National Horsemen's Benevolent And Protective Association v. Black

53 F.4th 869 (5th Cir. 2022)

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Nature of the Case

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Facts

The Horseracing Integrity and Safety Act (HISA) is a federal law that nationalizes governance of the thoroughbred horseracing industry. HISA creates a framework for enacting nationwide rules governing racetrack safety, anti-doping, and medication control. HISA empowers a 'private, independent, self-regulatory, nonprofit corporation, to be known as the 'Horseracing Integrity and Safety Authority[.]'' § 3052(a). The Authority's board of directors is set at nine members-five of whom 'shall be independent members selected from outside the equine industry.' § 3052(b)(1). Choosing board members is left up to a nominating committee. § 3052(d). The Act contains provisions to protect the board from conflicts of interest. The Authority is placed under the 'oversight' of the Federal Trade Commission (FTC). See § 3053. HISA divides responsibility for enacting rules between the Authority and the FTC. The Act outlines various 'considerations,' 'activities,' or 'elements' the Authority must incorporate into the programs and rule violations. See §§ 3055(b)-(g), 3056(b)-(c), 3057(a)(2)-(e). The Authority submits proposed rules to the FTC, § 3053(a), which publishes them in the Federal Register for public comment, § 3053(b)(1). A proposed rule 'shall not take effect' unless the FTC approves it, § 3053(b)(2), which must occur no later than 60 days after publication, § 3053(c)(1). The FTC 'shall approve' a proposed rule if it finds the rule 'consistent' with the Act and with 'applicable rules approved by the [FTC].' § 3053(c)(2). Conversely, the FTC can 'make recommendations' to the Authority to modify proposed rules, and the Authority 'may resubmit' proposed rules incorporating those modifications. § 3053(c)(3). The FTC itself may adopt an 'interim final rule' under the APA's good cause standard, provided it finds this 'necessary to protect-(1) the health and safety of covered horses; or (2) the integrity of covered horseraces and wagering on those horseraces.' § 3053(e); see also 5 U.S.C. § 553(b)(B). Rules promulgated in accordance with HISA 'shall preempt any provision of State law or regulation with respect to matters within the jurisdiction of the Authority[.]' § 3054(b). The Authority can investigate violations (including by issuing subpoenas) and enforce the rules by imposing civil sanctions or by suing to enforce sanctions or obtain injunctive relief. §§ 3058(a), 3054(j), 3054(h-j). Any civil sanction is subject to de novo review by both an administrative law judge and the FTC. § 3058(b)(1), (c)(3)(B). The Authority is primarily funded by fees collected from covered persons or State racing commissions. § 3052(f)(1-4). The Authority must submit for the FTC's approval its 'formula or methodology for determining [fee] assessments.' § 3053(a)(11). Currently, all kinds of rules have been approved from assessment methodology to sanctions. P sued the FTC and the Authority in federal district court. Ps claimed HISA was facially unconstitutional on various grounds, including the private non-delegation doctrine and the Fifth Amendment's Due Process Clause. The district court denied P's summary judgment motion and granted Ds' motion to dismiss. The court concluded Ps had standing to bring their private non-delegation and due process claims. The court framed the pertinent inquiry as (1) whether HISA contains an 'intelligible principle guiding the Authority and the FTC'; and (2) whether the Authority 'function[s] subordinately to the FTC.' The court concluded that HISA laid down sufficiently intelligible principles to guide the Authority and the FTC. The court candidly 'recognized that HISA's regulatory model pushes the boundaries of public-private collaboration.' The court reasoned that while the Authority drafts and proposes rules, those rules become law only after 'the FTC's independent review and approval.' The court noted that the FTC's 'limited ability to draft rules' was an 'uncommon feature in public-private partnerships.' The court also acknowledged that the FTC can review the Authority's proposed rules only for 'consistency' with HISA and existing rules, thus giving the Authority unreviewable power to 'fill up the details' of regulation and relegating the FTC to an 'adjudicative, rather than a regulatory, function.' Also, it found that the FTC lacked any power 'to formally modify the Authority's rules.' Ps appealed.