This is the determination
of the Railroad Retirement Board concerning
the status of Logistics Management Systems,
Inc., as an employer under the Railroad Retirement
Act (45 U.S.C. § 231 et seq.) and the
Railroad Unemployment Insurance Act (45 U.S.C.
§ 351 et seq.).
Information regarding Logistics was provided
by Thomas W. Flacke, formerly Vice President
of Logistics and now Debtor-in Possession.
According to Mr. Flacke, Logistics was incorporated
and began doing business in May 1989. Logistics
was placed into bankruptcy on May 15, 2002.
On January 9, 2003, all of Logistics’
assets were sold to a third party. In October
2002, it had 23 employees. As a result of
the bankruptcy, it has no employees, assets,
Logistics was owned by Bangor & Aroostook
Railroad Company, an employer under the Acts
(B.A. No. 1101), now in bankruptcy. Logistics
provided switching service at Skyway Industrial
Park, Presque Isle, Maine. Mr. Flacke states
that Logistics was a public warehousing company
with 50 percent of its business being done
with its affiliated carrier. Mr. Flacke stated
that 80% of Logistics’ time was spent
on warehousing and that 76% of its revenue
came from warehousing. In addition to warehousing,
it unloaded trucks and railcars; transported
products to their destination; and was a Surface
Transportation Board certificated motor carrier1.
Logistics did transloading of lumber, starch,
chemicals, etc. It provided single source
billing for its customers covering its services
and the rail or truck freight bill. It owned
a warehouse in Bangor, Maine, three operating
over-the-load tractors, furniture, computers,
various company cars and trucks, forklifts,
and packaging equipment. It leased a locomotive
at a nominal cost.
The Bangor & Aroostook brought traffic
to Skyway Industrial Park and Logistics was
paid $100.00 per freight car, $50.00 per log
car, and $25.00 for each intermodal trailer.
Logistics paid for the entire move which included
trucking, storage, handling, and rail transport.
Its customers then paid on a per move basis.
Section 1(a)(1) of the Railroad Retirement
Act (45 U.S.C. § 231(a)(1)), insofar
as relevant here, defines a covered employer
(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).
Section 202.7 of the Board's regulations
provides that service is in connection with
* * * 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).
Section 202.11 of the Board’s regulations
The employer status of any company or person
shall terminate whenever such company or
person loses any of the characteristics
essential to the existence of an employer
status. 20 CFR 202.11.
Initially, it should be noted that Logistics
had a switching operation. Accordingly, it
was a carrier-employer under the Acts. In
addition, Mr. Flacke characterized Logistics
as a public warehousing company, which provided
warehousing to its controlling rail carrier.
See Railroad Retirement Board v. Duquesne
Warehouse Co., 149 F.2d 507 (D.C.Cir. 1945),
aff'd 326 U.S. 446, 90 L.Ed. 192, 66 S.Ct.
238 (1946), where the Court of Appeals for
the District of Columbia Circuit 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 an employer
under the Railroad Unemployment Insurance
Accordingly, it is determined that Logistics
was an employer within the meaning of both
section 1(a)(1)(i) and 1(a)(1)(ii) of the
Railroad Retirement Act (45 U.S.C. §
231(a)(1)(i) and (ii)) and the corresponding
provisions of the Railroad Unemployment Insurance
Act as of May 1, 1989, the first date of the
month in which it commenced operations. We
find further, however, that Logistics ceased
to be an employer effective January 9, 2003,
the date as of which it sold all of its assets
and terminated operations, thereby losing
the characteristics essential to its employer