Section 14 of the Commodity Exchange Act (CEA) provides that any
person injured by a commodity broker's violation of the Act or
regulations of the Commodity Futures Trading Commission (CFTC) may
apply to the CFTC for an order directing the offender to pay
reparations to the complainant, and may enforce that order in
federal district court. The CFTC promulgated a regulation that
allows it in a reparations proceeding to adjudicate counterclaims
"aris[ing] out of the transaction or occurrence or series of
transactions or occurrences set forth in the complaint."
Respondents filed separate reparations complaints (later
consolidated) with the CFTC against petitioner commodity futures
broker (petitioner) and one of its employees, alleging that a debit
balance in their accounts with petitioner, resulting from
respondents' futures trading losses and expenses being in excess of
the funds deposited in the accounts, was the result of petitioner's
violations of the CEA. In the meantime, petitioner filed a
diversity action in Federal District Court to recover the debit
balance, but, after respondents moved to dismiss on the ground that
the reparations proceeding would resolve all rights of the parties,
petitioner voluntarily dismissed the action and presented its debit
balance claims as counterclaims in the CFTC reparations proceeding.
The Administrative Law Judge (ALJ) in that proceeding ruled in
petitioner's favor on both respondents' claims and petitioner's
counterclaims. Respondents then for the first time challenged the
CFTC's statutory authority to adjudicate the counterclaims. The ALJ
rejected the challenge, and the CFTC declined to review the
decision, allowing it to become final. Respondents filed a petition
for review with the Court of Appeals, which upheld the CFTC's
decision on respondents' claims in most respects, but ordered
dismissal of petitioner's counterclaims on the ground that the CFTC
lacked authority to adjudicate common law counterclaims. The court
held that, in light of the constitutional problems posed by the
CFTC's adjudication of such counterclaims, the CEA should be
construed
Page 478 U. S. 834
to authorize the CFTC to adjudicate only counterclaims arising
from violations of the CEA or CFTC regulations.
Held:
1. The CEA empowers the CFTC to entertain state law
counterclaims in reparations proceedings.
478 U.
S. 841-847.
(a) While the Court of Appeals' reading of the CEA permitted it
to avoid a potential Article III problem, it did so only by doing
violence to the statute, for its distinction between common law
counterclaims and counterclaims based on violations of the statute
cannot be drawn from the statute's language or history, nor
reconciled with the congressional purpose in creating reparations
proceedings to promote efficient dispute resolution. Pp.
478 U. S.
841-842.
(b) Section 8(a)(5) of the CEA, which empowers the CFTC to
promulgate such regulations as are reasonably necessary "to
effectuate any of the provisions or to accomplish any of the
purposes of [the CEA]," clearly authorizes a regulation providing
for adjudication of common law counterclaims. To require a
bifurcated examination of a single dispute would destroy the
efficacy of the reparations remedy. Pp.
478 U. S.
842-844.
(c) The CFTC's longstanding interpretation of the statute as
empowering it to take jurisdiction over counterclaims such as
petitioner's is reasonable, is well within the scope of its
delegated authority, and accordingly is entitled to considerable
weight, especially where Congress has twice amended the CEA since
the CFTC issued its counterclaim regulation without overruling it,
and indeed has explicitly affirmed the CFTC's authority to dictate
the scope of its counterclaim jurisdiction. Pp.
478 U. S.
844-847.
2. The CFTC's assumption of jurisdiction over common law
counterclaims does not violate Article III of the Constitution. Pp.
478 U. S.
847-858.
(a) As a personal right, Article III's guarantee of an impartial
and independent adjudication by the federal judiciary is subject to
waiver. Here, respondents indisputably waived any right they may
have had to the full trial of petitioner's counterclaims before an
Article III court by expressly demanding that petitioner proceed
with its counterclaims in the reparations proceedings, rather than
before the District Court. Even if there were no express waiver,
respondents' election to forgo their right to proceed in state or
federal court and to seek relief in the CFTC constituted an
effective waiver. Pp.
478 U. S.
847-850.
(b) Nor does the CFTC's common law counterclaim jurisdiction
contravene the nonwaivable protections Article III affords
separation of powers principles. Examination of the congressional
scheme in light of a number of factors, including the extent to
which the "essential attributes of judicial power" are reserved to
Article III courts, and conversely, the extent to which the
non-Article III forum exercises the
Page 478 U. S. 835
range of jurisdiction and powers normally vested only in Article
III courts, the origins and importance of the right to be
adjudicated, and the concerns that drove Congress to depart from
the requirements of Article III, yields the conclusion that the
limited jurisdiction the CFTC asserts over state law claims as a
necessary incident to the adjudication of federal claims willingly
submitted by the parties for initial agency adjudication does not
impermissibly threaten the institutional integrity of the Judicial
Branch. Pp.
478 U. S.
850-856.
(c) Even assuming that principles of federalism are relevant to
Article III analysis, those principles do not require invalidation
of the CFTC's counterclaim jurisdiction. The fact that petitioner's
counterclaims are resolved by a federal, rather than a state,
tribunal is not objectionable, because federal courts can, without
constitutional hazard, decide such counterclaims under their
ancillary jurisdiction. Moreover, respondents have identified no
historical support for the argument that Article III embodies a
compact among the Framers that all state law claims heard in a
federal forum be adjudicated by judges possessing the tenure and
salary protections of Article III. Pp.
478 U. S.
856-858.
248 U.S.App.D.C. 155, 770 F.2d 211, reversed and remanded.
O'CONNOR, J., delivered the opinion of the Court, in which
BURGER, C.J., and WHITE, BLACKMUN, POWELL, REHNQUIST, and STEVENS,
JJ., joined. BRENNAN, J., filed a dissenting opinion, in which
MARSHALL, JJ., joined,
post, p.
478 U. S.
859.
JUSTICE O'CONNOR delivered the opinion of the Court.
The question presented is whether the Commodity Exchange Act
(CEA or Act), 7 U.S.C. § 1
et seq., empowers the Commodity
Futures Trading Commission (CFTC or Commission) to entertain state
law counterclaims in reparation
Page 478 U. S. 836
proceedings and, if so, whether that grant of authority violates
Article III of the Constitution.
I
The CEA broadly prohibits fraudulent and manipulative conduct in
connection with commodity futures transactions. In 1974, Congress
"overhaul[ed]" the Act in order to institute a more "comprehensive
regulatory structure to oversee the volatile and esoteric futures
trading complex." H.R.Rep. No. 93-975, p. 1 (1974).
See
Pub.L. 93-463, 88 Stat. 1389. Congress also determined that the
broad regulatory powers of the CEA were most appropriately vested
in an agency which would be relatively immune from the "political
winds that sweep Washington." H.R.Rep. No. 93-975, at 44, 70. It
therefore created an independent agency, the CFTC, and entrusted to
it sweeping authority to implement the CEA.
Among the duties assigned to the CFTC was the administration of
a reparations procedure through which disgruntled customers of
professional commodity brokers could seek redress for the brokers'
violations of the Act or CFTC regulations. Thus, § 14 of the CEA, 7
U.S.C. § 18 (1976 ed.), [
Footnote
1] provides that any person injured by such violations may
apply to the Commission for an order directing the offender to pay
reparations to the complainant and may enforce that order in
federal district court. Congress intended this administrative
procedure to be an "inexpensive and expeditious" alternative to
existing fora available to aggrieved customers, namely, the courts
and arbitration. S.Rep. No. 95-850, p. 11 (1978).
See also
41 Fed.Reg. 3994 (1976)
Page 478 U. S. 837
(accompanying CFTC regulations promulgated pursuant to §
14).
In conformance with the congressional goal of promoting
efficient dispute resolution, the CFTC promulgated a regulation in
1976 which allows it to adjudicate counterclaims "aris[ing] out of
the transaction or occurrence or series of transactions or
occurrences set forth in the complaint."
Id. at 3995, 4002
(codified at 17 CFR § 12.23(b)(2) (1983)). This permissive
counterclaim rule leaves the respondent in a reparations proceeding
free to seek relief against the reparations complainant in other
fora.
The instant dispute arose in February, 1980, when respondents
Schor and Mortgage Services of America, Inc., invoked the CFTC's
reparations jurisdiction by filing complaints against petitioner
ContiCommodity Services, Inc. (Conti), a commodity futures broker,
and Richard L. Sandor, a Conti employee. [
Footnote 2] Schor had an account with Conti which
contained a debit balance because Schor's net futures trading
losses and expenses, such as commissions, exceeded the funds
deposited in the account. Schor alleged that this debit balance was
the result of Conti's numerous violations of the CEA.
See
App. to Pet. for Cert. in No. 85-621, p. 53a.
Before receiving notice that Schor had commenced the reparations
proceeding, Conti had filed a diversity action in Federal District
Court to recover the debit balance.
ContiCommodity Services,
Inc. v. Mortgage Services of America, Inc., No. 80-C-1089 (ND
Ill., filed Mar. 4, 1980). Schor
Page 478 U. S. 838
counterclaimed in this action, reiterating his charges that the
debit balance was due to Conti's violations of the CEA. Schor also
moved on two separate occasions to dismiss or stay the District
Court action, arguing that the continuation of the federal action
would be a waste of judicial resources and an undue burden on the
litigants in view of the fact that
"[t]he reparations proceedings . . . will fully . . . resolve
and adjudicate all the rights of the parties to this action with
respect to the transactions which are the subject matter of this
action."
App. 13.
See also id. at 19.
Although the District Court declined to stay or dismiss the
suit,
see id. at 15, 16, Conti voluntarily dismissed the
federal court action and presented its debit balance claim by way
of a counterclaim in the CFTC reparations proceeding.
See
id. at 29-32. Conti denied violating the CEA, and instead
insisted that the debit balance resulted from Schor's trading, and
was therefore a simple debt owed by Schor.
Schor v. Commodity
Futures Trading Comm'n, 239 U.S.App.D.C. 159, 162, 740 F.2d
1262, 1265 (1984); App. to Pet. for Cert. in No. 85-621, p.
53a.
After discovery, briefing, and a hearing, the Administrative Law
Judge (ALJ) in Schor's reparations proceeding ruled in Conti's
favor on both Schor's claims and Conti's counterclaims. After this
ruling, Schor for the first time challenged the CFTC's statutory
authority to adjudicate Conti's counterclaim.
See id. at
62a. The ALJ rejected Schor's challenge, stating himself "bound by
agency regulations and published agency policies."
Id. at
62a-63a. The Commission declined to review the decision, and
allowed it to become final,
id. at 50a-52a, at which point
Schor filed a petition for review with the Court of Appeals for the
District of Columbia Circuit. Prior to oral argument, the Court of
Appeals,
sua sponte, raised the question whether CFTC
could constitutionally adjudicate Conti's counterclaims in light of
Northern Pipeline Construction Co. v. Marathon Pipe Line
Co., 458 U. S. 50
(1982), in which this Court held that
"Congress may
Page 478 U. S. 839
not vest in a non-Article III court the power to adjudicate,
render final judgment, and issue binding orders in a traditional
contract action arising under state law, without consent of the
litigants, and subject only to ordinary appellate review."
Thomas v. Union Carbide Agricultural Products Co.,
473 U. S. 568,
473 U. S. 584
(1985).
After briefing and argument, the Court of Appeals upheld the
CFTC's decision on Schor's claim in most respects, but ordered the
dismissal of Conti's counterclaims on the ground that "the CFTC
lacks authority (subject matter competence) to adjudicate" common
law counterclaims. 239 U.S.App.D.C. at 161, 740 F.2d at 1264. In
support of this latter ruling, the Court of Appeals reasoned that
the CFTC's exercise of jurisdiction over Conti's common law
counterclaim gave rise to "[s]erious constitutional problems" under
Northern Pipeline. 239 U.S.App.D.C. at 174, 740 F.2d at
1277. The Court of Appeals therefore concluded that, under
well-established principles of statutory construction, the relevant
inquiry was whether the CEA was "
fairly susceptible' of [an
alternative] construction," such that Article III objections, and
thus unnecessary constitutional adjudication, could be avoided.
Ibid. (quoting Ralpho v. Bell, 186 U.S.App.D.C.
368, 380, 569 F.2d 607, 619 (1977)).
After examining the CEA and its legislative history, the court
concluded that Congress had no "clearly expressed" or "explicit"
intention to give the CFTC constitutionally questionable
jurisdiction over state common law counterclaims.
See 239
U.S.App.D.C. at 166, 178, 740 F.2d at 1269, 1281. The Court of
Appeals therefore "adopt[ed] the construction of the Act that
avoids significant constitutional questions," reading the CEA to
authorize the CFTC to adjudicate only those counterclaims alleging
violations of the Act or CFTC regulations.
Id. at 175, 740
F.2d at 1278. Because Conti's counterclaims did not allege such
violations, the Court of Appeals held that the CFTC exceeded its
authority in adjudicating those claims, and ordered that the
Page 478 U. S. 840
ALJ's decision on the claims be reversed and the claims
dismissed for lack of jurisdiction.
Id. at 161, 740 F.2d
at 1264.
The Court of Appeals denied rehearing en banc by a divided vote.
In a dissenting statement, Judge Wald, joined by Judge Starr, urged
that rehearing be granted because the panel's holding would
"resul[t] in a serious evisceration of a congressionally crafted
scheme for compensating victims of Commodity Futures Trading Act .
. . violations"
and would, in practical, effect "decimat[e]" the efficacy of
this "faster and less expensive alternative forum." App. to Pet.
for Cert. in No. 85-621, p. 71a. This Court granted the CFTC's
petition for certiorari, vacated the Court of Appeals' judgment,
and remanded the case for further consideration in light of
Thomas, supra, at
473 U. S. 582-593. 473 U.S.
473 U. S. 568
(1985). We had there ruled that the arbitration scheme established
under the Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA), 7 U.S.C. § 136
et seq., does not contravene
Article III, and, more generally, held that
"Congress, acting for a valid legislative purpose pursuant to
its constitutional powers under Article I, 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."
473 U.S. at
473 U. S.
593.
On remand, the Court of Appeals reinstated its prior judgment.
It reaffirmed its earlier view that
Northern Pipeline drew
into serious question the Commission's authority to decide
debit-balance counterclaims in reparations proceedings; concluded
that nothing in
Thomas altered that view; and again held
that, in light of the constitutional problems posed by the CFTC's
adjudication of common law counterclaims, the CEA should be
construed to authorize the CFTC to adjudicate only counterclaims
arising from violations of the Act or CFTC regulations.
See 248 U.S.App.D.C. 155, 157-158, 770 F.2d 211, 213-214
(1985).
Page 478 U. S. 841
We again granted certiorari, 474 U.S. 1018 (1985), and now
reverse.
II
The Court of Appeals was correct in its understanding that
"[f]ederal statutes are to be so construed as to avoid serious
doubt of their constitutionality."
Machinists v. Street,
367 U. S. 740,
367 U. S. 749
(1961).
See also NLRB v. Catholic Bishop of Chicago,
440 U. S. 490,
440 U. S.
500-501 (1979). Where such "serious doubts" arise, a
court should determine whether a construction of the statute is
"fairly possible" by which the constitutional question can be
avoided.
Crowell v. Benson, 285 U. S.
22 (1932).
See also Machinists v. Street,
supra, at
367 U. S. 750.
It is equally true, however, that this canon of construction does
not give a court the prerogative to ignore the legislative will in
order to avoid constitutional adjudication;
"'[a]lthough this Court will often strain to construe
legislation so as to save it against constitutional attack, it must
not and will not carry this to the point of perverting the purpose
of a statute . . .' or judicially rewriting it."
Aptheker v. Secretary of State, 378 U.
S. 500,
378 U. S. 515
(1964) (quoting
Scales v. United States, 367 U.
S. 203,
367 U. S. 211
(1961)).
See also Heckler v. Mathews, 465 U.
S. 728,
465 U. S.
742-743 (1984).
Assuming that the Court of Appeals correctly discerned a
"serious" constitutional problem in the CFTC's adjudication of
Conti's counterclaim, we nevertheless believe that the court was
mistaken in finding that the CEA could fairly be read to preclude
the CFTC's exercise of jurisdiction over that counterclaim. Our
examination of the CEA and its legislative history and purpose
reveals that Congress plainly intended the CFTC to decide
counterclaims asserted by respondents in reparations proceedings,
and just as plainly delegated to the CFTC the authority to fashion
its counterclaim jurisdiction in the manner the CFTC determined
necessary to further the purposes of the reparations program.
Congress' assumption that the CFTC would have the authority to
adjudicate counterclaims is evident on the face of
Page 478 U. S. 842
the statute.
See, e.g., 7 U.S.C. § 18(c) (providing
that, before action will be taken on complaints filed by
nonresident complainants, a bond must be filed which must cover
inter alia, "any reparation award that may be issued by
the Commission against the complainant
on any counterclaim
by respondent") (emphasis added); § 18(d) ("
any person for
whose benefit [a reparation award] was made" may enforce the
judgment in district court) (emphasis added).
See also §
18(e) (judicial review available to "any party"). Accordingly, the
court below did not seriously contest that Congress intended to
authorize the CFTC to adjudicate some counterclaims in reparations
proceedings. Rather, the court read into the facially unqualified
reference to counterclaim jurisdiction a distinction between
counterclaims arising under the Act or CFTC regulations and all
other counterclaims.
See 239 U.S.App.D.C. at 173, 740 F.2d
at 1278. While the court's reading permitted it to avoid a
potential Article III problem, it did so only by doing violence to
the CEA, for its distinction cannot fairly be drawn from the
language or history of the CEA, nor reconciled with the
congressional purposes motivating the creation of the reparations
proceedings.
We can find no basis in the language of the statute or its
legislative history for the distinction posited by the Court of
Appeals. Congress empowered the CFTC
"to make and promulgate such rules and regulations as, in the
judgment of the Commission, are reasonably necessary
to
effectuate any of the provisions or to accomplish any of the
purposes of [the CEA]."
7 U.S.C. § 12a(5) (emphasis added). The language of the
congressional Report that specifically commented on the scope of
the CFTC's authority over counterclaims unambiguously demonstrates
that, consistent with the sweeping authority Congress delegated to
the CFTC generally, Congress intended to vest in the CFTC the power
to define the scope of the counterclaims cognizable in reparations
proceedings:
Page 478 U. S. 843
"Counterclaims will be recognized in the [reparations]
proceedings . . . on such terms and under such circumstances as the
Commission may prescribe by regulation. It is the intent of the
Committee that the Commission will promulgate appropriate
regulations to implement this section."
H.R.Rep. No. 93-975, p. 23 (1974). Moreover, quite apart from
congressional statements of intent, the broad grant of power in §
12a(5) clearly authorizes the promulgation of regulations providing
for adjudication of common law counterclaims arising out of the
same transaction as a reparations complaint, because such
jurisdiction is necessary, if not critical, to accomplish the
purposes behind the reparations program.
Reference to the instant controversy illustrates the crippling
effect that the Court of Appeals' restrictive reading of the CFTC's
counterclaim jurisdiction would have on the efficacy of the
reparations remedy. The dispute between Schor and Conti is typical
of the disputes adjudicated in reparations proceedings: a customer
and a professional commodities broker agree that there is a debit
balance in the customer's account, but the customer attributes the
deficit to the broker's alleged CEA violations and the broker
attributes it to the customer's lack of success in the market. The
customer brings a reparations claim; the broker counterclaims for
the amount of the debit balance. In the usual case, then, the
counterclaim "arises out of precisely the same course of events" as
the principal claim, and requires resolution of many of the same
disputed factual issues.
Friedman v. Dean Witter &
Co., [1980-1982 Transfer Binder] CCH Comm.Fut.L.Rep. � 21,307,
p. 25,538 (1981).
Under the Court of Appeals' approach, the entire dispute may not
be resolved in the administrative forum. Consequently, the entire
dispute will typically end up in court, for, when the broker files
suit to recover the debit balance, the customer will normally be
compelled either by compulsory counterclaim rules or by the expense
and inconvenience of
Page 478 U. S. 844
litigating the same issues in two fora, to forgo his reparations
remedy and to litigate his claim in court.
See, e.g., App.
13 (Schor's motion to dismiss Conti's federal court action)
("[C]ontinuation of this action, in light of the prior filed
reparations proceedings, would be unjust to [Schor] in that it
would require [him], at a great cost and expense, to litigate the
same issues in two forums. If this action proceeds, defendants will
be required pursuant to [Federal Rule of Civil Procedure 13(a)] to
file a counterclaim in this action setting forth all the claims
that they have already filed before the CFTC"). In sum, as Schor
himself aptly summarized, to require a bifurcated examination of
the single dispute
"would be to emasculate, if not destroy, the purposes of the
Commodity Exchange Act to provide an efficient and relatively
inexpensive forum for the resolution of disputes in futures
trading."
Ibid. See also App. to Pet. for Cert. in No.
85-621, p. 71a (Wald, J., dissenting from denial of rehearing) ("To
bifurcate, as the panel's decision now requires, the main
reparations proceeding from counterclaims between the same parties
. . . will realistically mean that the courts, not the agency, will
end up dealing with all of these claims. The faster and less
expensive alternative forum will be decimated").
As our discuss on makes manifest, the CFTC's long-held position
that it has the power to take jurisdiction over counterclaims such
as Conti's is eminently reasonable, and well within the scope of
its delegated authority. Accordingly, as the CFTC's contemporaneous
interpretation of the statute it is entrusted to administer,
considerable weight must be accorded the CFTC's position.
See Chevron U.S.A. Inc. v.
Natural Resources Defense Council, Inc.,
467 U. S. 837,
467 U. S.
844-845 (1984);
Red Lion Broadcasting Co., Inc. v.
FCC, 395 U. S. 367,
395 U. S.
380-381 (1969). The Court of Appeals declined to defer
to the CFTC's interpretation because, in its view, the Commission
had not maintained a consistent position on the scope of its
authority to adjudicate counterclaims, and the
Page 478 U. S. 845
question was not one on which a specialized administrative
agency, in contrast to a court of general jurisdiction, had
superior expertise. 239 U.S.App.D.C. at 176, 740 F.2d at 1279. We
find both these reasons insubstantial.
First, the CFTC issued the counterclaim rule currently in force
at the time that the reparations program first took effect, and has
never altered that rule. The only "inconsistency" identified by the
Court of Appeals was a proposed rule, published by the Commission
for notice and comment, that would have allowed a narrower class of
counterclaims. 40 Fed.Reg. 55666-55667, 55672-55673 (1975). It goes
without saying that a
proposed regulation does not
represent an agency's considered interpretation of its statute, and
that an agency is entitled to consider alternative interpretations
before settling on the view it considers most sound. Indeed, it
would be antithetical to the purposes of the notice and comment
provisions of the Administrative Procedure Act, 5 U.S.C. § 553, to
tax an agency with "inconsistency" whenever it circulates a
proposal that it has not firmly decided to put into effect, and
that it subsequently reconsiders in response to public comment.
Second, the Court of Appeals was incorrect to state, on the
facts of this case, that the CFTC's expertise was not deserving of
deference because of the "statutory interpretation-jurisdictional"
nature of the question at issue. 239 U.S.App. D.C. at 176, 740 F.2d
at 1279. An agency's expertise is superior to that of a court when
a dispute centers on whether a particular regulation is "reasonably
necessary to effectuate any of the provisions or to accomplish any
of the purposes" of the Act the agency is charged with enforcing;
the agency's position, in such circumstances, is therefore due
substantial deference.
Such deference is especially warranted here, for Congress has
twice amended the CEA since the CFTC declared by regulation that it
would exercise jurisdiction over counterclaims arising out of the
same transaction as the principal
Page 478 U. S. 846
reparations dispute, but has not overruled the CFTC's assertion
of jurisdiction.
See Red Lion Broadcasting Co., Inc. v. FCC,
supra, at
395 U. S.
380-381. It is well established that, when Congress
revisits a statute giving rise to a longstanding administrative
interpretation without pertinent change, the
"congressional failure to revise or repeal the agency's
interpretation is persuasive evidence that the interpretation is
the one intended by Congress."
NLRB v. Bell Aerospace Co., 416 U.
S. 267,
416 U. S.
274-275 (1974) (footnotes omitted).
See also FDIC v.
Philadelphia Gear Corp., 476 U. S. 426
(1986).
Moreover, we need not, as the Court of Appeals argued, rely
simply on congressional "silence" to find approval of the CFTC's
position in the subsequent amendments to the CEA,
see 239
U.S.App.D.C. at 177, 740 F.2d at 1280. Congress explicitly affirmed
the CFTC's authority to dictate the scope of its counterclaim
jurisdiction in the 1983 amendments to the Act:
"The Commission may promulgate such rules, regulations, and
orders as it deems necessary or appropriate for the efficient and
expeditious administration of this section. Notwithstanding any
other provision of law such rules, regulations, and orders may
prescribe, or otherwise condition, without limitation . . . the
nature and scope of . . . counterclaims, . . . and all other
matters governing proceedings before the Commission under this
section."
7 U.S.C. § 18(b).
See also H.R.Rep. No. 97-565, pt. 1,
p. 55 (1982) ("[T]he reparations program seeks to pass upon the
whole controversy surrounding each claim, including counterclaims
arising out of the same set of facts"). Where, as here,
"Congress has not just kept its silence by refusing to overturn
the administrative construction, but has ratified it with positive
legislation,"
we cannot but deem that construction virtually conclusive.
See Red Lion Broadcasting Co. . Inc. v. FCC, supra, at
395 U. S.
380-381.
See also Bell v. New Jersey,
461 U. S. 773,
461 U. S. 785
and n. 12 (1983).
Page 478 U. S. 847
In view of the abundant evidence that Congress both contemplated
and authorized the CFTC's assertion of jurisdiction over Conti's
common law counterclaim, we conclude that the Court of Appeals'
analysis is untenable. The canon of construction that requires
courts to avoid unnecessary constitutional adjudication did not
empower the Court of Appeals to manufacture a restriction on the
CFTC's jurisdiction that was nowhere contemplated by Congress, and
to reject plain evidence of congressional intent because that
intent was not specifically embodied in a statutory mandate.
See Heckler v. Mathews, 465 U.S. at
465 U. S.
742-743. We therefore are squarely faced with the
question whether the CFTC's assumption of jurisdiction over common
law counterclaims violates Article III of the Constitution.
III
Article III, § 1, directs that the
"judicial Power of the United States shall be vested in one
supreme Court and in such inferior Courts as the Congress may from
time to time ordain and establish,"
and provides that these federal courts shall be staffed by
judges who hold office during good behavior, and whose compensation
shall not be diminished during tenure in office. Schor claims that
these provisions prohibit Congress from authorizing the initial
adjudication of common law counterclaims by the CFTC, an
administrative agency whose adjudicatory officers do not enjoy the
tenure and salary protections embodied in Article III.
Although our precedents in this area do not admit of easy
synthesis, they do establish that the resolution of claims such as
Schor's cannot turn on conclusory reference to the language of
Article III.
See, e.g., Thomas, 473 U.S. at
473 U. S. 583.
Rather, the constitutionality of a given congressional delegation
of adjudicative functions to a non-Article III body must be
assessed by reference to the purposes underlying the requirements
of Article III.
See, e.g., id. at
473 U. S. 590;
Northern Pipeline, 458 U.S. at
458 U. S. 64.
This inquiry, in turn, is guided
Page 478 U. S. 848
by the principle that "practical attention to substance, rather
than doctrinaire reliance on formal categories, should inform
application of Article III."
Thomas, supra, at
473 U. S. 587.
See also Crowell v. Benson, 285 U.S. at
285 U. S.
53.
A
Article III, § 1, serves both to protect "the role of the
independent judiciary within the constitutional scheme of
tripartite government,"
Thomas, supra, at
473 U. S. 583,
and to safeguard litigants' "right to have claims decided before
judges who are free from potential domination by other branches of
government."
United States v. Will, 449 U.
S. 200,
449 U. S. 218
(1980).
See also Thomas, supra, at
473 U. S.
582-583;
Northern Pipeline, 458 U.S. at
458 U. S. 58.
Although our cases have provided us with little occasion to discuss
the nature or significance of this latter safeguard, our prior
discussions of Article III, § 1's guarantee of an independent and
impartial adjudication by the federal judiciary of matters within
the judicial power of the United States intimated that this
guarantee serves to protect primarily personal, rather than
structural, interests.
See, e.g., id. at
458 U. S. 90
(REHNQUIST, J., concurring in judgment) (noting lack of consent to
non-Article III jurisdiction);
id. at
458 U. S. 95
(WHITE, J., dissenting) (same).
See also Currie,
Bankruptcy Judges and the Independent Judiciary, 16 Creighton
L.Rev. 441, 460, n. 108 (1983) (Article III, § 1, "was designed as
a protection for the parties from the risk of legislative or
executive pressure on judicial decision").
Cf. Crowell v.
Benson, supra, at
285 U. S. 87
(Brandeis, J., dissenting).
Our precedents also demonstrate, however, that Article III does
not confer on litigants an absolute right to the plenary
consideration of every nature of claim by an Article III court.
See, e.g., Thomas, supra, at
473 U. S. 583;
Crowell v. Benson, supra. Moreover, as a personal right,
Article III's guarantee of an impartial and independent federal
adjudication is subject to waiver, just as are other personal
constitutional rights that dictate the procedures by which
civil
Page 478 U. S. 849
and criminal matters must be tried.
See, e.g., Boykin v.
Alabama, 395 U. S. 238
(1969) (waiver of criminal trial by guilty plea);
Duncan v.
Louisiana, 391 U. S. 145,
391 U. S. 158
(1968) (waiver of right to trial by jury in criminal case);
Fed.Rule of Civ.Proc. 38(d) (waiver of right to trial by jury in
civil cases). Indeed, the relevance of concepts of waiver to
Article III challenges is demonstrated by our decision in
Northern Pipeline, in which the absence of consent to an
initial adjudication before a non-Article III tribunal was relied
on as a significant factor in determining that Article III forbade
such adjudication.
See, e.g., 458 U.S. at
458 U. S. 80, n.
31;
id. at 91 (REHNQUIST, J., concurring in judgment);
id. at
458 U. S. 95
(WHITE, J., dissenting).
See also Thomas, supra, at
473 U. S. 584,
473 U. S. 591.
Cf. Kimberly v. Arms, 129 U. S. 512
(1889);
Heckers v.
Fowler, 2 Wall. 123 (1865).
In the instant cases, Schor indisputably waived any right he may
have possessed to the full trial of Conti's counterclaim before an
Article III court. Schor expressly demanded that Conti proceed on
its counterclaim in the reparations proceeding, rather than before
the District Court,
see App. 13, 19, and was content to
have the entire dispute settled in the forum he had selected until
the ALJ ruled against him on all counts; it was only after the ALJ
rendered a decision to which he objected that Schor raised any
challenge to the CFTC's consideration of Conti's counterclaim.
Even were there no evidence of an express waiver here, Schor's
election to forgo his right to proceed in state or federal court on
his claim, and his decision to seek relief instead in a CFTC
reparations proceeding, constituted an effective waiver. Three
years before Schor instituted his reparations action, a private
right of action under the CEA was explicitly recognized in the
Circuit in which Schor and Conti filed suit in District Court.
See Hirk v. Agri-Research Council, Inc., 561 F.2d 96, 103,
n. 8 (CA7 1977).
See also Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Curran, 456 U. S. 353
(1982) (affirming the existence of a private cause of action under
the
Page 478 U. S. 850
CEA). Moreover, at the time Schor decided to seek relief before
the CFTC, rather than in the federal courts, the CFTC's regulations
made clear that it was empowered to adjudicate all counterclaims
"aris[ing] out of the same transaction or occurrence or series of
transactions or occurrences set forth in the complaint." 41
Fed.Reg. 3995 (1976) (codified in 17 CFR § 12.23(b)(2) (1983)).
Thus, Schor had the option of having the common law counterclaim
against him adjudicated in a federal Article III court, but, with
full knowledge that the CFTC would exercise jurisdiction over that
claim, chose to avail himself of the quicker and less expensive
procedure Congress had provided him. In such circumstances, it is
clear that Schor effectively agreed to an adjudication by the CFTC
of the entire controversy by seeking relief in this alternative
forum.
Cf. McElrath v. United States, 102 U.
S. 426,
102 U. S. 440
(1880).
B
As noted above, our precedents establish that Article III, § 1,
not only preserves to litigants their interest in an impartial and
independent federal adjudication of claims within the judicial
power of the United States, but also serves as "an inseparable
element of the constitutional system of checks and balances."
Northern Pipeline, supra, at
458 U. S. 58.
See also United States v. Will, supra, at
449 U. S. 217.
Article III, § 1, safeguards the role of the Judicial Branch in our
tripartite system by barring congressional attempts "to transfer
jurisdiction [to non-Article III tribunals] for the purpose of
emasculating" constitutional courts,
National Insurance Co. v.
Tidewater Co., 337 U. S. 582,
337 U. S. 644
(1949) (Vinson, C.J., dissenting), and thereby preventing "the
encroachment or aggrandizement of one branch at the expense of the
other."
Buckley v. Valeo, 424 U. S.
1,
424 U. S. 122
(1976) (per curiam).
See Thomas, 473 U.S. at
473 U. S.
582-583;
Northern Pipeline, 458 U.S. at
458 U. S. 57-58,
458 U. S. 73-74,
458 U. S. 83,
453 U. S. 86;
id. at
453 U. S. 98,
453 U. S.
115-116 (WHITE, J., dissenting). To the extent that this
structural principle is
Page 478 U. S. 851
implicated in a given case, the parties cannot by consent cure
the constitutional difficulty, for the same reason that the
parties, by consent, cannot confer on federal courts subject matter
jurisdiction beyond the limitations imposed by Article III, § 2.
See, e.g., United States v. Griffin, 303 U.
S. 226,
303 U. S. 229
(1938). When these Article III limitations are at issue, notions of
consent and waiver cannot be dispositive, because the limitations
serve institutional interests that the parties cannot be expected
to protect.
In determining the extent to which a given congressional
decision to authorize the adjudication of Article III business in a
non-Article III tribunal impermissibly threatens the institutional
integrity of the Judicial Branch, the Court has declined to adopt
formalistic and unbending rules.
Thomas, 473 U.S. at
473 U. S. 587.
Although such rules might lend a greater degree of coherence to
this area of the law, they might also unduly constrict Congress'
ability to take needed and innovative action pursuant to its
Article I powers. Thus, in reviewing Article III challenges, we
have weighed a number of factors, none of which has been deemed
determinative, with an eye to the practical effect that the
congressional action will have on the constitutionally assigned
role of the federal judiciary.
Id. at
473 U. S. 590.
Among the factors upon which we have focused are the extent to
which the "essential attributes of judicial power" are reserved to
Article III courts, and, conversely, the extent to which the
non-Article III forum exercises the range of jurisdiction and
powers normally vested only in Article III courts, the origins and
importance of the right to be adjudicated, and the concerns that
drove Congress to depart from the requirements of Article III.
See, e.g., id. at
473 U. S. 587,
437 U. S.
589-593;
Northern Pipeline, supra, at
458 U. S.
84-86.
An examination of the relative allocation of powers between the
CFTC and Article III courts in light of the considerations given
prominence in our precedents demonstrates that the congressional
scheme does not impermissibly intrude
Page 478 U. S. 852
on the province of the judiciary. The CFTC's adjudicatory powers
depart from the traditional agency model in just one respect: the
CFTC's jurisdiction over common law counterclaims. While wholesale
importation of concepts of pendent or ancillary jurisdiction into
the agency context may create greater constitutional difficulties,
we decline to endorse an absolute prohibition on such jurisdiction
out of fear of where some hypothetical "slippery slope" may deposit
us. Indeed, the CFTC's exercise of this type of jurisdiction is not
without precedent. Thus, in
RFC v. Bankers Trust Co.,
318 U. S. 163,
318 U. S.
168-171 (1943), we saw no constitutional difficulty in
the initial adjudication of a state law claim by a federal agency,
subject to judicial review, when that claim was ancillary to a
federal law dispute. Similarly, in
Katchen v. Landy,
382 U. S. 323
(1966), this Court upheld a bankruptcy referee's power to hear and
decide state law counterclaims against a creditor who filed a claim
in bankruptcy when those counterclaims arose out of the same
transaction. We reasoned that, as a practical matter, requiring the
trustee to commence a plenary action to recover on its counterclaim
would be a "meaningless gesture."
Id. at
382 U. S.
334.
In the instant cases, we are likewise persuaded that there is
little practical reason to find that this single deviation from the
agency model is fatal to the congressional scheme. Aside from its
authorization of counterclaim jurisdiction, the CEA leaves far more
of the "essential attributes of judicial power" to Article III
courts than did that portion of the Bankruptcy Act found
unconstitutional in
Northern Pipeline. The CEA scheme, in
fact, hews closely to the agency model approved by the Court in
Crowell v. Benson, 285 U. S. 22
(1932).
The CFTC, like the agency in
Crowell, deals only with a
"particularized area of law,"
Northern Pipeline, supra, at
458 U. S. 85,
whereas the jurisdiction of the bankruptcy courts found
unconstitutional in
Northern Pipeline extended to broadly
"all civil proceedings arising under title 11 or arising in or
related
Page 478 U. S. 853
to cases under title 11." 28 U.S.C. § 1471(b) (quoted
in
Northern Pipeline, 458 U.S. at
458 U. S. 85)
(emphasis added). CFTC orders, like those of the agency in
Crowell, but unlike those of the bankruptcy courts under
the 1978 Act, are enforceable only by order of the district court.
See 7 U.S.C. § 18(f);
Northern Pipeline, supra,
at
458 U. S. 85-86.
CFTC orders are also reviewed under the same "weight of the
evidence" standard sustained in
Crowell, rather than the
more deferential standard found lacking in
Northern
Pipeline. See 7 U.S.C. § 9;
Northern Pipeline,
supra, at
458 U. S. 85.
The legal rulings of the CFTC, like the legal determinations of the
agency in
Crowell, are subject to
de novo review.
Finally, the CFTC, unlike the bankruptcy courts under the 1978 Act,
does not exercise "all ordinary powers of district courts," and
thus may not, for instance, preside over jury trials or issue writs
of habeas corpus. 458 U.S. at
458 U. S.
85.
Of course, the nature of the claim has significance in our
Article III analysis quite apart from the method prescribed for its
adjudication. The counterclaim asserted in this litigation is a
"private" right for which state law provides the rule of decision.
It is therefore a claim of the kind assumed to be at the "core" of
matters normally reserved to Article III courts.
See, e.g.,
Thomas, supra, at
473 U. S. 587;
Northern Pipeline, 458 U.S. at
458 U. S. 70-71,
and n. 25;
id. at
458 U. S. 90 (REHNQUIST, J., concurring in judgment).
Yet this conclusion does not end our inquiry; just as this Court
has rejected any attempt to make determinative for Article III
purposes the distinction between public rights and private rights,
Thomas, supra, at
473 U. S. 585-586, there is no reason inherent in
separation of powers principles to accord the state law character
of a claim talismanic power in Article III inquiries.
See,
e.g., Northern Pipeline, 458 U.S. at
458 U. S. 68, n.
20;
id. at
458 U. S. 98
(WHITE, J., dissenting).
We have explained that
"the public rights doctrine reflects simply a pragmatic
understanding that, when Congress selects a quasi-judicial method
of resolving matters that 'could
Page 478 U. S. 854
be conclusively determined by the Executive and Legislative
Branches,' the danger of encroaching on the judicial powers"
is less than when private rights, which are normally within the
purview of the judiciary, are relegated as an initial matter to
administrative adjudication.
Thomas, 473 U.S. at
473 U. S. 589
(quoting
Northern Pipeline, supra, at
458 U. S. 68).
Similarly, the state law character of a claim is significant for
purposes of determining the effect that an initial adjudication of
those claims by a non-Article III tribunal will have on the
separation of powers, for the simple reason that private common law
rights were historically the types of matters subject to resolution
by Article III courts.
See Northern Pipeline, 458 U.S. at
68, n.
458 U. S. 20,
458 U. S. 84;
id. at
458 U. S. 90
(REHNQUIST, J., concurring in judgment). The risk that Congress may
improperly have encroached on the federal judiciary is obviously
magnified when Congress
"withdraw[s] from judicial cognizance any matter which, from its
nature, is the subject of a suit at the common law, or in equity,
or admiralty,"
and which therefore has traditionally been tried in Article III
courts, and allocates the decision of those matters to a
non-Article III forum of its own creation.
Murray's
Lessee v. Hoboken Land & Improvement Co., 18
How. 272,
59 U. S. 284
(1856). Accordingly, where private, common law rights are at stake,
our examination of the congressional attempt to control the manner
in which those rights are adjudicated has been searching.
See,
e.g., Northern Pipeline, 458 U.S. at
458 U. S. 84;
id. at
458 U. S. 90
(REHNQUIST, J., concurring in judgment). In this litigation,
however, "[l]ooking beyond form to the substance of what" Congress
has done, we are persuaded that the congressional authorization of
limited CFTC jurisdiction over a narrow class of common law claims
as an incident to the CFTC's primary, and unchallenged,
adjudicative function does not create a substantial threat to the
separation of powers.
Thomas, supra, at
473 U. S.
589.
It is clear that Congress has not attempted to "withdraw from
judicial cognizance" the determination of Conti's right to
Page 478 U. S. 855
the sum represented by the debit balance in Schor's account.
Congress gave the CFTC the authority to adjudicate such matters,
but the decision to invoke this forum is left entirely to the
parties, and the power of the federal judiciary to take
jurisdiction of these matters is unaffected. In such circumstances,
separation of powers concerns are diminished, for it seems
self-evident that, just as Congress may encourage parties to settle
a dispute out of court or resort to arbitration without
impermissible incursions on the separation of powers, Congress may
make available a quasi-judicial mechanism through which willing
parties may, at their option, elect to resolve their differences.
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.
See, e.g., Northern Pipeline,
supra, at
458 U. S. 73-74.
But this case obviously bears no resemblance to such a scenario,
given the degree of judicial control saved to the federal courts,
see supra, at
478 U. S.
852-853, as well as the congressional purpose behind the
jurisdictional delegation, the demonstrated need for the
delegation, and the limited nature of the delegation.
When Congress authorized the CFTC to adjudicate counterclaims,
its primary focus was on making effective a specific and limited
federal regulatory scheme, not on allocating jurisdiction among
federal tribunals. Congress intended to create an inexpensive and
expeditious alternative forum through which customers could enforce
the provisions of the CEA against professional brokers. Its
decision to endow the CFTC with jurisdiction over such reparations
claims is readily understandable, given the perception that the
CFTC was relatively immune from political pressures,
see
H.R.Rep. No. 93-975, pp. 44, 70 (1974), and the obvious
expertise
Page 478 U. S. 856
that the Commission possesses in applying the CEA and its own
regulations. This reparations scheme itself is of unquestioned
constitutional validity.
See, e.g., Thomas, supra, at
473 U. S. 589;
Northern Pipeline, supra, at
458 U. S. 80-81;
Crowell v. Benson, 285 U. S. 22
(1932). It was only to ensure the effectiveness of this scheme that
Congress authorized the CFTC to assert jurisdiction over common law
counterclaims. Indeed, as was explained above, absent the CFTC's
exercise of that authority, the purposes of the reparations
procedure would have been confounded.
It also bears emphasis that the CFTC's assertion of counterclaim
jurisdiction is limited to that which is necessary to make the
reparations procedure workable.
See 7 U.S.C. § 12a(5). The
CFTC adjudication of common law counterclaims is incidental to, and
completely dependent upon, adjudication of reparations claims
created by federal law, and, in actual fact, is limited to claims
arising out of the same transaction or occurrence as the
reparations claim.
In such circumstances, the magnitude of any intrusion on the
Judicial Branch can only be termed
de minimis. Conversely,
were we to hold that the Legislative Branch may not permit such
limited cognizance of common law counterclaims at the election of
the parties, it is clear that we would
"defeat the obvious purpose of the legislation to furnish a
prompt, continuous, expert and inexpensive method for dealing with
a class of questions of fact which are peculiarly suited to
examination and determination by an administrative agency specially
assigned to that task."
Crowell v. Benson, supra, at
285 U. S. 46.
See also Thomas, supra, at
473 U. S.
583-584. We do not think Article III compels this degree
of prophylaxis.
Nor does our decision in
Bowsher v. Synar, ante, p.
478 U. S. 714,
require a contrary result. Unlike
Bowsher, this case
raises no question of the aggrandizement of congressional power at
the expense of a coordinate branch. Instead, the separation of
powers question presented in this litigation is whether Congress
impermissibly undermined, without appreciable expansion
Page 478 U. S. 857
of its own power, the role of the Judicial Branch. In any case,
we have, consistent with
Bowsher, looked to a number of
factors in evaluating the extent to which the congressional scheme
endangers separation of powers principles under the circumstances
presented, but have found no genuine threat to those principles to
be present in this litigation.
In so doing, we have also been faithful to our Article III
precedents, which counsel that bright-line rules cannot effectively
be employed to yield broad principles applicable in all Article III
inquiries.
See, e.g., 473 U. S.
473 U. S. 568
(1985). Rather, due regard must be given in each case to the unique
aspects of the congressional plan at issue, and its practical
consequences in light of the larger concerns that underlie Article
III. We conclude that the limited jurisdiction that the CFTC
asserts over state law claims as a necessary incident to the
adjudication of federal claims willingly submitted by the parties
for initial agency adjudication does not contravene separation of
powers principles or Article III.
C
Schor asserts that Article III, § 1, constrains Congress for
reasons of federalism, as well as for reasons of separation of
powers. He argues that the state law character of Conti's
counterclaim transforms the central question in this litigation
from whether Congress has trespassed upon the judicial powers of
the Federal Government into whether Congress has invaded the
prerogatives of state governments.
At the outset, we note that our prior precedents in this area
have dealt only with separation of powers concerns, and have not
intimated that principles of federalism impose limits on Congress'
ability to delegate adjudicative functions to non-Article III
tribunals. This absence of discussion regarding federalism is
particularly telling in
Northern Pipeline, where the Court
based its analysis solely on the separation of powers principles
inherent in Article III, despite the fact that the claim sought to
be adjudicated in the bankruptcy court was
Page 478 U. S. 858
created by state law.
See, e.g., 458 U.S. at
458 U. S. 57-60,
and n. 11.
Even assuming that principles of federalism are relevant to
Article III analysis, however, we are unpersuaded that those
principles require the invalidation of the CFTC's counterclaim
jurisdiction. The sole fact that Conti's counterclaim is resolved
by a
federal, rather than a
state, tribunal could
not be said to unduly impair state interests, for it is established
that a federal court could, without constitutional hazard, decide a
counterclaim such as the one asserted here under its ancillary
jurisdiction, even if an independent jurisdictional basis for it
were lacking.
See, e.g., Baker v. Gold Seal Liquors,
417 U. S. 467,
417 U. S. 469,
n. 1 (1974);
Moore v. New York Cotton Exchange,
270 U. S. 593,
270 U. S. 609
(1926). Given that the federal courts can and do exercise ancillary
jurisdiction over counterclaims such as the one at issue here, the
question becomes whether the fact that a federal agency, rather
than a federal Article III court, initially hears the state law
claim gives rise to a cognizably greater impairment of principles
of federalism.
Schor argues that those Framers opposed to diversity
jurisdiction in the federal courts acquiesced in its inclusion in
Article III only because they were assured that the federal
judiciary would be protected by the tenure and salary provisions of
Article III. He concludes, in essence, that, to protect this
constitutional compact, Article III should be read to absolutely
preclude any adjudication of state law claims by federal
decisionmakers that do not enjoy the Article III salary and tenure
protections. We are unpersuaded by Schor's novel theory, which
suffers from a number of flaws, the most important of which is that
Schor identifies no historical support for the critical link he
posits between the provisions of Article III that protect the
independence of the federal judiciary and those provisions that
define the extent of the judiciary's jurisdiction over state law
claims.
Page 478 U. S. 859
The judgment of the Court of Appeals for the District of
Columbia Circuit is reversed, and the case is remanded for further
proceedings consistent with this opinion.
It is so ordered.
* Together with No. 85-642,
ContiCommodity Services, Inc. v.
Schor, et al., also on certiorari to the same court
[
Footnote 1]
Respondents' suit was governed by the Commodity Futures Trading
Commission Act of 1974, Pub.L. 93-463, 88 Stat. 1389. Congress
again significantly revised the Act in early 1983.
See
Futures Trading Act of 1982, Pub.L. 97-444, 96 Stat. 2294. The
changes effected by the 1983 amendments that are relevant to CFTC
proceedings became effective only as of May, 1983, and therefore do
not control in this proceeding.
See § 239. 96 Stat.
2327.
[
Footnote 2]
Two complaints, relating to separate trading accounts, were
filed on behalf of Schor and the mortgage banking company, Mortgage
Services of America, Inc., of which Schor was president and 90%
shareholder. The complaints contained virtually identical
allegations, and were consolidated at the administrative level. The
Court of Appeals also consolsidated the two separate petitions for
review of the CFTC's final reparation order filed by Schor and
Mortgage Services of America, Inc. Because the legal issues
involved in the two actions are, for all relevant purposes,
identical, we refer to Schor and Mortgage Services of America,
Inc., jointly as "Schor," and to ContiCommodity Services, Inc., and
Sandor jointly as "Conti."
JUSTICE BRENNAN, with whom JUSTICE MARSHALL joins,
dissenting.
Article III, § 1, of the Constitution provides that
"[t]he judicial Power of the United States, shall be vested in
one supreme Court, and in such inferior Courts as the Congress may
from time to time ordain and establish."
It further specifies that the federal judicial power must be
exercised by judges who
"shall hold their Offices during good Behaviour, and [who]
shall, at stated Times, receive for their Services a Compensation,
which shall not be diminished during their Continuance in
Office."
On its face, Article III, § 1, seems to prohibit the vesting of
any judicial functions in either the Legislative or the Executive
Branch. The Court has, however, recognized three narrow exceptions
to the otherwise absolute mandate of Article III: territorial
courts,
see, e.g., 26 U. S. Co. v.
Canter, 1 Pet. 511 (1828); courts-martial,
see, e.g.,
61 U. S.
Hoover, 20 How. 65 (1857); and courts that adjudicate certain
disputes concerning public rights,
see, e.g., 59 U.
S. Hoboken Land & Improvement Co., 18 How. 272
(1856);
Ex parte Bakelite Corp., 279 U.
S. 438 (1929);
Crowell v. Benson, 285 U. S.
22 (1932);
Thomas v. Union Carbide Agricultural
Products Co., 473 U. S. 568
(1985).
See generally Northern Pipeline Construction Co. v.
Marathon Pipe Line Co., 458 U. S. 50 (1982)
(opinion of BRENNAN, J.). Unlike the Court, I would limit the
judicial authority of non-Article III federal tribunals to these
few, long-established exceptions, and would countenance no further
erosion of Article III's mandate.
I
The Framers knew that
"[t]he accumulation of all powers, Legislative, Executive, and
Judiciary, in the same hands,
Page 478 U. S. 860
whether of one, a few, or many, and whether hereditary,
self-appointed, or elective, may justly be pronounced the very
definition of tyranny."
The Federalist No. 46, p. 334 (H. Dawson ed. 1876) (J. Madison).
In order to prevent such tyranny, the Framers devised a
governmental structure composed of three distinct branches -- "a
vigorous Legislative Branch," "a separate and wholly independent
Executive Branch," and "a Judicial Branch equally independent."
Bowsher v. Synar, ante at
478 U. S. 722.
The separation of powers and the checks and balances that the
Framers built into our tripartite form of government were intended
to operate as a "self-executing safeguard against the encroachment
or aggrandizement of one branch at the expense of the other."
Buckley v. Valeo, 424 U. S. 1,
424 U. S. 122
(1976) (per curiam).
"'The fundamental necessity of maintaining each of the three
general departments of government entirely free from the control or
coercive influence, direct or indirect, of either of the others has
often been stressed, and is hardly open to serious question.'"
Bowsher, ante at
478 U. S. 725
(quoting
Humphrey's Executor v. United States,
295 U. S. 602,
295 U. S. 629
(1935)). The federal judicial power, then, must be exercised by
judges who are independent of the Executive and the Legislature in
order to maintain the checks and balances that are crucial to our
constitutional structure.
The Framers also understood that a principal benefit of the
separation of the judicial power from the legislative and executive
powers would be the protection of individual litigants from
decisionmakers susceptible to majoritarian pressures. Article III's
salary and tenure provisions promote impartial adjudication by
placing the judicial power of the United States
"in a body of judges insulated from majoritarian pressures, and
thus able to enforce [federal law] without fear of reprisal or
public rebuke."
United States v. Raddatz, 447 U.
S. 667,
447 U. S. 704
(1980) (MARSHALL, J., dissenting). As Alexander Hamilton
observed,
"[t]hat inflexible and uniform adherence to the rights of the
Constitution, and of individuals,
Page 478 U. S. 861
which we perceive to be indispensable in the Courts of justice
can certainly not be expected from Judges who hold their offices by
a temporary commission."
The Federalist No. 78, p. 546 (H. Dawson ed. 1876). This is so
because,
"[i]f the power of making [periodic appointments] was committed
either to the Executive or Legislature, there would be danger of an
improper complaisance to the branch which possessed it; if to both,
there would be an unwillingness to hazard the displeasure of
either; if to the People, or to persons chosen by them for the
special purpose, there would be too great a disposition to consult
popularity, to justify a reliance that nothing would be consulted
but the Constitution and the laws."
Ibid. "Next to permanency in office," Hamilton added,
"nothing can contribute more to the independence of the Judges than
a fixed provision for their support," because "
a power over a
man's subsistence amounts to a power over his will."
Id. at 548 (emphasis in original).
See also United
States v. Will, 449 U. S. 200,
449 U. S.
217-218 (1980) ("A Judiciary free from control by the
Executive and the Legislature is essential if there is a right to
have claims decided by judges who are free from potential
domination by other branches of government");
United States ex
rel. Toth v. Quarles, 350 U. S. 11,
350 U. S. 16
(1955) (Black, J.) ("The provisions of Article III were designed to
give judges maximum freedom from the possible coercion or influence
by the executive or legislative branches of the Government").
These important functions of Article III are too central to our
constitutional scheme to risk their incremental erosion. The
exceptions we have recognized for territorial courts,
courts-martial, and administrative courts were each based on
"certain exceptional powers bestowed upon Congress by the
Constitution or by historical consensus."
Northern Pipeline,
supra, at
458 U. S. 70
(opinion of BRENNAN, J.). Here, however, there is no equally
forceful reason to extend further these exceptions to situations
that are distinguishable from
Page 478 U. S. 862
existing precedents.
Cf. Currie, Bankruptcy Judges and
the Independent Judiciary, 16 Creighton L.Rev. 441, 445 (1983). The
Court, however, engages in just such an extension. By sanctioning
the adjudication of state law counterclaims by a federal
administrative agency, the Court far exceeds the analytic framework
of our precedents.
More than a century ago, we recognized that Congress may not
"withdraw from [Article III] judicial cognizance any matter
which, from its nature, is the subject of a suit at the common
law, or in equity, or admiralty."
Murray's Lessee, 18 How. at
59 U. S. 284
(emphasis added). More recently, in
Northern Pipeline,
458 U. S. 50
(1982), the view of a majority of the Court that the
breach-of-contract and misrepresentation claims at issue in that
case lay "at the core of the historically recognized judicial
power,"
id. at
458 U. S. 70
(opinion of BRENNAN, J.), and were "the stuff of the traditional
actions at common law tried by the courts at Westminster in 1789,"
id. at
458 U. S. 90
(opinion of REHNQUIST, J.), contributed significantly to the
Court's conclusion that the bankruptcy courts could not
constitutionally adjudicate Northern Pipeline's common law claims.
In the instant litigation, the Court lightly discards both history
and our precedents. The Court attempts to support the substantial
alteration it works today in our Article III jurisprudence by
pointing,
inter alia, to legislative convenience; to the
fact that Congress does not altogether eliminate federal court
jurisdiction over ancillary state law counterclaims; and to Schor's
"consent" to CFTC adjudication of ContiCommodity's counterclaims.
* In my view, the
Court's effort fails.
Page 478 U. S. 863
II
The Court states that, in reviewing Article III challenges, one
of several factors we have taken into account is "the concerns that
drove Congress to depart from the requirements of Article III."
Ante at
478 U. S. 851.
The Court identifies the desire of Congress
"to create an inexpensive and expeditious alternative forum
through which customers could enforce the provisions of the CEA
against professional brokers"
as the motivating congressional concern here.
Ante at
478 U. S. 855.
The Court further states that
"[i]t was only to ensure the effectiveness of this scheme that
Congress authorized the CFTC to assert jurisdiction over common law
counterclaims[;] . . . absent the CFTC's exercise of that
authority, the purposes of the reparations procedure would have
been confounded."
Ante at
478 U. S. 856.
Were we to hold that the CFTC's authority to decide common law
counterclaims offends Article III, the Court declares, "it is clear
that we would
defeat the obvious purpose of the legislation.'"
Ibid. Article III, the Court concludes, does not "compe[l]
this degree of prophylaxis." Ibid.
I disagree -- Article III's prophylactic protections were
intended to prevent just this sort of abdication to claims of
legislative convenience. The Court requires that the legislative
interest in convenience and efficiency be weighed against the
competing interest in judicial independence. In doing so, the Court
pits an interest the benefits of which are immediate, concrete, and
easily understood against one the benefits of which are almost
entirely prophylactic, and thus often seem remote, and not worth
the cost in any single case. Thus, while this balancing creates the
illusion of objectivity and ineluctability, in fact the result was
foreordained, because the balance is weighted against judicial
independence.
See Redish, Legislative Courts,
Administrative Agencies, and the
Northern Pipeline
Decision, 1983 Duke L.J.197, 221-222. The danger of the Court's
balancing approach is, of course, that, as individual cases
accumulate in which the
Page 478 U. S. 864
Court finds that the short-term benefits of efficiency outweigh
the long-term benefits of judicial independence, the protections of
Article III will be eviscerated.
Perhaps the resolution of reparations claims such as
respondents' may be accomplished more conveniently under the
Court's decision than under my approach, but the Framers foreswore
this sort of convenience in order to preserve freedom. As we
explained in
INS v. Chadha, 462 U.
S. 919,
462 U. S. 959
(1983):
"The choices we discern as having been made in the
Constitutional Convention impose burdens on governmental processes
that often seem clumsy, inefficient, even unworkable, but those
hard choices were consciously made by men who had lived under a
form of government that permitted arbitrary governmental acts to go
unchecked. . . . With all the obvious flaws of delay [and]
untidiness . . . , we have not yet found a better way to preserve
freedom than by making the exercise of power subject to the
carefully crafted restraints spelled out in the Constitution."
Moreover, in
Bowsher v. Synar,
ante p. 714, we rejected the appellant's argument
that legislative convenience saved the constitutionality of the
assignment by Congress to the Comptroller General of essentially
executive functions, stating:
"'[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. Convenience and efficiency are not the primary
objectives -- or the hallmarks -- of democratic government. . .
.'"
Ante at
478 U. S. 736
(quoting
Chadha, supra, at
462 U. S.
944). We recognized that
"'[t]he hydraulic pressure inherent within each of the separate
Branches to exceed the outer limits of its power, even to
accomplish desirable objectives, must be resisted.'"
Ante at
478 U. S. 727
(quoting
Chadha, supra, at
462 U. S.
951). Despite the "conflicts, confusion, and
discordance" that separation of powers may at times generate,
ante at
Page 478 U. S. 865
478 U. S. 722,
we held that it is necessary to endure the inconvenience of
separated powers in order "
to secure liberty.'" Ante
at 478 U. S. 721
(quoting Youngstown Sheet & Tube Co. v. Sawyer,
343 U. S. 579,
343 U. S. 635
(1952) (Jackson, J., concurring)).
It is impossible to reconcile the radically different approaches
the Court takes to separation of powers in this litigation and in
Bowsher. The Framers established three coequal branches of
government, and intended to preserve each from encroachment by
either of the others. The Constitution did not grant Congress the
general authority to bypass the Judiciary whenever Congress deems
it advisable, any more than it granted Congress the authority to
arrogate to itself executive functions.
III
According to the Court, the intrusion into the province of the
Federal Judiciary caused by the CFTC's authority to adjudicate
state law counterclaims is insignificant, both because the CFTC
shares in, rather than displaces, federal district court
jurisdiction over these claims and because only a very narrow class
of state law issues are involved. The "sharing" justification fails
under the reasoning used by the Court to support the CFTC's
authority. If the administrative reparations proceeding is so much
more convenient and efficient than litigation in federal district
court that abrogation of Article III's commands is warranted, it
seems to me that complainants would rarely, if ever, choose to go
to district court in the first instance. Thus, any "sharing" of
jurisdiction is more illusory than real.
More importantly, the Court, in emphasizing that
this
litigation will permit solely a narrow class of state law
claims to be decided by a non-Article III court, ignores the fact
that it establishes a broad principle. The decision today may
authorize the administrative adjudication only of state law claims
that stem from the same transaction or set of facts that allow the
customer of a professional commodity broker to initiate reparations
proceedings before the CFTC, but the
Page 478 U. S. 866
reasoning of this decision strongly suggests that,
given "legislative necessity" and party consent, any federal agency
may decide state law issues that are ancillary to federal issues
within the agency's jurisdiction. Thus while, in this litigation,
"the magnitude of any intrusion on the Judicial Branch" may
conceivably be characterized as "
de minimis,"
ante at
478 U. S. 856,
the potential impact of the Court's decision on federal court
jurisdiction is substantial. The Court dismisses warnings about the
dangers of its approach, asserting simply that it does not fear the
slippery slope,
ante at
458 U. S. 862,
and that this litigation does not involve the creation by Congress
of a "phalanx of non-Article III tribunals equipped to handle the
entire business of the Article III courts."
Ante at
478 U. S. 855.
A healthy respect for the precipice on which we stand is warranted,
however, for this reason: Congress can seriously impair Article
III's structural and individual protections without assigning away
"the
entire business of the Article III courts."
Ibid. (emphasis added). It can do so by
diluting
the judicial power of the federal courts. And, contrary to the
Court's intimations, dilution of judicial power operates to impair
the protections of Article III regardless of whether Congress acted
with the "good intention" of providing a more efficient dispute
resolution system or with the "bad intention" of strengthening the
Legislative Branch at the expense of the Judiciary.
IV
The Court's reliance on Schor's "consent" to a non-Article III
tribunal is also misplaced. The Court erroneously suggests that
there is a clear division between the separation of powers and the
impartial adjudication functions of Article III.
Ante at
478 U. S. 848.
The Court identifies Article III's structural, or separation of
powers, function as preservation of the Judiciary's domain from
encroachment by another branch.
Ante at
478 U. S. 850.
The Court identifies the impartial adjudication function as the
protection afforded by Article III to individual
Page 478 U. S. 867
litigants against judges who may be dominated by other branches
of government.
Ante at
478 U. S.
848.
In my view, the structural and individual interests served by
Article III are inseparable. The potential exists for individual
litigants to be deprived of impartial decisionmakers only where
federal officials who exercise judicial power are susceptible to
congressional and executive pressure. That is, individual litigants
may be harmed by the assignment of judicial power to non-Article
III federal tribunals only where the Legislative or Executive
Branches have encroached upon judicial authority, and have thus
threatened the separation of powers. The Court correctly recognizes
that, to the extent that Article III's structural concerns are
implicated by a grant of judicial power to a non-Article III
tribunal,
"the parties cannot, by consent, cure the constitutional
difficulty for the same reason that the parties, by consent, cannot
confer on federal courts subject matter jurisdiction beyond the
limitations imposed by Article III, § 2."
Ante at
478 U. S. 851.
Because the individual and structural interests served by Article
III are coextensive, I do not believe that a litigant may ever
waive his right to an Article III tribunal where one is
constitutionally required. In other words, consent is irrelevant to
Article III analysis.
V
Our Constitution unambiguously enunciates a fundamental
principle -- that the "judicial Power of the United States" be
reposed in an independent Judiciary. It is our obligation zealously
to guard that independence, so that our tripartite system of
government remains strong, and that individuals continue to be
protected against decisionmakers subject to majoritarian pressures.
Unfortunately, today the Court forsakes that obligation for
expediency. I dissent.
* The Court also rests its holding on the fact that Congress has
not assigned the same sweeping judicial powers to the CFTC that it
had assigned to the bankruptcy courts under the Bankruptcy Act of
1978, and that we held violated Article III in
Northern
Pipeline Construction Co. v. Marathon Pipe Line Co.,
458 U. S. 50
(1982). While I agree with the Court that the grant of judicial
authority to the CFTC is significantly narrower in scope than the
grant to the bankruptcy courts under the 1978 Act, in my view, that
difference does not suffice to cure the constitutional defects
raised by the grant of authority over state law counterclaims to
the CFTC.