Document: 347 U.S. 298 74 S.Ct. 574 98 L.Ed. 710 ST. JOE PAPER CO. et al.v.ATLANTIC COAST LINE R. LYNCH al. v. ATLANTIC AIRD WELBON Nos. 24, 33, 36, 37. Argued Oct. 15, 1953. Decided April 5, 1954. Mr. William D. Mitchell, New York City, for petitioners. Edward W. Bourne, respondent. Justice FRANKFURTER delivered the opinion of Court. 1 The sole question decision in this case is whether Interstate Commerce Commission has power under § 77 Bankruptcy Act to submit a plan reorganization district court whereby debtor railroad would be compelled merge with another having no prior connection debtor. Answer problem depends on understanding long legislative history. First, however, it necessary put into its relevant context. 2 In August 1931, Florida East Coast Railway was thrown equity receivership. It operated manner until January 1941, when committee representing owners substantial portion debtor's principal bond issue filed petition United States District Court Southern Florida. approved by court, and, as provided statute, proceedings were initiated before hearings formulated bondholders' committee. re Ry. Co., D.C., 103 F.Supp. 825. 3 course next ten years, many proposals have been considered Commission. Most them rejected one reason or another, but three turn certified None yet confirmed that court. initial simple internal reorganization. and remanded directions take account an intervening improvement cash position. 52 420. Atlantic Line Railroad, present respondent, first appeared scene November 1944 when, after Commission's purpose devising second had closed, Lynch, joined other bondholders debtor, sought reopen proposing new each recipient stock reorganized required sell 60% his interest at par Atlantic, connecting carrier, thereby giving operating control On 30, 1944, allowed intervene support Lynch proposal. St. Joe Paper hand, which time acquired majority issue, opposed plan. proposal, indicating that, view Atlantic's deficits over past combining two railroads not public time. 261 I.C.C. 151, 187. 4 subsequent struggle largely between these interests—the owner major carrier anxious acquire coveted east coast traffic from Jacksonville Miami. Shortly rejection plan, proposed own providing merger return distribution various types securities bondholders. again opposed, did bondholders, competitors association employees, interested parties. matter referred Examiner who, lengthy investigation, found such interest, constitute 'fair equitable' treatment all unwilling who substance railroad.1 Commission, sharply divided overruled sanctioned 'forced merger.'2 267 295.3 Circuit Judge Sibley, sitting Court, set aside ground statute force merger; addition, he held equitable'. 81 926, 933. appeal Appeals Fifth Circuit, judges sustained authority propose while third agreed Sibley; 179 F.2d 538, 541. 5 then likewise forced 282 81, Strum, bound decision, unfair inequitable. now convened en banc. Three judges, without further consideration power, reversed fair equitable. dissented adopted reasoning Sibley earlier case, i.e., plan.4 201 325. Because importance administration Act, we granted certiorari. 345 948, 73 866, 97 1372. 6 procedure authorized consider approve parties acceptance, well courts judicial confirmation, governed elaborate statutory scheme. See 47 Stat. 1474, amended, 11 U.S.C. 205, U.S.C.A. 205. Any here must resolved reference governing law underlying purpose, imbedded merely formal words history gives meaning. If ever legislation br treated organic whole, whose parts are disjecta membra, true 77. 7 respondent relies subsection b(5) sustain type involved.5 This (b)(3) original enacted 1933, 1475. read, insofar material, 8 '(b) A within meaning section * (3) shall provide adequate means execution may, so far may consistent provisions sections include any corporation *.' 9 permissive provision plans thus made expressly conditional compliance requirements §§ 49 1, 5. proviso, commonly 'consistency clause,' stated follows Commissioner Joseph Eastman, Chairman Legislative Committee weightiest voices Congress matters:6 10 'Explanation.—This act ought authorize mergers inconsistent applicable particularly consolidation-plan provisions. These amendments intended avoid possibility.' ensuing floor debates clear consistency clause subject whatever restrictions obtained Act. Representative Hatton Summers, Judiciary reported out bill manager bill, gave assurance: 12 'Mr. Horr. May I inquire not, where word 'reorganization' used, gentleman encourage consolidations railroads? 13 Sumners Texas. They could consolidated violation interstate commerce act. 14 go through that? 15 Sumners. that.' 76 Cong.Rec. 2909. 16 And Congressman Rayburn, Foreign Commerce, thus: 17 'Fear expressed enactment powers expanded. my firm conviction proposal specific safeguards consolidation additional commission matters.' 2917—2918. 18 deliberate explicit incorporation attending give some former, tortuous; detailed summary relegated appendix. Suffice say thread runs extending period twenty commentaries upon it, only voluntarily participating carriers encompassed it. From Transportation 1920, 41 456, 480, most recent comprehensive re-examination 1940, 54 898, 905, consistently insistently denied initiative getting properties assorted latter. role regard traditionally confined approving disapproving merged. adamant position taken want attempts secure relaxation. Advocacy enforce steady times, strong, failed Congress. 19 reasons hostility imposed derive disadvantages attributed fair-reaching corporate revampings. Employees constituent would, feared, almost certainly adversely affected. Shippers communities adequately served suddenly find themselves unfavorably dependent B. Investors contrary their expectations, holdings transmuted different railroad. As 1938 Annual Report said consolidation: 20 'Projects character cannot crammed down throats those carry conform them. Legal compulsion can used advantage bring recalcitrants stragglers line, drive hostile majorities action.' (P. 23.)7 21 We therefore conclude does repeatedly namely initiate railroads. light continuously vehemently reiterated policy against endowing ICC inconceivable, wholly apart clause, sub silentio effect 77, emergency hurriedly scarcely debate. serves strengthen natural presumption tacit grant. require unambiguous language indeed accomplish result; nowhere reports nor materials relating thorough 1935,8can much conveys impression stealthily designed jettison longstanding oft-reiterated compulsory mergers. contrary, annual reports, Federal Coordinator several frequent occasion discuss strange authorities bemoan inability consolidations9 if fact Nation's mileage receivership proceedings10 clearly very power. Had declared intention drafters confer assume persistent opposition organized labor groups Act,11 passed. 22 All carried they are, consummated accordance primarily concerned amalgamations, So relevant, worked merging carriers.12 also railroaded undesired carrier. 23 short, incorporates amended. heart originates voluntary carriers. essential prerequisite Line—two existing entities—must complied with, virtue command applies even just neither trusteeship. should result mutilation. 24 Senate comprehensively re-examined report submitted 1946 Wheeler, guiding spirit consideration.13 Much what says there heading 'Avoidance statute' highly here: 25 'In (the) interests, immediately directly affected consolidation, series procedural steps, 26 'This procedure, safeguards, rights side institutional groups, assumed consolidations, Act; dealing transportation, financial reorganization; considers specifies single question, fixed charges, deals sorts problems, related consolidation. interests States, local communities, bankruptcy securityholders. 27 'Those trying bypass consolidate part proceeding something subsidiary, mere tail main kite. When governors representatives employees' organizations invited concerns enveloped questions technical nature. grab bag proceedings, task more complicated difficult than passed There always available cry—the disapprove though matter, lest expense gone lost. 28 'The justifies action citing subsections Subsection b lists number substantive changes Then 'means plan,' *. Among plan's included 'the corporations.' f authorizes confirms 'without proceedings' issuance securities, transfer property, sale, 'consolidation pooling traffic, extent contemplated purposes hereafter amended.' 29 'Note could, construction mergers, complying laid Consolidations, regarded dangerous, carefully regulated supervised; evils mind prevent excesses, saving good transactions; end elaborated considerable 30 'It intended, permit proceedings. Section either subcommittee full Senate, being up floor. pushed final days Seventy-second plea receiverships. manner, legislate existence, companies requiring reorganizations, respect pools. sound, necessity considering obvious contained 'joker' serious dangerous proportions. 31 claim order perhaps able 32 administering both statutes. preserved right; (Emphasis added.) 33 crucial therefore, meets requirements. Since found, because fiat rather carriers, matters security holders might ultimately accept vote. kind Hobson's choice, less, voting corporation. so, satisfy basic conditions circumscribe congenital defect, party object attempted effectuation. 34 Likewise, so-called 'cramdown' relied bearing case. That added 1935, 911, 919, sub. e, accepted least two-thirds (in amount) class creditors stockholders enabled small dissentient minority block reorganization, how equitable,' exact inequitable adjustments price acquiescence. Under appropriate circumstances making certain findings, confirm despite disapproval one-third existence general elements, conclusion drawn Obviously follow. vast involve scope application independent way case.14 our holding never applied involuntary plans. But nothing startling about this. Once terms valid, recalcitrant dissenters. validity derived still horse-chestnut chestnut horse. 35 judgment opinion. 36 Reversed remanded. 37 BLACK CLARK took cases. 38 For dissenting opinion, see p. 587. 39 Appendix. 40 brief outline theInterstate Prior competition desideratum economy. 1887 forbade agreements freights revenues,1 antitrust railroads.2 42 1919, Government planning private ownership, smaller weak condition continued survival jeopardy.3 Hence, time, governmental encouragement discussed. directed prepare country limited systems. sharp disagreement ways carrying program. House grant compel consolidations.4 Committee, leadership Senator Cummins, ardent advocate recommended master seven authorizing thereafter.5 Although including virtually railroads, provisions,6 59 952. conference, '(t)he receded consolidation' version adopted.7 43 1921, promulgated tentative plan.8 Strong developed ensued. upshot 1925, recognizing unfeasibility working national asked relieved burden.9 request left unheeded 1929 consolidation.10 44 Meanwhile Cummins renewed efforts years program progress.11 met strong opposition,12 defeat 1926, endow consolidations.13 failed. 45 February gained impetus National headed ex-President Coolidge, issued recommending along lines.14 Again vigorous15 Emergency Railroad months later, provision; special protect cutbacks employment.16 46 1933 established office investigate entire transportation make recommendations. Report, Coordinator, reviewed concluded sweeping legal adviser, Leslie Craven, followed, remedy lay lines greater coordination pooling, 'trial' basis.17 fourth Reports mergers.18 resulted.19 1938, President Roosevelt appointed Commissioners Splawn, Mahaffie study problem. 'Committee Three,' pointing 'voluntary accomplished, limitations, approval Commission,' legislation, 'authority unification, carrier.'20 Subsequently consisting executives railway labor, known Six.' Committee's recommendations vastly different:21 48 'We do think ready system consolidations. Whether ultimate resort principle better defer opportunity accomplished limitations (of plan). best results will achieved leaving themselves, 1940—Congress' last consolidation—essentially Six. finally duty promulgate completely hands carriers.22 50 Perhaps insight prevailing attitude towards following statements Wheeler during S. 2009, became 1940. response fear General Counsel Brotherhood Trainmen pending said:23 51 'Of course, you know, people maintain 'There sentiment great compelled. done happens. 53 consolidation; men generally speaking. 'After all, speak (encouraging consolidations), studied place 55 'I understand why talking committee, indicate favor change situation all. 56 'As fact, objection got easier consolidations; forcing coordinations, setting ahead suggest made. 57 out, refused adhere listen agruments (sic) buy coming telling us want. 58 get investigations try forth. So, concerned, wasting window.' Thus, except roads undeviating since 1920. assessing failure students problems agree difficulty refusal enforcing particular mergers.24 Yet deliberately explicitly followed 60 DOUGLAS, whom BURTON MINTON concur, dissenting. 61 misstates says, 'whereby railroad'. issue. Neither future attempt made, enough deal Hence misleading 'foisted Commission.' bankrupt merged road entitled vote To cases respective functions 62 First. chief architect originate d. Second. goes hearing. e. Third. After hearing judge approves disapproves Fourth. dismisses refers back Fifth. sends copy Sixth. submits Seventh. certifies submission Eighth. 'more two-thirds' claims Ninth. percentage judge, nevertheless 'cram down' reads follows: 63 'if stockholders, satisfied finds, hearing, makes equitable rejecting it; reasonably justified facts; conforms clauses (1) (3), inclusive, frist paragraph (e)'.1 64 discussed Ninth stage Rather, completed Sixth start. 65 face provision. 66 taken. powerful represented petitioners solidly overwhelmingly not. Election campaigns sometimes votes. eventually 67 Our weighed contingencies. 68 less 100 percent, lawful it? plainly reasons: 69 contemplates use reorganizations consummate 'may property corporations, corporations,' etc. (Italics supplied.) effected reorganization.2 way, felt—as abundantly shows—that apply same standards Accordingly wrote clause'—that confirmation 'transfer purposes' prescribes follow apply. 70 includes among things (a) notification Governors State situated; (b) reasonable 'interested parties' heard. No (and showing attempted) followed. 71 prescribed reorganizations. valuation, amount ratio bonds stock, like problems. Ecker Western Pacific Corp., 318 448, 692, 87 892. 5(2)(c) states: 72 passing transaction (2), weight considerations, others: service public; (2) inclusion, include, territory involved transaction; total charges resulting (4) employees affected.' findings issues inadequate. explicit. petitioner No. 'contrary interest' company, 'particularly large banking interests,' influence routing shipments. I.C.C., —would interest.3 Id., pp. 187, 188. 75 employees.4 savings unification.5 — betterment public.6 78 affect citizens Florida.7 187—188. 79 stability.8 80 operation Co.,9 24. findings. challenged. meet record f. shows, faithfully, painstakingly, conscientiously performed obligations imposes seem obvious, merger, disapproval. 82 disallows rests curious reason. consent war scheme 83 approved, appoints trustees management business court's supervision. c. officers board directors. apparently debtor,' mean trustees, speaks 'those absence wield powers'. old stockholders. reading square One look vain status debtor' identified road. method vote, depending represents value value, recapitalization given. allow veto indulge bold piece books. 84 does. initiation rested bankruptcy, bankruptcy. reveals misunderstanding precisely step obtained. measure. votes, cast ballot. deprive longer represent here. 85 comfort d, management, standing Plans percent 'or interest.' expresses wish. logic containing old, Standing relevancy fairness feasibility presented. contains whiphand equity; here, possible (except possibly nuisance created long-drawnout litigation), violates sense disregards mandate let preferred creates. protection 'equitable owners.' Where, enterprise, disregarded. 86 emphasis placed S.Rep. 1170, 79th Cong., 2d Sess. 80—85, Wheeler. Reprot irrelevant condemned 'to bypass' shown, 'bypassed' procedures, fully Second, covered endeavored practices. enacted. is, authoritative interpretation change. An unjaundiced results, submit, conclusions: 88 person merger. 89 provides 90 91 What letting adopt reject plan? 92 nonetheless answers already suggested: 93 94 Even decide find, things, 'is facts 95 undertook holders, overrule order. passed, Reconstruction Finance Corp. Denver & R.G.W.R. 328 495, 1282, 1384, 1400—one involving tendered10—we reserved said, page 535, 1303: 96 'this justification claimants submission. Reasons arise stop invoke tell advance disclose. remembered, minority. Unanimuos necessary. Suppose election returns bare two-thirds. ax grind, suggests Would unlawful case? 'Consent' justify effective (or black-mailing) Rio Grande (328 1303) deemed 'reasonable justification' circumstances. 99 per cent holders. Could properly invoked imagine proper so. harsh remedy, reasons. occasions closely guarded unless (here plan) proposes read together, plain subjected 'consent' 101 presented us.11 premature reached. decided, abstract, specifically reserve affirm cases, allowing rejection, Jewell previously 'control vest Company ownership outstanding refunding mortgage bonds, exchangeable debtor.' R., VI, 736. was, paid off cash. Previously decided unsecured recognized, participation 252 423, 465. By merger' 'compulsory meant foisted distinguished revise objections received sixty promulgation, b, shortly thereafter reaffirmed close membership. 729. Judges evenly Hutcheson, Holmes Rives power; Borah, Russell 'A (5) corporations Letter Eastman Hastings, sponsor dated Jan. 31, reproduced Hearings S.1869, 76th 1st 288, 300. Eastman's field regulation, Fuess, Eastman—Servant People. remarks Couzens, 6041 seq. 1935 revision combined similar combined, 920. indicated thought 'became accidentally misplaced redrafting Act.' 932. However be, seems quite intend alter relationship unaccompanied explanatory comment. gross disregard controlled detached from, defiance of, whole section. interesting note 1939, absolutely addition proviso subsection: 'Provided, Sess., March 20, 19. extensive subsequently 6257. probably controversial establishing hearings, requested views bill. commenting detail above to, simply 'unnecessary' comment 'minor amendments' Special Subcommittee Reorganization 1869, Serial 11, pt. 571. Cassius M. Clay, Assistant RFC intimately acquainted questioned need (f) construed parent subsidiaries. 329. See, e.g., Transportation, H.R.Doc.No. 89, 74th (1935); I.C.C.Ann.Rep. (1938). During 1933—1940 Year Percent 1933......... 16. 1937 1934......... 1935......... 27. 1939 1936......... 28. 1940 (Figures computed Table ICC's Statistics Railways 1933-1940, cumulative 151 volume.) aware requirement observed. conjunction party, subsidiaries, essentially event, called pass latter important remember defunct organism remains live going concern. references throughout active entity; Van Schaick McCarthy, Cir., 116 987, 992—993. trusteeship stockholders' meetings Board Directors elected. Coast's file Indeed desire overhauling railroad's structure impairing primary responsibilities regularly functioning Collier, Bankruptcy, 77.02. Thus viewed continuity work now. Cf. permits requires itself ('the plan'; 'may' S.Rep.No. 80-85. 379, 380. 209, Trans-Missouri Freight Ass'n, 166 290, 540, 1007; Joint Traffic 171 505, 25, 259; 730. S.Rep.No.1182, 2, 3d 518—520; Metre, 80. H.R.Rep.No.456, 66th 6: entered into, public, economy operation, otherwise convenience people.' S.Rep.No.304, 15. statement 226; Leonard, Consolidation 50, 61. H.R.Rep.No.650, 64; 524: noted rpogram voluntary. given affirmative effect. insist initiating developing actual 455. letter Exhibit C—1814, 1182, 3, 1578; (1925). 159 522. 2224, 68th supra, 6, 135, 175—179. S.1870, 69th Sess.; S.3840, 13, 11. 4873 seq.; 221—222. 211, 214. S.Doc.No.119, 73d 30—33, 36—37, 86—88. H.R.Doc.No.89, 41; H.R.Doc.No.394, 45—47. termination 1936, disturbed lack unification terminal properties. orders ignored 233. H.R.Doc.No.583, 75th 39. adverse reaction Brotherhoods proposals, id., 67, 70. Sept. Submit Recommendations Situation, Dec. 23, 31. 905. S.1310, S.2016, S.1869 S.2009, 391—395. 267—269; 86; Moulton, American Problem, 857—858; Dearing Owen, Policy, 322, 342—343, 376. Clauses that: complies section, equitable, affords due recognition discriminate unfairly land regarding classes stockholders; approximate amounts acquiring assets, expenses fees incident disclosed ascertained date reasonable, maximum limits judge; Alton Co. Reorganization, 343; York, N.H. H.R. 254 63, 405; Missouri Pac. 239 7; 233 515, 583, 349. criticized misapplying disregarding S.Rep.No.1170, 80—85. argument applied. us. Moreover, 'procedure preserved. *' And, see, reveals. broader concept integration Seaboard Air Company, any, interest. sufficient respects determination acquisition Line. compatible property. 'While equivalent surrendered creditors, hereinabove modified comply requirements, protected.' $850,000 $1,000,000 annum, eventual executive supervisory forces carriers; interchange yards shop facilities Jacksonville; (c) operations freight stations (d) off-line offices carriers.' line Line.' apprehensions inerest serve impartially, routes via maintained retain haul, based quality service, relationships trunk-line abuse Company.' appreciable benefit assuring stability general, preponderance evidence insure adequate, economical, efficient infra. e once. 531, 1301, 1400. complaint junior purely financial: valuation allocation too participation. constitutionally objecting justification,' complained aspects rule law. free facts, equities, votes required.

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