Supreme Court to Review Nondelegation Doctrine in FCC Case

The Supreme Court recently agreed to review a ruling of the Court of Appeal for the 5th Circuit that declared the Federal Communications Commission’s (FCC) E-rate programme unconstitutional. The ruling was granted after a series of cases filed by Consumers’ Research, an advocacy group, challenging the legality of the E-rate programme, which seeks to subsidise phone and Internet services in underserved regions. 

In Federal Communications Commission v. Consumers’ Research, the Supreme Court agreed to hear the FCC’s petition that seeks to quash the decision of the lower court. This case, which is slated for determination early or mid-2025, will set precedent on Congress’s ability to delegate its legislative powers, and the role of administrative agencies in creating by-laws. 

Factual Background of the Case

The E-rate program is a federal initiative that subsidised Internet and phone services for public schools, rural communities and low-income families in cities. Under this programme, telecoms companies are required to contribute to the Universal Service Administrative Company, which is a non-profit tasked with managing the Universal Service Fund that financed those subsidies. 

Congress created the E-rate programme and authorised the FCC to establish and oversee the corporation. As such, the federal agency has direct control of the Universal Service Administrative Company. FCC allocates the company’s budget and appoints its board of directors. Additionally, the company is required to comply with FCC rules. 

In light of the above, Consumers’ Research filed a series of cases in federal courts challenging the constitutionality of the E-rate programme. It argued that Congress had improperly delegated legislative powers to the FCC by allowing the agency to set and collect fees from telecoms providers. It maintained that such delegations are in violation of the nondelegation doctrine, which seeks to promote separation of power by prohibiting Congress from delegating legislative power to other branches of government.

The advocacy group argued that the FCC had also improperly delegated too much discretion to the Universal Service Administrative Company by allowing it to determine the amount of the fee. They argued that this violated the private nondelegation doctrine, which requires that the government cannot delegate its power to private entities. 

In a series of rulings in 2023, the US Courts of Appeal for the 5th, 6th and 11th Circuits rejected Consumers’ Research’s arguments. However, in a turn of events, the full 5th Circuit allowed the group’s petition for rehearing filed in July 2024, and later issued a ruling in favour of the group, declaring the E-rate programme unconstitutional for breach of the nondelegation doctrine.

The Nondelegation Doctrine and the Intelligible Principles Standard

On one hand, Consumers’ Research’s case is premised on the nondelegation doctrine, which is set out under Article 1 Section 1 of the US Constitution. This constitutional doctrine stipulates that all legislative powers vest in the US Congress. Consumers’ Research’s main arguments are:

• that Congress cannot delegate its legislative power to the FCC for the purposes of passing taxation laws; and
• that the FCC cannot subdelegate such authority to a private company. 

On the other hand, the FCC’s case is built around the Intelligible Principle Standard, which allows Congress to delegate policymaking and rulemaking powers to administrative agencies for ease of enforcement of laws. The intelligible standard was first laid down in the 1928 case of J. W. Hampton, Jr. & Co. v. United States, where the Supreme Court held that when delegating, Congress is only restrained by common sense and the necessity of governmental cooperation. In that case, the Court explained that Congress can delegate discretion to administrative bodies to secure the intended effect of legislation on condition that it issues intelligible principles on how such delegated policymaking powers are to be exercised. That typically means that Congress ought to set boundaries or limits for its delegations. 

The FCC maintains that Congress properly delegated its discretion because it established intelligible principles directing the federal agency on how to act. They also argue that the arrangement with the Universal Service Administrative Company is permissible because the company is only authorised to exercise administration functions over the Universal Service Fund, and has no policymaking power to set subsidy rates or fees.

Supreme Court Orders Pending Hearing

The FFC’s petition to have the ruling of the Court of Appeal for the 5th Circuit overturned will be heard in March or April 2025, with the apex court’s decision to follow between June and July 2025.

However, the Supreme Court issued orders requiring the parties to include in their submissions the question of whether the case is moot, or in other words, no longer a live controversy. 

Parallel Case: Schools, Health & Libraries Broadband Coalition v. Consumers’ Research

In a parallel case, Schools, Health & Libraries Broadband Coalition v. Consumers’ Research, a group of trade associations representing entities that have been receiving E-rate funding has also petitioned the Supreme Court for review of the decision of the appellate court. Both cases will be heard together in March or April 2025. 

What is at Stake for Administrative Agencies?

If the Supreme Court upholds the ruling of the Court of Appeal for the 5th Circuit and narrows Congress’s delegation powers, it could significantly impact agency rulemaking and policymaking authority across industries in the US.

Conclusion

The Supreme Court’s decision to review the nondelegation doctrine in the FCC case holds far-reaching implications for the balance of power between Congress and administrative agencies. The Supreme Court will apply the intelligible principle standard to determine whether Congress overstepped its constitutional boundaries when delegating authority to the FCC. The outcome of this case could reshape how federal agencies operate, particularly regarding their ability to create and enforce rules within delegated authority.

If the Supreme Court upholds the ruling by the Court of Appeal for the 5th Circuit, it could significantly limit Congress’s ability to delegate powers, placing more responsibility on lawmakers and limiting the reach of administrative agencies. Additionally, federal programmes like the E-rate initiative may face stricter oversight or restructuring. 

With the case set to be decided in 2025, the ruling will serve as a pivotal moment in defining the scope of legislative power and administrative governance in the US.

Source: SCOTUSblog

References:

Federal Communications Commission

Universal Service Administrative Company 

United States Court of Appeal for the 5th Circuit

Congress: Nondelegation Doctrine

Congress: Intelligible Principle Standard 

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