Special Court Reporter
Manuscripts and Archives Department, Hagley Museum and Library
PO Box 3630
Wilmington, Delaware, 19807
This finding aid was produced using the Archivists' Toolkit
Finding aid prepared using best local practices and Describing Archives: A Content Standard
Cite items for this collection in the following format:
[Description and dates], Box/folder number,
Special Court Reporter (Accession 2379), Hagley Museum and Library, Wilmington, DE 19807
The Special Court was created under the Regional Rail Reorganization Act of 1973 (signed January 2, 1974) for the purpose
of adjudicating conflicting claims arising out of the act-mandated transfer of viable properties of six bankrupt railroad
systems to a new government-funded entity to be called the Consolidated Rail Corporation (Conrail). The act created an independent
agency, the United States Railway Association, to plan the transfer and establish by means of traffic criteria, which part
of the rail network would be self-sustaining and eligible for transfer to Conrail.
The six railroads were the Penn Central Transportation Company (by far the largest), the Erie Lackawanna Railway Company,
the Reading Company, the Lehigh Valley Railroad Company, the Central Railroad Company of New Jersey, and the Lehigh and Hudson
River Railway Company (the smallest). In addition, there were numerous subsidiary companies that still owned rail property
in their own names. The Three R Act had been passed because all of the companies had suffered such erosion of traffic and
deferred maintenance that they could not be reorganized under the standard procedures of the bankruptcy laws, which were based
upon reducing fixed charges to a level that could be supported by earnings. However, each of the companies remained in the
hands of trustees appointed in bankruptcy proceedings begun before passage of the act.
Once the Railway Association had determined the viability of a particular rail line, transfer to Conrail was mandatory. As
might be expected, the bankrupts sought to maximize, and the government to minimize, the amounts to be paid in compensation
for this involuntary transfer of property. The former argued for something close to actual historical cost or replacement
value, and the latter for scrap value. Even by the latter reckoning, the sums were quite large, so the matter was hotly contested,
with large legal teams representing each party. Creation of the Special Court allowed these claims to be adjudicated by experts
without clogging the regular federal court system.
The entire process took almost a decade. Penn Central agreed to settle its claim at $2.11 billion on January 15, 1981, and
on January 24, the Special Court issued a blanket ruling sustaining the government’s contention that, while many route-miles
retained rail use potential, the limited number of potential buyers meant that their value was close to scrap value. However,
the last holdout, the Central Railroad Company of New Jersey, did not settle until July 1984. Of the six bankrupts, three
were liquidated, and the other three used the sale proceeds and their non-rail assets to transform themselves into industrial
or real estate holding companies or conglomerates. The Penn Central Transportation Company became the Penn Central Corporation
and later American Premier Underwriters. The Reading Company eventually became an entertainment concern under its old name
but based in Los Angeles, and the Central Railroad Company of New Jersey became Central Jersey Industries, Inc., which was
subsequently merged into a French multinational conglomerate.
Special Court Reporter was created by the Special Court's rule 17C3 to publish all papers filed with the clerk in proceedings under Sec. 303 (c)
(the valuation case), a summary of proceedings, the rules of the Court, and all orders and opinions subsequent to December
1, 1975. It was published by a commercial law printing company, the Corporate Reorganization Reporter, Inc. (renamed CRR Publishing
Co. in 1976) in a limited subscription printing for use by the attorneys engaged by all parties to the litigation and as part
of the Court's official record.
The collection lacks at least three volumes and some pages.
Special Court Reporter constitutes a step-by-step account of its proceedings and the playing out of the final stages of railroad reorganization
in the Northeast, but it is heavily weighted towards procedural matters concerning what constitutes a fair valuation. It does
not contain actual testimony or exhibits.
The index volume covers not only the contents of the
Special Court Reporter, but also the testimony and exhibits which were too voluminous to reproduce and which were bound in separate volumes as part
of the manuscript record of the Court.