Department of Transportation v. Association of American Railroads: Nondelegation Doctrine, Due Process, or Rebirth of Lochner?

This morning the Supreme Court heard argument in Department of Transportation v. Association of American Railroads (transcript here), a fascinating case about the contours of the nondelegation doctrine, which theoretically places limits on what kinds of responsibility Congress can delegate. Although it was difficult to read the Justices today, they were clearly deeply engaged with the issue. Their engagement is a very good thing because the Supreme Court’s decision will likely have enormous implications for the Constitution’s fundamental structure and the limitations (if any) on the growth of the administrative state.

This case questions the viability of restrictions on the delegation of power to private entities. A 2008 statute instructs the Federal Railroad Administration (FRA) and Amtrak to “jointly” develop what the statute calls “metrics and standards” for Amtrak’s performance. If they fail to agree, FRA appoints an arbitrator to “assist” the parties in resolving their disagreement.

Once the “metrics and standards” are in place, the law requires Amtrak and the freight railroads (who own almost all the track that Amtrak uses) to incorporate them into their operating contracts. If Amtrak fails to meet certain of these standards, the Surface Transportation Board (STB) can investigate and ultimately award damages and other relief against a freight railroad if Amtrak’s problems were “attributable” to that freight railroad.

It’s a fairly convoluted system that is designed to create the appearance of agreement and consent between the actors, even though the government always holds the whip hand. It’s also clear that Amtrak is the chief beneficiary of this regulatory game.

But the requirement that FRA and Amtrak “jointly” develop the standards creates a problem: Although it has a federal charter, Amtrak is a separate corporation and by law is required to be run as a for-profit entity. Even if the purpose of the statute is to give Amtrak and FRA extra bargaining power against freight railroads (who must, under federal law, grant preference to Amtrak trains), the statute also gives Amtrak power over FRA. After all, Amtrak can withhold consent in an attempt to extract concessions from FRA. Thus, the statute gives Amtrak—a private or governmental entity, depending on how you look at it—the shared power to write legally effective rules with FRA.

This power runs squarely into a New Deal–era case called Carter v. Carter Coal Co. (1936), in which the Supreme Court struck down a statute that required a cartel of coal companies to set wage and hour limitations and then gave those limitations the force of law. In striking down the statute, the Supreme Court concluded that the law was both an unlawful delegation and a violation of substantive due process:

The power conferred upon the majority is, in effect, the power to regulate the affairs of an unwilling minority. This is legislative delegation in its most obnoxious form; for it is not even delegation 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. . . . And a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property.

The plaintiffs argue that Carter Coal is still good law. The D.C. Circuit, with Judge Janice Rogers Brown writing for the unanimous panel, agreed with the plaintiffs and struck down the statute. The government then sought review by the Supreme Court.

The government’s oral argument was mostly uneventful. Early discussion centered around the legal significance of whether Amtrak was governmental or private (which is a close question). Justice Kennedy pointed out that in cases such as Marsh v. Alabama (1946) (state municipal corporation and private corporation owning “company town” subject to same constitutional limitations under First and Fourteenth Amendments), the Supreme Court didn’t seem to care about that distinction. Justice Alito asked why, if Amtrak was to be considered governmental for purposes of the nondelegation doctrine, it shouldn’t also be subject to the Appointments Clause, a line of discussion that Justice Scalia picked up later.

Justice Sotomayor, perhaps sensing that the other justices had laid a foundation for deciding the case without resolving Amtrak’s ambiguous situation, suggested that the case could also be decided by concluding that the “metrics and standards” were not regulatory in nature. But the Chief Justice countered, getting the government lawyer to confirm that the new “metrics and standards” had an enormous effect on Amtrak’s performance. Thus, the new standards must have had some regulatory effect. Both sides agreed that the metrics created such an effect through the meaningful threat of regulatory action against freight railroads. Even Justice Kagan espoused this view, pointing out that violations of the “metrics and standards” could result in damage awards against the freight railroads. This was clearly a blow to the government, which had been at pains to emphasize in its briefs that the “metrics and standards” only applied squarely to Amtrak.

Justice Breyer asked then whether upholding the plaintiffs’ position would “wreak havoc” on various regulatory schemes. This line of attack seemed to surprise the government’s lawyer, who responded that everything depended on the breadth of the Court’s holding.

And then it happened: Justice Breyer looked right at Justice Scalia and asked whether deciding the case for the plaintiffs would take us all back to Lochner v. New York (1905), the first in a pre–New Deal line of cases that used substantive due process principles in defense of economic liberty. Lochner has long been invoked in legal discussions as a reductio ad absurdum: What you’re proposing would take us back to the Lochner era, so you must be wrong. (If you are familiar with Godwin’s Law for Internet discussions, substitute “Lochner” for “Nazis” and you’ve basically got the idea.) But interestingly, Justice Breyer’s concerns didn’t seem to garner much sympathy from the other justices.

When it was Respondents’ turn, attorney Thomas H. Dupree, Jr. argued without notes and with what must be a photographic memory. Justice Sotomayor expressed skepticism about the thin line between this case and the set of cases where the Court approved statutes that allowed businesses to veto regulations. Dupree responded that the government, not the businesses, wrote those regulations.

Justices Ginsburg and Kagan delved into the dispute about whether Amtrak is governmental or private, highlighting the oddness of Amtrak’s position. Here, the public proclamations of congressional statutes and Amtrak’s management—all of which emphasize Amtrak’s independence—are directly at odds with the actual mechanisms of control that the government maintains over Amtrak. Although Dupree steadfastly maintained the view that Amtrak was legally a private entity, Justice Scalia reminded Dupree that Amtrak’s status wouldn’t matter to due process analysis.

The closing minutes of Respondents’ argument and the government’s rebuttal were devoted to the government’s strongest argument: There’s no delegation in the first place because the government controls the outcome of the process. Sure, the statute says FRA and Amtrak have to “jointly” agree on the metrics and standards, but if they can’t agree, then the government can appoint its own arbitrator with none of the usual due process protections that usually apply to government arbitrations. As a result, the government argued, the government always wins. There’s a certain cold logic to this argument, but it’s a bit odd to see the government defending a federal statute on the grounds that the process is a sham.

Although the justices were engaged, an unusual number of justices played their cards close to the chest. Justice Breyer was clearly worried about the implications of striking down the statute under any theory. Justice Sotomayor was looking for a way to dispose of the case without addressing the constitutional issue. Former administrative law professor Justice Scalia seemed very receptive to deciding the case on substantive due process grounds, as did Justice Kennedy. Justice Alito seemed unsympathetic to the government, but didn’t give away much else. Justices Roberts, Ginsburg, and Kagan were cautious, but seemed somewhat amenable to striking down the statute on narrow nondelegation grounds. We shall see.