Consolidated Rail Corp. v. Ray

DC Circuit Case No. 10-7029
The Rail Act does not preclude Conrail's (purchaser of former bankrupt company's assets) liability for an employee's exposure to asbestos where the exposure occurred prior to Conrail taking over operations because: (1) the Rail Act only stated Conrail was to acquire "free and clear of any liens or encumbrances" the operating assets of bankruptcy railroads; (2) a "lien" is a "charge or security or incumbrances upon property" [to secure payment of a debt or performance of an obligation], an "encumbrance" is "any right to, or interest in, land which may subsist in another to the diminution of its value," and, thus, asbestos injury is neither a lien or an encumbrance; (3) the Congress would have included express language limiting the damages an injured employee could assert against Conrail had the Congress wanted to; (4) the Northeast Rail Service Act of 1981 was added to the Rail Act and required Conrail to pay personal injury claims asserted by employees of a predecessor railroad; (5) Section 363(f)'s language is uses different terms than the Rail Act so as to render case law decided under Section 363(f) irrelevant to interpretation of the Rail Act; and (6) the plaintiff's claim was not subject to the control of the bankruptcy court since the North East Rail Service Act provided expressly that Conrail was to pay personal injury claims.
Procedural context:
Executor of the Plaintiff's estate files suit against Conrail and others in Ohio state court seeking damages under the Federal Employers' Liability Act allegedly arising from exposure to asbestos. Conrail files instant action in district court seeking a declaratory judgment that the Rail Act precludes Conrail's liability. The district court denies Conrail's motion for summary judgment and grants the estate's motion for judgment on the pleadings. Conrail appeals to the DC Circuit.
The Plaintiff worked for the Erie Lackawanna Railway Company ("Erie") from 1942 until 1976, at which point in time Erie filed for bankruptcy protection. The Regional Rail Reorganization Act was to lessen the impact of bankruptcy filings by major railroads by creating Conrail, an entity required to purchase the assets of the bankruptcy railroads but would purchase the assets "free and clear of any liens or encumbrances" pursuant to the Rail Act. Conrail purchased the assets of Erie free and clear of any liens or encumbrances. The Plaintiff sues Conrail claiming injuries from exposure to asbestos during the time the Plaintiff worked for Erie. Conrail removes the case to federal court and moves for a declaration that the Rail Act precludes any liability on the part of Conrail. The DC Circuit denies declaratory relief and permits the Ohio state court to proceed to evaluate the merits.

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