6th Circuit Questions Jurisdiction, Nondelegation Argument in USF Challenge

A three-judge panel on the 6th U.S. Circuit Court of Appeals questioned the timing of Consumers' Research's challenge of the USF 2021 Q4 contribution factor and how the nondelegation doctrine applied to the FCC's determination of the quarterly factor Thursday. Judges heard oral argument Friday on the challenge (see 2303060069).

"I'm struggling a little bit to understand your assumption regarding this intelligible principle that you assume” because it “does appear to me that your whole argument hinges on this need to show that the case is related to revenue raising statutes rather than ... complex technical determinations,” said Judge Karen Nelson Moore. The judge questioned whether it would resolve the case if the court disagreed with the petitioners’ conclusion that “this is a revenue raising statute.”

"When it comes to raising revenue, intelligible principal requires some sort of objective guardrail on the executive’s ability to raise money like caps or rates,” said Consumers' Research attorney Trent McCotter of Boyden Gray. It “would still be a nondelegation violation because of the FCC's power to redefine universal service," he said. Moore noted the FCC’s process “lives in the world of technical details and of an incredibly quickly changing arena,” adding there’s a distinction between revenue-raising provisions and “cases where what is being delegated grows out of a complex or more technical arena of the law.”

McCotter noted the case is a “nondelegation challenge" to the FCC's "revenue raising power.” FCC counsel James Carr called the issue a "red herring" because "the Supreme Court has made quite clear that for purposes of nondelegation, there's not a special test for delegations of taxing authority."

Judge Jane Branstetter Stranch questioned how the contribution system is revenue raising rather than “just imposing a fee.” McCotter argued the money collected for USF is “raised from a large group of individuals,” placed into a “common fund,” and then “redistributed back out for the benefit of perhaps millions, or hundreds of thousands, individuals.” It’s “kind of the classic definition of a tax,” he said. Judge Eric Clay questioned why the Q4 contribution factor public notice wasn’t “really like an invoice” that “just applies the regulatory scheme and … doesn't create a legal obligation” rather than a final order.

"The legal obligation comes from the passage of [Communications Act] Section 254," Clay said, and the contribution factor document is "another instance of providing ongoing notice." Clay suggested the petitioners "need to take your beef to the FCC" so the agency can make a determination before they appeal that to the court. It "would seem that the FCC should have an opportunity to rule on this before you get to the Court of Appeals," he said.

Stranch pressed McCotter on whether petitioners can "go back to the beginnings and challenge the constitutionality" of the FCC's approach every quarter. "We can challenge the constitutionality of an agency's application of a statute," McCotter said. Stranch also asked whether the challenge was premature. Carr agreed, saying the challenge was untimely because "we don't think the announcement of the contribution factor actually applies to any regulated entity" until the Universal Service Administrative Co. sends invoices to a particular carrier.