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April 30, 2016
  Association of American Railroads v. U.S. Department of Transportation
Headline: D.C. Circuit circumscribes Amtrak powers, invalidating enabling statute on Due Process and Appointments Clause grounds

Area of Law: Due Process, Appointments Clause

Issues Presented: Whether the Passenger Rail Investment and Improvement Act of 2008 violates the Fifth Amendment Due Process Clause by vesting regulatory authority in a self-interested actor and violates the Appointments Clause by permitting appointment of an arbitrator by the Surface Transportation Board, rather than the President.

Summary: Freight operators challenged the Passenger Rail Investment and Improvement Act of 2008 (PRIIA) as an unconstitutional delegation of regulatory power to a private entity and on due process and Appointments Clause grounds. A 2013 D.C. Circuit case, Association of American Railroads v. U.S. Department of Transportation, 721 F.3d 666, 677 (D.C. Cir. 2013), invalidated the statute as an unconstitutional delegation, and the Supreme Court reversed, 135 S. Ct. 1225 (2015), on the grounds that Amtrak was a governmental, rather than private, entity for purposes of the constitutional claims. On remand, the D.C. Circuit concluded that the PRIIA violates the Fifth Amendment Due Process Clause by authorizing an economically self-interested actor, Amtrak, to regulate its competition and violates the Appointments Clause by delegating regulatory power to an improperly appointed arbiter.

With respect to the due process claim, the court began by observing that Amtrak is a for-profit entity obliged by statute to maximize its revenues, 49 U.S.C. ยง 24301(a)(2), and at the same time is charged with developing standards for passenger train operations that directly affect freight train operations. Finding scant and somewhat contradictory precedent on point, the court examined the Federalist Papers and concern for abusive governmental power emanating from the Magna Carta to conclude that due process is offended when a statute vests a private entity with authority to regulate the business of its rivals. The court then found that, despite its hybrid private/governmental entity characteristics, Amtrak is statutorily charged with acting in its own economic self-interest and has authority to set metrics and standards that railroads face powerful incentives to obey, which it concluded was the essence of regulatory power. The court found that Amtrak did so without meaningful check and held the government's arguments that other entities working in tandem with Amtrak imposed such checks unpersuasive. Because Congress designed a scheme in which it delegated legislative power to a presumptively self-interested regulator, the court concluded that the scheme violated the Fifth Amendment Due Process Clause.

The court then turned to the Appointments Clause claim. Freight operators challenged the PRIIA scheme for appointment of arbitrators in the event that Amtrak and the Federal Railroad Association (FRA) are unable to agree on the issuance of metrics and standards. The statute provides that either party may petition the Surface Transportation Board (STB) for appointment of an arbitrator but does not specify whether the arbitrator is to be a private or public official. Freight operators argued that, on either basis, the provision was constitutionally infirm; either it vested a private individual with authority to issue binding regulations or conferred regulatory authority on a public official without providing for that official's appointment by the President with advice and consent of the Senate. The D.C. Circuit noted that it had previously held that vesting a private actor with regulatory authority violated the Constitution and that nothing in the Supreme Court's prior decision in the case had upset that conclusion.

Even if the statute were construed to vest authority only in public officials, however, the D.C. Circuit concluded that it violated the Constitution. The court found, first, that arbitrators are "Officers of the United States" because they have the power to issue final regulations that immediately affect the primary conduct of freight railroads. The court then concluded that, because an arbitrator's decision was binding and not subject to review by the STB, the arbitrator lacked supervision by other officers subject to appointment by the President with advice and consent of the Senate. As such, the arbitrator him/herself was a "principal officer" whose appointment could only be made by the President, and the PRIIA provisions violated the Appointments Clause.

To read the full opinion, please visit:
https://www.cadc.uscourts.gov/internet/opinions.nsf/7DB0A5319D2F70D385257FA4004FAB2B/$file/12-5204-1611061.pdf

Panel: Circuit Judge Brown and Senior Circuit Judges Williams and Sentelle

Argument Date: 11/10/2015

Date of Issued Opinion: 4/29/2016

Docket Number: No. 12-5204

Decided: Reversed

Case Alert Author: Elizabeth Earle Beske

Counsel: Thomas H. Dupree Jr., Amir C. Tayrani, Lucas C. Townsend, and Louis P. Warchot for Appellants. Michael S. Raab, Benjamin C. Mizer, Vincent H. Cohen, Jr., Mark B. Stern, Daniel Tenny, Patrick G. Nemeroff, Paul M. Geier, Peter J. Plocki, and Joy Park for Appellees

Author of Opinion: Judge Brown

Circuit: D.C. Circuit

Case Alert Circuit Supervisor: Elizabeth Earle Beske; Ripple Weistling

    Posted By: Ripple Weistling @ 04/30/2016 09:20 AM     DC Circuit  

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