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PORT AUTH. BONDHOLDERS PROTECTIVE COMM. v. PORT OF

July 7, 1967

PORT AUTHORITY BONDHOLDERS PROTECTIVE COMMITTEE, Henry W. Klein, and Alvin S. Lane, Plaintiffs,
v.
PORT OF NEW YORK AUTHORITY, Defendant



The opinion of the court was delivered by: TYLER

TYLER, District Judge.

 In this non-diversity action, plaintiffs, bondholders of the defendant Port of New York Authority ("Port Authority") sue, in their own behalf and for all bondholders similarly situated, for breach of contract and seek declaratory judgment and injunctive relief. *fn1" Defendant moves to dismiss for lack of subject-matter jurisdiction.

 The facts relevant to the disposition of this motion are relatively uncomplicated. In 1921, New York and New Jersey entered into a compact under which the Port Authority was formed and was authorized to purchase, construct, lease and operate "any terminal or transportation facility" and "for any of such purposes to own, hold, lease, and/or operate real and personal property." L. 1921, ch. 154, § 1, art. VI, McK.Unconsol. Laws § 6407. The compact was duly approved by Congress (42 Stat. 174) as required by the United States Constitution, Article I, Section 10. *fn2"

 In 1962, the legislatures of New York and New Jersey passed concurrent legislation under which the Port Authority was authorized to construct a "World Trade Center" in Manhattan. This legislation was not submitted for approval nor was it approved by Congress.

 As indicated above, plaintiffs hold bonds issued by the Port Authority. As holders of the bonds, they are protected by various covenants made by the Authority. *fn3" One such covenant is that that body will

 
"fully and faithfully * * * perform all duties required by the Constitutions and Statutes of the United States and of the States of New York and New Jersey, and by the Compact of April 30, 1921, between said two States with reference to all facilities the net revenues of which are pledged as security for Consolidated Bonds, - those hereafter established, constructed or acquired by it, as well as those presently owned, leased or operated by it." (Consolidated Bond Resolution (Adopted Oct. 9, 1952), Section 12(a)).

 At the present time, interest on the bonds is exempt from federal income taxes. General Counsel and Bond Counsel for the Authority have specifically stated that "such interest is, under the existing Acts of Congress, exempt from present Federal income taxes * * *." " Tax Exemption", Official Statement - The Port of New York Authority, March 22, 1967, p. 25.

 Jurisdiction of this court, which defendants contest by this motion, is said to be based upon several grounds, three of which should be discussed with some specificity.

 I.

 First, plaintiffs maintain that because this is an action involving the construction of an interstate compact which has been consented to by Congress pursuant to the Constitution, this court has jurisdiction over the controversy pursuant to 28 U.S.C. § 1331(a). To support this proposition, they cite Petty v. Tennessee-Missouri Bridge Comm'n, 359 U.S. 275, 79 S. Ct. 785, 3 L. Ed. 2d 804 (1959), in which the majority of the Supreme Court and the dissent agreed that the construction of a compact gives rise to a "federal question". 359 U.S. at 278 and 285, 79 S. Ct. 785, 3 L. Ed. 2d 804. Both the majority and dissenting opinions relied upon Delaware River Joint Toll Bridge Comm'n v. Colburn, 310 U.S. 419, 60 S. Ct. 1039, 84 L. Ed. 1287 (1940), to support this proposition.

 I cannot agree with plaintiffs. Neither the Petty nor the Colburn cases had a procedural stance similar to that of the case at bar. In Petty, suit was brought in the District Court for the Eastern District of Missouri under the Jones Act, 46 U.S.C. § 688. Accordingly, the issue of whether or not a federal district court had original jurisdiction over the controversy solely on the basis of the presence of a question involving the construction of a compact was not before the court.

 The Colburn case can be properly distinguished on a similar rationale. That case came before the Supreme Court on certiorari from the highest court of New Jersey. Thus, as in Petty, the Supreme Court did not have before it an issue relating to the original jurisdiction of the federal district courts.

 Counsel have not supplied and I have not found any Supreme Court or Circuit Court of Appeals decision which deals directly with the instant issue. As at least one commentator has noted, however, there is authority at the district court level that the "district courts will not hear compact questions under their federal question jurisdiction." Engdahl, Construction of Interstate Compacts: A Questionable Federal Question, 51 Va.L.Rev. 987, 988 (1965). For example, in Rivoli Trucking Corp. v. American Export Lines, Inc., 167 F. Supp. 937 (E.D.N.Y.1958), Judge Zavatt stated that "neither the [Waterfront Commission] Compact between the States of New York and New Jersey nor the Act of Congress consenting thereto are laws or treaties of the United States within the meaning of 28 U.S.C. § 1331." 167 F. Supp. at 939. The same result was reached in Delaware River Joint Toll Bridge Comm'n v. Stults, 146 F. Supp. 241 (D.N.J.1956). The compact there involved was between New Jersey and Pennsylvania. Plaintiff invoked the jurisdiction of the district court on the ground that the matter in controversy arose under the Acts of Congress approving the compact and amendments thereto. The court analyzed the complaint and concluded that the action was "the ordinary action in assumpsit for money had and received in which the local law is determinative of both the rights of the plaintiff and the liability of the defendants. There is obviously no federal question." 146 F. Supp. at 242. In the present case, this conclusion can be properly applied to all but one of the allegations of breach of covenant involved herein since the merits of such allegations must be determined in terms of state contract law. *fn4"

 The final case to be considered in this area is Delaware River Joint Toll Bridge Comm'n v. Miller, 147 F. Supp. 270 (E.D.Pa.1956). The plaintiff commission sued the two defendants, members of the commission, for the recovery of amounts alleged to have been paid to each defendant as salaries without legal authority. Plaintiff contended that the federal district court had original jurisdiction because the case arose under the Constitution or laws of the United States as those terms are used in 28 U.S.C. § 1331. Judge Van Dusen noted that plaintiffs' two causes of action were based on state-created rights and stated specifically that no federal "right or immunity is created by an act of Congress consenting to a compact between states." 147 F. Supp. at 274. In a footnote, he explicitly distinguished the Colburn case on the ground that what is a "federal question" for purposes of certiorari is not necessarily a "federal question" for purposes of the original jurisdiction of the federal district courts under 28 U.S.C. § 1331. 147 F. Supp. at 274 n. 14. Such reasoning seems sound, and I do not believe ...


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