Consumers' Research USF Challenges Seek to 'Manufacture a Split': Experts

Consumers’ Research's challenges to several of the FCC’s Universal Service Fund contribution factors may be an attempt to force a decision by the Supreme Court on the nondelegation doctrine, said academics and attorneys in interviews. Some said the group brought the exact same argument in multiple courts of appeals to forum shop and engineer a circuit split.

Central to Consumers’ Research’s argument is that the contribution factor is a tax raised and spent by the Universal Service Administrative Co., and therefore unconstitutional under the nondelegation doctrine (see 2206210040). The group’s public briefs in all three cases “have argued that a direct appropriation would remedy certain of the constitutional deficiencies,” emailed Consumers’ Research attorney Trent McCotter of Boyden Gray, “but the briefs also say that we take no position on the propriety or desirability of universal service itself.”

“They’re trying to manufacture a split,” said Cheryl Leanza, of the United Church of Christ Media Justice Ministry. “Inconsistency between the circuits would promote greater odds the Supreme Court would consider this on appeal,” said Penn State Law Professor Robert Frieden, who has filed an amicus brief supporting the FCC in the 5th Circuit.

It’s not uncommon for related, simultaneous cases to be filed in different circuits as litigants seek a venue that might be more favorable to them, but usually such cases are consolidated into a single court before proceeding, said Leanza, who successfully represented the Prometheus Radio Project before the 3rd U.S. Circuit Court of Appeals in the Prometheus IV broadcast ownership case.

Consolidation hasn’t happened here partly because each appeal targets a different iteration of the regular FCC orders setting the USF’s contribution factor, Leanza said. The 6th Circuit appeal is against the Q4 2021 contribution factor, the 5th Circuit case is against the Q1 2022 factor, and the case in the 11th goes after the Q4 2022 factor. Neither the FCC nor Consumers' Research has sought to have the cases moved or consolidated.

That’s “atypical,” said Leanza. The contribution factor orders also aren’t the kind of orders that are often appealed—they are largely procedural, following a process created previously by more substantial orders. In issuing the contribution factors, the agency didn’t “adopt a rule or change a policy,” she said.

All three of the circuits chosen by Consumers’ Research are generally seen as more conservative courts, attorneys told us. The 5th Circuit in particular is widely seen as a favorable place to challenge administrative agency decisions, Frieden said. “The 5th Circuit is probably going to be willfully mislead into believing that somehow a Universal Service Fund contribution is a tax,” Frieden said. A recent 5th Circuit ruling against the Consumer Financial Protection Bureau targeted the bureau’s funding -- which comes directly from the Federal Reserve, itself funded by assessments on banks – as violating the Constitution’s Appropriations Clause.

That suggests the court could be amenable to Consumers’ Research’s tax argument, said Boston College Law School Professor Daniel Lyons in an American Enterprise Institute blog post Monday (see 2110050056). He also pointed out recent 5th Circuit rulings invoking the nondelegation doctrine and Section 230 as indicators of a possible favorable reception there.

The timing of the challenges bodes well for Consumers’ Research’s ultimate goal, Lyons said. SCOTUS has appeared to be “increasingly interested in separation-of-powers questions and the importance of reining in an increasingly powerful administrative state,” said Lyons. “While this remains a difficult case to win, the stars seem to have aligned to give petitioners the best shot possible under existing case law,” Lyons wrote. “All three cases are now moving,” said Benton Institute for Broadband & Society Senior Counselor Andrew Schwartzman, so “I would expect three decisions by summer or early fall.”