Remedying Structural Separation-of-Powers Violations

Kent H. Barnett, To the Victor Goes the Toil—Remedies for Regulated Parties in Separation-of-Powers Litigation, 92 N.C.L. Rev. (forthcoming, 2014), available at SSRN.

This coming Term, the U.S. Supreme Court is set to decide National Labor Relations Board v. Noel Canning, a case involving the constitutionality of the President using his recess appointment power to fill various vacancies on the National Labor Relations Board (NLRB). Unless the Court ducks the issues presented in the case, Noel Canning promises to become yet another important case in a string of recent decisions involving structural challenges to federal administrative agencies—challenges that have sought to limit agencies’ power based upon the Appointments Clause, the President’s recess appointment power, the President’s general Article II powers, and the judiciary’s Article III powers. For example, in 2010 in Free Enterprise Fund v. Public Company Accounting Oversight Board the Court held that the dual for-cause restrictions placed on removal of members of the Public Company Accounting Oversight Board (PCAOB) violated separation-of-powers principles. Similarly, in 2011 in Stern v. Marshall the Court held that a non-Article III bankruptcy court could not constitutionally enter a final judgment on a state-law tortious interference counterclaim.

Even though significant attention has been given to the constitutional merits of these and other recent cases, exceedingly little attention has been given by litigants, the courts and scholars to a subsidiary question lurking in the background of the cases: What should the proper remedy be when separation-of-powers violations are found to exist in the structures of federal administrative agencies? Professor Kent Barnett, an assistant professor at the University of Georgia School of Law, quite perceptively identifies this little-noticed question and begins to try to answer it in a forthcoming article titled To the Victor Goes the Toil—Remedies for Regulated Parties in Separation-of-Powers Litigation, which is soon to be published in the North Carolina Law Review. Given that the Noel Canning case is looming on the Court’s docket and various other structural challenges have been brought challenging the newly-formed Consumer Financial Protection Bureau (CFPB), Professor Barnett’s article is extremely timely. Indeed, it is a “must read” for courts and litigants involved in structural separation-of-powers cases as well as constitutional and administrative law scholars.

At its heart, Professor Barnett’s main claim is that when faced with remedying structural separation-of-powers violations, courts often order ineffectual remedies—such as simply severing the structural defect from the agency’s organic act but otherwise leaving the agency fully operative—that fail to compensate regulated parties for harm suffered. Nor do the sorts of remedies often ordered by courts generally prevent future harm, achieve deterrence or incentivize regulated parties to seek redress for structural separation-of-powers violations, according to Professor Barnett. Hence, in structural separation-of-powers cases, Professor Barnett believes that courts often fail to order remedies that further three key remedial values: (1) providing compensation; (2) incentivizing the pursuit of redress; and (3) deterring violations.

To support his basic claim about the ineffectiveness of the kinds of remedies often ordered by courts, Professor Barnett walks through the varying remedies ordered by the federal courts in a number of important structural separation-of-powers cases, including Buckley v.Valeo, Free Enterprise Fund v. Public Company Accounting Oversight Board, Stern v. Marshall, and Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board. For example, he describes how the Court in Free Enterprise Fund—after holding unconstitutional the double for-cause restrictions on removal of members of the PCAOB—did not prevent the PCAOB from taking action under the Sarbanes-Oxley Act. Instead, as Professor Barnett notes, the Court simply severed the offending provision from the statute, rendering the PCAOB’s members “removable at will and thus sufficiently subject to presidential oversight to cure the structural defect.” The Court then remanded the matter to the PCAOB for further proceedings, leaving the board fully operative. According to Professor Barnett, this meant that “[u]ltimately, the prevailing litigant incurred significant costs only to end up in the same place it began, except this time before a potentially resentful board.” It also meant that “future litigants—especially those that repeatedly interact with an agency—might think it wise to ignore other structural defects, no matter how obvious or serious.”

After making his central claim that the kinds of remedies that courts often order in structural separation-of-powers cases like Free Enterprise Fund are ineffectual, Professor Barnett turns to propose some possible solutions and responses. Specifically, one very simple and very practical suggestion he makes to improve remedies is that parties should better brief the issue of remedies for the courts. This common-sense suggestion is one that parties should take to heart and that judges would likely welcome. After all, Professor Barnett notes that internal Supreme Court documents indicate that then-Justice Rehnquist lamented the lack of briefing on remedial issues in Buckley v. Valeo involving the Federal Election Commission.

Two other possible means of improving remedies that Professor Barnett mentions include: (1) having courts order more potent injunctive relief, such as more frequently requiring Congress to reconfigure the agency in a constitutionally sound manner as the Court did in Buckley v. Valeo; and (2) having Congress legislate remedies by statute by, for instance, providing scheduled, monetary damages for structural harms. However, both these proposals, as Professor Barnett himself acknowledges, might pose their own problems and are likely to be controversial. Hence, Professor Barnett raises two additional potential responses: (1) more judicial candor about the judiciary’s inability to render effective structural remedies for regulated parties and about the aspirational nature of structural limitations; and (2) a reassessment of the interest regulated parties have in pursuing structural violations.

In the end, all of the possible responses that Professor Barnett suggests are really just sketches—or tentative ideas—relating to proposed solutions. But the sketches are nonetheless quite useful because, at a minimum, they should help to kick start a broader conversation among scholars, litigators, legislators and judges about how to best deal with remedies in structural separation-of-powers cases. This is likely the greatest contribution of Professor Barnett’s article; it should help to bring more attention to an important topic that has to date largely been ignored and that is very timely given ongoing litigation involving the NLRB and CFPB.

If Professor Barnett’s article does indeed succeed in kick starting additional discussion about the adequacy of remedies for structural violations, care should be taken to view his article as merely the very useful opening of conversation on the topic—not the end. This is because, as Professor Barnett himself acknowledges, the article somewhat narrowly assesses the suitability of structural remedies through the lens of a regulated party’s interests. Other competing interests and values, like the importance of avoiding regulatory chaos and the proper role of the courts, are given some limited attention, but these interests seem to be treated by Professor Barnett as secondary to the interests of regulated parties. Professor Barnett does not hide this fact but rather quite frankly acknowledges that his goal in the article is assessing how best to protect and vindicate the interests of regulated parties. Hence, future conversations about the adequacy of remedies for structural violations—which Professor Barnett’s article hopefully will help to get going—would benefit from other more diverse vantage points being brought to bear, including the vantage point of various governmental interests.