Amtrak Is Ruled a Public Entity

In 1970, hoping to save passenger service from likely extinction, Congress created the National Railroad Passenger Corporation, commonly known as Amtrak. Congress said this would not be a government agency but an entity operated and managed as a private “for-profit corporation,” its purpose being to develop “the potential of modern rail service in meeting the nation’s intercity passenger transportation needs.” 

Railroads under the common carrier obligation to offer intercity passenger services no longer had to do so if they allowed Amtrak to use their track and other facilities at rates agreed to by both parties—or, in case of disagreement, set by the Interstate Commerce Commission, a role later assumed by the Surface Transportation Board. Amtrak now uses 97 percent of the track that the freight railroads own—which happens to be almost all of the track there is. And thanks to a 1973 law, the railroads must give a “preference” to Amtrak “in using a rail line, junction, or crossing.”

In 2008, concerned about poor service, unreliability, and delays resulting from freight traffic congestion, Congress granted the Federal Railroad Administration (FRA) and Amtrak joint authority to develop “metrics and standards” for measuring the performance and scheduling of passenger train service. It also provided that if Amtrak and the FRA disagree on metrics and standards, “any party involved in the development of those standards may petition the Surface Transportation Board to appoint an arbitrator to assist the parties in resolving their disputes through binding arbitration.” Congress also said that the metrics and standards may play a role in prompting Surface Transportation Board investigations of passenger train delays and other service problems, and also in enforcement actions, such as levying fines if it turns out that a delay was caused by “a rail carrier’s failure to provide preference to Amtrak over freight transportation.”

Implementing the new law, the FRA and Amtrak jointly drafted metrics and standards and put them out for public comment. Metrics developed to measure on-time performance in particular drew objection, not least from the Association of American Railroads (AAR), which said they were “unrealistic” and would cause “an excessive administrative and financial burden.”

The final version of the metrics and standards took effect in May 2010. But they didn’t satisfy AAR, which filed suit seeking their invalidation on grounds that Amtrak is a private entity and it was therefore unconstitutional for Congress to direct the corporation to exercise joint authority in the development and issuance of metrics and standards. The association’s argument relied on constitutional provisions regarding the separation of powers and on the Fifth Amendment’s due process clause, which provides that “No person shall .  .  . be deprived of life, liberty, or property, without due process of law.” 

The association lost in the district court in Washington, D.C., but prevailed in the circuit court of appeals, which unanimously ruled, on separation of powers grounds, that Congress had made “an unlawful delegation of regulatory power to a private entity.” The circuit court declined to take up the due process question. A unanimous Supreme Court then ruled that Amtrak is not a private but a public entity: “ ‘a federal actor or instrumentality,’ as far as the Constitution is concerned.” While Congress had said the opposite—that Amtrak is “not a department, agency, or instrumentality of the United States”—none of the justices could deny the reality that Amtrak was created by the government, is controlled by the government, and operates for the government’s benefit. 

Justice Anthony Kennedy wrote the opinion for the Court, Justice Samuel Alito a concurring opinion, and Justice Clarence Thomas an opinion concurring in the judgment. Yet while the public-versus-private issue was the only one the justices decided, it was not the only one they were interested in. Sending the case back to the D.C. Circuit for “further proceedings consistent with this opinion” (the usual boilerplate), the justices took the unusual step of identifying questions it would like the appeals court to consider. “It’s hard to think of [another Supreme Court ruling],” a lawyer familiar with the Amtrak case told me, “where the justices basically say here are the constitutional issues we want answered.” 

One concerns the provision for an arbitrator appointed by the Surface Transportation Board to resolve disputes over metrics and standards through binding arbitration. The issue, as stated by the Court’s opinion, is whether the provision violates the nondelegation principle and the appointments clause, matters that Justice Alito’s opinion addressed in some detail.  

Alito wrote that the law says nothing else about this “binding arbitration,” including “who the arbitrator should be.” For the justice, those failures were a matter of concern, for “if the arbitrator can be a private person, then this law is unconstitutional” under the principle, accepted by both parties in the case (and disputed by no one, really), that Congress may not delegate regulatory authority to a private entity.

Alito explained why Congress has no business doing that. The principle of nondelegation, he wrote, exists “to protect liberty.” The Constitution establishes a process for making law, “and within that process there are many accountability checkpoints.” They include bicameralism and presentment (for a bill to become a law it must be passed by both houses and presented to the president for his signature). “It would dash away the whole scheme,” wrote Alito, “if Congress could give its power away to an entity that is not constrained by those checkpoints.” 

Administration lawyers urged the Court to take the route of “constitutional avoidance” (interpreting the meaning of a statute so as to avoid a constitutional problem) and read the word “arbitrator” to mean “public arbitrator.” Yet under the appointments clause in Article II of the Constitution, which treats the presidency, such a reading would raise serious questions, wrote Alito. In particular, a public arbitrator would be making law without supervision (through “binding arbitration”). A public arbitrator doing that cannot be an “inferior” officer but must be a “principal” officer, as the clause requires, appointed by the president with the Senate’s advice and consent. That is how the Constitution ensures, wrote Alito, that “those who exercise the power of the United States are accountable to the president, who himself is accountable to the people.”

Alito also looked at how the Amtrak board of directors is structured. It has nine members, one of whom is the secretary of transportation. Seven others are appointed by the president and confirmed by the Senate. Those eight board members select the Amtrak president, who is the only board member not appointed by the president and confirmed by the Senate.

The board, so structured, is constitutionally problematic, said Alito. “Accountability,” he wrote, “demands that principal officers be appointed by the president.” And while a multi-member body may head an agency, all of its members must be principal officers. The administration argued that the board president is an inferior officer, serving at the pleasure of the other board members. “But,” said Alito, “the government does not argue that the president of Amtrak cannot cast tie-breaking votes. Assuming he can vote when the board of directors is divided, it makes no sense to think that the side with which the president agrees will demand his removal.” Alito’s point was that the Amtrak president has responsibilities that make him a principal officer—and require his appointment by the president. 

The due process claim was the only one on the Court’s list for the circuit court to consider that Alito did not take up. Yet whether Congress violated the due process clause by giving “a federally chartered, nominally private, for-profit corporation regulatory authority over its own industry,” as AAR put it, was a clear concern of Justice Antonin Scalia’s during the December argument. “Even if [Amtrak] is a government entity,” he said in one exchange, “there are some things that government entities can’t do.” And, later, in another exchange, he asked, “What difference does it make whether it’s a governmental entity or not, so long as it is operating on a for-profit basis and is .  .  . given the last word on some regulatory matters that disadvantage its competitors. There’s a violation of regulatory due process.”

Twenty years ago in his opinion for the Court in Lebron v. National Railroad Passenger Corporation, Scalia placed Amtrak within what he called “its proper context in the long history of corporations created and participated in by the United States for the achievement of governmental objectives.” By the end of World War II, observed Scalia, corporations “had gotten out of hand, in both their number and their lack of accountability.” Congress responded, and many corporations were dissolved. But then, in the early 1960s, “the allure of the corporate form was felt again, and new entities proliferated.” 

Many of them, said Scalia, “followed the traditional model, often explicitly designated as government agencies and located within the existing government structure.” But others didn’t. A new model emerged, in which the government sponsored “corporations that it specifically designated not to be [federal] agencies or establishments.” These corporations were not subjected to statutory control mechanisms, and they were incorporated “with the purpose of entering the private sector” and “doing so with government-conferred advantages.” Amtrak, Scalia said, followed the new model, as did the Corporation for Public Broadcasting and the Legal Services Corporation.

The AAR lawsuit may fairly be seen as a response to the new model and its lack of accountability. “When citizens cannot readily identify the source of legislation or regulation that affects their lives,” wrote Justice Alito in his opinion, “government officials can wield power without owning up to the consequences”—by, for example, “passing off a government operation [read: Amtrak] as an independent private concern. Given [the] incentive to regulate without saying so, everyone should pay close attention when Congress ‘sponsor[s] corporations that it specifically designate[s] not to be agencies or establishments’ ” of the government.

The quotation in that last sentence comes from Scalia’s opinion in Lebron, and Alito uses it to good effect, as it is only by paying “close attention” to such matters as a corporation’s governing structure that it is possible to say whether a corporation is what Congress says it is. In the case of Amtrak, the close attention Alito paid to it generated an opinion raising necessary questions about the entity’s structure. 

In addition to his nondelegation and appointment clause analyses, Alito dealt with oaths and commissions. The Constitution requires “all officers” of the United States to take an oath (or affirmation) to support the Constitution and to receive a commission from the president. “There is good reason,” wrote Alito, “to think that those who have not sworn an oath [and received a commission] cannot exercise significant authority of the United States.” Both provisions, said Alito, “confirm [that] those who exercise the power of Government are set apart from ordinary citizens.” As such, they are subject to special restraints. “There should never be a question whether someone is an officer of the United States because, to be an officer, the person should have sworn an oath and possess a commission.” 

Fair enough. Yet when the railroads’ lawyer told the Supreme Court that Amtrak’s board members do not take an oath of office to uphold the Constitution, as do Article II (executive-branch) officers vested with regulatory authority, the government’s response was silence. “Perhaps,” Alito wrote, “there is an answer.” Yet the rule, he said, is clear: “Because Amtrak is the government, those who run it need to satisfy basic constitutional requirements.”

Interestingly, Alito briefly discussed in his opinion a dissent by Chief Justice John Roberts in a 2013 case brought against the Federal Communications Commission. Roberts provided an essay on the administrative state that treated the growth of independent agencies (more than 50 new ones created in the past 15 years) and the many powers the agencies wield, enforcing them with “reams of regulations.” Concerned here, too, about a lack of accountability, Roberts asserted a bigger role for the courts—one in which they make sure that “the legislative branch has in fact delegated lawmaking power to an agency within the executive branch before the judiciary defers to the executive on what the law is.”

Justices Alito and Kennedy joined the Roberts dissent. Justice Thomas did not, but his separate opinion in the Amtrak case ended with this: 

Clearly, a number of justices—at least five—are concerned about a lack of accountability on the part of the national corporations and federal agencies that have been established by the government over the decades and now influence so much of ordinary life in America. They do not all agree on what should be done, judicially speaking. But ensuring basic constitutional requirements are satisfied—a mundane but accurate statement of what the courts are supposed to do—may require them to adjust unworkable precedents and take the Constitution’s structural principles more seriously. For these reasons, Round Two of Amtrak merits close attention.

Terry Eastland is an executive editor at The Weekly Standard.