p.37, revision to note 1 (replace note 1 with the following):
- Big changes may be coming: Gundy v. United States (2019). Since early in the twentieth century, the Supreme Court’s touchstone for applying the nondelegation doctrine has been whether Congress has limited agency authority with an “intelligible principle.” It has proven terrifically difficult to persuade courts to strike a grant of authority for lacking such an “intelligible principle.” As Justice Scalia observed in Whitman, the Supreme Court has taken this step just twice in over two hundred years, striking provisions of the National Industrial Recovery Act in the Depression-era cases of Panama Refining Co. v. Ryan, 293 U.S. 388 (1935), and A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). The more important of these two, Schechter, challenged an extraordinarily broad grant of authority to the president to create or approve “codes of fair competition” regulating trade and industry. The Court rejected this “virtually unfettered” power to create “whatever laws [the president] thinks may be needed or advisable for the rehabilitation and expansion of trade or industry” as “an unconstitutional delegation of legislative power.” Id. at 542.
In every other case that has reached the Supreme Court, it has found the “intelligible principle” needed to defuse a nondelegation challenge. Toward the end of his Whitman opinion, Justice Scalia documented this point by citing impressively broad grants of discretionary agency authority that the Court has approved in the past. Twelve years earlier, in his dissenting opinion in Mistretta v. United States, 488 U.S. 361 (1989), he explained why this toothless approach was, in his view, appropriate:
But while the doctrine of unconstitutional delegation is unquestionably a fundamental element of our constitutional system, it is not an element readily enforceable by the courts. Once it is conceded, as it must be, that no statute can be entirely precise, and that some judgments, even some judgments involving policy considerations, must be left to the officers executing the law and to the judges applying it, the debate over unconstitutional delegation becomes a debate not over a point of principle but over a question of degree. As Chief Justice Taft expressed the point for the Court in the landmark case of J. W. Hampton, Jr., & Co. v. United States, the limits of delegation “must be fixed according to common sense and the inherent necessities of the governmental coordination.” Since Congress is no less endowed with common sense than we are, and better equipped to inform itself of the “necessities” of government; and since the factors bearing upon those necessities are both multifarious and (in the nonpartisan sense) highly political — including, for example, whether the Nation is at war, or whether for other reasons “emergency is instinct in the situation” — it is small wonder that we have almost never felt qualified to second-guess Congress regarding the permissible degree of policy judgment that can be left to those executing or applying the law.
Mistretta, 488 U.S. at 415-16 (Scalia, J., dissenting).
Read together, the three opinions issued in Gundy v. United States, 139 S. Ct. 2116 (2019), indicate that the Court’s well-settled and lax approach to the nondelegation doctrine may soon be changing substantially. This case raised a nondelegation challenge to the Sex Offender Registration and Notification Act (SORNA), which Congress passed to strengthen and rationalize registration of sex offenders. SORNA requires sex offenders to register before completing their sentences of imprisonment. This requirement obviously could not apply to persons who had completed their sentences before SORNA itself was enacted. To deal with such persons, SORNA delegated to the Attorney General the authority to “specify the applicability” of registration requirements and to “prescribe rules for registration.” 34 U.S.C. § 20913(d). Gundy, a pre-SORNA offender, was convicted of failing to follow registration requirements adopted by the Attorney General. He challenged this conviction on the ground that the delegation of authority to the Attorney General to “specify the applicability” of SORNA registration requirements to pre-Act offenders violated the nondelegation doctrine. The Supreme Court affirmed the lower courts’ rejection of this claim by a 5-3 vote that nonetheless demonstrated that at least four justices are ready for serious reconsideration of the nondelegation doctrine—and Justice Kavanaugh, who did not participate in the case, likely would take this number to five.
Justice Kagan wrote a plurality opinion joined by the other three relatively “liberal” justices. She emphasized that the Court had in an earlier opinion, Reynolds v. United States, 565 U.S. 432 (2012), already determined that the Attorney General’s statutory authority to specify the applicability of SORNA registration requirements was quite constrained in light of congressional purpose, the Act’s definition of sex offender, and the Act’s history. Understood in this light, SORNA required the Attorney General to require registration by pre-Act offenders “as soon as feasible.” Given this statutory construction, it was an easy matter for Justice Kagan to conclude that the delegation at issue satisfied the “intelligible principle” requirement. She pointedly added that, “if SORNA’s delegation is unconstitutional, then most of Government is unconstitutional.”
Justice Alito concurred in the judgment. In his short opinion, he characterized the Court’s precedents as authorizing “agencies to adopt important rules pursuant to extraordinarily capacious standards.” He then declared, “[i]f a majority of this Court were willing to reconsider the approach we have taken for the past 84 years, I would support that effort. But because a majority is not willing to do that, it would be freakish to single out the provision at issue here for special treatment.”
Justice Gorsuch wrote a dissenting opinion joined by the Chief Justice and Justice Thomas. He opened with this salvo:
The Constitution promises that only the people’s elected representatives may adopt new federal laws restricting liberty. Yet the statute before us scrambles that design. It purports to endow the nation’s chief prosecutor with the power to write his own criminal code governing the lives of a half-million citizens. Yes, those affected are some of the least popular among us. But if a single executive branch official can write laws restricting the liberty of this group of persons, what does that mean for the next?
Today, a plurality of an eight-member Court endorses this extraconstitutional arrangement but resolves nothing. Working from an understanding of the Constitution at war with its text and history, the plurality reimagines the terms of the statute before us and insists there is nothing wrong with Congress handing off so much power to the Attorney General. But Justice Alito supplies the fifth vote for today's judgment and he does not join either the plurality’s constitutional or statutory analysis, indicating instead that he remains willing, in a future case with a full Court, to revisit these matters. Respectfully, I would not wait.
Id. at 2131 (Gorsuch, J., dissenting).
Justice Gorsuch, in stark contrast to Justice Kagan, construed SORNA as granting the Attorney General untrammelled authority to determine the applicability of registration provisions to pre-Act offenders. Having maximized agency discretion on a statutory level, he then turned to discussion of “guiding principles” for applying the nondelegation doctrine.
The first of these principles is that “as Congress makes the policy decisions when regulating private conduct, it may authorize another branch to ‘fill up the details.’” For support for this principle, Justice Gorsuch turned to Chief Justice Marshall’s opinion in Wayman v. Southard, 23 U.S. 1 (1825), in which the Court upheld the constitutionality of a congressional statute that instructed federal courts to use state-court procedural rules but also authorized them to make “alterations and additions.” Justice Gorsuch observed that, to justify this authority, the Chief Justice had “distinguished between those ‘important subjects, which must be entirely regulated by the legislature itself,’ and ‘those of less interest, in which a general provision may be made, and power given to those who are to act ... to fill up the details.’” As another example of Congress permissibly delegating power to fill up details, Justice Gorsuch also cited United States v. Grimaud, 220 U.S. 506 (1911), in which the Court upheld a delegation that authorized “the Secretary of Agriculture to adopt rules regulating the ‘use and occupancy’ of public forests to protect them from ‘destruction’ and ‘depredations.’”
A second principle is that “once Congress prescribes the rule governing private conduct, it may make the application of that rule depend on executive fact-finding.” In other words, Congress is free to make its instructions to agencies conditional, telling them to embark on some course of action only if they first find certain triggering facts to be true. For an early example of this practice, Justice Gorsuch cited Cargo of Brig Aurora v. United States, 11 U.S. 382 (1813), which had authorized the president during the Napoleonic Wars to impose a trade embargo on Great Britain if the president determined that France had stopped interfering with American trade or a trade embargo on France if the president determined that Great Britain had stopped interfering with American trade.
The third principle implicates the idea that some authorities overlap among the branches. No separation-of-powers problem arises where Congress instructs the executive or judicial branches to take actions that they are constitutionally empowered to take without congressional authorization. Justice Gorsuch noted that “the foreign-affairs-related statute in Cargo of the Brig Aurora may be an example of this kind of permissible lawmaking, given that many foreign affairs powers are constitutionally vested in the president under Article II,” and that Chief Justice Marshall’s holding in Wayman “might be explained by the same principle” given judicial power to regulate judicial practice.
Justice Gorsuch characterized the “intelligible principle” doctrine, adopted by the Court in J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394 (1928), as a “misadventure” that “has no basis in the original meaning of the Constitution, in history, or even in the decision from which it was plucked” and that “has been abused to permit delegations of legislative power that on any other conceivable account should be held unconstitutional.” He did not identify which delegations of the last century he would reject that the Court has mistakenly upheld.
Going forward, it seems likely that, when Justice Kavanaugh joins the fray, the conservative wing of the Court will rework the nondelegation doctrine along Justice Gorsuch’s preferred lines. Applying his framework will raise its own set of difficult line-drawing questions. Where is the line between policy determinations that Congress must make and those details that agencies can permissibly “fill up”? At what point does permissible executive “factfinding” become so value-laden that it veers into impermissible policymaking? Circling back to our lead excerpt, under Justice Gorsuch’s approach, did Whitman reach the right conclusion in upholding a delegation of authority to the EPA’s Administrator to promulgate ambient air quality standards “requisite to protect the public health” with “an adequate margin of safety”? And, circling back to the Mistretta quote near the opening of this note, do Justice Gorsuch’s principles provide an adequate response to Justice Scalia’s concerns about second-guessing Congress on the scope of permissible delegations?
p.60, note 4.a., In case you haven’t had enough of the public rights doctrine
The subject of public rights reared its head again in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018). The petitioner, Oil States Energy Services, LLC (“Oil States”), obtained a patent relating to hydraulic fracturing and sued respondent Greene’s Energy Group, LLC (“Greene’s Energy”) for infringement. In addition to challenging the patent’s validity in district court, Greene’s Energy also challenged it via “inter partes review,” an administrative proceeding that is authorized by the America Invents Act, which went into effect in 2012. Inter partes review allows a petitioner to request cancellation of patent claims in adversarial proceedings that are held before the Patent Trial and Appeal Board. Judicial review is available at the Court of Appeals for the Federal Circuit. Greene’s Energy successfully used inter partes review to obtain cancellation by the Board of two claims from the Oil States patent. Oil States appealed to the Federal Circuit, challenging inter partes review as an unconstitutional exercise of judicial power, in violation of Article III. The Federal Circuit had recently rejected this argument in other litigation, and it summarily affirmed.
Justice Thomas, that stalwart defender of separation of powers, authored the majority opinion upholding inter partes review. The gist of his opinion was very simple. The Court has long distinguished between public and private rights for the purpose of applying Article III, and it has “given Congress significant latitude to assign adjudication of public rights to entities other than Article III courts.” 138 S. Ct. at 1373. He conceded that the Court has not “definitively explained” this distinction and that the precedents on this issue have “not been entirely consistent.” Id. (quoting Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 69 (1982), and Stern v. Marshall, 564 U.S. 462, 488 (2011)). Still, the Court had long recognized that public rights include those matters “which arise between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.” Id. (quoting Crowell v. Benson, 285 U.S. 22, 50 (1932)). The government’s decision to grant a patent, a form of public franchise, to an individual fits this bill. “Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the [Patent and Trademark Office’s (PTO’s)] authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.” Id.
Justice Breyer, joined by Justices Ginsburg and Sotomayor, added a short concurrence to emphasize that “the Court's opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies.” 138 S. Ct. at 1379 (Breyer, J., concurring).
Justice Gorsuch, joined by Chief Justice Roberts, dissented. The gist of this dissent was that a patent, once granted, hardens into a sort of private right even though its initial grant was a matter of public right. Indicating that the argument over the role of the distinction between private and public rights will continue, the dissent also chided the concurrence in a footnote for suggesting that “depart[ures] from the requirements of Article III” are allowable where the benefits outweigh the costs. 138 S. Ct. at 1381 n.1 (Gorsuch, J., dissenting) (quoting Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 851 (1986)).
p.80, note 4.a, ALJs as inferior officers
In Freytag, as discussed in note 4 above, the question of whether Special Trial Judges were inferior officers was uncontroversial. About a decade after Freytag, the D.C. Circuit reached the opposite conclusion about ALJs in Landry v. FDIC; it held that because ALJs do not render final agency decisions they are employees, not officers, and thus can be appointed outside of the procedures dictated by Article II. The question of ALJ appointments recently reemerged, and resulted in split decisions of the Tenth and D.C. Circuits.
The Chief ALJ of the SEC has been responsible for appointing ALJs for the Commission. The SEC contended that this mode of appointment was permissible because its ALJs are employees, not officers, such that their appointment is not controlled by Article II.
The D.C. Circuit upheld the SEC’s appointment process. Following Landry, it concluded that SEC ALJs are employees because they do not have final decision-making authority. Raymond J. Lucia Cos., Inc. v. SEC, 832 F.3d 277, 283 (D.C. Cir. 2016). The Tenth Circuit, facing exactly the same issue, disagreed, holding that the SEC ALJs possessed significant authority in their position as agency adjudicators, and thus were inferior officers. Bandimere v. SEC, 844 F.3d 1168 (2016).
The Supreme Court stepped in to resolve the circuit split in Lucia v. SEC, 138 S. Ct. 2044 (2018). Interestingly, by the time Lucia arrived at the Court, the Trump Administration had “switched sides,” from defending the SEC’s appointments process to challenging it. Id. at 2050, n.1. The Court appointed an amicus curiae to defend the decision below that SEC ALJs are employees and thus that their method of appointment does not violate Article II.
The Lucia Court held that the SEC ALJs were inferior officers and thus subject to Article II’s appointment requirements. Justice Kagan, writing for the Court, relied on two prior Supreme Court precedents to articulate a two-part test for whether someone is an employee or officer within the meaning of the Appointments Clause. She explained that “an individual must occupy a ‘continuing’ position established by law to qualify as an officer,” id. at 2051 (quoting United States v. Germaine, 99 U.S. 508, 510, 511 (1879)), and must “exercis[e] significant authority pursuant to the laws of the United States.” Id. (quoting Buckley v. Valeo, 424 U.S. 1, 126 (1976)).
Applying this test to the SEC ALJs in Lucia, the Court first pointed out that all of the entities involved agreed that SEC ALJs held a “continuing position established by law” because they hold a “career appointment” that is “created by statute.” Id. at 2053.
The dispute arose over the scope and application of Buckley’s “significant authority” language, with all of the litigants encouraging the Court to elaborate on its meaning. Justice Kagan declined. She acknowledged that the Court may have occasion in the future to flesh out the boundaries of the “significant authority” standard, but that the present case was not one of those occasions. In her view, the ALJ positions at issue in Lucia were virtually indistinguishable from the Special Trial Judges (STJs) of the United States Tax Court that were held to be officers in Freytag. The Freytag Court listed four powers held by STJs that make their authority significant enough to qualify them as officers. They “take testimony, conduct trials, rule on the admissibility of evidence, and have the power to enforce compliance with discovery orders.” Id. at 2052 (quoting Freytag v. Commissioner, 501 U.S. 868, 881-82 (1991)). The Court explained that the ALJs’ powers were similar enough to require the same conclusion as to their officer status:
[T]he Commission’s ALJs exercise the same “significant discretion” when carrying out the same “important functions” as STJs do. Both sets of officials have all the authority needed to ensure fair and orderly adversarial hearings—indeed, nearly all the tools of federal trial judges. Consider in order the four specific (if overlapping) powers Freytag mentioned. First, the Commission’s ALJs (like the Tax Court’s STJs) “take testimony.” More precisely, they “[r]eceiv[e] evidence” and “[e]xamine witnesses” at hearings, and may also take pre-hearing depositions. Second, the ALJs (like STJs) “conduct trials.” . . . [T]hey administer oaths, rule on motions, and generally “regulat[e] the course of” a hearing, as well as the conduct of parties and counsel. Third, the ALJs (like STJs) “rule on the admissibility of evidence.” . . . And fourth, the ALJs (like STJs) “have the power to enforce compliance with discovery orders.” In particular, they may punish all “[c]ontemptuous conduct,” including violations of those orders, by means as severe as excluding the offender from the hearing. So point for point—straight from Freytag ‘s list—the Commission’s ALJs have equivalent duties and powers as STJs in conducting adversarial inquiries.
Id. at 2053 (citations omitted). As a remedy for the constitutional violation in Lucia’s enforcement proceeding, the Court remanded the case back to the SEC for a hearing before a different ALJ.
Justices Breyer, Ginsburg, and Sotomayor dissented from the Court’s choice of remedy. Likening the ALJ to a trial judge, they concluded that remand to the original ALJ would be appropriate. Id. at 2064, 2067. Justices Sotomayor and Ginsburg also dissented on the grounds articulated in Landry; because ALJ decisions are reviewable de novo by agency heads, they are not final and thus cannot represent the significant authority required of officers. Id. at 2065-67.
Perhaps most importantly going forward, the government in Lucia advanced the argument that the for-cause removal protection afforded to ALJs was unconstitutional based on the Court’s decision rejecting double-for-cause removal in Free Enterprise Fund v. Public Company Accounting Oversight Board, 130 S. Ct. 3138 (2010) (PCAOB). We discuss PCAOB in greater detail infra at note 8, but suffice to say that the Court in Lucia refused to decide the removal issue as it pertains to ALJs because it had not been raised in the lower courts. Nevertheless, the government’s interest in challenging ALJ removal provisions could represent a significant development for the future political independence—and therefore effectiveness—of ALJs.
p.85, note 7.a., Removal power and single-headed “independent” agencies.
As you read in note 8 above, the nature of independent agencies is a source of debate. As a descriptive matter, however, what we describe as independent agencies almost always have some common features: they are headed by a multi-member commission or board, and their leaders are protected from presidential removal by statutory provisions that allow the President to fire them only when he has cause to do so. These removal limitations were upheld as constitutional for FTC commissioners in Humphrey’s Executor, as discussed in note 7.
Then along came the Consumer Financial Protection Bureau (CFPB). The CFPB was created in 2010. It is an independent agency that is responsible for enforcing nineteen different consumer protection statutes. It is headed by a single Director who, in order to maintain her political independence, Congress protected from removal by the President except in instances of “inefficiency, neglect of duty, or malfeasance in office.” 12 U.S.C. § 5491(c)(3).
In 2014, the CFPB brought an enforcement action against PHH Corporation, a mortgage lender, based on allegations that PHH made illegal mortgage insurance referrals. Among its other defenses, PHH Corporation argued that the CFPB’s structure violated Article II of the constitution. More specifically, PHH argued that the CFPB’s structure unduly interfered with presidential control over the executive branch because it concentrated power in a single individual who was not fully accountable to the President. Unlike the singular head of an executive agency, the CFPB Director cannot be removed at will, and unlike the members of other independent agencies, the Director is not constrained by other board members or commissioners. A three-judge panel of the D.C. Circuit agreed. PHH Corp. v. CFPB, 839 F.3d 1 (D.C. Cir. 2016).
The CFPB sought and was granted rehearing en banc. The en banc court reversed the panel decision, holding that the CFPB’s structure did not unconstitutionally interfere with presidential authority under Article II. In doing so, the majority focused on two questions. First, “is the means of independence permissible?” Id. at 78. The majority concluded that the Supreme Court’s long tradition of upholding similar for-cause removal provisions indicates that the means of independence that Congress chose for the CFPB Director is similarly constitutional. Second, “does ‘the nature of the function that Congress vested in’ the agency call for that means of independence?” Id. (quoting Wiener v. United States, 357 U.S. 349, 353 (1958)). In answering this question, the court looked at whether, in the CFPB’s case, “a degree of independence from the Executive ... is necessary to the proper functioning of the agency or official.” Id. at 79 (quoting Morrison v. Olson, 487 U.S. 654, 691 n.30 (1988)). It concluded that it was:
[T]he functions of the CFPB and its Director are not core executive functions, such as those entrusted to a Secretary of State or other Cabinet officer who we assume must directly answer to the President’s will. Rather, the CFPB is one of a number of federal financial regulators—including the Federal Trade Commission, the Federal Reserve, the Federal Deposit Insurance Corporation, and others—that have long been permissibly afforded a degree of independence. The CFPB matches what the Supreme Court’s removal-power cases have consistently approved. Accepting PHH’s claim to the contrary would put the historically established independence of financial regulators and numerous other independent agencies at risk.
Id. at 84. Since neither party timely sought review in the Supreme Court, the en banc decision of the D.C. Circuit is, for now, the final word on the matter.
Note 11 (insert in place of last paragraph of note on page 90):
Prior to 2017, Congress had invalidated only one rule via the CRA, a hotly contested OSHA regulation that would have addressed repetitive motion injuries in a wide range of businesses. Adopted late in the Clinton Administration, the rule was promptly eliminated in March of 2001 after Republicans took control of both houses of Congress and the White House. The CRA then lay dormant for sixteen years, until 2017 when Republicans once again occupied both political branches under the new Trump Administration. In the spring of 2017, while the CRA’s streamlined repeal procedures were still available, Congress and the President eliminated fourteen of the fifteen regulations considered for repeal via the CRA. The lone survivor was an Interior Department rule to limit methane emissions that was saved by one vote in the Senate, 51-49. For obvious reasons, use of the CRA is most likely when one party controls both the legislative and executive branches. It is even more likely in the period right after a party takes control from its opposing party. It is unclear, however, whether the recent explosion in congressional use of the CRA will carry over to the next instance in which both political branches are within the control of a single party.