It seems that administrative agency cases are all the rage these days. This month, the Supreme Court agreed to hear consolidated cases to resolve a circuit split focused on whether Congress unlawfully delegated the power to tax to the Federal Communications Commission (FCC), which then delegated its power to a private company.
Background
The legal challenge focuses on the FCC’s Universal Service Fund.
Congress passed the Communications Act of 1934 to organize federal regulation of telephone, telegraph, and radio communications. The Act also created the FCC. Included in the Act was a direction that all people in the U.A. should have access to rapid, efficient, nationwide communications service with adequate facilities at reasonable charges.
Fast forward to the 1990s when landline phone service was commonplace, the use of cell phones was on the rise, and, importantly, the internet was being introduced into homes and businesses. As a result, Congress created the Telecommunications Act of 1996 to bring existing laws up to speed with modern technology. The 1996 update also introduced the Universal Service Fund (USF), intended to subsidize telephone service to low-income households and high-cost areas, including service to hospitals, schools, and libraries. In 2011, the fund was expanded to include broadband—high-speed internet—services.
The fund does not rely on money collected from income taxes or appropriated by Congress but by a specific fee on U.S. telephone providers. Typically, carriers then pass along a portion of that cost to consumers via line-item charges in their monthly phone bills. The funds are redistributed by a private company, the Universal Service Administrative Company (USAC), a private, not-for-profit corporation chartered in Delaware.
In November 2021, the USAC submitted its projections of expenses and revenues for the first quarter of 2022. As a result, the FCC proposed a contribution factor of 25.2%. The Respondents—a nonprofit organization, a carrier, and a group of consumers—filed comments requesting that the FCC set the contribution factor at 0%, arguing that the universal service program was unlawful. They contended that Congress had unconstitutionally delegated legislative power to the FCC and that the Commission had unconstitutionally redelegated power to the USAC in violation of the nondelegation doctrine.
The nondelegation doctrine is a principle originating in Article I of the Constitution, which granted legislative authority to Congress. The idea is that Congress may not surrender its legislative authority to other entities. The doctrine hasn’t been invoked a great deal—the last time it was successfully used to strike down laws was 1935. In that case, A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), the Supreme Court held that “Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested.” The deciding factor in that case was a lack of specificity—in that case, the Supreme Court found that the applicable law “sets up no standards… We think that the code-making authority this conferred is an unconstitutional delegation of legislative power.”
Questions
The questions in front of the Supreme Court are:
(1) Whether Congress violated the nondelegation doctrine by authorizing the FCC to determine the amount payable to the USF;
(2) Whether the FCC violated the nondelegation doctrine by using the financial projections of USAC when computing the USF rates; and
(3) Whether the combination of Congress’s conferral of authority on the FCC and the FCC’s delegation of administrative responsibilities to the administrator violates the nondelegation doctrine.
Writ of Certiorari
The Supreme Court has original jurisdiction over certain kinds of cases. Those cases go straight to the Supreme Court—a good example would be a dispute between the states.
Since other cases can’t simply be appealed to the Supreme Court, a party seeking to be heard on an appeal from a lower court decision—like this one—must file a writ of certiorari. Certiorari is Latin (remember, lawyers love Latin) meaning “to be more fully informed.”
If the Supreme Court decides to hear the matter, it’s called a grant of certiorari—by practice, at least four justices must vote to hear the case to be granted cert. Usually, cert is granted in a case of considerable importance or one involving a circuit split. A circuit split happens when the appellate courts disagree on a matter of federal law, reaching different conclusions about its application. That’s what happened here—there was a split between the Fifth Circuit and the Sixth and Eleventh Circuits.
Specifically, on a petition for a rehearing en banc (“en banc” is French for “on the bench” and refers to a matter heard by all judges of a particular court), the Fifth Circuit held that “the combination of Congress’s sweeping delegation to FCC and FCC’s unauthorized subdelegation to [the Company]” was unconstitutional. That included a finding that the FCC “may have impermissibly delegated the taxing power” to USAC.
The Sixth and Eleventh Circuits also heard cases on the matter—those were nondelegation challenges to other FCC orders setting quarterly contribution factors for different time periods. The Sixth and Eleventh Circuits rejected those challenges. The Sixth Circuit held that the arrangement “does not violate the nondelegation doctrine” and further that “there is no private-nondelegation doctrine violation” because the USAC is “subordinat[e] to the FCC” and provides only “ministerial support.”
The Eleventh Circuit similarly concluded that there were no unconstitutional delegations, nor any violation of the private nondelegation doctrine because the USAC “is subordinate to the FCC” and “the FCC retains ultimate decision-making power.”
Those decisions created a split.
Comments
Will Hild, Executive Director of Consumers’ Research (a named Respondent against the FCC), said about the decision to hear the case, “Consumers’ Research is pleased to see the Court take up this important question. American consumers deserve accountability regarding the taxes they pay. This power should rest with representatives that can be replaced by the electorate, not unelected bureaucrats who are farming out these decisions to conflicted private corporations.”
Paul Lekas, Senior Vice President, Global Public Policy, Software & Information Industry Association (SIIA), said about the ruling, “We are encouraged that the Court granted cert in this case. As we explain in our amicus brief, the E-Rate program has a critical role in bridging the digital divide in this country – especially for rural and economically disadvantaged areas. The program has provided connectivity to over 50 million students since 2002 in all 50 states. Invalidating the program would have an untold effect on the student development and teacher support, with follow on effects for U.S. leadership and workforce development in an increasingly technology-driven world.” SIIA filed an amicus brief in the matter. When it comes to legal issues before the Supreme Court, those with interest or expertise in the subject but aren’t a party to the litigation may also file briefs to explain their point of view. These briefs are called amicus briefs and are filed by—more Latin (!)—a party known as an amicus curiae which translates to “friend of the court.”
Grant of Cert And Next Steps
On November 22, 2024, the Supreme Court granted the petition for a writ of certiorari in SHLB Coalition et al. v. Consumers’ Research et al., (No. 24-422). The case was consolidated with FCC v. Consumers’ Research et al., (No. 24-354).
One hour is allotted for oral argument, which will most likely be held in the spring (that means you can expect a decision in June or July). In addition to the questions presented by the petitions, the parties are directed to brief and argue whether this case is moot in light of the failure to seek preliminary relief before the Fifth Circuit.
The cases can now be found on the Supreme Court docket as No. 24-354.
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