INTERCOLLEGIATE BROADCASTING SYSTEM, INC., a Rhode Island Non-Profit Corporation, Appellant v. COPYRIGHT ROYALTY BOARD and Library of Congress, Appellees
No. 11-1083
United States Court of Appeals, District of Columbia Circuit.
July 6, 2012.
Rehearing En Banc Denied Aug. 28, 2012.
684 F.3d 1332
WILLIAMS, Senior Circuit Judge
College Broadcasters, Inc. and SoundExchange, Inc., Intervenors. Argued Feb. 7, 2012.
Kelsi Brown Corkran, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief were Tony West, Assistant U.S. Attorney General, and Scott R. McIntosh, Attorney.
Michael B. DeSanctis argued the cause for intervenor SoundExchange, Inc. in support of appellees. With him on the brief were David A. Handzo, William M. Hohengarten, and Garrett A. Levin.
Catherine R. Gellis was on the brief for intervenor College Broadcasters, Inc. in support of appellee.
Before: GARLAND and GRIFFITH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge WILLIAMS.
WILLIAMS, Senior Circuit Judge:
Intercollegiate Broadcasting, Inc. appeals a final determination of the Copyright Royalty Judges (“CRJs” or “Judges“) setting the default royalty rates and terms applicable to internet-based “webcasting” of digitally recorded music. We find we need not address Intercollegiate‘s argument that Congress‘s grant of power to the CRJs is void because the provision for judicial review gives us legislative or administrative powers that may not be vested in an Article III court. But we agree with Intercollegiate that the position of the CRJs, as currently constituted, violates the Appointments Clause,
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Intercollegiate is an association of “noncommercial” webcasters who transmit digitally recorded music over the internet in educational environments such as high school and college campuses—a technologically updated version of “closed circuit” campus radio stations. As with traditional radio, such digital transmissions are “performances” under the Copyright Act and thus entitle the owner of a song‘s copyright to royalty payments. See
The administrative body responsible for setting these terms has changed in name and structure over time, but the Copyright Royalty Board (the regulatory name for the collective entity composed of the CRJs and their staff, see 37 C.F.R. § 301.1) was established in its current form in 2004 and is composed of three Copyright Royalty Judges who are appointed to staggered six-year terms by the Librarian of Congress. See
SoundExchange, Inc. (an intervenor here) is a non-profit clearinghouse for musicians’ webcast royalty payments. In 2008 it initiated ratemaking proceedings before the CRJs to set the default webcasting licensing rates for the years 2011-2015. The Judges initiated proceedings and received 40 petitions to participate, mainly from webcasters. Over the next two years, SoundExchange entered voluntary settlements with almost all of the participants, leaving only two webcasting participants, Intercollegiate and one other licensee, Live365 (a commercial webcaster). (Live365 originally appealed the CRJs’ determination as to commercial webcaster rates but reached a settlement with SoundExchange before the filing of opening briefs.) Intervenor College Broadcasting, Inc., an association of educational webcasters similar to Intercollegiate, participated in cooperation with SoundExchange, providing the CRJs their settlement agreement as a reference for market rates.
After reviewing the evidence and testimony from the remaining participants, the CRJs issued a final determination in which they adopted as statutory rates the royalty structure agreed to in the settlement between SoundExchange and College Broadcasting. See 76 Fed. Reg. 13,026, 13,042/1 (Mar. 9, 2011). Those terms include a $500 flat annual fee per station for both “educational” and other noncommercial webcasters whose “Aggregate Tuning Hours” stay below a monthly threshold separating them from commercial webcasters. See id. at 13,039/1, 13,040/1. The CRJs rejected Intercollegiate‘s proposal to establish different fee structures for “small” and “very small” noncommercial webcasters. See id. at 13,040/2-13,042/1. Intercollegiate appealed the CRJs’ determination pursuant to
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Intercollegiate first argues that all determinations made by the CRJs are void because the relevant appeal provision purports to ask Article III courts to take actions of a kind beyond their constitutional jurisdiction. Specifically,
Section 706 of title 5 shall apply with respect to review by the court of appeals under this subsection. If the court modifies or vacates a determination of the Copyright Royalty Judges, the court may enter its own determination with respect to the amount or distribution of royalty fees and costs, and order the repayment of any excess fees, the pay-ment of interest pertaining respectively thereto, in accordance with its final judgment. The court may also vacate the determination of the Copyright Royalty Judges and remand the case to the Copyright Royalty Judges for further proceedings in accordance with subsection (a).
We conclude that we need not address this objection because it has no bearing on Intercollegiate‘s case. So far as the substance of the CRJs’ decision is concerned, no party has asked us to enter our own determination, but rather to review the decision for compliance with
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Intercollegiate argues that the Copyright Royalty Board as currently structured violates the Constitution‘s Appointments Clause,
The Appointments Clause provides that
[The President] ... shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
The government concedes that the CRJs meet this initial threshold of significant authority. If significance plays no role beyond that threshold, i.e., has no bearing on whether an officer is principal or inferior, then we may pass on to the major differentiating feature, the extent to which the officers are “directed and supervised” by persons “appointed by Presidential nomination with the advice and consent of the Senate.” Edmond v. United States, 520 U.S. 651, 663, 117 S.Ct. 1573, 137 L.Ed.2d 917 (1997). But there is in fact some conflict over whether there are relevant degrees of significance in the authority of officers, so we first briefly examine the conflict and then consider the significance of the CRJs’ authority.
In Morrison v. Olson, 487 U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), the Court held that an independent counsel appointed by the Attorney General was an inferior rather than principal officer. Id. at 671-72. The counsel was removable “only for good cause,” see id. at 663, but the Court also stressed that she was “empowered by the Act to perform only certain, limited duties,” with no “authority to formulate policy for the Government or the Executive Branch,” and that her office was not only “limited in jurisdiction,” but also “‘temporary’ in the sense that an independent counsel is appointed essentially to accomplish a single task, and when that task is over the office is terminated,” see id. at 671-72. The deprecatory language about the independent counsel‘s duties seems to rest on a premise that levels of significance may play some role in the divide between principal and inferior.
But in Edmond the Court, once satisfied that the persons in question exercised significant authority and were thus officers, 520 U.S. at 662, went on to discuss only direction and supervision. And it observed that the exercise of significant authority “marks, not the line between principal and inferior officer for Appointments Clause purposes, but rather, as we said in Buckley, the line between officer and nonofficer.” Id.
In any event, assuming that significance of authority has any import beyond setting the threshold for officers, it is a metric on which the CRJs score high. Their ratemaking decisions have considerable consequences—as our colleague put it,
Of course one might see these authorities of the CRJs as primarily addressing “merely rates.” But rates can obviously mean life or death for firms and even industries. Intercollegiate calls our attention, for example, to a firm for which royalty expenses constitute half its costs. See Appellant‘s Reply Br. 6-7; see generally id. 4-11.
As we noted, Edmond accepts officers’ classification as “inferior” if their “work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” 520 U.S. at 663. In concluding that the judges of the Coast Guard Court of Criminal Appeals were inferior officers, the Court emphasized three factors: (1) the judges were subject to the substantial supervision and oversight of the Judge Advocate General (who in turn was subordinate to the Secretary of Transportation), see id. at 664; (2) the judges were removable by the Judge Advocate General without cause, see id. (“The power to remove officers, we have recognized, is a powerful tool for control.” (citing Bowsher v. Synar, 478 U.S. 714, 727, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986); Myers v. United States, 272 U.S. 52, 47 S.Ct. 21, 71 L.Ed. 160 (1926)))); and (3) another executive branch entity, the Court of Appeals for the Armed Forces, had the power to reverse the judges’ decisions so that they had “no power to render a final decision on behalf of the United States unless permitted to do so by other Executive Officers.” Id. at 664-65.
As to Edmond‘s first concern, the CRJs are supervised in some respects by the Librarian and by the Register of Copyrights, but in ways that leave broad discretion. The Librarian (who is appointed by the President with advice and consent of the Senate, see
The Register (who is appointed by the Librarian and acts at his direction, see
But the Register‘s power to control the CRJs’ resolution of pure issues of law plainly leaves vast discretion over the rates and terms. If one looks to market conditions, as one statutory provision governing webcasting directs, see
Moreover, the CRJs also apply ratemaking formulas that are even more openended. For example,
We find that, given the CRJs’ nonremovability and the finality of their decisions (discussed below), the Librarian‘s and Register‘s supervision functions still fall short of the kind that would render the CRJs inferior officers.
The second Edmond factor, removability, also supports a finding that the CRJs are principal officers. Unlike the judges
Finally, the CRJs’ rate determinations are not reversible or correctable by any other officer or entity within the executive branch. As we have mentioned, their procedural rules are reviewed by the Librarian, and their legal determinations by the Register. But the Judges are afforded
full independence in making determinations concerning adjustments and determinations of copyright royalty rates and terms, the distribution of copyright royalties, the acceptance or rejection of royalty claims, rate adjustment petitions, and petitions to participate, and in issuing other rulings under this title, except that the Copyright Royalty Judges may consult with the Register of Copyrights on any matter other than a question of fact.
Having considered all of these factors, we are in agreement with the view suggested by Judge Kavanaugh in SoundExchange that the CRJs as currently constituted are principal officers who must be appointed by the President and confirmed by the Senate, and that the structure of the Board therefore violates the Appointments Clause. 571 F.3d at 1226-27 (concurring opinion). We therefore must decide the appropriate remedy to correct the violation.
In Free Enterprise Fund, the Supreme Court reviewed the structure of the Public Company Accounting Oversight Board, whose members were appointed and removable by the Commissioners of the Securities and Exchange Commission. The Court held that in the circumstances of that case the “for-cause” restriction on the Commissioners’ removal power violated the Constitution‘s separation of powers by impeding the President‘s ability to execute the laws. See 130 S.Ct. at 3151-54. Rather than finding all authority exercised by the PCAOB to be unconstitutional, however, the Court held that invalidating and severing the problematic for-cause restriction was the solution best matching the problem and preserving the remainder intact. Id. at 3161 (citing Ayotte v. Planned Parenthood of Northern New England, 546 U.S. 320, 328, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006)).
We likewise conclude here that invalidating and severing the restrictions on the Librarian‘s ability to remove the CRJs eliminates the Appointments Clause violation and minimizes any collateral damage. Specifically, we find unconstitutional all of the language in
In sum, the inability of the Librarian to remove the CRJs, coupled with the absence of a principal officer‘s direction and supervision over their exercise of authority, renders them principal officers—but obviously ones not appointed in the manner constitutionally required for such officers. Once the limitations on the Librarian‘s removal authority are nullified, they would become validly appointed inferior officers—at least if the Librarian is a Head of Department, the issue to which we now turn.
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Intercollegiate argues that even if the CRJs are inferior officers, the Board‘s structure is unconstitutional because the Librarian is not a “Head of Department” within the meaning of the Appointments Clause. The Supreme Court addressed the same challenge as to the SEC Commissioners in Free Enterprise Fund; it ultimately held: “Because the Commission is a freestanding component of the Executive Branch, not subordinate to or contained within any other such component, it constitutes a ‘Departmen[t]’ for the purposes of the Appointments Clause.” 130 S.Ct. at 3163. See also Freytag, 501 U.S. at 915-22 (Scalia, J., concurring in part and concurring in judgment); Buckley, 424 U.S. at 127 (“‘Departments’ referred to in the Appointments Clause ‘are themselves in the Executive Branch or at least have some connection with that branch‘“). Intercollegiate notes that we have referred to the Library of Congress as a “congressional agency,” see Keeffe v. Library of Congress, 777 F.2d 1573, 1574 (D.C. Cir. 1985), and argues that it is not an executive department that can satisfy the “Head of Department” definition in Free Enterprise Fund.
Despite our language in Keeffe, the Library of Congress is a freestanding entity that clearly meets the definition of “Department.” Free Enterprise Fund, 130 S.Ct. at 3162-63. To be sure, it performs a range of different functions, including some, such as the Congressional Research Service, that are exercised primarily for legislative purposes. But as we have mentioned, the Librarian is appointed by the President with advice and consent of the Senate,
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We hold that without the unrestricted ability to remove the Copyright Royalty Judges, Congress‘s vesting of their appointment in the Librarian rather than in the President violates the Appointments Clause. Accordingly we invalidate and sever the portion of the statute limiting the Librarian‘s ability to remove the Judges. Because the Board‘s structure was unconstitutional at the time it issued its determination, we vacate and remand the determination and do not address Intercollegiate‘s arguments regarding the merits of the rates set therein.
So ordered.