TIMING OF MERGER

And we have an added consideration here with the land grant issues, which I will get to in a minute. But I appreciate it being pointed out earlier today that the timing of the ICC consideration was very crucial here. Again, ICC jurisdiction should not depend on the timing. If there were an application filed with the ICC for a noncarrier-namely, the holding company-to acquire control of two massive railroad systems-namely, Burlington Northern and the Frisco system-clearly, the ICC would have had jurisdiction. There were two separate systems that the holding company was seeking to acquire, but because the method was first merger, then holding company formation, their strategy succeeded to escape ICC jurisdiction. If the timing sequence had been slightly different by a matter of months, then the ICC would have had jurisdiction. We think that that is a clear end run around the public interest in regulation and supervision and is contrary to what the whole purpose of having ICC involvement in this area should be.

PURPOSE OF LAND GRANTS

Now, with the land grant, as was noted this morning, there are people who strongly disagree with the position that Burlington Northern has taken, that it has no public obligations arising out of the land grants it was given. Starting with the language of the statute itself, as we pointed out in our brief which is on the record, it was stated that the purpose of the land grant was not only to construct the railroad, but also to keep it in working order, and to secure to the Government at all times, but particularly in time of war, the uses and benefits of the same. And in that language, it seems to me it is clear it is not just a construction grant, but to provide a financial land base for a transportation system in perpetuity.

We think that further hearings are essential. I welcome your proposed legislation that should require complete monitoring and accounting for the proceeds of all those land grants and a monitoring right now of every transaction between the railroad and the holding company. And we believe that the standard applied by the ICC-whether the holding company decisions are consistent with their service to the public as a common carrier-should be imposed on the holding company itself; that is the minimum necessary to protect the public interest in the continued transportation system.

Thank you.

Senator BAUCUS. Thank you very much, Dan. By the way, you mentioned you have a brief that you would like to have included in the record; is that correct?

Mr. SMITH. Yes, I would. I did submit that by mail last week.
Senator BAUCUS. Fine, that will be included.

[The following was received for the record:]

CITIZENS COMMITTEE TO SAVE THE LAND) NO. 81-566V
GRANT RAILROADS (C.C.S.L.G.R.);

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INTRODUCTION.

This is a new case, but it arises out of an old controversy-one which has lasted over a century. From 1850 through the 1860's

18 Congress showered the railroad magnates with "lavish grants from the 19 public domain." United States v. Union Pacific, 353 U.S. 112, 125 20 (1957). But by the end of this period, "the mood of uncritical

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22 policy [of 'lavish grants'] incurred great public disfavor.

enthusiasm toward railroad enterprises began to veer."

Id.

"This

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Great Northern v. United States, 315 U.S. 262, 273 (1941).

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Since then, the courts have been vigilant against the excessive

25 claims of the railroads. The provisions of the land grants are to be

26 construed strictly against the railroads.

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Barden v. Northern

Pacific, 154 U.S. 288 (1893). "Nothing passes except what is

28 conveyed in clear language," and any doubts are to be resolved

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against the beneficiary of the grant.

Caldwell v. United States, 250

30 U.S. 14, 20 (1919). Thus rights and titles claimed by the railroads

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or their successors are to be limited to the express provisions of the grants.

And where necessary to accomplish the Congressional

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purpose for the land grants, limitations and conditions are read into

the titles to these lands, even lands held in fee by the railroads: Northern Pacific v.

"a limited fee, made on an implied condition."

Townsend, 190 U.S. 267 (1903). "In view of this lavish policy of

grants from the public domain, it is not surprising that the rights of way conveyed in such land grant acts have been held to be limited

fees." Great Northern v. United States, 315 U.S. at 273.

The Defendants in this action have particular duties and obligations arising out of their status as a "quasi-public" corporation. Woodstock Iron Company v. Extension Company, 129 U.S. 643, 656 (1889):

Railroads are for many purposes public highways.

Corporations, it is true, formed for their construction are
private corporations, but whilst their directors are required to
look to the interests of their stockholders, they must do so in
subordination to and in connnection with the public interests,
which they are equally bound to respect and subserve. 411
arrangements, therefore, by which directors or stockholders or
other persons may acquire gain, by inducing those corporations
to disregard their duties to the public are illegal. . .

See also Northern Pacific v. State, 84 Wash. 510, 523 (1915):

[L]et us keep in mind as we proceed that appellant is not a private business concern, but is a public service transportation corporation; . . . that appellant cannot abandon its duty to serve the public, nor can it dispose of its property real or personal in such a manner as to result in discontinuance of such service; that appellant and its successors in ownership of such property are bound to maintain such service, and incidentally to maintain an organized entity necessarily consisting of equipment and operating property, both real and personal, as a unit organization such as will make the rendering of such service possible.

The public purpose of the land grant is clear on the face of the to accomplish the object of this Act, namely, to

statute:".

26 promote the public interest and welfare by the construction of said

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railroad and telegraph line, and keeping the same in working
order. . . ." Section 20, 13 Stat. 365 (N.P. Grant of 1864).
The federal interest in interstate communications and
transportation is so strong and the legislation regulating such
companies is so comprehensive that federal law gives a remedy for
wrongs committed by these carriers, even when the statutes provide no

Ivy Broadcasting

Company v. American Tel. & Tel., 391 F.2d 486 (2d Cir. 1968). See

also Kohr v. Alleghany Airlines Inc., 504 F.2d 400 (7th Cir. 1974), cert. denied 421 U.S. 978 (1975). And see the further discussion of bases for jurisdiction below.

Under these principles, Plaintiffs complain that Defendants are in the middle of a planned course of action which illegally threatens grave and direct injury to their personal and economic interests, as well as the public interest. Defendants have moved to dismiss this

Complaint pursuant to Rule 12. In support of their motion,
Defendants repeat the denials, already made in their Answer, that
their actions are wrongful, and likewise their denials that the
Plaintiffs will be injured. These denials, of course, raise issues
of material fact, which will eventually be decided by the court after
the parties have had the opportunity to pursue the discovery provided
by the Federal Rules and the opportunity to present evidence in
support of their allegations. For the purposes of this Motion,
however, the allegations of the Complaint must be taken as true,
together with all reasonable inferences which may be drawn in
Plaintiffs' favor.1 We will now turn to the particular

arguments that the Defendants make in support of their assertion
that Plaintiffs have failed to state a claim upon which relief can be
granted.

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"[A] complaint should not be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim." 2A Moore's Fed. Prac. $12.08.

1 purpose for the land grants, limitations and conditions are read into the titles to these lands, even lands held in fee by the railroads:

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"a limited fee, made on an implied condition."

Northern Pacific v.

Townsend, 190 U.S. 267 (1903). "In view of this lavish policy of

grants from the public domain, it is not surprising that the rights of way conveyed in such land grant acts have been held to be limited fees." Great Northern v. United States, 315 U.S. at 273.

The Defendants in this action have particular duties and obligations arising out of their status as a "quasi-public"

corporation. Woodstock Iron Company v. Extension Company, 129 U.S.
643, 656 (1889):

Railroads are for many purposes public highways.
Corporations, it is true, formed for their construction are
private corporations, but whilst their directors are required to
look to the interests of their stockholders, they must do so in
subordination to and in connnection with the public interests,
which they are equally bound to respect and subserve.
arrangements, therefore, by which directors or stockholders or
other persons may acquire gain, by inducing those corporations
to disregard their duties to the public are illegal. . .

See also Northern Pacific v. State, 84 Wash. 510, 523 (1915):

A11

[L]et us keep in mind as we proceed that appellant is not a
private business concern, but is a public service transportation|
corporation;
that appellant cannot abandon its duty to
serve the public, nor can it dispose of its property real or
personal in such a manner as to result in discontinuance of such
service; that appellant and its successors in ownership of such
property are bound to maintain such service, and incidentally to
maintain an organized entity necessarily consisting of equipment
and operating property, both real and personal, as a unit
organization such as will make the rendering of such service
possible.

The public purpose of the land grant is clear on the face of the statute:". to accomplish the object of this Act, namely, to

promote the public interest and welfare by the construction of said 27 railroad and telegraph line, and keeping the same in working

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order. . .

Section 20, 13 Stat. 365 (N.P. Grant of 1864).

The federal interest in interstate communications and

transportation is so strong and the legislation regulating such

companies is so comprehensive that federal law gives a remedy for

32 wrongs committed by these carriers, even when the statutes provide no