Agency Adjudication.

In two decisions subsequent to Marathon involving legislative courts, Thomas v. Union Carbide Agric. Products Co.125 and CFTC v. Schor,126 the Court clearly suggested that the majority was now closer to the balancing approach of the Marathon dissenters than to the Marathon plurality’s position that Congress may confer judicial power on legislative courts only in very limited circumstances. Subsequently, however, Granfinanciera, S.A. v. Nordberg,127 a reversion to the fundamentality of Marathon, with an opinion by the same author, Justice Brennan, cast some doubt on this proposition.

In Union Carbide, the Court upheld a provision of a pesticide law which required binding arbitration, with limited judicial review, of compensation due one registrant by another for mandatory sharing of registration information pursuant to federal statutory law. And in Schor, the Court upheld conferral on the agency of authority, in a reparations adjudication under the Act, to also 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.

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.128 The right to compensation was not a purely private right, but “bears many of the characteristics of a ‘public’ right,” because Congress was “authoriz[ing] an agency administering a complex regulatory scheme to allocate costs and benefits among voluntary participants in the program. . . .”129 Also deemed important was not “unduly constrict- [ing] Congress’s ability to take needed and innovative action pursuant to its Article I powers”;130 arbitration seen as “a pragmatic solution to [a] difficult problem.”131 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.’ ”132 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.”133

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,134 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.”135

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 the Court seemingly goes beyond this point 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” that carries with it a right to jury trial. Though a statutory interest, the actions were identical to state-law contract claims brought by a bankrupt corporation to augment the estate.136 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.137 Thus, although the Court has made some progress in reconciling its growing line of disparate cases, doctrinal harmony has not yet been achieved.


473 U.S. 568 (1985). back
478 U.S. 833 (1986). back
492 U.S. 33 (1989). back
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. back
473 U.S. at 589. back
CFTC v. Schor, 478 U.S. at 851 (summarizing the Thomas rule). back
Thomas, 473 U.S. at 590. back
Thomas, 473 U.S. at 591, 592 (quoting Crowell v. Benson, 285 U.S. 22, 54 (1932)). back
473 U.S. at 594. back
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”). back
See CFTC v. Schor, 478 U.S. 833, 853 (1986). Notwithstanding Schor’s efforts to distinguish between the context presented in that case and the bankruptcy context, the Court, in Wellness International v. Sharif, extended Schor’s holding to adjudications of private right claims by bankruptcy courts. See 575 U.S. ___, No. 13–935, slip op. (2015). Specifically, the Wellness International Court utilized the balancing approach employed by Schor to conclude that allowing bankruptcy courts to decide a fraudulent conveyance claim by consent would not “impermissibly threaten the institutional integrity of the Judicial Branch,” id. at 12 (quoting Schor, 478 U.S. at 851), because (1) the underlying class of claims that was being adjudicated by the non-Article III court was “narrow” in nature, resulting in a “de minimis” intrusion on the federal judiciary; (2) the bankruptcy court was ultimately supervised and overseen by a constitutional court and not Congress; and (3) the Court found “no indication” that Congress, in allowing bankruptcy courts to decide with finality certain private right claims, was acting in “an effort to aggrandize itself or humble the Judiciary.” Id. at 13–14. back
Granfinanciera, 492 U.S. at 51–55, 55–60. back
492 U.S. at 59 n.14. back