December 10, 2014

Justices Probe Limits of Non-Delegation Doctrine and Express Due Process Concerns

Holland & Knight Regulatory Litigation Blog
Brian J. Goodrich | Jameson B. Rice

Yesterday, the U.S. Supreme Court heard oral argument in Dep't of Transp. v. Ass'n of Am. Railroads. At issue is whether Congress may grant Amtrak, a private entity created by Congress, the power to co-author regulations governing, and appoint an arbitrator for disputes concerning, private freight railroads, as instructed by § 207 of the Passenger Rail Investment Improvement Act without violating the non-delegation doctrine or due process clause.

During oral argument, counsel for the Department of Transportation argued that the metrics and standards developed pursuant to the statute are not regulatory and that instead any "regulatory effect" comes from the long-standing statutory preference requirement enacted by Congress rather than Amtrak. Counsel for the Association of American Railroads responded that to impose liability on the freight railroads, "[the government needs to prove both...violation of the metrics and standards and violation of the preference requirement"; therefore, the metrics and standards are also a part of the regulations imposed upon the freight railroads.

Chief Justice Roberts joined Justice Scalia in posing probing questions to the agency regarding its interpretation that a government arbitrator (rather than a private arbitrator) could be appointed, and asking whether such an arbitrator would be a principal or inferior officer. Both Justices pushed back on the agency's response that such an arbitrator would be an inferior officer, emphasizing the lack of supervision over the arbitrator's decision.

Notably, the Association's due process claim received substantial attention from several of the Justices during oral argument — more attention than the parties devoted to it in their briefs. Justice Scalia in fact declared there to be a violation of due process when any entity – government or not – "is operating on a for-profit basis and ... is given the last word on some regulatory matters that disadvantage its competitors."

While a primary issue in the Department of Transportation's brief, the question of whether Amtrak is a public or private entity received less attention from the Justices. Justice Kagan did, however, note the existence of government involvement at every step of the implementation of these metrics and standards and questioned the role of congressional labels in determining whether Amtrak is public or private. Justice Kennedy briefly raised the issue and noted his view that a prior case, which held that Amtrak was a public entity for purposes of the obligations imposed on United States public entities, is not controlling in this matter.

If the Court holds that Congress violated the non-delegation doctrine, it would be the first such ruling from the Supreme Court since 1936 in Carter v. Carter Coal Company, 298 U.S. 238 (1936).

Related Insights