decided: October 12, 1971.
WESTON ET AL., APPELLANTS,
Appeal from decree of Court of Common Pleas, Trial Division of Philadelphia, March T., 1965, No. 6107, in case of J. Fred Weston et al. v. Reading Company, Baltimore & Ohio Railroad Company and Chesapeake & Ohio Railway Company.
Jerome J. Shestack, with him Bernard J. Smolens and Schnader, Harrison, Segal & Lewis, for appellants.
Ernest R. von Starck, with him John H. Lewis, Jr., and Morgan, Lewis & Bockius, for appellee.
Fairfax Leary, Jr., with him John F. Meigs, Miles H. Shore, Eugene F. Waye, and Saul, Ewing, Remick & Saul, for appellee.
Jones, Eagen, O'Brien, Roberts, Pomeroy and Barbieri, JJ. Opinion by Mr. Justice Roberts. Mr. Justice Jones concurs in the result. Mr. Chief Justice Bell took no part in the consideration or decision of this case.
[ 445 Pa. Page 184]
Protesting shareholders and directors of the Reading Company have attempted to enjoin the Baltimore & Ohio Railroad Company and the Chesapeake & Ohio Railway Company from voting their Reading shares and otherwise mismanaging the Reading Company. They also sought an accounting with respect to various intercorporate transactions between the B&O, C&O and Reading which assertedly resulted in loss or injury to the latter. The protestors were successfully halted by preliminary objections, and the validity of the trial court's dismissal of their complaint is now before our Court.
Two principal issues are presented in this appeal: whether the protesting shareholders possess standing under Rule 1506 of the Pennsylvania Rules of Civil Procedure to obtain relief for defendants' alleged violation of their corporate fiduciary duties and whether any or all of the subject matter of this equity action is more properly within the exclusive or primary jurisdiction of the Interstate Commerce Commission. We affirm the chancellor's decree dismissing the complaint.
The parties have stipulated some of the pertinent facts, and others are of public record. The relevant corporate structures are both important and complex. Pursuant to the Transportation Act of 1940, 54 Stat. 899, 49 U.S.C. § 1 et seq., the C&O and the B&O presented a plan to the Interstate Commerce Commission whereby the C&O was to acquire capital stock control of the B&O. The proposed affiliation was determined by the Commission to be consistent with the public interest, Chesapeake & Ohio Ry. -- Control -- Baltimore & Ohio R. R., 317 I.C.C. 261 (1962), and appropriate judicial tribunals have concluded that the Commission's
[ 445 Pa. Page 185]
findings were supported by substantial evidence. See Brotherhood of Maintenance of Way Employees v. United States, 221 F. Supp. 19 (1963), aff'd, 375 U.S. 216, 84 S. Ct. 341 (1963) (per curiam). Thus, since 1963 the C&O has controlled the B&O.
The B&O has been a substantial stockholder of the Reading Company since 1902. As of December 7, 1904, the B&O owned 21.66% of Reading's outstanding shares. B&O's buying program continued, and by November 18, 1963, the B&O controlled 49.92% of Reading. Since 1965, B&O's proportional share of control has been reduced to 38.26%.
The instant litigation originated on May 24, 1965, with the filing of a complaint in equity in the Philadelphia Court of Common Pleas by seven Reading shareholders and directors naming the B&O, C&O, and Reading as defendants. The C&O filed preliminary objections asserting the court lacked proper jurisdiction in that the C&O owned no track or other real estate and operated no trains or other facilities within Pennsylvania.*fn1 The Reading demurred and also objected to the court's jurisdiction, contending, inter alia, that the ICC possessed primary jurisdiction over this litigation. The B&O challenged the specificity of the pleadings, asserted plaintiffs had no standing, and asked the complaint be dismissed because of laches.
Without passing on the other objections, the chancellor sustained Reading's and B&O's demurrers on January 17, 1967, because of a failure to sufficiently distinguish between a derivative and a representative cause of action.
An amended complaint was filed by two of the original plaintiffs and one new plaintiff (hereinafter termed "appellants") on August 21, 1967. In it, appellants contend they are bringing the action ". . . derivately
[ 445 Pa. Page 186]
[sic], in behalf of themselves and all other stockholders of Reading similarly situated." They allege that the C&O owns 10.71% of the Reading and that thus the C&O, through the B&O's 38.26% share of the stock, controls approximately 49% of Reading's outstanding voting shares. It is averred that the B&O and C&O have ". . . improperly and illegally maintained and exercised control of Reading." Appellants also stated that Reading owns 48.97% of the Central Railroad Company of New Jersey. They assert C&O owns 2.3% of Jersey Central, and through its control of Reading dominates the affairs of Jersey Central as well. Appellants claim that this pyramid and concentration of control has allegedly been employed by C&O and B&O to the disadvantage of Reading and Jersey Central. Nine specific transactions are listed being in furtherance of what amounted to a "plan or design" and an "improper conspiracy" of mismanagement on the part of B&O and C&O, the substance of which will be detailed below.
The Reading and the B&O renewed their preliminary objections, raising, inter alia, issues of jurisdiction, improper addition of a party, and lack of capacity to sue. A separate petition to dismiss was filed by the B&O asserting the ICC had primary jurisdiction over appellants' action.
On March 29, 1968, the chancellor wrote to the General Counsel of the ICC and requested an amicus brief concerning the Commission's view of its exclusive or primary jurisdiction over the issues in this litigation.*fn2 The Deputy General Counsel responded in a letter detailing the Commission's position.*fn3 Counsel for all litigants were then invited to submit their comments.
[ 445 Pa. Page 187]
Finally, on January 10, 1969, the chancellor sustained the preliminary objections concerning the primary jurisdiction of the Interstate Commerce Commission and appellant's standing to sue. Otherwise, the preliminary objections were not decided. The amended complaint was dismissed without prejudice to another complaint being filed in accordance with the chancellor's opinion issued that same day. Our review is limited to the chancellor's ruling, and we do not here consider the respective merits of the preliminary objections expressly left undecided.
The Amended Complaint
As will become evident, there is little disagreement in this litigation concerning the applicable principles of law. Rather the dispute centers on the nature of the amended complaint. Appellants urge they are not attacking the legality of the acquisition of control of Reading by B&O and C&O but only the improper and unlawful manner in which the control is being exercised to Reading's disadvantage. The railroads counter that the gist of the amended complaint is the existence of a conspiracy to effectuate a merger of Reading and Jersey Central into the C&O and B&O system at depressed merger values -- an issue purportedly within the primary jurisdiction of the ICC. Thus, prior to investigating either appellants' standing or the ICC's primary jurisdiction, we must examine the amended complaint in some detail.
The perimeters of the complaint have already been noted, and we now turn to the nine specific acts of mismanagement set forth in section 12 of the bill.
Paragraphs 12(a)-(d) recount four alleged incidences of improper control concerning Reading's interest in the Philadelphia Perishable Products Company, an enterprise which operated a warehouse and
[ 445 Pa. Page 188]
terminal facilities for the handling of produce shipped to Philadelphia by rail. In 1931, the C&O and B&O purportedly caused Reading to enter into an agreement with the B&O concerning a division of expenses incurred in running Perishable Products whereby Reading shouldered more than its fair share of the costs. Then in 1953, appellees supposedly compelled Reading to grant an option to purchase 611,049 square feet of the Perishable Products terminal to a B&O subsidiary at a price that was assertedly one half of the terminal's fair market value. Next, in 1961 the C&O and B&O allegedly engineered a plan pursuant to which the Reading permitted the B&O to move its terminal agent's office force from Pier 24 in Philadelphia to the Perishable Products terminal where they obtained rent-free office space, even though rent-paying tenants were displaced. Finally, some time in 1963 the C&O and B&O supposedly caused Reading to transfer its interest in Perishable Products to the B&O for a "grossly inadequate consideration."
In paragraph 12(e) it is averred that the C&O and B&O effectuated the sale of a number of rehabilitated box cars by Reading Dispatch, Inc., a Reading Company subsidiary, to Railease, a C&O subsidiary, for inadequate consideration. The cars were then leased to B&O for a term of fifteen years.
The next paragraph in the complaint (12(f)) asserts that in June, 1964, appellees made Reading lease a number of used hopper cars to the B&O ". . . on terms and conditions which were arbitrarily arrived at rather than through arms length negotiations. . . ."
In 12(g) appellants complain that at some unspecified time the C&O and B&O wrongfully compelled Reading to lease a large amount of railroad equipment from the B&O at exorbitant rents even though Reading had no bona fide need for the equipment.
[ 445 Pa. Page 189]
Paragraph 12(h) states that up until March 22, 1967, appellees brought about the negligent, wasteful, and improper management of Jersey Central in order to acquire that foundering railroad for "little or no consideration." It is also alleged that Jersey Central has had to file a petition for reorganization pursuant to section 77(b) of the Bankruptcy Act.
Finally, in paragraph 12(i) appellants claim that in July, 1967, appellees wrongfully caused Reading to reject a merger proposal tendered by the Pennsylvania and the New York Central Railroads even though the proposal was purportedly more favorable to Reading than the one propounded by the C&O and B&O system.
By reason of these acts of mismanagement, appellants demand that B&O and C&O be enjoined from voting their Reading shares, continuing the mismanagement of Reading, and misusing Reading's corporate assets. An accounting is also requested.
The parties have stipulated that the earliest acquisition of shares by any of the appellants was on April 1, 1964.*fn4 The issue becomes whether appellants possess adequate standing to challenge the acts of mismanagement alleged in their amended complaint.
Appellants' principal hurdle is Rule 1506 of the Pennsylvania Rules of Civil Procedure.*fn5 A two-pronged
[ 445 Pa. Page 190]
argument was pressed before the chancellor. First, appellants urged that the Act of August 27, 1963, P. L. 1355, § 1, 15 P.S. § 1516A superseded the Rule.*fn6 Secondly it was contended that the 1963 Act did not apply to the instant litigation as the Act related only to actions against an officer or a director of a corporation.
The chancellor disagreed and ruled that the 1963 Act did not govern railroads, because the Act was part of the Business Corporation Law, which specifically does not apply to ". . . any corporation incorporated for the purpose of acting as a railroad as defined in the Public Utility Law." See Act of May 5, 1933, P. L. 364, Art. I, § 4, as amended, 15 P.S. § 1004B(2)(ii). Rule 1506 was thus deemed controlling.
Appellants now contend that regardless of the correctness of the chancellor's reasoning as to the applicability of Rule 1506, they have sufficiently satisfied the rule's requirements to enable them to maintain this equity action. They urge that compliance with the rule is to be found in the allegation of a continuing conspiracy. We disagree.
[ 445 Pa. Page 191]
The Act of April 18, 1945, P. L. 253, No. 114, § 1, 15 P.S. § 432*fn7 began the process of bringing Pennsylvania into line with the federal practice.*fn8 The 1945 Act applied to derivative suits "against any officer, or director, or former officer or director of a corporation, domestic or foreign", and was duplicated in the Act of August 27, 1963, supra.
Appellants argued before the chancellor that since the present litigation was not against an officer or director, the statutes had no application here. However, they also maintained the 1963 Act superseded Rule 1506.
The chancellor properly ruled that if the 1945 Act was read to permit appellants to maintain the present litigation notwithstanding the issue of the timely acquisition of shares, it would be inconsistent with Rule 1506. Since the latter became effective in 1952, it supersedes the 1945 Act. See Act of June 21, 1937, P. L. 1982, No. 392, § 1, as amended, 17 P.S. § 61; Schofield Discipline Case, 362 Pa. 201, 66 A.2d 675 (1949); Lojeski v. Quirk, 202 Pa. Superior Ct. 471, 198 A.2d 410 (1964). As noted above appellants' contentions concerning the 1963 Act are equally unavailing, since the Act does not apply to railroads. Hence Rule 1506 clearly controls.
[ 445 Pa. Page 192]
The underlying rationale of Rule 1506 has been well summarized: "Ownership at the time of the transaction complained of is a safeguard against speculation in corporate causes of action and is designed to remove the incentive to champerty and maintenance. It also seems to be a sound and wholesome principle of equity, for it prevents persons who have not been harmed from receiving a windfall." Goodrich-Amram, Standard Pennsylvania Practice, § 1506-4.
By its terms, the rule requires that each plaintiff be a shareholder at the time of the occurrence of the challenged transaction. The chancellor correctly ruled that paragraphs 12(a)-(e) failed to satisfy the rule, for appellant Walter E. Schoenfeld did not acquire his shares until September 24, 1964. Appellants attempt to surmount this difficulty by an allegation of a continuing conspiracy. There has been little comment by Pennsylvania courts on the subject. However, because of Rule 1503's close affinity with Rule 23.1 of the Federal Rules of Civil Procedure*fn9 and statutes of at
[ 445 Pa. Page 193]
least six other jurisdictions,*fn10 we feel justified in looking outside of our own reported cases for assistance.
The Federal rule has been generally rationalized as operating to prevent courts from being used to litigate purchased grievances and becoming parties to speculative suits against corporations. See e.g., Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 556, 69 S. Ct. 1221, 1230 (1949); Bateson v. Magna Oil Corp., 414 F. 2d 128, 131 (5th Cir. 1969).
Actually, little improvement has been made on the well known opinion of Roscoe Pound in Home Fire Ins. Co. v. Barber, 67 Neb. 644, 93 N.W. 1024 (1903), decided when he was sitting as a commissioner with the Supreme Court of Nebraska:
"Sound reason and good authority sustain the rule that a purchaser of stock can not complain of the prior acts and management of a corporation. Hawes v. Oakland, 104 U.S. 450, 26 L. Ed. 827; Dimpfell v. Ohio & M. R. Co., 110 U.S. 209, 3 Sup. Ct. 573, 28 L. Ed. 121; Taylor v. Holmes, 127 U.S. 489, 8 Sup. Ct. 1192, 32 L. Ed. 179; Southwest Natural Gas Co. v. Fayette Fuel-Gas Co., 145 Pa. 13, 23 Atl. 224. . . . In Alexander v. Searcy, supra, [81 Ga. 536, 8 S.E. 630 (1888)], the
[ 445 Pa. Page 194]
court says: 'The weight of authority seems to be that a person who did not own stock at the time of the transactions complained of, can not complain or bring a suit to have them declared illegal.' In United Electric Securities Company v. Louisiana Electric Light Company, [68 F. 673 (1895)] it is said: 'As a general proposition, the purchaser of stock in a corporation is not allowed to attack the acts and management of the company prior to the acquisition of his stock; otherwise, we might have a case where stock duly represented in a corporation consented to and participated in bad management and waste and, after reaping the benefits from such transactions, could be easily passed into the hands of a subsequent purchaser, who could make his harvest by appearing and contesting the very acts and conduct which his vendor had consented to.' . . . [T]he present stockholders . . . by contesting these acts, which did not injure any of the present stockholders in the least, are recovering back a large part of the purchase price of stock which was admittedly worth all that they paid for it. Such cases illustrate forcibly the wisdom of confining complaints of this kind to those who were stockholders at the time or their successors by operation of law.
"The rule that a suit for mismanagement can not be maintained by one who was not a stockholder at the time . . . has its foundation in a sound and wholesome principle of equity, namely, that the rules worked out by chancellors in furtherance of right and justice shall not be used, because of their technical character, as rules, to reach inequitable or unjust results. . . . The right of the stockholder to sue exists because of special injury to him for which otherwise he is without redress. If his interest is trifling and the injury thereto of no consequence, he can not sue to compel righting of wrongs to the corporation. . . . Hence there
[ 445 Pa. Page 195]
is obvious reason for holding that one who held no stock at the time of the mismanagement ought not to be allowed to sue unless the mismanagement or its effects continue and are injurious to him, or it affects him specially and peculiarly in some other manner. . . . Except in such cases, the purchaser ought to take things as he found them when he voluntarily acquired an interest. If he was defrauded in the purchase, he should sue the vendor. As to the corporation and its managers, so long as he is not injured in what he got when he purchased, and holds exactly what he got and in the condition in which he got it, there is no ground of complaint. . . ." Id. at 656-58, 93 N.W. at 1028-29 (citations omitted). See also Capital Wine & Spirit Corp. v. Pokrass, 277 App. Div. 184, 98 N.Y.S. 2d 291, aff'd, 302 N.Y. 734, 98 N.E. 2d 704 (1951); see generally Baker & Carey, Corporation 666-67 (3d ed. 1959).
Turning to appellants' allegation of continuing wrongs, we note that the charge is wholly unsupported in the complaint. We here adopt the test for continuing transactions enunciated by the Fifth Circuit Court of Appeals in Palmer v. Morris, 316 F. 2d 649 (5th Cir. 1963), where plaintiff alleged that pursuant to an earlier transaction the company was still paying out sums of money for allegedly nonbeneficial services and exorbitant rentals. It was there stated: "Each of the counts . . . sufficiently stated the facts and circumstances touching on the alleged illegality of the payments currently being made so that these counts could not be dismissed as dealing only with transactions that had completely occurred and been terminated prior to plaintiff's acquisition of his stock." Id. at 650. Accord, Bateson v. Magna Oil Corporation, supra; cf. Hoover v. Allen, 180 F. Supp. 263 (S.D.N.Y. 1960); see generally Prunty, Business Associations, 35 N.Y.U.L. Rev. 1467 (1960).
[ 445 Pa. Page 196]
Upon examination of the amended complaint, we conclude that the transactions in paragraphs 12(a)-(e) "had completely occurred and been terminated" prior to appellants' acquisition of the stock. To maintain a cause of action based upon a "continuing wrong", appellants must allege specific on-going wrongs as to factually alleged acts. Cf. Lawson v. Baltimore Paint & Chemical Corp., 298 F. Supp. 373 (D. Md. 1969).*fn11
[ 445 Pa. Page 197]
Reading finally severed its more than thirty year connection with Perishable Products Company and the terminal in 1963, and the policies of Rule 1506 would be totally frustrated if 1964 shareholders were permitted to challenge transactions stretching back to 1931. Thus, appellants have no standing regarding the acts of mismanagement set forth in paragraphs 12(a)-(d).*fn12
Paragraph 12(e) concerning the sale of box cars by Reading to Railease is likewise a completed transaction. The continuing lease of the cars is between Railease and B&O, and appellants, as Reading shareholders, have no standing to question its propriety.
The hopper car transaction in 12(f) rests on a different footing. Here, Reading itself has allegedly made an improper lease to B&O. This, we believe, is a continuing wrong, and as such appellants possess standing under Rule 1506 to challenge the transaction. However, as will appear below, the issues embodied in this paragraph are more appropriately before the ICC.
With respect to the remaining paragraphs of the amended complaint, it is impossible to determine the
[ 445 Pa. Page 198]
applicability of Rule 1506 to paragraph 12(g) because no date is given. Appellants do collectively meet the requirements of the rule as to the acts of mismanagement set forth in paragraphs 12(h) and (i), but, similar to 12(f), consideration of the issue in these paragraphs by our Court is inappropriate at the present time.
To recapitulate, we conclude that appellants are without standing with regard to paragraphs 12(a) through (3) and paragraph 12(g) is too vague to enable us to ascertain Rule 1506's applicability. Appellants do possess standing as to the transactions alleged in paragraphs 12(f), (h), and (i).
We are in accord with the chancellor that the ICC possesses primary jurisdiction over the issue of the acquisition and exercise of control over Reading by the C&O -- B&O system with respect to two of the issues*fn13 appellants are qualified to raise in the amended complaint.
The principles of the doctrine of primary jurisdiction are well settled. The United States Supreme Court ". . . recognized early in the development of administrative agencies that coordination between traditional judicial machinery and these agencies was necessary if consistent and coherent policy were to emerge. . . . The doctrine of primary jurisdiction has become one of the key judicial switches through which this current has passed." Port of Boston Marine Terminal Ass'n v. Rederiaktiebolaget Trans-Atlantic, 400 U.S. 62, 68, 91 S. Ct. 203, 208 (1970) (footnote and citations omitted). The doctrine ". . . requires judicial abstention in cases where protection of the integrity
[ 445 Pa. Page 199]
of a regulatory scheme dictates preliminary resort to the agency which administers the scheme." United States v. Philadelphia National Bank, 374 U.S. 321, 353, 83 S. Ct. 1715, 1736 (1963). Such abstention is necessary to promote ". . . proper relationships between the courts and administrative agencies charged with particular regulatory duties. . . ." United States v. Western Pacific Railroad Co., 352 U.S. 59, 63, 77 S. Ct. 161, 165 (1956). Accord, Whitney National Bank in Jefferson Parish v. Bank of New Orleans, 379 U.S. 411, 85 S. Ct. 551 (1965); Far East Conference v. United States, 342 U.S. 570, 72 S. Ct. 492 (1952); cf. Bessemer and Lake Erie Railroad Company v. Pennsylvania Public Utility Commission, 430 Pa. 339, 243 A.2d 358 (1968). See generally 3 Davis, Administrative Law §§ 19.01-.07 (1958); Jaffe, Primary Jurisdiction, 77 Harv. L. Rev. 1037 (1964); Latta, Primary Jurisdiction in Regulated Industries and the Antitrust Laws, 30 U. of Cin. L. Rev. 261 (1961); Schwartz, Legal Restriction of Competition in the Regulated Industries; An Abdication of Judicial Responsibility, 67 Harv. L. Rev. 436 (1954).*fn14
[ 445 Pa. Page 200]
The doctrine is clearly applicable to the present litigation. The Interstate Commerce Commission has unquestionably embarked upon and is continuing: ". . . a vast reorganization of rail transportation implementing the congressional policy of encouraging consolidation of the Nation's railroads into a 'limited number of systems.' Section 407 of the Transportation Act of 1920, amending § 5(4) of the Interstate Commerce Act, 41 Stat. 481 (1920). That policy has been with us, in one form or another, for more than 45 years. The original idea of the 1920 Act, that the ICC would formulate a national plan of consolidation, proved unworkable. It ran into heavy opposition from carriers and eventually had to be abandoned. The 1920 Act was replaced by the Transportation Act of 1940 . . . governed the Commission's examination of the present transactions. Under the 1940 Act, the initiation of the merger and consolidation proceedings is left to the carrier themselves, and the Commission possesses no power to compel carriers to merge. However, the congressional directive for a limited number of railroad systems has not been changed. The only change has been in the means of achieving that goal. . . ." Penn-Central Merger and N & W Inclusion Cases, 389 U.S. 486, 492, 88 S. Ct. 602, 605 (1968) (citation omitted).*fn15
[ 445 Pa. Page 201]
The Commission has been endowed with extensive regulatory powers to enable it to further national transportation policy.*fn16 It is not our purpose to here review the history of the ICC.*fn17 If it sufficient to note that the Commission has exclusive authority over mergers, for it is unlawful for any person, except with Commission approval obtained in an appropriate proceeding,*fn18 to ". . . accomplish or effectuate, or to participate
[ 445 Pa. Page 202]
in accomplishing or effectuating, the control or management in a common interest of any two or more carriers, however such result is attained, whether directly or indirectly, by use of common directors, officers, or stockholders, a holding or investment company or companies, a voting trust or trusts, or in any other manner whatsoever. It shall be unlawful to continue to maintain control or management accomplished or effectuated after the enactment of this amendatory paragraph and in violation of its provisions." Act of February 4, 1887, c. 104, Pt. 1, § 5, 24 Stat. 380, as amended, 49 U.S.C. § 5(4) (hereinafter referred to as the Act).
The Commission has the power to initiate investigation in cases of effectuation of control by nonprescribed methods (Section 5(7) of the Act), and its authority in the area of mergers and consolidations ". . . shall be exclusive and plenary, and any carrier or corporation participating in or resulting from any transaction approved by the Commission thereunder, shall have full power . . . to carry such transaction into effect and to own and operate any properties and exercise any control or franchises acquired through said transaction. . . ." Section 5(11) of the Act (emphasis added). Further, the ICC has the authority to make such appropriate supplemental orders as it may from time to time, for good cause shown, deem necessary. Section 5(9) of the Act.
Mindful of the Commission's extensive mantle of power and authority, we turn again to the amended complaint. The applicability of the doctrine of primary jurisdiction becomes readily apparent. In paragraph 12(i) of the complaint, the appellants challenge Reading's rejection of a proposed Penn-Central merger offer. Appellants also later seek a decree enjoining the C&O and B&O from voting their respective Reading
[ 445 Pa. Page 203]
shares. In effect, such a decree would divest the C&O-B&O system of its Reading control and transfer the control to appellants or other shareholders. This judicial tampering with interlocking railroad systems would be wholly inappropriate at this juncture.
Appellants urge that the ICC has never "approved" of the C&O and B&O's acquisition of de facto control over Reading. While appellants may be technically correct, for there has been no separate hearing on the issue, B&O's holdings in Reading have always been a matter of public record. See e.g., Penn-Central Merger and N & W Inclusion Cases, supra at 519, 88 S. Ct. at 619. When the ICC approved C&O's acquisition of the B&O, see Chesapeake & Ohio Ry. -- Control -- Baltimore & Ohio R. R., supra, the C&O-B&O system's dominance over Reading and Jersey Central received implied agency authorization.
Furthermore, the issue is presently pending before the Commission. The C&O-B&O system filed for an order approving control of the Western Maryland Railroad Co. The acquisition was initially approved, see Chesapeake & Ohio Ry. and the Baltimore and Ohio R. R. -- Control -- Western Maryland Ry., 328 ICC 684 (1967), but the order is presently under reconsideration at Finance Docket 23178. Two petitions are pending in that litigation: one by the Reading Company for inclusion on fair and equitable terms within the C&O-B&O system, and one by the reorganization trustees of Jersey Central requesting a similar assimilation. Appellants have also interjected themselves into the joint application for merger by the Norfolk and Western and the C&O at Finance Docket 23832, raising the same allegations as contained in paragraphs 12(a), (e), (f), and (g) of the amended complaint.*fn19 Our Court should not interrupt these proceedings.
[ 445 Pa. Page 204]
Appellants repeatedly stress that they are contesting only appellees' exercise of control over Reading rather than the acquisition of control. Their injunction request belies such protestations. Additionally, even appellees' exercise of its Reading control is a matter more appropriate for the Commission. See e.g., Hewitt-Robins v. Eastern Freight-Ways, Inc., 371 U.S. 84, 83 S. Ct. 157 (1962). Thus, we may not consider paragraph 12(i) of the amended complaint.
Paragraph 12(f) concerning the leasing of hopper cars by Reading to the B&O meets a similar fate. Section 1(14) of the Interstate Commerce Act provides: "(a) The Commission may, after hearing, on a complaint or upon its own initiative without complaint, establish reasonable rules, regulations, and practices with respect to car service by common carriers by railroad subject to this chapter, including the compensation to be paid and other terms of any contract, agreement, or arrangement for the use of any locomotive, car, or other vehicle not owned by the carrier using it (and whether or not owned by another carrier), and the penalties or other sanctions for nonobservance of such rules, regulations, or practices." Considering the pendency of the general control issues before the ICC and its ability to afford relief on the hopper car transaction, we must again abstain.
As to paragraph 12(g), we have already indicated that it lacks adequate clarity to enable us to determine the applicability of Rule 1506. Even were the paragraph sufficiently specific so as to give appellants standing, we would refrain from passing on the issues raised therein because of the above quoted Section 1(14) of the Act.
Finally, with respect to paragraph 12(h) and the alleged irregularities regarding the Jersey Central, the matter is presently pending before the United States
[ 445 Pa. Page 205]
District Court for the District of New Jersey. A reorganization proceeding was instituted in that court on March 22, 1967, by Jersey Central pursuant to Section 77 of the Bankruptcy Act, 11 U.S.C. § 205. On March 25, 1968, the following order was entered:
"Pursuant to Section 77(c)(9) of the Bankruptcy Act the Trustees are hereby directed to report to the Court any facts pertaining to irregularities, fraud, misconduct or mismanagement as a consequence of which the Debtor [Jersey Central] may have a cause of action arising therefrom against any person or corporation.
"It is further requested that the Interstate Commerce Commission or such of its agencies as it may designate, report to the Court any facts pertaining to irregularities, fraud, misconduct or mismanagement as a consequence of which the Debtor may have a cause of action arising therefrom against any person or corporation." In the Matter of the Central Railroad Company of New Jersey, Debtor No. B-401-67, Order No. 116.*fn20
[ 445 Pa. Page 206]
We are confident that the bankruptcy court is giving full consideration to all aspects of the proceedings, and various interested parties have not hesitated to test that court's ruling on appeal. See e.g., In re Central Railroad Company of New Jersey, 429 F. 2d 507 (3d Cir. 1970), cert. denied sub nom. Bondholders Protective Committee v. The 3 1/4% Mortgage Bondholders Protective Committee, 401 U.S. 938, 91 S. Ct. 931 (1971) (application of Bondholders Protective Committee to intervene denied); In re Central Railroad Company of Page 206} New Jersey, 411 F. 2d 1178 (3d Cir. 1969) (trustee authorized to appoint officer of B&O as chief operating officer of Jersey Central, and Court of Appeals would not review I.C.C. order); In re Central Railroad Company of New Jersey, 391 F. 2d 417 (3d Cir. 1968) (intervention of Lehigh Valley Railroad Co. allowed). We therefore will not entertain the issues raised in paragraph 12(h).
To summarize, appellants do not possess standing to raise issues presented in paragraphs 12(a)-(e). With respect to paragraphs 12(f) and 12(i), we defer to the primary jurisdiction of the Interstate Commerce Commission. Paragraph 12(g) is too vague for us to consider, and even were we to conclude it possessed sufficient clarity, the issue raised would be more properly one for the Commission. Finally, the matter raised in paragraph 12(h) is pending before the Federal District Court of New Jersey. We have considered all other portions of the complaint and conclude it must be dismissed.
Accordingly, the decree of the Court of Common Pleas of Philadelphia dismissing the amended complaint is affirmed.*fn21 Costs on appellants.