CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

Intercollegiate raised a number of arguments, but the one that obviously got the court’s attention was the Appointments Clause claim. The Appointments Clause? Maybe not as familiar to the Great Unwashed as, say, the Commerce Clause or the First Amendment, it’s still a f’real part of the Constitution – check for yourself at Article II, Section 2, Clause 2. For those of you who never bothered to memorize the Appointments Clause for your Civics Class, here ‘tis:

[The President] . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

Intercollegiate argued that the CRB’s members are “principal” rather than “inferior” officers and, as such, must be appointed by the President and confirmed by the Senate.  Since CRB members aren’t appointed by the Prez (or confirmed by the Senate), they’re constitutionally invalid, as are their decisions.

This argument is not new. It surfaced three years ago in a CRB appeal. In that case the argument wasn’t raised in a timely manner, so it was ignored in the Court’s opinion. But Judge Kavanaugh, in a separate concurrence, specifically mentioned it with seeming approval. A couple of months later, a commercial company (Live365) raised the same argument in a U.S. District Court and lost; Live365 appealed that loss, but ultimately settled out before its appeal got too far along.

The third time’s the charm. Intercollegiate properly raised the argument in its own 2011 appeal and the D.C. Circuit has now spoken. Because the Librarian of Congress (who appoints CRB members) was very limited in his/her ability to remove CRB members, and because the CRB was not subject to the direction and supervision of any “principal officer”, well, then, CRB members are themselves “principal officers”. Not having been appointed by the President, they cannot function consistently with the Appointments Clause.

Not to worry, though. Relying on an approach used by the Supreme Court in a similar situation in 2010, the D.C. Circuit has opted to “invalidat[e] and sever[] the restrictions on the Librarian of Congress’s ability to remove” CRB members. By reading those pesky provisions out of the CRB law as Congress wrote it, the court figures that the CRB will henceforth be constitutional.

Constitutional, that is, as long as the Librarian of Congress is a “Head of Department” (as required by the last line of the Appointments Clause). No problem there, either, according to the D.C. Circuit: the Library of Congress is a “component of the Executive Branch” (meaning that it’s a “department”, constitutionally speaking), so the Librarian of Congress is a “Head of Department”. QED. (To get to this point, the Circuit had to tiptoe around at least one earlier case that suggested that the Library of Congress was a “congressional agency”.)

Bottom line: The CRB wasn’t constitutional, but now (with the helpful intervention of the D.C. Circuit) it is. 

Where does that leave orders issued by the CRB back in its benighted, unconstitutional days? The particular order that was the subject of Intercollegiate’s appeal has been vacated and shipped back to the CRB – that would be the New and Improved CRB, Now With Real Constitutional Authority! – for further consideration.  While Intercollegiate did, of course, raise some substantive gripes about the old CRB's royalty ruling, it'll be back to square one for those gripes. Intercollegiate will have to present them again to the CRB.  If, as one might expect, the new CRB does exactly what the old CRB had done, royalty-wise, Intercollegiate will have to bring its gripes back up to the D.C. Circuit all over again.  But next time, it won't have the Appointments Clause argument in its holster.

It’s possible that others subject to previous CRB rulings could now claim that those rulings have no force and effect, thanks to the D.C. Circuit’s decision. Whether or not anybody will view that as a worthwhile exercise remains to be seen.

This is the point where we would ordinarily observe that the losing party before the D.C. Circuit can still seek rehearing, or maybe even Supreme Court review. Chances of further appeals in this case, however, are effectively zero. Intercollegiate won its appeal, so it’s not likely to ask for further consideration by the Circuit or the Supremes. And the CRB isn’t likely to, either. After all, the Circuit’s decision saved the CRB from unconstitutional oblivion – why would the CRB want to appeal that? So we’re guessing that, with the judicially-imposed revisions to the Congressionally-enacted CRB statute in place, life at the CRB will go on largely as it has in the past.

As a threshold matter, Judge Walton rejected efforts to have the complaint tossed on jurisdictional grounds. No problem there, said the Judge, the District Court does indeed have jurisdiction – that is, the necessary authority – to hear such constitutional challenges.

Having brushed that question to the side, the Judge charged on to the merits.

As we reported last September, Live365’s argument consisted of a two-prong attack based on Article II of the Constitution. That section refers to two separate types of “officers” of the U.S.:   “principal” officers and “inferior” officers. Under the Constitution, “principal” officers must be appointed by the President and confirmed by the Senate; “inferior” officers, on the other hand, are not subject to the President/Senate limitation, but they may be appointed only by either the President, the courts, or “heads of departments”. Live365 (and Judge Kavanaugh before it) doubted that CRB judges satisfied either set of criteria.

Live365 first argued that CRB judges are “principal” officers because:

• they function without any real supervision from the Librarian of Congress;
• they’re not subject to limitations to which “inferior” officers are (such as limited duties, limited jurisdiction, temporary tenure, ability to be removed from office);
• they’re not subject to performance appraisals from their superiors;
• they have the same powers and responsibilities as their predecessor body, the Copyright Royalty Tribunal, whose members were directly appointed by the President as “principal” officers.

The trouble is that, while all those factors might indeed support Live365’s wished-for conclusion, the Supreme Court has not yet adopted any “bright line” test in this area. Rather, the Supreme Court has thus far chosen a case-by-case approach, looking at the peculiar matrix of factors presented in each individual case. Taking his cue from the Supremes, Judge Walton did the same here.

And to Live365’s disappointment, he decided that the defendants had the better argument. In his view, CRB judges should be deemed “inferior” (but only in the best sense, of course), largely because:

• CRB judges receive direction and supervision from the Librarian of Congress and the Register of Copyrights, who can promulgate and enforce binding ethical rules;
• the Librarian of Congress and Register of Copyrights provide all the judges’ administrative resources  and assign other duties.
• the Register of Copyrights can review the CRB judges' decisions for “legal error”.

But even Judge Walton acknowledged that there is room for disagreement here. Noting Judge Kavanaugh’s “understandable” observations, Walton conceded that “[t]he current state of the law has essentially created a gray area”, thanks to “the limited guidance the Framers of the Constitution provide as to where ‘[t]he line between ‘inferior’ and ‘principal’ officers . . . should be drawn,’ and the Supreme Court’s refusal to ‘decide exactly where the line falls between the two types of officers.’”

Having satisfied himself that the CRB judges are “inferior officers”, the Judge next analyzed Live365’s claim that, as such, they miss the Constitutional boat because they aren’t appointed by either the President, a “Head of Department”, or a court, like the Constitution requires.   

CRB judges are appointed by the Librarian of Congress. In Live 365’s view, the Librarian of Congress isn’t a “Head of Department" because he’s really part of the Legislative, not Executive, Branch. Not a crazy argument, since the Librarian reports to Congress, portrays itself as part of Congress, and has, in other contexts, been deemed by the D.C. Circuit to be part of the Legislative Branch. Hey, he’s the Librarian of Congress, for crying out loud.

Judge Walton was not persuaded. Sure, the Library of Congress is treated as a component of the Legislative Branch in the U.S. Code, but the Librarian (according to Walton) functions as an Executive Branch head: the Librarian is appointed (and can be removed) by the President and is in no way limited by Congress or Members of Congress. Moreover, the Copyright Act, in creating the Librarian of Congress, vests the Librarian with the power to appoint several employees in the manner afforded to other Executive Branch heads.

In light of those factors, Judge Walton concluded that Live365 had “not met its burden of showing that there is a substantial likelihood that it will succeed on the merits of its alternative Appointments Clause challenge”. The emphasis on “substantial” was the Judge’s, not ours – from which a reader could reasonably conclude that the Judge might think that there was at least some possibility (although obviously not a “substantial likelihood”) that Live365’s argument might prevail. So perhaps hope should spring eternal. After all, the Judge was merely ruling on the “preliminary injunction” aspect of Live365’s request, i.e., the part in which Live365 asked the Judge to order the CRB to stop its proceedings pending resolution of Live365’s request for a permanent injunction.

In seeking a preliminary injunction, a party is expected to demonstrate not only that it is likely to succeed on the merits of its ultimate claim, but also that it will sustain “irreparable harm” if a preliminary injunction is not granted. On this point, Live365 argued that, if it were forced to participate in a CRB rate-making proceeding while Judge Walton pondered Live365’s request for a permanent injunction, Live365 would incur more than $1 million in costs. Unfortunately for Live365, mere monetary harm generally doesn’t rise to the level of “irreparable” in the world of preliminary injunctions. And what’s worse, Judge Walton found that the other side would be harmed if the preliminary injunction were to be granted. The “already-tight schedule” of the CRB proceeding would have to be further “compressed”, and recording artists would not get paid during this period, which could adversely (and possibly profoundly) affect their finances. The Judge also decided that the public interest would not be harmed if the webcasting case goes forward.  Bottom line: request for preliminary injunction denied.

So the CRB lives on to set rates, at least for the time being. Live365 may continue to press for a permanent injunction, although the short-term outlook there isn’t great in view of Judge Walton’s detailed, and unfavorable, analysis of Live365’s constitutional arguments. Still, that analysis did include the acknowledgement that the question is far from settled, and Live365 has the added comfort of knowing that, once it moves past Judge Walton, it will find itself in the D.C. Circuit, i.e., Judge Kavanaugh’s house. Since Live365 has a pretty good idea that that judge, at least, is likely to be sympathetic to its arguments, don’t be surprised if Live365 picks itself up off the canvas and keeps slugging to get to the next round.

Live365’s argument, which draws from the reasoning advanced in both of the earlier cases, goes something like this.

The Constitution (Article II, to be precise) permits the President to appoint “officers of the United States”, as long as such appointments are subject to the advice and consent of the Senate. The same provision also permits Congress to designate certain “inferior officers” who can be appointed without the one-two punch of presidential appointment and Senate confirmation – BUT the Constitutional power to appoint those “inferior officers” is limited to the President, the courts, and “heads of departments”.

So there appear to be two types of U.S. “officers” identified in the Constitution: those which we can call “principal officers”, requiring Presidential appointment and Senate confirmation; and those which the Constitution refers to as “inferior officers”. But the appointment process to which CRJs are subject does not satisfy the Constitutional criteria for either type. CRJs are appointed by the Librarian of Congress. They thus cannot be “principal officers”. And since the Librarian of Congress is not a “head of department”, so the argument goes, CRJs cannot be “inferior officers”, either.   Accordingly, CRJs cannot be deemed to be validly-appointed U.S. “officers”, and their actions – including, for example, orders establishing royalty schedules – must be deemed to have no lawful effect.

Based on this line of argument, the Live365 case will hinge on:

• Whether the Court agrees that the CRJs rise to the level of “officers” of either type; and
• The proper characterization of the Library of Congress is a “department” whose “head” (i.e., the Librarian of Congress) may be given the power to appoint “inferior officers” under Article II of the Constitution.

Live365's complaint also argues that, because there is a high likelihood that the Court will find the CRJs to be unconstitutional and without authority, the Court should immediately order the CRB to terminate the upcoming proceeding to set the rates for 2011-2015. According to Live365, that proceeding is “a costly, intensive, year-long proceeding that may later be deemed null and void by a judicial determination that the CRB was constituted and sat in contravention of the Appointments Clause [of Article II].” 

We think that Live365 makes a very good initial argument. But that’s easy to do in a complaint. So we’re really interested in seeing what the government argues in response – and whether the Court does, in fact, rule on the preliminary injunction before the parties in the webcasting proceeding must make their next filings (direct statements) on September 29, which kicks off the trial-related frenzy that is the next phase of the CRB proceeding.