Association of American Railroads v. United States Department of Transportation, 821 F.3d 19

Background

Congress created Amtrak as a for-profit corporation (Rail Passenger Service Act of 1970) that is nonetheless closely tied to and dependent on the federal government.
PRIIA § 207 (2008) requires Amtrak and the Federal Railroad Administration (FRA) to jointly develop performance "metrics and standards" for intercity passenger rail and authorizes the Surface Transportation Board (STB) to appoint an arbitrator to issue binding resolutions if Amtrak and FRA cannot agree.
The Association of American Railroads (AAR) and freight railroads challenged PRIIA as unconstitutional; this court previously invalidated the statute as an unlawful delegation to a private entity, but the Supreme Court reversed, holding Amtrak is a governmental entity and remanding other claims.
On remand, AAR pressed three principal challenges: (1) PRIIA violates due process by empowering an economically self-interested entity (Amtrak) to regulate competitors; (2) PRIIA violates the Appointments Clause because it vests appointment power for an arbitrator in the STB rather than the President and Senate; (3) whether Amtrak’s board composition renders it ineligible to exercise regulatory power (court declined to decide this).
The D.C. Circuit found the due process and Appointments Clause challenges properly before it (the arbitration-appointments issue was addressed despite preservation concerns because the government did not press waiver and the issue is purely legal and structurally important).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether PRIIA violates the Fifth Amendment by giving Amtrak (an economically self-interested actor) regulatory authority over competing freight carriers	PRIIA entrusts Amtrak (statutorily required to operate as a for-profit and to maximize revenues) with developing metrics that materially affect freight carriers, creating self-interested regulation that violates due process (Carter Coal theory)	Amtrak is a governmental entity with public objectives and political accountability; FRA participation and STB oversight, plus voluntary incorporation language, prevent an unconstitutional delegation	Held: PRIIA violates the Due Process Clause. The court applied Carter Coal: self-interested entities cannot be entrusted with regulatory power over competitors; FRA’s joint role and political accountability do not cure the constitutional defect
Whether PRIIA’s arbitration provision violates the Appointments Clause by allowing the STB to appoint an arbitrator who issues binding agency decisions	The arbitrator exercises "significant authority pursuant to the laws of the United States" (final binding power to set metrics); thus is an Officer and must be appointed under Article II. Vesting appointment in the STB (not President with Senate advice and consent) is unconstitutional absent supervision by a properly appointed principal officer	The arbitrator’s duties are limited to a single impasse and thus are inferior in nature; appointment by the STB (a "department") is permissible	Held: The arbitrator is an Officer exercising significant authority; PRIIA does not provide supervision directing or reviewing the arbitrator by a Presidentially appointed principal officer, so vesting appointment in the STB violates the Appointments Clause

Key Cases Cited

Carter v. Carter Coal Co., 298 U.S. 238 (1936) (invalidating delegation that allowed self-interested market participants to regulate competitors)
Association of Nat'l Advertisers, Inc. v. FTC, 627 F.2d 1151 (D.C. Cir. 1979) (discussing prejudgment bias in rulemaking and imposing a high proof standard to disqualify rulemakers)
Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374 (1995) (Amtrak can be treated as a governmental entity for constitutional purposes)
Department of Transportation v. Ass'n of Am. R.R., 135 S. Ct. 1225 (2015) (Supreme Court reversing prior panel and holding Amtrak is a governmental entity; remanding remaining claims)
Edmond v. United States, 520 U.S. 651 (1997) (explaining the Appointments Clause framework and ‘‘significant authority’’ test)
Buckley v. Valeo, 424 U.S. 1 (1976) (Appointments Clause principles: appointment mode varies by officer class)
United States v. Germaine, 99 U.S. 508 (1878) (distinguishing principal and inferior officers and modes of appointment)