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. [The following was received for the record:] CITIZENS COMMITTEE TO SAVE THE LAND) NO. 81-566V 9 16 This is a new case, but it arises out of an old controversy-17 one which has lasted over a century. From 1850 through the 1860's 18 Congress showered the railroad magnates with "lavish grants from the public domain." United States v. Union Pacific, 353 U.S. 112, 125 (1957). But by the end of this period, "the mood of uncritical enthusiasm toward railroad enterprises began to veer." Id. "This 19 20 23 2 2 2 2 21 22 policy [of 'lavish grants'] incurred great public disfavor. Great Northern v. United States, 315 U.S. 262, 273 (1941). 24 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. Barden v. Northern 27 Pacific, 154 U.S. 288 (1893). "Nothing passes except what is 28 conveyed in clear language," and any doubts are to be resolved 30 31 against the beneficiary of the grant. Caldwell v. United States, 250 U.S. 14, 20 (1919). Thus rights and titles claimed by the railroads or their successors are to be limited to the express provisions of the grants. And where necessary to accomplish the Congressional 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. 1 2 3 "a limited fee, made on an implied condition." 29 30 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 statute:"... to accomplish the object of this Act, namely, to promote the public interest and welfare by the construction of said railroad and telegraph line, and keeping the same in working Section 20, 13 Stat. 365 (N.P. Grant of 1864). order. The federal interest in interstate communications and transportation is so strong and the legislation regulating such 31 companies is so comprehensive that federal law gives a remedy for wrongs committed by these carriers, even when the statutes provide no 1 2 such remedy, either expressly or implicitly. Ivy Broadcasting Company v. American Tel. & Tel., 391 F.2d 486 (2d Cir. 1968). See 3 also Kohr v. Alleghany Airlines Inc., 504 F.2d 400 (7th Cir. 1974), 10 7 8 9 10 11 12 13 14 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, 15 16 17 18 19 together with all reasonable inferences which may be drawn in 20 Plaintiffs' favor.1 We will now turn to the particular 2222 24 arguments that the Defendants make in support of their assertion that Plaintiffs have failed to state a claim upon which relief can be granted. 1 "[A] complaint should not be dismissed for insufficiency 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. 1 2 3 "a limited fee, made on an implied condition." 4 сл Townsend, 190 U.S. 267 (1903). "In view of this lavish policy of 5 grants from the public domain, it is not surprising that the rights 6 7 8 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 9 obligations arising out of their status as a "quasi-public" corporation. Woodstock Iron Company v. Extension Company, 129 U.S. 643, 656 (1889): 10 11 12 13 14 15 16 Railroads are for many purposes public highways. Corporations, it is true, formed for their construction are 17 See also Northern Pacific v. State, 84 Wash. 510, 523 (1915): 18 [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 26 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 |