Some more on the dormant Commerce Clause

This material is nothing if not a bit confusing, if only because what seems to be happening diverges from the doctrine articulated by the Court. So let me recap a few basic principles, in hopes of alleviating some of that confusion.

* First, as a doctrinal matter, the analysis is fairly simple. The first question we ask is whether the law at issue discriminates against interstate commerce. If it does, we apply "rigorous scrutiny," which requires a legitimate (i.e., non-protectionist) state interest and that the means be necessary to accomplish that objective. If the court determines the law to be non-discriminatory, we apply the Pike balancing test, and the law is unconstitutional only if its burden on interstate commerce is clearly excessive relative to its putative local benefits.

* Second, a law can qualify as discriminatory against interstate commerce on its face, in its purpose, or in its practical effect. The first two are fairly straightforward, and both clearly identify laws that are intended to discriminate against interstate commerce. The last is problematic category. As Exxon shows, not all laws that affect interstate commerce disproportionately are deemed to "discriminate in practical effect." As I tried to explain last night, I think what is ultimately driving that determination is an intuition that the law is motivated by a discriminatory purpose (even if the Court is unwilling to so state).

* Third, the same sort of thing seems to be going on in the Court's application of the Pike balancing test. That is, it sure seems that when the Court comes to the conclusion that the burdens imposed on interstate commerce are "clearly excessive" in light of what the state is attempting to accomplish, at least a strong inference is raised that something else is afoot. Again, this is not what the Court says in Pike or Kassel, but it seems to be what is going on.

* Finally, let me add one caveat that I forgot to mention last night. There are a class of cases where the Court has found the burden on interstate commerce "clearly excessive" when there probably was no protectionism afoot, and those are cases where states have done something to clog the channels of interstate commerce. Bibb might be the best example. It is unclear how requiring contoured mudflaps could have accomplished a protectionist objective. (I would want to look at the factual record to be sure, but it certainly seems counterintuitive.) Yet the Court invalidated the law. I think the idea is that, given that we are an economic union, states cannot adopt commercial laws that tend to impede the flow of commerce throughout the nation when their ideosyncrisy tends to clog up the flow of commerce. Kassel might also be classified as such a case, but as I said last night, I think Kassel can also be unsderstood as involving protectionism.

I hope this helps in some way. And, as always, feel free to ask more questions.

Next week

The reading assignments for next week's classes remain those set out in the assignment schedule. We will cover preemption on Monday and begin the material on the dormant Commerce Clause Wednesday. There is one modification: there will be no Problem 9. (I could manage to devise a preemption problem that justified the time it would take to cover in class.)

Also, as I mentioned in class last night, the lawyer for the Petitioner in Van de Kamp v. Goldstein, No. 07-854, will be mooting his Supreme Court argument at noon on Wednesday in our Moot Court Room. The question presented is whether supervising prosecutors are absolutely immune from civil rights claims based on their failure to implement an information management system tracking the information on government informants. All of the official documents in the case can be found here. (As a result of my participatin in the argument as a judge, I will not be available for my regularly scheduled office hours from noon to 1:30 next Wednesday.)

Analysis of Problem 8

For those interested in a thorough analysis of the constitutional problem with the appointment of administrative law judges within the PTO, you can read this short paper by Professor John Duffy of George Washington University Law School. (Once arriving at the page with the abstract, you can download a PDF version of the paper.) It was Duffy's research that led to the story blowing up this past summer, and the recent scramble in Congress to devise some sort of a fix.

Mere employees

During last night's class meeting, Stanley gently took issue with the distinction I was drawing between inferior officers and "mere employees." Instead of taking my word for it, here is the relevant section of the most recent Supreme Court opinion on the topic, again taken from Freytag v. Commissioner, 501 U.S. 868 (1991):

The Commissioner, in contrast to petitioners, argues that a special trial judge assigned under 7443A(b)(4) acts only as an aide to the Tax Court judge responsible for deciding the case. The special trial judge, as the Commissioner characterizes his work, does no more than assist the Tax Court judge in taking the evidence and preparing the proposed findings and opinion. Thus, the Commissioner concludes, special trial judges acting pursuant to 7443A(b)(4) are employees rather than "Officers of the United States."

"[A]ny appointee exercising significant authority pursuant to the laws of the United States is an `Officer of the United States,' and must, therefore, be appointed in the manner prescribed by 2, cl. 2, of [Art. II]." Buckley, 424 U. S., at 126. The two courts that have addressed the issue have held that special trial judges are "inferior Officers." The Tax Court so concluded in First Western Govt. Securities, Inc. v. Commissioner, 94 T. C. 549, 557-559 (1990), and the Court of Appeals for the Second Circuit in Samuels, Kramer & Co. v. Commissioner, 930 F. 2d 975, 985 (1991), agreed. Both courts considered the degree of authority exercised by the special trial judges to be so "significant" that it was inconsistent with the classifications of "lesser functionaries" or employees. Cf. Go-Bart Importing Co. v. United States, 282 U.S. 344, 352-353 (1931) (United States commissioners are inferior officers). We agree with the Tax Court and the Second Circuit that a special trial judge is an "inferior Officer" whose appointment must conform to the Appointments Clause.

The Commissioner reasons that special trial judges may be deemed employees in subsection (b)(4) cases because they lack authority to enter a final decision. But this argument ignores the significance of the duties and discretion that special trial judges possess. The office of special trial judge is "established by Law," Art. II, 2, cl. 2, and the duties, salary, and means of appointment for that office are specified by statute. See Burnap v. United States, 252 U.S. 512, 516- 517 (1920); United States v. Germaine, 99 U.S. 508, 511-512 (1879). These characteristics distinguish special trial judges from special masters, who are hired by Article III courts on a temporary, episodic basis, whose positions are not established by law, and whose duties and functions are not delineated in a statute. Furthermore, special trial judges perform more than ministerial tasks. They take testimony, conduct trials, rule on the admissibility of evidence, and have the power to enforce compliance with discovery orders. In the course of carrying out these important functions, the special trial judges exercise significant discretion.

Even if the duties of special trial judges under subsection (b)(4) were not as significant as we and the two courts have found them to be, our conclusion would be unchanged. Under 7443A(b)(1), (2), and (3), and (c), the chief judge may assign special trial judges to render the decisions of the Tax Court in declaratory judgment proceedings and limited- amount tax cases. The Commissioner concedes that in cases governed by subsections (b)(1), (2), and (3), special trial judges act as inferior officers who exercise independent authority. But the Commissioner urges that petitioners may not rely on the extensive power wielded by the special trial judges in declaratory judgment proceedings and limited- amount tax cases because petitioners lack standing to assert the rights of taxpayers whose cases are assigned to special trial judges under subsections (b)(1), (2), and (3).

This standing argument seems to us to be beside the point. Special trial judges are not inferior officers for purposes of some of their duties under 7443A, but mere employees with respect to other responsibilities. The fact that an inferior officer on occasion performs duties that may be performed by an employee not subject to the Appointments Clause does not transform his status under the Constitution. If a special trial judge is an inferior officer for purposes of subsections (b)(1), (2), and (3), he is an inferior officer within the meaning of the Appointments Clause and he must be properly appointed.

"Heads of Departments"

Article II, sec. 2, clause 2 permits Congress to vest the appointment of inferior officers in "Heads of Departments." One of you asked last night whether this referred exclusively to members of the President's cabinet--officers such as the Secretary of Defense, the Attorney General, and the like. The Supreme Court addressed this question most directly in Freytag v. Commissioner, 501 U.S. 868 (1991), where the question presented concerned the appointment of special trial judges of the Tax Court by the Chief Judge of the Tax Court. The Tax Court is a non-Article III court, whose judges are not members of the federal judiciary.

In addressing the constitutionality of the trial judges' appointment, the Court in Freytag stated as follows:

This Court for more than a century has held that the term "Department" refers only to "`a part or division of the executive government, as the Department of State, or of the Treasury,' " expressly "creat[ed]" and "giv[en] . . . the name of a department" by Congress. Germaine, 99 U. S., at 510-511. See also Burnap, 252 U. S., at 515 ("The term head of a Department means . . . the Secretary in charge of a great division of the executive branch of the Government, like the State, Treasury, and War, who is a member of the Cabinet"). Accordingly, the term "Heads of Departments" does not embrace "inferior commissioners and bureau officers." Germaine, 99 U. S., at 511.

Confining the term "Heads of Departments" in the Appointments Clause to executive divisions like the Cabinet- level departments constrains the distribution of the appointment power just as the Commissioner's interpretation, in contrast, would diffuse it. The Cabinet-level departments are limited in number and easily identified. Their heads are subject to the exercise of political oversight and share the President's accountability to the people.

Such a limiting construction also ensures that we interpret that term in the Appointments Clause consistently with its interpretation in other constitutional provisions. In Germaine, see 99 U. S., at 511, this Court noted that the phrase "Heads of Departments" in the Appointments Clause must be read in conjunction with the Opinion Clause of Art. II, 2, cl. 1. The Opinion Clause provides that the President "may require the Opinion, in writing, of the principal Officer in each of the Executive Departments," and Germaine limited the meaning of "Executive Department" to the Cabinet members.

The phrase "executive departments" also appears in 4 of the Twenty-fifth Amendment, which empowers the Vice President, together with a majority of the "principal officers of the executive departments," to declare the President "unable to discharge the powers and duties of his office." U. S. Const., Amdt. 25, 4. The Amendment was ratified February 10, 1967, and its language, of course, does not control our interpretation of a prior constitutional provision, such as the Appointments Clause. Nevertheless, it is instructive that the hearings on the Twenty-fifth Amendment confirm that the term "department" refers to Cabinet-level entities:

"[O]nly officials of Cabinet rank should participate in the decision as to whether presidential inability exists. . . . The intent . . . is that the Presidential appointees who direct the 10 executive departments named in 5 U.S.C. 1 [now codified as 101], or any executive department established in the future, generally considered to comprise the President's Cabinet, would participate . . . in determining inability." H. R. Rep. No. 203, 89th Cong., 1st Sess., 3 (1965).

Treating the Tax Court as a "Department" and its chief judge as its "Head" would defy the purpose of the Appointments Clause, the meaning of the Constitution's text, and the clear intent of Congress to transform the Tax Court into an Article I legislative court. The Tax Court is not a "Department."

A point on appointments and removal

Towards the end of class, we discussed a number of different issues regarding the appointment and removal of Officers of the United States, and in particular how the analysis regarding the two issues might at times overlap. This brief note is just meant to clarify one particular point in our discussion.

Under the Appointments Clause, the relevant issue can often be whether the official is a principal or inferior officer (as was the case in Morrison v. Olsen). If the person is a principal officer, she must be appointed by the President and confirmed by the Senate. But if she is an inferior officer, Congress can (if it so chooses) vest her appointment in the President alone, a court of law, or a head of a department. Morrison illustrates the analysis for how one assesses whether a given official is a principal or inferior officer.

With respect to removal, the inquiry is a bit more amorphous. The relevant question, as the Court explains in Morrison, is whether the limitation on the President's power to remove the officer "unduly trammels on executive authority" such that it "interfere[s] impermissibly with his constitutional obligation to ensure the faithful execution of the laws." Whether a given removal limitation crosses this line will necessarily depend on (a) the nature of the limitation, and (b) the nature of the office in question.

As to the latter inquiry -- the nature of the office in question -- the relevant factors are apt to be much like those that inform whether a given officer is properly labeled "principal" or "inferior." Importantly, though, they are not the same inquiry. That is, it is not true that every possible limitation on the removal of a principal officer would necessarily be unconstitutional. Nor is it the case that every possible limitation on the removal of an inferior officer would be permissible. While the inquiries might look at similar facts regarding the nature of the office (breadth of authority and jurisdiction, etc.), they are logically (and constitutionally) distinct.

The Constitution and the Fed

In light of all that is going on, and that we are presently discussing the powers of appointment and removal of Officers of the United States, I thought it would be worth sharing a great primer one of you (Jason Koch) provided me concerning the Federal Reserve Bank and the Open Market Committee. A question to ask yourself: how, exactly, is this arrangement constitutional? Honestly, I don't know the answer.

* * *

In the case of the Federal Open Market Committee (a quasi-governmental body), Congress not only restricted the power of the President to appoint and remove officers, but delegated that appointment and removal power to private entities outside of the Federal Government. The Federal Open Market Committee and the Sharing of Governmental Power with Private Citizens, 75 Va. L. Rev. 111 (1989). In light of the separation of powers doctrine it appears the Federal Reserve Act (as amended) “[did] not merely usurp the [President’s] appointment power but misappropriate[d] it." Id at 138.

Private Representation on the Federal Open Market Committee

The FOMC is charged with governing open-market operations, "with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation of the country." 12 U.S.C. Sect. 263(c), (1983). According the Federal Reserve Board’s website, “[o]pen market operations…are the Federal Reserve’s principal tool for implementing monetary policy.” Additionally, interest rates are established by the FOMC, contrary to the generally accepted notion that this duty belongs to the Board of Governors. Financial Liberalization, International Monetary Dis/Order, and the Neo-Liberal State, 15 Am. U. Int'l L. Rev. 1279 (2000). The FOMC is comprised of the seven members of the Board of Governors (appointed by the President, affirmed by the Senate, removable for “cause”) and five private members, four of whom are elected each year "by the boards of directors of the Federal Reserve Banks, which are privately owned" (the Federal Reserve Bank of New York has a permanent seat). Fragmenting the Unitary Executive: Congressional Delegations of Administrative Authority Outside the Federal Government, 85 Nw. U.L. Rev. 62 (1990). These latter members are not “directly accountable to any public official for their exercise” of power, and they owe their loyalty to the boards of the private Federal Reserve Banks they represent (indeed, only the presidents of the Federal Reserve Banks are considered for the appointments). 75 Va. L. Rev. 111. While the Board of Governors must approve the pool of candidates who may be elected, it does not decide which members are appointed; nor may the Board remove a private member from the FOMC except for cause. Id. By law, the Bank presidents are accountable to their shareholders, the member banks (i.e., private commercial banks). 15 Am. U. Int'l L. Rev. 1279

The Private Federal Reserve Banks

John Marshall noted that "the State does not, by becoming a corporator, identify itself with the corporation. The [bank] is not the [State], although the State holds an interest in it." Bank of United States v. Planters' Bank of Georgia, 22 U.S. 904, 907 (U.S. 1824). In Emergency Fleet, Brandeis made a similar observation: "Instrumentalities like the national banks or the federal reserve banks in which there are private interests, are not departments of the Government. They are private corporations in which the Government has an interest." Emergency Fleet Corp. v. Western Union Tel. Co., 275 U.S. 415, 425-426 (U.S. 1928). The Ninth Circuit held that the Federal Reserve Banks are not government agencies for purposes of the Federal Tort Claims Act. Federal tort liability requires that the principal is able to “control the actions of his agent, and not simply [that] the entity performs an important governmental function.” Lewis v. United States, 680 F.2d 1239, 1243 (9th Cir. 1982). The Lewis Court made a number of interesting findings about the nature of the Banks in reaching its conclusion:

Each Federal Reserve Bank is a separate corporation owned by commercial banks...The stockholding commercial banks elect two thirds of each Bank's nine member board of directors. The remaining three directors are appointed by the Federal Reserve Board. The Federal Reserve Board regulates the Reserve Banks, but direct supervision and control of each Bank is exercised by its board of directors [citation]....Each Bank is statutorily empowered to conduct [its] activities without day to day direction from the federal government....It is evident from the legislative history of the Federal Reserve Act that Congress did not intend to give the federal government direction over the daily operation of the Reserve Banks...

* * *

The Banks are listed neither as “wholly owned” government corporations under 31 U.S.C. § 846 nor as “mixed ownership” corporations under 31 U.S.C. § 856....Additionally, Reserve Banks, as privately owned entities, receive no appropriated funds from Congress....[T]he Banks are empowered to sue and to be sued in their own name. They carry their own liability insurance and handle their own claims....[T]he Banks have defended against tort claims directly, through private counsel, not government attorneys...and they have never been required to settle tort claims under the administrative procedure of 28 U.S.C. § 2672…

Id., 4, 7-10.

Governor Palin and the constitutional status of the Vice President

A question from one of you concerning part of last night's debate:

QUESTION: Do you know which part of the Constitution Governor Palin is referring to [in the portion of the debate excerpted below]?

IFILL: Governor, you mentioned a moment ago the constitution might give the vice president more power than it has in the past. Do you believe as Vice President Cheney does, that the Executive Branch does not hold complete sway over the office of the vice presidency, that it it is also a member of the Legislative Branch?

PALIN: Well, our founding fathers were very wise there in allowing through the Constitution much flexibility there in the office of the vice president. And we will do what is best for the American people in tapping into that position and ushering in an agenda that is supportive and cooperative with the president's agenda in that position. Yeah, so I do agree with him that we have a lot of flexibility in there, and we'll do what we have to do to administer very appropriately the plans that are needed for this nation.

ANSWER: I think I will take a pass on trying to decipher precisely what Governor Palin meant in her answer. But the controversy that the question and answer alludes to is this: Vice President Cheney has argued, in turns, that the Office of the Vice President is part of both the executive and the legislative branches. He argued in the case of his 2001 Energy Task Force that the deliberations of that group were within the executive branch, and thus entitled to executive privilege. He prevailed on this claim in a case that was ultimately decided by the Supreme Court. See Cheney v. United States District Court, 542 U.S. 367 (2004). More recently, when presented with the order to preserve his official records and letters, pursuant to a statute passed by Congress concerning the preservation of executive branch deliberations (for the national archives), Cheney argued that because the Vice President is the President of the Senate, see Art. I, sec. 3, clause 4, which permits him to break ties in Senate votes, he is also a member of the legislative branch, and thus exempt from the record-keeping requirements. Two weeks ago, the United States District Court for the District of Columbia ruled against Cheney on this issue, which you can read about here.

Revisiting the Exceptions Clause

Digging into the mailbag, I received these (fairly challenging) questions yesterday regarding McCardle, Klein, and the Mititary Commissions Act:

QUESTION: I see how under McCardle the Supreme Court did not need address the question of what happens if congress cuts off all avenues of appellate review because of the Judiciary Act of 1789. I also understand that, after oral argument but prior to final judgment, Congress saw that the Court was not going to rule in its favor, so it repealed the statute and the Court held that this was okay. I'm having a difficult time seeing how that is fundamentally different from Klein when, during the course of the suit, Congress attempts to prescribe "rules of decision," and the Court held that this is unconstitutional. I know you stated that Klein muddied the water, but I have been unable to convincingly distinguish the two.

ANSWER: Terrific question, and I'm not sure I can convincingly distinguish them, either. Here is my best effort. In McCardle, the statute was a facially neutral withdrawal of jurisdiction. We knew Congress's intent, but the law itself simply repealed an existing statute granting jurisdiction. It thus applied equally to everyone, including the government. In contrast, the law in Klein was decidedly non-neutral (even though it was styled as a regulation of the Court's jurisdiction). The statute in Klein only applied when the claimant had been granted a pardon by the President. It then efffectively directed the court to rule against one party -- the claimant. Thus, the government could never have lost or been deprived of jurisdiction that it sought. Rather, it effectively worked to direct the court, in certain pending cases, to rule in favor of the government (after the claimants had already sought and receieved pardons). In McCardle, by contrast, the withdrawal of jurisdiction worked both ways. In cases similar to McCardle's, neither the government nor the petitioner could seek the Court's jurisdiction.

QUESTION: In addition, the MCA example seems to ask the question McCardle failed to answer -- i.e., what happens when all appellate avenues are stripped from the Supreme Court by Congress? Does Boumediene, in determining foreign nationals held outside the jurisdiction of the U.S. still have a right to habeas corpus essentially render such a blanket denial of appellate jurisdiction to the Court by Congress as unconstitutional and thus give us our answer?

ANSWER: First, I think it is too early to tell exactly how broadly Boumediene will be understood. Second, as a technical legal matter, I think the answer is no. Boumediene specifically concerned the breadth of the Suspension Clause, and whether it afforded any positive rights to individuals who are not citizens and being held outside the technically sovereign areas of the United States. The Court held that such persons are indeed protected by the Suspension Clause. But under Boumediene, at least as I read it, there does not appear to be any right to judicial review in an Article III court per se. Instead, there must be meaningful review of the detention, and that potentially could occur through some other mechanism. Also, I do not read Boumediene as guaranteeing Supreme Court review (which is what the Exceptions Clause addresses). I think review in a United States District Court or the Courts of Appeals, if meaningful, could be sufficient. So I do not think Boumediene actually addresses the issue of cutting off all avenues of Supreme Court review.

Monday's assignment

In addition to finishing up our discussion of the nondelegation doctrine, we will cover the legislative veto (INS v. Chadha) and the Appointments Clause. With luck, we will get to Problem 8, which concerns the appointment of administrative patent judges. But we will defer our discussion of the removal power until Wednesday. Wednesday's assignment is likely to be the same as that set out in the assignment schedule, except that we will probably not get to the impeachment mateiral until the class after fall break. Thanks.