[00:00:00] Speaker 02: Base number 21-7021, National Railroad Passenger Corporation doing business as Amtrak versus Southeastern Pennsylvania Transportation Authority appellant. [00:00:11] Speaker 02: Mr. Pilsk for the appellant, Mr. Morota for the appellate. [00:00:15] Speaker 02: Good morning. [00:00:17] Speaker 03: Council for? [00:00:21] Speaker 05: Eric Pilsk, your honor, council for Southeastern Pennsylvania Transportation Authority. [00:00:25] Speaker 03: Yes, thank you. [00:00:29] Speaker 03: Please proceed. [00:00:31] Speaker 05: Thank you, Your Honor. [00:00:32] Speaker 05: May it please the court. [00:00:33] Speaker 05: In 1982, SEPTA and Conrail did everything required by the Northeast Act to convey the commuter easement to SEPTA so SEPTA could assume Conrail's commuter operations in Philadelphia. [00:00:45] Speaker 05: SEPTA recorded the commuter easement in 1983 and has used it ever since for its operations. [00:00:52] Speaker 05: After more than 35 years without challenge, [00:00:54] Speaker 05: Amtrak filed this suit claiming that it owns the commuter easement and that its rejected offer of a contract tender of a contract option in 1982 prevented Conrail and SEPTA from completing the Northeast Act transaction. [00:01:08] Speaker 05: The district court agreed. [00:01:10] Speaker 05: The district court erred because granting Amtrak's claim is contrary to the Northeast Act, is contrary to the terms of the option itself, [00:01:18] Speaker 05: is contrary to real estate law and is barred by the statute of limitations. [00:01:23] Speaker 03: Let me ask you just a question to help clarify my thinking. [00:01:29] Speaker 03: The option that Amtrak is referring to, as I understand it, is the option that was created in 1976. [00:01:46] Speaker 03: That was part of the, well, it's called Exhibit A, Computer Passenger Service Agreement. [00:01:57] Speaker 03: And that was part of the Northeast Corridor Computer Operating Agreement of 1976. [00:02:08] Speaker 03: Correct? [00:02:09] Speaker 05: Almost, Your Honor. [00:02:11] Speaker 05: It was created as part of the commuter easement in 1976. [00:02:14] Speaker 05: It was actually originally attached to the deeds that conveyed the Northeast Quarter from Conrail to Amtrak as a reserved right on behalf of Conrail. [00:02:26] Speaker 05: The document you're referring to, which we have included in the Joint Appendix, is a reproduction of that. [00:02:32] Speaker 03: So is your answer yes or no? [00:02:36] Speaker 05: My answer is that that is the commuter easement. [00:02:39] Speaker 05: That's a reproduction of the commuter easement. [00:02:41] Speaker 03: The commuter easement. [00:02:41] Speaker 03: So the answer is yes, that the option Amtrak is invoking is the language that appears in the 1976 agreement. [00:02:55] Speaker 03: Is that correct? [00:02:57] Speaker 05: Yes. [00:02:58] Speaker 03: All right. [00:02:59] Speaker 03: So then, as I understand the chronology here, is [00:03:05] Speaker 03: A number of things happened, but the salient thing, and this is why I'm questioning you, is that as time passed, Conrail did not work out as Congress had contemplated it would. [00:03:23] Speaker 03: And so Congress took further action, namely in the 1981 act, [00:03:31] Speaker 03: where it created another scheme and specifically your client is invoking Section 506B of the 1981 Act, which appears at, let's see, your addendum to the opening brief at page 76. [00:03:58] Speaker 03: Is that correct? [00:04:01] Speaker 05: Yes, Your Honor. [00:04:06] Speaker 03: So why, given that Congress changed the scheme once Conrail failed, why is the 1976 option relevant now? [00:04:21] Speaker 03: It's relevant after the 1981 act. [00:04:25] Speaker 05: Our position is that it isn't relevant, that the effect of the 1981 statute was to make the option ineffective, at least certainly at that time, and could not be used to prevent Conrail from conveying the commuter easement to Amtrak. [00:04:41] Speaker 00: That's your biggest argument in this case is Section 506, isn't it? [00:04:46] Speaker 05: Yes, Your Honor. [00:04:47] Speaker 00: Well, the thing that, you know, we're all textualists now, and [00:04:52] Speaker 00: That language says a computer authority may initiate negotiations. [00:04:58] Speaker 00: Now, why do you take that to be an overriding of all, everything that came before and granting a right to SEPTA? [00:05:09] Speaker 00: I don't get it. [00:05:11] Speaker 00: It may initiate negotiations. [00:05:15] Speaker 00: You want that commuter easement free. [00:05:20] Speaker 00: I don't understand. [00:05:21] Speaker 00: It may initiate negotiations. [00:05:23] Speaker 00: Sounds like you can initiate negotiations, but if there's disagreement, of course, there's a procedure whereby the government agency decides. [00:05:35] Speaker 00: But where does it say you get it free? [00:05:38] Speaker 05: Well, there was a transfer agreement that included consideration. [00:05:41] Speaker 05: In the bigger context here, which is- Wait, wait, wait. [00:05:44] Speaker 00: Which transfer agreement? [00:05:45] Speaker 05: There was a September 1, 1982 transfer agreement between Conrail and SEPTA that specified all of the properties and rights that were being transferred and conveyed from Conrail to SEPTA to enable SEPTA to take over the- But this deals with the question of Amtrak's rights, right? [00:06:05] Speaker 00: And why? [00:06:05] Speaker 00: Why do you take the position that may initiate negotiations, gives you a right against Amtrak that eliminates the option? [00:06:16] Speaker 05: Because once negotiations were initiated, the act then specifies that the party shall specify the rail properties to convey and- Wait a minute, wait a minute. [00:06:30] Speaker 00: Where's this shall? [00:06:31] Speaker 00: I do see the word shall. [00:06:33] Speaker 00: in other parts of section 506, but I don't see it in B1. [00:06:42] Speaker 00: I see it in C, I see it in E, but I don't see the word shall. [00:06:49] Speaker 05: In B2, one, B2, any transfer agreement between such commuter authority and Conrail, and I'm looking at page 76. [00:06:59] Speaker 00: Any agreement shall specify. [00:07:01] Speaker 00: Right. [00:07:01] Speaker 00: But it doesn't say [00:07:04] Speaker 00: that there has to be that, uh, the, the, the, it just says you may initiate negotiations. [00:07:11] Speaker 00: That's, that's words. [00:07:13] Speaker 00: It doesn't sound like you have a legal right. [00:07:15] Speaker 00: Why do you have to negotiate if you have a legal right? [00:07:17] Speaker 05: The scheme the Congress put in place here is that the parties would negotiate and reach an agreement on what was to be transferred, which rail properties were to be transferred. [00:07:27] Speaker 05: And once that agreement was reached, [00:07:28] Speaker 05: that that transaction had to close by the end of that year, December 31, 1982. [00:07:33] Speaker 00: When the agreement was reached, if it was reached, if it was reached. [00:07:37] Speaker 00: Correct. [00:07:38] Speaker 00: So that doesn't, I don't understand why that gives you a legal right to get it free. [00:07:44] Speaker 05: Well, it isn't a question of free because there was a transfer agreement that included consideration and it was part of the overall transfer of Conrail's authority to SEPTA as provided in the Northeast Act. [00:07:56] Speaker 05: And the point here, I think, is that Congress said, here's the process for figuring out how to transfer the assets from Conrail to the computer authorities, negotiate, reach an agreement if you can. [00:08:07] Speaker 05: If not, there's a series of mandatory steps. [00:08:10] Speaker 05: Once that once that process was initiated by SEPTA. [00:08:14] Speaker 05: The rest of the process was required by statute and whatever was specified in the transfer agreement was required to be closed by the end of the year and conveyed to SEPTA so that SEPTA could continue the operations that Conrail had been performing. [00:08:27] Speaker 03: Well, doesn't section 506, which is entitled property transfer, subsection A gives the choice to each commuter authority [00:08:45] Speaker 03: to notify Amtrak commuter and Conrail whether it intends to operate. [00:08:55] Speaker 03: And so then B1 as a computer authority may initiate negotiations with Conrail for the transfer. [00:09:06] Speaker 03: And then it goes on later in 506 to say, well, if no one comes forward, then [00:09:14] Speaker 03: Amtrak commuter is to run this. [00:09:19] Speaker 03: Amtrak commuter is an entity created in the 1981 Act and is separate and apart from Amtrak. [00:09:31] Speaker 05: That's correct, Your Honor. [00:09:34] Speaker 03: Why doesn't that, what I'm trying to have you focus [00:09:40] Speaker 03: And I don't know whether Judge Silliman will agree, but the point is that whole section in the 1981 Act is here's how the property is going to be transferred and Conrail has failed. [00:09:55] Speaker 03: So now what do we do? [00:09:57] Speaker 03: And this is Congress's answer. [00:09:59] Speaker 03: So the choice was up to these local commuter or what Congress calls each commuter authority. [00:10:13] Speaker 05: But that's right, Your Honor. [00:10:14] Speaker 05: That is how we read the statute. [00:10:16] Speaker 05: And because this is Congress's scheme for transferring the assets of Conrail to the appropriate commuter authority, that overrides any statute, any private contract obligation. [00:10:29] Speaker 00: But your key language is may initiate negotiations, right? [00:10:35] Speaker 00: Yes. [00:10:36] Speaker 00: Well, I don't understand why may initiate negotiations gives you a legal right [00:10:42] Speaker 00: to get it at your pleasure. [00:10:44] Speaker 05: It's a statutory option that once exercised, then the negotiations start, the parties reach an agreement, and then the property is to be conveyed. [00:10:53] Speaker 05: That was the process. [00:10:55] Speaker 05: But where's the agreement? [00:10:59] Speaker 05: There was an agreement, I don't have the record site, Your Honor, but there was a transfer agreement that was executed by SEPTA and Conrail on September 1, 1982, as provided by the Act that specified, among other properties, the transfer of the commuter easement. [00:11:14] Speaker 05: We fully complied, and then on December 31, 1982, [00:11:20] Speaker 05: SEPTA and Conrail closed on that transaction and the commuter easement was conveyed to SEPTA. [00:11:26] Speaker 05: We completely complied with the act and followed the process that Congress laid out for effecting the transfer of Conrail. [00:11:32] Speaker 00: I see. [00:11:33] Speaker 00: I want one more point. [00:11:35] Speaker 00: Your point is Amtrak's option was eliminated by virtue of this statute. [00:11:42] Speaker 00: Yes, sir. [00:11:42] Speaker 00: Yes, sir. [00:11:42] Speaker 00: That's your basic theory of the case. [00:11:44] Speaker 00: Yes, that's correct, Your Honor. [00:11:47] Speaker 01: Mr. Busk, I think you were also relying on the final plan under the 1975 Act as well as creating a right in SEPTA and then also an option to acquire or to lease these properties. [00:12:03] Speaker 01: I mean, are you now, I mean, did NURSA override the final plan or supersede the final plan in some way? [00:12:10] Speaker 05: No, in that instance, it supplemented it. [00:12:13] Speaker 05: It did not take away the right and in our, in the supplemental [00:12:17] Speaker 05: going to appendix, I don't have the page sign off the top of my head. [00:12:20] Speaker 05: There's a letter after the Northeast Act from the US Railway Association reaffirming that the section D rights did not go away. [00:12:29] Speaker 05: And further, I would point out that as you, I think Judge Rogers pointed out, when you go through the Northeast Act scheme, at the end of the day, even if Amtrak commuter had received Conrail's assets, the commuter authority could still at that point have required the transfer of those assets [00:12:47] Speaker 05: to the computer authority if it then chose to operate its own service, which mimics the Section D right. [00:12:53] Speaker 05: So it provides a second independent avenue. [00:12:56] Speaker 01: Because, I mean, I admit I'm somewhat skeptical that NERSA itself gives you this right because it talks about initiating negotiations, which doesn't seem like as firm of a right as from the 1975 Act and Section D of the plan. [00:13:11] Speaker 01: So I'm wondering which of these, are you relying on both? [00:13:15] Speaker 05: We are relying on both. [00:13:16] Speaker 05: And as I said, I believe first that the Northeast Act itself, by setting in place a process that is initiated by the community authority, by SEPTA, for the parties to work out how they're going to do the transfer. [00:13:32] Speaker 05: But the transfer itself is required. [00:13:35] Speaker 05: That is sufficient under Connelly and the other cases to prevent Amtrak from exercising its option. [00:13:41] Speaker 00: What is your textual reliance [00:13:45] Speaker 00: language in the final system plan. [00:13:49] Speaker 00: And D, what is the specific language on which you rely? [00:13:53] Speaker 05: It is, I apologize, your honor. [00:14:03] Speaker 05: Section D, and this is at, I apologize, I don't have the [00:14:13] Speaker 00: Section G says the following rail properties of the below named railroads. [00:14:19] Speaker 00: Is that the one? [00:14:21] Speaker 00: Yes. [00:14:22] Speaker 00: What's the key language? [00:14:23] Speaker 00: It says may be purchased or lease. [00:14:31] Speaker 00: May be purchased or lease. [00:14:33] Speaker 00: Now why the devil does that give you a legal right? [00:14:37] Speaker 05: Because we exercise the right to purchase it. [00:14:40] Speaker 05: At what price? [00:14:42] Speaker 05: I don't know that there was a specific price for the. [00:14:44] Speaker 00: Well, then then why do you have a claim that it's free? [00:14:49] Speaker 05: Because the entire northeast quarter, including the commuter easement, was divided up by Congress through the final system plan among the various rail modes, freight, intercity and commuter rail. [00:15:02] Speaker 05: And there was no one was paying anything for any of this. [00:15:05] Speaker 00: Well, women may be purchased or at least that implies a negotiation [00:15:12] Speaker 00: and an arrival of a figure that doesn't give you a legal right to get it free. [00:15:17] Speaker 05: But we, we did negotiate in the transfer agreement for the transfer of that asset among the other assets. [00:15:23] Speaker 05: And that was satisfactory to Conrail. [00:15:25] Speaker 05: I think that's more than sufficient. [00:15:27] Speaker 00: Well, you know, it's a little puzzling about that. [00:15:30] Speaker 00: When was the option, when did Conrail give the option to Amtrak? [00:15:36] Speaker 00: In 1970s. [00:15:37] Speaker 00: When exactly? [00:15:39] Speaker 05: The reason it was dated April, I forget the date, I want to say third, 1976. [00:15:45] Speaker 00: And you know what? [00:15:46] Speaker 00: That's after the system plan is published. [00:15:50] Speaker 00: So obviously Conrail was not under the impression then that it was obliged to give this property to a commuter company like SEPTA. [00:16:05] Speaker 00: It was thinking that it gave Amtrak [00:16:09] Speaker 03: When you go back to the 1976 statement, it's talking about when, let's see, how does it say it? [00:16:26] Speaker 03: It says, it's talking about [00:16:30] Speaker 03: the grantee and grand tour and conrail is the grand tour the grantee is amtrak and it says uh blah blah blah and i'm at ja 238 to 239 it says the grand tour shall elect to abandon or assign computer passenger service [00:16:59] Speaker 03: affiliate blah blah blah. [00:17:01] Speaker 03: The grantee Amtrak shall have first option. [00:17:06] Speaker 03: Well, all of that notion about Conrail being in charge and electing what the 1981 plan [00:17:16] Speaker 03: indicates, not the plan, but the act, is that by 1981, Congress had determined that Conrail was a failure in the sense it wasn't carrying out what Congress had intended it would do. [00:17:33] Speaker 03: And so Congress changed the system. [00:17:35] Speaker 03: So this whole notion that Conrail had any election disappeared. [00:17:44] Speaker 03: Now, in the 81 Act, Congress says, here's how we're going to do it, Section 506. [00:17:51] Speaker 03: And it says either one of these local groups is going to say, we want to do this commuter passenger service, and enters negotiations about it. [00:18:05] Speaker 03: And if they can't agree or whatever, then all of this is going to go to a new entity created by the 1981 Act [00:18:14] Speaker 03: namely Amtrak commuter, which is distinct from the Amtrak before us in this case. [00:18:22] Speaker 03: Isn't that correct? [00:18:25] Speaker 05: Yes, Your Honor. [00:18:27] Speaker 03: So when the district court focused on the language that Judge Silberman's first question [00:18:35] Speaker 03: made talking about well all the 81 access is may negotiate may enter into negotiations was this argument that i've been asking you about presented to the district court yes we it was definitely presented your honor we we relied heavily on the same line of argument that the northeast act effectively [00:19:00] Speaker 05: made unenforceable Amtrak's option precisely because the effect of the Northeast Act was to change the scheme and to shift the operations from Conrail to the Commuter Authorities or Amtrak Commuter at the Commuter Authorities option. [00:19:15] Speaker 03: Let me just say, because the chronology is so critical here, I found it very confusing to name these statutes anything other than the Act of 1976, the Act of 1981, whatever it was, so that we're clear. [00:19:31] Speaker 03: So when you're speaking of the Northeast Act, what are you referring to? [00:19:36] Speaker 05: The 1981 Act. [00:19:38] Speaker 03: Precisely. [00:19:40] Speaker 03: All right. [00:19:40] Speaker 03: So that's the new scheme Congress has come up with. [00:19:43] Speaker 03: And either one of these local groups [00:19:45] Speaker 03: is going to come forward and negotiate and have an agreement or it won't. [00:19:52] Speaker 03: And so Congress says, if it doesn't, then all this property that we have an otherwise reserved to either contract to Conrail or Amtrak goes to this new entity Amtrak commuter. [00:20:13] Speaker 03: I didn't understand why the district court didn't pick that up. [00:20:22] Speaker 03: I mean, the district court is as bright as anybody. [00:20:26] Speaker 03: And so I thought, well, maybe this wasn't argued to him. [00:20:31] Speaker 05: It was argued. [00:20:32] Speaker 05: And that's why it's an assignment of error on our part. [00:20:35] Speaker 05: We believe he simply missed that. [00:20:36] Speaker 05: And as we said in our brief, he gave [00:20:38] Speaker 05: very short discussion of Connolly and that line of cases and really did not give full effect, we believe, to what the 1981 Act required and provided. [00:20:50] Speaker 00: Counsel, will you do me a favor? [00:20:52] Speaker 00: I couldn't hear exactly my colleague's question. [00:20:56] Speaker 00: Will you specify what you're talking about? [00:21:00] Speaker 05: She was asking whether we had, SEPTA had presented this argument. [00:21:05] Speaker 05: Which argument? [00:21:06] Speaker 05: The statutory argument that the 1981 Act prevented Amtrak from exercising its option, whether we made that argument below. [00:21:13] Speaker 00: Oh, that's the core of your case. [00:21:15] Speaker 05: Yes, sir, and we did. [00:21:16] Speaker 00: That the 506 overrode the option. [00:21:22] Speaker 00: Yes, your honor. [00:21:22] Speaker 00: Dissipated it, zipped it out of the world. [00:21:27] Speaker 05: Yes, your honor. [00:21:29] Speaker 05: That is the argument that we did make it below. [00:21:33] Speaker 00: Yes, and I have difficulty seeing the language giving you that. [00:21:39] Speaker 05: And all I'll say, Your Honor, is that the 1981 Act gave the option to SEPTA to initiate a process pursuant to which the assets of Conrail would be transferred to SEPTA so that SEPTA could continue the operations of Conrail that Congress was terminating. [00:21:59] Speaker 00: That process itself, and it completely- There's no question you're right that Congress gave Conrail the right to initiate [00:22:10] Speaker 03: No, the statutory language is that with all due respect of 506 is that the initiative is placed in these local authorities, not in Congress. [00:22:27] Speaker 00: No question, I agree. [00:22:29] Speaker 00: All right. [00:22:30] Speaker 00: Wait a minute, let's see if I've got the right language in front of me. [00:22:36] Speaker 00: And then our point, Your Honor. [00:22:39] Speaker 00: Oh, 506, yes. [00:22:40] Speaker 00: may initiate negotiations. [00:22:43] Speaker 03: It's the computer authority. [00:22:46] Speaker 05: And once those negotiations are initiated, then that is the process by which Congress designated to affect the transfer of assets from Conrail to SEPTA. [00:22:56] Speaker 05: And our point is that is the process that Congress put in place. [00:23:00] Speaker 05: A private contract option can't prevent it from being carried out. [00:23:04] Speaker 03: And that's clear from subsection A. [00:23:08] Speaker 03: that each commuter authority shall notify Amtrak commuter and Conrail, whether it intends to operate. [00:23:17] Speaker 03: So the initiative lies with the commuter authorities and Congress contemplated, well, if none of them came forward, they couldn't reach agreement. [00:23:28] Speaker 03: this property was going to go to Amtrak commuter. [00:23:31] Speaker 03: I want to be clear, what was your response to Judge Rao's question about the final system plan? [00:23:38] Speaker 03: I wasn't clear about your response. [00:23:41] Speaker 05: We are relying on both the statutory argument under the 1981 act [00:23:47] Speaker 05: and the rights conferred in section D of the final system plan, they're independent and complimentary because the 1981 act effectively reproduces that right because at the end of the day, even if everything had gone, all the assets had gone to Amtrak commuter, SEPTA could still have requested or required those assets to be transferred to back to SEPTA or over to SEPTA. [00:24:13] Speaker 00: So the implications, if I understand you correctly, [00:24:18] Speaker 00: of the final systems plan is that the subsequent action on the part of Conrail giving an option to Amtrak was illegal. [00:24:36] Speaker 05: I don't believe it was illegal at the time. [00:24:38] Speaker 05: We certainly don't know. [00:24:39] Speaker 00: You say it's inconsistent with the final system plan and it came after the final system plan by some months. [00:24:46] Speaker 05: No, Your Honor, what I meant to say was that Section D of the final system plan gave SEPTA an independent right to get rail assets, including the commuter easement and rights in the stations. [00:25:02] Speaker 00: And so that... Then how do you explain Conrail's subsequent giving an option to Amtrak in the face [00:25:10] Speaker 00: after implementing the final system plan. [00:25:14] Speaker 05: Well, that is my point, is that they could give the option, but that option can't be applied in a way that would deprive SEPTA of its rights under either the final system plan or the 1981 Act. [00:25:25] Speaker 00: Well, an option that isn't effective is not an option at all. [00:25:34] Speaker 05: Well, not with respect, not when Congress, through the final system plan and through the 1981 act, has said that these assets need to go to SEPTA. [00:25:44] Speaker 05: There may have been other transactions. [00:25:45] Speaker 00: How can you explain what Conrail does then? [00:25:48] Speaker 00: Conrail, way after the final system plan, gives an option to Amtrak. [00:25:55] Speaker 00: If you're right, they're acting illegally because, under your theory of the Section D, [00:26:02] Speaker 00: that they were required to give this to SEPTA. [00:26:06] Speaker 05: Only if SEPTA asked for it. [00:26:07] Speaker 05: And the option itself could have been applied. [00:26:11] Speaker 05: There could have been circumstances when another entity could have tried to acquire the asset. [00:26:15] Speaker 00: That's not the way the option is phrased. [00:26:17] Speaker 03: Well, the option is back in 1976. [00:26:20] Speaker 03: The plan comes along in 1975. [00:26:27] Speaker 03: And in section D, which is at JA-194, it talks about the following rail properties, blah, blah, blah, designated to be transferred to Conrail in section A of this appendix may be purchased or leased from Conrail by a state or local. [00:26:50] Speaker 03: Well, that whole system is out of the [00:26:55] Speaker 03: out of the window, as it were, given that Congress comes along in 81 and says, we have to make changes in light of what's happened to Conrail. [00:27:05] Speaker 03: It's not working as we intended. [00:27:07] Speaker 03: So here's what we want to do. [00:27:11] Speaker 03: And that's Section 506. [00:27:12] Speaker 03: So unless this plan is somehow embodied in the 1981 Act, [00:27:23] Speaker 03: which I don't see it in either section 506A or B, I'm not clear why SEPTA is relying on it at this point or why it has any legal effect at this point after Congress has said in the 81 Act, it's the choice of the local authority [00:27:51] Speaker 03: If they come forward and initiate negotiations with Conrail and they can reach agreement, fine. [00:27:59] Speaker 03: If they can't or none comes forward, then this property on the local commuters goes to this new entity that we have created Amtrak Commuter. [00:28:14] Speaker 03: So I'm gonna understand your argument, Council Perceptor, when you say this section D of this 1975 plan, which was developed under a different statutory scheme, has resonance after the 1981 act. [00:28:36] Speaker 03: It may, but I need it explained to me. [00:28:39] Speaker 05: Well, I think our position is simply that under either Section D or the 1981 Act, there is a mechanism for SEPTA to obtain the commuter easement. [00:28:52] Speaker 05: And there's nothing inconsistent about the two. [00:28:54] Speaker 05: It's a question of which set of rights are used. [00:28:57] Speaker 03: What Judge Silverman's questions are getting to, as I understand them in part, is that if there was this 75 agreement or not, what is it? [00:29:07] Speaker 03: Not 75. [00:29:08] Speaker 03: Yes, July 26, 1975, final system plan. [00:29:17] Speaker 03: Then until the 1981 act is passed, Amtrak has both Conrail and Amtrak have some rights that were developed under a different statutory scheme. [00:29:35] Speaker 03: And that's what I'm not clear when you say they're complimentary. [00:29:40] Speaker 05: Well, even under the 1981 act under 506 subsection E, even if everything had gone to Amtrak commuter, SEPTA still had a right to obtain or could still have the ability to obtain those assets from Amtrak commuter for itself. [00:29:56] Speaker 03: Right, but we're not there. [00:29:57] Speaker 03: That's down the road. [00:29:59] Speaker 03: The first step is in A. [00:30:02] Speaker 03: that each commuter authority shall notify Amtrak commuter and Conrail whether it intends to operate. [00:30:12] Speaker 03: Then that commuter authority may initiate negotiations with Conrail for the transfer. [00:30:20] Speaker 03: And any agreement that they reach has to include the service responsibilities [00:30:26] Speaker 03: the rail property and a transfer date that's not later than January 1, 1983. [00:30:33] Speaker 03: I mean, what went on before under a different statutory scheme, it seems to me, unless Congress somehow indicated all this remained relevant, but it didn't because the factual circumstances had changed. [00:30:51] Speaker 03: Congress originally thought Conrail was going to be the solution. [00:30:56] Speaker 03: And it proved not to be, according to Congress. [00:31:00] Speaker 05: And our argument is simply that everything you've said I agree with about the 1981 act, the Section D, however, is not in any way inconsistent with that, because it gives SEPTA the right to obtain the same assets from Congress. [00:31:15] Speaker 03: No, but then it seems to me Judge Silverman's questions [00:31:22] Speaker 03: well, I don't know what the word is, have more resonance because you're dealing under a previous statutory scheme. [00:31:31] Speaker 03: And so Amtrak's rights under that system agreement may have been different than they were after Congress passes the 1981 Act. [00:31:43] Speaker 03: And I thought that was the point that you were trying to make in the district court. [00:31:48] Speaker 05: And the point that we're making with respect to section D is that the things that were changed in the 1981 act, the thing that it changed about the final system plan had to do with Conrail and its operating authority and its property rights by requiring them to be transferred to entities like SEPTA. [00:32:08] Speaker 05: And that's exactly what section D already provided. [00:32:10] Speaker 05: So that wasn't, we don't believe that was affected [00:32:13] Speaker 03: No, exactly. [00:32:14] Speaker 03: That's my point, counsel. [00:32:16] Speaker 03: That was talking about an election that Conrail makes, et cetera. [00:32:20] Speaker 03: And that's all out of the window now. [00:32:22] Speaker 03: It's not Conrail's election to make. [00:32:25] Speaker 03: Congress says it's these local authorities to make. [00:32:28] Speaker 03: Because we've decided that's the way it should go. [00:32:31] Speaker 03: And if that doesn't work out, then we've created this new entity called Amtrak Commuter. [00:32:36] Speaker 03: And they're going to handle these properties. [00:32:40] Speaker 03: Oh, they're going to handle the rest? [00:32:42] Speaker 03: understand. [00:32:46] Speaker 05: I mean, I'm not sure I'm exactly following your honor. [00:32:48] Speaker 05: I think under the 1981 act, except to have the have the ability to initiate the negotiations and then and then [00:32:57] Speaker 05: complete the transfer of assets that were contained in the transfer agreement. [00:33:01] Speaker 05: And that's what happened here. [00:33:03] Speaker 05: The section D also provides a mechanism for SEPTA to acquire the same kinds of property rights from Conrail for itself. [00:33:12] Speaker 05: And that is also what happened here. [00:33:15] Speaker 05: So our only point is that there's two statutorily approved mechanisms for Amtrak, excuse me, for SEPTA to get the same prop, the commuter easement from Amtrak [00:33:26] Speaker 05: and nothing about Amtrak's contract option could stop the concept of from exercising its statutory rights. [00:33:37] Speaker 00: It's the other way around, actually, sequentially. [00:33:40] Speaker 00: First, you have the final system plan. [00:33:45] Speaker 00: Secondly, you have Conrail negotiating with Amtrak and giving them an option. [00:33:55] Speaker 00: No question about that. [00:33:57] Speaker 00: You don't dispute that option was given to Amtrak. [00:34:01] Speaker 04: No. [00:34:02] Speaker 00: But your argument is when Conrail did that, that was inconsistent with obligations Conrail had to sell to SEPTA or in the final plan, which is sort of strange because you have Conrail [00:34:25] Speaker 00: thinking obviously the final system plan didn't preclude them from giving the option to Amtrak. [00:34:34] Speaker 00: Then you have the separate argument of the 1981-506 coming along, abrogating on your theory, the option given to Amtrak. [00:34:45] Speaker 00: Now if Congress was abrogating that option, wouldn't it have to be pretty specific? [00:34:51] Speaker 00: And as I read that language, it's certainly not [00:34:54] Speaker 00: specific on that proposition? [00:34:56] Speaker 05: I don't think it has to be specific at all, Your Honor. [00:34:59] Speaker 05: It can mandate a process. [00:35:00] Speaker 05: This is what we want to happen in order to achieve the public goal of assuring continued rail access along the Northeast corridor and continued viable commuter service. [00:35:09] Speaker 05: That was the legislative objective, which is clearly within Congress's power. [00:35:13] Speaker 05: I don't think there's any. [00:35:14] Speaker 00: Oh, I don't doubt that Congress could have abrogated the option. [00:35:20] Speaker 00: It seems to me is you'd have to put [00:35:22] Speaker 00: put it, make it clear. [00:35:23] Speaker 00: And the language I see in 506 doesn't get you there at all. [00:35:28] Speaker 05: Our point is not necessarily abrogation in an explicit sense, but a matter of inconsistency. [00:35:34] Speaker 05: The Congress set up a process that required the transfer of the asset included in the transfer agreement of the commuter easement to SEPTA. [00:35:43] Speaker 05: SEPTA and Commonwealth applied with the statute. [00:35:46] Speaker 05: Amtrak cannot assert a private contract right to prevent the execution of a statutory scheme. [00:35:53] Speaker 05: That's our fundamental point. [00:35:54] Speaker 00: Well, it says may, and that gets back to my point, it says may initiate negotiations. [00:36:00] Speaker 00: And we did. [00:36:01] Speaker 00: But that doesn't give you a right. [00:36:03] Speaker 00: That depends on what the negotiations come up with. [00:36:06] Speaker 05: And the negotiations did come up with a transfer of the commuter easement. [00:36:10] Speaker 05: and did include it in a transfer agreement that was executed by September 1, 1982. [00:36:15] Speaker 05: It did specify a closing date by December 31, 1982, and it was closed. [00:36:20] Speaker 05: The community reason was conveyed to SEPTA on December 31, 1982, and SEPTA has used it ever since, exactly. [00:36:30] Speaker 00: There's nothing inconsistent about many initiate negotiations, but runs afoul of Amtrak's option. [00:36:40] Speaker 05: And my point is that once the negotiations were initiated as they were, Amtrak could not assert a contract right to prevent the completion of the statutorily mandated or described negotiation and transfer process. [00:36:56] Speaker 03: Why don't we hear? [00:36:57] Speaker 01: Judge Rao, please continue. [00:37:00] Speaker 01: Just to follow up on Judge Silverman's point. [00:37:03] Speaker 01: Say I don't think that the 1981 act gives you any right that supersedes Amtrak's right of first refusal. [00:37:11] Speaker 01: What is your best argument that the final plan option that you have, the right to acquire or to lease these properties supersedes Amtrak's easement rights? [00:37:23] Speaker 05: Because in the final system plan, which was approved by Congress, Section D gave SEPTA the right to [00:37:30] Speaker 01: But as Judge Silberman points out, the easement comes after the final plan. [00:37:36] Speaker 01: So as to those two things, how do we choose which takes precedence, your option or Amtrak's option? [00:37:42] Speaker 01: I mean, to me, that's really the core of this case. [00:37:45] Speaker 05: And our option, because it's under Section D, which is part of the final system plan, it was authorized, directed to be created by Congress and approved by Congress after it was ratified by Congress. [00:37:57] Speaker 05: They can accept, excuse me, Conrail and Amtrak can agree to an option of any scope. [00:38:02] Speaker 05: And of course, there's any number of other entities that maybe Conrail could have tried to convey to. [00:38:07] Speaker 05: But that contract could not bargain away a previously granted right of SEPTA to obtain those assets. [00:38:15] Speaker 05: That's all it is. [00:38:16] Speaker 00: The SEPTA have a right to lease? [00:38:23] Speaker 00: Yes. [00:38:24] Speaker 00: The SEPTA have a right to purchase? [00:38:26] Speaker 00: Yes. [00:38:28] Speaker 00: It's up to them. [00:38:29] Speaker 00: Yes. [00:38:30] Speaker 00: Conrail has nothing to say. [00:38:32] Speaker 00: That's correct. [00:38:34] Speaker 00: Why? [00:38:34] Speaker 00: How do you get that out of it? [00:38:37] Speaker 00: May it be purchased or at least from Conrail. [00:38:40] Speaker 00: That depends on what the negotiations ensue. [00:38:48] Speaker 00: And indeed there's a processes or not for if there was disagreement, [00:38:54] Speaker 00: There is a process to decide that with a government agency, right? [00:38:59] Speaker 05: Yes, I mean, the 1981 act provides very limited. [00:39:02] Speaker 05: No, I'm talking about 75. [00:39:04] Speaker 05: Yes, there's a process for resolving those disputes. [00:39:07] Speaker 00: And how is that to be done? [00:39:09] Speaker 00: Is it the secretary of one of the, was it one of the boards or one of the secretaries? [00:39:15] Speaker 00: I think these disputes went to the special court. [00:39:18] Speaker 00: No, I think it went to the secretary, didn't it? [00:39:20] Speaker 00: But I'm not sure. [00:39:21] Speaker 00: I'd have to, I can follow up. [00:39:23] Speaker 03: Let's hear from Amtrak and then we'll give you some time on rebuttal. [00:39:28] Speaker 05: Thank you, Your Honor. [00:39:32] Speaker 03: Council for Amtrak. [00:39:55] Speaker 04: Thank you, Your Honor, and may it please the court, Sean Morata, on behalf of the National Railroad Passenger Corporation, better known as Amtrak. [00:40:02] Speaker 04: Let me get to your question, Judge Rao, about the final system plan. [00:40:06] Speaker 04: SEPTA treats the final SEPTA system plan as if it says that SEPTA has a right to purchase the commuter easement. [00:40:12] Speaker 04: But that's not what it says. [00:40:14] Speaker 04: What it says, and it's quoted at Joint Appendix 148, is that you have an option to purchase or lease appropriate trackage rights to conduct commuter operations. [00:40:26] Speaker 04: But that isn't the same thing as the commuter easement. [00:40:28] Speaker 04: And it can't be for the reason that Judge Silberman pointed out, which is that the commuter easement post dates the final system plan. [00:40:36] Speaker 04: So it could not mean when the final system plan says appropriate trackage rights, it's referring to a commuter easement that does not exist yet. [00:40:45] Speaker 04: Moreover, the fact that the final system plan says purchase or lease means that you could structure those appropriate trackage rights in any number of different ways. [00:40:55] Speaker 04: You could do it through an easement as Conrail and Amtrak agreed to. [00:40:59] Speaker 04: But you could do it through an operating agreement. [00:41:02] Speaker 04: You could do it through a lease. [00:41:03] Speaker 04: And I think that's a key point in this case. [00:41:06] Speaker 04: SEPTA treats it as if we will not achieve the goals of the 1981 Act or the Reorganization Act, which includes the final system plan. [00:41:15] Speaker 04: If SEPTA doesn't get this easement, that's simply not true from day one. [00:41:21] Speaker 03: Its position is not that the 81 act specifically says SEPTA gets this, but rather that choice is left to the commuter authorities and SEPTA is one and it came forward. [00:41:40] Speaker 03: So what I don't understand, and let me ask you to clarify for me, what I've been focusing on is [00:41:48] Speaker 03: You don't disagree, do you, that Conrail did not work out as Congress anticipated it would to run an effective and efficient and financially stable rail system. [00:42:07] Speaker 04: I agree. [00:42:08] Speaker 04: Conrail didn't work out the way Congress intended it to. [00:42:10] Speaker 03: So then Congress decided we need to redo this system that we had in mind. [00:42:20] Speaker 03: And it passes the 1981 Act. [00:42:25] Speaker 04: And what Congress did in the 1981 Act is it set up a system. [00:42:29] Speaker 04: SEPTA absolutely has the right to say, Conrail, we want to negotiate with you to figure out how to transfer properties to conduct commuter rail operations. [00:42:41] Speaker 04: And I think maybe you can even read into that a notion of good faith that Conrail then has to enter into good faith negotiations to effectuate that goal. [00:42:51] Speaker 04: But what Conrail can't do through those negotiations is sell something it doesn't own, which is a commuter easement free of Amtrak's right of first refusal. [00:43:01] Speaker 04: Under SEPTA's view, as far as I can tell, [00:43:03] Speaker 04: that if SEPTA and Conrail had agreed to transfer the Brooklyn Bridge to SEPTA, then their position would be, well, the Northeast Act requires it and no private contract right could get in the way of that. [00:43:14] Speaker 04: But of course that's not the law. [00:43:16] Speaker 03: Fairness counsel, go back to the 1976 language. [00:43:26] Speaker 03: And I wanna be clear that that is the option [00:43:33] Speaker 03: Amtrak is relying on, is that correct or not? [00:43:37] Speaker 04: So the option that Amtrak is relying on was the one that was conveyed through the deed that conveyed the Northeast Corridor properties. [00:43:46] Speaker 03: And is that the language that is repeated on JA 238 to 239? [00:43:55] Speaker 04: That's correct, Judge Rogers. [00:43:57] Speaker 03: All right, so it says, provided that in the event the grantor, namely Conrail, shall elect to abandon or assign the commuter passenger service, easement and holder in part, [00:44:18] Speaker 03: other than to a subsidiary affiliate or successor entity, the grantee, namely Amtrak, shall have a first option to acquire such easement or portion thereof at the purchase price of $1. [00:44:38] Speaker 03: Is that the language of the easement on which Amtrak is relying on? [00:44:43] Speaker 04: Yes, Judge Rogers, it is. [00:44:44] Speaker 03: Well, the 1981 Act [00:44:48] Speaker 03: eliminates any option or election, excuse me, eliminates any election in Conrail. [00:45:00] Speaker 03: Conrail has no right of election anymore because Congress has decided Amtrak's not done what we wanted it to do. [00:45:11] Speaker 03: And so we're creating a new system and instead, [00:45:16] Speaker 03: It gives these local authorities the choice. [00:45:21] Speaker 03: Do they want to do this or not? [00:45:23] Speaker 03: And if they do, they ought to let Conrail know and enter negotiations. [00:45:29] Speaker 03: And if they can agree, fine. [00:45:31] Speaker 03: If they can't agree, then Congress says a property that's at issue will go to Amtrak Commuter, which is an entity created in the 1981 act. [00:45:45] Speaker 03: So given that scheme, when the option you're talking about was based on Conrail having an election, that whole notion of Conrail's authority has gone. [00:46:10] Speaker 03: Or do you disagree? [00:46:12] Speaker 04: I think that's where we part ways, Judge Rogers. [00:46:14] Speaker 03: And what is the basis of your disagreement? [00:46:17] Speaker 03: Your basis of the disagreement is that when Amtrak, as I understand it, had an option where Conrail elected, and Conrail had the authority to elect, nevertheless, [00:46:39] Speaker 03: any right that SEPTA may have obtained remains subject to Amtrak's right with this first option under a different scheme [00:47:06] Speaker 04: So to Rogers, there was an election because on rail was entered into negotiations as part of those negotiations. [00:47:14] Speaker 04: Conrail had to negotiate as to what it would transfer election. [00:47:21] Speaker 04: The election was in the transfer agreement. [00:47:23] Speaker 04: It was. [00:47:25] Speaker 04: in the 1982 September 1 transfer agreements and the transfer agreements were pursuant to the 1981 act. [00:47:36] Speaker 03: That's what I'm trying to Amtrakis mentioned in this regard in the 1981 act. [00:47:42] Speaker 03: That's what I'm trying to understand. [00:47:44] Speaker 04: Right, so the 1981 act says there has to be a transfer agreement. [00:47:49] Speaker 04: It doesn't demand what the transfer agreement, what properties will pass. [00:47:54] Speaker 04: Though that is the result of negotiations between contract Conrail and SEPTA. [00:47:59] Speaker 04: So at the moment that Conrail decided to put into the transfer agreement, and this is joint appendix page 319, which is the section that deals with the commuter easement at the moment that, uh, [00:48:10] Speaker 04: Conrail elected to transfer that, that triggered the right of first refusal, which then Amtrak exercised. [00:48:17] Speaker 04: It's an election. [00:48:18] Speaker 03: Now, Judge Rogers- What I'm trying to understand is, if I have an option to buy your house under the property laws of 1976, and then those laws change, [00:48:38] Speaker 03: that says such an option is off the table. [00:48:46] Speaker 03: Is your point that Congress would have had to have said that expressly in the 1981 act in order to eliminate Amtrak's option under an election system in the 1976 act? [00:49:08] Speaker 04: What Congress would have had to do in the 1981 act is to make clear that it was a mandatory transfer of the commuter easement. [00:49:16] Speaker 04: Congress does not require the commuter easement to pass. [00:49:20] Speaker 04: Now, Judge Rogers, you mentioned the pass through to Amtrak commuter, which is, I'll note, it's a separate corporation, but it's a fully owned subsidiary of Amtrak with all of that entails, including Amtrak's right through its board of directors to control its operations. [00:49:37] Speaker 03: But counsel, that's why I asked you what option you were relying on, because I didn't understand, and maybe I missed this, Amtrak to be arguing to this court that Amtrak should be treated as Amtrak commuter. [00:49:56] Speaker 04: We're not arguing that, Judge Rogers, but what I'm saying is that one of the arguments that SEPTA has made, and I think your questions touch on this, is, well, don't you agree that Amtrak commuter, a transferred Amtrak commuter would not trigger the right of first refusal? [00:50:12] Speaker 04: And we agree with that. [00:50:13] Speaker 04: A transfer to Amtrak commuter, which we agree is a successor to Conrail as the commuter operator of last resort, and moreover as a compelled transfer under subsection C of the Section 506, that would not trigger the right of first refusal. [00:50:31] Speaker 04: So the follow on question is, well, why can't they just get it from Amtrak commuter? [00:50:35] Speaker 04: And the answer is actually found at Joint Appendix page 341. [00:50:39] Speaker 04: Where back in 1982, the parties did discuss possibly having the commuter easement passed through Amtrak commuter. [00:50:47] Speaker 04: And what the letter at JA 341 says from Amtrak is Amtrak commuter doesn't want the easement. [00:50:53] Speaker 04: Why? [00:50:54] Speaker 04: Well, because I'm speaking outside the letter now. [00:50:57] Speaker 04: I want to be clear. [00:50:57] Speaker 04: This is my inference from the letter. [00:51:00] Speaker 04: is why don't they want the easement? [00:51:02] Speaker 04: Well, because they're a subsidiary of Amtrak and so they don't want to do things contrary to Amtrak's preference, which is to have this easement eliminated, which Amtrak has always disliked as a cloud on its title. [00:51:14] Speaker 04: What Amtrak would prefer, it preferred back to 1982 and it prefers today, is that there simply be a negotiated agreement for appropriate trackage rights. [00:51:24] Speaker 04: which is either an agreement between Amtrak and SEPTA or set by the Surface Transportation Board according to its powers in the statutes. [00:51:31] Speaker 04: And that's a key point of this case. [00:51:33] Speaker 04: No SEPTA commuter will be left on a platform if you rule for Amtrak in this case. [00:51:38] Speaker 04: Rather, it's just a question of how much is SEPTA going to pay for these access rights? [00:51:44] Speaker 01: So my question is, say I agree with your position that the 1981 Act does not give SEPTA any rights. [00:51:53] Speaker 01: Why, so in 1975, however, there's both a statute and a final plan that's pursuant to the statute that gives SEPTA various rights. [00:52:02] Speaker 01: How does the easement and the right of first refusal override those statutory and final plan rights? [00:52:10] Speaker 04: Because what the statute gives is not a right to an easement. [00:52:13] Speaker 04: An easement is a particular way of structuring a transaction, which places a cloud on Amtrak's fee simple title to the Northeast corridor property. [00:52:23] Speaker 04: So in fact, if you look at the back and forth of the letters between Contrell and Amtrak and SEPTA, Amtrak explains the drafting history of the easement and of the right of first refusal that's contained in it. [00:52:36] Speaker 03: That's a very interesting notion that the court should defer to an interested party's interpretation of the legislative history. [00:52:47] Speaker 03: I mean, you know, some questions should we even defer to congressional committee statements? [00:52:53] Speaker 03: I didn't mean that as your argument at all. [00:52:57] Speaker 04: And it's not my argument, Judge Rogers, but rather Judge Rao's question was getting at, well, the final system plan gives certain rights. [00:53:04] Speaker 04: Why aren't those rights the commuter easement? [00:53:06] Speaker 04: And the point I was making was that you could structure the rights that the commuter easement gives in various ways. [00:53:12] Speaker 04: And so to say they have rights under the final system plan is not to say they have a right to an easement. [00:53:17] Speaker 04: They have a right to either a lease or to purchase appropriate rights, but it doesn't have to be through an easement. [00:53:24] Speaker 04: Our position is, and it continues to be, [00:53:27] Speaker 04: We are happy to negotiate a station lease with SEPTA that contains appropriate rights in the final system plan. [00:53:33] Speaker 04: And if we can't do that, we're happy to have the surface transportation board set the terms and conditions and price of those rights for us. [00:53:42] Speaker 04: But it's not an easement. [00:53:44] Speaker 03: Oh, sorry, Judge Rao, go ahead. [00:53:47] Speaker 01: Thank you. [00:53:48] Speaker 01: The final plan may not give them the right to that particular easement, but doesn't it give them a right to acquire various rights that are also included in the easement? [00:53:57] Speaker 01: So to the extent that the final plan right and the easement are inconsistent, wouldn't the final plan and statutory right of SEPTA, Trump, whatever terms are in the easement? [00:54:10] Speaker 04: So that we agree that the final plan, right? [00:54:13] Speaker 04: Because the easement was meant to carry out the final plan rights of Conrail, which are essentially identical to those of SEPTA. [00:54:20] Speaker 04: Our point is we don't want this to be an easement because it clouds title. [00:54:24] Speaker 04: It encumbers our development rights in various ways. [00:54:27] Speaker 04: Rather, SEPTA has a right to obtain the things that the final system plan gives it. [00:54:32] Speaker 04: It's not through an easement. [00:54:33] Speaker 04: It's rather through negotiation of a lease. [00:54:36] Speaker 01: Well, but Conrail had the easement, right? [00:54:38] Speaker 01: So the easement is one of the bundle of rights that Conrail had. [00:54:43] Speaker 01: And SEPTA has some statutory right to acquire, you know, the rights that Conrail had. [00:54:48] Speaker 01: And one of those property rights was an easement. [00:54:51] Speaker 01: So I'm not sure why the right of first refusal would trump SEPTA's [00:54:56] Speaker 04: statutory well because well we talked about the 1981 act and i think we we are in agreement as to why they are that would not why is that assuming but yeah so setting setting that aside for a moment the final system plan does not give the right to acquire conrails easement that's the key point why not why not because the because the easement post dates in the final system he says maybe um the following rail property [00:55:24] Speaker 00: In your view, the following rare properties does not include the easement. [00:55:29] Speaker 04: Right. [00:55:30] Speaker 04: Why? [00:55:31] Speaker 04: Because the easement doesn't exist at the moment that those words are put into law. [00:55:36] Speaker 04: Rather, the following properties are appropriate trackage rights. [00:55:40] Speaker 04: And the appropriate trackage rights can be embodied in an easement, but are not the easement. [00:55:48] Speaker 04: It can also be through a lease. [00:55:49] Speaker 04: It could also be through an operating agreement. [00:55:52] Speaker 04: It doesn't have to be an easement. [00:55:54] Speaker 04: And I think that's actually the, that's the fighting point between us and SEPTA in this case, which is that SEPTA thinks it's entitled to an easement. [00:56:04] Speaker 04: We think SEPTA is entitled to what the final system plan says, appropriate trackage rights and access to stations, but through an agreement or through a agreement imposed by the surface transportation board. [00:56:18] Speaker 04: So we are not trying to deny the rights that are contained at Joint Appendix page 148. [00:56:24] Speaker 04: Rather, we're just saying that you're not entitled to it in this specific form. [00:56:32] Speaker 04: And I understand that might seem pedantic, but it matters quite a bit to these two companies. [00:56:35] Speaker 00: In other words, your view is Section D did not include the computer easement for two reasons. [00:56:44] Speaker 00: Number one, it wasn't in existence. [00:56:49] Speaker 00: And two, it wouldn't be included in the terminology following rail properties. [00:57:02] Speaker 00: That's right. [00:57:03] Speaker 00: In other words, since it didn't exist, it can't be part of the following rail properties. [00:57:08] Speaker 04: That's exactly right. [00:57:08] Speaker 00: Is that your basic argument? [00:57:10] Speaker 04: That's absolutely right, Judge Silberman. [00:57:13] Speaker 01: But so what if, so if Conrad after the final plan were say to acquire additional tracks, would those not be part of the final system plan? [00:57:22] Speaker 01: So, you know, appropriate trackage rights. [00:57:24] Speaker 01: You say they have trackage rights. [00:57:25] Speaker 01: What if, you know, they acquired new tracks after the final plan? [00:57:29] Speaker 01: Would SEPTA not have an option to purchase those or to negotiate over those? [00:57:37] Speaker 01: I'm not sure why the easement is so different, right? [00:57:39] Speaker 01: Because they have a right to appropriate trackage rights. [00:57:42] Speaker 01: Conrail subsequently acquires different trackage rights or some bundle of rights under the easement. [00:57:49] Speaker 01: It's not clear to me why the final plan wouldn't apply to those. [00:57:53] Speaker 00: Yeah. [00:57:54] Speaker 00: I want you to answer her first question. [00:57:56] Speaker 00: What about subsequent acquired track? [00:58:02] Speaker 04: I think in those circumstances, um, [00:58:08] Speaker 04: Because I want to be careful because what's unusual is that although there are only one track, of course, the final system plan and the various deeds bifurcate the uses between intercity passenger freight and commuter. [00:58:25] Speaker 04: So what's sort of artificial is that Conrail has all the trackage rights in commuter operations. [00:58:32] Speaker 01: So the hypothetical still applies if they acquire more commuter tracks, you know, whatever [00:58:37] Speaker 00: You're not answering the question. [00:58:39] Speaker 04: I know. [00:58:39] Speaker 04: I just want to be, I want to be careful because I don't want to, these are very complicated statutes and I don't want to say something in response to the hypothetical that would be inconsistent with something that exists somewhere else in the world is all, um, I think they might have a right to operate on those tracks, but again, not by way of an easement. [00:59:01] Speaker 00: No, no, no, no, no, no, no. [00:59:04] Speaker 00: I think what my colleague is probing. [00:59:07] Speaker 00: is your response to my question, which was, your theory is, I thought this was the one weak point on your three. [00:59:16] Speaker 00: Your theory is that section D only refers to existing trackage rights, not the computer easement for two reasons. [00:59:25] Speaker 00: It doesn't refer to a computer easement. [00:59:28] Speaker 00: I'm not sure why, if the computer easement were in pre-existence at the time of Vitality, it wouldn't [00:59:38] Speaker 00: cover it. [00:59:39] Speaker 00: But let's assume, let's keep in mind it comes in afterwards. [00:59:43] Speaker 00: Then Judge Rall asked, well, suppose there was new trackage that didn't exist at the time of the final plan. [00:59:52] Speaker 00: Wouldn't that new trackage be covered? [00:59:56] Speaker 04: Oh, I think the question is now clicked for me and I think the answer is found at Joint Appendix 148. [01:00:01] Speaker 04: It's appropriate trackage rights for the operation of commuter services on all rail lines used by Amtrak on which there are present operations of commuter trains. [01:00:11] Speaker 04: So I think the fact that it's present operations of commuter trains would suggest that perhaps later required track would not fall under the final system plan. [01:00:22] Speaker 04: Is it not only is talking there's not only the temporal issue of what rights exist at the time of the final system plan, but the final system plan itself refers to the present operations of commuter as of the moment of the final system plan. [01:00:37] Speaker 04: So, I think the final system plan itself also gives an indication that it's the rights that are in existence as of that moment. [01:00:45] Speaker 00: It doesn't use the term rights. [01:00:47] Speaker 00: It uses the term property. [01:00:48] Speaker 04: Rail properties, and I believe rail properties is defined in the 76 act as both property and rights to property. [01:00:57] Speaker 00: I see. [01:00:57] Speaker 00: Oh, well, I see your point. [01:01:02] Speaker 01: Well, I mean, it doesn't just limit it to the present operations on which there are present operations of computer. [01:01:09] Speaker 01: commuter trains by transportation authority or which are useful for operation of trains by a transportation authority. [01:01:17] Speaker 01: So, I mean, I think that I don't think it's limited temporally necessarily. [01:01:21] Speaker 01: Or am I reading that incorrectly? [01:01:25] Speaker 04: So there is a discussion of used or useful, which I guess might suggest that if it's sitting in a warehouse somewhere, but is nonetheless found to be useful, there is a right to it. [01:01:37] Speaker 04: But I think even then we're winding back to the notion that there's not a right to acquire it. [01:01:42] Speaker 04: There is a right to purchase or lease it. [01:01:44] Speaker 04: SEPTA thinks that it's at SEPTA's election, but that's a statement found nowhere in the final system plan. [01:01:50] Speaker 01: Well, so then is your position, say the easement predated the final system plan, then would SEPTA have a right to acquire the easement particularly? [01:02:02] Speaker 01: Because you're suggesting that easement, you have two arguments, I guess, as I see it, right? [01:02:08] Speaker 01: One is that the easement comes after the plan and therefore is not covered by it. [01:02:12] Speaker 01: And also that the easement is not the same as trackage rights. [01:02:16] Speaker 01: So what if the easement came before the plan? [01:02:19] Speaker 01: Or if it pre-existed the plan? [01:02:22] Speaker 04: The easement pre-existed the plan, and I want to answer the question directly then explain why I'm not sure the premise works, but I want to answer the question directly first. [01:02:29] Speaker 04: The easement comes before it, and I suppose you could say there's a right to purchase or lease it, but that still doesn't mean it's at SEPTA's election as opposed to anyone else's. [01:02:41] Speaker 04: So, I think then we would be back to the same argument we had under the 1981 act that says the choice between purchase or lease. [01:02:48] Speaker 04: Is that Conrails election? [01:02:50] Speaker 04: And because it's at Conrails election, it triggers the right of 1st refusal. [01:02:53] Speaker 04: Now, let me answer why I'm not sure the premise works, which is that the commuter easement, even though it's drafted as an easement. [01:02:59] Speaker 04: Was meant to carry out the final system plan and so therefore comes into existence as part and parcel of the act and of the final system plan. [01:03:09] Speaker 04: So it's always going to post date the final system plan. [01:03:12] Speaker 04: I just not sure the hypothetical could exist. [01:03:14] Speaker 04: And that's one of the key points, which is, although it's written as an easement, really what Amtrak and Conrail were trying to say at the time is, all right, you have certain rights on the final system plan. [01:03:24] Speaker 04: Here is how we have decided to embody that right. [01:03:28] Speaker 04: But we're only willing to do it with respect to Conrail. [01:03:31] Speaker 04: And so if Conrail tries to give it to someone else who's not a subsidiary successor or affiliate, we Amtrak want that back. [01:03:39] Speaker 04: And then we're going to engage in purchase or leasing on our own terms with that new entity who's claiming track address under the final system. [01:03:49] Speaker 01: I understand that's what Amtrak wants. [01:03:51] Speaker 01: You've said a few times, but it's not clear that that's consistent with the underlying final system plan. [01:03:59] Speaker 01: I mean, that may be what Amtrak hoped to do, but it's still not clear to me why that easement would undermine the rights that are in the system plan that's up to us. [01:04:08] Speaker 04: I'm not sure that the easement undermines the final system plan rights. [01:04:11] Speaker 04: I don't think that the final system plan gives SEPTA the unvarnished right that it thinks it has. [01:04:17] Speaker 04: Because to overcome the word elect in the option, it has to be compelled. [01:04:22] Speaker 04: And what SEPTA can't do is say, what is compelling the transfer of this easement as opposed to anything else? [01:04:29] Speaker 04: Because they wait their statutory right of access to the Northeast for properties with access to this easement and I don't think they can point to anything. [01:04:41] Speaker 04: And in fact, at page 41 of their brief, they say, well, you shouldn't read an implication from a lack of expressiveness into these statutes. [01:04:49] Speaker 04: But our position is unless they can point to something in the final system plan, the 1981 act that requires the transfer of this easement, as opposed to merely appropriate trackage rights, then they can't overcome the word. [01:05:02] Speaker 00: Is it clear the term appropriate track tracking rights is different from the easement? [01:05:10] Speaker 04: The easement includes appropriate trackage rights. [01:05:13] Speaker 04: The easement is not itself the appropriate trackage. [01:05:16] Speaker 04: Where do you get that? [01:05:17] Speaker 00: Because the easement itself said... Where do you get that out of the documents? [01:05:24] Speaker 00: I thought that was a point on your brief that was a little weak. [01:05:29] Speaker 04: Well, I get it from the easement itself, which says that the purpose of this easement is to carry out the purposes of the 1976 act. [01:05:38] Speaker 04: And this, I think, gets back to what I've told Judge Rao, which is that the easement is one way in which you can embody the appropriate trackage rights, but it is not the appropriate trackage rights. [01:05:48] Speaker 04: And I don't think SEPTA can point to anything that says otherwise. [01:05:50] Speaker 04: There's nothing in the final system plan that says Conrail gets an easement. [01:05:55] Speaker 00: No, no, my question is what do you point to to exclude commuter easement from the term appropriate trackage? [01:06:04] Speaker 04: Because appropriate. [01:06:06] Speaker 04: It's appropriate trackage rights for the operation of commuter services on all rail lines used by Amtrak and then there's a bunch of language that follows it. [01:06:14] Speaker 04: Nothing in that requires an easement, nothing. [01:06:16] Speaker 01: I guess your thought is that an appropriate track is right. [01:06:20] Speaker 01: It's at Amtrak's election, whether they give an easement or some other embody it in some other legal way. [01:06:27] Speaker 04: Through a process of negotiation. [01:06:29] Speaker 04: Absolutely. [01:06:30] Speaker 04: And I think throughout all of these statutes, the 76 act, the 1981 act, Congress used the language of negotiations because although Congress was trying to reorganize passenger rail in America, they were attempting to do it through a [01:06:45] Speaker 04: group of at least nominally private for-profit corporations. [01:06:51] Speaker 04: Now, of course, all of these corporations were in many ways reliant on the government for their operations, but Congress wanted this to be done through systems of negotiation and planning and working it out among the parties. [01:07:03] Speaker 04: So it did not say, you must give them an easement. [01:07:06] Speaker 04: It said, you must give them appropriate trackage rights and then has silence following that. [01:07:12] Speaker 04: And into the silence comes negotiation. [01:07:18] Speaker 01: So your view is that nothing precludes Amtrak from embodying trackage rights to Conrail in an easement, but then when SEPTA comes along... It doesn't have to do it the same way. [01:07:30] Speaker 01: Doing it in a different way. [01:07:31] Speaker 01: Right, and that's why... And that's Amtrak's choice. [01:07:33] Speaker 04: That's right, and that's why it wrote in the option into Conrail's easement, which what in effect it does is it says, all right, Conrail, you get an easement. [01:07:44] Speaker 04: but you can't give this easement to someone else except the successor, an affiliate or a subsidiary. [01:07:50] Speaker 04: Um, that entity has to come along and work with us. [01:07:54] Speaker 01: Practically. [01:07:55] Speaker 01: Right. [01:07:55] Speaker 01: So if SEPTA has the right to acquire, um, these trackage rights from Conrail and the way Conrail has these rights is through an easement. [01:08:06] Speaker 01: You know, what can Conrail give to SEPTA? [01:08:09] Speaker 01: That's not the easement. [01:08:11] Speaker 04: I think it could. [01:08:12] Speaker 01: Because they have the right from Conrail, not from Amtrak itself. [01:08:17] Speaker 01: And what Conrail has is the easement. [01:08:19] Speaker 01: So what would SEPTA be able to get if it couldn't get the easement from Conrail? [01:08:28] Speaker 04: Well, but I think that it could get a lease, I think, over those rights. [01:08:36] Speaker 04: It could have a right to access, perhaps, through the lease. [01:08:41] Speaker 04: To the extent Conrail agreed to the option, and it then merges in back to Amtrak, what then comes about is you have to approach Amtrak. [01:08:52] Speaker 03: You have to what? [01:08:53] Speaker 04: I didn't hear the last... You have to go then back to Amtrak to get the appropriate track address. [01:09:00] Speaker 03: So you're back to negotiating with Amtrak as your position? [01:09:04] Speaker 03: Yes, and it's not as if Amtrak- No matter what, your position is no matter what path you pursue, no matter what Congress says, you have to negotiate with Amtrak. [01:09:18] Speaker 04: No, Congress could say the easement must be transferred or you're entitled to trackage rights in an easement, but Congress didn't do that. [01:09:26] Speaker 04: So what your left is, is with negotiating with Amtrak. [01:09:29] Speaker 04: And of course Amtrak can't be obstinate because there's always the surface transportation board to break the tie. [01:09:34] Speaker 04: or to break the impacts. [01:09:37] Speaker 03: Anything further? [01:09:40] Speaker 00: Does the whole case come down to the question whether trackage rights includes an easement? [01:09:49] Speaker 04: I'm not sure if the whole case comes down to that, Judge Silberman, but I think it's one of the elements of the case. [01:09:54] Speaker 00: No, but my point is if an easement is included within the term trackage rights, [01:10:03] Speaker 00: Don't you lose. [01:10:04] Speaker 04: I think if that you find that this easement is within the term trackage rights, then I have a much harder time. [01:10:19] Speaker 04: Unless the court has further questions. [01:10:22] Speaker 03: Thank you. [01:10:23] Speaker 03: All right. [01:10:23] Speaker 03: Council for septum. [01:10:33] Speaker 05: Thank you, your honor. [01:10:34] Speaker 05: I want to pick up on that last point because I think it is key. [01:10:38] Speaker 05: The commuter easement are the trackage rights. [01:10:41] Speaker 05: They are the rights to use the tracks that Conrail created and reserved for itself when it conveyed the rest of the fee interest along with the freight easement, by the way, when they conveyed the fee interest to [01:10:54] Speaker 05: to Amtrak. [01:10:55] Speaker 05: Those are the trackage rights. [01:10:56] Speaker 05: They are the appropriate trackage rights, because that's what Amtrak and Conrail designated as the appropriate trackage rights. [01:11:04] Speaker 05: It makes no sense to say that we can't get the same rights, except to can't get the same rights that Conrail had. [01:11:11] Speaker 05: That was the point of the transfer. [01:11:13] Speaker 05: That was the point of Section D. When I say transfer, I mean the 1981 statute transfer. [01:11:19] Speaker 05: That was the point of Section D. And at the time that Section D was written, there really weren't any [01:11:24] Speaker 05: trackage rights as such because that was before the division of property between the various railroad entities. [01:11:32] Speaker 05: So it was by definition forward-looking and by definition gave the commuter authorities the right to obtain the appropriate trackage rights. [01:11:41] Speaker 05: And I don't understand how you can say that the appropriate trackage rights aren't the very same embodiment of the statute of the easement of the rights in the easement. [01:11:52] Speaker 01: Surely there are other trackage rights besides the [01:11:55] Speaker 05: There are. [01:11:56] Speaker 05: And as Mr. Morata conceded, trackage rights could take the form of an easement. [01:12:03] Speaker 05: And they did. [01:12:03] Speaker 05: That is how the trackage rights were embodied. [01:12:07] Speaker 01: So why shouldn't Amtrak have the ability, though, to decide that it will give over appropriate trackage rights in some way other than itself? [01:12:16] Speaker 05: And really, this gets back to the 1981 Act. [01:12:18] Speaker 05: What we're talking about here is continuity of service under a revised scheme, with Conrail left the picture. [01:12:27] Speaker 05: In the original final system plan in 1976, the idea was the Conrail will do it. [01:12:31] Speaker 05: Here's all the rights that Conrail needed and that were granted to it and that needed to do its service. [01:12:37] Speaker 05: In 1981, Congress said all that needs to switch over to either a local commuter authority or Amtrak commuter at the commuter authority's election. [01:12:45] Speaker 05: SEPTA elected and it said, we want the same things that Conrail had and Conrail gave those to them. [01:12:52] Speaker 03: Council, you agree that last clause. [01:12:56] Speaker 03: Is that in the statute? [01:12:59] Speaker 05: I beg your pardon, Your Honor, I'm sorry. [01:13:00] Speaker 03: No, I mean, you said you want continuity so the local SEPTA can negotiate with Amtrak. [01:13:10] Speaker 03: That's all it says, right? [01:13:14] Speaker 05: Yes. [01:13:14] Speaker 05: Well, no, earlier in the Thicket Section 1136 and certainly in the [01:13:22] Speaker 05: I'm sorry, I didn't bring my agenda up, but in the initial section, it says the goal of this is to terminate conrails operate computer operations and transfer it to an appropriate computer authority. [01:13:32] Speaker 05: And the process that it set up to do that in 1137 is how it affected that. [01:13:38] Speaker 05: And as we talked about before, through the process that at SEPTA's initiation, [01:13:44] Speaker 05: the parties agreed to designate the commuter easement and other assets for transfer to SEPTA to allow SEPTA to continue the same operations, which is what Congress ultimately wanted was to continue commuter operations under a different operator than Conrail. [01:14:01] Speaker 03: So did you just speak in referring to 507, you meant 506? [01:14:05] Speaker 03: I don't see 507 in your statutory agenda. [01:14:16] Speaker 05: I'm sorry, I meant 1137. [01:14:19] Speaker 03: You meant 11. [01:14:20] Speaker 05: 1137 when I was talking about the transfer. [01:14:28] Speaker 03: Where is 1137? [01:14:30] Speaker 05: On page 76. [01:14:31] Speaker 03: So that's section 506. [01:14:37] Speaker 05: Yes, I'm sorry. [01:14:39] Speaker 03: Let's refer to the same thing the same way for just help us understand what's going on here. [01:14:48] Speaker 05: My basic point is that the point of the 1981 act was to affect the transfer of Conrail's commuter operations to local commuter authorities if they so elected, except it did so elect. [01:15:05] Speaker 05: SEPTA and Conrail agreed to the properties to be conveyed, which included the commuter easement, which makes perfect sense because SEPTA was taking over the exact same operation as Conrail to affect the same purpose that Conrail was created to do, which is to provide commuter rail service. [01:15:21] Speaker 05: There's no reason why Amtrak and SEPTA need to start all over when this was just an assumption of interest. [01:15:29] Speaker 05: And I want to make another point because it relates back to the option terms itself. [01:15:33] Speaker 05: Mr. Morata agreed that Amtrak Commuter was considered Conrail's successor. [01:15:42] Speaker 05: And yet, the 1981 Act refers to Amtrak Commuter and local operating authorities like SEPTA as equals. [01:15:49] Speaker 05: If Amtrak Commuter is a successor, in this case, so must SEPTA be considered a successor because it succeeded to Conrail's operations in exactly the same way that Amtrak Commuter would have. [01:16:01] Speaker 05: And as far as for the election point, I think the broader point here is that Conrail was being put out of business. [01:16:10] Speaker 01: I just have, or at least for my part, just one final question. [01:16:14] Speaker 01: Can you point to something in the statute or the final plan that precisely says that SEPTA, with respect to acquiring these trackage rights, sort of gets to step into the shoes of Conrail as opposed to negotiating with Amtrak separately? [01:16:28] Speaker 05: Well, it's that in section 506 and the property transfer. [01:16:34] Speaker 01: No, we're not talking about the 1981 act. [01:16:36] Speaker 01: We're talking about the final plan. [01:16:39] Speaker 05: Oh, I'm sorry. [01:16:39] Speaker 05: Well, the final plan. [01:16:41] Speaker 01: Or in the statute that, you know. [01:16:44] Speaker 05: Well, it would be section D, which allows SEPTA to acquire the appropriate trackage rights and use some property interests in the stations to carry out the commuter operations. [01:16:54] Speaker 05: And in the final system plan, of course, in that case, they weren't contemplating the elimination of Conrail service and succeeding to that by the local commuter authority. [01:17:06] Speaker 05: So it's a different context. [01:17:08] Speaker 05: But I think the point is that, and I want to put a little bit of context on this, at all times, SEPTA was paying, either Conrail was paying at the time Conrail for the service. [01:17:19] Speaker 05: It wasn't being offered for free by Conrail. [01:17:22] Speaker 05: So when SEPTA takes it over, it's really just taking over operation of its own service, as opposed to contracting out for it with either Conrail or as an option with Amtrak Commuter. [01:17:32] Speaker 05: So it always was SEPTA's service. [01:17:36] Speaker 05: It was a question of who was actually operating it. [01:17:38] Speaker 05: In the 1981 act, Congress gave the option to operate it not to Conrail, but to either SEPTA or, at SEPTA's election, Amtrak Commuter. [01:17:48] Speaker 00: I think that's- Just one more question I have. [01:17:51] Speaker 00: make sure I understand. [01:17:53] Speaker 00: Your position is the transaction between Conrail and Amtrak, whereby Conrail maintained an easement with Amtrak getting the option. [01:18:18] Speaker 00: Your position is that was illegal. [01:18:22] Speaker 05: My position is there's two positions, one under the facts. [01:18:26] Speaker 05: Their option was never triggered because I really did not make an election. [01:18:30] Speaker 00: And I'm not very impressed with that argument. [01:18:34] Speaker 05: And secondly, that the the option was unenforceable as against [01:18:40] Speaker 05: as against SEPTA because SEPTA was acting pursuant to either Section D and or the 1981 Act. [01:18:47] Speaker 00: Well, it would have been true. [01:18:49] Speaker 00: It would have been unenforceable against any computer company, right? [01:18:53] Speaker 05: Well, in this case, I suppose basically it's an illegal option. [01:18:59] Speaker 05: I could imagine, I'm not really fundamentally, I don't disagree with that. [01:19:04] Speaker 05: I'm just saying there could have been a particular purchaser who, for whatever reason, it would not have been contrary to Congress's plan. [01:19:12] Speaker 05: I don't know what that would be. [01:19:13] Speaker 05: But yes, the option was unenforceable, especially if CEPTA wanted to acquire it, the easement. [01:19:21] Speaker 00: Conrail plays an interesting role in this whole process. [01:19:26] Speaker 00: They seem to be on all sides of everything. [01:19:29] Speaker 05: Well, Congress put them in the middle and then Congress took them out and left it. [01:19:34] Speaker 05: And then it said, SEPTA, you take, essentially SEPTA, you take over from Conrail. [01:19:38] Speaker 05: And that's exactly at all we really are trying to do here and to continue the service on the same terms. [01:19:45] Speaker 05: Thank you. [01:19:47] Speaker 03: All right. [01:19:47] Speaker 03: Thank you, counsel. [01:19:49] Speaker 03: We'll take the case under advisement.