UNITED STATES GOVERNMENT RAILROAD RETIREMENT BOARD Memorandum FEB 5 1987 L-87-12 TO Director of Compensation and Certification FROM : Deputy General Counsel SUBJECT: Lehigh and Hudson River Railway Company Employer Status This is in response to your request of February 7, 1986, requesting my opinion regarding the employer status of the Lehigh and Hudson River Railway Company (LHR). LHR has previously been found to be an employer within the meaning of the Railroad Retirement Act and the Railroad Unemployment Act. Its name appears in the Employer Status List under Item No. 3625, with the period of creditable service shown as being from April 1, 1982 to date. From a review of memoranda contained in the file, it appears that LHR was given a new employer number in order to distinguish the bankrupt estate in reorganization from the former operating railroad. As a result, the period of creditable service shown in the Employer Status List appears to reflect only the period of tim^ since LHR has had the new employer number. It should be noted that the records indicate that LHR was originally found to be an employer as of February 4, 1887. In a letter dated January 11, 1986, Mr. Timothy Smith (the attorney for Mr. John Troiano, trustee of the property of the LHR) informed the Board that all operations of the LHR ceased as of March 31, 1976, pursuant to the Order of the Special Court for the Regional Rail Reorganization Act of 1973 under which all of LHR1s rail operations and rail operating properties were transferred to Consolidated Rail Corporation. Mr. Smith's letter further stated that the LHP. did not retain any rail properties or have any rail operations after that date, nor has it had any employees since March 31, 1976. This was verified in a telephone conversation with Mr. Smith on January 29, 1987. Mr. Smith's letter also stated that Honorable Robert J. Ward, Reorganization Judge of the United States District Court, Southern District of New York, directed the liquidation of the LHR and dissolution of the corporation. See also Interstate Commerce Commission Order dated April 6, 1977, service date April 20, 1977. That order further stated that the Commission's powers and duties with respect to LHR terminated April 1, 1976. According to a telephone conversation on September 30, 1986, between Mr. Smith and a member of my staff, the only properties LHR currently retains are a few parcels of real estate, which are in the Director of Compensation and Certification process of being transferred to local communities for back taxes. Mr. Smith also stated that he is currently filing applications with the states of New York and New Jersey to dissolve the corporation. (While LHR is a New York corporation, it is qualified to do business in New Jersey; thus, the corporation must be dissolved in both states.) According to a memorandum from the Board's Bureau of Data Processing and Accounts to the Bureau of Budget and Fiscal Operations dated September 2, 1981, LHR had no compensated employees as of 1977, and therefore LHR was not required to file reports of service and compensation from that time on. LHR is one of a number of railroads which were reorganized and which conveyed all or substantially all of their designated rail properties to Consolidated Rail Corporation (ConRail). LHR is one of six railroads that the Director of Data Processing and Accounts found to be estate or trustee organizations and, as stated above, were therefore issued new employer numbers. This Bureau has ruled on two of the six railroads given new employer numbers by the Bureau of Data Processing and Accounts and covered by the ICC Order of April 6, 1977. One of these railroads is the Penn Central Corporation (PCC). In Legal Opinion L-80-102 it was stated that it has long been held by the Board that a company chartered as a common carrier by railroad, whose railroad is operated in interstate commerce under a lease or other arrangement by a carrier by railroad subject to Part I of the Interstate Commerce Act, is itself subject to Part I of that Act, and consequently is an employer under the Railroad Retirement and Railroad Unemployment Insurance Acts. Since PCC was not under the jurisdiction of the Interstate Commerce Commission, and did not intend to resume operation of its leased lines but intended to sell them when it was possible to do so, it was held that PCC should be held to not be an employer under the Railroad Retirement and Railroad Unemployment Insurance Acts. In Legal Opinion L-76-557 the employer status of Erie Lackawanna Railway Company was considered. This was another railroad which was covered by the ICC order of April 6, 1977, and provided a new employer number by the Board. The Erie Lackawanna Railway Company had conveyed most of its rail properties to ConRail, the Delaware & Hudson Railway Company and the State of New Jersey. Trustees for the railroad (appointed in 1972 by a District Court) had stated that the office of the Trustees would continue in existence for an undetermined period, and possibly for longer than ten years, for the purpose of liquidation of the remaining properties of the railroad. It was found to be: - 3 - Director of Compensation and Certification "* * * apparent that the status of the Company as an employer under the Act ceased, in regard to the conveyed properties, as of April 1, 1976. Moreover, it appears that the Erie Lackawanna estate is continuing its activities as more than a mere liquidating operation. Therefore, it is my opinion that the Erie Lackawanna Railway Company ceased to be an employer under the Railroad Retirement Act and the Railroad Unemployment Insurance Act as of April 1, 1976." It is my opinion that the Lehigh and Hudson River Railway Company is similar to both of the above described railroads; i.e., it is no longer under the jurisdiction of the Interstate Commerce Commission (pursuant to the Order of April 6, 1977) and the existing corporate shell exists solely for the purpose of liquidating the few remaining real estate parcels. Based on the above information, including the fact that it has had no employees and has therefore filed no reports of service and compensation since 1976, and in accordance with Legal Opinions L-80-102 and L-76-557, I conclude that the Lehigh and Hudson River Railway Company ceased to be an employer as of the close of business on March 31, 1976, the date on which it ceased operations and no longer had compensated employees. An appropriate Form G-215 giving effect to the foregoing is attached. Steven A. Bartholov Attachment RLSimmons:ik:cmw WPPLus /id 2 C. 469-86.