Court Sides With AAR in On-Time Rules Dispute

A federal appeals court ruled last week that a 2008 law unconstitutionally gave Amtrak regulatory power over its contract railroads.

The U.S. Court of Appeals for the District of Columbia sided with the Association of American Railroads in saying that the Passenger Rail Investment and Improvement Act of 2008 gave Amtrak too much power when it comes to writing regulations pertaining to on-time performance metrics.

It was the second time that the appeals court has ruled in favor of the AAR.

Amtrak logoAn earlier decision was overturned by the U.S. Supreme Court which sent the case back to the appeals court for further review.

AAR had brought suit against the U.S. Department of Transportation in an effort to invalidate Section 207 of the 2008 PRII law.

In its latest ruling, the appeals court said the law’s giving Amtrak the authority to write regulations that affect its host railroads is in violation of the Constitution’s Due Process clause.

The court also knocked down the clause that gives the Surface Transportation Board the authority to appoint a mediator to arbitrate disputes between Amtrak and a host railroad over on-time performance.

The case has a long history that began with a federal district court siding with the U.S. DOT in favor of the law.

AAR appealed that decision to the appeals court, which said in July 2013 that Amtrak is a private company.

The Supreme Court ruled unanimously in March 2015 that Amtrak must be considered a governmental entity but instructed the appeals court to decide the question of the propriety of a government entity that is a participant in a private marketplace being able to regulate that marketplace.

However, concurring opinions by justices Samuel Alito and Clarence Thomas noted that the situation might violate a host railroad’s right to due process.

Those opinions said that regulators must be “disinterested” government bodies rather than competitors in the business.

In its latest ruling, the appeals court cited the Alito and Thomas’s opinions, but conceded that Amtrak and its contract railroads are not competing for the same customers.

They are, however, the court said, competing for the same scarce railroad route capacity and therefore must be considered economic competitors.

As for the STB’s authority under the 2008 law to appoint an arbitrator, the appeals court said that an independent arbitrator appointed by the STB cannot make final regulations because he or she is not a duly appointed or sworn Officer of the United States, as the Constitution requires.

The AAR originally filed suit acted after the U.S. DOT began to promulgate regulations under Section 207 if the PRII with the railroad trade group arguing that the law was an unconstitutional delegation of rule-making to a private company.

In briefs to the court, the AAR relied on the congressional proclamation of the Rail Passenger Service Act of 1970 creating the National Railroad Passenger Corporation (Amtrak) not be treated as a government entity but instead be operated as a for-profit business.

Although the appeals court last week struck down Section 207, it left the rest of the 2008 PRII intact and did not disturb Amtrak’s statutory rights to access of freight railroad tracks on an incremental cost basis.

Nor did the appeals court set aside laws that give Amtrak trains “preference over freight transportation.”

Congress could revise the 2008 law to grant the U.S. DOT the sole power to write on-time performance metrics and standards, in consultation with Amtrak and other others.

In doing so, Congress could give the authority to mediate between Amtrak and a contract railroad to the STB, whose members are duly sworn Officers of the United States, appointed by the president with the advice and consent of the Senate.

The court did not say that it was improper for the federal government to promulgate on-time performance regulations.

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