Opinion ID: 109117
Heading Depth: 1
Heading Rank: 6

Heading: Validity of the Rail Act Under Uniformity Requirement of Bankruptcy Clause

Text: We consider finally the contention that, because the Rail Act's provisions apply only to railroads in reorganization in the region, the statute lacks the uniformity required by Art. I, § 8, cl. 4, of the Constitution giving Congress power To establish . . . uniform Laws on the subject of Bankruptcies throughout the United States. The District Court held that recourse to the bankruptcy clause to justify Congressional action is necessary only if that action impairs the obligation of contracts. 383 F. Supp., at 534 (Fullam, J., concurring). In that respect, the court found that the Rail Act adds virtually nothing to the powers already granted to reorganization courts under the uniform and admittedly valid provisions of § 77 of the Bankruptcy Act. . . . Authority to order conveyances free and clear of liens, and to `cram down' a plan of reorganization, already exists under § 77, and is not newly created or added by the [Rail] Act. Ibid. The court determined, however, that one provision of the Rail Act is newly created or added by the [Rail] Act. Section 207 (b) requires the reorganization court to dismiss the § 77 proceeding if it finds that the railroad is not reorganizable on an income basis within a reasonable time, and that the Rail Act does not provide a process which would be fair and equitable to the estate of the railroad in reorganization. The District Court noted that the New Haven Inclusion Cases, supra , held that inasmuch as the plan disposed of the New Haven's assets to the Penn Central for continued operations, § 77 could be used to reorganize the enterprise as an investment holding company, at least where the plan contemplates that the bulk of the rail properties will continue to be operated as a railroad by someone. 383 F. Supp., at 534. The District Court held that § 207 (b) of the Rail Act precludes a like reorganization under § 77 by requiring dismissal of the § 77 proceedings, and to that extent violates the uniformity clause since this dismissal relates only to debtors within the region covered by the Rail Act. We need not decide whether the District Court was correct in this respect. Following the decision of the District Court, the Penn Central Reorganization Court issued its 180-day order finding that, although Penn Central is not reorganizable on an income basis under § 77, the Rail Act does not provide a process which would be fair and equitable to the debtor's estate. 382 F. Supp. 856, 870-871. Rather than dismiss the § 77 proceeding as required by § 207 (b), however, the court stayed its order pending an appeal to the Special Court. The Special Court found that the processes prescribed in the Rail Act are fair and equitable if a remedy exists under the Tucker Act, and reversed. 384 F. Supp., at 910-911. The Rail Act expressly provides that this holding is nonreviewable. § 207 (b). Although we need not address today the issue whether the judgment of the Special Court is subject to review, we do hold that the Tucker Act remedy is available for any uncompensated taking occurring under the Rail Act. That holding obviates the possibility that the Penn Central Reorganization Court will ever confront the provisions for dismissal of a § 77 proceeding under § 207 (b) of the Rail Act. There remains, however, another aspect of the uniformity issue for decision. Appellees urge that the entire Rail Act violates the uniformity clause. The argument is that the uniformity required by the Constitution is geographic, Hanover National Bank v. Moyses, 186 U. S. 181, 188 (1902), and since the Rail Act operates only in a single statutorily defined region, the Act is geographically nonuniform. The argument has a certain surface appeal but is without merit because it overlooks the flexibility inherent in the constitutional provision. Section 77 was upheld against a like challenge on the ground of the capacity of the bankruptcy clause to meet new conditions as they have been disclosed as a result of the tremendous growth of business and development of human activities from 1800 to the present day. Continental Illinois Nat. Bank & Trust Co. v. Chicago, R. I. & P. R. Co., 294 U. S., at 671. The Court therefore held that, though § 77 was a distinctive and far-reaching statute, treating railroad bankruptcies as a distinctive and special problem, it was not beyond the limit of congressional power. [44] The uniformity provision does not deny Congress power to take into account differences that exist between different parts of the country, and to fashion legislation to resolve geographically isolated problems. The problem dealt with [under the Bankruptcy Clause] may present significant variations in different parts of the country. Wright v. Vinton Branch, 300 U. S. 440, 463 n. 7 (1937). We therefore agree with the Special Court that the uniformity clause was not intended to hobble Congress by forcing it into nationwide enactments to deal with conditions calling for remedy only in certain regions. 384 F. Supp., at 915. The national rail transportation crisis that produced the Rail Act centered in the problems of the rail carriers operating in the region defined by the Act, and these were the problems Congress addressed. [45] No railroad reorganization proceeding, within the meaning of the Rail Act, was pending outside that defined region on the effective date of the Act or during the 180-day period following the statute's effective date. Thus the Rail Act in fact operates uniformly upon all bankrupt railroads then operating in the United States and uniformly with respect to all creditors of each of these railroads. The uniformity clause requires that the Rail Act apply equally to all creditors and all debtors, and plainly this Act fulfills those requirements. Vanston Bondholders Protective Committee v. Green, 329 U. S. 156, 172 (1946) (Frankfurter, J., concurring). No provision of the Act restricts the right of any creditor wheresoever located to obtain relief because of regionalism. 383 F. Supp., at 519. Our construction of the Bankruptcy Clause's uniformity provision comports with this Court's construction of other uniform provisions of the Constitution. The Head Money Cases, 112 U. S. 580 (1884), involved the levy on ships' agents or owners of a 50-cent tax for any passenger not a United States citizen who entered an American port from a foreign port by steam or sail vessel. Individuals engaged in transporting passengers from Holland to the United States challenged the levy as contrary to Art. I, § 8, cl. 1, under which Congress is empowered to lay and collect all Duties, Imposts and Excises [which] shall be uniform throughout the United States. The argument was that the head tax violated the uniformity clause because it was not also levied on noncitizen passengers entering this country by rail or other inland mode of conveyance. The Court upheld the tax, stating: The tax is uniform when it operates with the same force and effect in every place where the subject of it is found. The tax in this case . . . is uniform and operates precisely alike in every port of the United States where such passengers can be landed. 112 U. S., at 594. That the tax was not imposed on noncitizens entering the Nation across inland borders did not render the tax nonuniform since the evil to be remedied by this legislation has no existence on our inland borders, and immigration in that quarter needed no such regulation. Id., at 595. Similarly, the Rail Act is designed to solve the evil to be remedied, and thus satisfies the uniformity requirement of the Bankruptcy Clause. The argument that the Rail Act differs from the head tax statute because by its own terms the Rail Act applies only to one designated region is without merit. The definition of the region does not obscure the reality that the legislation applies to all railroads under reorganization pursuant to § 77 during the time the Act applies. Reversed.