The opinion of the court was delivered by: FULLAM
MEMORANDUM AND ORDER NO. 245, and FINDINGS PURSUANT TO THE FIRST SENTENCE OF 207(b) of the Regional Rail Reorganization Act of 1973
Section 207(b) of the Regional Rail Reorganization Act of 1973 (hereinafter the 'Act'), provides:
'Within 120 days after the date of enactment of this Act each United States district court or other court having jurisdiction over a railroad in reorganization shall decide whether the railroad is reorganizable on an income basis within a reasonable time under section 77 of the Bankruptcy Act (11 U.S.C. § 205) and that the public interest would be better served by continuing the present reorganization proceedings than by a reorganization under this Act . . ..'
The Debtor is a 'railroad in reorganization' as defined in the Act. The statute became effective January 2, 1974, which means that the decision as to reorganizability is to be made not later than May 2, 1974.
By Order No. 218, this Court directed that a hearing be held on April 8, 1974, in relation to the decision required by the quoted language of the statute, and invited all interested parties, at stated times in advance of the hearing, to specify and brief the legal and factual issues they deemed relevant to the required determination. In response to this invitation, a number of questions have been briefed and presented.
The findings made herein are based on the records of the June 1973 and April 1974 hearings. Although it is to be hoped that these findings will expedite further proceedings in this case, no ultimate finding or conclusion pertaining to the Trustees' petition to terminate is now being made. Rather, the Trustees' termination petition will be considered in conjunction with the hearing required by the second sentence of § 207(b) of the Act.
The issue to be considered now is whether the Debtor is reorganizable within the meaning of § 207(b). At the hearing, only the Commonwealth of Pennsylvania urged an affirmative answer. But the record simply does not support the Commonwealth's contention that the Debtor can be reorganized as an independent operating carrier. Moreover, reorganization through absorption into the Penn Central is less than realistic, as is the suggested combination of some of the smaller bankrupt carriers to form the so-called Mid-Atlantic Railroad (see Finding 51). This is particularly true since both the Penn Central and the Reading have been found not reorganizable under the § 207(b) criterion, and, therefore, at least as of this date, these carriers will be reorganized under the Act.
Certain legal issues which were raised in the Penn Central § 207(b) proceeding have also been raised here. The discussion of these issues in Parts I and II of the Memorandum and Order No. 1543 in the Penn Central proceedings is incorporated herein by reference.
1. The Lehigh Valley Railroad Company (hereinafter LV) is a Pennsylvania corporation with its executive offices in Bethlehem, Pennsylvania.
2. A petition for reorganization under § 77 of the Bankruptcy Act was filed by LV and approved by this Court on July 24, 1970.
3. The LV had previously obtained relief from pressing financial difficulties under the Bankruptcy Act in 1939 and under § 20b of the Interstate Commerce Act in 1949. Both proceedings resulted in ...