B.C.D. 01-15

JAN 2 4 2001

EMPLOYER STATUS DETERMINATION

Quality Logistic Services, L.L.C. (QLS-LLC)

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

of Quality Logistic Services, L. L. C. (QLS-LLC) as an employer under the

Railroad Retirement Act (45 U.S.C. §231 et seep) and the Railroad

Unemployment Insurance Act (45 U.S.C. §351 et seep).

Information regarding QLS-LLC was provided by Mr. Mike Ogborn, Manager

of QLS-LLC. QLS-LLC was organized as a Colorado Limited Liability

Company on May 12, 1998 and began operations “shortly thereafter”. QLS-LLC

has six employees. Currently, QLS-LLC does not have a Chief Executive

Officer. QLS-LLC is owned by MCS Properties, L.L.C (MCS). MCS is a 

Colorado limited liability company that is owned by Neptune Partners, Ltd.

(49%), Quality Holdings, Inc. (39%), and Pat Broe (12%). Pat Broe is the sole

owner of OmniTRAX, Inc. (OmniTRAX), a company which was held by the

Railroad Retirement Board not to be an employer covered under the Acts

(B.C.D. 97-5). OmniTRAX owns a number of rail carrier employers, including

the Newburgh & South Shore Railroad, L.L.C. (B.A. NO. 3268). OmniTRAX

provides certain services to QLS-LLC, such as accounting and human

resources, under a management contract between OmniTRAX and QLS-LLC.

According to information provided by Mr. Ogborn, Pat Broe also owns 100

percent of Quality Holdings, Inc.

Mr. Ogborn reported that QLS-LLC provides logistic services for Birmingham

Steel Company. Mr. Ogborn reported that QLS-LLC “unloads flatcars of heats

of steel, inventories them, and then coordinates the delivery of flats to

Birmingham Steel according to the needs of that shipper’s steel mill

production.” Mr. Ogborn stated that QLS-LLC operates wholly within the

confines of the property of the party with whom it contracts to provide logistics

services. Mr. Ogborn reported that QLS-LLC “operates in the yard of

Newburgh & South Shore Railroad, L.L.C. (“NSR”)”, an affiliate railroad

controlled by OmniTRAX. In 1998, QLS-LLC had operating revenues of

$350,187.

Although Mr. Ogborn states that QLS-LLC provides logistics services for

Birmingham Steel, the record establishes that NSR collects the revenue

attributable to the logistics services and then pays QLS-LLC for the services

rendered.

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:

BA# 9246
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Quality Logistic Services, L.L.C. (QLS-LLC)

(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 ***.

Sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act (45 U.S.C.

§§351(a) and (b)) contain substantially similar definitions, as does section 3231

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

The evidence of record shows that QLS-LLC is not a rail carrier employer

under the definition of employer in subparagraph (i) quoted above since it does

not operate, and has never operated, as a common rail carrier in interstate

commerce. Rather, it provides logistic sendee soley for Birmingham Steel

Company, a non-carrier entity.

This conclusion, however, leaves open the question as to whether QLS-LLC is

an employer under the definition in subparagraph (ii). commonly referred to as

the “affiliate definition."

Under section l(a)(l)(ii), a company is an employer if it meets both of two

criteria: if it is owned by or under common control with a rail carrier employer

and if it provides “service in connection with" railroad transportation. If it

fails to meet either condition, it is not a covered employer within section

l(aXlXii).

The evidence of record shows that QLS-LLC is under common control with a 

rail carrier employer. Mr. Pat Broe owns 100 percent of OmniTRAX, and also

owns a percentage of the controlling shares of QLS-LLC, by holding 12 percent

stock ownership in MCS -LLC, the owner of QLS-LLC , and 100 percent of

Quality Holdings, Inc. (QHI). As stated earlier. QHI owns 39 percent of MCSLLC. Therefore, Mr. Broe essentially owns 51 percent of MCS-LLC, which

owns 100 percent of QLS-LLC. Mr. Mike Ogborn and Mr. Dwight Johnson

serve as managers for both MCS Properties. Inc., and OmniTRAX. Lastly,

Mr. Ogborn and Mr. Johnson serve as managers for both OmniTRAX and QLS-
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Quality Logistic Services, L.L.C. (QLS-LLC)

LLC. Accordingly, the Board finds that QLS-LLC is under common control

with the rail carriers owned by OmniTRAX.

Section 202.7 of the Board’s regulations (20 CFR 202.7) defines service in

connection with railroad transportation as follows:

The service rendered or the operation of equipment or facilities by

persons or companies owned or controlled by or under common control

with a carrier is in connection with the transportation of

passengers or property by railroad * * * if such service or operation is

reasonably directly related, functionally or economically, to the

performance of obligations which a company or person or companies or

persons have undertaken as a common carrier by railroad ....

According to Mr. Ogborn, QLS-LLC currently performs logistic services for

only one entity, Birmingham Steel Company. Mr. Ogborn stated that QLS-LLC

does not perform any work for any of the subsidiary railroads of OmniTRAX.

However, the evidence of record shows that QLS-LLC performs services in the

yard of NSR in Cleveland, Ohio. Those services consist of unloading flatcars of

heats of steel, making inventories of them, and coordinating the delivery of the

flats to Birmingham Steel according to the needs of that shipper's steel mill

production schedule. The record also indicates that NSR collects the revenue

from Birmingham Steel and then QLS-LLC is paid out of those funds as a 

contractor. The evidence indicates that QLS-LLC is performing a service in

connection with railroad transportation for NSR. Unloading of rail cars and

related activities such as freight transfer have long been held to be a service in

connection with railroad transportation, Railroad Retirement Board v.

Duquesne Warehouse Company. 326 U.S. 446 (1946); Interstate Quality

Services. Inc, v. Railroad Retirement Board. 83 F.3d 1463 (D. C. Cir. 1996). The

record in this case indicates that QLS-LLC provides these services in the yard

of NSR and is paid for those services by NSR. The Board finds that QLS-LLC

is performing service in connection with railroad transportation for NSR within

the meaning of section l(a)(l)(ii) of the RRA and the corresponding provisions

in the RUIA.

The information summarized above indicates that QLS-LLC is under common

control with and performing a service in connection with railroad

transportation for NSR. Accordingly, it is determined that Quality Logistic

Services, LLC became an employer within the meaning of section l(a)(l)(ii) of

the Railroad Retirement Act [(45 U.S.C. §23l(a)(l)(ii)] and the corresponding
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Quality Logistic Services, L.L.C. (QLS-LLC)

provision of the Railroad Unemployment Insurance Act effective May 12, 1998,

the date of QLS-LLC’s formation.

Cherryl 77. ’Thomas

x~l/YW

V. M. Speakman, Jr.

i n

erome F. Kever