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SEATRAIN LINES, INC. v. PENNSYLVANIA R. CO.

October 23, 1952

SEATRAIN LINES, Inc.
v.
PENNSYLVANIA R. CO. et al



The opinion of the court was delivered by: FORMAN

- I-

So much of the amended complaint filed by the plaintiff, Seatrain Lines, Inc. (hereinafter called Seatrain), as is essential to the present consideration, charges as follows:

 In 1929 Overseas Railways, Inc. began to carry goods between the ports of New York and New Orleans, via Havana, Cuba. On December 31, 1931 Seatrain acquired its net assets and it was merged and consolidated with Seatrain on October 14, 1933. In October of 1932 Seatrain inaugurated its interstate service between the ports of New York and New Orleans, via Havana, Cuba. In or about June of 1940 it added a service between the ports of New York and Texas City, Texas and on November 30, 1951 it added a further service between the ports of New York and Savannah, Georgia.

 Seatrain developed a special type of vessel for the carriage of freight in railroad cars over the long distances in ocean routes. Each of the vessels used by Seatrain is so constructed that it can carry 100 railroad cars on four decks. Special equipment is provided to hoist these cars from adjacent tracks on the docks and move them bodily into the vessels. This procedure makes it unnecessary for goods carried to the ports in railroad cars to be unloaded from the cars and carried piecemeal into the vessels.

 Seatrain maintains physical facilities for the interchange of freight cars at dockside at the Port of New York (Edgewater, New Jersey), with the New York, Susquehanna and Western Railraod Company; at the Port of New Orleans (Belle Chasse, La.) with the New Orleans and Lower Coast Railroad Company; at Texas City, Texas, with the Southern Pacific Lines; Missouri Pacific Lines; Gulf, Colorado & Santa Fe; Missouri, Kansas & Texas; Fort Worth & Denver; Chicago, Rock Island & Pacific, and the Texas City Terminal Railroad; and at Savannah, Georgia, with the Central of Georgia Railway Company.

 In May of 1942 all of Seatrain operations were suspended as a result of the requisition of its ships, then five in number, for use by the United States in World War II. On March 12, 1947, its vessels having been returned to it by the government and reconditioned, it assumed its coastwise freight services. Two additional vessels were built and placed in operation in the latter part of 1951.

 There are 10 defendants who are common carriers by rail engaged in the transportation of commodities in interstate commerce within the United States, namely: Pennsylvania Railroad Company, Atlantic Coast Line Railroad Company, Southern Railway Company, Louisville & Nashville Railroad Company, Lehigh Valley Railroad Company, Baltimore and Ohio Railroad Company, Seaboard Air Line Railroad Company, St. Louis-San Francisco Railroad Company, New York Central Railroad Company and Erie Railroad Company.

 Also named as defendants are seven unincorporated associations of railroad corporations alleged to be supported, maintained and utilized by railroads, including the defendant railroads. The defendant associations are: Association of American Railroads, Presidents' Traffic Conference-Eastern Railroads, Traffic Executive Association-Eastern Railroads, General Freight Traffic Committee-Eastern Railroads, Freight Traffic Committee-New England Territory Railroads, Freight Traffic Committee-Trunk Line Territory Railroads, and Freight Traffic Committee-Central Territory Railroads.

 The first four defendants, Pennsylvania Railroad Company, Atlantic Coast Line Railroad Company, Louisville & Nashville Railroad Company and Southern Railway Company, are the primary defendants in a combination and conspiracy, together with other railroads and the defendant Association of American Railroads and the other defendant corporations. The remaining six railroads are secondary defendants, having been induced by the primary defendants to join in said combination and conspiracy.

 Seatrain is a holder of a Certificate of public Convenience and Necessity issued to it by the Interstate Commerce Commission authorizing continuance of its operations between the ports of New York, New Orleans and Texas City and the grant of temporary authority to operate between the ports of New York and Savannah, similarly issued on November 13, 1951.

 Except for the suspension of its service in World War II, as aforesaid, Seatrain has been operating continuously since 1932 in competition with railroads for interstate freight traffic between areas tributary to the gulf ports and areas tributary to the Port of New York, and since November 30, 1951 has been in similar competition for such traffic between areas tributary to the Port of New York and the Port of Savannah.

 Seatrain transports freight generally at lower rates than the railroads and by using Seatrain service shippers are saved packing and handling expenses necessarily incurred when freight is shipped over break-bulk water routes. In addition, certain classes of bulk freight which cannot be handled in vessels of the usual type and which cannot bear all rail charges can be handled by Seatrain and thus markets are opened up for them which otherwise could not be reached.

 The interstate commerce involved is primarily transportation of freight in loaded freight cars, principally conducted by common carriers by rail but Seatrain and certain railroad-owned or controlled water carriers (commonly known as 'car ferries'), are, and have been, engaged therein.

 The goods shipped all-rail from points in the northeast to points in the south or southwest must be transported over the lines of more than one railroad since the lines of no one railroad extend into both these territories; such transportation is effected, successively, by the several railroads whose lines are involved, each utilizing its own personnel, tracks, right of way, motive power, and other fixed and movable equipment, other than freight cars, but the car itself in which the freight is originally loaded, which may be owned by the railroad on which the traffic originated, by some other railroad participating in the haul, or by some railroad not participating therein, is loaded for shipment at the point of origin and hauled from point of origin to point of destination over all the lines of railroad involved, without unloading or reloading enroute.

 Mutual and reciprocal arrangements between railroads of the United States, including all of the defendant railroads, have existed for many years under which railroad-owned freight cars are loaded, hauled, and delivered in interchange without restriction between the various railroads and have been used in continuous haul over the various railroads of the United States regardless of railroad ownership of the freight cars and of the railroads participating in the haul.

 By such arrangements and agreements each railroad foregoes for the benefit of other railroads its right to control the use of its own freight cars (within limitations imposed by the Interstate Commerce Commission) and thereby surrenders such competitive advantage as it would otherwise possess as the owner of freight cars and the arrangements amount to, in effect, unrestricted, reciprocal licensing by each railroad of all other railroads in interchanging the cars owned by one railroad and that each railroad thereby acquires competitive advantages which it would not have if it would not have participated in such arrangements and agreements, and as a group the railroads of the country thereby acquire competitive benefits which they would not have if it were not for such arrangements and agreements.

 In implementation and furtherance of such arrangements and agreements the defendant Association of American Railroads, voluntarily organized by the railroads of the country to regulate and administer them, promulgated the 'Car Service and Per Diem Agreement' providing for the loading, interchanging, routing, handling, etc., of cars in interstate commerce for their rental both by the railroads using such cars and the railroads which own the cars so used and for matters relating to payment therefor.

 Water carriers are not eligible as subscribers to such car service and per diem agreement now in effect and cannot practically become subscribers if eligible since many of the rules are drawn so as to fit the operating conditions and methods of railroads and are not applicable in certain respects to the operation of water carriers.

 The ability of Seatrain to compete depends upon the lower rates (under which it can operate at a profit) which it can offer to shippers, the lower cost of packaging, handling, etc., and the more expeditious service via Seatrain as compared with the conventional type of water carrier service. Such competitive factors enable shippers to reach markets in which they cannot otherwise sell, but shippers cannot prudently enter into sales and other commitments based upon such lower rates, etc., unless assured that Seatrain will not be prevented from rendering the service at such rates upon which such shippers have relied in pricing their goods, selecting their markets and making their sales and shipping commitments.

 The amended complaint further alleges that the defendants and other rail carriers in the United States since 1932 have been and are engaged in a combination and conspiracy in restraint of interstate trade and commerce in the transportation of freight and loaded freight cars in violation of section 1 of the Sherman Act, 15 U.S.C.A. Sec. 1, and have conspired to, and attempted to, monopolize and have monopolized such trade and commerce in violation of section 2 of the said Act, 15 U.S.C.A. § 2, with intent to drive Seatrain out of business as a competitor of railroads, including particularly the primary defendants, and pending accomplishment of such purpose, they intend to restrain and limit Seatrain's development and expansion as a competitor of railroads, thereby depriving shippers and potential shippers of the economic and other benefits inherent in Seatrain's service and preventing them from having access to markets in which they would have been able to sell their products if they could have taken advantage of the lower transportation costs, etc. of Seatrain's services.

 As far back as 1932 the defendants, by their joint action with other railroads, added to the Code of Car Service Rules of the Association of American Railroads the following, known as Rule No. 4:

 'Cars of Railway ownership must not be delivered to a steamship, ferry or barge line for water transportation without permission of the owner filed with the Car Service Division.'

 This rule was directed specifically against Seatrain with the sole object of monopolizing traffic for the all-rail routes to the exclusion of Seatrain, and although the said rule in form is applicable to the railroad-owned or controlled freight car ferries it was not intended to restrict and in practice has not restricted the use and interchange by them of railroad-owned freight cars since no railroads have refused to permit delivery of their cars to such car ferries. Only Seatrain is thus affected.

 None of the primary defendants has currently on file with the Car Service division of the Association a consent under Car Service Rule 4 to the delivery of its cars to, or the use of its cars by, Seatrain. Other railroads acting in concert with them have likewise refused to consent, have from time to time withdrawn consents previously filed and have filed limited consents to Seatrain's use of their cars, and any or all of the railroads whose consents are so on file may at any time withdraw them. The purpose and effect of said Rule 4, as administered by the Association at the instance of the defendants, is and has been to deny to Seatrain the free use and interchange of cars.

 As a direct result of the conspiracy Seatrain has been drawn into numerous lengthy proceedings before the Interstate Commerce Commission and the courts ever since its commencement of the operation of coastwise routes in competition with the railroads in 1932. The litigation has been fomented and maintained, needlessly and vexatiously, by the primary defendants and others in combination with them in order to make more complete the boycott and to drain Seatrain of its ...


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