EDITORIAL NOTE: This article is the third installment of an 8-part series exploring the constitutionality of the PTAB under the public rights doctrine. To begin reading from the beginning please see: Patent Review in an Article I Tribunal is Unconstitutional.
The modern public rights jurisprudence flows from Atlas Roofing in 1977 to Stern in 2011. Although the case law does not provide a straight line, there is a consistent pattern illustrating the clear constraints of administrative agency adjudication. These constraints include consent of the parties, due process and review by Article III courts. Without these elements, according to a continuous line of Supreme Court jurisprudence, administrative proceedings are illegitimate and unconstitutional. Stern is the governing precedence on the issue of the public rights doctrine, with the composition of the Court today substantially identical to that of the Stern Court.
Before getting to Stern, however, we must consider Altas Roofing, Raddataz, Northern Pipeline, and Granfinanciera.
Atlas Roofing (1977) and Raddatz (1980)
According to Atlas Roofing, only Article III courts can adjudicate core constitutional rights. Congress has the power to establish statutory public rights and enable an administrative tribunal to adjudicate or develop an original fact finding involving these rights. Nevertheless, matters adjudicated in administrative tribunals are reviewable by Article III courts.
The Atlas Roofing court sought to resolve a conflict between a Seventh Amendment right to a jury and congressional power to create laws to empower an agency to regulate agency authority. In those cases in which Congress establishes a statute for resolving a public right, it may allocate to an executive agency the authority to resolve disputes in the agency’s domain. The Court in Atlas Roofing involved the allocation of authority for administration of OSHA, a class of public health and safety regulations that require specialized expertise and may satisfy the class of cases within the public rights exception.
“The Seventh Amendment does not prevent Congress from assigning to an administrative agency the task of adjudicating violations of OSHA. When Congress creates new statutory “public rights,” it may assign their adjudication to an administrative agency with which a jury trial would be incompatible, without violating the Seventh Amendment’s injunction that jury trial is to be “preserved” in “suits at common law.” That Amendment was never intended to establish the jury as the exclusive mechanism for factfinding in civil cases, but took the existing legal order as it found it, and hence there is little or no basis for now interpreting it as providing an impenetrable barrier to administrative factfinding under otherwise valid federal regulatory statutes. The Amendment did not render Congress powerless – when it concluded that remedies available in courts of law were inadequate to cope with a problem within its power to regulate – so to create such new public rights and remedies by statute and commit their enforcement, if it chose, to a tribunal other than a court of law (such as an administrative agency) in which facts are not found by juries.” (430 U.S. 442, 443 (1977))
While the Court preserved the public rights doctrine to enable allocation of a narrow class of OSHA matters to an administrative agency, outside the purview of Article III court juries, the Court also required a review of agency decisions in Article III courts. Thus, while an executive agency may be assigned the role of fact finder for a specialized class of public right, outside of the domain of a fact finding jury, an Article III court must be able to review the agency determinations. Once again, it is implied that the constraints of due process are applied to the agency fact-finding administration.
This due process constraint is brought to the surface in Raddatz (447 U.S. 667 (1980)). In creating a court of Magistrates to perform fact finding, Article III judges may review a tribunal’s determinations de novo, though not a hearing de novo. The review of a tribunal’s determinations de novo satisfies the due process requirement. In this way, “[t]he statute strikes the proper balance between the demands of due process under the Fifth Amendment and the constraints of Art. III.” (447 U.S. 668) The Court was keenly aware of the need to preserve due process constraints in a fact finding tribunal, namely, by enabling the review of the tribunal’s determinations by Article III courts.
Both the Atlas Roofing and Raddatz Courts recognized that in order to respect the separation of powers and to maintain the independence of the judiciary, it is necessary to enable Article III courts to review the fact finding of Article I tribunals. Only after a federal district court review is an administrative tribunal determination held to be final.
Northern Pipeline (1982) and Granfinanciera (1989)
In Northern Pipeline, the Court addressed the constitutionality of the Bankruptcy Act of 1978 when Congress created courts inferior to Article III courts to resolve bankruptcy disputes. The Court ruled that, as legislative courts, bankruptcy courts are not substitutes for Article III courts, thereby reiterating the sanctity and independence of the federal judiciary. “It thus threatens to supplant completely our system of adjudication in independent Art. III tribunals and replace it with a system of ‘specialized’ legislative courts.” (458 U.S. 73 (1982)) Following the earlier public rights exception cases, the Court held that private rights are adjudicated in Article III courts. “It is, of course, true that, while the power to adjudicate ‘private rights’ must be vested in an Art. III court, ‘this Court has accepted factfinding by an administrative agency, . . . as an adjunct to the Art. III court, analogizing the agency to a jury or special master and permitting it in admiralty cases to perform the function of the special master.’” (458 U.S. 77, citing Crowell 285 U.S. 51) The Court made two main points. First, litigants must supply consent to review a dispute in a non-Article III court. Second, Congress may create and define statutory rights and adjudicate this class of rights in administrative tribunals within constraints. A plurality of the Northern Pipeline Court observed:
“These two principles assist us in evaluating the ‘adjunct’ scheme presented in these cases. Appellants assume that Congress’ power to create “adjuncts” to consider all cases related to those arising under Title 11 is as great as it was in the circumstances of Crowell. But while Crowell certainly endorsed the proposition that Congress possesses broad discretion to assign factfinding functions to an adjunct created to aid in the adjudication of congressionally created statutory rights, Crowell does not support the further proposition necessary to appellants’ argument — that Congress possesses the same degree of discretion in assigning traditionally judicial power to adjuncts engaged in the adjudication of rights not created by Congress. Indeed, the validity of this proposition was expressly denied in Crowell when the Court rejected ’the untenable assumption that the constitutional courts may be deprived in all cases of the determination of facts upon evidence, even though a constitutional right may be involved, ‘the essential independence of the exercise of the judicial power of the United States in the enforcement of constitutional rights requires that the Federal court should determine . . . an issue [of agency jurisdiction] upon its own record and the facts elicited before it.’” (458 U.S. 81-81, quoting Crowell 285 U.S. 64)
The distinction between rights created by the Constitution and rights created by Congress is recognized as a major feature of the analysis.
“Although Crowell and Raddatz do not explicitly distinguish between rights created by Congress and other rights, such a distinction underlies in part Crowell’s and Raddatz’ recognition of a critical difference between rights created by federal statute and rights recognized by the Constitution. Moreover, such a distinction seems to us to be necessary in light of the delicate accommodations required by the principle of separation of powers reflected in Art. III. The constitutional system of checks and balances is designed to guard against “encroachment or aggrandizement” by Congress at the expense of the other branches of government. Buckley v. Valeo, 424 U.S. 122. But when Congress creates a statutory right, it clearly has the discretion, in defining that right, to create presumptions, or assign burdens of proof, or prescribe remedies; it may also provide that persons seeking to vindicate that right must do so before particularized tribunals created to perform the specialized adjudicative tasks related to that right. Such provisions do, in a sense, affect the exercise of judicial power, but they are also incidental to Congress’ power to define the right that it has created. No comparable justification exists, however, when the right being adjudicated is not of congressional creation. In such a situation, substantial inroads into functions that have traditionally been performed by the Judiciary cannot be characterized merely as incidental extensions of Congress’ power to define rights that it has created. Rather, such inroads suggest unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.” (458 U.S. 83-84)
As inferior tribunals established by Congress to adjudicate public rights, the decisions of these tribunals must be reviewed by Article III courts. This approach underlines the Court’s view that the Constitution preserved the power of an independent judiciary. On this issue, a plurality of the Northern Pipeline Court suggested that “appellate review is sufficient to satisfy either the command or purpose of Art. III.” (Northern Pipeline, footnote 28).
Observing the de novo review requirement in Crowell, the Northern Pipeline Court commented that “[the] Court in Crowell found that the requirement of de novo review as to certain facts was not ‘simply the question of due process in relation to notice and hearing,’ but was ‘rather a question of the appropriate maintenance of the Federal judicial power.’ 285 U.S. 56. The dissent agreed that some factual findings cannot be made by adjuncts, on the ground that, ‘under certain circumstances, the constitutional requirement of due process is a requirement of [Art. III] judicial process.’ Id. at 285 U. S. 87 (Brandeis, J., dissenting)” (Northern Pipeline, footnote 33).
Further, the mere allocation of a statutory right designed by Congress for review by specialized administrative courts is insufficient to overcome the objection that removal of adjudication of rights from the judiciary is legitimate. The sanctity and independence of the federal judiciary is paramount in order to maintain constitutional checks and balances.
Addressing the conflict between a bankruptcy court tribunal decision and the Seventh Amendment right to a jury trial, the Court in Granfinanciera ruled that though bankruptcy court adjudication of private rights can be considered to have public rights aspects in the allocation of fact-finding to an inferior tribunal, the Seventh Amendment jury right is not usurped by bankruptcy court adjudication. Citing Atlas Roofing, the Granfinanciera Court observed that “[a]lthough the Seventh Amendment does not prohibit Congress from assigning resolution of a statutory claim that is legal in nature to a non-Article III tribunal that does not use a jury as a factfinder so long as the claim asserts a ‘public right,’ Congress lacks the power to strip parties who are contesting matters of private right of their constitutional right to a jury trial.” (492 U.S. 34 (1989)) In fact in some cases, a private right is entwined with a public right that Congress may allocate to an Article I tribunal. Nevertheless, Congress “cannot eliminate a party’s Seventh Amendment right to a jury trial merely by relabeling the cause of action to which it attaches and placing exclusive jurisdiction in an administrative agency or a specialized court of equity.” (492 U.S. 61) This view fine tunes the Court’s ruling in Atlas Roofing in which the Court stated that, in cases in which Congress creates public rights and allocates the adjudication of these rights to an Article I tribunal, a jury trial may not be necessary. However, in cases in which private rights are implicated in “suits at common law,” “[o]ur prior cases support administrative factfinding in only those situations involving ‘public rights,’ e.g., where the Government is involved in its sovereign capacity under an otherwise valid statute creating enforceable public rights. Wholly private tort, contract, and property cases, as well as a vast range of other cases, are not at all implicated.” (Granfinanciera, 492 U.S. 51, citing Atlas Roofing at 430 U.S. 458) and concluding, following Crowell, that “Congress may devise novel causes of action involving public rights free from the strictures of the Seventh Amendment if it assigns their adjudication to tribunals without statutory authority to employ juries as factfinders. But it lacks the power to strip parties contesting matters of private right of their constitutional right to a trial by jury.” (492 U.S. 51-52)
Thus, reiterating a line of reasoning from Murray’s Lessee through Crowell and Northern Pipeline, the Granfinanciera Court states that congressional power is limited in assigning private claims outside of a jury’s purview just as it is limited in allocating “adjudicative authority in non-Article III tribunals.” (492 U.S. 52) However, in distinguishing between the limits of Article III and non-Article III courts, and the role and limits of the public rights exception to each of these, the Court, quoting Atlas Roofing, stated:
“In Atlas Roofing, supra, at 430 U. S. 458, we noted that Congress may effectively supplant a common law cause of action carrying with it a right to a jury trial with a statutory cause of action shorn of a jury trial right if that statutory cause of action inheres in, or lies against, the Federal Government in its sovereign capacity. Our case law makes plain, however, that the class of “public rights” whose adjudication Congress may assign to administrative agencies or courts of equity sitting without juries is more expansive than Atlas Roofing‘s discussion suggests. Indeed, our decisions point to the conclusion that, if a statutory cause of action is legal in nature, the question whether the Seventh Amendment permits Congress to assign its adjudication to a tribunal that does not employ juries as factfinders requires the same answer as the question whether Article III allows Congress to assign adjudication of that cause of action to a non-Article III tribunal: For if a statutory cause of action, such as respondent’s right to recover a fraudulent conveyance under 11 U.S.C. § 548(a)(2), is not a ‘public right’ for Article III purposes, then Congress may not assign its adjudication to a specialized non-Article III court lacking ‘the essential attributes of the judicial power.’ Crowell v. Benson, supra, at 285 U. S. 51. And if the action must be tried under the auspices of an Article III court, then the Seventh Amendment affords the parties a right to a jury trial whenever the cause of action is legal in nature. Conversely, if Congress may assign the adjudication of a statutory cause of action to a non-Article III tribunal, then the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder. See, e.g., Atlas Roofing, supra, at 458 U. S. 453-455, 458 U. S. 460” (Granfinanciera, 492 U.S. 53-54)
The public right exception is carefully limited to rights allocated by Congress that derive from government sovereignty or a public purpose, not from private rights designed to be adjudicated in common law in Article III courts. This is so because “’matters from their nature subject to a “a suit at common law or in equity or admiralty”’ lie at the ‘protected core’ of Article III judicial power.” (Granfinanciera quoting Crowell and Atlas Roofing, 492 U.S. 56).
Although it may seem expedient and cost-effective to maintain a specialized tribunal, the Court observed that these issues cannot “overcome the clear command of the Seventh Amendment,” (492 U.S. 63) citing Bowsher, “[T]he fact that a given law or procedure is efficient, convenient, and useful in facilitating functions of government, standing alone, will not save it if it is contrary to the Constitution,” quoting INS v. Chadha (462 U.S. 919) and further showing that “the desire for speedy justice” is overcome by a “right to a jury trial,” citing Pernell v. Southall Realty (416 U.S. 383-384).
CLICK HERE to CONTINUE READING… Part 4 will conclude discussion of the modern public rights discussion, specifically discussing Stern (2011) and the sanctity of Article III courts prohibiting private rights from being adjudicated by a legislative tribunal.
Other series articles:
- Patent Review in an Article I Tribunal Under the Public Rights Doctrine (Tues. 10/3)
- The Classical Public Rights Doctrine: Growth of the Administrative State (Thurs. 10/5)
- Private Rights and the Sanctity of an Independent Judiciary (Thurs. 10/12)
- Separation of Powers Constraints on Patent Invalidation (Tues. 10/17)
- PTAB Procedures for IPR Fail to Satisfy the Tests for Due Process (Thurs. 10/19)
- IPRs Unduly Harm Patent Holders and Benefit Big Tech Infringers (Tues. 10/24)
- AIA and PTAB Unconstitutional Under the Public Rights Doctrine (Thurs. 10/26)