June 13, 1994
Mr. David King Deputy Secretary for Public Transportation North Carolina Department of Transportation Raleigh, North Carolina
Re: Advisory Opinion: Proposed Abolishment of the North Carolina Ports Railway Commission
Dear Mr. King:
In your memorandum of May 31, 1994, you stated that legislation had been drafted which would abolish the North Carolina Ports Railway Commission (PRC) and transfer its powers, duties and responsibilities to the North Carolina State Ports Authority (SPA). You noted that pending litigation between the International Longshoreman’s Association, AFL-CIO (ILA), the SPA and the PRC "raises implications which should be addressed" and asked for our opinion "as to any negative legal consequences" and the "degree of risk involved" in the abolishment of the PRC.
We first note that the draft of the proposed legislation which has been furnished to this office would not transfer all of PRC’s powers, duties and responsibilities to the SPA. It provides only that the assets of PRC be transferred to SPA, and specifically does not authorize SPA to operate railroads or function as a common carrier by rail. Our opinion could be different if all of PRC’s powers, duties and operational responsibilities were to be transferred to SPA along with its assets.
The most likely "negative consequence" of abolishing PRC and transferring its assets to SPA would be in connection with the litigation involving SPA, PRC, and the ILA which is pending before the National Mediation Board. That litigation had its origins in 1970, when the National Mediation Board (Board) certified the ILA as bargaining representative for certain classes of SPA employees under the provisions of the Railway Labor Act (45 USC §§ 151 et seq.). That ruling was based on SPA’s operation of terminal railroads at the ports in Wilmington and Morehead City. The Railway Labor Act applies to "carriers" and defines the term "carrier" to include "any … carrier by railroad, subject to the Interstate Commerce Act, and any company which is directly or indirectly owned or controlled by or under common control with any carrier by railroad and which operates any equipment or facilities or performs any service … in connection with the transportation … and handling of property transported by railroad … ." After an unsuccessful court challenge to the Board’s jurisdiction, SPA entered into a series of agreements with the ILA, the last terminating December 30, 1980. In 1979, the General Assembly established PRC (§§ 143B-469 et seq.) and provided for the transfer to it of all of SPA’s railway equipment and operations. PRC then applied to the Interstate Commerce Commission (ICC) for a Certificate of Convenience and Necessity authorizing it to acquire and operate SPA’s terminal railroads, and received that certificate in December of 1980. In January 1981 SPA conveyed its railroad equipment to PRC and granted PRC trackage use rights over all of its tracks at Wilmington and Morehead City. PRC began operating the terminal railroads as of January 12, 1981.
In November of 1980 the ILA invoked the mediation services of the Board. In January, 1981,
SPA moved to dismiss the case, contending that it was no longer a carrier therefore not subject to
the Board’s jurisdiction. On June 8, 1982, the Board found that SPA was "no longer a carrier
within the meaning of the Railway Labor Act" and that PRC was its successor. Having twice
been appealed to the D.C. Circuit Court of Appeals, this case is still before the Board. The court
has instructed the Board to further consider whether SPA is a carrier because (as alleged by the
ILA and denied by SPA and PRC) SPA is under "common control" with PRC.
In September of 1986, PRC leased all of its rail facilities and railroad operations to two private
corporations and dismissed all of its employees except for its General Manager and a secretary.
In March, 1988, PRC petitioned the ICC for a declaratory order that it was no longer subject to
ICC jurisdiction. In Finance Docket No. 31248, decided September 21, 1988, the ICC denied
PRC’s request but "on its own motion" exempted PRC altogether from ICC regulation. The ICC
noted in that decision that PRC had not abandoned the terminal railroads, but had only
transferred the right to conduct operations over them. The ICC therefore found that PRC had a
"residual common carrier obligation" and indicated that the exemption might be revoked if the
private companies should discontinue their operations.
PRC’s "residual common carrier obligation," although not clearly defined by the ICC, apparently
means that its common carrier status could be reactivated. If all PRC’s assets were transferred to
SPA, including the operating leases, SPA would probably also inherit this "residual common
carrier obligation". SPA might then become a carrier subject to ICC and Railway Labor Act
regulation in either of two fact situations. First, if the existing operating leases were terminated
and SPA was unable to find successor operators, SPA might have to operate the terminal
railroads itself rather than abandon them. If it did so, SPA would be subject to the Railway Labor
Act, at least with respect to its rail operations personnel and probably with respect to all of its
non-managerial personnel. Second, even if the SPA never operates the terminal railroads, it could
still be at some risk due to the proposed transfer. Railroad ownership alone does not make one a
common carrier. Edwards V. Pacific Fruit Express Co., 390 US 538 (1960); ILA v. Harris
County Houston Ship Channel Navigation District, NNB No. C-3865. However, the SPA’s
ownership of the railroad facilities, its "residual common carrier obligation" and the limited
railroad related activities in which it engages as part of its operation of the port terminals, when
taken together, could be sufficient to support a finding that SPA is a carrier subject to the
Railway Labor Act.
We are reluctant to speculate on the "degree of risk" that the proposed transfer would have an
adverse effect on the pending litigation. While it is unlikely, we cannot say that the risk is
insignificant. For this reason, we do not recommend that the PRC be abolished at this time.
Andrew A. Vanore, Jr.
Chief Deputy Attorney General
Dennis P. Myers
Assistant Attorney General
Roy A. Giles, Jr.
Assistant Attorney General