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In re Penn Central Transportation Co.

decided as amended march 23 1972.: March 17, 1972.

IN THE MATTER OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR. APPEAL OF STATE OF NEW YORK AND T. W. PARKER, COMMISSIONER OF TRANSPORTATION OF THE STATE OF NEW YORK. T. W. PARKER, COMMISSIONER OF TRANSPORTATION OF THE STATE OF NEW YORK, APPELLANT,
v.
PENN CENTRAL TRANSPORTATION COMPANY



Van Dusen and James Rosen, Circuit Judges, and Layton, District Judge.

Author: Rosen

Opinion OF THE COURT

JAMES ROSEN, Circuit Judge.

This case is here on appeal from Order No. 377 of the United States District Court for the Eastern District of Pennsylvania ("Reorganization Court") insofar as that order refuses to extend as a preliminary injunction the terms of a temporary restraining order requiring the Trustees of Penn Central Transportation Company ("Debtor") to continue operating eight passenger trains between New York City and Chatham, New York.

Penn Central was required by Order No. 232 of the Reorganization Court to request leave of that court before discontinuing any intercity passenger trains covered by the Rail Passenger Service Act of 1970 (P.L. 91-518, 84 Stat. 1327, 45 U.S.C. § 501 et seq.). After posting the Notice of Discontinuance required by the Act and by the Interstate Commerce Act, 49 U.S.C. § 13a, the Trustees petitioned the Reorganization Court to discontinue all of their intercity passenger train service, including the eight trains running between New York City and Chatham, New York. Certain cities and states appeared to contest the intercity nature of these trains, and on April 30, 1971 the Court, without objection from the parties, referred the question to the Interstate Commerce Commission by Order No. 244, see In re: Penn Central Transportation Company, 329 F. Supp. 572 (E.D.Pa.1971). Concurrently, the court entered Order No. 245 which restrained the Trustees from discontinuing the New York to Chatham train service pending the initial determination and report to the Court by the Commission. The Commission entered an investigation and held hearings in Millerton, New York and New York City, and on June 29, 1971 announced its finding (Finance Docket 26633) that the New York-Chatham service is not "commuter or other short-haul service" as that term is defined in the Rail Passenger Service Act, and that the trains in question are intercity trains within the meaning of that Act. Ten Commissioners participated in the decision with three dissenting from the majority report. On July 14, 1971, by Order No. 322 in the Reorganization proceedings the District Court extended Order No. 245 until 11:59 P.M. on August 2, 1971. A final extension was granted by Order No. 377 until 12 o'clock noon on September 7, 1971. It is from this order that the instant appeal has been taken. A stay was granted by this Court on September 3, 1971.

The trains involved basically provide a service inbound to New York in the morning and outbound to Chatham in the late afternoon, with an additional train from New York to Chatham on Friday evening and from Chatham to New York on Sunday evening. Generally, the equipment on the trains consist of a diesel locomotive and standard coaches.

This is not the first attempt by Penn Central to discontinue service on the New York to Chatham run. New York State's Department of Transportation denied a previous application to abandon the northern portion of this intrastate rail line. Until passage of the Rail Passenger Service Act of 1970, supra, ("Amtrak Statute"), it would have been necessary for Penn Central to petition the Interstate Commerce Commission for authority to effect a discontinuance once its application was denied by New York.*fn1 However, the Amtrak Statute provided for the establishment of a National Railway Passenger Corporation, which was authorized to enter into and tender contracts upon request to existing railroads in order to relieve them of their responsibility to provide intercity rail passenger service. Any railroad entering into such a contract would be relieved of further responsibility in operating such service provided that it complied with the notice requirements contained in section 13a(1) of Title 49.*fn2 Penn Central informed both the District Court and the Commission that such a contract had been entered into with the directors of the National Rail Passenger Corporation, so that, if the passenger service operated by it between New York and Chatham is intercity the Debtor would bear no responsibility for the continued operation of that line, once it had observed the aforementioned notice requirements.

Sec. 102(5) of the Rail Passenger Service Act, 45 U.S.C.A. § 502(5), defines "intercity rail passenger service" as all rail passenger service other than

"(A) commuter and other short-haul service in metropolitan and suburban areas usually characterized by reduced fare, multiple-ride and commutation tickets, and by morning and evening peak period operations . . ."

In concluding that the service between New York and Chatham was intercity and not commuter and short-haul service, the Commission relied on certain standards developed by it to assist in the definition of "commuter and other short haul service." Penn Central Transp. Co. Discon. or Change in Serv., 338 I.C.C. 318 (1971).*fn3 The Commission found such standards to be necessary where the nature of its function was essentially that of statutory interpretation, and the statute in question (Amtrak Statute) defined "intercity service" only in a negative sense. The issue before it was stated to be not the need for the service, but the character of the service actually being rendered. While admitting that the record was replete with evidence of need, the Commission considered that evidence only insofar as it shed "considerable light upon the kind of service that the trains are providing for those who use them."*fn4

Several characteristics of normal commuter operations were found to exist in the service provided by Penn Central on the New York-Chatham line: "the small stations, many little more than shelters, would be recognized on any commuter line, and the frequency of stops and the short distances between them, are not inconsistent with services which are clearly commuter in nature." However, the commission believed that a balanced view of all the relevant criteria afforded sufficient basis for the conclusion that the service is not "commuter or other short haul service" as that term is defined in the Railway Passenger Act. The decision was made on alternative grounds: "In our view, then, the New York-Chatham service fails the first test, and is not commuter or short haul service of the kind which is excluded from the provisions of the Rail Passenger Service Act, because it is not performed within a single metropolitan area or between such an area and its suburbs. It is not necessary, however, to rely solely on an interpretation of this particular statutory language. The service itself cannot, we think, be characterized as commuter or short haul service as we have defined it in the past."*fn5

The parties briefed the validity of the agency reports in F.D. No. 26632*fn6 and F.D. No. 26633, but the cases were never scheduled for final disposition in the Reorganization Court. The court merely continued certain prior orders with respect to other passenger service which Penn Central had sought to discontinue, while declining to continue injunctive relief for the Chatham-New York service, thereby precipitating this appeal.

The critical question is whether the district court abused its discretion in denying a preliminary injunction, for New York recognizes that the district court has not actually ruled on the validity of the I.C.C. report in the Chatham-New York case.

It is well settled that the issue on appeal from an order denying a preliminary injunction is whether the district court abused its discretion. The appellants have the burden of showing an abuse of discretion by the District Court Judge, and any direct attack on the merits of the Commission report is clearly improper and beyond the legitimate scope of this appeal. The standards which govern the issuance of a preliminary injunction in a public utility case*fn6a are set forth in Virginia ...


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