Court Opinion

ID: 6875895
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:07:45.196227+00
Date Added: 2024-06-11T16:05:29.705566
License: Public Domain

SWAN, Circuit Judge
(dissenting).
With much diffidence I -disagree with my associates. The question is merely one of statutory interpretation, for it is conceded that under its power to enact bankruptcy laws Congress ' may, if it chooses, exclude state authorities from control over the operation of an interstate railroad which is in process of reorganization. In my opinion section 77, 11 U.S.C.A. § 205, indicates the intention of Congress so to do.
Section 77(a), 11 U.S.C.A. § 205(a), provides that after the petition of the railroad company is approved “the court in which such order approving the petition is entered shall, during the pendency of the proceedings under this section and for the purposes thereof, have exclusive jurisdiction of the debtor and its property wherever located.” Section 77(c) (2), 11 U.S.C.A. § 205(c) (2), gives the debtor’s trustee all of the powers of a trustee in bankruptcy and, subject to the control of the judge and the jurisdiction of the Interstate Commerce Commission, “the power to operate the business of the debtor.” There are other provisions that also make reference to the Interstate Commerce Commission but none which requires approval to be obtained from any state authority. In this respect section 77, 11 U.S.C.A. § 205, differs significantly from section 77B, 11 U.S.C.A. § 207. The latter expressly provides that if the corporation in reorganization is a utility subject to the jurisdiction of a state regulatory body, the plan of reorganization shall not be confirmed until such state authority has been afforded an opportunity to suggest amendments or objections, subdivision (e) (2), 11 U.S.C.A. § 207(e) (2); nor shall securities be issued without obtaining the consent of state authorities having jurisdiction over such matters, subdivision (f) (7), 11 U.S.C.A. § 207(f) (7). In striking contrast to these provisions, section 77 (f), 11 U.S.C.A. § 205(f), provides that-upon confirmation of the plan it shall be carried out subject to the supervision of the judge, “the laws of any State or the decision of any State authority to the contrary notwithstanding.” Subsection (o), 11 U.S.C.A. § 205(o'), also provides that during the pendency of the proceedings the trustee may present to the judge petitions for authority to sell property of the debtor or to abandon lines or portions of lines of railroads, and the judge may grant authority so to do, but only with the approval of the Interstate Commerce Commission when that is required. To my mind these provisions indicate not only that the putting into effect of a confirmed plan of reorganization is not to be hampered by state regulatory authorities but also that the conduct of the debtor’s business prior to confirmation is to be under the exclusive jurisdiction of the district judge, except where resort to the Interstate Commerce Commission is expressly required. One of the chief reasons for enactment of the statute was to provide a more expeditious- method of reorganization than was afforded by the old receivership procedure. Continental Illinois Nat. Bank & Trust Co. v. Chicago Rock Island & P. Ry. Co., 294 U.S. 648, 685, 55 S.Ct. 595, 79 L.Ed. 1110. If resort to state regulatory bodies were necessary, undesirable delay might well result, as it has in this very case. Nor do I see why control by a state authority should continue up to the date of confirmation, if the confirmed plan may disregard prior orders of the state commission. The district judge has found that no plan could be confirmed unless the proposed reduction of service were' made, and that the failure to grant the relief asked would result in confiscation. These findings are not challenged. Hence, enforcement of an order by the state commission refusing the proposed reduction of service could be enjoined. Mississippi Railroad Comm. v. Mobile, & Ohio R. R. Co., 244 U.S. 388, 37 S.Ct. 602, 61 L.Ed. 1216. Under such circumstances, at least, it would seem reasonable to hold that the court of bankruptcy has jurisdiction to protect the res within its custody by curtailing a confiscatory service. In my opinion the order should be affirmed.
The opinion in Re Fonda, J. & G. R. Co., 2 Cir., 95 F.2d 397, at page 399, contains a discussion of section 77(o), 11 U.S.C.A. § 205(o), and interprets that section as requiring the trustee to obtain approval of state authorities as well as the Interstate Commerce Commission when a line is abandoned. As I was the writer of that opinion, it is appropriate to explain that in that case all parties assumed that resort should be had to the state commission. No such issue was presented and the remarks were obiter. After the benefit of argument and more mature reflection, I now think them incorrect.