Delegation of Cabinet Members' Functions as Ex Officio Members of the Board of Directors of the Solar Energy and Energy Conservation Bank

Opinion

Delegation of Cabinet"Members’ Functions as Ex Officio Members of the Board of Directors of the Solar Energy and Energy Conservation Bank

Under settled principles o f adm inistrative law, Cabinet mem bers serving as ex officio m em bers o f the Board of D irectors o f the Solar Energy and Energy Conservation Bank may delegate their directorial functions to subordinates, even though the legislation establishing the Bank does not expressly authorize such delegation.

May 21, 1982

MEMORANDUM OPINION FOR THE GENERAL COUNSEL, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

This responds to your request for our opinion whether ex cfficio members of the Board of Directors of the Solar Energy and Energy Conservation Bank (Bank) are authorized to delegate their functions to Substitute Directors, or whether actions taken by such Substitute Directors pursuant to this delegation are invalid absent subsequent ratification by the statutorily named Directors. For the reasons stated below, we believe that the ex cfficio members may delegate their functions and, accordingly, that the actions taken by their duly appointed delegees are valid.

The Bank was created by Title V of the Energy Security Act of 1980, Pub. L. No. 96-294 , 94 Stat. 611, 719, 12 U.S.C. § 3601 (Act) to provide financial encouragement for the installation and use of energy conservation devices and solar energy systems. See 12 U.S.C. § 3601 (Supp. V 1981) and H.R. Rep. No. 1104, 98th Cong., 2d Sess. 278-291 (1980) (Conference Report). Established “ in the Department of Housing and Urban Development,” the Bank has “ the same powers as those powers given to the Government National Mortgage Association by [12 U.S.C. § 1723a(a)].” 12 U.S.C. § 3603(a).1 The General Accounting Office is responsible for auditing the financial transactions of the Bank. 12 U.S.C. § 3603(b).

The Bank is governed by a Board consisting of five ex cfficio Directors: the Secretaries of Housing and Urban Development, Energy, Treasury, Agriculture, and Commerce. The Secretary of HUD chairs the Board, and three Board

1 T hese pow ers include the pow er to en ter into and perform contracts with federal an d state agencies an d p n v ate persons; to sue and be sued “ in its corporate nam e” ; to lease, purchase and d ispose o f property; to co n d u c t its business “ w ithout reg ard to any qualification o r sim ilar statute” in any state, and to prescribe ru les and regulations for the conduct o f its b usiness. 12 U .S C § 1723a(a)

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members constitute a quorum. See 12 U.S.C. § 3604(a), (b) and (c). The President of the Bank is a presidential appointee and serves as Secretary of the Board. See 12 U .S.C . §§ 3604(a) and 3605(a). The Board is responsible for establishing the policy and carrying out the functions of the Bank, and it is authorized and directed to issue such regulations as it deems necessary to this end. 12 U.S.C. §§ 3603(e) and 3618. Among other things, the Board is directed to determine levels of financial assistance for various energy projects, 12 U.S.C. § 3608, designate financial institutions for participation in the Bank’s programs, 12 U .S.C . § 3611, and establish criteria for approving eligible solar technology and conservation measures. 12 U.S.C. §§ 3612 and 3613. In addition, the Board appoints members of the B ank’s two advisory committees and directs the President and other Bank officers in the management of the Bank’s affairs. 12 U .S.C . § 3605(c).

In September of 1980 the Board of Directors of the Bank met and adopted by­ laws, including a provision permitting the designation of “ Substitute Directors” by each of the statutorily named Directors. See 24 C.F.R. § 1895.1 (1980) (Section 3.02). Each Substitute Director is to be designated “ under the estab­ lished delegation provisions” o f the particular Cabinet agency involved, except that each must occupy a position at least equivalent to that of Assistant Secretary. In the absence of the designating Director, the Substitute Director “ will be deemed to be a member of the Board and will have all the powers and duties of the designating Director.” We understand from your request that, pursuant to this by­ law provision and the applicable delegation authorities of the five Cabinet agencies,2 Substitute Directors were named, have met on several occasions to conduct the statutory business o f the Bank, and have taken a number of actions in the name of the Bank that have not been adopted or confirmed by the statutorily named Directors. The question you have asked us to address is whether the ex cfficio members were authorized to delegate their directorial functions and, accordingly, whether these actions by the Substitute Directors are valid.

The terms of the Act do not provide for delegation of the directorial functions of the ex cfficio Board members. It is clear, however, as a “ general proposition” of administrative law, that “ merely vesting a duty in [a Cabinet officer] . . . evinces no intention whatsoever to preclude delegation to other officers in the [Cabinet officer’s agency] . . . .” U nitedStates v. Giordano, 416U .S. 505, 513 (1974).3 See also 1 Davis, Administrative Law Treatise, § 3:17 (2d ed. 1978);

l See 4 2 U .S .C § 3535(d) (Supp. V 1981) (H U D ); 42 U .S C . § 7252 (S upp V 1981) (Energy); 31 U .S .C . § 1007 (1 9 7 6 ) (T reasury); S ection 4 of R eorganization P lan N o. 2 o f 1953, 67 S tat. 633 (A griculture), S ection 2 of R eorganization P lan N o. 5 o f 1950, 64 Stat 1263 (C om m erce) T h e H U D delegation provision is ty pically worded.

T h e S ecretary m ay delegate any o f his functions, pow ers, and d uties to such officers an d em p lo y ees o f the D epartm ent as he m a y designate, m ay authorize such successive redelegations o f su ch functions, pow ers, and duties a s he m ay deem d esira b le, and m ay m ake such rules and regulations as m ay be necessary to c a rry out his functions, pow ers, and duties.

42 U .S .C . § 3535(d) (S upp. V 1981)

3 G iordano involved a statu to ry provision that vested the authority to approve w iretaps u n d er Title III o f the O m n ib u s C rim e C o n tro l and S afe Streets A ct o f 1968 in “ the A ttorney G eneral o r any A ssistant A ttorney G eneral sp ecially d esig n a ted by the A ttorney G en eral." 416 U S at 5 1 4 . T h e governm ent argued that delegation to the A ttorney G e n e ra l’s E xecutive A ssistant w as perm issible under the D ep artm en t o f Ju stice 's general delegation

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FTC v. Gibson, 460 F.2d 605 (5th Cir. 1972) (FTC may delegate to field officer power to issue subpoena); Wirtz v. Atlantic States Construction C o., 357 F.2d 442 (5th Cir. 1966) (Secretary of Labor may delegate to regional attorneys authority to institute suit under the Fair Labor Standards Act of 1938). To be sure, the legality of a particular administrative delegation is primarily a function of legislative intent. See, e .g ., Hall v. Marshall, 476F. Supp. 262, 272 (E.D. Penn. 1979). Nevertheless, as summarized in Sutherland’s treatise on statutory construction, Where the statute is silent on the question of redelegation and the delegation was to a single executive head, it is almost universally held that the legislature, understanding the impossibility of per­ sonal performance, impliedly authorized the delegation of au­ thority to subordinates.

1 C. Sands, Sutherland Statutory Construction, § 4.14 (4th ed. 1972).

The practical necessities underlying this administrative law principle are equally applicable where ex officio functions are involved. Indeed, they may be especially applicable. It can be fairly assumed that when Congress selects particular government officials for ex officio service, it is because their official duties bear a reasonable relationship to the functions of the body to which they are attached ex officio. In so designating political officials who serve individually only for the length of time they remain in their official posts, Congress expects both to take advantage of their agency’s specialized knowledge and experience, and to ensure its continuous availability. It is reasonable to conclude in these circumstances that Congress expects the agency head to operate as he would normally in running his agency, and thus to conform to the accepted admin­ istrative practice of delegating authority to subordinates for the performance of many of his official duties. An opposite conclusion would often lead to frustration of the legislation establishing the body in question, as well perhaps as other laws, since a rigid requirement that a Cabinet member give his personal attention to every one of his many official functions would be impossible of fulfillment.4 In this case, nothing in the legislative history of the Bank’s organic act suggests that Congress intended to depart from settled administrative law practice with

statute, 28 U S .C § 5 1 0 The C o u rt disagreed. W hile finding no “ precise language forbidding d e le g a tio n ," the C o u rt held that the 1968 statute, “ fairly read, was intended to lim it the power to the A ttorney G eneral h im se lf and to any A ssistant A ttorney G eneral he m ight desig n ate." Id T h e C o u rts op inion includes an extensive discu ssio n o f the 1968 statute’s legislative history, in w hich it notes in particular C o n g ress’ concern that the individual responsible for authorizing w iretaps be responsive to the political process In reaching this co n clu sio n , how ever, the C o u rt noted, as a general “ unexceptionable” proposition, that functions vested in the A ttorney G eneral m ay be d elegated unless the m atter of delegation has been otherw ise “ expressly addressed " Id.

4 C ongress has som etim es m ade specific provision for the delegation of ex officio functions o f C abinet m em b ers and o th er high governm ent officials serving on boards and advisory groups See, e.g., 40 U S C . § 872 (ex cfficio m em bers of P ennsylvania Avenue Redevelopm ent C orporation Board of D irectors may d esignate alternates); 45 U S C § 711 (sam e, U nited States Railw ay A ssociation); 16 U .S C § 468 (sam e. N ational Trust for H isto ric Preservation). B ut for every express provision perm itting delegation o f directorial functions in statutes creatin g governm ent co rp o ratio n s, there are several w hose boards include C abinet m em bers serving ex cfficio w hich contain no express delegation provisions. See, e g., 15 U .S .C . § 714g(a) (C om m odity C redit C orporation), 16 U .S .C . § 19(0 (N ational Rark Foundation); 45 U .S .C . § 543(a) (N ational Railroad F^ssenger C orporation), 4 2 U .S C. § 8103 (N eighborhood R einvestm ent C orporation), 2 9 U S C . § 1302(c) (Pension Benefit G u aran ty C orp o ratio n )

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respect to the delegation of ex cfficio board members’ authority. Indeed the statutory scheme lends support to the presumption favoring delegation. As in most instances where Congress selects particular government officials for ex cfficio service, the choice of the five Cabinet members in this case was based not on individual personal attributes, but on the contribution Congress believed each one’s agency could make to the Bank’s operations. See, e.g.. Conference Report at 278 (“The Conferees expect the Board will rely on DOE and HUD to determine the reliability, safety, and performance of such new energy conserving improve­ ments. . . .” ). We think it reasonable to conclude, therefore, that the general delegation authority available to each of these five Cabinet members is sufficient to accomplish the delegation of functions provided in the Board’s by-Laws.5 The district court for the District of Columbia has sustained a delegation of ex officio authority in a case similar to this one. In D .C . Federation of Civil Associations v. Airis, 275 E Supp. 533 (D.D.C. 1967), the court held that ex cfficio members of the National Capital Planning Commission properly appoint­ ed alternates to vote and otherwise act in their behalf, in spite of the absence of any specific statutory authorization for the delegation.6 In so holding, it noted that obviously, the ex cfficio members of the Commission are not expected to and cannot devote their entire time to its work. On the contrary, their services as members of the Commission are only one feature of their numerous activities. It has become the usage for the ex cfficio members to appoint alternates to act in their behalf.

275 F. Supp. at 539.

The general rule of private corporate law prohibiting delegation of a Director’s voting authority has no relevance in this context. Even if the Bank more closely resembled a private corporation in its structure and functions,7the law applicable to it would remain that contained in its own organic statute and in general principles of administrative and constitutional law applicable to similar govern­ ment entities. See Rainwater v. United States, 356 U.S. 590 (1958). See also D 'O ench, Duhme & Co. v. FDIC, 315 U.S. 447, 472 (1942) (Jackson, J., concurring). Like the Commodity Credit Corporation, whose status under the False Claims Act was at issue in the Rainwater case, the Bank is “ simply an administrative device established by Congress for the purpose of carrying out [energy] programs with public funds.” 356 U .S. at 592. Unlike the Commodity Credit Corporation, it does not even have “ a corporate name . . . to distinguish it

5 In d eed , this delegation p ro b ab ly would b e perm issible even w ith o u t the form al adoption by the B oard o f the “ S u b stitu te D irecto r” by-law 6 T he court did not say w h eth e r any of the statutorily ap pointed officials involved— w ho in clu d ed th e C h ie f of E n g in eers o f the A rm y, the D irecto r of the N ational Park S ervice, the Federal Highway A dm inistrator, and the C h airm en o f th e H ouse an d Senate D istrict C om m ittees— w ere otherw ise authorized by law to delegate th eir fu n ctio n s, as are the C ab in et m em bers in th is ca se. See note 2 , supra.

7 W hile the B an k ’s authorities are described m the legislative histo ry as “ corp o rate p o w ers,” it is not subject to the G o v ern m en t C orporation C ontrol A ct, 3t U .S .C §§ 8 4 1 -8 7 0 (S upp. V 1981). See list o f w holly ow ned governm ent corp o ratio n s in 31 U S .C § 846 (Supp. V 1981), and o f m ixed-ow nership corporations in 31 U S .C § 856 (Supp. V 1981).

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from the ordinary government agency.” Id. Nor is there any suggestion in the Act or its legislative history that Congress intended the Bank to be subject to principles of private corporation law.

Based on applicable administrative law principles permitting delegation by agency heads of ex officio functions in the absence of legislative directives to the contrary, we conclude that the directorial functions were properly delegated in this case and that actions taken by the Substitute Directors were not tainted by any improper delegation.

T h e o d o r e B . O lso n Assistant Attorney General Office of Legal Counsel