Wheeling-Pittsburgh Steel Corp. v. McCune
| Decision Date | 30 December 1987 |
| Docket Number | 87-3066 and 87-3072,Nos. 87-3017,WHEELING-PITTSBURGH,s. 87-3017 |
| Citation | 836 F.2d 153 |
| Parties | 17 Collier Bankr.Cas.2d 1471, Bankr. L. Rep. P 72,131 STEEL CORPORATION, Appellant, v. Alexander McCUNE and Bill L. Van Divner.STEEL CORPORATION, Appellant, v. Alexander McCUNE and Bill L. Van Divner and United Transportation Union.STEEL CORPORATION, v. Alexander McCUNE and Bill L. Van Divner and United Transportation Union, Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
David B. Fawcett, III (argued), M. Bruce McCullough, Buchanan, Ingersoll, Pittsburgh, Pa., Ronald S. Orr, Gibson, Dunn & Crutcher, Los Angeles, Cal., Deborah L. Schrier-Rape, Gibson, Dunn & Crutcher, Denver, Colo., for appellant.
Paul E. Moses (argued), Evans, Ivory, Moses, Hollander & McVay, Pittsburgh, Pa., for appellees Alexander McCune and Bill L. Van Divner.
T.P. Shearer (argued), United Transp. Union, Pittsburgh, Pa., for Appellee United Transp. Union.
Before SLOVITER and STAPLETON, Circuit Judges, and BROTMAN, District Judge *.
Monessen Southwestern Railway Company ("MSW"), a subsidiary of appellant Wheeling-Pittsburgh Steel Corporation ("Wheeling-Pitt"), filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Appellee United Transportation Union ("Union"), contending that the provisions of Subchapter IV of that Chapter governing railroad reorganizations are applicable, filed a motion for the appointment of a trustee, as is required in railroad reorganizations. See 11 U.S.C. Sec. 1163 (1982 & Supp. IV 1986). Appellees Alexander McCune and Bill Van Divner, MSW employees who had settled their claims under the Federal Employers' Liability Act (FELA), 45 U.S.C. Secs. 51-60 (1982), against MSW for $65,000 and $60,000 respectively, but who had not received payment, filed separate motions in the bankruptcy court to require MSW to comply with 11 U.S.C. Sec. 1171(a). That section provides priority as an "administrative expense", for personal injury claims of employees of a railroad reorganizing under Subchapter IV.
The bankruptcy court denied the appellees' motions on the ground that MSW is not a common carrier and therefore not subject to the provisions of Subchapter IV. The district court reversed the bankruptcy court's finding on the "common carrier" issue but nonetheless refused to order compliance
with provisions of Subchapter IV; instead the court stayed the bankruptcy court's proceedings. MSW appeals, arguing both that the district court erred on the common carrier issue and abused its discretion in entering the stay. The Union, McCune and Van Divner cross-appeal from the district court's refusal to order compliance with sections 1163 and 1171 of Subchapter IV, as well as its entry of a stay of the bankruptcy proceedings.
MSW operates a railroad over approximately thirty-eight miles of track in and around the Wheeling-Pittsburgh Steel plant in Monessen, Pennsylvania. The railroad delivers slag, a by-product of Wheeling-Pitt's steel operations, to Wheeling-Pitt's dump for processing. MSW was chartered in 1912 for the purpose of operating a railroad for "public use" and has conducted business since at least 1930 under a "certificate of public convenience" issued by the State of Pennsylvania recognizing it as a "common carrier" under Pennsylvania law.
In 1980, MSW applied to the Pennsylvania Public Utilities Commission ("PaPUC") for a certificate of public convenience pursuant to section 1102(a)(2) of the Public Utility Code, 66 Pa. Cons. Stat.Ann. Sec. 1102(a)(2) (Purdon 1979), authorizing it to abandon as a common carrier all of its railway tracks in the City of Monessen and the Township of Rostraver, in Westmoreland County, and to cease operations as a common carrier. The railroad claimed that its services were no longer necessary or proper for the service, accommodation, or convenience of the public as the only user and customer it serviced was its parent, Wheeling-Pitt, and that it had not rendered or been requested to render services to any other shipper for at least the ten years previous to its application.
The Administrative Law Judge ("ALJ") to whom the matter was referred held a hearing at which counsel for three unions, including appellee Union, participated in opposition to MSW's application. The ALJ noted that MSW and Wheeling-Pitt entered into an agreement with Rostraver Township for maintenance by MSW of the only public at-grade crossing on its track and that MSW agreed with the Pennsylvania Department of Transportation that MSW would maintain the rail highway crossings. The ALJ also noted that none of the three companies on MSW's line opposed its application. Nonetheless, the ALJ refused to grant MSW its requested decertification as a common carrier, in part because he believed there might be a potential future need for rail service. The PaPUC affirmed.
On appeal, the Commonwealth Court reversed, holding that the evidence "clearly supports a finding that the public is not presently being served by the common carrier" and that two other railroads service the area and are available for future and alternative service. Monessen Southwestern Railway Co. v. Pennsylvania Public Utilities Commission, 82 Pa.Cmwlth. 13, 18-19, 474 A.2d 1203, 1206 (1984). The court noted that under the applicable Pennsylvania statute, 66 Pa. Cons. Stat.Ann. Sec. 1102(b), the PaPUC, as a condition of its approval of abandonment of a railroad's common carrier status, shall require "a fair and equitable arrangement to protect the interests of railroad employees affected." It therefore remanded the case to the PaPUC for this purpose. 82 Pa.Cmwlth. at 20, 474 A.2d at 1206-07.
The PaPUC and the unions appealed to the Pennsylvania Supreme Court, which affirmed the order of the Commonwealth Court. Monessen Southwestern Railway Co. v. Pennsylvania Public Utilities Commission, 507 Pa. 586, 493 A.2d 666 (1985). The Pennsylvania Supreme Court rejected the unions' argument that MSW's application should be denied to protect the interests of the workers, stating that "that does not defeat [MSW's] right to cease to operate as a common carrier when it does not meet the statutory definition thereof." Id. at 591, 493 A.2d at 668-69. The Court held that the Commission may not use worker interests to disallow cessation of the common carrier status that would otherwise be On remand, the PaPUC granted FELA claimants, apparently including appellees McCune and Van Divner, the right to intervene in the proceedings to determine what "fair and equitable" arrangement should be provided for the employees affected by MSW's abandonment of its common carrier status. Apparently, MSW is appealing this decision. The PaPUC has yet to grant MSW its certificate of public convenience. Thus, as of this date, MSW remains certified as a common carrier under Pennsylvania law, despite the determination of the Pennsylvania Supreme Court that MSW is not a common carrier.
permissible. It remanded the case to the PaPUC for the sole purpose of proceedings under the labor protection provisions of the state Public Utility Code. Id. at 591, 493 A.2d at 669
On April 16, 1985, while the appeal was pending in the Supreme Court of Pennsylvania, MSW, along with its parent Wheeling-Pitt, filed a petition for reorganization under Chapter 11. The bankruptcy court denied appellees' motions to order MSW to comply with the provisions of Subchapter IV, holding that "[t]he Pennsylvania Supreme Court finally determined that MSW is in fact not a common carrier and therefore is entitled as a matter of substantive law to decertification as a public utility." App. at 16. The court stated that the fact that the PaPUC has not formally decertified MSW as a public entity is inconsequential for bankruptcy purposes, and declined to "exalt form over substance to no justifiable end." Id.
On appeal, the district court issued a two-page order which appears to hold that MSW is a railroad for purposes of reorganization under the Bankruptcy Code. The court stated:
[I]t appears from the record that Monessen Southwestern Railway Company was incorporated as a railroad in 1912, and was operated as a railroad for many years thereafter up to the present time and has acquiesced in regulation as such by the Pennsylvania Public Utilities Commission ... and that its status as such remains unchanged until permission under 66 Pa.C.S.A. Sec. 1102(a)(2) to cease operations is granted by the PUC.
App. at 8. The court then added that:
under 11 U.S.C. 1161 et seq. (including 1163 and 1171) ... short-line and industrial railroads are considered ... to be railroads even though owned by industrial corporations (business reasons for such ownership of rail subsidiaries being, for example, receipt of divisions of line-haul rates and co-ordination of rail movements with industrial operations within the plant).
In spite of these conclusions, however, the district court did not direct appointment of a trustee under section 1163 as required for railroad reorganizations or grant the FELA claims of McCune and Van Divner priority status under section 1171, because it said such orders "would have little practical utility and result in considerable delay" in the present case. Id. Instead, the court entered a stay of all proceedings in bankruptcy court until the PaPUC completes the process of granting MSW permission to abandon its operations as a common carrier. It stated that thereupon, the bankruptcy court could decide what treatment under federal bankruptcy law to give any obligations or liabilities the PaPUC had imposed on the MSW. Id. at 9. This appeal followed.
APPELLATE JURISDICTION
We first address, on our own initiative, the issue of our jurisdiction. This court has jurisdiction to hear appeals from final judgments entered by the district...
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