Ex©lusive Rights

As I mentioned last week,  Royalty Logic, a royalty collection company that seeks to compete with SoundExchange, filed a motion to the Court of Appeals of the District of Columbia arguing that the appointment of the Copyright Royalty Judges transgresses the Appointments Clause.    I thought it’d be worthwhile to take a closer look at Royalty Logic’s Appointments Clause challenge and the history behind the creation of the Copyright Royalty Board.

Background

President Bush signed the Copyright Royalty and Distribution Reform Act into law in 2004.  The legislation created the Copyright Royalty Board structure, under which three Copyright Royalty Judges determine, among other things, the rates for the statutory licenses collected by the United States Copyright Office under 17 U.S.C. Sections 112(e), 114, 115, 116, 118, 119 and 1000.  Why would Congress delegate the determination of the statutory rates to a third party?  WIlliam Patry wrote a fascinating post that reached this general topic (we’ll discuss Patry’s post more later):

Congress decided that adjusting rates in the statute was not the way to go: too much time would go by, there had to be bills introduced, hearings, haggling, the whole political thing. Better to fob the job off to someone else (and then Congress could come in as the white knight and save the day if the decision was too favorable to one side: bad agency, bad agency!).

The Librarian of Congress is appointed by the President with the advice and consent of the Senate.  The three Copyright Royalty Judges are appointed by the Librarian of Congress “after consultation” with the Register of Copyrights, an officer also appointed by the Librarian.  [I made somehow made a mistake on this fact on an earlier rendition of this post.]  The Copyright Royalty Judges who decided the order at issue are James Scott Sledge (a retired United States Bankruptcy Judge from Alabama), William J. Roberts (an attorney advisor in the Copyright General Counsel’s Office who was promoted to senior attorney for compulsory licenses), and Stanley C. Wisniewski (an attorney who has provided expert economic testimony in federal court and before Senate and House committees).

The Appointments Clause generally

“He [the President] . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other 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.”

So, says the Appointments Clause, Art II Clause 2, Section 2 of the Constitution.   Under the Section, a principal officer must be appointed by the President with the advice and consent of the Senate.  Inferior officers, which likely will include the Copyright Royalty Judges, can only be appointed (1) by the President; (2) the President with the advice and consent of the Senate; (3) by the Courts of Law; or (4) by the Heads of Departments.

The Supreme Court has forwarded two policy aims underlying the Clause.

(1) Limit the possibility for corruption by disallowing legislators the power to both create offices and make appointment to the offices

The first rationale for the Appointments Clause, as discussed by Justice Scalia in his concurrence in Freytag, is to limit the corruption often associated with combining the power to create offices with the power to appoint officers.  As Justice Scalia discussed, “The foremost danger was that legislators would create offices with the expectancy of occupying them themselves. This was guarded against by the Incompatibility and Ineligibility Clauses, Article I, § 6, cl. 2. But real, if less obvious, dangers remained. Even if legislators could not appoint themselves, they would be inclined to appoint their friends and supporters. This proclivity would be unchecked because of the lack of accountability in a multimember body.” [citation omitted.]

(2) Avoid diffusion of power

A second rationale for the Appointments Clause is that it prevents Congress from distributing power too widely by limiting the actors in whom Congress may vest the power to appoint.  As forwarded by Justice Blackmun in Freytag, the Founders intended that Congress only be able to vest appointment in the President, who is accountable to the public, or a Department Head who also “shares accountability to the people.”

Irony

The Copyright Royalty Board is not Congress’ first attempt to delegate the responsibility of setting statutory royalty rates.  The Copyright Royalty Tribunal (born 1976, died 2003) consisted of members appointed directly by the President, upon advice and consent.  This method of appointment, according to the theory underlying the Appointments Clause, should have limited the possibility for corruption by both eliminating Congress’ ability to directly appoint cronies to positions they created, and vesting the responsibility and potential political fallout from the appointments in the President, who is personally accountable to the people.

How did it go?  Not so well, apparently.  Here’s what William Patry, who served as policy planning adviser to the Register of Copyrights, had to say about the death of the CRT.  I’ve included a large snipit because Patry’s post provides the best primary source available for understanding the formation of the CRB.

The CRT was originally a five member tribunal, in the legislative branch, with members appointed by the President. Other than the very first chair, Tom Brennan, the former chief counsel of the Senate IP Subcommittee, who helped write the legislation that created his chairmanship, no subsequent permanent CRT member had any real experience with copyright law; some had none; some weren’t even lawyers (there were former boxers, for example, and I don’t mean Barbara or the dog). As one Senator described the situation, the CRT was a dumping ground for unqualified people to whom the President owed a small favor.

The first years of the CRT were marked by incessant appeals of its decisions. It was only the deep compassion of the DC Circuit in affirming decision after decision that kept the CRT afloat. Eventually, with the initial rate setting and challenges out of the way, the CRT was reduced to three members, but even three was too many; even one full-time member was too many. In data I compiled for its abolition, I discovered that on average, the CRT had only two weeks of hearings a year. This cried out for ad hoc adjudication. That opportunity came in 1993.

In 1993, as a result, in my opinion, of the appointment as chair of the then-wife of a former Congressman from Nebraska, the CRT simply imploded. It was a soap opera worthy of prime-time television, but for the substantial amounts of money that were involved. We didn’t set out to abolish the CRT, the CRT invited it. I was minding my own business in the subcommittee’s offices in the Cannon House Office Building. We began to get visits from different CRT members and the General Counsel, complaining about the fights that were destroying the place. For example, two members (a majority) would vote to change a regulation and send it to the Federal Register. The Federal Register would send it back because the change had not been transmitted by the chair; the chair, who was on the losing side of the vote, refused to transmit it. Moreover, we were told by the private sector that members were lobbying the private sector ex parte. No agency can function like that; the CRT was dangerously out of control.

So, given the CRT’s struggles, it shouldn’t be surprising that in 1994 Congress passed legislation that put the choice of the panel in the hands of the Librarian of Congress.  At its core, the decision appears to be motivated by pragmatism.  The CRTs were not high profile enough positions for the President to incur public derision if he appointed unqualified individuals.  There was a need to put the appointments into the hands of someone who, for lack of a better word, cared more about a functioning statutory royalty regime.

In light of the CRT’s issues, it would be easy to view the Appointments Clause as theory gone wrong, at least in terms of political appointees for positions of only niche-interest.  But we should, perhaps, pause for a moment to discuss how the world has changed since 1993.  Would the President be able to appoint unqualified candidates in the age of the internet?  It feels to me like the that type of story would be covered in niche-legal blogs on Monday, migrate to generally legal blogs by Wednesday, and be an embarrassing item in general publications by Thursday or Friday.  But who knows? Regardless, there is an interesting symmetry to the fact that William Patry’s post provides the best policy argument for both why we should read the Appointments Clause laxly in regards to the Copyright Royalty Judges, and why it should be given teeth.

The Librarian of Congress is not a “head of department” and cannot appoint inferior officers, such as the CRJs, without violating the Appointments Clause

Royalty Logic’s strongest argument targeting the Copyright Royalty Judges under the Appointments Clause is, if the CRJs  are inferior officers, the Librarian of Congress must be a “head of department” to wield the power to make the appointments.

In Freytag v. commissioner, 501 U. S. 868 (1991), the Supreme Court held that vesting the Chief Judge of the United States Tax Court, an Article I Court, with the power to appoint special trial judges did not transgress the structure of separation of powers embodied in the Appointments Clause.  The Supreme Court, however, broke sharply in their rationale for the decision.

The majority opinion, delivered by Justice Blackman, and joined by Justices Rehnquist, White, Marshall, and Stevens, found that the appointment of the special trial judges did not transgress the Appointments Clause because the United States Tax Court was a “Court of Law,” which along with the President and “heads of department,” is granted the power to make appointments under the Constitution.  In doing so, the majority read the phrase “heads of departments” narrowly to encompass the principals of Cabinet level departments:

This Court for more than a century has held that the term “Departmen[t]” refers only to “a part or division of the executive government, as the Department of State, or of the Treasury,’” expressly “creat[ed]” and “giv[en] . . . the name of a department” by Congress. Germaine, 99 U.S. at 99 U. S. 510-511. See also Burnap, 252 U.S. at 252 U. S. 515 (“The term head of a Department means . . . the Secretary in charge of a great division of the executive branch of the Government, like the State, Treasury, and War, who is a member of the Cabinet”). Accordingly, the term “Heads of Departments” does not embrace “inferior commissioners and bureau officers.” Germaine, 99 U.S. at 99 U. S. 511.

Confining the term “Heads of Departments” in the Appointments Clause to executive divisions like the Cabinet-level departments constrains the distribution of the appointment power just as the Commissioner’s interpretation, in contrast, would diffuse it. The Cabinet-level departments are limited in number, and easily identified. Their heads are subject to the exercise of political oversight, and share the President’s accountability to the people.

If the Court of Appeals for the District of Columbia elects to adopt the definition of “heads of departments” presented by the majority in Freytag, the appointment of the Copyright Royalty Judges will likely be held to transgress the Appointments Clause. The Librarian of Congress, under a reasonable appraisal, is not one of the “few in number” and easily identifiable “Cabinet-level” department heads who is “personally accountable to the people.”  I may be mistaken, but I’m not aware of too many people who would consider the position to be a launching pad for a political career.   The Librarian’s direct accountability to the people would seem to me to be attenuated at best.

Indeed, people much smarter than I have argued that similar appointments situations are cut-and-dry violations of the Appointments Clause.  John F. Duffey, a law professor at GWU, applied the majority decision in Freytage when he created a stir a couple of years ago by arguing that the method of appointing administrative patent judges was “almost certainly unconstitutional.”

I  harbor doubts, however, that the  Court of Appeals for the District of Columbia will elect to adopt the majority decision’s definition of principal officer.  The Supreme Court in Freytag broke five-four with only one current Justice siding with the majority and three current Justices adopting the concurring position.  Given the forward-leaning nature of the majority opinion, I wouldn’t be surprised if the Court of Appeals uses the definition of principal officer from the concurring decision.

The concurrence, delivered by Justice Scalia and joined by Justices O’Connor, Kennedy and Souter, found that the appointment of special trial judges by the Chief Justice of the U.S. Tax Court didn’t violate the Appointments Clause because the Chief Judge was a head of a department.  In reaching this decision Justice Scalia used no less than three different definitions of what constitutes a department for purposes of the Appointments Clause:

• “‘Departments’ means all independent executive establishments”;
• Departments are “all agencies immediately below the President in the organizational structure of the Executive Branch”;
• A Department is a “freestanding, self-contained entity in the Executive Branch, whose [principal officer] is removable by the President (and, save impeachment, no one else).”

All three of Justice Scalia’s tests for what constitutes a department require that the body be in the Executive Branch  — a literal reading of Justice Scalia’s opinion would imply that if the Library of Congress is in the Executive Branch, the appointments of the CRJs would be proper; and conversely, if the Library of Congress is part of the Legislative Branch then the appointments of the CRJs would violate the Appointments Clause.  Accordingly, much of Royalty Logic’s and the Department of Justices’ briefs battle on the issue of whether the Library of Congress is an executive or legislative agency.

Notwithstanding Justice Scalia’s language to the contrary, the argument over whether the Library of Congress is a legislative or executive agency appears to me to be irrelevant.  Scalia based his concurring position on the rationale that the Appointments Clause was designed to limit Congress’ ability to create new offices, and appoint people they owe political favors, without checks, to those same offices.  Regardless of which branch a department is located in, if an inferior officer is selected by a principal appointed by the President, the check on corruption remains the same.  What difference does it make if the Library of Congress leans more towards the Executive or Legislative Branch?  As long as the President appoints the person who picks the CRJs, Congress will not be able to insert people they owe favors into positions they legislate without first having to get someone appointed by the President, and whose actions reflect on the President,  to first sign on.

Potential for Supreme Court review

Royalty Logic’s appeal looks to me to be a strong candidate for Supreme Court review, even if the appointment of the CRJs is not found to violate the Appointments Clause.   The makeup of the Supreme Court has changed significantly since it last addressed a similar Appointments Clause issue, and the existing case law is a mess that merits refinement.