Herzog Transit Services, Incor v. RRRB ( 2010 )


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  •                            In the
    United States Court of Appeals
    For the Seventh Circuit
    No. 09-3945
    H ERZOG T RANSIT SERVICES,
    INCORPORATED , et al.,
    Petitioners,
    v.
    U NITED STATES R AILROAD
    R ETIREMENT B OARD ,
    Respondent.
    Petition for Review of an Order
    of the Railroad Retirement Board
    No. 09-53
    A RGUED M AY 26, 2010—D ECIDED O CTOBER 22, 2010
    Before R IPPLE, K ANNE and SYKES, Circuit Judges.
    R IPPLE, 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
    Railroad Retirement Board (“RRB” or “Board”) determined
    that Herzog is a covered employer under the Railroad
    Retirement Act 1 (“RRA”) and the Railroad Unemploy-
    ment Insurance Act2 (which we shall sometimes refer to
    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 cov-
    ered 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 be-
    tween Dallas and Forth Worth, Texas. On this line, DART
    and the T provide commuter rail service, known as the
    1
    
    45 U.S.C. §§ 231
    -231v.
    2
    
    45 U.S.C. §§ 351-69
    .
    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 func-
    tions for all train traffic on the line. The operating agree-
    ments 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 deter-
    mine 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 opera-
    tions of Herzog Transit Services, Inc., which would
    affect its status as an employer under the Railroad Re-
    tirement 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 deci-
    sion upon reconsideration. We shall discuss in detail
    only the part of the Board’s decision pertinent to this
    4                                                 No. 09-3945
    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
    3
    In addition to the portion of the decision concerning
    Herzog’s dispatching activities in Texas, the Board also held
    that, in all other respects, Herzog was not a covered employer
    under the Acts.
    4
    The Board rejected the argument, not renewed on appeal,
    that it should have focused on whether the individual dis-
    patchers in question were statutory employees of a railroad
    under 
    45 U.S.C. § 231
    (b)(1) and (d)(1).
    5
    
    20 C.F.R. § 202.3
    (a) provides in part:
    With respect to any company or person principally
    engaged in business other than carrier business, but
    (continued...)
    No. 09-3945                                                      5
    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 move-
    ment.6 Second, the Board noted that a common carrier
    is the insurer of the goods it carries. Third, because dis-
    5
    (...continued)
    which, in addition to such principal business, engages
    in some carrier business, the Board will require sub-
    mission 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.
    6
    
    49 C.F.R. § 241.5
     provides that “dispatch” means in part:
    (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 on-
    track 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 align-
    ing 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).
    6                                                  No. 09-3945
    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.7 These previous determinations in-
    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 Ven-
    tures, 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 never-
    theless 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-
    7
    See Employer Status Determination—Rail Temps, Inc., B.C.D. 03-
    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).
    No. 09-3945                                                  7
    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 provi-
    sions most directly relevant to our analysis.
    A.
    1.
    In the early part of the twentieth century, private rail-
    roads administered pension plans. These plans provided
    8
    Because Herzog is the party directly aggrieved by the Board’s
    decision, the arguments we shall address pertain to the status
    of Herzog. Therefore, for clarity, we shall refer to the joint
    petitioners as “Herzog.”
    8                                                No. 09-3945
    small benefits and had strict eligibility requirements.
    As a result, they provided little incentive for older em-
    ployees 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 com-
    pelling 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). 9 The 1937
    Act was styled as an amendment to the 1935 Act, but it was
    9
    The statute was revised significantly in 1974, although the
    coverage provision at issue in this case was not substantively
    altered.
    No. 09-3945                                                  9
    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.10 45 U.S.C. § 231a(a)(1)(i), (ii). The
    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 be-
    come 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
    Those with fewer than ten years of service (or five years
    accruing after 1995) are covered by the Social Security system.
    
    20 C.F.R. § 404.1401
    .
    10                                                   No. 09-3945
    The Retirement Act is just one component of the over-
    all statutory scheme. The Railroad Unemployment Insur-
    ance Act, enacted in 1938, establishes a system of unem-
    ployment 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.”).1 1
    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 equip-
    ment or facility or performs any service . . . in connection
    11
    The coverage provisions of the Railway Labor Act did not
    materially differ from those of the Railroad Retirement Act.
    Compare 
    48 Stat. 1185
     (June 21, 1934), with 
    48 Stat. 1283
     (June 27,
    1934).
    No. 09-3945                                                    11
    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 identi-
    cal fashion in the Unemployment Insurance Act. See Pet’r
    Br. 8 n.11 (“substantively identical”); Resp’t Br. 3 (“sub-
    stantially similar”). Other courts have so noted or as-
    sumed. 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 identi-
    cal” language). We agree.1 2
    12
    For completeness, we note that the analogous provision of
    the Railroad Unemployment Insurance Act covers “a railroad
    subject to the jurisdiction of the Surface Transporta-
    (continued...)
    12                                                    No. 09-3945
    The Retirement Act and the Unemployment Insurance
    Act are administered by the Railroad Retirement Board.1 3
    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 peti-
    tioner 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.1 4
    12
    (...continued)
    tion Board under part A of subtitle IV of title 49.” 
    45 U.S.C. § 351
    (b).
    13
    The Tax Act is administered by the Internal Revenue Service.
    Interstate Quality Servs., Inc. v. R.R. Ret. Bd., 
    83 F.3d 1463
    , 1464
    (D.C. Cir. 1996).
    14
    As we did in our decision in Livingston Rebuild Center, Inc. v.
    Railroad Retirement Board, 
    970 F.2d 295
    , 299 (7th Cir. 1992),
    (continued...)
    No. 09-3945                                                         13
    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 subsec-
    tion 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, how-
    ever, the Interstate Commerce Commission Termination
    Act of 1995 15 (“ICCTA”), which delineates the jurisdic-
    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
    (...continued)
    we pretermit a determination of whether we owe the deter-
    mination of the Board a particular degree of deference.
    15
    
    109 Stat. 803
     (1995).
    14                                                      No. 09-3945
    “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.1 6
    The ICCTA also defines “transportation.” That term
    is defined to include:
    (A) a locomotive, car, vehicle, vessel, warehouse,
    wharf, pier, dock, yard, property, facility, instru-
    mentality, 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).
    16
    Fayard v. Ne. Vehicle Servs., LLC, 
    533 F.3d 42
    , 46 (1st Cir. 2008);
    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.”).
    No. 09-3945                                              15
    2.
    Section 231(a)(1) also defines employer by requiring
    that the “carrier by railroad” be subject to the jurisdic-
    tion 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 ar-
    rangement for a continuous carriage or shipment.
    
    49 U.S.C. § 10501
    (a)(1) (emphasis supplied). STB jurisdic-
    tion 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
    its lines. Having retained no part of the interstate opera-
    tion 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 ar-
    rangement 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 oper-
    ated 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 con-
    stitutes 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 subsec-
    tion 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.1 7 These various
    17
    
    45 U.S.C. § 231
    (a)(1) provides:
    The term “employer” shall include—
    (i) any carrier by railroad subject to the jurisdiction of
    the Surface Transportation Board under part A of
    (continued...)
    No. 09-3945                                                            17
    17
    (...continued)
    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 transpor-
    tation of passengers or property by railroad, or the
    receipt, delivery, elevation, transfer in transit, refrigera-
    tion or icing, storage, or handling of property trans-
    ported 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 rail-
    road 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
    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”).1 8 It was “designed to provide
    pensions for employees ‘of the Nation’s railroad
    transportation system.’ ” 
    Id.
     (quoting H. Rep. No. 1069, at
    17
    (...continued)
    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).
    18
    It is also apparent that the various subgroups within the
    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 sup-
    port 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
    .
    No. 09-3945                                              19
    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 ap-
    plicable to today’s railroad industry and the organiza-
    tional 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.19 The RRA may have been enacted when all
    19
    The American Public Transportation Association, as amicus,
    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.
    20                                              No. 09-3945
    functions integral to interstate transportation usually
    were performed by carriers or their affiliates. Today,
    the rail transportation industry has adopted other ef-
    ficiencies. Our duty nevertheless remains the same.
    We must apply the statute to ensure individuals per-
    forming these integral functions to interstate rail trans-
    portation 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.2 0 Such entities
    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:
    20
    The Board’s authority to promulgate such regulations is
    found at 45 U.S.C. § 231f(b)(5).
    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 long-
    standing 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 opera-
    tion 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
    train operation.21 Interstate rail carriers can, and often
    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 sup-
    ports 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 opera-
    tions (“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 intra-
    state, 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 dis-
    patching manager.
    We cannot accept Herzog’s view that an earlier deci-
    sion of the STB 22 involving the same line commands
    an opposite result in the present case. See City of
    Dallas, City of Fort Worth and D/FW RAILTRAN, Petition for
    21
    See note 6, supra.
    22
    The RAILTRAN decision predated the creation of the STB
    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.
    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, opera-
    tion 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 declara-
    tory 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 non-
    operating owner assumes responsibility for interstate
    railroad-related functions and contracts with a third
    party to execute that responsibility. Importantly, how-
    ever, 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 func-
    tions. 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 opera-
    tions conducted on Trinity’s behalf [are] reported by
    Herzog Transit.”). Indeed, these two decisions are ani-
    mated by a single, consistent principle. Those entities
    that assume direct responsibility for the movement
    No. 09-3945                                                25
    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 dis-
    patching 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 per-
    forming 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
    23
    We note in passing that the STB has followed this principle
    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 Exemp-
    tion—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).
    26                                              No. 09-3945
    function for interstate trains using the tracks of Trinity,
    a covered employer. Accordingly, the petition for re-
    view is denied.
    P ETITION D ENIED
    S YKES, 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) (Transporta-
    tion 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 Trans-
    portation Board and the courts have used the common-
    No. 09-3945                                                 27
    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 compensa-
    tion.” 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 Trans-
    portation Board’s use of this definition).
    Putting these elements together, to be covered by the
    Acts, an employer must provide interstate common-
    carrier transportation by rail. More specifically, the em-
    ployer must hold itself out to the public as offering inter-
    state 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.1 Since 1999 they
    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
    1
    For ease of reference, I refer to DART and the T collectively
    as “DART,” unless the context requires otherwise.
    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 Retire-
    ment 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 indis-
    pensable component of carrier service and must be deliv-
    ered 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 dis-
    patching 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 Insur-
    ance 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 back-
    ground 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 con-
    flicts with the Interstate Commerce Commission’s (“ICC”)
    decision in RAILTRAN, which addressed the common-
    carrier 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
    limited to interstate “common carriers” by rail—that is, to
    entities that hold themselves out to the public as pro-
    viders 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
    2
    There may be an exception for entities that have the power to
    “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 sub-
    jecting it to the General Code of Operating Rules and establish-
    ing 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.
    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 pre-
    existing 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 Transporta-
    tion 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 em-
    ployers under the Acts) if they assumed certain func-
    tions—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 agree-
    ments], 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 re-
    quired (that is, its jurisdiction would not be triggered)
    if RAILTRAN were to “dispatch or maintain the Cor-
    ridor [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 dis-
    cussing this case. Despite its length, however, the Board’s
    discussion of RAILTRAN has not persuasively distin-
    guished 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. Ac-
    cordingly, I respectfully dissent.
    10-22-10