z_.C. H4. I5?/32 Rpfi g7'VQQ A 87-426.A CRS REPORT FOR CONGRESS Government Publications Umt AUG 1 7 1994 WaSh'"3‘°" WVGTSW Libraries St Lows. Mo 63130 LEGAL ANALYSIS OF ALTERNATIVE ENFORCEMENT iPROCEDURES UNDER PROPOSED FAIR HOUSING ACT AMENDMENTS OF 1987 .AasR F fi"%”Jf“%J.3 , K '. *1-...»"-‘V VJ" .r~ . :"“%:;,-. "“'\~. Y ’ ‘ A **:x.*" 1;: ,,_.;”“*.v» ‘ ‘e sgw?R§%RM§§fiE§’§‘fi/ E’ K ,R:{‘’ ‘g"t;A. "$2 . ..)< -'L'- - 3 § " ’ ‘Ii 1 3 ... .0‘ y 1 ‘£- 1 . ‘ NEH; . 's~ -* s ‘.24. r. as ..,;. -:2 V4.53 “J ""5 .- ‘Vs. .ht‘n., - . vx A31 x1n.....d.: By . Karen J. Lewis Legislative Attorney American Law Division May 7, 1987 I of Missouri - Columbia I///I//Il/ II////I/I/II////I/I/I//I/I//I/II/////II/ O10-103939883 . //II/// 3 The Congressional Research Service works exclusively for th ongress, conducting research, analyzing legislation, and }, .- ’ e >‘?o. iding information at the request of committees, Mem- rs, and their staffs. Tlge Service makes such research available, without parti- jias, in many forms including studies, reports, compila- ns, digests, and background briefings. Upon request, CRS assists committees in analyzing legislative proposals and issues, and in assessing the possible effects of these proposals and their alternatives. The Service’s senior specialists and subject analysts are also available for personal consultations in their respective fields of expertise. LEGAL ANALYSIS OF ALTERNATIVE ENFORCEMENT PROCEDURES UNDER PROPOSED PAIR HOUSING ACT AMENDMENTS OF 1987 INTRODUCTION The purpose of this report is to analyze the administrative enforcement procedures under the proposed Fair Housing Act Amendments of 1987. There are essentially two schemes to examine. The first one is already contained in S. 558, the "Fair Housing Amendments Act of 1987," which was introduced in the 100th Congress on February 19, 1987. It provides specifically for the hearing of complaints by an Administrative Law Judge (ALJ) within the Department of Housing and Urban Development (HUD). The second scheme is still in the drafting stage, but would substitute an expedited and inexpensive proceeding before a U.S. magistrate for the administrative proceeding conducted by an ALJ at HUD. Each method of enforcement is reviewed below in terms of any constitu- tional or jurisdictional problems which may exist. Administrative Enforcement Under S. 558 Under the procedures proposed by S. 558 the administrative process begins whenever an aggrieved person, or the Secretary of HUD on his own initiative, files a complaint alleging a discriminatory housing practice.1 An aggrieved person has one year after the alleged discriminatory practice occurs or terminates in which to file his charge with HUD. However, the Secretary of HUD must, within ten days after the charge is filed, serve notice on the party against whom the charge was made and commence the agency's investigation. Section 811 (a) of S. 558 authorizes the Secretary to issue subpoenas and order answers to interrogatories in aid of investigations. The section 1 s. 558, Section 810 (a) (1) (A) (1). CRS-2 similarly empowers an ALJ. Section 811 (b) provides that a complainant or a respondent shall be entitled to the issuance of a reasonable number of subpoenas on their behalf. Section 812 of S. 558 describes the administrative process with a hearing held before an ALJ. Generally, the proceeding is subject to the requirements of the Administrative Procedure Act (APA), S U.S.C. 551 et seq. since this proposed legislation requires that administrative adjudications be determined on the record after opportunity for a hearing. Section 812 (f) provides that after the hearing, the ALJ shall make findings of fact and conclusions of law. The ALJ then renders an appropriate order which can require the respondent, among other things, to pay actual damages, punitive damages, and to cease and desist from engaging in the .discriminatory housing practice. The proposed 1987 Amendments also provide that an order of the ALJ is final for the purposes of judicial review. In S. 558, Section 812 (h) sets out the process for review. The Secretary also is empowered to petition any U.S. court of appeals for the circuit in which the discriminatory housing practice was alleged to have occurred or in which the respondent resides or transacts business for the enforcement of the ALJ's order and for appropriate temporary relief or restraining order. The court, in turn, may grant the relief it deems just and proper. It can affirm, modify, or set aside, in whole or in part, the ALJ's order. It can also enforce such order. S. 558 specifically prevents consideration by the court of any objection not raised before the ALJ, unless failure to raise the objection is excused because of extraordinary circumstances. This proposed bill prevents the setting aside of the findings of the ALJ with respect to questions of fact unless they are found to be unsupported by substantial evidence on the record taken as a whole. CRS-3 Section 812 (1) provides that if before the end of the sixtieth day after the service of the ALJ's order, no petition for review has been filed and the Secretary did not seek enforcement of the order, the person entitled to relief can petition for a decree enforcing the order in the U.S. court of appeals where the discriminatory housing practice allegedly occurred. Section 812 (n) provides for the award of attorney's fees to the prevailing party. An examination of the foregoing administrative procedure, where an ALJ serves as a hearing officer with the authority to make findings of fact and conclusions of law and to issue an order for relief which can include actual as well as punitive damages and a directive to the respondent to cease and desist from engaging in the discriminatory housing practice, does not appear to reveal any constitutional or jurisdictional infirmities. While there may be policy objections to this enforcement approach, a discussion of these is beyond the scope and purpose of this report. The legal issue that needs to be addressed is whether the Seventh Amendment of the U.S. Constitution is a bar to giving enforcement powers to an administrative agency, including the authority to award monetary relief to victims of practices made unlawful by valid acts of Congress. The Seventh Amendment specifically provides that "in Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved." The U.S. Supreme Court has upheld the constitutionality of administrative proceedings geared to carrying out the congressional intent in passing "public" statutes. The administrative scheme in S. 558 is designed to effectuate the public's interest in eliminating housing discrimination. At the same time, the due process rights of violators of the law have to be protected. Similar proceedings to the one in the proposed Fair Housing Amendments Act of 1987 have been upheld by the U.S. CRS-4 Supreme Court. In one case, NLRB v. Jones and Laughlin Steel COrp.,2 the monetary relief went mainly to the individual injured by the complained of practice. In another, more recent decision, Atlas Roofing Co., Inc. v. Occupational Safety and Health Review Commission,3 the Court approved of a situation where the administrative order for relief involved a civil penalty to be paid to the U.S. Government. Both cases emphasized the public nature of the right being vindicated. In Jones and Laughlin, supra, the Court upheld the constitutionality of the National Labor Relations Board's (NLRB) authority to conduct administrative hearings based on unfair labor practice charges filed and to order monetary relief as well as reinstatement to victims. The Supreme Court specifically stated that, "the right of employees to self-organization and to have representatives of their own choosing for the purpose of collective bargaining is often an essential condition of industrial peace."4 The Court was really giving great weight to the NLRB's role of enforcing public policy as provided for in the National Labor Relations Act (NLRA). Atlas Roofing, supra, reaffirmed the principles of Jones and Laughlin. It too was concerned with a public right. In Atlas Roofing, the Supreme Court~ upheld the administrative scheme in operation at the Occupational Safety and Health Review Commission (OSHRC) which provided for the assessment of a civil penalty against a violator without guaranteeing an employer the right to a jury trial. The Court wrote: I ...in cases in which "public rights" are being litigated--e.g. cases in which the Government sues in its sovereign capacity to enforce‘ public rights created by statutes within the power of Congress to enact--the Seventh Amendment does not prohibit Congress from 2 301 u.s. 1 (1937). 3 430 u.s. 442 (1977). 4 301 u.s. at 42. CRS-5 assigning the fact finding function and initial adjudication to an administrative forum with which the jury would be incompatible.5 The Supreme Court made it clear in Atlas Roofing that Congress had considerable discretion in deciding which forum the protection of public rights should be assigned. The Court noted that: Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevented from committing some new types of litigation to administrative agencies with special competence in the relevant field. This is the case even if the Seventh Amendment would have required a jury where the adjudication of those rights is assigned to a federal court of law instead of an administrative agency. The Court emphasized in Atlas Roofing "that the Seventh Amendment was never intended to establish the jury as the exclusive mechanism for fact finding in civil cases."7 It refused to interpret the Amendment to act as an "impenetrable barrier to administrative fact finding under otherwise valid federal regulatory statutes."3 The Court sustained Congress‘ authority to create new public rights and remedies by statute and to vest their enforcement in an administrative agency where the factfinding is not done by juries, instead of a court of law. In upholding the administrative scheme for enforcement of the provisions of OSHA, the Court concluded: Congress found the common-law and other existing remedies for work injuries resulting from unsafe working conditions to be inadequate to protect the Nation's working men and women. It created a new cause of action and remedies therefor, unknown to the common law, and placed their enforcement in a tribunal supplying speedy and expert resolutions of the issues involved. The Seventh Amendment is no bar 5 430 U.S. at 450. 6 ;g. at 455. 7 ;g. at 460. 3 Id. CRS-6 to the creation of new rights or to their enforcement outside the regular courts of law.9 Based upon the U.S. Supreme Court's rulings in Jones and Laughlin and Atlas Roofing, it would seem fair to conclude that there are no constitutional infirmities inherent in the administrative enforcement scheme set out in S. 558, the Fair Housing Act Amendments of 1987. Enforcement by a Federal Magistrate An alternate proposal that may be offered as an amendment to the Fair »Housing Act Amendments of 1987 is to have federal magistrates conduct hearings of housing discrimination complaints under Title VIII of the Fair Housing Act. Federal magistrates are not Article III judges, and initially, it would seem that this might raise some constitutional and jurisdictional questions. However, since the U.S. Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co.,lO holding that the non-article III judges of the bankruptcy court could not constitutionally exercise at least part of the jurisdiction vested in them by the Bankruptcy Reform Act of 1978, the Supreme Court has rendered two other decisions distinguishing Northern Pipeline and clarifying when the role of non-article III judges is constitutionally valid. These two cases are Thomas v. Union Carbide Agricultural Products Co.,11 and Commodity Futures Trading Commission v. Schor.12 Moreover, all of the U.S. circuit courts of appeals have upheld the constitutionality of the Federal Magistrate Act and the magistrate system of enforcement. 9 ;g. at 461. 10 458 u.s. 50 (1982). 11 473 u.s. 568 (1985). 12 106 S.Ct. 3245 (1986). CRS-7 Article III, section 1 of the U.S. 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 will from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Office during good Behavior, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.13 The two main requirements of Article III are that the judges of those courts have life tenure and be free of salary diminution. However, the U.S. Supreme Court has noted that there are three categories of inferior courts exempt from Article III's requirements: military tribunals, adjuncts to article II courts, and legislative courts created pursuant to article I.14 Congress has relied upon these article III exemptions when it has felt that there was a need to relieve the caseload burden in the federal courts. Thus, Congress enacted the Bankruptcy Reform Act of 1978,15 creating bankruptcy courts, and it amended the Federal Magistrate Act of 1979 to add section 636 (c) allowing, with the consent of the parties, federal magistrates, appointed for eight year terms, to conduct civil trials and enter judgments.16 In the Northern Pipeline case, the Supreme Court attempted to clarify the meaning of article III. A divided Court could not agree on the precise scope and nature of article III's limitations. The Court did observe, however, that an absolute construction of article III was not possible in this area of "frequently arcane distinctions and confusing precedents."17 The Court's 13 U.S. Constitution, Article III, section 1. 14 See Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. at 66, 81; American Insurance Co. v. Canter, 26 U.S. (1 Pet.) 511 (1828). 15 28 u.s.c. 161-166, 771-775, 1471-1482 (1932). 16 28 u.s.c. 636 (1982). 17 Northern Pipeline, supra, 458 U.S. at 90 (opinion concurring in judgment). FCRS-8 plurality held in Northern Pipeline that Congress may not vest in a non-Article III court the power to adjudicate, issue final judgment and binding orders in a traditional contract action arising under state law, without the consent of the litigants, and subject only to ordinary appellate review.18 In Thomas v. Union Carbide Agricultural Products Co.,19 The U.S. Supreme Court distinguished its earlier decision in Northern Pipeline. According to the facts in Union Carbide, section 3 (c) (1) (D) (ii) of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) authorizes EPA to consider certain previously submitted data only if the "follow-on" registrant has offered to compensate the original registrant for use of the data, and provides for binding arbitration if the registrants fail to agree on compensation. The arbitrator's decision is subject to judicial review only for "fraud, misrepresentation, or other misconduct." The firms engaged in the development and marketing of these chemicals challenged the constitutionality of the arbitration provisions contending that they violated article III of the Constitution by giving arbitrators the functions of judicial officers and limiting review by an article III court. The Supreme Court disagreed with their interpretation of Northern Pipeline and held that their claims to compensation under FIFRA were not a matter of state law.20 The Court specifically wrote: For purposes of compensation under FIFRA's regulatory scheme, however, it is the "mandatory licensing provision" that creates the relationship between the data submitter and the follow-on registrant, and federal law supplies the rule of decision.21 18 458 U.S., at 84 (plurality opinion); id., at 90-92 (opinion concurring in judgment); id., at 92 (Burger, C.J., dissenting). A 19 473 u.s. S68 (1985). 20 ;g. at 584-585. 21 ;g. at 535. CRS-9 The Supreme Court also examined the nature of the right at issue in Union Carbide and concluded that it was a "public" and not a "private" right to compensation. The Court relied on one of its earlier decisions, Crowell v. Benson,22 where it emphasized the importance of examining the substance of an issue. In Crowell, the Court stated: In deciding whether Congress, in enacting the statute under review, has exceeded the limits of its authority to prescribe procedure..., regard must be had, as in other cases where constitutional limits are invoked, not to mere matters of form but to the substance of what is required.23 Interpreting its holding in Crowell, the Court in Union Carbide noted "that practical attention to substance rather than doctrinaire reliance on form categories should inform application of Article III."24 Applying this standard to the FIFRA scheme, the Court concluded that the arbitration mechanism adopted by Congress did not contravene Article III: First, the right created by FIFRA is not a purely "private" right, but bears many of the characteristics of a "public" right. Use of a registrant's data to support a follow-on registration serves a public purpose as an integral part of a program safeguarding the public health. Congress has the power, under Article I, to authorize an agency administering a complex regulatory scheme to allocate costs and benefits among voluntary participants in the program without providing an Article III adjudication. It also has the power to condition issuance of registrations or licenses on compliance with agency procedures. Article III is not so inflexible that it bars Congress from shifting the task of data evaluation from the agency to the interested parties.25 The Court further found in Union Carbide that the use of civilian arbitrators, selected by agreement of the parties or appointed on a case-by-case basis by an independent federal agency, did not detract from impartial decisionmaking. The 22 285 u.s. 22 (1932). 23 285 u.s. at 53. 24 473 u.s. at 587. 25 ;g. at 589. CRS-10 Court approved of what it viewed as an expeditious way to proteoD'the public health and saw no threat to the independence of the Judiciary. .Finally, the Court in Union Carbide found that FIFRA limited but did not prevent review of the arbitration proceeding by an Article III court.26 In upholding the arbitration scheme in FIFRA, the Court concluded 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. 7 * t In Commodity Futures Trading Commission v. Schor,28 the Supreme Court followed its reasoning in Union Carbide, supra, and held that the Commodity Futures Trading Commission's (CFTC) assumption of jurisdiction over common-law counter-claims did not violate Article III. Under the facts in Schor, futures customers filed reparations complaints with the CFTC, and a broker filed a counterclaim to recover the debit balance of accounts. The precise issue before the Court was whether the Commodity Exchange Act, 7 U.S.C;=l et seq., empowered the CFTC to entertain state law counterclaims in reparation proceedings, and if so, whether that grant of authority violated Article III. The Supreme Court ruled in the affirmative with respect to each aspect of the issue. As in Union Carbide, the Court relied on Crowell and applied a flexible interpretation to the language in article III.29 The Court specifically noted that: Our precedents also demonstrate...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...Moreover, as a personal 26 ;g. at 592. 27 Id. at 594. 28 106 s. Ct. 3245 (1986). 29 106 s. Ct. at 3256. CRS-ll 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 and criminal matters must be tried. Under the facts of Schor, there was an intentional decision made on Schor's part to forego his right to proceed in state or federal court and instead to seek relief in a CFTC reparations proceeding.31 Another consideration, however, is the matter of maintaining the proper balance of power among the branches of the Federal Government and preserving the independence of the Judiciary. The Court in Schor emphasized: To the extent that this structural principle is 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, section 2...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.32 The Court does not have rigid rules that it applies to ascertain the extent to which a congressional decision to authorize adjudication of Article III business in a non-Article III forum impermissibly violates the institutional integrity of the Judiciary. Instead, it considers a number of factors, and its approach is a pragmatic one: 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 30 I_. at 3256. 31 g_. at 3257. 32 1 . at 3257-3258. CRS-12 to be adjudicated, and the concerns that drove Congress to depart from the requirements of Article III. After going through the above analysis and weighing the respective factors, the Court in Schor concluded that, from a practical standpoint, there was no constitutional problem with the scheme set up by the Commodity Exchange Act (CEA) even though the CFTC had jurisdiction over common law counterclaims. It‘ noted that: 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...3 The CFTC deals with a "particularized area of law"; its orders are enforceable only by an order of the district court and are reviewed under the same "weight of the evidence" standard sustained in Crowell. The foregoing factors "distinguished Schor from Northern Pipeline. Moreover, as in Crowell, the CFTC's legal rulings are subject to de E913 review. This was not true of the bankruptcy courts. The Court in §£h9£ also looked at the nature of the claim at issue. It was determined to be a "private" right; however, guided by its earlier rulings, in Crowell and Union Carbide, the Court chose to be guided by substance instead of form.35 The Court thus concluded: 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 33 ;g. at 3258. 34 Id. at 3258. 35 ;g. at 3259-3260. CRS-13 readily understandable given the perception that the CFTC was relatively immune from political pressures...and the obvious expertise that the Commission possesses in applying the CEA and its own regulations. This reparations scheme itself is of unquestioned constitutional validity...It was only to ensure the effectiveness of this scheme that Congress authorized the CFTC to assert jurisdiction over common law counterclaims. Thus, when trying to determine the constitutionality of a non-Article III procedure, the Supreme Court has indicated that one must weigh numerous factors, including the unique aspects of the congressional plan in question and its practical consequences in light of the bigger concerns that underlie Article III. In addition to the fact that the Supreme Court in decisions subsequent to Northern Pipeline upheld non-article III proceedings in an arbitration context (Union Carbide) and in an administrative agency context (Schor) and in essence formulated a broader, more flexible framework of analysis in evaluating the constitutionality and jurisdictional validity of congressionally created non= article III schemes of enforcement, all of the U.S. circuit courts of appeals have expressly upheld the constitutionality of Section 636 (c) of the Federal Magistrate Act.37 36 18. at 3260. 37 Adams v. Heck1er,794 F.2d 303 (7th Cir. 1986); K.M.C. Co., Inc. v. Irving Trust Co., 757 F.2d 752, 755 (6th Cir. 1985); Gairola v. Commissioner of Va. Dept. of General Services, 753 F.2d 1281, 1284-1285 (4th Cir. 1985); D.L. Auld Co. v. Chroma Graphics Corp., 753 F.2d 1029, 1031-1032 (Fed. Cir. 1985), cert. den., U.S. , 106 s.cc. 83; U. s. v. Dobey, 751 F.2d 1140 (10th Cir. 1985); Fields v. Washington Metropolitan Area Transit Authority, 743 F.2d 890, 893-895 (D.C. Cir. 1984); Geras v. Lafayette Display Fixtures, Inc., 742 F.2d 1037, 1045 (7th Cir. 1984); Lehman Brothers Kuhn Loeb, Inc. v. Clark 011 & Refining Co., 739 F.2d 1313, 1316 (8th Cir. 1984) ( en banc), cert. den., u.s.___, 105 s.cc. 906; Puryear v. Ede's Ltd., 731 F.2d 1153, 1154 (5th Cir. 1984); Collins v. Foreman, 729 F.2d 108, 120 (2d Cir. 1984), cert. den., U.S.___, 105 S. Ct. 218; Goldstein v. Kelleher, 728 F.2d 32, 36 (1st Cir 1984), cert. den., U.S.___, 105 S. Ct. 172; Pacemaker Diagnostic Clinic Inc., v. Instromedix, Inc., 725 F.2d 537, 547 (9th Cir. 1984) (en banc), cert. den.,___ U.S.___, 105 S. Ct. 100; Wharton-Thomas v. U.S., 721 F.2d 922, 929-930 (3d Cir. 1983). CRS-14 The Federal Magistrate Act allows district court judges to refer civil matters to federal magistrates. The Act permits these magistrates, with the consent of the parties, to conduct a jury or non-jury trial and to order the entry of a final judgment.38 38 28 U.S.C. 636 (c) (1982) provides in pertinent part: Notwithstanding any provision of law to the contrary-- (1) Upon the consent of the parties, a full-time United States magistrate or a part-time United States magistrate who serves as a full-time judicial officer may conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in the case, when specially designated to exercise such jurisdiction by the district court or courts he serves. (Upon the consent of the parties, pursuant to their specific written request, any other part-time magistrate may exercise such jurisdiction, if such magistrate meets the bar membership requirements set forth in section 631 (b) (1) and the chief judge of the district court certifies that a full-time magistrate is not reasonably available in accordance with guidelines established by the judicial council of the circuit. when there is more than one judge of a district court, designation under this paragraph shall be by the concurrence of a majority of all the judges of such district court, and when there is no such concurrence, then by the chief judge. (2) If a magistrate is designated to exercise civil jurisdiction under paragraph (1) of this subsection, the clerk of court shall, at the time the action is filed, notify the parties of their right to consent to the exercise of such jurisdiction. The decision of the parties shall be communicated to the clerk of court. Thereafter, neither the district judge nor the magistrate shall attempt to persuade or induce any party to consent to reference of any civil matter to a magistrate. Rules of court for the reference of civil matters to magistrates shall include procedures to protect the voluntariness of the parties’ consent. ) (3) Upon entry of judgment in any case referred under paragraph (1) of this subsection an aggrieved party may appeal directly to the appropriate United States court of appeals from the judgment of the magistrate in the same manner as an appeal from any other judgment of a district court. In this circumstance, the consent of the parties allows a magistrate designated to exercise civil jurisdiction under paragraph (1) of this subsection to direct the entry of a judgment of the district court in accordance with the Federal Rules of Civil Procedure. Nothing in this paragraph shall be construed as a limitation of any party‘s right to seek review by the Supreme Court of the United States. (4) Notwithstanding the provisions of paragraph (3) of this subsection, at the time of reference to a magistrate, the parties may further consent to appeal on the record to a judge of the district court in the same manner as on an appeal from a judgment of the district court to a court of appeals. Wherever possible the local rules of the district court and the rules promulgated by the conference shall endeavor to make such appeal expeditious and inexpensive. The district court may affirm, reverse, modify, or remand the magistrate's judgment. (5) Cases in the district courts under paragraph (4) of this subsection may be reviewed by the appropriate United States court of appeals CRS-15 Federal magistrates are like adjuncts and legislative courts in the sense that they do not enjoy article III salary and tenure protections. They are dissimilar, however, because they have the power to adjudicate cases involving private rights created by common law. The only limitation contained in 28 U.S.C. 636 (c) is that the type of cases federal magistrates adjudicate to final judgment be civil matters. Another distinction between adjuncts and legislative courts and magistrates is that Congress controls the former, whereas the Judiciary controls the latter to a greater extent.‘ The Judiciary controls magistrates through their dockets. However, Congress has limited the Judiciary's power to appoint and remove magistrates.39 It also controls the general salary level of magistrates and can reduce it whenever it chooses. Thus, there is not complete autonomy from Congress. However, the fact that article III judges control the magistrates‘ dockets contributes considerably to their independence and distance from political influence and pressure. The magistrate system was designed to assist in relieving the backlog of cases in the federal district courts and to assist in expediting the administration of justice. While the Supreme Court's decision in Northern Pipeline may have raised doubts as to the constitutionality of the Federal Magistrate Act, all of the circuit courts have since upheld the Act and distinguished Northern Pipeline.40 Generally, most of the circuits pointed to some or all of the following factors in upholding the magistrate system: the reference to a upon petition for leave to appeal by a party stating specific objections to the judgment. Nothing in this paragraph shall be construed to be a limitation on any party's right to seek review by the Supreme Court of the United States. (6) The court may, for good cause shown on its own motion, or under extraordinary circumstances shown by any party, vacate a reference of a civil matter to a magistrate under this subsection. 39 28 u.s.c. 631 (e) and 631 (1). 40 See n.37 infra. CRS-16 magistrate is consensual; the consent must be voluntary; the district judge has the power to withdraw a reference; the magistrate is appointed by the district judges, is part of the district court, and is specially named to try cases; and the parties have a right of appeal to the appropriate U.S. court of appeals. Alternatively, the parties may consent to appeal to a judge of the district court. In all instances, whether the initial appeal is to the court of appeals pursuant to 28 U.S.C. 636 (c) (3) (as a matter of right) or to the district court under 28 U.S.C. 636 (c) (4) (by agreement of the parties), the parties retain the right to seek ultimate review by the U.S. Supreme Court under 28 u.s.c. 636 (c) (S).41 A reading of the circuit courts of appeals decisions reveals the importance of the litigants‘ consent as critical to the constitutionality of the magistrate scheme of enforcement. For example, the Third Circuit explicitly discussed litigant consent as the principal distinction between the decision in Northern Pipeline, concerning the Bankruptcy Reform Act, and the constitutionality of section 636 (c) of the Magistrate Act.42 The Wharton- Thomas court quoted Northern Pipeline as holding that a "traditional" state common-law action, not made subject to a federal rule of decision, and related only peripherally to an adjudication of bankruptcy under federal law, must, absent the consent of the litigants, be heard by an "Article III court" if it is to be heard by any court or agency of the United States.43 The Third Circuit noted that, "The lack of consent by the litigants is thus a critical element of Northern Pipeline, but in the case at hand there is 41 See especially, Wharton-Thomas v. U.S., 721 F.2d 922, 929-930 (3rd ,Cir. 1983). 42 721 F.2d 922, at 925-26 (1983). 43 Id. at 926 (citing Northern Pipeline (Burger, C.J., dissenting)) (emphasis supplied by Third Circuit). CRS-17 consent--uncoerced and submitted pursuant to statutory safeguards."44 It further observed that the 1itigants' consent "went not to the jurisdiction of the district court as an entity, but to the judicial officer within the court who conducted the trial."45 The court pointed out that this waiver of a particular kind of trial or factfinder was not unknown. It compared the situation of consenting to a trial by a magistrate to the waiver of a jury trial.46 The significance of Article III and "consent" has been discussed by some legal scholars. One commentator wrote: ...the purpose of article Illis tenure and salary provision is to guarantee that federal judges can adjudicate cases free from interference by the political branches. In order to effectuate this goal, a judge with article III protections must possess ultimate control over every federal adjudication. Yet an article III judge need not render the final decision in every case. Article III's purpose indicates that it is a structural provision; it guards institutional values that transcend the interests of private litigants. Thus, consent by the litigants is both unnecessary and insufficient to cure a defect under article III.47 This same commentator, however, points out that there are circumstances when the due process clause of the Fifth Amendment may entitle litigants to a final decision by an Article III judge. This due process right is waivable.48 Section 636 (c) of the Magistrate Act with its waiver provision thus enables the law to pass constitutional muster, especially when challenged on due process grounds. 44 Id. at 926 (referring to 28 U.C.C. 636 (c) (2). 45 E_ 46 lg, 47 Note, "Federal Magistrates and the Principles of Article III," 97 Harvard Law Review 1947, 1953-1954 (1984). 43 ;g. at 1962-1963. CRS-18 with respect to the Federal Magistrate Act itself, Congress recognized ythat some of the cases that would be heard by magistrates were cases required to be heard by an Article III tribunal unless parties consented to magistrates. Thus, in order to avoid procedural complications, Congress chose to establish a uniform rule requiring consent in all cases. The circuit courts of appeals decisions upholding the constitutionality of the Federal Magistrate Act turned for the most part on the presence of the consensual reference requirement. On the other hand, in the context of the magistrate enforcement scheme under the proposed 1987 Fair Housing Amendments, it seems that Congress can dispense with the litigant consent requirement if it wants to because the hearing of housing discrimination complaints involves more of a "public" as opposed to a "private" right. The Supreme Court's decisions in Union Carbide, supra, and Schor, supra, are relevant in this regard, with the holding in the former being controlling on this point. Relying on its earlier decision in Crowell, supra, the Court emphasized in Union Carbide, supra, that substance and not form was critical to its Article III analysis. It pointed out that: The Court has treated as a matter of "public right" an essentially adversary proceeding to invoke tariff protections against a competitor, as well as an administrative proceeding to determine the rights of landlords and tenants. See Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. 442, 454-455 (1977), citing as an example of "public rights" the federal landlord/tenant law discussed in Block v. Hirsh, 256 u.s. 135 (1921); Ex Parte Bakelite Corp., 279 U.S. 438, 447 (1929) (tariff dispute). These proceedings surely determine liabilities of individuals. . . In essence, the public rights doctrine reflects simply a pragmatic understanding that when Congress selects a quasi-judicial method of resolving matters that "could be conclusively determined by the Executive and Legislative Branches," the danger of encroaching on the judicial powers is reduced. Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S., at 68 CRS-19 (plurality opinion), citing Crowell v. Benson, 285 u.s., at 50.4 Just as the Court found in Union Carbide that the right created by Congress in FIFRA was not a purely "private" right, but bore many of the traits of a "public" right, the same conclusion can be reached with respect to the proposed Fair Housing Act Amendments of 1987. In Union Carbide, the Court approved of Congress‘ enactment in FIFRA of an enforcement scheme that provided for binding arbitration to resolve intractable disputes. The Court wrote: Removing the task of valuation from agency personnel to civilian arbitrators, selected by agreement of the parties or appointed on a case-by-case basis by an independent federal agency, surely does not diminish the likelihood of impractical decisionmaking, free from political influence.50 Thus, the critical factors leading the Court to uphold the scheme in FIFRA included consideration of 1) the nature of the right at issue and 2) the concerns motivating Congress. As long as the independent role of the Judiciary is not implicated, then there is no need for a consent requirement and the scheme does not violate Article III. In Schor, supra, a "private" right was in issue, and consent was, therefore, a critical requirement in order that the CFTC enforcement scheme not run afoul of Article III. The Supreme Court in §ghg£ stated that the party has the option of having his claim adjudicated in an Article III court, but instead voluntarily chose to waive this right and proceed in the administrative forum, i.e., the CFTC, utilizing the "quicker and less expensive procedure Congress had provided him."51 The Court pointed out that, "as a personal right, Article III's 49 Union Carbide, supra, 473 u.s. at 588-589. 50 ;g. at 590. 51 Schor, supra, 106 S.Ct. 3245, at 3257. CRS-20 guarantee of an impartial and independent federal adjudication is subject to waiver.52 One other issue that has been raised with respect to the proposed magistrate scheme of enforcement under the 1987 Fair Housing Act Amendments is whether the parties are entitled to a jury trial. Section 636 (c) (1) of the Magistrate Act itself specifically provides that a magistrate "may conduct any or all proceedings in a jury or nonjury civil matter..." As discussed earlier in this report, in the administrative context with the enforcement lodged in the agency and the ALJ, the Supreme Court held in Atlas Roofing that the Seventh Amendment (guaranteeing a jury trial) was no bar to the creation of new rights or to their enforcement outside regular courts of law.53 Such is probably not the case in the magistrate context. In Eullv. g;§.,54 the U.S. Supreme Court recently ruled that the Seventh Amendment guarantees a jury trial to determine liability in actions by the Government seeking civil penalties and injunctive relief under the Clean Water Act. The Court examined both the nature of the actions and the remedies sought in reaching its conclusion. In the case of the Clean Water Act, the Court determined that they were more similar to "Suits at common law" within the meaning of the Seventh Amendment than they were to cases traditionally tried in courts of equity. The Court wrote: Actions by the Government to recover civil penalties under statutory provisions therefore historically have been viewed as one type of action in debt requiring trial by jury. 52 ;g. at 3256. 53 430 u.s. 442 at 461. 54 No. 85-1259, Slip Opinion, April 28, 1987. 55 ;g. at 6. CRS-2 1 In Tull, the Federal Government was seeking penalties of over $22 million for violation of the Clean Water Act, and it got a judgment for $325,000. The Court had no difficulty in concluding that the Seventh Amendment's guarantee of a jury trial attached. Arguably, the Fair Housing Act Amendments of 1987 provide an analogous situation since the U.S. could in certain instances be seeking relief for an injury to the public. According to the Supreme Court in Tull, the most important factor to consider when ascertaining if the Seventh Amendment jury trial guarantee attaches is characterizing the type of relief that is being sought. Civil penalties and punitive damages have, for example, been traditionally viewed as forms of relief sought in actions in courts of law and not courts of equity. The Court also pointed out in Tull that when a legal claim and an equitable claim for relief are combined then the petitioner's right to a jury trial attaches to both; and "The right cannot be abridged by characterizing the legal claim as 'incidental' to the equitable relief sought."56 The Court in Tull concluded that the actual assessment of civil penalties could be done by a judge and did not have to be done by a jury.57 Thus, the Court found that, ...the Seventh Amendment required that the petitioner's demand for a jury trial be granted to determine his liability, but that the trial court and not the jury should determine the amount of penalty, if any.58 I Q. I , I I; J,’ . : L‘ U ; \ I I , \ ; 5 / 'm r,' I ' ._ ~- .' " .// //) /I, “_. /,4 \ . \ I. .I{/\.. .v, / 4 ' I Vv ‘ 4 ‘ I f " Karen!J. Lewis Legiélatiwé Attorney American Law Division May 8, 1987 q" / 56 id. at 12 (quoting from Curtis v. Loether, 415 U.S. at 196, n. 11). 57 ;g. at 14. A 58 Id. 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