Opinion ID: 109117
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Heading Rank: 1

Heading: introduction

Text: A rail transportation crisis seriously threatening the national welfare was precipitated when eight major railroads in the northeast and midwest region of the country [2] entered reorganization proceedings under § 77 of the Bankruptcy Act, 11 U. S. C. § 205. [3] After interim measures proved to be insufficient, [4] Congress concluded that solution of the crisis required reorganization of the railroads, stripped of excess facilities, into a single, viable system operated by a private, for-profit corporation. Since such a system cannot be created under § 77 rail reorganization law, and since significant federal financing would be necessary to make such a plan workable, Congress supplemented § 77 with the Rail Act, which became effective on January 2, 1974. The salient features of the Rail Act are: 1. Reorganization of each railroad in § 77 reorganization must proceed pursuant to the Rail Act unless the district court having jurisdiction over its reorganization (a) finds, within 120 days after January 2, 1974, that the railroad is reorganizable on an income basis within a reasonable time under section [77] and that the public interest would be better served by such a reorganization than by a reorganization under this chapter, [5] or (b) within 180 days after January 2, 1974. finds that this chapter does not provide a process which would be fair and equitable to the estate of the railroad in reorganization. . . . § 207 (b), 45 U. S. C. § 717 (b) (1970 ed., Supp. III). [6] Appeals from § 207 (b) orders may be taken within 10 days of entry to a Special Court constituted under § 209 (b), 45 U. S. C. § 719 (b) (1970 ed., Supp. III), and must be decided by the Special Court within 80 days after the appeal is taken. Section 207 (b) expressly provides that [t]here shall be no review of the decision of the special court. [7] 2. Appellant United States Railway Association (USRA) is established as a new Government corporation. § 201 (a), 45 U. S. C. § 711 (a) (1970 ed., Supp. III). USRA must prepare a Final System Plan for restructuring the railroads in reorganization into a financially self-sustaining rail service system. § 206 (a) (1), 45 U. S. C. § 716 (a) (1) (1970 ed., Supp. III). See §§ 201, 202, 204-206, 45 U. S. C. §§ 711, 712, 714-716 (1970 ed., Supp. III). The Final System Plan must provide for transfer of designated rail properties by the railroads in reorganization to a private state-incorporated corporation, Consolidated Rail Corporation (Conrail), § 301 (a), 45 U. S. C. § 741 (a) (1970 ed., Supp. III), in return for securities of Conrail, plus up to $500 million of USRA obligations guaranteed by the United States, and the other benefits accruing to such railroad by reason of such transfer. § 206 (d) (1), 45 U. S. C. § 716 (d) (1) (1970 ed., Supp. III); see also § 210, 45 U. S. C. § 720 (1970 ed., Supp. III). [8] 3. USRA must submit a proposed Final System Plan to Congress within 570 days after January 2, 1974, §§ 207 (c), 207 (d), 208 (a), 45 U. S. C. §§ 717 (c), 717 (d), 718 (a) (1970 ed., Supp. III), that is, by July 26, 1975. [9] The Plan becomes effective if neither House of Congress disapproves it within 60 continuous session days after submission. §§ 102 (4), 208 (a), 45 U. S. C. §§ 702 (4), 718 (a) (1970 ed., Supp. III). [10] USRA is required to transmit the Plan within 90 days after its effective date to the Special Court which, under § 209 (b), is given exclusive jurisdiction of all proceedings with respect to the final system plan. 45 U. S. C. § 719 (b) (1970 ed., Supp. III). The Special Court within 10 days after deposit . . . of Conrail securities and USRA obligations shall . . . order the trustee or trustees of each railroad in reorganization . . . to convey forthwith to Conrail all right, title, and interest in the rail properties of such railroad in reorganization . . . designated in the Final System Plan. § 303 (b), 45 U. S. C. § 743 (b) (1970 ed., Supp. III). 4. The Special Court next determines whether the conveyances of the rail properties to Conrail (A) . . . are in the public interest and are fair and equitable to the estate of each railroad in reorganization in accordance with the standard of fairness and equity applicable to the approval of a plan of reorganization . . . under section [77] . . . [or] (B) whether the transfers or conveyances are more fair and equitable than is required as a constitutional minimum. § 303 (c), 45 U. S. C. § 743 (c) (1970 ed., Supp. III). If the Special Court finds that the transfer is not fair and equitable, the Special Court must reallocate, or order issuance of additional, Conrail securities and USRA obligations (subject to the overall $500 million limitation on USRA obligations for this purpose), or enter a judgment against Conrail, or decree a combination of these remedies. § 303 (c) (2). The Special Court is not authorized to enter a judgment against the United States. Section 303 provides also that if the Special Court decides that the consideration exchanged for the rail properties is more fair and equitable than is required as a constitutional minimum, § 303 (c) (1) (B), it shall make necessary adjustments so that the constitutional minimum is not exceeded. § 303 (c) (3). Appeal from § 303 (c) determinations is to this Court. § 303 (d). [11] 5. Although railroads in reorganization subject to the Act are free to abandon service and dispose as they wish of any rail properties not designated for transfer under the Final System Plan, §§ 304 (a)-(c), 45 U. S. C. §§ 744 (a)-(c) (1970 ed., Supp. III), until that Plan becomes effective none may discontinue service or abandon any line of railroad . . . unless . . . authorized to do so by [USRA] and unless no affected State or local or regional transportation authority reasonably opposes such action. . . . § 304 (f).