]

Page 490

Howard J. Trienens, Chicago, Ill., Myron S. Isaacs, New York City, Edward A. McDermott, Washington, D.C., Ernest R. von Starck, Philadelphia, Pa., Gordon P. MacDougall, Washington, D.C., Malcolm Fooshee and Lester C. Migdal, New York City, for appellants.

Solicitor General, Erwin N. Griswold, Thomas D. Barr, Harry G. Silleck, Jr., New York City, Joseph Auerback and Hugh B. Cox, Washington, D.C., for appellees.

[Argument of Counsel intentionally omitted from pages 490-491]

Page 492

Mr. Justice FORTAS delivered the opinion of the Court.

These cases again bring before us problems arising from the program to merge the Pennsylvania and New York Central railroads and related problems proceeding from an Interstate Commerce Commission order that certain railroads be included in the Norfolk & Western (N & W) system. The merger and the inclusion orders are part of a vast reorganization of rail transportation implementing the congressional policy of encouraging consolidation of the Nation's railroads into a 'limited number of systems.' Section 407 of the Transportation Act of 1920, amending § 5(4) of the Interstate Commerce Act, 41 Stat. 481 (1920). That policy has been with us, in one form or another, for more than 45 years. The original idea of the 1920 Act, that the ICC would formulate a national plan of consolidation, proved unworkable. It ran into heavy opposition from carriers and eventually had to be abandoned. The 1920 Act was replaced by the Transportation Act of 1940, 54 Stat. 898. Section 5(2)(b) of the Interstate Commerce Act, as amended by the 1940 Act, 54 Stat. 906, 49 U.S.C. § 5(2)(b), which governed the Commission's examination of the present transactions. Under the 1940 Act, the initiation of

Page 493

merger and consolidation proceedings is left to the carriers themselves, and the Commission possesses no power to compel carriers to merge. However, the congressional directive for a limited number of railroad systems has not been changed. The only change has been in the means of achieving that goal. See generally St. Joe Paper Co. V. Atlantic Coast Line R. Co., 347 U.S. 298, 315 321, 74 S.Ct. 574, 584—587, 98 L.Ed. 710 (Appendix) (1954).

The Pennsylvania and the New York Central dominate rail transportation in the Northeast. Their freight operations extend over some 20,000 miles of road in 14 States and Canada. They are the two largest passenger carrying railroads in the United States. In 1965 their combined operating revenue surpassed $1,500,000,000 and their combined net income was more than $75,000,000. As independent lines, Pennsylvania and New York Central are, to some extent, in direct competition for rail traffic. There are 32 urban areas in which the two lines are in competition with each other and in which no other rail facilities are available. The two roads operate at 160 common points or junctions and have a substantial amount of parallel trackage and routes. The proposed merger which the ICC has approved contemplates the unification of these vast roads and, as time goes on, the rationalization and elimination of some of the dual facilities and services in various areas and in various respects. The merger will result in 'enormous savings in transit time.' It is estimated that in eight years, the savings in expense will amount to more than $80,000,000 annually. See Baltimore & Ohio R. Co. v. United States, 386 U.S. 372, 379—381, 87 S.Ct. 1100, 1103—1105, 18 L.Ed.2d 159 (1967).

At the same time the combination of these two roads will directly and adversely affect various smaller railroads in the service area because of the more effective competitive service that the combined system will offer and

Page 494

because of the tendency of the combined roads, unless restrained by law, to favor their own system rather than to share traffic by interchange with nonsystem roads.

In brief, the antecedents of the issues before us are as follows: the Penn-Central merger has been under consideration by the parties and the Commission for about 10 years. It was preceded by the vast N & W-Nickel Plate merger, which the Commission approved in 1964. That transaction, which, it is anticipated, will eventually produce savings for the N & W system of over $29,000,000 annually, resulted in a large rail network covering some 7,000 miles of track and extending in the north from Des Moines and Kansas City to Buffalo and Pittsburgh, and in the southern tier from Cincinnati to Norfolk. See Norfolk & Western Railway Co. and New York, Chicago & St. Louis Railroad Co.—Merger, etc., 324 I.C.C. 1 (1964). The transaction was not presented to this Court for review.

In 1962 the parties to the Penn-Central transaction signed an agreement of merger including 36 rail carriers. The merger agreement did not include the New York, New Haven & Hartford Railroad (NH), although that road requested inclusion.

Following the merger agreement, the parties submitted the proposal to the Commission for approval under § 5(2) of the Interstate Commerce Act. Exhaustive hearings were held in which States, municipalities, railroads, shippers, and public bodies some 200 parties, in all—took part. The Commission's own staff participated extensively as did the Department of Justice acting for affected interests of the United States other than the regulatory functions of the Commission. All participants, with relatively minor exceptions to which we shall later advert, agreed that the merger itself would be in the public interest. There were sharp differences, however, with respect to certain issues. These primarily concerned the

Page 495

provisions to be made for three smaller lines affected by the proposed merger: the Erie-Lackawanna (E—L), Delaware & Hudson (D & H), and Boston & Maine (B & M) railroads. The Commission approved immediate consummation of the merger, subject to a reservation of jurisdiction to establish protective provisions for the three roads. Pennsylvania Railroad Co.—Merger—New York Central Railroad Co., 327 I.C.C. 475 (1966). Its order was approved by a three-judge court in the Southern District of New York. Erie-Lackawanna R. Co. v. United States, 259 F.Supp. 964 (1966).

At the last Term of Court, we reversed. We noted that the Commission itself had found that the survival of the E—L, D & H, and B & M was essential to the public interest and that these roads would be so seriously affected by the competition of the merged company that they might not be able to survive unless adequate protective arrangements were made. In these circumstances we concluded that the Commission should have determined the means to preserve the 'protected roads,' on both an interim and a permanent basis, before permitting consummation of the merger. We expressly stated that we were not passing upon the validity of the merger or the 'peripheral points posed by the various parties.' Baltimore & Ohio R. Co. v. United States, supra, 386 U.S. at 378, 87 S.Ct. at 1103.

The Court noted that in 1965 each of the three 'protected roads' had filed applications for inclusion in the N & W system, and that these were pending before the Commission in the N & W-Nickel Plate merger case pursuant to the Commission's continuing jurisdiction over those proceedings. We further noted that the Commission, pursuant to its power under § 5 of the Act to require as a condition of approval of a merger that other railroads be included in the merger, had obligated the merged N & W system to include the E—L, D & H,

Page 496

and B & M if the Commission should so direct, upon such equitable terms as the Commission might prescribe. We stated that if the three protected roads were ordered to be included in the N & W system, 'such action would provide the solution to the problem of the necessary and indispensable protection to the three railroads that the Commission found prerequisite to the merger.' 386 U.S., at 390, 87 S.Ct., at 1109.

In accordance with our remand of the Penn-Central merger case, the Commission conducted further proceedings in the N & W case on the pending petitions of the three roads. On June 9, 1967, it issued its decision to the effect that 'inclusion of the petitioners in the N & W system is preferable to their inclusion in the Penn-Central,' and ordered N & W to acquire the stock of the three roads on prescribed terms. Norfolk & Western Railway Co. and New York, Chicago & St. Louis Railroad...

To continue reading

Request your trial
82 practice notes
  • Interstate Investors, Inc. v. United States, No. 66 Civ. 3004.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • July 22, 1968
    ...Act. As has been made abundantly clear by the Supreme Court, see, e. g., Penn-Central Merger and N. & W. Inclusion 287 F. Supp. 390 Cases, 389 U.S. 486, 498-501, 88 S.Ct. 602, 19 L.Ed.2d 723 (1968); Seaboard Air Line R. R. Co. v. United States, 382 U.S. 154, 86 S.Ct. 277, 15 L.Ed.2d 223 (19......
  • Griffin v. Burns, No. 77-1250
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • January 19, 1978
    ...where a party may be barred from future litigation by his mere failure to intervene. See Penn-Central Merger and N & W Inclusion Cases, 389 U.S. 486, 88 S.Ct. 602, 19 L.Ed.2d 723 (1968). Cases in that category would seem limited, however, to ones where by statute, rule or practice, interven......
  • Lamoille Valley R. Co. v. I.C.C., Nos. 82-1498
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 28, 1983
    ...under "the congressional policy of encouraging consolidation of the Nation's railroads." Penn-Central Merger & N & W Inclusion Cases, 389 U.S. 486, 492, 88 S.Ct. 602, 605, 19 L.Ed.2d 723 (1968). The Railroad Revitalization and Regulatory Reform Act of 1976 ("4R Act"), Pub.L. No. 94-210, 90 ......
  • Lehigh & New England Ry. Co. v. I. C. C., No. 75-1518
    • United States
    • U.S. Court of Appeals — Third Circuit
    • June 9, 1976
    ...consider the public interest as well as their balance sheets is found in the Penn-Central Merger and Norfolk & Western Inclusion Cases, 389 U.S. 486, 510-11, 88 S.Ct. 602, 611, 19 L.Ed.2d 723 While the rights of the bondholders are entitled to respect, they do not command Procrustean measur......
  • Request a trial to view additional results
82 cases
  • Interstate Investors, Inc. v. United States, No. 66 Civ. 3004.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • July 22, 1968
    ...Act. As has been made abundantly clear by the Supreme Court, see, e. g., Penn-Central Merger and N. & W. Inclusion 287 F. Supp. 390 Cases, 389 U.S. 486, 498-501, 88 S.Ct. 602, 19 L.Ed.2d 723 (1968); Seaboard Air Line R. R. Co. v. United States, 382 U.S. 154, 86 S.Ct. 277, 15 L.Ed.2d 223 (19......
  • Griffin v. Burns, No. 77-1250
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • January 19, 1978
    ...where a party may be barred from future litigation by his mere failure to intervene. See Penn-Central Merger and N & W Inclusion Cases, 389 U.S. 486, 88 S.Ct. 602, 19 L.Ed.2d 723 (1968). Cases in that category would seem limited, however, to ones where by statute, rule or practice, interven......
  • Lamoille Valley R. Co. v. I.C.C., Nos. 82-1498
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 28, 1983
    ...under "the congressional policy of encouraging consolidation of the Nation's railroads." Penn-Central Merger & N & W Inclusion Cases, 389 U.S. 486, 492, 88 S.Ct. 602, 605, 19 L.Ed.2d 723 (1968). The Railroad Revitalization and Regulatory Reform Act of 1976 ("4R Act"), Pub.L. No. 94-210, 90 ......
  • Lehigh & New England Ry. Co. v. I. C. C., No. 75-1518
    • United States
    • U.S. Court of Appeals — Third Circuit
    • June 9, 1976
    ...consider the public interest as well as their balance sheets is found in the Penn-Central Merger and Norfolk & Western Inclusion Cases, 389 U.S. 486, 510-11, 88 S.Ct. 602, 611, 19 L.Ed.2d 723 While the rights of the bondholders are entitled to respect, they do not command Procrustean measur......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT