B.C.D. 10-3

EMPLOYER STATUS DETERMINATION

Pan Am Railways, Inc. (PARI) FEB 012010

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

Pan Am Railways, Inc. (PARI) as an employer under the Railroad Retirement Act

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

U.S.C. § 351 et sea.KRUIA). The status of PARI under the Acts has not previously

been considered.

PARI is a holding company that was formerly known as Guilford Transportation'

Industries, Inc. Information regarding the activities of PARI was provided by

Cynthia Scarano, the Executive Vice President of PARI. PARI is a wholly owned

subsidiary of Pan Am Systems, Inc. In turn, PARI is the owner of all or a majority of

the shares of stock of its railroad subsidiaries. PARI presently has no salaried

employees, and the management of PARI consists of a Board of Directors and

three officers. PARI formerly provided real estate management services to its rail

subsidiaries and PARI collected a management fee in proportion to the property

owned by the subsidiary. This payment practice was discontinued at the end of

2008 for some of PARI’s subsidiaries.

Currently, PARI is providing similar services to other rail subsidiaries to include:

Northern Railroad, Vermont and Massachusetts Railroad, Portland Terminal

Company, and Stonybrook Railroad. Information provided by the company

indicated that several officers of PARI held specific positions of authority in

subsidiary railroads. Mr. Eric Lawler is the treasurer of Boston and Maine (BA

1102), Portland Terminal (BA 4105) and Maine Central Railroad (BA 1107). Mr.

Robert Culliford is the secretary of all the previous railroads. Mr. David Andrew

Fink is the president of Pan Am Railways. Mr. David Armstrong Fink is the

president of the three previously mentioned railroads (BA 1102, 4105, and 1107).

These four individuals (Mr. Lawler, Mr. Culliford, Mr. D. Andrew Fink, and Mr. D.

Armstrong Fink) are the directors or officers of PARI. It appears that the majority

of the actions by the directors of PARI consist of Board Decisions which affect

the major business activities of the subsidiary railroads.

1 In legal opinion L-82-169 Guilford Transportation Industries, Inc. was held not to

be a railroad employer under the Acts because at the time of that decision

(July 13, 1982) Guilford was limiting its involvement with its subsidiary rail carriers

to activities that included new acquisitions, overall directing of policy and

coordination of the subsidiaries, and was not performing service in connection

with transportation of passengers or property by rail. The decision specifically

noted that should Guilford consolidate all or part of its operations, the Board

would find that Guilford would be performing such service.

BA # 9115
2

Examples of the major activities of the rail subsidiaries determined by the

management of PARI include review and approval of credit agreements

entered into by PARI and its subsidiaries and the formation of a joint venture with

Norfolk Southern Corporation to create a new rail carrier pursuant to which a

subsidiary would maintain a 50% interest in the new carrier. Each of these votes

authorized one or more of the officers to execute certain agreements necessary

to effectuate the vote.

Further information received indicates that the previous railroads are not

providing active freight service. Additionally, PARI performed real estate

management services to Springfield Terminal Railway Company which leases rail

lines and operates rail carrier services over those leased lines. The file indicates

that PARI ceased receiving fees from Springfield Terminal in 2008 as well.

Sections 1 (a) (1)(i) and (ii) of the Railroad Retirement Act (45 U.S.C. § 231 (a)(1) (i)

and (ii), insofar as relevant here, define 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;

(ii) any company which is directly or indirectly owned or controlled by,

or under common control with, one or more employers as defined

in paragraph (i) of this subdivision, and which 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;

Section 1 of the RUIA (45 U.S.C. § 351) contains essentially the same definition, as

does section 3231 of the Railroad Retirement Tax Act (26 U.S.C.§ 3231).

Section 202.4 (20 CFR 202.4) of the Board's regulations provides that:

A company or person is controlled by one or more carriers, whenever

there exists in one or more such carriers the right or power by any means,

method or circumstance, irrespective of stockownership to direct, either

directly or indirectly, the policies and business of such a company or

person and in any case in which a carrier is in fact exercising direction of

the policies and business of such company or person.
3

Section 202.5 (20 CFR 202.5) of the Board's regulations provides that:

A company or person is under common control with a carrier, whenever

the control (as the term is used in 202.4) of such company or person is in

the same person, persons, or company as that by which such carrier is

controlled.

The evidence of record establishes that PARI is under common control with its

covered rail carriers by the common ownership of Pan Am Systems, Inc., the

ultimate holding company. Further, PARI performs a service for several of those

carriers. Section 1(a)(1) (ii) clearly states that "any service" in connection with

the transportation of person or property by rail (with exceptions that do not

apply to PARI) performed by an entity which controls, or is under common

control, with a rail carrier will result in that entity being "covered" under the Acts. 

The active management of a rail carrier's real estate has been considered such 

a service. [Southern Development Company v. Railroad Retirement Board. 243

F.2d 351 (C.A. 8 1957); B.C.D. 07-01, CSX Real Property, Inc.]. In this case, the

evidence in the file indicates that PARI continues to provide “real estate

management services" which would include all property owned by the

subsidiary carriers. All property owned by the subsidiary carriers would include

railroad rights of way and lines of railroad. This function is a step in the direction

of more directly serving the subsidiaries that was previously discussed in the

Guilford Transportation decision found at L-82-169. PARI has taken additional

steps to consolidate real estate management into its regular course of business,

whereas Guilford Transportation limited its involvement with its subsidiaries only to 

directing policy and acquiring new subsidiaries. The real estate management

for fees function in which PARI has engaged and continues to engage

represents a more direct involvement in the direct support of railway operations

for its subsidiaries and reflects a change in the relationship between PARI and its

subsidiaries as compared to the relationship Guilford Transportation had with its

subsidiaries. In addition, the fact that PARI reviews the operations of its rail

subsidiaries and votes to approve or disapprove major activities to be

undertaken by the rail subsidiaries indicates a much higher degree of

involvement by PARI in the operation of the rail subsidiaries than was evidenced

in the case of PARI's predecessor, Guilford Transportation Industries, Inc.
4

Accordingly, it is determined that Pan Am Railways, Inc. became an employer

within the meaning of section 1 (a) (1) (ii) of the Railroad Retirement Act and its

corresponding provision of the Railroad Unemployment Insurance Act effective

April 1,2006, the date on which PARI began operations.

Michael S. Schwartz

Jerome F. Kever