Constitutionality of Repealing the Employee Protection Provisions of the Regional Rail Reorganization Act ( 1981 )

Constitutionality of Repealing the Employee Protection
Provisions of the Regional Rail Reorganization Act
Congress may modify or repeal altogether the income protection program enacted by
T itle V o f the Regional Rail Reorganization A ct of 1973, under which the Consoli­
dated Rail Corporation (Conrail) was given responsibility for paying employee benefits
under existing collective bargaining agreements between its five component railroads
and their unions. Such action would not result in any constitutionally compensable
“taking” from railroad employees, o r impair any private contract rights in violation of
the Due Process Clause.
Railroad employees have no present vested interest in the benefits specified in Title V
whose abrogation o r modification would be restricted by the Fifth Amendment, since
by their nature those benefits are entirely prospective.
Congress may interfere with vested property rights, or impair a contract between two
private parties, as long as the results are not harsh and oppressive, in light o f the
governm ental interests served by the legislation. M oreover, a legislative measure inter­
fering with contract rights is m ore likely to be held constitutional if it is one of a long
series o f actions regulating the business in question.
One Congress cannot legislate so as to divest itself or subsequent Congresses of the right
and responsibility to exercise th e full legislative authority to enact laws for the common
good.
May 13, 1981
MEMORANDUM OPINION FOR THE CHIEF COUNSEL,
FEDERAL RAILROAD ADMINISTRATION
This responds to your request for our opinion on the constitutionality
of repealing Title V of the Regional Rail Reorganization Act of 1973,
as amended, 45 U.S.C. §§771-80 (the Rail Act), and enacting in its
stead a more limited program of employee protection emphasizing
severance payments rather than continuing monthly displacement
allowances.1 This proposed legislative action has been opposed by rep­
resentatives of organized rail labor on the ground that it would deprive
railroad employees of vested property rights in violation of the Fifth
Amendment to the Constitution. You also ask whether Congress may,
consistent with the Fifth Amendment, relieve the Consolidated Rail
Corporation (Conrail) of certain obligations it may have to its employ­
ees under existing collective bargaining agreements. We conclude that
1 W hile you do not describe in detail the program which is proposed to replace Title V, we have
made some general assumptions about it based on the Department o f Transportation draft bill entitled
“ Rail Service Im provement Act of 1981.” See infra.
130
the Fifth Amendment poses no obstacle to the repeal of Title V, and
that Congress may at the same time terminate or modify any analogous
contractual obligations which Conrail may have towards its employees
under collective bargaining agreements.
Our discussion begins with a brief review of the historical back­
ground of the enactment of Title V in 1973 and a summary of its most
significant provisions. We then examine how the Fifth Amendment
might be implicated in any repeal or substantial modification of those
provisions.
I. Factual Background
The Rail Act was enacted in 1973 in response to a crisis in northeast
rail service which saw the eight major regional rail carriers all under­
going contemporaneous reorganization under the bankruptcy laws.
Congress attempted to resolve this crisis by creating Conrail, a private,
for-profit corporation authorized to purchase the assets of the bankrupt
carriers and carry on their services, initially with federal assistance but
eventually on a financially self-sustaining basis. See Regional R ail Reor­
ganization Act Cases, 419 U.S. 102, 109-17 (1974). One of the most
difficult problems faced by Congress in its efforts to accomplish this
restructuring was rail labor’s insistence on the continuation and
strengthening, under its new employing entity Conrail, of the contrac­
tual protections rail employees had enjoyed under collective bargaining
agreements with the eight bankrupt carriers. The solution eventually
agreed upon was to make these protections binding on Conrail by
incorporating them into the Rail Act itself as Title V.
The specific provisions of Title V were developed in negotiations,
conducted at the behest of the Administration with the concurrence of
congressional leaders, between representatives of rail labor unions and
rail management.2 The resulting hybrid approach to labor protection
supplemented the contractual guarantees ordinarily secured by rail em­
ployees under §5(2)(f) of the Interstate Commerce Act,3 with a statu­
2This method of developing legislation, perhaps unique for the candor with which it was acknowl­
edged m subsequent hearings and debates, is described in Northeastern and Midwestern Rail Transporta­
tion Crisis: Hearings on S. 2188 and H R 9142 Before the Subcommittee on Surface Transportation o f the
Senate Commerce Committee, 93d Cong., 1st Sess. 958-960 (1973) (Senate Hearings) (testimony of
Stephen Ailes, President o f the Association of American Railroads) See also 119 Cong. Rec. 36343,
37353, 36375, 40711, 40717 (1973).
3Section 5(2)(f), 49 U.S.C §5(2)(f), recodified without substantive change as 49 U.S.C. § 11347 (Supp.
II 1978), was added to the Interstate Commerce Act by the Transportation Act of 1940, ch. 722, 54
Stat. 898 (1940) It requires as a condition to the grant o f a merger, consolidation, or acquisition that
labor protection be guaranteed for a certain period (originally four, but now more generally six years)
from the effective date o f the transaction In IC C v Railway Labor Ass'n. 315 U.S. 373 (1942), the
Supreme Court noted that the effect of the 1940 amendments was to make mandatory the protection
of workers which had been discretionary under the 1936 Washington Job Protection Agreement
between the carriers and rail unions. The “Washington Agreement” became the blueprint for a series
o f standard employee protections more or less routinely imposed by the Interstate Commerce Commis­
sion (ICC) m the event o f any “joint action” by two or more rail earners See discussion and cases
cited in New York Dock Railway v. United States, 609 F.2d 83 (2d Cir. 1979). See also H.R. Rep No.
Continued
131
tory specification of Conrail’s obligations in particular areas to the
employees of the carriers it was absorbing.4 Conrail itself was made
subject to the Railway Labor Act by § 502(a) of the Rail Act, and
required by § 504(a) to assume all obligations of acquired railroads
under existing collective bargaining agreements except those relating to
job stabilization. These latter were “superseded and controlled” by the
detailed specifications of § 505, which included provisions for “monthly
displacement allowances” (MDA’s), separation and termination allow­
ances, and a variety of transfer benefits. Section 509 made Conrail
financially responsible for the payment of all allowances paid to em­
ployees pursuant to the Act, though provision was also made for
reimbursement of those costs to Conrail from federal funds specially
appropriated to the Railroad Retirement Board, in an aggregate amount
not to exceed $250 million.5
The job stabilization provisions spelled out in § 505, particularly the
monthly displacement allowances, are at the heart of what is now
proposed to be changed in the Rail Act. It is therefore important to
review at least briefly their history and substance.
A t the time the Rail A ct was being considered by Congress, most
employees in the railroad industry were protected against loss of em­
ployment by provisions in collective bargaining agreements modeled on
the 1936 Washington Job Protection Agreement. See note 3, supra.
Under these agreements, layoffs as a result of a merger or other joint
action were permitted, but protected employees were entitled to a
“monthly displacement allowance” for a certain period afterwards (usu­
ally six years) while out of work. Most of the employees of the eight
bankrupt northeastern carriers, however, enjoyed an assurance, derived
from the Penn Central Merger -Agreement of 1964, against loss of
employment or reduction in compensation except in the most drastic
circumstances of business downturn.
The extraordinary lifetime job security feature of the Penn Central
Merger Agreement was the subject of considerable discussion during
hearings in the Senate, where participants were virtually unanimous in
stressing the importance o f incorporating some equivalent protections in
the restructuring program. See, e.g., Senate Hearings, supra note 2, at
821-24 (colloquy among Department of Transportation officials and
1035, 96th Cong. 2d Sess. 139-45 (1980) (Staggers Rail Act o f 1980). Under the Interstate Commerce
Act, the actual term s o f employee protection provisions are ordinarily negotiated between the rail
carrier and its unions, subject to the approval o f the ICC.
4Com pare this substantive specificity with §405 of the Rail Passenger Service A ct of 1970 (the
Am trak A ct), 45 U.S C. § 565(b), which provides that employee protective arrangements negotiated
between carriers and unions “shall in no event provide benefits less than those established pursuant to
[§ 5(2)(0].’*
5T he original authorization of $250 million to reimburse Conrail for the cost of labor protection has
been exhausted. T he Staggers Rail A ct o f 1980, Pub. L. No. 96-448, 94 Stat. 1895 (1980), modified
certain o f the provisions of §505 to reduce the benefits available to employees, and authorized an
additional $235 million to reimburse Conrail. We understand that not all of this amount has been
appropriated, however, and that Conrail has not been reimbursed for recent labor protection payouts.
132
Senators Beall and Cook); 972-73 (testimony of Graham Claytor, Presi­
dent, Southern Railway System). In both House and Senate committee
reports it was emphasized that railroad employees should not be re­
quired to bear a disproportionate share of the cost of continuing rail
service in the northeast under Conrail. See H.R. Rep. No. 620, 93d
Cong., 1st Sess. 58 (1973) (“the cost of employee protection in the
restructuring of the rail system should be a social cost, borne by the
federal government”); S. Rep. No. 601, 93d Cong. 1st Sess. 13-14
(1973) (describing Title V as “[providing for these costs as an integral
part of the restructuring effort . . . .”). The perception that employees
of the bankrupt carriers to be acquired by Conrail enjoyed “vested
rights” to permanent job security was shared by a number of active
participants in the debates on the legislation in the House and Senate.
Legislators supporting enactment of the negotiated protective provi­
sions stressed what they perceived as the government’s moral and legal
obligation to offer employees displaced by the restructuring at least as
much protection as they had had under the superseded collective bar­
gaining agreements. See 119 Cong. Rec. 36375 (1973) (remarks of Rep.
Staggers); 119 Cong. Rec. 40729-32 (1973) (remarks of Sen. Hartke).
The Statutory provisions negotiated by rail labor unions and manage­
ment as a replacement for these “vested rights” gave Conrail employees
the best of both worlds: the job stabilization provisions of § 505 grafted
the open-ended lifetime employment assurance of the Penn Central
Merger Agreement onto the heretofore limited concept of displacement
allowances under the Washington Agreement. Thus, Conrail employees
laid off or furloughed for any reasons and at any time were statutorily
entitled to receive monthly displacement allowances until retirement.6
In 1980, the employee protection provisions in Title V were modified
to eliminate some windfall benefit provisions, and generally to reduce
the benefits available to certain classes of employees. See Pub. L. No.
96-448, 94 Stat. 1895 (1980). The legislation presently proposed by the
Administration would effect a more basic change in the job stabilization
structure established by the Act, replacing the monthly displacement
allowances mandated by Title V with a scheme of severance payments.
Conrail would remain bound by the terms of its existing labor con­
tracts, and bound by the Railway Labor Act to bargain with its em­
ployees on all otherwise negotiable terms and conditions of employ­
6 Under § 505(b) of the Rail Act, Conrail must pay to any protected employee w ho has been
deprived of employment or adversely affected with respect to his compensation a monthly allowance
in the full amount o f his average monthly compensation for the preceding 12 months, including
overtime, adjusted periodically to reflect subsequent general wage increases. The employee remains
entitled to receive this allowance until he reaches age 65, though he must always remain available to
return to work on peril o f losing his entitlement. As an alternative, a protected employee may elect to
resign and receive a lump-sum separation payment of as much as a year’s salary. See § 505(e) and (f).
In addition, Conrail employees transferred by the company are entitled to moving expenses, including
compensation for any loss associated with the sale of an old home or the purchase of a new one. See
§ 505(d) and (g).
133
ment, except those withdrawn from the bargaining process by statute.
As under present law, no collective bargaining agreement could include
provisions relating to job stabilization which exceed or conflict with
those established by statute. See 45 U.S.C. § 774(d). In short, the pro­
posed legislation would eliminate rail employees’ statutory entitlement
to a monthly displacement allowance during periods of lay-off, and
preclude their regaining this entitlement through the bargaining proc­
ess.
II. Fifth Amendment Issues Raised by the Proposed Repeal of Title V
Constitutional objection to the repeal or substantial modification of
Title V would, we assume, be based on the Due Process or Just Com­
pensation Clauses of the Fifth Amendment:7
No person shall . . . be deprived of life, liberty, or
property, without due process of law; nor shall private
property be taken for public use, without just compensa­
tion.
These two clauses together place limits on Congress’ power to struc­
ture and adjust economic benefits and burdens, either directly through
the imposition of a regulatory system, or indirectly through the modifi­
cation of existing contractual relationships including those to which the
United States is a party.8
Where the constitutionality of legislation is at issue, the analysis
under either the Due Process or Just Compensation Clause generally
focuses on the source of Congress’ power to legislate, the nature of the
claimed legal interest, the way in which it is affected by the govern­
ment’s action, and the importance of the governmental purpose served.
7Changes in the protections afforded employees under Title V might also be subject to challenge
on equal protection grounds. See H inds v. Conrail. 518 F. Supp. 1350 (E.D. Mich. 1981) (suit
challenging 1980 amendments to T itle V as unfairly discriminatory against nonoperating employees).
F o r such a challenge to succeed, it would be necessary to show that any benefit differentials among
classes o f employees are “patently arbitrary or irrational.” See U.S. Railroad Retirement Board v. Fritz,
449 U.S. 166 (1980). W e see no reason to believe that there would be any substantia] basis for such a
challenge to the amendments proposed here.
8T he analysis which the Court has employed in contract impairment cases is similar to that
employed in “taking’* cases. The answer to the question whether and under what circumstances
Congress may abrogate or modify rights arising under a contract between two private parties, or
between a private party and the federal government, generally also disposes o f the question whether
there has been a constitutional “taking.” Thus, a failure adequately to compensate for a governmental
taking will often be analyzed as a failure of due process, either procedural or substantive. See, e.g.,
Lynch v. United States, 292 U.S. 57], 579 (1934) (D ue Process Clause prohibits United States from
abrogating its own valid contractual undertakings). Conversely, property rights may be “ taken”
without compensation “when interference arises from some public program adjusting the benefits and
burdens o f econom ic life to promote the common good.” Penn Central Transp. Co. v. New York City,
438 U.S. 104, 124 (1978). See Sax, Takings and The Police Power. 74 Yale L. J. 36, 61-62 (1964). In
Louisville & Nashville R .R. Co. v. Mottley. 219 U.S. 467 (1911), the Supreme Court explained that
property rights, including contractual property rights, are always “subject to the lawful demands of
the Sovereign, so contracts must be understood as made in reference to the possible exercise o f the
rightful authority o f the Government . . . .” 219 U.S. at 482, quoting from Knox v. Lee, 12 Wall. 457,
550-51 (1870).
134
In this case, Congress’ power under the Commerce Clause to regu­
late employment relationships in the railroad industry is not disputed,
nor is the importance of the government’s interest in Conrail’s sol­
vency. Rather, the constitutional question turns on the nature of the rail
employees’ claimed interest in Title V benefits. Representatives of the
rail unions characterize the employees’ interest in Title V benefits as a
“vested property right,” obtained as compensation for relinquishing in
1973 their rights under the Penn Central Merger Agreement, and thus
in the nature of a contract with the federal government itself which
cannot be unilaterally altered.9 In the view of the General Counsel of
the Interstate Commerce Commission, the employees’ interest in Title
V benefits is most properly characterized as derived from and depend­
ent upon their contractual relationship with the private entity Conrail.10
Finally, Title V has been characterized as a “public benefit” program
or “statutory entitlement” analogous to those established under the
Social Security and Railroad Retirement Acts, and alterable for all
practical purposes at the will of Congress.
While we do not find any of these characterizations a perfect fit, we
think the last-mentioned comes closest to providing the correct frame­
work for purposes of constitutional analysis. The fact that Congress in
1973 was willing to assure rail employees of some measure of income
protection with their new employer, Conrail, does not lead inescapably,
or even logically, to the conclusion that Congress was constitutionally
required to do so. It is demonstrably not the case that the passage of the
Rail Act in 1973 interfered with contract rights between the bankrupt
railroads and their employees. The Rail Act simply created an opportu­
nity for the railroads to sell their assets and operating rights to Conrail,
free of the most burdensome aspects of their labor agreements. We
have no doubt that it is within Congress’ power to withdraw regulatory
protections imposed by an agency pursuant to a statute (in this case the
9See undated memoranda entitled “ Preliminary Memorandum—Legal Effects of Repeal of Title V
of the 3R A ct,” and “ Response to ICC Memorandum. . prepared by Highsaw & Mahoney, P.C.,
on behalf of the Railway Labor Executives' Association. We do not understand these memoranda to
argue that Conrail employees have a compensable property interest in Title V benefits independent of
the events o f 1973. By their nature, M DAs and other Title V allowances are entirely prospective, and
thus may be altered or eliminated without raising a Fifth Amendment problem. C f Bell v. United
States, 366 U.S. 393 (1961). Because availability for active employment is a condition o f continuing
eligibility for MDAs and the other statutory allowances provided in Title V, they must be regarded as
compensation for present rather than past services. A rail employee's interest in displacement allow­
ances may thus be analogized to the interest of a retired military officer serving in the active reserve
in his retirement pay. See Abbott v. United States, 200 Ct. Cl. 384 (1973); Akerson v United States. 175
Ct Cl. 551, cert, denied, 385 U.S. 946 (1966). T he case of United States v Larionoff, 431 U S 864
(1977) is thus inapposite, at least insofar as it indicates that an employee w ho performs services in
reliance upon a government promise to pay a certain sum is constitutionally entitled to be paid that
amount
10Memorandum from the General Counsel to the Acting Chairman, March 12, 1981, “Constitution­
ality of Legislation Amending Title V of the Regional Rail Reorganization Act of 1973. . . .” We
understand the General Counsel’s argument to be that Title V was intended by Congress to create a
contractual obligation on the part o f Conrail towards its employees; therefore, analysis of its repeal or
modification by Congress would be similar to that applicable to the legislative impairment of a purely
private contract between Conrail and its unions. See part III, infra.
135
ICC’s longstanding requirement that the cost o f existing labor agree­
ments be included in a sale of assets). What Congress chose to substi­
tute for the ICC’s requirement was a statutory income protection pro­
gram whose benefits, like those paid under the Social Security and
Railroad Retirement Acts, “are not contractual and may be altered or
even eliminated at any time.” U.S. Railroad Retirement Board v. Fritz,
449 U.S. at 174. Railroad employees thus have no constitutionally
compensable property right in Title V benefits, and no expectation of
their continuance whose unsettling offends substantive due process. See
Flemming v. Nestor, 363 U.S. 603, 608-11 (1960) (Social Security annu­
itants have no vested rights to receive benefits). See also Hisquierdo v.
Hisquierdo, 439 U.S. 572, 575 (1979) (similar treatment of Railroad
Retirement benefits). Modification of the benefits scheme mandated by
Title V is well within Congress’ power to “adjust[ ] the burdens and
benefits of economic life” in a reasonable manner, even if it thereby
“upsets otherwise settled expectations.” Usery v. Turner Elkhorn Mining
Co., 428 U.S. 1, 16-17 (1975).11
Indeed, we believe the Fifth Amendment claims of Title V benefici­
aries are even less compelling than those of Social Security Act and
Railroad Retirement Act annuitants, since Title V benefits—and their
proposed alteration—operate in an entirely prospective fashion. See
note 9, supra. The Supreme Court has indicated that the Due Process
Clause requires measures that interfere with rights previously acquired
to be more strongly justified than legislation which effects mere expec­
tations. See Usery v. Turner Elkhorn Mining Co., 428 U.S. at 17; R ail­
road Retirem ent Board v. Alton R. R. Co., 295 U.S. 330, 348-50 (1935).
But even if the interest of rail employees in Title V benefits were
thought as substantial as the interest of annuitants under the Social
Security and Railroad Retirement Acts, they would be entitled to
protection only from “patently arbitrary” congressional action, action
which is “utterly lacking in rational justification.” Flemming v. Nestor,
363 U.S. at 611. We have no reason at this point to doubt Congress’
ability to frame legislation which would meet that test.
As noted above, we do not believe Title V creates a present property
interest in rail employees which would be enforceable against the fed­
11 We d o not think it is material to this analysis whose responsibility it may be under a statute for
the actual payment o f benefits. A s previously noted, Congress expressly made a non-government
entity, Conrail, responsible for paying Title V benefits, though it also agreed to underwrite some
portion o f Conrail’s costs in this respect. Similarly, under the Black Lung Benefits Act held constitu­
tional in Turner Elkhorn, the federal government assumed responsibility for paying certain claims, and
assigned to the states and to the mine operators responsibility for paying others. Benefits paid out
under the Social Security and Railroad Retirement A cts have a similarly hybrid source. Under none of
these statutes did the substantive validity o f a beneficiary’s claim depend upon who ultimately could
be made to pay it; the fact that the entitlement was assured m a federal statute was sufficient to
establish the constitutional issue. In any event, the fact that Conrail, rather than the federal govern­
ment, is responsible under the statute for paying claims cannot be said to strengthen the case against
Congress* present authonty to modify Conrail’s obligations. Cf. Lynch v. United States, supra, 292 U S.
571.
136
eral government through either the Due Process or Just Compensation
Clauses. We recognize, however, that there is support in the legislative
history of the Rail Act for a theory that Congress intended Title V
benefits as compensation for employees’ loss of private contract rights
under the Penn Central Merger Agreement. There is also some support
for a theory that Title V was enacted in consideration of the rail
unions’ promise not to strike or otherwise disrupt the restructuring
effort, and that it therefore constitutes a sort of legislative contract
which Congress may not unilaterally abrogate or even alter without
adequate compensation.12
With respect to the latter theory, we think it clear that under the
Constitution one Congress cannot legislate so as to divest itself or
subsequent Congresses of the right and responsibility to exercise the full
legislative authority to enact laws for the common good. See Pennsylva~
nia Hospital v. Philadelphia, 245 U.S. 20, 23 (1917). See also Home
Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 435 (1934) (“the
reservation of essential attributes of sovereign power is . . . read into
contracts as a postulate of the legal order.”). Those cases in which the
United States has been held to the performance of its part of a contract
authorized under a law of Congress, e.g., Lynch v. United States, supra,
292 U.S. 571, and Perry v. United States, 294 U.S. 330 (1935), cast no
doubt on this fundamental principle of government. Both Lynch and
Perry involved contracts entered into by the United States extrinsic to
the law which authorized them, under which claimants were found to
have vested property rights. We know of no instance in which Con­
gress was held to be disabled from legislating under one of its enumer­
ated powers because of a proposed new law’s effect on some expecta­
tion of future benefits arising under existing law. Indeed, we know of
no situation in which legislation by itself was held to confer a contrac­
tual benefit.13 And, even when dealing with legislative programs whose
beneficiaries’ earned interest is arguably quite strong, the Supreme
Court has tended to defer to Congress in recognition that those pro­
grams rest “on judgments and preferences as to the proper allocation of
the Nation’s resources which evolving economic and social conditions
will of necessity in some degree modify.” Flemming v. Nestor, 363 U.S.
at 610.
12 It is noteworthy in this regard that no due process argument has to date been advanced in the suit
challenging the change in benefits mandated by the 1980 amendments to Title V. See note 7, supra.
13 In Larionoff v. United States, 431 U.S. 864, 869 (1977), the Supreme Court reaffirmed the
established rule that a federal employee’s claim to wages “must be determined by reference to [statutes
and regulations], rather than to ordinary contract principles." In Larionoff, one of the plaintiffs had
signed an agreement reenlisting in the military with the expectation that he would receive a statutory
reenlistment bonus which was subsequently abolished. While the Court was able to avoid deciding the
constitutional issue in this case, it pointed to the "serious constitutional questions” which would have
been presented by an attempt to “deprive a service member of pay due for service already performed,
but stiil owing ” 431 U.S. at 879. At the same time, it noted that “fnjo one disputes that Congress may
prospectively reduce the pay of members of the Armed Forces, even if that reduction deprived
members of benefits they had expected to be able to earn." Id.137
Finally, we come to the theory that Title V was intended by Con­
gress to compensate rail employees for loss o f private contract rights,
whose benefit structure cannot now be altered without effecting a new
“taking.” In order to prevail under such a theory, the employees would
have to show that they had a valuable property right which was in fact
constitutionally “taken” by Congress in 1973. As discussed above, we
doubt that such a showing could be made. Compare United States v.
Sioux Nation o f Indians, 448 U.S. 371, 407-21 (1980). Assuming, how­
ever, that the statements o f some legislators on the floor of Congress
were in 1973 accepted as a legally accurate characterization of Con­
gress’ intent in enacting Title V, the employees would still have to
show that the private contract rights they gave up in 1973 were in fact
worth what they are now claiming is due them. See United States v.
General Motors Corp., 323 U.S. 373, 379 (1945). That is, they would
have to establish the fair market value of their 1973 rights under the
Penn Central Merger agreement and show at a minimum that those
rights were greater than the value of the allowances they have already
received under the Act. The legal standard applied to test the adequacy
of compensation in taking cases is whether the payment was “fair, just,
and equitable.” Choctaw Nation v. United States, 119 U.S. 1, 35 (1886).
See also Duke Power Co. v. Carolina Environmental Study Group, Inc.,
438 U.S. 59 (1978) (Price-Anderson Act limiting nuclear plant opera­
tors’ liability provides a “reasonably just substitute” for tort law reme­
dies it replaced).
While the question of value is always one of fact and one for a court
rather than the legislature to decide, Monongahela Navigation Co. v.
United States, 148 U.S. 312, 327 (1893), we think that in this case a
court would find persuasive the value Congress itself placed on rail
labor’s rights in 1973, at least insofar as it believed those rights were
constitutionally required to be compensated at that point in time. In this
regard, the terms of the statute and its legislative history make clear
that the federal financial commitment to Conrail employees was not an
open-ended one. Section 509 authorizes the Railroad Retirement Board
to reimburse Conrail for payments to employees in an amount “not to
exceed the aggregate sum o f $250,000,000 . . .” The legislative history
makes clear Congress’ intent to limit the exposure of the federal treas­
ury to employee claims under the Act to this amount, an amount
regarded even by the most enthusiastic supporters of railroad employ­
ees in Congress as sufficient to satisfy whatever obligation the taxpayer
might have to subsidize the cost of those employees’ dislocation. See,
e.g„ 119 Cong. Rec. 40,716-20 (1973). Senator Hartke, for example,
after expressing the view that Congress’ failure adequately to compen­
sate rail employees for their willingness to forgo rights under the Penn
Central Merger Agreement might result in a suit in the Court of
Claims, himself sponsored the amendment which incorporated the
138
$250 million reimbursement limitation into § 509. See 119 Cong. Rec.
40,720 (1973). In doing so, he made clear his intention that this sum
should represent the extent of the federal government’s responsibility
toward rail employees. See 119 Cong. Rec. 40,729-32 (1973).14
In summary, the legislative restructuring of the northeast rail system
accomplished by the Rail Act resulted in no constitutionally compensa­
ble “taking” from railroad employees, and did not impair private con­
tract rights in violation of the Due Process Clause. Moreover, railroad
employees have no present vested property interest in the benefits
specified in Title V whose abrogation or modification would be prohib­
ited under the Fifth Amendment. If Congress in 1973 committed itself
to subsidize some portion of the labor costs associated with the restruc­
turing of rail service under Conrail, that commitment has by now been
fully satisfied. As long as legislation is not enacted in an irrational or
arbitrary manner, and the burdens imposed on rail labor are not objec­
tively “harsh and oppressive,” Congress may take what steps it believes
are necessary in order to ensure the continued efficient functioning of
rail service in the northeast.
III. Whether Congress May Abrogate or Impair the Value of a Contract
Between Conrail and Its Employees 15
The final question you have asked us relates to the claimed existence
of present contractual rights to allowances, equivalent to those specified
in Title V, but existing independent of the statute, derived from collec­
tive bargaining agreements between Conrail and some of its employ­
ees.16 You have asked us to advise you, assuming the existence of such
14Senator Hartke stated that he did not think there was “even the slightest indication that there is a
requirement by Congress to reimburse [Conrail] in an amount in excess of $250 million,'' 119 Cong.
Rec. 40718 (1973), and denied that the law would “bind a subsequent Congress to anything." Id. at
40,720 The fact that a new authorization in 1980 increased the federal funds potentially available to
pay Title V claims has no bearing on Congress’ understanding in 1973 that the sum it was then
authorizing was sufficient to satisfy any obligation it might have, under the Fifth Amendment or
otherwise, to employees of the restructured railroad system. While it is open to rail employees to
claim that their property rights under the Penn Central Merger Agreement were undervalued by
Congress in 1973, or that they are somehow otherwise constitutionally entitled now to additional
compensation, the burden would be upon them to show that what they have received to date is of less
value than what they gave up in 1973.
15The constitutional permissibility of contract impairment through legislation has been implicated in
several other contexts in connection with the general problem o f repealing Title V. As previously
discussed, the rail unions claim that Title V was enacted in the first place as compensation for a
‘'taking" arising from contract impairment in 1973. And, the ICC General Counsel has characterized
Title V itself as a kind of legislative contract between two private parties, Conrail, and its employees.
The analysis developed in this section, while specifically addressed to the proposed modification of
present rights under Conrail’s collective bargaining agreements, is applicable as well to alleged
impairments in these other contexts.
16 For example. Rule 62 of the contract between Conrail and the Brotherhood of Railway, Airline
and Steamship Clerks, Freight Handlers, Express and Station Employees (BRAC) states that
‘‘[protected 'employees will be afforded the benefits as provided in Appendix No. 8 or No. 9,
whichever is applicable.” These appendices reproduce the terms of Title V.
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private contractual rights, whether Congress may relieve Conrail of its
obligations by statute consistent with the Fifth Amendment.17
While we doubt that a court would regard the displacement allow­
ances mandated by Title V as a property interest, see note 9 supra, the
cases indicate that the legislature may interfere with even ripened
contractual entitlements or other property rights so long as the results
are not “particularly ‘harsh and oppressive,’ ” Unites States Trust Co. v.
N ew Jersey, 431 U.S. 1, 17 n.13 (1977), quoting Welsh v. Henry, 305 U.S.
134, 147 (1938),18 and that federal legislation affecting existing contract
rights can be highly burdensome so long as the burden is not imposed
irrationally or arbitrarily. Usery v. Turner Elkhorn Mining Co., 428 U.S.
at 17-19. In deciding whether legislation is “harsh and oppressive,” the
courts have focused not only on the party complaining that his contrac­
tual rights have been impaired, but also on the governmental interests
furthered by the legislation and efficacy with which it furthers those
interests. See, e.g., Welsh v. Henry, 305 U.S. at 146—57; Louisville &
Nashville R .R . Co. v. Mottley, 219 U.S. at 474.
We would add that a legislative measure interfering with contract
rights is more likely to be held constitutional if it is “one of a long
series” of actions “regulating the many integrated phases of the . . .
business” in question. Veix v. Sixth Ward Building and Loan A ss’n, 310
U.S. 32, 37 (1940). See A llied Structural Steel v. Spannaus, 438 U.S. 234,
249 (1978). Persons who are frequently and closely regulated know,
and can anticipate, that any commitments they may make and any
commitments made to them may well be affected by “further legislation
upon the same topic.” Veix v. Sixth Ward Building and Loan A ss’n, 310
U.S. at 38. See also United States Trust Co. v. N ew Jersey, 431 U.S. at 19
n. 17; Norman v. Baltimore & Ohio R .R . Co., 294 U.S. 240, 308 (1935).
Management-labor relations in the railroad industry have been the
subject of federal regulation at least since the mid-1930’s and closely
monitored by the Interstate Commerce Commission for over 40 years.
See note 3, supra. More recently, labor contracts negotiated on railroads
subject to the Rail Passenger Service Act of 1970 have been required to
be certified by the Secretary of Labor. See 45 U.S.C. § 565. And, in the
past several years Congress has imposed explicit and detailed labor
17 W e note that under § 453(b) o f th e Administration’s proposed legislation, any railroad acquiring
operating rights from Conrail could not be required to assume obligations under any contract between
Conrail and its employees. If Congress may release Conrail from its own contractual undertakings, a
fortiori it may take steps to ensure a similar latitude for railroads succeeding to Conrail’s interest by
limiting the authority o f the ICC.
18 United States Trust Co. and Welsh dealt with state efforts to affect obligations created by
contracts. Such efforts are restncted not just by the D ue Process and Just Compensation Clauses but
by the m ore specific constitutional injunction that “ No State shall . . pass any . . . Law impairing
the Obligation o f Contracts . .” A rt. I. § 10, cl. 1. This specificity suggests, and the Supreme Court
has confirm ed, that states have less latitude in imparing contract rights than does the federal govern­
ment. Compare Allied Structural Steel v. Spannaus, 438 U.S. 234 (1978), with Usery v Turner Elkhorn
M ining Co., supra, 428 U.S. 1. If legislative repeal of Title V can satisfy the standards applied to state
interference with private contract rights, a fortiori it meets the constitutional standards governing
federal statutes.
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protective conditions on railroads undergoing reorganization under the
bankruptcy laws, or in liquidation. See Pub. L. No. 96-101, 93 Stat. 736(1979) (Milwaukee Railroad Restructuring Act); Pub. L. No. 96-254, 94
Stat. 399 (1980) (Rock Island Railroad Transition and Employee Assist­
ance Act).19 Rail employees can scarcely claim that a further reorder­
ing of their contractual rights vis-a-vis their employer could not have
been anticipated.
L a r r y L . S im m s
Deputy Assistant Attorney General
Office o f Legal Counsel
19 The labor protection provisions of the Rock Island Act, as amended and reenacted by the
Staggers Rail Act, Pub. L. No. 96-448, 94 Stat. 1959 (1980), have been declared unconstitutional and
enjoined as a taking o f the property rights of creditors, in violation of the Just Compensation Clause.
See In re Chicago, R.I. <£ P R Co., 645 F.2d 74 (7th Cir. 1980) (en banc), a ffg mem.. Civ. No. 75-B -
2697 (N.D. 111., Oct. 15, 1980). This case has been appealed to the Supreme Court, and probable
jurisdiction noted. 451 U.S. 936 (1981) (Nos. 80-415 and 80-1239). [N o t e : The Supreme C ourt’s
decision in this case found the provisions at issue repugnant to the Bankruptcy Clause of the
Constitution, Art I, § 8, cl. 4, and affirmed the court of appeals without deciding the issues raised by
the plaintiffs under the Just Compensation Clause and several other constitutional provisions. Railway
Executives Ass'n v. Gibbons. 455 U.S. 457, 465 (1982). Ed ]
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