Federalist Society logo

2018 National Lawyers Convention

Good Government through Agency Accountability and Regulatory Transparency

November 15 — 17, 2018

The 2018 National Lawyers Convention was held on Thursday, November 15 through Saturday, November 17 at the Mayflower Hotel in Washington, D.C. The theme for the convention was: Good Government through Agency Accountability and Regulatory Transparency. Video is now available on the agenda tabs.

LodgingFeesCLE


2018 Antonin Scalia Memorial Dinner
SOLD OUT

Union Station
50 Massachusetts Avenue NE
Washington, DC 20002
Thursday, November 15, 2018
Reception - 6:00 p.m.
Dinner - 7:00 p.m.
(ticketed event) BLACK TIE OPTIONAL


Eighteenth Annual Barbara K. Olson Memorial Lecture

Featuring:


Hon. Jeffrey S. Sutton

United States Court of Appeals,
Sixth Circuit

The Mayflower Hotel
1127 Connecticut Avenue NW
Friday, November 16, 2018
5:00 p.m.
(ticketed event)


Eleventh Annual Rosenkranz Debate

RESOLVED: District courts do not have the authority to enter universal injunctions.

Featuring:

John HarrisonProf. John Harrison
James Madison Distinguished
Professor of Law,
University of Virgina
School of Law
 

          and

 

 

 

 

 

Neal KatyalMr. Neal Katyal
Partner,
Hogan Lovells US LLP


 

The Mayflower Hotel
1127 Connecticut Avenue NW
Saturday, November 17, 2018
12:30 p.m.


Showcase Sessions Discussing the Convention Theme:
"Good Government through Agency Accountability and Regulatory Transparency"

  • What is Regulation For?
  • Balancing Insulation and Accountability of Agency Decisions
  • The States & Administrative Law
  • Does Agency Regulatory Power Extend Beyond its Formal Power, and Should It?

Practice Group Breakout Sessions

  • Independent Agencies: How Independent is Too Independent?
  • Say What You Will?: Government Compelled Speech
  • Rulemaking by Adjudication: Who Am I to Judge?
  • Discrimination Against Minorities
  • A New Approach to Antitrust Law: Transparency
  • The Pros and Cons of Plea Bargaining
  • Climate Change Nuisance Suits
  • Revisiting the Community Reinvestment Act
  • Artificial Intelligence and Big Data Innovation: Navigating the Technology World of the Near Future
  • National Security Law & Doing Business Abroad
  • Joint Employment: The Unintended and Unpredictable 'Employment' Relationship
  • The Future of the Past: Stare Decisis
  • Technology, Social Media and Professional Ethics
  • The Current Landscape of Telecommunications Law
  • Masterpiece Cakeshop and its Implications

Up to 20 hours of Continuing Legal Education (CLE) credits available. Direct all CLE inquiries to the Federalist Society's national office - (202) 822-8138 or email cle@fedsoc.org.


Lodging

Reserve early! Washington, DC hotels are becoming booked very quickly for the fall convention season. To reserve overnight accommodations for the Convention, please contact The Mayflower directly:

The Mayflower Hotel
1127 Connecticut Avenue, NW
Washington, DC 20036

Reservations Toll Free: 877-212-5752
Reservations Local Phone: 202-347-3000

Reservation Link: https://book.passkey.com/event/49723797/owner/1261/home

Cut off Date: October 22, unless rooms sell out sooner.

Inquire about the special rate of $270 per night offered to Federalist Society Convention registrants. Specify "Federalist Society" when contacting the Mayflower.


Convention Fees

Convention Package* 
Private Sector
Non-Member
$625
Private Sector
Active Member
$500
Student/Non-Profit/Government
Non-Member
$400
Student/Non-Profit/Government
Active Member                                                
$300


*The Convention Package includes all three days of sessions, CLE, and lunches as well as the Barbara K. Olson Memorial Lecture & Reception.  Please note that the Convention Package does not include the Antonin Scalia Memorial Dinner.

 Individual Day**
Non-Member$250 per day
Active Member$200 per day
Student Non-Member$60 per day
Student Active Member                                                $50 per day


**Individual day purchase includes that day’s sessions, CLE and lunch.  It does not include social events.

Social Events 
Annual Dinner - SOLD OUT
Non-Member
                  $250
Annual Dinner - SOLD OUT
Active Member
$200
Barbara K. Olson Memorial Lecture & Reception
Non-Member
$150
Barbara K. Olson Memorial Lecture & Reception         
Active Member
$100

CANCELLATION FEE OF $100 AFTER MONDAY, NOVEMBER 5.
NO REFUNDS WILL BE GIVEN AFTER MONDAY, NOVEMBER 12.


Media inquiries should go to Peter Robbio at probbio@crcpublicrelations.com.

 

Back to top
9:00 a.m. - 9:45 a.m.
Opening Address by Mike Lee

2018 National Lawyers Convention

Topics: Administrative Law & Regulation • Federalism • Federalist Society • Regulatory Transparency Project
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Event Video

Listen & Download

Description

On November 15, 2018, Sen. Mike Lee (UT) gave the opening address at the Federalist Society's 2018 National Lawyers Convention. Lee discussed the sharp divisions in modern politics and the role of conflict in our constitutional republic.

  • Hon. Mike S. Lee, United States Senate, Utah
  • Introduction: Mr. Leonard A. Leo, Executive Vice President, The Federalist Society

Speakers

Event Transcript

2018 National Lawyers Convention

Opening Address

November 15, 2018 at 9:00am

 
 

 

 

 

Featuring

Hon. Mike S. Lee - United States Senate, Utah

Moderator: Leonard Leo - Executive Vice President, Federalist Society

 
 

 

 

 

 

Leonard Leo:  Good morning, ladies and gentlemen. If you could all please take your seats. If we could close those doors in the back, please. Good morning, ladies and gentlemen. My name is Leonard Leo, and on behalf of all of us at The Federalist Society it is my privilege to welcome all of you to this year’s annual convention. It is inspiring and exciting to see so many of you who have travelled so far to be here today, and whether you are from outside our nation’s capital or not, it is a real testament to the strength of our movement for limited constitutional government that all of you would take time away from work and family to spend these next several days together.

 

You know, it’s hard to believe how The Federalist Society has flourished over the years. I remember not all that long ago when we used to space out the chairs in this room to make the crowd seem bigger.

 

[Laughter]

 

Now, we squeeze seats together as tightly as possible to accommodate an ever-growing community of citizen lawyers committed to the rule of law. The audience here today in terms of its size, and distinction, and geographic reach is representative of a flourishing movement of people that places a premium on the free exchange of ideas and on the structural limits on government power contained in the Constitution that are ultimately most important for the preservation of human dignity and freedom.

 

The overall theme for these next several days is "Good Government through Agency Accountability and Transparency." The subject is right now at the intersection of the most important constitutional flash points we face today. Debate about the administrative state played an unprecedented part in the last two Supreme Court confirmations, and President Trump has stated that judicial selection is inextricably intertwined with this issue. We’ve witnessed over the past few years a growing number of lawsuits initiated by an historic number of states that challenge administrative action as a means of drawing clearer federalism boundaries. And at the heart of any current debate about repairing the legislative process is a serious inquiry into the proper limits of congressional delegation of power to administrative agencies. These and other issues will feature prominently in the programs you attend here.

 

I know of no better person to launch this year’s convention than U.S. Senator Mike Lee. Almost all of you, if not all of you, know him. He has been a mainstay at these gatherings. He has served in Federalist Society leadership, and as a senator he has been an irrepressible advocate for insuring respect for a structural constitution. He is a man of tremendous principle and courage. He is a man who takes seriously his oath of office to preserve and defend our constitution. He is sincere, candid, generous, and earnest. He is the kind of public servant our Founding Fathers envisioned. Please join me in welcoming Senator Mike Lee.

 

Hon. Mike Lee:  Thanks so much, Leonard. Thanks to all of you for joining us this morning. It’s a pleasure and an honor to be at The Federalist Society in any form, but I especially like this annual gathering. I wanted to start today by telling you a story that I heard just a couple of days ago by a friend and neighbor of mine back in Utah. He told me about a nephew of his who’s in medical school. His nephew’s married. His nephew and his nephew’s wife don’t have any children, but they were the loving parents of a dog, a large dog who tragically passed away recently. Well, his nephew was at medical school the day the dog passed away, so his nephew’s wife started to try to figure out what to do about the dog who had just tragically died.

 

They lived in a small apartment in an urban area. They didn’t have a yard, so they didn’t know where to bury the dog. They couldn’t just take it outside and bury it anywhere since they didn’t have their own yard, so she called the vet and said, “What do I do?” The vet suggested, at one point, that she just bring the dog down to the vet’s office, and the vet would arrange for disposal of the dog’s body. Fair enough. Then she remembered, “Well, we don’t have a car, so I’m gonna have to take the subway to get to the vet, but this is a large dog. I don’t really want to walk onto a subway train holding a large dead dog. That could be kind of awkward.”

 

So she did what any rational person would do in that circumstance. She got out a very large suitcase and put the large dead dog inside the very large suitcase. And she lugged the large, heavy suitcase containing the large, heavy, dead dog onto the subway train. A chivalrous gentleman seeing her carrying this very heavy suitcase, obviously not knowing what was inside, said, “May I help you with that, ma’am?” And she said, “Yes, please. Thank you.” He lifted it, and upon hefting this object asked, “What on Earth is in there? That’s heavy.” She was too embarrassed to admit what it actually contained, and so she said, “Oh, it contains computer equipment.”

 

So he went ahead and put it up on a shelf. When she got to her intended stop on the subway, she got out to lift this heavy suitcase off of a shelf, and lo and behold the guy, it turns out, was still there. And he very chivalrously, again, got up and lifted the suitcase down. She thought, “This man is so helpful. I’m glad he’s still here.” But then something unexpected happened. The guy took off with the suitcase. I can’t exactly count how many ways this is analogous to today’s political environment, but there’s definitely a close corollary to what the Democrats tried to do to Brett Kavanaugh.

 

      Now, Congress has just returned to Washington after a legislative recess of a few weeks during the election, at which time I’m sure Washington breathed a lot easier during that recess. But then we had the split results of this election that have caused a lot of people to panic. Everyone in the media, most people on Capitol Hill, and people within the Administration are wondering all kinds of questions like, "What’s going to happen with the new Democratic House of Representatives?" Whether it be gridlock, there is all this handwringing going on. I’m glad that at least one thing stays consistent, and that is that The Federalist Society continues to meet in Washington in November, shortly before Thanksgiving. At least we’re still here.

 

      Now, I obviously had some disappointments on election night, a lot of them, in fact. Some good friends came up short in their races, and losing the Republican majority in the House of Representatives obviously hurts. It hurts a lot, but I’m not going to lie. I’m really, really going to like being able to call Mitt Romney the 'junior Senator from Utah.'

 

[Laughter]

 

That takes some of the sting out of it actually, but no one enjoys that more than Mitt Romney himself, who, every time he speaks, refers to himself as the 'junior Senator from Utah.' He tells me, “At my age I really like any term that comes with the word junior in it.”

 

      It is those elections that we have just experienced and that are causing so much uncertainty in this town right now, and the ambiguous message that was sent through those elections that I’d like to talk about and think about a little bit today in my conversation with you. To constitutional conservatives, the election results and the split Congress that those election results will produce have to be seen as an opportunity to learn some lessons that both parties, especially my own party, have been ignoring for far too long. Obviously, I was strongly rooting for Republicans to win across the board Tuesday night, but from my perspective divided government need not be a problem in and of itself.

 

The House and Senate are going to be divided because the country itself is divided. In that sense the election results again affirmed some of the genius of the Founding Fathers’ framework. Now, in the media division is often lamented and feared as if it were some sort of disease that needs curing, ideally by conservatives just giving up and going along with whatever progressives want. A lot of them, and a lot of people in Washington, tend to view the job of the Republican is to just split the difference from our position and the goal, and meet them half the distance to the goal. In other words, allowing progressives to continue to set the agenda and move us in their direction. All too often that happens.

 

Disagreement, especially in the United States is not a disease. It’s not something that we need to avoid just for the sake of avoiding it. It's a sign, actually, of health. Conflict, even an especially deep and bitter conflict, is innate really to all of human relationships. And it’s certainly an innate part of any society, and of any system of government, in which the system calls itself a republic. The Founding Fathers understood this. They had to or they never would have gotten out of Philadelphia in one piece, much less with a document that would foster the development of the greatest civilization the world has ever known. From the day it was first conceived, the United States was among the most ideologically diverse nations in the world. Our Constitution was written specifically for a people divided on political, regional, cultural, and religious questions. It serves as a road map for resolving disputes peaceably through mechanisms designed to best facilitate the happiness, and freedom, and prosperity of its people on all questions, really.

 

When people ask today how Americans can overcome differences and come together as one nation, the answer remains today, in many, many respects, the same as it was back in 1787. You see, the Constitution’s system of separated powers and of federalism not only made the United States vibrant, and flexible, and resilient, but what the scholar Nassim Taleb calls anti-fragile. Ours is a system made stronger by tension and by division. Thanks to our constitution, diversity really is a strength because of the common gratitude Americans can take from the freedom to govern their unique communities according to their own particular values. Under the alchemy of the constitution, America’s wild differences are transformed into a source of national unity.

 

Now, each year for the last few years I’ve tried to throw in a story about my daughter, Eliza. My daughter, Eliza, is now 17 years old. She’s a senior at Lone Peak High School in Highland, Utah, near our home in Alpine, Utah. And she often says things that are sometimes unintentionally profound, sometimes just profound in and of themselves. Eliza recently had her wisdom teeth removed. As she was coming out of anesthesia, while heavily sedated, the oral surgeon brought my wife and me into the operating room to help her recover. And she was coming out of the anesthesia. She sat there; it turns out, she would be a happy drunk, a nice drunk, a loving drunk. “I love you, man.” She was sitting there saying, “Mom and Dad, I love you. You’re just the best parents in the world. You’re so nice.” And then she paused, and she looked over at me, and she said, “And I love federalism, and I love separation of powers." The oral surgeon, knowing me as he does, looked over at me and he said, “That must be your proudest moment, too,” and indeed it was.

 

Today, though, it doesn’t always seem like division is in fact our greatest source of strength even though it can be, even though it should be, even though it in fact is under our constitutional system. Today, our disagreements sometimes seem to be pulling us apart and not together. But it doesn’t have to be that way. Take for example, the character assassination of Brett Kavanaugh, or, excuse me, Justice Brett Kavanaugh.

 

[Applause]

 

Six weeks after he was confirmed, I still can’t completely get my head around what happened. My Democratic colleagues on the Senate Judiciary Committee deliberately withheld material evidence from committee and FBI investigators for weeks so as to maximize the cruelty visited upon Justice Kavanaugh, visited upon Justice Kavanaugh’s family, visited upon Dr. Christine Blasey Ford. They used a nationally televised hearing to ask Justice Kavanaugh about such weighty matters as flatulence and drinking games. They attempted to launder vile accusations raised by Michael Avenatti, and they uncritically repeated other unsubstantiated, uncorroborated, specious allegations. It justified their stunning, bold, and deliberately cruel abandonment of the presumption of innocence by saying blithely that the confirmation process was merely a job interview, as if that somehow disposed of any kind of a need for fairness, or kindness, or decency.

 

The truth is that Democrats were acting irresponsibly even before Dr. Ford’s letter was leaked to the press. My friend, the junior senator from New Jersey, declared that Justice Kavanaugh’s supporters were quote, unquote "complicit in evil" and urged protestors to get up in the face of Congress people. Now, we’re told that this is somehow payback for Judge Merrick Garland’s nomination and what happened there. "At least Brett Kavanaugh had a hearing," the left would tell us, as if that would somehow justify a deliberate effort to destroy a man’s life. In any event, that excuse can in no way, shape, or form justify or explain the smears against the other highly qualified nominees, those possessing exemplary character that we’ve seen over the last few decades.

 

So while the Democrats’ treatment of Judge Kavanaugh is perhaps the worst, and the most recent, the most current manifestation of this phenomenon, while it was shocking and disgusting, let’s be honest, it was neither completely unprecedented, nor entirely surprising, given what we’ve seen from them in the past few decades. In any event, we need to find a way to prevent things like this from happening again, ever. I applaud Chairman Grassley for investigating every lead and making criminal referrals where appropriate. It’s one very important way to deter people from making false accusations like these and engaging in this awful pattern of conduct.

 

But there’s an even deeper problem, I think. From the perspective of raging extremists who control the left’s agenda, what happened earlier this year, as evil as it was, was entirely rational, as they see it. For decades, we have pulled powers constitutionally reserved for the states and for the people into the federal government. Then once they’re here, we have transferred those from the people’s elected law makers over to unaccountable, unelected bureaucrats, over to the administrative state. Today more and more decisions are made in Washington rather than in city halls and state capitols. And more and more of Washington’s decisions are made by unelected judges and unaccountable bureaucrats, not senators and representatives, as they are supposed to be.

 

This anti-constitutional project has hacked away at the bonds of trust formed long ago between the American people and their government. By seizing power from more politically homogenous local governments and communities, Washington denies the American people the ability to govern by consensus. A government designed to be by the people, of the people, and for the people, all people is too often instead run for fifty-one percent of the United States, and against the other forty-nine percent.

 

This approach artificially raised the stakes of federal policymaking, and, therefore, raises the temperature of our national political discourse to an unacceptable degree. As long as Supreme Court justices anoint themselves as philosopher kings issuing moral decrees, to use Nancy Pelosi’s words, “Almost as if God has spoken”—how is that not blasphemy? But anyway—the total political war we saw this fall is going to continue as long as that continues to be our mindset because that’s what happens when you raise the political stakes and the political temperature to the degree that we have in recent decades by concentrating this much power as we have. As long as the federal government blithely asserts the power to regulate, to penalize, to tax, or to subsidize any and all behavior, our politics will incite the very impulses that constitutions were written specifically to overcome.

 

When we saw that leftist mob just a few blocks from here, driving Ted Cruz and his wife from a restaurant while they were just out on a nice date together one evening, or violent criminals terrorizing Tucker Carlson’s poor wife at her own home, this is just the beginning. Increasingly, the left treats politics like a religion and conservatives not as loyal opponents, but as heretics and infidels. On college campuses and other institutions where the left holds unchallenged power, the right is not questioned, but anathematized. Conservative arguments are denounced as hate speech, as illegitimate, as undeserving somehow of first amendment protection.

 

Many students today are being taught the foolish theory that some speech is violence, and by extension, the evil corollary, that some violence is speech. The popularity on the right of a more combative style is only further evidence that Americans have simply accepted the unhappy consequences of Washington’s bipartisan consensus that all politics is now necessarily, unavoidably national.

 

As we’ve seen in recent elections, very much including last week’s midterms, our growing ideological divide mirrors a hardening geographic divide. Look at any electoral map today and you’ll see the same thing. America is split in two. Democrats are increasingly clustering in densely populated cities, and in and near suburbs, mostly on the coasts. Republicans are winning in exurban and rural America.

 

After last week’s elections, for the first time in the century only one state in the union will have a divided legislature. Red and blue America see the country and see the world very, very differently. So differently, in fact, that our rhetoric today seems often to be less about Option A versus Option B, or even about correct versus incorrect, or ideal versus sub-optimal, and more in the realm of good versus evil. Such stridency makes moral consensus rare, and makes federal compromise very, very difficult. Taken together, these three trends –bitter philosophical disagreement, stark geographic division, and the bi-partisan embrace of winner-take-all, necessarily national politics – compromise has become a sort of constitutional crisis. In other words, these things taken together make up a constitutional dirty bomb that threatens the foundations of our republic.

 

Terms like bitter clingers or deplorables, the Kavanaugh nomination, the religious inquisition of Amy Coney Barrett and of Russ Vought, even worse Charlottesville and the congressional baseball practice, even the institutions set up to shield Americans from this sort of mob behavior that’s always threatened the stability of republics are coming today increasingly under attack. The Electoral College, the legislative filibuster, even the Senate itself, freedom of speech, freedom of religion, the presumption of innocence, the right to bear arms, in today’s all-or-nothing national politics, especially on the left—but sometimes also on the right—these bulwarks of liberty are too often too casually dismissed as obstacles of progress.

 

Meanwhile, proponents of these principles are not just dismissed, but they’re often downright vilified and cast out as some sort of demons. This toxicity of our national politics and revolt against our institutions is itself the fruit, the inevitable, foreseeable fruit of centralized power. This is what centralized power does, and we, therefore, shouldn’t be surprised when this comes about as a result of many decades of power centralization in Washington, D.C.

 

Centralization, you see, has not made us stronger. It has not made us happier. It has not made our economy stronger, or more dynamic, or more likely to promote economic mobility among the poor and middle class, which, by the way, has always been one of the distinguishing features of our economy. Sure, there are lots of countries where some people are prosperous. America has been relatively unique in that this is a land where you can be born into poverty and have the reasonable hope and expectation that if you work hard and play by the rules, one day you’ll be able to retire comfortably. Centralization tends to produce the exact opposite of these very things that we have come to identify so closely with who we are as a nation.

 

Meanwhile, and for many of the same reasons, it’s making our politics weak, and coarse, and raw, and brittle. Where do we think this is going to take us next if and when the opportunity comes to replace one of the Supreme Court’s liberals? In 2020, as Democrats jockey to see which one can be their successful Trump candidate, where is it going to take us? Bear in mind, we’re at this fever pitch, emotionally, in our rhetoric and at a time of relative peace and economic prosperity within our country, thanks in large measure to President Trump’s economic reforms and a sense of optimism that those reforms have created within our economy. Our economy’s at full employment, and it’s growing fast enough to distract us, at least temporarily, from our $21 trillion national debt and our $800 billion annual deficit. Perhaps it shouldn’t be enough, but for the time being it is.

 

But my big concern is when the next bubble bursts, when the next recession hits, when the multi-trillion debts accrued by state and local pension funds come due, what happens when next we face a genuine international crisis? What happens when treasury yield rates return to their historic average, and we see our national debt service payments go from where they are today, which is about $300 billion a year, which is not that much higher than they were 20 years ago when our nation debt was one seventh of its current size, to where they’ll go within a couple years after treasury yield rates return to their historical average, which will be around a trillion dollars a year, forcing us to find another roughly $700 billion per year in federal revenue, more than our entire budget for the Department of Defense, within a surprisingly short period of time. What happens then?

 

You get the idea. According to any reasonable measuring stick, the dysfunctional status quo is unsustainable, even in good times like those we’re experiencing right now. It’s driving our government toward insolvency and our politics toward violence. Realistically, Americans have two options. Either we’re going to once again embrace the Constitution’s vision of a diverse, tolerant, pluralistic union of states and of communities each governed according to the values and priorities of its own citizens, or this fundamentally un-American contest, one recklessly designed to determine which half of our nation will have the power, at least temporarily, to unilaterally impose its will and its values on the other half, will escalate violently out of control.

 

Ultimately, this will come down to a binary choice, a simple binary choice. Federalism or violence. Many on the left don’t seem too concerned about any of this. They believe demographic and historic trends, coupled with what many see as the inherent rightness of their leftist cause make their ultimate victory over red America inevitable and morally justifiable. They believe every lever of federal power will one day soon, and permanently, be in their hands. They are content with non-stop political total war because they’re sure they’re going to win it, blind to the fact that such a victory would come at the expense of the American experiment itself, unless or until this changes, unless or until we change this. It, therefore, falls to conservatives to chart a new course. Not simply to turn away from disaster, but to turn America toward something better, toward a genuinely happy and sustainable future, one of tolerance and diversity of viewpoint.

 

Beginning this project is going to be my focus for the upcoming Congress. Pundits expect the next two years to be legislatively thin, you might say. The Democratic House is expected to focus on investigating the Trump Administration, while the Senate will be spending a lot of its time confirming the President’s nominees.

 

Now, confirming judges and confirming executive branch nominees is critically important work, and I look forward to continuing to do that. It’s especially important if we hope to restore localism and subsidiarity to our republic, but it by itself is not enough and never will be. Conservatives also need a vision of America that can itself transcend total war, and an agenda to help us get there; a new sustainable politics of subsidiarity and localism in the service of diversity and tolerance. Federalism is the answer. It’s not just the best answer. It’s not just a convenient answer. It is the only answer.

 

Setting aside for a moment that it happens to be required by the Constitution, federalism offers several unique advantages for us today, specifically in our time, more now than ever before. First, if fully embraced, it would allow each state to govern itself according to its own values. Federal policies that have usurped local autonomy and imposed one controversial set of ideas on the entire country should be rethought and reformed and the corresponding power returned back to the states or to the people. We have to devolve the federal programs necessary to once again let Vermont be Vermont, and let Utah be Utah.

 

Second, we must allow the states to be more than laboratories of Republican democracy. Too often when Washington does speak of federalism, it does so not only with lip service, but it does so in terms of temporary experimentation, as if the only goal were to figure out which state’s approach might be the right one, the magical one that is later to be scaled-up and then forced on the entire country. This is the absolute wrong approach. It is the opposite of federalism, just as kitsch is the opposite of art and not merely a cheap substitute therefore.

 

Instead, we should allow each unique community to develop unique solutions according to unique local preferences and then leave it at that. In every instance, some states are going to do that better than others. The beauty of governing locally is that if you really don’t like one community, you don’t necessarily have to run for office, or sue anyone, or protest, or write editorials. You can just move. Move to another place where they adopt policies more to your liking. This is how it was always designed to work.

 

Third, we should not think of federalism as merely a devolution of power, but the re-personalization of American politics. How much of the toxicity of our national debate is due to its forced impersonal anonymity? Few people treat their neighbors or their family members the way activists tend to treat each other on social media. Politics, you see, is an innately, inherently human activity. It's meant to take place eyeball-to-eyeball, not iPhone-to-iPhone. Glad you liked that. I was really proud of that one.

 

[Laughter]

 

Getting decisions out of Washington will not just make Americans happier by giving the power to run their own communities back to them, it will also make them nicer by forcing them to engage in politics as human beings again instead of digital 'Skolls' and online virtue signalers.

 

Now, I want to be very clear about something. We should harbor no illusions about state and local governments always being virtuous and pure, or always necessarily even being more efficient or less wasteful than the federal government. They’re often not. But sovereignty and civility are more important than efficiency, and you can turn a state around a lot faster than you can a national government. You can turn a city government around a lot faster than you can turn around a state government.

 

States and localities have two other advantages over Washington. First, they’re close to their voters and policymakers are more accountable, more easily pressure-able, and fire-able than they are here in this town. And second, of course, most states are required to balance their budgets, either by operation of a state constitutional amendment or otherwise. In any event, there is not state in this union, not a single one, that has the option of perpetual deficit spending on the scale seen here in Washington, D.C.

 

There’s nothing wrong with a state’s voters choosing to have a big government, or a small government for that matter, especially because they tend and their elected representatives and governors tend to bear the cost for their choices, and they don’t have the option of transferring those costs to another state, or in some cases, even worse, to another generation. The low hanging fruit is obvious: the Interstate Highway System, K-12 public education, the federal higher accreditation cartel, early childhood education, the Department of Commerce, the huge glut of federally owned land and real estate, housing policy, workforce regulation.

 

These and the knotty, interconnected problems of welfare dependents and healthcare would all be more easily untied if 50 diverse and motivated states were working on them; 50 diverse states where, by the way, populations disperse differently, healthcare is provided differently in each locality, and each state has more of an ability to decide what solutions will most benefit their respective populations. In Washington because of America’s deep red-blue divide, these are very controversial issues. They are less so within our increasing dark red and dark blue states.

 

When there is no national consensus or federal imperative, there should not be federal law, especially if there is a greater degree of consensus within each state. Just because New York, Massachusetts, and California may agree on something doesn’t mean the rest of the country has to go along, has to be forced to go along or suffer grave penalties under federal law. Insisting otherwise is not constitutional republicanism. It is in fact, cultural imperialism.

 

By clearing Washington’s decks of these smaller issues, we can finally begin to regain the trust necessary to deal with the bigger ones, the ones that we can’t return to the states and localities, the ones that are distinctively made part of our federal panoply of responsibilities, things like national security, like immigration, trade, localization, and also things that have become federal, and therefore have to be addressed federally, like senior entitlements and like the debt.

 

The good news is that thanks to President Donald Trump, and the Republican Senate majority, we have a Supreme Court that should be ready to do its part on this project. Today the Court stands ready to allow, and, I would add, indeed to require the elected branches of the federal government to once again do their jobs instead of having the Supreme Court arrogate to itself the authority to permanently settle important national issues. And for that, of course, no one deserves more credit, or more thanks, than the men and women of The Federalist Society. Thank you.

 

Leonard Leo: We have time for two or three questions. They should be crisp. They should end with a question mark. There are mics on either side. Senator Lee enjoys a legislative filibuster, but not a convention filibuster.

 

Questioner 1:  Good morning. So what concerns me about everything that you’re saying is one thing that is missing, especially in this voting, is what about accountability for when we see all this type of voter fraud that we’re seeing in Broward County, etc., etc., all the investigations we’ve had. How are we going to help this if we are not seeing accountability?

 

Hon. Mike Lee:  I want to make sure I understand your question. Not seeing accountability, you mean from state and local election officials?

 

Questioner 1:  Federal. Anything that goes on, the people that go after Kavanaugh, Benghazi, you name it, the voter fraud in Broward County right now. I mean, what the public sees time, after time, after time, the last six years specifically, I think, is that all this goes down, no one’s held accountable – Hillary Clinton, servers, you name it.

 

Hon. Mike Lee:  Yep. Alright. Look, it’s a great question, and it’s a question that inheres in the republican form of government itself. The very best thing we can do to promote greater accountability is to protect the people from the risks inherent in the excessive accumulation of power in the hands of a few. So the fact that -- a lot of the accountability issues that you’ve mentioned—not all of them, but a lot of them—are, in fact, federal issues. And the larger the government in question, the more the layers of insulation you will necessarily see between the government and people to whom it’s supposed to be accountable.

 

Leonard Leo:  Over here. Do you have a question?

 

Questioner 2:  What’s your reaction to people who are starting to use city governments for social engineering and that kind of tinkering and then state governments usually trying to preempt it and to stop that? Because I think I hear on the left also, they claim to be in favor of local governance, and that’s kind of what they’re actually trying to do.

 

Hon. Mike Lee:  I’m not sure I understand your question. So you’re asking, "What do I think about people who try to use state governments for the purpose of social engineering?"

 

Questioner 2:  City governments, usually more left-wing governments, and state government trying to use that power to stop that over-regulation.

 

Hon. Mike Lee:  Okay. I would a whole lot rather -- look. The progressive worldview is such that progressives do, and probably always will, view government as a vehicle through which to achieve social engineering. That’s yet another reason for localism, yet another reason why we need to turn back to it. Look, most of the people in the state of Vermont would, I’m told, prefer a single-payer, government-run, government-funded healthcare system, one that would not only make going to the doctor a government experience, but one that would also inevitably involve all kinds of social engineering by promoting, rewarding some approaches to life and punishing and discouraging others.

 

If the people of Vermont want to do that, let them knock themselves out doing it. That should be their prerogative under our Constitution. It’s probably what they would do if we didn’t already have such a huge federal footprint in the area of healthcare, for example. Vermont would probably turn to that very quickly. It’s my view that they should be able to do that. It’s my view that there’s nothing in the Constitution that prevents a state from choosing to use the machinery of the state to engage in social engineering. It’s also one of the reasons I’m likely never to live in Vermont.

 

[Laughter].

 

Leonard Leo:  Senator Lee, thank you very much for joining us again this year. We’re truly grateful for your leadership. Thank you very much. If everyone could please stay seated, we’re going to go directly to our next panel, and I’d like to welcome the panelists up at this point.

 

 

 

 

 

 

 

 

 

 

 

9:45 a.m. - 11:30 a.m.
Showcase Panel I: What is Regulation For?

2018 National Lawyers Convention

Topics: Administrative Law & Regulation • Regulatory Transparency Project
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Event Video

Description

The administrative state, with roots over a century old, was founded on the premise that Congress lacked the expertise to deal with the many complex issues facing government in a fast-changing country, and that it was unhelpfully mired in and influenced by politics, leading to bad outcomes when it did act. The alternative was to establish administrative agencies, each with assigned areas of responsibility, housing learned experts qualified to make policy decisions, deliberately insulated from political accountability. The Administrative Procedure Act (APA), passed in 1946, both governs the manner in which agencies may adopt and enforce regulations, and provides for judicial review of agency action. Supporters of the administrative state point to the successes of agency actions leading to a cleaner environment, more sensible use of finite resources, healthier foods, safety on the roads and rails, and many other areas of improved quality of life. But even looking past structural separation of powers issues written into the bones of the administrative state, critics assert that in the ensuing 70 years the APA has become an ineffective limitation an agency power, as agencies bypassed its requirements by issuing sub-regulatory guidance, letters, FAQs, and more. Compounding the problem, the critics continue, the courts have adopted a policy of deference to agency actions that grant agencies even more latitude. Is it time to revisit the APA? If so, how should it be updated?

  • Prof. Richard Epstein, Laurence A. Tisch Professor of Law and Director, Classical Liberal Institute, New York University School of Law
  • Prof. Philip Hamburger, Maurice & Hilda Friedman Professor of Law, Columbia Law School
  • Prof. Kathryn Kovacs, Professor of Law, Rutgers Law School 
  • Prof. Jon Michaels, Professor of Law, UCLA School Of Law
  • Moderator: Hon. Britt Grant, United States Court of Appeals, Eleventh Circuit

Speakers

Event Transcript

Hon. Britt Grant:  Hi, everyone. I think we're ready to get started with our first panel. It's like a family reunion in here, so you'll get to see your good friends after this. Thanks, everyone. My name is Britt Grant. I'm a judge on the Eleventh Circuit Court of Appeals in Atlanta, Georgia. I'm pleased to be here to present our first panel, What is Regulation For? These panels have a lot of interesting ideas. It'll give us a lot of starting point and background for so many of the discussions about the administrative state and regulation that we're going to be having over the next few days. There are robust debates, which we will experience first-hand here today about whether the administrative state in its most perfect form is a threat to liberty or a guarantor of liberty, whether the direction that the administrative state had gone is a turn away from its originally correct role as a less politically-oriented, policy-making body, or as the inevitable fulfillment of the headless monster that is the fourth branch of government.

 

      Our panelists, again, have interesting and innovative ideas on these topics and more. So let's go ahead and get started. After introductions, to give you all a path for this panel, I'll introduce in brief each of our panelists, and then each will give a five to ten-minute thesis, the backbone of their comments for today. After that, I'll give them a chance to ask each other a few questions. I'll interject as necessary, and then we'll get to the audience for some of your fantastic questions.

 

      First, to my left, is Professor Jon D. Michaels. He is a Professor of Law at the UCLA School of Law where he teaches and writes about administrative law, national security law, bureaucracy, privatization, and the separation of powers. He's a graduate of Williams College, Oxford University as a Marshall Scholar, and Yale Law School. He clerked for Judge Guido Calabresi of the U.S. Court of Appeals for the Second Circuit, and then for Justice Souter. His current book project, I think, is going to be the basis of his remarks today, and it's called Constitutional Coup: Privatization's Threat to the American Republic.

 

      Next, we have Professor Philip Hamburger. He's a scholar of constitutional law and history at Columbia Law School where he serves as the Maurice and Hilda Friedman Professor of Law. He's also President of the New Civil Liberties Alliance, which is a civil rights organization dedicated to protecting all Americans from the administrative state and other threats to constitutional rights. His books include Liberal Suppression: Section 501(c)(3) and the Taxation of Speech, The Administrative Threat, Is Administrative Law Unlawful?, and among his recent articles is "Chevron Bias" in the George Washington Law Review, which explains how Chevron deference violates due process.

 

      Next is Professor Kathryn Kovacs of the Rutgers School of Law. She's a graduate of Yale University and Georgetown University Law Center. She currently teaches Administrative Law, Natural Resources Law, Environmental Law, and Property. And before joining the Rutgers faculty, she spent 12 years in the DOJ Environment and Natural Resources Division, Appellate Section. And most recently in the government, she was a political appointee serving as Senior Advisor to the Director of the Bureau of Land Management in the U.S. Department of the Interior.

 

      Professor Epstein, last but not least, is the inaugural Laurence Tisch Professor of Law at NYU School of Law. He is also Senior Fellow at the Hoover Institution and the James Parker Hall Distinguished Service Professor of Law Emeritus and a senior lecturer at the University of Chicago. His first law school appointment was at the University of Southern California. I will not be able to list all of his publications without taking up our entire time here, so I'll note that his newest book is called The Classical Liberal Constitution: The Uncertain Quest for a Limited Government.

 

      With that, I will kick it off to Professor Michaels to get us started.

 

Prof. Jon Michaels:  Thank you very much. It's a pleasure to be here and a privilege to be on this panel. As I see it, there are two principal sets of challenges to the administrative state today. First, there are those who see the modern administrative state as a threat to the constitutional separation of powers. And second, there are those who are more or less okay with a modern administrative state as a constitutional matter, but they are nevertheless distressed by our administrative state which they see as hopelessly inefficient, sclerotic, or unresponsive. And both camps, by my estimations, are seemingly gaining ground. The first, whom I'll call constitutional conservatives, are not only influencing but also reshaping academic debates, as evidenced by this panel, but they're also obviously influencing American jurisprudence. And the second camp, whom I will call neoliberal, have been wildly successful in reconfiguring the administrative state along more businesslike lines.

 

      By and large, the liberal response to these challenges has been a bit dismissive, from my perspective. This is especially true with respect to responses to the first camp. Many of my fellow travelers will point to history, settled practices, reliance interests, and long-standing and capacious holdings to essentially tell conservative critics to get over it -- the administrative state's here to stay. And as for responses to the second group, many will try to meet the neoliberals halfway. They'll say, "Okay, it's okay in these contexts, but not in these contexts," or they'll appeal to values that are, by my estimation, too abstract or contested – 0the various symbolism of being in the public sphere and things like that. Or they'll work to refute the businesslike government crowd empirically, documenting waste, fraud, and abuse that, say, privatization or outsourcing engenders.

 

      In both cases, I feel as if my team is playing defense, as it were. And this is a mistake. It's a mistake for us because it isn't working. As I said, both camps are gaining ground. But more to the point is a missed opportunity. It's a missed opportunity for folks who believe in the administrative state to reaffirm and strengthen the constitutional bona fides of the administrative states, and to do so in ways that would buoy progressive regulation.

 

      So that's what I've been working on. As Judge Grant mentioned, I'm developing an affirmative constitutional theory of the administrative state that responds to both of these camps, and the crux of my argument is that we have, right now, something -- what I call the administrative separation of powers. In brief, I agree that the advent of the modern administrative state involved the collapsing of the traditional separation of powers. And I also agree that that's highly disconcerting. An early phase of modern administration in which essentially lawmaking, law adjudication, and law enforcing powers were given over to largely monolithic agencies was a problematic one, but in short order, we've redeemed and refashioned the constitutional commitment to checking and separating state power.

 

      And we did so by disaggregating that administrative power among three sets of rivalrous, diverse stakeholders. Specifically, power was—and today it still is—triangulated among three sets of actors: the presidentially appointed political leaders atop the agencies, the career, politically insulated civil servants who carry out much of the day to day work of the agencies, and thirdly, the public writ large, that's all of us who have been long authorized to participate meaningfully in many facets of administrative government. The triangulation, for me, redeems and revitalizes federal governance in an era far different from that imagined by the Framers.

 

      And to be clear, this triangulation is not just a thin reproduction. I'm not just saying, "Oh, we had three great constitutional branches, and now we have three administrative rivals." I'm not trying to make -- I'm not suggesting something as empty or formalistic as that. But rather, there's a lot that connects the old and the new separation of powers, most obviously, the agency heads are apt stand-ins for the president herself, insofar as they are appointed by and answerable to the president. Less apparent, but I think that still has an analogy, is the public writ large, whom I compare to Congress. Like Congress, the public's participation is multi-polar. It's pluralistic, at times scatter shot, at any moment some are favoring and other are disfavoring any given proposal or initiative.

 

      Last, I analogize the civil service to the judiciary. Like the judiciary, the civil service may act as a counter-majoritarian check. But precisely because of its distance from the people, the civil service's legitimacy cannot be taken for granted. Thus, like judges, the civil servants earn their legitimacy through careful, robust engagement, through the articulation of reasons, and through consistency across time and across political movements.

 

      The interplay of these three sets of actors ensure that administrative government is the product of broad based and pluralistic buy-in. Specifically, we have two sets of political actors. One that's unitary, like the president, and the other that's heterogeneous, more like the Congress, and a counter-majoritarian one, again, not unlike the judiciary in disposition and orientation. As a result, administrative power, by my light, isn't a runaway train because there are multiple veto points. It isn't a tool of naked presidentialism because the agency heads need to secure buy-in from civil servants and the public writ large. And it isn't a coven of some Deep State because the bureaucracy, to an even greater extent, needs support from its rivals, namely, the agency heads and public participants.

 

      It is, instead, a rough reproduction of what happens, or more often, doesn't happen, under traditional constitutional governance with its checks and balances. So administrative separation of powers, at least, is my answer to those worried about all-powerful, all-concentrated administrative power, which I would agree, were it to exist, would be out of step with our constitutional commitments.

 

      Now, if may take a minute to turn to how administrative separation of powers also responds to the neoliberal critique, it's -- the way I formulate that is that administrative separation of powers helps explain why framing administrative government in blunt, businesslike terms is actually on constitutionally shaky footing. Businesslike government seeks, among other things, to replace civil servants with private contractors. Most recently, businesslike government proponents have also been seeking to convert the civil service itself into more of an at-will workforce, which may be justified as keeping up or keeping in tandem with what we'd find mostly in American private sector. These efforts, let me just be clear, are overwhelmingly bipartisan, and they're pitched as nonideological, technocratic fixes. They're ways to speed up and streamline administrative government. So this critique is really coming from kind of the opposite side of kind of the administrative state compared to the what I call the Constitutional conservatives.

 

      But think about what these fixes do vis-à-vis the administrative separation of powers. So let's start with government outsourcing, wherein all sorts of administrative responsibilities are contracted out to the private sector. Again, this is bipartisan, but it's also pervasive. In many instances, the contractors directly will replace civil servants. All the reasons folks like contractors are also all the reasons why they're constitutionally dangerous. Because they're hired and fired by the agency leadership, they, unlike civil servants, have every incentive to be yes-men and women to the political leadership.

 

      Civil servants, by contrast, are servants of the state, not any particular administration. They thus provide a meaningful check and do so in Republican and Democratic administrations alike. And it isn't just liberal bureaucrats who check a conservative presidential administration, as some may be seeing today. But Democrats, too, also run into all sorts of problems with civil servants uneasy with hyper-partisan or unsubstantiated directives. Again, so the use of contractors weakens one of the important dimensions of the administrative separation of powers, namely that between the political leaders and the civil servants. And this is also true when we talk about converting the civil service into an at-will work force. It would, again, flatten that line of rivalry and consolidate power more in the hands of political leaders.

 

      Also, just one last point on the contractors -- to the extent that responsibilities are being outsourced to private firms and private institutions, that also limits the opportunities for public engagement because the public sector is much more amenable to the engagement from members of the public writ large, and that's not necessarily true in the private sector. So to the extent policy is also being driven externally, that limits the degree to which that third set of rivals, the public writ large, is able to participate.

 

      Okay. To sum up, though the administrative separation of powers has been largely overlooked, it is this scheme, this fragmented tripartite scheme, that serves as a constitutional salve as it takes a good deal of the sting out of an otherwise unitary and, thus, hyper-potent or unfettered agencies. It serves as a constitutional adhesive, binding the administrative state to the underlying and similarly fragmented and triangulated Framers' scheme, and it serves as a constitutional emulsifier, mixing the administrative regime into what Professor Thomas Merrill calls an overarching separation of powers doctrine that is more than the sum of the specific clauses that govern relations among the branches. I'll end there.

 

Hon. Britt Grant:  Thank you. Professor Hamburger?

 

Prof. Philip Hamburger:  Well, thank you very much. It's a great pleasure to be here with such a distinguished panel and such a distinguished audience. And I might say, it's particularly a pleasure to follow Jon, whose new book on privatization is very, very interesting. As you'll see, I do not agree with some of it, particularly the administrative side of it, but it's an interesting book. And he's a thoughtful critique of the position taken by those of us who are doubtful about the administrative state.

 

      Now, forgive me. As a preliminary matter, I just want to mention that the New Civil Liberties Alliance is continuing to hire more lawyers. Our director, Mark Chenoweth, is in the room, and if you're interested, by all means, speak to him. That is, if you're a superb litigator. We've been busy with a wide range of litigation, and where we cannot get standing, where we can't sue, we've been doing other amusing things. For example, we just recently petitioned about 20 agencies to adopt administrative rules barring administrative guidance. And since we're inviting the administrative state to cannibalize itself, the movement against administrative power is growing.  There'll be plenty of opportunities for everyone in this room. I know many of you already are fighting the administrative state, and I encourage everyone here to participate in one way or another. It's going to be fun.

     

      Now, I have two points today. First, administrative power threatens civil liberties. Second, administrative theory is a fig leaf, a fig leaf that covers up the reality of lost freedom. Now, first, and you've heard this from me before, but I want to reiterate, even if only briefly, administrative power is a profound threat to civil liberties. No other development to contemporary American law threatens more civil liberties of more Americans.

 

      I'm just going to run through the list here. Administrative power -- there could be a longer list, this is just the short version -- administrative power denies due process, both in the agencies and later in the courts. The courts, essentially, are corrupted by administrative process because they end up also denying due process because of their deference. Administrative power denies jury rights. And again, that is echoed in the courts on appeal. In fact, administrative tribunals give government ambidextrous power. The government can proceed in the courts with the full due process of law and all of the other constitutional rights of procedure, or it can proceed in administrative tribunals and take a little shortcut and avoid all of that nonsense, that silliness, those niceties, those mere formalities.

 

      Administrative power thereby transforms procedural guarantees in the Constitution. It changes the very nature of these rights. No longer are they guarantees. They're merely options for power, and our Bill of Rights is thereby been entirely eviscerated. You say, "Well, that's just the procedural rights. What about the substantive rights, free speech and religion?" Them, too, because administrative power is a profound threat to the substantive rights such as speech and religious liberty. We now have full-scale licensing of speech in about half dozen agencies. We've revived the 17th Century. The Star Chamber could not have been more efficient.

 

      And then, just to mention one that is particularly curious, administrative power undermines equal voting rights. Now, that may seem a bit of a puzzle, so I'm going to linger on that one. I want to linger on the point about voting rights. There have been two preeminent developments in federal law since the Civil War, voting rights and the administrative state. And of course, this is not a coincidence. There's a profound connection between the two. Although educated Americans increasingly welcomed equal voting rights, they had misgivings about the results. People who are less clean than them, the great unwashed masses, were suddenly controlling power, and that didn't seem so good to people who went to Yale, and Harvard, and the like. And Princeton, Princeton, of course.

 

[Laughter]

 

      Woodrow Wilson -- never forget Woodrow Wilson -- Woodrow Wilson complained about the diversity of the nation, which meant that the reformer, and I'm quoting now. Do not attribute these words to me. The reformer needed to influence, and I quote, "the mind of not only Americans of the older stocks only, but also of Irishmen, of Germans, and of Negroes." That's the granddaddy of the administrative state speaking. He said, "In order to get a footing for new doctrine, one must influence minds cast in every mold of race, minds inheriting every bias of environment, warped by the history of a score of different nations warmed or chilled, closed or expanded by almost every climate of the globe." He liked immigration, right? Rather than try to persuade such persons, Wilson welcomed administrative governance. The people could still have the Republic, but much legislative power be shifted out of an elected body into the hands of the right sort of people.

 

      Now, far from being narrowly a matter of racism, this has been the transfer of legislative power to the knowledged class, to a class that finds authority in their knowledge and that therefore feel empowered to disempower other Americans. But of course, even if it's just a matter of class, and it hasn't just been a matter of class, but even if it were, when legislative power is removed from the representatives of a diverse people, there are implications for minorities. So leaving aside Wilson's overt racism, the problem is the relocation of legislative power a step further away from the people into the hands of a relatively homogenized class. I know many of us are part of that class, but we at least have false consciousness.

 

      So even when this is exercised with solicitude for minorities, it's a sort of power exercised from above. And those who dominate the administrative state have always been, if not white men, then at least members of the knowledged class. Administrative power thus cannot be understood apart from equal voting rights. The redistribution of legislative power has gratified the knowledged class, but it makes a mockery of the struggle for equal voting rights. It reduces equal voting rights to a bait and switch, and it confirms how seriously administrative power threatens civil liberties.

 

      And all of this brings us back to Jon's comments. He writes a book about a constitutional coup, and it's a very eloquent book, but I wonder why he objects to a small, private coup, if that's the language he wants to use, it's not my language, but not a huge, administrative one. I'm sure he cares about retail assaults on due process, jury rights, equal voting rights, and so forth, but why not care about the wholesale assault on such rights? I suspect he does care but is still evolving his views, I trust. Administrative power is the primary threat to our freedom, and the apologists for administrative power have said nothing about that, absolutely nothing.

 

      Now, my second point is very simply that administrative theory stands in contrast to administrative reality and is a sort of fig leaf that covers it up. And it's not just me who says this. Daniel Farber, Anne O'Connell—and they're not conservatives—say that there is, and I quote, "a gap between theory and practice which leads to an increasingly fictional yet deeply ingrained account of administrative law." That's right, administrative theory is largely fictional, and that includes a lot of judicial doctrines. Rather than justify the realities, it disguises them, and not very well.

 

      Now, how is this so? I'm just going to run through a few of many possible examples. We could spend an hour on this, but I don't want to do that to you. First, nondelegation -- Jon very candidly, and I appreciate him saying this, says that it's a fiction to say Congress isn't delegating legislative power to agencies. And of course, even the word delegation is a misnomer. It's a distraction. The Constitution vests legislative power in Congress, and the reality is that Congress is divesting itself of that power. We should all stop using the word delegation. The Court may use it, but we have to press them not to because the constitutional word is vest and divest, and once you think about that, you realize the violation of the Constitution.

 

      Then there's the intelligible principle test. Congress supposedly uses intelligible principles to guide agencies. But such principles often do nothing of the sort, as Jon says, and again, I appreciate being able to quote him, "This test is flabby." That's a bit of an understatement, but I appreciate the thought.

 

[Laughter]

 

      And of course, Congress often doesn't even offer an intelligible principle. See the Gundy case, right? Administrative power is said to be democratic. No kidding. That's the standard academic justification for it, allegedly because it comes with notice and comment, oh my. Jon writes about this as, and I quote, "meaningful and truly" -- it's not just democratic, it's "truly democratic public participation."

 

      Well, on this, I want to just rely on Justice Kagan. That's right, Justice Kagan has described notice and comment as a charade. That’s her word. And then it said—and this comes in some of the theories of our colleagues on this little bench here—Jon -- the theory is that agencies unbiased both in regulation and adjudication, Jon writes about the civil servants as the administrative state's judiciary. Really? This is clearly false. The overwhelming majority are on one side of the political spectrum. He said that civil servants have treated Democratic and Republican administrations alike. Really? Well, I leave you to judge that.

 

      And then when we get to adjudication, it's all the more curious. We have to have neutrality in adjudication. But of course, administrative adjudication is profoundly biased. ALJs are often chosen to favor their agencies, notwithstanding the theory, their decisions ultimately decided by or viewable by agency heads who are political appointees who adopt administrative rules and set prosecutorial policy. ALJ procedures are slanted to favor the agencies. An SEC ALJ recently boasted that he has never held against the agency. He told this to a defendant, trying to get them to settle. "I've never held against the agency. Now what are you going to do?"  And I won't bore you with all of this. If you want to read more about ALJ bias, read the NCLA's brief in Lucia v. SEC. It's sort of a Brandeis brief just documenting layers and layers of bias just at one agency. And then, of course, there's the separation of functions in agencies. Well, that's not the Constitution's separation of powers, but what's more, it's not even the reality because there is not really separation. This is clear from the agency adjudication.

 

      Okay, I'm not going to keep on going. We all know all this stuff. To sum up, administrative power is a profound threat to civil liberties and has to be understood not as a separation of powers problem, not as a delegation problem, but as a threat to civil liberties. We need a civil liberties movement against this great threat to our freedom. And then, second, administrative theory is just a fig leaf. It covers up the reality of lost freedom. Thank you.

 

Hon. Britt Grant:  Thank you. We'll move to Professor Kovacs.

 

Prof. Kathryn Kovacs:  Good morning. Thank you. Thank you for the introduction. Thank you so much for the invitation to be here. I'm really delighted to be one of the only light gray suits in the room. And I feel like being on the jumbotron, I should get up and dance. But instead, I'm going to talk about the Administrative Procedure Act. So as Judge Grant pointed out, I've practiced law for a long time. I've practiced in the government for 15 years, and that experience puts me at the more practical end of the continuum in legal academia, makes me kind of a weirdo, actually, in legal academia.

 

      So I take the fourth branch as a fait accompli, and I write about the Administrative Procedure Act of 1946 which embodies the compromise liberals and conservatives reached to constrain federal administrative agencies. The APA treated the New Deal as a done deal and created a framework for agency procedure and judicial review that balances the values of regulatory programs and private interests. Unfortunately, the courts never really implemented the APA as written. I think we should try it. And today, I'd like to talk about just one aspect of that.

 

      So in 1933, of course, Franklin Delano Roosevelt became President and kicked off the New Deal. And of course, that entailed tons of new agencies and regulatory programs that brought with them the question of how to control them. At the same time, agencies in Europe were becoming tools of fascist autocrats, and there was a widespread fear here in the United States that FDR would go down the same road. So the desire to avoid totalitarianism became one of the driving forces behind administrative reform. Then during the war, the federal bureaucracy exploded and began to impact people's everyday lives through things like rationing and price controls, and the belief that agencies could pave the way for totalitarianism went mainstream. And that concern infused the entire debate on administrative reform from 1933 to 1946. The APA's legislative record is riddled with arguments based on the need to avoid totalitarianism.

 

      Well, the Administrative Law Section of the American Bar Association took the lead in this effort. At the time, it was a very conservative section. Now, it's delightfully bipartisan, multi-partisan. I see a bunch of members in the audience and hope you'll all consider joining us. Two weeks after D-Day, the ABA Ad Law Section bill was submitted in Congress. It was designed as a compromise between the conservative and liberal approaches. And in 1946, 17 years after the first administrative reform bill was introduced in Congress, the APA passed unanimously, and President Truman signed it. The debate leading up to this moment was lengthy and intense, and the public was involved. It was a truly deliberative process, a really remarkable moment of civic republicanism in our history.

     

      Much of the APA was controversial. It contains lots and lots of compromises and lots of language that's murky at best because that's the only way the bill would pass. But other things in the APA are clear. For one thing, the same standard of review applies to all agencies. No agency should get super deference under the APA. There was also a consensus that rulemaking should be pretty simple. Congress intentionally left a lot of the rulemaking process to agency discretion in order to encourage rulemaking, to give regulated parties more certainty, and to avoid what Congress saw as the separation of powers concerns with courts making the law.

 

      Well, since then, rulemaking has become intensely resource intensive because of additional rules imposed by Congress, by the courts, by the president, and by the agencies themselves. The upshot is it's hard for agencies to make policy in a timely fashion, to respond to new circumstances, and to respond to elections. Government power in the United States can be seen as a hydraulic system. The Supreme Court is often concerned about one branch aggrandizing its power and putting pressure on the other branches. Now we're seeing the opposite. We see a Congress that is abdicating its power. When one branch allows its power to atrophy, another branch will fill the void. If Congress nor agencies can make policy efficiently, then the president and the courts will.

 

      So the difficulty of rulemaking is one of the reasons why presidents have increasingly made policy themselves. Of course, there are other reasons for presidential direct action. Presidents can no longer rely on Congress to make policy. Presidents prefer to take the political credit for policy decisions, and in this tech crazy and media savvy world, it behooves a president to take ownership of policy decisions. But also, rulemaking is just too difficult and time consuming. In the very least, if rulemaking were easier, the pressure on the president to make decisions himself would decrease.

 

      Now, this kind of unilateral presidential action is certainly not new. I'm sure most of you remember President Clinton's memos directing agencies to take specific action. You remember President Bush's signing statements. Obama took up both of those tactics and had some 38 czars in the White House. President Trump has taken presidential control to a new level. He makes policy every week that previously would have come from agencies in rulemaking. And in a sense, this is good because it responds to elections. President Trump was elected.

 

      On the other hand, presidential policy making entails little transparency, public participation, or deliberation. There is no requirement that the President obtain feedback from interested parties to hone his policy. Presidential decision making limits the parties engaged in presidential -- in policy discussions. Sometimes even the relevant cabinet officer is excluded. There is no way to know who or what he consulted in making his decision. The President is less accountable than agencies. He's often not subject to judicial review, and aside from quadrennial elections in which the President need not even obtain a majority of the vote, he's only removeable via impeachment or the Twenty-fifth Amendment. And finally, the President lacks the expertise of agencies.

 

      Now, ideally, Congress would make policy decisions, and I'm an optimist, but I'm also a realist, so absent that, for all of its flaws, notice-and-comment rulemaking is superior to rule by presidential fiat. Taking agencies out of the policymaking game eliminates one mechanism for checking presidential aggrandizement. Certainly, it's not enough standing alone to make agencies more agile, but it is a necessary component of a balanced government.

 

      So I think—and I'm glad there are so many federal judges in the audience to listen to me today—I think we should stick to the APA. We should preserve the balance Congress struck in 1946. We should hold agencies accountable. We desperately need to update the law, but let's not take agencies out of the game, or we will fall into the trap the APA was designed to avoid.

 

Prof. Richard Epstein:  Thank you very much for the opportunity to be here with old friends and new. It's always a great pleasure to speak to The Federalist Society. The question is what can I do to rile you up a bit?

 

[Laughter]

 

      And in order to answer that particular question, what I'm going to do is to point out a deep contradiction in the program. The way in which it's done on the title is to say What is Regulation For? And that should be intelligently understood, a discussion of the aims of regulation and the possibility of its abuse. The body of the text starts to talk about the APA and its internal structures, and I think it's fair to say that three panelists have fallen into the trap of speaking about the content. And I'm going to fall into a different trap in speaking about the title.

 

      And I think that this is extremely important because when you're trying to ask the question of what agencies are for, one of the things that you have to ask, particularly in connection with the New Deal, is what agencies cannot do well, where they should never be used at all. There is no question that the 1946 APA was a kind of a peace treaty in which you accepted the legitimacy of the administrative state and then tried to prevent some of its great abuses, and so forth. I am not bound by that sort of paltry convention, and so I think it's important to ask well, what is the legitimate functions of an administrative state?

 

      And here, I think that you have to divide the world into two substantive cases. Case number one are cases where competitive markets work, and case number two is situations where competitive markets do not work. And if, in fact, you have a competitive market that works -- this does not mean an utterly unregulated market. It means one with statutes of frauds, with recordation statutes, parol evidence rules and the like, the basic function of the administrative state is to do nothing whatsoever because there's nothing it can do to improve upon what Mother Nature has created.

 

      And so if you start looking at the way in which the Roosevelt cartel machine was put into place, virtually all of the codes of fair competition and similar devices which give rise in the end to such notable organizations as the National Labor Relations Board, the Civil Aeronautics Board, the Motor Vehicle Act, and so forth, these are all things that should simply be outside the ken of the administrative state because the simple way to understand them is what you're doing is you're taking a competitive market with high output, try to put in a cartelized market with lower output, then adding to the insult by increasing the administrative cost, and then creating, in addition, the massive possibilities for redistribution through the state, not on any intelligible principle which is worried about differentials in wealth, and so forth, but simply to help your friends as opposed to your enemies.

 

      And as far as I'm concerned, if you have an administrative state which is doing everything wrong and doing everything wrong for all the wrong reasons, there is no way that you're going to purify this particular situation through a system of notice-and-comment hearing, public participation, administrative expertise, and the like. All of those things may be fine under other circumstances, but here, if you know that the nature of the game is negative sum from the day in which it starts, it seems to me to be utterly futile to argue how it is that we ought to run this thing.

 

      The real intellectual urge should be for massive deregulation. And indeed, if you go back to the great Chicago economists of the 1940s and 50s, Milton Friedman, George Stigler, and so forth, they all grew up in that particular area. And the reason why they wrote the way in which they did is they saw a world in which it turned out that competitive industries were turned upside down by administrative regulation. And the great tragedy of the APA by implication, therefore, is that it entrenched this particular kind of situation and created some of these great difficulties.

 

      So let me just give a couple of examples of this. If you're talking about healthcare, and you're trying to figure out the way in which the system should run, and you put in a system of community rating in a competitive market, you destroy the particular market because it requires massive cross subsidies from the young to the old. And that has the ironic consequence of taking those people who have limited means and asking them to basically subsidize the wallets of those people who've been able to accumulate wealth for many, many years. I see no particular virtue in a particular cross subsidy that runs in that operation.

 

      If you look at something like the Fair Labor Standards Act that has exactly the same characteristics, you put in a minimum wage law, it blocks the low productive workers from getting into the workplace and protects those with higher levels of skill. It works a huge degree of redistribution, but it requires no benefit, and there's nothing about the various new cases that come down from the Fair Labor Standards Board, from the Department of Labor, which will cure that difficulty. So you don't want any administrative state there.

 

      The question then is, is there a place in which you need it? And I think it would be utterly foolish to say that you can live a world without an administrative state because there are too many cases in which markets do fail, and it's important to understand exactly what those cases are. Well, one of them is the situation with respect to natural monopolies. It turns out a single supplier can outperform multiple suppliers in a market, and so one has developed a particular formula on how to deal with that. And that's basically the formula which says you need fair, reasonable, and non-discriminatory rates. It's somewhat difficult to apply in context, but nonetheless, it's an important notion because you know what it is you're trying to achieve, which is to eliminate the dead weight losses associated with monopoly. And you hope that you could get a system in place whose administrative costs are low enough that you could get some net social gain coming out of the operation.

 

      So I don't think that you can look at this particular system and simply rule it out of bounds, saying we just can't live with an administrative state. What you really have to do is to figure out how it's going to work. And here, there's the basic problem that you could see in other areas as well, which is you never quite know when you're putting one of these systems into place as to whether or not it's going to be tool for redistribution and, therefore, upset markets in much the way that regulation of competitive markets do, or whether or not what it's going to do is secure some kind of a Pareto improvement. That is a situation in which, by putting the regulations in place, you raise the level of all individuals, so it becomes a positive as opposed to a negative sum game.

 

      In a competitive market, it's easy. You just don't allow the regulation to begin, at least as a matter of first principle. But in a natural monopoly market, you can't do that. So then one of the things you have to worry about, not a lot of time here, so I'll just mention one of them, and that's the question of implicit cross subsidies that come through rate regulation. And it is very easy under these circumstances to try to put the majority of the cost on one group of users and give the majority of benefits to another use of users. And the system of rate regulation that was understood in the pre-New Deal era always considered any cross subsidies created in a regulatory environment as off limit. And so what you were trying to do was to imitate a competitive market, and a competitive market never allowed for those particular things to take place.

 

      A secondary in which you could start to worry about these kinds of externalities has to do with areas associated with environmental control of one sort or another. And I have a very naïve view of what it is that environmental regulation is supposed to do. You look at a well understood system of common law nuisances which talks about various kinds of emissions and pollutions that take place, fill, smoke and all the rest of this stuff, realize that trying to control pale pipe admission through private rights of action is going to be utterly fatuous.

 

      What you're then trying to do is to put into place a public agency that replicates what it is that a private rights of action will do, namely tries to get that appropriate mix of damages—now we call them fines—injunctions—now we call them general prohibitions—so that you can optimize the total amount of wealth that comes from the use of various kinds of pollution emitting kinds of devices. That means that you can never get your pollution levels down to zero, but what you're trying to do is to maximize the total kind of output that can come from any given level of pollution, which starts to make it seem like in certain markets, like with sulfur dioxide, and so forth, tradeable emissions permits and taxations are perfectly legitimate situations.

 

      The danger here, however, is exactly the same as the dangers that you have in other kinds of areas. You can start to regulate where there is no danger on the one hand, and thereby distort markets, or you could have differential regulation so that you could prefer your red state friends to your blue state enemies, or the other way around. And environmental regulation is certainly very rife with all of these kinds of problems. So if you start to take something like global warming, one of the things that you must always worry about is whether or not when you start to regulate something in the name that you're trying to control this sort of situation, whether you've got the right cause which is being the subject of regulation, or whether or not it's misguided. And it turns out the climate situation is strongly complicated to understand, and many of the things that are attributable to carbon dioxide changes have nothing to do with carbon dioxide. They may have to do, for example, with volcanic activity under the Antarctic which creates much more heat than you could ever get by the change of temperatures of one tenth of a degree.

 

      And then if you start to look to other kind of emissions like coal, and so forth, it's extremely important that when you tax the emissions, what you don't use is a differential tax rate in order to subsidize one kind of performance vis-à-vis another. And when we start dealing with coal regulations, started dealing with water regulation, and so forth, there is a great deal of temptation of the part of many people to either overrate the kind of peril that is being regulated so as to suppress activities which are worth having, or to have a differential form of regulation so that the pollution that comes out of one set of states as opposed to that coming out of another set of states gets differential treatment. And for example, when you start looking at the Obama Clean Power Plan, much of the difficulties associated with this operation was the differential

      impact by location rather than having a consistent theory, which says that when you regulate, you always want the regulations in question to be calibrated to the severity of the particular harm, and again, to avoid the cross subsidies that come when you put governments into power.

 

      So the basic position that I would take about this is that one of the problems that we have with the administrative state is that it simply tries to do too much, and that if you get all of the competitive markets out from under it, you can shrink its particular size, and then you could concentrate resources on those particular areas where they're likely to be good. And then when you start talking about the particular areas in which regulation is appropriate, I think what you have to do is to pay much more attention to the substantive organization and program that are put into place than is currently done. And when you do that, and you understand what it is that you're trying to achieve and what not, then you can have intelligible standards, to use the famous word, of what kinds regulations are and are not permissible. And if, in fact, you can identify certain ends as being illegitimate and others as being proper, then the task of judicial review is going to be made more simple because what you actually do is you now know what you're going after and knowing the things that you're willing to tolerate.

     

      So essentially what happens is to understand administrative law, you have to go back to the old conceit with respect to civil procedure and private law. And to realize that private law in procedural matters is adjectival to the substantive law, meaning, in effect, it's the substantive law that defines the right, and it's the adjective law that modifies those rights, like an adjective modifies a noun, in order to make sure that the system is going to be put together in a reasonably coherent fashion. And you should treat the administrative law as a substitute for ordinary civil procedure devices, and if you do that, many things about the system will start to change.

 

      I'll just mention one that particularly bothers me. Right now, one of the standard ploys of every administrative agency is to give series of inquiries to the regulated parties that require eons of energy in order to do. And there's nothing comparable to the rule in civil litigation which says that we can stop vexatious discovery. And so in environmental cases having to do with pipelines, and so forth, you can spend years upon years looking at this stuff which is of no particular relevance. And so what you need to do in the administrative state is to have the same kind of limits on government inquires for fact collecting that you would use in connection with private discovery actions, and that would change things.

 

      So the key element is if you've got the substance right, then what you have to do is to modify the procedures in the administrative state so as to prevent its abuse and strategy in the same way that you prevent abuses that take place in ordinary private litigation. And if you put that program into place, I think you could do much better than we're currently doing today. And I regard this as a bipartisan program. When I say bipartisan, I sometimes mean that it's a program which is likely to be rejected by both parties. Thank you.

 

[Laughter]

 

Hon. Britt Grant:  Thank you all.  I'll confess that I have a few questions of my own that I'm dying to ask scribbled down here, but in order to keep my promise to the panelists, I will give you the opportunity to ask each other questions that have popped into your head during these presentations.

Prof. Kathryn Kovacs:  I'd love to start, if that's okay, to ask -- I wonder, Richard, if common law itself is not a form of regulation, it is a form of government intervention in the free market. Clearly, in order for a free market to work, we need some mechanism for dispute resolution, so I wonder what makes common law judges preferable to agencies whose powers, and procedures, and budgets are controlled by Congress?

 

Prof. Richard Epstein:  Mine is not an argument about whether you have bad administratives and bad common law judges. You could have both. I'm thinking of the common law here as a system of substantive rights, and it is a system of substantive rights that supports competitive markets, as I've mentioned. But the thought that you could have a competitive market with no form of regulation whatsoever is slightly crazy, so a common law system which not only has a system of contract, it also has a system of tort law. The system of tort law is designed to prevent the use of force by one individual against another, and its primary application typically a stranger. And so the particular end that you want the common law to enforce, the control of trespass, the control of nuisance, for example, the control of monopoly, those become the same ends for the administrative state.

 

      So the key element to understand about this is you never want to create a system where you have two sets of substantive rights. You've got a common law set of rights which stresses freedom of contract. Then you get something as misguided as the Civil Rights Act of 1964, which tries to impose comprehensive duties of non-discrimination in competitive markets. And I would not want that to come out of a common law rule. I would not want it to come out of a statutory rule. The point here is nobody should understand the common law rule as being sort of abstractly given by God or so forth. What you have to do is to make a substantive case—which on another occasion, I'm happy to do—as to why it is that the distribution of these rights starting from my favorite period, to wit, Roman law, and moving forward, pretty much got it right on those things, and that becomes a template for which you can then do the rest of the stuff.

 

      And so the whole point about this is administrative law ought to take over where there's enforcement breakdown in the common law, and its function should be to lower the transactions cost to vindicate these particular rights. It should not be to put into place a new set of rights that make no sense. And nothing is more dangerous than imposing regulations on either labor, or capital, or real estate markets in competitive situations. The appropriate place for regulation is always those situations in which it turns out that you have a single supplier of good for which the FRAND obligations – fair, reasonable, and non-discriminatory things –should take place. That was the common law rule a long time ago. That should be the administrative law rule. So the question is you want perfect translation, and the problem about the progressives is somebody as dumb as Wilson always thought he knew more than everybody else.

 

[Laughter].

 

Prof. Philip Hamburger:  So I have a question for my colleagues on my physical right and left.

 

Prof. Richard Epstein:  That does not include me.

 

Prof. Philip Hamburger:  That does not include you, actually, in this case --

 

Prof. Kathryn Kovacs:  -- I get the left.

 

Prof. Philip Hamburger:  -- which is why are you content with the loss of civil liberties?

 

Prof. Kathryn Kovacs:  Why what?

 

Prof. Philip Hamburger:  Why are you content with the loss of civil liberties that comes with the administrative state? If the administrative state essentially guts the procedural rights in the Bill of Rights, and if it increasingly threatens freedom of speech and freedom of religion, which it does through a host of agencies -- we've given up our right in jury, our right of due process, the burdens of proof derive from due process, and so forth, even the right to have an unbiased decision maker, even if you accept an ALJ. Why are you content with this?

 

Prof. Kathryn Kovacs:  I just don't think it's done that.

 

Prof. Philip Hamburger:  Oh, okay.

 

Prof. Jon Michaels:  So I, too, would kind of challenge the underlying presumptions that are built into the question. But I would say that to the extent that this ties into one of the larger themes that Philip emphasized in his opening remarks about the relocation of power from, say, more democratic entities to administrative entities, which he cites as starting around the progressive era, I would say a couple of things about that, if I may. First, one of these questions or these absolutes are these comparative questions. Are we going to feel differently about state power and be more concerned, of course, about the exercise of state power as opposed to exercise, of course, of market power?

 

      And so I would start by saying that to the extent there are, even conceding the point, to the extent there are some intrusions on liberty in this space, if you're talking about the access to opportunities for redress, for dispute resolution, for empowerment when the market has failed you, or the state has failed you, are folks who are already disempowered and marginalized, which I think is the group that Philip was referencing in his opening remarks, at least, are they going to have more of an opportunity to have their voice heard in administrative agencies before a Congress or within the market? And I think I would take the administrative agencies nine times out of ten on that --

 

Prof. Philip Hamburger:  -- I could not disagree more.

 

[Laughter]

 

Prof. Jon Michaels:  I'm not surprised, but I just, I think we're talking about different groups of disempowered and different groups of marginalized Americans.

 

Hon. Britt Grant:  Let me ask you, Professor Michaels, does your supposition depend on -- or does your theory depend on a supposition that the civil service doesn't politically skew in one direction or the other, or would a different presumption interrupt your conclusions?

 

Prof. Jon Michaels:  Okay, so, and that's come up, so I'm glad that was asked. First of all, I'm not so sure that the bureaucracy as an empirical matter is as skewed as commonly believed. It's -- many studies by political scientists have suggested that the median bureaucrat is closer to the median American than are either presidential -- the presidents from either set of parties. It doesn't skew as democratic as suggested because there are also many parts of the federal government that skew quite conservative. But the larger point is simply that to the extent that the bureaucracy has been skewed, if that's right, it doesn't have to be that way. It's not -- it wasn't designed to be that way. It has to do with, presumably, preferences, choices, opportunities, and whatnot.

 

      So to the extent an institution skews in a particular direction, as long as it's open, I encourage, especially there's a lot of students here. We talked -- Katie gave a shout out to judges. I'll give a shout out to law students. Go join the government. Go help counter that progressive or democratic tide, and join the EPA, and join the Department of Interior, and tell the liberals where they're getting things wrong and where they're overreaching. So I think the point is, one, is whether it's built in. I don't think it's built in. And to the extent it is this way empirically, Congress skews, the courts skew, these things kind of come and go over different moments in time, and they're not inherently so.

 

Prof. Richard Epstein:  Can I get --

 

Prof. Philip Hamburger:  Can I just get -- I just have one little bit.

 

Prof. Richard Epstein:  I have a long bit. You have a short bit.

 

Prof. Philip Hamburger:  This will be very short. Then you can have a long bit. I just want to observe the nature of the responses. I'm not going to try to respond to them in detail, I just want to observe. The first response is, "Oh, there is, in reality, no loss in our freedoms." That is just an illusion that we should believe all those doctrines. And I don't think anybody who has practiced in this field would really conclude that unless they've spent too long in academia. Think there's a lot of second-hand smoke perhaps --

 

[Laughter]

 

Prof. Kathryn Kovacs:  I might be the only one on the panel who actually did practice for 15 years.

 

Prof. Philip Hamburger:  Well, I used to be a tax lawyer, and I must say, the closer you get to this, the more frightening it is. And then the other answer, one is, I think, a denial of reality. And the other one, I think, was a very candid and, I think, welcome concession that, in fact, yes, our rights may be lost, but that's okay. The government will take better care of us than we knew. And I just want to observe the nature of the answers, that's all. Thank you.

 

Prof. Richard Epstein:  I want to criticize the answers.

 

[Laughter]

 

Prof. Philip Hamburger:  Division of labor.

 

Prof. Richard Epstein:  I'm not a simple observer. There's the following dichotomy. If you have a competitive market, each individual has a majority of one, and that's a perfect majority, and can take resources and devote them to whatever offers on the other side of the market become available without having to consult and gain the approval of all of his citizens. What the administrative state does is it puts all of these individuals into a collectivity, then uses a system of participation to discuss what goes on, and it's a system of majority vote to figure out what is going to happen.

 

      This is the classic situation with labor unions and collective bargaining. And it turns out that the dissenters are represented by the majority, and the question is how powerful are the fiduciary duties that are put into place? And if the unions are organized by bargaining unions designated by the state, the answer is very different from the situation if the unions had purely voluntary creation. So I'll give you one example. Back in 1920s, there was a great deal of racial segregation in the United States, as I'm sure you're all aware. And there were black unions, and there were white unions. And what happened is the employers would play one off against the other, and the black workers roughly did as well as the white workers.

 

      Railway Labor Act comes along—this is a Coolidge confection, so it's not an anti-democratic attack—and they put everybody into a single union. And the single union is dominated by white workers, and they then enter a master agreement with all of the railroads relegating black workers to inferior positions. And somebody says, "Wait, you can't do this." We then have a case under the theory of fair representation, which was invented for the occasion in Steele v. Louisville and Nashville Railroad in 1944, one year after Justice Jackson celebrated the wonderful glories of collective bargaining. And they said, "Yes, you really owe fiduciary duties."

 

      1955 comes along. We have the great case of Conley v. Gibson which you think of as a civil procedure case, but it's a Railway Labor Act case because they're still trying to push these guys into the situation where they'll do honest representation of the minority situation. And so the problem that you have, quite simply, is if you've got a hostile trustee put into place against your own will representing your interests, you're not going to be nearly as well off as if you could fashion your own voluntary organizations by unanimous consent.

 

      And that's the tradeoff that the administrative state made, and it is a damnable mistake, and there's no way that you could soft pedal it, and by next year we'll get better trustees, and by next year we'll put other people on the National Labor Relations Board. It is a fundamental structural error. The best it could do is equal a competitive market, probability .001. The worst it could do is a lot worse than that, probability 99.999.

 

[Laughter]

 

Prof. Kathryn Kovacs:  Well, I guess my thought is that the extent to which the administrative state interferes with fundamental rights depends on what you define as a fundamental right. I take it as a fundamental right that we've all agreed to live as Senator Lee said, under a Constitution that enshrines a manner of disagreeing and learning to live with each other. And so due process rights may -- if your conception of due process rights is at one end of the spectrum, then you will see the administrative state as interfering with those rights.

 

      My conception of due process rights, I think, accords with Justice Kennedy's, and I feel like he fought a one-man battle for many years to try to bring due process concerns into administrative law. I hope somebody will take up that banner. But his view of due process was not so extreme that it eliminated the possibility of having a fourth branch of the government to assist Congress and the President in administering the law. And I would say that the same thing applies to religious rights, and so on. It depends on what your conception of the right is. I think my fundamental right as an American is to have a government that functions to protect me and to help me live with everyone else in the country, and we've made decisions about how to do that.

 

Prof. Richard Epstein:  May I say a terrible word about Justice Kennedy? His conception of civil rights is so thin that perhaps the worst decision of his administration was the thing he wrote, that opinion in the Masterpiece Cake theory, where he had no idea what the substantive rights are, who should do anything, picked a narrow ground on which to decide a case instead of trying to say much more powerfully, in a competitive market, if some people have strong religious beliefs and you do not wish to patronize them, bless you. And if he does not wish to serve you, then bless him. There are many other people nearby in which to do that.

 

      And the moment what you do is you empower a commission of the federalist state to tell you which religious beliefs matter and which ones do not, the moment you get some federal officer saying, "Oh, we're going into a commercial transaction is as far as we're concerned business with no religious oversight," then you're replacing individual judgement on those issues with collective judgement, and that is necessarily a losing situation. We can live in a society where .01 percent of the people don't want to make wedding cakes of same-sex couples. It's much more difficult to live in a society in which the 99.9 percent of people can say, "We are so concerned with absolute unanimity on all of these points that we're going to reeducate you or drive you out of business if you don't agree with us." Justice Kennedy was the handmaiden in that terrible opinion that he wrote to very strong forms of totalitarian rule with respect to matters that should have been left in businesses and other areas of life to private choice.

 

[Applause].

 

Hon. Britt Grant:  Let's hear from Professor Michaels -- I think we'll have a different view, and then Professor Hamburger.

 

Prof. Jon Michaels:  So I just wanted to respond a little bit to Philip and Richard on this point about rights and liberty and pick up where I think Katie left off. Just to note where I stand, although it may not be any surprise, I consider rights and liberties to be completely tied up with the ability to have clean air, safe workplaces, economic autonomy, reproductive autonomy. And those too matter, and those may not be provided for through the vicissitudes of the market. And it again, I think, is a definitional question about kind of what notion of ordered liberty all of us have and where we disagree.

 

Hon. Britt Grant:  Professor Hamburger?

 

Prof. Philip Hamburger:  Thank you. So first, Jon, I appreciate your concern for a whole host of goods. Your list of goods may be different from others. Your list of goods may not be listed in the Constitution, but let's give you your goods and acknowledge that they matter to you. Would you want those goods to be treated with the solicitousness that due process rights get under the Constitution, or religious liberty, or freedom of speech? And I think we all know the answer. We can all judge that for ourselves.

 

      I want to get back to Kathryn's comments. She talked about fundamental rights, especially due process. And I want to pick up her line about one end of the spectrum. That's right. My view of this stands at one end of the spectrum. Which end is that? The Constitution.

 

[Laughter]

 

      I respect all the Justices. They all are serious people pursuing serious ideas, but Justice Kennedy is not the people. Justice Kennedy did not write the Constitution. The Constitution is different from what any one Justice --

 

Prof. Richard Epstein:  -- He didn't read it, either.

 

[Laughter]

 

Prof. Philip Hamburger:  So I want to talk about those rights that are not, in reality, affected. I want to talk about due process in particular. So the phrase due process comes out of a series of 14th Century English statutes. Most largest one was 1368, and it's summarized as none shall be put to answer without due process, meaning due process in the courts of law. They had administrative evasions of the courts then. The statute was designed to defeat that. This is echoed by American judges. American judges and the people who draft the Bill of Rights understood this perfectly. It was well-known history. St. George Tucker says that due process is the right to be heard by a judge or judicial magistrate. Chancellor James Kent says the same thing, just as Story says the same thing. In fact, until the administrative state came along and had to -- needed, required an adjustment of due process, due process was the right to be heard in a court and have the processes of the court, not any substitute.

 

      The modern response of the administrativists is, "Oh, but it's fair. It's fair." Really? Okay. Let's take your standard that it's fair. Let's just throw away due process of the courts and see how fair it is. In front of an ALJ, that's not a judge. Whoops. There's no jury. Whoops. Only limited discovery for defendants. Whoops. There's discovery for the government even in cases that are criminal in nature. Whoops. There are -- the final decision, in fact, is actually not made by the ALJs because their final decision, or review of it, goes to the commissioners, and mind you, ALJs have admitted that they look to that in making their decisions because they don't want to be reversed, right? And so --

 

Prof. Richard Epstein:  -- You're talking about --

 

Phillip Hamburger:  -- Hold on, I haven't even finished.

 

Prof. Richard Epstein:  All right.

 

[Laughter]

 

Prof. Philip Hamburger:  You took -- Richard, you took the bait on Justice Kennedy. I want to talk about the Constitution.

 

[Laughter]

 

Prof. Richard Epstein:  They have nothing in common.

 

[Laughter]

 

Prof. Philip Hamburger:  So let's -- so you might say, "But it's still fair because you get a judicial review in the courts." But when you get to the courts—and you judges in the room, please, please, listen to this—when you get to the courts, what happens to that fairness and due process? Well, the judges will defer to the agency and the law, and where the government is a party in the case, that means the judges are systematically, institutionally biased in favor of the government again, and again, and again. That's called Chevron, and Auer, and so forth, all of which is grossest violation of due process and notices barred by the conduct -- the judicial code which requires you to recuse yourself in cases of bias. And of course, you say, "Well, I can at least argue in the facts." Oh, whoops, there's deference in the facts, too. And you might think at least in a court, you get a jury, but you don't because it's all set up so you appeal to a circuit court, so there is no right to a jury.

 

      And then last but not least, there's the great unspoken elephant in the room. Most companies are never -- and personal defendants -- are never going to appeal their agency. The cardinal rule -- I've talked to a lot of corporate counsel about this -- is you do not fight your agency that much because they can come back and screw you. Retaliation can almost not be documented because people will talk to you about it in whispers. Even in private, they'll go into hushed tones because they cannot be seen as resisting their agency. And the fear of retaliation is used by agencies to control people, and it's a gross impediment to due process because you cannot regularly get review.

 

      And so I ask you, you judge, is this the Constitution? Is this fair? So, yeah, if this is your definition of fairness, then do apply it to the rights you love, and then we'll see how happy you are.

 

[Applause].

 

Prof. Kathryn Kovacs:  I just want to point out that I carry a copy of the Constitution with me at all times.

 

Prof. Richard Epstein:  I wanted to make a slightly different point. There are some pretty terrible judges out there who share many of the values associated --

 

Prof. Kathryn Kovacs:  Not you. [Pointing to Britt Grant]

 

Prof. Richard Epstein:  -- save you -- with the administrative state, and so forth, and so it's not here a question of sort of picking the institution. You'll never get one institution which is filled with flawless individuals and another which is filled with people wholly retrograde. What you're trying to do in the abstract is to put together a system of organization which on average will do better than any other, even though in particular cases it may make mistakes. And so this is the basic problem with the administrative state at that level. We know what the sensible distribution is, we think, when you're dealing with civil trials, and so forth. You give a great deal of discretion on particular evidentiary facts that try a fact, a little bit less discretion with respect to whether or not the ultimate facts are made up. Is or is there not negligence? And no discretion on having de novo review with respect to the way in which legal questions are decided.

 

      And the structural differences that you see with the administrative state is all of this stuff can easily get whacked up. If it turns out that an administrative agency approves a sensible private project, you get now hard look review. And that stuff is often completely corrosive because what it means is, given the rules on standing, is that the strongest objector can now have the largest say on whether or not a collective project should take place. And so what you do is you put the locus of power on one extreme, which is what you have when you can challenge things not on grounds of ultra vires but on the grounds that you disagree with it. So you look at all the nature of the environmental protesters. They're the same guys all the time, and it's always the same mistakes all the time because they want to kill everything. And the moment you have hard look review, they have a very good chance of succeeding. Then on the legal questions, you defer to agencies with the aggrandizement of its own power being very much at issue, and that's backwards as well.

 

      So what you have to do, again, is to try to think of an administrative agency in a judicial situation as being a trial court, and the courts then having appellate responsibilities. And by that test, basically both the two great mistakes are transitional cases in the early Reagan years. Chevron – too much deference on questions of law, State Farm – too much of a hard look in a case by Justice White whose ignorance about how you make automobiles was so colossal that you're trying to basically -- what he said is, "You know what you should have done? We don't know whether airbags work. Let's put them in every car." And that was what he said in the case, so you have to basically take the pattern of adjudication you see in ordinary civil litigation and think of it as a template for administrative state, and then you'll do a lot better.

 

      And the problem with all the modern judges is they're tinkerers in the Wilsonian tradition. They always think that they have something better that they could come up with. And it's not the question of administrative failure. State Farm, last I looked, was a Supreme Court decision. Chevron was a Supreme Court decision. If you get the wrong theory, you're always going to get the wrong result. And then the problem of an academic is they tend to celebrate error, whereas what we have to do is to deplore the kind of mistakes that we see on matters this structural and this fundamental.

 

Hon. Britt Grant:  Professor Kovacs, we've obviously got sustained and strong disagreement about whether it is, in fact, too difficult for agencies to regulate. But supposing we agree with your theory that it is too hard, could that be a feature rather than a bug in terms of a reflection of the type of tension that Senator Lee said is built into our system overall? A feature rather than a bug, a good part of the process that reflects the difficulty in reaching agreement that's baked into our structure?

 

Prof. Kathryn Kovacs:  Oh, sure. And I think that the APA was designed so that rules -- agencies couldn't just roll out rules. They do have to go through a notice-and-comment process. I would add a little bit to it now to reflect modern realities, but that process was meant to build in a deep deliberation before the rule is rolled out. I think the problem is that we have a Congress that for, what, 80 years now, has been delegating broad authority and responsibility to make policy to agencies, and yet, the agencies are not able to do that job in an efficient fashion. And in this world, we need policy fast and now, and we expect, when circumstances change, that we get a new rule reflecting those circumstances. We expect that when an election is had that policies will change in response to that election, and yet, the mechanism that our Congress set up to do that is broken.

 

      So what happens is that the system is askew. We have the Supreme Court making decisions that go beyond its expertise. I love the example of the five-member majority in State Farm that said rescinding the rule about those idiotic automatic seatbelts -- I love showing my students the video. You remember those seat belts from the 80s, and when you tried to get out of your car in a rush, it would strangle you? And the Court said, "Oh, but you didn't consider the value of inertia." Inertia? With seat belts? Those things were never sitting still. So I think that that's the problem. It was not -- yes, there certainly are and should be constraints on agency policy making, but the system has become askew.

 

      And I think one of the ways to get it back into balance is to convince the courts to try what Congress wanted us to try in 1946, which we've never really tried because we have SEC v. Chenery. We have pre-enforcement review, thanks to Abbott Labs. We have all these common law doctrines that came out of nowhere, that came out of pre-APA law, and we've never actually implemented the APA as written. I would really love for us to try that.

 

Prof. Richard Epstein:  I agree with this on many --

 

Hon. Britt Grant:  Professor Hamburger, I think, was going to --

 

Prof. Philip Hamburger:  -- Who's going to invite you? I appreciate your comments on APA. I want to invite you to consider the possibility of signing briefs against Chevron on the grounds that it violates the APA.

 

Prof. Richard Epstein:  That would be wonderful.

 

[Laughter]

 

      I have another operation. Look, some of the great problems that you have are because you try to get an administrative agency to do what it cannot do. Agencies are good at enforcement. They're very bad at giving away public goods to private individuals. So when you start with one of the early pre-APA cases, the NBC case, how do you allocate the spectrum in the public interest convenience and necessity? There is no metric that you can use to figure out which of your favorite friends ought to get something. You need to use a bid system. And so what you did is you had Felix Frankfurter coming up with his typical ignorance on these things, saying, "Well, the market can't possibly allocate resources when they are scarce," not having studied Economics 101.

 

[Laughter]

 

      I mean, it's just an amazing statement. And so we're going to have the agency do more than set the rules of the road. They're going to determine the composition of the traffic. And they have 80 years to try, and they've never been able to do that. And so that one has to recognize that if you have a valuable resource in public hand, the way to maximize it is to figure out whether you sell it off in bits and pieces, lease it, or whatever it is to maximize its net value, and use a market mechanism over publicly owned rights rather than to try to use an administrative procedure to determine which person should get them and why. And that's one of the fundamental conceits of administrative state is it gets itself out of enforcement mode where it actually can have some sensible things to do. And it starts to distribute goodies to its friends, and that's a massive situation of corruption and favoritism.

 

Hon. Britt Grant:  Well, we've had all the fun up here, so I trust that this has inspired a lot of questions from our audience. Over here?

 

Steve Calabresi:  Hi, I'm Steve Calabresi. I'm the Chairman of The Federalist Society Board of Directors. And I had a question for --

 

Prof. Kathryn Kovacs:  His microphone doesn't appear to be on, for anybody who can do that.

 

Steve Calabresi:  -- essentially a separation of powers -- the separation of power issue raised by agencies. You have in one building agency commissioners making rules. In the same building, enforcement personnel executing those rules. And in the same building, administrative law judges appointed by the agency deciding cases that are being prosecuted by the agency with a right of appeal to the agency. And this makes a complete mockery of the separation of powers. I think there are two simple reforms which the Supreme Court in a 5-4 decision could impose on the system that would help a lot.

 

      On the problem of agencies having too much rulemaking power, it seems to me that part of the problem is that Congress likes to delegate power to agencies because it doesn't want to have to make hard decisions. And so it's constantly throwing hot potatoes to agencies rather than making hard decisions. I don't think we'll ever get Congress to stop doing that, and I don't think we'll ever get the President to stop signing bills that do that. The courts had been unwilling to use the nondelegation doctrine -- apologies, Philip, for using that label -- the courts have been unwilling to use the nondelegation doctrine because they can't figure out how to draw a clear line between what delegations are excessive and what aren't.

 

      What I'd like to suggest is a very clear line that could be drawn, and that is any time Congress attaches an unconstitutional legislative veto to a bill, it should be presumed that it's delegating legislative power, and the bill should be struck down and sent back to Congress. INS v. Chadha striking down legislative vetoes was a huge victory for the separation of powers, but it was also a huge victory for the administrative state because all this power that had been delegated since the 1930s subject to legislative vetoes was suddenly no longer subject to legislative vetoes. And looking at whether there's a legislative veto in the statute or not would provide the Supreme Court and other federal courts with a clear line for enforcing the nondelegation doctrine.

 

      With respect to adjudication, I cannot fathom how anyone could think that administrative law judges ought not to be life tenured Article III judges with a right to jury trial. And I cannot fathom the notion that administrative law judges shouldn't be housed in a separate building of administrative courts rather than where they're rubbing shoulders with prosecutors and agency commissioners in the cafeteria. So those are my questions for Professor Michaels.

 

      My question for Professor Kovacs goes to her work in the Interior Department. And my big complaint with the Interior Department is that it owns 80 percent of Montana, 80 percent of Wyoming, 80 percent of Idaho, 50 percent of California, 95 percent of Alaska, and whole lot of other land. Back in the 19th Century, we passed homesteading laws and we privatized a lot of land. We stopped doing that in 1970. It seems to me we should go back to doing that. I know the current outgoing Secretary of the Interior has been opposed to privatization of land, but I wonder what your thoughts are on that. If we can't privatize land, can we at least sell drilling and gas rights permanently to individuals who can buy them so that future administrations can't rescind those rights?

 

Prof. Jon Michaels:  Katie, do you want to go first? You've got the question.

 

Prof. Kathryn Kovacs:  I think I'd like to decline to talk about public lands because it's a different form of regulation. I think there are historic reasons why the government owns so much land in the West. There are subsidies that western states get for that land, so privatizing -- selling off the land, giving it to the states, would throw a lot of historic compromises way out of balance. It is possible to do it, but the states east of the Mississippi would need to be involved because it would rebalance a lot of historic compromises.

 

      As for permit -- well, here I am, answering the question anyway. I think permanently giving away federal mineral rights -- if there is a public trust in the federal fiduciary obligation vis-à-vis the ownership of land, I think the Illinois Central case made it pretty clear that giving away permanent rights to the federal mineral estate would be unlawful. So that is something that can certainly be changed, but it would be a big job to do it, and it wouldn't just be between the Department of the Interior and the Governor of Utah.

 

Prof. Richard Epstein:  One comment on that -- two things. One, on the public trust doctrine, the great mistake that was made in that case was to assume that things were held in public trust were inalienable, at which point you have to figure out the line between a short-term lease and a long-term ownership interest. The correct rule was always you could get rid of it, but you can't give it away. You have to receive fair value back, and you scrutinize the transaction to see that that's done. And at that point, getting these mineral rights out would be good. You also have to worry about externalities, what easements you get to go in and all the rest of that stuff. As far as the west of it, on western lands, the whole point of selling it off is it's going to have a huge allocative efficiency instead of having the worst-run departments running these things, it's going to be privately owned. Just think of the number of fires that you could protect against if you had Georgia Pacific instead of the Department of Interior running some of these forest lands. So I think one really ought to try and do that.

 

Hon. Britt Grant:  Professor Michaels?

 

Prof. Jon Michaels:  Yeah. So I'm not sure exactly what the question was other than why do I believe what I believe? But I will say that I have deep misgivings about the politicization of agency adjudicators. If I suggested otherwise, I apologize. I think that agency adjudicators should be much more insulated than they currently are, as evidenced just a couple of weeks ago by the decision to -- in the Veteran's Administration to allow some adjudicators to continue in their job and others not. That seemed to fall entirely on partisan lines. Whether they're housed in the same office or elsewhere, again, I don't have a problem with that, and I think it probably would be healthy for the reasons that Professor Calabresi suggested.

 

      On the legislative veto issue, if that's a helpful touchstone, it probably would -- even if it were a helpful touchstone, I imagine Congress would pick up on it pretty quickly. So I don't know how much that would help us if we were truly concerned about overbroad delegations of that sort, given that most members of Congress presumably know now that those provisions would be struck down.

 

Prof. Philip Hamburger:  Just one sentence, if I may, about Steve's point concerning ALJs. It's a very serious problem. The solution's not that difficult. By one estimate, this is Bill Funk's estimate, there are 257 ALJs that exercise significant binding power. Another estimate puts it more like 150. We're not talking about that many judgeships. And of course, one can take a Burkean step by step approach. Imagine if the SEC, under pressure from judges, recognized how prejudiced its proceeding are. Imagine that the SEC were simply to send its cases to court. It only has five ALJs. The burden on the judges spread across the United States would not be that great. It would be a very good experiment in shifting to real judges.

 

Hon. Britt Grant:  We --

 

Prof. Richard Epstein:  Can I ask one question?

 

Hon. Britt Grant:  Sure.

 

Prof. Richard Epstein:  I disagree with Steve on one point. I quite agree that the current ALJ system with rotating judges, Lucia, the situation in Oil States, is unforgiveable. I have no particular objection to, and in principle, prefer the kind of Article I judges with 15-year terms and think that federal judges should be subject to similar kinds of restraints because I don't see any abuse coming in long-term appointments, and I see having a rotation in offices being something good. And I would rather amend the United States Constitution, for example, to limit Supreme Court judges to 18-year terms, something of that sort, to get rid of some of the huge pressure that takes place on the confirmation value battles.

 

Hon. Britt Grant:  Thank you. And we've only got a few minutes left, so I'll encourage all of our questioners to keep your questions brief and make sure that we can get to as many of you as possible.

 

Art Macomber:  I think next time we'll get Steve on a panel. My name's Art Macomber from Coeur d'Alene, Idaho. And briefly, with all due respect to Professor Kovacs from my home state of New Jersey, if New Jersey was 65 percent owned by the federal government, you might see fit to change your view on public lands.

 

      My question is on judicial function for Professor Epstein. Professor, in many states, administrative rules are not -- they say they don't rise to the level of law. They're not law, they didn't go through the presentment process, the Executive didn't sign them. And my question is to you, as a judge, say a state judge, and I'm confronted with an administrative rule, is this a case where we apply law, or is it a case where we apply equity? Or from a judge's perspective, what is the approach to taking on an administrative rule case? Thank you.

 

Prof. Richard Epstein:  Well, I think if you're talking about a question of law, I would generally favor de novo review on those things, which is, I think, consistent with the original design of the Administrative Procedure Act. Remember in Chevron, this great case of statutory construction, Justice Stevens does not cite the provision, Section 706(a), at all.

 

Hon. Britt Grant:  Next question.

 

Brian Bishop:  Yeah. Brian Bishop from the Stephen Hopkins Center for Civil Rights in Rhode Island, and certainly a salute to Philip's recognition of the civil rights issues here. I'd actually like to ask Professor Kovacs and Mr. Michaels if they see a point that Richard has made that judicial review in this case is reversed, that individual cases are subject to extreme precautionary principle advanced with almost limitless standing, whereas the ability to challenge and obtain hard look on the broader regulatory questions has been exceedingly constrained. Could you agree with Richard that that is an area that might deserve address?

 

Prof. Richard Epstein:  What do you think about hard look?

 

Prof. Kathryn Kovacs:  I'm not sure I really understand the question, but I can tell you I was employed for 15 years based on hard look review and the courts. I don't think I agree with you that the ability to challenge government policy is constrained in that way.

 

Prof. Jon Michaels:  Yeah, and I would just say that one of the bases for deference, which isn't always met or satisfied, but one of the bases for deference by my lights is that the process is rigorous. And I know folks can say, "Well, what does rigorous mean?" But it means that there is an extensive record with opportunities for all different viewpoints to be heard, and for those viewpoints to be vetted and presented to political leadership for the ultimate kind of curation and generation of rules in those cases.

 

      And so if a challenge comes under those terms, I think it is appropriate for courts to give a look, but not de novo, kind of readdress or reexamine a rule from scratch because we pay respect to that process that, again, is open and it is one that is both met with political and expert input. You may not like the outcome, but that is the process that engenders the most deliberative framework. And I think that's a lot better than just having maybe no process, just a black box, and then whatever judicial panel you get maybe saying, "Yeah, I like that," or "Yeah, I don't like that, but we're going to substitute our best preference for your best preference."

 

Prof. Richard Epstein:  But, I mean, look, what happens is the hard look review is imposed in those cases where administrative agencies have actually granted an approval. And what happens is you fly speck this thing, find something which you think is -- should have been considered that was ignored or something that was ignored that should have been considered, it turns out in any complex proceeding, you always miss something or add something in, and so you can negate it. The illustration of a simply dreadful opinion on this was the recent decision that took place with respect to the Keystone Pipeline in Montana where they vetoed it because of the ostensible effects on mitigation plans and on climate change. And this is something which had been reviewed 15 times, and a judge basically has one unreasoned paragraph that says, "I need a full statement," and then they give me another one, and it's just a de facto veto of a project which essentially has passed all sorts of sensible administrative rigor.

 

      So I think hard look situation makes the extremists in the general population rule what the court is doing, and I don't think that that is an appropriate way in which to run an administrative state. So that, I think, is the difficultly with hard look review. It's doing it on the wrong question. De novo for law, deference for questions of fact.

 

Prof. Kathryn Kovacs:  I just have to take up the Keystone Pipeline point. As a matter of fact, the federal government, federal agencies win, I think, somewhere in the neighborhood of 75 percent of APA cases, and the Keystone -- the problem in the Keystone case was not the court fly specking. The problem that the court identified was that the administration changed positions without justifying the change in position.

 

      And that's one of the things we've seen so much in the past year and a half, the administration trying to change policy and getting struck down some, what is it, 38 times now in attempting to change policy because they're not supporting the decision enough. And yes, I think agencies should have to justify their decisions, but I do agree with Richard that hard look review -- the Supreme Court has never used that term. And I think the courts of appeal should probably get the message. Arbitrary or capricious was meant to be quite deferential.

 

Prof. Philip Hamburger:  I just want to observe that Kathryn earlier said that when there's a change of election, the President should be able to get his policies carried through quickly.

 

Hon. Britt Grant:  I shall now exercise my moderator's prerogative and move to the next question.

 

Questioner 3:  Yeah, I was wondering to what extent the psychology of the regulator comes into play? And what I mean by that is I spend my days litigating for and against decisions of a particular state agency in my home state that is almost exclusively populated by engineers and scientists. And no offense to engineers and scientists, but I tend to find that by education, training, and temperament, they're particularly resilient to the idea that deliberative processes can come up with a better solution to problems. They tend to grab a solution and stick with that, and they view the APA and the due process requirements as merely check boxes on the way to get to where they ultimately want to go, and not as the notice, and the hearing, and the deliberative process to try to get to a better decision or to consider alternative viewpoints. And so I'm just curious -- how do you see that as an -- how do you create a structural system whereby you get the benefit of their expertise and their knowledge of the agency, but actually temper that so that they're not just checking off the boxes of the APA rules and the due process requirements?

 

Prof. Philip Hamburger:  So I think that's a profoundly important question. I think we can question expertise. Expertise is usually old science. We all know about expert bias, right? Experts fall in love with their area, and they don't adequately consider other matters. And the solution to all of this, I think, is to distinguish between expertise and expert decision making. The administrative state has justified on the grounds of expertise, and it's assumed that experts should then decide. But the reality is we need scientific input -- whether that's expertise is a different matter -- but experts surely should be able to talk, but that doesn't mean experts should decide.

 

      And we have a solution to this, oddly enough. It's actually up to date, even if old. It's called the Constitution. We can have agencies that can be filled with experts, hopefully more expert than we have since they produced orange rivers and the like, but we should have expert decision -- input. Experts can draft bills if they wish and just send them up to Congress to decide. And then we get more balanced decision making that's more responsive to the people.

 

Hon. Britt Grant:  Do you have a response?

 

Prof. Jon Michaels:  Yeah. So I'll just say that I think that's right to focus on there's certain technical aspects where, for instance, lay participation wouldn't be particularly useful. And in those cases, one way to think about this is that what are the private interests that are mobilized to care about a particular technical question? And one of the issues to think about is are those private interests better able to be heard and dealt with within an administrative proceeding or within a legislative proceeding?

 

      And my general sense of this, and my general take on this is that agencies are much more amenable to hearing from all different sides on an issue, particularly because of judicial review, because someone's going to say, "Well, did you -- why didn't you take into consideration this comment?", or "Why didn't you take into consideration this position?", which the legislature never has to justify. And secondly, as it turns out that we do have a Congress, but that Congress is beholden to special interests of a monied sort, and so it's not clear that everyone would get the same fair shake. I could submit comments on rules every single day. I can't get a meeting with members of Congress, probably, any day.

 

Hon. Britt Grant:  We have time for one last brief question with a brief answer.

 

Mark Chenoweth:  Mark Chenoweth with the New Civil Liberties Alliance. I wanted to come back to Professor Hamburger's earlier question to Professor Michaels and Professor Kovacs and just narrow it a little bit. And that's to say why are you comfortable with the loss of civil liberties in administrative adjudication? He went through all of the things that you lose. There's no jury. You can't even contest constitutional problems with the prosecutions being brought against you. There's no federal rules of evidence, et cetera, et cetera. There's also no expertise with administrative law judges. None of the five ALJs at the SEC practiced securities law before they became judges at the SEC. That's crazy, right? So there's no positive tradeoff with expertise. Why are you willing to give up all of the due process rights in order to have administrative adjudication when we could just get rid of those 200 judges and put all these cases into Article III courts?

 

Prof. Kathryn Kovacs:  Well, the Supreme Court has decided that post-deprivation process is sufficient. Now, I think that it's been a very long time since the Supreme Court has taken procedural due process doctrine to task. I think there are -- the way agency adjudication has developed and the role that -- and this gets back to the earlier question about separation of functions within agencies, an issue that Congress hasn't addressed since 1976, I agree that post-deprivation process is sufficient in most cases. If the --

 

Mark Chenoweth:  -- Then the process is the punishment because it takes a decade --

 

Prof. Kathryn Kovacs:  -- Yeah. And I take --

 

Mark Chenoweth:  -- and no one can afford it.

 

Prof. Kathryn Kovacs:  And Philip's point is well taken that a lot of litigants may be afraid to go to court because it gets them on the bad side of the regulating agency, but I do think that procedural due process doctrine is ripe for a new look from the Supreme Court, and I sure wouldn't be surprised to see it.

 

Prof. Richard Epstein:  One sentence on this, which is what you do is you take all the adjudicative function outside the administrative agencies and to put them into either Article I or Article III Courts. Period. Nothing else will do.

 

[Applause].

 

Prof. Kathryn Kovacs:  Look, there are good reasons why Congress --

 

Prof. Richard Epstein:  -- Not in this case.

 

Prof. Kathryn Kovacs:  -- put these adjudications into agencies, including not just adjudications about public rights --

 

Mark Chenoweth:  -- But why does the agency get the choice to go to Article III courts? How about you let the defendant have the choice about going to Article III courts --

 

Prof. Kathryn Kovacs:  -- But it's not the agency's choice, it's Congress's. It's Congress that made the decision to do this and the Supreme Court that gave it its blessing.

 

Prof. Richard Epstein:  So both take a pass on a serious structural issue.

 

Hon. Hon. Britt Grant:  This question is a great example of our commitment to debating ideas freely here. I think we've done a lot of that on this panel, and I thank you all for your attention. Thank you to all of our panelists. And those of you who have questions, I hope you'll approach them outside and pose them.

11:45 a.m. - 1:30 p.m.
The Future of the Past: Stare Decisis

2018 National Lawyers Convention

Topics: Federal Courts • Litigation • Supreme Court
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Event Video

Listen & Download

Description

Stare decisis – “to stand by things decided” – is the doctrine under which courts follow their own precedents, and precedents of superior courts. Proponents of stare decisis assert that it promotes predictability in the law, reduces revisiting settled issues, and increases reliance on judicial decisions, all while enhancing the legitimacy of the judicial branch. Critics of stare decisis assert that a court decision in error should not be followed blindly, and over-reliance on stare decisis can cause errors to become set in concrete. A handful of recent opinions suggest that some in the judiciary might be open to revisiting the contours of the doctrine of stare decisis. Should it be reevaluated? Does it matter whether the issue under consideration is statutory or constitutional? Does the time in history of the original decision matter? What is the future of this doctrine?

  • Prof. John S. Baker, Jr., Visiting Professor, Georgetown University Law Center
  • Hon. W. Neil Eggleston, Partner, Kirkland & Ellis LLP
  • Mr. Kannon K. Shanmugam, Partner, Williams & Connolly LLP
  • Moderator: Hon. Amy Coney Barrett, United States Court of Appeals, Seventh Circuit

Speakers

Event Transcript

2018 National Lawyers Convention

The Future of the Past: Stare Decisis

November 15, 2018, at 11:45am

 

 

Featuring

Prof. John S. Baker, Jr. - Visiting Professor, Georgetown University Law Center

Hon. W. Neil Eggleston - Partner, Kirkland & Ellis LLP

Mr. Kannon K. Shanmugam - Partner, Williams & Connolly LLP

Moderator: Hon. Amy Coney Barrett - United States Court of Appeals, Seventh Circuit

 

 

 

Hon. Amy Coney Barrett:  We're going to go ahead and get started, if everyone's ready. I'm Amy Coney Barrett, and I am a judge on the Seventh Circuit. I am particularly delighted to moderate this panel because before I was a judge, I was a law professor. And I spent some of my time thinking and writing about our topic for today, stare decisis.

 

      So stare decisis is a bedrock principle of our system, and it has many benefits. It produces stability in the law. It promotes efficiency because judges don’t have to reinvent the wheel. And it increases the public's confidence in the impartiality of the law. But stare decisis also has its kinks. And so we're going to solve all of stare decisis's problems today with our all-star panel.

 

      We've got John Baker, who is a distinguished scholar and long-time law professor himself. John has written about former-Chief Justice Rehnquist's approach to precedent. We have Kannon Shanmugam, who is a Partner at Williams & Connolly and one of the nation's most prominent appellate lawyers. And we have Neil Eggleston, who is a Partner at Kirkland & Ellis and has an impressive record of public service, most recently as President Obama's White House Counsel. I'm going to keep each of them, to the best of my ability, to eight minutes because we’d like to save the balance of the time for Q&A from the audience. We're going to start with John.

 

Prof. John S. Baker:  Thank you, Judge Barrett. A couple of years before he was confirmed as Chief Justice, then-Justice Rehnquist came to the LSU law school, and one of my colleagues asked him about his views on precedent and stare decisis. Well, it's obvious that the Justice had been asked this question before because he had a very ready reply. He said, "Well, if a case has been decided a year or two ago by 5-4, I don't give it much weight. But you better have a very good argument if you want to overturn Marbury v. Madison."

 

[Laughter].

 

      Thank you for the laugh. I appreciate that. But more than the laugh, there're actually a couple of important lessons from what he said. For one thing, not long after, his famous opinion in National League of Cities v. Usery, decided 5-4, was overturned by Garcia v. San Antonio Metro 5-4. Now, I think the only thing that he agreed on with the 5 that voted against him was they all agreed that a recent precedent doesn't have a whole lot of weight in the Supreme Court if it's decided 5-4. But there's also something else that you may not have noticed. At least implicit in what he said about Marbury is that it's primarily a precedent. And, indeed, law schools for 90 years or more have really approached it this way, and a lot of people often don’t even think about it. And it's both on the right and the left. Is -- what we’ve called judicial review since the beginning of the 20th Century -- is that really grounded just in Marbury? Or is it grounded in the Constitution?

 

      There're many on the right who believe, at least historically, that it's illegitimate, and therefore we have to restrain it. And there're many on the left who believe it's illegitimate and we need to expand it. But either way, they don’t think it's really legitimate. On the contrary, however, Justice Scalia used to say—quite rightly—that Marshall merely plagiarized Marbury from Federalist 78. Now, you may wonder, since this is the section on litigation, what all this has to do with most of you because most of you are actually litigating in the lower federal courts and the chance of getting to the Supreme Court is very slim. (And I'm being told I better speed up).

 

[Laughter].

 

      I hope to tell you, lead you to the notion that there's a lot you can do with precedent if you understand its background. So three quick points I want to go over. Understanding the nature of precedent and stare decisis at the time the Constitution was written; two, how separation of powers changes our understanding; and three, what you can do with this in the lower federal courts.

 

      At the time of the Founding—first point—there's a broad common law background, yes. But Britain has moved from the notion of precedent as primarily customary to really that it is tied to Parliament; that is, after the Revolution of 1688-89, the notion of precedent hardens. And it hardens because when a court has a holding and the Parliament does nothing, the precedent becomes law—not because of the courts, but because of Parliament's inaction equated with action.

 

      Going along with this was their attitude about opinions. Opinions were, essentially, seriatim – each judge wrote an opinion. And what was the holding was the holding that they basically agreed on. The rest of it was opinion, just opinion. That's all it was.

     

      Well, when we get to the Constitution, yes, it is true that, of course, Hamilton says in Federalist 78 that judges are to be bound down strictly by precedent. But what did he mean? Well, for one thing, all of the Federalists thought that the common law background was actually in some way incorporated into the Constitution. That was one thing. Two, separation of powers obviously changes that link to Parliament. Parliament's no longer. Courts in the federal system are now, under separation of powers, distinct. Instead of answering to Parliament, they're supposed to be answering to the Constitution.

 

      But this posed a problem for Marshall. What's the common law of the Constitution? The Constitution doesn't explain itself. It's like a blueprint, that's all. Marshall set out to have unanimous opinions in which he explained everything. And later, Story wrote his Commentaries on the Constitution, which according to -- his son said that Story set out to combine the Constitution, the Marshall Court decisions, and The Federalist. The Federalist explains the blueprint. And so you had that background that educated lawyers, until at least the Civil War, because of the Commentaries on the Constitution. But all of that gets replaced beginning at the end of the 19th Century with progressivism and Holmes and others talking about law as judge-made law. That's the biggest change that occurs. It comes through all of the law schools.

 

      Now, what can you do as lower court litigators and lower court judges? And I have one minute to tell you this. You may have noticed that we have a number of new originalist court-of-appeals judges. Given a narrow understanding of holding, which you already know anyway when you try to distinguish facts and holdings, it would be useful to many of these judges if, not only in plotting the holdings of the existing precedents from the Supreme Court in your circuit, you try to give them alternative explanations that are originalist in nature so that what comes from the lawyers will go through the lower courts and they in turn will feed it up to the Supreme Court. Thank you very much.

 

Mr. Kannon K. Shanmugam:  Great. Well, good afternoon. My name is Kannon Shanmugam, and it's a great pleasure to be back at the National Lawyers Convention and to be a part of this really incredible panel. And it's a particular pleasure to be here with Judge Barrett, who clerked for Justice Scalia the year before I did, and who, in fact, interviewed me. Judge, welcome back to Washington, and I hope you'll come back for good sometime soon.

 

[Applause].

 

      There's this cliché that everyone will be aware of about eating Chinese food. And I was sort of reminded about that cliché when I was asked to serve on a panel about stare decisis. I think attending a panel on a subject like this will be satisfying while you're here, but you'll probably be hungry in about 30 minutes because this is one of those hopelessly amorphous topics—no criticism of The Federalist Society. It's just inherent in the nature of this concept. And so I thought I'd start by offering a few reflections as a practicing lawyer and as a lawyer who practices, perhaps most visibly in the Supreme Court, but really primarily in the courts of appeals and occasionally in district courts as well.

 

      Perhaps it makes sense to just sort of start with some thoughts about what we are talking about here. I'm a former Latin major, so I always love it when I'm asked to talk about a subject in Latin. And stare decisis is, of course, a Latin phrase. And it literally means to "stand by what has been decided." Actually, for the people who are real Latin nerds, decisis is in the ablative form and that can actually mean a variety of things. It can mean to stand by your decisions or with your decisions, or best of all, to stand on your decisions. And that is really what we're discussing today, and it's an issue that can arise, as Professor Baker said, in a wide range of contexts.

 

      Historically, scholars have distinguished between vertical stare decisis and horizontal stare decisis. In my view, I'm not sure that vertical stare decisis is really stare decisis at all. It's just the basic notion that lower courts are bound by decisions from higher courts. And that is a principle that is effectively embedded in the Constitution. It's really embedded in Article III Section 1, which distinguishes between the Supreme Court and inferior courts – the implication being that inferior courts really ought to listen to the Supreme Court. And at least most courts of appeals tend to do that.

 

      What we're really talking about when we're talking about stare decisis, I think, is horizontal stare decisis. As Judge Barrett has pointed out in her really thoughtful articles on this subject, what that means really varies depending on the level of court that you're at. If you're a district court, it doesn't really mean very much at all because district judges are not bound, even by decisions by other judges within their districts. And, similarly, the Supreme Court applies stare decisis in a less than entirely binding way, and I'll talk about that in a minute. I think where stare decisis has the most force in our system is at the court-of-appeals level, where there is a pretty established rule that, where a prior panel has decided a question of law, a subsequent panel is bound by that decision, and that rule of law can only be overturned by the en banc court. And we'll come back to that in a minute as well.

 

      I really want to talk about two aspects of stare decisis in my opening remarks, and I'm sure we'll talk about others as the panel proceeds. First, let me talk about the Supreme Court, and in particular about stare decisis in the constitutional area of this subject that Professor Baker focused on. This is usually what people are talking about when they talk about stare decisis. And it is, of course, the most visible area in which stare decisis is discussed, and the Supreme Court has articulated a set of factors to be taken into account in the analysis.

 

      Now, the Supreme Court standard is a notoriously pliable one, and that is probably inevitable because as nice as it would be to reduce stare decisis to a set of scientific criteria, that would probably be a hopeless aspiration. And one might wonder why we have a doctrine of stare decisis at all. After all, our judges and justices take an oath to uphold and defend the Constitution. They don't take an oath to uphold and defend the United States Reports or the Federal Reporter. And yet, if we were not to have stare decisis at all, I think we would all agree that that would be an unfortunate outcome because after all, as Judge Barrett put it in one of her articles, "a new majority cannot impose its vision with only votes." If judges gave no heed to prior precedents, the law would be uncertain. There would be a constant vacillation depending on the preferences of individual judges and justices. And so I think all agree that stare decisis serves important values.

 

      The challenge, of course, is in figuring out how to apply the criteria, and the Supreme Court has articulated criteria that sort of fall into two categories. The Court has made clear that merely concluding that a decision is incorrect is insufficient. You have to have a special justification to overturn a prior precedent. And those justifications have fallen into two categories. There are those that relate to the merits of an underlying decision: Was the decision not just incorrect but profoundly so? Has it been called into question by subsequent decisions? Did it employ an improper methodology in reaching its result? And the Court has sort of focused on those considerations to some extent.

 

      And the Court has also focused on more pragmatic considerations, such as the workability of past precedent and the issue of reliance. And the Court has uniformly held that reliance is a relevant consideration, even though it's a consideration that, by definition, comes into play only in a subset of cases. And really only primarily in cases involving individual rights. And really only in cases where prior decisions have recognized individual rights. It's hard to know how the concept of reliance would apply in the context of structural constitutional principles. You know, if you're dealing with, say, a question of administrative law is the reliance of a low-level administrative officer on a deference doctrine reliance in the sense that the Supreme Court thinks? I think probably not, but that is a consideration that, again, the Court has uniformly applied.

 

      I want to offer a quick thesis, and then I'll just identify with the Judge's leave one thought about the other principle area of stare decisis. I think that a lot of the Supreme Court's considerations really boil down to a focus on notice, and a focus on notice to parties and to the world at large that the Court is reconsidering a past precedent. And I think that that is really what animates a number of the factors in the Court's stare decisis framework. The Court really wants the world to be aware of the possibility that it's going to reconsider a precedent so that parties can adjust their behavior and to give parties and amici the opportunity to weigh in before the Court, in fact, does so.

 

      Let me say just a word about the other principle area of stare decisis – courts of appeals. It is true that the articulated rule at the court-of-appeals level is that a panel will not revisit a prior legal holding without en banc review. But in my experience as a litigator, that is a rule that is very much honored in the breach rather than the observance. In the words of one commentator, panels often make nit-picky distinctions about cases, aggressively characterized statements in prior opinions as dicta, ignore inconsistent authority, or reject or disregard such authority without expressly overruling it. And, again, in my experience I think that where panels want to avoid earlier decision on the court-of-appeals level, they have many ways of doing so.

 

      And I think one of the real problems in our system at the court-of-appeals level is that court of appeals do not police inconsistencies among panel decisions as aggressively as, in my view, they should. The en banc mechanism exists, both to police those inconsistencies and to revisit prior incorrect decisions. But it is used incredibly sparingly. In this country last year there were only 36 en banc oral arguments. That's fewer in the entire country—en banc arguments—than there were cert grants at the Supreme Court level. And as a result, I think one thing that we see is continued disuniformity and an unwillingness of courts of appeals to correct incorrect decisions, and instead a desire to leave that to the Supreme Court.

 

      So I'm sure we'll discuss all these topics as we get into the discussion. But, again, it's great to be here. Thank you very much.

 

Hon. W. Neil Eggleston:  I'm a little taller, so I'll raise this a little bit. So I'm Neil Eggleston. I mentioned to Dean Reuter before I got up here that -- obviously I'm out of the Obama administration; I probably otherwise would not be attending these lunches except for being invited periodically to be on the panels. I've told Dean before -- as I said, before we started, that people always treat me politely in these circumstances, but they always look at me in bemusement about how wrong I am.

 

[Laughter].

 

      So I anticipate that will happen again, and I'll tell you I'm fine with it as long as you are.

 

[Laughter].

 

      So as you might guess, I'm thinking about this topic a little differently over the last year because of the recent installation of two Justices. And I want to talk a little bit about that. Judge Barrett gave some reasons for the rationale for stare decisis. I actually think about it in a little more of a global sense, which is that it's a recognition that the Supreme Court is an institution. And that it's been around for hundreds of years, and it’s had -- you Supreme Court-wonks are probably better at this than I am, but I think the Chief Justice may have changed how to count Justices recently. He's counting Chief Justices differently than Associate Justices. But I think there've been 110, roughly, Justices of the Supreme Court. They were all -- got their seats through the same constitutional process that the current group of nine has. And I think part of the concept of stare decisis is a recognition that the Court does not exist for the current members at all, but it exists in a continuum. And at the risk of using a little of my time…

 

      So I was in the Clinton administration in the White House Counsel's Office and left and then had the fortune to come back and work in the Obama administration. And the first time I didn’t sense this, but the second time I very much sensed this, which is it’s the same building that we left at the end of the Clinton administration. The Bush administration occupied it in between. In the Clinton administration, we were just temporary tenants; the Bush administration was temporary tenants; and in the Obama administration, we were temporary tenants; and we had a duty to the institution. I felt much more strongly, I think, having come back again. And I would just urge people to think about the value of the institution and how important stare decisis is to that.

 

      Now, let me make one other point which I think may sound simplistic but I think also matters, which is all nominees at their confirmation hearings talk about how important stare decisis is. That's one of their key notes. And it's because the Democrats are all worried about certain cases and the Republican senators don’t really care as long as they get confirmed if they're Republican nominees. But stare decisis applies when the Justice would not decide the case the same way. That's what it means. You don't need stare decisis if you're the Justice and you would decide the case the same way without stare decisis. This is a reason to go a different direction than you might have been. That's the whole function of stare decisis. And the Court has developed a whole series—a cannon set—of precedents about how to deal with that and how to think through when a separation from a prior precedent might be appropriate.

 

      I'm a little worried, having read a fair amount of the literature related to stare decisis that's come out in the last couple of years, that stare decisis and originalism are starting to interact with each other; that there has become a sense that the prior Justices didn't recognize this superior method of interpreting the Constitution. I think Professor Baker made some reference or an oblique reference to this -- that somehow the prior Justices didn't have the benefit of this superior method of interpreting the Constitution, which is originalism. And so the prior decisions are not as worthy of respect as other decisions might be in the originalist era. I just want to warn everybody: theories come and theories go and Justices get appointed and Justices don’t get appointed. But it remains the same institution throughout and decisions that are rendered now will be subject to review in the future and disrespect for stare decisis is not limited only to the current time.

 

      I guess the other thing, just talking a little bit about the institution -- and I really think the Supreme Court is at a bit of a fork in the road, if you will, which is we've seen -- and it's not just over the last two years. It's over a period of time -- but that the other two branches of government aren't really functioning very well. I don't think that Congress is going to function any better, frankly, with a Democratic House and a Republican Senate – in fact, it may in some ways function even worse than it would before. The presidency, obviously, is an area that we read about in the paper every day.

 

      I think this Supreme Court has to think very hard about whether it is going to become enmeshed in the partisan morass or whether it's going to continue to be an institution of enormous respect. And I think that how the Court deals with stare decisis, particularly in cases that the public might otherwise think of as essentially partisan cases, it is important. If they start reversing a bunch of decisions by 5-4, whether they're recent decisions or not recent decisions, then I think that the Court has a real risk of losing what I still think is quite a high stature and position in the country. And I think that one of our institutions should have that. And I would really not like the Supreme Court to delve down to the level of the other two at the moment.

 

      So anyway, I care enormously. I also clerked in the Supreme Court, although many Chief Justice's ago, for Chief Justice Burger. And I'm enormously fond of that year, and I'm enormously fond of the institution. I recommended Merrick Garland to President Obama to be a Justice, and there are a lot of people who think the latest—nobody in this room, obviously, but a lot of people in the country—think the latest two Justices shouldn't actually be sitting in their seats. And I just think we have to be really careful at this time because I think the institution could suffer for lack of recognition, frankly, of the importance of stare decisis. So thank you.

 

Hon. Amy Coney Barrett:  Well, I'm going to exercise the moderator's prerogative of asking each of our panelists a question, and then we can open the floor and take some questions from the audience that the panelists can then answer and get a conversation going.

     

      So I'll start with John Baker, and my question for you, John, you talked about The Federalist Papers and a historical view of stare decisis. So do you think that stare decisis is constitutionally required?

 

Prof. John S. Baker:  Do you mean constitutionally required in that we would put it to a decision or do you mean that it is part of the constitutional framework?

 

Hon. Amy Coney Barrett:  Part of the constitutional framework in the sense that if courts, as part of the judicial power under Article III, -- so that if they entirely ignored precedents, that they would actually be acting contrary to the Constitution.

 

Prof. John S. Baker:  I believe that. And that -- Federalist 78 is an answer to Brutus. And Brutus, the anti-federalist, was arguing they would be the supreme power. And that's why Hamilton is assuring them they are going to be tied down. My point only was that our understanding of precedent today and their understanding was not the same.

 

Hon. Amy Coney Barrett:  Okay. So this next one is for Kannon. Kannon and I talked a little bit about this before the panel, so I thought I would ask him to speak a little bit about it now. And that is how, as a litigator who practices in the courts of appeals, he finds unpublished opinions and their role and precedent?

 

Mr. Kannon K. Shanmugam:  Yeah, I think the practice of unpublished opinions, which does vary considerably from circuit to circuit—there's some circuits that do it quite often; there's some like Judge Barrett's circuit that do it virtually never—I think that subject is very much wrapped into this subject of stare decisis for the simple reason that the availability of unpublished opinions gives judges a mechanism for avoiding the effects of stare decisis on both ends. It allows judges to, say, if there's an earlier decision with which they disagree that their subsequent decision isn't going to have any precedential effect, and so you don't need to worry about any inconsistency. And conversely, if a judge has a really difficult or uncomfortable question of law, they can issue a decision knowing that it is not going to bind subsequent panels.

 

      And, again, I think that all of this comes back to an unwillingness to use the available mechanism – the mechanism of en banc review – to ensure the consistency and rectitude of the court-of-appeals' decisions because, after all, we indulge this fiction that a three-judge panel of a court of appeals is the court.

 

      But where the court as a whole takes a different view, it seems to me that particularly given the stare decisis rules in effect, a court really does have a duty to correct the incorrect panel decision. And I think that that is an outcome that also, I think, would really aid the Supreme Court in its own decision making because one thing the Supreme Court doesn't do is to police internal inconsistencies within particular circuits. And in some circuits in particular, the panel that you draw can be very significant to the outcome.

 

Hon. Amy Coney Barrett:  Okay. So my last one is for Neil. So I entirely agree with you, Neil, about the importance of stare decisis in maintaining an institution, and the obligation that judges—and you were referencing the Supreme Court in particular—to the Justices’ responsibility to the institution itself. At the same time, stare decisis itself is a doctrine to which the Justices owe stare decisis effect. And as the Court as always articulated that doctrine, it's always said that it’s not absolute, that there's a time when cases should be overruled and errors corrected. And if that weren't true, Plessy v. Ferguson would still be the law of the land. So there has to be some times in which precedent ought to be overruled. So I wondered what thoughts you might have about when overruling would not betray a Justice's institutional obligations.

 

Hon. W. Neil Eggleston:  So that's a good question. And thanks for giving me the opportunity to elaborate on that. Obviously, I think there are cases -- and there're a whole series of them, Plessy would be one; and in the -- the Supreme Court in the travel act -- or I'm sorry, the travel ban case, maybe overruled Korematsu, or wrote a note about it. I don't know what exactly you'd say they did. But there're certainly occasions where prior precedent are so undermined that overruling them would be completely appropriate. And I think, actually, much of the -- there's the Dickerson, I think it's called -- the Miranda case, where it decided not to overturn Miranda and went through a number of these various different factors. I think the factors are basically accurate. I think, as Kannon said, the problem with the factors and whenever -- I think, as usual, Justice Breyer in one of his opinions had a six-part test. So when you have a six-part test, the only thing longer than that would be his hypotheticals.

 

[Laugher].

 

Mr. Kannon K. Shanmugam:  I had one last week that apparently weighed in a three minutes and eight seconds total, so…

 

Hon. W. Neil Eggleston:  Unfortunately, that was out of your time, right?

 

Mr. Kannon K. Shanmugam:  It's his time, not my time.

 

Hon. W. Neil Eggleston:  So…now I forgot where I was headed. Anyway --

 

Mr. Kannon K. Shanmugam:  Like Justice Breyer.

 

Hon. W. Neil Eggleston:  -- with his six-part test. The problem with it is the courts can then manipulate it anyway they want, really, to come out with a conclusion.

 

      I think that, as an institution, the Court should be very cautious about overturning prior decisions. And I think things like overturning a 5-4 decision with a 5-4 decision because there've been changes in two Justices since the last opinion, I think that's a place where they should think to themselves, “Are we actually applying our precedent or are we just exercising power?” And if they're just exercising power, as they now have five -- and, frankly, the Justices on the Supreme Court I think for 50 years have been majority appointed by Republican presidents. What hasn’t been true -- and I don't know this to be true, but I think we all suspect that this five will be more unified than the groups in the past that have had various different Justices who went various different directions. And so what I'm worried about is that those factors will be manipulated to really, essentially, just justify an exercise of power.

 

Mr. Kannon K. Shanmugam:  Can I just respond to one thing --

 

Hon. Amy Coney Barrett:  Absolutely.

 

Mr. Kannon K. Shanmugam:  -- that Neil said earlier. I would respectfully disagree with the proposition that there is some particular tension between originalism and the doctrine of stare decisis. And, actually, I would point to Judge Barrett and my former boss, Justice Scalia, as sort of an example of that. Justice Scalia once did famously refer to stare decisis as an exception to originalism. But I think in practice, he was a big believer in stare decisis, certainly more than other originalists, like Justice Thomas, on the Court. And I don't think that there's anything inherent in that particular theory of constitutional interpretation that puts it more than—stare decisis—than any other theory, other than the fact that it's a -- it has been in the ascendency, comparatively recently, across the grand arc of constitutional interpretation.

     

      And so I think that the question of how to apply stare decisis is one that should really be considered kind of independent of one's substantive theory of constitutional or statutory interpretation. And very similar issues can arise in the context of statutory interpretation as well. The Court recently had a case, Kimble v. Marvel [Entertainment], where there was a very vigorous back-and-forth about a prior Supreme Court precedent on statutory interpretation that, I think it’s fair to say, was decided before 1986. And there was a debate about whether to adhere to that decidedly non-textualist decision. And, again, I think you have to try to come up with a theory of stare decisis that is a neutral one without regard to substance to the extent possible.

 

Hon. W. Neil Eggleston:  Can I --?

 

Hon. Amy Coney Barrett:  Yeah, absolutely.

 

Hon. W. Neil Eggleston:  Do you mind? Sorry. So I understand completely that there's not an inherent inconsistency between originalism and stare decisis. And I really wasn't referring, as much, to Justice Scalia as to some recent scholarship in the area, which, as I said, suggests a little bit that because the oath is to the Constitution and not to precedent and because the prior precedent didn't have the benefit of originalism, there's less need to do it.

     

      And let me just say on Justice Scalia, the fact that he recognized stare decisis as an exception has actually been one of the criticisms of his adoption of originalism as a -- if it's a doctrine, why do you have exceptions to your doctrine? You know what I mean? If that's what you think the appropriate interpretive doctrine is, then how can you admit that there is an exception? And he plainly acknowledged there were a number of exceptions. I'm not getting into originalism, but I do think that, at least in the recent scholarship, this is a sort of joining of concepts that I think we're going to continue to hear about.

 

Mr. Kannon K. Shanmugam:  Yeah, and I think if he were here, I think what he would say is that there are the values that Judge Barrett articulated at the outset that stare decisis serves, you know, these values in consistency and uniformity and predictability in the law. And those do count for something. I think that was very much his view.

 

Hon. Amy Coney Barrett:  Well, and I think he also said -- so Kannon, I'm just going to engage in channeling the Justice, now.

 

[Laughter].

 

Hon. Amy Coney Barrett:  But he did say, explicitly, that it's an exception to all theories because all theories would militate, sometimes, in favor of a result that's at odds with the precedent. But that all theories required Justices, as Neil said early on, to decide cases in ways that they would not otherwise decide if there wasn't precedent on the books. And so that can be true of a more pragmatic approach to interpreting the Constitution as well as to an originalist approach. Stare decisis truly is an independent or more neutral doctrine in that regard.

 

      I'm also going to give the panelists—we've had a little bit of conversation back and forth—a chance to ask each other any questions they would like before we open the floor.

 

Prof. John S. Baker:  I just wanted to say that I don't refer to originalism as a theory. I think of it as the oath that you take; that is a judge takes an oath to the Constitution as written. That's what originalism is. It's not that you take an oath to whatever vision you have of the Constitution. And that has to undergird the doctrine of precedent and stare decisis. And the problem is that for too many judges—and Justices—they're in the school of legal realism, otherwise known as what the judge had for breakfast that morning.

 

      And that kind of unprincipled—and it's not just on the left—that kind of unprincipled decision making creates a lot of these problems because they're not fitting it to the Constitution. Sometimes they're simply solving the particular problem, which is a common law way of acting in a certain sense. But as Justice Scalia said in his first book, the one published by Princeton, "We're common-law [lawyers] in a civil-law system." What he meant by that was a written text, which is what the common law did not have.

 

Hon. Amy Coney Barrett:  Okay, well, how about if I open it up? I don't think -- Dean, we don’t have a microphone that people can use? Is there hand-held? Okay, well, we have a hand-held microphone right over here, so if anyone would like to ask a question, can feel free. And if not, I'll fill some air time by coming up with some more.

 

      We have one, right -- yeah.

 

Clarke Forsythe:  Clarke Forsythe with Americans United for Life. Given the six factors of stare decisis -- as you alluded to, [those] are: settled, wrongly decided, workable, legal erosion, factual erosion, and reliance interests -- is there really any hope for much coherence between the Justices? Wouldn't it be better for the Court, perhaps, to say, “Was there error? How big was the error? And what's the cost of overruling the error?”

 

Hon. Amy Coney Barrett:  Kannon, I think that one was for you.

 

Mr. Kannon K. Shanmugam:  I'm not sure that there's that much daylight between the first way you articulated this standard in the second, which is to say that as I indicated at the outset, I do think that the Court's factors really boil down to the merits and how wrong was the decision. And there are various ways of articulating that. And then the more pragmatic factors that relate to the effects of the decision.

 

      And I do think—and this is somewhat in response to Professor Baker, who I largely agree with much of what he's had to say—I do think that this issue of whether the prior decision was not just wrong in terms of the outcome that a Justice looking at the issue today would reach free of precedent. But whether it reached that result for a methodologically inappropriate outcome is part of the analysis.

 

      And I'll say with regard to Justice Scalia that an example of this, I think, is -- there was a case that was decided the year that I clerked called Troxel v. Granville. It's not a case of particularly great broad or jurisprudential significance, but it was interesting because it was a case involving grandparent's rights and substantive due process. And Justice Scalia wrote a very short but I think very telling separate opinion in that case, where he said: Look, I, Justice Scalia, am obviously not a believer in substantive due process. There are these earlier cases like Pierce v. Society of Sisters in the context of parental rights. And I'm not sure that those decisions are right, but I'm just not going to be willing to extend them. I'm willing to abide by them, but I'm not going to be willing to extend them. And I think that that sort of reflects the way that he approached the balance between originalism and stare decisis. I think in his view if there was a decision on the books that he thought was wrong but that was not working much broader mischief in the law, he was perfectly happy to say that decision can remain in effect.

 

Prof. John S. Baker:  I would make the distinction there that he would do that on Bill of Rights questions but not on structural questions. On structural questions, he was ready to overturn Humphrey's Executor. That'd be pretty big.

 

Mr. Kannon K. Shanmugam:  Yeah. And I think that reflects his view that those are questions on which -- I mean, for one thing, again, as I indicated at the outset, I don't know that you can really readily apply the reliance factor as a thumb on the scale on those sorts of structural questions.

 

Prof. John S. Baker:  The only people relying on it are Washington law firms --

 

Mr. Kannon K. Shanmugam:  Right.

 

[Laughter].

 

Mr. Kannon K. Shanmugam:  I would that that were a significant factor in any of the Court's analysis.

 

Hon. W. Neil Eggleston:  And let's just say whatever the law is, it doesn't really matter to us. We'll deal with it.

 

[Laughter].

 

Hon. Amy Coney Barrett:  Next question. I think right behind you.

 

Joe Cosby:  Joe Cosby from Washington, D.C. I am kind of struck -- I mean, it's particularly when you're talking about the reliance factor, I don't think there could be a better example than Erie v.... the Railroad, overturning Swift because that was a bolt of thunder out of the blue. I mean, nobody was looking to overturn Swift. I don't think at the oral arguments that anybody suggested that. And that's clearly one of the most important precedents that we have now. And the reliance factor in that one . . . completely out. And I'm wondering as I'm listening to this, it sounds to me as though there may be a tension between those who'd want to rely on stare decisis in order to protect the practical questions that you seek to protect and someone who would be more inclined to be uncomfortable with stare decisis if it involves a logical issue, that it then becomes very difficult to fit the pieces of the law together under the particular approach or theory that you're using to interpret it because…

 

      So to kind of boil it down, what's more important when you're talking about stare decisis? Is it the practical factors and the things that you've got in front of you right now? Or is it the theoretical or the logical consistency in being able to have a rule that can be understood and applied along those lines?

 

Hon. Amy Coney Barrett:  John is eager to answer this.

 

Prof. John S. Baker:  Well, a couple of things. Again, to quote then-Justice Scalia -- I'm sorry, Rehnquist, who said to his student who asked a similar question, he responded, he says, "If you're looking for consistency, you're in the wrong business."

 

[Laugher].

 

      And the problem here is that, as wonderful a Justice as I think Rehnquist was, he was the ultimate legal realist. I mean, he was a federalist, but he was an ultimate legal realist. And he was just better at it than some of the other legal realists on the Court. You point to Erie. Erie was the only case, as far as I know, to ever declare a prior decision of the Supreme Court unconstitutional. And what that really marked was this huge shift from the way the Court had viewed things, and Swift says Court opinions are not law. Okay? And that drove Holmes nuts, and Brandeis vindicated Holmes in the Erie case. That foundation has a lot to do -- where you're stepping as to how you view precedent and stare decisis.

 

Hon. Amy Coney Barrett:  I'll interject one thing there too. One thing about Erie that is very interesting is that it overruled Swift, distinguishing between statutory and constitutional precedents, saying that only a question of statutory interpretation where involved and we might let it lie. But because this is a question of constitutional interpretation, then we're going to overrule it. And the Court has distinguished between statutory and constitutional cases because in constitutional cases, if it doesn’t correct the error, it can be corrected only by constitutional amendment, which is, of course, an onerous process. So the Kimble case that Kannon was mentioning earlier -- that was one of the reasons to not overrule it. It was a case of statutory interpretation -- the baseball antitrust exemption is an example of that. So I don't know if you all have views on that.

 

Mr. Kannon K. Shanmugam:  I wonder if there'll be some softening in that, and that may be reflected in the views of the dissenters in Kimble, in part because as Judge Barrett says, the rationale for this distinction is that amending the Constitution is really hard; amending a statute in theory should be easy. But as we see Congress getting ever and ever more dysfunctional and unable to pass even the most basic legislation, I wonder whether there'll be a sense that even amending a statue is not an easy thing to do. And I think that that has kind of effected the Court's statutory interpretation more generally. But I think on the specific question of statutory/stare decisis one could see that having an effect as well, particularly where you do have -- there're a lot of statutory interpretations, decisions on the books that bear no resemblance to how any of the current members of the Court would approach the statutory interpretation. If you go into that pre-1986 era, it's not hard to find decisions that don’t even attempt to confront the text of the statute at all. And I think Kimble and other cases reflect the problem of what happens when the modern Court encounters a precedent of that variety.

 

Hon. W. Neil Eggleston:  So let me sort of, frankly, agree with that. And it may be partially from my perch in the White House for the last three years of the Obama administration. But the civics class teaches you that Congress can change statutes if it sees fit, and both Houses pass a bill, and it gets put on the president's desk. But unless it's included in the Omnibus, which funds the government at the end of the year, it's just not really happening. I'm sure people in the room will know lots that has happened, but Lilly Ledbetter is probably the last one that I actually remember, which was early in the Obama administration, where the Ledbetter's decision was overturned by statute.

 

      I can't really think of one since. There probably are. There may be some in the sort of national security area, where the Court every once in a while does things that Congress doesn't like. But that sort of civics class approach, I think -- and particularly people like now-Justice Kavanaugh, who spent a fair amount of time in that milieu as well, is probably skeptical, that not to worry if this is a problem, Congress can just fix it. I think that people are unlikely to continue to think that.

 

Mr. Kannon K. Shanmugam:  I mean, think back to Northern Pipeline where the Court actually, famously and somewhat controversially, stayed its hand on a statutory interpretation question so that Congress could have a chance to amend the Bankruptcy Act. I'm not sure that the Court would ever do that nowadays because they would have no confidence that Congress was going to act if there was a problem that needed Congress to address.

 

Hon. Amy Coney Barrett:  Right there in the back.

 

John Giokaris:  Thank you. I'm John Giokaris. I'm with the Chicago Federalist Society. I'm going to ask you guys to handicap the Court on stare decisis going forward. Up until now, the Roberts Court has sort of established a reputation for being the stare decisis Court. Previous Courts, according to an analysis from the Volokh Conspiracy, the Burger, Warren, and Rehnquist Courts would overturn a precedent of about -- an average of two to three per term. And the Robert's Court, at least up until recently was an average of about one per term. This past term was an exception. I think they overturned three major precedents, which was a lot of for them. But going forward do you still see the Roberts Court as being the stare decisis Court, or is that average going to bump up more? And what do you say to the theory that a lot of the bad cases have already been overturned at this point so there might not be many left to have to do it?

 

Hon. W. Neil Eggleston:  So I'm certain people could think of others they don’t like, actually.

 

[Laughter].

 

      But look, my opening remarks were largely a cry to the Court to be cautious about exercising its newfound power. I don't really know how it's going to come out. I'm going to quote something that I read getting ready for this, but I want to be quite clear that I've not checked it myself, so it may not be accurate. So if people are tweeting, don’t be too vicious about it. But there is something that I read that said that Justice Gorsuch in 60 cases suggested that 10 of the Court's precedent should be reconsidered last term. That's a lot. They weren't all at issue precisely in the case that was under decision, but that's a lot to suggest should be reviewed. And so, look, I hope that the Court will recognize the situation that it's in at the moment and will proceed with great caution. And ever since November of 2016, I'm out of the prediction business.

 

[Laughter].

 

Mr. Kannon K. Shanmugam:  I have a couple of thoughts, but John, do you have any?

 

Prof. John S. Baker:  I was just going to refer to the Wayfair case which overturned things on a non-ideological, basically, issue. Internet taxation – a lot at stake in there. But it's also ripe for further overturning because Thomas and Gorsuch went along with the narrow holding, but it's pretty clear that they basically don’t agree with the dormant commerce clause. So what does that portend? A lot more unsettled precedent.

 

Mr. Kannon K. Shanmugam:  Yeah, and I would just add a couple of things. First of all, I think it really is true, just as an empirical matter that the Court overturned precedents more frequently in the pre-Roberts years. The irony is that the very first case that the Chief Justice argued, a fairly quotidian question involving the Double Jeopardy Clause, was a case where the Court overturned its decision, like, eight years later. And this was, of course, in the days of the Rehnquist Court. And I think it's largely because, I think, the Chief Justice is very reluctant to overrule precedent unless there's really no choice but to do it. And there're a number of areas of the law in which you could argue that the Court, under his leadership, has sort of gutted prior precedents without expressly overruling them and then conversely cases where the Court has said that prior precedents are overruled in the Court of history – a Court that I hope to appear in front of one day --

 

[Laugher].

     

      -- since that's not -- that's still one on my bucket list. But I think in all seriousness, I think that the Chief Justice doesn't -- I think he doesn't like the optics of the Court being seen to overrule prior precedent. Sometimes there's no choice because that's the sole question before the Court, as was true in South Dakota v. Wayfair. And, of course, there he famously dissented from the overruling of Bellas Hess and Quill.

 

Hon. Amy Coney Barrett:  I'll add—and I know Kannon won't disagree with this—that the Court does have a choice; it just happens earlier, in the cert grant. So a way that the Court, I think actually a primary way that the Supreme Court contributes to stability is not to grant cert when the question presented is, “Do you want to overrule a precedent?” And I think that if the Court is looking to keep things calm, it will be in the nature of that and just declining to take up cases in which overruling precedent would be on the table.

 

Mr. Kannon K. Shanmugam:  Can I also defend Justice Gorsuch from what Neil said a little bit? I do think that when a Justice is writing separately, it's pretty rare for a Justice to confront the hypothetical question of whether those decisions, in fact, are now overruled. There would be something artificial about doing that. And so I think that when Justice Gorsuch or Justice Thomas writes a separate opinion that attempts to kind of reason from first principles, I don't think that you can always say that if the Justice was confronted with the question of whether or not to overrule the precedents, the Justice would, in fact, do so. I think those sorts of opinions, obviously, are very influential in directing the law, and I would respectfully submit that there's probably no Justice who's been more effective in that regard than Justice Thomas over the last 20 or so years. But I think that it's sort of a quite separate question when you're actually confronted with a binary choice, because that's where all these other considerations come into play.

 

Hon. Amy Coney Barrett:  Another question? There's one in the back of the room.

 

Ian Millhiser:  Thanks. Ian Millhiser with ThinkProgress. I think this is primarily a question for you, Kannon, but if other folks want to weigh in, I'm open. You drew this distinction between structural decisions and not-structural decisions, and how there might be less of a call for stare decisis in structural cases because there's fewer reliance interests. And I just wanted to tease that out because I'm not sure if that's empirically true. Like, I mean, it is the case that if we're talking about changing administrative law that the defendant might be the United States or might be a federal agency, but if it's an environmental case, like power plants have built their plants relying on this interest and they would've -- relying on the regulation being there and they would've had a different -- they would've built it differently otherwise. And I could give an example from the labor context. I could give an example from the healthcare context. So I'm just trying to figure out how do you draw that box when there will always be third parties who, even if they aren't involved in this particular litigation, have made decisions based on the regulation and, in some cases, have benefited tremendously from the regulation?

 

Hon. Amy Coney Barrett:  Well, I'll add onto the end of Ian's question, too. Wickard v. Filburn – is that structural?

 

Mr. Kannon K. Shanmugam:  Well, to sort of tackle the first part of that, I think what makes questions of administrative law a little bit different, at least if you're thinking about sort of the questions about Auer, and Chevron, and the like that have been very much in the news, is that those questions seem one step removed from the immediate question that a court is considering, which is, of course, is this particular regulation valid? Should this particular statute be interpreted in a particular way? And, obviously, the interests of private parties comes into play in a very real sense with regard to that specific question. That individual litigant, presumably, doesn't care so much about whether or not Auer is still a good law, except insofar as it implicates their particular interest in that particular regulation or statute. So I think that that's one potential ground for distinction.

 

      I won't profess to be enough of an expert in the Court's overall stare decisis jurisprudence to know, for instance, how the Court has looked at reliance interests in the Commerce Clause context and whether they've taken into account the interests of individual parties in those particular contexts. But I do think it's fair to say that when you're dealing with these structural constitutional questions, at a minimum—and, again, subject to exception—those individual interests tend to be a little more indirect.

 

Hon. Amy Coney Barrett:  Go ahead, John.

 

Prof. John S. Baker:  I want to talk about Wickard for a minute. I'm glad you brought up Wickard.

 

Hon. Amy Coney Barrett:  I thought it might stir things up a little bit.

 

[Laugher].

 

Prof. John S. Baker:  I think that's a good example of how you can -- and I've done it before. I've gone back and looked at all the Commerce Clause cases leading up to Wickard. And if you take a narrow approach to the holding, you can uphold all of those cases before Wickard without all the language in those cases. You can leave those cases standing; you can't leave Wickard standing if you really want to go back to an understanding of the Commerce Clause as you find in Gibbons, which was extremely textual. It actually read the words and applied the words – an unusual thing.

 

      There is no such thing as the Interstate Commerce Clause. That's a term that comes from a statute. Go back and read the text. Reread Gibbons, and then you can look at those cases differently.

 

Hon. Amy Coney Barrett:  I think reliance interests, too, can be structural or government. The government can have reliance interests, not just individuals. And I think that the formulation of stare decisis doctrine is capacious enough to encompass the reliance of institutions on doctrines, like Commerce Clause doctrine, for example.

 

      Next question.

 

Questioner 5:  So there was some discussion before on how, if there was a 5-4 decision, it would, more or less, be a show of raw judicial power. And my question is this, how do we reconcile if the 5-4 decision was to actually punt some questions of law to states or to other branches of government to handle? Would that, in essence, not be a raw judicial exercise of power? It would rather be the Supreme Court decentralizing its power to other branches.

 

Hon. Amy Coney Barrett:  Takers?

 

Hon. W. Neil Eggleston:  One of you two should do that.

 

Prof. John S. Baker:  Without something more specific, I don't know how to answer that question.

 

Hon. W. Neil Eggleston:  Yeah, I'm sorry. I'm a little bit in the same boat. I wasn't quite sure where you were headed with that. And so it leaves Kannon to give the smart answer.

 

[Laughter].

 

Prof. John S. Baker:  [Indiscernible 01:09:08]

 

Mr. Kannon K. Shanmugam:  I think we're unanimous on that.

 

Hon. Amy Coney Barrett:  Right in front of you.

 

Questioner 6:  Quick question for Mr. Eggleston. So it seems like everybody on the panel agrees, including you, if I understand you correctly, that nobody wants an all-powerful or political Supreme Court, a judicial aristocracy legislating from the bench, for example. But originalism, as I understood you describe it, sounds a little bit more like a passing trend or fad. What are your thoughts on, I guess, the decisions that were made that are -- previous decisions made by the Supreme Court that are at odds with the Constitution? Would that be an occasion where, in your opinion, it would be appropriate to reverse previous decisions?

 

Hon. W. Neil Eggleston:  So I missed a critical word. Did you say previous decisions that are at odds with originalism? Was that --?

 

Questioner 6:  Previous decisions that are at odds with the Constitution.

 

Hon. W. Neil Eggleston:  So --

 

Questioner 6:  Or I'll add to that. Either at odds with the Constitution or just written in to the Constitution, but not actually formally written into it.

 

Hon. W. Neil Eggleston:  Well, so look. Obviously, the Constitution controls. The danger in this area, I think -- and let me just correct one thing. I have no idea if originalism is going to be a passing fad or not. And I didn't mean to suggest that. It could be that it's going to catch on. All I meant is that if it is, then people who are advocating a particular way of dealing with it are going to have to accept the blowback if it goes a different direction. So I was making no prediction about that at all.

 

      Obviously, the Constitution controls. I think that the danger in this area is the sense that a particular Court can get it right and the prior Court got it wrong. Do you know what I mean? So what your question implies is a certainty about how the case should come out. And it rarely exists. All the cases that are high profile are 5-4, basically, or 6-3 – even the Justices rarely agree. And so the notion -- and look, this last term we saw Justice Thomas and Justice Gorsuch fight about originalism and where originalism would take them in various different cases. And I thought to myself, well, look, I thought this was a doctrine that all you had to do was apply neutrally and the answer would come out. How can two people who are espousing the same philosophy actually disagree with each other on where this whole thing ends up? I thought the neutrality of it was one of the things that was to its benefit.

 

      So I think that the assumption, really, of the question is sort of what I was worried about, which is a notion that originalism -- they'll all disagree with me.

 

[Laughter].

 

      They'll do it if we're having lunch.

 

Mr. Kannon K. Shanmugam:  We're just lining up.

 

[Laughter].

 

Hon. W. Neil Eggleston:  So I think the danger -- and as I said earlier, the thing about stare decisis is it is an agreement that the prior decisions is going to be sustained even if the current Justices don’t agree with it. That's the whole theory of it. You don’t need stare decisis if you agree with a prior decision. And I think that there's a certainly of rightness that comes out of that, and I think that's a dangerous place to be. Very few of these cases is there a certainly of rightness basically. The courts are always split and disagreeing with prior Justices. I just think that there is a hubris that comes with that, that the Justices should be very careful about.

 

Prof. John S. Baker:  There's a misunderstanding on your part and many people's part about what originalism is. I mean, it's not the notion that because you apply neutral principles that every originalist is going to come to the same conclusion and the same set of facts and law. I mean, Scalia and Thomas didn't always agree. So that's not the principle.

 

      And the real principle, I think, was best expressed by Lincoln regarding Dred Scott, and he said, the reason why normally we adhere to precedent is because when things are ambiguous and the people don’t object to it, we settle it and it becomes approved by the people—he substituted the people for Parliament—it becomes accepted as part of the fabric of the law. But there are certain few decisions that are so disruptive and rejected by ordinary citizens that they cannot be regarded as a precedent. So he urged his party members in the Congress to certainly respect the judgment in Dred Scott – you couldn't free him – but reject the precedent.

 

Mr. Kannon K. Shanmugam:  Yeah, and I would just add, first of all, I would just underscore that regardless of one's methodology, there are hard cases, and there are hard cases for originalists where originalists can disagree. And that certainly is also true in the area of statutory interpretation where there are often very hard cases for texualists and even with the constraining mechanism of textualism, there are cues on the face of the statute that might point in different directions. So I don't know that that has much of a bearing on the appropriate role of stare decisis; it's just a reflection of the fact that regardless of one's approach, there are cases that a judge or justice is going to struggle with.

 

      I do think that the reality is that regardless of whether you characterize originalism as a methodology or not, there are different methodological approaches on the current Supreme Court – constitutional interpretation, which will probably be the most obvious of the many obvious things I've said today. And that is really the reason why I would respectfully submit that stare decisis is a relatively weak principle in the constitutional area. And Judge Barrett has written very thoughtfully about this precise issue where you have Justices who have deep methodological commitments. That tends to cause them to think that prior precedents may not just be incorrect, but be profoundly so, because the Court was using the wrong approach in those prior decisions. And so I think that that explains the reality that we live in a world in which stare decisis, again, is not a mechanical or inexorable command. You have a variety of prudential factors that different judges and Justices are going to balance differently.

 

Prof. John S. Baker:  I would agree, but I'd just add this: the methodological differences are tied further back to different visions of what the Constitution is, because you can't have a methodology unless you know what the method is all about. Now, some of them I know, historically, had not a clue about what it was about. Justice Blackmun, I heard him famously say, he said, "Until I got to the Supreme Court, I had no idea what my constitutional philosophy was." Well, when you start from ground zero when you get there and you just start with a methodology, you're putting it together and you don’t have any real clear idea, and then you become terribly unpredictable.

     

Hon. Amy Coney Barrett:  I'll just add the footnote to say that I don't think methodological disagreement alone, though, is a reason for overruling cases. In many ways, stare decisis mediates that because if everyone on the Court had the same approach to constitutional interpretation, we'd probably see very few cases. I mean, you'd have some cases where Justices Thomas and Gorsuch might be duking it out over what was the right interpretation, but one of the great functions of stare decisis, I think, is to mediate methodological disagreement because it is methodological disagreement that provides the occasions for overruling.

 

      Is there a question ready to go over there? I also can't see because of the light from that side so…Okay, right there.

 

Ilya Somin:  Ilya Somin, George Mason University. The panelists and also the Supreme Court talks about reliance interests and how sometimes we might need to stick to a flawed precedent to protect people who've been relying on it. I wonder if the panel could talk about the flip side, which is situations where a longstanding but flawed has caused harm, potentially even great harm. Should that harm be considered? Should it be weighed against the benefits to those who have reliance? And if so how would you do that cost benefit analysis? Like, obviously one reason why we think it was correct to get rid of Plessy v. Ferguson, I think, is precisely because of the great harm and not merely because there was flaws in the Court's logic. But if that was true of Plessy, maybe it can be true of other decisions. Wickard was mentioned before – clearly some people benefit from it, but there're also others who are harmed. The whole purpose of the law upheld there was to raise food prices in the midst of a depression where people were already suffering from malnutrition in many cases. So should both benefit and harm be weighed, and if so is there any kind of neutral calculus that can be used to do that?

 

Prof. John S. Baker:  I think Wayfair was a good example of that, where Justice Kennedy was looking at harms. He did a calculation, which was disputed by Roberts, and Roberts was going on the other side – reliance. And the question is, should that case have been decided at all? Should it have been decided that way? Or should it have gone to Congress? Congress had the opportunity before; they didn't do anything. But does that mean because they didn't do anything, something should've been done?

 

Mr. Kannon K. Shanmugam:  In Wayfair, there was a debate between the majority and the dissent about how expensive it was going to be for parties to comply with the rule, right? And that they were going to have to get software to keep track of the state and local tax regime, the patchwork that was going to result. And so I think you don't get much more brass tacks then that.

 

Prof. John S. Baker:  And they didn't do a very good job with it because they can't do what a congressional committee can do.

 

Mr. Kannon K. Shanmugam:  I mean, one of my favorite random facts about that case was I saw something on Twitter -- and so, therefore, it must have been true -- that in the immediate aftermath of the decision, the value of the stock of the company that produces the software for companies to account for this tax soared. And so maybe that vindicated the concern and maybe it didn't. I don't know.

 

Hon. W. Neil Eggleston:  So I agree with you. I think that the existing jurisprudence, though, sort of accounts for that. I think workability of a rule is typically one of the places they look. The difference is that the reliance interests are people who -- the case comes down and they conform their conduct to benefit from the rule. So they've actually -- I think the thought is they've acted in a way that assumes that the rule is going to be in existence, which is different. The people who are being harmed, at least they know what the rule is, and so they know how to adjust their conduct in a way to maybe have less harm. And I think that's why, the reason that we talk more about reliance interests because those are the ones, presumably, who've actually organized their affairs in conformance with what they thought the law was going to be. And then for the Supreme Court to change it means that whatever investment they did, and as my colleagues have said, there's a significant amount of back and forth between the majority and the dissent in Wayfair.

 

Hon. Amy Coney Barrett:  We have one up here.

 

Questioner 8:  Thank you to the panel. This is a question for Mr. Eggleston. I want to extend the earlier question. I didn't take your prepared remarks to mean that you're concern about the shoving aside of stare decisis would mean that you would never overrule a prior case. I mean, I suspect in 1954, you probably would've not extended the principles underlying Plessy v. Ferguson. But what criteria would you actually use, like two or three bullet points, that would guide you in a decision whether or not to overrule?

 

Hon. W. Neil Eggleston:  Well, I actually don’t think I can do any better than the Supreme Court precedent, the Dickerson, the legging or whatever the case…you guys are better at case names than I am, I'm sure, by a long shot. But sort of the three or four cases that discuss—and I think we talked about some of them: Justice Breyer's six-part test, which is how fundamentally wrong the prior decision is, reliance interests we have talked about – there's a whole series. I think that's pretty much where I would be.

 

      Where I would not be is we got five now so we should do it. That's where I would not be.

 

Hon. Amy Coney Barrett:  There's one right here.

 

Microphone Person:  Perfect.

 

Josiah Kollmeyer:  Thank you to the panel for coming here and speaking. I'm Josiah Kollmeyer. I'm a law clerk on the Fifth Circuit. And my question is specifically for Dr. Baker. You're idea of "popular acquiescence" and --

 

Prof. John S. Baker:  It's Lincoln's, not mine.

 

Josiah Kollmeyer:  Oh, yes, absolutely. Lincoln's. How can we guard and weigh that against the idea that oftentimes important Supreme Court decisions defend the unpopular? How do we ensure that the populace can't, in essence, overrule the Supreme Court?

 

Prof. John S. Baker:  Well, we have to look beyond just the courts. I mean, that's why we have a separation of powers system. We don’t just have a court system. And as the Framers understood, you needed the three separate branches to maintain that kind of stability and justice in the country. I mean, that's the short answer to your question.

 

Hon. Amy Coney Barrett:  There's one right there.

 

Questioner 10:  You know, I'd like the panel if they could to talk about the negative effects of stare decisis on individual liberty. It seems to me that the imposition of a past case to a present case forecloses the fact patterns of an individual case in controversy. And I'm just really concerned that while it may bring court stability, it may bring stability to the law, it may bring stability to actors that rely on the law or that consider it a law and not simply an opinion, that individual liberty is watered down, is negatively impacted by this idea that the judges could make a pronouncement, for example, on a Texas case that applies across the whole country and not only to that case in controversy [and] the parties before it. And I'm looking for some discussion on that.

 

Prof. John S. Baker:  The person who's done the most on this is Judge Barrett.

 

[Laugher].

 

Hon. Amy Coney Barrett:  I'm the moderator not the panelist. [Laugher].

 

Prof. John S. Baker:  I've experienced that very frustration that you're talking about. Yes, it is extremely frustrating. And the difficulty in our federal system is when the Supreme Court went from being a court of errors to being a court that resolves conflicts, it's in the nature of the structure, and there is no good answer to what you say. But, yes, having experienced it -- of arguing a case dependent on another case that was previously argued and decided before I had my brief in. That was very frustrating. Because I thought I had arguments that weren't considered in the case that resolved my case. Yeah, I don’t have an answer to that.

 

Mr. Kannon K. Shanmugam:  And that does happen all the time. And to pick up where Professor Baker started, there's no better place to start in thinking about this issue than I think Judge Barrett's first article on stare decisis, which talks about kind of the due process aspect and looks at this from the perspective of individual litigants. And to pick up on something I said at the outset, I think that if you are in a world in which it is practically impossible to raise your arguments because of the way in which the rules are being applied, that that is a very real problem.

 

      And I think that where that really does, typically, meet the road is at the court-of-appeals level, where you can have a situation much like the one Professor Baker has indicated where there may be another case that is right out in front of yours. It may have worse lawyers; the arguments may be presented worse. And you may be the victim of stare decisis rules in that context, simply by virtue of having come second. That seems like a context in which the unfairness seems at its peak. But I think in particular, again, at the court of appeals level, if that en banc mechanism is not available, a party can very easily be out of luck if there is a prior precedent from the circuit, and there may not be a circuit conflict because if you can't get to the en banc court, you can't necessarily get anywhere. The district court's going to be bound by that prior precedent, you won't be able to get en banc review and you probably won't be able to get cert unless you have a circuit conflict. And, again, that's a context in which that unfairness seems at its greatest.

 

Hon. Amy Coney Barrett:  Did you want to add, Neil?

 

Hon. W. Neil Eggleston:  Well, so I've also read your article and since Kirkland's based in Chicago, I think I won't comment on it more than that.

 

[Laughter].

 

      But I do think in some ways on the court-of-appeals level, if you think about the other way it would work, which is that every panel gets a new shot at every new issue, they would be en banc all the time. And so it's a -- I guess I'm not that troubled. It works in the district court level, obviously, as everybody up here knows, which district courts in a district are not bound by decisions by other district courts in their district. So you're not -- if some district court rules against you, the next district judge isn't really bound. But as a matter of how you would proceed, you would have a lot of en bancs. And I guess it sort of presumes that the court of appeals is not properly exercising its en banc capability. And maybe that's the real solution to it.

 

      I agree people -- I mean, technically, people aren't precluded. They can bring their action, they can lose in whatever panel they have. They can seek en banc review and they can seek Supreme Court review. Nobody stops them from making all those attempts up the line. There's no, in my view, deprivation of due process. They can do it. It's just, because the way our system is worked, the likelihood of getting a real review is much less because, unfortunately -- I actually think -- although, and Ken and I talked about this a little bit, even in the Ninth Circuit, en banc isn't really en banc; it is a subset of en banc. And I don't quite know how they've sorted through all those issues. But I think there's a practicality to this, and without significantly more en bancs, I don't know how else that you would really do it.

 

      And court -- well, Judge Barrett is here. Courts of appeals tend not to like en bancs because it is so time-consuming for the judges because then all the judges have to get ready on any particular issue, which has always struck me as the reason they don’t particularly do it.

 

Mr. Kannon K. Shanmugam:  I think there are ways of dealing with that, and the Seventh Circuit has, I think, an excellent way of dealing with that. I'm not just saying that because we have cases in the Seventh Circuit and Judge Barrett's here. They have an internal en banc mechanism that I think they use to kind of police intra-circuit conflicts or inter-circuit conflicts where opinions are circulated internally, and I think that addresses a lot of the efficiency concern.

 

      But it's really striking when you look at the statistics, actually, by far, the majority of en bancs in the country occur in the Ninth Circuit, and it's a strange kind of mechanism where en banc doesn't really mean en banc. There're other circuits where they -- there were at least three circuits last year where there weren't any en banc reviews at all. And I've heard judges say that, you know, it's sort of viewed as discourteous when you're reviewing your work of your peers, and it creates internal fractiousness. And to me, that may be true, but I don't know that that rises to the level of a constitutional value that we're concerned that judges might not get along as well if they en banced each other more often.

 

Hon. Amy Coney Barrett:  Another question?  We have one right here.

 

Hon. W. Neil Eggleston:  [aside] Is this person going to be right in the light? No, good.

 

Questioner 11:  So this is the elephant in the room, and I think, Judge, you probably will not want to respond to this one. But I hear in the panel today, one of the things that they look at is whether the impact of applying stare decisis is going to be: constitutional or legislative? The biggest case we hear this discussed about is Roe v. Wade. And it appears that on both sides of Roe v. Wade, a number of Justices and judges have commented that it was not a well-decided decision, wasn't well-based. And then when you add to that the changes in science and other issues, it seems that it would be one that would be ripe for a court to want to revisit. And so my question is, how does the impact of the political issue -- because the third part of that is, do we allow the legislature, which is supposed to be reflecting the interests of its people, make these kinds of decisions or do we allow the courts to make these decisions? But if it's constitutionally determined to have been a poor decision, then it's no longer really a decision for the courts; it's a decision for the legislature. So how do we balance that with the horrendous, political atmosphere that then deals with a decision like this and makes it very difficult to ever revisit? Kannon?

 

[Laugher].

 

Mr. Kannon K. Shanmugam:  Why me?

 

[Laughter].

 

Questioner 11:  Because I heard you agree that if it's a constitutional issue, it's more likely to be visited than if it's a statutory issue.

 

Mr. Kannon K. Shanmugam:  So I will say this. Look, there are obviously hot-button areas of the law, and I think you just mentioned one, but there are numerous others where people feel very strongly about the rights and wrongs of prior decisions. I think it's all the more reason why it's important to try to articulate these principles neutrally. This is part and parcel of the exercise of the rule of law that you've got to try to come up with the best possible, most objective principles for stare decisis. I just think, however, that when it comes to something this broad, this is really sort of, on some level, a methodological question in and of itself, and it's just really hard. I think really smart people have tried to come up with more concrete standards for stare decisis, and it has just -- it just is not susceptible to that. So I wish there were a clear answer, whether in that context or any other, but I just think that the best that judges and Justices can do is to try to articulate those principles neutrally. And I think there's been a lot of thoughtful scholarship, again, including Judge Barrett's articles, on the broader subject.

 

Hon. Amy Coney Barrett:  Nothing to add?

 

Prof. John S. Baker:  I would fall back on Lincoln's statement.

 

Hon. Amy Coney Barrett:  Neil?

 

Hon. W. Neil Eggleston:  Well, I mean, I don't know that anybody in this room cares about what I think about this, but I will --

 

[Laughter].

 

      -- but I'll offer a few thoughts very quickly to let you get back to your dessert, or something. Look, the case has been unreversed for 40 years -- I don't know how long, maybe longer than that. Somebody can do the math. And it has been upheld over and over and over again. I know there's a significant portion of the populous that don’t like it and have never liked it. I think there's a significant reliance interest – I think that's what he meant by the Lincoln comment. I think it's an accepted right, at this point, in that it would be inappropriate for this Court to overrule it; that it satisfies all the conditions of being sustained. And that's where I am on it.

 

Hon. Amy Coney Barrett:  And with that, we've hit 1:30. So thank you to our panelists.

11:45 a.m. - 1:30 p.m.
Independent Agencies: How Independent is Too Independent?

2018 National Lawyers Convention

Topics: Administrative Law & Regulation • Federalism
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Event Video

Description

Justice Scalia put it bluntly in Morrison v. Olson: “There are now no lines.” Morrison, 478 at 726 (Scalia, J., dissenting). This is, perhaps, an unsurprising observation, considering the majority in Humphrey's Executor v. United States recognized that, “between the decision in the Myers v. United States case, which sustains the unrestrictable power of the President to remove purely executive officers, and our present decision that such power does not extend to an office such as that here involved, there shall remain a field of doubt." Humphrey's Ex'r, 295 U.S. at 632. How do courts navigate this field?  

In Humphrey's Executor, for-cause removal was approved as applied to the five-member FTC, which exercises powers the Court described as "neither political nor executive, but predominantly quasi-judicial and quasi-legislative." Id. at 624. In Morrison, the Court approved for-cause removal—by the Attorney General—as applied to an independent counsel. In so doing, it walked back its emphasis on the character of an agency's or officer's functions and expressly noted there was "no real dispute that the functions performed by the independent counsel [were] 'executive.'" Morrison, 487 at 691. But "the real question," the Court reasoned, "is whether . . . removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty" to take care that the laws be faithfully executed. Id. Then, in Free Enterprise Fund v. PCAOB, the Court invalidated a two-layer system of for-cause removal that over-insulated PCAOB members. Free Enter. Fund, 561 U.S. at 495–508. Combining the lessons of Humphrey's Executor and Morrison, the problem was that the act in question "grant[ed] the Board executive power without the Executive's oversight, [thereby] subvert[ing] the President's ability to ensure that the laws are faithfully executed." Id. at 498.

While Myers and Free Enterprise teach that limits do exist on Congress's ability to isolate executive functions from executive oversight, a clear articulation of those limits has so far eluded the Court's jurisprudence in this area. And with an active Special Counsel and several recent lawsuits challenging the structural design of various independent agencies, the question remains: how independent is too independent? Is there any unifying principle for lower courts to apply? Does the character of an agency's/officer's functions matter? May an agency's director be removable only for cause if it is a single director? The D.C. Circuit said yes to the latter while sitting en banc in PHH Corp. v. Consumer Financial Protection Bureau, but what if there were no Financial Stability Oversight Council with veto power over the CFPB's policies? Or, what if there is such a veto-wielding council but the agency is not subject to funding via the normal budgeting process over which the President holds veto power?

Different agencies are structured differently, so certainly we are stuck with an ad hoc inquiry. But how is a judge to know when Congress has placed one straw too many on the camel's back?

  • Prof. William W. Buzbee, Professor of Law, Georgetown University Law Center
  • Prof. John Eastman, Henry Salvatori Professor of Law & Community Service and former Dean, Chapman University's Fowler School of Law; Senior Fellow, Claremont Institute
  • Hon. Henry Kerner, Special Counsel, Office of the Special Counsel
  • Prof. Jennifer Mascott, Assistant Professor, Antonin Scalia Law School, George Mason University
  • Moderator: Hon. Diane Sykes, United States Court of Appeals, Seventh Circuit

Speakers

Event Transcript

2018 National Lawyers Convention

Independent Agencies – How Independent is Too Independent

November 15, 2018 at 11:45 A.M.

 

 

Featuring

Professor William W. Buzbee - Professor of Law, Georgetown University Law Center

Professor John Eastman - Henry Salvatori Professor of Law & Community Service and Former Dean, Chapman University’s Fowler School of Law; Senior Fellow, Claremont Institute

Honorable Henry Kerner - Special Counsel, Office of the Special Counsel

Professor Jennifer Mascott - Assistant Professor, Antonin Scalia Law School, George Mason University

Moderator: Honorable Diane Sykes - United States Court of Appeals, Seventh Circuit

 

 

 

Hon. Diane Sykes:  Alright. Good afternoon, everyone. Good afternoon, everyone. If I could ask you to please quiet down. And please, if you haven’t finished eating feel free to continue to finish your lunch, but I’d like you to quiet down now, if you would, so we can get our program started.

 

      Welcome, everyone. This is the Administrative Law and Regulation Practice Group. This is our topic on administrative law today, "Independent Agencies: How Independent Is Too Independent." I’d like to welcome you all here this afternoon, and also welcome those of you who are listening in in the overflow rooms and online. Everyone is most welcome.

 

The Supreme Court has lately shown a greater interest in the constitutional limits on our independent agencies. Statutory limits on the president’s authority to remove agency officials raise questions under the Appointments Clause, the Take Care Clause, and the doctrine of separation of powers. Our panel today will take up this topic under that broad heading of the question, how independent is too independent? As always, The Federalist Society has assembled a panel of all-stars for our discussion here today. Distinguished scholars in the fields of administrative and constitutional law who will discuss and debate the law of independent agency accountability and oversight.

 

      First up this morning will be John Eastman, Professor of Law at Chapman University Law School, where he teaches constitutional law and legal history and runs the Constitutional Jurisprudence Clinic. Professor Eastman is also a Senior Fellow at The Claremont Institute and Director of its Center for Constitutional Jurisprudence. He holds a PhD from Claremont and a JD from the University of Chicago Law School. He clerked at the Fourth Circuit for Judge Michael Luttig and at the Supreme Court for Justice Thomas.

 

      Next up, this afternoon, will be Jennifer Mascott, Assistant Professor of Law at George Mason’s Antonin Scalia Law School, where she teaches administrative law. Professor Mascott graduated Summa Cum Laude from the George Washington University Law School and clerked for then-Judge Brett Kavanaugh of the D.C. Circuit, and at the Supreme Court for Justice Thomas.

 

After Professor Mascott presents her opening remarks, we’ll hear from Henry Kerner who     serves as Special Counsel in the Office of the Special Counsel.

 

[Laughter]

 

      No. It’s not what you’re thinking about. Mr. Kerner runs the United States Office of Special Counsel, an independent federal investigative agency whose basic legislative authority is found in four federal statutes: the Civil Service Reform Act, the Whistleblower Protection Act, the Hatch Act, and the Uniformed Services Employment and Reemployment Rights Act, or USERRA. The agency is charged with safeguarding the integrity of the merit system in federal employment by protecting employees and applicants from prohibitive personnel practices, including retaliation for whistleblowing. He’ll tell you more about it in his remarks here this afternoon. Mr. Kerner is a graduate of Harvard Law School and spent 18 years as a prosecutor in California before coming to Washington, D.C. to serve in a series of positions on Capitol Hill, as an investigator for the House Committee on Oversight, and for the Senate Permanent Subcommittee on Investigations.

 

      Rounding out our discussion this afternoon, we’ll hear from William Buzbee who is Professor of Law at Georgetown University Law Center, where he teaches administrative law, legislation and regulation, and environmental law. Professor Buzbee came to Georgetown from Emory Law School, where he had similar academic interests and teaching loads. He earned his law degree at Colombia and clerked on the Second Circuit for Judge Jose Cabranes.

 

      With that I’ll turn the podium over to Professor Eastman who will get us started today.

 

Prof. John Eastman:  Thank you, Judge Sykes, and before I give my comments about this panel, I’m also the chairman of the Federalism & Separation of Powers Practice Group, so I have duties with that. For anybody interested in being considered for joining the executive committee of that practice group, please let me know, or Juli Nix, or Dean Reuter know. We’re always looking for new blood and people to help share the work of that important practice group.

 

      So for many years, I’ve thought about getting one of those Powerball glass bowls, and putting letters into it, and reaching in and grabbing any five out, and seeing who could make the most number of federal agencies out of the random number we have. You’d have to have a C in there for commission, and a B in there for Board. They all seem to have those. FEC, or SEC, or FTC, or NLRB, or FERC, or CFPB. We’re very keen on acronyms in this town. But it, I think, indicates a deeper constitutional structure problem that we have.

 

"How Independent Is Too Independent?" is the topic of the panel. My short answer is any independence is too independent—any from constitutional officers. But I think Dean and Leonard would not be happy if I left it there, so let me elaborate a little bit. We’re trying to look at these things after 200 years. Sometimes our ship of state has grown layers, and layers, and layers of barnacles, and until you start carving those away, it’s a little hard to see what the real question, the underlying, fundamental questions are. So I always like to return to first principles on these things. Right there, it’s buried deep in the Constitution, Article I, Section 1, Clause 1: “All legislative powers herein granted shall be vested in a Congress of the United States.”

 

From that we get the non-delegation doctrine. It’s largely been dead since 1935, but 15, 18 years ago, Justice Thomas in the Whitman v. American Trucking case, invited us to reconsider the intelligibility principle doctrine. He says even when it’s met, it allows delegation of lawmaking power. So, “I would be willing to address the question whether our delegation jurisprudence has strayed too far from our Founders’ understanding of separation of powers.” And then, of course, a few years ago, in a series of cases, he really made good on that promise to reconsider these things – Department of Transportation v. Association of American Railroads, “We never even glance at the Constitution to see what it says about how this authority must be exercised and by whom.” And he offered a blunt assessment of the competing visions at stake.

 

He said, “We should return to the original meaning of the Constitution. The government [must] create generally applicable rules of private conduct," through the Legislative Branch, not through the Executive Branch. "We have too long abrogated our duty to enforce the separation of powers required by our Constitution,” he said. “We’ve overseen and sanctioned the growth of an administrative [state] system that concentrates…power to make laws and the power to enforce them in the hands of a vast and unaccountable administrative apparatus that finds no comfortable home”—I would say, not even an uncomfortable home—“in our constitutional structure. The end result in that case may be trains that run on time, although,”—this wonderful little paraphrase—“although I doubt it, but the cost is to our Constitution and the individual liberty [that] it protects."

 

      He’s done this a number of times, and he ties this, in another case, Perez v. Mortgage Bankers, that same year, to kind of an outgrowth of the Woodrow Wilsonian Progressive Movement, that we’re going to staff-up these agencies with experts. We’re going to get beyond any political accountability because they’re more than just standing in the way; they create a clumsy nuisance. He quotes Woodrow Wilson, “a rusted handling of delicate machinery.” We need these experts to figure this stuff out better for us. It really is a dramatically different understanding of government and the role of the people and the ultimate authority of the people in deciding the course of our government. So the notion of independent agencies -- this is true even when an executive agency, pure and simple, is getting delegations of lawmaking power. It's even more true with even less accountability when it’s a so-called administrative agency.

 

So piece one of this is the fundamental violation of the Article I command that the lawmaking power be exercised by Congress. Not to be left out, we have that first clause of Article II. The executive power shall be vested in a president of the United States. Full stop. The entire executive power. Now, the Constitution mentions other executive officers. It mentions heads of departments. It mentions the vice-president. It mentions ambassadors, and councils, and military officers, but all of them exercise their executive power derivative of the president. Jennifer Mascott’s wonderful piece, and I commend it to your attention. I’ll do this so she doesn’t have to. Her piece on the definition of officer recently published in the Stanford Law Review, I think, conclusively demonstrates that we’ve been much too stingy with that understanding. And why is that important? Well, the broader the understanding of officer, the more accountability there is to the president for the basic, ongoing functions of the Executive Branch.

 

Principle officers and inferior officers cover a lot more ground than we’ve come to realize. And because we’ve too stingily interpreted those requirements, we’ve left whole aspects of executive authority immune from, or largely immune from, presidential control. We get these cases coming up in, who do you get to fire, and how many layers of for-cause removal must be there for it to be constitutionally valid? But the fact of the matter is, we give much more protection to independent agencies and officers than the Constitution allows. And we ought to revisit that fairly quickly.

 

So the short answer is Myers was right, Humphry’s Executor was wrong, and Justice Scalia got it right in his descending opinion in Morrison v. Olson. And it's time for us, I think, to revisit those. What would be left in such a world? Well, you could have commissions that make legislative recommendations without binding force. You might have commissions that could offer recommendations on the exercise of executive powers, such as when to use the pardon power and when not, or the use of prosecutorial discretion, as long as those also don’t have binding force. But if these unelected and unaccountable officers, unappointed by the constitutional process, are making judgements with binding force without the oversight of the president, you’ve got a real problem under Article II, it seems to me. I won’t get into the details on the cases. The other panelists will go into more detail about the current state of affairs, but things like the CFPB, and what have you. These are front and center on those cases right now.

 

      Now, I don’t want to leave the judiciary out of that because we also have a problem there. Article III, Section 1, Clause 1. I know they buried them all right at the beginning of each section. “The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.” That’s a full stop as well. All of the judicial power is specified, that is then enumerated, is vested in the courts. So we now have agencies, though, that write their own rules from a delegate of lawmaking power. They enforce their own rules without oversight from the duly elected executive. And then they adjudicate the enforcement of their own rules. I’d say that fits a little less comfortably within our constitutional design than the Founders had in mind, like not at all.

 

So for example, the case last term of Lucia—I’ve never gotten the pronunciation properly conveyed to me. I don’t know which it is. The phase two litigation of that idea ought not to be whether the officers were properly appointed—that’s our Article II issue—but can we be adjudicating private rights from within an executive, or worse, an independent agency completely removed from the judicial power of the United States? I think under our constitution the answer to that is easy as well. No. We cannot. After all, it was Madison in Federalist 47 that reminded us that, “The cumulation of all powers legislative, executive, and judiciary in the same hands whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.”

 

Of course, he gets that from Montesquieu. And let me just close with this wonderful passage from Montesquieu that should be familiar to many.

“When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty…Again, there is no liberty if the judiciary power [be] not separated from the 0 and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control; for the judge would then be the legislator. Were it joined to the executive power, the judge might behave with violence and oppression. There would be an end to everything, were the same man, or the same body, whether of the nobles or of the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the [causes] of individuals.”

Our administrative state has violated this principle routinely over the last half century. I’m so excited to see the large number of Justices on the Supreme Court now engaging and revisiting some of those questions and starting to strip away some of the barnacles that have grown up on our ship of state. Thanks so much.

 

Prof. Jennifer Mascott:  I’m Jen Mascott. Thanks, John, for those nice words. Thanks Judge Sykes for moderating the panel, and The Federalist Society for all the time that it takes to put this convention together every year. I’m really thankful to be here. And I’m going to start similar to how John started with, how independent is too independent for agencies? And as John said, I think really in a certain sense, the bottom line answer is that any independence is too much. That doesn’t mean that government should neglect impartiality. Our elected leaders and all governmental actors need to serve everyone fairly, fulfill their oaths to the Constitution, and everybody in the Executive Branch and administrative agencies needs to seek to faithfully execute the law. But independence within our current governmental structure has come to mean independent from the control of the Executive and thus from electoral accountability. Independent agencies today are wielding significant power, and we’ve somehow gotten this idea in our modern system that we want a government staffed by scientific experts who are going to somehow independently do the right thing irrespective of direction from the politically elected Executive. And this is just flat wrong within our constitutional structure.

 

      It’s clear from the text of the Constitution itself, its structure, founding-era documents, like the ratification debates, that the federal government derives its power from the consent of the governed. The federal government’s supposed to have three branches, just three, no more. The Executive and Legislative Branch in particular, are to gain authority to exercise power by being elected. One reason I belabor this point a little bit is that some contemporary scholars say that maybe now we need a new, kind of an updated separation of powers framework, maybe within administrative agencies themselves. And so these scholars acknowledge perhaps administrative agencies might be able to do things more efficiently, and so maybe if we if give agencies their own internal, soft, separation of powers-like constraints, that will be adequate to mimic the constitutional structure.

 

So perhaps notice-and-comment rulemaking can be like the public input required from elections, these scholars say. Maybe the tenured, protected civil service can act like a non-partisan, mini Article III judiciary. Well, this misunderstands the key point, I think, that James Madison makes about separation of powers in Federalist 51. And that is that the branches get their ability to be able to check each other by being accountable back to the people through elections. Madison wrote, “A dependence on the people is, no doubt, the primary control on the government.” And so there cannot be a floating set of key administrative entities that lack accountability back to their elected head.

 

If some of our modern agencies fit anywhere within our constitutional structure, it would naturally be within the Executive Branch, as they are in theory executing or carrying out the law. And if that’s the case, that means every action that they take needs to be subject to the authority of the Executive. Somehow down to every level of power exercised within the Executive Branch, there needs to be a line of accountability back up to the president. And so as John mentioned a bit, the accountability of appointments and the ability to be able to remove and supervise officials and personnel within the Executive Branch are all key for accountability. This is important to preserve the role of self-governance within our system and to preserve individual rights, quite frankly. If our governmental system intrudes on the president’s ability to exercise proper authority over the Executive Branch, then ultimately the people are going to lose some of the say in their governance.

 

      So I think there are at least two areas of law that have recently been before the courts that relate to this issue of independence in administrative agencies, and I think provide a real opportunity for us to reinvigorate discussion about the proper size and scope of agencies overall, reevaluate really whether there’s any proper role for modern independent agencies within our constitutional structure as they’re now designed, and reexamine whether agencies right now are properly being limited to the exercise of executive functions for which they’re accountable, at least indirectly, back to the people through the chief executive.

 

      So I think most obviously one line of cases that jump to mind are the cases dealing with the constitutionality of the structure of the Consumer Financial Protection Bureau. These cases have been in the news a lot because of the D.C. Circuit reviewing the constitutionality of the CFPB now on two occasions – [the] opinion finding it unconstitutional first at the panel level by then-Judge Kavanaugh. And so this issue of the CFPB and its structure came up a little bit even during the confirmation hearings recently. And the idea, basically, of the case—and of then-Judge Kavanaugh’s opinion—is that, as John mentioned, in 1935 the Supreme Court in Humphrey’s Executor, gave what, in theory, is the constitutional justification for, in general, independent  agencies. It's very inconsistent with the decision nine years earlier in Myers that gave executive accountability in large measure to the president.

 

But in Humphrey’s Executor, the Court went a different way. It said, we’ve got these commissions. They’re headed by multiple people at the top representing both political parties. And so we want these scientific experts at the top over their large substantive policy areas to be governing in a way that’s not beholden to the politics of the president. And what Judge Kavanaugh said in his opinion, basically, is that even if you agree with the Humphrey’s Executor decision and give stare decisis affect to it, that now Congress is structuring agencies in ways that go many steps even beyond the independence and the lack of executive control over commissions in Humphrey’s Executor. And so he pointed out that with the Consumer Financial Protection Bureau, it’s headed by one director, who's subject to removal only for cause. And so instead of even having the accountability of having to work together as a team with folks at the top to govern this entity, this director’s able to go on his or her own, not really subject to presidential control, and run this big agency.

 

Because the director has a five year term, in theory, a president may not even ever have a chance to pick the head of the CFPB on the appointment side in the president’s term. The CFPB has a lot more power even than some other agencies because it’s in charge of helping implement 18 consumer financial protection statutes that previously had been administered by multiple agencies. Then one of the other key things that Judge Kavanaugh pointed out is that the CFPB does not have to report to Congress and get annual appropriations through the congressional process. It can sort of on its own, up to a point, decide how many funds it needs from funding within the Federal Reserve. And so Judge Kavanaugh said even if you buy into the Humphrey’s Executor line, this goes quite a bit beyond that, and this is unconstitutional.

 

As you all probably know, the D.C. Circuit, sitting en banc, disagreed squarely with Judge Kavanaugh. But the PHH regulated entity in the case did not challenge this case and bring it up to the level of the Supreme Court and give them a chance to review it because the D.C. Circuit, at the same time that it found the CFPB’s structure to be fine, it found the penalty that the CFPB imposed to be problematic. And so PHH never had any incentive to go up to the Supreme Court.

 

      But over the summer in a case involving State National Bank of Big Spring, which is being litigated by former Ambassador Gray’s, also White House Counsel’s firm, the D.C. Circuit summarily affirmed its reasoning. And the PHH case, again, found the CFPB’s structure to be constitutional. And so now the Big Spring Bank has filed a petition before the Court. The government’s response is not due until December 10th, but perhaps if the Court decides to take that case, the constitutionality of the CFPB will be squarely before it.

 

      Also this summer, showing how pressing of an issue these new agencies are, in the Fifth Circuit there’s arguably been a circuit split created in the case Collins v. Mnuchin, dealing with the constitutionality of the Federal Housing Finance Agency, which was created in 2008 to oversee Fanny Mae and Freddie Mac in light of some of the problems with mortgages. And so similarly to the CFPB, here’s another agency that’s headed by one person who’s subject to for-cause removal protections. It’s not easy for the Executive to supervise what’s happening within the agency – another agency that does not have to report to Congress for annual appropriations.

 

      And so the Fifth Circuit in a per curiam opinion found that this structure was unconstitutional. The opinion is written in a way to try to suggest maybe that there’s not a circuit split with the PHH decision because the court pretty clearly says in the Collins case that they’re not holding that just the removal protections alone are unconstitutional; it’s the combination of all these factors that makes it very hard for the Executive to supervise the agency at stake.

 

      But I think if the Court were to look at this, it’s likely that they would find the two decisions to be in conflict. That decision’s not being petitioned right now to the Supreme Court because there are pending petitions for en banc rehearing within the Fifth Circuit. But there’s just case after case because obviously regulated entities are facing lots of consequences, penalties, fines from these agencies and are trying to figure out where in the Constitution there’s supervision of what’s happening. So I think before long these issues will come before the Court.

 

      Also, to tie in to what John said about Lucia v. SEC, I actually think the Lucia decision is another key way in which the Court will have to look at removal protections. As John mentioned, that case found that administrative law judges, who preside over formal agency hearings, are officers of the United States, so they’ve got to be appointed by the president with Senate consent, the president alone, a department head or a court of law. And so I think in reaching that decision, the Court very clearly put the ALJ’s under-executive accountability in the front end. And the question will be, now that the Court has caused us all to look again at these agency adjudicators who are exercising significant authority -- that case came up because Mr. Lucia received a $300,000 penalty and was told that he has a lifetime bar from practicing in the securities industry. This is by an administrative official who had not been appointed really by any other officer.

 

These are becoming big issues, and I think the Court’s going to start maybe seeing litigation over the years on the back end. Are ALJ’s removal protections too tough under Free Enterprise Fund, which suggests that perhaps at some point there are too many layers of removal protections, where the president’s authority to take care that the law be faithfully executed is restrained too sizably. ALJ’s are subject by statute to removal for cause as determined by the Merit Systems Protection Board. So these officials who are presiding over arguable big issues—touching possibly on private rights—to remove them if there was misconduct, you’d have to get with an independent agency, the commissioners, to find good cause. And then that finding would have to be approved by layers of people protected by for-cause removal within the Merit System’s Protection Board.

 

      So I think litigants probably will, and hopefully will, start to challenge on the back end as the Solicitor General tried to get the Court to take a look at in Lucia whether there’s some trouble with supervision over agency adjudication as well, which might cause us in general, as John said, to question, are adjudicators within agencies just perhaps hearing too many issues and cases to begin with? So thanks a lot. I’ll look forward to the Q & A discussion.

 

Hon. Henry Kerner:  Good afternoon. As I was listening to these two excellent presentations I was wondering whether they’re talking about me. I was thinking, “Am I just Exhibit A of this unaccountable bureaucrat who has way too much power and is accountable to no one?” And I’m feeling very constitutionally infirm at the moment.

 

[Laughter]

 

However, as my prepared remarks will hopefully illustrate, I think there’s a very good reason why we have independent agencies. So I’m here to advocate on behalf of some independent agencies. One hint: CFPB – they’re over there; we are over here.

 

[Laughter]

 

      So, first of all, it’s really a great honor to be here. I appreciate being here. I’ve been coming to these The Federalist Society Lawyer’s Conventions for many, many years. I was the vice president in law school of The Federalist Society, and I’ve always been a very proud member. It’s also a real honor to be among such distinguished panelists, so thank you for inviting me.

 

      Some time ago I completed a quiz asking me which Supreme Court justice’s philosophy was most similar to mine. And I was really pleased when Antonin Scalia’s picture popped up on my Facebook page. I didn’t know about all those privacy things then, but…

 

[Laughter]

 

      Today, however, I’ll be advocating a position that the late, great Justice would likely disagree with, and supporting the constitutionality, and the importance of for-cause removal protections for some single independent agency heads.

 

      Most of us are familiar with the expression "where you stand depends on where you sit," which I recently learned is apparently called Miles’s Law, after some bureaucrat in the Truman administration. So it’s obviously in my own self-interest, as a single head of an independent agency, to favor for-cause-only removal. But I would support this position, at least in our case, even if I wasn’t the head of the agency. For OSC see to do its job credibly, it needs to truly be independent.

 

      So let me begin a little bit just to give you some background about the OSC. I appreciated the Judge laying out some of what we do. My job is enshrined in statute, it’s at 5 USC § 1211, which establishes the Office of Special Counsel, which shall be headed by the Special Counsel. You will note the definite article before the words "Special Counsel" which are distinguished from that of the other Special Counsel we hear so much about in the news, and with whose investigation I have nothing to do with.

 

[Laughter]

 

      That’s very important for people who call our office—we don’t do anything with that—which happens a lot.

 

      Instead, the Special Counsel is appointed by the president with the advice and consent of the Senate for a fixed term of five years and heads up the United States Office of Special Counsel – a permanent, independent, federal investigative and prosecutorial agency whose primary mission is the safeguarding of the merit system in federal employment. It does so by protecting employees and applicants from prohibitive personnel practices, also known as PPP’s – special reprisals for whistleblowing. The agency also operates as a secure channel for federal whistleblower disclosures of violations of law, rule, or regulation, gross mismanagement, gross waste of funds, abuse of authority, and substantial and specific danger to public health and safety. In addition, OSC issues advice on the Hatch Act and enforces its restrictions of partisan political activity by government employees. Finally, OSC protects the civilian unemployment and reemployment rights of military service members under USERRA, but once again, only against federal agencies.

 

So in fulfilling its oversight and prosecutorial responsibilities, Congress intended OSC to be independent of any direction or control of the president. Because OSC is charged with oversight of the Executive Branch and prosecuting wrongdoing, such independence is crucial to fulfilling our mission. The principle mechanisms that Congress’s utilized to ensure that OSC’s decisions were unbiased and free of undue influence were to impose a five year fixed term of office, and to restrict a president’s power to remove the Special Counsel to instances of inefficiently, neglect of duty, or malfeasance in office. The Supreme Court has recognized Congress’s power to enact statutes that restrict the president’s removal of power in ways that are compatible with the president’s constitutional duty to faithfully execute the laws.

 

In Morrison v. Olson, the Court ruled that Congress may impose for-cause removal restrictions up until they are of such nature that they impede the president’s ability to perform his constitutional duty. As we have learned from the presentations prior to this, however, some jurists and academics have criticized the independent, single head agency structure as unconstitutional. In his dissent to the D.C. Circuit’s en banc decision in PHH Corp. v. CFPB, now-Justice Kavanaugh argued that consecrating power in a single director as the structure of the CFPB—and also ours—creates a greater "risk of arbitrary decision making, abuses of power, and threats to liberty." To Kavanaugh, the overarching constitutional concern with independent agencies, like the CFPB, is that they exercise executive power but are unchecked by the President, who is the only official imbued with the executive power by Article II and directly accountable to the people.

 

Some commentators argue that the CFPB’s constitutional woes could be cured by transforming the agency into a bipartisan, multi-member body like the Federal Trade Commission, but because the president alone has the power to choose whom to appoint, bipartisan requirements are arguably on even shakier constitutional grounds than for-cause removal. A bipartisanship requirement forces the president to appoint agency leaders from the opposing political party who may not be his preferred candidates and may not be in line with his policy directives. By contrast, allowing the president to remove an independent agency head for inefficiency, neglect of duty, or malfeasance at least preserves the president’s ability to ensure that the laws are faithfully executed.

 

Of these three grounds, inefficiency may be the broadest, as Judge Griffith in his concurrence in PHH articulated. He went further to say that it wouldn’t take much for a president to dismiss a recalcitrant agency head as being ineffectual so long as the president didn’t specify that it was because of a policy disagreement, like in a careless tweet, for example, or something. Of course, there could be some costs associated with that removal, such as Congressional hearings or a negative headline in the press. “President Fires Special Counsel”.

 

[Laughter]

 

At least I hope that would be a disincentive. Of course, if he so chooses, the president can always fire the agency head anyway and remove him from office. A likely lawsuit, even if it were to get past Justice Kavanaugh, would many years later at most result in backpay, as the remedy for the wrongly fired head. So in any event, the president can shed himself of an independent head.

 

As I said from the outset, I support the structure of a single agency head with for-cause removal protections for independent agencies that have oversight responsibilities with limited power over private citizens. The calculus is quite different when it comes to more intrusive and powerful agencies like a CFPB. It might, therefore, be instructive to illustrate the critical differences between OSC and the CFPB.

 

First, OSC’s different from CFBP in that OSC cannot act alone to enforce any of our statutes. At OSC we’re wholly dependent on the Merit Systems Protection Board, MSPB, to adjudicate our complaints and to issue orders. If we seek any corrective or disciplinary actions, we must either try to settle the case or file a complaint with the MSPB. And the MSPB is always free to reject our reasoning and rule against us. Unlike CFPB, OSC is by no means judge, jury, and executioner. We do not have quasi-legislative or judicial powers.

 

Second, OSC’s independence is at the heart of OSC’s mission. OSC’s charged [with] policing Executive Branch employees. For example, OSC has exclusive jurisdiction to enforce the Hatch Act, a law that prohibits all federal employees, with the exception of the president and vice-president, from using their job or tax payer dollars for partisan political purposes. If an administration could fire the Special Counsel at will for investigating these lawful activities, then the Hatch Act is rendered toothless.

 

A third important distinction between CFPB and OSC is that OSC’s sole focus is on wrongdoing within the federal government. We have no authority over private citizens or corporations, we cannot bring enforcement actions against the public, and we cannot issue law-like regulations. Even our Hatch Act regulations reside within the Office of Personnel Management. This narrow focus on government misconduct underscores the need for OSC’s independence. OSC’s mission would be compromised if the Special Counsel were subject to at-will removal. And unlike CFPB, the statutes we enforce have very limited impact on the U. S. economy.

 

Fourth, unlike CFPB or the Fair Housing Finance Agency, a single-director-lead agency, whose structure was recently found unconstitutional by the Fifth Circuit, OSC’s not completely unmoored from the Executive and Legislative Branches. The MSPB is made up of presidentially appointed members with staggered term limits. We, at OSC, also rely on budgetary appropriations from Congress, and even submit our annual budget justification to OMB for review. With our purse strings held by Congress, and the commissioners of our adjudicatory board appointed by the Executive, OSC’s only independent in that the Special Counsel enjoys some protection from at-will termination by the president – a small but necessary protection that allows OSC to fulfill its mission. Independence allows me to stand firm when making what could be politically unpopular decisions.

 

Finally, restructuring always seems to be run by a bipartisan, multi-member board, as has been suggested for CFPB, is incompatible with OSC’s mission and function as a prosecutor. As I’ve said a few times by now, OSC’s main authority to investigate cases of prohibitive personnel practices and Hatch Act violations and try those cases before the MSPB. In my first year as Special Counsel, I’ve seen how decisions need to be made quickly and efficiently. In the past our process has been rightly criticized as at times being too slow. Once a case is finally ready to be closed or a complaint for corrective action filed, having multiple principals at OSC would be inefficient and burdensome.

 

Just like the structure of the Executive Branch, having a single, independent principal at OSC facilitates faster decision making while also maintaining built-in checks and balances. The bottom line is that not all independent agencies are alike. OSC’s mission is uniquely nonpartisan and the Special Counsel needs to be free from political pressure exerted by the Executive Branch. Having a single agency head who can only be removed for cause is a protection vital to OSC’s ability to uphold the law and fulfill its mission. Thank you very much.

 

Professor William W. Buzbee:  Greetings, everyone. Nothing like being the last speaker after everyone’s eaten lunch, so I hope everyone’s having a good nap now.

 

[Laughter].

 

      Well, first, I guess I look at my name and it says William Buzbee, Federalist Society, and I suddenly wonder what’s happened. Just to be clear, I think I was asked to be here as a sort of counterpoint. And I don’t agree with much of what I’ve heard, but let me reason my way to my conclusions, suggest that there’s some important parts of the Constitution and our laws development that are being neglected in some of these discussions, and suggest why the view that almost any agency is constitutionally problematic is itself constitutionally problematic and unfaithful to the bargain we see in the Constitution.

 

      And I guess I’d start off by saying I think Special Counsel Kerner’s points here are really a perfect example. At one point I think everyone has concerns with lack of accountability, but then when you start looking at each agency and try to understand what they do, you can see why radical Justices, like Justice Scalia, were very concerned with making sure agencies abide by their statutory substantive criteria and procedural criteria, which is about much more than just a president’s power to appoint or remove. And I would say that the discussion of CFPB, and the Free Enterprise case, and Lucia are really important here today, not so much just for those cases, which mostly can be formally worked around without radical disruption of the federal government, but the next steps – the way in which they are a sort of toehold for reversals of long-standing administrative law and constitutional law.

 

      I think, starting right off, just as far as historical understandings, which are an underpinning of the first two speakers, I just commend to you two really great pieces of work. Jerry L. Mashaw’s book, Creating the Administrative Constitution: the Lost One Hundred Years of American Administrative Law, is a really important counterpoint to this idea that the world of our country is just courts, legislatures, and presidents, in fact pointing out that variance of the administrative state emerged immediately in the post-founding era. And he has a wonderful chapter, if you’ve never read it, on steamboat regulation, a very early form of health and safety regulation that was enacted when some of the Founders were probably getting quite long in the tooth, but some of them would have still been around at that point.

 

      The other is, I know some of you -- I know Professor Mascott’s familiar with the work of John Mikhail, a colleague of mine at Georgetown, and I know that there’s a lot of reliance on The Federalist Papers as people talk through these issues. And he’s done some really fascinating work on The Federalist Papers themselves and their reliability, and it’s in several of his pieces, including a very good article on the Necessary and Proper Clause. But what’s interesting is he’s pointed out when you start looking at The Federalist Papers, they were, as we all know, they were advocacy pieces written for different states’ debates over the Constitution at different points in time. And what he found is that they are often, actually, inaccurate in describing the Constitution as it stood at that point. That is, they were themselves strategic statements and documents. So themselves, when we look at The Federalist Papers, or return to Montesquieu, we have to be wary of that problem Justice Scalia liked to quote, “We should always be wary of any approaches to law where we're just looking over the crowd and picking out our friends.” Okay?

 

So let’s look at the Constitution here. First, we have to be careful about adding in the word "only" in connection with key clauses. But more importantly, people quickly move to say the president is critical to accountability. And the president is critical to accountability, but there’s no way in which you can look at the Constitution as saying it is the exclusive source of accountability. Most important, of course, is the legislative power, which people did mention. That was good. I was glad. But legislative supremacy has, going back to the earliest Supreme Court decisions, been viewed as the core principle under our Constitution. That is, when it comes to making policies, and handing authority out, and requiring action, legislative supremacy is really the critical source of legitimacy and accountability in our government. And for reasons I’ll talk about, that ties in with long-standing views about the administrative state and reasons it should be subject to law and constraint in addition to oversight by the president.

 

So moving on, of course, there is this provision which is also talked past, the Necessary and Proper Clause. You have to think about the fact that the Constitution conferred Congress with broad power in making laws to structure the government that resulted. And if you look at the earliest cases that have sort of worked through the development of the administrative state and the permissible bounds of the administrative state, some of the earliest decisions point that out. Congress chooses to make policy and how to structure how the government works. That is the fundamentals of the Necessary and Proper Clause.

 

And along those lines, for those of you who are eager to go back and read these key Supreme Court decisions, in the Free Enterprise Case, Justice Breyer’s dissent, he has a whole first section where he’s not taking on the decision, but where he reviews the law as it stands and as it still stands, since no cases were overruled in Free Enterprise. And he goes through really the many forms of agencies over time, their structures, the forms of check that are on the agencies, the ways they’re appointed, the functions they fulfill. And it’s an important -- and he cites the cases by the Supreme Court that still stand that have upheld these many different forms of agencies. And that ties in, again, with legislative supremacy, and the Necessary and Proper Clause.

 

Then, very importantly, the president has an obligation to take care that the laws be faithfully executed. Okay? Now, one approach to that is that the president, and the president alone, decides what that means. That’s pretty antithetical to the development of administrative law going back to Marbury v. Madison. There is a role of the courts in overseeing the functions of the government, the work of the government, the appointments, and the faithful carrying out of the functions handed out by the legislature. And that is very critical to the president’s obligation that the laws be faithfully executed. When you look at the dozens, probably actually hundreds of cases that have upheld the very basics of the modern administrative state, that is also a critical element here; that our system under the Constitution and under still standing law, we do not have a president who is a free-standing, I guess, uncheckable king or queen, but instead, is an actor subject to law and who must act in conformity with the law.

 

This is, in fact, the fundamental virtue of modern administrative law. And I think, actually, that if—I won’t spend a long time quoting the many cases—but probably the strongest voice in favor of this idea that the administrative state needs to be judicially checked and needs to be subject to law, both in its substantive criteria and its procedures, were dozens of cases by Justice Scalia where he emphasized this. The problem, of course is, if you start saying that every member of every agency is subject to unfettered, uncheckable removal, then you weaken all of those systems – every substantive criteria and every procedural choice becomes subject to intimidation or concerns. I think Special Counsel Kerner’s mentions here of his role if his role were subject to unfettered removal by the president at any point, it would be a completely different agency, and it would really be unable to fulfill its functions.

 

Moving on, I guess another really important point here is, I think there is a practical point which is if agencies are viewed as fundamentally antithetical to the administrative state and we go, as Professor Mascott suggested, to something where there could be commissions that could make recommendations, then you start having just huge amounts of power being wielded, I suppose by—I wasn’t clear who the commission would be making recommendations to—whether it be --

 

Prof. Jennifer L. Mascott:  It was John Eastman.

 

Professor William W. Buzbee:  Okay, sorry, John. Sorry, Professor Eastman -- whether it be to Congress or to the president. But then the question is -- so then you have essentially fleshing out of instructions by either Congress or perhaps the White House. But then judges, who are generalists—and talented generalists, of course—but judges tend not to know the particulars of the fields in which regulation works. And so it would require a very heroic conception of judicial knowledge and especially expertise in often very technical areas if you started just having commissions making recommendations, and then the details being worked out in front of Article III judges.

 

So my sense here—and I gave some comments at the recent law professors' convention here a few weeks ago—I think it’s really helpful to look at these questions of administrative law structure through a "bad-man" perspective. You’re probably familiar, or remember Justice Holmes and his view that you need to look at the law from the perspective of the "bad man." That is someone who would be inclined not to abide by it and then the question is, is it structured well when a person or people you don’t think highly of wield that power?

 

I think when you look at administrative law and it’s many, many choices and Congress’s many choices about regulation of the administrative state, what we have is, fundamentally, an extensive web of constraints to constrain – the bad regulator, the bad president, the bad or ignorant judge. And so what do we have? The Administrative Procedure Act, one of the most enduring bodies of law going back to the mid-1940’s, which was a compromise really intended to protect business from unfettered and unchecked arbitrary power of agencies. The APA itself is the underpinning of many of the sources of concern we’re talking about today. Similarly, concerns about partisanship and concerns about political favoritism, and corruption, especially in regulated industries, led to the creation of the independent agencies. Again, a desire to remove decisions from partisanship, corruption, and perhaps other venal motive.

 

Procedural rigor, statutes—dozens of them—they’re wonderful to teach to students because the procedural intricacies of the modern administrative state before different agencies show really quite nuanced and different understandings of the best way to attack challenging social ills. But all of those procedural mandates, again, are very specific to different agencies and tasks. If they all become, essentially, secondary to presidential whim, everyone should be concerned.

 

      The partial for protection from politics is one of the points I was going to make. Special Counsel Kerner, I think, made the point well. For-cause protection is not complete protection from removal. That is, if it were the case, no one would ever be fired in much of the world where for-cause protection is the norm in private employment. What it is, it is partial protection. It is, essentially, protection if you are doing your job. It is protection from dismissal for wrongful reasons. And so that is an important part of protection from politics and raw use of power. In addition, independent agencies, especially those agencies that are structured to have bipartisan members, they also are an effort to create some insulation from partisan politics and rancor.     

 

      I won’t go into depth here, you’re all lawyers, or I guess. Is everyone lawyers? Almost everyone here’s a lawyer. It doesn’t get better.

 

[Laughter]

 

So the abundant law about reasoned decision making is really something that everyone should celebrate. This whole body of law going back to State Farm, including also cases that have allowed shifts, to say market-based permits, and the like, the whole idea that agencies are held to an obligation to engage in reasoned decision-making where they engage with facts, they engage with criticism, they engage with the statutes, they use the procedures required by law. This whole body of law really hinges on courts and forcing structures set up by Congress, which again, involve presidential oversight of certain forms, but not unfettered power of the president to remove based on whatever factors the president chooses.

 

Consistency doctrine, I’ll also point out, again, the key precedents here were both the State Farm case, and FCC v. Fox with the main opinion, although it’s partially a splintered court, by Justice Scalia and then the 2016 opinion by Anthony Kennedy in Encino Motorcars. Those cases collectively say agencies can change policy, but they have to engage with facts. They have to engage with science. They have to offer good reasons for change, and they cannot leave unexplained inconsistency. Again, a fundamental rule of law, virtue, which requires respect for the rule of law. The basic idea that regulations are standing and binding until validly changed is a very important tenet, which also disappears if removal is, again, at the whim of a president.

 

I should stop there. I guess my sense here is, whenever I think through administrative law -- I worked in a public institution environmental group and I represented industry for years in New York City. And I always think back to what most of my business clients wanted. And they were some of the most sophisticated businesses in the country. [What] they always wanted was, they wanted stability. They wanted known law. They didn’t want to have a law where they could not find out what it was. So things like agencies, they always wanted to know what the guidance document said. They wanted to narrow the range of uncertainty. They wanted some stability. They were always concerned with regulators that had unfettered power and could act in unpredictable sorts of ways.

 

So my sense here is that before moving too fast, we have to remember there is a really vast body of law that is about the regulatory rule of law, and it’s worth celebrating. And that body of law itself has a virtue I just want to close with which is administrative law is a body of constitutional common law. It is a body of law that has built up for several centuries now, and it is pragmatic, sequentially developed, fact-bound, looking at particular statutes, thinking about how they work. And it is in that sense a bipartisan, sequentially developed, and handed off body of law. It has a lot of wisdom in it, and it’s filled with compromises. And I think we should all be wary of theories or approaches that allow sort of leap-frogging backwards in time past these compromises and pragmatic solutions that have been worked out. So thank you.

 

Hon. Diane Sykes:  Alright. If you would all start thinking about what questions you’d like to ask the panel, I’d like to -- just by way of summarizing the positions that you’ve just heard, we have one group of panelists that have argued that independent agencies are essentially unconstitutional all the way down under the Constitution’s explication of the executive power, legislative power, and the judicial power. And on the other end, we have the position that independent agencies are meaningfully constrained and that the congressional choice to insulate them from direct accountability is justified by the need to keep them free to bring their expertise to bear on difficult and complex social and economic problems free from partisan influence. Then we have sort of a middle ground being occupied by Henry Kerner, who has taken the position that regardless of the relative merits of both of those more polar opposite positions, that his agency, the Office of Special Counsel, has only limited independence protections and is, therefore, sort of the Goldilocks of independent agencies --

 

[Laughter]

 

      -- with just the right amount of independence protections, in kind and degree, if I could, by way of summary.

 

All right. Now, while you’re thinking about your questions, I don’t think we have a standing mic. I think we’re going to have a handheld mic for questions. But before we get to that let me pose a question to the panel, which is particularly from my perspective as a judge watching what the Supreme Court has recently done and may be about to do. As I look over the Supreme Court’s recent reentry into this field in the Free Enterprise Fund case and the Lucia case, or Lucia case, I am struck by a distinct impulse of minimalism perhaps, probably springing from the concern about consequences of a shakeup of our modern administrative state that would involve anything more than incremental approaches to these problems as they arise and find their way to the Supreme Court. That’s especially evident, I think, in Justice Kagan’s decision in the Lucia case which was very narrow, and to a lesser degree in the Chief’s decision in the Free Enterprise Fund case. And with that in mind, I’d like you to address -- both sides to address that reality and whether it’s likely to continue or whether we’ll see some more rapid acceleration in the Court’s willingness to address these issues at a deeply theoretical space.

 

Prof. John Eastman:  I'll start. I think you saw this in the PCAOB case, initially. We’re going to set down a constitutional marker here, but we’re going to cure the problem to stop the hemorrhaging on the consequences while we work through this revisiting, as some of the core doctrines. So I think you’re right. And I think this is particularly true of Chief Justice Roberts, to a lesser degree of Justice Alito. This kind of incrementalism to revisit some of these questions, not quite so bold and all at once as Justice Thomas has become famous for. But remember he’s laying down markers to force people to reconsider things. So I’m not sure he would disagree with that more incremental approach as well.

 

      But I do think there’s some problem. And I share Professor Buzbee’s notion that there are other mechanisms of accountability as well. Statutes can do that. But the problem is the statutes aren’t being complied with. And part of that is some of the deference doctrines that arose to defer some of the fundamental questions that those statutes are supposed to have settled to the very agency that they’re supposed to be making accountable. And Justice Scalia points this out in the Perez case. You know, we’ve got the APA, and it says the courts are supposed to be the ones that give the interpretive answer to an ambiguous statute, and yet, we’ve got doctrines, Chevron deference, that in fact do the opposite. And so the various doctrines in conjunction have magnified the separation of powers problems. And I’m not sure adding more statutes is going to solve that. Maybe giving teeth to the statutes we have and faithfully employing them. But that’s not going to get to the incremental piece that you want. That’s almost an all-or-nothing, black-and-white rule. It could have some pretty severe consequences.

 

Prof. Jennifer Mascott:  I do agree that, I think, the Court’s likely to continue in the minimalist approach, as John said. I think that’s one reason why then-Judge Kavanaugh probably wrote his opinion, PHH, the way that he did, is that he’s trying to frame the issue so that there doesn’t have to be any overruling or overcoming of precedent like Morrison v. Olson, or Humphrey’s Executor. [He's] looking for these places where there’s an innovative new structure that seems to take things one step too far, and maybe hoping when he was a judge on the D.C. Circuit, that the Court, if it ever got the case, would do something similar to what it did in Free Enterprise Fund which was say we’ve got all this precedent on the books, we’re keeping that in place, but we’re just not going to extend it.

 

In the Lucia decision, with the administrative law judges, the Court definitely had a very fact-bound limited decision. It didn’t even want to decide things like, on remand does there have to be a totally new adjudicator in place? Maybe in that particular case it did. The Court wasn’t going to require that moving forward. It wrote its opinion narrowly to really just talk about the SEC ALJ’s. And so I think it’s going to be to the lower courts and the agencies to realize, okay, analogously, what are all the positions that come under Lucia? On the removal side, I do thing that’s a place where litigation’s going to head, but even there, the Solicitor General actually did not ask the Court to strip the ALJ tenure protections. The SG said, “Could the Court read them narrowly so that ALJ’s could be removed for misconduct, failure to follow lawful agency directives, or failure to perform adequately."

 

The SG was very careful to say it would not be appropriate to have a situation where you’re just sort of willy-nilly removing an ALJ or threatening removal based on how one particular case is going to come out. I think there’s some language to that effect, even in the Myers Supreme Court opinion from 1926, and in faithfully executing the laws. We’re not talking about this kind of idea of threatening people if they’re not going to do a politically charged thing of being fired. We’re talking about everybody remaining faithful to their constitutional duties, but to the extent that people are not following the agenda set by Congress, the Executive, and doing their job that there does need to be some way to be able to bring supervision and removal.

 

      The other piece the SG asked the Court to revisit is the MSPB’s role and narrow it to just determining that there’s a factual basis for the removal rather than a multiple level of an appeals structure. Whereas, I think now you get your case heard, first, by an administrative judge within the MSPB, and then it would go up to the board. So I that could be an incremental way in which litigants who are being strategic will bring these carefully framed, minimalist, fact-bound questions to the Court and enable the Court to sort of reach a decision that’s maybe right in its view of the Constitution, but doesn’t necessarily have one hundred immediate implications down the line.

 

Hon. Diane Sykes:  Professor Buzbee, any response?

 

Professor William W. Buzbee:  One, I agree. I think that you see in these cases, especially in Lucia, a very minimalist approach. Free Enterprise has some much broader language within it, but in the end what the Court actually does is limit it in the scope and carefully says it’s not doing somethings. So I think you see it. So there’s one way to look at it as that’s just how they got to the majorities in those cases. That is limiting the reach of them, leaving some questions undecided was just strategic, so it doesn’t tell you next. It’s a question of where the votes stand. I think there is some truth to that.

 

But the other is kind of, I think, an interesting big question. We’ll see. Chief Justice Roberts and Justice Kagan analytically approach statutory interpretation in very similar ways. They are both very thorough readers of statutes in their entirety, in their functioning, putting provisions together. And I think for this reason, I think Chief Justice Roberts, who’s a key vote here, I think he understands that different choices and statutes matter and should matter. And I think he would be concerned with too readily jettisoning a body of law or embracing an approach which makes all statutes just about arbitrary power.

 

      You look back at his D.C. Circuit decisions, he is genuinely concerned about arbitrary wielding of power, and if you allow agencies to be subject to threats, reprisals, or dismissals, or the same thing at other officials subject to that, then there’s concerns of that. So I think you have the issue of the administrative state, you have maybe the minimalist approach to create majorities, but maybe also just a respect for and an understanding of the rich choices Congress makes over time in structuring statutes and a desire not to create overly broad rules.

 

      The other Court watchers—my friends who are much more day-in-and-day-out watchers of the Court—I think people view Chief Justice Roberts, who again is a key vote here, as truly being an institutionalist, very concerned about the Supreme Court’s integrity. And so part of his reason for embracing more minimal approach is a radical upheaval and jettisoning of whole bodies of law would be inconsistent with, I think, his view of what the Court needs to be respected as a legitimate institution.

 

Hon. Diane Sykes:  I know this isn’t a panel on agency deference, but Professor Eastman brought this up about the likelihood that the Court may more readily embrace a revisitation of agency deference doctrine as more within the comfort zone than some of these more radically consequential, structural, constitutional decisions. And I’d like to hear the other panelist’s responses to that idea, and also whether that’s more comfortably within the Court’s vision of its own role as an institution that has Republican legitimacy.

 

Hon. Henry Kerner:  Who wants to go first?

 

Prof. John Eastman:  It exacerbates -- I mean, you’ve got both an Article I problem and an Article III problem. I think Justice Thomas’s opinion of Michigan v. EPA—I forget which one—points out the Article III problem with these deference doctrines. The agencies are themselves interpreting statutes. That’s the role of the courts. And it’s not just him. There’s --Bill Eskridge and Cass Sunstein both criticize Chevron deference on those grounds. But it exacerbates the consolidation of power problem and the lack of accountability problem. You’ve got the non-delegation on the front end that allows them to make laws. You’ve got the lack of direct supervision from the elected executive that allows them to force laws maybe contrary to the policy of the administration. And then you’ve got the deference doctrines that allow them to interpret the laws while they are also adjudicating them. This seems to me just a huge problem from separation of powers perspective. And that’s with an executive agency, quite apart from an independent agency.

 

Hon. Diane Sykes:  Anybody else?

 

Hon. Henry Kerner:  I have one thought, if I may.

 

Hon. Diane Sykes:  Sure.

 

Hon. Henry Kerner:  So I know Professor Buzbee was talking about rules and how folks don’t like vague rules. So one of the things that’s really important in our world is we try to have as clear rules as we can. So we get very clear rules, and we try to work on, for example, the Hatch Act area. There’s regulations promulgated by OPM, but within these, especially with social media and other new developments, how do you get a law from 1939 to apply to Twitter? Right? And so you come up with these, and to go back to what [John] Eastman said, at some point when you work out with practitioners who’ve been in this field for 20 years, I think they have an expertise that ought to be given some credence because they’ve been working on this, they’ve thought this through, they work very hard on this. And when you come up with rules that are clear, then you have robust training, and then you have accountability, you set up sort of a three-legged stool that I think really works. And when that gets into the courts and judges at that point aren’t second guessing these rules or giving you no deference on them, how can judges have that kind of expertise when you’ve worked on these? So I do thing that there’s a need for technicians, essentially, and experts to work through difficult problems. And obviously if they run violative of statutes or the Constitution that’s one thing, but at least giving them some deference and to appreciate the technical expertise.

 

Hon. Diane Sykes:  All right, let's go -- oh, you have a response? Sure. Absolutely.

 

Professor William W. Buzbee:  So a couple things, one is, there’s kind of Chevron as a kind of toehold, or a claim generally, about excessive agency power, and then there’s Chevron the actual case what it says as it currently stands. And so I think there are two issues and people sometimes shift from Chevron as sort of a place holder for the problem with the administrative state and then Chevron as it actually stands today. So most importantly is Chevron itself has been subject to substantial limitations. The Mead case comes in. There’s kind of a Swiss-cheese aspect to Chevron where very little is left of Chevron as more broadly parodied, or caricatured, when people say it creates kind of unfettered power. Where Chevron stands now is effectively rewarding agencies that use notice-and-comment rulemaking and who, in the end, come up with a promulgated rule through a transparent and open process subject to judicial review that is reasoned and responds to all salient criticisms. And if an agency doesn’t do that, on any of those fronts, you’re not in the world of Chevron step two deference.

 

And so I think it’s important to remember that Chevron is not a permission to agencies to do whatever they want. It is in fact, a regime which is built on the idea that Congress does hand authority to agencies, and agencies then, with their expertise about the field, the law, related statutes, they come up with regulations. And again, my sense is what business clients, especially—which I think is a traditional concern of The Federalist Society—what they want to do is they don’t want to have a statute where everyone’s guessing how it should be read. In general, people want greater clarity, and notice-and-comment rulemaking is a source of such clarity and also legal stability. So I think it needs to be read for what it actually says.

 

Also, just along those lines, there’s a wonderful, famous article for those of you who really want to get some good reading today. Right before the Chevron case came out, Henry Monaghan, who’s a professor at Columbia wrote an article called Marbury and the Administrative State. And he basically thought about the nature of authority conferred on agencies and explained why some degree of deference to agencies is basically a constitutional necessity and logically unavoidable, and kind of worked his way through it. And although the Chevron case did not cite to that article, it really anticipated the logic of Chevron, and I think it still is, for people trying to understand Chevron, it’s probably the best article about Chevron, although it was published before it.

 

Hon. Diane Sykes:  All right. Professor Mascott.

 

Prof. Jennifer Mascott:  Well, I guess just responding to what Bill just said about stability, I do see your point about stability and notice-and-comment rulemaking. I think ultimately the most stability, of course, would come from clear laws being passed by Congress. I mean, the virtue that we’d have if more detail was in congressional legislation as well is -- you know, we’ve got 435 member, 100 Senators; they’re representing interests geographically all over the country, and so it’s just able to represent the interests of the people in a way that any agency, whether it’s headed by a commission or one person, is just not going to be able to do, in as much of a way. So I think a lot of the problems that we’re seeing here and talking about whether people are concerned about the whims of Executive Branch actors, or whatever it may be, could be solved by Congress taking a larger role.

 

Bill also earlier talked about the Necessary and Proper Clause and saying with the congressional role and the executive role, I think the suggestion is, that if the two politically elected branches reach a compromise under the Necessary and Proper Clause, the idea is we should sort of defer to that. And so not be too quick to have courts or ad law scholars or whoever else step in and say, “Well, that’s an unconstitutional arrangement. That violates Take Care Clause, or the Appointments Clause, or whatever.” I think the one thing to keep in mind, though, with that, is if we see the Constitution as being the document that brings into being this federal government, and we’ve still got states who are supposed to be operating in the background, if we too much defer to the Necessary and Proper Clause and say that Congress and the Executive can do anything they want, even if it’s outside of the text of constitutional restraint, such as the Commerce Clause, then Congress and the Executive might be happier with the arrangement. But I think people, the states, there are others, whose interests also need to be looked out for.

 

So obviously we don’t want to be willy-nilly, second guessing the elected branches, but the Constitution does have constraints, one of which fundamentally, of course, is the Commerce Clause and limiting federal power just in general. And so I think we need to have comfort where the Constitution does speak clearly to things, coming in and saying that is a limitation that needs to be abided by and adhered to, even if sometimes it means we’re saying that various governmental actors have gone outside of those constraints.

 

Hon. Diane Sykes:  All right. Thank you. Let’s go to your questions. Yes, sir?

 

Randy May:  Do you want me to use the mic?

 

Hon. Diane Sykes:  If we have one. Oh, it’s right over here. There is a standing mic right under the light so it’s hard for me to see it. There we go. If others have questions you can line up next to the microphone stand.

 

Randy May:  Thank you to all of you. Randy May from the Free State Foundation. Judge Sykes was inching up to the question and a point I want to make, and then Professor Eastman came even closer in inching up, but here’s the point, and I think the answer to the incrementalist question. Why can’t the Judicial Branch -- why doesn’t or can’t the Judicial Branch impose a less deferential standard in reviewing the actions of the truly independent agencies? I’m talking about the FCC, and so forth.

 

      I’ve written a couple law review articles suggesting that—published in the Administrative Law Review—but more importantly, in Justice Kagan’s presidential administration article, you know that mammoth article. It is in footnotes, but she basically says that the independent agencies, because they’re less accountable than the true Executive Branch agencies, because of the lack of the termination ability under the for-cause one, that they should receive less deference from judges like Judge Sykes and others, because of that lack of accountability and because Chevron, which Professor Buzbee just talked about, is really based, at the core of it, on the notion of political accountability. I know there’s a nod to agency expertise, but political accountability. So maybe Professor Eastman, or anyone else, could talk about whether you think that that might be an incremental step towards holding the independent agencies more accountable?

 

Hon. Diane Sykes:  That’s a really good question, distinguishing between truly independent agencies and other executive agencies for purposes of deference.

 

Prof. John Eastman:  At least it’s a first step. I’m willing to take a cut back on deference where ever I can get it. So I think that’s a very good step. I think—and I’d love to hear from Professor Buzbee on this—the notion that the statutes themselves provide some level of accountability if we properly enforce them in the Judiciary. I think he would share that view.

 

Professor William W. Buzbee:  The Supreme Court has been confronted with this question. They’ve declined to approach deference differently for independent agencies and executive agencies.

 

Randy May:  [indiscernible 01:15:00]

 

Professor William W. Buzbee:  I guess I would say it’s been mentioned. It’s in the opinions. Has there been a clear majority that has said in recent cases that there should be no deference? But I think kind of for the same reasons that Justice Scalia’s opinion in the Arlington [v.] FCC case when he said the difference between a standard question of interpretation and regulation and a jurisdictional question is a hard line to draw. Agencies come in many forms. There're degrees of independence and degrees of executive-ness in agencies, and my sense is this would be kind of unworkable and could become itself very political. So I think it would be a bad idea.

 

      I still think agencies should be scrutinized closely. I think agencies that don’t follow the law, that don’t offer good reasoning and basis for their decisions, should be quickly rejected by the courts. I just don’t think the deference regime should change.

 

Hon. Diane Sykes:  Anybody else at this point? All right, next question.

 

Paul Kamenar:  Yes. I’m Paul Kamenar, a D.C. lawyer. Just a quick comment and a question with respect to the for-cause removal. That issue is before the D.C. Circuit regarding the other Special Counsel, Mueller. That’s a case I argued last week before the D.C. Circuit and whether that for-cause removal under the DOJ regulations can be immediately revoked and thereby revert Mueller to an inferior officer. And I cited Jen’s article in the case that if he is an inferior officer, he has to be appointed by the head of the department, which was Jeff Sessions. But my question is with respect to the CFPB case. What—anybody on the panel—what would be the minimalist solution or answer to that to reverse the D.C. Circuit case, and how do you do a head count on that knowing that Justice Kavanaugh would recuse himself because he ruled on the issue below? Do we have the five votes up there to reverse the D.C. Circuit case?

 

Hon. Diane Sykes:  Anybody?

 

Prof. Jennifer Mascott:  One answer to that might be maybe, who knows -- maybe the Court -- I’ve heard some scholars speculate maybe the Court won’t take the case as a result. Maybe the Court will wait for some others to come up. Possibly this Collins decision from the Fifth Circuit might be a way to get at the idea of tenure protections for single directors. To me it seems like, because in Free Enterprise Fund, the Court already demonstrated willingness to cut back some for-cause removal protections that my sense is that the Court’s minimalist approach would be to strike the removal protections for the single director rather than doing something more dramatic like making it a multi-member commission because it seems to me, at least, that requires a lot more rewriting of the statute than just severing one portion of it. But who knows? My suspicion is that we might see the Court rule on this, not in a CFPB case, or not at least in a D.C. Circuit case, but in something else within the next couple of years.

 

Prof. John Eastman:  I will add one point, and I agree with Special Counsel Kerner. I don’t see the constitutional difference on the separation of powers question between a multi-member independent commission and a single member. The theory that the multi-member commission would check each other doesn’t provide the constitutional check that’s required. It may create a greater opportunity for mischief than a single member, but I don’t think it cures the constitutional problem. So I’m agreeing with you. There’s no difference, but where I’m disagreeing with you is I think that they’re all unconstitutional rather that all constitutional.

 

Hon. Diane Sykes:  Okay. Next question.  Yes, sir?

 

Devin Watkins:  Hi. My name’s Devin Watkins. As an originalist, I look closely at what James Madison said and some of the other Founders. But James Madison advocated that the Comptroller of the Treasury have for-cause protection. And so I wonder if we should instead be looking at what that for-cause protection means. Should the president be able to remove a policy-creating officer for not creating policy that follows faithfully the law? Or as Myers said an adjudicary officer, a quasi-judicial officer, be removed after the adjudication for lack of wisdom, or other reason that Myers talks about?

 

Hon. Diane Sykes:  Alright. Anyone want to take that one on? I think you’ve stumped them.

 

[Laughter]

 

Hon. Diane Sykes:  Go ahead, Professor Eastman.

 

Prof. John Eastman:  This often comes up in the context of certain government functions are just too technical for the people to understand, and therefore the constitutional system of accountability to the people through their elected officials just doesn’t work. We need to bring in the experts. And I think a hundred years of experience with that progressive doctrine has proved that that doesn’t work very well, in fact, often times catastrophically much worse. We, after all, had experts at Fanny Mae and Freddie Mac that gave us the greatest recession since 1929. So I guess I would challenge the very basic assumption that if we get unaccountable experts in these technical fields, we’ll all be better off. I just don’t think that experience has borne that out.

 

Hon. Diane Sykes:  All right. Yes, sir.

 

Mike Daugherty:  I’m Mike Daugherty. I’m the CEO of LabMD and a business owner. I just won in Eleventh Circuit, and I just want -- this is about accountability and specificity of accountability to the panel, especially Professor Buzbee. I’ll just read four sentences from this.

 

So the court had said, “Doesn’t that underscore the importance of significance of rulemaking? Otherwise you’re regulating data security on a case-by-case basis.”

And the FTC said, “We are regulating data security case-by-case basis. And that’s exactly what the Supreme Court says in Bell Atlantic and Chinery.”

And then the Court says, “It doesn’t matter whether the subject has any notice at all?”

And the FTC says, “Correct. Correct.”

He says, “Okay, notice becomes irrelevant.”

And the FTC says, “You can adopt new rules in adjudication. The Supreme Court’s made that very clear.”

And the court says—this is Judge Tjoflat—“I appreciate your concessions.”

 

Now, we won. The company’s dead. 700,000 cancer patients have to shift medical. There’s carnage everywhere, which never comes up in the legal system. How do you hold these people accountable for gun-to-the-head regulatory when they’re off the chain and they have qualified immunity? How would you in specificity hold agencies off the chain accountable?

 

Hon. Diane Sykes:  I think that was to you, Professor.

 

[Laughter].

 

Professor William W. Buzbee: Honestly, I have not seen the case. Part of what you were reading is part of longstanding --

                     

Mike Daugherty:  It’s oral argument from --

 

Professor William W. Buzbee:  -- constitutional doctrine which is going back to the Chinery case, which is agencies have procedural choice, how to make -- it's not allowed to make rules, but how to make policy, and they can act through notice-and-comment rulemaking. They can develop policy on a case-by-case basis, and this discretion --

 

Mike Daugherty:  Well, they will just reject it flat out in that case.

 

Professor William W. Buzbee:  But in this whole body of law, which is longstanding, and actually one of the areas of law that the most conservative wing has most ardently adhered to over the decades, the idea is that courts should not be second guessing agencies' choices of how to proceed. So I think what you’re suggesting is you think there should be more done by notice-and-comment rulemaking, I would guess.

 

Mike Daugherty:  Well, I think knowing the laws is a really nifty concept.

 

Professor William W. Buzbee:  I think that you should know that there has been a longstanding that more should be done by notice-and-comment rulemaking. That is more knowable law is better than law that can be wielded an announced for the first time in adjudications. And so I think, if that’s what you’re getting at, then --

 

Mike Daugherty:  No, what I’m getting at is there’s no accountability when we have an agency parachuting in saying, “This is what you’ve got to do for cybersecurity.” And it’s gotten worse for 20 years and there’s no accountability. They’ve completely screwed it up without saying what the law is which is the fundamental thing. They’re not saying what you’re supposed to do, which is what you earlier said your clients want to know.

 

Professor William W. Buzbee:  Right. Again --

 

Mike Daugherty:  How do you hold them accountable if you’re for agencies being held accountable? There’s mass destruction.

 

Professor William W. Buzbee:  What is the name of the case? I look forward to reading it.

 

Mike Daugherty:  LabMD. It's FTC v. LabMD. In the Eleventh Circuit. They did not seek cert.

 

Professor William W. Buzbee:  I look forward to reading it.

 

Hon. Diane Sykes:  Thank you, sir. Next.

 

Stephen Casey:  Thank you so much. Stephen Casey from the Austin area. This question would be for Professor Eastman and Professor Buzbee. And this sort of steps forward from the point the previous person brought up. I’ve been in criminal defense before, and also did some mortgage defense, so civil and criminal issues. The question is, laws are out there. People can go into the books and look at them. But with respect to notice, I represented people, plenty of mortgage owners for a house at foreclosure that had not idea of the protections that were in Regulation Z. There’s no ability for them to know where they were protected. On the other hand -- because when someone buys a house, they’ve got to sign tons of disclosures. You see them just flying through there. There’s a huge body of them that they’re not made aware of. On the flip side of that, on the criminal side, you want to be able to adjust your behavior so you run afoul of the laws.

 

Hon. Diane Sykes:  We are running out of time, so I need you to connect this up to the independent agency issue.

 

Stephen Casey:  How does someone know on the civil side or the criminal side – on the criminal side how to protect themselves from not violating one of these massive ten thousand sets of regulations; and on the civil side, what substantive rights have been created when it’s just experts in a notice-and-comment period?

 

Hon. Diane Sykes:  I guess it’s a question about inscrutability of the modern regulatory state and what do consumers do about that?

 

Prof. John Eastman:  I think Senator Lee offered a very good answer to that in the opening remarks of this convention – that we have allowed so much accretion of power over so many areas that are not constitutionally enumerated to the federal government that we’ve destroyed the subsidiarity principles where a lot of this stuff ought to have been resolved in a much more local state level, where you do have a greater capacity to keep track of what’s going on. So it’s a much bigger problem than just administrative agencies, or deference, or what have you.

 

Professor William W. Buzbee:  I guess [what] I’d just say is the complexity of law is a problem. It does mean we need lots of lawyers. That’s not necessarily a bad thing. But I think the reality is that most people in businesses are more concerned with the broad stroke law. That is, law that is vague and really are hoping there will be more specific instructions. The downside there is it does begin to accrete and can be hard to sort out. And so I do think that finding ways to make sure people know about their key legal rights and their obligations is essential. And 9I think that’s someplace where maybe the web will in time help us on that front. But that is a critical need for law to work.

 

Hon. Diane Sykes:  All right. Last one. Go ahead, sir.

 

Jimmy Conde:  I'm Jimmy Conde. I’m a lawyer here in D.C. And I think my question is really for John Eastman and Jennifer Mascott. And the question is, is the Federal Reserve’s Federal Open Market Committee constitutional?

 

Hon. Diane Sykes:  Well?

 

Prof. John Eastman:  My intuition is to say, no, but I don’t know enough about the intricacies of that particular authorizing statute to be able to answer definitively. Sorry to duck it. I’m going to pass it to Jennifer.

 

[Laughter].

 

Prof. Jennifer Mascott:  I will just say on a closing note, Bill recommended this book by Jerry Mashaw, which does give a lot of rich history of administrative a law in the first few years. And I would commend -- we’re heading up to winter break. I think pairing that book with Joe Postell’s recent Bureaucracy in America, which goes over the same history and from a slightly different constitutional view would be excellent reading for those of you who are interested enough in these issues to come to the panel. And that's my last word.

 

Hon. Diane Sykes:  That’s a great way to close with a reading list. Let’s thank the panel.

11:45 a.m. - 1:30 p.m.
General Luncheon

2018 National Lawyers Convention

The Mayflower Hotel - Various Rooms
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Description

Lunch Buffet:
Cabinet, East, Senate and State Rooms 

Practice Group Sessions & Lunch:
Federalism Panel - East Room 
Litigation Panel - State Room 

1:45 p.m. - 3:15 p.m.
Artificial Intelligence and Big Data Innovation: Navigating the Technology World of the Near Future

2018 National Lawyers Convention

Topics: Intellectual Property
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Event Video

Description

Technology progress in recent years has been driven in large part by the continuous generation of massive amounts of data (“Big Data”) and its processing by means of Artificial Intelligence (“AI”). Self-driving cars, personalized advertising, and automated medical diagnostics are examples of a technology trend that will accelerate in the future, creating unseen before opportunities for innovation, along with serious legal and regulatory pitfalls. This panel will focus on practical matters concerning AI and Big Data related innovation, including (a) protecting of related intellectual property (“IP”) and (b) handling of data ownership and privacy issues. It will tackle problems such as: who owns AI-generated IP?; who owns personal or test data?; who is liable if something goes wrong?; and what role, if any, should the government(s) have in regulating the flow and use of data-driven information?

  • Address: Hon. Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent Trademark Office
  • Mr. James C. Cooper, Deputy Director for Economic Analysis, Bureau of Consumer Protection, Federal Trade Commission
  • Mr. Shawn D. Hamacher, Assistant General Counsel, Steelcase 
  • Hon. Michelle K. Lee, Former Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office
  • Dr. Ognian “Oggie” Shentov, Of Counsel, Jones Day
  • Moderator: Hon. David J. Porter, United States Court of Appeals, Third Circuit

Speakers

Event Transcript

Hon. David J. Porter:  -- AI might be defined as the science that enables machines to do things like understand language and logic, make decisions, engage in conversations, and recognize images. In this panel, we'll be considering how the growth of Big Data and AI will affect and be effected by legal issues, such as tort liability, IP ownership and infringement, regulatory activity, ethical questions—like human agency and mens rea—privacy, security, competition, and consumer protection.

 

      We have a terrific lineup on this panel. To kick things off, Andrei Iancu will begin. He's the Under Secretary of Commerce for Intellectual Property and the Director of the U.S. Patent and Trademark Office. Before that, he was Managing Partner of Irell & Manella. I'm just going to give very brief introductions. There's, obviously, more bio in the guidebook if you want to see those.

 

      After that, Oggie Shentov will go next. He's Of Counsel at Jones Day and Vice-Chair of the International Patent Law and Trade Committee of the Intellectual Property Owners Association.

 

      During the Obama administration, from 2014-2017, Michelle Lee had the same job that Andrei has. She was Under Secretary of Commerce for Intellectual Property and Director of the U.S. PTO. Interestingly, she wrote her graduate thesis on artificial intelligence at MIT's AI Laboratory.

 

      Shawn Hamacher is Assistant General Counsel of Steelcase Inc. in Grand Rapids, Michigan. Steelcase offers architecture, furniture, and technology products and services designed to help people work and learn.

 

      And next to me, Dr. James Cooper is Deputy Director for Economic Analysis in the FTC's Bureau of Consumer Protection. He is on leave from the George Mason University Antonin Scalia School of Law.

 

      So, Director Iancu, would you like to begin?

 

Hon. Andrei Iancu:  Hi. Thank you, Judge Porter. I thought I would stand up over here for my remarks. It's a bit easier. It's an honor to be here with you and all the panelists this morning. I'm especially honored to share this stage with my immediate predecessor, Michelle Lee, who—among many other things—initiated a Big Data Program that not only supports what we currently do at the USPTO, but also serves as the foundation of future AI at the agency.

 

      And thank you to the board, the officers, and staff of The Federalist Society, and especially Dean Reuter, for the invitation to be here today and for organizing this incredible event that takes place every year.

 

      As Judge Porter noted in his introduction, I have the honor of leading the USPTO at this time with nearly 13,000 employees, including some 9,000 examiners—patent and trademarks—who work tirelessly every day to secure the intellectual property rights of inventors and brand owners.

 

      As you can imagine, the USPTO has vast reserves of scientific data contained in the more than 1 million patent and trademark applications we receive every year. Indeed, our patent, trademark, and other types of data are among our most important assets. Many depend on our data. Whether it's an independent inventor working in her garage or lab to better understand her inventions compared to the existing landscape, or a large multi-national corporation considering whether to invest in developing new technologies to create new brands or acquire existing patent portfolios, just about everyone uses the USPTO's data to keep up with a pace of innovation and entrepreneurship.

 

      We, too, as an agency at the PTO, are leveraging this invaluable data source so we can more efficiently and effectively fulfill our constitutional mandate "to promote the progress of science and useful arts." So on that front, let me share with you just a few ways we are doing this within the agency.

 

      At the PTO, we have a "Big Data Reservoir" that contains over 8 million patent office actions, for example. This empowers us to harness data to measure work product consistency across our entire patent core and systematically focus our quality improvement efforts.

 

      For instance, our "Big Data Reservoir" has enabled us to answer fundamental questions, such as, how many and what types of rejections under the different statutes are our examiners making and consistently applying throughout the examination corps? How can examiners more effectively use non-patent literature in priority rejections? And what impact has our guidance and training had on examination outcomes? Efforts like these, as well as other patent quality studies, have resulted in reallocating millions of dollars in training expenses to more localized areas for optimal rates of return.

 

      Moreover, by identifying how and what priorities used by our examiners and comparing that too, for example, the outcomes of AIA trials before the PTAB—our Patent Trial and Appeal Board for those new to the PTO jargon—we can begin to measure and qualify the accuracy of the searches we conduct during examination, as compared to the art an opponent might find during litigation or another dispute after issuance. Enhancing search during the original examination, in particular, is an area that we expect AI could yield tremendous results. Indeed, it's a tool we hope that can help us narrow the gap between the search done during examination and the search done post-issuance.

 

      To that end, we've developed, and we are actively beta testing right now, a new cognitive assistant called "U" or "Unity," which leverages AI and machine learning in a way that augments our existing next-generation patent tools. For example, the tool is intended to allow patent examiners, through a single click, to conduct a federated search across patents, publications, non-patent literature, and images. And through AI and machine learning-based algorithms, this would present to the examiner the results in the form of a pre-search report.

     

      We're also exploring semi-automated tools for search query expansion, trained to mine technology-specific synonyms with the help of crowd, or examiner, sourcing. This new capability holds the potential to promote consistency in searching and to more quickly surface prior art that may be located in any of several separate databases. And that's important because one of the benchmarks of a high-quality patent is whether it can withstand fair challenge down the road. And surfacing the best prior art early helps to increase the likelihood that this will happen. AI can help us do that.

 

      We’re also testing new AI tools and technologies such as robotic processing automation that could potentially generate smart office action templates that are automatically populated based on the interactions between examiner and attorney, saving our examiners time from some of the more tedious clerical tasks when generating office actions.

 

      And in an effort to reduce the costs of manually classifying patents, we’re exploring the use of AI technology to ensure that we route the right case to the right examiner. This, in turn, enables us to organize our workforce more effectively and as a result conduct a more effective examination. These are just a few of the many ways we’re using Big Data and AI within the institutional walls of the USPTO.

 

      Now, outside our agency, AI has significant implications for the law, the economy, and America’s position as the global leader on innovation. Not surprisingly, AI is changing the landscape of intellectual property policy, and in doing so, it is raising real legal, regulatory, ethical, and moral questions for us to grapple with.

 

      I am sure that other panelists today will address many of these issues in their own remarks, but let me share some IP-related examples. Will the legal concepts of inventor, author, and creator be fundamentally changed by AI? Does use of copyrighted works to train AI systems constitute fair use? How will firms, both large and small, protect AI-related inventions and how does patent subject matter eligibility impact those strategies? What are the disclosure requirements in a patent for a machine-learning algorithm, when the human inventor may not know exactly how the machine will perform a given task after it has learned from training?

 

      Such questions cut across industrial sectors and national boundaries, and many do not have viable answers yet. But how we choose to answer them will have major national economic impact and implications. The good news is that we are working on these issues right now as we speak. And, in fact, these and similar issues will be examined in an all-day conference organized by the USPTO to take place on December 5th at the USPTO. It's called "Artificial Intelligence: Intellectual Property Policy Considerations. Please attend.

 

      Needless to say, AI has evolved from the obscure to the mainstream, and it’s taking the use of computers to a new level, at an awe-inspiring speed. Some have even characterized this fusion of technologies that blur the lines between the physical, digital, and biological spheres as the “Fourth Industrial Revolution.” As with the prior industrial revolutions, these new technologies, which include robotics, autonomous vehicles and quantum computing—among many others—hold the promise to improve and lengthen lives, generate higher income levels, dramatically increase productivity and efficiency, and—critically important—vastly increase the speed of innovation itself. But they also pose substantial risks, particularly if the United States is left behind in the innovation race.

 

      Countries around the world are adopting and implementing long-term, comprehensive strategies designed to increase their prominence and leadership in innovation. For example, the “Made in China 2025” initiative is aimed at transforming China into a global leader in strategic industries, such as AI and 5G telephony, that are critical to competitiveness and innovation in the Fourth Industrial Revolution.

 

      In recent years, there has been dramatic growth in Chinese patent filings in such key technologies as next generation IT, computerized numerical control and robotics, and advanced transportation. When we look at patent applications in the technology areas largely covered by the “Made in China 2025” initiative, we see that filings by Chinese nationals to China’s IP office have grown at an annual rate of 24 percent between 2006 and 2016. By comparison, such applications filed by U.S. nationals to the USPTO grew at an annual rate of only 3 percent. Patent filings are not fully determinative of innovation, and some have questioned the quality of some Chinese applications, but these statistics are one measure and a potential leading indicator. Other indicators point to similar trends.

 

      And China is not the only innovator in the technologies of the Fourth Industrial Revolution. From the smallest countries like Singapore to the largest like China, many nations around the world have become extremely competitive in the innovation ecosphere.

 

      Only by innovating faster and in key areas will the United States continue to lead. We must harness our long history of innovation, born of our nation’s founding document and perpetuated by our people’s innovative spirit since then, and apply the same spirit to this new Fourth Industrial Revolution. As director of the USPTO, one of my top priorities is making sure the United States remains the market of choice when it comes to innovation, especially in the emerging technologies of the future, including AI and machine-learning technologies.

 

      This administration is committed to protecting and promoting American innovation and entrepreneurship, as symbolized, by the way, by President Trump’s recent signing of Patent Number 10 Million. This was only the second time a president signed a patent document since John Quincy Adams, and it evidences the importance and innovation in today’s economy and to this administration.

 

      So with that, I want to thank you for the invitation to speak on this important topic, and I very much look forward to continuing the conversation with all of you during the panel discussion. Thank you all.

 

Dr. Ognian “Oggie” Shentov:  I will be next, then. That's a terrific and wonderful speech by Director Iancu, which I'd like to pick up on some themes that he already outlined. And in particular, I'd like to show a red flag—a warning bell, if you'd like—that the United States' decade-long leadership position in areas of innovation is -- and protection of intellectual property rights is slipping. And it's slipping, in some instances, rapidly, precisely at the wrong time when we are in the midst of a gigantic technological revolution the likes of which we have never seen, at least since the invention of the personal computer in the '70s and the internet in the '90s. The most profound changes are happening technologically in virtually every area of our daily life and touches it practically every day.

 

      Obviously, I'm talking about artificial intelligence, about Big Data, and just in passing about block chain, which I guess we have to leave at this conference for another time, although I know it is hugely important. So as a definitional matter, artificial intelligence is the theory and development of computer systems that perform tasks that are normally associated with human intelligence. And those can be something like sensing, like visual interpretation. You can have comprehension, a natural language processing, understanding foreign language and translating, or action, in terms of -- the best example being robotics, where a machine feels its environmental and wants to navigate and can navigate around it.

 

      Big Data is a very closely associated concept. I understand about some months ago when, according to IBM, 90 percent of all data generated at any time was created in the past two years. The rate of growth is so tremendous it is overpowering. And Big Data and artificial intelligence are clearly going to determine the winners and losers, if you like, of the coming century. So it's critically important to make sure that the United States retains its leadership position. And there are certain cracks in this thing to which Director Iancu pointed to already.

 

      So I'd like to start a little bit with the type of problems that I have, and others have identified in the protection of intellectual property. And the major problems can be characterized one way in two categories. One of them is sort of procedural and the other one is systemic, sort of the nature of the beast type of problem. The procedural problem, and what I refer to is probably best illustrated in a Supreme Court decision in Alice about four years ago, which attempted to clarify what is patent-eligible subject matter.

 

      So four years ago, they came up with a two-part test that was supposed to clarify for people—and particularly the examiners in the Patent Office—how to ensure that the particular concept is, in fact, patent eligible and can proceed. Well, I'm afraid the Supreme Court in that particular case, and subsequent cases, really kind of failed. The two-part test involves in the first step the determination as to whether a particular idea is directed to patent ineligible concept, such as an abstract idea, loft nature, or something to that effect. And if so, then it goes to a second step where it is looked into the question of whether there is sufficiently more added in the claim language to make an otherwise non-eligible idea into patent-eligible idea.

 

      Unfortunately, it seems like it's a practical matter. The result of the Supreme Court decision at the time is largely uncertainty and confusion, particularly in the areas of software where I practice as an attorney. Some software portfolios, as I understand, have dropped in value by 80 percent, primarily because you really don’t know whether something is patent eligible or not. And even if you get a patent, you may get it invalidated because for a somewhat simple reason the two-part test is something, an abstract idea, that the Supreme Court did not give a definition—and could not give a definition—of what's an abstract idea. And as a result, it's very difficult to apply. Examiners have problems, practitioners have problems, everybody has a problem. So the problems surrounding patent eligibility are—what we call one-on-one patent practitioners—are very well known.

 

      I'd like to finish my portion of the presentation with some aspects of the systemic issues that are relevant to artificial intelligence. And by that, what I mean is artificial intelligence is really -- could be looked at something like a black box that in general tries to simulate the performance of the human mind on a particular task, or in the case of general artificial intelligence to simulate a human being or even exceed the human being. Well, the problem in having a black box, and Director Iancu already mentioned this thing, is that it is a black box, and we don’t really know exactly how it works. We don’t have time to show slight presentation to see what the typical structure looks like. But it's basically, there's a lot of input, tons of data coming in from one place, it goes through this box, it is massaged, coefficients are being adjusted properly or improperly to come up with a result. How exactly that works is something of a mystery, and if you look at it from the perspective of a person who wants to draft a patent application, it's not real clear how you do it. There are instances in which -- for example, there have been suggestions that you do a full term disclosure, like literally the entire code of the machine. Others suggest that in addition to the machine – the artificial intelligence engine –you also have to provide the data because, frankly, the data that is put into the algorithm to train it to perform a particular task could be hugely important. And it, in some cases, may be outcome determinative.

 

      So the net result of this thing is that we have a position where written description and enablement requirements—they're part of what the Patent Office does every day—are kind of put on restrain. It is not exactly clear how people will go about complying with these requirements.

 

      Number two: to have a patentable invention, you need -- we deal with concepts of novelty and obviousness. Well, obvious to whom? And that's a very interesting question. I understand the European Patent Office in October, just last month, actually, had a directive in which they defined three categories of person of ordinary skill in the art, only one of which is sort of something that we are familiar with, generally, people who are knowledgeable about concepts and the lingo of artificial intelligence. The second category is teams of experts. So one of the biggest applications of artificial intelligence is in medical sciences, and so you need probably a medical expert to figure out if you have lung cancer or that sort of information to put the right medical data into the training algorithm. And then you may need a computer scientist who can figure out what the purpose of this data is and how to make sense of it.

 

      So we see a diffusion in which it's not even clear who the invention is directed to because the person of ordinary skill may be one person, it may be two persons, and here's the kicker: according to the European Patent Office, the person of ordinary skill in the art could be artificial intelligence machine. So that's a third option, which is now provided, and it is kind of in the context of should we be giving personal rights to machines and so on.

 

      So problems with figuring out how to describe and how to enable patent inventions: what is obvious and what is not obvious, and to whom it is obvious – how do you go about enabling it? And the flip side of it is, for example, who infringes? Suppose that you are lucky enough to get yourself a patent. How do you know that someone infringes? And, again, we don’t have the slide presentation, but do you see that artificial intelligence systems are generally diffused? They have data owners, you have the engine that runs the data, and you have feedback mechanisms, and you have a variety of things. So who is the infringer, and how do you make sure they infringe?

 

      Furthermore, because it's the nature of artificial intelligence that it changes over time, well, maybe something that didn't infringe in the past after a while, after some adjustments are made to the coefficients of the artificial intelligence becomes infringing. Who is going to determine that? And, of course, another problem in this regard is who's responsible if something goes wrong? At the moment, I think we are dealing with it at a very basic level. It is like if you order something on Amazon and you get something wrong, you kind of know how to deal with it. But what if a robot hits somebody on the street, then who's going to be responsible? The people who created the robot? The people who tested it or put the data in?

 

      I will conclude my opening remarks with, again, it is -- there are warning signs the United States is losing some of the innovative leadership that it has had for years. I had data, for example, that in the area of natural language processing, patent applications in China exceed those filed in the United States six times. So you can argue whether these are good or bad applications, but you cannot argue that the focus of the business community is probably slowing drifting away from the United States, which not only provides procedural problems, such as the Supreme Court decisions on patent eligibility, but also makes it difficult to enforce certain actions.

 

      I hope that The Federalist Society is one of the societies that is deeply involved in the solution of societal and legal problems [and] will take an active role in the formulation of this. Thank you for your attention.

 

Michelle K. Lee:  So I think I'm up next. I'm Michelle Lee. It's a privilege to be here. Thank you to The Federalist Society, and thank you to my co-panelists. It's a privilege to be on the panel with my successor as well. During my comments, I'm going to give you a glimpse into the novel legal issues, to the extent already addressed by Oggie, as well as the novel ethical issues posed by artificial intelligence.

 

      So as with any introduction of any new, disruptive technology, as majorly disruptive as artificial intelligence, it will pose new legal, ethical, policy, regulatory issues that will have to be addressed by all of you in this room are courts, federal and state legislatures, and the alphabet soup of federal administrative agencies who are and will increasingly feel the urge to jump in.

 

      So before I discuss some of these novel, legal issues, it's important to understand the difference between artificial intelligence when I was a graduate student at the MIT AI Lab—I'm not going to say how many decades ago—and today. And there are really two main differences. One is that computers are now much faster and much more powerful. Number two is that computers -- the memory storage price has plummeted, so that basically everything that you do on a computer, every click you make, every purchase you make online, is now electronically recorded, essentially, forever. You combine those two facts and you have computers now who can pour over vast amounts of data to identify patterns and trends leading to intelligent action. Computers can now learn, based upon data provided to it, to take action beyond that which they were explicitly programed to do by the computer programmer. They're drawing inferences.

 

      And why is this important? Well, it's important because it affects the issue of liability, as Oggie, mentioned. If there's a harm, do you trace it back to the computer programmer, or the computer programmer's employer, who wrote the lines of code? But then what happens if it resulted from the machine learning part of the code, where you have data combined with the explicitly programmed code to arrive at the conclusion? Or what happens if you have combinations of systems with program code, machine learning, producing output combined with another output from program code, machine learning, and output. How do you trace liability? And transparency is going to critical to tracing liability.

 

      Keep in mind that for a tort, there are four elements: duty of care, breach, causation, and harm. And the third element, causation, is based upon proximate cause. But proximate cause depends heavily on foreseeability. But foreseeable by whom and by what? By the computer programmer? By the computer robot? By the robot's owner? What's reasonable?

 

      So these are all new issues that we will have to address on a going forward basis. And Oggie touched upon some of the IP-related issues raised by AI, including obviousness, which I think are all completely valid. Let me just highlight another new novel, legal issue, and that deals with protection.

 

      So who is eligible for protection? The Patent Act—35 U.S.C § 101, all of you know it well, states that "whoever invents [or] discovers any new [and] useful process, machine, [or] manufacture…may obtain a patent therefore." But it anticipates a human being. And, thankfully, when I was head of the patent office, no application came in for an invention created by a machine; however, perhaps in Andrei's term, that might happen, and I'll leave it to him to formulate a solution for that one. But, basically, machines in the future will be able to create artistic works and invent as well. So those will be issues, including infringement -- what if a computer, machine, or an algorithm infringes – again, who is liable, and was it foreseeable, and how do you trace liability?

 

      So let me turn to the ethical issues, particularly ethical issues related to a subset of artificial intelligence, which is driverless cars or autonomous vehicles. So what happens if a self-driving car has to decide between one of two unavoidable harms: to kill a pedestrian, to save the occupant in the driverless car, or vice versa. Human drivers have had to make this decision on occasion, sometimes with split-second notice. Often times, there's no consistency in the decisions from person to person. But how should we program computers to make those decisions? And this is not a theoretical issue because computer programmers today are writing code to identify target objects and to take different actions depending upon its classification of that object. For example, whether the object is stationary or mobile; whether it's a bus or a car; whether it's a hard object or a soft object—a soft object, presumably, being some sort of living thing. So with the enhancements of machine vision, with facial recognition combined with databases linked to biometric data, like facial features, AI systems will be able to identify gender, age, and other attributes. So, again, should the driverless car sacrifice the passenger to save the pedestrian?

 

      And what if, instead of a person, it's a cat or a dog? Does it matter whether, if it is a person, it's an elderly person or a young person, male or female? And what if the numbers are different? One person versus a bunch of school children on a bus or crossing a street. It turns out that according to a study conducted by the MIT Media Lab asking some 4 million people across the globe, answers to these ethical questions are anything but clear cut. There seems to be more consensus or stronger consensus of saving young versus old, humans versus pets or animals, more lives versus fewer lives, except, of course, when it's your life or your pet.

 

      So in order for us to feel like these driverless cars have made the best decision, these cars will need to make decisions that comfort with our values. But who is making these decisions? Engineers? And if so, what, if any, training do they have and what ethical rules are they applying? And if it's the car manufacturers, what incentives do they have to protect the car purchaser or the car occupant as opposed to the pedestrian or the public at large? And how should these cars be programed to comply with whose sets of ethical values?

 

      It turns out that Germany's Federal Ministry of Transport has promulgated the first ethics code related to autonomous vehicles, which states that "any distinction based on personal features (age, gender, physical or mental constitution) is strictly prohibited." In the U.S. or any other country, to my knowledge, there are no similar such restrictions. The closest that I've found was that the U.S. National Highway Transportation Safety Administration promulgated federal autonomous vehicle policies containing, for now, non-binding and voluntary guidance and asking for input of information. And under the first version of this policy published in 2016, NHSTA sought input on ethical issues, specifically asking automotive manufacturers how vehicles are currently programed to address conflict dilemmas on the road.

 

      Now, under the second version, which was published in 2017, NHSTA removed the inquiry on the ethical issues, which I think is the proper approach, given the nascency of the technology and the products as well, given the proper role of administration agencies, such regulations, although well-intentioned, stifle innovation, impede the role of the free-market forces to guide and define optimal products and services, waste resources, and quite frankly and importantly, do not reflect the values of the public at large. As a former head of a governmental agency, I think these agencies are woefully ill-equipped to come up with these rules. And if rules are promulgated, they should be enacted by the legislative bodies rather than administrative agencies to really capture the full sentiment, by elective officials, of all of us and all of our values.

 

      Now, let me pivot to the criminal side before I end. On the criminal side, there is an interesting case—Loomis v. Wisconsin. Some of you may have followed it because there was a petition filed at the Supreme Court. And in that case, the defendant's jail sentence had been determined in part by considering the results of a software algorithm which produced a recidivism risk score. The algorithm predicted that the defendant posed a high risk of recidivism, but the defendant was not permitted to determine how the algorithm arrived at the conclusion due to concerns about confidential proprietary intellectual property. The defendant argued that the Court's consideration of the AI generated risk assessment violated his due process because the use of the risk assessment was used without his ability to challenge its validity, and also because the assessment took into account his gender.

 

      The Supreme Court ultimately denied the request for review, and so the sentence stood. But this case raises interesting questions about the use of AI algorithms in deciding, or at a minimum, informing whether and how long people are sentenced or put on probation. And keep in mind that AI algorithms may also reflect biases of the programmers as well as the data fed to it.

 

      So from an ethical perspective, how do we feel about an AI system influencing, or even making, decisions to curtail our liberty and possibly even our life? Although I am an IP lawyer, I believe that defendants should have the right to know how these algorithms work to determine how these risk scores are computed so that they may have the opportunity to rebut it with facts if necessary. And machines do not do well with the notion of judicial discretion. But maybe that's the idea – to ensure greater consistency and less bias. I will say that while judges may be subject to bias, computer AI systems can and should do better in terms of accuracy, fairness, accountability, and transparency; otherwise, why have them? So let me end by quoting a famous proverb: "to err is human." But for a computer, systematically programed, broadly, powerfully, and efficiently propagated across the country, across the world, to err is unacceptable. Thank you.

 

Mr. Shawn D. Hamacher:  So I think that's my cue. Good afternoon. It's an honor to be with you and thank you, also, to the co-panelists. Now, you may have glanced at your list of speakers and wondered what's so remarkable about a 100-year-old furniture manufacturer, a company that's largely known for manufacturing desks, chairs, and architectural office furniture/office products when the topic of discussion today is artificial intelligence and Big Data innovation. You probably don’t feel like you're navigating the technology world of the future when sitting in your elegant, new Gesture chair behind a beautifully designed desk, unless, perhaps, if the desk is height adjustable. That's technology, right? I'd like to take a few minutes, though, to highlight Steelcase's digital transformation strategy, bringing AI and machine learning into the workplace environment.

 

      The reality is that digital transformation is happening everywhere and affecting everybody. AI and access to smart data will, just like everything else, transform the future of work, workers and the workplace. Steelcase's transformation involves the integration of digital and emerging technologies to bring systems of intelligence to our customers which empower their employees, help them engage their own customers, optimize their operations, and transform their own products and services.

 

      I tuned in the last couple of days to the Federal Trade Commission's seventh session of its Hearings Initiative with the two-day nearing taking place at Howard University Law School here in D.C., the focus being on algorithms, artificial intelligence, and predictive analytics. It's fascinating to listen to major industry players, especially in technology, healthcare, and financial services describing the different challenges they confront with their own uses of AI and Big Data, where autonomous decisions affect basic individual rights and/or consumer safety.

 

      In February of this year, the Subcommittee on Information Technology of the House Committee on Oversight and Government Reform also held a series of hearings on AI. Leading experts from academia, industry, and government gave their reports. Several points became evident. First, AI is an immature technology. It's abilities in many areas are still relatively new. Second, the workforce is affected by AI. Whether the effect is overall positive, negative, or neutral remains to be seen. Third, AI requires massive amounts of data, which may encroach upon privacy or perpetuate bias, even when using data for good purposes. And, finally, AI has the potential to disrupt every sector of society in both anticipated and unanticipated ways.

 

      Now, chief among the Subcommittee's concerns, of course, are policy questions. It's dialing up the appropriate regulatory approach to AI to solve for the tensions between technological advancement and the legal and ethical considerations involved. It's examining whether the risks fall within any existing regulatory frameworks, and if so, whether those existing frameworks can adequately address the risks. Where a risk falls outside of an existing framework, an approach should consider whether modifications or additions to the existing framework are needed or better account for the addition of AI.

 

      So what is AI anyway? Oggie gave his definition. You'll hear it defined many different ways because it's, essentially, a computational technology that works and reacts in human-like ways. The idea is to train AI algorithms on vast amounts of collected data and to keep learning as they affect decisions going forward. Machine learning is one subfield of AI, where machines take data they learn for themselves. Where AI involves hard coding software – the specific instructions for a system to carry out – machine learning allows a system to learn and recognize patterns on its own and make its own predictions. This is often called predictive analytics or predictive modeling.

 

      Fast forward and let's look at how AI, smart data, and the gig economy will transform the future of work. In another ten years, the integration of AI, virtual reality, augmented reality, and human analytics will make your current office look as quaint and unrecognizable to you as the rotary phone. In the future, you may walk about an office full of computers. But these computers will look and feel profoundly different. Virtual reality headsets will create immersive holographic experiences. While less isolating, augmented reality glasses will layer virtual information atop the physical plane. Rooms and furnishings will feel different – more intuitive and designed to accommodate diverse networks of people who come together to solve difficult problems.

 

      Perhaps the most notable change will be that the lines between technology and space will blur. Embedded with smart sensors and speech recognition software, your workplace will take care of much of the administrative day-to-day – transcribing meeting notes, scheduling conference calls, responding to your routine emails, and generally serving as a dutiful member of your team. Spaces designed for your well-being will accommodate the very work styles, privacy expectations, and personality types of the teams that occupy them.

 

      We are already seeing today's companies adapting spaces to align with human needs and constantly changing workplace demands. Tomorrow organizations will be able to manage buildings, desks, and computers as never before. Supporting employees by giving them greater control over their environments, the data and AI brokered to orchestrate these changes will teach machines to anticipate and predicate desired future states – to go beyond sensing and responsiveness, to be able to speak to us intimately, assist with our projects and tasks, and radically improve our workplace fitness and augment performance.

 

      For illustration, imagine an application that relies on AI and smart data to report room occupancy, especially in real time. Think of your conference rooms and other meeting spaces – how valuable it would be to enter a building or an area and know what spaces are available by looking at a digital floorplate. To do this autonomously requires training machine learning algorithms to determine, based on sensor inputs, whether a person is in the room. The AI becomes better at guessing correctly with the more sensor data you feed it. Confidence levels are important here as you're asking Outlook, for example, to release a room reservation so someone else may use the space. It's also important to be able to differentiate people from other objects in the room, so training machine learning algorithms, or machine vision, to detect uniquely human features can improve accuracy. Once the AI can detect humans, then it can count how many people are present and so on. So you see how this goes, and it builds on itself.

 

      Other applications involve the use of sensor data to empower better human decisions effecting space allocation and furnishings in the workplace. These would be referred to as human-in-the-loop type applications, where the decision making is not totally autonomous. Sensor data about how frequently meeting spaces with certain attributes are used in comparison to others gets reported out through a web-based dashboard tool. Measuring space performance allows a facilities manager, then, to make more informed decisions about their capital spent to better meet the specific needs of employees as expressed through their own interactions with the space. It's collecting and making sense of high volumes of unstructured data about how space is used in the workplace.

 

      Now, transparency is trust when entering this realm. AI systems raise questions about permissions and data ownership, privacy and security. Privacy engineering and risk management jump to the forefront. Anonymization techniques are used to design around employee perceptions of individual monitoring or workplace surveillance. Other organizational and technical measures must be put in place to secure data. Cyberattacks are more likely to exploit vulnerabilities in AI systems. How far must one go with systems hardening and penetration testing in view of all the likely threat vectors in order to satisfy a commercially reasonable standard? At a minimum, a widely agreed upon standard for measuring the safety and security of AI products and applications should proceed any new regulations. The National Institute of Standards and Technology, or NIST, seems situated to be a key player in developing these standards, and I see a lot of government deferment to the NIST initiatives. However this shakes out, AI solutions require accountability, which means they should be able to demonstrate that they have the right processes, policies, and resources in place to minimize potential risks and adverse impacts to the individual and the public at large. Thank you.

 

Mr. James C. Cooper:  Thank you. I want to thank The Federalist Society for inviting me and it is a great honor to be on such an august panel. I'm, as you heard in the introductory remarks, I'm from the Federal Trade Commission, and we're a unique agency in the sense that we have both the consumer protection and a competition commission. In fact, the FTC, as probably many of you know, has been really the leading privacy and data security enforcer at the federal level since the dawn of the internet age, really the late 1990s until today. So in that vein, I want to talk about some of the privacy and Big Data issues -- or privacy and competition issues that Big Data raises. Before I do that, let me give my disclaimer that these remarks are mine and shouldn't be attributed to the Federal Trade Commission or any individual commissioner. In fact, much of what I want to talk about today is work that I'd developed while I was actually at Scalia Law School before -- I'm currently on leave at the FTC.

 

      So with those caveats out of the way, let me first talk a little bit about privacy and Big Data. And Michelle touched on this. The benefit of Big Data is the three to five V's. We have this these gigantic data sets – volume, veracity, variety, and some other V's that are escaping me right now. But the idea is that you can gain with these giant data sets -- you have a lot of statistical power to tease out unknown associations or correlations. And that is really the promise of Big Data, in the sense -- probably everyone has heard about one of the -- Google Flu Trends. That's an example. There've been methods that have been used to try to predict potential bad outcomes in a neonatal ICU setting. And then there's the more mundane – Netflix and Netflix recommendations and Amazon recommendations. But those are all applications of Big Data and algorithms. 

 

      So this same promise, though, of Big Data, which we've heard a lot about on the panel so far, also is the same -- you know, there are two sides to this coin. The other side gives rise to privacy concerns. The worry is that these large data sets coupled with powerful algorithms, machine learning, are going to able to suss out private, characteristics about us that we don’t want out there, that we want to keep private.

 

      One of the, perhaps what I call, the poster child for Big Data gone bad, is the Target example. Perhaps maybe some of you are aware of that, that several years ago, Target -- a father began seeing ads sent to his teenage daughter for cribs or prenatal vitamins, things like that, coupons, and he was offended. And so he went into Target and said, "How dare you send my daughter these things?" And they said, "Well, she was on our list because we thought she was pregnant." Turned out, she actually was pregnant. And what had apparently happened is that some clever analytics guy at Target said, well, we've got a baby shower registry, and so we know -- we have a set here, and then on the other side we can see what these people purchase in their daily lives. So we know a set of pregnant people and what they purchase, so we can kind of run that through some analytics and come out with a predication and then apply that to our larger population. And that's what they had done here. So Target is often held up as the poster child, again, for, as I said, Big Data gone bad – a reason we need to really clamp down.

 

      And while I think there are some legitimate fears, I want to highlight a couple of places where I think we should -- a couple reasons why I think we should proceed cautiously before we look at examples like that and say, hey, we have to stop.

 

      First, I think it's important to distinguish between two types of harms that can arise from a Big Data scenario like we just talked about. So imagine an algorithm that crunches a variety of data, whether it's purchasing habits or Fitbit feed or social media, for whatever reason, to predict diabetes risk. Okay? And there're two possible distinct harms that could be suffered someone who's been predicted, say, accurately so to actually be a diabetic. All right? So first, that person may feel there may be sigma, there may be some sort of embarrassment because this is a sensitive, personal, health condition. We all have different thresholds for what we are okay with being public or private, and that may very well be something that this person would want to keep private – that they have a medical condition. In fact, we have a law called HIPPA that is all about that, and one of other medical privacy laws at the state level. This type of intangible privacy harm is really no different than the type of intangible privacy harm that is covered by the normal privacy torts – intrusion into seclusion, publication of private facts, the Brandeisian torts.

 

      But there's a second type of harm, and this is, I think, the one that often gets more of the attention, but I don't necessarily categorize this as a privacy harm. The second -- that this person who's been accurately predicted to have diabetes may end up with, say, higher insurance rates, right? Somehow this data ends up in their insurance. So is this a harm to that consumer? Yes, it is. But is it a privacy harm? Is it something that falls under the ambit of privacy? Well, I would say that they're subtly different, and it leads to important policy conclusions, I believe. So what's happened here is a third party has taken some action based on accurate information, right? Now this, unfortunately, for the person who's been found out to have diabetes and now, perhaps, pays a higher health insurance rate, he's been on the bad side of what we call separating equilibrium. Before that, we had pooling – non-diabetics and diabetics together pay one rate. Now, I can more accurately figure out whose diabetic and give them a higher rate. Bad news for that person, right?     

 

      But there's a flip side, and the flip side is what we have to be cognizant of. The flip side is the people without diabetes now pay a lower rate, okay? The other part of that is that to the extent that this ameliorates what are called adverse selection problems, then you actually make the pie bigger. You've actually -- to the extent that people are kept from a market because they can't accurately signal their true type, that their actually a good type – that's called adverse selection. And that leads to the "Lemons Market" to the extent anyone's heard of that before – George Akerlof, Nobel Laureate. The notion that once you can get this separation, now you can draw more people into the market because prices go down, demand curves slope down, and you increase social welfare.

     

      So to the extent that this sort of separation that Big Data allows this type of separation by sussing out previously hidden characteristics, there's winners and there's losers and they offset. But it can also make the pie bigger. I say this as an economist – the pie, the social welfare. It actually can increase social welfare to a very old result. So to the extent that we think that these are harms, we have to realize that on the other side there's a game.

 

      There's an interesting paper a couple years ago by Liran Einav—he's an economist at Stanford—along with some various co-authors -- actually, two different versions, looking at this data set—one published in Rand, one published in American Economic Review, look at a situation where you have a group of subprime lenders -- or I should say a used car dealer that deals with a subprime market. So these are very -- we're almost at the usury cap. These are high default rates. They couldn't really tell -- everyone who came into their -- to apply for a loan essentially looked the same on paper. Very similar zip codes, same income, everything. It was impossible to tell the good credit risks from the bad credit risks within that pool. They were pooled together. This used car -- it's apparently -- it's anonymized, but it's a very large chain in Southern California that -- a used car dealer. Once they got the ability to create credit scoring, which is just another type of very early Big Data, or now one of the earliest types of Big Data, they were then able to suss out who in this pool of relatively large credit risks were actually, compared to the rest of the population, but within their population was actually very good credit risks. They just maybe had transitory bad luck. But then there are the deadbeats.

 

      So what happens? What happened is the good -- the more people came into the market because they could credible signal that they were actually good credit risks, even though they looked like bad credit risks. Bad credit risks no longer got loans. So people got better cars, more money, and the car dealer made more profit. This is the idea of the pie getting larger – more people were drawn into the market when you can get this type of separation.

 

      So let me say that just because this is, perhaps, the economics of the situation is not to say that we shouldn't be concerned about the person who's on the bad side of this separation, but I think it's important that we don’t deal with this through privacy laws. These really should be dealt with -- these are the areas of non-discrimination. They're important areas. And I think the good news is that we have, already on the books, a lot of laws that deal with this. The FTC, for instance, enforces the Equal Credit Opportunity Act, which prohibits basing credit on a whole bunch of characteristics we find that -- you know, race, gender, religion, age. Can't do that. There're also fair housing laws. There are employment laws. There's GINA, the Genetic Information Nondiscrimination Act, which prevents using genetic information for insurance or employment. Those could actually be very valuable when we talk about separation. But we, again, as a society, say there are limits. We can maybe suss this out, maybe we can get some efficiency, make the pie bigger, but we're okay by saying you use genetics to make decisions. Again, these are cuts. But these aren't necessarily privacy issues. I think they're more in the domain of -- should be dealt with more in the domain of non-discrimination.

 

      Finally, the FCRA, the Fair Credit Reporting Act—really the first Big Data statute that is also designed to -- it limits the ability -- it limits who can use credit reports. It limits how you can use credit reports, and it provides consumers with the ability to -- it provides transparency. It gives consumers the ability to look at and correct their credit reporting and get notified with adverse actions, why didn't I get this loan? So those sorts of things.

 

      We have a lot of things on the books. We may not have a specific privacy law like the GDPR or the upcoming California law, but I don't think -- what I'm really trying to say here is I don't think the U.S. should necessarily be pillaring for that because we have sectoral laws that are really risk based, okay? And we look at areas where we say this kind of discrimination on this sort of private information, even if we can figure it out, even if it creates efficiencies, we don’t want it. It may not be written into a grand federal privacy law, but nonetheless, these protections are there, and if we feel that there're gaps, it's an issue for Congress and we can think about that. When I say "we," I don't mean the Federal Trade Commission. I want to make that clear. I'm speaking only for myself.

 

      So, second—we're still thinking about Big Data and privacy—another thing I want to be hesitant and you see this in some of the calls for regulation in this area, is the notion of data minimization, meaning when you're going out and collecting data, just take what you need. Don’t take anything else at all. And I understand that and that makes sense from a privacy perspective, right? But when you, I think that the restrictions -- we come up with restrictions, they probably should be on the use of the data rather than on the collection side. It's not to say that there are some data that we don’t want to limit or make harder to collect. We already do that – again, healthcare. We do that with children. We already have protections on the books and if we want more protections, that's fine. But I think what we have to be careful with because of all the promise of Big Data and AI that's out there is we don’t know what these data may be able to do. We don’t know what could be left on the cutting room floor if we don’t collect it. So I think it's not to say that there shouldn't be reasonable limits on collection, but I don't think that data minimization is necessarily the way to do this. I think there's probably a smarter balancing of collection and use.

 

      And let me move -- a final thing I'll just quickly say on privacy, and Michelle touched on this, on some of these really interesting ethical issues that when I go back across the river as a law professor, these will make great law final exam questions. But I think that there are certainly very legitimate concerns about algorithmic bias. The idea of what are the training sets. You, perhaps, have heard the story about Amazon in the news. Amazon used an algorithm to help hiring decisions, and it was trained on the set of Amazon employees, which were mostly while males. And so they ended up picking out white males, and then they realized -- someone realized, like, hey there's something wrong here. We're not getting the diversity that we thought we would. And the reason is the training set. And that may be an apocryphal story. It was in the media. It doesn't necessarily mean it's true, but it's one of those, kind of like the Target example, that's held up there.

 

      So I think that these are legitimate questions, but I do think we have to be careful when we think in this area not to commit with the Nirvana fallacy, that we have to look at what is the benchmark. Often algorithms are more accurate and have less bias than the human counterparts. And I, again, will return to credit. Prior to credit scoring coming along, how were loans given out? Loans were given out by people who would -- you would go and you would ask for a loan, and they would look at you and look at some of your documents. But there're biases, conscious or unconscious, built into all of us.

 

      What we saw empirically is that once credit scoring came along and it became anonymous vision, it was done based on a number -- now, it's not to say that there's not discrimination in lending. I'm not saying it's been purged, but the data are pretty convincing that the biggest gainers from credit scoring were women minorities. That's who gained. People who previously were judged not credit worthy by human, now you have a score. The credit explosion that we saw in the '70s and '80s from credit reporting is mostly not from the while college educated male who could always get the loan; it's from the people who couldn't previously prove that they could get the loan. That's where we see it.

 

      I want to mention, just quickly, I said I'd talk about competition. I do want to just make a couple quick points on competition that Big Data is often looked at -- giant data sets are looked at as a barrier to competition. I think, and you see this, perhaps, because some of the largest tech platforms who live on data, they seem to have dominant positions, it seems to lead to the conclusion that well, these giant data sets are one of the problems. We need to do something about that. Often because of the notion of network effects, which leads to increasing returns to scale which may mean we end up with one dominant player in, say, the social media or search industries, to pull two out of the air. But I also think we need to be careful by merely focusing on large data sets as the key to dominance. I would say that a large data set is definitely not a sufficient condition to succeed and probably not even necessary. Look at the startups like—you may have heard of them—Uber, Airbnb, Instagram, Snapchat, just come to mind. None of those came with giant data sets. But yet, they rose to create industries—sharing industries—and dominate the sharing industries. And at the same time to post serious challenges in social media.

 

      I think the key—and this is some of the -- we're, at the FTC, holding these hearings on the competition and consumer protection in the 21st century, and we had some on Big Data last week. And one of the themes that came out of that is that the key, the Big Data in and of itself, the giant data sets of the billion observations are useless unless you have a smart, clever team who knows how to ask the right questions. And that's probably the key to being a competitor, not necessarily sitting on a billion data points because if you don't know what to do with them -- in fact, how Hal Varian, the Chief Economist of Google, had written a couple years ago in an article that Google, when they were doing their AB testing, are pooling to experiment, they pool a sample of less than 1% pf their data. They don’t need -- they have tons of data; they don’t need all of it to figure out how to hone their algorithms.

 

      The final thing I'll say on the competition side when it comes to Big Data is we just want to be careful not to punish success, and from a static -- we have to be careful about dynamic incentives from a static view. It's really easy to look at the large, entrenched social media or search platforms and say, "We have a problem and they all have data. We need to do something about it. Perhaps make them share their data sets." That's been out there as a possible solution. But just like intellectual property—that's really the only think I'll say about intellectual property here on this panel because I'm already getting out of my lane a little bit—we give exclusivity to create incentives. And this is a big -- incentives to produce dynamically. And this is a theme that runs through all of antitrust law, that you don’t punish the firm after you've encouraged them to compete and win. Now they've won and now you're going to punish them. Well, what sort of ex ante incentive does that provide to the marketplace? I think we have to be very cognizant of that as well.

 

      So just to sum up, we've seen throughout this panel and at least specifically privacy and consumer protection, that Big Data raises some really important issues. And this is why at the FTC we're holding the series of hearings, where we did the -- we just finished up with the AI hearings, two days of AI hearings yesterday. Last week, we did three days on Big Data and competition and consumer protection, and early next year, we'll be focusing on privacy, which'll probably touch on some of these issues as well. So with that, I'll yield my time over. Thank you.

 

Hon. David J. Porter:  Thank you, everyone. I'd like to give the panelists an opportunity to ask each other any questions they might have or to react to each other's comments, and then we'll open it up to the audience for questions. Anything from the panel? Okay, audience members? There are microphones on either side here. It's on.

 

James Boyajian:  Good afternoon. James Boyajian with Palace Entertainment. My question is about urgency. The leading innovators and disruptors of our time seem to disagree about how urgent we need to pass news laws and regulations to address gaps in the law in dealing with things like AI and Big Data. Two examples are Elon Musk, who recently stated that artificial intelligence is the greatest single existential threat to human life. On the other side of the table, you have Mark Zuckerberg, founder of Facebook, who disagrees with that view and believes that passing new regulations would stifle innovations in these areas. So what position would you take in terms of urgency in passing new laws? Would you say that it's urgent that we have new laws to address the threats posed by these new technologies, and if so, which law makers would be best positioned to do so? Would it be a proactive act of Congress? Would it be your agencies passing administrative regulations? Or would it be courts or the Executive Branch? Thank you.

 

Hon. Andrei Iancu:  Okay, well, since nobody's jumping in, let me just start by from an IP point of view to say that what I think is urgent is to make sure that the United States keeps innovating at the highest level possible as fast as possible. We need to stay competitive technologically in the first place in order to even get to the question you're posing about whether AI is a threat and regulations can benefit or stifle because if we don’t do that and we fall behind or meaningfully behind in some or all of these areas, we have significant other issues, including national security issues. So that's first and foremost.

 

      And second, so whatever we do from a government point of view, I think, needs to aim towards making sure we stay competitive technologically. In terms of whether and when we regulate the various issues presented by the panelists, whether they're legal or moral and ethical issues or the like my own personal view, speaking in my own personal capacity—I'd be thrilled to see what others think—I think we need to take it one step at a time. We need to see exactly what are the technologies we're dealing with and be very specific. Let’s not paint with a broad brush because if we do so, we could potentially create additional obstacles instead of solving problems, so let's be specific. What is the technology at issue? What threats to society does that technology pose? And then balance the pros and cons of regulation. The interference with the speed of innovation versus the need to protect society from the potential risks. So that's the kind of balanced approach I would take.

 

Michelle K. Lee:  I'm glad to jump in with some additional thoughts, adding to what Andrei said. It's interesting, Elon Musk – he believes that AI will lead to dystopia along with Stephen Hawking as well. And a bunch of other technologists believe that it will lead to utopia, meaning none of us will have to work. We can maintain the same quality of life and life will be lovely. I think it is all up to us. Technology can be used for good or bad, and it depends upon how we guide its use and what we permit it to do and how we permit it to enter our lives and control our lives. So that's just a point on that comment there.

 

      In terms of regulations and laws, it really does depend upon the technology area. So, for example, in the area of driverless cars, I mean, the safety of the vehicle tended to be regulated by the alphabet soup of federal agencies – National Highway Transportation Safety Administration, and the list goes on and on and on. The licensing and the insurance and operation of a vehicle tended to be state level. So you saw a whole bunch of states enacting legislations from these super permissive -- we really have no restrictions on autonomous vehicles in Arizona—which is why all the autonomous vehicle manufacturers test in Arizona and why you saw the accident, I think it was by Uber or whatever – that was in Arizona—versus New York which is extremely restrictive. And then, of course, local governments will have their restrictions as well.

 

      So it really depends upon, again, what issue you're trying to solve for and is it a medical AI system and what regulation would be appropriate. But to my points earlier and to Andrei's points, the technology is so new. I mean, if you talk about autonomous vehicles, we don’t even know what the form factor is. Some vehicles are completely -- aiming for complete autonomy. Others, more moderate, level three, user-driver intervention. And so how is any federal agency, with that many different solutions, able to regulate for all of that? And I think we need time. So in any new developing industry, my thought is is that you let the market forces define, you try to allow the innovation to move forward, you allow the free market forces to define the products and services, and eventually as it ripens, then there may be consideration for legislation and so forth.

 

Hon. David J. Porter:  The question included the Judiciary as a potential actor. I would just say that I think that's probably the least capable branch. I mean, of all the panelists here, I'm certain that I know less about this subject than any of them. Judges decide particular cases in controversies using existing laws. Judges don’t look prospectively and try to fashion rules, typically, to address existential problems. So I would think that the Judiciary would be the last place you'd look.

 

Michelle K. Lee:  What I will say is the issues are going to the courts, though, because --

 

Hon. David J. Porter:  They are.

 

Michelle K. Lee:  -- we saw that in terms of the iPhone and accessing the data through the back door. So all these issues are going to the courts, I think, at every level.

 

Hon. David J. Porter:  Yeah.

 

Mr. Shawn D. Hamacher:  I would just reiterate, also, being on the other side of the table from the regulators in the private sector, reiterate the comments that to some degree with have the cart before the horse. I think you have align on a set of standards first before you know what you're going to regulate, and therefore enforce. So that's important.

 

Hon. David J. Porter:  Can we go to this side?

 

Questioner 2:  I have a question about block-chain technology. I know it's not AI, but I'm hoping it's close enough. And my question simply is what does the panel see is the pressing intellectual property issues that are going to develop to -- going to affect the development of that technology?

 

Dr. Ognian “Oggie” Shentov:  I can address this thing in part. Block chain is a terrific algorithm that provides for decentralized and confident -- for decentralized distribution of data that is very difficult to fake, to alter, or to change. And the good part about it is that it is not central, so it is distributed in a manner that really prevents, almost prevents, alteration. And the other good side of it is that is essentially avoids the middle man. So the chances are that a lot of transactions that took a long time in the past would probably need a handshake at the end and you may avoid lawyers, actually, frankly, if the mechanism is set up [for] people to transact in a way that allows them to do it with no fear of alteration. I think that may be a great idea.

 

      Specifically in the context of intellectual property, I think it probably has application in areas where it's important when some concept was invented, who invented that concept? So potentially to resolve ownership issues, which we all -- it appears that all of us anticipate that the ownership issues could be pretty big. So if you use block chain, you may be able to establish exactly who said what to whom and when. I think it is a terrific prospect. We probably may need to have another session specifically on this one. Thank you.

 

Hon. David J. Porter:  Yes, ma'am.

 

Michelle Roberts:  Good afternoon. Michelle Roberts of the New York Young Lawyers Chapter. Many of the panelists talked about who are the winners and who are the losers from Big Data. One of the winners, I hope, will be investors who can achieve better outcomes and better financial futures with more information and more transparency related to their investments. And certainly Wall Street is licensing and aggregating the Big Data sets that we've been discussing and mining them and harvesting them for clues about the economy and markets. And that begs the question from government and regulators as to whether or not this information is disclosed. Is it possibly material, non-public information if it needs to be licensed and mined and aggregated in some of the ways that we've been discussing today? So my question to the panelists is have you considered Big Data and its implications as it relates to regulation FD or insider trading? Thank you.

 

Hon. David J. Porter:  You need an SEC commissioner.

 

[Laughter].

 

Hon. Andrei Iancu:  Okay, well, just to have somebody speak on the panel, again, I'm at the U.S. Patent and Trademark Office. I don’t view us a regulator, per se. I will say you raise a very important question. From an IP point of view, IP is based in large part on disclosure. Usually there is a quid pro quo. This is in the traditional patent sense, copyright sense, even trademark sense, as opposed to a trademark secret sense. So when applications are made for patents, a requirement is to disclose, publicly, the basis for the patent and exactly what you have come up with. If that is -- it is going to raise issues because if we're talking about machine learning, especially vis-à-vis Big Data type of inventions, sometimes that might call into a disclosure question -- into question the disclosure requirements, and that could be quite problematic from a privacy point of view. It hasn't really come up yet, I don't think, in any meaningful way because we're not quite there for those types of innovations.

 

      The other side of intellectual property that we do have to be mindful of is trade secrets, and for the entities and the people who want to protect that type of data, we do have to have appropriate laws in place to protect its secrecy. And that is another form of intellectual property. Luckily, we do have the Defend Trade Secrets Act that Congress passed a few years ago. I think Michelle was in position at that time, and it is a very good piece of legislation that can help in this regard.

 

Hon. David J. Porter:  I had a follow-up question on that for the two PTO directors. In copyright law, the fundamental distinction is between ideas and expression. And if you have, through AI machines generating expressions, what would -- I guess the point of that distinction is to protect the unique human agency that's involved in expressing particular propositions. But if it's a machine generating that proposition, what would be the point of giving it copyright protection?

 

Michelle K. Lee:  So there's a case, a copyright case, Naruto v. Slater, and I think some of you may have heard about it. Basically, of all things, a monkey took a selfie, photograph of himself, and the question is, who has copyright ownership to that photograph? And the court held that the non-human monkey could not. But that's the issue which is who will have ownership to these non-human created expressions, inventions, and so forth. And I think what we need to do is we need to look back at the underpinning of our intellectual property system. And it's, according to the Constitution, right, "to promote the progress of science and the useful arts." So what does our system need to look like in order to best promote the progress of science and the useful arts?

 

Hon. Andrei Iancu:  So, Your Honor, let me just address -- to piggyback on Michelle's last point. First of all, Naruto's lawyer was sitting here. I saw him. He must have just left probably before you asked the question. But Naruto did have a lawyer that represented him in the action. And it was a fun case. But it addressed the question under the current statute, who is an author? Can an animal, a non-human—well, an animal in that case—be an author? I would say that that's a different question from whether a machine can be an author or an inventor because while we might not have an interest as a society to promote creative acts by monkeys taking selfies, for example, or creating art, we might have an interest as a society in promoting, and therefore protecting and rewarding machines created by humans to create further technology or further art. That is a policy debate that needs to be had. I don't think we've had it yet as a country. The statutes are currently as they are, but in decades or hundreds of years now -- but it is a different question—also from a judiciary's point of view if a case comes up—I do think it's a different question from whether the animal, who was not created in any way or programed in any way by a human, has those rights.

 

Hon. David J. Porter:  Okay. Yes, sir?

 

Questioner 4:  So this is drawing from Mr. Cooper's comments, but certainly happy to hear from anyone. If we're talking about restricting the use of data versus the collection of data, how do you strike the balance between doing that approach and protecting trade secrets? If we're talking about things that are difficult to patent, I can understand not wanting people to have to put too many cards on the table. But at the same time, we're talking about applications that seem difficult or maybe even impossible to detect if they're not being disclosed to the FTC or whomever else. So how do you strike that balance?

 

Mr. James C. Cooper:  So is the question -- when you're talking about use and disclosure, I'm talking about collection of data from consumers. And so you're talking about trade secrets or…? I'm sorry, I just want to make sure I understand the question.

 

Questioner 4:  Yeah, so if the method of analyzing or using data is what we're regulating versus regulating the collection, how do you do with without making someone disclose too much --

 

Mr. James C. Cooper:  Oh, I see. Yeah, okay. I understand. Yeah, no, that's a good question as far as -- and I don't think I'm necessarily saying -- what you're talking about may be—I don't want to put words in your mouth—something like algorithmic transparency, that, okay, so this how we're -- this is what we're doing with the data, and we want to make sure that's transparent, and we want to disclose that to a regulator. I don't think you need to look at what's in the black box and necessarily have that disclosed. I think you just want to look at what the outcomes are.

 

      So going back to my privacy versus discrimination dichotomy. If you're having disparate outcomes from an algorithm, well, you'd look at the outcomes. You don’t necessarily need to know -- in fact, I think that algorithmic transparency is somewhat overrated because consumers don’t read a privacy policy. Consumers don’t read anything. Are they going to really -- because there're lots of calls, and I don’t want to pick on certain laws of other jurisdictions, but that these algorithms—even down to the code—need to be transparent. I'm not really sure how useful that would be.

 

      So the same token, I don’t necessarily -- when I say the difference between restriction and use, what I really mean is you want to focus on—I'm sorry, between collection and use—is you want to focus on practices that end up being harmful to consumers in some ways. So you want to focus on harm to consumers, not ex ante, prohibits certain uses in sort of per -- the analogy in antitrust would be like a per se rule – we're not going to allow anyone to do this; it's just illegal – as opposed to let's let you collect data. But if you use it in a way that harms privacy, that is discriminatory in a way that we as a society don’t like, then we'll go there. But I don't think that necessarily would require disclosure. Now, maybe if you got into the nuts and bolts of an FTC action, maybe it would -- or any action, it would be part of discovery. But we can already deal with that stuff through the normal courts. I don't know if that answers your question, but that's my answer.

 

Hon. David J. Porter:  I received, about two minutes ago, I received a signal that we have five minutes left. So let's try to handle the next few questions in about a minute each if possible. Yes, sir.

 

Carl Domino:  Thank you. Carl Domino. There's much news about a possible trade war with China. That has two dimensions, what is physical goods—which is handled by tariffs or competitive nature—but the other is intellectual property, which we read is mandated transfers by companies that want to go over there and/or stealing IP. In your comments, Director, you indicated that they were increasing their patents by 24 percent a year for over a decade. Are they getting anywhere near the patent portfolio where it's no longer their interest not to obey international norms of IP patent protection?

 

Hon. Andrei Iancu:  It's a good question. And they have -- so in China, they have changed their IP system and their patent protection system over the past number of years. They have continuously, in some respects, improved their system. In many respects, the Chinese IP regime has come closer to international standards. In other respects, the IP protection regimes in China are still lacking. And we still see significant issues vis-à-vis the treatment of IP, especially IP from foreign companies, such as U.S. companies. So we're paying very close attention to that aspect. And my main point in my opening remarks is that irrespective of all that—and all that is really important—irrespective of all that, the United States must continue to innovate on our own terms to make sure that we stay competitive no matter what they do over there.

 

Michelle K. Lee:  If I could add one quick point to that, on the issue of China and the U.S. and the number of patents, I think it's important not to just look at the numbers because there are patents that can be filed in China that are unexamined and you have some rights. So our patents are examined, and it is true that the Chinese government has been setting quotas and incentives for local industries in given areas and they have been giving subsidies to folks to file patents. Well, if you're a communist system and you're going to incentivize a quota, you will get what you ask for, just like they had in the system where they had to meet a certain quota of nails. So people produced lots of nails that were really tiny that didn't serve the purpose.

 

      So all I would say is let's be careful. I mean, we clearly need to focus on the innovation in our country and incentivizing it and keeping it strong. But on the other hand, the mere number alone is not enough. And I would commend you to look at a book called AI Superpowers: China, the Silicon Valley, and the New World Order. And we are in the first of nine innings in the area of artificial intelligence. And what the book says is that in the area of novel inventions, the U.S. is still ahead. In the area of implementation, China is ahead. But who will prevail at the end? Still to be determined. We're only in the first inning.

 

Hon. David J. Porter:  I'm sorry, we are out of time. But thank you to our panelists for a great discussion.

1:45 p.m. - 3:15 p.m.
Joint Employment: The Unintended and Unpredictable 'Employment' Relationship

2018 National Lawyers Convention

Topics: Labor & Employment Law
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

Share

Event Video

Description

The vast web of federal and state laws protecting employees stands or falls on a single concept: Is there an employment relationship? Payment of overtime, responsibility for employment taxes, union obligations, responsibility for workplace discrimination, workers compensation – every employment law obligation depends on the existence of an employment relationship. 

Thus, it may be surprising to some that most employment laws do not define who is an employer or who is an employee. The Fair Labor Standards Act, for example, defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee,” and an “employee” is “any individual employed by an employer.” The National Labor Relations Act also makes us dizzy with circular definitions: an “employer” is “any person acting as an agent of the employer, directly or indirectly” and an “employee” is “any employee.”  

The result: Whether an employment relationship exists has been left to the vagaries of agency guidance and decisions. In its 2015 Browning-Ferris decision, the NLRB expanded the definition of “joint employment” to include employers who share direct, indirect, potential or even “ultimate” control over a worker. In a 2016 Administrator’s Interpretation, the Labor Department similarly expanded the definition of joint employment, declaring that “employment generally should be defined expansively” under the FLSA, unrestrained by the concept of control found in the common law concepts of employment. Suddenly, many businesses faced investigations regarding activities of subcontractors, and franchisors were named as defendants for alleged violations by franchisees.   

DOL has withdrawn its 2016 Administrator’s Interpretation, but has yet issued no replacement guidance. Browning-Ferris still stands, although the NLRB has announced its intention to issue regulations regarding joint employment. This panel will explore whether and how the key concepts of employment, employer and employee should be defined under our nation’s employment laws: By Congress, the Courts, or agencies? Adopting one definition or many? Based on statutory definitions or the common law?

  • Prof. Richard Epstein, Laurence A. Tisch Professor of Law and Director, Classical Liberal Institute, New York University Law School
  • Mr. Richard F. Griffin, Jr., Of Counsel, Bredhoff & Kaiser, PLLC  
  • Hon. Philip A. Miscimarra, Partner, Morgan & Lewis
  • Moderator: Hon. Timothy M. Tymkovich, United States Court of Appeals, Tenth Circuit

Speakers

Event Transcript

Hon. Timothy M. Tymkovich:  Let’s go ahead and get started. Good afternoon. If somebody could get the doors, please, that would be helpful. My name is Tim Tymkovich. I’m the Chief Judge of the Tenth Circuit Court of Appeals, headquartered in the Wild, Wild West, Denver, Colorado, and it’s a pleasure to have a panel like this because it’s a bit of a Wild, Wild West in labor and employment. It’s also interesting to come off a panel discussion on stare decisis, our lunchtime topic, because there’s going to be many elements of that in today’s discussion. The issue that we’re going to discuss is the vast web of federal and state laws protecting employees stands or falls on a single concept: Is there an employment relationship? Payment of overtime, responsibility for employment taxes, union obligations, responsibilities for workplace discrimination, worker’s compensation, every employment law obligation depends on the existence of the employment relationship.

 

      That may be surprising to some that most employment laws do not define who is an employer or who is an employee. The Fair Labor Standard Act, for example, defines an employee as any person acting directly or indirectly in the interest of an employer in relation to an employee, and an employee is any individual employed as an employee. The National Labor Relations Act also makes us dizzy with circular definitions. An employer is a person acting as an agent of the employer directly or indirectly, and an employee is any employer, and on, and on, and on.

 

      Well, today’s panel is going to try to make some sense of that. As you can see our three member panel is only two, at this point. And so, we’ve had to juggle things a bit. We’re going to start with Professor Richard Epstein of the NYU Law School, a prolific writer and thinker in this area. And he’s going to offer some broad topics about the subject matter before we get into the weeds. Our second speaker’s Dick Griffin, who has joined us as a former member of the Nation Labor Relations Board, and in 2012 he was the recess appointment to the NLRB by President Obama. He was then nominated by President Obama and confirmed by the U.S. Senate as General Counsel of the Board where he served until October 2017.  Our missing speaker is Phil Miscimarra. He’s a partner Morgan & Lewis and has a long history working on employment matters. He’s the former chairman of the U.S. National Labor Relations Board, and he currently leads Morgan & Lewis’s NLRB practice. With that, let’s begin with Professor Epstein.

 

Professor Richard Epstein:  I have to stand because I can’t look into the light. Well, now that I’m going first I will give a slightly different speech than the one I was intended to. And I’ve given an immense amount of thought and preparation to this. This is actually a topic of great importance in terms of what’s happened, and the judge, I think, actually laid on the line how much churns on so much little. The first thing I want to do is to pose a kind of a paradox, and then ask yourself how it’s resolved in one system or another. And the paradox is that the question about the relationships between an independent contractor and an employee, for example, is something which exists in common law as well as existing in circumstances under these variety of statutes.

 

      If you look at all of the literature that has accumulated, it turns out that 99 percent of the literature that accumulates is on the statutory definition, and there seems to be nothing close to the level of angst that exists on this same question when you start to look at it as a common law matter. That doesn’t mean that there are no issues of common law, and I’ll try and describe what they are in a second, but I think it’s important to ask the question: Why is it that the problem seems to be relatively easily solved in the private law context, and solved only with enormous difficulty when we start to move to the public law context? And so let me -- so back to the topic, which begins, "What do we think about the categorization of relationships as a matter of common law and how does it work?"

 

      And you could go way back, not only to common law, but to Roman law and what you typically see in virtually all of these areas is that there are kinds of stark oppositions that are described by the particular doctrines in question. So, for example, in property we have the difference between a licensee and a lessee. And in employment we have employee and the independent contractor. And in other kinds of areas we have contracts for sale and contracts for hire. And it turns out that these are defined as relatively pure types, and what you then do, very usefully, is to attach various incidents to these things so that when you’re trying to solve particular disputes, you will know what’s going to happen with respect to unallocated terms. And so you’d have to ask such questions, "Which way is the risk of all this going to go under a bailment contract?" or something of the sort.

 

      And what happens is, for the most part, when people are organizing their private affairs, what they tend to do is to stay with relatively clear and polarizations because it is generally easier to work through something in the standardized form than it is to try and create some blend that’s going to sit in the middle. And so what happens is you develop a fairly large body of law dealing with these pure cases filling in, by implication, the terms that are needed, and to the extent that you have judges whose sole concern is trying to figure out how you make these more efficient kinds of relationships, there is, generally, a tendency for these things, when they start to fill in, to be sensible default terms.

 

      Once the default terms turn out to be sensible, there is now less and less desire to get rid of them. Sometimes they are going to be codified. And when they’re codified, they are basically taking the common law stuff and putting it in a tidy bundle. And so you can see in partnership agreements, for example, “All the terms that are not specified in this agreement shall be governed by the California Partnership Act.” Basically you incorporate the defaults into the basic arrangement.

 

      Now, that’s the basic rule, but what happens is sometimes when people want to engage in various kinds of situations, they would like to innovate. And in order to innovate it sometimes turns out that you cannot keep these pure cases together and you have to roll kind of complicated situations. This problem first arose very early on in connection with the forms of action. If you have a kind contract in which there’s a lease with an option to purchase, and you had to bring an executory action, is it a contract for sale or hire? And if you guess the wrong form you could be out of court.

 

      Well, we cured that problem with a single form of action under the federal rules. And then what happens is you start to deal with these mixed cases. You’re doing so under a principle of freedom of contract, and if the parties decided that they want to create some kind of intermediate form, it’s perfectly easy for them to do so. They draft something, and they then create whatever relationship they want. And so what will happen is they say, “With the exception of A, B, and C, the relationship here is that of an independent contractor, or with the exception of D, E, and F, the relationship here is one of an employment relationship.”

 

      And the only thing that a court has to do under these circumstances, for the most part, is to figure out what the base is and then to make the particular corrections. And it turns out it doesn’t matter how many times you have to do this, you can do it in all these cases. If firm A, or line of business A, goes in one way or firm B, and line of business B goes another way, there’s no need to have a reconciliation of the two positions. It turns out that what you now do it develop a divergence of forms, and for the most part these, then, become paradigmatic types—in some cases themselves—and the system goes on quite merrily. And so within the private kind of framework the borderline question, essentially, yields for the most part to the general principle of freedom of contract.

 

      Now, there is an exception to this. And the exception in many of these cases has to do with externalities. So one of the common questions that you’ve had about independent contractors, an employee, is if you call somebody an employee, you’re responsible for the actio