What the Supreme Court has, and has not, ruled about Amtrak

Posted by Malcolm Kenton
on Friday, March 13, 2015

I am nestled into a Roomette aboard the northbound Silver Meteor, hustling up the Northeast Corridor to New York after spending a few days in South Florida. This trip comes amidst a momentous week for passenger trains in America, with the same day bringing news of a key Supreme Court ruling regarding Amtrak, and of the Indiana Department of Transportation’s decision to terminate the Chicago-Indianapolis Hoosier State in light of a forthcoming Federal Railroad Administration (FRA) determination that state agencies paying for and overseeing intercity passenger train services should be the “entity of record” for responding to federal railroad regulations, and thus be treated as if they were railroad companies. I will treat the latter decision, which took many observers by surprise but actually has been under development for some time, in a future column.

Amtrak's northbound Silver Meteor pausing at Savannah, GA, on the evening of March 12, 2015. Photo by Malcolm Kenton.
On Monday (March 9), the US Supreme Court issued a ruling in the case over the constitutionality of Section 207 of the 2008 Passenger Rail Investment and Improvement Act (PRIIA), Department of Transportation v. Association of American Railroads (DOT v. AAR). Section 207 gives the DOT’s FRA and Amtrak joint authority to write metrics and standards for many aspects of Amtrak trains’ performance, and provides that the Surface Transportation Board (STB) shall appoint an arbitrator to resolve any disputes between Amtrak and host railroads as to their applicability. The DOT appealed the case to the justices after the three-judge US Court of Appeals for the District of Columbia Circuit ruled in AAR’s favor, declaring Amtrak to be a private entity that cannot be vested with regulatory authority. 

The justices’ decision was unanimous 9-0, with Justice Anthony Kennedy writing the majority opinion, and Justices Samuel Alito and Clarence Thomas writing concurring opinions. The only final declaration coming from the ruling is that Amtrak is a government entity for Constitutional purposes, despite the law’s declarations to the contrary. However, the Court says constitutional questions about the validity of the metrics and standards promulgated under Section 207 remain, and instructs the DC Circuit Court to reconsider the other issues in the case in light of Amtrak’s governmental status.

The question that is now before the DC Circuit is whether Amtrak’s role in crafting the metrics and standards is constitutional, not based on Amtrak’s status as a government entity vs. a private corporation, but rather on whether the power exercised by Amtrak, as a governmental body, is exercised constitutionally. Justice Kennedy’s opinion summarizes the main arguments that both sides are likely to use when the DC Circuit hears the case again, probably later this year. The AAR will maintain that Amtrak’s exercise of regulatory authority violates the Constitution’s separation of powers, as Amtrak’s leadership does not fit squarely into either the executive or legislative branch, and its President and Board members are not sworn to uphold the Constitution or, in the case of Amtrak’s President, not commissioned directly by the President of the United States. AAR may also contend that, even if Amtrak’s regulatory power is legitimate under separation of powers, it is still a violation of due process as the power to take property (i.e. valuable space on their tracks) from the host railroads is exercised by an entity that also operates as a for-profit business in the same industry. 

The DOT will argue that AAR’s concerns are unfounded because the FRA and STB are responsible for bringing the metrics and standards into force over the host railroads, and thus are the only entities exercising true regulatory authority. What may be the kicker, though, is that if there is a dispute between the FRA/Amtrak and a host railroad over how the metrics and standards are applied, Section 207 calls for the STB to appoint an independent arbitrator “to assist the parties in resolving their disputes through binding arbitration.” This arbitrator is also not necessarily a government official sworn to uphold the Constitution, so the Court of Appeals may declare his or her power to be unconstitutional. The DOT does not seem to have a ready counterargument on this matter. Another pertinent point, made by Justice Thomas, is that the power to write “generally applicable rules of private conduct,” such as the metrics and standards, is a legislative power that Congress, under separation of powers, may not delegate to an executive body. Of course, the lower court could determine that promulgating metrics & standards constitutes an executive power, but the question as to whether Amtrak is constitutionally qualified to exercise this power remains.

Much of the dispute at the heart of this case stems from the way PRIIA was written. If only a few sentences had been worded differently, perhaps there would not have been litigation. So one of three courses of events will follow: either the DC Circuit will nullify Section 207, thereby leaving a gaping hole in PRIIA’s ability to affect better performance of Amtrak trains, the DC Circuit will uphold all or part of the section (which, depending on the grounds on which it is upheld, could lead to even more litigation, perhaps returning the case to the Supreme Court), or Congress will intervene and rewrite the law. The House has already passed a new passenger rail authorization and policy law, but the Senate has yet to act on it, giving Senators an opportunity to fix PRIIA’s flaws. But given the instructions the justices offer to the DC Circuit in its review of the case, a ruling agreeing with the other points that AAR uses to support the unconstitutionality of Section 207 seems likely, especially that the majority of the lower court’s judges (appointees of President George W. Bush) espouse a philosophy of limited government.

The Supreme Court’s firm declaration that Amtrak is a governmental entity — in spite of Congress’s statutory disclaimers that it is “not a department, agency or instrumentality of the United States Government” and “shall be operated and managed as a for-profit corporation” — as Justice Alito puts it, “raises a host of constitutional questions.” These go beyond the metrics and standards and could lead to further litigation. However, it’s important to note that the Court’s holding that Amtrak is governmental only applies to constitutional matters. For matters that are within Congress’s control, however, its stipulations that Amtrak act as if it were a private company do carry some weight. Though Amtrak gains some advantages from not being treated as a branch of the government, the justices did come to a logical conclusion based on the degree of control that elected and appointed officials exercise over how Amtrak operates, and the fact that Congress created Amtrak to serve public purposes.

One final point worth mentioning: as Justice Kennedy recognized, Congress created Amtrak in 1970 to relieve the private railroads of their obligation as common carriers to offer passenger service, and granted Amtrak statutory dispatching priority over freight transportation in 1973. Neither the Supreme Court ruling nor the next DC Circuit ruling will change these two facts. It is also reasonable to conclude that, should Amtrak go out of business or be significantly altered or abolished for whatever reason, the common carrier obligation to provide passenger service would remain in place and would either revert to the private railroads or be vested by Congress in a different entity.

But for now, if Congress and the DOT want America's intercity passenger trains to run on-time and Amtrak (not to mention states and other train operators) to have a productive relationship with its host railroads, they will have to do so in a way that passes Constitutional muster, and perhaps not leave Amtrak in a perpetual confusion of being neither fully private nor fully public.

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