Soo Line Railroad Company v. United States

Citation280 F. Supp. 907
Decision Date30 January 1968
Docket NumberNo. 4-67 Civil 318.,4-67 Civil 318.
PartiesSOO LINE RAILROAD COMPANY, Plaintiff, and Railroad Labor Executives' Association and Brotherhood of Locomotive Engineers, Intervenor-Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, and Chicago and North Western Railway Company and Chicago Great Western Railway Company, Intervenor-Defendants.
CourtU.S. District Court — District of Minnesota

Fordyce W. Crouch, Charles H. Clay, C. Harold Peterson, Robert G. Gehrz, and Lindquist, Magnuson & Glennon, by Edward M. Glennon and Kenneth F. Kirwin, Minneapolis, Minn., for Soo Line Railroad Co.

Vennum, Newhall, Ackman & Goetz, by Thomas Vennum, Minneapolis, Minn., and Mulholland, Hickey & Lyman, by William G. Mahoney, Washington, D. C., for Railway Labor Executives' Association and Brotherhood of Locomotive Engineers.

Donald F. Turner, Asst. Atty. Gen., Patrick J. Foley, U. S. Atty., and John H. D. Wigger, Atty., Dept. of Justice, for the United States; and Robert W. Ginnane, Gen. Counsel, Henri F. Rush, Jr., Atty., and Fritz R. Kahn, Associate Gen. Counsel, for Interstate Commerce Commission.

Richard M. Freeman, Chicago, Ill., Wheeler & Wheeler, by Edward K. Wheeler and Robert G. Seaks, Washington, D. C., and Stringer, Donnelly & Sharood, by Philip Stringer, St. Paul, Minn., for Chicago and North Western Railway Co.

Winston, Strawn, Smith & Patterson, by Edmund J. Kenny, Chicago, Ill., and Stearns & Goetteman, by Harry S. Stearns, Jr., St. Paul, Minn., for Chicago Great Western R. Co.

Before HEANEY, Circuit Judge and DEVITT, Chief Judge and LARSON, District Judge.

OPINION

HEANEY, Circuit Judge:

This is an action by the Soo Line Railroad Company (Soo), the Railway Labor Executives' Association, and the Brotherhood of Locomotive Engineers pursuant to 28 U.S.C. § 2325 (1964) to enjoin the merger of the Chicago and North Western (NW) and the Chicago Great Western (GW) Railway Companies. See generally, 28 U.S.C. §§ 2284, 2324 (1964). The merger has been approved by the Interstate Commerce Commission pursuant to § 5(2) of the Interstate Commerce Act, 41 Stat. 481 (1920), as amended, 49 U.S.C. § 5(2). Chicago & North Western Railway Company and Chicago Great Western Railway Company —Merger, Etc., Finance Docket 23388, Report of the Commission (April 20, 1967); Chicago & North Western Railway Company—Issuance of Stock and Assumption of Obligation, Finance Docket 23389, Report of the Commission (April 20, 1967) (hereinafter cited as Report of the Commission) (330 I.C.C. 13 subsequently withdrawn as official opinion, see note 26, infra). The residence and principal office of the Soo being in Minneapolis, Minnesota, venue lies in this District.

The GW, faced with serious financial problems and with an inability to solve them internally, conducted unsuccessful merger negotiations with the Chicago, Rock Island and Pacific Railroad Company (Rock Island), the Soo, and the St. Louis-San Francisco Railway Company. In early 1964, the NW proposed a merger, the terms of which were tentatively accepted by the GW on July 24, 1964. A merger application, filed in November, 1964, was followed by lengthy hearings. The Commission's decision of April 20, 1967, found that substantial benefits would flow to the merging railways, the principal one being a saving of approximately $6,000,000 per year. The Commission found that the savings would be achieved over a five-year period without sacrifice of service to shippers, and would result primarily from the elimination of side-by-side duplicate facilities. The savings, the Commission further found, would serve as an incentive to stimulate investment in equipment and right-of-way, would assure a continuance of GW's operations, and would enable the NW to provide resources for the continued operation of its 730 miles of branch lines in South Dakota, maintenance of which had heretofore been a major problem. The Commission concluded that the merger was in the public interest.

The plaintiffs, while not disputing the benefits to the merging railroads and a segment of the public, contend that the Soo, its employees and the public it serves will be injured by the merger, and that it should thus be enjoined. They maintain that the Commission erred by refusing: (I) to consolidate this application with the NW's application to merge with the Chicago, Milwaukee, St. Paul and Pacific Railroad Company and with its application to control the Rock Island; (II) to impose more extensive conditions for the benefit of the Soo; (III) to impose labor protective conditions for the benefit of Soo's employees.1 See generally, 60 Stat. 243 (1946), as amended, 80 Stat. 393 (1966); 5 U.S.C. § 1009(e), as amended, 5 U.S.C. § 706 (Supp. II 1967).

I. CONSOLIDATION.

Contemporaneously with the NW-GW merger, the NW sought to merge with the Milwaukee and to gain control of the Rock Island.2 The Soo argues that it was an abuse of discretion for the Commission to refuse to consolidate the NW-GW merger proceedings with those of the Milwaukee and the Rock Island. It also urges that the Commission erred in refusing to permit it to introduce evidence in this proceeding as to the effect of the other mergers.3

The Soo's initial motion to consolidate this proceeding with the one involving the NW and the Milwaukee was filed after stockholder approval of the Milwaukee-NW merger had been sought by management. This motion was denied in an order dated January 13, 1965, and because "good cause has not been shown." The petition to reconsider was denied in an order dated February 24, 1965, on the grounds that "it is purely speculative whether, or when the NW-Milwaukee application * * * will be filed." A later request made after stockholder approval of the NW-Milwaukee merger was rejected on the grounds "that the vote of the stockholders does not make the filing of such a merger application any more certain as to when it will be filed." That order was dated June 3, 1965. Subsequent requests for consolidation made by the Soo after the filing of the NW-Milwaukee application to merge do not appear to have been specifically ruled upon.4

The Soo's motion to consolidate the Rock Island proceedings with this one was denied in an order dated August 17, 1966, on the grounds that such consolidation "would require an infinite delay in decision in the instant proceedings and is not essential in affording due process to the parties of record in the disposition of those proceedings and that infinite postponement of the decision herein would be unreasonable."

In considering whether the Commission abused its discretion in refusing to consolidate, we recognize the absence of an explicit statutory directive requiring consolidation. Nevertheless, § 17(3) of the Interstate Commerce Act, 49 U.S.C. § 17 (1964), does provide that "the Commission shall conduct its proceedings * * * in such manner as will best conduce to the proper dispatch of business and to the ends of justice." The Commission and United States, in brief, recognize that the Commission's refusal to consolidate may not "prejudice any substantial right of any party to the proceeding or preclude the Commission from properly performing its responsibilities under Section 5(2) of the Act." Cf., American Trucking Asso. v. United States, 326 U.S. 77, at 83, 65 S.Ct. 1499, at 1501, 89 L.Ed. 2065 (1945); Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 60 S.Ct. 437, 84 L.Ed. 656 (1940).

The consolidation issue was most recently discussed by the Supreme Court in the "Penn-Central" merger cases B & O R. Co. v. United States, 386 U.S. 372, 87 S.Ct. 1100, 18 L.Ed.2d 159 (1967) (Preliminary Print), and Penn-Central Merger and N & W Inclusion Cases, 389 U.S. 486, 88 S.Ct. 602, 19 L.Ed.2d 723, January 15, 1968. The Court refused to approve that merger on the first appeal on the grounds that the Commission had found that the survival of the Erie-Lackawanna, the Delaware and Hudson, and the Boston and Maine, was essential to the public interest and that those 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.5 It went on to require that the Commission determine the means of preserving the protected roads on both an interim and permanent basis before permitting consummation of the merger, and specifically to determine whether the smaller roads ought to be incorporated in the Norfolk and Western or the Penn-Central system. Mr. Justice Clark, speaking for the Court, noted:

"* * * The Commission has * * not proceeded by or under `a master plan' for consolidation in the various regions. Following this procedure the Commission has refused to consolidate the Northeastern Region railroad merger or control proceedings into one case."

B & O R. Co. v. United States, supra, 386 U.S. at 387, 87 S.Ct. at 1107.6

Mr. Justice Brennan, in a concurring opinion, was highly critical of the Commission's refusal to consolidate:7

"Although a case-by-case adjudication may offer advantages in flexibility and continual exposure to concrete situations, `the disadvantages of developing policy through a sequence of limited cases are both numerous and impressive.' H.R. Doc. No. 678, supra, p. 81. A significant disadvantage is that individual proceedings `seldom if ever produce sufficiently comprehensive records for the adequate solution of questions of major importance.' Id., at 82. Obviously, without all the relevant facts, the chance of a satisfactory disposition is diminished. Although the ICC has tools to assemble complete factual records, it employed virtually none of them in these highly interrelated proceedings, including the power to consolidate the proceedings on common issues. Rather, the cases have been rigidly segregated, leading the ICC to resort to extraordinary interim conditions instead of resolving definitely the fate of
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