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L-41-358

MEMORANDUM------

Washington, D. C. August 2, 1941

Director of Retirement Claims

FROM General Counsel

SUBJECT Status of Mutual Transit Company

On the basis of information furnished by Mr. | trustee and chief executive officer of the Erie Railroad Company, in response to our inquiries, together with information obtained from the standard financial manuals and the opinion of the Interstate Commerce Commission in Lake Line Applications Under Panama Canal Act. 33 I.C.C. 699, it is my opinion that Mutual Transit Company, hereinafter called Mutual, was an employer within the meaning of the Railroad Retirement Act from February 28, 1903 until April 4> 1916, when it dispttsed of the last of its boats.

Mutual was organized February 28, 1903, under the laws of the State of New York for the purpose of owning and operating a fleet of boats for the transportation of package freight on the Great Lakes. It was owned by the Erie Railroad__Company, the Lehigh Valley..Railroad Company, the Delaware, Lackawanna & Western Railroad Company and the New York Central & Hudson River Railroad Company, all carriers by rail­ road subject to part I of the Interstate Commerce Act, through their ownership in equal shares of the entire capital stock of the Mutual Terminal Company of Buffalo, known for a short time as the Mutual Ele­ vator Company, which owned Mutual’senti r e capital stock. Mutual was organized, as stated in Mr. | | letter, in order "to concentrate as far as possible the ex-lake traffic to the road haul of the four railroads" which indirectly owned it. Immediately upon its organiza­ tion Mutual bought eight vessels from another steamship company, and in 1907 it purchased four additional vessels.

Approximately 80 per cent of Mutual's freight was transported immediately before or after its shipment by railroad, most of its freight at Buffalo being delivered to or received from the railroads which indirectly owned the company. Freight interchanged with railroads X 2 - Memorandum to Mr. R.R.B. No,

was handled over railroad docks and docks owned by Mutual. In some cases Mutual "acted as stevedore," transferring freight from the rail­ road cars to the ships. A number of freight tariffs were published by the Erie Railroad Company Lines, East covering class and commodity rates from stations thereon and on certain of its short line connec­ tions to ports on the Great Lakes reached by Mutual as well as to points beyond, via the Erie Railroad, Mutual and, where necessary, rail connections beyond. Mutual published concurrences in the filing of Erie Railroad tariffs in which the company was shown as a participating carrier. Conversely, the Erie Railroad issued concurrences in freight rate schedules in which Mutual showed the Erie Railroad as a partici­ pating carrier.

Although Mutual must undoubtedly have entered into other contracts with carriers by railroad subject to part I of the Interstate Commerce Act concerning the interchange of freight, the only available contract is one with the Erie Railroad Company effective April 10, 1903. Under that contract the Erie Railroad Company agreed to furnish cars on^ requisition and to pay the company a fixed sum per ton as the cost of loading the cars at Mutual1s warehouse. After loading at the docks on the tracks of a subsidiary of the Erie, the company was to seal every car, which the Erie would later examine. Certain items of freight con­ signed via Mutual's steamers, although intended for storage and diver­ sion at Buffalo, were to be delivered directly to the Erie Railroad's freight dock or to be delivered at Mutual's expense via its own ware­ house to the railroad's warehouse in railroad cars.

Mutual operated twelve vessels serving the ports of Buffalo, Fairport and Cleveland on Lake Erie, Gladstone and Green Bay on Lake Michigan and Duluth, Hancock, Houghton, Hubble, Port William, Port Arthur and Westport on Lake Superior. Its operations and the functions it performed for its controlling railroad companies were substantially similar to those of the other railroad-controlled boat lines involved in Lake Line Applications Under Panama Canal Act. 33 I.C.C. 699 (1915). Speaking in particular of the Lehigh Valley Railroad Company and the Delaware, Lackawanna & Western Railroad Company, each of which owned a one-fourth interest in Mutual, the Interstate Commerce Commission at pp. 706 ff. of the Lake Line case showed the usefulness of the boat lines to the controlling railroad carriers, with which they furnished through rail and water service. This conclusion applied with equal force to all the lines involved, including all those which indirectly shared in the ownership of Mutual. See Lake Line case, supra. at p. 710. And the Commission's opinion made apparent the fact that all the lines were operated in the interest of the controlling carriers.

/ w. Memorandum to Mr. I R.R.B. No.

The foregoing facts indicate that in connection with its controlling and other carriers Mutual was engaged in furnishing "through freight service between all eastern territory and all points in the northwest," as it advertised in the Official Guide of the Railways; and that this service was similar to that performed by the other Lake Lines. The controlling railroad companies all stated that the Lake Lines performed a useful service in connection with their own railroad operations. In support of this contention the railroads showed that as a group "the boat lines had been a losing proposition as a distinct operating unit," but had been continued in operation because of their value in connection with the carrier activities of the owning railroads. See Lake Line case, supra, at pp. 710-711.Such continued operation of a subsidiary which would be unprofitable as an independent unit tends to indicate that the subsidiary performs a service, func­ tionally and economically, for the controlling railroad. See Canada Atlantic Transit Company of United States. General Counsel’s Opinion V' •- ^ N o . R.R. 112, 2 R.R.B. Law Bulletin 463# 467;Champlain Trans- / portation Company, Lake George Steamboat Company, General Counsel's , ,/\V Opinion No. 1939 R.R. 5, 2 R.R.B. Law Bulletin 469, 472-473.With re- ^ ' x spect to the Railroad Retirement Act, it is most significant that, with the exception of one line with which no service has been claimed, ser- , i^e to all the lines but Mutual involved in the Lake Line case, supra, v has been held creditable under the Railroad Retirement Act. Erie and Western Transportation Company, (Anchor Line), L-40-94;Lehigh Valley Transportation Company, General Counsel's Opinion No. 1938 R.R. 112;-— JLziX Canada Atlantic Transit Company of United States, General Counsel's r ^ Opinion No. 1939,R.R. 112; Rutland Transit Company, General Counsel's Opinion No. 1939R.R. 7. (Erie Railroad Lake Line was simply the designation of the boats operated by the Erie Railroad as a part of its system.) ^ , , . 1

In view of these precedents dealing with the type of opera­ tion chiefly performed by Mutual Transit Company, the significance of such additional services in connection with transportation as it may have performed need not be determined. Such services would include the transfer and stevedoring operations performed by Mutual under its contract with the Erie Railroad Company at Buffalo and perhaps performed at other points or in connection with other railroads under contracts not now available.

The facts discussed and the precedents cited make it clear that Mutual Transit Company from February 28, 1903, the date on which it was organized and acquired the bulk of its vessels, until April 4, 1916, when it disposed of its last four vessels, ivas controlled by one or more carriers by railroad subject to part I of the Interstate Commerce Act and was principally or entirely engaged in performing services "in connection with the transportation of . . . property by - 4 ~ Memorandum to Mr. R.R.B. No.

railroad, or the receipt, delivery, elevation, transfer-in-transit, refrigeration or icing, storage, or handling of property transported by railroad . . . It follows that Mutual Transit Company was an employer, as defined in the Railroad Retirement Act, from February 28, 1903 until April 4, 1916, and that compensated service rendered to it between those dates is creditable toward annuities under the Act.

General Counsel I