Tag: deference

Net Neutrality Repeal Upheld (DC Circuit)

On 1 October 2019, the US Court of Appeals for DC Circuit ruled, in the case of Mozilla Corporation v Federal Communications CommissionNo. 18-1051 (2019), that the Trump Administration’s repeal of the so called Net Neutrality policy was lawful. However, the Court allowed States to set their own policies, therefore limiting the impact of the new regulations.

The case of Mozilla Corporation v Federal Communications CommissionNo. 18-1051 (2019) comes down to the classification of Internet services. The Telecommunications Act 1996 created two potential classifications for Internet: ‘telecommunications services’ under Title II or ‘information services’ under Title I. This distinction entails two completely different regulatory frameworks. Title II (‘telecommunications services’) entails common carrier status and triggers statutory restrictions and requirements, including making unlawful “any […] charge, practice,classification or regulation that is unjust or unreasonable” (§201(b)). On the other hand, Title I (‘information services’) does not require a common carriage status leaving the sector mostly unregulated (pp10-11). 

The Federal Communications Commission is empowered under the Telecommunications Act 1996 to classifying various services into the appropriate categories. Initially, in 1998, Internet delivered over phone lines was classified as a ‘telecommunications service’, but in 2002 it was reclassified under the Bush Administration as a ‘information service’ (along with a newly available wireless mode of delivery) which was upheld by the Supreme Court in National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967 (2005). In 2015, under the Obama Administration, Internet services were once again classified as a ‘telecommunication service’ which was upheld under the Chevron deference doctrine (Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)) by the US Court of Appeals for DC Circuit in United States Telecom Association v. Federal Communications Commission, DC Cir., No. 15-1063 (pp11-12).

In 2018, under the Trump Administration, the Federal Communications Commission issued an Order again reclassifying Internet access as an ‘information service’ under Title I of the Telecommunications Act of 1996. In the Order, the Commission undertook a cost-benefit analysis concluding that the benefits of a market-based approach under Title I outweighed benefits of heavy regulations under Title II (p12). The opponents of the Order sued in a federal District Court.

On appeal, in a highly technical judgment, the US Court of Appeals for DC Circuit upheld most of the Order as a reasonable interpretation of the Telecommunications Act 1996 under the Chevron deference doctrine (Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)). The Court found that the Federal Communications Commission had conducted a proper analysis of the impact of the order on investments (pp74-85), potential harm to consumers (pp85-93) as well as an honest overall cost-benefit analysis of the proposed reclassification (pp113-119) and had taken into account the reliance interest created since 2015 (pp100-104).

However, the Court found that the Federal Communications Commission had not considered all relevant factors: 

“…Aspects of the Commission’s decision are still arbitrary and capricious under the Administrative Procedure Act because of the Commission’s failure to address an important and statutorily mandated consideration—the impact of the 2018 Order on public safety—and the Commission’s inadequate consideration of the 2018 Order’s impact on pole-attachment regulation and the Lifeline Program” (pp73-74).

Furthermore, the US Court of Appeals for DC Circuit struck down the preemptive effect of the Order. The Order provided that “regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations,” and not by a patchwork that includes separate state and local requirements” (s194). To this effect, the Order “preempt[s] any state or local measures that would effectively impose rules or requirements that we have repealed or decided to refrain from imposing in this order or that would impose more stringent requirements for any aspect of broadband service that we address in this order” (s195). Consequently, the Order sought to invalidate State and local laws interfering with its objectives (pp121-122).

The US Court of Appeals for DC Circuit held that the Federal Communications Commission lacked any express or ancillary power to preempt State or local laws. The Court found that no Act of Congress conferred on the Commission such power. Furthermore, the Court rejected a list of alternatives sources of authority, including the doctrines of ‘impossibility exception’ (pp126-129), ‘federal policy of non-regulation’ (pp130-133) and ‘conflict preemption’ (pp135-144).

Overall, with the preemption part of the order struck down, the US Court of Appeals for DC Circuit upheld the core of the Order despite finding that the Federal Communications Commission had not properly considered the impact of the Order on public safety, pole-attachment regulation and the Lifeline Program. Consequently, the Order was partly remanded back to the Commission ‘without vacatur’ which means that the Commission will conduct a further analysis of the impugned parts of the Order while the Order itself remains in force.

The judgment of the US Court of Appeals for DC Circuit in Mozilla Corporation v Federal Communications CommissionNo. 18-1051 (2019) was fully supported by Judges Millett and Wilkins (both Obama-appointees) and partly supported by Senior Judge Williams (a Reagan-appointee). However, all three judges submitted separate opinions. Judges Millett and Wilkins submitted concurring opinions while Senior Judge Williams submitted a partly concurring and partly dissenting opinion. In this opinion, Senior Judge Williams argued that the order should be allowed to preempt State and local laws under the doctrine of ‘impossibility exception’ claiming that “the consequences of the Commission’s choice of Title I depend on its having authority to preempt” (pp1-5).

The ruling in Mozilla Corporation v Federal Communications CommissionNo. 18-1051 (2019) comes after a huge media storm preceding the repeal of the so called Net Neutrality policy by the Trump Administration. The pre-existing policy of Net Neutrality issued by the Obama Administration barred internet providers from slowing down, blocking or charging Internet companies to favor some websites over others. But the Trump Administration claimed that the policy created a disincentive for Internet services to invest in their networks (CBSNews). The repeal of Net Neutrality was part of the Trump Administration’s deregulation agenda. Ultimately, regardless of policy implications, the ruling of the US Court of Appeals for DC Circuit mostly vindicates the Trump Administration. However, at the same time, it leaves room for States to implement their own policies, somehow, inadvertently reinforcing the principle of federalism.

The End of Chevron Doctrine on the Horizon (SCOTUS)

The Chevron Doctrine is the key element of the modern administrative state in the US. It was created by the US Supreme Court in 1984 in the case of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and since then, it has been a subject of many heated debates among constitutional lawyers (Take Care). Recently, there has been more and more indications that the Court might be changing its mind and considering the Doctrine to be a dead end from which it needs to gallantly retreat. The original decision was unanimous in a sense that all Justices considering the case (Justices Burger, Brennan, White, Blackmun and Powell) joined the Majority Opinion written by Justice Stevens. However the remaining 3 Justices (Justices Marshall, Rehnquist and O’Connor) took no part in the consideration of the case making it an unusual 6-0 decision. The holding of the case is rather simple and dictates that, in cases involving disputes between administrative agencies of the US Government (such as Environmental Protection Agency or Internal Revenue Service) and citizens or corporations, Federal Courts must always defer to an agency’s interpretation of an ambiguous statute which it administers, so long as the interpretation is ‘reasonable’. This simple rule of construction has automatically tipped the scales in favour of administrative agencies over ordinary citizens and corporations.

It comes as no surprise that the composition of the Court has changed completely since 1984 and out of those new 9 Justices, at least 3 have publicly disapproved of the Chevron Doctrine. Justice Thomas wrote in his Concurring Opinion in the case of Michigan v. Environmental Protection Agency, 576 U.S. (2015) that “Chevron deference raises serious separation-of-powers questions”. Similarly, Justice Gorsuch in his Opinion in the case of Gutierrez-Brizuela v. Lynch, No. 14-9585 (10th Cir. 2016) suggested that the Chevron was “a judge-made doctrine for the abdication of judicial duty” while Justice Kavanaugh described the Chevron Doctrine as ‘troubling’ (Harvard Law Review). It is not hard to see that this makes 1/3 of the current Supreme Court openly hostile to the Chevron Doctrine. The question remains whether the other Justices, especially Justice Alito and Chief Justice Roberts, share this hostility. This will only become clear once the Supreme Court come to deal with some case involving the Chevron Doctrine. A case like BNSF Railway Company v. Loos 17-1042.

On 14 May 2018, the US Supreme Court (with Justice Kennedy still on the bench) issued a writ of certiorari to the US Court of Appeals for the Eighth Circuit agreeing to hear an appeal in the case of BNSF Railway Company v. Loos 17-1042. The case raises the question of “whether a payment to a railroad employee for lost wages on account of a personal physical injury is subject to employment taxes under the Railroad Retirement Tax Act,” with the Claimant arguing YES and the Respondent arguing NO (SCOTUSBlog). While the Act itself is silent on this issue, the Internal Revenue Service (which is an administrative agency) in its 1994 regulations stipulates that ‘pay for time lost’ is taxable under the Railroad Retirement Tax Act. According to the Chevron Doctrine, given that the statute itself is silent (i.e. ambiguous), deference should be made to the interpretation put forward by the Internal Revenue Service (unless such an interpretation could be proved to be grossly unreasonable). If the Court was minded to follow the Chevron Doctrine, this would be a very simple case for the Claimant. In fact, under the Doctrine, it is surprising that the Court of Appeals for the Eighth Circuit ruled for the (now) Respondent, Mr Loos. The decision of the Court of Appeals might in itself be an indicator that lowers Courts feel that the US Supreme Court will not defend the Chevron Doctrine on appeal.

Interestingly, it is not only the lower Courts that can sense the hostility of the Supreme Court towards the Chevron Doctrine. Lisa Blatt, who appeared before the Court for the Claimant, mentioned the Chevron Doctrine only briefly at the end of her argument, even though the Doctrine clearly favours her client. Furthermore, Rachel Kovner, an assistant to the Solicitor General, who appeared as a ‘friend of the court’ in support of the Claimant, also almost completely ignored the Chevron Doctrine until the last moment before resting her case (SCOTUSBlog). The hostility of the Court transpires also from the questions that the Justices asked during the oral argument stage of the proceedings. Justices Gorsuch and Kegan seemed to be ready to recognise that the silence of the Railroad Retirement Tax Act on the issue of payments in question was not an ambiguity of the statute within the meaning of the Chevron Doctrine therefore making the Doctrine inapplicable in this case. Justice Kavanaugh was also skeptical when it comes to taking the Internal Revenue Service’s interpretation as a given and questioned the Claimant’s lawyer on the historical changes of the Railroad Retirement Tax Act that would suggest that the payment could not be construed as being subject to a tax (SCOTUSBlog).

The holding in the case of BNSF Railway Company v. Loos 17-1042, whatever it might be, may or may not overrule the Chevron Doctrine. However, the very manner in which this case was argued before the Supreme Court suggests that the Doctrine is not popular these days. It is difficult to predict its future at this point, but is seems that even if the Doctrine is no completely overturned one day, the Court might simply drastically limit its scope either by reading ambiguous states as sufficiently unambiguous, so not to bring the Doctrine into play at all, or it might regularly treat interpretations of ambiguous statutes put forward by administrative agencies as grossly unreasonably, therefore not worthy of any special deference under the Doctrine. In either case, any limitation to the the Chevron Doctrine will have a profound impact on the functioning of the administrative state.

Very interestingly, federal jurisprudence is not the only level at which the struggle against the Chevron Doctrine is unfolding. During the midterm election on 6 November 2018, the people of Florida passed the ballot measure called Amendment 6 which prohibits state Courts from deferring to state administrative agencies (such as Florida Department of Revenue) in cases of ambiguous statutes (Florida Today). The measure was clearly designed to rid state law of anything resembling the Chevron Doctrine. Although the Amendment does not apply outside the state of Florida, and even within the state it applies only to state (not federal) law, it is yet another signal that the Chevron Doctrine might be in trouble.