The Myth of the Federal Private Nondelegation Doctrine, Part 3

Serial-blogging my recent article in the Notre Dame Law Review

On Monday, I started serial-blogging my article, The Myth of the Federal Private Nondelegation Doctrine, which has just come out in the Notre Dame Law Review. I continued this yesterday, and I'll continue serial-blogging it here over the next couple of days. This is a timely issue, because of the horseracing case currently pending in the Fifth Circuit (in which I filed an amicus brief on behalf of the Reason Foundation and others). Here's Part II.A, explaining how there are no nondelegation doctrines specific to private parties — beginning with the Nondelegation Doctrine of Article I. (Please be sure to refer to the real version if you want all the footnotes!)

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II. No Private Nondelegation Doctrines

Do any of these doctrines prohibit private delegations?  If, per the conventional wisdom discussed in the Introduction, Schechter Poultry and Carter Coal prohibit Congress from delegating to private parties (without regard to the traditional "intelligible principle" doctrine for delegations to public parties) . . . and if (perhaps also due to Carter Coal) you can't give power to private parties . . . and if (as Justices Alito and Thomas say) private parties can't exercise federal power because they're not within the government . . . then aren't private delegations invalid, maybe for several different reasons?

As it happens, though, private delegations have been widely misunderstood.  Contrary to popular belief, there is no Article I prohibition against private delegations, though Schechter Poultry is often misread to imply one.  The prohibition is also often inferred from Carter Coal, but Carter Coal is best read as a due process case—and one that also doesn't impose any per se prohibition on delegations to private parties.  Likewise, recipient-based theories might invalidate certain private delegations, but not because the parties are private.  Private status might be correlated with some relevant factors, but it generally isn't part of the actual test.

Understanding how the theories differ—and why they don't rule out private delegations—thus opens the door to various types of privatization that would otherwise be thought impermissible.

A. No Private Article I Nondelegation Doctrine

Nothing in the Article I Nondelegation Doctrine bars private delegations.  Several Supreme Court cases have upheld private delegations, and no Supreme Court cases have struck them down (or have even analyzed them differently), under that doctrine.  Some cases that have been thought to establish such a doctrine have been thoroughly misread.

This result makes sense.  The Article I Nondelegation Doctrine is a giver-based doctrine: Congress isn't supposed to give up too much power.  Provided the "too much" question is answered properly, why should it matter, under that doctrine, who gets that power?  The doctrine might play out slightly differently when private parties are involved, but that's a result of the neutral application of the doctrine as currently formulated—it doesn't make sense to have a different formulation of the Article I Nondelegation Doctrine that applies differently in private cases.

1. Upholding Private Delegations

Congress has delegated power to private parties since the earliest days of the republic.  But, more to the point: the Supreme Court, far from invalidating private delegations under the Article I Nondelegation Doctrine, has upheld them at least four times: in Butte City Water Co. v. Baker (1905), St. Louis, Iron Mountain & Southern Railway Co. v. Taylor (1908), Currin v. Wallace (1939), and United States v. Rock Royal Co-operative, Inc. (1939).

In two cases—Butte City Water and Rock Royal—the Court simply upheld the delegation.  Two other times—in St. Louis Railway and Currin—the Court went further and upheld the delegation by explicitly analogizing it to a similar case where the delegate was the President or an executive official.

We shouldn't ignore these cases just because they're old.  No later Supreme Court decision has taken a contrary approach; and in 1935, the two oldest cases were explicitly cited in Schechter Poultry as examples of cases where private delegation is constitutional.  (Schechter Poultry itself has never been questioned and continues to be cited regularly.)

So there's no per se rule against private delegations, and the rule for private delegations is the same as for public ones.

Let's look at these four cases in detail.  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—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.  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 effected by the legislation.

In upholding this private delegation, the Currin Court closely followed its earlier analysis from St. Louis Railway.  A statute authorized a private group, the American Railway Association, to "designate to the Interstate Commerce Commission [(ICC)] the standard height of draw bars 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—a case about delegating tea-inspecting authority to the Secretary of the Treasury.  Thus, in St. Louis Railway, 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 St. Louis Railway as a case where private delegations were unproblematic.

Another case cited in Schechter Poultry as an example of an unproblematic private delegation was Butte City Water.  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 Rock Royal.  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 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.  This means that the Article I Nondelegation Doctrine doesn't distinguish between public and private parties.  This makes sense: with giver-based doctrines, it's all about how much power Congress has given up, not who gets the power.

2. Two Completely Misunderstood Precedents

a. Schechter Poultry

But what about Schechter Poultry itself, with its negative take on Congress's "delegat[ing] 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," and its statement that "[s]uch a delegation of legislative power is unknown to our law and is utterly inconsistent with the constitutional prerogatives and duties of Congress"?

One can be forgiven for thinking that the case was about private delegations.  The whole thrust of the National Industrial Recovery Act was to rely on private industry, and in a few later cases, the Supreme Court distinguished that delegation as having been to private parties.  But those later cases were wrong: Schechter Poultry itself didn't involve private delegations.  (Fortunately, those later characterizations of Schechter Poultry were just dicta.  So the strongest case for a Supreme Court Article I private nondelegation doctrine rests on dicta in cases mischaracterizing a previous case.)

The Schechter Poultry Court never found a private delegation—nor could it have, since private industries could only propose a code of fair competition: no code could actually go into effect without being promulgated by the President.  The President wasn't required to approve any code at all, even if a trade group proposed one; if a trade group proposed one, the President could approve it with "such exceptions . . . and exemptions . . . as the President in his discretion deem[ed] necessary to effectuate the policy" of the statute; and the President could also just decline to approve a proposed code and instead "prescribe one . . . on his own motion."  The Court actually invalidated the delegation because the statute insufficiently constrained the President when he approved those codes.  Thus, no part of the Schechter Poultry holding concerns private delegations, and any comments about the validity of private delegations were just dicta.

But even suppose that Schechter Poultry's private-delegation dicta were binding.  That still wouldn't establish that delegations to private parties are per se invalid—or even that private delegations are subject to a stricter rule than public ones.  The Court was right: of course Congress can't "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."  But that's not a statement against private delegation as such—it's a statement against unrestricted private delegation.  And Schechter Poultry holds that Congress is equally forbidden from delegating comparable authority to the President.  Unrestricted delegations are invalid, no matter the delegate.  Schechter Poultry acknowledged that delegation of authority (even to private parties) could be acceptable, but it distinguished this particular delegation to the President as being excessive and crossing the line into a delegation of "legislative authority."

So Schechter Poultry adds nothing to our understanding of whether Congress can delegate power to private parties.  To the extent it says anything about private delegations, it amounts to nothing more than "'intelligible principle' for everybody."  Delegations, to be valid, must be accompanied by an "intelligible principle," and this is true whether the delegate is public or private.

b. Carter Coal

How about Carter Coal  ?  There, the Court said, referring to the delegation to the majority of the coal industry of the power to make binding standards: "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."  This sentence was followed by a string cite to three cases, including Schechter Poultry.

Some have characterized Carter Coal as an Article I Nondelegation Doctrine case, and the word "delegation" in the quote—and the Schechter Poultry citation—can certainly encourage that belief.

But the mere recitation of the word "delegation" doesn't mean much, because the Supreme Court has used the word "delegation" for several nondelegation doctrines that have nothing to do with Article I.  The reference, in the same sentence, to due process considerations suggests that the Court is talking about the due process nondelegation doctrine; moreover, right after citing Schechter Poultry, the Court cites two (private) due process cases that we'll discuss soon, Eubank v. City of Richmond and Washington ex rel. Seattle Title Trust Co. v. Roberge.  The focus on financial bias in those cases is a good fit with the concerns in Carter Coal, so it makes more sense to read Carter Coal as a due process case, not an Article I Nondelegation Doctrine case.

But even suppose we read Carter Coal as an Article I Nondelegation Doctrine case.  It would make no difference, because that case is explainable in very 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.)  Whichever way we slice it, neither Schechter Poultry nor Carter Coal supports the idea that the Article I Nondelegation Doctrine distinguishes between public and private delegates.

The failure to properly categorize Carter Coal, Schechter Poultry, and the other cases leads to ongoing confusion.  For instance, Paul Larkin combines the due process cases Eubank, Cusack, Roberge, and Carter Coal together with Schechter Poultry in a doctrine that he calls the "private nondelegation doctrine," even though some of these (as state-government cases) are only due process cases, while Schechter Poultry has no due process holding, rests on the Article I Nondelegation Doctrine (among other grounds), and doesn't rest on private status.  What about cases like Currin and Rock Royal, which allow private delegations?  Larkin distinguishes them as being merely about delegations of a power to halt government regulation, not an affirmative power to regulate individuals.  But even if this matters, it still fails to distinguish Butte City Water or St. Louis Railway, where the Court had no problem with the private delegation.

So this isn't a situation where some antiquated Supreme Court doctrine has been undermined by later caselaw.  The original doctrine has never been repudiated and hasn't been undermined by later Supreme Court precedent; in fact, the contrary lower-court cases are quite recent, i.e., Judge Brown's re-adoption of her private-delegation theory in the Amtrak remand and the Fifth Circuit's recent horseracing opinion.

3. How Private Status Can Be Relevant

Still, could the doctrine play out differently in practice for private delegates?  Yes, and I'll give two examples: one is the existence of administrative procedures and judicial review, and another is the Inherent-Powers Corollary.  But neither of these suggests any per se constitutional problem with privatization.

a. Administrative Procedures and Judicial Review

In Schechter Poultry, the Court distinguished the delegation to the President from the Interstate Commerce Act's delegation to the Interstate Commerce Commission.  The ICC, the Court wrote,

in dealing with particular cases, is required to act upon notice and hearing, and its orders must be supported by findings of fact which in turn are sustained by evidence. . . . The authority conferred has direct relation to the standards prescribed for the service of common carriers and can be exercised only upon findings, based upon evidence, with respect to particular conditions of transportation.

If a delegate needs to follow certain procedures before doing something, that constrains the delegate's scope of action.  And if that delegate's actions are then subject to judicial review—which is facilitated by the presence of procedures—a court can strike down actions that don't comport with the principle or that aren't substantively rational, which further constrains the delegate's scope of action.  In other words, the presence of administrative procedures and judicial review (either separately or together) reduces what the delegate can get away with.  And that's just another way of saying that less power has been delegated.

From this perspective, it's easy to see why public delegations might be more likely to be constitutional than private ones.  The reasoning involves two steps, which have opposite constitutional effects, so let's go through this carefully.

First, privatization will often mean that certain procedures are no longer mandatory.

Public actors will almost always be state actors, and private actors often won't be; if so, procedural due process will apply to the public actors and not the private ones, and so public actors will be subject to constitutionally mandated procedures that private actors will evade.  Statutory mandates, too, like those of the Administrative Procedure Act (APA), the Freedom of Information Act (FOIA), or the National Environmental Policy Act (NEPA), are also less likely to apply.

If this step were all, then privatization would make a given setup more likely to be constitutional, because there would be fewer applicable constitutional norms to violate.

This is where the second step comes in: that lack of procedures (whether constitutional or statutory) would also make a delegation broader, in a way that might violate the Article I Nondelegation Doctrine.  So taking oneself out of publicness under some doctrines might invalidate the delegation under another doctrine.

Perhaps this will make some difference in how the doctrine plays out as between public and private delegates in some cases.  But this doesn't require a special doctrine for private delegations—it just means that the ordinary doctrine will tend to play out differently, and needs to be applied with an understanding of how procedures and judicial review affect the scope of a delegation.

Moreover, this argument doesn't necessarily rule out private delegations.  Procedural requirements and judicial review are only one way to narrow a delegation.  Their absence needn't doom a delegation provided the "intelligible principle" is detailed enough.  And even if their absence would doom a private delegation, the remedy (aside from making the principle more intelligible) might just be to structure the delegation to have more procedural requirements and judicial review, either by statute or by contract.  For instance (as a matter of constitutional law), private prisons are already considered state actors, subject to the full panoply of constitutional rights—and in § 1983 suits (as a matter of statutory interpretation), public prison guards get qualified immunity while private prison guards don't.  So in some ways, private incarceration can be even more robustly accountable than public incarceration.  If, in any particular instance, we don't like some private accountability regime, legislation or contracts could subject private delegates to whatever requirements we like—FOIA, APA, or anything else, including some custom-made accountability regime designed for the specific case.

The Article I Nondelegation Doctrine thus has the seeds of an argument that could be used against particular private delegations, but it doesn't embody any rule against such delegations, and the doctrine itself applies neutrally.

b. The Inherent-Powers Corollary

The next reason why private delegations might look different under the Article I Nondelegation Doctrine is the Inherent-Powers Corollary.  As I've noted, when the delegate has some inherent authority over the subject matter, the intelligible principle doctrine is greatly weakened, or dropped entirely.  For instance, Congress can delegate to the President in military or foreign-affairs matters without providing an intelligible principle.

But what if Congress took a standardless foreign-affairs delegation to the President and converted it to an identical standardless delegation to a private military corporation like Blackwater?  Blackwater lacks any inherent power, so a constitutional delegation to the President would become an unconstitutional private delegation.

This isn't an especially broad category, because usually delegations to the Executive are made where the President has a derivative power (i.e., his "take Care" power), not an inherent power like the Commander in Chief power.  Thus, if a delegation to the President in, say, meat inspection (where the President lacks inherent power) were converted to a delegation to a private corporation, identical in every way—including procedures and accountability mechanisms—the constitutionality of those delegations would be identical.

This argument doesn't apply uniquely to private actors; it would apply to any delegate that lacks inherent power.  (Consider the hypo above about Indian tribes versus the Bureau of Indian Affairs.)  Moreover, it's not a per se argument against private delegation—the problem is just with standardless delegations to delegates that lack inherent power.  Private delegations would simply require the same sort of "intelligible principle" that's otherwise required outside of the Inherent-Powers Corollary.