Appeal from order of the United States District Court for the Southern District of New York, Lloyd F. MacMahon, Judge, dismissing the petition of a group of creditors for reorganization of a debtor corporation under Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq. Affirmed.
Clark, Associate Justice,*fn* and Moore and Mulligan, Circuit Judges.
Four companies, REA Holding Corporation, The Express Company, Inc., REA Express, Inc., f/k/a Railway Express Agency, Inc. and Rexco Supply Corporation (collectively referred to as "REA"), have been adjudicated as bankrupts. Out of the welter of charges and countercharges a few salient facts emerge. For many years prior to 1975 REA had been engaged in the express shipping business in the United States by land and by air, and to some extent internationally. Its Railway Express Agency trucks were a common sight to the American public. It operated under both Interstate Commerce Commission (ICC) and Civil Aeronautics Board (CAB) authority.
Unlike the Biblical seven fat years alternating with seven lean years,*fn1 for some 30 years REA's were all lean with a modest exception in 1974. The natural consequence of such financial debility was the filing of a petition for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. § 701 et seq., which occurred on February 18, 1975. Honorable John J. Galgay, the Bankruptcy Judge in charge of these proceedings, by order permitted the Bankrupts to continue to operate their business as Debtors-In-Possession. A Creditors Committee (confirmed April, 1975), in cooperation with the Bankrupts, endeavored by operating economies to restore REA to a profitable operation. One of the economy measures was a motion to reject a contract with the Brotherhood of Railway and Airline Clerks (BRAC), a union of which most employees were members. From the time of the motion until ultimate rejection of the contract, the BRAC employees were paid only 90% of their then going wage and no vacation or holiday pay. These deficits constitute the bulk of the large claims which the BRAC employees assert and are the source of the claims of the ten petitioning creditors in this proceeding.
Despite high hopes and substantial economies, REA continued to suffer losses which during the Chapter XI proceeding - February 18, 1975 through September 28, 1975 - amounted to some $15,790,000 with a discouraging prognostication of additional losses of some $5,681,000 for the next three months (October through December).
Unable to meet their payrolls, the bankrupts on November 6, 1975 requested that they be adjudicated bankrupt. Then ensued rapid developments. On November 6, 1975 the bankruptcy order was signed and entered. The next day, C. Orvis Sowerwine, Esq. was appointed and qualified as Trustee. The Trustee straightaway proceeded to collect claims and to liquidate the bankrupts' assets - including terminals and rolling stock - so that REA had no operating facilities. There remains, however, REA's "operating authorities" - rights obtained through the ICC and CAB to operate various routes.
In the liquidation process, these operating authorities were put up for sale. Six hearings were held before the Bankruptcy Judge during the period from June 23, 1976 to July 9, 1976. Judge Galgay, in an opinion and order dated July 16, 1976, held that of the four*fn2 proposals submitted for the acquisition of REA's operating authorities, customer lists and trade names and marks, the Alltrans Express - U.S.A. proposal was the "best offer": that it represented "a fair and reasonable value for the Property"; that "acceptance of the Alltrans offer is in the best interests of the bankrupt estate"; and that it "provides the probability of the greatest realization to the bankrupt estate from the sale of the property".
The Bankruptcy Judge had eliminated All Truck and ABC as submitting either partial or contingent offers, so that the choice was between Alltrans and REAEMCO. In the July 16, 1976 order, the Judge found in favor of Alltrans and directed the Trustee to accept the Alltrans offer and to prepare a contract for submission to, and approval by, the Judge. An appeal from this order is pending before Judge Werker.
Although not particularly material to the narrow issue before us, a word about Alltrans and REAEMCO may not be amiss.
Alltrans is represented to be a subsidiary of Thomas Nationwide Transport, Ltd., with consolidated assets of $190,000,000. Pursuant to its proposal, Alltrans was to pay the bankrupts $2,500,000 in cash upon ICC approval of a temporary transfer to it of the operating authorities. Additionally, pending decision on a permanent transfer, Alltrans would make interim payments of certain percentages of gross revenues over a ten year period. If such approval of a permanent transfer were obtained, Alltrans and Thomas together guaranteed payments of at least some $9,500,000.
REAEMCO was organized in the interest of REA's employees who desired to continue to operate REA. It was without funds and without operating facilities. Its chief asset was "hope" and a hypothetical plan portrayed in minute detail during 3 1/2 days of testimony by an acknowledged expert in the transportation field, Mr. F. Ralph Nogg. It was Mr. Nogg's opinion that $3,000,000 would be needed at the outset; that equipment could be rented or purchased by the employees; that employees could contribute 10% of their salaries; and that large anticipated profits might enable substantial payments to be made to creditors. However, no part of the REAEMCO plan called for the production and presentation of new money because there was none.
Thereafter, a group of ten former REA employees, as creditors (claims aggregating $22,000) filed a petition for reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C. § 501 et seq. That petition, assigned to District Judge Lloyd F. MacMahon, was referred to Bankruptcy Judge Galgay who since February 18, 1975 had been thoroughly familiar with all the facts and proceedings in connection with the bankrupt estate. Judge Galgay held a hearing on the petition on September 27, 1976. It is on that occasion that appellants claim that they were deprived of a fair hearing. The deprivation, however, is that Mr. Nogg was not permitted to repeat his contention that "the reorganization of REA would be feasible". (Appellants' Brief, p. 13a). But the Bankruptcy Judge considered all of the testimony and exhibits from ...