Opinion ID: 368992
Heading Depth: 2
Heading Rank: 3

Heading: The Application of Judicial and Administrative Precedent

Text: 55 to Section 20a. 56 The Court's interpretation of section 20a is fully consistent with all relevant judicial precedent. Although it must be conceded that all prior judicial interpretations of section 20a have relied heavily on the ICC's pre-1975 reading of the statute an interpretation that the 1975 Order would overturn these precedents still provide clear support for the construction which this Court adopts. For example, in REA Express, Inc. v. Alabama Great Southern Railroad, 427 F.Supp. 1157 (S.D.N.Y.1976) (three-judge court), Aff'd mem. sub nom. Sowerwine v. United States, 431 U.S. 961, 97 S.Ct. 2914, 53 L.Ed.2d 1057 (1977), Judge Friendly examined the significance of the statute's use of the word issue. He explained: 57 While non-negotiable debt representing an advance from an owner may fall within the letter of the term other evidence of . . . indebtedness, one would not normally speak of a carrier's issuing such debt. At best, therefore, the applicability of § 20a to the contracting of non-negotiable debt would be doubtful. 58 427 F.Supp. at 1164. 41 Moreover, the court noted that prior ICC interpretations, which had applied the rule of Ejusdem generis to section 20a, 42 had support in reason. Id. at 1165. In United States v. New York, New Haven & Hartford Railroad, 276 F.2d 525 (2d Cir. 1959), Cert. denied, 362 U.S. 961, 80 S.Ct. 877, 4 L.Ed.2d 876 (1960), the Second Circuit reviewed the scope of section 20a and concluded: 59 Appellees are quite right in saying that, in enacting 20a Congress did not grant the Commission general power to pass judgment on all obligations incurred by railroads and that, in this early essay in Federal security regulation, Congress did not enact so comprehensive a definition of security as it later did in the Securities Act of 1933, 15 U.S.C.A. § 77b(1), the Securities Exchange Act of 1934, 15 U.S.C.A. § 78c(a)(10), and the Public Utility Act of 1935, 15 U.S.C.A. § 79b(a)(16). 60 276 F.2d at 533. 43 A similar construction was applied in Interstate Investors, Inc. v. United States, 287 F.Supp. 374, 386-88 (S.D.N.Y.1968) (three-judge court), Aff'd per curiam, 393 U.S. 479, 89 S.Ct. 707, 21 L.Ed.2d 687 (1969). 61 Respondents seek to distinguish this line of precedent by pointing to the Commission's change in position. Yet, like the 1975 Order, the Commission's earlier readings of the statute were merely interpretative, 44 and, as a result, they merited little judicial deference. Under such circumstances, the courts' unanimous adoption of its reading of section 20a should be viewed as more than a judicial stroll down a path worn smooth by ICC regulation. Rather, these decisions reflect an independent consideration of the language and purpose of the statue and, as such, this Court deems them reliable and persuasive precedent. 62 Finally, the Court also draws support for its reading of the statute from prior ICC interpretations. For half a century, the Commission construed the term securities in accordance with its normal meaning. In Lehigh Valley Railroad Conditional Sale Contract, 233 I.C.C. 359 (1939), the Commission ruled that a conditional sale contract, which covered the acquisition of $1,125,000 worth of railroad equipment, was Not a security. It explained, Considering the provisions of section 20a as a whole . . . it appears that the provisions were intended to apply to instruments negotiable or quasi-negotiable in character, such as are issued for the purpose of railroad financing. 233 I.C.C. at 365. Although a handful of ICC decisions indicate that the Commission's construction of section 20a may involve an analysis more refined than that of Lehigh Valley, 45 the ICC has regularly held that many noteless borrowings, such as mortgages, conditional sale contracts, equipment leases, loan agreements and chattel mortgages, are not securities within the scope of the statute. 46 This longstanding interpretation by the Commission itself is convincing evidence of the correctness of the Court's interpretation. See Textile and Apparel Group v. FTC, 133 U.S.App.D.C. 353, 410 F.2d 1052, 1055-57, Cert. denied, 396 U.S. 910, 90 S.Ct. 223, 24 L.Ed.2d 185 (1969). 63