UNREPORTED CASE: READING CO v. TRAILER TRAIN CO., No. 7422. Skip over navigation
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Copyright Delaware Law School of Widener University, Inc. 1984

Delaware Journal of Corporate Law

UNREPORTED CASE: READING CO v. TRAILER TRAIN CO., No. 7422.

Court of Chancery of the State of Delaware, New Castle, March 15, 1984

FALL, 1984

9 Del. J. Corp. L. 223

Author

LONGOBARDI, Vice-Chancellor

Excerpt

The Plaintiff, Reading Company ("Reading"), sued Trailer Train Company ("Trailer Train"), seeking a declaration that Trailer Train's proposed agreement with creditors of its wholly owned subsidiary, American Rail Box Car Company ("Railbox"), constitutes a waste of corporate assets. Reading contends the debt restructuring agreement which obligates Trailer Train to an additional loan of up to $ 54,000,000 will never be repaid.

A motion for preliminary injunction was heard and this is the Court's decision on that motion.

Trailer Train was incorporated in 1955 by several operating railroads in order to provide a fleet of standardized railroad flat cars for lease to railroads. Over the years, 40 railroads have become stockholders of Trailer Train. Reading became a stockholder in 1961. By requiring a purchase of 500 shares of stock, each of the stockholders is given a seat on Trailer Train's Board of Directors. In 1971, Reading entered into reorganization under the bankruptcy laws and in 1976 conveyed its rail properties to the Consolidated Rail Corp. ("Conrail"). Thereafter, it discontinued all railroad operations but it retained its stock in Trailer Train.

Under the pooling concept, participating railroads were required to sign Trailer Train's Form A Car Contract. The stockholder was then entitled at a special rate to use the cars from the pool on its own lines and to interchange those cars with other railroads including non-shareholder railroads. Those shareholder and non-shareholder railroads with Trailer Train cars in their possession pay a car hire fee set by Trailer ...
 
 
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