503 F.3d 596 (7th Cir. 2007), 06-3455, Weyerhaeuser Co. v. United States Railroad Retirement Bd.

Docket Nº:06-3455, 06-3763.
Citation:503 F.3d 596
Party Name:WEYERHAEUSER COMPANY, Petitioner and Intervening Respondent, v. UNITED STATES RAILROAD RETIREMENT BOARD, Respondent, and B.B., K.N., G.S., et al., Intervening Respondents and Petitioners.
Case Date:September 24, 2007
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 596

503 F.3d 596 (7th Cir. 2007)

WEYERHAEUSER COMPANY, Petitioner and Intervening Respondent,

v.

UNITED STATES RAILROAD RETIREMENT BOARD, Respondent,

and

B.B., K.N., G.S., et al., Intervening Respondents and Petitioners.

Nos. 06-3455, 06-3763.

United States Court of Appeals, Seventh Circuit.

September 24, 2007

Argued June 1, 2007

Petitions for Review of an Order of the United States Railroad Retirement Board. No. 06-26 (June 22, 2006)

Page 597

Kevin M. Sheys (argued), Edward J. Fishman, Kirkpatrick & Lockhart Nicholson Graham, Washington, DC, for Petitioner.

C. Burt Newell (argued), Bachelor & Newell, Hot Springs, AR, for Intervenors.

Before FLAUM, MANION, and ROVNER, Circuit Judges.

MANION, Circuit Judge.

Under the Railroad Retirement Act ("RRA"), an employee who works for a railroad employer is entitled to benefits based, in part, on the employee's years of service with that employer. The intervening respondents received their paychecks from Weyerhaeuser Company ("Weyerhaeuser"), but they worked for DeQueen and Eastern Railroad ("DeQueen"), which is a subsidiary of Weyerhaeuser. Railroad carriers such as DeQueen are covered employers under the RRA. Weyerhaeuser did not credit these employees for that railroad service. The Railroad Retirement Board ("Board") found in favor of four of the employees and credited them for their prior service. Weyerhaeuser does not dispute that four of the intervening respondents should be credited retroactively for four years' service. The Board, however, determined that the four employees were entitled to retroactive RRA service credit beyond the four years automatically allowed by statute. The Board also concluded that the other two intervening respondents were not entitled to retroactive RRA service credit. Weyerhaeuser appeals from the Board's order granting the four employees retroactive service credit beyond four years. The four employees granted retroactive service credit intervened and appeal, claiming they were entitled to additional years of service credit, even beyond the years awarded. The two employees denied retroactive service credit also intervened, claiming they were also entitled to retroactive service credit. We affirm in part, reverse in part, and remand in part.

I.

This case involves the Railroad Retirement Act of 1974, 45 U.S.C. § 231 et. seq. ("RRA"). The RRA provides "a system of annuity, pension, and death benefits for employees of designated classes of employers," Railroad Concrete Crosstie Corp. v. Railroad Retirement Bd., 709 F.2d 1404, 1409 (11th Cir. 1983) (internal citation omitted), similar to the Social Security Act. See Peppers v. Railroad Retirement Bd., 728 F.2d 404 (7th Cir. 1983) (noting that because of the similarities between the RRA and the SSA, the same analysis applies on appeal). The RRA applies only to employers that provide railroad services. See 45 U.S.C. § 231(a) (2000) (defining the term "employer" under the RRA).

The Board determined that the petitioner in this appeal, Weyerhaeuser Company ("Weyerhaeuser"), is not an employer under the RRA. See Weyerhaeuser Car Shop, B.C.D., 03-40 (U.S. R.R. Ret. Bd. May 8, 2003) (Employer Status Deter.).1

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However, a Weyerhaeuser subsidiary, DeQueen and Eastern Railroad ("DeQueen"), is a covered employer under the RRA.

The intervening respondents and petitioners, Ben Bramlett, Karen Neumeier, Gil Sharp, Deborah Ruth, Carol Honea and Larry Potts, 2 were all treated as Weyerhaeuser employees for payroll purposes, although they all performed services for DeQueen. They each received checks from Weyerhaeuser and, in turn, Weyerhaeuser charged DeQueen for their salaries. Weyerhaeuser did not file RRA returns reporting compensation for Sharp, Ruth, Honea, or Potts, and only started filing RRA returns for Bramlett and Neumeier in the mid-1980's.

In 2002, the Board initiated an audit of Weyerhaeuser. Following the audit, the Board concluded that certain employees who were paid by Weyerhaeuser, but who performed work for DeQueen, should be considered employees of DeQueen for purposes of RRA coverage.3Specifically, in May 2003, the Board concluded the because Weyerhaeuser employee Potts had provided a portion of his services to DeQueen and was "integrated" into DeQueen's staff and railroad operations, he was covered by the RRA. Potts, B.C.D. 03-40.2 (U.S. R.R. Ret. Bd. May 12, 2003) (Employee Serv. Deter.).4 The Board concluded that Potts' service should have been credited under the RRA and granted him retroactive service credit for four years, "as permitted by section 211.16." Section 211.16 and its statutory counterpart, 45 U.S.C. § 231h, both provide for time limits for correcting records of compensation. Section 211.16 provides:

The Board's record of the compensation reported as paid to an employee for a given period shall be conclusive as to amount, or if no compensation was reported for such period, then as to the employee's having received no compensation for such period, unless the error in the amount of compensation or the failure to make return of the compensation is called to the attention of the Board within four years after the date on which the compensation was required

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to be reported to the Board as provided for in § 209.6 of this chapter.

20 C.F.R. § 211.16.5 In other words, any compensation possibly due but not paid or not credited more than four years before the Board receives notice of a deficiency is not recoverable, i.e., the non-payment is final. Because the filing deadline for service records for each calendar year is the last day of February of the following year, when the Board issued its May 2003 decision as to Potts, the service records for the years 1998 and earlier were deemed conclusive. Accordingly, as a result of the Board's May 2003 decision, Potts received retroactive service credit for the years 1999 through 2002. Potts sought reconsideration of the Board's decision, requesting additional retroactive service credit beyond the four-year limit based on 20 C.F.R. § 211.16(b). Section 211.16(b) provides: "The Board may correct a report of compensation after the time limit set forth in paragraph (a) of this section where the compensation was posted or not posted as the result of fraud on the part of the employer." Potts argued that a 1995 efficiency study prepared for Weyerhaeuser by Anacostia & Pacific Company, Inc. ("Anacostia") showed that Weyerhaeuser fraudulently failed to file RRA service records on his behalf. In the efficiency study, Anacostia stated that DeQueen's "practice of contracting with [Weyerhaeuser] for the entire mechanical work force as well as certain accounting personnel is subject to challenge by the Railroad Retirement Board ('RRB'). In essence, the RRB position is that railroads cannot escape payment of Railroad Retirement and Unemployment Insurance Taxes by contracting an integral railroad function to an affiliate under common ownership." The Board denied Potts' request for reconsideration, finding that Potts' allegations of fraud were "not meritorious." See Potts, B.C.D. 05-21 (U.S. R.R. Ret. Bd. May 17, 2005) (Employee Serv. Deter. Recon.).6 The Board added:

[T]he Board regards the contention that fraud was committed as a very serious accusation and does not find that the failure of Weyerhaeuser to report [Potts'] service and compensation constituted fraud even though a management study stated that certain Weyerhaeuser Company employees worked exclusively for [DeQueen] (and another affiliated railroad). The Board notes that the same report also stated that the employees had "apparently performed considerable mechanical or maintenance work for [Weyerhaeuser Company] and third parties."

Id.

Then, in May 2005, the Board found that Sharp, Ruth, and Honea, who were all supervised by DeQueen employees and were subject to the continuing authority of DeQueen, were covered employees. Accordingly, the Board found their service creditable under the RRA. See Weyerhaeuser Car Shop, B.C.D. 05-17 at 8 (U.S. R.R. Ret. Bd. May 4, 2005) (Employer Status/Employee Serv. Deter.).7 The Board

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further granted them retroactive service credit "to the extent permitted by section 9 of the Railroad Retirement Act and section 211.16 of the Board's regulations." Id. at 8-9. That amounted to retroactive service credit for Sharp, Ruth, and Honea for the years 2001 through 2004. Sharp, Ruth, and Honea requested additional service credit beyond four years, also relying on 20 C.F.R. § 211.16(b)'s fraud exception. The Board denied their request for additional service credit, concluding that "as a general rule the Board's record of compensation and service may not be corrected after four years in the absence of fraud. A majority of the Board finds no evidence of fraud in the record ...." See B.C.D. 05-39 (U.S. R.R. Ret. Bd. Aug. 5, 2005) (Retro. Employee Serv. Credit, Employer Status Deter.).8

After the Board issued its decision denying Sharp, Ruth, and Honea's request for additional service credit, their attorney, who also represented Potts, requested reconsideration of the Board's decisions denying all four claimants retroactive service credit beyond four years.9 The four again argued that Weyerhaeuser had committed fraud and that they were entitled to RRA service credit beyond the four years already authorized. On June 22, 2006, the Board reversed its earlier holding as to all four employees and granted them retroactive service credit back to 1995-beyond the four-year limit set forth in section 211.16. See Weyerhaeuser Car Shop, B.C.D. 06-26 (U.S. R.R. Ret. Bd. June 22, 2006) (Employer Status/Employee Serv. Deter. on Recon.).10 After noting its prior decisions, in which it found no evidence that Weyerhaeuser committed fraud, the Board cited the 1995...

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