STATE OF OKLAHOMA; OKLAHOMA HORSE RACING COMMISSION; TULSA COUNTY PUBLIC FACILITIES AUTHORITY, dba Fair Meadows Racing and Sports Bar; STATE OF WEST VIRGINIA; WEST VIRGINIA RACING COMMISSION; HANOVER SHOE FARMS, INC.; OKLAHOMA QUARTER HORSE RACING ASSOCIATION; GLOBAL GAMING RP, LLC, dba Remington Park; WILL ROGERS DOWNS, LLC; UNITED STATES TROTTING ASSOCIATION; STATE OF LOUISIANA v. UNITED STATES OF AMERICA; HORSERACING INTEGRITY AND SAFETY AUTHORITY, INC.; LEONARD S. COLEMAN, JR.; NANCY M. COX; FEDERAL TRADE COMMISSION; REBECCA KELLY SLAUGHTER, in her official capacity as Acting Chair of the Federal Trade Commission; NOAH JOSHUA PHILLIPS, in his official capacity as Commissioner of the Federal Trade Commission; ALVARO BEDOYA, in his official capacity as Commissioner of the Federal Trade Commission; CHRISTINE S. WILSON, in her official capacity as Commissioner of the Federal Trade Commission; STEVE BESHEAR; ADOLPHO A. BIRCH, JR.; ELLEN MCCLAIN; CHARLES P. SCHEELER; JOSEPH DEFRANCIS; SUSAN STOVER; BILL THOMASON; D.G. VAN CLIEF; LINA KHAN
No. 22-5487
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
March 3, 2023
RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b). File Name: 23a0035p.06. Argued: December 7, 2022. Before: SUTTON, Chief Judge; COLE and GRIFFIN, Circuit Judges.
Appeal from the United States District Court for the Eastern District of Kentucky at Lexington. No. 5:21-cv-00104—Joseph M. Hood, District Judge.
COUNSEL
ARGUED: Matthew D. McGill, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C., for Appellants. Courtney L. Dixon, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Federal Appellees. Pratik A. Shah, AKIN GUMP STRAUSS HAUER & FELD LLP, Washington, D.C., for Horseracing Authority Appellees. ON BRIEF: Matthew D. McGill, Lochlan F. Shelfer, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C., Zach West, Bryan Cleveland, OFFICE OF THE OKLAHOMA ATTORNEY GENERAL, Oklahoma City, Oklahoma, Lindsay S. See, OFFICE OF THE WEST VIRGINIA ATTORNEY GENERAL, Charleston, West Virginia, Joseph Bocock, BOCOCK LAW PLLC, Oklahoma City, Oklahoma, Todd Hembree, CHEROKEE NATION BUSINESS, Catoosa, Oklahoma, Elizabeth B. Murrill, LOUISIANA DEPARTMENT OF JUSTICE, Baton Rouge, Louisiana, Michael Burrage, WHITTEN BURRAGE, Oklahoma City, Oklahoma, Jared C. Easterling, GREEN LAW FIRM PC, Ada, Oklahoma, for Appellants. Courtney L. Dixon, Joseph F. Busa, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Federal Appellees. Pratik A. Shah, Lide E. Paterno, AKIN GUMP STRAUSS HAUER & FELD LLP, Washington, D.C., John C. Roach, RANSDELL ROACH
SUTTON, C.J., delivered the opinion of the court in which GRIFFIN and COLE, JJ., joined. COLE, J. (pp. 20–31), delivered a separate concurring opinion.
OPINION
SUTTON, Chief Judge. Sometimes government works. In 2020, when Congress enacted the Horseracing Safety and Integrity Act to create a national framework to regulate thoroughbred horseracing, it generated several non-delegation and anti-commandeering challenges to the validity of the Act. The lead challenge—the non-delegation challenge—turned on the reality that the Act replaced several state regulatory authorities with a private corporation, the Horseracing Authority, which became the Act‘s primary rule-maker and which was not subordinate to the relevant public agency, the Federal Trade Commission, in critical ways. The Fifth Circuit declared the Act unconstitutional because it gave “a private entity the last word” on federal law. Nat‘l Horsemen‘s Benevolent & Protective Ass‘n v. Black, 53 F.4th 869, 872, 888–89 (5th Cir. 2022).
In response, Congress amended the Act to give the Federal Trade Commission discretion to “abrogate, add to, and modify” any rules that bind the industry. Consolidated Appropriations Act of 2023, Pub. L. No. 117-328, 136 Stat. 4459 (2022). The Constitution anticipates, though it does not require, constructive exchanges between Congress and the federal courts. See Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring) (explaining that “interdependence” and “reciprocity” should characterize the relationship between the branches as much as “separateness” and “autonomy“). A productive dialogue occurred in this instance, and it ameliorated the concerns underlying the non-delegation challenge. As amended, the Horseracing Act gives the FTC the final say over implementation of the Act relative to the Horseracing Authority, allowing us to uphold the Act as constitutional in the face of this non-delegation challenge as well as the anti-commandeering challenge.
I.
Unlike other sports, no one authority traditionally has regulated horseracing. Instead, 38 state regulatory schemes have supplied an array of protocols and safety requirements. Kjirsten Lee, Transgressing Trainers and Enhanced Equines, 11 J. Animal & Nat. Res. L. 23, 26 (2015). Most Americans know horseracing through occasional high-visibility races, say the Kentucky Derby on the first Saturday of May, or high-visibility books, say Seabiscuit. But as the partly and fully initiated alike can appreciate, the sport comes with risk. Racing a dozen or more jockeys atop large horses around a mile or more track, all with prize money and gambling positions at stake, creates plenty of danger. Over the last seventy years or so, fatal accidents for jockeys during horseraces have exceeded that of drivers in NASCAR races. Peta L. Hitchens et al., Jockey Falls, Injuries, and Fatalities Associated with Thoroughbred and Quarter Horse Racing in California
Whether it‘s the risk of pushing horses past their limits or the risks associated with unsafe tracks and doping, or other health and safety issues facing horses and jockeys, no one doubts the imperative for oversight. The question, as is so often the case, is whether the regulation should be national or local.
In 2020, Congress answered national but did so in conventional and unconventional ways. Conventionally, it enacted the Horseracing Integrity and Safety Act to nationalize regulatory authority over thoroughbred racing.
The Act charges the Horseracing Authority with “developing and implementing a horseracing anti-doping and medication control program and a racetrack safety program.”
The Horseracing Authority funds its operations through fees on the horseracing industry. Each year, it calculates its budget and apportions amounts owed by each State.
The Act empowers the Horseracing Authority to promulgate rules on a variety of subjects: prohibited medications, laboratory protocols and accreditation, racetrack standards and protocols, injury analysis, enforcement, and fee assessments.
The Horseracing Authority implements the rules, monitors compliance, and investigates potential rule infractions.
Under the Horseracing Act as originally passed, the Federal Trade Commission played a limited role. The FTC published the Authority‘s proposed rules for public comment.
After the Fifth Circuit issued its decision and after we heard oral argument in our case, Congress enacted, and the President signed into law, an amendment to the Act that increased the FTC‘s oversight role. The amendment eliminated the FTC‘s interim-rule authority and instead gave sweeping power to the FTC to create rules that “abrogate, add to, and modify the rules of the Authority.”
II.
Mootness. First things first: Does the amendment to the Act transform this live controversy into a moot one? When Congress amends a statute, it is true, pending claims challenging the law sometimes become moot. See City of Pontiac Retired Emps. Ass‘n v. Schimmel, 751 F.3d 427, 430 (6th Cir. 2014) (en banc) (per curiam). Not invariably, however. If the revised statute continues to place a non-trivial burden on the plaintiff that arises from the same theory of unconstitutionality set forth in the complaint, the case remains live. Kenjoh Outdoor, LLC v. Marchbanks, 23 F.4th 686, 692–93 (6th Cir. 2022). A similar conclusion applies if the amendment does not affect other features of the challenge. Both exceptions apply here.
The amendment to
Remand. One other preliminary point remains. If the legislature changes a law while a live challenge to it remains on appeal, appellate courts may remand the case for the district court to take the first look at the revised law. Hadix v. Johnson, 144 F.3d 925, 934 (6th Cir. 1998), abrogated on other grounds, 530 U.S. 327 (2000). The option is discretionary, not mandatory. In this instance, we see “little to be gained” from a remand because Oklahoma brings facial challenges that raise only legal issues and because the parties and panel have already devoted considerable time and resources to the dispute. Id. at 935; see Phelps-Roper v. Troutman, 712 F.3d 412, 417 (8th Cir. 2013) (per curiam). Fortifying this conclusion is the reality that
III.
A.
Non-delegation. Through the United States Constitution, the People separated the powers of the National Government into three branches. They vested the legislative power in Congress, the executive in the President, and the judicial in the federal courts.
What about delegations to private entities? Surely, if the Vesting Clauses bar the three branches from exchanging powers among themselves, those Clauses bar unchecked reassignments of power to a non-federal entity. Just as it is a central tenet of liberty that the government may not permit a private person to take property from another private person, Calder v. Bull, 3 U.S. (3 Dall.) 386, 388–89 (1798) (Chase, J.), or allow private individuals to regulate other private individuals, Washington ex rel. Seattle Title Tr. Co. v. Roberge, 278 U.S. 116, 122 (1928), it follows that the government may not empower a private entity to exercise unchecked legislative or executive power. Those who govern the People must be accountable to the People. Completely transferring unchecked federal power to a private entity that is not elected, nominated, removable, or impeachable undercuts representative government at every turn.
Precedent confirms that unchecked delegations to private entities at a minimum violate core separation-of-power guarantees. Consider A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). A federal statute gave the President discretion to create codes of fair competition based on proposals from private entities. Id. at 542. Rejecting the government‘s view that private participation cured any surplus delegation to the President, the Court explained that transforming private groups into legislatures was “utterly inconsistent” with the constitutional design. Id. at 537.
The Court applied the same standard to the Bituminous Coal Act. In Carter v. Carter Coal Co., the Court concluded that, by empowering coal producers to set wages and to control the businesses of others, the Act amounted to a “delegation in its most obnoxious form” because such regulation “is necessarily a governmental function.” 298 U.S. 238, 310–11 (1936). Appreciating the problem, Congress amended the Act the next year to give the Coal Commission, a government entity, the power to set prices. See Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388 (1940). After Congress subordinated the private coal producers to a public body (the Coal Commission) that could modify or reject their proposals, the Court determined that the statute did not impermissibly delegate “legislative authority to the industry.” Id. at 399.
Taken together, these cases draw a line between impermissible delegation of unchecked lawmaking power to private entities and permissible participation by private entities in developing government standards and rules. Adkins shows that a private entity may aid a public federal entity that retains authority over the implementation
Decisions from the courts of appeals hold this line. Private entities may serve as advisors that propose regulations. See Sierra Club v. Lynn, 502 F.2d 43, 59 (5th Cir. 1974); Cospito v. Heckler, 742 F.2d 72, 87–89 (3d Cir. 1984); Todd & Co. v. SEC, 557 F.2d 1008, 1012–13 (3d Cir. 1977). And they may undertake ministerial functions, such as fee collection. See Pittston Co. v. United States, 368 F.3d 385, 395–97 (4th Cir. 2004); United States v. Frame, 885 F.2d 1119, 1128–29 (3d Cir. 1989), abrogated on other grounds, 521 U.S. 457 (1997). But a private entity may not be the principal decisionmaker in the use of federal power, Pittston Co., 368 F.3d at 395–97, may not create federal law, Texas v. Rettig, 987 F.3d 518, 533 (5th Cir. 2021), may not wield equal power with a federal agency, Ass‘n of Am. R.R. v. U.S. Dep‘t of Transp. (Amtrak I), 721 F.3d 666, 671–73 (D.C. Cir. 2013), vacated on other grounds, 575 U.S. 43 (2015), or regulate unilaterally, Black, 53 F.4th at 872.
An illuminating example comes from securities law. The Securities and Exchange Commission regulates the securities industry with the assistance of private, self-regulatory organizations called SROs. The SROs propose rules for the industry, and they initially enforce the rules through internal adjudication. The SEC oversees both the rulemaking and the enforcement. As to the rules, the SEC approves proposed rules if they are consistent with the Maloney Act, and may “abrogate, add to, and delete from” an SRO‘s rules “as the Commission deems necessary or appropriate.”
These sources all suggest that, at a minimum, a private entity must be subordinate to a federal actor in order to withstand a non-delegation challenge. Whether subordination always suffices to withstand a challenge raises complex separation of powers questions. Simplifying matters for today, if not for a future day, the parties accept this framing of the appeal. As the case comes to us, then, the determinative question is whether the Horseracing Authority is inferior to the FTC.
B.
The Horseracing Authority is subordinate to the agency. The Authority wields materially different power from the FTC, yields to FTC supervision, and lacks the final say over the content and enforcement of the law—all tried and true hallmarks of an inferior body.
Rulemaking. As amended, the Horseracing Act gives the FTC supervision over the rules that govern the horseracing industry. At the outset, the Horseracing Authority
Section 3053(e)‘s amended text grants the FTC a comprehensive oversight role. The Act provides that the FTC may act as it “finds necessary or appropriate to ensure the fair administration of the Authority, to conform the rules of the Authority to requirements of this Act and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of this Act.”
A comparison with § 3053(e)‘s pre-amendment language reenforces the point. Before the amendment,
With § 3053(e)‘s broad power to write and rewrite the rules comes policymaking discretion. See Cospito, 742 F.2d at 88–89. When the FTC decides to act—whether by abrogating one of the Horseracing Authority‘s rules or introducing its own—the FTC makes a policy choice and necessarily scrutinizes the Authority‘s policies. That is no less true when the FTC decides not to act. In either setting, the FTC may “unilaterally change regulations,” Amtrak I, 721 F.3d at 671, and “is free to prescribe” the rules, showing that it “retains ultimate authority,” Cospito, 742 F.2d at 88. In a recent rule, the FTC recognized as much, explaining that its new “rulemaking power” allows it to “exercise its own policy choices.” Order Ratifying Previous Commission Orders 3, Fed. Trade Comm‘n (Jan. 3, 2023), https://tinyurl.com/dkenwspt.
In full, § 3053(e)‘s amended text gives the FTC ultimate discretion over the content of the rules that govern the horseracing industry and the Horseracing Authority‘s implementation of those rules. By the same token, ultimate “law-making is not entrusted to the [Authority].” Adkins, 310 U.S. at 399; see Frame, 885 F.2d at 1129. That makes the FTC the primary rule-maker, and leaves the Authority as the secondary, the inferior, the subordinate one. See Adkins, 310 U.S. at 388.
Accountability considerations lead to the same destination. Before the amendment, the Fifth Circuit determined that the FTC could not question the Horseracing Authority‘s policy choices or modify its rules. Black, 53 F.4th at 886–87. It followed that the Authority, a private entity beyond public control, alone was responsible for the exercise of government power in this area.
Enforcement. A similar conclusion applies to enforcement of the Act. The Horseracing Authority‘s enforcement duties are extensive, granted. The Authority implements the Act, investigates potential rule violations, and enforces the rules through internal adjudications and external civil lawsuits. Even so, the FTC‘s rulemaking and rule revision power gives it “pervasive” oversight and control of the Authority‘s enforcement activities, just as it does in the rulemaking context. Adkins, 310 U.S. at 388.
Take an example to illustrate the point. Imagine that the Horseracing Authority began enforcing its rule without giving thought to the procedural rights of jockeys, trainers, and other industry participants. Section 3053(e) gives the FTC the tools to step in. To ensure a fair enforcement process, the FTC could issue rules protecting covered persons from overbroad subpoenas or onerous searches. The FTC could require that the Authority provide a suspect with a full adversary proceeding and with free counsel. And the FTC could require that the Authority meet a burden of production before bringing a lawsuit or preclear the decision with the FTC. In these ways as well as others, the FTC may control the Authority‘s enforcement activities and ensure that the FTC, not the Authority, ultimately decides how the Act is enforced.
Topping this oversight off, the FTC has full authority to review the Horseracing Authority‘s enforcement actions.
Whether the FTC becomes a demanding taskmaster or a lenient one, the FTC could subordinate every aspect of the Authority‘s enforcement “to ensure the fair administration of the Authority... or otherwise in furtherance of the purposes of [the] Act.”
C.
In seeking to head off this conclusion, Oklahoma points out that the amendment does not change one feature of the Act—that the FTC has power only to review proposed rules by the Authority for “consistency” with the Act, a standard of review that, it says, does not pick up policy disagreements.
Before the amendment, Oklahoma observed that the SEC‘s modification power gives the SEC “largely unbounded authority to craft [the private entity‘s] regulations as it sees fit.” Reply Br. 7. The same is now true under the Horseracing Act. The lack of a modification power, moreover, was the “key distinction” the Fifth Circuit identified between the Maloney and Horseracing Acts. Black, 53 F.4th at 887. The amendment to
Oklahoma worries that the Horseracing Authority‘s rules could govern a dispute until the FTC undoes rules it dislikes. It‘s true that the FTC‘s modification authority under
This argument overlooks another reality. When the FTC reviews the Horseracing Authority‘s proposed rules, it asks not just whether they are “consistent” with the Act; it also asks whether they are “consistent” with other “applicable rules approved by the Commission.”
Oklahoma notes that the FTC‘s duty under the Administrative Procedure Act to explain any changes to the rules limits its hand. But that just means it may not arbitrarily alter the rules. The APA does not limit the FTC‘s authority to disagree with the Horseracing Authority over a policy choice delegated to the agency by Congress. The FTC “need not demonstrate to a court‘s satisfaction that the reasons for the new policy are better than the reasons for the old.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). It is enough that “there are good reasons” for the new policy “and that the agency believes it to be better.” Id.
No matter, Oklahoma adds: The Horseracing Authority‘s ability to expand its jurisdiction to breeds other than thoroughbreds escapes the FTC‘s review. Not so. The FTC‘s § 3053(e) power allows it to revoke the Authority‘s decision or place
Oklahoma points to the Horseracing Authority‘s ability to enforce the Act through civil lawsuits, asserting that the ability cannot reside outside the executive branch. “Difficult and fundamental questions,” we agree, arise when private entities enforce federal law. Friends of the Earth, Inc. v. Laidlaw Env‘t Servs. (TOC), Inc., 528 U.S. 167, 197 (2000) (Kennedy, J., concurring). But this is not an as-applied challenge to an individual enforcement action; it is a facial challenge to the Act. The FTC‘s ultimate authority over all rules promulgated under the Act, which would include any rules related to enforcement, offers a potent answer to this concern in the context of a facial challenge. The Authority‘s enforcement through internal adjudication and external lawsuits is subordinate to the FTC. The other reality is that the parties simply have not engaged with this feature of the Act, including briefing with respect to founding-era or contemporary analogs showing the role private entities may, and may not, play in law enforcement. That omission is understandable. From the start, Oklahoma litigated this claim as one turning on “governmental oversight” of and “accountability” for the Horseracing Authority‘s activities, not as a categorical Article II inquiry or as a question of historical meaning. R.53 ¶ 150; R.98 at 23–24. We thus will decide the case as it comes to us, and save resolution of such questions, if such questions there be, for a day when the Authority‘s actions and the FTC‘s oversight appear in concrete detail, presumably in the context of an actual enforcement action.
IV.
Oklahoma separately claims that two provisions of the Horseracing Act,
A.
Oklahoma initially sets its sights on
Standing arises from the Constitution‘s mandate that federal courts decide only “Cases” or “Controversies.”
Oklahoma has not carried this burden. Even if Oklahoma is correct that
Oklahoma asserts in response that wrongdoing will “frequently” implicate both federal and state law, and thus trigger the duty to cooperate. R.86 at 10. But the question is not how often the opportunity for cooperation may arise; it is whether the defendants can or will mandate cooperation when that time comes. Even so, Oklahoma notes, the Horseracing Authority may penalize States that refuse to cooperate. But the Authority‘s sanction power extends only to covered persons, a term that does not include States.
Absent a credible allegation that the Horseracing Authority or the FTC can or will enforce
B.
Oklahoma separately claims that
Congress may not require the States, separate sovereigns all, to implement federal programs. Printz v. United States, 521 U.S. 898, 925 (1997). Nor may the federal government issue “orders directly to the States” to carry out this or that federal program. Murphy v. NCAA, 138 S. Ct. 1461, 1475 (2018). At the same time, Congress may “encourage a State to regulate” or “hold out incentives” in hopes of “influencing a State‘s policy choices.” New York v. United States, 505 U.S. 144, 166 (1992).
One option in this last respect is that Congress may encourage the States through conditional preemption. Hodel v. Va. Surface Mining & Reclamation Ass‘n, Inc., 452 U.S. 264, 290 (1981). Instead of preempting state law altogether, Congress may offer States a regulatory role contingent on following federal standards. New York, 505 U.S. at 167–68. The choice brings consequences. If a State participates, it often has discretion in how it implements the program. See Hodel, 452 U.S. at 289. If a State decides not to participate, the State‘s activities are preempted. By offering States such a non-coercive choice—regulate or be preempted— Congress has not violated any constitutional imperatives. Murphy, 138 S. Ct. at 1479; New York, 505 U.S. at 167; Hodel, 452 U.S. at 288–91; FERC v. Mississippi, 456 U.S. 742, 769 (1982).
That‘s how
Section 3052(f) also lacks the hallmark of commandeering: a “direct” order to the States. Murphy, 138 S. Ct. at 1476. Section 3052(f)‘s statement that a State “shall not impose or collect” certain fees may sound like a command, true enough.
All of this is not to say “that the choice put to the States—that of either abandoning regulation” or assisting the Authority—is an easy one or a good one as a matter of policy. FERC, 456 U.S. at 766. Fraught though it may be, Congress has not commandeered the States by putting them to this choice.
Oklahoma‘s principal counterargument is that a choice between collecting fees and losing fee collecting authority is illegitimate, coercive, or punitive. We don‘t think so.
Oklahoma begins by arguing that § 3052(f)‘s choice—collect fees for the Horseracing Authority or stop collecting entirely—commandeers the States because Congress may not force the States to adopt either alternative. See New York, 505 U.S. at 175–76. Congress may not force a State to collect fees, true. Printz, 521 U.S. at 933. But Congress may use its commerce power to preempt the field of horseracing, preventing States from imposing fees. See FERC, 456 U.S. at 764; Gonzales v. Raich, 545 U.S. 1, 22 (2005). Threatening to do so, it follows, is a “conditional exercise of [a] congressional power.” New York, 505 U.S. at 176.
Oklahoma‘s response that a “threat of preemption,” Reply Br. 25, is coercive runs aground on contrary precedent. The Court has rejected the argument “that the threat of federal usurpation of their regulatory roles coerces the States.” Hodel, 452 U.S. at 289; New York, 505 U.S. at 176.
Even so, Oklahoma continues, threatening a State‘s taxing authority is especially coercive. We fail to see how. The validity of conditional preemption does not fluctuate with the power that is threatened. See Hodel, 452 U.S. at 290–91. This would not be the first time a State‘s taxing power was preempted. See Aloha Airlines, Inc. v. Dir. of Tax‘n, 464 U.S. 7, 14 n.10 (1983); Exxon Corp. v. Hunt, 475 U.S. 355, 360–63 (1986).
Oklahoma presses the point that Congress‘s financial incentives may become so overwhelming that a State effectively cannot refuse. See South Dakota v. Dole, 483 U.S. 203, 211–12 (1987). Grafting this principle on conditional preemption raises legal and factual problems. Legally, it is bereft of support; no case evaluates conditional preemption by looking to a State‘s monetary incentives. Factually, Oklahoma falters because it does not quantify its expected loss. See NFIB v. Sebelius, 567 U.S. 519, 580–82 (2012) (opinion of Roberts, C.J.) (comparing an incentive to a State‘s budget). Without knowing how much money is at stake, how are we to say the sum is too high?
Oklahoma adds that the threat is punitive because it serves no purpose other than to obtain compliance. Conditional preemption, however, amounts to a “permissible method of encouraging a State to conform to federal policy.” New York, 505 U.S. at 168; see FERC, 456 U.S. at 766. And a State that sees itself as a sovereign sometimes must act like one. Another reason is not difficult to find anyway. The fee provisions ensure that a single entity—whether a State or the Authority—imposes fees on the horseracing industry for all anti-doping and racetrack safety matters. Eliminating “double taxation” and fostering uniformity are adequate grounds to preempt parallel collection regimes. Aloha Airlines, 464 U.S. at 9–10; see Coventry Health Care of Mo., Inc. v. Nevils, 581 U.S. 87, 97–99 (2017); Gade v. Nat‘l Solid Waste Mgmt. Ass‘n, 505 U.S. 88, 99 (1992) (plurality).
Oklahoma next argues that Congress failed to “appropriate the funds needed to administer the program” by forcing States to pay for collecting fees even if they refuse to act as the Authority‘s fee collector. Murphy, 138 S. Ct. at 1477. Not so. Private parties pay for the Authority‘s operations.
Oklahoma also worries that the scheme blurs accountability. Conditional preemption, however, leaves a State and its citizens with “the ultimate decision as to whether or not the State will comply.” New York, 505 U.S. at 168. The ability to choose ensures that state and federal entities are accountable for their roles. See id.
We affirm.
CONCURRENCE
COLE, Circuit Judge, concurring. While I agree with the majority‘s conclusions that the Act is facially constitutional, and its analysis in full in Part IV, I write separately because I depart slightly from its framing of the issue and its analysis of the private nondelegation doctrine.
I. ISSUE ON APPEAL
As a threshold matter, I note what is before us on appeal. In 2020, with wide bipartisan support, Congress passed, and then-President Trump signed into law, the Horseracing Integrity and Safety Act (“HISA” or “the Act“). Pub. L. No. 116-260, §§ 1201–12, 134 Stat. 1182, 3252–75 (2020) (codified at
The Commission, by rule, in accordance with section 553 of title 5, United States Code, may abrogate, add to, and modify the rules of the Authority promulgated in accordance with this Act 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 Act and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of this Act.
Today, our review is cabined to the statute as amended, withholding judgment on the previous version or other circuits’ handling of the original statute. To the extent that the cogent majority opinion goes further—opining in dicta that the original statute was unconstitutional—I note that not only does such analysis not carry the force of law, but also that
I disagree, as I believe the original statute was constitutional because the private Authority has always been subordinate to the FTC.
II. PRIVATE NONDELEGATION DOCTRINE
The nondelegation doctrines broadly refer to judicially imposed limits on Congress‘s ability to constitutionally delegate authority to others. Specifically, Congress cannot delegate its legislative authority to an executive agency unless the statute contains an “intelligible principle” guiding the agency. See Gundy v. United States, 139 S. Ct. 2116, 2123 (2019) (plurality opinion); see also Mistretta v. United States, 488 U.S. 361, 372 (1989). This is the public nondelegation doctrine. The private nondelegation doctrine refers to constitutional concerns that arise where a private entity—rather than a government entity—wields significant power to execute a statutory scheme. See Carter v. Carter Coal Co., 298 U.S. 238 (1936). Only the latter of these, private nondelegation, is at issue here.
I agree with the majority that the Act is constitutional under the private nondelegation doctrine, and also that the main test for this issue is whether the private entity is subordinate to the federal agency. But I write separately because I diverge from the majority‘s analysis in two ways: (1) the source of the private nondelegation doctrine, and (2) the precise framing of the private nondelegation question.
A. Source of Private Nondelegation Doctrine
The private nondelegation doctrine is rooted in both due process and separation of powers concerns. Indeed, the earliest invocations of the private nondelegation doctrine arose in the context of local regulations. See Washington ex rel. Seattle Title Tr. Co. v. Roberge, 278 U.S. 116, 121-22 (1928); Thomas Cusack Co. v. City of Chicago, 242 U.S. 526, 530 (1917); Eubank v. City of Richmond, 226 U.S. 137, 143-44 (1912). In these
The separation of powers concerns, meanwhile, stem from the Vesting Clauses, inasmuch as the Constitution vests each of the three branches of government with specific powers and responsibilities. Article I of the Constitution grants Congress legislative power, Article II grants the President executive power, and Article III grants the federal courts judicial power. “Accompanying that assignment of power to Congress is a bar on its further delegation.” Gundy, 139 S. Ct. at 2123; see Mistretta, 488 U.S. at 371 (“The nondelegation doctrine is rooted in the principle of separation of powers that underlies our tripartite system of Government.“). Therefore, when a statute confers “the power to regulate the affairs of an unwilling minority” onto a private entity, that “is legislative delegation in its most obnoxious form[.]” Carter Coal, 298 U.S. at 311. But when the private entity “operate[s] as an aid to the [agency]” and is “subject to [the agency‘s] pervasive surveillance and authority, . . . law-making is not entrusted to the [private entity]” and so such a “statutory scheme is unquestionably valid.” Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388, 399 (1940).
Notably, in its federal private nondelegation cases, the Supreme Court has blurred the lines between the two rationales, opting not to definitively root the private nondelegation doctrine in one or the other, and often referring to both. For instance, in Carter v. Carter Coal Co., the first case applying the private nondelegation doctrine to a federal statute, the Court ruled that a portion of the Bituminous Coal Conservation Act of 1935 was unconstitutional under the private nondelegation doctrine. 298 U.S. at 311. In invalidating the statute, the Court found the delegation at issue “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.” Id. at 311-12 (first citing Schechter Poultry Corp. v. United States, 295 U.S. 495, 537 (1935); then citing Eubank, 226 U.S. at 143; and then citing Roberge, 278 U.S. at 121-22).
In so holding, the Court cited two of the zoning cases premised on the due process concerns of the private nondelegation doctrine, and also Schechter Poultry, addressing the separation of powers argument. By doing so, the Court maintained the public versus private division as opposed to a rationale-based division and endorsed both of the rationales underpinning the private nondelegation doctrine. See Carter Coal, 298 U.S. at 311.
The Fifth Circuit, when it ruled recently on the original version of the Act, recognized this ambiguity. See Nat‘l Horsemen‘s Benevolent & Protective Ass‘n v. Black, 53 F.4th 869, 881 n.23 (5th Cir. 2022). “Courts and commentators,” it wrote, “differ over the locus of the constitutional violation.” Id. (citing several articles and cases). Compare U.S. Dep‘t of Transp. v. Ass‘n of Am. R.R.s, 575 U.S. 43, 46 (2014) (“This argument [regarding
Moreover, if we root the private nondelegation doctrine solely in separation of powers concerns, we circumvent our own court‘s private nondelegation doctrine cases—many of which focus on local regulations, not federal ones, and are grounded in due process rights, as opposed to separation of powers principles. See Rice, 30 F.4th at 589-91; Kiser v. Kamdar, 831 F.3d 784, 791-92 (6th Cir. 2016); Stevens v. City of Columbus, No. 21-3755, 2022 WL 2966396, at *9 (6th Cir. July 27, 2022).
Whatever the exact underpinning of the private nondelegation doctrine, what is clear is that the statute is constitutional if the Authority remains subordinate to the FTC. See Adkins, 310 U.S. at 388, 399 (holding a statute constitutional where the private entity is “an aid” to the agency and is “subject” to the agency‘s “pervasive surveillance and authority“); Carter Coal, 298 U.S. at 310-11 (invalidating a statute where private entities were granted the power to establish the maximum hours of labor without any governmental oversight or approval).
That is the beginning and end of the inquiry as to whether a statute is constitutional under the private nondelegation doctrine. The Supreme Court has never suggested that this is the minimum finding, or that subordination on its own may not suffice to withstand a challenge to a statute on private nondelegation grounds. And so the parties could not have framed the appeal in a different way, because the only private nondelegation test is that of subordination.
Now that the framing and source of the nondelegation doctrine is clear, I apply the existing precedent to HISA, finding that HISA as a whole is facially constitutional because the Authority is subordinate to the FTC in several ways.
B. HISA‘s Constitutionality
1. Rulemaking Authority
Oklahoma raises several concerns with the Act and its different components. I agree in full with the majority‘s discussion of section 3053(e)‘s amended text, and its conclusion that the amended text indicates that the Authority remains subordinate to the FTC. I diverge in that I find the rest of the Act to be nearly identical to the previously upheld Maloney Act and Coal Act. I also find that the amended text supports the Authority‘s subordination but does not alone ensure the Act‘s constitutionality.
A proposed rule or proposed modification to a rule cannot take effect unless approved by the Commission. The Commission is authorized to grant such approval if the proposed rule or modification of a rule is consistent with the requirements in this legislation and any applicable rules approved by the Commission. The Commission is granted the authority to prescribe rules and interim final rules to carry out their responsibilities under this section using the rulemaking process under the Administrative Procedure Act.
H.R. Rep. No. 116-554, at 25 (2020).
Like the private entities in the Maloney Act, known as self-regulatory organizations (“SROs“), and the private entity in Adkins, the Authority may only “propose[]” rules to the Commission.
This consistency review is no mere rubber stamp. The FTC, under the express terms of the Act, must review the Authority‘s proposed rules to ensure they are consistent with “the safety, welfare, and integrity of covered horses, covered persons, and covered horseraces[.]”
HISA is remarkably similar to the constitutional Maloney Act, and was so even when assessed irrespective of the amendment. The Maloney Act provides the following parameters regarding the SEC‘s approval of an SRO‘s rules. The SEC “shall approve“—meaning it must approve—a rule “if it finds that such proposed rule change is consistent with the requirements of this chapter and the rules and regulations issued under this chapter that are applicable to such organization.”
And neither agency‘s review of the respective private entity ends there. Each act also provides additional requirements for the consistency review of proposed rules in specific instances. In the Maloney Act, specifically relating to rules proposed by one specific subset of SROs, the SEC‘s consistency review includes that the rules be “designed[,] in general, to protect investors and the public interest[,]” as well as not be “designed to permit unfair discrimination . . . among participants[.]”
In HISA, the Authority proposes rules or modifications to rules “relating to” eleven buckets of issues that it then “submits” to the FTC.
Both HISA and the Maloney Act therefore provide for similarly broad consistency review, with additional requirements for specific subsets of rules, such that consistency review on its own can ensure that a private authority remains subordinate to a federal agency.
HISA also matches the aforementioned Coal Act‘s constitutional agency review of private entities’ proposed rules. The statute, which the Supreme Court upheld as “unquestionably valid,” Adkins, 310 U.S. at 399, granted the Coal Commission the power to “approve, disapprove, or modify” the private coal boards’ “proposed minimum prices to conform to the requirements of this subsection,” Bituminous Coal Act of 1937, § 4, pt. II(a), 50 Stat. 72, 78 (emphasis added). Whether providing that the rule must be consistent with a statute, which both the Maloney Act and HISA require, or that the rule must conform to the requirements of a statute, as the Bituminous Coal Act requires, all three statutes properly and constitutionally subordinate the private entity to the federal agency.
And all three statutes provide the agency with independent rulemaking power.
Further still, the Maloney Act provides a separate set of requirements for the SEC to approve an SRO‘s new rule or rule change. See
The Coal Act also provided the Coal Commission limited modification power. Much like the review described in the Maloney Act, the Coal Commission‘s power to modify rules was not all-encompassing: it could only be done to conform the proposal to the requirements of the statute. § 4, 50 Stat. at 78. The importance of this power is that the Coal Commission could ensure that proposed rules that did not align with, or were inconsistent with, the statute‘s purpose did not become promulgated rules with the power of law.
Both before and after the amendment, the FTC has had, and continues to have, independent rulemaking power. Prior to the amendment, section 3053(e) provided that the FTC could issue an interim final rule, which carries the power of law, under the standards articulated in the Administrative Procedures Act,
One final note about the private nondelegation doctrine and the cases that have formulated the subordination test. I have noted the numerous ways in which HISA—both with and without the amendment—is nearly identical to the unquestionably constitutional Maloney Act. But even if there are slight differences between the two statutes, no case has ever said that the Maloney Act in its current form is a floor for private nondelegation purposes. In other words, it is not true that a statute must be identical to the Maloney Act, or provide more oversight than the SEC, to be a constitutional delegation. The private entity simply must be subordinate to the agency. The Authority is subordinate to the FTC, and so HISA remains facially constitutional.
2. Enforcement Authority
Oklahoma also challenges HISA‘s enforcement structure. The Supreme Court has not ruled on this precise issue, but other circuit courts have relied upon Supreme Court precedent to do so in a way that supports the enforcement structure‘s constitutionality. Courts’ review of the Maloney Act is once again instructive. All circuits that have ruled on the issue have held that the Maloney Act‘s enforcement scheme is constitutional where, as here, a private entity (the National Association of Securities Dealers (“NASD“)) brought enforcement actions against covered entities. See, e.g., Sorrell v. SEC, 679 F.2d 1323 (9th Cir. 1982); First Jersey Sec., Inc. v. Bergen, 605 F.2d 690 (3d Cir. 1979), cert. denied, 444 U.S. 1074 (1980); R.H. Johnson & Co. v. SEC, 198 F.2d 690 (2d Cir. 1952), cert. denied, 344 U.S. 855 (1952).
The Second Circuit held that because of “the [SEC‘s] review of any disciplinary action” taken by the NASD, there is “no merit in the contention that the Act unconstitutionally delegates power to the association.” R.H. Johnson & Co., 198 F.2d at 695. The Ninth Circuit, citing to Second and Third Circuit decisions upholding the constitutionality of NASD‘s enforcement powers, noted that “[petitioner‘s] claim of unconstitutional delegation appears to rest on his mistaken idea that the SEC does not engage in an independent review of NASD decisions. As we stated in Sartain v. SEC, 601 F.2d 1366, 1371 n.2 (9th Cir. 1979), SEC review is de novo.” Sorrell, 679 F.2d at 1326 n.2. The unanimous principle from the circuit decisions—which the Supreme Court has not disturbed despite repeated opportunities to do so—is that so long as the agency retains de novo review of a private entity‘s enforcement proceedings, there is no unconstitutional delegation of legislative or executive power, even if the agency does not review the private entity‘s initial decision to bring an enforcement action. The consistency of this principle reinforces the constitutionality of HISA‘s enforcement scheme.
We need not now decide whether this statutory change effects a significant alteration in the SEC‘s power to review NASD disciplinary proceedings. It suffices to say that to the extent the amendment restricts the SEC‘s ability to receive additional evidence not presented below, this does not alter our conclusion in Todd [Todd & Co., Inc. v. SEC, 557 F.2d 1008 (3d Cir. 1977)] that there is no unconstitutional delegation of legislative authority.
Bergen, 605 F.2d at 697. HISA, unlike the Maloney Act, unambiguously empowers the FTC to obtain additional evidence not in the record below and to review the proceeding de novo. See
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Although the majority and I take different paths in our analysis, I fully agree that HISA is constitutional under Supreme Court precedent as well as the majority of federal court caselaw.