Amtrak seems to be contending that all other issues either have already been decided elsewhere, or cannot be decided because they should have been decided elsewhere. In order to attempt to understand these contentions, it is necessary to review briefly the checkered procedural history of this case.
The basic agreement between Amtrak and the Trustees requires the Trustees to maintain facilities at the same service levels prevailing as of May 1, 1971. It also provides for compensation to the Trustees by Amtrak in amounts related, initially, to costs incurred solely for passenger service. The contract also provides for arbitration of disputes. However, in authorizing the Trustees to enter into the agreement, this Court's Order No. 238 imposed the condition that final determinations of arbitrators would be subject to review and approval by this Court before becoming finally binding upon the Trustees and the Debtor's estate. In compliance with that condition, several such awards have been submitted to this Court for approval or rejection.
The arbitration proceeding pertaining to the level of maintenance of the Indiana trackage was instituted by Amtrak, in 1972, but the hearings were postponed for a lengthy period at Amtrak's request.
After hearing, the arbitrators (by a 2 to 1 vote) reached their decision on February 3, 1976. Amtrak later petitioned the United States District Court for the Southern District of Indiana to confirm the award. The Trustees then petitioned this Court to enjoin Amtrak from proceeding with the Indiana litigation, invoking the condition set forth in Order No. 238 and the general powers of the Bankruptcy Court. At the hearing in this Court, counsel for Amtrak acknowledged that the award could not be enforced against the Trustees or the debtor's estate except as this Court might direct; made clear that it would be his contention that Amtrak was not bound by the condition set forth in Order No. 238; but contended that this was academic, since the Indiana Court was being asked to do nothing more than confirm the award of the arbitrators. It was conceded that, quite apart from the question of Order No. 238 and the condition it imposed, Amtrak would have to return to this Court in order to obtain enforcement of the arbitrators' decision.
On that basis, I dismissed the Trustees' Petition and permitted the Indiana confirmation proceeding to go forward. Thereafter, the Trustees appeared in the Indiana court and stipulated that they had no objection to the entry of a judgment confirming the arbitrators' award, so long as the judgment was strictly limited to the actual award of the arbitrators. The Trustees submitted a proposed form of the judgment which they would be satisfied to have entered, and that was the order which was entered.
Amtrak then filed the present petition. The Trustees filed an answer, reiterating the position which they had taken, and which had been fully discussed, at the earlier hearings in this Court, namely, that as of April 1, 1976, substantially all of the Debtor's rail properties had been conveyed to ConRail, ConRail had taken over all rail operations, and substantially all of the Debtor's personnel were now employed by ConRail. In essence, the Trustees pointed out that implementation of the Rail Act relieved them of all further operating responsibilities, including any vestigial responsibilities emanating from the basic agreement with Amtrak, and that compliance with the arbitrators' award is now a legal and practical impossibility.
Amtrak thereupon sought, and obtained, a postponement of the hearing on its petition (asserting that the scheduled date would be personally inconvenient to its counsel), and returned to the Indiana court to file a "Petition for Declaratory Judgment" seeking, inter alia, a determination by the Indiana court that its earlier judgment confirming the arbitrators' award was res judicata as to, and barred all further assertion of, issues relating to the possible impact of the Rail Act upon enforcement of the arbitrators' award. Concurrently, Amtrak sought a stay of all proceedings in this Court on its own petition for enforcement, and when this proved unsuccessful, sought further stays from the Court of Appeals and even from the United States Supreme Court. Application to the Supreme Court was filed on the eve of the scheduled hearing; a temporary stay was granted pending receipt of the Trustees' response to the application. The stay was dissolved a few days later, and the hearing in this Court was rescheduled.
In the Indiana declaratory judgment proceeding, Amtrak's counsel drafted and submitted to that Court a statement of findings and conclusions, and a form of order, all of which were signed by the court on June 25, 1976. In essence, as I understand it, this Order declares that the Trustees are barred, by the earlier judgment confirming the arbitrators' award, from asserting in this Court or elsewhere any issues relating to the impact of the Rail Act upon enforcement of the award, and all issues relating to alleged impossibility of performance. An appeal has been taken from this Order, which is now pending in the Seventh Circuit.
The first issue to be addressed is whether, as Amtrak contends, this Court lacks jurisdiction to consider whether the interposition of the Rail Act relieves the Trustees of further responsibility with respect to the upgrading of trackage now owned by ConRail. Amtrak's argument involves two somewhat related assertions: (1) that the reservation in Order No. 238 does not confer jurisdiction to review the arbitrator's award, because that reservation was invalid, and in any event is not binding upon Amtrak in any way; and (2) the doctrine of res judicata precludes consideration of the stated issue by this Court, in view of the judgment or judgments entered in Indiana.
A. Validity and Effect of Order No. 238.
The provision in the basic agreement relating to arbitration of disputes such as that involved in Case No. 11 is purely contractual; it was not mandated by the Rail Passenger Service Act of 1970. The Trustees' Petition to this Court seeking authorization to enter into the basic agreement with Amtrak was not unopposed, and many legitimate and substantial objections to the proposed contract were asserted by various parties. The statute provided for resolution by the Interstate Commerce Commission of certain disputes relating to the basis of compensation to the Trustees for operating the passenger service. Obviously, parties dissatisfied with the ICC decisions in this area would be able to obtain judicial review of those determinations. It was felt that many of the other issues which, under the contract, would be submitted to arbitration before the National Arbitration Panel, might prove to have equally substantial impact upon the Debtor's estate, yet, under the contract as originally proposed, would escape meaningful judicial review in any forum. As discussed in the Opinion filed in connection with the entry of Order No. 238, serious questions were raised as to the possibly unconstitutional impact of the basic agreement. At the very least, therefore, it seemed desirable to insure that the arbitration provisions were not so utterly open-ended as to give rise to an argument that unconstitutional impact could not be prevented.
Moreover, there was at least a serious question as to the legal propriety in a railroad reorganization context of authorizing a contract with binding arbitration provisions of the type contemplated. Section 26 of the Bankruptcy Act did provide for arbitration; however, § 26(c) provided:
"c. The written finding of the arbitrators or of a majority of them as to the issues presented may be filed in court and shall have like force and effect as the verdict of a jury."
Thus, even if § 26 of the Bankruptcy Act were held applicable to railroad reorganization proceedings, it would seem that the proposed arbitration clause in the basic agreement would be partially in conflict with § 26(c), unless the bankruptcy court reserved the right to insure that arbitrators' awards were not given any greater effect than that contemplated by § 26(c).
Moreover, § 26 of the Bankruptcy Act was the only provision of the bankruptcy laws which authorized arbitration of disputes, and it was, and is, far from clear that § 26 is applicable in railroad reorganization cases. Section 77(l ) makes the nonrailroad reorganization provisions of the Bankruptcy Act, including § 26, applicable to proceedings under § 77 only to the extent that they are "consistent with the provisions" of § 77 itself. And § 77(c)(2) vests in the reorganization court sweeping authority over, and responsibility for, the affairs of the debtor. An argument can be made that submitting disputes to arbitration in accordance with § 26 of the Bankruptcy Act would not be "consistent with" the allocation of authority contemplated by § 77(c)(2), and that therefore § 26 does not apply in railroad reorganization proceedings. Be that as it may, at the very least it seems clear that a reorganization court can best carry out its responsibilities under § 77(c)(2) by retaining some degree of control over the implementation of the end product of arbitration, especially where the magnitude and legal ramifications of an arbitration award cannot be perceived in advance.
For all of these reasons, I am satisfied that the condition included in Order No. 238 is entirely valid. But even if it were otherwise, the fact remains that the Trustees were authorized to enter into the Amtrak agreement only upon that condition. Amtrak, like any other party contracting with court-appointed trustees, can validly contract with them only to the extent authorized by the appointing court. I thus am unable to accept the suggestion that, somehow, Amtrak is free to ignore the provisions of Order No. 238.
In my view, Amtrak would be bound by the provisions of Order No. 238 even if it had been unaware of the condition imposed by the Court, until after the contract was executed. But no one can seriously suggest that Amtrak was not fully conversant with the terms of Order No. 238. The initial hearing on the Trustees' Petition for approval of the Amtrak contract commenced on April 20, 1971. In the course of that hearing, it was agreed that the cross-examination of certain witnesses would be deferred until a final hearing to be held three days later, on April 23, 1971. While Amtrak did not formally enter an appearance or participate as a party in these hearings, counsel for Amtrak, R. Chapman Rose, Esq., attended at least the April 20 hearing, and participated therein to the extent of making a brief argument in support of the Trustees' Petition (Tr. pp. 1692-97). In the course of these hearings, particularly at the April 23 hearing, the arbitration provisions of the proposed contract came under heavy attack; indeed, many parties insisted that the type of condition ultimately inserted in Order No. 238 would provide insufficient protection. At the conclusion of the April 23 hearing, the Court sought information as to whether Amtrak had any objection to the proposed reservation relating to arbitration, and counsel for the Trustees advised that Amtrak had expressed no objection. The record does not disclose whether any representative of Amtrak was actually in attendance at the hearing on April 23. However, either that same day, or within two or three days thereafter, at the request of Amtrak's counsel, a conference in chambers was held, attended by Mr. Rose and other representatives of Amtrak, together with counsel for the Trustees. At that conference, Amtrak sought, unsuccessfully, to have the condition about arbitration removed from Order No. 238; and it was made clear that Amtrak would seriously consider the possibility of challenging that feature of the Order by means of an appeal therefrom. However, Order No. 238 was not appealed, by anyone.
B. Review Irrespective of Order No. 238.
Wholly apart from the provisions of Order No. 238, I find unacceptable the notion that a reorganization court is without jurisdiction to consider the propriety and feasibility of a proposal that the Trustees of the Debtor must forthwith embark upon a program of trackage rehabilitation involving potential expenditures (as to one small segment of the Debtor's property) of $ 11.5 million to $ 22 million. Irrespective of the provisions of Order No. 238, and even if the Rail Act had never been enacted, and the Trustees were still operating the railroad, the effect to be given in these reorganization proceedings to the conclusions of the arbitrators would have been a matter for determination by this Court. Section 77(c)(2) of the Bankruptcy Act provides that even the orders of governmental regulatory agencies requiring that certain work be done in order to protect the safety of the traveling public, are binding upon the Debtor's estate only if approved by the Court (or, under certain limited circumstances, the ICC); surely mere contractual obligations are entitled to no greater weight.
C. The Indiana Judgment.
The arbitrators in Case No. 11 determined that the trackage in question was not being maintained so as to provide a level of utility commensurate with that existing as of May 1, 1971, and that under Paragraph 4.2 of the basic agreement, it was the responsibility of the Trustees to arrange for the upgrading, at no cost to Amtrak. In the course of the hearings before the arbitration panel, Amtrak expressly disclaimed any intention to seek damages for the alleged inadequate maintenance (an understandable concession, since (a) the possibility that Amtrak could prove that it had suffered damages was remote, and (b) under the operating agreement, if the Trustees had spent more on maintenance, the compensation due them from Amtrak would have been increased, at least to some extent). Amtrak sought only prospective relief, and the arbitrators' award was prospective only.
Moreover, the arbitrators' report expressly refused to resolve any issues concerning the effect of the Rail Act and the forthcoming conveyance to ConRail, stating
"Accordingly, the Panel does not consider that it is the proper body to decide whether, or to what extent, the Regional Rail Reorganization Act of 1973 or the Final System Plan thereunder may affect the carrying out of this award."
The judgment of the United States District Court for the Southern District of Indiana which was entered on March 24, 1976, confirming the award, was strictly limited to the provisions of the award itself. The judgment added nothing to the award, except finality. Essentially the only issues which could have been resolved in the confirmation proceeding were such matters as the integrity of the arbitrators, the absence of fraud or collusion, and the jurisdiction of the arbitrators, under the terms of the contract, to render the award.