UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
CONSOLIDATED RAIL : CORPORATION, : : Plaintiff, : Civil Action No.: 07-1148 (RMU) : v. : Re Document Nos.: 11, 15 : JAMES T. RAY, for the Estate of : HAROLD F. BOYD, : : Defendant. :
MEMORANDUM OPINION
G RANTING THE D EFENDANT ’ S M OTION FOR J UDGMENT ON THE P LEADINGS ; D ENYING THE P LAINTIFF ’ S M OTION FOR S UMMARY J UDGMENT
I. INTRODUCTION The plaintiff, Consolidated Rail Corporation (“Conrail”), commenced this action seeking declaratory relief under the Regi onal Rail Reorganization Act of 1973 (“Rail Act”), 45 U.S.C. §§
701 et seq. , as amended by the Northeast Rail Serv ice Act of 1981 (“NSRA”), 45 U.S.C. §§ 1101 et seq. Conrail seeks a declaratory judgment that th e Rail Act precludes it fr om being held liable as a successor for asbestos claims stemming from the conduct of insolvent predecessor railroads whose rail assets were conveyed to Conrail “free and clear of any liens or encumbrances” pursuant to the Rail Act. Conrail contends that the “free and clear” pr ovision of the Rail Act, incorporated into the orders conveying the rail asse ts to Conrail, foreclos es its liability for the pre-conveyance conduct of th e predecessor railroads. The defendant is the estate of a former employee of Erie Lackawanna Railroad Company (“Erie Lackawanna”), one of the insolvent railro ads whose rail assets were conveyed to Conrail2 pursuant to the Rail Act. Alleging that the deced ent was negligently exposed to asbestos during his employment with Erie Lackaw anna, the estate commenced an action in an Ohio state court against Conrail and other defendants under the Federal Employer’s Liability Act (“FELA”), 45 U.S.C. §§ 51 et seq. The estate contends that Conrail is liable for the decedent’s asbestos-related injuries under state law successor liability principles. As discussed below, the court concludes th at the “free and clear” provision of the Rail Act does not categorically preclude the estate from holding Conrail liable for FELA claims based on the decedent’s exposure to asbestos prior to the conveyance of Erie Lackawanna’s assets to Conrail. Put differently, the Rail Act does not prevent the estate fr om asserting in the Ohio state court action that Conrail may be held liabl e under the FELA based on state law successor liability principles. 1 Accordingly, the court grants the estate’s motion for judgment on the pleadings and denies Conrail’s motion for summary judgment.

II. BACKGROUND A. History of the Rail Act Beginning in the late 1960s, “[a] rail tran sportation crisis seriously threatening the national welfare was precipitated when eight majo r railroads in the northeast and midwest region of the country entered reorganization proceed ings under § 77 of the Bankruptcy Act.”

1 Whether or not Conrail may be held liable as a successor under state law is not a matter before this court.3 Blanchette v. Conn. Gen. Ins. Corps. , 419 U.S. 102, 108 (1974). 2 “Congress concluded that solution of the crisis required reorganization of th e railroads, stripped of excess facilities, into a single, viable system operated by a private, for-profit corporation.” Id . at 341-42. To implement this solution, “Congress supplem ented § 77 with the Rail Act, which became effective on January 2, 1974.” Id . at 342. As one senator remarked, th e Rail Act was “intended to wipe the slate clean, to allow these rail systems to correc t mistakes that led them into financial collapse and to enable them to start anew and con tinue on a profitable basi s.” 119 Cong. Rec. S23,784 (daily ed. Dec. 21, 1973) (statement of Sen. Long). The Rail Act created a government corporat ion, the United States Railway Corporation (“USRA”), tasked with creating a Final System Plan for restructuring the ra ilroads. 45 U.S.C. § 716(a)(1). The Final System Plan, published by the USRA in July 1975, designated certain rail properties held by the railroads in reorganization for transfer to a newly-formed private corporation, Conrail. Pl.’s Mot. for Su mm. J. (“Pl.’s Mot.”) at 7 & Ex. B; see also 45 U.S.C. § 741(d). As required by the Rail Act, the USRA submitted the Final System Plan to Congress, which approved the plan shortly thereafter. Pl.’s Mot. at 8; see also 45 U.S.C. § 718(a). The Rail Act also called for th e creation of a Special Court, which would have exclusive jurisdiction over proceedi ngs relating to the Final System Plan. 45 U.S.C. § 719. Following Congress’s approval of the Final System Plan, th e Special Court would issue conveyance orders, directing the trustee of e ach railroad in reorganization to convey all right, title and interest in the

2 Section 77 of the Bankruptcy Code, repealed in 197 8, authorized the bankruptcy court to approve a plan of reorganization containing provisions “m odifying or altering the rights of creditors” and to transfer property to the debtor or to another corporation “free and clear of all claims of the debtor, its stockholders and creditors.” Schweitzer v. Consol. Rail Corp. , 758 F.2d 936, 941 (3d Cir. 1985) (citing 11 U.S.C. § 205 (repealed 1978)).4 designated rail properties to Conrail. 3 28 U.S.C. § 743(b)(1). The Rail Act required that “[a]ll rail properties conveyed to [Conrail] . . . be conveyed free and clear of any liens or encumbrances.” Id . § 743(b)(2). B. Conveyance of Eric Lack awanna’s Assets to Conrail In June 1972, Erie Lackawanna filed for bankruptcy pursuant to § 77 of the Bankruptcy Code. See In re Erie Lackawanna Ry. Co. , 803 F.2d 881, 882 n.2 (6th Cir. 1986). In March 1976, the Special Court ordered Erie Lackawanna and various other railroads to convey the bulk of their rail assets to Conrail (“ the Conveyance Order”), pursuant to § 743 of the Rail Act. Pl.’s Mot. at 8; see generally Compl., Ex. B. Following the conveyance of a railroad’s as sets to Conrail, th e Rail Act required the bankruptcy court “to reorganize or liquidate such railroad in re organization pursuant to Section 77 on such terms as the court deems just and reasonable.” 45 U.S.C. § 791(b)(4). The conveyance of Erie Lackawanna’s assets to Conrail left it with insufficient resources to permit it to be reorganized as an ongoing business entity. Erie Lackawanna , 803 F.2d at 882. Accordingly, in November 1982, the bankruptcy court discharged Erie Lackawanna from

3 In 1997, Congress transferred the exclusive jurisd iction of the Special Court to the United States District Court for the District of Columbia. See Niagara Mohawk Power Corp. v. Consol. Rail Corp. , 97 F. Supp. 2d 454, 456 (S.D.N.Y. 2000) (citi ng 45 U.S.C. § 719(b)(2)). Because Conrail’s claims require judicial interpreta tion of the Conveyance Order, this court has jurisdiction over the case. See 45 U.S.C. § 719(e)(2) (providing that “[t]he original and exclusive jurisdiction of the special court shall include any ac tion, whether filed by any interested person or initiated by the special court itself, to interpret, alter, amend, modify, or implement any of the orders entered by such court pursuant to section 743(b)”); Consol. Rail Corp. v. Ritter , 593 F. Supp. 2d 107, 111 (D.D.C. 2009) (holding that the court had jurisdiction over Conrail’s action for a declaratory judgment that the Rail Act pr ecluded Conrail’s successor liability for the defendants’ FELA claims); Consol. Rail Corp. v. United States , 883 F. Supp. 1565, 1571 (Sp. Ct. R.R.R.A. 1995) (noting that the interpretation of conveyance orders, the Final System Plan, the statutes creating the Final System Plan and the conveyance documents are matters falling within the jurisdiction of the Special Court).5 bankruptcy as Erie Lackawanna, Inc., whose purpose was “to liquida te its remaining assets as expeditiously as practicable.” Id . at 883. C. The Estate’s Claims Against Conrail The decedent was a railroad worker em ployed by Erie Lackawanna from May 1942 through March 1976. Pl.’s Mot. at 4. Following the conveyance of Erie Lackawanna’s rail assets to Conrail, he worked for Conrail from April 1976 until his retirement in 1978. Id . On May 8, 2002, the executor of Boyd’s es tate filed a complaint in a state court of Ohio (“the Ohio complaint”) against various railroad defendants, including Conrail. Id .; see generally Compl., Ex. A. The Ohio complaint alleges that duri ng the course of his employment as a railroad worker, the decedent was negligently exposed to asbestos, in violation of the FELA. 4 Compl., Ex. A ¶¶ 11-12. The Ohio complaint further alleges that the decedent’s exposure to asbestos resulted in his developing of mesothelioma and caused him severe injury, ultimately resulting in his progressive disability and death. Id . ¶¶ 14-15. Through the Ohio st ate court action, the estate seeks to hold Conrail liable for the decedent’s ex posure to asbestos by Erie Lackawanna prior to the April 1976 conveyance. See id . ¶ 2. D. Procedural History Conrail filed this complaint on June 26, 2007, seeking a declaratory judgment that the Rail Act precludes the estate from holding it li able for the decedent’s pre-conveyance exposure to asbestos by Erie Lackawanna. See generally Compl. In addition, C onrail asks the court to enjoin the estate from seeking to hold Conra il liable for any FELA violations committed by Erie Lackawanna. See generally id . By agreement, the parties stayed the Ohio action pending the resolution of this action. See Def.’s Mot. for J. on the Pleadings (“Def.’s Mot.”) at 2.

4 The estate has also asserted state law claims against various asbestos manufacturers. See generally Compl., Ex. A.6 On June 12, 2009, the estate moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). See generally Def.’s Mot. On July 2, 2009, Conrail moved for summary judgment. See generally Pl.’s Mot. Both motions a ddress the same core issue: whether the Rail Act precludes the estate from asserting successor liability against Conrail for the decedent’s pre-conveyance exposure to asbest os while employed by Erie Lackawanna. With both motions now fully submitted, the court turns to the applicable legal standards and the parties’ arguments.

III. ANALYSIS A. Legal Standard for a Motion for Judgment on the Pleadings Federal Rule of Civil Procedure 12(c) states that “[a]fter the pleadings are closed but within such time as not to delay the trial, a ny party may move for judgment on the pleadings.”
See F ED
. R. C IV
. P. 12(c). 1 If a party files a Rule 12(c) mo tion before the answer, the court may treat it as a motion to dismiss under Rule 12(b)(6). See Seber v. Unger , 881 F. Supp. 323, 325 n.2 (N.D. Ill. 1995). “In fact, any distinction between them is merely semantic because the same standard applies to motions made under either subsection.” 2 F ED
. P RAC . 3d § 12.38, 12-101; see also GATX Leasing Corp. v. Nat’l Union Fire Ins. Co. , 64 F.3d 1112, 1114 (7th Cir. 1995). Under Rule 12(c), the court must accept the non movant’s allegations as true and should view the facts in the light most favorable to the nonmovant. See Judicial Watch, Inc. v. Clinton , 880 F. Supp. 1, 7 (D.D.C. 1995). The court should grant a motion for judgment on the pleadings

1 Rule 12(c) also states that if, on a motion for judgment on the pleadings, the court considers matters outside the pleadings, then the court sh all treat the motion as one for summary judgment pursuant to Rule 56. In its analysis, the court will not consider any matters outside the pleadings, and will therefore treat the motion as one for judgment on the pleadings pursuant to Rule 12(c).7 if the movant “is entitled to judgment as a matter of law.” See Burns Int’l Sec. Servs. v. Int’l
Union , 47 F.3d 14, 16 (2d Cir. 1995). B. Legal Standard for a Motion for Summary Judgment Summary judgment is appropriate when “t he pleadings, the discovery and disclosure materials on file, and any affidav its show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” F ED
. R. C IV
. P. 56(c); see also Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986); Diamond v. Atwood , 43 F.3d 1538, 1540 (D.C. Cir. 1995). To determine which facts are “m aterial,” a court must look to the substantive law on which each claim rests. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986). A “genuine issue” is one whose resolution could es tablish an element of a claim or defense and, therefore, affect the outcome of the action. Celotex , 477 U.S. at 322; Anderson , 477 U.S. at 248. In ruling on a motion for summary judgment , the court must draw all justifiable inferences in the nonmoving party’s favor and ac cept the nonmoving party’s evidence as true. Anderson , 477 U.S. at 255. A nonmoving party, however, must establish more than “the mere existence of a scintilla of evid ence” in support of its position. Id. at 252. To prevail on a motion for summary judgment, the moving party must show that the nonmoving party “fail[ed] to make a showing sufficient to establish the existence of an element essential to that party’s case.” Celotex , 477 U.S. at 322. By pointing to the ab sence of evidence proffered by the nonmoving party, a moving party may succeed on summary judgment. Id. The nonmoving party may defeat summary j udgment through factual representations made in a sworn affidavit if he “support[s] hi s allegations . . . with facts in the record,” Greene v. Dalton , 164 F.3d 671, 675 (D.C. Cir. 1999) (quoting Harding v. Gray , 9 F.3d 150, 154 (D.C. Cir.8 1993)), or provides “direc t testimonial evidence,” Arrington v. United States , 473 F.3d 329, 338 (D.C. Cir. 2006). C. The Rail Act Does Not Categorically Preclude Conrail’s Successor Liability for Latent FELA Claims In its motion for judgment on the pleadi ngs, the estate points out that in Consolidated Rail Corporation v. Ritter , 539 F. Supp. 2d 368 (D.D.C. 2009) (Urbina, J.) (“ Ritter I ”), a case practically indistinguishabl e from the present action, 5 this court held that the Rail Act does not preclude successor liability against Conrail for th e pre-conveyance conduct of Erie Lackawanna.
See Def.’s Mot. at 1. Conrail had argued in Ritter I , as it does in this case, that the language in the Rail Act requiring the Special Court to convey the de funct railroads’ assets to Conrail “free and clear of any liens or encumbrances” preclude d Conrail’s successor liability for tort claims based on the pre-conveyance acti ons of Erie Lackawanna. Ritter I , 539 F. Supp. 2d at 371. In granting the defendants’ motion to dismiss for lack of jurisdicti on, the court rejected Conrail’s interpretation of the Rail Act, holding that bo th “lien” and “encumbrance” denoted interests in property rather than interest s protected by tort law. Id . at 371-72. The estate acknowledges that the court subsequently vacated its holding in Ritter I in Consolidated Rail Corporation v. Ritter , 593 F. Supp. 2d 107 (D.D.C. 2009) (“ Ritter II ”). Def.’s Mot. at 3. Given the fact that the onl y matter properly before the court in Ritter I was the defendants’ motion to dismiss for lack of jurisdiction, the court concluded that it had “prematurely” undertaken the task of interpre ting whether the Rail Ac t precluded Conrail’s

5 Ritter I concerned a declaratory judgment action brou ght by Conrail against former employees of Erie Lackawanna who had commenced an action in Pennsylvania state court against Conrail to recover for injuries that allegedly stemmed fro m their pre-conveyance exposure to asbestos. Consol. Rail Corp. v. Ritter , 539 F. Supp. 2d 368, 370 (D.D.C. 2009). As in this case, Conrail sought a declaratory judgment that the Ra il Act precluded the defendants from asserting successor liability against Conrail for the pre- conveyance actions of Erie Lackawanna. Id . at 371.9 successor liability for the actions of Erie Lackawanna. Ritter II , 539 F. Supp. 2d at 110 (granting Conrail’s motion for relief upon r econsideration and holding that as a Special Court under the Rail Act, the court had jurisdiction to consider Co nrail’s claims, which required an interpretation of a conveyance order). The estate argues, however, that “nothing in Ritter II in any way calls into question the correctness of Ritter I ’s analysis of the merits.” 6 Def.’s Mot. at 3-4. Accordingly, the estate conte nds that state law successor lia bility principles should govern Conrail’s liability for the estate’s claims. See generally Def.’s Mot.; Def.’s Reply at 2 n.1. In its motion for summary judgment, Conrail maintains that the Ra il Act precludes the estate from holding it liable as a successor to Erie Lackawanna. See generally Pl.’s Mot. More specifically, Conrail argues that the provision of the Rail Act di recting the conveyance of rail assets to Conrail “free and cl ear of any liens or encumbrances” precludes Conrail’s successor liability for Erie Lackawanna’s pre-conveyance FELA violations. See id . at 10-19. Such an interpretation is mandated, Conrail argues, by th e fact that the Rail Act embodied a legislative intent to give Conrail a “fresh start,” free from the burdensome liabilities that had contributed to the financial collapse of the predecessor railroads. Id . at 6-7. Conrail contends that [i]mplicit in the design of the Rail Act is the premise that in personam claims, including general unsecured claims asse rting successor liability, would not and could not follow the assets conveyed to C onrail pursuant to the Rail Act. Rather, those interests were to be retained by and relegated to the estates of the transferor railroads in reorganization under § 77 of the Bankruptcy Act. Id . at 13. Conrail notes that at least one court refused to impose successor liability on Conrail for FELA claims arising out of an individual’s pr e-conveyance exposure to asbestos, holding that such liability remains with the reorganized debtor. Id . at 14-15.

6 The court did not thereafter address the merits of the parties’ arguments in Ritter , as the parties filed a stipulation of dismissal with prejudice s hortly after the court granted Conrail’s motion for relief upon reconsideration. See Consol. Rail Corp. v. Ritter , No. 07-1370 (D.D.C. Jan. 15, 2009), Joint Stipulated Dismissal With Prejudice.10 The court begins its assessment of the part ies’ arguments by analyzing the “free and clear” language of the Rail Act incor porated into the Conveyance Order. 1. The Plain Language of the Rail Act’s “Free and Clear” Provision Does Not Foreclose Conrail’s Successor Liability As Conrail states, “[t]he narrow question before this Court, sitting as the Special Court, is whether the ‘free and clear or liens and encumbrances’ language of the asset conveyance order excluded liability for asbestos claims asserted by employees who once worked for those railroads in reorganization and who may have later worked for Conrail.” Id . at 2. The starting point for this analysis is the plai n language of the text. See Lamie v. U.S. Tr. , 540 U.S. 526, 534 (2004) (observing that “[t]he starting poi nt in discerning congr essional intent is the existing statutory text”) (citing Hughes Aircraft Co. v. Jacobson , 525 U.S. 432, 438 (1999)); Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A. , 530 U.S. 1, 6 (2000) (noting that “when the statute’s language is plain, the sole function of th e courts – at least wher e the disposition required by the text is not absurd – is to en force it according to its terms”) (citing United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)). As this court observed in Ritter I , when Congress enacted th e Rail Act in 1973, “a ‘lien’ was defined as ‘[a] charge or security or in cumbrance upon property.’ ‘Incumbrance,’ in turn, was defined as ‘[a]ny right to, or interest in, land which may subs ist in another to the diminution of its value.’” See Ritter I , 539 F. Supp. 2d at 371 (citing Permanent Mission of India to the United Nations v. City of New York , 551 U.S. 193, 198 (2007) (quoting B LACK ’ S L AW D ICTIONARY 908, 1072 (4th ed. 1951)) (internal citation omitted)). Likewise, the Bankruptcy Code defines the term “lien” as a “charge against or interest in property to secure payment of a debt or performance of an ob ligation.” 11 U.S.C. § 101(37). Thus, the plain language of the statute indicates that the “fr ee and clear” language incorporat ed into the Conveyance Order11 provided for the transfer of the assets free from certain in rem interests in the property conveyed. See id . As the court noted in Ritter I , nothing in the text indicate s that the “free and clear” provision insulated C onrail generally for in personam tort liabilities. Ritter I , 539 F. Supp. 2d at
371. Indeed, the Special Court previously rejected an effort by Conrail to expand the meaning of the Rail Act’s “free a nd clear” provision in the manner proposed here. See Penn Cent. Corp. v. United States , 862 F. Supp. 437, 462 (Sp. Ct. R.R.R.A. 1994). In Penn Central , Conrail sought a declaratory judgment a nd injunction barring claims agai nst it under the Comprehensive Environmental Response, Compensation, and Li ability Act of 1980 (“CERCLA”) based on the pre-conveyance conduct of th e insolvent railroads. Id . at 444. Conrail argued that the “free and clear” provision of the Rail Act functioned as “a broad statutory codification of the fresh start policy” that precluded liability for pre-conveyance CERCLA claims. Id . at 462. The Special Court rejected Conrail’s inte rpretation of the provision: In contrast to the purpose the railroads as cribe to it, the ‘free and clear’ provision was designed to verify the conveyance of ma rketable title vis-a-vis the properties. No evidence exists that this language was additionally intende d to insulate the defendants from the type of statutory liability at issue here or any other obligations. Accordingly, th e ‘free and clear’ provision is meaning[less] in the face of the government’s CERCLA enforcement action. This construction is borne out by a textua l analysis as well. Neither the term ‘lien’ nor ‘encumbrance’, taken in its or dinary legal meaning, could encompass a statutory claim for the rec overy of cleanup costs. Id .; see also id . at 462 n.93 (observing that “[a] lien is a claim or charge on property as security for an obligation” a nd that “[a]n encumbrance simila rly affects title to real12 property”). 7 Conrail attempts to analogize the “free and clear” provision of the Ra il Act to § 363(f) of the Bankruptcy Code, which permits a sale of prope rty “free and clear of any interest in such property” and has been interpreted to preclude succe ssor tort liability against purchasers of assets under that provision. Pl.’s Mot. at 11. For instance, in In re Trans World Airlines, Inc. , 322 F.3d 283 (3d Cir. 2003), 8 the Third Circuit held that American Airlines, which had purchased assets of TWA “free and clear of any inte rest in such property” under § 363(f), could not be held liable for the undischarged employment discrimina tion claims of former TWA employees. Id . at 289- 90. The Third Circuit based its hold ing on the fact that § 363(f) author ized the sale of assets free and clear of “any interest” in the property, rather than of merely in rem interests. See id . at 289 (observing that “while the plain meaning of the ph rase ‘interest in such property’ suggests that not all general rights to payment are encompa ssed by the statute, Congress did not expressly indicate that, by employing such language, it intended to limit th e scope of section 363(f) to in

rem interests, strictly defined”) (quoting In re Leckie Smokeless Coal Co. , 99 F.3d 573, 582 (4th Cir. 1996)). The court reasoned that Congress intended the term “any interest” to be construed broadly so as to encompass “obligations that ar e connected to, or arise from, the property being sold.” Id . at 289 (quoting Folger Adam Sec. Inc. v. DeMatteis/MacGregor, JV , 209 F.3d 252, 259 (3d Cir. 2000)). Accordingly, th e Third Circuit concluded that

7 The Penn Central court ultimately held that the deeds for the conveyed rail properties, which contained language disclaiming Conr ail’s liability for any actions or events prior to conveyance, together with the fresh start policy embodied in the Rail Act, shielded Conrail from preconveyance CERCLA liability. Penn Cent. Corp. v. United States , 862 F. Supp. 2d 437, 463-64 (Sp. Ct. R.R.R.A. 1994).

8 In re Trans World Airlines has been described as the leading case on the construction of § 363(f). See In re Chrysler LLC , 405 B.R. 84, 111 (S.D.N.Y. 2009).13 [w]hile the interests of the [plaintiffs] in the assets of TWA’s bankruptcy estate are not interests in property in the sense that they are not in rem interests . . . they are interests in property within the meaning of section 363(f) in the sense that they arise from the property being sold. Id . at 290. Yet the Third Circuit reached its holding by expressly distingu ishing the term “any interest” from a more limited term, such as a “lien,” which would have designated only in rem interests. Id . at 290 (noting that “to equate interests in property with only in rem interests such as liens would be incompatible with section 363(f)(3 ), which contemplates that a lien is but one type of interest”) (citi ng 11 U.S.C. § 363(f)(3)); 9 see also In re WBQ P’ship , 189 B.R. 97, 105 (E.D. Va. 1995) (noting that “since ‘lien’ is a de fined term under the Bankruptcy Code, it stands to reason that Congress would have used the term ‘lien’ instead of ‘inter est,’ had it intended to restrict the scope of § 363(f) to liens” and observi ng that “[o]ther courts have indicated that the term ‘interest’ is broad, covering more than mere liens”). Given that the Rail Act and the Conveyance Order provided for the transfer of property free and cl ear of “liens” and “encumbrances” specifically, rather than “any interest” in the transferred rail properties generally, the authorities constr uing § 363(f) of the Bankruptcy C ode provide little support for Conrail’s interpretation of th at provision of the Rail Act. 2. The Purpose and Design of the Rail Act Do Not Demand a More Expansive Interpretation of the “Free and Clear” Provision Conrail also asserts that a more limited reading of the “free and clear” conveyance language would be inconsistent with the purpose and design of the Rail Act, which contemplated

9 Section 363(f) provides that one of the circumstances under which the trustee may sell property “free and clear of any interest in such property” is if “such in terest is a lien.” 11 U.S.C. § 363(f)(3); see also id . § 363(f)(4) (authorizing the sale “free a nd clear of any interest in such property” if “such interest is in bona fide dispute”).14 that liability for the pre-conveya nce actions of the predecessor railroads would remain with the reorganized railroads so as to give Conrail a “fresh start.” 10 Pl.’s Mot. at 13-16, 21-25; Pl.’s Reply at 6-8. In Consolidated Rail Corporation v. Reading , 654 F. Supp. 1318 (Sp. Ct. R.R.R.A. 1987), however, the Special Court rejected the ar gument that the appl ication of common law successor liability principles to Conrail in the context of F ELA claims would undermine the legislative objectives underlying the Rail Act. Id . at 1331-32 (holding that the NRSA did not preempt common law successor liability for clai ms brought by rail workers allegedly injured through pre-conveyance exposure to asbestos). In Reading , Conrail had argued that allowing a state to apply common law successor liability prin ciples would permit an unpredictable but large influx of liability claims, which would drain Conr ail financially and thereby interfere with the Rail Act’s objective of creating an economically viable rail system. Id . at 1331. The Special Court found Conrail’s re asoning unpersuasive: There is no doubt that Congress intended to cr eate a viable rail system. Nor is there any question that Congress sought to insulate Conrail from certain liabilities, and also in enacting NRSA sought to reduce the expense of employee benefit programs . . . . For example, § 702 [of the NRSA] enabled Conrail to reduce the number of employees substantially and provided a substantia lly lower level of labor protection benefits to the terminat ed employees. However, these provisions do more than demonstrate Congress’ intent to limit sources of financial burden. The fact that Congress listed and expre ssly limited some burdens suggests that this court should be wary of expanding that list simply on the basis of Congress’ silence. The principal problem with Conrail’s argum ent is that there is just no indication that Congress regarded the possibility of su ccessor tort liability to be an obstacle to Conrail’s continued operations, unlik e Congress’ explicit finding that the crippling burden of employee protectiv e benefits posed an obstacle to the purposes of the Rail Act. Id . at 1332 (internal citations omitted).

10 The court notes that although Conrail’s arguments al lude to the possibility of implied preemption of state successor liability law, Conrail does not expressly assert such a theory, instead confining its arguments to the construction of the Rail Act. See generally Pl.’s Mot.; Pl.’s Reply.15 In reaching its conclusion, the Reading court analyzed 45 U.S.C. § 797h(b), a provision of the NRSA that required Conra il to process and pay all personal injury claims asserted against a “railroad in reorganization,” and called for Congress to reimburse Conrail for any such payments. 11 Id . at 1333. The court acknowledged that by its express terms, this provision applied only during the period wh en a railroad was in reorgani zation, and did not specify “who should assume liability for claims for occupationa l injuries which did no t manifest themselves until after the bankrupt railroads had been re organized and were no longer ‘railroads in reorganization.’” Id . Nonetheless, the Reading court considered this provision a significant indicator of Congress’s intent: We must assume that Congress knew that railroad workers were susceptible to latent occupational diseases which might not manifest themselves until after the bankrupt railroads had been reorganized a nd discharged in ba nkruptcy; and that it also knew that such workers would not be able to avail themselves of the unique opportunities provided by [§ 797h(b)]. Ho wever, Congress’ 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. There is no discernible reason to suppose that the same Congress which expressly provided that workers who had the oppor tunity to bring FELA claims for preconveyance injuries prior to the c onsummation of bankruptcy proceedings would be entitled to full a nd expedited relief intended, 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. At any rate we find no basis for inferring such congressional intent. Id . Thus, the Special Court perceived no incompatib ility between the “fresh start” policy of the Rail Act and Conrail’s potential successor liability for FELA claims. See id

. Conrail attempts to distinguish Reading by noting that that cour t’s jurisdiction extended only to interpreting the terms of the NRSA and that the Special Court in that case did not interpret a conveyance order or any provisions of the Rail Act. Pl.’s Mot. at 20-21; Pl.’s Reply at

11 Conrail notes that this provision of the NRSA replaced a virtually identical provision of the Rail Act. Pl.’s Mot. at 20 (citing 45 U.S.C. § 774(g) (repealed 1981)).16 4. Conrail does not, however, explain how this feature of the Reading case undermines the force of its analysis, which addressed the effect of the fresh start policy underlying Congress’s rail reorganization efforts on FELA claims against Conrail. See Reading , 654 F. Supp. at 1331-32. Indeed, in Penn Central , the Special Court relied on Reading in concluding that the fresh start policy of the Rail Act, standing alone, did not preclude Conrail’s successor liability for CERCLA claims. See Penn Central , 862 F. Supp. at 461-62 (noting that “CERCLA or other environmental damage liability simply was of no moment to Congress” at the time it implemented the Rail Act as there was “‘just no indication that Congress rega rded the possibility of successor tort liability to be an obstacle to Conrail’ s continued operations’”) (quoting Reading , 654 F. Supp. at 1331- 32). Accordingly, the court is unpersuaded by Conrail’ s efforts to distinguish Reading from this

case. As for Conrail’s argument that § 77 of the Bankruptcy Code relega ted the latent tort claims of former rail workers to the estates of the insolvent railroads, see Pl.’s Mot. at 12-14; Pl.’s Reply at 7-8, at least one c ourt has held that § 77 does not di scharge the latent FELA claims of former rail workers whose symptoms did not ma nifest themselves until after the conclusion of the bankruptcy proceedings. See Schweitzer v. Consol. Rail Corp. , 758 F.2d 936, 943-44 (3d Cir. 1985) (reversing the bankruptcy court’s determination that the la tent FELA claims of former rail workers were discharged as a result of the in solvent railroad’s § 77 bankruptcy proceedings). The Third Circuit in Schweitzer noted that although § 77 “clearl y provides broad authorization for the discharge in bankruptcy of claims against the debtor in order to se cure a fresh start for a company,” it was “equally clear th at plaintiffs’ rights only coul d have been affected by the discharge of all ‘claims’ agains t their employer if they had ‘claims’ within the meaning of section 77 prior to the consummation date of their employer’s reorganization.” Id . at 941.17 Because the rail workers did not have discharg eable FELA “claims” during the pendency of the § 77 proceedings, the § 77 proceedings had no impact on the plaintiffs’ FELA claims. Id . at 943- 44. Likewise, this court conclude s that § 77 of the Bankruptcy Code did not relegate the latent FELA claims to the estates of the insolvent railroads. 12 In sum, the court concludes that confining the “free and clear” conveyance language of the Rail Act to “liens” and “en cumbrances” does not undermine the design and scheme of the Rail Act. Nothing in the legislative history or design of the Rail Act persuades the court to stretch the meaning of the “free and clear” provision be yond the plain meaning of the text. 3. The Authorities Relied on by Conra il Do Not Support its Broad Construction of the “Free and Clear” Provision Conrail relies on a number of prior Special Court decisions declining to hold Conrail liable for certain pre-conveyance obligations of the predecessor railroads. See Pl.’s Mot. at 21- 25. Yet each of these decisions is fundame ntally distinct from the case at hand. See id . First, each case revolved around an effort to hold Conrail liable for obligations arising directly out of the use of rail property tr ansferred to Conrail by vi rtue of the Rail Act. See Stratford Land & Improvement Co. v. Blanchette , 448 F. Supp. 279, 284-85 (Sp. Ct. R.R.R.A. 1978) (holding that Conrail was not liable for unpa id costs incurred in purchasin g “side tracks” running from the Penn Central rail line to an industr ial park owned by the plaintiff); Consol. Rail Corp. v. Pa.

12 Conrail also suggests that imposing successor liab ility on it would “be inconsistent with the asset valuations made at the time of the conveyances because such liability would have the effect of reducing the value of the assets conveyed to Conrail.” Pl.’s Mot. at 16. There is, however, no reason to suppose that the asset valuations did not reflect the potential risk of latent FELA claims, which the parties were plainly aware of during the conveyancing process. See Penn Cent. Corp. v. United States , 862 F. Supp. 437, 464 (Sp. Ct. R.R.R.A. 1994) (observing that “FELA claims existed and were known at the time the predece ssor conveyed its assets to the successor railroad” and that “the parties would have been well-versed in FELA claims” such that “the valuation and subsequent releases from future liability in th e conveyancing process would have taken tort claims brought under FELA into account”).18 Dep’t of Gen. Servs. , Civ. Action No. 97-RR-01 (Sp. Ct. R.R.R.A. Mar. 24, 1997) (Mem. Op. & Order) at 6-7 (holding that Conrai l was not liable for unpaid costs incurred in the construction of a convention center tr ansferred by Penn Cent ral to Conrail); City of Philadelphia v. Consol. Rail Corp. , Civ. Action No. 96-RR-01 (Sp. Ct. R.R.R.A. Nov. 3, 1997) (Mem. Op. & Order) at 14-16 (holding that Conrail and its succes sor, Amtrak, were not liable for the maintenance or repair of a bridge over which Penn Central held a right of way that it transfe rred to Conrail pursuant to the Rail Act). The claims asserted against Conrail in those cases involved precisely the type of in

rem interests that fall within the plain language of the Rail Act’s “free and clear” provision; accordingly, they offer no support for Conrail’s contention that the “fr ee and clear” language foreclosed Conrail’s successor liability for in personam tort claims. Moreover, in each of those Special Court d ecisions, the documents c onveying title of the subject property from the predecessor railroad to Conrail expressly discla imed Conrail’s liability for pre-conveyance obligations arising out of the property. See Stratford , 448 F. Supp. at 282 (noting that the Bill of Sale and Assignment between Penn Central and Conrail expressly reserved and excepted from the conveyance to Conrail obligations as sociated with the construction or purchase of industrial “side tracks”); Pa. Dep’t of Gen. Servs. , Civ. Action No. 97-RR-01 (Sp. Ct. R.R.R.A. Mar. 24, 1997) (Mem. O p. & Order) at 2-3 (noting that “the deed and accompanying bill of sale contained language limiting Conrail’s liability for obligations accruing prior to the date of delivery of the deed”); City of Philadelphia , Civ. Action No. 96-RR01 (Sp. Ct. R.R.R.A. Nov. 3, 1997) (Mem. Op. & Or der) at 3 (noting that the bill of sale transferring rail property to Conrail “expressly reserved a nd excepted from conveyance all agreements for ‘the maintenance and security of rail properties, real or personal, which are not conveyed to [Conrail]’”). Conr ail’s express disclaimer of lia bility for these pre-conveyance19 liabilities played a central role in the court’s reasoning in each case. See Stratford , 448 F. Supp. at 284-85 (rejecting the plaintiff’ s argument that the Final Sy stem Plan nullified Conrail’s express disclaimers of liability in the bill of sale); Pa. Dep’t of Gen. Servs. , Civ. Acton No. 97- RR-01 (Sp. Ct. R.R.R.A. Mar. 24, 1997) (Mem. Op. & Order) at 6 (observing that “[t]he fresh start policy embodied in the Rail Act, and incorporated into the conveyancing documents , creates a bright line date upon which the liabilit y of Penn Central ended and the liability of Conrail began”) (emphasis added); City of Philadelphia , Civ. Action No. 96-RR-01 (Sp. Ct. R.R.R.A. Nov. 3, 1997) (Mem. Op. & Order) at 10 (same). Absent any evidence that Conrail expressly disclaimed liability for pre-conveya nce asbestos exposure of Erie Lackawanna employees, see generally Compl.; Pl.’s Mot.; Pl.’s Reply, these Special Court cases are fundamentally distinct from the case at hand. Finally, to the extent that the aforementione d Special Court cases s uggest that the Rail Act’s fresh start policy is suffici ent, standing alone, to extinguis h Conrail’s liability for the preconveyance actions of th e predecessor railroads, 13 the court considers this reasoning unpersuasive. As previously discussed, there is no indication that the Rail Act’s fresh start policy was intended to extinguish successor tort liability. See Reading , 654 F. Supp. at 1331-32. Furthermore, in concluding that the fresh st art policy did not by itsel f extinguish Conrail’s CERCLA liability, the Special Court observed th at “[t]he crucial distinction between the Bankruptcy Code and the Rail Act is that the Code actually c odified a fresh start scheme, whereas under the Rail Act it is just a pervasive polic y. In this sense, the fresh start policy in the Rail Act is less compelling than its sister statute.” Penn Cent. , 862 F. Supp. at 461. This court

13 See, e.g. , Consol. Rail Corp. v. Pa. Dep’t of Gen. Servs. , Civ. Action No. 97-RR-01 (Sp. Ct. R.R.R.A. Mar. 24, 1997) (Mem. Op. & Order) at 6-7 (stating that “[a]ny recovery in contract, tort or otherwise for the conduct of Penn Central was legislatively and contractually apportioned to be satisfied out of the assets of the bankrupt railroad”).20 cannot conclude, based merely on the implications of a pervasive but un codified legislative policy, that Congress intended to extinguish all latent FELA clai ms of rail workers employed by the predecessor railroads. 14 See Reading , 654 F. Supp. at 1331-32. Conrail also directs the court to a number of non-Special C ourt decisions that purportedly support its interpretation of the Rail Act. See Pl.’s Mot. at 25-27. Chief among these is Schweitzer v. Consol. Rail Corporation , 65 B.R. 794 (E.D. Pa. 1986), in which the court rejected a reorganized debtor’s effort to shift liabi lity for latent FELA claims to Conrail. See id .; Pl.’s Reply at 1-3. More specifically, Schweitzer concerned the FELA lia bility of the Reading Company, the entity that emerged from the reor ganization of the insolv ent Reading Railroad. See Schweitzer , 65 B.R. at 796. Pursuant to the Ra il Act and the Bankruptcy Code, Reading Railroad’s rail assets were conveyed to Conrail, while its non-rail as sets (principally, real estate holdings and claims against the government) we re transferred to the Reading Company. Id . The Reading Company argued that any liability for th e latent FELA claims of former Reading rail workers exposed to asbestos during their employm ent with the Reading Railroad fell to Conrail rather than the Reading Company. Id . at 799. The Reading Company’s argument was based on the bankruptcy principle that non-d ischarged claims that could ha ve been asserted against the insolvent debtor may be asserted against the re organized company that emerges from bankruptcy proceedings. See id . The Reading Company argued that the Rail Act and the Bankruptcy Code effectively resulted in two reorganized companies emerging from Reading Railroad’s

14 For the same reason, the non-Special Court decisi on cited by Conrail con cerning Conrail’s liability for employment discrimination claims does not pers uade the court to reach a different result. See Howard v. Penn Cent. Transp. Co. , 87 F.R.D. 342, 348 n.8 (N.D. Ohio 1980) (holding that Conrail could impose equitable remedies but not monetary damages in a discrimination case asserted by former rail worker, while noting that “it is difficu lt to believe that Congress would have eliminated the possibility of obtaining from Conrail pos t-conveyance relief for pre-conveyance race discrimination without expressly so stating”).21 insolvency: Conrail, the reorganized company with respect to the Reading Railroad’s rail operations, and the Reading Company, the reorgani zed company with respect to the debtor’s non-rail operations. Id . Under this theory of “dual reor ganization,” the plai ntiffs’ asbestos claims would be Conrail’s responsibility becau se those claims stemmed from the insolvent railroad’s rail operations, which were conveyed to Conrail and not to the Reading Company. Id

. The Schweitzer court rejected this ar gument, noting that there was no evidence in the Rail Act to support the Reading Company’ s “dual reorganization” theory. See id . at 800-01 (noting that “Congress did not intend to alter a fundamental co ncept of reorganization law to relieve a debtor’s successor and saddle a wholly-new enti ty that was created by Congress to serve the public interest with non-discharg ed claims against the debtor”). As the court observed, it is a fundamental principle of reorganiza tion law that the non- discharged claims of the debtor may be properly asserted against the company which emerges as the reorganized debtor. Implicit in this fundamental prin ciple is the concept that although the assets of the debtor may be distributed to numerous entities, the organic nature of the debtor would be reorganized into a single entity. While in the Rail Act Congress devised ‘imagina tive and innovative solutions in an endeavor to avoid [a] nationa l disaster . . . one would certainly expect that if Congress intended to alter this fundamental principle of reorganization law to create two reorganized entitie s, such an intention would be manifest either in the language or legislative histor y of the Rail Act. However, a review of the structure and legislative history of the Act fi nds no suggestion of such an intent. Id . (internal citations omitted). The court furt her reasoned that the dua l reorganization theory was inconsistent with the purpose and structure of the Rail Act, as it would require the court to set down “an expansive and inde licate rule imposing responsi bility on Conrail for all nondischarged rail obligations.” Id . at 801-02. “Faced with the stru cture of the Rail Act, the Act’s avowed purpose of fostering northeastern rail se rvice, and the absence of legislative history suggesting a fundamental change in reorganization law,” the cour t concluded that “Congress did22 not intend to impose on Conrail the primary resp onsibility for non-discharged F.E.L.A. claims which arose from the debto r’s pre-conveyance conduct.” Id . at 802. Conrail asserts that Schweitzer stands for the broad pr oposition that the Rail Act categorically forecloses C onrail’s liability for pre- conveyance FELA claims. See Pl.’s Mot. at 25-26. Yet, as discussed above, the Schweitzer court merely held that the language, structure and legislative history of the Ra il Act did not support the Readi ng Company’s assertion that Congress intended bankruptcy courts to treat Conrail as the “reorganized company” automatically succeeding to all of the Reading Railroad’s rail obligations. Schweitzer , 65 B.R. at 799-801; see also State of New York v. Solvent Chem. Co. , 6 F. Supp. 2d 186, 193 (W.D.N.Y. 1998) (distinguishing Schweitzer on the grounds that “the court discussed the Rail Act, but only with respect to how the Rail Act failed to suppor t Reading’s ‘dual reorgani zation’ argument”). Indeed, after rejecting the Reading Company’s “dual reorganization” theory, the Schweitzer court proceeded to a separate examination of whether Conrail could be held liable for the plaintiffs’ FELA claims under state law successor liability principles. See id . at 803-05 (concluding that Conrail could not be held liable in light of th e fact that the Reading Company remained a going concern, as “[i]t is the general rule that where a [corporation] is not dissolved [following] a sale of assets or a reorganization, it remains liable for debts and liabilities incurred by it”). Such an analysis would have been neither necessary nor appropriate had the court interpreted the Rail Act to simply foreclose Conrai l’s liability for the plai ntiffs’ FELA claims. Accordingly, Schweitzer does not support the proposition that the Rail Act precludes the23 application of common law successor liability principles to Conrail. 15 In sum, Conrail has presente d no authorities persuading the court to conclude that the Rail Act forecloses the applica tion of common law successor liabili ty principles, as proposed by the estate. Likewise, Conrai l has identified no provision in the Rail Act or the Conveyance Order precluding the application of common law successor liability principles as proposed by the estate. Accordingly, the court is persuaded that the estate is entit led to judgment as a matter of law that the Rail Act does not preclude it from a ttempting to hold Conrail liable in the Ohio state court action based on state law su ccessor liability principles. See Burns Int’l Sec. Servs. , 47 F.3d at 16 (holding that a Rule 12(c) motion should be granted when the movant is “entitled to judgment as a matter of law”).

IV. CONCLUSION For the foregoing reasons, the court grants the defendant’s moti on for judgment on the pleadings and denies the plainti ff’s motion for summary judgment. An Order consistent with

15 Conrail similarly overstates the holding of Zulkowski v. Consol. Rail Corp. , 852 F.2d 73 (3d Cir. 1988), which, like Schweitzer , concerned a reorganized debtor’s efforts to shift liability for latent FELA claims to Conrail by arguing that Conrail was the “reorganized company” for claims stemming from the predecessor railroad’s rail operations. See Zulkowski , 852 F.2d at 75-77. Relying on Schweitzer , the Third Circuit rejected this argument. Id . at 77 (stating that “nowhere in these citations, or elsewhere in the Rail Act, is there any provision transferring the liability for a claim of the type made here from an entity reorganized under the [Rail] Act to Conrail or otherwise relieving an entity so reorganized from su ch a liability”). This court rejects Conrail’s attempt to transform the limited holding of Zulkowski into a broad rule that the Rail Act precludes the application of common law successo r liability. Conrail’s reliance on United States Fidelity & Guar. Co. v. DiMassa , 496 F. Supp. 71 (E.D. Pa. 1980), is similarly misplaced. See id . at 75-76 (dismissing anti-trust claims against Conrail because Conrail “did not become a successor corporation which assumed all of Reading’s pre-1976 liabilities” by taking over the operating assets of the insolvent railroads pursuant to the Rail Act).24 this Memorandum Opinion is separately and co ntemporaneously issued this 2nd day of March,
2010.

RICARDO M. URBINA United States District Judge