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CHICAGO SOUTH SHORE & SOUTH BEND R. v. MONON RD.

September 17, 1964

CHICAGO SOUTH SHORE AND SOUTH BEND RAILROAD, W.P. COLITON AND ROBERT C. GASSER, PLAINTIFFS,
v.
MONON RAILROAD, WILLIAM C. COLEMAN, JOHN B. GOODRICH, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Marovitz, District Judge.

Defendants' motion to dismiss the Count I of complaint.

This action is before the Court today pursuant to plaintiff's motion to temporarily restrain and enjoin defendants from making further purchases of stock in plaintiff railroad, until such time as the Interstate Commerce Commission (ICC) may determine the legality of said acquisition. Defendant has moved, in response, for a dismissal order, on the grounds that the Court lacks jurisdiction over the subject matter of the complaint.

Count I alleges that plaintiffs have filed a complaint before the ICC alleging violations by defendants of Sections 5(2) and 5(4) of Part I of the Interstate Commerce Act (ICA). (Secs. 5(2), 5(4), Title 49 U.S.C.) Said Sections prohibit the acquiring of "control" of one "carrier" by another, without prior ICC approval.

More specifically, it is alleged that the defendants are presently engaged in, and will continue to engage in the acquisition of shares of the capital stock of the plaintiff railroad in such amounts, that, in the absence of an injunction order, the capital stock of plaintiff will be concentrated into a single large block, so as to preclude the South Shore from ever again being an independent railroad, even upon divestiture by the defendants.

Count II is brought under Section 16(a) of the Securities Exchange Act of 1934, and alleges that the aforesaid acquisition by defendants has not been reported as required by Statute.

Plaintiffs seek injunctive relief pendente lite, to maintain the status quo in the matter until such time as the ICC may determine the merits of the aforementioned complaint filed with it.

The issue raised by defendants' motion to dismiss concerns the jurisdiction of this Court over the cause before us. Section 5(11) of the ICA specifically states that "[t]he authority conferred by this section (to the ICC) shall be exclusive and plenary * * *." Despite this unequivocal language, plaintiffs seek an injunction today, to "preserve the status quo," arguing that such action would not interfere with the primary jurisdiction of the ICC, but would merely prevent irreparable injury until such time as the ICC may fully determine the merits of the complaint brought before it.

This Court cannot agree. A preliminary injunction will not be granted, merely on a balancing of the equities, as plaintiffs propose, but rather upon a showing of probable cause for ultimate relief on the merits. Acme Fast Freight v. United States (D.C.Del. 1955) 135 F. Supp. 823; Corica v. Ragen, (7th Cir., 1944) 140 F.2d 496; Vergas v. Shaughnessy, (D.C., N.Y., 1951) 97 F. Supp. 335.

Sections 5(4), 5(5), and 5(6) of the ICA are replete with narrow legalisms and terms of art. The phrases "control" and "carrier" are defined by the circumstances in which they arise, and are best applied by the administrative agency to whose care they have been entrusted. The Supreme Court has stated in Gilbertville Trucking Co. v. United States, 371 U.S. 115, 122, 125, 83 S.Ct. 217, 222, 223, 224, 9 L.Ed.2d 177 (1962):

  "Section 5(4) is part of a comprehensive legislative
  scheme designed to place ownership, management, and
  operational control over common carriers within the
  regulatory jurisdiction of the Commission."
  "We * * * have left to the agency charged with
  enforcement, the determination from the facts whether
  `control' exists, subject to normal standards of
  review. * * * In this manner, the Commission may
  adapt § 5(4) to the actualities and current practices
  of the industry involved and apply it to the extent
  it feels necessary to protect its jurisdiction
  under § 5(2) * * *."

Congress has wisely placed great confidence in the expertise of our regulatory agencies. That its intent was to create exclusive primary jurisdiction in the ICC in "control" matters of this kind is abundantly clear from the statutory scheme of the Act.

In Section 1(20) of the ICA, Congress gave the Commission authority to permit, or to prohibit the construction, acquisition or extension of a railroad line. Alongside this authority, however, the right of injunction of any contrary act was granted to the United States Courts, upon suit by the United States, the Commission, any affected regulatory body, or any party in interest. Under this provision, it has been held that a competing railroad may bring suit in a U.S. Court to enjoin a proposed expansion. Bremner v. Mason City and C.L.R. Co. (D.C.Del. 1931) 48 F.2d 615.

Similarly, Congress has authorized injunctive actions brought by interested parties in U.S. Courts, to prevent enforcement of ICC orders. See Section 2321-2325, Title 28, U.S.C. Thus, Congress has twice granted private parties the right to seek injunctive relief in the Courts, while withholding such right with respect to Section 5 proceedings. When coupled with the specific authority granted to the ICC under Section 5(8) to obtain an injunction from a U.S. ...


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