TMT with Mike O'Rielly – Ep 22: Pending SCOTUS Decision on USF

Episode 22 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on June. In this episode, titled "The Pending U.S. Supreme Court Decision on the Universal Service Fund," Mr. O'Rielly has a conversation with guest Tim Donovan, President and CEO of the Competitive Carrier Association (CCA). Their conversation addresses issues involving the much-anticipated ruling by the Supreme Court in FCC v. Consumers' Research. Streaming video of the episode is now available:

High Court Again Declines to Rule on State-Level Price Controls for Broadband

On February 24, the Supreme Court issued an order denying a petition for a rehearing on its order to deny a writ of certiorari in New York State Telecommunications Association v. James. That is a wordy way of saying the Court declined to change its mind about its earlier refusal to take up the case. The Court's order leaves in place an April 2024 decision by the U.S. Court of Appeals for the Second Circuit rejecting ISPs' claims that the New York broadband price control law is subject to field preemption and conflict preemption.

The Supreme Court's prior order denying certiorari in NYSTA v. James is the subject of my blog post from December 18, 2024. Reconsideration was requested by the petitioners following the January 2, 2025, decision by the Sixth Circuit in In re: MCP No. 185. The Sixth Circuit's decision vacated the FCC's April 2024 order that reclassified broadband services as Title II "telecommunications services" and thereby left in place the agency’s prior order that classified broadband as a Title I "information service." The petitioners argued that the result in the Sixth Circuit constituted intervening circumstances substantial enough to warrant the granting of a rehearing and certiorari. But the Court declined to see it that way. 

 

New York's Affordable Broadband Act imposes price ceilings—a type of rate regulation—on broadband Internet service providers (ISPs) offering service in the state. Under the law, ISPs must offer low-income individuals plans of $15 per month and $20 per month. After being involved in litigation, the law finally went into effect on January 15 of this year. As a result of the Supreme Court's recent order, it appears the New York price control law will remain in effect for the foreseeable future. 

 

There are early signs that the New York law has unintended consequences for broadband competition and new deployments in that state. For more, see my February 20 FedSoc Blog post, "States Should Keep Broadband Internet Services Free From Price Controls."

2025 Will Be a Big Year for the FCC in the Courts

On December 16, the Federalist Society hosted a webinar panel event, "Is FTC Administrative Litigation Unconstitutional?" The webinar's panelists discussed the future of Federal Trade Commission's (FTC) litigation and enforcement in light of the Supreme Court's decisions in Axon Enterprise, Inc. v. FTC (2023) and SEC v. Jarkesy (2024) as well as in light of the Court's openness to revisit the contours of administrative power as reflected by decisions such as West Virginia v. EPA (2022) and Loper Bright Enterprises v. Raimondo (2024).

In Jarkesy, the Court held that the Seventh Amendment entitles a defendant to a jury trial when the Securities and Exchange Commission (SEC) seeks civil penalties for securities fraud. The Court determined that the SEC's antifraud provisions replicate common law fraud claims that must be heard by a jury. 

 

Although the Supreme Court's holding in Jarkesy was limited to the Seventh Amendment, the FedSoc webinar panel's discussion touched on two facets of the Fifth Circuit's holding in an earlier stage of the case. The Fifth Circuit held that Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle by which the SEC would exercise delegated power, thereby violating the U.S. Constitution's Article I Legislative Vesting Clause. Additionally, the Fifth Circuit held that statutory removal restrictions on SEC Administrative Law Judges (ALJs) violate the Take Care Clause of Article II. Shortly, the Supreme Court will likely tackle nondelegation claims, presidential removal power claims, and other claims brought in other cases against the FTC or other agencies – including the FCC.

 

Indeed, in 2025, the Supreme Court will review the Fifth Circuit's July 2024 en banc decision in Consumers' Research v. FCC. The Fifth Circuit concluded that the universal service contribution system violates the Article I Legislative Vesting Clause. The Court's grant of a writ of certiorari in Consumers' Research v. FCC is noted briefly in my blog post from November 26, 2024. The lower court's decision in the case, which was based on nondelegation principles and precedents, is the subject of my August 2024 Perspectives from FSF Perspectives, "Fifth Circuit Rules USF Contribution Scheme Violates Legislative Vesting Clause."

 

Furthermore, lower courts are likely to weigh in next year on Jarkesy implications for the FCC's enforcement authority. In April 2024, the FCC fined the three nationwide wireless providers for the sale of consumer location-related information. Legal challenges to the Commission's authority to levy those fines are now pending before the D.C. Circuit, the Second Circuit, and the Fifth Circuit. 

 

Added to all of these pending cases are anticipated judicial decisions about the legal fate of the FCC's Safeguarding and Securing the Open Internet Order regulating broadband Internet services as public utilities and the Commission'sDigital Discrimination Order subjecting broadband providers to liability for unintentional disparate impacts. Oral arguments in those respective cases have been held before the Sixth Circuit and the Eighth Circuit. 

 

In all, it looks like 2025 will be a big year for the FCC in the courts.   

Panel Discusses Gonzalez v. Google and the Future of Section 230 Immunity

For an incisive debate and discussion about legal immunity for editorial, publishing, and distribution decisions by major online platforms, tune in to the video or audio of the January 24 webinar hosted by the Federalist Society titled "Section 230 Goes to Court: Gonzalez v. Google and the Future of the Electronic Town Square."  

The webinar was moderated by Boyd Garriott and it featured panelists Ashkhen Kazaryan, Joel Thayer, and Free State Foundation President Randolph May. The webinar expert panel discussed the meaning and scope of immunity conferred on online platforms under Section 230 of the Communications Decency Act, particularly in light of the case of Gonzalez v. Google. The issue in focus in the case is whether immunity under Section 230(c)(1) applies when online platforms make targeted recommendations of content to viewers. The U.S. Supreme Court has schedule oral argument in the case for February 21. 

 

FSF President May wrote about Gonzalez v. Google in his August 2022 Perspectives from FSF Scholars, "Thinking Clearly and Speaking Freely – Part 13: A Reasonableness Standard for Fixing Section 230." 

The Latest on State Cable Bill Prorating Requirements

There have been two recent developments of note regarding legal challenges to state-level requirements that cable operators prorate customers' last-month bills – obligations that, as I argued in "State Cable Bills Prorating Requirements Clearly Are Preempted," an April 2021 Perspectives from FSF Scholars, constitute a form of rate regulation preempted by the 1984 Cable Act, not an otherwise permissible customer service standard or consumer protection law.

Both Maine and New Jersey require that cable operators – but not any of the countless other distributors of video programming, whether facilities-based (such as the two Direct Broadcast Satellite operators, DIRECTV and DISH Network, or telco TV providers, like Verizon FiOS) or streamed over the Internet (Netflix, Hulu, Amazon Prime Video, Disney+, and so on) – bill canceling customers on a per-day basis during their final month of service.

In "Maine Cable Law, Ignoring Competition, Is 'Unambiguously Preempted'," an October 2020 Perspectives, I reported that the U.S. District Court for the District of Maine had found the Maine statute to be "unambiguously preempted." The Court of Appeals for the First Circuit, however, reversed that decision on January 4, 2022. For more information, please see "First Circuit Wrongly Concludes Maine's Prorated Billing Requirement Is Not Unlawful."

And last week, on January 9, 2023, the U.S. Supreme Court announced that it had denied Charter Communications' petition for certiorari.

New Jersey's "virtually identical" rule likewise, and for similar reasons, was deemed preempted by the Superior Court of New Jersey, Appellate Division, in an October 15, 2021, unpublished opinion. I discussed this decision in "NJ State Court Concurs: Requirement to Prorate Cable Bills Equals Preempted Rate Regulation," a contemporaneous post to the Free State Foundation blog.

The New Jersey Board of Public Utilities and Division of Rate Counsel appealed to the New Jersey Supreme Court, which held oral arguments on Tuesday (subscription required). Should the lower court decision be reversed, this case potentially could make its way to the Supreme Court.

A decision is expected as early as late next month.

Supreme Court Hears Oral Arguments Copyright Case on "Transformative" Works

On October 12, the U.S. Supreme Court held oral arguments in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith. The case involves a series of prints and illustrations by the late Andy Warhol that are based on a copyrighted 1981 photo of the late music artist Prince. One image from that series was published – without authorization of the owner of the photo – on a magazine cover in May 2016. At issue in the case is the fair use doctrine and the nature or role of "transformative" works in fair use analysis. 

The Petitioner, Andy Warhol Foundation, presented  the question to the Court in a hedged manner: 

Whether a work of art is "transformative" when it conveys a different meaning or message from its source material (as this Court, the Ninth Circuit, and other courts of appeals have held), or whether a court is forbidden from considering the meaning of the accused work where it "recognizably deriv[es] from" its source material (as the Second Circuit has held). 

Fair use is an affirmative defense to copyright infringement, and it consists of four non-exclusive factors that are to be considered in evaluating whether the use of a copyrighted work is "fair:" (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Under Supreme Court precedents such as Campbell v. Acuff-Rose Music, Inc. (1994), courts typically analyze the first factor according to the degree to which the use is "transformative" – that is, "whether the new work merely supersedes the objects of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." 

 

However, Section 106(2) secures to copyright owners the exclusive right to prepare "derivative works" based upon the copyrighted work. According to Section 101:

A "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted." A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole represent an original work of authorship, is a "derivative work."

Some insightful commentaries have been published about Andy Warhol Foundation v. Goldsmith, and Free State Foundation scholars likely will address the case more definitively once the Supreme Court has issued its decision. Until then, a general observation here is that the Petitioner's seeming overemphasis on an artist's subjective intent or interpretation of a copyrighted work as rendering a secondary work "transformative" and thus a fair use would, if adopted by the Court, encroach significantly on a copyright owner's exclusive right to prepare derivative works. During the oral arguments, Justice Amy Coney Barrett appeared to make this point – or at least a similar point – when she stated to the Petitioner's counsel: "And it seems to me like your test, this meaning or message test, risks stretching the concept of transformation so broadly that it kind of eviscerates Factor 1 and puts all of the emphasis on Factor 4." 

Additionally, I second FSF President Randolph May in commending the Committee for Justice for its amicus curiae brief in this case. As explained in his August 18 blog post, CFJ's amicus brief skillfully sets forth the conceptual underpinnings of copyright law as it pertains to the fair use doctrine. And their brief applies that background understanding to the transformative works claims being made in Andy Warhol v. Goldsmith.

PRESS RELEASE: Reaction of FSF President Randolph May to Supreme Court's West Virginia v. EPA Decision

 

 

 

The following statement may be attributed to Free State Foundation President Randolph May with regard to the Supreme Court’s decision in West Virginia v. EPA. May, an expert in administrative law, is a former Chair of the ABA Section of Administrative Law & Regulatory Practice, a former Public Member and present Senior Fellow at the Administrative Conference of the United States, and a Fellow at the National Academy of Public Administration.

“The Supreme Court’s opinion in the West Virginia case is a consequential decision for the administrative state because it further cements the ‘major questions’ doctrine in our jurisprudence as a means of protecting the separation of powers embedded in the Constitution. Despite the complexities of the Clean Air Act, the Court’s ruling is straightforward: an agency lacks the authority to adopt regulations in cases of major economic and political significance absent a clear statement from Congress delegating the agency such authority. Here, the Court concluded that EPA’s new comprehensive generation-shifting regulatory approach, with its major impacts on the economy, went beyond anything Congress clearly authorized.”

“The Court’s reliance once again on the major questions doctrine likely will diminish further the effect of the Chevron doctrine which requires courts to defer to agencies’ reasonable interpretations of their own statutes. This, in turn, likely will constrain the overly broad discretion of agency regulators to adopt major rules without a clear statement from Congress that they possess the authority to do so. This is consistent with the Founders’ view of the Constitution that it is the duty of the judiciary, not the 'Fourth Branch' consisting of unelected bureaucrats, to say what the law is."

NOTE: One of my pieces is cited in Justice Gorsuch’s concurring opinion.

NOTE: For relevant background, also see the law review article, "NFIB V. OSHA: A Unified Separation of Powers Doctrine and Chevron's No Show,” by Randolph May and Andrew Magloughlin, forthcoming in the South Carolina Law Review.

Justice Kavanaugh's US Telecom Dissent Could Govern Platform Speech

Slightly less than a month ago, in NetChoice v. Paxton, the Supreme Court restored a preliminary injunction that prevented Texas's social media common carriage law, HB20, from taking effect. I already wrote about Justice Alito's dissent in that case, and as I noted back then, the Supreme Court's 5-4 majority did not explain its reasoning. This time, I'm going to take a stab at guessing that reasoning, and my guess involves then-Judge Kavanaugh's dissent in US Telecom v. FCC (2017).

Justice Kavanaugh, a member of the NetChoice majority, possibly showed his cards years earlier while dissenting from the denial of en banc review as a D.C. Circuit Judge in US Telecom. In that case, Kavanaugh explained his belief that the First Amendment bars the imposition of "net neutrality" regulations, including prohibitions on blocking, throttling, and paid-prioritization, on broadband providers. Specifically, Kavanaugh relied on Turner Broadcasting System v. FCC (1997), which he interpreted as ruling that First Amendment protections for editorial discretion apply to modern communications services, even though Turner addressed cable television rather than broadband. Kavanaugh would have applied the editorial protection afforded to cable providers in Turner to broadband providers.

Here, of course, we deal with Internet service providers, not cable television operators. But Internet service providers and cable operators perform the same kinds of functions in their respective networks. Just like cable operators, Internet service providers deliver content to consumers. Internet service providers may not necessarily generate much content of their own, but they may decide what content they will transmit, just as cable operators decide what content they will transmit. Deciding whether and how to transmit ESPN and deciding whether and how to transmit ESPN.com are not meaningfully different for First Amendment purposes.

Then, and most relevant to guessing the Court's possible reasoning in NetChoice, Kavanaugh argued that, in order to overcome the "intermediate scrutiny" protection the First Amendment affords to editorial discretion, the government needed to make a credible finding that broadband providers had market power. The FCC's order adopting the net neutrality regulations did not do that. To show the consequences of that omission, Kavanaugh argued that, if that approach were adopted, Congress could impose similar regulations on Internet platforms such as Facebook, Google/YouTube, and Twitter, and even traditional publishers like the New York Times, without obstacle.

If market power need not be shown, the Government could regulate the editorial decisions of Facebook and Google, of MSNBC and Fox, of NYTimes.com and WSJ.com, of YouTube and Twitter. Can the Government really force Facebook and Google and all of those other entities to operate as common carriers? Can the Government really impose forced-carriage or equal-access obligations on YouTube and Twitter? If the Government’s theory in this case were accepted, then the answers would be yes. After all, if the Government could force Internet service providers to carry unwanted content even absent a showing of market power, then it could do the same to all those other entities as well. There is no principled distinction between this case and those hypothetical cases.

The underlying sentiment of Kavanaugh's "slippery slope" argument above is that there is something wrong with common carriage regulation of Internet platforms and traditional publishers. And the Court long ago ruled that something is indeed wrong with common carriage style regulation of newspapers in Miami Herald Publishing Co. v. Tornillo (1974).

Perhaps the Court's majority in NetChoice reached the same conclusion as Kavanaugh in US Telecom, relying on cases like Turner and Tornillo as an indication that NetChoice is likely to succeed on the merits of its case, which is one of the factors for granting a preliminary injunction.

For now, we do not know the Court's reasoning, but Kavanaugh's opinion in US Telecom is a good place to start guessing. And we also do not know, assuming the majority embraced Kavanaugh's reasoning, whether a majority of the Justices would do the same in the context of common carriage regulation of broadband service. As Justice Alito explained in his NetChoice dissent, the Court has taken different First Amendment approaches for different technologies.

But we do know that, as NetChoice continues to move through the courts, it will have broad implications on communications and First Amendment law.

Big Administrative Law Decisions Pending at SCOTUS

As the Supreme Court wraps up its 2021-2022 term this summer, it will issue opinions that could reshape administrative law. West Virginia v. EPA and American Hospital Association v. Becerra, both of which the Court has not yet decided, involve separation of powers issues that define the scope of the executive branch's powers. The Court might pare back the executive branch's ability to make law as early as tomorrow morning.

West Virginia v. EPA is a challenge to an environmental rule that West Virginia and other petitioners argue exceeds the EPA's authority. Petitioners argue that the EPA's rule is unlawful under the "major questions doctrine," which requires that Congress "speak clearly when authorizing an agency to exercise powers of vast economic and political significance." Randolph May and I wrote a law review article, NFIB V. OSHA: A Unified Separation of Powers Doctrine and Chevron's No Show, on this subject. A ruling in this case could make it harder for agencies to issue sweeping rules based on vague or unspecific authority in laws passed by Congress.

American Hospital Association v. Becerra involves a challenge to an administrative interpretation of a complicated Medicare statute. For our purposes, during the oral argument in this, the Court appeared to consider overturning or narrowing "Chevron deference." Chevron specifies that courts will uphold agency actions that are based on statutory language that is ambiguous or silent, so long as the actions are based on reasonable interpretations of the relevant statutes. In other words, rather than determining the best reading of the law as the Constitution tasks it to do, the judiciary will permit any reasonable interpretation of a vague or ambiguous law. A ruling in Becerra may limit the executive branch's power by instructing the judiciary to be less deferential.

We will closely read these opinions when the Court releases them. We also note that the two legal issues – the major questions doctrine and Chevron deference – mesh together. Read our law review article mentioned above to learn more.

Justice Alito's NetChoice v. Paxton Dissent Shows Openness to Platform Common Carriage

Justice Alito penned an emergency docket dissent last week in NetChoice v. Paxton  that may shed light on whether the Supreme Court would uphold common carriage or must-carry obligations for social media platforms. Alito, joined by Justices Gorsuch and Thomas, argued that the Court should not have restored a district court's preliminary injunction of Texas's HB20, which prevented social media platforms with over 50 million users from banning users and removing user-generated content on the basis of viewpoint.

While defending the law in a federal district court, Texas Attorney General Ken Paxton described HB20 as a form of common carriage regulation. The District Court enjoined HB20 for infringing on platforms' First Amendment right to editorial discretion. A Fifth Circuit panel stayed that decision, but the Supreme Court has now vacated that stay, restoring the preliminary injunction.

However, it is unclear why because the Court's 5-4 majority, which included a unique breakdown of Chief Justice Roberts and Justices Barrett, Breyer, Kavanaugh, and Sotomayor, did not explain its reasoning. Justice Kagan voted against restoring the preliminary injunction, but she did not join Justice Alito's dissent.

Image credit: Wikipedia user JoshEllie1234. No alterations made.

Justice Alito, applying the requirement that applicants for preliminary injunctions must be likely to succeed on the merits under existing law, argued that common carriage of social media is a novel issue unaddressed by precedent. Alito further explained that "[i]t is not at all obvious how our existing precedents, which predate the age of the internet, should apply to large social media companies . . ." because while some cases have recognized a First Amendment right to editorial discretion, others have denied it.

The law before us is novel, as are applicants' business models. Applicants claim that §7 of HB20 interferes with their exercise of "editorial discretion," and they maintain that this interference violates their right "not to disseminate speech generated by others." Under some circumstances, we have recognized the right of organizations to refuse to host the speech of others. See Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston, Inc., 515 U. S. 557 (1995) (parade organizer); Miami Herald Publishing Co. v. Tornillo, 418 U. S. 241 (1974) (newspaper). But we have rejected such claims in other circumstances. For example, in PruneYard Shopping Center v. Robins, 447 U. S. 74 (1980), we rejected the argument that the owner of a shopping mall had "a First Amendment right not to be forced by the State to use his property as a forum for the speech of others." And in Turner Broadcasting System, Inc. v. FCC, 512 U. S. 622 (1994), we declined to apply strict scrutiny to rules that "interfere[d] with cable operators' editorial discretion by compelling them to offer carriage to a certain minimum number of broadcast stations."

Alito also explained that Texas made arguments similar to those accepted by the Court in cases upholding common carriage or must-carry regulations.

First, Texas contends that §7 does not require social media platforms to host any particular message but only to refrain from discrimination against a user’s speech on the basis of "viewpoint," and in this respect the statute may be a permissible attempt to prevent "repression of [the freedom of speech] by private interests." Second, Texas argues that HB20 applies only to platforms that hold themselves out as "open to the public," and as neutral forums for the speech of others. These representations suggest that the covered social media platforms—like the cable operators in Turner—do not generally "'convey ideas or messages [that they have] endorsed.'" Third, since HB20 is limited to companies with "50 million active users in the United States,” Texas argues that the law applies to only those entities that possess some measure of common carrier-like market power and that this power gives them an "opportunity to shut out [disfavored] speakers."

Apart from the merits, Alito explained that the "procedural posture" of the case also warrants against granting a preliminary injunction.

In conclusion, Alito made clear that he has "not formed a definitive view on the novel legal questions that arise from Texas’s decision to address the 'changing social and economic' conditions it perceives." But the perceived novelty of the legal issues presented in this case, to Justices Alito, Gorsuch, and Thomas, warranted against a preliminary injunction.

Alito's dissent indicates that at least three justices are willing to entertain the legality of common carriage or must-carry regulations on social media platforms. And Justice Kagan, though she did not join Alito's dissent or write for herself, may likewise be open to the prospect. This case will be important to watch as the lower courts, and possibly the Supreme Court itself, address the merits in later stages.

Government's "Time, Place, and Manner" Authority Preserved by Supreme Court

Last week, the Supreme Court upheld regulatory distinctions between on-premise and off-premise roadway signs as lawful "content neutral" restrictions under the First Amendment in City of Austin v. Reagan National Advertising of Austin, LLC. This holding clarifies the Court's prior ruling in Reed v. Town of Gilbert, which held that viewpoint-based regulation of roadway signs violate the First Amendment.

City of Austin preserves government authority to restrict speech for reasons that do not relate to the underlying content of the message – so-called content-neutral "time, place, and manner" restrictions. Some courts and commentators had cited Reed v. Town of Gilbert to narrow government authority to implement such restrictions. A consensus had emerged that Town of Gilbert outlaws regulations that require government officials to read the potentially subjected speech to determine whether the regulation applies.



This is how my constitutional law professor taught me to read Town of Gilbert, and the Fifth Circuit opinion reversed in City of Austin likewise took this approach. The Fifth Circuit's opinion reasoned that, because a government official must read a roadway sign to determine whether the sign is on-premise or off-premise, Austin's sign code drawing distinctions on that basis was an unlawful "content-based" restriction.

But the Court disagreed with that simplistic "read the sign" test, noting that Austin's sign code did not discriminate based on the underlying message of the sign. All messages within the on-premises category faced the same regulations, and all messages within the off-premises category faced the same regulations. The only reason the regulator had to read the underlying message at all was to determine whether the sign was on- or off-premises, not what the message itself said. In other words, City of Austin involved a place restriction, which is not usually suspect under the First Amendment. This is a far-cry from the sign code that violated the First Amendment in Town of Gilbert, which would've applied different regulations to signs depending on whether their messages were "ideological" or "commercial," among other categories.

Justice Alito concurred in the outcome. Justices Thomas, Gorsuch, and Barrett dissented, arguing that the Fifth Circuit correctly applied Town of Gilbert by holding that the on-vs-off premises distinction is unconstitutional.

City of Austin appears to credit the crux of Justice Breyer's Town of Gilbert concurrence. Breyer concurred in the outcome but refused to join the majority opinion in Town of Gilbert because he believed the simplistic "read the sign" test would eliminate too much government regulatory authority over subjects that do not involve serious First Amendment concerns like protecting political speech.

Moving forward, it appears the Court will respect broader authority to implement time, place, and manner restrictions.

Supreme Court Denies Petition in Case Involving State Takings of Copyrighted Property

On March 21, the Supreme Court denied a petition for certiorari in the case of Jim Olive Photography v. University of Houston System. The case involved important and interesting legal issues regarding judicial enforcement of the Fifth and Fourteenth Amendments' prohibitions against state government takings of copyrighted property without just compensation. Unfortunately, the court's denial of the petition means that those issues will have to wait for another time.  

In Allen v. Cooper (2020), the Supreme Court concluded that the Eleventh Amendment generally bars federal courts from hearing infringement claims against state governments. But the Eleventh Amendment does not bar federal courts from hearing claims against states for takings of private property without just compensation or for deprivations of due process. As explained in my December 2021 Perspectives from FSF Scholars, "States Should Not Take Intellectual Property Without Justice Compensation: The Constitution's Fifth and Fourteenth Amendments Protect Copyrights." 

In Jim Olive Photography, the petitioning copyright owner's taking claims were denied by the Texas Supreme Court. He sought an order by the U.S. Supreme Court to vacate that decision and have the lower court reconsider his taking claims in light of the high court's decision in Cedar Point Nursery v. Hassid (2021). In Hassid, the court determined that regulations requiring government access to private property constitute per se physical takings similar to an easement in property because they appropriate the "right to exclude." And the copyright owner in Jim Olive Photography made a well-founded argument a state's appropriation of a copyright owner's exclusive rights, either by making unauthorized reproductions of the work or by publicly displaying it, is analogous to a state's appropriation of a portion of a property owner's land or crops. 

 

The Supreme Court's denial of the petition in Jim Olive Photography is unfortunate for copyright owners whose works have been infringed by state government agencies. But I stand by the legal principles and reasoning about takings of copyrighted property that are set forth in my December 2021 Perspectives:

Copyrights are a type of property that are expressly recognized in the Constitution. This understanding of copyrights as property provides a principled basis for Takings Clause claims when states intentionally or recklessly appropriate exclusive rights in copyrighted property. Such claims also appear consonant with Supreme Court decisions that prohibit states from appropriating personal property and an owner's "right to exclude." The Court should extend its Takings Clause jurisprudence to include takings of copyrighted property. 

Supreme Court Clarifies Meaning of Safe Harbor Provision for Copyright Registration

On February 24, the U.S. Supreme Court issued its decision in Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. (2022). At issue in the case is the meaning of Copyright Act Section 411(b), which is a procedural provision for copyright registration that functions as a safe harbor in the event that the copyright registration application includes inaccurate information. Section 411(b)(1)(A) provides that a copyright registration application is valid regardless of whether it contains any inaccurate information, unless "the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate."  

The Ninth Circuit narrowly interpreted Section 411(b) to mean that the safe harbor only saves a copyright registration from invalidation for failure to understand the law, but not for failure to understand the facts. But the Supreme Court reversed the Ninth Circuit and determined that Section 411(b)'s safe harbor encompasses both mistakes of law and mistakes of fact. 

As the Supreme Court stated, "[l]ack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration." However, the court did note its recognition in civil cases that willful blindness may support a finding of actual knowledge. 

 

Copyright registration is important because it is a prerequisite to filing civil copyright infringement claims. Registration also entitles a copyright owner to statutory damages and attorney's fees. Free State Foundation President Randolph May and I discuss aspects of civil copyright enforcement in chapter 8 of our book Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020). 

Supreme Court Ends Legal Challenge to Limits on Cable Franchising Authorities

On February 22, the Supreme Court denied a petition for certiorari in City of Eugene v. FCC. The Supreme Court's denial of the petition leaves standing a decision by the Sixth Circuit Court of Appeals that upheld most of a 2019 order by the Commission that clarified limits on local franchising authorities (LFAs) with respect to cable infrastructure. This is welcome news because the Commission's 2019 order is an important reform that helps keep state and local governments from regulating broadband Internet access services.   

As explained in my blog post from June 2021, the Sixth Circuit upheld the Commission's "mixed use rule" – which clarifies that LFA's may not use their cable franchising authority to regulate non-cable services such as broadband Internet access services. Also, the Sixth Circuit upheld the Commission's determination that in-kind obligations imposed by LFAs on cable operators count toward Section 622(b)'s limit on how much LFAs can charge cable operators. Under Section 622(b), LFA's can charge cable operators no more than an amount equal to 5% of their gross revenues during any 12-month period.

 

Additionally, Free State Foundation Legal Fellow Andrew Magloughlin wrote a blog post on January 12 of this year about the certiorari petition in City of Eugene v. FCC and offered solid reasons why the Supreme Court should deny it. 

Federalist Society Podcast Panelists Tackles NFIB v. OSHA and Non-Delegation

The Federalist Society-hosted "Regulatory Transparency Project's Fourth Branch Podcast" features an episode from January 20 on "The Vaccine Mandate Cases and the Future of Administrative Law." The podcast episode featured a panel discussion about the U.S. Supreme Court's decisions released January 13 in NFIB v. OSHA and Biden v. Missouri. The panelists addressed the Court's reasoning in those cases regarding statutory authority and legal doctrines such as non-delegation, major questions, and constitutional avoidance.

One of the panelists for the podcast episode was Law Professor Ilan Wurman, a member of the Free State Foundation's Board of Academic Advisors. Prof. Wurman's 2021 article in the Yale Law Journal on "Non-Delegation at the Founding" was cited by Justice Neil Gorsuch's concurring opinion in NFIB v. OSHA. During the panel discussion, Prof. Wurman offered sharp insights into the differences between non-delegation, major questions, and constitutional avoidance. Listeners will benefit from the contributions of all of the episode's participants regarding the import of NFIB v. OSHA for the future of the administrative state. 

For additional insights on these topics, check out Free State Foundation President Randolph May's Perspectives from FSF Scholars titled "NFIB v. OSHA: Nondelegation, Major Questions, and Chevron's No Show." 

Supreme Court Should Leave Alone a Sound Ruling on Cable Franchise Fee Limits

The Supreme Court should promptly deny certiorari in City of Eugene v. FCC, a case that has been pending before the court since November 4, 2021. The cert petition, filed by numerous localities, argues for a non-textual reading of the Communications Act and invents a non-existent preemption issue, all to impose excess fees on information services provided over cable systems. But the text of the Act prohibits such fees.

In City of Eugene, a unanimous Sixth Circuit panel correctly interpreted the Communications Act as expressly preempting imposition of franchise fees by states and local governments on non-cable services provided over cable systems. The lower court upheld most of the FCC's 2019 order that clarified limits on local governments' authority to impose such fees. Free State Foundation Director of Policy Studies Seth Cooper briefed the court's "sensible" opinion shortly after its publication, and also observed that the mostly-affirmed 2019 order stopped localities from imposing fees "beyond the statute's limits, potentially draining cable operator investment in their broadband Internet networks."

To review, Section 541 of the Cable Act of 1984 – which is incorporated into the Communications Act – requires cable providers to receive authorization from a local franchising authority (LFA) before providing cable service in the LFA's jurisdiction. In exchange for granting this franchise, LFAs can subject franchisees to franchise fees, which Section 542(g)(1) defines as "any tax, fee, or assessment of any kind imposed by a franchising authority or other governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such." But Section 542(b) caps franchise fees at "five percent of a cable operator’s gross revenues for cable services for any 12-month period." And critically, Section 544(b)(1) expressly prohibits regulation of non-cable services in franchise agreements: an LFA "in its request for proposals for a franchise… may establish requirements for facilities and equipment, but may not… establish requirements for video programming or other information services[.]"

The Sixth Circuit upheld most of the FCC's 2019 order that preempted the City of Eugene's 7% tax on cable broadband revenues. In an opinion by Judge Raymond Kethledge, the court upheld the FCC's "mixed use rule," which prohibited LFAs from taxing broadband Internet access service in franchise agreements, pursuant to the Section 544(b)(1)'s prohibition on "establish[ing] requirements for video programming or other information services." Because the Restoring Internet Freedom Order classified broadband Internet access service as an information service, it obviously fit under the prohibition. The Sixth Circuit also determined that it didn't matter that Eugene taxed broadband by city ordinance instead of through its franchise authority—either way, it acted as an LFA subject to the Communications Act. Lastly, because Eugene's broadband tax was in direct conflict with the prohibition on LFAs regulating information services, the lower court concluded that the tax was expressly preempted by the Communications Act.

Eugene and numerous localities now argue that the Sixth Circuit decision conflicts with Oregon Supreme Court precedent and presents a novel implied preemption issue. However, as NCTA notes in its Brief in Opposition, the Oregon Supreme Court interpreted the relevant portion of the Communications Act years prior to the FCC's 2019 order, meaning the record considered by the Oregon Supreme Court lacked the Commission's interpretations – unlike the Sixth Circuit's decision that benefited from a full record and the position of the relevant expert agency. And because the Sixth Circuit opinion relied on express preemption, there is no issue regarding implied preemption in this case. These two reasons support denial of Eugene's cert petition.

Policy reasons further support denial. When Congress passed the Cable Act of 1984, it sought to eliminate competitive distortions in the market that arose from excess demands and taxes on cable providers. Cable providers often paid multiple fees for access to a single right-of-way prior to the Cable Act. Cable companies likely passed the cost of these excesses to consumer in the form of higher prices. The FCC's interpretation of the LFA-related statutory provisions, which the Sixth Circuit upheld, serves the law's purpose of "minimiz[ing] unnecessary regulation that would impose an undue economic burden on cable systems."

Free State Foundation Scholars have long supported the FCC's 2019 order precisely because it minimizes unnecessary regulation on cable systems. The Free State Foundation filed reply comments in the proceeding that led to the Commission's order. And blog posts were written in defense of the 2019 order in July 2019, May 2019, and September 2018.

The Supreme Court should deny Eugene's cert petition. Congress expressly prohibited the sorts of fees on information services offered over cable systems that Eugene seeks to impose. And the Sixth Circuit rightly upheld the FCC's rules doing just that.

FSF President Randolph May's Statement Regarding Former President Trump's Lawsuits Against Social Media Companies

Free State Foundation President Randolph May issued the following statement in reaction to former President Trump’s filing of lawsuits against Twitter, Facebook, and Google’s YouTube:

Regardless of what one thinks of former President Trump, or his use of social media, the lawsuits he filed today against Twitter, Facebook, and Google's YouTube are not frivolous. They claim that the immunity from liability granted to social media companies by Section 230 of the Communications Act, in effect, converts these private firms into 'state actors' for First Amendment purposes because the immunity grant amounts to a delegation of authority by Congress that facilitates the companies' censorship actions. If the state action theory is correct, then the Big Tech companies would not be able to censor posts — or deplatform persons — based on the content of their lawful speech.

 

In his recent Biden v. Knight First Amendment Institute concurring opinion, Justice Thomas lent credence to the "state actor" theory upon which Trump’s lawsuit is based, and other respected scholars have done so as well. While the claim is not frivolous, I'm not convinced at this point that Section 230's grant of immunity, standing alone, is sufficient to make the Big Tech social media companies state actors. It is certainly possible, however, that if the case makes it to the discovery phase, Trump could uncover a trove of emails from various congressional officials urging the social media companies to take certain actions which the firms quickly took. That would make the case even more interesting, and the claim stronger.

Supreme Court Order Ends Legal Challenge to FCC's Wireless Infrastructure Orders

On June 28, the U.S. Supreme Court denied certiorari in City of Portland v. FCC. Thus, the Court left undisturbed the August 2020 decision by the Ninth Circuit Court of Appeals that upheld most of the Commission's 2018 Small Cell Order, Moratoria Order, and One Touch Make-Ready Order. The Small Cell and Moratoria Orders defined limits on local governments' permitting authority regarding wireless infrastructure siting for small cells. And the OTMR Order established limits on local governments' discretion regarding pole attachments involving wireless networks. Those orders effectively removed local regulatory obstacles to deploying advanced wireless networks, including 5G networks.  

The Supreme Court's order is important because it leaves standing important circuit court precedent recognizing the preemptive authority of the FCC prohibit certain actions by state and local governments that effectively prohibit the offering of wireless communications services. That authority comes from the 1996 Telecommunications Act and the Constitution's Commerce Clause. The Court's order also leaves undisturbed the Ninth Circuit's rejection of Tenth Amendment-related anti-commandeering challenges to the Commission's rules regarding permitting fees, shot clocks for decisionmaking on permit applications, and moratoria on reviewing permit applications. The Ninth Circuit concluded (rightly) that the Commission's orders did not require state or local officials to take action to implement any federal regulatory scheme, but instead they secured a federal right to place and modify cell sites subject only to certain federal constraints. 

The Ninth Circuit's decision in City of Portland v. FCC was discussed in more detail in my September 2020 blog post. Free State Foundation President Randolph May and I also discuss the Ninth Circuit's decision as well as the Small Celland Moratoria Orders in our June 2021 Perspectives from FSF Scholars paper, "Wireless Infrastructure Reforms Rest on Solid Constitutional Foundations: Congress Should Preempt Local Obstacles to 5G Deployment." 

Judge Silberman's Straight Talk on New York Times v. Sullivan and One-Sided Media

On April 8, Free State Foundation President Randolph May posted a blog bout Justice Clarence Thomas's concurring statement in Biden v. Knight First Amendment Institute at Columbia University. Justice Thomas's concurring statement is both intriguing and provocative. For another intriguing and provocative judicial opinion, look no further than Senior Judge Laurance Silberman's dissent in Tah v. Global Witness Publishing, Inc. 

 

The D.C. Circuit's decision in Tah was released on March 19. The court affirmed a dismissal of a defamation case for failing to plausibly allege actual malice. Senior Judge Silberman's partial dissent gets really interesting in Part III, in which he calls into question the legal standard for proving defamation of public figures that was created by the Supreme Court in New York Times v. Sullivan (1969): 

I am prompted to urge the overruling of New York Times v. Sullivan. Justice Thomas has already persuasively demonstrated that New York Times was a policy-driven decision masquerading as constitutional law. See McKee v. Cosby, 139 S. Ct. 675 (2019) (Thomas, J., concurring in denial of certiorari). The holding has no relation to the text, history, or structure of the Constitution, and it baldly constitutionalized an area of law refined over centuries of common law adjudication. See also Gertz v. Robert Welch, Inc., 418 U.S. 323, 380–88 (1974) (White, J., dissenting). As with the rest of the opinion, the actual malice requirement was simply cut from whole cloth. New York Times should be overruled on these grounds alone.  

The foregoing paragraph is only the warm-up, as Senior Judge Silberman has much more to say about the Supreme Court making up new legal standards and leveraging its institutional legitimacy to resist any subsequent careful re-evaluation of its precedents. 

 

Senior Judge Silberman's dissent gets more interesting still when he identifies the effects of New York Times v. Sullivan in increasing the power of one-sided professional mass media organizations. Here is his first paragraph dealing with those effects: 

As the case has subsequently been interpreted, it allows the press to cast false aspersions on public figures with near impunity. It would be one thing if this were a two-sided phenomenon. Cf. New York Times, 376 U.S. at 305 (Goldberg, J., concurring) (reasoning that the press will publish the responses of public officials to reports or accusations). But seeSuzanne Garment, The Culture of Mistrust in American Politics 74–75, 81–82 (1992) (noting that the press more often manufactures scandals involving political conservatives). The increased power of the press is so dangerous today because we are very close to one-party control of these institutions. Our court was once concerned about the institutional consolidation of the press leading to a "bland and homogenous" marketplace of ideas. See Hale v. FCC, 425 F.2d 556, 562 (D.C. Cir. 1970) (Tamm, J., concurring). It turns out that ideological consolidation of the press (helped along by economic consolidation) is the far greater threat. 

No blog summary can do justice to Senior Judge Silberman's dissent in Tah. Part III of his dissent deserves a full reading – and some pondering.