Document: 334 U.S. 182 68 S.Ct. 958 92 L.Ed. 1305 SCHWABACHER et al.v.UNITED STATES al. No. 258. Argued Jan. 6, 7, 1948. Decided May 3, As Amended 10, Appeal from the District Court of United States for Eastern Virginia. Mr. Carl McFarland, Washington, D.C., appellants. Daniel H. Kuk el, appellee I.C.C. [Argument Counsel page 183 intentionally omitted] George D. Gibson, Richmond, Va., C. & O. Ry. Co. and others. Justice JACKSON delivered opinion Court. 1 This controversy grows out voluntary merger Chesapeake Ohio Railway Company Pere Marquette Company, which companies, together with Alleghany Corporation, sought approval by Interstate Commerce Commission. is incorporated under laws Michigan, while chartered acquired some years exercised active control Marquette, whose properties operations complement rather than compete those Ohio. Late in 1945 proceedings were commenced enabling statutes two states consummated considerably more number shares made necessary respective states. The Commission found, there no attack upon findings, that public interest served unification these operations. also concluded plan as a whole, applied to each group shareholders, just reasonable, this conclusion except appellants treated fully herein. Consequently, details are little importance litigation. 2 Appellants owners 2,100 $100 par 5% cumulative preferred stock Marquette. Their interests aggregate less 2% outstanding class. Dividends on have been unpaid since 1931 and, commencement controversy, arrears sum $72.50 per share, an amount increasing time. charter provides full payment at par, plus accrued dividends, 'in event dissolution, liquidation, or winding up company, involuntary * before any amounts paid holders common stock.' contend hereinafter described terminates corporate existence clause construed Michigan law, 'winding up.' They insist makes provision compensation stockholders right, their recognized basis least $172.50 each. found market value share ranged, different times, $87 to.$99, terms give stocks exchange would realized about $90 $111 same dates. dissented merger, but law specific right procedure appraisal retirement holdings stockholder dissenting railroad merger. 3 When application was filed § 5 Act amended (49 U.S.C. 5, 49 U.S.C.A. 5), authorization merger,1 well other relief, intervened asked body determine, recognize protect asserted legal liquidation figure. approved terms, finding them reasonable class stockholders. However, it disclaimed jurisdiction pass further claims interpretation law. It reviewed length economic position stock. recited had received dividends appellants' witnesses agreed could not expect receive many years, apart pointed deficit first quarter 1946 contrasted net income Chesp eake Ohio, 'On whole seem prospects returns investments be enhanced company into Ohio.' did question stockholders, dissolution entitled accumulated undertake determine ultimate worth case actual considered present intrinsic capitalized earnings basis, yield its concluded: 'Accordingly, considering Marquette's investment according books, property values, company's history earnings, future prospects, stocks, all set forth above, we find both parties generally proposed ratios exchange, issues assumptions indebtedness, reasonable.' 4 then noted contention because they deprived contract rights waived. contended should remit remedies state courts thereby decline conferred 20a Act.2 But entrusted authority decide aspects transportation facilities expected enter 'compensation specified bases' thought that, having treatment done duty 'when make certain alike.' declined what were, whether equivalent said: 'This does mean do remain free settle controversies through negotiation litigation courts.' Taking account small percentage shares, current assets maximum possible cost merged settlement most favorable appellants, amply able bear 'any probable expenditure cash might required connection Accordingly appears consummation will involve burden excessive expenditure.' thus left suspense, subject negotiation, concerning extent capital obligations constituent after examining sufficiently only however settled, enough affect solvency new jeopardize denied petition rehearing suit Virginia aside order authorizing A court three judges, convened law,3 sustained Commission, 72 F.Supp. 560. bring us4 view over mergers, declared exclusive plenary, stockholders'l egal charter, 6 disposition claims, nature themselves, requires consideration relative function federal regulating approving mergers. measured by, dissenters in, agency bound apply hand refuses either finally foreclose allow claims. apparently leaves open courts, add surviving carrier's has others founded such findings. We conclude neither wholly consistent statutory 7 us adjudicate measure may confer Neither nor can plenary decision be, declaring interpreting own Union. effect relation constitutional Congress, provision, art. cl. 2, latter shall 'the supreme Law Land,' 'Laws State Contrary notwithstanding,' determine. Our inquiry here, therefore, accords recognition rights, if exist. To assume, decide, consider regard given entitling 'full payment' thereon. Assuming State, must Transportation 19405 conditioned observance contingently them. resume throws light problem dealt legislation. 8 basic constructed restrictions corporations powers limitations prescribed legislatures, resulted themselves. Construction reference primarily local regional needs created duplicating competing areas provided inadequate ones Expansion serve advancing national frontiers stimulated extensive subsidies Federal Government, largely form land grants. stress strain World War I brought home railroads country really system transportation. That crisis plain confusions, inefficiencies, inadequacies dangers our defense economy flowing patchwork pattern created. 9 demand integrated, efficient coordinated rail transport, equal defense, 1920.6 In series decisions particular problems, defined general purposes establishment railway o licy7 insure adequate service means securing fair return devoted service, restoration impaired credit, regulation rates, security issues, consolidations mergers public. tenor confirm power regardless rate structures, physical make-up relations between carriers, system. Railroad Wisconsin v. Chicago, B. Q.R. Co., 257 563, 42 232, 66 371, 22 A.L.R. 1086; New England Divisions Case, (Akron, Y.R. States,) 261 184, 43 270, 67 605; Dayton—Goose Creek R. States, 263 456, 44 169, 388, 33 472; California Southern Pac. 264 331, 376, 713; Texas P.R. Gulf, S.F.R. 270 266, 46 263, 70 578.8 10 end, 1920 required9 prepare adopt nationwide country. master governing permitted harmony furtherance Commission's overall plans.10 If met test, Congress notwithstanding restraint prohibition authority.11 11 By 1940 become apparent ambitious nation-wide consolidation bearing fruit. Various studies investigations12 led where best enemy good waiting perfect official defeating postponing attainable iprovements. relieved formulating consolidations. Instead, authorized carrier-initiated, plans if, subjc t conditions modifications prescribe, transactions tests interest, justice reasonableness, effective authority.13 specify every weight determining meets tests. Section 5(2) 'among others,' inclusion failure include railroads, total fixed charges, carrier employees affected. recently unanimously said Act, 'Congress long maintenance development economical matter primary concern. Its legislation read purpose mind.' Seaboard Air Line Daniel, 333 118, 426, 430.14 12 So reading relevant within scope dependent three, considerations: First, 'will interest.' (§ 5(2)(b).) Second, modification 'just Third, assent 'majority, unless vote applicable so assent, votes vote.' 5(11).) complied with, Commission-approved transaction goes without need invoking authority, 'restraints, limitations, prohibitions Federal, municipal, insofar enable carry accordance conditions, any, imposed hold, maintain, operate exercise franchise transaction.' 13 1920, complete structure result merger.15 carrier, even creatd it, issue stock, bond evidence indebtedness approval. assume obligation respect securities another person corporation And '(a) lawful object purposes, compatible appropriate proper performance impair ability perform (b) reasonably purpose.' 20a(2), 20a(2). 14 independent authority. 5(11);16 20a(7).17 15 seen, liabilities settled assumption 20a. Indeed, exceed hardly interest. 16 inconsistent Act18 leave growing one companies added contingent tribunal agreement think approve discharge greater allowed deplete inflate company. strong still service. sole supervision statute. capitalization carried test respects. error assuming have, liberty renounce delegate, proportion thereof contributions entity. 17 equally clear look standards passing Act. matters land. everything pertaining structures plain. very fact rely heavily, 'plenary' 'exclusive,' argues force exclusive. likely probably interpret state's law.W hatever ask assure federal, state, 18 Apart meeting reasonable. These meaningless ultimately provisions charters laws. Such usually drawn time experience unsettled. Public obliged cannot lightly intended restore promised already lost operation forces. Cf. Market St. 324 548, 65 770, 89 1171. appraising stockholder's promise him governs, he once put contributing good. 19 construing words 'fair equitable' statute similar held although priority rule applies solvent holding pursuant statute, satisfied giving presently preferences apply. being liquidated compliance administrative order, valued 'on going business though taking place.' Consequently factor valuation determinative payable. Otis Securities Exchange 323 624, 483, 488, 511. 20 enterprise continue, letter charter. method longer default all. however, continued prospect greatly exchange. measuring rod legalistic one. stock's past yield, value, prospects. things considered, gave held. deal continuing enterprise. say whether, exact equivalent. 21 Since clearly contemplates step enterprise, follows winding-up irrelevant, reflected values designates groups contemplation use calling dedicated. minority dissatisfied block compel capital, often permit private corporationsw here much concerned stockholders' consent, provide withdrawal nonconsenting oversight supplied us. part dedicated withdraw itself abandon submit regulations readjustments terms. receives turns course, see protected, especially when absence arm's bargaining management adverse indicates awareness case. challenged impose financial merging consequent increased calls earning capacity. 23 therefore hold alleged granted survive requisite Any are, accorded making determination, values. While record lacked jurisdiction. Under circumstances, sure arriving exclude factors views opinion. reverse judgment below remand reconsideration principles herein expressed. 24 Reversed remanded. 25 REED took 26 FRANKFURTER, dissenting. 27 operated 693 corporations. exist virtue several States,1 govern internal affairs, particularly, Virginia, Michigan. respectively combine sufficient satisfy favor absorption consummate agreement, 1940. provided, short, amounting 450,460 common, 124,290 preferred, 112,000 prior preference, exchanged 211,429.4 312,272.2 preferred. All 9% h e assented arrangement. stood claiming 1931, share. 28 refused ruled called individual against road potential safeguard For involved nowise 29 $191,433,919. An additional $28,949,745 issued, plan, $220,383,595. offered $111.60 $234,360. claim book honored, $362,250. liability $127,890, concluded, soundness, point 'public interest,' devised stock—the contemplated agreement—were refuse participate, difference could, required, readily absorbed soundly based quarter-billion-dollar carrier. 30 Both urge Court, reads quite differently, reaching practice. 31 duties. Even doubtful, me construction experienced judgment, American Trucking Ass'ns, 310 534, 549, 60 1059, 1067, 84 1345, required. disclaims asserts power, reason feel assured disinterestedness resolve ambiguity choice construction. 32 Until Sherman seq., See Northern 193 197, 436, 48 679. acquisition another, amended. 1940, carriers sanctioned, subject, scrutiny due protection wt particularity constituted interest' keeping. now holds State-chartered impliedly supplanted who finds adjudication touches condition carrying arrangement, arrangement dissenters. doubt theretofore separate ownership doing override State-created carriers. financially embarrassed bankruptcy powers, empowered formulate reorganization, which, equitable, assent. system, accomplish like results Clause. precisely do. besought eliminate waste inefficiencies congeries instrumentalities operate, providing compulsory away complexities confusion resulting conducting country's interstate business, requiring incorporation. rejected demands. H.R.Rep. 650, 66th Cong., 2d Sess., pp. 63—64. larger units owners, merely lodging veto run counter explicitly negatived possibility creation, 'directly indirectly, corporation.' 34 charged seeing limited requirements observed, end 'exclusive plenary' 5(11). authorize sanction coerce adoption, true 77. specifically enumerates constitute secure are: proposal service; including failing plan; charges; allowed. great detailed comprehensive 77, 205, carries sharp contrast coercion reorganization insolvent roads. 35 Appropriate accommodation needlessly sacrificed adding, whereby implied abrogation authorization, survival impinge ignores salutary principle construction, strikingly illustrated Los Angeles Terminal cases drawn, 'that circumscribe occupy field, andt hat intention supersede covered fairly interpreted conflict State.' Atchison, T. 283 380, 392, 393, 51 553, 556, 557, 75 1128. Palmer Massachusetts, 308 79, 34, 93. 36 needless, undesirable draw implication destructive Congressional scheme allowing fact, manifested abrogate collision interest; interferes Thus, assenting seems congruous opposition prevent enforcing rights. Again, 5(11) relieves restraints laws, 'Federal, municipal,' 'insofar *.' paragraph contains expressed disclaimer incorporation surely desire retain fullest ties One vital consequences subjection relationship unmistakably overrides it. 37 considerations sharply differ liquidations reorganizations 77 Bankruptcy (See Reorganization 1948 Pub.L.No. 478, 80th April 9, 1948, 208, 20b.) administered assets. dealing inevitably concentrated court. proceedings, obstacle practice pursued deciding reasonable' securities, permitting dissenter stand issue, leaving corporation, affected allowance assert unliquidated negligible successor, full. fail negligence amount. Every operating times. interfere easily for. event, determination eventual protected appropriately bel eft informed discretion. 38 control, 20a, course loss negligence. differences foundation relevance arise off cash, turn founded, successor corporation. 39 written, underlying persuades vigorously exercise. consistently law—or law—contested deemed E.g., Sullivan-Purchase-Service Freight Line, Inc., M.C.C. 621; Jessup-Control-Safeway Trails, 233, 241; Lee-Control; Carolina M. Exp. Lines, Inc.—Lease Purchase—Reed, 40 405, 407. York Central Corporation 287 12, 26, 27, 53 45, 48, 49, 138; Cleveland, C., L.R. 275 404, 414, 189, 193, 338. holding, essence, governs during proceedings. thrusting rejected, depriving selected 41 affirm judgment. CHIEF JUSTICE BURTON join dissent. follows: '(2) (a) lawful, subdivision (b)— '(i) consolidate merge franchises, thereof, ownership, management, '(b) Whenever subparagraph (a), persons seeking therefor thereupon notify Governor situated, applicant applicants, afford opportunity interested heard. transaction, modifications, '(c) (2), following considerations, among others: (1) public; (2) inclusion, include, territory *; (3) charges transaction; (4) '(e) No guaranty '(4) unlawful person, '(11) section participating thereunder, (with purchase sale, lease, consolidation, majority, regular notice incu de purpose, special purpose) franchises authority; corporations, officers persons, hereby antitrust restraints, transaction. Nothing create directly addition pertinent §§ notes respectively. 47, 47. 47a, 47a; 345, 345. September 18, 54 Stat. 898. February 28, 456. 'It manifest act departure. *' Chief Taft, 585, 236, 1086. 172, 472, referring case, 1086, 605, late 'In adds important previous commerce designed unreasonable discriminatory rates localities. seeks affirmatively build railways prepared handle promptly traffic aims earn maintain equipment efficiency burden. achieve puts systems completely ever fostering guardianship supervise car supply distribution, joint terminals, lines, abandonment old division fixing commerce, discrimination, intrastate engaged.' 407(4), 5(4). 407(6)(a), 5(6)(a). 407(8), 5(8). See, example, report recommendations President's Committee Six, appointed 20, 1938, dated December 23, legislative note 1, supra. included statement 'National Policy' terms: policy impartial modes preserve inherent advantages each; promote safe, adequate, economical, foster sound carriers; encourage services, unjust discriminations, undue advantages, unfair competitive practices; cooperate duly officials thereof; wages equitable working conditions;—all developing, coordinating, preserving water, highway, rail, means, meet Postal Service, defense. enforced above declaration policy.' preceding 1. Repeated government field followed 439 494). early 1907 stated come issuance engaged commerce.' 277, 306. recommendation renewed annual 1907, p. 24, succeeding 1919. 1919 recommended submitted Senate Committee, issues. House Report 1st Sess. (November 1919), later became 20a: '* enactment pending bill exclusively hands Government uniformity promptness action.' enacted remained unchanged lessor, lessee, guarantor, indorser, surety, otherwise, natural artificial, creating until, investigation commission uses proceeds authorizes assumption. assumption: purpose. '(6) Upon receipt cause copy governor operates. commissions, utilities authorities representations deem conserving people respectively, hearings, sees fit, '(7) exl usive text 20a(7) 15. (Pittsburgh W.V.R. App.D.C. 293 F. 1001, 1004, appeal dismissed 266 640, 45 124, 69 483) constitutionality upheld, 'If 'a service' (New 273, 605) insured public, incurring bonded extension becomes utmost importance. Without bonds, limit dividend expenditures extensions improvements, impossible. According reports Class II file Congress: Pacific Railway. March 1871, 573, 1923, 1223.

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