National R. Passenger Corp. v. A. T. & S. F. R. Co. - Oral Argument

ORAL ARGUMENT OF PAUL F. MICKEY, JR., ESQ., ON BEHALF OF NATIONAL RAILROAD PASSENGER CORPORATION

Chief Justice Burger: Mr. Mickey, I think you may proceed when you're ready.

Mr. Mickey: Thank you, Your Honor.

Mr. Chief Justice and may it please the Court:

This case involves a challenge by several freight railroads to a federal statute that requires the railroads to compensate Amtrak for free and reduced rate transportation privileges on Amtrak trains provided to the railroads' employees and retired employees.

The basis of the railroads' claim is that they have a contract with the United States and this statute impairs that contract.

Mr. Alito will argue that in fact they have no binding contract rights enforceable against the United States, and I will argue that, even if they do, this statute has not impaired those rights and certainly not impaired them substantially so as to raise a constitutional issue.

The background of the case I believe is important and can be summarized in five basic facts.

First, as of 1971 the nation's railroads wore incurring substantial deficits as a result of their common carrier obligation to transport passengers They sought to discontinue their passenger trains as promptly as the ICC would permit.

Secondly, Congress enacted the Rail Passenger Service Act to give them an option They could either choose to continue operating passenger trains and incurring deficits for at least three and a half more years or they could transfer their passenger service to Amtrak, along with a payment equal to one-behalf of one year's deficits.

The option was attractive, and as a result on May 1, 1971, some 97 percent of the nation's rail passenger service was transferred to Amtrak.

Amtrak--

Unidentified Justice: 97 percent of what, total miles or passengers?

Mr. Mickey: --Passenger miles.

95 percent of route miles, 97 of passenger miles.

And Amtrak operated somewhat less than half of those in its new system that had been designated by the Department of Transportation.

The rest were discontinued by effect of law.

Third, for generations there had been a tradition in the railroad industry that railroad employees, retired employees and dependents could travel free or at reduced rates on passenger trains.

One of Amtrak's first acts when it came into being was to significantly curtail the scope of privileges available to the railroad employees.

Even though Amtrak had the express right under its agreement with the railroads to decide what privileges, if any, would be offered to railroad employees, the railroads protested loudly.

They warned of labor problems.

Their employees protected and some labor unrest occurred.

Unidentified Justice: Mr. Mickey, at some appropriate point will you tell me how much money we're talking about?

Mr. Mickey: I believe that the total amount that's at issue to date for the railroad parties to this case is on the order of $60 million, Mr. Platz may have a more precise figure, We're talking at this point... if we're talking about an amount--

Unidentified Justice: Annually?

Mr. Mickey: --No.

It's on the order of a million dollars annually and diminishing, and it may be somewhat higher.

I think that's the order.

Unidentified Justice: It's diminishing why?

Mr. Mickey: Diminishing because the category of employees who are entitled to travel under the statute, for whom the railroads must compensate, is shrinking.

The record shows that in 1972 there were 2.83 million such employees.

As of 1979 in the GAO report, that number had shrunk to roughly one million.

Unidentified Justice: These employees continue to be employees of the railroads, not of Amtrak?

Mr. Mickey: That's a critical fact, Your Honor, that the privilege was created for railroad employees, and indeed only for those employees who were eligible under the railroad's pre-existing policies for past travel as of the date of the transfer of service.

Unidentified Justice: And these employees didn't become employees of Amtrak.

They remained employees of the railroads?

Mr. Mickey: The employees who are eligible for privileges under the statute are those who remained employees of the railroads.

There may have been some who transferred to Amtrak and they would not be covered by this statute.

They'd be covered by different privileges.

Unidentified Justice: Mr. Mickey.

Mr. Mickey: Yes, Justice.

Unidentified Justice: How was this amount computed?

Do they get half fare or quarter or something?

I mean, Amtrak gets how much for what?

Mr. Mickey: Amtrak receives from the employee railroad.

25 percent of yield.

That's the statutory definition.

Yield is the amount of revenue that Amtrak gets for transporting a passenger a mile, so that--

Unidentified Justice: Oh, I see.

Mr. Mickey: --the yield--

Unidentified Justice: It's measured against what Amtrak gets.

Mr. Mickey: --It is, that's right.

Unidentified Justice: And it's 25 percent?

Mr. Mickey: 25 percent.

In ballpark figures, the yield that Amtrak earns for transporting a normal passenger is eight cents.

They pay roughly two cents, a little more than two cents per mile.

The fourth background fact that I'd like to mention is that, as a result of the labor unrest and as a result of the protests from the railroads, there was enacted in 1972 an amendment to the Rail Passenger Service Act creating an entirely new statutory pass privilege.

The new statute, the 1972 amendment, required Amtrak to provide privileges to the railroads' employees on a basis comparable to what they'd enjoyed before, and required the railroads to pay Amtrak very modest amounts for those privileges.

The fifth fact is that in 1979 Congress revisited the issue of compensation, decided that some more meaningful payment was in order, and it increased the amount to the 25 percent of yield formula.

Unidentified Justice: May I ask right there, that imposed an obligation on Amtrak to accept these passengers.

Did it allow the railroad to opt out, in effect?

Or was the railroad... there's no choice?

Mr. Mickey: No choice.

The railroads' employees had a statutory right to travel.

Unidentified Justice: That's what I thought.

Mr. Mickey: The railroads had no right.

The railroads bring this case as one for contract impairment, and I think the critical fact to remember at the outset is that when you look at the Rail Passenger Service Act or the basic agreement, even if you assume that they are binding contracts on the United States... and again, Mr. Alito will argue that they are not... you cannot find any term in either that deals with this issue.

Both instruments are silent on the issue of compensation for employee pass privileges.

Now, the railroads have tried to work around that problem by saying that when they were relieved from their obligation to transport passengers, they were relieved of all of the incidents of passenger service and that transporting employees as pass riders was an incident.

Well, we suggest that it should be viewed very differently.

It is really an employee fringe benefit rather than a necessary part of passenger service.

It has to do with the employees' obligations to their... with the railroads' obligations to their employees, and not to the public.

And it was the obligation to transport the public as a common carrier that the railroads were relieved of.

The GAO report, which is in the joint appendix, points out that prior to 1971 there were freight-only railroads and there were terminal companies that arranged for their employees to have pass privileges on passenger trains.

So it wasn't just something that followed naturally and ineluctably from the fact that these railroads were operating passenger service.

Unidentified Justice: May I just cut in once more?

Mr. Mickey: Sure.

Unidentified Justice: I'm sorry.

Assume... I understand you don't think there's a contract, but assume for a moment there is.

And assume that the provision of intercity rail passenger service includes as part of the provision the provision of service for this group of new employees.

Why doesn't it cover that?

In other words, they argue, as I understand it, that this is part of that whole.

Mr. Mickey: I'm not clear whether you're asking me to assume that it's covered or to explain why it is not covered.

Unidentified Justice: Well, wouldn't the plain language... if the provision of transportation services for these employees is a part of the provision of the total obligation to provide intercity rail passenger service, why then does not the plain language of the agreement cause you to lose?

Mr. Mickey: The plain language causes us to lose only if you conclude that the limited release, contractual or otherwise, and we'll assume under your hypothetical that it is contractual, that the railroads received in 1971 addressed employee fringe benefits.

The release is narrowly defined.

Section 401 of the statute says the railroads shall be relieved of their obligation to provide passenger service under Part I of the Interstate Commerce Act or any other statute or law that pertains to this subject.

Both courts below looked to see if there was any legal responsibility of the railroads to provider pass privileges that might be embraced by that statutory release, and we believe both courts below correctly concluded that it was not the sort of responsibility that Congress meant to relieve them of.

And I'd submit, if you were looking at interpreting the statute or the--

Unidentified Justice: You mean there wasn't any responsibility to be relieved of?

Mr. Mickey: --That's right.

Unidentified Justice: The railroads could have terminated that at will at any time?

Mr. Mickey: I answered too quickly.

Unidentified Justice: I mean in as far as the law was concerned?

Mr. Mickey: There may have been a responsibility.

With respect to some railroads, there was a responsibility under collective bargaining.

Unidentified Justice: Collective bargaining, but not under the law.

Mr. Mickey: Not under the law, not under the statute.

Unidentified Justice: Not under the referenced section.

Mr. Mickey: Exactly, exactly.

And I would submit that if one concludes that Congress is bound contractually by the terms of that statute, one should be careful about construing the terms broadly so as to cover responsibilities that aren't explicitly covered by the terms of the statute.

Unidentified Justice: Under the union contracts was that regarded as part of the compensation of employees, to have pass benefits?

Mr. Mickey: I have only common sense to go on to answer it, but I submit that it probably was.

I think you end up with in overall pose valuable compensation package if employees are allowed to travel free or at reduced rates in a lifetime basis, which was the expectation that these employee had prior to Amtrak.

Unidentified Justice: Well, it replied to some goals that weren't in the union, too--

Mr. Mickey: Surely.

It applied--

Unidentified Justice: --on railroads.

So it must not have been limited to the union contract.

Mr. Mickey: --That's true.

Unidentified Justice: But in either case it would be arguably partial compensation.

It was arising out of the employment relationship.

Mr. Mickey: Unquestionably it did.

And I think when you look at the legislative history of the 1972 amendment and see what led Congress to impose a statutory pass privilege, you see evidence that the Senators who read into the record letters from employees who had lost this lifetime expectancy were seriously concerned about the loss of what had been understood to be compensation that would endure after the employment relationship terminated.

Unidentified Justice: May I try and rephrase my question.

Does anyone now have a responsibility to provide intercity rail passenger service to this group of employees?

Mr. Mickey: To provide... Amtrak has the responsibility and is now the only carrier in the country that has the responsibility to provide intercity rail passenger service.

The employees who were described by the statute have a right to ride as pass riders.

Unidentified Justice: But you'd say that Amtrak is the only entity that has any such responsibility?

Mr. Mickey: I believe, that's clear.

Amtrak assumed service from nearly all the railroads in 1971 and as about two years ago the last carrier that had held onto a route transferred it to Amtrak.

Unidentified Justice: The word "responsibility" really doesn't mean who has to pay for it, just who has to provide the service?

Mr. Mickey: Well, we're not trying to argue that when they were relieved of the responsibility they weren't relieved, contractually or otherwise, of the responsibility to run the trains and the responsibility to pay for running the trains.

If they didn't get the financial release, the operational release wouldn't have been significant.

We're saying that what release they act focused on the obligation for transportation.

Unidentified Justice: They do now, under your view, have a responsibility to pay for the running of the trains to the extent that they provide passenger service, or at least a portion of the cost, for these people?

Mr. Mickey: Do the railroads have that obligation?

Unidentified Justice: Yes.

Mr. Mickey: The railroads have an obligation not to pay for the running of the trains.

They have an obligation to pay Amtrak for the benefit, the service that is provided for their employees.

Unidentified Justice: To buy the tickets.

Mr. Mickey: I don't mean to split hairs.

I think it may be an important... to pay one-quarter of the cost of the tickets.

It's a little different.

Unidentified Justice: Mr. Mickey, do Amatrak's own employees get free passes?

Mr. Mickey: They get different degrees of the passes, but it has customarily been provided by Amtrak, again because it is regarded as a valuable emolument.

Unidentified Justice: On the matter of reimbursement, some argument is made by your opponents that the amount is too great.

Why wouldn't reimbursement for the incremental costs of providing free pass services fully cover the cost of providing those services?

Mr. Mickey: I think by definition it would fully cover the costs.

I think the question is, does Congress have the discretion only to adopt an incremental cost formulation, and we have argued in our brief that it does not have such constrained discretion, that it can take into account other facts, as it did.

When it enacted the 1979 amendment and asked the GAO to do a study, it said take into account value as well as costs.

GAO looked at both factors, discovered that they were very difficult to quantify, and said a legislative judgment is in order.

Unidentified Justice: Well, can Congress also take into account the fact that Amtrak is losing money?

Mr. Mickey: I think that that was a factor.

I wouldn't deny that.

Congressman Florio, who was the chief sponsor of the 1979 amendments, said, a rough quote: It's difficult to justify having the railroads' employees traveling virtually for free when two out of every three dollars for normal public travel are coming out of the public treasury.

I think there was a burden associated with intercity rail passenger service to be borne, and Congress took into account a number of factors, one of which was that operating this transportation system was inherently expensive and the railroads that had benefited from it should be paying some more meaningful share of its costs.

But I'd like to suggest that, without trying to define what the outer limit may be, I think if you look to see whether the fully allocated cost of transportation on Amtrak would be an appropriate basis--

Unidentified Justice: Well, Congress couldn't have come in and required the air carriers, for example, to pay for these pass privileges, could it?

Mr. Mickey: --In the hypothetical there is no background of facts that suggests that that was an appropriate action for Congress to take in order to preserve--

Unidentified Justice: The railroads' position is that what Congress did is much like requiring the air carriers to.

Amtrak was running at a loss and so Congress just reaches cut and grabs somebody and says, you help subsidize it.

Mr. Mickey: --I think that is a fair summary of their argument.

We would put it a little bit differently.

A benefit was created in 1972, wholly aside from any deal that was cut in 1971.

It was a benefit that obviously responded to the desires of the railroads, benefited their employees for years, gave them substantial benefits.

In exchange for the roughly $1 million per year that the railroads pay to Amtrak, these five railroads pay, they get some 40 million miles, passenger miles of employee travel.

The GAO has suggested that there is improved morale, a richer compensation package, the avoidance of labor disruption that led to enactment of the statute in the first place, and these benefits I think are substantial.

It's possible that the railroads are better off, taking into account the amounts they've paid and without suggesting facts that I don't think are important for this issue--

Unidentified Justice: Well then, it isn't a straight space available.

Mr. Mickey: --It says space available, but space available when you have reserved trains requires some sort of reservation.

So they are allowed to make, to book reservations 24 hours in advance.

Unidentified Justice: A reservation then can be made on a pass without paying for it?

Mr. Mickey: Without paying for it on the home road or paying half fare on the off-road.

I should point out that in the GAO study it's noted that the free privilege applies to some 56 percent of all pass travel, or it did as of '69 when GAO did its study.

And one would suppose that a significant portion of the remaining 44 percent begins and terminates on the home road, so that the bulk of the privilege that's being exercised is the free and more valuable, privilege.

I would just summarize by saying that, in light of all the benefits the railroads have gotten, we believe Congress has acted well within its discretion, in deciding that this is a reasonable fee, one-quarter of the price of a ticket.

And if I have any remaining moments I'd like to save them for rebuttal.

Chief Justice Burger: Mr. Alito.

ORAL ARGUMENT OF SAMUEL A. ALITO, ESQ., ON BEHALF OF THE UNITED STATES, IN SUPPORT OF NATIONAL RAILROAD PASSENGER CORPORATION

Mr. Alito: Mr. Chief Justice and may it please the Court:

In the time that's allotted to me this afternoon, I would like to concentrate on the threshold issue in this case, which is whether the railroads have any contractual rights whatsoever against the United States.

The railroads' position is that the Fail Passenger Service Act, the RPSA, gave them the contractual right to be forever free from all passenger service obligations, while at the same time allowing them to retain their freight lines.

Our position is that the Rail Passenger Service Act merely gave them regulatory relief from their passenger service obligations, much as if the ICC had issued a certificate of discontinuance.

The background of the RPSA makes this quite clear.

The RPSA was enacted in 1970 at a time when rail passenger service in this country had become extremely unprofitable, and the railroads were petitioning the ICC in ever-increasing numbers to discontinue their passenger trains.

These discontinuance proceedings, however, were often hotly contested.

They were lengthy, they were costly, they were sometimes unsuccessful; and I don't think there was any prospect that the ICC was simply going to authorize the termination of all passenger trains in this country.

So if the RPSA had not been enacted, the railroads, it seems quite clear, would have been compelled to continue to operate many of their passenger trains at a considerable loss for quite some time.

The RPSA in a very real sense rescued the railroads.

If created a quick method for shedding all their passenger lines and, as Mr. Mickey said, virtually all of the railroads immediately snapped at this opportunity.

The RPSA created a new carrier, Amtrak, to take over the passenger lines and it set up a procedure, a two-step procedure that was essentially the same as what takes place whenever one carrier acquires another's lines.

The first step is a contract between the carriers, in this case Amtrak and the railroad.

This is a contract, but the United States is not a party to it and is not in any way bound by it.

Under this contract, Amtrak agreed to take over operation of the passenger lines and the railroad agreed to give up those lines.

The railroad also agreed to provide maintenance and services and facilities to Amtrak, and also to make some payments to cover some of Amtrak's expected initial losses.

Now, the second step does involve the Government, but it is non-contractual.

Once the parties have entered into the contract, the United States, in the exercise of its commerce clause authority, relieves the railroad of its common carrier duty to transport passengers.

This puts the railroad in essentially the same position as if a certificate of discontinuance had been granted.

The railroad doesn't have to operate passenger trains any more, but it doesn't have any contract rights against the United States.

And as long as it continues to operate freight trains, it remains subject to all of the familiar common carrier obligations, which may include some passenger service obligations.

This two-step procedure is reflected in the statutory language, and the relevant provision is Section 401(a)(1), which is reproduced on pages 40-A and 41-A of the appendix to Amtrak's jurisdictional statement.

The first step, the contract between Amtrak and the railroads, is set out in the first two sentences.

Amtrak is authorized to contract to take over the railroads' passenger lines.

The second step, the regulatory relief, is set out in the last sentence before the proviso.

Once Amtrak and the railroad have entered into the contract, the railroad shall be relieved of all its responsibilities as a common carrier of passengers by rail in intercity rail passenger service.

Now, the railroads argue that this was really one step, that Congress delegated to Amtrak, which is a non-governmental entity, the authority to contract away the power under the commerce clause to impose passenger service obligations on the railroads.

If that were true, then this statutory language, which seems to describe two steps, would be redundant.

Moreover, the statutory language uses the language of contract when it talks about the relationship between Amtrak and the railroads, but then when it turns to the relationship between the railroads and the United States it uses the language of regulation.

The railroad shall be relieved of its common carrier obligations.

The railroads' interpretation of what took place under the RPSA doesn't make sense for several additional reasons.

First of all, as I have alluded to, it means that Congress contracted away a portion of its commerce clause authority, something that Congress is quite unlikely to do.

Second, it means that a non-governmental entity, Amtrak, was delegated the authority to contract away this commerce clause power.

That is even more unlikely.

Third, it means that there was a marked departure from the way discontinuance matters had been handled for decades.

They had always been handled by regulation.

They had never been handled by contract.

And fourth, the railroads have not offered any plausible explanation why Congress would have entered into such a contract.

The only thing the railroads really gave up under the RPSA besides their passenger lines, which were losing money, were payments that were approximately equal to what the railroads had lost on passenger service during just the preceding six months.

Now, this was much less than the railroads would have lost if the RPSA had not been enacted at all, and I think it is only a fraction of what everyone realized Amtrak would lose at the beginning of its operation.

If this is a contract, it's a contract that doesn't make any sense.

In sum, the railroads do not have any contract rights against the United States, and so the railroads' entire argument based on the impairment of contract must fail.

Let me also comment very briefly on our second point in this case, which is that even if there was a contract it was not impaired.

The release that the railroads obtained under the RPSA is described in two places in Section 401(a)(1).

The first reference states that the railroad is relieved of its entire responsibility for the provision of intercity rail passenger service, and the railroads have tried to argue that that means providing payment for these few pass riders.

I think that is a strained reading of the statutory language, but it is completely refuted when one looks at the second way in which the release is described in Section 401(a)(1): The railroad shall be relieved of its responsibilities as a common carrier of passengers by rail in intercity rail passenger service.

Now, I believe it is a tenet of contract construction that a more specific term controls the more general term.

The latter description is more specific and I think that is what was meant by the release in the RPSA.

The railroads no longer had to operate passenger trains, and that's all.

It doesn't mean they didn't have to pay for the free rides taken by their employees.

Chief Justice Burger: Mr. Platz.

ORAL ARGUMENT OF GEORGE A. PLATZ, ESQ., ON BEHALF OF THE ATCHISON, TOPEKA AND SANTA FE RAILROAD COMPANY, ET AL.

Mr. Platz: Mr. Chief Justice and may it please the Court:

In 1971 the five railroads which are parties to this case, relying on the terms of Section 401 of the Rail Passenger Service Act, paid more than $80 million to Amtrak in exchange for relief from their

"entire responsibility for the provision of intercity rail passenger service."

After eight years of escalating Amtrak deficits, in 1979 Congress enacted an amendment to Section 405(f) of the Rail Passenger Service Act which Amtrak and the United States contend required the railroads to make additional payments to Amtrak which are approximately $1.5 million per year, purportedly to reimburse Amtrak for its space available pass privileges for railroad employees, which the railroads contend cost Amtrak vastly less than that $1.5 million per year and which the railroads have never agreed to pay for.

This Court has held in Lynch versus the United States and earlier cases that in order for the United States to be able to enter into contracts with others of financial nature--

Unidentified Justice: Mr. Platz, this is more cut of curiosity, Where did the name "Amtrak" come from?

Mr. Platz: --I'm afraid I can't say that.

I believe the first versions of the bill called it "Railpack", and I don't know who invented that name.

Unidentified Justice: I'll bet somebody over there knows.

Mr. Platz: This Court, as I was saying, has held in Lynch versus the United States that in order for the United States to be able to contract, make contracts of a financial nature, the Fifth Amendment prohibits it from abrogating those contractual obligations in the absence of supervening conditions authorizing such abrogation.

The question before the Court here is whether the payment requirement enacted by Congress in 1979, if it's applicable to the railroads, impairs their release in violation of this Fifth Amendment principle.

And I say

"if applicable' because we also contend in the last part of our brief that the 1979 statute can and should be construed to be inapplicable to any railroad that entered into the 1971 agreement."

But for purposes of my argument today I would like to address four points that we contend require affirmance even if the 1979 payment requirement does apply.

These four points are:

First, that the railroads received the contract obligation from both the United States and Amtrak granting permanent relief from their responsibility for the provision of intercity rail passenger service;--

Second, that that release is narrowly limited to relief from financial responsibility and does not contract away any important governmental powers;--

Third, that the 1979 statute, if it's applicable, does impair this release;--

And fourth, that the resulting impairment was not justified by any supervening conditions or excused for any other reason.

But before addressing those three... those four points, I would like to mention several facts that we believe are quite important and were omitted or inappropriately emphasized in the arguments of Amtrak.

First of all, when the railroads themselves had the responsibility for intercity rail passenger service prior to 1971, they also provided passes only on a space available basis and they themselves, as the GAO has found in its report, allocated only an insignificant amount of costs, of incremental costs to those passes.

Furthermore, whenever the railroads did discontinue passenger trains... and I believe the record will show that between the 1920's and 1970 the number of passenger trains went down like something from 5,000 to 500.

Whenever the railroads did discontinue a passenger tray prior to 1971, the pass privileges were always automatically discontinued to the same extent that the passenger trains were discontinued.

Now--

Unidentified Justice: What does that mean?

You wouldn't give a person a pass to ride on a train that didn't run any more.

Mr. Platz: --I think this goes to the point that the passes were merely a dependent incident of the passenger service; furthermore, that the employees could not reasonably have had a strong expectation and a continuous right to passes because they had seen the service to which they were entitled diminished over the years.

And also, I think it has to do with the railroads' expectation under their release.

Unidentified Justice: Do you mean that the pass use diminished just to roughly the same extent that the service was diminished, discontinued?

Mr. Platz: Well, there is not in the record and I don't have any information as to those specific facts.

But presumably, if the number of passenger trains declines from 5,000 to 500, the amount of miles traveled on passes undoubtedly decreased.

Unidentified Justice: I'm confused about that.

Is that simply because there weren't that many places to go any more?

Mr. Platz: I suspect, yes, that's basically it.

Unidentified Justice: May I ask you, do you agree with your opponent's view that there was... prior to the basic contract, you had no responsibility for providing these free passes to employees of other railroads?

Mr. Platz: We have conceded that in our papers.

It was a gratuity and was always considered to be a gratuity.

Unidentified Justice: But then how could the entire... being relieved of the entire responsibility for the provision of intercity rail passenger service relieve you of this responsibility?

Mr. Platz: Well, we contend that the railroads were... well, certainly the 1979 statute is a responsibility, and we contend that when Congress said 1971.

As I'm about to discuss in a moment, the purpose of the Rail Passenger Service Act was to get the railroads out of a situation of crippling passenger service losses that threatened their freight service.

And Congress' intent was to relieve them from that financial responsibility, and the words 1971, but to any subsequent responsibility that Congress might attempt to impose that would in effect restore these uncompensated costs.

Unidentified Justice: Counsel, it wasn't all gratuity.

There was a little brotherhood negotiations in there.

Mr. Platz: I believe the record shows--

Unidentified Justice: The brotherhoods ran the railroads.

Mr. Platz: --There is a case that has been cited, Baker versus System Federation, that indicates that Penn Central apparently did have... the passes were a part of the collective bargaining agreement of the Penn Central.

I do think, though, that the GAO report indicates that almost all the other railroads had a provision in the collective bargaining agreement that said only that employees covered by this agreement will receive passes to the extent that any other employees of the railroad receive them.

But it wasn't... the record indicates it was only the Penn Central that actually guaranteed the passes.

Unidentified Justice: And another thing.

If you look into it, it was not on space available except on the limited trains.

There was no space available requirement.

How could you have it if you didn't have reservations?

Mr. Platz: As we understand it from the GAO report that is in the record, the practice of the railroads is, when the conductors go down and collect tickets, they of course know who is riding on passes, and if there are fare-paying passengers on the train who are standing while the pass-riders are sitting, that the pass-riders are made to give up their seats so the fare-paying passengers can sit down.

Unidentified Justice: Or otherwise they put them off?

The train is going 60 miles an hour.

Mr. Platz: I'm sure they don't put them off.

I think all they make them do is stand, although the statute on which these payments are based does say that Amtrak is only required to give space available passes and that's the only passes that the railroads are required to pay for.

Another important fact that I believe Mr. Mickey glossed over very quickly is the fact that the 1972 version of Section 405(f), which first required the railroads... first required Amtrak to supply these passes, did not, as he says, just require the railroads to pay a minimal amount.

That 1972 statute required the railroads to pay the "costs" of the passes, and it delegated to the Interstate Commerce Commission the authority to determine what those costs were.

The Interstate Commerce Commission decided, after a hearing, that those costs were less than one-tenth of a cent per mile and that they should be reduced by the half fares that were received from pass-riders.

By contrast, the 1979 statute that is at issue here has required the railroads to pay more than two cents per mile for both free travel and half-fare travel, without any offset for the half fares.

Unidentified Justice: I take it the earlier arrangement was also a violation of the contract as you construe it, but just not serious enough to fight about it?

Mr. Platz: Yes, Your Honor.

The railroads in fact raised the argument that it impaired the contract before the Commission.

The Commission said it wasn't within their jurisdiction to decide it.

After the Commission decision, the railroads did not consider it worthwhile to contest the point further because of the favorable nature of the Commission decision.

Unidentified Justice: Mr. Platz, I guess your whole argument depends on finding the existence of some contractual relationship between the railroads and the Federal Government--

Mr. Platz: That's correct.

Unidentified Justice: --by virtue of its passage of the Railroad Passenger Service Act.

Mr. Platz: Your Honor, we do contend that the pass requirement is irrational because of its failure to take into account... because it requires the railroads to pay exactly the same amount for riders who travel for free as those who travel for half-fare.

But you're correct, our basic argument is that there is a contract between the railroads and the United States that frees them from this obligation, end that's the point, my first point which I'd like to address now.

We believe that the terms of the Act and its legislative history permit no other conclusion but that there was a contract of both the United States and Amtrak to grant the railroads permanent relief from responsibility for rail passenger service.

Section 401(a)(1), which as Mr. Alito has mentioned is set out on page 40-A of Amtrak's jurisdictional statement, says that Amtrak is "authorized" to enter into

"a contract to relieve the railroad from and after May 1, 1971, of its entire responsibility for the provision of intercity rail passenger service."

Such relief obviously could only come from the United States and it therefore authorized Amtrak to provide it.

Furthermore, Section 401(a)(2) requires substantial payment by the railroads in the amount of millions of dollars and calls it "consideration" for this release.

We contend that these provisions not only require the conclusion that the United States authorized Amtrak to contract on its behalf to grant the release, but also that the railroads received more for their millions of dollars than a one-shot mass discontinuance that could be revoked at any time.

As stated by the House report on the Rail Passenger--

Unidentified Justice: Let me just stop you for a minute.

What was discontinued and then revoked at any time?

Certainly your obligation as a common carrier hasn't been revoked.

That was discontinued and it hasn't been revoked.

What responsibility was discontinued and then latter revoked?

Mr. Platz: --We contend that it was the responsibility, the financial responsibility to pay the costs, uncompensated costs, the financial responsibility for the losses generated by rail passenger service.

In other words, if you're asking, if the question is what one can construe "responsibility" to mean, that's what we--

Unidentified Justice: Supposing the president of the railroad used to ride free and they said, now in the future he's got to pay for his ticket.

Does that breach the contract?

Mr. Platz: --No, if an individual agrees to pay--

Unidentified Justice: The railroad must pay for the officers of the road to ride.

Mr. Platz: --If it's compelled, if the railroad is compelled to pay an amount in excess of the cost of the passes, we certainly would say that, just like the 1979 statute, that that is a violation of the release.

Unidentified Justice: Except that the president used to travel in a private car.

Mr. Platz: I do believe there is a separate provision wherein Amtrak and the railroads have agreed on private cars.

Unidentified Justice: That gives him a private car?

Mr. Platz: Excuse me?

Unidentified Justice: Does he still have a private car?

Mr. Platz: I think the agreement says that pay for it.

Unidentified Justice: Marginal cost.

Mr. Platz: I don't know that the cost is set forth in the agreement.

As I was about to say--

Unidentified Justice: Could the Government, could Amtrak, collect from the railroads the marginal cost?

Mr. Platz: --I believe that... we contend that incremental cost and marginal cost I think are the same thing.

We have two arguments--

Unidentified Justice: All right, incremental costs, then.

Mr. Platz: --First of all, we are saying that the railroads were released from their entire responsibility for rail passes, for the passes.

But our second point and the point on which the Court of Appeals agreed with us is that this payment requirement in 1979 in fact requires the railroads to pay vastly more than the marginal or incremental costs, and therefore--

Unidentified Justice: Though not more than the public is charged.

Mr. Platz: --Not more than the public is charged.

Unidentified Justice: Not as much as the public is charged.

Mr. Platz: Not as much, but the public doesn't get space available passes.

Unidentified Justice: Wouldn't your theory go so far as to require the Amtrak to pay for, for instance, hospital benefits for railroad employees or free Christmas turkeys that were given, or whatever else might have been given by the railroads?

I mean, your theory is that the entire financial responsibility passed over to Amtrak for everything that might have been given for free to railroad employees.

Mr. Platz: No, we contend only the responsibility for the provision of intercity rail passenger service passed over to Amtrak, not any other responsibility.

Unidentified Justice: Well, that's considerably narrower than the language you've been using.

Mr. Platz: I apologize if I misrepresented what our position is.

But our position, of course, is that the passes are intercity rail passenger service and therefore they were relieved from the responsibility for those.

Unidentified Justice: Even though there was absolutely no obligation on the part of the railroads to give those passes to their employees?

Mr. Platz: That's correct.

I would like to address, if I might, the argument that Mr. Alito made with respect to whether a xx railroads.

He argues... and this argument, I might mention, was made by the United States for the very first time in this case in the reply brief that they filed last week... that the word 401(A)(1), which I've quoted, does not mean that Amtrak is authorized to grant relief to xx authorized to acquire passenger lines from the railroads.

We contend that this is a totality unnatural meaning of the word Mr. Alito says is meant by the word "relieved" in the sixth sentence of that section.

Unidentified Justice: Is it not relieving them of their common carrier obligation?

Isn't that the correct use of the term in that sense?

Mr. Platz: We contend that the entire responsibility for the provision of intercity rail passenger service, from which the railroads were relieved in that first sentence, is more than just the common carrier responsibility.

We contend that the later sentence which deals with the common carrier responsibility was only meant to make clear that all the statutes presently on the books which would impose common carrier passenger service responsibilities are no longer applicable to the railroads, but that the more encompassing phrase

"entire responsibility for the provision of intercity rail passenger service."

includes more than that.

Another reason we contend that the Solicitor General's interpretation of the word "relieve" is wrong is because it's totally unnecessary.

There was no need for Congress to authorize Amtrak to acquire passenger lines in Section 401, as Mr. Alito contends, because Amtrak was authorized to do exactly that very thing in Section 305 of the Act.

And furthermore, in Section 306 of the Act it was exempted from any need to obtain approval under the Interstate Commerce Act.

Therefore, it would have been totally unnecessary for such a narrow meaning of the word 401(a)(1).

In summary, the United States' interpretation, we contend, is at odds with the rest of the Rail Passenger Service Act, the terms of the basic agreement, and the legislative history of the Act as well.

The second point that I would like to address is that the release, we contend, is narrowly limited to financial responsibility.

We think it's clear from the statute that Congress did not intend to relieve the railroads from responsibility to operate passenger trains.

Section 402 of the Act continues to require them to operate, provide employees and services and facilities to Amtrak under contract, but it guarantees them just and reasonable compensation for doing so.

The Senate report on the Rail Passenger Service Act indicates that one of its primary purposes was to relieve the railroad industry from the

"onerous xx report on the Act specifically notes that in 1969 the railroads lost $200 million on passenger service, in a year when their total net income was only about $500 million."

The only reasonable conclusion from these facts, we contend, is that Congress intended to retain its power to direct the use of railroad facilities to carry passengers, but that it wanted the railroads free from the crippling losses of passenger service which, if not stopped, would threaten the freight service as well.

And so construed, the release does not curtail any important Congressional power, but merely makes a commitment to stop the railroads' passenger service losses, a commitment that would have to be made eventually if the railroads' freight service was to be preserved.

My third point is--

Unidentified Justice: What consideration did the Federal Government obtain in exchange for the promise that you say the Federal Government made in giving up all of its commerce power to require the railroads to provide any of this service?

Mr. Platz: --Well, these railroads paid, I xx entirely--

Unidentified Justice: What did the Federal Government get?

Mr. Platz: --Well, Amtrak at that time was financed by the Federal Government, and I suppose that meant that the Federal Government didn't have to come up with that $82.4 million.

Unidentified Justice: And the 80-some million dollars was about one-half the annual loss being suffered by the railroads in giving passenger service at that time, is that right?

Mr. Platz: Under the statute it was one-half of the fully distributed loss.

Now, of course, when the railroads themselves went to discontinue passenger trains the Interstate Commerce Commission didn't let them use fully distributed costs.

It required them to use variable costs.

And I think an alternative under the Act was that they could pay 100 percent of the 1969 variable loss.

Our third point is that this statute, if it's applicable, the 1979 statute, impairs the railroads' release.

We contend, first of all, as I've said... and this is in support of our cross-appeal as well as an xx that the entire responsibility for the provision of intercity rail passenger service from which the railroads were relieved encompassed any obligation to pay for pass riders.

Certainly the definition in the statute cf intercity rail passenger service is broad enough to encompass service to pass riders.

Both courts below have held, however, that the passes were not part of the entire responsibility from which the railroads were relieved because they weren't strictly required to provide the passes at that time.

But as I believe I've stated earlier in answer to questions from Justice Stevens, we think that this is much too narrow an interpretation of this broad term, 1971, and certainly the purpose of the Act, to relieve the railroads from these crippling losses, requires interpreting it to apply to subsequent responsibilities.

Furthermore, the passes were really in many senses inextricable from the other passenger operations of the railroads and were always terminated when the railroads themselves discontinued the passenger trains.

Therefore, as again I believe I mentioned earlier, it was reasonable for the railroads to expect that passes were part of the entire responsibility from which they were relieved.

But in any event, the release clearly relieved the railroads from paying the direct costs of public passenger service, and the 1979 statute forces the railroads to subsidize those costs, as the Court of Appeals held.

As I mentioned earlier, in 1972 the Interstate Commerce Commission determined that the costs of the passes were less than one-tenth of a cent per mile and that those should be reduced by the half fares.

The 1979 statute requires the railroads to pay more than 20 times what the Interstate Commerce Commission found the costs to be, with no reductions for half fares.

Because, thus, the required payments vastly exceed the cost of the passes, it follows that Amtrak can use these payments under the 1979 statute to pay precisely those costs of public passenger service from which the railroads were relieved of responsibility, because Amtrak operates in many instances exactly the same trains from which these railroads... for which these railroads had common carrier responsibility prior to May 1, xx--

xx railroads' reasonable expectations based on their release, but the very purpose of the Rail Passenger Service Act.

Now, Amtrak argues in its brief that it was proper for Congress to require the railroads to pay the value of the passes, even if this amount exceeded the cost of the passes.

We submit that it's irrelevant whether or not the amounts of the payments equal the value of the passes, because they nevertheless forced the railroads to pay to subsidize the costs of public passenger service from which they were released of liability... released of responsibility.

But furthermore, we do not even believe, as I've stated, that the payments are rationally related to the value of the passes, because those payments are exactly the same for each mile of travel that is for free as for which the riders pay half fares.

Now, my fourth point is that this impairment of the railroads' contract was not excused, or there were no supervening conditions making the payment requirement proper.

There are simply no rational reasons why... well, let me just put it this way: No event has occurred changing conditions to make it necessary for the railroads to pay more money to Amtrak than they originally agreed to pay.

Even the supposed purpose that Mr. Mickey mentioned of achieving labor harmony and preventing strikes or whatever is not served by requiring the railroads to pay more than the cost of the passes.

The payment requirement is nothing more in this sense than an attempt to reduce expenditures by abrogating contractual obligations of the United States, which is squarely prohibited by the Lynch case.

Nor do the supposed benefits received by the railroads justify the impairment, as Mr. Mickey has xx If there really were a benefit to the railroads equal to the amount of payments they're required to make, Congress wouldn't have had to enact the statute requiring the payments.

The railroads would have been willing to enter into contracts with Amtrak to pay this amount.

Furthermore, the principle of the Lynch case would be totally undermined if Congress could alter contracts of the United States at will merely by asserting that the alteration was a benefit to the other party, rather than renegotiating the contract.

I would like to, in the moment I have left, address very briefly the question of whether the payment requirement of the 1979 statute does in fact apply to the railroads.

That statute imposes the requirement to make the payments only if Amtrak and the railroads do not

"agree on a different basis for compensation."

Now, we contend that the basic agreement signed in 1971, the release in 1971, constitutes a different basis for compensation from the 1979 payment requirement for the same reasons that it's impaired by the 1979 payment requirement.

The only real issue is whether the word... that the word 1979 statute means.

We contend it should not be construed to refer only to agreements reached after 1979 without much clearer language of an intent to invalidate prior agreements.

In conclusion, I would like to state that it is our view that if the Court were to allow the payment requirement of the 1979 statute to be applied to the railroads for any of the reasons advanced by Amtrak and the United States, it would cost the United States in the long run far more than is involved in this case by substantially increasing the risk perceived by others in relying on a promise of the United States.

Chief Justice Burger: Do you have anything further, Mr. Mickey?

You have two minutes remaining.

REBUTTAL ARGUMENT OF PAUL F. MICKEY, JR., ESQ., ON BEHALF OF NATIONAL RAILROAD PASSENGER CORPORATION

Mr. Mickey: I'll try to be brief.

First of all on the factual matter; I think if the Court looks to the facts set out in the GAO report it will see that the amounts the railroads were paying did not go up 20 times.

What the railroads were actually paying was administrative costs of the program, which they had agreed to pay, and the increment was more on the order of six or seven times.

But I don't know xx--

A point that is important is that this case comes here on motions, cross-motions for summary judgment.

The railroads' complaint has not alleged and their papers have not argued, and in general I don't think that Mr. Platz has contended today, that they are not... that the premise of their case is that they are not getting fair value for the fees that they pay.

Their claim is that they have a contract right and that contract right was impaired when they were required to pay more than Amtrak's out of pocket costs for this privilege.

That's what the Court of Appeals found as well.

There are two problems with that argument.

One is that it's impossible to me to find anywhere in the alleged contract a right to pay no more than incrementals.

I don't believe Congress has so limited it.

Secondly, it suggests that if Congress in the exercise of its regulatory authority over interstate commerce determines... and I think we are fundamentally working here with Congress' decisions... that it is important to preserve labor peace or to promote the interests of interstate commerce that benefits such as these should be preserved, and if Congress requires that the benefits be preserved, as it has often done, in ways that cost the railroads great deals of money... for example, labor protection payments... nevertheless, under the railroads' argument, Congress cannot require these railroads to pay any sums for the benefits conferred because they have a binding contract right.

The suggestion leads to the notion that if any railroad dollars find their way into Amtrak's treasury then this contract has somehow been breached, and I don't think it's reasonable to believe or for the railroads to have believed in '71 that Congress was entering into that kind of a relationship.

Congress was entering on an entirely new way of structuring intercity rail passenger service.

It was an experiment.

The statute reserved Congress' right to repeal, alter or amend the statute.

The statute has been amended every year since 1971 except for 1977 in substantive ways.

And to suggest that Congress is so constrained in shaping the relationship between Amtrak and the railroads that it cannot make this kind of adjustment for the benefit of the railroads' employees I think would require a stronger showing than they can make.

Unidentified Justice: How about Amtrak?

What's that name come from?

Mr. Mickey: Justice White, my understanding of the law is that "Railpax" was adopted initially.

Judge Fulham's court was besieged with cases involving Amtrak's early days.

He took to calling it "Railpax" and people decided that that was not a good name.

So we paid a consultant to decide what the proper name was, and "Amtrak"--

Unidentified Justice: So it's just a trade name?

xx--

--Is it official, or is... the Appellant is National Rail Passenger Corporation.

Mr. Mickey: --That's one and the same.

That's the name--

Unidentified Justice: Parentheses, "Amtrak"?

Mr. Mickey: --Parentheses, "Amtrak".

Unidentified Justice: Is that the way the statute--

Mr. Mickey: It's not in the statute, no.

That's our own--

Unidentified Justice: --There's Amtrak Commuter Corporation and so forth.

That was created especially.

Mr. Mickey: --That was created by statute, although it is defunct already.

[Laughter]

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.