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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 21, 2010 Decided February 4, 2011

No. 10-7029

CONSOLIDATED RAIL CORPORATION,

APPELLANT

v.

JAMES T. RAY, FOR THE ESTATE OF HAROLD F. BOYD,

DECEASED,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:07-cv-01148)

Laurence Z. Shiekman argued the cause and filed the 

briefs for appellant.

David B. Rodes argued the cause and filed the brief for 

appellee. Betsy E. Lehrfeld entered an appearance.

Before: GINSBURG, HENDERSON and ROGERS, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

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GINSBURG, Circuit Judge: The Congress enacted the 

Regional Rail Reorganization Act of 1973, Pub. L. No. 93-

236, 87 Stat. 985 (1974) (codified as amended at 45 U.S.C. §§ 

701–797m) [hereinafter the Rail Act], in order to limit the 

harm caused by the bankruptcy of several major railroads.

The Act created the Consolidated Rail Corporation, a/k/a

Conrail, a private, for-profit enterprise, to acquire “free and 

clear of any liens or encumbrances” the operating assets of the 

bankrupt railroads and to continue rail service in their stead. 

The estate of a former employee of one of the failed roads 

sought to hold Conrail liable in tort for damages allegedly 

arising out of that employee’s exposure to asbestos, which

had occurred before Conrail was created. Conrail asked the 

district court for a declaratory judgment that it could not be 

held liable for such a claim. Because the tort claim at issue is 

neither a “lien” nor an “encumbrance,” and personal injury 

claims against the railroad were not before the bankruptcy 

court in its reorganization proceeding, we affirm the judgment 

of the district court in favor of the employee. 

I. Background

“A rail transportation crisis seriously threatening the 

national welfare was precipitated when eight major railroads 

in the northeast and midwest region of the country entered 

reorganization proceedings under § 77 of the [now 

superseded] Bankruptcy Act.” Regional Rail Reorganization 

Act Cases, 419 U.S. 102, 108 (1974). In 1973 the Congress 

passed the Rail Act to reorganize the “railroads in this region 

into an economically viable system capable of providing 

adequate and efficient rail service.” 45 U.S.C. § 701(b)(2). 

The Act created a Special Court to “order the conveyance [to 

Conrail] of rail properties of railroads leased, operated, or 

controlled by a railroad in reorganization in the region.” Id. § 

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719(b). The Special Court was to resolve disputes related to 

the reorganization and to convey the rail properties “free and 

clear of any liens or encumbrances.” Id. § 743(b)(2).*

In 1976 the Special Court issued an order conveying to 

Conrail a majority of the rail assets of several failed railroads, 

including the Erie Lackawanna Railway Company, which in 

1972 had initiated a conventional reorganization proceeding 

under § 77 of the Bankruptcy Act then in effect. Upon the 

conveyance of its rail assets to Conrail, the Erie discontinued 

operations; it later emerged from the § 77 proceedings solely 

for the purpose of liquidating any remaining non-rail assets. 

In re Erie Lackawanna Ry. Co., 803 F.2d 881, 882–83 (6th 

Cir. 1986).

The late Harold Boyd worked for the Erie from 1942 

until it ceased operating in 1976, at which point he began 

working for Conrail; he retired in 1978. Consol. Rail Corp. v. 

Ray, 693 F. Supp. 2d 39, 42 (D.D.C. 2010). James Ray, the 

executor of Boyd’s estate, filed suit against Conrail and others 

in an Ohio state court, seeking damages under the Federal 

Employers’ Liability Act for injuries allegedly arising from 

his exposure to asbestos while on the job. Id. Conrail then 

filed the present action in the district court, seeking a 

declaratory judgment that the Rail Act precludes Conrail’s 

liability for FELA claims based upon an employee’s exposure 

to asbestos while working for a predecessor railroad. Id. at 

42–43. That court denied Conrail’s motion for summary 

 * The jurisdiction of the Special Court, under which this claim 

arises, is now vested in the U.S. District Court for the District of 

Columbia. 45 U.S.C. § 719(b)(2). 

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judgment and granted the estate’s motion for judgment on the 

pleadings, id. at 53, whereupon Conrail appealed.

II. Analysis

This case is both factually and legally narrow. Factually, 

it is limited to Boyd’s exposure to asbestos during his 

employment by the Erie; Conrail does not seek a declaration 

with respect to its liability for Boyd’s exposure during his 

employment by Conrail. The only legal issue, which we 

resolve de novo, see McFadden v. Ballard Spahr Andrews &

Ingersoll, LLP, 611 F.3d 1, 3 (D.C. Cir. 2010) (summary 

judgment); Nat’l Ass’n of Mfrs. v. Taylor, 582 F.3d 1, 9 (D.C. 

Cir. 2009) (judgment on the pleadings), is whether the Rail 

Act precludes Conrail’s liability for an employee’s preconveyance exposure to asbestos, see Ray, 693 F. Supp. 2d at 

42–43.

The Rail Act provided the assets of failed railroads were 

to be “conveyed [to Conrail] free and clear of any liens or 

encumbrances.” 45 U.S.C. § 743(b)(2) (emphases added). 

Ray argues that, by their plain meaning, the italicized terms 

are limited to interests in property. Conrail does not 

meaningfully engage with Ray’s textual argument; it prefers 

to avoid the plain import of the phrase “liens or 

encumbrances” by emphasizing instead what the Special

Court has previously identified as the intent of the Congress 

to give the railroad industry a “fresh start.” See Penn Cent.

Corp. v. United States, 862 F. Supp. 437, 461-62 (Regional 

Rail Reorg. Ct. 1994). 

As the district court here noted, the Supreme Court has 

already plowed this ground in Permanent Mission of India to 

the United Nations v. City of New York, 551 U.S. 193, 198 

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(2007), a case involving the Foreign Sovereign Immunities 

Act:

At the time of FSIA’s adoption in 1976, a 

“lien” was defined as “[a] charge or security or 

incumbrance upon property.” BLACK'S LAW 

DICTIONARY 1072 (4th ed. 1951). 

“Incumbrance,” in turn, was defined as “[a]ny 

right to, or interest in, land which may subsist 

in another to the diminution of its value....” 

Id.[] at 908.

Because the Rail Act was passed just three years before the 

FSIA, we see no reason to believe “liens or encumbrances” 

should be understood any differently there. Similarly, we 

note the Bankruptcy Code enacted in 1978 defines a “lien” as 

a “charge against or interest in property to secure payment of 

a debt or performance of an obligation.” 11 U.S.C. § 101(37). 

Both these definitions focus upon property-based, or in rem,

claims and not upon in personam claims. Accordingly, the 

plain text of the Rail Act strongly supports Ray’s position that 

the assets of failed railroads were not conveyed to Conrail 

“free and clear” of liability for personal injuries.

Conrail nonetheless argues imposing liability for a preconveyance personal injury would violate “the policy goals 

underlying the Rail Act,” particularly that of giving Conrail a 

“fresh start.” Ray responds Conrail has not shown that 

immunity from liability for such a personal injury claim is 

sufficiently important to the purpose of the Rail Act as to 

overcome what he characterizes as “the strong presumption 

that Congress would not eliminate the possibility of a remedy 

for injured railroad workers without expressly saying so.” See 

Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005) 

(“If Congress had intended to deprive injured parties of a long

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available form of compensation, it surely would have 

expressed that intent more clearly”). 

The reasoning of the Special Court in Consolidated Rail 

Corp. v. Reading Co., 654 F. Supp. 1318 (Regional Rail 

Reorg. Ct. 1987), is persuasive on this point. There the court 

considered the Northeast Rail Service Act of 1981, which 

added to the Rail Act a provision, 45 U.S.C. § 797h(b),

requiring Conrail to pay (without necessarily assuming 

liability for) personal injury claims asserted by employees of

a predecessor railroad during the pendency of that railroad’s 

bankruptcy proceeding. Reading, 654 F. Supp. at 1321–22. 

Because the Congress must have known some railroad 

workers had suffered injuries that would not be manifest until 

after the reorganization proceedings had ended, the Special 

Court concluded the legislature’s “failure to make specific 

provisions for these employees in the Rail Act can hardly be 

interpreted as a determination that they be bereft of any 

otherwise available remedy,” to wit, a suit against Conrail. 

Id. at 1333. We agree with the Special Court. There is no 

reason to suppose the Congress would both provide a path to 

recovery for workers with a manifest injury and intend, “sub 

silentio, to foreclose any available remedy from those workers 

who did not (and through no fault of their own could not) file 

identical claims until after their former employers had been 

discharged in bankruptcy.” Id. 

Next, Conrail points to § 363 of the Bankruptcy Code, 

which authorizes a bankruptcy trustee to sell a debtor’s asset 

“free and clear of any interest in such property.” 11 U.S.C. § 

363(f). As Conrail notes, many courts have interpreted 

“interest in such property” to include liability for an in 

personam tort claim even though, like “liens or

encumbrances,” the plain meaning of that phrase does not 

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compel such a broad reading. See, e.g., In re Trans World 

Airlines, Inc., 322 F.3d 283, 288–90 (3d Cir. 2003). As Ray 

persuasively argues, however, because § 743(b)(2) of the Rail 

Act uses different terms than does § 363(f) of the Bankruptcy 

Code, an interpretation of the latter statute does not inform 

our reading of the former. In any event, Conrail points to 

nothing to indicate the Special Court, if it did have the power 

to quash in personam claims, exercised that power in 

conveying the Erie’s assets to Conrail.

Conrail also argues that because, at the time of their 

conveyance, it valued the Erie’s assets with the understanding 

that the Erie would be responsible for personal injury claims, 

allowing such claims against Conrail would mean it had 

overpaid for the assets. As the district court noted, however, 

the parties presumably were aware of this risk and “‘the 

valuation ... would have taken tort claims brought under 

FELA into account.’” Ray, 693 F. Supp. 2d at 49 n.13 

(quoting Penn Cent., 862 F. Supp. at 464). 

Finally, Conrail argues Ray’s FELA claim was subject to 

the control of the bankruptcy court in the Erie reorganization 

proceeding under § 77 of the Bankruptcy Act, which was

ongoing at the time of the conveyance order, and therefore 

was never among the liabilities the Special Court could have 

conveyed to Conrail. This argument is unpersuasive because 

§ 797h(b) and former § 774(g) of the Rail Act, both of which 

specifically provided for Conrail to pay personal injury claims 

brought by employees of predecessor railroads, 45 U.S.C. § 

797h(b); id. § 774(g) (repealed 1981), would have been 

superfluous if such claims were subsumed by the § 77 

proceeding. See Zhu v. Gonzales, 411 F.3d 292, 295 (D.C. 

Cir. 2005) (quoting United States v. Menasche, 348 U.S. 528, 

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538–39 (1955)) (“we must ‘give effect, if possible, to every 

clause and word of a statute’”).

Having reached the conclusion that personal injury 

claims were not before the bankruptcy court in the Erie’s § 77 

proceeding, we have no occasion to decide whether it would 

have been appropriate for that court to have discharged Ray’s 

FELA claim. For the same reason, we note, the district court

went further than necessary in concluding Ray’s claim was 

not discharged; that conclusion was not necessary to the 

court’s holding.*

III. Conclusion

For the foregoing reasons, we hold the Rail Act does not 

preclude Conrail’s liability for an employee’s pre-conveyance 

exposure to asbestos. Accordingly, the Ohio court may 

proceed to evaluate the merits of Ray’s claim and the

judgment of the district court is

Affirmed.

 * Similarly, because Ray’s claim is not part of the § 77 proceeding, 

there is no merit to Conrail’s argument that permitting Ray to assert 

his claim would “grant a priority to [Ray] in preference over the 

claims of other preconveyance creditors, in contravention of 

fundamental reorganization principles.” Neither of the cases 

Conrail cites in support of this argument involves a conveyance 

pursuant to the Rail Act.

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