Jonathan had a post on Friday about the Fifth Circuit's new case, National Horsemen's Benevolent & Protective Ass'n v. Black. It has a few fun features: (1) it's one of the rare cases to strike down a federal statute based on the non-delegation doctrine, and (2) it's one of the even rarer cases to do based on a supposed theory that delegations to private parties are judged by a stricter standard—or are even per se unconstitutional.
In this case, the statute is the Horseracing Integrity and Safety Act, and the private entity is the Horseracing Integrity and Safety Authority. (The case calls the statute HISA and the entity the Authority, so I'll follow the same convention.) The Authority is supposedly subject to the FTC, but the Fifth Circuit finds that the extent of FTC oversight is not nearly great enough, so the Authority wields a lot of coercive power all by itself, which makes this an unconstitutional private delegation.
Now I think the supposed "private nondelegation doctrine", which the Fifth Circuit calls a "commonsense principle", actually doesn't exist. Not just that it's a bad idea: actually, no Supreme Court case [UPDATE: holding] gives it any support, and several Supreme Court cases cut the other way and uphold private delegations under the nondelegation doctrine. (The D.C. Circuit's first Amtrak opinion does give it support, but that opinion was vacated by the Supreme Court.) Plus, such a doctrine would also be a bad idea. (My broader thesis is that there are a bunch of different doctrines that could be called "nondelegation doctrines", but here we're only talking about the Article I Nondelegation Doctrine, so for now I'll stick to that. But I'm working on an article on the broader issue, which I'll probably post here eventually.)
This view is radically at odds with the popular understanding of several Supreme Court cases, mainly A.L.A. Schechter Poultry Corp. v. United States (1935) and Carter v. Carter Coal Co. (1936), so I'll spend some time discussing those. Today, I'll just focus on Schechter Poultry.
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Schechter Poultry concerned section 3 of the National Industrial Recovery Act, which allowed the president to promulgate "codes of fair competition" for various industries. I'll quote the Supreme Court on what the involved:
That section [section 3 of the NIRA] . . . authorizes the President to approve "codes of fair competition."
Such a code may be approved for a trade or industry, upon application by one or more trade or industrial associations or groups, if the President finds (1) that such associations or groups "impose no inequitable restrictions on admission to membership therein and are truly representative," and (2) that such codes are not designed "to promote monopolies or to eliminate or oppress small enterprises and will not operate to discriminate against them, and will tend to effectuate the policy" of Title I of the Act. Such codes "shall not permit monopolies or monopolistic practices."
As a condition of his approval, the President may "impose such conditions (including requirements for the making of reports and the keeping of accounts) for the protection of consumers, competitors, employees, and others, and in furtherance of the public interest, and may provide such exceptions to and exemptions from the provisions of such code, as the President in his discretion deems necessary to effectuate the policy herein declared."
Where such a code has not been approved, the President may prescribe one, either on his own motion or on complaint. Violation of any provision of a code (so approved or prescribed) "in any transaction in or affecting interstate or foreign commerce" is made a misdemeanor punishable by a fine of not more than $500 for each offense, and each day the violation continues is to be deemed a separate offense.
This case concerned the "Live Poultry Code". This code was proposed by the industry and then approved by the president. It provided for maximum work hours, minimum wages, collective bargaining, and minimum numbers of employees for slaughterhouses, and it defined certain practices as "unfair methods of competition". It was to be administered by an "industry advisory committee" (mostly staffed and paid for by the industry).
This statute was challenged on a number of grounds—including the Commerce Clause—but it's the nondelegation part that's best known today. The Court said Congress is allowed delegate its power as long as Congress declares a basic policy or standard (previous cases had called it an "intelligible principle"). But the Court concluded that this standard was lacking, because "unfair method of competition" could mean anything thought to be bad, and one couldn't glean sufficient guidance from section 1 of the statute (which declared basic principles) because that was a hodgepodge of highly abstract principles that didn't really constrain discretion.
Now here's the interesting part, where the Court looked at the involvement of industry:
The Government urges that the codes will "consist of rules of competition deemed fair for each industry by representative members of that industry—by the persons most vitally concerned and most familiar with its problems."
Instances are cited in which Congress has availed itself of such assistance; as, e.g., in the exercise of its authority over the public domain with respect to the recognition of local customs or rules of miners as to mining claims, or, in matters of a more or less technical nature, as in designating the standard height of drawbar. But would it be seriously contended that Congress could delegate its legislative authority to trade or industrial associations or groups so as to empower them to enact the laws they deem to be wise and beneficent for the rehabilitation and expansion of their trade or industries? Could trade or industrial associations or groups be constituted legislative bodies for that purpose because such associations or groups are familiar with the problems of their enterprises? And, could an effort of that sort be made valid by such a preface of generalities as to permissible aims as we find in section 1 of title I?
The answer is obvious. Such a delegation of legislative power is unknown to our law, and is utterly consistent with the constitutional prerogatives and duties of Congress.
Whenever someone wants to argue that there's an anti-private-delegation doctrine, this is always the quote they bring out.
But let's look at how the Court continues:
The question, then, turns upon the authority which § 3 of the Recovery Act vests in the President to approve or prescribe. If the codes have standing as penal statutes, this must be due to the effect of the executive action. But Congress cannot delegate legislative power to the President to exercise an unfettered discretion to make whatever laws he thinks may be needed or advisable for the rehabilitation and expansion of trade or industry.
Accordingly, we turn to the Recovery Act to ascertain what limits have been set to the exercise of the President's discretion. First, the President, as a condition of approval, is required to find that the trade or industrial associations or groups which propose a code, "impose no inequitable restrictions on admission to membership," and are "truly representative." That condition, however, relates only to the status of the initiators of the new laws, and not to the permissible scope of such laws. Second, the President is required to find that the code is not "designed to promote monopolies or to eliminate or oppress small enterprises, and will not operate to discriminate against them." And to this is added a proviso that the code "shall not permit monopolies or monopolistic practices." But these restrictions leave virtually untouched the field of policy envisaged by section one, and, in that wide field of legislative possibilities, the proponents of a code, refraining from monopolistic designs, may roam at will, and the President may approve or disapprove their proposals as he may see fit. That is the precise effect of the further finding that the President is to make—that the code " will tend to effectuate the policy of this title." While this is called a finding, it is really but a statement of an opinion as to the general effect upon the promotion of trade or industry of a scheme of laws. These are the only findings which Congress has made essential in order to put into operation a legislative code having the aims described in the "Declaration of Policy."
Nor is the breadth of the President's discretion left to the necessary implication of this limited requirement as to his findings. As already noted, the President, in approving a code, may impose his own conditions, adding to or taking from what is proposed as, "in his discretion," he thinks necessary "to effectuate the policy" declared by the Act. Of course, he has no less liberty when he prescribes a code on his own motion or on complaint, and he is free to prescribe one if a code has not been approved. The Act provides for the creation by the President of administrative agencies to assist him, but the action or reports of such agencies, or of his other assistants—their recommendations and findings in relation to the making of codes—have no sanction beyond the will of the President, who may accept, modify, or reject them as he pleases. Such recommendations or findings in no way limit the authority which § 3 undertakes to vest in the President with no other conditions than those there specified. And this authority relates to a host of different trades and industries, thus extending the President's discretion to all the varieties of laws which he my deem to be beneficial in dealing with the vast array of commercial and industrial activities throughout the country.
Such a sweeping delegation of legislative power finds no support in the decisions upon which the Government especially relies.
Those blockquotes were a handful, so let me boil it down: The Court denied that Congress could delegate a free-wheeling power to private industry. But then it looked to see whether the president was limited. In fact, it had to do this, because industry itself had no power to put codes into effect—any codes had to be approved by the president. And then it found that the president also had no guidance, so his power was also free-wheeling, and therefore unconstitutional.
In other words, no part of the holding of Schechter Poultry concerns private delegations, because there was no private delegation in the case.
But I would go even further: Even if we treated the anti-private-delegation rhetoric as binding, it wouldn't support any view against private delegations. In the first place, the Court granted that Congress could delegate power to private parties in some cases. (I'll talk more about those cases soon.) But then, the Court denied that Congress could delegate unconstrained power to private industry, but then immediately also denied that Congress could delegate unconstrained power to the president. There's no reason to think there's any difference in the standards for private and public delegates.
In other words, Schechter Poultry adds nothing to our understanding of whether Congress can delegate power to private parties. The modern test is whether Congress has stated an "intelligible principle". Maybe the Court will tighten that up in the coming years, but in any event, nothing in the caselaw suggests that there's any difference in the tests depending on whether the delegate is public or private.
The post The Horseracing Case and How It Misunderstands Private Delegation appeared first on Reason.com.
