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November 24, 1942


The opinion of the court was delivered by: BIGGS

BIGGS, Circuit Judge.

The plaintiff, Hoboken Manufacturers' Railroad Company (referred to hereafter as Hoboken), in the case at bar seeks to set aside an order of the Interstate Commerce Commission, date July 24, 1939, finding, after full hearing, that the divisions received by Hoboken out of joint class and commodity rates on traffic interchanged by it with Seatrain Lines, Inc., were not unjust or inequitable.

 The plaintiff is a short switching railroad which runs along the waterfront of Hoboken, New Jersey. It connects with the Erie Railroad and through the Erie with other trunk line railroads. It exchanges freight and cars with those railroads. The Hoboken Railroad also serves industries and stemship piers along the Hoboken waterfront and, in particular, the pier of Seatrain Lines, Inc.

 The defendant is the United States of America. The Interstate Commerce Commission was made a defendant, pursuant to the provisions of Sections 212 and 213 of the Judicial Code, as amended, 38 Stat. 220, 28 U.S.C.A. § 45a. Many of the eastern trunk line carriers intervened, and the argument for these carriers has been made by the Baltimore & Ohio Railroad Company.

 This court has jurisdiction, pursuant to the provisions of the Acts of June 18, 1910 and October 22, 1913, the Commerce Act and the Urgent Deficiencies Act, as set forth in 38 Stat. 219, 28 U.S.C.A. § 41(28) and 38 Stat. 219, 220, 28 U.S.C.A. §§ 43-48, inclusive. The suit at bar was brought to review a decision and order of the Commission dismissing a complaint brought by Hoboken, to secure a determination by the Commission of the just, reasonable, and equitable divisions of the joint through rates on lighterage-free freight interchanged by Hoboken with Seatrain Lines, Inc.

 Seatrain Lines, Inc. (hereafter referred to as "Seatrain") operates three ships. These are fast four-decked vessels, carrying standard gauge railroad tracks. Two of the vessels can carry one hundred freight cars each and the third ninety-five cars. The vessels operate between Hoboken, New Jersey and Belle Chasse in Louisiana, via Havana, Cuba. When a Seatrain ship is put in position at its dock, it is next to a "cradle" which, by means of a large overhead crane, lifts the loaded freight car from the dock and carries it through one of a number of large hatches on the ship to one of the tracks within the vessel. The tracks of the cradle fit the tracks on ship, and the car is then pushed off the cradle to its place on the ship by a special little engine. There is one cradle for each track on each deck of the vessel and, when the loading of each deck is accomplished, the cradles are left in place flush with the deck, each cradle closing a hatch. In taking the car from ship to shore the process is reversed. By the use of the Seatrain method, goods and merchandise may be transported from shore to ship and from ship to shore without breaking bulk, and the necessity of loading and unloading the freight is eliminated.

 This method of interchange is used between Seatrain and Hoboken. Approximately 40% of the cars interchanged by Hoboken with Seatrain move under lighterage-free rates, and about 60% under nonlighterage-free rates. With Seatrain freight regardless of how it is billed, whether as lighterage-free freight or nonlighterage-free freight, it is handled by Hoboken in precisely the same physical fashion.

 The Commission has established a through-rate of $7 per ton, to shipside. On break-bulk lighterage-free freight the trunk lines receive for their share $5.65, and Hoboken receives $1.35. Of this $1.35, 60 goes to Hoboken as compensation for switching charges and 75 goes to it as reimbursement for the cost of loading, unloading, and transferring freight between the freight cars and shipside. On Seatrain freight, using that phrase to describe freight contained in cars lifted on the cradle to or from the Seatrain ship and in which the bulk is not broken, of the $7 through-rate to shipside, the trunk lines have refused to allot to Hoboken more than the sum of 60 for its switching charges, retaining the 75 , which was saved due to elimination of loading and unloading charges. Hoboken claims that upon Seatrain freight the trunk lines should receive $5.65 as their share and Hoboken should receive 60 for switching as usual, and 75 to reimburse it for payments made to Seatrain for the right to use the special Seatrain labor-saving and time-saving facilities. Hoboken contends that, while it may not be entitled to the full sum of 75 in this connection, it is entitled to some part of the 75 for the facilities which it has made available which permit shipping by sea without breaking bulk. *fn2"

 The contentions of Hoboken must be examined in the light of the corporate relations existing between Seatrain and Hoboken. Prior to 1932, Seatrain had begun negotiations with Hoboken for the use of the terminal facilities. Seatrain then learned that Hoboken was insolvent and bought up all of its stock at auction. Seatrain now owns all of the 4000 shares with the exception of five qualifying directors' shares. Six of Hoboken's seven directors are also directors of Seatrain. Four of Hoboken's eight officers are officers of Seatrain.

 Graham M. Brush, the president of Seatrain and of Hoboken, is the inventor of the Seatrain ship and of the appliances for loading and unloading freight cars into and out of such ships. He assigned his patents to Railway Transports, Inc., a corporation in which he is one of 700 shareholders. The extent of his control of this corporation was not disclosed. Railway Transports, Inc., gave Seatrain an exclusive license under the patents, for which Seatrain pays as royalty the sum of approximately $50,000 per annum. The patents expire in 1944.

 By a later contract between Hoboken and Seatrain, dated February 24, 1937, effective as of March 1, 1937, it was provided that Hoboken would pay Seatrain 73 per ton (subject to possible revisions because of increases or decreases in the scale of longshoremen's wages) on all freight interchanged between them shipped on lighterage-free rates, and that Hoboken would pay Seatrain nothing on freight shipped on non-lighterage-free rates. ...

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