The Horseracing Case, Part 3: How Carter Coal Is Misunderstood

Despite a recent Fifth Circuit case, Carter v. Carter Coal Co. (1936) doesn't limit private delegations.

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 Monday'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. And in Tuesday's post, I talked about how the Supreme Court upheld private delegations four times between 1905 and 1939, and cited two of those cases in Schechter Poultry as examples of cases where private delegation was unproblematic; unfortunately it mischaracterized Schechter Poultry a few times in the 1940s as being about private delegation, but fortunately that was dictum.

Today, I'll talk about the second case that people often rely on when they want to argue that there's a rule against private delegations: Carter v. Carter Coal Co. (1936). Just like Schechter Poultry, this case has been widely misunderstood: (1) if you read it as an Article I Nondelegation Doctrine case, it doesn't support any special rule against private delegations; (2) it's probably best read as a Due Process case (based on the presence of financial bias); (3) if you read it as a Due Process case, it likewise doesn't support any special rule against private delegations.

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Carter v. Carter Coal Co. involved a challenge to Bituminous Coal Conservation Act of 1935. The Act imposed a 15% tax on coal, but provided that, if a producer accepted the Bituminous Coal Code, he would get a 90% rebate of that tax. And this Code involved, in part, setting minimum and maximum prices of coal, regulation of various methods of competition, collective bargaining, and workers' wages and hours. The wages and hours were to be determined by negotiation between labor and management:

"Whenever the maximum daily and weekly hours of labor are agreed upon in any contract or contracts negotiated between the producers of more than two-thirds the annual national tonnage production for the preceding calendar year and the representatives of more than one-half of the mine workers employed, such maximum hours of labor shall be accepted by all the code members. The wage agreement or agreements negotiated by collective bargaining in any district or group of two or more districts, between representatives of producers of more than two-thirds of the annual tonnage production of such district or each of such districts in a contracting group during the preceding calendar year, and representatives of the majority of the mine workers therein, shall be filed with the Labor Board and shall be accepted as the minimum wages for the various classifications of labor by the code members operating in such district or group of districts."

The Supreme Court didn't like this arrangement, which allowed some companies and workers to impose their negotiated wages and hours on other companies and workers. Here's what it wrote:

That subdivision delegates the power to fix maximum hours of labor to a part of the producers and the miners . . . . The effect, in respect of wages and hours, is to subject the dissentient minority, either of producers or miners or both, to the will of the stated majority, since, by refusing to submit, the minority at once incurs the hazard of enforcement of the drastic compulsory provisions of the act to which we have referred. To "accept," in these circumstances, is not to exercise a choice, but to surrender to force.

The power conferred upon the majority is, in effect, the power to regulate the affairs of an unwilling minority. This is legislative delegation in its most obnoxious form, for it is not even delegation to an official or an official body, presumptively disinterested, but to private persons whose interests may be and often are adverse to the interests of others in the same business. . . . Some coal producers favor the Code; others oppose it, and the record clearly indicates that this diversity of view arises from their conflicting and even antagonistic interests.

The difference between producing coal and regulating its production is, of course, fundamental. The former is a private activity; the latter is necessarily a governmental function, since, in the very nature of things, one person may not be entrusted with the power to regulate the business of another, and especially of a competitor. And a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property. The delegation is so clearly arbitrary, and so clearly a denial of rights safeguarded by the due process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions of this court which foreclose the question. [citing Schechter Poultry, Eubank v. City of Richmond (1912) and Washington ex rel. Seattle Title Trust Co. v. Roberge (1928).]

So you see why, on its face, this looks like a good anti-private-delegation opinion! It says "delegates" and "delegation", it cites Schechter Poultry, and it strikes down a delegation to private parties!

But let's look at this more closely. Clearly merely saying the word "delegation" isn't enough to make something an Article I Nondelegation Doctrine opinion. For instance, a state government can't delegate to a church the power to veto the licensing of a bar -- that's the doctrine of Larkin v. Grendel's Den (1982). The verb "delegate" shows up all over that opinion, but of course it can't be an Article I Nondelegation Doctrine opinion, because that doctrine has no applicability to state delegations, only to federal ones. A bunch of other doctrines are similar: they've been described using the term "delegation", but they're not about the Article I Nondelegation Doctrine.

More specifically, Carter Coal also looks suspiciously like a Due Process opinion: it says "arbitrary" and "denial of rights safeguarded by the due process clause of the Fifth Amendment", and then it cites Due Process cases Eubank and Roberge. The focus on financial self-interest in those cases is a good fit with the concerns in Carter Coal (I'll discuss those cases in a blog post next week), so it makes more sense to read Carter Coal as a Due Process case, not an Article I Nondelegation Doctrine case.

Admittedly, Carter Coal does cite Schechter Poultry, which is indeed an Article I Nondelegation Doctrine decision . . . but maybe some commingling of doctrines is going on. And this isn't some arbitrary labeling of doctrines that only academics should care about: Due Process holdings apply against all levels of government, while Article I Nondelegation holdings apply only against congressional delegations; Due Process holdings can support damages under section 1983 and Bivens, while Article I Nondelegation holdings don't. This matters for how the holding can be used in future cases, which is why courts ought to be careful about their reasoning.

Fortunately, in later cases, the Supreme Court has come down on the Due Process side of characterizing Carter Coal. But it turns out -- even though I think courts should be careful -- it doesn't much matter how we read Carter Coal, because under any reading, it doesn't support any special rule against private delegations.

If we read Carter Coal as a nondelegation case, it would be explainable in completely ordinary terms: the delegation to the coal producers was unlimited; the majority of coal producers could impose whatever conditions they wanted on the dissenting minority. In other words, there was no intelligible principle. This delegation would have been struck down even if the delegates were public. (Thus, Chief Justice Hughes wrote a separate opinion relying on both nondelegation and Due Process, and his nondelegation discussion didn't even mention private status.)

So, as Article I Nondelegation Doctrine cases, neither Schechter Poultry nor Carter Coal support the idea that the Article I Nondelegation Doctrine distinguishes between public and private delegates.

O.K., but what if we read Carter Coal as a Due Process case? To answer this question, we need to look at the relevant Due Process caselaw in greater detail, which I'll do in my next post -- next week, after we take some time off for Thanksgiving.