Amtrak's Indemnification Arrangement with Host RRs

The OT part: Mr JoeG thank you

On Topic: Ms Bly, thank you for well reasoned comments. As an aside, I find it interesting that Don Phillips is doing transportation for the IHT in Paris, and some bozo writer muckrakes a significant transportation story without understanding the long term history!!!

John Perkowski

I sure have enjoyed the thoughtful discussion on this thread. Sorry that I could not be a part of it.

Messrs. JLo and C&O 15 make a point that I find particularly interesting: The economic and legal environment in which Amtrak operates is far from perfect. The disconnect between the entity that pays punitive damages and the entity whose conduct causes the punitive dames is particularly troubling.

Even when the Host Railroad is at fault why does Amtrak still have to pay? Also if it's the Host Railroads fault why don't they pay for the Wreck Repairs?

AmtrakFan

The "who pays" matters set forth here and in the Times article are simply the existing contractual agreements between Amtrak and the roads, Mr. fan; also the ARAA 97 put legislative "teeth' into the Agreements lest some hot shot trial lawyer knows how to bend the ear of a sympathetic jury.

I realize all of us, at least one being a practicing attorney,participating at this topic have probably used enough legalese to blow one's mind. Mine would have been blown at what I understand to be your age.

So I hope I have set it out as succinctly as possible; no one here will belittle you for asking.

GBN

We forget one thing that without these indemnity agreements, Amtrak would not exist outside of the NEC.

The freight railroads will not, under any circumstances allow for passenger trains without these agreements. Amtrak knows this and that is why they are shutting up and paying the money.

The freights can shut off the switch at any time, and Amtrak knows not to make too much noise.

In regards to the business of running trains, we can argue forever about the merits of who pays, but the central question is one of safety. Who is actually responsible for avoiding accidents in the first place? If there is no financial risk to the host railroads, what incentive do they have to keep the tracks safe for passengers? I suppose their freight trains are also at risk, but fewer lives are at stake. They may be willing to absorb the loss of material goods (which can often be salvaged anyway) to cut costs elsewhere.

The first issue is safety, not money.

To paraphrase the words of Her Majesty's Prime Minister:

I refer the honorable gentleman to key portions of the comments Ms Bly made some posts ago:

NellieBly wrote:<snip>


First, there are no "sweetheart deals" here. Congress legislated that Amtrak gets to use the freight railroads' track at "avoidable cost", which is -- by anyone's measure -- less than the actual cost to the railroads and much less than freight railroads *pay each other* for track use. But hey, Congress gets to make the laws.

<snip>

Punitive damages are another issue. The freight railroads argued (successfully) that Amtrak's exposure to large punitive damage suits was much greater than theirs, simply because passengers get damaged more easily, and in more costly ways, than frieght. I have no problem with this arrangement. But for government intervention, passenger trains would be *gone* from the Class I network by now, and this would be a non-issue. So why should private, for-profit companies be forced to shoulder part of the cost of a government-mandated business?

And recall that no railroad can walk away from "gross negligence" by one of its employees -- for example, the Conrail engineer in 1986. That one cost Conrail major $.

<snip>

So let's recap:

1) Amtrak enjoys rail network access at below-market rates (easily demonstrable)
2) Amtrak does not pay for the track capacity it consumes
3) Railroads have been steadily improving their safety record since 1980
4) Amtrak and the railroads have a "no fault" agreement on accident costs, and Amtrak assumes responsibility for all punative damages except in the case of gross negligence.

Where's the story here? This all sounds reasonable to me.

AmtrakFan wrote:Even when the Host Railroad is at fault why does Amtrak still have to pay? Also if it's the Host Railroads fault why don't they pay for the Wreck Repairs?

AmtrakFan

This issue of idemnification is a murky issue. It involves the two major categories of civil practice, Contract Law and Tort Law. A tort is defined as a "wrong"--- ie one party violating some right of the complaining party.-- In the area being discussed here this typically involves a carrier failing to exercise a reasonable standard of care ( ie being negligent) which causes some kind of injury, thus violating the injured person's right not to be injured because of the negligence of the railroad. Though exceptions have developed over the 224 plus year history of American Civil Practice, generally civil actions are intended to provide redress for private grievances ( as opposed to Criminal Law-- which deals with violations of those laws intended to protect the public as a whole)

The primary legal remedy under tort law for a violation of the right not to be injured by the negligence of a railroad is compensatory damages. These kinds of damages are not intended to enforce any kinds of standards, safety or otherwise, but are solely a means of compensating the injured party for the injury which he has suffered as the result of the carrier's negligence. The remedy of Punative, or exemplary, damages has developed over the years to enforce the public's interest in preventing gross violations of the standard of care expected of a party in a particular situation, and requires a much more severe form of culpability ( the wanton and wilfull standard) than simple negligence.

Contract law, of course, deals with court enforcement of private agreements. In the situations being discussed here, it involves an agreement between Amtrak and the private freight railroads that, in exchange for being charged a much lower rate for the use of the infrastructure of the railroads, Amtrak will pay any claims arising from the negligence of the railroads with regard to that infrastucture. Since both entities receive something of value in this agreement, the courts will not normally question the "fairness" of the arrangement.

Idemnification by Amtrak, for punative damages, however, may be something that the courts would examine, on public policy grounds. Since punative damages are intended as a method for enforcing certain standards of care, which involves creating an economic incentive to excersise that care----- which is an interest apart and aside from the interest of the injured party to be compensated for his injury, it is possible that a court could rule that idemnification by Amtrak to a liable host railroad of an award of punative damages arising from the gross negligence of the host railroad is against public policy and therefore void.

( I won't go into the issue of damages for pain and suffering, which are a form of compensatory damages, and are extremely controversial, as this issue could involve a post of numerous pages to fully explore)

Thanks for the very interesting and informative post, Mr. Walt. It raises several questions in my mind.

How would the issue of Amtrak's indemnification of a host railroad for punitive damages ever come before the courts? Presumably Amtrak itself is not going to sue the freight railroads to void that part of their contract, or they would have already done so. But could they? And are they the only party that would have standing to do so? Could Angelica Palank, the woman in the NYT article who thought she was collecting from CSX, raise the issue? If so, would she have to sue Amtrak? Her successful lawsuit was intended to punish CSX, but instead punished Amtrak because of a contract she didn't know about. What are her options at this point? And finally, would some regulatory body such as the FRA have any ability to address this issue in court?

C&O-- Your question raises a number of possibilities which could get rather complicated. The most direct way the issue would be raised would be if Amtrak were sued because of an injury suffered on one of its trains as it operated on, say, CSX rails. If Amtrak felt the injury was caused by CSX's negligence, it could do what is called "implead" CSX-- ie say that it is not our negligence that caused the injury, it was CSX's,( which could also be a defense to the complaint) OR the complaining party could name both Amtrak & CSX, to protect against a court finding that Amtrak wasn't liable. If, at a trial ( which probably wouldn't happen, because these things are usually settled prior to trial to avoid the heavy expenses of actually going to trial) CSX was found to be solely liable, and compensatory damages were awarded, CSX would then invoke the agreement to secure payment ( indemnification) from Amtrak.

With regard to the issue of Punative Damages, in an egregious case, Amtrak would probably plead that idemnification for these damages is against public policy, which would force the court to decide that issue. I doubt whether the injured party would have standing to challenge this part of any agreement, because, legally, it doesn't matter to her ( in a legal sense) where her payment comes from. It might be possible for the FRA to intervene, however whether to permit this would have to be decided by the court.

Amtrak would likely have a difficult time with a lawsuit aimed directly at voiding any agreement that it indemnify CSX for punative damages. Generally courts have held that if a contract was negotiated between equal parties ( and this term is VERY broad in this context) a party will not be permitted, later, to challenge a provision with which it initially agreed absence a finding of fraud or duress , the absence of which would have resulted in that provision not being agreed to. If permitted to intervene, the FRA would have a better chance of having that kind of provision declared void than Amtrak would.

I can see why legally it doesn't matter where the money comes from to pay the victim for compensatory damages. But for punitive damages, I don't know why that should be. If the legal theory behind such damages is to "enforce the public's interest in preventing gross violations of the standard of care expected of a party in a particular situation," isn't it crucial to make sure the right party pays the damages? Otherwise, the damages do nothing to enforce the public's interest.

It sounds like, in this case, the injured woman should have sued Amtrak as well as CSX, even though she thought CSX was the party at fault. Perhaps that way all this could have been addressed in court. I don't remember if the article said it actually went to trial or settled before hand.

But it also sounds like Amtrak would have to complain that the indemnification against punitive damages in its contract is against public policy, and that nobody else really has standing to bring the issue to court. I doubt Amtrak will do this unless they are hit with a damage award large enough to threaten to bankrupt the company - a few hundred million dollars or so. And outrageous as punitive damages claims have gotten, you don't often see them that big.

C&O 15 wrote:I can see why legally it doesn't matter where the money comes from to pay the victim for compensatory damages. But for punitive damages, I don't know why that should be. If the legal theory behind such damages is to "enforce the public's interest in preventing gross violations of the standard of care expected of a party in a particular situation," isn't it crucial to make sure the right party pays the damages? Otherwise, the damages do nothing to enforce the public's interest.

Theoretically you're correct. That would be the basis for permitting the intervention into the lawsuit of the FRA--- the public agency charged with the responsibility of protecting the public against gross violations of the applicable standard of care. My argument, if I represented either Amtrak or the FRA, for voiding the offending indemnification provision, would be exactly the point you make in that last sentence.

Walt,

Assuming that Amtrak were to prevail, and have the indemnification provision declared void as against public policy, why would any freight railroad's management continue to permit Amtrak to use that railroad's tracks? Absent much higher compensation by Amtrak, I would think that violates management's fiduciary duty to its shareholders since the risks dramatically outweigh the potential return from hosting passenger service.

It could be a case of winning the battle but losing the war.

That's why I call the issue murky!--- I suspect that you're exactly right--- otherwise why negotiate this kind of provision in the first place.--- And putting aside Amtrak's origin and relationshp to the government, this problem is just one of the many problems that have always existed when the trains of one railroad operate over the tracks of another ( the old "trackage rights" problem). I don't think there has ever been an arraingement of this nature that was satisfactory to all concerned.

Ken W2KB wrote:Assuming that Amtrak were to prevail, and have the indemnification provision declared void as against public policy, why would any freight railroad's management continue to permit Amtrak to use that railroad's tracks?

That was exactly my point...

Amtrak knows not to "rock the boat", as they would be kicked off of the home rr's rails, and for good cause.