Source: http://supreme.nolo.com/us/347/298/case.html
Timestamp: 2019-08-24 03:01:05
Document Index: 689816276

Matched Legal Cases: ['§ 77', '§ 77', '§ 77', '§ 77', '§ 5', '§ 77', '§ 77', '§ 77', '§ 77', '§ 205', '§ 77']

ST. JOE PAPER CO. V. ATLANTIC COAST LINE R. CO., 347 U. S. 298 - Volume 347 - 1954 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 347 > ST. JOE PAPER CO. V. ATLANTIC COAST LINE R. CO., 347 U. S. 298 (1954) > Full Text
In a railroad reorganization proceeding under § 77 of the Bankruptcy Act, the Interstate Commerce Commission formulated a plan of reorganization which provided for a forced merger of the debtor railroad and another railroad. 282 I.C.C. 81. The District Court set the plan aside. 103 F. Supp. 825. The Court of Appeals reversed. 201 F.2d 325. This Court granted certiorari. 345 U.S. 948. Reversed and remanded, p. 347 U. S. 315.
The subsequent struggle for control of the debtor has been largely between these two interests -- the St. Joe Paper Co., owner of the major interest in the debtor, and Atlantic, a connecting carrier anxious to acquire the debtor's coveted Florida east coast traffic from Jacksonville to Miami. Shortly after the Commission's rejection of the Lynch plan, Atlantic proposed its own plan providing for the merger of the debtor into Atlantic in return for the distribution of cash and various types of Atlantic's securities to the debtor's bondholders. St. Joe again opposed, as did various other bondholders, two competitors of Atlantic, an association representing the debtor's employees, and other interested parties. The matter was referred to an Examiner who, after a lengthy investigation, found that such a merger would not be in the public interest, and that the Atlantic plan would not constitute "fair and equitable" treatment for all the unwilling bondholders, who were, in substance, the owners of the debtor railroad. [Footnote 1] The Commission, however, by a sharply divided decision, overruled the Examiner and sanctioned
The Commission then formulated another plan, which likewise provided for a forced merger of the debtor and Atlantic, 282 I.C.C. 81, and Circuit Judge Strum, sitting in the District Court, while bound on the question of the Commission's power by the prior Court of Appeals decision, again set the plan aside as unfair and inequitable. 103 F.Supp. 825. The Court of Appeals was now convened en banc. Three of its judges, without further consideration of the Commission's power, reversed the District Court and found the plan fair and equitable. The other two judges dissented, and adopted the reasoning of Judge Sibley in the earlier case, i.e., that the Commission had no power under the statute to propose such a compelled merger plan. [Footnote 4] 201 F.2d 325.
this natural presumption against such a tacit grant. It would require unambiguous language indeed to accomplish a contrary result; yet nowhere in the committee reports and the debates on the original § 77, nor in any of the legislative materials relating to the thorough reexamination of that statute in 1935, [Footnote 8] can we find so much as one word which conveys the impression that, as to mergers under the Bankruptcy Act, Congress stealthily
designed to jettison its longstanding and oft-reiterated policy against compulsory mergers. On the contrary, after the enactment of § 77 in 1933, the Commission in its annual reports, and the Federal Coordinator of Transportation in his several reports, had frequent occasion to discuss § 77 of the Bankruptcy Act and § 5 of the Interstate Commerce Act. It would indeed be strange for these railroad authorities to bemoan the Commission's inability to initiate mergers and consolidations [Footnote 9] if it had been a fact that as to the substantial portion of the Nation's railroad mileage then in receivership or § 77 proceedings [Footnote 10] the Commission clearly had this very power. Had it been the declared intention of the drafters of § 77 to confer such a power, it is fair to assume that, in view of the persistent opposition of organized labor and other groups
All this, of course, is not to say that mergers cannot be carried out in the course of a § 77 reorganization. It merely means that, if they are, they must be consummated in accordance with all the requirements and restrictions applicable to mergers under the Act primarily concerned with railroad amalgamations, the Interstate Commerce Act. So far as here relevant, that means that the merger must be worked out and put before the Commission by the merging carriers. [Footnote 12] It also means that one carrier
Likewise, the so-called "cramdown" clause, much relied on by respondent, has no bearing on this case. That provision was added to § 77 of the Bankruptcy Act in 1935, 49 Stat. 911, 919, 11 U.S.C. § 205, sub. e, because, under the prior law, a plan had to be accepted by at least two-thirds (in amount) of each class of creditors and stockholders affected by the plan. This enabled a small dissentient minority to block any plan of reorganization, no matter how "fair and equitable," in order to exact inequitable adjustments as the price of its acquiescence. Under the "cramdown" provision, the district court may, under the appropriate circumstances and after making certain required findings, confirm a plan despite the disapproval of more than one-third of each class affected. From the existence of this general power in the district court to confirm a plan despite the opposition of dissentient elements, the conclusion is sought to be drawn that the Commission must therefore have initial power to submit a compulsory merger plan to the court. Obviously this does not follow. Since the vast majority of § 77 proceedings involve internal reorganizations, the "cramdown" provision has a purpose and scope of application wholly independent of mergers, and it therefore has no bearing one way or the other on the question at issue in this case. [Footnote 14] It is true that, in view of our holding here that merger plans cannot be proposed by the Commission under the Bankruptcy Act, the "cramdown" provision can never be applied to such involuntary plans. But there
In 1919, when the Government was planning to return the railroads to private ownership, many of the smaller railroads were in very weak condition, and their continued survival was in jeopardy. [Footnote 2/3] Hence, for the first time, governmental encouragement of railroad consolidation was discussed. It was agreed that the Interstate Commerce Commission should be directed to prepare a plan for the
In 1921, the Commission promulgated a tentative consolidation plan. [Footnote 2/8] Strong opposition immediately developed, and long hearings before the Commission ensued.
-- would result in savings as a result of unification. [Footnote 3/5] Id., p. 187.
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