Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-01313/USCOURTS-caDC-95-01313-0/pdf.json

Parties Involved:
Interstate Quality Services, Inc.
Petitioner
Railroad Retirement Board
Respondent

Document Text:

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 18, 1996 Decided May 17, 1996

No. 95-1313

INTERSTATE QUALITY SERVICES, INC.,

PETITIONER

v.

RAILROAD RETIREMENT BOARD,

RESPONDENT

On Petition for Review of an Order of the

United States Railroad Retirement Board

Jeffrey E. Schiller argued the cause for the petitioner. John L. Oberdorfer was on brief.

Marguerite P. Dadabo, General Attorney, Railroad Retirement Board, argued the cause for the

respondent. Catherine C. Cook, General Counsel, Steven A. Bartholow, Deputy General Counsel,

and Thomas W. Sadler, Assistant General Counsel, were on brief.

Before: BUCKLEY, WILLIAMS and HENDERSON, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Petitioner Interstate Quality Services, Inc.,

d/b/a/ Interstate Reloads, Inc. (Reloads) is an Illinois corporation and a wholly owned subsidiary of

Iowa Interstate Railroad, Ltd. (Iowa Interstate), a freight carrier operating between Blue Island,

Illinois and Council Bluffs, Iowa. Reloads operates a freight transfer and storage business in Blue

Island which primarily unloads freight from trains or trucks, stores freight in its warehouses and

reloads freight onto trains or trucks. In addition, Reloads contracts for transportation of freight by

truck and leases part of its premisesto a lumber wholesaler. In a decision dated March 16, 1993, the

Railroad Retirement Board (Board) ruled that Reloads is an "employer" within the meaning of the

Railroad Retirement Act, 45 U.S.C. § 231(a)(1)(ii), (RRA) and the Railroad Unemployment

Insurance Act, 45 U.S.C. § 351(a), (RUIA). Reloads has petitioned for review of that decision. For

the following reasons we deny the petition.

USCA Case #95-1313 Document #200353 Filed: 05/17/1996 Page 1 of 4
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

The RRA and the RUIA both define "employer" to include not only a railroad carrier but also

any company that (1) is "directly or indirectly owned or controlled by" a railroad carrier or "under

common control" with such a carrier and (2) "operates any equipment or facility or performs any

service (except trucking service, casual service, and the casual operation of equipment or facilities)

in connection with the transportation of passengers or property by railroad, or the receipt, delivery,

elevation, transfer in transit, refrigeration or icing, storage, or handling of property transported by

railroad." 45 U.S.C. § 231(a)(1); 45 U.S.C. § 351(a). Reloads does not dispute that, as a wholly

owned subsidiary of Iowa Interstate, it satisfiesthe first criterion but vigorously conteststhe Board's

conclusion that it meets the second. We conclude that under the unambiguous statutory language

and the Board's regulations, which Reloads does not challenge, the Board's determination must be

upheld. Given the bases for our decision, we need not resolve whether deference is owed the Board's

interpretation of the statutory language under Chevron U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984). We do note that the Railroad Retirement Tax Act, administered

by the InternalRevenue Service, contains an almost identical definition of "employer," see 26 U.S.C.

§ 3231(a), and deference to each agency's interpretation might lead to conflicting results. See

Livingston Rebuild Center v. Railroad Retirement Board, 970 F.2d 295, 299 (7th Cir. 1992)

("steer[ing] clear ofthe subject" of deference to Board's employer determinations "because the Board

is not the onlyentityinvolved" and "[a]ppellate deference to the Commissioner [ofInternalRevenue],

the Board, and trial courts would produce a muddle if these institutions should disagree"). But see

Itel Corp. v. United States Railroad Retirement Board, 710 F.2d 1243, 1245 (7th Cir. 1983)

("Congress has entrusted the Board with the authority to make employer/employee determinations

under the statutes it administers. 45 U.S.C. §§ 231f(b)(1), 362(l). The Board's interpretation of

RRA and RUIA is entitled to deference if it has a reasonable basis in law.") (citations omitted).

Reloadsfirst arguesthat the servicesit performs, including the loading, unloading and storage

of rail freight, are not "obviously essential to the functioning of the railroad" or "inextricably linked

to the operation ofthe railroad." Brief of Petitioner at 19 (quoting Railroad Concrete Crosstie Corp.

v. Railroad Retirement Board, 709 F.2d 1404, 1411 (11th Cir. 1983)). Perhaps sobut they need

USCA Case #95-1313 Document #200353 Filed: 05/17/1996 Page 2 of 4
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

1

In Railroad Concrete Crosstie Corp., the Eleventh Circuit, rebutting the petitioner's argument

that the manufacture and sale of a product do not constitute services, held that if a subsidiary

provides its parent carrier with a product that is "inextricably linked to the operation of the

railroad" and "obviously essential to the functioning of the railroad," "the subsidiary's provision of

the product constitutes a service to the parent within the meaning of 45 U.S.C.A. §§ 231(a)(1)

and 351(a)." 709 F.2d at 1411. The court did not, however, purport to establish the quoted

characteristics as prerequisites to satisfy the statute. 

2When a company performs a service for a related carrier so as to come within the statutory

definition of "employer" but is "principally engaged in some other business," the Board then

considers the "functional dominance or subservience" of the rail service in determining whether to

treat the entire company as the covered employer or only "some separable and identifiable

enterprise" thereof. See 20 C.F.R. § 202.9(a)(2). 

not be. The statutes require that services be performed merely "in connection with" rail activity and

the Supreme Court long ago held that "loading and unloading services ... are services performed "in

connection with the transportation of * * * property by railroad.' " Railroad Retirement Board v.

Duquesne Warehouse Co., 326 U.S. 446, 455 (1946).1

Reloads next argues that it is not an employer because its rail services are not "functionally

dominant in relation to its other business." But, again, "functional dominance" is not required under

the statute or under theBoard'sregulations which construe "in connection with" to mean "reasonably

directly related, functionally or economically." 20 C.F.R. 202.7.2 Both the statutes and the

regulations exempt from coverage companies that perform only "casual" rail service, which the

regulations define as service that either "is so irregular or infrequent as to afford no substantial basis

for an inference that such service or operation will be repeated" or "is insubstantial." 20 C.F.R. §

202.6. Here, however, the Board correctly concluded that Reloads' rail-related service "cannot be

considered insubstantial" and "is not casual in nature." B.C.D. No. 95-26 at 5, 6. The undisputed

evidence, as recited in the Board's decision, shows that in each of the four years from 1989-92,

Reloads' staff spent a majority of its time (63.6% to 87.2%) performing such services and that a

substantial percentage of that time (36.5% to 56.3%) was devoted to Iowa Interstate.

Reloads argues the Board's determination conflicts with other Board decisions that have found

railroad-affiliated companies not to be covered employersa conflict that might, had we found the

statute ambiguous and subject to the Board'sreasonable interpretation, require that we remand to the

Board for it to explain the departure from past precedent. See Greater Boston Television Corp. v.

USCA Case #95-1313 Document #200353 Filed: 05/17/1996 Page 3 of 4
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

3The company's service to the affiliated railroad constituted only 2.5% of its own business and

was equal to only 3.2% of the repair work the railroad performed for itself. 

FCC, 444 F.2d 841, 852 (D.C. Cir. 1970). Reloads points to In re VMV Enters., B.C.D. No. 93-79

(Oct. 19, 1993), in which the Board concluded a locomotive repair company was not an employer

although 58.2% of its work was performed for commercial rail carriers. The Board's determination

there, however, had nothing to do with the total amount of rail service the company performed but

instead rested on the fact that it provided only "minimalservice" to the affiliated railroad.3 As already

noted, that is not the case here. Reloads also relies on Pabtex, Inc., in which the Board again found

the company was not a statutory "employer." In Pabtex, however, all ofthe company'sservices were

performed for independent brokers and not for the related carrier. Here, by contrast, Reloads

provides services directly to Iowa Interstate. Finally, Reloads relies on two letter decisions of the

Board's General Counsel. See Carnegie-Illinois Steel Corp., L39-811 (1939) (DA A-42-44);

Pullman Standard Car Manufacturing Co., L40-403 (1940) (DA A-45-46). In each, the General

Counsel found that the sale of commodities by a company to a related railroad was not a service

because the railroad was only one of the company's many customers and was treated no differently

fromits others. Cf. RailroadConcreteCrosstieCorp. v. Railroad Retirement Board, 709 F.2d 1404,

1408 (11th Cir. 1983) (noting that while manufacture of commodity may not by itself be service,

"[t]he provision of a steady, dependable supply of an essential item is a service."). Here, Reloads is

not in the business of manufacturing or selling but instead provides services to its customers,

including substantial services to Interstate Iowa.

For the preceding reasons the petition for review is

Denied.

USCA Case #95-1313 Document #200353 Filed: 05/17/1996 Page 4 of 4