Justices hear arguments in case that could shift US passenger train landscape

Posted by Malcolm Kenton
on Thursday, December 11, 2014

The Supreme Court heard oral arguments on Monday in a case that could have a lasting impact on Amtrak’s status and the shape of the passenger rail industry in this country.

The main question in the case, about which I wrote in October, is whether Section 207 of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), which says the Federal Railroad Administration (FRA) and Amtrak “shall jointly” issue a set of Metrics & Standards (M&S) for on-time performance of Amtrak trains to which the Surface Transportation Board would refer in resolving any dispute over the cause and extent of delays, constitutes an unconstitutional delegation of regulatory authority to a private company.  

US Supreme Court courtroom. Photo by Flickr.com user John Marino.
“The constitution does not permit Congress to create a corporation, deem it non governmental, and then launch it into the commercial sphere with a for-­profit mandate and then vest it with regulatory authority over other companies in the same industry,” argued Thomas Dupree, Jr., the attorney for the Association of American Railroads (AAR), which first brought the legal challenge to PRIIA Section 207. “Amtrak operates under a statutory mandate to conduct its affairs as though it were […] a for-profit corporation,” he later added.

While many of the stakeholders in the case are focused on their own interests, few have focused on what the outcome will mean for America’s passengers. While on-time performance (OTP) metrics are the focal point, the decision is likely to affect more than simply whether Amtrak trains are able to run on time. Perhaps more important than whether the Supreme Court rules in DOT’s favor or in AAR’s is how broadly the decision will be written. And based on the justices’ statements and lines of questioning on Monday, it seems more likely that we will see a broad decision that could change much of the dynamic surrounding American passenger trains. 

Assistant US Solicitor General Curtis Gannon argued to the justices that the M&S are not tantamount to regulations because a violation of them merely triggers an investigation by the Surface Transportation Board. Private entities can petition the STB to investigate matters as it is, and this does not constitute delegation. The only reason we saw a dramatic improvement in OTP after the M&S came into effect is “because for the first time in decades there was a meaningful threat that there would be an enforcement proceeding, not to enforce the metrics and standards, but to enforce the [pre-existing] statutory preference requirement,” Gannon maintained. 

Dupree responded later by claiming that the government, in an STB proceeding pursuant to an alleged violation by a host railroad, would need to prove violation of both the M&S and the preference requirement. Justice Elana Kagan in turn responded to Dupree by positing that “the metrics and standards are useless unless the [STB] decides to enforce the preference requirement.” 

“Mr. Dupree is talking about Amtrak as a competitor of the freight railroads,” Gannon later replied, “and we think that that's the wrong analogy, that Amtrak is effectively like a customer of a common carrier that is entitled to get services from the railroads at a particular rate.”

Justice Ruth Bader Ginsburg stated that her understanding is that the issue before the Supreme Court is the fact that the DC Circuit appellate court based its decision on finding Amtrak to be a private company. None of the other justices directly questioned that assertion, and much of the following discussion centered around the extent to which Amtrak is part of the government. Justices Kagan, Sonia Sotomayor and Stephen Breyer seem convinced that the national passenger carrier is governmental, while Justices Antonin Scalia, Samuel Alito and Anthony Kennedy and Chief Justice John Roberts questioned this premise. (Though it is worth noting that justices often play devil’s advocate during oral arguments, so their line of questioning isn’t necessarily reflective of how they will decide the case.) Justice Clarence Thomas did not speak on Monday.

A broad ruling in DOT’s favor would likely pronounce Amtrak to be a part of the government, regardless of language in its authorizing legislation declaring the corporation to be “not an agency or instrumentality of the United States Government.” While this would allow the PRIIA Metrics & Standards to stand, and may thus cause short-term improvements in on-time performance, it could weaken Amtrak over time, and it is unclear whether Amtrak would become part of the US DOT or a separate agency. 

There are copious restrictions on government agencies’ ability to perform for-profit services and compete with private companies. Amtrak would likely be barred from competing with other operators for contracts from commuter rail agencies, and may be left with little recourse if a state (having complete authority over intercity passenger train routes of 750 or fewer miles thanks to PRIIA Section 209) chose to contract out the service to a different company. Additionally, it would not be surprising to see further lawsuits from AAR or individual host railroads questioning a government agency’s right to impose its use of their property and whether railroads were being justly compensated for the extra freight-hauling capacity they give up by hosting Amtrak trains.

A broad ruling in AAR’s favor could jeopardize Amtrak’s ability to benefit from many government protections. While a wholly private Amtrak could still receive operating support and capital investment from the federal government (as many other private companies do), it could lose the statutory right to access host railroads’ tracks on an incremental cost basis, among other federal protections and requirements (such as the requirement to have an Office of the Inspector General) that have different effects on the carrier’s bottom line. And other companies could compete with Amtrak for federal subsidies. While this would satisfy in part the desires of other private passenger train operators for a more level playing field, it could jeopardize long-distance routes that either a host railroad or Amtrak would desire to discontinue. 

Ex-B&O signals on CSX's Cumberland Subdivision, used by Amtrak's Capitol Limited, at Magnolia, WV. Photo by Sturmovik/Wikimedia Commons.
However, one interesting point that a friend and fellow observer of American passenger railroading made is that regardless of the Supreme Court’s ruling, the railroads’ common carrier obligation to provide passenger service remains in effect. This obligation has existed since the late 19th century, and was a responsibility of the private (now freight) railroads until they agreed to pass it off to Amtrak as part of the Rail Passenger Service Act of 1970. If the Court issues a broad ruling, regardless of which way it goes, the question of who is responsible for being a common carrier of passengers may be up for discussion. Could a fully governmental or a fully private Amtrak retain the entire common carrier obligation, or would it be transferred to the US DOT, to the states, back to the private railroads, or some combination thereof?

Under any of these scenarios, the companies that seek to win contracts to operate intercity passenger services in place of Amtrak stand to benefit. And increased competition could yield benefits for passengers: higher quality and quantity service at lower prices. Perhaps the best outcome would be for FRA, or perhaps Amtrak as a government agency, to oversee a more competitive marketplace, ensuring interconnectivity between various passenger services and enforcing universal standards for safety, reliability and quality.

Another aspect of law, aside from the common carrier obligation, that doesn’t seem to be affected by the current case is the aforementioned statutory preference requirement, written into law in 1978. AAR raised the question of whether giving Amtrak joint regulatory power with the FRA, and letting it be a joint arbiter of disputes between itself and a host railroad, violates the Constitutional guarantee of due process of law. Both lower courts seemed to say that due process is not at issue because the metrics and standards do not enact or change the statutorily-required preference for passenger trains, but serve merely as yardsticks by which to determine whether the required preference was given in each particular case. 

In the end, America’s passengers, as well as the freight rail industry, would benefit greatly from a more cooperative and less adversarial relationship between freight and passenger interests. For the needed modernization and expansion of our passenger train network, there is no alternative as cost-effective for public treasuries as sharing tracks or rights-of-way with freight railroads. And freight carriers, facing tremendous capacity constraints, could benefit from increased federal and state investment in their infrastructure that would allow for more frequent and fluid movement of both types of trains. An environment in which Amtrak’s role is clarified — where freight railroads, states and other passenger carriers know whether they are dealing with a government agency or with a private company — is likely to be more conducive to cooperation than the current situation. 

If the entire railroad industry worked more closely together to realize a more robust and fluid network, and achieve the funding necessary to build it, then all railroad customers — passengers and shippers, along with government agencies and rail industry shareholders, and the entire economy that depends on a strong multi-modal transportation network, could reap substantial dividends. The path towards a more cooperative future may begin once the Supreme Court issues its ruling early next year.

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