Agencies & Adjudication

1. Agencies & Adjudication • 2 questions: • To what extent can agencies adjudicate consistent with Article III – i.e., what is the relationship between agencies and the federal courts in terms of the functions agencies perform? • If agencies can adjudicate, what procedures are required for adjudications?

2. Agencies & The Power to Adjudicate Article III Section 1: The judicial Power of the United States shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior courts, shall hold their Offices during good Behavior, and shall. . . receive compensation, which shall not be diminished during their continuation in Office. Section 2: Establishes that federal courts shall have jurisdiction over all cases arising under Constitution/Laws/Treaties of U.S. and in certain cases of diversity of citizenship Why does the Constitution vest federal judicial power in independent judges?

3. The foundations of Schor – Crowell v. Benson • New Deal federal law established a workmen’s compensation scheme making maritime employers strictly liable to their employees for job-related injuries according to a schedule of damages. • ECC implemented the scheme and determined the circumstances, nature, extent & consequences of the injuries. • ECC compensation orders could be appealed to district court. ECC determinations of law were subject to substantial review by federal courts but determinations of fact were almost totally insulated from judicial review. • Employer challenged the scheme as giving the ECC judicial authority reserved to the federal courts. • SCT: Statute does not unconstitutionally vest judicial authority in the ECC.

4. Crowell’s reasoning • Agency adjudicators (i.e., non-article III courts) can adjudicate “public” rights as opposed to “private” rights • Public right = those arising between gov’t and persons subject to its authority in connection w/ the performance of the constitutional functions of the executive or legislative departments (i.e., statutorily created rights) • Private right = rights or obligations between two individuals arising at common law (contract/tort/property) • Non-article III adjudicators can serve as “adjuncts” to Article III courts • Agencies can engage in fact-finding even re private rights. • But some form of judicial review of agency adjudicatory decisions must be available (see Murray’s Lessee) AND • Federal courts have right to de novo review of jurisdictional/constitutional facts AND legal findings

5. CFTC v. Schor – the modern take on adjudication • CEA prohibits fraud & manipulation in connection with commodities transactions; gives customers right to ask the CFTC to order the broker to pay reparations. • CFTC regs also allowed CFTC to adjudicate any broker’s counterclaim against customers if it arose “out of the same transaction” as the customer’s claim under the CEA. • Schor (customer) filed a claim with the CFTC against Conti (broker) alleging violations of the CEA • Prior to Schor’s claim w/ CFTC, Conti (broker) filed diversity suit in federal court to recover unpaid brokerage fees. • Schor maintained that the federal court should dismiss Conti’s claim because it was related to Schor’s CFTC complaint. Conti finally voluntarily dismissed federal lawsuit & joined his action as counterclaim before CFTC

6. CFTC v. Schor, cont’d • CFTC adjudicator ruled against Schor on his claim and Conti’s counterclaim. • Schor then challenged the CFTC’s authority to hear the counterclaim because it essentially amounted to a state common law breach of contract claim – argued this was a “core” area of law generally reserved to Article III courts (See Crowell). • This is a slightly different issue from Crowell: • In Schor there was no question of whether an adequate scheme of judicial review was in place. Question was whether the CFTC could ever adjudicate purely state law claims unrelated to its special mission. • Both questions raise the issue, however, of what authority agencies should have to adjudicate any or certain kinds of claims

7. Schor’s approach: • SCT looked to “purposes underlying Article III” to determine whether the CFTC’s exercise of jurisdiction over the counterclaim violated Article III • Identified 2 purposes: • (1) independent judiciary gives us freedom from bias in adjudications • Characterizes as largely an interest personal to the litigant – right to Art. III adjudication can be and was waived here • (2) independent judiciary also serves as a check on other branches • This is an institutional interest in separation of powers, preventing aggrandizement of power in the executive branch, and in protecting the institutional integrity of courts (pp. 574-75) • Litigants cannot waive or consent to cure this constitutional defect

8. Schor & Separation of Powers • On the separation of powers concern – how does the court determine that agency adjudication “impermissibly threatens the institutional integrity of the judicial branch”? • Multi-factor test: • Are “essential attributes” of judicial power reserved to Article III courts? Does the agency exercise the “range of jurisdiction and powers normally vested in Article III courts”? • Ex: CFTC’s jurisdiction is narrowly limited to violations of commodities laws & related transactions, and agency has limited powers – can’t issue writs or supervise jury trials • What are the origins & importance of the right to be adjudicated? • It is a common law right (contract) – pretty foundational – but court has de novo review of all legal determinations in this scheme • What concerns drove Congress to depart from Article III requirements? • Primarily efficiency concerns – there is no sense that Congress was trying to do an end run around courts adjudicating common law rights

9. Procedural Requirements w/ Adjudications – Procedural Due Process • 5th Amendment: No person shall be deprived of life, liberty & property without due process of law. • 14th Amendment: No State shall deprive any person of life, liberty or property without due process of law. • When do the due process clauses apply to agency actions? • Bi-Metallic/Londoner: • Quasi-legislative actions do not implicate the due process clauses. BUT quasi-judicial actions do implicate the due process clauses and require heightened procedures. • What is an “adjudication” for due process purposes? • Involve a “relatively small number of persons” who are “exceptionally affected, in each case, upon individual grounds.”

10. Quasi-judicial agency actions violate the due process clause only if they involve the following: • Deprivation • By the Government • Of a Person’s • Life, Liberty or Property – what are these things? • Without Due Process of Law – what does this require?

11. Goldberg v. Kelly – foundational due process case • Facts: Plaintiffs received AFDC benefits. State & city of New York changed its law so that plaintiffs’ benefits were terminated or about to be terminated. Plaintiffs claimed that this change in the law violated due process. • Is this an adjudication in the constitutional sense? • Yes - although involves statutory change in eligibility, decisions to terminate based on new criteria will be individualized & people are contesting termination under those procedures • Is it a deprivation by the government of a personal interest? • Yes – pretty obviously • Are AFDC benefits “life, liberty or property?” • Why are AFDC benefits “property” in any meaningful sense? How does SCT reason to this result, or does it?

12. What process were the Goldberg plaintiffs given re termination of benefits? • Discussion of eligibility for benefits with caseworker • Notice of termination – w/ reasons at least 7 days prior to termination • Appeal to a superior agency officer via written statement • Written letter confirming the termination of benefits • POST-termination fairness hearing (formalish hearing in nature) • What did plaintiffs want and why did SCT argue this “process”was inadequate under the 14th Amdt?

13. The process required in Goldberg to satisfy the 14th Amendment? • Majority identifies 2 principle requirements for a hearing to satisfy due process: • Timely/adequate notice of termination with reasons • 7 days is not per se inadequate but SCT notes it could be insufficient in particular situations • Effective opportunity to participate in hearing prior to termination • Hearing need not be “quasi-judicial” but it must be held in a “meaningful manner” • Hearing must be “tailored to the capacities and circumstances of those who are to be heard” • What must the agency do differently regarding the 2nd requirement to satisfy SCT?

14. Interest balancing in procedural due process cases • Does the agency/government have no countervailing interest in the current form of hearings here? • Why isn’t that interest enough? • Note the beginnings of a balancing framework for determining what kind of process is due (i.e. what procedures are required) when gov’t deprives a person of an property/liberty interest Balance gov’t interest vs. individual interest • But how easy is it to apply this balancing test – how do we know when individual or gov’t interest is weightier?