Procedural rules vs. legislative rules

1. Procedural rules vs. legislative rules • Sec. 553(b) exempts rules of agency organization, procedure & practice. How to tell the difference? Courts generally define procedural rules as: • Those rules that do not themselves alter the rights or interests of parties (like legislative rules do) but which may alter the manner in which the parties present themselves or their viewpoints to the agency • Example – rules re the timing and format for presentation of arguments in hearings • Sometimes things that seem “procedural” have a substantial impact on people’s rights and courts will find such rules are “legislative.” • Example – Pickus v. US, 507 F.2d 1107 (D.C. Cir. 1974) – Rule setting out mechanical formula for determining time when a prisoner could be paroled was used as a binding legislative rule and had a substantial impact on prisoners’ rights (even though it was part of a “decision-making procedure”).

2. Agencies & Article III 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 injuriesaccording 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 doesn’t 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 • Can engage in fact-finding even re private rights. • But there must always be the right to judicial review of agency adjudicatory decisions AND • Federal courts have right to de novo review of jurisdictional/constitutional facts AND legal findings

5. CFTC v. Schor • CEA prohibits fraud & manipulation in connection with commodities transactions and gives customers the 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 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 Schoron both 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 – a “core” area of law generally reserved to Article III courts. • This is a slightly different issue from Crowell: • In Schorthere was no question of whether an adequate scheme of judicial review was in place. Rather the 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

7. Schor ‘s test: • Does agency adjudication “impermissibly threaten the institutional integrity of the judicial branch”? • Court notes that we don’t want transfers of power away from Art. III courts in ways that emasculates them and undermines their role in separation of powers • How to give content to this notion? Another pragmatic test. Factors to consider: • 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”? • What are the origins & importance of the right to be adjudicated? • What concerns drove Congress to depart from Article III requirements?

8. Bottom line re Schor • Schor is one of several cases moving away from Crowell’s rigid public vs. private distinction and toward a more pragmatic approach to agency adjudication. • Schor has its problems, particularly that it uses an amorphous and unpredictable balancing test to determine whether judicial power has been “intruded upon.” • When doing that balancing keep in mind the purposes of Article III – (1) freedom from bias in adjudications and (2) preservation of an independent judiciary that serves as a check on other branches. • If those purposes seem undermined when weighing the Schorfactors, question the constitutionality of agency adjudicative authority at issue.