ASSOCIATION OF AMERICAN RAILROADS, Appellant v. UNITED STATES DEPARTMENT OF TRANSPORTATION, et al., Appellees.
No. 12-5204.
United States Court of Appeals, District of Columbia Circuit.
Argued Feb. 19, 2013. Decided July 2, 2013.
Thomas H. Dupree, Jr. argued the cause
Michael S. Raab, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Stuart F. Delery, Acting Assistant Attorney General, Ronald C. Machen Jr., U.S. Attorney, Mark B. Stern and Daniel Tenny, Attorneys, Paul M. Geier, Assistant
Before: BROWN, Circuit Judge, and WILLIAMS and SENTELLE, Senior Circuit Judges.
BROWN, Circuit Judge:
Imagine a scenario in which Congress has given to General Motors the power to coauthor, alongside the Department of Transportation, regulations that will govern all automobile manufacturers. And, if the two should happen to disagree on what form those regulations will take, then neither will have the ultimate say. Instead, an unspecified arbitrator will make the call. Constitutional? The Department of Transportation seems to think so.1
Next consider a parallel statutory scheme—the one at issue in this case. This time, instead of General Motors, it is Amtrak (officially, the “National Railroad Passenger Corporation“) wielding joint regulatory power with a government agency. This new stipulation further complicates the issue. Unlike General Motors, Amtrak is a curious entity that occupies the twilight between the public and private sectors. And the regulations it codevelops govern not the automotive industry, but the priority freight railroads must give Amtrak‘s trains over their own. Whether the Constitution permits Congress to delegate such joint regulatory authority to Amtrak is the question that confronts us now.
Section 207 of the Passenger Rail Investment and Improvement Act of 2008 empowers Amtrak and the Federal Railroad Administration (FRA) to jointly develop performance measures to enhance enforcement of the statutory priority Amtrak‘s passenger rail service has over other trains. The Appellant in this case, the Association of American Railroads (AAR), is a trade association whose members include the largest freight railroads (known in the industry as “Class I” freight railroads), some smaller freight railroads, and—as it happens—Amtrak. Compl. ¶ 10, at 4. Challenging the statutory scheme as unconstitutional, AAR brought suit on behalf of its Class I members against the four Appellees—the Department of Transportation, its Secretary, the FRA, and its Administrator (collectively, the “government“). Id. ¶¶ 14-17, at 6-7. We conclude § 207 constitutes an unlawful delegation of regulatory power to a private entity.
I
A
To reinvigorate a national passenger rail system that had, by mid-century, grown moribund and unprofitable, Congress passed the Rail Passenger Service Act of 1970,
Naturally, sharing tracks can cause coordination problems, which is why Congress has prescribed that, absent an emergency, Amtrak‘s passenger rail “has preference over freight transportation in using a rail line, junction, or or crossing.”
Though § 207 provides the means for devising the metrics and standards, § 213 is the enforcement mechanism. If the “on-time performance” or “service quality” of any intercity passenger train proves inadequate under the metrics and standards for two consecutive quarters, the STB may launch an investigation “to determine whether and to what extent delays or failure to achieve minimum standards are due to causes that could reasonably be addressed by a rail carrier over whose tracks the intercity passenger train operates or reasonably addressed by Amtrak or other intercity passenger rail operators.”
B
Following § 207‘s mandate, the FRA and Amtrak jointly drafted proposed metrics and standards, which they submitted to public comment on March 13, 2009. See Metrics and Standards for Intercity Passenger Rail Service Under Section 207 of Public Law 110–432, 74 Fed.Reg. 10,983 (Mar. 13, 2009). The proposal attracted criticism, with much vitriol directed at three metrics formulated to measure on-time performance: “effective speed” (the ratio of route‘s distance to the average
AAR filed suit on behalf of its Class I freight railroad members, asking the district court to declare § 207 of the PRIIA unconstitutional and to vacate the promulgated metrics and standards. The complaint asserted two challenges: that § 207 unconstitutionally delegates to Amtrak the authority to regulate other private entities; and that empowering Amtrak to regulate its competitors violates the Fifth Amendment‘s Due Process Clause. Compl. ¶¶ 47-54, at 16-17. The district court rejected these arguments, granting summary judgment to the government and denying it to AAR. See AAR v. Dep‘t of Transp., 865 F.Supp.2d 22, 35 (D.D.C.2012). AAR renews these constitutional claims on appeal.
II
AAR‘s argument takes the following form: Delegating regulatory authority to a private entity is unconstitutional. Amtrak is a private entity. Ergo, § 207 is unconstitutional. This proposed syllogism is susceptible, however, to attacks on both its validity and soundness. In other words, does the conclusion actually follow from the premises? And, if it does, are both premises true? Our discussion follows the same path.
A
We open our discussion with a principle upon which both sides agree: Federal lawmakers cannot delegate regulatory authority to a private entity. To do so would be “legislative delegation in its most obnoxious form.” Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936). This constitutional prohibition is the lesser-known cousin of the doctrine that Congress cannot delegate its legislative function to an agency of the Executive Branch. See
Not so, however, in the case of private entities to whom the Constitution commits no executive power. Although objections to delegations are “typically presented in the context of a transfer of legislative authority from the Congress to agencies,” we have reaffirmed that “the difficulties sparked by such allocations are even more prevalent in the context of agency delegations to private individuals.” Nat‘l Ass‘n of Regulatory Util. Comm‘rs v. FCC (“NARUC“), 737 F.2d 1095, 1143 (D.C.Cir.1984) (per curiam).3 Even an in-
Preliminarily, we note the Supreme Court has never approved a regulatory scheme that so drastically empowers a private entity in the way § 207 empowers Amtrak. True, § 207 has a passing resemblance to the humbler statutory frameworks in Currin v. Wallace, 306 U.S. 1 (1939), and Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940). In Currin Congress circumscribed its delegations of administrative authority—in that case, by requiring two thirds of regulated industry members to approve an agency‘s new regulations before they took effect. See 306 U.S. at 6, 15. Adkins, meanwhile, affirmed a modest principle: Congress may formalize the role of private parties in proposing regulations so long as that role is merely “as an aid” to a government agency that retains the discretion to “approve[], disapprove[], or modif[y]” them. 310 U.S. at 388. Like the private parties in Currin, Amtrak has an effective veto over regulations developed by the FRA. And like those in Adkins, Amtrak has a role in filling the content of regulations. But the similarities end there. The industries in Currin did not craft the regulations, while Adkins involved no private check on an agency‘s regulatory authority.4 Even more damningly, the agency in Adkins could unilaterally change regulations proposed to it by private parties, whereas Amtrak enjoys authority equal to the FRA. Should the FRA prefer an alternative to Amtrak‘s proposed metrics and standards, § 207 leaves it impotent to choose its version without Amtrak‘s permission. No case prefigures the unprecedented regulatory powers delegated to Amtrak.5
As far as we know, no court has invalidated a scheme like § 207‘s, but perhaps that is because no parallel exists. Unprecedented constitutional questions, after all, lack clear and controlling precedent. We nevertheless believe Free Enterprise Fund v. Public Co. Accounting Oversight Board, 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010), offers guidance. There the Supreme Court deemed it a violation of
As for the second principle, Free Enterprise Fund also clarifies that novelty may, in certain circumstances, signal unconstitutionality. That double good-cause tenure, for example, lacked an antecedent in the history of the administrative state was one reason to suspect its legality: “Perhaps the most telling indication of the severe constitutional problem with the PCAOB is the lack of historical precedent for this entity. Neither the majority opinion nor the PCAOB nor the United States as intervenor has located any historical analogues for this novel structure. They have not identified any independent agency other than the PCAOB that is appointed by and removable only for cause by another independent agency.” Id. at 3159 (quoting Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 537 F.3d 667, 699 (D.C.Cir.2008) (Kavanaugh, J., dissenting)); accord Nat‘l Fed‘n of Indep. Bus. v. Sebelius, 567 U.S. 519, 132 S.Ct. 2566, 2586 (2012). In defending § 207, the government revealingly cites no case—nor have we found any—embracing the position that a private entity may jointly exercise regulatory power on equal footing with an administrative agency. This fact is not trivial. Section 207 is as close to the blatantly unconstitutional scheme in Carter Coal as we have seen. The government would essentially limit Carter Coal to its facts, arguing that “[n]o more is constitutionally required” than the government‘s “active oversight, participation, and assent” in its private partner‘s rulemaking decisions. Appellee‘s Br. 19. This proposition—one we find nowhere in the case law—vitiates the principle that private parties must be limited to an advisory or subordinate role in the regulatory process.
To make matters worse, § 207 fails to meet even the government‘s ad hoc standard. Consider what would have happened if Amtrak and the FRA could not have reached an agreement on the content of the metrics and standards within 180 days of the PRIIA‘s enactment. Amtrak could have “petition[ed] the Surface Transportation Board to appoint an arbitrator to assist the parties in resolving their disputes through binding arbitration.”
We remain mindful that the Constitution “contemplates that practice will integrate the dispersed powers into a workable government.” Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring). But a flexible Constitution must not be so yielding as to become twisted. Unless it can be established that Amtrak is an organ of the government, therefore, § 207 is an unconstitutional delegation of regulatory power to a private party.
B
Now the crucial question: is Amtrak indeed a private corporation? If not—if it is just one more government agency—then the regulatory power it wields under § 207 is of no constitutional moment.
Many of the details of Amtrak‘s makeup support the government‘s position that it is not a private entity of the sort described in Carter Coal. Amtrak‘s Board of Directors includes the Secretary of Transportation (or his designee), seven other presidential appointees, and the President of Amtrak. See
That being said, Amtrak‘s legislative origins are not determinative of its constitutional status. Congress‘s power to charter private corporations was recognized early in our nation‘s history. See McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 409 (1819). And, as far as Congress
How to decide? Since, in support of its claim that Amtrak is a public entity, the government looks past labels to how the corporation functions, it is worth examining what functional purposes the public-private distinction serves when it comes to delegating regulatory power. We identify two of particular importance. First, delegating the government‘s powers to private parties saps our political system of democratic accountability. See Mich. Gambling Opposition v. Kempthorne, 525 F.3d 23, 34 (D.C.Cir.2008) (Brown, J., dissenting in part). This threat is particularly dangerous where both Congress and the Executive can deflect blame for unpopular policies by attributing them to the choices of a private entity. See NARUC, 737 F.2d at 1143 n. 41; cf. New York v. United States, 505 U.S. 144, 169 (1992) (“[W]here the Federal Government directs the States to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision.“). This worry is certainly present in the case of § 207, since Congress has expressly forsworn Amtrak‘s status as a “department, agency, or instrumentality of the United States Government.”
Second, fundamental to the public-private distinction in the delegation of regulatory authority is the belief that disinterested government agencies ostensibly look to the public good, not private gain. For this reason, delegations to private entities are particularly perilous. Carter Coal specifically condemned delegations made not “to an official or an official body, presumptively disinterested, but to private persons whose interests may be and often are adverse to the interests of others in the same business.” 298 U.S. at 311. Partly echoing the Constitution‘s guarantee of due process, this principle ensures that regulations are not dictated by those who “are not bound by any official duty,” but may instead act “for selfish reasons or arbitrarily.” Roberge, 278 U.S. at 122. More recent decisions are also consistent with this view. See Pittston Co., 368 F.3d at 398; NARUC, 737 F.2d at 1143-44; Sierra Club v. Sigler, 695 F.2d 957, 962 n. 3 (5th Cir.1983). Amtrak may not compete with the freight railroads for customers, but it does compete with them for use of their scarce track. Like the “power conferred upon the majority . . . to regulate the affairs of an unwilling minority” in Carter Coal, § 207 grants Amtrak a distinct competitive advantage: a hand in limiting the freight railroads’ exercise of their property rights over an essential resource. 298 U.S. at 311.
No discussion of Amtrak‘s status as a private or public institution would be complete, however, without an examination of the Supreme Court‘s decision in Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995).8 There the Court held that Amtrak “is part of the Government for purposes of the First Amendment.” Id. at 400. Otherwise, the majority cautioned, the government could “evade the most solemn obligations imposed in the Constitution by simply resorting to the corporate form.” Id. at 397. What the Court did not do in Lebron was conclude that Amtrak counted as part of the government for all purposes. On some questions—Does the Administrative Procedure Act apply to Amtrak? Does Amtrak enjoy sovereign immunity from suit?—Congress‘s disclaimer of Amtrak‘s governmental status is dispositive. See id. at 392; Totten, 380 F.3d at 491-92. This makes sense: Congress has the power to waive certain governmental privileges, like sovereign immunity, that are within its legislative control; but it cannot circumvent the Bill of Rights by simply dubbing something private.
Whether § 207 effects an unconstitutional delegation is a constitutional question, not a statutory one. But just because Lebron treated Amtrak as a government agency for purposes of the First Amendment does not dictate the same result with respect to all other constitutional provisions. To view Lebron in this way entirely misses the point. In Lebron, viewing Amtrak as a strictly private entity would have permitted the government to avoid a constitutional prohibition; in this case, deeming Amtrak to be just another governmental entity would allow the government to ignore a constitutional obligation. Just as it is impermissible for Congress to employ the corporate form to sidestep the First Amendment, neither may it reap the benefits of delegating regulatory authority while absolving the federal government of all responsibility for its exercise. The federal government cannot have its cake and eat it too. In any event, Lebron‘s holding was comparatively narrow, deciding only that Amtrak is an agency of the United States for the purpose of the First Amendment. 513 U.S. at 394. It
This distinction is more than academic. When Lebron contrasted “the constitutional obligations of Government” from “the ‘privileges of the government,‘” it was not drawing a distinction between questions that are constitutional from those that are not. Any “privilege” of the federal government must also be anchored in the Constitution. Id. at 399. As our federal government is one of enumerated powers, the Constitution‘s structural provisions are the source of Congress‘s power to act in the first place. See United States v. Lopez, 514 U.S. 549, 552 (1995); THE FEDERALIST NO. 45 (James Madison). And, generally speaking, these provisions authorize action without mandating it. Congress‘s power to regulate interstate commerce, for example, does not dictate the enactment of this or that bill within its proper scope. By contrast, individual rights are “affirmative prohibitions” on government action that become relevant “only where the Government possesses authority to act in the first place.” Nat‘l Fed‘n of Ind. Bus., 132 S.Ct. at 2577. While often phrased in terms of an affirmative prohibition, Congress‘s inability to delegate government power to private entities is really just a function of its constitutional authority not extending that far in the first place. In other words, rather than proscribing what Congress cannot do, the doctrine defines the limits of what Congress can do. And, by designing Amtrak to operate as a private corporation—to seek profit on behalf of private interests—Congress has elected to deny itself the power to delegate it regulatory authority under § 207. Cf. Religious Freedom Restoration Act of 1993,
We therefore hold that Amtrak is a private corporation with respect to Congress‘s power to delegate regulatory authority. Though the federal government‘s involvement in Amtrak is considerable, Congress has both designated it a private corporation and instructed that it be managed so as to maximize profit. In deciding Amtrak‘s status for purposes of congressional delegations, these declarations are dispositive. Skewed incentives are precisely the danger forestalled by restricting delegations to government instrumentalities. And as a private entity, Amtrak cannot be granted the regulatory power prescribed in § 207.
III
We conclude § 207 of the PRIIA impermissibly delegates regulatory authority to Amtrak. We need not reach AAR‘s separate argument that Amtrak‘s involvement in developing the metrics and standards deprived its members of due process. Accordingly, the judgment of the district court is
Reversed.
JANICE ROGERS BROWN
UNITED STATES CIRCUIT JUDGE