If you thought that SCOTUS’ decision in Loper Bright last term tolling the bell for the 70-year old Chevron doctrine was the end of SCOTUS’ drubbing of the administrative state, look again—you may well be sorely mistaken. (See this PubCo post.) You might remember that, at a recent Ninth Circuit judicial conference, Justice Elena Kagan, expanding on her dissent in Loper Bright in response to a question, suggested that one reason the Court abandoned stare decisis in the case was plain hubris: in her view, the Court just believed that there was too much agency regulation and thought that the courts needed to step in. (See the Sidebar in this PubCo post.) And perhaps that conclusion didn’t require a giant leap. As far back as 2013 in his dissent in City of Arlington v. FCC (2013), Chief Justice Roberts worried that “the danger posed by the growing power of the administrative state cannot be dismissed.” Is there any reason to think that the urge to curb the administrative state has suddenly abated? Or will we perhaps see a temporary pause while agencies and court watchers catch their breath? As it turns out, there certainly could be opportunities for SCOTUS to continue the onslaught this term. The nondelegation doctrine—which SCOTUS studiously avoided addressing in Jarkesy v. SEC, its looming presence in the lower court decision notwithstanding—has once again reared its head, this time in Consumers’ Research v. FCC out of the Fifth Circuit. A petition for cert has just been filed in that case. And the concept of agency independence as established in a 1935 case, Humphrey’s Executor v. United States, may also be on the chopping block, as SCOTUS considers whether to take up the petition for cert in a Fifth Circuit decision, Consumers’ Research v. Consumer Product Safety Commission, in which the panel practically begged SCOTUS to review the case. [UPDATE 10/21: Cert. denied in the latter case.] [UPDATE 11/22: Cert. granted in the former case.]
Nondelegation doctrine
What is the “nondelegation doctrine”? The nondelegation doctrine addresses the constitutional limits on the extent to which legislative authority may be delegated to the executive branch and its various agencies. As explained in this essay on the Constitution on Congress.gov., the “nondelegation doctrine is rooted in certain separation of powers principles. In limiting Congress’s power to delegate, the nondelegation doctrine exists primarily to prevent Congress from ceding its legislative power to other entities not vested with legislative authority under the Constitution.” Although “the Supreme Court has declared categorically that the legislative power of Congress cannot be delegated,… the categorical statement has never been literally true…The Court has long recognized that administration of the law requires exercise of discretion, and that, in our increasingly complex society, replete with ever changing and more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general directives. The real issue is where to draw the line.” In a 1928 case, J. W. Hampton, Jr. & Co. v. United States, SCOTUS upheld Congress’s delegation of authority to the President to ensure implementation of legislation where it provided an “intelligible principle” to which the President or other entity must conform. In that way, the President was acting as the agent of the Congress guided by the intelligible principle that Congress set forth, a legal framework that defines or limits the authority of the administrative agency to which authority has been delegated. The intelligible principle standard “remains the Supreme Court’s primary test for assessing whether Congress has unconstitutionally delegated its legislative power to the other branches of the government. Under this lenient standard, the Supreme Court has repeatedly affirmed, without deviation, Congress’s ability to delegate power under broad standards to governmental entities.” The essay observes, however, that the “modern application of the J. W. Hampton Court’s intelligible principle test and the broad deference it affords congressional delegations of authority to the other branches has met with growing skepticism from some members of the Court.”
SCOTUS has an opportunity to address the nondelegation doctrine in Consumers’ Research v. FCC, if it decides to grant cert. to this case out of the Fifth Circuit. Notably, similar claims by Consumers’ Research against the FCC were made in cases in the Sixth and Eleventh circuits, but the claims were denied—as were the petitions for cert. But, in this case, the en banc Fifth Circuit narrowly held in favor of Consumers’ Research that the funding mechanism for a universal service program implemented by the FCC violated Article I of the Constitution, leaving a split in the circuits.
Background. For almost 30 years, many rural and low-income persons have relied on the Universal Service Fund to subsidize universal modern telecommunications services. The FCC is authorized under §254 of the Telecommunications Act of 1996 to establish mechanisms to “preserve and advance universal service,” pursuant to which the FCC levies “contributions” to the USF from telecom carriers and distributes the funds raised. Telecom carriers then pass the “contribution” amounts through to consumers. The FCC relies on a private company to help determine the contribution amounts.
Petitioners challenged the constitutionality of the universal service contribution mechanism, contending that the mechanism violates the Legislative Vesting Clause of Article 1 of the Constitution, which provides that “[a]ll legislative Powers herein granted shall be vested in a Congress of the United States.” The Fifth Circuit agreed. The court explained that “the power to levy USF ‘contributions’ is the power to tax—a quintessentially legislative power.” The court held that Congress “may have delegated legislative power to FCC” by delegating the “power to tax without supplying an intelligible principle to guide FCC’s discretion,” and the FCC “may have impermissibly delegated the taxing power to private entities.” But, in any event, the court concluded, the combination of the two delegations certainly violated the Constitution: the court “need not definitively answer either delegation question because even if §254 contains an intelligible principle, and even if FCC was permitted to enlist private entities to determine how much universal service tax revenue it should raise, the combination of Congress’s broad delegation to FCC and FCC’s sub-delegation to private entities certainly amounts to a constitutional violation.”
The FCC responded that Congress wasn’t delegating the power to tax; rather FCC was imposing a fee because it conferred benefits on contributing carriers. But the court disagreed, concluding that in §254, Congress “delegated its taxing power to FCC,” a “quintessentially legislative” power. As a result, “§254 is constitutional only if it passes nondelegation muster.” But SCOTUS, the court maintained, “has never upheld a delegation of core legislative power as sweeping as the one contained in §254.”
Under the separation of powers doctrine, “Congress, not agencies, must make legislative decisions.” However, SCOTUS “has held that delegations are constitutional so long as Congress ‘lay[s] down by legislative act an intelligible principle to which the person or body authorized [to exercise the delegated authority] is directed to conform.’” Nevertheless, “‘there are limits of delegation which there is no constitutional authority to transcend.’” According to the court, those would include vague or overly broad delegations, which could “obscure accountability.” The court found that the guidance included in §254—that USF funding should be “sufficient” to preserve the service and make services available at “affordable rates”—supplied “no principle at all.” The “only real constraint on FCC’s discretion to levy excise taxes on telecommunications carriers (and American consumers in turn) is that rates ‘should’ remain ‘affordable.’”
Although the court acknowledged that SCOTUS had previously “upheld certain broad delegations”—even “broad congressional delegations of core legislative functions”—those decisions did “not necessarily dictate that we uphold §254’s delegation of power to FCC to levy taxes on American consumers. And §254 appears unlike any delegation the Court has ever blessed.” In all the prior cases, the court said, there has been a special justification for the delegation, such as superior technical knowledge, or agency discretion was limited “enough that, at the very least, reviewing courts could ‘ascertain whether the will of Congress ha[d] been obeyed.’”
The court’s “grave concerns” about the constitutionality of §254 were compounded by the fact that the contribution amount was formulated by private parties. This sub-delegation did not pass the test; it reflected a “de facto abdication. And when an agency de facto abdicates to a private entity its responsibility to make governmental decisions,” the “private company becomes a lawmaker in its own right.” Ultimately, the court concluded that “[b]road congressional delegations to the executive undermine democratic accountability” and held the contribution amount unconstitutional.
There were two dissents, the first contended that §254 did provide an intelligible principle and that the FCC maintained control over the private entity helping to administer the USF. The dissent observed that SCOTUS “has approved narrow and broad delegations, acknowledging that ‘in our increasingly complex society, replete with ever changing and more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general directives.’” The second dissent took issue with the majority’s decision to adopt a “novel theory that it is ‘the combination’ of these two non-violations that ‘violates the Legislative Vesting Clause in Article I, § 1.’” That is, the “majority finds neither an unconstitutional delegation of legislative power nor an unconstitutional exercise of government power by a private entity. Supreme Court precedent dictates these answers, which is why every other circuit to consider these questions stopped there and the Supreme Court denied petitions for review of those decisions.” Since “the majority cannot prevail under legislative delegation or private delegation precedent,… it concocts a theory to rewrite both.” In addition, the second dissent maintained, the nationwide telecom program “is exactly the type of ‘ever changing’ and ‘technical problem[]’ that the Supreme Court has held Congress can address with ‘broad general directives’ to expert agencies.”
As noted above, the FCC has just filed a petition for cert. and Consumers’ Research was immediately there with a response.
Petition. As framed by the FCC, there are three questions presented:
- “Whether Congress violated the nondelegation doctrine by authorizing the Commission to determine, within the limits set forth in Section 254, the amount that providers must contribute to the Fund.
- Whether the Commission violated the nondelegation doctrine by using the Administrator’s financial projections in computing universal service contribution rates.
- Whether the combination of Congress’s conferral of authority on the Commission and the Commission’s delegation of administrative responsibilities to the Administrator violates the nondelegation doctrine.”
According to the petition, under the Telecommunications Act, Congress’s delegation to the FCC is subject to guiding principles. It is required “to ‘base policies for the preservation and advancement of universal service’ on a series of specific ‘principles’—for example, the principle that consumers in rural areas ‘should have access to telecommunications and information services * * * that are reasonably comparable to those services provided in urban areas.’” It is also required by the Act to be guided in certain decision-making by a set of prescribed factors. To help the FCC administer the USF, including data to assist in calculation of carrier contributions, it established a private, not-for-profit company, which remains subject to the FCC’s “oversight and control” and “exercises no independent regulatory power.” The process for computing each carrier’s contribution to the USF was established by FCC rules.
The FCC contended that its petition should be granted because the decision of the en banc Fifth Circuit conflicts with decisions of the Sixth and Eleventh Circuits and “invalidates the system that the Commission has used for a quarter century to implement an important Act of Congress. If left in place, the decision will upend the universal service programs, to the detriment of millions of consumers nationwide.” According to the FCC, the Fifth Circuit decision was incorrect because “Congress did not delegate legislative power” to the FCC, nor did the FCC delegate governmental power to the [private company] Administrator. Nor did the combination of those two conferrals of responsibility create a constitutional violation.” In addition, although the Fifth Circuit found the delegation issue “‘especially salient’” in this case because “Section 254 ‘implicates the taxing power,’” the FCC argued that a tax may not even be involved: “Congress may regulate commerce by requiring those engaged in commerce to pay money.” Moreover, even if the taxing power were implicated, the FCC asserted, “this Court has specifically rejected ‘the application of a different and stricter nondelegation standard in cases where Congress delegates discretionary authority to the Executive under its taxing power.’”
Although Congress may not delegate legislative powers to the executive, the FCC observed, it may authorize agencies to exercise substantial discretion in implementation and enforcement so long as a statute provides an “intelligible principle” to guide agency actions. This “test is ‘not demanding,’” and SCOTUS “has ‘over and over upheld even very broad delegations,’” such as regulating in the “public interest” or setting “fair and equitable prices.” Only twice, when no policy or standard was articulated, has the delegation failed to pass muster. The statute here, the FCC argued, “provides far more detailed guidance than others that this Court has upheld,” identifying “six specific ‘principles’” on which the FCC must base its policies for universal service. The Act also specifies other requirements, such as the type of services the FCC may fund. Because the Act “provides comprehensive guidance to the FCC on how to implement Congress’s universal service policy,” it “effects a permissible grant of discretionary authority, not an impermissible delegation of legislative power.”
The FCC also took issue with the Fifth Circuit’s separate determination that the sub-delegation to the private Administrator was not Constitutional. The nongovernmental actor here was subordinate to the FCC and subject to its authority and oversight: the “FCC, not the Administrator, determines, within the limits set by Congress, how much carriers must pay. Under the FCC’s rules, the amount of a carrier’s contribution depends ‘on a contribution factor determined quarterly by the Commission.’” The role of the Administrator is simply to help the FCC “compute the contribution factor by providing ‘projections’ of the universal service programs’ expenses and the carriers’ revenues.”
Finally, the FCC also questioned the Fifth Circuit’s resort to the “combination theory,” asserting that it conflicts with prior precedent. In addition, the “supposed second level of delegation in this case—the FCC’s reliance on the Administrator’s non-binding projections in computing the contribution factor” did not have a “transformative effect. The FCC still decides, within the bounds set by Congress, how much carriers must pay; the Administrator simply provides data to assist the Commission in making that decision.”
SCOTUS should grant the petition, the FCC argued, not only in light of the circuit split, but also because the Fifth Circuit decision “invalidates the FCC’s implementation of a federal statute.” Although “the court did not invalidate the statute on its face, it did invalidate the way in which the Commission has implemented the statute for more than two decades.” Moreover, the practical consequences of the decision are significant: it “threatens to nullify the universal service programs—to the detriment of the ‘millions of Americans’ whom those programs serve.”
Response. In their response, Consumers’ Research and the other Respondents (which styled themselves as “Challengers”) profess that they “have long contended that the taxing system used to fund the [USF] is unconstitutional under nondelegation principles.” They maintain that, in reality, “Congress imposed no formula, ceiling, or other meaningful restrictions on how much money can be raised for the USF. To be sure, Congress provided a list of universal service ‘principles.’ … But they are so amorphous and non-binding that courts—adopting the FCC’s own language—have long labeled them ‘aspirational only,’… meaning Congress ‘suppl[ied] no principle at all.’… In addition, Congress expressly authorized the FCC to redefine ‘universal service’ and ‘universal service principles’ as often as it wishes, giving the agency even broader authority to raise billions of dollars in taxes for a program designed to benefit the country more broadly…. The FCC then off-loaded authority over the USF to USAC, a private entity of self-described industry insiders with an incentive to push USF charges increasingly higher.” In Respondents’ view, it is the USAC that exercises discretion in determining the USF budget and the FCC that, acting in a “ministerial” capacity, converts the number into a contribution factor, which is then passively “deemed approved”: the FCC does not take “any affirmative action or even issu[e] an approval order. … There is no evidence the FCC itself ever actually reviews USAC’s work or agrees with USAC’s discretionary decisions about how much money to raise, which is far from a ministerial undertaking.” In effect, they assert, “a private company is taxing Americans in amounts that total billions of dollars every year, under penalty of law, without true governmental accountability.” The Fifth Circuit was correct, they contend, in holding the combination of delegations unconstitutional; several concurring judges would have gone further and held each delegation to be unconstitutional.
Further, rehearing has been sought for SCOTUS’s June 2024 denial of cert. petitions from the Sixth and Eleventh Circuits regarding essentially the same case. As a result, Respondents “agree the constitutionality of the USF funding mechanism warrants this Court’s review.” They advocate that SCOTUS “grant the petitions for rehearing and certiorari” in the two other cases and “then either consolidate all three cases,” realigning parties as petitioners, or “hold this case pending a decision” in the two earlier cases.
So it appears that the battle has been joined. With both parties requesting cert.—in some form—will SCOTUS decide to step in? Might SCOTUS decide that the concept of an “intelligible principle” as a standard is inadequate to preserve accountability? Might the Court instead invoke a more demanding “sufficiently precise” or “sufficiently clear” standard? Or might SCOTUS decide to just let sleeping dogs lie?
Agency independence
The second issue—in another case from Consumers’ Research—involves the president’s authority to remove commissioners of so-called “independent” agencies, in this instance, the Consumer Product Safety Commission. The three-judge panel of the Fifth Circuit in Consumers’ Research v. Consumer Product Safety Commission explicitly suggested that the case may attract SCOTUS’s attention because it
“tees up one of the fiercest (and oldest) fights in administrative law: the Humphrey’s Executor ‘exception’ to the general ‘rule’ that lets a president remove subordinates at will. In this 1935 New Deal-era precedent, which detractors say dilutes the president’s constitutional power over the executive branch, the Supreme Court upheld restrictions on the president’s authority to remove commissioners of so-called ‘independent’ agencies—those headed by officers who may only be removed for specified causes….As middle-management circuit judges, we must follow binding precedent, even if that precedent strikes us as out of step with prevailing Supreme Court sentiment. The logic of Humphrey’s may have been overtaken, but the decision has not been overruled—at least not yet. Until that happens, Humphrey’s controls.”
And at the conclusion, the court acknowledges that “Humphrey’s does settle the question. Only the Supreme Court has power to reconsider that New Deal-era precedent—perhaps reaffirming it, overruling it, or narrowing it—and at least so far, it hasn’t.”
In recent past precedent, the court explained, the Fifth Circuit “described the [Humphrey’s Executor] exception like this: Congress’s decision ‘limiting the President to “for cause” removal is not sufficient to trigger a separation-of-powers violation.’ Instead, for-cause removal creates a separation-of-powers problem only if it ‘combine[s]’ with ‘other independence-promoting mechanisms’ that ‘work[] together’ to ‘excessively insulate’ an independent agency from presidential control.” Structurally, the court found, the CPSC is “a mirror image of the Federal Trade Commission (FTC), an agency whose institutional design the Supreme Court considered in Humphrey’s Executor v. United States,” and the President may remove a member of the CPSC “only for ‘neglect of duty or malfeasance in office’—that is, only for cause.”
This case involved an amendment to CPSC’s FOIA regulations that increased the per-page fee for paper copies by $0.05(!!), and eliminated duplication fees for electronic copies. One of the plaintiffs, an educational consulting partnership, asked for, but was denied, waivers of these fees. They sued, arguing that the CPSC’s structure violates Article II of the U.S. Constitution because the President may remove the members of the CPSC only for cause, along with other claims related to CPSC’s purported unconstitutional structure.
The court first analyzed whether the plaintiffs had standing, concluding that because they “alleged an injury-in-fact that is traceable to the Commission’s unconstitutional structure and that is redressable by a favorable decision from this court, [they have] established [their] Article III standing to assert the separation-of-powers violation as an independent claim.” On the merits, however, the court could not “agree that the Commission’s structure violates the prevailing iteration of the removal doctrine as the Supreme Court has articulated it. This is not to say that the doctrine is clear. And perhaps clarity will remain a mere aspiration so long as the doctrine’s foundation includes a decision proclaiming that the FTC ‘exercises no part of the executive power.’ Still, the Supreme Court, while it has limited Humphrey’s, has not yet overruled it.” Under the Humphrey’s Executor exception, Congress may provide “for-cause removal protections to a multimember body of experts, balanced along partisan lines, that performed legislative and judicial functions and was said not to exercise any executive power.” Subsequent cases did not change that exception. According to the court, the “contours of the Humphrey’s Executor exception depend upon the characteristics of the agency before the Court”— “organizational features that helped explain its characterization of the FTC as non-executive,” such as nonpartisan composition and expertise.
The plaintiffs, however, contended that the CPSC did exercise executive power and, therefore, the agency fell outside of the Humphrey’s Executor exception. That argument meant that the court had to consider the role of “executive power” in this context. But that was not so easy: “to do that is to board a train of thought that seems almost predestined for incoherence.” The court concluded that, “under any modern conception, the [CPSC] unquestionably does exercise executive power. Even so, it is hard to tell how much of that power is required before an agency loses protection under the Humphrey’s exception.”
The court concluded that the power wielded was substantial, but that still did not remove the CPSC from the exception: the CPSC’s structure was not “historically unprecedented,” included a multi-member board (unlike the Consumer Financial Protection Bureau, the structure of which was held unconstitutional in Seila Law), and did “not have any of the features that combined to make the CFPB’s structure ‘even more problematic’ in Seila Law” (e.g., leadership by a single individual). In the end, the court determined that the CPSC “fits squarely within what our ‘en banc court described just a few years ago as ‘the recognized exception for independent agencies’ whose leadership consists of a ‘multi-member bod[y] of experts.’… Our en banc court has already held that for-cause protection is ‘not sufficient to trigger a separation-of-powers violation.’” To trigger a constitutional violation would require that for-cause removal be combined with “‘other independence-promoting mechanisms’ that ‘work[] together’ to ‘excessively insulate’ an agency from the President’s control.” None were identified. The court held that, “[u]nder these rules, Humphrey’s still protects the [CPSC]”.
Consumers’ Research petitioned for cert. with this question presented: “Whether the for-cause restriction on the President’s authority to remove Commissioners of the Consumer Product Safety Commission violates the separation of powers?” The petition contended that the question “teed up” for the Court “goes to the heart of our system of government: Whether a federal agency may exercise substantial executive power while shielded from the President’s supervision and control….A bare majority of the Fifth Circuit answered yes—but only on the ground that Humphrey’s Executor forced its hand. And while the opinions below disagreed strongly about whether Humphrey’s extends so broadly, all agreed that this Court’s review is warranted. Even the author of the majority opinion said so, going so far as to state that the ‘cert petition writes itself.’”
The CPSC, “one of the most powerful independent agencies ever created,” it argues, “is a federal agency entrusted with substantial executive power, but wholly unaccountable to the Chief Executive whose power it wields.” In petitioners’ view, “Seila Law controls here…. Because the CPSC wields substantial executive power, its Commissioners must be removable at will. But the court of appeals held otherwise.” The Fifth Circuit held that because the CPSC is structured as traditional multimember agency, “its removal protections are constitutional. That was seriously wrong—at least if Seila Law meant what it said. As this Court explained, Humphrey’s reaches only multimember agencies that do not exercise ‘substantial executive power,’ because it was premised on the 1935 FTC not exercising any executive power—instead performing only ‘specified duties as a legislative or as a judicial aid.’… But as eight judges emphasized in dissent, the CPSC is different in kind: It exercises substantial power, so it falls outside Humphrey’s bounds.”
In response, the CPSC suggested that there were really two questions presented, one being the Constitutional question about the CPSC’s for-cause removal protection, but the second being whether the petitioners’ FOIA requests to the CPSC gives them Article III standing to challenge the statute. CPSC argued that the cert petition should be denied. First, it contended, petitioners lack Article III standing because they are “not regulated by the Commission and thus face no potential exercise of ‘substantial executive power’ that, on petitioners’ theory, can be exercised only by officers subject to at-will removal. To the contrary, petitioners have conceded the constitutionality of removal protection for officers who oversee the same sorts of FOIA determinations at issue here.”
Next, CPSC contended that the decision by the Fifth Circuit “does not conflict with any decision of this Court or another court of appeals.” The removal limitations at issue here have been in place for 90 years, and “[p]etitioners offer no sound reason to upset that understanding at this late date.” Finally, CPSC asserted that “this case would not be an appropriate vehicle for revisiting Humphrey’s Executor in any event. Petitioners conspicuously decline to ask the Court to overrule Humphrey’s Executor and do not mention stare decisis. And even if petitioners had Article III standing, this highly artificial suit would at minimum be an exceptionally poor vehicle for deciding a constitutional question of this magnitude.”
We should know soon whether SCOTUS will grant the cert petition in this case. [Update 10/21: cert. denied]
