B.C.D. 01-14 JAN 2 4 2001

EMPLOYER STATUS DETERMINATION

OmniTRAX Logistics Services, L.L.C. (OTL-LLC)

This is the determination ofthe Railroad Retirement Board concerning the

status of OmniTRAX Logistics Services, L.L.C. (OTL-LLC), as an employer

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

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

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

of OTL-LLC. OTL-LLC began operations on October 24, 1996, and is owned by

MCS Properties, L.L.C. (MCS-LLC). MCS -LLC is a Colorado limited liability

company that is owned by Neptune Partners, Ltd. (NPL) (49%), Quality

Holdings, Inc. (QHI) (39%), and Pat Broe (12%). Pat Broe is 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. OmniTRAX provides

certain services to OTL-LLC, such as accounting and payroll services, under a 

management contract between OmniTRAX and OTL-LLC. According to

information provided by Mr. Ogborn, Pat Broe also owns 100 percent of Quality

Holdings, Inc.

Mr. Ogborn reported that OTL-LLC has 14 employees. In addition, Mr.Ogborn

reported that OTL-LLC neither owns nor operates over any track, has no

terminal points and does not interchange with any railroad. Mr. Ogborn stated

that OTL-LLC provides warehousing, just-in-time inventory management,

product distribution services, palletizing, and freight distribution. Its annual

volume of business for 1998 was $1,122,280, ofwhich only about 5% was paid to

OTL-LLC directly by railroads. Mr. Ogborn stated that OTL-LLC spends

approximately 4% of its time doing business for Wisconsin Central, Ltd. (B. A.

No. 2633), 1% for CSX Transportation, Inc. (B. A. No. 1524), and 2% for the

Burlington Northern Santa Fe (B. A. No. 1621). Mr. Ogborn further stated that

OTL-LLC’s only relationship to the railroad industry is to “coordinate the

movement of freight on behalf of shippers to or from the OTL-LLC warehouse

and thereafter the storage of goods until the goods are transported to the

ultimate destination by truck or rail. Mr. Ogborn stated that OTL-LLC “does

not perform any services whatsoever” for any of the affiliated railroads of

OmniTRAX. OTL-LLC operates on the property of Hawthorne Street

Properties, Inc., according to Mr. Ogborn. Information found on OmniTRAX’s

web page shows that OTL-LLC ‘s services are advertised to the general public.

In his original submission to the Board dated October 5, 1999, Mr. Ogborn

stated the following regarding OTL-LLC:
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OmniTRAX Logistics Services, L.L.C. (OTL-LLC)

• No railroad employee supervises any aspect of the operations of [OTLLLC]. Employees of [OTL-LLC] supervise the day-to-day operations.

• With one exception, [OTL-LLC] only enters into written contracts with

members of the shipping or warehousing community and does not

contract with any railroads.

• [OTL-LLC] does not own, lease or operate any rail equipment. Nor

does it own, lease or operate over any rail tracks.

. A rail carrier does not own the property on which [OTL-LLC]

operates.

. No rail carrier has a financial interest in [OTL-LLC], either through

direct or indirect stock ownership, as a parent corporation or indirect

ownership through a parent company.

. No individual owns a controlling interest in [OTL-LLC] and in any

rail carrier.

. [OTL-LLC] does not provide any services other than logistical

services to customers of rail shippers to any carrier.

According to Mr. Ogborn, OTL-LLC ceased doing business effective

January 31, 2000. Mr. Ogborn stated, however, that OTL-LLC has not yet filed

Articles of Dissolution with the State of Colorado.

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:

(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 * * *.
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OmniTRAX Logistics Services, L.L.C. (OTL-LLC)

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 OTL-LLC is clearly not a rail carrier

employer under the definition of employer in subparagraph (i) quoted above.

This conclusion, however, leaves open the question as to whether OTL-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 ifit 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(a)(l)(ii).

The evidence of record shows that OTL-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 OTL-LLC, by holding 12 percent

stock ownership in MCS -LLC, the owner of OTL-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 OTL-LLC. Additionally, Mr. Mike Ogborn and Mr. Dwight

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

Lastly, Mr. Ogborn serves as a manager for both OmniTRAX and OTL-LLC.

Accordingly, the Board finds that OTL-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, or the receipt, delivery, elevation, transfer in transit,

refrigeration or icing, storage, or handling of property transported by

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

transported by railroad.

Thus, if OTL-LLC performs a “service in connection with” railroad

transportation, it is a covered employer under the Acts.

According to Mr. Ogborn, almost all of the work of OTL-LLC is done directly

for shippers or receivers of freight. In addition, only a small percent of its

business comes directly from rail carriers, namely Wisconsin Central Ltd.

(4%), CSX Transportation, Inc. (1%), and Burlington Northern Santa Fe

Railroad (2%). Mr. Ogborn stated that OTL-LLC does not perform any work

for any of the subsidiary railroads of OmniTRAX. Accordingly, since OTLLLC performs no “service in connection with” any affiliated railroads, it is

determined that OmniTRAX Logistic’s Services, LLC is not an employer

under the Railroad Retirement and Railroad Unemployment Insurance Acts.

OmniTRAX Logistics Services, L.L.C. (OTL-LLC)

V. M. Speakman