Welcome back to Ninth Circuit Review-Reviewed, your periodic recap of administrative law before arguably “the second most important court in the land.”

Since my last post in late 2024, the Ninth Circuit published several significant decisions involving agency adjudications. These cases—and their doctrinal implications—are discussed below.

Panel Applies Decker Coal Doctrine in Denying ‘Double Tenure’ ALJ Challenge

In early 2020, the Drug Enforcement Agency initiated an administrative proceeding to revoke Dr. Fares Jeries Rabadi’s registration to dispense prescription drugs under the Controlled Substances Act. Dr. Rabadi then requested an ALJ hearing, which occurred in September of 2020.

At the hearing, Dr. Rabadi explained his lack of statutorily required records by saying, “I rely on my photographic memory.” Unpersuaded, the ALJ recommended the revocation of Dr. Rabadi’s registration; the DEA adopted the ALJ’s recommendation in May of 2022.

Dr. Rabadi petitioned for judicial review in the Ninth Circuit. He argued that his registration revocation was invalid because the DEA’s ALJs are unconstitutionally insulated from removal by two layers of tenure protection. (The agency’s ALJs are removable only “for good cause” by the Merit Systems Protection Board, whose members in turn may be removed only for cause).

Dr. Rabadi’s argument, of course, relies on Free Enterprise Fund v. Pub. Co. Accounting Oversight Bd., in which the Supreme Court invalidated similar double tenure protections for certain officers as being in conflict with Article II. The PCAOB Court, however, expressly left open the question whether two-level protections for ALJs are constitutionally permissible. After PCAOB, in Decker Coal Co. v Pehringer, the Ninth Circuit upheld removal protections for ALJs at the Labor Department, which are virtually identical to those at the DEA. According to the Decker Coal court, ALJs are “purely adjudicatory” and, therefore, fall outside the constitutional concerns set forth in PCAOB.

In Rabadi v. DEA, a three-judge panel applied the Decker Coal doctrine in a short opinion that affirmed the DEA’s order against Dr. Rabadi.

Panel Sustains NLRB’s New Thryv Remedies, Splitting with Third Circuit 

To remedy “unfair labor practices,” the National Labor Relations Board may take “affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of” the National Labor Relations Act. About 90 years ago, in NLRB v. Jones & Laughlin Steel, the Supreme Court sustained the agency’s backpay awards from constitutional attack.

During the Biden administration, however, the NLRB broke new remedial ground. In Thryv Inc., the agency set forth a policy to “make whole” employees who had been unlawfully discharged or terminated. Thryv required employers to pay, in addition to backpay, any “foreseeable pecuniary harms,” including credit card debt, car loans, mortgage payments, and immigration expenses incurred by reinstated employees during their unemployment. Two NLRB Board members (John Ring and Marvin Kaplan) dissented in Thryv. They observed that the agency’s new “make whole” remedy, besides “go[ing] beyond the [agency’s] remedial authority,” also raises constitutional concerns by “stray[ing] into areas more akin to tort remedies.”  

In International Union of Operating Engineers v. NLRB, a Ninth Circuit panel reviewed the NLRB’s Thryv remedies for the first time. Although the court had ordered briefing on the applicability of the Seventh Amendment after Jarkesy, a majority on the panel ultimately determined that the employer forfeited any constitutional claims by failing to exhaust them administratively. The majority went on to sustain the NLRB’s order under the National Labor Relations Act (both the unfair labor practice finding and the Thryv remedy)

Judge Patrick Bumatay partially dissented. Regarding Thryv, Judge Bumatay noted that “nothing in the text of the [NLRA] authorizes such expansive authority” and, furthermore, that “reading the Act to grant these broad remedies … puts the Board in conflict with the Seventh Amendment.” In making this constitutional claim, Judge Bumatay leaned on the Supreme Court’s recent reasoning in SEC v. Jarkesy.

The majority’s decision sets up a split with the Third Circuit, which recently struck down the NLRB’s Thryv remedy as being beyond the agency’s statutory authority. See NLRB v. Starbucks, 2024 WL 5231549 (3d. Cir. 2024). That said, the agency is under new political management. As with many major policies in this era of “presidential administration,” it’s possible (and perhaps likely) that the new leadership at the NLRB will reverse course on Thryv.

Does the Power to Issue a License Include the Power to Revoke It?

Under Title II of the Communications Act, common carriers must obtain authorization from the FCC before they can build, acquire, or operate any telecommunications lines. This authorization comes in the form of a certificate, and the FCC grants these Title II (sec. 214) certificates based on the “public interest” standard. For foreign carriers, the FCC’s public interest standard includes “national security … foreign policy and trade policy concerns.”

China Unicom (Americas) (“CUA”) is a foreign-owned telecom that caters to Chinese Americans. In 2002, the FCC granted Title II certificates to CUA’s predecessor entities. However, in 2020, the FCC ordered CUA to show cause why the agency should not initiate proceedings to revoke the company’s certification due to national security concerns over the company’s state ownership. The FCC’s show cause order had been prompted by the formation, during the first Trump administration, of an ad hoc executive branch committee on foreign ownership of domestic telecoms. 

After assessing the CUA’s responses to the show cause order, the FCC instituted a “paper hearing” proceeding to determine whether to revoke CUA’s Title II certificates. Ultimately, in February 2022, the FCC issued a revocation order.

CUA then petitioned for review. Before the Ninth Circuit, the CUA argued that, because Title II expressly refers only to a power to “issue” a certificate, to “refuse to issue” a certificate, or to “attach” conditions, the FCC has not been granted the power to revoke a certificate. In China Unicom (Americas) v. FCC, a split three-judge panel rejected the telecom’s argument “that a power to revoke certificates cannot be found to exist unless it is specifically and expressly recited in the statute.” Instead, the majority determined that the power to issue a license may include implied authority to revoke it, depending on the statutory context:

[A] statutory grant of agency authority to “issue” an authorizing document may carry with it an implied ancillary grant of authority to “deny” and to “revoke” such documents. Whether such an authority has been granted generally, and if so whether it may be exercised on particular grounds, will turn … on the details of the statutory scheme and, perhaps, the relevant administrative practice.

As a practical matter, the majority presumed that a delegation to grant a license includes an implied revocation power, unless the statutory context indicates otherwise.

Judge Carlos Bea penned a thoughtful dissent. According to Judge Bea, “the FCC’s attempted revocation of the validly granted [Title II] certificates authorizing [CUA] to provide domestic and international telecommunications services was ultra vires—without lawful authority.”

The majority’s holding strikes me as a significant development in administrative law. In the Ninth Circuit, a delegation to grant a license presumptively carries with it the power to revoke that license.

[Bonus Case] CA9 Is an Outlier on Reviewing Regulatory Restitution under the Seventh Amendment 

The three cases above deal with agency enforcement through administrative adjudication. By contrast, the Ninth Circuit’s recent decision in Consumer Financial Protection Bureau v Cashcall involves agency enforcement through a civil suit in federal court. Still, the case implicates related doctrines, so I discuss it here as a bonus.

In Cashcall, a three-judge panel affirmed a district court’s judgment ordering the respondent to pay $164 million in legal restitution. Cashcall had contended, inter alia, that the CFPB’s civil suit for restitutionary relief triggered the company’s Seventh Amendment right to a jury trial. The panel disagreed, concluding that Cashcall had knowingly waived its jury right in a joint status report before the district court. I mention this case primarily to draw attention to Judge Ryan Nelson’s thoughtful concurring opinion. In it, Judge Nelson takes aim at the law of the circuit that would’ve decided CFPB v Cashcall on the merits:

[E]ven if CashCall had not waived a jury, it still would not have been entitled to one under our precedent.  In FTC v. Commerce Planet, Inc., we held that claims for restitution, even when understood as actions at law, never trigger the Seventh Amendment’s guarantee. 815 F.3d 593, 602 (9th Cir. 2016) …. And its flaws have become even clearer since. I write separately to explain why Commerce Planet dilutes the jury trial right, and why, in the appropriate case, we should reconsider it en banc.

I’d not known about FTC v. Commerce Planet and its categorical assertion that “all restitution [is] equitable relief that necessarily falls outside the Seventh Amendment’s scope.” I agree with Judge Nelson that Commerce Planet seems incompatible with the Supreme Court’s recent Seventh Amendment jurisprudence in SEC v Jarkesy and also the Court’s approach to restitutionary relief in Liu v. SEC.