B.C.n. 01-54

JUN 0 4 2001

EMPLOYER STATUS DETERMINATION

V & S Railway, Inc. (V&SR)

This is a determination of the Railroad Retirement Board concerning the status of

V & S. Railway, Inc. (V&SR) as an employer under the Railroad Retirement Act (45 

U.S.C. §231 et seg.) and the Railroad Unemployment Insurance Act (45 U.S.C. §351 et

seg.).

In Surface Transportation Board (STB) Finance Docket 33964, decided November 29,

2000, V&SR filed a verified notice of exemption to acquire and to operate the Medicine

Lodge Subdivision (line) of Central Kansas Railway, L.L.C. (CKR) (B. A. No. 2765). The

line acquired from CKR extends between milepost 0+1016 in Attica, and the end of the

line at milepost 41.0, in Sun City, serving the intermediate points of Sharon, Medicine

Lodge, and Lake City, a distance of approximately 41 miles in Harper and Barber

Counties, Kansas. According to the STB decision, this transaction was to be

consummated on or after November 28, 2000. This transaction is related to STB 

Finance Docket No. 33965, decided November 29, 2000, wherein Mr. Kern W. 

Schumacher and Mr. Morris H. Kulmer filed a verified notice of exemption to continue in

control of V&SR, upon V&SR’s becoming a Class III railroad. The STB decision in

Finance Docket No. 33965 stated that Mr. Schumacher and Mr. Kulmer indirectly

control two existing class III railroads: Tulare Valley Railroad Company1 and Kern 

Valley Railroad Company.2

Information regarding V&SR was furnished by Mr. Fritz R. Kahn, an attorney

representing V&SR. According to Mr. Kahn, V&SR “will assume responsibility for

rendering service on the line" and further, V&SR “anticipates engaging a contractor to

operate the line for its account." Mr. Kahn stated that V&SR “plans no operations and 

anticipates having no employees."

Section 1(a)(1) of the Railroad Retirement Act (45 U.S.C. §231 (a)(1)), insofar as 

relevant here, defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction of the Surface

Transportation Board under part A of subtitle IV of Title 49, United States

Code.

Section 1 of the RUIA contains essentially the same definition.

In its decision regarding the employer status of Railroad Ventures, Inc. (B.C.D. 00-47),

the Board held that an entity that has STB authority to operate a rail line, but leases or

contracts with another to operate the line in question, is covered under the

1 Tulare Valley Railroad Company was held not to be a covered employer in B.C.D. No. 94-1.

" The Board’s Audit and Compliance Section is investigating the status of Kern Valley Railroad Company.

BA# 2796
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V & S Railway, Inc. (V&SR)

Acts administered by the Board unless the Board determines that the entity is not a

carrier. The Board enunciated a three-part test in B.C.D. 00-47 to be applied in making

this determination. An entity that leases a line to another company or contracts with

another company to operate the line is a carrier under the Railroad Retirement Act

unless the Board finds that all three of the following factors exist: 1) the entity does not

have as a primary business purpose to profit from railroad activities; 2) the entity does

not operate or retain the capacity to operate the rail line; and 3) the operator of the rail

line is already covered or would be found to be covered under the Acts administered by

the Board.

We pointed out in our decision in the case of Railroad Ventures that an entity that is

affiliated through common ownership with other for-profit carriers will be presumed to 

have as a primary business purpose to profit from the ownership of the rail line. We find

that that presumption applies in this case to V & S Railway, Inc., which is under

common control with Tulare Valley Railroad Company and Kern Valley Railroad Co.

Accordingly, we do not have to reach the other two considerations, since all three need

to be present to remain outside the coverage of the RRA and the RUIA.

Accordingly, it is determined that V & S Railway, Inc. became an employer within the 

meaning of section 1 (a)(1 )(i) of the Railroad Retirement Act (45 U.S.C. §231 (a)(1 )(i))

and the corresponding provision of the Railroad Unemployment Insurance Act effective 

November 28, 2000, the date on which the STB decision indicates it acquired its rail

line.