BNUMBER: B-277814
DATE: October 20, 1997
TITLE: [Letter], B-277814, October 20, 1997
**********************************************************************
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 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 sec. 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. sec. 24302 (1994). Amtrak's common stock,
authorized by 49 U.S.C. sec. 24304, is held by four private railroads.
The Secretary of Transportation holds Amtrak's preferred stock, issued
in amounts commensurate with the financial assistance provided to
Amtrak by the United States.[3] 49 U.S.C. sec. 24304(d). Amtrak is a
rail carrier, which is operated and managed as a for-profit
corporation. 49 U.S.C. sec. 24301(a)(1), (2). Amtrak is not a
department, agency, or instrumentality of the United States
Government. 49 U.S.C. sec. 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 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., 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
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 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:
"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 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 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. sec.
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 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 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., 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 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 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
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
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. sec. 24312(b).
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. sec.
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. sec. 24302(a)(1)(D).
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. sec.
5(2)(f) (1970).
5. Amtrak is in the process of revising this information using 1997
data.
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.
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.
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, sec. 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. sec. 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 sec. 10(a), 86 Stat. 227, 232 (1972).
Section 602 was repealed in 1992. See Pub. L. No. 102-533 sec. 7(c), 106
Stat. 3515, 3519 (1992).
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.
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.
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).
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.
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. sec. 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.
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.