5th Circuit Declares HISA’s Enforcement Provisions Unconstitutional Under Private Nondelegation Doctrine

Introduction

The case of National Horsemen's Benevolent and Protective Association; Arizona Horsemen's Benevolent and Protective Association v. Jerry Black et al. (107 F.4th 415) presents a significant development in the application of the private nondelegation doctrine within federal regulatory frameworks. The plaintiffs, comprised of various horsemen's associations and racing entities, challenged the constitutionality of the Horseracing Integrity and Safety Act of 2020 (HISA), arguing that its delegation of regulatory and enforcement powers to a private entity, the Horseracing Integrity and Safety Authority (HISA), violated several constitutional provisions.

Summary of the Judgment

The United States Court of Appeals for the Fifth Circuit reviewed multiple constitutional challenges to HISA. The court upheld the district court's determination that recent congressional amendments to HISA rectified previous nondelegation issues related to rulemaking by empowering the Federal Trade Commission (FTC) to oversee and modify the Authority’s rules. Additionally, the court dismissed claims that HISA violated the Due Process Clause, the Appointments Clause, and the Tenth Amendment. However, the court found that HISA's enforcement provisions remained unconstitutional under the private nondelegation doctrine because the Authority retained significant enforcement powers without adequate FTC oversight. Consequently, the court affirmed the district court's decision in part and reversed it in part, declaring the enforcement provisions of HISA facially unconstitutional.

Analysis

Precedents Cited

The court extensively referenced several key precedents to frame its decision:

• National Horsemen's Benevolent & Protective Association v. Black (Horsemen's I), 53 F.4th 869 (5th Cir. 2022): This prior decision addressed the initial nondelegation challenge, finding HISA’s original rulemaking delegation unconstitutional due to insufficient FTC oversight.
• Oklahoma v. United States, 62 F.4th 221 (6th Cir. 2023): The Sixth Circuit upheld the nondelegation of HISA’s enforcement provisions, contrasting with the Fifth Circuit’s current stance.
• Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995): A Supreme Court decision pivotal in determining whether an entity is considered governmental for constitutional purposes, particularly under the Appointments Clause.
• A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935): A foundational case for the nondelegation doctrine, emphasizing that certain governmental powers cannot be delegated to private entities.
• Logan v. Zimmerman Brush Co., 515 U.S. 479 (1995): While not directly cited, principles from this case on procedural due process were relevant to the Due Process Clause arguments.

Legal Reasoning

The court's legal reasoning centered on the private nondelegation doctrine, which prohibits Congress from delegating essential governmental powers to private entities without adequate oversight. The key points include:

• Rulemaking Oversight: The amendment to HISA granted the FTC the authority to abrogate, add to, and modify the Authority's rules, which the court found sufficient to subordinate rulemaking powers and address the nondelegation issue initially identified in Horsemen's I.
• Enforcement Powers: Contrary to the rulemaking oversight, HISA's enforcement provisions still delegated core executive powers—such as investigations, issuing subpoenas, conducting searches, levying fines, and seeking injunctions—to the private Authority without effective FTC supervision. This lack of oversight rendered the enforcement provisions unconstitutional under the private nondelegation doctrine.
• Due Process and Appointments Clauses: The court upheld that HISA did not violate the Due Process Clause, attributing sufficient conflict-of-interest safeguards. Regarding the Appointments Clause, applying *Lebron*, the court determined that the Authority was a private entity not subject to constitutional appointment requirements.
• Tenth Amendment: Claims under the Tenth Amendment were dismissed due to lack of standing, as plaintiffs failed to demonstrate a concrete injury.

Impact

This judgment has profound implications for federal regulatory agencies, particularly those contemplating delegation to private entities. The ruling reinforces the necessity of maintaining stringent oversight when delegating core governmental functions, especially executive powers. Future legislative actions similar to HISA will need to ensure that any delegation of regulatory or enforcement powers to private entities includes robust supervisory mechanisms to withstand constitutional scrutiny. Additionally, this decision underscores the evolving landscape of the private nondelegation doctrine, potentially influencing how courts interpret congressional power decentralization.

Complex Concepts Simplified

Conclusion

The Fifth Circuit's decision in National Horsemen's Benevolent and Protective Association v. Black marks a critical examination of the boundaries of congressional power delegation, particularly to private entities. By upholding the constitutional validity of revised rulemaking oversight while striking down HISA's enforcement provisions, the court delineates clear limits on the delegation of executive powers. This ruling not only reinforces the private nondelegation doctrine but also serves as a cautionary precedent for future legislative endeavors aiming to incorporate private oversight within federal regulatory frameworks. The emphasis on maintaining governmental supervision over essential enforcement functions ensures that constitutional safeguards remain intact, promoting accountability and the rule of law.

Moving forward, regulators and lawmakers must carefully balance the benefits of private sector involvement in regulatory processes with the imperatives of constitutional compliance. This case underscores the judiciary's role in scrutinizing such balances to prevent overreach and preserve the integrity of governmental authority structures.