Changing Guards: Improving Corporate Governance with D&O Insurer Rotations

Almost all public companies buy insurance for their directors and officers. D&O insurers should be active gatekeepers for the corporation, since they lose money if executives misbehave, but all available evidence suggests the opposite: insurers protect executives from liability for bad management, and they encourage wasteful settlement of even meritless lawsuits.

This Article diagnoses the failure of D&O insurance as a form of pernicious relational contracting. Insurers ignore even the worst corporate governance because they can recoup losses in the years to come. This recognition unlocks a potential solution: mandatory rotation. If insurers had only a few years to recoup any losses, they would seek to limit those losses by serving as an active gatekeeper.

Introduction

In a typical year, managers of corporations representing about 10% of America’s big public corporations are sued by their investors.1.Securities Class Action Filings: 2019 Year in Review, Cornerstone Research 13, https​://securities.stanford.edu/research-reports/1996-2019/Cornerstone-Research-Securities-Class​-Action-Filings-2019-YIR.pdf [https://perma.cc/PD8P-YL84] (reporting 10% of S&P 500 by market cap was sued for securities violations in 2019). Last year brought slightly fewer. Securities Class Action Filings: 2021 Year in Review, Cornerstone Research 15, https://www.cornerstone.com/wp-content/uploads/2022/02/Securities-Class-Action-Filings-2​021-Year-in-Review.pdf. [https://perma.cc/4JGL-35SH]. This 10% figure plainly understates the scope of litigation, since many investors’ suits are derivative actions with no securities violation component, but comprehensive data for derivative suits are not available.In this Article, I use the word “manager” to refer to both officers and directors.Show More These suits cost billions of dollars to litigate and settle.2.Alice Uribe & Leslie Scism, Companies Are Paying a Lot More to Insure Their Directors and Officers, Wall St. J. (June 21, 2020, 5:30 AM), https://www.wsj.com/articles/companies-are-paying-a-lot-more-to-insure-their-directors-and-officers-11592731801?mod=hp_listc_po​s2 [https://perma.cc/93HE-LMK9] (reporting that D&O litigation expenses are approaching $1 billion annually, not including jury verdicts or settlements).Show More Proponents of shareholder litigation argue that America’s corporate directors and officers are prone to gross negligence, bad faith, and self-dealing.3.E.g., Eugene V. Rostow, To Whom and For What End is Corporate Management Responsible?, in The Corporation In Modern Society 48 (Edward S. Mason ed., 1959) (characterizing derivative suits as “the most important procedure the law has yet developed to police the internal affairs of corporations”); Robert B. Thompson & Randall S. Thomas, The Public and Private Faces of Derivative Lawsuits, 57 Vand. L. Rev. 1747, 1786–87 (2004) (finding data that derivative suits play a valuable monitoring role in duty of loyalty cases and that the tool combats unscrupulous directors); see also Jill E. Fisch, Teaching Corporate Governance Through Shareholder Litigation, 34 Ga. L. Rev. 745, 746 (2000) (explaining how the rules of shareholder litigation can “deter[] corporate misconduct”).Show More Critics argue that these are attorney-driven “strike suits.”4.See Rostow, supranote 3; Stephen M. Bainbridge, Fee-Shifting: Delaware’s Self-Inflicted Wound, 40 Del. J. Corp. L. 851, 852–53 (2016); Roberta Romano, The Shareholder Suit: Litigation without Foundation?, 7 J.L. Econ. & Org. 55, 84 (1991); Sean J. Griffith, Correcting Corporate Benefit: How to Fix Shareholder Litigation by Shifting the Doctrine on Fees, 56 B.C. L. Rev. 1, 2 (2015).Show More

Nearly everyone agrees that directors’ and officers’ insurance (“D&O insurance”) is part of the problem.5.Dain C. Donelson, Justin J. Hopkins & Christopher G. Yust, The Role of Directors’ and Officers’ Insurance in Securities Fraud Class Action Settlements, 58 J.L. & Econ. 747, 748 (2015); see Sean J. Griffith, Uncovering A Gatekeeper: Why the SEC Should Mandate Disclosure of Details Concerning Directors’ and Officers’ Liability Insurance Policies, 154 U. Pa. L. Rev. 1147, 1189 (2006).Show More

Essentially all public companies buy insurance to protect their managers from the cost of shareholder litigation, and it is easy to see how widespread insurance can cause problems.6.Griffith, supra note 5, at 1168.Show More Insured officers and directors are protected against the legal consequences of their mismanagement and recklessness.7.Id. at 1163.Show More They can behave badly without ever seeing the bill. The insurance company pays the bill. Indeed, managers may ask insurers to pay lucrative settlements, even in meritless cases, just to minimize the hassle and cost of litigation.8.Tom Baker & Sean J. Griffith, How the Merits Matter: Directors’ and Officers’ Insurance and Securities Settlements, 157 U. Pa. L. Rev. 755, 797–98 (2009).Show More And it is insurers’ reputation as honeypots that draws plaintiffs’ lawyers to concoct meritless suits.9.See Richard M. Phillips & Gilbert C. Miller, The Private Securities Litigation Reform Act of 1995: Rebalancing Litigation Risks and Rewards for Class Action Plaintiffs, Defendants and Lawyers, 51 Bus. Law. 1009, 1014–15 (1996).Show More Thus, D&O insurance serves to clog up dockets with stories of misbehavior, both encouraged and imagined.

This critique is strange because it is at odds with a plausible theory of gatekeeper behavior.10 10.The “gatekeeper” idea is that trusted professionals near the corporation can be used as external checks on fraud and mismanagement. See John C. Coffee, Jr., The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence and Governance of Accounting 11–13 (Colum. L. Sch., Ctr. For L. & Econ. Stud., Working Paper No. 191, 2001), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=270944 [https://perma.cc/LM3D-3T6H].Show More Why would insurers sign up to be punching bags?11 11.See Joseph A. Grundfest, Punctuated Equilibria in the Evolution of United States Securities Regulation, 8 Stan. J.L. Bus. & Fin. 1, 7–8 (2002) (“D&O insurers could today easily make the retention of insurer-approved auditors a condition of coverage. They could today also require an element of control over the audit process. Yet they don’t. Why?”).Show More Insurers have strong incentives to watch for warning signs and drop customers before the hammer drops, or at least to increase insurance premiums vividly when clients stand on the precipice of trouble.12 12.Such responses were once common. Roberta Romano, What Went Wrong With Directors’ and Officers’ Liability Insurance?, 14 Del. J. Corp. L. 1, 12 (1989). Professor Romano’s article diagnosed insurer responses to a sudden increase in liability exposure, so it is unsurprising that insurers reacted in this way. Id. at 13. There is no indication that this tendency to withdraw is still commonplace.Show More They have strong incentives to monitor their insureds for dangerous risk. They have strong incentives to retain control of individual suits to fight meritless ones. All of these risk-controlling practices are commonplace when insurers offer nearly any other kind of multi-million-dollar coverage. 13 13.Richard V. Eicson & Aaron Doyle, Uncertain Business: Risk, Insurance and the Limits of Knowledge 94–211 (2004) (reporting research from a variety of contexts including building construction and disability management); Steven Shavell, On Liability and Insurance, 13 Bell J. Econ. 120, 121–22 (1982) (modeling the relationship between liability and insurance and concluding that, “[a]lthough the purchase of liability insurance changes the incentives created by liability rules, the terms of the insurance policies sold in a competitive setting would be such as to provide an appropriate substitute (but not necessarily equivalent) set of incentives to reduce accident risks”).Show More Critics of D&O insurance tacitly assume that these insurers are uniquely negligent in protecting themselves from moral hazard, adverse selection, and predation.14 14.Moral hazard is the tendency of insured parties to engage in riskier conduct. Kenneth J. Arrow, Uncertainty and the Welfare Economics of Medical Care, 53 Am. Econ. Rev. 941, 961 (1963); Daniel Schwarcz, Reevaluating Standardized Insurance Policies, 78 U. Chi. L. Rev. 1263, 1283 (2011). With respect to health insurance, smoking has been described as the “classic moral hazard.” Thomas R. McLean, International Law, Telemedicine & Health Insurance: China as a Case Study, 32 Am. J.L. & Med. 7, 25 (2006). Adverse selection is the tendency of the costliest clients to seek out coverage offered at a given price. Cf. George A. Akerlof, The Market for “Lemons”: Quality Uncertainty and the Market Mechanism, 84 Q.J. Econ. 488, 488 (1970) (setting out a canonical adverse selection model in a non-insurance commercial setting); Peter Siegelman, Adverse Selection in Insurance Markets: An Exaggerated Threat, 113 Yale L.J. 1223, 1223 (2004) (explaining that adverse selection is a process where “insureds utilize private knowledge of their own riskiness when deciding to buy or forgo insurance”).Show More

For now, it appears the critics are right and theory is wrong. D&O insurers do not drop their clients regularly; instead, renewal rates approach 100%.15 15.Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2018, at 9 (2018), https://www.aon.com/getmedia/20bfac85-dce6-4902-91cb-c61265abcd7e/2018-Q4-DO-Pric​ing-Index.aspx [https://perma.cc/PR58-CPUT] (95.7% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2017, at 9 (2017), https://ww​w.aon.com/attachments/risk-services/d-o_pricing_index/2017_Q4_DO_Pricing_Index.pdf [h​ttps://perma.cc/V33R-ZY9U] (93.2% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2016, at 8 (2016), https://www.aon.com/attachme​nts/risk-services/d-o_pricing_index/2016_Q4_DO_Pricing_I​ndex.pdf [https://perma.cc/HRY​4-4HTA] (95.3% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2015, at 8 (2015), https://www.aon.com/attachments/risk-services/d-o_pricing_index​/2015_Q4_DO_Pricing_Index.pdf [https://perma.cc/J5WG-K6QQ] (95% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2014, at 8 (2014), https://www.aon.com/attachments/risk-services/d-o_pricing_index/201​4_Q4_DO_Pricing_I​ndex.pdf [https://perma.cc/8CDA-MSYG] (93.7% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2013, at 3 (2013), https://www.aon​.com/attachments/risk-services/d-o_pricing_index/2013_Q4_DO_P​ricing-Index.pdf [https://​perma.cc/22DW-YDPB] (94.9% annual retention) Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2012, at 3 (2012), https://www.aon.com/attachments/risk-services/d-o_pricing_index/2012_4Q_DandOPricingI​ndex.pdf [https://perma.cc/4GJU-4PKG] (94% retention for Q4).Show More D&O insurers do not penalize risky clients with much higher premiums; instead, premium increases are almost lockstep.16 16.Alicia Davis Evans, The Investor Compensation Fund, 33 J. Corp. L. 223, 261 (2007) (“Currently, competitive pressures appear to make it impossible for D&O insurer premium prices to reflect governance risk fully.”).Show More D&O insurers do not monitor clients’ quality of governance and risk-exposure; instead, insurers devote essentially zero effort to monitoring existing clients.17 17.Infra Section II.C.Show More Insurers do not fight weak claims; instead, they cede control over litigation to the client and agree to settle essentially every well-pleaded complaint.18 18.Baker & Griffith, supra note 8, at 797–804.Show More Far from gatekeepers, insurers have become cheerful doormen for those who would cart the insurer’s wealth, and that of the corporate client, out the door.19 19.Cf. Grundfest, supra note 11, at 7 (noting that “the current structure of D&O insurance and auditor liability has failed to give rise to incentives” to address fraud risks even though “D&O insurers could today easily make the retention of insurer-approved auditors a condition of coverage”).Show More

Why? And what can be done to fix it? This Article explains the failure of the D&O insurance market and a solution. The analysis is moderate in that it accepts the good and bad of D&O insurance and tries to tilt the balance,20 20.See Shauhin A. Talesh, Insurance Companies as Corporate Regulators: The Good, The Bad, and the Ugly, 66 DePaul L. Rev. 463, 467 (2017) (“The debate going forward is not whether insurers are good risk regulators as prior scholars theorize, but more precisely, examining under what conditions can insurers make positive regulatory interventions into corporate behavior and nudge corporations toward a governance structure in line with societal values of fairness, equality, transparency, and safety.”); Chen Lin, Micah S. Officer, Thomas Schmid & Hong Zou, Is Skin in the Game a Game Changer? Evidence from Mandatory Changes of D&O Insurance Policies, 68 J. Acct. & Econ. 1–2 (2019) (arguing that the structure of insurance policies matters).Show More rather than, say, banning D&O insurance altogether.21 21.See, e.g., Merritt B. Fox, Civil Liability and Mandatory Disclosure, 109 Colum. L. Rev. 237, 288–89 (2009) (calling for an end to D&O insurance for certain securities violations).Show More This Article’s argument contains four premises.

First, insurance (D&O and otherwise) can be operated in an “active” or “passive” fashion.22 22.Most insurers do not embrace a purely active or passive strategy, and it can be difficult to distinguish them in many cases. An insured who makes a costly claim may see her future premium rise from either an active or passive insurer, but for very different reasons. The active insurer raises the rate insofar as the claim signals information about the client’s type and future riskiness. The passive insurer raises the rate simply because that is the deal: the insurer pays now and recoups later, even if the claim was a fluke and signals nothing about the insured’s risk.Show More An active insurer seeks to address clients’ risks by discovering current risk level, setting premiums that reflect it, and discouraging excessively risky behavior.23 23.Daniel Schwarcz, Coverage Information in Insurance Law, 101 Minn. L. Rev. 1457, 1487 (2017) (“[T]he risk of moral hazard only exists when the insurer does not observe policyholder levels of activity or care after purchase . . . .”).Show More By contrast, a passive insurer does little vetting, risk-pricing, or monitoring. Instead, the passive insurer just seeks to recoup losses on a costly client by charging that client more in the future.24 24.Infra Section III.A.Show More

Second, active insurance is socially preferable at the margin. Active insurers encourage least-cost avoiders to avoid risks. They force their customers to internalize their expected costs.25 25.Omri Ben-Shahar & Kyle D. Logue, Outsourcing Regulation: How Insurance Reduces Moral Hazard, 111 Mich. L. Rev. 197, 228 n.102 (2012).Show More And they generate information about the magnitude of risks.26 26.See Tom Baker & Sean J. Griffith, Predicting Corporate Governance Risk: Evidence from the Directors’ and Officers’ Liability Insurance Market, 74 U. Chi. L. Rev. 487, 489–90 (2007) (arguing that insurance premiums can publicize problematic governance).Show More At a minimum, the board may ask the chief executive officer (“CEO”) for an explanation if insurance costs treble. Conversely, passive insurers are more problematic. They protect bad managers from the cost of their bad conduct, and muddy the signal litigation might otherwise send, by spreading the cost of managerial malfeasance into distant future periods. For that reason, society will tend to be better served by relatively more active insurance and managers will tend to prefer relatively more passive insurance.

Third, the passive method is viable only if the market for insurance is rather uncompetitive and illiquid, because it requires customers to submit themselves to years of premiums that exceed the actuarially fair rate.27 27.Infra Sections III.B. & C.Show More If the insureds often switched under those circumstances, the passive insurance model would collapse. Passive insurance requires enduring relationships between insured and insurer, but it can thrive under those conditions.

Fourth, the existing insurance market is consistent with an excessive degree of passive insurance, owing to agency costs and transaction costs.28 28.Infra Sections II.C. & III.D.Show More Insurance relationships are long-lasting; switching insurers is rare. For a firm to switch from its longstanding passive insurer to a lower-priced active insurer, directors and officers must approve the change. But directors and officers would be exposed to greater pressure and transparency from an active insurer. At the same time, contracting conventions and market structure impose frictions on competition. Managers can cite these frictions as a reason to retain the passive insurer they like best.

These premises lead to the descriptive conclusion that insufficient client turnover has led D&O insurance to insufficiently address client risk. The normative conclusion is that we should impose mandatory D&O insurance rotation.

Insurers should be permitted no more than five years with a given client, at which time they must take their underwriting elsewhere. Mandatory rotation renders the passive insurance model impractical. Insurers can never hope to insure passively and then recoup their losses down the line. Every insurer will have to actively vet insureds for risks pending over the next few years, to monitor for abrupt changes during that period, and to take steps to limit a corporation’s slide toward increased risk; the result is that corporations and their managers will be more likely to internalize the expected cost of their harmful behaviors and, thus, take those harms more seriously.

Mandatory rotation has been used in other areas of law to destabilize corrupt relationships that compromise gatekeepers and fiduciaries. Auditing partners must rotate every five years.29 29.Infra Subsection IV.B.1.Show More The theory is that genuine auditing can jeopardize a long relationship, but auditors who know they will soon lose their client anyway are freer to audit honestly. Similar intuitions drive term limits for elected officials.30 30.Infra Subsection IV.B.2.Show More The temptation to buckle to special interests is greater if it secures reelection. If reelection is impossible, the politician is freer to act according to her best judgment of the public interest. Likewise, career diplomats with the foreign service are permitted only three years in a given foreign country.31 31.Infra Subsection IV.B.3.Show More While these changes may diminish some country-specific expertise, the alternative of long-service may tempt foreign service officers to strike implicit bargains with their host country that undermine America’s interests.

The deep economic intuition behind mandatory insurance rotation is that passive D&O insurance is a relational contract.32 32.See Jay M. Feinman, The Insurance Relationship as Relational Contract and the “Fairly Debatable” Rule for First-Party Bad Faith, 46 San Diego. L. Rev. 553, 556–57 (2009) (“The insurance contract is a relational contract par excellence. The relation created by the contract extends over time; although a typical policy term is a year, the rate of renewal is very high, often in the order of ninety percent, so a typical relation extends over years or even decades.”). Note that Feinman was not addressing D&O insurance.Show More Relational contracts are agreements that motivate cooperation without recourse to legal enforcement, but are instead embedded in a relationship.33 33.See Robert E. Scott, Conflict and Cooperation in Long-Term Contracts, 75 Calif. L. Rev. 2005, 2007–08 (1987); Morten Hviid, Long-Term Contracts and Relational Contracts, in 5The Encyclopedia of Law and Economics 54 (Boudewijn Bouckaert & Gerrit De Geest eds., 1999) (“Relational contract theory can be seen as an attempt to generate a model able to explain when transacting parties do not resort to contracts and by what means they ensure that each party fulfils their obligations. The theory focuses on the relationship between the ‘contracting’ parties and posits that this leads to cooperation and to implicit obligations being self-enforcing.”); Benjamin E. Hermalin, Avery W. Katz & Richard Craswell, Contract Law, in 1 Handbook of Law and Economics 123 (A. Mitchell Polinsky & Steven Shavell eds., 2007) (“Within the literature, self-enforcing contracts are often known as relational contracts.” (emphasis omitted)).Show More For example, a long-term supply agreement may include an unwritten term that the seller may sometimes deliver goods late or mark up prices to reflect rising costs, and the buyer may happily honor that agreement even if no court would enforce it, because the buyer wants to preserve an ongoing profitable relationship.34 34.For examples of this kind, see, e.g., Stewart Macaulay, Non-Contractual Relations in Business: A Preliminary Study, 28 Am. Socio. Rev. 55, 61–67 (1963); Ian R. MacNeil, The Many Futures of Contracts, 47 S. Cal. L. Rev. 691, 721, 732 (1974); H. Beale & T. Dugdale, Contracts Between Businessmen: Planning and the Use of Contractual Remedies, 2 Brit. J.L. and Soc’y 45, 45–46, 51, 53 (1975).Show More Relational contracts are widespread, but they only succeed when certain fragile conditions are met.35 35.E.g., Hviid, supra note 33, at 55 (“Repeated interaction may enable cooperation, because of the potential for a current deviation to be punished in the future. For this to work, four conditions must be met.”).Show More Importantly, relational contracts require some mechanism for overcoming the “last period problem.”36 36.Sean J. Griffith, Afterward and Comment: Towards an Ethical Duty to Market Investors, 35 Conn. L. Rev. 1223, 1239 (2003) (“The last period problem is a concept drawn from game theory and experimental economics to explain individual defections from cooperative enterprises in the last period of a repeated situation.”).Show More

In relational contracts, enforceable contract rights underdetermine the parties’ relationship.37 37.Charles J. Goetz & Robert E. Scott, Principles of Relational Contracts, 67 Va. L. Rev. 1089, 1091 (1981) (“A contract is relational to the extent that the parties are incapable of reducing important terms of the arrangement to well-defined obligations.”).Show More Cooperation is possible nevertheless because one party can detect and subsequently penalize defection by the other.38 38.Hviid, supra note 33, at 55 (“Any deviation must be observable and it must be punishable. This punishment must be credible so that it is clear that when required the punishment will be carried out, and the parties must be patient in the sense that the future matters to them.”).Show More Fear of reprisal keeps both parties cooperative. However, defection again becomes rational in the last period of a long game because reprisal becomes impossible.39 39.Christine Jolls, Contracts as Bilateral Commitments: A New Perspective on Contract Modification, 26 J. Legal Stud. 203, 231–32 (1997).Show More Passive insurance is a relational contract in which the managers agree (on behalf of the entity) to pay a higher-than-competitive rate in the future, and the insurer agrees to cover claims without any effort to expose or reduce governance problems. If both parties knew that the relationship was going to end soon, the insurer would have reason to breach the informal agreement by reducing its costs through monitoring and increasing its premiums now. And since they know they won’t get the cozy treatment that they want anyway, managers will no longer cheerlead an overpriced premium.

Part of what is interesting about this project is exploring the dark side of relational contracts. Most often, scholars of relational contracts adopt a laudatory tone: Is it not amazing that parties can accomplish their goals without much law?40 40.See, e.g., Robert C. Ellickson, Order Without Law: How Neighbors Settle Disputes 1, 1 (1991); Lisa Bernstein, Beyond Relational Contracts: Social Capital and Network Governance in Procurement Contracts, 7 J. Legal Analysis 561, 561–62 (2015) (discussing how master supply agreements, a type of relational contract between business firms, are designed to “keep the law . . . largely out of their relationship” and can “create a space in which private order can flourish.”).Show More But parties’ ability to informally secure a result is only laudatory if we would have been happy to honor their agreement had they made it formal. And not all contracts are of this sort. Business cartels use relational contracts to tacitly enforce restraints of trade that we would never countenance as formal contracts.41 41.Hermalin et al., supra note 33, at 122 (“It has long been understood from the repeated games literature that some agreements are self enforcing in the context of an ongoing relationship. The most prominent example of such ‘agreements’ is tacit collusion among competing firms.”).Show More Mob bosses use relational contracts to reward and govern their lieutenants.42 42.Curtis J. Milhaupt & Mark D. West, The Dark Side of Private Ordering: An Institutional and Empirical Analysis of Organized Crime, 67 U. Chi. L. Rev. 41, 43, 66 (2000).Show More And D&O insurers promise to help paper over managers’ mistakes and abuses in return for wastefully large insurance premiums. Relational contracts can allow parties to coordinate in ways we would never tolerate from formal contracts.

The structure of this Article is as follows. Part I introduces the practice and industrial organization of D&O insurance. Part II discusses the link between insurance and risk: while insurance can reduce riskiness, D&O insurers actually appear to exacerbate client risks, doing almost no monitoring or vetting. Part III provides a stylized introduction to two ways that D&O insurance business can operate—actively and passively. That Part shows that the market likely operates to generate excessive levels of passive insurance, and it explains that manager opportunism is central to the problem. Accordingly, Part IV presents a solution intended to increase the proportion of active D&O insurance: mandatory rotation of D&O insurers. It also explains analogies to other domains of law and addresses objections.

  1. Securities Class Action Filings: 2019 Year in Review, Cornerstone Research 13, https​://securities.stanford.edu/research-reports/1996-2019/Cornerstone-Research-Securities-Class​-Action-Filings-2019-YIR.pdf [https://perma.cc/PD8P-YL84] (reporting 10% of S&P 500 by market cap was sued for securities violations in 2019). Last year brought slightly fewer. Securities Class Action Filings: 2021 Year in Review, Cornerstone Research 15, https://www.cornerstone.com/wp-content/uploads/2022/02/Securities-Class-Action-Filings-2​021-Year-in-Review.pdf. [https://perma.cc/4JGL-35SH]. This 10% figure plainly understates the scope of litigation, since many investors’ suits are derivative actions with no securities violation component, but comprehensive data for derivative suits are not available.In this Article, I use the word “manager” to refer to both officers and directors.
  2. Alice Uribe & Leslie Scism, Companies Are Paying a Lot More to Insure Their Directors and Officers, Wall St. J. (June 21, 2020, 5:30 AM), https://www.wsj.com/articles/companies-are-paying-a-lot-more-to-insure-their-directors-and-officers-11592731801?mod=hp_listc_po​s2 [https://perma.cc/93HE-LMK9] (reporting that D&O litigation expenses are approaching $1 billion annually, not including jury verdicts or settlements).
  3. E.g., Eugene V. Rostow, To Whom and For What End is Corporate Management Responsible?, in The Corporation In Modern Society 48 (Edward S. Mason ed., 1959) (characterizing derivative suits as “the most important procedure the law has yet developed to police the internal affairs of corporations”); Robert B. Thompson & Randall S. Thomas, The Public and Private Faces of Derivative Lawsuits, 57 Vand. L. Rev. 1747, 1786–87 (2004) (finding data that derivative suits play a valuable monitoring role in duty of loyalty cases and that the tool combats unscrupulous directors); see also Jill E. Fisch, Teaching Corporate Governance Through Shareholder Litigation, 34 Ga. L. Rev. 745, 746 (2000) (explaining how the rules of shareholder litigation can “deter[] corporate misconduct”).
  4. See Rostow, supra note 3; Stephen M. Bainbridge, Fee-Shifting: Delaware’s Self-Inflicted Wound, 40 Del. J. Corp. L. 851, 852–53 (2016); Roberta Romano, The Shareholder Suit: Litigation without Foundation?, 7 J.L. Econ. & Org. 55, 84 (1991); Sean J. Griffith, Correcting Corporate Benefit: How to Fix Shareholder Litigation by Shifting the Doctrine on Fees, 56 B.C. L. Rev. 1, 2 (2015).
  5. Dain C. Donelson, Justin J. Hopkins & Christopher G. Yust, The Role of Directors’ and Officers’ Insurance in Securities Fraud Class Action Settlements, 58 J.L. & Econ. 747, 748 (2015); see Sean J. Griffith, Uncovering A Gatekeeper: Why the SEC Should Mandate Disclosure of Details Concerning Directors’ and Officers’ Liability Insurance Policies, 154 U. Pa. L. Rev. 1147, 1189 (2006).
  6. Griffith, supra note 5, at 1168.
  7. Id. at 1163.
  8. Tom Baker & Sean J. Griffith, How the Merits Matter: Directors’ and Officers’ Insurance and Securities Settlements, 157 U. Pa. L. Rev. 755, 797–98 (2009).
  9. See Richard M. Phillips & Gilbert C. Miller, The Private Securities Litigation Reform Act of 1995: Rebalancing Litigation Risks and Rewards for Class Action Plaintiffs, Defendants and Lawyers, 51 Bus. Law. 1009, 1014–15 (1996).
  10. The “gatekeeper” idea is that trusted professionals near the corporation can be used as external checks on fraud and mismanagement. See John C. Coffee, Jr., The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence and Governance of Accounting 11–13 (Colum. L. Sch., Ctr. For L. & Econ. Stud., Working Paper No. 191, 2001), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=270944 [https://perma.cc/LM3D-3T6H].
  11. See Joseph A. Grundfest, Punctuated Equilibria in the Evolution of United States Securities Regulation, 8 Stan. J.L. Bus. & Fin. 1, 7–8 (2002) (“D&O insurers could today easily make the retention of insurer-approved auditors a condition of coverage. They could today also require an element of control over the audit process. Yet they don’t. Why?”).
  12. Such responses were once common. Roberta Romano, What Went Wrong With Directors’ and Officers’ Liability Insurance?, 14 Del. J. Corp. L. 1, 12 (1989). Professor Romano’s article diagnosed insurer responses to a sudden increase in liability exposure, so it is unsurprising that insurers reacted in this way. Id. at 13. There is no indication that this tendency to withdraw is still commonplace.
  13. Richard V. Eicson & Aaron Doyle, Uncertain Business: Risk, Insurance and the Limits of Knowledge 94–211 (2004) (reporting research from a variety of contexts including building construction and disability management); Steven Shavell, On Liability and Insurance, 13 Bell J. Econ. 120, 121–22 (1982) (modeling the relationship between liability and insurance and concluding that, “[a]lthough the purchase of liability insurance changes the incentives created by liability rules, the terms of the insurance policies sold in a competitive setting would be such as to provide an appropriate substitute (but not necessarily equivalent) set of incentives to reduce accident risks”).
  14. Moral hazard is the tendency of insured parties to engage in riskier conduct. Kenneth J. Arrow, Uncertainty and the Welfare Economics of Medical Care, 53 Am. Econ. Rev. 941, 961 (1963); Daniel Schwarcz, Reevaluating Standardized Insurance Policies, 78 U. Chi. L. Rev. 1263, 1283 (2011). With respect to health insurance, smoking has been described as the “classic moral hazard.” Thomas R. McLean, International Law, Telemedicine & Health Insurance: China as a Case Study, 32 Am. J.L. & Med. 7, 25 (2006). Adverse selection is the tendency of the costliest clients to seek out coverage offered at a given price. Cf. George A. Akerlof, The Market for “Lemons”: Quality Uncertainty and the Market Mechanism, 84 Q.J. Econ. 488, 488 (1970) (setting out a canonical adverse selection model in a non-insurance commercial setting); Peter Siegelman, Adverse Selection in Insurance Markets: An Exaggerated Threat, 113 Yale L.J. 1223, 1223 (2004) (explaining that adverse selection is a process where “insureds utilize private knowledge of their own riskiness when deciding to buy or forgo insurance”).
  15. Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2018, at 9 (2018), https://www.aon.com/getmedia/20bfac85-dce6-4902-91cb-c61265abcd7e/2018-Q4-DO-Pric​ing-Index.aspx [https://perma.cc/PR58-CPUT] (95.7% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2017, at 9 (2017), https://ww​w.aon.com/attachments/risk-services/d-o_pricing_index/2017_Q4_DO_Pricing_Index.pdf [h​ttps://perma.cc/V33R-ZY9U] (93.2% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2016, at 8 (2016), https://www.aon.com/attachme​nts/risk-services/d-o_pricing_index/2016_Q4_DO_Pricing_I​ndex.pdf [https://perma.cc/HRY​4-4HTA] (95.3% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2015, at 8 (2015), https://www.aon.com/attachments/risk-services/d-o_pricing_index​/2015_Q4_DO_Pricing_Index.pdf [https://perma.cc/J5WG-K6QQ] (95% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2014, at 8 (2014), https://www.aon.com/attachments/risk-services/d-o_pricing_index/201​4_Q4_DO_Pricing_I​ndex.pdf [https://perma.cc/8CDA-MSYG] (93.7% annual retention); Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2013, at 3 (2013), https://www.aon​.com/attachments/risk-services/d-o_pricing_index/2013_Q4_DO_P​ricing-Index.pdf [https://​perma.cc/22DW-YDPB] (94.9% annual retention) Aon, Quarterly D&O Pricing Index: Fourth Quarter and Full Year 2012, at 3 (2012), https://www.aon.com/attachments/risk-services/d-o_pricing_index/2012_4Q_DandOPricingI​ndex.pdf [https://perma.cc/4GJU-4PKG] (94% retention for Q4).
  16. Alicia Davis Evans, The Investor Compensation Fund, 33 J. Corp. L. 223, 261 (2007) (“Currently, competitive pressures appear to make it impossible for D&O insurer premium prices to reflect governance risk fully.”).
  17. Infra Section II.C.
  18. Baker & Griffith, supra note 8, at 797–804.
  19. Cf. Grundfest, supra note 11, at 7 (noting that “the current structure of D&O insurance and auditor liability has failed to give rise to incentives” to address fraud risks even though “D&O insurers could today easily make the retention of insurer-approved auditors a condition of coverage”).
  20. See Shauhin A. Talesh, Insurance Companies as Corporate Regulators: The Good, The Bad, and the Ugly, 66 DePaul L. Rev. 463, 467 (2017) (“The debate going forward is not whether insurers are good risk regulators as prior scholars theorize, but more precisely, examining under what conditions can insurers make positive regulatory interventions into corporate behavior and nudge corporations toward a governance structure in line with societal values of fairness, equality, transparency, and safety.”); Chen Lin, Micah S. Officer, Thomas Schmid & Hong Zou, Is Skin in the Game a Game Changer? Evidence from Mandatory Changes of D&O Insurance Policies, 68 J. Acct. & Econ. 1–2 (2019) (arguing that the structure of insurance policies matters).
  21. See, e.g., Merritt B. Fox, Civil Liability and Mandatory Disclosure, 109 Colum. L. Rev. 237, 288–89 (2009) (calling for an end to D&O insurance for certain securities violations).
  22. Most insurers do not embrace a purely active or passive strategy, and it can be difficult to distinguish them in many cases. An insured who makes a costly claim may see her future premium rise from either an active or passive insurer, but for very different reasons. The active insurer raises the rate insofar as the claim signals information about the client’s type and future riskiness. The passive insurer raises the rate simply because that is the deal: the insurer pays now and recoups later, even if the claim was a fluke and signals nothing about the insured’s risk.
  23. Daniel Schwarcz, Coverage Information in Insurance Law, 101 Minn. L. Rev. 1457, 1487 (2017) (“[T]he risk of moral hazard only exists when the insurer does not observe policyholder levels of activity or care after purchase . . . .”).
  24. Infra Section III.A.
  25. Omri Ben-Shahar & Kyle D. Logue, Outsourcing Regulation: How Insurance Reduces Moral Hazard, 111 Mich. L. Rev. 197, 228 n.102 (2012).
  26. See Tom Baker & Sean J. Griffith, Predicting Corporate Governance Risk: Evidence from the Directors’ and Officers’ Liability Insurance Market, 74 U. Chi. L. Rev. 487, 489–90 (2007) (arguing that insurance premiums can publicize problematic governance).
  27. Infra Sections III.B. & C.
  28. Infra Sections II.C. & III.D.
  29. Infra Subsection IV.B.1.
  30. Infra Subsection IV.B.2.
  31. Infra Subsection IV.B.3.
  32. See Jay M. Feinman, The Insurance Relationship as Relational Contract and the “Fairly Debatable” Rule for First-Party Bad Faith, 46 San Diego. L. Rev. 553, 556–57 (2009) (“The insurance contract is a relational contract par excellence. The relation created by the contract extends over time; although a typical policy term is a year, the rate of renewal is very high, often in the order of ninety percent, so a typical relation extends over years or even decades.”). Note that Feinman was not addressing D&O insurance.
  33. See Robert E. Scott, Conflict and Cooperation in Long-Term Contracts, 75 Calif. L. Rev. 2005, 2007–08 (1987); Morten Hviid, Long-Term Contracts and Relational Contracts, in 5 The Encyclopedia of Law and Economics 54 (Boudewijn Bouckaert & Gerrit De Geest eds., 1999) (“Relational contract theory can be seen as an attempt to generate a model able to explain when transacting parties do not resort to contracts and by what means they ensure that each party fulfils their obligations. The theory focuses on the relationship between the ‘contracting’ parties and posits that this leads to cooperation and to implicit obligations being self-enforcing.”); Benjamin E. Hermalin, Avery W. Katz & Richard Craswell, Contract Law, in 1 Handbook of Law and Economics 123 (A. Mitchell Polinsky & Steven Shavell eds., 2007) (“Within the literature, self-enforcing contracts are often known as relational contracts.” (emphasis omitted)).
  34. For examples of this kind, see, e.g., Stewart Macaulay, Non-Contractual Relations in Business: A Preliminary Study, 28 Am. Socio. Rev. 55, 61–67 (1963); Ian R. MacNeil, The Many Futures of Contracts, 47 S. Cal. L. Rev. 691, 721, 732 (1974); H. Beale & T. Dugdale, Contracts Between Businessmen: Planning and the Use of Contractual Remedies, 2 Brit. J.L. and Soc’y 45, 45–46, 51, 53 (1975).
  35. E.g., Hviid, supra note 33, at 55 (“Repeated interaction may enable cooperation, because of the potential for a current deviation to be punished in the future. For this to work, four conditions must be met.”).
  36. Sean J. Griffith, Afterward and Comment: Towards an Ethical Duty to Market Investors, 35 Conn. L. Rev. 1223, 1239 (2003) (“The last period problem is a concept drawn from game theory and experimental economics to explain individual defections from cooperative enterprises in the last period of a repeated situation.”).
  37.  Charles J. Goetz & Robert E. Scott, Principles of Relational Contracts, 67 Va. L. Rev. 1089, 1091 (1981) (“A contract is relational to the extent that the parties are incapable of reducing important terms of the arrangement to well-defined obligations.”).
  38. Hviid, supra note 33, at 55 (“Any deviation must be observable and it must be punishable. This punishment must be credible so that it is clear that when required the punishment will be carried out, and the parties must be patient in the sense that the future matters to them.”).
  39. Christine Jolls, Contracts as Bilateral Commitments: A New Perspective on Contract Modification, 26 J. Legal Stud. 203, 231–32 (1997).
  40. See, e.g., Robert C. Ellickson, Order Without Law: How Neighbors Settle Disputes 1, 1 (1991); Lisa Bernstein, Beyond Relational Contracts: Social Capital and Network Governance in Procurement Contracts, 7 J. Legal Analysis 561, 561–62 (2015) (discussing how master supply agreements, a type of relational contract between business firms, are designed to “keep the law . . . largely out of their relationship” and can “create a space in which private order can flourish.”).
  41. Hermalin et al., supra note 33, at 122 (“It has long been understood from the repeated games literature that some agreements are self enforcing in the context of an ongoing relationship. The most prominent example of such ‘agreements’ is tacit collusion among competing firms.”).
  42. Curtis J. Milhaupt & Mark D. West, The Dark Side of Private Ordering: An Institutional and Empirical Analysis of Organized Crime, 67 U. Chi. L. Rev. 41, 43, 66 (2000).

Permission to Destroy: How a Historical Understanding of Property Rights can Reign in Consent Searches

Consent searches are by far the most common tool to circumvent the Fourth Amendment’s warrant requirement. Though police officers have the property owner’s permission, the searches they conduct are not always harmless. Without probable cause or reasonable suspicion, consent searches have justified officers’ destruction of car parts, electronics, and shoes. Are officers allowed to damage property after receiving consent to search a person’s belongings? In some jurisdictions, a consent search becomes unreasonable when officers destroy property, entitling the owner to money damages in civil litigation or the exclusion of evidence in criminal prosecutions. In other jurisdictions, an owner’s consent means she has forfeited the right to have her property stay intact. This Note’s first contribution is identifying and examining this consequential circuit split.

To resolve Fourth Amendment ambiguities, the Supreme Court has increasingly turned to the common law in place at the Founding. The mishandling and destruction of colonists’ personal property by British soldiers acting pursuant to general warrants and writs of assistance helped to spur the Revolutionary War. This Note’s second contribution applies Founding-era evidence to consent search doctrine. By drawing on colonial records, this Note offers an originalist argument for restraining consent searches.

Introduction

Just before daybreak on March 31, 2011, ten law enforcement officials arrived at the Chicago apartment where Jai Crutcher and Christopher Colbert, brothers by adoption, lived with their families.1.Colbert v. City of Chicago, 851 F.3d 649, 652 (7th Cir. 2017); id. at 661 (Hamilton, J., concurring in part and dissenting in part).Show More The officers told Crutcher they were there to conduct a parole check, and Crutcher consented to the search.2.Id. at 652 & n.1 (majority opinion) (“The terms of Crutcher’s release required him to ‘refrain from possessing a firearm or other dangerous weapon,’ ‘consent to a search of [his] person, property, or residence under [his] control,’ and ‘comply with any additional conditions the Prisoner Review Board has or may set as a condition of [his] parole or mandatory supervised release including, but not limited to: ELECTRONIC MONITORING FOR DURATION.’” (alterations in original)).Show More As the police moved through the house, their search quickly turned destructive. In testimony that Judge David Hamilton of the U.S. Court of Appeals for the Seventh Circuit called “disturbing,” the brothers described “the fright of their children as officers broke holes in the walls, cut open a couch, [and] tore doors off of cabinets.”3.Id. at 661 (Hamilton, J., dissenting in part). Both the majority and dissenting opinions recounted the facts in the light most favorable to the plaintiffs because the case was on appeal from a grant of summary judgment for the defendants. Id. at 654 (majority opinion); id. at 661 (Hamilton, J., dissenting in part). Therefore, the account of property damage recited here came from the plaintiffs’ perspective. In the officers’ depositions, they “claimed they did not remember many of the events of March 31, 2011.” Id. at 662.Show More In total, the officers damaged, dismantled, or destroyed: a weight bench, clothing, the basement door, the stairs, bedroom dressers, an electronic tablet, a stereo, a television, photographs of Crutcher’s grandmother, wall insulation, a kitchen countertop, and shelf hinges.4.Id. at 661, n.1 (Hamilton, J., dissenting in part); id. at 652–53 (majority opinion).Show More The officers tracked dog feces through the house during their search.5.Id. at 652 (majority opinion).Show More One officer allegedly “unholstered his firearm and threatened to shoot Crutcher’s six-week-old puppy before leaving the dog outside, where it was lost.”6.Id. at 661 (Hamilton, J., dissenting in part).Show More Crutcher and Colbert subsequently brought a § 1983 civil rights suit against the City of Chicago and four individual officers for violating their Fourth Amendment rights.7.Id. at 653–54, 656 (majority opinion).Show More The district court dismissed the complaint, the Seventh Circuit affirmed, and the brothers were left to foot the bill.8.Id. at 654, 661. Most courts have held that harms like these do not violate the Takings Clause or related provisions of state constitutions, making this Note’s proposal all the more important. See Lech v. Jackson, 791 Fed. App’x. 711, 719 (10th Cir. 2019); see also Maureen E. Brady, The Damagings Clauses, 104 Va. L. Rev. 341, 394–95 (2018) (describing several instances in which the government compensated property owners for police-inflicted damage).Show More

Whether, or how, property damage should affect the reasonableness of a consent search has divided the lower courts. In some jurisdictions, property damage has no effect on the legality of a consent search or potential remedies. In other jurisdictions, when police damage property, a search that began with the owner’s permission becomes per se unreasonable. In still others, officers may damage property so long as they do not render it unusable. Drawing on Founding-era evidence and the common law, this Note argues that mishandling and destroying property during consent searches would have been anathema to the Constitution’s Framers. This Note is the first to use the Fourth Amendment’s history to answer whether consent searches are constitutional when they involve property damage. Academics and advocates have frequently attacked the lax “voluntariness” requirement of consent searches, and they rightly note that many individuals agree to invasive searches without knowing they have the right to refuse.9.See, e.g., James C. McGlinchy, Note, “Was that a Yes or a No?” Reviewing Voluntariness in Consent Searches, 104 Va. L. Rev. 301, 303 (2018); Gerard E. Lynch, Why Not a Miranda for Searches?, 5 Ohio St. J. Crim. L. 233, 237, 245 (2007); Marcy Strauss, Reconstructing Consent, 92 J. Crim. L. & Criminology 211, 212 (2001); Oren Bar-Gill & Barry Friedman, Taking Warrants Seriously, 106 Nw. U. L. Rev. 1609, 1661–62 (2012).Show More But the scope of consent searches is just as important and is more likely to be taken up by the Supreme Court.10 10.While the Supreme Court has explicitly rejected a requirement that consent be given knowingly or intelligently, the Court has said relatively little about the scope of consent searches. See, e.g., Schneckloth v. Bustamonte, 412 U.S. 218, 227 (1973). In addition, Justices on the Court today often find government overreach when private property is concerned. See, e.g., Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2072 (2021) (holding that a California regulation giving union organizers access to farm workers constitutes a per se physical taking); Ala. Ass’n of Realtors v. Dep’t of Health and Human Servs., 141 S. Ct. 2485, 2489 (2021) (per curiam) (concluding that a federal eviction moratorium intruded on property owners’ right to exclude).Show More

Part I introduces consent searches, explaining their significance and situating them in Fourth Amendment doctrine. Part II describes how different circuits have addressed the question of property damage during consent searches and dissects their underlying reasoning. Part III uses Founding-era evidence to advocate limitations on consent searches. Part III also offers a workable test—one in accord with the primacy of property rights during the Founding—for identifying property damage that exceeds the scope of consent searches. Finally, Part IV anticipates and responds to objections.

  1. Colbert v. City of Chicago, 851 F.3d 649, 652 (7th Cir. 2017); id. at 661 (Hamilton, J., concurring in part and dissenting in part).
  2. Id. at 652 & n.1 (majority opinion) (“The terms of Crutcher’s release required him to ‘refrain from possessing a firearm or other dangerous weapon,’ ‘consent to a search of [his] person, property, or residence under [his] control,’ and ‘comply with any additional conditions the Prisoner Review Board has or may set as a condition of [his] parole or mandatory supervised release including, but not limited to: ELECTRONIC MONITORING FOR DURATION.’” (alterations in original)).
  3. Id. at 661 (Hamilton, J., dissenting in part). Both the majority and dissenting opinions recounted the facts in the light most favorable to the plaintiffs because the case was on appeal from a grant of summary judgment for the defendants. Id. at 654 (majority opinion); id. at 661 (Hamilton, J., dissenting in part). Therefore, the account of property damage recited here came from the plaintiffs’ perspective. In the officers’ depositions, they “claimed they did not remember many of the events of March 31, 2011.” Id. at 662.
  4. Id. at 661, n.1 (Hamilton, J., dissenting in part); id. at 652–53 (majority opinion).
  5. Id. at 652 (majority opinion).
  6. Id. at 661 (Hamilton, J., dissenting in part).
  7. Id. at 653–54, 656 (majority opinion).
  8. Id. at 654, 661. Most courts have held that harms like these do not violate the Takings Clause or related provisions of state constitutions, making this Note’s proposal all the more important. See Lech v. Jackson, 791 Fed. App’x. 711, 719 (10th Cir. 2019); see also Maureen E. Brady, The Damagings Clauses, 104 Va. L. Rev. 341, 394–95 (2018) (describing several instances in which the government compensated property owners for police-inflicted damage).
  9. See, e.g., James C. McGlinchy, Note, “Was that a Yes or a No?” Reviewing Voluntariness in Consent Searches, 104 Va. L. Rev. 301, 303 (2018); Gerard E. Lynch, Why Not a Miranda for Searches?, 5 Ohio St. J. Crim. L. 233, 237, 245 (2007); Marcy Strauss, Reconstructing Consent, 92 J. Crim. L. & Criminology 211, 212 (2001); Oren Bar-Gill & Barry Friedman, Taking Warrants Seriously, 106 Nw. U. L. Rev. 1609, 1661–62 (2012).
  10. While the Supreme Court has explicitly rejected a requirement that consent be given knowingly or intelligently, the Court has said relatively little about the scope of consent searches. See, e.g., Schneckloth v. Bustamonte, 412 U.S. 218, 227 (1973). In addition, Justices on the Court today often find government overreach when private property is concerned. See, e.g., Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2072 (2021) (holding that a California regulation giving union organizers access to farm workers constitutes a per se physical taking); Ala. Ass’n of Realtors v. Dep’t of Health and Human Servs., 141 S. Ct. 2485, 2489 (2021) (per curiam) (concluding that a federal eviction moratorium intruded on property owners’ right to exclude).

Slaying “Leviathan” (Or Not): The Practical Impact (Or Lack Thereof) of a Return to a “Traditional” Non-Delegation Doctrine

Administrative agencies play an integral role in the everyday lives of all Americans. Although it would be impossible to point to a single cause of the administrative state’s growth since the New Deal era, the Supreme Court’s acquiescence in congressional delegation of legislative authority is certainly one part of the equation. Since the early twentieth century, the Supreme Court has employed the so-called “intelligible principle” test to determine when Congress unconstitutionally delegates authority. In the century since the inception of the “intelligible principle” test, however, the Court has stricken down only two statutes as such unconstitutional delegations of legislative authority. For better or worse, this lax approach to delegation has permitted administrative agencies to gain increasingly broad authority.

Some believe, however, that a dissent authored by Justice Neil Gorsuch in a recent Supreme Court case, Gundy v. United States, marked the beginning of the end for the “intelligible principle” test and, thereby, the modern administrative state. This Note takes on the latter concern. It argues that a return to the traditional view of the nondelegation doctrine advocated by Justice Gorsuch does not compel the unwinding of the modern administrative state. It does so by applying the traditional tests to two modern statutes, both of which have received sustained and recent constitutional doubt under even the permissive “intelligible principle” test. This Note demonstrates that both statutes likely would survive nondelegation scrutiny under the traditional tests. Taking these statutes as an apt—albeit imperfect—proxy for the administrative state, this Note thus demonstrates that a return to a traditional nondelegation doctrine would not result in the sea-change in administrative law that some have predicted.

Introduction

Administrative agencies are an integral part of the modern American legal landscape.1.See, e.g., J. Harvie Wilkinson III, Assessing the Administrative State, 32 J.L. & Pol. 239, 243 (2017) (describing the “American regulatory landscape” as a “diverse set of institutions . . . that, together, seem to sprawl over just about every facet of modern life”).Show More For better or worse, the so-called “administrative state” has continued to grow from its inception in the New Deal era forward into the twenty-first century.2.See id. at 242–44 (describing the growth of the administrative state from the New Deal era to modern day).Show More Today, administrative agencies oversee how we vote,3.52 U.S.C. § 30106 (Supp. II 2012) (Federal Election Commission).Show More how we retire,4.42 U.S.C. § 901 (2012) (Social Security Administration).Show More the food we eat,5.21 U.S.C. § 393 (2012) (Food and Drug Administration).Show More the shows we watch on television,6.47 U.S.C. § 151 (2012) (Federal Communications Commission).Show More and much more. While one would be hard-pressed to pin down any one entity responsible7.Indeed, Congress must legislate, the Executive must act pursuant to that legislation, and the courts must stay out of the way.Show More for the growth of this “fourth branch,” at least part of the credit lies with the judicial branch. Courts repeatedly have played a role in granting increased authority to this new “Leviathan,”8.This term is frequently used to refer to the administrative state. See e.g., Wilkinson, supra note 1, at 242 (referring to the administrative state as an “impersonal leviathan”); Nicholas R. Parrillo, Leviathan and Interpretive Revolution: The Administrative State, the Judiciary, and the Rise of Legislative History, 1890–1950, 123 Yale L.J. 266, 281 (2013) (“[W]e must appreciate the crucial role of the newly expanded federal administrative state—the leviathan—in providing legislative history to the Court.”); Jamison E. Colburn, “Democratic Experimentalism”: A Separation of Powers for Our Time?, 37 Suffolk U. L. Rev. 287, 287 (2004); Marek D. Steedman, Taming Leviathan, 52 Tulsa L. Rev. 621 (2017); David French, John Roberts Throws the Administrative State a Lifeline, Nat’l Rev. (June 26, 2019), https://www.nationalreview.com/2019/06/john-roberts-throws-the-administrative-state-a-lifeline/ [https://perma.cc/B4SX-4GZJ] (referring to the “federal administrative leviathan”).Show More tacitly approving of its continued expansion in case after case.

One way in which the judiciary has acquiesced in the administrative state’s growth is through the judiciary’s reluctance to invoke the nondelegation doctrine as one means by which to rein in the authority granted.9.Gary Lawson, The Rise and Rise of the Administrative State, 107 Harv. L. Rev. 1231, 1240 (1994) (pointing out that it is “not . . . for lack of opportunity” that the Court “has not invalidated a congressional statute on nondelegation grounds since 1935”).Show More In 1928, the Supreme Court articulated what has become the modern standard for determining when Congress goes too far in its delegation of authority to administrative agencies—what is referred to as the “intelligible principle” test.10 10.J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928).Show More On only two occasions since that time, both in 1935, has the Supreme Court stricken down a duly enacted statute on the grounds that the law was an unconstitutional delegation of legislative authority.11 11.Panama Refin. Co. v. Ryan, 293 U.S. 388, 430 (1935); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 551 (1935).Show More Since then, the Court has routinely upheld broad delegations of authority to administrative agencies, citing the “intelligible principle” test as a pro-forma step leading to the delegation’s inevitable approval.12 12.See infra note 43 (collecting cases in which the Court applied the “intelligible principle” test).Show More This has led many who are skeptical of the constitutionality of the increasingly large role agencies play in the government to mourn that the nondelegation doctrine is nothing more than a dead letter.13 13.See, e.g., Keith E. Whittington & Jason Iuliano, The Myth of the Nondelegation Doctrine, 165 U. Pa. L. Rev. 379, 404 (2017) (arguing that there is not “much basis for thinking that there was ever a seriously confining nondelegation doctrine as part of the effective constitutional order”); Lawson, supra note 9, at 1237–41 (“Thus, the demise of the nondelegation doctrine . . . has encountered no serious real-world legal or political challenges, and none are on the horizon.”).Show More

That hand-wringing aside, the tide is turning on the nondelegation doctrine. A recent dissent by Justice Gorsuch in Gundy v. United States served as a strong signal that the nondelegation doctrine may yet have life in it.14 14.See generally, Gundy v. United States, 139 S. Ct. 2116, 2131–48 (2019) (Gorsuch, J., dissenting) (arguing that the Court should be less deferential to delegations of legislative power).Show More In his dissent, Justice Gorsuch argues that the “intelligible principle” test is without doctrinal or constitutional mooring and should be put to rest.15 15.Id. at 2138–40.Show More His dissent also articulates three “traditional tests” that, in his view, represent the true underpinnings of what the nondelegation doctrine ought to be employed to do.16 16.Id. at 2135–37, 2139.Show More With the momentum of an ideologically shifting Court behind him, his dissent sparked hand-wringing of a different sort—over the practical implications of waking the nondelegation doctrine after its nearly century-long slumber.17 17.Id. at 2130 (plurality opinion) (“[I]f SORNA’s delegation is unconstitutional, then most of Government is unconstitutional.”); see also Jonathan Hall, Note, The Gorsuch Test: Gundy v. United States, Limiting the Administrative State, and the Future of Nondelegation, 70 Duke L.J. 175, 179 (2020) (arguing that adoption of “the Gorsuch test” would have “destabilizing effects”); Ian Millhiser, Brett Kavanaugh’s Latest Opinion Should Terrify Democrats, Vox (Nov. 26, 2019), https://www.vox.com/2019/11/26/20981758/brett-kavanaughs-terrify-democrats-supreme-court-gundy-paul [https://perma.cc/DAL6-Z3H4] (“[Justice] Gorsuch, in other words, would give the Republican-controlled Supreme Court a veto power over all federal regulations.”).Show More This Note addresses, among other things, those concerns.

To be sure, a single dissenting opinion ordinarily wouldn’t sound the death-knell of a doctrine that has been a staple of constitutional jurisprudence for nearly a century. Nonetheless, it is not difficult to count to five votes in support of Justice Gorsuch’s position in Gundy. Chief Justice Roberts and Justice Thomas both joined the dissent, obviously indicating that they endorse its reasoning.18 18.See Gundy, 139 S. Ct. at 2131–48 (Gorsuch, J., dissenting).Show More Justice Alito concurred in the judgment only.19 19.Id. at 2130–31 (Alito, J., concurring in the judgment).Show More But his vote to uphold the result in Gundy was driven by a desire not to “single out” the statute at issue in Gundy “for special treatment.”20 20.Id.Show More And if a majority of the Court were willing to engage in a wholesale revision of the nondelegation doctrine, Justice Alito “would support that effort.”21 21.Id.Show More Neither Justice Kavanaugh nor Justice Barrett participated in the Gundy decision, leaving their views less known. In the time since Gundy, however, Justice Kavanaugh has indicated that he agrees with Justice Gorsuch’s position.22 22.See Paul v. United States, 140 S. Ct. 342, 342 (2019) (statement of Kavanaugh, J., respecting the denial of certiorari).Show More In a statement respecting the denial of certiorari in a companion case to Gundy, Justice Kavanaugh wrote that “Justice Gorsuch’s thoughtful Gundy opinion raised important points that may warrant further consideration in future cases.”23 23.Id.Show More Thus, while Justice Gorsuch’s dissent was just that—a dissent—it seems likely that his opinion now carries the support of a majority of the current members on the Court.24 24.This Note does not—nor does it need to in light of the head-counting provided above—take a view on what Justice Barrett’s stance may be on this issue. Even assuming Justice Barrett disagrees with Justice Gorsuch, it seems as though there are now five votes to support his dissenting position.Show More That reality raises the stakes for what the opinion means for the administrative state, which is what this Note aims to address.

This Note analyzes the constitutional and pragmatic issues implicated by Justice Gorsuch’s opinion. Part I addresses the fundamental principle of separation of powers. That part provides a brief constitutional overview of how the delegation of legislative authority to non-legislative actors implicates that basic constitutional precept. Part II provides a brief overview of the Court’s decision and Justice Gorsuch’s dissent in Gundy. Part III explores the constitutional and doctrinal bases for the “traditional tests” Justice Gorsuch articulates in his Gundy dissent. That Part, by explaining the constitutional and precedential frameworks for those tests, defends the soundness of Justice Gorsuch’s premise. Part IV then applies the “traditional tests” to two specific statutes, which received nondelegation scrutiny beginning nearly a century ago, and continue to be scrutinized as recently as cases decided within the past year. In its application of the “traditional tests” to these constitutionally dubious statutes, this Note argues that Justice Gorsuch’s proposed “revolution” of nondelegation jurisprudence would not result in the sea-change that some have predicted. Rather, its analysis shows that the limits these “traditional tests” impose on delegation, while meaningful, are not impossible to satisfy. Indeed, the tests leave Congress ample flexibility to govern effectively without forsaking the boundaries imposed by the separation of powers. At bottom, it demonstrates, in contrast with the plurality’s fears articulated in Gundy, that Justice Gorsuch’s traditional nondelegation approach does not compel the alarmist conclusion that “most of Government is unconstitutional.”25 25.Gundy, 139 S. Ct. at 2130.Show More

  1. * University of Virginia School of Law, J.D. 2020. This paper has benefitted greatly from a host of folks, without whom it would not have been written in the first place, much less published. Specifically, thanks go to Ray Gans and Andrew Kintner for their helpful, encouraging, and thoughtful feedback from the earliest stages of putting pen to paper. Additionally, to the members of the Virginia Law Review for their thorough and insightful revisions throughout the editing process. All the credit is theirs—all the errors mine.
  2. See, e.g., J. Harvie Wilkinson III, Assessing the Administrative State, 32 J.L. & Pol. 239, 243 (2017) (describing the “American regulatory landscape” as a “diverse set of institutions . . . that, together, seem to sprawl over just about every facet of modern life”).
  3. See id. at 242–44 (describing the growth of the administrative state from the New Deal era to modern day).
  4. 52 U.S.C. § 30106 (Supp. II 2012) (Federal Election Commission).
  5. 42 U.S.C. § 901 (2012) (Social Security Administration).
  6. 21 U.S.C. § 393 (2012) (Food and Drug Administration).
  7. 47 U.S.C. § 151 (2012) (Federal Communications Commission).
  8. Indeed, Congress must legislate, the Executive must act pursuant to that legislation, and the courts must stay out of the way.
  9. This term is frequently used to refer to the administrative state. See e.g., Wilkinson, supra note 1, at 242 (referring to the administrative state as an “impersonal leviathan”); Nicholas R. Parrillo, Leviathan and Interpretive Revolution: The Administrative State, the Judiciary, and the Rise of Legislative History, 1890–1950, 123 Yale L.J. 266, 281 (2013) (“[W]e must appreciate the crucial role of the newly expanded federal administrative state—the leviathan—in providing legislative history to the Court.”); Jamison E. Colburn, “Democratic Experimentalism”: A Separation of Powers for Our Time?, 37 Suffolk U. L. Rev. 287, 287 (2004); Marek D. Steedman, Taming Leviathan, 52 Tulsa L. Rev. 621 (2017); David French, John Roberts Throws the Administrative State a Lifeline, Nat’l Rev. (June 26, 2019), https://www.nationalreview.com/2019/06/john-roberts-throws-the-administrative-state-a-lifeline/ [https://perma.cc/B4SX-4GZJ] (referring to the “federal administrative leviathan”).
  10. Gary Lawson, The Rise and Rise of the Administrative State, 107 Harv. L. Rev. 1231, 1240 (1994) (pointing out that it is “not . . . for lack of opportunity” that the Court “has not invalidated a congressional statute on nondelegation grounds since 1935”).
  11. J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928).
  12. Panama Refin. Co. v. Ryan, 293 U.S. 388, 430 (1935); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 551 (1935).
  13. See infra note 43 (collecting cases in which the Court applied the “intelligible principle” test).
  14. See, e.g., Keith E. Whittington & Jason Iuliano, The Myth of the Nondelegation Doctrine, 165 U. Pa. L. Rev. 379, 404 (2017) (arguing that there is not “much basis for thinking that there was ever a seriously confining nondelegation doctrine as part of the effective constitutional order”); Lawson, supra note 9, at 1237–41 (“Thus, the demise of the nondelegation doctrine . . . has encountered no serious real-world legal or political challenges, and none are on the horizon.”).
  15. See generally, Gundy v. United States, 139 S. Ct. 2116, 2131–48 (2019) (Gorsuch, J., dissenting) (arguing that the Court should be less deferential to delegations of legislative power).
  16. Id. at 2138–40.
  17. Id. at 2135–37, 2139.
  18. Id. at 2130 (plurality opinion) (“[I]f SORNA’s delegation is unconstitutional, then most of Government is unconstitutional.”); see also Jonathan Hall, Note, The Gorsuch Test: Gundy v. United States, Limiting the Administrative State, and the Future of Nondelegation, 70 Duke L.J. 175, 179 (2020) (arguing that adoption of “the Gorsuch test” would have “destabilizing effects”); Ian Millhiser, Brett Kavanaugh’s Latest Opinion Should Terrify Democrats, Vox (Nov. 26, 2019), https://www.vox.com/2019/11/26/20981758/brett-kavanaughs-terrify-democrats-supreme-court-gundy-paul [https://perma.cc/DAL6-Z3H4] (“[Justice] Gorsuch, in other words, would give the Republican-controlled Supreme Court a veto power over all federal regulations.”).
  19. See Gundy, 139 S. Ct. at 2131–48 (Gorsuch, J., dissenting).
  20. Id. at 2130–31 (Alito, J., concurring in the judgment).
  21. Id.
  22. Id.
  23. See Paul v. United States, 140 S. Ct. 342, 342 (2019) (statement of Kavanaugh, J., respecting the denial of certiorari).
  24. Id.
  25. This Note does not—nor does it need to in light of the head-counting provided above—take a view on what Justice Barrett’s stance may be on this issue. Even assuming Justice Barrett disagrees with Justice Gorsuch, it seems as though there are now five votes to support his dissenting position.
  26. Gundy, 139 S. Ct. at 2130.
  27. Mistretta v. United States, 488 U.S. 361, 372 (1989).
  28. Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 42–43 (1825).
  29. Yakus v. United States, 321 U.S. 414, 425 (1944) (alteration in original) (quoting Currin v. Wallace, 306 U.S. 1, 15 (1939)).
  30. See The Federalist No. 47, at 301 (James Madison) (stating that, if the Constitution failed to protect against a breakdown in the separation of powers, “no further arguments would be necessary to inspire a universal reprobation of the system”).
  31. Id.
  32. The Federalist No. 37, at 228 (James Madison).
  33. The Federalist No. 47, at 301 (James Madison).
  34. See The Federalist No. 51, at 321–22 (James Madison) (“But the great security against a gradual concentration of the several powers in the same department consists in giving to those who administer each department the necessary constitutional means and personal motives to resist encroachments of the others. . . . Ambition must be made to counteract ambition.”).
  35. The Federalist No. 47, at 301 (James Madison); see also Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 42–43 (1825) (holding that Congress may not constitutionally delegate legislative powers); Peter B. McCutchen, Mistakes, Precedent, and the Rise of the Administrative State: Toward a Constitutional Theory of the Second Best, 80 Cornell L. Rev. 1, 8 (1994) (“[T]he abdication of power and its corresponding responsibilities is as serious a problem as aggrandizement.”).
  36. U.S. Const. art. I, § 1 (emphasis added).
  37. Wayman, 23 U.S. at 42–43.
  38. Field v. Clark, 143 U.S. 649, 693–94 (1892) (quotation omitted).
  39. Id. at 694 (quotation omitted).
  40. Id. at 693–94 (quotation omitted).
  41. Wayman, 23 U.S. at 42–43.
  42. 276 U.S. 394 (1928).
  43. Id. at 409.
  44. See, e.g., Whitman v. Am. Trucking Ass’n, 531 U.S. 457, 474 (2001) (“The scope of discretion § 109(b)(1) [of the Clean Air Act] allows is in fact well within the outer limits of our nondelegation precedents.”); Mistretta v. United States, 488 U.S. 361, 371–79 (1989) (holding that, “[a]lthough Congress ha[d] delegated significant discretion,” the Court had “no doubt” that the delegation in the sentencing guidelines to the Sentencing Commission was “sufficiently specific and detailed to meet constitutional requirements”); Loving v. United States, 517 U.S. 748, 751, 771–74 (1996) (finding “no fault” in the delegation to the President the authority to define aggravating factors that permit the death penalty in military capital cases); Touby v. United States, 500 U.S. 160, 162, 165–66 (1991) (discussing the intelligible-principle test and holding that “even if greater congressional specificity” were “required in the criminal context,” legislative delegation of authority to the Attorney General under § 201(h) of the Controlled Substances Act would still pass constitutional muster); Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 221 n.7 (1986) (rejecting the assertion that the discretionary authority granted by Multiemployer Pension Plan Amendments Act of 1980 did not constitute “a reasonable means of achieving congressional aims,” and that it provided an “intelligible principle” to guide the delegee); Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548, 559 (1976) (stating that 19 U.S.C. § 1862(b), or Section 232 of the Trade Expansion Act, “easily fulfills” the intelligible-principle test); Lichter v. United States, 334 U.S. 742, 774–87 (1948) (applying the intelligible-principle test and concluding the purpose and background of the Renegotiation Act established a “sufficient meaning” for the phrase “excessive profits” so as to make the Act “a constitutional definition of administrative authority and not an unconstitutional delegation of legislative power”).
  45. Panama Refin. Co. v. Ryan, 293 U.S. 388, 431–33 (1935); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 541–42 (1935).
  46. 293 U.S. 388 (1935).
  47. 295 U.S. 495 (1935).
  48. See generally Schechter Poultry, 295 U.S. at 519–51 (failing, in its 32-page opinion, to invoke the phrase “intelligible principle”).
  49. See Panama Refin., 293 U.S. at 420–30 (providing the “intelligible principle” language from J.W. Hampton as just one of many examples in which “the Court has recognized that there are limits of delegation which there is no constitutional authority to transcend”).
  50. See Gundy v. United States, 139 S. Ct. 2116, 2138–40 (2019) (Gorsuch, J., dissenting) (arguing that the “intelligible principle” phrase was used in J.W. Hampton as a way of “explain[ing] the operation of [other] traditional tests,” and describing it as a “passing comment” that has been “divorc[ed] . . . from its context,” and an “isolated phrase” that has been “treat[ed] . . . as if it were controlling”).
  51. See supra note 43.
  52. See Gundy, 139 S. Ct. at 2139–40 (Gorsuch, J., dissenting) (“This mutated version of the ‘intelligible principle’ remark has no basis in the original meaning of the Constitution, in history, or even in the decision from which it was plucked.”); id. at 2131 (Alito, J., concurring in the judgment) (“If a majority of this Court were willing to reconsider the approach we have taken for the past 84 years, I would support that effort.”).
  53. See supra notes 18–21 and accompanying text.
  54. See supra notes 22–23 and accompanying text.
  55. Gundy, 139 S. Ct. at 2121–22 (plurality opinion).
  56. Id. at 2122.
  57. 34 U.S.C. § 20913(d) (2012).
  58. Gundy, 139 S. Ct. at 2132 (Gorsuch, J., dissenting) (“The breadth of the authority Congress granted to the Attorney General in these few words can only be described as vast.”).
  59. Id. (providing examples of how the “pendulum swung” on retroactive application of SORNA depending on who happened to be serving as Attorney General at the time); but see id. at 2122 (plurality opinion) (“The final rule, issued in December 2010, reiterated that SORNA applies to all pre-Act offenders. That rule has remained the same to this day.”) (citation omitted).
  60. Id. at 2123–24 (plurality opinion).
  61. Id. (emphasis added).
  62. Id. at 2125.
  63. See id. at 2129 (reframing the constitutional question as such: “The question becomes: Did Congress make an impermissible delegation when it instructed the Attorney General to apply SORNA’s registration requirements to pre-Act offenders as soon as feasible?”).
  64. Id.
  65. Id. at 2124.
  66. For the plurality’s proposition, see id. at 2129. For Justice Gorsuch’s disagreement, see id. at 2131–32 (Gorsuch, J., dissenting).
  67. Id. at 2131–32 (Gorsuch, J., dissenting) (quoting Wayne A. Logan, The Adam Walsh Act and the Failed Promise of Administrative Federalism, 78 Geo. Wash. L. Rev. 993, 1000 (2010)).
  68. Id. at 2132.
  69. This exposes what was really at issue in Gundy—it was a case that turned on statutory interpretation. See e.g., Aditya Bamzai, Commentary, Delegation and Interpretive Discretion: Gundy, Kisor, and the Formation and Future of Administrative Law, 133 Harv. L. Rev. 164, 166 (2019) (stating that Gundy “turned largely on the plurality’s narrowing construction of a statutory scheme”). The plurality was content to impose a limiting construction to avoid the delegation question, while Justice Gorsuch was willing to take on the broader issue. See also Gundy, 139 S. Ct. at 2145 (Gorsuch, J., dissenting) (“Most everyone, the plurality included, concedes that if SORNA allows the Attorney General as much authority as we have outlined, it would present ‘a nondelegation question.’” (quoting id. at 2123–24 (plurality opinion))).
  70. Gundy, 139 S. Ct. at 2135 (Gorsuch, J., dissenting).
  71. Id. at 2135–39.
  72. See id. at 2136–37 (citing both Wayman v. Southard, 23 U.S. (10 Wheat.) 31, 43 (1825) and The Cargo of the Brig Aurora v. United States, 11 U.S. (7 Cranch) 382, 388 (1813) as articulating these standards). To be sure, it does not seem as though the third category comes explicitly from any one case. See id. at 2137. Nonetheless, Justice Gorsuch asserts that both Wayman and Aurora could have appropriately been decided on these grounds. Id. Further, it seems obvious that separation of powers concerns are not implicated when Congress gives another branch discretion over matters properly within the scope of that branch’s powers. See, e.g., David Schoenbrod, The Delegation Doctrine: Could the Court Give It Substance?, 83 Mich. L. Rev. 1223, 1260 (1985) (“Legislation that leaves the Executive Branch with discretion does not delegate legislative power where the discretion is to be exercised over matters already within the scope of executive power.”). In other words, nondelegation is implicated only when Congress abdicates its own constitutionally assigned power, not when it empowers another branch to act within that branch’s proper sphere.
  73. While the tests are interrelated, the satisfaction of any test is sufficient to insulate a statute from a nondelegation challenge. Which test applies depends on the unique circumstances presented by the delegation at issue in a particular case. See infra Part III.
  74. Gundy, 139 S. Ct. at 2136 (Gorsuch, J., dissenting) (quoting Wayman, 23 U.S. at 43).
  75. Id.
  76. Id. at 2137.
  77. See id. at 2137–38 (Gorsuch, J., dissenting).
  78. Id. at 2139 (“There’s a good argument, as well, that the statute in J. W. Hampton passed muster under the traditional tests.”).
  79. Id. at 2145 (“Nor would enforcing the Constitution’s demands spell doom for what some call the ‘administrative state.’ . . . Respecting the separation of powers forecloses no substantive outcomes.”).
  80. See supra note 17.
  81. Gundy, 139 S. Ct. at 2137–39 (Gorsuch, J., dissenting).
  82. Id. at 2130 (plurality opinion) (“[I]f SORNA’s delegation is unconstitutional, then most of Government is unconstitutional.”).
  83. Yakus v. United States, 321 U.S. 414, 425 (1944) (alterations in original) (quoting Currin v. Wallace, 306 U.S. 1, 15 (1939)).
  84. See Bamzai, supra note 68, at 177 (describing Justice Gorsuch’s approach as “a set of formal rules to identify those cases that pose a nondelegation problem”).
  85. Gundy, 139 S. Ct. at 2136 (Gorsuch, J., dissenting) (quoting Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 43 (1825)).
  86. By this, Chief Justice Marshall meant areas that did not implicate “powers which are strictly and exclusively legislative.” Wayman, 23 U.S. at 42–43.
  87. Id. at 43. For another early example of the “fill up the details” test, see, e.g., Hannibal Bridge Co. v. United States, 221 U.S. 194, 205 (1911) (“All that the act did was to impose upon the Secretary the duty of attending to such details as were necessary in order to carry out the declared policy of the Government.”).
  88. Panama Refin. Co. v. Ryan, 293 U.S. 388, 426 (1935) (citing Wayman, 23 U.S. at 43)).
  89. See, e.g., Red “C” Oil Mfg. Co. v. Bd. of Agric. of N.C., 222 U.S. 380, 394 (1912) (citations omitted).
  90. Buttfield v. Stranahan, 192 U.S. 470, 496 (1904).
  91. Id.
  92. Id.
  93. Id.
  94. Red “C” Oil Mfg. Co., 222 U.S. at 394.
  95. Buttfield, 192 U.S. at 496; see also St. Louis, Iron Mountain & S. Ry. Co. v. Taylor, 210 U.S. 281, 286–87 (1908) (holding that permitting the American Railway Association to set “the standard height of draw bars for freight cars,” which was binding on all railways engaged in interstate commerce, was not an unconstitutional delegation under Buttfield, presumably due to the fact that this was a detail that was constrained by the greater purpose, or primary standard, of the legislation—safety).
  96. See A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 530 (1935) (“Accordingly, we look to the statute to see . . . whether Congress in authorizing ‘codes of fair competition’ has itself established the standards of legal obligation . . . or, by the failure to enact such standards, has attempted to transfer that function to others.”); Panama Refin. Co. v. Ryan, 293 U.S. 388, 426 (1935) (“Moreover, the Congress . . . may establish primary standards, devolving upon others the duty to carry out the declared legislative policy”) (citing Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 43 (1825)).
  97. J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 406 (1928) (citations omitted).
  98. See Buttfield, 192 U.S. at 496.
  99. See Wayman, 23 U.S. at 43.
  100. See J.W. Hampton, 276 U.S. at 406; Buttfield, 192 U.S. at 496. To be sure, Congress’s requirement to provide “defined limits” for the Executive cannot be a high bar and remain consistent with the Court’s precedent. For example, in the statute at issue in Buttfield, Congress provided that the Secretary of the Treasury was to consider “purity, quality, and fitness for consumption” in making its determination. Id. at 494. Further, that statute required the Secretary to appoint a seven-member board of tea “expert[s]” who were to “prepare and submit to [the Secretary] standard samples of tea” and provide recommendations for the “standards of purity, quality, and fitness for consumption” of imported teas. An Act To Prevent the Importation of Impure and Unwholesome Tea, 29 Stat. 604, 605 (1897). Conversely, it is argued here that Congress could not have constitutionally stated a purpose of improving the quality of tea, and then empowered the Secretary to ban all tea of inferior quality, with no exposition as to how the Secretary was to make that determination. While the constraints provided in the Act at issue in Buttfield were admittedly not severe, they nonetheless confined the authority of the Secretary to some extent.
  101. See Schechter Poultry, 295 U.S. at 530, 541–42 (stating that the relevant provision of the Act represents an unconstitutional delegation of authority in part because it “supplies no standards”).
  102. See, e.g., Red “C” Oil Mfg. Co. v. Bd. of Agric. of N.C., 222 U.S. 380, 394 (1912); Buttfield, 192 U.S. at 496; St. Louis, Iron Mountain & S. Ry. Co., 210 U.S. 281, 287 (1908).
  103. 11 U.S. (7 Cranch) 382 (1813). Many early cases employed the “conditional fact-finding” test. See, e.g., Miller v. Mayor of New York, 109 U.S. 385, 394 (1883) (“The efficiency of an act as a declaration of legislative will must, of course, come from Congress, but the ascertainment of the contingency upon which the act shall take effect may be left to such agencies as it may designate.” (citing South Carolina v. Georgia, 93 U.S. 4, 13 (1876)); Field v. Clark, 143 U.S. 649, 694 (1892) (“The legislature cannot delegate its power to make a law; but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend.”) (quoting Locke’s Appeal, 72 Pa. 491, 498 (1873)).
  104. See Aurora, 11 U.S. at 386 (argument of Joseph R. Ingersoll) (stating that making the revival of a law contingent on the President’s proclamation is the equivalent of giving “that proclamation the force of law”); see also Union Bridge Co. v. United States, 204 U.S. 364, 378 (1907) (describing both the statute at issue and the Court’s analysis in Aurora).
  105. Aurora, 11 U.S. at 388.
  106. See Field v. Clark, 143 U.S. 649, 682–83 (1892) (describing the statute at issue in Aurora).
  107. 204 U.S. 364, 387 (1907); see also, J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 407 (1928) (“Congress may feel itself unable conveniently to determine exactly when its exercise of the legislative power should become effective, because dependent on future conditions, and it may leave the determination of such time to the decision of an Executive.”); Panama Refin. Co. v. Ryan, 293 U.S. 388, 426 (1935) (“[A]uthorizations given by Congress to selected instrumentalities for the purpose of ascertaining the existence of facts to which legislation is directed, have constantly been sustained.”); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 530 (1935) (“[T]he Constitution has never been regarded as denying to Congress the [ability to] . . . leav[e] to selected instrumentalities . . . the determination of facts to which the policy as declared by the legislature is to apply.”) (citing Panama Refin., 293 U.S. at 421).
  108. Union Bridge Co., 204 U.S. at 387.
  109. Id. at 366 (quoting An Act Making Appropriations for the Construction, Repair, and Preservation of Certain Public Works on Rivers and Harbors, and for Other Purposes, 30 Stat. 1121, 1153–54 (1899)).
  110. Id.
  111. Id. at 385.
  112. Id. at 386–88.
  113. See supra note 95 (citing to the Court’s discussion of conditional fact finding in both Schechter Poultry and Panama Refining).
  114. Panama Refin. Co. v. Ryan, 293 U.S. 388, 415 (1935).
  115. See A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 538 (1935) (describing the three “findings” that the President was required to make under the Recovery Act in order to exercise his discretion: (1) find that the proposed trade or industrial code did not inequitably restrict admission to membership in industrial associations; (2) that the proposed code did not promote monopolies; and (3) that the proposed code would “tend to effectuate the policy of” the Act (quoting National Industrial Recovery Act, Pub. L. No. 73-67 § 3, 48 Stat. 195, 196 (1933)).
  116. Id.
  117. Id.
  118. Id. at 537–42.
  119. See, e.g., Union Bridge Co. v. United States, 204 U.S. 364, 386–88 (1907).
  120. See Panama Refin. Co. v. Ryan, 293 U.S. 388, 415 (1935).
  121. See Schechter Poultry, 295 U.S. at 538.
  122. For example, the statute at issue in Buttfield required only that the Secretary of Treasury act with the purpose of excluding the lowest quality of tea. While it could conceivably be argued that this finding of quality constituted a finding of fact, that is not how the Court approached the statute. Buttfield v. Stranahan, 192 U.S. 470, 496 (1904) (finding the statute to simply provide the Secretary of the Treasury with the necessary standard to “effectuate the legislative policy declared in the statute”).
  123. Indeed, it is hard to imagine how Congress would condition an action upon the finding of fact if there were no declared policy. For example, in Union Bridge, what facts would have been relevant to the Secretary of War in determining which bridges must be removed or altered if the policy of promoting the free travel upon navigable waters was not clearly stated? See Union Bridge, 204 U.S. at 366.
  124. This conclusion is bolstered by the fact that the Court in Union Bridge also determined that Congress had previously laid down a “general rule” that the administrator was acting within. See id. at 386.
  125. Gundy v. United States, 139 S. Ct. 2116, 2137 (Gorsuch, J., dissenting).
  126. See id. (citing no direct authority for this proposition).
  127. See, e.g., Loving v. United States, 517 U.S. 748, 768 (1996) (“And it would be contrary to the respect owed the President as Commander in Chief to hold that he may not be given wide discretion and authority.”).
  128. Gundy, 139 S. Ct. at 2137 (Gorsuch, J., dissenting); see also Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring in the judgment) (“While the Constitution diffuses power the better to secure liberty, it also contemplates that practice will integrate the dispersed powers into a workable government. It enjoins upon its branches separateness but interdependence, autonomy but reciprocity.”) .
  129. 299 U.S. 304, 319–20 (1936); see also Youngstown, 343 U.S. at 635–37 (Jackson, J., concurring in the judgment) (explaining that, when the President acts within an area of executive discretion and in accordance with an express or implied congressional authorization, “his authority is at its maximum” and such an act in accordance with a congressional delegation would be afforded “the widest latitude of judicial interpretation”).
  130. Curtiss-Wright, 299 U.S. at 319–22.
  131. See Schoenbrod, supra note 71, at 1260.
  132. Id. at 1260–61.
  133. Field v. Clark, 143 U.S. 649 (1892).
  134. Id. at 1262–63; Gundy, 139 S. Ct. at 2137 (Gorsuch, J., dissenting) (“Wayman itself might be explained by the same principle as applied to the judiciary: Even in the absence of any statute, courts have the power under Article III ‘to regulate their practice.’”) (citing Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 43 (1825)).
  135. The statute at issue in this case was about a trade embargo against the British. See The Cargo of the Brig Aurora v. United States, 11 U.S. (7 Cranch) 382, 382–83 (1813).
  136. Clark, 143 U.S. 649, 691 (1892).
  137. Wayman, 23 U.S. at 43 (1825). As Justice Gorsuch notes in his dissent, courts possess this power under Article III, regardless of statutory authorization. Gundy, 139 S. Ct. at 2137 (Gorsuch, J., dissenting).
  138. See The Federalist No. 78, at 465 (Alexander Hamilton) (“The legislature . . . prescribes the rules by which the duties and rights of every citizen are to be regulated.”).
  139. Gundy, 139 S. Ct. at 2137 (Gorsuch, J., dissenting).
  140. See Schoenbrod, supra note 71, at 1260–61.
  141. Id. at 1260.
  142. Or, in other words, the point at which the “intelligible-principle” test got its legs. See supra note 43 (citing cases, beginning in 1948, when the Court began earnestly applying the “intelligible principle” test).
  143. Gundy, 139 S. Ct. at 2130 (“[I]f SORNA’s delegation is unconstitutional, then most of Government is unconstitutional.”).
  144. It bears mentioning that any selection of statutes would be an imperfect proxy for the administrative state as a whole (as would any individual field). The purpose of this Note is not to prove that every statute that delegates authority to an administrative agency would be upheld under the traditional tests. Rather, it is intended to show that even these broad delegations are likely constitutional under the traditional tests, indicating that much of the administrative state would fare similarly. While a statute-by-statute analysis might be productive, such an analysis is beyond the scope of this Note. Thus, the selected statutes are apt, if imperfect, vessels by which to gauge the impact of Justice Gorsuch’s dissent.
  145. Big Time Vapes, Inc. v. FDA, 963 F.3d 436, 447 (5th Cir. 2020) (internal quotation marks and citation omitted), petition for cert. filed, (U.S. Dec. 28, 2020) (No. 20-850).
  146. Am. Inst. for Int’l Steel v. United States, 376 F. Supp. 3d 1335, 1344 (Ct. Int’l Trade 2019) (stating that Section 232 “invite[s] the President to regulate commerce by way of means reserved for Congress”).
  147. Id. at 1346–52 (Katzmann, J., concurring dubitante).
  148. 21 U.S.C. § 387a–1 et seq. (2018); Pub. L. No. 111-31, 123 Stat. 1776, 1784 (2009).
  149. 21 U.S.C. § 301, et seq. (2018); Pub. L. No. 75-717, 52 Stat. 1040 (1938); see Big Time Vapes, 963 F.3d at 438.
  150. Big Time Vapes, 963 F.3d at 440. An “e-liquid” is a liquid mixture that is used in electronic vaping products. The liquid is aerosolized by the vaping device and inhaled by the user. See id. at 439 n.11.
  151. Deeming Tobacco Products to Be Subject to the Federal Food, Drug, and Cosmetic Act, 81 Fed. Reg. 28,974, 28,974­–75 (May 10, 2016).
  152. Big Time Vapes, 963 F.3d at 438–440.
  153. Id. at 446.
  154. The plurality opinion, plus Justice Alito’s concurrence.
  155. Big Time Vapes, 963 F.3d. at 447.
  156. Id. (cleaned up).
  157. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 125–26 (2000).
  158. 21 U.S.C. § 387 et seq. (2018).
  159. Id. § 387a(b).
  160. Id. (emphasis added).
  161. Id. § 387(20).
  162. Id. § 387d.
  163. Id. § 387e(b), (g).
  164. Id. § 387j(a)(1)–(2), (c)(1)(A).
  165. Id. § 387f(d), (a), 387c(a)(8)(B)(i).
  166. Id. § 321(rr)(1).
  167. Deeming Tobacco Products to be Subject to the Federal Food, Drug, and Cosmetic Act, 81 Fed. Reg. 28,974, at 28,976 (May 10, 2016).
  168. Id.
  169. 21 U.S.C. § 387a(b) (2018).
  170. Id.
  171. Id.
  172. Appellants’ Principal Brief at 45, Big Time Vapes, Inc. v. FDA, 963 F.3d 436 (5th Cir. 2020) (No. 19-60921), 2020 WL 957184 (emphasis added), petition for cert. filed, (U.S. Dec. 18, 2020) (No. 20-850).
  173. Id. at 58.
  174. Gundy v. United States, 139 S. Ct. 2116, 2130 (2019).
  175. Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 43 (1825).
  176. See, e.g., Red “C” Oil Mfg. Co. v. Bd. of Agric. of N.C., 222 U.S. 380, 394 (1912) (citations omitted).
  177. Buttfield v. Stranahan, 192 U.S. 470, 496 (1904).
  178. Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, § 3, 123 Stat. 1776, 1781–82 (2009). While not codified at 21 U.S.C. § 387 et seq., the Fifth Circuit in Big Time Vapes nonetheless relied on it to discern a congressional purpose. As the court put it, “Section 3 is part of the positive law that ran the gauntlet of bicameralism and presentment. That’s a far cry from ‘the sort of unenacted legislative history that often is neither truly legislative nor truly historical.’” Big Time Vapes, 963 F.3d at 444 n.24 (cleaned up) (quoting BNSF Ry. Co. v. Loos, 139 S. Ct. 893, 906 (2019) (Gorsuch, J., dissenting)). The distinction between statutory and legislative history is beyond the scope of this Note. Suffice it to say, when Congress enacts a statute by bicameralism and presentment, the entirety of that statute is fair game. See Loos, 139 S. Ct. at 906 (Gorsuch, J. dissenting) (describing statutory history as “the record of enacted changes Congress made to the relevant statutory text over time, the sort of textual evidence everyone agrees can sometimes shed light on meaning”).
  179. § 3(2), 123 Stat. at 1781.
  180. § 3(5)–(9), 123 Stat. at 1782.
  181. § 3(3), 123 Stat. at 1782.
  182. Buttfield, 192 U.S. at 496.
  183. Red “C” Oil Mfg. Co. v. Bd. of Agric. of N.C., 222 U.S. 380 (1912).
  184. Id. at 394.
  185. See J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 406 (1928) (stating that it is “frequently necessary to use officers of the Executive Branch, within defined limits”) (emphasis added). To be sure, Congress could express a clear purpose but provide no guidance on how the delegee was to achieve that purpose. Such a delegation, while it may contain a “sufficient primary standard” would almost certainly be an unconstitutional delegation of legislative authority. For example, suppose Congress passed a law to combat homelessness. In that hypothetical law, there are three sections: The first section creates a “Homelessness Commission”; the second section instructs the Homelessness Commission to “by the year 2024, reduce homelessness in America by 98%, by whatever means the Commission deems appropriate”; and the third section defines “homelessness.” The purpose here is exceptionally clear, and yet it is uncontroversial that providing no guidance as to how to achieve that purpose would be constitutionally problematic.
  186. Id. (emphasis added).
  187. Tariff Act of 1922, ch. 356, § 315, 42 Stat. 858, 941–43 (1922).
  188. See Hampton, Jr., & Co. v. United States, 14 Ct. Cust. App. 350, 361–67, T.D. 42030 (1927).
  189. It is illustrative because Justice Gorsuch stated that the statute at issue in J.W. Hampton likely “passed muster under the traditional tests.” Gundy v. United States, 139 S. Ct. 2116, 2139 (2019) (Gorsuch, J., dissenting).
  190. Hampton. Jr., & Co., 14 Ct. Cust. App. at 362.
  191. Id. at 361–63.
  192. Id. at 362.
  193. Id.
  194. Id at 361–62.
  195. Id. at 362.
  196. Id.
  197. Big Time Vapes, Inc. v. FDA 963 F.3d 436, 445 (5th Cir. 2020) (citing 21 U.S.C. § 321(rr)(1)), petition for cert. filed, (U.S. Dec. 18, 2020) (No. 20-850).
  198. 21 U.S.C. § 387a(b) (2018) (subjecting all cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco to TCA regulation).
  199. Id. § 387d(a).
  200. Id. § 387e(i)(1).
  201. Id. § 387j(a)–(c).
  202. Big Time Vapes, 963 F.3d at 446.
  203. 21 U.S.C. § 387a(b).
  204. 19 U.S.C. § 1862 (2018).
  205. 376 F. Supp. 3d 1335, 1337, 1345 (Ct. Int’l Trade 2019), cert. denied, 141 S. Ct. 133 (June 22, 2020) (No. 19-1117).
  206. Id. at 1346–47 (Katzmann, J., concurring dubitante) (“While acknowledging the binding force of [Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548 (1976)], with the benefit of the fullness of time and the clarifying understanding borne of recent actions, I have grave doubts.”).
  207. This statute has been the focus of much criticism for the breadth of discretion it confers on the President. See, e.g., Paul Bettencourt, Note, “Essentially Limitless”: Restraining Administrative Overreach Under Section 232, 17 Geo. J.L. Pub. Pol’y 711, 726–27 (2019) (analyzing Section 232 under a nondelegation framework, using the AIIS case as an example, but claiming that challenging the statute on a nondelegation basis would be “unlikely to succeed” unless “the Court revisits its jurisprudence”).
  208. 19 U.S.C. § 1862 (2018).
  209. Id. § 1862(b)(1)(A).
  210. Id. § 1862(b)(3)(A).
  211. Id.
  212. Id. § 1862(c)(1)(A).
  213. Id. § 1862(c)(1)(A)(ii).
  214. Id. § 1862(c)(1)(B), (c)(2).
  215. Id. § 1862(d).
  216. Id.
  217. Id. This is significant because it empowers the President to effectively conflate “economy” with “security.”
  218. Proclamation No. 9705, 83 Fed. Reg. 11,625, at 11,626 (Mar. 8, 2018).
  219. Proclamation No. 9704, 83 Fed. Reg. 11,619, at 11,620 (Mar. 8, 2018).
  220. Prior to the Trump administration, a President acted pursuant to Section 232 on six occasions, the last of which occurred in 1986. See Rachel F. Fefer et al., Cong. Rsch. Serv., Section 232 Investigations: Overview and Issues for Congress 4, App. B (2020). In contrast, under the Trump administration there were five investigations. Id. at app. B. Two of those investigations resulted in the imposition of tariffs, two are still in process, and one seemingly expired with no action due to a missed deadline. See id. at App. B. (providing a table of Section 232 investigations dating back to 1963); see also David Lawder, Trump Can No Longer Impose ‘Section 232’ Auto Tariffs After Missing Deadline: Experts, Reuters (Nov. 19, 2019), https://www.reuters.com/article/us-usa-trade-autos/trump-can-no-longer-impose-section-232-auto-tariffs-after-missing-deadline-experts-idUSKBN1XT0TK [https://perma.cc/D5QY-X7ZX] (stating that the statutory deadline for the Section 232 investigation being used to impose tariffs on foreign-made cars and auto parts passed with no action, forfeiting the administration’s opportunity to utilize such tariffs).
  221. See Fefer, supra note 219, at 7 (noting that in his Memo on proposed Section 232 tariffs, Secretary of Defense James Mattis, while agreeing that “imports of foreign steel and aluminum based on unfair trading practices impair the national security,” ultimately disagreed with the President’s broad-brushed imposition of tariffs in this instance, as “U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production”) (quoting Letter from James N. Mattis, Secretary of Defense, to Wilbur L. Ross Jr., Secretary of Commerce (2018), https://www.commerce.gov/sites/default/files/depart‌ment_of_defense_memo_response_to_steel_and_aluminum_policy_recommendations.pdf [https://perma.cc/M2FB-U63M]; see also Editorial Board, The National Security Tariff Ruse, Wall St. J. (Mar. 12, 2018), https://www.wsj.com/articles/the-national-security-tariff-ruse-1520897310 [https://perma.cc/V9UP-VYCY] (describing the Trump administration’s use of Section 232 to justify tariffs as “dubious,” because “[n]ot even the Pentagon buys” the notion “that steel and aluminum imports make the U.S. military vulnerable”); John Brinkley, Trump’s National Security Tariffs Have Nothing To Do with National Security, Forbes (Mar. 12, 2018) https://www.forbes.com/sites/johnbrinkley/2018/03/12/trumps-national-security-tariffs-have-nothing-to-do-with-national-security/?sh=197f0c6e706c [https://perma.cc/WZE3-AYNP] (arguing that “[t]he national security argument [on behalf of the tariffs] is a sham and everyone knows it,” as “[n]ot even Defense Secretary James Mattis bought it”).
  222. See Brinkley, supra note 220 (“It’s obvious that [the President] used the national security argument as a pretense for something he wanted to do, but for which he had no other legal justification.”).
  223. See Fefer, supra note 219, at 12 (quoting Requirements for Submissions Requesting Exclusions from the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel into the United States and Adjusting Imports of Aluminum into the United States, 83 Fed. Reg. 12,106 (Mar. 19, 2018)).
  224. Andrea Shalal, U.S. Handling of Tariffs Raises Appearance of ‘Improper Influence’: Watchdog, Reuters (Oct. 30, 2019) (quotation omitted), https://www.reuters.com/article/us-usa-trade-steel/u-s-handling-of-tariffs-raises-appearance-of-improper-influence-watchdog-idUSKBN1X92KP?feedType=RSS&feedName=topNews [https://perma.cc/5XPA-33J6].
  225. Fefer, supra note 219, at 12–15; see also Shalal, supra note 223 (explaining that the Commerce Department’s inspector general found a lack of transparency surrounding the Trump Administration’s tariff policy).
  226. 426 U.S. 548, 558–60 (1976).
  227. Proclamation No. 4341, 40 Fed. Reg. 3965, 3966 (Jan. 27, 1975); see also Algonquin, 426 U.S. at 554–55 (observing that President Ford’s Proclamation targeted the importation of petroleum and derivative products on the basis of national security concerns).
  228. Algonquin SNG, Inc. v. Fed. Energy Admin., 518 F.2d 1051, 1062 (D.C. Cir. 1975) (“[W]e do not say that Congress cannot constitutionally delegate, accompanied by an intelligible standard, such authority to the President; we merely find that they have not done so by this statute. We reach no conclusion on any delegation issue raised by the parties.”).
  229. Id.
  230. Id.
  231. Algonquin, 426 U.S. at 570–71.
  232. Id. at 559.
  233. Id. at 558–60.
  234. Id. at 559.
  235. 19 U.S.C. § 1862(b) (2018) (preconditioning the President’s action on the determination of the Secretary of Commerce).
  236. Id. § 1862(a).
  237. Algonquin, 426 U.S. at 559.
  238. Id. (quoting 19 U.S.C. § 1862(b)).
  239. Id.
  240. See 19 U.S.C. § 1862(d) (providing, among other factors, that the President should, “without excluding other relevant factors” consider factors such as “unemployment,” “effects resulting from the displacement of any domestic products by excessive imports,” and “the investment, exploration, and development necessary to assure” growth of domestic industries pertinent to national security).
  241. See Algonquin, 426 U.S. at 559.
  242. 376 F. Supp. 3d 1335 (Ct. Int’l Trade 2019).
  243. Id. at 1344–45.
  244. Id. at 1345 (citation omitted).
  245. Not to be confused with Second Circuit Senior Judge Robert Katzmann.
  246. Am. Inst. for Int’l Steel, 376 F. Supp. at 1347 (Katzmann, J., concurring dubitante).
  247. Id. at 1346. Judge Katzmann previously concluded that the power at issue, imposing duties and tariffs, “is a core legislative function.” Id.
  248. Id. at 1351–52.
  249. Id. at 1352.
  250. Id.
  251. Certainly, those who would claim that Justice Gorsuch’s position makes “most of Government . . . unconstitutional” would seem to agree with this statement. See Gundy v. United States, 139 S. Ct. 2116, 2130 (2019) (plurality opinion).
  252. See Am. Inst. for Int’l. Steel, 376 F. Supp. 3d at 1344–45 (majority opinion) (concluding that although, among other concerns, Section 232 “bestow[s] flexibility on the President and seem[s] to invite the President to regulate commerce by way of means reserved for Congress, leaving very few tools beyond his reach,” “such concerns are beyond this court’s power to address, given the Supreme Court’s decision in Algonquin”); see also id. at 1352 (Katzmann, J., concurring dubitante) (“[I]t is difficult to escape the conclusion that [Section 232] has permitted the transfer of power to the President in violation of the separation of powers.”). The conclusion that Section 232 presents a nondelegation “close call” is not undercut by the cursory analysis provided by the Court in Algonquin. To be sure, the Court there stated that Section 232 “easily fulfills” the intelligible-principle test. Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548, 559 (1976). That statement notwithstanding, as stated above, the Court did not meaningfully analyze the delegation claim in Algonquin. See supra Subsection IV.B.ii.
  253. See supra Section III.B.
  254. Cf. Am. Inst. for Int’l. Steel, 376 F. Supp. 3d at 1352 (Katzmann, J., concurring dubitante) (providing brief recognition of “the flexibility that can be allowed the President in the conduct of foreign affairs”).
  255. Id. at 1346 (Katzmann, J., concurring dubitante).
  256. 19 U.S.C. § 1862(a) (2018).
  257. See United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 320 (1936).
  258. See supra Section III.C.
  259. 19 U.S.C. § 1862(c)(1)(A). Indeed, the Court in Algonquin stated as much. Fed. Energy Admin v. Algonquin SNG, Inc., 426 U.S. 548, 559 (1976) (“[Section 232] establishes clear preconditions to Presidential action.”).
  260. Compare A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 538 (1935) (holding that the conditions precedent to presidential action in the Recovery Act were more appropriately described as “a statement of an opinion as to the general effect” that the proposed regulations would have) with The Cargo of the Brig Aurora v. United States, 11 U.S. (7 Cranch) 382, 382–83, 388–89 (1813) (holding that delegating the authority to the President to reinstate a law based on the factual determination of Great Britain’s ceasing to violate the neutral commerce of the United States was constitutionally permissible).
  261. 19 U.S.C. § 1862(c)(1)(A).
  262. See, e.g., Aurora, 11 U.S. at 382, 387–89 (reviewing the statutory scheme that “ma[d]e the revival of an act depend upon a future event”); Union Bridge Co. v. United States, 204 U.S. 364, 366–67 (1907) (requiring a finding of “an unreasonable obstruction to the free navigation” of navigable waters).
  263. See supra note 114 (listing the precedent findings the President was required to make under the Recovery Act at issue in Schechter Poultry).
  264. 19 U.S.C. § 1862(d).
  265. Schechter Poultry, 295 U.S. at 538 (citations omitted).
  266. Id.
  267. See 19 U.S.C. § 1862(a), (b), (c).
  268. Schechter Poultry, 295 U.S. at 538.
  269. Meshal v. Higginbotham, 804 F.3d 417, 443 (D.C. Cir. 2015) (Pillard, J., dissenting).
  270. See, e.g., Laura K. Donohue, The Limits of National Security, 48 Am. Crim. L. Rev. 1573, 1577–87 (2011) (providing an in-depth analysis of how to best define “national security”).
  271. Id. at 1580.
  272. 19 U.S.C. § 1862(a); see also, Bettencourt, supra note 206, at 715 (noting the “broad discretion” granted to the “executive branch’s interpretation of ‘national security’” under Section 232) (citation omitted).
  273. See Schoenbrod, supra note 71, at 1260.
  274. United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 319–20 (1936).
  275. See, e.g., Abraham D. Sofaer, Presidential Power and National Security, 37 Presidential Stud. Q. 101, 120 (2007) (“The Constitution allocates powers over national security to all the branches that enable each to affect national policy.”); Schoenbrod, supra note 71, at 1260–61 (describing the confluence of executive and legislative power in the “war and foreign affairs” context).
  276. Sofaer, supra note 274, at 120. For example, Congress holds the power to declare war, U.S. Const. art. I, § 8, while the President, as Commander in Chief, exercises simultaneous military and national security powers. U.S. Const. art. II, § 2.
  277. Gundy v. United States, 139 S. Ct. 2116, 2137 (2019) (Gorsuch, J., dissenting); see also Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring in the judgment) (“While the Constitution diffuses power the better to secure liberty, it also contemplates that practice will integrate the dispersed powers into a workable government. It enjoins upon its branches separateness but interdependence.”).
  278. To be sure, an analysis of executive powers is a topic of ongoing debate and is well beyond the scope of this Note. See, e.g., Sofaer, supra note 274, at 120–22 (explaining the debate over those powers which are exercised exclusively by the President and which powers are shared with other branches).
  279. Id. at 120.
  280. U.S. Const. art. I, § 8; see also Am. Inst. for Int’l Steel v. United States, 376 F. Supp. 3d 1335, 1346 (Ct. Int’l Trade 2019) (Katzmann, J., concurring dubitante) (“[T]he power to impose duties is a core legislative function.”).
  281. Schoenbrod, supra note 71, at 1260.
  282. This, clearly, does not require a finding that the administration’s actions under Section 232 discussed previously are permissible. Those actions remain subject to challenge on the grounds that the President has stepped beyond the bounds of Section 232 and is not acting in the interest of national security. That analysis encompasses an entirely different set of questions and is not addressed by this Note.
  283. Gundy v. United States, 139 S. Ct. 2116, 2145 (2019) (Gorsuch, J., dissenting).
  284. Id. at 2130 (plurality opinion).
  285. Yakus v. United States, 321 U.S. 414, 425 (1944) (alterations in original) (quoting Currin v. Wallace, 306 U.S. 1, 15 (1939)).