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National Railroad Passenger Corp. v. Blanchette

decided: February 15, 1977.

NATIONAL RAILROAD PASSENGER CORPORATION, PLAINTIFF-APPELLEE,
v.
ROBERT W. BLANCHETTE, RICHARD C. BOND AND JOHN H. MCARTHUR, TRUSTEES OF THE PROPERTY OF PENN CENTRAL TRANSPORTATION COMPANY, DEBTOR, DEFENDANTS-APPELLANTS



Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division No. IP 76-274-C - William E. Steckler, Chief Judge.

Hastings, Senior Circuit Judge, Moore, Senior Circuit Judge,*fn* and Sprecher, Circuit Judge.

Author: Hastings

HASTINGS, Senior Circuit Judge.*fn**

We are concerned here with various issues arising out of an order by the district court,*fn1 entered on March 24, 1976, confirming an arbitration award compelling the restoration of certain tracks by Penn Central Transportation Company (Penn Central); and also with the judgment entry and memorandum order by the district court entered on June 25, 1976, granting the motion of the National Railroad Passenger Corporation (Amtrak) for summary judgment in a declaratory judgment action, thereby enforcing the district court's previous order of confirmation. Penn Central has appealed.

I

For purposes of clarity we first mention three relevant substantive legislative enactments of the Congress:

1. The Bankruptcy Act of 1898, which was amended in 1933 by adding Section 77 thereto, which provided for the reorganization of railroads. Section 77 furnished the structural framework by which Penn Central commenced its reorganization proceedings before the United States District Court for the Eastern District of Pennsylvania (Reorganization Court). Bankruptcy Act of 1898, as amended, 11 U.S.C. § 205, Reorganization of Railroads.

2. The Rail Passenger Service Act of 1970, 45 U.S.C. § 501, et seq., which created the National Railroad Passenger Corporation, a for-profit corporation, pursuant to the District of Columbia Business Corporation Act, to provide intercity rail passenger service over a designated basic national rail passenger system, as a private enterprise, but with federal financial assistance. The need for such a corporation arose from the specific Congressional finding that a modern, efficient, intercity railroad passenger service was a necessary part of a balanced transportation system and was in the national interest. The National Railroad Passenger Corporation (Amtrak) was authorized to contract with each railroad operating passenger trains in a basic system, for use by Amtrak of railroad tracks, facilities and services "on such terms and conditions as the parties may agree." See 45 U.S.C. § 562(a). Subsequent amendments to 45 U.S.C. § 501, et seq., have merely supplemented the basic legislation. See Amtrak Improvement Act of 1974 (Public Law 93-496, October 28, 1974, 88 Stat. 1527). The Amtrak Improvement Act of 1974, supra, amended the name of the Railroad Passenger Service Act of 1970 to become the Rail Passenger Service Act. See Section 12 of the 1974 amendment. The Act is referred to by the parties and will herein be referred to simply as the "Amtrak Act."

3. The Regional Rail Reorganization Act of 1973, 45 U.S.C. § 701, et seq. (Public Law 93-236, January 2, 1974, 87 Stat. 986), referred to by the parties and by our court as the "Rail Act," provided for the establishment of the United States Railway Association and the Consolidated Rail Corporation (ConRail), both with enumerated powers and duties. The United States Railway Association was created as a Government corporation, incorporated under the District of Columbia Nonprofit Corporation Act, and was empowered to prepare and implement a Final System Plan. ConRail was created as a for-profit corporation, incorporated under the laws of a state, with its principal office in Philadelphia, Pennsylvania. Pursuant to Section 742, ConRail was to acquire, operate, rehabilitate and maintain efficient rail service over the rail lines designated in the Final System Plan.

Amtrak brought the instant declaratory judgment action on May 5, 1976, pursuant to 28 U.S.C. §§ 2201 and 2202, alleging both diversity of citizenship and federal question jurisdiction. The relief sought was an order to show cause upon Penn Central why a quarterly work schedule for the restoration of 360 miles of Penn Central tracks had not been submitted to Amtrak on May 3, 1976, as required by the order of confirmation and the arbitration award referred to earlier. This declaratory action was brought in the United States District Court for the Southern District of Indiana, Indianapolis Division.

Amtrak initiated arbitration proceedings on August 18, 1972, in the Reorganization Court, pursuant to a broad arbitration clause entered into by the parties in The National Railroad Passenger Corporation Agreement of April 16, 1971. This agreement is referred to by the parties as the "Basic Agreement," and was mandated by Section 561(a) of the Amtrak Act, 45 U.S.C. § 501, et seq., whereby Amtrak was directed to contract with the railroad "to relieve the railroad of its entire responsibility for the provision of intercity rail passenger service" under "such terms and conditions as necessary to permit the Corporation [Amtrak] to undertake passenger service on a timely basis."

Under the terms of the Basic Agreement, Amtrak undertook to assume the intercity rail passenger responsibilities of the Trustees of Penn Central and all other contracting railroads, and Penn Central undertook to render certain services to Amtrak and to maintain its rail lines used by Amtrak at an agreed upon "level of utility."

Under Article Six of the Basic Agreement any "claim or controversy" between Amtrak and Penn Central was to be resolved by binding arbitration in accordance with the provisions of The National Railroad Passenger Corporation Arbitration Agreement separately contracted to by the parties on April 16, 1971. Referred to by the parties as the "Arbitration Agreement," Section 4.2 provides:

"* * * Any arbitration award hereunder made by a majority of the members of any Arbitration Panel shall be binding upon the parties thereto. Any arbitration award hereunder shall declare the rights of the parties thereto and may make awards of money, or enjoin or otherwise operate in such a way as to require specific performance by a party of any act or obligation." (Emphasis added.)

Section 4.3 of the Arbitration Agreement further provides:

"Judgment may be entered upon any arbitration award hereunder * * * in any United States District Court."

A dispute arose between Amtrak and Penn Central concerning the "level of utility" of about 360 miles of certain rail lines of Penn Central connecting Kankakee, Illinois, with Louisville, Kentucky, and Cincinnati, Ohio, via Indianapolis, Indiana, under the Basic Agreement of 1971. Amtrak's claim that Penn Central had defaulted in its obligation to maintain the track was duly submitted to the National Arbitration Panel.*fn2

After the parties submitted extensive written memoranda and oral testimony was heard, the arbitration was interrupted by an "Emergency Order" of the Federal Railroad Administration on August 1, 1974. This emergency order terminated Amtrak's service on the above-mentioned Penn Central line because the track had been found to be "in an unsafe condition," creating "an emergency situation involving a hazard of death or injury to persons affected by the use thereof."

Without objection from Penn Central and in accordance with its rules, the Panel began additional hearings, accepted a revised request for an award from Amtrak, and received additional evidence on September 11, September 24, September 29 and December 16, 1975, and January 20, 1976. Thereafter, on February 3, 1976, the National Arbitration Panel issued a written award in NAP Case No. 11, In Re: Level of Utility, with the following declarations and awards:

First, the Panel declared that Amtrak had a contract right to have the Penn Central rail lines connecting Kankakee with Cincinnati and with Louisville via Indianapolis kept "at no less than ...


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