A federal bankruptcy judge yesterday rejected attempts by two railroads to cut off Auto-Train Corp.'s access to tracks and key services they provide, saying that those services are necessary for the financial reorganization of the troubled company.
U.S. Bankruptcy Judge Roger M. Whalen ruled that Auto-Train must make periodic payments "to the extent that funds are available" to the Seaboard Coast Line Railroad Co. and the Richmond, Fredericksburg and Potomac Railroad Co., which attempted to prevent Auto-Train's use of its facilities because the Washington-based railroad owned them $4 million.
But whalen added that Auto-Train may use -- instead of cash -- accounts receivable, such as customers' credit card payment receipts to provide security for payment of weekly operating expenses.
Whalen denied a request from Auto-Train's trustee to reduce certain charges for services provided by RF&P and SCL, saying that such a reduction is in the jurisdiction of the Interstate Commerce Commission.
Auto-Train earlier this month filed a petition for reorganization under federal bankruptcy laws.
"The decision is sensitive to all parties including the railroads and in particular the riding public," Auto-Train bankruptcy trustee Murray Drabkin said yesterday in response to the ruling. "The ruling gives us the breathing space necessary to formulate the reorganization of Auto-Train while at the same time providing a means to achieve uninterrupted service."
A spokesman for SCL said the firm has made no decision and is "still considering the order and its alternatives."
Whalen said in his 17-page opinion, that he rejected SCL's and RF&P's attempts to refuse access to Auto-Tran until paid, partly because Auto-Train has no other comparable services in its sole route between Lorton, Va., and Sanford, Fla., and that the operation of the train is in the public interest.
Auto-Train attorneys, who had requested an injunction against SCL's and RF&P's attempts, argued in a three-hour hearing on Tuesday that unless Seaboard and RF&P are prevented from altering service to the Washington-based railroad, attempts to reorganize Auto-Train are hopeless.
Whalen said that "the services provided by [SCL and RF&P] are vital to the Auto-Train operation, and cessation of such services, as presently threatened by SCL because of substantial defaults, will clearly impede, if not seal the doom of, Auto-Train."
"Unlike most business reorganizations is this country, the nation's railroads -- cast as they are in the shade of the public interest -- present unique and perplexing problems not only for the courts but, as illustrated by the remedial legislation emanating from the now-historic Penn Central reorganization, for the legislature as well," Whalen said.
"While the operations of Auto-Train appear unique in nature," since the system transports passengers and their cars to and from Florida, Whalen said their operations don't involve the movement of commercial freight.
Auto-Train had contended that the two rail lines should allow the trustee's reorganization to be put into place, particularly this fall, when Florida tourism and therefore Auto-Tran's revenues historically rise. An Auto-Train attorney had said that if the operations could continue he would ask the Department of Transportation for a $3 million loan guarantee to be used to pay for a variety of company operations.
"While the ultimate impact on the public interest still remains to be seen, one fact remains paramount at this stage of the reorganization case -- thousands of individual citizens have made and are making reservations on Auto-Train, and a sudden cessation of service at this time would have a deleterious impact on such individuals not to mention the debtor railroad."