Penn-Central Merger and N & W Inclusion Cases/Dissent Douglas

Mr. Justice DOUGLAS, dissenting in part in Nos. 433, 663, Misc., and 664, Misc.

In my opinion, these cases present important questions concerning the 'public interest' which I feel the Commission should be required to answer before judicial review can be feasible.

The Pennsylvania District Court proceedings were initiated by the Borough of Moosic (petitioner in No. 663, Misc.), located in Lackawanna County, Pennsylvania. The Borough brought its action on June 26, 1967, to annul and set aside the orders of the Commission authorizing the Penn-Central merger and requiring the inclusion of E-L, D & H, and B & M in the N & W system. Those orders by the Commission had been issued on June 9, 1967, following our remand last Term on March 27, 1967. Baltimore & Ohio R. Co. v. United States, 386 U.S. 372, 87 S.Ct. 1100, 18 L.Ed.2d 159. Moosic, whose complaint is dated June 26, 1967, was joined by intervenors City of Scranton and Milton J. Shapp (petitioners in No. 664, Misc.) and the City of Pottsville (appellant in No. 433). On July 11, the court granted the applications of Shapp and the City of Scranton to intervene, but denied that of the City of Pottsville.

Before the Pennsylvania action was initiated, the District Court for the Southern District of New York, in which the original action to set aside the Commission's order allowing consummation of the Penn-Central merger had been filed (i.e., the action reviewed by this Court last Term), was asked to enjoin consummation of the merger authorized by the Commission's June 9 order until the validity of the inclusion order had been finally determined. On July 3 the New York court temporarily enjoined the merger, and ordered all plaintiffs and intervening plaintiffs in the original action to file supplemental complaints by July 17, attacking the June 9, 1967, order of the Commission in the Penn-Central Merger Case, or their complaints would be dismissed with prejudice.

Also before the Pennsylvania action was filed, N & W (on June 13) filed an action in a federal district court in Virginia to set aside the inclusion order; and on June 23, D & H filed a similar action in the Southern District of New York. Other interested parties had apparently indicated that they were contemplating filing additional actions in still other district courts, and the Government and the Commission urged all parties to present their challenges to the original District Court in New York. In a hearing before that court on June 28, two days after the filing of Moosic's complaint in Pennsylvania, it was stated that no objections to venue would be interposed by the Government against any party choosing to litigate in the New York forum. Thereafter, the United States and the Commission moved in the Virginia and Pennsylvania courts to stay proceedings pending the final determination of the New York actions. The Virginia court continued its proceedings until after the decision of the New York court should become available to it. The Pennsylvania court issued a stay until October 1, 1967.

Upon failing twice to have the stay order dissolved by the Pennsylvania court, the Borough of Moosic and Shapp and the City of Scranton petitioned this Court to vacate the stay order and command the District Court to proceed with their complaints. The Court today dismisses those two petitions.

The three communities involved-the Borough of Moosic and the cities of Scranton and Pottsville, make a broadside attack on many aspects of the merger in their actions in the Pennsylvania court. Among those many issues tendered is at least one that has never been considered by any court, namely, whether the inclusion of E L, D & H, and B & M into N & W would have such a serious detrimental impact on their communities-in terms of services, employment, and business-as to make their inclusion against the 'public interest' within the meaning of the Interstate Commerce Act. The communities also contend that they have not been afforded an adequate opportunity to present their arguments to the Commission.

This Court quotes the conclusion of the Commission that the 'contentions regarding the adverse effect of the merger on Pennsylvania's economy are not substantiated by the evidence. On this record, the prospects clearly import that the merger will benefit rather than harm the Commonwealth.' This statement, however, is taken from an earlier (April 6, 1966) opinion by the Commission in the merger case. Pennsylvania Railroad Co. Merger-New York Central Railroad Co., Finance Docket No. 21989, 327 I.C.C. 475, 492. In other words, the Commission was there directing its attention to the effects which the merger of the Penn and Central railroads itself would have on various Pennsylvania communities. It was not concerned with the community impact of the inclusion of E-L, D & H, and B & M into the N & W system. That issue was not then even before the Commission, but was presented only at a later date in the separately docketed N & W Inclusion case, in which the Commission issued its order on June 9, 1967. Norfolk & Western Railway Co. and New York, Chicago & St. Louis Railroad Co.-Merger, etc., Finance Docket No. 21510, 330 I.C.C. 780.

The Court seems to suggest that because the Commission in its April 6, 1966, order also contemplated that E-L, D & H, and B & M would eventually be included in some major system, it must have been taking into account the impact of such inclusion on the communities served by those roads when it made the statement quoted above. But this assumption flies in the face of the Commission's case-by-case approach. It ignores the fact that the evidence before the Commission in Finance Docket No. 21989 (the Penn-Central Merger Case) relating to the community impact of the Penn-Central merger was not addressed to the impact which the eventual inclusion of E-L, D & H, and B & M into N & W would have on communities served by those roads. See Recommended Report, Finance Docket No. 21989, at 229-286; 327 I.C.C. 475, 489-493. And if the Court were correct in divining the Commission's hidden intent, I would have no doubt that the Commission did not provide adequate opportunity to the communities which would be affected by the inclusion of the three roads in any major system to participate in the proceedings. Infra, at 535-536.

Congress has, of course, committed all questions of policy under § 5 to the Commission; but on judicial review, we must be able to say that the Commission has made the necessary findings in determining policy-in this instance, that the inclusion will be in the 'public interest.' I do not find in the opinion of the District Court, or in the Court's opinion, a searching inquiry into the Commission's conclusions regarding the community impact of its orders in the Inclusion Case to ascertain whether they are adequately supported by 'basic or essential findings.' State of Florida v. United States, 282 U.S. 194, 215, 51 S.Ct. 119, 125, 76 L.Ed. 291; United States v. Carolina Freight Carriers Corp., 315 U.S. 475, 489, 62 S.Ct. 722, 729, 86 L.Ed. 971. A few words about the community impact of this case-the Inclusion Case-will point up what I mean.

In the Recommended Report of Commissioner Webb, served on December 22, 1966, in the Inclusion Case, scant attention was paid to the issues tendered by the community interests. Commissioner Webb noted that many representatives of various shipper and community interests testified concerning the vital need for the services of the three roads. He then disposed of the assertions of Milton J. Shapp and certain Pennsylvania interests in one sentence:

'Contrary to the assertions of Shapp and other Pennsylvania     interests, intramodal competition would not be significantly      lessened.'

'Shapp's contentions that competition would be substantially     curtailed and that rail facilities in the eastern and western      portions of Pennsylvania would be contracted are predicated      on the merger of both E-L and D & H into N & W. However, the      merger of E-L into N & W is not authorized herein (only      control was authorized). Moosic submitted testimony through its Mayor and Northampton through the Chairman     of its Board of Commissioners, in which opinions were      expressed that inclusion of E-L and D & H in the N & W system      would be injurious to shippers and receivers and the      economies of their areas. No evidence was offered to support     these opinions and they are not sustained by any other      evidence in the record.'

This cursory treatment of the allegations of Shapp and other Pennsylvania interests is not an analysis of the merits of their assertions sufficient for judicial review. This is hardly a considered treatment of the effects which inclusion would have on communities presently served by more than one of the roads to be included in the N & W system.

The parties in the Pennsylvania court argue that the Hearing Examiner and Commission failed to relate the various pieces of evidence which were available concerning the community impact of any reduction in services or facilities likely to result from the inclusion order in the communities involved. In particular, the parties note that Moosic would be a prime candidate for the pruning of facilities since it has a substantial amount of E-L and D & H track, and that Scranton would be reduced to a two-railroad town with E-L and D & H also having duplicating facilities in the area. It was noted that even though the Commission stated that its inclusion order did not authorize the abandonment of facilities, the evidence introduced by E-L in support of inclusion demonstrated clearly that the avowed purpose underlying the entire transaction was substantially to reduce facilities in the Wilkes Barre-Scranton-Binghamton area, and thereby effect economies. It was further alleged that according to E-L's own plan presented to the Commission, inclusion of E-L and D & H into N & W would lead to the tearing up of the main line double track between Binghamton and Scranton, and would thus take Scranton off the main line between Chicago and New York.

The communities also contend that their opportunity to participate meaningfully in the Inclusion proceedings was seriously limited: the Commission and its Hearing Examiner denied all requests by Moosic to hold hearings in the Scranton area so that its citizens, businessmen, and civic leaders could be heard concerning the railroad proposals. And the City of Scranton describes the difficulty of meaningful participation by community interests in the following manner:

'The April 6, 1966 report of the Commission in the PRR-NYC     Merger Case stated that its decision is related to the      'inclusion' proceeding, F.D. 21510, whereby E-L, D & H and B      & M seek to be absorbed by N & W. The Commission stated that      it took official notice of F.D. 21510 and that it had a      bearing on its decision. (327 I.C.C. 475, 487-489.) Yet the     fact was that the Commission, on April 6, 1966, did not and      could not have considered the evidence of the nonrailroad      parties to F.D. 21510, because such evidence from the      nonrailroad parties was not circulated until April 13, 1966,      and was not received in evidence prior to June 16, 1966. The     Commission could not in its April 6, 1966 report have      considered the public interest aspects of the inclusion case,      but could only have based its PRR-NYC decision in this regard      strictly upon consideration of railroad evidence, railroad      positions, and railroad arguments.' It is not at all clear to me that the Commission offered a meaningful opportunity in the Inclusion Case to local and regional interests to present their arguments. That is a matter for the Pennsylvania court to determine in this Inclusion Case.

As respects the question of 'public interest' in the N & W Inclusion Case, the Commission concluded:

'On the positive side, inclusion of the petitioners in N & W     will strengthen railroad competition, enhance the adequacy of      the transportation service provided by N & W as well as the      three petitioners by opening new routes and instituting new      service, produce the economies and efficiencies inherent in      single-line operation, and permit the joint use where      possible, of facilities, equipment and routes. * *  * 'Our      order herein does not authorize the abandonment of lines,      operations or facilities by N & W or the petitioners. Applications for such abandonments are to be filed in     appropriate proceedings. We expect N & W to maintain proper     divisions with the petitioners.' 330 I.C.C. 780, 827.

Despite the Commission's disclaimer that the inclusion order 'does not authorize the abandonment of lines, operations or facilities,' it appears that some abandonment will almost certainly result given the geographical location of the lines of the four roads involved and the companies' desire for efficiency. In addition, the Commission itself, in the first paragraph quoted above, indicates that it contemplates 'economies and efficiencies inherent in single-line operation,' and 'the joint use where possible, of facilities, equipment and routes'-all of which portend significant effects on the local communities stretched along the routes of the roads. Deferral of the question of community interests until a subsequent hearing on abandonments will not ensure adequate protection of those interests; for at the subsequent hearing the Penn-Central merger would be a fact, and the pressures would be great for increased economies on the part of the N & W system to make it a more efficient competitor of Penn-Central.

Communities which depend heavily on the railroad industry for employment, such as the City of Scranton, would be affected significantly by any loss of jobs. In its opinion in the N & W Inclusion Case, the Commission noted that in the earlier phase of this proceeding, N & W had entered into agreements with certain labor unions which provided that elimination of jobs resulting from the N & W-Nickel Plate unification would be accomplished only through normal attrition (i.e., 'principally by death, retirement, discharge for cause, or resignation.' 330 I.C.C. 780, 822, n. 26); the agreements were apparently modified at a later date to prohibit transfer of employees to other jobs beyond their general locality. For those employees not covered by the agreements, the Commission imposed certain protective conditions prescribed in Southern Ry. Co.-Control-Central of Georgia Ry. Co., 317 I.C.C. 557, as supplemented and clarified in 317 I.C.C. 729 and 320 I.C.C. 377. The Commission concluded that the employees of E-L, D & H, and B & M should be protected in the same manner as their counterparts involved in the N & W-Nickel Plate proceedings. For all employees not covered by attrition agreements, the protection would consist of the following: either N & W's existing agreements had to be modified to cover employees of the included roads or similar new agreements were to be drafted; and, if no agreement was concluded within 60 days, the Commission would impose appropriate conditions. The Commission denied the requests of D & H and B & M to extend this employee protection to their supervisory, professional, and executive personnel.

Whether the use of attrition agreements to eliminate jobs has a substantial adverse impact simply because jobs are eliminated is a question not free of doubt.

The Commission outlined the importance of the service of the three protected roads to the public, but limited this to a showing that, as a geographical matter, the lines of all three roads supplied needed services. 330 I.C.C. 780, 793-794. As far as appears from its decision, the Commission did not consider the unfavorable impact on the communities now served by more than one of the protected roads when the three roads are put into a single system.

Under a hearing in its opinion entitled 'Advantages to petitioners and to the public,' the Commission noted that under N & W control, the three protected roads could achieve substantial savings; and it observed further that:

'The petitioners as well as the public will benefit from the     unified management of what is now several separate companies      operating independently. Among others, such benefits will     include joint routes of affiliated lines, the prospect of      single-line service, elimination of interchanges, improved      schedules, and a more flexible distribution of equipment. Such benefits will increase the petitioners' ability to     preserve and improve their present services and meet the      needs of the shipping public. Through expanded piggyback     operations, petitioners will be in a better position to meet      the competition of motor carriers. Because many industries     prefer to locate plants where a single-line through-route      service will be available, more opportunities for industrial      development will be created. As part of the large N & W     system, the use of more modern equipment and facilities will      be justified, resulting in greater efficiency, improved      operations and better service to the public.' 330 I.C.C. 780,      795.

These general conclusions are not addressed to the objections made by the communities affected. Moreover, the Commission's references to 'joint routes,' 'elimination of interchanges,' and a 'more flexible distribution of equipment,' suggests that community fears of eventual abandonment or scaling down of facilities are well founded.

The issues tendered by the parties in the Pennsylvania court, touching on the questions just described, are substantial and are not now before this Court for review. They have not been briefed or argued; and I fail to understand how the Court can presume to decide them.

The Court suggests that the community interests involved can obtain adequate protection from possible curtailment of service by asserting their challenges 'in appropriate proceedings when such curtailment is specifically proposed.' Yet it seems clear that postponing review of this question until a subsequent proceeding on proposed abandonments will not protect the communities adequately. The inclusion of the three protected roads into the N & W system surely portends significant curtailment and rerouting of the facilities of one or more of the four roads involved. Once the Penn-Central merger is consummated, N & W and its three included roads will face competitive injury unless their operations are streamlined and economized. The interests of the communities stretched along the routes of E-L, D & H, B &M, and N & W might well weigh less against the threat of Penn-Central competition once the merger has been consummated than those interests would if they were considered and evaluated before actual competition from a merged Penn-Central system is felt.

I do not suggest that we can now decide whether the impact on community interests justifies disapproval by the Commission of the inclusion of the three protected roads into N & W. The question of the adequacy of the Commission's findings on this point has not been presented either to this Court or to the New York District Court; and as pointed out previously, I have grave doubts that the Commission's opinion in the Inclusion Case contains adequate findings on the issue to permit responsible judicial review.

The cases presently pending in Pennsylvania present, inter alia, the question whether the Commission failed to evaluate the adverse impact of the inclusion of the E-L, D & H, and B & M into the N & W system upon the communities served by the carriers involved.

In the action before the New York District Court, here for review in Nos. 778 and 779, that court dismissed the complaints of Shapp and the City of Scranton, with prejudice, for failing to file supplemental complaints attacking the Commission's June 9, 1967, order in the Penn-Central Merger Case. But the complaints of Shapp and Scranton that were dismissed with prejudice dealt only with the merits of the Commission's approval of the Penn-Central merger in its April 1966 decision in Finance Docket No. 21989. They did not attack the Commission's later (June 9, 1967) order in the separately docketed Inclusion proceedings. Thus, there is no question of res judicata present with regard to those parts of Shapp's and Scranton's complaints in the Pennsylvania court which attack the Commission's June 9 order in the Inclusion Case. And, of course, no question of res judicata arises with respect to the complaints of Moosic and Pottsville. Even if the Penn-Central Merger and N & W Inclusion Cases are regarded as inseparable, it is clear that the community impact aspect of the Inclusion Case was not considered by the New York court. It is evident from the record and that court's opinion that the primary concern of the court related to various aspects of the merger and inclusion orders tendered by the railroad parties which were unrelated to at least some of the attacks leveled by the parties in the Middle District of Pennsylvania, including the question of community impact.

The Court seemingly declares, however, a new rule of res judicata in its effort to prevent the parties in Pennsylvania from proceeding with their actions challenging the basic validity of the Commission's inclusion order on the ground, inter alia, that the Commission has not made adequate findings on the issue of the community impact of that order. Because the Borough of Moosic, which had properly filed a suit in the Middle District of Pennsylvania but saw its action stayed, refused to accept the invitation of the New York District Court (a court in which Moosic was never a party, and which neither assumed jurisdiction over Moosic nor attempted to do so by making it an involuntary plaintiff) to come to New York and litigate, the Court holds that Moosic is bound by the decision of the New York court in the Inclusion Case. The New York court itself did not attempt to hold that its orders in the Inclusion Case would bind Moosic if it did not join in the New York proceedings. And I am at a loss to discover any such principle in the law of res judicata.

A party is entitled to its day in court; and I cannot fathom how a party can be deprived of that right or waive it by refusing an invitation-not even an order-to litigate in another court located in another State. The Court could reach its conclusion under the doctrine of res judicata only if Moosic could be termed in 'privity' with one of the parties litigating in the New York action. See, e.g., Lawlor v. National Screen Service Corp., 349 U.S. 322, 75 S.Ct. 865, 99 L.Ed. 1122; Bank of Kentucky v. Commonwealth of Kentucky, 207 U.S. 258, 28 S.Ct. 82, 52 L.Ed. 197; Mutual Benefit Life Ins. Co. v. Tisdale, 91 U.S. 238, 23 L.Ed. 314; In re Howard, 9 Wall. 175, 19 L.Ed. 634. But Scranton and Shapp were the only community interests in the New York court who challenged the Commission's basic finding that the Penn-Central merger was in the public interest; and, as pointed out, their allegations were not directed to the Commission's order in the N & W Inclusion Case. The Borough of Moosic is a separate community, with distinct interests based on the facilities and lines of the various roads located within the Borough, or serving the Borough. Under such conditions, Moosic cannot properly be called in privity with Scranton or Shapp.

The Court states that 'further judicial review or adjudication of the issues upon which (the New York District Court) passes' is precluded by its decision. But, as I have already pointed out, the New York court did not pass on at least some of the contentions, including the question of the community impact of the inclusion order, which are raised by the parties in Pennsylvania; nor were those questions even presented to the New York Court for review.

Congress might, of course, channel all complaints against an administrative agency order to a particular court. It has indeed done so in many instances through provisions that a person aggrieved by a certain type of order should seek review in a designated court of appeals. 28 U.S.C. § 2341 et seq. (1964 ed., Supp. II). Where review of an agency order is lodged in a court of appeals and review of the same agency order is also sought in other such courts, the court of appeals where review was first sought is the one to which all other courts are directed to transfer all proceedings with respect to the agency order. 28 U.S.C. § 2112(a) (1964 ed., Supp. II). That has the obvious advantage of centralizing and consolidating judicial review and avoiding conflicts which might obtain if the parties could go to any court that had venue. Congress, however, has made no such provision respecting ICC orders. Section 2112, on which the Court relies, provides in subsection (d) that its provisions are not applicable to review of agency orders in the district courts. ICC orders are reviewable by three-judge district courts. 28 U.S.C. § 1336(a), § 2325. The general provision for transfer of actions from one district court to another is 28 U.S.C. § 1404(a). But 28 U.S.C. § 1398 provides, with exceptions not relevant here, that actions challenging ICC orders 'shall be brought only in the judicial district wherein is the residence or principal office of any of the parties bringing such action.' And where the jurisdiction of more than one three-judge district court has been invoked and a motion to transfer the proceedings from one to another has been made, the motion is denied if venue would not have been proper for an original action in the district court to which transfer is sought. When a three-judge district court in New York was asked to transfer proceedings challenging an ICC order to the district court in Maryland, where another like challenge was being made, it declined, saying, 'None of the plaintiffs in the actions in the Southern District of New York has its residence or principal office in the District of Maryland.' New York Central R. Co. v. United States, 200 F.Supp. 944, 947 (D.C.S.D.N.Y.1961). The New York District Court, speaking through Judge Friendly, refused to invoke the procedure provided for in 28 U.S.C. § 2112(a), since that section applies, as already noted, only to review of agency orders in the courts of appeal. Id., at 949-950. That court was much more faithful to the system of review, which Congress has provided, than we are today. Moosic and Scranton by no stretch of the imagination have their 'residence' in New York. By 28 U.S.C. § 1398 venue plainly lies in Pennsylvania; and Congress has provided no method of transferring those suits to New York.

It is not only hard cases which make bad law. Cases surcharged with the pressure for instant and immediate decision to the same and create precedents which plague us.

It seems clear to me that we must permit the parties to litigate in the Pennsylvania court whether E-L, D & H and B & M should be included in the N & W system. By no stretch of the imagination can it be argued that the question of the adverse impact on the Pennsylvania communities of the inclusion of the three roads in the N & W system, as now posed by the parties in Pennsylvania, was here for review or was before the New York District Court. See Erie-Lackawanna R. Co. v. United States, 279 F.Supp. 316, at 325-326.

Last Term we held that the ultimate fate of the three protected roads must be determined before the Penn-Central merger could be consummated. This surely means that judicial review must first be had at least with respect to the contentions which bear on the basic validity of the inclusion order-that is, whether the order is in the 'public interest,' as required by 49 U.S.C. § 5(2) (d)-as distinguished from collateral questions about the order which need not delay the Penn-Central merger. The basic validity of the inclusion order certainly involves the impact of the inclusion on the communities served by the three lines in question. Whether other questions of like character have survived need not now be determined. It is certain that at least the community-impact issue has not been resolved. And its intimate connection with our holding last Term is evident. For what if it were found that by reason of the impact on the communities the inclusion order was not in the public interest? Our 'protected' roads would then have no home.

The stay order of the Pennsylvania court has expired, and that court is now proceeding with these cases. For purposes of review by this Court, the petitions in Nos. 663, Misc. and 664, Misc., seeking review of the stay order or mandamus to compel the Pennsylvania court to proceed with the cases, can be dismissed. But those petitions did not present to this Court any question concerning the merits of the parties' actions in Pennsylvania; rather they attacked the validity of the order staying their actions in deference to proceedings then being conducted in the New York District Court. And, as already pointed out, at least the question of the community impact of the inclusion order, which is raised in Pennsylvania, has not been presented either to this Court or the New York District Court for review. I therefore dissent from the Court's holding that all of the parties now litigating in Pennsylvania are precluded from challenging 'the Commission's basic findings that the * *  * inclusion of the protected lines in N & W (is) in the public interest.' If the Pennsylvania court believes that the allegations of the plaintiffs are substantial, it should be free to enjoin the merger until questions concerning the basic validity of the inclusion order, at least so far as impact on the Pennsylvania communities is concerned, have been resolved.