The Horseracing Case, Part 2: Private Delegation Before and After Schechter Poultry

The Supreme Court has never held that private delegations have any special unfavorable treatment under the Article I Nondelegation Doctrine: quite the opposite!

This is one of a series of posts on the Fifth Circuit's recent "private nondelegation case", National Horsemen's Benevolent & Protective Ass'n v. Black, where it struck down the Horseracing Integrity and Safety Act for delegating power to a private organization, the Horseracing Integrity and Safety Authority. In yesterday's post, I explained how A.L.A. Schechter Poultry Corp. v. United States (1935), the main case that proponents of a "private nondelegation doctrine" usually rely on, gives no support to any view that delegations are judged more harshly if the recipient of the delegation is private instead of public.

Today, I'll talk about private delegations before and after Schechter Poultry -- the bottom line is that the Supreme Court has actually upheld private delegations on at least four occasions. Two of those were before Schechter Poultry, and Schechter Poultry actually mentioned them as examples of cases where private delegations were acceptable. Two of them were after Schechter Poultry. In two of the cases, the Court explained why the delegation was unconstitutional by analogizing the delegation to a delegation to a public party -- which shows that the private nature of the delegate wasn't relevant. None of these cases -- neither Schechter Poultry nor the other four -- has ever been overruled, and some of them (particularly Schechter Poultry, which approved of two of those cases) continue to be cited regularly.

And this makes sense: the Article I Nondelegation Doctrine is about how Congress can't give up too much power; so far, the formulation it's used is whether the delegate is limited by an "intelligible principle". Provided that's present and Congress hasn't given up too much power, what does it matter who has been the recipient of the power? There might be other principles at work (I'm looking at you, Due Process Clause or Appointments Clause), but the Article I Nondelegation Doctrine doesn't seem to be one of them.

Alas, Schechter Poultry has been mischaracterized since then. In a couple of cases since Schechter Poultry, the Court has mischaracterized that case -- when it has upheld a delegation, it has sometimes distinguished Schechter Poultry on the ground that it involved a private delegation. This was clearly wrong, but fortunately it's only dictum, and fortunately I've only found a handful of instances of this in Supreme Court caselaw. So the strongest case that there's a private Article I nondelegation doctrine stems from dictum in a couple of 1940s cases.

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Let's look at these four cases in detail. (I won't do this in chronological order, but in an order that makes sense for explaining the principles involved.)

First, there's Currin v. Wallace (1939). Currin concerned a challenge to the Tobacco Inspection Act of 1935. The Act authorized the Secretary of Agriculture to establish uniform standards for tobacco, and designate tobacco markets where no tobacco could be sold unless it was inspected and certified according to those standards. But the Secretary couldn't designate a market unless two-thirds of the growers in that market voted in favor of the designation in a referendum. Industry members thus held an "on-off" power to decide whether predetermined regulations would go into effect.

Is this a delegation subject to the Article I Nondelegation Doctrine? Yes: an "on-off" power to determine the applicability of legal norms isn't a trivial power, and it becomes a (forbidden) delegation of legislative authority if not adequately circumscribed. At least once -- in Panama Refining Co. v. Ryan (1935) -- the Supreme Court struck down a delegation of an "on-off" power to the president on those grounds, holding that the president lacked statutory guidance as to whether to exercise the power. In other cases, the Supreme Court has upheld the delegation of such an "on-off" power, but it was clear that the validity of the delegation had to be analyzed under the Article I Nondelegation Doctrine.

The Currin Court upheld the delegation to the industry members. The Court held that the delegation was comparable to the delegation to the president of the power to determine the difference in production costs between countries and set tariffs that equalized those costs -- which had been upheld in J.W. Hampton, Jr., & Co. v. United States (1928). Therefore, the delegation of power to industry did "not involve any delegation of legislative authority."

Did the Currin Court say anything negative about the industry members' being private citizens? No, and in fact it implied the contrary: in analogizing the case to J.W. Hampton, it explicitly treated a federal official (the president!) and private citizens as equivalent in terms of whether Congress could delegate an "on-off" power to them:

Congress may feel itself unable conveniently to determine exactly when its exercise of the legislative power should become effective, because dependent on future conditions, and it may leave the determination of such time to the decision of an executive, or, as often happens in matters of state legislation, it may be left to a popular vote of the residents of a district to be affected by the legislation.

In upholding this private delegation, the Currin Court closely followed its earlier analysis from St. Louis, Iron Mountain, & Southern Railway Co. v. Taylor (1908). A statute authorized a private group, the American Railway Association, to "designate to the Interstate Commerce Commission the standard height of drawbars for freight cars." The ICC was then directed to promulgate that height as law. This was challenged as "an unconstitutional delegation of legislative power to the railway association and to the [ICC]."

The Supreme Court rejected this argument in one paragraph, analogizing the case to Buttfield v. Stranahan (1904) -- a case about delegating tea-inspecting authority to the Secretary of the Treasury. Here, too, it was clear that the Court didn't consider the delegate's private status relevant. Decades later (a few years before Currin), in Schechter Poultry, the Court explicitly listed this case as one where private delegations were unproblematic.

Another case cited in Schechter Poultry as an example of an unproblematic private delegation was Butte City Water v. Baker (1905). There, the Supreme Court upheld the power of Congress, as part of its power to make regulations for public lands, to delegate rulemaking authority to miners in local mining districts.

Finally, a few months after Currin, the Supreme Court upheld another private delegation in United States v. Rock Royal Co-operative, Inc. (1939). Rock Royal concerned a challenge to the Agricultural Marketing Agreement Act of 1937, a statute aimed at assisting in the marketing of agricultural commodities. The Act authorized the Secretary of Agriculture to make orders restoring parity prices for farmers of specific farm products. Orders could become effective in two ways: (1) consent of the handlers; or (2) two-thirds support from the producers (if the Secretary of Agriculture, with the president's approval, determined that the handlers' failure to consent obstructed the policy of the act). The Court held that a delegation to private parties of this "on-off" power to put an order into effect didn't violate the nondelegation doctrine. Again, no mention of private status.

In short, the Supreme Court has upheld delegations to private parties against Article I Nondelegation challenges at least four times, twice before Schechter Poultry and twice after. In Schechter Poultry, it explicitly cited the two prior cases as examples of unproblematic private delegations. And none of these cases have been repudiated. So there's no per se rule against such delegations.

And because, in Currin and St. Louis Railway, the Court upheld the private delegations by explicitly analogizing them to delegations to public officials, without expressing any reservations based on private status, the Article I Nondelegation Doctrine doesn't distinguish between public and private parties. This makes sense: it's all about how much power Congress has given up, not who gets the power.

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The Supreme Court has sometimes forgotten this history, and has even forgotten what Schechter Poultry was about.

Remember yesterday's post: there was no private delegation in Schechter Poultry; the industry associations' power was limited to proposing "codes of fair competition". The codes didn't go into effect unless approved by the president; the president wasn't required to approve the codes; he was allowed to modify them in various ways; and he was also allowed to promulgate codes on his own motion or on complaint if a code hadn't been approved. So the industry groups had no formal power at all (though admittedly their ability to propose codes gave them a lot of informal power).

Accordingly, the Supreme Court -- after a burst of rhetoric against delegation to private groups -- went on to analyze the delegation to the president; the conclusion is that, even if we took the case as holding that unconstrained industry delegations are unconstitutional, the holding of the case says: so are unconstrained delegations to the president. (The administration of the codes did involve "industry advisory committee[s]" to be appointed by industry members, but the Court's nondelegation discussion concerned the promulgation of the codes themselves, not their administration.)

Still, in Yakus v. United States (1944), the Supreme Court said, in upholding a wartime price control statute:

The Act is unlike the National Industrial Recovery Act . . . considered in Schechter Corp. . . . . [That act] prescribed no method of attaining that end save by the establishment of codes of fair competition, the nature of whose permissible provisions was left undefined. It provided no standards to which those codes were to conform. The function of formulating the codes was delegated not to a public official responsible to Congress or the Executive, but to private individuals engaged in the industries to be regulated. Compare Sunshine Coal Co. v. Adkins.

The reference to Sunshine Anthracite Coal Co. v. Adkins is funny. The signal "Compare" indicates that Sunshine Anthracite doesn't suffer from the problems that plagued Schechter Poultry. Here, the Court upheld a delegation to an agency on the grounds that the agency had sufficient standards. But the Court also denied that there was a delegation to industry: "Nor has Congress delegated its legislative authority to the industry. The members of the code function subordinately to the Commission. It, not the code authorities, determines the prices. And it has authority and surveillance over the activities of these authorities. Since lawmaking is not entrusted to the industry, this statutory scheme is unquestionably valid." Fair enough . . . but this is not too different from industry's subordinate position in Schechter Poultry.

Then, in Rice v. Board of Trade of City of Chicago (1947), it upheld a delegation by saying, in a footnote: "We therefore have no attempt here to endow private groups with lawmaking functions. Cf. Schechter Poultry [and two other cases involving antitrust, not con law]."

Then, in Fahey v. Mallonee (1947), the Court distinguished the delegation in that case from Schechter Poultry and Panama Refining Co. v. Ryan, the two 1935 cases where the Court struck down statutes under the nondelegation doctrine: "Both cited cases dealt with delegation of a power to make federal crimes of acts that never had been such before and to devise novel rules of law in a field in which there had been no settled law or custom. [Schechter Poultry] also involved delegation to private groups, as well as to public authorities."

That's three mentions in 1940s cases -- fortunately all dictum. (I could add a mention in a Brennan concurrence in the result in United States v. Robel (1967) and another mention in a Breyer dissent in Clinton v. City of New York (1998).) So the strongest case that the Supreme Court has established a "private nondelegation doctrine" rooted in Article I and Schechter Poultry comes from dictum in three cases from the 1940s (as well as popular understandings of Schechter Poultry that are unsupported by the actual case).