Exhuming Nondelegation . . . Intelligibly

Fordham Journal of Corporate & Financial Law Volume 28 Issue 2 Article 5 2023 Exhuming Nondelegation . . . Intelligibly Zachary R.S. Zajdel Fordham University School of Law Follow this and additional works at: https://ir.lawnet.fordham.edu/jcfl Part of the Administrative Law Commons, Constitutional Law Commons, Judges Commons, Law and Politics Commons, Legislation Commons, and the Securities Law Commons Recommended Citation Zachary R.S. Zajdel, Note, Exhuming Nondelegation . . . Intelligibly, 28 Fordham J. Corp. & Fin. L. 467 (2023). This Note is brought to you for free and open access by FLASH: The Fordham Law Archive of Scholarship and History. It has been accepted for inclusion in Fordham Journal of Corporate & Financial Law by an authorized editor of FLASH: The Fordham Law Archive of Scholarship and History. For more information, please contact . EXHUMING NONDELEGATION . . . INTELLIGIBLY Zachary R.S. Zajdel* ABSTRACT Whether by avalanche or a thousand cuts, the intelligible principle test may be awaiting its untimely demise at the behest of a reinvigorated nondelegation movement. Perhaps looking to speed up the decomposition, the Fifth Circuit in Jarkesy v. Securities and Exchange Commission struck down the SEC’s discretion to pursue enforcement actions with its own Administrative Law Judges or in federal court as unconstitutionally delegated legislative power. This Note posits that Jarkesy was rightly decided but rife with uncompelling reasoning. Establishing this requires a detour into the meaning of the Necessary and Proper Clause, the significance of the separation of powers, and the interplay between executive and legislative authority. In so doing, this Note proposes a refined nondelegation test that more clearly categorizes the powers that Congress may or may not constitutionally delegate and offers a novel conception of legislative power emphasizing constitutional text. The result is a blueprint that neither defends nor attacks the intelligible principle test but can nonetheless be used as a basis for either. On the one hand, this proposal may provide a spirited framework for asserting that a modified intelligible principle test is constitutionally agreeable and not just practically preferable in a modern society. On the other hand, this proposal endorses a more exacting categorical test that builds on Justice Gorsuch’s framework and advocates for more robust enforcement of nondelegation generally. * J.D. Candidate, Fordham University School of Law, 2023; B.B.A. Finance, Economics, University of Notre Dame, 2019. I would like to extend my sincerest gratitude to Professor Aaron J. Saiger for lending his invaluable feedback and support throughout the drafting process. 467 468 FORDHAM JOURNAL OF CORPORATE & FINANCIAL LAW [Vol. XXVIII INTRODUCTION ............................................................................ 469 I. DOCTRINAL FOUNDATIONS ...................................................... 470 A. Separation of Powers and the Nondelegation Doctrine... 470 II. JARKESY AND THE RANGE OF CONSTITUTIONAL POWERS ..... 476 A. The Securities and Exchange Commission’s Enforcement Powers in Jarkesy .......................................................... 476 B. Concurrent vs. Exclusive Powers and Conventional Delegations .................................................................... 479 C. The President’s (or the Agency’s) Authority to Act on Their Own................................................................................ 488 D. What a Broad Reading of the Necessary and Proper Clause Would Mean—Unconventional Delegations ................. 494 III. WHEN CONGRESS CAN DELEGATE: RETOOLING NONDELEGATION WITHOUT (NECESSARILY) UPROOTING THE INTELLIGIBLE PRINCIPLE TEST............... 496 A. Rationalizing Jarkesy ...................................................... 497 B. Framing the Threshold Question: The Definition of Legislative Power........................................................... 498 C. Congress Generally Cannot Delegate or Assign Powers It Does Not Have Itself................................................... 505 D. In Dodd-Frank, Congress Impermissibly Delegated a Power It Does Not Have Itself .................................................. 511 E. What If Congress Delegated the Authority to Select the Forum on a General, Rather Than Case-Specific, Basis? ............................................................................. 517 F. Why Is There No Nondelegation Doctrine for Executive Power?............................................................................ 523 G. Proposed Nondelegation Test.......................................... 528 CONCLUSION ................................................................................ 531 2023] EXHUMING NONDELEGATION . . . INTELLIGIBLY 469 INTRODUCTION With increasing urgency, legal commentators across the nation have warned of the impending “death knell” for the administrative state due to the new makeup of the Supreme Court.1 So it goes, the Court’s majority apparently may now approve of strictly enforcing the nondelegation principle—the idea that Congress may not delegate its legislative authority—which would shrink the power of federal agencies.2 Not the least brunt of this would hit the Securities and Exchange Commission (SEC), which enforces the federal securities laws and regulates the U.S. financial markets for the purpose of protecting investors and ensuring fair transactions.3 The Fifth Circuit, appearing to almost force the Supreme Court’s hand, undercut the SEC’s power to enforce and regulate the securities markets in Jarkesy v. SEC.4 The split panel held that, inter alia, Congress unconstitutionally delegated legislative power in Dodd–Frank § 929P(a) by granting the SEC the authority to choose whether to bring securities fraud enforcement actions against individuals with administrative law judges (ALJs), who are essentially SEC employees that decide disputes initiated by the agency, or with judges in federal Article III court.5 Under the majority’s reasoning, it is the constitutional domain of Congress to decide whether certain public disputes are to be resolved by an agency itself or the federal courts.6 A subsect of conservative scholars have long asserted that federal administrative agencies operate on shoddy constitutional grounds, as the lovechild of contrived reasoning.7 Bureaucratic defenders, on the other hand, have long focused on practical considerations, emphasizing the importance of expert and efficient agencies to modern governance in the 1. See, e.g., Robert Litan, The Supreme Court Won’t Dismantle the Administrative State Quite Yet, BARRON’S (Apr. 19, 2022, 4:00 AM), https://www.barrons.com/articles /the-supreme-court-wont-dismantle-the-administrative-state-regulation-51650298951 [https://archive.ph/ZADsG]. 2. See Thomas Geoghegan, When the Court Shrinks the Administrative State, Congress Loses Power, WASH. POST (July (...truncated)