Court Opinion

ID: 9462023
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:30:06.484651+00
Date Added: 2024-06-11T17:37:22.037565
License: Public Domain

SEITZ, Chief Judge
(dissenting).
The majority opinion is premised on the assumption, that the shareholder claim of Penn Central Company for diminution in the value of its stock is separate and distinct from the trustees’ potential Tucker Act claims for erosion of the assets of the debtor. Indeed, the majority states that “it is not a claim that the trustees in reorganization may advance now or anytime hereafter.” Such a view ignores the reality that the sole foundation of the shareholder claim here is the “substantial erosion of the estate of P.C.T.C.” through the forced continuation of operations (amended petition). In my opinion, any claim for *1393diminution of stock value premised on erosion of assets is only derivative of the debtor’s right to Tucker Act compensation and would be encompassed within any claim filed by the trustees. The trustees’ recovery would be an asset available to the court in formulating a plan of reorganization that would determine shareholder interests in the debtor. Should the shareholder successfully assert a claim for monetary damages in the Court of Claims at this time, a portion of that asset would be removed from the control of the reorganization court, and the shareholder would have assured itself of a cash payment from the asset when in fact the reorganization plan might provide for some alternative treatment of shareholder rights.
Another potential interference with the reorganization proceedings arises from the fact that Penn Central Company’s Court of Claims petition apparently seeks not only recovery as a shareholder but also compensation for damages incurred by the asset erosion in its status as an unsecured creditor of the Penn Central Transportation Company. The amended petition asserts that “[p]laintiff is also a creditor of P.C.T.C. in the approximate amount of $43 million” and seeks damages for the decline in value of its “interest and holdings” in the debtor. The prayer for relief is consistent with a claim for recovery as a creditor as well as a shareholder. Certainly any recovery in the status of a creditor would also amount to a direct interference with the functions of the reorganization court.
The reorganization court has a duty to protect the interests of shareholders as well as creditors in fashioning a plan of reorganization. In re Chicago & N. W. Ry. Co., 121 F.2d 791 (7th Cir. 1941). Recognizing this obligation and cognizant of the potential for interference with the reorganization court’s functions, I would hold that the court had the power to enjoin prosecution of the shareholder’s claim at this time under § 2a(15) of the Bankruptcy Act, 11 U.S.C. § ll(a)(15) and that it did not ábuse its discretion in entering Order 1698.