THE PUBLIC CHARACTER OF PRIVATE ACTORS

The default vertical approach - as I argued in chapter one - is premised upon the assumption that sovereign power, concentrated within the state, possesses unique normative salience in relation to threats to individual interests, and therefore in relation to invoking and applying constitutional rights.

The inadequate constraint hypothesis remedies this lacuna by asking whether a sufficient degree of ‘functional equivalence’^[130] exists between the private party and the state. If the answer is ‘yes’, then the private party is subjected to the bill of rights as if it were the state. Equivalence is determined through a range of overlapping tests. In the interests of conceptual clarity, these can be broadly classified into: tests asking what a body is (ie its composition and character), what it does (ie its activities and tasks), and the kinds of impact it can have on individual interests and rights. In practice, of course, courts employ a combina­tion of some or all of these tests in order to determine functional equivalence.^[131]

A.

Private bodies are subject to bills of rights if they are, to all appearances, indistinguishable from the state. After a few decades of vacillation, the Indian Supreme Court finally held that it would decide this question by applying a straightforward test of control: does the state exercise ‘functional, financial, and administrative control’^[132] over the private party? It is difficult to imagine what remains after taking away finances, functions and administration. Indian jurisprudence, therefore, presents the archetype of the situation where the legal form is the only relevant difference between the state and the private party. In a similar, although less stark, fashion, the extent of ministerial control over a formally ‘private’ body engaged in regulating the practice of microlending was one of the important factors that led the South African Constitutional Court to subject it to the Bill of Rights, as an ‘organ of state’ under the South African Constitution.^[133]

Not every jurisdiction, however, insists on such near-effacement of the identity of the private party before subjecting it to a bill of rights. The state’s ‘involvement with’ or ‘participation in’ a private activity can often suggest a sufficiently close ‘relation’^[134] or ‘nexus’^[135] between the two as to warrant the application of the bill of rights. This relationship is determined by a number of factors. For example, in Public Utilities Commission v Pollack, the exten­sive regulatory supervision undertaken by the Public Utilities Commission (a state agency) over the activities of Pollack (the owner of the streetcar-and-bus system in Washington DC) was deemed a close enough nexus by the US Supreme Court to subject the latter to the provisions of the Bill of Rights.^[136] In Burton v Wilmington Parking Authority, the Respondent - an agency of the State of Delaware - leased an integral part of its parking-building space to a restaurant, while also providing it with necessary electricity and gas.

Demonstrating, however, that these enquiries were all a matter of degree, in Moose Lodge v Irvis, the US Supreme Court refused to hold a bar liable for racial discrimination even though its licence was provided under a state regula­tory scheme because ‘the symbiotic relationship between lessor and lessee that was present in Burton’^[138] was not present here. Consequently, the mere fact of state regulation was not sufficient, as the private party must be operating within ‘a framework of extensive state supervision and control’.^[139] The result of the difference, of course, was that while the respondent in Burton was held liable for racial discrimination under the Constitution, Moose Lodge escaped liability.

While judges in the majority and the dissent in the USA have disagreed with each other over whether, in particular cases, the facts justify a finding of ‘state action’ or not, they have been united over the principles governing the enquiry. Abstracting from the specifics of when ‘involvement’ or ‘participation’ is deemed ‘sufficiently close’, judges have repeatedly held that the underlying principle is whether the private body’s acts are ‘attributable to the State’^[140] or may be treated ‘as that of the State’.^[141] It is in this sense that the state remains central to the enquiry: if the key is whether the state is ‘responsible’ for the private party’s action or whether the private party’s action is ‘attributable’ to the state, then the normatively significant actor remains the state. The success of the claim then depends on how effectively the private party can be assimilated to the classical understanding of ‘state’ under the default vertical approach.

B. What a Private Party ‘Does’

There are occasions, however, when a private party does not retain a tangible ‘nexus’ with the state (or a state agency) either in formal or in real terms. In such situations, the focus shifts the nature of the functions that it performs, and whether there is a sufficiently close relationship in terms of those. For exam­ple, in terms of Canadian jurisprudence, which puts the point most clearly and narrowly, is the private party performing ‘governmental functions’?^[142]

As I will argue subsequently, this category of approaches remains bound to one of the underlying assumptions of default verticality: that of centralised and unitary sovereignty. This is made clear if we pay close attention to how courts decide whether a private party's conduct bears a sufficiently close relationship with the state. The following discussion, therefore, is organised around three themes that play a role in these cases: an emphasis on the ‘traditional' functions of the state (i), and the markers that are used to decide that issue: delegation (ii) and monopoly (iii).

(i) The ‘Traditional’ Functions of the State

Naturally, functional equivalence requires a prior account of what constitutes a ‘state function', with which equivalence is being drawn. In the previous chapter, I briefly discussed the US Supreme Court's decision in Flagg Bros, which asked whether the private party performs a function that has ‘traditionally [been] the exclusive prerogative of the State'.^[143] This expression has been a staple feature in US Supreme Court judgments both before and after Flagg Bros.^[144] The use of the word ‘traditionally' indicates that the focal point of the enquiry is historical. And, indeed, the disagreements between the majority and the dissenting opin­ions in state action cases have often revolved around the kinds of functions that the state has been historically expected to perform. As I shall highlight subse­quently, this approach ignores Andrew Clapham's straightforward insight that ‘the classic duties of the State may vary over time'.^[145] Instead, it locks in (descrip­tive) assumptions about what the state once did into (normative) judgements about what it now should do.

Additionally, there is no clarity on precisely how far back into the past the historical enquiry needs to go. In Flagg Bros itself, for example, Justice Marshall (in dissent) accused the majority of attempting to resolve the issue in a ‘histori­cal vacuum', and noted that ‘by ignoring this history, the Court approaches the question before us as if it can be decided without reference to the role that the state has always played in lien execution by forced sale' (emphasis added).^[146] And in Rendell-Baker v Kohn, which concerned the status of a private school that entered into an arrangement with the state to meet the educational needs of ‘maladjusted' students, the fact that ‘until recently the State had not undertaken to provide education for students who could not be served by traditional public schools' (emphasis added)^[147] was an important factor in the majority's refusal to subject it to the bill of rights.

(ii) Markers of State Functions I: Delegation

The backward-looking nature of the enquiry, which ties it to the state (and, in particular, to the ‘traditional’ conception of what the state should look like) is exemplified by two of the most prominent indicia applied by the courts: delegation and monopoly. The prominent concerns of the courts revolve less around the rights bearer and her relationship with the private party, and more around whether the state is attempting to ‘evade’ its constitutional responsibili­ties by delegating functions to private parties. For example, in Evans v Newton, which involved a challenge to a town administering a large private park along racially segregated lines, in its capacity as the trustee of a bequest, the US Supreme Court noted that the issue was whether ‘private individuals or groups are endowed by the State with powers or functions governmental in nature’ (emphasis added).^[148] The point was made more expressly in Local 590 v Logan Valley when the Court considered the issue of peaceful picketing in the loading porch of a privately owned shopping centre: ‘the State may not delegate the power, through the use of its trespass laws, wholly to exclude those members of the public wishing to exercise their First Amendment rights on the premises’.^[149]

The hold of the delegation argument is visible perhaps most starkly in judicial disputes over the interpretation of the US Supreme Court’s famous judg­ment in Marsh v Alabama. In Marsh, the Court held that the First Amendment to the US Constitution (guaranteeing the freedom of expression and religion) applied to a ‘company town’ (ie a town that, in every respect, functioned as a town, but was privately owned).

Understanding the departure from the default vertical approach in the language of delegation has influenced constitutional thought beyond the borders of the USA. Under the South African Constitution, for example, the Bill of Rights binds all ‘organs of state’.^[154] An organ of state is defined, in turn, as an entity performing a public function in terms of national legislation.^[155] Admittedly, the higher courts in South Africa have not (yet) had the occasion to develop a body of long-standing jurisprudence (as in the USA).^[156] However, in one of the first cases, AAA Investments - concerning the conduct of a nominally ‘private’ body that regulated micro-lending, discussed above - in which it did have an oppor­tunity to explore the definition of ‘organ of state’ (and thereby the underlying foundations of extending the bill of rights to bodies performing public func­tions), the South African Constitutional Court expressly chose to follow US and Canadian jurisprudence. After engaging in a lengthy survey of the law in those jurisdictions, it observed that ‘our Constitution ensures, as in Canada and the United States, that government cannot be released from its human rights and rule of law obligations simply because it employs the strategy of delegating its functions to another entity’ (emphasis added).^[157] On the facts of the case, what weighed with the Court (apart from ministerial control, discussed above, and another factor, discussed below), was that the minister who was required by stat­ute to oversee the micro-lending industry had ‘passed on [that] regulatory duty’ (emphasis added).^[158]

(iii) Marker of State Functions II: Monopoly

The third factor that weighed with the South African Constitutional Court in AAA Investments comes through most clearly in the concurring opinion of O’Regan J. Endorsing the judgment of the High Court (which was overturned on appeal by the SCA), O’Regan J observed that ‘no lender may lawfully operate without registering with the Council... in that sense, the rules are coercive and general in their effect’.^[159] In other words, the Council’s monopoly over regulating micro-lending - backed up by coercion - brought it into the ‘public’ side of the public/private divide.^[160] Similarly, in Allpay Consolidated Investment Holdings v Chief Executive Officer (No 2), the Constitutional Court noted that Cash Paymaster Services - a private limited company in charge of distributing social security payments - was an organ of state because, having signed an exclusive contract with the state social security agency, it had become the ‘gatekeeper’ of the right to social security - and thereby was ‘the operational arm of the... administration’.^[161]

Similarly, while US judges have been careful to specify that monopoly is not a dispositive factor in determining the existence of state action, it has always been a relevant factor. In Marsh, for example, the company town’s exclusive control - through its property rights - of the ‘channels of communication’^[162] weighed with the Court in invoking the First Amendment. And in their dissent­ing opinions in Jackson and Hudgen, Justices Douglas and Marshall found that the electricity company’s monopoly over municipal power supply^[163] and the shopping centre’s monopoly over the channels of effective communication when it came to company policies^[164] amounted to ‘displacing’ the state and taking over its functions.

The vocabulary of displacement brings us back to the concept with which this section began: like the cases that focus on the character of the private party, cases focusing on functions also come back to the question of attributability. In his dissent in Jackson, Marshall J noted that in performing vital public func­tions, private parties acted as ‘surrogates’^[165] of the state; in Kohn, he went even further, holding (also in dissent, although not on this point) that private conduct ‘impregnated with. governmental character. can be regarded as governmen­tal action’.^[166] Whether delegation, monopoly or the character of the private body, it is this inability to depart from the paradigm of the state - even while departing from default verticality - that, I shall argue, continues to bind these approaches to the assumption of sovereignty that underlies default verticality.

C. The Private Body’s Capability to Affect Rights

In chapter one, I set out Frank Michelman’s important insight, that the ‘concen­tration [of legitimate coercive power] in a single institutional nexus (the state)’^[167] was responsible for presenting it as a unique threat to core individual interests. This was one of the major reasons for subjecting the state to constitutional control through a bill of rights, while leaving it free to deal with ‘private’ inva­sions of rights through legislation.^[168] Pared down to its essentials, this bare logic suggests an alternative method of departing from the default vertical approach, one that can bypass the Ptolemaic epicycles of control, delegation, monopoly and attributability.^[169]

The tentative beginnings of this method are found in Marsh v Alabama before it was watered down to the delegation argument by future judgments. What the majority in Marsh actually said was that ‘whether a corporation or a municipality owns or possesses the town the public in either case has an identical interest in the functioning of the community in such manner that the channels of communication remain free’ (emphasis added).^[170] In other words, it was the company town’s ability to impact a vital constitutional interest - by virtue of its ownership of the town - that justified subjecting it to the bill of rights. A few decades later, more tentative steps were taken in the judgment of the South African Constitutional Court in Khumalo v Holomisa, within the framework of a more facilitative Constitution. Section 8(2) of the South African Constitution provides that the bill of rights binds a natural or juristic person in certain circumstances, ‘taking into account the nature of the right and the nature of any duty imposed by the right’.^[171] In Khumalo, the question before the Court was whether the law of defamation was consistent with the free speech guaran­tee of the Constitution. To answer that question, however, the Court decided to first examine whether the right to free speech was horizontally applicable.^[172] Answering in the affirmative, the Court noted that:

given the intensity of the constitutional right in question, coupled with the potential invasion of that right which could be occasioned by persons other than the state or organs of state, it is clear that the right to freedom of expression is of direct horizon­tal application in this case. (emphasis added)^[173]

While the Constitutional Court in Khumalo did not explain this any further, in legal scholarship, the argument is articulated in its most straightforward form by Daphne Barak-Erez. Barak-Erez argues that instead of focusing upon the private party accused of violating rights, our starting point should be the rights bearer. We therefore begin from the premise that in our society, every individual is entitled to certain basic goods (including rights and freedoms). Any entity - private or public - that is in a position to impact that entitlement is subjected to the same standards as imposed upon the government.^[174] This approach, Barak-Erez argues, allows us to address ‘the challenges posed by the realities of the new state’^[175] - in particular, the large-scale privatisation of welfare functions. Indeed, the South African Constitutional Court gestured towards this in Allpay (discussed above) when it noted that Cash Paymaster Ltd, through its contract with the state social security agency, exercised control over individuals’ ability to exercise their constitutional right to social security.^[176]

In more formal terms, and in line with the typology discussed above, Jean Thomas labels this the ‘vulnerable valuable interests diagnosis’:

A third important way of describing the situation is that crucial interests are going unprotected. This way of thinking says that people’s interest in freedom from summary execution and torture, for instance, is radically under-protected when Shell, for example, can participate in the violation of those interests and have claims brought against it in the United States under the Alien Tort Claims Act thrown out partly on the basis that its actions are insufficiently connected to a government to be eligible for accountability.^[177]

III.