FROST & JACOBS2500 CENTRAL TRUST CENTER • POST OFFICE Box 5715 • 201 EAST FIFTH STREET • CINCINNATI. OHIO 45202-4182 • (513) 651-6800DSNNtSJ BAMHOMJ LIl-ANO BRBW«TBR •JAM** * WACHSJOHN K ROMRONALD • HSINLBf*DONALD MOO ROMJAM** M AOAMSWILLIAM O BABKBTT MJOHN • BTITHP1SRCB « CUNhHNOHAM• OMUMOJ ADAM*A1.BBMT • HBBKM •I_AWRBHCS H KVTB. JHT STEPHIN PMH.UPBTHOMAB P MEHNBRTJAMB* K L LAWRENCEROSSRT A OIMUNOCARL! WISTMAN-a«RALD L BALOWINJOHN O PARMBLLRICHARD j i RICK SONPRBOIRICK J MCDAVRANMEIL dANLHJHJOHN H APP«LMICHABL P HUMCHKAMCRICHARD A OBTTVJOHN I* LIATHER*-JOSBPH J. DMHfMRBAMUBL Mew BCOOaVtSSUSAN aHOdAN FALJ.BHJSPPBRY m RUSHTHOMAS A SWOPB

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(513) 651-6939

August 6, 1992

CERTIFIED MAIL - RETURN RECEIPT REQUESTED

Mr. William E. MunoActing Director, Waste Management DivisionU.S. Environmental Protection AgencyRegion V77 West Jackson BoulevardChicago, Illinois 60604-3590

Re: Conrail Rail Yard Site - Elkhart, Indiana - Responseto Unilateral Administrative Order ________________

Dear Mr. Muno:

Frost & Jacobs is counsel to The Penn Central Corporationin regard to its involvement at the above-captioned site. Onbehalf of The Penn Central Corporation, Frost & Jacobs submitsthis response to your letter dated July 7, 1992, which encloses aUnilateral Administrative Order issued under Section 106 of theComprehensive Environmental Response, Compensation and LiabilityAct of 1980, as amended by the Super fund Amendments andReauthorization Act of 1986 (CERCLA) , 42 U.S.C. 9601 fit

Pursuant to Section XXV of the Unilateral AdministrativeOrder, Frost & Jacobs submits this Notice of Intent on behalf ofThe Penn Central Corporation. The Penn Central Corporationrespectfully declines at this time to comply with therequirements, conditions and mandates set forth in theAdministrative Order.

Pursuant to Sections 9606(b) and 9607(c)(3) of CERCLA, ThePenn Central Corporation believes that it has sufficient cause todecline at this time to comply with the Administrative Order.Pursuant to The Penn Central Corporation's Complaint for a

OFFICES IN: CINCINNATI. COLUMBUS AND MIDDLETOWN, OHIO LEXINGTON. KENTUCKY NAPLES. FLORIDA

FROST A JACOBS

Mr. William E. MunoAugust 6, 1992Page 2

Declaratory Judgment filed on March 25, 1992 in the Special Courtestablished under the Regional Rail Reorganization Act of 1973, acopy of which is enclosed herewith and made a part this response.The Penn Central Corporation believes that it has noresponsibility for any response costs incurred, or to beincurred, with respect to the remediation of the above-referencedsite. Further, based on information and belief, The Penn CentralCorporation does not believe that there is credible evidence atthis time to support U.S. EPA's belief that hazardous substanceswere deposited or otherwise released at the above-referenced siteduring the period when it was owned by The Penn CentralCorporation.

If The Penn Central Corporation is unsuccessful inreceiving appropriate relief under its Complaint for aDeclaratory Judgment in the Special Court, and if new informationis revealed which indicates that hazardous substances weredeposited or otherwise released on the above-referenced siteduring the period when The Penn Central Corporation owned theproperty, The Penn Central Corporation is willing to reconsiderits position and at that time would be willing to discuss anappropriate response to the Administrative Order.

If you have any questions concerning this response or wishto discuss it further, do not hesitate to contact theundersigned.

Very truly yours,

FROST & JACOBS•r- r ' , /fjU't'tS. & . L^sy^<*'<--r-f'&->r{_/^.>

t*Pierce E. Cunningham

PEC:dwmEnclosurecc: The Penn Central Corporation (w/Encl.)

Mr. Charles Wilk, Remedial Project Manager (w/Encl.)Ms. Janet R. Carlson, Assistant Regional Counsel (w/Encl.)

3539s

IN THE SPECIAL COURT

FILEDMAR 251993

NANCY MAYER-WHlTTlNGTOrCLER!

REGIONAL RAIL REORGANIZATION ACT OF 1973

THE PENN CENTRAL CORPORATION, :

Plaintiff, t

v. i

THE UNITED STATES OF AMERICA, :CONSOLIDATED RAIL CORPORATION,SOUTHEASTERN PENNSYLVANIA !TRANSPORTATION AUTHORITY ANDTHE NATIONAL RAILROAD PASSENGER.:CORPORATION,

•*Defendants.

COMPLAINTNO.

Precisi Declaratory JudgmentAction Seeking SpecifiedRelief On Ground ThatOpposed Application Of CERCLATo Certain PropertiesConveyed Pursuant To The RailAct Is Inconsistent WithThe Settlement Of And TheOrders And Judgment Of ThisCourt Concluding The PennCentral Valuation Case

Plaintiff The Penn Central Corporation ("Penn

Central"), as and for its Complaint seeking a declaratory

judgment and injunctive relief against defendants the United

States of America (the "government"), Consolidated Rail

Corporation ( "Conrail" ) , Southeastern Pennsylvania

Transportation Authority ("SEPTA"), and The National Railroad

Passenger Corporation ("Amtrak"), alleges as follows i

Nature of Action1. This is an action for a declaratory judgment and

injunctive relief arising from attempts by the government and

other defendants to assert claims against Penn Central for money

damages on account of the contaminated condition of certain

properties owned by its bankrupt predecessor/which were conveyed

to Conrail pursuant to the directives of the Regional Rail

Reorganization Act of 1973, as amended, Pub. L. No. 93-236, 87

Stat. 986, (the "Rail Acf'jyithe compensation for which was partM\

of the settlement achieved in 1980 in proceedings before this

Court entitled In the Matter of the Valuation Proceedings Under

Sections 303fCM and 306 of the Regional Rail Reorganization Act

of 1973. Misc. No. 76-1 ("Valuation Case"). This Court, by

order filed December 5, 1980, approved the parties' settlement

of the Valuation Case and final judgment was thereafter entered

dismissing with prejudice all claims against Penn Central,

including the claims of the government. The government now

seeks to hold Penn Central liable for money damages arising from

the pre-April 1, 1976 contaminated condition of the Paoli Rail

Yard ("Paoli Yard") in Paoli, Pennsylvania which contamination

was present at the site and known to the government well before

the settlement. Defendants Conrail and SEPTA, as a result of

the government's claims against them arising out of the

contaminated condition of Paoli Yard, also seek to assert

derivative type claims against Penn Central by way of

contribution. Defendant Axntrak is the current owner of Paoli

Yard, and is also a defendant in the government's action

regarding th« Paoli Yard contamination. In another action, the

government has commenced a suit for money damages against

-2-

Conrail arising out of the contaminated condition of the Conrail

Rail Yard ("Elkhart Yard") in Elkhart, Indiana. Defendant

Conrail has issued a third-party complaint for contribution

against Penn Central and seeks to hold it liable for money

damages arising from the pre-April 1, 1976 contaminated

condition of the Elkhart Yard.

2. Penn Central, by this Complaint seeks: (i) a

declaratory judgment that any such claims based upon the

condition of the Paoli Yard or the Elkhart Yard properties are

barred by the settlement of the Valuation Case proceedings and

the final judgment of this Court dismissing with prejudice the

government's claims therein, as well as the dismissal with

prejudice of all claims in the related Tucker Act proceeding

commenced by Penn Central in the United States Claims Court, The

Penn Central Corp. v. United States, No. 334-80C (the "Tucker

Act Case"); (ii) a declaratory judgment that Penn Central is not

liable for the contaminated condition of Paoli Yard or the

Elkhart Yard by reason of the operation and effect of the Rail

Act, the conveyance procedures implemented pursuant to the Rail

Act and the orders of this Court with respect to conveyance by

which Paoli Yard and the Elkhart Yard were transferred to

Conrail "as is" on April 1, 1976; (iii) a declaratory judgment

that the Comprehensive Environmental Response, Compensation and

Liability Act ("CERCLA"), 42 U.S.C. S 9601 e£ SSi-r was not

-3-

intended and cannot be read to permit recovery against PennCentral in these circumstances, and that if so read, itsapplication would be unconstitutional; (iv) a permanent

injunction against defendants and other parties with actualnotice of these proceedings from instituting or attempting to

institute, maintaining or prosecuting any claims against PennCentral arising out of the contaminated condition of Paoli Yard

or the Elkhart Yard. In the alternative, and in the event the

above requested relief is denied, Penn Central seeks an orderreopening the Valuation Case proceedings in this Court as to it,

and permitting it to proceed with a claim under the Tucker Act,28 U.S.C. S 1491, for recovery of the amount by which its

constitutional entitlement to just compensation for its property

conveyed to Conrail pursuant to the Rail Act — as increased to

take into account the values of the Paoli Yard and the Elkhart

Yard in an uncontaminated condition — exceeds the value of the

settlement achieved in the Valuation Case proceedings.

The Parties

3. Penn Central is the reorganized company that

emerged on October 24, 1976 from the bankruptcy reorganization

proceedings of Penn Central Transportation Company ("PCTC").Penn Central is incorporated under the laws of the Commonwealth

-4-

of Pennsylvania and has its principal office in Cincinnati,

Ohio.

4. The United States intervened and actively

participated in the bankruptcy reorganization proceedings of

PCTC, was a party to the Valuation Case proceedings in the

Special Court, was a party to the settlement of the Valuation

Case, and was a party-defendant on Penn Central's claims in the

Tucker Act Case in the United States Claims Court. The

"government parties" as defined in the settlement agreement of

the Valuation Case are the United States and the United States

Railway Association ("USRA").

5. Conrail is a for-profit corporation created

pursuant to the Rail Act §§ 301-08, as amended. Conrail is

incorporated under the laws of the Commonwealth of Pennsylvania

and has its principal office in Philadelphia, Pennsylvania. On

April 1, 1976, PCTC conveyed virtually its entire rail

operations to Conrail. Among the properties conveyed were the

Paoli Yard and the Elkhart Yard. Conrail immediately conveyed

the Paoli Yard to Amtrak. Thereafter, pursuant to an agreement

with SEPTA, Conrail operated commuter service operations at the

Paoli Yard until January 1983.

6. SEPTA is a transportation authority authorized

under Pennsylvania law. It has its principal office in

Philadelphia, Pennsylvania. Conrail operated commuter service

-5-

operations at the Paoli Yard for SEPTA from April 1976 through

December 1982. SEPTA assumed., responsibility for the operation

of commuter services at Paoli Yard in 1983.

7. Amtrak is a for-profit corporation established

under the Rail Passenger Service Act of 1970, 45 U.S.C.

SS 541-48, and is incorporated under the laws of the District of

Columbia. It has its principal office in Washington, D.C.

Amtrak is the current owner of Paoli Yard and has owned the

property since April 1, 1976, when it was acquired from Conrail.

Jurisdiction

8. This Court has jurisdiction pursuant to Rail Act

SS 209(e), 209(g), 303(c) and 28 U.S.C. SS 2201 and 2202.

9. In this action Penn Central seeks declaratory and

injunctive relief with respect to the effect of the Settlement

Agreement in the Valuation Case and the order of the Special

Court approving the settlement and making findings, as well as

the effect of other orders of this Court. Pursuant to Rail ActS 209(g) the Special Court has the power to stay or enjoin any

action or proceeding that is contrary to any provision of the

Rail Act, impairs the effective implementation of the Rail Act

or interferes with an order of the Special Court issued pursuant

to the Rail Act.

—6 —

PCTC Bankruptcy Reorganization

10. The PCTC bankruptcy proceeding commenced on

June 21, 1970 when the bankrupt PCTC filed a petition for

reorganization in federal court in the Eastern District of

Pennsylvania ("Reorganization Court") pursuant to Section 77 of

the Bankruptcy Act of 1898, as amended, 11 U.S.C. $ 205

(repealed 1978).

11. In March 1973, the PCTC Reorganization Court,

noting that "the point of unconstitutionality [for continuing

railroad operations] is fast approaching if it has not already

arrived," ordered the Trustees of PCTC to file with the Court

and the Interstate Commerce Commission ("ICC") either a feasible

plan for reorganization or "their proposals for liquidation or

other disposition of the enterprise" by July 2, 1973. The

Trustees thereafter filed a plan of reorganization which called

for the orderly liquidation of all railroad functions, the rail

lines to be offered first to other viable railroads. The

Reorganization Court ordered the plan to be filed with the ICC,

which rejected it because the Trustees' plan did not provide

concretely for the continuation of essential rail service.

The Rail Act12. Congress thereafter passed the Rail Act, which

became law effective January 2, 1974. Pub. L. No. 93-236, 87

-7-

Stat. 986. Congress enacted the statute in part because it

determined that "essential rail service is threatened with

cessation or significant curtailment because of the inability of

the trustees of [insolvent] railroads [undergoing reorganization

under the Bankruptcy Act] to formulate acceptable plans of

reorganization. This rail service is operated over rail

properties which were acquired for a public use, but which have

been permitted to deteriorate and now require extensive

rehabilitation and modernization." Rail Act S 101(a)(2).

13. Later in 1974 the Reorganization Court determined

that PCTC was not reorganizable "on an income basis within a

reasonable time" under Section 77 of the Bankruptcy Act, and5

pursuant to Rail Act S 207(b), its reorganization would

therefore proceed under the Rail Act.

14. The Rail Act was challenged as unconstitutional

on multiple grounds, including the contention that itsW

provisions required the continued operation of the railroads

covered by its terms in the face of enormous, mounting, and

hopeless losses, without either the prospect of reorganization

within a reasonable time or the assurance of just compensation.

These losses, which included huge amounts of deferred

rehabilitation and maintenance of operating properties, came to

be called "Compensable Unconstitutional Erosion" ("CUE"). The

Supreme Court upheld the Rail Act in Regional Rail

-8-

Reorganization Act Cases. 419 U.S. 102 (1974), in part on the

ground that CUE could be compensated under the Tucker Act.

15. Among the rail properties included in the FSP

were PCTC's rail line and related properties in Chester County,

Pennsylvania, including the Paoli Yard and in Elkhart County,

Indiana, including the Elkhart Yard.

16. As provided in the Rail Act, on March 25, 1976

the Special Court ordered the transfer and conveyance of certain

rail properties to Conrail, including properties of PCTC, as

designated in the FSP and its supplement.

17. On March 31, 1976 the trustees of PCTC and

Conrail entered into a Bill of Sale and Assignment which

conveyed the real property certified by USRA to the Special

Court as part of the Final System Plan ("FSP"), and other rail

assets of PCTC. The Bill of Sale provided that "Grantee takes

the property as is and where is."

18. As part of the conveyance process a deed was

executed in favor of Conrail transferring all of PCTC's interest

in real property in Chester County, Pennsylvania, including the

Paoli Yard and in Elkhart County, Indiana, including the Elkhart

Yard, effective April X, 1976.

19. Pursuant to provisions of the Rail Act S 302, it

was Conrail's responsibility to rehabilitate the rail properties

-9-

conveyed to it as designated in the FSP, including the Paoli

Yard and Elkhart Yard.

20. The Reorganization Court approved a plan of

reorganization in 1978, which was thereafter confirmed, and

entered a Consummation Order and Final Decree, effective October

24, 1978. Pursuant to the plan of reorganization, Penn Central,

the reorganized company, issued a series of securities having a

cascade of priorities. Included among these securities were wseveral which, by the terms of the reorganization plan, were toparticipate in the proceeds of any settlement of the Valuation

Case in the order and to the extent prescribed by the plan of

reorganization. The most junior of the securities was the

Certificate of Beneficial Interest, the only value of which was

its right to participate in the proceeds of the Valuation Case

when, as, if, and to the extent received. The Reorganization

Court specifically addressed the fairness and eguitableness of

the array of securities in the light of the then posture of the

Valuation Case and approved the plan of reorganization after

having examined that question. Upon that approval, the

reorganized company emerged from the PCTC bankruptcy

proceedings.

-10-

The Valuation Case

21. Pursuant to provisions of the Rail Act S 303,

proceedings were held in the Special Court between PCTC, and

later, Penn Central, and the government and USRA to consider and

decide the value of the conveyance of the PCTC's property as

designated in the FSP and conveyed to Conrail on April 1, 1976.

22. The Rail Act required the Special Court, giving

due consideration to the findings in the FSP, to decide whether

the conveyances of rail properties pursuant to the FSP in

exchange for the consideration provided by the FSP and the Rail

Act, were (i) "in the public interest and . . . fair and

equitable to the estate of each railroad in reorganization in

accordance with the standard of fairness and equity applicable

to the approval of a plan of reorganization or a step in such a

plan under Section 77 of the Bankruptcy Act" and (ii) "more fair

and equitable than is required as a constitutional minimum."

Rail Act SS 303(c)(1)(A),(B). The Rail Act empowered the

Special Court to adjust the compensation to PCTC based upon its

findings, and thereafter to make appropriate provisions for the

payment of compensation by way of Conrail stock and other

securities, and certificates of value issued by USRA.

23. The proceedings to consider the amount of

compensation to which PCTC and other bankrupt railroads were

-11-

entitled as a result of the Rail Act conveyances were known asthe Valuation Case, and commenced in 1976. For four years

thereafter/ the parties addressed and vigorously litigated

numerous substantial and difficult issues before this Court

relating to the value of the properties conveyed to Conrail,including such issues as Constitutional Minimum Value, Net

Liquidation Value and CUE, all of which were the subject of

extensive proofs submitted by the parties and determination by N—•

this Court.

24. On June 30, 1980 Penn Central commenced an action

against the government in the United States Claims Court under

the Tucker Act, 28 U.S.C. S 1491, seeking judgment in its favor

for the amount by which its entitlement to just compensation for

its properties conveyed pursuant to the Rail Act exceeded the

value of the relief it was to be awarded by the Special Court in

the Valuation Case. That action was immediately stayed pending

resolution of the Valuation Case.

The Settlement:

25. A settlement of the proceedings before the

Special Court on the value of PCTC's conveyances to Conrail was

achieved by the parties on November 16, 1980 subject to this

Court's approval. Settlement Agreement Among The United States

of America, United States Railway Association, The Penn Central

-12-

Corporation and Certain Affiliates, dated November 16/ 1980

{"Settlement Agreement"). As described by the government in

support of the joint petition~"of the parties to seek approval of

the settlement agreement and to ask the Court to make certain

findings with respect to terms of the settlements

There is ample basis, both procedural andsubstantive, for the requested findings . . .as to the fairness and equity of the terms onwhich settlement is proposed. To begin with,both sides have been represented, both in theproceedings and in settlement negotiations, byskillful counsel and other experts. Thepresent settlement grew out of hard-foughtlegal and evidentiary proceedings andprotracted and vigorous negotiations.

Memorandum of the Government Parties in Support of Joint

Petition for an Order Approving the Settlement Agreement, dated

November 19, 1980, at 13.

26. The government, USRA and Penn Central agreed in

settlement of their disputes that the value of the properties

conveyed by PCTC to Conrail was approximately $1.46 billion,

plus interest, which was to be paid in cash at closing upon the

redemption of the face value of USRA certificates of value. In

negotiating this settlement, Penn Central gave up claims of

constitutional entitlement to additional billions of dollars

relating to the value of the properties conveyed to Conrail and

CUE.

27. The parties also agreed to release claims against

each other as specified in the Settlement Agreement. Thus, the

-13-

government agreed to release, among other things, "any claim

that the terms of transfer or conveyance of Rail Properties by

[PCTC] . . . under Section 303 of the Rail Act were more fair

and equitable than required as a constitutional minimum."

Settlement Agreement, Section 4.04(b) and Exhibit 5.

28. In an order filed December 5, I960, the Special

Court determined and found, among other thingsi (i) that the

settlement "constitutes a fair and equitable compromise of the

claims at issue in this proceeding," and that the stipulations

of the parties as set forth in the order "are reasonable" and

"within the reasonable range of probable outcomes in these

proceedings had such proceedings been litigated to a

conclusion"; (ii) the net liquidation value of the rail

properties conveyed by PCTC to Conrail, as of April 1, 1976, was

as agreed to by the parties; (iii) the transfers and conveyances

and the agreed upon compensation for those properties were "in

the public interest" and were "fair and equitable" to PCTC in

accordance with Section 77, and were "not more fair and

equitable than is required as a constitutional minimum."

29. The order approving settlement provided that

after the closing of the settlement, the "Clerk shall enter a

final judgment dismissing with prejudice the claims of [PCTC]

against the [government] and the claims of the.[government]

against [PCTC]."

-14-

30. The settlement resolved all issues regarding the

condition of the conveyed properties including, among others,

the Net Liquidation Value of the conveyed properties and the

entitlement to and amount of compensation for CUE, and Penn

Central's constitutional entitlement to and amount of

compensation for CUE, and Penn Central's constitutional

entitlement to compensation for the conveyed properties, and is

a bar to any claims that would have the effect of retroactively

reducing the amount of compensation received by Penn Central to

. below constitutional minimum value.

31. The settlement was effected at a closing on

January 15, 1981. A final judgment dismissing the claims of the

parties was entered January 15, 1981.

32. Upon the closing of the settlement of the

Valuation Case, certificates of value of the USRA were redeemed

by the United States for their present value in cash and such

cash was remitted to Fenn Central and thereafter distributed to

its securities holders in accordance with the Plan of

Reorganization referred to above.

33. The Tucker Act Case brought by Penn Central in

the United States Claims Court was dismissed with prejudice by

stipulation of the parties on February 3, 1983.

34. Prior to the judgment dismissing the Valuation

Case and the dismissal of the Tucker Act case, CERCLA was passed

-15-

by Congress and became effective. The CERCLA statute became

effective on December 11, 1980.

Claims Against Penn CentralArising From The Condition Of_______Paoli Yard_____

35. In Hay 1986 the government petitioned the

Reorganization Court for leave to assert claims against Penn

Central arising out of alleged polychlorinated biphenyl ("pcb")

contamination at the Paoli Yard. At or around the same time •s^Conrail and SEPTA also petitioned the Reorganization Court for

leave to bring third-party claims for contribution against Fenn

Central arising out of an action commenced against them by the

United States in federal court in the Eastern District of

Pennsylvania for cleanup of the pcb contamination at Paoli Yard.

36. Those petitions were denied by the Reorganization

Court on the basis of provisions of Section 11, the PCTC Plan of

Reorganization and the Consummation Order and Final Decree. On

September 19, 1991 the Court of Appeals for the Third Circuit

reversed the Reorganization Court, concluding that the

petitioners' claims were not discharged in the bankruptcy

proceeding. The Third Circuit remanded the case with

instructions that petitioners be permitted to bring their claims

against Penn Central. Further proceedings were stayed pending

the filing of a petition for writ of certiorari and the

disposition of the case by the United States Supreme Court.

-16-

Penn Central's petition was denied on March 2, 1992. By order

entered March 17, 1992 the Reorganization Court has permitted

the government, Conrail and SEPTA to pursue actions against Penn

Central in the District Court for the Eastern District of

Pennsylvania.

37. It is believed that the government, Conrail and

SEPTA will now seek to assert claims against Penn Central. As a

party-defendant in the government's action seeking cleanup of

Paoli Yard, as well as the owner of the Paoli Yard, Amtrak may

also seek to assert claims against Penn Central for

contribution.

38. The government was aware of the dangers of pcbs

and the widespread railroad use of pcbs for electric

transformers during the 1960's and 1970's, well before the

settlement of the Valuation Case.

39. The government was also aware of the pcb

contamination at Paoli Yard at least as early as 1978.

40. In March 1978, four representatives of the United

States Environmental Protection Agency ("EPA") visited Paoli

Yard for the purpose of assessing the current and future use of

pcbs at railroad yards, which information was used by the EPA in

developing regulations issued pursuant to the Toxic Substances

Control Act, 15 U.S.C. S 2601, e£ ssg, ("TSCA"). In June 1978,

in an effort to reduce pcb exposures, the EPA issued regulations

-17-

governing the continued use of pcbs by railroads. See 43 Fed.

Reg. 24808. In doing so the government recognized that frequent

environmental exposure to pcb's occurs when transformers overheat

or are damaged in operation.

41. On or about November 21, 1978, the EPA inspected

the Faoli Yard as part of its program for inspecting railroad

facilities that handled pcb equipment. The EPA tested for and

discovered pcb contamination at the site at that time in

violation of the TSCA regulations.42. The EPA then notified the Pennsylvania Department

of Environmental Resources ("DER") of its findings of pcb

contamination at Paoli Yard. The DER inspected the site at

least five times in April, May and June, 1979 and conducted

tests of on-site water and other areas. Thereafter, on or about

June 28, 1979, the DER issued an order under the Pennsylvania

Clean Streams Law to Amtrak, Conrail and SEPTA to stop any

further pcb contamination and to undertake a comprehensive study

of the site. The EPA received notice of this order at the time

it was issued.

Claims Against Penn CentralArising From The Condition_____Of Elkhart Yard_____

43* In February 1990 the United States commenced an

action against Conrail in federal court in the Northern District

-18-

of Indiana arising out of alleged contamination by numerous

hazardous substances at Elkhart Yard.

44. On January 13,--1992 Conrail issued a third-party

complaint for contribution against Penn Central arising out of

the government's action against them for the cleanup of Elkhart

Yard. Conrail alleged that during PCTC's pre-April 1, 1976

ownership of the Elkhart Yard, "hazardous substances were

released and disposed of" on the property.

45. Conrail's claims against Penn Central with

respect to the costs of cleaning up the contamination of the

Elkhart Yard are for contribution and are derivative in nature,

arising out of the government's claims against Conrail. Conrail

can stand in no better position than the United States; if the

government is foreclosed and barred from asserting claims

against Penn Central, Conrail's claims for contribution are

similarly barred.

46. The government was aware, or should have been

aware, of the contamination at Elkhart Yard well before the

settlement of the Valuation Case.

47. In 1975, agents of the government inspected the

Elkhart Yard as part of a comprehensive effort to "investigate

and develop a gross unadjusted land value" for fifty-seven (57)

major rail yards that were to be transferred to Conrail pursuant

to the FSP. Government agents "photographed each yard, studied

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environmental and physical conditions of the area" and noted

that the "yard in general is extremely active with many train

movements taking place."

48. Penn Central repeats and realleges paragraphs 1

through 47 of this Complaint as though fully set forth herein.

49. The government presently seeks to assert a claim

against Penn Central for money damages as a result of the ,-

contaminated condition of the Paoli Yard. Conrail and SEPTA

also seek to assert claims for contribution against Penn Central*

for the condition of Paoli Yard. Amtrak, as the current owner

of Paoli Yard and a party-defendant in the government's cleanup

case, is likely to assert similar contribution claims.

50. Conrail has filed a third-party complaint for

contribution against Penn Central for money damages as a result

of the contaminated condition of Elkhart Yard. Conrail's

contribution claims against Fenn Central are derivative of the

government's claims being asserted against it for the costs of

cleaning up Elkhart Yard.

51. The parties in the Valuation Case addressed and

litigated issues of the proper valuation of the property

conveyed by PCTC to Conrail, including the Faoli Yard and

Elkhart Yard. In settling the Valuation Case and the related

Tucker Act Case, it was the intent of the parties to dispose of,

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with finality, all claims based upon the condition of the

property conveyed to Conrail. The contaminated condition of the

properties was apparent and known to the government prior to the

settlement. Any claims by the government with respect to the

condition of the Paoli Yard, including the claims it presently

seeks to assert with respect to pcb contamination on the

property, and any claims with respect to the contaminated

condition of Elkhart Yard, are barred by reason of (i) thesettlement of the Valuation Case, (ii) the release of claims

between Penn Central and the government parties in the

Settlement Agreement, (iii) the order of the Special Court

approving the settlement agreement, (iv) the entry of judgment

dismissing the claims of the parties in the Valuation Case, and

(v) the stipulated dismissal of claims in the Tucker Act Case.

As And For It Secoi"

52. Penn Central repeats and realleges paragraphs

1 through 47 of this Complaint as if fully set forth herein.

53. Penn Central is not liable with respect to claims

for the condition of the Paoli Yard and Elkhart Yard properties

(i) by reason of its conveyance of property to Conrail pursuant

to the Rail Act conveyance procedures, the FSP and orders of

this Court in an "as is" condition and (ii) because therehabilitation of rail properties designated in the FSP and

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conveyed to Conrail pursuant to the Rail Act is the

responsibility of Conrail.

As And For Iti Third Clflifl

54. Penn Central repeats and realleges paragraphs

1 through 47 of this Complaint as if fully set forth herein.

55. In the event that this Court does not grant

relief to Penn Central on its first and second claims, Penn

Central is entitled to pursue a Tucker Act claim for the

difference between Penn Central's minimum constitutional

entitlement for its property conveyed to Conrail pursuant to the

Rail Act, as increased by the values of the Paoll Yard and

Elkhart Yard in an uncontaminated condition, and what it

actually received in settlement of the Valuation Case.

WHEREFORE, Penn Central prays

1. That this Court issue a judgment declaring that

any claims by the government or other defendants herein against

Fenn Central based upon the contaminated condition of Faoli Yardor Elkhart Yard are barred as a result of the settlement of the

Valuation Case and related proceedings before this Court in the

valuation Gas* and the United States Claims Court in the TuckerAct Case, and that Penn Central is not liable for the

contaminated condition of Paoli Yard or Elkhart Yard by reason

of its conveyance to Conrail pursuant to the Rail Act conveyance

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procedures, the FSP and orders of this Court in an "as is"

condition.

2. That this Court issue a judgment declaring that:

(i) SEPTA, Amtrak and Conrail do not possess greater rights

against Penn Central than does the government, and (ii) any

rights SEPTA or Amtrak possesses regarding the contaminated

condition of Paoli Yard are enforceable against only the

transferor, Conrail, who upon conveyance implicitly agreed to

indemnify the transferees for such claims.

3. That this Court issue a judgment declaring that

CERCLA was not intended and cannot be read to permit recovery

against Penn Central in these circumstances, and that if so

read, its application would be unconstitutional.

4. That this Court issue an order permanently

enjoining defendants and all persons with actual notice of its

order from instituting or attempting to institute, maintaining

or prosecuting any claims against Penn Central arising out of

the contaminated condition of Paoli Yard or Elkhart Yard.

5. That, in the alternative, the Court enter a

judgment declaring that the settlement between Penn Central and

the government requires reopening the Valuation Case proceedings

in this Court as to Penn Central and permitting Penn Central to

proceed with a Tucker Act claim for recovery of the amount by

which its constitutional entitlement to just compensation for

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its property conveyed to Conrail pursuant to the Rail Act — as

increased to take into account the values of Paoli Yard and

Elkhart Yard in an uncontaminatedt condition « exceeds the value

of the settlement achieved in the Valuation Case proceedings.

6. That the Court grant such other and further

relief as it may deem just and proper under the circumstances.

Datedi March 25, 1992New York, New York

WILLKIEl FARR & GALLAGHER

One Citicorp Center153 East 53rd StreetNew York, New York 10022(212) 935-8000

DONOVAN LEISURE NEWTON &IRVIN]

enneth N. HartNJenn

30 Rockefeller PlazaNew York, New York 10112(212) 632*3000

Attorneys for PlaintiffThe Penn Central Corporation

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