Monday, December 31, 2012

Jurisdiction-Stripping in Bizzaro World

By Mike Dorf

Well, it's that time of year again: Time for me to post another of my exams.  This one is from my Federal Courts class.  It was administered a few weeks ago as an open book, one-question, 8-hour, self-scheduled, take-home.  It was topical when administered but already has been somewhat overtaken by events.  E.g., Japan has a new Prime Minister. I suspect that readers of this blog will enjoy the exam a bit more than my Fed Courts students did.


Absent new federal legislation, in early 2013, three sets of events—collectively sometimes known as the “fiscal cliff”—will occur.  First, federal taxes will increase for most U.S. taxpayers due to the expiration of the payroll tax holiday and of tax cuts enacted in 2001 and 2003—and extended in 2010.  Republicans in Congress have expressed the desire to extend tax rate cuts for all taxpayers, while Democrats in Congress and President Obama have stated that they would like to extend tax cuts for all but the highest earners.  Second, due to the inclusion of a “sequestration” procedure adopted in the summer of 2011 in order to avert a government shutdown, billions of dollars in mandatory spending cuts will automatically occur.  Third, the government will reach the limit of its borrowing authority under a federal statute commonly called the “debt ceiling.”  The President and Congressional leaders have been seeking a cliff-avoiding deal, but as this exam goes to press, they have not reached one.

      (Everything in the prior paragraph is true.  Now we come to the made-up facts.)

On December 24, 2012, Congress passes and the President signs the Securing America’s Fiscal Existence (SAFE) Act.  Article I of the SAFE Act establishes a Board of Regulatory Experts (BORE) consisting of seven members, each to serve for a three-year term.  The Act itself designates the initial members: the Speaker and Minority Leader of the House; the Majority Leader and Minority Leader of the Senate; the Premier of China; the Prime Minister of Japan; and the Prime Minister of the United Kingdom.  (Those three countries rank first, second and third, respectively, among holders of U.S. debt.)  After the expiration of the initial terms, new members of the BORE are to be nominated by the President and confirmed by the Senate.

      Article II of the SAFE Act consists of the following provisions:
      Section 1: The BORE is hereby delegated the authority to promulgate rules governing federal taxes, federal spending and federal borrowing.  Such rules shall have the force and effect of law.  All laws in conflict with such rules shall be of no further force or effect after such rules have taken effect.
      Section 2: A simple majority of the BORE shall be necessary and sufficient for all legal acts performed by the BORE.
      Section 3: Except as otherwise provided in this Act, neither the Administrative Procedure Act, 5 U.S.C. § 551 et seq., nor any other provision of law except the U.S. Constitution, insofar as it applies, shall be read to limit the procedures that the BORE may use in exercising its authority.
Section 4: Except as expressly provided by this Act, no court shall have jurisdiction to hear any case directly or indirectly challenging the validity of any rule or regulation promulgated by the BORE, or any part or application thereof, either as an original action or by way of appeal.
      Section 5: To the extent that the Constitution requires that a forum be made available to hear a challenge to the validity of a regulation promulgated by the BORE, or any part or application thereof, the BORE itself, sitting as a quasi-judicial body, shall have jurisdiction to hear such a challenge. In conducting hearings under this Section, the BORE shall be guided by the Federal Rules of Evidence and the Federal Rules of Civil Procedure, to the extent practicable.
      Section 6:  All factual findings of the BORE in a Section 5 proceeding shall be final and unreviewable.  A party that brings an unsuccessful challenge under Section 5 of this Act may obtain judicial review of a ruling on a question of law by filing a petition for a writ of error in the Supreme Court of Hawai’i.  Notwithstanding any contrary provision of Hawai’i law, the Supreme Court of Hawai’i shall have jurisdiction to hear such a case on writ of error.  Should the Supreme Court of Hawai’i hold invalid any rule or regulation promulgated by the BORE, or any part or application thereof, the United States shall have a right to review by writ of error in the Supreme Court of the United States.
      Section 7:  In any judicial proceeding authorized by Section 6 of this Act for the consideration of the validity of any aspect of the BORE or any of its actions, all legal determinations of the BORE shall be accepted as conclusive, unless they are patently unreasonable.
      Section 8:  If any part or application of the BORE or any of its actions is found unconstitutional (including the participation on the BORE of any person) it shall be severed, and the rest of the part or application of the BORE (including the balance of members in the event of a finding with respect to participation) shall operate as a fully effective provision or body.

The BORE convenes on December 26, 2012 and quickly gets to work.  On December 28, 2012, it promulgates a rule that does the following: (a) raises the debt ceiling by $3 trillion; (b) repeals the portion of the sequestration law that requires cuts to the non-military budget while reaffirming the military spending cuts; and (c) extends the payroll tax holiday and the tax cuts for individuals earning less than $200,000/year and for couples earning less than $250,000/year, for three years.  The rule states that it becomes effective on January 1, 2013.  The vote in favor of the rule is 4-3, with House Minority Leader Pelosi, Senate Majority Leader Reid, Chinese Premier Li, and Japanese Prime Minister Noda voting yes.  The three other members of the BORE vote no.

It is now January 2013.  You are an associate in the Ithaca, NY law firm of Myron, Taylor & Hall.  Ithaca resident Rochelle Rich has come to your boss, Leslie Myron, seeking advice.  Rich is a celebrity chef who earned $7 million in 2012. Assuming the same income for 2013, under the new rule promulgated by the BORE, her 2013 taxes will be hundreds of thousands of dollars more than what she expects to pay for 2012.  Rich would like to obtain an authoritative ruling by the Supreme Court of the United States invalidating the BORE’s rule on the ground that the BORE cannot constitutionally exercise the power Congress delegated to it under the SAFE Act.  Write a memorandum to Ms. Myron identifying the legal obstacles to obtaining such a ruling and evaluating the prospects for overcoming those obstacles.


Ian said...

Take home, open book law school exam? Wow. I'm guessing you don't have a mandatory curve for your students?

Michael C. Dorf said...

Ian: We do have a mandatory curve. In my experience (over 20 years of giving law school exams), a well-designed exam will produce a good spread, regardless of format. I give open-book take-home exams because it more closely approximates the challenges that lawyers really face than do closed-book time-pressured exams.

Ian said...

Guess that makes sense. Greatly enjoyed your Constitutional Law Stories. Best.

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