L-39-107 Opinion No. 1939 R.R. 7

February 27 1939

Director of Claims Service

The General Counsel

Creditability of service rendered to Rutland Transit Company.

The question of the creditability of service rendered to the Rutland Transit Company 1/ has been raised. It is ny opinion that the Transit Company is a company owned and controlled by a 1‘carrier em­ ployer" under the Railroad Retirement Act and was, at least from Decem­ ber 14, 1899 to November 50, 1915, engaged in operating equipment and facilities and in performing a service in connection with transporta­ tion by railroad within the moaning of Section 1(a) of the Act.

Transit was incorporated on December 14, 1899 in Vermont, as the successor to the Cgdonsburg Transit Company. From the date of its incorporation all of Transit’s capital stock has boon directly owned by the Rutland Railroad, a carrier by railroad subject to the Inter­ state Commerce Act and an "employer" under the Railroad Retirement Act. Transit is cloarly, therefore, a company owned and controlled by a "carrier employer" within the meaning of Section 1 (a) of the Act.

From December 14, 1899 to November 30, 1915, Transit operated boats on the Great Lakes, for the transportation of freight, passengers and mail, botwoen Ogdensburg, Now York, in the East, and Milwaukee, Wisconsirilad Chicago, Illinois, in the Mid-West, which points woro all important railroad terminals and points of interchange for east and west bound traffic. Transit’s boat operations were confined to carriage between those points. It appears that Transit carried only insubstantial amounts of local freight traffic between Milwaukee, Chicago and Ogdens­ burg, practically all of Transit’s traffic being carried under through joint rail water transportation arrangements. In connection with this through joint rail-water transportation service, Transit filod with the Interstate Commerce Commission, on May 14, 1900, its own separate tariffs naming the following railroads as concurring originating carriers for westbound traffic: the Boston ft Maine; Fitchburg; Portland 8. Rochester; Bennington & Rutland; Rutland; Delaware & Hudson; United Counties; Rutland- Canadian; Intercolonial; and Ogdensburg h Lake Champlain; and naming many Western railroads as participating carriers at Chicago and Milwaukee. Thus it appears that from the very beginning of its operations, Transit served as an integral link in a through joint rnil-watcr transportation service in connection with numerous concurring carriers by railroad.

1/ Hereafter referred to as Transit. -2- Momo \o Director, Claims Service

Examination of Transit's economic and functional relations with its parent railroad, the Rutland, shows an even closer tie-up between the carriage services of Transit and railroad transportation. Coordi­ nation of the policies of Transit and the Rutland Railroad was the normal result of the control exercised over Transit by the railroad on the basis of the railroad's stock ownership of Transit and through common officers and directors. That such coordination existed in fact appears from several facts. Beginning in 1906, the Rutland Railroad filed the tariffs with the Interstate Commerce Commission covering the west bound rail-water transportation, in which Transit was a concurring carrier. Furthermore, we have been informed by the Rutland Railroad as follows:

"The Rutland R.R. Company including the Bennington & Rutland Ry., the Rutland-Canadian R.R. and the Ogdensburg & Lake Champlain Ry. participated in the movement of all westbound freight assembled at Ogdensburg, N. Y. for movement via the Rutland Transit Company with the exception of an occasional carload of freight originating in the city of Ogdensburg. It also participated in all eastbound freight handled by the Rutland Transit Company steamers to Ogdensburg, N. Y. with the exception of a little local business for the city of Ogdensburg. The revenue on traffic originating in New England and New York State points excepting points on the Rutland R.R. divided 55% for the rail line east of Ogdensburg, 45% for the Rutland Transit Co. On traffic originating on the Rutland R.R. the division was 50% for each company."

Finally, the position of Transit as part of the joint rail- water east-west route which the Rutland Railroad was offering to the public as an alternative to the all-rail route available because of the Rutland Railroad's affiliation with the Newr York Central Railroad System appears from the report of the Interstate Commerce Commission, in the proceeding entitled Lake Line Applications under Panama Canal Act, 33 I.C.C. 700 (1915). The character of this alternative through joint rail-water transportation service was investigated by the Interstate Commerce Commission in connection with petitions filed by certain railroads under the Panama Canal Act for extension of tine during which their interest in and operation of boat lines on the Great Lakes might be continued. It appears from the Commission's re­ port that a number of compenies chartered as common carriers by water ware organized or purchased by railroads serving the Great Lakes region in Memo to Director, Claims Service

order to maintain competitive conditions among themselves, to create in the Groat Lakes territory a transportation monopoly in favor of rail­ roads , and to destroy independently owned water carrier competition. To effectuate this purpose the several railroads became parties to through all-rail routes or became members of fast freight lines, enabling them thereby to compete with their water carrier subsidiaries, which participated in an alternative, joint rail-water transportation service between the same points served by all-rail routes. In dictat­ ing the policies of the water subsidiaries and in fixing the rates for rail-water transportation service upon such a basis as would effectively discourage the use of the rail-water transportation service, the rail­ roads deprived their water subsidiaries of the right to engage in free competition with the rail carriers between eastern and western traffic centers. The water carrier subsidiaries of the carriers by railroad were consequently operated at a deficit. Thus, for example, our in­ formation shows that Transit sustained not deficits of $65,525 and $63,490 for the years 1912 and 1913 respectively.

This operation of the Great Lakes water carriers under the domination of the railroads serving the same area was found by the Com­ mission not to bo in the interest of the public or to the convenience of commerce within the meaning of the Panama Canal Act, and the rail­ roads' petitions were denied. After this decision, Transit ceased its boat operations on November 30, 1915 and thereafter sold its floating equipment.

From the Commission's report in that proceeding, it appears that Transit was not actually engaged in competition with railroad trans­ portation, but was, in fact, merely an operating unit of the Rutland Railroad's transportation system.

It appears, therefore, from the foregoing, that during the period of its operations as a water carrier on the Groat Lakes, Transit was engaged in the operation of equipment and facilities and the per­ formance of a service in connection with transportation by railroad, within the meaning of Section 1(a) of the Railroad Retirement Act and Section 2.07 of the Board's current regulations. It is established by the facts set out above that Transit was an integral link of a through rail-water route which was an alternative to all-rail transportation, and practically all of the carriage performed by Transit was done under the arrangements for that through rail-water route. Consequently, it is my opinion that the Rutland Transit Company is a company owned and controlled by a "carrier employer" under the Railroad Retirement Act since December 14, 1899, its incorporation date, and was from that date at least until November 30, 1915, when it ceased its water carriage operations, engaged in the operation of equipment and facilities and in i -4- Ivlomo to Director, Cloins Service

the performance of a service ir. connection vjith railroad transporta­ tion, within the meaning of Section 1(a) of the Railroad Retirement Act; and was, therefore, an "employer” within the meaning of that Act. Service rendered to the Rutland Transit Company is creditable from December 14, 1899 to November 30, 1915.

Lester P. Schoeno General Counsel

cc: Mr. Latimer Mr. Eddy Mr. Rood Mr. Hodge Mr. Ilursoy Mr. Glover