298

DOUGLAS, J., dissenting.

table treatment for the interests or claims of those rejecting it; that such rejection is not reasonably justified in the light of the respective rights and interests of those rejecting it and all the relevant facts; and that the plan conforms to the requirements of clauses (1) to (3), inclusive, of the first paragraph of this subsection (e)." 1

1

The case has been discussed as if we are at the Ninth stage of the reorganization. Rather, only the Fifth stage has been completed and the Sixth stage is about to start.

The case has been discussed as if the creditors will vote the plan down and the judge, in the face of that, will force the plan on the creditors through the "cram down" provision.

But as yet no vote has been taken. Perhaps the powerful interests represented by the petitioners will vote solidly and overwhelmingly against the plan. Perhaps not. Election campaigns sometimes change votes. Perhaps the creditors will eventually approve the plan.

Our present problem must be weighed in light of both of those contingencies.

If the creditors approve the plan by "more than twothirds" vote but less than 100 percent, would it be lawful

1 Clauses (1) and (2) referred to read as follows:

"the judge shall approve the plan if satisfied that: (1) It complies with the provisions of subsection (b) of this section, is fair and equitable, affords due recognition to the rights of each class of creditors and stockholders, does not discriminate unfairly in favor of any class of creditors or stockholders, and will conform to the requirements of the law of the land regarding the participation of the various classes of creditors and stockholders; (2) the approximate amounts to be paid by the debtor, or by any corporation or corporations acquiring the debtor's assets, for expenses and fees incident to the reorganization, have been fully disclosed so far as they can be ascertained at the date of such hearing, are reasonable, are within such maximum limits as are fixed by the Commission, and are within such maximum limits to be subject to the approval of the judge; . . . .

DOUGLAS, J., dissenting.

347 U.S.

to confirm it? I think it plainly would be for the following reasons:

Section 77 contemplates the use of reorganizations to consummate mergers. Section 77 (b) (5) says that a plan "may include the transfer of any interest in or control of all or any part of the property of the debtor to another corporation or corporations, the merger or consolidation of the debtor with another corporation or corporations," etc. (Italics supplied.) (Italics supplied.) So it is clear that Congress contemplated that mergers of railroads could be effected by a § 77 plan of reorganization. Since mergers could be accomplished that way, Congress felt as the legislative history abundantly shows-that the Commission must apply in this class of mergers the same standards it must apply in other mergers. Accordingly Congress wrote into § 77 (f) the "consistency clause"-that on confirmation of a plan the Commission shall grant authority for the "transfer of any property, sale, consolidation or merger of the debtor's property... to the extent contemplated by the plan and not inconsistent with the provisions and purposes" of the Interstate Com

2 The Commission has repeatedly proposed and approved reorganization plans requiring consolidations or mergers. See, e. g., Alton R. Co. Reorganization, 261 I. C. C. 343; New York, N. H. & H. R. Co. Reorganization, 254 I. C. C. 63, 405; Missouri Pac. R. Co. Reorganization, 239 I. C. C. 7; Denver & R. G. W. R. Co. Reorganization, 233 I. C. C. 515, 239 I. C. C. 583, 254 I. C. C. 349. As a result of some of these proceedings the Commission has been criticized for misapplying or disregarding the standards set up for mergers by §5 of the Interstate Commerce Act. S. Rep. No. 1170, 79th Cong., 2d Sess. 80-85. In the present case, however, no argument is made that the proper standards have not been applied. Indeed that question is not before us. Moreover, not even the Senate Report, supra, suggests that the Commission cannot ever approve reorganization mergers. That Report says only that the "procedure and safeguards of the Transportation Act must be preserved. . . ." And, as we shall see, the standards prescribed in § 5 have been satisfied here, so far as this record reveals.

298

DOUGLAS, J., dissenting.

merce Act. (Italics supplied.) Section 5 of the Interstate Commerce Act prescribes both a procedure for the Commission to follow in those cases and the standards which the Commission must apply.

The procedure includes among other things (a) notification to the Governors of each State in which the properties of the carriers are situated; and (b) a reasonable opportunity for the "interested parties" to be heard. No objection is made in these cases (and no showing is attempted) that that procedure was not followed.

The standards for the Commission's action on mergers are different from those prescribed in case of reorganizations. In reorganizations the Commission is concerned with matters of valuation, the amount of fixed charges, the ratio of bonds to stock, and like financial problems. See Ecker v. Western Pacific R. Corp., 318 U. S. 448. Congress by § 5 of the Interstate Commerce Act has prescribed special standards for mergers. Section 5 (2) (c) states:

"In passing upon any proposed transaction under the provisions of this paragraph (2), the Commission shall give weight to the following considerations, among others: (1) The effect of the proposed transaction upon adequate transportation service to the public; (2) the effect upon the public interest of the inclusion, or failure to include, other railroads in the territory involved in the proposed transaction; (3) the total fixed charges resulting from the proposed transaction; and (4) the interest of the carrier employees affected."

There is no objection made nor showing attempted that in these cases the Commission failed to make findings on those issues nor that the findings as made were inadequate. The Commission indeed was most explicit. It said that control of Florida East Coast by the petitioner in No. 24, St. Joe Paper Co., would be "contrary to the

ה-ו

DOUGLAS, J., dissenting.

347 U.S.

public interest" since that company, "particularly because of its large banking interests," would be in a position to influence the routing of shipments. 282 I. C. C., p. 187. It found that the merger of the Florida East Coast with Atlantic Coast Line

-would be in the public interest. Id., pp. 187, 188. -would adequately protect the interests of employees. Id., p. 187.

—would result in savings as a result of unification.5 Id., p. 187.

“The public interest in its broader concept will be better served by integration of the debtor into a large railroad system than by its continued operation as an independent railroad.

"The effect of a merger upon the Southern Railway system and Seaboard Air Line Railroad Company, if any, will not adversely affect the public interest.

"The record is sufficient in all respects for a determination of the issue of the public interests involved in an acquisition of the debtor's properties by the Coast Line.

"It will be compatible with the public interest for the Coast Line to control the debtor's property.

"While the plan proposed by the Coast Line is inequitable in that it does not provide for the full equitable equivalent of the rights to be surrendered by the debtor's creditors, the plan as hereinabove modified will comply with such requirements, will be fair and equitable, and otherwise in the public interest."

4 "The interests of the railroad employees affected by the merger will be adequately protected."

5 "There should eventually result savings through a unification of the two carriers of between $850,000 and $1,000,000 per annum, through (a) eventual unification of the executive and supervisory forces of the two carriers; (b) consolidation of interchange yards and shop facilities at Jacksonville; (c) unification of operations of the freight stations of the two carriers at Jacksonville; and (d) coordination and consolidation of off-line traffic offices of the two carriers."

298

DOUGLAS, J., dissenting.

-would result in a betterment of service to the public. Id., p. 187.

-would not adversely affect the citizens and communities of the east coast of Florida. Id., pp. 187-188.

-would give the debtor greater financial stability. Id., p. 188.

-would give a better service than service under an operation by St. Joe Paper Co., petitioner in No. 24. Id., p. 188.

We are not asked to set aside those findings. They are indeed not challenged. On their face they plainly meet the standards of § 5 of the Interstate Commerce Act. We cannot say on this record that they are not consistent with § 5 within the meaning of the consistency clause of § 77 (f). So far as this record shows, the Commission has faithfully, painstakingly, and conscientiously performed the obligations which § 5 of the Interstate Commerce Act

"There would be betterment of service to the public resulting from a unification of the debtor's line with that of the Coast Line." 7 "The apprehensions of the citizens and communities of the east coast of Florida that a merger would adversely affect their interests are not justified since (a) it would be to the interest of the Coast Line to serve all its territory impartially, (b) existing through routes via Jacksonville will be maintained, and (c) while the Coast Line would attempt to retain its long haul, its appeal to the public would be based primarily on the quality of its service, and the traffic relationships between trunk-line carriers would prevent any abuse of power such as would be possible under control of the debtor's line by the St. Joe Company."

8 "The merger of the debtor with the Coast line will be of appreciable benefit in assuring greater financial stability for the debtor."

"In general, there is a substantial preponderance of evidence that a merger will insure a more adequate, economical, and efficient transportation service than will operation of the debtor by the St. Joe Company."

288037 0-54-26