Will SCOTUS Revive the Nondelegation Doctrine?

When SCOTUS granted cert. in SEC v. Jarkesy, the case challenging the constitutionality of the SEC’s administrative enforcement proceedings, one of the questions presented was whether the statute granting authority to the SEC to elect to use ALJs violated the nondelegation doctrine. Jarkesy had contended that, in adopting the provision in Dodd-Frank permitting the use of ALJs but providing no guidance on the issue, “Congress has delegated to the SEC what would be legislative power absent a guiding intelligible principle” in violation of that doctrine. Had SCOTUS gone that route, commentators suggested, the case had the potential to be enormously significant in limiting the power of the SEC and other federal agencies beyond the question of ALJs. A column in the NYT discussing  Jarkesy explained that, if “embraced in its entirety, the nondelegation doctrine could spell the end of agency power as we know it, turning the clock back to before the New Deal.” And in Bloomberg, Matt Levine wrote that, while the ”nondelegation doctrine has not had a lot of wins in the Supreme Court in the last 90 years….it’s back now: There is revived interest in it at the Supreme Court.”  Had Jarkesy won the nondelegation argument, that could have meant “that all of the SEC’s rulemaking (and every other regulatory agency’s rulemaking) is suspect, that every policy decision that the SEC makes is unconstitutional. Much of US securities law would need to be thrown out, or perhaps rewritten by Congress if they ever got around to it. Stuff like the SEC’s climate rules would be dead forever.”  In his view, “the Supreme Court does have several justices who would love to revive the nondelegation doctrine in a way that really would undermine most of securities regulation.”  That didn’t happen in Jarkesy; SCOTUS studiously avoided addressing the issue, its looming presence in the lower court decision notwithstanding. But the nondelegation doctrine has again reared its head, this time in Consumers’ Research v. FCC out of the Fifth Circuit.  In late November, SCOTUS granted cert. in that case (and consolidated it with another case, SHLB Coalition v. Consumers’ Research, that presented similar questions). All three of the questions presented in the cert. petition relate to the nondelegation doctrine (although another was added by SCOTUS itself). With this case now on the docket, will SCOTUS continue its shellacking of the administrative state? (See this PubCo post, this PubCo post, this PubCo post, this PubCo post and this PubCo post.) And add another big wrinkle: how will the new Administration approach this case and this question? While, historically, according to Bloomberg, the “solicitor general typically defends federal statutes and programs regardless of party affiliation,” there is no assurance that the new Administration will follow historical practice. Indeed, according to this article in Law.com, with a new administration, “[f]lipping positions at the Supreme Court has become a common trend of incoming U.S. solicitors general, even if it tends to irk the justices themselves.”

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.”

That skepticism may soon be brought to bear in Consumers’ Research v. FCC, from the Fifth Circuit.  Interestingly, 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. In the cert. petition filed by the FCC, the questions presented were:

1. “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.
2. Whether the Commission violated the nondelegation doctrine by using the Administrator’s financial projections in computing universal service contribution rates.
3. 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.”

And, as noted above, in granting cert., SCOTUS added this question: “[w]hether this case is moot in light of the challengers’ failure to seek preliminary relief before the Fifth Circuit.” Could the case turn on that issue?

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.

Consumers’ Research 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 concluded 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 held, 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 had argued that Congress wasn’t delegating the power to tax; rather, the 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, the court explained, “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.

Cert. Petition

In its cert. petition, the FCC maintained that, 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 decision of the en banc Fifth Circuit not only conflicts with decisions of the Sixth and Eleventh Circuits, it also “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.” (In its petition, SHLB also contended that “the Fifth Circuit’s decision declared unconstitutional the program the FCC administers to provide billions of dollars in needed assistance for network buildout in rural and remote areas, enabling connectivity for millions of individuals, as well as support for tens of thousands of schools, libraries, healthcare providers, and low-income consumers, including those in Tribal Nations.”) 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.”

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.”

Finally, the FCC contended that 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 advocated 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.

According to the NYT, “[r]eviving the nondelegation doctrine has been a longstanding goal of the conservative legal movement, and several conservative justices have written favorably about it. ‘Since 1935,’ Justice Samuel A. Alito Jr. wrote in 2019,’“the court has uniformly rejected nondelegation arguments and has upheld provisions that authorized agencies to adopt important rules pursuant to extraordinarily capacious standards. If a majority of this court were willing to reconsider the approach we have taken for the past 84 years, I would support that effort.’ Three other members of the court—Chief Justice John G. Roberts Jr. and Justices Clarence Thomas and Neil M. Gorsuch—also said then that they were ready to act right away.” 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” or other more exacting standard? Will the new Administration revisit the FCC’s approach to this case entirely?