Amtrak’s role in setting on-time performance standards that could trigger U.S. investigations of railroads whose trains get in its way are unconstitutional, a federal appeals court ruled.

A three-judge panel of the U.S. Court of Appeals in Washington today said Congress had improperly delegated to Amtrak, a private corporation, the power to draft performance standards that affected companies whose tracks the passenger carrier uses. Amtrak trains have legal priority over freight.

“Though the federal government’s involvement in Amtrak is considerable, Congress has both designated it a private corporation and instructed that it be managed so as to maximize profit,” U.S. Circuit Judge Janice Rogers Brown said in the ruling.

The Association of American Railroads sued the Department of Transportation in 2011 arguing that the standards, which Amtrak jointly drafted with Federal Railroad Administration, forced the railroads to substantially alter their business operations, at times by delaying their own freight traffic.

Steve Kulm, a spokesman for Amtrak, Patti Reilly, a spokeswoman for the Association of American Railroads, and Kevin Thompson, a spokesman for the Federal Railroad Administration, didn’t immediately respond to a phone call and e-mail seeking comment on the ruling.

The case involves on-time performance standards established under the Passenger Rail Investment and Improvement Act of 2008. If Amtrak trains don’t meet the standards set by the company and the government, the Surface Transportation Board can investigate the railroads whose tracks they use and assess damages.

Brown, in the unanimous ruling, said Amtrak’s involvement in rulemaking was akin to the government giving General Motors the power to coauthor regulations governing all automobile manufacturers.

The case is Association of American Railroads v. U.S. Department of Transportation, 12-5204, U.S. Court of Appeals for the District of Columbia (Washington).

With assistance from Angela Greiling in Washington. Editors: Fred Strasser and Charles Carter.

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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Photo Credit: Three freight trains run into Amtrak territory in Chicago. vxla / Flickr