B.C.D. 00-47

EMPLOYER STATUS DETERMINATION NOV 0 7 2000

Railroad Ventures, Inc.

Decision on Reconsideration

This is the decision on reconsideration of the status of Railroad Ventures, Inc.

as an employer under the Railroad Retirement Act (45 U.S.C. §231 et seq.)

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

(RUIA).

PROCEDURAL BACKGROUND

In B.C.D. No. 98-48, issued on October 20, 1998, a majority of the three-member

Railroad Retirement Board, Management Member dissenting, held that

Railroad Ventures, Inc. (RVT) became a rail carrier employer under the RRA

and RUIA effective November 6, 1996. By letter dated October 30, 1998, RVI

submitted a request for reconsideration of that decision.

DISCUSSION

There is no dispute regarding the following facts in this case. On November 6.

1996, RVI was incorporated and acquired by purchase the railroad right of way

ofthe Youngstown and Southern Railroad Company between Youngstown,

Ohio and Darlington, Pennsylvania. In a decision entered on July 1, 1997, the

Surface Transportation Board (STB) indicated that RVI had acquired

approximately 35.7 miles of rail line from milepost 0.00, near Struthers, Ohio to

milepost 35.7 near Darlington, Pennsylvania, plus an additional 1-mile segment

of the Smith Ferry Branch line near Negley, Ohio. RVI does not provide rail

service over its rail line, but contracted with the Ohio & Pennsylvania Railroad

Company (BA No. 2264), an employer under the RRA and the RUIA, to provide

service.

Section 1(a)(1) of the RRA defines an employer to include:

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

Surface Transportation Board under part A of subtitle IV of Title 49

[45 U.S.C. §231(a)(l)(i)].

Section 1 of the RUIA contains essentially the same definition.

In the decision at issue in this appeal, the majority found that because RVI 

obtained authority from the STB to acquire and operate a railroad, it falls

within the plain meaning ofthe carrier definition of employer under the RRA

and the RUIA. In its request for reconsideration, RVI contends that it is not an

BA# 9354
Railroad Ventures, Inc.

Decision on Reconsideration

-2-

employer under the RRA and the RUIA because it does not operate a train but

merely owns the rail line in question.

RVI argues that the Board should not change its policy of holding not to be

covered under the RRA and the RUIA an entity which obtains STB authority to 

operate a railroad but which leases the line to or contracts with another entity

to operate the railroad instead of performing that operation itself. In other

words, RVI argues that it is not covered under the RRA and the RUIA because

it does not run trains over its rail line.1 In support of its position that it is not a

rail carrier employer under the RRA and the RUIA, RVI noted that it has no

employees and stated “as a point of correction,” that it did not seek both

acquisition and operating authority from the STB. RVI maintains that since

the Ohio & Pennsylvania Railroad already had operating authority for this rail

line, RVI “only obtained acquisition authority from the STB.” Two decisions of

the STB, however, are in direct conflict with RVTs assertion. The Board finds

that those decisions contain clear and undisputable evidence that RVI falls

squarely within the definition of a carrier employer under the RRA and the

RUIA for the reasons set out below.

Specifically, in a decision in STB Finance Docket No. 33385, published in the

Federal Register on April 24, 1997 (62 F.R. 20061), the first sentence stated in

pertinent part that, “(RVI)... has filed a verified notice of exemption under 49

CFR 1150.31(a)(1) to acquire and operate approximately 35.7 miles of line . . .”

In a later decision, decided July 1, 1997, which consolidated Finance Docket

No. 33385 and Finance Docket No. 41991, the STB referenced the April decision

with a statement that in Finance Docket No. 33385, RVI was “exempted from

the prior approval requirements of 49 U.S.C. 10901 to allow it to acquire and

operate approximately 35.7 miles of rail line owned by Youngstown & Southern

Railroad Company.” The STB explained in the July 1997 decision that by

virtue of its acquisition of the rail line, RVI undertook a common carrier

'The majority referenced that policy in B.C.D. No. 98-48, and explained

its reasons for not applying it to RVI. As the remainder of the discussion above

indicates, the obligations placed on RVI by the STB do not support the

application of that policy in this case.
Railroad Ventures, Inc.

Decision on Reconsideration

-3-

obligation under 49 U.S.C. §11101(a). Noting that section 11101(a) provides in

pertinent part that “[a] rail carrier providing transportation or service subject to

the jurisdiction of the Board under this part shall provide transportation or

service on reasonable request,” the STB wrote that:

“RVI has entered into an agreement with OPRC [Ohio &

Pennsylvania Railroad Company] to provide service, and, ifRVI

decides to abandon the lines, it first must obtain our abandonment

authorization.” (Footnote omitted.)

Thus, the STB expressly pointed out that RVI has a statutory obligation as a

rail carrier to provide transportation or service on its rail line. In fact, the STB

indicated that despite the fact that a separate entity, Ohio & Pennsylvania

Railroad Company, would operate rail service over the line in question, RVI is

the party responsible for ensuring that common carrier service is provided over

the rail line. Moreover, in its July 1997 decision, the STB ordered RVI to file a 

bi-weekly report with the STB’s Office of Compliance and Enforcement

detailing all activities and problems in restoring the subject rail lines to a 

serviceable condition and the extent to which sendee is currently being

provided by the Ohio & Pennsylvania Railroad Company.

Despite the Board having found RVI to have both acquisition and operating

authority from the STB, the Board has, prior to the initial decision on RVI in

B.C.D. 98-48, found in certain circumstances that an entity with STB authority

may still not be a covered carrier. In reviewing those cases along with the

record of the public hearing held by the Board2 on this policy issue, a modified

position of the Board is appropriate which balances between the Board’s

position prior to RVI and its current position. This position would recognize

2On August 19, 1999, an examiner designated by the Board held a hearing

to receive views and comments on whether an entity, which does not itself

operate a railroad, but which leases or contracts with another entity to operate a

railroad, should be considered an employer under the Railroad Retirement Act

and the Railroad Unemployment Insurance Act. The designated examiner

issued a report in September 1999.
-4-

Railroad Ventures, Inc.

Decision on Reconsideration

that certain entities have STB authority to own and operate the line but sought

authority only to preserve service or advance the public goal of insuring mass

transportation service. To cover these entities would not benefit the Trust

Funds but would only complicate the goal of preserving rail service and would

also cause confusion where employees are potentially caught between different

pension systems.

Therefore, the Board modifies its position upon reconsideration and will apply

the following considerations in determining whether an entity with STB

authority who contracts or leases the tracks to another entity to operate the line

is covered under the RRA and RUIA.

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 Acts

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

carrier. An entity is not a carrier under the Railroad Retirement Act if 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. An entity that owns a railroad line solely to preserve

or promote passenger or freight service would not be considered to have

as its primary business purpose to profit from railroad activities. The

Board will make a finding regarding the primary business purpose of the

entity based upon full consideration of all the available facts. Factors

that the Board will consider in determining whether a primary business

purpose of an entity is to profit from railroad activities include, but are

not limited to: (1) the reasons stated in the STB decision for the entity’s

acquisition of authority to operate the rail line; (2) the existence of a 

State statute which authorized the formation of the entity and/or

authorizes the entity to acquire one or more rail lines for the purpose or

purposes set out in the authorizing statute; (3) proofthat the entity is

considered by the Internal Revenue Service to be a non-profit entity; (4)

circumstances surrounding the acquisition of line which would show

intent simply to maintain service such as a history of unprofitability of

line acquired, potential or actual abandonment of line, or decrease in rail
Railroad Ventures, Inc.

Decision on Reconsideration

-5-

traffic over the line; (5) whether the entity is affiliated with other

carriers.3

2) . The entity does not operate or retain the capacity to operate the rail line.

If another entity is the certified operator ofthe rail line in question and

actually conducts the railroad service over the line, the entity that owns

the line will not be considered the operator. An entity that leases out the

rail line or grants trackage rights and easements will not be considered to

be operating the line ifit does not retain control over the day to day

operations of the line.

3) . The operator of the rail line is already covered or would be found covered

under the Acts administered by the Board. Where the operator of the

line is not covered and could not be found to be covered, the Board will

necessarily find the entity owning the rail line to be covered and persons

operating the line to be the entity’s employees.

Applying this to the facts of RV7, the Board affirms its initial determination

that RVI is a covered employer. Based upon the history of RVTs activities with

respect to its rail line, it appears the primary purpose was to profit from the

railroad by abandoning its assets. The purpose does not appear to be

preserving rail service rather to profit from selling of the assets. 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.

Therefore, the decision upon reconsideration is affirmed based on the grounds

set forward in this decision.

3An 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 line.
Railroad Ventures, Inc.

Decision on Reconsideration

-6-

CONCLUSION

The decision in B.C.D. No. 98-48 that RVI became a rail carrier employer

effective November 6, 1996, is affirmed. The request for reconsideration is

denied.

____/m rm_________ CherryyT. Thomas

9^.

/

V. M. Speakman, Jr.

y _. -

A-----------—------------- 'Jerome F. Kever