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IN RE READING CO.

May 2, 1974

In the Matter of READING COMPANY, Debtor. In Proceedings for the Reorganization of a Railroad Bky


The opinion of the court was delivered by: DITTER

MEMORANDUM AND ORDER NO. 607, and DECISION REQUIRED BY THE FIRST SENTENCE OF § 207(b) OF THE REGIONAL RAIL REORGANIZATION ACT OF 1973.

The Reading Company is a railroad that has been in reorganization under Section 77 of the Bankruptcy Act since November 23, 1971. It is one of several northeast railroads that are in grave financial difficulty. In order to ameliorate this situation and to provide essential rail service, Congress passed the Regional Rail Reorganization Act of 1973.

 This Act requires that each district court having jurisdiction over a railroad in reorganization decide whether it is reorganizable on an income basis within a reasonable time under the Bankruptcy Act, 11 US.C. § 205, and whether the public interest would be best served by continuing with those proceedings. The alternative is reorganization under the new Rail Act. Pursuant to this mandate, public hearings were held on March 27, 1974, so that all interested parties could be heard. Based on the affidavits, testimony, and documentary evidence offered, I make the following:

 FINDINGS OF FACT

 1. The Reading Company is a bankrupt railroad presently in reorganization under Section 77 of the Bankruptcy Act.

 2. The Regional Rail Reorganization Act of 1973, 45 U.S.C. § 701 et seq., was intended by Congress to provide for:

 (1) The identification of a rail system in the midwest and northeast region which will be adequate to meet regional and national rail transportation requirements;

 (2) The reorganization of railroads serving that area into an economically viable system; and

 (3) The financial assistance and legal procedures to accomplish these purposes at the least possible cost to the general taxpayer.

 3. The Act affords certain advantages to those railroads which are reorganized under its provisions as compared to those which are reorganized under Section 77 of the Bankruptcy Act, including:

 (1) Simplified procedures for the abandonment of lines which are not profitable to operate;

 (2) Federal subsidies to provide compensation for employees whose services are no longer required; and

 (3) The possibility of simplified criteria for obtaining interim financial assistance.

 4. At least six suits have been brought, however, to challenge the constitutionality of the Act. No decision has been ...


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