Baltimore & Ohio R. Co. v. United States, 386 U.S. 372 (1967)

Baltimore & Ohio Railroad Co. v. United States

No. 642

Argued January 9-10, 1967
Decided March 27, 1967 *
386 U.S. 372

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

Syllabus

By order of April 6, 1966, the ICC permitted the merger of the Pennsylvania and the New York Central railroads, the largest and third largest railroads in the Northeast, pursuant to § 5(2) of the Interstate Commerce Act. The ICC found that the merger might divert substantial traffic from the Erie-Lackawanna, Delaware and Hudson, and Boston and Maine railroads, three smaller carriers designated as "protected railroads." These protected lines had filed applications for inclusion not only in the Penn-Central merger, but also in the Norfolk & Western-Nickel Plate merger, which the ICC had previously approved. In the latter case, the ICC retained jurisdiction to consider inclusion of the three lines upon equitable terms if "found consistent with the public interest," and it provided that consummation of the merger would constitute "irrevocable assent" by Norfolk & Western to such inclusion. The applications for inclusion in the Penn-Central system have been held in abeyance pending decision on inclusion in Norfolk & Western-Nickel Plate, presently under consideration by the ICC. On the merits of the Penn-Central merger, the ICC found that the protected railroads rendered essential service which required preservation, and concluded that immediate consummation of the merger would be consistent with the public interest if "conditions are imposed to obviate impairment or serious weakening" of the three lines. Without such conditions or the inclusion of the protected roads in one of the major rail systems, the ICC found that it was doubtful if the

three carriers could withstand the competition of the applicants merged, and, unless they are protected during the period necessary to determine their future, we would not authorize consummation at this time, even though approving the merger.

The ICC, sua sponte, specified in Appendix G certain conditions to the immediate consummation of the merger "to prevent any loss of revenue over the three [protected] railroads." These conditions concerned traffic practices and indemnification for loss of income. On September 16, 1966, the ICC modified its order, apparently on the objection of most of the parties, and, though retaining the traffic practices condition, it lifted the revenue indemnification condition until further order. Erie-Lackawanna and other railroads filed suit seeking an interlocutory injunction restraining the consummation of the merger. A three-judge court declined to grant the injunction.

Held: In the light of its findings as to the necessity for interim protection for the three "protected railroads," the ICC erred in withdrawing all of the protective conditions of Appendix G save the traffic ones, and permitting immediate consummation of the Penn-Central merger without determining the ultimate fate of the three protected roads. P. 378-392.

259 F.Supp. 964, reversed and remanded.