City of New York v. United States, Civ. No. 71-C-1639.

CourtU.S. District Court — Eastern District of New York
Writing for the CourtFRIENDLY, Circuit , MISHLER, , and WEINSTEIN
Citation337 F. Supp. 150
PartiesCITY OF NEW YORK, Plaintiff, and Bush Terminal Railroad Users Association, Inc., et al., Intervening Plaintiffs, v. The UNITED STATES of America et al., Defendants.
Decision Date20 January 1972
Docket NumberCiv. No. 71-C-1639.

337 F. Supp. 150

CITY OF NEW YORK, Plaintiff, and Bush Terminal Railroad Users Association, Inc., et al., Intervening Plaintiffs,
The UNITED STATES of America et al., Defendants.

Civ. No. 71-C-1639.

United States District Court, E. D. New York.

January 20, 1972.

337 F. Supp. 151
337 F. Supp. 152
Louis Walters, Asst. Corp. Counsel (J. Lee Rankin, Corp. Counsel for City of New York, Peter C. Demetri and Eleanor Oppenheimer, Asst. Corp. Counsels, of counsel), for plaintiff

Stacey L. Wallach, New York City (Tenzer, Greenblatt, Fallon & Kaplan, New York City, of counsel), for intervening plaintiff, Bush Terminal Users Ass'n.

William C. Mahoney, Washington, D. C., for intervening plaintiffs, United Transportation Union and Brotherhood of Railway, Airline & Steamship Clerks, Freight Handlers, Express & Station Employes.

John C. McTiernan, Asst. Counsel, N. Y. State Dept. of Transportation, Albany, N. Y., for intervening plaintiff, State of New York.

Lloyd H. Baker, Asst. U. S. Atty. (Robert A. Morse, U. S. Atty. Eastern District of New York, of counsel), for defendant, the United States.

Theodore C. Knappen, Washington, D. C., Asst. Gen. Counsel, for defendant, Interstate Commerce Commission.

G. Clark Cummings, New York City, for defendant, Bush Terminal R.R.

Before FRIENDLY, Chief Circuit Judge, MISHLER, Chief District Judge, and WEINSTEIN, District Judge.

FRIENDLY, Chief Circuit Judge:

In this action against the United States, the Interstate Commerce Commission, Bush Terminal Railroad and certain of the latter's officers and directors, the City of New York, joined by several intervenors, asks us to annul an order of the Interstate Commerce Commission dated December 13, 1971, in F.D. No. 25896, which authorized abandonment of the entire line of Bush Terminal Railroad Company (the Railroad) in Kings County, New York, and Hudson County, New Jersey. The order, which was effective immediately, was entered after the Railroad on December 1, 1971, had unilaterally imposed an embargo on all outgoing freight and announced that on December 15, 1971, it would impose a similar embargo on all incoming freight, because of the allegedly unseaworthy condition of its marine equipment, and after users of the Railroad had begun an action to enjoin the embargo which they considered to be an unauthorized abandonment. The Railroad terminated operation on December 13 immediately on learning of the Commission's order.1

On December 17, the City began this action and sought a temporary restraining order, see 28 U.S.C. § 2284(3). Judge Weinstein denied this but set the City's motion for a temporary injunction for argument on December 22 before a three-judge court which he asked to have convened, 28 U.S.C. §§ 2321, 2325. At the argument, the Bush Terminal Users Association, Inc., United Transportation Union, the Brotherhood of Railway, Airline and Steamship Clerks, Freight Handlers, Express and Station Employes, and the Department of Transportation of the State of New York were allowed to intervene as plaintiffs. Issuance of

337 F. Supp. 153
a temporary restraining order was again refused, but we reserved decision on the motion for a temporary injunction pending the filing of the record and briefs

The Railroad, organized in 1903, is a wholly-owned subsidiary of Bush Universal, Inc., which had been known as Bush Terminal Company until July, 1968. The purpose of establishing the Railroad was to acquire franchise rights in city streets and extend to new buildings railroad services then being provided in Brooklyn, New York, by Bush Terminal. The line owned by the Railroad is only 1.8 miles long. This connects with some 13.56 miles of track in Brooklyn and car-float and towage facilities that are operated by the Railroad but are owned and had previously been operated by Bush Terminal, allegedly as agent for the Railroad and for trunk line carriers serving New York Harbor. In Bush Terminal R.R. Co. Operation, 257 I.C.C. 375 (1944), the Commission authorized the Railroad, pursuant to § 1(18) of the Interstate Commerce Act, to extend its railroad by acquiring through lease the trackage and other facilities owned by Bush Terminal. The lease took effect on January 1, 1945. Since then the Railroad, as a common carrier, has moved cars between industries in and near the Bush Terminal in Brooklyn across New York Harbor to and from various trunk line terminals in New Jersey. In December, 1968, Bush Terminal, having changed its name and become a conglomerate, controlled by Universal Consolidated Industries, Inc., a still more conglomerated conglomerate, conveyed all its real estate, including some of the land over which the Railroad operates, to a newly organized, wholly owned subsidiary, Bush Terminal Company, Inc. This new subsidiary assumed its parent's obligations under the lease to the Railroad. We will generally refer to Bush Universal, Inc. and Bush Terminal Company, Inc., simply as "the Terminal Company."

The Railroad, on October 23, 1969, filed an application under § 1(18) of the Interstate Commerce Act for permission to abandon the operation both of its owned and of its leased properties. Hearings were held in late June, 1970. The application was opposed by users of the service, governmental and quasi-governmental bodies and labor organizations representing the Railroad's employees. In their post-hearing briefs the City, the State, and the Users Association for the first time raised the issue that authorization of abandonment by the lessee, the Railroad, would not relieve the lessor, the Terminal Company, of its independent obligation to operate the leased properties, an obligation that would revive upon discontinuance of operations by the lessee. See Lehigh Valley R.R. Co. Proposed Abandonment of Operation, 202 I.C.C. 659, 663 (1935); Norfolk S.R.R. Co. Receivers Abandonment, 221 I.C.C. 258, 260 (1937); Livestock Terminal Service Co. Abandonment of Operation, 257 I.C.C. 1, 7 (1944); Hoboken R.R., Whse. & S.S. Connecting Co. Operation, 257 I.C.C. 739, 743-44 (1944). The Railroad responded, correctly enough as a matter of law, see Meyers v. Famous Realty, Inc., 271 F.2d 811, 814-815 (2 Cir. 1959), cert. denied, 362 U.S. 910, 80 S.Ct. 681, 4 L.Ed.2d 619 (1960), that this doctrine applies only when the lessor was a "carrier by railroad," see 49 U.S.C. § 1(18), when the lease was made; it claimed that the Terminal Company was not.

On June 3, 1971, the examiner rendered a report recommending authorization of the abandonment. He found that, despite various promotional efforts, the Railroad's traffic had seriously declined, due to motor vehicle competition, and the moving of industries away from the Brooklyn area served by it; that the Railroad "has sustained substantial losses for many years, and prospects for reversing the decline in traffic and for profitable operations are very slim;" and that the property owned and leased by the Railroad was in such poor condition that an expenditure by it of approximately $930,000 would be required for

337 F. Supp. 154
rehabilitation of roadway and marine equipment.2 With the Railroad's long record of losses and negative net worth, these funds could not be obtained except from the parent. The examiner concluded that, despite undoubted hardship to users, which might require many to move, with consequent loss of employment opportunities and revenues to the City and the State, there was no alternative to authorizing abandonment by the Railroad. Turning to the legal argument concerning the obligations of Terminal Company as lessor, the examiner concluded that this raised a factual issue of the lessor's earlier common carrier status, which had never previously been resolved and which could be tested in an action by the objecting parties under § 1(18) and (20). Thus, he declined to condition abandonment by the Railroad upon resumption of operation of the leased properties by the Terminal Company. Following the Commission's general practice in cases of complete abandonment where neither the carrier nor a parent carrier realizes economic advantages other than the termination of losses,3 see Chicago, A. & S.R.R. Co. Receiver Abandonment, 261 I.C.C. 646, 652 (1946); Okmulgee Northern Ry. Co. Abandonment, 320 I.C.C. 637, 645-646 (1964); Manifestee & Repton R.R. Co. Abandonment, 324 I.C.C. 489, 492 (1964); Tennessee Central Ry. Co. Abandonment of Operations, 333 I.C.C. 443, 453-454 (1968), he declined to impose employee protective conditions

Exceptions and a reply thereto by the Railroad were filed with the Commission in early August. The City's, the Unions' and the Users Association's exceptions requested oral argument. On November 3, the Users Association filed a petition for leave to file a petition to reopen the hearing to include further testimony concerning the willingness of users to pay a surcharge of $25 per car.

337 F. Supp. 155
The Railroad replied by letter. On December 13, the Commission, acting by Division 3, entered the order to which we have referred. This noted that the exceptions had raised "a substantial question of possible damage to the environment" as a result of the substitution of trucks for railroad cars but concluded that "any damage that may occur to environmental amenities by our approval of this application is to be outweighed by the proven economic harm that would result from its denial." It upheld the findings and conclusions of the examiner and decided that, save for the point just stated, the exceptions and reply thereto raised no new or material issue and were not of such a nature as to require the issuance of a report. After denying the petition of the Users Association for leave to file a petition to reopen the record, it adopted the hearing examiner's order of abandonment "as the order of the Commission, Division 3, effective on the date of service hereof," which was specified to be December 13


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1 books & journal articles
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