Reply Brief — National Horsemen's Benevolent and Protective Association, et al., Petitioners v. Horseracing Integrity and Safety Authority, Inc., et al.

Supreme Court briefDec 2, 2024

Ask Donna

What actually matters in this document.

Text

No. 24-472

In the Supreme Court of the United States

________________

NATIONAL HORSEMEN’S BENEVOLENT AND

PROTECTIVE ASSOCIATION, ET AL., PETITIONERS

HORSERACING INTEGRITY AND SAFETY AUTHORITY,

INCORPORATED, ET AL., RESPONDENTS

________________

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

_________________________________

REPLY IN SUPPORT OF CERTIORARI

__________

DANIEL R. SUHR

Counsel of Record

Center for

American Rights

747 N. LaSalle St. #210

Chicago, IL 60654

414.588.1658

dsuhr@

americanrights.org

Counsel for Petitioners

the NHBPA and its

Affiliates

CHRISTOPHER E. MILLS

Spero Law LLC

Charleston, SC

FERNANDO M. BUSTOS

Bustos Law Firm, P.C.

Lubbock, TX

PETER ECABERT

National HBPA

Lexington, KY

TABLE OF CONTENTS

PAGE

TABLE OF AUTHORITIES ........................................ ii

ARGUMENT................................................................ 1

1. Policymaking is a sovereign function that must

rest in the FTC alone.

2. The Authority mischaracterizes the FTC’s

“consistency review.”

3. There is a circuit split over whether a private

delegate may set fees without agency oversight.

4. There is a circuit split over whether a private

delegate may set policy through guidance without

agency oversight.

This case calls for certiorari this term.

CONCLUSION ..................................................................... 8

TABLE OF AUTHORITIES

CASES

Alpine Sec. Corp. v. Fin. Indus. Regul. Auth., 2024

U.S. App. LEXIS 29728 (D.C. Cir. Nov. 22, 2024) .. 8

Carter v. Carter Coal Co., 298 U.S. 238 (1936) .......... 2

Consumers’ Rsch. v. FCC, 67 F.4th 773 (6th Cir.

2023) ......................................................................... 7

FCC v. Consumers’ Research, S.Ct. No. 24-354 .......... 7

Kisor v. Wilkie, 588 U.S. 558 (2019) ........................... 6

Pittston Co. v. United States, 368 F.3d 385 (4th Cir.

2004) ......................................................................... 2

Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381

(1940) .................................................................... 1, 2

STATUTES

15 U.S.C. § 3053(a) ...................................................... 5

15 U.S.C. § 3053(c)(2) .................................................. 3

15 U.S.C. § 3053(f)(1)(C)(iv)(I-II) ................................ 5

15 U.S.C. § 3054(g)(1) .................................................. 6

15 U.S.C. § 3054(g)(3) .................................................. 6

15 U.S.C. § 3055(a)(1) .................................................. 3

15 U.S.C. § 3055(c)(4)(A) ............................................. 6

15 U.S.C. § 3056(a)(1) .................................................. 3

OTHER AUTHORITIES

Order Approving the Racetrack Safety Rule

Modification Proposed by the Horseracing Integrity

and Safety Authority, FTC Order (June 7, 2024) ... 3

ARGUMENT

The responses of the Federal Trade Commission

(FTC) and the Horseracing Integrity and Safety

Authority (the Authority) both highlight rather than

obviate the need for serious constitutional thinking on

all aspects of the private non-delegation doctrine.

Though there is broad agreement among the circuits

that the principle exists—government cannot willynilly delegate its responsibilities to private actors—

there is deep confusion among the circuits about the

contours of that principle. That confusion stems in

large part from the fact that this Court has not

addressed the doctrine in a majority opinion since

1940, and even then did so with a minimum of

analysis. Sunshine Anthracite Coal Co. v. Adkins, 310

U.S. 381, 398-99 (1940). Certiorari on both the

legislative and executive delegations made by the

Horseracing Integrity and Safety Act is needed to fully

expound the scope of the non-delegation doctrine,

given the confusion among the lower circuits on both

its Article I and Article II application.

This Reply addresses five specific points raised by

the Authority and FTC in their responses, explaining

that (1) policymaking is a sovereign function exclusive

to the government, (2) the FTC’s current policy review

of proposed rules lacks real bite, (3) there is a circuit

split over private delegates’ power to set fees, (4) there

is similarly a circuit split over private delegates’ power

to issue guidance, and (5) the Court should hear this

case this term.

1. Policymaking is a sovereign function that

must rest in the FTC alone.

It is not true that “‘all parties’ and courts across

every private-nondelegation challenge to HISA’s

rulemaking structure have expressly ‘agree[d] that

the outcome turns on whether the private entity is

subordinate to the agency.’” Auth. Resp. 13.

The NHBPA Plaintiffs have made two arguments.

The first is that under some existing precedent,

particularly Sunshine Anthracite Coal Co. v. Adkins,

310 U.S. 381, 399 (1940), the question is one of

subordination.

But the NHBPA Plaintiffs have also argued (Pet.

21) that under a second line of precedent, starting in

Carter v. Carter Coal Co., 298 U.S. 238 (1936), and

most recently reiterated in Pittston Co. v. United

States, 368 F.3d 385, 397-98 (4th Cir. 2004), the

question is not one of subordination but of sovereignty:

is the function one uniquely vested in the government?

In other words, some activities may be delegated

across branches, but they cannot be delegated outside

government at all. Policymaking, like law

enforcement, is one such sovereign function. Carter,

298 U.S. at 311 (“The difference between producing

coal and regulating its production is, of course,

fundamental. The former is a private activity; the

latter is necessarily a governmental function. . .”).

Review of legislative delegation is needed to clarify

these two conflicting frameworks. May a private entity

enjoy a privileged and powerful position as the

primary policymaker writing regulations for an

industry1, or may a private entity only act as an

“advisor” and “consultant” but not as the primary

driver of policy? Pet. 13-14.

2. The Authority mischaracterizes the FTC’s

“consistency review.”

According to the Authority, “the FTC’s front-end

‘consistency’ review has real ‘bite.’ Petitioners are

wrong that the FTC cannot disapprove proposed

standards ‘on policy grounds.’” Auth. Resp. 22.

Actually, the Fifth Circuit correctly concluded that

consistency review is “high-altitude,” “arms-length,”

“open-ended,” and “next to nothing.” Pet. App. 86a.

That remains the standard even in the amended act.

15 U.S.C. § 3053(c)(2). And that is the standard the

FTC still uses when reviewing rules. See, e.g., Order

Approving the Racetrack Safety Rule Modification

Proposed by the Horseracing Integrity and Safety

Authority, FTC Order (June 7, 2024), at 3-4.

Consistency review precludes the FTC’s exercise of

its own policy preferences. Pet. App. 135a (“whatever

‘consistency’ review includes, we know one thing it

excludes: the Authority’s policy choices in formulating

rules”). The only way the FTC can exercise its policy

preferences concerning proposed rules under the

amended act is by twisting itself in procedural knots:

it can sit on the proposed rule without actually

See 15 U.S.C. § 3055(a)(1) (“the Authority shall establish a

horseracing anti-doping and medication control program

applicable to all covered horses, covered persons, and covered

horseraces”); id. § 3056(a)(1) (“the Authority shall establish a

racetrack safety program applicable to all covered horses, covered

persons, and covered horseraces”).

granting it consistency review, Auth. Resp. 36, or

delay its effective date until the FTC completes its own

separate rulemaking first. Id. Accord FTC Resp. 10.

But the Act does not grant the FTC the two most

obvious and effective powers: the power to amend a

proposed rule to rewrite, remove, or add a particular

section or subsection to the rule (it must approve or

reject an Authority-proposed rule in toto) and the

power to act in the first instance on its own policy

preference regarding the proposed rule.

In all events, the “consistency” standard does not

have “bite.” It is cursory, a rubber-stamp, and not the

same standard as the SEC’s “public interest”

standard. Contra Auth. Resp. 22. It does not permit

the FTC to act as an independent, supervisory check

on the Authority’s proposed rules.

3. There is a circuit split over whether a

private delegate may set fees without

agency oversight.

Shortly after the Horsemen first began targeting

the Act’s delegation of fee-setting power to the

Authority in their amended complaint, the FTC sua

sponte (the more appropriate Latin is probably

mirabile dictu) issued a rule giving itself supervision

of the Authority’s budget, even while acknowledging

the budget was not one of the eleven items of

supervisory authority enumerated in the statute, 88

Fed. Reg. 18034, 18035 (citing 15 U.S.C. § 3053(a)).

That still does not grant the FTC power over the fee

rates themselves, which are formulated and set by the

Authority. Pet. 9-10. In all events, even the budget

oversight rule does not grant the FTC power to

approve or disprove the specific fees charged to

horsemen—the statute gives that power exclusively to

the Authority. 15 U.S.C. § 3053(f)(1)(C)(iv)(I-II).

While arguing that the Horsemen should file an asapplied challenge to the rule if they think it is contrary

to the statute, Auth. Resp. 27, FTC Resp. 10, the

Authority and FTC never respond to the core point of

the Petition: the Fifth Circuit decision allowing the

Authority to set fees parts ways from the Third,

Fourth, and Sixth Circuits, which have held that

private delegates may collect fees but may not set fee

rates. Pet. 9-12. That circuit split is real and requires

resolution.

4. There is a circuit split over whether a

private delegate may set policy through

guidance without agency oversight.

The Authority and FTC also fail to refute the

Petition about the circuit split over a private entity’s

guidance power. The Act grants the Authority the

power to issue interpretive guidance. 15 U.S.C.

§ 3054(g)(1). By law, that guidance takes “immediate

effect.” Id. § 3054(g)(3). The Act also authorizes the

Authority’s anti-doping agency (a sub-delegate) to

issue “rules, protocols, policies, and guidelines” not for

approval by the FTC but “for approval by the

Authority.” Id. § 3055(c)(4)(A).

The Authority and FTC respond that such

guidance “does not have the force of law.” Auth. Resp.

28, FTC Resp. 11. But return to the example given in

the Petition (Pet. 19): the Authority proposes, and the

FTC finds consistent and promulgates, a rule limiting

toe grabs in races (think cleats for horseshoes) (ROA.

3479). The Authority then issues “guidance” saying it

will not enforce the toe grabs rule (as indeed it has,

ROA.3680). Has not the Authority made the final

policy determination that has “the force of law”? See

Kisor v. Wilkie, 588 U.S. 558, 607-08 (2019) (Gorsuch,

J., concurring in the judgment) (noting that “a legal

brief, press release, or guidance document” can be

used by agencies as “a shortcut around the APA’s

required procedures for issuing and amending

substantive rules”).

The Fifth Circuit sanctioned giving the Authority

this guidance power to rewrite the rules, Pet. App. 13a

n.6, even when faced with a record containing over two

dozen examples of the Authority rewriting rules

through formal guidance and informal press releases

and newsletters.

The Sixth Circuit, by contrast, upheld the

Universal Service Administration Corporation against

a private nondelegation challenge precisely because it

could not “make policy, interpret unclear provisions of

the statute or rules, or interpret the intent of

Congress.” Consumers’ Rsch. v. FCC, 67 F.4th 773, 796

(6th Cir. 2023).2

The Fifth Circuit permits the Authority to make

policy and interpret statutes and rules via guidance.

2 The Government says that “[i]t is especially incongruous for

petitioners to assert (National Horsemen Pet. 8) a conflict with

the Sixth Circuit’s decision in Consumers’ Research when the

Sixth Circuit has squarely rejected a private nondelegation

challenge to the amended Act’s rulemaking provisions.” FTC

Resp. 12. But the Oklahoma Court did not consider—because the

parties did not raise—the nondelegation doctrine as applied to

fee-setting or the guidance power, so it can hardly be said to have

“squarely rejected” these arguments.

The Sixth Circuit does not permit that sort of thing.

The Authority’s response in no way addresses this

divergence.

5. This case calls for certiorari this term.

The Horsemen are aware that this Court has

already granted certiorari in Federal Communications

Commission v. Consumers’ Research, No. 24-354, also

from the Fifth Circuit. The third question presented in

that case touches on the private nondelegation

doctrine. FCC Pet. I. However, it does not squarely

present the private nondelegation question as the

central issue of the case, as the litigation around the

Horseracing Act does.

In some sense, the horseracing petitions are a

necessary predicate to the Consumers’ Research case.

Consumers’ Research calls for the Court to consider

the admixture of public and private nondelegation

principles. But this Court must first decide the

appropriate private nondelegation principles before

considering whether those concerns combined with

public nondelegation concerns can together create a

constitutional problem.

Moreover, the FCC case does not present the

question of delegated enforcement authority, which

may demand a different constitutional standard from

administrative authority.3 Thus, from a legal

perspective, separate review of this case is needed.

3 Alpine Sec. Corp. v. Fin. Indus. Regul. Auth., 2024 U.S. App.

LEXIS 29728, *62-63 (D.C. Cir. Nov. 22, 2024) (Walker, J.,

concurring in part in the judgment and dissenting in part) (There

is “a constitutionally significant difference between rulemaking

Prompt review is also needed from a practical

perspective. The horseracing industry employs

thousands of people and generates billions of dollars a

year in economic activity. It needs clarity on the

fundamental constitutionality of its national

regulatory structure. All parties on both sides of the

“v” agree that this clarity is necessary as soon as

possible, and have respectfully requested that the

Court hear this case this term. The Horsemen are

ready to accept an accelerated briefing schedule if

necessary to accomplish that goal.

CONCLUSION

The Court should grant this Petition, the petition

of Texas, and the petitions of the Authority and FTC,

for a comprehensive vehicle to clarify and apply the

private non-delegation doctrine in both its Article I

and Article II contexts.

and enforcement. Rulemaking can sometimes be properly

supervised by final-stage review if the review occurs before the

rule takes effect. In contrast, enforcement actions cannot be

properly supervised by final-stage review because severe

restrictions on liberty can occur at every step. So, for an

enforcement action, the issue of when oversight occurs is just as

important as how much oversight occurs.”).

Respectfully submitted,