[House Report 106-976]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-976
======================================================================
FEDERAL AGENCY COMPLIANCE ACT
_______
October 12, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Gekas, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1924]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1924) to prevent Federal agencies from pursuing
policies of unjustifiable nonacquiescence in, and relitigation
of, precedents established in the Federal judicial courts,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
TABLE OF CONTENTS
Page
The Amendment.............................................. 2
Purpose and Summary........................................ 2
Background and Need for the Legislation.................... 4
Hearings................................................... 8
Committee Consideration.................................... 8
Votes of the Committee..................................... 8
Committee Oversight Findings............................... 10
Committee on Government Reform Findings.................... 10
New Budget Authority and Tax Expenditures.................. 10
Congressional Budget Office Cost Estimate.................. 11
Constitutional Authority Statement......................... 12
Section-by-Section Analysis and Discussion................. 12
Agency Views............................................... 16
Changes in Existing Law Made by the Bill, as Reported...... 22
Dissenting Views........................................... 25
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Federal Agency Compliance Act''.
SEC. 2. PROHIBITING AGENCY NON-ACQUIESCENCE IN APPELLATE PRECEDENT.
(a) In General.--Chapter 7 of title 5, United States Code, is
amended by adding at the end the following:
``Sec. 707. Adherence to court of appeals precedent
``(a) Except as provided in subsection (b), an agency (as defined
in section 701(b)(1) of this title) shall in civil matters, in
administering a statute, rule, regulation, program, or policy within a
judicial circuit, adhere to the existing precedent respecting the
interpretation and application of such statute, rule, regulation,
program, or policy, as established by the decisions of the United
States court of appeals for that circuit.
``(b) An agency is not precluded under subsection (a) from taking a
position, either in an administrative proceeding or in litigation, that
is at variance with precedent established by a United States court of
appeals if--
``(1) it is not certain whether the administration of the
statute, rule, regulation, program, or policy will be subject
to review exclusively by the court of appeals that established
that precedent or a court of appeals for another circuit;
``(2) the Government did not seek further review of the
case in which that precedent was first established, in that
court of appeals or the United States Supreme Court, because--
``(A) neither the United States nor any agency or
officer thereof was a party to the case; or
``(B) the Solicitor General determines or the
agency officer responsible for such determination
determines the decision establishing that precedent was
otherwise substantially favorable to the agency; or
``(3) it is reasonable to question the continued validity
of that precedent in light of a subsequent decision of that
court of appeals or the United States Supreme Court, a
subsequent change in any pertinent statute or regulation, or
any other subsequent change in the public policy or
circumstances on which that precedent was based.''.
(b) Clerical Amendment.--The table of sections for chapter 7 of
title 5, United States Code, is amended by adding at the end the
following new item:
``707. Adherence to court of appeals precedent.''.
SEC. 3. AVOIDING UNNECESSARILY REPETITIVE LITIGATION.
(a) In General.--Chapter 7 of title 5, United States Code, is
amended by adding at the end the following:
``Sec. 708. Avoiding unnecessarily repetitive litigation
``In supervising the conduct of civil litigation, the officers of
any agency of the United States authorized to conduct litigation,
including the Department of Justice acting under sections 516 and 519
of title 28, United States Code, should seek to ensure that the
initiation, defense, and continuation of proceedings in the courts of
the United States, within, or subject to the jurisdiction of, a
particular judicial circuit, avoids unnecessarily repetitive litigation
on questions of law already uniformly resolved against the United
States in 3 or more courts of appeals. A decision on whether to iniate,
defend, or continue litigation is not subject to review in any court by
mandamus or otherwise on the grounds that the decision violates this
section.''.
(b) Clerical Amendment.--The table of sections for chapter 7 of
title 5, United States Code, is amended by adding at the end the
following new item:
``708. Avoiding unnecessarily repetitive litigation.''.
Purpose and Summary
The Federal Agency Compliance Act, H.R. 1924, generally
prevents agencies in civil matters from refusing to follow
controlling precedents of the United States courts of appeals
in the course of program administration and litigation. The
Committee on the Judiciary (hereinafter referred to as
committee) believes that citizens who file claims or who
otherwise are involved in proceedings with Federal agencies
have the right to expect that those agencies will obey the law
as interpreted by the courts. Moreover, the committee believes
that agencies should be discouraged from relitigating settled
questions of law in multiple circuits. Unnecessary litigation
is a needless expense for both the Government and private
parties and a waste of limited judicial resources. The bill is
based upon a recommendation by the Judicial Conference of the
United States that Congress ``* * * enact legislation to--(a)
generally prohibit agencies from adopting a policy of non-
acquiescence to the precedent established in a particular
Federal circuit; and (b) require agencies to demonstrate
special circumstances for relitigating an issue in an
additional circuit when a uniform precedent has been
established already in multiple courts of appeals.'' \1\
---------------------------------------------------------------------------
\1\ Judicial Conference of the United States, Long Range Plan for
the Federal Courts 34 (1995) (Recommendation 11).
---------------------------------------------------------------------------
H.R. 1924 addresses the two kinds of agency
nonacquiescence: intracircuit nonacquiescence--refusal to
follow controlling appellate precedent within a specific
Federal judicial circuit; and intercircuit nonacquiescence--
relitigating in other judicial circuits issues on which
precedents have already been established in multiple
circuits.\2\ Regarding intracircuit nonacquiescence, the bill
generally requires an agency in civil matters to follow
relevant existing court of appeals precedent in that circuit.
The committee, however, recognizes that an agency should be
able to assert a position contrary to precedent in limited
circumstances, for example, such as when intervening legal,
factual, or public policy developments may have undermined or
changed the rationale for the earlier decision.
---------------------------------------------------------------------------
\2\ See Samuel Estreicher & Richard L. Revesz, Nonacquiescence by
Federal Administrative Agencies, 98 Yale L.J. 679 (1989).
---------------------------------------------------------------------------
With respect to intercircuit nonacquiescence, the committee
believes that agencies should not repeatedly relitigate legal
issues that have been uniformly resolved against the Government
or one of its agencies. The bill provides that officers of any
agency of the United States authorized to conduct litigation,
including the Department of Justice, should seek to ensure that
the initiation, defense, and continuation of proceedings in the
courts of the United States, avoid unnecessarily repetitive
litigation on questions of law already uniformly resolved
against the United States in three or more courts of appeals.
The committee believes that it is important to conserve
judicial and agency resources, as well as those of citizens and
businesses that would otherwise be required to participate in
unnecessary litigation. However, a decision by an agency under
this provision is not subject to judicial review or
enforcement.
The Federal Agency Compliance Act gives effect to the
principle of stare decisis. An appellate court's decisions
resolving legal issues form precedents, which thereafter serve
as controlling law on the legal points resolved. Stare decisis
as applied to precedents of a United States court of appeals
has been referred to as the ``law of the circuit'' doctrine.
Respect for controlling law provides stability and
predictability to our judicial system facilitating settlement
of disputes and freeing parties from relitigating established
legal precedents. It promotes uniformity by treating everyone
alike within a circuit and providing litigants with a sense of
fairness, regardless of their financial means. H.R. 1924
ensures that Federal agencies, as well as other claimants and
parties, will respect the law of the circuit.
Background and Need for the Legislation
Nonacquiescence is an agency's refusal to adhere to
judicial precedent in handling or resolving a subsequent matter
that presents the same question of law under sufficiently
similar facts. As previously noted, H.R. 1924 addresses both
types--intracircuit and intercircuit nonacquiescence.\3\
---------------------------------------------------------------------------
\3\ During the 105th Congress, Mr. Gekas, the Chairman of the
Subcommittee on Commercial and Administrative Law, introduced similar
legislation, H.R. 1544, together with Mr. Frank of Massachusetts. The
bill was passed by the House on February 25, 1998, by a vote of 241-
173. On September 11, 1997, a substantially similar bill, S. 1166, was
introduced by Senator Ben Nighthorse Campbell. H.R. 1924 was introduced
on May 25, 1999, and Senator Campbell introduced similar legislation,
S. 932, the ``Federal Bureaucracy Accountability Act of 1999,'' on
April 30, 1999.
---------------------------------------------------------------------------
The routine practice of nonacquiescence generates
significant social costs. Even though a party who challenges an
agency decision in court may be certain to prevail based upon
favorable precedent, that party nonetheless has been required
to expend considerable resources to achieve that result.
Moreover, the nonacquiescent agency may continue to apply its
policy to those who are similarly situated, each of whom may
ultimately have to file suit to obtain the relief previously
deemed appropriate by the Federal court. As a prerequisite to
judicial review, those aggrieved by agency action must
generally exhaust their administrative remedies, which may
involve hearings before administrative law judges, applications
to appellate boards, or other proceedings required under the
relevant statute. Thus, the process whereby an aggrieved party
ultimately receives the relief to which the party is entitled
under judicial precedent can be costly and protracted. Agency
nonacquiescence has been an ongoing problem. In their study,
Professors Samuel Estreicher and Richard Revesz trace the
practice back to the 1920's,\4\ noting that since that time
``many agencies have insisted, in varying degrees, on the
authority to pursue their policies, despite conflicting court
decisions.'' \5\ The Social Security Administration (SSA) and
the Internal Revenue Service (IRS) were among those agencies
cited as having practiced nonaquiescence.\6\ In 1975, the
report of the Commission on Revision of the Federal Court
Appellate System (the Hruska Commission) identified significant
concerns about the impact of agency nonacquiescence
practices.\7\ And in the 1980's, the Social Security
Administration was strongly criticized by courts, legal
scholars, and the Congress for its repeated nonacquiescence in
the face of contrary appellate court rulings.\8\
---------------------------------------------------------------------------
\4\ The origin of the practice of nonacquiescence at the Internal
Revenue Service is explained further in Gary L. Rodgers' The
Commissioner Does Not Acquiesce, 59 Neb. L. Rev. 1001, 1004-05 (1980)
(footnotes omitted):
Historically, the practice began in 1924 when the Tax Court
was known as the Board of Tax Appeals. At that time there
was no procedure for direct appeal from the Board's
decision. If the Service lost, it could bring suit in
Federal district court within 1 year to collect any
deficiency disallowed by the Board. In order that taxpayers
who were successful before the Board would not have to wait
a full year to find out if the [S]ervice planned to appeal,
the Commissioner would publish the decision to acquiesce or
nonacquiesce.
---------------------------------------------------------------------------
\5\ See Estreicher & Revesz, supra note 2, at 681.
\6\ Id.
\7\ See Commission on Revision of the Federal Court Appellate
System, Structure and Internal Procedures: Recommendations for Change,
67 F.R.D. 195, app. B at 349-61 (1975).
\8\ Estreicher & Revesz, supra note 2, at 681-82. During the 98th
Congress, the House passed H.R. 3755, ``The Social Security Disability
Benefits Reform Act of 1984,'' which barred SSA intracircuit
nonacquiescence outright. The Senate took a somewhat different
approach, instead mandating procedural safeguards whenever
nonacquiescence was asserted. Although the relevant provisions in each
bill were subsequently deleted, the Conference Report noted that the
decision to eliminate them should ``not be interpreted as approval of
`non-acquiescence' by a Federal agency to an interpretation of a U.S.
Court of Appeals.'' H. Conf. Rep. No. 1039, 98th Cong., 2d Sess. 37
(1984), reprinted in 1984 U.S.C.C.A.N. 3095. During the 99th Congress,
the Subcommittee on Administrative Law and Governmental Relations of
the House Judiciary Committee held hearings on ``Judicial Review of
Agency Action: HHS Policy of Nonacquiescence'' at which a substantial
body of testimony was received against the Social Security
Administration's practice. Judicial Review of Agency Action: HHS Policy
of Nonacquiescence: Hearing Before the Subcomm. on Administrative Law
and Governmental Relations of the House Comm. on the Judiciary, 99th
Cong., 1st Sess. (July 25, 1985).
---------------------------------------------------------------------------
The problem of agency nonacquiescence was also recognized
in 1990 by the Federal Courts Study Committee (the Study
Committee), which was established by Congress to perform a
comprehensive review of the problems and issues facing the
Federal judiciary. In its report, the Study Committee
recommended to Congress that the practice of agency
nonacquiescence in administrative adjudication of Social
Security disability claims be prohibited.\9\ The recommendation
responded to an assertion by the Secretary of Health and Human
Services (whose department at that time included the SSA) of a
right to disregard the precedential holdings of the courts of
appeals if the agency determined that the relevant court
decisions were not in accord with its own policy. The Study
Committee also called upon Congress to explore whether
``legislative control'' should be applied to other executive
branch agencies as well.\10\
---------------------------------------------------------------------------
\9\ Report of the Federal Courts Study Committee 59-60 (1990). In
the Study Committee's view, an exemption from this prohibition should
be recognized for ``test'' cases designated by the Solicitor General.
\10\ Id. at 60.
---------------------------------------------------------------------------
In explaining the Judicial Conference recommendation for
legislation to address the continuing problem, the Long Range
Plan for the Federal Courts noted that the practice of
unjustified nonacquiescence ``undermines the fundamental
principle that an appellate court's decision on a particular
point of law is controlling precedent for other cases raising
the same issue.'' \11\ It went on to cite the practice's
``questionable propriety and inefficiency'' and criticized it
as ``unfair to litigants, many of whom are pro se, who
frequently are unaware of precedent favorable to their cases.''
\12\
---------------------------------------------------------------------------
\11\ Long Range Plan for the Federal Courts, supra note 1, at 35
(commentary on Recommendation 11).
\12\ Id.
---------------------------------------------------------------------------
In a written statement in support of H.R. 1924 submitted to
the subcommittee on behalf of the Judicial Conference of the
United States, Judge Walter K. Stapleton of the United States
Court of Appeals for the Third Circuit, observed:
Over the past several decades, some Federal agencies
have refused to apply, either in a particular case or
across the board in all cases, decisions within the
same circuit that are contrary to the legal positions
taken by the agency. This intra-circuit non-
acquiescence has, at times, resulted in an agency's
issuance of internal instructions to administrative
decision-makers to apply a rule of law at variance with
the circuit precedent. Litigants then have been
required to seek Federal judicial review of agency
action to avail themselves of existing decisional law
in their favor. The Judicial Conference of the United
States believes that when the Federal Government has
had a fair opportunity to litigate an issue in a court
of appeals and has lost, all citizens and businesses
within the court's jurisdiction who the decision favors
are entitled to have the government recognize their
right to equal treatment without having to establish
that right again through costly agency proceedings and
litigation. \13\
---------------------------------------------------------------------------
\13\ Federal Agency Compliance Act: Hearing on H.R. 1924 Before the
Subcomm. on Commercial and Administrative Law of the House Comm. on the
Judiciary, 106th Cong., 1st Sess. [hereinafter Compliance Act Hearing
on H.R. 1924] (written statement of Hon. Walter K. Stapleton, Judge,
U.S. Court of Appeals for the Third Circuit at 3).
In the 105th Congress, Judge Stephen H. Anderson of the
United States Court of Appeals for the 10th Circuit testified
on behalf of the Judicial Conference on H.R. 1544. In his
testimony before the subcommittee, Judge Anderson noted that
nonacquiescence ``violates all our concepts of the rule of law
existing in this country for more than 200 years.'' \14\ He
added that, oftentimes, agency nonacquiesence discourages
meritorious claimants from pursuing what is their right under
favorable precedent.
---------------------------------------------------------------------------
\14\ Federal Agency Compliance Act: Hearing on H.R. 1544 Before the
Subcomm. on Commercial and Administrative Law of the House Comm. on the
Judiciary, 105th Cong., 1st Sess. at 11 (1997) [hereinafter Compliance
Act Hearing on H.R. 1549] (testimony of Hon. Stephen H. Anderson,
Judge, U.S. Court of Appeals for the 10th Circuit).
---------------------------------------------------------------------------
He stated:
This is a matter of the invisible statistic, the
invisible citizen claimant. What happens to the mass of
citizen claimants at the lowest level, the first desk
of an agency's consideration? That action we don't know
about. The only way that we know that something may be
wrong is the announcement over and over again, one way
or the other, by agencies that they have the right to
disregard the law set by the circuit in which they
conduct their affairs.\15\
---------------------------------------------------------------------------
\15\ Id. at 16.
John H. Pickering, Esq., testifying on behalf of the
American Bar Association (ABA) during the 106th Congress, noted
that the ABA has a longstanding interest in the issue of Social
Security nonacquiescence and has frequently criticized its
adverse effects on the bar, the courts and claimants.\16\
---------------------------------------------------------------------------
\16\ Compliance Act Hearing on H.R. 1924, supra note 13 (written
statement of John H. Pickering, Wilmer, Cutler & Pickering, on behalf
of the ABA at 2).
---------------------------------------------------------------------------
The legal and policy concerns surrounding agency
nonacquiescence have been the subject of substantial debate. In
essence, agencies consider it their responsibility to
administer national programs with standards consistent
throughout the country. They argue that adhering to divergent
precedents established by the various courts of appeals
detracts from this goal by fractionalizing those standards. In
defense of intercircuit nonacquiescence, agencies argue that to
freeze the law based upon a decision of one or two circuits
prevents the ``percolation'' of issues that ensures
comprehensive appellate review prior to final resolution by the
Supreme Court.
The committee believes, however, that equity and orderly
governance require that agencies, like private citizens, should
obey the law enunciated by courts of competent jurisdiction. If
an agency disagrees with a court's decision, it has several
options. It can seek further review of the matter by the court
of appeals (the same panel or en banc) or by the Supreme Court
until the issue is finally resolved. It can also seek to
vindicate its position in other courts of appeals and perhaps
obtain review of the matter in the Supreme Court if conflicting
rulings are obtained among the circuits. If the agency
disagrees with the outcome of the judicial process, it can
petition Congress to amend the law. This structure is
consistent with the principle of separation of powers under
which it is the courts' constitutional role to interpret the
laws governing agency actions. It is true that today some
agencies assert that they fully or generally acquiesce in
controlling precedents.\17\ However, some agencies do not
``acquiesce'' in a particular court decision until agency
officials review the judicial opinion and issue a directive to
agency employees to follow the ruling in subsequent
administrative proceedings.\18\ Thus, some agencies appear to
treat controlling precedent as having no binding effect until
the agency interprets such precedent and determines how it
should be implemented.\19\ Under that rationale, the agency has
become, in effect, a review level between the appellate courts
and the Supreme Court, a view that the committee does not
share. The committee believes the Federal agencies are not
entitled to craft their own ``grace periods'' during which they
may decline to observe the law as stated in an otherwise
binding precedent.
---------------------------------------------------------------------------
\17\ The Department of Justice has stated that ``agency
nonacquiescence is uncommon'' and ``[w]here the government has lost a
legal issue in three circuits, the Solicitor General only rarely
permits a fourth appellate test of the issue.'' Letter from Andrew
Fois, Assistant Attorney General, Department of Justice, to Honorable
Henry J. Hyde, Chairman, Committee on the Judiciary (Sept. 17, 1997).
In his written statement on H.R. 1924, William B. Schultz, Deputy
Assistant Attorney General for the Civil Division of the Department of
Justice, added that ``[w]e agree with the general proposition that
agencies should follow court of appeals'' precedent within the
circuit--and in the vast majority of instances that is precisely what
agencies do. Nonacquiescence occurs only in rare cases.'' Compliance
Act Hearing on H.R. 1924, supra note 13 (written statement of William
B. Schultz at 1).
\18\ Compliance Act Hearing on H.R. 1924, supra note 13 (written
statement of Arthur J. Fried, Esq., General Counsel, Social Security
Administration at 3). The SSA issues ``acquiescence rulings'' which
explain how it will apply the decisions of courts of appeals that are
at variance with the agency's national policies for adjucating claims.
These ``rulings'' explain how SSA will apply the appellate court
holding to other cases involving the issue at all levels of
adjudication in the same circuit. See also 20 CFR 404.985 and 416.1485
48,963 (SSA rules on application of circuit precedent to administrative
decision making). During the 105th Congress, Daniel J. Wiles, Deputy
Associate Chief Counsel, Office of Chief Counsel, Internal Revenue
Service, explained the IRS ``Action on Decision'' (AOD) program in
which he noted that in significant cases an AOD is issued which states
whether the IRS position is one of acquiescence, acquiescence in result
or nonacquiescence, supra note 14 at 30-31. Compliance Act Hearing on
H.R. 1544, supra note 14 at 30-31.
\19\ In 1996 a court of appeals reversed an SSA decision applying
regulations the court had invalidated in an earlier case. Although the
agency explained its failure to observe the earlier precedent on
grounds that an ``acquiescence ruling'' had not been issued, the court
rejected that argument, noting:
Regardless of whether the Commissioner formally announces
her acquiescence, however, she is still bound by the law of
this circuit and does not have the discretion to decide
whether to adhere to it. `` `[T]he regulations of [SSA] are
not the supreme law of the land. ``It is, emphatically, the
province and duty of the judicial department, to say what
the law is,'' Marbury v. Madison, 1 Cranch 137, 2 L.Ed. 60
(1803) and the [Commissioner] will ignore that principle at
[her] peril.' '' Hillhouse v. Harris, 715 F.2d 428, 430
(8th Cir. 1983) (per curiam) (quoting Hillhouse v. Harris,
---------------------------------------------------------------------------
547 F.Supp. 88, 93 (W.D. Ark. 1982)).
Hutchison v. Chater, 99 F.3d 286, 287-88 (8th Cir. 1996) (bracketed
language in opinion).
The decision whether or not to acquiesce appears to be
premised on the view that Federal agencies apply legal
principles from court rulings in the administration of a
statutory program only for reasons of comity, not because the
precedent is legally binding on the agency.\20\ As long as an
agency holds the view that following controlling precedent is
optional, the committee believes that this bill is necessary.
No one is above the law, especially Federal agencies, whose
officials are sworn to uphold the rule of law.\21\
---------------------------------------------------------------------------
\20\ United States Department of Energy v. Federal Labor Relations
Authority, 106 F.3d 1158, 1165 (4th Cir. 1997) (Luttig, J. concurring)
(quoting letter from William Kanter, Deputy Director of the Justice
Department's Civil Division Appellate Staff dated Nov. 14, 1996).
\21\ In Allegheny General Hospital v. NLRB, 608 F.2d 965 (3d Cir.
1979), the court observed:
Congress has not given to the NLRB the power or authority
to disagree, respectfully or otherwise, with decisions of
this court. For the Board to predicate an order on its
disagreement with this court's interpretation of a statute
---------------------------------------------------------------------------
is for it to operate outside the law.
Id. at 970 (citation omitted). See also Lopez v. Heckler, 713 F.2d 1432
(9th Cir. 1983).
Hearings
The Subcommittee on Commercial and Administrative Law of
the Judiciary Committee held a hearing on H.R. 1924, the
``Federal Agency Compliance Act,'' on Wednesday, October 27,
1999. Testimony was received from the following witnesses:
Senator Ben Nighthorse Campbell, United States Senator for the
State of Colorado; Honorable Walter K. Stapleton, Judge, U.S.
Court of Appeals for the Third Circuit, submitted a written
statement of behalf of the Judicial Conference of the United
States; William Schultz, Deputy Assistant Attorney General,
Civil Division, United States Department of Justice; Arthur J.
Fried, General Counsel, Social Security Administration; John
Pickering, Chair of the Senior Lawyers Division of the American
Bar Association, Wilmer, Cutler & Pickering; Honorable Ronald
Bernoski, Social Security Administration, Office of Hearings
and Appeals and President of the Association of Administrative
Law Judges, Inc.; and Sheldon Cohen, Senior Counsel, Morgan,
Lewis & Bockius, LLP.
Committee Consideration
On Tuesday, June 20, 2000, the Subcommittee on Commercial
and Administrative Law met in open session and ordered reported
the bill H.R. 1924, with an amendment in the nature of a
substitute by a voice vote, a quorum being present. On Tuesday,
September 19, 2000, the committee met in open session and
ordered reported favorably the bill H.R. 1924 with an amendment
in the nature of a substitute by voice vote, a quorum being
present.
Votes of the Committee
There were six amendments offered during Full Committee
consideration of H.R. 1924.
Mr. Nadler offered an amendment, which was adopted by voice
vote, providing that in order for the section of the bill on
intercircuit nonacquiescence to apply, the precedent in three
or more circuits must have been ``uniformly'' decided against
the position of the government.
Ms. Jackson Lee offered an amendment, which was defeated by
a recorded vote of 9-17, to allow an agency to exercise its
discretion not to acquiesce in an appellate court precedent if
it determines that the precedent would impede the defense and
protection of civil liberties or civil rights.
ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... .............. X ..............
Mr. McCollum.................................................... .............. X ..............
Mr. Gekas....................................................... .............. X ..............
Mr. Coble....................................................... .............. X ..............
Mr. Smith (TX).................................................. .............. X ..............
Mr. Gallegly.................................................... .............. .............. ..............
Mr. Canady...................................................... .............. X ..............
Mr. Goodlatte................................................... .............. .............. ..............
Mr. Chabot...................................................... .............. X ..............
Mr. Barr........................................................ .............. X ..............
Mr. Jenkins..................................................... .............. X ..............
Mr. Hutchinson.................................................. .............. X ..............
Mr. Pease....................................................... .............. X ..............
Mr. Cannon...................................................... .............. X ..............
Mr. Rogan....................................................... .............. .............. ..............
Mr. Graham...................................................... .............. X ..............
Ms. Bono........................................................ .............. X ..............
Mr. Bachus...................................................... .............. X ..............
Mr. Scarborough................................................. .............. X ..............
Mr. Vitter...................................................... .............. .............. ..............
Mr. Conyers..................................................... X .............. ..............
Mr. Frank....................................................... X .............. ..............
Mr. Berman...................................................... .............. .............. ..............
Mr. Boucher..................................................... .............. .............. ..............
Mr. Nadler...................................................... X .............. ..............
Mr. Scott....................................................... X .............. ..............
Mr. Watt........................................................ X .............. ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. X .............. ..............
Ms. Waters...................................................... X .............. ..............
Mr. Meehan...................................................... X .............. ..............
Mr. Delahunt.................................................... .............. .............. ..............
Mr. Wexler...................................................... .............. .............. ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... .............. .............. ..............
Mr. Weiner...................................................... .............. .............. ..............
Mr. Hyde, Chairman.............................................. .............. X ..............
-----------------------------------------------
Total....................................................... 9 17 ..............
----------------------------------------------------------------------------------------------------------------
Mr. Nadler offered an amendment, defeated by a recorded
vote of 11-17, to provide that the requirements of the bill
should apply only to ``agency actions which involve a Federal
health benefits program, a Federal program under which cash is
paid based on need or insurance benefits are paid.''
ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... .............. X ..............
Mr. McCollum.................................................... .............. .............. ..............
Mr. Gekas....................................................... .............. X ..............
Mr. Coble....................................................... .............. X ..............
Mr. Smith (TX).................................................. .............. X ..............
Mr. Gallegly.................................................... .............. .............. ..............
Mr. Canady...................................................... .............. X ..............
Mr. Goodlatte................................................... .............. .............. ..............
Mr. Chabot...................................................... .............. X ..............
Mr. Barr........................................................ .............. X ..............
Mr. Jenkins..................................................... .............. X ..............
Mr. Hutchinson.................................................. .............. X ..............
Mr. Pease....................................................... .............. X ..............
Mr. Cannon...................................................... .............. X ..............
Mr. Rogan....................................................... .............. .............. ..............
Mr. Graham...................................................... .............. X ..............
Ms. Bono........................................................ .............. X ..............
Mr. Bachus...................................................... .............. X ..............
Mr. Scarborough................................................. .............. X ..............
Mr. Vitter...................................................... .............. .............. ..............
Mr. Conyers..................................................... X .............. ..............
Mr. Frank....................................................... .............. X ..............
Mr. Berman...................................................... X .............. ..............
Mr. Boucher..................................................... .............. .............. ..............
Mr. Nadler...................................................... X .............. ..............
Mr. Scott....................................................... X .............. ..............
Mr. Watt........................................................ X .............. ..............
Ms. Lofgren..................................................... X .............. ..............
Ms. Jackson Lee................................................. X .............. ..............
Ms. Waters...................................................... X .............. ..............
Mr. Meehan...................................................... X .............. ..............
Mr. Delahunt.................................................... .............. .............. ..............
Mr. Wexler...................................................... X .............. ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... .............. .............. ..............
Mr. Weiner...................................................... .............. .............. ..............
Mr. Hyde, Chairman.............................................. .............. X ..............
-----------------------------------------------
Total....................................................... 11 17 ..............
----------------------------------------------------------------------------------------------------------------
Mr. Nadler offered three amendments which were considered
en bloc and defeated by a voice vote. Mr. Nadler's amendments
provided: 1) That in order for an agency to be required to
acquiesce to a circuit court of appeals decision it must have
not sought review of that decision because it was not a party
to that decision; 2) To provide that an agency may not be
required to acquiesce to a decision of the circuit court of
appeals if ``further review of the decision was effectively
unavailable''; and 3) To provide that an agency could use a
subsequent decision of a court of appeals other than that which
rendered an otherwise binding precedent to determine that it
``is reasonable to question the continued validity'' of that
precedent and therefore nonacquiesce.
Committee Oversight Findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the committee reports
that the findings and recommendations of the committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform Findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the rules of the House of
Representatives.
New Budget Authority and Tax Expenditures
Clause 2(l)(3)(B) of House Rule XI is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the committee sets forth, with
respect to the bill, H.R. 1924, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 11, 2000.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1924, the Federal
Agency Compliance Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Lanette J.
Keith, who can be reached at 226-2860.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable John Conyers Jr.
Ranking Democratic Member
H.R. 1924--Federal Agency Compliance Act.
H.R. 1924 would require federal agencies to abide by
appellate court precedents in a particular circuit when
administering policies or regulations in that circuit, except
under certain circumstances. The bill also would direct federal
agencies to avoid unnecessary relitigation of legal issues,
especially in instances where three or more judicial circuits
have handed down rulings unfavorable to the government.
CBO estimates that enacting H.R. 1924 would have no
significant impact on the federal budget. Because enactment of
the bill could affect direct spending and receipts, pay-as-you-
go procedures would apply--but the amounts involved would not
be significant. The bill contains no intergovernmental or
private-sector mandates as defined in the Unfunded Mandates
Reform Act and would impose no costs on state, local, or tribal
governments.
Based on information from the Department of Justice (DOJ),
CBO believes that federal agencies are generally in compliance
with federal law and that they usually exercise appropriate
discretion when determining whether an appeal in any particular
case is warranted. For example, the Social Security
Administration (SSA)--one of the agencies potentially most
affected by this bill--already has a policy on acquiescence
that essentially meets the requirements of H.R. 1924. It is
possible that implementing this bill could reduce the amount of
litigation concerning policies and regulations of some federal
agencies. This could lead to lower litigation costs, as well as
changes in the amounts paid for certain federal benefits and
the amount of revenues collected. Based on information from
DOJ, SSA, and the Internal Revenue Service, CBO expects that
the magnitude of such changes would be small.
The CBO staff contact for this estimate is Lanette J.
Keith, who can be reached at 226-2860. This estimate was
approved by Robert A. Sunshine, Assistant Director for Budget
Analysis.
Constitutional Authority Statement
Pursuant to rule XI, clause 2(l)(4) of the Rules of the
House of Representatives, the committee finds the authority for
this legislation in Article I, section 8, clause 18 of the
Constitution.
Section-by-Section Analysis and Discussion
Section 1. Short title
Section 1 titles the bill as the ``Federal Agency
Compliance Act.''
Section 2. Prohibiting agency non-acquiescence in appellate precedent
Section 2(a) adds a new section, section 707, at the end of
chapter 7 of title 5, United States Code, generally to prevent
agencies from pursuing intracircuit nonacquiescence. More
specifically, subsection (a) of section 707 provides that an
agency must adhere in civil matters to controlling precedent
established by the United States court of appeals for a given
judicial circuit in administering a statute, rule, regulation,
program, or policy within that circuit. ``Administering''
includes agency action in an administrative or judicial context
that is required or arises as part of the agency's
responsibilities under a statute, rule, regulation, program, or
policy. The committee believes that citizens should be able to
avail themselves of favorable circuit case law at every level
of the administrative process. Subsection (a) incorporates the
same definition of ``agency'' applicable to other provisions of
the Administrative Procedure Act. While the bill does not
define the term ``precedent,'' it is intended to carry its
common meaning--i.e., a decision that a court will consider as
controlling authority for an identical or similar question of
law within its jurisdiction. Requiring agencies to adhere
within a given judicial circuit to the precedents established
by the respective court of appeals, however, does not bind an
agency to rulings premised on materially distinguishable facts
or circumstances, nor does it limit an agency's ability to seek
clarification of earlier decisions. The requirement to adhere
to a precedent attaches once the decision in which the
precedent is established becomes effective--i.e., when the
mandate of the appellate court issues in accordance with rule
41 of the Federal Rules of Appellate Procedure. If the parties
in a case are bound by the lower appellate decision pending
Supreme Court review, it is appropriate for that decision to
serve as precedent in other indistinguishable cases.\22\
Nevertheless, proceedings in such other cases might be stayed
so that final action is not taken until after the Supreme Court
acts.
---------------------------------------------------------------------------
\22\ Under rule 41(d) of the Federal Rules of Appellate Procedure,
a party may seek a stay of the mandate.
---------------------------------------------------------------------------
Although the bill requires an agency to adhere to
controlling appellate precedent concerning the laws the agency
applies, it is not intended to alter the agency's prosecutorial
or enforcement discretion as recognized in existing case law.
Thus, even if a court of appeals decision establishes precedent
in a given circuit on what acts or omissions constitute a
violation of a particular law, this bill does not require an
agency charged with enforcement of that law to initiate or
continue administrative or judicial proceedings where an
identical or similar act or omission occurs subsequently within
that judicial circuit. Subsection (b) of section 707 specifies
those instances when an agency is not precluded from taking a
position that is contrary to the controlling precedent
established by a court of appeals within the same circuit. This
subsection, in essence, establishes three exceptions to the
requirement in subsection (a). If none of the three exceptions
are applicable to the agency, then it must adhere to the
applicable appellate precedent within that circuit. The first
exception, stated in section 707(b)(1), applies where the
administration of a statute, rule, regulation, program, or
policy could be subject to review by either the court of
appeals that established that precedent or by a court of
appeals for another circuit. This situation occurs where
several venue options exist under the operative statute, and it
is uncertain which circuit will ultimately consider proceedings
for the pending claim or case. For example, any person
aggrieved by a final order of the National Labor Relations
Board (NLRB) can seek review of such order in the circuit in
which the unfair labor practice in question was alleged to have
been engaged, in any circuit in which the person resides or
transacts business, or in the United States Court of Appeals
for the District of Columbia. 29 U.S.C. Sec. 160(f) (1994).
Thus, during the administrative consideration of the alleged
unfair labor practice, it may be uncertain which of the three
potential circuits would review the Board's decision. Even
where multiple venues are possible, the agency must adhere to
any precedents uniformly established by each of the court of
appeals in which venue may lie. And, in any event, appellate
jurisdiction becomes certain once proceedings are initiated in
Federal court. On the other hand, other agencies have more
certainty in the venue options for judicial review. For
example, while the Social Security Act provides for Federal
judicial review where the plaintiff resides or has his or her
principal place of business, SSA decisions are typically
reviewed within the circuit in which the claimant resides.\23\
---------------------------------------------------------------------------
\23\ See 42 U.S.C. Sec. 405(g); see also Estreicher & Revesz, supra
note 2, at 694.
---------------------------------------------------------------------------
The second exception, stated in section 707(b)(2),
recognizes that an agency should not be precluded from
asserting a position contrary to precedent if the Government
did not seek further review of the case in which that precedent
was first established either in that court of appeals or in the
United States Supreme Court because neither the Government nor
any agency or officer thereof was a party to the case; or the
Solicitor General determines, or the agency officer responsible
for such determination determines, that the decision
establishing that precedent was otherwise substantially
favorable to the agency. This section ensures that the court
will have an opportunity to evaluate its precedents in the
context of agency views and expertise that were not available
in the earlier proceeding. In addition, there may be situations
where the Government did not seek further review because the
Government substantially prevailed in the case. If the Solictor
General or the appropriate agency officer determines that that
was the situation, then the Government should not be bound for
all time to rulings on secondary or incidental issues that did
not affect the ultimate result. The third exception, stated in
section 707(b)(3), recognizes that changes in the law or other
relevant developments following the establishment of the
precedent might make it reasonable to question its continued
validity. These possible developments are: (1) a subsequent
decision of that court of appeals or the United States Supreme
Court; (2) a subsequent change in any pertinent statute or
regulation; or (3) any other subsequent change in the public
policy or circumstances on which that precedent was based. An
agency should not seek to relitigate an issue on which there is
established controlling precedent unless there are objectively
reasonable grounds for believing that the appellate court,
consistent with the principle of stare decisis, might decide
the issue differently.
The first development listed above involves those instances
where, in one or more cases subsequent to the establishment of
the precedent, that same appellate court or the Supreme Court
has indicated a possible need for reexamination of the issue by
questioning the validity of the prior holding, indicating a
desire to revisit the issue in a future case, or expressing
frustration at the results of the application of the prior
interpretation. The second development arises when Congress or
the agency changes a statute, regulation, or rule that was
interpreted in the precedent. Such a change, if substantive and
relevant, might provide a basis for the court to overrule or
modify its prior decision. The third development primarily
concerns changes occurring during the passage of time. Shifts
in public policy may sometimes make it reasonable to argue that
an appellate court might approach the same issue differently.
Also, after a court of appeals renders its decision, other
appellate courts might interpret the provision at issue
differently, thereby suggesting a change in circumstances that
could lead the same court to reconsider its former precedent.
The bill does not purport to abrogate or limit any other rules
or principles that may govern the acts or omissions of an
agency. For example, H.R. 1924 does not diminish any existing
obligations of agencies to acquiesce in appellate court
decisions, nor does it otherwise affect existing law with
respect to controlling precedent, the law of estoppel, or the
ethical responsibility of parties and counsel to acknowledge
and characterize faithfully any legal authority that may be
relevant in a particular administrative or judicial proceeding.
Thus, H.R. 1924 should not be interpreted or construed to
lessen the obligation of the Federal Government to adhere to
precedents in any other context.
Unlike section 3 dealing with intercircuit nonacquiescence,
the committee expects that Federal agencies and the Federal
courts will enforce section 2 in appropriate circumstances. A
variety of judicial remedies already exist to address the
government's unwarranted failure to adhere to circuit
precedent. These include the award of sanctions for vexatious
multiplication of proceedings pursuant to Federal procedural
rules and the award of fees and costs under the Equal Access to
Justice Act (28 U.S.C. Sec. 2412). All such sanctions will
remain available to help address agency nonacquiescence with
the law of the circuit. Finally, the committee notes that, in
the past, the Federal courts have occasionally entertained
class actions aimed at overturning an agency's stated policy of
refusing to acquiesce in particular circuit precedents. In
cases of clear non-compliance (and assuming that provisions
otherwise governing review of agency action have been
satisfied), the committee expects that victims of agency
nonacquiescence could bring actions to enforce the provisions
of section 2. Prudential judicial doctrines, such as exhaustion
of administrative remedies and ripeness, would permit a court
to decline to hear claims that would be unnecessarily
disruptive of agency process, thereby minimizing any fears of
significant collateral litigation.
H.R. 1924 adopts a balanced approach. The three exceptions
in section 707(b) provide Federal agencies with sufficient
flexibility to adhere to valid, established precedent so as not
to interfere with continued development of the law. If an
agency asserts the applicability of any of these three factors,
a court will ultimately determine whether the factor is
applicable. Thus, H.R. 1924 preserves the judiciary's
constitutional role of interpreting the law, while allowing
agencies to administer fairly their programs. Section 2(b) is a
conforming amendment to the table of sections at the beginning
of chapter 7 of title 5, United States Code, that adds a
reference to the new section 707.
Section 3. Avoiding unnecessarily repetitive litigation.
Section 3 adds a new section 708 to chapter 7 of title 5,
United States Code, that is intended to convey the view of the
committee that unnecessary relitigation of well-settled
questions of law in multiple circuits should be avoided.
Section 708 expresses the committee's belief that in
supervising the conduct of civil litigation, the Department of
Justice and the officers of any agency independently authorized
to conduct litigation, should seek to ensure that the
initiation, defense, and continuation of proceedings in Federal
court avoid unnecessarily repetitive litigation on questions of
law already uniformly resolved against the Government in three
or more courts of appeals. Section 708 is intended to
discourage the Government from pursuing wasteful and abusive
appeals and relitigating settled questions of law. Agencies are
expected to give careful scrutiny when deciding whether to
relitigate. This section applies to situations where all
existing appellate case law is against the Government's or
agency's position and is based on the same or similar
rationale. It would not, however, be applicable if at least one
circuit has decided a case on grounds consistent with the
Government's or agency's position. Furthermore, this section
does not apply when the Government was not a party in the cases
in which the adverse appellate decisions were rendered. A
conforming amendment changes the table of sections for chapter
7 of title 5, United States Code, to reflect the new section
708.
Agency Views
United States Securities and
Exchange Commission,
Washington, DC, October 26, 1999.
Hon. George W. Gekas, Chairman,
Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Hon. Jerrold Nadler, Ranking Member,
Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
House of Representatives, Washington, DC.
H.R. 1924: The Federal Agency Compliance Act
Dear Congressmen Gekas and Nadler: I am writing to express
my concerns about the Federal Agency Compliance Act, H.R. 1924.
I greatly appreciate your staff members' courtesy in meeting
with SEC staff on October 13, 1999 to discuss these concerns.
At the outset, I would like to state that while the purpose
of this bill--to eliminate unjustified, deliberate agency
refusal to follow existing precedents of courts of appeals
(``nonacquiescence'')--is salutary, I am not aware of
widespread nonacquiescence among federal agencies. I can assure
you that the Commission does not engage in such a practice and,
instead, seeks to follow applicable appellate precedent. For
agencies like the Commission, H.R. 1924, like its predecessor
H.R. 1544, cuts too broad a swath. Its effect--to extend and
perpetuate judicial outcomes in particular courts of appeals
(normally only three judge panels of those courts) which are
adverse to agencies' interests--is too a steep price to pay to
fix isolated problems with a particular agency or subset of
agencies.
Two years ago, my predecessor as general counsel of the
Commission, Richard Walker, commented on H.R. 1544, an earlier
version of H.R. 1924. H.R. 1544 was introduced during the
second session of the 105th Congress. Although H.R. 1924
differs from H.R. 1544 in certain ways, it raises many of the
same concerns as did H.R. 1544. I have attached a copy of
Richard Walker's letter, originally sent to members of the
House Committee on the judiciary on October 16, 1997, setting
forth those concerns.
Today, I would like to ask you to consider two of the most
significant problems I see as arising from H.R. 1924. First,
the bill would cede important litigation decisions of this
agency to the judgment of other agencies with different
missions and priorities. Second, the bill may inhibit the
Commission from challenging judicial decisions made without the
Commission's input even where the Commission's position is
endorsed by a majority of appellate judges.
H.R. 1924 Cedes the Commission's Important Litigation Decisions to
Other Agencies.
Section 2 of H.R. 1924, dealing with intracircuit
nonacquiescence, is substantially similar to the provision on
intracircuit nonacquiescence in H.R. 1544. Subject to certain
exceptions, Section 2 requires all government agencies to
adhere ``in civil matters, in administering a statute, rule,
regulation, program, or policy within a judicial circuit'' \1\
to the precedent of that circuit.
---------------------------------------------------------------------------
\1\ H.R. 1924 expressly includes ``civil matters,'' which did not
appear in H.R. 1544.
---------------------------------------------------------------------------
I am concerned that this provision, like its parallel
provision in H.R. 1544, in effect cedes the important
litigation decisions of this agency to other agencies that do
not share this agency's mission or expertise. The provision can
foreclose the Commission from taking a position at variance
with precedent established in a case in which another agency
has decided not to appeal, even where the Commission, had it
been a party, might have chosen to appeal. Moreover, the option
offered by Section 2 of allowing an agency to take a contrary
position on questions decided in precedent that was ``otherwise
substantially favorable to the Government'' does not mitigate
the problem. Where an independent agency such as the Commission
has not participated in the decision by another agency not to
seek review in a particular case, it may be difficult to
determine that agency's basis for not seeking review. What may
seem substantially favorable to one agency may not seem so to
another.
H.R. 1924 appears to assume that judicial precedent is
always clear and unambiguous. As explained in the attached
letter, this is not so in the field of securities law. It is
not always possible, therefore, to ascertain the scope of a
decision until it is tested by presenting the same court of
appeals with new cases involving different facts.
It appears that the bill might allow judicial review of a
Commission decision to take a position where merely the specter
of nonacquiescence may be raised--for example, arguing for an
interpretation of law where prior precedent is unclear. I am,
therefore, concerned that the bill would promote costly,
unnecessary collateral litigation on the appropriateness of the
Commission's decisions to litigate. Such litigation would shift
the court's focus from the merits of the Commission's
substantive positions and would consume our scarce enforcement
resources.
The Bill May Inhibit the Commission from Challenging Judicial Decisions
Even Where the Commission's Position is Endorsed by a Majority
of Appellate Judges.
Section 3 of the bill, dealing with intercircuit
nonacquiescence, provides that an agency ``should seek to
ensure'' that it avoids unnecessarily repetitive litigation
``on questions of law already consistently resolved against the
United States in 3 or more circuits.'' This provision differs
from the parallel provision in H.R. 1544 in certain noteworthy
respects. First, apparently because the new provision exhorts
(``should seek to ensure'') rather than commands (``shall
ensure''), it eliminates certain subsections, including one
making it clear that litigation decisions are not subject to
review on the ground that they violate limits on relitigation.
Second, H.R. 1544 barred agencies from relitigating legal
issues ``already consistently resolved against the position of
the United States, or an agency or officer thereof, in
precedents established by the United States courts of appeals
for 3 or more other judicial circuits,'' while H.R. 1924
prohibits relitigation of issues ``already consistently
resolved against the United States in 3 or more circuits''
(emphasis supplied). In my view, however, these distinctions do
not eliminate the problems with the provision.
I remain concerned that Section 3, although now hortatory,
may still operate to inhibit the Commission from challenging
judicial decisions made without benefit of its participation
and expertise. Even though Section 3 now appears to be limited
to government cases (by virtue of the second change mentioned
above), I believe, for the reasons stated at length in Richard
Walker's attached letter, that it is still unwise to bind the
Commission by precedents in criminal cases, which, of course,
are not prosecuted by the Commission.
Moreover, the bill could substantially impair the
Commission's ability to enforce the securities laws to the
extent that Section 3 can be read to mean that a view of the
law articulated by a minority of appellate judges could inhibit
the Commission from taking a position endorsed by a
majority.\2\ This is illustrated by the judicial history of the
``misappropriation theory'' of insider trading, as recounted in
the attached letter. As that letter explains, even if a
majority of courts of appeals had endorsed the theory, a
minority could have removed this important enforcement tool
from the legal landscape had even one more court followed the
minority.\3\ And yet the theory ultimately was adopted by the
Supreme Court.
---------------------------------------------------------------------------
\2\ If the bill is not intended to operate in this manner, its
language ought to be modified to make it clear that litigation on an
issue is not ``unnecessarily repetitive'' simply because three courts
of appeals have resolved that issue against the agency's position. For
example, when other courts of appeals in earlier decisions have
resolved the issue in favor of the agency's position, the later
position of three courts of appeals ought not inhibit an agency from
pursuing a view of the law previously embraced by at least one circuit.
\3\ Moreover, Section 2, the ``intracircuit nonacquiescence''
provision, so limits the grounds for asking a given court of appeals to
revisit precedent, that it would prevent the Commission from asking a
court of appeals that has issued an early adverse ruling to reconsider
that ruling even if several--or indeed all--of the other courts of
appeals had reached a different result.
---------------------------------------------------------------------------
Moreover, because the bill eliminates the provision in
Section 3(d) of H.R. 1544 that precluded judicial review of
litigation decisions, it raises the specter of the same sort of
collateral litigation on questions of litigation strategy as
does Section 2.
In sum, as the attached letter explains in more detail,
while the proposed legislation reflects a balancing of
interests that may be appropriate in litigation involving clear
principles applied over time in administering benefits programs
and the like, it is inappropriate as applied to the sort of
complex enforcement litigation in which the Commission engages.
As a consequence, I urge you to consider whether amendments can
be made that would reduce the bill's adverse effects on
enforcement programs such as the Commission's. Thank you for
your consideration.
Sincerely,
Harvey J. Goldschmid, General Counsel.
Attachment
United States Securities and
Exchange Commission,
Washington, DC, October 16, 1997.
Hon. George W. Gekas, Chairman,
Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
House of Representatives, Washington, DC.
H.R. 1544, the Federal Agency Compliance Act
Dear Congressman Gekas: I appreciate this opportunity to
express my concerns, as the General Counsel of the Securities
and Exchange Commission, regarding the Federal Agency
Compliance Act, H.R. 1544. I recognize that this bill has
already been marked up in the House Committee on the Judiciary,
but I hope that there may still be an opportunity to modify the
proposed legislation as the legislative process moves forward.
I understand and support the core purpose of H.R. 1544--to
rein in federal agencies that deliberately refuse to follow
existing precedents of U.S. Courts of Appeals (called ``agency
nonacquiescence''). I assure you that the Commission, an
independent regulatory agency, does not engage in such a
practice. In fact, the Commission is careful to follow
applicable appellate precedent in all of its litigation and
administrative decisions.
I am concerned, however, that H.R. 1544 makes other
fundamental changes in the current system of judicial review of
agency cases that will significantly impair the Commission's
ability to fulfill its congressional mandate to protect
investors and preserve the integrity of the nation's securities
markets.
There are several troublesome aspects of the bill. As
explained below, these give rise to serious problems for the
Commission, including the potential that H.R. 1544 could
foreclose the Commission from asserting important but
controversial legal theories because those theories have been
rejected by three appellate courts, without the benefit of the
Commission's expertise, in cases in which the Commission was
not a party and did not participate. Moreover, adverse
decisions by three courts of appeals could preclude the
Commission from a legal theory even if a majority of appellate
courts endorsed it. The recent history of the
``misappropriation'' theory of insider trading, which is
discussed more fully below, and which the Commission has used
in some of its most significant securities fraud cases of the
last fifteen years, illustrates the potential for unintended
adverse consequences.
H.R. 1544 Could Foreclose The Commission From Challenging Ill-Reasoned
Judicial Decisions Made Without The Commission's Participation
and Expertise.
H.R. 1544 requires federal agency officials to avoid
litigating questions of law already resolved against the
government's position in precedents established in three
appellate circuits, even if a majority of the circuits have
already endorsed the government's position. Federal securities
law is made not only in the Commission's civil law enforcement
litigation but in private securities litigation outside the
Commission's control and in criminal cases independently
prosecuted by numerous United States Attorneys' offices around
the country. H.R. 1544 would bind the Commission by adverse
decisions in those cases even though the Commission was not a
party to, or participant in, those cases and even though the
courts did not have the benefit of the Commission's expertise.
Even if the portion of the legislation relating to the
effect of adverse rulings by three courts of appeals were
limited to government cases, I believe it would still be unwise
to bind the Commission by precedents in criminal cases.
Criminal prosecutors must devote their limited resources to
more than just prosecuting securities law violations and may
not be as well-equipped as the Commission to deal with the
complex frontiers of the federal securities laws. Typically,
the Commission is not involved in criminal prosecutions at the
trial stage. The Commission may be consulted on an informal
basis in some cases when the Department of Justice determines
whether to appeal a criminal securities fraud case. If a
criminal defendant appeals, however, the Commission may not
learn about a case until a court of appeals renders its
decision. As a result, adverse precedents specific to the
securities laws administered by the Commission may develop
without the Commission's input
Recent judicial developments in the ``misappropriation
theory'' of insider trading illustrate the potentially adverse
effects of H.R. 1544 on the evolution of the securities laws.
Up to 50% of the Commission's insider trading enforcement cases
rely on the misappropriation theory, and many of our biggest
cases were brought on that theory, such as SEC v. Drexel
Burnham Lambert, SEC v. Ivan Boesky, and SEC v. Dennis Levine.
Beginning in 1981, the Second, Seventh, and Ninth Circuits
endorsed the theory, but in 1995 the Fourth Circuit rejected it
in a criminal case. The Commission only became involved in the
Fourth Circuit case after the adverse decision, when the
government sought rehearing of the misappropriation issue by
the full court. Rehearing was denied. The government did not
seek Supreme Court review because the case was not a compelling
one on the facts. Subsequently, the Eighth Circuit, following
the Fourth Circuit's lead, also rejected the misappropriation
theory in a criminal case, reversing a conviction. The
government sought Supreme Court review of the Eighth Circuit
case, because the facts were far more favorable to the
government. The Supreme Court, fortunately, reversed the Eighth
Circuit and upheld the misappropriation theory.\1\ But events
could easily have taken a different turn.\2\
---------------------------------------------------------------------------
\1\ See U.S. v. O'Hagan, ____ U.S. ____, 117 S.Ct. 2199, 138 L. Ed.
2d 721 (June 25, 1997).
\2\ The facts in the Eighth Circuit might have been less favorable
for seeking review, for example. In any event, Supreme Court review is
by no means certain. Indeed, the proposed legislation might make it
more difficult to obtain Supreme Court review, since the government
would be more likely to seek review in cases for which it would not
have sought review before the legislation. Thus, H.R. 1544 would
dramatically change the calculus for determining whether to seek
review, with possibly unforeseen results.
---------------------------------------------------------------------------
If H.R. 1544 had been the law when the Eighth Circuit
decided against misappropriation, and if the Supreme Court had
not granted review, the legal theory would have been in
jeopardy. Another criminal case involving the misappropriation
theory could have arisen, and the Commission would have been at
risk of losing an important legal theory: (1) without having
had the opportunity itself to develop the arguments, and (2)
even though the entire Second Circuit (sitting en banc) and two
other courts of appeals had endorsed it
A Minority View Could Bar The Commission From Taking A Position
Actually Endorsed By A Majority Of Appellate Judges.
H.R. 1544 bars an agency from taking a position ``resolved
unfavorably in ``precedents established'' by three courts of
appeals, regardless of whether one or two or even six or eight
other circuits have ruled in favor of the position. Thus, it
may be possible for a majority of appellate judges who address
an issue to endorse a government position even while three
courts of appeals reject it. As illustrated by the
misappropriation theory example above, the potential that a
minority view could become binding is not insignificant. The
Fourth Circuit decision that first rejected the
misappropriation theory departed from the views of three other
courts of appeals.\3\ That decision was followed by the Eighth
Circuit's adverse decision. Even if a majority of the courts of
appeals had endorsed the misappropriation theory, either before
or after these two decisions, that majority of appellate courts
ruling on the issue would not have prevented a minority from
removing the theory from the Commission's arsenal if just one
more court had followed the Fourth and Eighth Circuits.
---------------------------------------------------------------------------
\3\ Actually, only one Fourth Circuit judge was sitting on the
case. He wrote the opinion, in which the two district court judges
sitting by designation concurred.
---------------------------------------------------------------------------
The Commission, Like Other Agencies With Independent Litigating
Authority, Would Have Special Problems Complying With H.R.
1544.
The bill requires all government agencies to adhere to
precedent in a specific circuit unless the government did not
seek review because the decision was ``otherwise substantiatIly
favorable'' to the government. This would create significant
problems for the Commission, and the other agencies with
independent litigating authority. Where an agency has not
participated in the decision by another agency not to seek
review in a particular case, it may be difficult to determine
the basis for not seeking review. Moreover, what may seem
substantially favorable to one agency may not seem so to
another; and it seems inappropriate to bind one agency on an
issue of importance to it based on another agency's
determination that an adverse ruling on that issue is not
important to that other agency.
This also would curtail the independence of the
Commission's litigating authority. The Commission would be
foreclosed from appealing in cases in which another agency has
declined to appeal for reasons other than that the decision was
``substantially favorable'' to the government.
H.R. 1544 Would Promote Costly, Unnecessary Collateral Litigation That
Would Consume Scarce Enforcement Resources.
H.R. 1544 seems to assume that precedent is always clear
and unambiguous. The precise holding of many judicial
decisions, however, is not clear, particularly in complex areas
of the law such as securities regulation. Defendants in
securities fraud cases often argue for broad readings of
decisions adverse to the government.\4\ For this reason, the
Commission's decision to pursue a case. will frequently be open
to attack under H.R. 1544. Although H.R. 1544 specifies that
federal agencies and officials may not be subject to mandamus
actions, the legislation would only encourage defendants to
harass the Commission with claims for sanctions and the like
for pressing disputed positions allegedly in violation of the
restrictions of H.R. 1544.
---------------------------------------------------------------------------
\4\ The Commission, for example, has been repeatedly met with the
argument that the Supreme Court's decision in Central Bank of Denver.
N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994),
which held that there is no private right of action for aiding and
abetting securities fraud, governs in cases having nothing to do with
aiding and abetting. Defendants contend that Central Bank stands for a
variety of propositions, such as that the securities laws must be
construed narrowly and that the purpose of the securities laws to
protect investors has no bearing in interpreting the statutory text.
---------------------------------------------------------------------------
H.R. 1544 Reflects A Balancing of Interests That May Be Appropriate For
The ``Cookie Cutter'' Litigation Of Some Agencies, But That
Would Be Detrimental To The Kind Of Complex Enforcement
Litigation In Which The Commission Engages.
H.R. 1544 addresses problems that arise in ``cookie
cutter'' litigation about which the Committee appears
concerned, where the applicable principle is clear and is
applied over and over again in administering a benefits
program. This concern, however, does not apply to an
enforcement litigation program such as the Commission's, which
often involves questions about how prior decisions apply in new
situations, as securities violators, ever-creative, engage in
new schemes to defraud. The application of antifraud laws to
new and evolving conduct is important.
Clearly, the Committee must balance the benefits H.R. 1544
would provide in resolving the problems of administering a
benefits program that yields unfair results, against the
problems H.R. 1544 would create for enforcement litigation
programs like the Commission's. I recognize that in drafting
H.R. 1544, the Committee has focused its attention on an area
that the Committee has determined requires close attention. I
believe, however, that the Commission's litigation does not
raise the problems addressed by the legislation, and that
including the Commission's enforcement litigation within the
scope of H.R. 1544 would create problems that far outweigh any
potential benefit of including the Commission's enforcement
litigation. For this reason, I respectfully request that as the
bill moves forward, you consider whether appropriate amendments
can be made to reduce the adverse effects of H.R. 1544 on
enforcement litigation programs that routinely encounter novel
issues requiring flexibility in their resolution. As currently
drafted, H.R. 1544 does not distinguish between enforcement
litigation to protect the public by stopping and preventing
violations of law, and other kinds of agency litigation in
which an agency seeks to apply ``cookie cutter'' principles.
In sum, I urge you to consider amending H.R. 1544 to avoid
the problems it would create for the Commission. I would be
happy to meet with you to discuss further how that might be
done or to discuss in more detail the Commission's concerns.
Sincerely,
Richard H. Walker, General Counsel.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART I--THE AGENCIES GENERALLY
* * * * * * *
CHAPTER 7--JUDICIAL REVIEW
Sec.
701. Application; definitions.
* * * * * * *
707. Adherence to court of appeals precedent.
708. Avoiding unnecessarily repetitive litigation.
* * * * * * *
Sec. 707. Adherence to court of appeals precedent
(a) Except as provided in subsection (b), an agency (as
defined in section 701(b)(1) of this title) shall in civil
matters, in administering a statute, rule, regulation, program,
or policy within a judicial circuit, adhere to the existing
precedent respecting the interpretation and application of such
statute, rule, regulation, program, or policy, as established
by the decisions of the United States court of appeals for that
circuit.
(b) An agency is not precluded under subsection (a) from
taking a position, either in an administrative proceeding or in
litigation, that is at variance with precedent established by a
United States court of appeals if--
(1) it is not certain whether the administration of
the statute, rule, regulation, program, or policy will
be subject to review exclusively by the court of
appeals that established that precedent or a court of
appeals for another circuit;
(2) the Government did not seek further review of
the case in which that precedent was first established,
in that court of appeals or the United States Supreme
Court, because--
(A) neither the United States nor any
agency or officer thereof was a party to the
case; or
(B) the Solicitor General determines or the
agency officer responsible for such
determination determines the decision
establishing that precedent was otherwise
substantially favorable to the agency; or
(3) it is reasonable to question the continued
validity of that precedent in light of a subsequent
decision of that court of appeals or the United States
Supreme Court, a subsequent change in any pertinent
statute or regulation, or any other subsequent change
in the public policy or circumstances on which that
precedent was based.
Sec. 708. Avoiding unnecessarily repetitive litigation
In supervising the conduct of civil litigation, the
officers of any agency of the United States authorized to
conduct litigation, including the Department of Justice acting
under sections 516 and 519 of title 28, United States Code,
should seek to ensure that the initiation, defense, and
continuation of proceedings in the courts of the United States,
within, or subject to the jurisdiction of, a particular
judicial circuit, avoids unnecessarily repetitive litigation on
questions of law already uniformly resolved against the United
States in 3 or more courts of appeals. A decision on whether to
iniate, defend, or continue litigation is not subject to review
in any court by mandamus or otherwise on the grounds that the
decision violates this section.
* * * * * * *
Dissenting Views
As a general matter, we agree that agencies should comply
with circuit court decisions. However, we dissent from H.R.
1924, the ``Federal Agency Compliance Act,'' because we believe
it to be an inappropriate and overbroad means of responding to
the perceived problem of nonacquiescence.
H.R. 1924 attempts to curb the perceived problem of
``intracircuit nonacquiescence'' \1\ by legislatively mandating
that Federal executive branch agencies adhere to precedents of
the courts of appeals for disputes which arise within a
particular circuit.\2\ The legislation only permits an agency
to take a contrary position to such precedent where: (1) it is
not certain whether the issue in question ``will be subject to
review exclusively by the court of appeals that established
that precedent or a court of appeals for another circuit;'' (2)
the Government did not seek further review of the case in which
that precedent was established ``because neither the United
States nor any agency or officer thereof was a party to the
case'' or ``because the decision establishing that precedent
was otherwise substantially favorable to the Government;'' or
(3) ``it is reasonable to question the continued validity of
that precedent in light of a subsequent decision of that court
of appeals or the United States Supreme Court,'' a subsequent
change in the law, or any other subsequent change ``in the
public policy or circumstances on which that precedent was
based.'' \3\
---------------------------------------------------------------------------
\1\ Agency failure to comply with circuit court precedent within a
particular circuit.
\2\ H.R. 1924, 106th Cong., 1st Sess. Sec. 2 (1999) [hereinafter
H.R 1924].
\3\ Section 3 of H.R. 1924 also urges agency officers to ensure
that questions of law already consistently resolved against the United
States in 3 or more courts appeals are not unnecessarily relitigated.
However, an agency decision on ``whether to initiate, defend, or
continue litigation'' is not subject to court review on the grounds
that the agency decision violates the section.
---------------------------------------------------------------------------
In attempting to diminish the instances of nonacquiescence,
H.R. 1924 would create significant new problems. It would
indiscriminately reduce the discretionary authority of every
Federal agency to decide when to challenge circuit court
decisions, not just the agencies that legislative proponents
claim have abused their discretion. In doing so, H.R. 1924
would diminish the effectiveness of the agencies that protect
the rights of our citizens under the labor, civil rights,
environmental, consumer safety, and other important laws.
Moreover, the terms of H.R. 1924 are so vague that they will
inevitably lead to uncertainty and confusion concerning their
scope and applicability.
It is for these reasons that the Department of Justice
opposes H.R. 1924,\4\ which would likely lead to a Presidential
veto if it passes.\5\ And it is for these reasons that groups
such as the AFL-CIO,\6\ the Mexican American Legal Defense and
Educational Fund,\7\ and environmental grounds such as Natural
Resources Defense Council, Environmental Defense, Alliance for
Justice, Friends of the Earth, Earthjustice Legal Defense Fund,
and OMB Watch \8\ strongly oppose H.R. 1924, or its
predecessor.\9\ We join in dissenting from this well
intentioned, but ultimately misguided legislation. A summary of
our concerns follows.
---------------------------------------------------------------------------
\4\ See Hearing on H.R. 1924, Proposing The Federal Agency
Compliance Act Before the Subcomm. on Commercial and Administrative Law
of the House Comm. on the Judiciary, 106th Cong., 1st Sess. (Oct. 27,
1999) (forthcoming) [hereinafter 1999 House Judiciary Hearings]
(statement of William Schultz at 2).
\5\ See Statement of Administration Policy, H.R. 1544: Federal
Agency Compliance Act (February 25, 1998).
\6\ Letter from Peggy Taylor, Director for Dept. of Legislation,
American Federation of Labor and Congress of Industrial Organizations
(Sept, 20, 2000) [hereinafter AFL-CIO Letter].
\7\ Letter from Antonia Hernandez, President and General Counsel of
Mexican American Legal Defense and Educational Fund, to the Hon. Henry
J. Hyde, chairman, Committee on the Judiciary (Nov. 3, 1997)
[hereinafter MALDEF Letter].
\8\ Letter from Alyssondra Campaigne, Legislative Director of
Natural Resources Defense Council, Elizabeth Thompson, Legislative
Director of Environmental Defense, Nan Aron, President of Alliance for
Justice, Courtney Cuff, Legislative Director of Friends of the Earth,
Joan Mulhern, Legislative Counsel for Earthjustice Legal Defense Fund,
and Gary D. Bass, Executive Director for OMB Watch (September 22,
2000)(on file with the Minority Staff of the Committee on the
Judiciary).
\9\ H.R. 1544, 105th Cong., 1st Session (1997)[hereinafter H.R.
1544].
I. H.R. 1924 IS UNNECESSARY
In our view, H.R. 1924 is a ``solution in search of a
problem.'' The Department of Justice testified that except
where ``relitigation of a legal issue is later determined to be
justified in prescribed circumstances,'' Federal agencies
follow the holding of the circuit courts of appeals.\10\
Congressional intervention is particularly unnecessary with
respect to the many agencies that depend on the Justice
Department for their Federal court litigation \11\ due to the
appellate restrictions already imposed on them by the Solicitor
General's office. As Deputy Assistant Attorney William Schultz
explained:
---------------------------------------------------------------------------
\10\ See 1999 House Judiciary Hearings, supra n. 4 (statement of
William Schultz at 2).
\11\ 28 U.S.C. Sec. 516 (1993) (except as otherwise authorized by
law, the conduct of litigation in which an agency is a party is
reserved to the Department of Justice).
[I]n cases within the litigation authority of the
Department of Justice, every appeal to a court of
appeals must be authorized by the Solicitor General.
Authorization comes only after an internal deliberative
process involving the agency, the responsible
litigating division of the Justice Department, and the
Solicitor General's staff. Adverse precedent in the
same circuit is a weighty reason not to authorize
appeal. (By the same token, if circumstances are such
that it is appropriate to request an appellate court to
revisit a legal issue previously decided, or to
preserve a legal argument for possible Supreme court
review, an appeal might be entirely appropriate despite
the existence of binding circuit precedent).\12\
---------------------------------------------------------------------------
\12\ See 1999 House Judiciary Hearings, supra n. 4 (statement of
William B. Schultz at 11).
Agencies are also hesitant to challenge court precedent because
they face the possibility of paying other parties' attorneys
fees under the Equal Access to Justice Act if it is determined
that the government position was not ``substantially
justified.'' \13\
---------------------------------------------------------------------------
\13\ 28 U.S.C. Sec. 2412(d)(1)(A) (1994) (except as otherwise
specifically provided by statute, a court shall award to a prevailing
party in any civil action, other than the United States, fees and other
expenses incurred by the party unless the court finds that the position
of the United States was substantially justified or that special
circumstances make an award unjust).
---------------------------------------------------------------------------
Those of us who support the concept of statutory
acquiescence believe that the legislation should be limited to
benefits programs, such as those administered by the Social
Security Administration (``SSA''). SSA has often been
criticized for failing to acquiescence court decisions and
precedent.\14\ It is important to note that the American Bar
Association only endorses this bill as it applies to the Social
Security Administration, but takes no position with regard to
its application to other agencies.\15\ John Pickering, Chair of
the Senior Lawyers Division of the American Bar Association
testified that, ``We take no position regarding other
applications to other agencies.'' \16\ Moreover, recently SSA
has taken several actions to ameliorate the problem of
nonacquiescence. Prior to June 1985, when a circuit court
decision was inconsistent with SSA's interpretation of the law
and regulations, their practice was to apply the decision only
to the named litigants in that particular case. However, SSA
announced a new policy wherein they would apply such circuit
court decisions at the hearings level, following an
acquiescence ruling, in adjudicating claims in the circuit.\17\
In 1990, SSA went even further adopting an explicit rule
requiring such intracircuit acquiescence.\18\ As recently as
September 18, 1997, SSA responded to concern that it
occasionally takes too long to issue its acquiescence rulings
by publishing a proposed regulation requiring it to offer
litigants preliminary guidance within 10 days and requiring it
either to appeal the circuit court decision or to adopt an
appropriate acquiescence ruling within 120 days. In addition to
publishing acquiescence rulings when they are issued, SSA will
be required to identify and notify individuals whose cases may
be affected by them.\19\
---------------------------------------------------------------------------
\14\ See 1999 House Judiciary Hearings, supra n. 4, transcript at
40 and 42.
\15\ See Hearing on H.R. 1924, Proposing The Federal Agency
Compliance Act Before Subcomm. on Commercial and Administrative Law of
the House Comm. on the Judiciary, Cong., 1st Sess. (Oct. 27, 1999)
(forthcoming) [hereinafter 1999 House Judiciary Hearings] 106th
(Testimony of John H. Pickering).
\16\ Id at 38.
\17\ See Hearing on H.R. 1544, Proposing The Federal Agency
Compliance Act Before the Subcomm. on Commercial and Administrative Law
of the House Comm. on the Judiciary, 105th Cong., 1st Sess. (May 22,
1997) (forthcoming) [hereinafter 1997 House Judiciary Hearings]
(statement of Arthur J. Fried, General Counsel, Social Security
Administration at 2).
\18\ 20 C.F.R. Sec. 404.985 a-c (1990) (SSA will apply a holding
from a Federal circuit court which conflicts with SSA legal
interpretations, and publish an acquiescence ruling, unless SSA seeks
further review or decides to relitigate the issue despite an
acquiescence ruling after consulting the Department of Justice).
\19\ 20 C.F.R. Sec. 416.1485 (1997).
II. H.R. 1924's CATEGORICAL RESTRICTIONS DIMINISH NEEDED DISCRETION
H.R. 1924's narrowing of agency discretion over whether to
challenge circuit court precedents could have a number of
adverse policy consequences. As noted above, H.R. 1924 provides
only three exceptions to the intracircuit acquiescence
rule.\20\ It omits a number of other justifiable exceptions--
such as cases including two alternative holdings (only one of
which the agency likes) or cases involving litigation fact
patterns which do not lend themselves to Supreme Court review
(e.g., cases involving sympathetic parties violating important
laws). The net result will be to unduly hamstring the
government in developing its litigation strategies.
---------------------------------------------------------------------------
\20\ H.R. 1924, supra n. 2, Sec. 2 ((I) it is not certain whether
the issue will be subject to review by the court of appeals that
established the precedent; (II) the government did not seek further
review of the case in which the precedent was established because it
was not a party to that case or the decision was otherwise
substantially favorable; and (III) it is reasonable to question the
continued validity of the precedent).
---------------------------------------------------------------------------
This is one of the principal reasons why initiatives of
this nature have been opposed on a bipartisan basis. Rex Lee,
Solicitor General under President Reagan, argued that a similar
1984 bill \21\ ``represents an unprecedented interference with
the ability of the Justice Department to determine the cases it
will appeal.'' \22\ Similarly, in their recent testimony
opposing H.R. 1924, the Clinton Justice Department explained
that the bill would significantly ``inhibit the Solicitor
General in protecting the litigating interests of the United
States. . . . [T]he Solicitor General should have the
discretion, where the stakes are important enough, to continue
to seek a circuit conflict and thus to facilitate Supreme Court
review of decisions harmful to the United States.'' \23\
---------------------------------------------------------------------------
\21\ Congress previously sought to address this matter with
reference to SSA in 1984, during proceedings leading up to the
enactment of the Social Security Disability Benefits Reform Act, Pub.
L. No. 98-460, 98 Stat. 1794. Prior to enactment of the final
legislation, the House passed a bill that would have required the SSA
to acquiesce to circuit court precedent in Social Security disability
benefits cases unless it sought Supreme Court review. See H.R. Rep. 98-
618, 98th Cong., 2d Sess. 22-26 (1984). The Senate bill did not contain
such a provision; instead it would have required the SSA to publish a
notice of nonacquiescence whenever it determined not to acquiesce. See
S. Rep. 98-466, 98th Cong., 2d Sess. 21 (1984). Congress ultimately
declined to include any provision on nonacquiescence in the act as
finally passed. Rather than impose statutory restrictions on
nonacquiescence in the 1984 legislation, the conferees urged SSA to
change its policy of nonacquiescence. See H.R. Conf. Rep. No. 1039,
98th Cong., 2d Sess. 37, (1984).
\22\ 130 Cong. Rec. S11454 (1984) (Letter by Rex Lee, Solicitor
General, to Hon. Robert Dole).
\23\ 1999 House Judiciary Hearings, supra n.4 (statement of William
B. Schultz at 14).
---------------------------------------------------------------------------
Preserving the litigation prerogatives of our agencies is
an important function of separation of powers and helps foster
development of the case law. For example, in United States v.
Mendoza,\24\ a unanimous Supreme Court held that the government
could not be foreclosed from relitigating a legal issue it had
previously litigated unsuccessfully in another action against a
different party, even within the same judicial circuit:
---------------------------------------------------------------------------
\24\ 464 U.S. 154 (1984).
Government litigation frequently involves legal
questions of substantial public importance; indeed,
because the proscriptions of the United States
Constitution are so generally directed at governmental
action many constitutional questions can arise only in
the context of litigation to which the government is a
party. Because of those facts the government is more
likely than any private party to be involved in
lawsuits against different parties which nonetheless
involve the same legal issues. A rule allowing
nonmutual collateral estoppel against the government in
such cases could substantially thwart the development
of important questions of law by freezing the first
final decision rendered on a particular legal issue.
Allowing only one final adjudication would deprive this
Court of the benefit it receives from permitting
several courts of appeals to explore a difficult
question before this Court grants certiorari.\25\
---------------------------------------------------------------------------
\25\ Id. at 160.
It is particularly important to recognize that all of the
Federal agencies are unique in some respects and therefore that
the categorical prohibitions of H.R. 1924 would affect each
agency differently. Harvey J. Goldschmid, the General Counsel
of the Securities and Exchange Commission, highlighted the
---------------------------------------------------------------------------
problems that his agency would face under the bill:
I am concerned that this provision, like its parallel
provision in H.R. 1544, in effect cedes the important
litigation decisions of this agency to other agencies
that do not share this agency's mission or expertise.
The provision can foreclose the Commission from taking
a position at variance with precedent established in a
case in which another agency has decided not to appeal,
even where the Commission, had it been a party, might
have chosen to appeal. Moreover, the option offered by
section 2 of allowing an agency to take a contrary
position on questions decision in precedent that was
``otherwise substantially favorable to the Government''
does not mitigate the problem. Where an independent
agency such as the Commission has not participated in
the decision by another agency not to seek review in a
particular case, it may be difficult to determine that
agency's basis for not seeking review. What may seem
substantially favorable to one agency may not seem so
to another.\26\
---------------------------------------------------------------------------
\26\ Letter from Harvey J. Goldschmid, General Counsel, United
States Securities and Exchange Commission, to the Hon. George W. Gekas
and the Hon. Jerrold Nadler (Oct. 26, 1999).
The SEC went on to explain how acquiescence rules could prove
to be particularly damaging to them since they do not have the
opportunity to challenge adverse precedents in criminal cases
\27\ which can have an adverse impact on the SEC's ability to
bring civil cases.\28\
---------------------------------------------------------------------------
\27\ The Justice Department has criminal jurisdiction over the
securities laws.
\28\ For example, several circuit courts issued adverse precedents
in criminal cases negating the ``misappropriation theory'' used to
challenge insider trading before the Supreme Court ultimately adopted
the SEC's new.
III. H.R. 1924 IS OPENED-ENDED AND VAGUE
Implementation of the provisions in H.R. 1924 would require
the interpretation of terms that are inherently vague and
ambiguous in their meaning. Under the legislation, even
seemingly appropriate exercises of discretion might be subject
to challenge. For instance, circuit court decisions frequently
are subject to a variety of legal interpretations. It may not
be possible to ascertain a decision's true scope and effect
until an opportunity arises to test it by presenting the same
court of appeals with a different factual scenario. Rather than
challenging a precedent, an agency may merely be attempting to
limit its effect. However, under H.R. 1924, such a legitimate
strategy could be subject to challenge as violating the new
acquiescence rules.
In addition, the exceptions in the bill which allow an
agency to challenge precedents are inherently subjective. In
deciding whether to take a position at variance with
intracircuit precedent, the agency must make determinations
such as whether the government did not seek further review of
the case because the precedent was ``otherwise substantially
favorable.'' Another subjective exception would require the
agency to determine whether ``it is reasonable to question the
continued validity of that precedent.'' \29\
---------------------------------------------------------------------------
\29\ H.R. 1924, supra n. 2, Sec. 2.
---------------------------------------------------------------------------
Accordingly, the enactment of H.R. 1924 ultimately could
create a whole new category of litigation. This would result in
wasteful preliminary litigation over whether a case can
proceed, in addition to litigation over the substance of the
dispute. This type of collateral litigation is costly; it
consumes scarce enforcement resources; and it can create the
very type of delay that H.R. 1924 is intended to avoid.
IV. H.R 1924 WILL HARM ENFORCEMENT OF THE LABOR, ENVIRONMENTAL,
CONSUMER SAFETY, AND CIVIL RIGHTS LAWS
Perhaps most seriously, we oppose H.R. 1924 because of the
adverse consequences it will have on the ability of government
agencies to protect our citizens' rights under important laws
concerning labor, employment, workplace safety, consumer
protection, civil rights, and the environment, to name but a
few.
H.R. 1924 will force agencies such as the National Labor
Relations Board, the Department of Labor, the Occupational
Safety and Health Administration, the National Highway
Transportation Safety Administration, the Equal Employment
Opportunity Commission, the Justice Department Civil Rights
Division, the Environmental Protection Agency, and the Bureau
of Land Management to litigate from a disadvantageous position.
Unlike the well-funded interests the government frequently
opposes in court, under the bill, such agencies will face
complex new legal constraints when they determine which cases
to appeal. To the extent this translates into less capable
enforcement of these important laws, we will all be
disadvantaged.
It is for these reasons, among others, that the AFL-CIO has
taken a position strongly opposing H.R. 1924, writing:
Under this bill, agencies could be compelled to seek
Supreme Court review of cases that would not otherwise
warrant such review. Agencies could also be precluded
from making certain legitimate choices. For example, an
agency could be precluded from foregoing an appeal of
an adverse circuit court decision to the Supreme Court
in anticipation of a later case with stronger facts. Of
particular concern to us, this bill would prevent
agencies with jurisdiction over labor matters from
properly enforcing the labor and employment law.\30\
---------------------------------------------------------------------------
\30\ AFL-CIO Letter, supra n. 6.
The same concerns lie with civil rights enforcement. At the
committee markup, Rep. Jackson Lee singled out her concern for
the adverse impact H.R. 1924 would have in this critical legal
---------------------------------------------------------------------------
area:
Civil rights cases by nature challenge judges at every
level of our judicial system to properly scrutinized
those constitutional or statutory protections that all
Americans which is not addressed by this measure. These
are precisely the type or nature of precedents that are
subject to differing interpretations because judges
reasonably interpret a point of law or principle from
totally opposite viewpoints. . . . The limitations on
these agencies' ability to appeal decisions by circuit
courts to the Supreme Court in addition to their
ability to create novel and ingenious ways of
protecting the right of citizens is a sacred craft and
should only be regulated with the highest level of
scrutiny.\31\
---------------------------------------------------------------------------
\31\ Markup of H.R. 1924, The Federal Agency Compliance Act, Before
the Subcommittee on Commercial and Administrative Law of the House
Comm. on the Judiciary, 106th Cong., 2st Sess. (Sept. 20, 2000)
(statement of Rep. Jackson Lee).
Similarly, the Mexican American Legal Defense and
Educational Fund, a staunch defender of civil rights, took a
position against H.R. 1544, the predecessor version of H.R.
---------------------------------------------------------------------------
1924, noting, among other things,
[b]y limiting each agency's discretion in determining
the cases it will appeal, agencies such as the U.S.
Department of Justice and the Social Security
Administration can only do less to adequately and
legally interpret and pursue particular cases deemed to
be significant in determining substantive policy.\32\
---------------------------------------------------------------------------
\32\ MALDEF Letter, supra n. 7 (emphasis added).
We are aware that some would argue that the fact that under
the bill agencies would be constrained in developing their
litigation strategies could be a positive or negative
development, depending on the political orientation of the
administration. In our view, however, this argument ignores the
fact that by and large agencies are in the posture of seeking
to enforce laws designed to protect our workplace safety, civil
rights, and environmental and health safeguards against
culpable parties. If an agency chooses not to protect these
rights, it doesn't need the ``cover'' of acquiescence
requirements such as those set forth in H.R. 1924--the agency
can simply exercise its discretion not to bring particular
enforcement actions. It is only those agencies who desire to
enforce these laws against recalcitrant interests which will
face new difficulties under H.R. 1924. We therefore reject the
assertion that H.R. 1924 will have a neutral impact on both
---------------------------------------------------------------------------
pro- and anti-enforcement administrations.
CONCLUSION
In our view, supporters of H.R. 1924 have not established
that abusive nonacquiescence exists on a sufficiently wide-
spread basis to justify legislation limiting the litigation
authority of every agency in the government. In an effort to
assist people who are having difficulty enforcing their own
individual rights, H.R. 1924 would reduce the effectiveness of
the agencies that are charged with the responsibility of
protecting the rights of our citizens as a whole, including
critical safeguards concerning employment rights, civil rights,
consumer safety, and the environment.
We believe that on the rare occasions when dangerous legal
precedents are written--such as Plessy v. Ferguson (upholding
``separate but equal'' facilities),\33\ and Korematsu v. United
States (Japanese-American interment upheld) \34\--agencies
protecting public safety and welfare should have unfettered
discretion to challenge them. Accordingly, we dissent from this
legislation.
---------------------------------------------------------------------------
\33\ 163 U.S. 537 (1896).
\34\ 324 U.S. 885 (1944).
John Conyers, Jr.
Howard L. Berman.
Jerrold Nadler.
Melvin L. Watt.
Sheila Jackson Lee.
Maxine Waters.
Martin T. Meehan.
Steven R. Rothman.
Anthony D. Weiner.