L-39-781 Opinion No. 1939 R.R. 112 November 18, 1939 Mr. D. C. Grant Canadian National Railways Montreal, Quebec Dominion of Canada Dear Sir: Reference is made to our correspondence concerning the status under the Railroad Retirement Act of Canada Atlantic Transit Company of U.S., herafter called Transit. The facts discussed in this letter have been furnished by you in the course of that corres- pondence or obtained from various reports of the Interstate Commerce Commission. The scope of this discussion does not include the employer status of Canada .-vfclantic Transit Company, a Canadian cor­ poration which has been an inactive lessor company with no compensa­ ted officers or employees since at least August, 1904. Incorporated under the laws of Minnesota in 1899, Transit was at first operated in conjunction with Canada Atlantic Railway Com­ pany. These companies were acquired by the Grand Trunk Railway Company in 1904, and Transit is not wholly owned by the Grand Trunk's successor, Canadian National Railway Company, hereafter called Canadian National. Since 1929 Transit has been under common control with at least two car­ riers by railroad subject to Part I of the Interstate Commerce Act, the Grand Trunk Western Railway Company and Central Vermont Railway, Inc. Consequently Transit is an employer within the meaning of tho Railroad Retirement Act if it performs a service in connection with the trans­ portation of persons or property by railroad; that is, if its operations are "reasonably directly related, functionally or economically, to the performance of the common carrier obligations of a railroad subject to Part I of the Interstate Commerce Act." Railroad Retirement Act, Sec. 1 (a); Regulations, Sec. 202.07, 4 Federal Register 1472 Upril 7, 1939). Transit operates its fleet of four steamers, which carry only freight, on a scheduled service to and from Depot Harbour, Contario; Milwaukee, Wisconsin; and Chicago, Illinois, In my opinion these opera­ tions are directly related, functionally as well as economically , to railroad transportation, and in consequence Transit is an employer - 2 - Mr. D, C. Grant under the Railroad Retirement Act. General Counsel's opinions in New England Steamship Company, approved by the Board on August 23, 1938; Champlain Transportation Company and Lake George Steamboat Company. Opinion No. 1939 R.R. 5, As an integral part of Canadian National's through rail and water route from Chicago and Milwaukee to Southern New England and, through connections, to New York, Transit plays a significant role in the railroad transportation system of the United States. Virtually all of Transit's traffic is interchanged at Depot Harbor, its eastern terminus, with Canadian National. It interchanges freight with eleven Class I railroads at Chicane and with three such railroads at Milwaukee. Eastbound railroad freight is stored at those points by Transit, sub­ ject always to lading on Transit's steamers. In 1937, the only year for which you have furnished breakdown figures, 192,367 tons, 72 per cent of Transit's total tonnage at Chicago and Milwaukee, were delivered to or received from these railroad connections, although 38,090 tons delivered through the Illinois Central on switching movement at Chicago are treated as not interchanged with a railroad. In that year 97 per cent of the 125,662 tons of eastbound freight handled by Transit at Chicago and Milwaukee was received from railroad connections. Twenty-five tariffs filed with the Interstate Commerce Com­ mission have been issued or participated in by Transit, which is also mentioned in a number of routing guides and miscellaneous schedules. Virtually all of Transit's traffic is carried under such tariffs. These tariffs cover not only Transit's line-haul operations but all its terminal services. They have been issued by the following "em­ ployers, " among others $ Chicago, Milwaukee, St. Paul and Pacific Rail­ road Company, Central Freight Association, New England Freight Associa­ tion, Southwestern Freight Bureau, Transcontinental Freight Bureau and Western Trunk Line Committee. The routing guides referred to have been issued by Grand Trunk Railway, Boston and Maine Railroad, The Delaware and Hudson Railroad Corporation, and The New York, New Haven and Hart­ ford Railroad Company, all "carrier-employers." Transit's only traffic moving solely between water ports and not in connection with railroads is "a small amount" of bulk grain car­ ried between elevators, decreasing in recent years, which you describe as a purely incidental and infrequent traffic. Although Transit's earlier history may of course throw light on its functional relation to its parent railroad, the details of its operations before 1935 are not important as such; for service to a company which was an employer on August 22, 1935, is creditable from the date of the company's incor­ poration, Railroad Retirement Act, Secs. 1 (f) and 202. No local traffic at all was carried in 1935, and since that year only a few such cargoes appear to have been carried. -3- Mr. D. C, Grant Close coordination with railroad transportation is evidenced in almost every phase of Transit’s operations. The bulk of its traffic is handled directly between cars and steamers. All its terminal facilities appear to be owned by railroads and designed exclusively or principally for the accomodation of railroad cars. Transit's facilities at Chicago are rented from the Illinois Central Railway Company, which switches all freight delivered to or received from other railroads as well as most of Transit's other freight at that point. Its Milwaukee facilities are rented from the Chicago, Milwaukee, St. Paul and Pacific Railroad Company. It also receives and delivers freight at sheds of that railroad and of the Chicago and Northwestern Railway Company at Milwaukee. Transit's ships are loaded and unloaded by Canadian National employees at Depot Harbour, where a joint agent acts for both Transit and Canadian National. The Official Guide of the Railways (July, 1939) states at page 1065 that Transit is "operated by the Canadian National Railways"; and at page 1058 lists Transit's manager, R. B. Teakle, as an operating officer of Canadian National. That information has appeared without change in the Official Guide over a period of years. Canadian Nation­ al's senior officers arc "at all times available for consultation" with Transit's officers. Clearly, as you state, Transit "forms an integral part of the Canadian National System." This seems to have been tacitly recognized by the granting of pensions, before January 1, 1935, to Transit's employees under the Canadian National pension plan. Transit's function as a link in a rail-water transportation route appears from two decisions of the Interstate Commerce Commission on the application under the Panama Canal Act of its parent company, The Grand Trunk Railway Company of Canada, for permission to continue Transit's operation. Lake Line Applications, 33 I.C.C. 700 (1915); Application of the Grand Trunk Railway of Canada. 43 I.C.C. 286 (1917). Denied in the earlier decision, the Grand Trunk's petition was granted on rehearing. The lake lines, one of which, Rutland Transit Company, has been held to have been an employer under the Retirement Act, were links in rail-water routes from Great Lake ports to the Atlantic Sea­ board, alternative to all-rail routes participated in by their parent railroads. Apparently the function of most of the lake lines was to destroy independent water carrier competition. Lake Line Applications. supra, pp. 714-716. Transit, on the contrary, has always been main­ tained as part of a differential rail-water transportation route essential to its parent railroad in obtaining its share of the traffic between Lake Michigan ports and the Atlantic Seaboard. Thus the Inter­ state Commerce Commission found in Application of the Grand Trunk Rail­ way of Canada, supra, pp. 289-290: "The service of the transit company was originally established to provide a western connection for the Canada Atlantic Railway, which otherwise would have -4- Mr. D. C, Grant ended in a transportation cul de sac. Thirty per cent of the gross earnings of the Canada Atlantic Railway Company during the season of navigation and 18 per cent of its earnings throughout the year are received on traffic destined to or received from the transit company. The service of the transit company was established solely as a supplement to and extension of the Canada Atlantic Railway . ." (Underscoring added) The quoted finding of the Commission indicates that Transit has performed a service in connection with railroad transportation even more clearly than did such a lake line as the Rutland Transit Company. That Transit has performed such a service appears, too, from the fol­ lowing statement by the Commission in Lake Line Applications, supra. at p. 290: "The Canada Atlantic Railway has always absorbed out of its rail revenue the deficit resulting from the operation of the transit company, because there has been no other way- to secure the maintenance of the service performed by the transit company or to secure an equivalent water service west of Depot Harbour for the interchange of traffic to and from lake Michigan ports . ." Transit was incorporated in the same year as was Canada Atlan­ tic Railway Company, upon completion of construction of the railroad from Ottawa to Depot Harbour. With Canada Atlarfcic Railway Company, Transit comprised a system of transportation extending frcm Swan ton, Vermont to Milwaukee and Chicago; and Transit's ownership has always been transferred at the same time as ownership of the railroad proper­ ties associated with it. Transit is and has been since long before 1935 a link in a rail-water transportation route under common ownership extending from the Great lakes to New London, Connecticut.