State of TX v. USA

United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
April 9, 2021
No. 18-10545 Lyle W. Cayce
Clerk
State of Texas; State of Kansas; State of Louisiana;
State of Indiana; State of Wisconsin; State of
Nebraska,
Plaintiffs—Appellees/Cross-Appellants,
versus
Charles P. Rettig, in his Official Capacity as
Commissioner of Internal Revenue; United States of
America; United States Department of Health and
Human Services; United States Internal Revenue
Service; Xavier Becerra, Secretary, U.S. Department of
Health and Human Services,
Defendants—Appellants/Cross-Appellees.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 7:15-CV-151
ON PETITION FOR REHEARING EN BANC
(Opinion: Revised February 12, 2021, 5 Cir., 987 F.3d 518)
No. 18-10545
Before Barksdale, Haynes, and Willett, Circuit Judges. 1
Per Curiam:
The court having been polled at the request of one of its members, and
a majority of the judges who are in regular active service and not disqualified
not having voted in favor (Fed. R. App. P. 35 and 5th Circ. R. 35), the petition
for rehearing en banc is DENIED.
In the en banc poll, five judges voted in favor of rehearing (Judges
Jones, Smith, Elrod, Ho, and Duncan), and eleven judges voted against
rehearing (Chief Judge Owen, and Judges Stewart, Dennis, Southwick,
Haynes, Graves, Higginson, Costa, Willett, Engelhardt, and Wilson).
1
Judge Oldham did not participate in the consideration of the rehearing en banc.
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No. 18-10545
James C. Ho, Circuit Judge, joined by Jones, Smith, Elrod, and
Duncan, Circuit Judges, dissenting from denial of rehearing en banc:
For those who believe in the text and original understanding of the
Constitution, the panel decision is troubling for at least two different reasons.
First, the Constitution vests lawmaking power in the most politically
accountable branch of our government—the Congress of the United States.
Yet the panel blesses the placement of lawmaking power in purely private
hands, wholly unaccountable to the people. That devalues the right to vote
and desecrates the entire premise of our constitutional democracy—that our
laws are supposed to be written by members of Congress elected by the
American people, not by private interests pursuing unknown private agendas.
Second, judges swear an oath to uphold the Constitution, consistent
of course with a judicial system based on precedent. That should mean that
we decide every case faithful to the text and original understanding of the
Constitution, to the maximum extent permitted by a faithful reading of
binding precedent. Dutiful application of this standard is vital to respecting
and restoring our nation’s founding principles. But rather than apply this
standard, the panel instead extends precedent unnecessarily, in a strained
effort to uphold the uniquely unlawful delegation challenged here.
The Constitution vests “[a]ll legislative Powers herein granted” in
Congress. U.S. Const. art. I, § 1. And it makes clear that “any Bill . . .
shall not be a Law” unless it has complied with the bicameralism and
presentment requirements of Article I. U.S. Const. art. I, § 7, cl. 2. These
provisions do not permit Congress to delegate its lawmaking powers
elsewhere, any more than they permit the President to delegate the power to
sign legislation. See, e.g., Gundy v. United States, 139 S. Ct. 2116, 2121 (2019)
(plurality opinion by Kagan, J.) (“The nondelegation doctrine bars Congress
from transferring its legislative power to another branch of Government.”).
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See also, e.g., Electronic Presentment and Return of Bills, 35 Op. O.L.C. 51, 62
(2011) (“[T]he President . . . could not delegate his constitutional signing
responsibility.”); Whether the President May Sign a Bill by Directing That His
Signature Be Affixed to It, 29 Op. O.L.C. 97, 124 (2005) (same).
This prohibition on delegation might seem inconvenient and
inefficient to those who wish to maximize government’s coercive power. But
the purpose of the nondelegation doctrine is not to serve Congress, but to
preserve liberty. See, e.g., Dep’t of Transp. v. Ass’n of Am. R.Rs., 575 U.S. 43,
61 (2015) (Alito, J., concurring) (“The principle that Congress cannot
delegate away its vested powers exists to protect liberty.”).
“‘[B]icameralism and presentment make lawmaking difficult by
design.’” Id. (quoting John F. Manning, Lawmaking Made Easy, 10 Green
Bag 2d 191, 202 (2007)). This “deliberative process was viewed by the
Framers as a valuable feature, . . . not something to be lamented and evaded.”
Id. Indeed, “the framers went to great lengths to make lawmaking difficult,”
for “[a]n ‘excess of law-making’ was, in their words, one of ‘the diseases to
which our governments are most liable.’” Gundy, 139 S. Ct. at 2134(Gorsuch, J., dissenting) (quoting The Federalist No. 62 (James
Madison)). The processes for new legislation may be “arduous,” “but to the
framers these were bulwarks of liberty.” Id.The modern administrative state illustrates what happens when we
ignore the Constitution: Congress “pass[es] problems to the executive
branch” and then engages in “finger-pointing” for any problems that might
result. Id. at 2135. The bureaucracy triumphs—while democracy suffers.
That’s why our Founders deliberately designed the legislative power
to be exercised “only by elected representatives in a public process”—so that
“the lines of accountability would be clear” and “[t]he sovereign people
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would know, without ambiguity, whom to hold accountable.” Id. at 2134. In
short: When it comes to lawmaking, the buck stops with Congress.
Admittedly, the nondelegation doctrine has been more honored in the
breach than in the observance. “[S]ince 1935, the Court has uniformly
rejected nondelegation arguments and has upheld provisions that authorized
agencies to adopt important rules pursuant to extraordinarily capacious
standards.” Id. at 2130–31 (Alito, J., concurring).
So when the panel upheld the unlawful delegation of legislative power
challenged in this case, it no doubt assumed it could invoke precedents
reflecting the general dormancy and underenforcement of the nondelegation
doctrine, and call it a day.
But fidelity to the Constitution requires much more than this. Critical
features of the delegation challenged here make it categorically different
from—and unsupportable under—current precedent.
To begin with, this case involves a delegation of lawmaking power, not
to another governmental entity, but to private bodies wholly unaccountable
to the citizenry. In addition, the delegation was effectuated not by Congress,
but at the whim of an agency—and without Congressional blessing of any
kind. There is no precedent that permits this kind of “double delegation”
from Congress to public bureaucrats to private parties—no case cited by the
panel or the parties, and no case that I have independently uncovered.
To the contrary, the Supreme Court has made clear that delegation to
“private persons” is “legislative delegation in its most obnoxious form.”
Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936) (emphasis added). “[F]or
it is not even delegation to an official or an official body.” Id. Delegation of
legislative power to private entities is “unknown to our law” and “utterly
inconsistent with the constitutional prerogatives and duties of Congress.”
A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 537 (1935).
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After all, “[w]hen it comes to [delegating to] private entities, . . . there
is not even a fig leaf of constitutional justification.” Ass’n of Am. R.Rs., 575
U.S. at 62 (Alito, J., concurring). “Private entities are not vested with
‘legislative Powers.’ Nor are they vested with the ‘executive Power,’ which
belongs to the President.” Id. (citations omitted). Indeed, “[e]ven the
United States accepts that Congress ‘cannot delegate regulatory authority to
a private entity.’” Id. at 61.
At bottom, the regulation challenged here is uniquely offensive to the
Constitution—and unsupported by precedent—for three reasons: (1) It
subdelegates substantive lawmaking power, rather than some minor factual
determination or ministerial task; (2) the subdelegation is authorized by an
administrative agency, rather than by Congress; and (3) the agency is
subdelegating power to a private entity, rather than to another governmental
entity that is at least minimally accountable to the public in some way.
Not a single one of the precedents cited by the panel involves this toxic
combination of constitutional abnormalities. Not one of them prevents us
from enforcing the Constitution and the democratically accountable
government for which it stands.
I dissent from the denial of rehearing en banc. The right to vote means
nothing if we abandon our constitutional commitments and allow the real
work of lawmaking to be exercised by private interests colluding with agency
bureaucrats, rather than by elected officials accountable to the American
voter. 1
1
See, e.g., Philip Hamburger, Is Administrative Law Unlawful?
369 (2014) (“[T]he expansion of the electorate has been accompanied by the growth of
administrative law . . . . One of the extraordinary achievements of American life over the
past two centuries has been to make the theory of consensual government a reality. Yet
when consensual government became a reality, the administrative state undermined that
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I.
The Medicaid program provides financial assistance to low-income
individuals so that they may obtain medical care. “States have two options
for providing care to Medicaid beneficiaries: a ‘fee-for-service’ model and a
managed-care model.” Texas v. Rettig, 987 F.3d 518, 524 (5th Cir. 2021).
“Under the . . . managed-care model, the state pays a third-party health
insurer (‘managed-care organization’ or ‘MCO’) a monthly premium (the
‘capitation rate’) for each Medicaid beneficiary the MCO covers, and the
MCO provides care to the beneficiary.” Id.In order for states to be reimbursed for these expenditures, MCO
capitation rates must be “actuarially sound.” 42 U.S.C.
§ 1396b(m)(2)(A)(iii), (xiii). In 2002, the Department of Health and Human
Services (HHS) promulgated the “Certification Rule” to further delineate
what it means for an MCO capitation rate to be “actuarially sound”:
(i) Actuarially sound capitation rates means capitation rates
that—
(A) Have been developed in accordance with generally
accepted actuarial principles and practices;
reality by shifting lawmaking away from people and their representatives . . . . [W]hether in
1870, 1920, or 1965 . . . each time, after representative government became more open to
the people, legislative power increasingly has been sequestered to a part of government that
is largely closed to them.”); id. at 374–75 (“[A]lthough [members of the knowledge class]
mostly supported expanded suffrage, they also supported the removal of legislative power
to administrative agencies staffed by persons who shared their outlook. The development
of administrative power thus . . . must be recognized as a sociological problem—indeed, a
profoundly disturbing shift of power. As soon as the people secured the power to vote, a
new class cordoned off for themselves a sort of legislative power that they could exercise
without representation.”).
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(B) Are appropriate for the populations to be covered,
and the services to be furnished under the contract; and
(C) Have been certified, as meeting the requirements of
this paragraph (c), by actuaries who meet the
qualification standards established by the American
Academy of Actuaries and follow the practice standards
established by the Actuarial Standards Board.
42 C.F.R. § 438.6(c)(1)(i)(A)–(C) (2002) (emphases added). 2
The Actuarial Standards Board is not a governmental entity
accountable to the American people. It is a private organization that sets
practice standards for private actuaries certified by the private American
Academy of Actuaries (AAA). Yet the Certification Rule empowers the
Board to determine the regulatory standard for whether a capitation rate is
“actuarially sound,” by allowing the Board to dictate the “practice
standards” that an actuary must follow in so certifying the rate. Id. And
other private entities—AAA-qualified private actuaries—determine
whether a particular capitation rate meets the Board’s private standards. Id.One such privately promulgated “practice standard” is the
requirement that capitation rates “certified in accordance with 42 CFR
438.6(c)” “provide for all reasonable, appropriate, and attainable costs,”
“includ[ing] . . . government-mandated assessments, fees, and taxes.”
Rettig, 987 F.3d at 525–26. It is the issuance of this practice standard in 2015
2
The Certification Rule has since been recodified into multiple provisions. 42
C.F.R. § 438.4 now states that “[t]o be approved by [the Centers for Medicare and
Medicaid Services], capitation rates must . . . [b]e certified by an actuary as meeting the
applicable requirements,” while § 438.2 defines “[a]ctuary” as “an individual who meets
the qualification standards established by the American Academy of Actuaries . . . and
follows the practice standards established by the Actuarial Standards Board.”
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that gives rise to the instant case. Id. With the issuance of this private rule,
the Plaintiff States suddenly had a new legal obligation to account for (and
thus pay) a new “Provider Fee”—a “cost” (specifically, a “government-
mandated . . . tax[]”) incurred by certain MCOs. See id. at 528–29.
In October 2015, the State of Texas filed suit, joined by Indiana,
Kansas, Louisiana, Nebraska, and Wisconsin, challenging the validity of both
the Provider Fee itself and the Certification Rule that enabled a private entity
to impose the Provider Fee. They sought various injunctive and declaratory
remedies to relieve them from the burden of paying the Fee. Most relevant
here, Plaintiffs claimed that the Certification Rule violates the nondelegation
doctrine. The district court agreed. Texas v. United States, 300 F. Supp. 3d
810, 820 (N.D. Tex. 2018).
A panel of this court reversed. First, the panel held that there is no
subdelegation at all because “[c]ertification by a qualified actuary who
applies the Board’s standards is reasonably connected to ensuring actuarially
sound rates,” and the private parties “have institutional expertise in actuarial
principles and practices.” Rettig, 987 F.3d at 531. Second, the panel held
that “even assuming arguendo that HHS subdelegated authority to private
entities, such subdelegations were not unlawful” because HHS (the panel
claimed) “reviewed and accepted” the Board’s standards and retained “the
ultimate authority to approve a state’s contract,” “superintend[ing]” the
approval process “in every respect.” Id. at 532–33.
II.
As discussed, the Constitution vests legislative power in Congress and
does not permit delegation of that power—especially not to private parties.
Ante, at 1–4. The panel responds by invoking various precedents. But at the
very most, current precedent allows only Congress itself to involve private
parties in the rulemaking process. See Currin v. Wallace, 306 U.S. 1, 15–16
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(1939) (allowing Congress to condition agency action on private approval);
Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388 (1940) (allowing
Congress to permit private parties to propose prices and regulations for
agency approval).
There is good reason to limit these precedents to only those
delegations authorized by Congress itself. Congress has express
constitutional authority to legislate. U.S. Const. art. I, § 1. And it is
directly accountable to the American people. Neither is true of
administrative agencies. As our sister circuit once observed, “when an
agency delegates power to outside parties, lines of accountability may blur,
undermining an important democratic check on government decision-
making . . . . In short, subdelegation to outside entities aggravates the risk of
policy drift inherent in any principal-agent relationship.” U.S. Telecom Ass’n
v. FCC, 359 F.3d 554, 565–66 (D.C. Cir. 2004). “Agencies may play the
sorcerer’s apprentice but not the sorcerer himself.” Alexander v. Sandoval,
532 U.S. 275, 291 (2001).
The Certification Rule plainly violates the private nondelegation
doctrine. First, it delegates to a private entity the power to determine what
constitutes an “actuarially sound” capitation rate. But Congress gave HHS
no authority to turn this decision over to a private entity such as the Board.
Moreover, there is no agency review of the Board’s established “practice
standards.” If HHS disagrees with the Board’s standards regarding
capitation rates, its only recourse is to amend or repeal the rule delegating
power to the Board in the first place. HHS has thus semi-permanently
subjugated its regulatory power to that of the Board.
Second, there is no agency review of capitation rates unless and until
they are approved by the private actuaries. The rule itself indicates that the
Centers for Medicare and Medicaid Services (CMS) will not review an MCO
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contract before these actuaries confirm the capitation rates’ actuarial
soundness. See 42 C.F.R. § 438.6(c)(1)(i)(C) (2002) (“Actuarially sound
capitation rates . . . [h]ave been certified . . . by actuaries who . . . follow the
practice standards established by the . . . Board.”) (emphasis added). And
the record confirms that CMS does not in fact review an MCO contract
unless and until private parties have blessed the capitation rates. See
Declaration of Christopher J. Truffer at 10 (“[T]he state actuary must certify
the rates . . . . Next, a state sends a contract . . . to the appropriate . . . Office
. . . , and the CMS actuarial review process begins. After ensuring that the
documentation . . . contains the rate certification, . . . the [office] forwards
the contract package to the Center for Medicaid and CHIP Services.”)
(emphases added)).
So before CMS even begins to exercise its own judgment and
determine whether a rate meets the standards promulgated by the Board,
private actuaries may apply the Board’s private standards and determine that
a capitation rate is not actuarially sound. In such cases, the agency’s review
process ends before it ever begins.
Under the Certification Rule, then, HHS neither sets the regulatory
standard nor exercises final authority over the application of that standard.
Private actors wield “final reviewing authority.” Rettig, 987 F.3d at 532–33.
They act as veto-gates that categorically preclude agency review—whether
it’s review of the “actuarially sound” standard itself, the determination that
a capitation rate complies with that standard, or both. The Constitution
forbids such delegations of government power to private entities.
III.
The panel offers two arguments for why the Constitution permits the
Certification Rule. Neither is persuasive.
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A.
First, the panel denies that there is any subdelegation at all. It cites
the D.C. Circuit’s decision in Telecom for the proposition that “an agency
does not improperly subdelegate its authority when it ‘reasonabl[y]
condition[s]’ federal approval on an outside party’s determination of some
issue,” because “such conditions only amount to legitimate requests for
input.” Rettig, 987 F.3d at 531.
But the panel misreads Telecom. For starters, that case rejected an
agency’s unauthorized subdelegation of legal determinations. 359 F.3d at567–68. And it had nothing at all to do with an agency delegating its
substantive rulemaking power.
What’s more, Telecom makes clear that any “subdelegation[] to
outside parties [is] assumed to be improper absent an affirmative showing of
congressional authorization.” Id. at 565. See also id. at 566 (“A general
delegation of decision-making authority to a federal administrative agency
does not, in the ordinary course of things, include the power to subdelegate
that authority beyond federal subordinates.”).
In other words, under Telecom, at most only Congress may involve
private parties in agency decision-making—an agency does not get to make
that decision itself.
To be sure, the panel notes that, under Telecom, “specific types of
legitimate outside party input into agency decision-making processes” do not
amount to “subdelegation[s] of decision-making authority”—such as
“establishing a reasonable condition for granting federal approval.” Id. But
Telecom limited this principle to governmental conditions—determinations by
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“state, local, or tribal government[s].” Id. at 567. It endorsed no such
principle with respect to private parties. 3
And it’s clear why. In the cases cited in Telecom, the “reasonable
connection between the outside entity’s decision and the federal agency’s
determination” was patently obvious and justified—there was simply no
reason for the agency to approve a federal permit if the state (in the case of
United States v. Matherson, 367 F. Supp. 779 (E.D.N.Y. 1973)) or tribal entity
(in the case of Southern Pacific Transportation Co. v. Watt, 700 F.2d 550 (9th
Cir. 1983)) was going to prevent the petitioner from engaging in the regulated
activity anyway. So the agencies weren’t subordinating their authority to
outside entities—they were refusing to waste agency resources on futile
approvals. See Matherson, 367 F. Supp. at 782 (“[I]t is apparent that a
vehicular permit from the National Seashore is of little value without the
corresponding vehicular permit from the appropriate local municipality . . . .
[A]n individual holding only a National Seashore vehicular permit would be
prohibited from traversing state land and thereby be precluded from ever
reaching the National Seashore by motor vehicle. The promulgation of [the
regulation] has foreclosed the possibility of such an anomaly ever existing.”);
Southern Pacific, 700 F.2d at 556 (“The regulation at issue is not an
abdication of the Secretary’s power to administer the 1899 Act but rather an
effort by the Secretary to incorporate into the decision-making process the
wishes of a body with independent authority over the affected lands.”).
3
The panel claims that, under Telecom, it does not matter whether an agency is
conditioning its approval on that of a government entity or a private party. Rettig, 987 F.3d
at 531 n.10. But Telecom equated governmental and private entities only to say that an
unauthorized subdelegation to either is invalid: “[F]ederal agency officials . . . may not
subdelegate to outside entities—private or sovereign—absent affirmative evidence of authority
to do so.” 359 F.3d at 566 (emphasis added). And it is undisputed that Congress gave HHS
no such authority here.
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The situation here could not be more different. The private Board and
private actuaries would have no say at all in the approval of capitation rates
or MCO contracts but for HHS’s decision to hand them its rulemaking and
review powers in the first place.
So the Certification Rule is plainly unconstitutional under Telecom.
“Congress has not delegated to [HHS] the authority to subdelegate [the
actuarial soundness requirement] to outside parties.” 359 F.3d at 566. And
“[i]n contrast to [Matherson and Southern Pacific], where an agency with
broad permitting authority . . . adopted an obviously relevant local
[government] concern as an element of its decision process,” HHS has not
only “delegated to another [private] actor almost the entire determination of
whether a specific statutory requirement . . . has been satisfied,” id. at 567—
it has even granted a private party the power to define the statutory
requirement in the first place. 4
B.
Second, the panel argues that, if there is a subdelegation here, it’s
permissible under Supreme Court and circuit precedent. But all the panel’s
authorities are inapposite.
4
The panel also invokes Louisiana Forestry Association v. Secretary of United States
Department of Labor, 745 F.3d 653 (3rd Cir. 2014). Rettig, 987 F.3d at 531 & n.10. But the
statute in that case specifically granted the Department of Homeland Security (DHS) the
authority to “determine[]” an alien’s status “after consultation with appropriate agencies
of the Government.” La. Forestry Ass’n, 745 F.3d at 660. So of course DHS’s decision to
seek the “advice” of the Department of Labor in the form of a labor certification was not
an unconstitutional subdelegation. It was one agency acting pursuant to congressional
authorization to enlist the help of another agency in making a legal determination. There is
no serious way to analogize the scheme in that case to the Certification Rule. Here, there
is no statutory language granting HHS authority to give the private Board (or anyone else)
rulemaking power to craft the legal standard.
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The panel first invokes Adkins. Rettig, 987 F.3d at 532. But as noted,
in Adkins it was Congress itself, not the agency, that enlisted the assistance
of private parties in rulemaking. As our sister circuit has noted, “Adkins . . .
affirmed a modest principle: Congress may formalize the role of private
parties in proposing regulations.” Ass’n of Am. R.Rs. v. U.S. Dep’t of Transp.,
721 F.3d 666, 671 (D.C. Cir. 2013), rev’d on other grounds by Ass’n of Am. RRs.,
575 U.S. 43 (emphasis added). See also Telecom, 359 F.3d at 565(“[S]ubdelegations to outside parties are assumed to be improper absent an
affirmative showing of congressional authorization.”).
As explained, it is one thing to bless a Congressional decision to
involve private parties in the rulemaking process. It is quite another to allow
an agency—already acting pursuant to delegated power—to re-delegate that
power out to a private entity. See, e.g., Gundy, 139 S. Ct. at 2123 (plurality
opinion by Kagan, J.) (“Accompanying [Article I, section 1’s] assignment of
power to Congress is a bar on its further delegation. Congress, this Court
explained early on, may not transfer to another branch ‘powers which are
strictly and exclusively legislative.’”) (quoting Wayman v. Southard, 23 U.S.
1, 42–43 (1825)); Kisor v. Wilkie, 139 S. Ct. 2400, 2416 (2019) (“Congress
has delegated rulemaking power, and all that typically goes with it, to the
agency alone.”).
Moreover, the private parties in Adkins truly “function[ed]
subordinately to the Commission,” 310 U.S. at 399—serving as merely “an
aid” that “propose[d]” minimum prices and regulations. Id. at 388 (emphasis
added). The agency exercised “pervasive surveillance and authority,”
including the power to “approve[], disapprove[], or modif[y]” the industry
proposals. Id. It was therefore the agency, and “not the [private actors],”
that set the regulations. Id. at 399. Ultimately, “Adkins . . . affirmed a modest
principle: 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
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retains the discretion to ‘approve[], disapprove[], or modif[y]’ them.” Ass’n
of Am. R.Rs., 721 F.3d at 671 (emphasis added).
Here, by contrast, HHS has delegated to the Board the power to define
actuarial soundness. And that power is reviewable only in the sense that the
agency can amend or repeal the Certification Rule altogether. So absent new
rulemaking, the Board’s practice standards and the actuaries’ certifications
can prevent a state’s capitation rate and associated MCO contract from ever
reaching CMS for review. In short, while the instant scheme arguably allows
HHS to “approve[]” private standards and actuarial certifications, it
emphatically does not leave HHS free to “disapprove[] or modif[y]” them.
Id.
The panel also cites Sierra Club v. Lynn, 502 F.2d 43 (5th Cir. 1974).
But Sierra Club did not decide whether an agency was unconstitutionally re-
delegating its delegated rulemaking powers. Rather, it questioned whether
an agency was “abdicat[ing] its statutory duties [under the National
Environmental Policy Act] by reflexively rubber stamping a[n impact]
statement prepared by others.” Id. at 59.
At most, then, Sierra Club tells us how much “fact-finding” an agency
can delegate. See Telecom, 359 F.3d at 567 (“[T]here is some authority for
the view that a federal agency may use an outside entity, such as a state
agency or a private contractor, to provide the agency with factual
information.”). There, we allowed a private developer to assist an agency in
compiling studies that were conditions precedent to federal approval. See
Sierra Club at 47, 59. So a private party was assisting the agency in
determining the facts underlying the agency’s decision to exercise
government power. That is a far cry from allowing private parties to both
define and apply a legal standard, and to do so without congressional
authorization or agency review.
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In any event, the panel cites Sierra Club for the proposition that there
is no impermissible subdelegation where an agency “retains final reviewing
authority,” and “independently perform[s] its reviewing, analytical and
judgmental functions.” Rettig, 987 F.3d at 532. But again, HHS doesn’t
review the Board’s practice standards, or the capitation rates rejected by
private actuaries. So even if Sierra Club could justify an unauthorized
subdelegation of substantive rulemaking power, its standard hasn’t been met.
The panel’s reliance on Louisiana Public Service Commission v. FERC,
761 F.3d 540 (5th Cir. 2014), is unavailing for the same reason. No matter
how many times the panel claims otherwise, HHS has never “reviewed and
accepted” the Board’s practice standards or the actuaries’ rejected
capitation rates—let alone “continue[d] to exercise oversight” over those
actions. Id. at 552. It just made a one-time decision to hand the private
parties a blank check.
In the end, then, the only “final reviewing authority” HHS retains is
the ability to issue a new rule.
Incredibly, the panel is fine with this: “[A]ny state dissatisfied with
the Board’s practice standards can petition HHS for ‘amendment[] or
repeal’ of the . . . Rule’s requirement that the Board’s practice standards be
followed.” Rettig, 987 F.3d at 532 n.13 (quoting 5 U.S.C. § 553(e)). But by
that logic, any agency subdelegation of rulemaking power is permissible.
After all, any agency can always claw back its delegated power by issuing a
new rule. See Fund for Animals v. Kempthorne, 538 F.3d 124, 133 (2nd Cir.
2008) (“If all it reserves for itself is ‘the extreme remedy of totally
terminating the [delegation agreement],’ an agency abdicates its ‘final
reviewing authority.’”) (alteration in original) (citation omitted). But that
would render the nondelegation doctrine a dead letter. We might as well say
that Congress can never violate the nondelegation doctrine, because the
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American people can always petition Congress to pass a new law and claw
back its lawmaking power from an agency. 5
IV.
As judges, we have sworn an oath to uphold the Constitution. So if
we are forced to choose between upholding the Constitution and extending
precedent in direct conflict with the Constitution, the choice should be clear:
“[O]ur duty [is] to apply the Constitution—not extend precedent.” NLRB
v. Int’l Ass’n of Bridge, Structural, Ornamental, & Reinforcing Iron Workers,
Local 229, AFL-CIO, 974 F.3d 1106, 1116 (9th Cir. 2020) (Bumatay, J.,
5
According to the panel, holding the Certification Rule unconstitutional would also
“jeopardize over a thousand regulations promulgated by federal agencies.” Rettig, 987
F.3d at 532 n.11. But this collapses the distinction between the completely legitimate
practice of codifying preexisting private standards and the novel, unconstitutional practice
of handing private parties a blank check to fill (and amend) at their leisure.
As the panel notes, it is a “common and accepted practice” for agencies to
incorporate by reference standards established by private organizations. See id. at 531–32
(citing Am. Soc’y for Testing & Materials v. Public.Resource.Org, Inc., 896 F.3d 437, 442 (D.C.
Cir. 2018)). But this just tells us what HHS could have done in this case—not that what
HHS did was okay. In American Society, the agencies exercised their rulemaking power to
approve fixed, preexisting private standards. The standards were not automatically
updated by the unilateral action of those outside entities. See, e.g., 896 F.3d at 443
(describing a statute requiring the Secretary of Energy to decide whether to adopt revisions
to incorporated materials); id. at 447 (“[W]e need not determine what happens when a
regulation or statute is revised to incorporate newer versions of a particular standard.”)
(emphasis added); id. at 450 (explaining that the 2011 National Electrical Code had been
incorporated into a power source regulation, “but not the 2014 edition”). See also Office
of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-119: Federal
Participation in the Development and Use of Voluntary Consensus Standards and in Conformity
Assessment Activities 4 (2016) (requiring agencies “to ensure[] . . . that regulations
incorporating standards by reference are updated on a timely basis”).
To say that HHS can empower the Board to write whatever standards it chooses
because it “could achieve exactly the same result by promulgating regulations . . . adopt[ing]
the . . . Board’s standards,” Rettig, 987 F.3d at 532, is to say that process doesn’t matter.
But when it comes to the Constitution and the separation of powers, the ends do not justify
the means. Ante, at 2.
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No. 18-10545
dissenting from denial of rehearing en banc). “[F]idelity to original meaning
counsels against further extension of [] suspect precedents.” Hester v. United
States, 139 S. Ct. 509, 509 (2019) (Alito, J., concurring in the denial of
certiorari).
The Supreme Court has repeatedly applied this principle when
confronted with the choice between fidelity to the Constitution and an
otherwise logical extension of its own precedent. See, e.g., Seila Law LLC v.
CFPB, 140 S. Ct. 2183, 2201 (2020) (“The question . . . is whether to extend
those precedents to the ‘new situation’ before us, namely an independent
agency led by a single Director and vested with significant executive power.
We decline to do so. Such an agency has no basis in history and no place in
our constitutional structure.”) (citation omitted); id. at 2211 (“A decade ago,
we declined to extend Congress’s authority to limit the President’s removal
power to a new situation, never before confronted by the Court. We do the
same today.”) (referring to Free Enter. Fund v. Pub. Co. Accounting Oversight
Bd., 561 U.S. 477 (2010)); Hernandez v. Mesa, 140 S. Ct. 735, 749 (2020) (“In
sum, this case features multiple factors that counsel hesitation about
extending Bivens, but they can all be condensed to one concern—respect for
the separation of powers.”).
We should do the same. “As inferior court judges, we are bound by
Supreme Court precedent. Yet[] . . . judges also have a ‘duty to interpret the
Constitution in light of its text, structure, and original understanding.’”
Edmo v. Corizon, Inc., 949 F.3d 489, 506 (9th Cir. 2020) (Bumatay, J.,
dissenting from denial of rehearing en banc) (quoting NLRB v. Noel Canning,
573 U.S. 513, 573 (2014) (Scalia, J., concurring)). “While we must faithfully
follow [Supreme Court] precedent . . . , ‘[w]e should resolve questions about
the scope of those precedents in light of and in the direction of the
constitutional text and constitutional history.’” Id. (quoting Free Enter. Fund
v. Public Co. Accounting Oversight Bd., 537 F.3d 667, 698 (D.C. Cir. 2008)
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No. 18-10545
(Kavanaugh, J., dissenting), aff’d in part, rev’d in part and remanded, 561 U.S.
477 (2010)). See also, e.g., Alvarez v. City of Brownsville, 904 F.3d 382, 401
(5th Cir. 2018) (en banc) (Ho, J., concurring) (noting that an important
purpose of rehearing en banc is “to better align our precedents with the text
and original understanding of the Constitution” “where the Supreme Court
has not yet ruled”).
***
Our Founders fought a war to defend the principle of “no taxation
without representation.” And that is precisely the principle Plaintiffs seek to
vindicate today. The federal government forces them to pay nearly half a
billion dollars—not by an act of their elected representatives in Congress, but
by private entities acting in collusion with unelected public bureaucrats.
The Constitution forbids this result. And no precedent requires it. I
respectfully dissent from the denial of rehearing en banc.
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