Atlantic Land & Imp. Co. v. U.S.

• Citation: 790 F.2d 853
• Decision Date: 03 June 1986
• Docket Number: No. 85-3728,85-3728
• Parties: -5128 ATLANTIC LAND & IMPROVEMENT COMPANY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 853

790 F.2d 853

58 A.F.T.R.2d 86-5128

ATLANTIC LAND & IMPROVEMENT COMPANY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 85-3728.

United States Court of Appeals, Eleventh Circuit.

June 3, 1986.

George K. Dunham, CSX Corp., Richmond, Va., for plaintiff-appellant.

Michael L. Paup, Chief, Appellate Section, Tax Div., U.S. Dept. of Justice, Glenn L. Archer, Jr., David Pincus, Nancy G. Morgan, Assts. Atty. Gen., Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before HILL, Circuit Judge, HENDERSON ^* and BROWN ^**, Senior Circuit Judges.

HENDERSON, Senior Circuit Judge:

This appeal focuses on the sole issue of whether a longshoreman in the peculiar circumstances of this case is a railroad employee. The plaintiff-appellant, Atlantic Land & Improvement Company (AL & I), is a wholly owned subsidiary of Seaboard Coast Line Railroad (SCL). Its primary function is to acquire and develop real estate for SCL.

AL & I owned and operated the Rockport facility (Rockport) in Tampa, Florida, which it leased to SCL. Rockport is a phosphate loading facility at which the mineral is transferred from SCL boxcars or SCL storage tanks onto ships. To reduce particulate air pollution during loading, a tarpaulin is attached from the spout of the loading elevator to the hatches of each vessel. For each transfer AL & I hired five longshoremen who boarded the ship, attached and detached the tarps, and generally helped to implement the loading plan promulgated by the ship's captain. SCL included the cost of loading the phosphate and hiring the longshoremen in the line-haul tariff it charged its customers. The longshoremen were recruited through the local union hiring hall. All were members of the International Longshoremen's Association (ILA) and their sole duties involved loading phosphate on board the ships. Significantly AL & I paid Federal Insurance Contribution Act (FICA), 26 U.S.C. Secs. 3101-26, and Federal Unemployment Tax Act (FUTA), 26 U.S.C. Secs. 3301-11, taxes for each longshoreman.

On February 16, 1977 the Internal Revenue Service (IRS) proposed the assessment of a tax against AL & I pursuant to the provisions of the Railroad Retirement Tax Act (RRTA), 26 U.S.C. Secs. 3201-33, for the years 1972-1974. On May 5, 1978 the IRS issued another report reaching the same conclusion for the years 1975-1977. After unsuccessfully exhausting all administrative remedies, AL & I paid the tax on September 13, 1978. The disputed taxes were assessed by the IRS on July 23, 1979. AL & I afterwards sought a refund from the IRS but was unsuccessful in its effort. It then filed this suit in the United States District Court for the Middle District of Florida seeking a refund. AL & I contended that (1) it was not subject to RRTA taxes for the services of the longshoremen, and (2) the assessments were untimely and therefore barred by the applicable three-year statute of limitations. See 26 U.S.C. Sec. 6501(a). The district court found against AL & I on both issues ¹ and this appeal followed.

Whether AL & I is obligated to pay RRTA tax on behalf of the longshoremen calls for a two-step analysis. First, does AL & I meet the statutory definition of an "employer" under the RRTA, 26 U.S.C. Sec. 3231(a)? Second, were the longshoremen employees of AL & I or independent contractors?

As a threshold matter, this inquiry is a mixed question of fact and law and therefore subject to plenary review in this court. See Pullman-Standard v. Swint, 456 U.S. 273, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982). On the other hand, the district court's determination that the longshoremen are AL & I employees and not independent contractors is a question of fact that may be reversed only if clearly erroneous. See Anderson v. Bessemer City, --- U.S. ----, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).

26 U.S.C. Sec. 3231(a) defines an "employer" for RRTA purposes as a railroad or a subsidiary of a railroad that "operates any equipment or facility or performs any service (except ... casual service)) in connection with the transportation of ... property by railroad, or the receipt, delivery, elevation, transfer in transit, ... storage, or handling of property transported by railroad." ² Thus, AL & I is an "employer" under the RRTA--and therefore subject to RRTA liability--only if it meets a two-part test: (1) is AL & I a railroad carrier or the subsidiary of a railroad carrier and (2) does AL & I perform a regular, noncasual service for SCL that is connected with the transportation of property by railroad. Since it is clear beyond peradventure that AL & I is the wholly owned subsidiary of SCL, a railroad carrier, we need consider only the second prong of the statutory definition to resolve this issue. We agree with the district court that an evaluation of the relevant facts and case law makes clear that AL & I is an "employer" under the terms of the RRTA.

"Employer" is defined in virtually identical language in the RRTA, the Railroad Retirement Act (RRA), 45 U.S.C. Sec. 231(a)(1), ³ and the Railroad Unemployment Insurance Act (RUIA), 45 U.S.C. Sec. 351(a). ⁴ The three statutes are interrelated parts of an overall plan designed to benefit railroad employees. See Universal Carloading & Distributing Co. v. Pedrick, 184 F.2d 64, 65-66 (2d Cir.), cert. denied, 340 U.S. 905, 71 S.Ct. 280, 95 L.Ed. 654 (1950). The caselaw defining and applying each therefore is highly persuasive and furnishes guidance in this case. ⁵

Railroad Retirement Board v. Duquesne Warehouse Co., 326 U.S. 446, 66 S.Ct. 238, 90 L.Ed. 192 (1946) involved whether a railroad-controlled warehouse company qualified as an "employer" under the RRA and RUIA. The Duquesne Warehouse Company loaded and unloaded freight transported by a railroad. Although the burden to load or unload fell on the owners of the freight, the applicable tariff charged by the railroad included this service. The warehouse company argued that it could not be classified as an "employer" because it did not deal in railroad transportation services; i.e., it performed these activities either before railroad transportation commenced or after it had ended. Id. at 453-54, 66 S.Ct. at 241, 90 L.Ed. at 197. The Supreme Court held that the central question was "whether a carrier's affiliate is performing a service that could be performed by the carrier and charged for under the line-haul tariffs. If it is such a service, it is a transportation service within the meaning of [the RRA and the RUIA].... In other words, if a service is involved which the railroad could perform as a part of its transportation service, it is within the present Acts." Id. at 454, 66 S.Ct. at 242, 90 L.Ed. at 197-98. The key is not whether other nonrailroad-owned companies provide the same service, but whether the carrier could have performed the work and charged for it. We note that subsequent courts have adopted a broad reach to the definition of "employer." See Railroad Concrete Crosstie Corp. v. Railroad Retirement Bd., 709 F.2d 1404, 1408 (11th Cir.1983) (subsidiary made concrete crossties for railroad); Southern Development Co. v. Railroad Retirement Bd., 243 F.2d 351, 354-55 (8th Cir.1957) (subsidiary leased buildings to railroad); Despatch Shops, Inc. v. Railroad Retirement Bd., 153 F.2d 644, 645-46 (D.C.Cir.1946) (subsidiary made and rebuilt railroad cars for railroad); Despatch Shops, Inc. v. Railroad Retirement Bd., 154 F.2d 417, 419 (2d Cir.1946) (same).

AL & I fits within the guidelines set forth in Duquesne. It performed a service that could have been fulfilled by SCL and was included in the line-haul tariffs. As such, SCL was performing a "service ... in connection with the transportation of passengers or property by railroad," as provided in 26 U.S.C. Sec. 3231(a).

Additionally, the activities relevant here do not fit within the "casual service" exception in 26 U.S.C. Sec. 3231(a). The assistance rendered by SCL was neither "so irregular or infrequent as to afford no substantial basis for an inference that such service or operation will be repeated," nor "insubstantial." See 20 C.F.R. Sec. 202.6. The service was regular, frequent and substantial, as well as necessary to comply with state antipollution statutes. In short, it was not "casual service."

Having determined that AL & I meets both prongs of the definition of "employer" as set forth in the RRTA, we turn next to its contention that the longshoremen were independent contractors and not AL & I employees. Using a frequently cited Treasury regulation, ⁶ the district court found, as a matter of fact, that the longshoremen were employees of AL & I. The court laid out an extensive factual pattern which demonstrated that AL & I retained the right to control the longshoremen. The right to control, not actual control, is the most significant indicia of the true nature of the relationship. See United States v. Silk, 331 U.S. 704, 716, 67 S.Ct. 1463, 1469-70, 91 L.Ed. 1757, 1769 (1947). We agree with the district court that it is noteworthy that the contractual agreement between the Tampa Maritime Association (of which AL & I was a member) and the International Longshoremen's Association (the longshoremen's union) exclusively vested the management of the employer's business and the direction of the work force in the employer. It also is important to note that by paying FICA and FUTA taxes on each longshoreman, AL & I tacitly acknowledged the existence of an employer-employee relationship. "If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it." Anderson v. Bessemer City, --- U.S. ----, ----, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518, 528 (1985). The district court's conclusion that the longshoremen were AL & I employees is not clearly erroneous.

The second issue raised in this appeal is whether the three year statute of...