If the General Assembly abolishes the NC Ports Railway Commission (PRC) and transfers its assets to the State Ports Authority (SPA), will that hurt the ongoing federal labor litigation between SPA, PRC, and the longshoremen's union over whether SPA is a Railway Labor Act 'carrier'?
Plain-English summary
David King, Deputy Secretary for Public Transportation at NCDOT, sent the AG a draft bill that would abolish the NC Ports Railway Commission (PRC) and transfer its assets to the NC State Ports Authority (SPA). King flagged that litigation between SPA, PRC, and the International Longshoreman's Association (ILA), AFL-CIO, was pending before the National Mediation Board and asked the AG to assess negative legal consequences and risk.
Chief Deputy AG Andrew A. Vanore, Jr., Assistant AG Dennis P. Myers, and Assistant AG Roy A. Giles, Jr. walked through a tangled procedural history and concluded the AG did not recommend abolishing PRC at this time.
The 1970s. In 1970, the National Mediation Board certified the ILA as bargaining representative for certain classes of SPA employees under the federal Railway Labor Act (45 U.S.C. §§ 151 et seq.). The Board's jurisdiction was based on SPA's operation of terminal railroads at the Wilmington and Morehead City ports. The Railway Labor Act applies to "carriers" and defines that term to include any carrier by railroad subject to the Interstate Commerce Act, and any company directly or indirectly owned or controlled by or under common control with such a carrier and operating equipment or facilities in connection with rail-transported property. After an unsuccessful court challenge to the Board's jurisdiction, SPA entered a series of collective bargaining agreements with the ILA. The last expired December 30, 1980.
The PRC creation (1979). In 1979, the General Assembly created PRC (§§ 143B-469 et seq.) and transferred SPA's railway equipment and operations to PRC. PRC applied to the Interstate Commerce Commission (ICC) for a Certificate of Convenience and Necessity to acquire and operate SPA's terminal railroads, which it received in December 1980. In January 1981, SPA conveyed its railroad equipment to PRC and granted PRC trackage use rights over all its tracks at Wilmington and Morehead City. PRC began operating the terminal railroads January 12, 1981.
The 1982 NMB ruling. In November 1980, the ILA had invoked the Board's mediation services. In January 1981, SPA moved to dismiss, claiming it was no longer a carrier. On June 8, 1982, the Board found SPA was no longer a Railway Labor Act carrier and that PRC was its successor. That decision was appealed twice to the D.C. Circuit Court of Appeals and remained pending before the Board, with the court directing further consideration of whether SPA was a carrier because (as the ILA alleged) SPA was under "common control" with PRC.
The 1986–1988 lease and ICC exit. In September 1986, PRC leased all its rail facilities and railroad operations to two private corporations and dismissed all employees except a 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. The ICC denied the petition in September 1988 but, on its own motion, exempted PRC altogether from ICC regulation. The ICC noted that PRC had not abandoned the terminal railroads, just transferred operating rights, so PRC had a "residual common carrier obligation." The ICC indicated the exemption might be revoked if the private companies should stop their operations.
The proposed abolishment. The draft bill would transfer PRC's assets to SPA but explicitly not authorize SPA to operate railroads or function as a common carrier by rail. The AG noted the bill could look different if all PRC's powers, duties, and operational responsibilities went to SPA along with assets.
The risk analysis. PRC's "residual common carrier obligation" means its common carrier status could be reactivated. If all PRC's assets transferred to SPA (including the operating leases), SPA would probably inherit that residual obligation. Two scenarios then become available for SPA to become a carrier subject to the Railway Labor Act:
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Lessee exits. If the existing operating leases end and SPA cannot find successor operators, SPA might have to operate the terminal railroads itself rather than abandon them. SPA would then become subject to the Railway Labor Act, at least for rail operations personnel and probably for all non-managerial personnel.
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Common control theory. Even if SPA never operates the terminal railroads, ownership plus the residual obligation plus limited rail-related activities incident to port operations could, taken together, support a Railway Labor Act carrier finding. Railroad ownership alone is not sufficient to make one a common carrier (Edwards v. Pacific Fruit Express Co., 390 U.S. 538 (1968); ILA v. Harris County Houston Ship Channel Navigation District, NNB No. C-3865), but the combination is more troublesome.
The AG declined to quantify the degree of risk but said it was not insignificant. For that reason, the AG did not recommend abolishing PRC at this time.
Currency note
This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
The Interstate Commerce Commission was abolished in 1995 by the ICC Termination Act, and its functions transferred to the Surface Transportation Board. Subsequent NC legislation has restructured the relationship between SPA and rail operations at the ports, and the Ports Railway Commission's status and operations have evolved. The Railway Labor Act doctrines around "carrier" status and common control continue to develop. Anyone with a current question about port-area rail labor or organizational structure should consult current NC Chapter 143B, current Surface Transportation Board regulations, current Railway Labor Act case law, and counsel familiar with rail labor.
Common questions
Q: Why is the Railway Labor Act so different from regular employment law?
A: RLA covers rail and airline labor relations exclusively, with its own dispute-resolution machinery (National Mediation Board, presidential emergency boards, statutory cooling-off periods). It is structurally different from the National Labor Relations Act that covers most other private-sector workers. Being pulled into RLA jurisdiction means an employer has to operate under that distinct framework instead of the more familiar NLRA framework.
Q: What is "residual common carrier obligation"?
A: When a railroad transfers operating rights without formally abandoning the line, the railroad keeps a latent obligation to provide service if the lessee or successor ever exits. The ICC (now Surface Transportation Board) recognized this concept because abandoning rail service requires a separate regulatory process; transferring operations to a lessee is a less complete exit. The residual obligation can spring back to life if circumstances change.
Q: Why would the bill keep PRC alive instead of transferring everything to SPA?
A: To preserve the legal separation. As long as PRC exists as a distinct entity (even if functionally dormant) holding the "carrier" status, SPA can maintain its 1982-vintage finding that it is not a carrier. Folding PRC into SPA may unwind that separation in the eyes of the NMB and federal courts.
Q: What does "common control" mean under the Railway Labor Act?
A: A test for whether two entities are functionally a single carrier for RLA purposes. The ILA's argument has been that SPA and PRC are under common control (because of overlapping governance, financial relationships, or operational integration) and therefore both should be treated as carriers. The D.C. Circuit's remand pushed the NMB to take that argument seriously.
Q: What would happen to longshoremen's representation if SPA became a carrier again?
A: The 1970 ILA certification for SPA terminal railroad employees would essentially be revived, and SPA's broader employment relations could fall under RLA jurisdiction instead of the NLRA. That would change collective bargaining structure, dispute resolution, and many practical aspects of labor relations at the ports.
Q: Does the AG opinion bind the General Assembly?
A: No. AG opinions are advisory. The General Assembly is free to pass legislation despite an AG opinion identifying risks. But this opinion gave NCDOT (and through it, legislators considering the bill) a clear-eyed assessment of the litigation exposure abolishment could create. The AG recommends against the abolishment at this time, and the General Assembly retains discretion to follow that recommendation or not.
Background and statutory framework
The interplay between state ports authorities, terminal railroads, and federal rail labor law is unusually intricate. The NC Ports Railway Commission was created in 1979 specifically to take over SPA's terminal railroad operations, presumably with the legal effect of decoupling SPA from RLA jurisdiction. That decoupling worked for a while: the NMB in 1982 confirmed SPA was no longer a carrier.
But the decoupling was incomplete enough that ILA continued to litigate, and the D.C. Circuit twice remanded for further NMB consideration. The 1986–1988 lease arrangement and ICC exit further muddied the picture by leaving PRC with a residual common carrier obligation that could be reactivated.
The 1994 AG opinion is a careful piece of risk analysis. It does not say abolishing PRC will definitely lose the litigation, but it does say the risk is meaningful enough that doing nothing is the prudent course. The opinion is a useful example of legal risk advice on a multi-year, multi-forum litigation matter where structural changes at the state level could disrupt a careful legal architecture.
Citations
- N.C.G.S. §§ 143B-469 et seq. (NC Ports Railway Commission, established 1979)
- 45 U.S.C. §§ 151 et seq. (federal Railway Labor Act; defines "carrier" to include any common-controlled or carrier-controlled entity operating rail-related facilities)
- Edwards v. Pacific Fruit Express Co., 390 U.S. 538 (1968) (U.S. Supreme Court; railroad ownership alone does not make one a common carrier under the Railway Labor Act)
- ILA v. Harris County Houston Ship Channel Navigation District, NNB No. C-3865 (NMB; similar carrier-status analysis)
Source
- Landing page: https://ncdoj.gov/opinions/proposed-abolishment-of-the-north-carolina-ports-railway-commission/
Original opinion text
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