available without having to send men out in the field to determine what are the actual sales of property of a similar type adjacent to it. Then, on page 52, in lines 12 and 13, I recommend strongly the elimination of the words "of any sale at not less than a fair upset price." Bear in mind that you are going to have two kinds of cases under this bill, section 77 cases and equity receiverships.

The court in all cases, after hearing, has got to approve a plan that is fair and equitable. In the case of a sale they have to approve a plan that is fair and equitable. The upset price is a matter of small importance if the plan is fair and equitable. With these words in, as a practical matter the procedure will be delayed. The court, even though it has found the plan is fair and equitable, cannot order the sale at the upset price without referring to the Commission the matter of the upset price. It may take the Commission 6 months or a year to determine the upset price. It is unnecessary, and I suggest that it be left out.

Mr. MICHENER. Just leave the price to the court?

Mr. CLAY. Yes, sir.

Mr. CHANDLER. We will adjourn until Wednesday at 10 o'clock. (Thereupon, at 4:15 p. m., the special subcommittee adjourned until Wednesday, June 21, 1939, at 10 a. m.)

RAILROAD REORGANIZATION

WEDNESDAY, JUNE 21, 1939

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The committee met, pursuant to adjournment, at 10:25 a. m. for further consideration of S. 1869, Hon. Walter Chandler presiding. Mr. CHANDLER. The committee will come to order. We are going to hear Commissioner Eastman this morning and, Mr. Commissioner, we want to thank you for your report to the committee.

STATEMENT OF HON. JOSEPH B. EASTMAN, COMMISSIONER OF THE INTERSTATE COMMERCE COMMISSION AND CHAIRMAN OF THE LEGISLATIVE COMMITTEE OF THE COMMISSION

Commissioner EASTMAN. Mr. Chairman, and gentlemen of the committee, my name is Joseph B. Eastman. I am a member of the Interstate Commerce Commission and chairman of its legislative committee. In the case of this bill a report on behalf of the Commission has been made to your committee. That report was sent in yesterday, dated June 19.

Some differing views are expressed in that report on behalf of various members of the Commission, and I shall, in what I have to say, stick quite closely to that report, indicating where I depart from it, because I wish to present the views of the majority of the Commission and also to make clear where there is a difference of opinion. I may say, however, that, so far as the objective of the bill is concerned the Commission has no quarrel with it. We understand that the objective of the bill is to improve the reorganization procedure and to produce sound financial reorganizations of the roads which are in bankruptcy and receivership, and with that intent we are in hearty accord. The criticisms that we have to offer will be from the point of view of what we think the actual results might be as contrasted with the objective.

You have had so much discussion of this bill at your hearings that it is unnecessary for me to describe it, nor shall I go into the details of the bill. We did not, in fact, discuss any of the details in this report, because we deemed that unnecessary. My remarks will be confined to what we regard as the two major features; first, the creation of a special Railroad Reorganization Court and, second, the question of the standards to be applied by the Commission in the work which is assigned to it by the bill.

Now, with respect to this matter of the Reorganization Court, I think it might be well at the outset to say something about the general attitude of the Commission upon that matter.

It happens that away back in 1933, January 1, 1933, when this matter began, that is, when section 77 of the Bankruptcy Act was first being proposed and under consideration, we made a report which I signed in behalf of the legislative committee of the Commission to a subcommittee of the Senate Committee on the Judiciary. Now, that report contained this statement:

As a preliminary to this discussion, it should also be stated that the Commission has no ambition to have further duties with respect to reorganization plans, realizing that very difficult questions are involved and that the work is likely to be worse than thankless. So far as we may recommend or approve the imposition of additional duties of this character upon the Commission. it will be motived by two facts: First, that the Congress has already entrusted the Commission with final responsibility for the protection of the public interest with respect to the issue of railroad securities, and the very essence of railroad reorganizations is the issue of new securities; and second, that because of this jurisdiction and its other duties, the Commission has greater acquaintance with railroad affairs and more complete information with reference thereto than any court or any other public body possesses, and it also has the assistance of a staff of accounting and financial experts.

That was our attitude in 1933, and the Commission is of similar mind now. It has no pride of possession or power, so far as its present duties under section 77 are concerned. They are burdensome and exceedingly difficult. The Commission has no disposition to resist the curtailment or modification of these duties, or the transfer of a greater measure of responsibility to another agency of the Government, out of any personal feelings with respect to the matter. On the contrary, from that point of view it would welcome such action. Such criticisms as we have to offer of the proposed legislation, therefore, are based upon consideration of its practical results and their relation to the public interest.

Now, there are four of the Commissioners who go further than that with respect to this matter of the court. Commissioner Splawn has indicated that he stands by the testimony that he gave before this committee in regard to the entire bill. The other separate expressions by Commissioners Aitchison, Caskie, and Alldredge are of the same general purport, and I think by reading Commissioner Aitchison's statement, which is the longest of the three, I can indicate their point of view. He states:

I do not feel it is within the competency of the Commission as an adminis trative body to attempt to advise Congress as to the proper framework of the judicial branch of the Government. Nor do I feel that I have sufficient personal knowledge to warrant an expression as to whether the district courts as now constituted or some special court can best perform the judicial duties which Congress under the bankruptcy clause may deem it necessary to entrust to the judicial branch of the Government. I know of nothing which suggests the need for change, as far as the jurisdiction of the courts is concerned: If there he reasons therefor, they are not within my official knowledge, and my personal views are of no consequence. It is important that any legislation which may be enacted shall define with the utmost possible clarity the line of differentia tion between the judicial and administrative functions, and that overlapping of jurisdiction and conflict may be avoided. There has been little of that under the existing law, and doubtless whatever judicial machinery may be provided by Congress, the Commission will continue to function in harmony with the

Federal court or courts.

Chairman Caskie and Commissioner Alldredge stated more briefly similar views, both indicating that they were not in a position to take a position either for or against the creation of the new court. So far as the majority are concerned, their attitude may be indicated by this passage from the letter which we sent up yesterday: Whether or not a new court should be created for the performance of judicial duties under the bankruptcy clause is not a question upon which the Commission should undertake to advise the Congress. We believe, however, that your committee desires, and is entitled to, such views as the Commission may have, as a result of its experience under section 77, with respect to the practical effect which the creation at this time of a Railroad Reorganization Court such as is proposed might have upon the administration of the bankrupt railroad properties and their financial reorganization. We shall express only such views. Now, from that standpoint, it seemed to the majority of the Commission that there were two main questions to which you should give consideration, that is, from the standpoint of the practical effect of the creation of a new court at this time. The first question is one upon which we do no undertake to express any opinion, but we merely bring it to the attention of the committee, as no doubt it has been brought by others, in connection with the hearings. Quoting from the letter:

The district judges who now have jurisdiction are so located that they are, in cach instance, in close contact with the operating officials of the railroad. A multitude of administrative matters relating to the operation of the property require their attention

We make there a distinction between administrative matters relating to the operation of the property and the determination of the plan of financial reorganization

and they are in a position to act readily and promptly. This would not be true of a single court with headquarters at Washington. To meet this situation, the bills provide that the Reorganization Court may delegate duties with respect to operation and like matters to the district courts. However, the Reorganization Court would retain the right to review each and every act of a local judge under such delegated powers. How well such a system of delegation subject to review would work as a practical matter is a question. We shall not hazard an opinion on this question, but there are many others who have been in close touch with this phase of bankruptcy or receivership procedure who should be able to give your committee well-informed advice upon it.

A related question has to do with the selection of trustees. They should, preferably, be chosen from the territory immediately concerned, and ability and character of an unusual order are required. When it had the duty of naming a panel of trustees, the Commission had some difficulty in locating with confidence, from Washington, men throughout the country with the necessary qualifications.

In other words, we could not personally know those men in most cases, and we had to depend upon what we heard about them from others.

A single court sitting in Washington might have similar difficulty, and we can predict from experience that it would be deluged by requests for the consideration of particular candidates for these lucrative positions. Theoretically, local district judges should be better situated to make appropriate selections. Practically, the Reorganization Court might, dependent upon the quality of its membership, select better trustees than some district judges. We have no confident opinion as to what the relative results would be, but merely bring the question to the attention of your committee.

Now, a much more important question, it seems to us, is whether even if it be assumed that it would have been desirable in 1933, when