The 8th Circuit unanimously vacated a Biden-Era FCC rule, agreeing that the Commission’s effort to impose a novel form of disparate-impact liability exceeded its statutory powers.

The case involves the FCC’s rule-making to combat “digital discrimination.” They acted after Congress passed a first-of-its-kind provision, extending the frame for laws against discrimination to bar that “based on income level.”  The FCC went further, imposing into this uncharted territory disparate-impact liability for everything “affect[ing]” broadband service and infrastructure.

The petitioners and other amici addressed the best reading of the statute and the administrative law problems with the FCC’s rule: its violation of the major-questions doctrine and inconsistency with Congress’s language.

Our Argument

Our brief took a different tack, assuming for the sake of argument that administrative law posed no barrier.  Instead, we explored why–if the FCC had such power–the Constitution would forbid the statute (as the FCC interprets it) in at least three ways.

As interpreted, the act made the Commission racially classify Americans and incorporate racial balancing into its assessment of every act by every participant in a vast industry.  The FCC would back those assessments with potentially massive, punitive fines.  Such a policy would need to meet strict scrutiny to be Constitutional.  This one could not.

It also sought to ban disparate impacts across income levels.  But income differences are universal and gradient.  No regulated party could ever avoid presumptive violation of the law.  No decision by any business to invest in infrastructure, open locations, deploy personnel, or advertise could ever not.  The rule would make everything illegal, unless parties proved an affirmative defense.  And even that option rang hollow: the Commission’s definitions rendered the defense one no one could ever meet.  More, this structure provides no notice to anyone of what they can or must do to avoid liability.  That approaches the Platonic ideal of voidness for vagueness.

Finally, we argued that a statute denying regulated parties any apparent legal use of their assets would work a regulatory taking of unprecedented scale.  Governments’ prohibitions entirely depriving owners of the economically beneficial use of their assets trigger the same compensation obligations as do uses of eminent domain.  The U.S. domestic broadband industry generated $111.73 billion in total revenue in 2022.  At that size–much less at its larger, current one–the act would commit Congress to fund at least hundreds of billions of dollars in compensatory damages.  No evidence suggests that Congress ever assessed such costs, budgeted or appropriated any funds to cover them, or even contemplated that its act might incur such an obligation.

We argued that unless the Court of Appeals embraced an alternative reading of the statute as incompatible with the FCC’s proposed rule, the Court would need to declare the statute as a whole an unconstitutional nullity.

Bottom Line

As we asked, the Court avoided this morass by holding the statute to impose liability only for intentional discrimination.

Calvin Coolidge taught America a century ago that “It is much more important to kill bad bills than to pass good ones.”  Here, the Court killed an agency’s imposition of a particularly bad reading of a good law.  We score that as an important “win” of the same ilk.