United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 21, 2010 Decided February 4, 2011
No. 10-7029
CONSOLIDATED RAIL CORPORATION,
APPELLANT
v.
JAMES T. RAY, FOR THE ESTATE OF HAROLD F. BOYD,
DECEASED,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:07-cv-01148)
Laurence Z. Shiekman argued the cause and filed the
briefs for appellant.
David B. Rodes argued the cause and filed the brief for
appellee. Betsy E. Lehrfeld entered an appearance.
Before: GINSBURG, HENDERSON and ROGERS, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
2
GINSBURG, Circuit Judge: The Congress enacted the
Regional Rail Reorganization Act of 1973, Pub. L. No. 93-
236, 87 Stat. 985 (1974) (codified as amended at 45 U.S.C. §§
701–797m) [hereinafter the Rail Act], in order to limit the
harm caused by the bankruptcy of several major railroads.
The Act created the Consolidated Rail Corporation, a/k/a
Conrail, a private, for-profit enterprise, to acquire “free and
clear of any liens or encumbrances” the operating assets of the
bankrupt railroads and to continue rail service in their stead.
The estate of a former employee of one of the failed roads
sought to hold Conrail liable in tort for damages allegedly
arising out of that employee’s exposure to asbestos, which
had occurred before Conrail was created. Conrail asked the
district court for a declaratory judgment that it could not be
held liable for such a claim. Because the tort claim at issue is
neither a “lien” nor an “encumbrance,” and personal injury
claims against the railroad were not before the bankruptcy
court in its reorganization proceeding, we affirm the judgment
of the district court in favor of the employee.
I. Background
“A rail transportation crisis seriously threatening the
national welfare was precipitated when eight major railroads
in the northeast and midwest region of the country entered
reorganization proceedings under § 77 of the [now
superseded] Bankruptcy Act.” Regional Rail Reorganization
Act Cases, 419 U.S. 102, 108 (1974). In 1973 the Congress
passed the Rail Act to reorganize the “railroads in this region
into an economically viable system capable of providing
adequate and efficient rail service.” 45 U.S.C. § 701(b)(2).
The Act created a Special Court to “order the conveyance [to
Conrail] of rail properties of railroads leased, operated, or
controlled by a railroad in reorganization in the region.” Id. §
3
719(b). The Special Court was to resolve disputes related to
the reorganization and to convey the rail properties “free and
clear of any liens or encumbrances.” Id. § 743(b)(2). *
In 1976 the Special Court issued an order conveying to
Conrail a majority of the rail assets of several failed railroads,
including the Erie Lackawanna Railway Company, which in
1972 had initiated a conventional reorganization proceeding
under § 77 of the Bankruptcy Act then in effect. Upon the
conveyance of its rail assets to Conrail, the Erie discontinued
operations; it later emerged from the § 77 proceedings solely
for the purpose of liquidating any remaining non-rail assets.
In re Erie Lackawanna Ry. Co., 803 F.2d 881, 882–83 (6th
Cir. 1986).
The late Harold Boyd worked for the Erie from 1942
until it ceased operating in 1976, at which point he began
working for Conrail; he retired in 1978. Consol. Rail Corp. v.
Ray, 693 F. Supp. 2d 39, 42 (D.D.C. 2010). James Ray, the
executor of Boyd’s estate, filed suit against Conrail and others
in an Ohio state court, seeking damages under the Federal
Employers’ Liability Act for injuries allegedly arising from
his exposure to asbestos while on the job. Id. Conrail then
filed the present action in the district court, seeking a
declaratory judgment that the Rail Act precludes Conrail’s
liability for FELA claims based upon an employee’s exposure
to asbestos while working for a predecessor railroad. Id. at
42–43. That court denied Conrail’s motion for summary
*
The jurisdiction of the Special Court, under which this claim
arises, is now vested in the U.S. District Court for the District of
Columbia. 45 U.S.C. § 719(b)(2).
4
judgment and granted the estate’s motion for judgment on the
pleadings, id. at 53, whereupon Conrail appealed.
II. Analysis
This case is both factually and legally narrow. Factually,
it is limited to Boyd’s exposure to asbestos during his
employment by the Erie; Conrail does not seek a declaration
with respect to its liability for Boyd’s exposure during his
employment by Conrail. The only legal issue, which we
resolve de novo, see McFadden v. Ballard Spahr Andrews &
Ingersoll, LLP, 611 F.3d 1, 3 (D.C. Cir. 2010) (summary
judgment); Nat’l Ass’n of Mfrs. v. Taylor, 582 F.3d 1, 9 (D.C.
Cir. 2009) (judgment on the pleadings), is whether the Rail
Act precludes Conrail’s liability for an employee’s pre-
conveyance exposure to asbestos, see Ray, 693 F. Supp. 2d at
42–43.
The Rail Act provided the assets of failed railroads were
to be “conveyed [to Conrail] free and clear of any liens or
encumbrances.” 45 U.S.C. § 743(b)(2) (emphases added).
Ray argues that, by their plain meaning, the italicized terms
are limited to interests in property. Conrail does not
meaningfully engage with Ray’s textual argument; it prefers
to avoid the plain import of the phrase “liens or
encumbrances” by emphasizing instead what the Special
Court has previously identified as the intent of the Congress
to give the railroad industry a “fresh start.” See Penn Cent.
Corp. v. United States, 862 F. Supp. 437, 461-62 (Regional
Rail Reorg. Ct. 1994).
As the district court here noted, the Supreme Court has
already plowed this ground in Permanent Mission of India to
the United Nations v. City of New York, 551 U.S. 193, 198
5
(2007), a case involving the Foreign Sovereign Immunities
Act:
At the time of FSIA’s adoption in 1976, a
“lien” was defined as “[a] charge or security or
incumbrance upon property.” BLACK'S LAW
DICTIONARY 1072 (4th ed. 1951).
“Incumbrance,” in turn, was defined as “[a]ny
right to, or interest in, land which may subsist
in another to the diminution of its value....”
Id.[] at 908.
Because the Rail Act was passed just three years before the
FSIA, we see no reason to believe “liens or encumbrances”
should be understood any differently there. Similarly, we
note the Bankruptcy Code enacted in 1978 defines a “lien” as
a “charge against or interest in property to secure payment of
a debt or performance of an obligation.” 11 U.S.C. § 101(37).
Both these definitions focus upon property-based, or in rem,
claims and not upon in personam claims. Accordingly, the
plain text of the Rail Act strongly supports Ray’s position that
the assets of failed railroads were not conveyed to Conrail
“free and clear” of liability for personal injuries.
Conrail nonetheless argues imposing liability for a pre-
conveyance personal injury would violate “the policy goals
underlying the Rail Act,” particularly that of giving Conrail a
“fresh start.” Ray responds Conrail has not shown that
immunity from liability for such a personal injury claim is
sufficiently important to the purpose of the Rail Act as to
overcome what he characterizes as “the strong presumption
that Congress would not eliminate the possibility of a remedy
for injured railroad workers without expressly saying so.” See
Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)
(“If Congress had intended to deprive injured parties of a long
6
available form of compensation, it surely would have
expressed that intent more clearly”).
The reasoning of the Special Court in Consolidated Rail
Corp. v. Reading Co., 654 F. Supp. 1318 (Regional Rail
Reorg. Ct. 1987), is persuasive on this point. There the court
considered the Northeast Rail Service Act of 1981, which
added to the Rail Act a provision, 45 U.S.C. § 797h(b),
requiring Conrail to pay (without necessarily assuming
liability for) personal injury claims asserted by employees of
a predecessor railroad during the pendency of that railroad’s
bankruptcy proceeding. Reading, 654 F. Supp. at 1321–22.
Because the Congress must have known some railroad
workers had suffered injuries that would not be manifest until
after the reorganization proceedings had ended, the Special
Court concluded the legislature’s “failure to make specific
provisions for these employees in the Rail Act can hardly be
interpreted as a determination that they be bereft of any
otherwise available remedy,” to wit, a suit against Conrail.
Id. at 1333. We agree with the Special Court. There is no
reason to suppose the Congress would both provide a path to
recovery for workers with a manifest injury and intend, “sub
silentio, to foreclose any available remedy from those workers
who did not (and through no fault of their own could not) file
identical claims until after their former employers had been
discharged in bankruptcy.” Id.
Next, Conrail points to § 363 of the Bankruptcy Code,
which authorizes a bankruptcy trustee to sell a debtor’s asset
“free and clear of any interest in such property.” 11 U.S.C. §
363(f). As Conrail notes, many courts have interpreted
“interest in such property” to include liability for an in
personam tort claim even though, like “liens or
encumbrances,” the plain meaning of that phrase does not
7
compel such a broad reading. See, e.g., In re Trans World
Airlines, Inc., 322 F.3d 283, 288–90 (3d Cir. 2003). As Ray
persuasively argues, however, because § 743(b)(2) of the Rail
Act uses different terms than does § 363(f) of the Bankruptcy
Code, an interpretation of the latter statute does not inform
our reading of the former. In any event, Conrail points to
nothing to indicate the Special Court, if it did have the power
to quash in personam claims, exercised that power in
conveying the Erie’s assets to Conrail.
Conrail also argues that because, at the time of their
conveyance, it valued the Erie’s assets with the understanding
that the Erie would be responsible for personal injury claims,
allowing such claims against Conrail would mean it had
overpaid for the assets. As the district court noted, however,
the parties presumably were aware of this risk and “‘the
valuation ... would have taken tort claims brought under
FELA into account.’” Ray, 693 F. Supp. 2d at 49 n.13
(quoting Penn Cent., 862 F. Supp. at 464).
Finally, Conrail argues Ray’s FELA claim was subject to
the control of the bankruptcy court in the Erie reorganization
proceeding under § 77 of the Bankruptcy Act, which was
ongoing at the time of the conveyance order, and therefore
was never among the liabilities the Special Court could have
conveyed to Conrail. This argument is unpersuasive because
§ 797h(b) and former § 774(g) of the Rail Act, both of which
specifically provided for Conrail to pay personal injury claims
brought by employees of predecessor railroads, 45 U.S.C. §
797h(b); id. § 774(g) (repealed 1981), would have been
superfluous if such claims were subsumed by the § 77
proceeding. See Zhu v. Gonzales, 411 F.3d 292, 295 (D.C.
Cir. 2005) (quoting United States v. Menasche, 348 U.S. 528,
8
538–39 (1955)) (“we must ‘give effect, if possible, to every
clause and word of a statute’”).
Having reached the conclusion that personal injury
claims were not before the bankruptcy court in the Erie’s § 77
proceeding, we have no occasion to decide whether it would
have been appropriate for that court to have discharged Ray’s
FELA claim. For the same reason, we note, the district court
went further than necessary in concluding Ray’s claim was
not discharged; that conclusion was not necessary to the
court’s holding. *
III. Conclusion
For the foregoing reasons, we hold the Rail Act does not
preclude Conrail’s liability for an employee’s pre-conveyance
exposure to asbestos. Accordingly, the Ohio court may
proceed to evaluate the merits of Ray’s claim and the
judgment of the district court is
Affirmed.
*
Similarly, because Ray’s claim is not part of the § 77 proceeding,
there is no merit to Conrail’s argument that permitting Ray to assert
his claim would “grant a priority to [Ray] in preference over the
claims of other preconveyance creditors, in contravention of
fundamental reorganization principles.” Neither of the cases
Conrail cites in support of this argument involves a conveyance
pursuant to the Rail Act.