SPEAKERS CONTENTS INSERTS
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FEDERAL AGENCY COMPLIANCE ACT
COMMERCIAL AND ADMINISTRATIVE LAW
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
OCTOBER 27, 1999
Page 2 PREV PAGE TOP OF DOCSerial No. 40
Printed for the use of the Committee on the Judiciary
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Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
Page 3 PREV PAGE TOP OF DOCMARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
DAVID VITTER, Louisiana
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
Page 4 PREV PAGE TOP OF DOCSubcommittee on Commercial and Administrative Law
GEORGE W. GEKAS, Pennsylvania, Chairman
LINDSEY O. GRAHAM, South Carolina
STEVE CHABOT, Ohio
SPENCER BACHUS, Alabama
MARY BONO, California
JOE SCARBOROUGH, Florida
DAVID VITTER, Louisiana
JERROLD NADLER, New York
TAMMY BALDWIN, Wisconsin
MELVIN L. WATT, North Carolina
ANTHONY D. WEINER, New York
WILLIAM D. DELAHUNT, Massachusetts
RAYMOND V. SMIETANKA, Chief Counsel
SUSAN JENSEN-CONKLIN, Counsel
JAMES W. HARPER, Counsel
C O N T E N T S
October 27, 1999
TEXT OF BILL
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Gekas, Hon. George W., a Representative in Congress from the State of Pennsylvania, and chairman, Subcommittee on Commercial and Administrative Law
Bernoski, Ronald, Social Security Administration, Office of Hearings and Appeals, President of the Association of Administrative Law Judges, Inc., Milwaukee, WI
Campbell, Hon. Ben Nighthorse, a U.S. Senator from the State of Colorado
Cohen, Sheldon S., Morgan, Lewis & Bockius LLP, Washington, DC
Fried, Arthur J., General Counsel, Social Security Administration, Baltimore, MD
Pickering, John, past Chair, Senior Lawyers Division of the American Bar Association, Wilmer, Cutler & Pickering, Washington, DC
Schultz, William, Deputy Assistant Attorney General, Civil Division, United States Department of Justice, Washington, DC
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LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Bernoski, Ronald, Social Security Administration, Office of Hearings and Appeals, President of the Association of Administrative Law Judges, Inc., Milwaukee, WI: Prepared statement
Campbell, Hon. Ben Nighthorse, a U.S. Senator from the State of Colorado: Prepared statement
Cohen, Sheldon S., Morgan, Lewis & Bockius LLP, Washington, DC: Prepared statement
Federal Courts Study Committee: A report dated April 2, 1990
Fried, Arthur J., General Counsel, Social Security Administration, Baltimore, MD: Prepared statement
Gekas, Hon. George W., a Representative in Congress from the State of Pennsylvania: Prepared statement
Pickering, John, past Chair, Senior Lawyers Division of the American Bar Association, Wilmer, Cutler & Pickering, Washington, DC: Prepared statement
Schultz, William, Deputy Assistant Attorney General, Civil Division, United States Department of Justice, Washington, DC: Prepared statement
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Staple, Walter K., United States Court of Appeal for the Third Court: Prepared statement
FEDERAL AGENCY COMPLIANCE ACT
WEDNESDAY, OCTOBER 27, 1999
House of Representatives,
Subcommittee on Commercial,
and Administrative Law,
Committee on the Judiciary,
The subcommittee met, pursuant to call, at 2 p.m., in Room 2237, Rayburn House Office Building, Hon. George W. Gekas [chairman of the subcommittee] presiding.
Present: Representatives George W. Gekas, Steve Chabot and Jerrold Nadler.
Staff present: Raymond V. Smietanka, Subcommittee Chief Counsel; Susan Jensen-Conklin, Subcommittee Counsel; Sarah Zaffina, Subcommittee Staff Assistant; Perry Apelbaum, Minority General Counsel; and David Lachmann, Minority Professional Staff Member.
OPENING STATEMENT OF CHAIRMAN GEKAS
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Mr. GEKAS. The hour of 2 o'clock having arrived, the committee will come to order.
Pursuant to the rules of the House, this hearing cannot proceed until there are at least two members in attendance. What we have done thus far is remained faithful to our concept of opening the hearings and meetings on time, even at the risk of having to wait until an appropriate time when someone else should appear.
Having said that, the gentleman from New York wanders into the doorway, enters the space reserved for the members of the subcommittee. He is about to take his place; and, therefore, a quorum has been constituted for this hearing.
This gives us double pleasure because it means that we do not have to make our special guest and first witness, Senator Campbell, wait unduly to participate in the scope of this hearing. He is here, as we all are, to revisit an issue which we thought was well settled and perhaps completed last term when the House of Representatives overwhelmingly approved a measure that would put the controls on what we have begun to term nonacquiescence on the part of our agencies. It is the war that exists between what the law on the one side dictates and what agencies consider their policy, which, in effect, would trump that law.
This has been very difficult to explain to our constituents back hometo say that everyone is expected to comply with the law, to follow the rule of law, and then to say or to allow a presumption or an implication that some agencies do not have to follow the law.
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[The text of the bill, H.R. 1924, follows:]
H. R. 1924
To prevent Federal agencies from pursuing policies of unjustifiable nonacquiescence in, and relitigation of, precedents established in the Federal judicial courts.
IN THE HOUSE OF REPRESENTATIVES
MAY 25, 1999
Mr. GEKAS introduced the following bill; which was referred to the Committee on the Judiciary
To prevent Federal agencies from pursuing policies of unjustifiable nonacquiescence in, and relitigation of, precedents established in the Federal judicial courts.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ''Federal Agency Compliance Act''.
SEC. 2. PROHIBITING AGENCY NON-ACQUIESCENCE IN APPELLATE PRECEDENT.
(a) IN GENERAL.Chapter 7 of title 5, United States Code, is amended by adding at the end the following:
Page 10 PREV PAGE TOP OF DOC''§707. Adherence to court of appeals precedent
''(a) Except as provided in subsection (b), an agency (as defined in section 701(b)(1) of this title) shall in civil matters, in administering a statute, rule, regulation, program, or policy within a judicial circuit, adhere to the existing precedent respecting the interpretation and application of such statute, rule, regulation, program, or policy, as established by the decisions of the United States court of appeals for that circuit. All officers and employees of an agency, including administrative law judges, shall adhere to such precedent.
''(b) An agency is not precluded under subsection (a) from taking a position, either in an administrative proceeding or in litigation, that is at variance with precedent established by a United States court of appeals if
''(1) it is not certain whether the administration of the statute, rule, regulation, program, or policy will be subject to review exclusively by the court of appeals that established that precedent or a court of appeals for another circuit;
''(2) the Government did not seek further review of the case in which that precedent was first established, in that court of appeals or the United States Supreme Court, because
''(A) neither the United States nor any agency or officer thereof was a party to the case; or
''(B) the decision establishing that precedent was otherwise substantially favorable to the Government; or
''(3) it is reasonable to question the continued validity of that precedent in light of a subsequent decision of that court of appeals or the United States Supreme Court, a subsequent change in any pertinent statute or regulation, or any other subsequent change in the public policy or circumstances on which that precedent was based.''.
Page 11 PREV PAGE TOP OF DOC (b) CLERICAL AMENDMENT.The table of sections for chapter 7 of title 5, United States Code, is amended by adding at the end the following new item:
''707. Adherence to court of appeals precedent.''.
SEC. 3. AVOIDING UNNECESSARILY REPETITIVE LITIGATION.
(a) IN GENERAL.Chapter 7 of title 5, United States Code, is amended by adding at the end the following:
''§708. Avoiding unnecessarily repetitive litigation
''In supervising the conduct of civil litigation, the officers of any agency of the United States authorized to conduct litigation, including the Department of Justice acting under sections 516 and 519 of title 28, United States Code, should seek to ensure that the initiation, defense, and continuation of proceedings in the courts of the United States, within, or subject to the jurisdiction of, a particular judicial circuit, avoids unnecessarily repetitive litigation on questions of law already consistently resolved against the United States in 3 or more circuits.''
(b) CLERICAL AMENDMENT.The table of sections for chapter 7 of title 5, United States Code, is amended by adding at the end the following new item:
''708. Avoiding unnecessarily repetitive litigation.''.
MR. GEKAS I know some of the opponents of this legislation will find ways to try to convince us that they are correct in it, and we understand that. We will give them full hearing on that matter, without question. But, in the end, it is not a secret that the chair of this committee favors passage of this legislation and will move the bill to a markup as soon as it is expeditious to do so. Hoping that it follows the pattern of last term, where on the floor it will receive a bipartisan vote of approval in adequate numbers.
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[The prepared statement of Mr. Gekas follows:]
PREPARED STATEMENT OF GEORGE W. GEKAS A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA, AND CHAIRMAN, SUBCOMMITTEE ON COMMERICAL AND ADMINISTRATIVE LAW
Today's hearing concerns one of the oldest boundaries in the United States, one that conjures up an image of American history and growth. The boundary is that presented by the Red River between Texas and Oklahoma.
While the Red River has marked the boundary of the two states only since Oklahoma's admission to the Union in 1907, it has been the northern border of Texas since Secretary of State John Quincy Adams negotiated our acquisition of Florida with Spain in 1819. The Louisiana Purchase of 1803 had given the United States possession of vast French territories beyond the Mississippi River which had previously belonged to Spain. The borders of that province were somewhat vague and it remained for the United States to settle them precisely with Spain which still was in possession of Mexico. The Transcontinental Treaty negotiated by Adams extended the western boundary of Louisiana all the way to the Pacific Ocean and its southern boundary was set in part along the Red River. Historians have hailed Adams' negotiations as one of the greatest feats of American diplomacy.
The precise demarcation of that line is difficult to ascertain because of the exigencies of the local topography which result in the Red River often running dry. The two states have been negotiating for some time to develop a solution that would more clearly define what exactly is the south bank of the Red River. The resulting Red River Boundary Compact has been approved by the legislatures of Texas and Oklahoma and is now brought before the Congress for its approval pursuant to the provisions of Article I, Section 10, clause 3 of the Constitution.
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We look forward to listening to the testimony of the witnesses, including Members representing districts adjacent to the border and officials from Texas and Oklahoma.
With that, I would like to yield to the gentleman from New York for an opening statement, after which we will entertain our colleague from the Senate.
Mr. NADLER. Well, I thank you, Mr. Chairman.
I will simply say that I have always approved of this legislation in concept. I still do. I was reminded by my counsel that I voted against it on the floor last year because of some specific concern. I do not at this particular time remember what it was. I hope whatever it was it will be taken care of in this year's version so I can support it on the floor.
As I said, if properly drafted, I would approve it. The various reasons for agency noncompliance, I think, ultimately don't make a great deal of sense. The law of the circuit ought to be obeyed provided that we take care of certain concerns that some of us had last year.
With that, I yield back.
Mr. GEKAS. I thank the gentleman.
As I indicated, we have the pleasure of our opening witness, Senator Campbell. Ben Campbell and I served in the House together during some pleasant times and unpleasant times as well. But many of us from the outset learned to respect this gentleman from Colorado, both in the House and later when he descended to the Senate. After that, we even had other encounters, did this chairman and Senator Campbell. All of them, I must say, were with pleasant outcomes.
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Senator Campbell was born in California, as I have learned, went to San Jose University, was educated in Tokyo, and has served in many different capacities on Indian tribe questions and constitutional law. On a variety of subjects he has been a leader. I welcome him here today as a personal friend. I don't care what he says, I am for him.
With that, I would introduce him to the audience and to the committee and ask that he proceed with his statement.
STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, A U.S. SENATOR FROM THE STATE OF COLORADO
Mr. CAMPBELL. Thank you, Mr. Chairman, for that nice introduction. I need to have you talk to a couple of editorial boards in my State.
Thank you for conducting this hearing on what I consider is a very important issue. As you mentioned, during last Congress we did deal with this. I had introduced S. 1166. That was a companion bill to your H.R. 1544. We simply ran out of time, but it is still an important issue.
This year, in April, I introduced another version, S. 932, the Federal Bureaucracy Accountability Act of 1999, because I believe that the situation, if anything, is getting worse; and that is why I wanted to be here for a few moments with you to speak on its behalf.
Page 15 PREV PAGE TOP OF DOC I know that you will be hearing from other witnesses later on that have a different opinion. We did a hearing on this, and certainly the opinion of the people that will be testifying from the administration have, you might say, a less favorable opinion of this bill than I have.
My belief extends from just an old fashioned understanding about this Nation. I simply happen to believe that it is supposed to be a country of laws and a system of checks and balances; and every single person, everyone, including Congress, very simply is supposed to obey the law. Otherwise, why do it? We can challenge them in court and disagree, but if we don't like it, what we do is try to change the law, not circumvent the law. At least that is what we all thought and that was my understanding as a youngster growing up.
But little is known about this widely used exception to the rule that you mentioned called nonacquiescence. Through this policy, Federal agencies don't have to follow the established law. In fact, they don't have to follow their own regulations, Mr. Chairman. They just simply have to nonacquiesce. They can do that virtually whenever they want and whatever they want. In the past 10 years alone, there have been thousands of cases where an agency has simply refused to follow the law, costing not only the individual claimants but all American taxpayers hundreds of millions of dollars.
And this nonacquiescence continues to occur on a regular basis. You have heard the term and I have, too, by many of our constituents that call it legislating by regulation. That is not a figment of our imagination, but that actually is happening regularly. It not only ignores the law but removes the average person's assumption and understanding and acceptance of the democratic process and forces claimants into expensive bureaucratic nightmares.
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Let me just maybe tell you about one personal experience.
In 1988, I introduced a bill called the Ute Indian Water Rights Settlement Act here in the House when I was serving with you. It was agreed to by two States, by two tribes and nine Federal agencies at the time. They all bought into it. They all helped to write the bill. It was signed into law by then President Reagan.
Under that agreement, it would have asked the Ute Indian tribe to drop a lawsuit against the Federal Government for not complying with a water right that they felt they had under the old treaties. Under the language of that bill, this water project to find a way that we could share the water in the arid West was supposed to be built by the year 2000 or the tribes would have a right to go back to court and sue again. We have not turned one shovel of dirt in 10 years, even though that law was signed in 1988. The year 2000 is fast approaching, and it was supposed to be done. If it is not doneand obviously it won't be now because it was about a 10-year time frame to build it, the tribes will have the right to go back and sue.
Think how complicated that gets, because the agency that was required to build it by the law, the Bureau of Reclamation, has not moved forward and built it. The Bureau of Indian Affairs has not seen fit to take the side of their own trustees, the Indian tribes, and pursue it and push it forward. If that tribe has to go back, the two tribes involved, go back to court and sue, since the BIA is empowered with the trust responsibility of the tribes, they have to take the side of the Indian tribes, meaning they are going to have to foot the bill for the lawsuit as the plaintiffs. The defendants will be the Bureau of Reclamation for noncompliance.
Page 17 PREV PAGE TOP OF DOC So here you have a situation where this acquiescence has pitted one Federal agency against another, but the bottom line is Federal bills on both sides of the equation are going to be borne by the taxpayers in the millions and millions of dollars. That is fast approaching.
So I mention that as a personal thing that has happened to me, and I am sure it has to you and most other members of the committee, where we have seen the law signed and had the rightful expectations that we would all obey that law only to see the Federal agencies that were empowered to administer that law take a left turn and go the other way and not perform, not do it.
Federal agencies don't compose the fourth branch of government, and they can't continue to operate without legislative authority. They cannot continue to abuse the power without appropriate checks and balances, and they can't continue to ignore or abuse the courts. Federal agencies remain an important component of our government system, but we must demand the same adherence of the laws from them as we do from ourselves and from our constituents and their expectations. We have either got three separate and equal branches of government, or that is what we are supposed to have under what was envisioned by the Founders of this Nation, or we don't.
In my view, we don't. What we have basically is one branch of government that is more equal than the other branch of government and of the existing system. We cannot elect them. If we are doing a bad job, certainly my constituents tell me. Next election, I will be going home. You will, too. Every Member of this body could do that. But under the existing mess that we have in the administration, we simply have people able to make decisions that don't have to be accountable for them. They don't stand for reelections. They are there forever. Yet we still have to live with these agency regulations.
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This Federal Bureaucracy Accountability Act that we have been working on and the Federal Agency Compliance Act are designed to basically force the administration to obey the laws that they sign. This legislation requires Federal agencies to follow the letter of the law and to prevent the unnecessary and costly relitigation that comes as a result of willing noncompliance.
We face some tough problems in balancing the budget, Mr. Chairman, reducing the deficit, and maintaining some semblance of fiscal conservancy. The fact that the Federal agencies continue to practice nonacquiescence backlogs the system, wastes millions of dollars, and certainly wreaks financial, physical, and emotional havoc on thousands of claimants every year and certainly, in my view, flies in the face of basic principles of democracy. I really believe that this legislation will pass the House again, rightfully so. I will continue to work with you also on the Senate side to get this important legislation passed into law.
Thank you very much, Mr. Chairman, for your time.
Mr. GEKAS. We thank the Senator. The message is very thorough, clear and to the point. There is no need to cross-examine you on it because, in substance, we agree with the thrust of your position on this matter.
[The prepared statement of Senator Campbell follows:]
PREPARED STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, A U.S. SENATOR FROM THE STATE OF COLORADO
Page 19 PREV PAGE TOP OF DOC Mr. Chairman: Thank you for conducting a hearing on this important issue and for inviting me to make a statement before this Committee. During the last Congress, I introduced the Federal Agency Compliance Act, S. 1166 which was a companion bill to the House version, H.R. 1544, introduced by Congressman Gekas. Unfortunately, we ran out of time in the 105th Congress so this bill didn't reach the Senate floor for a vote.
In April of this year, I introduced another version, S. 932, the Federal Bureaucracy Accountability Act of 1999, because I believe this situation still requires our attention. That is why I am here today to speak on this issue.
Mr. Chairman, our country is a country of laws, but it is also a system of checks and balances. And every single person, every business entityeveryone, including Congress, is required to obey those laws. We can challenge them in court if we disagree but otherwise, we must obey the law. So we all thought.
However there is a little-known, but widely used exception to this rule. It's called federal agency ''non-acquiescence.'' Through this policy, federal agencies don't have to follow the established law. In fact, they don't even have to follow their own regulations. They just simply have to ''non-acquiesce'' and they can do virtually whatever they want, whenever they want. In the past ten years alone, there have been thousands of cases where an agency has refused to follow the law, costing not only the individual claimants, but all American taxpayers, hundreds of millions of dollars. And, this non-aquiesence continues to occur nearly every day. This ''legislation by regulation'' not only ignores the law, it removes the average person's assumption and acceptance of the democratic process and forces claimants into an expensive, bureaucratic nightmare.
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Federal agencies do not compose the fourth branch of government and they cannot continue to operate without legislative authority, cannot continue to abuse their power without the appropriate checks and balances, and they cannot continue to ignore and abuse our courts. Federal agencies remain an important component of our governmental system, but we must demand the same adherence to laws from them as we demand of ourselves.
The Federal Bureaucracy Accountability Act and the Federal Agency Compliance Act, are designed to do just that. This legislation requires federal agencies follow the letter of the law and will prevent the unnecessary and costly re-litigation that comes as a result of their willful non-compliance.
Mr. Chairman, we face enough problems balancing the budget, reducing the deficit and maintaining some semblance of fiscal conservancy. That's with the right hand. The fact that federal agencies continue to practice non-acquiescence backlogs the system, wastes millions of dollars, and reeks financial, physical, and emotional havoc on thousands of individual claimants every year.
I look forward to hearing the testimony of the witnesses and I fully expect this legislation to pass the House again. I will continue to work on the Senate side to get this important legislation passed and signed into law.
Mr. GEKAS. Does the gentleman from New York have any questions of Senator Campbell?
Page 21 PREV PAGE TOP OF DOC If not, we excuse you with our thanks, and we promise you as expeditiously a piece of action as we can muster for this legislation.
Mr. CAMPBELL. Thank you, Mr. Chairman. I appreciate that.
Mr. GEKAS. By all means.
The next witness was scheduled to have been in Panel II, Judge Stapleton, Walter K. Stapleton, United States Court of Appeals for the Third Circuit, who not only in his own right, but also as a representative of the Judicial Conference of the United States, was to be our key witness on the message of the Judicial Conference.
I must tell you that the chair was first brought into a cognizance of this issue through the efforts and missals of the Judicial Conference, which urged congressional action on this rampant problem of nonacquiescence by Federal agencies. I repeat that this member, the chair of this committee, was moved to action almost 100 percent based on the concerns as expressed by the Judicial Conference. It was at, I believe, a conference of the administrative law judges, where that notion was first presented to that conference, and that is how we heard that the Judicial Conference was actually very much interested in this issue.
This is what Judge Stapleton would have been testifying to today, except that he came down with some kind of malady and high temperature, and so he is ill and is not able to be here today.
Had he been here, he would have said, as part of his statement, that even if Federal agencies were not currently asserting the right of nonacquiescence, the Federal judiciary would still urge the passage of H.R. 1924 as wise and necessary legislation.
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This is part of the written statement submitted to us which we made a part of the record, without objection. But it also highlights something that we have said time and time again, and which members of the committee have reiterated. Namely, that if one of the responses of the people who are going to be representing the agencies of the administration said, ''we are already doing it.'' Then, there should be no opposition to what we are attempting to do, because we are simply codifying what those individuals might be saying is already being done. So we have the best of both worlds. We are doing something that cures a problem and something that sustains, if that be true of that contention, one already occurring. We are in good position to do something in the pursuit of better government when we pass this piece of legislation.
So in incorporating Judge Stapleton's testimony by reference to his written statement, which now has been accepted without objection, we have dismissed successfully Panel II.
[The prepared statement of Judge Stapleton follows:]
PREPARED STATEMENT OF WALTER K. STAPLE, UNITED STATES COURT OF APPEAL FOR THE THIRD COURT
Mr. Chairman and members of the Subcommittee, I am Walter K. Stapleton, Senior Judge of the United States Court of Appeals for the Third Circuit. I appear today on behalf of the Judicial Conference of the United States, which is the policy-making body for the federal courts. I chair the Judicial Conference Committee on Federal-State Jurisdiction which considers issues affecting the jurisdiction and structure of the federal courts, including agency ''non-acquiescence.'' The judiciary greatly appreciates the Subcommittee's interest in addressing this significant problem and being asked to share its views on H.R. 1924, the Federal Agency Compliance Act.
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The Judicial Conference encourages the enactment of legislation generally prohibiting federal agencies from declining to accept decisions of a United States court of appeals as the governing law in matters involving residents within the jurisdiction of the court (''intra-circuit non-acquiescence.'') The Conference also supports legislation to discourage federal agencies from unnecessarily re-litigating an issue in an additional court of appeals when a uniform precedent contrary to the agency's position has already been established in multiple courts of appeals (''inter-circuit non-acquiescence.'') This position is embodied as Recommendation 11 in the judiciary's Long Range Plan for the Federal Courts, which was published in December 1995.
The Federal Agency Compliance Act, which you introduced Mr. Chairman as H.R. 1924, furthers this position of the Judicial Conference, and the Conference therefore supports this bill. Its primary objective is to require all federal agencies that have litigated and lost an issue in a court of appeals to respect the rule of law and provide equal justice to all within the jurisdiction of that court in the absence of exceptional circumstances justifying re-litigation. I am also pleased to note that similar legislation, S. 932, has been introduced in the Senate by Senator Ben Nighthorse Campbell. I would also like to thank you, Mr. Chairman, for your leadership in securing passage in the House of Representatives during the 105th Congress of a similar bill, H.R. 1544.
THE RULE OF LAW
Our Nation is committed to the rule of law. Under the rule of law, similarly situated people are entitled to equal treatment under the law. This goal is achieved in part in our society by the doctrine of stare decisisthe principle that, when a court has interpreted and applied the law, its ruling will be controlling in all later cases presenting the same issue. Consistent application of the doctrine of stare decisis is essential to the maintenance of the rule of law. It also serves to encourage respect for the law and the judicial system and to conserve public and private resources.
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There are twelve regional courts of appeals in our country. Because the Supreme Court can only hear a limited number of cases, the appellate courts are the courts of last resort in 99.8% of cases. Individual citizens and businesses who litigate in a court of appeals are, of course, bound by the decision rendered in their case, but that is not the sole consequence of the decision.
A decision of a court of appeals becomes a precedent, and under our rule of law, all individuals and businesses within the region over which the court has jurisdiction who are similarly situated with the parties who litigated the case have a right to expect that they will receive the same treatment.
Over the past several decades, some federal agencies have refused to apply, either in a particular case or across the board in all cases, decisions within the same circuit that are contrary to the legal positions taken by the agency. This intra-circuit non-acquiescence has, at times, resulted in an agency's issuance of internal instructions to administrative decision-makers to apply a rule of law at variance with the circuit precedent. Litigants then have been required to seek federal judicial review of agency action to avail themselves of existing decisional law in their favor. The Judicial Conference of the United States believes that when the Federal Government has had a fair opportunity to litigate an issue in a court of appeals and has lost, all citizens and businesses within the court's jurisdiction who the decision favors are entitled to have the government recognize their right to equal treatment without having to establish that right again through costly agency proceedings and litigation.
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Thus, for example, when a citizen litigates against the Commissioner of the Social Security Administration (SSA) and a court of appeals determines the citizen is entitled to disability benefits, the Commissioner should not be able to deny benefits to a neighbor by applying a rule of law contrary to the one announced by the court. When the Commissioner does that, the Commissioner undermines the rule of law, and justice is permanently denied to any claimant who cannot afford to press his or her claims through multiple levels of agency proceedings and ultimately reach a court. Since the vast majority of claimants cannot afford to persevere through this long process, the Commissioner's failure to respect the rule of law results in a permanent denial of equal justice to many intended beneficiaries.
Agencies have attempted to justify the practice of non-acquiescence by asserting, among other things, the need to administer a federal regulatory system uniformly. National uniformity in the administration of a federal program is almost always the ideal for which federal agencies and the federal judiciary strive. In reality, however, it frequently is not a goal that can be immediately achieved. Federal statutes and regulations are often subject to more than one interpretation, and disputes about their meaning can only be judicially resolved in individual cases litigated around the country by litigants who have an interest. Our courts of appeals do not always agree with one another or with an agency on how particular disputes about the meaning of statutes and regulations should be resolved. Such disagreements may persist unless the Supreme Court resolves the conflicts among the circuits or Congress enacts clarifying legislation.
H.R. 1924 addresses what will happen during the period when there are understandable differences of view about the meaning of the statute and national uniformity is not yet possible to achieve: it specifies that circuit law will control. During this time, the legislation precludes federal agencies from discriminating among neighbors or among citizens having and not having the economic resources necessary to litigate fully their cases. H.R. 1924 provides that until national uniformity can be achieved, there shall be equal justice for all citizens who are subject to the jurisdiction of the same court of appeals.
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H.R. 1924 does, however, recognize three circumstances in which acquiescence would not be required. The first exception recognizes that some agencies are governed by a broad venue provision, often creating uncertainty as to which court of appeals will ultimately review the agency's final decision. This exception provides that if it is uncertain whether the agency's position will be subject to review by the court of appeals that established the precedent, then acquiescence will not be required. Once judicial proceedings are initiated, however, venue becomes certain and the agency must acquiesce in the existing precedents in that circuit.
The prohibition against intra-circuit non-acquiescence would also not apply if the government did not have an opportunity to seek rehearing or Supreme Court review in the case in which the precedent was first established. This might occur when the precedent involves an issue that arose in litigation between non-federal parties (e.g., statutory schemes in which either the government or a private party can seek enforcement), or an issue whose resolution did not prevent the government from substantially prevailing in the case. Because the government has interests that may differ from those of other litigants, it should be afforded a full and fair opportunity to present its position to the court of appeals.
The final exception allows agencies to non-acquiesce if at least one of three factors or events makes it reasonable to question the earlier precedent: (a) intervening decisions of the Supreme Court or the same court of appeals; (b) changes in any pertinent statute or regulation; or (c) other changes in public policy or circumstances. Factor (a) appears to account for situations where, subsequent to the issuance of the initial precedent, the Supreme Court or the same appellate court has rendered a decision that reasonably calls into question the earlier precedent. Factor (b) similarly accounts for subsequent legislative or administrative action modifying or rescinding the earlier provision on which the precedent was based. Lastly, factor (c) recognizes changes in public policy or circumstances and is perhaps intended to account for societal shifts in how an issue is perceived or to account for development of the law in other circuits during an intervening period of time. By allowing the agency to question a precedent where it is reasonable to believe that the court of appeals might overturn or modify its earlier ruling, the bill facilitates the continued development and evolution of circuit law.
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Inter-circuit non-acquiescence is a different type of problemone based not on controlling precedent but on the re-litigation of well-settled points of law. Although an agency in one circuit is not bound to follow the law of another circuit, it should be the exceptional court case in which an agency re-litigates the same issue after losing consistently in several circuits. Unnecessary agency litigation among the circuits not only wastes valuable resources but also delays resolution of disputes without significantly furthering the development of case law.
Section 3 of H.R. 1924 addresses this problem by providing that those officials supervising agency litigation ''should seek to ensure'' that the initiation, defense, and continuation of proceedings in the federal courts avoids unnecessarily repetitive litigation on questions of law already consistently resolved against the United States in three or more circuits. This section essentially establishes a congressional policy favoring the conservation of judicial and agency resources, as well as the private resources of citizens and businesses that would otherwise be required to participate in that unnecessary litigation.
PREVIOUS EFFORTS TO ADDRESS AGENCY NON-ACQUIESCENCE
The problem of non-acquiescence was formally addressed by Congress for the first time during consideration of the Social Security Disability Benefits Act of 1984. Although the conferees deleted the differing House and Senate approaches to requiring acquiescence by the agency responsible for handling litigation over Social Security claims, the conference committee emphasized that the committee was not approving non-acquiescence. To the contrary, the conference report stated: ''By refusing to apply circuit court interpretations and by not promptly seeking review by the Supreme Court, the Secretary forces beneficiaries to re-litigate the same issue over and over again in the circuit, at substantial expense to both beneficiaries and the federal government. This is clearly an undesirable consequence.'' H.R. Conf. Rep. No. 1039, 98th Cong., 2d Sess., reprinted in 1984 U.S.C.C.A.N. 3080 at 3096. Today, as the judiciary strives to improve judicial economy, unnecessary re-litigation is still an undesirable consequence.
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The problem was also recognized in 1990 by the Federal Courts Study Committee (the Study Committee), which was established by Congress to perform a comprehensive review of the problems and issues facing the federal judiciary. In its Report, the Study Committee recommended to Congress that the practice of agency non-acquiescence be prohibited in the context of Social Security disability claims. The Study Committee noted that the practice forces a claimant to litigate in federal court to gain advantage of an existing precedent on a procedural or substantive issue in the court of appeals for the claimant's circuit. More specifically, the Study Committee's recommendation would have required the Social Security Administration to abide by the holdings of the court of appeals in the circuit in which the claim for benefits was filed.(see footnote 1) This recommendation was primarily in response to an assertion by the Secretary of Health and Human Services (whose department at that time included the SSA) of a right to disregard the precedent-setting decisions of the courts of appeals if the agency determined that the relevant court decisions were not in accord with its own policy. While the Study Committee focused upon the failure of the Social Security Administration to abide by rulings of the relevant court of appeals, it also called upon Congress to explore whether legislative control should be applied to other agencies as well.
WHY H.R. 1924 IS NECESSARY
The practice of non-acquiescence is not limited to a single federal agency. Commentators and judicial opinions have identified not only the Social Security Administration, but also such agencies as the Internal Revenue Service (IRS) and the National Labor Relations Board (NLRB). Some federal agencies in the past not only have asserted the right to decline to follow a controlling precedent, but have adopted across-the-board policies of non-acquiescence. Although agencies may withdraw (and sometimes have withdrawn) such policies, it is clear that agencies still assert the power to determine whether to comply with circuit precedent.
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As recently as 1997, in a case heard by the United States Court of Appeals for the Fourth Circuit, an official of the Appellate Staff of the Civil Division of the Department of Justice in a letter attached to the opinion stated that ''we do not believe that there is any constitutional requirement or any other inflexible rule that a federal agency must apply the legal principles announced in a court of appeals decision to the administration of a statutory program, either generally or in matters arising in the particular circuit.''(see footnote 2) The letter also indicated that ''in many instances an agency will, as a matter of policy and comity, follow circuit precedent.''(see footnote 3)
Even if federal agencies were not currently asserting the right of non-acquiescence, however, the federal judiciary would still urge the passage of H.R. 1924 as wise and necessary legislation. As noted previously, the bill addresses situations in which the Supreme Court has not yet authoritatively established how a statute or regulation should be interpreted. In such circumstances, as long as the option of non-acquiescence is not expressly foreclosed, an agency that has committed itself to a view of the law subsequently determined by a court of appeals to be erroneous, is likely to be reluctant to acquiesce. For this reason, Congress should make clear by passing H.R. 1924 that it is no longer willing to pay the high price that non-acquiescence exacts.
H.R. 1924 reaffirms the principle that equity and orderly governance require that agencies, like private citizens, obey the law as enunciated by courts of competent jurisdiction. This principle, which is at the heart of the rule of law, should not be selectively applied to particular agencies or types of claims, nor should respect for the rule of law be subject to changes in administration or agency policies. To the extent that an agency routinely complies today with appellate precedents within a circuit, the bill ensures that such compliance will continue and does not require a change in agency practice. If an agency does not acquiesce, however, this Act will compel adherence to the rule of law.
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The concerns expressed by some about the adverse impact of this legislation on enforcement of ''important'' federal laws are premised on a troubling assumption: that certain laws are of such overriding importance to American society that the courts cannot be trusted to have the final word in interpreting and applying them. Even more troubling is the assumption that executive agencies are more competent, and can be better trusted, to protect the policies underlying those laws. These assumptions contradict basic principles in our Constitution, which guarantee equal protection of the laws and allocate the legislative, executive, and judicial powers of government among separate, co-equal branches. Individual litigants are bound by the rule of law. We should expect no less when the litigant is the Federal Government. Agencies cannot reserve to themselves the power to determine whether or not to follow the law of the circuit. The door to that debate should be closed.
Mr. Chairman, we appreciate and applaud the efforts of the Subcommittee on Commercial and Administrative Law to promote fair treatment for all litigants, while enhancing judicial efficiency and consistency. Thank you again for your leadership and the opportunity to present this statement on behalf of the Judicial Conference of the United States.
Mr. GEKAS. We now begin the process of empaneling Panel III.
I think the wiser decision on the part of the chair will be to recess for the purpose of responding to the call for a vote on the floor, after which we will resume this hearing.
This committee now stands in recess
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Mr. NADLER. Before we recess, could I be recognized for a moment?
Mr. GEKAS. Yes.
Mr. NADLER. I simply want to welcome in advance of recess for the votes Arthur Fried who will be testifying as General Counsel of the Social Security Administration, a very distinguished constituent from my own district.
Mr. GEKAS. We join in that welcome.
The committee now stands in recess until approximately a quarter of 3:00.
Mr. GEKAS. The hour of a quarter of 3 having arrived and passed, the committee will come to order.
Let the record indicate that a stipulation has been reached between the chair and the minority ranking member of this committee that we may proceed with receiving testimony from the witnessesnot withstanding the absence of any member of the minorityand that all of the records in this matter will be made available to every member of the committee for review.
Page 32 PREV PAGE TOP OF DOC With that, we happily empanel Panel III, which is comprised of William D. Schultz, Deputy Assistant Attorney General in the Civil Division at the Department of Justice. He previously had served as Deputy Commissioner for Policy at the Food and Drug Administration where he oversaw the processing of all FDA regulations.
Prior to his tenure with the FDA, Mr. Schultz had been a counsel to the House Subcommittee on Health and the Environment, chaired by our colleague from California, Mr. Waxman. Before that, he was senior attorney at Public Citizen Litigation Group, often representing public citizen entities before Congress as well as writing numerous articles on food and drug law.
Mr. Schultz received his undergraduate degree from Yale University and his law degree from the University of Virginia.
He is joined by Arthur Fried, the First General Counsel of the Social Security Administration, a position he has held since 1995. Previously, Mr. Fried has served as general counsel to two of New York City's largest agencies, the Department of Housing Preservation and Development and the Human Resources Administration.
Order of the CoifI still want to say quaffbut Coif and magna cum laude graduate of Cornell Law School, Mr. Fried served as law clerk to the U.S. District Judge John Cannella of the Southern District of New York and spent 13 years with the Legal Aid Society of New York.
We will entertain your testimony in the order in which we have introduced the panelists, and we will make as a matter of record the written statements, without objection. We will ask you to reduce your oral statements to approximately 5 minutes, so that we may maintain some sort of decorum for the remainder of this hearing.
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Mr. GEKAS. We will begin with Mr. Schultz.
STATEMENT OF WILLIAM SCHULTZ, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, UNITED STATES DEPARTMENT OF JUSTICE, WASHINGTON, DC
Mr. SCHULTZ. Mr. Chairman, I appreciate the opportunity to testify on H.R. 1924, which addresses the Federal Government's policy on when it can test decisions within a particular circuit.
I would like to begin by noting the large area of agreement within this room. First, the Justice Department agrees that when a circuit court of appeals has ruled against a Federal agency there is almost always a strong basis for following that circuit court's decision or in acquiescing to the ruling. This has been the consistent position of the Clinton administration, it has been the practice of prior administrations, and it is the right policy.
Second, Mr. Chairman, the Justice Department also agrees with the sponsors of H.R. 1924 that there are situations when the Department should have the opportunity to relitigate an issue decided by a circuit within that circuit. Three such situations are listed in section 707(b) of the bill, and they are where it is not certain in what court the next case will be filed in, where the government did not seek review in the Supreme Court because it was not a party to the case or because it has substantially won the case, and where a subsequent decision of the Supreme Court or a subsequent decision of the circuit court has changed the law and therefore justifies relitigation of the issue.
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That having been said, Mr. Chairman, there are two concerns with the bill that we have. I would like to address each of those, and then I would like to mention the three circuit rule which raises a different issue.
Our first concern, Mr. Chairman, relates to the difficulty of anticipating the future. You have tried to identify the exceptions that are appropriate to this general rule of following rulings within a circuit. I think that you have done an excellent job, but there may well be other situations that are just too difficult to identify and to codify a piece of legislation like this.
I would like to mention two as examples. First, it may be that, even though the government lost the argument in the Court of Appeals, it is impractical or even impossible to go to the Supreme Court. For example, where an interlocutory appeal has been taken in the middle of litigation, it is often difficult to convince the Supreme Court to take the case.
The second example occurs only occasionally, but occasionally a large number of circuits will go against the decision of the initial circuit court. Let me give you an example that we recently confronted which I think is worth considering, and this example occurred in cases interpreting 18 USC 922(g)(1), which is a provision in the criminal law that prohibits convicted felons from possessing firearms.
Now, the actual statute allows the Bureau of Alcohol, Tobacco and Tax to grant exceptions. But for the past 4 years Congress in appropriations bills has prohibited the ATF from granting those exceptions.
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Individuals have tried to get around that. In the first case litigated in 1995, Rice v. United States, the third circuit held, in light of this congressional appropriations bar, that the district court could, de novo, consider granting the waiver on its own.
So even though Congress in the appropriations bill had said there shall be no waivers, the third circuit held that a district court could grant waivers to individuals. The Justice Department then relitigated the issue in other circuits, and we prevailed in the fifth circuit, in the ninth circuit, and in the tenth circuit, which all upheld the ban on convicted felons possessing firearms.
Subsequently, we have gone back to the third circuit to relitigate the issue there on the theory that we can now get the third circuit to reconsider its earlier decision or, if the court maintains its previous position so that the government can petition to the Supreme Court. I have to say, Mr. Chairman, this seems appropriate to me.
Our second concern with the bill is also very significant. That is our concern that the bill could spawn litigation about when it applies to bar a government suit. It is not difficult to imagine a party litigating such questions as whether venue was truly unclear under the exception in 707(b)(1), or whether a prior decision did establish a precedent that was, ''otherwise substantially favorable to the government, under the exception in 707(b)(2)(b).''
In our view, these two concerns are sufficiently serious to justify not adopting the bill even though, on a policy level, the Justice Department is in substantial agreement with your sentiments, Mr. Chairman, and with the sentiments of the other sponsors of the bill.
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Finally, I would like to comment very briefly on section 708 which states that the United States should avoid unnecessary, repetitive litigation on questions of law already resolved against the United States in three or more circuits.
On one level, we agree. In fact, on one level I would say that the bill is too narrow. The United States should always seek to avoid unnecessary litigation even if fewer than three circuits have decided the issue. The more circuits that have decided an issue, the less often the U.S. should continue to litigate. That is the policy, and, therefore, there is no need for the provision.
Having said this, Mr. Chairman, there are situations where it is appropriate to continue to litigate even though three or more circuits have decided an issue. Typically, every term the Supreme Court decides a case like this where many circuits have gone one way and yet the court goes another way. We provided some examples in our testimony. And so, while the language of 708 may suggest no judicial review, we think that is a problem.
I would like to ask, if this section is retained, that the committee be explicit about the fact that this sort of decision would not be subject to judicial review. In other words, the language, I think, is written in a way that would preclude review of a government decision to pursue review. But if you do retain the section, we would ask that you make it explicit, and we would be happy to work with your staff in drafting that provision, if you wish.
That concludes my testimony. I would like to thank you for allowing us to testify, and I would be happy to answer any questions.
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Mr. GEKAS. Thank you.
[The prepared statement of Mr. Schultz follows:]
PREPARED STATEMENT OF WILLIAM SCHULTZ, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, UNITED STATES DEPARTMENT OF JUSTICE, WASHINGTON, DC
Thank you, Mr. Chairman. I am pleased to have this opportunity to discuss acquiescence and nonacquiescence by federal administrative agencies in adverse appellate decisions, as well as the litigation of legal issues in multiple judicial circuits, and to comment on the proposed legislation concerning these matters. As you are aware, the Department of Justice is responsible for representing agencies of the federal government in litigation, and it is the Solicitor General who determines whether to appeal adverse decisions to the courts of appeals and whether to take adverse appellate decisions to the Supreme Court.
It may be useful to begin by describing what is meant by nonacquiescence in an appellate decision. What we are talking about is an agency's determination not to follow a court of appeals precedent in the administration of its program within the geographical territory of that judicial circuit, where there is a conflict between the agency's construction of a statute and the court's decision. Of course, agencies comply with a court order in the particular case in which the order was issued. So-called ''intra-circuit nonacquiescence'' involves only the decision to continue applying the agency's policy to others within the circuit.
We agree with the general proposition that agencies should follow court of appeals' precedent within the circuitand in the vast majority of instances that is precisely what agencies do. Nonacquiescence occurs only in rare cases. Because it is the practice within the federal government to follow adverse court of appeals decisions for purposes of future agency action within the respective judicial circuits, we believe that there is no apparent need for legislation on nonacquiescence at present.
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When the subject of federal agency nonacquiescence was first addressed by Congress in the mid-1980s, the circumstances were substantially different. At that time, there was a great deal of litigation contending that the Social Security Administration had refused to acquiesce in various adverse court of appeals decisions. At that time, there was considerable concern among Members of Congress and others that nonacquiescence could operate to the severe detriment of deserving benefits recipients and was unjustified.
Due in large part to the efforts of this Committee, the Social Security Administration changed its policy, explicitly committing itself to a policy of acquiescence. Its policy now is to acquiesce within the circuit in appellate holdings which conflict with its interpretation of the Social Security Act or underlying regulations, except where relitigation of a legal issue is later determined to be justified in prescribed circumstances. I defer to SSA's letter to the Committee for a fuller explanation of its policy.
The same concerns that motivated the Department's opposition to the 1980's legislation mandating acquiescence apply with equal or greater force to the recent legislative proposals, including the pending bill. The pending bill covers not just the Social Security Administration, but federal administrative agencies generally. Prescribing fixed, across-the-board standards for determining when nonacquiescence is appropriate is antithetical to the flexibility needed in deciding which cases to appeal to the Supreme Court and which legal issues to continue litigating in the lower courts. Thus, legislation of the sort now under consideration is a serious cause for concern.
I will address, in greater detail, the two substantive provisions of the pending bill.
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Section 707 would require federal agencies to acquiesce in adverse court of appeals decisions within a judicial circuit except in certain enumerated circumstances. (This provision is aimed at ''intra-circuit nonacquiescence,'' as distinct from (i) ''inter-circuit nonacquiescence,'' where an agency declines to follow one circuit's precedent when taking action outside that circuit, which is widely accepted; and (ii) ''venue-uncertainty nonacquiescence,'' where the agency cannot know whether the court of appeals whose precedent is involved would have exclusive jurisdiction to review a given action, which the bill would expressly allow.)
1. As I previously indicated, Congress addressed this matter with reference to the Social Security Administration in 1984, during proceedings leading up to enactment of the Social Security Disability Benefits Reform Act, Pub. L. No. 98460, 98 Stat. 1794 et seq. Prior to enactment of the final legislation, the House passed a bill that would have required the Social Security Administration to acquiesce in circuit court precedent on social security disability benefits cases unless it sought Supreme Court review. See H.R. Rep. 98618, 98th Cong., 2d Sess. 2226 (1984). The Senate bill did not contain such a provision; instead it would have required the Social Security Administration to publish a notice of nonacquiescence whenever it determined not to acquiesce. See S. Rep. No. 98466, 98th Cong., 2d Sess. 21 (1984). Congress ultimately declined to include any provision on nonacquiescence in the Act as finally passed.
At the time the proposed nonacquiescence provision was under consideration, thenSolicitor General Rex Lee submitted a letter to Congress in which he outlined the Department of Justice's objections to such legislation. The letter states in part:
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''In practical terms, the bill would require the Department to consider seeking Supreme Court review of the first adverse decision on a point in any court of appeals. * * * There also would be significant practical problems in administering the provision, because it is often difficult to ascertain the precise scope of a particular appellate decision until subsequent cases arise on somewhat different facts and a court is asked to distinguish prior precedent. Finally, the provision would have the effect of rigidly freezing the law in a particular circuit and thereby foreclosing the Secretary from asking an appellate court to reconsider the particular holding in light of experience or changed circumstances, including contrary holdings by other courts of appeals. * * * In sum, [the bill] has serious adverse implications for the conduct of the government's litigation in the Social Security context.''
130 Cong. Rec. 25,977 (1984).
As these and other concerns expressed by the Solicitor General with respect to legislation on nonacquiescence remain valid today, I am providing a copy of his letter (together with Senator Dole's floor statement making it a part of the record) for the Committee's consideration. For the same reason, I also commend to the Committee the statement of Carolyn B. Kuhl, Deputy Assistant Attorney General, Civil Division, Department of Justice, before the Senate Finance Committee in 1984, see Social Security Disability Insurance Program: Hearing Before the Senate Finance Comm., 98th Cong., 2d Sess. 11336 (Jan. 25, 1984), and her statement before this Committee in 1985, see Judicial Review of Agency Action: HHS Policy of Nonacquiescence: Hearing Before the Subcomm. on Administrative Law and Governmental Relations of the House Judiciary Comm., 99th Cong., 1st Sess. 1013 (July 25, 1985).
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Rather than impose statutory restrictions on nonacquiescence in the 1984 legislation, the conferees urged the Social Security Administration to change its policy of nonacquiescence. See H.R. Conf. Rep. No. 1039, 98th Cong., 2d Sess. 37, reprinted in 1984 U.S.C.C.A.N. 3095. The Social Security Administration subsequently did so, such that its current policy is to acquiesce in adverse appellate decisions within the circuit, if the holding of the court conflicts with SSA's construction of the Social Security Act or the agency's regulations, except where relitigation of a legal issue is later determined to be justified in prescribed circumstances.
Congress again considered the issue of agency acquiescence in the 105th Congress. On May 22, 1997, this Committee held a hearing on H.R. 1544, a bill whose ''non-acquiescence'' provisions are substantially the same as those contained in H.R. 1924. Deputy Assistant Attorney General Stephen W. Preston testified against that bill on behalf of the Department of Justice. On February 25, 1998, the House passed H.R. 1544 over the vigorous objection of the Department of Justice. On June 18, 1998, the Senate held a hearing on S. 1166, which was nearly identical to H.R. 1544, but no action was taken by the Senate on S. 1166 in the 105th Congress. These proceedings on H.R. 1924 thus present the Committee with another opportunity to consider the issue of nonacquiescence as it arises in the present legal landscape.
2. With respect to the government's authority not to acquiesce in some circuit court decisions, there is no constitutional issue, in our view. The Department has consistently taken the position that agency nonacquiescence does not violate the Constitution. Specifically, the doctrine of separation of powers does not bar a federal agency from declining to apply the legal reasoning of a particular court of appeals decision in the agency's further administration of a statutory program outside the context of the particular case in which the court rendered its decision. Then-Solicitor General Rex Lee advanced this position before the Supreme Court in Heckler v. Lopez, 469 U.S. 1082 (1984), and before Congress in connection with proposed legislation on nonacquiescence, see 130 Cong. Rec. 25,977 (1984). It was also the view expressed in 1984 by Senator Dole on behalf of the Senate when Congress declined to pass legislation on nonacquiescence. At that time, he stated, ''[w]hile some of the conferees have expressed strong reservations regarding this practice, it should be made clear for the record that it is not the position of the Senate that the practice is unconstitutional as exercised by the Department of Health and Human Services or as by any other Federal agency.'' 130 Cong. Rec. 25,975, 25,977 (1984). And it continues to be the Department's position today.
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Under Article III of the Constitution, the ''judicial power'' vested in the Supreme Court and the lower courts is limited to the decision of discrete ''Cases'' and ''Controversies.'' A necessary element of the judicial power under Article III is that the judgment of the court is final as between the parties to the particular case and cannot be made subject to revision by the Executive or Legislative Branch. Conversely, the extension of legal principles applied in a particular decision to other factual contexts and other parties not before the court is not an essential component of the judicial power to decide ''Cases'' and ''Controversies.'' The prescription of general rules of conduct that operate directly on persons outside the Judicial Branch is the province of Congress in passing laws and of the Executive Branch in issuing regulations or taking other administrative action in the execution of the laws. Professor Wechsler put it succinctly: ''under Marbury [v. Madison], the court decides a case; it does not pass a statute calling for obedience by all within the purview of the rule that is declared.'' H. Wechsler, The Courts and the Constitution, 65 Colum. L. Rev. 1001, 1008 (1965).
3. A fundamental concern with the pending bill is that it would impose fixed standards on administrative and litigative decisionmaking that is necessarily discretionary and highly dependent upon the context presented.
With certain exceptions, the bill would require the government to choose between appealing an adverse decision and acquiescing in that decision. Yet there are any number of situations in which neither appeal nor acquiescence is appropriate. For example:
A court of appeals may decide a case concerning an agency policy that affects multi-state transactions with parties in different circuits, and in which pending litigation exists in other circuits. It may be entirely appropriate for the agency to decline to acquiesce to avoid upsetting these multi-state transactions while it waits for another circuit to rule on the agency's policy and crystallize the issues for further Supreme Court review.
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A court of appeals may decide a case by making two alternative holdings, either of which would sustain the result reached. One may be a significant adverse precedent that the agency strongly believes to be incorrect; the other may be less significant and less clearly incorrect. Because of the adequate alternative holding, further review ordinarily would be inappropriate. Yet the agency could reasonably decline to acquiesce in hopes of generating an opportunity to challenge the significant holding.
The government cannot completely control which cases are decided by the courts of appeals because cases may reach that level by virtue of the opposing party's taking an appeal after the government has won in district court. Such a case may come to the court of appeals in a posture that would pose an obstacle to further review of an adverse appellate decisione.g., because the appellate decision is interlocutory, ruling against the government on a point of law, but remanding the case to district court for further proceedings.
The circumstances of a case decided against the agency on appeal may be overwhelmingly favorable to the opposing partye.g., a highly sympathetic plaintiff, egregious conduct on the part of government employees
such that the agency should forego further review for equitable or tactical reasons.
In these and other situations, the bill would eliminate the government's opportunity to litigate the legal issue again, even though the reason it did not appeal the adverse decision had nothing to do with the merits of the agency's position.
Page 44 PREV PAGE TOP OF DOC In addition, in a wide variety of cases, the meaning and significance of an adverse appellate decision may not be clear from the court's opinione.g., whether the court's decision is in conflict with the agency's policy, whether the case is distinguishable, whether the language in question is dictum or a holding. Indeed, it may be impossible to ascertain the decision's true scope and effect until an opportunity arises to test it by presenting the same court of appeals with a different factual scenario. Here, again, foregoing appeal and persisting with the agency's position would be quite reasonable. This should not be regarded as ''nonacquiescence,'' but rather as a judgment by the government as to the precedential effect of the decision.
To be sure, the bill recognizes that acquiescence should not be invariably compelled and calls out some situations in which nonacquiescence may be appropriate, including (a) when it is unclear that the agency action will be subject to review exclusively by the particular court of appeals that has issued the prior decision; (b) when the government did not seek further review because it was not a party or because the decision was otherwise substantially favorable to the government; or (c) when ''it is reasonable to question the continued validity of the precedent'' in light of subsequent legal developments, notably a subsequent decision by that court of appeals or the Supreme Court. While these are all situations in which an agency may decline to acquiesce, as just noted, there are others, as well. The circumstances in which the issue of nonacquiescence might arise vary too muchamong agencies, among statutes and programs administered by an agency, and among the types of appellate decisions presentedto make a uniform statutory approach feasible.
4. Even though the meaning of an appellate decision may not be clear from the court's opinion, section 707 requires all officers and employees of an agency to adhere to circuit precedent. This provision would require every employee, rather than the final decisionmaker or the General Counsel, to attempt to interpret a court of appeals' decision and to determine its applicability to his or her activities. Employees ''particularly those not trained in the law and unaware of the context of the particular appellate decision'' may have difficulty interpreting ambiguous appellate precedent and adjusting their activities accordingly. Moreover, agency officials and employees, including attorneys and Administrative Law Judges, may disagree regarding the meaning and scope of a court of appeals' decision. Until an authoritative agency determination can be made on the meaning of the decision and direction given as to how it applies to different situations, employees under a statutory obligation to ''adhere'' to the court of appeals' decision may take inconsistent actions. I refer the Committee to the letter from the General Counsel of SSA which outlines in detail that agency's concerns on this very point.
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5. To the extent that section 707 would allow some form of judicial review of an agency's decision not to acquiesce in an adverse appellate ruling, the proposed legislation stands to create a whole new category of litigation and, for that reason alone, is troubling. The proposed legislation could generate separate proceedings, even trials, on the issue of nonacquiescencefor example, on whether the prior decision was really substantially favorable to the government, or on whether it is reasonable to question the continued validity of that precedent. This would be enormously costly and burdensome. It also seems essentially pointless to invite litigation concerning the appropriateness of the agency's nonacquiescence and efforts to relitigate, as opposed to litigation concerning the substantive agency policy that is alleged to be inconsistent with circuit precedent and the merits of the plaintiffs' underlying claims.
Congress should be wary of encouraging an additional layer of litigation about the very conduct of litigation itself. We would be particularly disturbed by any suggestion that a court, as an aspect of engaging in judicial review of an agency's decision not to acquiesce in an adverse precedent, could review the reasonableness of the Solicitor General's litigating judgments. Judicial review of the decision by the responsible Executive Branch official to invoke the jurisdiction of the courts, or to decline to do so, would be a substantial departure from the usual practice under the separation of powers prescribed by the Constitution. Compare Heckler v. Chaney, 470 U.S. 821, 832 (1985); Buckley v. Valeo, 424 U.S. 1, 138 (1976); United States v. Nixon, 418 U.S. 683, 693 (1985).
6. Finally, we note that general statutory restrictions on nonacquiescence are unnecessary because there are already significant checks that work effectively to prevent agencies from unreasonably nonacquiescing.
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The principal check, of course, is that an adverse court of appeals decision is generally a reliable indicator of how future cases in the same circuit will be decided. Except where there is a point in relitigating, agencies have an obvious incentive to follow applicable precedent.
In any event, in cases within the litigation authority of the Department of Justice, every appeal to a court of appeals must be authorized by the Solicitor General. Authorization comes only after an internal deliberative process involving the agency, the responsible litigating division of the Justice Department, and the Solicitor General's staff. Adverse precedent in the same circuit is a weighty reason not to authorize appeal. (By the same token, if circumstances are such that it is appropriate to request an appellate court to revisit a legal issue previously decided, or to preserve a legal argument for possible Supreme Court review, an appeal might be entirely appropriate despite the existence of binding circuit precedent.)
The Equal Access to Justice Act is also a significant check. It provides that a prevailing party in litigation against the United States is entitled to attorney's fees unless the agency's position is ''substantially justified.'' Thus, any time it decides not to acquiesce, an agency runs the risk of not only losing on the merits, but also being held liable for attorney's fees.
Moreover, the fact that the Department of Justice so frequently litigates in the courts creates an additional internal check. Because, in contrast to most private litigants, the Department will have to appear repeatedly before the same court in the future, its credibility is an important factor in deciding whether to appeal a decision.
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As a result of checks such as these, agencies have a strong incentive to acquiesce; on the relatively few occasions when they do not, it is for a good reason.
Section 708 provides that government officers ''should seek to ensure'' that the United States avoids ''unnecessarily repetitive litigation'' by continuing to litigate an issue of law that has been consistently resolved against the government by three or more courts of appeals.
In our view, this provision is unnecessary as a practical matter and could inhibit the Solicitor General in protecting the litigating interests of the United States.
1. While the government infrequently takes a legal issue it has lost to more than three courts of appeals, important considerations support the need for flexibility in this regard. In nearly every Term, the Supreme Court issues a decision rejecting rulings of three or more courts of appeals. A recent Supreme Court case, Brogan v. U.S., provides an example of an issue in which seven circuit courts had ruled incorrectly before the Supreme Court had an opportunity to review the matter and correctly state the law. See Brogan v. U.S., 522 U.S. 398 (1998). The Court in Brogan stated: ''In sum, we find nothing to support the ''exculpatory no'' doctrine except the many Court of Appeals decisions that have embraced it. While communis error facit jus [common error repeated many times makes law] may be a sadly accurate description of reality, it is not the normative basis of this Court's jurisprudence. Courts may not create their own limitations on legislation, no matter how alluring the policy arguments for doing so, and no matter how widely the blame may be spread.'' See id. at 408. See also, United States v. Gaudin, 515 U.S. 506 (1995) (in affirming Ninth Circuit ruling that materiality of false statement under 18 U.S.C. 1001 was a jury question, the Supreme Court in effect rejected the decision of every other circuit to have considered the issue, i.e., every circuit except the Federal Circuit); Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 190 (1995) (Stevens, J., dissenting) (Supreme Court rejected private right of action against aiders and abettors under Securities Exchange Act, which ''all 11 courts of appeals to have considered the question have recognized''); Eastern Enterprises v. Apfel, 524 U.S. 498, 519 n.4 (1998) (striking down the Coal Industry Retiree Health Benefit Act notwithstanding that fact that all six appellate courts to address the issue had upheld the Act).
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2. In cases within the litigation authority of the Department of Justice, the Solicitor General must approve any appeal to a court of appeals. 28 C.F.R. 0.20. Where the government has lost a legal issue in three circuits, an agency would ordinarily have an uphill battle in persuading the Solicitor General to authorize an appeal to still another circuit. The appeal authorization process is a rigorous one, and it is an unusual legal issue or set of circumstances that would prompt the Solicitor General to permit a fourth appellate test. Because the process has been working well, we see no need for legislation on this point.
In deciding whether to authorize an appeal beyond the third court of appeals, the Solicitor General may conclude that existing precedent on an issue of huge fiscal, policy or institutional importance is simply wrong, or at least sufficiently questionable, so as to warrant a Supreme Court test. After three court of appeals losses, however, obtaining Supreme Court review almost always would require a circuit conflict. The Solicitor General may determine that every effort should be made to seek a conflict in the circuits and thus pave the way for possible Supreme Court review.
Inasmuch as the Supreme Court from time to time revisits issues on which the courts of appeals are largely in agreement, the Solicitor General should have the discretion, where the stakes are important enough, to continue to seek a circuit conflict and thus to facilitate Supreme Court review of decisions harmful to the United States. Moreover, the government should have the discretion to defend a favorable district court decision on appeal, notwithstanding the existence of adverse precedent in three circuits.
3. Finally, we note that the proposed Section 708, unlike the parallel provision in H.R. 1544, does not contain an express subsection making clear that the decision on whether to continue litigation on a matter that has been resolved by three or more circuits is not subject to judicial review. Since the new Section 708 seems to be in the nature of a hortatory provision (government officials ''should seek to ensure'' that there is no unnecessarily repetitive litigation), whereas the earlier provision stated that government officials ''shall [so] insure * * *, (emphasis added), it is arguable that the new bill already reflects an intent to foreclose judicial review. Nonetheless, in order to avoid any confusion about Congress's intent, we suggest that, if the Committee decides to retain Section 708, a provision expressly precluding judicial review be added.
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For these reasons, the Department opposes the proposed legislation. I appreciate this opportunity to present the Department's views and would be happy to answer any questions.
Mr. GEKAS. Before we turn to Mr. Fried, let the record indicate that the gentleman from Ohio has joined the committee, and we will now entertain the testimony of Mr. Fried.
STATEMENT OF ARTHUR J. FRIED, GENERAL COUNSEL, SOCIAL SECURITY ADMINISTRATION, BALTIMORE, MD
Mr. FRIED. Thank you, Mr. Chairman, members of the subcommittee. I am pleased to be here to discuss the Social Security Administration's views on H.R. 1924, the Federal Agency Compliance Act. Not only is there no need for this legislation, as Mr. Schultz has indicated, but we believe that provisions of this legislation would actually harm the Social Security and supplemental security incomeor SSI programs.
First, there is no need for this legislation because when a United States Court of Appeals issues a decision on a Social Security or SSI claim and SSA determines that the holding of this decision conflicts with its interpretation of the statute or regulations, it either issues an acquiescence ruling, changes its national rules, or seeks judicial review. Partially through the urging of this committee, we evaluated our policy and issued revised regulations to publish acquiescence rulings within 120 days, which we have been doing.
Page 50 PREV PAGE TOP OF DOC Second, there is potential harm because H.R. 1924 would allow Social Security's 32,000 decisionmakers to independently interpret circuit court decisions without waiting for an acquiescence ruling. Since these rulings provide specific guidance as to how a circuit court decision would be applied in the circuit, they ensure consistency between the agency adjudicators.
To put things in perspective, it is important to note that only a small number of cases at the district court level are appealed to the circuit courts. In fiscal year 1998, the Court of Appeals affirmed SSA's position 74 percent of the time and dismissed 10 percent of the cases. Rarely, only three or four times a year recently, do the courts of appeals issue a decision with a holding that conflicts with SSA's interpretation of the statute or regulations. As I said, when this happens, SSA issues an acquiescence ruling. Once SSA formally codified this practice in its 1990 regulations, it essentially ended criticism by the courts of SSA's previous practice regarding failure to follow holdings of the courts of appeals, evidence that the legislation under consideration isn't necessary.
Acquiescence rulings explain how SSA will apply the decisions of the courts of appeals which it determines contain a holding conflicting with its national rules for adjudicating claims. SSA applies the Court of Appeals holding, as explained in the ruling, to other cases involving the issue at all levels of adjudication in the same circuit unless the holding, by its nature, applies only at certain levels of adjudication. They are effective upon publication in the Federal Register. They are also binding on all SSA components unless superseded, rescinded, or modified by another ruling. Therefore, SSA believes that H.R. 1924 is not needed to mandate that SSA follows the Court of Appeals decisions because we already do. As I said, based upon your concerns expressed at previous hearings, we have modified our rules to make them even stronger.
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SSA opposes the provision in H.R. 1924 that requires each of the more than 32,000 individuals who rule on SSA claims, including but not limited to ALJs, to individually apply their own interpretation of Court of Appeals decisions without guidance from the Commissioner. This would greatly undermine fairness and consistency in our decisionmaking process.
Also, if each of these thousands of decisionmakers were responsible for interpreting circuit court holdings, conflicting decisions would certainly result. SSA would have no way to ensure uniform application of eligibility standards as required by law, leading to further litigation. SSA would have no way to ensure the consistent application of agency rules since, under this approach, each adjudicator would be asked to independently interpret circuit court decisions. As we have seen even within the same circuit and certainly across circuits, we see differing interpretations of similar agency rules.
SSA's current regulations ensure the consistent application of these rules. Claims that could be affected by adverse Court of Appeals holdings are identified as soon as possible. The interpretation of the Court of Appeals holding is appropriately determined after careful scrutiny by SSA officials who have a broad understanding of the national program and then by decision of the Commissioner.
Additionally, we oppose the provision of H.R. 1924 requiring government officers to guarantee that the United States not engage in unnecessarily repetitive litigation, essentially for the same reasons identified by Mr. Schultz. We firmly believe that allowing the Commissioner to state the agency's rules via the timely issuance of acquiescence rulings is the best way to ensure that the constitutional and statutory requirements are properly and consistently applied and that the agency can be held accountable for any failure to do so.
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In closing, we are proud of SSA's current record in applying circuit court decisions. We believe our regulations for issuing acquiescence rulings constitute a successful and balanced exercise of our responsibility to the American public to administer the vast and complex Social Security benefit programs.
Once more, I must reiterate that we at the Social Security Administration strongly believe that, although we agree that circuit court decisions ought to be applied, H.R. 1924 is not only an unnecessary piece of legislation but that it undermines the fair and consistent administration of vital programs upon which so many Americans depend.
I would like to just add one further note. I noticed that Administrative Law Judge Bernoski in his written testimony raised concerns about potential plans to reorganize certain aspects of the Administrative Law Judge Corps at Social Security. As the Commissioner testified last week, there are no plans to make such a reorganization.
Thank you very much for the opportunity to testify.
Mr. GEKAS. We thank the gentleman.
[The prepared statement of Mr. Fried follows:]
PREPARED STATEMENT OF ARTHUR J. FRIED, GENERAL COUNSEL, SOCIAL SECURITY ADMINISTRATION, BALTIMORE, MD
Page 53 PREV PAGE TOP OF DOC Mr. Chairman and Members of the Subcommittee:
I am pleased to be here to discuss the Social Security Administration's views on H.R. 1924, the ''Federal Agency Compliance Act.'' At the outset, we want to make two important points. First, we want to assure you that no legislation is needed in this area with respect to the Social Security Administration (SSA) because SSA follows circuit court holdings that conflict with the Agency's interpretation of the Social Security Act (the Act) or regulations unless we decide to relitigate and publish a notice in the Federal Register as provided in our regulations. Second, this legislation would harm Social Security and Supplemental Security Income (SSI) claimants and programs because it would result in inconsistent decisionmaking by SSA adjudicators.
On the first point, when a U.S. Court of Appeals issues a decision on a claim for Social Security benefits, or SSI payments, and SSA determines that the holding in the decision conflicts with its interpretation of the statute or regulations, it either issues an Acquiescence Ruling, changes its national rules or seeks further judicial review. SSA's regulations require it to quickly issue Acquiescence Rulings and identify the cases of other claimants who may be affected by the ruling. Partially through the urging of this committee, SSA has continuously been improving this process. Last year, the Agency issued regulations with the goal of publishing Acquiescence Rulings within 120 days and we have been complying with these regulations.
On the second point, the legislation under consideration, would allow SSA's 32,000 decisionmakers to interpret Circuit Court decisions as soon as those decisions are issued without waiting for an Acquiescence Ruling. Court decisions are frequently broad in nature with little guidance as to how they should be applied to any fact situation other than the facts at issue in the case. On the other hand, Acquiescence Rulings provide specific guidance as to how a Circuit Court decision should be applied to a myriad set of fact situations in the circuit involved. Therefore, Acquiescence Rulings ensure consistency among the Agency adjudicators. For these reasons, in H.R. 1924, the last sentence of sec. 2(a) adding sec. 707(a), ''All officers and employees of an agency, including administrative law judges, shall adhere to such precedent,'' should be deleted.
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Below is a description of SSA's appeals process, its acquiescence regulations, and the Social Security Administration's views on H.R. 1924.
A person who is dissatisfied with an initial determination, may pursue an appeal through SSA's administrative appeals process and the Federal courts. The Act requires the Commissioner to provide a claimant the opportunity for a hearing, and allows for filing of a civil action in Federal court after the Commissioner's final decision. SSA's regulations also provide an opportunity for final review after the hearing by SSA's Appeals Council.
The administrative appeals process provides a de novo hearing before an administrative law judge (ALJ) who can call on medical or vocational experts, if needed, to help evaluate the evidence. Usually the claimant obtains legal representation at this point. Frequently, new evidence is introduced by the claimant and his or her representative, often at the hearing itself. Claimants are allowed to appear before the ALJ and to call witnesses.
The final administrative appeal is before the Appeals Council which may grant, deny, or dismiss a request for review of the ALJ decision. It will grant review if the ALJ decision contains an error of law, is not supported by substantial evidence, involves a broad policy issue, or if there appears to be an abuse of discretion by the ALJ. After an Appeals Council action, if the claimant is still dissatisfied, the next step is filing a civil action in Federal court.
Page 55 PREV PAGE TOP OF DOC Only a small number of the cases affirmed by district courts are appealed to the circuit courts. In the overwhelming majority of the 521 circuit court decisions rendered in FY 1998 on Social Security cases, either SSA received an affirmation of its position (384 cases, 74 percent) or the claimant's case was dismissed (52 cases, 10 percent). Circuit courts remanded 73 cases (14 percent) for further action. When the circuit court does not uphold the Agency's decision, it is usually based on a finding that the evidence does not support the decision or that our decisionmakers failed to follow or incorrectly applied our national rules.
Rarely, on average three or four times a year, do the courts of appeals issue a decision with a holding that conflicts with SSA's interpretation of the statute or regulations. When such a conflict occurs, SSA generally issues an Acquiescence Ruling. In rare cases, it seeks further judicial review. This has been the Agency's practice since 1985. The formal codification of this practice in regulations in 1990 essentially ended criticism by the courts of SSA's practice regarding failure to follow holdings of courts of appeals. This change in position by the courts is evidence that the legislation under consideration is not necessary.
Acquiescence Rulings explain how SSA will apply the decisions of courts of appeals that it determines contain a holding that conflicts with its national rules for adjudicating claims. SSA applies the Court of Appeals holding, as explained in the ruling, to other cases involving the issue at all levels of adjudication in the same circuit unless the holding, by its nature, applies only at certain levels of adjudication. Acquiescence Rulings are published in the Federal Register and are effective upon publication. They are binding on all SSA components unless superseded, rescinded, or modified by another published ruling.
Last year, SSA issued revised regulations to ensure that Acquiescence Rulings are developed and issued promptly and that pending claims which might be affected by an Acquiescence Ruling are identified as soon as possible. These final regulations were published in the Federal Register on May 6, 1998 and supplemented longstanding rules and practice of appropriately applying the holdings of the Court of Appeals. The regulations fully protect the interests of claimants sought to be protected by H.R. 1924, by providing for:
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Early identification by SSA of claims potentially affected by a Court of Appeals' holding;
Self-identification of claims or cases by claimants or their representatives as being potentially affected by a Court of Appeals decision;
Expeditious issuance of an Acquiescence Ruling (with a goal to publish an AR in the Federal Register within 120 days after receipt by SSA of the Court of Appeals decision);
Individual notification by SSA to previously identified claimants that an Acquiescence Ruling has been issued and that they have a right to request re-adjudication under the Acquiescence Ruling;
Limits on when SSA will re-litigate an issue after publishing an Acquiescence Ruling; and
Consistent application of SSA's rules because all adjudicators will receive the same guidance on how to apply the holding.
H.R. 1924, the Federal Agency Compliance Act, is not needed to mandate that SSA follow Court of Appeals decisions because SSA already does.
SSA opposes the provision in H.R. 1924 that represents a fundamental shift in the role of the Commissioner in administrative jurisdiction. A core concept of administrative law is that Congress and the Commissioner set the Agency's rules and adjudicators find the facts and apply the established rules to those facts. By requiring each of the more than 32,000 individuals who rule on SSA claims (including, but not limited to, ALJs) to individually apply their own interpretation of Court of Appeals decisions without guidance from the Commissioner, would greatly undermine fairness and consistency in our decisionmaking process.
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If each of SSA's thousands of decisionmakers were responsible for interpreting circuit court holdings, it could result in conflicting decisions by different decisionmakers, even within the same office. SSA would have no way to ensure uniform application of eligibility standards as required by law, leading to further litigation. Indeed, SSA would have no mechanism to ensure that Agency rules are consistently applied since, under this approach, it would be each adjudicator's role to interpret circuit court decisions for him or herself. SSA, the claimants, and the courts might not even know what adjudicatory standard was applied.
Such a requirement would also greatly confuse claimants. One person's claim could be decided one way, while a neighbor's identical claim could be decided a different way; i.e., a different interpretation of law might be applied to the same or a similar set of facts and could result in different outcomes. Not only would this be unfair, it would undermine public confidence in the decisionmaking process and lead to an increase in the number of cases appealed at all levels of review. It could also increase administrative costs and processing times. In contrast, SSA's timely issuance of ARs ensures that all adjudicators apply the same rules fairly and consistently.
SSA's current regulations ensure the consistent application of Agency rules. Claims that could be affected by adverse Court of Appeals holdings are identified as soon as possible. The interpretation of the circuit court's holding and its consistency with SSA's interpretation of the statute and regulations is appropriately determined after careful scrutiny by SSA officials who have a broad understanding of the national program. All this is within the framework of our regulatory goal of publishing an Acquiescence Ruling in the Federal Register within 120 days after receipt of the Court of Appeals decision. In addition, after a Court of Appeals issues a decision, the Agency has 45 days to petition for rehearing, and 90 days to seek certiorari after the decision (or after the denial of rehearing). SSA's timeframe for issuing acquiescence rulings, therefore, corresponds with the time that is taken in deciding whether to seek further judicial review in court.
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Additionally, we oppose the provision in H.R. 1924 which would require government officers to ensure that the United States not engage in ''unnecessarily repetitive litigation'' by continuing to litigate an issue of law that has been resolved against the government by three or more Courts of Appeals. SSA must be able to appeal a decision which it determines conflicts with the Social Security Act or its own regulations. Moreover, the Supreme Court has recognized the propriety and salutary effects of the government's continuing to litigate decisions previously decided against it by other Courts of Appeals.
In nearly every court term, the Supreme Court has issued a decision rejecting rulings of three or more Courts of Appeals. Since the Supreme Court has demonstrated this willingness to revisit issues on which the Courts of Appeals are largely in agreement, SSA should continue to have the discretion to seek further review when such issues are involved. Experience shows that Federal Agencies and the Department of Justice act with restraint in the exercise of this discretion. Limiting SSA's ability to continue to litigate issues in the manner stated in H.R. 1924 unduly restricts the Commissioner's ability to determine Agency rules. Another major concern is accurately determining when three circuits have litigated an issue of law. The facts and scope of judicial review in similar cases are seldom identical and can be subject to disparate interpretations.
SSA strongly supports the adjudicator's responsibility to impartially find the facts, apply Agency rules to them, and issue a decision. Nonetheless, it remains the responsibility of Congress and the Commissioner to decide what the eligibility standards and rules are. The Commissioner's duties also include interpreting the statute as well as deciding whether a circuit court holding conflicts with SSA's national rules and, if so, how that holding should be applied in deciding other claims within the applicable circuit. This is vital in order to maintain decisional consistency not only within a particular adjudicatory level, but across levels as wellwhich is a key goal in our efforts to obtain similar results in similar cases at all levels of SSA adjudication. Allowing the Commissioner to state the Agency's rules via the timely issuance of Acquiescence Rulings is the best way to ensure that Constitutional and statutory requirements are properly and consistently applied and that the Agency can be held accountable for any failure to do so.
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In closing, we are proud of SSA's current record in applying circuit court decisions. SSA's regulations for issuing Acquiescence Rulings constitute a successful and balanced exercise of our responsibility to administer the vast and complex Social Security benefit programs in a manner that is least burdensome to our claimants and preserves our ability to maintain national uniformity in program administration and adjudication. SSA strongly believes that H.R. 1924 is not only unnecessary, but its provisions would undermine the consistent and fair administration of complex programs that are vital to so many people.
Mr. GEKAS. Does the gentleman from Ohio, Mr. Chabot, wish to examine the witness? Perhaps he would like to examine what I might say to the witnesses.
Mr. CHABOT. I will reserve my judgment.
Mr. GEKAS. Both of you have stated in different ways that the bill is unnecessary, that you have already seen evidence that the agencies have followed the suggestive language of our bill. Mr. Fried goes so far as to say that the regulations, which we knew had been changed to reflect our original concern about nonacquiescence that future Social Security Administration agency heads will not be bound by the regulations that now exist? Isn't that so?
Mr. FRIED. Future commissioners will be bound by the regulations unless they change them. And certainly Congress will be aware of any proposals to change regulations.
Page 60 PREV PAGE TOP OF DOC Mr. GEKAS. So you say wait until such change occurs before putting what you already agree is necessary into effectthat there be acquiescence? Wait until the nonacquiescence under your terms happens to the next administration? That is what you are saying to us?
Mr. FRIED. The main focus of most of my testimony is there are two provisions in the bill that would be harmful to SSA's programs and its clients.
Mr. GEKAS. But you see no harm, apparently, to passing a bill that would incorporate the very regulations of acquiescence to which you subscribe now in the agency. Isn't that correct?
Mr. FRIED. The agency does not oppose the general proposition which is written in its regulations that ordinarily, without circumstances again as Mr. Schultz described, which are not fully described in the bill, that SAA ought toand, as I said, we do, follow circuit court precedent. However, there are two provisions in the bill which concern Social Security. One, giving the potential for 32,000 different interpretations by many individuals who are not even trained as lawyers, raises the potential to wreak havoc with our programs and actually cause much more significant harm that it is meant to prevent.
Mr. GEKAS. I am still struck by what I repeated in my opening statement about the position of the Judicial Conference which seems to indicate that even if you had taken mighty steps, as you have, to bring the regulations in line with our first harangue to you about how nonacquiescence was rampant through the land, that the Judicial Conference feels, and it is a strong feeling, that even if all of the agencies all of a sudden saw the light and did bring about acquiescence as they would envision it, it would still be salutary in their view to pass this legislation, once and for all, so that the future Social Security administrator would not put into effect new sets of regulations that would take a step backwards. You don't disagree with the Judicial Conference's feeling, do you, that we ought to pass the statute notwithstanding the heroic efforts of the Social Security Administration to bring about acquiescence?
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Mr. FRIED. I certainly understand those concerns. As I have said, I compliment the committee, but I believe you have already had the results that you have intended, and that is, certainly to the extent that the focus was placed on the Social Security Administration, the policies that existed in the early 1980's do not exist. They were changed partially in 1986 and then fully in 1990 and strengthened in 1998. However, I continue to revert my focus to the two provisions in the bill that we think are particularly troublesome.
Mr. GEKAS. I understand, but would our committee be, shall we say, remiss in its responsibility if we did not pass the bill on the expectation that the objections that you are registering here could themselves be the subject of future objections by future Social Security Administrations? Thus, the burden would be on them to show why these two objections that you have should be codified or removed from the current law? In other words, I am willing to take a chance with the current statute which brings into line and conforms with your own concept of acquiescence and the regulations you have promulgated, notwithstanding the fact that perhaps two little glitches, as you see them, appear in this bill, and pass the bill. Let those glitches find new legislative approaches later. Do you object to that kind of approach that we should follow?
Mr. FRIED. I don't see them as glitches. The provision of the bill which would dramatically change the administrative jurisprudence in this country and take away from the Commissioner the responsibility for administering the laws that Congress passes and place them onto 32,000 other individuals I think is a dramatic departure from administrative law as well as creates very substantial and significant problems for administering the Social Security programs.
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We could have a situation where two people who live next to each other would have different adjudicative rules applied to their disability claims. And, beyond that, we might not even realize that differing rules were applied based upon the way that the decision was written by the administrative law judge or the individual adjudicating the claim.
Mr. GEKAS. Do you believe that the judges who sit on the Judicial Conference are unaware of the problems you are discussing? They are individuals who, one way or another, are going to be the supreme last word on most of these cases. Apparently they do not see what you see because they approve of the bill we have provided.
Mr. FRIED. I would be curious to have a discussion with them about this specific provision. I have not seen anything in their testimony that indicates that their support of the legislation, which began in 1985 and 1990, is based on this particular provision. Their resolutions talk about requiring agencies to follow circuit court decisions, not anything about the mechanism by which that should be carried out. I think that if the legislation is passed, it should give the Commissioner, where the responsibility for applying the laws rightfully rests, the responsibility of
Mr. GEKAS. I would respectfully request that you write a letter to the Judicial Conference outlining your concerns and then provide us with a copy of the letter that you have written. We will ask the Judicial Conference to respond to you and to respond to us as well.
For the time being, we believe that we are in good hands with the Judicial Conference recommendation that we proceed with this legislation.
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Does minority counsel wish to pose any questions? If so, we will so permit.
Mr. LACHMANN. Thank you, Mr. Chairman.
I think Mr. Nadler may have some questions. I know he would appreciate it if you would acquiesce to his request that he could file questions for the record at a later date.
Mr. GEKAS. Without objection, and we would note that the witnesses are nodding their heads in agreement that they will respond to such questions. We thank the gentleman, we thank our witnesses, and we dismiss them with our gratitude.
Which brings us to Panel IV. The third panel to testify, but designated as number four.
A well-known figure in these halls, and one who has testified in many venues over the years, is one of our esteemed witnesses, John Pickering of Washington. A native of Harrisburg, Illinois, which we note with parochial pride, he received his undergraduate and law degrees from the University of Michigan just a few years after former President Gerald Ford did so, who is himself being honored today here in the Capitol.
Mr. Pickering served as clerk to the U.S. Supreme Court Justice Frank Murphy and went on to spend 16 years with the Washington law firm of Wilmer and Broun before it became Wilmer, Cutler & Pickering in 1962. The recipient of the ABA medal this year from the American Bar Association, Mr. Pickering is the past chair of the ABA Senior Lawyers Division and the ABA Commission on Legal Problems of the Elderly, as well as being a recipient of many awards for his legal accomplishments. So many that we will not take the time of the committee or the audience to repeat all of them.
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He is joined by Judge Ronald Bernoski, who was born in Phillips, Wisconsin, received his undergraduate degree from the University of Wisconsin, Stevens Point in 1962, and his LLD from the University of Wisconsin in 1965. He was in the private practice of law until becoming an administrative law judge for the Social Security Administration in 1980, where he serves even today. He has been the president of the Association of Administrative Law Judges for the past 3 years.
They are joined by Sheldon Cohen, a well-known figure in his own right in the halls of Congress, counsel to the firm of Morgan, Lewis & Bockius. A former Commissioner of Internal Revenue under President Johnson, Mr. Cohen previously had served in various positions with the Internal Revenue Service, including 3 years as its chief counsel. His years in private practice included several as partner in the firm of Arnold, Fortas & Porter.
Mr. Cohen is one of those rarities, a Washington native, who received his undergraduate and law degrees, both with highest honors, from George Washington University. I hope it is not too parochial to indicate that, in addition to a distinguished career in law, Mr. Cohen should be credited also for his choice of son-in-law, notably Perry Apelbaum, who is the respected general counsel to the minority of the Judiciary Committee.
With that, we will follow the protocol of inserting the written statements of our witnesses for the record, without objection, and to ask each to try to review that written testimony within a parameter of 5 minutes if at all possible.
Mr. GEKAS. We will begin in the order of introduction with Mr. Pickering.
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STATEMENT OF JOHN PICKERING, PAST CHAIR, SENIOR LAWYERS DIVISION OF THE AMERICAN BAR ASSOCIATION, WILMER, CUTLER & PICKERING, WASHINGTON, DC
Mr. PICKERING. Thank you, Mr. Chairman.
It is a pleasure to appear before you again on behalf of the American Bar Association to express our support for your Federal Agency Compliance Act. Our suppot is limited to Social Security cases. We do so for this reason. We take no position regarding application to other agencies, but we are concerned about nonacquiescence in the Social Security field because the American Bar Association has had a long and proud commitment to protect the legal rights of those persons who are least able to help themselves, the poor, the elderly and persons with disabilities who are special beneficiaries of our Social Security system.
I know the depth of that commitment of the American Bar Association from my service, as you have mentioned, as chair of the Senior Lawyers Division and also as chair of the American Bar Association's Commission on Legal Problems of the Elderly.
The nonacquiescence policy of the Social Security Administration has had a drastic effect on these beneficiaries of our Social Security system because it denies or delays the receipt of benefits to which they are entitled and on which many depend for their very existence. For these reasons, the American Bar Association has consistently called on the Social Security Administration to drop its nonacquiescence policy and has supported corrective legislation to end that policy.
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The pertinent resolutions adopted by the Association for this purpose are attached to my prepared statement which note that our calls for corrective legislation have also been supported, as they are today, by the Judicial Conference of the United States, by the report of the Federal Court Study Committee, and by individual Federal judges who have called the agencies' actions outrageous and intolerable.
I ask permission, Mr. Chairman, to add as an exhibit to my prepared statement page 60 of the report of the Federal Court Study Commission dealing with and heavily criticizing the Social Security's policy of nonacquiescence. I have supplied a hundred copies of that page to the clerk of the subcommittee, and we will supply it
Mr. GEKAS. Without objection it will be included in the record.
[The information referred to follows:]
FROM REPORT OF THE FEDERAL COURTS STUDY COMMITTEE, APRIL 2, 1990
2. Congress should prohibit the so-called policy of ''non-acquiescence'' by amending the Social Security Act, 42 U.S.C. §3011397e, to require the Secretary of Health and Human Services, in all administrative proceedings, to abide by the holdings of the court of appeals in the circuit in which a claim for benefits under the Act is filed. But Congress should exempt from this requirement any case that the Solicitor General has determined is appropriate to use as a test of the existing law. The exemption should apply only to the case so designated and should expire when the judgement in that case becomes final.
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The Secretary of Health and Human Services claims the right to disregard the precedential holdings of the courts of appeals if the Secretary determines that the relevant court decisions are not in accord with agency policy. Thus if a claimant applies for benefits through administrative channels, and the court of appeals for the claimant's circuit has established precedent on a procedural or substantive issue favorable to the claimant, the Secretary sometimes denies benefits, refusing to comply with the relevant precedent. The claimant must then litigate in federal court in order to gain the advantage of the judicial precedent. Claimants who pursue benefit claims without counsel are unlikely even to know of advantageous judicial precedents.
This ''non-acquiescence'' policy is unfair to the Social Security disability claimant, and the continuing litigation it necessitates consumes scarce judicial resources. It repudiates the obvious and fundamental principle that an appellate court's decision on a particular point of law is, in the absence of special circumstances, controlling precedent for other cases raising the same issue. (One committee member, a former Solicitor General, characterized this ''non-acquiescence'' policy as lawless.'') It weakens the concept of the ''law of the circuit.'' And it creates unnecessary tension between the executive and judicial branches.
Requiring the Secretary to abide by the rulings of the relevant court of appeals will eliminate such inequities and reduce the federal court caseload. The Tax Court has followed a similar requirement for years without apparent adverse effect, although the Commissioner of Internal Revenue still asserts a ''right of non-acquiescence.''
In connection with consideration of this issue with respect to the Social Security Administration, Congress should explore whether ''non-acquiescence'' policies in other executive branch agencies are in need of legislative control.
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Mr. PICKERING. I would like to point out also that that page refers to the comment of a member of that study conducted in 1990, the former Solicitor General, Rex Lee, who is cited in the testimony of Assistant Attorney General Schultz as having opposed legislation in this area. That reference was to a different piece of legislation, and that was a remark in 1984.
Solicitor General Lee had a conversion in 6 years, I would suggest, when he calls what the SSA was doing ''lawless.'' Nonacquiescence policies are questionable at best. But in Social Security cases, they are plainly wrong. They harm these low income, elderly, and disabled persons who are least able to protect their rights and who depend upon the receipt of benefits to meet their daily needs but which are denied to them if the agency chooses to disregard decisions of the court. We have been at this with the Social Security Administration for over 10 years. They have made progress, and they are making some progress in response to the prodding of this committee, as you have heard today. But it still is not enough. It is time to pass legislation codifying for all time the rule of law that they must follow.
The agency still reserves to itself two things which are, we think, very detrimental to the process: One, it decides what a decision of the Court of Appeals means and thus denies to its administrative law judges the authority, the discretion to interpret a court decision; and, two, it will follow the court decision only if it agrees with it.
This is very frustrating to the administrative law judges. I have talked to them as I have gone around the country. You will be hearing more about their frustration. It is really time to end this process, and I urge that the committee favorably report to the Congress and pass the Federal Agency Compliance Act for the benefit of our poor and elderly citizens.
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Thank you very much. We appreciate this opportunity to present the views of the American Bar Association.
Mr. GEKAS. Thank you, Mr. Pickering.
[The prepared statement of Mr. Pickering follows:]
PREPARED STATEMENT OF JOHN PICKERING, PAST CHAIR, SENIOR LAWYERS DIVISION OF THE AMERICAN BAR ASSOCIATION, WILMER, CUTLER & PICKERING, WASHINGTON, DC
Mr. Chairman and Members of the Subcommittee:
My name is John H. Pickering. I am past chair of the American Bar Association Senior Lawyers Division, and I serve as Commissioner Emeritus of the ABA Commission on Legal Problems of the Elderly, which I also chaired for a number of years.
Thank you for the invitation to present the views of the American Bar Association on issues addressed by H.R.1924, ''The Federal Agency Compliance Act.'' H.R.1924 would require federal agencies to acquiesce to precedents established by federal courts of appeals with jurisdiction over a particular matter. Agencies could no longer pursue policies of unjustifiable nonacquiescence, and would be barred from relitigating a legal issue simply because they do not agree with court decisions. The American Bar Association strongly endorses this goal insofar as the bill would apply to the Social Security Administration, although we take no position with regard to its application to other agencies.
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Pursuant to the United States House of Representatives ''Truth in Testimony'' rule, non-governmental witnesses appearing before the House are required to include as part of their written testimony both a curriculum vitae and a disclosure by source and amount of federal grants which are relevant to the subject matter of the hearing, received by them and by any organization represented by them in the current and preceding two fiscal years. Neither the ABA nor I have received any grants relevant to this hearing during the current and two preceding fiscal years. My curriculum vitae is attached.
As the representative of the legal profession in the United States, the American Bar Association strives to promote the rule of law and to ensure fairness and integrity in our justice system, particularly for members of society who are least able to advocate for themselves. Over the years, the Association has drawn upon the considerable expertise of members with backgrounds as claimant representatives, administrative law judges, academicians and agency staff, to develop a wide-ranging body of recommendations on Social Security issues. Many of these recommendations emphasize clarity in communications and due process protections for claimants, and urge the application of appropriate, consistent legal standards at all stages of the disability adjudication process.
We have a longstanding interest in the issue of Social Security nonacquiescence, and have frequently criticized its adverse effects on the bar, the courts, and claimants. Nonacquiescence policies undermine the fundamental legal principle that, with certain limited exceptions on issues of law, the administrative branch of our government is bound by controlling precedents of the judicial branch. Such policies create unnecessary delays as the agency's resources are spent on duplicative efforts. They deny access to federal courts while those courts spend valuable time and resources considering anew, issues of law that have already been decided. Finally, and most importantly, they harm persons least able to protect themselveslow-income elderly and disabled persons, who depend upon the prompt receipt of benefits to meet their daily needs, but whose benefits are delayed or denied because the agency chooses to disregard decisions of the courts.
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In 1985, we joined with the Administrative Conference of the United States (ACUS) to sponsor a national symposium on the Social Security Administration appeals process. Shortly thereafter, we called for legislation requiring SSA to cease its policy of nonacquiescence to the precedent established in a particular circuit (intracircuit nonacquiescence). In 1990, seeing little change in the Social Security Administration's policies or practices, and troubled by the agency's continuing disregard for court decisions in multiple circuits (intercircuit nonacquiescence), we again stepped forward. We urged the Social Security Administration to cease its policy of nonacquiescence, and recommended certain guidelines to address those instances where courts of appeals in two or more circuits issued conflicting decisions. Our calls for legislation have been echoed by the Judicial Conference of the United States,(see footnote 4) the Federal Courts Study Committee,(see footnote 5) and individual federal judges who have decried the agency's attitude as ''outrageous'' andintolerable.(see footnote 6)
In 1990, the Social Security Administration formally agreed to adopt a federal circuit's interpretation of the Social Security Act or regulations within the circuit, and to direct agency adjudicators to follow the court's decision, unless the agency decided to seek judicial review of the decision or to relitigate the issue.(see footnote 7) However, this is acquiescence in name only, because the SSA still reserves to itself the right to review a decision of the court of appeals within a particular circuit to determine whether, in the agency's opinion, the decision correctly interprets the statute or regulations at issue. If in the opinion of the agency, the case is correctly decided, a formal ruling acquiescing to the decision within that circuit is issued. While the agency has improved its rate of acquiescence during the past decade, acquiescence remains the exception rather than the rule.(see footnote 8) Some rulings are not published until more than a year after the court decision; meanwhile, agency adjudicators in the affected circuit are directed to follow agency policy.
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While the Social Security Administration may be reluctant to acquiesce to federal court precedent in individual circuits, the agency appears even less inclined to change its policy nationwide, despite multiple federal circuit rulings on an issue. For example, three circuit courts (and multiple district courts) have held the SSA policy on trial work periods to be inconsistent with the Social Security Act and its regulations. SSA has acquiesced only in those three circuits, choosing to apply its own policy to claims filed in all other circuits.
In another example, the agency appears to be attempting to circumvent multiple circuit court precedents to which it has already acquiesced.(see footnote 9) The issue involves disability claims by certain older persons whose age, in combination with other factors, may render them unemployable in the current marketplace. The regulations require that to find that skills are transferable for claimants close to retirement age (6064) who are limited to sedentary or light work, or for claimants of advanced age (5559) who are limited to sedentary work, ''there must be very little, if any, vocational adjustment required.''(see footnote 10) The regulations also state that claimants close to retirement age (6064) who are limited to sedentary or light work, will not be considered to have skills that are transferable unless those skills are ''highly marketable.'' Three circuit courts of appeals have held that in these circumstances, the agency must make a separate finding that the skills are ''highly marketable.''(see footnote 11) The agency has acquiesced to each of those decisions.(see footnote 12)
Just last month, however, SSA proposed to delete ''highly marketable'' as a factor to be considered.(see footnote 13) The agency declares that the courts'' decisions are not required by the Social Security Act, but rather by the regulations, and that the language of the regulations has been interpreted ''contrary to our intent.'' SSA further states that the Act prohibits consideration of whether an individual would be hired if he or she applied for a job, and does not require a separate finding that skills are ''highly marketable'' to find that those skills are transferable. At first blush, these explanations may sound reasonable. On further examination, and given the agency's years of foot-dragging in this context, one suspects that the proposed regulations may be an attempt to circumvent court rulings on questions of law.
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The Social Security Administration is an integral part of our nation's justice system, which is designed to protect the most vulnerable segments of our society. The agency cannot be allowed to continue to pick and choose those issues on which it will adhere to the rule of law. Nor can it be allowed to continue policies that produce unfair and harmful results for those people who are most in need of its services. H.R. 1924, ''The Federal Agency Compliance Act,'' would eliminate the need for acquiescence rulings, along with the delays and opportunities for evasion that accompany those rulings. The bill would require the Social Security Administration to follow legal precedents set by the federal circuit courts of appeals, or to use judicial process to challenge those decisions. It would also bind future administrations to following these precedents.
We commend the Subcommittee for holding these hearings on these important issues, and appreciate the opportunity to appear before you. We look forward to working with you and with the Social Security Administration on these issues in the future.
RESOLUTION OF THE AMERICAN BAR ASSOCIATION ADOPTED BY THE HOUSE OF DELEGATES JULY 1985
BE IT RESOLVED, That the American Bar Association urges the Social Security Administration to observe, in all stages of administrative proceedings, the applicable decisions of the United States Court of Appeals for the circuit in which the matter has arisen, subject to the agency seeking review in the United States Supreme Court.
BE IT FURTHER RESOLVED, That the American Bar Association urges that, in the event the Social Security Administration continues its nonacquiescence policy, in its former or present form, Congress enact legislation to mandate the agency to observe fully within each circuit the decisions of the Court of Appeals within that circuit, subject to the agency seeking review in the United States Supreme Court.
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RESOLUTION OF THE AMERICAN BAR ASSOCIATION ADOPTED BY THE HOUSE OF DELEGATES FEBRUARY 1990
BE IT RESOLVED That the American Bar Association urges that federal legislation be enacted to provide that the Social Security Administration cease its policy of ''nonacquiescence,'' and that such legislation incorporate the following principles:
A. Where two Circuit Court of Appeals have decided the same issue of law and adversely to the position of the Social Security Administration, regardless of whether another Circuit Court has ruled favorably, then the Secretary of Health and Human Services shall recommend to the Solicitor General of the United States that the last Circuit Court decision be appealed to the United States Supreme Court, and, if the Solicitor General refuses to appeal or if certiorari is sought and denied by the United States Supreme Court, then that rule a enunciated by the two Circuit Courts ruling adversely shall be followed by the Social Security Administration in all jurisdictions;
B. Where a dispute arises as to whether an issue is the ''same,'' a petition for mandamus also will lie in the second circuit issuing an adverse decision; and
C. Where mandamus is granted, imposition of liquidated damages up to $50,000 may be imposed as well as imposition of court costs, expert witness fees, and attorney fees.
Mr. GEKAS. We turn to Judge Bernoski.
STATEMENT OF RONALD BERNOSKI, SOCIAL SECURITY ADMINISTRATION, OFFICE OF HEARINGS AND APPEALS, PRESIDENT OF THE ASSOCIATION OF ADMINISTRATIVE LAW JUDGES, INC., MILWAUKEE, WS
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Mr. BERNOSKI. Thank you, Mr. Chairman. Thank you for inviting us to testify this afternoon.
I appear as the President of the Association of Administrative Law Judges. We support the Federal agency compliance bill. We believe that the bill is based on the fundamental concept of separation of powers which is one of the basic principles of our Constitution. This doctrine was further developed in 1803 in the famous Supreme Court case of Marbury v. Madison. This law is the basis for the principle that all citizens and government agencies must follow the law and there can be no exceptions.
However, some agencies, such as Social Security, have a long history of failing to follow Federal circuit law. For example, in 1996, in the case of Hutchinson v. Chater, the court said that the Commissioner will ''ignore the law at his peril.'' And in the 1997 case of Rogers v. Chater, the court said that the Commissioner's policy of nonacquiescence was flagrantly unlawful.
Social Security, Mr. Chairman, has a policy that requires its employees, including administrative law judges, to not apply circuit law until the Commissioner interprets the decision in a ruling. However, recent events have shown that the Commissioner has no special expertise in interpreting Federal court decisions.
In April of this year, in the case of Albright v. Commissioner, the Fourth Circuit Court of Appeals noted the problem of attempting to develop a broad legal ruling from a fact-dependent case. The court, in that case, held that an acquiescence ruling of the Commissioner was not ''an accurate restatement of its prior decision.'' This case shows that the Commissioner's policy of issuing acquiescence rulings is flawed and that the Commissioner of the Social Security Administration has no special expertise in interpreting the law. Therefore, this policy is not justified under their own rationale.
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As Mr. Pickering so ably noted, and he has worked for many years in this area for the American Bar Association, that Social Security cases involve the people of this Nation in their personal issues and they deserve to have the law applied to their cases in an administrative hearing rather than placing the burden on them in having to appeal these cases to the Federal court which involves additional time and, of course, additional money.
In response to a statement by Mr. Fried, I note that there are less acquiescence rulings than there are Federal Court of Appeals decisions. This shows that the Commissioner, by his very definition of the program, is not acquiescing under his own policy to a substantial number of cases.
We have further concern that Social Security is adopting a policy that is directed at refusing to follow the principles of the Administrative Procedure Act which adds to the problem.
In January, 1997, the Office of the General Counsel of SSA issued a memorandum stating that administrative law judges can be disciplined for failure to follow agency policy even if the policy is contrary to the law. The agency next expanded the power of the General Counsel by giving him the authority to prosecute administrative law judges before the Merit Systems Protection Board. Previous to that, that power was in the Associate Commissioner of the Office of Hearings and Appeals. We believe that this policy violates the Administrative Procedure Act because it mixes the policymaking and adjudication function of the agency because the General Counsel has policymaking responsibility.
Page 77 PREV PAGE TOP OF DOC During the past several months, the Social Security Administration attempted to remove the Chief Judge from any responsibility for daily operations and make him an advisor to the Associate Commissioner, thereby reducing his powers dramatically. This, in our opinion, would have politicized the Social Security hearing system. This effort was stopped only after considerable objections were made by Members of Congress and many other legal organizations.
In a recent memo from the Social Security Deputy Chief Judge, it was implied that the full protection of the Administrative Procedure Act was not available to Social Security claimants. This assertion is contrary to the Supreme Court in the Perales case, where the Court specifically held that the protections provided by the Social Security Act and the Administrative Procedure Act are identical.
This agency conduct shows a failure of the agency to comply with both the Federal circuit law and the statutory law. Last week, in fact, our Association appeared and testified at a Congressional hearing before the House Social Security Subcommittee. This hearing revealed that Social Security is still having a difficult time applying Federal law at its lower levels of claims review which shows the need for this legislation. In fact, this topic became a considerable issue for discussion which GAO attempted to explain. But it shows that this problem exists at the Social Security Administration to a greater extent than Mr. Fried acknowledges.
Mr. Fried also referred to the fact that there were 32,000 adjudicators in SSA that would be involved by the statute. We question this number. SSA has approximately 1,000 administrative law judges, and there are some other employees at the DDS level that are reviewing these claims. But we doubt whether there are 31,000 employees in the DDS adjudicating claims in addition to the 1,000 administrative law judges.
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Also, the agency has a policy that is known as process unification. In fact, that policy
Mr. GEKAS. Process what?
Mr. BERNOSKI. Process unification. That policy was talked about quite extensively at the SSA hearing that we attended last week before Chairman Shaw. The purpose of the policy, as SSA explained during the course of that hearing, is to apply the Federal court law at all levels of adjudication. If that is the policy of the administration, it is contrary to the concerns of Mr. Fried. He is saying that if they apply a uniform legal standard it is going to destroy the whole program.
The two positions, taken in these two hearings, are inconsistent. Therefore, Mr. Chairman, we believe that the Federal Agency Compliance Act is good law, and it is the first step in correcting the problems we noted.
Thank you very much.
Mr. GEKAS. We thank the Judge.
[The prepared statement of Judge Bernoski follows:]
PREPARED STATEMENT OF RONALD BERNOSKI, SOCIAL SECURITY ADMINISTRATION, OFFICE OF HEARINGS AND APPEALS, PRESIDENT OF THE ASSOCIATION OF ADMINISTRATIVE LAW JUDGES, INC., MILWAUKEE, WI
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My name is Ronald G. Bernoski, I am an administrative law judge assigned to the Office of Hearings and Appeals of the Social Security Administration in Milwaukee, Wisconsin.
This statement is presented in my capacity as President of the Association of Administrative Law Judges, Inc. (Association) which is an organization having the stated purpose of promoting full due process hearings to those individuals seeking adjudication of controversies within the Social Security Administration (SSA) and of promoting judicial education for Federal administrative law judges.
The Association has a membership of approximately 700 active administrative law judges. This is the largest organization exclusively representing the interests of Federal administrative law judges and administrative law.
The Association appears in support of the Federal Agency Compliance Act (H.R. 1924). The purpose of this legislation is to prevent Federal agencies from pursuing policies of unjustifiable nonacquiescence in, and relitigation of, precedents established in the Federal judicial circuits.
Similar legislation was introduced in the 105th Congress (H.R. 1544 and S. 1166). The U.S. House of Representatives adopted the legislation and the Senate bill was pending on the Senate floor when the session of the Congress ended. The current bill (H.R. 1924) includes the changes recommended in the Senate during the last Congress and the bill now has a wide base of bi-partisan support.
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The law has clearly established that a Federal agency head is bound by the controlling law in each Federal Circuit. In the case of Hillhouse v. Harris, 715 F.2d 428 (8th Cir. 1983), the court reached the same result. The court stated as follows:
[W]e note the Secretary continues to operate under the belief that she is not bound by district or circuit court decisions. In its findings the Appeals Council states, ''the Secretary is bound only by the provisions of the Social Security Act, regulations and rulings, and by United States Supreme Court decisions. A district or circuit court decision is binding only in the specific case it decides.''
In a similar controversy with the National Labor Relations Board the Third Circuit discussed the precedential value of circuit court opinions on administrative agencies:
A decision by this court, not overruled by the United States Supreme Court, is a decision of the court of last resort in this federal judicial circuit. Thus our judgments * * * are binding on all inferior courts and litigants in the Third Circuit, and also on administrative agencies when they deal with matters pertaining thereto.
([the] Secretary violated the separation of powers doctrine in announcing her nonacquiescence in federal appeals court decisions). We repeat Judge Arnold's words with emphasis.
The result of this individual case should not obscure the fact that the regulations of HHS are not the supreme law of the land. ''It is, emphatically, the province and duty of the judicial department, to say what the law is, Marbury v. Madison, 1 Cranch 137, 177, 2 L.Ed. 60 (1803), and the Secretary will ignore that principle at his peril.
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In the recent case of Hutchinson v. Chater, 99 F.3d 286 (8th Cir. 1996), the court cited Hillhouse and reached the same holding. The court stated:
In denying Ms. Hutchinson's request for review, the Appeals Council stated that Tyrrell was not applicable to Donald's case because the Commissioner had not Issued an ''Acquiescence Ruling.'' Regardless of whether the Commissioner formally announces her acquiescence, however, she is still bound by the law of this Circuit and does not have the discretion to decide whether to adhere to it. The regulations of SSA are not the supreme law of the land. It is, emphatically, the province and duty of the judicial department, to say what the law is, Marbury v. Madison, 1 Cranch 137 (1803), and the Commissioner will ignore that principle at her peril'' . . . Tyrrell is, and was at the time of the ALJ's decision, the law of this Circuit, and the Commissioner must abide by it.
Federal judges have reacted to the past nonacquiescence policy of SSA with outrage. In the case of Lopez v. Heckler, 713 F.2d 1432 (9th Cir. 1983) Judge Pregerson likened SSA's policy to the pre-Civil War doctrine of nullification of Federal authority.(see footnote 14) An excellent comment on this policy is set forth by Federal District Court Judge Sand in the case of Stieberger v. Heckler, 615 F.Supp. 1315 (1985), vacated and remanded, 801 F.2d 29 (2d Cir. 1986) when the court stated as follows:
Our system of constitutional Government is undoubtedly a unique and complex one, with three distinct branches of government with independently derived legal authority and substantially separate functions . . . Undoubtedly, too, the lines of separation between these functions are not always clear-cut. The judiciary necessarily exercises enforcement-related functions as an incident of its interpretive and adjudicative activities, while the executive, particularly in the modern era of elaborate administrative agency regulation of a multitude of commercial, social, economic, scientific and employment-related affairs, is permitted to exercise a degree of interpretive authority in its enforcement of the law. However, only a fundamental reordering of constitutional balance would permit the SSA to exercise the power to which it claims an entitlement in this case. The fundamental principles of our constitutional scheme, as articulated in decisions such as Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) (Judicial determination of constitutionally of congressional legislation), Cooper v. Aaron, 358 U.S. 1, 1719 (1958)(stated executive and legislative officials' duty to obey federal court decisions), and United States v. Nixon, 418 U.S. 683 (1974)(judicial determination of scope of presidential power), establish the authority of federal courts to render decisions which bind all other participants in our constitutional system of government. Thus, the SSA's status as an agency of a co-equal branch of the federal government clearly is not an impediment to the imposition of a requirement that it adhere to decisions of federal courts in accordance with the doctrine of separation of powers. The judiciary's duty and authority, as first established in Marbury, ''to say what the law is'' would be rendered a virtual nullity if coordinate branches of government could effectively and unilaterally strip its pronouncements of precedential force . . .
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SSA subsequently settled the Stieberger case which included an agreement to instruct all employees to follow Second Circuit holdings involving New York residents.(see footnote 15)
The dicta in another 8th Circuit Court of Appeals case was not complementary of the Social Security policy of nonacquiescence. In Rogers v. Chater, 118 F.3d 600 (8th Cir. 1997), the court stated that ''[t]he Commissioner's policy of nonacquiescence is flagrantly unlawful.''
The Congress has also been critical of the past nonacquiescence policy of SSA. In a Report prepared by the Subcommittee on Oversight of Government Management of the Committee on Governmental Affairs of the United States Senate, the Recommendations stated that ''[t]he SSA should immediately cease its policy of nonacquiescence in decisions issued by Circuit Courts of Appeal.(see footnote 16) The Congress then attempted to legislate on this issue and each chamber promulgated legislation which failed to be reconciled in the Conference Committee. The Conference Report expressed the intent of the conferees which shows that they did not endorse the nonacquiescence policy of SSA. The Report stated in part that:
The conferees reaffirm the congressional intent that the Secretary resolve policy conflicts promptly in order to achieve consistent uniform administration of the program. This objective may be achieved in at least two ways other than nonacquiescence when the agency is faced with conflicting interpretations of the of the meaning and intent of the Social Security Act: either to appeal the issue to the Supreme Court, or to seek a legislative remedy from the Congress.
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The Stieberger case further shows that members of the executive branch also expressed disagreement with the policy of nonacquiescence by refusing to defend or adhere to it in judicial proceedings. The Court referred to a letter of June 25, 1984 from the United States Attorney for the Southern District of New York to Chief Judge Motley which stated that:
It is our view that this policy, whatever it does permit, surely does not allow the United States Attorney's Office, HHS or any other federal agency to refuse to follow clear rules of law decided by the United States Court of Appeals . . . There has never been any support to my knowledge for the notion that federal agencies within a particular Circuit could disagree with and refuse to follow clear rulings of that Circuit. We have not defended cases in the past by disregarding the law of this Circuit and will not do so in the future.
Social Security has a long history of conflict with the Federal courts regarding its policy of nonacquiescence to Federal circuit court law. On July 2, 1996 the Social Security Administration published notice of a Social Security Ruling.(see footnote 17) The notice expressed that ''[t]his Ruling clarifies SSA's long-standing policies.'' The Ruling stated as follows:
This Ruling clarifies SSA's long-standing policies that (1) unless and until a Social Security Acquiescence Ruling is issued determining that a final circuit court holding conflicts with the Agency's interpretation of the Social Security Act or regulations and explaining how SSA will apply such a holding, SSA decisionmakers will continue to be bound by SSA's nationwide policy, rather than the court's holding, in adjudicating other claims within that circuit court's jurisdiction, and (2) despite a district court decision which may conflict with SSA's interpretation of the Social Security Act or regulations, SSA adjudicators will continue to apply SSA's nationwide policy when adjudicating other claims within that district court jurisdiction unless the court directs otherwise.
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In May 1998, Social Security published final regulations which revise current regulations that govern how it applies holdings of the Federal Circuit courts that conflict with its interpretation of the Social Security Act or regulations in adjudicating claims.(see footnote 18) The new regulations are more modest than the Rulings which Social Security published in 1996. The regulations provide that Social Security will apply a holding in a United States Court of Appeals decision that it determines conflicts with its interpretation of the Social Security Act or regulations unless it seeks further judicial review of the decision or the issue is relitigated. If Social Security determines that a Federal circuit court decision conflicts with the Social Security Act or Regulations it will issue an Acquiescence Ruling within 120 days of the court decision explaining how it will apply the court holding. The regulation also provides that Social Security may relitigate court decisions under certain circumstances.
The new acquiescence regulations of Social Security are not inconsistent with the provisions of the Federal Agency Compliance Act, but they raise several legal issues: First, Pursuant to the Separation of Powers Doctrine, is the agency not required to follow the holding of the circuit court? Where does the agency obtain the authority to delay 120 days before it implements an order of the court? Why is the agency not required to implement a final circuit court decision or not required to follow the Federal Rules of Procedure regarding the finality of court orders, requesting a stay of court orders or perfecting an appeal from circuit court orders? Second, what sanction, if any, is available if the agency does not issue an Acquiescence Ruling within 120 days of the court order? Who has the burden or responsibility to ensure that the agency acts as it represents? If the agency does not act within 120 days, which law is applied by the agency after that time period (court law or agency law)? Third, what is the legal authority for permitting the agency to disregard a court order and revert to its prior interpretation of either the Social Security Act or regulations and then relitigate an issue previously decided by the court?
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In January 1997 Social Security issued a memorandum, prepared by the Office of the General Counsel, which stated that the agency may establish practices and programmatic policies that administrative law judges must follow. The memorandum further concluded that administrative law judges may be disciplined for violations of these agency policies.(see footnote 19) The Association is concerned that this memorandum is the beginning of a structure that the agency will use to enforce its policies upon administrative law judges regardless of whether the policies are consistent with Federal circuit law. This action by the agency conflicts with the responsibilities and duties of an administrative law judge under both the U.S. Constitution and the Administrative Procedure Act. The Association has requested that this memorandum be withdrawn, but the agency has not done the same.
The agency has subsequently taken another step to implement the concept of the ''impartiality memorandum.'' It has changed the agency disciplinary procedure for administrative law judges. Previously this function was within the jurisdiction of the Associate Commissioner of the Office of Hearings and Appeals (OHA) of Social Security. This procedure has been changed and the Associate Commissioner of OHA now only has the authority to investigate claims and prefer disciplinary charges against administrative law judges. The Office of General Counsel now has the responsibility to prosecute the case for the agency against the judge before the Merit Systems Protection Board. The Association is of the opinion that this change co-mingles the policy making and adjudication function of the agency. It places the Office of the General Counsel, which has a policy making function, in a position where it can force agency policy on to administrative law judges through its disciplinary power. This creates a ''chilling effect'' for administrative law judges and violates the spirit, if not the letter, of the Administrative Procedure Act. We have requested that the agency return to the former procedure but the same has been denied.
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During the 105th Congress it was suggested that the adoption of the Federal Agency Compliance Act will unduly elevate the power of the administrative law judge and that the costs of administering the Social Security program will increase. This is not correct. If following the law will have this result, then the problem with the current law should be addressed in the appropriate manner. The correct policy is not to refuse to follow the law. Passing this legislation neither increases nor decreases the function of the administrative law judge. There is no distinction between applying a statute, a regulation or a rule of case law. A judge is in each situation applying a written principle of law to a factual situation. This is the work lawyers are trained to perform. The Commissioner has no special capacity to read or interpret Federal court decisions beyond that of an administrative law judge. In April 1999 the United States Court of Appeals for the 4th Circuit clearly established that an agency does not have any special expertise in interpreting Federal case law. In the case of Albright v. Commissioner of the Social Security Administration, 174 F.3d 473 (4th Cir. 1999) the court stated that it could hardly fault the Commissioner for attempting to faithfully adhere to its precedent, but noted the pitfalls of extrapolating a legal rule of broad applicability from the result in a heavily fact- dependent case. The court then held that an Acquiescence Ruling [942(4)] of the Social Security Administration was not ''an accurate restatement'' of its decision in the Lively case. We believe that this case demonstrates that the issue of nonacquiescence of the Social Security Administration to Federal circuit law is still alive in Federal litigation.
Since the last hearing on this legislation in the 105th Congress, the Social Security Administration has attempted to reorganize the Office of Hearings and Appeals and remove all responsibility from the Chief Judge for daily operations of the adjudication function of the agency. This change removes the Chief Judge from the chain of authority and would have the Regional Chief Judges reporting directly to the Associate Commissioner. This reorganization in inconsistent with the prior stated policy of SSA for a national program and instead fractures the system into 10 regional programs. We believe that this is an attempt to assert more agency control over the administrative law judges, contrary to the intent and scope of the Administrative Procedure Act. We believe that this proposed change violates the Administrative Procedure Act by joining the independent adjudication function with the policy making branch of the agency. This may result in SSA management interfering in the independent decision making process of adjudication at the agency to achieve management objectives such as cost savings, thereby denying lawful claims of American citizens contrary to Federal court precedent, to reach management goals. This reorganization is inconsistent with the Administrative Procedure Act and has the potential to increase the agency past policy of nonacquiescence and politicize the process. In our opinion, SSA should have a system that provides accountability of administrative law judges to both the public and the agency for enforcing Federal court law and precedent. We believe that this can best be accomplished by adopting the Federal Agency Compliance Act and by adopting meaningful reform within SSA by creating a separate Review Commission for the adjudication function of the agency. The Review Commission would be headed by a Chief Judge, based on the Occupational Safety and Health Review Commission model. This system would make SSA administrative law judges responsible for enforcing all Federal law. This change in consistent with the recommendation of the Judicial Conference of the United States that ''Congress and agencies concerned should be encouraged to take measures to broaden and strengthen the administrative hearing and review process for disputes assigned to agency jurisdiction . . .'' It recommended that ''legislation should be requested to improve the adjudicative process for Social Security disability claims by establishing a new mechanism for administrative review of ALJ decisions and limiting the scope of appellate review in the Article III courts.(see footnote 20)
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The policy of agency nonacquiescence to Federal circuit court law exacts a large price from the citizens of the nation. It establishes a two-tier legal system for litigants appearing before an agency which is class driven. Litigants who are financially able will appeal their cases to the Federal courts, to have ''court law'' applied to their cases. Those who are not financially able to appeal will have their cases decided by ''agency law.'' Agency policy of nonacquiescence to Federal court law prevents an uniform national law from developing. It instead results in large class action litigation involving the disputed legal principles which is expensive for both the litigants and the government. The result is different law being created by the class action lawsuits in various separate jurisdictions. The repetitive litigation of the same issues is also extremely costly and time consuming for the Federal courts.
For the reasons stated, the Association of Administrative Law Judges supports the enactment of the Federal Agency Compliance Act (H.R. 1924).
Mr. GEKAS. We turn to Mr. Cohen.
STATEMENT OF SHELDON S. COHEN, MORGAN, LEWIS & BOCKIUS LLP, WASHINGTON, DC
Mr. COHEN. Thank you, Mr. Chairman.
I should start by saying that my only experience with Social Security is that I get a check each month. I am over 70. But my other experience with Social Security is that I had the problem of collecting its tax, and its commissioner had the pleasure of sending out the checks. So I was on the wrong end of that stick.
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One of my problems with this bill is I am not an expert in the adjudication of Social Security claims, and there may well be a serious problem there. But the bill is written in terms of the government as a whole, and I hold myself out as somewhat of an expert in the tax field.
I find that, as former Chief Counsel of the Revenue Service and former Commissioner of the IRS and as presently a teacher of students in litigation in the tax field and practitioner in that field, that this could cause some mischief in the sense that it would inhibit a process which seems to be working. There is a process within the government when a case is appealed beyond the trial court level that the Solicitor General must approve the appeal, that is, if the government appeals it. And the Solicitor General has fairly strict guidelines.
I used to argue these cases with Archie Cox and Thurgood Marshall and with Erwin Griswold when they were Solicitor General when I had a case I wanted to take up. In each instance they would only let you take this case up if they thought that the law needed further developing and that existing case law didn't do that either because it was wrong or because it was too narrow or confusing.
And so at each level it became more difficult. That is, they had a two court rule. If two circuits had ruled, it was virtually impossible, very hard to get them to agree to take a third case. With a three circuit rule, it was rare that they would go beyond that.
And so the Revenue Service, along with many other government agencies, had a rule that it would review carefully at the end of two adverse decisions and generally give up. Occasionally, they would go three, and they would almost universally give up.
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There are cases, and they have been cited to you by the Justice Department, but many cases where there are five or six. That is, that the Solicitor General thought that the issue was so important that the opinions to the contrary were not well reasoned or confusing or left loopholes that created problems. In those situations and in those rare situations, he would allow you to go to the circuit court a third time or the fourth time even.
It just seems to me that if you are dealing with a Social Security problem, if that seems to beand that is all I hear today, and having read your past hearings that is all I seeif that is your issue and you have decided that they are incorrigibleI don't know, but I hear that today, then legislate only in that area. But if you are going to legislate across the board, you need to know where all of the nooks and crannies are, because those nooks and crannies will come back to haunt you and whoever is administering the tax law and whoever is administering whatever other law that is being administratively determined.
We have a tax system, for example, that is uniform across the United States. It is very difficult for the Commissioner of Internal Revenue to say to a taxpayer in the second circuitwho happens to live in the second circuit that you pay less tax than somebody who lives in California. So the Commissioner, of course, is going to try to get that uniform and get the rule that he believes to be the right rule. The governor on him, the Solicitor General, is saying I can't win that case. I have been there twice. I am not going back again. I am not going to let you go back again, is what he says.
I have pointed out a couple of instances in my testimony, where you don't know which way is beneficial for a taxpayer. I want a transaction. I have a capital transaction, and I want it to be capital gain because I get a 20 percent rate instead of a 39.6 percent rate. You have a capital loss on exactly the same facts. You want it to be an ordinary loss because you get a 39.6 percent benefit offset for that loss as against a 20 percent offset if it is only capital.
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So when you take these issues, whichever side you take, you don't know whether it is beneficial or hurtful to taxpayers out there. You take it because you think it is the right answer, and you have got to live with it both ways.
Thank you, sir.
[The prepared statement of Mr. Cohen follows:]
PREPARED STATEMENT OF SHELDON S. COHEN, MORGAN, LEWIS & BOCKIUS LLP, WASHINGTON, DC
Thank you Mr. Chairman and members of the Judiciary Committee for inviting me to testify on H.R. 1924, the Federal Agency Compliance Act.
Because I was invited to testify only a few days ago, I was only able to prepare an outline of my thoughts. With your permission I will expand them in a supplemental statement filed in a few days.
My experience is as a tax lawyer practicing both in the Government, at the IRS and later in various firms in private tax practice. I had the privilege of serving as Chief Counsel of the IRS, December 1963December 1964 and Commissioner of IRS: 19651969. I taught law at the George Washington University Law School, Howard Law School and the University of Miami Law School for about 40 years. I lectured at a number of other law schools. I was also appointed to the Administrative Conference of the U.S. and served there about eight years, working closely with the Honorable Antonin Scalia when he was Chairman of that group. At GWU and the University of Miami I regularly taught a course in Tax Litigation where litigating techniques in the Tax Court, District Courts, Court of Federal Claims and Courts of Appeals were explored.
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I appear here today at your request, in my personal capacity. The views I express are my own and should not be attributed to my law firm nor any of its clients.
The bill before you would amend Title 5 (The Administrative Procedure Act) to require agencies adhere to Court of Appeals decisions in cases appealable to that Circuit and would limit an agency's discretion to re-litigate legal issues in other Federal Circuit Courts. I believe this suggested change is both unwise and unnecessary. It is a solution in search of a problem. I will limit my remarks to the tax field, in which I have practiced for 48 years (10 in the Government and 38 in private practice) and have some expertise. I specifically have no experience with the Social Security cases which seem to have caused the proposal in the first instance.
The bill is completely unnecessary and confusing in the tax field. As Chief Counsel I issued Litigation Order #19647(see footnote 21) which states that in essence litigation is not for the purpose of raising revenue, it is to establish a proper legal point which is fair to all taxpayers. This is still the IRS' practice today. Ours is a tax system which is universal; it applies equally in all states, hence it needs uniform interpretation and administration to be considered fair. You cannot have one rule in one section of the country and a different rule in others. Everyone would consider that as unfair and it would make enforcement more difficult. You would have some taxpayers paying more than others who are similarly situated.
* * *
Page 92 PREV PAGE TOP OF DOCIn addition to insuring that litigation positions conform with ruling policy, it is important that legal positions urged in litigation reflect the same ''largeness of attitude'' that the Commissioner and Chief Counsel have stated should be used in performing the ruling or interpretative function . . . It is natural for the lawyer responsible for litigating a case or supervising its litigation to want to urge whatever arguments will support the Government. However, because a case is in litigation does not justify taking a position which would not be taken had the question been presented for a ruling.
The IRS' policy is reasonable and in accord with the Solicitor General's views. The Tax Division of the Department of Justice and Solicitor General act as the traffic policeman for appeals to the courts of appeal and petitions for cert. The Tax Division and the Solicitor General's office do their job in a highly professional manner. The Solicitor General may seek clarification in a second or third Circuit Court or ultimately to the Supreme Court when the issue is of importance, when they view development of the law by the Circuit Courts as inadequate or confusing or where the issue is of unusual importance. Rarely, if ever, is a case allowed to be appealed to a third circuit where there are two or more Circuit Court opinions clearly enunciating an issue. The appeal involving a third circuit court is extremely rare and thus the IRS almost always accedes to the decision of three or more Circuit Courts. I can think of only a handful of cases when the IRS has tried to get the issue to the Supreme Court by developing a conflict after two or three decisions. One is LoBue(see footnote 22) where four or five cases were reversed by the Supreme Court to set the law right and make it uniform for all taxpayers.
In tax cases you often do not know which side will be to taxpayer's advantage. One taxpayer wants a set of facts to yield capital gain. A taxpayer with identical facts may want the opposite ruling; i.e., he wants to claim an ordinary loss, not a capital loss. In a corporation or pass through entity, they may have one decision involving many taxpayers whose appeals may go to different Circuits. Remember the ITT ruling which was reversed as a result of the Watergate scandal. They had stockholders in every state, so they could have appealed to all of the Circuits. Do you stop litigation when the first three decide? What should be the rule? Remember, uniformity is the key to a fair tax system; all taxpayers with the same situation should be treated the same. Otherwise, they will see the tax system as unfair and this will lead to disrespect for the law, hence less compliance. You may be effecting tax results which you have not contemplated, so if you do not restrict this bill you may want to study the issue further.
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In the tax field we often find taxpayers who will shop for a forum more favorable then the circuit in which they reside or do business. Our system allows a case to be brought in the Court of Federal Claims. The appeal from such a case is to the Court of Appeals for the Federal Circuit. Thus, the taxpayer with the money to prepay the tax is provided a separate and independent court with a separate Court of Appeals. Most taxpayers are not afforded this luxury because they do not have the liquidity to prepay the tax. We have multiple Courts of Appeal, but only one tax system which cries for uniformity. I am afraid you can make it worse by creating more uncertainty with your proposed rule; if you apply it in the tax field.
Thus, while I acknowledge minor problems with the current set up, I prefer it to one where there are wooden criteria and chances to make the system worse.
There is already adequate sanctions on the IRS if it litigates and loses without justification, the statute requires it to pay the fees of the winner, when its position is not substantially justified. Thus, it appears to me, a private lawyer, practicing tax law and litigating regularly against the IRS and Justice Department, that this suggested legislation is not necessary, at least in the tax areas.
Mr. GEKAS. Yes, I understand that, Mr. Cohen. But are you saying that if a circuit court comes down with a decision that seems, at first glance, to be the law for that circuit, that the IRS Commissioner should be able to nonacquiesce?
Mr. COHEN. He doesn't. He nonacquiesces to the rest of the circuits because he follows the law in that circuit. He follows the law in that circuit until it is reversed, and he has done that for 25 or 30 years. It is not new.
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Mr. GEKAS. What objection do you have to this bill, then?
Mr. COHEN. The fact that he may go to the Solicitor General and he may decide that the circuit court didn't write as clear as it ought to and this is confusing the law.
And while the essence of it is in favor of a position, we aren't exactly sure where it leads, and therefore we need further clarification. We need to get it to the Supreme Court and get a decision that is the final decision or we need to get another circuit to explore this further. And you block that out, or at least you made that extremely difficult.
Mr. GEKAS. Would you equate relitigation with acquiescence?
Mr. COHEN. Yes, sir. If you don't let them relitigate it, they can'tthey might just as well have acquiesced because they have given up. They have to give up.
Mr. GEKAS. But we want them to give up.
Mr. COHEN. I understand that. If everybody assumed this morning that every circuit court opinion is crystal clear and we all understand it, I wish that were so. I have seen circuit court opinions that muddy the waters. I have seen Supreme Court decisions that muddy the water. You have to follow the Supreme Court, but the circuit courts are not infallible. They were never designed to be infallible. They were designed to be circuit courts, just that.
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Mr. GEKAS. I guess that we might be on different planes. You might be referring to intercircuit nonacquiescence, where we are primarily interested in intracircuit nonacquiescence.
Mr. COHEN. I understand that. As far as the Revenue Service is concerned, it is extremely rare that they will go back to the same circuit. Only in the case of confusion or, as was alluded to earlier in the testimony, a case where other circuits have cast doubts on that opinion and therefore to get uniformity you go back to that court and say, 20 years ago you said brown, three other circuits have now said white, and ask wouldn't you say white this time?
Now, I think that is a perfectly appropriate exercise of administrative discretion of the Commissioner and the Chief Counsel and the Assistant Attorney General of the Tax Division to try to get that clarified because the 20 years and other circuit courts writing at slight angles of this one have cast doubts on its earlier opinion. It happens quite often. It is not a rare instance.
Mr. GEKAS. We do not prohibit the time kind of finalization that you are describing. It is not in our bill. My concern is the IRS, or you engaging the IRS position in all of this. If there is ever a place in our system where we have to breed confidence from the citizens to the United States government as a whole, it is in the IRS. If we allow nonacquiescence, not following the law, even if it is just perception that that is the case, it breeds more cynicism about the IRS, our codes and our tax collection system. That is what concerns me.
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Mr. COHEN. The only place the IRS does that now is it will announce that it differs with the opinion of the Fifth Circuit, whatever the number is, in this regard. It will follow it, but it won't follow it elsewhere. It isn't the law elsewhere, so they don't have to follow it elsewhere. Indeed, taxpayers are free to argue and do argue in other circuits that the law is different because they may have cases, as I have pointed out, where the issue is exactly the same but they want the opposite result.
Indeed, there has been a suggestion in the tax field that we have one unified Court of Appeals so we get it over with one time. I happen to favor that, but it is quite controversial, and it is quiescent at the moment. I am in favor of it because we get finality faster and we get more uniformity. Other people want more bites of the apple. You have to have enough confidence that you will win it in the circuit court and get it over with.
Mr. GEKAS. Judge Bernoski, I take it you disagree with Mr. Fried's assertion that all is well at the shop because they passed regulations pursuant to our warnings in previous hearings.
Mr. BERNOSKI. Yes, Mr. Chairman. As I indicated in my testimony, it appears to us that the system is not functioning well. The Commissioner is not issuing a ruling every case, and the policy provides that if the Commissioner doesn't issue a ruling we are not to follow the law of the case. So, by that very definition, there is substantial nonacquiescence in the system. Also, the Commissioner is not infallible, as the Albright case very clearly points out. So it is better to follow the policy of this legislation.
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In answer to what Mr. Cohen said, which is a frequent argument raised in opposition to this type of legislation, is that it will thwart the national policy of the agency.
But I think, as Judge Stapleton points out in his statement, the result is just the opposite. When an agency doesn't follow the law and instead ignores the law, it is frustrating the system. The agency should be required to either follow the law or appeal the decision. If they appeal the case, the agency allows the common law to grow and develop, as Judge Stapleton advises, through the doctrine of stare decisis. The program then is flexible, and it builds upon itself. It does not help any agency to ignore the law. It is very difficult for American citizens to understand a concept that allows any agency to ignore the law.
Mr. GEKAS. That perception I was talking about. If not the actual rationaleMr. Pickering, I hope that I didn't infer improperly from your opening statement that the American Bar Association supports this legislation only insofar as the Social Security Administration is concerned.
Mr. PICKERING. That is correct. That is the situation with which we are most familiar. That is the situation that we have had a long-standing commitment to try to correct. We do not take any position regarding the application of the act to any other agency.
Mr. GEKAS. But you are aware that the Judicial Conference makes no distinction in its edict among its members and its suggestion to the Congress. You agree that they were not restricting it to Social Security?
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Mr. PICKERING. Yes, I would like to further point out the problem is largely the matter of the intracircuit situation. Because the agency reserves to itself the right to interpret the decision or even not to follow it pending other litigation, that makes the administrative law judges apply a rule in cases where they know they are going to be reversed if a claimant, who often lacks legal representation, is somehow able to take an appeal within that circuit.
So those are reasons why we are very concerned. This is sort of like a floating target. Every time we deal with the agency, they offer a few more things. I think the time has come tolet's have a statute of repose.
Mr. GEKAS. That brings us to the end of the series of panels that we had appear today. The testimony will be made available to everyone who is interested in the subject. We hope to engage in a markup as soon as possible. We have confidence that we will prevail in the House, and we will try to nudge the Senate to follow suit.
We thank our witnesses, and we dismiss them with that gratitude. Thank you very much.
The committee is adjourned.
[Whereupon, at 4:12 p.m., the subcommittee was adjourned.]
(Footnote 1 return)
Report of the Federal Courts Study Committee at pp. 5960 (April 1990).
(Footnote 2 return)
United States Department of Energy v. Federal Labor Relations Authority, 106 F.3d 1158, 1169 (4th Cir. 1997) (Luttig, J. concurring) (letter dated November 14, 1996 from the Deputy Director, Appellate Staff, Civil Division, Department of Justice, fn 1).
(Footnote 3 return)
(Footnote 4 return)
Judicial Conference of the United States, Proposed Long Range Plan for the Federal Courts, Recommendation 11 (1995).
(Footnote 5 return)
Report of the Federal Courts Study Committee 5660 (1990).
(Footnote 6 return)
Dan T. Coen, The Constitutional Case Against Intracircuit Nonacquiescence, 75 Minn. L. Rev. 1339, 142931 (1991).
(Footnote 7 return)
20 C.F.R. §404.985(a) and (b), 416.1485(a) and (b).
(Footnote 8 return)
Since 1990, SSA has published thirty-seven rulings, twenty-four between 1990 and 1993. Acquiescence Rulings are available on the Social Security Administration's web site, http://www.ssa.gov.
(Footnote 9 return)
64 Fed.Reg.42310 (Aug.4, 1999).
(Footnote 10 return)
20 C.F.R. §201.00 (f), 202.00(f).
(Footnote 11 return)
McQueen v. Apfel, 168 F.3d 152 (5th Cir.1999), Kerns v. Apfel 169 F.3d 464 (8th Cir.1998), Presslar v. Sec'y of HHS, 14 F.3d 1107 (6th Cir.1994).
(Footnote 12 return)
SSAR 993(5), SSAR 992(8), SSAR 951(6).
(Footnote 13 return)
20 C.F.R. §404.1563(d) and 416.963(d).
(Footnote 14 return)
Gellhorn and Byse, Administrative Law, Cases and Comments, (9th ed. 1995).
(Footnote 15 return)
Gellhorn and Byse, Administrative Law, Cases and Comments, (9th ed. 1995).
(Footnote 16 return)
98th Congress, 1st Session, Committee Print, S. PRT. 98111, U.S. Government Printing Office, Washington, (1983).
(Footnote 17 return)
Federal Register/Vol. 61, No. 128, page 34470, July 2, 1996, Social Security Ruling 961p.
(Footnote 18 return)
Federal Register/Vol. 63, No. 87, page 24927, May 6, 1998, 20 CFR Sec. 404.985 & 416.1485.
(Footnote 19 return)
Legal Foundations of the Duty of Impartiality in the Hearing Process and its Applicability to Administrative Law Judges, Social Security, Office of the General Counsel, January 28, 1997.
(Footnote 20 return)
Long Range Plan For The Federal Courts, page 33, Judicial Conference of the United States, December 1995.
(Footnote 21 return)
Litigation Order 19647: ''A detailed tax code does not provide all the answers. Many questions arise for the first time in litigation. The position taken must represent the interpretation the Service wants because it is the best and most reasonable, the interpretation that makes the maximum contribution to a sound, wise tax system, not only immediately but over the long run. Our responsibility to adopt the proper position in litigation cannot be shifted to the courts.
(Footnote 22 return)
351 U.S. 243 (1958).