Article I, Section 1:

All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.

To define what constitutional limits could apply if Congress delegates authority to another entity to perform specified functions and duties, the Supreme Court has said that that it must first determine whether the entity in question is a private or governmental entity. The Court applies varying levels of scrutiny to a delegation depending on whether the delegation is made to a governmental, private, or quasi-governmental entity. For governmental entities such as federal agencies, the Court applies the lenient “intelligible principle” standard.1

The Court has held that a provision of a statute that states an entity is either a private or governmental entity is not dispositive for constitutional purposes.2 While certain entities such as federal agencies can be readily characterized as governmental entities,3 the distinction between a public and a private entity is often unclear for government-created or government-appointed entities.4 Nondelegation challenges involving quasi-governmental entities highlight “the judiciary’s unsettled approach to analyzing the constitutional status of ‘boundary agencies’ that sit at the public-private border.” 5

The Supreme Court has examined the following factors to determine whether government-created entities6 with varying degrees of governmental involvement and oversight are private or governmental entities:

• ownership and corporate structure;

• day-to-day management;

• statutory goals;

• political branches’ supervision over the entities’ priorities and operations; and

• federal financial support.7

These factors arose from two Supreme Court decisions involving the status of Amtrak, a federally chartered corporation. In its 1995 decision in Lebron v. National Railroad Passenger Corp., the Supreme Court held that Amtrak “is an agency or instrumentality of the United States” for purposes of a First Amendment challenge.8 After reviewing Amtrak’s history and operations, the Court concluded that when the “Government creates a corporation [such as Amtrak] by special law, for the furtherance of governmental objectives, and retains for itself permanent authority to appoint a majority of the directors of that corporation, the corporation is part of the Government for purposes of the First Amendment.” 9

Twenty years later, the Supreme Court affirmed Amtrak’s status as a governmental entity in a case involving nondelegation and Appointments Clause challenges. In Department of Transportation v. Association of American Railroads,10 the Court relied on its analysis in Lebron to determine whether Amtrak was a governmental or private entity. The Association of American Railroads filed suit alleging that the Passenger Rail Investment and Improvement Act of 2008 unconstitutionally delegated authority to Amtrak to set certain standards.11 The Court concluded that Amtrak was a governmental entity because the “political branches created Amtrak, control its Board, define its mission, specify many of its day-to-day operations, have imposed substantial transparency and accountability mechanisms, and, for all practical purposes, set and supervise its annual budget.” 12 The Court did not explain the relative importance of the various factors in the Amtrak test, concluding that the “combination of these unique features and [Amtrak’s] significant ties to the Government” established that it was not a private entity but a governmental entity that “was created by the Government, is controlled by the Government, and operates for the Government’s benefit.” 13 The Court did not reach the issue of whether the delegation of power given to Amtrak over its competitors violates the Due Process Clause or the nondelegation doctrine.14

Because case law on the threshold question of whether an entity is a private or governmental entity is limited and fact-dependent, it is difficult to conclude with any certainty how the Supreme Court would apply the Amtrak test with respect to other government-created corporations or other entities performing government functions.15 In addition to nondelegation concerns, the growth of quasi-governmental entities16 could also raise due process and other constitutional concerns.17

Footnotes

1

See ArtI.S1.5.3 Origin of Intelligible Principle Standard.

2

Dep’t of Transp. v. Ass’n of Am. R.R., 575 U.S. 43, 52 (2015); Lebron v. National Railroad Passenger Corp., 513 U.S. 374, 394 (1995).

3

See, e.g., 5 U.S.C. §§ 101–105 (enumerating and defining executive and military departments, executive agencies, government corporations, and independent establishments). See also Ass’n of Am. R.R. v. Dep’t of Transp., 821 F.3d 19, 39 (D.C. Cir. 2016) ( “[T]he Due Process Clause effectively guarantees the regulatory power of the federal government will be wielded by ‘presumptively disinterested’ and ‘duly appointed’ actors who, in exercising that awesome power, are beholden to no constituency but the public good.” ).

4

See Alexander Volokh, The New Private-Regulation Skepticism: Due Process, Non-Delegation, and Antitrust Challenges, 37 Harv. J.L. & Pub. Pol’y 931, 940 (2014) ( “The public-private distinction is fuzzy, and statutory labels aren’t always dispositive.” ); Donna M. Nagy, Playing Peekaboo with Constitutional Law: The PCAOB and Its Public/Private Status, 80 Notre Dame L. Rev. 975, 1030 (2005) ( “[E]xpanded privatization has served to blur the distinction between the spheres of public and private.” ).

5

The Supreme Court 2014 Term: Leading Case: Federal Statutes & Regulations: Passenger Rail Investment and Improvement Act—Nondelegation—Department of Transportation v. Association of American Railroads, 129 Harv. L. Rev. 341, 350 (2015). See e.g., S.F. Arts & Athletics, Inc. v. U.S. Olympic Comm., 483 U.S. 522, 560 (1987) (determining that the United States Olympic Committee was not a governmental actor); Ass’n of Am. R.R, 821 F.3d 19 (holding that Amtrak was a self-interested governmental entity subject to the due process clause of the Fifth Amendment).

6

See U.S. Gov’t Accountability Off., GAO-16-464SP, Principles of Federal Appropriations Law, ch. 15, at 86–87 (3d. ed. 2008) (discussing how the distinction between what is public or private is “indistinct” for “quasi-private,” “quasi-governmental,” “hybrid organizations,” and “twilight zone corporations” ) (internal quotations and citations omitted).

7

Dep’t of Transp. v. Ass’n of Am. R.R., 575 U.S. 43, 54–55 (2015) (citing Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 392–99 (1995)).

8

Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 376–78 (1995).

9

Id. at 400.

10

Ass’n of Am. R.R., 575 U.S. at 45–46.

11

The U.S. Court of Appeals for the District of Columbia Circuit concluded that Amtrak was a private entity “with respect to Congress’s power to delegate regulatory authority.” Ass’n of Am. R.R. v. Dep’t of Transp., 721 F.3d 666, 677 (D.C. Cir. 2013), vacated by 575 U.S. 43 (2015).

12

Ass’n of Am. R.R., 575 U.S. at 55.

13

Id. at 53–54.

14

Dep’t of Transp. v. Ass’n of Am. R.R., 575 U.S. 43, 45, 55–56 (2015). See also Ass’n of Am. R.R. v. Dep’t of Transp., 821 F.3d 19 (2016), reh’g denied, 2016 U.S. App. LEXIS 16669 (D.C. Cir., Sept. 9, 2016).

15

Id. at 54. In general, when applying this multi-factor test, lower courts have examined these entities in a holistic manner rather than focus on the specific challenged action of the entity. See, e.g., United States v. Ackerman, 831 F.3d 1292, 1297–98 (10th Cir. 2016) (examining the factors considered in the Supreme Court’s decision in Association of American Railroads to determine that the National Center for Missing and Exploited Children was a government entity to which the Fourth Amendment applied).

16

Congress has established such entities in the form of for- and nonprofit corporations that are managed by boards of directors and not (as declared in the enabling legislation) “agencies” or “instrumentalities” of the Government. See Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 386–391 (1995) (discussing examples of corporations created by Congress). For example, Congress created Amtrak in 1970 as a for-profit corporation to provide railroad passenger service, requiring by law for Amtrak to “maximize its revenues.” Rail Passenger Service Act of 1970 (RPSA), Pub. L. No. 91–518, § 101, 84 Stat. 1328 (1970). Congress established Amtrak in 1970 as a for-profit corporation to take over the passenger rail service that had been operated by private railroads because “the public convenience and necessity require the continuance and improvement” of railroad passenger service. Id. See also 49 U.S.C. §§ 24301(a)(2), 24101(d)).

17

The potential self-interested nature of government-created entities may also raise concerns beyond violations of the nondelegation doctrine. See generally Anne Joseph O’Connell, Bureaucracy at the Boundary, 162 U. Pa. L. Rev. 841 (2014) (analyzing government-created corporations and organizations). These concerns include whether the self-interested nature of a government-created corporation combined with its coercive power over its competitors violate the Due Process Clause. Id. Also, delegation of authority to officers, members of the board of directors, or employees of government-created entities may implicate the Constitution’s requirements regarding the appointment of certain federal officials under the Appointments Clause. The Appointments Clause applies to “officers” who wield “significant authority pursuant to the laws of the United States.” Buckley v. Valeo, 424 U.S. 1, 126 (1976) (per curiam). For discussion of the Appointments Clause, see ArtII.S2.C2.3.1 Overview of Appointments Clause.