EMPLOYER STATUS DETERMINATION

Hohorst-Drunsic Transportation Company, Inc.

This is the determination of the Railroad Retirement Board 

concerning the status of Hohorst-Drunsic Transportation Company,

Inc. (HDTC) 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).

Information regarding HDTC was provided by the Bureau of Fiscal

Operations, Division of Audit and Compliance, and HDTC's attorney

John F. McHugh of McHugh & Sherman. HDTC was incorporated on March

12, 1986. The Articles of Incorporation state HDTC's purpose as

follows:

To do any lawful act or thing for which corporations may

be organized pursuant to the provisions of Title 14A,

Corporations, General, of the New Jersey Statutes.

HDTC is located in Rumson, New Jersey and Manchester Center,

Vermont. Mr. Henry Hohorst and Mr. William J. Drunsic are the

owners, officers and directors of HDTC.

HDTC entered into contract agreement on September 13, 1986 with 

Nashville & Eastern Railroad Corp. (N&E), Tennken Railroad Co.,

Inc. (TENN), and West Tennessee Railroad Corp. (WTRC), all of which

are covered employers under the RRA and RUIA. The contract

agreements state that HDTC as the contractor "is a consulting firm 

with expertise in the field of the creation, marketing, funding and

rehabilitation of short line railways." Mr. Drunsic, in an

interview on September 29, 1993, with an employee from the Railroad

Retirement Board's Division of Audit and Compliance stated that 

HDTC's purpose is to:

provide consulting management services to the RR's 

(engineering services, design/preparation of contracts, 

construction of spur lines, repairs bridges, upgrades

track) provide real estate services, public relations, 

legal services, etc.

The contract agreements state in part:

The Contractor's services will include public relations, 

industry relations, governmental relations, acquisition

of rehabilitation funding, lobbying and negotiations with

State, Federal and Local authorities, evaluation,

management and marketing of surplus real estate assets,

marketing, customer relations, market research, equipment

acquisition and rehabilitation planning, project design,

quality control and oversight. [Coverage Audit Report,

Exhibit 2,3 and 4]

BCD 1995-43 BA # 9349
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Hohorst-Drunsic Transportation Company, Inc.

The agreements may be terminated by either party on ninety days 

notice to the other party. Each agreement is structured to pay

HDTC an initial base fee per year plus an adjustable sum per year

to cover accounting clerical costs. HDTC is reimbursed for any

costs and expenses incurred. Amounts are to be paid weekly based

on a fifty-two week year. The payment terms are reviewed annually

and adjusted as agreed upon by both parties.

HDTC employed six (6) employees during calendar years 1991-1992.

Mr. Drunsic, president of HDTC, stated that approximately 90% of

HDTC's consulting and management service work is performed for N&E,

TENN, and WTRC railroads. Mr. Drunsic also stated that HDTC does 

not advertise HDTC services to the general public.

Section 1 of the RRA defines an employer to include the following:

(i) any express company, sleeping car company, and

carrier by railroad, subject to subchapter I of chapter

105 of Title 49;

(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 services (except trucking service, casual

service, and the casual operations of equipment or 

facilities) in connection with the transportation of

passengers or property by railroad--- [45 U.S.C. §231 (i)

and (ii)] .

The RUIA contains the same definition.

Sections 202.4 and 202.5 of the Board's regulations, define when a

company or person is controlled by or under common control with a

carrier. Those sections provide as follows:

§ 202.4 Control.

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 circumstances, irrespective

of stock ownership 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
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Hohorst-Drunsic Transportation Company, Inc.

direction of the policies and business of such

a company or person.

§ 202.5 Company or person under common control.

A company or person is under common control

with a carrier whenever the control of such

company or person is in the same person, 

persons, or company as that by which such

carrier is controlled. [20 CFR 202.4 & 202.5] .

HDTC is not a carrier by railroad. However, according to the

information provided, Mr. Drunsic and Mr. Hohorst, who are the

owners of HDTC, also serve as officers and directors of N&E, TENN,

and WTRC. Furthermore Mr. Drunsic, Mr. Hohorst, and Mr. Linn are

officers of South Central Rail Corp (SCRC), a holding company

formed for the sole purpose of owning the stock of N&E, TENN, and 

WTRC railroads. Consequently, control of HDTC, N&E, TENN, and WTRC

is concentrated in the hands of these three individuals. HDTC is

located in the same facility as N&E, TENN, and WTRC. Based on the

facts in this case, the Board finds that HDTC is under common

control with N&E, TENN, and WTRC. The question then becomes

whether HDTC performs service "in connection with the

transportation of passengers or property by railroad."

Section 202.7 of the Board's regulations defines service or

operation 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 railroads.... [20 CFR 202.7] .

In Adams v. Railroad Retirement Board. 214 F.2d 534, 542 (9th Cir.

1954) , the court held that the provision of "accounting services, 

the services of a purchasing department, correspondence and

stenographic services... bridge and building services, and safety

engineer and repairs for its automotive equipment and its general

controlling stock" by a carrier's affiliate were services in

connection with rail transportation so as to render the affiliate

an employer under the Acts.
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Hohorst-Drunsic Transportation Company, Inc.

Ninety percent of HDTC's operations constitute managerial services

for its three affiliate railroads similar to those found covered in

Adams. Management services performed by HDTC are clearly essential

to N&E, TENN, and WTRC's operations and are, in the Board's

opinion, services in connection with rail transportation.

Therefore, the Board finds that HDTC is both under common control

with N&E, TENN, and WTRC and HDTC is performing services in

connection with railroad transportation. Accordingly, the Board

finds that HDTC is and has been a covered employer under the Acts

from the date it started to perform services to N&E, TENN, and 

WTRC, September 1, 1986.

Glen L. Bower