Public Citizen Charges That Amtrak Used Taxpayer Dollars to Reimburse CSX Negligence, Not Rail Passenger Services



Oct 27, 1997, 00:00 ET from Public Citizen

    WASHINGTON, Oct. 27 /PRNewswire/ -- The following letter was released by
 the Chairman of Public Citizen:
 
     The Honorable Rodney Slater
     Secretary
     Department of Transportation
     400 7th Street, SW
     Washington DC 20590
 
     Dear Mr. Secretary:
 
     Public Citizen strongly supports rail passenger service and believes that
 the continuation of Amtrak as an important part of our transportation system
 is critical.  At the same time, we have been vocal in our opposition to
 provisions contained in both the House and Senate Amtrak reauthorization bills
 (H.R. 2247 and S. 738, respectively) that would result in reduced safety on
 the rails, inadequate compensation of victims of passenger rail accidents, and
 complete Amtrak indemnification of freight railroads, whose lax safety
 standards result in accidents, injury and death.
     We are also aware that the lack of funding for Amtrak is a critical
 problem, both for maintaining service and for the current labor impasse that
 could result in a strike on Amtrak.  Amtrak is arguing that it is unable to
 pay inflation increases for the maintenance of way employees because it has no
 funds, even though Amtrak believes that the wage increases are justified.
     Let me suggest both an immediate and longer-range solution to some of the
 funding problem:
 
     1)  Ask the court to void on public policy grounds the indemnification
         agreement that Amtrak now has with CSX that appears to require it to
         pay a recent $50 million punitive damages judgment for gross CSX
         safety violations, which caused the death of eight Amtrak passengers
         in 1991.  This savings would more than cover the costs of wages
         involved in the current labor dispute.
 
     2)  Stop negotiating indemnification agreements with the freight railroads
         that absolve them from responsibility for any damage payments
         resulting from people injured or killed due to their unsafe track, no
         matter how egregious the misconduct of the freight railroad.
 
     The facts of the recent CSX case show why these actions should be taken.
 This past July a Florida jury imposed a $50 million punitive damage award
 against CSX Transportation, Inc. for misconduct that led to a 1991 derailment
 and crash of an Amtrak Silver Star No. 82 train traveling on CSX track in
 Lugoff, South Carolina.  The derailment occurred due to a defective switch on
 one railroad track, which was negligently maintained by CSX.  Eight passengers
 died in the crash and 78 were injured.  The jury awarded an additional
 $6.1 million in compensatory damages ($3.1 million economic damages;
 $3.0 million non-economic damages) to the family of 35-year old Miami Police
 Sergeant Paul Palank for his death.
     On October 9, 1997, Florida Judge Arthur J. Franza, in upholding the
 jury's $50 million punitive damages verdict in the Palank case, issued a
 stinging rebuke of CSX, calling their actions that led to the Amtrak train
 crash "borderline criminal."  He also noted that with respect to CSX, "the
 consequences of carelessness and greed resulted in death, the ultimate
 violation."  He also said, "The clear and convincing evidence shows that
 Silver Star No. 82's tragic derailment was caused by willful, wanton
 negligence, which is the functional equivalent of manslaughter."  Yet under
 the House and Senate bills such behavior would be countenanced by
 legislatively affirming the validity of indemnification agreements that
 protect CSX and other freight railroad companies from punishment for the most
 willful corporate wrongdoing.
     An indemnification agreement between Amtrak and CSX has already required
 Amtrak to pay out $7.54 million to the Palank family for the compensatory
 damages ($6.1 million plus costs and interest since the July 1995 verdict in
 this part of the case) for CSX's corporate wrongdoing.  An August 4, 1997 Fort
 Lauderdale Sun Sentinel article indicates that Amtrak already had paid out
 $19 million in settlements and verdicts for compensatory damages resulting
 from this crash, not counting the damages assessed in the Palank case.  In
 effect, the American taxpayer is required to bail out CS for its gross
 negligence.
     Another article dated August 2, 1997, in the Palm Beach Post reports that
 CSX and Amtrak have noted that CSX won't have to pay a penny of the
 $50 million punitives judgment in the Palank case due to an agreement between
 Amtrak and CSX.  We assume the agreement referred to is the one entitled,
 "Amendment to Liability Provisions of Operating Agreement Between Amtrak and
 Seaboard Coast Line Railroad Company."  This agreement, which we understand is
 a typical indemnification agreement between Amtrak and the freight railroads,
 was produced as part of the discovery process in the Palank case when CSX was
 asked to produce the contract between the company and Amtrak.  We understand
 that Seaboard Coast Line (the "S" in CSX) was merged into CSX Transportation,
 Inc.
     The agreement states that Amtrak indemnifies CSX "irrespective of any
 negligence or fault of Railroad (CSX), its employees ..." from any and all
 liability for injuries to, death of or damage to or destruction of property of
 any passenger on an Amtrak train traveling on CSX track.  The agreement also
 indemnifies CSX against any damage to Amtrak property damaged or destroyed in
 accidents on CSX track.
     We are also attaching a CSX response to a Palank motion in the punitive
 damages case, in which CSX argues against the "Plaintiff's attempt to
 challenge the applicability of the Indemnity Agreement between Defendant CSX
 Transportation, Inc. and Amtrak to Plaintiff's punitive damage claim,"  Our
 understanding is that Ms. Palank filed this motion because she did not want
 the American taxpayer to have to bailout CSX for the damages arising from the
 gross safety violations that caused the train crash that killed her husband
 and seven others.
     All of this information is highly relevant as Congress debates
 controversial Amtrak reauthorization legislation.  It is being opposed by
 labor groups because of employee compensation issues that cost money and by
 consumer groups because of tort issues (blanket indemnification to CSX and
 other rail companies even for egregious misconduct) that would save money if
 they are stricken from the bill.
     These issues are all the more important in light of the recent sorry
 history of railroad safety -- or lack thereof.  CSX alone has been involved in
 five major crashes in the past 18 months that have killed or seriously injured
 scores of passengers.  As you are aware, a widely publicized October 8, 1997,
 report from the DOT's own Federal Railroad Administration details numerous,
 serious safety shortfalls in all areas of CSX's operation.
     If railroad companies know that they are completely indemnified from the
 cost of compensatory damages and the possibility of punitive damages, they
 have much less incentive to maintain the safest tracks possible.  Evidence in
 the Palank case upholds such a conclusion.  The plaintiff provided expert
 testimony showing that CSX saved $2.4 billion from 1981 to 1993 by cutting its
 safety inspection staff in half.  Judge Franza noted this in his order,
 "(A)lthough cost-cutting measures may have saved (CSX) over two billion
 dollars, society paid the cost with eight human lives."
     Besides giving a blanket indemnification policy to the country's largest
 railroads for the most egregious misconduct (misconduct that is wanton,
 willful or deliberate) and making taxpayers pick up the tab for Amtrak crashes
 that result from such misconduct, the House and Senate bills would also take
 away the legal rights of injured train passengers who seek to hold CSX and
 other corporate wrongdoers fully accountable.  For instance, S. 738 would cap
 punitive damage awards at $250,000 or two times economic losses, whichever is
 greater (the House bill caps punitive damages at three times the economic
 loss).
     In the Palank case, had the Senate bill been law, the punitive damages
 assessed against CSX could not have exceeded $6.2 million, or two times the
 $3.1 million award for economic damages.  At this level for companies the size
 of CSX and other freight rail entities, the threat of punitive damages becomes
 just another modest cost of doing business, encouraging companies to take
 shortcuts that surely will result in less safety and more death, and injury on
 the rails.
     Further, the House bill would also prohibit passengers injured in train
 accidents from receiving non-economic damages greater than $250,000 of their
 economic loss, regardless of the circumstances.  Such awards include
 compensation for pain and suffering resulting from gross disfigurement, loss
 of fertility, loss of vision, paraplegia and brain damage.  This cap
 discriminates against the elderly, the poor, children and women -- especially
 those not employed outside the home -- whose injuries often involve mostly
 non-economic losses.
     Assuming that Amtrak plans to make the $50 million punitive damages
 payment on behalf of CSX, it is probably accounting for that amount on its
 books in fiscal year 1998.  However, if Amtrak were to object to that payment,
 it will have $50 million that it can use to properly pay its employees and
 meet other expenses.  Amtrak should ask the court to intervene in this matter
 and void the indemnification agreement -- at least in this instance -- due to
 the willful nature of the behavior that caused the crash.  I want to assure
 you that Public Citizen will not let this matter rest.
     I am sure you are aware that the issue of Amtrak's obligation to reimburse
 a freight railroad for the gross negligence of the freight railroad already
 has been litigated.  Several courts, including a federal court in the 1987
 Chase, Maryland, train wreck that killed 16 have refused to uphold
 indemnification agreements that would completely immunize a railroad from
 liability when it engages in gross negligence or recklessness.  Making H.R.
 2247 or S. 738 law would preclude such court decisions.
     We see no justification for a $50 million federal corporate welfare
 payment to CSX as a reward for what the judge in the case called its "greed"
 and "callous indifference" to safety.  This $50 million can be put to use
 productively to improve Amtrak's performance and pay its employees as the
 presidential commission recommended.
     We believe that you should put a stop to this corporate welfare payment
 and adopt an Amtrak policy that prohibits such payments in the future.  We
 also believe the prudent public policy would be for Amtrak to make public how
 much it has paid out on behalf of the railroads as a result of these
 indemnification agreements so that Congress and the American taxpayer can
 better assess the prudence of this legislation.  I am asking by this letter
 that such information be made, public immediately before Congress votes on
 this legislation.
 
     Sincerely,
 
     Joan Claybrook
 
 

SOURCE Public Citizen
    WASHINGTON, Oct. 27 /PRNewswire/ -- The following letter was released by
 the Chairman of Public Citizen:
 
     The Honorable Rodney Slater
     Secretary
     Department of Transportation
     400 7th Street, SW
     Washington DC 20590
 
     Dear Mr. Secretary:
 
     Public Citizen strongly supports rail passenger service and believes that
 the continuation of Amtrak as an important part of our transportation system
 is critical.  At the same time, we have been vocal in our opposition to
 provisions contained in both the House and Senate Amtrak reauthorization bills
 (H.R. 2247 and S. 738, respectively) that would result in reduced safety on
 the rails, inadequate compensation of victims of passenger rail accidents, and
 complete Amtrak indemnification of freight railroads, whose lax safety
 standards result in accidents, injury and death.
     We are also aware that the lack of funding for Amtrak is a critical
 problem, both for maintaining service and for the current labor impasse that
 could result in a strike on Amtrak.  Amtrak is arguing that it is unable to
 pay inflation increases for the maintenance of way employees because it has no
 funds, even though Amtrak believes that the wage increases are justified.
     Let me suggest both an immediate and longer-range solution to some of the
 funding problem:
 
     1)  Ask the court to void on public policy grounds the indemnification
         agreement that Amtrak now has with CSX that appears to require it to
         pay a recent $50 million punitive damages judgment for gross CSX
         safety violations, which caused the death of eight Amtrak passengers
         in 1991.  This savings would more than cover the costs of wages
         involved in the current labor dispute.
 
     2)  Stop negotiating indemnification agreements with the freight railroads
         that absolve them from responsibility for any damage payments
         resulting from people injured or killed due to their unsafe track, no
         matter how egregious the misconduct of the freight railroad.
 
     The facts of the recent CSX case show why these actions should be taken.
 This past July a Florida jury imposed a $50 million punitive damage award
 against CSX Transportation, Inc. for misconduct that led to a 1991 derailment
 and crash of an Amtrak Silver Star No. 82 train traveling on CSX track in
 Lugoff, South Carolina.  The derailment occurred due to a defective switch on
 one railroad track, which was negligently maintained by CSX.  Eight passengers
 died in the crash and 78 were injured.  The jury awarded an additional
 $6.1 million in compensatory damages ($3.1 million economic damages;
 $3.0 million non-economic damages) to the family of 35-year old Miami Police
 Sergeant Paul Palank for his death.
     On October 9, 1997, Florida Judge Arthur J. Franza, in upholding the
 jury's $50 million punitive damages verdict in the Palank case, issued a
 stinging rebuke of CSX, calling their actions that led to the Amtrak train
 crash "borderline criminal."  He also noted that with respect to CSX, "the
 consequences of carelessness and greed resulted in death, the ultimate
 violation."  He also said, "The clear and convincing evidence shows that
 Silver Star No. 82's tragic derailment was caused by willful, wanton
 negligence, which is the functional equivalent of manslaughter."  Yet under
 the House and Senate bills such behavior would be countenanced by
 legislatively affirming the validity of indemnification agreements that
 protect CSX and other freight railroad companies from punishment for the most
 willful corporate wrongdoing.
     An indemnification agreement between Amtrak and CSX has already required
 Amtrak to pay out $7.54 million to the Palank family for the compensatory
 damages ($6.1 million plus costs and interest since the July 1995 verdict in
 this part of the case) for CSX's corporate wrongdoing.  An August 4, 1997 Fort
 Lauderdale Sun Sentinel article indicates that Amtrak already had paid out
 $19 million in settlements and verdicts for compensatory damages resulting
 from this crash, not counting the damages assessed in the Palank case.  In
 effect, the American taxpayer is required to bail out CS for its gross
 negligence.
     Another article dated August 2, 1997, in the Palm Beach Post reports that
 CSX and Amtrak have noted that CSX won't have to pay a penny of the
 $50 million punitives judgment in the Palank case due to an agreement between
 Amtrak and CSX.  We assume the agreement referred to is the one entitled,
 "Amendment to Liability Provisions of Operating Agreement Between Amtrak and
 Seaboard Coast Line Railroad Company."  This agreement, which we understand is
 a typical indemnification agreement between Amtrak and the freight railroads,
 was produced as part of the discovery process in the Palank case when CSX was
 asked to produce the contract between the company and Amtrak.  We understand
 that Seaboard Coast Line (the "S" in CSX) was merged into CSX Transportation,
 Inc.
     The agreement states that Amtrak indemnifies CSX "irrespective of any
 negligence or fault of Railroad (CSX), its employees ..." from any and all
 liability for injuries to, death of or damage to or destruction of property of
 any passenger on an Amtrak train traveling on CSX track.  The agreement also
 indemnifies CSX against any damage to Amtrak property damaged or destroyed in
 accidents on CSX track.
     We are also attaching a CSX response to a Palank motion in the punitive
 damages case, in which CSX argues against the "Plaintiff's attempt to
 challenge the applicability of the Indemnity Agreement between Defendant CSX
 Transportation, Inc. and Amtrak to Plaintiff's punitive damage claim,"  Our
 understanding is that Ms. Palank filed this motion because she did not want
 the American taxpayer to have to bailout CSX for the damages arising from the
 gross safety violations that caused the train crash that killed her husband
 and seven others.
     All of this information is highly relevant as Congress debates
 controversial Amtrak reauthorization legislation.  It is being opposed by
 labor groups because of employee compensation issues that cost money and by
 consumer groups because of tort issues (blanket indemnification to CSX and
 other rail companies even for egregious misconduct) that would save money if
 they are stricken from the bill.
     These issues are all the more important in light of the recent sorry
 history of railroad safety -- or lack thereof.  CSX alone has been involved in
 five major crashes in the past 18 months that have killed or seriously injured
 scores of passengers.  As you are aware, a widely publicized October 8, 1997,
 report from the DOT's own Federal Railroad Administration details numerous,
 serious safety shortfalls in all areas of CSX's operation.
     If railroad companies know that they are completely indemnified from the
 cost of compensatory damages and the possibility of punitive damages, they
 have much less incentive to maintain the safest tracks possible.  Evidence in
 the Palank case upholds such a conclusion.  The plaintiff provided expert
 testimony showing that CSX saved $2.4 billion from 1981 to 1993 by cutting its
 safety inspection staff in half.  Judge Franza noted this in his order,
 "(A)lthough cost-cutting measures may have saved (CSX) over two billion
 dollars, society paid the cost with eight human lives."
     Besides giving a blanket indemnification policy to the country's largest
 railroads for the most egregious misconduct (misconduct that is wanton,
 willful or deliberate) and making taxpayers pick up the tab for Amtrak crashes
 that result from such misconduct, the House and Senate bills would also take
 away the legal rights of injured train passengers who seek to hold CSX and
 other corporate wrongdoers fully accountable.  For instance, S. 738 would cap
 punitive damage awards at $250,000 or two times economic losses, whichever is
 greater (the House bill caps punitive damages at three times the economic
 loss).
     In the Palank case, had the Senate bill been law, the punitive damages
 assessed against CSX could not have exceeded $6.2 million, or two times the
 $3.1 million award for economic damages.  At this level for companies the size
 of CSX and other freight rail entities, the threat of punitive damages becomes
 just another modest cost of doing business, encouraging companies to take
 shortcuts that surely will result in less safety and more death, and injury on
 the rails.
     Further, the House bill would also prohibit passengers injured in train
 accidents from receiving non-economic damages greater than $250,000 of their
 economic loss, regardless of the circumstances.  Such awards include
 compensation for pain and suffering resulting from gross disfigurement, loss
 of fertility, loss of vision, paraplegia and brain damage.  This cap
 discriminates against the elderly, the poor, children and women -- especially
 those not employed outside the home -- whose injuries often involve mostly
 non-economic losses.
     Assuming that Amtrak plans to make the $50 million punitive damages
 payment on behalf of CSX, it is probably accounting for that amount on its
 books in fiscal year 1998.  However, if Amtrak were to object to that payment,
 it will have $50 million that it can use to properly pay its employees and
 meet other expenses.  Amtrak should ask the court to intervene in this matter
 and void the indemnification agreement -- at least in this instance -- due to
 the willful nature of the behavior that caused the crash.  I want to assure
 you that Public Citizen will not let this matter rest.
     I am sure you are aware that the issue of Amtrak's obligation to reimburse
 a freight railroad for the gross negligence of the freight railroad already
 has been litigated.  Several courts, including a federal court in the 1987
 Chase, Maryland, train wreck that killed 16 have refused to uphold
 indemnification agreements that would completely immunize a railroad from
 liability when it engages in gross negligence or recklessness.  Making H.R.
 2247 or S. 738 law would preclude such court decisions.
     We see no justification for a $50 million federal corporate welfare
 payment to CSX as a reward for what the judge in the case called its "greed"
 and "callous indifference" to safety.  This $50 million can be put to use
 productively to improve Amtrak's performance and pay its employees as the
 presidential commission recommended.
     We believe that you should put a stop to this corporate welfare payment
 and adopt an Amtrak policy that prohibits such payments in the future.  We
 also believe the prudent public policy would be for Amtrak to make public how
 much it has paid out on behalf of the railroads as a result of these
 indemnification agreements so that Congress and the American taxpayer can
 better assess the prudence of this legislation.  I am asking by this letter
 that such information be made, public immediately before Congress votes on
 this legislation.
 
     Sincerely,
 
     Joan Claybrook
 
 SOURCE  Public Citizen