Agency Adjudication

Legislative Courts

Legislative courts, so-called because they are created by Congress in pursuance of its general legislative powers, have comprised a significant part of the federal judiciary.49 The distinction between constitutional courts and legislative courts was first made in American Ins. Co. v. Canter,50 which involved the question of the admiralty jurisdiction of the territorial court of Florida, the judges of which were limited to a four-year term in office. Said Chief Justice Marshall for the Court: “These courts, then, are not constitutional courts, in which the judicial power conferred by the Constitution on the general government, can be deposited. They are incapable of receiving it. They are legislative courts, created in virtue of the general right of sovereignty which exists in the government, or in virtue of that clause which enables Congress to make all needful rules and regulations, respecting the territory belonging to the United States. The jurisdiction with which they are invested, is not a part of that judicial power which is defined in the 3rd article of the Constitution, but is conferred by Congress, in the execution of those general powers which that body possesses over the territories of the United States.”51 The Court went on to hold that admiralty jurisdiction can be exercised in the States only in those courts which are established in pursuance of Article III, but that the same limitation does not apply to the territorial courts, for in legislating for them “Congress exercises the combined powers of the general, and of a state government.”52

49 In Freytag v. Commissioner, 501 U.S. 868 (1991), a controverted decision held Article I courts to be “Courts of Law” for purposes of the appointments clause. Art. II, 2, cl. 2. See id. at 888-892 (majority opinion), and 901-914 (Justice Scalia dissenting).

50 26 U.S. (1 Pet.) 511 (1828).

51 26 U.S. at 546.

52 In Glidden Co. v. Zdanok, 370 U.S. 530, 544-45 (1962), Justice Harlan asserted that Chief Justice Marshall in the Canter case “did not mean to imply that the case heard by the Key West court was not one of admiralty jurisdiction otherwise properly justiciable in a Federal District Court sitting in one of the States.... All the Chief Justice meant . . . is that in the territories cases and controversies falling within the enumeration of Article III may be heard and decided in courts constituted without regard to the limitations of that article... .”

Canter postulated a simple proposition: “Constitutional courts exercise the judicial power described in Art. III of the Constitution; legislative courts do not and cannot.”53 A two-fold difficulty attended this proposition, however. Admiralty jurisdiction is included within the “judicial power of the United States” specifically in Article III, requiring an explanation how this territorial court could receive and exercise it. Second, if territorial courts could not exercise Article III power, how might their decisions be subjected to appellate review in the Supreme Court, or indeed in other Article III courts, which could exercise only Article III judicial power?54 Moreover, if in fact some “judicial power” may be devolved upon courts not having the constitutional security of tenure and salary, what prevents Congress from undermining those values intended to be protected by Article III’s guarantees by giving jurisdiction to non-protected entities that, being subjected to influence, would be bent to the popular will?

Attempts to explain or to rationalize the predicament or to provide a principled limiting point have from Canter to the present resulted in “frequently arcane distinctions and confusing precedents” spelled out in cases comprising “landmarks on a judicial ‘darkling plain’ where ignorant armies have clashed by night.”55 Nonetheless, Article I courts are quite usual entities in our judicial system.56

53 Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 106 (1982) (Justice White dissenting).

54 That the Supreme Court could review the judgments of territorial courts was established in Durousseau v. United States, 10 U.S. (6 Cr.) 307 (1810). See also Benner v. Porter, 50 U.S. (9 How.) 235, 243 (1850); Clinton v. Englebrecht, 80 U.S. (13 Wall.) 434 (1872); Balzac v. Porto Rico, 258 U.S. 298, 312-313 (1922).

55 Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 90, 91 (1982) (Justice Rehnquist concurring). The “darkling plain” language is his attribution to Justice White’s historical summary.

56 In addition to the local courts of the District of Columbia, the bankruptcy courts, and the U. S. Court of Federal Claims, considered infra, these include the United States Tax Court, formerly an independent agency in the Treasury Department, but by the Tax Reform Act of 1969, 951, 83 Stat. 730, 26 U.S.C. 7441, made an Article I court of record, the Court of Veterans Appeals, Act of Nov. 18, 1988, 102 Stat. 4105, 38 U.S.C. 4051, and the courts of the territories of the United States. Magistrate judges are adjuncts of the District Courts, see infra, and perform a large number of functions, usually requiring the consent of the litigants. See Gomez v. United States, 490 U.S. 858 (1989); Peretz v. United States, 501 U.S. 923 (1991). The U. S. Court of Military Appeals, strictly speaking, is not part of the judiciary but is a military tribunal, 10 U.S.C. 867, although Congress designated it an Article I tribunal and has recently given the Supreme Court certiorari jurisdiction over its decisions.

Power of Congress Over Legislative Courts.—In creating legislative courts, Congress is not limited by the restrictions imposed in Article III concerning tenure during good behavior and the prohibition against diminution of salaries. Congress may limit tenure to a term of years, as it has done in acts creating territorial courts and the Tax Court, and it may subject the judges of legislative courts to removal by the President,57 or it may reduce their salaries during their terms.58 Similarly, it follows that Congress can vest in legislative courts nonjudicial functions of a legislative or advisory nature and deprive their judgments of finality. Thus, in Gordon v. United States,59 there was no objection to the power of the Secretary of the Treasury and Congress to revise or suspend the early judgments of the Court of Claims. Likewise, in United States v. Ferreira,60 the Court sustained the act conferring powers on the Florida territorial court to examine claims rising under the Spanish treaty and to report its decisions and the evidence on which they were based to the Secretary of the Treasury for subsequent action. “A power of this description,” it was said, “may constitutionally be conferred on a Secretary as well as on a commissioner. But [it] is not judicial in either case, in the sense in which judicial power is granted by the Constitution to the courts of the United States.”61

Review of Legislative Courts by Supreme Court.—Chief Justice Taney’s view, that would have been expressed in Gordon,62 that the judgments of legislative courts could never be reviewed by the Supreme Court, was tacitly rejected in De Groot v. United States,63 in which the Court took jurisdiction from a final judgment of the Court of Claims. Since the decision in this case, the authority of the Court to exercise appellate jurisdiction over legislative courts has turned not upon the nature or status of such courts but rather upon the nature of the proceeding before the lower court and the finality of its judgment. The Supreme Court will neither review the administrative proceedings of legislative courts nor entertain appeals from the advisory or interlocutory decrees of such a body.64 But in proceedings before a legislative court which are judicial in nature, admit of a final judgment, and involve the performance of judicial functions and therefore the exercise of judicial power, the Court may be vested with appellate jurisdiction.65

57 McAllister v. United States, 141 U.S. 174 (1891).

58 United States v. Fisher, 109 U.S. 143 (1883); Williams v. United States, 289 U.S. 553 (1933).

59 69 U.S. (2 Wall.) 561 (1864).

60 54 U.S. (13 How.) 40 (1852).

61 54 U.S. at 48.

62 The opinion in Gordon v. United States, 69 U.S. (2 Wall.) 561 (1864), had originally been prepared by Chief Justice Taney, but following his death and reargument of the case the opinion cited was issued. The Court later directed the publishing of Taney’s original opinion at 117 U.S. 697. See also United States v. Jones, 119 U.S. 477, 478 (1886), in which the Court noted that the official report of Chief Justice Chase’s Gordon opinion and the Court’s own record showed differences and quoted the record.

63 72 U.S. (5 Wall.) 419 (1867). See also United States v. Jones, 119 U.S. 477 (1886).

64 E.g., Postum Cereal Co. v. California Fig Nut Co., 272 U.S. 693 (1927); Federal Radio Comm’n v. General Elec. Co., 281 U.S. 464 (1930); D. C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). See Glidden Co. v. Zdanok, 370 U.S. 530, 576, 577-579 (1962).

65 Pope v. United States, 323 U.S. 1, 14 (1944); D. C. Court of Appeals v. Feldman, 460 U.S. 462 (1983).

The “Public Rights” Distinction.—A major delineation of the distinction between Article I courts and Article III courts was attempted in Murray’s Lessee v. Hoboken Land & Improvement Co.66 At issue was a summary procedure, without benefit of the courts, for the collection by the United States of moneys claimed to be due from one of its customs collectors. It was objected that the assessment and collection was a judicial act carried out by non-judicial officers and thus invalid under Article III. Accepting that the acts complained of were judicial, the Court nonetheless sustained the act by distinguishing between any act, “which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty,” which, in other words, is inherently judicial, and other acts which Congress may vest in courts or in other agencies. “[T]here are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which congress may or may not bring within the cognizance of the courts of the United States, as it may deem proper.”67 The distinction was between those acts which historically had been determined by courts and those which historically had been resolved by executive or legislative acts and comprehended those matters that arose between the government and others. Thus, Article I courts “may be created as special tribunals to examine and determine various matters, arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it. The mode of determining matters of this class is completely within congressional control.”68

66 59 U.S. (18 How.) 272 (1856).

67 59 U.S. at 284.

68 Ex parte Bakelite Corp., 279 U.S. 438, 451 (1929).

Among the matters susceptible of judicial determination, but not requiring it, are claims against the United States,69 the disposal of public lands and claims arising therefrom,70 questions concerning membership in the Indian tribes,71 and questions arising out of the administration of the customs and internal revenue laws.72 Other courts similar to territorial courts, such as consular courts and military courts martial, may be justified on like grounds.73

The “public rights” distinction appears today to be a description without a significant distinction. Thus, in Crowell v. Benson,74 the Court approved an administrative scheme for determination, subject to judicial review, of maritime employee compensation claims, although it acknowledged that the case involved “one of private right, that is, of the liability of one individual to another under the law as defined.”75 This scheme was permissible, the Court said, because in cases arising out of congressional statutes, an administrative tribunal could make findings of fact and render an initial decision on legal and constitutional questions, as long as there is adequate review in a constitutional court.76 The “essential attributes” of decision must remain in an Article III court, but so long as it does, Congress may utilize administrative decision-makers in those private rights cases that arise in the context of a comprehensive federal statutory scheme.77 That the “public rights” distinction marked a dividing line between those matters that could be assigned to legislative courts and to administrative agencies and those matters “of private right” that could not be was re-asserted in Marathon, but there was much the Court plurality did not explain.78

69 Gordon v. United States, 117 U.S. 697 (1864); McElrath v. United States, 102 U.S. 426 (1880); Williams v. United States, 289 U.S. 553 (1933). On the status of the then-existing Court of Claims, see Glidden Co. v. Zdanok, 370 U.S. 530 (1962).

70 United States v. Coe, 155 U.S. 76 (1894) (Court of Private Land Claims).

71 Wallace v. Adams, 204 U.S. 415 (1907); Stephens v. Cherokee Nation, 174 U.S. 445 (1899) (Choctaw and Chickasaw Citizenship Court).

72 Old Colony Trust Co. v. Commissioner, 279 U.S. 716 (1929); Ex Parte Bakelite Corp., 279 U.S. 438 (1929).

73 See In re Ross, 140 U.S. 453 (1891) (consular courts in foreign countries). Military courts may, on the other hand, be a separate entity of the military having no connection to Article III. Dynes v. Hoover, 61 U.S. (20 How.) 65, 79 (1857).

74 285 U.S. 22 (1932).

75 285 U.S. at 51. On the constitutional problems of assignment to an administrative agency, see Atlas Roofing Co. v. OSHRC, 430 U.S. 442 (1977); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 48 (1937).

76 301 U.S. at 51-65.

77 301 U.S. at 50, 51, 58-63. Thus, Article III concerns were satisfied by a review of the agency fact finding upon the administrative record. Id. at 63-65. The plurality opinion denied the validity of this approach in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 86 n.39 (1982), although Justice White in dissent accepted it. Id. at 115. The plurality, rather, rationalized Crowell and subsequent cases on an analysis seeking to ascertain whether agencies or Article I tribunals were “adjuncts” of Article III courts, that is, whether Article III courts were sufficiently in charge to protect constitutional values. Id. at 76-87.

78 Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 67-70 (1982) (plurality opinion). Thus, Justice Brennan states that at a minimum a matter of public right must arise “‘between the government and others”’ but that the presence of the United States as a proper party to the proceeding is a necessary but not sufficient means to distinguish “private rights.” Id. at 69 & n.23. Crowell v. Benson, however, remained an embarrassing presence.

The Court continued to waver with respect to the importance to decision-making of the public rights/private rights distinction. In two cases following Marathon, it rejected the distinction as “a bright line test,” and instead focused on “substance”—i.e., on the extent to which the particular grant of jurisdiction to an Article I court threatened judicial integrity and separation of powers principles.79 Nonetheless, the Court indicated that the distinction may be an appropriate starting point for analysis. Thus, the fact that private rights traditionally at the core of Article III jurisdiction are at stake leads the Court to “searching” inquiry as to whether Congress is encroaching inordinately on judicial functions, while the concern is not so great where “public” rights are involved.80

However, in a subsequent case, the distinction was pronounced determinative not only of the issue whether a matter could be referred to a non-Article III tribunal but whether Congress could dispense with civil jury trials.81 In so doing, however, the Court vitiated much of the core content of “private” rights as a concept and left resolution of the central issue to a balancing test. That is, “public” rights are, strictly speaking, those in which the cause of action inheres in or lies against the Federal Government in its sovereign capacity, the understanding since Murray’s Lessee. However, to accommodate Crowell v. Benson, Atlas Roofing, and similar cases, seemingly private causes of action between private parties will also be deemed “public” rights, when Congress, acting for a valid legislative purpose pursuant to its Article I powers, fashions a cause of action that is analogous to a common-law claim and so closely integrates it into a public regulatory scheme that it becomes a matter appropriate for agency resolution with limited involvement by the Article III judiciary.82 Nonetheless, despite its fixing by Congress as a “core proceeding” suitable for an Article I bankruptcy court adjudication, the Court held the particular cause of action at issue was a private issue as to which the parties were entitled to a civil jury trial (and necessarily which Congress could not commit to an Article I tribunal, save perhaps through the consent of the parties.83

79 Thomas v. Union Carbide Agric. Products Co., 473 U.S. 568 (1985); CFTC v. Schor, 478 U.S. 833 (1986). The cases also abandoned the principle that the Federal Government must be a party for the case to fall into the “public rights” category. Thomas, 473 U.S. at 586; and see id. at 596-99 (Justice Brennan concurring).

80 “In essence, the public rights doctrine reflects simply a pragmatic understanding that when Congress selects a quasi-judicial method of resolving matters that ‘could be conclusively determined by the Executive and Legislative Branches,’ the danger of encroaching on the judicial powers is reduced.” Thomas v. Union Car-bide Agric. Products Co., 473 U.S. 568, 589 (1985) (quoting Northern Pipeline, 458 U.S. at 68 (plurality opinion)).

81 Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 51-55 (1989). A seventh Amendment jury-trial case, the decision is critical to the Article III issue as well, because, as the Court makes clear what was implicit before, whether Congress can submit a legal issue to an Article I tribunal and whether it can dispense with a civil jury on that legal issue must be answered by the same analysis. Id. at 52-53.

82 492 U.S. at 52-54. The Court reiterated that the Government need not be a party as a prerequisite to a matter being of “public right.” Id. at 54. Concurring, Justice Scalia argued that public rights historically were and should remain only those matters to which the Federal Government is a party. Id. at 65.

83 492 U.S. at 55-64. The Court reserved the question whether, a jury trial being required, a non-Article III bankruptcy judge could oversee such a jury trial. Id. at 64. That question remains unresolved, both as a matter, first, of whether there is statutory authorization for bankruptcy judges to conduct jury trials, and, second, if there is, whether they may constitutionally do so. E.g., In re Ben Cooper, Inc., 896 F.2d 1394 (2d Cir. 1990), cert. granted, 497 U.S. 1023, vacated and remanded for consideration of a jurisdictional issue, 498 U.S. 964 (1990), reinstated, 924 F.2d 36 (2d Cir.), cert. denied, 500 U.S. 928 (1991); In re Grabill Corp., 967 F.2d 1152 (7th Cir. 1991), pet. for reh. en banc den., 976 F.2d 1126 (7th Cir. 1992).

Constitutional Status of the Court of Claims and the Court of Customs and Patent Appeals.—Though the Supreme Court for a long while accepted the Court of Claims as an Article III court,84 it later ruled that court to be an Article I court and its judges without constitutional protection of tenure and salary.85 Then, in the 1950s, Congress statutorily declared that the Court of Claims, the Customs Court, and the Court of Customs and Patent Appeals were Article III courts,86 a questionable act under the standards the Court had utilized to determine whether courts were legislative or constitutional.87 But in Glidden Co. v. Zdanok,88 five of seven participating Justices united to find that indeed the Court of Claims and the Court of Customs and Patent Appeals, at least, were constitutional courts and their judges eligible to participate in judicial business in other constitutional courts. Three Justices would have overruled Bakelite and Williams and would have held that the courts in question were constitutional courts.89 Whether a court is an Article III tribunal depends largely upon whether legislation establishing it is in harmony with the limitations of that Article, specifically, “whether . . . its business is the federal business there specified and its judges and judgments are allowed the independence there expressly or impliedly made requisite.” When a court is created “to carry into effect [federal] powers . . . over subject matter . . . and not over localities,” a presumption arises that the status of such a tribunal is constitutional rather than legislative.90 The other four Justices expressly declared that Bakelite and Williams should not be overruled,91 but two of them thought the two courts had attained constitutional status by virtue of the clear manifestation of congressional intent expressed in the legislation.92 Two Justices maintained that both courts remained legislative tribunals.93 While the result is clear, no standard for pronouncing a court legislative rather than constitutional has obtained the adherence of a majority of the Court.94

84 De Groot v. United States, 72 U.S. (5 Wall.) 419 (1866); United States v. Union Pacific Co., 98 U.S. 569, 603 (1878); Miles v. Graham, 268 U.S. 501 (1925).

85 Williams v. United States, 289 U.S. 553 (1933); cf. Ex parte Bakelite Corp., 279 U.S. 438, 450-455 (1929).

86 67 Stat. 226, 1, 28 U.S.C. 171 (Court of Claims); 70 Stat. 532. 1, 28 U.S.C. 251 (Customs Court); 72 Stat. 848, 1, 28 U.S.C. 211 (Court of Customs and Patent Appeals).

87 In Ex parte Bakelite Corp., 279 U.S. 438. 459 (1929), Justice Van Devanter refused to give any weight to the fact that Congress had bestowed life tenure on the judges of the Court of Customs Appeals because that line of thought “mistakenly assumes that whether a court is of one class or the other depends on the intention of Congress, whereas the true test lies in the power under which the court was created and in the jurisdiction conferred.”

88 370 U.S. 530 (1962).

89 Glidden Co. v. Zdanok, 370 U.S. 530, 531 (1962) (Justices Harlan, Brennan, and Stewart).

90 370 U.S. at 548, 552.

91 370 U.S. at 585 (Justice Clark and Chief Justice Warren concurring); 589 (Justices Douglas and Black dissenting).

92 370 U.S. at 585 (Justice Clark and Chief Justice Warren).

93 370 U.S. at 589 (Justices Douglas and Black). The concurrence thought that the rationale of Bakelite and Williams was based on a significant advisory and reference business of the two courts, which the two Justices now thought insignificant, but what there was of it they thought nonjudicial and the courts should not entertain it. Justice Harlan left that question open. Id. at 583.

94 Aside from doctrinal matters, in 1982, Congress created the United States Court of Appeals for the Federal Circuit, giving it, inter alia, the appellate jurisdiction of the Court of Claims and the Court of Customs and Patent Appeals. 96 Stat. 25, title 1, 28 U.S.C. 41. At the same time Congress created the United States Claims Court, now the United States Court of Federal Claims, as an Article I tribunal, with the trial jurisdiction of the old Court of Claims. 96 Stat. 26, as amended, 902(a)(1), 106 Stat. 4516, 28 U.S.C. 171-180.

Status of Courts of the District of Columbia.—Through a long course of decisions, the courts of the District of Columbia were regarded as legislative courts upon which Congress could impose nonjudicial functions. In Butterworth v. United States ex rel. Hoe,95 the Court sustained an act of Congress which conferred revisory powers upon the Supreme Court of the District in patent appeals and made its decisions binding only upon the Commissioner of Patents. Similarly, the Court later sustained the authority of Congress to vest revisory powers in the same court over rates fixed by a public utilities commission.96 Not long after this the same rule was applied to the revisory powers of the District Supreme Court over orders of the Federal Radio Commission.97 These rulings were based on the assumption, express or implied, that the courts of the District were legislative courts, created by Congress in pursuance of its plenary power to govern the District of Columbia. In dictum in Ex parte Bakelite Corp.,98 while reviewing the history and analyzing the nature of the legislative courts, the Court stated that the courts of the District were legislative courts.

95 112 U.S. 50 (1884).

96 Keller v. Potomac Elec. Co., 261 U.S. 428 (1923).

97 Federal Radio Comm’n v. General Elec. Co., 281 U.S. 464 (1930).

98 279 U.S. 438, 450-455 (1929).

In 1933, nevertheless, the Court, abandoning all previous dicta on the subject, found the courts of the District of Columbia to be constitutional courts exercising judicial power of the United States,99 with the result that it assumed the task of reconciling the performance of nonjudicial functions by such courts with the rule that constitutional courts can exercise only the judicial power of the United States. This task was accomplished by the argument that in establishing courts for the District, Congress is performing dual functions in pursuance of two distinct powers, the power to constitute tribunals inferior to the Supreme Court, and its plenary and exclusive power to legislate for the District of Columbia. However, Article III, 1, limits this latter power with respect to tenure and compensation, but not with regard to vesting legislative and administrative powers in such courts. Subject to the guarantees of personal liberty in the Constitution, “Congress has as much power to vest courts of the District with a variety of jurisdiction and powers as a State legislature has in conferring jurisdiction on its courts.”100

In 1970, Congress formally recognized two sets of courts in the District, federal courts, district courts and a Court of Appeals for the District of Columbia, created pursuant to Article III, and courts equivalent to state and territorial courts, created pursuant to Article I.101 Congress’ action was sustained in Palmore v. United States.102 When legislating for the District, the Court held, Congress has the power of a local legislature and may, pursuant to Article I, 8, cl. 17, vest jurisdiction to hear matters of local law and local concerns in courts not having Article III characteristics. The defendant’s claim that he was denied his constitutional right to be tried before an Article III judge was denied on the basis that it was not absolutely necessary that every proceeding in which a charge, claim, or defense based on an act of Congress or a law made under its authority need be conducted in an Article III court. State courts, after all, could hear cases involving federal law as could territorial and military courts. “[T]he requirements of Article III, which are applicable where laws of national applicability and affairs of national concern are at stake, must in proper circumstances give way to accommodate plenary grants of power to Congress to legislate with respect to specialized areas having particularized needs and warranting distinctive treatment.”103

99 O’Donoghue v. United States, 289 U.S. 516 (1933).

100 289 U.S. at 535-46. Chief Justice Hughes in dissent argued that Congress’ power over the District was complete in itself and the power to create courts there did not derive at all from Article III. Id. at 551. See the discussion of this point of O’Donoghue in National Mutual Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582 (1949). Cf. Hobson v. Hansen, 265 F. Supp. 902 (D.D.C. 1967) (three-judge court).

Bankruptcy Courts.—After extended and lengthy debate, Congress in 1978 revised the bankruptcy act and created as an “adjunct” of the district courts a bankruptcy court composed of judges, vested with practically all the judicial power of the United States, serving for 14-year terms, subject to removal for cause by the judicial councils of the circuits, and with salaries subject to statutory change.104 The bankruptcy courts were given jurisdiction over all civil proceedings arising under the bankruptcy code or arising in or related to bankruptcy cases, with review in Article III courts under a clearly erroneous standard. In a case in which a claim was made against a company for breaches of contract and warranty, purely state law claims, the Court held unconstitutional the conferral upon judges not having the Article III security of tenure and compensation of jurisdiction to hear state law claims of traditional common law actions of the kind existing at the time of the drafting of the Constitution.105 While the holding was extremely narrow, a plurality of the Court sought to rationalize and limit the Court’s jurisprudence of Article I courts. According to the plurality, as a fundamental principle of separation of powers, the judicial power of the United States must be exercised by courts having the attributes prescribed in Article III. Congress may not evade the constitutional order by allocating this judicial power to courts whose judges lack security of tenure and compensation. Only in three narrowly circumscribed instances may judicial power be distributed outside the Article III framework: in territories and the District of Columbia, that is, geographical areas in which no State operated as sovereign and Congress exercised the general powers of government; courts martial, that is, the establishment of courts under a constitutional grant of power historically understood as giving the political branches extraordinary control over the precise subject matter; and the adjudication of “public rights,” that is, the litigation of certain matters that historically were reserved to the political branches of government and that were between the government and the individual.106 In bankruptcy legislation and litigation not involving any of these exceptions, the plurality would have held, the judicial power to process bankruptcy cases could not be assigned to the tribunals created by the act.107

101 Pub. L. 91-358, 84 Stat. 475, D.C. Code 11-101.

102 411 U.S. 389 (1973)

103 411 U.S. at 407-08. See also Pernell v. Southall Realty Co., 416 U.S. 363, 365-365 (1974); Swain v. Pressley, 430 U.S. 372 (1977); Key v. Doyle, 434 U.S. 59 (1978). Under Swain, provision for hearing of motions for postjudgement relief by convicted persons in the District, the present equivalent of habeas for federal convicts, is placed in Article I courts. That there are limits to Congress’ discretion is asserted in dictum in Territory of Guam v. Olsen, 431 U.S. 195, 201-202, 204 (1977).

104 Bankruptcy Act of 1978, Pub. L. 95-598, 92 Stat. 2549, codified in titles 11, 28. The bankruptcy courts were made “adjuncts” of the district courts by 201(a), 28 U.S.C. 151(a). For citation to the debate with respect to Article III versus Article I status for these courts, see Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 61 n.12 (1982) (plurality opinion).

105 The statement of the holding is that of the two concurring Justices, 458 U.S. at 89 (Justices Rehnquist and O’Connor), with which the plurality agreed “at the least,” while desiring to go further. Id. at 87 n.40.

106 458 U.S. at 63-76 (Justice Brennan, joined by Justices Marshall, Blackmun, and Stevens).

107 The plurality also rejected an alternative basis, a contention that as “adjuncts” of the district courts, the bankruptcy courts were like United States magistrates or like those agencies approved in Crowell v. Benson, 285 U.S. 22 (1932), to which could be asigned factfinding functions subject to review in Article III courts, the fount of the administrative agency system. Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 76-86 (1982). According to the plurality, the act vested too much judicial power in the bankruptcy courts to treat them like agencies, and it limited the review of Article III courts too much.

The dissent argued that, while on its face Article III provided for exclusivity in assigning judicial power to Article III entities, the history since Canter belied that simplicity. Rather, the precedents clearly indicated that there is no difference in principle between the work that Congress may assign to an Article I court and that which must be given to an Article III court. Despite this, the dissent contended that Congress did not possess plenary discretion in choosing between the two systems; rather, in evaluating whether jurisdiction was properly reposed in an Article I court, the Supreme Court must balance the values of Article III against both the strength of the interest Congress sought to further by its Article I investiture and the extent to which Article III values were undermined by the congressional action. This balancing would afford the Court, the dissent believed, the power to prevent Congress, were it moved to do so, from transferring jurisdiction in order to emasculate the constitutional courts of the United States.108

Again, no majority could be marshaled behind a principled discussion of the reasons for and the limitation upon the creation of legislative courts, not that a majority opinion, or even a unanimous one, would necessarily presage the settling of the law.109 But the breadth of the various opinions not only left unclear the degree of discretion left in Congress to restructure the bankruptcy courts, but also placed in issue the constitutionality of other legislative efforts to establish adjudicative systems outside a scheme involving the creation of life-tenured judges.110

Congress responded to Marathon by enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984.111 Bankruptcy courts were maintained as Article I entities, and overall their powers as courts were not notably diminished. However, Congress did establish a division between “core proceedings,” which bankruptcy courts could hear and determine, subject to lenient review, and other proceedings, which, though initially heard and decided by bankruptcy courts, could be reviewed de novo in the district court at the behest of any party, unless the parties consented to bankruptcy-court jurisdiction in the same manner as core proceedings. A safety valve was included, permitting the district court to withdraw any proceeding from the bankruptcy court on cause shown.112 Notice that in Granfinanciera, S.A. v. Nordberg,113 the Court found that a cause of action founded on state law, though denominated a core proceeding, was a private right.

Agency Adjudication.—The Court in two decisions following Marathon involving legislative courts clearly suggested that the majority was now closer to the balancing approach of the Marathon dissenters than to the position of the Marathon plurality that Congress may confer judicial power on legislative courts in only very limited circumstances. Subsequently, however, Granfinanciera, S.A. v. Nordberg,114 a reversion to the fundamentality of Marathon, with an opinion by the same author, Justice Brennan, cast some doubt on this proposition. In Thomas v. Union Carbide Agric. Products Co.,115 the Court upheld a provision of the pesticide law requiring binding arbitration, with limited judicial review , of compensation due one registrant by another for mandatory sharing of registration information, the right arising from federal statutory law. And in CFTC v. Schor,116 the Court upheld conferral on the agency of authority, in a reparations adjudication under the Act, also to adjudicate “counterclaims” arising out of the same transaction, including those arising under state common law. Neither the fact that the pesticide case involved a dispute between two private parties nor the fact that the CFTC was empowered to decide claims traditionally adjudicated under state law proved decisive to the Court’s analysis.

108 458 U.S. at 92, 105-13, 113-16 (Justice White, joined by Chief Justice Burger and Justice Powell).

109 Ex parte Bakelite Corp., 279 U.S. 438 (1929), was, after all, a unanimous opinion and did not long survive.

110 In particular, the Federal Magistrates Act of 1968, under which judges may refer certain pretrial motions and the trial of certain matters to persons appointed to a specific term, was threatened. Pub. L. 90-578, 82 Stat. 1108, as amended, 28 U.S.C. 631-639. See United States v. Raddatz, 447 U.S. 667 (1980); Mathews v. Weber, 423 U.S. 261 (1976).

111 P. L. 98-353, 98 Stat. 333, judiciary provisions at 28 U.S.C. 151 et seq.

112 See 28 U.S.C. 157.

113 492 U.S. 33 (1989).

In rejecting a “formalistic” approach and analyzing the “substance” of the provision at issue in Union Carbide, Justice O’Connor‘s opinion for the Court pointed to several considerations.117 The right to compensation was not a purely private right, but “bears many of the characteristics of a ‘public’ right,” since Congress was “authoriz[ing] an agency administering a complex regulatory scheme to allocate costs and benefits among voluntary participants in the program.”118 Also important was not “unduly constrict[ing] Congress in its ability to take needed and innovative action pursuant to its Article I powers;”119 arbitration was “a pragmatic solution to [a] difficult problem.” The limited nature of judicial review was seen as a plus in the sense that “no unwilling defendant is subjected to judicial enforcement power;” on the other hand, availability of limited judicial review of the arbitrator’s findings and determination for fraud, misconduct, or misrepresentation, and for due process violations, preserved the “‘appropriate exercise of the judicial function.”’120 Thus, the Court concluded, Congress in exercise of Article I powers “may create a seemingly ‘private’ right that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary.”121

114 492 U.S. 33 (1989)

115 473 U.S. 568 (1985).

116 478 U.S. 833 (1986).

117 Contrast the Court’s approach to Article III separation of powers issues with the more rigid approach enunciated in INS v. Chadha and Bowsher v. Synar, involving congressional incursions on executive power.

118 473 U.S. at 589.

119 CFTC v. Schor, 478 U.S. at 851 (summarizing the Thomas rule).

120 Thomas, 473 U.S. at 591, 592 (quoting Crowell v. Benson, 285 U.S. 22, 54 (1932)).

121 473 U.S. at 594.

In Schor, the Court described Art. III, 1 as serving a dual purpose: to protect the role of an independent judiciary and to safeguard the right of litigants to have claims decided by judges free from potential domination by the other branches of government. A litigant’s Article III right is not absolute, the Court determined, but may be waived. This the litigant had done by submitting to the administrative law judge’s jurisdiction rather than independently seeking relief as he was entitled to and then objecting only after adverse rulings on the merits. But the institutional integrity claim, not being personal, could not be waived, and the Court reached the merits. The threat to institutional independence was “weighed” by reference to “a number of factors.” The conferral on the CFTC of pendent jurisdiction over common law counterclaims was seen as more narrowly confined than was the grant to bankruptcy courts at issue in Marathon, and as more closely resembling the “model” approved in Crowell v. Benson. The CFTC’s jurisdiction, unlike that of bankruptcy courts, was said to be confined to “a particularized area of the law;” the agency’s orders were enforceable only by order of a district court,122 and reviewable under a less deferential standard, with legal rulings being subject to de novo review; and the agency was not empowered, as had been the bankruptcy courts, to exercise “all ordinary powers of district courts.”

Granfinanciera followed analysis different from that in Schor, although it preserved Union Carbide through its concept of “public rights.” State law and other legal claims founded on private rights could not be remitted to non-Article III tribunals for adjudication unless Congress in creating an integrated public regulatory scheme has so taken up the right as to transform it. It may not simply relabel a private right and place it into the regulatory scheme. The Court is hazy with respect to whether the right itself must be a creature of federal statutory action. The general descriptive language suggests that, but in its determination whether the right at issue in the case, the recovery of preferential or fraudulent transfers in the context of a bankruptcy proceeding, is a “private right,” the Court seemingly goes beyond this point. Though a statutory interest, the actions were identical to state-law contract claims brought by a bankrupt corporation to augment the estate.123 Schor was distinguished solely on the waiver part of the decision, relating to the individual interest, without considering the part of the opinion deciding the institutional interest on the merits and utilizing a balancing test.124

122 Cf. Union Carbide, 473 U.S. at 591 (fact that “FIFRA arbitration scheme incorporates its own system of internal sanctions and relies only tangentially, if at all, on the Judicial Branch for enforcement” cited as lessening danger of encroachment on “Article III judicial powers”).

123 Granfinanciera, 492 U.S. at 51-55, 55-60.

124 492 U.S. at 59 n.14.

Thus, while the Court has made some progress in reconciling its growing line of disparate cases, doctrinal harmony has not yet been achieved.