that the Trustees will have no such liability (e.g., if all programs can be terminated, and values are then such as to provide full coverage; or if Conrail absorbs most of the Debtor's employees and provides a compatible pension program), or that the available RRRA funding will have been exhausted due to unforeseen emergencies or other intervening events, so that these and other operating expenses will necessarily be deferred, and eventual compensation under the Tucker Act thereby increased. In the nature of things, it is probable that actual events will produce a result lying somewhere between these two extremes. Surely, the legal system should be able to devise a mechanism with sufficient flexibility to produce an accommodation which will represent just treatment in light of actual events.
In my view, neither the Trustees nor the FRA should be permitted to structure the interim operations of the railroad on a "heads I win, tails you lose" basis. If the Trustees' present proposals were adopted, and if their present cash forecast proves reasonably accurate, they would be able to finance operations until the conveyance date without resort to additional § 213 funds except for the purpose of paying the retroactive wage adjustment, and would have $20 million in cash available to meet their pension funding responsibilities. But if the $20 million proved to be more than was needed for that purpose, the Trustees would presumably be free to use it for other purposes (which would thus have been indirectly paid for by the § 213 funds used to make the retroactive wage adjustments). While this would probably merely balance other inequities which implementation of the RRRA would involve, the fact remains that, under the present statute, § 213 funds may not be used for such purposes.
On the other hand, acceptance of the Government's position would improperly require the Trustees to defer one aspect of labor costs for the purpose of paying the retroactive wage increases, even though Congress expressly provided § 213 funds for that purpose.
It is no answer, in my view, to assert that the unfairness inherent in the Government's proposal can be disregarded because it is susceptible to remedy in the Special Court and in a Tucker Act suit in the Court of Claims. Pre-conveyance operating deficits are to be paid in cash, to the extent that Congress has provided the cash, and not in Conrail securities or a Tucker Act judgment, unless as a last resort.
As suggested earlier, it would seem preferable for the FRA and the Trustees to enter into a comprehensive financing agreement pursuant to which § 213 funds and the special accounts here in question could be jointly used as needed to defray operating expenses, subject to a final accounting and appropriate adjustments as between sources of funds, as of the conveyance date. I have not been made aware of any insuperable legal impediment to some such quasi-escrow arrangement. But in the absence of any such comprehensive agreement, it is necessary to deal with the specific issues as best we can.
In the case of the equipment obligation repurchase account, the suggested solution has been achieved, in effect, by the Government's concession that further tender of repurchase will not be necessary, and that this Court may appropriately adjust the legal consequences to the parties in light of final appellate disposition of the underlying legal issues.
This leaves for consideration the pension funding special account. On the present record, I have concluded that it is essential to the proper performance of the Trustees' responsibilities for prudent management of the affairs of the Debtor to make some provision, on a current basis, for that portion of their pension responsibilities attributable to the pre-conveyance period. And, while the Trustees' estimate of $20 million may be valid, it seems probable that, as a practical matter, the actual liability for the pre-conveyance period can be reduced substantially below that amount. The circumstances do not permit a high degree of confidence in the correctness of a judgment in this area, but I am inclined to believe that a more realistic figure would be $10 million. I will therefore direct the Trustees to continue to hold in a special account the sum of $10 million as a reserve against such liabilities. The Trustees will not, however, be permitted actually to use these funds for that purpose or any other purpose, except upon further order of this Court. The net result will be that these funds can still be made available, if necessary, to support continued rail operations pre-conveyance if RRRA funding has been exhausted, and that any balance remaining after providing for the actual pension liability can be restored to the appropriate agency.
An order will be entered in conformity with the views expressed above.
ORDER NO. 2123
AND NOW, this 10th day of December, 1975, upon consideration of the "Petition of Trustees for Instructions Concerning Payment of Retroactive Wage Adjustment and Certain Special Accounts" (Document No. 9645), and the "Petition of the United States of America for an Order to Preserve Debtor's Rail Properties" (Document No. 9643), and after hearing thereon of which due notice was given, it is hereby ORDERED that:
1. The Trustees are authorized and directed to hold in an existing Special Account the sum of $10 million as a reserve against unfunded pension liabilities. The funds held in said Special Account shall not, without further order of this Court, be used or considered to be available for other expenses of the Debtor's estate.
2. The Trustees are authorized and directed, using operating revenues of the estate other than the funds referred to in Paragraph 1 above, together with any grant funds which may be provided under § 213 of the Regional Rail Reorganization Act, to pay the balance of the amount due to employees in connection with the retroactive portion of the wage increase the Trustees were authorized to pay in Order No. 1827.
3. The Trustees are directed to seek approval from the appropriate officials and agencies of comprehensive arrangements for financing interim operations, in accordance with the views expressed in the accompanying Opinion, and to report to this Court within fifteen (15) days the results of such efforts.
John P. Fullam / J.
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