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CHEMICAL BANK & TRUST CO. v. GROUP INSTITUTIONAL INVESTORS ALLEGHANY CORPORATION V. GROUP INSTITUTIONAL INVESTORS MISSOURI PACIFIC RAILROAD COMPANY 5 1/4% SECURED SERIAL BONDHOLDERS COMMITTEE V. GROUP INSTITUTIONAL INVESTORS FARWELL ET AL. V. GROUP INSTITUTIONAL INVESTORS AND MISSOURI PACIFIC RAILROAD CO. V. GROUP INSTITUTIONAL INVESTORS

decided: June 9, 1952.

CHEMICAL BANK & TRUST CO., TRUSTEE
v.
GROUP OF INSTITUTIONAL INVESTORS

ALLEGHANY CORPORATION
v.
GROUP OF INSTITUTIONAL INVESTORS

MISSOURI PACIFIC RAILROAD COMPANY 5 1/4% SECURED SERIAL BONDHOLDERS COMMITTEE
v.
GROUP OF INSTITUTIONAL INVESTORS

FARWELL ET AL
v.
GROUP OF INSTITUTIONAL INVESTORS

AND MISSOURI PACIFIC RAILROAD CO
v.
GROUP OF INSTITUTIONAL INVESTORS



[ 343 U.S. Page 982]

Certiorari denied.

Memorandum of MR. JUSTICE FRANKFURTER, in connection with the denial of the petitions for writs of certiorari.*fn*

Reference to the opinion in Maryland v. Baltimore Radio Show, 338 U.S. 912, makes it unnecessary to indicate the reasons which preclude the Court from stating, however briefly, the grounds for denial of petitions for certiorari. Selective notations of dissent from such denials would not correctly reflect the operation of the certiorari process. That would require notation not only of all dissents when petitions are denied. It would equally require public recording of dissents from the granting of petitions. Due regard for all these factors touching the administration of our certiorari jurisdiction has determined my unbroken practice not to note dissent from the Court's disposition of petitions for certiorari.

But it has seemed to me appropriate to indicate from time to time the issues that are involved in a litigation for which review has been sought and denied. These cases, arising out of the long-drawn-out Missouri Pacific reorganization, present another such instance. The

[ 343 U.S. Page 983]

     denial of these petitions for certiorari does not definitively close the door for relief to security holders who claim forfeiture of their rights. The current Interstate Commerce Commission plan for the reorganization of the Missouri Pacific system has not been consummated. It may never be consummated. If carried to the stage of confirmation by the lower courts, review may again be sought here, perhaps with the benefit of additional light. But as the matter stands, two great questions are in controversy; they are questions for which the Congress has not authorized the Interstate Commerce Commission to give final answers.

 The reorganization plan sustained by the lower court involves the forfeiture of existing securities of vast proportions. The Commission's plan also eliminates existing corporations and directs financial power into new channels. These far-reaching consequences are based on the Commission's predictions of the future. One is not remotely unmindful of the relevant elements and their meaning on which judgment in such matters must be based, nor of the diffidence with which courts should sit in judgment upon the Commission's conclusions, by reminding that the Reorganization Act of 1933 ( ยง 77 of the Bankruptcy Act), 47 Stat. 1467, 1474, as amended, did subject to judicial review the determinations of the Commission and the processes which underlie them.

In three years (1940, 1944, and 1949) the Commission has proposed forfeiture plans on the basis of estimates of future earnings of the three component parts of the Missouri Pacific lines. The estimates on which the Commission based its proposals to strike down hundreds of millions of dollars of securities were the same in 1944 as in 1940. In 1949, the Commission recognized that the 1940 and 1944 estimates and forfeiture proposals were unsound, to the extent of millions of dollars.

[ 343 U.S. Page 984]

     In the eleven years since the Commission first proposed forfeiture on the basis of estimates of future earnings in this case, the actual earnings of each of the three component parts of the Missouri Pacific lines have exceeded those estimates. Two of the three have earned, in those eleven years, more than twice as much as the estimates; one earned almost fifty percent more than the estimate.

For the system as a whole, the actual earnings of the eleven post-estimate years averaged $18,000,000 per year more than the estimate on which the Commission's forfeiture plan was based. For every million dollars of underestimate of future earnings the Commission's forfeiture proposals would unjustly destroy twenty to twenty-five million dollars of securities. (For the basis of this calculation see my opinion in Bondholders, Inc. v. Powell, 342 U.S. 921.) The error indicated by the eleven years of actual earnings suggests that the Commission undervalued the property in 1940 and 1944 by $360,000,000 to $450,000,000.

In 1949, when the Commission adopted higher estimates for each of the three components of the Missouri Pacific lines and for the system as a whole, the Commission doubled the 1940 and 1944 estimates of the future earnings of one of the three parts of the Missouri Pacific system. But the actual earnings of each of the three years since the 1949 estimate substantially exceeded even that doubled estimate. Similarly, though the Commission in 1949 substantially increased the 1940 and 1944 estimates for the other two components of the system, their actual earnings for the three ensuing years were, in the case of one of these two sections of the system, double the Commission's 1949 estimate, and, in the other, 48 percent above the 1949 estimate.

On the basis of the record of actual earnings so far available, the indicated error in ...


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