NATIONAL RAILROAD PASSENGER CORPORATION, APPELLANT V. ATCHISON, TOPEKA, AND SANTA FE RAILWAY CO., ET AL., ATCHISON, TOPEKA, AND SANTA FE RAILWAY CO., 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 Brief for the United States as Appellee Supporting the National Railraod Passenger Corporation TABLE OF CONTENTS QUESTION PRESENTED Opinions below Jurisdiction Statutory provisions involved Statement Introduction and summary of argument Argument: Section 405(f) of the Rail Passenger Service Act does not unconstitutionally impair any contractual right of the railroads I. The railroads do not have a contractual right to be free of their prior responsibilities for providing intercity railroad passenger service A. The RPSA is not a contract B. The basic agreement between Amtrak and the the railroads did not grant the railroads the contractual right to be free from all obligation to provide passenger service II. Even if the railroads were contractually relieved of any responsibility for the provision of passenger rail service, the pass rider amendment does not impose any such obligation upon them A. Requiring payment for the use of pass privileges does not constitute the reimposition of common carrier obligations B. The reimbursement formula in 45 U.S.C. 565(f) does not result in a subsidy or windfall for Amtrak III. Section 405(f) is constitutional even assuming that it somehow alters the railroads' contracts Conclusion OPINIONS BELOW The opinion of the court of appeals (J.S. App. 1a-10a) /1/ is reported at 723 F.2d 1298. The decision of the district court (J.S. App. 11a-27a) is unreported. JURISDICTION The judgment of the court of appeals (Pet. App. 28a-29a) was entered on December 13, 1983. On January 10, 1984, the National Railroad Passenger Corporation (Amtrak) filed a notice of appeal to this Court (J.S. App. 31a-32a). /2/ On March 9, 1984, Amtrak files its jurisdictional statement (No. 83-1492). This Court noted probable jurisdiction on October 1, 1984. Jurisdiction of this appeal is invoked under 28 U.S.C. 1252. On April 6, 1984, appellees Atchison, Topeka and Santa Fe Railraod, et al. (the railroads) filed a notice of cross-appeal. On April 6, 1984, the railroads filed a jurisdiction statement on cross-appeal (No. 83-1633). Jurisdiction was invoked under 28 U.S.C. 1252. In response, Amtrak and the United States agreed that if this Court noted probable jurisdiction of Amtrak's appeal, the Court should do so for the railroads' cross-appeal as well. On October 1, 1984, this Court deferred consideration of the question of jurisdiction with respect to the railroads' cross-appeal until consideration of the case on the merits. We see no jurisdictional defect in the cross-appeal. After Amtrak appealed to this Court under 28 U.S.C. 1252, any subsequent appeal or cross-appeal had to be taken to this Court as well. See Heckler v. Edwards, No. 82-874 (Mar. 21, 1984), slip op. 9; Regan v. Taxation With Representation, No. 81-2338 (May 23, 1983), slip op. 2 n.3. Moreover, since cross-appellant seeks relief broader than that granted by the court of appeals' judgment (see 83-1633 J.S. 7), cross-appeal was proper. STATUTORY PROVISIONS INVOLVED Relevant provisions of the Rail Passenger Service Act, 45 U.S.C. 501 et seq., are set out at J.S. App. 40a-45a. QUESTIONS PRESENTED 1. Whether a railroad that was relieved, under the Rail Passenger Service Act (RPSA), 45 U.S.C. 561(a), of "its responsibilities as a common carrier of passengers by rail in intercity rail passenger service," thereby obtained a contractual right against being required to reimburse Amtrak for free or reduced-fare transportation furnished to the railroads' present and retired employees and their dependents (No. 83-1492). 2. Whether such a railroad has a contractual right against being required to subsidize Amtrak and whether the reimbursement formula in 45 U.S.C. 545(f) impairs such a right (No. 83-1633). 3. If 45 U.S.C. 545(f) impairs any such rights, whether the Due Process Clause is violated. STATEMENT 1. The Rail Passenger Service Act (RPSA or the Act), 45 U.S.C. 501 et seq., took effect on May 1, 1971. Before then, numerous private railroad companies, including all of the railroads in this case, provided intercity rail passenger service in the United States. GAO, Comptroller General, Nos. B-196907, CED-80-83, Report to the Congress, "How Much Should Amtrak Be Reimbursed For Railroad Employees Using Passes to Ride Its Trains?," at 2 (Mar. 28, 1980) (hereinafter cited as GAO Report). Beginning in the 1880s, many railroads permitted current and retired employees and their dependents to travel on their passenger trains free or at reduced rates. Ibid. Many railroads also had reciprocal agreements allowing employees to travel on other railroads at reduced rates, usually half fare. Ibid. By 1970, the railroads were losing huge sums as a result of their obligation to provide intercity passenger service, and many had petitioned the Interstate Commerce Commission for permission to discontinue passenger trains. H.R. Rep. 91-1580, 91st Cong., 2d Sess. 2 (1970). Congress responded to this crisis by enacting the RPSA. The RPSA established Amtrak as a for-profit corporation to provide intercity passenger service (45 U.S.C. 541). The RPSA also established a procedure under which railroads could obtain relief from their passenger service obligations -- relief that previously was available only by petitioning the ICC (49 U.S.C. (1970 ed.) 1 (18)). Under the new procedure, the railroads relinquished their passenger routes in order to enable Amtrak "to undertake passenger service on a timely basis" (45 U.S.C. 561(a)). The railroads were also required to pay Amtrak an amount equal to one-half their financial losses from intercity passenger service during 1969 (45 U.S.C. 561(a)(2)) and to provide Amtrak with services and the use of tracks and other facilities at rates to be agreed upon by the parties or, in the event of disagreement, by the ICC (45 U.S.C. 561(a)-(c) ). Pursuant to Section 401 of the RPSA, 45 U.S.C. 561, most of the railroads that had previously provided intercity rail passenger service (including all of the railroads involved in this case) entered into standardized contracts, called "Basic Agreements," with Amtrak. See The National Railroad Passenger Corporation Agreement (Apr. 16, 1971) (hereinafter cited as Basic Agreement). Section 2.1 of the Basic Agreement, entitled "Relief from Responsibility," reflects the release of the railroads from their former obligation to provide intercity rail passenger service. /3/ The Basic Agreements mirrored the RPSA in numerous other respects, imposing upon the railroads significant responsibilities incidental to the provision of intercity rail passenger service. Like Section 402 of the RPSA, 45 U.S.C. 562, Articles 3 and 4 of the Basic Agreements required the railroads to make services, tracks, and facilities available to Amtrak. And like Section 405 of the RPSA, 45 U.S.C. 565, Section 7.3 of the Basic Agreements required the railroads to protect employees who might subsequently be affected by a discontinuance of passenger service. Section 7.5 of the Basic Agreements deals with transportation privileges. The fifth paragraph, which concerns pass rider benefits, states: Transportation privileges, if any, with respect to business and personal travel of Railroad personnel shall be as determined by (Amtrak). Unlike the previous paragraph of Section 7.5, this paragraph does not specify which party is to bear the cost of pass rider transportation. When Amtrak came into being, it decided for reasons of economy to adopt a pass rider policy more restrictive than that which the railroads had employed. As a result, many railroad employees lost their pass privileges. /4/ Later in 1971, Amtrak adopted a less restrictive pass rider policy but did not restore many of the pass rider benefits that had previously been cancelled. GAO Report 3. Moreover, the new policy was subject to change or cancellation by Amtrak. Ibid. The railroads vigorously protested Amtrak's actions. Noting that railroad employees attached great importance to their pass rider benefits, the railroads expressed concern about substantial morale problems and the possibility of strikes. Employees of the Penn Central Railroad threatened to strike over the issue of pass rider service. /5/ This threat was sufficiently serious for a federal court to issue a temporary restraining order. Baker v. System Federation No. 1, 331 F. Supp. 1363, 1364-1365 (E.D. Pa. 1971). In 1972, Congress determined that the railroads' pass rider policies should be reinstated. The Senate Committee Report accompanying the proposed pass rider legislation stated (S. Rep. 92-756, 92d Cong., 2d Sess. 11 (1972)): The Committee believes that employees who were entitled to free or reduced-rate transportation before the advent of Amtrak should not lose such privileges on account of the transfer of passenger service from the railroads to Amtrak. Similarly, the House Committee Report observed (H.R. Rep. 92-905, 92d Cong., 2d Sess. 11 (1972)): Railroads have traditionally offered employees some form of free or reduced fares, both "on line" and "off line." This section requires Amtrak to continue the tradition of according transportation service to railroad employees to the maximum extent practicable. In order to restor the pass rider benefits, Congress added Section 405(f) to the RPSA (45 U.S.C. 565(f)). Pub. L. No. 92-316, Section 8, 86 Stat. 230. Section 405(f) required Amtrak to assure, to the maximum extent practicable, that pass rider privileges were preserved for all railroad employees, retirees, and their dependents who had been eligible for such benefits when Amtrak assumed operation of the passenger lines on April 30, 1971. In floor debates on this legislation, Senator Church stated that "the loss of, or reduction of, free pass privileges by railroad employees entitled to them was a breach of faith with these people." 118 Cong. Rec. 14792 (1972). Senator Percy stated that the railroads "must also deliver on their promises of long standing" (id. at 14791). Amtrak implemented this program by permitting pass riders to "travel free or at half fare depending on factors such as length of railroad employment, whether they are retired, and whether they are traveling on or off the rail lines of their home railroads." GAO Report i. Pass riders may not use metroliners, may not make reservations on reserved trains until 24 hours before departure, and once on board unreserved trains, "pass riders are supposed to stand if there are not enough seats." Ibid. As originally enacted, Section 405(f) also required the railroads to reimburse Amtrak for "such costs as may be incurred" in providing the pass rider benefits. Pub. L. No. 92-316, Section 8, 86 Stat. 230. The Senate Committee explained (S. Rep. 92-756, supra, at 11): Because Congress is merely continuing pass policies which the railroads themselves developed, it would appear that the railroads and not Amtrak should bear the cost, if any. Section 405(f) did not specify how these costs were to be calculated but provided for the matter to be referred to the ICC if Amtrak and the railroads were unable to reach agreement. Pub. L. No. 92-316, Section 8, 86 Stat. 230. When the matter was subsequently referred to the ICC pursuant to this provision, the ICC required the railroads as an interim tive costs of operating the pass rider program. Determination of Cost Reimbursement Under Section 405(f) of the Rail Passenger Service Act, As Amended, 347 I.C.C. 325 (1972); J.A. 23-37. The ICC recognized that honoring the pass privileges might result in some substantial costs for Amtrak. The Commission noted (347 I.C.C. at 332; J.A. 34) that reservations made by pass riders might "'block' potential full revenue passengers." The Commission also noted (347 I.C.C. at 333; J.A. 34) that "(t)here is no suggestion in the record as to how the space-available limitation can be enforced on * * * non-reserved trains, short of excluding pass riders from using them." Observing that the data before it were "not as reliable as is ordinarily desirable," the Commission approved "an interim payment of 0.79 cents per passenger-mile" subject to "possible adjustment in the future, perhaps with an effect retroactive to the date of this decision" (347 I.C.C. at 333-335; J.A. 36). The ICC also specified that such payments were to be offset by reduced-rate fares paid by pass riders (347 I.C.C. at 334; J.A. 36). When this formula was applied, the amount of the reduced-rate fares paid by the pass riders always exceeded, and thus fully offset, the payments otherwise due from the railroads. GAO Report 5. In 1979, Congress determined that the reimbursement received by Amtrak for pass rider service was not adequate. Congressman Florio, sponsor of the pass rider legislation during that session, said that he found it "somewhat difficult to accept railroad employees riding for virtually free * * * if, in fact, the taxpayers are paying $2 for every $1 of the general passenger public." Amtrak Fiscal Year 1980 Authorization and Amtrak Route Restructuring: Hearings on H. Res. 93, 97, 105, et al. Before the Subcomm. on Transportation and Commerce of the House Comm. on Interstate and Foreign Commerce, 96th Cong., 1st Sess. 244-246 (1979). In the Amtrak Reorganization Act of 1979, Pub. L. No. 96-73, Section 120, 93 Stat. 547, therefore, Congress amended Section 405(f) to require the railroads prospectively to reimburse Amtrak for pass rider service at the rate of "25 percent of the systemwide average monthly yield per revenue passenger mile" (i.e., approximately one-fourth of the normal fares for ticket-buying passengers). The new rate was to remain in effect for a two-year period. The Act also directed the Comptroller General to conduct a study and make recommendations concerning the appropriate method of reimbursement. In 1980, the Comptroller General submitted his report to Congress. The report analyzed in detail two methods of reimbursement: first, reimbursement to Amtrak for the administrative costs of providing pass rider service (as the ICC had originally required); and, second, reimbursement to Amtrak for the value of such service (as required by the 1979 Amendment). GAO Report iv. The Comptroller General concluded that it was impossible to determine with precision either the administrative costs to Amtrak of pass rider service or the value to employees of a pass privilege. Id. at ii. Further, he advised Congress that he was unable to find "adequate analytical evidence to recommend one position over the other." Ibid. Therefore, the Comptroller General concluded that the choice between the two reimbursement formulas was "a policy decision the Congress should make." Ibid. After receiving the GAO report, Congress once again amended Section 405(f) in 1981 and provided that the 25 % reimbursement requirement would remain in effect indefinitely. 2. This case began in 1980 when five railroads (appellees in No. 83-1492 and cross-appellants in No. 83-1633) brought suit against Amtrak in the United States District Court for the Northern District of Illinois, challenging the constitutionality of Section 405(f). The railroads' principal contention was that Section 405(f) impaired a contractual right granted to them by Section 401(a) of the RPSA, 45 U.S.C. 561(a), and their Basic Agreements with Amtrak. The railroads contended that these provisions gave them the contractual right permanently to be relieved from all responsibility for the provision of intercity passenger service. The railroads also argued that even if they had no contractual rights against the United States, "the congressionally ordered transfer of wealth from the railroads to their current and past employees and their families (the pass riders) is a deprivation of property without due process of law, in violation of the Fifth Amendment" (J.S. App. 16a (footnote omitted)). Because the constitutionality of an Act of Congress was drawn in question, the United States intervened as a defendant. See 28 U.S.C. 2403(a). In November 1982, the district court issued an opinion upholding the statute and dismissing the case (J.S. App. 11a-27a). The court first held that the RPSA itself does not constitute a contract between the United States and the railroads (J.S. App. 17a). The court noted (ibid.) that "(t)he language of the statute * * * is clearly not that of a contract." By contrast, the court assumed (J.S. App. 18a) that the Basic Agreement was a contract between the United States and the railroads, but the court held that Section 405(f) did not impair that contract. The court observed that the Basic Agreement "relieves the railroads from their Entire responsibility for the provision of 'intercity Rail Passenger Service'" (J.S. App. 18a, quoting Basic Agreement Section 2.1 (emphasis in court's opinion)). The court then noted (J.S. App. 18a) that by the railroads' own admission, they never had a legal or contractual responsibility to provide free or reduced-rate transportation to employees and their families but had instead done so gratuitously. The court further noted (J.S. App. 19a) that another provision of the Basic Agreement (Section 7.5) gave Amtrak the right to determine such transportation privileges. The court next rejected (J.S. App. 19a-26a) the railroads' substantive due process argument, holding that the railroads had not overcome the heavy presumption of constitutionality that applies to "legislative Acts adjusting the burdens and benefits of economic life" (Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 17 (1976)). Finally, the court (J.S. App. 26a-27a) found no merit in the railroads' claim that the particular reimbursement formula chosen by Congress in the 1979 amendment violates due process by requiring the railroads to pay more than Amtrak's costs. The court held that Congress had acted rationally in choosing a formula based on the value of the pass privileges rather than Amtrak's costs (ibid.). The court noted (ibid.) that the GAO had reported to Congress that it "did not find adequate analytical evidence to recommend one position over the other" and that the GAO report had concluded that the choice between a cost or value-based formula was "a policy decision that the Congress should make." GAO Report ii, 30. Relying on Usery v. Turner Elkhorn Mining Co., 428 U.S. at 18-19, the court held that the choice between such formulas does not present a constitutional question (J.S. App. 27a). 3. The court of appeals affirmed in part and reversed in part (J.S. App. 1a-10a). The court agreed (id. at 9a) that Section 405(f) is a legitimate exercise of Congress's power under the Commerce Clause. The court also agreed (J.S. App. 4a) that "Congress did not act unconstitutionally in requiring the railroads to reimburse Amtrak for employee pass privileges." The court of appeals noted that Section 405(f) of the RPSA and Section 2.1 of the Basic Agreement state that the railroads are relieved of any "responsibility" for providing intercity railroad passenger service, and the court held that these provisions do not apply to reimbursement for pass rider privileges because the railroads never had a "responsibility" to furnish those privileges. While the court found that the railroads had no contractual right against compelled reimbursement, the court concluded (J.S. App. 8a) that the railroads did have contractual protection against being required "to finance aspects of (Amtrak's) operations that were once part of the railroads' entire responsibility for the provision of intercity rail passenger service." The court held that the railroads enjoyed this contract right under the Basic Agreement (see J.S. App. 4a, 8a, 10a), and the court found it unnecessary to decide whether Section 401(a) of the RPSA conferred a similar contractual right (J.S. App. 4a). Having decided that the railroads had a contractual right under the Basic Agreement not to be called upon to finance Amtrak's operations, the court of appeals then held (J.S. App. 8a (footnote omitted)) that Section 405(f) "authorizes Amtrak to breach the basic agreement." Reasoning that "passholders occupy seats that would otherwise be empty" (J.S. App. 10a), the court concluded (id. at 8a-10) that any reimbursement in excess of Amtrak's "costs" -- by which the court appears to have meant merely Amtrak's administrative costs in operating the program -- would constitute a subsidy or "windfall" for Amtrak. The court therefore held that Section 405(f) violated the Due Process Clause. 4. Amtrak appealed to this Court, contending that the reimbursement formula in Section 405(f) is constitutional (No. 83-1492). The railroads cross-appealed, arguing that required reimbursement under any formula violates due process (No. 83-1633). The United States, which intervened below, is participating in support of Amtrak as an appelle in both cases. INTRODUCTION AND SUMMARY OF ARGUMENT For many years, private railroads in this country gratuitously provided their employees and retirees and their dependents with what are known as "pass rider privileges," i.e., the privilege of traveling free or at a reduced fare on the trains of the employer railroad and certain other railroads with which reciprocal arrangements had been made. By 1970, passenger train service had become highly unprofitable. The Rail Passenger Service Act, 45 U.S.C. 501 et seq., gave financially struggling railroads the opportunity to turn over their passenger lines to the National Railroad Passenger Corporation (Amtrak). A railroad choosing to take advantage of the RPSA was "relieved of all its responsibilities as a common carrier of passengers by rail in intercity rail passenger service" (45 U.S.C. 561(a)). A participating railroad was also required to enter into an implementing contract (called a "Basic Agreement") with Amtrak. Section 405(f) of the RPSA, 45 U.S.C. 565(f), which was later added and amended, requires Amtrak to honor the pass rider privileges held by the railroads' employees and retirees and their dependents. Section 405(f) also requires the railroads to reimburse Amtrak for approximately one-fourth the ticket price of transportation provided to pass riders. The railroads involved in this case took advantage of the RSPA to shed their passenger service obligations, while retaining their freight lines. They now claim that the RPSA and their Basic Agreements with Amtrak gave them a contractual right to be free in perpetuity from any attempt by Congress to reimpose any common carrier obligations relating to passenger service. They also assert a contractual right to be free from making any payments that may constitute a subsidy for Amtrak. And they claim that these alleged contract rights protect them from having to make the reimbursements required by Section 405(f). The railroads' claims are devoid of merit. I. In the first place, neither the RPSA nor the Basic Agreements gave the railroads a contractual right against reimposition of common carrier obligations relating to passenger service. There is a strong presumption that statutes do not create contractual obligations that restrict future government action, and this presumption has special force where, as in this case, it is claimed that the government has bartered away a portion of an important sovereign power, such as the power to regulate commerce. Here, it is clear that the RPSA is not a contract. "The language of the statute * * * is clearly not that of a contract," as the district court accurately observed (J.S. App. 17a). Instead, the RPSA merely granted the railroads regulatory relief from some of their common carrier obligations. The railroads obtained the same relief they would have obtained had they successfully petitioned the Interstate Commerce Commission for discontinuance of their passenger service, and such relief would have provided no guarantee against reimposition of passenger service obligations as long as the railroads continued to operate freight lines in interestate commerce. The Basic Agreement likewise did not give the railroads a contractual right against the reimposition of common carrier obligations. Only the government could conceivably confer such a right, and the government was not a party to the Basic Agreement. Any attempt by private parties to restrict future government action by contract would obviously be ineffectual. The Basic Agreement did not attempt to impose such restrictions but merely stated that the transfer of passenger service obligations from the railroads to Amtrak was the purpose of the agreement and perhaps a condition of its performance. II. A. Even if the RPSA or the Basic Agreement gave the railroads contractual rights against the United States, those rights are not violated by Section 405(f). At most, a railroad would have a right against reimposition of "its responsibilities as a common carrier of passengers by rail in intercity rail passenger service" (45 U.S.C. 561(a)). In other words, the railroad could not be compelled to resume operation of passenger trains. Such a right would not mean that the railroad could not be required to reimburse Amtrak for the use of pass rider privileges. The difference is as great as the difference between running a railroad and buying someone a ticket. The railroads' attempt to construe the RPSA more broadly is unpersuasive. Contrary to the railroads' suggestion, the RPSA did not relieve them from the responsibility of doing anything that is related to rail passenger service. On the contrary, the RPSA expressly requires the railroads to assist Amtrak in many ways, such as by providing the use of track, services, and facilities. See 45 U.S.C. 545, 652. All of these measures are far more directly related to common carrier responsibilities than is the reimbursement required by Section 405(f). Moreover, as both courts below held, even if the railroads were contractually protected against reimposition of passenger service responsibilities, Section 405(f) would be unaffected because providing pass rider benefits was never one of the railroads' legal or contractual responsibilities. B. The court of appeals held that the railroads have a contractual right against having to subsidize Amtrak and that the reimbursement formula in Section 405(f) violates that right because it requires the railroads to pay more than the incidental costs of allowing the pass riders on board -- for example, the administrative costs of processing the reimbursements. The court of appeals' theory is clearly wrong. First, as previously discussed, even if the RPSA or the Basic Agreement conferred contract rights binding against the United States, those rights would at most protect the railroads from having to operate passenger trains, not from having to operate passenger trains, not from having to make any payments that might contribute to Amtrak's survival. Moreover, requiring the railroads to pay one-fourth the ticket price does not subsidize Amtrak. Even the full tickt price is not enough to cover Amtrak's costs, since Amtrak has been operating at a loss and has required continual federal subsidies. The court of appeals' conclusion that any reimbursement in excess of incremental costs would be a "windfall" for Amtrak (J.S. App. 9a-10a) was based on the erroneous premise that "passholders occupy seats that would otherwise be empty." In fact, however, some percentage of those seats would be filled because some passholders would undoubtedly purchase full-fare tickets if the pass rider privileges were not available. Estimating the value of the pass rider privileges is difficult in the absence of a market for tickets with comparable restrictions. But as suggested by the Government Accounting Office's detailed study of the question, the rate contained in Section 405(f) is reasonable and fair. III. Finally, even if Section 405(f) altered contract rights, it would not offend the Due Process Clause. Federal laws "'adjusting the burdens and benefits of economic life'" violate due process only if "'the legislature has acted in an arbitrary and irrational way.'" Pension Benefit Guaranty Corp. v. R.A. Gray & Co., No. 83-245 (June 18, 1984), slip op. 10-11, quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 %1976). Here, Congress rationally required Amtrak to honor the pass rider privileges of the railroads' employees and retirees and their dependents because the railroads had created an expectation that those privileges would be honored, because labor peace might have otherwise been threatened, and because the railroads themselves strongly urged that the privileges be honored. Congress rationally required the railroads to pay at least part of the cost of the privileges because Congress felt that the railroads were responsible and that the taxpayers should not have to bear the full burden. And Congress rationally concluded, in light of the GAO study, that requiring reimbursement at the rate of approximately one-fourth the ticket price was reasonable and fair to the railroads. ARGUMENT SECTION 405(f) OF THE RAIL PASSENGER SERVICE ACT DOES NOT UNCONSTITUTIONALLY IMPAIR ANY CONTRACTUAL RIGHT OF THE RAILROADS I. THE RAILROADS DO NOT HAVE A CONTRACTUAL RIGHT TO BE FREE OF THEIR PRIOR RESPONSIBILITIES FOR PROVIDING INTERCITY RAILROAD PASSENGER SERVICE In the lower courts, the railroads argued that both the Rail Passenger Service Act and their Basic Agreement with Amtrak gave them a contractual right to be free of any responsibility related to the provision of intercity railroad passenger service. Disavowing or abandoning any argument based on the Commerce Clause (see J.S. App. 19a) or the Takings Clause, /6/ the railroads conceded that Section 405(f) is constitutional unless they possess such contractual rights. It is clear, however, that neither the RPSA nor the Basic Agreement confers such rights. A. The RPSA Is Not A Contract 1. The Rail Passenger Service Act, 45 U.S.C. 501 et seq., is a public law designed to provide the American public with a "modern, cost-efficient, and energy-efficient intercity railroad passenger service" (45 U.S.C. 501(a)). It is not a contract between the United States and the railroads or anyone else. The federal and state governments enter into numerous contracts, but those contracts seldom take the form of statutes. Construing a statute to be a contract often restricts the exercise of legitimate and important governmental powers, and accordingly there is a strong presumption that legislation "is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise." Dodge v. Board of Education, 302 U.S. 74, 79 (1937). Accord, Wisconsin & Michigan Ry. v. Powers, 191 U.S. 379, 387 (1903); Rector of Christ Church v. County of Philadelphia, 65 U.S. (24 How.) 300, 302 (1860). See United States Trust Co. v. New Jersey, 431 U.S. 1, 17 n.14 (1977). This presumption is particularly strong where it is claimed, as it is in the present case, that government has not merely incurred a commercial obligation, such as the payment of money /7/ or conveyance of property, /8/ but has bartered away important governmental powers. For example, in Wisconsin & Michigan Ry. v. Powers, 191 U.S. 379, 387 (1903), Justice Holmes, writing for the Court, responded to a claim that a state had incurred a contractual obligation not to tax certain railroads: The broad ground in a case like this is that, in view of the subject matter, the legislature is not making promises, but framing a scheme of public revenue and public improvement. In announcing its policy and providing for carrying it out it may open a chance for benefits to those who comply with its conditions, but it does not address them, and therefor it makes no promise to them. It simply indicates a course of conduct to be pursued, until circumstances or its views of policy change. Indeed, there is considerable authority holding that there are certain powers that government cannot restrict by contract. For example, in Pennsylvania Hospital v. City of Philadelphia, 245 U.S. 20 (1917), a state law was passed that forbade construction of any streets through the grounds of a hospital without its consent. In return, the hospital was required to make certain payments and to furnish ground for designated streets. Nevertheless, this Court held that the city was not barred from condemning part of the hospital grounds for a street. The Court wrote (id. at 23): States cannot by virtue of the contract clause be held to have divested themselves by contract of the right to exert their governmental authority in matters which from their very nature so concern that authority that to restrain its exercise by contract would be a renunciation of power to legislate for the preservation of society or to secure the performance of essential governmental duties. See also, e.g., Norman v. Baltimore & O.R.R., 294 U.S. 240, 309-310 (1935); Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 436-437 (1934); Atlantic Coast Line R.R. v. City of Goldsboro, 232 U.S. 548 (1914); Illinois Central R.R. v. Illinois, 146 U.S. 387 (1892); Butchers' Union Co. v. Crescent City Co., 111 U.S. 746 (1884). 2. In the present case, the presumption that a statute does not create contractual rights and obligations has not been overcome. By its terms, the RPSA clearly does not create or speak of a contract between the United States and the railroads. See J.S. App. 17a; compare Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 105 (1938). Instead, the relationship between the United States and the railroads is described in non-contractual terms. Section 401(a), 45 U.S.C. 561(a), states that upon entering into one of the prescribed contracts with Amtrak, a participating railroad "shall be relieved of all its responsibilities as a common carrier of passengers by rail in intercity rail passenger service" under the Interstate Commerce Act and any other laws. This is the language of regulation under the Commerce Clause and not the language of contract. To be sure, there are frequent references in Section 401(a), 45 U.S.C. 561(a), to contracts between the railroads and Amtrak. However, this Court has recognized that legislation establishing the terms on which other parties may execute contracts does not itself constitute a statutory contract but is rather merely a declaration of legislative policy that is subject to revision or repeal in the discretion of the legislature. Dodge v. Board of Education, 302 U.S. at 79. Any remaining doubt about the meaning of Section 401(a) is dispelled by Section 301, 45 U.S.C. 541, under which Congress "expressly reserved" its rights to "repeal, alter, or amend (the RPSA) at any time." A "contract" that Congress may unilaterally repeal, alter, or amend at any time is no contract at all. /9/ This principle was recognized long ago in the Sinking-Fund Cases, 99 U.S. 700 (1878), where railroads challenged an act of Congress that amended prior statutes governing their obligations to the United States on securities issued to aid in the initial construction of the railroads. Rejecting the railroads' claim that the amendment "improperly interfere(d) with vested rights," (id. at 719), the Court held that by using "the simple words * * * 'that Congress may at any time alter, amend, and repeal this act,' * * * Congress not only retains, but has given special notice of its intention to retain, full and complete power to make such alterations and amendments of the charter as come within the just scope of legislative power" (id. at 720). Just such "simple words" were employed by Congress in the Rail Passenger Service Act. They fully authorized and contemplated changes such as the 1979 and 1981 pass rider amendments. 3. In addition to the language of the RPSA, the nature of the contractual right that Congress allegedly bartered away -- its power to impose certain common carrier obligations under the Commerce Clause -- weighs heavily against the railroads' position. The regulation of interstate commerce is one of Congress's broadest and most important powers, and it should not lightly be presumed that Congress contracted away any portion of this vital authority. Similarly, the prior regulatory relationship between the government and the railroads and the economic background of the RPSA are incompatible with the railroads' claim that Congress gave them the contractual right to be free of certain common carrier obligations. "One of the duties of a railroad company doing business as a common carrier is that of providing reasonably adequate facilities for serving the public. This duty arises out of the acceptance and enjoyment of the powers and privileges granted by the State and endures so long as they are retained. It represents a part of what the company undertakes to do in return for them, and its performance cannot be avoided merely because it will be attended by some pecuniary loss." Chesapeake & O. Ry. v. Public Service Comm'n, 242 U.S. 603, 607 (1917). A railroad may be compelled, among other things, to continue unprofitable service (see Hayfield Northern R.R. v. Chicago & North Western Transportation Co., No. 82-1579 (June 12, 1984), slip op. 4), to construct expensive new facilities (Atchison Ry. v. Railroad Comm'n, 283 U.S. 380 (1931) ); and to undertake new service (Chesapeake & O. Ry. v. Public Service Comm'n, supra). When the RPSA was enacted in 1970, many of the passenger lines were "operating under heavy and continuing deficits." H.R. Rep. 91-1580, 91st Cong., 2d Sess. 3 (1970). More than one-fifth of the existing passenger trains were the subject of petitions for discontinuance before the Interstate Commerce Commission. Ibid. If the RPSA had not been enacted, most of the railroads would have faced bleak prospects. At best, they could have anticipated lengthy, costly, and hotly contested discontinuance proceedings (see Hayfield Northern R.R. v. Chicago & North Western Transportation Co., slip op. 4) while losses attributable to passenger service mounted. At worst, discontinuance might have been denied by the ICC. See, e.g., New Haven Inclusion Cases, 399 U.S. 392, 406 (1970) (ICC required New Haven Railroad to continue passenger service although "'totally lacking any hope * * * for future survival of this carrier'"); Penn-Central Merger Cases, 389 U.S. 486, 507 (1968). The RPSA gave the railroads the same relief that might have been obtained through discontinuance petitions, but it eliminated the uncertainty and costly delay that would have otherwise occurred. Congress relieved the railroads of the portion of their common carriers obligations relating to passenger service, but the railroads did not obtain any contractual guarantee that Congress, acting under its Commerce Power, would not reimpose all or part of those obligations in the future if the railroads continued to operate freight service in interstate commerce. See Chesapeake & O. Ry. v. Public Service Comm'n, supra (railroad operating freight service may be required to initiate passenger service as well). In light of the railroads' plight prior to the RPSA, it is far-fetched to suggest that the Act gave them anything other than welcome regulatory relief. One would expect Congress to have acquired some valuable consideration if, as the railroads maintain, Congress gave them the enforceable contractual right to be free in perpetuity from any obligation to provide any passenger service, while at the same time retaining their potentially profitable freight monopolies. In fact, however, the railroads relinquished little. Instead of shouldering huge annual losses resulting from passenger operations, the railroads were required to pay Amtrak an amount equal to 50% of their passenger service deficit during the preceding year, 45 U.S.C. 561(a)(2). This sum was almost certainly less than the loss a railroad would have otherwise occurred during the pendency of discontinuance proceedings. The railroads were also required to provide operational assistance and facilities to Amtrak at rates to be set by contract or, in the case of disagreement, by the ICC (45 U.S.C. 562). This, however, was a normal incident of the railroads' continuing obligations as common carriers. See, e.g., 49 U.S.C. 11101. Finally, the railroads were required to enter into "fair and equitable arrangements to protect the interests of employees * * * affected by a discontinuance of intercity rail passenger service" (45 U.S.C. 565(a)). However, even if the RPSA had not been enacted, similar conditions might well have been attached to certificates allowing abandonment of rail service. ICC v. Railway Labor Ass'n, 315 U.S. 373 (1942); see 49 U.S.C. 10903(2). In sum, the net effect of the RPSA was to relieve the railroads of an immense and potentially fatal burden more quickly and more cheaply than would otherwise have been possible. On the other side, the federally subsidized National Railroad Passenger Corporation was given the opportunity to run passenger lines that had been -- and continue to be -- unprofitable. This was no contract but the gratuitous provision of regulatory relief. B. The Basic Agreement Between Amtrak and the Railroads Did Not Grant The Railroads the Contractual Right to be Free From All Obligation to Provide Passenger Service Unlike the RPSA, the Basic Agreement is a contract. But it is a contract between the railroads and Amtrak, not the government. /10/ Since Amtrak could not possibly bargain away any portion of Congress's Commerce Clause power, any argument that relies solely on the Basic Agreement and not the RPSA faces an immediate (and insurmountable) obstacle. The railroads tried to circumvent this obstacle in the lower courts by contending that Congress made Amtrak its agent and delegated to Amtrak the authority to confer upon railroads entering into the Basic Agreement the contractual right to be free of any obligation to provide passenger service. See Appellants Brief in the court of appeals 22, 26-28. This fiction, however, adds nothing to an argument based exclusively on the RPSA. Only Congress could conceivably confer a contractual right against the imposition of common carrier obligations. Thus, whether it is claimed that Congress conferred that right directly in the RPSA or indirectly through an agent, the source of the right must ultimately be the RPSA. And as already shown, the RPSA merely extended regulatory relief. Both of the courts below suggested that the Basic Agreement gave the railroads a contractual right against future passenger service obligations, but the courts' reasoning was flawed. The district court correctly held (J.S. App. 17a) that the RPSA is not a contract but then erroneously stated in dictum that "(t)he Basic Agreement may well constitute a contract between the United States and the railroads." The court reached this conclusion because it believed that the Basic Agreement granted the railroads something -- viz., "relie(f) * * * from their responsibility to provide passenger rail service" -- "that only the United States, if anyone at all, can offer" (id. at 18a (footnote omitted)). The district court was wrong on several scores. First, the United States was not a party to the Basic Agreement and is therefore not bound by it. Second, while there is no doubt that the railroads were relieved from their passenger service responsibilities, that relief, as previously shown, was furnished by the RPSA and was provided as a matter of regulatory grace, not contractual right. The court of appeals took a different but equally erroneous approach. The court found (J.S. App. 8a) that the Basic Agreement gave the railroads contractual protection against having to subsidize Amtrak and reasoned that Section 405(f) "authorizes Amtrak to breach the basic agreement." But the court never explained how Amtrak, by entering into the Basic Agreement, could bargain away Congress's power to enact a statute that the court conceded (J.S. App. 9a) was "a legitimate exercise of the commerce power." In concluding that the Basic Agreement gave the railroads a contractual right against having to subsidize Amtrak, the court of appeals may have been misled by the language of Section 2.1 of the Basic Agreement, which states in part that "(f)rom and after May 1, 1971, Railroad shall be relieved of its entire responsibility for the provision of Intercity Rail Passenger Service." Of course, even if the Basic Agreement had purported to abrogate the railroads' common carrier obligations, it could not possibly have done so. It is apparent, however, that the Basic Agreement did not attempt to exercise such governmental powers but merely stated that the transfer of those obligations from the railroads to Amtrak, which would be provided under the RPSA as a matter of regulatory grace, was the purpose of the Basic Agreement and perhaps a condition of its performance. See Restatement (Second) of Contracts Sections 224-230 (1981). Other language in Section 2.1, which the court of appeals ignored, shows that the contracting parties recognized that only government could lift the railroads' common carrier responsibilities. The second paragraph of Section 2.1 states: If, having fully complied with the notice or other provisions of Section 401(a)(1) of the Act, Railroad is required, because of any order of any Federal, State or local court or agency of government, whether or not such order is lawfully issued, to continue or resume operation of any Intercity Rail Passenger Train beyond April 30, 1971, NRPC and Railroad will cooperate in efforts to effectuate discontinuance thereof. II. EVEN IF THE RAILROADS WERE CONTRACTUALLY RELIEVED OF ANY RESPONSIBILITY FOR THE PROVISION OF PASSENGER RAIL SERVICE, THE PASS RIDER AMENDMENT DOES NOT IMPOSE ANY SUCH OBLIGATION UPON THEM A. Requiring Payment For the Use of Pass Privileges Does Not Constitute the Reimposition of Common Carrier Obligations Even if the RPSA or the Basic Agreement gave the railroads contract rights against the United States, those rights have nothing to do with this case. The railroads have taken language from the RPSA and the Basic Agreement out of context and have grossly distorted its meaning. Under the RPSA and the Basic Agreement, a participating railroad was "relieved of all its responsibilities as a common carrier of passengers by rail" under the Interstate Commerce Act and state law (45 U.S.C. 561(a) ). Elsewhere, the Act /11/ and the Basic Agreement /12/ use slightly different language, but the meaning is the same. The railroads no longer had to operate passenger trains and incur the huge resulting losses. This relief had nothing to do with reimbursement for rides taken by pass holders. In the first place, the railroads in this case have alleged that they never had a contractual or legal "responsibility" to provide free passes or reduced fares for their employees and their dependents. They claim that these benefits were provided gratuitously -- like "'Christmas turkey(s),'" as the railroads put it (J.S. App. 18a). For this reason, both of the courts below correctly held that Section 405(f) was not affected by provisions relieving the railroads from "responsibilities" relating to the provision of passenger service. More fundamentally, requiring the railroads to make reimbursement for the use of pass privileges on Amtrak does not constitute the reimposition of common carrier obligations. Contrary to the railroads' suggestion, the RPSA and the Basic Agreement did not relieve the railroads from the obligation to provide any type or degree of support for passenger operations. Quite to the contrary, Congress explicity imposed upon the railroads various responsibilities relating to the provision of rail passenger service by Amtrak. Contracting railroads must provide Amtrak with equipment, track, personnel, services, and facilities. 45 U.S.C. 545, 562. Congress was particularly concerned that the railroads make "fair and equitable arrangements to protect the interests of employees" who might be adversely affected by a discontinuation of intercity rail passenger service, and Congress therefore specified certain protections and benefits for them. 45 U.S.C. 565(b); Basic Agreement App. C-1. In addition, two years after the Act went into effect, Congress required the contracting railroads to give Amtrak's passenger trains the right of way over their own freight trains in the use of their tracks, junctions, and crossings. 45 U.S.C. 562(e)(1). All of these measures imposed on the railroads responsibilities far more directly and closely connected to the provision of passenger service than is Section 405(f). Finally, even if the railroads had been relieved of any responsibility even remotely related to the operation of passenger trains, Section 405(f) would still not be affected. Paying for someone's train ticket -- and that in essence is all that Section 405(f) requires -- is a far cry from running or helping to run a passenger railroad. /13/ B. The Reimbursement Formula In 45 U.S.C. 565(f) Does Not Result In a Subsidy Or Windfall For Amtrak The court of appeals rejected the railroads' claim that reimbursement for pass rider privileges was the same thing as the reimposition of common carrier obligations (J.S. App. 4a, 6a n.4). Instead, the court appears to have begun from the premise that the RPSA and the Basic Agreement protect the railroads from any requirement to subsidize Amtrak (id. at 8a). The court then reasoned that any payment in excess of "the costs of the passes" would constitute a subsidy or a "windfall" for Amtrak (id. at 10a). The court defined this "windfall" as the "amount in excess of what the railroads would have expended had they provided the pass privileges" (ibid.). The court's reasoning, including its economic theory, does not make sense. First, the court of appeals' premise was wrong. As previously explained, the RPSA merely relieved the railroads from their common carrier obligation to operate passenger lines, not from any measure that might contribute to Amtrak's financial well-being. If Congress chose to levy a tax on the railroads, while simultaneously subsidizing Amtrak by an equivalent amount, the RPSA and the Basic Agreement would pose no obstacle. Moreover, there is no basis for the court of appeals' conclusion that the statute requires the railroads to pay Amtrak more than the value of the transportation furnished to pass holders. The court of appeals appears to have concluded (see J.S. App. 10a) that the value of the pass privileges was equal to the incremental costs of allowing the pass riders on board. These costs include such items as the administrative cost of issuing tickets, the extra fuel used as a result of the added weight, additional towels in the lavatory, and wear and tear on the trains' furnishings. See GAO Report 14. The court reasoned that "passholders occupy seats that would otherwise be empty." (J.S. App. 10a). This is clearly not true. If the pass rider privileges were cancelled, some of the pass riders would undoubtedly purchase full-fare tickets. Surely all of them would not stay home or use other forms of transportation. Determining the true value of the pass rider privileges is not easy. In a free market, the value of the transportation obtained by the pass holders would be the price of a ticket with comparable restrictions. However, railroad passenger transportation is not a free market. It is heavily subsidized by the government, so that even the cost of a full-fare ticket is less than what Amtrak would have to charge if it were economica-ly self-sufficient. In addition, Amtrak does not sell tickets with restrictions comparable to those imposed on pass holders. It is therefore hard to estimate, among other things, how many such tickets could be sold and how many of those tickets would be purchased by persons who now buy regular tickets. Before amending Section 405(f) in 1981, Congress requested the GAO to determine the value of the pass privileges, but the GAO was unable to arrive at a firm figure. The GAO concluded (GAO Report 27-28): (W)e could not arrive at a definitive value of the service. The value of service provided regular passengers may be considred to be the amount they are willing to pay for it; that is, the price of the ticket. The value of the service to pass riders probably would be something less because of the restrictions placed on pass riders and the uncertainty about getting on the train they want. However, how much the value would be reduced could vary from pass rider to pass rider and from situation to situation. * * * * * Although Amtrak and the railroads had not placed a specific value on the service to pass riders, Amtrak now receives half fares from all non-public-law pass riders and from public law riders traveling off their home lines. In addition, Amtrak receives half fares from some pass riders when they travel on their home lines. Before Amtrak took over, the railroads also generally received half fares from other railroads' employees traveling on their lines. Like the GAO, the sponsors of the House bill regarding the 1979 amendments to the RPSA felt that it was reasonable to require the railroads to reimburse Amtrak for one-half the price of the transportation furnished to the passholders, and they therefore required reimbursement for 50% of the "system-wide average monthly yield per revenue passenger mile." H.R. Rep. 96-189, 96th Cong., 1st Sess. 48 (1979). In conference, that rate was reduced to the 25% rate in the present statute. H.R. Conf. Rep. 96-481, 96th Cong., 1st Sess. 32-33 (1979). This figure is an eminently fair estimate of the value of the pass rider privileges and may well be far less than their true worth. It should not have been overturned, especially on the basis of the court of appeals' simplistic economic analysis. Estimating the value of the pass rider privilege is a matter on which Congress and the GAO have far greater expertise than the courts, and their judgments should have been given more respect. Unlike the court of appeals, the district court here correctly declined to second-guess Congress on the particular rate of reimbursement it chose (J.S. App. 27a). As this Court observed in Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 18-19 (1976), in refusing to overturn Congress's evaluation of an analogous cost issue: We are unwilling to assess the wisdom of Congress' chosen scheme * * *. It is enough to say that the Act approaches the problem of cost spreading rationally, whether a broader cost-spreading scheme would have been wiser or more practical under the circumstances is not a question of constitutional dimension. The railroads here ask this Court to "reweigh the evidence and substitute (its) judgment for that of Congress," a task the Court has previously hed it "must decline to do." Kleppe v. New Mexico, 426 U.S. 529, 541 n.10 (1976). Accord, National Ass'n of Greeting Card Publishers v. USPS, No. 81-1304 (June 22, 1983), slip op. 15 (citation omitted) ("'(a)llocation of costs is not a matter for the slide-rule. It involves judgment on a myriad of facts. It has no claim to an exact science.'"). III. SECTION 405(f) IS CONSTITUTIONAL EVEN ASSUMING THAT IT SOMEHOW ALTERS THE RAILROADS' CONTRACTS Assuming, arguendo, that Section 405(f) somehow altered the railroads' contractual rights, due process was not violated. This Court's decision last Term in Pension Benefit Guaranty Corp. v. R.A. Gray & Co. (PBGC), No. 83-245 (June 18, 1984), is completely dispositive of the railroads' due process/contract impairment claim. There, an employer argued that an amendment to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., violated the Due Process Clause because it impaired the employer's rights under a collective bargaining agreement by retroactively imposing financial liability for withdrawing from a multi-employer pension plan. The Court upheld the constitutionality of the amendment on grounds that are fully applicable here. Like the court of appeals' decision in this case (see J.S. App. 9a-10a), the court of appeals' decision in PBGC was based on the Seventh Circuit's analysis in Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d 947 (1979), aff'd, 446 U.S. 359 (1980). But the Court in PBGC specifically rejected "the constitutional underpinnings" of the Seventh Circuit's analysis in Nanchman (PBGC, slip op. 9 n.6). The PBGC Court also made clear (id. at 14-15) that principles developed under the Contract Clause may not be mechanically applied when reviewing federal economic legislation under the Due Process Clause: We have never held, however, that the principles embodied in the Fifth Amendment's Due Process Clause are coextensive with prohibitions existing against state impairments of pre-existing contracts. See, e.g., Philadelphia, Baltimore & Washington Railroad v. Schubert, 224 U.S. 603 (1912). Indeed, to the extent that recent decisions of the Court have addressed the issue, we have contrasted the limitations imposed on States by the Contract Clause with the less searching standards imposed on economic legislation by the Due Process Clauses. See United States Trust Co. v. New Jersey, 431 U.S. 1, 17, n.13 (1977). And, although we have noted that retrospective civil legislation may offend due process if it is "particularly 'harsh and oppressive,'" ibid. (quoting Welch v. Henry, 305 U.S. 134, 147 (1938), and citing Turner Elkhorn, supra, at 14-20), that standard does not differ from the prohibition against arbitrary and irrational legislation that we clearly enunciated in Turner Elkhorn. Instead, the Court observed (PBGC, slip op. 10) that "(t)he starting point for analysis is (the) decision in Usery v. Turner Elkhorn Mining Co. (, supra)." The Court applied the following standard of review taken from that decision (PBGC, slip op. 10-11, quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. at 15): It is by now well established that legislative Acts adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and that the burden is on one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way. See, e.g. Ferguson v. Skrupa, 372 U.S. 726 (1963); Williamson v. Lee Optical Co., 348 U.S. 483, 487-488 (1955). Section 405(f) easily passes this test. Congress clearly was not acting in an "arbitrary or irrational way" when it determined that the railroads should pay for at least a portion of the value of the free or reduced-rate transportation furnished to their employees and retirees and their dependents. The railroads originally created the expectation that these privileges would be continued, and when Amtrak proposed to curtail them, the railroads strongly opposed such measures, arguing that employee morale and labor peace would be un undermined. Amtrak's general passenger service is heavily subsidized by the taxpayers. Thus it was entirely reasonable for Congress to conclude that the railroads should pay for at least a small portion of the pass rider privileges extended at the railroads' request and to satisfy the expectations that the railroads created. The railroads may no longer fear that curtailment of pass privileges will result in diminished employee morale or labor unrest, since the number of current employees enjoying those privileges has decreased. But that, in our judgment, does not diminish the rationality of the legislation that the railroads themselves once urged upon Congress. The particular reimbursement formula chosen by Congress is also entirely reasonable, as the detailed GAO report and our prior discussion (see pages 32-35, supra) show. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. REX E. LEE Solicitor General RICHARD K. WILLARD Acting Assistant Attorney General SAMUEL A. ALITO, JR. Assistant to the Solicitor General LEONARD SCHAITMAN AL J. DANIEL, JR. Attorneys NOVEMBER 1984 /1/ "J.S. App." refers to the appendix to the jurisdictional statement in No. 83-1492. /2/ The United States also filed a notice of appeal from the judgment of the court of appeals (J.S. App. 31a-32a). However, the Solicitor General decided not to docket a separate appeal but instead to participate as an appellee in support of Amtrak. /3/ Section 2.1 provides: From and after May 1, 1971, Railroad shall be relieved of its entire responsibility for the provision of Intercity Rail Passenger Service. Railroad shall not, without the prior written consent of (Amtrak), operate or provide any regularly scheduled Intercity Rail Passenger Service except pursuant to and in accordance with this Agreement. If, having fully complied with the notice or other provisions of Section 401(a)(1) of the Act, Railroad is required, because of any order of any Federal, State or local court or agency of government, whether or not such order is lawfully issued, to continue or resume operation of any Intercity Rail Passenger Train beyond April 30, 1971, (Amtrak) and Railroad will cooperate in efforts to effectuate discontinuance thereof. /4/ Exhibit 4 to Amtrak's Motion for Summary Judgment, Docket Item No. 36. /5/ Lewis Aff. Paragraphs 4-5, 7-8; Amtrak's Motion for Summary Judgment, Exhs. 5-7 & 9. /6/ See Plaintiffs' Reply Memo. in Support of Motion for Summary Judgment 12 (no Takings Clause issue raised). Nor was any such issue raised on appeal. /7/ See, e.g., United States Trust Co. v. New Jersey, 431 U.S. 1 (1977) (issuance of bonds); Perry v. United States, 294 U.S. 330 (1935) (issuance of bonds); Lynch v. United States, 292 U.S. 571 (1934) (issuance of War Risk Insurance); Indiana ex rel. Anderson v. Brand, 303 U.S. 95 (1938) (employment contract). /8/ See, e.g., United States v. Northern Pacific Ry., 256 U.S. 51 (1921) (land grant); Fletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810) (land grant). /9/ The railroads contend that this section was "intended to insure that Congress could make future modifications in the corporate charter of Amtrak without giving rise to an action for impairment of contract by Amtrak. It had nothing to do with the separate contractual undertaking between the United States and the railroads pursuant to Section 401(a) and the Basic Agreements." Brief of Appellants in the court of appeals 22 n.20 (emphasis in original). This argument ignores the plain language of the statute and defies common sense. Section 301 speaks of the right to repeal, alter, or amend the Act -- not merely Amtrak's corporate charter. Moreover, the railroads' contention would preclude Congress from making any modifications in Amtrak's corporate charter that might have an effect upon the terms of the Basic Agreements. If Congress had intended to so limit its express reservation of a right to "repeal, alter, or amend," it would have chosen far less sweeping language to accomplish such a narrow purpose. /10/ Amtrak is not even a government agency, but a for-profit corporation that is "not be an agency or establishment of the United States Government" (45 U.S.C. 541). /11/ Another portion of Section 401(a), 45 U.S.C. 561(a), speaks of relieving a railroad of "its entire responsibility for the provision of intercity rail passenger service." /12/ Section 2.1 of the Basic Agreement states that a participating railroad is "relieved of its entire responsibility for the provision of Intercity Rail Passenger Service." See J.S. App. 2a. /13/ As previously explained (pages 26-29, supra), we do not see how the Basic Agreement between Amtrak and the railroads may create contractual rights against the United States. But if it does, Section 7.5 of the Basic Agreement refutes any claim that those rights are violated by requiring the railroads to reimburse Amtrak for the use of pass privileges. That provision states that "(t)ransportation privileges, if any, with respect to business and personal travel of Railroad personnel shall be as determined by (Amtrak)." And unlike other paragraphs of Section 7.5, this provision does not allocate costs, thus leaving the question open for resolution by subsequent contract or statute.