FINANCE DOCKET No. 13680 IN RE SMITH INTERLOCKING DIRECTORATE APPLICATION OF Submitted April 29, 1942. Decided June 29, 1942 Application of Robert E. Smith for authority to hold the position of director of the New York, New Haven and Hartford Railroad Company, in addition to the position of director of the Chicago and North Western Railway Company, denied. Robert E. Smith for applicant. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4: By application filed on March 31, 1942, Robert E. Smith, of New York, N. Y., requests authority under section 20a (12) of the Interstate Commerce Act to hold the position of director of the New York, New Haven and Hartford Railroad Company while continuing to hold the position of director of the Chicago and North Western Railway Company. A brief filed on April 29, 1942, in support of the application, shows, among other things, that the applicant was elected director of the New Haven at a stockholders' meeting on April 15, 1942, for a 1-year term, but that he has not qualified for the position pending our decision herein. He was elected director of the North Western at the stockholders' meeting of that company in April 1940 for a 1-year term, and was elected in April 1941 for a 3-year term. Both the North Western and the New Haven are in process of reorganization under section 77 of the Bankruptcy Act. The applicant is technical advisor to preferred and common stockholders' committees of each company, and his election as director was secured as the result of his activity with those committees. He also is chairman and director of the National Conference of Investors, a nonprofit Delaware corporation formed for the purpose of protecting lifeinsurance savings. 252 I. C. C. The applicant states that, so far as he knows, there is no financial, operating, or other relationship between the North Western and the New Haven and that the respective operating territories of the two carriers are approximately 1,000 miles apart. He asserts that his selection as director of each company was dictated by the need for harmonious relations among the various stockholders, to the end that stockholders having no creditor interest may be satisfied that their rights are not jeopardized by a board of directors, some of whom also are directors or officers of corporations which are large creditors of the debtor, and who may in reorganization proceedings influence the debtor in a manner detrimental to the stockholders. He states that his selection, with that of certain others, to the board of directors of the respective companies was the solution agreed upon by the stockholders to create harmony among the opposing interests involved, and that this end has been accomplished. He urges that his serving as director of the two companies does not and cannot adversely affect public or private interests, but on the contrary that, if the application is denied, it will tend to destroy the mutual trust and good will which now prevails among the New Haven stockholders. In In re Rand, 175 I. C. C. 587, and in In re Astor, 193 I. C. C. 528, the Commission denied applications to serve as director of systems in widely separated sections of the country, pointing out that the presence or absence of competition between the respective systems is not of controlling importance and that the public interest would be served in greatest measure if complete independence and impartiality can be secured and maintained between systems generally, although directly serving different territories. In In re Coverdale, 252 I. C. C. 672, decided June 1, 1942, the Commission held that such considerations are as applicable to established systems as they were to the systems provided for in the plan to consolidate railroads. The applicant argues that the two cases first cited are not controlling in this instance because the railroads there involved were not in bankruptcy. He asserts that the duties and responsibilities of a director of a railroad in bankruptcy are fundamentally different from those of a director of a solvent company and are primarily in connection with duties imposed on the debtor by section 77 of the Bankruptcy Act, inasmuch as substantially all other affairs of the bankrupt carrier are transferred to the trustee, who is an officer of the court. He relies particularly on the action of this division in In re Atherton, wherein by our order of July 12, 1932, in Finance Docket 11670, we authorized Louis M. Atherton to hold the position of director of the Chicago, Milwaukee, St. Paul and Pacific Railroad Company during and until its reorganization shall have been accomplished while continuing to hold the position of director of the Boston & Maine Railroad. In In re Coverdale, supra, the Commission denied the application of William H. Coverdale to serve as director of the Gulf, Mobile & Ohio Railroad Company while continuing to hold positions as director, or officer and director, of the Seaboard Air Line Railway Company and the Georgia & Florida, both of which are in receivership, and certain minor carriers. It found that, although the applicant's connection with the Seaboard Air Line would cease upon reorganization of that company and his connection with the Georgia & Florida would end with the termination of its receivership, and although he had no direct voice in the management of the properties of either concern, there nevertheless was the possibility of the exertion of personal influence in the affairs of the companies because of the positions he held with them. It thus appears that the Commission found no ground for distinguishing between railroads that are in receivership and those that are not. In the administration of the provision of section 20a (12) of the act, there is no ground for distinguishing between railroads in receivership and those in process of reorganization under section 77 of the Bankruptcy Act. In disposing of the application under consideration, we are governed by the first three cases cited above. We are unable to find that neither public nor private interests will be adversely affected by the holding by applicant of the position of director of the New York, New Haven and Hartford Railroad Company while continuing to hold the position of director of the Chicago and North Western Railway Company. An order denying the application will accordingly be entered. COMMISSIONERS MAHAFFIE and MILLER concur only because, voting as members of a division, they feel bound by the decision of the entire Commission in the Coverdale case. 252 I. C. C. FINANCE DOCKET No. 13569 ERIE RAILROAD COMPANY FERRY ABANDONMENT Submitted June 10, 1942. Decided June 19, 1942 Certificate issued permitting abandonment by the Erie Railroad Company of its ferry between Jersey City, N. J., and West Twenty-third Street, New York City. H. A. Taylor and W. T. Pierson for applicant. C. M. Mulholland and G. H. Reppert for protestants. REPORT OF THE COMMISSION DIVISION 4, COMMISSIONERS PORTER, MAHAFFIE, AND MILLER BY DIVISION 4: Exceptions to the report proposed by the examiner were filed by counsel for the Railway Labor Executives' Association. Robert E. Woodruff and John A. Hadden, trustees in reorganization proceedings of the Erie Railroad Company, applied on December 12, 1941, for permission to abandon the Erie system ferry between Jersey City and West Twenty-third Street, New York City, a distance of about 2 miles, in Hudson County, N. J., and New York County, N. Y. Protests were filed, and a hearing was held. No representations have been made by State authorities. The Erie was reinvested with title to its properties and resumed operation on December 22, 1941, pursuant to order of the court having jurisdiction of the reorganization proceeding, and it prosecuted the application at the hearing. It is the carrier charged with the duty of continuing operation of the ferry, unless and until relieved from that duty, and is the party which should be named in our certificate, if the application be granted. Hence, the Erie now should be treated as the applicant, and, hereafter in this report, the previous relationship of the trustees to its properties will be disregarded. See Chicago, S. & St. L. Ry. Co. Receiver Abandonment, 236 I. C. C. 765, 771-772. The proposed abandonment is opposed by the Railway Labor Executives' Association on behalf of employees, and by a resident of Montclair, N. J., on behalf of 35 commuters who use the ferry, in conjunction with rails of the Erie system, in travel between their places 252 I. C. C. of residence in northern New Jersey and their place of business on Manhattan Island.1 The applicant's station at Jersey City is the eastern rail terminus for passenger trains of the applicant, the New York, Susquehanna & Western, and the New Jersey & New York Railroads, which include, among others, lines serving densely populated areas in northern New Jersey. In connection with this passenger service, the applicant operates from Jersey City, across the North River, the ferry to the foot of West Twenty-third Street, and a ferry to the foot of Chambers Street, in the Borough of Manhattan, New York City. The boat service is used principally by vehicles and foot passengers. The latter are chiefly persons arriving at or departing from the railroad terminal, and most of them are commuters. The Twenty-third Street ferry has been in operation continuously since May 6, 1869. Operation of the Chambers Street ferry is to be continued. The reason assigned for the proposal to abandon the Twenty-third Street line is that this ferry has been and is operated at substantial losses annually because of insufficient patronage. It is averred that in recent years, particularly, much of the ferry traffic has been diverted to other Hudson River crossings, and that the ferry cannot be operated except at a loss with the present volume of traffic. The applicant believes that there is no reasonable prospect of increase in the traffic, but that the trend downward will continue. The applicant's ferry service to New York City is performed by a pool of seven vessels. Two boats are used in the Twenty-third Street service, three are used in the Chambers Street service, one is used partly in one service and partly in the other, and one regularly is laid up for inspection and repairs. The vessels ordinarily used in the Twentythird Street service are the ferryboats Tuxedo, Rutherford, and Goshen. Rail service to and from the Jersey City passenger terminal, with the traffic handled daily, is as follows: (1) By the applicant, 5 through trains in each direction between the terminal and points beyond Port Jervis, N. Y., about 88 miles west of Jersey City, traffic not shown; and, inclusive of trains and passengers handled on the New York & Greenwood Lake Railway and on the Northern Railroad of New Jersey, 48 commuter trains in-bound to Jersey City and 44 out-bound, about 24,618 passengers; (2) by the New Jersey & New York, 6 trains in-bound and 5 out-bound, about 3,332 passengers; and (3) by the New York, Susquehanna & Western, 6 trains in-bound and 5 trains outbound, number of passengers not available at the hearing; total com 1 Protests were made also in petitions submitted by numerous other persons, none of whom appeared at the hearing. |