Legislative Courts

Legislative Courts

Legislative courts, so-called because they are created by Congress in pursuance of its general legislative powers, have comprised a significant part of the federal judiciary.⁴⁹ The distinction between constitutional courts and legislative courts was first made in American Ins. Co. v. Canter,⁵⁰ which involved the question of the admiralty jurisdiction of the territorial court of Florida, the judges of which were limited to a four-year term in office. Said Chief Justice Marshall for the Court: “These courts, then, are not constitutional courts, in which the judicial power conferred by the Constitution on the general government, can be deposited. They are incapable of receiving it. They are legislative courts, created in virtue of the general right of sovereignty which exists in the government, or in virtue of that clause which enables Congress to make all needful rules and regulations, respecting the territory belonging to the United States. The jurisdiction with which they are invested, is not a part of that judicial power which is defined in the 3rd article of the Constitution, but is conferred by Congress, in the execution of those general powers which that body possesses over the territories of the United States.”⁵¹ The Court went on to hold that admiralty jurisdiction can be exercised in the States only in those courts which are established in pursuance of Article III, but that the same limitation does not apply to the territorial courts, for in legislating for them “Congress exercises the combined powers of the general, and of a state government.”⁵²

Canter postulated a simple proposition: “Constitutional courts exercise the judicial power described in Art. III of the Constitution; legislative courts do not and cannot.”⁵³ A two-fold difficulty attended this proposition, however. Admiralty jurisdiction is included within the “judicial power of the United States” specifically in Article III, requiring an explanation how this territorial court could receive and exercise it. Second, if territorial courts could not exercise Article III power, how might their decisions be subjected to appellate review in the Supreme Court, or indeed in other Article III courts, which could exercise only Article III judicial power?⁵⁴ Moreover, if in fact some “judicial power” may be devolved upon courts not having the constitutional security of tenure and salary, what prevents Congress from undermining those values intended to be protected by Article III’s guarantees by giving jurisdiction to non-protected entities that, being subjected to influence, would be bent to the popular will?

Attempts to explain or to rationalize the predicament or to provide a principled limiting point have from Canter to the present resulted in “frequently arcane distinctions and confusing precedents” spelled out in cases comprising “landmarks on a judicial ‘darkling plain’ where ignorant armies have clashed by night.”⁵⁵ Nonetheless, Article I courts are quite usual entities in our judicial system.⁵⁶

Power of Congress Over Legislative Courts.—In creating legislative courts, Congress is not limited by the restrictions imposed in Article III concerning tenure during good behavior and the prohibition against diminution of salaries. Congress may limit tenure to a term of years, as it has done in acts creating territorial courts and the Tax Court, and it may subject the judges of legislative courts to removal by the President,⁵⁷ or it may reduce their salaries during their terms.⁵⁸ Similarly, it follows that Congress can vest in legislative courts nonjudicial functions of a legislative or advisory nature and deprive their judgments of finality. Thus, in Gordon v. United States,⁵⁹ there was no objection to the power of the Secretary of the Treasury and Congress to revise or suspend the early judgments of the Court of Claims. Likewise, in United States v. Ferreira,⁶⁰ the Court sustained the act conferring powers on the Florida territorial court to examine claims rising under the Spanish treaty and to report its decisions and the evidence on which they were based to the Secretary of the Treasury for subsequent action. “A power of this description,” it was said, “may constitutionally be conferred on a Secretary as well as on a commissioner. But [it] is not judicial in either case, in the sense in which judicial power is granted by the Constitution to the courts of the United States.”⁶¹

Review of Legislative Courts by Supreme Court.—Chief Justice Taney’s view, that would have been expressed in Gordon,⁶² that the judgments of legislative courts could never be reviewed by the Supreme Court, was tacitly rejected in De Groot v. United States,⁶³ in which the Court took jurisdiction from a final judgment of the Court of Claims. Since the decision in this case, the authority of the Court to exercise appellate jurisdiction over legislative courts has turned not upon the nature or status of such courts but rather upon the nature of the proceeding before the lower court and the finality of its judgment. The Supreme Court will neither review the administrative proceedings of legislative courts nor entertain appeals from the advisory or interlocutory decrees of such a body.⁶⁴ But in proceedings before a legislative court which are judicial in nature, admit of a final judgment, and involve the performance of judicial functions and therefore the exercise of judicial power, the Court may be vested with appellate jurisdiction.⁶⁵

The “Public Rights” Distinction.—A major delineation of the distinction between Article I courts and Article III courts was attempted in Murray’s Lessee v. Hoboken Land & Improvement Co.⁶⁶ At issue was a summary procedure, without benefit of the courts, for the collection by the United States of moneys claimed to be due from one of its customs collectors. It was objected that the assessment and collection was a judicial act carried out by non-judicial officers and thus invalid under Article III. Accepting that the acts complained of were judicial, the Court nonetheless sustained the act by distinguishing between any act, “which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty,” which, in other words, is inherently judicial, and other acts which Congress may vest in courts or in other agencies. “[T]here are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which congress may or may not bring within the cognizance of the courts of the United States, as it may deem proper.”⁶⁷ The distinction was between those acts which historically had been determined by courts and those which historically had been resolved by executive or legislative acts and comprehended those matters that arose between the government and others. Thus, Article I courts “may be created as special tribunals to examine and determine various matters, arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it. The mode of determining matters of this class is completely within congressional control.”⁶⁸

Among the matters susceptible of judicial determination, but not requiring it, are claims against the United States,⁶⁹ the disposal of public lands and claims arising therefrom,⁷⁰ questions concerning membership in the Indian tribes,⁷¹ and questions arising out of the administration of the customs and internal revenue laws.⁷² Other courts similar to territorial courts, such as consular courts and military courts martial, may be justified on like grounds.⁷³

The “public rights” distinction appears today to be a description without a significant distinction. Thus, in Crowell v. Benson,⁷⁴ the Court approved an administrative scheme for determination, subject to judicial review, of maritime employee compensation claims, although it acknowledged that the case involved “one of private right, that is, of the liability of one individual to another under the law as defined.”⁷⁵ This scheme was permissible, the Court said, because in cases arising out of congressional statutes, an administrative tribunal could make findings of fact and render an initial decision on legal and constitutional questions, as long as there is adequate review in a constitutional court.⁷⁶ The “essential attributes” of decision must remain in an Article III court, but so long as it does, Congress may utilize administrative decision-makers in those private rights cases that arise in the context of a comprehensive federal statutory scheme.⁷⁷ That the “public rights” distinction marked a dividing line between those matters that could be assigned to legislative courts and to administrative agencies and those matters “of private right” that could not be was re-asserted in Marathon, but there was much the Court plurality did not explain.⁷⁸

The Court continued to waver with respect to the importance to decision-making of the public rights/private rights distinction. In two cases following Marathon, it rejected the distinction as “a bright line test,” and instead focused on “substance”—i.e., on the extent to which the particular grant of jurisdiction to an Article I court threatened judicial integrity and separation of powers principles.⁷⁹ Nonetheless, the Court indicated that the distinction may be an appropriate starting point for analysis. Thus, the fact that private rights traditionally at the core of Article III jurisdiction are at stake leads the Court to “searching” inquiry as to whether Congress is encroaching inordinately on judicial functions, while the concern is not so great where “public” rights are involved.⁸⁰

However, in a subsequent case, the distinction was pronounced determinative not only of the issue whether a matter could be referred to a non-Article III tribunal but whether Congress could dispense with civil jury trials.⁸¹ In so doing, however, the Court vitiated much of the core content of “private” rights as a concept and left resolution of the central issue to a balancing test. That is, “public” rights are, strictly speaking, those in which the cause of action inheres in or lies against the Federal Government in its sovereign capacity, the understanding since Murray’s Lessee. However, to accommodate Crowell v. Benson, Atlas Roofing, and similar cases, seemingly private causes of action between private parties will also be deemed “public” rights, when Congress, acting for a valid legislative purpose pursuant to its Article I powers, fashions a cause of action that is analogous to a common-law claim and so closely integrates it into a public regulatory scheme that it becomes a matter appropriate for agency resolution with limited involvement by the Article III judiciary.⁸² Nonetheless, despite its fixing by Congress as a “core proceeding” suitable for an Article I bankruptcy court adjudication, the Court held the particular cause of action at issue was a private issue as to which the parties were entitled to a civil jury trial (and necessarily which Congress could not commit to an Article I tribunal, save perhaps through the consent of the parties.⁸³

Constitutional Status of the Court of Claims and the Court of Customs and Patent Appeals.—Though the Supreme Court for a long while accepted the Court of Claims as an Article III court,⁸⁴ it later ruled that court to be an Article I court and its judges without constitutional protection of tenure and salary.⁸⁵ Then, in the 1950s, Congress statutorily declared that the Court of Claims, the Customs Court, and the Court of Customs and Patent Appeals were Article III courts,⁸⁶ a questionable act under the standards the Court had utilized to determine whether courts were legislative or constitutional.⁸⁷ But in Glidden Co. v. Zdanok,⁸⁸ five of seven participating Justices united to find that indeed the Court of Claims and the Court of Customs and Patent Appeals, at least, were constitutional courts and their judges eligible to participate in judicial business in other constitutional courts. Three Justices would have overruled Bakelite and Williams and would have held that the courts in question were constitutional courts.⁸⁹ Whether a court is an Article III tribunal depends largely upon whether legislation establishing it is in harmony with the limitations of that Article, specifically, “whether . . . its business is the federal business there specified and its judges and judgments are allowed the independence there expressly or impliedly made requisite.” When a court is created “to carry into effect [federal] powers . . . over subject matter . . . and not over localities,” a presumption arises that the status of such a tribunal is constitutional rather than legislative.⁹⁰ The other four Justices expressly declared that Bakelite and Williams should not be overruled,⁹¹ but two of them thought the two courts had attained constitutional status by virtue of the clear manifestation of congressional intent expressed in the legislation.⁹² Two Justices maintained that both courts remained legislative tribunals.⁹³ While the result is clear, no standard for pronouncing a court legislative rather than constitutional has obtained the adherence of a majority of the Court.⁹⁴

Status of Courts of the District of Columbia.—Through a long course of decisions, the courts of the District of Columbia were regarded as legislative courts upon which Congress could impose nonjudicial functions. In Butterworth v. United States ex rel. Hoe,⁹⁵ the Court sustained an act of Congress which conferred revisory powers upon the Supreme Court of the District in patent appeals and made its decisions binding only upon the Commissioner of Patents. Similarly, the Court later sustained the authority of Congress to vest revisory powers in the same court over rates fixed by a public utilities commission.⁹⁶ Not long after this the same rule was applied to the revisory powers of the District Supreme Court over orders of the Federal Radio Commission.⁹⁷ These rulings were based on the assumption, express or implied, that the courts of the District were legislative courts, created by Congress in pursuance of its plenary power to govern the District of Columbia. In dictum in Ex parte Bakelite Corp.,⁹⁸ while reviewing the history and analyzing the nature of the legislative courts, the Court stated that the courts of the District were legislative courts.

In 1933, nevertheless, the Court, abandoning all previous dicta on the subject, found the courts of the District of Columbia to be constitutional courts exercising judicial power of the United States,⁹⁹ with the result that it assumed the task of reconciling the performance of nonjudicial functions by such courts with the rule that constitutional courts can exercise only the judicial power of the United States. This task was accomplished by the argument that in establishing courts for the District, Congress is performing dual functions in pursuance of two distinct powers, the power to constitute tribunals inferior to the Supreme Court, and its plenary and exclusive power to legislate for the District of Columbia. However, Article III, § 1, limits this latter power with respect to tenure and compensation, but not with regard to vesting legislative and administrative powers in such courts. Subject to the guarantees of personal liberty in the Constitution, “Congress has as much power to vest courts of the District with a variety of jurisdiction and powers as a State legislature has in conferring jurisdiction on its courts.”¹⁰⁰

In 1970, Congress formally recognized two sets of courts in the District, federal courts, district courts and a Court of Appeals for the District of Columbia, created pursuant to Article III, and courts equivalent to state and territorial courts, created pursuant to Article I.¹⁰¹ Congress’ action was sustained in Palmore v. United States.¹⁰² When legislating for the District, the Court held, Congress has the power of a local legislature and may, pursuant to Article I, § 8, cl. 17, vest jurisdiction to hear matters of local law and local concerns in courts not having Article III characteristics. The defendant’s claim that he was denied his constitutional right to be tried before an Article III judge was denied on the basis that it was not absolutely necessary that every proceeding in which a charge, claim, or defense based on an act of Congress or a law made under its authority need be conducted in an Article III court. State courts, after all, could hear cases involving federal law as could territorial and military courts. “[T]he requirements of Article III, which are applicable where laws of national applicability and affairs of national concern are at stake, must in proper circumstances give way to accommodate plenary grants of power to Congress to legislate with respect to specialized areas having particularized needs and warranting distinctive treatment.”¹⁰³

Bankruptcy Courts.—After extended and lengthy debate, Congress in 1978 revised the bankruptcy act and created as an “adjunct” of the district courts a bankruptcy court composed of judges, vested with practically all the judicial power of the United States, serving for 14-year terms, subject to removal for cause by the judicial councils of the circuits, and with salaries subject to statutory change.¹⁰⁴ The bankruptcy courts were given jurisdiction over all civil proceedings arising under the bankruptcy code or arising in or related to bankruptcy cases, with review in Article III courts under a clearly erroneous standard. In a case in which a claim was made against a company for breaches of contract and warranty, purely state law claims, the Court held unconstitutional the conferral upon judges not having the Article III security of tenure and compensation of jurisdiction to hear state law claims of traditional common law actions of the kind existing at the time of the drafting of the Constitution.¹⁰⁵ While the holding was extremely narrow, a plurality of the Court sought to rationalize and limit the Court’s jurisprudence of Article I courts. According to the plurality, as a fundamental principle of separation of powers, the judicial power of the United States must be exercised by courts having the attributes prescribed in Article III. Congress may not evade the constitutional order by allocating this judicial power to courts whose judges lack security of tenure and compensation. Only in three narrowly circumscribed instances may judicial power be distributed outside the Article III framework: in territories and the District of Columbia, that is, geographical areas in which no State operated as sovereign and Congress exercised the general powers of government; courts martial, that is, the establishment of courts under a constitutional grant of power historically understood as giving the political branches extraordinary control over the precise subject matter; and the adjudication of “public rights,” that is, the litigation of certain matters that historically were reserved to the political branches of government and that were between the government and the individual.¹⁰⁶ In bankruptcy legislation and litigation not involving any of these exceptions, the plurality would have held, the judicial power to process bankruptcy cases could not be assigned to the tribunals created by the act.¹⁰⁷

The dissent argued that, while on its face Article III provided for exclusivity in assigning judicial power to Article III entities, the history since Canter belied that simplicity. Rather, the precedents clearly indicated that there is no difference in principle between the work that Congress may assign to an Article I court and that which must be given to an Article III court. Despite this, the dissent contended that Congress did not possess plenary discretion in choosing between the two systems; rather, in evaluating whether jurisdiction was properly reposed in an Article I court, the Supreme Court must balance the values of Article III against both the strength of the interest Congress sought to further by its Article I investiture and the extent to which Article III values were undermined by the congressional action. This balancing would afford the Court, the dissent believed, the power to prevent Congress, were it moved to do so, from transferring jurisdiction in order to emasculate the constitutional courts of the United States.¹⁰⁸

Again, no majority could be marshaled behind a principled discussion of the reasons for and the limitation upon the creation of legislative courts, not that a majority opinion, or even a unanimous one, would necessarily presage the settling of the law.¹⁰⁹ But the breadth of the various opinions not only left unclear the degree of discretion left in Congress to restructure the bankruptcy courts, but also placed in issue the constitutionality of other legislative efforts to establish adjudicative systems outside a scheme involving the creation of life-tenured judges.¹¹⁰

Congress responded to Marathon by enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984.¹¹¹ Bankruptcy courts were maintained as Article I entities, and overall their powers as courts were not notably diminished. However, Congress did establish a division between “core proceedings,” which bankruptcy courts could hear and determine, subject to lenient review, and other proceedings, which, though initially heard and decided by bankruptcy courts, could be reviewed de novo in the district court at the behest of any party, unless the parties consented to bankruptcy-court jurisdiction in the same manner as core proceedings. A safety valve was included, permitting the district court to withdraw any proceeding from the bankruptcy court on cause shown.¹¹² Notice that in Granfinanciera, S.A. v. Nordberg,¹¹³ the Court found that a cause of action founded on state law, though denominated a core proceeding, was a private right.

Agency Adjudication.—The Court in two decisions following Marathon involving legislative courts clearly suggested that the majority was now closer to the balancing approach of the Marathon dissenters than to the position of the Marathon plurality that Congress may confer judicial power on legislative courts in only very limited circumstances. Subsequently, however, Granfinanciera, S.A. v. Nordberg,¹¹⁴ a reversion to the fundamentality of Marathon, with an opinion by the same author, Justice Brennan, cast some doubt on this proposition. In Thomas v. Union Carbide Agric. Products Co.,¹¹⁵ the Court upheld a provision of the pesticide law requiring binding arbitration, with limited judicial review , of compensation due one registrant by another for mandatory sharing of registration information, the right arising from federal statutory law. And in CFTC v. Schor,¹¹⁶ the Court upheld conferral on the agency of authority, in a reparations adjudication under the Act, also to 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.¹¹⁷ The right to compensation was not a purely private right, but “bears many of the characteristics of a ‘public’ right,” since Congress was “authoriz[ing] an agency administering a complex regulatory scheme to allocate costs and benefits among voluntary participants in the program.”¹¹⁸ Also important was not “unduly constrict[ing] Congress in its ability to take needed and innovative action pursuant to its Article I powers;”¹¹⁹ arbitration was “a pragmatic solution to [a] difficult problem.” 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.”’¹²⁰ 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.”¹²¹

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,¹²² 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.”

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 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,” the Court seemingly goes beyond this point. Though a statutory interest, the actions were identical to state-law contract claims brought by a bankrupt corporation to augment the estate.¹²³ 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.¹²⁴

Thus, while the Court has made some progress in reconciling its growing line of disparate cases, doctrinal harmony has not yet been achieved.

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Last modified: June 9, 2014