NATIONAL HORSEMEN‘S BENEVOLENT AND PROTECTIVE ASSOCIATION; ARIZONA HORSEMEN‘S BENEVOLENT AND PROTECTIVE ASSOCIATION; ARKANSAS HORSEMEN‘S BENEVOLENT аnd PROTECTIVE ASSOCIATION; INDIANA HORSEMEN‘S BENEVOLENT and PROTECTIVE ASSOCIATION; ILLINOIS HORSEMEN‘S BENEVOLENT AND PROTECTIVE ASSOCIATION; LOUISIANA HORSEMEN‘S BENEVOLENT AND PROTECTIVE ASSOCIATION; MOUNTAINEER PARK HORSEMEN‘S BENEVOLENT and PROTECTIVE ASSOCIATION; NEBRASKA HORSEMEN‘S BENEVOLENT and PROTECTIVE ASSOCIATION; OKLAHOMA HORSEMEN‘S BENEVOLENT ANd PROTECTIVE ASSOCIATION; OREGON HORSEMEN‘S BENEVOLENT AND PROTECTIVE ASSOCIATION; PENNSYLVANIA HORSEMEN‘S BENEVOLENT and PROTECTIVE ASSOCIATION; WASHINGTON HORSEMEN‘S BENEVOLENT and PROTECTIVE ASSOCIATION; TAMPA BAY HORSEMEN‘S BENEVOLENT AND PROTECTIVE ASSOCIATION; GULF COAST RACING, L.L.C.; LRP GROUP, LIMITED; VALLE DE LOS TESOROS, LIMITED; GLOBAL GAMING LSP, L.L.C.; TEXAS HORSEMEN‘S PARTNERSHIP, L.L.P. v. JERRY BLACK; KATRINA ADAMS; LEONARD COLEMAN; MD NANCY COX; JOSEPH DUNFORD; FRANK KEATING; KENNETH SCHANZER; HORSERACING INTEGRITY AND SAFETY AUTHORITY, INCORPORATED; FEDERAL TRADE COMMISSION; COMMISSIONER NOAH PHILLIPS; COMMISSIONER CHRISTINE WILSON; LISA LAZARUS; STEVE BESHEAR; ADOLPHO BIRCH; ELLEN MCCLAIN; CHARLES SCHEELER; JOSEPH DEFRANCIS; SUSAN STOVER; BILL THOMASON; LINA KHAN; REBECCA SLAUGHTER; ALVARO BEDOYA; D. G. VAN CLIEF
No. 23-10520
United States Court of Appeals for the Fifth Circuit
July 5, 2024
Lyle W. Cayce, Clerk
Plaintiffs—Appellants,
STATE OF TEXAS; TEXAS RACING COMMISSION,
Intervenor Plaintiffs—Appellants,
versus
JERRY BLACK; KATRINA ADAMS; LEONARD COLEMAN; MD NANCY COX; JOSEPH DUNFORD; FRANK KEATING; KENNETH
Defendants—Appellees.
Appeal from the United States District Court
for the Northern District of Texas
USDC Nos. 5:21-CV-71, 5:23-CV-77
Before KING, DUNCAN, and ENGELHARDT, Circuit Judges.
STUART KYLE DUNCAN, Circuit Judge:
We again consider constitutional challenges to the Horseracing Integrity and Safety Act of 2020 (“HISA“). In HISA, Congress empowered a private corporation—the Horseracing Integrity and Safety Authority (“Authority“)—to create and enforce nationwide rules for thoroughbred horseracing. Last time, we held HISA facially unconstitutional under the private nondelegation doctrine because the Authority‘s rulemaking was not subordinate to the Federal Trade Commission (“FTC“). See Nat‘l Horsemen‘s Benevolent & Protective Ass‘n v. Black (Horsemen‘s I), 53 F.4th 869 (5th Cir. 2022). At the time, we did not consider a separate nondelegation challenge to the Authority‘s enforcement power. Congress responded to our decision by amending HISA, giving the FTC power to abrogate, add to, or modify the Authority‘s rules.
On remand, the district court held the amendment cured HISA‘s constitutional deficiencies because the FTC now has general rulemaking power over the Authority‘s activities. It also rejected claims raised by a new
We agree with nearly all of the district court‘s well-crafted opinion. Specifically, we agree that the FTC‘s new rulemaking oversight means the agency is no longer bound by the Authority‘s policy choices. In other words, the amendment solved the nondelegation problem with the Authority‘s rulemaking power. We also agree that HISA does not violate the Due Process Clause by putting financially interested private individuals in charge of competitors. Further, we agree that, under current Supreme Court precedent, see Lebron v. Nat‘l R.R. Passenger Corp., 513 U.S. 374 (1995), the Authority does not qualify as a government entity subject to the Appointments Clause. Finally, we agree that plaintiff Gulf Coast lacks standing to bring its Tenth Amendment challenge.
We disagree with the district court in one important respect, however: HISA‘s enforcement provisions violate the private nondelegation doctrine. The statute empowers the Authority to investigate, issue subpoenas, conduct searches, levy fines, and seek injunctions—all without the FTC‘s say-so. That is forbidden by the Constitution. We therefore DECLARE that HISA‘s enforcement provisions are facially unconstitutional on that ground. In doing so, we part ways with our esteemed colleagues on the Sixth Circuit. See Oklahoma v. United States, 62 F.4th 221 (6th Cir. 2023) (rejecting nondelegation challenge to HISA‘s enforcement provisions).
Accordingly, the district court‘s judgment is AFFIRMED in part and REVERSED in part.
A. HISA Framework
In 2020, HISA created a framework for enacting and enforcing nationwide rules governing doping, medication control, and racetrack safety in the thoroughbred horseracing industry. See
Under HISA, the Authority writes all the rules—that is, rules fleshing out the substantive areas covered by HISA, as well as rules governing investigation, adjudication, and sanctions.1 The Authority submits proposed rules to the FTC, which publishes them for public comment.
The Authority also has the power to enforce HISA. It does so by (1) exercising “subpoena and investigatory authority,”
B. Procedural History
Horsemen‘s I concluded that HISA‘s delegation of rulemaking power was facially unconstitutional. HISA delegated rulemaking power to a private
On remand, the National Horsemen‘s Association (“Horsemen“) and Texas continued to press their private nondelegation claims, arguing Congress‘s amendment did not actually subordinate Authority rulemaking to the FTC. They also continued to press their nondelegation challenge to the Authority‘s enforcement powers (as well as their due process claims). In addition, a new plaintiff, Gulf Coast Racing (“Gulf Coast“), raised separate challenges to HISA in a different division of the same district. See Nat‘l Horsemen‘s Benevolent & Protective Ass‘n v. Black (Black), 672 F. Supp. 3d 220, 224 (N.D. Tex. 2023). Gulf Coast claimed (1) HISA‘s directors qualify as “officers of the United States” and are therefore subject to Article II‘s appointment and removal requirements; and (2) HISA commandeers Texas in violation of the Tenth Amendment. Gulf Coast‘s suit was consolidated with the remanded Horsemen‘s I case. Id. at 230–31. Following a one-day bench trial, the district court rejected all the plaintiffs’ claims.
As to private nondelegation, the district court followed the Sixth Circuit‘s decision in Oklahoma, 62 F.4th 221. That court reasoned that Congress‘s amendment empowering the FTC to “abrogate, add to, and modify” proposed rules “cured the constitutional issues identified by [Horsemen‘s I]” by making the Authority‘s rulemaking power “subordinate” to the FTC. Black, 672 F. Supp. 3d at 241, 243 (citing Oklahoma, 62 F.4th at 230, 232). As to the separate challenge to the Authority‘s enforcement
As to Gulf Coast‘s claims, the district court concluded that our Horsemen‘s I decision required it to reject them. Specifically, the court reasoned that Horsemen‘s I necessarily decided the Authority was a private entity, and so its directors were not subject to the Appointments Clause. Id. at 234–37. Alternatively, the court reasoned that the Authority is private because “it is not government created, and its directors are not government appointed.” Id. at 234 (citing Lebron, 513 U.S. 374). Finally, the court rejected the Tenth Amendment commandeering argument for lack of standing. Id. at 250.
Accordingly, the district court entered final judgment dismissing all claims. The Horsemen, Texas, and Gulf Coast timely appealed.
II. STANDARD OF REVIEW
We review the district court‘s legal conclusions following a bench trial de novo. Deloach Marine Servs., L.L.C. v. Marquette Transp. Co., 974 F.3d 601, 606 (5th Cir. 2020). To рrevail on their facial challenge, the plaintiffs “must show that no set of circumstances exists under which [HISA] would be valid.” Horsemen‘s I, 53 F.4th at 878 (cleaned up) (citations omitted).
III. DISCUSSION
The various plaintiffs raise these issues on appeal:
Did Congress‘s amendment to HISA cure the private nondelegation problem with the Authority‘s rulemaking powers? - Do the Authority‘s enforcement powers separately violate the private nondelegation doctrine?
- Does HISA violate due process by permitting self-interested industry participants to regulate their competitors?
- Are the Authority‘s directors subject to the Appointments Clause?
- Does HISA violate the Tenth Amendment‘s anti-commandeering rule by forcing States to administer a federal program?
We consider each issue in turn.
A. Private Nondelegation Challenge to Authority‘s Rulemaking.
We previously discussed the origins of the private nondelegation doctrine in Horsemen‘s I. See id. at 880–81. In essence, the doctrine teaches that “a private entity may wield government power only if it ‘functions subordinately’ to an agency with ‘authority and surveillance’ over it.” Id. at 881 & n.21 (citing Texas v. Rettig, 987 F.3d 518, 532 (5th Cir. 2021)); Pittston Co. v. United States, 368 F.3d 385, 394 (4th Cir. 2004); United States v. Frame, 885 F.2d 1119, 1128 (3d Cir. 1989)).4 Or, as our sister circuit has explained: “Congress may formalize the role of private parties in proposing regulations so long as that role is merely as an aid to a government agency that retains the discretion to approve, disapprove, or modify them.” Ass‘n of Am. R.R.s v. U.S. Dep‘t of Transp. (Amtrak I), 721 F.3d 666, 671 (D.C. Cir. 2013) (cleaned
In Horsemen‘s I, we ruled the Authority‘s rulemaking power was an unconstitutional private delegation. Our analysis focused on the fact that the Authority‘s proposed rules were subject only to the FTC‘s limited “consistency review,” which did not permit the agency to second-guess the Authority‘s policy choices. See Horsemen‘s I, 53 F.4th at 882–87. In response, Congress amended HISA to provide that:
[the FTC], by rule in accordance with section 553 of title 5, may abrogate, add to, and modify the rules of the Authority promulgated in accordance with this chapter as the Commission finds necessary or appropriate to ensure the fair administration of the Authority, to conform the rules of the Authority to requirements of this chapter and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of this chapter.
We agree with the district court and the Sixth Circuit that the amendment cured the nondelegation defect identified in Horsemen‘s I. That defect lay in the agency‘s being at the mercy of the Authority‘s policy choices. See Horsemen‘s I, 53 F.4th at 872 (“[T]he FTC concedes it cannot
Appellants’ arguments to the contrary do not persuade us.
First, the Horsemen argue the Authority remains superior because it continues to write the rules in the first place and the agency must approve them if they hurdle the low bar of consistency review. We disagree. The problem was never that the private entity proposed the rules; the problem was that the agency lacked рower to second-guess them once they were proposed. See Horsemen‘s I, 53 F.4th at 884 (“The FTC‘s oversight is too limited to ensure the Authority functions subordinately to the agency.” (cleaned up) (quoting Adkins, 310 U.S. at 399)). Now the FTC has been given that power: it can “abrogate” or “modify” Authority rules it disagrees with.
Next, the Horsemen argue the FTC‘s new review power creates a timing problem. Because the FTC may alter only rules “promulgated” by the Authority,
Finally, the Horsemen point to the SEC‘s supervisory authority over private self-regulatory organizations like FINRA. They argue that, notwithstanding
In sum, we agree with the district court and the Sixth Circuit that, in light of Congress‘s amendment to HISA in
Appellants next argue that, apart from its rulemaking powers, the Authority‘s enforcement powers violate the private nondelegation doctrine. Recall that the Authority enforces HISA by levying sanctions, which are ultimately subject to FTC review, and by bringing lawsuits. The Authority also has power to investigate potential violations, although the actual investigatory work is contracted to other private organizations, such as USADA in the case of doping rules, or to state racing commissions in the case of racetrack safety rules. See supra I.A. Our Horsemen‘s I decision did not address this challenge to the Authority‘s enforcement powers, see 53 F.4th at 890 n.37, and on remand the district court treated it as a due process claim and rejected it. See Black, 672 F. Supp. 3d at 248–49. Appellants now bring the claim to us, arguing that the Authority‘s enforcement power is not subordinate to FTC oversight.
1.
Before addressing the merits of this claim, we must address the Authority‘s argument that it is premаture. Arguing both in terms of standing and ripeness, the Authority contends that it has not yet tried to enforce HISA against the Horsemen and that any challenge to the Authority‘s enforcement power can be raised if and when it does. We disagree for several reasons.
First, the Authority misunderstands the Horsemen‘s claim. They do not challenge some particular enforcement action undertaken by the Authority—claiming, for instance, that the Authority issued an overbroad subpoena for medical records or lacked probable cause to search a racetrack. Instead, the Horsemen argue that HISA, on its face, vests the Authority with enforcement power that is effectively unreviewable by the agency. When a regulated entity raises “a purely legal challenge” like this one, “it is
Second, the Horsemen have a cognizable injury for standing purposes. Pursuant to HISA, they have already had to agree “to be subject to and comply with [Authority‘s] rules, standards, and procedures“—including rules requiring they cooperate with investigations, consent to searches, and comply with subpoenas. See
Finally, the record shows several instances in which the Authority has enforced HISA against the Horsemen. For example, the Authority has threatened one of the Horsemen‘s members with sanctions if it did not repair a racetrack railing. Additionally, the Authority has both threatened and
In sum, the Horsemen have standing to challenge the Authority‘s enforcement powers and that challenge is ripe. We proceed to the merits.
2.
The Horsemen‘s (as well as Texas‘s) basic contention is that HISA grants the Authority enforcement power that is effectively unreviewable by the FTC. That claim turns on the same standard as the challenge to the Authority‘s rulemaking addressed in Horsemen‘s I: the delegation is constitutional if, when enforcing HISA, the Authority “‘functions subordinately’ to an agency with ‘authority and surveillance’ over it.” 53 F.4th at 881 (quoting Rettig, 987 F.3d at 532). In other words, the Authority may constitutionally enforce HISA only if it acts “as an aid” to the FTC, which “retains the discretion to approve, disapprove, or modify” the private entity‘s enforcement actions. Ibid. (cleaned up) (quoting Amtrak I, 721 F.3d at 671).8
HISA divides enforcement authority among the FTC, the Authority, and USADA, “each within the scope of their powers and responsibilities under this chapter.”
First, the Authority has respоnsibility for (1) investigating potential violations, including by issuing subpoenas (
The Act‘s plain terms permit only one conclusion: HISA is enforced by a private entity, the Authority. The Authority decides whether to investigate a covered entity for violating HISA‘s rules. The Authority decides whether to subpoena the entity‘s records or search its premises. The Authority decides whether to sanction it. And the Authority decides whether to sue the entity for an injunction or to enforce a sanction it has imposed. To be sure, the Authority does not perform these functions itself. Rather, HISA requires the Authority to contract with another private entity, USADA, which undertakes enforcement “on behalf of the Authority.”
Consider also what HISA does not say. It does not empower the FTC to decide whether to investigate a covered entity, whether to subpoena its records, whether to search its premises, whether to charge it with a violation, or whether to sanction or sue it. Nor does the Act empower the FTC to countermand any of the Authority‘s investigatory or charging decisions (or, more precisely, USADA‘s decisions). Nor does it require the Authority or USADA to seek the FTC‘s approval before investigating, searching, charging, sanctioning, or suing. All these actions are enforcement actions, and, by the plain terms of the Act, they can be done by the private entities without the FTC‘s involvement.
The inescapable conclusion is that the Authority does not “function subordinately” to the FTC when enforcing HISA. Horsemen‘s I, 53 F.4th at 881. That is not permitted under the private nondelegation doctrine. A private entity that can investigate potential violations, issue subpoenas, conduct searches, levy fines, and seek injunctions—all without the say-so of the agency—does not operate under that agency‘s “authority and surveillance.” Ibid. Put another way, with respect to enforcement, HISA‘s plain terms show that the Authority does not merely act “as an aid” to the FTC because the FTC does not “retain[] the discretion to approve, disapprove, or modify” the Authоrity‘s enforcement actions. Ibid. (cleaned up) (quoting Amtrak I, 721 F.3d at 671).
3.
One might counter, though, that the FTC at least partially supervises the Authority because it can review sanctions at the back end, after ALJ review. See
The argument nonetheless fails. Suppose the Authority sanctions a horse owner for a doping violation, but the sanction is later reversed by the FTC. Does that make the Authority‘s enforcement power subordinate to the agency? No, it does not. Consider everything the Authority was permitted to do up to that point: launch an investigation into the owner, subpoena his records, search his facilities, charge him with a violation, adjudicate it, and fine him.12 Each and every one of those actions is “enforcement” of HISA. Each can occur under HISA without any supervision by the FTC. Moreover, penalties imposed by the Authority are not automatically stayed pending appeal. See
Consider a hypothetical. Suppose a city structures its speeding laws to let a group of private car enthusiasts monitor speeds with their own radar guns, pull speeders over, and ticket them. Fines are reviewed by the police department and, ultimately, the mayor. Who enforces the speeding laws? Anyone would say the private group. After all, consider how many cases we decide concerning whether the police have wrongly stopped someone or used excessive force during the stop. See, e.g., Terrell v. Town of Woodworth, No. 23-30510, 2024 WL 667690 (5th Cir. Feb. 19, 2024) (per curiam). All would agree that the police were “enforcing” the law when they stopped the person. The same goes for the private entity in the hypothetical.
The Authority‘s argument, moreover, does not work even on its own terms. In addition to levying fines, HISA empowers the Authority to sue people and racetracks to enjoin past, present, or impending violations. See
4.
The Authority next argues that the FTC could use its new rulemaking authority to rein in the Authority‘s enforcement actions or even require the Authority to preclear lawsuits with the agency. See
The Authority‘s rulemaking argument would let the agency rewrite the statute. In HISA, Congress set out a definite enforcement scheme, dividing responsibilities among the FTC, the Authority, and USADA. See
Take the Authority‘s power to seek injunctions. HISA empowers the Authority to file suit to enjoin violations, while saying nothing about FTC involvement in the process. See
Furthermore, when Congress wanted to put the FTC in charge of enforcement, it knew how. Section 3059, for instance, is a separate part of HISA targeting certain “unfair or deceptive” practices in selling horses.15 With respect to that section, the Authority can only “recommend” that the
Additionally, the Sixth Circuit believed the FTC could supervise the Authority through a slightly different kind of rulemaking—that is, by issuing rules governing how the Authority enforces HISA. See Oklahoma, 62 F.4th at 231. For instance, the agency could issue rules against “overbroad subpoenas or onerous searches” or “provid[ing] a suspect with a full adversary proceeding and with free counsel.” Ibid. Unhappily, we again disagree with our sister circuit.
The Horsemen are not complaining about how the Authority exercises its enforcement power. They are complaining about where the enforcement рower is lodged: on its face, HISA empowers private entities to enforce it and permits agency oversight only after the enforcement process is over and done with (and then only with respect to fines, not injunctions). If the Horsemen were objecting only to overbroad subpoenas, unwarranted
In sum, HISA‘s clear delineation of enforcement power between the FTC, the Authority, and USADA cannot be altered through rulemaking.
5.
Finally, the Authority defends its enforcement role by analogizing it to the role of self-regulatory organizations (“SROs“)—specifically, FINRA—which assist the SEC in enforcing securities laws. The Authority seeks support in circuit cases concluding that FINRA‘s enforcement role presents no private nondelegation problem. See, e.g., Oklahoma, 62 F.4th at 229, 232 (gathering cases).18 For their part, the Horsemen argue that, for
We agree with the Horsemen that, for enforcement purposes, HISA gives the Authority an enforcement role meaningfully different from FINRA‘s. Unlike the SEC-FINRA relationship, HISA does not give the FTC potent oversight power over the Authority‘s enforcement such as the power to enforce HISA itself, deregister the Authority as the enforcing entity, or remove its directors.
To begin with, Congress empowered the SEC to enforce FINRA‘s rules if needed. The SEC can “in its discretion, make such investigations as it deems necessary to determine whether any person has violated, is violating, or is about to violate” the Maloney Act.
Moreover, HISA diverges radically from the Maloney Act in empowering the Authority to sue. The SEC alone has the power to bring civil suits,
Finally, the SEC “retains formidable oversight power to supervise, investigate, and discipline [FINRA] for any possible wrongdoing or regulatory missteps.” In re NYSE Specialists Sec. Litig., 503 F.3d 89, 101 (2d Cir. 2007). The FTC does not. This “formidable” power is manifest in the SEC‘s ability to derecognize FINRA‘s regulatory role entirely,
* * *
In sum, we agree with the Horsemen that the FTC lacks adequate oversight and control over the Authority‘s enforcement power. HISA‘s explicit division of enforcement responsibility empowers the Authority with quintessential executive functions and gives the FTC scant oversight until enforcement has already occurred. Such backend review by the FTC does not subordinate the Authority. And the FTC‘s general rulemaking power provides no answer because executive rulemaking cannot amend the plain division of enforcement power laid out in HISA‘s text. Such a radical delegation differs materially frоm the SEC-FINRA relationship because the FTC lacks any tools to ensure that the law is properly enforced. HISA‘s enforcement provisions thus violate the private nondelegation doctrine.
C. Due Process Challenge
We turn next to the Horsemen‘s challenge based on the Fifth Amendment‘s Due Process Clause. They argue that HISA, both facially and as-applied, deprives them of due process by permitting economically self-interested actors to regulate their competitors. See Carter Coal, 298 U.S. at 311 (government violates due process by allowing regulation by “private persons whose interests may be and often are adverse to the interests of
The district court correctly rejected these claims. As to the Horsemen‘s facial challenge, the court concluded it was defeated by HISA‘s conflict-of-interest provisions. See Black, 672 F. Supp. 3d at 252. Those provisions prohibit a range of individuals from serving as Board or independent committee members,
As to the as-applied challenge, the district court rejected it on the facts. Following a bench trial, the court found the Horsemen relied only on the committee members’ biographical information but adduced no other evidence showing their adverse interests, financial or otherwise. See Black, 672 F. Supp. 3d at 252 (“HISA affords sufficient protection through its conflicts-of-interest provisions, and the plaintiffs have not met their burden to show unconstitutional self-dealing by directors, committee members, or others associated with the Authority.“). At most, the court observed that the biographical information may show the members do not qualify as “independent members.” Ibid.;
D. Appointments Clause Challenge
A separate plaintiff, Gulf Coast, challenges the Authority‘s structure under the Appointments Clause of Article II.21 Recall that Gulf Coast raised this distinct challenge in a suit later consolidated with the Horsemen‘s. See id. at 230. Gulf Coast argues that, for constitutional purposes, the Authority is governmental, not private, and so is subject to the Appointments Clause. This means the Authority‘s directors, if they are principal officers, must be appointed by the President with Senate confirmation or, if they are inferior officers, by the President, courts, or department heads according to law. See Free Enter. Fund, 561 U.S. at 487-88; Cochran v. SEC, 20 F.4th 194, 198 (5th Cir. 2021) (en banc). The Authority‘s directors are not appointed in any of these ways,22 and so, if Gulf Coast is right, their appointment would violate Article II.
The Authority and the FTC first respond that we previously decided this question in Horsemen‘s I. By applying the private nondelegation doctrine to the Authority, they argue we necessarily determined the Authority is not governmental for constitutional purposes. The district court took this view
That said, however, we cannot agree that we decided this question in Horsemen‘s I. The Appointments Clause question was never posed. Party presentation is a fundamental constraint on appellate decision-making. See United States v. Sineneng-Smith, 590 U.S. 371, 375-76 (2020) (“Courts . . . wait for cases to come to them, and when cases arise, courts normally decide only questions presented by the parties.” (cleaned up) (citation omitted)). The fact is that in Horsemen‘s I, all parties proceeded on the assumption that the Authority is private for constitutional purposes. See Horsemen‘s I, 53 F.4th at 875 n.11 (“The Horsemen also claimed HISA was unconstitutional under the . . . Appointments Clause. The district court did not rule on those claims and so they are not before us.“). No one suggested that the Authority might qualify as a government entity or that its directors were subject to the Appointments Clause. So, because we did not settle the question previously, we can address it now. See Companion Prop. & Cas. Ins. v. Palermo, 723 F.3d 557, 561 (5th Cir. 2013) (“Appellate powers are limited to reviewing issues raised in, and decided by, the district court.” (cleaned up) (citation omitted)); Alpha/Omega Ins. Servs. v. Prudential Ins. of Am., 272 F.3d 276, 281 (5th Cir. 2001) (“[T]he law of the case doctrine only applies to issues we actually decided[.]“).
The basic premise of Gulf Coast‘s argument is that the Authority is part of the federal government for Appointments Clause purposes. See Amtrak II, 575 U.S. at 50-51. We of course recognize that HISA calls the Authority private, as does the Authority‘s own charter. See
The analysis guiding that inquiry comes from Lebron. In that case, the Supreme Court examined “the long history of corporations created and participated in by the United States for the achievement of governmental objectives.” Id. at 386.23 The specific question before the Court was whether “Amtrak, though nominally a private corporation, must be regarded as a Government entity for First Amendment purposes.” Id. at 383. The answer was yes. That was so, the Court held, because “the Government create[d] [the Amtrak] corporation by special law, for the furtherance of governmental
First, the Authority was not created by the federal government “by special law,” ibid., but was incorporated under Delaware law shortly before HISA‘s passage. Contrast this with Amtrak, which “Congress established” by enacting the Rail Passenger Service Act of 1970. Id. at 383-84; see also Nat‘l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 454 (1985) (observing “Congress established the National Railroad Passenger Corporation, a private, for-profit corporation thаt has come to be known as Amtrak“).
Second, the Authority was not created to further “governmental objectives,” Lebron, 513 U.S. at 399, but instead as a private association to address doping, medication, and safety issues in the thoroughbred racing
Third, the federal government does not “control[] the operation of the [Authority],” nor has it “retain[ed] for itself permanent authority to appoint a majority of the [Authority‘s] directors.” Ibid. To the contrary, the government has no role in appointing the Authority‘s Board. Once again, contrast this with Amtrak—where a majority of its directors was appointed by the President. Id. at 397-98; see also Amtrak II, 575 U.S. at 51 (observing that seven of nine Amtrak board members “are appointed by the President and confirmed by the Senate“); cf. Free Enter. Fund, 561 U.S. at 484, 484-85 (noting the PCAOB—despite being statutorily deemed “private“—is a “Government-created, Government-appointed entity,” whose five members are “appointed . . . by the [SEC]“).
Instead of engaging with Lebron, Gulf Coast argues that Lebron‘s analysis is not “the only way” to tell whether a corporation is a government instrumentality. That takes too narrow a view of precedent, however. Lebron canvassed “the long history of corporations created and participated in by the United States” and set out a detailed analysis to determine whether a particular corporation—despite its designation as “private“—counts as a government instrument for constitutional purposes. See 513 U.S. at 386, 386-91. That is precisely the question we must answer with respect to the Authority. How can we, as an inferior court, simply bypass Lebron? We cannot.
Gulf Coast tries to offer us a way around Lebron, but it is a dead end. Gulf Coast argues that Lebron addressed only government-created corporations “that in no way exercised government power.” But Lebron did not limit itself in that way—to the contrary, it relied on cases where Congress
Gulf Coast also argues that, to determine whether directors of a private entity are “Officers of the United States,” we should focus on their duration in office and the nature of the entity‘s power. We disagree. The two principal cases Gulf Coast relies on for this argument addressed whether individuals already part of the government should be considered “Officers.” So, Buckley examined whether Federal Election Commission appointees wielded “significant authority pursuant to the laws of the United States.” 424 U.S. at 126. And Lucia v. SEC, 585 U.S. 237, 244-45 (2018) applied this same test to SEC ALJs. Gulf Coast urges us to extend Buckley and Lucia well beyond their facts to analyze whether persons in a private entity are “Officers.” Even if we were inclined to take that step, however, Lebron would remain an insuperable hurdle. As explained, Lebron addressed when a private entity qualifies as part of the government for constitutional purposes.
Finally, Gulf Coast argues that if Lebron is the test, then the federal government can simply vest all executive power in a private corporation and avoid the Appointments Clause. This argument ignores the role of the private nondelegation doctrine. The government cannot delegate core governmental powers to unsupervised private parties. Pittston, 368 F.3d at 394. A private entity can only act “subordinately to an agency with authority and surveillance over it.” Horsemen‘s I, 53 F.4th at 881 (quotations omitted). The private nondelegation doctrine thus corrals any attempts to evade Lebron by giving unaccountablе governmental power to a pre-existing private entity.
In sum, Lebron is the governing test to determine whether an entity is private or public and, under that test, the Authority is a private entity not subject to Article II‘s Appointments Clause.
E. Anti-Commandeering Challenge
Finally, we turn to Gulf Coast‘s argument that HISA unconstitutionally commandeers state officials. The Constitution forbids Congress from “command[ing] the States’ officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.” Printz v. United States, 521 U.S. 898, 935 (1997); see also New York v. United States, 505 U.S. 144, 165, 188 (1992). Gulf Coast argues HISA violates that principle by coercing state racing commissions to remit fees to fund the Authority‘s operations. If state officials refuse, the Authority collects fees directly from covered persons—but, in that event, HISA prohibits the state from imposing taxes or fees to finance the state‘s own horseracing programs. See
The problem with this claim, as the district court pointed out, is that Gulf Coast lacks standing to raise it. Specifically, Gulf Coast‘s alleged injury—that it prefers Texas‘s racetrack safety rules to HISA‘s—is “no injury at all.” Black, 672 F. Supp. 3d at 250. As the district court correctly reasoned, “[a] party cannot establish constitutional injury by suggesting that he may be subject to rules he does not prefer.” Ibid.; see also, e.g., Consumers’ Rsch. v. Consumer Prod. Safety Comm‘n, 91 F.4th 342, 350 (5th Cir. 2024) (holding that “merely being subject to . . . regulations, in the abstract, does not create an injury“).
On appeal, Gulf Coast fails to explain how the district court erred. It merely argues that the coercive pressure the funding scheme allegedly places on Texas will lead it to implement HISA‘s rules rather than the current Texas regulations, which makes Gulf Coast subject to “a new set of unwanted (federal) regulations.” Again, though, this does not explain why Gulf Coast experiences an injury sufficient to assert an anti-commandeering challenge to HISA.
IV. CONCLUSION
In sum, we affirm the district court‘s judgment that (1) Congress‘s recent amendment to HISA cured the private nondelegation flaw in the
We reverse the district court‘s judgment in one respect. Insofar as HISA is enforced by private entities that are not subordinate to the FTC, we DECLARE that HISA violates the private nondelegation doctrine.
Accordingly, the district court‘s judgment is AFFIRMED in part and REVERSED in part.