PDR Network or: Why the Hobbs Act Doesn’t Incorporate Chevron Doctrine (Part I), by James R. Conde

by Guest Blogger — Wednesday, Feb. 6, 2019

Can Congress require courts to turn a blind eye to the invalidity of an agency’s legal interpretation of the law in an enforcement action?

This question is implicated in a case that is before the Supreme Court this term. In PDR Network, LLC v. Carlton & Harris Chiropractic Inc., the Supreme Court will decide whether the 1950 Administrative Orders Review Act, 28 U.S.C. 2341 et seq., commonly known as the Hobbs Act, requires an enforcing court to accept the FCC’s interpretation of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. Professor Bernard Bell has previewed the case for readers of this blog here.

The Fourth Circuit below held that the Hobbs Act strips enforcing courts of the power to review the validity of an FCC interpretation. This holding raises troubling constitutional questions. As Professor Henry Hart put it over sixty years ago, allowing Congress to strip the courts of their power “to say what the law is” in a case would require “re-think[ing] Marbury v. Madison.” Henry M. Hart, Jr., The Power of Congress to Limit the Jurisdiction of the Federal Courts: An Exercise in Dialectic, 66 Harv. L. Rev. 1362, 1378–79 (1953). Fortunately, Professor Hart maintained, the Supreme Court has never “squarely held” that the legal validity of a regulation or order can be “withdrawn from the consideration of the enforcement court,” at least where there was no prior “adequate opportunity” to test its validity in court. Id.

As we shall see, however, under the Supreme Court’s decision in Yakus v. United States, 321 U.S. 414 (1944), judicial notions of what counts as an “adequate opportunity” to challenge an agency rule can be quite expansive.

This is the first of two blog posts. In this first post, I will explain why the Fourth Circuit’s unusual interpretation of the Hobbs Act in PDR raises serious constitutional concerns. These concerns were last seriously considered by the Supreme Court’s controversial opinion in Yakus, a case that Michael Greve and I explore in detail in Yakus and the Administrative State (forthcoming in the Harvard Journal of Law & Public Policy). I will explain why the Fourth Circuit’s opinion in PDR is in fact a troubling expansion of the logic in Yakus.

In the second follow-up post, I will explain two ways in which the Supreme Court could avoid these constitutional concerns.

Background

The basic facts in PDR are easily stated. In a preamble to a 2006 FCC Order, the FCC broadly interpreted some provisions of the TCPA.[1] Years later, Carlton & Harris sued PDR in district court, seeking damages for PDR’s alleged violation of the TCPA. Carlton & Harris argued it was entitled to prevail under the FCC’s 2006 interpretation of the TCPA. PDR argued that the FCC’s 2006 interpretation was inconsistent with the TCPA. The district court agreed with PDR.

On appeal, the Fourth Circuit reversed. The Fourth Circuit held that the Hobbs Act prevented the district court from even considering whether the FCC’s 2006 interpretation was authorized by the TCPA. The Hobbs Act, the court observed, vests courts of appeals with “exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of” certain administrative actions, including FCC actions like the FCC’s 2006 Order. 28 U.S.C. § 2342(a) (emphases added). The Hobbs Acts further allows courts of appeals to exercise their exclusive jurisdiction only through petitions for review filed “within 60 days” of the entry of a final order. 28 U.S.C. § 2344. PDR’s attempt to resist the FCC’s interpretation of the TCPA, the Fourth Circuit reasoned, is functionally the same as a challenge to “the validity” of the 2006 Order—something that can be done only through the Hobbs Act. The Fourth Circuit thus concluded that allowing PDR to challenge the FCC’s interpretation would “perform an end run around the administrative process Congress created” when it enacted the Hobbs Act. Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 883 F.3d 459, 465–66 (4th Cir. 2018). The Fourth Circuit then held that under the FCC’s interpretation, PDR violated the TCPA.

Jurisdiction-channeling provisions are a core feature of our appellate model of federal administrative law, but the Fourth Circuit’s application of the Hobbs Act is unusual and constitutionally suspect.

As PDR explains, it had no reason to suspect that the FCC’s open-ended interpretation of the TCPA would be applied as a binding rule against it years later. But the Fourth Circuit was untroubled by its harsh application of the Hobbs Act to PDR. As the Fourth Circuit put it, “jurisdiction-channeling” provisions like those in the Hobbs Act are nothing novel “in the context of administrative law.” Id. at 464.

In one sense, the Fourth Circuit is correct that jurisdiction-channeling provisions are not novel. Indeed, the Hobbs Act can be traced all the way back to the early 20th century. The 1906 Hepburn Act vested the Interstate Commerce Commission with the power to set “just and reasonable” rates for carriers. Act of June 29, 1906, 34 Stat. 584, 589. Carriers could challenge the orders by petitioning a circuit court to “enjoin, set aside, annul, or suspend” the orders. Id. at 592. Simultaneously, the agency or injured third-parties could ask a circuit court to enforce an order. Id. at 591. Courts were required to enforce it if “upon such hearing as the court may determine to be necessary, it appears that the order was regularly made and duly served,” and “that the carrier is in disobedience of the same.” Id. This system was replaced in 1913 by the Urgent Deficiencies Act, 38 Stat. 208, the Hobbs Act’s immediate predecessor.

The Hepburn Act was the first of many Congressional acts that set up a new kind of “collaborative partnership” between agency and court. See, e.g., United States v. Ruzicka, 329 U.S. 287 (1946); Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 48–49 (1938). The Supreme Court ratified this “appellate review” model of administrative law, updating notions of due process to fit the evolving nature of this new partnership. Under this new collaborative partnership between agencies and courts, agencies could find the facts and apply the law in the first instance, even with binding effect, as long as courts retained some supervisory authority “to decide whether an erroneous rule of law was applied and whether the proceeding in which facts were adjudicated was conducted regularly.” St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 84 (1936) (Brandeis, J., concurring); see generally Thomas W. Merrill, Article III, Agency Adjudication, and the Origins of the Appellate Review Model of Administrative Law, 111 Colum. L. Rev. 939 (2011).

But even though jurisdiction-channeling statutes are far from novel in administrative law, the Fourth Circuit’s application of the Hobbs Act is relatively unusual. Despite evolving notions of due process and separation of powers in administrative law, courts have been reluctant to infer that Congress meant to foreclose their power (and, some would say, duty) to consider the legal validity of an administrative action in an enforcement context. See, e.g., Adamo Wrecking Co. v. United States, 434 U.S. 275 (1978) (creatively interpreting the Clean Air Act to allow a criminal defendant to challenge an EPA rule). But see United States v. Ruzicka, 329 U.S. 287 (1946) (foreclosing a legal defense in an enforcement action by implication).

The Supreme Court last confronted the constitutional issues raised by PDR in Yakus v. United States.

The Supreme Court’s last real confrontation with these constitutional questions was in Yakus v. United States, 321 U.S. 414 (1944), and a companion case, Bowles v. Willingham, 321 U.S. 503 (1944), both cases upholding the controversial “jurisdiction-channeling” provisions of the Emergency Price Control Act of 1942, 56 Stat. 23 (EPCA).

EPCA vested the Office of Price Administration (OPA) with broad discretion to control ordinary commodity and rent prices throughout the U.S. economy, and made it “unlawful” for any person to violate OPA’s price control regulations and orders. 56 Stat. at 28. More pertinently, EPCA created the “Emergency Court of Appeals” and vested it with “exclusive jurisdiction to determine the validity” of OPA regulations and orders. 56 Stat. at 33. To petition the Emergency Court for review, a regulated party had to file a protest with OPA “[w]ithin a period of sixty days,” and OPA had to deny the protest. OPA had discretion to delay ruling on a protest for months and years, and short of extraordinary relief by writ of mandamus, the Emergency Court had little power to force OPA’s hand. As a practical matter, therefore, it could take years before the Emergency Court could hear a case.

At the same time, even while a protest was pending, EPCA authorized OPA to enforce its regulations and orders through “civil and criminal proceedings in the federal district courts and in the state courts throughout the country.” Yakus, 321 U.S. at 465–66 (Rutledge, J., dissenting). EPCA also expressly stripped enforcing courts of “jurisdiction or power to consider the validity of any” regulation or order, “or to stay, restrain, enjoin, or set aside” a regulation or order. 56 Stat. at 33 (emphasis added); Yakus, 321 U.S. at 429–431.

Yakus arose after a small meat wholesaler, Albert Yakus, violated an OPA price control regulation after the time to file a protest had expired. The United States indicted Yakus, and Yakus challenged his indictment by offering to prove that OPA’s price control violated the statute. The district court refused to allow the jury to consider evidence regarding the legal validity of OPA’s price control and the jury convicted Yakus.

The Supreme Court affirmed the conviction. Yakus had not filed a protest, so the Supreme Court assumed the protest and review procedure was constitutionally “adequate,” and concluded that EPCA’s jurisdiction-channeling “requirement present[ed] no novel constitutional issue.” Yakus, 321 U.S. at 444. Thus, Yakus holds that Congress can require enforcing courts to turn a blind eye to the validity of administrative rules, at least where a defendant didn’t exhaust his administrative remedies.

But as Justice Rutledge pointed out, in a dissent joined by Justice Murphy, “[n]o previous legislation has presented quite this combination of procedural devices.” Yakus, 321 U.S. at 463 (Rutledge). As Justice Rutledge explained, the Supreme Court had also never previously addressed the “question whether Congress can confer jurisdiction upon federal and state courts in the enforcement proceedings, more particularly the criminal suit, and at the same time deny them ‘jurisdiction or power to consider the validity’ of the regulations for which enforcement is thus sought.” Id. at 467. In a memorable passage, Justice Rutledge argued that:

It is one thing for Congress to withhold jurisdiction. It is entirely another to confer it and direct that it be exercised in a manner inconsistent with constitutional requirements or, what in some instances may be the same thing, without regard to them. Once it is held that Congress can require the courts criminally to enforce . . . regulations . . . without regard for their validity, the way will have been found to circumvent the supreme law and, what is more, to make the courts parties to doing so. This Congress cannot do. . . . [W]henever the judicial power is called into play, it is responsible directly to the fundamental law and no other authority can intervene to force or authorize the judicial body to disregard it.

Justice Rutledge conceded that in some circumstances, “Congress [may], by offering the individual a single chance to challenge a law or an order, foreclose for him all further opportunity to question it, though requiring the courts to enforce it.” Id. at 471. Justice Rutledge then set forth some parameters under which it could be proper for enforcing courts to turn a blind eye to the legal validity of administrative action.

In criminal cases, Justice Rutledge argued, foreclosure of a defense “should be allowed, if at all, only by a procedure affording the substantial equivalent of a criminal trial,” such that failure to use the opportunity “could be taken as an actual, not a forced waiver.” Id. at 488 n.41. In civil cases, Justice Rutledge was ready to accept a more expansive version of “adequacy,” as long as the regulation was not “invalid on its face.” See Bowles, 321 U.S. at 526 (Rutledge, J., concurring). By this, Justice Rutledge meant that the courts must retain the ability to consider the validity of a rule in any situation that did not require them to consider outside evidence introduced at trial, as in Yakus. In other words, matters of law, involving no consideration of outside evidence, had to be fully preserved for the courts, even in civil cases.

The Fourth Circuit’s PDR decision expands Yakus by applying it to purely legal questions.

Yakus’s exhaustion holding may not have been “overruled in the court of history.” Trump v. Hawaii, 138 S. Ct. 2392, 2423 (2018). But Yakus has not aged well. “Congress amended the most onerous features of the Emergency Price Control Act” in response to Justice Rutledge’s dissent. Adamo Wrecking Co. v. United States, 434 U.S. 275, 291 (1978) (Powell, J., concurring). Justice Powell later called for limiting Yakus as a War Powers case, if not overruling it. Id. at 290.

The Fourth Circuit’s opinion in PDR, however, is a troubling expansion of Yakus. In Yakus, the majority carefully noted that “[t]here is no contention that the present regulation is void on its face.” Yakus, 321 U.S. at 447. Justice Rutledge, for his part, believed that Congress could never prohibit courts from considering pure legal questions in an enforcement action. Bowles, 321 U.S. at 526 (Rutledge, J., concurring). Pure questions of law, requiring no consideration of outside evidence, had to be preserved for the courts, arguably even under the New Deal Court’s evolving notions of the judicial role. See NLRB v. Hearst Publications, 322 U.S. 111 (1944); see also Gary Lawson & Stephen Kham, Making Law out of Nothing at All: The Origins of the Chevron Doctrine, 65 Admin. L. Rev. 1, 17–18 (2013).

The Fourth Circuit’s majority opinion in PDR makes no such fine distinctions and would prevent defendants like PDR from raising even purely legal challenges in enforcing courts, precisely the kind of challenge that Justice Rutledge thought must be preserved for the judiciary.

James R. Conde is an associate at Boyden Gray & Associates PLLC, a constitutional and regulatory law firm in Washington, D.C.

[1] The FCC’s “Orders” are more like agency rules under the APA. See FCC, Rulemaking at the FCC, https://www.fcc.gov/general/rulemaking-fcc.

Cite As: Author Name, Title, 36 Yale J. on Reg.: Notice & Comment (date), URL.

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