In the

United States Court of Appeals

For the Seventh Circuit

No. 09-3945

HERZOG TRANSIT SERVICES,

INCORPORATED, et al.,

Petitioners,

v.

UNITED STATES RAILROAD

RETIREMENT BOARD,

Respondent.

Petition for Review of an Order

of the Railroad Retirement Board

No. 09-53

ARGUED MAY 26, 2010—DECIDED OCTOBER 22, 2010

Before RIPPLE, KANNE and SYKES, Circuit Judges.

RIPPLE, Circuit Judge. Herzog Transit Services (“Herzog”)

operates, under contract with Dallas Area Rapid Transit

(“DART”) and Fort Worth Transportation Authority (“the

T”), a commuter rail service on a line connecting Dallas

and Fort Worth, Texas. Herzog dispatches all train traffic

along this line, including interstate freight trains. The
2 No. 09-3945

45 U.S.C. §§ 231-231v. 1

45 U.S.C. §§ 351-69. 2

Railroad Retirement Board (“RRB” or “Board”) determined

that Herzog is a covered employer under the Railroad

Retirement Act (“RRA”) and the Railroad Unemploy- 1

ment Insurance Act (which we shall sometimes refer to 2

collectively as “the Acts”), but only with respect to these

dispatching operations. Herzog, DART and the T petition

for review of this determination. For the reasons set

forth in this opinion, we deny the petition for review.

I

BACKGROUND

1.

Herzog is a contract operator of commuter railroads.

In 1994, the RRB determined that Herzog was not a covered employer under the Acts. At that time, Herzog

operated commuter rail services in the Miami, Florida

area for the Tri-County Commuter Rail Organization

(now known as South Florida Regional Transportation

Authority, or SF RTA). Since then, Herzog has engaged

in six new operations in five other states: North

Carolina, New Jersey, New Mexico, California and Texas.

This petition concerns only the operation in Texas.

DART and the T jointly own a line of train track between Dallas and Forth Worth, Texas. On this line, DART

and the T provide commuter rail service, known as the
No. 09-3945 3

Trinity Railway Express (“Trinity” or “TRE”). These

commuter trains have been operated by Herzog since

1996. Four interstate freight carriers also operate on the

line. The Union Pacific Railroad Company and the BNSF

Railway Company, interstate freight carriers, use the entire

line. The Dallas, Garland & Northeastern Railroad and the

Fort Worth & Western Railroad, also interstate freight

carriers, use only part of the line.

Since 2001, Herzog has performed dispatching functions for all train traffic on the line. The operating agreements among the participating lines (DART, the T and the

freight carriers) require Herzog to give priority to the

Trinity trains, but also require it to allow the freight

carriers to use the line.

2.

In November 2003, Richard C. Beall, an employee of

Herzog, wrote to the RRB and asked the Board to determine that Herzog was a covered employer under the

Acts. In February 2006, the Board ordered that a hearing

be held on whether there has “been a change in the operations of Herzog Transit Services, Inc., which would

affect its status as an employer under the Railroad Retirement and Railroad Unemployment Insurance Acts.”

A.R. 1256. A hearing was held on May 16, 2006. The

Hearing Examiner issued a report, and the Board rendered

a decision. The Board affirmed and adopted that decision upon reconsideration. We shall discuss in detail

only the part of the Board’s decision pertinent to this
4 No. 09-3945

In addition to the portion of the decision concerning 3

Herzog’s dispatching activities in Texas, the Board also held

that, in all other respects, Herzog was not a covered employer

under the Acts.

The Board rejected the argument, not renewed on appeal, 4

that it should have focused on whether the individual dispatchers in question were statutory employees of a railroad

under 45 U.S.C. § 231(b)(1) and (d)(1).

20 C.F.R. § 202.3(a) provides in part: 5

With respect to any company or person principally

engaged in business other than carrier business, but

(continued...)

petition, namely, the Board’s discussion of Herzog’s

dispatching activities in Texas.3

The Board framed the issue as whether Herzog, a

contractor, was a covered employer under the Acts.4

Focusing on the nature of the activity conducted by

Herzog, the Board emphasized that “dispatching is as

inextricable a part of the actual motion of trains as is

the operation of a train’s locomotive controls by the

engineer.” A.R. 7. Dispatchers, said the Board, direct

and control the movement of trains; no train can move

without an order from the dispatcher. Therefore,

where “the train dispatching includes trains that operate

interstate, the entity dispatching trains operates as a

rail carrier” under the Acts. Id. Because Herzog’s

principal business is intrastate passenger service,

however, the Board found only its dispatching unit to be

a covered employer.5
No. 09-3945 5

(...continued) 5

which, in addition to such principal business, engages

in some carrier business, the Board will require submission of information pertaining to the history and

all operations of such company or person with a view

to determining whether some identifiable and separable

enterprise conducted by the person or company is to

be considered to be the employer.

49 C.F.R. § 241.5 provides that “dispatch” means in part: 6

(1) To perform a function that would be classified as a

duty of a “dispatching service employee,” as that term

is defined by the hours of service laws at 49 U.S.C.

21101(2), if the function were to be performed in the

United States. For example, to dispatch means, by

the use of an electrical or mechanical device—

(i) To control the movement of a train or other ontrack equipment by the issuance of a written or verbal

authority or permission affecting a railroad operation,

or by establishing a route through the use of a railroad

signal or train control system but not merely by aligning or realigning a switch; or

(ii) To control the occupancy of a track by a roadway

worker or stationary on-track equipment, or both . . . .

(italics in original).

In support of this conclusion, the Board identified five

considerations. First, the Board noted that the Federal

Railroad Administration (“FRA”) has issued regulations

highlighting the control of dispatchers over train movement. Second, the Board noted that a common carrier 6

is the insurer of the goods it carries. Third, because dis-
6 No. 09-3945

See Employer Status Determination—Rail Temps, Inc., B.C.D. 03- 7

38 (served May 6, 2003); Employer Status Determination—Mass.

Bay Commuter R.R. Co., B.C.D. 03-23 (served Mar. 3,

2003); Employer Status Determination—S. Cal. Reg’l R. Auth.,

Segregation of Dispatching Dep’t, B.C.D. 02-12 (served Feb. 12,

2002).

patching is an indispensable component of carrier

service and must be delivered with such service, Herzog’s

position was analogous to those of contractors and

other entities previously found by the Board to be

covered employers. These previous determinations in- 7

cluded a commuter authority that provided dispatching

services for interstate freight trains operating on its

line. Fourth, the Board noted that, if Trinity (DART and

the T) performed the interstate freight service itself,

it would be a covered employer; Trinity could not

remove an essential aspect of carrier operation from

coverage by removing it from the covered interstate

freight carriers. In this context, the Board referred to its

decision in Employer Status Determination—Railroad Ventures, Inc., B.C.D. 00-47 (served Nov. 7, 2000). Railroad

Ventures set forth a test to determine when a rail line

owner that contracts out railroad activities nevertheless remains a covered employer. The Board stated

that under this test, Trinity (DART and the T) would not

have been a covered employer when the interstate

freight trains performed their own dispatching. Once it

“took back” control over dispatching operations and

assigned them to Herzog, however, Herzog became an

employer as lessee of the dispatching operations. A.R. 41-
No. 09-3945 7

Because Herzog is the party directly aggrieved by the Board’s 8

decision, the arguments we shall address pertain to the status

of Herzog. Therefore, for clarity, we shall refer to the joint

petitioners as “Herzog.”

42. Fifth, the Board emphasized that its decision would

not necessarily have adverse consequences on other

similarly situated entities because the Board considers,

in each case, the particular facts before it.

The Management Member dissented, but wrote only

that he disagreed with “the portion of the majority’s

decision that affirms the Board’s initial determination

finding dispatchers working for Herzog Transit Services

to be covered under the Railroad Retirement Act and

the Railroad Unemployment [I]nsurance Act.” A.R. 9A.

Herzog, DART and the T now petition for review.8

II

ANALYSIS

We begin, as we must, with the governing statutory

scheme. We first shall describe it generally. We then

shall turn to a more precise discussion of the provisions most directly relevant to our analysis.

A.

1.

In the early part of the twentieth century, private railroads administered pension plans. These plans provided
8 No. 09-3945

The statute was revised significantly in 1974, although the 9

coverage provision at issue in this case was not substantively

altered.

small benefits and had strict eligibility requirements.

As a result, they provided little incentive for older employees to retire, thereby keeping younger workers out

of the industry. But the older workers were dissatisfied

as well; as one former Associate General Counsel to the

RRB has put it, “[t]he older men complained because

these pension plans were like an umbrella that did not

open whenever it rained, offered little protection when

it did open, and hardly any when the heavy rains

came.” David B. Schreiber, The Legislative History of

the Railroad Retirement and Railroad Unemployment

Insurance Systems 2 (1978) (hereinafter Schreiber).

The Railroad Retirement Act was directed toward

remedying this situation. The first version of the Act was

enacted in 1934 and struck down by the Supreme Court. A

new Act was passed in 1935 and promptly challenged

in court. A district court enjoined the Board from compelling the railroads to provide information needed to

administer the Act; however, the court did not prevent

the Board from adjudicating annuities and making

awards if it had the necessary information. Schreiber at 16-

17. While the litigation was pending on appeal, a third Act,

which represented a negotiated compromise between

management and labor that both sides supported, was

enacted in 1937. See S. Rep. No. 697, at 2 (1937). The 1937 9

Act was styled as an amendment to the 1935 Act, but it was
No. 09-3945 9

Those with fewer than ten years of service (or five years 10

accruing after 1995) are covered by the Social Security system.

20 C.F.R. § 404.1401.

essentially a rewriting. See 50 Stat. 307 (1937). The Act

establishes annuity benefits for retired workers in the

railroad industry. Full annuities are available in the

current version of the Act to those who have completed

ten years of service to one or more employers (or five

years accruing after 1995) and reach the retirement age

provided by the Social Security Act, as well as to those

who have reached the age of sixty and completed thirty

years of service. 45 U.S.C. § 231a(a)(1)(i), (ii). The 10

amounts of these annuities are calculated pursuant to 45

U.S.C. § 231b. Reduced annuities are available to those

who have reached the age of 62 and completed at least

ten (or five, all accruing after 1995) but fewer than

thirty years of service. Id. § 231a(a)(1)(iii). Additionally,

certain disabled individuals are entitled to annuities. Id.

§ 231a(a)(1)(iv), (v). The statute also provides for annuities

to spouses, as well as supplemental annuities to certain

employees. Id. § 231a(b), (c). When an annuity has become due but has not been paid prior to the individual’s

death, it is payable to a surviving spouse, who was

living with the individual at the time of the individual’s

death. Id. § 231e(a)(1). In light of these benefits, it is

unsurprising that the Supreme Court has observed that

“[t]he Railroad Retirement Act is substantially a Social

Security Act for employees of common carriers.” Eichel v.

New York Cent. R.R. Co., 375 U.S. 253, 254 (1963) (per

curiam) (quotation marks and citation omitted).
10 No. 09-3945

The coverage provisions of the Railway Labor Act did not 11

materially differ from those of the Railroad Retirement Act.

Compare 48 Stat. 1185 (June 21, 1934), with 48 Stat. 1283 (June 27,

1934).

The Retirement Act is just one component of the overall statutory scheme. The Railroad Unemployment Insurance Act, enacted in 1938, establishes a system of unemployment insurance for this same group of employees.

Cheney R.R. Co. v. R.R. Ret. Bd., 50 F.3d 1071, 1074 (D.C.

Cir. 1995). Employers and employees subject to the Acts

must pay a payroll tax akin to the social security tax

required of other employers and employees. These taxes,

established by the Railroad Retirement Tax Act, are

higher than the social security tax. See Standard Office

Bldg. Corp. v. United States, 819 F.2d 1371, 1373 (7th Cir.

1987).

The Retirement Act aimed to protect the nation’s railroad

employees. See 48 Stat. 1283 (1934) (“AN ACT To provide

a retirement system for railroad employees, to provide

unemployment relief, and for other purposes.”); H. Rep.

1988, at 1 (1934) (“The bill proposes to establish a railroad

retirement pension system for all carriers subject to the

Railway Labor Act and all employees of such carriers.”).11

In order to prevent railroads from avoiding the Act by

creative corporate structuring, the Act from its inception

has covered “any company which is directly or indirectly

owned or controlled by, or under common control with,

one or more employers . . . and which operates any equipment or facility or performs any service . . . in connection
No. 09-3945 11

For completeness, we note that the analogous provision of 12

the Railroad Unemployment Insurance Act covers “a railroad

subject to the jurisdiction of the Surface Transporta-

(continued...)

with the transportation of passengers or property by

railroad.” 45 U.S.C. § 231(a)(1)(ii); see also 48 Stat. 1283

(1934). If not for this provision, railroads could remove

most of their workers from the Act simply by setting up a

wholly owned subsidiary. See Despatch Shops, Inc. v. R.R.

Ret. Bd., 154 F.2d 417, 419 (2d Cir. 1946).

In its current form, the Retirement Act defines a covered

employer in five ways. In this case, the Board relied on 45

U.S.C. § 231(a)(1)(i), which has been a part of the Act, in

similar form, since 1934. It provides that “employer”

shall 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)(1)(i).

The parties assume that “employer” is defined in identical fashion in the Unemployment Insurance Act. See Pet’r

Br. 8 n.11 (“substantively identical”); Resp’t Br. 3 (“substantially similar”). Other courts have so noted or assumed. See Am. Orient Express Ry. Co. v. Surface Transp. Bd.,

484 F.3d 554, 556 (D.C. Cir. 2007) (implicitly assuming);

Cheney R.R. Co., 50 F.3d at 1074 (explicitly noting); Atl.

Land & Improvement Co. v. United States, 790 F.2d 853, 855-

56 (11th Cir. 1986) (explicitly noting the “virtually identical” language). We agree.12
12 No. 09-3945

(...continued) 12

tion Board under part A of subtitle IV of title 49.” 45 U.S.C.

§ 351(b).

The Tax Act is administered by the Internal Revenue Service. 13

Interstate Quality Servs., Inc. v. R.R. Ret. Bd., 83 F.3d 1463, 1464

(D.C. Cir. 1996).

As we did in our decision in Livingston Rebuild Center, Inc. v. 14

Railroad Retirement Board, 970 F.2d 295, 299 (7th Cir. 1992),

(continued...)

The Retirement Act and the Unemployment Insurance

Act are administered by the Railroad Retirement Board.

13

The Board is an independent executive agency with

three members, all appointed by the President. 45 U.S.C.

§ 231f(a). The Board adjudicates claims for benefits

under the Act. R.R. Ret. Bd. v. Duquesne Warehouse Co., 326

U.S. 446, 447 (1946); see also 45 U.S.C. § 231f(b). The Board

also determines the status, as covered or non-covered, of

particular employers and employees. 20 C.F.R. § 259.1.

Its decisions, if they determine “the rights or liabilities

of any person,” may be appealed to the Courts of

Appeals for the Seventh Circuit, the District of Columbia

Circuit, or to the Court of Appeals in which the petitioner resides, “or will have had his principal place of

business or principal executive office.” 45 U.S.C. § 231g;

45 U.S.C. § 355(f).

B.

With this background, we turn now to an examination

of the provisions most pertinent to the case before us.14
No. 09-3945 13

(...continued) 14

we pretermit a determination of whether we owe the determination of the Board a particular degree of deference.

109 Stat. 803 (1995). 15

As we noted earlier, the parties focus on the provision

of the RRA that 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 . . . .

45 U.S.C. § 231(a)(1) (emphasis supplied). This subsection contains several terms and phrases that require

further investigation.

1.

We turn first to the phrase “carrier by railroad.” The

RRA provides no definition of this term. Notably, however, the Interstate Commerce Commission Termination

Act of 1995 (“ICCTA”), which delineates the jurisdic15

tion of the Surface Transportation Board (“STB”), defines

“rail carrier” as a “a person providing common carrier

railroad transportation for compensation.” 49 U.S.C.

§ 10102 (emphasis supplied). The RRB seemed to

assume, and we see no reason to disagree, that Congress

intended “carrier” to have the same meaning in both of

these closely related statutes and that the RRA statute

therefore affords no broader coverage than the ICCTA.

The ICCTA definition of “rail carrier” presents, in turn,

its own internal issues. The ICCTA does not define
14 No. 09-3945

Fayard v. Ne. Vehicle Servs., LLC, 533 F.3d 42, 46 (1st Cir. 2008); 16

Am. Orient Express Ry. Co. v. Surface Transp. Bd., 484 F.3d 554, 557

(D.C. Cir. 2007); New York Susquehanna & W. Ry. Corp. v. Jackson,

500 F.3d 238, 250 (3d Cir. 2007); Black’s Law Dictionary 242

(9th ed. 2009) (“A commercial enterprise that holds itself out

to the public as offering to transport freight or passengers for

a fee.”).

“common carrier.” Other courts have assumed that the

term should be given the same meaning as it is given

in the common law: an entity that holds itself out to the

public as offering transportation services to all who are

willing to pay its tariff.

16

The ICCTA also defines “transportation.” That term

is defined to include:

(A) a locomotive, car, vehicle, vessel, warehouse,

wharf, pier, dock, yard, property, facility, instrumentality, or equipment of any kind related to

the movement of passengers or property, or both,

by rail, regardless of ownership or an agreement

concerning use; and

(B) services related to that movement, including

receipt, delivery, elevation, transfer in transit,

refrigeration, icing, ventilation, storage, handling,

and interchange of passengers and property . . . .

49 U.S.C. § 10102(9).
No. 09-3945 15

2.

Section 231(a)(1) also defines employer by requiring

that the “carrier by railroad” be subject to the jurisdiction of the Surface Transportation Board. The relevant

statute, which is dependent on the definitional section

we have just referenced, provides that the Board has

jurisdiction over:

transportation by rail carrier that is—

(A) only by railroad; or

(B) by railroad and water, when the transportation

is under common control, management, or arrangement for a continuous carriage or shipment.

49 U.S.C. § 10501(a)(1) (emphasis supplied). STB jurisdiction attaches to such transportation that is part of the

interstate rail network. Id. § 10501(a)(2)(A).

C.

With these statutory provisions as our decisional

matrix, we now examine the RRB’s resolution of the

situation presented by this case.

1.

In determining that Herzog’s dispatching operations

were covered by the Acts, the Board reasoned that

Trinity (DART and the T), as the owner of the rail line in

question, formerly had leased the right to run interstate

rail operations over its line to the four interstate freight

rail owners that operate interstate freight trains over
16 No. 09-3945

45 U.S.C. § 231(a)(1) provides: 17

The term “employer” shall include—

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

the Surface Transportation Board under part A of

(continued...)

its lines. Having retained no part of the interstate operation of rail transportation for itself, Trinity was not,

during that earlier period, a covered employer under the

Acts. In January 2001, however, Trinity altered that arrangement by taking back one aspect of the right to run

interstate rail operations over its lines—dispatching—and

vesting that right in Herzog Transit, which also operated an intrastate commuter line over the same track.

Herzog then performed the dispatching function for

the interstate operations as well as the commuter line.

In the Board’s view, Herzog’s dispatching function constitutes a necessary and integral part of the operation

of interstate trains over Trinity’s tracks and, therefore,

its activity as a dispatcher constitutes operation as a rail

carrier subject to the RRA.

2.

In determining whether the Board’s analysis comports

with the statutory mandate that we have described,

we believe that, as a first step, it is essential to keep in

mind two overarching considerations. First, the subsection of the RRA that we have analyzed is part of a

much broader provision that brings within the scope of

an “employer” many different entities. These various 17
No. 09-3945 17

(...continued) 17

subtitle IV 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 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, or the

receipt, delivery, elevation, transfer in transit, refrigeration or icing, storage, or handling of property transported by railroad;

(iii) any receiver, trustee, or other individual or body,

judicial or otherwise, when in the possession of the

property or operating all or any part of the business

of any employer as defined in paragraph (i) or (ii) of

this subdivision;

(iv) any railroad association, traffic association, tariff

bureau, demurrage bureau, weighing and inspection

bureau, collection agency and any other association,

bureau, agency, or organization which is controlled and

maintained wholly or principally by two or more

employers as defined in paragraph (i), (ii), or (iii) of this

subdivision and which is engaged in the performance

of services in connection with or incidental to railroad transportation; and

(v) any railway labor organization, national in scope,

which has been or may be organized in accordance

with the provisions of the Railway Labor Act, as

amended [45 U.S.C. 151 et seq.], and its State and

(continued...)
18 No. 09-3945

(...continued) 17

National legislative committees, general committees,

insurance departments, and local lodges and divisions,

established pursuant to the constitution or bylaws

of such organization.

(Brackets in original).

It is also apparent that the various subgroups within the 18

statute’s coverage are not necessarily exclusive. 

In any event, the other subsections make evident Congress’s

decision to place within the railroad retirement system those

employed in directly supporting the running of the interstate

rail system. Our reading of the statutory language finds support as well in decisions dealing with whether a subsidiary of

a railroad is an “employer.” In that context, our colleagues in

the District of Columbia Circuit have emphasized that

“[t]he statutes require that services be performed merely ‘in

connection with’ rail activity.” Interstate Quality Servs., 83 F.3d at

1464.

subsections are designed primarily to bring within the

railroad retirement scheme employees who play many

different roles in the interstate railway system of the

United States. When read together, these subsections

make clear that Congress envisioned a broad retirement

program for employees playing many roles within the

railroad industry. See United States R.R. Ret. Bd. v. Fritz,

449 U.S. 166, 168 (1980) (noting that the 1937 Act was

intended to benefit “persons who pursued careers

in the railroad industry”). It was “designed to provide 18

pensions for employees ‘of the Nation’s railroad

transportation system.’ ” Id. (quoting H. Rep. No. 1069, at
No. 09-3945 19

The American Public Transportation Association, as amicus, 19

informs us that “a commuter rail operator very often is the

dispatcher of all the trains on shared track, including

freight trains.” Amicus Br. 4.

2 (1937)). In short, this bedrock provision makes evident

that, as our colleagues in the District of Columbia Circuit

have put it, the statute has a “broad purpose” and a

“protective character.” Cheney R.R. Co., 50 F.3d at 1078. As

the judges of the District of Columbia Circuit also have

said, the legislative history supports a reading of the

text that gives effect to Congress’s clear intent that this

benefit statute “be construed broadly.” Id. at 1077-78.

Secondly, as we recognized in Livingston Rebuild Center,

Inc. v. Railroad Retirement Board, 970 F.2d 295, 298-99 (7th

Cir. 1992), the provisions of this statutory scheme are

not to be constrained by the business models common

at the time of the passage of the Act. Unless and

until Congress deems otherwise, they are equally applicable to today’s railroad industry and the organizational relationships of today’s business environment,

which reflect, among other factors, increased competition

and the increased frequency of intrastate commuter lines

sharing trackage and other facilities with participants

in the Nation’s interstate railway system. It is not

unusual for an entity, the activities of which generally

do not involve interstate transportation, to perform a

particular function that is an integral part of interstate

transportation by rail and that therefore is subject to

the Acts. The RRA may have been enacted when all 19
20 No. 09-3945

The Board’s authority to promulgate such regulations is 20

found at 45 U.S.C. § 231f(b)(5).

functions integral to interstate transportation usually

were performed by carriers or their affiliates. Today,

the rail transportation industry has adopted other efficiencies. Our duty nevertheless remains the same.

We must apply the statute to ensure individuals performing these integral functions to interstate rail transportation are covered and thereby effectuate Congress’s

broad protective purpose.

Notably, in order to keep the Acts from reaching too

broadly, the Board has promulgated regulations that

account for entities that perform “carrier business” but

are principally engaged in other business. Such entities 20

may, subject to certain considerations, be covered only

with respect to those employees performing the integral

functions. These regulations state that coverage will be

compatible with the statutory directive only when the

function performed by the entity has a direct link to

the actual operation of interstate trains. Specifically, the

regulation identifies a series of factors which the

Board must consider in determining whether such an

entity may be covered by the Acts. According to the

RRB’s regulation, in making such a determination, the

Board considers the “history and all operations” of the

company “with a view to determining whether some

identifiable and separate enterprise conducted by the

[company] is to be considered to be the employer.” 20

C.F.R. § 202.3. The Board considers the following factors:
No. 09-3945 21

(1) The primary purpose of the company or person

on and since the date it was established;

(2) The functional dominance or subservience of

its carrier business in relation to its non-carrier

business;

(3) The amount of its carrier business and the

ratio of such business to its entire business;

(4) Whether its carrier business is a separate and

distinct enterprise.

Id.

This approach is certainly compatible with longstanding judicial interpretation. Ever since the Supreme

Court’s seminal decision in Railroad Retirement Board v.

Duquesne Warehouse Co., 326 U.S. 446 (1946), the key

inquiry has been not whether an entity not owned by

the interstate railroads provides the same service, but

whether the interstate carrier could have performed the

work and charged for it. Id. at 454; see also Atl. Land &

Improvement Co., 790 F.2d at 856; R.R. Concrete Crosstie

Corp. v. R.R. Ret. Bd., 709 F.2d 1404, 1410 (11th Cir. 1983).

Dispatching services are a necessary part of the operation of any train, including interstate trains. There is

great force in the RRB’s point that the Federal Railroad

Administration, charged with carrying out “all railroad

safety laws of the United States,” 49 U.S.C. § 103(b),

considers dispatching services to be central to the safe

operation of a train and has described them in its own

regulations in terms that underline their centrality to
22 No. 09-3945

See note 6, supra. 21

The RAILTRAN decision predated the creation of the STB 22

and, therefore, was decided by the predecessor agency, the

Interstate Commerce Commission. For ease of reading, we

shall refer to its decision as that of the STB.

train operation. Interstate rail carriers can, and often 21

do, undertake to perform this function themselves

and, when they incur such an expense, can no doubt

charge for it.

The Board’s own administrative precedent also supports our decision. In this case, the Board relied on its

earlier decision in Employer Status Determination—S. Cal.

Reg’l R. Auth., Segregation of Dispatching Dep’t, B.C.D.

02-12 (served Feb. 12, 2002). There, a governmental entity

charged with the administration of commuter rail operations (“SCRRA”) had contracted the operation of all

trains to AMTRAK. It nevertheless became a partially

covered employer when it decided to provide its own

dispatching services for all traffic, interstate and intrastate, over its tracks. The Board noted that SCRRA

had organized the dispatching services into a separate

identifiable department that maintained strict personnel

separation from the remainder of the agency’s activities

and that was under the sole supervision of a dispatching manager.

We cannot accept Herzog’s view that an earlier decision of the STB involving the same line commands

22

an opposite result in the present case. See City of

Dallas, City of Fort Worth and D/FW RAILTRAN, Petition for
No. 09-3945 23

Declaratory Order, I.C.C. Fin. Docket No. 32406, 1993 WL

540395 (served Dec. 30, 1993). RAILTRAN concerned the

same lines involved in the present case, although under a

different structure than the current iteration. At the time

of the RAILTRAN decision, the cities of Dallas and Fort

Worth owned the rail line and a state administrative

agency, RAILTRAN, was tasked with the responsibility

to “preserve and manage the [line] for commuter rail

service.” Id. at *1. Pursuant to a then-existing operating

rights agreement, a railroad company paid rent for use

of the lines and was responsible for maintenance, operation and dispatching on the line. Id. at *2. The cities had

the right to choose an operator who would contract

with the railroad to perform commuter rail services.

Freight operations were conducted by the railroad and

were subject to existing rights of other railroads.

The parties negotiated new agreements that modified

these existing relationships, and they sought a declaratory judgment from the STB about whether the pending

contractual arrangements would alter the non-carrier

status of the cities and of RAILTRAN. Under the new

agreement, the cities and RAILTRAN would have the

right and responsibility to both select and contract with

an entity or entities to operate commuter rail and perform

dispatching on the track.

The STB held that this proposed arrangement would not

transform the existing non-carrier status of the cities

and of RAILTRAN, because the proposal “would not

change their relationship to the line.” Id. at *4. That is, the

cities and RAILTRAN would remain non-operating
24 No. 09-3945

owners who would contract with other parties to provide

the commuter operations and dispatching. According

to the STB, nothing in that arrangement would convert

the non-operating, non-dispatching owners themselves

into covered entities.

We acknowledge the superficial similarities in the

factual background underlying both of these decisions

from different administrative agencies. In each, a nonoperating owner assumes responsibility for interstate

railroad-related functions and contracts with a third

party to execute that responsibility. Importantly, however, the agencies’ inquiries focused on two different

entities in these transactions and answered different

questions. The STB was evaluating its jurisdiction at

the request of the predecessors-in-interest of Trinity, the

non-operating owner, and found that it had none. In

the present case, the Board’s inquiry concerned Herzog,

the entity that would be performing the dispatching functions. The analog to Herzog in the prior STB case

had not yet been identified, although the language in

the opinion suggests that the parties contemplated it

would be one of the interstate railroads already servicing

the line. Further, to the extent that the present case

does address Trinity itself, it reaches the same conclusion

as that reached in RAILTRAN—that Trinity is not a

covered entity. A.R. 8 (“Trinity itself is not a covered

employer to the extent that the train dispatching operations conducted on Trinity’s behalf [are] reported by

Herzog Transit.”). Indeed, these two decisions are animated by a single, consistent principle. Those entities

that assume direct responsibility for the movement
No. 09-3945 25

We note in passing that the STB has followed this principle 23

when dealing directly with entities to which the dispatching

function is delegated. If the pertinent agreement renders

minimal the effect which the dispatching function will have

on the interstate movement of trains, the STB has determined

that the entity performing the function is not subject to

federal regulation. See Utah Transit Auth.—Acquisition Exemption—Union Pac. R.R. Co., S.T.B. Fin. Docket No. 35008, 2007

WL 2107123, at *5 (served July 23, 2007); Los Angeles County

Trans. Comm’n—Pet. for Exemption—Acquisition from Union Pac.

R.R. Co., S.T.B. Fin. Docket No. 32375, 1996 WL 408632, at *3

(served July 23, 1996).

of trains in interstate commerce are subject to federal

regulation. Those entities whose participation in

interstate commerce is indirect are not subject to the

federal statutes.23

Here, Trinity acquired the duty to perform the dispatching function for the interstate rail operations along

its tracks. It then delegated this function to Herzog, the

operator of the intrastate service on its tracks. Herzog,

therefore, in performing the dispatching function for

the interstate freight traffic on Trinity’s track, is performing the function of a common carrier in interstate

commerce and is a covered employer under the statute,

at least with respect to the dispatching function.

Conclusion

The Railroad Retirement Board correctly determined

that Herzog was, insofar as it performed the dispatching
26 No. 09-3945

function for interstate trains using the tracks of Trinity,

a covered employer. Accordingly, the petition for review is denied. 

PETITION DENIED

SYKES, Circuit Judge, dissenting. An employer is

covered by the Railroad Retirement and Unemployment

Insurance Acts (and therefore required to contribute to

these federal funds) if it is a “carrier by railroad subject

to the jurisdiction of the Surface Transportation Board.”

45 U.S.C. § 231(a)(1)(I) (Railroad Retirement Act); 45

U.S.C. § 351(b) (Railroad Unemployment Insurance

Act). The Transportation Board’s jurisdiction is limited

to “transportation by rail carrier that is . . . by railroad

[operating interstate].” 49 U.S.C. § 10501(a) (Transportation Board has jurisdiction over transportation by rail

carrier that is “in the United States” and “part of the

interstate rail network” or between a place in one state

and a place in another state, U.S. territory, or foreign

country). A “rail carrier,” in turn, is defined as a “person

providing common carrier railroad transportation for

compensation.” Id. § 10102(5). “Common carrier” is not

defined, but as my colleagues have noted, the Transportation Board and the courts have used the common-
No. 09-3945 27

For ease of reference, I refer to DART and the T collectively 1

as “DART,” unless the context requires otherwise.

law definition: an entity that “holds itself out to the

general public as engaged in the business of transporting

persons or property from place to place for compensation.” Am. Orient Express Ry. Co., S.T.B. Fin. Docket

No. 34502, at 4 (served Dec. 29, 2005), 2005 WL 3552968;

Am. Orient Express Ry. Co. v. Surface Transp. Bd.,

484 F.3d 554, 557 (D.C. Cir. 2007) (affirming the Transportation Board’s use of this definition).

Putting these elements together, to be covered by the

Acts, an employer must provide interstate commoncarrier transportation by rail. More specifically, the employer must hold itself out to the public as offering interstate passenger or freight rail transportation for a tariff.

See Majority Op. at 14 (giving “common carrier” its

common-law meaning: “an entity that holds itself out

to the public as offering transportation services to all

who are willing to pay its tariff”).

Petitioners Dallas Area Rapid Transit (“DART”) and

Fort Worth Transportation Authority (“the T”) are

regional public-transportation authorities and political

subdivisions of the State of Texas. Since 1999 they 1

have jointly owned a line of train track that runs between

the cities of Dallas and Forth Worth. The cities

previously owned the line, having acquired it in 1984

from the Trustee in bankruptcy for the Chicago, Rock

Island and Pacific Railroad Company. See City of Dallas,

City of Fort Worth & D/FW RAILTRAN, I.C.C. Fin. Docket
28 No. 09-3945

No. 32406 (served Dec. 30, 1993), 1993 WL 540395

(“RAILTRAN”). DART provides commuter rail service

on the subject line marketed under the brand name

“Trinity Railway Express.” Herzog Transit Services, Inc.,

operates this service under a contract with DART. The

line of track and the commuter rail service operating on

it are entirely intrastate, running only between Dallas

and Fort Worth.

Four interstate freight railroads also use this line of

track pursuant to preexisting easements and related

agreements that have been modified over time as the

ownership of the line has transferred to Dallas and Fort

Worth and then to DART. In 2001 DART expanded

Herzog’s contract operating responsibilities to include

maintenance of the track and dispatching of all train

traffic. In response to this move, and based on an

inquiry from a Herzog employee, the Railroad Retirement Board opened a proceeding for an “employer

status determination.” In a split decision, the Board

held that Herzog is a covered employer under the Acts

with respect to its employees who perform dispatching

services. Emp’r Status Determination—Dec. on Recons.,

Trinity Ry. Express—Train Dispatching, Herzog Transit

Servs., Inc., B.C.D. 09-53 (served Oct. 28, 2009), available

at http://www.rrb.gov/blaw/bcd/bcd09-53.asp (last visited

Oct. 12, 2010).

As my colleagues have noted, the Board’s rationale

was that because “[d]ispatching service is an indispensable component of carrier service and must be delivered as a part of carrier service,” dispatching operations
No. 09-3945 29

are covered by the Acts. Id. at 4. The Board further

held that “[w]here, as in this case, the train dispatching includes trains that operate interstate, the

entity dispatching trains operates as a rail carrier within

the meaning of the definition of an employer under the

Railroad Retirement and Railroad Unemployment Insurance Acts.” Id.

DART, the T, and Herzog jointly petitioned this court

for review. In a scholarly opinion, my colleagues have

outlined the applicable statutes and regulations and

provided a thorough explanation of the historical background of the Acts. In my view this should lead us to

reject the Board’s decision. But my colleagues accept it

and therefore deny the petition for review. I disagree.

The Board’s decision ignores the statutory requirements

for covered-employer status under the Acts and conflicts with the Interstate Commerce Commission’s (“ICC”)

decision in RAILTRAN, which addressed the commoncarrier status of the predecessor operator of this very

same Dallas-Fort Worth commuter rail line under

similar circumstances as those presented here.

Like the Board, my colleagues rest their decision on the

fact that dispatching is “a necessary and integral part” of

interstate rail transportation. Majority Op. at 16. It

goes without saying that a train—whether running

wholly intrastate or interstate—does not move without

an order from a dispatcher. But it does not follow that

dispatching alone is enough to trigger covered-employer

status under the Acts. Under the interlocking definitions

in the statutory scheme, covered-employer status is
30 No. 09-3945

There may be an exception for entities that have the power to 2

“materially interfere” with the operations of a common carrier.

The Transportation Board has strongly implied that a noncarrier

with the power to “materially interfere” with the operations

of a common carrier is itself subject to the jurisdiction of the

Transportation Board. See Metro-N. Commuter R.R. Co., S.T.B.

Fin. Docket No. 34293, at 3 (served May 13, 2003), 2003 WL

21062876; see also Md. Transit Admin., S.T.B. Fin. Docket No.

34975 (served Oct. 9, 2007), 2007 WL 2936134. However, the

“materially interfere” inquiry is practical, not abstract, and

looks to whether the noncarrier is actually in a position

to exert meaningful negative influence over a common

carrier’s operations. Here, DART’s agreement with Herzog

significantly limited Herzog’s dispatching discretion by subjecting it to the General Code of Operating Rules and establishing strict priority rules for trains running on the subject line. J.A.

at 266. Herzog is therefore not in a position to materially

interfere with the operations of a common carrier and is not

subject to the jurisdiction of the Transportation Board under

this alternative theory.

limited to interstate “common carriers” by rail—that is, to

entities that hold themselves out to the public as providers of interstate rail transportation for passengers

or freight. Providers of subsidiary services that make

interstate rail transportation possible are not themselves

“interstate common carriers.”2

It makes no difference to the common-carrier analysis

that DART “t[oo]k back one aspect of the right to run

interstate rail operations over its lines—dispatching—and

vest[ed] that right in Herzog Transit.” Id. This analysis

misconstrues the contractual arrangements among and
No. 09-3945 31

between the parties. As the owner of the line, DART

had the right to dispatch trains on the track. It could

perform this function itself or contractually designate

another to do it—one of the freight railroads, perhaps, or

Herzog or another contractor. But it is not correct to

suggest that by designating Herzog to do the dispatching,

DART effectively “took back one aspect of the right to

run interstate rail operations over its lines” and vested it

in Herzog. Id. The interstate freight railroads had preexisting rights, via easement or other contracts, to run

their trains on this track. DART did not “take back” these

rights from them. DART owns the line but never owned

interstate freight rights (or interstate passenger rights,

for that matter) and never assumed responsibility for

interstate rail service.

To the contrary, DART owns and through its contract

partner (Herzog) operates a wholly intrastate commuter

line. As such, neither DART nor Herzog is an interstate

common carrier. If DART was dispatching the trains

itself, it would not, by virtue of that function alone,

become an interstate common carrier. That it assigned

the dispatching function to Herzog does not make

Herzog an interstate common carrier, either.

This was essentially the holding in RAILTRAN, a 1993

decision by the ICC (the predecessor to the Transportation Board) in a case involving the cities of Dallas and

Forth Worth and this very same commuter rail line. The

cities had formed RAILTRAN to manage and operate

the line for commuter rail service and were in the

process of restructuring their contractual arrangements
32 No. 09-3945

with the interstate freight carriers that also used the

corridor. They sought a declaratory order from the ICC

on the question whether RAILTRAN or the cities would

become common carriers (and therefore covered employers under the Acts) if they assumed certain functions—including dispatching—necessary to operate the

line. The ICC held that the proposed agreements would

not trigger its jurisdiction; the agreements, the agency

held, “will not change the non-carrier status” of

RAILTRAN or the cities. RAILTRAN, I.C.C. Fin. Docket

No. 32406, 1993 WL 540395, at *4. The agreements “would

permit [the cities or RAILTRAN] to select a Designee to

perform certain contract duties such as maintenance,

dispatching and operational control” of the line, “[b]ut . . .

that authority would not change their relationship to

the line.” Id. The ICC concluded that the cities and

RAILTRAN “will not become common carriers under the

Act by executing or carrying out [the proposed agreements], or by contracting for an Operator to provide

rail commuter service or Designee to dispatch and/or

maintain the Corridor for joint use.” Id. at *5. The ICC

further concluded that its authorization was not required (that is, its jurisdiction would not be triggered)

if RAILTRAN were to “dispatch or maintain the Corridor [itself] or to select a Designee other than [one of the

interstate freight carriers] to perform this function.” Id.

RAILTRAN, it seems to me, is directly on point. Its

holding, as applied here, means that DART’s assignment

of the dispatching function to Herzog does not make either

DART or Herzog an interstate common carrier subject

to the Transportation Board’s jurisdiction. It is true that
No. 09-3945 33

the petitioners did not alert the Board to the RAILTRAN

decision during the agency proceedings. But the Board

has not relied on waiver doctrine and instead has

devoted considerable space in its appellate brief to discussing this case. Despite its length, however, the Board’s

discussion of RAILTRAN has not persuasively distinguished it.

Because the Board’s decision fails to apply the statutory

standards for covered-employer status under the Acts

and conflicts with the ICC’s decision in RAILTRAN,

I would grant the petition for review and reverse. Accordingly, I respectfully dissent.

10-22-10