Seatrain Lines, Inc. v. United States

• Decision Date: 01 September 1964
• Docket Number: Civ. A. No. 33-62.
• Parties: SEATRAIN LINES, INC., Plaintiff, Waterways Freight Bureau and the Port of New York Authority, Intervening Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, The Missouri Pacific Railroad Company et al., Intervening Defendants.
• Court: U.S. District Court — District of New Jersey

233 F. Supp. 199

SEATRAIN LINES, INC., Plaintiff, Waterways Freight Bureau and the Port of New York Authority, Intervening Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants, The Missouri Pacific Railroad Company et al., Intervening Defendants.

Civ. A. No. 33-62.

United States District Court D. New Jersey.

September 1, 1964.

Stryker, Tams & Dill, by Walter F. Waldau, Newark, N. J., for plaintiff Seatrain Lines, Inc.; Chadbourne, Parke, Whiteside & Wolff and S. S. Eisen, New York City, of counsel.

Walter F. Waldau, Newark, N. J., and Nuel D. Belnap, Chicago, Ill., for intervening plaintiff Waterways Freight Bureau; Stryker, Tams & Dill, Newark, N. J., and Belnap, Spencer, Hardy & Freeman, Chicago, Ill., of counsel.

Francis A. Mulhern, Newark, N. J., for intervening plaintiff Port of New York Authority; Arthur L. Winn, Jr., and La Roe, Winn & Moerman, Washington, D. C., of counsel.

David M. Satz, Jr., U. S. Atty., Newark, N. J., by Edward J. Turnbach, Asst. U. S. Atty., for defendant United States.

Robert W. Ginnane, Gen. Counsel, by Robert S. Burk, Atty., I. C. C., Washington, D. C., for defendant Interstate Commerce Commission.

Lum, Biunno & Tompkins, by Charles H. Hoens, Jr., Newark, N. J., for intervening defendants Missouri Pac. R. Co., and others; Robert S. Davis, St. Louis, Mo., of counsel.

Before SMITH, Circuit Judge, and MEANEY and AUGELLI, District Judges.

AUGELLI, District Judge.

Plaintiff Seatrain Lines, Inc. (Seatrain), a common carrier by water, challenges the validity of an order and report made by the Interstate Commerce Commission (Commission) on August 6, 1963, in proceedings entitled "Aluminum Articles from Sandow, Tex., to Pennsylvania and New York", 319 I.C.C. 431.

We are here concerned only with those parts of the challenged order and report that pertain to the movement of aluminum articles from Sandow, Texas, to Cressona, Pennsylvania, by all-rail and rail-water-rail routes. It is with respect to this movement that Seatrain objects to the Commission's finding that the all-rail rates in issue do not discriminate against Seatrain in violation of section 3(4) of the Interstate Commerce Act (Act), 49 U.S.C.A. § 3(4).

The all-rail route originates at Sandow, Texas, with the Rockdale, Sandow & Southern Railroad Company, which in turn connects with the Missouri Pacific Railroad Company at Marjorie, Texas. From that point the Missouri Pacific continues the run to Longview, Texas, where connection is made with the Texas & Pacific Railway Company, which moves the shipment to Texarkana, Arkansas. At Texarkana connection is again made with the Missouri Pacific, which then proceeds north and eastward to three alternate gateways: St. Louis, Missouri; East St. Louis, Illinois; and Flinton, Illinois. At these gateways connections are made with other rail carriers for further eastward movement to Cressona, Pennsylvania.

The rail-water-rail route also originates at Sandow, Texas, with the Rockdale, Sandow & Southern Railroad Company. In this movement, too, connection is made with the Missouri Pacific at Marjorie, Texas. From Marjorie, the shipment moves via the Missouri Pacific to Texas City, Texas. At this point the cars thus transported by rail, with lading intact, are loaded aboard a Seatrain vessel for movement by water to Seatrain's northern port at Edgewater, New Jersey. At Edgewater the cars, again with lading intact, are transferred to a rail carrier for ultimate destination to Cressona, Pennsylvania.

The presently effective all-rail through rate for the aluminum traffic here involved is $1.19 per hundred pounds, minimum 100,000 pounds. This is a joint rate maintained by all the railroads participating in the movement. The rail-water-rail rate presently effective is $1.15 per hundred pounds, same minimum. This is a non-concurring through rate composed of the local rail rate of 44 cents from Sandow to Seatrain's port at Texas City, Seatrain's ocean rate of 43 cents from Texas City to Edgewater, and the local rail rate of 28 cents from Edgewater to Cressona.

The aluminum traffic giving rise to the present controversy originated in 1952 when the Aluminum Company of America built an ore reduction plant at Sandow, Texas, to produce aluminum billets for its fabricating plants located at Cressona, Pennsylvania, and Rome, New York. From 1952 until January, 1959, the aluminum traffic moved exclusively over the all-rail route from Sandow to Cressona and Rome. In January, 1959, Seatrain commenced to participate in the business. Thereafter, the traffic pattern shifted to Seatrain, the last movements by all-rail having occurred during the period of a longshoremen's strike in October, 1959. A statement of the rate manipulations that brought about this change will prove helpful to an understanding of the case.

Prior to November 10, 1958, the all-rail rate for the aluminum movement from Sandow to Cressona was a fraction more than $1.43 per hundred pounds. Seatrain's rail-water-rail rate was a fraction more than $1.69. This represented a combination of the local rail rate of 72 cents from Sandow to Texas City, the ocean rate of a little over 50 cents from Texas City to Edgewater, and the local rail rate of 47 cents from Edgewater to Cressona. Effective November 10, 1958, the local rail rate from Sandow to Texas City was reduced from 72 cents to 44 cents. This gave Seatrain a differential in its favor of 2.1 cents over the all-rail rate. On January 10, 1959, the local rail rate from Edgewater to Cressona was reduced from 47 cents to 39 cents. The differential in favor of Seatrain now amounted to 10.1 cents. A reduction made by Seatrain on its ocean rate in this same month of January from 50¼ cents to 47½ cents, increased this differential to 12.85 cents. On May 8, 1959, Seatrain reduced its ocean rate to 40 cents, thereby increasing its differential to 20.35 cents. The rail-water-rail rate was now $1.23 as compared with the all-rail rate of $1.43, which had remained constant during this period.

On June 21, 1959, the all-rail rate was reduced to $1.30 thus cutting down Seatrain's differential to 7 cents. Following this, on July 24, 1959, Seatrain reduced its ocean rate to 36 cents which resulted in a rail-water-rail rate of $1.19 as against the all-rail rate of $1.30. This produced a differential of 11 cents in favor of Seatrain. On February 20, 1960, the all-rail rate was reduced to $1.19 to match Seatrain's rate. On February 29, 1960, Seatrain again reduced its ocean rate from 36 cents to 32 cents. This made the rail-water-rail rate $1.15, a differential of 4 cents in favor of Seatrain over all-rail. In May, 1960, a reduction in the local rail rate from Edgewater to Cressona from 39 cents to 28 cents, enabled Seatrain to increase its ocean rate to 43 cents and still maintain a rate 4 cents lower than all-rail. This same differential has continued to the present time.

The proceedings with which we are here concerned, and which resulted in the order and report under attack, stemmed from cross protests filed with the Commission by certain railroads and by Seatrain in connection with the reduction of the all-rail rate from $1.30 to $1.19 and the rail-water-rail rate from $1.19 to $1.15. The Commission, in Docket No. 33362, ordered an investigation into the lawfulness of Seatrain's rail-water-rail rate, and in Docket No. 33373 ordered an investigation into the lawfulness of the all-rail rate. These two dockets were consolidated and the matter was heard on one record before an examiner for the Commission.

Seatrain contended before the examiner that the railroads, by reducing the all-rail through rate from $1.30 to $1.19, without making a corresponding reduction in the local rail rates from Sandow to Texas City and from Edgewater to Cressona, were practicing selective rate cutting solely for the purpose of eliminating Seatrain's participation in the aluminum traffic. Seatrain argued that, to the extent the all-rail rate under investigation in Docket 33373 was on a lower level than the local rail rates maintained to and from the ports used in connection with Seatrain's water route, it was discriminatory against Seatrain and in violation of section 3(4) of the Act. The railroads, on the other hand, argued for equality of rates, stating that they had a proposed rate pending of $1.15, which they did not seek to justify. The railroads suggested that the Commission fix a rate of $1.15 for both carriers for a trial period of one year in order to ascertain whether or not the traffic could be shared on that basis. In answer to this proposal Seatrain pointed out that it was the low-cost carrier; that because of inherent disabilities in its operations, it could not hope to compete with the railroads at equal rates; and that, in order to compete, it needed a rate differential in its favor.

The examiner decided in favor of Seatrain and found that the failure of the railroads to provide proportional rates to and from Seatrain's ports on a comparable basis with the reduced all-rail rate from Sandow to Cressona was discriminatory and contrary to the national transportation policy. In a report and order dated November 16, 1960, in which he recommended that the Commission direct the railroads to maintain proportional rates to and from the Seatrain ports, the examiner prescribed the formula to be used to eliminate the unlawfulness he found to exist in the rail rate under investigation. The formula was based on the Docket 28300 first-class rates prescribed by the Commission in "Class Rate Investigation, 1939", 281 I.C.C. 213. Section 6(11) (b) of the Act, 49 U.S.C.A. § 6(11) (b), which authorizes the Commission to establish the proportional rates suggested by the examiner, provides that "by proportional rates are meant those which differ from the corresponding local rates to and from the port and which apply only to traffic which has been brought to the port or is carried from the...