It is hardly unusual to find government power in the hands of regulators who have the opportunity and the incentive to use that power solely to benefit themselves. But that doesn't mean that judges should rubber-stamp such arrangements when their constitutionality is challenged in court. In holding that the Constitution forbids Amtrak from having a part in making laws that regulate railroad companies with which it competes for scarce track, a three-judge panel of the Court of Appeals for the District of Columbia affirmed a vital principle of limited government.
Amtrak is a unique beast. It is a for-profit, publicly funded entity that was created by the government and exercises government power, to the end of "provid[ing] efficient and effective intercity passenger rail mobility." In 2008, Congress passed the Passenger Rail Investment and Improvement Act (PRIIA), which gave Amtrak and the Federal Railroad Administration (FRA) joint authority to issue "metrics and standards" addressing the performance and scheduling of passenger railroad services. In 2013, the Association of American Railroads (AAR) brought suit, claiming that it was unconstitutional for Congress to allow a private company to regulate its competitors. The AAR made two arguments that are related but distinctive. First, the AAR argued that Article I of the Constitution prohibits Congress from delegating its legislative powers to a private entity. Second, the AAR argued that regardless of whether Amtrak is a government entity or a private entity, it is a self-interested economic actor, and the Fifth Amendment's Due Process of Law Clause forbids institutional arrangements that allow self-interested economic actors to exercise the government's coercive power over their competitors.
Let's break down the "nondelegation" claim. Under the Constitution, "We the People" are the ultimate source of all political authority--we delegate limited powers to our agents in government in order to better secure our rights. The Constitution expressly gives "all legislative powers" to the people's representatives in Congress "consist[ing] of a Senate and House of Representatives," and to them alone. Implicit in this grant is a prohibition against subdelegating those powers to other entities whose members are not chosen by and accountable to the people in the same way. For Congress to hand its delegated powers over to a private entity would necessarily be a prohibited subdelegation, argued the AAR, and Amtrak was such an entity.
The due process of law claim focuses on the impact of the subdelegation on the companies that Amtrak is authorized to regulate. The Fifth and Fourteenth Amendment's Due Process of Law Clauses are, at their core, guarantees of lawful rule--requirements that the government's coercive power be exercised in accordance with rational, public-oriented principles rather than the beliefs and desires of particular individuals or groups. The AAR argued that the PRIIA creates an intolerable risk of rule by will rather than by law by giving a for-profit corporation regulatory power over its competitors.
In 2013, a three-judge panel of the Court of Appeals for the District of Columbia Circuit determined that Amtrak was indeed a private entity and that Congress had unconstitutionally subdelegated its regulatory authority to Amtrak. The Supreme Court reversed, deciding that Amtrak was a public entity, not a private one, for the purposes of evaluating the issues at stake. It then remanded the case back to the D.C. Circuit to consider the due process question.
Judge Janice Rogers Brown, writing the panel, framed the core question thus: "Whether an economically self-interested entity may exercise regulatory authority over its rivals." She drew upon the Supreme Court's decision in Carter v. Carter Coal Co. (1936), in which the Court invalidated a statute that prohibited the United States or any other contractor from purchasing bituminous coal from any mine that did not comply with wage and hour requirements set by "the producers of more than two-thirds of the . . . tonnage production for the preceding calendar year" and "more than one-half the mine workers employed." The Court determined that the provision subjected the minority producers "to the will" of the majority producers and so deprived those minority producers of due process of law. It reasoned that because the majority producers "may be and often are adverse to the interests of others in the same business," they could not be presumed, as official bodies are, to be impartial, and subjecting others to their will effectuated "an intolerable and unconstitutional interference with personal liberty and private property." From Carter Coal, Judge Brown extracted a principle: "The power to self-interestedly regulate the business of a competitor is, according to Carter Coal, anathema to... the very nature of governmental function." Thus, in the instant case, if Amtrak was (1) self-interested and (2) had regulatory authority over its competitors, the PRIIA effectuated a deprivation of due process of law.
Judge Brown examined Amtrak's obligations under the statute that created it, as well as the powers conferred upon it by the PRIIA. Amtrak is obligated "to be operated and managed as a for-profit corporation." It is required to "to make agreements with the private sector and undertake initiatives that are consistent with good business judgment and designed to maximize its revenues." By way of incentivizing Amtrak to maximize its revenues, Amtrak's officers receive pay greater than "the general level of pay for officers of rail carriers with comparable responsibility" for any year in which Amtrak does not receive federal assistance. Amtrak's self-interest, concluded Judge Brown, is "readily apparent." So, too, is its power to regulate its competitors. The PRIIA requires freight operators to incorporate the metrics and standards issued by Amtrak and the FRA "to the extent practicable" and grants authority to Surface Transportation Board to investigate freight operators in the event the metrics and standards are not satisfied. "Ordinarily," Judge Brown noted, "one party doesn't face statutory pressure to acquiesce in the other's demands 'to the extent practicable.'"Judge Brown concluded: "Because PRIIA endows Amtrak with regulatory authority over its competitors, that delegation violates due process."
While Amtrak is unique, the principle that serves as the lodestar of Judge Brown's analysis can and should be used to evaluate institutional arrangements that are common at both the state and federal level. To take but one example, consider the Connecticut Dental Commission, which regulates the practice of dentistry in Connecticut and is mostly composed of... practicing dentists. Teeth-whitening services that are performed by non-dentists are increasingly popular at spas, salons, and shopping malls. In 2011, the Dental Commission issued a ruling that only licensed dentists were allowed to provide certain teeth-whitening services and threatened non-dentist teeth whiteners with fines and jail time. Several teeth-whiteners who sold over-the-counter teeth-whitening products and provided clean, comfortable environments in which customers could apply them to their teeth, filed a lawsuit, arguing that this prohibition served only to protect dentists from competition. Only after the lawsuit was filed did the Dental Commission adopt an interpretation of its initial ruling that effectively transformed it from a flat ban on non-dentist teeth-whitening to a requirement that only licensed dentists can position low-wattage light-emitting-diode (LED) lamps in front of customers' mouths during teeth-whitening procedures. That this ruling had nothing to do with protecting customer safety is evident in the fact that customers were free to shine LED lights into their own mouths.
The Second Circuit Court of Appeals upheld the Dental Commission's ruling. Senior Judge Guido Calabresi, writing for a three-judge panel, acknowledged the possibility that the ruling was designed only to serve the interests of licensed dentists--but he went on to conclude that pure economic protectionism is a legitimate government interest. The contrast between Judge Calabresi's analysis and that of Judge Brown, which rests upon the premise that the mere possession of regulatory power by self-interested economic actors is constitutionally problematic, could not be more stark.
Judge Brown's approach is the correct one. The Constitution is not designed to facilitate a Hobbesian war of all-interest-groups-against-all, in which those who emerge triumphant can use the government's coercive power as an instrument of mere will. Its guarantees of due process of law safeguard Americans against not only the imposition of mere will but institutional arrangements that lend themselves to such imposition. It will take careful, impartial, context-sensitive review of particular institutional arrangements of the kind performed by Judge Brown to enforce those guarantees. Only through such judicial engagement can the rule of law be maintained.
For more commentary on the Amtrak case (and other recent decisions by federal courts of appeals), tune into the Institute for Justice's Short Circuit podcast, presented by IJ's Center for Judicial Engagement.