Is the Copyright Royalty Board Unconstitutional?

This morning the U.S. Court of Appeals for the D.C. Circuit released its opinion in SoundExchange, Inc. v. Librarian of Congress. A three-judge panel consisting of Judges Ginsburg, Henderson, and Kavanaugh, largely rejected SoundExchange's challenge to the royalty rate set by the Copyright Royalty Board that satellite radio services must pay to copyright owners for the use of sound recordings. The panel concluded that the rate was not arbitrary, capricious, or unsupported by substantial evidence, but found (as the government conceded) that the Board failed to set a rate for "ephemeral copies."

While he joined the court's opinion in full, Judge Kavanaugh wrote a brief concurrence noting a potential separation-of-powers question raised by the manner in which Board members are appointed.

As this case demonstrates, billions of dollars and the fates of entire industries can ride on the Copyright Royalty Board’s decisions. The Board thus exercises expansive executive authority analogous to that of, for example, FERC, the FCC, the NLRB, and the SEC. But unlike the members of those similarly powerful agencies, since 2004 Copyright Royalty Board members have not been nominated by the President and confirmed by the Senate. Instead, as a result of a 2004 statute, Board members are appointed by the Librarian of Congress alone. Board members are removable by the Librarian, but only for cause. Moreover, in exercising important duties, Board members are apparently unsupervised by the Librarian of Congress or by any other Executive Branch official.

The new statutory structure raises a serious constitutional issue. Under the Appointments Clause, principal officers of the United States must be nominated by the President and confirmed by the Senate. U.S. CONST. art. II, § 2, cl. 2. Copyright Royalty Board members plainly are officers of the United States. And they appear to be principal officers – not inferior officers – because they are not removable at will and their decisions regarding royalty rates apparently are not reversible by the Librarian of Congress or any other Executive Branch official. See Edmond v. United States, 520 U.S. 651, 662-66 (1997); see also 17 U.S.C. §§ 701, 801-03; Tr. of Oral Arg. at 24 (Government counsel agreeing that Librarian of Congress and Register of Copyrights cannot change copyright royalty rates set by the Board).

If the members of the Board are in fact principal officers, then the present means of appointing Board members is unconstitutional. But no party here has timely raised a constitutional objection. We therefore may resolve the case without deciding whether the Board is constitutionally structured, and so I join the opinion of the Court.

Kavanaugh is on to something, but he hasn't quite framed it correctly. The relevant issue isn't whether the board members are principal or inferior officers. It is whether they are officers or employees. If they are employees, the Appointments Clause and its excepting provision just don't apply. But likely they are officers -- as the fact of prior presidential nomination and appointment with Senate A&C suggests. Under the excepting provision, it is very clear that the choice of who may be given appointment power is three -- the President alone (not here), the Heads of (executive) Departments, or the Courts of Law (again, not here) -- and that the appointment power is not properly vested in a legislative officer. The librarian of Congress would have to be characterized as a head of an executive department and the board members would have to be subordinate. If either one does not obtain, no dice.

I'd be curious what the OLC bill review on the 2004 amendments said about this one.
7.7.2009 1:41pm
So ... can the issued NOW be raised, even if not rasied in the linked appeal? More importantly, can the issue be raised after the PCAOB case is decided by the Supreme Court next term?
7.7.2009 1:43pm
A.S.: At least according to Freytag's majority opinion (which might be wrong on this point as on every other point it touched), the Court might have discretion to hear the issue raised for the first time by the litigants on appeal. Justice Scalia and the concurring justices would not have reached the appointments clause issue.

As for the PCAOB case, I imagine the Court will have to address the principal/inferior officer decision. My hope is that it will make clear that Edmond put to rest Morrison v. Olson on this point, viz., to be an inferior officer is to be a subordinate one.
7.7.2009 1:59pm
Dominick (mail):
It would appear that Kavanaugh assumes that the Library of Congress would qualify as an executive department (perhaps there is even a prior case out there saying as much) and that he believes that the members of the Board are officers - which seems a fair belief given his description of the members and their authority (if they can't be removed at will and their decisions cannot be altered by the Librarian or others they don't look much like employees).

Thus, his framing of the issue seems fair. Either these officers are principal officers or they are inferior officers. If the former, then their appointment is unconstitutional for the reasons he states (principal officers are subject to the full procedure - no exceptions). If the latter, then Congress could provide for one of the exceptions to apply to their appointment. If Kavanaugh assumes (or believes, or has case law saying) that the Librarian of Congress is the Head of a Department, then the current process is fine, Congress has provided that the Board members be appointed by the Head of a Department.

So Kavanaugh's framing of the issue is perfectly fine given his baseline - that these are not employees. If you really believe that the question of employee vs. officer needs to be addressed, it would seem to only be a preliminary step - if you find that the members are officers you still have to proceed to the next step of deciding whether they are principal vs. inferior officers. Kavanaugh has simply skipped this preliminary step by stating that he sees the members as officers of the United States.
7.7.2009 2:05pm
Talk about dicta!
7.7.2009 2:07pm
[insert here] delenda est:
Talk about a 'oops maybe I should have thought of the get out of jail free card for myself before they told me about it' moment for counsel for the appellant ;)
7.7.2009 2:12pm
Seems reminiscent of Professor Duffy's criticism of the appointment administrative patent judges by the Director of the PTO.
7.7.2009 2:13pm
And you lawyers find nothing wrong with Kavanaugh ignoring the constitutional issue because no one raised it? it's okay to ignore unconstitutional situations if nobody complains? how does that serve justice?
7.7.2009 2:19pm

Perhaps an empathetic jurist or European inquisitorial jurist would. But I prefer baseball and umpire analogies for the American judicial system. The umpire isn't supposed to throw off his mask, take his place at the plate, and swing for the stands for one of the teams.
7.7.2009 2:25pm
martinned (mail) (www):
@TalkingHead: The rule here is ius cognoscit curia, the court knows the law. Parties argue about facts, the court sorts out what happened and applies the law to the facts. (I'm exaggerating, of course. In practice, parties will argue about law as well, but theoretically no harm would be done if they didn't.) If the law states that an unconstitutional statute is null and void, then it is up to the court to decide that issue whether the parties raised it or not. After all, a nullity cannot be law. (Exaggerating, again, because obviously courts can be forgiven for not considering the possible unconstitutionality of a statute when no one raised any problems.) Of course, in many countries the courts are forbidden from considering the unconstitutionality of laws (eg. in the Netherlands and in France), but that's a different story.

Ruling on the constitutionality of a statute even when it wasn't raised isn't a case of the court "swinging" on behalf of one of the teams, but rather it is the court carrying out its duty to say what the law is (to channel Marshall).
7.7.2009 2:36pm
Martinned -

Forgive me in advance as I am but a lowly IP attorney whose experience with Constitutional law is limited to my second year in law school.

With that said, I seem to recall that courts are limited in their ability to opine on the constiutionality of a statue by separation of powers considerations. That is, they can only rule on the validity of a statute when it is a live question in a case. To otherwise rule on such an issue would constitute an opinion on a political question... no?
7.7.2009 2:42pm
Dominick (mail):
TH -

I generally agree, but I don't think this is a situation where the umpire takes up one side of the other. And I can see steve's point in thinking it a little odd. This situation may be more analogous to the umpire noticing a rule violation (say he sees that the pitcher has a foreign substance on the brim of his hat that he's transferring to the ball) but deciding to ignore it because the opposing team hasn't bothered to complain about it. I suspect most people wouldn't approve of the umpire looking the other way in that case.

At the end of the day, in this particular situation, everybody knew the rules - Kavanaugh didn't spring a trap - it has always been the case that appellate courts do not address issues that were not raised below. Plaintiff's attorneys knew that was the rule and knew that they needed to make sure that they included everything they thought might be relevant. They didn't, and so they lose. The question raised by Kavanaugh will have to wait for the next time the Board makes a decision a party doesn't like.
7.7.2009 2:43pm
Per Son:
Since the LOC is a legislative Agency, does that make it very different than say the NLRB, FCC, etc?
7.7.2009 2:46pm
martinned (mail) (www):
@HSAHM: I'm sorry if it wasn't clear, but I meant to explain the logic behind the continental European approach.

In the US, the reluctance of the courts to touch this question if it wasn't raised by the parties has less to do with separation of powers issues (it's not an advisory opinion if the answer to the question actually matters for the case at bar), but rather with a deeply ingrained respect for the adversarial system, the theory being that the lawyers for both parties can do their research better than the three highly qualified judges on the panel.
7.7.2009 2:56pm
wgsalter (mail):
Sorry, but the analysis os very confused. If they are employees, they should not be removeable except for cause. If they are officers, and of the Executive branch, then they should be removeable for any or no cause, at the president's discretion. This whole body of interpretation where officers OF THE EXECUTIVE BRANCH, are nominated by the president, confirmed by the senate, and then unremoveable is just bad law. SEC Commissioners, PCAOB, etc. should ALL be removeable by the president. Article I and III officers are a whole different matter, but someone please inform me - is there any corollary for not being able to remove officers (not employees) in those two branches?
7.7.2009 3:26pm
loki13 (mail):
1. If the appointments clause was a horse, J. Kavanaugh would have not just beaten it to death by now, but rendered it into glue. Sua sponte.

2. Usually, you try to avoid the constitutional issue.

3. This is a clear example of why a term such as "judicial activism" has no content. In my mind, the "conservative" judicial philosophy would not countenance this concurrence. But is this judicial activism? Or just a judge flogging his pet cause? (Or, for the cynical, an attempt to get into future admin law casebooks)

4. Finally, for those who wonder why a judge would not raise these issue- it's because the parties didn't contest them! It's a bit of an unfair surprise for judges to make rulings based on an issue that the parties did not brief or litigate (save a few exceptions like the jurisidiction of the court). You might say that there is a "no harm, no foul" because this concurrence did not affect the outcome, but had the parties even known it was an issue, they might have prepared their cases differently. In any event, it will give the Judge something to cite in the future when he needs to go back to his hobbyhorse.
7.7.2009 3:40pm
Hanah Volokh (mail) (www):
Isn't the Library of Congress part of the legislative branch, not the executive branch? Am I missing something?
7.7.2009 3:51pm
Go Horns!:
The proper umpire analogy for an issue not raised by the parties (let's just forget about subject-matter jurisdiction) is not a foreign substance on the hat. Instead, it is a player missing a base when rounding it or leaving a base early when tagging up. After the play is over, the ump knows that the runner screwed up, but unless the other team appeals to the umpire, the umpire can't do anything about it.
7.7.2009 4:29pm
Just Dropping By (mail):
Eltra Corp. v. Ringer, 579 F.2d 294, 300 (4th Cir. 1978) looks potentially relevant to this point:

Unlike the Federal Election Commission, however, the Office of the Register of Copyrights is not open to any charge that it is violative of the Appointments Clause. The Register is appointed by the Librarian of Congress, who in turn is appointed by the President with the advice and consent of the Senate. By the nature of his appointment the Librarian is an "Officer of the United States, with the usual power of such officer to appoint 'such inferior Officers [i.e., the Register], as [he] thinks proper." This case is accordingly different from either Buckley or Springer, and the appointment of the Register accords fully with the requirements of the Appointments Clause in connection with the appointment of executive officers clothed with the power to issue regulations.
7.7.2009 4:35pm
Just Dropping By (mail):
Sorry for the double post, but to address some of the points above, SoundExchange's attorneys might very well have recognized the constitutional problem, but decided not to pursue it. Challenging a specific agency decision is generally easier than trying to have the entire structure of the agency declared unconstitutional. I've personally had cases involving state agencies where I thought there were good grounds for Dormant Commerce Clause challenges to the regulatory regime as a whole, but the clients declined to pursue it since they just wanted to try for a different result on their specific issue.
7.7.2009 4:49pm
Le Messurier (mail):
Question from a non-lawyer and further to this point:

And you lawyers find nothing wrong with Kavanaugh ignoring the constitutional issue because no one raised it? it's okay to ignore unconstitutional situations if nobody complains? how does that serve justice?

Assuming there were in fact oral arguments, could a judge raise this issue himself by framing a question that illuminates the possible unconstitutionality of the statute? Thus, giving the lawyers the opportunity to raise the issue before the bench even though it was absent from their written pleadings.
7.7.2009 6:07pm
loki13 (mail):
Le Messurier,

While I suppose it is possible, that would be a horrifically bad idea. Oral arguments, while fund, lively, and a great opportunity to explore the arguments, are not a good place to raise completely novel area (esp. constitutional issues). The briefs are the primary source of information for the judges, so much so that some Justice (see Thomas, Clarence) don't even both much with oral arguments. The Judge could raise the question, but the lawyers wouldn't have the requisite cases and knowledge at the ready, and in a complicated area like this, would likely be the equivalent of sandbagging them.
7.7.2009 6:27pm
"Although the Library of Congress was established in 1800, the office of Librarian was not created until 1802. This 1802 law stipulated that the Librarian of Congress was to be appointed by the president---not by the Congress. In fact, Congress had no formal role in the appointment process until 1897, when the Senate gained the privilege of confirming the president's selection. "
7.7.2009 6:29pm
Bad Ideas:
Oral arguments, while fund, lively, and a great opportunity to explore the arguments, are not a good place to raise completely novel area (esp. constitutional issues).

At the risk of massive thread drift... but speaking of novel approaches raised at oral argument before the Supreme Court...

The Fourth Amendment Blog recently brought to my attention a paper by Peter A. Winn, “Katz and the Origins of the 'Reasonable Expectation of Privacy' Test”, forthcoming in the McGeorge Law Review, .

In short, the now well-known REP test was a novelty brought up at oral argument. From the paper's abstract:
The credit for the development of the test belongs to counsel for Charles Katz, Harvey (now Judge) Schneider, who presented the test for the first time in his oral argument, not in his briefs.

As, over the years, I am becoming more and more convinced that Katz was a profound misstep, I'm pursuadable that no matter how fun oral argument might be, it's really not a good place to bring up new way to look at the Constitution.
7.8.2009 6:18am
Gordon (mail) (www):
Sound Exchange likely did not raise the Appointments Clause issue because THEY too derive their authority from the CRB, which appointed that organization to be the exclusive collector of this class of royalties.

If the CRB's appointment is invalid, then Sound Exchange's authority (and monopoly) likely goes out the window.

This is, I understand, at issue in another suit, so they may have wished to avoid any adverse holding at this time.
7.10.2009 1:18pm

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