US SUPREME COURT DECISIONS

Last Term this Court concluded ( 386 U. S. 386 U.S. 372) that the Interstate Commerce Commission (ICC) erred in permitting immediate consummation of the Penn-Central merger without determining the ultimate fate of the Erie-Lackawanna, Delaware & Hudson, and Boston & Maine railroads (the "protected roads"). The ICC then conducted proceedings on the petitions of those three lines for inclusion in the Norfolk & Western (N & W) system and ordered N & W to acquire the stock of the three "protected roads" on prescribed terms. In the remanded Penn-Central proceedings, the ICC reconsidered certain protective conditions previously devised to aid the three roads, imposed amended protective conditions for the interim period between consummation of the Penn-Central merger and the protected lines' inclusion in a major system, and again authorized the immediate consummation of the Penn-Central merger. A three-judge district court for the Southern District of New York enjoined implementation of the merger order pending chanrobles.com-red

Page 389 U. S. 487

review. Actions were also filed in that court to set aside the ICC's order to include the protected roads in the N & W system. Suits challenging the merger and inclusion orders in other courts were stayed to permit orderly disposition of the issues in the Southern District of New York. The District Court for the Southern District of New York dismissed all complaints attacking the merger and inclusion orders and sustained the decisions of the ICC. The Borough of Moosic filed an action in the Middle District of Pennsylvania to set aside the ICC's orders, in which action the City of Scranton and one Shapp intervened. The City of Pottsville's request to intervene was denied. The action was stayed, and Moosic, Scranton and Shapp filed petitions for mandamus or certiorari seeking to challenge the stay, which has since been dissolved.

Held:

1. The ICC properly and lawfully discharged its duties with respect to the Penn-Central merger, as its findings and conclusions accord with § 5 of the Interstate Commerce Act, as amended by the Transportation Act of 1940, and are supported by substantial evidence. Pp. 389 U. S. 498-502.

(a) Under the congressional policy, set forth in the Act, of consolidating railroads into a "limited number of systems," competition is only one of many considerations in determining the public interest in the merger. Pp. 389 U. S. 499-500.

(b) The evidence before the ICC, with negligible exceptions, attested to the probability of significant benefit from the merger not only to the railroads and their investors, but also to shippers and the general public. P. 389 U. S. 500.

(c) The ICC retains authority over reductions of service and facilities not specifically approved in the merger plans. P. 389 U. S. 501.

(d) Rail service by the merged company will remain subject to restraining pressures and vigorous competition from other railroads and from motor, water, and air carriers. P. 389 U. S. 501.

2. The attack on the orders by certain municipalities and Shapp based on the ICC's alleged failure to consider or properly evaluate the adverse effect of the merger considered in light of the inclusion order does not warrant reversal of the judgment of the District Court for the Southern District of New York. Pp. 389 U. S. 502-506.

(a) These complainants' petitions for mandamus or certiorari challenging the stay order of the District Court for the Middle District of Pennsylvania are dismissed as moot, since the stay order has been dissolved. P. 389 U. S. 503. chanrobles.com-red

Page 389 U. S. 488

(b) In its April 6, 1966, opinion approving the merger the ICC considered arguments made by participating communities and stated that the "merger will benefit, rather than harm, the Commonwealth." Pp. 389 U. S. 503-504.

(c) Claims of specific injury resulting from reduction of competition by curtailment of service now provided by the "protected roads" may be asserted in appropriate proceedings when such curtailment is proposed. P. 389 U. S. 504.

(d) The City of Scranton and Shapp were parties to the New York proceedings, and the Borough of Moosic had adequate opportunity to join in that litigation following the stay of proceedings in the Pennsylvania court, and accordingly the New York court's decision which, with certain exceptions, is affirmed, precludes further judicial review of the issues on which it passes. Pp. 389 U. S. 505-506.

(e) Since the proceedings in the Pennsylvania court are not before this Court, except for the petitions challenging the stay order which have been dismissed as moot, it will be that court's task to determine the effect of the present decision upon the proceedings before it. P. 389 U. S. 506.

3. The decision of the District Court for the Middle District of Pennsylvania denying intervention to the City of Pottsville is vacated. Pp. 389 U. S. 506-507.

4. The appeals of bondholders of the New York, New Haven & Hartford Railroad Company (NH), which has been under reorganization since 1961, challenging the ICC's order of November 21, 1967, providing terms for NH's inclusion in the Penn-Central system and for a loan arrangement to keep NH operating, are rejected. Pp. 389 U. S. 507-511.

(a) The merits of the provisions of that order are not before this Court; they have not been reviewed by the bankruptcy court or by a statutory district court under the applicable statute. P. 389 U. S. 509.

(b) Continuation of NH's operations can be realistically assured only upon effectuation of the merger, and, while the rights of bondholders are entitled to respect, they do not dictate that vital rail operations be jettisoned for this reason alone. Pp. 389 U. S. 510-511. chanrobles.com-red

Page 389 U. S. 489

(c) The bondholders' objections may be adjudicated in the reorganization or upon proper judicial review, and the ICC has retained jurisdiction to make further necessary orders. P. 389 U. S. 511.

5. The New York court's conclusion that the interim provisions for the "protected roads" are adequate and conform to the purposes insisted on by the ICC and which this Court sought to ensure by its decision last Term is affirmed. Pp. 389 U. S. 511-518.

(a) The protective conditions do not constitute a pooling arrangement within the meaning of the applicable statute, and the ICC's holding may be sustained by the substantial evidence that, even if these provisions established a pooling arrangement, "this record clearly supports findings . . . that to protect these carriers clearly is in the interest of better service to the public" and "will not unduly restrain competition." Pp. 389 U. S. 513-514.

(b) The ICC has reserved jurisdiction under which it could modify these provisions should improper traffic diversions develop or if the conditions should otherwise prove inequitable. Pp. 389 U. S. 514-515.

(c) This Court's decision last Term was based on the ICC's failure to decide the question of the ultimate home of the "protected roads," and does not forbid consummation of the merger until the three roads are actually included in a larger system. Pp. 389 U. S. 516-518.

6. The ICC's refusal to permit the Reading Company to reopen the merger record and submit evidence supporting its claim for protection similar to that given the "protected roads" is sustained, without prejudice to any proceeding by Reading, based on actual experience, for relief from undue prejudice caused by the merger. Pp. 389 U. S. 519-520.

7. The New York court's disallowance of the claims of those appellants who challenge the ICC's order for inclusion of the "protected roads" in the N & W system is affirmed. Pp. 389 U. S. 520-526.

(a) If, after inclusion of Erie-Lackawanna (E-L) in the N & W system by stock acquisition, E-L bondholders feel that N & W has engaged in conduct invading their rights, they may apply to the ICC for relief under its reserved jurisdiction. P. 389 U. S. 522.

(b) The financial terms and property valuations involved in the inclusion of the "protected roads" were established by the ICC within the area of fairness and equity, were reviewed in chanrobles.com-red

Page 389 U. S. 490

detail by the District Court and sustained, and there is no basis for reversing the judgment of that court. Pp. 389 U. S. 523-526.

(c) The inclusion order has no compulsive or coercive effect on the roads to be included, and unless and until modified by the ICC, it remains available to the protected lines upon the terms specified. P. 389 U. S. 526.

(d) The conditions prescribed by the ICC to protect employees of the roads to be included in the N & W system are sustained. They are similar to those set by the ICC for N & W's employees at the time of the N & W-Nickel Plate merger. P. 389 U. S. 526.

Nos. 778, 779, 830 836, 279 F.Supp. 316, affirmed, subject to modifications and conditions stated in the opinion, and remanded; Nos. 663, Misc., and 64, Misc., petitions for mandamus or certiorari denied; No. 433, jurisdiction noted, 272 F.Supp. 513, vacated and remanded. chanrobles.com-red

Page 389 U. S. 492