Caseflicks

Supreme Court of the United States • 2015

Department of Transportation v. Association of American Railroads

575 U.S. 43 | 135 S. Ct. 1225 | 191 L. Ed. 2d 153 | 2015 U.S. LEXIS 1763 | 83 U.S.L.W. 4145 | 25 Fla. L. Weekly Fed. S 114

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Takeaway

In short, this case holds that Amtrak's real-world federal creation, control, mission, and funding make it a governmental actor for constitutional purposes—but leaves unresolved whether Congress structured its regulatory role in a constitutionally valid way.

Background

Congress created Amtrak in 1970 to preserve intercity passenger rail service. Although freight railroads own much of the track Amtrak uses, federal law gives Amtrak preference over freight transportation on those lines. In 2008, the Passenger Rail Investment and Improvement Act directed Amtrak and the Federal Railroad Administration (FRA) jointly to develop performance metrics and minimum standards for passenger rail service, including on-time performance and delays caused by host freight railroads.

The resulting metrics and standards set targets for Amtrak's on-time performance and limited host-railroad-caused delays. They could affect freight railroads because the Surface Transportation Board may investigate poor Amtrak performance and award damages when a railroad fails to provide Amtrak its statutory preference.

The Association of American Railroads challenged the arrangement. It argued that Amtrak was a private, interested market participant and that Congress therefore could not give it joint regulatory authority consistent with separation-of-powers and due-process principles. The District Court granted summary judgment for the Department of Transportation and the FRA. The D.C. Circuit reversed on the separation-of-powers claim, holding that Amtrak was private because Congress had said it was not a federal agency or instrumentality and had directed it to operate as a for-profit corporation. The Supreme Court vacated and remanded.

Issues

Issue #1

Whether Amtrak is a governmental entity, rather than a private corporation, for purposes of evaluating the constitutionality of its joint issuance of rail-performance metrics and standards with the FRA.

Holding

Yes. For this constitutional inquiry, Amtrak is a governmental entity.

Reasoning

Congress's statutory description of Amtrak as neither a federal department, agency, nor instrumentality, and its instruction that Amtrak operate as a for-profit corporation, did not conclusively determine Amtrak's constitutional status. Congress may define an entity's statutory characteristics, but it cannot settle by label whether that entity is governmental for purposes of constitutional structural limits.

The practical structure of Amtrak showed pervasive governmental creation, control, and supervision. The Secretary of Transportation held all preferred stock and most common stock; the Secretary sat on Amtrak's board; and seven of the other eight board members were presidential appointees confirmed by the Senate. The Executive Branch also understood those appointed directors to be removable by the President at will.

Congress and the Executive exercised substantial control over Amtrak's operations and accountability mechanisms. Amtrak had reporting duties to Congress and the President, was subject to the Freedom of Information Act whenever it received federal subsidies, maintained an inspector general, and faced regular congressional oversight of its budget, routes, and prices.

Amtrak was required to pursue public objectives fixed by statute, not merely its own commercial interests. Congress directed it to provide effective intercity passenger mobility, minimize subsidies, offer reduced fares to certain passengers, maintain specified service, and follow detailed operational and procurement requirements. Amtrak also depended on federal subsidies throughout its existence.

Lebron v. National Railroad Passenger Corp. controlled the basic constitutional principle. Lebron held that Congress cannot evade constitutional obligations simply by placing a government-created and government-controlled entity in corporate form and disclaiming its agency status. Just as Amtrak was a government actor for First Amendment purposes in Lebron, it was governmental for this separation-of-powers inquiry.

Taken together, Amtrak was created by the Government, controlled by the Government, and operated for the Government's benefit. Its participation with the FRA in issuing the metrics and standards was therefore governmental action, which must itself comply with the Constitution's separation-of-powers requirements.

Issue #2

Whether the Supreme Court should resolve the remaining challenges to the metrics and standards, including possible Appointments Clause, nondelegation, and due-process objections.

Holding

No. The Court did not decide those questions and remanded for the D.C. Circuit to consider any properly preserved issues in the first instance.

Reasoning

The D.C. Circuit had invalidated the standards on the mistaken premise that Amtrak was a private entity. Once that premise fell, its decision could not stand, so the proper disposition was to vacate the judgment and remand.

Serious constitutional questions could remain even though Amtrak was governmental. The parties had raised issues concerning the appointment of Amtrak's president, the statutory provision for binding arbitration if Amtrak and the FRA disagreed, the scope of any rulemaking authority, and due process concerns arising from Amtrak's role in an industry in which it participates.

The Court followed its ordinary role as a court of final review rather than first review. Because the lower court had not passed on the remaining arguments, it left their resolution to the D.C. Circuit, subject to that court's determination of which issues had been properly preserved and were before it.

Concurrences

Justice Alito

Reasoning

Justice Alito joined the Court's opinion in full. He agreed that Congress's statutory disclaimer could not control Amtrak's constitutional status: because the Government created, controls, funds, and directs Amtrak, Amtrak must be treated as a federal actor or instrumentality for constitutional purposes.

He emphasized a broader accountability principle: liberty requires that citizens be able to identify who exercises regulatory power. Congress cannot avoid constitutional accountability by presenting a governmental operation as a supposedly private corporation. Recognizing Amtrak as governmental therefore triggers, rather than ends, scrutiny of whether its structure complies with the Constitution.

Justice Alito highlighted the Oath and Commission Clauses. If Amtrak officials exercise significant federal authority, he reasoned, there is substantial cause to ask whether they must take an oath to support the Constitution and receive presidential commissions. The parties' briefing suggested that Amtrak board members did not take such oaths, while the Government offered no response.

He concluded that the PRIIA's metrics-and-standards regime is regulatory because it has coercive effects on private freight railroads. The standards must be incorporated into Amtrak-host railroad agreements when practicable, and compliance materially reduces the risk of enforcement and damages. That practical pressure makes the scheme an exercise of regulatory power, notwithstanding the Government's effort to characterize the standards more modestly.

Justice Alito regarded the statute's binding-arbitration provision as especially problematic. If a private arbitrator could make a binding choice between Amtrak and the FRA's competing standards, Congress would have delegated regulatory power to a private person, which he viewed as unconstitutional. Reading the provision to require a public arbitrator might avoid that problem, but it would raise a distinct Appointments Clause issue if the arbitrator issued binding rules without adequate presidentially appointed supervision.

He also questioned the appointment of Amtrak's president by the board rather than by the President with Senate confirmation. If the president exercises significant authority or may cast a decisive board vote, the office may be a principal office; and even if it is inferior, the board's authority to appoint may depend on whether Amtrak qualifies as a constitutionally recognized department. These unresolved problems showed that governmental status did not establish the constitutionality of Amtrak's structure.

Justice Thomas

Reasoning

Justice Thomas agreed only with the judgment to vacate and remand. He faulted the majority for framing the central inquiry as whether Amtrak was sufficiently controlled by the Federal Government. In his view, the Constitution first requires identifying the type of power exercised and then determining whether the constitutionally proper institution or officer exercises it.

He grounded his approach in the Vesting Clauses. The Constitution separately and exclusively vests legislative power in Congress, executive power in the President, and judicial power in the federal courts. A governmental entity's status alone cannot make it eligible to exercise a particular kind of power; it must be constituted and controlled in the manner the relevant constitutional grant requires.

Justice Thomas argued that the original meaning of legislative power includes making generally applicable rules governing private conduct. The historical separation between lawmaking and execution protected individuals from being governed by the arbitrary will of executive officials rather than by laws enacted through the constitutionally prescribed legislative process.

He criticized the Court's modern intelligible-principle doctrine, under which Congress may authorize agencies to make binding rules so long as it provides some guidance. In his view, that test has allowed the Executive to make policy choices and formulate broad, binding rules of private conduct that are legislative in nature. He would return to the original understanding and require generally applicable rules of private conduct to be made through Article I's legislative process.

Applying that framework, Justice Thomas concluded that Amtrak's role in formulating the metrics and standards involved legislative power. The standards gave content to freight railroads' obligations to incorporate them into contracts with Amtrak when practicable and could influence the Surface Transportation Board's imposition of terms and enforcement decisions. Because Amtrak is not Congress and the standards were not enacted through bicameralism and presentment, he believed the arrangement violated Article I.

Justice Thomas acknowledged that lower courts would be bound by the existing intelligible-principle doctrine and might instead characterize the authority as executive. On that view, he explained, the key question would be whether Amtrak was sufficiently subject to presidential control to exercise executive power. Appointment, removal, and the additional Appointments Clause concerns identified by Justice Alito would require careful examination on remand.