The opinion of the court was delivered by: FULLAM
MEMORANDUM AND ORDER NO. 2569
National Rail Passenger Corporation ("Amtrak") has petitioned this Court for an order directing the Trustees of the Debtor's estate to carry out the terms of an arbitrators' award (National Arbitration Panel Case No. 11 In re: Level of Utility) which was confirmed by a judgment entered in the United States District Court for the Southern District of Indiana on March 24, 1976 (Civil Actions Nos. IP 76-76-C and 74-42-C). The award determined that the Trustees had failed to maintain certain passenger trackage, principally located in Indiana, in such condition as to provide for the same level of passenger service which was in effect as of May 1, 1971, as required by P 4.2 of the "basic agreement" between Amtrak and the Trustees, which became effective as of May 1, 1971, in accordance with Order No. 238 in these proceedings. In essence, Amtrak seeks to have the Trustees perform the required engineering work for a program of upgrading the trackage in question, and either to perform or arrange with others to perform the necessary work, all at the expense of the Debtor's estate. (In the course of the arbitration proceeding, estimates of the costs involved ranged from $ 11.5 million to $ 22 million.)
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 ...