Note from the Editor: The Federalist Society is pleased to present two different perspectives on the North Carolina Board of Dental Examiners v. Federal Trade Commission case currently pending before the U.S. Supreme Court.
Federalism Implications of Applying
Federal Antitrust Scrutiny to
State Licensing Boards
By David J. Owsiany*
There is a long-simmering debate over professional licensing in America. One side argues that state-based licensure and regulation of certain professions, especially in health care, is beneficial to the protection of the public in terms of ensuring minimal standards and quality of services.1 The other side argues that professional licensing reduces the number of providers of the regulated professional services and leads to artificially higher prices, with limited evidence of consumer protection or benefit.2
North Carolina State Board of Dental Examiners v. FTC3 has become a proxy for the battle over the benefits and detractions of professional licensing.4 The issue in the case is whether the state-action exemption from federal antitrust laws applies to the actions of the North Carolina State Board of Dental Examiners (NC Dental Board or Board) in preventing unlicensed individuals from providing teeth-whitening services. The U.S. Court of Appeals for the Fourth Circuit, agreeing with the Federal Trade Commission (FTC), held that the state-action exemption did not apply to the NC Dental Board’s actions.5 The U.S. Supreme Court granted the NC Dental Board’s petition for certiorari.
Much of the public debate has focused on the economic impact of professional licensing and the growth in the number of professions that the states have chosen to license in recent years.6 While these arguments merit serious consideration, especially as policy matters before state legislatures, the North Carolina State Board of Dental Examiners v. FTC case presents important federalism considerations, which were largely ignored by the FTC and the Fourth Circuit.
I. Overview of the State-Action Antitrust Exemption
In Parker v. Brown,7 the U.S. Supreme Court first set out the parameters of what has become to be known as the “state-action doctrine” related to application of federal antitrust laws. Specifically, the Parker Court held that a state’s anticompetitive acts directed by the legislature are exempt from the Sherman Act’s prohibitions. The Court noted that “in a dual system of government,” the states are “sovereign” and that there is “nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.”8 Congress has not enacted legislation to attempt to expand the reach of federal antitrust laws to cover state action since the Parker court defined the state-action doctrine in 1943. Instead, Congress and federal enforcement agencies have mostly focused their attention on private anticompetitive activities.9
The U.S. Supreme Court later applied the state-action antitrust exemption to the actions of a state supreme court in denying an applicant admission to the state bar.10 Conversely, the U.S. Supreme Court held in Town of Hallie v. City of Eau Claire that actions of municipalities are not beyond the reach of federal antitrust laws by virtue of their status, because they are not themselves sovereign. In order to obtain the state-action exemption, the Court said that municipalities must demonstrate that their anticompetitive activities are pursuant to a “clearly articulated” state policy to displace competition with regulation or monopoly public service.11 The determination that a municipality’s activities constitute state action is not a purely formalistic inquiry.12 The state may not validate a municipality’s anticompetitive conduct simply by declaring it to be lawful.13 On the other hand, in proving that a state policy to displace competition exists, the municipality is not required to “point to a specific, detailed legislative authorization before it properly may assert a Parker defense to an antitrust suit.”14 The Hallie Court held that this “clear articulation” test does not require the statute to compel a municipality to act. The statutory provisions must merely show that the legislature contemplated such anticompetitive actions by the municipality.15
The Supreme Court has also held that private parties may receive the state-action exemption but only if (1) they act pursuant to a clearly articulated state policy to displace competition with regulation or monopoly public service, and (2) the policy is actively supervised by the state itself.16 The active supervision requirement stems from the belief that where a private party engages in the anticompetitive activity, there is a real danger that the private party is acting to further his or her own interests, rather than the governmental interests of the state.17
While the Court in Hallie considered the application of federal antitrust laws to municipalities, it noted in a footnote that “[i]n cases in which the actor is a state agency, it is likely that active state supervision would also not be required.”18
II. Background of North Carolina State Board of Dental Examiners v. FTC
A. North Carolina Board of Dental Examiners
The North Carolina statute provides that:
The practice of dentistry in the State of North Carolina is hereby declared to affect the public health, safety and welfare and to be subject to regulation and control in the public interest. It is further declared to be a matter of public interest and concern that the dental profession merit and receive the confidence of the public and that only qualified persons be permitted to practice dentistry in the State of North Carolina. This Article shall be liberally construed to carry out these objects and purposes.19
The statute also provides that the “North Carolina State Board of Dental Examiners [is] heretofore created” and “is hereby continued as the agency of the State for the regulation of the practice of dentistry in this State.”20 The NC Dental Board is made up of eight members—six licensed dentists, one licensed dental hygienist and one consumer member. Licensed North Carolina dentists elect the six dentist members, and the state’s licensed dental hygienists elect the hygienist member. The consumer member is appointed by the governor. Any dentist elected to the NC Dental Board must possess a license to practice dentistry in North Carolina and be engaged in the active practice of dentistry.21
The statute also specifically provides that a person must hold a valid license issued by the NC Dental Board to engage in the practice of dentistry in North Carolina.22 According to the statute, the practice of dentistry includes any person who
“[r]emoves stains, accretions or deposits from the human teeth.”23
Beginning in 2006, the NC Dental Board issued cease and desist letters to non-dentists who were providing teeth-whitening services to the public in North Carolina. The NC Dental Board based its actions on finding that non-dentists who provide teeth-whitening services were practicing dentistry without a license.24
B. Federal Trade Commission
In 2010, the FTC issued an administrative complaint against the NC Dental Board charging it with violating federal antitrust laws by excluding non-dentist teeth whiteners from the market.25
An administrative law judge held a merits trial and issued a decision finding that the NC Dental Board’s concerted action to exclude non-dentists from the market for teeth-whitening services in North Carolina constituted an unreasonable restraint of trade and an unfair method of competition in violation of federal antitrust law.26 On appeal, the FTC issued a final order sustaining the administrative law judge’s decision and issuing a cease and desist order enjoining the NC Dental Board from, among other things, prohibiting, restricting, impeding, or discouraging the provision of teeth-whitening services by a non-dentist provider.27
In finding the NC Dental Board violated federal antitrust law, the FTC noted that “[n]o advanced degree in economics is needed to recognize that exclusion of products from the marketplace that are desired by consumers is likely to harm competition and consumers, absent a compelling justification.”28 The FTC then suggested that it did not even need to seriously consider the existence of a justification, noting that the NC Dental Board’s actions to foreclose access to an entire class of competitors invites condemnation with “little, if any, consideration of any purported defenses.”29 The FTC then summarily rejected the NC Dental Board’s claims that its actions were intended to promote public health and safety pursuant to state statute, finding that the board’s proffered defense was not a cognizable justification for its anticompetitive actions.30
In rejecting the NC Dental Board’s claims that its actions were protected pursuant to the principles of federalism, the FTC concluded that the NC Dental Board was a private actor, and not a state agency entitled to deference under the state-action doctrine, because the NC Dental Board was controlled by financially interested members.31 As a private actor, the NC Dental Board had to show that it was actively supervised by the state, which it could not do, according to the FTC.32
C. U.S. Court of Appeals for the Fourth Circuit
The NC Dental Board petitioned to the Fourth Circuit for review of the FTC’s order. The NC Dental Board contended that because it is a state agency under the state-action doctrine, it merely had to show that it was acting pursuant to a clearly articulated state policy to displace competition with regulation. The Fourth Circuit largely followed the FTC’s approach, finding that the NC Dental Board is a private actor, not a state agency, because a decisive majority of the Board is made up of market participants who are chosen by their fellow market participants.33 Accordingly, the Fourth Circuit held that the NC Dental Board had to show that: (1) it was acting pursuant to a clearly articulated and affirmatively expressed state policy to displace competition with regulation and (2) its actions were actively supervised by the state.34 The Fourth Circuit then found that the NC Dental Board could not show any active supervision, noting, for example, that the NC Dental Board sent out cease and desist letters to non-dentist teeth whiteners “without state oversight and without the required judicial authorization.”35
The Fourth Circuit quickly rejected the NC Dental Board’s federalism arguments with little analysis, summarily holding: “given our conclusion that the Board is a private actor under the antitrust laws, there is no federalism issue” involved in the case. The Fourth Circuit concluded that its decision “hardly sounds the death knell for federal/state balance” related to professional licensing boards.36 A closer examination of the case’s facts and the history and law related to state-based professional licensing, however, reveals legitimate federalism concerns related to the Fourth Circuit’s holding.
III. Brief History of Professional Licensing and
Regulation in America
The regulation and licensure of health care professionals in America dates back to the Colonial Era.37 In the 1600s, certain colonies recognized the danger to their citizens of unscrupulous or unqualified health practitioners so they adopted medical licensure requirements and other health care-related regulations.38
Following ratification of the U.S. Constitution, states continued to be active in the regulation and licensure of health care practitioners. For example, in 1806, New York’s state legislature enacted what some have characterized as the most elaborate medical law for its time in the U.S.39 The New York law called for the formation of medical societies to examine and license candidates for the practice of medicine following three years of medical study.40 New York’s law was typical of the direction of most licensing laws in the early 1800s with states working with medical societies to regulate the practice of medicine.41
The Jacksonian Era (1828-1840) ushered in an anti-regulatory climate that led to a collapse of medical regulation and licensure in the U.S. During that time, nearly all states repealed their penalties for the unlicensed practice of medicine and other health care regulations.42 With the onset of the Civil War in 1861, states began reconsidering and eventually reestablishing regulation of health care and licensing of medical professionals. America’s Civil War involved unprecedented levels of casualties, including both soldiers and civilians, many of which were attributable to medical illnesses and unsanitary medical practices, not necessarily the direct result of the armed conflict.43
Two main developments led to the reestablishment of medical licensing and regulation in America. First, advancements in modern medical science by 1880 led to more advanced and successful treatment of diseases and injuries, requiring professional knowledge and skill.44 The second development was the discovery that keeping wounds, surgical instruments, and health care providers clean would dramatically reduce deaths due to infection.45 The states’ decisions to reinstitute medical regulatory systems were largely based on these public protection considerations.46
By the early 1900s, most states had enacted some kind of dental and medical licensing regulations.47 From 1900 to 1930, states expanded licensure to other professionals, including lawyers, accountants, architects, nurses, and pharmacists.48 In recent years, some states have expanded licensing to many more professions and occupations, which has fueled the debate over the value of certain state licensing laws.49
The U.S. Supreme Court has long recognized the state’s authority to license and regulate professionals. In the 1923 Douglas v. Noble case, the U.S. Supreme Court held that a state may “prescribe that only persons possessing the reasonably necessary qualifications shall practice dentistry” and that the state legislature may “confer upon an administrative board the power to determine whether an applicant possesses the qualifications which the legislature has declared to be necessary.”50 Similarly, in the 1926 Graves v. Minnesota case, the Court held that “[i]t is well settled that a state may, consistently with the Fourteenth Amendment, prescribe that only persons possessing the reasonably necessary qualifications of learning and skill shall practice medicine or dentistry.”51
The Court in Douglas, and again in Graves, relied upon the seminal 1889 case, Dent vs. West Virginia, which held that “[t]he power of the State to provide for the general welfare of its people authorizes it to prescribe all such regulations as in its judgment will secure or tend to secure them against the consequences of ignorance and incapacity, as well as of deception and fraud.”52 The Dent Court also noted that “[d]ue consideration, therefore, for the protection of society may well induce the State to exclude from [medical] practice those who have not such a license, or who are found upon examination not to be fully qualified.”53
IV. Analysis of North Carolina State Board of Dental Examiners v. FTC and It’s Potential Impact on State-Federal Balance
A. Scope of the Fourth Circuit’s Decision
The FTC seemed to suggest the fact that most of the NC Dental Board’s members are market participants was enough for it to conclude that the board is a private actor, regardless of how the board members are selected.54 The Fourth Circuit arguably considered two factors—that a majority of the NC Dental Board is made up of market participants and that those board members are elected by other market participants—in reaching its conclusion that the NC Dental Board is a private actor. Accordingly, there appears to be some confusion over the scope of the Fourth Circuit’s holding and the significance of the fact that the dentist board members are elected by North Carolina’s dentists.55
Judge Barbara Milano Keenan issued a separate concurring opinion in the case to “emphasize the narrow scope” of the Fourth Circuit’s holding. Judge Keenan pointed out that the court did not hold that a state agency must always have active state supervision to be exempt from antitrust scrutiny. Judge Keenan also claimed that the court did not hold that a state agency comprised, in whole or in part, of members participating in the market regulated by that state agency is necessarily a private actor subject to the active state supervision requirement.56
Judge Keenan wrote that “[i]f the Board members here had been appointed or elected by state government officials pursuant to state statute, a much stronger case would have existed” that the NC Dental Board did not need active state supervision in order to be exempt from antitrust scrutiny.57
States employ many different mechanisms for board appointments, including some that rely upon regulated professionals in the selection process. One common method is for states to give the governor broad authority to appoint board members.58 In some states, as is the case with the NC Dental Board, certain board members are elected by the regulated professionals within the state.59 Other states require the governor to appoint board members from a list of names recommended by the licensed professionals.60 These varying methods of appointment are a reflection of state discretion in the area of professional licensure, consistent with the principles of federalism,61 and should have no bearing on whether the state-action exemption applies.62 Other courts have not considered the method of appointment as dispositive in determining whether a state licensing board is a private actor for state-action exemption purposes.
B. Impact on the States
The fact that the State of North Carolina chose to have dentists on the board that licenses and regulates dentists is not surprising or unique. All states have some type of professional licensure laws, and they regularly set up systems with individuals from the regulated profession participating on the regulatory boards.63 This makes sense since market participants have the expertise to determine qualifications, set standards, and assess competence. Moreover, active practicing professionals are likely to spot emerging threats to the public—especially in dynamic fields like medicine and dentistry—much faster than state legislators or bureaucrats.64
States would be significantly impacted if the Fourth Circuit’s decision is allowed to stand. States would be forced to make sweeping changes to their licensing and regulatory structures, impacting dozens of boards in each state.65 Twenty-three states joined in an amicus brief filed with the Supreme Court in support of the NC Dental Board, pointing out that each of the amici states uses active professionals on regulatory boards overseeing their own respective professions, including doctors, dentists, chiropractors, nurses, pharmacists, optometrists, lawyers, architects, funeral directors, and accountants.66 The National Governors Association and the National Conference of State Legislatures also jointly filed an amicus brief arguing that the “level of supervision required by the Fourth Circuit and the FTC places an impractical burden on States that depend on hundreds of boards to carry out regulatory and policymaking functions.” This burden “impinges upon the very principles of federalism that the Parker doctrine was intended to protect.”67
The Fourth Circuit’s approach would have a wide-ranging effect on the states’ ability to regulate professionals. For example, by finding that these boards are private actors instead of state agencies, board members could be held personally liable for damages in court actions taken by licensees.68 This would make it more difficult for states to find knowledgeable and experienced professionals to help them regulate other professionals who often practice in complex, dynamic, and technical fields, including medicine and dentistry.
Requiring active supervision of state licensing boards would be redundant and cumbersome, requiring one set of state actors to supervise another set of state actors. One commentator summarized the concern this way:
[I]t is hard to imagine a greater intrusion into the internal affairs of a state than a federal inquiry into the government’s oversight of its own agencies, and it is not easy to imagine just how a state in practice would go about supervising its agencies. Usually, agencies do the supervising.69
This would likely result in a system that is more expensive and less effective than the current system, potentially requiring states to either hire full-time bureaucrats to supervise the regulation of professions about which they have little knowledge and experience or force legislators to be actively involved in the oversight of every licensed profession.70 Many states may stop utilizing market participants within their regulatory scheme altogether. Since the new regulators would not be active in the regulated profession, they would likely be less effective in ensuring professional standards are met and protecting consumers who use such professional services.71
C. Federalism Concerns
Among the powers reserved to each state under the Tenth Amendment is the power to protect the public health and safety of its citizens.72 It is pursuant to this power that states are authorized to regulate law, medicine, dentistry, and other professions, which they typically do by delegating authority to professional licensing boards.73 The states have engaged in the licensing and regulation of certain professionals since our nation’s founding, and the state-action exemption protects the states’ role in professional licensing from federal antitrust intrusion.
The critics of the state-action doctrine—including the FTC—support their desire to restrict the availability of the state action-exemption through what seems to be either an “unduly cramped notion of the value and purposes of the state-action doctrine or a policy-oriented belief that federal competition policy is generally superior to the state regulatory schemes.”74 These critics focus on “economic-efficiency” but are “reluctant to grapple openly with reassessing the value of federalism.”75 The central legal principle underlying the state-action doctrine, however, is federalism; it is not whether federal competition policy would achieve better efficiency76 or superior outcomes versus a state regulatory scheme.77
The state-action doctrine allows a state to displace the federal procompetitive norm in order to achieve a policy objective that the state believes is more important.78 The NC Dental Board’s actions, taken pursuant to state statute, were intended to protect the public from potential harm related to non-dentists performing teeth-whitening services. The FTC and the Fourth Circuit’s majority opinion summarily dismissed the NC Dental Board’s health and safety justification.79
The facts of the case, however, clearly support the NC Dental Board’s health and safety justification. Judge Keenan’s concurring opinion states:
In this case, I do not doubt that the Board was motivated substantially by a desire to eliminate an unsafe medical practice, namely, the performance of teeth-whitening services by unqualified individuals under unsanitary conditions. The Board was aware that several consumers had suffered from adverse side effects, including bleeding or “chemically burned” gums, after receiving teeth-whitening services from persons not licensed to practice dentistry. Additionally, the Board was aware that many of the “mall kiosks” where such teeth-whitening services are performed lack access to running water. The Board also received reports that non-licensed persons performed teeth-whitening services without using gloves or masks, thereby increasing the risk of adverse side effects. Accordingly, in my view, the record supports the Board’s argument that there is a safety risk inherent in allowing certain individuals who are not licensed dentists, particularly mall-kiosk employees, to perform teeth-whitening services.80
The FTC and the Fourth Circuit’s majority opinion did not give the NC Dental Board’s health and safety justification much consideration because they focused their analyses on finding that the NC Dental Board is a private actor. By doing so, they then required that the NC Dental Board’s actions had to be actively supervised by the state.81 However, the FTC and Fourth Circuit’s conclusion that the NC Dental Board is a private actor is inconsistent with the clear, unambiguous statement of North Carolina law, which declares that the NC Dental Board is “the agency of the State for the regulation of the practice of dentistry.”82
There are several additional factors that support the conclusion that the Board is a state agency. North Carolina statutes: (1) designate NC Dental Board members as “state employees,”83 (2) provide that NC Dental Board members may be punished by the North Carolina Ethics Commission if they act in a manner that presents a conflict of interest, which can potentially lead to removal from office,84 (3) give the North Carolina Joint Legislative Commission on Governmental Operations the authority to study state agency activities (including those of the NC Dental Board) to ensure conformity with legislative intent,85 and (4) provide NC Dental Board members with sovereign immunity and legal defense from the state attorney general.86 Moreover, the NC Dental Board members must take an oath of office promising to uphold North Carolina’s laws.87 The above statutory provisions and constitutional oath specifically apply to members of state agencies, including the NC Dental Board, but not to individuals engaged in private actions.
This is not a case where the state merely authorizes a private entity to engage in anticompetitive activities, which would require active supervision.88 The State of North Carolina established a state agency licensing board for dentists—the NC Dental Board—and included market participants as members of the board. North Carolina through its statutes passed by the legislature clearly articulated its definition of the practice of dentistry and licensure requirements to be enforced by the NC Dental Board.
The FTC and Fourth Circuit ignored these clear dictates of North Carolina law in order to find that the NC Dental Board is a private actor. They did so because they believe that giving greater weight to the active-supervision requirement is likely the best way available to them to discourage state licensing and regulatory boards from acting in anticompetitive ways.89 Several critics who disagree with the states’ policy decisions related to occupational and professional licensing have urged courts to take this approach.90 However, the principles of federalism and separation of powers dictate that these occupational and professional licensure policy issues should be resolved by state legislatures, not federal courts.
Because the NC Dental Board is a state agency under any reasonable interpretation of North Carolina law, the NC Dental Board should only be required to show that it acted pursuant to a clearly articulated legislative direction to displace competition with regulation. The North Carolina statute gives the NC Dental Board broad regulatory authority over dentistry, explaining that the practice of dentistry “affect(s) the public health, safety and welfare” and is “to be subject to regulation” by the NC Dental Board.91 The statute limits the practice of dentistry only to those who possess a valid license issued by the NC Dental Board.92 The statute, however, does more than just give the NC Dental Board broad grants of licensing and regulatory authority; it also specifically defines the practice of dentistry to include the removal of “stains, accretions or deposits from the human teeth.”93
These statutory provisions make clear that the NC Dental Board acted pursuant to a clearly articulated policy set by the state legislature when the board acted to prevent teeth-whitening activities by unlicensed individuals.94 In fact, it is hard to imagine a more clearly articulated policy than the North Carolina statutes: only licensed dentists can practice dentistry and the practice of dentistry is defined to include removing stains from human teeth. Arguably, the NC Dental Board would have been in dereliction of its duty if it did not act to restrict the teeth-whitening activities of unlicensed individuals.
As noted above, the Parker Court made clear that there is “nothing in the language of the Sherman Act or its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.”95 The NC Dental Board is an agency of the State of North Carolina that was engaged in activities directed by the North Carolina Legislature. Accordingly, the Supreme Court should reverse the Fourth Circuit and find that the NC Dental Board’s actions are not restrained by federal antitrust laws.
In doing so, the Court would vindicate the principles of federalism by respecting the states’ long-standing, primary role in the area of professional licensing and would clarify that the state-action exemption applies to state agency licensing boards. Those critics who have policy concerns regarding the states’ recent activities in the area of professional and occupational licensing can still take their case to the state legislatures where such policy discussions belong.
1 See Neil Katsuyama, The Economics of Occupational Licensing: Applying Antitrust Economics to Distinguish Between Beneficial and Anticompetitive Professional Licenses, 19 S. Cal. Interdisc. L.J. 565, 577-78 (2010) (“Supporters of licenses argue that they are necessary because there is a lack of information available to consumers. If consumers are not able to gauge the quality of services, this will lead to two negative effects. The first is that consumers will be unable to find the appropriate level of quality they desire and will likely pay the wrong price for what they are receiving. Since they are unable to accurately assess the quality and skill of a professional, consumers will be taken advantage of and will pay for the services of quacks. This will be especially dangerous in professions like medicine and dentistry where poor quality service can cause permanent physical injury. Licenses can alert consumers that a certain professional is poorly qualified and that the consumer’s money is better spent elsewhere. The second negative effect is that high quality sellers will leave the market. Sophisticated consumers will know that some of the sellers are of poor quality. Taking the chance that they will receive the services of a poor seller into account, consumers will reduce the price they are willing to pay. With no guarantee of what they are going to receive, the maximum that a consumer will pay is less than they would pay if there had been some assurance of the quality of the service. This is necessarily lower than what the value of the highest quality sellers and those sellers will have to either lower their prices or exit the market.”); see also Marc T. Law & Sukkoo Kim, Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation, 65 J. Econ. Hist. 723, 754 (2005) (“The evidence presented suggests that the emergence of professional licensing regulation during the Progressive Era was motivated by a desire to improve the market for professional services. During this period, advances in knowledge and increased specialization gave rise to asymmetric information problems in the market for professional services, especially in urban areas. But, because private mechanisms alone could not eliminate all unqualified practitioners from the market, it was necessary for state governments to enact regulations that set standards of qualification to practice these occupations. Our analysis finds that licensing legislations were adopted earlier and were more likely to restrict entry into professions where informational asymmetries were most likely to be problematic. In addition, a detailed study of the effects of medical licensing shows that the specific licensing regulations that restricted entry most effectively were those that were likely to increase physician quality. Accordingly, we also find that stricter licensing also lowered mortality rates from diseases where physician quality may have mattered.”).
2 Adam B. Summers, Reason Foundation Policy Study No. 361 Occupational Licensing: Ranking The States and Exploring the Alternatives (Executive Summary) (Aug. 2007) (“While occupational licensing laws are billed as a means of protecting the public from negligent, unqualified, or otherwise substandard practitioners, in reality they are simply a means of utilizing government regulation to serve narrow economic interests. Such special-interest legislation is designed not to protect consumers, but rather to protect existing business interests from competition.”); Shirley Svorny, Cato Institute Policy Analysis No. 621, Medical Licensing: An Obstacle to Affordable, Quality Care 1 (Sept. 2008) (“[L]icensure not only fails to protect consumers from incompetent physicians, but, by raising barriers to entry, makes health care more expensive and less accessible.”).
3 717 F.3d 359 (4th Cir. 2013).
4 See Aaron Edlin & Rebecca Haw, Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?, 162 U. Pa. L. Rev. 1093, 1126-27 (2014); see also Jarod M. Bona, The Antitrust Implications of Licensed Occupations Choosing Their Own Exclusive Jurisdiction, 5 U. St. Thomas J.L. & Pub. Pol’y 28, 46-49 (2011).
5 N.C. State Bd. of Dental Exam’rs v. FTC, 717 F.3d 359 (4th Cir. 2013).
6 See Morris M. Kleiner, Why License a Florist?, N.Y. Times, May 29, 2014, at A35 (“On the left, there are concerns about inflated prices for essential services like plumbers and the availability of those services for people in or near poverty. Many of the jobs that require licenses are relatively low-skilled, like barbers and nurse’s aides, and licensing creates a barrier that might keep low-income people out of those positions…On the right, the issue is one of economic liberty. From that perspective, government-issued licenses largely protect occupations from competition. Conservatives often see members of the regulated occupation supporting licensing laws under claims of ‘public health and safety.’ However, these laws do much more to stop competition and less to enhance the quality of the service.”); see also Law & Kim, supra note 1, at 723-24 (“The late nineteenth and early twentieth centuries witnessed the birth of modern-day professions. Prior to the late 1800s only medicine, law, and theology were considered ‘learned professions.’ The growth of modern day professions was fueled not only by a transformation of these older professions but also by a significant increase in new professional occupations such as teaching, engineering, dentistry, and accountancy to list a few. Between 1900 and 2000 the percentage of the labor force engaged in technical and professional occupations increased from 4 percent to over 20 percent. This rise of professionals was also accompanied by the widespread adoption of occupational licensing regulation at the state level.”).
7 317 U.S. 341 (1943).
8 Id. at 350-51.
9 See generally William E. Kovacic & Carl Shapiro, Antitrust Policy: A Century of Economic and Legal Thinking, 14 J. Econ. Persp. 43 (2000); see also Robert Bork, The Antitrust Paradox (1993).
10 Hoover v. Ronwin, 466 U.S. 558 (1984).
11 Town of Hallie v. City of Eau Claire, 471 U.S. 34, 38-39 (1985).
12 Id. at 39.
13 Id.; see also Parker, 317 U.S. at 351.
14 City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 415 (1978).
15 Town of Hallie, 471 U.S. at 44-45.
16 Cal. Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980).
17 Town of Hallie, 471 U.S. at 47; see also Patrick v. Burget, 486 U.S. 94, 100 (1988). At least one commentator has taken an alternative view, noting that “[w]ith regard to antitrust state-action doctrine, the commentators fail to recognize that individuals who choose to enter public service in modern American society do not invariably pursue self interest.” Steven Semeraro, Demystifying Antitrust State Action Doctrine, 24 Harv. J.L. & Pub. Pol’y 203, 273 (2000).
18 Town of Hallie, 471 U.S. at 46 n.10.
19 N.C. Gen. Stat. § 90-22(a).
20 N.C. Gen. Stat. §. 90-22(b).
22 N.C. Gen. Stat. § 90-29(a) (“No person shall engage in the practice of dentistry in this State, or offer or attempt to do so, unless such person is the holder of a valid license or certificate of renewal of license duly issued by the North Carolina State Board of Dental Examiners.”).
23 N.C. Gen. Stat. § 90-29(b)(2) (“A person shall be deemed to be practicing dentistry in this state who does, undertakes or attempts to do, or claims the ability to do any one or more of the following acts or things which, for purposes of this Article, constitute the practice of dentistry:…[r]emoves stains, accretions or deposits from the human teeth.”).
24 See Opinion of Commission, N.C. Bd. of Dental Exam’rs, FTC Docket No. 9343 at 4 (Dec. 7, 2011) [hereinafter Opinion of Commission], http://www.ftc.gov/sites/default/files/documents/cases/2011/12/111207ncdentalopinion.pdf.
25 See Complaint, N.C. Bd. of Dental Exam’rs, F.T.C. Docket No. 9343 (June 17, 2010), http://www.ftc.gov/sites/default/files/documents/cases/2010/06/100617dentalexamcmpt.pdf.
26 Opinion of Commission, supra note 24, at 7.
27 Final Order, N.C. Bd. of Dental Exam’rs, FTC, Docket No. 9343 at 3 (Dec. 7, 2011). http://www.ftc.gov/sites/default/files/documents/cases/2011/12/111207ncdentalorder.pdf
28 Opinion of Commission, supra note 24, at 20.
29 Id. at 21.
30 Id. at 24-26.
31 Id. at 26.
33 N.C. State Bd. of Dental Exam’rs v. FTC, 717 F.3d at 368-70.
34 Id.at 367-70.
35 Id. at 370.
36 Id. at 375.
37 See David A. Johnson & Humayun J. Chaudhry, Medical Licensing and Discipline in America 3-6 (2012); see also Edward P. Richards, The Police Power and the Regulation of Medical Practice: A Historical Review and Guide for Medical Licensing Board Regulation of Physicians in ERISA-Qualified Managed Care Organizations, 8 Annals Health L. 201, 202 (1999) (“Since colonial times, the regulation of professions has been seen as a state activity in the United States.”); Milton Heumann, et al., Prescribing Justice: The Law and Politics of Discipline for Physician Felony Offenders, 17 B.U. Pub. Int. L.J. 1, 5 (2007).
38 See Johnson & Chaudhry, supra note 37, at 4 (“A 1649 regulation passed by the Massachusetts Bay Colony, and mirrored by New York in 1665, was … among the first to acknowledge the danger to its citizens of unscrupulous and/or unqualified health practitioners.”).
39 Id. at 11.
40 Id. at 11. The only penalty for the unlicensed practice of medicine in New York at the time was a prohibition on suing in the state’s courts to collect outstanding fees.
41 Id. at 12 (“In most instances, state legislatures looked to work in concert with medical societies as the best mechanism for regulating the practice of medicine within their state.”).
42 Id. at 18 (“The rugged individualism and anti-regulatory climate of the first half of the nineteenth century, combined with the democratization of medicine…led directly to what modern observers might find shocking: the wholesale collapse of medical regulation in the United States. Nearly every state repealed its penalties for the unlicensed practice of medicine, with Illinois leading the way in 1826, followed over the next quarter century or so by Alabama, Ohio, Mississippi, Georgia, Massachusetts, Maine, South Carolina, the District of Columbia, Maryland, Vermont, Connecticut, New York, Texas, Michigan, and, in 1852, Louisiana. Only New Jersey appears to have managed to avoid repealing its medical licensing laws throughout much of this period.”); see also Richards, supra note 37, at 206 (“Those regulations that had been passed by state legislatures were repealed in the period from the early 1800s to the Civil War because of Jacksonian democratic notions of ‘every man his own doctor’ (and lawyer), combined with the poor organization of the professions.”).
43 Johnson & Chaudhry, supra note 37, at 21 (“The 1861 onset of the Civil War represented a watershed moment in the practice of medicine, leading eventually to both a greater scrutiny of those who call themselves physicians and a higher regard for the enforcement of proper sanitation and public hygiene. From the time that hostilities commenced at Fort Sumter on April 12, 1861, to the final surrender at Appomattox Court House on April 9, 1865, more than 620,000 soldiers and countless number of civilians died in the conflict. Though the Civil War remains America’s deadliest war, two-thirds of the deaths were said to be the result of medical illnesses such as typhoid and dysentery in grossly unsanitary encampments rather than at the end of a bayonet or a bullet.”).
44 See Richards, supra note 37, at 209-10.
45 Id.; The actions of the NC Dental Board at issue in North Carolina State Board of Dental Examiners v. FTC relate to the regulation of the practice of dentistry, which involves significant infection control issues similar to medicine. See Jennifer L. Cleveland, et al., Advancing Infection Control in Dental Care Settings: Factors Associated with Dentists’ Implementation of Guidelines from the Centers for Disease Control and Prevention, 143 J. Am. Dental Ass’n 1127, 1127-28 (2012) (“CDC published infection control recommendations for dentistry first in 1986 and again in 1993. These guidelines were developed partly in response to published reports regarding nine clusters of hepatitis B virus (HBV) transmission to patients from infected dental health care providers (DHCPs) during the 1970s and 1980s, a high prevalence of markers of past HBV infection among dentists and oral surgeons and transmission of HIV from an infected dentist to five patients. These guidelines focused on preventing transmission of blood-borne pathogens to DHCPs and patients through the use of standard precautions such as barrier precautions and the safe handling of sharp instruments.”). States’ dental laws and regulations address infection control issues in great detail. See, e.g., Infection Control Manual, Ohio State Dental Board (Apr. 2011), http://www.dental.ohio.gov/icmanual.pdf.
46 See Johnson & Chaudhry, supra note 37, at 22 (“The reinstitution of a medical regulatory system in America can be traced to many factors, though perhaps the greatest of these was a general reassessment of what government regulation in the guise of licensing represented. Where once the licensing of physicians had been equated with ‘power and privilege,’ the concept now became more closely linked to a genuine effort at protecting the general public.”).
47 See Law & Kim, supra note 1, at 731.
48 See id.; see also Johnson & Chaudhry, supra note 37, at 23. While lawyers have played an important role in society throughout American history, the legal profession was largely self-regulated in America until the 1920s. See Fred C. Zacharias, The Myth of Self-Regulation, 93 Minn. L. Rev. 1147, 1161 (2009) (“In the 1920s, a movement began to produce court rules or statutes requiring all practicing lawyers to belong to state bar organizations. This allowed the organizations to collect fees, control (and limit) admission to the bar, and participate in the discipline of lawyers.”).
49 See Law & Kim, supra note 1, at 723-24; see also Bona, supra note 4, at 31 (“Licensing is now pervasive, as about 50 occupations are licensed in all states and over 800 of them are licensed in at least one state.”).
50 261 U.S. 165, 167 (1923).
51 272 U.S. 425, 427 (1926).
52 129 U.S. 114, 122 (1889).
53 Id. at 123.
54 See Opinion of Commission, supra note 24.
55 See Recent Cases, 127 Harv. L. Rev. 2122, 2129 (noting that the Fourth Circuit’s opinion “has caused confusion about the degree to which selection methods are dispositive.”); see also Edlin & Haw, supra note 4, at 1100 n.38.
56 N.C. State Bd. of Dental Exam’rs v. FTC, 717 F.3d, 359, 376 (4th Cir. 2013) (Keenan, J., concurring).
58 See, e.g., Ohio Rev. Code § 4715.02 (Ohio State Dental Board); Ohio Rev. Code § 4731.01 (Ohio State Medical Board);,Tex. Occ. Code Ann. § 252.001 (Texas State Board of Dental Examiners); See also Nadia N. Sawicki, Character, Competence, and the Principles of Medical Discipline, 13 J. Health Care L. & Pol’y, 285, 290-91 (2010) (noting that modern American medical boards generally are dominated by physicians “appointed by the governor.”).
59 N.C. Gen. Stat. § 90-22(b); See, e.g., Okla. Stat. tit. 59 § 328.7 (Oklahoma State Board of Dentistry); S.C. Code Ann. § 40-15-20(B) (South Carolina Board of Dentistry); Cal. Bus. & Prof. Code § 6013.2(a) (Board of Trustees of the California State Bar).
60 See, e.g., Ky. Rev. Stat. Ann. § 313.020(1) (Kentucky Board of Dentistry); Ingram Weber, The Antitrust State Action Doctrine and State Licensing Boards, 79 U. Chi. L. Rev. 737, 767 (2012) (“State governors often appoint board members from a list of names recommended by licensed professionals.”); see also Clark C. Havighurst, Contesting Anticompetitive Actions Taken in the Name of the State: State Action Immunity and Health Care Markets, 31 J. Health Pol. Pol’y & L. 587, 596 (2006) (“Although practices vary, many states appoint the members of such boards from lists of nominees provided by the professional or occupational group being regulated.”).
61 Heumann, et al., supra note 37, at 7-8 (“Federalism accounts for the variance in regulatory structure and discretion of state boards around the country.”).
62 See Recent Cases, 127 Harv. L. Rev. 2122, 2127-29 (2014). Both supporters and opponents of applying the state-action exemption to the NC Dental Board’s actions have argued against making the method of selection of board members dispositive. See Brief for Petitioner at 59, N.C. State Bd. of Dental Exam’rs v. FTC, (No. 13-534) (2014) (arguing that the “particular method under state law for selecting market-participant officials is completely irrelevant under the state-action doctrine.”); see also Edlin & Haw, supra note 4, at 1100 (arguing that that the Supreme Court should hold that competitor-dominated boards should be required to show that its anticompetitive actions are both (1) pursuant to the state’s clearly articulated purpose to displace competition and (2) subject to active state supervision “regardless of how the board’s members are appointed.”).
63 While licensing boards may include a majority of market participants serving as members, these boards also typically have administrative staff, attorneys, and investigators available to assist them. See Heumann, supra note 37, at 8.
64 See Weber, supra note 60, at 755; see also Bona, supra note 4, at 45 (“Naturally, licensing boards typically consist primarily of members of the regulated occupation, as these individuals possess the best knowledge and expertise about how to regulate and discipline the licensed members.”).
65 See Edlin and Haw, supra note 4, at 1144 (noting that “requiring state supervision for licensing boards that claim state-action immunity creates the potential for sweeping changes to regulations affecting over a third of the nation’s workforce.”).
66 Brief of Amici Curiae State of West Virginia and 22 Other States in Support of Petitioner at 8-9, N.C. State Bd. of Dental Exam’rs v. FTC (No. 13-534).
67 Brief of Amici Curiae National Governors Association, et al., in Support of Petitioner at 30, N.C. State Bd. of Dental Exam’rs v. FTC (No. 13-534).
68 Alexander Volokh, The New Private-Regulation Skepticism: Due Process, Non-Delegation, and Antitrust Challenges, 37 Harv. J. L. & Pub. Pol’y 931, 1007 (2014) (“Regulators are, therefore, advised to be extremely careful. Those who think of themselves as public officials might find that they are sadly mistaken, all the more sadly to the extent that they find themselves having to pay out-of-pocket damages to their regulatory victims.”).
69 John E. Lopatka, The State of “State Action” Antitrust Immunity: A Progress Report, 46 La. L. Rev. 941, 1040-41 (1986); see also Havighurst, supra note 60, at 599-600 (“There is no familiar institutional model for providing state oversight of its licensing boards, however, and it would seem awkward for a federal court to prescribe added supervision to supplement a state board’s normal political accountability to the legislature, the governor, and the courts. Indeed, for a federal court to declare accountability of the latter kinds inadequate under federal law would seem far more offensive to federalism values than merely expecting a state legislature to be clear about it if it really wants to authorize a state board to restrict competition in some significant way.”).
70 See Weber, supra note 60, at 773 (noting that states choose to utilize professionals on regulatory boards in part “because they are cheaper than bureaucratic agencies and reduce the attention legislatures must give to creating regulations themselves.”).
71 Id. at 740 (“Real dangers to consumers can arise in these markets. Obstructing the ability of licensing boards to regulate services when no alternative regulatory regime is in place invites harm.”).
72 U.S. Const. amend. X; Jacobson v. Massachusetts, 197 U.S. 11, 24-25 (1905); Sawicki, supra note 58, at 289; see generally Robert Bork, The Tempting of America (1990) (“Leaving the states as the sole regulators of areas left beyond federal power is the constitutional doctrine of federalism.”).
73 See Sawicki, supra note 58, at 289.
74 Hillary Greene, Articulating Trade-Offs: The Political Economy of State Action Immunity, 2006 Utah L. Rev. 827, 834 (2006). The FTC has a long history of hostility toward state-based occupational licensing. See generally Carolyn Cox & Susan Foster, FTC, Bureau of Econ., The Costs and Benefits of Occupational Regulation (1990).
75 Greene, supra note 74, at 828.
76 See Weber, supra note 60, at 739-40 (noting that “the state[-]action doctrine originates in a concern for federalism, not efficiency.”).
77 Greene, supra note 74, at 827 (noting that the “central legal issue” related to the state-action doctrine is “federalism” and “not whether federal competition policy would achieve superior outcomes versus a state regulatory scheme.”).
78 Weber, supra note 60, at 740.
79 But see Sawicki, supra note 58, at 295 (explaining that the primary goal of, and justification for, professional discipline is public protection.).
80 N.C. State Bd. of Dental Exam’rs v. FTC, 717 F.3d 359, 377 (4th Cir. 2013) (Keenan, J., concurring).
81 One antitrust expert has questioned the value of the active supervision requirement altogether because it is inconsistent with the “economics of federalism.” Frank H. Easterbrook, Antitrust and the Economics of Federalism, 26 J.L. & Econ. 23 (1983).
82 N.C. Gen. Stat. § 90-22(b).
83 N.C. Gen. Stat. §. 93B-16(b).
84 N.C. Gen. Stat. §§ 138A-22(a), 138A-28(a), 138A-45.
85 N.C. Gen. Stat. § 120-76(1)(d).
86 N.C. Gen. Stat. §§ 93B-16(c), 143-300.3.
87 N.C. Const. art VI, § 7.
88 See FTC v. Ticor Title Ins. Co., 504 U.S. 621 (1992).
89 See Havighurst, supra note 60, at 599.
90 See generally Edlin and Haw, supra note 4, at 1154-55; see also Bona, supra note 4, at 51.
91 N.C. Gen. Stat. § 90-22(a).
92 N.C. Gen. Stat. 90-29(a).
93 N.C. Gen. Stat. § 90-29(b)(2).
94 See Weber, supra note 60, at 775 (“[T]he North Carolina legislature declared that only licensed dentists are permitted to remove stains from the human teeth. It delegated to practicing dentists the power to implement this and other rules on the theory that state-licensed dentists were best situated to regulate the dental profession. The Board exercised its judgment, as contemplated by the legislature, and implemented the legislature’s rule by prohibiting nondentists from removing such stains in the form of teeth whitening. Allowing the FTC to use federal antitrust laws to prevent the enforcement of the Board’s rule would interfere with the ability of North Carolina to regulate within its borders, thereby undermining the federalism principle animating Parker.”).
95 Parker v. Brown, 317 U.S. 341, 350-51; see also Bork, supra note 9, at 350 (noting that Parker’s premise, that where a restraint upon trade is the result of a valid government action, as opposed to a private action, no violation of federal antitrust laws can be found, is “unassailable.”).
*David J. Owsiany is the executive director of the Ohio Dental Association and a past president of the Columbus Lawyers Chapter of the Federalist Society. The views expressed are his own.
The New Private-Regulation Skepticism: Due Process, Non-Delegation, and Antitrust Challenges*
*Alexander Volokh, “The New Private-Regulation Skepticism: Due Process, Non-Delegation, and Antitrust Challenges,” Harvard Journal of Law & Public Policy Vol. 37, No. 3 (2014): 932-1007. Reprinted with permission.
In recent years, state and federal courts have been ruling against private regulatory organizations on a number of theories. This Article explores this new private-regulation skepticism and the theories that underpin it.
This Article focuses on three main sources of law: the Due Process Clause, non-delegation doctrine, and antitrust law. To illustrate the doctrines, it follows five examples from recent cases and recent news of regulation by Amtrak, the North Carolina Board of Dental Examiners, the Mississippi Board of Pharmacy, the Texas Boll Weevil Eradication Foundation, and landowners in Texas water quality protection zones.
The Due Process Clause is a potential limit on the private exercise of regulatory power, especially if the regulators and the regulated parties compete with each other. Federal non-delegation doctrine, by contrast, is unlikely to be much help in these challenges, though some states, like Texas, have vibrant non-delegation doctrines that not only are stricter than the federal one but also strongly distinguish between public and private delegates. Some courts don’t clearly distinguish between non-delegation and due process. I argue that they should, as the two doctrines serve very different purposes.
Finally, federal antitrust law is available to guard against the anticompetitive dangers of “industry regulating itself.” Excessive conflicts of interest decrease the chance that a court will find state action immunity from antitrust law, and increase the chance that a court will find a substantive antitrust violation because of structural anticompetitive factors. Additionally, regulators that are sufficiently independent from state government are less likely to be insulated from liability by sovereign immunity. This new regulation skepticism thus provides several useful tools to challenge private regulation.
I. The Problem of Private Regulation
A. Private Regulation and Its Discontents
Using private entities to achieve regulatory goals has been a long-standing American practice. The most salient examples for lawyers are our own professional accreditors—state bars and the American Bar Association—but examples can be found across the entire economy,1 and the growth of the regulatory state, combined with resource constraints for governments, suggests that the phenomenon will continue.2
On the one hand, relying on the private sector to regulate its own ranks seems to offer an advantage because lawyers, doctors, and the like know more about their own professions than the government does. It’s a strategy that has appealed to both New Deal corporatists and modern-day pro-business advocates.
On the other hand, “industry regulating itself” has its disadvantages from both an external and an internal perspective. From the outside, this sort of “self-regulation” seems to detract from the regulatory power of government. Perhaps more interestingly, from the inside, it’s apparent that “industry” isn’t a monolith. “Industry regulating itself” really means “some people in industry regulating other people in industry,” “people regulating their own competitors,” or perhaps even “incumbents regulating potential entrants.” This perspective invites one to fear self-interested bias and anticompetitive behavior.
In recent years, courts seem to have grown increasingly skeptical of these private regulatory delegations. Interesting cases have come out of Germany,3 India,4 and Israel,5 but this Article will focus on what U.S. state and federal law has to say on the matter. The most relevant doctrines that recently have been used to question private regulatory delegations have been (state or federal) non-delegation doctrine, the Due Process Clause, and federal antitrust law.6
The doctrines are mostly old, but their recent use against private delegations of all sorts is striking: The cases cutting the other way, chiefly in the context of the civil rights liability of private prisons, get more press.7 The Texas Supreme Court has developed its own theory of private delegation. The D.C. Circuit did the same—just in 2013. Also in 2013, the Fourth Circuit tightened up on antitrust immunity for a state licensing board. Moreover, these courts have characterized the relevant regulators as “private,” even when one might have thought they were public.
This Article explains the contours of these emerging doctrines and their roots in past case law. The rest of this Part outlines five examples that I will follow throughout the Article, and briefly shows the complexity of the public-private distinction. Part II discusses challenges under the Due Process Clause. Part III discusses non-delegation doctrine. The Article also will explain how not all courts are clear on the difference between due process and non-delegation theories. I argue that this commingling is unfortunate, and that non-delegation and due process reasoning are very different animals that ought to be kept analytically separate.
Part IV discusses how private regulatory delegation can run afoul of federal antitrust law. Usually, state regulation is immune from federal antitrust law under antitrust’s state action immunity, but relying on private entities to do the regulation can make the action just private enough to lose the immunity.
B. Five Examples
Throughout this Article, I will follow a few examples, some pulled from current legislative activity and some pulled from recent cases, to see how they would fare under the various doctrines.8
Amtrak is a passenger rail corporation created by federal statute in 1970. It’s a for-profit corporation9 that’s run by presidential appointees and in which the federal government holds most of the stock.10 The Passenger Rail Investment and Improvement Act of 2008 requires the Federal Railroad Administration (FRA) and Amtrak to “jointly . . . develop new or improve existing metrics and minimum standards for measuring the performance and service quality of intercity passenger train operations.”11 These performance measures are used, among other things, as a basis for the Surface Transportation Board (STB) to assess damages against railroads if “on-time performance” or “service quality” is substandard for two consecutive quarters.12
If Amtrak and the FRA can’t agree on performance measures, they “may petition the [STB] to appoint an arbitrator to assist [them] in resolving their disputes through binding arbitration.”13 Amtrak thus has equal authority with the FRA on this issue; no metrics or standards can be developed unless they agree, or appoint a binding arbitrator.
2. The North Carolina Board of Dental Examiners
The North Carolina Board of Dental Examiners, composed almost entirely of practicing dentists who are elected by practicing dentists, regulates the practice of dentistry.14 It’s illegal to practice “dentistry” in North Carolina—a term that includes teeth-whitening services—without a license from the board.15 The Board sent dozens of letters to non-dentist providers of teeth-whitening services, asserting that their activities constituted the illegal practice of dentistry and ordering them to cease and desist. As a result, non-dentist teeth whiteners were successfully excluded from North Carolina.16
3. The Mississippi Board of Pharmacy
The Mississippi Board of Pharmacy, composed entirely of practicing pharmacists appointed by the Governor from a list submitted by pharmacy associations,17 regulates the practice of pharmacy and the distribution of drugs and devices.18 In 2011, it was given regulatory authority over pharmacy benefit managers. Pharmacy benefit managers administer prescription drug benefits for HMOs and others; they negotiate discounts with pharmacies and manufacturers, and thus are the market adversaries of pharmacists, competing with them for a share of the profits arising out of the prescription drug business.19
The statute requires that pharmacy benefit managers, as a condition of doing business in the state, disclose their financial statements to the state Board of Pharmacy.20 These financial statements are to include balance sheets, income statements, and “[a]ny other information relating to the operations of the pharmacy benefit manager required by the board under this section,” though pharmacy benefit managers aren’t required to disclose “proprietary information.”21
Also, the Board recently attempted to institute a regulation imposing a fiduciary duty on pharmacy benefit managers, but ultimately backed down.22
4. The Texas Boll Weevil Eradication Foundation
The Texas legislature has created a nonprofit Boll Weevil Eradication Foundation, which operates boll weevil eradication programs and charges growers for the cost.23 Growers vote to decide whether to establish a boll weevil eradication zone and (if they choose to establish a zone) elect a member to the Foundation board.24 The board determines assessments on growers in each zone, which growers then have to approve by a two-thirds referendum vote.25
The Foundation wields significant power. It determines what programs to conduct.26 It imposes penalties for late payment of assessments: A grower who is sufficiently in arrears is required to destroy his crop or have it destroyed at his cost by the Department of Agriculture, and failing to pay or destroy the crop is a misdemeanor.27 Foundation representatives can enter any private property subject to eradication without the owner’s permission for any purpose under the statute, including “the treatment, monitoring, and destruction of growing cotton or other host plants.”28 The Foundation also has rulemaking authority.29
The Commissioner of Agriculture retains some authority: For instance, the Board requires Commissioner approval to change the number of board positions or change zone representation on the board, the Commissioner can exempt a grower from excessive penalties, and the Board can only spend money on Commissioner-approved programs.30
5. Texas Water Quality Protection Zones
A provision of the Texas Water Code allows landowners to establish “water quality protection zones” in some cities’ extraterritorial jurisdictions.31 By establishing such a zone, landowners exempt themselves from certain regulations and create their own water quality plan.32
Landowners owning 500 to 1000 contiguous acres can’t designate a zone without approval from the state agency, but owners of more than 1000 contiguous acres can designate a zone without agency approval.33 As to the water plan, the state agency can’t reject a plan unless it “finds that implementing the plan will not reasonably attain” either of the two listed water quality objectives: “(1) . . . maintain[ing] background levels of water quality in waterways; or (2) . . . captur[ing] and retain[ing] the first [one and a half] inches of rainfall from developed areas.”34 Once the zone is designated, the municipality can’t enforce any ordinances or regulations in the zone that are inconsistent with the land use and water quality plans.35
C. What Is “Private”?
The Texas property owners above are of course private, but not all the other examples seem self-evidently so. Amtrak was created by federal statute, has presidentially appointed board members, is a “state actor” for purposes of constitutional rights, and the federal government holds most of its stock.36 The North Carolina Board of Dental Examiners is labeled public by statute.37 The Mississippi Board of Pharmacy members are gubernatorial appointees. The Texas Boll Weevil Foundation is labeled a “state agency,” “governmental unit,” and “governmental body” for various purposes.38
And yet, as we’ll see, various courts have held that these entities are private, at least for some purposes. The public-private distinction is fuzzy, and statutory labels aren’t always dispositive:39 For example, federal law states that Amtrak “shall be operated and managed as a for-profit corporation.”40 The members of the North Carolina Board of Dental Examiners all have private dental practices and are only accountable to other dentists.41 The Texas Boll Weevil Foundation board members are likewise “private interested parties.”42 The Mississippi Board of Pharmacy could similarly be considered private for some purposes: its members are in private practice, and the governor is restricted to choosing from lists submitted by trade associations.
The bottom line is that private regulators are vulnerable on a number of fronts. Moreover, some regulators might be surprised to find out that they’re “private.” Courts might not invalidate the entire agency, but they might prevent it from regulating in certain ways, and—depending on the doctrine—individual regulators might be held liable for damages. Regulators who aren’t sure that they’re unambiguously public might want to exercise greater caution: one of the new wave of skeptical courts might find them to be private and, as private actors, they might find themselves disempowered or, perhaps worse for them, liable.
II. The Due Process Clause
The Due Process Clause is a plausible avenue for challenging certain private delegations. There’s no due process doctrine that’s specific to private parties, but delegation of power plus pecuniary bias is a due process faux-pas, and it is easy to imagine (or presume) that such bias will be more likely if the delegate is private. Thus there are many Supreme Court cases, some fairly recent, that strike down private delegations on due process grounds.
Under current law, Amtrak’s exercise of regulatory authority violates due process; the North Carolina Board of Dental Examiners’s driving out non-dentist teeth whiteners doesn’t, and neither does the Texas homeowners’ establishing a water quality zone. As for the Mississippi Board of Pharmacy’s regulation of pharmacy benefit managers and the Texas Boll Weevil Foundation’s regulation of cotton growers, whether there’s a due process violation depends on what actions these boards undertake in the course of their duties.
A. The “Private Due Process” Doctrine
1. The Eubank-Thomas Cusack-Roberge Synthesis
Delegating coercive power to private parties has long been held to be a potential violation of due process. In Eubank v. City of Richmond,43 the Supreme Court examined a city ordinance allowing the owners of two thirds of the property abutting a street to establish a “building line” beyond which construction would be illegal.44 The Supreme Court held that this violated due process:45
The statute and ordinance, while conferring the power on some property holders to virtually control and dispose of the property rights of others, creates no standard by which the power thus given is to be exercised; in other words, the property holders who desire and have the authority to establish the line may do so solely for their own interest, or even capriciously . . . .
This, as we have said, is the vice of the ordinance, and makes it, we think, an unreasonable exercise of the police power.46
In other words, there was no protection against the property holders’ using their coercive power arbitrarily or to serve their own purposes.
One shouldn’t read Eubank too broadly: A few years later, in Thomas Cusack Co. v. City of Chicago,47 the Supreme Court upheld a city prohibition on billboards, where the prohibition could be waived on any block if the owners of a majority of the property fronting the street consented.48 Why didn’t this case fall within Eubank? Because Eubank involved an unregulated status quo and property owners regulating their fellows, while Thomas Cusack involved a regulated status quo and property owners deregulating their fellows.49 This made all the difference:
The [petitioner] cannot be injured, but obviously may be benefited by this provision, for without it the prohibition of the erection of such billboards in such residence sections is absolute. He who is not injured by the operation of a law or ordinance cannot be said to be deprived by it of either constitutional right or of property.50
At first glance, Thomas Cusack seems to deprive Eubank of much of its force. Many ordinances that run afoul of Eubank could be salvaged simply by switching the legal baseline around and making them into waivable prohibitions. In Eubank, perhaps the city of Richmond could have established an extremely conservative building line (i.e., extremely far from the street), and voting among property owners would have progressively relaxed the requirement.
But perhaps, in reality, it’s Thomas Cusack that should be read narrowly. In Washington ex rel. Seattle Title Trust Co. v. Roberge,51 a city ordinance allowed the construction of a “philanthropic home for children or for old people” in a particular residential district with the written consent of the owners of two thirds of the property within 400 feet.52 In language reminiscent of Eubank, the Court wrote that it violated due process to give coercive power over the property owner to a minority of property owners who could dissent or abstain “for selfish reasons or arbitrarily,” “uncontrolled by any standard or rule prescribed by legislative action” and without any “provision for review.”53 What distinguished this from Thomas Cusack, which looks similar on its face? As the Court saw it, the billboards had been found to be a nuisance,54 while there was no such showing for this “home for the aged poor.”55
What emerges thus looks like a general rule that property owners can’t regulate other property owners—with an exception if, as in Thomas Cusack, they’re actually deregulating against the baseline of a general prohibition of a nuisance. This general principle was also on display in Carter v. Carter Coal Co.56 In Carter, the Supreme Court examined the Bituminous Coal Conservation Act of 1935. The Act allowed the producers of two thirds of the coal in any “coal district,” negotiating with unions representing a majority of mine workers, to set wages and hours for all coal producers in the district.57 The Supreme Court’s decision, against the background of the preceding cases, shouldn’t be surprising:
The power conferred upon the majority is, in effect, the power to regulate the affairs of an unwilling minority. This is legislative delegation in its most obnoxious form; for it is not even delegation to an official or an official body, presumptively disinterested, but to private persons whose interests may be and often are adverse to the interests of others in the same business . . . . 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, since, in the very nature of things, one person may not be entrusted with the power to regulate the business of another, and especially of a competitor. And a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property. The delegation is so clearly arbitrary, and so clearly a denial of rights safeguarded by the due process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions of this court which foreclose the question [such as A.L.A. Schechter Poultry Corp. v. United States,58 Eubank, and Roberge.]59
2. The Mandatory-Discretionary Distinction
Several constitutional law doctrines didn’t survive the 1930s, but the due process rationale for striking down delegations of regulatory authority to private parties—in particular competitors—remained alive and well. Eubank was cited as good law in Supreme Court opinions three times (though twice in dissent) in the 1970s,60 and Roberge was cited as good law in a concurring opinion as recently as 2010.61 The Supreme Court has cited Thomas Cusack (which went against the claimant) as good law only once recently.62 The case citing Thomas Cusack is an important case, as discussed below,63 but Eubank and Roberge remain viable.64 The newer cases are essentially consistent with the older Eubank-Thomas Cusack-Roberge synthesis.
A generation after the early cases, in 1972, the Supreme Court decided Fuentes v. Shevin.65 Fuentes concerned state statutes “ordering state agents to seize a person’s possessions, simply upon the ex parte application of any other person who claims a right to them and posts a security bond.”66 The Court established that the possessor’s interest was a property interest protected by procedural due process,67 and that due process was violated because of the lack of a predeprivation hearing for the possessor.68 But, in the portion of its opinion rebutting the claim that this was an “extraordinary situation” justifying a departure from the requirement of a predeprivation hearing,69 the Court wrote:
The statutes, moreover, abdicate effective state control over state power. Private parties, serving their own private advantage, may unilaterally invoke state power to replevy goods from another. No state official participates in the decision to seek a writ; no state official reviews the basis for the claim to repossession; and no state official evaluates the need for immediate seizure. There is not even a requirement that the plaintiff provide any information to the court on these matters. The State acts largely in the dark.70
The Court added, in a footnote, that “[t]he seizure of possessions under a writ of replevin is entirely different from the seizure of possessions under a search warrant” (evidently to counter the concern that its holding might now require predeprivation hearings in those situations): Among other distinctions, “the Fourth Amendment guarantees that the State will not issue search warrants merely upon the conclusory application of a private party. It guarantees that the State will not abdicate control over the issuance of warrants and that no warrant will be issued without a prior showing of probable cause.”71
Fuentes thus sets up a mandatory-discretionary distinction, which one can trace through its progeny of cases about garnishment and prejudgment attachment procedures.72 This is consistent with the old cases: in Eubank, property owners could force establishment of a building line; in Roberge, they could force a waiver of the rule against old people’s homes; in Carter Coal, coal producers could force a binding wage through their collective bargaining activity.73 In all these cases, the due process problem was that they were able to force an alteration in the legal regime without any discretion remaining in government and without any protection against their personal biases.74
The Supreme Court’s decision the following year in Gibson v. Berryhill75 was also consistent with this principle. The Alabama Board of Optometry sued Lee Optical Co. and its employees in Alabama state court, charging that they were engaged in the “unlawful practice of optometry” by working for a corporation rather than being self-employed.76 The state court agreed with the Board and “enjoined Lee Optical both from practicing optometry without a license and from employing licensed optometrists.”77 When the state court proceedings were over, the Board moved to hold delicensing proceedings against the individual optometrists.78 The optometrists sued to enjoin the Board proceedings on the grounds (among others) that the Board was impermissibly biased.79 After all, by statute, the Board was entirely composed of self-employed optometrists.80 The Supreme Court agreed: “[T]hose with substantial pecuniary interest in legal proceedings should not adjudicate these disputes,” whether as judges or as administrative adjudicators.81
Gibson didn’t invalidate the entire Board; it made no pronouncements on the Board’s ability to proceed by lawsuit in state court against optometrists or corporations it believed were unlawfully practicing optometry, which it had just done before the attempted delicensing proceedings. In light of Fuentes, this makes sense: Running your own potentially biased tribunal makes your victim fully subject to your bias, like the target of your writ of replevin in Fuentes. Suing someone in court, on the other hand, has no coercive effect beyond forcing the opposing party to appear to answer your charges. That’s an important coercive effect, to be sure, but at least the entity is limited to making a request for government action—a request that the court may deny.82
The same distinction from Fuentes, between giving private parties mandatory control over coercive processes and merely allowing them to petition the government to (in its discretion) coerce private parties, seems to continue to be key in the recent cases, even if the Supreme Court hasn’t been very clear in its reasoning. In New Motor Vehicle Board of California v. Orrin W. Fox Co.,83 the Supreme Court examined a scheme where car manufacturers had to get the approval of the New Motor Vehicle Board before opening a new dealership, but only if a nearby incumbent franchisee protested.84 The Supreme Court upheld the scheme, though the portion dealing with private delegation had little depth of analysis. Here is the entirety of its private delegation analysis:
Appellees and the dissent argue that the California scheme constitutes an impermissible delegation of state power to private citizens because the Franchise Act requires the Board to delay franchise establishments and relocations only when protested by existing franchisees who have unfettered discretion whether or not to protest.
The argument has no merit. Almost any system of private or quasi-private law could be subject to the same objection. Court approval of an eviction, for example, becomes necessary only when the tenant protests his eviction, and he alone decides whether he will protest. An otherwise valid regulation is not rendered invalid simply because those whom the regulation is designed to safeguard may elect to forgo its protection.85
The Court ended this analysis with a citation to Thomas Cusack, a case that does not appear relevant here. There was no blanket prohibition of car dealerships that incumbents could waive, and in any case car dealerships aren’t like nuisances. Rather, the status quo, if there is no protest, is that a car dealership is allowed. In this respect, it’s more like Eubank (no building line unless some property owners petition for one)86 or Carter Coal (no binding wages unless some producers and unions agree to them).87
Nonetheless, read in light of the mandatory-discretionary distinction, the result makes sense. Incumbent auto dealers couldn’t unilaterally shut down entrants: all they could do was force the New Motor Vehicle Board to decide whether to allow a new dealership. And it isn’t as though Board consideration is a meaningless rubber stamp: The Board actually allowed the new dealership in 99% of cases.88 So the incumbent auto dealers were more in the position of private parties authorized to sue in court (recall, in the Court’s quote above, a tenant’s power to force court consideration of his eviction). The incumbent auto dealers’ only coercive power was to delay matters while their protest was pending.89
The Supreme Court relied on the weakly justified private delegation holding in New Motor Vehicle Board in an even more under-reasoned private delegation holding in Hawaii Housing Authority v. Midkiff.90 The Hawaii Legislature enacted a statute under which certain tenants could ask a state agency to condemn the property on which they lived; if the state agency, after a public hearing, decided that condemnation would serve the statute’s public purposes, it could condemn the property and could then sell it to tenants who had applied for fee simple ownership.91 Famously, the Supreme Court upheld this scheme against a Takings Clause challenge, holding that the condemnation was for a “public use” because it was “rationally related to a conceivable public purpose.”92 Less famous, though, is the Court’s private-delegation-based due process holding, buried in a footnote, the entirety of which runs as follows:
We similarly find no merit in appellees’ Due Process . . . Clause argument. The argument that due process prohibits allowing lessees to initiate the taking process was essentially rejected by this Court in [New Motor Vehicle Board].93
The best way to explain this result is, again, via the mandatory-discretionary distinction. Hawaiian tenants couldn’t force a condemnation, they could only force the state agency to determine whether to condemn land. The actual decision whether to condemn rested with the agency itself, based on whether the agency believed a condemnation would serve the Act’s public purposes.94 In this sense, the private petitioners had no greater delegated coercive power than any litigant who can set legal machinery in motion.95
The best reading of these cases thus suggests that the basic Eubank due process rule against delegating mandatory authority to private parties without protection against self-interested decisionmaking continues to this day. Lower federal court cases96 and state cases97 bear this out.
Now let’s apply this framework to our examples. The Amtrak delegation is probably invalid under the Due Process Clause because Amtrak can unilaterally impose a disadvantageous regulatory regime on its market adversaries.98 I discuss this case at greater length below in connection with the D.C. Circuit’s Amtrak case.99 Challengers could enjoin Amtrak’s conduct, as well as potentially obtain money damages under Bivens100 against the Amtrak officials involved in the formulation of the performance measures.101
The North Carolina Board of Dental Examiners didn’t create the rule against non-dentist teeth-whiteners; that rule is statutory.102 Obviously the private-bias arguments against the Board do not apply to the state legislature. Nor can the Board expel non-dentist teeth-whiteners from the market except by suing them in court; they’re saved by the mandatory-discretionary distinction. At that point, it’s the court, not the Board, that rules that the non-dentists are violating the law.103 But—though the Board’s actions in connection with driving out the non-dentist teeth whiteners don’t violate due process—it is still possible that the Board could violate due process through other things it does, like its own disciplinary hearings against dentists.104
Whether the Mississippi Board of Pharmacy is violating due process depends on what they do and how. If turning over sensitive business information were required by a general statute, then—as with the dental examiners—the Board of Pharmacy’s pecuniary bias wouldn’t seem relevant unless the Board adjudicates violations of the rule in its own tribunal. But because the statute empowers the Board to demand “[a]ny other information” relating to pharmacy benefit managers’ operations,105 one can challenge the Board’s bias when such extra information is demanded. Similarly, the proposed fiduciary duty for pharmacy benefit managers106 would have been a Board regulation. Perhaps one could then bring a due process challenge to the rule based on the Board’s bias even in the case of in-court enforcement,107 and obtain money damages under 42 U.S.C. § 1983 against the board members. But this is less clear because some Supreme Court cases have suggested that potential pecuniary bias in adjudication is easier to challenge than potential pecuniary bias in rulemaking.108 The same is true of enactments by the Texas Boll Weevil Foundation.109
The property owners in the Texas water quality protection zones present a much easier case. They aren’t violating due process, as (1) they’re probably not state actors,110 and (2) even if they were, they don’t have coercive authority over other landowners, so no one suffers a deprivation of “life, liberty, or property” within the meaning of the Due Process Clause.111
It’s clear, then, that the Due Process Clause has the potential to be a strong tool against private regulatory delegation. Biased rulemakers can be challenged, unless their role is limited to enforcing commands they didn’t create by suing violators in courts they don’t operate.
B. No Private Due Process Doctrine
The reality about due process, though, is that there’s no federal doctrine specific to private parties.112 Indeed, some of the classic cases of this line of doctrine involve public officials.113 For instance, in Tumey v. Ohio,114 the offender was a village mayor who also sat as a judge in prohibition-related cases (this was in the dry ‘20s) and who was impermissibly biased because his costs were only reimbursed by the defendant in case of a conviction.115 In Ward v. Village of Monroeville,116 the offender was another village mayor who also sat as a traffic court judge; his bias arose because the traffic fineshe assessed as judge contributed a substantial portion of the village finances that he would be able to use as mayor.117 And in Aetna Life Insurance Co. v. Lavoie,118 the offender was an Alabama Supreme Court Justice whose rulings on a case could directly affect a pending case in which he was a litigant.119
Thus, if the Due Process Clause applies with special force to private delegations, it’s only to the extent that bias is more obviously present in such cases.120 This will certainly be true if private parties are given unconstrained discretion: In such cases, we can probably assume that the private parties will seek their individual gain. Public officials, on the other hand, are often presumed to be public-minded.121 But cases like Tumey and Ward show that this presumption can be overcome even without a showing of actual bias122—for instance by showing the details of public employee or agency compensation arrangements.123
III. Non-Delegation Doctrine
Non-delegation doctrine is a separation of powers doctrine based on the idea that legislative power is vested in the legislative branch and that there are limits to how much (if any) of it the legislature can give away. At the federal level, non-delegation doctrine isn’t terribly strict—all Congress needs to do to avoid being held to have delegated legislative power is to provide an “intelligible principle” to guide the delegate’s exercise of power. Nor is there any difference between public and private delegations.
So non-delegation doctrine seems to have much less bite than the Due Process Clause in potentially controlling private delegations of regulatory power (though there’s a chance that, as a matter of constitutional avoidance, non-delegation concerns might affect the interpretation of the statute).124 But this may be different at the state level: Some states have non-delegation doctrines that are stricter than the federal one; these are discussed in Subpart B. The most interesting state doctrine comes from Texas, which recently has devised its own strict non-delegation doctrine exclusively for private delegations.
Moreover, because the Due Process Clause is also relevant to delegations, the common presence of the word “delegation” leads many courts to indiscriminately mix non-delegation and due process ideas. Subpart C explains this commingling. The most recent offender is the D.C. Circuit, in a case concerning the delegation of regulatory power to Amtrak, but the confusion has possibly existed since 1936 and infects many state-level doctrines.
The moral of non-delegation doctrine is that an attack under the federal doctrine is likely to lose, except possibly in the D.C. Circuit—or in other circuits, to the extent they follow the D.C. Circuit’s lead. All five of our examples are probably valid under the permissive federal non-delegation doctrine. Many more private delegations might be vulnerable under a Texas-style private non-delegation doctrine—obviously, the two Texas examples that have in fact been struck down under the doctrine, though the other examples are vulnerable as well. Note, though, that Texas is an outlier among states in having a doctrine that’s so strict and that’s limited to private parties.
A. At the Federal Level
Non-delegation doctrine in the federal Constitution derives from the Vesting Clause of Article I: “All legislative Powers herein granted shall be vested in a Congress of the United States.”125 This language has long been interpreted to mean that the legislative powers—being vested in Congress—can’t be transferred to anyone else,126 though this reading isn’t an obvious one.127 Clearly rights that “vest” aren’t usually inalienable: consider vested property rights128 or vested stock options.129
This separation of powers doctrine hasn’t been explicitly used very often: The Supreme Court has used it only twice to strike down a federal statute, both times in 1935.130 Nonetheless, the doctrine plays a more significant role under the radar than it might seem: A Supreme Court majority in 1974 and a plurality in 1980 used it as an avoidance canon to save statutes from unconstitutionality by adopting narrowing constructions,131 and Cass Sunstein argues that the doctrine continues to play an important role in this way.132 The basic doctrinal test has been the same since 1928: Congress must provide an “intelligible principle” to guide the delegate’s discretion.133 An intelligible principle makes the difference between, on the one hand, a (forbidden) delegation of legislative power, and on the other hand, a (permitted) delegation of gap-filling power, which is essentially executive.
The structure of non-delegation doctrine suggests that it should be irrelevant whether the recipient of the delegation is public or private: the focus is whether Congress has given up too much power, not to whom it’s given the power.134
True, in 1935, the Supreme Court expressed itself somewhat negatively about broad private delegations:
But would it be seriously contended 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? Could 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? . . . The answer is obvious. Such a delegation of legislative power is unknown to our law and is utterly inconsistent with the constitutional prerogatives and duties of Congress.135
But this was dictum,136 and it was 1935. The language doesn’t question private delegation as such, only extremely broad private delegation. Further, because the case went on to strike down the delegation based entirely on the delegation to the President (without reference to the participation of private industry),137 it’s not clear that the public-private distinction played any role.
The existence of administrative procedures and judicial review has occasionally been used to provide an intelligible principle,138 and these tend to be less common when delegates are private.139 Perhaps privateness should make some difference in how the doctrine plays out in the cases, but that doesn’t require a special doctrine for private delegations.140
And indeed, in practice the public-private distinction hasn’t much mattered in the federal non-delegation cases. In Currin v. Wallace,141 the Supreme Court examined a challenge to the Tobacco Inspection Act of 1935.142 The Act was designed to provide “uniform standards of classification and inspection” of tobacco, without which “the evaluation of tobacco [would be] susceptible to speculation, manipulation, and control” and “unreasonable fluctuations in prices and quality determinations . . . .”143 Under the Act, the Secretary of Agriculture was authorized to “designate those markets where tobacco bought and sold at auction or the products customarily manufactured therefrom move in commerce”; the result of a designation was that “no tobacco [could] be offered for sale at auction [at such a market] until it [had] been inspected and certified by an authorized representative of the Secretary according to the established standards.”144
But the Act contained a delegation of discretion to the regulated industry: The Secretary was not to designate a market “unless two-thirds of the growers, voting at a prescribed referendum, favor[ed] it.”145 Private industry thus held the “on-off” switch for regulation.
The Supreme Court upheld this delegation. First, it made a few preliminary comments:
· “Similar conditions are frequently found in police regulations. [Thomas Cusack.]”146
· “This is not a case where a group of producers may make the law and force it upon a minority . . . . [Carter Coal.]”147
· This was also not a case “where a prohibition of an inoffensive and legitimate use of property is imposed not by the legislature but by other property owners. [Roberge.]”148
These cases cited—Thomas Cusack, Carter Coal, and Roberge—are all due process cases.149 Perhaps citing the due process cases in a non-delegation opinion was somewhat sloppy, as non-delegation and due process cases aren’t interchangeable, for reasons explained below;150 but in any event, this much is dictum.151
The Court held: “Here it is Congress that exercises its legislative authority in making the regulation and in prescribing the conditions of its application. The required favorable vote upon the referendum is one of these conditions.”152 In this sense, the relevant distinction was one stated in J.W. Hampton, Jr., & Co. v. United States:153
Congress may feel itself unable conveniently to determine exactly when its exercise of the legislative power should become effective, because dependent on future conditions, and it may leave the determination of such time to the decision of an Executive, or, as often happens in matters of state legislation, it may be left to a popular vote of the residents of a district to be effected by the legislation. While in a sense one may say that such residents are exercising legislative power, it is not an exact statement, because the power has already been exercised legislatively by the body vested with that power under the Constitution, the condition of its legislation going into effect being made dependent by the legislature on the expression of the voters of a certain district.154
One may quarrel with the theory here. In Panama Refining Co. v. Ryan,155 the President also held an on-off switch—he could decide whether to prohibit (as a matter of federal law) the shipment of oil in excess of permitted amounts under state law.156 And his discretion in choosing whether to flip the switch had no constraint, except for a hodgepodge of vague and conflicting policy statements in the preamble of the statute.157 If that sort of unconstrained delegation were valid, the Panama Refining Court said, “it would be idle to pretend that anything would be left of limitations upon the power of the Congress to delegate its lawmaking function.”158 But the private tobacco growers’ discretion in flipping this particular on-off switch was just as unconstrained, if not more so; they didn’t even have the minimal constraint of a statement of policy, and on the contrary could have voted based on whim or (more likely) private interest.
So maybe Currin was wrong given the doctrine as it stood in 1939; or maybe it implicitly overruled Panama Refining. But the important thing is that the Currin Court treated the two on-off switches identically; the power to flip a regulatory on-off switch isn’t a legislative power, whether the switch is flipped by “the decision of an [e]xecutive” or “a popular vote of the residents of a district to be affected by the legislation.”159 The result is that public and private delegations are both judged by the same “intelligible principle” standard160—even though the occasional lower court decision will at least hint that private delegations are more problematic.161
Let’s turn to the examples noted in Part I.162 Most of the examples are state delegations, which aren’t subject to the federal non-delegation doctrine, so let’s assume that the identical programs were passed by Congress;163 or let’s assume that the programs occur in states with vesting clauses and non-delegation doctrines identical to those found in federal constitutional law.
These examples mostly have sufficient intelligible principles to protect them against a federal non-delegation challenge. Amtrak is supposed to “be operated and managed as a for-profit corporation.”164 This principle is general, but the Supreme Court has made it clear that general language can be “intelligible” enough for purposes of non-delegation doctrine.165
The other examples fare similarly. The North Carolina dental board authorizes regulation of dentistry “in the public interest”166—pathetic, but welcome to non-delegation doctrine.167 The Texas Boll Weevil Eradication Foundation, as the dissenting Justices point out, “contains relatively comprehensive standards to guide both the Commissioner of Agriculture (a statewide elected official) and the Foundation in their joint efforts to execute the legislative mandate to ‘suppress and eradicate boll weevils and other cotton pests.’”168 And the Texas statute authorizing water quality protection zones, as the Texas Supreme Court acknowledged, “provides fairly detailed statutory standards to guide landowners in formulating their initial water quality plans” (though not as many standards as the court would have liked).169 Landowners in these zones also can’t implement their own water quality plans and suspend the operation of municipal ordinances unless the state agency determines that their plans reasonably can be expected to maintain background levels of water quality in waterways or capture and retain the first one and half inches of rainfall from developed areas.170 Of the five examples, only the Missisippi board of pharmacy seems to lack an intelligible principle for licensing pharmacy benefit managers.171
B. In the States
Because the federal non-delegation doctrine derives from Article I of the federal Constitution, which only discusses the legislative powers of the federal government,172 it has no applicability to state delegations. Various states, however, have their own non-delegation doctrines. Mississippi’s doctrine is about as loose as the federal one; Mississippi courts are “committed to a liberal rule governing the delegation of legislative functions”;173 “[t]he essential is that the statute delegating the power must reasonably define the area in which the administrative agency operates and the limitations upon its powers.”174 But other states’ non-delegation doctrines are stricter than the federal one.175 Gary Greco lists 18 states that (as of 1994) had relatively strict non-delegation doctrines: Arizona, Florida, Kentucky, Massachusetts, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Virginia, and West Virginia.176 Some states, like Florida177 and Oklahoma,178 clearly ground their doctrines in separation of powers concerns;179 other states, like Arizona, have non-delegation doctrines that don’t clearly distinguish between separation of powers concerns and due process concerns, as discussed later in this Article.180
Some states, like Iowa,181 Minnesota,182 Pennsylvania,183 and South Carolina,184 have non-delegation doctrines, based on their state constitution’s vesting clauses, that specifically impose some limits on delegations to private parties.185 Perhaps the most interesting such state is Texas, which (more recently than Greco’s article) came up with a new non-delegation doctrine, based on the vesting clauses of the Texas constitution, specifically to deal with private delegations.186 The first use of this doctrine was to declare the structure of the Boll Weevil Eradication Foundation illegal.187
First, the Court established that the Boll Weevil Eradication Foundation was private. This wasn’t obvious, as “the statutory provisions as to governmental powers suggest both public and private attributes.”188 The court listed the public factors:
The Act exempts the Foundation from taxation and affords state indemnification to its board members. The Foundation’s board members, officers, and employees have official immunity except for gross negligence, criminal conduct, or dishonesty. The Foundation must adopt and publish its rules in accordance with state requirements, it may be dissolved by the Commissioner when its purpose has been fulfilled, and it (or at least its board) is subject to . . . the Texas Sunset Act. The Legislature specifically denominates the Foundation a “governmental unit” for purposes of immunity from suit under the Tort Claims Act. Finally, the Foundation does not dispute that it is a “governmental body” subject to the Texas Open Meetings Act.189
On the other hand, some factors cut in favor of describing the Foundation as private. For instance, the statute classified the board and the Foundation as “state agencies” only for the limited purposes of tax exemption and indemnification.190 Moreover:
[T]he funds the Foundation collects are expressly “not state funds and are not required to be deposited in the state treasury.” The Act also does not subject the Foundation to state purchasing or audit requirements, and its board members are not required to take oaths of office. Finally, there is no provision for administrative appeal from Foundation decisions, except as to penalties imposed for nonpayment of assessments.191
The court ended up coming down on the side of the Foundation’s being private, because the statute “delegate[d] authoritative power to private interested parties.”192
As to the validity of the private delegation, the court created its own eight-part test:
1. Are the private delegate’s actions subject to meaningful review by a state agency or other branch of state government?
2. Are the persons affected by the private delegate’s actions adequately represented in the decisionmaking process?
3. Is the private delegate’s power limited to making rules, or does the delegate also apply the law to particular individuals?
4. Does the private delegate have a pecuniary or other personal interest that may conflict with his or her public function?
5. Is the private delegate empowered to define criminal acts or impose criminal sanctions?
6. Is the delegation narrow in duration, extent, and subject matter?
7. Does the private delegate possess special qualifications or training for the task delegated to it?
8. Has the Legislature provided sufficient standards to guide the private delegate in its work?193
We can immediately see how the Texas private delegation doctrine differs from the federal doctrine (which doesn’t distinguish between public and private). The federal doctrine only requires an intelligible principle, which appears in Texas’s factor 8, but Texas adds (1) supervision, (2) representation, (3) generality, (4) bias, (5) restriction to civil cases, (6) narrowness, and (7) expertise. In the court’s view, factors one, three, four, seven, and eight cut against the delegation in this case, while factor two cut in favor; factor five was neutral because the criminal penalties were severable from the rest of the statute; and factor six was “inconclusive” because the purpose was narrow but cost and duration weren’t.194 With so many factors cutting against the delegation, the court concluded that the delegation as a whole was unconstitutional.195
The Texas approach is potentially quite stringent; a partial dissent in the Texas Boll Weevil case charged that it could invalidate school choice plans (delegations to parents), prison privatization (delegations to private prison firms),196 the Texas Automobile Insurance Plan (which is administered by private insurers),197 the delegation of the power of eminent domain to utilities,198 or lawyer licensing through the American Bar Association (as well as licensing in other professions),199 though of course dissents can be hyperbolic in characterizing the slippery slope.200 Since that case, the Texas Supreme Court has upheld the Civil Service Act’s delegation of the power to designate permissible arbitrators to the American Arbitration Association and the Federal Mediation and Conciliation Service.201 Not that arbitrators are immune from delegation analysis: The Court has been continually mindful of the potential private delegation problems surrounding arbitrators. In one case, it interpreted a statute to give municipalities the right to appeal arbitrators’ decisions, lest the first prong of the Texas Boll Weevil test be violated.202
The Texas Supreme Court also struck down the provision of the Texas Water Code allowing water quality protection zones.203 The landowners establishing a zone were empowered to create their own water quality plan. Unlike in Texas Boll Weevil, this didn’t give the landowners regulatory authority over other people’s property.204 But, the Court said, there was still a delegation of legislative power to the landowners, because water quality regulation is a legislative power, as is the power to decide which municipal regulations are enforceable.205 Then, relying on the factors from Texas Boll Weevil, the Court concluded that this delegation was unconstitutional; the most significant factors weighing against the delegation were that, in the Court’s view—referring to the eight prongs of the test—(1) the opportunities for governmental review were insufficient, (2) affected persons such as downstream landowners were inadequately represented, (4) landowners had a pecuniary interest in protecting their property values, and (6) the extent of the delegation was broad.206
Going to our examples under this test, we already know how the two Texas cases would be resolved, as they were in fact resolved under the Texas test by the Texas Supreme Court. The North Carolina Board of Dental Examiners (in its regulation of teeth-whiteners) and the Mississippi Board of Pharmacy (in their regulation of pharmacy benefit managers) seem likewise questionable, as (2) the targets of the regulation aren’t represented in the process, (3) the organizations apply rules to particular individuals, (4) the organizations are peopled with practicing practitioners who have a pecuniary bias against their competitors, (6) the extent of the delegation is broad, and (8) the legislature hasn’t provided detailed standards. (As to (8), general guidance like “public interest” may be enough for the federal doctrine,207 but Texas is more demanding.208)
The Amtrak delegation also appears to violate a few of the Texas factors: (1) there’s no meaningful review, (2) affected parties aren’t represented, (4) Amtrak has a pecuniary bias, and (8) there are likely insufficient standards for Texas’s liking. So the Amtrak delegation might be vulnerable under a Texas non-delegation standard, though on the other hand, (3) Amtrak’s power is limited to making rules, (5) there are no criminal sanctions attached, (6) the delegation is narrow, and (7) Amtrak has railroad expertise.
C. Commingling Non-Delegation and Due Process
1. The D.C. Circuit’s Private Delegation Doctrine
The D.C. Circuit has recently applied a special private non-delegation doctrine in a new and, as this Article contends, incorrect way. In Association of American Railroads v. Department of Transportation,209 it held that Amtrak was private and that therefore a statute that delegated regulatory power to it violated non-delegation doctrine.210
The court wrote that, though generally an “intelligible principle” is enough to save a delegation by Congress, such a principle isn’t enough when the recipient of the delegation is private: “Even an intelligible principle cannot rescue a statute empowering private parties to wield regulatory authority”211—here citing Carter Coal.212 The court distinguished Currin, where industry merely held the on-off switch,213 and Sunshine Anthracite Coal Co. v. Adkins, where industry merely had an advisory role.214 This case was more like Carter Coal, where industry had binding authority over wages: here, Amtrak had an “effective veto” over Federal Railroad Administration regulations and, in fact, enjoyed “authority equal to the FRA.”215
To complete the reasoning, the D.C. Circuit had to establish that Amtrak was indeed private.216 Such an approach could be problematic in light of Lebron v. National Railroad Passenger Corp.,217 where the Supreme Court held, in a First Amendment context, that Amtrak was a state actor.218 No problem, said the D.C. Circuit: one can be governmental for purposes of the state action doctrine, but private for purposes of non-delegation doctrine.219
The court then tallied up the indicia of privateness and publicness. Cutting in favor of calling Amtrak public was Lebron.220 Also, Amtrak’s Board of Directors has nine members, one of whom is the Secretary of Transportation and seven of whom are presidential appointees; the ninth, the president of Amtrak, is elected by the other eight.221 Amtrak has some private shareholders, but almost all its stock is preferred stock held by the federal government.222 Amtrak receives substantial subsidies from the federal government223—though the amount of government money an actor receives generally isn’t relevant to whether that actor is public or private.224
Cutting in favor of calling Amtrak private, the 1970 statute specifies that Amtrak “is not a department, agency, or instrumentality of the United States Government.”225 The statute also commands that Amtrak “shall be operated and managed as a for-profit corporation.”226 Relatedly, by statute, “Amtrak is encouraged to make agreements with the private sector and undertake initiatives that are consistent with good business judgment and designed to maximize its revenues and minimize Government subsidies.”227 Amtrak itself announces that it’s “not a government agency or establishment [but] a private corporation operated for profit.”228 The D.C. Circuit attached some significance (“somewhat tellingly”229) to the fact that Amtrak’s URL is amtrak.com—not amtrak.gov—but this marketing decision doesn’t really seem all that telling, as one could make a similar claim about the U.S. Postal Service, whose website is located at usps.com.
To decide the issue, the D.C. Circuit looked to “what functional purposes the public-private distinction serves when it comes to delegating regulatory power.”230 One purpose is accountability: a private delegation dilutes democratic accountability, because when power is delegated to a private organization, the government is no longer blamed for that organization’s decisions.231 (Perhaps; but if something goes wrong, why can’t the voters blame the government for the initial decision to delegate?232) Another purpose is the distinction between the public good and private gain: public recipients of delegated power are “presumptively disinterested”233 and are bound by “official duty,” whereas private recipients may act “for selfish reasons or arbitrarily.”234 (Perhaps; but doesn’t this display an overly optimistic view of the motivations of public employees?235) In the D.C. Circuit’s view, these considerations cut in favor of treating Amtrak as private: the statutory command that it be “managed as a for-profit corporation” requires that it seek its private good, not the public good, and Congress’s and Amtrak’s consistent labeling of Amtrak as “private” tends to distance Amtrak’s decisions from democratic accountability.236 The end result was that the statute delegated regulatory power to a private party and was therefore invalid.237
2. The Carter Coal Puzzle
Whether the D.C. Circuit is correct depends in large part on how to interpret Carter Coal, which is, doctrinally speaking, a confusing case. The quote reproduced earlier is replete with references to “delegation.”238 But it also mentions arbitrariness and denial of “due process.” Is it a delegation case or a due process case (or both)?
By deciding that an intelligible principle couldn’t save a private delegation,239 the D.C. Circuit chose to treat Carter Coal as a non-delegation decision. But, at the same time, the court suggested that the characterization didn’t matter: it wrote, in a footnote, that “the distinction evokes scholarly interest,” but the parties in this case didn’t press the point, and “neither court nor scholar has suggested a change in the label would effect a change in the inquiry.”240 But this is quite wrong. Labels don’t always matter, though in this case, non-delegation and due process doctrines have quite different implications.
First—as a matter of doctrine—a non-delegation holding only applies against federal delegations while a due process holding applies against the states as well.241 Admittedly, this wouldn’t change the result in the Amtrak case, which concerned a federal delegation; but making the basis clear would help litigants in future cases of state delegation. Non-delegation cases have their particular “intelligible principle” doctrine, while due process cases have their own separate doctrine involving Washington ex rel. Seattle Title Trust Co. v. Roberge,242 Mathews v. Eldredge,243 Board of Regents v. Roth,244 and so on. Thus, treating the doctrine of private delegations as a unitary entity rooted in both the Vesting Clause and the Due Process Clause needlessly raises questions that could be avoided if the doctrinal basis were clear. For instance, must all non-delegation cases import due process case law? Must cases involving federal delegations (where both clauses apply) proceed identically with cases involving state delegation (where only one clause applies)?
Second, plaintiffs in cases involving federal delegation would prefer to win on a due process theory rather than on a non-delegation theory. A due process victory can give rise to a damages claim under Bivens against the federal actors responsible for the violation,245 while Bivens has never been applied to non-delegation doctrine.246
Third—as a matter of realpolitik—given the widespread perception that non-delegation doctrine is mostly dead247 while due process is used constantly, a theory grounded in due process is probably more likely to be used.
Fourth—as a matter of convenience—a due process approach would have the advantage of being able to use theexisting holding of Lebron that Amtrak is a state actor for constitutional rights purposes, rather than having to invent a new ad hoc test to make Amtrak private for non-delegation purposes.248
Finally, and most fundamentally—as a jurisprudential matter, even putting aside pragmatic concerns and assuming away all cases involving state delegation—the Due Process Clause and non-delegation doctrine serve quite different purposes. Non-delegation doctrine is structural and seeks to ensure that Congress makes the important decisions. Due process, on the other hand, is all about fairness. Fairness and structural boundaries may be related, but not in any necessary way.
Consider, for instance, Whitman v. American Trucking Ass’ns, Inc.,249 where the Supreme Court considered a non-delegation challenge to a provision of the Clean Air Act.250 Earlier, the D.C. Circuit had agreed with the challengers that the delegation of regulatory authority to the EPA lacked an intelligible principle.251 Nonetheless, it had given the EPA a chance to cure the overbreadth of the delegation by adopting a limiting construction.252 The D.C. Circuit’s approach had been suggested by administrative law scholar Kenneth Culp Davis, who argued that the goal of non-delegation doctrine should be to protect against “arbitrariness” and “uncontrolled discretionary power,” and that administrative safeguards could fulfill this purpose as well as statutory language.253
No way, said the Supreme Court: If Congress has delegated too broadly, separation of powers has already been breached.254 The EPA’s trying to adopt the limiting construction would itself be a forbidden exercise of regulatory power.255 But note that, under the Davis theory, there would be no unfairness: everyone will be on notice as to the precise conduct required or prohibited, and everyone will have had an opportunity to comment under the Administrative Procedure Act.256 So presumably, if the limiting regulations were adopted, a due process challenge would, and should, fail.
A violation of non-delegation doctrine thus needn’t violate due process. The same is true in reverse: If Congress passes a very specific statute allowing welfare benefits to be withdrawn without any process, presumably due process will be violated257 but there will be no impermissible delegation.
Not that non-delegation doctrine and due process should never talk to each other. As noted above, the presence of procedures has sometimes been held to prevent a violation of non-delegation doctrine.258 This is still good law after American Trucking, as long as these procedures aren’t made up by the recipient of the overbroad delegation. APA procedures or the availability of statutory or constitutional judicial review really do narrow a delegation—in the case of APA procedures, Congress made some of the important decisions in 1946, and in the case of constitutional review, Congress legislated against the background of decisions that were made in, say, 1791 or 1868 and that are now out of the delegate’s hands. The availability of these procedures will no doubt also be relevant to a due process inquiry. So the doctrines aren’t entirely unrelated. Moreover, to the extent certain procedures are unavailable against the government (for example, the APA, which governs only agencies,259 or Bill of Rights protections, which often don’t apply against private actors260), non-delegation doctrine—just like due process—might end up applying differently against public and private parties even though the inquiry is the same.261
Nonetheless, the doctrines should still be kept distinct as an analytic matter. The procedures that save a delegation from overbreadth are the sorts that constrain a delegate’s discretion, for instance by enforcing substantive rationality. One example might be “hard look” review under the APA.262 The procedures that save a delegation from violating due process, on the other hand, are the sorts that ensure fair treatment for the affected party, for instance by minimizing bias or by ensuring that the three-part Mathews v. Eldridge balancing test263 is met—one example might be the APA procedures for formal adjudication.264
Having established that the label matters, an important question is whether the Carter Coal holding265 is best thought of as a non-delegation or due process decision. The Supreme Court’s references to “delegation” aren’t very probative. Merely saying the word “delegation” isn’t enough to invoke non-delegation doctrine. Delegations can be unconstitutional for many reasons. This Article has discussed many cases as being about private delegations even though (as state cases) they were unambiguously about due process.266 One can argue that Congress can’t constitutionally delegate a “private attorney general” power to qui tam plaintiffs, either on standing grounds267 or on Appointments Clause grounds;268 or, one can argue that delegation to religious groups violates the Establishment Clause.269 One can thus speak of “delegations” and call them unconstitutional without implying that the case has anything to do with non-delegation doctrine as discussed in Panama Refining or Schechter Poultry.270
Slightly more probative is the opinion’s citation of Schechter Poultry, which is indisputably a non-delegation case.271 I say “slightly” because mere citation isn’t a jurisprudential argument. That citation is immediately followed by citations to Eubank and Roberge, which are due process cases.272 As I mentioned above in the context of Currin v. Wallace (a non-delegation case that cites Roberge, a due process case, as well as Carter Coal),273 perhaps this “commingling” of doctrines is a sign of sloppiness,274 or maybe it’s a sign that the Supreme Court thought private delegations automatically raise due process issues while public delegations don’t. Or perhaps this is reading too much into a mere citation.
One could—on the basis of the Schechter Poultry citation—call Carter Coal both a non-delegation decision and a due process decision.275 Some venerable commentators take this route and characterize Carter Coal in both ways. In 1971, dissenting in McGautha v. California,276 Justice Brennan characterized non-delegation doctrine as having “roots both in . . . separation of powers . . . and in the Due Process Clause”—here citing Carter Coal277—and stated that, as a due process doctrine, it applied to the states.278 A little bit later, Justice Thurgood Marshall agreed that Carter Coal was (at least) a non-delegation case: “The last time that the Court relied on Schechter Poultry was in [Carter Coal].”279 Paul Verkuil explicitly writes that the Carter Coal Court “held the delegation arbitrary both under Article I of the Constitution and the Due Process Clause.”280
The non-delegation rationale wouldn’t be crazy: Entrusting a decision entirely to the unreviewable and unguided discretion of private parties is the opposite of having an “intelligible principle.” But then the Court wouldn’t need to explicitly use the fact that the delegates were private.281 So even if Carter Coal were labeled a non-delegation case, it wouldn’t be one that supports a special doctrine for private parties (some private parties, like Amtrak, do have intelligible principles attached to their delegation282); nor would it add anything to a due process analysis.
On balance, Carter Coal is properly considered a due process case and not a non-delegation case, at least not one that has a distinctive take on private delegations283—though the text (as well as the text in Currin284) isn’t a model of clarity. More importantly for the law, the last thirty years’ worth of Supreme Court cases agrees with this conclusion.285 In 1983, Justice White, in his dissent in INS v. Chadha,286 characterized Schechter Poultry and Panama Refining as the only two cases where a statute was struck down on non-delegation grounds, and omitted Carter Coal entirely.287 Justice Blackmun did the same in his majority opinion in Mistretta v. United States288 in 1989,289 and Justice Scalia did the same in his majority opinion in Whitman v. American Trucking Ass’ns, Inc. in 2001.290 A former appellate judge, one Antonin Scalia, wrote in 1986 that, though Carter Coal “discussed” non-delegation doctrine, the holding of the case “appears to rest primarily upon denial of substantive due process rights.”291
3. How the Amtrak Case Should Have Been Decided
The wording of Carter Coal (aside from the mere citation of Schechter Poultry) and the characterization of the last thirty years of Supreme Court cases establish that Carter Coal is a due process case, not a non-delegation doctrine case. What does this imply about the D.C. Circuit’s Amtrak case?
The Amtrak case may have been rightly decided, but for the wrong reason. Here’s how the reasoning should have proceeded.292 As a matter of non-delegation doctrine, there’s no problem. As mentioned above, the statutory command that Amtrak “be operated and managed as a for-profit corporation” is enough to provide an intelligible principle for how Amtrak should exercise its power, jointly held with the FRA, to set performance standards.293
The very intelligible principle that dooms the non-delegation challenge, however, also establishes bias for purposes of a due process challenge. As a threshold matter for due process protections to apply, Amtrak must be a state actor. (Unlike the D.C. Circuit, which was concerned to call Amtrak private, here we would be concerned to call Amtrak public to achieve the same result.) No problem: see Lebron.294 Next, the bias must be substantial enough to establish a due process violation. Here, the statute requires Amtrak to maximize its profits, and Amtrak has an effective veto power over performance measures. Therefore, it plausibly can’t, without a conflict of interest, regulate the rest of the railroad industry.295
4. Other Comminglers
The D.C. Circuit isn’t the only court that has commingled non-delegation and due process concepts so as to make the precise basis of a holding unclear. In 2004, the Fourth Circuit considered a non-delegation challenge to a supposed delegation of power to the United Mine Workers of America Combined Benefit Fund made in the Coal Industry Retiree Health Benefits Act of 1992.296 Faced with severely underfunded benefit funds in the coal industry and an exit of firms from the industry, Congress required currently active coal companies to pay into the Combined Benefit Fund, which in turn would pay promised healthcare benefits to active and retired coal miners.297 The Pittston Company, a coal company, argued that the Act “unconstitutionally delegates governmental authority to the Combined Fund, a private entity, giving the Combined Fund ‘discretionary authority to collect and spend federal taxes and the plenary authority to administer a federal entitlement.’”298
The Fourth Circuit summarized private non-delegation doctrine by citing J.W. Hampton, Jr., & Co. v. United States299 and Whitman v. American Trucking Ass’ns, Inc.300—as well as Carter Coal. Having characterized non-delegation doctrine as stemming from the Vesting Clauses,301 the court continued by stating that a delegation to private entities rather than to the executive branch would be a “legislative delegation in its most obnoxious form.”302 Therefore, “[a]ny delegation of regulatory authority ‘to private persons whose interests may be and often are adverse to the interests of others in the same business’ is disfavored.”303
This is doctrinally incorrect insofar as it doesn’t recognize that the private delegation aspect of Carter Coal is a due process issue, but the doctrinal confusion in this case was innocuous. The Pittston court determined that the Combined Benefit Fund didn’t determine who paid it, how much it would get paid (or whether penalties for nonpayment could be excused), who the beneficiaries would be, or the nature or amount of the benefits. Every important decision was made by the Act itself, the Social Security Commissioner, or the Secretary of the Treasury. All the supposed powers of the Fund related to its internal governance, or were non-regulatory, ministerial, advisory, or otherwise inconsequential. Therefore, the court held—relying on Sunshine Anthracite Coal Co. v. Adkins304—there was no invalid delegation.
Upholding the delegation based on Sunshine Anthracite was clearly correct (assuming the court correctly characterized the Fund’s powers, or lack thereof). In retrospect, the court’s characterization of private delegations as being specially disfavored under non-delegation doctrine is just dictum.
State courts also often commingle. In general, state courts are more likely to analyze delegations under a due process theory; Wyoming is one example of a state that has seen the difference clearly and apparently adopted an exclusively due-process-based theory.305 In fact, several commentators argue that the due process approach is better than the separation of powers approach, and suggest junking the latter and retaining the former.306 Most states haven’t done that, but instead rely on both theories simultaneously.
The Texas Supreme Court, whose private delegation doctrine is discussed above,307 claims to have been careful to keep separation of powers and due process principles separate;308 nonetheless, the potential bias of the private delegate (factor four in its test)309 sounds like an infusion of due process.310
Arizona has a non-delegation doctrine based on the legislative vesting clause of the Arizona constitution;311 but a case apparently based on that vesting clause, Emmett McLoughlin Realty, Inc. v. Pima County,312 cites Roberge,313 a federal due process case, as well as a previous Arizona case314 that cites Carter Coal. The same goes for Illinois, which also has a general non-delegation doctrine based on its legislative vesting clause315 and at least one other specific non-delegation doctrine based on a constitutional grant to the legislature of the power to grant homestead exemptions;316 cases citing the relevant structural clauses also cite federal due process cases like Eubank, Thomas Cusack, and Carter Coal, or other cases relying on these.317
For states, though, the commingling seems less harmful than for the federal government. Granted, the general concern that structural violations needn’t implicate fairness, while unfair delegations raise all their own issues even if they’re structurally sound, still applies.318 But the concern that non-delegation is purely federal while due process also applies to states no longer applies when a state has its own structural non-delegation doctrine based on its own constitution.319
How does this apply to our examples? Recall from the due process section that several of the examples—Amtrak, and possibly the Mississippi Board of Pharmacy and the Texas Boll Weevil Eradication Foundation, but not the North Carolina Board of Dental Examiners or the Texas homeowners in the water quality protection zones—were vulnerable for bias.320 (The dental board was immune because its role was limited to enforcing statutory commands through ordinary lawsuits, while the Texas landowners were non-state actors who didn’t regulate anyone.) If a state mixes non-delegation concepts with due process concepts, the result should probably be the same as under the Due Process Clause alone.
IV. Antitrust Theories
Moving from constitutional theories like non-delegation and due process to federal statutory challenges under antitrust law isn’t as great a change of gears as it might seem. As mentioned in Part I, private delegation—in particular an industry “regulating itself”—raises the possibility that incumbents will regulate potential entrants or current competitors, which can be anticompetitive.
For federalism reasons, regulation by the state itself, through the legislature or judiciary, is absolutely immune from antitrust liability under the “state action” doctrine.321 Agencies stretch the doctrine, depending on their degree of privateness. Here, too, agencies can be private for antitrust purposes even if they otherwise look public. Once state action immunity is overcome, however, the question is whether there is an actual antitrust violation. In many of the preceding examples, this will be true, or at least will be easier to prove because of structural factors like the competitive relationship between the regulator and the regulated parties.
Once an antitrust violation is established, there remains the issue of remedy. The standard remedy is treble damages. Municipalities are exempt from damages, and many agencies will be exempt as well under sovereign immunity, mainly if the state is required to pay their bills. For some of the examples, the sovereign immunity question is difficult, so the most that can be said definitively is that they might be fully liable, and that they’re in any event subject to injunctive lawsuits in which they’ll have to pay attorney fees.
A. State Action Immunity
A state board charged with anticompetitive behavior will always argue, as an initial matter, that its behavior is state action exempt from antitrust law under Parker v. Brown.322 The acts of state governments themselves—that is, a state legislature323 or a state supreme court in its regulatory role324—aren’t covered by federal antitrust law,325 but a state board doesn’t fall within this category. At the opposite extreme, private parties get state action immunity if they satisfy the two prongs of the test from California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.—that is, if they (1) act according to a clearly articulated state policy and (2) are actively supervised by the state.326
In between these poles, we have intermediate entities like municipalities, which have to satisfy only the first Midcal prong. They don’t get blanket Parker immunity because they have no sovereignty of their own; but they’re also public enough to dispense with the requirement of active supervision. The second Midcal prong, as the Supreme Court explained in Town of Hallie v. City of Eau Claire,327 serves an essentially evidentiary purpose—that the first Midcal prong is truly satisfied and the body is really acting pursuant to state policy.328 When the entity is private, “there is a real danger that [it] is acting to further [its] own interests, rather than the governmental interests of the State”;329 a “private price-fixing arrangement” might be concealed by “a gauzy cloak of state involvement.”330 But when a municipality is involved, the court “may presume, absent a showing to the contrary, that [it] acts in the public interest,”331 partly because of the increased public scrutiny that comes from municipal elections and mandatory disclosure laws.332 Thus, the court doesn’t need the extra evidentiary benefits that active state supervision would provide.
1. Applicability to State Agencies
As for state agencies, the Supreme Court suggested in Town of Hallie that “it is likely that active state supervision would also not be required.”333 This is dictum, but the influential Areeda-Hovenkamp antitrust treatise agrees with it: “Dispensing with any supervision requirement for municipalities implies, a fortiori, the same for the ‘public’ departments and agencies of the state itself.”334 The treatise adds that “[t]oday the courts uniformly agree with that conclusion,”335 which gives a nice three-part doctrine where legislatures themselves get blanket immunity, public state agencies and municipalities are subject to the first Midcal prong, and private parties are subject to both Midcal prongs. But the apparent uniformity might be misleading, as “determining whether an actor is sufficiently ‘public’ so as not to require supervision has often proven difficult.”336
2. The Cursory View
Determining whether an actor is sufficiently public has proven so difficult that the circuits are split three ways on the question, though the Supreme Court may resolve this split in the 2014 Term, in which case this Subpart will become partly moot.337 The Fifth Circuit held that Louisiana’s State Board of Certified Public Accountants (CPAs), which made rules prohibiting CPAs from “engaging in incompatible professions” like selling securities,338 was public enough to be exempt from the active supervision requirement. Even though it was “composed entirely of CPAs who compete in the profession they regulate,” the “public nature of [its] actions mean[t] that there [was] little danger of a cozy arrangement to restrict competition.”339 The Board was thus “functionally similar to a municipality.”340 The analysis here was unfortunately fairly cursory. Similarly, the Tenth Circuit held, in the context of a public university (which allegedly conspired to “monopolize certain agricultural testing services” in the state341), that the active supervision requirement was unnecessary “[g]iven the nature of these defendants, a constitutionally created state board, its executive secretary, and a state created and funded university.”342
The Second Circuit’s analysis of why an urban development corporation was exempt from the active supervision requirement seems to have the same flavor: The development corporation at issue was presumed to be public-interested because it was “by statute a political subdivision of the state.”343 This one-factor test certainly seems incorrect in light of the Supreme Court’s holding that the Virginia State Bar, though a state administrative agency,344 was a “private part[y]”345 subject to the active supervision requirement.
3. The Intermediate View
Other circuits don’t rely on formal labeling or take the publicness of a state agency for granted. The Oregon State Bar adopted a rule making itself the sole legal provider of malpractice insurance for the state’s lawyers.346 The Ninth Circuit ended up exempting it from the active supervision requirement, but only after analyzing a number of factors: not just the Bar’s formal classification as “a public corporation and an instrumentality of the State of Oregon,” but also how many of its members “must be nonlawyer members of the public,” the requirement that its records be “open for public inspection” and its accounts “subject to periodic audits by the State Auditor,” its open meeting requirements, and the fact that its members “are public officials who must comply with the Code of Ethics.”347 “These requirements leave no doubt that the Bar is a public body, akin to a municipality for the purposes of the state action exemption.”348
The First Circuit seems to also follow a nuanced approach. Then-Judge Stephen Breyer discussed whether the Massachusetts Board of Registration in Pharmacy was acting anticompetitively in limiting pharmacist advertising, mail-order pharmacies, and “branch offices” or “pick-up stations.”349 According to Judge Breyer, whether the pharmacy board was essentially private for the purposes of the active supervision requirement would depend “upon how the Board functions in practice, and perhaps upon the role played by its members who are private pharmacists.”350 Just half a year earlier, Judge Breyer had used a similarly pragmatic approach, holding that the Massachusetts Port Authority was similar to a municipality because it possessed “such typical governmental attributes as the power of eminent domain, rulemaking authority, bonding authority, and tax exempt status.”351
The Eleventh Circuit summarized its own (and other circuits’) cases as focusing on how “public the entity looks”352 through an analysis of “the government-like attributes of the defendant entity”:
Factors favoring political-subdivision treatment include open records, tax exemption, exercise of governmental functions, lack of possibility of private profit, and the composition of the entity’s decisionmaking structure. The presence or absence of attributes such as these tells us whether the nexus between the State and the entity is sufficiently strong that there is little real danger that the entity is involved in a private anticompetitive arrangement.353
A similar multi-factor analysis—where the entity’s nonprofit status also plays a role—can be found in the Seventh Circuit.354
4. The FTC and Areeda-Hovenkamp View
This multi-factor analysis, while more nuanced than the simple “public is public” view of the Second, Fifth, and Tenth Circuits, still is insufficient for the FTC. Rather than a “laundry list of attributes” approach, the FTC prefers to focus on one particular aspect of the challenged bodies: the extent to which they’re driven by private self-interest.
In 2011, the FTC examined the case of North Carolina’s Board of Dental Examiners.355 The Board had been accused of conspiring to drive non-dentists out of the state market for teeth-whitening services.356 The FTC’s position was that the state action exemption required active supervision “in circumstances where the state agency’s decisions are not sufficiently independent from the entities that the agency regulates.”357 This includes cases where the agency has a “financial interest in the restraint that [it] seeks to enforce”358 and is “controlled by private market participants”359 “who [stand] to benefit from the regulatory action.”360
Using this framework, the FTC concluded that the Board must meet the active supervision requirement if it wants to benefit from state action immunity. “Because North Carolina law requires that six of the eight Board members be North Carolina licensed dentists, the Board is controlled by North Carolina licensed dentists.”361 Moreover, dentists perform teeth whitening. Therefore, “Board actions in this area could be self interested.”362
According to the FTC, the need for active supervision is especially acute when the agency “is not accountable to the public but rather to the very industry it purports to regulate.”363 This political unaccountability concern was present here: The Board was only accountable to dentists, as “the six dentist members of the Board are elected directly by their professional colleagues, the other licensed dentists in North Carolina.”364 Because the Board couldn’t show that it was actively supervised,365 it wasn’t immune from federal antitrust law. The Fourth Circuit affirmed the FTC’s holding, at least to the extent of requiring active supervision when both of the FTC’s factors were present—domination by and accountability to market participants.366 (This is the decision on which the Supreme Court has granted cert.367)
The Areeda-Hovenkamp treatise seems to take a position closer to the FTC’s, not requiring the additional element of accountability to market participants:
We would presumably classify as “private” any organization in which a decisive coalition (usually a majority) is made up of participants in the regulated market. This presumption would be rather weak . . . where the competitive relationship between the decision maker . . . and the plaintiff is weak and the potential for anticompetitive effects not particularly strong. It would be weaker still where the decision maker responds to the court, governor, or legislature directly and on an ongoing basis. But the presumption should become virtually conclusive where the organization’s members making the challenged decision are in direct competition with the plaintiff and stand to gain from the plaintiff’s discipline or exclusion.368
Or, as Einer Elhauge puts it, “[F]inancially interested parties cannot be trusted to restrain trade in ways that further the public interest.”369 The strict view could also be supported by capture-based theories of the state action doctrine, like that advocated by John Wiley.370 Aaron Edlin and Rebecca Haw, surveying recent scholarship on the subject, conclude that “although the various accounts differ in other ways, they all agree that self-dealing, unaccountable decision-makers should face antitrust liability.”371
The Areeda-Hovenkamp treatise thus takes issue with the Ninth Circuit’s approach in the Oregon State Bar case,372 agreeing with the dissent that the self-interest of the lawyers composing the Bar should make the Bar private for state action immunity purposes.373 The treatise additionally disagrees with approaches like that of the Second Circuit, stating that “state legislative declarations that the body is a ‘public’ corporation”374 or “state mandates that the organization serve the ‘public interest’” should count for little.375 Nor should an entity’s nonprofit status376 count for much: “the typical trade or professional association is itself a nonprofit organization dedicated to improving the welfare of its members. The key is not the profit or nonprofit status of the organization, but the identity of its decision-making personnel.”377
How might the distinction between the Fourth Circuit’s approach and the FTC and Areeda-Hovenkamp approach play out? The distinction is irrelevant if a state legislature imposes restraints on its own, in which case its action is absolutely immunized under Parker v. Brown.378 For example, the Mississippi statute requiring pharmacy benefit managers to disclose their financial statements to the state Board of Pharmacy379 is immunized from antitrust attack because it’s the act of the legislature. The Board also, however, has a delegated power to require additional information besides balance sheets and income statements,380 so conceivably particular bits of financial information that the Board might eventually require could still be challenged. The fiduciary duty requirement for pharmacy benefit managers, had it been adopted, would have come entirely from the Board.
If there is to be a challenge, consider the applicability of state action immunity. The Mississippi Board of Pharmacy is appointed by the Governor from lists submitted by the Mississippi Pharmacy Association with input from other pharmacist organizations.381 All members must be licensed pharmacists and have at least five years of experience practicing pharmacy in Mississippi.382 These requirements probably make the Board “private” for purposes of state action immunity under the FTC and Areeda-Hovenkamp approach.
The Fourth Circuit’s approach would, in addition, require accountability to market actors. At first sight, this seems lacking because the Governor appoints and removes the Board members. But, on the other hand, Board members can only be removed for cause and with procedural protections,383 so the Governor can’t remove a Board member for purely policy reasons. The Governor is also constrained to appoint members suggested by pharmacist associations.384 There is thus a plausible, though not inescapable, argument that the accountability is more to market participants than to politicians.385
The Texas Boll Weevil Eradication Foundation should be private enough to require active supervision under either the Fourth Circuit’s or FTC and Areeda-Hovenkamp standards, because it’s both peopled with growers and accountable to (that is, elected by) growers.386
Texas landowners in water quality protection zones are private under any test, but as we will see in the next section, they don’t engage in anticompetitive behavior, so the point is moot. As for Amtrak, state action immunity is irrelevant because Amtrak is federal, so the federalism concerns animating the state action doctrine387 don’t apply.388 Hypothetically, if Amtrak were a state entity, its for-profit nature and its statutory labeling as private should satisfy even the loose approach of the Second, Fifth, and Tenth Circuits.
Whether a state agency like the Mississippi Board of Pharmacy or the Texas Boll Weevil Eradication Foundation will be able to benefit from state action immunity from federal antitrust law will thus depend on the circuit and how strictly it analyzes the agency’s structure for signs of privateness. A challenger who can show that an agency is dominated by and accountable to market participants is certainly well off in the Fourth Circuit, though such characteristics may also make the difference in “laundry list” circuits like the First (where Judge Breyer had specifically referred to pharmacists389), Ninth, and Eleventh, especially among judges who respect the author of the Areeda-Hovenkamp treatise. As to lesser degrees of privateness, the “laundry list” circuits might still deny state action immunity, but it’s always hard to predict the outcome of a broad-ranging multi-factor test. The agencies are best off in the formalist circuits that merely look at the agency’s legal designation as public.
B. Actual Antitrust Violations
Denying the agency state action immunity is only a first step, which is of no help to a challenger unless the agency’s actions violate the antitrust laws.
1. The Fourth Circuit’s Dental Examiners Reasoning
The Fourth Circuit’s recent Dental Examiners opinion390 and the FTC decision that it upheld391 illustrate how a board found to lack state action immunity can also be found in violation of antitrust law. The FTC determined that the Board’s action—sending cease-and-desist letters to drive non-dentist teeth whiteners out of the North Carolina market—was anticompetitive,392 and the Fourth Circuit had little trouble upholding that determination.393
First, using the “quick look” framework,394 the FTC determined that the Board’s conduct was “inherently suspect” because “at its core,” the Board was excluding lower-cost competitors.395 The Board offered some procompetitive justifications for its conduct: first, that teeth whitening by non-dentists carried greater health risks; second, that teeth whitening by non-dentists was illegal; and third, that it acted in good faith.396 Promoting public safety, however, isn’t a recognized excuse for colluding to restrain trade (and, moreover, the alleged health risks weren’t sufficiently proven);397 neither is the illegality of the competition sought to be restrained.398 Good faith likewise isn’t a valid antitrust defense.399
Next, using a “rule of reason” analysis,400 the FTC determined that the Board (obviously) had market power;401 this power, combined with the competition-suppressing nature of the conduct, provided indirect evidence of anticompetitive effects.402 In any event, the actual abandonment of the market by non-dentist providers as a result of the conduct provided direct evidence of anticompetitive effects.403 These findings shifted the burden to the Board to provide procompetitive justifications, but the same analysis from the “quick look” section likewise showed that these justifications were insufficient.404
One final consideration concerns whether the Board, arguably a unitary entity, was capable of concerted action, which is required for a “contract, combination . . . , or conspiracy in restraint of trade”405 that violates Section 1. (A Section 1 violation requires “concerted,” not “independent,” action,406 unlike, say, monopolization under Section 2,407 which can be done by a single actor.)
The discussion of Board members’ personal commercial interests in the context of state action immunity408 also shows up here. The test for concerted action is functionalist, not formalist:409 One needs to look for “‘separate economic actors pursuing separate economic interests,’ such that the agreement ‘deprives the marketplace of independent centers of decisionmaking,’ and therefore of ‘diversity of entrepreneurial interests,’ and thus of actual or potential competition.”410 “[C]ompetitors ‘cannot simply get around’ antitrust liability by acting ‘through a third-party intermediary or “joint venture.”’”411 Applying this framework, the FTC noted that the dentist Board members operated their own dental practices and were elected by practicing dentists; that they thus had a personal financial interest in limiting the teeth-whitening market; and that they therefore remained separate economic actors.412
2. The Other Cases
The Board’s action in this case made it one of the easier cases for antitrust analysis, because it involved conduct seeking to actually exclude competitors from a market.413 In other cases, the antitrust analysis might be more complicated.
Areeda and Hovenkamp give an example of a municipality setting “safety standards forbidding any taxicab operator from working more than ten hours per day.”414 A private arrangement to that effect would of course be illegal. A municipality would want to claim state action immunity, but suppose the immunity fails because the necessary state authorization is lacking. Presumably there would nonetheless be no antitrust liability because this might be considered “reasonable” regulation.415
And presumably calling this reasonable wouldn’t require a court to actually do an analysis of the policy.416 Surely it matters more that a municipality is governmental. “This conclusion is strengthened by the fact that the city is presumably (a) not a seller of taxicab services itself; and (b) not in a position to profit from any cartel limiting output of taxicab services.”417 Areeda and Hovenkamp suggest that a structural inquiry, similar to that of standard-setting organizations, is appropriate.418 In such a context, it becomes relevant whether the antitrust plaintiffs and defendant are competitors (and, more generally, whether the defendant has a financial interest in the outcome),419 whether they’re in vertically related or collateral markets,420 and whether they’re in the same geographic market.421
The Mississippi Board of Pharmacy thus seems vulnerable. Once state action immunity is overcome,422 the competitive relation between pharmacists and pharmacy benefit managers—which was already relevant to the state action inquiry under the FTC and Areeda-Hovenkamp approach423—can at least create a strong presumption of a substantive antitrust violation. As noted above, the requirement of financial disclosure comes from the legislature, so state action immunity is dispositive. The Board of Pharmacy, however, still has its own discretion to choose what extra information to require, and of course the proposed fiduciary duty for pharmacy benefit managers came entirely from the Board.424 Establishing the anticompetitive effect will still take some proof—one can imagine a challenge to disclosure of financial information because knowing one’s adversaries’ costs helps one to compete against them and can also facilitate collusion among pharmacists. In any event, the structural considerations should make a challenge that much easier.
The same goes for Amtrak, which has a competitive relationship with other railroads, and the Texas Boll Weevil Eradication Foundation, whose growers on its board compete with other regulated growers. On the other hand, it’s hard to argue that homeowners in Texas water quality protection zones are acting anticompetitively by using a neutral state law to exempt themselves from certain water quality regulations.
The result could be treble damages and attorney’s fees425 for those who are found to have conspired to restrain trade.426 In City of Lafayette v. Louisiana Power & Light Co.,427 Justice Blackmun, dissenting, noted that municipalities found in violation of antitrust laws and not shielded by state action immunity would be liable for treble damages.428 The majority punted on the question,429 but the “shall recover threefold the damages” language of the Clayton Act430 is mandatory. Justice Rehnquist, dissenting a few years later, wrote that avoiding this conclusion would “take a considerable feat of judicial gymnastics.”431
In Rehnquist’s view, the need to avoid subjecting governmental entities to treble damages counseled interpreting anticompetitive local ordinances not as violating antitrust law but merely as being preempted.432 That was a dissent, however; the law at the time was that even municipalities could violate antitrust law and be found liable.433
For municipalities, this is no longer the case. Congress passed the Local Government Antitrust Act in 1984 to protect local governments, their “official[s] or employee[s] . . . acting in an official capacity,”434 or anyone acting under a local government or official’s or employee’s direction.435 Municipalities can still violate antitrust law, but now they can only be enjoined.436
But this statute is of no help to private actors or state agencies that fail the tests for state action immunity.437 In Hoover v. Ronwin,438 for instance, the majority and the dissent disagreed over whether it was an antitrust violation for the Arizona Supreme Court’s Committee on Examinations and Admissions to have conspired to restrain trade by reducing the number of attorneys in the state.439 The majority thought it wasn’t a violation because the challenged action was that of the Arizona Supreme Court in its sovereign capacity.440 The dissent thought it was a violation because the challenged action was that of the Committee, not the Arizona Supreme Court,441 and there was no clearly articulated state policy to reduce the number of attorneys.442 But both sides agreed that had there been a violation, the board members would be subject to treble damages.443 Goldfarb v. Virginia State Bar444 would be another example of this—where the board was denied state action immunity.445
This has apparently been the fate of the California Travel and Tourism Commission, which was alleged to have colluded with the rental car industry to fix rental car prices.446 The Ninth Circuit found that the Commission—which was chaired by a California cabinet official and whose commissioners were one-third gubernatorial appointees and two-thirds elected by the tourism industry447—wasn’t acting pursuant to a “clearly articulated” state policy.448 Thus, the Ninth Circuit found, the Commission failed Midcal’s first prong; the court therefore didn’t need to consider whether the Commission had (or required) “active state supervision” under Midcal’s second prong.449 The case against the Commission was allowed to proceed to trial, and the parties later settled for an amount that included nearly $6 million in attorneys’ fees and costs alone.450
Some state agencies will nonetheless be considered “arms of the state” and share the state’s sovereign immunity for purposes of the Eleventh Amendment, but other agencies and boards won’t. The Supreme Court has explained that the arm-of-the-state inquiry—like the Eleventh Amendment itself—is focused on protecting both the state’s dignity and the state’s treasury.451 Operationalizing this two-factor test has been left to the individual federal circuits, with the predictable result that arm-of-the-state jurisprudence “is, at best, confused.”452 Whether the state is legally liable for the agency’s debts is an important factor, but how important is unclear.453 The treasury concern trumps the dignity concern in some circuits,454 but dignity can sometimes be more important in others,455 and the Eleventh Circuit has stated that the most important factor is how the entity is treated by state courts.456
For instance, in the Fourth Circuit, the relevant factors for whether an agency shares the state’s sovereign immunity are (1) whether judgments against the entity will be paid by the state or whether recoveries inure to the state’s benefit; (2) whether the entity exercises substantial autonomy (this involves looking at who appoints the entity’s directors and funds the entity and whether the state can veto the entity’s actions); (3) whether the entity is involved with state concerns as opposed to local concerns; and (4) how the entity is treated under state law.457 The Fifth Circuit has a similar test, but with more factors: (1) whether state statutes and case law characterize the agency as an arm of the state; (2) the source of funds for the entity; (3) the entity’s degree of autonomy; (4) whether the entity is concerned primarily with local concerns; (5) whether the entity has authority to sue and be sued in its own name; and (6) whether the entity has the right to hold and use property.458
An extra twist is that most circuits deny sovereign immunity to private entities.459 Some of the private entities that show up in the cases are indisputably private corporations contracting with the state,460 but for others, one could make a colorable argument that they were public.461 Sometimes courts seem to be merely applying their multi-factor “arm of the state” tests to these entities, but at least the Ninth Circuit has an explicit doctrine against extending sovereign immunity to private parties.462 It’s thus possible that, if an entity is found to be private under some other test—for example, the antitrust state action immunity test discussed above463—one will be able to import that finding of privateness as at least one factor cutting against sovereign immunity.
In any event, even if the entity is covered by sovereign immunity, it will still be subject to injunctive suits. The FTC primarily proceeds by cease-and-desist orders, though it also has the power to assess civil penalties,464 and even private plaintiffs can pursue injunctions under Ex parte Young.465 Such suits would still require defendants to pay both their own and the prevailing plaintiff’s litigation costs.466
Not surprisingly, given the multitude of factors and unclear tests, it’s hard to say whether some of our example organizations are potentially subject (if found in violation of antitrust law) to treble damages. Amtrak is easy; it’s a for-profit entity, so it should be liable.467 The Texas water quality protection zone landowners are likewise easy; they’re just private landowners.468
The North Carolina Board of Dental Examiners supports itself through fees469 and seems fairly autonomous, which cuts in favor of liability, but, on the other hand, it’s also treated like an agency under state law (and its employees like state employees)470 and deals with an issue of statewide concern, which cuts in favor of immunity. Ultimately, the Board probably has sovereign immunity because North Carolina statutes envision that in case of tort judgments against occupational boards, the state will pay the excess liability over $150,000 unless the Board’s insurance covers more.471
The Mississippi Board of Pharmacy is funded by licensing fees and penalties,472 but the money is deposited into the state treasury “in a special fund to the credit of the board,” and funds can be expended only by legislative appropriation.473 So perhaps the state is liable for its debts, but it’s hard to tell from the statute. It’s also characterized as a state board by the statute474 and is concerned with statewide problems, which again cuts in favor of immunity.475 On the other hand, the only state role is appointment and removal of board members by the Governor,476 which cuts in favor of liability. It’s unclear from the statute whether it has the right to hold and use property. This factor is one of the prongs of the Fifth Circuit test, discussed above.477 As for suing and being sued in its own name, there are certainly cases involving the Board both as plaintiff and defendant;478 this again is a factor that cuts in favor of liability.479
The Texas Boll Weevil Eradication Foundation is a separate nonprofit corporation,480 which cuts in favor of liability, though it’s also labeled a “quasi-governmental entity,”481 which (depending on how strong the “quasi” is) might cut in favor of imunity. It’s funded through fines and assessments and has power to borrow money,482 though this doesn’t tell us whether the government is on the hook for its debts. The Foundation does have some autonomy, though a State commissioner retains some authority. His approval is required to change the number of Board positions or change zone representations on the Board.483 The Commissioner also can exempt a grower from excessive penalties,484 and the Board can only spend money on Commissioner-approved programs.485 The Foundation is concerned with the statewide problem of boll weevil eradication, which cuts in favor of immunity. The Foundation can sue in its own name, which cuts in favor of liability,486 but the statute also declares the Foundation “immune from lawsuits and liability,”487 which of course can cut in favor of immunity depending on how relevant the state-law sovereign immunity treatment is to federal law.488
In short, I lean strongly toward sovereign immunity for the North Carolina Board of Dental Examiners but wouldn’t draw any firm conclusions on the immunity of the Mississippi Board of Pharmacy or the Texas Boll Weevil Eradication Foundation. Instead, I would simply reiterate two points: that the boards would at least possibly be liable, and that injunctive suits and attorney’s fees are issues regardless.
Putting the conclusions on state action immunity, substantive antitrust violations, and liability together, Amtrak should be non-immune, in violation, and fully liable. The North Carolina Board of Dental Examiners was found non-immune in the Fourth Circuit and may be found non-immune in the intermediate circuits. It’s in violation and it might be fully liable. The Mississippi Board of Pharmacy’s state action immunity likewise depends on the circuit. It may be found in violation, depending on the anticompetitive effect of its activities, and it might be fully liable. The Texas Boll Weevil Eradication Foundation’s state action immunity depends on the circuit. It may be found in violation, depending on the anticompetitive effect of its activities, and it might be fully liable. The Texas landowners in water quality protection zones are non-immune and fully subject to liability but are unlikely to be substantively violating the law.
These are just some of the most salient doctrines that are currently being used, often successfully, to challenge the legality of private regulatory delegations. Federal non-delegation doctrine is unlikely to be a successful avenue for challenging these delegations. State doctrines like that in Texas will probably fare much better. The Due Process Clause seems quite promising for challenging private regulators, especially if the regulators are competitors of the regulated parties and have mandatory control over coercive processes. Due process cases can also lead to money damages against the specific individuals responsible under 42 U.S.C. § 1983 or Bivens. (In jurisdictions that confuse non-delegation and due process, the result under their non-delegation analysis should be similar to the result under a proper due process analysis.)
Federal antitrust law likewise seems promising, especially if the regulators are competitors of the regulated parties. State action immunity is then more likely to fail, at least in the more stringent circuits, a substantive antitrust violation is more likely to succeed because of the presence of structural anticompetitive factors, and the more independent the regulators are from the state, the more likely they are to be fully liable for treble damages. Even if treble damages aren’t available, injunctive relief and the litigation costs that come with antitrust suits are still an issue.
Even more interesting is the proliferation of public-private tests: the familiar “state action” test for federal constitutional law, including the Due Process Clause; the public-private test for Texas’s private non-delegation doctrine; the public-private test for the D.C. Circuit’s recent private non-delegation doctrine; and the various circuits’ and the FTC’s tests for whether state action immunity applies. One can easily dismiss the characterization of Amtrak or the North Carolina Board of Dental Examiners as “private,” but one would be wrong. At the very least, one would be wrong to presume that entities with governmental powers are necessarily public or that a finding that an organization (like Amtrak) is public for some legal doctrines implies that it can’t be private for other doctrines.
Regulators are, therefore, advised to be extremely careful. Those who think of themselves as public officials might find that they are sadly mistaken, all the more sadly to the extent that they find themselves having to pay out-of-pocket damages to their regulatory victims.
1. Harold Abramson, writing a quarter century ago, distinguished three categories of “private regulators.” Harold I. Abramson, A Fifth Branch of Government: The Private Regulators and Their Constitutionality, 16 Hastings Const. L.Q. 165, 169 (1989). First, there are private actors who are “formally deputized by government as private regulators” (not counting actual public officials). Id. These include, for instance, professional licensing boards, such as the Louisiana State Board of Embalmers and Funeral Directors. See, e.g., St. Joseph Abbey v. Castille, 700 F.3d 154, 158 (5th Cir. 2012) (noting that the FTC had raised concerns about state funeral boards’ being “dominated by funeral directors”). At the other extreme, there are private adjudicatory and standard-setting organizations with no formal connection to government, like the Better Business Bureau or Consumers Union. Abramson, supra, at 170–71. In between, there are organizations with some formal connection with government, though one that’s less definite than in the first category. These include standard-setting organizations whose standards are incorporated by reference into law, like the American National Standards Institute, or private court-ordered arbitrators. Id. at 172–74.
2. See, e.g., Michael J. Astrue, Health Care Reform and the Constitutional Limits on Private Accreditation as an Alternative to Direct Government Regulation, Law & Contemp. Probs., Autumn 1994, at 75, 81.
3. See Bundesverfassungsgericht [BVerfG] [Federal Constitutional Court] Jan. 18, 2012, 2 BvR 133/10, available at http://www.bverfg.de/entscheidungen/
rs20120118_2bvr013310.html, [http://perma.cc/G7A5-TBZ9]; see also Maximilian Steinbeis, Outsourcing als Mittel der Haushaltssanierung ist verfassungswidrig, Verfassungsblog (Jan. 18, 2012), http://verfassungsblog.de/outsourcing-als-mittel-der-haushaltssanierung-ist-verfassungswidrig/, [http://perma.cc/YZ55-75MR].
4. See Judith Resnik, Globalization(s), privatization(s), constitutionalization, and statization: Icons and experiences of sovereignty in the 21st century, 11 Int’l J. Const. L. 162 (2013).
5. See HCJ 2605/05 Academic Ctr. of Law & Bus., Human Rights Div. v. Minister of Finance  (Isr.) ¶ 18, available at http://elyon1.court.gov.il/files_eng/05/050/
026/n39/05026050.n39.htm, [http://perma.cc/42AY-XV2F]; Barak Medina, Constitutional limits to privatization: The Israeli Supreme Court decision to invalidate prison privatization, 8 Int’l J. Const. L. 690 (2010); Resnik, supra note 4; Alexander Volokh, Privatization and the Elusive Employee-Contractor Distinction, 46 U.C. Davis L. Rev. 133, 180–85, 198–200 (2012).
6. These aren’t the only doctrines used today to support the accountability of private entities doing government-like tasks: another example is the narrow scope that has recently been given to government contractor immunity. Government contractor immunity was first recognized in Boyle v. United Technologies Corp., 487 U.S. 500 (1988), and extended in Koohi v. United States, 976 F.2d 1328 (9th Cir. 1992), Bentzlin v. Hughes Aircraft Co., 833 F. Supp. 1486 (C.D. Cal. 1993), and Saleh v. Titan Corp., 580 F.3d 1 (D.C. Cir. 2009). But recent cases have taken a narrower view, including McMahon v. General Dynamics Corp., 933 F. Supp. 2d 682 (D.N.J. 2013), and at least four other cases since 2005. See id. at 692–94 (collecting cases); Alexander Volokh, Are Federal Contractors Immune from Tort Suits Just Because the Government Is?, Reason.Org, May 9, 2013, http://reason.org/news/show/
7. Private prison liability—and civil rights liability generally—is a mixed bag that resists easy characterization. Although the Supreme Court did restrict qualified immunity in civil rights suits against private prisons in Richardson v. McKnight, 521 U.S. 399 (1997), it established in Filarsky v. Delia, 132 S. Ct. 1657 (2012), that qualified immunity for private parties was still available in other contexts. Moreover, in Minneci v. Pollard, 132 S. Ct. 617 (2012), it cut back on the availability of civil rights suits for money damages against federal private prisons, though this was on a theory that state tort law already provided an adequate remedy. Id. at 620. See generally Alexander Volokh, The Modest Effect of Minneci v. Pollard on Inmate Litigants, 46 Akron L. Rev. 287 (2013); Alexander Volokh, Recent Developments in the Federal Civil-Rights Liability of Federal Private Prisons, Reason.Org, May 6, 2013, http://reason.org/news/show/apr-2013-federal-liability-prisons, [http://perma.cc/77KJ-XSHM]; Alexander Volokh, Supreme Court Clarifies Standards for Qualified Immunity in Civil Rights Cases—Or Does It?, Reason.Org, Apr. 5, 2013, http://reason.org/news/show/privatization-qualified-immunity, [http://perma.cc/ZKF4-ECJC].
8. Although the organizations below are described in the present tense, in reality some of them are described as they were before cases, discussed in this Article, striking them down or altering their workings in some way.
9. See infra notes 227–29 and accompanying text.
10. See infra notes 221–23 and accompanying text.
11. Ass’n of Am. Railroads v. Dep’t of Transp., 721 F.3d 666, 669 (D.C. Cir. 2013) (quoting Passenger Rail Investment and Improvement Act of 2008 [hereinafter PRIIA], Pub. L. No. 110-432, § 207(a) (codified at 49 U.S.C. § 24101 note)) (internal quotation marks omitted) (holding PRIIA § 207 to be unconstitutional).
12. Id. (citing 49 U.S.C. § 24308(f)(1)–(2)) (internal quotation marks omitted).
13. Id. (citing PRIIA § 207(d) (codified at 49 U.S.C. § 24101 note)).
14. N.C. Gen. Stat. Ann. § 90-22(b) (West 2013).
15. Id. § 90-29(a), (b)(2).
16. See text accompanying infra notes 355–67.
17. Miss. Code Ann. § 73-21-75(1) (West 2013).
18. Id. § 73-21-83(1).
19. Similar bills are pending in Oregon, Hawaii, and Oklahoma. See Joanna Shepherd, The Fox Guarding the Henhouse: The Regulation of Pharmacy Benefit Managers by a Market Adversary, 9 Nw. J.L. & Soc. Pol’y 1 (2013).
20. Miss. Code Ann. § 73-21-157(3).
21. Id. (internal quotation marks omitted).
22. See Shepherd, supra note 19, at 19–21; Mari Edlin, PBMs concerned oversight involves conflict of interest, Managed Healthcare Executive, June 2013, at 30.
23. Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 457 (Tex. 1997) (citing Tex. Agric. Code §§ 74.101–.127 (1995)).
24. Id. (citing Tex. Agric. Code §§ 74.105–.106).
25. Id. (citing Tex. Agric. Code § 74.113, 4 Tex. Admin. Code § 3.3(c) (1995)).
26. Id. at 458 (citing Tex. Agric.Code § 74.108(a)(4)).
27. Id. (citing Tex. Agric. Code §§ 74.115(a)–(b), 74.126).
28. Id. (quoting Tex. Agric. Code § 74.117) (internal quotation marks omitted).
29. Id. (quoting Tex. Agric. Code § 74.120(c)).
30. Id. (quoting Tex. Agric. Code §§ 74.107(b), 74.116, 74.109(h)).
31. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 870 (Tex. 2000) (internal quotation marks omitted).
33. Id. at 871 (citing Tex. Water Code § 26.179(d) (1995)).
34. Id. (citing Tex. Water Code § 26.179(g)).
35. Id. at 872 (citing Tex. Water Code § 26.179(i)).
36. See infra notes 225–29 and accompanying text.
37. N.C. Gen. Stat. Ann. § 90-22(b) (West 2013).
38. See infra notes 188–91 and accompanying text.
39. See, e.g., Alexander Volokh, What a Recent Labor-Relations Decision Teaches Us About the Meaning of “Public” and “Private,” Reason.Org, Mar. 21, 2013, http://reason.org/news/show/nlrb-public-private, [http://perma.cc/QEX3-N5KN].
40. 49 U.S.C. § 24301(a) (2006).
41. See infra notes 363–67 and accompanying text.
42. Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W. 2d 545, 471 (Tex. 1997).
43. 226 U.S. 137 (1912).
44. Id. at 141–42 (internal quotation marks omitted).
45. Id. at 143.
46. Id. at 143–44.
47. 242 U.S. 526 (1917).
48. Id. at 530–31.
49. Id. at 531.
50. Id. at 530.
51. 278 U.S. 116 (1928).
52. Id. at 118 (internal quotation marks omitted).
53. Id. at 122.
54. Thomas Cusack, 242 U.S. at 529.
55. Roberge, 278 U.S. at 122.
56. 298 U.S. 238 (1936).
57. Id. at 283–84.
58. 295 U.S. 495 (1935). I discuss Schechter Poultry in the section on non-delegation doctrine, see text accompanying infra note 130.
59. Carter Coal, 298 U.S. at 311; cf. Highland Farms Dairy, Inc. v. Agnew, 300 U.S. 608, 614 (1937) (dodging the issue).
60. City of Eastlake v. Forest City Enters., Inc., 426 U.S. 668, 677–78 (1976); McGautha v. California, 402 U.S. 183, 253 n.3 (1971) (Brennan, J., dissenting); New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 126 n.30 (1978) (Stevens, J., dissenting).
61. Stop the Beach Renourishment, Inc. v. Fla. Dep’t of Envt’l Protection, 130 S. Ct. 2592, 2614 (2010) (Kennedy, J., concurring in part and concurring in the judgment).
62. New Motor Vehicle Bd., 439 U.S. at 109.
63. See text accompanying infra notes 83–87.
64. See also Gen. Elec. Co. v. N.Y. State Dep’t of Labor, 936 F.2d 1448, 1455 (2d Cir. 1991) (“Eubank and Roberge remain good law today.”); Silverman v. Barry, 727 F.2d 1121, 1126 (D.C. Cir. 1984) (noting that the Supreme Court has had recent opportunity to overrule Eubank and Roberge but has chosen to distinguish them instead); cf. A. Michael Froomkin, Wrong Turn in Cyberspace: Using ICANN to Route Around the APA and the Constitution, 50 Duke L.J. 17, 155 (2000) (making this point about Carter Coal); Mark Seidenfeld, Empowering Stakeholders: Limits on Collaboration as the Basis for Flexible Regulation, 41 Wm. & Mary L. Rev. 411, 457 n.199 (2000) (same).
65. 407 U.S. 67 (1972).
66. Id. at 69–70.
67. Id. at 84–90.
68. Id. at 80–84.
69. Id. at 90 (internal quotation marks omitted). This case was decided before Mathews v. Eldridge, 424 U.S. 319 (1976), which sets forth the current balancing test, under which predeprivation hearings aren’t always necessary.
70. Fuentes, 407 U.S. at 93.
71. Id. at 93 n.30.
72. See N. Ga. Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 606–07 (1975) (finding a due process violation: The “writ of garnishment [was] issued by a court clerk without notice or opportunity for an early hearing and without participation by a judicial officer” and was based on “conclusory allegations.”); Mitchell v. W.T. Grant Co., 416 U.S. 600, 605–06 (1974) (finding due process satisfied: “The writ [of sequestration] . . . will not issue on the conclusory allegation of ownership or possessory rights” but only when a judge is convinced of particular facts.); Sniadach v. Family Fin. Corp. of Bay View, 395 U.S. 337, 338 (1969) (finding a due process violation: “[N]otice and an opportunity to be heard are not given before the in rem seizure of the wages . . . . [T]he clerk of the court issues the summons at the request of the creditor’s lawyer . . . .”).
73. Froomkin, supra note 64, at 149 (“The coal boards’ decisions went into effect directly, without review or intervention by the federal government.”).
74. If there were some standards to protect against personal bias, the result might well have been different. See, e.g., Women’s Med. Prof’l Corp. v. Baird, 438 F.3d 595, 610 (6th Cir. 2006) (finding no due process violation when a statute required abortion clinics to be licensed by hospitals, because a government official retained the ability to waive the requirement); Biener v. Calio, 361 F.3d 206, 216 (3d Cir. 2004) (“Delaware’s limitation on the [primary election] filing fee amount[, set by the relevant political party itself,] is a sufficient limitation on the Party’s authority to prevent the delegation from running afoul of the Due Process Clause.”); Gen. Elec. Co. v. N.Y. State Dep’t of Labor, 936 F.2d 1448, 1455 (2d Cir. 1991) (stating that Eubank and Roberge “stand for the proposition that a legislative body may not constitutionally delegate to private parties the power to determine the nature of rights to property in which other individuals have a property interest, without supplying standards to guide the private parties’ discretion.” (emphasis added)); Seidenfeld, supra note 64, at 457 n.199 (“There is some academic disagreement about the extent of an agency’s discretion to deviate or reject negotiated rules necessary to avoid the process being deemed unconstitutional private law making, but the agency or courts must retain some power to ensure that negotiated rules do not contravene statutory provisions and aim to implement something other than deals struck by some, but not all, affected interest groups.” (citations omitted)); cf. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 188 n.4 (2000) (“[T]he Federal Government retains the power to foreclose a citizen suit by undertaking its own action.”).
75. 411 U.S. 564 (1973).
76. Id. at 568 (internal quotation marks omitted).
77. Id. at 569.
79. Id. at 569–70.
80. Id. at 571. Specifically, board members had to be members of the Alabama Optometric Association, which excluded from membership non-self-employed optometrists. Id.
81. Id. at 579; see also Wall v. Am. Optometric Ass’n, Inc., 379 F. Supp. 175, 188–90 (N.D. Ga. 1974), summarily aff’d sub nom Wall v. Hardwick, 419 U.S. 888 (1974); cf. Commonwealth Coatings Corp. v. Cont’l Cas. Co., 393 U.S. 145, 146–50 (1968) (pecuniary bias of arbitrator).
82. Of course, claimants may still sometimes lose for one reason or another under this line of cases. For example, merely speculative, remote, or conflicting claims of bias aren’t sufficient. In Schweiker v. McClure, the Court unanimously upheld the delegation of authority to administer Part B Medicare payments, and adjudicate disputed claims, to private insurance companies like Blue Shield of California. 456 U.S. 188 (1982). The Court held that there was no basis for finding that the hearing officers were biased because their salaries, as well as the medical claims they approved, were paid by the federal government, not by the company that employed them. Id. at 196–97. While it’s quite plausible that self-employed optometrists will benefit financially from disqualifying corporate-employed optometrists, the same can’t be said of Blue Shield employees who deny Medicare claims. I thus disagree with the discussion of McClure in Abramson, supra note 1, at 202–03. See also N.Y. State Dairy Foods, Inc. v. Ne. Dairy Compact Comm’n, 198 F.3d 1, 14–15 (1st Cir. 1999); Chrysler Corp. v. Tex. Motor Vehicle Comm’n, 755 F.2d 1192, 1199 (5th Cir. 1985); cf. Marjorie Webster Junior Coll., Inc. v. Middle States Ass’n of Colls. & Secondary Schs., Inc., 432 F.2d 650, 658–59 (D.C. Cir. 1970) (rejecting a due process challenge to an educational accreditation organization (assuming that it could be a state actor) without even mentioning the possibility of financial bias). A private organization could also alleviate due process concerns by its own internal regulations. See N.Y. State Dairy Foods, 198 F.3d, at 15.
As another example, delegation to the state referendum process isn’t really a private delegation. City of Eastlake v. Forest City Enters., Inc., 426 U.S. 668, 677–78 (1976). Referenda are part of democracy and don’t fall within the rule.
83. 439 U.S. 96 (1978).
84. Id. at 98.
85. Id. at 108–09.
86. See text accompanying supra notes 43–45.
87. See text accompanying supra notes 56–57.
88. New Motor Vehicle Bd., 439 U.S. at 120 (Stevens, J., dissenting).
89. This is admittedly an important coercive power, but not one whose self-interested exercise raises due process concerns. In fact, filing lawsuits (unless they’re “sham”) is a form of petitioning the government and, as such, is protected under the Petition Clause of the First Amendment under the Noerr-Pennington doctrine. See E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers v. Pennington, 381 U.S. 657 (1965); Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508 (1972); Freeman v. Lasky, Haas & Cohler, 410 F.3d 1180 (9th Cir. 2005).
90. 467 U.S. 229 (1984).
91. Id. at 233–34.
92. Id. at 241; see also Kelo v. City of New London, 545 U.S. 469, 480 (2005).
93. Midkiff, 467 U.S. at 243 n.6; see also Br. for Appellees at 82–85, Midkiff, 467 U.S. 229, Nos. 83-141, 83-236, 83-283, 1984 WL 987633 (citing Washington ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116 (1928), Eubank v. City of Richmond, 226 U.S. 137 (1912), and other cases).
94. Midkiff, 467 U.S. at 233–34.
95. See also Berry v. Bd. of Governors of Registered Dentists of Okla., 611 P.2d 628, 630 (Okla. 1980) (bias in a board’s decision to enforce the law by suing in state court doesn’t violate due process).
96. See Biener v. Calio, 361 F.3d 206, 215–17 (3d Cir. 2004) (entertaining under Eubank and Roberge, though ultimately rejecting, a challenge to political parties’ right to charge and keep filing fees for primary elections); Gen. Elec. Co. v. N.Y. State Dep’t of Labor, 936 F.2d 1448, 1455 (2d Cir. 1991) (“[T]he determination of wage and supplement rates is delegated in the first instance to private parties who are not those persons the statute is designed to protect, and . . . the statute gives the state no option other than to accept the decision made by those private parties.”); Silverman v. Barry, 727 F.2d 1121, 1126 (D.C. Cir. 1984) (holding that a challenge to a delegation of tenants of the power to prevent conversion of apartments to condos can survive a motion to dismiss); Beary Landscaping Inc. v. Shannon, No. 05 C 5687, 2008 WL 4951189 (N.D. Ill. Nov. 18, 2008) (similar to General Electric Co. v. New York State Department of Labor); Schulz v. Milne, 849 F. Supp. 708, 712–13 (N.D. Cal. 1994) (holding that allegations that a city had unlawfully surrendered permitting power to a “neighborhood review board,” a local citizens’ group, adequately stated a § 1983 claim under Eubank and Roberge); Independence Pub. Media of Phila., Inc. v. Pa. Pub. Television Network Comm’n, 808 F. Supp. 416, 424–27 (E.D. Pa. 1992); Nissan Motor Corp. in U.S.A. v. Royal Nissan, Inc., 757 F. Supp. 736, 740–41 (E.D. La. 1991); Wall v. Am. Optometric Ass’n, Inc., 379 F. Supp. 175, 187–90 (N.D. Ga. 1974); cf. Geo-Tech Reclamation Indus., Inc. v. Hamrick, 886 F.2d 662, 666–67 (4th Cir. 1989) (suggesting that consideration of adverse public sentiment in waste facility permitting raises similar issues to those in Eubank and Roberge); Sierra Club v. Sigler, 695 F.2d 957, 962 n.3 (5th Cir. 1983) (stating, in a case where the U.S. Army Corps of Engineers apparently rubberstamped information provided by a private firm for an Environmental Impact Statement, that “an agency may not delegate its public duties to private entities, particularly private entities whose objectivity may be questioned on grounds of conflict of interest,” but locating the source of this prohibition in NEPA (internal citations omitted)); Sierra Club v. Lynn, 502 F.2d 43, 59 (5th Cir. 1974) (same).
97. Some of these state courts may also be applying their own constitutional law. See, e.g., People ex rel. Rudman v. Rini, 356 N.E.2d 4, 7 (Ill. 1976) (striking down delegation to political parties of the power to fill vacancies in political offices, citing Carter Coal and Illinois cases); People ex rel. Chi. Dryer Co. v. City of Chicago, 109 N.E.2d 201, 204–06 (Ill. 1952) (striking down delegation to residents of the power to name streets, citing Eubank and Thomas Cusack); Am. Motors Sales Corp. v. New Motor Vehicle Bd. of Cal., 138 Cal. Rptr. 594, 596–600 (Cal. Ct. App. 1977); Bayside Timber Co. v. Bd. of Supervisors, 20 Cal. App. 3d 1, 10–15 (Cal. Ct. App. 1971) (striking down law giving private parties veto power over enforcement of environmental and public protection laws on their property, citing Carter Coal and California cases); Murtha v. Monaghan, 151 N.E.2d 83 (N.Y. 1958); David N. Wecht, Note, Breaking the Code of Deference: Judicial Review of Private Prisons, 96 Yale L.J. 815, 827 n.66 (1987) (collecting state cases); cf. Santaniello v. N.J. Dep’t of Health & Senior Servs., 5 A.3d 804, 809 (N.J. Super. Ct. App. Div. 2010) (recognizing the doctrine but calling it a “principle of administrative law” rather than a state or federal constitutional doctrine).
98. See supra Part I.B.1.
99. See infra Part III.C.3. This would require a showing that Amtrak is a state actor, but fortunately one can simply rely on Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995).
100. See Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (1971).
101. Perhaps not against Amtrak itself. See FDIC v. Meyer, 510 U.S. 471 (1994); Corr. Servs. Corp. v. Malesko, 534 U.S. 61 (2001); Volokh, Modest Effect, supra note 7, at 297. As with all these examples, the employees sued under Bivens or 18 U.S.C. § 1983 would be able to argue qualified immunity. The question would be whether the boards are closer to the private attorney hired by the government in Filarsky v. Delia, 132 S. Ct. 1657 (2012), or the private prison firm in Richardson v. McKnight, 521 U.S. 399 (1997). I would lean toward Filarsky (and thus the presence of qualified immunity), but this is an unresolved issue. See Volokh, Supreme Court, supra note 7. But even if this argument succeeded, that wouldn’t help against clear violations of due process or against injunctive challenges. See also Barbara Kritchevsky, Civil Rights Liability of Private Entities, 26 Cardozo L. Rev. 35 (2004) (discussing qualified immunity, vicarious liability, and punitive damages issues in § 1983 suits).
102. N.C. Gen. Stat. Ann. § 90-29(b)(2) (West 2013).
103. See supra Part I.B.2.
104. N.C. Gen. Stat. Ann. §§ 90-27, 90-41.1.
105. Miss. Code Ann. § 73-21-157(3)(b) (West 2013).
106. See Shepherd, supra note 19.
107. Or there may be pre-enforcement review of the biased rule, regardless of the forum in which the rule will ultimately be enforced.
108. As to general allegations of bias (not necessarily pecuniary), compare Federal Trade Commission v. Cement Inst., 333 U.S. 683, 701 (1948) (a rulemaker is impermissibly biased if his mind is “irrevocably closed”), with Cinderella Career & Finishing Schools, Inc. v. Federal Trade Commission, 425 F.2d 583, 589–92 (D.C. Cir. 1970) (an adjudicator is impermissibly biased if he has prejudged the law or facts). For pecuniary bias, see Friedman v. Rogers, 440 U.S. 1, 18–19 (1979) (“Finding [in previous cases involving adjudicatory hearings] the presence of . . . prejudicial [pecuniary] interests [in regulatory board members], it was appropriate for the courts to enjoin further proceedings against the plaintiffs. In contrast, [the current challenger’s] challenge to the fairness of the Board does not arise from any disciplinary proceeding against him.”), N.Y. State Dairy Foods, Inc. v. Northeast Dairy Compact Comm’n, 198 F.3d 1, 13–14 (1st Cir. 1999), Alliance of Auto. Mfrs. v. Gwadosky, 353 F. Supp. 2d 97, 108–09 (D. Me. 2005) (distinguishing between facial and as-applied challenges to boards), Wall v. Am. Optometric Ass’n, 379 F. Supp. 175, 190–91 (N.D. Ga. 1974) (invalidating board adjudication because of biased board membership, but upholding validity of rules without even mentioning biased board membership). But see Wecht, supra note 97, at 825 n.58 (arguing that this distinction is “murky”).
109. Challengers should have no trouble showing that all three of these boards are state actors since, as regulators, they fulfill traditionally exclusive governmental functions. See, e.g., Jackson v. Metro. Edison Co., 419 U.S. 345, 352 (1974).
110. Non-state actors are not subject to Bill of Rights protections like the Due Process Clause. See, e.g., Brentwood Acad. v. Tenn. Secondary Sch. Athletic. Ass’n, 531 U.S. 288, 295 (2001); Rendell-Baker v. Kohn, 457 U.S. 830, 840–41 (1982).
111. See Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 572 (1972).
112. See Volokh, supra note 5, at 153–56.
113. Cf. Galaxy Fireworks, Inc. v. City of Orlando, 842 So. 2d 160, 166–67 (Fla. Dist. Ct. App. 2003) (noting that it would be unconstitutional (though the precise constitutional provision is left ambiguous) for a state statute to incorporate federal laws or private code provisions as they may exist in the future, without distinguishing between the public and private sources incorporated).
114. 273 U.S. 510 (1927).
115. Id. at 514–20.
116. 409 U.S. 57 (1972).
117. Id. at 57–60.
118. 475 U.S. 813 (1986).
119. Id. at 821–25.
120. See Withrow v. Larkin, 421 U.S. 35, 47 & n.14 (1975) (identifying “pecuniary interest” cases as one type where “the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable,” and citing Gibson v. Berryhill, Ward v. Village of Monroeville, and Tumey v. Ohio—both private-adjudicator and public-adjudicator cases).
121. See, e.g., Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936) (“[I]t is not even delegation to an official or an official body, presumptively disinterested, but to private persons whose interests may be and often are adverse to the interests of others in the same business.”); Washington ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116, 122 (1928) (“They are not bound by any official duty, but are free to withhold consent for selfish reasons or arbitrarily and may subject the trustee to their will or caprice.”); see also text accompanying infra notes 233–235.
122. See Wecht, supra note 97, at 825–26 & n.59.
123. See, e.g., Esso Standard Oil Co. v. Cotto, 389 F.3d 212, 218–19 (1st Cir. 2004); United Church of the Med. Ctr. v. Med. Ctr. Comm’n, 689 F.2d 693, 698–700 (7th Cir. 1982).
124. See text accompanying infra notes 130–132.
125. U.S. Const. art. I, § 1.
126. See Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457, 472 (2001); Field v. Clark, 143 U.S. 649, 692 (1892).
127. See Am. Trucking, 531 U.S. at 487–90 (Stevens, J., concurring in part and concurring in the judgment).
128. See, e.g., Joseph William Singer, Property Law: Rules, Policies, and Practices 590 (2d ed. 1997) (quoting the traditional Rule Against Perpetuities: “No interest is good unless it must vest, if at all, no later than 21 years after the death of some life in being at the creation of the interest”).
129. See, e.g., In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999).
130. See Panama Refining v. Ryan, 293 U.S. 388, 430 (1935); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 542 (1935).
131. Nat’l Cable Television Ass’n, Inc. v. United States, 415 U.S. 336, 341–42 (1974); Indus. Union Dep’t, AFL-CIO v. Am. Petroleum Inst., 448 U.S. 607, 646 (1980) (plurality opinion); cf. Arizona v. California, 373 U.S. 546, 626–27 (1963) (Harlan, J., dissenting in part) (using constitutional doubts raised by a broad delegation to “buttress the conviction, already firmly grounded in [a statute] and its history,” that an agency lacked certain power under the statute).
132. Cass R. Sunstein, Nondelegation Canons, 67 U. Chi. L. Rev. 315, 315–16 (2000).
133. J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394, 409 (1928).
134. See Thomas W. Merrill, Rethinking Article I, Section 1: From Nondelegation to Exclusive Delegation, 104 Colum. L. Rev. 2097, 2167–68 (2004); Eric A. Posner & Adrian Vermeule, Interring the Nondelegation Doctrine, 69 U. Chi. L. Rev. 1721, 1731, 1757 (2002). But see Merrill, supra, at 2168 (suggesting that private delegations might run afoul of deep structural considerations—there are only three branches, and delegation to someone outside of the three branches is invalid—or some other provision like “the Appointments Clause, Article III’s guarantee of judicial independence, or the Due Process Clause” (footnotes omitted)). Thus, for instance, one can object to the delegation to citizens of the power to enforce federal statutes on Article II grounds; this is one of the dormant themes of Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167 (2000), though the point wasn’t squarely presented there, see id. at 209 (Scalia, J., dissenting). As Justice Kennedy wrote:
Difficult and fundamental questions are raised when we ask whether exactions of public fines by private litigants, and the delegation of Executive power which might be inferable from the authorization, are permissible in view of the responsibilities committed to the Executive by Article II of the Constitution of the United States.
Id. at 197 (Kennedy, J., concurring).
135. Schechter Poultry, 295 U.S. at 537.
136. See Note, The Vagaries of Vagueness: Rethinking the CFAA as a Problem of Private Nondelegation, 127 Harv. L. Rev. 751, 763 (2013) (“[T]his passage relating to the industrial actors might best be read as unnecessary dicta.”).
137. I thus disagree with David Wecht, Michael Froomkin, and David Horton, who argue that this was a holding of Schechter regarding delegation to private organizations. See Wecht, supra note 97, at 824; Froomkin, supra note 64, at 148; David Horton, Arbitration as Delegation, 86 N.Y.U. L. Rev. 437, 475 (2011). The delegation was to the President, and analyzed as such, so any statement about delegation to private groups was dictum.
138. See, e.g., Fahey v. Mallonee, 332 U.S. 245, 253 (1947); Yakus v. United States, 321 U.S. 414, 426 (1944) (noting adequate opportunity for judicial review); Schechter Poultry, 295 U.S. at 539–40 (distinguishing delegation to the ICC, which acts on “notice and hearing,” and the Federal Radio Commission, which enforces congressional standards “upon hearing, and evidence, by an administrative body acting under statutory restrictions adapted to the particular activity”); see also Indus. Union Dep’t, AFL-CIO v. Am. Petroleum Inst., 448 U.S. 607, 686 (1980) (Rehnquist, J., concurring) (one goal of non-delegation doctrine is to ensure adequate judicial review).
139. See Abramson, supra note 1, at 180–87 (discussing difference in accountability mechanisms for public and private actors); see also, e.g., text accompanying infra note 191.
140. See also text accompanying infra notes 259–61.
141. 306 U.S. 1 (1939).
142. Id. at 5.
143. Id. at 6 (quoting Act) (internal quotation marks omitted).
146. Id. at 15.
147. Id. at 15–16.
148. Id. at 16.
149. See supra Part II.A.1.
150. See text accompanying infra notes 241–64.
151. Or perhaps the Court was hinting that private delegations become due process issues (and thus problematic even if states do it), while public delegations are just a matter of the division of power within the government (and therefore only a matter of constitutional concern if the federal government does it). This is all very tantalizing, but this, too, is dictum.
152. Currin, 306 U.S. at 16.
153. 276 U.S. 394 (1928).
154. Id. at 407. This section was cited in Currin, 306 U.S. at 16.
155. 293 U.S. 388 (1935).
156. Id. at 406.
157. Id. at 416–19.
158. Id. at 430.
159. Currin, 306 U.S. at 16 (quoting J.W. Hampton, 276 U.S. at 407) (internal quotation marks omitted). The Supreme Court relied on Currin under similar circumstances in United States v. Rock Royal Co-Operative, Inc., 307 U.S. 533, 577–78 (1939). See also United States v. Frame, 885 F.2d 1119, 1127–28 (3d Cir. 1989) (upholding similar industry referendum provision based on Currin). The Court also upheld a regulatory scheme for the coal industry in Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940), where Congress delegated power to a government commission but made private industry into advisors to the commission. Justice Douglas wrote: “Nor has Congress delegated its legislative authority to the industry. The [private industry] members of the code function subordinately to the [government] Commission. It, not the code authorities, determines the prices. And it has authority and surveillance over the activities of these authorities. Since law-making is not entrusted to the industry, this statutory scheme is unquestionably valid.” Id. at 399. See also Frame, 885 F.2d at 1128 (upholding delegation to beef industry of power to collect assessements and plan spending of funds, because of considerable government involvement and lack of actual lawmaking power in hands of beef industry); Cospito v. Heckler, 742 F.2d 72, 86–89 (3d Cir. 1984) (no invalid delegation to Joint Commission on Accreditation of Hospitals because Secretary of Health, Education and Welfare retained ultimate authority on accreditation); Todd & Co., Inc. v. SEC, 557 F.2d 1008, 1012–13 (3d Cir. 1977) (self-regulation of over-the-counter securities dealers by the National Association of Securities Dealers was not an unconstitutional delegation because “the Association’s rules and its disciplinary actions [are] subject to full review by the SEC”); R.H. Johnson & Co. v. S.E.C., 198 F.2d 690, 695 (2d Cir. 1952) (similar).
160. See Frame, 885 F.2d at 1128 (upholding delegation to beef industry based on the presence of sufficient standards, without referring to any special test for private delegates); Crain v. First Nat’l Bank of Or., Portland, 324 F.2d 532, 537 (9th Cir. 1963) (under Article I, Section 1, “Congress cannot delegate to private corporations or anyone else the power to enact laws” (emphasis added)); Metro Med. Supply, Inc. v. Shalala, 959 F. Supp. 799, 801 (M.D. Tenn. 1996) (“Plaintiffs aver that the pedigree provisions constitute an unconstitutional delegation of legislative authority, under Article I, Section 1, of the Constitution, to the FDA and, in turn, to private drug manufacturers.”); Abramson, supra note 1, at 193 (asserting that, in Currin and Rock Royal, the Supreme Court examined private delegation “under the same test that it applied to public delegations”); id. at 198 (arguing that, in Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568 (1985), involving “an Article III challenge to a private adjudication, . . . the majority did not analyze the implications of [the] crucial fact [that the adjudicators were private]; instead it concluded summarily that delegation did not ‘diminish the likelihood of impartial decisionmaking’”); cf. Luxton v. N. River Bridge Co., 153 U.S. 525, 529–30 (1894) (implying that Congress can not only exercise the power of eminent domain, but also create a corporation to exercise eminent domain if this is necessary and proper to exercise Congress’s powers).
161. The most recent case is Ass’n of American Railroads v. Department of Transportation, 721 F.3d 666 (D.C. Cir. 2013), discussed infra Part III.C.1, which does quite a bit more than hint. Pittston Co. v. United States, 368 F.3d 385 (4th Cir. 2004), is also discussed below, see text accompanying infra notes 296–303. See also Cospito v. Heckler, 742 F.2d 72, 87 n.25 (3d Cir. 1984) (in dictum, citing Schechter and Roberge as cases possibly establishing a higher bar for private delegations under non-delegation doctrine); Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095, 1143 (D.C. Cir. 1984) (“[A non-delegation] argument is typically presented in the context of a transfer of legislative authority from the Congress to agencies, but the difficulties sparked by such allocations are even more prevalent in the context of agency delegations to private individuals. [But w]e need not examine the problem because we divine no such abdication of the Commission’s role as disinterested arbiter to any interested party.”); United States v. Mazurie, 487 F.2d 14, 19 (10th Cir. 1973) (“Congress cannot delegate its authority to a private, voluntary organization, which is obviously not a governmental agency, to regulate a business on privately owned lands, no matter where located.”), rev’d, 419 U.S. 544, 557 (1975) (holding that the Indian tribe to which authority was delegated wasn’t private but rather a “unique aggregation possessing attributes of sovereignty”).
162. See supra Part I.B.
163. Assume away any problems of Congressional powers, such as Commerce Clause problems.
164. See 49 U.S.C. § 24301(a) (2006).
165. Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457, 474–75 (2001).
166. N.C. Gen. Stat. Ann. § 90-22(a) (West 2013).
167. See, e.g., NBC v. United States, 319 U.S. 190, 225–26 (1943); N.Y. Cent. Sec. Corp. v. United States, 287 U.S. 12, 24–25 (1932).
168. Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 496 (Tex. 1997) (Cornyn, J., concurring in part and dissenting in part) (quoting Tex. Agric. Code § 74.101(c) (1995)).
169. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 887 (Tex. 2000).
170. See text accompanying supra note 34.
171. See Miss. Code Ann. § 73-21-157 (West 2013).
172. See text accompanying supra notes 125–27.
173. Abbott v. State, 63 So. 667, 669 (Miss. 1913).
174. State ex rel. Patterson v. Land, 95 So. 2d 764, 777 (Miss. 1957); see also City of Belmont v. Miss. State Tax Comm’n, 860 So. 2d 289 (Miss. 2003); State v. Allstate Ins. Co., 97 So. 2d 372, 375 (Miss. 1957).
175. See Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 468 (Tex. 1997) (citing Kenneth Culp Davis, Administrative Law Treatise § 3.14, at 204 (2d ed. 1978)); Peter L. Strauss et al., Gellhorn and Byse’s Administrative Law: Cases and Comments 617–19 (11th ed. 2011) (citing Boreali v. Axelrod, 517 N.E.2d 1350 (1987)); Hans A. Linde et al., Legislative and Administrative Processes 477–78 (2d ed. 1981)). The state cases are often criticized for being not very well reasoned or not forming a coherent whole. See, e.g., Davis, supra, § 3.12, at 196 (“[I]dentifiable principles do not emerge.”).
176. Gary J. Greco, Note, Standards or Safeguards: A Survey of the Delegation Doctrine in the States, 8 Admin. L.J. 567, 580–88 (1994).
177. See Askew v. Cross Key Waterways, 372 So. 2d 913, 924 (Fla. 1978).
178. See In re Initiative Petition No. 366, 46 P.3d 123 (Okla. 2002); Democratic Party of Okla. v. Estep, 652 P.2d 271 (Okla. 1982); Oliver v. Okla. Alcoholic Beverage Control Bd., 359 P.2d 183 (Okla. 1961).
179. See also City of Covington v. Covington Lodge No. 1, 622 S.W.2d 221, 222–23 (Ky. 1981) (adopting powers-based approach to forbid a municipality from delegating “legislative or discretionary,” but not “administrative,” powers).
180. See infra Part III.C.4; see also Grp. Health Ins. of N.J. v. Howell, 193 A.2d 103, 108–09 (N.J. 1963) (striking down a requirement that the nomination of trustees of medical service corporations be approved by “a recognized medical society or professional medical organization” under both a separation of powers analysis and a due process analysis). Several states have moved from a separation of powers view to a “procedural safeguards” view, which sounds more in due process. Colorado, for instance, followed a separation of powers-based view, see Olinger v. People, 344 P.2d 689, 691–92 (Colo. 1959) (en banc), but later adopted the procedural safeguards view, see People v. Lowrie, 761 P.2d 778, 782 (Colo. 1988) (en banc). The same evolution can also be seen in New York. Compare Fink v. Cole, 97 N.E.2d 873, 876 (N.Y. 1951) (citing N.Y. Const. art. III, § 1) (referring to the need for “guides and proper standards”), with Boreali, 517 N.E.2d at 1353–54 (stating that “[t]he modern view” insists on “‘reasonable safeguards and standards’”). And likewise in Maryland. Compare Md. Co-operative. Milk Producers v. Miller, 182 A. 432, 435 (Md. 1936), with Dep’t of Transp. v. Armacost, 532 A.2d 1056, 1060 (Md. 1987).
181. Gamel v. Veterans Memorial Auditorium Comm’n, 272 N.W.2d 472, 475 (Iowa 1978) (citing Iowa Const. art. III, § 1); id. at 476 (striking down a delegation to a veterans’ group of the power to spend public funds; also citing similar cases from other jurisdictions); see also Vietnam Veterans Against the War v. Veterans Memorial Auditorium Comm’n, 211 N.W.2d 333, 338–39 (Iowa 1973) (McCormick, J., dissenting).
182. Remington Arms Co. v. G.E.M. of St. Louis, Inc., 102 N.W.2d 528, 534–35 (Minn. 1960); West St. Paul Fed. of Teachers v. Indep. Sch. Dist. No. 197, West St. Paul, 713 N.W.2d 366, 376–77 (Minn. App. 2006) (recognizing Remington Arms as good law but distinguishing it). A recent challenge to Minnesota’s occupational licensing of horse teeth floaters relied in part on a private delegation theory. See Challenging Barriers to Economic Opportunity, Institute for Justice, http://www.ij.org/minnesota-horse-teeth-floating-background, [perma.cc/FC55-9LKR]. But this challenge failed in a district court in 2008. See Minnesota District Court Upholds Economic Protectionism, Institute for Justice (June 23, 2008), http://www.ij.org/minnesota-horse-teeth-floating-release-6-15-07, [http://perma.cc/G8Z9DQMV].
183. Hetherington v. McHale, 329 A.2d 250, 253–54 (Pa. 1974) (striking down delegation to private organizations of the power to select eight out of seventeen members of a board responsible for spending public funds); Commonwealth ex rel. Kane v. McKechnie, 358 A.2d 419, 420–21 (Pa. 1976); Independence Pub. Media of Phila., Inc. v. Pa. Pub. Television Network Comm’n, 808 F. Supp. 416, 422–24 (E.D. Pa. 1992).
184. Toussaint v. State Bd. of Med. Exam’rs, 329 S.E.2d 433 (S.C. 1985); Gold v. S.C. Bd. of Chiropractic Exam’rs, 245 S.E.2d 117, 119–20 (S.C. 1978); Gould v. Barton, 181 S.E.2d 662, 674 (S.C. 1971); Ashmore v. Greater Greenville Sewer Dist., 44 S.E.2d 88, 95 (S.C. 1947).
185. Some Utah cases have struck down private delegations, but the constitutional basis for these holdings has been quite ambiguous. See, e.g., Salt Lake City v. Int’l Ass’n of Firefighters, 563 P.2d 786, 789 (Utah 1977); Union Trust Co. v. Simmons, 211 P.2d 190, 191–93 (Utah 1949); Revne v. Trade Comm’n, 192 P.2d 563, 565–68 (Utah 1948).
186. Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 465 (Tex. 1997) (citing Tex. Const. art. II, § 1; id. art. III, § 1). For previous cases applying a non-delegation doctrine against the judiciary and a state administrative agency, see id. at 468–69 (citing cases).
187. See supra Part I.B.4.
188. Tex. Boll Weevil, 952 S.W.2d at 470.
189. Id. (citing Tex. Agric. Code §§ 74.109(d), 74.109(f), 74.110, 74.120(c), 74.127; Tex. Gov’t Code § 551.001(3) (1995) (internal citations omitted)).
190. Id. (citing Tex. Agric. Code § 74.109(d)).
191. Id. (citing Tex. Agric. Code § 74.109(e), 4 Tex. Admin. Code § 3.57) (internal citations omitted).
192. Id. at 471. But see id. at 494 (Cornyn, J., concurring in part and dissenting in part) (“The Court also fails to adequately explain why this largely fictional distinction [between public and private agencies], which leads it to propose an ‘either/or’ choice, is so important that this entire statute should turn on it.”); see also text accompanying infra note 248 (noting potential disadvantages of developing new public-private tests).
193. Tex. Boll Weevil, 952 S.W.2d at 472 (majority opinion).
194. Id. at 473–75.
195. Id. at 475. Justice Hecht believed the unconstitutionality of the delegation was even clearer than the majority had thought; in his view, the Foundation was “little more than a posse: volunteers and private entities neither elected nor appointed, privately organized and supported by the majority of some small group, backed by law but without guidelines or supervision, wielding great power over people’s lives and property but answering virtually to no one.” Id. at 479 (Hecht, J., concurring in part and concurring in the judgment). Justice Hecht’s opinion analyzed the delegation using due process cases like Carter v. Carter Coal Co., 298 U.S. 238 (1936), Eubank v. City of Richmond, 226 U.S. 137 (1912), and Washington ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116 (1928). See Tex. Boll Weevil, 952 S.W.2d at 487–89 (Hecht, J., concurring in part and concurring in the judgment). The majority opinion avoided using such cases. See text accompanying infra note 304. These due process cases are discussed above, see supra Part II.A.1. For a discussion of why non-delegation ideas and due process ideas should be kept separate, see infra Part III.C.
196. Tex. Boll Weevil, 952 S.W.2d at 492 (Cornyn, J., concurring in part and dissenting in part).
197. Id. at 493.
199. Id. at 493–94.
200. Justice Abbott recapitulated the concerns of the Texas Boll Weevil dissent the next time the Texas Supreme Court used the doctrine to strike down a private delegation. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 899 (Tex. 2000) (Abbott, J., dissenting).
201. See Proctor v. Andrews, 972 S.W.2d 729, 734–38 (Tex. 1998).
202. See City of Houston v. Clark, 197 S.W.3d 314, 320 (Tex. 2006); see also City of Pasadena v. Smith, 292 S.W.3d 14 (Tex. 2009). For the analogous use of the federal non-delegation doctrine as an avoidance canon, see text accompanying supra notes 131–32.
203. See supra Part I.B.5.
204. FM Props., 22 S.W.3d at 879.
205. Id. at 875–77.
206. Id. at 880–88; see also Froomkin, supra note 64, at 158 (suggesting that, according to FM Properties, factors (1) and (4) are most important).
207. See text accompanying supra notes 160–61.
208. See, e.g., FM Props., 22 S.W.3d at 887–88 (fairly searching review of standards).
209. 721 F.3d 666 (D.C. Cir. 2013).
210. Id. at 668. For the facts surrounding the Amtrak case, see supra Part I.B.1. This case is already being relied on to challenge other delegations of regulatory authority to private parties. See, e.g., Appellants’ Brief, Contender Farms, L.L.P. v. U.S. Dep’t of Agric., No. 13-11052, 2013 WL 6823424 (5th Cir. Dec. 18, 2013) (challenging rule delegating USDA’s enforcement authority under Horse Protection Act to private parties).
211. Ass’n of Am. Railroads, 721 F.3d at 671.
212. Id. at 671 n.3 (citing Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936)).
213. See text accompanying supra notes 141–51.
214. See supra note 159; Ass’n of Am. Railroads, 721 F.3d at 671.
215. Ass’n of Am. Railroads, 721 F.3d at 671.
216. See text accompanying supra notes 188–95 (explaining the Texas Supreme Court’s test establishing that the Boll Weevil Eradication Foundation was private).
217. 513 U.S. 374, 400 (1995).
219. Ass’n of Am. Railroads, 721 F.3d at 676–77.
221. Id. at 674.
224. See Rendell-Baker v. Kohn, 457 U.S. 830, 840–41 (1982); Blum v. Yaretsky, 457 U.S. 991, 1010–11 (1982).
225. Ass’n of Am. Railroads, 721 F.3d at 675 (quoting 49 U.S.C. § 24301(a)) (internal quotation marks omitted).
226. Id. (quoting 49 U.S.C. § 24301(a)) (internal quotation marks omitted).
227. Id. at 676 (quoting 49 U.S.C. § 24101(d)) (internal quotation marks omitted).
228. Id. at 675 (quoting Nat’l R.R. Passenger Corp., Freedom of Information Act Handbook 1 (2008)) (internal quotation marks omitted).
232. See Jerry L. Mashaw, Prodelegation: Why Administrators Should Make Political Decisions, 1 J.L. Econ. & Org. 81, 85–91 (1985).
233. Ass’n of Am. Railroads, 721 F.3d at 675 (quoting Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936)) (internal quotation marks omitted).
234. Id. (quoting Washington ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116, 118, 122 (1928)) (internal quotation marks omitted).
235. Cf. Volokh, supra note 5, at 172–87.
236. Ass’n of Am. Railroads, 721 F.3d at 676.
237. This case is also discussed in Alexander Volokh, A New Private Delegation Doctrine?, Reason.Org (Aug. 1, 2013), http://reason.org/news/show/private-delegation-doctrine-amtrak, [perma.cc/CUZ9-5FPR].
238. See text accompanying supra note 58.
239. See text accompanying supra note 206.
240. Ass’n of Am. Railroads, 721 F.3d at 671 n.3.
241. See Wecht, supra note 97, at 825 n.57; The Vagaries of Vagueness, supra note 136, at 764; text accompanying supra note 172.
242. 287 U.S. 116 (1928).
243. 424 U.S. 319 (1976).
244. 408 U.S. 564 (1972).
245. See Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (1971).
246. On Bivens, see Volokh, Modest Effect, supra note 7.
247. See Fed. Power Comm’n v. New England Power Co., 415 U.S. 345, 352–53 (1974) (Marshall, J., dissenting); John Hart Ely, Democracy and Distrust: A Theory of Judicial Review 131–33 (1980); David Schoenbrod, Power Without Responsibility: How Congress Abuses the People Through Delegation 58–81 (1993); Sunstein, supra note 132, at 315.
248. Cf. Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 494 (Tex. 1997) (Cornyn, J., concurring in part and dissenting in part) (criticizing majority’s newly minted public-private analysis).
249. 531 U.S. 457 (2001).
251. Id. at 463 (citing Am. Trucking Ass’ns, Inc. v. EPA, 175 F.3d 1027, 1034 (D.C. Cir. 1999)).
252. Id. (citing Am. Trucking, 175 F.3d at 1038).
253. Kenneth Culp Davis, A New Approach to Delegation, 36 U. Chi. L. Rev. 713, 713 (1969). The D.C. Circuit, by the time of American Trucking, had already used this approach in Amalgamated Meat Cutters & Butcher Workmen AFL-CIO v. Connally, 337 F. Supp. 737, 758–59 (D.D.C. 1971) (three-judge panel).
254. Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457, 472–73 (2001).
255. Id. at 473.
256. See 5 U.S.C. § 553(b)–(c) (2012).
257. See Goldberg v. Kelly, 397 U.S. 254 (1970).
258. See supra notes 138–39 and accompanying text.
259. See 5 U.S.C. § 551(1) (defining “agency”); id. § 551(4)–(7) (limiting the definitions of “rule,” “rule making,” “order,” and “adjudication” to agencies).
260 . Bill of Rights protections apply only against “state actors,” a category that often (though not always) excludes private parties. See sources cited supra note 110.
261 . See text accompanying supra notes 139, 160–61.
262 . See 5 U.S.C. § 706(2)(A); Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (1971).
263 . 424 U.S. 319, 335 (1976) (holding that analysis of whether procedure conforms to due process is done by balancing affected party’s interest, government’s interest, and importance of procedure for accuracy).
264 . See 5 U.S.C. §§ 554, 556–57.
265 . See text accompanying supra notes 56–59.
266 . See supra Part II.A.
267 . See Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 771–78 (2000) (rejecting this argument).
268 . See, e.g., id. at 778 n.8 (noting the question but not deciding it); Paul R. Verkuil, Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy and What We Can Do About It 106–13 (2007); Evan Caminker, The Constitutionality of Qui Tam Actions, 99 Yale L.J. 341, 374–80 (1989).
269 . See Bd. of Educ. of Kiryas Joel Vill. Sch. Dist. v. Grumet, 512 U.S. 687 (1994); Larkin v. Grendel’s Den, Inc., 459 U.S. 116 (1982); Alexander Volokh, The Constitutional Possibilities of Prison Vouchers, 72 Ohio St. L.J. 983, 1015–20 (2011); The Vagaries of Vagueness, supra note 136, at 767–68.
270 . See supra note 130 and accompanying text.
271 . See Carter v. Carter Coal Co., 298 U.S. 238, 311–12 (1936).
272 . See id. at 311–12.
273 . See text accompanying supra notes 141–59.
274 . See Abramson, supra note 1, at 208–09 (calling Carter Coal “[t]he most glaring example of this commingling” and attributing the “persistent” commingling in part to “sloppy judicial analysis”).
275 . See Horton, supra note 137, at 473–74 & nn.205–07 (listing sources that locate private delegation doctrine in the Vesting Clause, the Due Process Clause, or both—and correctly listing Carter Coal as a due process case).
276 . 402 U.S. 183 (1971).
277 . Id. at 272 n.21 (Brennan, J., dissenting).
278 . Id. at 272.
279 . Fed. Power Comm’n v. New England Power Co., 415 U.S. 352, 354 n.2 (1974) (Marshall, J., concurring in the result and dissenting); see also Hornell Ice & Cold Storage Co. v. United States, 32 F. Supp. 468, 470 (W.D.N.Y. 1940) (stating that “Congress did not unlawfully delegate legislative power to private persons in violation of Article I, Section 1 of the Constitution” but, in justifying why not, distinguishing Carter Coal); Douglas H. Ginsburg & Steven Menashi, Nondelegation and the Unitary Executive, 12 U. Pa. J. Const. L. 251, 264 n.72 (2010) (“The nondelegation doctrine . . . survives instinctively, . . . appearing variously in the guise of the Due Process Clause, see, e.g., [Carter Coal], [and other provisions].”); Posner & Vermeule, supra note 134, at 1722 n.5, 1757; Ira P. Robbins, The Impact of the Delegation Doctrine on Prison Privatization, 35 UCLA L. Rev. 911, 914, 919–20 (1988).
280 . Paul R. Verkuil, Public Law Limitations on Privatization of Government Functions, 84 N.C. L. Rev. 397, 422 (2006); see also Froomkin, supra note 64, at 151 (treating Carter Coal as having been limited by Currin v. Wallace, discussed above as a non-delegation case); id. at 153 (recognizing due process aspect of Carter Coal).
281 . Thus, Chief Justice Hughes writes, in his separate opinion in Carter Coal, that the delegation violates (1) non-delegation doctrine and (2) the Due Process Clause. Carter v. Carter Coal Co., 298 U.S. 238, 318 (1936) (separate opinion of Hughes, C.J.). But his non-delegation discussion doesn’t refer to the public-private distinction: If the argument in support of the delegation were valid, he writes, it “would remove all restrictions upon the delegation of legislative power, as the making of laws could thus be referred to any designated officials or private persons . . . .” Id. (emphasis added). Only the due process discussion treats the private nature of the delegates as relevant. See id.
282 . See text accompanying supra notes 164–65.
283 . Wecht calls Carter Coal a “de facto application of the nondelegation doctrine to private, for-profit entities through the Due Process clause.” Wecht, supra note 97, at 824 (section title) (section capitalization removed).
284 . See text accompanying supra notes 141–59.
285 . But see Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 467 (Tex. 1997) (“Even in its heyday, the nondelegation doctrine was sparingly applied, having been used by the United States Supreme Court to strike down a federal statute only three times.” (citing Panama Refining Co. v. Ryan, 293 U.S. 388 (1935), A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), Carter Coal, 298 U.S. 238)).
286 . 462 U.S. 919 (1983).
287 . See id. at 985 (White, J., dissenting).
288 . 488 U.S. 361 (1989).
289 . Id. at 373 (citations omitted); see also Tex. Boll Weevil, 952 S.W.2d at 499 n.5 (Cornyn, J., concurring in part and dissenting in part).
290 . 531 U.S. 457, 474 (2001).
291 . Synar v. United States, 626 F. Supp. 1374, 1383 n.8 (D.D.C. 1986), aff’d sub nom., Bowsher v. Synar, 478 U.S. 714 (1986).
292 . I make many of these arguments in my amicus brief supporting the cert petition in this case. See Brief of Alexander Volokh as Amicus Curiae in Support of Petitioners, Dep’t of Transp. v. Ass’n of Am. Railroads, No. 13-1080 (Apr. 10, 2014), available at http://www.washingtonpost.com/news/volokh-conspiracy/wp-content/
293 . See supra notes 164–65 and accompanying text.
294 . See text accompanying supra notes 217–19.
295 . But see Ass’n of Am. Railroads v. Dep’t of Transp., 865 F. Supp. 2d 22, 31–32 (D.D.C. 2012) (stating that the Association of American Railroads had waived this argument, but “not[ing]” “[i]n passing” that “in light of the FRA’s and STB’s involvement and Amtrak’s political accountability, the potential for bias appears remote” (citation omitted)).
296 . See Pittston Co. v. United States, 368 F.3d 385, 389 (4th Cir. 2004).
297 . Id. at 390–91.
298 . Id. at 393.
299 . 276 U.S. 394 (1928); see text accompanying supra notes 153–58.
300 . 531 U.S. 457 (2001); see text accompanying supra notes 249–56.
301 . See Pittston, 368 F.3d at 394 (citing U.S. Const. art. I, § 1; id., art. II, § 1; id., art. III, § 1).
302 . Id. (quoting Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936)) (internal quotation marks omitted).
303 . Id. (quoting Carter Coal, 298 U.S. at 311) (internal quotation marks omitted).
304 . 310 U.S. 381 (1940); see supra note 159 and text accompanying supra note 214.
305 . See Newport Int’l Univ., Inc. v. State Dep’t of Educ., 186 P.3d 382, 388–90 (Wyo. 2008).
306 . See, e.g., Louis L. Jaffe, Law Making by Private Groups, 51 Harv. L. Rev. 201, 248 (1937); David M. Lawrence, Private Exercise of Governmental Power, 61 Ind. L.J. 647, 662 (1986).
307 . See supra Part III.B.
308 . See Tex. Boll Weevil Eradication Found. v. Lewellen, 952 S.W.2d 454, 467 n.10 (Tex. 1997).
309. See text accompanying supra note 193.
310. Factor (1), the availability of “meaningful review by a state agency or other branch of state government,” also sounds like the relevant due process factor of the availability of post-deprivation remedies.
311. See Emmett McLoughlin Realty, Inc. v. Pima Cnty., 58 P.3d 39, 41 (Ariz. Ct. App. 2002) (citing Ariz. Const. art. IV, pt. 1, § 1(1) (“The legislative authority of the State shall be vested in the Legislature . . . .”)).
313. See text accompanying supra notes 51–55.
314. Emmett McLoughlin Realty, 58 P.3d at 41 (citing Indus. Comm’n v. C & D Pipeline, Inc., 607 P.2d 383, 385 (Ariz. App. 1979) (citing Carter v. Carter Coal Co., 298 U.S. 238 (1936))).
315. See People ex rel. Chi. Dryer Co. v. City of Chi., 109 N.E.2d 201, 204 (Ill. 1952) (citing Ill. Const. art. IV, § 1).
316. See Chicagoland Chamber of Commerce v. Pappas, 880 N.E.2d 1105, 1118–19 (Ill. App. Ct. 2007) (citing Ill. Const. art. IX, § 6). The title heading of the section of that case discussing the doctrine is “Nondelegation Doctrine Separation of Powers,” id. at 1118, which makes the source of the doctrine clear.
317. Chicagoland Chamber of Commerce, 880 N.E.2d at 1120 (citing Chi. Dryer Co., 109 N.E.2d at 201, 204); Chi. Dryer Co., 109 N.E.2d at 205–06 (citing Eubank v. City of Richmond, 226 U.S. 137 (1912), Thomas Cusack Co. v. City of Chi., 242 U.S. 526 (1917), Carter v. Carter Coal Co., 298 U.S. 238 (1936)).
318. See text accompanying supra notes 257–70.
319. See text accompanying supra notes 241–44, 247.
320. See supra Part II.A.3.
321. Don’t confuse this with the “state action” doctrine of constitutional law. See sources cited supra note 110.
322. 317 U.S. 341 (1943).
323. Id. at 350–52.
324. Bates v. State Bar of Ariz., 433 U.S. 350, 361–62 (1977).
325. See Hoover v. Ronwin, 466 U.S. 558, 568 (1984) (summarizing Parker doctrine as to state legislatures and state supreme courts acting in legislative capacity).
326. See Fed. Trade Comm’n v. Phoebe Putney Health Sys. Inc., 133 S. Ct. 1003 (2013); Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980); see also, e.g., Patrick v. Burget, 486 U.S. 94, 100–01 (1988); Alexander Volokh, Supreme Court Antitrust Ruling Supports Public-Private Neutrality, Reduces Barriers to Privatization, Reason.Org, Feb. 21, 2013, http://reason.org/news/show/scotus-antitrust-privatization, [http://perma.cc/C9XR-RLGS]. William Page has questioned whether active supervision should be required. William H. Page & John E. Lopatka, Antitrust, Federalism, and the Regulatory Process: A Reconstruction and Critique of the State Action Exemption After Midcal Aluminum, 61 B.U. L. Rev. 1099, 1125–26 (1981). But see William H. Page, State Regulation in the Shadow of Antitrust: FTC v. Ticor Title Insurance Co., 3 Sup. Ct. Econ. Rev. 189 (1993) (justifying the active-supervision requirement as a way to guarantee that states aren’t effecting a naked repeal of antitrust law, as they could if all that was required was clear articulation). See also Jarod M. Bona, The Antitrust Implications of Licensed Occupations Choosing Their Own Exclusive Jurisdiction, 5 U. St. Thomas J.L. & Pub. Pol’y 28, 44–51 (2011) (discussing the application of the state action doctrine to licensing boards).
327. 471 U.S. 34, 46 (1985).
329. Id. at 47.
330. Midcal, 445 U.S. at 106 (quoted in Town of Hallie, 471 U.S. at 46–47).
331. Town of Hallie, 471 U.S. at 45.
332. Id. at 45 n.9.
333. Id. at 46 n.10.
334. 1A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 226b, at 166 (3d ed. 2006).
336. Id.; see also Ingram Weber, The Antitrust State Action Doctrine and State Licensing Boards, 79 U. Chi. L. Rev. 737, 752–54 (2012). This is one of several attempts, aside from the state action doctrine, see Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 400 (1995), to classify organizations as public or private. See text accompanying supra notes 188–93 (discussing the Texas Supreme Court’s description of the Boll Weevil Eradication Foundation as private for purposes of the Texas non-delegation doctrine), 208–26 (describing the test the D.C. Circuit used to classify Amtrak for purposes of the federal non-delegation doctrine).
337. See N.C. Bd. of Dental Exam’rs v. Fed. Trade Comm’n, 134 S. Ct. 1491 (2014) (granting cert).
338. Earles v. State Bd. of CPAs of La., 139 F.3d 1033, 1034 (5th Cir. 1998).
339. Id. at 1041.
341. Porter Testing Lab. v. Bd. of Regents for the Okla. Agric. & Mech. Colls., 993 F.2d 768, 770 (10th Cir. 1993).
342. Id. at 772.
343. Cine 42nd St. Theater Corp. v. Nederlander Org., Inc., 790 F.2d 1032, 1047 (2d Cir. 1986).
344. Goldfarb v. Va. State Bar, 421 U.S. 773, 776 (1975).
345. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 45 (1985). Goldfarb, the case discussing the Virginia State Bar, had no occasion to discuss whether the active supervision requirement applied, as it was handed down before Midcal enunciated the test in 1980. But Town of Hallie, which announced that municipalities aren’t subject to the active supervision requirement, distinguished Goldfarb as involving private parties, unlike the municipality at issue there. Id. at 45. Town of Hallie therefore supports the proposition that the Virginia State Bar, though statutorily defined as a state administrative agency, could be classified on the “private” side of the Town of Hallie distinction.
346. Hass v. Or. State Bar, 883 F.2d 1453, 1455–56 (9th Cir. 1989).
347. Id. at 1460.
349. Fed. Trade Comm’n v. Monahan, 832 F.2d 688, 688 (1st Cir. 1987). Pick up stations are locations where patients can “drop off, and pick up, prescriptions that the ‘main office’ (in the interim) would fill in batches.” Id.
350. Id. at 690.
351. Interface Grp., Inc. v. Mass. Port Auth., 816 F.2d 9, 13 (1st Cir. 1987).
352. Bankers Ins. Co. v. Fla. Residential Prop. & Cas. Joint Underwriting Ass’n, 137 F.3d 1293, 1297 (11th Cir. 1998).
353. Id. at 1296–97 (citing Commuter Transp. Sys., Inc. v. Hillsborough Cnty. Aviation Auth., 801 F.2d 1286, 1290 (11th. Cir. 1986), Crosby v. Hosp. Auth. of Valdosta, 93 F.3d 1515, 1525 (11th Cir. 1996), and various cases from outside the Eleventh Circuit, as well as the then-current edition of the Areeda-Hovenkamp treatise, supra note 334) (citations omitted).
354. See Fuchs v. Rural Elec. Convenience Coop. Inc., 858 F.2d 1210, 1217–18 (7th Cir. 1988).
355. In re N.C. Bd. of Dental Exam’rs, 151 F.T.C. 607, 612 (2011); see also supra Part I.B.2.
356. Dental Exam’rs, 151 F.T.C. at 613.
357. Id. at 620.
358. Id. at 621; see also id. at 620.
359. Id. at 623.
361. Id. at 626.
363. Id. at 621.
364. Id. at 626.
365. Id. at 628–33.
366. N.C. State Bd. of Dental Exam’rs v. Fed. Trade Comm’n, 717 F.3d 359, 368 (4th Cir. 2013), cert. granted, 134 S. Ct. 1491 (2014); see also id. at 376 (Keenan, J., concurring) (noting that the opinion turns not on the mere presence of market participants on the Board but on the fact that the market participants are elected by other market participants). The Fourth Circuit reviewed the FTC’s legal findings de novo, with due regard for the FTC’s expertise, id. at 370 (majority opinion), which amounts to Skidmore deference, see Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). This case is also discussed in Alexander Volokh, Privatized Regulation and Antitrust, Reason.Org (July 1, 2013), http://reason.org/news/show/privatized-regulation-and-antitrust, [http://perma.cc/X924-49HZ]. For another case in the Fourth Circuit raising broadly similar issues, see First Amended Complaint at ¶¶ 120–21, Petrie v. Va. Bd. of Medicine, No. 1:13-cv-1486, 2014 WL 494273 (E.D. Va. Feb. 3, 2014).
367. 134 S. Ct. 1491 (2014).
368. 1A Areeda & Hovenkamp, supra note 334, ¶ 227b, at 209.
369. Einer Richard Elhauge, The Scope of Antitrust Process, 104 Harv. L. Rev. 667, 696 (1991); see also id. at 697–708 (supporting “a process test that focuses on whether the decisionmakers controlling the restraints are financially interested,” and noting that state action doctrine channels this question into “more formal, and conclusory, adjudications of whether the board is public or private”).
370. See John Shepard Wiley, Jr., A Capture Theory of Antitrust Federalism, 99 Harv. L. Rev. 713, 769–73 (1986).
371. Aaron Edlin & Rebecca Haw, Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?, U. Pa. L. Rev. (forthcoming 2014), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2384948, [perma.cc/AZ3H-THVP].
372. Hass v. Or. State Bar, 883 F.2d 1453 (9th Cir. 1989); see also text accompanying supra notes 346–48.
373. See 1A Areeda & Hovenkamp, supra note 334, ¶ 227a, at 207.
375. Id. ¶ 227a, at 207–08.
376. See Fuchs v. Rural Elec. Convenience Coop. Inc., 858 F.2d 1210, 1217–18 (7th Cir. 1988); text accompanying supra note 350.
377. 1A Areeda & Hovenkamp, supra note 334, ¶ 227a, at 208.
378. 317 U.S. 341, 351–52 (1943).
379. Miss. Code Ann. § 73-21-157(3) (West 2013).
380. Id. § 73-21-157(3)(b).
381. Id. § 73-21-75(1).
382. Id. § 73-21-75(4)(b)–(c). Apparently, the statute technically allows for a Board member to be a retired pharmacist, as long as he’s licensed and experienced in Mississippi, so it’s not technically true that all members must be currently practicing pharmacists.
383. Id. § 73-21-75(5).
384. Id. § 73-21-75(3), (5).
385. In the federal constitutional context, “for cause” limitations on removal have been held consistent with political accountability, see Morrison v. Olson, 487 U.S. 654, 687–88 (1988); Humphrey’s Ex’r v. United States, 295 U.S. 602, 629 (1935), though such limitations might at some point go too far, see Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3151–55 (2010).
386. See Tex. Agric. Code § 74.106(c) (West 2013) (“A cotton grower who is eligible to vote in a referendum or election under this subchapter is eligible to be a candidate for and member of the board if the person has at least seven years of experience as a cotton grower and otherwise meets the qualifications for the position.”); id. § 74.106(f) (“An eligible voter may vote for a cotton grower whose name does not appear on the official ballot by writing that person’s name on the ballot.”).
387. See Fed. Trade Comm’n v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1016 (2013); Fed. Trade Comm’n v. Ticor Title Ins. Co., 504 U.S. 621, 632–33 (1992); City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 370 (1991); Parker v. Brown, 317 U.S. 341, 351 (1943).
388. See, e.g., Warfield Phila., L.P. v. Nat’l Passenger R.R. Corp., No. 09-1022, 2009 WL 4043112, at *3–4 (E.D. Pa. Nov. 20, 2009) (entertaining, though rejecting, antitrust claims against Amtrak).
389. See text accompanying supra notes 349–50.
390. N.C. State Bd. of Dental Exam’rs v. Fed. Trade Comm’n, 717 F.3d 359 (4th Cir. 2013), cert. granted, 134 S. Ct. 1491 (2014).
391. In re N.C. Bd. of Dental Exam’rs, Final Order, No. 9343, 2011 WL 6229615 (F.T.C. Dec. 7, 2011).
392. Id. at *25.
393. Dental Exam’rs, 717 F.3d at 374. The Fourth Circuit reviewed the FTC’s factual findings under the “substantial evidence” standard, id. at 370; its legal findings received Skidmore deference, see supra note 366.
394. Dental Exam’rs, 717 F.3d at 374 n.11.
395. See Dental Exam’rs, 2011 WL 6229615, at *25.
396. Id. at *29, *34.
397. Id. at *30.
398. Id. at *34.
400. Id. at *35–39.
401. See id. at *36.
402. Id. at *37.
403. Id. at *37–38.
404. See id. at *38–39.
405. 15 U.S.C. § 1 (2000).
406. Am. Needle, Inc. v. Nat’l Football League, 130 S. Ct. 2201, 2208 (2010) (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767 (1984) (quoting Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984))).
407. 15 U.S.C. § 2.
408. See text accompanying supra notes 355–77.
409. See Copperweld, 467 U.S. at 773 n.21.
410. Am. Needle, Inc., 130 S. Ct. at 2212 (quoting Copperweld, 467 U.S. at 769; Fraser v. Major League Soccer, L.L.C., 284 F.3d 47, 57 (1st Cir. 2002); Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133, 1148–49 (9th Cir. 2003); Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 214–15 (D.C. Cir. 1986); Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 1462b, at 193–94 (2d ed. 2003)) (citations omitted) (second omission in original).
411. Id. at 2215–16 (quoting Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 335 (2d Cir. 2008) (Sotomayor, J., concurring in the judgment)).
412. Dental Exam’rs, 2011 WL 6229615, at *20–21.
413. More precisely, the FTC and the Fourth Circuit may have been wrong here because the cease-and-desist letters may have been protected by Noerr-Pennington immunity. See sources cited supra note 89. On the applicability of Noerr-Pennington to demand letters, see Sosa v. DIRECTV, Inc., 437 F.3d 923, 933–39 (9th Cir. 2006), McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552, 1560 (11th Cir. 1992), and Coastal States Mktg., Inc. v. Hunt, 694 F.2d 1358, 1367–68 (5th Cir. 1983).
The Board argued it was just trying to enforce state law and that enforcement of state law isn’t an antitrust violation, but the Fourth Circuit disagreed, saying “the Board was acting to regulate third parties in a manner not authorized by state law.” N.C. State Bd. of Dental Exam’rs v. Fed. Trade Comm’n, 717 F.3d 359, 373 n.9 (4th Cir. 2013), cert. granted, 134 S. Ct. 1491 (2014); see also id. at 364 (“[T]he Board does not have the authority to discipline unlicensed individuals or to order non-dentists to stop violating the Dental Practice Act.”); id. at 370 (“[L]etters were sent without state oversight and without the required judicial authorization.”). Presumably, though, anyone, including a state board, has a First Amendment right under the Free Speech Clause to tell people that their conduct is illegal and anyone who has a right to sue has a First Amendment right under either the Free Speech Clause or the Petition Clause to send a cease-and-desist letter before suing and thus avoid a lawsuit altogether. It’s not clear whether the distinction between a cease-and-desist letter and “order[ing]” someone to stop violating the law can bear the weight the Fourth Circuit sought to place on it.
The Board apparently didn’t adequately raise the Noerr-Pennington defense, so it was probably waived. In any case, the reasoning of the Dental Examiners case is far more general and would apply even in cases not covered by Noerr-Pennington.
414. 1A Areeda & Hovenkamp, supra note 334, ¶ 228b, at 214.
416. Cf. 13 Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 2232a, at 444 (3d ed. 2012) (“[D]irect inquiries into the ‘reasonableness’ of a challenged restraint [in the context of standard-setting] quickly involve the court in a morass of technical issues where neither the judge nor the jury has sufficient expertise to produce acceptable results.”).
417. 1A Areeda & Hovenkamp, supra note 334, ¶ 228b, at 214.
418. Id. at 214 n.15 (citing 13 Hovenkamp, supra note 416, ¶¶ 2232a, 2232d, at 443–44, 452–57).
419. 13 Hovenkamp, supra note 416, ¶ 2232d1, at 452–54.
420. Id. ¶ 2232d2, at 454–56.
421. Id. ¶ 2232d3, at 457.
422. See text accompanying supra notes 378–82, 389.
423. See supra Part IV.A.4.
424. See text accompanying supra notes 378–80.
425. 15 U.S.C. § 15(a) (2012).
426. There might be some immunity when the challenged acts were reasonably thought to be valid at the time. See, e.g., Lease Lights, Inc. v. Pub. Serv. Co. of Okla., 849 F.2d 1330, 1334 (10th Cir. 1988); 1A Areeda & Hovenkamp, supra note 334, ¶ 228d, at 222–27 (arguing that “damages, especially treble damages, seem completely unwarranted when a reasonable actor had no substantial reason to believe that the challenged act was unlawful at the time it acted”).
427. 435 U.S. 389 (1978).
428. Id. at 442–43 (Blackmun, J., dissenting).
429. See id. at 402 & n.22 (majority opinion).
430. 15 U.S.C. § 15(a).
431. Cmty. Commc’ns Co., Inc. v. City of Boulder, 455 U.S. 40, 65 n.2 (1982) (Rehnquist, J., dissenting).
432. Id. at 60.
433. Areeda and Hovenkamp agree with Rehnquist. See 1A Areeda & Hovenkamp, supra note 334, ¶ 223a, at 79–80; id. ¶ 228c, at 214–15.
434. 15 U.S.C. § 35(a).
435. Id. § 36(a).
436. 1A Areeda & Hovenkamp, supra note 334, ¶ 228c1, at 215.
437. Id. ¶ 227a, at 202 (emphasizing the limited scope of “the federal legislation immunizing local governments from damages liability”); id. ¶ 228c1, at 215; id. ¶ 228c2, at 220.
438. 466 U.S. 558 (1984).
439. See id. at 565–66.
440. See id. at 573.
441. See id. at 588–89 (Stevens, J., dissenting).
442. Id. at 594.
443. See id. at 580–81 n.34 (majority opinion); id. at 597–98 (Stevens, J., dissenting) (noting the majority’s concern but deflecting it on other grounds); 1A Areeda & Hovenkamp, supra note 334, ¶ 227a, at 201–02 (“The [Ronwin] dissenters did not acknowledge the harshness of imposing potential treble damage liability on Committee members for the silence of the Arizona court, but perhaps they felt it fair and desirable that Committee members should be in peril of treble damages unless they took the initiative in securing more express court approval of the anticompetitive grading formula.”). Eldin and Haw argue that this result is desireable. See Eldin & Haw, supra note 371, at pt. IV.A.2.
444. 421 U.S. 773 (1975).
445. Id. at 788–92; Edlin & Haw, supra note 371, at Pt. IV.A.2.
446. Shames v. Cal. Travel & Tourism Comm’n, 626 F.3d 1079, 1081–82 (9th Cir. 2010).
447. Id. at 1081.
448. Id. at 1084–85.
449. Id. at 1085 & n.3.
450. Shames v. Hertz Corp., No. 07-CV-2174-MMA(WMC), 2012 WL 5392159, at *3 (S.D. Cal. Nov. 5, 2012). It’s not clear from the opinion how much was paid by the Commission and how much by the rental car companies.
451. See Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 47–49, 52 (1994).
452. Mancuso v. N.Y. State Thruway Auth., 86 F.3d 289, 293 (2d Cir. 1996). See generally Jameson B. Bilsborrow, Keeping the Arms in Touch: Taking Political Accountability Seriously in the Eleventh Amendment Arm-of-the-State Doctrine, 63 Emory L.J. (forthcoming 2014).
453. Compare, e.g., Town of Smyrna v. Mun. Gas Auth. of Ga., 723 F.3d 640, 651 (6th Cir. 2013) (determining that whether the state is liable is the most important issue), with Benn v. First Judicial Dist. of Pa., 426 F.3d 233, 239–40 (3d Cir. 2005) (finding that financial liability is equal with other factors after Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743 (2002)).
454. See Tucker v. Williams, 682 F.3d 654, 659 (7th Cir. 2012) (quoting Peirick v. Ind. Univ.-Purdue Univ. Indianapolis Athletics Dep’t, 510 F.3d, 681, 695 (7th Cir. 2007)); Gorton v. Gettel, 554 F.3d 60, 62 (2d Cir. 2009) (citing Mancuso, 86 F.3d at 293); Thomas v. St. Louis Bd. of Police Comm’rs, 447 F.3d 1082 (8th Cir. 2006).
455. See Pucci v. Nineteenth Dist. Court, 628 F.3d 752, 761 (6th Cir. 2010) (stating that although treasury concern is generally most important, there can be sovereign immunity based on other factors even when treasury concern cuts the other way).
456. See Ross v. Jefferson Cnty. Dep’t of Health, 701 F.3d 655, 659 (11th Cir. 2012).
457. United States ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 580 (4th Cir. 2012); see also S.C. Dep’t of Disabilities & Special Needs v. Hoover Universal, Inc., 535 F.3d 300, 305–07 (4th Cir. 2008); Md. Stadium Auth. v. Ellerbe Becket, Inc., 407 F.3d 255, 261 (4th Cir. 2005); Kitchen v. Upshaw, 286 F.3d 179, 185 (4th Cir. 2002).
458. Raj v. La. State Univ., 714 F.3d 322, 329 (5th Cir. 2013); Delahoussaye v. City of New Iberia, 937 F.2d 144, 147 (5th Cir. 1991); see also Black v. N. Panola Sch. Dist., 461 F.3d 584, 596–98 (5th Cir. 2006); United States ex rel. Barron v. Deloitte & Touche, L.L.P., 381 F.3d 438, 440 (5th Cir. 2004).
459. Justin C. Carlin, State Sovereign Immunity and Privatization: Can Eleventh Amendment Immunity Extend to Private Entities?, 5 FIU L. Rev. 209, 212–13 (2009) (limiting this rule to the First, Fifth, Sixth, Seventh, Ninth, and Tenth Circuits; only the Eleventh Circuit has extended sovereign immunity to a private entity contracting with the state, see Shands Teaching Hosp. & Clinics, Inc. v. Beech St. Corp., 208 F.3d 1308, 1311 (11th Cir. 2000)).
460. See, e.g., Del Campo v. Kennedy, 517 F.3d 1070, 1072 (9th Cir. 2008); Shands, 208 F.3d at 1311; Carlin, supra note 459, at 222–25.
461. See, e.g., United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 721 (10th Cir. 2006) (debating the status of a laboratory owned by University of Utah Medical Center); Takle v. Univ. of Wis. Hosp. & Clinics Auth., 402 F.3d 768, 769–71 (7th Cir. 2005) (debating the status of a hospital spun off by University of Wisconsin but retaining many institutional ties with University); Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. & the Caribbean Cardiovascular Ctr. Corp., 332 F.3d 56, 64, 71 (1st Cir. 2003); Sw. Bell Telephone Co. v. City of El Paso, 243 F.3d 936 (5th Cir. 2001); Carlin, supra note 459, at 225–29.
462. Del Campo, 517 F.3d at 1074 (citing United States ex rel. Ali v. Daniel, Mann, Johnson, & Mendenhall, 355 F.3d 1140, 1147 (9th Cir. 2004)); Carlin, supra note 459, at 223–25.
463. See supra Part IV.A.
464. 15 U.S.C. § 45 (2012); see also 1A Areeda & Hovenkamp, supra note 334, ¶ 231b, at 245.
465. 209 U.S. 123, 157 (1908).
466. 15 U.S.C. § 15a; 1A Areeda & Hovenkamp, supra note 334, ¶ 227a, at 202–03.
467. Amtrak National Facts, Amtrak, http://www.amtrak.com/ccurl/335/
968/Amtrak-National-Fact-Sheet-FY2012.pdf, [perma.cc/Q4ZT-K9WX] (last visited Feb. 5, 2014).
468. Tex. Water Code Ann. § 26.179(d) (West 2013).
469. N.C. Gen. Stat. Ann. § 90-39 (West 2013).
470. Id. § 93B-16(b).
471. Id. §§ 93B-16(b), 143-299.4; see also Petitioner’s Opening Brief at 7, N.C. State Bd. of Dental Exam’rs v. Fed. Trade Comm’n, 717 F.3d 359 (2013) (No. 12-1172), 2012 WL 2931297.
472. Miss. Code Ann. §§ 73-21-83, 73-21-103 (West 2013).
473. Id. § 73-21-113.
474. Id. § 73-21-73.
475. At least one court has considered the labeling as a state agency dispositive and held the Board immune. Claiborne v. Miss. Bd. of Pharmacy, No. 3:07-CV-2.77-HTW-LRA, 2011 WL 3684431, at *4 (S.D. Miss. Aug. 22, 2001).
476. Miss. Code Ann. § 73-21-75.
477. See text accompanying supra note 459.
478. See, e.g., Garrett-Woodberry v. Miss. Bd. of Pharmacy, 300 F. App’x 289 (5th Cir. 2008); Claiborne, 2011 WL 3684431; Riddle v. Miss. State Bd. of Pharmacy, 592 So. 2d 37 (Miss. 1991); House v. Miss. State Bd. of Pharmacy, 592 So. 2d 946 (Miss. 1991); Duckworth v. Miss. State Bd. of Pharmacy, 583 So. 2d 200 (Miss. 1991); Miss. State Bd. of Pharmacy v. Baker, 365 So. 2d 67 (Miss. 1978); Miss. State Bd. of Pharmacy v. Steele, 317 So. 2d 33 (Miss. 1975); Miss. State Bd. of Pharmacy v. Clemer, 317 So. 2d 37 (Miss. 1975).
479. Carter v. Mississippi Department of Human Services, No. 3:05-CV-190 HTW-JCS, 2006 WL 2827691 (S.D. Miss. Sept. 29, 2006), states that the Mississippi Board of Nursing has been found to be an arm of the state and immune under the Eleventh Amendment. Carter, 2006 WL 2827691, at *2 (citing O’Neal v. Miss. Bd. of Nursing, 113 F.3d 62 (5th Cir. 1997)). But O’Neal, on inspection, is about official immunity for Board members, not sovereign immunity for the Board. Still, for what it’s worth, O’Neal does briefly mention that plaintiffs conceded that the Board of Nursing had sovereign immunity. O’Neal, 113 F.3d at 64.
480. Tex. Agric. Code § 74.1011 (West 2013).
481. Id. §§ 74.101(3), 74.129.
48 . Id. §§ 74.115, 74.108(3).
483 . Id. § 74.107(c).
484 . Id. § 74.116.
485 . Id. § 74.109(h).
486 . See, e.g., Garza v. Tex. Boll Weevil Eradication Found., Nos. 03-11-00787-CV, 03-11-0078-CV, 03-11-00789-CV, 03-11-00790-CV, 2012 WL 6726685 (Tex. Ct. App. Dec. 19, 2012).
487 . Tex. Agric. Code § 74.129; see also id. § 74.109(f).
488 . As noted above, it’s relevant in the Eleventh Circuit. See text accompanying supra note 459.
**Associate Professor, Emory Law School, firstname.lastname@example.org. I am grateful to Jonathan H. Adler, Thomas C. Arthur, Joanna Shepherd Bailey, William W. Buzbee, Rebecca Haw, Jay L. Himes, Andrew P. Morriss, Jonathan R. Nash, William H. Page, Vladimir Volokh, Michael L. Weiner, and attendees at the 2014 Next Generation of Antitrust Scholars Conference at NYU School of Law for their helpful comments. I am also grateful to Vinita Andrapalliyal, Jameson B. Bilsborrow, Erin E. Cawthorn, and Alexander J. Owings for their able research assistance. This research was funded by an Emory summer research grant and by the Reason Foundation and Express Scripts, Inc., though none of these funders exercised any editorial control over my work, and, indeed, the ideas expressed here stem directly from my previous work, including Volokh, infra note 5; Volokh, infra note 101; Volokh, infra note 237; Volokh, infra note 326; Volokh, infra note 366.