EMPLOYER STATUS DETERMINATION

Samuels Pacific Industries, Inc.

JAN 1 9 2000

This is the determination of the Railroad Retirement Board concerning the

status of Samuels Pacific Industries, Inc. (SPI), as an employer under the

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

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

SPI was incorporated February 13, 1997, and is wholly owned by Richard

Samuels. Mr. Samuels also owns the Oregon Pacific Railroad Company, an

employer covered under the Acts as ofJanuary 1, 1997 (B.A. 2788).

In 1962, Mr. Samuels formed Samuels Steel Products, which performed heavy

steel fabrication. In the mid-1980s Mr. Samuels created Hill Vista Investment

Company, which dealt with the salvaging and scrapping of old locomotives and

abandoned track. In 1991, Mr. Samuels purchased the East Portland Traction

Company (B.A. 4646). In 1993, Hill Vista purchased Molalla Western Railway

(B.A. 2771). On December 31, 1996, Molalla Western Railway and the East

Portland Traction Company were dissolved. Oregon Pacific was then created to

carry out all former railroad operations, and SPI was created to carry out

railroad salvage, equipment maintenance and repair, locomotive rebuilding,

and leasing.

SPI currently has seven employees who are also employees of Oregon Pacific.

SPI performs service for Oregon Pacific and for various industrial companies,

such as grain mills. SPI also performs service for Samtrak, an excursion

railroad owned by Mr. Samuels. In 1998, 75 percent of SPI’s revenues were

attributable to its rail affiliate OPR, 14 percent to the lease of a locomotive to a

private industrial company, and 9 percent to miscellaneous sources. In 1997, 58

percent of SPI’s revenues were attributable to OPR, 35 percent to the lease and

sale oflocomotives to private industrial companies, and 5 percent to

miscellaneous sources. In each year, 2 percent of SPI’s revenues were

attributable to services provided to Samtrak.

Section 1 of the RRA defines the term “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, 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

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facility or performs any service (other than 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 RUIA (45 U.S.C. §§ 351(a) and (b)) contain

substantially similar definitions, as does section 3231 ofthe Railroad

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

SPI clearly is not a carrier by rail. This leaves open the question as to whether

SPI is covered under the Acts by reason of its being under common control

with an employer and its performing service in connection with transportation

by railroad. Mr. Samuels is the sole owner of both SPI and Oregon Pacific, a

covered employer. Accordingly, SPI is under common control with an

employer under the Acts.

Section 202.7 of the Board's regulations provides that service is in connection

with railroad transportation:

* * * 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, or to the receipt, delivery, elevation, transfer

in transit, refrigeration or icing, storage, or handling of property

transported by railroad. (20 CFR 202.7).

In Livingston Rebuild Center. Inc., v. Railroad Retirement Board. 970 F. 2d 295

(7th Cir. 1992), the Court ofAppeals for the Seventh Circuit held a company

whose business consisted of repairing locomotives and other rolling stock to be

performing service in connection with railroad transportation in a fact situation

where approximately 25 percent of its business came from its affiliate and

where approximately 95 percent ofits business came from the railroad

industry. The type of service provided by SPI is vital to railroad transportation:

a railroad cannot function without repair and maintenance of locomotives and

other rail equipment. See Despatch Shops. Inc, v. Railroad Retirement Board.

153 F. 2d 644 (D.C. Cir. 1946); and Livingston Rebuild Center. In Railroad

Retirement Board v. Duouesne Warehouse Co.. 149 F.2d 507 (D.C. Cir. 1945),

affd 326 U.S. 446, 90 L.Ed. 192, 66 S.Ct. 238 (1946), the Court ofAppeals held

that a warehouse corporation owned by a railroad and engaged in loading and

unloading railroad cars and other handling of property transported by railroad,

and in other activities which enabled the railroad to perform its rail

transportation more successfully, was performing "services in connection with"

the transportation of property by railroad and therefore was an employer under

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the Railroad Unemployment Insurance Act. The Court of Appeals quoted from

the opinion of the Railroad Retirement Board which had held that Duquesne

was an employer under the Act:

In light of the general purpose ofthe * * * [Railroad

Unemployment Insurance Act] and accepted doctrines ofstatutory

construction, the Board has construed the carrier affiliate coverage

provision as denoting services which are an integral part of, or are

closely related to, the rail transportation system of a carrier and as

including within its coverage (1) carrier affiliates engaged in activities

which are themselves railroad transportation or which are rendered

in connection with goods in the process of transportation, such as

loading and unloading railroad cars, receipt, delivery, transfer in

transit, and other handling of property transported by railroad; and

also (2) carrier affiliates engaged in activities which enable a railroad

to perform its rail transportation, such as maintenance and repair of

way and equipment, and activities which enable a railroad to operate

its rail system more successfully and to improve its services to the

public such as auxiliary bus transportation, dining facilities, and

incidental warehousing services.

We agree with the Board's construction of the Act. It follows

the ordinary meaning ofthe words used in the statute. It achieves a

common sense result well within what we conceive to be the policy of

Congress, t£., to cover the business of railroading as it is actually

carried on. (Footnote omitted.) 149 F.2d at 509.

SPI is under common control with a rail carrier employer, Oregon Pacific. It

leases rail equipment, performs maintenance and repair of rail equipment, and

rebuilds locomotives. The majority of the revenue of SPI is generated by

services it provides for its affiliated carrier.

Accordingly, it is determined that SPI is an employer within the meaning of

section l(a)(l)(ii) of the Railroad Retirement Act (45 U.S.C. § 231(a)(1)(h)) and

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the corresponding provision of the Railroad Unemployment Insurance Act as

of February 13,1997, the date of its incorporation. SPI should be considered a

new employer for purposes of experience rating under the RUIA.

Samuels Pacific Industries, Inc.