110. The Universal Service Fund and the Non-Delegation Doctrine

Friday's major new cert. grant raises the question whether the justices are poised to reinvigorate the non-delegation doctrine, or whether they're just going to slap the Fifth Circuit down again.

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I’ve been wanting for some time to write about the litigation challenging on constitutional grounds the way in which the Federal Communications Commission (FCC) administers the “Universal Service Fund.” The prompt for finally biting the bullet came on Friday afternoon—when the Supreme Court granted a pair of cert. petitions asking the justices to review the en banc Fifth Circuit’s holding that the USF’s administration violates the Constitution’s “non-delegation doctrine”—a legal theory the Supreme Court hasn’t used to invalidate a statute since … 1935:

Right away, this becomes one of the biggest and most important cases the Court is going to hear this term—not just because of what it would mean legally if the justices were to re-invigorate the non-delegation doctrine, but because of the potential practical consequences for the USF itself, a multi-billion-dollar pool of money that, among lots of other things, helps to subsidize internet access to large swaths of the country (especially rural and economically disadvantaged communities). If the Fifth Circuit’s decision were affirmed, the USF would become effectively un-administrable, with potentially staggering consequences for internet access and other digital communications across much of the country.

As I explain below, though, there are at least three significant tea leaves in the way in which the Court granted certiorari that can fairly be read to suggest that this is not a road the justices want to go down—and that, yet again, the Court is taking up an outlier ruling from the Fifth Circuit for the specific purpose of reversing it. It thus appears that the real story of the USF case isn’t the potential return of the non-delegation doctrine, but the Fifth Circuit yet again getting out over its skis.

But first, the news.

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On the Docket

On Friday, the Court handed down its first decision in a case argued this term—sort of. The Court briefly took the bench in order to release a one-sentence “DIG” (dismissing certiorari as improvidently granted) in Facebook, Inc. v. Amalgamated Bank, in which the Ninth Circuit had allowed a securities fraud class action against Meta to go forward on the theory that Facebook’s disclosures improperly downplayed the risks of a data breach to shareholders. A “DIG” has the same effect as if the Court had never taken up the appeal in the first place; the decision below goes into full effect (and the securities fraud suit against Facebook can continue). It also reduces by one the total number of signed opinions the Court will hand down this term—in which we’re already headed for the sixth-straight term with fewer than 60.

The DIG in Facebook capped off a busy but relatively news-light week at the Court. Monday’s regular Order List included no new grants of certiorari and no separate opinions; and none of the denials provoked even a single public dissent. On Thursday, the Court denied a stay of execution to Alabama death-row prisoner Carey Grayson, over no public dissents. And there were no public dissents from the Court’s other ruling on Friday, in which the Court also denied an emergency application from Ohio, which was seeking to prevent a lower-court grant of habeas relief from going into effect while Ohio appeals. Besides the aforementioned grants of certiorari in two consolidated cases about the USF, the only other news was the release of the “February” argument calendar (which, as usual, goes into March, cf. Dar Williams). The big headlines there are almost certainly the Mexico guns case, scheduled for argument on Tuesday, March 4; and the nuclear waste storage/major questions cases, scheduled for argument on Wednesday, March 5.

Other than a regular Order List at 9:30 ET today, we expect very little from the Court this week thanks to the holiday. There are still a handful of pending emergency applications in which rulings could come down at any time, but none that seem especially likely to be ruled upon by Wednesday. And we don’t expect the justices back on the bench until next Monday, for the beginning of the December argument session.

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The One First “Long Read”:
The USF, Non-Delegation, and the Fifth Circuit

As noted above, the biggest news the Court made last week was agreeing, on Friday, to hear two (consolidated) cases challenging the en banc Fifth Circuit’s holding that the way Congress and the FCC have structured the administration of the Universal Service Fund violates the non-delegation doctrine. Before turning to why I think the Court is not likely to affirm the Fifth Circuit’s ruling, let me start with a bit of background on both the USF itself and the non-delegation doctrine. And let me note, as a disclaimer, that I filed an amicus brief in support of the FCC’s cert. petition on behalf of the Software & Information Industry Association—and that what follows are my views, and not (necessarily) theirs.

The USF

The Universal Service Fund (USF) is a massive pool of telecommunications subsidies and fees managed by the FCC with the goal of promoting universal access to telecommunications services (since 2011, especially broadband internet) across the United States. Although the total varies by year, the USF in recent years has regularly disbursed more than $7 billion annually, through one of its four major programs. The biggest of these is the “E-Rate” program, which provides funding to public schools, libraries, and certain health care providers for substantial discounts for eligible products and services—everything from internet access itself to the routers, switches, and hotspots that make that access widely scalable. And unlike most federal spending, the funds for the USF come not from congressional appropriations, but from fees charged to telecom providers and other industry companies.

Congress expressly stood up the USF in 1996, and has empowered the FCC, through a series of express statutory delegations, to administer the Fund. The FCC, in turn, has, through rulemaking, created a private, non-profit entity—the Universal Service Administrative Company (USAC)—to manage the contribution of revenue to and distribution of funding from the USF. Although this structure has evolved at the margins over the 27 years that it has been on the books, the basics are the same as what was initially established in the mid-1990s.

There is significant public debate about the USF, along with calls for reforms of various of its procedures/mechanics. As tends to be the norm with large federal spending programs, there have also been issues with fraud and other mismanagement. But even though the Fund has existed since 1997, in recent years, there have also been constitutional challenges, led by what can fairly be described as right-wing lawyers and legal groups, to how Congress has delegated power to the FCC and how the FCC, in turn, has delegated power to the USAC. By early this year, three different federal courts of appeals panels—on the Fifth, Sixth, and Eleventh Circuits—had all rejected constitutional challenges to the USF. A fourth (the D.C. Circuit) had dismissed an analogous case.

But on July 24, the full Fifth Circuit, by a 9-7 vote, sustained the challenge. In a nutshell, Judge Oldham’s opinion held that, whether or not Congress’s delegation to the FCC was constitutional, and whether or not the FCC’s delegation to USAC was constitutional, the real problem with the USF was those two delegations taken together. (Three judges, in a separate concurrence, would also have struck down each of the individual delegations.)

The Non-Delegation Doctrine

At its simplest, the non-delegation doctrine is the idea that the Constitution bars Congress from “delegating” any of the constitutional powers of the three branches of government to anyone else. As Professor Cass Sunstein famously quipped, the non-delegation doctrine has had “one good year”—1935. It was then that the Supreme Court, in the midst of the New Deal, relied upon the doctrine in a pair of major rulings against Roosevelt Administration initiatives, Panama Refining Co. v. Ryan, and A.L.A. Schechter Poultry Corp. v. United States. But at least until recently, that had been it; starting in 1937, and consistently through at least the mid-2010s, the Supreme Court had read the non-delegation doctrine minimally—as foreclosing only those delegations of authority that lack an “intelligible principle” to constrain the recipient of the delegation. It’s no exaggeration to say that this more forgiving understanding of the non-delegation doctrine was central to the rise and growth of the administrative state throughout the twentieth century; unlike debates over whether Congress’s delegations of power to agencies are and have been clear enough (the heart of the fight over the Chevron doctrine and the so-called “major questions” doctrine), the debate over non-delegation is whether Congress can delegate much of its regulatory power to agencies at all.

Starting in the mid-2010s, a handful of lower-court judges and Supreme Court justices started calling for a reinvigoration of the doctrine—in order to limit agency power (and, per Justice Alito in the Association of American Railroads case, better protect “liberty”). Perhaps the closest the Court came was in Gundy v. United States, in 2019. Gundy is a bit tricky to parse, because Justice Kavanaugh didn’t participate (it was argued before he was confirmed). But the four Republican appointees who participated all signaled at least some support for revisiting the scope of the non-delegation doctrine—the dissenters in that case; and Justice Alito (who concurred in the judgment) in a future case. With Justice Kavanaugh and, as of October 2020, Justice Barrett, it seemed like a matter of time before the Court would put real teeth back into the non-delegation doctrine—perhaps crippling much of the contemporary administrative state, in the process.

And then, something weird happened: The Court appeared to lose its appetite. Despite being presented with a series of cases in which various delegations had been challenged on constitutional grounds, the justices kept denying certiorari—including as recently as June 10, when it denied certiorari in two USF cases brought by “Consumers’ Research,” the same right-wing group that brought the Fifth Circuit case. Only folks inside the Court know for sure, but it’s entirely possible that the felt need to reinvigorate the non-delegation doctrine has been abated somewhat by intervening developments—especially the demise of Chevron deference and the rise of the so-called “major questions” doctrine. As a practical matter, a world without Chevron and with the “major questions” doctrine is a world in which Congress can delegate significant power to agencies only expressly. At least from a political accountability standpoint, then, there’s less concern that these delegations are involuntary arrogations of Congress’s power on the agencies’ part.

As significantly, in striking down the way Congress and the FCC have delegated power with respect to the USF, the en banc Fifth Circuit didn’t rely upon a broad reading of the non-delegation doctrine; it relied upon a bizarrely narrow one—that, even if Congress could delegate to the FCC and the FCC could delegate to the USAC, the constitutional problem arises from those delegations happening together. Thus, if the goal was to reinvigorate the non-delegation doctrine more generally, this would be an odd vehicle through which to do so.

What (I Think) SCOTUS Is Doing

The narrowness of the vehicle is just one of a handful of clues that, in my view, suggest that the Court is not inclined to take Consumers’ Research up on its invitation. Here are three others:

1. Adding to the Questions Presented: In addition to the questions presented in the FCC’s cert. petition, as noted above, the Court added a question about whether Consumers’ Research challenge is “moot” because it failed to seek preliminary relief in the Fifth Circuit. The Fifth Circuit had already addressed this argument, and it held that, even though the dispute was moot (because Consumers’ Research was challenging USF rates for only one quarter of 2022), the exception to mootness for cases “capable of repetition, yet evading review” applied. What’s curious about the Supreme Court’s behavior is that, in its cert. petition, the federal government agreed with the Fifth Circuit that the dispute isn’t moot. Adding the question thus suggests that at least some justices are looking for a way, on their own, to wipe away the en banc Fifth Circuit’s ruling without even reaching the non-delegation question. That’s a pretty telling sign in its own right—an “off ramp” that would keep the USF untouched while saving for another day the messier non-delegation questions at issue here. (Of course, that day may not be far in the offing.)

2. Granting the SHLB petition: The second sign is the fact that the Court did not just grant the FCC’s cert. petition; it also granted a companion petition filed by the Schools, Health & Libraries Broadband Coalition, a private party that had been on the FCC’s side in the Fifth Circuit. The significance here is that including the SHLB Coalition means that the change in administration, by itself, won’t affect the arguments being presented to the Supreme Court. It’s hard to game-out how the FCC’s legal position might change after January 20 (the USF is a very big deal regardless of partisan politics). But this way, it won’t matter. Until and unless the FCC does something formal through rulemaking to undo the delegations at issue in this case, granting the SHLB Coalition’s petition ensures that the dispute will have adversarial presentation. If the Court wasn’t invested in wiping the Fifth Circuit’s ruling off the books, it might have granted only the FCC’s petition—and let things develop from there.

3. Not Acting on the Rehearing Petitions: Finally, and perhaps most modestly, the Court took no action on Consumers’ Research’s two pending petitions for rehearing arising from the Court’s denials of certiorari in June the Sixth Circuit and Eleventh Circuit cases. If the Court was fully committed to the non-delegation question, and not just to slapping down the Fifth Circuit, it might have made sense to grant those petitions, as well. By leaving them out there, the Court may well be signaling that it continues to see no issue with the denials of certiorari back in June—and that it’s looking at the case it granted on Friday less as a referendum on non-delegation than as a referendum on the Fifth Circuit.

To be sure, even a reversal or vacatur of the Fifth Circuit here won’t end the non-delegation drama. There are at least five pending cert. petitions arising from a different Fifth Circuit non-delegation ruling striking down Congress’s delegation of power to the Horseracing Integrity and Safety Authority—which, like the Consumers’ Research ruling, created a circuit split. But I think I can say without too much offense that the stakes of the horseracing case are somewhat lower than the stakes of the USF case. Indeed, even if there really are five votes to reinvigorate at least some features of the non-delegation doctrine, the consequences for the USF may lead even sympathetic justices to conclude that this is not only not a good case in which to do it, but it’s an exceptionally bad one. That might suggest a narrow ruling (mootness, perhaps) in the USF case, and then using the horseracing case, perhaps next term, to tackle the much larger constitutional question.

We’ll know more by the end of June, but at least for now, folks should perhaps take a beat before assuming that Friday’s grant means that the Court is going to party like it’s 1935.

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SCOTUS Trivia:
The Fifth Circuit Passes the Ninth

Friday’s two (consolidated) grants in the USF case brings the total number of petitions granted for plenary review during the current term to 52. And, strikingly, the Fifth Circuit is responsible for 13 of those—or 25%. Even counting consolidated appeals (like the USF petitions) as one case each, the Fifth Circuit is still way ahead of other lower courts—it’s responsible for 10 of the 46 total cases the Court is expected to decide (21.7%).¹ The two lower courts responsible for the next-most number of appeals—the Ninth and Tenth Circuits—are responsible for 11 total between them (and 9 if we count consolidated cases as one each). In other words, the Fifth Circuit is on track to account for more of the justices’ workload this term than the next two lower courts combined.

This figure isn’t just striking in the abstract; it’s on pace to break a remarkable streak. For each of the first 19 terms of the Roberts Court, the Ninth Circuit has been responsible for the most total plenary decisions by the Supreme Court. (One year—OT2013—it tied with the Sixth Circuit, but it’s been alone in first each of the other 18.) Even last term, when the Fifth Circuit easily led the way for most reversals, the Ninth Circuit was still responsible for more total cases. Of course, the Ninth Circuit is, by far, the largest federal appeals court by volume—which means it ought to be first by default if Supreme Court cases are proportional to lower-court caseloads. But there’s also the Court’s relationship with the San Francisco-based court of appeals during the 2000s and 2010s, when the median Ninth Circuit judge was well to the left of the median justices, which also helps to explain the total.

In contrast, having the Fifth Circuit comprise a quarter of the Court’s merits docket is, frankly, bonkers. It underscores just how much the court of appeals has become the chosen home for nationwide litigation brought by right-of-center litigants (eight of the 13 Fifth Circuit cases so far on the docket this term could have been filed anywhere). And, assuming reversal rates along the lines that we’ve seen the last two terms, it also drives home just how much of a disconnect there continues to be between the New Orleans-based court of appeals and the median justices—a much more revealing disconnect, in my view, given the outward ideological alignment among the majorities on both courts. Of course, there will be fewer challenges to federal policies brought in the Fifth Circuit starting in January—so this particular datapoint may be short-lived. But the broader behavior that it reflects won’t go away just because of the forthcoming change atop the federal government.

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1. These totals don’t even include the two Louisiana redistricting cases—which are direct appeals from a three-judge district court that included a Fifth Circuit judge. Counting those, the totals jump to 15/52 (28.8%) and 11/46 (23.9%).