Another attempt to limit federal agency power — this time by limiting Congress’s ability to delegate decision-making to regulators — was driven by a federal appeals court ruling against an $8 billion-a-year FCC program aimed at improving phone and broadband service to poor and rural areas.
In a 9-7 en banc decision, the U.S. Fifth Circuit Court of Appeals ruled that the FCC’s Universal Service Fund is an unconstitutional delegation of Congress’ taxing power because it gives federal regulators power to delegate that power to nongovernmental organizations. Judge Andrew S. Oldham described the fee, which is collected from telecommunications companies but often passed on to consumers’ phone bills, as “a multibillion-dollar tax that nobody votes for.”
Observers say the 5th Circuit’s decision could create a split between the circuits and attract the attention of the U.S. Supreme Court, which has so far refused to review decisions from the 6th and 11th Circuits.
Critics of the grant program argue that the fund is an example of Congress abdicating its legislative responsibilities and that the Supreme Court, through the doctrine of nondelegation, should seize the opportunity to ensure that legislative power is exercised by elected officials who are accountable to the people.
“In many ways, this lawsuit isn’t about the FCC and the Universal Service Fund,” said Carol Matti, a Washington-based consultant who served as deputy director of the FCC’s Bureau of Wireline Competition during the Obama administration. “This lawsuit is part of a broader effort by groups seeking to undermine the administrative state and the executive branch of government.”
The July 24 ruling was a victory for Consumers Research, a Washington-based nonprofit that encourages website visitors to warn “woke” companies. The group has filed lawsuits challenging the Universal Service Fund in four different circuits, losing in the 6th and 11th Circuits and voluntarily dismissing a lawsuit it filed in the D.C. Circuit.
Parliamentary powers
The non-delegation principle is a legal principle that states that Congress cannot delegate legislative power or capacity to other parties, including federal agencies.
“Policy involves balancing trade-offs, and you want elected bodies to set policy,” said Molly Nixon, an attorney at the Pacific Legal Foundation who works on separation of powers issues. Nixon said delegating policy issues is more problematic than technical issues, and in the case of universal service funding, delegating to a private entity creates “accountability issues.”
Writing for the en banc majority, Oldham noted that when Congress passed the Telecommunications Act of 1996, part of its goal was to “make telecommunications service available to all Americans.” But he said the Fifth Circuit had “significant concerns” about whether Congress had given the FCC sufficiently straightforward principles to guide it in achieving universal service.
Barbara Cherry, professor emeritus at Indiana University and former deputy commissioner and senior counsel at the FCC, said that when Congress wanted to fund universal service, it “shielded itself away from responsibility” for imposing a tax by calling it a fee — a distinction at the heart of the 5th Circuit’s decision.
But critics of the 5th Circuit’s decision argued that Congress took specific action in passing the legislation at the heart of the subsidy program, and that the majority failed to clearly articulate what an appropriate delegation of authority would be.
“We in Congress decide that everyone should have access to the Internet. We in Congress tell the FCC to do this,” said Harold Feld, senior vice president of Public Knowledge. “What else should Congress do to take responsibility for this?”
Critics of the ruling also said the court misunderstood the role of the Universal Service Management Company, a nonprofit organization designated by the FCC to collect and distribute the funds.
“If the FCC intends to rely on non-governmental actors to satisfy the revenue requirements that determine the size of the tax imposed on American consumers, it must at least do something to demonstrate that it has applied its own discretion,” Oldham wrote.
Mattie denied the criticism, saying it is the FCC that “directs USAC on all matters of policy and operations.”
Administrative law confusion
The circuit court’s split on the universal service fund comes amid a series of high court decisions chipping away at agency power, including Loper Bright Enters v. Raimondo, which overturned a 40-year-old Chevron administrative doctrine that required courts to defer to agencies’ reasonable interpretations of ambiguous laws.
The Supreme Court also recently dealt a blow to the SEC’s in-house adjudication system, ruling in SEC v. Jarcasm that defendants have a right to a jury trial under the Seventh Amendment when the SEC seeks civil penalties for securities fraud. The Court also invoked the key issue principle in 2022, holding in West Virginia v. EPA that decisions of a certain magnitude and consequence must be made within the scope of Congress or its proper delegations of power.
“There’s been a lot of constitutional and statutory agitation in administrative law,” said Saikrishna Prakash, a professor at the University of Virginia Law School. He said he believes the agitation is in part “based on long-standing principles that underlie the Constitution” and not necessarily anti-executive power.
“The Fifth Circuit has been more willing than any other circuit to raise some of these larger administrative law questions,” said Jonathan H. Adler, a professor at Case Western Reserve University School of Law.
While the Supreme Court has not always sided with the 5th Circuit, Adler said Judge Oldham’s majority opinion was similar in some ways to the Supreme Court’s decision in Sayla Law v. CFPB, a 2020 decision that found there was a separation of powers issue regarding removal protections for the director of the Consumer Financial Protection Bureau.
But Adler said he doesn’t believe there will be a consensus on a “sufficiently clear” delegation test on the Supreme Court. Unless the majority agrees on such a test, “I don’t think we’re likely to get a broad nondelegation ruling,” he said.
Public Knowledge’s Feld said there’s a “nice irony” in the fact that universal service funding has attracted widespread attention from nondelegates.
“What’s odd is that the FCC has consistently refused to change the program, despite requests from many people, because they have repeatedly insisted that it’s Congress’ job to change the law,” Feld said. “Everyone loves a story about an agency overstepping its authority, but in this case, the agency is saying, ‘No, no, we’re just following Congress’ instructions.'”
