Justices pass on opportunity to further limit the power of federal agencies

Last year the Supreme Court took a significant step to limit the power of administrative agencies with its decision overturning the Chevron doctrine, which for 40 years had instructed courts to show certain deference to an agency’s interpretation of the laws that it administered. On Friday, the justices declined to take another step to curtail those agencies’ power. By a vote of 6-3, the court turned back a challenge to a federal program that subsidizes telephone and high-speed internet services in schools, libraries, rural areas, and low-income communities in urban areas. In doing so, the majority declined to revive a theory known as the nondelegation doctrine – the principle that Congress cannot delegate its lawmaking powers to other institutions. 

Writing for the majority, Justice Elena Kagan held that under the court’s nondelegation precedents, “Congress sufficiently guided and constrained the discretion that it lodged with” another institution, the Federal Communications Commission, with regard to implementing the federal program at issue. According to Kagan, “[n]othing in those arrangements, either separately or together, violates the Constitution.” 

Congress has long sought to ensure that all U.S. residents and businesses have access to the same kinds of telephone and, later, internet services at roughly the same rates. Initially, this was done through the rates charged by the telephone companies themselves: Customers in urban areas paid rates that were higher than what it actually cost to provide those services, effectively subsidizing the rates paid by customers in rural areas. 

But once the telephone industry was deregulated, Congress needed another solution. In 1996, it created an entity known as the Universal Service Fund to subsidize universal telephone and high-speed internet access for schools, libraries, and rural health care providers. The money in the fund comes from contributions from telecommunications carriers, which can and do pass on the costs of the contributions – which are calculated every quarter – to their customers. One year after creating the Universal Service Fund, Congress created a private nonprofit, known as the Universal Service Administrative Company, to help with the administration of the fund. 

Consumers’ Research, which describes itself as the country’s oldest consumer protection agency, filed several challenges to the Universal Service Fund contributions calculated for different quarters. In the case before the court, the full U.S. Court of Appeals for the 5th Circuit ruled that the contributions to the fund were a “misbegotten tax” that violates the provision of the Constitution giving Congress, and only Congress, the power to legislate. 

Writing for the majority, Judge Andrew Oldham explained that Congress may have violated the nondelegation doctrine in two different ways: by giving the FCC the power to set the amount that telecommunications carriers must pay into the fund without giving it an “intelligible principle” to guide it and by outsourcing the power to set fees to a private group, the USAC. At a minimum, Oldham wrote, the combination of those two delegations violates the Constitution. 

The Supreme Court disagreed. Kagan first determined that Congress had provided an “intelligible principle” to guide the FCC’s actions, given that it “imposed ascertainable and meaningful guideposts for the FCC to follow when carrying out its delegated function of collecting and spending contributions from carriers.” Specifically, “the statute directs the FCC to collect the amount that is ‘sufficient’ to support the universal-service programs Congress has told it to implement.” According to Kagan, the word “sufficient” sets both a ceiling and a floor, and thus cabins the amount of money the FCC is statutorily permitted to raise. 

Kagan admitted that sufficiency alone was inadequate to settle the matter, as any such inquiry also turned on the “nature and content” of the universal service. Accordingly, if Congress did not adequately carve out the contours of the universal-service program, then “the ‘sufficiency’ ceiling will do no serious work.” But Kagan concluded that such contours had been carved out, as Congress “provides the FCC with determinate standards for operating the universal-service program.” In particular, the statute is clear on what communities the program is intended to serve, provides “specific criteria for which services those statutory beneficiaries should receive,” and draws relatively clear lines that such services must be essential for things such as education, public safety, or public health. 

Finally, Kagan rejected the invocation by Consumers’ Research of the so-called private nondelegation doctrine. In support of the argument, the challengers contended, and the 5th Circuit agreed, that the FCC had unconstitutionally delegated government power to a private party – namely, the United States Administrative Company. In rejecting this argument, Kagan asserted that the FCC had done no such thing: rather, the FCC, not the USAC, “endorses final projections, converts them into a contribution factor, and formally promulgates them.”  As Kagan concluded,”[i]n every way that matters to the constitutional inquiry,” the FCC “is in control.”

In a concurrence, Justice Brett Kavanaugh explored the rationale and background behind the “intelligible principle” standard. Although Kavanaugh agreed with the majority that the federal program in this case did not violate that test, he left open the possibility that his opinion could differ were the FCC an independent agency with the ability to make and shape policy, thus potentially operating outside the bounds of congressional authority. 

Justice Neil Gorsuch, wrote a 38-page dissent, joined by Justices Clarence Thomas and Samuel Alito. In Gorsuch’s view, in the context of the universal service taxes at issue, the court concludes that “an executive agency may decide for itself what rates to apply and how much to collect,” thus defying “the Constitution’s command that Congress ‘may not transfer to another branch ‘powers which are strictly and exclusively legislative.”” 

Gorsuch then pointed to several powers that Congress conferred on the FCC. First, Gorsuch noted the FCC’s power to compel carriers to contribute money to the Universal Service Fund. In his view, this constitutes a tax, which “ranks among the government’s greatest powers” and the rate of which must be set by the legislature, not a federal agency. Nor, in Gorsuch’s view, is it adequate that Congress has provided a “’qualitative’ cap” on what the FCC may collect here. In reality, the amount of this tax has varied dramatically over the years, and the statute thus provides more of a “blank check” based on the program’s supposed needs than any sort of fixed restraint. 

Gorsuch concluded by questioning the efficacy of the intelligible principle test itself.  According to Gorsuch, “historical practice and our cases suggest other guides, beyond the intelligible principle test, for assessing when Congress has impermissibly ceded legislative power.” Although he did not explore these in any great depth in his dissent, Gorsuch calls for the court to begin taking such considerations more seriously in future cases and find “manageable ways to honor the Constitution’s design.”