In Re Penn Central Transportation Co. , 533 F. App'x 164 ( 2013 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 12-3807
_____________
In the Matter of PENN CENTRAL TRANSPORTATION COMPANY,
Debtor
PENN CENTRAL TRANSPORTATION COMPANY and
AMERICAN PREMIER UNDERWRITERS, INC., the Reorganized Company,
Appellants
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(District Court No. 2-70-bk-00347)
District Judge: Honorable Harvey Bartle, III
Argued July 17, 2013
Before: RENDELL, SMITH and ROTH, Circuit Judges
(Opinion Filed: August 14, 2013)
Carl M. Bucholz, Esquire
Brian M. Robinson, Esquire
DLA Piper
1650 Market Street
One Liberty Place, Suite 4900
Philadelphia, PA 19103
Michael L. Cioffi, Esquire (Argued)
Nathaniel R. Jones, Esquire
Thomas H. Stewart, Esquire
Blank Rome
201 East 5th Street
1700 PNC Center
Cincinnati, OH 45202
Counsel for Appellants
Sara J. Geenen, Esquire
Frederick Perillo, Esquire (Argued)
The Previant Law Firm
1555 North Rivercenter Drive
Suite 202
Milwaukee, WI 53212
Mark D. Griffin, Esquire
Thorman Petrov Griffin
3100 Terminal Tower
50 Public Square
Cleveland, OH 44113
Randy J. Hart, Esquire
Randy J. Hart, LLC
Carla M. Tricarichi, Esquire
Tricarichi & Carnes
23600 Commerce Park
Suite A
Beachwood, OH 44122
Counsel for Appellees
2
OPINION
RENDELL, Circuit Judge:
Appellants American Premier Underwriters, Inc., also known as the Reorganized
Company, and the Penn Central Transportation Company (“PCTC”)1 appeal the District
Court’s order enforcing a $14,761,238 arbitration award in favor of 32 former PCTC
employees or their estates (the “Claimants”) against the Reorganized Company. The
award resolved the Claimants’ claims for benefits under a 1964 agreement that was
designed to protect employees of the Pennsylvania Railroad Company and the New York
Central Railroad Company in the event the railroads merged (the “MPA”). For the
reasons discussed below, we will affirm.2
In 1968, the Pennsylvania Railroad Company and the New York Central Railroad
Company merged to form PCTC. The Claimants brought suits against PCTC under the
MPA in the United States District Court for the Northern District of Ohio (the “Ohio
Court”) in 1969 and 1974. In 1970, PCTC filed for reorganization under § 77 of the
Bankruptcy Act in the United States District Court for the Eastern District of
Pennsylvania (the “Reorganization Court”). The Reorganization Court authorized the
1
The Pennsylvania Central Transportation Company emerged from bankruptcy in 1978
as The Penn Central Corporation. In 1994, The Penn Central Corporation changed its
name to American Premier Underwriters, Inc.
2
The District Court had jurisdiction under § 77 of the Bankruptcy Act of 1898, 11
U.S.C. § 205 (repealed 1978). This Court has jurisdiction under 28 U.S.C. § 1291.
3
Claimants’ actions to proceed outside the bankruptcy, but reserved the right to enforce
any award.3
In 2009, approximately forty years after this “Dickensian . . . odyssey through the
legal system began,” J.A. 18, an arbitration panel awarded the Claimants $564,820 in
benefits under the MPA and $13,453,504 in pre-judgment interest. The Reorganized
Company appealed the arbitration panel’s award to the Surface Transportation Board,
which affirmed the award with slight modifications. The Ohio Court then entered
judgment for each Claimant or his or her personal representative with pre-judgment
interest calculated through the date of its order, increasing the total award to $14,761,238.
Only 5 of the 32 Claimants were alive at that time.
After the Ohio Court entered judgment, the Reorganized Company petitioned the
Reorganization Court to exercise its retained jurisdiction to determine whether the
judgment would be enforced. Following a brief discovery period, both parties moved for
summary judgment. The Reorganized Company contended, as it argues again on appeal,
that (1) the discharge and injunction provisions in the bankruptcy plan and the
consummation order bar liability against it because the MPA claims arose before and
during the reorganization and (2) the Bankruptcy Act of 1898 and the bankruptcy plan
forbid post-petition interest. The Claimants argued that (1) the bankruptcy plan and the
consummation order did not affect their rights to MPA benefits because § 77(n) of the
3
In 2007, the Ohio Court ordered the Claimants’ actions to be arbitrated in one
consolidated proceeding.
4
Bankruptcy Act4 prohibited the Reorganization Court from modifying their wages and (2)
their award of post-petition interest was fair given the lengthy passage of time.
We have reviewed the parties’ arguments, the record, and the applicable law, and
will affirm the District Court’s order enforcing the arbitration award for the reasons
stated in parts IV and VI of its opinion, which provide a thorough and comprehensive
analysis of the Bankruptcy Act and the issues involved in the arbitration proceeding.5
We need not repeat the District Court’s excellent analysis here but note only that we find
it clear that § 77(n) of the Bankruptcy Act prohibits reorganization courts from modifying
the obligations of railroads with respect to the wages and working conditions of their
employees. As a result, contrary to Defendants’ position, the discharge and injunction
provisions of the bankruptcy plan and the consummation order could not have affected
the MPA. The Reorganized Company, which is “the very same corporation that the
Claimants had sued [for MPA benefits]—only reorganized with a new name!”, J.A. 35, is
thus required to pay the MPA benefits that the arbitration panel awarded Claimants.
Similarly, we find it evident that neither the bankruptcy plan nor Supreme Court
precedent interpreting the Bankruptcy Act prohibit post-petition interest in this fact-
pattern, and that none of the practical considerations that typically weigh against allowing
4
The second sentence of § 77(n) reads: “No judge or trustee acting under this title shall
change the wages or working conditions of railroad employees except in the manner
prescribed in the Railway Labor Act. . . .” It is undisputed that during the reorganization,
PCTC’s obligations under the MPA were not modified under the Railway Labor Act.
5
As we agree with the District Court’s analysis of the Bankruptcy Act, we will not
address the District Court’s alternative holding that, due to its acquiescence in the
arbitration proceedings over the course of many years, the Reorganized Company is
estopped from denying liability.
5
post-petition interest are present in this case. Thus, we agree with the Reorganization
Court’s approval of the award of pre-judgment interest.
Accordingly, we will affirm the order of the District Court in all respects.
6