INDUSTRIAL & OFFLINE
OF BROOKLYN, QUEENS, STATEN ISLAND, BRONX & MANHATTAN:
JAY STREET TERMINAL
INJUCTION ENJOINING TERMINAL FROM CESSATION OF OPERATIONS
APPEAL & DECISION
INJUCTION ENJOINING TERMINAL FROM CESSATION OF OPERATIONS
FILED BY CUSTOMERS SERVED BY
JAY STREET CONNECTING RAILROAD
259 F.2d 532
William MEYERS, Standard Brands Incorporated, Brillo Manufacturing Co., Inc., Atlantic Gummed Paper Corp., Warshaw Manufacturing, Inc., and Abraham & Straus Division of Federated Department Stores, Inc., Plaintiffs-Appellees,
JAY STREET CONNECTING RAILROAD, and Moses Spatt, Milton E. Spatt, Joseph S. Wohl, and Herbert S. Struller, individually and as officers and directors thereof, Defendants-Appellants.
United States Court of Appeals Second Circuit.
Argued September 29, 1958
Decided October 7, 1958.
Rehearing Denied October 27, 1958.
Richard S. Buell, New York City (McLanahan, Merritt & Ingraham, New York City, on the brief), for plaintiffs-appellees William Meyers, Atlantic Gummed Paper Corp., and Warshaw Mfg., Inc.
James E. Sapp, Jr., New York City, for plaintiff-appellee Standard Brands Inc.
Morris Gottlieb, New York City, for plaintiff-appellee Brillo Mfg. Co., Inc.
Jacob Imberman, New York City (Proskauer, Rose, Goetz & Mendelsohn, New York City, on the brief), for plaintiff-appellee Abraham & Straus Division of Federated Department Stores, Inc.
J. Bertram Wegman, New York City (Wegman, Epstein & Burke, New York City, on the brief), for defendants-appellants.
Before CLARK, Chief Judge, and LUMBARD and MOORE, Circuit Judges.
LUMBARD, Circuit Judge.
The question for decision is whether there is sufficient basis for the district
court's issuance of a preliminary injunction enjoining the Railroad and the
four individual defendants from ceasing operations on the ground that the
Interstate Commerce Commission has not permitted abandonment. We think the
preliminary injunction was properly issued and we affirm the order of the
District Court for the Eastern District of New
On August 20, 1958, Judge Abruzzo, after a hearing which commenced August
13, issued an injunction, preliminary to a trial of the action set for October
6, 1958, which enjoined defendants from
"directly or indirectly abandoning or ceasing operations of the defendant,
Jay Street Connecting Railroad, or refusing to receive, deliver or transport
carload freight. * * *"
The order is conditioned upon the giving of $50,000 security by the plaintiffs
to safeguard against interim losses should the defendants ultimately
The plaintiffs here all either ship freight on the Railroad, or own buildings
presently served by it. The individual defendants are all officers, stockholders
or directors of the corporate defendant, the Jay Street Connecting
The Railroad's main track of 3,102 feet is entirely located within a small
area of Brooklyn adjacent to the East River and extending for a few blocks
under and on either side of the ramp of the Manhattan Bridge. The Railroad
delivers to and receives freight cars from its customers in this area solely
by means of numerous spur tracks and team tracks which total in length
respectively 6,313 feet and 3,352 feet. There is no public terminal where
freight can be received or discharged, and freight is handled only by the
carload. The other terminal points of the Railroad lie in the Bronx and in
Hudson County, New Jersey, where the Railroad interchanges with the major
eastern trunk line railroads. The Railroad transports cars between these
shore line interchange points and its Brooklyn tracks by means of a car-float
propelled by a tug. Since 1941 the Railroad has operated under a certificate
of convenience and necessity issued by the Interstate Commerce Commission.
During the last several years the financial condition of the Railroad has
seriously deteriorated. The district court found that the Railroad has lost
money for five years and is now losing money, that its current liquid assets
are "approximately $400," and that "the present operation of the Railroad
is being done on borrowed money." There is uncontested evidence in the record
of large and increasing monthly losses. There is further undisputed testimony
that the Railroad has recently managed to continue operations only by withholding
from the trunk line roads their share of the freight charges which it had
collected, and by advances from its stockholders. In June 1958 the Railroad
applied to the Commission for a certificate of convenience and necessity
authorizing abandonment of its operations, and hearings were set for August.
Finally, after the district court proceedings referred to above, hearings
were commenced before a Commission examiner on September 2 and concluded
on September 10. The parties now await the examiner's report.
On August 5 the Railroad was notified by some of the trunk line roads with
which it connects that no more credit would be extended to it. At about the
same time the Railroad's tugboat met with an accident and was ruled unfit
for use by the Coast Guard, thus necessitating the rental of another tug.
On August 6 the Railroad notified its patrons that because of a lack of funds
to meet operating expenses and in order to prevent the accumulation of cars
it was issuing "an embargo on all freight, with no exceptions, from, to or
via the Jay Street Terminal, The Jay Street Connecting Railroad, Brooklyn,
New York, including all private side tracks, team tracks and other facilities,
which embargo will become effective midnight, August 8, 1958." At the same
time the Railroad notified its employees that their services would not be
needed after August 8. The plaintiffs construed the embargo as a threat by
the Railroad to abandon operations and they immediately sought a temporary
restraining order forbidding such abandonment. On August 8 the district court
issued a temporary restraining order. After the commencement of the hearing
on August 13, it extended the order and on August 20 it issued the preliminary
injunction here in issue.
The statutory bases for the injunction are paragraphs (18) and (20) of §
1 of the Interstate Commerce Act, 49 U.S.C. A. § 1(18), (20). Paragraph
(18) provides that "no carrier by railroad subject to this chapter shall
abandon all or any portion of a line of railroad, or the operation thereof,
unless and until there shall first have been obtained from the commission
a certificate that the present orfuture public convenience and necessity
permit of such abandonment." Paragraph (20) provides that "any * * * abandonment
contrary to the provisions of * * * paragraph (18) * * * of this section
may be enjoined by any court of competent jurisdiction at the suit of * *
* any party in interest * * *."
It is conceded by both sides that the Jay Street Connecting Railroad is a
"carrier by railroad subject to this chapter" within the meaning of paragraph
(18) except as the Railroad or any part of it is affected by paragraph (22)
of 49 U.S.C.A. § 1. Paragraph (22) provides: "The authority of the
commission conferred by paragraphs (18) to (21), both inclusive, shall not
extend to the * * * abandonment of spur, industrial, team, switching, or
side tracks, located * * * wholly within one State. * * *"
Defendants urge three reasons for reversing the preliminary injunction. First,
they argue that their August 6 embargo notice did not constitute a threat
of abandonment within the meaning of paragraph (18). Second, they assert
that paragraph (22) exempts such a significant portion of the Railroad from
ICC jurisdiction as to leave the plaintiffs with no cause of action even
if the embargo would have been an abandonment. Finally, they argue that whatever
the legality of the proposed embargo, the district court's injunction is
improper because the Railroad does not possess the funds to operate. We find
no merit in these arguments.}
The basis for defendants' first argument is their assertion that the August
6 embargo was intended only as a temporary cessation of service, to last
until funds with which to resume operations were somehow found. They urge
that a cessation of service must be permanent in order to constitute an
abandonment within the meaning of paragraphs (18) and (20) of 49 U.S.C. §
1, and in support of this proposition they cite language in Zirn v. Hanover
Bank, 2 Cir., 1954, 215 F.2d 63, 69, and in Wheeling & L. E. R. Co. v.
Pittsburgh & W. V. R. Co., 6 Cir., 1929, 33 F.2d 390, 392. It is true
that these cases define abandonment as a permanent cessation of service.
It is also true that the August 6 notice of embargo did not expressly recite
an intention never to resume operations. That embargo was, however, an expression
of an intention indefinitely to cease all service. We think the purpose of
paragraphs (18) and (20) permits of no distinction between discontinuing
service permanently and suspending it indefinitely. So far as these plaintiffs
are concerned there is no way of knowing when they can expect service to
resume and they can make no business plans on the possibility that service
may be resumed.
We come next to the effect of paragraph (22) of 49 U.S.C.A. § 1. There
is no doubt that a substantial part of the defendant Railroad's track consists
of "spur, industrial, team, switching, or side tracks," the abandonment of
which, at least separately, would not fall within the authority of the ICC.
The Railroad, however, also contains track the abandonment of which is clearly
within the authority of the ICC. This is so on two accounts. First, defendants
concede in their brief that the Railroad contains a "main line" in addition
to its spurs and sidings. In addition, the Railroad is an interstate operation,
with an interchange point in New Jersey, and paragraph (22) restricts the
authority of the ICC only insofar as intrastate side lines are concerned.
Were the defendants' threat to abandon limited to a part of the track it
would have been necessary for the district court to determine whether that
part was exempt from ICC authority under paragraph (22). It was unnecessary,
however, to go into such questions in this case. The notice of embargo of
August 6 was a proposal to abandon the entire operation of the Jay Street
Connecting Railroad. This total abandonment would have included the abandonment
of track within the jurisdiction of the ICC. It was therefore proper under
paragraph (20) to enjoin the proposed abandonment of the entire line.
Defendants seek to excuse their threat of total abandonment by arguing that
were they only to abandon all the spurs and side tracks which they claim
they may properly abandon under paragraph (22), no shipper would have access
to their lines. The effect would then, they say, be the same as that of the
total abandonment which the district court enjoined. Of course it is open
to the defendants to develop in the district court the facts regarding any
abandonment which may be permissible under paragraph (22) and it would then
be the duty of the district court to make findings with respect to such proposed
abandonment. All that defendants have as yet proposed is an abandonment of
their entire operation, and we hold that an injunction prohibiting that is
Once we have concluded that the proposed abandonment of the entire Railroad
would be improper under paragraph (18) of 49 U.S.C.A. § 1, it is clear
that the plaintiffs here are parties in interest entitled to an injunction
under paragraph (20) of that section. Plaintiffs are the Railroad's customers.
Its cessation of service disrupts their business operations. Their interest
in the matter could hardly be more acute.
Defendants' final point is that Judge Abruzzo's injunction is improper because
the corporation has not the funds or credit to comply. Were it in fact impossible
for the individual defendants to avoid contempt proceedings without sacrificing
their personal funds this point would be a serious one. As it is, however,
defendants can attempt to escape personal liability by petitioning for
reorganization of the railroad under § 77 of the Bankruptcy Act, 11
U.S.C.A. § 205. They have not sought this relief. Unless they do so,
and relief is denied to them, it is our opinion that the hardships imposed
by the injunction do not outweigh the strong purpose of the Interstate Commerce
Act to prohibit the abandonment of railway service without the approval of
It is to be hoped that in view of the financial situation allegedly faced
by the Railroad the examiner and the Commission will expedite their determination
of the application to abandon.
The order is affirmed.
1] Defendant Moses Spatt is a director, a vice-president, and owns fifty percent of the stock. The remaining fifty percent of the stock is owned by defendant Wohl, who is also secretary-treasurer and a director. Defendant Milton Spatt is executive vice-president and defendant Struller is comptroller
On Petition for Rehearing.
The petition for rehearing is denied. The original opinion stated that "it is open to the defendants to develop in the district court the facts regarding any abandonment which may be permissible under paragraph (22) and it would then be the duty of the district court to make findings with respect to such proposed abandonment." The district court was confronted only with a proposal for total abandonment. Until it has had an opportunity to pass upon such other and different proposals which plaintiffs may wish to advance, there is no occasion for appellate consideration of the matter.
APPEAL FILED BY
JAY STREET CONNECTING RAILROAD
271 F.2d 811
William MEYERS, Standard Brands Incorporated, Atlantic Gummed Paper Corp. and Warshaw Manufacturing, Inc., Plaintiffs-Appellants,
FAMOUS REALTY, INC., and Moses Spatt and Joseph S. Wohl, individually and as director-trustees in dissolution thereof, Defendants-Appellees.
United States Court of Appeals Second Circuit.
Argued September 9, 1959.
Decided October 27, 1959.
Richard Swan Buell, New York City, (McLanahan, Merritt & Ingraham, and Andrew M. Calamari, New York City, on the brief), for plaintiffs-appellants.
Whitney North Seymour, New York City (Simpson Thacher & Bartlett, Richard Hawkins and Taylor R. Briggs, New York City, on the brief), for defendants-appellees.
Before CLARK, Chief Judge, and HINCKS and LUMBARD, Circuit Judges.
HINCKS, Circuit Judge.
1] The condition which was added to the original order by an amended order of May 26, 1959 was as follows:
"The applicant shall sell to any responsible person, firm, or corporation, offering within thirty days from the date of service hereof to purchase the same for continued operation of the railroad line here involved or any portion thereof, any or all of its property necessary or useful to such continued operation, including the applicant's right and interest as lessee or tenant in respect of any such property and facilities used or useful in the operation of its line of railroad, at a price not less than the net salvage value of the properties and interests sought to be acquired, it being intended by this condition that the purchaser of the physical properties shall be substituted for and occupy the same status as the applicant now does with respect to said leasehold interests."
2] 49 U.S.C.A. § 1
"(18) * * * [N]o carrier by railroad subject to this chapter shall abandon all or any portion of a line of railroad, or the operation thereof, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity permit of such abandonment.
* * * * * * *
"(20) The commission shall have power to issue such certificate as prayed for, or to refuse to issue it, or to issue it for a portion or portions of a line of railroad, or extension thereof, described in the application, or for the partial exercise only of such right or privilege, and may attach to the issuance of the certificate such terms and conditions as in its judgment and public convenience and necessity may require. From and after issuance of such certificate, and not before, the carrier by railroad may, without securing approval other than such certificate, comply with the terms and conditions contained in or attached to the issuance of such certificate and proceed with the construction; operation or abandonment covered thereby. Any construction, operation, or abandonment contrary to the provisions of this paragraph or of paragraph (18) or (19) of this section may be enjoined by any court of competent jurisdiction at the suit of the United States, the Commission, any commission or regulating body of the State or States affected, or any party in interest;"
3] See fn. 1, supra
4] In the Jay Street Connecting Railroad Abandonment proceedings the Commission stated that, "the same conclusions on the facts and law would justify our permitting the physical abandonment of the line herein by the lessor of the railroad properties, if such lessor were subject to our jurisdiction and therefore was obligated to continue the lessee's carrier operations, unless legally relieved of that requirement."
5] See fn. 1, supra
6] It is true that the Commission, when these defendants were not before it, indicated the belief that it had no jurisdiction over them and that they were under no duty to operate the line even in the absence of an abandonment order. But this comment could in no way estop the plaintiffs from bringing action under § 1 (20); it is clear that the United States district court is the only forum having jurisdiction to prevent an illegal abandonment begun without the institution by the carrier of a § 1(20) proceeding before the Commission. Texas & Pac. R. Co. v. Gulf, C., & S. F. R. Co., 270 U.S. 266, 273, 46 S.Ct. 263, 70 L.Ed. 578; Powell v. United States, 300 U.S. 276, 57 S.Ct. 470, 81 L.Ed. 643; cf. Thompson v. Texas Mexican R. Co., supra
7] See Interstate Commerce Commission v. Railway Labor Executive Assn., 315 U.S. 373, 62 S.Ct. 717, 86 L.Ed. 904; Smith v. Hoboken R. Co., supra; Thompson v. Texas Mexican R. Co., supra; Central New Eng. R. Co. v. B. & A. R. Co., supra; Gulf, Mobile & Ohio R. Co. v. Illinois Central R. Co., 5 Cir., 225 F.2d 816; Village of Mantorville v. Chicago Great Western R. Co., supra
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