Petition for Writ of Certiorari — Schools, Health & Libraries Broadband Coalition, et al., Petitioners v. Consumers' Research, et al.
Supreme Court briefOct 11, 2024
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No.
In the
Supreme Court of the United States
SHLB COALITION, ET AL.,
Petitioners,
v.
CONSUMERS’ RESEARCH, ET AL.,
Respondents.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Fifth Circuit
PETITION FOR A WRIT OF CERTIORARI
Sean A. Lev
Jason Neal
Counsel of Record
Mohammad M. Ali
HWG LLP
1919 M St NW, 8th Fl.
Washington, DC 20036
(202) 730-1300
jneal@hwglaw.com
Jennifer Tatel
Daniel H. Kahn
Morgan O. Schick
Wilkinson Barker
Knauer LLP
1800 M St. NW, Ste. 800N
Washington, DC 20036
(202) 783-4141
jtatel@wbklaw.com
Counsel for SHLB
Coalition
Counsel for CCA, NTCA,
and USTelecom,
OCTOBER 11, 2024
Additional Counsel Listed on Inside Cover
Andrew Jay Schwartzman
525 9th Street NW, 7th Fl.
Washington, DC 20004
(202) 241-2408
AndySchwartzman@gmail.com
Counsel for Benton Institute,
NDIA, and MediaJustice
i
QUESTIONS PRESENTED
In the Telecommunications Act of 1996, Congress
required the FCC to update existing subsidy
mechanisms in order to promote “universal service,”
supported by statutorily required contributions from
carriers offering interstate telecommunications
service. Congress defined universal service and
adopted specific, detailed principles to guide and
cabin the FCC’s exercise of delegated authority. See
47 U.S.C. §§ 254(b), (c), (h).
Following Congress’s directive in Section 254, the
FCC has administered the Universal Service Fund
(“USF” or “the Fund”) for decades, with support from
the Universal Service Administrative Company
(“USAC”). The FCC’s rules limit USAC’s role to
administrative matters, prohibit USAC from making
policy decisions, and provide for de novo FCC review
of any USAC decision upon request.
The questions presented are:
1. Whether Congress violated the nondelegation
doctrine by authorizing the Commission to
determine, within the limits set forth in Section 254,
the amount that providers must contribute to the
Fund.
2. Whether the Commission violated the
nondelegation doctrine by using USAC’s financial
projections
in
computing
universal
service
contribution rates.
3. Whether the combination of Congress’s
conferral of authority on the Commission and the
Commission’s
delegation
of
administrative
responsibilities to USAC violates the nondelegation
doctrine.
ii
PARTIES TO THE PROCEEDING
Petitioners are the Schools, Health, &
Libraries Broadband Coalition, Competitive Carriers
Association (“CCA”), National Telecommunications
Cooperative Association dba NTCA (“NTCA”),
USTelecom
–
The
Broadband
Association
(“USTelecom”), Benton Institute for Broadband &
Society, National Digital Inclusion Alliance, and
Center for Media Justice dba MediaJustice.
Respondents are Consumers’ Research; Cause
Based Commerce, Inc.; Kersten Conway; Suzanne
Bettac; Robert Kull; Kwang Ja Kerby; Tom Kirby;
Joseph Bayly; Jeremy Roth; Deanna Roth; Lynn
Gibbs; Paul Gibbs; and Rhonda Thomas.
The following parties were respondents below:
the Federal Communications Commission and the
United States of America.
iii
CORPORATE DISCLOSURE STATEMENT
Schools, Health & Libraries Broadband Coalition
(“SHLB Coalition”) has no parent corporation, and no
publicly held corporation owns ten percent or more of
its stock.
CCA has no parent corporation, and no publicly
held corporation owns ten percent or more of its
stock.
NTCA has no parent corporation, and no publicly
held corporation owns ten percent or more of its
stock.
USTelecom has no parent corporation, and no
publicly held corporation owns ten percent or more of
its stock.
Benton Institute for Broadband & Society has no
parent corporation, and no publicly held corporation
owns ten percent or more of its stock.
National Digital Inclusion Alliance has no parent
corporation, and no publicly held corporation owns
ten percent or more of its stock.
Center for Media Justice dba MediaJustice has no
parent corporation, and no publicly held corporation
owns ten percent or more of its stock.
iv
RELATED PROCEEDINGS
Supreme Court of the United States:
No. 24-354, FCC v. Consumers’ Research
(judgment entered in Fifth Circuit July 24, 2024)
United States Court of Appeals for the Fifth Circuit:
No. 22-60008, Consumers’ Research v. FCC (July
24, 2024)
v
TABLE OF CONTENTS
OPINIONS BELOW ....................................................1
JURISDICTIONAL STATEMENT .............................1
STATUTORY PROVISIONS INVOLVED .................1
INTRODUCTION ........................................................2
STATEMENT OF THE CASE ....................................3
REASONS FOR GRANTING THE PETITION .......12
I. The Fifth Circuit’s Decision Created a Circuit
Split on an Issue of Substantial Importance
and Would Have Immense Legal and Practical
Implications. ....................................................13
II. The Fifth Circuit’s Decision Invalidates the
FCC’s Implementation of a Federal Program
Created by an Act of Congress. .......................16
III. The Fifth Circuit’s Analysis Is Wrong and
Conflicts with This Court’s Precedent. ...........17
CONCLUSION ..........................................................26
Appendix A – En banc court of appeals opinion
(July 24, 2024) ......................................................1a
Appendix B – Court of appeals panel opinion
(Mar. 24, 2023................................................... 125a
Appendix C – FCC public notice
(Dec. 13, 2021) .................................................. 141a
Appendix D – USAC contribution base report
(Dec. 2, 2021) .................................................... 150a
Appendix E – Court of appeals order granting
rehearing (June 29, 2023) ................................ 160a
Appendix F – 47 U.S.C. § 254 ............................... 162a
vi
TABLE OF AUTHORITIES
Cases
AT&T, Inc. v. FCC,
886 F.3d 1236 (D.C. Cir. 2018) ................................3
Carter v. Carter Coal Co.,
298 U.S. 238 (1936) ................................................21
Consumers’ Rsch. v. FCC,
88 F.4th 917 (11th Cir. 2023) ................ 7, 14, 20, 22
Consumers’ Rsch. v. FCC,
67 F.4th 773 (6th Cir. 2023) ............................. 7, 14
Consumers’ Rsch. v. FCC, No. 21-3886, 2023 WL
3807406 (6th Cir. May 30, 2023) .............................7
Free Enter. Fund v. Pub. Co. Acct.
Oversight Bd., 561 U.S. 477 (2010) ........... 10, 24, 25
Gundy v. United States,
588 U.S. 128 (2019) ................................................18
Iancu v. Brunetti,
588 U.S. 388 (2019) ...............................................17
Maricopa County v. Lopez-Valenzuela,
574 U.S. 1006 (2014) ..............................................17
Mistretta v. United States,
488 U.S. 361 (1989) .......................................... 18, 20
Mozilla Corp. v. FCC,
940 F.3d 1 (D.C. Cir. 2019) ....................................21
Nat’l Broad. Co. v. United States,
319 U.S. 190 (1943) ................................................20
New York Cent. Sec. Corp. v. United States,
287 U.S. 12 (1932) ..................................................20
vii
Qwest Commc’ns Int’l, Inc. v. FCC.,
398 F.3d 1222 (10th Cir. 2005) ..............................21
Qwest Corp. v. FCC.,
258 F.3d 1191 (10th Cir. 2001) ..............................21
Rostker v. Goldberg,
453 U.S. 57 (1981) ..................................................16
Seila L. LLC v. Consumer Fin. Prot. Bureau,
591 U.S. 197 (2020) .................................... 10, 24, 25
Sunshine Anthracite Coal Co. v. Adkins,
310 U.S. 381 (1940) .......................................... 12, 22
Texas Off. of Pub. Util. Couns. v. FCC,
265 F.3d 313 (5th Cir. 2001). ...................................3
Texas Off. of Pub. Util. Couns. v. FCC.,
183 F.3d 393 (5th Cir. 1999) ..................................21
Whitman v. Am. Trucking Associations,
531 U.S. 457 (2001) ................................................20
Yakus v. United States,
321 U.S. 414 (1944) ................................................20
Statutes
28 U.S.C. § 1254 ..........................................................1
47 U.S.C. § 254(b) .............................................i, 16, 18
47 U.S.C. § 254(b)(1) ............................................. 4, 18
47 U.S.C. § 254(b)(2) ............................................. 4, 18
47 U.S.C. § 254(b)(3) .................................................19
47 U.S.C. § 254(b)(4) .................................................19
47 U.S.C. § 254(b)(5) .................................................19
47 U.S.C. § 254(b)(6) .................................................19
47 U.S.C. § 254(b)(7) .................................................20
viii
47 U.S.C. § 254(c) .................................................. i, 19
47 U.S.C. § 254(c)(1) ....................................................3
47 U.S.C. § 254(c)(1)(A) ...............................................4
47 U.S.C. § 254(c)(1)(B) ...............................................4
47 U.S.C. § 254(c)(1)(C) ...............................................4
47 U.S.C. § 254(c)(1)(D) ...............................................4
47 U.S.C. § 254(d) .............................................. 4, 5, 19
47 U.S.C. § 254(e) ......................................................19
47 U.S.C. § 254(h)...............................................i, 4, 19
Regulations
47 C.F.R. §§ 54.604-.606. ..........................................23
47 C.F.R. §§ 54.701-.717 .............................................5
47 C.F.R. § 54.507 .....................................................23
47 C.F.R. § 54.702(b) .................................................22
47 C.F.R. § 54.702(c) ............................................. 5, 22
47 C.F.R. § 54.702(g) .................................................23
47 C.F.R. § 54.702(h) .................................................22
47 C.F.R. § 54.704(b)(2) .............................................22
47 C.F.R. § 54.706 .......................................................5
47 C.F.R. § 54.709 ................................................. 5, 23
47 C.F.R. § 54.709(a)(1) ...............................................6
47 C.F.R. § 54.709(a)(2) ...............................................5
47 C.F.R. § 54.709(a)(3) ......................................... 6, 23
47 C.F.R. § 54.709(c) ...................................................5
47 C.F.R. § 54.719 .......................................................5
ix
47 C.F.R. § 54.719(b) .................................................23
Other Authorities
FCC, Universal Service, https://www.fcc.gov/general/
universal-service ................................................ 4, 15
In re Fed.-State Joint Bd. on Universal Serv.,
Report and Order, 12 FCC Rcd. 8776 (1997). .........4
Lifeline & Link Up Reform & Modernization,
Requests for Rev. of Decisions of the Universal Serv.
Admin. Co. by Amerimex Commc'ns Corp., et al.,
Order, DA 24-784, WC Docket No. 11-42
(rel. Aug. 8, 2024) ...................................................24
NTCA, NTCA Survey Highlights Significant Risks of
Skyrocketing Consumer Bills, Plummeting
Broadband Investment & Loans in Peril if USF
Support were Eliminated (Sept. 4, 2024) ..............16
Promoting Telehealth in Rural America,
34 FCC Rcd. 7335, (2019) ......................................15
S. Ct. R. 10(a) ............................................................14
Universal Service Administrative Company,
2023 Annual Report ......................................... 14, 15
Universal Service Contribution Methodology, Request
for Review of Decision of the Universal Service
Administrator by BT Americas Inc, Order,
DA 22-812, WC Docket No. 06-122, USAC Audit
CR2015CP004, (rel. Aug. 2, 2022) .........................23
1
PETITION FOR A WRIT OF CERTIORARI
Petitioners respectfully petition this Court for
a writ of certiorari to the United States Court of
Appeals for the Fifth Circuit.
OPINIONS BELOW
The opinion of the en banc Fifth Circuit is
available at 109 F.4th 743 and reproduced at Pet.
App. 1a. The opinion of the Fifth Circuit panel is
available at 63 F.4th 441 and reproduced at Pet.
App. 125a.
JURISDICTIONAL STATEMENT
The en banc Fifth Circuit entered its judgment
on July 24, 2024. This Court has jurisdiction
pursuant to 28 U.S.C. § 1254(1).
STATUTORY PROVISIONS INVOLVED
Pertinent statutory provisions are reproduced
at Pet. App. 162a.
2
INTRODUCTION
Three courts of appeals have reviewed
essentially identical challenges asserting that the
federal
universal
service
program
is
unconstitutional. In all three circuits, the
challengers argued that Congress impermissibly
delegated legislative power to the FCC in directing
it, through 47 U.S.C. § 254, to collect certain
contributions to help promote universal service
nationwide,
and
that
the
FCC
acted
unconstitutionally by relying on USAC to serve as an
aid in carrying out that task. The Sixth and Eleventh
Circuits rejected both arguments, as did a panel of
the Fifth Circuit. But on rehearing, the en banc Fifth
Circuit
concluded
differently,
applying
a
“combination” theory of nondelegation not found in
this Court’s precedent.
The Fifth Circuit’s creation of a circuit split on
the constitutionality of the USF contribution
mechanism is enough to warrant this Court’s review.
But in addition, the Fifth Circuit’s decision declared
unconstitutional the program the FCC administers
to provide billions of dollars in needed assistance for
network buildout in rural and remote areas, enabling
connectivity for millions of individuals, as well as
support for tens of thousands of schools, libraries,
healthcare providers, and low-income consumers,
including those in Tribal Nations. The Fifth Circuit’s
decision also is contrary to this Court’s precedents.
The Court should grant this Petition alongside
the government’s petition seeking review of the same
decision in FCC v. Consumers’ Research,
No. 24-354 (docketed Sept. 30, 2024).
3
STATEMENT OF THE CASE
A. Statutory Scheme
Since the FCC’s creation, Congress has charged it
with promoting the availability of affordable, reliable
communications service nationwide. See 47 U.S.C. §
151. Before the Telecommunications Act of 1996 Act,
Pub. L. 104-104 (the “1996 Act”), the FCC “achieved
universal service by authorizing rates to monopoly
providers sufficient to enable revenue from easy-toreach customers, such as city dwellers, to implicitly
subsidize service to those in areas that were hard to
reach.” AT&T, Inc. v. FCC, 886 F.3d 1236, 1242 (D.C.
Cir. 2018) (citation omitted).
The 1996 Act, however, changed many aspects of
telecommunications law to promote competition in
the industry. Congress recognized that its efforts to
introduce competition could undermine the FCC’s
previous efforts to promote universal service.
Because competition and implicit subsidies operated
in tension with each other, Congress “required that
the implicit subsidy system of rate manipulation be
replaced with explicit subsidies for universal
service.” Tex. Off. of Pub. Util. Couns. v. FCC, 265
F.3d 313, 318 (5th Cir. 2001). The provisions
Congress adopted to create those explicit subsidies
are codified at 47 U.S.C. § 254.
Section 254 defines universal service as “an
evolving level of telecommunications services that
the Commission shall establish periodically under
this section,” taking into account “advances in
telecommunications and information technologies
and services.” 47 U.S.C. § 254(c)(1). In doing so, the
FCC must also “consider the extent to which such
telecommunications services . . . are essential to
4
education, public health, or public safety,” alongside
other factual considerations. Id. § 254(c)(1)(A); see id.
§ 254(c)(1)(B)-(D).
Section 254 also identifies several limiting
“principles” upon which the FCC “shall base [its]
policies for the preservation and advancement of
universal service,” including that quality services
“should be available at just, reasonable, and
affordable rates” and that “advanced telecommunications and information services” should be
accessible “in all regions of the Nation.” 47 U.S.C.
§§ 254(b)(1)-(2). Section 254 also requires that every
telecommunications carrier “shall contribute, on an
equitable
and
nondiscriminatory
basis,”
to
mechanisms
supporting
universal
service.
Id. § 254(d). Finally, it includes specific rules
governing universal service support to rural
healthcare providers, schools, and libraries. See id.
§ 254(h).
Beginning in 1997, the FCC adopted regulations
to implement Congress’s directions and create the
programs necessary to promote universal service. See
In re Fed.-State Joint Bd. on Universal Serv., Report
and Order, 12 FCC Rcd. 8776, 8780 (1997). Those
programs are: (1) the “High Cost” program, which
supports service to rural and other high-cost areas;
(2) the “Rural Health Care” program, which supports
telecommunications and broadband for healthcare
providers outside urban areas; (3) the “E-Rate”
program,
which
supports
affordable
telecommunications and broadband for schools and
libraries; and (4) the “Lifeline” program, which
supports service for low-income consumers. See
generally
FCC,
Universal
Service,
https://www.fcc.gov/general/universal-service
(last
5
updated Sep. 12, 2024). The FCC also created a
mechanism to implement Congress’s direction that
telecommunications carriers providing interstate
telecommunications services “contribute, on an
equitable and nondiscriminatory basis, to the
specific, predictable, and sufficient mechanisms
established by the Commission to preserve and
advance universal service.” 47 U.S.C. § 254(d); see,
e.g., 47 C.F.R. §§ 54.706, 54.709.
Finally, the FCC appointed USAC to help
administer these mechanisms. See generally 47
C.F.R. §§ 54.701-.717. All USAC actions in
connection with contributions are subject to FCC
review. See id. § 54.719. The FCC forbade USAC
from “mak[ing] policy” or “interpret[ing] unclear
provisions” of the 1996 Act or FCC rules. Id.
§ 54.702(c). 1
Each quarter, pursuant to Section 254(d), the
FCC adopts a “contribution factor” that specifies the
percentage of telecommunications providers’ “enduser
interstate
and
international
telecommunications revenues” that must be paid into
the Fund. Id. § 54.709(a)(2). It is the FCC’s adoption
of this “contribution factor” for a particular quarter—
the first quarter of 2022—that is at issue in this
case. Under the FCC’s rules, USAC performs the
mechanical exercise of calculating and submitting
“projections of demand”—including “the basis for
In the event “contributions received by [USAC] in a
quarter are inadequate to meet the amount of universal
service support program payments and administrative
costs for that quarter,” USAC must “request authority
from the Commission to borrow funds commercially . . . .”
47 C.F.R. § 54.709(c).
1
6
those projections”—“at least sixty (60) calendar days
prior to the start of that quarter.” Id. § 54.709(a)(3).
USAC also submits the total “contribution base” (i.e.,
“contributors’ projected collected interstate and
international revenues” from domestic end users for
telecommunications services) at least 30 days before
the start of each quarter. Id. § 54.709(a)(1); see id.
§ 54.709(a)(3). After receiving those submissions
from USAC, the FCC (through its Office of the
Managing Director) issues a public notice with a
proposed contribution factor based on the demand
and contribution-base projections. “The Commission
reserves the right to set projections of demand and
administrative expenses at amounts that the
Commission determines will serve the public
interest.” Id. § 54.709(a)(3). If the FCC takes no
further action within 14 days of the release of the
public notice, the projections and the calculation of
contribution factor are “deemed approved.” See id.
B. This Litigation
In 2021, Respondents began challenging each of
the FCC’s quarterly contribution factors in the
federal courts of appeals. In addition to this
challenge in the Fifth Circuit, they filed challenges to
particular quarters’ contribution factors in the Sixth
Circuit, Eleventh Circuit, and D.C. Circuit. 2
2 Respondents Suzanne Bettac, Kersten Conway, Kwang
Ja Kerby, Tom Kirby, Robert Kull, and Rhonda Thomas
did not join the petition for review in the lead Sixth
Circuit challenge, No. 21-3886. The challengers in the
various cases have also filed some additional petitions for
review in the Sixth Circuit and Fifth Circuit, but those
cases have generally been held in abeyance pending the
7
Respondents
made
substantively
identical
arguments before these courts of appeals. They
contended that (1) Congress violated the nondelegation doctrine in granting the FCC authority
regarding the collection of contributions in support of
universal service in Section 254 and (2) the FCC
violated the private non-delegation doctrine in
relying on USAC to calculate the projected demand
and contribution base that inform the FCC’s
quarterly contribution factor. See Pet. App. 127a;
Consumers’ Rsch. v. FCC, 67 F.4th 773, 778 (6th Cir.
2023), cert. denied, 144 S. Ct. 2628 (2024);
Consumers’ Rsch. v. FCC, 88 F.4th 917, 920-21 (11th
Cir. 2023), cert. denied, 144 S. Ct. 2629 (2024).
Panels in the Sixth and Eleventh Circuits
unanimously rejected those arguments; the Sixth
Circuit also denied a petition for en banc rehearing
(Respondents did not seek rehearing in the Eleventh
Circuit). Consumers’ Rsch. v. FCC, No. 21-3886, 2023
WL 3807406, at *1 (6th Cir. May 30, 2023) (denying
rehearing en banc).
A panel of the Fifth Circuit reached the same
conclusion in this case. The court denied the petition
for review, concluding that, as to Section 254, “there
are no nondelegation doctrine violations.” Pet. App.
126a. The panel concluded that Respondents’
argument that Section 254(b)’s principles “offer no
guidance to the FCC” was “untenable.” Id. at 133a.
Rather, Section 254(b) “expressly requires” the FCC
to ensure compliance with the enumerated
principles, and Congress therefore “provided ample
outcomes of the lead cases in the respective circuits.
Respondents voluntarily dismissed their D.C. Circuit
challenge, No. 23-1091.
8
direction” to the FCC and created “numerous
intelligible principles” for it to apply. Id. The panel
also concluded that Section 254 adequately limits the
FCC’s authority to compel private contributions only
as necessary “to satisfy its primary function,” both by
limiting the recipients and services eligible for USF
(through Sections 254(c) and (e)) and by mandating
that any programs be “predictable and sufficient . . .
to preserve and advance universal service” (through
Section 254(b). See id. at 136a.
As to Respondents’ private nondelegation
arguments, the Fifth Circuit panel concluded that
there was no violation for four reasons. First, the
FCC’s regulations “expressly subordinate[ ] USAC to
the FCC” by barring USAC from making policy or
engaging in statutory or regulatory interpretation.
See Pet. App. 139a-140a. Second, USAC lacks
rulemaking power and is authorized to provide the
FCC only nonbinding proposals for approval. Id. at
140a. Third, the panel concluded that USAC
proposals are subject to direct challenge before the
FCC, and the record demonstrated that such relief is
in fact available. Id. Fourth, the FCC determines by
regulation the method by which USAC calculates the
inputs the FCC uses in its contribution-factor
determination. Id.
Rehearing the case en banc, the full Fifth Circuit,
in a 9-7 vote, granted the petition for review, held
the Q1 2022 contribution factor unconstitutional,
and remanded to the FCC for further proceedings. 3
3 The Fifth Circuit stayed the issuance of its mandate in
an order on August 26, 2024, pending this Court’s
disposition of a petition for a writ of certiorari from the
9
The court concluded first that USF contributions
were a tax, not a fee, and that Congress therefore
delegated its power to tax—a “core legislative
power”—to the FCC. Pet. App. 24a. The court
nevertheless recognized that delegations by Congress
to agencies are permissible so long as Congress
provides an intelligible principle to guide the
exercise of delegated authority. Id. at 24a-25a. It
further recognized that this Court “has not in the
past several decades held that Congress failed to
provide a requisite intelligible principle.” Id. at 25a26a. The Fifth Circuit did not conclude that Section
254 violated the nondelegation doctrine under this
Court’s precedents. Instead, it expressed “grave
concerns about § 254’s constitutionality under the
Supreme Court's nondelegation precedents.” Id. at
42a.
As to Respondents’ private nondelegation
challenge, the Fifth Circuit stated that the FCC’s
reliance on USAC was problematic for two reasons.
First, it concluded, FCC regulations permit USAC’s
projections to take effect without “formal FCC
approval.” Pet. App. 49a. Second, it concluded, the
FCC has “de facto abdicat[ed]” its duty to supervise
USAC’s work. Id. at 50a. As with its analysis of the
public nondelegation doctrine, however, the Fifth
Circuit stopped short of concluding that the FCC’s
reliance on USAC was unconstitutional standing
alone. See id. at 55a.
FCC and the United States so long as it was filed by
September 30 (as subsequently occurred). See Order,
Consumers’ Rsch., No. 22-60008 (5th Cir. Aug. 26, 2024).
10
Instead, the court determined that it “need not
resolve either question in this case . . . because the
combination of Congress’s sweeping delegation to
FCC and FCC’s unauthorized subdelegation to USAC
violates the Legislative Vesting Clause in Article I,
§ 1.” Pet. App. 64a. The Fifth Circuit read this
Court’s opinions in Free Enterprise Fund v. Public
Company Accounting Oversight Board, 561 U.S. 477
(2010), and Seila Law LLC v. Consumer Financial
Protection Bureau, 591 U.S. 197 (2020) to stand for
“a general principle that . . . two constitutional parts
do not necessarily add up to a constitutional whole.”
Id. at 67a. Reviewing Congress’s delegation to the
FCC and USAC’s role through this lens, the court
concluded that the “combination of delegations,
subdelegations, and obfuscations of the USF Tax
mechanism offends Article I, § 1 of the Constitution.”
Id. at 81a.
Judge Elrod, joined by Judges Ho and
Engelhardt, concurred, writing separately to note
that she would “go one step further and address the
lawfulness of each individual delegation.” Pet. App.
82a. Judge Ho issued a separate concurrence,
arguing in addition for the Fifth Circuit to overrule a
prior Fifth Circuit decision related to the private
nondelegation doctrine. See id. at 85a-87a.
Judge Stewart, writing for seven judges,
dissented. In their view, Section 254 provides an
intelligible principle to guide the FCC, and the FCC
maintained appropriate control over USAC’s actions.
Pet. App. 88a. The dissent took issue with the
majority’s “amorphous new standard to analyze
delegations” and its deviation from “established
administrative law principles and all evidence to the
11
contrary to create a private nondelegation doctrine
violation.” Id.
The dissent explained that Congress, through
Section 254(b), “la[id] out the principles that the FCC
must adhere to,” Pet. App. 90a, and imposed on the
FCC “a duty to weigh the enumerated universal
service principles,” id. at 92a. The dissent agreed
with the Sixth Circuit that, through Section 254(b),
Congress “required that the FCC base its efforts to
preserve and advance universal service on the
enumerated principles while allowing the FCC to
then ‘balance [each] principle[ ] against one another
when they conflict.’” Id. (quoting Consumers’ Rsch.,
67 F.4th at 791). It further noted that Sections 254(c)
and (e) limit the FCC’s discretion as to the recipients
and services eligible for USF support. See id. at 93a96a. These factors “satisfie[d] the intelligible
principle test as articulated by the Supreme Court.”
Id. at 96a.
As to the private nondelegation doctrine, the
dissent explained that the majority’s conclusion
lacked statutory or regulatory support, failed to
consider
“well-established
principles
of
administrative law . . . [and] follow[ed] from
misstatements of record facts.” Pet. App. 97a. The
dissent noted that USAC’s authority is limited to
billing, collection, and distribution of contributions,
as well as collecting information from contributors in
order to undertake the mathematical function of
calculating inputs for the FCC’s contribution-factor
determination, applying formulas that the FCC
provides. See id. at 99a. Finally, the dissent
highlighted that the FCC’s control over USAC is
evident in regulations that bar the latter from
making policy, interpreting rules, or issuing
12
anything that has the force of law. Id. at 100a. In
short, contrary to the majority, the dissent concluded
that “the FCC maintains complete control over
USAC and holds final decision-making authority
regarding the USF and its programs.” Id. at 101a.
In a second dissent, Judge Higginson, writing for
five judges, disagreed with the majority’s “novel
theory” of nondelegation. Pet. App. 115a. In addition
to agreeing with Judge Stewart’s dissent on the
merits of the public and private nondelegation
issues, the dissent explained that this Court had
previously considered cases that raised both public
and private nondelegation challenges, but “never
instructed . . . that a different standard applies” in
cases involving both issues. Id. at 116a; see also id.
(if a different standard applied to “combination”
cases, this Court in Sunshine Anthracite “would have
. . . asked whether, despite constituting neither a
delegation of legislative power nor a delegation of
government power to a private entity, there was still
a constitutional problem. It did not.”) (citing
Sunshine Anthracite Coal Co. v. Adkins, 310 U.S.
381 (1940)).
REASONS FOR GRANTING THE PETITION
The Sixth and Eleventh Circuits were presented
with essentially identical claims to those brought
here. Those courts concluded that the FCC’s
administration of USF under Section 254 was
constitutional, as did a panel of the Fifth Circuit. In
a closely divided vote, the en banc Fifth Circuit
reached a different conclusion based on a novel
theory that even Respondents did not urge. To the
Fifth Circuit majority, it is unnecessary to find an
actual constitutional violation under this Court’s
13
precedents, as two supposed “almost” violations are
sufficient together to create a constitutional
violation.
The Fifth Circuit’s decision has created a split
among the courts of appeals as to the
constitutionality of a significant federal statutory
and regulatory scheme. Absent review, that decision
threatens to undermine the funding mechanism
central to the that program’s continued operation,
casting
doubt
on
billions
of
dollars
in
telecommunications subsidies that strengthen the
networks that serve as critical lifelines to millions of
Americans, as well as Tribal lands, schools, libraries,
and healthcare providers. Finally, the decision is
contrary to this Court’s nondelegation precedent and
rests on a misguided theory of unconstitutional
“double delegation” that this Court has never
adopted and that the Fifth Circuit wrongly
transplanted from an analytically distinct context.
This Court’s review is warranted. 4
I. The Fifth Circuit’s Decision Created a
Circuit Split on an Issue of Substantial
Importance and Would Have Immense Legal
and Practical Implications.
The decision below conflicts with contrary
decisions by the Sixth and Eleventh Circuits, each of
which rejected substantively identical arguments by
Respondents and held that Congress had permissibly
Petitioners previously opposed petitions for certiorari
from the Sixth and Eleventh Circuits, as there was not
yet any circuit split to warrant this Court’s review. See
Br. in Opp. for Intervenor Respondents, Consumers’ Rsch.
v. FCC, Nos. 23-456 & 23-743 (U.S. May 3, 2024).
4
14
delegated authority to the FCC in Section 254 to
establish universal service programs. See Consumers’
Rsch., 67 F.4th at 793; Consumers’ Rsch., 88 F.4th at
924; see also Rural Cellular Ass’n v. FCC, 685 F.3d
1083, 1091 (D.C. Cir 2012) (concluding that Section
254 “clearly provides an intelligible principle”). In
addition, both other courts of appeals held that the
FCC’s reliance on USAC was permissible under this
Court’s precedent. Consumers’ Rsch., 67 F.4th at 797;
Consumers’ Rsch., 88 F.4th at 928. This case thus
presents a square conflict that warrants this Court’s
review. See S. Ct. R. 10(a).
Moreover, absent this Court’s intervention now,
the Fifth Circuit’s decision would have immense
practical implications. The Fund has supported
subsidies on which millions of Americans and
thousands of service providers rely. The High-Cost
program, for example, enables and encourages
businesses to deploy high-speed broadband in areas
that would otherwise be cost-prohibitive. The
program distributed $4.3 billion in 2023 to providers
to build out advanced network infrastructure and
deliver affordable, reliable voice and broadband
connections in rural communities that might
otherwise be left unserved. Universal Service
Administrative Company, 2023 Annual Report, at 9,
https://www.usac.org/wp-content/uploads/about/
documents/annual-reports/2023/2023_USAC_Annual
_Report.pdf (“USAC 2023 Annual Report”). The
Fund’s Lifeline program, which subsidizes the
provision of phone service to low-income consumers,
assisted nearly 7.4 million participants as of the end
of 2023. Id. at 11.
The Fund also supports connectivity for critical
community institutions like schools, libraries, and
15
non-profit and public healthcare institutions. See
generally FCC, Universal Service, https://www.
fcc.gov/general/universal-service. More than 100,000
schools and libraries nationwide received services
supported by the USF E-Rate program in 2023.
USAC 2023 Annual Report at 7.
Finally, more than 10,000 rural health care
providers received commitments from thousands of
service providers based on support from the Rural
Health Care program in 2023. Id. at 13. The program
is vital for the many patients in rural communities
who are able to access telehealth services and other
connected health services in or near their homes
because of USF. Those health services would
otherwise be available, if at all, only by traveling
long distances. See, e.g., Promoting Telehealth in
Rural America, 34 FCC Rcd. 7335, ¶¶ 2, 5 (2019)
(describing benefits of telehealth services for patients
in rural areas across the country).
Absent this Court’s review, the Fifth Circuit’s
decision would call into question the FCC’s ability to
continue to operate all of those programs. The FCC
adopts a new contribution factor each quarter. If the
Fifth Circuit’s decision becomes effective, any party
in the Fifth Circuit could challenge subsequent
contribution factors there and seek invalidation of
the FCC’s decision (and potentially a stay of the
FCC’s adoption of that contribution factor pending
any review), even though the same arguments would
fail under the Sixth and Eleventh Circuit precedents.
That result would threaten to deprive the USF of
all contributions going forward, leaving the many
individuals and institutions that rely upon USF
disbursements without the “[q]uality services . . . at
just, reasonable, and affordable rates,” that Congress
16
envisioned. See 47 U.S.C. § 254(b). In addition, the
loss of USF contributions would significantly impact
the telecommunications providers and others who
benefit from the broad connectivity enabled by USF
subsidies, and the providers offering USF-supported
services over several decades—many of which are
small businesses based in the rural communities
they serve—would find themselves, quite suddenly,
without a needed revenue stream. A recent survey of
rural carriers indicated that, without USF, prices for
high-speed (100/20 megabits per second) service in
rural areas may nearly double to almost $165 per
month on average, and companies could be compelled
to cancel almost two billion dollars’ worth of rural
broadband deployment projects in 2025 and 2026
alone. 5 And, of course, there would be substantial
impacts to the national economy.
II. The Fifth Circuit’s Decision Invalidates the
FCC’s Implementation of a Federal Program
Created by an Act of Congress.
The Court’s review also is necessary because the
Fifth Circuit held that a substantial federal program
authorized by an Act of Congress nearly thirty years
ago violates the Constitution. This Court has
described judging the constitutionality of an Act of
Congress as “the gravest and most delicate duty that
this Court is called upon to perform.” Rostker v.
Goldberg, 453 U.S. 57, 64 (1981). The Court therefore
NTCA, NTCA Survey Highlights Significant Risks of
Skyrocketing Consumer Bills, Plummeting Broadband
Investment & Loans in Peril if USF Support were
Eliminated (Sept. 4, 2024), https://www.ntca.org/
ruraliscool/newsroom/press-releases/2024/4/ntca-surveyhighlights-significant-risks-skyrocketing.
5
17
has applied “a strong presumption in favor of
granting writs of certiorari to review decisions of
lower
courts
holding
federal
statutes
unconstitutional.” Maricopa County v. LopezValenzuela, 574 U.S. 1006, 1007 (2014) (statement of
Thomas, J., respecting the denial of the application
for a stay); see, e.g., Iancu v. Brunetti, 588 U.S. 388,
392 (2019) (“As usual when a lower court has
invalidated a federal statute, we granted
certiorari.”). Because the Fifth Circuit’s decision
expresses
“grave
concerns”
about
the
constitutionality of Section 254, Pet. App. 42a, and
invalidates the FCC’s long-standing application of
that statute, certiorari should be granted. See FCC
Pet. 28.
III. The Fifth Circuit’s Analysis Is Wrong and
Conflicts with This Court’s Precedent.
The Court also should grant review because the
en banc Fifth Circuit’s decision was incorrect and
conflicts with this Court’s precedent.
The en banc Fifth Circuit’s decision is wrong as to
its analysis of both the statutory delegation to the
FCC and USAC’s role in the USF system. Its novel
holding is likewise an incorrect rewriting of this
Court’s nondelegation jurisprudence that conflicts
with a long line of cases holding that far broader
delegations of authority to agencies are permissible. 6
6 As the FCC explains (FCC Pet. 28-29), the Court should
grant review as to the three questions presented both
here and in the FCC petition because it would be difficult
to evaluate the Fifth Circuit’s unorthodox “combination”
theory without looking at the components of that
18
a. The Fifth Circuit was wrong to express “grave
concerns” as to the constitutionality of the delegation
to the FCC. Pet. App. 42a. While Congress may not
“transfer to another branch powers which are strictly
and exclusively legislative,” the Constitution does
not “deny to the Congress the necessary resources of
flexibility and practicality that enable it to perform
its functions.” Gundy v. United States, 588 U.S. 128,
135 (2019) (cleaned up). In a long line of decisions,
this Court has held that congressional delegation is
permissible where Congress, through a statutory
grant of authority, lays down an intelligible principle
that “clearly delineates the general policy, the public
agency which is to apply it, and the boundaries of
this delegated authority.” Mistretta v. United States,
488 U.S. 361, 372-73 (1989) (citations omitted). “Only
twice in this country’s history” has the Court “found
a delegation excessive.” Gundy, 588 U.S. at 130. The
Court has “over and over upheld even very broad
delegations.” Id.
Section 254(b) establishes the principles on which
the FCC must base its policies for the “preservation
and advancement of universal service.” 47 U.S.C.
§ 254(b). Those principles are:
•
•
the availability of “[q]uality services” at “just,
reasonable, and affordable rates,” id.
§ 254(b)(1);
nationwide
“[a]ccess
to
advanced
telecommunications and information services,”
id. § 254(b)(2);
combination, even if the Court resolves the case without
answering all three questions.
19
•
•
•
•
providing low-income and rural consumers
with access to telecommunications and
information services “at rates that are
reasonably comparable to rates charged for
similar services in urban areas,” id.
§ 254(b)(3);
ensuring that all telecommunications carriers
“make an equitable and nondiscriminatory
contribution
to
the
preservation
and
advancement of universal service,” id.
§ 254(b)(4);
the creation of “specific, predictable and
sufficient Federal and State mechanisms to
preserve and advance universal service,” id.
§ 254(b)(5); and
“access to advanced telecommunications
services” for “schools and classrooms, health
care providers, and libraries” in accordance
with Section 254(h), id. § 254(b)(6).
Beyond that, Section 254 identifies the set of
entities that must pay into the Fund: “every
telecommunications carrier that provides interstate
telecommunications services” is required to
contribute on an “equitable and nondiscriminatory”
basis. Id. § 254(d). It further identifies the services
that the FCC may support through the Fund. See id.
§ 254(c) (requiring the FCC to consider, among other
things, whether services are “essential to education,
public health, or public safety” and whether they
have been “subscribed to by a substantial majority of
residential customers”). And it specifies the eligible
beneficiaries of the Fund, as well as the purposes for
which the Fund may be used. See id. § 254(e), (h).
Additionally, while the FCC may adopt other
principles to guide its decision-making, that does not
20
mean that the FCC may, as the Fifth Circuit
majority suggested, “roam at will.” Pet. App. 28a.
Rather, any such principles must be “necessary and
appropriate for the protection of the public interest,”
and “consistent with” the Act. Id. § 254(b)(7). As
Judge Stewart recognized in dissent, Ҥ 254(b)(7)
enables, and likely obligates, the FCC to add
principles consistent with’ § 254’s overall purpose.”
Pet. App. 91a (internal quotation marks and
brackets omitted). Thus, as the Eleventh Circuit
noted, while Respondents “contend that paragraph
(b)(7) is proof of the FCC’s boundless authority . . .
the grant itself comes with specific limits.”
Consumers’ Rsch. v. FCC, 88 F.4th at 924.
In fact, Section 254 is substantially more
constraining than many of the delegations this Court
has historically found constitutional. See Mistretta
488 U.S. at 373-74 (collecting cases). For instance,
this Court has upheld delegations to agencies to
regulate “in the public interest.” See Nat’l Broad. Co.
v. United States, 319 U.S. 190, 225 (1943) (FCC
regulation of broadcasting); New York Cent. Sec.
Corp. v. United States, 287 U.S. 12, 24-25 (1932)
(ICC regulation of railroad consolidations). It has
similarly upheld directives to fix prices at “fair and
equitable” levels, see Yakus v. United States, 321
U.S. 414, 427 (1944), and for the EPA to set ambient
air quality standards” that “are requisite to protect
the public health,” Whitman v. Am. Trucking
Associations, 531 U.S. 457, 472 (2001); see also FCC
Pet. 11-12.
Moreover, and contrary to the Fifth Circuit’s
suggestion that Section 254 is so lacking in guidance
that “no reviewing court could ever possibly
invalidate any FCC action,” Pet. App. 40a-41a,
21
several circuit courts, including the Fifth Circuit,
have overturned FCC actions as inconsistent with
Section 254’s directives. See, e.g., Texas Off. of Pub.
Util. Couns. v. FCC., 183 F.3d 393, 425 (5th Cir.
1999) (reversing FCC requirement for incumbent
local exchange carriers to recover USF contributions
from access charges because “the plain language of
§ 254(e) does not permit the FCC to maintain any
implicit subsidies for universal service support”);
Qwest Corp. v. FCC., 258 F.3d 1191, 1202 (10th Cir.
2001) (remanding to FCC to define “reasonably
comparable” and “sufficient” in a manner consistent
with Section 254); Qwest Commc’ns Int’l, Inc. v.
FCC., 398 F.3d 1222, 1234, 1236-37 (10th Cir. 2005)
(remanding again for FCC to “articulate a definition
of ‘sufficient’ that appropriately considers the range
of principles identified in the text of the statute” and
because definition of “reasonably comparable” rested
on “impermissible statutory construction”); Mozilla
Corp. v. FCC, 940 F.3d 1, 69 (D.C. Cir. 2019)
(remanding to FCC where court concluded that FCC
did not adequately explain how broadband remained
eligible for low-income USF support following
reclassification of broadband as information service).
b. The Fifth Circuit’s private-nondelegation
analysis is likewise inconsistent with this Court’s
precedents. In Carter v. Carter Coal Co., 298 U.S.
238 (1936), this Court held unconstitutional a federal
statute that authorized producers of two-thirds of the
coal in a particular district to set wages and hours
for all producers in that district, without review by
any federal actor. See id. at 281-83. The Court
explained that Congress had impermissibly
conferred power on the majority to “regulate the
affairs of an unwilling minority.” Id. at 311. Four
years later, this Court was faced with an amended
22
version of the same statute it had struck down in
Carter Coal. This time, it held that the delegation
was constitutional. While the revised statute
authorized private local boards to propose minimum
prices for coal, the proposals were required to be
approved by a government commission. See Sunshine
Anthracite, 310 U.S. at 388. The Court confirmed
that there was no delegation of legislative authority
to the private boards. Id. at 399. The boards
“function[ed] subordinately to the Commission,” and
the Commission, not the private entities, determined
the ultimate prices. Id. Moreover, the Court noted,
the boards “operate[d] as an aid to the Commission
. . . subject to its pervasive surveillance and
authority.” Id. at 388.
This case falls well within the permissible scope
of reliance on private entities established in
Sunshine Anthracite. In suggesting otherwise, the
Fifth Circuit majority overstated USAC’s role while
understating the FCC’s. Among other restrictions,
USAC (1) is subject to FCC oversight; (2) cannot
make policy, see 47 C.F.R. § 54.702(c); and (3) must
adhere to regulations that restrict it to tasks such as
“billing contributors, collecting contributions to the
universal service support mechanisms, and
disbursing universal service support funds.” Id.
§ 54.702(b); see Consumers’ Rsch., 88 F.4th at 926.
USAC’s CEO is approved by the FCC Chairperson.
47 C.F.R. § 54.704(b)(2). USAC must file quarterly
reports to the FCC on the disbursement of universal
service funds, id. § 54.702(h), and an annual report
detailing, among other things, its operations and
activities, actions it has taken to “prevent waste,
fraud, and abuse,” and “an itemization of monthly
administrative costs,” including “all expenses,
receipts, and payments associated with the
23
administration of the universal service support
programs,” id. § 54.702(g).
In particular, in undertaking the ministerial
function of providing inputs to help the FCC compute
the quarterly contribution factor, USAC must follow
detailed FCC regulatory guidance, see, e.g., 47 C.F.R.
§§ 54.507, 54.604-.606, 54.709, and submit its
projections of demand and the basis for those
projections, as well as calculations as to the
contribution base, to the Commission ahead of time.
See id. § 54.709(a)(3). Those projections themselves
have no legal effect, and there is no basis in the
record to conclude the FCC does not review USAC’s
submissions. See also FCC Pet. 23 (noting that the
FCC has departed from USAC’s projections in
calculating quarterly contribution factors). Even
after the FCC issues a public notice of the
contribution factor, the FCC retains authority “to set
projections of demand and administrative expenses
at amounts that the Commission determines will
serve the public interest,” notwithstanding any
calculation by USAC. 47 C.F.R. § 54.709(a)(3).
More generally, the FCC maintains authority to
review all USAC decisions denying reimbursement
at the request of aggrieved parties. See id.
§ 54.719(b). When the FCC identifies an error, it
reverses USAC. See, e.g., Universal Service
Contribution Methodology, Request for Review of
Decision of the Universal Service Administrator by
BT Americas Inc, Order, DA 22-812, 37 FCC Rcd.
9216, USAC Audit CR2015CP004, ¶ 11 (2022)
(concluding USAC “did err” in its direction to
provider related to required filing and reversing that
direction). Even where the FCC denies requests for
review, it conducts a complete analysis. See, e.g.,
24
Lifeline & Link Up Reform & Modernization,
Requests for Rev. of Decisions of the Universal Serv.
Admin. Co. by Amerimex Commc’ns Corp., et al.,
Order, DA 24-784, WC Docket No. 11-42, ¶¶ 6-11
(rel. Aug. 8, 2024) (denying requests for review of
USAC denial of requests for upward revision of
reimbursements, and explaining reasoning).
In all, USAC is subject to the FCC’s oversight
regarding the inputs USAC provides for the FCC’s
determination of the contribution factor, just as the
Court envisioned in Sunshine Anthracite. USAC is
barred from making any binding decisions or policy,
or from interpreting law. Its proposals are subject to
FCC approval, and all of its actions relevant to the
FCC’s determination of the contribution factor are
subject to the FCC’s plenary review. Consistent with
this Court’s precedent, the regulatory scheme
governing USAC limits the Administrator to
ministerial duties in this context.
c. Finally, the Fifth Circuit’s decision fashions
from whole cloth a new framework for analyzing
nondelegation claims. As five dissenting judges on
the Fifth Circuit noted, the court’s decision rested on
a “novel theory that it is ‘the combination’ of these
two non-violations that violates the Legislative
Vesting Clause in Article I, § 1.” Pet. App. 115a.
Simply put, this Court has never ruled that a federal
statute was unconstitutional because of what the
Fifth Circuit dubbed a “double delegation,” i.e., a
delegation from Congress to an agency, and from an
agency to a private entity.
The Fifth Circuit characterized that approach as
required by this Court’s approach to “review[ing]
separation-of-powers challenges” in general, citing
Seila Law, 591 U.S. 197, and Free Enterprise Fund,
25
561 U.S. 477. Both of those cases involved a
particular separation-of-powers question not at issue
here: what restrictions on the President’s authority
to remove officers are permissible, consistent with
the Constitution’s vesting of the “executive Power” in
the President. See Seila Law, 591 U.S. at 227
(quoting Free Enterprise Fund, 561 U.S. at 483). An
accumulation of multiple limits on the President’s
ability to remove particular officials (such as the
multiple layers of removal protection at issue in Free
Enterprise Fund, see 561 U.S. at 483) could together
exceed what this Court’s precedents permit.
But while the Court’s precedents in the removal
context focus on whether limits on the President’s
authority (individually or cumulatively) violate the
vesting of executive authority in the President, the
Court’s precedents in that context do not require or
support the application of a similar methodology to
other separation-of-powers contexts. In fact, this
Court addressed a situation involving both public
and private nondelegation challenges in Sunshine
Anthracite. As Judge Higginson recognized in
dissent, this Court could have, but did not, announce
a different analytical approach there. See Pet. App.
116a. The Fifth Circuit’s decision thus is contrary to
this Court’s precedents.
26
CONCLUSION
This petition for a writ of certiorari should be
granted.
Respectfully submitted,
Jennifer Tatel
Daniel H. Kahn
Morgan O. Schick
Wilkinson Barker
Knauer LLP
1800 M St. NW, Ste. 800N
Washington, DC 20036
(202) 783-4141
jtatel@wbklaw.com
Sean A. Lev
Jason Neal
Counsel of Record
Mohammad M. Ali
HWG LLP
1919 M St NW, 8th Fl.
Washington, DC 20036
(202) 730-1300
jneal@hwglaw.com
Counsel for CCA, NTCA,
and USTelecom
Counsel for Schools,
Health & Libraries
Broadband Coalition
Andrew Jay Schwartzman
525 9th Street NW, 7th Fl.
Washington, DC 20004
(202) 241-2408
AndySchwartzman@gmail.com
Counsel for Benton Institute,
NDIA, and MediaJustice
OCTOBER 11, 2024
APPENDIX
TABLE OF CONTENTS
Appendix A — En banc court of appeals opinion
(July 24, 2024) ..............................1a
Appendix B — Court of appeals panel opinion
(Mar. 24, 2023) ......................... 125a
Appendix C — FCC public notice
(Dec. 13, 2021) .......................... 141a
Appendix D — USAC contribution base report
(Dec. 2, 2021) ............................ 150a
Appendix E — Court of appeals order granting
rehearing (June 29, 2023)........ 160a
Appendix F — Statutory provision:
47 U.S.C. § 254 ......................... 162a
1a
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 22-60008
CONSUMERS’ RESEARCH; CAUSE BASED COMMERCE,
INCORPORATED; KERSTEN CONWAY; SUZANNE BETTAC;
ROBERT KULL; KWANG JA KERBY; TOM KIRBY; JOSEPH
BAYLY; JEREMY ROTH; DEANNA ROTH; LYNN GIBBS;
PAUL GIBBS; RHONDA THOMAS, PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION;
UNITED STATES OF AMERICA, RESPONDENTS
Filed: July 24, 2024
Petition for Review from the
Federal Communications Commission
Agency No. 96-45
ON PETITION FOR REHEARING EN BANC
Before RICHMAN, Chief Judge, and JONES, SMITH,
STEWART, ELROD, SOUTHWICK, HAYNES, GRAVES, HIGGINSON, WILLETT, HO, DUNCAN, ENGELHARDT, OLDHAM, WILSON, and DOUGLAS, Circuit Judges. *
*
JUDGE RAMIREZ joined the court after this case was
2a
ANDREW S. OLDHAM, Circuit Judge, joined by JONES,
SMITH, ELROD, WILLETT, HO, DUNCAN, ENGELHARDT,
and WILSON, Circuit Judges:
In the Telecommunications Act of 1996, CONGRESS
delegated its taxing power to the Federal Communications Commission. FCC then subdelegated the taxing power to a private corporation. That private corporation, in turn, relied on for-profit telecommunications companies to determine how much American citizens would be forced to pay for the “universal service”
tax that appears on cell phone bills across the Nation.
We hold this misbegotten tax violates Article I, § 1 of
the Constitution.
I.
A.
Congress has long “pursued a policy of providing
‘universal’ [telecommunications] service to all residents and businesses in the United States.” Ronald J.
Krotoszynski, Jr., Reconsidering the Nondelegation
Doctrine: Universal Service, the Power to Tax, and the
Ratification Doctrine, 80 IND. L.J. 239, 279 (2005). For
half a century Congress pursued this policy through a
complicated cross-subsidy regime. Back when the old
AT&T was a regulated monopoly, Congress allowed it
to charge supra-competitive rates to urban customers
in exchange for requiring it to provide services it
might not otherwise provide to high-cost rural customers. But “[f]or obvious reasons, this system of implicit
subsidies can work well only under regulated conditions. In a competitive environment, a carrier that
tries to subsidize below-cost rates to rural customers
submitted and did not participate in the decision.
3a
with above-cost rates to urban customers is vulnerable to a competitor that offers at-cost rates to urban
customers.” Tex. Off. of Pub. Util. Couns. v. FCC
(“TOPUC I”), 183 F.3d 393, 406 (5th Cir. 1999). So
when Congress deregulated AT&T and other telecommunications companies, it had to abandon the old way
of pursuing universal service.
Congress’s new way is 47 U.S.C. § 254. Section 254
authorizes FCC to establish “specific, predictable, and
sufficient . . . mechanisms to preserve and advance
universal service.” Id. § 254(b)(5). Pursuant to this
grant of authority, FCC levies “contributions” to a
Universal Service Fund (“USF”) from telecommunications carriers, id. § 254(b)(4), and it distributes the
monies raised to people, entities, and projects to expand and advance telecommunications services. FCC
regulations expressly permit carriers to pass these
“contributions” through to their customers, see 47
C.F.R. § 54.712(a), and the overwhelming majority of
carriers do so, see FCC, FCC 22-67, Report on the Future of the Universal Service Fund 10084-85, (Aug. 15,
2022) (“Report to Congress”).
Notably, Congress declined to define “universal
service” itself. Instead, it delegated to FCC the responsibility to periodically “establish” the concept of “universal service” by “taking into account advances in telecommunications and information technologies and
services.” 47 U.S.C. § 254(c)(1). In making this determination, Congress directed FCC to:
consider the extent to which such telecommunications services—
(A) are essential to education, public health, or
public safety;
4a
(B) have, through the operation of market choices
by customers, been subscribed to by a substantial majority of residential customers;
(C) are being deployed in public telecommunications networks by telecommunications carriers; and
(D) are consistent with the public interest, convenience, and necessity.
Id. § 254(c)(1).
Section 254(b) also suggests principles for FCC to
“base policies for the preservation and advancement
of universal service.” Telecommunications services
“should” be “available at just, reasonable, and affordable rates”; accessible “in all regions of the Nation”;
and available to “low-income consumers and those in
rural, insular, and high cost areas” at rates “reasonably comparable to rates charged for similar services in
urban areas.” Id. § 254(b)(1)-(3). FCC also may develop “such other [universal service principles it] determine[s] are necessary and appropriate for the protection of the public interest, convenience, and necessity and are consistent with this chapter.” Id.
§ 254(b)(7).
Section 254 further provides that “[e]lementary
and secondary schools and classrooms, health care
providers, and libraries should have access to advanced telecommunications services.” Id. § 254(b)(6).
Accordingly, “telecommunications carrier[s] shall,
upon receiving a bona fide request, provide telecommunications services which are necessary for the provision of health care services in a State . . . to any public or non-profit health care provider that serves persons who reside in rural areas in that State at rates
that are reasonably comparable to rates charged for
5a
similar services in urban areas in that State.” Id.
§ 254(h)(1)(A). And “telecommunications carriers . . .
shall, upon a bona fide request for any of its services
that are within the [FCC’s] definition of universal service . . . , provide such services to elementary schools,
secondary schools, and libraries for educational purposes at rates less than the amounts charged for similar services to other parties.” Id. § 254(h)(1)(B). FCC
then reimburses telecommunications providers for the
costs of providing this subsidized service. Id.
§ 254(h)(1)(A), (B)(i)-(ii).
B.
Presently, USF supports telecommunications projects through four major programs: the High-Cost Program (see 47 C.F.R. §§ 54.302-54.322), the Lifeline
Program (see id. §§ 54.400-54.423), the E-rate Program (see id. §§ 54.500-54.523), and the Rural Health
Care Program (see id. §§ 54.600-54.633).
Each program has a laudable objective. The HighCost Program subsidizes the provision of voice and internet services in rural communities. The Lifeline
Program subsidizes the provision of phone service to
low-income consumers. The E-Rate Program subsidizes the provision of broadband connectivity and WiFi to schools and libraries. And the Rural Health Care
Program subsidizes the provision of telecommunications services to rural healthcare providers.
FCC regulations establish the services supported
by each of these programs and the eligibility criteria
applicants must satisfy to obtain assistance. But FCC
does not administer all these universal service programs itself. Instead, it relies on a private company
called the Universal Service Administrative Company
6a
(“USAC”). USAC is managed by representatives from
“interest groups affected by and interested in universal service programs” who are “nominated by their respective interest groups.” See Leadership, UNIVERSAL
SERV. ADMIN. CO., https://perma.cc/9W92G4Z9 (last
accessed Sept. 11, 2023); see also 47 C.F.R. § 54.703(b)
(providing for the composition of USAC’s board of directors). FCC has charged USAC with myriad tasks:
“billing contributors, collecting contributions to the
universal service support mechanisms, and disbursing universal service support funds.” 47 C.F.R.
§ 54.702(b).
Most prominently, though, USAC is responsible for
deciding the quarterly USF contribution amount—a
projection of the dollar value of demand for universal
support programs and the costs of administering
them. See id. § 54.709(a)(3). The contribution amount
dictates the size of the universal service contributions
levied on telecommunications carriers and, in turn,
American telecommunications consumers. To set the
contribution amount, USAC relies on “information
from universal service program participants” to “estimate[] how much money will be needed each quarter
to provide universal service support.” See Universal
SERV.
ADMIN.
CO.,
Service,
UNIVERSAL
https://perma.cc/B5NN-AVF8 (last accessed Oct. 10,
2023). In other words, the contribution amount ultimately derives from the universal service demand
projections of private, for-profit telecommunications
carriers, all of whom have “have financial incentives”
to increase the size of universal service programs.
U.S. GOV’T ACCOUNTABILITY OFF., GAO-17-538, ADDITIONAL ACTION NEEDED TO ADDRESS SIGNIFICANT
RISKS IN FCC’S LIFELINE PROGRAM 1 (2017),
https://perma.cc/K5J9-L89K
(“FCC’s
Lifeline
7a
Program”).
FCC then uses USAC’s contribution amount to impose a tax on America’s telecommunications carriers.
(FCC calls this tax the USF “contribution factor”; but
we call it what it is—the “USF Tax.”) The USF Tax is
the percentage of end-user telecommunications revenues each carrier must contribute to USF in a particular quarter. As a practical matter, USAC sets the
USF Tax—subject only to FCC’s rubber stamp. True,
FCC “reserves the right to set projections of demand
and administrative expenses at amounts that [it] determines will serve the public interest.” See 47 C.F.R
§ 54.709(a)(3). But FCC never made a substantive revision to USAC’s proposed contribution amount prior
to this litigation, 1 and it does not even have a documented process for checking USAC’s work. Instead,
FCC has provided that if it “take[s] no action within
fourteen (14) days of the date of release of the public
notice announcing [USAC’s] projections of demand
and administrative expenses, the projections of demand and administrative expenses . . . shall be
deemed approved by the Commission.” See ibid. (emphasis added). So FCC has delegated to USAC responsibility—de facto if not de jure—for imposing the USF
Tax.
C.
In 1995, the USF Tax was $1.37 billion. JA62. But
by the end of 2021, USAC ballooned the USF to over
1 FCC claims it has made three alterations to USF projec-
tions. But one of those was a ministerial change of the rate
from .09044 to .091 because some carriers’ computers could
not handle five decimal places. And the other two were not
even initiated by FCC. See Petrs’ EB Br. 63.
8a
$9 billion. See UNIVERSAL SERV. ADMIN. CO., 2021 ANNUAL REPORT 20 (2023) https://perma.cc/9CPT-H5LM.
The proposed USF Tax at issue in this case is 25.2%,
up from just over 5% in 2000. See FCC, DA 00-517,
PROPOSED SECOND QUARTER 2000 UNIVERSAL SERVICE
CONTRIBUTION FACTOR (Mar. 7, 2000), https://perma.
cc/4BSK-6QZR. Recent USF Taxes have been set as
high as 34.5%. See FCC, DA 23-843, PROPOSED
FOURTH QUARTER 2023 UNIVERSAL SERVICE CONTRIFACTOR
(Sep.
13,
2023),
BUTION
https://perma.cc/Y2QW-6HBD.
Many of the billions injected into the USF have undoubtedly been deployed to support the important
goal of universal service. But waste and fraud have
also contributed to the USF’s astronomical growth.
For example, in 2004, FCC’s Inspector General affirmed that schools view the E-Rate Program as “a big
candy jar” of “free money.” Sam Dillon, School Internet
Program Lacks Oversight, Investigator Says, N.Y.
TIMES (June 18, 2004), https://perma.cc/9PZY-ED3K.
The Inspector General’s primary concern was FCC’s
heavy and longstanding reliance on self-certified eligibility determinations in the E-rate Program. See
U.S. GOV’T ACCOUNTABILITY OFF., GAO-20-606, FCC
SHOULD TAKE ACTION TO BETTER MANAGE PERSISTENT
FRAUD RISKS IN THE SCHOOLS AND LIBRARIES PROGRAM18 (Sep. 2020), https://perma.cc/5EK4-Q8V8
(“FCC’s E-rate Program”). A 2008 GAO report demonstrated that, in a single year, USAC made almost a
billion dollars of High-Cost Program payments that
“should not have been made, or were not made, in the
correct amount, when viewed from the perspective of
applicable Federal Communications Commission
rules, orders and interpretative opinions.” OFF. OF THE
INSPECTOR GEN., FCC, THE HIGH COST PROGRAM 2
9a
(Nov. 26, 2008), https:// perma.cc/WJG3-6PJ6 (“The
High-Cost Program”). In 2013, one Congressman
noted:
The [Lifeline] fund [] increased 266 percent [between 2008 and 2013], . . . all while the cost of
phone service [went] down. Despite the limit of
one subsidized subscriber per household, published reports suggest some subscribers have
eight or more phones with subsidized service, with
one woman saying that to get one “she just goes
across the street and gets it.” One man has
claimed to have a bag full of 20 phones on the program that he sells “for about 10, 15, 20 bucks”
each.
The Lifeline Fund: Money Well Spent?: Hearing Before
the H. Subcomm. on Commc’n & Tech., H. Comm. On
Energy & Comm., 113th Cong. 2 (2013) (opening statement of Chairman Greg Walden), https://perma.cc/
4DAWUERW. And in 2018, FCC’s managing director
reported a GAO audit that uncovered gross improper
payments of $336.39 million in the Lifeline Program
alone. See Letter from Mark Stephens, Managing Director, FCC, to Ron Johnson, Chairman, S. Comm. On
Homeland Sec. & Gov’t Affs. (Aug. 27, 2019), https://
perma.cc/VNQ6-N3WB. While earth’s only two certainties are death and taxes, the USF Tax manages to
cheat the grave: It is well-documented that FCC disburses USF money to dead people. See FCC’s LIFELINE
PROGRAM, supra, at 43.
USAC’s role in perpetuating USF waste is equally
well known. In 2010, GAO concluded that USAC
“lacks key features of effective internal controls.” U.S.
GOV’T ACCOUNTABILITY OFF., GAO-11-11, IMPROVED
MANAGEMENT CAN ENHANCE FCC DECISION MAKING
10a
FOR THE UNIVERSAL SERVICE FUND LOW-INCOME PROGRAM i (Oct. 2010), https://perma.cc/9YHE-8YE9
(“FCC’s Low-Income Program”); see also FCC’s E-RATE
PROGRAM, supra, at 20-21. The Low-Income Program
report noted that while USAC primarily uses audit
findings to monitor compliance with USF rules, “the
number and scope of USAC’s audits have been limited
and there is no systematic process in place to review
the findings of those audits that are conducted.” FCC’s
LOW-INCOME PROGRAM, supra, at cover page. Moreover, the GAO noted USAC had not even considered
“the possibility that multiple carriers may claim support for the same telephone line and that households
may receive more than one discount, contrary to program rules.” Ibid. In 2017, GAO explained that USAC
“relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility,” which is problematic because “companies may
have financial incentives to enroll as many customers
as possible.” FCC’S LIFELINE PROGRAM, supra, at cover
page. And in 2019, FCC acknowledged that USAC was
out of compliance with improper payment reporting
requirements. See Letter from Mark Stephens, supra,
at 1.
***
Section 254 reflects a policy goal of making telecommunications services available to all Americans.
It is emphatically the province of Congress to make
such policy choices. But it is our judicial duty to ensure that Congress pursued its goal through lawful
means. And in that regard, our brief survey of the
USF’s history makes three things clear. First, Congress’s instructions are so ambiguous that it is unclear
11a
whether Americans should contribute $1.37 billion, $9
billion, or any other sum to pay for universal service.
Second, private entities bear important responsibility
for universal service policy choices. And third, it is impossible for an aggrieved citizen to know who bears
responsibility for the USF’s serious waste and fraud
problems. All three of those things implicate bedrock
constitutional principles.
II.
A.
On November 2, 2021, USAC proposed its Q1 2022
USF contribution amount. A subset of the Petitioners
in this action filed a comment with FCC challenging
the constitutionality of the universal service contribution mechanism on November 19. On December 13,
2021, FCC issued a public notice of its Proposed Q1
2022 USF Tax, which was derived directly from
USAC’s proposed contribution amount. Petitioners refiled their comment on December 22. FCC took no action with respect to USAC’s proposed contribution
amount, so on December 27 the contribution factor
was deemed approved. See 47 C.F.R. § 54.709(a)(3).
Petitioners then filed a timely petition for review in
our court.
B.
We have statutory jurisdiction under 47 U.S.C.
§ 402 and 28 U.S.C. § 2342. 2 FCC does not contest our
2 Before the panel, FCC argued that we lack statutory ju-
risdiction because the petition was not timely filed. The
panel rejected that argument, see Consumers’ Rsch. V.
FCC, 63 F.4th 441, 446 (5th Cir. 2023), reh’g en banc
12a
constitutional jurisdiction, but we have an obligation
to consider jurisdictional questions sua sponte even
when they are not raised by the parties. See E.T. v.
Paxton, 41 F.4th 709, 718 n.2 (5th Cir. 2022).
Consistent with that obligation, we note that at
least one petitioner—Cause Based Commerce—had
Article III standing when the petition was filed. See
Biden v. Nebraska, 143 S. Ct. 2355, 2365 (2023) (“If at
least one plaintiff has standing, the suit may proceed.”); Advanced Mgmt. Tech., Inc. v. FAA, 211 F.3d
633, 636 (D.C. Cir. 2000) (“Standing is assessed at the
time the action commences.” (citation and quotation
omitted)). Cause Based Commerce incurred a classic
pocketbook injury as a result of its legal obligation to
pay the USF Tax. Its injury is fairly traceable to the
challenged conduct because the size of its Q1 2022
USF liability was controlled by the contribution factor
set by USAC. And, at the time the petition was filed,
its injury could have been redressed by a favorable judicial decision because vacatur of FCC’s approval of
the proposed contribution factor would have prevented collection of the USF Tax. See 47 C.F.R. §
54.709(a)(3) (“[T]he Administrator shall apply the
quarterly contribution factor, once approved by the
Commission, to contributor’s interstate and international end-user telecommunications revenues to calculate the amount of individual contributions.” (emphasis added)).
It is not clear that Cause Based Commerce’s pocketbook injury is still redressable because sovereign
immunity may bar recovery of the monies it paid into
USF pursuant to the Q1 2022 USF Tax. See 5 U.S.C.
granted, opinion vacated, 72 F.4th 107 (5th Cir. 2023), and
FCC has abandoned it.
13a
§ 702 (waiving sovereign immunity for actions against
agencies seeking relief “other than money damages”).
If that is right, Cause Based Commerce’s challenge
might be moot because no court-ordered relief could
redress the injuries it incurred as a result of the Q1
2022 USF Tax. See Already, LLC v. Nike, Inc., 568
U.S. 85, 91 (2013) (“A case becomes moot—and therefore no longer a ‘Case’ or ‘Controversy’ for purposes of
Article III— when the issues presented are no longer
live or the parties lack a legally cognizable interest in
the outcome.” (quotation and citation omitted)).
We need not reach that question, however, because
even assuming Cause Based Commerce’s injury is no
longer redressable, it is nonetheless justiciable because it is capable of repetition yet evading review.
See, e.g., S. Pac. Terminal Co. v. Interstate Com.
Comm’n, 219 U.S. 498, 515 (1911) (establishing the
exception and noting that jurisdiction “ought not to be
. . . defeated, by short term orders, capable of repetition, yet evading review” because otherwise the government and regulated parties would “have their
rights determined by the Commission without a
chance of [judicial] redress”). The Q1 2022 USF Tax
evades review because it was in force for just one quarter—”too short [a] duration to be fully litigated in the
United States Supreme Court before it expire[d].”
Ralls Corp. v. Comm. on Foreign Inv. in U.S., 758 F.3d
296, 321 (D.C. Cir. 2014); see ibid. (“As a rule of
thumb, agency actions of less than two years’ duration
cannot be fully litigated prior to cessation or expiration, so long as the short duration is typical of the
challenged action.” (quotation and citation omitted)).
And it is capable of repetition because there is “a reasonable expectation”—indeed, a near certainty—
“that [Cause Based Commerce] will be subjected to
14a
the same action again.” Id. at 323; see id. at 324 (“The
same action generally refers to . . . recurrent identical
agency actions.” (quotation and citations omitted)); see
also 47 C.F.R. § 54.709(a)(3) (providing that a new
contribution factor is calculated each quarter).
Accordingly, we have jurisdiction to decide the
merits of petitioners’ constitutional claims.
C.
We must decide one more threshold issue. On June
17, 2024, FCC filed a motion to dismiss on the that
ground issue preclusion bars the petition for review.
In FCC’s view, that is because petitioners raised identical challenges to different USF quarterly contribution factors in the Sixth and Eleventh Circuits, and
those courts rejected petitioners’ arguments. But even
if there were something to FCC’s issue preclusion argument, it fails because FCC forfeited it.
“[I]ssue preclusion[] is an affirmative defense.”
Taylor v. Sturgell, 553 U.S. 880, 907 (2008). That
means the party asserting preclusion ordinarily must
timely raise it. Ibid.; see 18A CHARLES ALAN WRIGHT,
ARTHUR R. MILLER, & EDWARD H. COOPER, FEDERAL
PRACTICE & PROCEDURE § 4405 (3d ed. 2017). Where,
as here, an allegedly preclusive judgment is rendered
after suit is filed, the party “wishing to raise [preclusion] is obliged to assert it at the earliest moment
practicable.” Home Depot, Inc. v. Guste, 773 F.2d 616,
620 n.4 (5th Cir. 1985); see Evans v. Syracuse City Sch.
Dist., 704 F.2d 44, 47 (2d Cir. 1983) (“[T]he party
wishing to raise [preclusion as a] defense is obliged to
plead it at the earliest possible moment.” (quotation
omitted)); Aetna Cas. & Sur. Co. v. Gen. Dynamics
Corp., 968 F.2d 707, 711 (8th Cir. 1992) (issue
15a
preclusion must be raised “at the first reasonable opportunity after the rendering of the decision having
the preclusive effect”); Davignon v. Clemmey, 322 F.3d
1, 15 (1st Cir. 2003) (holding that district court abused
its discretion by allowing defendant to assert preclusion defense “at the eleventh hour”); Georgia Pac.
Consumer Prod., LP v. Von Drehle Corp., 710 F.3d
527, 533 (4th Cir. 2013) (“Even when a preclusion defense is not available at the outset of a case, a party
may waive such a defense arising during the course of
litigation by waiting too long to assert the defense after it becomes available.”); Arizona v. California, 530
U.S. 392, 413 (2000) (holding that party could not
raise preclusion as a defense when party could have
raised the defense earlier in the proceedings but did
not, “despite ample opportunity and cause to do so”).
That makes sense. The policy underlying issue
preclusion is based primarily on a “defendant’s interest in avoiding the burdens of twice defending a suit”
and “the avoidance of unnecessary judicial waste.” Arizona, 530 U.S. at 412 (quoting United States v. Sioux
Nation, 448 U.S. 371, 432 (1980) (Rehnquist, J., dissenting)). Issue preclusion cannot serve either of those
purposes if it is raised in the eleventh hour of proceedings, after the defendant and the court have already
carried all the burdens necessary to decide the case.
So even assuming FCC could defeat petitioners’
claims on the ground the Sixth and the Eleventh Circuits have rendered preclusive judgments, FCC was
obliged to raise that issue “at the earliest moment
practicable.” Guste, 773 F.2d at 620 n.4.
It did not. The first allegedly preclusive judgment
FCC cites is the Sixth Circuit’s judgment in Consumers’ Research v. FCC. See 67 F.4th 773 (6th Cir. 2023),
16a
cert. denied Consumers’ Rsch. v. FCC, No. 23-456,
2024 WL 2883753 (U.S. June 10, 2024). That judgment bound six of the named petitioners in this case. 3
And it was final on June 7, 2023. See Mandate Issued,
Consumers’ Rsch., 67 F.4th 773 (No. 21-3886) (Jun. 7,
2023). True, the petitioners sought certiorari in that
case. But “the general rule in American jurisprudence
[is] that a final judgment of a court . . . can be given
[preclusive] effect even while an appeal is pending.”
Prymer v. Ogden, 29 F.3d 1208, 1213 n.2 (7th Cir.
1994); see WRIGHT & MILLER, supra, § 4433 (“[I]t is . .
. held in federal courts that the preclusive effects of a
lower court judgment cannot be suspended simply by
taking an appeal that remains undecided.”); RESTATEMENT (SECOND) OF JUDGMENTS § 13, cmt. f (explaining
a “judgment otherwise final” for purposes of the law of
res judicata should “remain[] so despite the taking of
an appeal”).
That means FCC could have asserted preclusion
against six petitioners on June 7, 2023. At the very
least, FCC could have raised preclusion in its supplemental brief, which it filed on August 30, 2023. But
FCC did not do so. Instead, it waited more than a year
and then filed a tardy motion to dismiss at the eleventh hour. FCC therefore forfeited its preclusion defense with respect to at least six petitioners. 4 So there
is no doubt we may proceed to the merits of those petitioners’ claims.
FCC also cites the Eleventh Circuit’s judgment in
3 Consumers’ Research, Cause Based Commerce, Deanna
Roth, Jeremy Roth, Joseph Bayly, Lynn Gibbs, and Paul
Gibbs.
4 Including Cause Based Commerce, who certainly has
standing. See supra, at 11.
17a
Consumers’ Rsch. v. FCC, 88 F.4th 917, 923 (11th Cir.
2023), cert. denied Consumers’ Rsch. v. FCC, No. 23743, 2024 WL 2883755 (U.S. June 10, 2024). That
judgment bound all the petitioners in this case, including the six who were parties to the Sixth Circuit
proceeding. But that another allegedly preclusive
judgment was rendered during the course of this proceeding does not change the fact that FCC had a purported preclusion defense against six petitioners as of
June 7, 2023. And even if the Eleventh Circuit’s judgment somehow gave FCC a new window to raise a preclusion defense against those petitioners, the window
closed before FCC raised it. The Eleventh Circuit’s
judgment was final (and therefore had preclusive effect) on February 5, 2024. See Mandate Issued, Consumers’ Research v. FCC, 88 F.4th 917 (No. 22-13315)
(Feb. 5, 2024). FCC nonetheless waited to file a motion
to dismiss on the basis of that judgment until June 17,
2024—more than four months later.
There may sometimes be ambiguity about whether
a defendant carried its obligation to raise a preclusion
defense “at the earliest moment practicable.” Guste,
773 F.2d at 620 n.4. But this is not a close case. Litigants ordinarily have 21 days to plead an affirmative
defense. See FED. R. CIV. P. 12(a)(1)(A)(ii); see also
WRIGHT & MILLER, supra, § 1394 (noting affirmative
defenses are forfeited if they are not raised in responsive pleadings). There is no reason a party should
have six times that many days to raise an affirmative
defense to a petition for review. So even if we thought
FCC could have asserted preclusion against all the petitioners within a reasonable time after the Eleventh
Circuit rendered judgment, we would hold FCC failed
to do so.
18a
In sum, FCC forfeited any preclusion defense.
True, we have discretion to forgive a forfeiture in “extraordinary circumstances”—as where “a miscarriage
of justice would result from our failure to consider” the
forfeited argument. See, e.g., AG Acceptance Corp. v.
Veigel, 564 F.3d 695, 700 (5th Cir. 2009). But FCC
does not supply any reason to think a miscarriage of
justice would result from our reaching the merits of
petitioners’ claims. See ibid. (explaining the burden of
establishing extraordinary circumstances is on the
party seeking review). And we cannot think of one. In
fact, if we do not decide the constitutional questions
presented in this case, we will have to decide them in
a pending challenge that includes petitioners who
were not parties to the Sixth or Eleventh Circuit proceedings. See Petition for Review, Consumers’ Research v. FCC, No. 24-60330 (5th Cir. Jun. 27, 2024).
It effects no injustice to hold FCC to its forfeiture. 5
5 FCC convinced the Supreme Court to deny certiorari in
the Sixth and Eleventh Circuit cases in part by explaining
the Court would have another chance to consider the constitutionality of the USF after this court’s en banc ruling.
See Br. in Opp’n 17-18, Consumers’ Rsch. v. FCC, Nos. 23456, 23-743 (U.S. May 3, 2024) (“[T]he en banc Fifth Circuit
has not yet issued its decision in that case. Once it does so,
the parties can determine whether to seek, and this Court
can determine whether to grant, certiorari to review that
decision.”). Had FCC told the Supreme Court it thought petitioners’ claims in this court were issue precluded, the
Court might have granted certiorari in those other cases.
It would be unjust to allow FCC to raise an issue to evade
en banc review so soon after it hid that issue to evade Supreme Court review.
19a
***
We therefore proceed to the merits. Our review is
de novo. See Huwaei Tech. USA, Inc. v. FCC, 2 F.4th
421, 434 (5th Cir. 2021).
III.
Petitioners contend the universal service contribution mechanism violates the Legislative Vesting
Clause. See U.S. CONST. art. I, § 1 (“All legislative
Powers herein granted shall be vested in a Congress
of the United States, which shall consist of a Senate
and House of Representatives.”). We agree. We (A) explain that the power to levy USF “contributions” is the
power to tax— a quintessentially legislative power.
Then we (B) explain that Congress through 47 U.S.C.
§ 254 may have delegated legislative power to FCC because it purported to confer upon FCC the power to
tax without supplying an intelligible principle to
guide FCC’s discretion. Next, we (C) explain that FCC
may have impermissibly delegated the taxing power
to private entities. Finally, we (D) explain that we
need not definitively answer either delegation question because even if § 254 contains an intelligible principle, and even if FCC was permitted to enlist private
entities to determine how much universal service tax
revenue it should raise, the combination of Congress’s
broad delegation to FCC and FCC’s subdelegation to
private entities certainly amounts to a constitutional
violation.
A.
Section 254(d) provides that “[e]very telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and
20a
nondiscriminatory basis, to the specific, predictable,
and sufficient mechanisms established by the Commission to preserve and advance universal service.”
47 U.S.C. § 254(d). Pursuant to this authority, FCC
mandates that “telecommunications carriers . . . must
contribute to the universal service support mechanisms.” 47 C.F.R. § 54.706(a). USAC determines carriers’ USF contribution obligations on a quarterly basis by “apply[ing] the quarterly contribution factor . .
. to [each carriers’] interstate and international enduser telecommunications revenues.” Id. § 54.709(a)(3).
The result is a USAC-fashioned USF Tax.
FCC’s principal defense of the USF scheme is that
the USF Tax is not really a tax at all. Rather, FCC
contends, it is a fee. That is because, FCC reasons, a
fee is a charge that “bestows a benefit on the [payor],
not shared by other members of society.” Nat’l Cable
Television Ass’n v. United States, 415 U.S. 336, 341
(1974). And FCC thinks universal service contributions comport with that definition because telecommunications carriers pay them, and because they are
used to fund the universal service program, which
“confers special benefits on contributing carriers by
(among other things) expanding the network such carriers can serve.” FCC EB Br. 51.
But FCC misunderstands the nature of the inquiry. A fee has three characteristics: First, fees are
incurred “incident to a voluntary act.” Nat’l Cable, 415
U.S. at 341; see also Krotoszynski, Jr., Reconsidering
the Nondelegation Doctrine, supra, at 270 (“A ‘fee’ constitutes a charge that an agency exacts in return for a
benefit voluntarily sought by the payer.”). For example, “[a] public agency might charge a user fee to visit
a public park, tour a museum, or enter a toll road.”
21a
Trafigura Trading LLC v. United States, 29 F.4th 286,
293 (5th Cir. 2022) (Opinion of Ho, J.); see also ibid.
(noting that fees “arise in the context of value-forvalue transactions” between individuals and government). The government may also charge fees designed
to defray the cost of providing benefits to a regulated
party, but only if the fees charged represent a “fair approximation of services, facilities, or benefits furnished.” United States v. U.S. Shoe Corp., 523 U.S.
360, 363 (1998). Second, a fee generally is “imposed by
an administrative agency upon only those persons, or
entities, subject to its regulation for regulatory purposes.” Valero Terrestrial Corp. v. Caffrey, 205 F.3d
130, 134 (4th Cir. 2000). And third, the revenue the
government raises through its collection of fees is used
to supply benefits inuring to the persons or entities
paying them rather than to the public generally. See
Skinner v. Mid-Am. Pipeline Co., 490 U.S. 212, 223
(1989) (quoting Nat’l Cable, 415 U.S. at 343).
Universal service contributions do not have any of
these characteristics. First, they are not incident to a
voluntary act but rather are a condition of doing business in the telecommunications industry. See
47 U.S.C. § 254(d). Nor do they represent a fair approximation of the benefits conferred by government
regulation on telecommunications carriers. In fact,
they are not related to regulatory costs at all. They are
designed to fund telecommunications subsidies to
schools, libraries, healthcare facilities, and low-income individuals. Second, the cost of universal service
contributions is not borne by parties FCC regulates.
While FCC formally imposes the charges on telecommunications carriers, carriers overwhelmingly pass
the cost of contributions on to consumers, as is expressly permitted by FCC regulation. See FCC,
22a
REPORT TO CONGRESS, supra, at 45-46; 47 C.F.R. §
54.712(a). So the cost of universal service contributions is widely shared by the population in a manner
reminiscent of a “classic tax.” See Valero, 205 F.3d at
134 (“The ‘classic tax’ is imposed by the legislature
upon a large segment of society.”). And third, the benefits associated with universal service contributions
“inure to the benefit of the public”—or more accurately to the benefit of those fortunate enough to receive subsidies from USAC—rather than to the benefit of the persons who pay them. Skinner, 490 U.S. at
223 (quoting Nat’l Cable, 415 U.S. at 343). There is no
overlap at all between the class of USF beneficiaries
(recipients of subsidized telecommunications services)
and the class of USF contributors (American telecommunications consumers who see USF charges on their
phone bills each month).
Think about the consequences of FCC’s position:
• Congress could fund Medicare and Medicaid
without “taxing” anyone. It could simply allow
hospital executives to set the Medicare-Medicaid budget, then have HHS rubber-stamp the
hospitals’ healthcare taxes, which could then be
passed through to consumers’ hospital bills.
• Congress could fund the Supplemental Nutrition Assistance Program (“SNAP”) without
“taxing” anyone. It could simply allow grocery
store executives to set the SNAP budget, then
have USDA rubber-stamp the grocers’ SNAP
taxes, which could then be passed through to
consumers at the checkout register.
• Congress could fund affordable housing without “taxing” anyone. It could simply allow real
23a
estate companies to set the affordable housing
budget, then have HUD rubber-stamp the companies affordable-housing taxes, which could
then be passed through to consumers as new
line items at closing or in monthly surcharges
for rent.
We could go on. But you get the point: All of these are
obviously taxes. So while “[d]istinguishing a tax from
a fee often is a difficult task,” Tex. Ent. Ass’n, Inc. v.
Hegar, 10 F.4th 495, 505 (5th Cir. 2021) (citation omitted), the analysis here is straightforward. Congress
has bestowed upon FCC the power to levy taxes, and
we accordingly conclude that it has delegated its taxing power. 6
B.
In § 254 of the Telecommunications Act, Congress
delegated its taxing power to FCC. The power to tax
is a quintessentially legislative one. See U.S. CONST.
art. 1, § 8, cl. 1; see also Nat’l Cable, 415 U.S. at 340
(“Taxation is a legislative function, and Congress . . .
is the sole organ for levying taxes.”); MICHAEL W.
MCCONNELL, THE PRESIDENT WHO WOULD NOT BE
KING 334 (2020) (noting that domestic taxation is “especially central to the legislative branch”). So § 254 is
constitutional only if it passes nondelegation muster.
We (1) explain the nondelegation doctrine as articulated by the Supreme Court. Then we (2) explain the
6 The fact that Congress euphemistically labeled these uni-
versal service charges “contribution[s],” 47 U.S.C. § 254(d),
is irrelevant. “Congress cannot change whether an exaction is a tax . . . for constitutional purposes simply by” relabeling it. Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S.
519, 544 (2012) (emphasis in original).
24a
breadth of Congress’s delegation to FCC. Lastly, we
(3) explain that the Supreme Court has never upheld
a delegation of core legislative power as sweeping as
the one contained in § 254.
The Constitution vests “[a]ll legislative Powers
herein granted” “in a Congress of the United States.”
U.S. CONST. art. I, § 1. “Accompanying that assignment of power to Congress is a bar on its further delegation.” Gundy v. United States, 588 U.S. 128, 135
(2019) (plurality op.). Moreover, “the principle of separation of powers that underlies our tripartite system
of Government” independently compels the conclusion
that Congress, not agencies, must make legislative decisions. Mistretta v. United States, 488 U.S. 361, 371
(1989); see Gundy, 588 U.S. at 153 (Gorsuch, J., dissenting) (“[I]t would frustrate the system of government ordained by the Constitution if Congress could
merely announce vague aspirations and then assign
others the responsibility of adopting legislation to realize its goals.” (quotation omitted)). So there is no
doubt that “the lawmaking function belongs to Congress,” Loving v. United States, 517 U.S. 748, 758
(1996), and that Congress “may not constitutionally
delegate that power to another” constitutional actor,
Touby v. United States, 500 U.S. 160, 165 (1991).
But “[t]he Constitution has never been regarded as
denying to the Congress the necessary resources of
flexibility and practicality, which will enable it to perform its function.” Panama Refin. Co. v. Ryan, 293
U.S. 388, 421 (1935). So the Supreme Court has held
that delegations are constitutional so long as Congress “lay[s] down by legislative act an intelligible
principle to which the person or body authorized [to
exercise the delegated authority] is directed to
25a
conform.” J.W. Hampton, Jr., & Co. v. United States,
276 U.S. 394, 409 (1928).
Still, “there are limits of delegation which there is
no constitutional authority to transcend.” Panama Refin., 293 U.S. at 430. And for good reason. Vague congressional delegations undermine representative government because they give unelected bureaucrats—
rather than elected representatives—the final say
over matters that affect the lives, liberty, and property of Americans. See Tiger Lily, LLC v. U.S. Dep’t of
Hous. & Urb. Dev., 5 F.4th 666, 674 (6th Cir. 2021)
(Thapar, J., concurring) (“By shifting responsibility to
a less accountable branch, Congress . . . deprives the
people of the say the framers intended them to have.”).
Overly broad delegations also obscure accountability:
When elected representatives shirk hard choices, constituents do not know whom to hold accountable for
government action. See Gundy, 588 U.S. at 156 (Gorsuch, J., dissenting). And they offend the deliberation
forcing features of the constitutionally prescribed legislative process. See U.S. CONST. art. I, § 7; John Manning, Lawmaking Made Easy, 10 GREEN BAG 2d 191,
202 (2007) (“[B]icameralism and presentment make
lawmaking difficult by design.” (emphasis in original)); see also THE FEDERALIST NO. 73 (A. Hamilton)
(noting that the Constitution prescribed elaborate
procedures for lawmaking because “[t]he oftener the
measure is brought under examination, the greater
the diversity in the situations of those who are to examine it, the less must be the danger of those errors
which flow from want of due deliberation, or of those
missteps which proceed from the contagion of some
common passion or interest.”).
So while “the Supreme Court has not in the past
26a
several decades held that Congress failed to provide a
requisite intelligible principle,” Jarkesy v. SEC, 34
F.4th 446, 462 (5th Cir. 2022), aff’d on other grounds,
144 S. Ct. 2117 (2024), “[t]hat does not mean . . . we
must rubber-stamp all delegations of legislative
power,” Big Time Vapes, Inc. v. FDA., 963 F.3d 436,
443 (5th Cir. 2020). Rather, “[w]e ought not to shy
away from our judicial duty to invalidate unconstitutional delegations.” Ibid. (quotation omitted).
2.
Nondelegation inquiries “always begin[] . . . with
statutory interpretation” because the constitutional
question is whether Congress has supplied a sufficiently intelligible principle to guide an agency’s discretion. Gundy, 588 U.S. at 135 (plurality op.). So we
must construe “the challenged statute to figure out
what task it delegates and what instructions it provides.” Id. at 136. Petitioners challenge the USF’s
funding mechanism, so we must consider whether
47 U.S.C. § 254 sufficiently instructs FCC regarding
how much it should tax Americans to pay for the universal service program.
Two of § 254’s subsections are relevant: § 254(d)
provides that USF funding should be “sufficient . . . to
preserve and advance universal service,” and §
254(b)(1) suggests that telecommunications services
“should be available at . . . affordable rates.”
These statutory phrases supply no principle at all.
Start with sufficiency. That funding should be “sufficient . . . to preserve and advance universal service” is
meaningful only if the concept of universal service is
sufficiently intelligible. It is not. Rather, universal
service is “an evolving level of telecommunications
27a
services that the Commission shall establish periodically” by determining what telecommunications services are “essential to education, public health, or public safety”; are “subscribed to by a substantial majority
of residential customers”; are “deployed . . . by telecommunications carriers”; or are otherwise “consistent with the public interest, convenience, and necessity.” 47 U.S.C. § 254(c). That is a lot of words, but
they amount to a concept of universal service so amorphous that Congress’s instruction to raise “sufficient”
funds amounts to a suggestion that FCC exact as
much tax revenue for universal service projects as
FCC thinks is good. Cf. Gary Lawson, Delegation and
Original Meaning, 88 VA. L. REV. 327, 339-40 (2002)
(describing consequences of congressional enactment
that requires “‘goodness and niceness’”).
That § 254(b) supplies minimal guidance on the
contours of Congress’s idea of an ideal universal service policy is no answer. That is for three reasons.
First, we have previously accepted FCC’s contention
that “nothing in [§ 254] defines ‘sufficient’ to mean
that universal service support must equal the actual
costs incurred by” telecommunications carriers contributing to the USF. TOPUC I, 183 F.3d at 412. So
FCC’s universal service taxation is not formally limited by the amount it disburses on universal service
projects. Nothing in the statute precludes FCC from,
for example, imposing the USF Tax to create an endowment that it could use to fund whatever projects it
might like. FCC has never done so, but the fact “that
the recipients of illicitly delegated authority opted not
to make use of it is no antidote. It is Congress’s decision to delegate that is unconstitutional.” Dep’t of
Transp. v. Ass’n of Am. Railroads (“Amtrak II”), 575
U.S. 43, 62 (2015) (Alito, J., concurring) (emphasis in
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original) (quotation omitted) (quoting Ass’n of Am.
Railroads v. U.S. Dep’t of Transp. (“Amtrak I”), 721
F.3d 666, 674 (D.C. Cir. 2013), vacated and remanded
sub nom. Amtrak II, 575 U.S. 43); see Whitman v. Am.
Trucking Ass’n, 531 U.S. 457, 472 (2001) (“We have
never suggested that an agency can cure an unlawful
delegation of legislative power by adopting in its discretion a limiting construction of the statute.”).
Second, even if FCC’s power to levy taxes were limited by the amount it disburses on universal service
projects, subsection (b) still would not curb FCC’s discretion because we have explained it sets out “aspirational” principles rather than “inexorable statutory
command[s].” TOPUC I, 183 F.3d at 421; see also Tex.
Off. of Pub. Util. Couns. v. FCC, 265 F.3d 313, 321 (5th
Cir. 2001). And even if the principles in subsection (b)
were more than aspirational, they still would not
meaningfully limit FCC because § 254(b)(7) vests FCC
with discretion to formulate “other principles” so long
as it considers the additional principles to be “necessary and appropriate for the protection of the public
interest, convenience, and necessity and . . . consistent
with” the rest of Chapter 5 of Title 47 of the United
States Code. In other words, FCC “may roam at will,”
A.L.A. Schechter Poultry Corp. v. United States, 295
U.S. 495, 538 (1935), disregarding § 254(b)’s enumerated principles altogether when it thinks the “public
interest” warrants the journey. 47 U.S.C.
§ 254(c)(1)(D); id. § 254(b)(7).
Third, even if the principles in § 254(b) in some
way bind FCC, they are contentless in important respects. For example, § 254(b)(6) suggests that
“[e]lementary and secondary schools and classrooms .
. . and libraries should have access to advanced
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telecommunications services as described in subsection (h).” But subsection (h) says only that “elementary schools, secondary schools, and libraries” should
have access to telecommunications services “for educational purposes at rates less than the amounts
charged for similar services to other parties.” Id. §
254(h)(1)(B). Which services? Presumably those FCC
thinks are “essential to education” or otherwise within
the ambit of its self-defined universal service utopia.
Id. § 254(c). But how is FCC to make that determination? And which schools and libraries should receive
subsidized services? And how much less should they
pay?
Congress never said. FCC has answered some of
these questions, see 47 C.F.R. §§ 54.501, .502, .505,
but it remains a mystery how we are supposed to “ascertain whether the will of Congress has been obeyed.”
Mistretta, 488 U.S. at 379 (citation omitted). Each of
the “aspirational” universal service principles in §
254(b) & (c) is inapposite. 7 So apparently your guess
Section 254(c)(1)(B) suggests low-income consumers
should have access to telecommunications services comparable to those subscribed to by unsubsidized residential
customers. And § 254(b)(3) tells FCC to make telecommunications services available in rural areas at rates comparable to those charged in urban areas. Those provisions
may supply sufficient guidance for FCC to execute certain
aspects of the universal service program. But nothing in
the statute remotely suggests FCC should provide universal service funding only to low-income or rural schools. So
§§ (b)(3) and (c)(1)(B) cannot supply the limiting principle
that § (h)(1)(B) lacks. And the fact that FCC has limited
universal service funding to low-income schools is, once
again, irrelevant. See Am. Trucking, 531 U.S. at 472. The
question is whether the statute itself in any way limits
7
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is as good as ours is as good as FCC’s is as good as any
random American taxpayer’s. And funding for schools
and libraries is not merely an interstitial gap in the
statutory scheme. It constituted more than a third of
the contribution amount that gave rise to these proceedings. See JA.101. 8
So if § 254(b) binds at all, it is apparent that the
only real constraint on FCC’s discretion to levy excise
taxes on telecommunications carriers (and American
consumers in turn) is that rates “should” remain “affordable.” 47 U.S.C. § 254(b)(1); see Consumers’ Rsch.,
67 F.4th at 794 (“[E]xcess subsidization in some cases
may detract from universal service by causing rates
unnecessarily to rise, thereby pricing some consumers
out of the market.” (citation omitted)). But saying telecommunications services “should” remain “affordable” amounts to “no guidance whatsoever.” Jarkesy, 34
F.4th at 462 (emphasis in original). How is FCC to determine whether the USF Tax it mandates has made
telecommunications services unaffordable? The demand for cell phones is uncommonly inelastic because
cell phones are essential to participation in the modern world. See Carpenter v. United States, 138 S. Ct.
2206, 2220 (2018) (“[C]ell phones and the services
they provide are such a pervasive and insistent part
of daily life that carrying one is indispensable to participation in modern society.” (citation and quotation
FCC’s discretion to supply universal service funding for educational programs, and it plainly does not.
8 Both dissenting opinions contend 47 U.S.C. § 254 is
loaded with intelligible principles. See post, at 77-82 (Stewart, J., dissenting); id. at 101-02 (Higginson, J., dissenting).
But neither identifies any principle that might guide FCC
in determining how much less schools and libraries should
pay for telecommunications services.
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omitted)). That means the FCC could impose eye-watering USF Taxes while also arguing with a straight
face that cell phones remain “affordable” in the sense
that most Americans would choose to keep using
them. And that means § 254 leaves FCC—and as importantly reviewing courts 9—utterly at sea. Is a 25%
excise tax excessively burdensome under § 254(b)(1)?
250%? 2500%? There are no answers because Congress never gave them.
Finally, the breadth of § 254’s delegation is especially troubling because the statute insulates FCC
from the principal tool Congress has to control FCC’s
universal service decisions—the appropriations
power. See U.S. CONST. art. I, § 9, cl. 7 (“No Money
shall be drawn from the Treasury, but in Consequence
of Appropriations made by Law.”). Ordinarily, when
Congress delegates broadly, it retains a residuum of
control over agency action because the agency is powerless to act without a congressional appropriation of
funds. See CFPB v. All Am. Check Cashing, Inc., 33
F.4th 218, 232 (5th Cir. 2022) (Jones, J., concurring)
(“Congress’s supremacy in fiscal matters makes the
executive branch dependent on the legislative branch
for subsistence, thereby forging a vital line of accountability between the executive branch and the legislative branch and, therefore, the people. Recent history
confirms that Congress’s appropriations powers have
proven a forcible lever of accountability: Congress has
tightened the purse strings to express displeasure
with an agency’s nefarious activities and even to end
9 See Mistretta, 488 U.S. at 379 (noting courts are “justi-
fied” in invalidating delegations where it would be “impossible in a proper proceeding to ascertain whether the will
of Congress has been obeyed”) (quoting Yakus v. United
States, 321 U.S. 414, 425-26 (1944)).
32a
armed combat.”). So even when statutes vest agencies
with significant discretion, the appropriations process
generally ensures agencies remain subservient to the
will of the people as expressed through their elected
representatives. See Jonathan H. Adler & Christopher
J. Walker, Delegation and Time, 105 IOWA L. REV.
1931, 1957 (2020) (cataloguing examples and noting
that “[l]imiting appropriations is an effective way to
limit an agency’s exercise of delegated power”).
Here, though, Congress cannot exercise control by
limiting appropriations because the whole point of
USF is to fund universal service outside the regular
appropriations process. 10 And since FCC commissioners are removable by the President only for-cause, see
47 U.S.C. § 154(c)(1)(A), the connection between FCC
10 FCC has concluded that 47 U.S.C. § 254 constitutes “a
permanent indefinite appropriation.” GAO-05-151,
GREATER INVOLVEMENT NEEDED BY FCC IN THE MANAGEMENT AND OVERSIGHT OF THE E-RATE PROGRAM 11 (2005),
https://perma.cc/QNU6-YEFS. If we had to decide whether
§ 254 comports with the Appropriations Clause, U.S.
CONST. art. I, § 1, cl. 9, we would apply the Supreme
Court’s decision in CFPB v. Cmty. Fin. Servs. Ass’n of Am.,
Ltd., 601 U.S. 416 (2024). But we need not decide that
question because Petitioners did not formally raise an Appropriations Clause challenge. Our point is only that, to
the extent Congress’s ability to control agencies through
regular appropriations supplies some justification for
broad delegations, see, e.g., Christopher J. Walker, Restoring Congress’s Role in the Modern Administrative State,
116 MICH. L. REV. 1101, 1116 (2018) (explaining the tools
Congress has, including the appropriations power, “to rein
in the administrative state and prevent federal agencies
from abusing their consolidated lawmaking and law-execution powers”), that justification is absent here.
33a
policy decisions made pursuant to § 254 and any democratically accountable federal official is extremely attenuated.
3.
The Supreme Court has “over and over upheld
even very broad delegations.” Gundy, 588 U.S. at 146
(plurality op.). But it has also suggested the scope of
permissible delegation varies with context. See Am.
Trucking, 531 U.S. at 475 (“[T]he degree of agency discretion that is acceptable varies according to the scope
of the power congressionally conferred.”); J.W. Hampton, 276 U.S. at 406 (“In determining what [Congress]
may do in seeking assistance from another branch, the
extent and character of that assistence [sic] must be
fixed according to common sense and the inherent necessities of the governmental co-ordination.”); Loving,
517 U.S. at 768 (noting the general rule that “a constitutional power implies a power of delegation of authority under it sufficient to effect its purposes” (emphasis added)) (quoting Lichter v. United States, 334
U.S. 742, 778 (1948)); Lichter, 334 U.S. at 778-79 (suggesting Congress may delegate its war powers more
broadly); Panama Refin., 293 U.S. at 422 (same). So
the fact that the Court has upheld certain broad delegations does not necessarily dictate that we uphold §
254’s delegation of power to FCC to levy taxes on
American consumers. And § 254 appears unlike any
delegation the Court has ever blessed.
For starters, the Supreme Court’s nondelegation
“jurisprudence has been driven by a practical understanding that in our increasingly complex society, replete with ever changing and more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general directives.”
34a
Mistretta, 488 U.S. at 372 (emphasis added). So the
Court has deemed it constitutionally sufficient for
Congress to make a policy judgment and then direct
an agency to give that judgment effect through the application of technical knowledge.
For example, in American Trucking, 531 U.S. 457,
the Court considered a congressional directive to EPA
to set ambient air quality standards for certain pollutants. Id. at 472. It held that the statute supplied an
intelligible principle because it required EPA to set air
quality standards “requisite to protect the public
health” “for a discrete set of pollutants” based on “the
latest scientific knowledge.” Id. at 472-73. In other
words, the statute was constitutional because Congress made the crucial policy judgment—that the public should be protected from harmful pollutants— and
then relied on EPA to give effect to that judgment
through the application of its scientific expertise. 11
See Gundy, 588 U.S. at 166 (Gorsuch, J., dissenting)
(explaining that the “most important[]” question in
the intelligible principle inquiry is whether “Congress, and not the Executive Branch, ma[d]e the policy
judgments”).
Here, in contrast, Congress did not delegate because FCC has some superior technical knowledge
about the optimal amount of universal service funding. No such knowledge exists because determining
the ideal size of a welfare program involves policy
judgments, not technical ones. And under our
11 The Court upheld the delegation only after deciding that
the statute in question “unambiguously bar[red] cost considerations from the NAAQS-setting process.” Id. at 471;
see also id. at 473-74 (noting the statute “did not permit
economic costs to be considered”).
35a
Constitution, those judgments usually are Congress’s
to make.
In fact, in every case where the Court has upheld
a congressional delegation of its prerogative to make
significant policy judgments, there has been some special justification. In Mistretta, for example, the Court
considered a congressional delegation of authority to
Article III judges to promulgate sentencing guidelines. Few things are more policy-laden than criminal
sentencing decisions, but the Court found the delegation permissible because “the Judiciary always has
played, and continues to play, [a role] in sentencing.”
Mistretta, 488 U.S. at 391; see also ibid. (“Just as the
rules of procedure bind judges and courts in the
proper management of the cases before them, so the
Guidelines bind judges and courts in the exercise of
their uncontested responsibility to pass sentence in
criminal cases. In other words, the Commission’s functions, like this Court’s function in promulgating procedural rules, are clearly attendant to a central element of the historically acknowledged mission of the
Judicial Branch.”).
Similarly, in National Broadcasting Co. v. United
States, 319 U.S. 190 (1943), the Court upheld a delegation to FCC to regulate broadcasting “as public convenience, interest, or necessity requires. . . . “ Id. at
214. But licensing of broadcasting rests on the principle “that the public . . . own[s] the airwaves,” and that
private people may use that resource only on terms
the government sets. John Harrison, Executive Administration of the Government’s Resources and the
Delegation Problem, in THE ADMINISTRATIVE STATE
BEFORE THE SUPREME COURT 232, 250 (Peter J. Wallison & John Yoo eds., 2022); see also MCCONNELL, THE
36a
PRESIDENT WHO WOULD NOT BE KING, supra, at 334
(noting that the Communications Act of 1934 “can be
seen as merely a transfer back to the executive branch
of a power to manage public property”). “[S]ecur[ing]
the maximum benefits of” a public resource “to all the
people of the United States,” Nat’l Broad. Co., 319
U.S. at 217, is “within the core of the executive power,”
Harrison, Executive Administration, in THE ADMINISTRATIVE STATE BEFORE THE SUPREME COURT, supra, at
238. And “when a congressional statute confers wide
discretion to the executive, no separation-of-powers
problem may arise if the discretion is to be exercised
over matters already within the scope of executive
power.” Gundy, 588 U.S. at 159 (Gorsuch, J., dissenting) (citation and quotation omitted); see Wayman v.
Southard, 23 U.S. 1, 42-43 (1825) (“It will not be contended that Congress can delegate . . . powers which
are strictly and exclusively legislative. But Congress
may certainly delegate to others, powers which the
legislature may rightfully exercise itself.”); United
States v. Curtiss-Wright Exp. Corp., 299 U.S. 304, 31920 (1936) (explaining that Congress may delegate
more broadly in the foreign affairs context because
“the President [is] the sole organ of the federal government in the field of international relations.”); see
also MCCONNELL, THE PRESIDENT WHO WOULD NOT
BE KING, supra, at 334 (“[S]ome of Congress’s enumerated powers are strictly and exclusively legislative but
some are not, and Congress may either exercise the
latter powers itself or delegate them.”); Phillip Hamburger, Nondelegation Blues, 91 GEO. WASH. L. REV.
1083, 1148 (2023) (noting that “the shared reach of
the” legislative, executive, and judicial “powers occasionally allows different branches to do the same
thing even under their different and separated powers.”).
37a
Section 254, in contrast, did not delegate to the executive any power even remotely executive in character. It delegated the power to tax, which “is a legislative function.” Nat’l Cable, 415 U.S. at 340.
True, the Supreme Court has upheld seemingly
broad congressional delegations of core legislative
functions. See, e.g., Yakus, 321 U.S. at 420 (upholding
a delegation to the agency to fix the prices of commodities at a level that “will be generally fair and equitable and will effectuate the purposes of the Act.” (citation omitted)); Am. Power & Light Co. v. SEC, 329
U.S. 90, 97 (1946) (upholding a delegation to SEC to
modify the structure of holding company systems so
as to ensure that they are not “unduly or unnecessarily complicated” and do not “unfairly or inequitably
distribute voting power among security holders.” (citation omitted)). But careful consideration reveals
that the statutes considered in all these cases limited
agency discretion enough that, at the very least, reviewing courts could “ascertain whether the will of
Congress ha[d] been obeyed.” Mistretta, 488 U.S. at
379 (quoting Yakus, 321 U.S. at 425-26).
In Yakus, for example, Congress directed the administrator responsible for ensuring “fair and equitable” prices to “ascertain and give due consideration to
the prices prevailing” in a particular two-week period,
and to make adjustments for relevant factors including “[s]peculative fluctuations, general increases or
decreases in costs of production, distribution, and
transportation, and general increases or decreases in
profits earned by sellers of the commodity or commodities, during and subsequent to the year ended October 1, 1941.” 321 U.S. at 421 (citation omitted). It can
hardly be contended that the executive wanted for
38a
legislative direction under this statute, or that reviewing courts lacked workable standards. See id. at 426
(noting that “the standards prescribed by the . . . Act”
were “sufficiently definite and precise to enable Congress, the courts and the public to ascertain whether
the Administrator, in fixing the designated prices, has
conformed to those standards”). Similarly in American
Power & Light Co., the Court found that “a veritable
code of rules” set out in other sections of the statute
clarified the ambiguities inherent in the phrases “unduly or unnecessarily complicate[d]” and “unfairly or
inequitably distribute[d]” such that courts would have
no trouble testing SEC’s policies against the law. 329
U.S. at 104-05.
The Court’s other nondelegation precedents are in
accord. The statute considered in J.W. Hampton, 276
U.S. 394, simply directed the President to impose tariffs that would “equalize” the relative costs of production for American companies and their foreign counterparts—a fact-finding role. Id. at 401; see also
Gundy, 588 U.S. at 163 (Gorsuch, J., dissenting) (noting that the statute may have required the President
to make “intricate calculations, but it could be argued
that Congress had made all the relevant policy decisions, and the Court’s reference to an ‘intelligible principle’ was just another way to describe the traditional
rule that Congress may leave the executive the responsibility to find facts and fill up details.”). And the
term “public interest” in § 407 of the Transportation
Act of 1920 was shorthand for a congressional instruction to the Interstate Commerce Commission to ensure that proposed railroad consolidation would not
result in deteriorating service quality or unreasonable
or discriminatory rates—an instruction with discernible content in light of the common law of common
39a
carriers. See N.Y. Cent. Sec. Corp. v. U.S., 287 U.S. 12,
25 (1932); see also id. at 24 (“It is a mistaken assumption that [the term ‘public interest’] is a mere general
reference to public welfare without any standard to
guide determinations. The purpose of the Act, the requirements it imposes, and the context of the provision in question show the contrary.”); Herbert
Hovenkamp, Regulatory Conflict in the Gilded Age:
Federalism and the Railroad Problem, 97 YALE L.J.
1017, 1045 (1988) (“As early as the 17th century, the
common law had derived the duty to charge reasonable rates from the common carrier’s obligation to serve
everyone. . . . “). And the statute considered in Touby
“meaningfully constrain[ed] the Attorney General’s
discretion” because it directed the Attorney General
to ban drugs only after making a factual determination that there was a history of significant abuse that
threatened the public health. See 500 U.S. at 166; see
also Gundy, 588 U.S. at 166 (Gorsuch, J., dissenting)
(noting that in Touby the Court “stressed all [the statutory] constraints on the Attorney General’s discretion . . . to indicate that the statute supplied an ‘intelligible principle’ because it assigned an essentially
fact-finding responsibility to the executive.” (emphasis in original)). And the statute considered in Lichter,
334 U.S. 742—which authorized the executive to recoup “excessive profits” on wartime government contracts—was likewise judicially workable. As the Court
noted, ‘excessive’ simply means “[g]reater than the
usual amount or degree.” Id. at 785 n.37 (quoting
WEBSTER’S NEW INTERNATIONAL DICTIONARY (2d ed.
1938)). A reviewing court would thus have no trouble
discerning whether a contractor reaped in excess because it could easily compare his profits to those of his
40a
peers. 12 And so on and so forth.
***
So amidst all the statutes that have survived nondelegation challenges, § 254 stands alone. Unlike delegations implicating special agency expertise, § 254
delegates to FCC the power to make important policy
judgments, and to make them while wholly immunized from the oversight Congress exercises through
the regular appropriations process. Unlike delegations implicating the power to impose criminal sentences, taxation has always been an exclusively legislative function. Unlike the power to impose conditions
on the use of public property, taxation involves the
conversion of private property. And unlike other congressional delegations implicating core legislative
functions, § 254 is a hollow shell that Congress created for FCC to fill—so amorphous that no reviewing
12 Moreover, as we have noted, context matters to the intel-
ligible-principle inquiry. So assuming arguendo Lichter
blessed a delegation more sweeping than any other (we
think it did not), it is surely relevant that the Court emphasized that the statute in question came about because
of the necessities of war, “sprang from [Congress’s] war
powers,” and operated only for “the duration of the war or
. . . a short time thereafter.” Id. at 755; 787. As the Court
explained, because “[t]he power to wage war is the power
to wage war successfully,” “[r]easonable regulations to
safeguard the resources upon which we depend for military
success must be regarded as being within the powers confided to Congress to enable it to prosecute a successful
war.” Id. at 780-81. The Panama Refining Court similarly
deemed the wartime posture of certain broad delegations
meaningful to the delegation inquiry because the President
himself has war powers “cognate to the conduct by him of
the foreign relations of the government.” 293 U.S. at 422.
41a
court could ever possibly invalidate any FCC action
taken in its name. 13
Section 254 also implicates the taxing power, which
makes the nondelegation concerns it raises especially salient. See Nat’l Cable, 415 U.S. at 341 (“It would be such a
sharp break with our traditions to conclude that Congress
had bestowed on a federal agency the taxing power that we
read [the relevant statute] narrowly as authorizing not a
‘tax’ but a ‘fee.’”). That is because limitations on the taxing
power have long been the mechanism through which the
people curb the excesses of unelected power. See THE FEDERALIST NO. 58 (J. Madison) (“[The House], in a word,
hold[s] the purse that powerful instrument by which we behold, in the history of the British Constitution, an infant
and humble representation of the people gradually enlarging the sphere of its activity and importance, and finally reducing, as far as it seems to have wished, all the overgrown
prerogatives of the other branches of the government.”).
For that reason, the framers through the Origination
Clause took special care to ensure that the taxing power
remained intimately connected with the people. See U.S.
CONST. art. I, § 7, cl.1 (“All Bills for raising Revenue shall
originate in the House of Representatives; but the Senate
may propose or concur with Amendments as on other
Bills.”); 1 THE RECORDS OF THE FEDERAL CONVENTION OF
1787 544 (Max Farrand ed., 2d ed. 1937) (George Mason)
(“[T]he consideration which weighed with the Committee
[when drafting the Origination Clause] was that the
[House] would be the immediate representatives of the people, the [Senate] would not.”). In fact, “vesting the origination power with the House was an integral part of the deal
that resolved the conflict over congressional apportionment: seats in the Senate would not be apportioned based
on population, but only the House of Representatives
would have the power to initiate legislation that raises or
spends money.” Krotoszynksi, Jr., Reconsidering the Nondelegation Doctrine, supra, at 252. Benjamin Franklin,
13
42a
We therefore have grave concerns about § 254’s
constitutionality under the Supreme Court’s nondelegation precedents. See Gundy, 588 U.S. at 136 (plurality op.) (noting that the Court “would face a nondelegation question” if the statutory provision at issue had
“grant[ed] the Attorney General plenary power to determine [the statute’s] applicability to pre-Act offenders—to require them to register, or not, as she sees fit,
and to change her policy for any reason and at any
time” (emphasis added) (citation omitted)). Nevertheless, we need not hold the agency action before us unconstitutional on that ground alone because the unprecedented nature of the delegation combined with
other factors is enough to hold it unlawful. See infra,
Part III.D.
C.
The Q1 2022 USF Tax is not only difficult to square
with the Supreme Court’s public nondelegation precedents. It was also formulated by private entities. That
raises independent but equally serious questions
about its compatibility with Article I, § 1, which requires “[a]ll legislative Powers herein granted shall be
among others, noted that “the two clauses, the originating
of money bills, and the equality of votes in the Senate, [are]
essentially connected by the compromise which had been
agreed to.” 2 THE RECORDS OF THE FEDERAL CONVENTION,
supra, at 233.
So the Constitution’s original meaning would seem to
compel a more restrictive test for delegations of the taxing
power. Nevertheless, the Supreme Court has declined to
apply heightened scrutiny to tax-related delegations, see
Skinner, 490 U.S. at 223, and we are not authorized to depart from that holding.
43a
vested in a Congress.” We (1) explain that the scope of
FCC’s delegation to private entities may violate the
Legislative Vesting Clause by allowing private entities to exercise government power. Then we (2) explain that even if FCC’s delegation could be constitutionally justified, FCC may have violated the Legislative Vesting Clause by delegating government power
to private entities without express congressional authorization.
1.
a.
The Supreme Court has held Congress has broad
discretion to empower executive agencies to “execute”
the law. See City of Arlington v. FCC, 569 U.S. 290,
304 n.4 (2013). “When it comes to private entities,
however, there is not even a fig leaf of constitutional
justification. Private entities are not vested with legislative Powers. Nor are they vested with the executive Power, which belongs to the President.” Amtrak
II, 575 U.S. at 62 (Alito, J., concurring) (quotation and
citations omitted). So it is clear that delegations to private entities raise constitutional concerns entirely distinct from delegations to the executive.
Only four times has the Supreme Court considered
whether a delegation to private entities violates Article I’s Vesting Clause. 14
14 The parties in Amtrak II raised a private delegation chal-
lenge, but the Court did not reach it because it determined
that, for relevant purposes, Amtrak was a governmental
entity. See 575 U.S. at 55. The Court has also several times
considered whether state delegations of legislative power
44a
First, in Schechter Poultry, the Court considered a
constitutional challenge to the National Industrial
Recovery Act (“NIRA”) of 1933, 48 Stat. 195. See 295
U.S. at 519-21. That statute delegated to trade or industrial groups the authority to develop codes defining “unfair method[s] of competition.” Id. at 521 n.4
(quotation omitted). If the codes were approved by the
President, they were to become law under “such exceptions to and exemptions from the provisions of
such code, as the President in his discretion deem[ed]
necessary to effectuate the policy” of the NIRA. Ibid.
The Court held that the statute was unconstitutional.
In part, it reasoned the idea that “Congress could 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,” or that “trade or industrial associations or
groups be constituted legislative bodies for that purpose because such associations or groups are familiar
with the problems of their enterprises” was “utterly
inconsistent with the constitutional prerogatives and
duties of Congress.” Id. at 537.
The next year, in Carter v. Carter Coal Company,
298 U.S. 238, 278 (1936), the Court considered a delegation challenge to the Bituminous Coal Conservation
Act of 1935, 49 Stat. 991 (repealed 1937). That statute
authorized the district board in local coal districts (the
“code authority”) to adopt a code that included agreedupon minimum prices for coal. Carter Coal, 298 U.S.
to private entities violated due process, see Paul J. Larkin,
The Private Delegation Doctrine, 73 FLA. L. REV. 31, 45-47
(2021), but those cases present a question different from
the one before us.
45a
at 282-83. It also allowed an agreement between producers of more than two-thirds of the annual tonnage
of coal and a majority of mine workers to set industrywide minimum wage and maximum working-hour
agreements. Id. at 283-84. Both the minimum price
codes and the labor codes bound producers—i.e., obtained legal force—without approval by any federal official. Id. at 282, 284. The Court explained the statute
amounted to “delegation in its most obnoxious form”
because it purported to delegate regulatory power not
“to an official or an official body, presumptively disinterested,” but rather “to private persons whose interests . . . often are adverse” to those whom the statute
authorized them to regulate. Id. at 311. That, the
Court held, was “an intolerable and unconstitutional
interference with personal liberty and private property.” Ibid. 15
In Currin v. Wallace, 306 U.S. 1, 5-6 (1939), the
Court considered a delegation challenge to the Tobacco Inspection Act of 1935, 49 Stat. 731 which authorized the Secretary of Agriculture to designate
markets in which no tobacco could be sold unless it
had “been inspected and certified by an authorized
representative of the Secretary according to the established standards.” One of the bases for the challenge
15 The Court did not clearly specify which constitutional
provision—the Legislative Vesting Clause or the Fifth
Amendment Due Process Clause—the statute offended.
See id. at 310-12; see also Nat’l Horsemen’s Benevolent &
Protective Ass’n v. Black, 53 F.4th 869, 881 n.23 (5th Cir.
2022). But because the relevant portion of the Carter Coal
cited Schechter Poultry, a Vesting Clause case, alongside
Due Process cases, the Court presumably held the delegation was unlawful on both grounds.
46a
was that the Secretary could not designate a market
unless two-thirds of the growers voting at a prescribed
referendum favored the designation. See Currin, 306
U.S. at 6, 15. But the producers had no power to designate the markets in which classification would be
required; only the Secretary could do that. Nor did the
statute even provide that the producers would help
craft regulations. So unlike the private bodies in
Carter Coal, the tobacco producers had no power to
“make the law and force it upon a minority.” Id. at 1516 (citation omitted). Congress merely gave them the
ability to prevent certain regulations from taking effect. See ibid. The Court accordingly rejected the challenge on the ground that the statute did not delegate
any legislative power to private entities. Ibid.
Finally, in Sunshine Anthracite Coal Company v.
Adkins, 310 U.S. 381, 387 (1940), the Court considered a private delegation challenge to The Bituminous
Coal Act of 1937, 50 Stat. 72 (repealed 1966), a revised
version of the statute the Court held unlawful in
Carter Coal. Congress’s most important revision was
to relegate the code authorities from lawmakers to
“aid[s]” subject to the “pervasive surveillance and authority” of the National Bituminous Coal Commission.
Sunshine Anthracite, 310 U.S. at 388. Under the revised statute, code authorities could “propose” minimum prices, but their proposals were legal nullities
until they were expressly “approved, disapproved, or
modified” by the Coal Commission. Ibid. Thus, the
Court concluded that the Commission, “not the code
authorities, determine[d] [coal] prices,” id. at 399, and
it therefore held that the statute did not unconstitutionally delegate government power to private entities.
47a
Lower courts have discerned from these cases the
“cardinal constitutional principle [] that federal power
can be wielded only by the federal government.”
Black, 53 F.4th at 872. Private delegations are thus
constitutional only on three conditions. First, government officials must have final decision-making authority. See Larkin, The Private Delegation Doctrine,
supra, at 50-51 (noting that in every case in which the
Supreme Court has upheld a private delegation, “the
law[] at issue . . . left final decision-making authority
in the hands of a government official”). Second, agencies must actually exercise their authority rather than
“reflexively rubber stamp [work product] prepared by
others.” Sierra Club v. Lynn, 502 F.2d 43, 59 (5th Cir.
1974); see State v. Rettig, 987 F.3d 518, 531 (5th Cir.
2021), cert. denied, Tex. v. Comm’r of Internal Revenue, 142 S. Ct. 1308 (2022) (“A federal agency may not
abdicate its statutory duties by delegating them to a
private entity.” (quotation and citation omitted)). 16
And third, the private actors must always remain subject to the “pervasive surveillance and authority” of
some person or entity lawfully vested with government power. Sunshine Anthracite, 310 U.S. at 388.
In light of these strictures on private delegations,
16 Lynn arose under the National Environmental Policy Act
(“NEPA”), not the Constitution. But Rettig repeatedly cited
Lynn to expound the level of control agencies must retain
over private actors wielding governmental power for constitutional purposes. Rettig, 987 F.3d at 532. The central
question in Lynn was whether an agency bore ultimate responsibility for work product prepared by a private entity,
see 502 F.2d at 59, which is required not only by NEPA but
also by the Legislative Vesting Clause, see, e.g., Black, 53
F.4th at 881.
48a
we held unconstitutional a statute that vested a private entity with the power to make rules regulating
an industry where those rules were subject only to
limited agency review. See Black, 53 F.4th at 884-89.
And the D.C. Circuit similarly held unconstitutional a
statute that empowered Amtrak to work jointly with
the Federal Railroad Administration to develop binding railroad performance standards because the statute did not vest FRA with complete regulatory control.
See Amtrak I, 721 F.3d at 670-74, vacated and remanded sub nom. Amtrak II, 575 U.S. 43; see also
Black, 53 F.4th at 889-90 (relying on Amtrak I ).
In contrast, where courts have deemed delegations
to private entities constitutional, they have uniformly
emphasized the agency’s actual decision-making authority and control. For example, when the Third Circuit approved the National Association of Securities
Dealers’ role in securities regulation, it explained industry self-regulation raises “serious constitutional
challenges.” Todd & Co. v. SEC, 557 F.2d 1008, 1014
(3d Cir. 1977). Accordingly, the Court held securities
self-regulation was constitutional only after emphasizing that SEC was obliged to “insure fair treatment
of those disciplined by” NASD. Ibid. It also stressed
that SEC was statutorily required to review NASD orders, make de novo findings, and come to an “independent decision on” securities’ violations and penalties. See id. at 1012; see also id. at 1012-13 (“[NASD’s]
rules and its disciplinary actions were subject to full
review by the S.E.C., a wholly public body, which must
base its decision on its own findings.” (emphasis
added)). Similarly, when we approved a private entity’s role in drafting an environmental impact statement, we emphasized that “the applicable federal
agency [bore] the responsibility for the ultimate work
49a
product” and “independently perform[ed] its reviewing, analytical and judgmental functions.” Lynn, 502
F.2d at 59 (quotation and citation omitted); see also
Rettig, 987 F.3d at 531-32 (citing Lynn in an Art. I, §
1 challenge).
b.
FCC has delegated government power—the power
to dictate the size of the universal service contribution
amount, which controls the size of a tax levied on
American consumers—to USAC and private telecommunications carriers. That delegation is lawful only if
FCC (1) has final decision-making authority, (2) actually exercises that authority, and (3) exercises “pervasive surveillance and authority” over the private entities exercising power in its name. Black, 53 F.4th at
884 (quoting Sunshine Anthracite, 310 U.S. at 388).
FCC’s subdelegation of its taxing power violates
this test in two ways. The first problem is that FCC
regulations provide that USAC’s projections take legal effect without formal FCC approval. See 47 C.F.R.
§ 54.709(a)(3). FCC has, in effect, given private entities the final say with respect to the size of the USF
Tax. That FCC retains discretion to revise the proposed contribution amount, see ibid., is insufficient.
Congress could not say: “The defense budget is whatever Lockheed Martin wants it to be, unless Congress
intervenes to revise it.” To make law, Congress must
affirmatively adopt the statutory text, pass it bicamerally, and present it to the President for signature.
INS v. Chadha, 462 U.S. 919, 959 (1983). Legislation
requires action not acquiescence. Similarly, while
FCC may solicit advice from USAC and private carriers, it must affirmatively act to give legal effect to that
advice because it alone has constitutional authority to
50a
execute 47 U.S.C. § 254.
The second problem is that FCC does not appear to
“independently perform[] its reviewing, analytical and
judgmental functions” with respect to the privately
supplied universal service contribution amount. Rettig, 987 F.3d at 532 (quoting Lynn, 502 F.2d at 59).
FCC has not pointed us to anything that suggests it
even checks USAC’s work. Instead, it appears to “reflexive[ly] rubber stamp” whatever contribution
amount USAC proposes. Lynn, 502 F.2d at 59. The
record before us shows that, before this litigation
started, FCC never made a single substantive change
to the contribution amounts proposed by USAC. See
supra, at 6 & n.1. 17
That is a de facto abdication. And when an agency
de facto abdicates to a private entity its responsibility
to make governmental decisions, that entity becomes
more than a mere “aid” to the agency. See Black, 53
F.4th at 881 (quoting Sunshine Anthracite, 310 U.S.
at 388). The private company becomes a lawmaker in
its own right. So de jure approval alone is not enough.
If FCC is going to rely on a non-governmental actor to
supply a revenue requirement that dictates the size of
a tax levied on American consumers, it must at the
very least do something to demonstrate that it applied
its independent judgment.
17 Even if FCC wanted to change USAC’s proposals, it is
not at all clear it could. Petitioners contend, and FCC does
not dispute, that the “approval” process for USAC’s proposals plays out just days before the new quarter begins.
With such a short time window, it appears FCC has no real
choice but to accept USAC’s proposed figures.
51a
c.
The Government’s principal counterargument is
that FCC—not USAC—is exercising governmental
power. Its argument goes like this: FCC sets out detailed regulations specifying who is eligible for what
kinds of universal service subsidies. Private companies merely project the costs they will incur supplying
the FCC-specified subsidized services and report that
information to USAC. And then USAC merely aggregates that information into a contribution amount,
which FCC turns into the contribution factor that is
levied on telecommunications revenues as a USF Tax.
FCC regulations even preclude USAC from making
policy. So in determining the contribution amount,
which directly controls the size of the tax levied on
American telecommunications consumers, USAC and
private carriers perform a simple, ministerial task—a
mere “fact gathering function for the FCC.” FCC EB
Br. 56 (quotation omitted).
But FCC obfuscates how the universal service sausage is really made. FCC would have us believe its
universal service policy necessarily dictates the size of
the contribution amount, and so FCC really controls
the size of the USF Tax. But that cannot be right because USF disbursements often do not comply with
FCC policy. See supra, Part I.C. Instead, large swaths
of USF funds—perhaps at one point close to one-quarter—are disbursed to ineligible recipients. See, e.g.,
THE HIGH-COST PROGRAM, supra, at 2. That FCC sets
universal service policy obviously does nothing to
limit the revenue FCC allows private entities to exact
from consumers to fund payments made in violation
of FCC’s universal service policy.
Put differently, FCC policy would dictate the
52a
contribution amount only if it in fact dictated how private companies raised and spent USF monies. The
problem is that FCC has abdicated responsibility for
ensuring compliance to the very entities whose universal service demand projections dictate the size of
the contribution amount. See, e.g., FCC’s LIFELINE
PROGRAM, supra, at executive summary page (noting
that FCC “relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility,” which is problematic because “companies may have financial incentives to enroll as
many customers as possible”); FCC’s E-RATE PROGRAM, supra, at 21-22 (noting that telecommunications service providers have opportunities to “make
misrepresentations . . . during the funding phase” that
“may not be discovered due to the self-certifying nature of the program”).
Moreover, the entity most responsible for snuffing
out wasteful or fraudulent disbursements—USAC—is
run almost entirely by stakeholders who stand to benefit financially when universal service subsidies grow.
See Leadership, UNIVERSAL SERV. ADMIN. CO., supra;
see also FCC’s E-RATE PROGRAM, supra, at 15 (noting
that FCC relies on USAC to ensure compliance carrier
compliance with FCC rules). And that is no accident.
USAC is run by self-interested stakeholders because
FCC regulations require it. See 47 C.F.R. § 54.703(b).
FCC mandates that nine of USAC’s nineteen directors
represent companies in the telecommunications industry who are compensated by the very same USF
funds they raise. See id. § 54.703(b)(1)-(6). It mandates that another seven represent the schools, libraries, health care providers, and low-income consumers
who are direct recipients of USF funds. See id. §
53a
54.703(b)(7)-(10).
Because the telecommunications industry polices
its own compliance with FCC universal service policy,
and responsibility for monitoring the industry falls
most heavily on a board composed of industry representatives and consumer groups with a direct financial interest in the size of USF taxes, private entities
have a far more important and discretionary role in
determining the size of the contribution amount
(which controls the level of universal service taxation)
than FCC would have you believe. For example, a carrier could (intentionally or unintentionally) project
and then supply USF-subsidized service costing
twenty-five percent more than its USF-subsidized service would cost if it strictly complied with FCC rules.
And FCC offers us zero reason to think it would even
discover the discrepancy—let alone that FCC would
do anything about it. FCC has in effect said to carriers: “Here is our universal service policy and a blank
check. We’re not going to pay any attention to what
you put in the dollar box. We know you have financial
incentives to juice the number, but we trust you’ll follow our policy to the letter anyways. Just fill it out
however you see fit, take it to the bank, and the money
will be drawn from the accounts of American telecommunications consumers.” We do not doubt that most
of the industry is staffed by individuals of the utmost
integrity, but we cannot agree that private entities are
no more than ministerial bean counters when it comes
to setting the USF Tax.
Moreover, even if we put the compliance issue to
one side, we would still disagree that private companies have merely “ministerial” control over the contribution amount. As we have noted, FCC’s
54a
counterargument turns on the Commission’s nominal
control over universal service policy. But setting a policy is not the same as allocating funds to execute that
policy. That much is evident from the constitutional
requirement that Congress appropriate money to execute the government programs it establishes. See U.S.
CONST. art. I, § 9, cl. 7. Thus, FCC’s argument fails
because it impermissibly collapses universal service
funding decisions into universal service policy decisions. The decision of how much money should be set
aside to execute FCC’s universal service policies—the
very decision FCC has delegated to USAC and private
carriers—is an independent decision that requires independent judgment. And surely discretion inheres in
decisions about how much money to allocate to a massive federal welfare program. See Gaines v. Thompson, 74 U.S. (7 Wall.) 347, 353 (1868) (“A ministerial
duty . . . is one in respect to which nothing is left to
discretion.” (quotation omitted)). So even if we
thought FCC correctly described the role of private entities, we would still conclude that dictating the contribution amount is an exercise of government power.
***
FCC has not delegated to private entities a trivial,
fact-gathering role. It has delegated the power to dictate the amount of money that will be exacted from
telecommunications carriers (and American consumers in turn) to promote “universal service.” In other
words, it has delegated the taxing power. And the delegation is not even “to an official or an official body,
presumptively disinterested,” but rather to private
persons vested with no government power and with
interests that “often are adverse” to those whom they
are taxing. Carter Coal, 298 U.S. at 311; see also Ass’n
55a
of Am. Railroads v. U.S. Dep’t of Transp. (“Amtrak
III”), 821 F.3d 19, 29 (D.C. Cir. 2016) (“Delegating legislative authority to official bodies is inoffensive because we presume those bodies are disinterested, that
their loyalties lie with the public good, not their private gain. But here, the majority producers may be
and often are adverse to the interests of others in the
same business.” (citation and quotation omitted)). We
accordingly have serious trouble squaring FCC’s subdelegation with Article I, § 1 of the Constitution. 18
2.
Even if the Constitution does not categorically forbid FCC’s delegation to USAC and private telecommunications carriers, 47 U.S.C. § 254 does not authorize
it. And there is no precedent establishing that federal
agencies may subdelegate powers in the absence of
statutory authorization. To the contrary, the only Supreme Court cases blessing private delegations involved explicit statutory authorizations.
a.
18 JUDGE NEWSOM recently expressed skepticism that the
private entities involved in USF may constitutionally exercise the power FCC delegated to them. See Consumers’
Rsch., 88 F.4th at 932 (Newsom, J., concurring). But JUDGE
NEWSOM voted to deny a petition for review that is almost
identical to the one before us because in his view, these private entities exercise executive rather than legislative
power, and petitioners did not raise an Article II challenge.
Ibid. With utmost respect to our distinguished colleague,
private entities do play a legislative role in the USF because their projections directly control the size of USF tax
rates, and setting tax rates is unquestionably a legislative
function. See supra, Part III.B.
56a
At the Founding, the maxim that delegata potestas
non potest delegari—no delegated powers can be further delegated—was widely accepted. The maxim has
its roots in the civil law. See Patrick W. Duff & Horace
E. Whiteside, Delegata Potestas Non Potest Delegari:
A Maxim of American Constitutional Law, 14 CORNELL L.Q. 168, 171 (1929). Lord Coke enshrined the
maxim as a common law doctrine. See id. at 170-71
(citations omitted). And the doctrine endured through
the founding generation, as evidenced by treatises of
the great 19th-century scholars. Samuel Livermore,
for example, noted that “[a]n authority given to one
person cannot in general be delegated by him to another; for being a personal trust and confidence it is
not in its nature transmissible, and if there be such a
power to one person, to exercise his judgment and discretion, he cannot say, that the trust and confidence
reposed in him shall be exercised at the discretion of
another person.” A TREATISE ON THE LAW OF PRINCIPAL
AND AGENT AND OF SALES BY AUCTION 54 (1818). Likewise, James Kent wrote that “[a]n agent, ordinarily
and without express authority, has not power to employ a sub-agent to do the business, without the
knowledge or consent of his principle. The maxim is,
that delegatus non potest delegare, and the agency is
generally a personal trust and confidence which cannot be delegated.” 2 COMMENTARIES ON AMERICAN LAW
496 (1827). And Joseph Story agreed, explaining that
“[o]ne, who has a bare power or authority from another to do an act, must execute it himself, and cannot
delegate his authority to another; for this being a trust
or confidence reposed in him personally, it cannot be
assigned to a stranger, whose ability and integrity
might not be known to the principal or who, if known,
might not be selected by him for such a purpose.” COMMENTARIES ON THE LAW OF AGENCY, AS A BRANCH OF
57a
COMMERCIAL AND MARITIME JURISPRUDENCE 66-67
(1844).
As with most rules, this one had exceptions. Common lawyers assumed that ministerial tasks could be
subdelegated. See GARY LAWSON & GUY SEIDMAN, “A
GREAT POWER OF ATTORNEY”: UNDERSTANDING THE FIDUCIARY CONSTITUTION 115 (2017). And a fiduciary
document could specifically authorize subdelegations
of delegated authority. Ibid.
But as a general matter, “[t]he founding-era rule
against subdelegation of delegated agency authority
is as clearly established as any proposition of law can
be established.” Id. at 114. And it was not merely a
proposition of agency law. In fact, the Supreme Court
once noted that the maxim “has had wider application
in the construction of our federal and state Constitutions than it has in private law.” J.W. Hampton, 276
U.S. at 405-06; see also Duff & Whiteside, Delegata
Potestas Non Potest Delegari, supra, at 175 (“[I]n
cases which involve a supposed delegation to an independent board or commission, as well as those where
the delegation is to the executive or judiciary, the
maxim delegata potestas non potest delegari, or its
English equivalent, has been the chief reliance of the
courts, and has attained in their eyes the dignity of a
principle of constitutional law.”).
So the Founders’ law prohibited unauthorized subdelegations of non-ministerial delegated authority,
and the Supreme Court has recognized that as a constitutional principle. See J.W. Hampton, 276 U.S. at
405-06; cf. Gundy, 588 U.S. at 135 (plurality op.) (“Article I of the Constitution provides that ‘[a]ll legislative Powers herein granted shall be vested in a Congress of the United States.’ § 1. Accompanying that
58a
assignment of power to Congress is a bar on its further
delegation.”). We think the clear implication is that
the Constitution imposes upon federal agencies—acting as agents of the people’s representatives in Congress—a duty to wield delegated power unless Congress authorizes subdelegation or the subdelegation
involves no more than ministerial tasks. In other
words, “Congress may formalize [a limited] role [for]
private parties” in executing its laws, Amtrak I, 721
F.3d at 671 (emphasis added) (citing Sunshine Anthracite, 310 U.S. at 388), but agencies may not.
b.
This rule does not just accord with law at the
Founding; it also accords with Supreme Court precedent.
The Court has emphasized the “vital constitutional
principle” that “[l]iberty requires accountability.”
Amtrak II, 575 U.S. at 57 (Alito, J., concurring). Every
executive branch official is in some way accountable
to the people because every executive branch official
may be removed—for good cause at least—by the
President, who is himself “the most democratic and
politically accountable official in Government.” Seila
L. LLC v. CFPB, 591 U.S. 197, 224 (2020). Private persons, in contrast, may not be removed by the President because private persons do not wield any portion
of “the executive Power” our Constitution vests “in a
President of the United States of America.” U.S.
CONST. art. II, § 1, cl.1. There is no reason to lightly
infer that Congress intends to insulate law execution
from democratic accountability in this way. 19
19 Deciding who should exercise governmental power can
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In accordance with these principles, both Supreme
Court cases authorizing private entities to wield anything like government power involved express authorizations from Congress. The Tobacco Inspection Act
considered in Currin expressly provided that regulations would take effect only with the support of twothirds of the tobacco growers in the relevant market.
See 306 U.S. at 6, 15. And the Bituminous Coal Act
considered in Sunshine Anthracite created the very
private boards that proposed minimum prices and labor codes to the Coal Commission. See 310 U.S. at
387-88 (noting that the statute provided for “[s]ome
twenty district boards of code members . . . which are
to operate as an aid to the Commission” and “specifie[d] in detail the methods of their organization and
operation, the scope of their functions, and the jurisdiction of the Commission over them.”). 20
c.
Section 254, by contrast, makes no mention of the
fact that private entities might be responsible for
be as important as deciding whether governmental power
should be delegated in the first place. If it were not, we
would not care so deeply about Presidential elections. So
democratic accountability is frustrated when decisions
about who should exercise governmental power are made
by bureaucrats—whose connection to the people is real but
highly attenuated—rather than Congress, whose members
are directly “accountable to [their] constituents through
regular popular elections.” Jarkesy, 34 F.4th at 459 (citation omitted).
20 Likewise the Maloney Act, which the Third Circuit considered in Todd & Co., specifically authorized registered
organizations to self-regulate over-the-counter securities
markets. See 557 F.2d at 1012.
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determining the size of the tax FCC levies on American consumers. It does not even mention USAC, a Delaware corporation FCC established without congressional authorization.
When asked at oral argument to identify the portion of § 254 that authorizes FCC to subdelegate administration of the universal service contribution
mechanism to private entities, the Government’s
counsel could point only to subsection § 254(b)(5). See
Oral Arg. at 46:40-48:55. That subsection directs FCC
to establish “mechanisms to preserve and advance
universal service.” § 254(b)(5). But a directive to establish “mechanisms” plainly does not imply that
those “mechanisms” may be controlled by a private,
non-governmental entity incorporated by FCC without any involvement from Congress.
In fact, § 254(b)(5) seems to suggest precisely the
opposite. Rather than directing FCC to establish private mechanisms, it specifically instructs FCC to establish “Federal and State mechanisms,” ibid., which
indicates Congress intended to make government entities responsible for administering universal service
programs. So subsection (b)(5) is unavailing.
The closest § 254 comes to contemplating that a
non-governmental entity might play any role in executing the statute is to incorporate by reference some
of the preexisting regulations governing the Lifeline
Program. See § 254( j) (“Nothing in this section shall
affect the collection, distribution, or administration of
the Lifeline Assistance Program provided for by the
Commission under regulations set forth in section
69.117 of title 47, Code of Federal Regulations, and
other related sections of such title.”). Those regulations made the National Exchange Carrier
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Association (“NECA”) responsible for calculating the
Lifeline Assistance charges levied on local exchange
carriers. See 47 C.F.R. § 69.117 (10-1-95 ed.). And they
gave local exchange carriers a small role in determining the size of Lifeline Assistance charges because carriers could obtain subsidies for their self-reported
costs incurred in waiving one kind of regulatory fee.
See id. § 69.104(j) (10-1-95 ed.).
But the fact that § 254 incorporated certain pre1996 Lifeline Assistance program regulations does not
suggest Congress authorized FCC’s abdication of responsibility for the USF Tax to private entities. That
is for three reasons.
First, NECA’s role under 47 C.F.R. § 69.117 in
1995 was not remotely analogous to USAC’s current
role of administering the entire USF. Section 69.117
charged NECA only with two simple, ministerial
tasks: (1) Calculating Lifeline Assistance charges by
“dividing the sum of one-twelfth of the projected annual Lifeline Assistance revenue requirement and
one-twelfth of the projected annual revenue requirement calculated by all telephone companies pursuant
to § 69.104(l) by the number of common lines presubscribed to interexchange carriers. . . . “ Id. § 69.117(b)
(10-1-95 ed.). And (2) “bill[ing] and collect[ing] the
charge, and disburs[ing] associated revenue.” Ibid.
USAC’s role as USF administrator, by contrast, involves far more than ministerial tasks. See supra,
Part III.C.1.c.
Second, the carriers’ role under 47 C.F.R. § 69.117
(and associated regulations) in 1995 was not analogous to their role in 2023. Before the 1996 Act, FCC
regulations authorized certain carriers to bill the Lifeline Program for costs associated with waiving certain
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minor, regulatorily imposed end user common line
charges for certain means-tested subscribers pursuant to a carrier-developed plan certified by FCC. Id.
§ 69.104(j) (10-1-95 ed.). But carriers could waive end
user charges only if they reduced their own service
rate charges by an equivalent amount. Ibid. That is
nothing like the modern universal service regime,
which allows a greatly expanded class of carriers to
bill USF for a broad range of subsidized services provided at no cost to themselves.
Third, even if the role NECA and telecommunications carriers played in administering Lifeline Assistance charges before § 254 was analogous to the role
they play in administering the modern Lifeline Program, there is no evidence Congress contemplated private entities would play the same role in administering the three other major universal service programs
FCC has established pursuant to its § 254 authority.
That Congress provided a narrow role for certain private entities in administering a small government
program subsidizing one kind of telecommunications
service says nothing about whether Congress authorized a broadly expanded class of private entities to
play a central role in administering a nine-billion-dollar welfare fund offering subsidies for technologies no
one could have imagined when § 254 was enacted. If
anything, the text of § 254 suggests Congress actually
meant to preclude private entities from administering
USF programs other than Lifeline. That is because
NECA did administer the pre-1996 USF. See 47
C.F.R. § 69.116 (10-1-95 ed.). But NECA’s USF responsibilities were distinct from its Lifeline Assistance responsibilities; the former were spelled out in
§ 69.116, and the latter in § 69.117. Congress referenced § 69.117 in § 254, but it conspicuously did not
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reference § 69.116. Congress’s explicit recognition of
one relatively minor aspect of private companies’ participation in the pre-1996 Lifeline Assistance regime
thus evinces that Congress knew how to empower private companies and chose not to empower them to administer other aspects of the USF.
So if Congress authorized FCC to delegate sweeping universal service responsibilities to private entities, it did not say so very clearly. Indeed, it speaks
volumes that the only plausible statutory justification
for FCC’s subdelegation—§ 254( j)—is so ambiguous
that FCC, which should be more familiar with § 254
than anyone, did not even think to point to it as justification for its reliance on private companies to set the
USF Tax.
***
FCC subdelegated the power to determine the universal service contribution amount to USAC, who further subdelegated it to private, for-profit telecommunications carriers. That subdelegation was not authorized. See supra, Part III.C.2.c. And the tasks FCC
subdelegated are not ministerial. See supra, Part
III.C.1.b-c. So even if Article I, § 1 does not categorically forbid USAC and private telecommunications
carriers from exercising the kind of power FCC has
vested in them, it may forbid them from doing so absent express congressional authorization. 21
Petitioners certainly could have framed their private
n
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