oversight

[Comments on Amtrak Labor Protection Issues]

Published by the Government Accountability Office on 1997-10-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Office of the General Counsel


      B-277814


      October 20, 1997


      The Honorable John R. Kasich
      Chairman, Committee on the Budget
      House of Representatives

      Dear Mr. Chairman:

      This is in response to your letter of August 13, 1997, written jointly with
      Chairman Bud Shuster, requesting our opinion on several questions pertaining to the
      National Railroad Passenger Corporation (Amtrak). You asked whether any
      changes in law warranted altering our 1985 opinion (1) that the United States would
      not be liable for Amtrak's labor protection obligations in the event of a partial or
      complete discontinuance of passenger service, and (2) that Amtrak and its
      employees could not negotiate changes to existing labor protection arrangements
      without legislation. You also asked whether Amtrak and its employees could
      mutually agree to alter the current statutory restriction on Amtrak's contracting out
      of non-food service work. Finally, you asked whether Amtrak's pending non-labor
      protection liabilities would be attributable to the United States in the event of an
      Amtrak bankruptcy. We understand that your request was prompted, at least in
      part, by Amtrak's current precarious financial situation, exacerbated by the
      possibility of a strike this month by the Amtrak employees who maintain the tracks,
      bridges, buildings and other structures on Amtrak-owned rights-of-way.

      As we pointed out in our 1985 opinion, B-217662, Mar. 18, 1985, legitimate
      differences of opinion exist with respect to questions about the rights and
      obligations of the United States in the event of an Amtrak bankruptcy. For the
      reasons stated below, we continue to believe (1) that the United States would not
      be liable for the labor protection obligations arising from a partial or complete
      discontinuance of passenger service, and (2) that modifications to Amtrak's labor
      protection obligations would require legislation. We also conclude that Amtrak
      labor and management are not free to alter the current restriction on Amtrak's
      contracting out of non-food service work. Further, we do not believe that the




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United States would be liable for Amtrak's pending non-labor protection obligations
in the event of a bankruptcy.1

In preparing this opinion, we formally solicited the views of Amtrak and the
Departments of Justice and Transportation. We received written responses from
Amtrak and the Department of Transportation. The Department of Transportation
agrees with our opinion that the United States would not be liable for Amtrak's
labor protection obligations and other debts, as well as our other conclusions. We
have presented Amtrak's views in our discussion.

BACKGROUND

To prevent the complete abandonment of intercity rail passenger service following
decades of declining passenger train usage, Congress passed the Rail Passenger
Service Act of 1970. H.R. Rep. No. 91-1580, at 2-3 (1970), reprinted in 1970
U.S.C.C.A.N. 4735, 4736-7. The Act authorized the creation of the National Railroad
Passenger Corporation (Amtrak) to provide intercity rail passenger service in an
innovative manner so as to "fully develop the potential of modern rail service in
meeting the Nation's intercity passenger transportation requirements." Pub. L. No.
91-518 § 301, 84 Stat. 1327, 1330 (1970). Amtrak was incorporated under the
District of Columbia Business Corporation Act and, under section 401(a) of the Rail
Passenger Service Act, entered into contracts with existing railroads to relieve them
of "their entire responsibility for the provision of intercity rail passenger service."
See 84 Stat. at 1334.

Amtrak has a nine-member Board of Directors, consisting of the Secretary of
Transportation who serves ex officio; five individuals appointed by the President,
three with the advice and consent of the Senate;2 two individuals selected by the
Secretary of Transportation; and the President of Amtrak, who also serves as
Chairman. 49 U.S.C. § 24302 (1994). Amtrak's common stock, authorized by
49 U.S.C. § 24304, is held by four private railroads. The Secretary of Transportation
holds Amtrak's preferred stock, issued in amounts commensurate with the financial


1
 Because consideration of Amtrak's labor protection obligations and other debts
requires similar analysis, we consider the two issues together in the discussion that
follows.
2
 One of the three appointees subject to Senate confirmation must be from a list of
individuals recommended by the Railway Labor Executives Association, one must
be from among the Governors of States with an interest in rail transportation, and
one must be a representative of business with an interest in rail transportation.
49 U.S.C. § 24302(a)(1)(C)(i)-(iii). The two directors not subject to Senate
confirmation are selected from a list of names submitted by commuter rail
authorities. 49 U.S.C. § 24302(a)(1)(D).

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assistance provided to Amtrak by the United States.3 49 U.S.C. § 24304(d). Amtrak
is a rail carrier, which is operated and managed as a for-profit corporation.
49 U.S.C. § 24301(a)(1), (2). Amtrak is not a department, agency, or instrumentality
of the United States Government. 49 U.S.C. § 24301(a)(3).

The Rail Passenger Service Act required Amtrak and existing railroads to assume
certain labor protection responsibilities. Sections 405(a) and (b) of the act required
contracts between Amtrak and the railroads to include "fair and equitable
arrangements" to protect employees affected by a discontinuance of passenger
service. 84 Stat. at 1337. Section 405(b) also required the Secretary of Labor to
certify that such arrangements afforded railroad employees "fair and equitable
protection." Id. Section 405(c) of the act made the substantive labor protection
provisions of subsection (b) applicable to Amtrak, after commencement of
operations in the basic system of intercity rail service, and contained a similar
certification requirement. Id.

In April 1971, Amtrak tendered to all passenger railroads in the United States an
identical contract, known as the "Basic Agreement," to relieve them of their
obligation to provide passenger service. Appendix C-1 to the Basic Agreement
contained protective arrangements for railroad employees, which were certified by
the Secretary of Labor as "fair and equitable." In October 1973, the Secretary of
Labor approved protective arrangements for Amtrak employees, which were
designated as Appendix C-2 to the Basic Agreement. Among other things,
Appendices C-1 and C-2 provide 1 year of salary protection for each year of prior
service, up to a maximum of 6 years' pay, for employees affected by a
discontinuance of passenger rail service.4 Alternatively, employees may elect to
receive a one-time lump-sum severance payment.

In a paper accompanying Amtrak's fiscal year 1996 grant request, Amtrak estimated
the total maximum theoretical 6-year impact of labor protection obligations
attributable to a discontinuance of passenger service at $6.9 billion. 5 The paper also


3
 Amtrak receives operating and capital grants administered by the Federal Railroad
Administration (FRA). Amounts for these grants are provided in the annual
appropriation for the Department of Transportation and Related Agencies. See, e.g.,
Pub. L. No. 104-205, 110 Stat. 2951, 2963 (1996).
4
 Section 405(b) of the act required the arrangements for railroad and Amtrak
employees to include provisions that were at least as protective as those established
pursuant to section 5(2)(f) of the Interstate Commerce Act. Id. The minimum level
of labor protection under section 5(2)(f) was 4 years of salary protection. See
49 U.S.C. § 5(2)(f) (1970).
5
 Amtrak is in the process of revising this information using 1997 data.

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stated that if all employees accepted the alternative one-time lump-sum in lieu of
the multi-year payments, the cost would be approximately $1.1 billion.

Amtrak's paper also set out Amtrak's "pre-bankruptcy obligations." These
obligations include postretirement health care benefits for Amtrak retirees;
obligations under various outstanding debt instruments for locomotives, passenger
and mail cars, stations, highway vehicles, office facilities, and equipment; lease
obligations for facilities such as stations and offices; casualty and environmental
obligations; refunds to passengers and others; and other debts to employees,
contract railroads, and vendors, among others. The paper did not describe these
obligations in detail and we have not reviewed them for purposes of this opinion.
However, the paper states that Amtrak's obligations under various outstanding debt
instruments have no federal guarantee.

DISCUSSION

Liability of the United States for Labor Protection Obligations and Other Debts

In our 1985 opinion, we stated that the United States would not be liable for labor
protection obligations arising from a partial or complete discontinuance of service.
Without repeating the detailed analysis, our opinion rested on essentially three
premises. First, the Basic Agreement is a "private operating agreement between
two corporations," and neither the Secretary of Labor nor the United States were
parties to the Basic Agreement or anything contained therein. B-217662, supra at 4.
Second, there has been no explicit or implicit commitment by the United States to
ensure that affected employees receive labor protection benefits. Rather, by statute,
Amtrak is not an instrumentality of the United States, and there are a number of
cases in which courts have refused to treat Amtrak as a governmental entity. Id. at
5-7. Finally, the statutory language contradicts Amtrak's suggestions that the United
States would be liable either because Amtrak incurred its labor protection
obligations as an agent of the United States or because, as Amtrak's putative parent,
the United States created Amtrak's labor protection obligations, controlled Amtrak's
conduct, and left Amtrak insufficiently capitalized to meet those obligations. Id . at
8-10.

There have been no changes in statutory or decisional law that would undermine
our 1985 opinion and lead us to alter its conclusions. To the contrary, as discussed
below, changes in law since 1985 only confirm our view that it is within the
capacity of Congress to insulate the United States from liability for the financial and
contractual obligations of a statutorily created entity and that Congress has done so
with respect to Amtrak.

In 1985, on the same day as we issued our opinion, the United States Supreme
Court addressed the nature of the agreements between Amtrak and the railroads.
In National Railroad Passenger Corp. v. Atchison, Topeka & Santa Fe Railway Co.,

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470 U.S. 451 (1985), the Court considered constitutional challenges to statutory
provisions requiring railroads that had been relieved of their passenger service
obligations to reimburse Amtrak for the costs of providing free and reduced fare
service to railroad employees. The Court held that neither the Rail Passenger
Service Act itself nor the Basic Agreements were contractual obligations of the
United States. Id. at 467-71. The Court stated that the Basic Agreements were not
contracts between the United States and the railroads, but rather private contracts
between the railroads and "the non-governmental corporation, Amtrak." Id. at 470.

The Supreme Court's decision thus supports our opinion that the United States
would not be expressly liable for the labor protection obligations embodied in
Appendices C-1 and C-2 to the Basic Agreements. However, Amtrak continues to
argue that the United States would be liable for its labor protection obligations, as
well as its other debts, by implication. In response to our request for its views,
Amtrak asserts that as the putative parent and controlling shareholder of Amtrak,
the United States likely would be liable for its labor protection obligations, as well
as its other debts, under the common law principle of corporate law generally
known as "piercing the corporate veil."6 The essence of this argument is that the
United States would be liable for Amtrak's obligations because Congress created
Amtrak, required it to incur labor protection obligations and operate a losing
business, and left it too thinly capitalized to meet its own obligations.

Decisions regarding statutorily created corporations make clear that the principles
of common law applicable to private commercial entities advanced by Amtrak do
not apply to the United States in this context. It is beyond dispute that courts have
identified such corporations with the United States, and subjected the United States
to liability for corporate transactions, where the corporations functioned as


6
 Under this principle, those who engage in improper conduct amounting to an abuse
of the corporate form lose the presumption of separateness that would ordinarily
protect parent corporations from liability for the acts of their subsidiaries. A
finding of fraud is not required for a parent corporation to lose the protection from
liability associated with the corporate form; inadequate capitalization of the
subsidiary has been an important factor. Anderson v. Abbott, 321 U.S. 349, 362
(1944). However, the decision to "pierce the corporate veil" may not rest on a
single factor. DeWitt Truck Brokers v. W. Ray Flemming Fruit Co., 540 F.2d 681,
687 (4th Cir. 1976). Among the factors that courts have considered significant are
(1) gross undercapitalization for the purposes of the corporate undertaking,
(2) failure to observe corporate formalities, (3) non-payment of dividends, (4) the
insolvency of the debtor corporation at the time, (5) siphoning of funds of the
corporation by the dominant stockholder, (6) non-functioning of other officers or
directors, (7) absence of corporate records, and (8) the fact that the corporation is
merely a facade for the operations of the dominant stockholder or stockholders. Id.
at 685-7.

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instrumentalities of the United States. However, statutory provisions governing the
entities and their operations rather than principles of common law provided the
bases for such decisions.7 See, e.g., Cherry Cotton Mills, Inc. v. United States,
327 U.S. 536 (1946) (concerning the Reconstruction Finance Corporation); Inland
Waterways Corp. v. Young, 309 U.S. 517 (1940); Breitbeck v. United States, 500 F.2d
556 (Ct. Cl. 1974) (concerning the Saint Lawrence Seaway Development
Corporation); Butz Engineering Corp. v. United States, 499 F.2d 619 (Ct. Cl. 1974)
(concerning the United States Postal Service); National State Bank of Newark v.
United States, 357 F.2d 704 (Ct. Cl. 1966) (concerning the Federal Housing
Administration); Optiperu, S.A. v. Overseas Private Investment Corp., 640 F. Supp.
420 (D.D.C. 1986). Thus, cases relying on the analogous "piercing the corporate
veil" analysis, though legion, are materially distinguishable from Amtrak's situation.8
Amtrak does not address this distinction, but rather states that "it is difficult to see
why the normal rules for holding parents liable should not be fully applicable." In
our view, this distinction is key to determining whether the United States would be
liable for Amtrak's labor protection obligations and other debts or, in other words,
whether those obligations carry the "full faith and credit" of the United States.

Decisions addressing "full faith and credit" questions point to the significance of
governing statutes and suggest that the United States would not be liable for
Amtrak's labor protection obligations and other debts. Statutory language expressly
pledging the credit of the United States is not required to create obligations of the
United States. See 6 Op. Off. Legal Counsel 262 (1982) and cases cited therein.
Rather, when Congress authorizes a federal agency or officer to incur obligations,
those obligations are supported by the full faith and credit of the United States,
unless the authorizing statute specifically provides otherwise. Id. at 264.

Clearly, the conclusion that particular obligations are supported by the credit of the
United States requires a prior finding that the entity involved is a constituent part of
the United States for purposes of the obligations at issue. For example, in
68 Comp. Gen. 14 (1988), we considered whether promissory notes and assistance
guarantees issued by the Federal Savings and Loan Insurance Corporation in
connection with the restructuring of failed savings and loan institutions were
obligations of the United States backed by its full faith and credit. In concluding
that the promissory notes and assistance guarantees were obligations of the
United States backed by its full faith and credit, we observed that the Federal


7
 In contrast to Amtrak, none of the entities in these cases were disassociated from
the United States by statute.
8
 This analytical distinction reflects the fundamentally different functions of private
corporations and Congress. Private corporations conduct activities designed to
increase profits for the benefit of investors. Congress passes legislation designed to
effect particular public policies subject to the constraints of the Constitution.

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Savings and Loan Insurance Corporation was defined by statute as a corporate
instrumentality of the United States and that Congress had not disclaimed liability
for its obligations. Id. at 18. As noted earlier, Amtrak's organic legislation states
quite the opposite: that it is not a department, agency, or instrumentality of the
United States Government.9 While neither the statute nor its legislative history
refers specifically to Amtrak's financial obligations, such a broad disclaimer of
agency status would appear to encompass responsibility for financial obligations.10

Further, the language in Amtrak's organic legislation suggests that, with respect to
Amtrak, the United States has not renounced its own sovereign immunity so as to
expose the Treasury to liability for Amtrak's obligations. To the contrary, the
United States has expressly reserved its own immunity. In this regard, the Congress
has the capacity to disassociate a statutorily created entity from the United States.
In Butz Engineering Corp. v. United States, supra, the Court of Claims held that a
contractor could sue the United States under the Tucker Act on a Postal Service
contract. In concluding that the Postal Service was an instrumentality of the
United States for whose actions the United States had renounced its own sovereign
immunity, the court focused on several provisions in the Postal Service's organic
legislation. Id. at 624-6. Among other things, the court emphasized that its organic
legislation defined the Postal Service as "an independent establishment of the
executive branch of the Government of the United States" (emphasis in original).
Id. at 624. However, the Court also went on to state that:


9
 As enacted, section 301 of the Rail Passenger Service Act provided that Amtrak
"will not be an agency or establishment of the United States Government." 84 Stat.
at 1330. In 1988, section 301 was amended to provide that Amtrak "will not be an
agency, instrumentality, authority, entity, or establishment of the United States
Government." See Pub. L. No. 100-342, § 18, 102 Stat. 624, 636 (1988). Explaining
his amendment, which added only the word "instrumentality" to section 301,
Senator Hollings stated that he wanted to "make clear" that Amtrak was not an
instrumentality of the Federal Government for purposes of Internal Revenue Code
provisions on tax exempt bonds. See 133 Cong. Rec. S3119 (daily ed. Nov. 5, 1987).
The words "authority" and "entity" were apparently added in Conference. See H.R.
Conf. Rep. No. 100-637, at 28 (1988), reprinted in 1988 U.S.C.C.A.N. 708, 717. The
provision was simplified in connection with the 1994 recodification of the Rail
Passenger Service Act. See 49 U.S.C. § 24301 nt.
10
 Of course, the United States may expressly guarantee otherwise private
obligations. For example, as we pointed out in our 1985 opinion, section 602 of the
Rail Passenger Service Act authorized the Secretary of Transportation to guarantee
certain loans made to Amtrak. 84 Stat. at 1338. As added in 1972, section 602(b)
provided that such guarantees were backed by the full faith and credit of the
United States. Pub. L. No. 92-316 § 10(a), 86 Stat. 227, 232 (1972). Section 602 was
repealed in 1992. See Pub. L. No. 102-533 § 7(c), 106 Stat. 3515, 3519 (1992).

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          "Congress has shown it is capable of unequivocally cleaving a
          public service or corporation from all governmental nexus
          when it so desires. In establishing the Securities Investors
          Protection Corporation, for instance, the legislature bluntly
          directed that the corporation 'shall not be an agency or
          establishment of the United States Government * * *.'"

Id. See also T.O.F.C. v. United States, 683 F.2d 389, 393 (Ct. Cl. 1982) and
Consolidated Rail Corp. v. Metro-North Commuter Railroad Co., 638 F. Supp. 350
(Regional Rail Reorg. Ct. 1986) (both emphasizing similar statutory language to find
that the actions of Conrail could not be imputed to the United States).

Courts have repeatedly relied upon the explicit disclaimer of agency status in
Amtrak's organic legislation to address assertions that Amtrak should be identified
with the United States. For example, quoting the above cited language from Butz,
the Court of Claims dismissed an action in which the plaintiff sought to impute the
allegedly improper actions of Amtrak to the United States. Green v. United States,
229 Ct. Cl. 812, 814 (1982). See also Hrubec v. National Railroad Passenger Corp.,
49 F.3d 1269 (7th Cir. 1995) (holding that Amtrak's employees are not employees of
the United States); Ehm v. National Railroad Passenger Corp., 732 F.2d 1250
(5th Cir. 1984) (holding that Amtrak is not subject to the Privacy Act); National
Railroad Passenger Corp. v. Commonwealth of Pennsylvania Public Utility
Commission, No. 86-5357, 1997 U.S. Dist. WESTLAW 597963 (E.D. Pa. Sept. 15,
1997) (holding that Amtrak is not a federal entity for purposes of state sovereign
immunity under the Eleventh Amendment);11 Riddle v. National Railroad Passenger
Corp., 831 F. Supp. 442 (E.D. Pa. 1993) (holding that the doctrine of qualified
immunity is not applicable to Amtrak in a suit alleging negligence by its statutorily
created Office of Inspector General); Held v. National Railroad Passenger Corp.,
101 F.R.D. 420 (D.D.C. 1984) (holding that Amtrak is not a government-controlled
corporation for purposes of the Age Discrimination in Employment Act); Sentner v.
Amtrak, 540 F. Supp. 557 (D.N.J. 1982) (holding that Amtrak, unlike a federal
agency, may be subject to liability for punitive damages). We find nothing in these
decisions to support Amtrak's claim that the statutory disclaimer would be effective




11
 Summarizing the statutory provisions exempting Amtrak from state and local taxes
and other fees, the Court stated that "it is probable that Congress intended Amtrak
not to be an agency, entity or instrumentality of the United States government for
the purposes of extending those privileges and immunities which are only available
to the United States, except where Congress explicitly stated that Amtrak should be
so treated." Id. at *5-6.

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with respect to ordinary business transactions, but of no legal effect in the event of
bankruptcy.12

In 1995, the Supreme Court addressed the limits of the disclaimer of agency status
in Amtrak's organic legislation. In Lebron v. National Railroad Passenger Corp.,
513 U.S. 374 (1995), the Court considered a claim that Amtrak's refusal to display a
political advertisement on a billboard in Pennsylvania Station violated the
petitioner's First Amendment rights. Responding to the argument that the statutory
language regarding Amtrak's non-agency status was dispositive, the Court stated
that if Amtrak is what the Constitution regards as the Government, a congressional
pronouncement to the contrary could not relieve it of the restrictions of the First
Amendment. Id. at 392. The Court held that where, as in the case of Amtrak, "the
Government creates a corporation by special law, for the furtherance of
governmental objectives, and retains for itself permanent authority to appoint a
majority of the directors of that corporation, the corporation is part of the
Government for purposes of the First Amendment." Id. at 400.

While holding that the statutory provision regarding Amtrak's status was not
dispositive for purposes of the First Amendment, the Court stated that it would be
dispositive for purposes of Amtrak's financial and contractual obligations. The
Court stated that the provision:

          ". . . is assuredly dispositive of Amtrak's status as a
          Government entity for purposes of matters that are within
          Congress' control--for example whether it is subject to statutes
          that impose obligations or confer powers upon Government
          entities, . . .. And even beyond that, we think [section 24301]
          can suffice to deprive Amtrak of all those inherent powers and
          immunities of Government agencies that it is within the power
          of Congress to eliminate. We have no doubt, for example, that
          the statutory disavowal of Amtrak's agency status deprives
          Amtrak of sovereign immunity from suit . . ., and of the
          ordinarily presumed power of Government agencies



12
 We recognize that in several cases concerning the constitutionality of personnel
actions, courts considered whether the ties between Amtrak and the United States
were sufficient to render Amtrak a "government actor" and concluded that they
were not. See Anderson v. National Railroad Passenger Corp., 754 F.2d 202
(7th Cir. 1985); Wilson v. Amtrak National Railroad Corp., 824 F. Supp. 55 (D. Md.
1992); Marcucci v. National Railroad Passenger Corp., 589 F. Supp. 725 (N.D. Ill.
1984). The purpose of the analyses in these cases was to determine whether the
actions of an ostensibly private entity gave rise to a constitutional injury, not to
assign liability for a pre-existing injury or obligation.

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              authorized to incur obligations to pledge the credit of the
              United States . . .."

Id. at 392. In addition, commenting on its earlier decision in National Railroad
Passenger Corp. v. Atchison, Topeka, and Santa Fe Railway Co., the Court stated
that:

              "for the purpose at hand in Atchison it was quite proper for
              the Court to treat Congress's assertion of Amtrak's
              nongovernmental status in [section 24301] as conclusive. . . .
              [E]ven if Amtrak is a Government entity, [section 24301's]
              disavowal of that status certainly suffices to disable that
              agency from incurring contractual obligations on behalf of the
              United States" (emphasis in original).

Id. at 394.

The Court's discussion, coupled with the statute and pertinent case law, supports
our view that Congress can insulate the United States from liability for obligations
of a statutorily created corporate entity and that Congress has in fact done so with
respect to Amtrak.

Amtrak asserts that the Court's comments as to the liability of the United States for
Amtrak's financial obligations "cannot be stretched to dispose of the possibility of
liability of the United States in the context of an Amtrak bankruptcy." Amtrak
states that 49 U.S.C. § 24301(a) "is best read as making it clear that . . . the
United States would not be liable for [Amtrak's] debts merely because it was
created by statute" and that the provision did not exempt "the United States-Amtrak
relationship from the entire body of common law on the subject of parents and
subsidiaries."

We acknowledge that the Court did not specifically address the prospect of an
Amtrak bankruptcy. However, it did not restrict its discussion of Amtrak's financial
and contractual obligations to those arising in the ordinary course of business.
Further, as discussed above, we are not aware of any basis in the statute, its
legislative history, or pertinent case law for so limiting the disclaimer in Amtrak's
organic legislation.

With respect to labor protection, Amtrak also states that the loss of the economic
benefit of labor protection must be evaluated as a taking without just compensation
in violation of the Fifth Amendment. Amtrak constructs a "takings" argument from
the 1972 amendment to section 305 of the Rail Passenger Service Act. Under
section 305, as enacted, freight railroads were extensively involved in passenger
service and would have borne primary responsibility under Appendix C-1 for labor
protection payments to employees. In 1972, section 305 was amended to require

                                                                               10281020
Amtrak, to "directly operate and control all aspects of its rail passenger service"
insofar as practicable. See 86 Stat. at 228. Amtrak asserts that, as a result of the
1972 amendment, the "labor protections that [employees] once enjoyed [were] over
the course of about fifteen years transformed from valuable rights against solvent
freight railroads to claims in a potential Amtrak liquidation, which would
presumably be worthless unless paid by the United States." Amtrak raises the
question whether the United States may so shift the labor protection obligation and
then "reject responsibility for that obligation to the individuals affected."

This argument assumes that the United States had accepted responsibility for the
labor protection obligations at issue and relies on an underlying assumption that
Amtrak and the United States are one for purposes of Amtrak's financial
obligations, such that those obligations are attributable to the United States. The
Court's decision in Lebron does not support Amtrak's assumption. To the contrary,
the decision draws a sharp distinction between Amtrak's financial and contractual
obligations and its obligations under the First Amendment. In light of the Court's
distinction, we do not presume that such obligations would be the source of a
constitutional injury and, therefore, liability on the part of the United States.

As we understand Amtrak's argument, a "taking" may occur upon Amtrak's demise
since the economic benefit of labor protection is not the same as it would have
been had Congress maintained the freight railroads' involvement in passenger
service. However, benefits from freight railroads would have been subject to the
same constraints as those from Amtrak. Under section 405(c) of the Rail Passenger
Service Act, as amended in 1972, Amtrak was required to provide its employees
with the same degree of protection as the freight railroads. In addition, the
procedural requirements associated with Appendix C-1, i.e., certification by the
Secretary of Labor, were also applicable to Appendix C-2. Moreover, recoveries
from the freight railroads, like those from Amtrak, would have been limited by the
railroads' capacity to provide such benefits under the circumstances.13

In support of its position, Amtrak cites Duke Power Co. v. Carolina Environmental
Study Group, 438 U.S. 59 (1978). In Duke Power, the Court upheld the
constitutionality of the Price-Anderson Act, which replaced common law remedies
for the destruction of property in connection with a nuclear accident with a
statutory guarantee of compensation capped at $560 million, plus a commitment to


13
 A number of railroads confronted bankruptcy in the 1970s. We understand that, in
at least one case, involving the Rock Island and Pacific Railroad Co., no labor
protection was paid. In 1982, the Supreme Court struck down a provision of the
Rock Island Transition and Employee Assistance Act that provided benefits to
certain employees on the grounds that the provision violated the bankruptcy clause
of the Constitution. See Railway Labor Executives' Ass'n v. Gibbons, 455 U.S. 457
(1982).

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take "whatever action is deemed necessary and appropriate." Id. at 66-7. The Court
did not address the plaintiff's "takings" argument because of the availability of the
Tucker Act remedy, presumably to recover such additional amounts.14 Rather, the
Court noted that "the question of whether a taking claim could be established under
the Fifth Amendment is a matter appropriately left for another day." Id. at 94, n. 39.

Amtrak seems to suggest that a court could determine that Congress implicitly
made an analogous promise with respect to Amtrak's labor protection obligations,
and, as in Duke Power, the Tucker Act or other remedy for a taking would be
available to Amtrak employees. As discussed at length above and in our 1985
opinion, there simply is no explicit or implicit guarantee here. Further, we question
whether the 1972 legislation could lead to a "taking" on the ground that it interfered
with employees' settled expectations of recovery under Appendix C-1. While
contracts may create rights of property, the fact that legislation disregards or
destroys such rights, and the associated expectations, does not always transform
the legislation into a taking. Norman v. Baltimore & Ohio Railroad Co., 294 U.S. 240
(1935); Omnia Commercial Co., Inc. v. United States, 261 U.S. 502 (1923). Rather,
the fact that legislation nullifies a contractual provision does not justify a holding
that the legislation violates the Taking Clause where the United States has
appropriated nothing for its own use. Connolly v. Pension Benefit Guaranty Corp.,
475 U.S. 211 (1986) (upholding the statutory nullification of contractual provisions
limiting an employer's liability upon withdrawal from a multi-employer pension
plan);15 see also United Transportation Union v. Consolidated Rail Corp.,


14
  One commentator has suggested that, while the Court repeatedly emphasized the
fact that Congress had expressly committed itself to taking further action, "the
constitutionality of the [statute] cannot possibly turn on a Congressional promise to
'make everything all right' in the event of a nuclear disaster, for such a pledge
would not be binding on a subsequent Congress." Lawrence H. Tribe, American
Constitutional Law 610-612 (1988).
15
  Citing Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), the
Court emphasized that the interference at issue could not be characterized as a
physical invasion or appropriation, but rather one arising from a public program
adjusting the benefits and burdens of economic life to promote the common good.
The Court reinforced its view that the statute did not constitute a compensable
taking by examining two additional factors identified in Penn Central: the economic
impact of the regulation on the claimant and the extent to which the regulation
interfered with distinct investment-backed expectations. 475 U.S. at 225. The Court
declined to find a compensable taking notwithstanding the fact that the statute
"completely deprived the employer of whatever amount of money it [was] obligated
to pay to fulfill its statutory liability." Further, with respect to the argument that
the statute interfered with the employers' reasonable expectations, the Court noted
the long time legislative concern with pension plans. Id. at 225-7.

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535 F. Supp. 697 (Regional Rail Reorg. Ct. 1982) (upholding statutory provisions for
the elimination of excess positions that superseded provisions in collective
bargaining agreements). Even if it were true that the 1972 amendment to the Rail
Passenger Service Act indirectly interfered with employees' ability to receive labor
protection benefits, the United States did not appropriate anything for its own use.

Modification of Labor Protection Arrangements for Amtrak Employees

In our 1985 opinion, we also concluded that, without legislation, Amtrak and its
employees could not agree to modify existing labor protection arrangements. We
based our conclusion largely on the statutory provisions under which Amtrak's
labor protection arrangements were put in place. B-217662 at 16-17.

Section 24706(c) of title 49, United States Code, which governs protective
arrangements for Amtrak or railroad employees affected by a discontinuance of
passenger service, does not explicitly bar Amtrak and its employees from
renegotiating such arrangements. Rather, it merely establishes the minimum
requirements for such arrangements and identifies certain modifications to service
that would not trigger labor protection benefits.

However, the text and subsequent amendments to this statutory provision suggest
that Amtrak and its employees would not be authorized to renegotiate the labor
protection arrangements embodied in Appendix C-2. As enacted, section 405(a) of
the Rail Passenger Service Act required railroads "to provide fair and equitable
arrangements to protect the interests of employees affected by discontinuances of
intercity rail passenger service." 84 Stat. at 1337. Section 405(b) set out the
substantive requirements of such labor protection arrangements and made
certification by the Secretary of Labor a prerequisite to the execution of contracts
between Amtrak and the railroads. Id. Section 405(c) made the substantive
requirements of section 405(b) applicable to Amtrak "after commencement of
operations in the basic system." Id. With respect to Amtrak, section 405(c) also
provided that "[t]he certification by the Secretary of Labor that employees affected
have been provided fair and equitable protection as required by this section shall be
a condition to the completion of any transaction requiring such protection"
(emphasis added). Id. Thus, it could be argued that, as enacted, section 405(c)
would have permitted Amtrak and its employees to negotiate labor protection
arrangements on a transaction-by-transaction basis.

Any doubt in this area was resolved when section 405(c) was amended in 1972.
Among other things, Public Law 92-316 amended the last sentence of section 405(c)
to read as follows:

          "[t]he Secretary of Labor shall certify that affected employees
          of the Corporation have been provided fair and equitable
          protection as required by this section within one hundred and

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          eighty days after assumption of operations by the
          Corporation."

86 Stat. at 230. Explaining the amendment, the Senate Commerce Committee stated
that:

          "[t]he second sentence of amended subsection 405(c) makes
          clear first that the Secretary of Labor must certify that 'fair
          and equitable' arrangements have been provided for. Second
          it requires that such certification be issued by a certain point
          in time, namely '180 days after assumption of operations' by
          Amtrak."

S. Rep. No. 92-756, at 11 (1972), reprinted in 1972 U.S.C.C.A.N. 2393, 2399.

The 1972 amendment thus established a procedure for the implementation of labor
protection arrangements for Amtrak employees, namely, a single certification at a
specific point in time. It would be impossible for this procedure to be followed at
present. Therefore, we believe that Amtrak and its employees would not be free to
renegotiate those labor protection arrangements. See Botany Worsted Mills v.
United States, 278 U.S. 282, 289 (1929) (holding that statutory procedures for the
compromise of tax claims were exclusive because "when a statute limits a thing to
be done in a particular mode, it includes the negative of any other mode").16

Amtrak agrees with our view that any modification of the presently certified labor
protection arrangement would require legislation. Amtrak also points out that,
notwithstanding the matter of certification, unions would be unable to waive their
statutory entitlement to at least four years of labor protection. In support of its
assertion, Amtrak cites Norfolk and Western Railway Co. v. Nemitz, 404 U.S. 37
(1971), in which the Supreme Court held that a union could not bargain away the
statutorily mandated labor protection afforded to employees under the Interstate
Commerce Act. We have no basis to disagree with Amtrak's observation.

Amtrak's Authority to Contract Out

Section 24312(b)(1) of title 49, United States Code states that Amtrak "may not
contract out work normally performed by an employee in a bargaining unit covered


16
  In the 1994 recodification of the Rail Passenger Service Act, the provision
requiring the Secretary of Labor's certification of labor protection arrangements for
Amtrak employees was omitted as executed. See 49 U.S.C. § 24706 nt. Given the
context of this amendment, we do not view it as a substantive change. Accordingly,
it provides us with no basis for concluding that Amtrak and its employees would be
free to renegotiate the labor protection arrangements contained in Appendix C-2.

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by a contract between a labor organization and Amtrak or a rail carrier that
provided intercity rail passenger transportation on October 30, 1970, if contracting
out results in the layoff of an employee in the bargaining unit." Section 24312(b)(2)
provides that the prohibition contained in subsection (b)(1) does not apply to food
and beverage services provided on Amtrak trains. On its face, section 24312(b)
restricts Amtrak's authority to contract out for services.17
Amtrak agrees with our conclusion and points out that, like the statutory labor
protection provisions, the statutory prohibition on contracting out is not the type of
statutory right that could be waived by Amtrak's unions since it represents a public
policy of providing protection to employees.

Sincerely yours,




Robert P. Murphy
General Counsel




17
 The report of the House Judiciary Committee accompanying Public Law 103-272,
which recodified the provision on contracting out, states that "[t]he words 'may not'
are used in a prohibitory sense, as 'is not authorized to' and 'is not permitted to.'"
H.R. Rep. No. 103-180, at 4 (1994), reprinted in 1994 U.S.C.C.A.N. 818, 821.


                                                                              10281020
bcc:   Mr. Fitzgerald, OGC/RCED
       Mr. Volpe, OGC/RCED
       Ms. Desaulniers, OGC/RCED
       Mr. Belkin, OGC/GGD
       Mr. Centola, OGC/AIMD
       Ms. Scheinberg, RCED
       Mr. Ratzenberger, RCED
       Mr. Jorgenson, RCED
       Ms. Ruchala, RCED
       Ms. Fleming, RCED
       Ms. Scott, OCR
       OGC/RCED




                                   10281020
DIGESTS

B-277814

October 20, 1997



1. The United States would not be legally liable for the labor protection obligations

that would result from the partial or complete discontinuance of intercity rail

passenger service by the National Railroad Passenger Corporation (amtrak) since

the United States was not a part to the agreement giving rise to such obligations

and has not explicitly or implicitly guaranteed such obligations. To the contrary,

Amtrak's organic legislation provides that it is not a department, agency, or

instrumentality of the United States Government. For similar reasons, the United

States would not be liable for Amtrak's other debts in the event of an Amtrak

bankruptcy.



2. The labor and management of the National Railroad Passenger Corporation

(Amtrak) would not be authorized to renegotiate the terms of labor protection

arrangements known as "Appendix C-2" in the absence of legislation.



3. The labor and management of the National Railroad Passenger Corporation

(Amtrak) could not agree to alter the current restriction on Amtrak's contracting

out of non-food service work contained at 49 U.S.C. § 24312(b).




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