Court Opinion

ID: 9443535
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:24:18.116111+00
Date Added: 2024-06-11T17:29:31.915797
License: Public Domain

RUSSELL, Circuit Judge,
with whom
BORAH, Circuit Judge, joins, dissenting.
So much has already been written in the several appearances of this matter before the Interstate Commerce Commission and the Courts that the temptation is present to avoid further cumbering the record by merely noting dissent from the judgment and there letting the matter rest. However, that which is here the controlling question, in the sense that upon its determination depends all further assumed authority to proceed with the details of the matter, is of such far reaching importance and so fundamental to the protection of property rights against invasion under the guise of serving the public interest, that at least some bare outline of the reason for disagreement seems obligatory. Such question is present in this case in the form of the claimed power of the Interstate Commerce Commission, in proposing a plan of reorganization under the provisions of Section 77 of the Bankrutpcy Act, to require the equitable owners of the debtor, who are united in opposition to such a plan, to surrender their interests in a going and efficiently operated railroad, for undesired rights in another railroad system. While the result of the proposed plan, which the majority now approves, may be denominated a “merger”, as well said by the trial Judge, “[i]t is in fact an enforced, noncompetitive sale of F. E. C. to A. C. L., a wholly unrelated corporation, over the objections of 99% of the present bondholders whose property interests are at stake, and who do not wish to sell, and over the active protest of F. E. C. employees whose jobs and seniority rights are also at stake, and who do not wish to be forcibly transferred to Atlantic Coast Line. The plan virtually gives A. C. L. the power of eminent domain over F. E. C., with authority to pay, not in cash, but 90% in Coast Line securities of debatable value.” It is these equitable owners of the property who would be entitled to the stock of the reorganized' Florida East Coast Railroad. There is no question here of the relative rights of the creditors among themselves, nor is this the usual case where there is objection by only minority interests. The bald proposition established by the majority opinion is that the court’s power in bankruptcy authorizes the taking, against the wishes of the overwhelming majority of the refunding bondholders, of their existing rights, requiring acceptance by them of an entirely different and unrelated security which they do not desire. This holding poses a serious constitutional question as to whether the court’s power in bankruptcy could thus be extended to force a merger consistent with the Fifth Amendment. However, in my view of the case I do not reach the constitutional question because here it is clear from the history of the legislation of Section 77, that the Commission has undertaken to exercise *332a power which the Congress never intended to confer on the Commission. This was well pointed out by Judge Sibley in his decision while sitting as District Judge in a former proceeding in this matter. In re Florida East Coast Railway Co., D.C., 81 F.Supp. 926. This view was expressly approved .by the writer in his special concurrence upon the former appeal of this case. Atlantic Coast Line v. St. Joe Paper Co., 5 Cir., 179 F.2d 538, 545. It is reaffirmed today.
Rehearing denied; BORAH and RUSSELL, Circuit Judges, dissenting.