NATIONAL RAILROAD PASSENGER CORPORATION, APPELLANT V. ATCHISON,
TOPEKA AND SANTE FE RAILWAY COMPANY, ET AL. ATCHISON, TOPEKA AND SANTA
FE RAILWAY COMPANY, ET AL., CROSS-APPELLANTS V. NATIONAL RAILROAD
PASSENGER CORPORATION

   No. 83-1492, No. 83-1633

   In the Supreme Court of the United States

   October Term, 1984

   On Appeal and Cross-Appeal From the United States Court of Appeals
for the Seventh Circuit

   Reply Brief for the United States as Appellee Supporting the
National Railroad Passenger Corporation

                                  I.

   As the railroads correctly observe (Br. 16), the "threshold
inquiry" in this case is whether the United States released the
railroads from their passenger service obligations as a matter of
regulatory relief or contractual right.  The railroads contend (Br.
16) that "the realities underlying the enactment of the (Rail
Passenger Service Act, 45 U.S.C. 501 et seq. (RPSA)) clearly
establish" that their release "is a contractual obligation of the
United States." Nothing could be more wrong.

   The realities are these.  Interstate railroads have been
extensively regulated by the federal government for more than a
century.  In exchange for monopoly status, which in past years was
enormously profitable, the railroads incurred special public service
obligations.  As common carriers, they could be required to provide
passenger, as well as freight, service.  They also lacked the
authority unilaterally to discontinue all or any portion of their
service but were instead obligated to petition and secure permission
for discontinuance from the Interstate Commerce Commission.  See Gov't
Br. 24-25.

   By the late 1960's rail passenger service had become extremely
unprofitable.  The railroads were incurring enormous annual losses and
were clamoring for permission to terminate passenger service.  If the
RPSA had not been enacted, the railroads would have continued to
suffer these losses at least until the conclusion of discontinuance
proceedings, which were often lengthy, costly, and hotly contested.
And at the end of these proceedings, discontinuance was sometimes
denied despite extreme financial hardship on the part of the
petitioning railroad.  See Gov't Br. 24-25.

   It was against this background that the RPSA was enacted.  The
RPSA, which the railroads now wield as a weapon against the
government, was in reality a life preserver thrown to a floundering
industry.  The RPSA provided a quicker, surer, and cheaper alternative
to discontinuance proceedings.  Before enactment of the RPSA, a
railroad could shed passenger lines by selling or leasing them to
another carrier with ICC approval.  49 U.S.C. (1970 ed.) 5(2)(a);  see
49 U.S.C. 11343.  Of course, in the late 1960's, no carrier was
willing to assume the burden of operating unprofitable passenger
trains, so the RPSA created a new passenger railroad, Amtrak, to
undertake that task (45 U.S.C. 541).  Amtrak was chartered as a
for-profit corporation under the laws of the District of Columbia and
is not "an agency or establishment of the United States Government"
(45 U.S.C. 541).

   The RPSA created a two-step procedure under which a railroad could
gain release from its passenger service obligations.  There was
nothing novel about this procedure.  It was essentially the same as
the procedure that takes place whenever one carrier acquires or leases
another's lines.  See, e.g., Penn-Central Merger Cases, 389 U.S. 486,
494 (1968).

   The first step involved an agreement between the carriers -- in
this case Amtrak and the railroads.  Amtrak was "authorized to
contract * * * to relieve (a requesting railroad) of its entire
responsibility for the provision of intercity rail passenger service"
(45 U.S.C. 561(a)(1)).  This does not mean, as the railroads suggest
(Br. 18-19), that Amtrak was delegated the power to contract away a
portion of the federal government's regulatory authority under the
Commerce Clause.  Rather, it means that Amtrak was authorized to enter
into an agreement to acquire a railroad's passenger lines, just as any
other carrier might acquire another's lines.  The United States was
not a party to such agreements and was not bound by them.  And the
agreements themselves did not alter the railroad's common carrier
duties.  Instead, performance of the agreements was conditioned upon
government regulatory action shifting those responsibilities from one
carrier to another.

   The second step under the RPSA involved government regulatory
action needed to effectuate the agreements between Amtrak and the
railroads.  It was analogous to ICC approval of a proposed
acquisition.  See 49 U.S.C. 11343.  Under the RPSA, "(u)pon its
entering into a valid contract" with Amtrak, a railroad was granted
regulatory relief "of all its responsibilities as a common carrier of
passengers by rail in intercity rail passenger service" (45 U.S.C.
561(a)).  This means that as a matter of regulatory discretion the
United States relieved the railroad from its passenger service
obligations, which had been assumed by another carrier.  But as long
as the railroad continued to operate freight lines in interstate
commerce, it remained potentially subject to the full panoply of
common carrier duties, including passenger service obligations.  See
Chesapeake & O. Ry. v. Public Service Comm'n, 242 U.S. 603 (1917).

   The railroads' argument that they acquired contractual rights
against the United States confuses these two discrete steps.  The
railroads rely (Br. 17) upon language in the RPSA referring to
contracts.  But all of this language refers to the contracts between
Amtrak and the railroads, not to the relationship between the United
States and the railroads, which is now and always has been that of
sovereign and regulatees.

   The railroads debunk (Br. 19-20) the well-established rule that the
United States should be presumed not to have contracted away vital
governmental authority, such as the power to regulate commerce.  The
railroads seem to suggest that the government is just as likely to
contract away essential attributes of sovereignty as it is to incur
routine financial obligations.  In support of that proposition, the
railroads quote (Br. 19) United States Trust Co. v. New Jersey, 431
U.S. 1, 24 (1977), where the Court observed that "(s)uch formalistic
distinctions perhaps cannot be dispositive." But the railroads omit
the rest of the sentence (ibid.; emphasis added):  "but they contain
an important element of truth." /1/

   The railroads also find it necessary baldly to rewrite an important
provision of the RPSA in order to make way for their argument.
Section 301 of the RPSA, 45 U.S.C. 541 (emphasis added), "expressly
reserve(s)" Congress's authority to "repeal, alter, or amend this
chapter (i.e., the RPSA) at any time." Apparently recognizing that
such a reservation is incompatible with their theory that the RPSA
conferred contractual rights, the railroads insist that this provision
merely "means that the 'corporate charter may be repealed or amended'"
(Br. 22;  citation omitted).  However, there is no support for the
notion that Congress really meant "corporate charter" when it used the
term "this chapter" in Section 301.  /2/

   Most tellingly, the railroads offer no plausible explanation why
Congress would have granted them the far-reaching and unprecedented
contractual rights that they now claim.  After decades of dealing with
railroad discontinuance matters by regulation, why would the United
States suddenly choose to deal with this subject by contract?  Why
would Congress contract away a portion of its vital Commerce Clause
authority?  And why would Congress grant the railroads the contractual
right to be free in perpetuity from any passenger service obligations
while continuing to operate potentially profitable freight lines in
interstate commerce?  Was it necessary for Congress to make such a
bargain because otherwise the railroads might not have surrendered
their passenger lines (see R.R. Br. 16-17), which were leading them to
financial ruin?  Was it because of the "consideration" paid by the
railroads (see R.R. Br. 19) -- an amount approximately equal to what
Amtrak could have been expected to lose during just its first six
months, an amount less than what a railroad would have lost during the
pendency of discontinuance proceedings?  If this consideration was the
lure, why was no carrier other than Amtrak willing to take over these
passenger lines at any price?  The "realities underlying the enactment
of the RPSA" (R.R. Br. 16) emphatically refute the railroads'
argument.

                                 II.

   The railroads' remaining arguments require little response.  Even
if the railroads acquired contractual rights against the United
States, those rights were not violated by Section 405(f), 45 U.S.C.
565(f), which merely requires them to provide reimbursement for pass
rider privileges.  The railroads contend (Br. 23-28) that they were
contractually released from their "entire responsibility for the
provision of intercity rail passenger service" (45 U.S.C. 561(a)(1))
and that providing reimbursement for pass rider privileges falls
within this release.  Their argument is far-fetched.

   Under the RPSA, a railroad was relieved of "its responsibilities as
a common carrier of passengers by rail in intercity rail passenger
service" (45 U.S.C. 561(a)(1)).  That is what was meant by the "entire
responsibility for the provision of intercity rail passenger service"
(45 U.S.C. 561(a)(1)) -- operating passenger trains, not paying for
free train rides taken by the railroads' employees, retirees, and
their families.  If the railroads had been required to provide bus
fare for employees who commute to work, would they say that they were
being required to provide bus passenger service?

   The railroads concede (Br. 20) that under the RPSA they must
"continue to provide facilities and services to Amtrak for the
transportation of passengers." See Gov't Br. 30-31.  The continuation
of such obligations refutes the railroads' claim that they were
released from anything more than the operation of passenger trains.
"(P)rovid(ing) facilities and services * * * for the transportation of
passengers" (R.R. Br. 20) is much more closely related to the
provision of "intercity rail passenger service" than is a requirement
to pay for pass rider privileges.  /4/

                                 III.

   Even if the railroads were contractually released from any
responsibility for subsidizing Amtrak, that release was not violated
by the reimbursement formula in Section 405(f), which requires the
railroads to pay approximately one-fourth of the face value of the
transportation furnished to their employees.

   In our opening brief (at 31-35), we explained why this formula is a
reasonable approximation of the value of this transportation and thus
does not require the railroads to subsidize Amtrak.  /5/ The railroads
provide only a sketchy response.  First, the railroads suggest (Br.
33-34) that reimbursement for anything beyond the "incremental costs"
of allowing pass riders on board constitutes a subsidy.  However, the
railroads offer no legal or economic support for that contention.

   Second, the railroads repeatedly note that pass riders travel on a
"space available" basis (Br. 29, 31, 32), but the term "space
available" is misleading.  For one thing, as the ICC has recognized,
reservations made by pass riders may "'block' potential full revenue
passengers." Determination of Cost Reimbursement Under Section 405(f)
of the Rail Passenger Service Act, As Amended, 347 I.C.C. 325, 332
(1972);  J.A. 34.  A disproportionate number of pass riders travel on
long-distance trains with reserved seats.  See GAO, Comptroller
General, Nos. B-196907, CED-80-83, Report to Congress, "How Much
Should Amtrak Be Reimbursed For Railroad Employees Using Passes To
Ride Its Trains?" 24 (Mar. 28, 1980).  On these trains, pass riders
may make reservations within 24 hours of departure, and once such a
reservation is made, Amtrak may not sell the seat to a passenger
wishing to pay full fare.  Id. at 22.  On unreserved trains, pass
riders are supposed to surrender their seats if paying passengers are
standing, but whether conductors do, or practicably could, enforce
these restrictions on crowded trains is dubious.  See Id. at 23;  J.A.
34.

   Finally, the railroads rely (Br. 31) on the ICC's 1972 decision
requiring the railroads to reimburse Amtrak for the administrative
costs of the pass rider program.  Determination of Cost Reimbursement
Under Section 405(f) of the Rail Passenger Service Act, As Amended,
supra;  J.A. 23-37.  But as noted in our opening brief (at 8), the
ICC's decision was merely an "interim" determination subject to
"possible adjustment in the future, perhaps with an effect retroactive
to the date of (that) decision" (347 I.C.C. at 333-335;  J.A. 36).
/6/

                              CONCLUSION

   For these reasons and the reasons set forth in our opening brief,
the judgment of the court of appeals should be reversed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   JANUARY 1985

   /1/ The railroads argue (Br. 19-20) that their position would not
restrict Congress's authority to regulate commerce because Congress
could still regulate Amtrak.  However, Congress would be barred from
exercising the full measure of its Commerce Clause authority with
respect to the railroads, which continue to operate in interstate
commerce and thus remain subject to the full range of common carrier
duties.

   /2/ Coombes v. Getz, 285 U.S. 434 (1932), upon which the railroads
rely (Br. 22), is inapposite.  The issue there was not whether a
statute imposed contractual obligations on the government.  Instead
the issue was whether a contractual obligation between private parties
could be retroactively extinguished by the repeal of the provision of
law upon which the obligation was based.

   /4/ There is no merit to the railroads' contention (Br. 25) that
Section 7.5 of the Basic Agreement shows that Amtrak was supposed to
pay for the pass rider privileges of railroad personnel.  Section 7.5
gave Amtrak the right to decide whether those privileges would be
honored, a right that Congress subsequently repealed at the railroads'
urging.  Section 7.5 does not in any way suggest that Amtrak would pay
for those privileges, which had been created by the railroads and were
enjoyed by their employees and their families.

   /5/ The fact that Congress was concerned about Amtrak's deficits
when it adopted the new reimbursement formula in 1979 does not call
into question the fairness of that formula, as the railroads suggest
(Br. 30).  Congress was legitimately concerned about allowing the
railroads' employees to travel on Amtrak virtually for free, while
even full-fare Amtrak passengers were being heavily subsidized at the
taxpayers' expense.  See Gov't Br. 8-9.  In other words, Congress's
objective was not to require the railroads to subsidize Amtrak but to
reduce the taxpayers' subsidy of the railroads' employees.

   /6/ The railroads dispute the fact that significant numbers of pass
riders might purchase full fare tickets if free transportation were
not provided (Br. 29 n.14).  The railroads suggest that pass riders
would be no more likely to choose train transportation, instead of
air, bus, or car travel, than any other member of the public.  This
suggestion seems clearly false.  Pass riders are persons closely
associated with railroads.  As a result, they are probably more
familiar than most people with the location of train stations, train
routes, and train schedules.  From experience, they are probably more
accustomed to train travel.  For these reasons, they are probably much
more likely to select train travel than are other members of the
public.