Supreme Court's Decision in Department of Transportation v. Association of American Railroads

On March 9 the Supreme Court ruled that Amtrak is a governmental entity for purposes of the Separation of Powers; therefore it did not violate the Constitution for Congress to give Amtrak a voice in the development of metrics and standards for evaluating the performance of passenger rail service. This was a non-controversial decision -- but it does have implications for King v. Burwell, the Affordable Care Act case.

This case pitted Amtrak, a government-created passenger railroad corporation, against the country’s freight railroads. The freight companies thought it violated the Constitution for Amtrak to play a role in writing regulations governing rail service – specifically, regulations governing how the freight companies had to defer to passenger trains on the tracks.

Section 207 of the Passenger Rail Investment and Improvement Act of 2008 requires the Federal Railroad Administration and Amtrak to “jointly develop” the metrics and standards for Amtrak’s performance, which is strongly affected by congestion with freight traffic on congested rail lines. In the event that the FRA and Amtrak could not agree on those metrics and standards, the matter was to be submitted to arbitration.

This law was challenged by the Association of American Railroads, representing the interests of freight railroads who could be charged with failing to grant preference to Amtrak’s passenger trains. The AAR contended that § 207 violates the doctrine of Separation of Powers. The freight railroads argued that Congress had unconstitutionally delegated some of its legislative power to a private entity -- Amtrak.

The freight railroads had a powerful argument in support of the proposition that Amtrak is a private corporation. The Federal statute creating Amtrak expressly provides that Amtrak “shall be operated and managed as a for-profit corporation” and “is not a department, agency, or instrumentality of the United States Government ….” 49 U.S.C. Section 24301(a).

The District Court for the D.C. Circuit upheld § 207. The Court ruled that the FRA retained ultimate control over the issuance of any regulations governing “metrics and standards” of Amtrak’s performance, and that even if it did not, Amtrak itself was under government control.

The Court of Appeals for the D.C. Circuit ruled that Amtrak in effect retained a veto over the “metrics and standards” regulations and that the law did not require  for the arbitrator to be a government official. Furthermore the Court found that despite aspects of government control Amtrak was a private corporation. Accordingly the Court ruled that § 207 represents an unconstitutional delegation of lawmaking authority to a private entity.

The Supreme Court agreed with the holding of the District Court and reversed the Circuit Court. The Supreme Court found that Amtrak’s Board of Directors are appointed by the President, confirmed by the Senate, and are removeable by the President at will; that Congress and Executive Branch establish Amtrak’s priorities and supervise its operations; and that Amtrak depends on federal financial support. The Court stated:

Given the combination of these unique features and its significant ties to the Government, Amtrak is not an autonomous private enterprise. … Amtrak was created by the Government , is controlled by the Government, and operates for the Government’s benefit. Thus, in its joint issuance of the metrics and standards with the FRA, Amtrak acted as a governmental entity for purposes of the Constitution’s separation of powers provisions.

Why is this significant for the case of King v. Burwell? It is yet another case this year where the Supreme Court has rejected a literal application of a statute and instead adopted a “functional” or “realistic” approach to the interpretation of the law. Similarly in Yates v.United States decided on February the Supreme Court rejected a literal approach to interpreting the Sarbanes-Oxley Act, and instead relied upon evidence of Congressional intent in determining the meaning and application of that law. This may mean that the Court will eschew a literal reading of Section 1401 of the Affordable Care Act and will uphold federal subsidies for the purchase of health insurance in all states.

Justice Kennedy authored the opinion for the majority, joined by six other justices, including the Chief Justice. Justice Alito filed a concurring opinion in which he objected to the facts that Amtrak’s Board of Directors do not take an oath to support the Constitution; that a private arbitrator might be appointed to issue regulations if Amtrak and the FRA had not agreed; and that Amtrak’s President is hired by the Board of Directors rather than appointed in the normal constitutional process. Justice Thomas concurred in the judgment but announced his position that the Executive Branch lacks constitutional authority to issue regulations that have the force of law – in other words, he would declare virtually all of the Code of Federal Regulations to be unconstitutional. This is consistent with Justice Thomas’ general commitment to “the Constitution as it was” previous to 1937.