Wednesday, May 27, 2015

Formalism and Functionalism in the Fifth Case in the Article III "Trilogy"

By Michael Dorf

Article III grants federal judges life tenure and salary protection. Nonetheless, Congress may assign some business that could be assigned to an Article III court to adjudication by personnel who lack life tenure and salary protection. For example, under the so-called Madisonian Compromise, Congress need not have created any lower federal courts in the first place, and Congress has never granted the lower federal courts the full jurisdiction allowable by Article III. For example, Title 28 generally requires "complete diversity" and a minimum of $75,000 in controversy for diversity jurisdiction, even though Article III would permit jurisdiction based on minimal diversity with no minimum amount in controversy. Likewise, under Title 28 as construed by the SCOTUS, federal district courts only have federal question jurisdiction in cases in which the federal question appears on the face of the plaintiff's well-pleaded complaint, even though Article III would allow federal question jurisdiction in cases in which the federal issue arises by way of defense or counterclaim. All of these cases that could be adjudicated by Article III judges are instead relegated to state courts in which judges lacking life tenure and salary protection preside. In addition, Congress has authorized administrative adjudication over large numbers of cases that could have been assigned to Article III judges. It has also authorized trial by military commission and territorial courts in numerous cases that could have been given to Article III courts.

Despite all of these Article-III-court-adjudicable cases that are adjudicated by non-Article III personnel, the SCOTUS has said that there is a limit. Some Article-III-court-adjudicable cases cannot be assigned to non-Article III federal adjudicators. The limits are set forth in a series of cases that begins with the 1982 ruling in Northern Pipeline v. Marathon Pipe Line. In that case, the Court invalidated the assignment to non-Article III bankruptcy judges of certain traditional common law cases. Justice Brennan's plurality opinion was formalist in the sense of rule-like. He said that unless a case fell within one of three traditional exceptions for military courts, territorial courts, or public rights cases, Congress had to assign adjudication to an Article III judge. The next two cases in what for some time was regarded as a trilogy--Thomas v. Union Carbide and CFTC v. Schor--upheld non-Article III adjudication under a multi-factor balancing test, leading most commentators to conclude that functionalism had replaced formalism in this area. But then, in 2011, the SCOTUS decided a fourth case in the "trilogy." In Stern v. Marshall, the Court invalidated a provision of the revised bankruptcy code, invoking the formalism of Northern Pipeline. Somewhat surprisingly, the Court split on conservative/liberal lines--surprisingly because the liberal Justice Brennan had been the author of the original formalist opinion in this line.

Yesterday came the fifth case in the "trilogy." (Yes, that's a tribute to the late great Douglas Adams.) In Wellness Int'l Network v. Sharif, Justice Sotomayor, writing for the Court, explained that bankruptcy judges could adjudicate cases that could not otherwise be assigned outside of the Art III judiciary (if assigned to federal adjudication at all), so long as the parties consent to such adjudication. Wellness Int'l could be said to mark the return of functionalism. Justice Sotomayor writes:
The question here, then, is whether allowing bankruptcy courts to decide Stern claims by consent would “impermissibly threate[n] the institutional integrity of the Judicial Branch.”  And that question must be decided not by “formalistic and unbending rules,” but “with an eye to the practical effect that the” practice “will have on the constitutionally assigned role of the federal judiciary.” 
And indeed, CJ Roberts, in a dissent joined by Justices Scalia and Thomas, sees the majority opinion as once again displacing formalism. "I would not yield so fully to functionalism. The Framers adopted the formal protections of Article III for good reasons," the Chief Justice warns.

But is the majority opinion really functionalist? It might instead be understood as simply expressing a formal rule that consent vindicates non-Article III adjudication. After all, as Justice Alito notes in a partial concurrence, arbitrators are not Article III judges; yet everyone accepts that parties may consent to binding arbitration of cases that otherwise fall within the jurisdiction of the Article III courts. And in fact, Justice Sotomayor's Wellness Int'l opinion purports to reconcile the holding with Stern in just this way, arguing that the right to an Article III forum, while having structural implications, is ultimately a personal right subject to waiver, just like most other personal rights.

Why, then, do the majority and dissenting Justices all treat the case as reviving functionalism and rejecting formalism? The answer, I think, is that consent as an on/off switch has no logical stopping point.

Consider a hypothetical example. Suppose that Congress phased out the lower federal courts entirely and created a new cadre of non-Article III (i.e., non-tenured, non-salary-protected) adjudicators. Most of the jurisdiction formerly vested in Article III courts is now transferred to the non-Article III courts, but only with the consent of the parties. As a practical matter, this is accomplished by making all of the federal non-Article III courts' jurisdiction concurrent with state court jurisdiction (as it mostly is already for Article III courts) and by giving any defendant a right to remove to state court. Now the non-Article III federal courts would completely replace the Article III lower federal courts but their jurisdiction would be only by consent. Would that be permissible?

I think that any fair attempt to apply the past precedents would have to result in a negative answer. But the only way to get to that negative answer is by recognizing that consent is a factor, but only one factor, in a balancing test that the majority is applying in Wellness Int'l. If consent were really on/off determinative, as it would have to be to reconcile the holding with the formalism of Stern, then my hypothetical law would be valid. To be able to say that the hypothetical law is unconstitutional notwithstanding the role consent plays in validating less extreme laws, one needs the balancing test. Thus, in the end, the majority and the dissent are right to see Wellness Int'l as an important turning point that restores the balancing test of Thomas and Schor. At least until the next sequel.


greg651 said...

Justice O'Connor makes your exact point in Schor: "This is not to say, of course, that if Congress created a phalanx of non-Article III tribunals equipped to handle the entire business of the Article III courts without any Article III supervision or control and without evidence of valid and specific legislative necessities, the fact that the parties had the election to proceed in their forum of choice would necessarily save the scheme from constitutional attack."
But where the relevant line is is anyone's guess.

Marty Lederman said...

In fairness, Justice Sotomayor makes it, too: Her holding is that "allowing Article I adjudicators to decide claims submitted to them by consent does not offend the separation of powers so long as Article III courts retain supervisory authority over the process; and she also suggests that the case might be different where "the magnitude of any intrusion on the Judicial Branch" would be more than "de minimis” or where Congress was endeavoring "to aggrandize itself or humble the Judiciary."

So it's a quasi-formalist "rule" with functionalist justifications and qualifications: consent plus Article III supervisory authority is presumptively constitutional, and perhaps the presumption could be overcome in a case where the intrusion on the Judicial Brnch is too extensive or where Congress endeavors "to aggrandize itself or humble the Judiciary."

Michael C. Dorf said...

Greg: Right. I didn't mean to claim originality. I was trying to flesh out Justice O'Connor's statement with a more concrete example, and it was her statement that led me to conclude that fairly read, the cases wouldn't allow this.

Greg's point about the uncertainty of where the line is, combined with the multi-factor inputs leads me to think that Thomas, Schor, and now Wellness are really standards rather than rules. Or perhaps another way to put that is that Marty is right that the test is rule-like so long as Congress leaves the Art III courts with a lot of business, but if Congress were to take away a lot of business from the Art III courts and transfer it to non-Art III federal adjudication, at some point that would be unconstitutional. Where that "some point" would be is governed by a standard rather than a rule.

Marty Lederman said...

By the way, far as I can tell, this is the first time the Court has ever suggested that the Constitution might impose an interbranch "anti-humbling" principle! (Any ideas where Sotomayor got it from?) Given the everyday realities of partisan maneuvering in DC these days, that might have the makings of a SOP doctrine with real teeth! (Just kidding. I think.)

Reuel Schiller said...

May I ask a different question about a puzzling issue in Schor? Brennan's dissent in Schor is formalist in that it relies on the public rights/private rights distinction. Yet his reasoning is quite instrumental. Without enforcing this distinction, he argues, the vague standards articulated by O'Connor will result in a genuine loss of liberty because of the "evisceration" of Article III courts' independence.

This has always struck me as an odd argument. Does the public rights/private rights distinction really do much heavy lifting in the liberty department? Brennan's formalism gets you a jury and an Article III judge when you least need it -- in a common law lawsuit between two private parties. In most (every?) instance when you might really be worried about your liberty (i.e. you're interacting with the government) wouldn't the case be a public rights-type action in which, according to Brennan, you'd have no right to an Article III tribunal? Add to this the implication in Schor that the government can convert a private right of action into a public right simply by legislating in the area (fraud under the Securities Act of 1933 rather than common law fraud, for example)and you're not getting very much civil libertarian bang for your buck with Brennan's formalist approach. Indeed, one might think that O'Connor's functional test would be more protective of liberty.

This is not my area of expertise (at all), so perhaps I am misunderstanding the case. I look forward to being enlightened.

Michael C. Dorf said...

Reuel: The Hart & Wechsler casebook makes just this point--that the public rights/private rights dichotomy is backwards. My sense is that Brennan thought, ceteris paribus, access to an Art III court would serve justice. His efforts in Northern Pipeline and thereafter to cabin prior cases were an effort in damage control. He was stuck with military courts, territorial courts, and public rights cases, so he drew the line there, but if writing on a clean slate, he might well have found a broader right of access to Art III courts.

greg651 said...

For this reason, I think that Scalia's concurrence in Granfinanciera is the only opinion in the whole doctrinal area that really explains the public/private distinction. Admitedly, though, it does not focus on liberty as the basis.

Marty Lederman said...

Heavily relying on the work of his former clerk Caleb Nelson, Justice Thomas yesterday tried to justify the public/private rights dichotomy by re-reading public rights quite narrowly, to encompass only those rights "belonging to the people at large." He concedes that if this is correct, the Court went wrong beginning with Murray's Lessee; but in his view, of course, 160 years of precedent is hardly a serious hurdle.

Anonymous said...

I'm with Marty on this "humble point". Even if it was merely rhetorical it was still bad rhetoric. After all, it is Congress who has aggrandized the courts to their current role, beyond anything envisioned at the time of the framing. It's easy to forgot SCOTUS' control of its own docket via the certiorari process is a historical novelty.

So in my view repealing the Evarts Act, for example, would not be a case of Congress humbling the courts but merely the restoration of the status quo.

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