L-41-90 Opinion No. 1941 R.R. 9 March 1, 1941 Parker Mccollester
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L-41-90 Opinion No. 1941 R.R. 9 March 1, 1941 Parker McCollester, Esq. Lord, Day & Lord 25 Broadway New York, New York Dear Sir: This will acknowledge your letter of December 5, 1940, con cerning the status under the Railroad Unemployment Insurance Act of Seatrain Lines, Inc., hereafter called "Seatrain." A ruling on Seatrain's status has been delayed in order to permit full study of the practical difficulties and the legal consid erations you raised at our conference last year and in subsequent correspondence. But after considering your arguments carefully, I am of the opinion that Seatrain is covered by the Railroad Unemployment Insurance Act. My opinion is based upon the facts that Seatrain is under common control with a carrier by railroad subject to Part I of the Interstate Commerce Act and that it performs services in connec tion with the transportation of property by railroad. These facts appear from information submitted by the Hoboken Manufacturers Rail road Company and from the following decisions of the Interstate Com merce Commission: Investigation of Seatrain Lines, Inc., 195 I.C.C. 215 (1933); 206 I.C.C. 328 (1935) ; Hoboken Manufacturers Railroad Company Notes, 189 I.C.C. 29 (1932); and Hoboken Manufacturers Rail road Company Note, 212 I.C.C. 167 (1936); 217 I.C.C. 781 (1937j . Seatrain was incorporated in Delaware in 1931 as a successor to Over-Seas Railways, Inc., in the operation of vessels especially designed for transportation of cargo loaded in railroad cars. Each of Seatrain's three older vessels has four docks, and each deck has four sets of standard gauge railroad tracks whose aggregate length is approximately one mile, with a capacity of from ninety-five to one hundred cars. Seatrain's vessels can handle cargo only between ports at which special loading facilities have been constructed. Such facili ties include a movable platform called a "cradle" on which is laid a single track of standard gauge. When in place on the dock, the cradle forms a section of the railroad track over which cars are moved to and from the loading point. In the course of loading and unloading, the -2- Parker McCollester, Esq. cradle is moved between dock and deck, alternately articulating with the tracks on land and with the tracks on the deck to form a continu ous track. The necessary loading facilities exist only at Hoboken, New Orleans (Belle Chasse), Havana and Texas City, Texas. Seatrain directly owns the facilities at Belle Chasse, 11 miles by rail south of New Orleans, which are located on the property of the New Orleans and Lower Coast Railroad Company, a member of the Missouri Pacific System. The facilities at Texas City were constructed on the tracks of Texas City Terminal Railway, a switching line, one-third of whose stock is owned by the Missouri Pacific. The loading facilities at Hoboken are owned by Hoboken Manufacturers Railroad Company, hereafter called the "Hoboken," a switching and terminal railroad subject to Part I of the Interstate Commerce Act, whose entire capital stock, with the exception of directors' qualifying shares, is owned by Sea train. Seatrain acquired the Hoboken's stock in 1932 in order to ob tain terminals and rail connections on New York Harbor. During that year, its traffic having greatly decreased, the Hoboken was operating at a loss. To participate in the service contemplated by Seatrain to and from the port of New York, the Hoboken had to rearrange its yard and terminal facilities and purchase additional equipment. The funds required for these improvements and for certain expenses were fur nished the Hoboken by Seatrain, partly for an unsecured note of the Hoboken and partly through subsequent advances on open account. Seatrain operates between fixed termini on regular schedules. It has filed with the Interstate Commerce Commission tariffs naming numerous joint and proportional rates covering the movement of traffic from Hoboken to various points in Louisiana, Arkansas and Texas. Eveh shipments which it handles as port-to-port shipments are in most cases known to Seatrain at the time the shipment starts from the interior point to be destined for through movement. Seatrain has contracts with the Hoboken covering the interchange, supply and return of freight cars and with American Refrigerator Transit Company, a subsidiary of the Missouri Pacific, covering refrigerator cars to be handled on its vessels. Under the latter contract a car is considered in Seatrain's service from its delivery to the Hoboken or the New Orleans and Lower Coast until its return by one of those railroads to a trunk line or terminal railroad. Its contract with the Hoboken obligates Seatrain to classify cars on the Hoboken's tracks for shipments via Seatrain and incidentally to move cars to and from its elevator cradle and over the Hoboken's tracks for distances up to two thousand feet. This obli gation, the contract states, is the Hoboken's duty under its tariffs. To fulfill this obligation, Seatrain operates a locomotive leased from the Hoboken although the actual work is apparently performed by Hoboken employees for whose services Seatrain reimburses the Hoboken. -3- Parker McCollester, Esq. Seatrain's traffic has been handled predominantly in freight cars with out transfer of lading at the ports, and necessarily in connection with either the Hoboken or the New Orleans and Lower Coast or both. Since 1932 through its ownership, whether direct or indirect, of the Hoboken's capital stock, Seatrain has been under common control with the Hoboken; for the same interests which have controlled Seatrain necessarily have controlled Hoboken. At the same time, the Missouri Pacific Railroad Company and a subsidiary, the Texas & Pacific, have owned capital stock of Seatrain with more than fifteen per cent of the total voting power and have been represented on Seatrain's board of directors since the latter's incorporation. Moreover, in the opinion of the Interstate Commerce Commission, Seatrain could not operate "with out the cooperation of a railroad at each of these terminals." In particular, the cooperation of the Missouri Pacific System "made the venture of Overseas ^/Seatrain's predecessor^ possible." The Missouri Pacific and Texas & Pacific both acquired stock in Overseas in 1927, more than one year before that company began operations, and in Seatrain in 1931, almost a year before that company began operations. Both roads made large cash loans to Overseas in 1929, when its service between New York and Havana started. The New Orleans & Lower Coast Railroad Com pany, wholly owned by the Missouri Pacific, is, in the opinion of the Interstate Commerce Commission, "an essential link in Seatrain service." Seatrain's supply of railroad cars depends in part upon contracts with the Missouri Pacific System. The Missouri Pacific's interest in Seatrain's operations arises out of its competition with the Southern Pacific, which has its own water lines between New Orleans and New York, service to which is creditable under the Retirement and Unemployment Insurance Acts. Seatrain's dependence upon the Missouri Pacific System, by which it is partly owned, might well constitute de facto control, which is included within the statutory phrase, "directly or indirectly con trolled." That that phrase is used in Section 1(a) of the Act in its usual sense is fully confirmed, if confirmation is necessary, by both the legislative reports and the committee hearings on the Carriers Taxing Act and the Railroad Retirement Act, whose language is in this respect identical with that of the Unemployment Insurance Act. "De facto control may be exercised not only by direct ownership of stock, but by means of agreements, licenses and other devices which insure that the operation of the company is conducted in the interests of the carrier." S. Rep. No. 697 to accompany S. 2395, 75th Cong., 1st Sess. (1937 Retirement Act) p. 7; H.R. Rep. No. 818 to accompany H.R. 7589 (1937 Carriers Taxing Act) p. 4. It need not be decided, however, whether Seatrain has in fact been controlled by the Missouri Pacific. In any event, Seatrain is, as above stated, under common control with the Hoboken, a carrier by railroad subject to Part I of the Interstate Commerce Act and an "employer" under the Railroad Retirement and Unem ployment Insurance Acts. -4- Parker McCollester, Esq. It is equally clear that Seatrain performs services in con nection with the transportation of property by railroad. Its oper ations are directly related, both functionally and economically, to railroad operations. Regulations, Section 202.07, 4 Fed. Reg. 1479 (April 7, 1939) ; Regulations under the Railroad Unemployment Insurance Act, Sec. 301.04, 5 Fed. Reg. 2717 (August 1, 1940). In applying to the Shipping Board for a construction loan, Seatrain itself stated that its type of vessel "might be termed an improved 'car ferry'." In its promotional literature Seatrain has described itself as: "* * * a sea-going railroad, running hundreds or even thousands of miles across the ocean to some far distant port with a train of freight cars a mile long. * * * Although it is an ocean carrier, a Seatrain ship is actually a floating bridge— a connecting link for all railroads. In the case of Cuba, Seatrain has literally added to North American railroads 2,626 miles of standard gauge Cuban track. * * * Thus, it may be said that the function of Seatrain is essentially that of an intermediate rail carrier; it extends the rails out across the sea." This self-description is, in large measure, substantiated in opinions of the Interstate Commerce Commission. Those opinions make abundantly clear the closeness of Seatrain's operating, financial and administrative relations with the Hoboken and to a lesser extent with the Missouri Pacific System.