Jacksonville Terminal Co. v. Florida East Coast Ry. Co.

• Decision Date: 11 August 1966
• Docket Number: No. 22931.,22931.
• Citation: 363 F.2d 216
• Parties: JACKSONVILLE TERMINAL COMPANY, Atlantic Coast Line Railroad Company and Seaboard Air Line Railroad Company, Appellants, v. FLORIDA EAST COAST RAILWAY COMPANY, Appellee. FLORIDA EAST COAST RAILWAY COMPANY, Appellant, v. ATLANTIC COAST LINE RAILROAD COMPANY and Seaboard Air Line Railroad Company, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

363 F.2d 216 (1966)

JACKSONVILLE TERMINAL COMPANY, Atlantic Coast Line Railroad Company and Seaboard Air Line Railroad Company, Appellants, v. FLORIDA EAST COAST RAILWAY COMPANY, Appellee.

FLORIDA EAST COAST RAILWAY COMPANY, Appellant, v. ATLANTIC COAST LINE RAILROAD COMPANY and Seaboard Air Line Railroad Company, Appellees.

No. 22931.

United States Court of Appeals Fifth Circuit.

July 7, 1966.

Rehearing Denied August 11, 1966.

John S. Cox, Yardley D. Buckman, Clark W. Toole, Jr., Jacksonville, Fla., for appellants; Kurz, Toole, Maness & Martin, Cox, Grissett & Webb, Jacksonville, Fla., of counsel.

Chester Bedell, Robert P. Smith, Jr., Raymond Ehrlich, Marion R. Shepard, Jacksonville, Fla., for appellees; Bedell, Bedell, Dittmar & Smith, Mathews, Osborne & Ehrlich, Jacksonville, Fla., of counsel.

Before BROWN and COLEMAN, Circuit Judges, and DAWKINS, District Judge.

JOHN R. BROWN, Circuit Judge:

Now on its second trip following our earlier holding that there was federal-question jurisdiction, 28 U.S.C.A. § 1337, Florida East Coast Ry. v. Jacksonville Terminal Co., 5 Cir., 1964, 328 F.2d 720, cert. denied, 1964, 379 U.S. 830, 85 S.Ct. 59, 13 L.Ed.2d 38, this appeal presents the merits of the controversy. That controversy essentially presents a single question: shall the law give effective recognition to the plain terms of a private contract made between experienced, mature parties of exceptional bargaining strength, the legality of which all concede and no one challenges? The answer here, as it was below, is in the affirmative. We therefore affirm.

The contract, though plain and positive, is indeed most unusual. The controversy centers around Art. 21.¹ Under it any of the owner-lines is entitled at any time to demand the dismissal of the President or General Manager of the Jacksonville Terminal, their jointly owned terminal subsidiary. Likewise, selection of a new President requires the unanimous approval of all owner-lines.² Since February 1963, an impasse has existed. At that time 50% of the owner-lines demanded the dismissal of Marshall C. Jennette, President and General Manager of the Company, who entered on his office shortly before on August 1, 1962.³ The other 50% agree this demand is lawful, but they decline to do anything about it. In the meantime, Mr. Jennette continues to hold and exercise his office. The District Judge put the train back on the tracks by the order, now under review, in which the recalcitrant 50% were ordered and "directed to join in effecting a prompt termination of the services" of the President and the General Counsel.

For our purposes, the background facts may be severely capsulated. In 1947 the five Railroads comprising the owner-lines⁴ made an agreement for the continued joint ownership and operation of the Jacksonville Terminal and the guaranty by four of them of the payment of principal and interest on four million dollar issue of refunding bonds and other financial obligations of the Terminal. As a part of this transaction, the parties executed what is described as the Operating and Guaranty Agreement. Art. 21, note 1, supra, was contained in this agreement.

Since this pertained to the continued joint operation and control of a carrier by two or more other carriers, it was necessary to obtain approval of the Interstate Commerce Commission under § 5, 49 U.S.C.A. § 5(2).⁵ The Commission by report and order formally approved the issuance of the bonds. Additionally it declared that continued joint use of the Terminal by the owner-lines "will be consistent with the public interest" and "that the terms and conditions" of the Operating and Guaranty Agreement "are just and reasonable." Although no specific mention is made of it, this approval thereby approved the much mooted Art. 21.

On February 8, 1963, FEC made a written demand that Jennette⁶ be dismissed pursuant to the Operating Agreement. An effort by FEC and its allies, Southern and Georgia Southern, having a combined 50% voting power to implement this demand by stockholder resolutions directing the Board to relieve these officers was frustrated by Coastline's and Seaboard's combined 50% opposition. Not surprising, Coastline's and Seaboard's counter move to postpone formally dismissal until a successor President was selected met a similar fate at the combined hands of FEC-Southern-Georgia Southern. Thus with neither train deferring the right-of-way to the other at the intersection, neither can move.

As stated before, none of the parties to the contract challenge its validity. Hence, Coastline and Seaboard as appellants here candidly recognize that FEC's written demand of February 8, 1963, was legally authorized and that no owner-line, alone or in combination, could challenge either the right to make the demand or its effectiveness as a "dismissal." But, they assert, the dismissal is not the whole thing. Rather, it is related to the time when the dismissal becomes effective. And for this, they bring in the Florida Corporation statutory "holdover" doctrine reflected in F.S.A. §§ 608.40, 608.51.⁷ Under this doctrine, so they contend, the dismissal, although binding and legal, is not effective until such time as the successor is named. They carry this argument so far as to assert that had the by-laws of the Terminal Company expressly provided what Art. 21 requires, the by-laws would have been illegal under Florida law. The whole attack rests, therefore, on application of Florida law.⁸

This attack has no merit. We would have, first, a great deal of doubt that the Florida holdover doctrine would ever serve to continue in office one who has legally been discharged. But we think that on matters having such direct relationship to the effective operation of an important instrumentality of interstate commerce, federal, not state, standards must control. International Ass'n of Machinists, etc. v. Central Airlines, Inc., 1963, 372 U.S. 682, 83 S.Ct. 956, 10 L.Ed.2d 67; Textile Workers Union of America v. Lincoln Mills, 1957, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972. The fact that the physical activities of the Terminal Company may all be localized within Florida is of little consequence since it is an essential link in movements of equipment and freight to and from distant points on this web of interestate rails. Nor is there any difficulty from an absence of any formalized body of federal law. With judicial inventiveness and resourcefulness the Federal Courts are quite adequate for the task of fashioning an appropriate set of standards. Textile Workers Union of America v. Lincoln Mills, supra, 353 U.S. at 456-457, 77 S.Ct. at 917-918, 1 L.Ed. 2d at 980-981. Indeed, for one of these very carriers, there is fresh evidence of the capacity and obligation of the Courts to prescribe judicial standards to effectuate the overriding policies of Congress. See Brotherhood of Ry. & S. S. Clerks v. Florida East Coast Ry., 1966, 384 U.S. 238, 86 S.Ct. 1420, 16 L.Ed.2d 501 affirming United States v. Florida East Coast Ry., 5 Cir., 1965, 348 F.2d 682, which followed this Court's earlier action in Florida East Coast Ry. v. Brotherhood of R. R. Trainmen, 5 Cir., 1964, 336 F.2d 172, cert. denied, 1965, 379 U.S. 990, 85 S.Ct. 703, 13 L.Ed.2d 611.

Approached then as a matter of Federal law, we have no doubt that the contract says what it means, means what it says, and that the law should give effect to it. No holdover doctrine, designed primarily to give continuity to a corporate enterprise in its relation to outsiders, may be applied to leave in office one who has lawfully been discharged. That the discharge could come about through the action of one, or a minority, rather than a majority, relates to the internal management of the affairs of a jointly-owned subsidiary by the owners thereof under the scheme adopted by them. Cf. Chicago, M. & St. P. Ry. v. Minneapolis Civic & Commerce Ass'n, 1918, 247 U.S. 490, 38 S.Ct. 553, 62 L.Ed. 1229; Chicago, M. & St. P. Ry. v. Des Moines Union Ry., 1920, 254 U.S. 196, 41 S.Ct. 81, 65 L.Ed. 219. And the action of the District Judge in opening the switch does not offend the asserted policy denying ordinarily to Courts the power or right to displace corporate officers.⁹

Approval of this action by the District Court does not, as supposed by Appellants, put a binding imprimatur on the chaos they apprehend will occur when equal antagonists, persisting in their partisan jousting, fail in the required effort of unanimous selection of a successor. Several factors support us. First, there is no indication that Past is Prologue. And lest our affirmance be mistakenly read as putting any premium on a dog-in-the-manger intransigence on the part of any one of these parties who have solemnly bound themselves to act unanimously, it is plain that this independence is a powerful right which has to be exercised in the best of good faith. And if any stalemate develops in the ability to select top management, there are ample resources at hand. Not the least of these will be the Interstate Commerce Commission. Since there is a continuing obligation on the part of all of these carriers to fulfill the awesome obligations imposed by the Transportation Act, Brotherhood of Ry. & S.S. Clerks v. Florida East Coast Ry., supra, 384 U.S. 238, 86 S.Ct. 1420, 16 L.Ed.2d 501, the Commission is certainly open to any one or more or all of these parties or public authorities to review, in the light of...