Railway Labor Executives’ Assn. v. Gibbons, 455 U.S. 457 (1982)

Railway Labor Executives’ Assn. v. Gibbons

No. 8015

Argued December 2, 1981
Decided March 2, 1982 *
455 U.S. 457

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR

THE NORTHERN DISTRICT OF ILLINOIS

Syllabus

In 1975, the Chicago, Rock Island and Pacific Railroad Co. (Rock Island) petitioned the District Court for reorganization under the Bankruptcy Act of 1898, and thereafter continued operation under the protection of that Act until September, 1979, when it ceased operation as a result of a labor strike. The District Court concluded that reorganization was not possible, and directed appellee Trustee of Rock Island’s estate (hereafter appellee) to liquidate the estate’s assets. On June 2, 1980, the reorganization court ordered abandonment of the Rock Island system and concluded that no claim or arrangement "for employee labor protection payable out of the assets of the Debtor’s estate is allowed or required by this Court." However, three days before the court’s order, the Rock Island Railroad Transition and Employee Assistance Act (RITA) was signed into law. Under §§ 106 and 110 of the statute, appellee must pay benefits of up to $75 million to those Rock Island employees who are not hired by other carriers, and the United States guarantees Rock Island’s employee protection obligations. The statute also requires that such obligations must be considered administrative expenses of the Rock Island estate for purposes of determining the priority of the employees’ claims to the estate’s assets. On June 5, 1980, a complaint was filed in the reorganization court challenging the constitutionality of RITA and seeking injunctive relief. On June 9, the court issued a preliminary injunction against enforcement of §§ 106 and 110, holding that those provisions constituted an uncompensated taking of private property (Rock Island’s creditors’ interests in the estate’s assets) for a public purpose in violation of the Just Compensation Clause of the Fifth Amendment. Pursuant to 28 U.S.C. § 1252, the District Court’s order was appealed to this Court (No. 8015). Congress responded to the District Court’s injunction by enacting § 701 of the Staggers Rail Act of 1980, which reenacted §§ 106 and 110 of RITA and added a provision seeking to avoid any implication that appellee and creditors had been deprived of any Tucker Act remedy otherwise available to pursue their takings claim against the United States. Thereafter, the reorganization court denied a motion of appellant and the United States to vacate its June 9 injunction on the asserted ground that it was rendered moot by the passage of the Staggers Act, and issued a new order enjoining implementation of the labor protection provisions of RITA, as amended and reenacted by the Staggers Act. This order was appealed to the Court of Appeals pursuant to § 124(a)(1) of RITA, as added by the Staggers Act. The Court of Appeals affirmed, and an appeal was then taken to this Court (No. 80-1239).

Held:

1. The June 9 injunction was rendered moot by the enactment of the Staggers Act, and accordingly the judgment of the District Court is vacated and it is ordered to vacate the injunction. P. 465.

2. The Court of Appeals’ judgment is affirmed in No. 80-1239 because RITA, as amended by the Staggers Act, is repugnant to Art. I, § 8, cl. 4, of the Constitution, which empowers Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." Pp. 465-473.

(a) The labor protection provisions of RITA are an exercise of Congress’ power under the Bankruptcy Clause, rather than under the Commerce Clause. Although the subject of bankruptcies is incapable of final definition, "bankruptcy" has been defined as the "subject of the relations between an insolvent or nonpaying or fraudulent debtor and his creditors, extending to his and their relief." Wright v. Union Central Ins. Co., 304 U.S. 502, 513-514. By its terms, the subject matter of RITA is the relationship between a bankrupt railroad and its creditors; Congress did nothing less than to prescribe the manner in which Rock Island’s property is to be distributed among its creditors. The events surrounding RITA’s passage, as well as its legislative history, also indicate that Congress was exercising its powers under the Bankruptcy Clause. Pp. 465-468.

(b) The Bankruptcy Clause’s uniformity requirement does not prohibit Congress from distinguishing among classes of debtors, or from treating railroad bankruptcies as a distinctive problem. Nor does it deny Congress power to fashion legislation to resolve geographically isolated problems. However, RITA is not a response either to the particular problems of major railroad bankruptcies or to any geographically isolated problem. By its terms, RITA applies to only one regional bankrupt railroad; only Rock Island’s creditors are affected by RITA’s employee protection provisions, and only Rock Island employees may take benefit of the arrangement. The language of the Bankruptcy Clause itself compels the conclusion that such a bankruptcy law is not within Congress’ power to enact. Although meager, the debate in the Constitutional Convention regarding the Clause also supports the conclusion that the uniformity requirement prohibits Congress from enacting bankruptcy laws that specifically apply to the affair of only one named regional debtor. Pp. 468-473.

No. 80 115, vacated and remanded; No. 80-1239, 645 F.2d 74, affirmed.

REHNQUIST, J., delivered the opinion of the Court, in which BURGER, C.J., and WHITE, BLACKMUN, POWELL, STEVENS, and O’CONNOR, JJ., joined. MARSHALL, J., filed an opinion concurring in the judgment, in which BRENNAN, J., joined, post, p. 473.