City of Nashville, Tennessee v. United States

• Decision Date: 24 May 1957
• Docket Number: Civ. No. 2354.
• Parties: CITY OF NASHVILLE, TENNESSEE, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — Middle District of Tennessee

155 F. Supp. 98

CITY OF NASHVILLE, TENNESSEE, Plaintiff, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

Civ. No. 2354.

United States District Court M. D. Tennessee, Nashville Division.

May 24, 1957.

George F. McCanless, Atty. Gen., State of Tenn., LaRoe, Winn, & Moerman, Washington, D. C., Waller, Davis & Lansden and Elmer D. Davies, Jr., Davidson County Atty., Nashville, Tenn., for plaintiff.

Fred Elledge, Jr., U. S. Atty., James E. Kilday and E. Riggs McConnell, Department of Justice, Washington, D. C., for defendants.

Hooker, Keeble, Dotson & Harris, Nashville, Tenn., W. L. Grubbs, Louisville, Ky., for L. & N. R. Co.

Robert W. Ginnane, Washington, D. C., Interstate Commerce Commission, for defendants.

Walter Harwood, Nashville, Tenn., for Employees of N., C. & St. L. R. Co.

Before MARTIN, Circuit Judge, and DARR and SHELBOURNE, District Judges.

PER CURIAM.

The undersigned three-judge court was assembled pursuant to sections 2284 and 2321-2325, Title 28, United States Code, for the hearing of an application for interlocutory injunction. The court has considered the pleadings and the proceedings and evidence adduced before the Interstate Commerce Commission, the entire record in the case, and the oral arguments and briefs of the attorneys for the plaintiff, for the defendants, and for all the intervenors, constituting all the parties. It was agreed that the hearing would be a final hearing on the merits upon demand for a permanent injunction.

The court is of opinion that the litigation will be most expeditiously and, at the same time, adequately disposed of finally by the promulgation of findings of fact and conclusions of law, instead of by a lengthy opinion. Accordingly, the following findings of fact and conclusions of law are filed for entry.

Findings of Fact

1. The Louisville and Nashville Railroad Company, The Nashville, Chattanooga & St. Louis Railway, the Atlantic Coast Line Railroad Company, and The Atlantic Coast Line Company, hereinafter sometimes referred to collectively as the applicants, and individually as the Kentucky Company, the Tennessee Company, the Coast Line, and the Connecticut Company, respectively, or by the distinctive name in their respective corporate titles, on January 28, 1955, jointly applied for authority under Section 5(2) of the Interstate Commerce Act, as amended, 49 U.S.C.A. § 5(2), to merge the properties and franchises of the Tennessee Company into the Kentucky Company for ownership, management, and operation. The Connecticut Company and the Coast Line joined in the application because of their control, through stock ownership, of the Kentucky Company.

2. The plaintiff, City of Nashville, and the intervening plaintiffs, State of Tennessee, Tennessee Public Service Commission, Davidson County, Tennessee, and the N., C. & St. L. Railway Employees Job Protection Association, intervened before the Interstate Commerce Commission in opposition to the merger. Hearings were held at Washington, D. C., on August 23 to August 26, 1955, and at Nashville, Tennessee, on August 30 to September 1, 1955. Upon petition of the City of Nashville, et al., the Commission, by Division 4, ordered a further hearing at Washington on September 13, 1955, for the purpose of adducing testimony with respect to a routing and solicitation agreement between the Kentucky Company and the Tennessee Company which the Examiner previously had refused to require the applicants to furnish for the record. The Examiner filed a proposed report, recommending the merger on or about June 21, 1956. Exceptions were field by the plaintiffs and intervening plaintiffs; oral argument before the full Commission was scheduled and held; and, on March 13, 1957, the Commission released a report and order, both dated March 1, 1957, approving the merger. The order was made effective forty days from date, to-wit, on April 9, 1957. The complaint in this case, seeking to set aside and vacate the order of the Commission, was filed March 29, 1957, and a temporary restraining order was issued on April 8, 1957.

3. The application stated that the Connecticut Company has outstanding 235,200 shares of common stock, each share having one vote, and that there were 973 stockholders as of November 13, 1953. The application stated further that, as of November 15, 1954, Mercantile-Safe Deposit & Trust Company, 13 South Street, Baltimore 2, Maryland, owned 86,313 shares, and Safe & Company, 13 South Street, Baltimore 2, Maryland, owned 42,636 shares. Safe & Company is a nominee for Mercantile-Safe Deposit & Trust Company. At the hearing before this court, plaintiff filed as an exhibit "Supplemental Application of Mercantile-Safe Deposit & Trust Company and Motion to Dismiss said Supplemental Application" filed July 6, 1956, with the Interstate Commission in Finance Docket No. 19261, involving application of Atlantic Coast Line Railroad Company and the Atlantic Coast Line Company, under Section 5(2) of the Interstate Commerce Act, for authority to purchase the properties of the Florida East Coast Railway Company. This supplemental application, verified by Thomas B. Butler, President, who is also a director of the Kentucky Company, states that the Mercantile-Safe Deposit & Trust Company, as sole Trustee under various trusts, holds a majority of the voting stock of the Connecticut Company and also holds additional amounts in other fiduciary capacities, and 4,725 shares outright. Mercantile-Safe Deposit & Trust Company did not join in the application in the proceeding here involved.

4. The plaintiff, City of Nashville, brought this suit to annul, vacate and set aside the report and order of March 1, 1957, of the Interstate Commerce Commission in Louisville and Nashville Railroad Company, et al., Merger, etc., authorizing, under Section 5(2) of Title 49 U.S.C.A., the merger of The Nashville, Chattanooga & St. Louis Railway into the Louisville and Nashville Railroad Company and the acquisition of direct control by the Atlantic Coast Line Railroad Company of the surviving corporation and indirect control of such corporation by The Atlantic Coast Line Company, holding company. The Commission's order was released on March 13, 1957.

The report and order of March 1, 1957, also authorize, under Section 20a of Title 49 U.S.C.A., the issuance by applicant, Louisville and Nashville Railroad Company, of additional shares of stock and the assumption by the Louisville and Nashville Railroad Company of obligation and liability in respect of the securities of The Nashville, Chattanooga & St. Louis Railway.

5. Interveners, as plaintiffs, are the State of Tennessee, the Tennessee Public Service Commission, the County of Davidson, Tennessee, Robert L. Bryson, Luther Thomas Lambert and Vernon H. Hedgepath, individually and as representative of a class composed of 839 employees of The Nashville, Chattanooga & St. Louis Railway, and the N., C. & St. L. Railway Employees Job Protection Association. Interveners, as defendants, are the Louisville and Nashville Railroad Company and The Nashville, Chattanooga & St. Louis Railway. These interventions are authorized by section 2323, Title 28 United States Code.

6. On April 8, 1957, a temporary restraining order was issued by John D. Martin, United States Circuit Judge sitting by designation as District Judge of the United States District Court for the Middle District of Tennessee, Nashville Division, staying the operation of the Commission's order. Such temporary restraining order was issued pursuant to Section 2284 of Title 28 United States Code, to remain in effect until the hearing and determination of the issues by this court.

7. In its report and order, the Commission found that, subject to certain prescribed conditions and to terms and conditions which it found to be just and reasonable, the proposed merger is within the scope of sub-paragraph (a) of Section 5(2) of Title 49 U.S.C.A., and that it will be consistent with the public interest.

8. The Commission found that the stockholders of both involved companies had voted for the merger. In both companies there was more than a majority of the shares entitled to vote cast for the merger. The only state law which could alter the majority vote requirement of Section 5(11) of Title 49 U.S.C.A. is Section 2610 of Williams' Tennessee Code (Section 65-601 of Tennessee Code Annotated), which requires of Tennessee corporations (The Nashville, Chattanooga & St. Louis Railway being such a corporation) a vote of "three-fourths in amount of the capital stock of said company present and voting." This requirement was met in the vote cast for the merger by stockholders of The Nashville, Chattanooga & St. Louis Railway.

9. A comprehensive record was made before the Commission, which held three separate hearings. The transcript of testimony covers 1,733 pages. There were numerous and elaborate exhibits. Extensive briefs, exceptions to the Examiner's proposed report and replies to such exceptions were submitted to the Commission, numerous other documents were filed, and the parties were heard on oral argument by ten members of the Commission, one member not participating. The decision of the Commission was unanimous.

10. The Commission concluded that "the merger would enhance the adequacy of service by the merged companies, and would constitute the best use of the facilities" of the involved companies; that savings approximating $3,243,123 per annum—and probably more—may be expected from the merger; that such "savings and improved efficiency of operation necessarily would strengthen the applicants, and render them capable of better service"; that "Applicants have spent vast sums of money in improvements to their equipment and plant"; that additional large improvements are in contemplation, but that "Nothing now left to be done offers such great opportunity for improvement in efficiency and economy as does the proposed merger"; and that ...