SPEAKERS CONTENTS INSERTS
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BANKRUPTCY JUDGESHIP ACT OF 1997
THURSDAY, MAY 22, 1997
House of Representatives,
Subcommittee on Commercial and
Administrative Law,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:07 a.m., in room 2226, Rayburn House Office Building, Hon. George Gekas (chairman of the subcommittee) presiding.
Present: Representatives George W. Gekas, Lamar Smith, Bob Inglis, Ed Bryant, Steve Chabot, Jerrold Nadler, Sheila Jackson Lee, and Martin T. Meehan.
Also present: Raymond V. Smietanka, chief counsel; Audray Clement, staff assistant; and Perry Appelbaum, minority chief counsel.
OPENING STATEMENT OF CHAIRMAN GEKAS
Mr. GEKAS. This subcommittee will come to order.
We acknowledge the attendance of the gentleman from New York, Mr. Nadler, the ranking minority member of this subcommittee.
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This morning's hearing will be centered around what has been generally described as nonacquiescence. In a more formal sense it may be better to title it ''A question of law and order,'' because taking it to its logical extreme, a body that insists on nonacquiescence to the status and the state and the word of the law, may be purposely evading the law, disobeying the law, or in may other ways doing the same kinds of things upon which we visit punishment on criminal activity.
Of course, we're talking about the administrative part of the law of the land, and perhaps it doesn't rise as dramatically as I have indicated to those quarters, but it is still a very worrisome aspect of trying to bring about a sense of confidence for our people in their justice system, and particularly in a field in which their lives are perhaps more forcefully touched than in any phase of the administration of justice in our country. Because the aged, the disabled, those who look to the various programs that are in place for sustenance and for help, if they can't rely on certain principles of law and have a government that applies equal justice to all, then it is more important in many ways than other parts of the law, criminal or civil.
So we proceed today with another note to make, and that is that we did not come upon this hearing or this issue very lightly. Many of our colleagues in previous Congresses, including the chairman, have been acting on it in different ways, but now we have the impetus of a formal recommendation to the Congress from the Judicial Conference on this very subject. That is very powerful stuff if you consider the working relationship between the Congress and the judicial branch of the Government. If, indeed, the judicial branch is issuing a lament, a complaint, a worry, a recommendation to its sister branch of the Government, the legislative branch, to do something about a vexing problem, then even if we did not believe there was a problem, we would have to, in my judgment, investigate it thoroughly.
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Therefore, the testimony that we'll be adducing here today will be to that end: to determine the extent of what we call nonacquiescence, to determine who is for or against trying to implement some changes, and to work together with an end product for a bill that we hope will reflect the best thinking of the witnesses, the public, and the Members of Congress.
[The bill, H.R. 1544, follows:]
INSERT OFFSET RING FOLIOS 1 TO 5 HERE
Mr. GEKAS. I yield to the gentleman from New York, if he wishes to address the subcommittee hearing for 5 minutes or for an opening statement.
Mr. NADLER. Opening statement—I don't think it will be 5 minutes. Thank you, Mr. Chairman. I want to commend you, Mr. Chairman, for scheduling today's hearing on the subject that raises important questions about the rule of law and government accountability.
Our system of government is guided by the rule of law, and we should regard with great seriousness any suggestion that anyone, especially any government agency, would hold themselves above the law. Our independent judiciary has been a bulwark of the rule of law and the protection of the rights of all Americans. That is why I have found so disturbing the gratuitous and sometimes overheated attacks on that coequal branch of government, the judiciary, by some of our colleagues. So, I commend you, Mr. Chairman, for your courage and commitment to safeguarding the independence of the judiciary.
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The question of agency nonacquiescence is not new. The disregard of Federal agencies during the Reagan administration for the courts and for the rule of law brought this House, more than a decade ago, to vote for restrictions similar to the ones proposed in the legislation which you and Representative Frank have introduced. I hope to hear from today's witnesses whether some Federal agencies, as has been alleged, are still writing their own laws and simply disregarding the orders of the Federal appellate courts, and of greatest concern, whether they are still ignoring the laws, to the detriment of American citizens who should be able to expect that their Government will not make them jump through unnecessary legal hoops to vindicate their rights.
But I think it is important for this subcommittee to look behind the rhetoric and to view the cases to see what the courts have actually said and what the agencies have actually done. Federal agencies do have an obligation to protect the taxpayers' money and to press the Government's case where they believe the merits lay. I do not think we need 535 attorneys general making calls on the executive branch's appellate strategy, but simply ignoring the rulings of the Federal courts is not an appropriate or a lawful strategy. That's the line, and we need to look today at whether Federal agencies are in fact crossing that line, and whether the problem requires remedial legislation of the sort proposed here.
Finally, Mr. Chairman, I want to take this opportunity to recognize the outstanding work of our colleague, the gentleman from Massachusetts, that he has done on this issue over the years. His efforts, going back to some of the extreme abuses of the Reagan years, have helped promote awareness of the problem as well as have helped move us toward a solution, and I thank him.
And I thank you for calling this hearing, and I look forward to a dispassionate review of what's been going so that we can see what we need to do. Thank you, Mr. Chairman.
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Mr. GEKAS. We thank the gentleman.
We acknowledge the presence the gentleman from Massachusetts, Mr. Frank, who—as Mr. Nadler has noted—has had a deep impact on this issue over the years. He's here by acquiescence of the Chair—and is one that, I'm sure, will lend additional credibility to this hearing.
Does the gentleman have an opening statement?
Mr. FRANK. Thank you very much, Mr. Chairman. Yes, I do, and it is that, while I very much appreciate your including me today, I also very much regret the fact that we have to be here. I am very disappointed that this issue has come up again. It seemed to me—what?—more than 10 years ago to be simply wrong to have the administration then in power failing fully to comply with these decisions. I continue to think so. The fact that this flares up again convinces me, Mr. Chairman, that the proposal that you and I both support about independence of the administrative law judges has a great deal of relevance. I think the administrative law judges have been put in a very difficult position by this departmental policy, and people whose job it is to interpret the law ought not to be put in that kind of position.
I remember it. I don't know whether—I had heard that this might be going on again; I hope it will get cleared up, but I remember in the eighties, when this came up, ALJ's who decided too many cases in favor of the applicant had to go to remedial judging school, but ALJ's who decided every single case against the applicant were subject to no such remediation. The administration at the time said, ''Well, if people deviate from this norm of what we expect to happen, then we have to look at it,'' but deviations in the direction of leniency were a problem; deviations in the direction of saying no to everybody were accepted.
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I don't understand why this is even controversial. I don't understand why this administration doesn't just follow the law, particularly since what we are talking about are some of our most unfortunate fellow citizens. And while holding down government spending is a good idea, denying benefits to people in need of them, to disabled people, is simply outrageous, and to do that either in defiance of or in only the most grudging compliance with the law is also outrageous.
So, I appreciate these hearings, Mr. Chairman. I hope we will either get from the administration an acknowledgment that none of this is going on, and maybe they can try to explain away what's happened, but that's less important than their promising to simply comply from here on, and instruct the people who work for them that they're going to comply with the law, or else we will have to move with legislation. And, as I said, they're also, I think, strengthening the argument for the administrative law judge central court.
I appreciate your including me today. I will be back and forth, because we have a hearing of the Banking Committee, and we have one of the rare appearances on the Hill when we question Mr. Greenspan, and those are not to be frittered away lightly, so I may go over there. [Laughter.]
Mr. GEKAS. Tell him to acquiesce in low interest rates. [Laughter.]
Mr. FRANK. Yes, I think that's probably what we'll try to do. The difference, however, is that Mr. Greenspan, we know, acknowledges no higher authority. [Laughter.]
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Mr. GEKAS. I wish to add to the opening statements made by the gentleman from New York and that of myself and that of Mr. Frank, that, notwithstanding what we thought we were able to accomplish in rectifying some of the abuses 10, 15 years ago, it was the 1995 report and analysis made by the Judicial Conference really spurred us into rethinking this issue. So it is not a déjá vu back to the 1980's which we're considering here. The springing factor was the 1995 report by the Judicial Conference. They were worried about it; and that worries us.
With that, we'll go to the first witness who will be Judge Stephen Anderson, who was appointed to the U.S. Court of Appeals for the Tenth Circuit in 1985 by President Ronald Reagan. In addition to his regular duties on the bench, Judge Anderson has been active in judicial administration. In 1995, Chief Justice Rehnquist appointed Judge Anderson as the Chair of the Federal State Jurisdiction Committee of the Judicial Conference of the United States. Judge Anderson was a trial attorney in the Tax Division of the Department of Justice from 1960 to 1964, and from then until his appointment to the bench, he practiced law in Salt Lake City, concentrating in business and tax law and related litigation. He was president of the Utah State Bar. He attended Eastern Oregon College of Education, Brigham Young University, and the University of Utah and received his law degree from the University of Utah in 1960.
We will allot the customary 5 minutes to the witnesses. We will say at the outset that any written statement will be accepted and placed in the record, without objection. We will ask you to extract whatever you want to from that written statement for the purposes of the oral testimony.
You may proceed.
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STATEMENT OF HON. STEPHEN H. ANDERSON, JUDGE, U.S. COURT OF APPEALS FOR THE TENTH CIRCUIT, SALT LAKE CITY, UT, ON BEHALF OF THE JUDICIAL CONFERENCE OF THE UNITED STATES
Judge ANDERSON. Thank you, Mr. Chairman and members of the subcommittee and Congressman Frank. I appreciate the opportunity to appear before you today.
As you mentioned, I do appear on behalf of the Judicial Conference of the United States, and I am here to testify in support of H.R. 1544, the Federal Agency Compliance Act.
The act generally prohibits agencies from refusing to follow the law of the circuit in which they are conducting their affairs. This practice has been called intracircuit nonacquiescence. Your proposal also seeks to discourage agencies from persistently litigating an issue from circuit to circuit after a string of consistently unfavorable decisions. This practice is commonly referred to as intercircuit nonacquiescence.
The Judicial Conference, as you mentioned, Mr. Chairman, went on record in 1995 in the long range plan for the Federal courts encouraging the enactment of legislation to generally prohibit agencies from adopting a policy of nonacquiescence to the precedent established in a particular Federal circuit and to limit intercircuit nonacquiescence.
The Federal Courts Study Committee, which was established by Congress, also recognized the problem in 1990 when it issued its report to Congress. The Federal Courts Study Committee recommended that the Social Security Administration be required to abide by the legal precedents established by the court of appeals in the circuit in which the claim or benefit was filed. The report went on to describe the underlying problem of unfairness to claimants. The Study Committee also called upon Congress to explore whether legislative control should be applied to other agencies as well. Thus, the problem of nonacquiescence is not a new problem, and the idea of legislation to correct it is not a new idea.
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In 1984, both the House and the Senate—and I believe, Congressman Nadler, you referred to this in your statement—passed proposals to restrict nonacquiescence by the Social Security Administration. While the conferees determined to delete the nonacquiescence section from the Social Security Disability Benefits Act then under consideration, the conference committee stated as follows in their report: ''By refusing to apply circuit court interpretations and by not promptly seeking review by the Supreme Court, the Secretary forces beneficiaries to relitigate 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.''
Mr. Chairman, it is still an undesirable consequence. The reasons for prohibiting agency non-acquiescence are almost self-evident and have been touched upon in opening statements by members of this subcommittee and Congressman Frank. Agencies should not be free to ignore the law established in a particular circuit. It violates all of our concepts of the rule of law existing in this country for more than 200 years and certainly since Marbury v. Madison. Such a practice engenders disrespect for the rule of law because, as mandated by Congress, agencies are in the stream of Federal litigation; they should not be above the law when a controlling precedent has been established.
In short, nonacquiescence shows disrespect of the careful jurisdiction and venue provisions established by Congress because Congress provided that citizen claimants could appeal any unfavorable ruling to the Federal courts, including the appellate courts. So the agency is merely part of the stream, the end result of which, as prescribed by Congress, is in the Federal courts.
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When an agency ignores a precedent in a subsequent case either at the administrative level or in Federal court, it is unfair to individual claimants——
Mr. GEKAS. We will grant the witness an additional 2 minutes, without objection.
Judge ANDERSON. You know, I get to this point, and I always feel sorry for attorneys who appear before me in appellate court, and I want you to know, Mr. Chairman, that I grant extra time, and I appreciate your extension. [Laughter.]
It's unfair to individual claimants to force them to relitigate to a foregone conclusion; it's an expense and it's a delay. It is, further, unfair to those individuals who aren't represented by counsel, who don't know that a precedent exists. This situation is true for the bulk of citizen claimants who are too tired, too discouraged, or too unaware of the law to litigate at all and go away with an adverse decision when there could be a decision in their favor.
H.R. 1544 is a solution to this and related problems. It would end unnecessary litigation. It would restore fairness to the application of controlling precedents and it would conserve judicial resources instead of draining resources. H.R. 1544 also has a number of safety valves which would address the legitimate concerns of Federal agencies and allow them to continue to try to press their views under appropriate circumstances.
In conclusion, Mr. Chairman, I thank you again for permitting me to represent the views of the Judicial Conference of the United States here today in support of this bill and applaud the bill as a just and fair means of finally closing the door on this debate which should not have gone on for so long. Thank you.
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[The prepared statement of Judge Anderson follows:]
PREPARED STATEMENT OF STEPHEN H. ANDERSON, JUDGE, U.S. COURT OF APPEALS FOR THE TENTH CIRCUIT, SALT LAKE CITY, UT, ON BEHALF OF THE JUDICIAL CONFERENCE OF THE UNITED STATES
Mr. Chairman and members of the Subcommittee, I am Stephen H. Anderson, Judge of the United States Court of Appeals for the Tenth Circuit and Chair of the Judicial Conference Committee on Federal-State Jurisdiction. 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.'' In addition, I have witnessed first-hand the problems and tensions caused when agencies pursue policies under which they ignore relevant circuit precedent. We greatly appreciate the subcommittee's interest in addressing this significant problem and in being asked to share our views today.
The Judicial Conference of the United States encourages the enactment of legislation to generally prohibit agencies from adopting a policy of non-acquiescence to the precedent established in a particular federal circuit. The Conference also supports efforts to require agencies to demonstrate special circumstances for re-litigation of an issue in an additional circuit when a precedent has already been established in multiple courts of appeals. This position is embodied as Recommendation 11 in the judiciary's Long Range Plan for the Federal Courts, which was published in December 1995.
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I am testifying today in support of the Federal Agency Compliance Act, H.R. 1544, because it is consistent with the position of the Judicial Conference. By requiring agencies to follow circuit precedent, the bill preserves the time-honored doctrine of stare decisis through which the law is administered in a dear and consistent manner, guided by applicable appellate precedents. At the same time it recognizes that agencies should be permitted to re-litigate a circuit precedent under certain circumstances. Thus, H.R. 1544 is a necessary and balanced proposal, which will allow litigants, as well as the courts, to conserve resources by avoiding unnecessary re-litigation of issues in the federal courts.
DESCRIPTION OF THE PROBLEM OF AGENCY NON-ACQUIESCENCE
Mr. Chairman, I would like to briefly describe the practice of agency non-acquiescence and how it affects the administration of justice. Non-acquiescence can be divided into two categories, intra-circuit and inter-circuit. Intra-circuit non-acquiescence occurs when an agency refuses to conform its rulings and litigation to the legal interpretations by the court of appeals with jurisdiction. Inter-circuit non-acquiescence occurs when multiple courts of appeals have rejected an agency's position and the agency nevertheless continues to litigate its position in other courts of appeals.
Intra-circuit non-acquiescence by agencies is contrary to the principle of stare decisis. When a United States court of appeals renders a decision in a case on a particular point of law, that decision is controlling precedent for subsequent cases raising the same issue within the same circuit. This fundamental principle spares claimants from re-litigating legal issues already settled within that judicial circuit.
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However, certain federal agencies ignore, either occasionally or systematically, decisions within the same circuit that are contrary to the outcome sought 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 legal position contrary to the circuit precedent. Litigants have then been required to pursue their claims in federal court in order to avail themselves of existing decisional law in their favor.
Agencies have attempted to justify this practice by asserting, among other things, the need to administer a federal regulatory system uniformly. But intra-circuit non-acquiescence creates a different inequality, one between claimants who appeal agency orders and those who do not. Agency non-acquiescence is particularly unfair when litigants are proceeding pro se or lack the resources to seek judicial review in federal court of an agency's final decision. Even if the litigant is able or willing to initiate federal judicial proceedings, he or she may be unaware of an existing favorable precedent and choose not to seek judicial review. As a result, claims by litigants within the same judicial circuit may be treated differently depending upon their ability to pursue their claims.
Inter-circuit non-acquiescence is a different type of problem one based not on controlling precedent but on repeated precedents. 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 relitigates the same issue after losing consistently in several circuits. Unnecessary agency litigation among the circuits does not further the development of case law.
APPROACHES FOR ADDRESSING NON-ACQUIESCENCE
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The problem, which has been ongoing for decades, 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 agencies in 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. Conf. Rept. No. 1039, 98th Cong., 2nd Sess., reprinted in 1984 U.S. Code Cong. & Admin. News 3096.) Mr. Chairman especially in these times where we are striving to improve judicial economy, unnecessary re-litigation is still an undesirable consequence.
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 in the context of Social Security disability claims be prohibited. 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 (SSA) 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 precedential holdings of the courts of appeals if the agency determined that the relevant court decisions are 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.
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That broader approach, which is now reflected in H.R. 1544 is supported by the federal judiciary. The restrictions on non-acquiescence should be applied to all agencies for three reasons. First, as noted previously, intra-circuit non-acquiescence undermines the application of the doctrine of stare decisis adherence to established precedents to subsequent cases arising within the same judicial circuit. That fundamental principle provides stability and predictability to our judicial system and, as a result will facilitate settlement of disputes and free litigants from relitigating settled legal precedents. The ''law of the circuit doctrine'' promotes uniformity and provides litigants with a sense of fairness, regardless of their financial means.
Second, the problem is not limited to the Social Security Administration. Commentators and judicial opinions have frequently mentioned other agencies, such as the Internal Revenue Service (IRS) and the National Labor Relations Board (NLRB), which have chosen to ignore controlling precedents. Although agencies may withdraw (and sometimes have withdrawn) nonacquiescence policies, their assertion of a right to selectively follow applicable law should be constrained.
Third, non-acquiescence drains already limited resources within the judiciary. Enactment of the Federal Agency Compliance Act would result in fewer cases being filed in both the United States district courts and courts of appeals, and it may streamline the proceedings in cases that are filed. It would also likely result in a reduction in administrative litigation. Moreover, an agency's litigation of the same issue in additional circuits after repeated, unsuccessful attempts to achieve a circuit split (which increases the likelihood of Supreme Court review) is also a poor use of judicial resources.
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THE SOLUTION IN H.R. 1544 TO AGENCY NON-ACQUIESCENCE
H.R. 1544 is a measured approach to restoring efficiency and fairness to the agency decision-making process and to resulting litigation.(see footnote 2) While the bill requires agencies to follow precedent within the same circuit, it also recognizes three circumstances where it may be appropriate for the agency to pursue a position contrary to an otherwise applicable court of appeals decision. 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.(see footnote 3) 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 the agency is free to assert a position contrary to the precedent. Once the judicial proceedings are initiated, however, appellate jurisdiction becomes certain and the agency must acquiesce in the existing precedents in that circuit.
In the second exception, the agency could pursue a position contrary to the circuit precedent 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.
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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. If the agency asserts the applicability of any of these three factors, the court will likely determine, in light of stare decisis principles, whether the factor articulated will cause the court to question its earlier precedent. 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, this bill facilitates the continued development and evolution of circuit law.
Section 3 of H.R. 1544 addresses the related problem created when an agency persists in re-litigating an issue resolved consistently against the Government in multiple circuits (intercircuit non-acquiescence). This section does not appear to actually bar agencies from re-litigating in other circuits an issue previously decided by other courts of appeals. Instead, it encourages Justice Department and other agency officials to carefully consider whether to re-litigate in yet another circuit when an issue has been decided against an agency in at least three other courts of appeals. The responsible official is exhorted to apply several factors, including those listed in the bill, to ensure that unnecessarily repetitive litigation is avoided. Although this mandate would not be subject to judicial review, the section's annual reporting requirement will enable Congress to monitor the degree to which agencies needlessly continue to re-litigate issues, and it will allow Congress, in the future, to consider whether a more restrictive solution to the problem of intercircuit non-acquiescence is needed.
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CONCLUSION
Before I close, I would like to emphasize that agency non-acquiescence and persistent relitigation policies are, at best, of questionable propriety. It is a fundamental principle that an appellate court's decision on a particular point of law is, in the absence of extraordinary circumstances, controlling precedent for other cases raising the same issue in the same judicial circuit. When an agency chooses to ignore applicable circuit law, the principle of stare decisis is seriously undermined and tension is created between the executive and judicial branches. Individual litigants are bound by this legal principle. We should expect no less when the litigant is the Federal Government.
Mr. Chairman, we appreciate 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 this opportunity to speak at today's hearing.
Mr. GEKAS. I thank you, Judge. I must tell you that the recommendations of the Judicial Conference are probably the single most weighty impact that we have had that has been visited upon this subcommittee. We would not be here if it weren't for the alarm that has been raised.
What I wanted to ask, when Chief Justice Rehnquist appointed you, did he specifically or did someone specifically say, ''We have to look into this question of non-acquiescence'' or was this a general mandate that you received on all Federal problems?
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Judge ANDERSON. It is a general mandate. The Committee on Federal-State Jurisdiction has a written jurisdictional mandate that encompasses the allocation of responsibility for litigation between State and Federal courts. The committee often addresses the impact on Federal courts of actions by Congress. It considers all sorts of jurisdictional questions that Federal courts face all the time, and in particular repetitive and unnecessary litigation. Even more fundamentally, the allocation of power between the executive and judicial branches of government most certainly falls within the jurisdiction of this committee.
Mr. GEKAS. And I take it that you indulged in statistic-gathering and case management reports throughout the various circuits during that time, is that correct?
Judge ANDERSON. We have statistics, Mr. Chairman. May I add to that a comment?
Mr. GEKAS. Yes, certainly.
Judge ANDERSON. The number of administrative cases actually litigated in Federal courts is close to 3,000 annually, but we know that there are at least, as of this year, 588,000 claims before the Social Security Administration. This is a matter of the invisible statistic, the invisible citizen claimant. What happens to the mass of citizen claimants at the lowest level, the first desk of an agency's consideration? That action we don't know about. The only way that we know that something may be wrong is the announcement over and over again, one way or the other, by agencies that they have the right to disregard the law set by the circuit in which they conduct their affairs. And so the case of the invisible statistic and the balance of comity versus power are the concerns that engage our attention.
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Mr. GEKAS. Yes, then you probably would be familiar with the report that was made in the Judicature, volume 80, No. 5, by Susan Hare and Stephanie Lindquist, which talked about an agency in 12 courts, that compares the statistics and shows which circuit courts are stuck on one kind of precedent and the other circuit courts with others. Have you found this——
Judge ANDERSON. I have read the article; I have it with me here today. I found it very interesting, but inconclusive.
Mr. GEKAS. Yes.
Judge ANDERSON. They were unable to draw statistical conclusions from the tables they put together.
Mr. GEKAS. But they did confirm the fact that it's intractable, the number of different types of decisions that come from the various circuits?
Judge ANDERSON. Clearly intractable. May I give you just one example? In 1988, in Adamson v. Bowen, the tenth circuit, in a panel on which I sat, in a decision written by Judge Logan, upheld rule 11 sanctions against the Secretary for bringing a frivolous case in district court. We addressed—not head on, but in passing—the nonacquiescence problem. That case is still on the Social Security Administration nonacquiescence list almost 10 years later.
In 1995, the tenth circuit had a case, Fisher v. Commissioner involving the Internal Revenue Service, which is on the IRS nonacquiescence list. The problem appears to be intractable.
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The letter by William Kanter of the Department of Justice to the fourth circuit recently, attached to the opinion of the fourth circuit, confirms the problem that we face, which is not a problem of voluntary compliance by an agency to reduce tensions between the executive and the judicial branch; it is that agencies assert the power to determine whether to comply with a precedent which concerns us greatly.
If I may, Mr. Chairman, just share this one point: Mr. Kanter said this to the court, ''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.'' Of course, in many instances an agency will apply a precedent as a matter of policy and comity, but not as a requirement. And so we have here the specter of citizens hearing the argument they least want to hear: that a Federal agency need not follow the law of the circuit; that the Federal agency may be a law unto itself; that the Federal agency may pick and choose the law it will follow at its whim—in other words, acting as a fourth branch of government with powers equal or greater to the third branch of government. That is what alarms us, Mr. Chairman.
Mr. GEKAS. The time of the chairman has expired on this first round of questioning. We acknowledge the attendance of the gentleman from Texas, Mr. Smith, and the gentleman from Tennessee, Mr. Bryant, and I will yield 5-minute questioning period to the gentleman from New York, Mr. Nadler.
Mr. NADLER. Thank you, Mr. Chairman.
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First of all, does the Social Security Administration always issue an acquiescence ruling when a circuit court decision contradicts an agency policy, to your knowledge?
Judge ANDERSON. The Social Security Administration has released some statistics; they have issued approximately 65 AR's, that is acquiescence rulings. We do not know, however, how many rulings occur in which they don't acquiesce; the Social Security Administration does not issue that kind of a statistic, and it is not available to us, so we don't know.
Mr. NADLER. Thank you. In your opinion—obviously, you think this bill or something like it is necessary.
Judge ANDERSON. Oh, I think it is at this late date mandated, because of the continuing debate over something that should be so self-evident after 200 years of government in this country—as I think Congressman Frank described it or the chairman, so self-evident that we wonder why we are here.
Mr. NADLER. I would ask if you would comment on the bill in the following sense: The bill seems to me precatory, certainly for the intracircuit question. How would you enforce the bill? In other words, should we add some language to the bill or change language in the bill to make it enforceable, because there is a specific provision that says that you cannot sue in court on the grounds that a particular agency action is not—is a case of nonacquiescence?
Judge ANDERSON. The Conference has taken no position on sanctions in the context of this bill. I think that the bill is a measured step in the right direction to close the door on the debate and that it will allow courts, with confidence, to apply tools that are already at hand. Those tools might include sanctions under rule 11 and perhaps rule 16 of the Federal Rules of Civil Procedure. Also perhaps relevant are rules 37 and 38 of the Federal Rules of Appellate Procedure, as well as 28 U.S.C., section 1927.
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Mr. NADLER. Those are—I'm not sure—I'm not familiar with the last one you mentioned, but most of those—certainly, rule 11(c)—are sanctions against the initiation of frivolous litigation. We're dealing with a situation where you're forcing the claimants to initiate litigation because of a frivolous denial of a benefit by an agency. I don't know that 11(c) would apply there. To what extent do the courts already have the power to stop nonacquiescence by contempt, by rule 5, and/or any other rule, and to what extent would this bill bring those more into play or do the courts need some additional way of enforcing this bill?
Judge ANDERSON. Well, as I say, I think the bill is a measured step in the right direction, and it could be that future experience would dictate that something more be done. I have some faith in the agencies, having been a trial attorney in the Tax Division of the Department of Justice, and we certainly tried to uphold the law. What happened in the past, particularly in the eighties, is that the courts would certify a class action, issue an injunction, and then hold the threat of contempt over the Secretary. That scenario was what happened in Hyatt v. Sullivan and Lopez v. Heckler and in a number of the other famous cases. And that tool is still available.
It certainly has not been sufficient to change the position of the agencies. They have continued to assert the power to defy the law as announced by the circuit. They may show comity, but they cannot reserve to themselves the power to determine whether to follow the law of the circuit. The door to that debate must be closed.
Mr. NADLER. I think, sir, we all agree with that. The question I'm asking is: If the courts have the power now, it's obviously not sufficient to solve the problem. If this bill simply states a policy, are you saying in effect that this bill is useful simply because it will increase the willingness of the courts to use that power which they have been somewhat reluctant to use until now?
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Judge ANDERSON. I think, in part, exactly so. I think some judges have been hesitant to use tools at their disposal because of the arguments earnestly made by these very agencies—to be made by witnesses following after me—that they have the right to do what they are doing; that they will follow the law in a particular case, but not generally. This bill will give judges a greater confidence, I think, to use tools at hand.
Mr. NADLER. Thank you, sir.
Mr. GEKAS. The time of the gentleman has expired. Mr. Smith of Texas is recognized for 5 minutes.
Mr. SMITH. Mr. Chairman, thank you, and I'll be brief.
I noticed that this bill, as it looks like to me, comes and stems from a recommendation of the Judicial Conference in 1995. It has a good, bipartisan support and it's been introduced by you, Mr. Chairman, Mr. Frank as well, as I understand it.
I'm reassured by your answers, Judge Anderson, I just have one question, in part, because I am unfamiliar with some of the problems that perhaps led to it, but what's an example of the wrong that this bill is supposed to right?
Judge ANDERSON. The most dramatic example that comes to my mind is Hyatt v. Sullivan. In that case the Secretary refused for 10 years to follow the rulings of the circuit, resulting in seven district court opinions, four circuit court opinions, one Supreme Court order, and $300,000 in attorneys' fees imposed against the agency under the Equal Access to Justice Act for litigating in defiance of the orders of the court. Finally, at the end, the district court made the dramatic statement that no reimbursement will ever repay those claimants denied benefits to pay utility bills, to take care of the basic necessities of life, to exist at the lowest possible subsistence level during the pendency of that litigation—many of the claimants having died with, in some cases, the lack of benefits having resulted in the death itself. I think that poignant statement by the district court eight years into the litigation, when the Secretary still had not fully complied, is one of the best examples I can give you.
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Mr. SMITH. Thank you, Judge Anderson; that answers my question. I don't have any others, Mr. Chairman. I'll yield back my time.
Mr. GEKAS. We thank the gentleman. We'll turn to the gentleman from Massachusetts, Mr. Frank.
Mr. FRANK. Thank you, Mr. Chairman.
Judge, one of the things we have before us, I guess, is a kind of a factual dispute here, and I know at your level factfinding is not your forte, but I'm going to ask you to help us with it. [Laughter.]
The statements we have from the administration—from Mr. Fried, Mr. Preston, and others—say we don't need the bill because they don't do this anymore, and they say they are now fully acquiescing unless they plan to appeal. There seems to me to be a factual dispute. I mean, in your study of this is that an accurate statement or are there some exceptions that I'm missing here? It does say at one point—I think in Mr. Fried's statement—that the general practice is to acquiescence. I suppose I could say that my general driving practice is not to speed, but I don't think that means we don't need speeding laws. So, I mean, is that what we're talking about?
Judge ANDERSON. Reducing the number of times you rob banks doesn't help on the single instance. There is a cognitive dissonance between the statement of volunteerism and an assertion of power.
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Mr. FRANK. Always, that's important. So, in other words, you're not contesting the fact that nonacquiescence has at the very least substantially diminished, but the problem you see is that it is still being explained as a choice that the administration in power can make rather than a compulsion of the law?
Judge ANDERSON. Precisely.
Mr. FRANK. I'm always dubious when either one of my colleagues or someone in the administration tells us that their main objection to a bill is that it's not necessary. In general, we are not a profession, lawmakers, who are opposed to redundancy, and if the only objection to something is that it's not necessary, usually that doesn't avail. [Laughter.]
I mean, the literary terseness is never one of our goals, and so there are obviously some other things. The only thing I can see that's plausible, and as I got a chance to read Mr. Preston's testimony, was he claimed that—and I think not wholly implausibly—that this could restrict their litigation strategy in some cases; that is, that telling them, ''either acquiesce or appeal,'' could be a problem. Do you see any merit to that? Is there anything we can do in the bill to try and deal with that?
Judge ANDERSON. I don't see a problem because the bill has a number of safety valves in it. I think they are temperate and well considered. If the safety valves are not as extensive as the agencies would want, perhaps some other language should go in, but the agencies do persist in nonacquiescence. Fisher, from the tenth circuit in 1995, has been——
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Mr. FRANK. Yes, let me say, you mentioned the Hyatt case and the others. Was that an HHS case?
Judge ANDERSON. Yes.
Mr. FRANK. Well, then I guess there is some disparity here, because the statements I saw at one point said, ''Well, since 1985 they have followed a policy of acquiescence,'' and well, obviously, this is—a 10-year period must go after that. So how do you explain that one?
Judge ANDERSON. The most famous cases, of course, are in the eighties, when Congress finally felt it necessary to pay attention to this. But, first of all, we don't know in the invisible statistic, the 587,000 claimants, what's going on there, and we suspect that non-acquiescence continues to go on silently. There are documented examples of nonacquiescence in court cases; the NLRB is famous for it. Just recently, TCI-West, which is a nonacquiescence case——
Mr. FRANK. In which agency?
Judge ANDERSON. TCI——
Mr. FRANK. Which is the agency that——
Judge ANDERSON. The NLRB. TCI-West, Inc., which followed Arvin Automotive. The NLRB was the first agency, I think back in the 1940's, to establish a policy of nonacquiescence, later decried by its former Chairman, Dodson, and General Counsel, as being lawless, but it continues on.
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Mr. FRANK. You've tested my commitment to this principle, Judge, because while I never had any personal quarrel with Mr. Dodson, you've just cited my least favorite public official in his chairmanship at the NLRB, but principle has to take precedence over ideology. And I guess—let me just—a final question: Is there any difference, other than in the niceness of the word, between ''nonacquiescence'' and ''disobedience?''
Judge ANDERSON. I think they're synonymous.
Mr. FRANK. Thank you. I appreciate it. I think that ''nonacquiescence'' is just a politer term for ''disobedience'' and explains why we think this ought to be dealt with.
Judge ANDERSON. May I answer one other question that you asked?
Mr. FRANK. Sure. You may answer a question I didn't ask. [Laughter.]
Judge ANDERSON. Well, then, in response to the question I think you asked which had to do with the agencies saying, ''Well, this is very difficult for the agencies''——
Mr. FRANK. In terms of the litigation strategies, right.
Judge ANDERSON. Yes, that argument is answered by the term itself, ''nonacquiescence.'' ''Nonacquiescence'' doesn't mean nonunderstanding; it means they understand perfectly and disobey. So, it is important to look at the term itself in answer to any argument that dicta might confuse the agency or the case might be difficult. It doesn't mean—nonacquiescence does not mean nonunderstanding; they understand it perfectly, and don't agree.
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Mr. FRANK. Thank you, Mr. Chairman.
Mr. GEKAS. We thank the gentleman from Massachusetts. We turn to the gentleman from South Carolina and yield the customary 5 minutes to him. The gentleman from South Carolina, Mr. Inglis.
Mr. INGLIS. Mr. Chairman, I have no questions.
Mr. GEKAS. Would the gentleman yield to me for one question? And that is only a clean-up question, as it were.
I take it from the responses, particularly you offered to Mr. Nadler, that if we pass the bill intact with the language that is now contained, without change—although I think there might be some changes—do you believe that that will strengthen the hands of the judiciary in applying the sanctions under the rules of civil procedure?
Judge ANDERSON. I do.
Mr. GEKAS. Thank you. And we need that firmly stated in the record, and that's a big advance. If we just pass it even with the so-called precatory words to which Mr. Nadler refers, we've strengthened the hand of the judiciary.
Judge ANDERSON. The Federal Rules of Civil Procedure and statute, 28 U.S.C., section 1927.
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Mr. FRANK. Mr. Chairman, could I just, in closing, thank the judge for the implicit compliment he paid us by citing several Rules of Civil Procedure under the assumption that we would know what they were? [Laughter.]
Mr. GEKAS. We thank the witness, and excuse him with our thanks.
Judge ANDERSON. Thank you, Mr. Chairman.
Mr. GEKAS. The second panel consists of Arthur J. Fried, who was recently appointed as the first General Counsel of the newly independent Social Security Administration. Mr. Fried joined SSA after having served as general counsel to the New York City Department of Housing, Preservation, and Development. Prior to that, he was acting general counsel for the city's Human Resources Administration. He graduated Order of the Coif, is it?
Mr. FRIED. ''Coif,'' I believe.
Mr. GEKAS. Pardon me?
Mr. FRIED. ''Coif,'' I believe.
Mr. GEKAS. ''Coif?'' I don't think you know your French. [Laughter.]
I think it's ''coif,'' but we'll accept ''coif.''
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Mr. FRANK. ''Coif'' is the yiddish pronunciation. [Laughter.]
Mr. GEKAS [continuing]. And magna cum laude from the Cornell Law School in 1975, and served as law clerk for Federal District Judge John Connelo from 1975 to 1977. He spent 13 years with the Legal Aid Society of New York, during which he handled many landmark cases in the Social Security, supplemental security income, Medicaid, and other related areas.
He's joined at the witness table by Daniel J. Wiles, Deputy Associate Chief Counsel, Domestic Field Service for the Internal Revenue Service. He received his law degree with honors in 1976 from the University of Maryland. He joined the IRS Office of Chief Counsel in 1977 as a general attorney in the Criminal Tax Division, and was transferred in 1978 to the Baltimore district office. In 1986, he joined the Chief Counsel's Office, and after serving as Deputy Assistant Chief Counsel for Tax Litigation, he was named to his current position in 1991.
And the third member of this panel is Deputy Assistant Attorney General Stephen Preston, who is in charge of the appellate staff of the Civil Division of the Department of Justice. Serving in his present capacity since 1995, Mr. Preston previously served in the Office of General Counsel at the Department of Defense—initially, as Deputy General Counsel, then as Acting General Counsel. Prior to that, he was a partner in the Washington, DC, law firm of Wilmer, Cutler & Pickering, where he engaged in trial and appellate litigation practice. From 1984 through 1985, Mr. Preston was a visiting fellow with the Center for Law in the Public Interest. He received his undergraduate degree, summa cum laude from Yale University in 1979, and his law degree magna cum laude from Harvard in 1983.
I will say to the members of this panel, as I did to the first panel, that your written statements will be accepted as part of the record, without objection, and you will be granted 5 minutes to extract from that statement whatever oral testimony you wish to offer. We'll begin, as announced, with Mr. Fried.
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STATEMENT OF ARTHUR J. FRIED, GENERAL COUNSEL, SOCIAL SECURITY ADMINISTRATION
Mr. FRIED. Thank you, Mr. Chairman and members of the subcommittee. I'm pleased to be here today to discuss the Social Security Administration's policy for acquiescence in Federal circuit court decisions that conflict with our interpretation of the law, and I appreciate the opportunity to submit a statement for the record.
When a U.S. court of appeals publishes a decision on a claim for Social Security benefits or supplemental security income payments, and that decision contains a holding which conflicts with our interpretation of the law, we take one of several actions. We either issue an acquiescence ruling, change our national rule, or, in rare cases, seek review by the Supreme Court. Let me stress, however, we do not ignore these holdings. We either follow the holding or we appeal the decision. This has been our policy since 1985, and the publication of our current regulations in 1990 essentially ended criticisms by the courts in this area.
As you know, Mr. Chairman, a claimant who is dissatisfied with SSA's decision on a claim can pursue a number of administrative appeals. If still dissatisfied, the claimant may then file a civil action in Federal court. Only a small number of claims are pursued to Federal court, and in most of these cases, SSA's decision is upheld. For example, in 1996, about 8,560 complaints were filed against SSA in district courts. Of the 5,345 district court decisions rendered in 1996, only 573—just over 10 percent—reversed SSA's decision.
Once the district court renders its decision, both SSA and the claimant have 60 days to appeal to the U.S. circuit court. Only a small number of the cases affirmed by the district court are appealed to the circuit courts, and the district court's decision is, again, usually upheld. Of the 575 circuit court decisions rendered in Social Security cases in 1996, only 25 reversed the district court, less than 5 percent. The vast majority of these cases do not call our legal interpretations into question. Rarely, on average three or four times a year, does a circuit court decision conflict with SSA's interpretation of the law. When this happens, as I have indicated, we issue an acquiescence ruling unless we change our rules nationally or, in rare cases, appeal the decision to the Supreme Court.
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Also, as I mentioned, this has been our policy since June 1985. Prior to that time, when the circuit court decision was inconsistent with our interpretation of the law and regulations, SSA's practice had been to apply the decision only to named litigants in the particular case. In June 1985, however, reacting to criticism in both Congress and the courts, we announced a new policy wherein we would apply circuit court decisions at the hearings level following an acquiescence ruling in adjudicating claims in that circuit. Since then, we have gone even farther, so that we now acquiesce to court decisions at all levels of administrative adjudication.
Under an acquiescence ruling, we apply the circuit court holding as explained in the ruling to other cases at all levels of adjudication in the same circuit when the issues involved are the same. However, unlike circuit court decisions, which are written for particular individual cases, acquiescence rulings are written to ensure uniform application and consistency in applying agency rules to the myriad other cases that come before us. This is vital in order to maintain decisional consistency, not only within each adjudicatory level, but across levels as well.
Acquiescence rulings are published in the Federal Register and are effective upon publication. Since 1985, we have issued 65 acquiescence rulings, of which 45 are still in force. The remainder have been rescinded as our policies have changed or been clarified and there was no longer a need for that acquiescence ruling.
Mr. Chairman, I believe that SSA's acquiescence regulations have been working well. However, recent controversy has arisen based largely on a recent newspaper article that was inaccurate and misleading. The article said that SSA reserved the right to accept or reject decisions from Federal appeals courts as precedent. This simply is not correct. As I stated before, whenever any circuit court decision conflicts with our interpretation of the law, SSA's published regulations require us to issue an acquiescence ruling if we are not changing national policy, again, unless it is one of those rare instances in which we appeal. It is the agency's responsibility to tell decisionmakers how to implement a conflicting holding which we do not appeal, but we do not arbitrarily reject circuit court decisions.
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The newspaper article then quoted from a decision by the eighth circuit court of appeals in Hutchison v. Chater to the effect that it is the duty of the court to say what the law is, and SSA must adhere to what the court decides, and that SSA should have followed the court's decision—the court's earlier decision—in Tyrrell v. Sullivan in the Hutchison case. As I've said, Mr. Chairman, unless we are appealing to the Supreme Court, we do follow circuit court decisions. We did not publish an acquiescence ruling in Tyrrell because we instead changed our regulations to comport with the court's decision on a national basis. In Hutchison there was disagreement over whether the issue was the same as in Tyrrell.
May I just take a moment or two to finish?
Mr. GEKAS. We'll grant you another second of time.
Mr. FRIED. Thank you very much.
The circuit court ruled that that case should be remanded to Social Security. This was not, Mr. Chairman, a case of SSA deciding not to follow the circuit court decision.
In conclusion, Mr. Chairman, let me reiterate: We do not ignore circuit court decisions that conflict with our interpretation of the law. We either issue an acquiescence ruling, change our rules nationally, or seek review by the Supreme Court. Hopefully, this hearing will provide a needed opportunity to clarify this situation, and I would be happy to answer any questions that you might have.
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[The prepared statement of Mr. Fried follows:]
PREPARED STATEMENT OF ARTHUR J. FRIED, GENERAL COUNSEL, SOCIAL SECURITY ADMINISTRATION
Mr. Chairman and Members of the Subcommittee, I am pleased to be here today to discuss SSA's policy for acquiescing in Federal circuit court decisions that conflict with our national policy. When a U.S. Circuit Court of Appeals publishes a decision on a claim for Social Security Benefits, or Supplemental Security Income (SSI) payments, and that decision conflicts with our national policy, we either issue an Acquiescence Ruling, change our national policy, or, in rare cases, seek review by the Supreme Court. We never ignore these decisions. This has been our policy since 1985, and the publication of our current policies in regulations in 1990 essentially ended criticism by the courts in this area. I will be providing you with the details of these policies in a minute, after which I will discuss the recent controversy in this area mistakenly generated by an article in the New York Times.
Before going any further, I will provide some general information about the current appeals process at both the administrative and court levels.
ADMINISTRATIVE APPEALS PROCESS
A person who is dissatisfied with an initial determination made by SSA may pursue an appeal through three administrative levels and the Federal courts. The Social Security Act requires the Commissioner to provide a claimant the opportunity for a hearing before an ALJ, and allows for filing of a civil suit in Federal court after the Commissioner's final decision. SSA has also provided a reconsideration review—in disability cases, performed by the State Disability Determination Service (DDS)—prior to the hearing and a final review after the hearing by SSA's Appeals Council.
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Reconsideration is the first administrative review for claimants and is a de novo (fresh) review of the claims file (including any new evidence) by parties (at the DDS in disability cases) who did not participate in the original decision. The reviewers consider all of the evidence and issue a reconsideration decision.
The second level of administrative appeal is a de novo hearing before an ALJ who can call on experts such as medical consultants, if needed, to help evaluate the evidence. Usually the claimant will obtain legal representation at this point. Frequently new evidence is introduced by the claimant and his or her representative, often at the hearing itself. They are allowed to appear before the ALJ in person and to call witnesses.
The final administrative appeal level is the Appeals Council (a group of 24 administrative appeals judges), 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 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.
APPEALS TO FEDERAL COURT
Only a small number of claims are pursued to Federal court and in most of those SSA's decision is upheld. The overwhelming majority—about 97 percent—of Social Security and SSI cases appealed to the Federal courts are based on the issue of entitlement to disability benefits. In fiscal year 1996, about 8,560 complaints were filed against SSA in the district courts. Of the 5,345 district court decisions rendered in fiscal year 1996, only 573—just over 10 percent—reversed SSA's decision. Once the district court renders its decision, both SSA and the claimant have 60 days to appeal to the U.S. Circuit Court.
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Only a small number of the cases affirmed by the district court are appealed to the circuit courts and the district court's decision is again usually upheld. Of the 575 circuit court decisions rendered in fiscal year 1996 on Social Security cases, only 25 reversed the district court—less than 5 percent. When the circuit court reverses the district court's decision, it is usually based on a finding that our decisionmakers failed to follow or incorrectly applied our national policy. Rarely, on average three or four times a year, does a circuit court decision conflict with SSA's national policy. When this happens, as I stated above, we generally issue an Acquiescence Ruling, unless we change our national policy or, in rare cases, appeal the decision to the Supreme Court.
BACKGROUND
This is not the first hearing before the subcommittee on administrative law concerning this issue. Back in 1985, SSA testified about the change in our policy from nonacquiescence to acquiescence. Prior to that point, when a circuit court decision was inconsistent with our interpretation of the law and regulations, SSA's practice had been to apply the decision only to named litigants in that particular case. In June of 1985, however, reacting to criticism in both Congress and the courts, we announced a new policy wherein we would apply circuit court decisions at the hearings level, following an Acquiescence Ruling, in adjudicating claims in the circuit.
No legislation was enacted at that time. Since then, we have gone even farther—we acquiesce to circuit court decisions at all levels of administrative adjudication.
ACQUIESCENCE RULINGS
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Acquiescence Rulings explain how SSA will apply the decisions of circuit courts that are at variance with our national policies for adjudicating claims. We apply the circuit court holding as explained in the ruling to other cases at all levels of adjudication in the same circuit when the issues involved are the same. 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. SSA was the first Federal agency to announce, in regulations, its policy of acquiescence in circuit court holdings. Those regulations, which evolved from the policy adopted in 1985, were published in the Federal Register in 1990. Since 1985 we have issued 65 Acquiescence Rulings—26 were disability related and 39 for other issues. Currently there are 45 active rulings in force; the remainder have been rescinded as our policies have changed and there was no longer a need for that Acquiescence Ruling.
Circuit court decisions are written to decide individual cases, not to provide adjudicatory instructions to decisionmakers, and are therefore often subject to disparate interpretations, particularly when the myriad possible situations to which they may apply are considered. 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 circuit. 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 an adjudicator's role to interpret circuit court decisions for him or herself. Instead, the interpretation of a circuit court's decision and its consistency with SSA policy is appropriately made with careful scrutiny by SSA officials who have a broad understanding of national policy and who work closely with Department of Justice attorneys in this effort. If an ALJ or other decisionmaker believes that a particular circuit court decision conflicts with SSA policy, the decisionmaker can provide input to the Office of the General Counsel through the appropriate channels about either appealing the case or issuing an Acquiescence Ruling.
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In March 1996, the Judicial Conference of the United States officially published its Long Range Plan for the Federal Courts. Among other things, it recommended that Congress generally prohibit agencies from adopting a policy of nonacquiescence and from relitigating an issue within a circuit except under specified conditions. I believe this is already reflected in our regulations.
Mr. Chairman, you said that the legislation you recently introduced is designed to prevent Federal agencies from following a policy of nonacquiescence to circuit court decisions. I can assure you that no legislation is needed to require SSA to follow our own regulations which are fully consistent with that purpose.
POLICIES REEMPHASIZED
Last summer, as part of our Process Unification efforts, we issued a Social Security Ruling (SSR 96–1p) restating our longstanding acquiescence policy. Then, in January of this year, we issued a memorandum clarifying the relationship between ALJ ''decisional independence'' and Agency management authority. Following a thorough review of the history and case law, the memorandum concludes with what most ALJs already knew:
... the Agency may establish administrative practices and programmatic policies that ALJs must follow, as long as the Agency does not take actions which abridge, directly or indirectly, the duty of impartiality the Agency and ALJs owe the claimant when hearing and deciding claims.... Along with the authority to set these policies, of course, goes the authority to ensure that these policies are carried out....
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Far from being a ''non-acquiescence policy,'' Mr. Chairman, these documents show that SSA strongly supports the ALJ's responsibility to impartially find the facts, apply Agency policy to them, and issue a decision. Nonetheless, it remains the Commissioner's responsibility to decide what Agency rules are. This is vital in order to maintain decisional consistency not only within a particular adjudicatory level, but across levels as well—a key goal in our process unification efforts to obtain similar results in similar cases at all levels of SSA adjudication. There is no other 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.
THE RECENT CONTROVERSY
On April 21, 1997, the New York Times printed an article titled ''U.S. Challenges Courts on Disabilities'' which was inaccurate and misleading. The article said that SSA ''reserved the right to accept or reject decisions from Federal appeals courts as precedents....'' That is not correct. As I stated before, whenever any circuit court decision conflicts with our national policy, SSA's published regulations require us to issue an Acquiescence Ruling if we are not changing national policy unless it is one of the rare occasion that we appeal. It is the Agency's responsibility to tell our decisionmakers how to implement a conflicting holding when we do not appeal, but we do not arbitrarily reject circuit court decisions.
The article then quoted from a decision by the 8th U.S. Circuit Court of Appeals in Hutchison vs. Chater to the effect that it is the duty of the court to say what the law is, that SSA must adhere to what the court decides, and that SSA should have followed the court's decision in Tyrrell vs. Sullivan in the Hutchison case. As I've said, Mr. Chairman, unless we are appealing to the Supreme Court, we do follow circuit court decisions. We did not publish an Acquiescence Ruling in Tyrrell because we instead changed our regulations to comport with the court's decision on a national basis. In Hutchison, there was a disagreement over whether the issue was the same as in Tyrrell. The circuit court ruled that the case should be remanded to SSA. It must be kept in mind, however, that this was not, Mr. Chairman, a case of SSA deciding not to follow a circuit court decision.
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Hopefully, this hearing has provided a needed opportunity to clarify this situation.
CONCLUSION
In closing, Mr. Chairman, we are proud of SSA's current record in applying circuit court decisions. SSA's published 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 policy and program administration.
Mr. GEKAS. Yes, I thank you. The Chair yields itself the customary 5 minutes—well, no, no, I think we'll complete the panel first to keep it in a block state.
Mr. Wiles.
STATEMENT OF DANIEL J. WILES, DEPUTY ASSOCIATE CHIEF COUNSEL (DOMESTIC FIELD SERVICE), OFFICE OF CHIEF COUNSEL, INTERNAL REVENUE SERVICE
Mr. WILES. Good morning, Mr. Chairman and members of the subcommittee. My name is Dan Wiles, and I am the Deputy Associate Chief Counsel, Internal Revenue Service. In this capacity I oversee counsel's litigation efforts and practice in the area of domestic taxation, including its action on decision program. I appreciate the opportunity to be here today to discuss H.R. 1544, the Federal Agency Compliance Act.
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My written statement provides a description of the role of tax litigation in tax administration as well as an explanation of our approach to tax litigation. I would like to summarize that part of my statement briefly and then explain in more detail our concerns with H.R. 1544.
The Service's goal has been to resolve tax controversies as promptly and efficiently as possible without resorting to litigation. The statistics show that we have been remarkably successful in this goal. Even though more than 2 million tax returns are examined each year, the Government initiates only about 50 cases in the courts of appeals in substantive tax matters each year. Decisions to initiate appeals to the court of appeals are made only after considerable review at senior levels within the Office of Chief Counsel, the Tax Division of the Department of Justice, and the Office of the Solicitor General.
The Service has had an action on decision program for over 70 years in order to communicate its position with respect to adverse court decisions. We have two general categories of AOD's—and before I go on, let me say, if we do not issue one of these two categories, our policy is to follow that opinion. Acquiescence means that we will follow the court's opinion on a nationwide basis. Nonacquiescence means that we will disagree with the opinion and do not intend to follow it nationwide. However, our general policy when we nonacquiescence to a court of appeals' decision is that we will follow it in cases appealable to that circuit court. I think that it is important to point out that our usage of these terms is different than the terms as used by the Social Security Administration, and as Judge Anderson pointed out, the Fisher case I think points this out. In that case we did nonacquiesce. However, that document states specifically that we will follow and we have followed that opinion in the tenth circuit; we have not followed it outside the tenth circuit.
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In rare situations the Service will issue a nonacquiescence indicating that it will relitigate an issue in the same circuit which had issued the adverse opinion. To prepare for today's hearing, I asked my staff to quickly survey the AOD's we have issued in the last 10 years. According to this informal survey, we have determined to relitigate in the same circuit in only 6 out of 200 AOD's. Three of these AOD's allowed relitigation in the circuit only if the adverse decision could be distinguished or limited to its facts. You may say that's not a nonacquiescence at all. Two of these AOD's directed litigation of a very significant issue which we intended to take to the Supreme Court. We did take that issue to the Supreme Court, and it upheld our position. The final AOD also involves an issue which we anticipate will be shortly reviewed by the Supreme Court.
We believe that the decisions to continue intracircuit litigation in these exceptional instances were appropriate to promote sound tax administration. We are sincerely committed to avoiding unnecessary litigation in and outside the circuit which may have decided an issue against our position. However, the Internal Revenue Service is charged with administering the tax laws uniformly for taxpayers across the country. The inherent structure of the 13 judicial circuits and the IRS responsibility to ensure Federal tax uniformity require us to balance these competing factors. There are a wide variety of factors that must be considered and a balance of these factors will be different in every case.
This is, in essence, why we do not support H.R. 1544. While the intent of H.R. 1544 is substantially consistent with the litigation philosophy of the Internal Revenue Service, we believe that senior managers should have the flexibility to consider unique and individual circumstances as well. We believe that this legislation will supplant our ability to exercise discretion tailored to the circumstances of each case.
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We believe that H.R. 1544 is of particular concern when applied to tax cases for several reasons. The bill may have the unintended effect in those—may I continue, Mr. Chairman?
Mr. GEKAS. You may proceed for another short segment of time.
Mr. WILES. Thank you.
The bill may have the unintended effect in those tax cases where given opinions would affect taxpayers in different ways. A decision of a court may be tax beneficial to one taxpayer and tax detrimental to another. The three-circuit rule of the proposal could mean that the Government would be forced to honor inconsistent decisions of courts of appeals depending on which taxpayers go to which circuits. Appeals in tax cases arise simultaneously in different circuits. Oftentimes, new cases enter the appellate stream before decisions are rendered by appellate courts in earlier appeals. It is uncertain whether the three-circuit rule of H.R. 1544 would be applied based on the coincidental order in which these cases are decided.
This legislation appears to allow judicial review of an agency's decision to continue intracircuit litigation. We are concerned that this proposal may create more litigation than it prevents, as the opposing parties offer different meanings of the terms of the bill as well as the scope of the precedent. The scope of existing precedent is frequently the central argument on merits of subsequent cases. We are concerned that the proposed legislation will shift the focus away from the substantive issues to the sole issue of whether the existing precedent precludes litigation.
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Finally, Mr. Chairman, we believe that H.R. 1544 is unnecessary in the context of tax litigation because the Internal Revenue Code already provides a more appropriate sanction for improper litigation. Internal Revenue Code section 7430 permits the taxpayer to recover attorneys' fees and costs unless the Service can prove that its position is substantially justified. We believe that this law provides taxpayers adequate assurance that appellate litigation is pursued only in meritorious cases.
In conclusion, the Service's litigation decisions involve a carefully balanced judgment based on a number of factors. Decisions to pursue appellate litigation must be approved by senior officials in two agencies. Accordingly, while we agree with the intent of H.R. 1544 and that it is consistent with our longstanding litigation policy, we do not believe the bill is an appropriate substitute for the conscientious exercise of informed judgment.
Mr. Chairman, that concludes my remarks.
[The prepared statement of Mr. Wiles follows:]
PREPARED STATEMENT OF DANIEL J. WILES, DEPUTY ASSOCIATE CHIEF COUNSEL (Domestic Field Service), Office of Chief Counsel, Internal Revenue Service
INTRODUCTION
Good morning, Mr. Chairman and members of the committee. My name is Daniel J. Wiles and I am the Deputy Associate Chief Counsel (Domestic Field Service), Office of Chief Counsel, Internal Revenue Service. In this capacity, I oversee the Service's litigation efforts and practice in the area of Domestic taxation. This includes supervisory oversight of the Counsel's appellate litigation practices and its Action on Decision program. I appreciate the opportunity to be here today to discuss H.R. 1544, the Federal Agency Compliance Act.
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This bill would amend the Administrative Procedure Act by (1) requiring an agency to adhere to the court of appeals' precedent in cases appealable to that circuit and (2) limiting an agency's discretion to relitigate legal issues in federal courts. While H.R. 1544 reflects an approach that is, in large part, consistent with the Internal Revenue Service's current policy with respect to litigation, we do not think it would be desirable to enact this bill into law for a number of reasons.
In brief, we are concerned that the legislation would limit administrative judgment and flexibility and could create more—rather than less—litigation and uncertainty.
I would like first to provide an overview of the role of litigation within the context of tax administration and how the Office of Chief Counsel approaches that litigation. I will then discuss our concerns with H.R. 1544.
ROLE OF LITIGATION IN TAX ADMINISTRATION
To understand the role of litigation in tax administration, it is important first to understand the mission of the Internal Revenue Service. The mission of the IRS states that:
The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our products and services; and perform in a manner warranting the highest degree of public confidence in our integrity, efficiency, and fairness.
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This mission is further reflected in our Statement of Principles of Internal Revenue Tax Administration, which is as follows:
The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue is determined by Congress.
With this in mind, it is the duty of the Service to carry out that policy by correctly applying the laws enacted by Congress; to determine the reasonable meaning of various Code provisions in light of the congressional purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Service, charged with the duty of interpreting the law, to try to find the true meaning of the statutory provision and not to adopt a strained construction in the belief that he or she is ''protecting the revenue.''
The revenue is properly protected only when we ascertain and apply the true meaning of the statute.
The Service also has the responsibility of applying and administering the law in a reasonable, practical manner. Issues should only be raised by examining officers when they have merit, never arbitrarily or for trading purposes. At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that care be exercised not to raise an issue or to ask a court to adopt a position inconsistent with an established Service position.
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Administration should be both reasonable and vigorous. It should be conducted with as little delay as possible and with great courtesy and considerateness. It should never try to overreach, and should be reasonable within the bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and fraud.
This philosophy—of collecting the proper amount of tax revenue by correctly interpreting the Code—is as important in litigation as in other tax administration activities. Over 30 years ago, the Office of Chief Counsel provided the following guidelines for litigation:
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.
* * * * *
In 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 func-tion.... 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.
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Chief Counsel Order 1964–7. We continue to follow this philosophy today.
It is also important to put into context both the amount of litigation in the system and the way we handle that litigation. Litigation is never our first choice in resolving a dispute. We recognize that it is an expensive and uncertain process and should be used only when absolutely necessary.
To put the amount of litigation in perspective, over 200 million tax returns are filed each year. In fiscal year 1995, approximately 2.1 million examinations were conducted and all but about 68,000 of these cases were resolved at the examination stage. The vast majority of these remaining 68,000 cases were settled without litigation. On average, only about 29,000 Tax Courts petitions and about 800 refund suits are filed each year.(see footnote 4) The Tax Court tries and decides only about 1,200 to 1,500 cases each year; the district courts and Claims Court write about 160 opinions a year in tax cases. Even while pending in court, the vast majority of these disputes are settled. Taxpayers and the government choose to appeal only about 250–275 Tax Court and refund cases each year while the government appeals only about 50 of these cases a year.
Any decision to appeal a case is made only after considerable review. Within the Office of Chief Counsel, the recommendation to appeal or not to appeal is made by one of the three Associate Chief Counsel (the one with subject matter jurisdiction over the issue) in consultation with the Treasury General Counsel. This recommendation is initially reviewed by the Assistant Attorney General for the Tax Division of the Department of Justice who makes an independent recommendation to the Solicitor General. The final decision to appeal is made by the Office of the Solicitor General, after taking into account these recommendations. This process is designed to ensure that the decision to appeal is reviewed by senior level officials at the IRS and the Department of Justice who are not involved in the case at the trial level.
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IRS ACTION ON DECISION PROGRAM
The foregoing statistics, which have remained relatively constant in recent years, show that the government initiates only a limited number of appeals. Nevertheless, in some cases where the decision is made not to pursue further appeals (including appeals to the Supreme Court), the issue may be significant to tax administration and indirectly affect numerous other taxpayers. In these instances, it is important that the Service communicate its planned future actions with respect to these issues. The Service may do this by issuing what we call an ''Action on Decision'' (AOD). An AOD lets Internal Revenue Service agents, Chief Counsel lawyers, and taxpayers know whether the IRS will litigate the issue again in that court or another court.
The Action on Decision program was created in the 1920's and has been only slightly modified over the intervening 70 years. Under our current guidelines (a copy of which has been provided to the Committee) in significant cases, the Chief Counsel's office issues an Action on Decision which states whether the IRS position on the court decision is one of acquiescence, acquiescence in result only, or nonacquiescence.
Acquiescence means that the Service accepts the holding of the court in a case and will follow it nationwide in disposing of cases with the same controlling facts. It does not indicate approval or disapproval of the reasons assigned by the court for its conclusions.
Acquiescence in result only means that the Service accepts the holding of the court in a case and that the Service will follow it nationwide in disposing of cases with the same controlling facts. However, it indicates disagreement or concern with some or all of the reasons assigned by the court for its conclusions.
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Nonacquiescence signifies that, although the decision was not appealed or was not reviewed by the Supreme Court, the Service does not agree with the holding of the court and will not follow it nationwide in disposing of other taxpayers' cases. If a nonacquiescence AOD is issued with respect to an opinion of a circuit court, the AOD will state whether or not the Service will follow the holding of the court on that issue in cases that are appealable to the court that issued the adverse decision.
The decision whether to issue an AOD is made at the same senior IRS level as the decision to recommend appeal; that is, by the Associate Chief Counsel with jurisdiction over the subject matter. While considering the issuance of an AOD, the Associate Chief Counsel must also consider whether changes are needed in IRS rulings and regulations because of the court decision or whether the issue may be resolved by administrative changes rather than further litigation. A decision to issue an AOD is frequently made only after coordination with the Treasury Department, Office of Tax Policy and the Department of Justice.
INTRACIRCUIT RELITIGATION
It is the longstanding general policy of the Office of Chief Counsel to follow the decisions of the courts of appeals. Even where it is determined that an opinion of a court of appeals will not be followed nationwide, the stated nonacquiescence policy of the Office of Chief Counsel is that ''as a general rule, with respect to opinions of an appellate court, the Service will follow the holding of the circuit court in case[s] appealable to that circuit due to the binding nature of that opinion in lower courts.'' Chief Counsel Directives Manual (35)(12)11.(4).
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In the time available to prepare this testimony, I asked my staff to quickly survey the AODs issued in the last 10 years. A preliminary count indicated that the Service issued a total of 200 AODs covering 247 issues during this period. In the majority of these AODs, the Service accepted the decision of the court and indicated that it would follow that decision in disposing of other cases nationwide. Even where we did not do that, we generally decided to follow that opinion in that circuit.
One example of this policy is the AOD the Service issued with respect to Security Bank of Minnesota v. Commissioner, 994 F.2d 432 (8th Cir. 1993), AOD 1995–14. In this AOD, the Service disagreed with the opinion of the court and announced that it would litigate the issue presented by the case again, but only in circuits other than the Eighth Circuit. A number of banks which could appeal cases to the Eighth Circuit wished to follow the decision in Security Bank and change their methods of accounting. To allow taxpayers in the Eighth Circuit to avail themselves of the method of accounting permitted by Security Bank, the Service issued Notice 95–57, 1995–2 C.B. 337, which allowed the taxpayers to automatically change their methods of accounting to that desired.
In limited situations however, the Service will issue an AOD indicating that it will relitigate an issue in the same circuit which had issued the adverse opinion. Over the last 10 years, our quick survey found only six cases(see footnote 5) in which this exception to our general practice was implicated.
In three of the six cases, the Service believed that litigation could proceed even in the deciding circuit because the precedent could be distinguished on, or limited to, its facts.(see footnote 6)
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In two of the six cases, the procedures required by these decisions would have been administratively difficult and burdensome.(see footnote 7) Moreover, if the Service's position was ultimately upheld, any contrary treatment for taxpayers in those circuits would have resulted in dramatically inconsistent treatment of similarly-situated taxpayers in different areas of the country.(see footnote 8) We were convinced that other courts would not agree with those initial decisions, and the Service position was ultimately upheld by the Supreme Court. Bufferd v. Commissioner, 113 S. Ct. 927 (1993).
The remaining case also involves an issue in which we anticipate review by the Supreme Court, but such review has not yet occurred.(see footnote 9) We believe that the decisions to continue litigation in these exceptional instances were appropriate to promote sound tax administration.
INTERCIRCUIT RELITIGATION
The IRS carefully reviews all court of appeals opinions adverse to the government and considers whether the opinion reflects a persuasive view of the law that should be adopted as the Service position. If we believe that the opinion is not correct, we may determine to litigate the issue in other circuits. As explained above, although Service nonacquiescence is generally not intended to direct relitigation in the same court of appeals, it is intended to direct relitigation in other circuits.
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Given the decision of Congress to have 13 separate courts of appeals, intercircuit conflict is probably inevitable and, in some ways, beneficial. Relitigation in other courts may present a fresh, independent look at the issue which may result in an opinion more consistent with the correct interpretation of the statute. The Internal Revenue Service is charged with administering the tax laws uniformly for taxpayers across the country. In those rare situations where the Service believes that a Supreme Court decision is required to provide final resolution of an issue, intercircuit relitigation is often necessary to obtain Supreme Court review. The inherent structure of the 13 judicial circuits and the IRS's responsibility to ensure federal tax uniformity require IRS litigation decisions to balance these competing factors.
An alternative to the current judicial structure that might ensure greater tax uniformity with less relitigation has been proposed on a number of occasions in the past. This alternative has focussed upon the possibility of having a single national court of appeals for tax cases. However, while this proposal has often been discussed, it has never obtained significant support and has never been enacted. The consensus has been that there are significant advantages to multi-circuit litigation of tax cases. Commenting on this proposal and summarizing a number of independent analyses of multi-circuit litigation, the American Bar Association, Section on Taxation, Report of the Task Force on the Civil Litigation Process concluded:
Part of the genius of our system of circuit appellate reports is the opportunity for reconsideration of an issue already decided in one circuit by another appellate court free of the constraints of the doctrine of stare decisis. This opportunity for an issue to be ventilated in more than one circuit may be especially important in tax cases. The first appellate review of a tax issue may be shortsighted, distorted by a particular record or omission of an argument, or simply mistaken.... Only after the initial decision may the importance of the matter become apparent—along with different circumstances or other new material indicating that the initial decision did not take into account all relevant considerations.
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(Nov. 1, 1989, at 18–19). We agree with this statement.
It has been suggested by some that there is a ''two circuit rule'' or a ''three circuit rule'' before the Service will accept or concede a position (i.e., that the Service will concede a position only after it loses in two or three circuits). The Service has no such rule. We look at each situation individually and consider the best course of action for each. On some issues, the Service concedes after a loss in a single court; on other issues, the Service will concede only after the Supreme Court has addressed the issue.
REASONS WE DO NOT SUPPORT H.R. 1544
As we noted at the outset, the design and the intent of H.R. 1544 is substantially consistent with the litigation philosophy of the Office of Chief Counsel and the Internal Revenue Service as reflected in our published guidelines and longstanding practice. However, the Service does not support H.R. 1544 because we believe that in order to further sound tax administration we need the flexibility to exercise judgment in determining the most appropriate litigation strategy for each individual case. This legislation would replace our ability to exercise this judgment with a set of prescribed rules.
This bill also does not address taxpayer appeals which are the greatest cause of repetitive litigation; the proposal would not limit taxpayer appeals regardless of the number of court of appeals decisions favorable to the government position. Neither would the proposal ensure the uniform interpretation of legislation. For example, it would require government concession of issues even where three or more circuits supported the government view, if three circuits did not support that view.
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Also, a particular statutory provision or complementary provisions may affect parties to the same transaction in different ways. This proposal, especially with regard to multi-circuit relitigation, assumes that a decision of a court is either completely in favor of, or adverse to, the interests of taxpayers at large. However, in the Internal Revenue Code there are numerous reciprocal provisions that affect different taxpayers in opposite ways. In a given transaction, the application of the law may be tax-beneficial to one taxpayer (e.g., a deduction) and correspondingly tax-detrimental to another (e.g., taxable income). Further, the controlling circuits for these taxpayers are often different. Thus, for a given transaction, it is possible for both taxpayers to prevail at appellate levels notwithstanding the theoretical impossibility that both opinions could be correct. The ''three circuit rule'' of the proposed legislation could mean that the government would be forced to honor both contrary decisions if each garnered support of three circuits.
Another concern with the proposal is that it does not take into account the fact that appeals in tax cases, unlike appeals in other civil cases, may frequently arise simultaneously in different circuits. This may happen, for example, when the Tax Court consolidates cases with a common issue that are appealable to different circuits. Other times, new cases enter the appellate stream before decisions are rendered by appellate courts in earlier appeals. It is uncertain whether the ''three circuit'' rule will be applied based upon the coincidence of which circuits decide their cases first, and thus, the ''three circuit'' rule would likely cause confusion and be difficult to administer.
More generally, we note also that the bill implicitly allows for judicial review of an agency's decision to continue intracircuit litigation. Thus, we believe that this proposal would likely create more litigation than it prevents as the opposing parties offer differing meanings of the terms of the bill as well as the scope of the precedent itself. For example, proposed section 707(b) would allow intracircuit litigation when it is ''not certain whether [the matter] will be subject to review by the court of appeals that established the precedent....'' However, appellate venue in tax cases is never absolutely determinable until the taxpayer files a petition or complaint in a particular federal court.(see footnote 10) Of course, as noted above, venue is possible in the Court of Appeals for the Federal Circuit regardless of residence or place of business. If the bill is enacted, there will be litigation as to whether the venue was nevertheless ''certain'' before the filing of the petition or complaint.
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Likewise, the scope of existing precedent is frequently the central argument on the merits of subsequent cases on similar issues. The proposed legislation will shift the focus away from the substantive issues in a particular case and to the issue of whether there is existing precedent in the circuit that precludes relitigation. The other exceptions are also likely to increase (rather than decrease) controversy. Finally, it is probably not possible to state exceptions in objective terms that will encompass all the legitimate rationales that exist, or may in the future exist, to justify intracircuit litigation or litigation in more than those circuits. Nor will these objective exceptions meaningfully substitute for the judgment that is applied by the Office of Chief Counsel, the Tax Division of the Department of Justice and the Office of the Solicitor General today in deciding whether individual cases should be appealed.
We believe, there are already adequate managerial controls in place to ensure that the government's decisions to appeal in tax cases further the goals of sound tax administration. The Service's decision to nonacquiesce in a court of appeals decision is made only after extensive coordination. Also, the Solicitor General's office must approve all appeals; it is our experience that recommendations for further appeals after an adverse decision are subject to very careful scrutiny. The justification would typically be based on the importance of the legal issue and chances of success of continued appeals. The existence of favorable precedents of other courts or split decisions may also be significant. These factors, however, are not specifically recognized as relevant in the proposed legislation.
Finally, the Internal Revenue Code already contains a sanction designed to prevent unjustifiable litigation on the part of the Internal Revenue Service. IRC section 7430, Awarding of Costs and Certain Fees, provides that the prevailing party in an administrative or court proceeding against the United States may be awarded administrative and litigation costs. This would apply when the taxpayer is the prevailing party and the position of the United States was deemed ''not substantially justified.'' In initially approving this legislation, Congress noted that it was generally justifiable to relitigate in order to seek a circuit conflict. Nevertheless, it would not be justifiable to continue litigation where it is not justifiable in both fact and law. Under the Taxpayer Bill of Rights 2, it is the Service's burden to show that its position is justifiable.
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The specific remedy of IRC section 7430, in combination with the overall structure for review and control of decisions to appeal, ensures that litigation is pursued only in meritorious cases. H.R. 1544 will add little to this process but may well result in additional litigation over compliance with the bill itself. This ancillary litigation will do nothing to resolve the merits of the Service's position or determine whether that position was substantially justified.
CONCLUSION
Before the Service decides to relitigate an adverse decision, it considers the significance of the decision to taxpayers across the country, its impact on tax administration, the benefits of uniformity and costs of relitigation, the importance of the issue, and the relative merits of both sides of the issue. Thus, the Service's litigation decisions reflect a carefully balanced judgment taking into account relevant factors and competing interests. We do not believe H.R. 1544 is an appropriate substitute for the conscientious exercise of informed judgment based on the circumstances of each particular situation.
Mr. Chairman, that concludes my remarks. I would be happy to answer any questions.
INSERT OFFSET RING FOLIOS 6 TO 11 HERE
Mr. GEKAS. Mr. Preston.
STATEMENT OF STEPHEN W. PRESTON, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE
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Mr. PRESTON. Thank you, Mr. Chairman and Congressman Nadler. I am pleased to have this opportunity to discuss——
Mr. GEKAS. I have to interrupt. I didn't notice the gentleman from Ohio, Mr. Chabot, has joined us.
Mr. PRESTON. Thank you. 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, the matters addressed by the proposed legislation.
It may be useful to begin by describing what is meant by non-acquiescence here. What we are talking about is an agency's determination not to follow a court of appeals precedent in the administration of its statutory program within the geographic territory of that judicial circuit. This so-called ''intracircuit nonacquiescence'' is uncommon, as Federal agencies generally follow legal principles announced in the holdings of appellate courts except where extraordinary circumstances warrant continued litigation of a legal issue previously decided.
When the subject of Federal agency non-acquiescence was last addressed by the Congress in the mid-1980's, the circumstances were substantially different. At that time there was a great deal of litigation contending that the Social Security Administration had systematically refused to acquiesce in various adverse court of appeals decisions. At that time there was considerable concern among Members of Congress and others that such nonacquiescence could operate to the severe detriment of deserving benefits recipients and was unjustified.
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Due in large part of the efforts of this committee, the Social Security Administration changed its policy, explicitly committing itself to a policy of acquiescence. I will leave it to Mr. Fried to explain the operation of that policy, but my point is this: At this time, SSA's policy is roughly in line with that of other Federal administrative agencies. As the general practice within the Federal Government is to follow adverse court of appeals decisions within the circuits that have issued them, there is no apparent need for legislation at this point.
Now when Congress last considered legislation mandating acquiescence by the Social Security Administration, again in the mid-1980's, the Department of Justice objected. Then-Solicitor General Rex Lee emphasized the importance of according latitude to the Government in choosing which cases to appeal. He pointed out that such legislation would cause serious practical problems, effectively compelling the Department to take cases to the Supreme Court that would not otherwise warrant Supreme Court review and prejudicing the ability of the Department to protect the litigating interests of the United States in court.
The same concerns that motivated the Department's opposition to the 1980's legislation apply with equal or greater force here, for the pending bill applies not only to the Social Security Administration, but to 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, in extraordinary circumstances, which legal issues to continue litigating in the lower courts.
We are not talking about refusing to follow circuit precedent simply because an agency disagrees with it or finds it inconvenient; I'm not here to endorse that. We are concerned about situations in which an appellate decision is firmly believed to be incorrect and, if followed, would seriously disrupt the administration of a statutory program, but in which appeal is effectively unavailable for a variety of reasons.
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Mr. Wiles has provided some examples of just that type of situation in his written statement. In such exceptional situations it is entirely reasonable for the agency to persist in its position and seek another opportunity to litigate the issue. I repeat, the situations are relatively rare, but when they occur, it is perfectly appropriate to continue litigating.
For these reasons, the legislation causes great concern to the administration. Let me turn for a moment to section 708 of the bill, which concerns continued litigation of legal issues decided against the Government by three courts of appeals. As a practical matter, this provision, too, is unnecessary, because the Solicitor General only rarely permits a fourth appellate test under such circumstances. Moreover, the provision could inhibit the Solicitor General in protecting the litigation interests of the United States, for it does not seem to contemplate situations in which the issue is of such importance that seeking a circuit conflict and, ultimately, Supreme Court review is imperative, notwithstanding the initial lack of success in the first three circuits.
For these reasons, Mr. Chairman and committee members, the Department opposes the proposed legislation. I appreciate this opportunity to present the Department's views and would be happy to answer questions.
[The prepared statement of Mr. Preston follows:]
PREPARED STATEMENT OF STEPHEN W. PRESTON, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE
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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 considered 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. This so-called ''intra-circuit nonacquiescence'' is uncommon, as federal agencies generally follow legal principles announced in the holdings of appellate courts, except where extraordinary circumstances warrant continued litigation of a legal issue previously decided.
When the subject of federal agency nonacquiescence was last 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 in adverse appellate decisions within the circuit, except where relitigation of a legal issue is later determined to be justified in prescribed circumstances. I will leave it to Mr. Fried to explain the actual operation of the current policy. My point is simply this: at this time, the Social Security Administration's practice is in line with that of other federal administrative agencies. As the general practice within the federal government is to follow adverse court of appeals decisions for purposes of future agency action within the respective judicial circuits, there is no apparent need for legislation on nonacquiescence at present.
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When Congress last considered legislation to require the Social Security Administration either to appeal to the Supreme Court or to acquiesce in adverse appellate rulings, in the mid-1980s, the Department of Justice objected. Then-Solicitor General Rex Lee emphasized the importance of according the government great latitude in choosing which cases to appeal. He pointed out that such legislation would cause serious practical problems, effectively compelling the Department to take cases to the Supreme Court that would not otherwise warrant Supreme Court review and prejudicing the ability of the Department to represent the government's interests in court.
The same concerns that motivated the Department's opposition to earlier legislation mandating acquiescence apply with equal or greater force to the pending bill, which 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.
A.
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 which court of appeals would review a given action, which the bill would expressly allow.)
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1. Congress previously 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. 98–460, 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. 98–618, 98th Cong., 2d Sess. 22–26 (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. 98–466, 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, then-Solicitor 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:
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.
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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. 113–36 (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. 10–13 (July 25, 1985).
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 USCCAN 3095. The Social Security Administration subsequently did so, such that its current policy is to acquiesce in adverse appellate decisions within the circuit, except where relitigation of a legal issue is later determined to be justified in prescribed circumstances. Inasmuch as the general practice of federal agencies is to follow adverse court of appeals rulings, there has been no occasion for Congressional attention to this issue over the past several years, not to mention legislation affecting all agencies. Moreover, to the extent that recent concern about the Social Security Administration can otherwise be addressed, as Mr. Fried can describe more fully, there appears to be no need for Congressional action of any sort at this time.
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2. The Supreme Court has recognized the propriety, and salutary effects, of the government's continuing to litigate legal issues previously decided against it in a court of appeals.
In United States v. Mendoza, 464 U.S. 154 (1984), a unanimous Supreme Court decided that the government could not be foreclosed from relitigating a legal issue it had previously litigated unsuccessfully in another action against a different party, even within the same judicial circuit. The Court's rationale is instructive here:
Government litigation frequently involves legal questions of substantial public importance; indeed, because the proscriptions of the United States Constitution are so generally directed at governmental action many constitutional questions can arise only in the context of litigation to which the government is a party. Because of those facts the government is more likely than any private party to be involved in lawsuits against different parties which nonetheless involve the same legal issues.
A rule allowing nonmutual collateral estoppel against the government in such cases could substantially thwart the development of important questions of law by freezing the first final decision rendered on a particular legal issue. Allowing only one final adjudication would deprive this Court of the benefit it receives from permitting several courts of appeals to explore a difficult question before this Court grants certiorari.
Id. at 160.
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The proposed legislation poses many of the same problems that would be created by the application of nonmutual collateral estoppel against the government. The practical result would be to require the government to consider seeking Supreme Court review of the first adverse decision in a given circuit. This would undermine the Solicitor General's role in carefully screening cases in which to seek Supreme Court review, and in implementing the government's litigation and substantive policies in doing so. And, to the extent that the Supreme Court might be compelled to grant certiorari rather than waiting for a conflict among the circuits to develop, it would tend to deprive the Court of the benefit of consideration by multiple courts of appeals. The ultimate result would be to render the Solicitor General's selection of cases for Supreme Court review less effective in promoting the fiscal, policy and institutional interests of the United States.
As the Supreme Court noted in United States v. Estate of Donnelly, 397 U.S. 286, 294–95 (1970), ''the United States, like other parties, is entitled to adhere to what it believes to be the correct interpretation of a statute, and to reap the benefits of that adherence if it proves to be correct, except where bound to the contrary by a final judgment in a particular case.'' Statutorily mandated acquiescence would largely deprive the United States of those benefits.
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:
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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 decision—e.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. In such cases, nonacquiescence may be entirely appropriate.
The circumstances of a case decided against the agency on appeal may be overwhelmingly favorable to the opposing party—e.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. Again, if the agency strongly believes the appellate decision to be incorrect, it could reasonably decline to acquiesce in hopes of relitigating the legal issue in a more favorable context.
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.
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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 opinion—e.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 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 much—among agencies, among statutes and programs administered by an agency, and among the types of appellate decisions presented—to make a uniform statutory approach feasible.
4. 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 nonacquiescence—for 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. Not only would this 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.
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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).
5. 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.
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.)
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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, it does not want to lose credibility by needlessly challenging circuit precedent.
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 usually for a good reason.
B.
Section 708 would require government officers to ensure that the United States does 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. The section goes on to list factors that, among others, should be taken into account in deciding whether to press an issue beyond three courts of appeals. (It also provides that the decision to continue to litigate is not subject to judicial review.)
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.
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1. 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.
2. While the government infrequently takes a legal issue it has lost to more than three courts of appeals, the thoughtful factors in section 708(b) already recognize that an inflexible three-court rule would be unworkable. But those factors do not capture all of the relevant considerations.
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.
This is hardly a theoretical concern. In nearly every Term, after all, the Supreme Court issues a decision rejecting rulings of three or more courts of appeals. See e.g., United States v. Gaudin, 115 S. Ct. 2310 (1995) (in affirming Ninth Circuit ruling that materiality of false statement under 18 U.S.C. 1001 was jury question, 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''); United States v. Texas, 507 U.S. 529, 532, n.3 (1993) (Supreme Court rejected construction of Debt Collection Act adopted by three circuits before circuit conflict arose).
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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.
3. By its terms, this provision is aimed at ''unnecessarily'' repetitive litigation, includes a non-exclusive list of factors to be considered, and is judicially unenforceable. Lest it be construed as otherwise constraining the Solicitor General's discretion, Congress may wish to consider expressing its intent in this regard by means other than the mandatory language of a statute.
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.
INSERT OFFSET RING FOLIOS 12 TO 14 HERE
Mr. GEKAS. Yes, my first round of questions will be to Mr. Preston. You did say—that if an appeal is unsavory or probably unrewarding, that the agency should persist in its policy. To me, that's a gigantic nonacquiescence. When you say that when the agency decides that an appeal is not going to yield desired results, that it reserves the right to persist in its policy, and if that policy is different from—the way I take it—from what the appeal would have litigated, well, so be it; you're going to follow the policy. If you didn't say that, please tell me what you said.
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Mr. PRESTON. Mr. Chairman, I should clarify, because I——
Mr. GEKAS. Please.
Mr. PRESTON [continuing]. I don't believe we are talking about situations in which there has merely been a predictive judgment that the appeal is unlikely to come out favorably. This legislation and virtually any restriction on the occasional practice of nonacquiescence that I have seen is premised on the notion that an agency should either appeal or live with the adverse decision of the court of appeals, but there are a variety of cases in which appeal—and I am not saying it's undesirable—in which it's effectively unavailable.
I have cited three instances in my written statement for example where there are alternative holdings such that the other holding would prevent you from taking a case to the Supreme Court, situations where the procedural posture is such that Supreme Court review is simply unavailable. The Judicial Conference in its own report cites a couple of examples, including where the case gets mooted out before appeal, a situation that is not encompassed by this statute. And a variety of cases in which the court of appeals' decision and its impact on the agency is unclear will require a judgment by the agency as to its precedential effect, and those are situations which ought not even be considered nonacquiescence but rather the responsible interpretation of applicable law.
Mr. GEKAS. In that regard, I ask you to reread section 707, and see whether or not we do not cater to that concern of yours in outlining the alternatives that we provide.
But in the meantime, I want to turn to Mr. Wiles for a moment and ask—it seemed to me that something in your testimony—I can't find it now; I heard you say it—that you will acquiesce, and you will follow the law, and you will do what is right except when sound tax policy—I think that's the word you used—dictates otherwise.
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Mr. WILES. I think that is my——
Mr. GEKAS. Pardon me?
Mr. WILES. Yes, I do believe my written statement says that, but sound tax policy is described by the six cases in which we've done that. To give you an example of what that means, in two of the cases, as my colleague noted, it was impractical for us to take those two cases immediately to the Supreme Court. We very shortly took a third case to the Supreme Court and were upheld. Sound tax policy in that context meant that we should attempt to apply a uniform rule, because we were fairly certain, and we predicted correctly, that a uniform rule would be determined by the Supreme Court in a very short time.
Mr. GEKAS. But if it didn't get to the Supreme Court?
Mr. WILES. If it didn't make it to the Supreme Court, we go back, and we look at the cases; if we cannot get Supreme Court review in a short time, we may very well go back and change that policy as to that particular case. Intracircuit nonacquiescence is done as a temporary measure subject to reconsideration.
Mr. GEKAS. Mr. Fried, were you onboard with—in your present position in 1996?
Mr. FRIED. Yes, sir.
Mr. GEKAS. Are you familiar with the Social Security Administration ruling 96–1(p)? You don't have to know it by heart, but it says, ''SSA decisionmakers 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.'' That is a ruling, in the Federal Register, having to do with this very same issue. Now we're talking about 1996. Do you refute that or how do you comment on that?
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Mr. FRIED. No, sir, I don't refute that. That's what the ruling says, but it also explains that it is referring only to the time period prior to the issuance of an acquiescence ruling. There was similar language in the 1985 memo initially instituting the Social Security Administration's policy on acquiescence at the hearing level, and there was almost identical language in the 1990 regulation putting those policies into regulation and applying them not only to the hearing level, but also to the initial decision level.
Let me explain briefly the purpose of that. The issue here, Mr. Chairman and members of the committee, is not whether the Social Security Administration follows court law; it's how it follows court law and who is authorized under the Constitution and the Social Security Act to make those determinations. And the only solution, it seems to me, and certainly the solution in law currently, is that it is the Commissioner who interprets the law and determines the rules that should be applied to individual adjudications within the Social Security Administration.
We have over 3.5 million disability claims a year; we have, in addition to that, other claims; we have more than 15,000 adjudicators, and the only way to consistently and appropriately follow circuit court law is for the Commissioner to determine what that case means, because the circuit court decision is aimed at resolving individual cases, not aimed at providing instructions to adjudicators. So, it's up to the Commissioner to determine what that court means, what that case means, how it applies to the statutes and to the claims that are applied before us, and then to provide instructions to our 15,000 adjudicators as to how to apply that case to similar cases across the board.
What we're saying is, ''Yes, we will follow court law,'' and that's what the ruling, the 96–1(p) says. Our regulations in 1990 say we will follow the ruling of circuit courts unless we appeal to the Supreme Court, and that an adjudicator must look at the instructions issued by the Commissioner on how to follow the circuit court ruling—just like an adjudicator must look at instructions issued by the Commissioner in the full panoply of SSA's rules and regulations and the statutes that have been passed by Congress in order to determine how to adjudicate an individual case.
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Mr. GEKAS. The time of the Chair has expired. We'll yield to the gentleman from New York.
Mr. NADLER. Yes, first of all, let me welcome Mr. Fried who is from my district on the Upper West Side of Manhattan.
Let me ask you, Mr. Fried—I have read this regulation you were just reading from, and it does seem to make certain sense that you issue an acquiescence ruling and that, pending that acquiescence ruling coming out, the ALJ applies the policy of the agency and that you afford a litigant the opportunity to go back to the ALJ if he believes that the acquiescence ruling, or the ruling of the court, would have affected that. How long does it take after a circuit court issues a ruling, issues a decision, to get out the acquiescence ruling?
Mr. FRIED. The data that I have is that, once a decision is made to issue an acquiescence ruling, the average to date has been 366 days; that is——
Mr. NADLER. Takes a year?
Mr. FRIED. Yes, that is an unacceptable solution to us, and we have committed ourselves to a goal of 120 days from the date of circuit court decisions to issuance of an acquiescence ruling, if one is necessary.
Mr. NADLER. So, for that period, which is a certain period of time from the ruling of a circuit court until the Commissioner makes a decision to issue an acquiescence ruling followed by a year or, hopefully, 120 days, ALJ's are going to be following the wrong policy and making wrong decisions?
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Mr. FRIED. In those rare instances where the court of appeals' decision is determined to conflict with our interpretation of the law, the ALJ's, and other decisionmakers, will be following our nationwide interpretation of the law that was in effect prior to the decision that was issued. The agency looked—both when it issued the 1985 and when it issued the 1990 rules—at other ways of handling that issue, and again, as I said, because we have more than 3.5 million individual claims, and we have recently had in excess of 500 court of appeals' decisions every year, it would be virtually impossible to start identifying cases immediately to hold them in abeyance pending a determination.
Mr. NADLER. Sir, let me make this just a little quick because I'm going to be limited. Wouldn't it be a better idea to let the ALJ—if the attorney for a claimant said, ''Here's a court of appeals' decision last Thursday in this circuit''—let the ALJ apply that court of appeals' decision?
Mr. FRIED. The problem with that—there are at least two problems with that approach. One is we would then have different standards being applied at the initial level and at the ALJ level, but, more importantly, how would the ALJ know what standard to apply based upon that court of appeals' decision?
Mr. NADLER. The ALJ is an attorney who supposedly is learned and knows how to read court decisions, and, yes, you would have different decisions, and that's why you have an appeals process for that case within the agency.
Mr. FRIED. Just as in a number of cases where different circuits and different district courts come up with different opinions, it is likely that administrative law judges would come up with different opinions in interpreting circuit court cases. In fact, when we determine to acquiesce, we frequently——
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Mr. NADLER. But they would presumably be within a smaller gambit. In other words, if the policy of the agency is that—I don't know—a switched rotator cuff—I just made up a term; I don't know if it exists—a switched rotator cuff is not enough to cause complete disability, and the second circuit says, ''Oh, yes it is,'' you might have disagreements between ALJ's as to whether in fact that in this case is a switched rotator cuff, but you could not have a disagreement on whether, should they make that finding, it causes complete disability?
Mr. FRIED. I wish the disability determinations and the other types of decisions in this circumstance were that easy. The typical case is far more complex than that—and, actually the court does not even say, ''The rule that the Social Security Administration uses is inaccurate.'' Typically, the court will say that the standard used in this particular case did not comply with the statute or the regulations, and we will have to look very closely at that.
Mr. NADLER. Let me ask you a different question. When you stated in your testimony that in certain exceptional cases you would relitigate a case on the same point that you had previously lost in the same circuit, in that exceptional case would you obey the law of the circuit during the pendency of the relitigation?
Mr. FRIED. Firstly, we have in our regulations a procedure whereby we can relitigate a case. We have never availed ourselves of that provision in the regulations. What the regulations allow us to do is identify those cases where we are not following the circuit court decision, and where there would be a different outcome if we did follow the circuit court decision. This would allow that claimant to appeal that case, and we can then readily implement any subsequent decision in that case.
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Mr. NADLER. OK, I have only one more question for you. Given what you've just said about the complexity of these cases and how you need the acquiescence ruling to determine how to apply this, assuming this bill were passed into law exactly as is, what would you change in your practice?
Mr. FRIED. What we would change in our practice?
Mr. NADLER. Yes, would you still wait to have an acquiescence ruling? In other words, how would you implement this bill if it were passed?
Mr. FRIED. We would still need to have the Commissioner implement an acquiescence ruling in each and every case where it was determined the circuit court holding conflicted with our interpretation of the law.
Mr. NADLER. In other words, what you're saying is that this bill wouldn't change anything at all in the way you do business?
Mr. FRIED. I don't see how it could in that regard.
Mr. NADLER. Thank you.
Mr. GEKAS. You want more time?
Mr. NADLER. Yes, I do.
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Mr. GEKAS. Why? [Laughter.]
Mr. NADLER. For a series of questions.
Mr. GEKAS. You may have it.
Mr. NADLER. Thank you.
I'm not sure how to follow up on that, except to say that in that case I think we've just made the case that we need some enforcement language in this bill that we don't have at the moment.
Mr. GEKAS. Would the gentleman yield for just one moment?
Mr. NADLER. Yes, sir.
Mr. GEKAS. When we as lawyers used to try to find cases that we'd try to convince a judge that this precedent ought to follow, I don't remember ever saying, ''Judge, you ought to acquiesce in a decision made in this case.'' Why? Because acquiescence or nonacquiescence didn't enter into it; they had to follow the law. Now we hear descriptions of policy of acquiescing and policies of nonacquiescing. Everybody should acquiesce and follow the law; it is a simple essay in this whole thing. So, if you have a policy of acquiescence, it means that there is something nonacquiescence about it that you want to establish. You either follow the law or you don't.
Mr. FRIED. I agree, sir.
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Mr. NADLER. Tell me why, in your opinion, it would not be a good idea, other than what you said previously about difficulty of implementation, why we should not put a provision in this bill that says that, if brought to the attention of an ALJ by a party to a case, the holding of any court of competent jurisdiction or certainly any circuit court must be applied by the ALJ with or without the acquiescence ruling?
Mr. FRIED. Firstly, sir, there is a difference—and I'll refer in part to the Chair's comments on this—there is a difference between the role of a Federal judge in either the district court or Supreme Court——
Mr. NADLER. Make it circuit court.
Mr. FRIED [continuing]. Which is to interpret the law—and the role of an administrative law judge, which is not to interpret the law but to apply the law as specified by the head of the agency for which that administrative law judge is rendering decisions to the facts of a case, and I must go back——
Mr. NADLER. Well, wait. Let me interrupt at this point. Isn't it—I'm sorry—isn't it inevitable that any trier of a case, whatever you call him or her, an ALJ, must interpret the law unless the facts of the case are exactly the same on all four as a previous case or exactly the same as the case cited in the acquiescence ruling? He's got to decide if the facts here come under the ambit of this acquiescence ruling or that decision. I mean, isn't it always a case of interpretation inevitably?
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Mr. FRIED. No, sir, and if a situation comes up where it is not clear to an administrative law judge what the law is in that particular instance, it is not the appropriate response of that judge to decide if that is what would happen. You would have circumstances—and this could be both favorable and unfavorable to claimants—where claimants, depending upon which administrative law judge they came before, would have a different rule that was applied to them. That, in essence, would be unreviewable unless the claimant knew that there were differing rules and would appeal on that basis, or unless, in terms of favorable decisions the agency reviewed each and every decision that was made by an adjudicator in order to determine whether the agency thought the appropriate standard was applied. I think the far better approach, and the approach that is in the Social Security Act currently, is that the Commissioner determines the rules and regulations. And we have used a bit loosely the term ''policy'' here. What we're talking about is the Commissioner's interpretation of congressional statutes, the Commissioner's regulations, and the Commissioner being held by courts of competent jurisdiction to the appropriate interpretation of those rules.
We're talking now about administrative law judges, but we also have 14,000 adjudicators at an initial level. Just as the Social Security Administration got criticized, and rightfully so, during the eighties for not following court decisions, we have received criticism that our adjudications are inconsistent. We are doing everything that we can and are, in fact, in the middle of a reengineering of our disability determination process in order to ensure that our adjudicators at all levels, to the greatest extent possible, apply as consistent rules as is possible to the claims that are before them.
Mr. NADLER. Thank you. I have a couple of questions for the——
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Mr. GEKAS. I will yield the Chair's second round to the gentleman from New York.
Mr. NADLER. Thank you. I have a couple questions for Mr. Preston, I think, from the Department of Justice.
I think you stated in your testimony that the executive branch has the right and the need on occasion to exercise a nonacquiescence; am I correct?
Mr. PRESTON. Yes, sir.
Mr. NADLER. OK. The Social Security Administration has said that they don't do it, although presumably they're not saying they couldn't if they wanted to. Could you tell me if the administration has a position on this question? Does the administration believe—never mind whether it's a good idea or whether it will do it or won't do it—does the administration believe it has the right under the Constitution and the law to disobey an applicable decision of a circuit court of appeals?
Mr. PRESTON. Your Honor, I think the——
Mr. NADLER. Your Honor? That's not me. [Laughter.]
Mr. PRESTON. Excuse me, Mr. Nadler. Let me be clear: It is the consistent view of successive administrations that there is no doubt that the Government is bound by the judgment of a court in a case vis-a-vis the parties. It is the consistent view of successive administrations that there is no question that the law of a circuit governs in litigation within that circuit. It has also been the consistent view of successive administrations that nonacquiescence is not per se violative of the separation of powers principles and certainly not unconstitutional as practiced on an exceptional basis, as it is in the Federal Government. That position——
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Mr. NADLER. Let me just interrupt and bore in on this. If the law is the law—if the decision of the circuit is the law in that circuit, how can nonacquiescence, whether exceptional or not, not be illegal?
Mr. PRESTON. The judgment of a court is binding in that case; the law articulated by a court of appeals is binding in litigation in that circuit. However——
Mr. NADLER. But not in practice in that circuit?
Mr. PRESTON [continuing]. The circuit court does not stand as a minilegislature for that territory to be issuing in the nature of statutory pronouncements. Let me explain. Consistent with the doctrine of separation of powers, under article III of the Constitution, the judicial power is exercised by the courts in the decision of cases and controversies; however, the power under the Constitution to prescribe rules of general applicability falls to the Congress in the enactment of statutes——
Mr. NADLER. Let me for a moment——
Mr. PRESTON. Yes, sir.
Mr. NADLER [continuing]. I'm well aware of basic constitutional law, but going right back to Marbury v. Madison, the Chief Justice said it is emphatically the duty of the courts—to say what the law is. When a circuit court of appeals says, ''This is the law,'' isn't the duty of the executive to enforce that interpretation of the law both administratively—it may appeal the decision, but isn't it the duty, meanwhile, until you get a contrary decision from the Supreme Court, I presume, or until the circuit court may change its mind in a subsequent case—isn't the duty of the administration or the executive to enforce the law as stated by the competent court, namely, the circuit, in that circuit at least?
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Mr. PRESTON. It is certainly the duty of the executive to follow the dispositive pronouncement of the law by the Supreme Court, but with reference to Marbury v. Madison, I think Professor Wechsler's comment in his seminal treatise on the courts and constitutional law is telling. He said, ''Under Marbury, 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.''
Our view is, and the consistent practice of Federal agencies is, to generally follow the legal reasoning and the legal principles articulated by the courts of appeals, but there are circumstances in which that is not appropriate. In fact, this bill recognizes that there are some circumstances where that is not appropriate——
Mr. NADLER. Yes.
Mr. PRESTON [continuing]. And it is not disobedience to the law; it is not holding oneself above the law; it is in the faithful execution of the laws, in taking care that the laws are faithfully executed, engaging in the interpretation of the law——
Mr. NADLER. Then aren't you saying, in effect, that when the executive chooses to do this, be it rare or whatever, that the power of statutory construction, which one would normally think to be an article III power, is in fact an article I power for the executive in that circumstance?
Mr. PRESTON. Mr. Nadler, I think that the responsibility for interpreting the laws and executing the laws falls squarely——
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Mr. NADLER. It's two separate things. Executing is one; interpreting is the executive or the courts?
Mr. PRESTON. I don't think that either has an exclusive province. I don't——
Mr. NADLER. Thank you very much.
Mr. GEKAS. The time of the gentleman has expired. We will acknowledge the presence of the gentleman from Massachusetts, Mr. Meehan and the lady from Texas, Ms. Jackson Lee.
We will ask the next panel to come to the witness table and then yield to the gentleman from Massachusetts if he wants to make an opening statement or he can reserve his time for questioning of the third panel.
Mr. MEEHAN. Mr. Chairman, there's no time to ask one question?
Mr. GEKAS. I'd rather not, only because it would not be fair to the protocol that we're trying to establish here.
I thank the gentleman for appearing.
Mr. NADLER. Excuse me, Mr. Chairman. Could I ask, on behalf of the gentleman from Massachusetts, unanimous consent that he ask the question for the record?
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Mr. GEKAS. Without objection.
Mr. NADLER. Thank you.
Mr. GEKAS. You've destroyed the protocol that I wanted to establish. [Laughter.]
Mr. MEEHAN. Yes, just one quick followup for Mr. Preston was how often it is that an agency initially refuses to acquiesce with an adverse circuit court decision, and then finds itself liable for attorneys' fees in a subsequent similar case for insisting upon a once-rejected position. I have to believe it happens.
Mr. PRESTON. I am unable to give you any statistical information. However——
Mr. MEEHAN. If you could get that for us maybe——
Mr. PRESTON. We would be happy to look into it. I should point out that you have put your thumb on one of several existing disincentives for unnecessary relitigation of issues or nonacquiescence. We will look into that.
Mr. MEEHAN. OK, great.
[The information follows:]
Question: From Mr. Meehan: Just one quick followup for Mr. Preston was how often it is that an agency initially refuses to acquiesce with an adverse circuit court decision, and then finds itself liable for attorneys' fees in a subsequent similar case for insisting upon a once-rejected position. I have to believe it happens ... If you could get that for us....
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Answer: The Department of Justice does not keep statistical information regarding the frequency of attorneys' fees awards in cases in which an agency has declined to acquiesce in circuit precedent. However, we have conducted a case law database search that has yielded responsive information.
Under the Equal Access to Justice Act (''EAJA''), a court may award reasonable attorneys' fees to a ''prevailing party'' in a ''civil action'' or ''adversary adjudication'' unless the position taken by the United States in the proceeding at issue ''was substantially justified'' or ''special circumstances make an award unjust.'' 28 U.S.C. 2412(d)(1)(A), 2412(d)(3). As an initial matter, we note that agency nonacquiescence, and hence fee awards based on such nonacquiescence, are uncommon inasmuch as federal agencies generally acquiesce in court of appeals decisions. However, our research shows that courts have, on occasion, awarded attorneys' fees where an agency refused to acquiesce in prior circuit precedent. One court of appeals has stated—albeit in a decision declining to award fees because the agency had not failed to acquiesce in circuit precedent—that ''[t]he government's non-acquiescence in the law of the circuit entitles the claimant to recover attorney fees.'' Crawford v. Sullivan, 935 F.2d 655, 658 (4th Cir. 1991).
Although fee awards for agency nonacquiescence are uncommon, our research indicates that there were several fee awards against the Social Security Administration (''SSA'') based on its failure to acquiesce in court of appeals decisions in the 1980s. In 1990, SSA promulgated regulations that reflect its current policy of acquiescence. Our database search did not locate any fee awards based on alleged SSA nonacquiescence after 1990. We are otherwise aware of one case in which a district court has awarded attorneys' fees based in part on its finding that a 1990 SSA ruling failed to comply with the law of the circuit. (That case is now on appeal, the court of appeals having already indicated in other cases that the SSA ruling in question is consistent with circuit precedent.)
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As we pointed out previously, because a refusal to acquiesce carries with it the risk not only of losing on the merits if challenged, but also of being held liable for attorneys' fees, the EAJA provides a significant practical check on unjustified nonacquiescence.
Mr. FRIED. Mr. Chairman, may I submit for the record a letter in response to statements made by an individual who is a witness after us this morning, a letter from the Commissioner to the editor——
Mr. GEKAS. Has that witness received that letter?
Mr. FRIED. It's a letter to the editor of the St. Louis Post Dispatch in response to an article written by this individual.
Mr. GEKAS. Was this article given to that witness?
Mr. FRIED. Was this letter given to the witness?
Mr. GEKAS. Yes.
Mr. FRIED. I don't know whether this was actually given to him——
Mr. GEKAS. Well, without objection, we'll permit it to be entered into the record.
Mr. FRIED. Thank you very much.
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Ms. JACKSON LEE. Mr. Chairman, I have a point of information.
Mr. GEKAS. You have extra copies of that?
Mr. FRIED. I have one extra copy.
Mr. GEKAS. Leave it at the counsel table, at the witness table there. Leave a copy on the witness table, in addition to the one that will be entered into the record through the stenographer——
Mr. FRIED. OK, actually I have a few——
Mr. GEKAS [continuing]. If you don't mind.
[The information follows:]
Social Security Administration,
Office of the Commissioner,
Washington, DC, May 19, 1997.
Letter to the Editor, St. Louis Post Dispatch.
TO THE EDITOR: Bernard Baruch once said that ''Everyone has a right to be wrong about their opinions, but no one has a right to be wrong about their facts.''
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Unfortunately, James Allsup was wrong about his facts in a recent commentary about the Social Security Administration's policies on determining disability claims (''Agency Cuts Costs By Blocking Aid For The Disabled,'' May 15).
Mr. Allsup says that SSA plans ''to force its [administrative law] judges to apply the agency's policy instead of federal law when determining who receives disability benefits.''
This is factually untrue. Social Security's policy guidelines are, in fact, in full compliance with the law. In those rare circumstances where a circuit court issues a final decision that conflicts with Social Security policy, Social Security either appeals that decision to the Supreme Court or implements that decision in accordance with the law.
Mr. Allsup contends that Social Security is concerned about the high ''allowance rate'' by administrative law judges in disability cases and wants to ''intimidate them into abandoning an oath to provide due process.''
Again, factually untrue. Our sole aim is to make certain that there is one and only one standard for determining disability at all levels of the adjudicative process and that similar results in similar cases will be consistent nationwide to the greatest extent possible.
Social Security has always supported the administrative hearing procedures and the due process rights of claimants. Claimants, however, also need assurance that the decision in their case is made in accordance with applicable law, and is not dependent upon the philosophy of the particular judge who hears the case.
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A recent U.S. General Accounting Office report, in fact, stated that Social Security should make efforts to improve management of the decision-making process to increase the likelihood that disability examiners and administrative law judges would reach the same conclusions in viewing the same evidence. Surprisingly, an organization of attorneys and other claimant representatives opposed this idea—Mr. Allsup among them.
The apparent bias of Mr. Allsup in arguing to maintain a lucrative status quo should be evident. On the other hand, the Social Security Administration is responsible only to American taxpayers, who pay for the disability program, and to eligible beneficiaries who depend upon monthly disability benefit payments. We constantly seek to make the disability determination process simpler, more efficient and more equitable.
We are both vigilant and conscientious in carrying out these responsibilities, since we must ultimately answer to the American public for our stewardship of the programs we administer. In doing so, we fully intend to follow the law. Those who suggest otherwise should get their facts straight.
JOHN J. CALLAHAN,
Acting Commissioner of Social Security.
Ms. JACKSON LEE. Mr. Chairman.
Mr. GEKAS. The lady from Texas.
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Ms. JACKSON LEE. A point of information: Since I had a competing hearing, might you state the protocol that has been established? I would have liked to have been able to question both Mr. Fried, Mr. Wiles, and Mr. Preston. So I was not aware of any protocol on the questioning by Members, but I would like to understand it. Am I to be able to ask them questions when the second panel comes up or how is that going to work? Or the third panel, I'm sorry.
Mr. GEKAS. You can ask questions of the third panel. If you have questions you want to submit to this panel, I would request that you do that in writing.
Ms. JACKSON LEE. Well, then, let me just state on the record that I was not in this hearing because I was in a competing hearing——
Mr. GEKAS. Yes, we will permit that.
Ms. JACKSON LEE [continuing]. But would have wanted to be able to ask these individuals questions, and so I suffer the indulgence and appreciate the protocol that's been established.
Mr. GEKAS. We thank the lady.
Mr. MEEHAN. Mr. Chairman, could I just state for the record, too, that I was in the National Security Committee hearing——
Mr. GEKAS. Yes.
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Mr. MEEHAN [continuing]. And I was unaware of the protocol, and I look forward to submitting written questions to the panelists.
Mr. GEKAS. By all means.
Mr. MEEHAN. Hopefully, I'll get a response consistent with the protocol.
Mr. GEKAS. I thank the gentleman.
[The information follows:]
Social Security Administration,
Office of the General Counsel,
Baltimore, MD, July 7, 1997.
HON. GEORGE W. GEKAS,
Chairman, Subcommittee on Commercial and Administrative Law,
Washington, DC
DEAR CHAIRMAN GEKAS: Enclosed please find the Social Security Administration's response to the written questions for the record submitted by Congressman Martin T. Meehan regarding the May 22, 1997 hearing on H.R. 1544, the Federal Agency Compliance Act.
Sincerely,
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ARTHUR J. FRIED, General Counsel,
Social Security Administration.
Enclosure.
Q. 1. Does SSA issue an acquiescence ruling, interpreting an adverse circuit court holding and adopting that interpretation as precedent in all future cases, in response to every single adverse circuit court holding?
A. Consistent with our regulations on acquiescence issued in 1990, if SSA determines that a circuit court decision contains a holding which conflicts with our interpretation of the Social Security Act or regulations, we will apply that holding within the applicable circuit by issuing an acquiescence ruling (AR) or, on some occasions, by changing our national rules to conform to the court's holding without issuing an AR. However, as explained in the preamble to the 1990 acquiescence regulations, the ''vast majority of adverse circuit decisions'' do not contain holdings which conflict with SSA's nationwide rules. Instead, the majority of adverse decisions are based on a finding by the circuit court that our decisionmakers failed to follow or incorrectly applied our nationwide rules and are not based on a rejection by the court of our nationwide rules. We do not issue ARs for such decisions because they do not contain holdings which conflict with our nationwide rules. Of the 575 circuit court decisions issued in fiscal year 1996, only one conflicted with our nationwide rules and required an AR. The courts' holdings in the remainder of the cases were consistent with SSA's rules and regulations. In this regard, it should be noted that, since the publication of our acquiescence regulations, there has been virtually no criticism of SSA by circuit courts for failing to issue an AR for specific cases decided by the courts. The only recent criticism in this area was in the Hutchison case, which, as discussed in my statement to the Subcommittee for the May 22 hearing, involved an error made in the adjudication of that one particular case, rather than a policy of nonacquiescence.
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Q. 2. What is the nature of the ''rare case'' that SSA immediately appeals to the Supreme Court?
A. The Social Security Administration only recommends review of a court of appeals decision by the Supreme Court if the decision of the appellate court is inconsistent with its rules, following the decision would be extremely burdensome or expensive to implement, and the case is the type that merits attention by the Court. The classic situation where SSA might seek Supreme Court review would be where a decision of a court of appeals was in conflict with the decision of another court of appeals on the same matter. In this situation, the Court most typically becomes involved to resolve the conflict. That is one of its primary functions. In some situations, even when there is a court of appeals conflict, for example, the conflict is based on an ambiguity in SSA's regulations, Supreme Court review might not be pursued since it might be possible to resolve the problem by changing SSA's regulations. Some other situations where Supreme Court review also might be sought include important questions of Federal law (for example, where the constitutionality of a statute is at issue) which should be decided by the Court or court of appeals decisions which conflict with applicable decisions of the Supreme Court. It must be kept in mind, however, that review by the Supreme Court is discretionary.
Since 1990 when SSA promulgated its acquiescence regulations, it has only sought Supreme Court review in one case involving its substantive program rules, Sullivan v. Lidy, 911 F.2d 1075 (5th Cir., 1990). The Supreme Court denied this request for review. 500 U.S. 959 (1991). When one considers that Social Security cases are the largest single component of the Federal Court workload averaging close to 10,000 cases annually over the last 15 years, an appeal to the Supreme Court in a Social Security case is the ''rare'' case.
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Q. Do you believe that SSA has greater expertise at deciphering circuit court decisions than its individual administrative law judges?
A. Circuit court decisions generally resolve individual claims and are not written in a way that instructs our decisionmakers on how to consistently apply the courts' holdings to other cases. The meaning and scope of a court's holding are not always clear and can be subject to disparate interpretations, particularly in the myriad of circumstances not addressed in the decision to which they might be applicable. If each of SSA's ALJ's were permitted to apply his or her own interpretation of a circuit court decision in resolving these difficult questions, rather than relying on guidance from the Commissioner in the form of an AR, it could result in conflicting standards being used by decisionmakers, even within the same circuit. That would undermine uniformity and lead to further litigation. Furthermore, adjudicators at the initial and reconsideration levels of review, the vast majority of whom are not attorneys, generally do not have any legal training in interpreting and applying court decisions. As noted in the preamble to the 1990 acquiescence regulations, if the authority to apply circuit court decisions in the absence of an AR was extended only to ALJ's and the Appeals Council, it would further undermine uniformity in decisionmaking by creating different standards of adjudication at different levels of administrative review.
For all these reasons, we believe that ARs are the most effective and fair method to achieve uniform acquiescence in circuit court holdings which conflict with SSA's nationwide rules. This approach is consistent with the longstanding legal principle that it is the responsibility of the Commissioner, not individual decisionmakers, to interpret the Social Security Act and to establish SSA's rules and policies (including how to apply a court holding which conflicts with SSA's nationwide rules). It is the role and responsibility of decisionmakers to decide cases by applying the rules established by the Commissioner to the facts of an individual case. If this authority of the Commissioner were delegated to each of the more than 1,050 ALJs in SSA's employ, there would no longer be any accountability for the standards used to determine eligibility for benefits under programs that SSA administers.
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Q. 4. What is SSA policy with regard to inter-circuit non-acquiescence?
A. The preamble to SSA's 1990 acquiescence regulations addressed the concept of intercircuit acquiescence. The preamble explained that we were not adopting the suggestion from a public commenter that circuit court holdings which conflict with SSA's rules be applied nationwide because such a policy would ''result in the first circuit that happens to circuit that happens to rule on an issue setting the agency's national policy on that subject.'' Ordinarily, neither the Federal agencies nor the courts refer to the practice of not applying legal precedents from one circuit to cases arising in other circuits as nonacquiescence. The Department of Justice (DOJ) has approved SSA's policy because inter-circuit acquiescence would have the practical effect of requiring DOJ to consider seeking Supreme Court review of cases that it might not otherwise appeal.
Although we do not automatically acquiesce on a nationwide basis in a conflicting circuit court decision, whenever a circuit court decision is found to conflict with SSA's national rule, SSA considers whether its nationwide rule is in need of clarification, modification, or change. When a single circuit court articulates a line of reasoning that is sufficiently persuasive, we have changed our national rule to adopt the court's holding. If an AR has been issued for that holding, we will rescind the AR when we change our national rule. This occurred when we changed our regulations in July 1994, to adopt on a nationwide basis the holding in Summy v. Schweiker, 688 F.2d 1233 (9th Cir. 1982), and concurrently rescinded the AR for that case. We also are planning to change our regulations to adopt nationally the court's holding in Parisi by Cooney v. Chater, 69 F. 3d 614 (1st Cir. 1995), a case for which we previously issued an AR.
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If multiple circuit courts issue decisions that conflict with an SSA rule, those court decisions may not be completely consistent with each other. Crafting a national rule that reconciles the differences between multiple circuit court holdings can be very difficult. Nevertheless, if a number of circuit courts have adopted a position on a particular issue which is contrary to SSA's rule and results in fragmentation of the national rule through the issuance of multiple ARs, we may change that national rule to adopt the circuit courts' holdings and to restore uniformity.
Mr. GEKAS. The next panel of witnesses is invited to the witness table. The third panel is made up of John H. Pickering, a partner and currently senior counsel of the distinguished Washington, DC, law firm of Wilmer, Cutler & Pickering. He is testifying today on behalf of the American Bar Association, where he chairs the Senior Lawyers Division.
A native of Harrisburg, IL, Mr. Pickering received his undergraduate degree from the University of Michigan in 1938 and his law degree from that university in 1940. He served as law clerk to the U.S. Supreme Court Justice Frank Murphy from 1941 through 1943, and then with U.S. Naval Reserve until 1946, ultimately, as lieutenant commander. He was a partner for 16 years with the Washington law firm of Wilmer & Brown, and then, until now, with the firm that bears his name. In 1994 he was recognized by the D.C. Bar as one of its legends in the law. In 1996, he was named Lawyer of the Year by the D.C. Bar.
I want to thank Mr. Pickering for another matter. Coming from Harrisburg, IL, he bolsters my contention that there's a Harrisburg, I think, in all 50 States, including my birthplace in Pennsylvania. So I thank him for confirming that.
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With him is Prof. Dan T. Coenen, who has taught at the University of Georgia Law School since 1987, first as an assistant, then associate professor, and since 1996 as professor of law. A native of Appleton, WI, he graduated with a degree in journalism from the University of Wisconsin in 1975. He graduated in 1978 magna cum laude from the Cornell Law School, where he was editor of the Law Review. He clerked to the U.S. Appeal Court Judge Clement Hainesworth from 1978 to 1979, and then for U.S. Supreme Court Justice Harry Blackmun from 1979 through 1980. Before joining the faculty of the University of Georgia in 1997, he practiced law in Charlotte, NC, during which he acted as counsel in representing plaintiffs in the Social Security class action of Hyatt v. Heckler.
Jim Allsup sits at the table as the creator of the first private nationwide Social Security disability representational service in 1984, after having served as an SSA claims representative and field representative in various administration offices. He is founder, president, and chief executive officer of Allsup, Inc., which for 3 consecutive years has been named to the Inc. 500's ranking of the Nation's fastest-growing private firms. He is the publisher of the Allsup Alternative, and producer/host of Kaleidoscope Television's ''The Allsup Report.'' Mr. Allsup is a native of Belleville, IL, and received his B.A. in business administration from Southern Illinois University.
And last, Mr. Peter Ferrara, the general counsel and chief economist for the Americans for Tax Reform. From 1993 to 1995, he was a senior fellow for the National Center for Policy and Analysis in the Heritage Foundation, concentrating on welfare, tax policy and reform issues, and labor law. From 1992 to 1993, he was Associate Deputy to the Attorney General and, prior to that, he practiced law with the Washington, DC, law firm of Shaw, Pittman, Potts, & Trowbridge for 10 years. From 1982 to 1983, he served as senior staff member with the Office of Policy Development at the White House for President Ronald Reagan. A magna cum laude Harvard University graduate of 1976, Mr. Ferrara also received his law degree cum laude from that university in 1979.
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We welcome the panel and we'll begin in the order that they were announced. We make this similar announcement: that their written statements will be accepted for the record, without objection, and ask that they restrict their excerpts from their written statement to 5 minutes.
STATEMENT OF JOHN H. PICKERING, WILMER, CUTLER & PICKERING, ON BEHALF OF THE AMERICAN BAR ASSOCIATION
Mr. PICKERING. Thank you, Mr. Chairman, and I do confirm that there are Harrisburg's in all 50 States. [Laughter.]
I'm constantly asked, ''Oh, Pennsylvania?'' Of course, that's the most prominent Harrisburg.
On behalf of the American Bar Association, I am pleased to be here to testify on this important matter of nonacquiescence. The American Bar Association, since 1985, has consistently opposed the Social Security Administration's policy of nonacquiescence in court decisions. They did change their policy in 1990, which improved matters somewhat, but not, in our judgment, far enough.
With all deference, I think we were treated to a great instance of double-speak regarding the practice of the Social Security Administration this morning. As I understood Mr. Fried's testimony, in the same circuit the Commissioner reserves the right to interpret what the court decided and then, and only then, will they follow that. Now, if this is acquiescence—nonacquiescence—I don't know what it is. I simply refer to it as ''almost 1984,'' George Orwell.
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If that policy were as described, why does the Federal Judicial Conference come here in 1997 with a resolution calling for legislative solution? Why did the Federal Court Study Committee in 1990—which was created by the Congress—why did it recommend changes? A pertinent excerpt from the Federal Court Study Committee is attached; it's the last attachment to my prepared statement.
The ABA statement is limited to the matter of non-acquiescence in Social Security Administration matters because of our concern for access to justice, access to justice on behalf of the citizens who are least able to protect themselves: the poor, the disabled, and the elderly who have to depend on Social Security processing their cases fairly, expeditiously, and in accordance with the rule of law.
My former partner, Mr. Preston, whom I admire greatly, but with whom I disagree occasionally, referred to testimony by Solicitor General Rex Lee regarding previous legislation. Let me read from the relevant excerpt from the report of the Federal Court Study Committee in 1990 regarding Social Security's nonacquiescence policy: ''This nonacquiescence policy is unfair to the Social Security disability claimant, and the continuing litigation that 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 nonacquiescence policy as ''lawless.'' It weakens the concept of the law of the circuit; it creates unnecessary tension between the executive and judicial branches, and 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 Solicitor General, the member of the committee referred to, was the Honorable Rex Lee who at that point was president of Brigham Young University, following his tenure, distinguished tenure, as Solicitor General of the United States. He characterized the practice as ''lawless.'' That is precisely what it is, no matter how it is attempted to be described, as we've heard it today, and it is time for legislation to take care of the matter.
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The ABA supports in principle the principles of H.R. 1544. It deals, we think, adequately with the problems that are presented so far as intracircuit, within the circuit. It has sufficient loopholes to allow the agency to litigate where that's appropriate, and then as far as inter-circuit acquiescence is concerned, it says three times is enough; it's a modern version of ''three strikes and you're out.'' So, we support the bill, and we compliment very much the chairman and Congressman Frank for introducing this much-needed legislation.
Congress did not act in 1985 thinking that the agencies or that Social Security Administration would follow the law, but the time has come, as the Judicial Conference now says, that legislation is needed. We urge the enactment of this statute.
[The prepared statement of Mr. Pickering follows:]
PREPARED STATEMENT OF JOHN H. PICKERING, WILMER, CUTLER & Pickering, on Behalf of the American Bar Association
Mr. Chairman and Members of the Subcommittee, my name is John H. Pickering. I chair the American Bar Association's Senior Lawyers Division, and serve as Commissioner Emeritus of the ABA Commission on Legal Problems of the Elderly, which I also chaired for a number of years. I appreciate the opportunity to discuss with you this morning the American Bar Association's positions with regard to the issues sought to be addressed by H.R. 1544, ''The Federal Agency Compliance Act,'' a bill to prevent federal agencies from pursuing policies of unjustifiable nonacquiescence in, and relitigation of, federal judicial precedents. As the representative of the legal profession in the United States, the American Bar Association is particularly concerned with equal access to the justice system for those members of our society who are generally least able to protect their own rights—low-income persons, individuals with disabilities and older people—and we believe that federal agency compliance with federal court precedent is an integral component of that system.
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Pursuant to the U.S. 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 and contracts 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. The ABA has not received any grants relevant to this hearing in the current and preceding two fiscal years. Please find attached my curriculum vitae.
Over a decade ago, we joined with the Administrative Conference of the United States (ACUS) to sponsor a national symposium on the Social Security Administrative Appeals process. Since that time, the Association has drawn upon the considerable expertise of a membership with backgrounds as claimant representatives, administrative law judges, academicians and agency staff, to develop a wide ranging body of recommendations that emphasize clarity in communications with and due process protections for claimants, and that urge the application of appropriate, consistent legal standards at all stages of the disability adjudication process. In 1986, in an amicus curiae brief in the landmark U.S. Supreme Court case, Bowen v. City of New York, the Association argued successfully that the Social Security Administration should reopen the cases of thousands of mentally disabled claimants who were denied disability benefits because they failed to meet sub rosa requirements and appeal deadlines. Brief for the American Bar Association, Amicus Curiae, in Support of the Respondents, Bowen v. City of New York, 476 U.S. 467 (1986). We understand that Social Security cases have become a significant factor in the caseload of the federal courts. SSA could improve this situation at the front-end of the process, by providing individuals applying for benefits with a clear statement of applicable eligibility requirements, the claimant's responsibilities, a description of the administrative steps in the process, an explanation of relevant medical and vocational evidence and notice of the availability of legal representation. However, it is our opinion that much of this burden could be alleviated if the agency would comply with federal court precedent, thereby avoiding costly and time consuming relitigation of similar issues of law.
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The American Bar Association has consistently condemned the Social Security Administration's practice of nonacquiescence. In 1985, the ABA House of Delegates urged the SSA to cease its policy of refusing to apply to claims, filed within a circuit, interpretations of the Social Security Act and its regulations by the U.S. Court of Appeals within that circuit (intracircuit nonacquiescence). The Association called for legislation mandating SSA to ''observe within each circuit the decisions of the Court of Appeals within that Circuit, subject to seeking review in the United States Supreme Court.'' Following our adoption of this policy, the SSA made some welcome changes in its practices, but did not go far enough, and still continued to carve out exceptions. On January 1, 1990, we presented our position on this issue to the Federal Courts Study Committee. In a follow-up memorandum dated January 17, 1989, prepared at the request of Committee chair, the Hon. Joseph E. Weis, I expressed the Association's ongoing disappointment that the agency continued to flout the rule of law that government agencies are bound by judicial decisions, and that the agency's policy has the ultimate effect of denying claimants fair and timely resolution of their claims. One month later, at the request of the National Conference of Administrative Law Judges, the American Bar Association House of Delegates adopted policy urging the enactment of federal legislation directing SSA to cease its nonacquiescence policy, with the recommendation that such legislation incorporate the following principles to address conflicting decisions by two circuits courts of appeals:
A. Where two Circuit Courts of Appeals have decided the same issue of law 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 as enunciated by the two Circuit Courts ruling adversely shall be followed by the Social Security Administration in all jurisdictions;
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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.
We were extremely gratified when we learned that the Study Committee agreed with our position that legislation is necessary to halt the agency's non-acquiescence policy. In its 1990 Report, the Study Committee recommended that Congress prohibit nonacquiescence by ''amending the Social Security Act ... to require the Secretary of Health and Human Services, in all administrative proceedings, to abide by the holding of the court of appeals in the circuit in which a claim for benefits under the Act is filed.... [except in cases which] the Solicitor General has determined [are] appropriate to use as a test of the existing law.'' (Copies of the 1985 and 1990 ABA policies, and the January 17 follow-up statement and the Recommendation and analysis of the Federal Courts Study Committee, are attached.)
While we appreciate the steps that the agency has taken since 1990 in recognizing the authority of decisions of the circuit in selected cases, notably on issues such as widow's disability and the evaluation of pain, it is our position that the agency's actions are still unacceptable. The agency continues to hold itself outside the rules on which our system of justice is based. It claims to be bound only by federal district and appellate court decisions in a particular circuit as they affect the particular litigant in the specific case under consideration. Beyond that, the agency considers itself bound only by the Social Security Act, agency regulations and rulings, and decisions of the United States Supreme Court. It reviews decisions of the Court of Appeals within a particular circuit to determine whether, in the opinion of the agency, they are ''correctly decided.'' If, in the opinion of the agency, the case is correctly decided, it issues a formal ruling acquiescing to the decision in that circuit. If, in the opinion of the agency, the case is incorrectly decided, the ruling will not be followed. Until an acquiescence ruling is issued, agency decision makers in the affected circuit are directed to follow agency policy. As recently as January of this year, the agency instructed its administrative law judges that they must follow agency regulations and guidelines, without regard to the law in the circuit to which the claim in question would eventually be appealed. The agency also reserves the right to relitigate issues in a circuit, even though it has issued an acquiescence ruling. Only in the Second Circuit, as a result of a settlement reached in Stieberger v. Sullivan, 738 F. Supp. 716 (S.D.N.Y. 1990) after years of wrangling, has the agency agreed to follow decisions of the circuit court. SSA has not chosen to follow the procedures we recommended in 1990 to resolve intercircuit disputes on the same issue of law.
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The agency contends that to acquiesce in each and every case would be untenable, leading to a requirement that the agency change its policies each time a federal court awarded benefits to a particularly sympathetic claimant. This raises the image of a feather being tossed in the wind. The Social Security Administration certainly is no feather, and we most certainly do not ask the agency to change its policies to comport with each circuit court decision, particularly not those based on issues of fact. Rather, we argue that the Social Security Administration, as an adjudicatory body that is an integral part of our nation's system of justice, should follow the legal precedent set by the federal courts, or challenge those decisions through the judicial system.
Nonacquiescence allows a federal agency to act without check until either the Congress or the Supreme Court intervenes—flying in the face of the reliance on judicial precedent that our system of justice presupposes and undermining the integrity and efficiency of the appeals process while guaranteeing the claimant due process. Claimants, who are frequently indigent, should not be forced to relitigate legal issues on which the agency has not prevailed but refuses to follow or appeal. Judge Learned Hand once said that if democracy is to be preserved, there must be one commandment: ''Thou shalt not ration justice.'' By continuing to pursue its policy of nonacquiescence, the Social Security Administration is limiting access to the justice system, and thereby rationing justice, for: 1) the claimant who must pursue lengthy appeals to obtain a decision on an issue of law that could have been resolved at the agency level; 2) claimants whose cases are delayed because the agency's resources are spent on duplicative efforts; and 3) claimants who may be denied timely access to the federal court system because the court is forced to consider anew, issues of law that it has already decided.
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We commend the Subcommittee for hearing these important issues, and appreciate the opportunity to submit this testimony. We look forward to working with the Subcommittee and with the Social Security Administration on these issues in the future.
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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 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 as enunciated by the two Circuit Courts ruling adversely shall be followed by the Social Security Administration in all Jurisdictions;
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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.
———
American Bar Association,
Commission on Legal Problems of the Elderly,
Washington, DC, February 28, 1990.
Judge JOSEPH F. WEIS, JR., Chairman,
Federal Courts Study Committee,
Philadelphia, PA.
DEAR JUDGE WEIS: During my testimony on behalf of the American Bar Association (ABA) before your Committee on January 31, 1990, in Washington, D.C., I was requested to submit a memorandum commenting further on two matters discussed in my testimony.
The first matter related to proposed statutory/regulatory language for you to consider in formulating recommendations with respect to the Social Security Administration's (SSA) policy of non-acquiescing to selected circuit court decisions. The Committee's request arose in the context of my statement that the ABA strongly opposes SSA's policy of non-acquiescence because it results in relitigating the same legal issues within a circuit that have already been decided by that circuit, thereby causing significant hardship for Social Security claimants who are a particularly vulnerable segment of our society.
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The second matter was to comment further on the Committee's alternative proposal to reconstitute the SSA Appeals Council ''in the format presently exemplified by the Benefits Review Board'' (Tentative Recommendations of December 22, 1989 at pp. 28–29).
This memorandum responds to your request.
I. NON-ACQUIESCENCE
As I testified, the ABA has long been concerned with the adverse effects of SSA's non-acquiescence policy on Social Security claimants, the bar, and the courts.
A. Intra-circuit non-acquiescence
In July 1985, the ABA House of Delegates passed resolutions (ABA Recommendation 110, copy enclosed) condemning SSA's policy of non-acquiescing within each Federal circuit to that circuit court's interpretations of the Social Security Act and regulations, and urging, in the event that SSA continued its non-acquiescence policy, that ''Congress enact legislation to mandate SSA to observe within each circuit the decisions of the Court of Appeals within that circuit, subject to seeking review in the United States Supreme Court.'' The quoted language, we believe, could be the basis for legislative language regarding intra-circuit non-acquiescence.
Following ABA's adoption of Recommendation 110, the SSA made some welcome changes in its non-acquiescence policy, but did not go far enough. On November 18, 1988, SSA published proposed rules regarding its non-acquiescence policy (53 F.R. 46628). We submitted comments dated January 17, 1989, opposing the exceptions proposed by SSA to acquiescence. A copy of those comments is enclosed. As you can see, we argued that anything short of total acquiescence by SSA to local circuit court law not only flouts the rule of law that government agencies are bound by judicial decisions, but also will have the ultimate effect of denying claimants fair and timely resolution of their claims. Many of those claimants, we pointed out, are elderly, disabled and indigent, and therefore are among the people least able to challenge the Government's conduct. We also noted that a policy of non-acquiescence needlessly and unjustifiably adds to the caseload of the federal courts, already quite heavy, thus denying to other litigants, private and governmental, the opportunity for more rapid resolution of their cases.
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Despite these and similar comments by other legal and claimant groups, the Final Rule as promulgated by SSA on January 11, 1990, made few changes and continued the exceptions to which we objected (55 F.R. 1012).
B. Inter-circuit non-acquiescence.
Because of SSA's failure to adopt a satisfactory acquiescence policy, the National Conference of Administrative Law Judges recently proposed that the ABA support federal legislation, directing SSA to cease its non-acquiescence policy, and incorporating certain stated principles. That proposal, Recommendation No. 114 (copy enclosed) was adopted by the ABA House of Delegates on February 13, 1990. Like the prior 1985 ABA resolution dealing with intra-circuit non-acquiescence (Report 110), this recent Report 114 contains the framework of statutory language for dealing with intercircuit non-acquiescence.
We hope that the language of these two reports is responsive to your request. We urge your Committee to recommend that SSA cease its non-acquiescence policy. At the very least, we urge adoption of the proposal for a study and pilot project as described at pp. 116–120 of the Committee's Tentative Recommendations of December 22, 1989. SSA's non-acquiescence policy simply imposes too great a burden on claimants and the courts to be allowed to continue. As the Chairman of this Committee has written:
The non-acquiescence policy of an agency results in intolerable and inexcusable expense to litigants, as well an in the unnecessary and wasteful expenditure of scarce judicial resources.(see footnote 11)
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II. BENEFITS REVIEW BOARD
It would be an improvement to eliminate the SSA Appeals Council, but we oppose substituting the Benefits Review Board format in its place.
We do not have any experience with the Benefits Review Board. Nor do we have any basis for questioning the Committee's statement that the ''Board has generally been considered successful,'' although we are not aware of any studies supporting that statement. Nevertheless, we are opposed to the alternative recommendation to use the Benefits Review Board format with review by the Courts of Appeal. Our reasons are:
1. The recommendation would continue to require a fourth level of administrative review, a burdensome, time consuming, and often useless process. Although the Benefits Review Board might be more independent than the Appeals Council has been, there can be no assurance in that regard. Advocates who represent claimants in Black Lung cases may have a different view about the Board's success in protecting the rights of persons with disabilities. In any event, that success should be compared with the track record of the federal district courts in Social Security cases.
2. The effect of this proposal, which would assign judicial review to the Courts of Appeal, is to cut out federal district court review. That would eliminate a forum that historically has played a significant role in exposing illegal policies and practices of SSA and thereby insuring protection of claimants' rights. The landmark decision in Bowen v. City of New York, 476 U.S. 467 (1986), was a direct result of the federal district courts finding that many Social Security claimants had their benefits terminated illegally. Between 1981 and 1984, hundreds of thousands of claimants were notified that their benefits would cease as a result of new eligibility standards. Understandably, this sparked an avalanche of requests for administrative hearings and, once administrative appeals had been exhausted, appeals to federal district courts. Many of those decisions to terminate benefits were based on SSA policy which was not contained in SSA regulations or, even worse, on ''sub rosa'' policies unpublished and unavailable to the public. The administrative review process was unable to uncover this unlawful action, either at the Administrative Law Judges or the Appeals Council level. That uncovering was done by the district courts. The Supreme Court affirmed, finding SSA's policies to be illegal and ordering SSA to reopen thousands of disability denials. The ABA filed a brief as amicus curiae (copy enclosed) on behalf of Social Security claimants in the Supreme Court in that case urging affirmance and pointing out how SSA's action contravened the rule of law.
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Nothing in the history of either the SSA Appeals Council or the Benefits Review Board indicates that either administrative review body could provide the kind of objective review and close scrutiny that have been demonstrated by the federal district courts in reviewing Social Security claims. Furthermore, the Appeals Council has come under attack by numerous organizations; indeed, several proposals have advocated its elimination. This Committee's alternative proposal would elevate its status to a cheaper, less formal substitute for federal district court review. Since that would provide less protection for SSA claimants, the ABA strongly opposes this restructuring.
We very much appreciate the opportunity to express the Association's views on these issues. Please include this letter in the hearing record as a supplement to my January 31 testimony.
Very truly yours,
John H. Pickering, Chair,
American Bar Association,
Commission on Legal Problems of the Elderly.
Enclosures.
cc: Diana Gribbon Motz, Esq.
Steven G. Gallagher, Esq., Committee Counsel.
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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. 301–1397e. 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 judgment in that case becomes final.
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 to or 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.
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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.
Mr. GEKAS. The Chair thanks the gentleman's offer of testimony, and in support of the legislation.
And the better part of valor here commands the Chair to declare a recess for 15 minutes, so that the Members can retire to the Chamber for the purpose of casting a vote, and we'll return to hear the testimony of Professor Coenen. With that, we recess for 15 minutes.
[Recess.]
Mr. GEKAS. Time of the recess having expired, we will proceed with the testimony from the panel of witnesses.
Mr. PICKERING. Mr. Chairman, may I ask that a list of the members of the Federal Court Study Committee be added to the record as part of my statement?
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Mr. GEKAS. Without objection, it will be so included.
Mr. PICKERING. Thank you, sir.
[The information follows:]
INSERT OFFSET RING FOLIO 15 HERE
Mr. GEKAS. We will continue with Professor Coenen.
STATEMENT OF DAN T. COENEN, J. ALTON HOSCH PROFESSOR, UNIVERSITY OF GEORGIA SCHOOL OF LAW
Mr. COENEN. Thank you, Mr. Chairman. I appreciate very much the chance to appear before the subcommittee to comment on the nonacquiescence section of the proposed act.
I personally first learned about intracircuit nonacquiescence in the early 1980's when I was in a private corporate litigation practice in Charlotte, NC. During that time my law firm became involved in a major pro bono project challenging Social Security nonacquiescence in the so-called Hyatt case. At my firm's request, I ended up working on this case at all levels of the Federal judiciary for several years. After I left practice and became a law professor, I decided to study intracircuit nonacquiescence more systematically, and this study produced a law review article published in the Minnesota Law Review in 1991 on this subject.
I emphasize to the committee that I am not a social security lawyer. I also lack familiarity with the details of recent agency activities, including with regard to nonacquiescence. But I do know these things for sure: First, intracircuit nonacquiescence has occurred on a widespread scale in the past. Second, Federal courts have condemned this practice uniformly in the very strongest terms. Third, at least three significant nonpartisan entities—the American Bar Association, the Judicial Conference of the United States, and the Federal Courts Study Committee—have advocated legislation prohibiting the practice. For these reasons, I genuinely applaud the subcommittee's decision to put this subject back on the congressional table.
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Now much can be said about why intracircuit nonacquiescence is wrong. In fact, my law review article devotes 105 pages to the subject. At bottom, though, I think the reasons for rejecting the practice are really very simple. First, intracircuit nonacquiescence offends the deep traditional American commitment to the rule of law. Second, intracircuit nonacquiescence undermines trust in and respect for Government. Third, intracircuit nonacquiescence produces deeply unfair and harmful results—with the worst results reserved for the most ill and the most impoverished members of our society.
These concerns have led Federal Judges to describe intracircuit nonacquiescence—and I quote from various opinions—as ''utterly meritless,'' ''intolerable,'' ''outrageous,'' and ''shocking.'' I believe that these sentiments are shared by the broader legal community. That is why I believe the American Bar Association is here today. That is why the bulk of the academic commentary on intracircuit nonacquiescence is highly critical. That is why former Solicitor General Lee, as noted by Mr. Pickering, after leaving Government described intracircuit nonacquiescence as ''lawless'' and himself advocated legislation against it.
Finally, I know that the Social Security Administration says it is not now engaging in intracircuit nonacquiescence because of the regulations it has issued. I note to the committee that Judge Sand's opinion in the Stieberger case raises questions about whether the existing regulations are adequate. In addition, the committee has already noted the Hutchinson case decided in 1996, which directly criticizes the Social Security Administration for engaging in intracircuit nonacquiescence.
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And, finally, as Judge Anderson noted, the Department of Justice clearly continues to assert that there is no rule that a Federal agency must apply the legal principles announced in a court of appeals' decision to the administration of a statutory program in matters arising in that particular circuit.
But let us put all that to one side. Let us assume that the Social Security Administration, in fact, is not nonacquiescing at this time. It seems to me that that matter is basically beside the point, and the reason why is this: This legislation is not being proposed to deal with some fleeting or temporary problem; it is designed instead, as I read it, and as I understand it, to give continuing protection to an enduring principle, the principle that agency officials are not above the law.
There is no question that intracircuit nonacquiescence has occurred in the past, and I hope the work of the subcommittee produces a strong statute that keeps this practice from occurring in the future.
[The prepared statement of Mr. Coenen follows:]
PREPARED STATEMENT OF DAN T. COENEN, J. ALTON HOSCH PROFESSOR, UNIVERSITY OF GEORGIA SCHOOL OF LAW
I appreciate the chance to appear before the subcommittee to comment on the proposed Federal Agency Compliance Act, H.R. 1544. The bill concerns so-called intracircuit nonacquiescence, a subject in which I have a longstanding interest. Although the bill also touches on other matters, my own comments will focus on the nonacquiescence provisions.
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My familiarity with intracircuit nonacquiescence stems from two experiences. First, while I was in private law practice in Charlotte, North Carolina, I became (through my firm's involvement in a major pro bono project) one of the lawyers for the plaintiffs in a Social Security nonacquiescence lawsuit called the ''Hyatt'' case. Second, after becoming a law professor, I devoted a good bit of time and energy to writing a law review article entitled ''The Constitutional Case Against Intracircuit Nonacquiescence,'' 75 Minn. L. Rev. 1339 (1991). Both of these experiences left me with the firm belief that intracircuit nonacquiescence is a real phenomenon and a serious problem in our law. In my view there are three main reasons why the practice is unacceptable:
First, intracircuit nonacquiescence is profoundly at odds with the traditional American commitment to the rule of law.
Second, intracircuit nonacquiescence is corrosive of trust in and respect for government.
Third, intracircuit nonacquiescence produces deeply unfair and harmful results, most often for the very people who are most in need of the government's help.
In light of these concerns, I was pleased to learn that this subcommittee is considering legislation that would outlaw intracircuit nonacquiescence. I believe that, whatever legislation Congress might enact, an agency's adherence to this practice violates the bedrock constitutional principle that ''it is, emphatically, the province and duty of the judicial department, to say what the law is.'' Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803). I also believe, however, that a strong legislative prohibition—if carefully drafted—could be extremely useful in bringing this wrongful practice to an end.
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A. THE DAMAGE INFLICTED BY INTRACIRCUIT NONACQUIESCENCE.
1. The Rule of Law
Intracircuit nonacquiescence involves an agency decisionmaker's refusal to follow the binding precedents of a federal circuit court of appeals even when the agency decisionmaker's ruling is appealable to that very circuit court. Just to define intracircuit nonacquiescence is to show why that practice stands at odds with the rule of law. It is, for example, inconceivable that a federal district court could announce that henceforth it would ignore its own superior circuit court's legal pronouncements. Yet an intracircuit nonacquiescence policy requires agency decisionmakers—who surely have no greater claim to adjudicative autonomy than full-fledged Article III district court judges—to flout considered circuit court precedent in just this way. In our system, there is such a thing as the ''law of the circuit.'' Pierce v. Underwood, 487 U.S. 552, 561 (1988). Ordinary people—who are employed by universities, who work in businesses, or who sit on local hospital authorities or school boards—cannot disregard local circuit court rulings set forth in the Federal Reports. Then how can government decisionmakers—bound by the Constitution itself to ''take care that the laws be faithfully executed,'' U.S. Const. art. II, 3—claim an entitlement to disregard that body of law? It travels far from traditional conceptions of the rule of law for agency decisionmakers, directly subject to review in a particular circuit, to claim a right to ignore what the law of that circuit says.
2. Respect for Government
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The conflict between intracircuit nonacquiescence and the rule of law explains why that practice has triggered overwhelming opposition among those groups whose job it is to care for the law: the American Bar Association, the Judicial Conference of the United States, the Federal Courts Study Committee, and the individual federal judges who have encountered challenges to the practice in actual lawsuits. I also believe, however, that intracircuit nonacquiescence contributes to negative attitudes toward government among citizens who are not lawyers or judges. Members of Congress know well that many Americans believe their government is out of touch with their lives. Consider in this regard the messages sent out by a policy of intracircuit nonacquiescence: that government decisionmakers must woodenly adhere to inflexible, uniform, agency-created rules; that government agencies are not accountable to an independent judiciary; that government adjudicators, when approached for help by a real person, can put off for years—if not forever—application of the legal rule the local federal circuit court already has said should govern that person's case. The themes that such a practice evokes are themes of bureaucracy, of rigidity, of delay, of callousness, and of disconnection from reality. These are exactly the images of modern government that are most corrosive of respect for government and thus most likely to undermine positive-minded, participatory self-rule.
In making this observation about intracircuit nonacquiescence I hasten to add two points. First, it is obvious that the specific practice of intracircuit nonacquiescence is not itself the central cause of generalized citizen worries about the unresponsiveness of government. But I do believe the policy, along with other policies, contributes to a mentality of frustration and mistrust. Second, in making this observation I do not question the good faith of actual agency decisionmakers, who I believe are trying hard to do their jobs well. The difficulty is that the smaller number of persons who formulate agency rules may become too enamored of their own pronouncements and too caught up in the values of ''uniformity'' and ''efficiency'' and ''processing claims.'' These risks account in large part for Congress's longstanding insistence that agency action should be subject to a meaningful check provided by a detached and independent judiciary. But the judicial check envisioned by Congress can have little practical effect if agency decisionmakers subject to a specific federal circuit court's review authority can ignore that circuit court's precedents altogether.
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3. Fairness and Common Sense
Most important, intracircuit nonacquiescence should be rejected because it is fundamentally unfair and offends common sense. Consider what happens to the person who seeks Social Security disability benefits against a backdrop of agency disregard for local circuit court law. To get a proper consideration of the case, the claimant must first go to the agency, then exhaust all administrative remedies, then go to court to get an order requiring enforcement of circuit court law, and then go back to the agency for a full reprocessing of the claim in light of circuit court precedent. Such a process is arduous and emotionally draining, and it may well take years. This strange procedure invites injustice for every disability claimant for the simple reason that justice delayed is justice denied. The greatest injustice is reserved, however, for those who have the most at stake: the poor who cannot afford to persist through the lengthy appeals process; the unrepresented who do not have enough information to know they need to persevere; and those so ill they die before the protracted appeals process comes to its end. Defenders of intracircuit nonacquiescence have said it promotes uniformity. But what kind of uniformity is this, where one disabled woman gets benefits, but her identically situated neighbor does not, only because the latter woman did not know, or could not afford, to appeal her case?
B. THE FAILED DEFENSES OF INTRACIRCUIT NONACQUIESCENCE
The costs imposed by intracircuit nonacquiescence are real and severe. Defenders of the practice have suggested, however, that those costs are justified by three considerations. They rely upon:
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(1) The value of uniformity in the administration of complex national programs;
(2) The advisability of facilitating reconsideration of questionable circuit court rulings; and
(3) The specialized expertise of agencies, to which federal courts supposedly should defer.
A large part of my law review article is devoted to showing why these defenses of the practice are unpersuasive. See 75 Minn. L. Rev. at 1412–32. I shall touch here on only a few key points.
1. Uniformity
The main argument for intracircuit nonacquiescence is that it permits an agency to administer its program in a nationally uniform manner. This argument, however, has a question-begging ring. Nonuniformity, after all, is built into the administration of agency programs, precisely because Congress has assigned the judicial-review function to a system of multiple, geographically identified courts. Agencies acknowledge their duty to depart from uniform standards when specifically instructed to reconsider a case in a remand order issued by a supervisory circuit court. Yet if an agency must depart from its uniform rules after a court tells it to follow that court's precedent, why should the agency not depart from its uniform rules in anticipation of such an order that (if proper appeals are taken) is certain to come?
The main answer offered in response to this question is that maximum uniformity is desirable because it cuts down on agency costs. For at least three reasons, however, this reasoning is weak. First, any true cost/benefit analysis must take into account all of the costs imposed by intracircuit nonacquiescence, including the significant costs that flow from damage to the rule of law and respect for government. These costs, although intangible, cannot be overlooked. Second, even if a uniform disregard of circuit court precedent saves money for the agency, it does so only because it shifts costs to litigants and to courts that, as a result of agency nonadherence to precedent, must handle otherwise needless appeals. These costs are what economists describe as ''externalized'' because they are borne by persons outside the agency; the key point is that an agency is not likely to consider these costs in establishing its own policy because these costs—although again very real—do not come to rest on the agency itself.
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Finally, intracircuit nonacquiescence—especially in the long run—may not save on administrative costs even for the agency. This is the case because intracircuit nonacquiescence leads to additional appeals through the administrative process, and because cases remanded by courts for reconsideration must be heard twice, instead of just once, at the agency level. The problem of agency administrative costs is compounded by the understandable hostility courts have exhibited when they discover that intracircuit nonacquiescence is in fact afoot. In the Hyatt case, for example, the government's policy of intracircuit nonacquiescence produced judicial orders and consent decrees that required:
(1) The sending of some 230,000 notices of the possible availability of reconsideration relief to persons previously denied benefits by the agency;
(2) Reconsideration at the agency level of tens of thousands of previously closed cases;
(3) Awards of benefits in these reconsidered cases estimated by the district court to total ''several hundred million dollars a year,'' Hyatt v. Sullivan, 711 F. Supp. 833, 836 (W.D.N.C. 1989); and
(4) Attorneys fee awards against the government under the Equal Access to Justice Act, for actions taken without substantial justification or in bad faith, in an amount exceeding $1.5 million.
The Hyatt case does not stand alone. Similar large-scale challenges to Social Security Administration nonacquiescence have produced similar results in other parts of the country. The egregious facts of these cases have stirred anger among federal judges, who have decried intracircuit nonacquiescence as ''utterly meritless,'' ''intolerable,'' ''outrageous,'' ''shocking,'' a ''symbolic bookburning,'' and the equivalent of ''the repudiated pre-civil War doctrine of nullification.'' See 75 Minn. L. Rev. at 1400 (quoting judicial opinions). The orders issued by courts in these cases, not surprisingly, have imposed massive costs on the agency, as well as on innocent claimants whose cases must wait while the agency responds to remedial judicial decrees caused by its own wrongful conduct.
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As stated by the Conference Committee that considered the nonacquiescence issue in 1984: ''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., 38, reprinted in U.S. Code Cong. & Admin. News 3080, 3095.
2. Reconsideration
The second defense of intracircuit nonacquiescence rests on the idea that prohibiting the practice would unduly restrict an agency's ability to secure reconsideration of circuit court precedents the agency views as incorrect. Stop and think about what this argument really means. It means that an agency can ignore a circuit court precedent altogether to make sure that the agency is in a position to test the continued efficacy of that precedent. In other words, the agency's claimed ability to test a precedent keeps the precedent from operating as a precedent at all.
The reality is that, if an agency disagrees with a local circuit court's precedent, it has ample means at its disposal to secure a reconsideration of that precedent without resorting to wholesale intracircuit nonacquiescence. The agency promptly can seek en banc or Supreme Court review of the decision it opposes. It can continue to argue the point of law in other circuits and, if necessary, then take the issue to the United States Supreme Court. It can—as forcefully suggested by the 1984 Conference Committee—''seek a legislative remedy from the Congress.'' Id.
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Within the circuit itself, the agency can attack the precedent it disfavors in the context of later judicial review proceedings brought by persons whose cases involve application of the disputed rule. Alternatively, the agency itself can initiate a request for reconsideration of the pre-existing precedent by way of a declaratory judgment action brought for that specific purpose. See Judicial Review of Agency Action: HHS Policy of Nonacquiescence, Oversight Hearings Before the Subcomm. on Admin. Law & Governmental Relations of the House Comm. on the Judiciary, 99th Cong., 1st Sess. 129, 131 (1985) (statement of Professor Brilmayer).
For all of these reasons—and another reason I will touch on shortly—the need-for-reconsideration argument for wholesale intracircuit nonacquiescence reflects an unmistakable overreach. In fact, a variety of ''less restrictive alternatives'' permit the retesting of a supervisory circuit court's precedent without the need for a generalized agency disregard of circuit court law.
3. Expertise
The final argument for intracircuit nonacquiescence is the weakest of all. The argument is that federal agencies have expertise in administering federal statutes, so that—given a conflict in the interpretation of federal law between an agency and a supervisory circuit court—the interpretation of the agency should prevail. The difficulty with this argument is that the federal court is bound, under the so-called Chevron principle (see Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)), to defer to the agency's expertise when it initially establishes the precedent that the agency wishes to ignore. In other words, the agency (quite properly) wants the court to respond to the agency's expertise by deferring to its interpretation of the governing statute when the issue first comes before the court. Then, however, after the court does defer but still rejects the agency's interpretation, the agency (quite improperly) wants the court to defer again by letting it violate the now-settled law of the circuit. There is no good reason to give the agency two separate bites at the expertise apple in this way. Rather, the principle that federal courts must act with caution before displacing the agency's own preferred interpretation of federal statutes strengthens the argument that—in those unusual cases when a circuit court does override an agency rule—the agency should thereafter respect and abide by the circuit court's pronouncement.
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C. THE PROPOSED BILL
The foregoing discussion reveals powerful reasons to enact the basic prohibition of intracircuit nonacquiescence set forth in section 707(a) of the proposed bill. There also is, however, an ''exceptions'' section in the bill that, in my view, merits some further consideration and revision. I have two points to make about what is now in the exceptions section, one small point concerning section 707(b)(1) and one large point concerning section 707(b)(3). I also have a comment on one significant subject that the bill, as I read it, fails to address.
1. Section 707(b)(1)
Section 707(b)(1) does not concern intracircuit nonacquiescence, but instead so-called ''nonacquiescence in the face of venue choice.'' 75 Minn. L. Rev. at 1347–48. According to some observers, for example, the National Labor Relations Board often acts without knowing which particular circuit court will review its action because an expansive venue statute permits appeal to a variety of courts. The idea behind section 707(b)(1) is that agencies in this situation need not follow the precedent of one possible reviewing court when the case actually may be reviewed in an entirely different circuit. Although nonacquiescence in the face of venue choice has stirred some controversy, there is no reason to question the practice in this legislation, which deals with a very different subject. Thus the inclusion of this exception is understandable.
The problem is with the wording of the exception and in particular its exemption of cases in which ''it is not certain [the agency's action] will be subject to review by the court of appeals that established the precedent.'' I worry that the language as now drafted might reach even Social Security disability decisions—which everyone has always agreed involve intracircuit nonacquiescence and which, I believe, this legislation is intended to cover. The problem is that (by way of example) an agency decisionmaker in a Tennessee office dealing with a disability claim filed in Tennessee by a Tennessee resident cannot be literally certain that the agency's decision will be reviewed in the Sixth Circuit. The reason why is stated in my article:
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Even with respect to a Social Security disability claim, the SSA may not be absolutely certain as to the reviewing court because an applicant may relocate his or her home during the claims process. See 42 U.S.C. 405(g) (1988) (specifying that venue in SSA judicial-review action lies in the district where ''the plaintiff resides''). Nonetheless, the probability that the local circuit will review the local decision maker's action is so high that all agree that a failure to follow that circuit court's precedents constitutes intracircuit nonacquiescence.
75 Minn. L. Rev. at 1350 n.34 (emphasis in original)
I believe the bill would profit from a clarification—perhaps by way of insertion of the word ''substantially'' or ''essentially'' or ''apparently'' before the word ''certain''—to clear up this possible ambiguity. In any event, the subcommittee should make it clear in some way that the (b)(1) exception does not cover Social Security disability claims.
2. Section 707(b)(3)
My second and far more significant comment on section 707(b) concerns subparagraph (3). That subparagraph provides:
(b) An agency is not precluded under subsection (a) from taking a position, either in administration or litigation, that is at variance with precedent established by a United States court of appeals if——
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* * * * *
(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.
The problem with this exception is that it is far too broad. Lawyers often will be able to construct a ''reasonable'' argument that some later legal development casts doubt on an earlier precedent. That is what lawyers are trained and paid to do. Moreover, government lawyers charged with making such arguments will have a wealth of material to work with. They can rely on anything, including changes in the agency's own regulations ''or any other subsequent change in public policy or circumstances on which the precedent was based.'' This loophole, in my view, may well turn out to be big enough to drive a truck through.
Particularly troubling is the spectre that agencies will seek to evade the duty to honor precedent by promulgating revised versions of their own rules that change in words, but not in substance, agency directives previously found invalid in an unwelcome circuit court decision. In fact, according to the Fourth Circuit, this is exactly what the agency tried to do after it initially lost in the Hyatt case. See Hyatt v. Sullivan, 899 F.2d 329, 333–35 (4th Cir. 1990). The Fourth Circuit wisely rejected this agency effort to elevate form over substance. But I believe the 707(b)(3) exception invites agencies to engage in just this type of strategy. In fact, I believe that—contrary to the overarching intent of the proposed bill—the b(3) exception in practice could all but swallow the section 707(a) rule.
There is another reason not to include this sort of open-ended changed-circumstances provision in the statute: a much more evasion-proof exception could be created that meets the concerns that underlie the exception now set forth in (b)(3). In particular, the statute could permit targeted ''test-case'' nonacquiescence, when truly necessary to clarify the current status of circuit law, without authorizing the sort of wholesale nonacquiescence that the present version of section 707(b)(3) would permit. See 75 Minn. L. Rev. at 1429–31. Such an approach would put the basic authority for abandoning a circuit court precedent not with the agency, but with the court itself, which is where that authority belongs. I have attached to this statement a possible substitute provision for section 707(b)(3) that depicts the sort of test-case exception I have in mind. I note that this suggested approach is neither novel nor exotic; in fact, it tracks the approach recommended in 1990 by the blue-ribbon Federal Courts Study Committee. See Report of the Federal Courts Study Committee 59–60 (Apr. 2, 1990).
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3. Nonacquiescence Pending Supreme Court Review
There is a final issue concerning the proper scope of the duty to honor intracircuit precedent that the proposed legislation does not seem to address. The question is whether an agency must acquiesce in a circuit court ruling while a certiorari petition may still be filed or is pending in that very case. There is disagreement on this issue, and reasonable arguments can be made both ways. My personal view is that such nonacquiescence should be barred unless the agency secures specific interim relief, authorizing continued adherence to the invalidated agency rule, from the circuit court panel or the Supreme Court pending final disposition of the case. See 75 Minn. L. Rev. at 1442–44. Whatever way this issue is resolved, however, it would seem advisable to address it specifically in federal legislation that treats the subject of intracircuit nonacquiescence.
D. CONCLUSION
The case against intracircuit nonacquiescence is supported by two simple propositions. First, the practice does great harm. Second, the practice lacks a persuasive justification. If these propositions are correct—and I strongly believe they are—the case against intracircuit nonacquiescence is compelling. In these circumstances, Congress should outlaw the practice and do so in the strictest terms.
———
ATTACHMENT I.—PROPOSED ALTERNATIVE TO H.R. 1544 Section 707(b)(3)
(b) An agency is not precluded under subsection (a) from taking a position that is at variance with precedent established by a United States court of appeals if——
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* * * * *
(3) each of the following conditions is met:
(i) that position is taken in litigation;
(ii) upon securing approval to take that position by the Solicitor General of the United States;
(iii) whose decision shall be based on genuinely exceptional circumstances that cast serious doubt on the continuing validity of the precedent, as a result(see footnote 12) of (A) a change in the particular language of the statute or regulation that was relied on in the precedent to reject the agency's position; (B) a subsequent ruling by the court of appeals or by the United States Supreme Court; or (C) subsequent rulings in multiple other courts of appeals that directly reject the precedent;
(iv) provided that such nonacquiescence shall be limited to only one case,(see footnote 13) so that the agency shall continue to follow the precedent in, and process without delay, all other claims and cases; and
(v) provided further that, if the matter concerns a benefits award to which the claimant would be entitled if the precedent were followed, interim benefits shall be afforded the claimant pending final disposition of all judicial appeals.
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Mr. GEKAS. The time of the witness has expired. We turn to Mr. Allsup.
STATEMENT OF JAMES F. ALLSUP, PRESIDENT, ALLSUP, INC., BELLEVILLE, IL
Mr. ALLSUP. Thank you, Mr. Chairman. First of all, I'd like to comment that I offer these remarks as a Social Security disability practitioner from the standpoint of I, myself, and a number of my employees, are former employees of the Social Security Administration and its Disability Determination Services, which are States that the agency contracts with to make medical determinations for the agency in disability claims. Since we left the agency and its Disability Determination Services counterparts, we have provided services representing disabled individuals in all 50 States in their disability claims. We have provided the service since 1984 and have assisted individuals in obtaining—roughly about 25,000 people—in obtaining their entitled disability benefits in all 50 States. So I make my comments as a former Social Security employee as well as a nonattorney representative of individuals in their disability claims.
I want to indicate that I strongly support H.R. 1544 on behalf of the thousands of people throughout this country that we have provided services to in assisting them with obtaining their entitled benefits. I strongly support section 1 as regards intracircuit nonacquiescence, but would also strongly recommend that some measure be inserted into this legislation that would hold the policymakers personally accountable for their actions. And the reason I say that is, for 20 years I have witnessed the devastation and destitution their policy inflicts upon disabled Americans. I witnessed it as an employee of the Social Security Administration, and I have witnessed it as a private practitioner in the services that we provide throughout the entire country. So, I strongly recommend that the policymakers who are responsible for these policies are, ultimately, personally accountable for the policies they create and apply.
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I want to also indicate that in the Social Security Administration itself, its very culture, its very practice, its philosophy is one of nonacquiescence. Acquiescing is not in their culture. An acquiescence ruling is only issued in a situation where the agency agrees with the position that the court is taking. In a situation where they agree with the position of the court, they provide an acquiescence ruling, and there's only been relatively few disability related rulings over the last 12 years, since 1985.
The Hutchison case that was referred to by Mr. Fried—I want to point out that the Hutchison case in the eighth circuit only came about as a result of the agency not issuing an acquiescence ruling following the Tyrrell case; that was also mentioned by Mr. Fried. So, the Hutchison case came about because the agency did not issue an acquiescence ruling following Tyrrell, and in the Hutchison case it was indicated by the court that ''The Tyrrell case was not applicable to Donald Hutchison because the Social Security Commissioner had not issued an acquiescence ruling.''
In my opinion, the nonacquiescence on the part of the agency has worsened since 1985, when there was a hearing by this subcommittee as regards agency nonacquiescence and disability. This nonacquiescence is applied through the agency's programs operation manual system; it is a manual system applying the agency's policy in disability decisionmaking.
I want to point out two areas where the policy is applied as vivid examples of nonacquiescence—two areas, being the treatment of an individual's pain, and how that pain affects the individual's ability to function and engage in work activity, as well as the opinion of the treating physician as to the individual's residual functional capacity. All 12 circuits have ruled in a minimum of 69 times that pain must be considered by the agency in determining an individual's ability to function and engage in work activity. We've also identified a minimum of 57 decisions rendered by all 12 circuits that the opinion of the treating physician must be given considerable or controlling weight in determining an individual's ability to function or engage in work activity.
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But, despite these rulings, the agency continues to apply a policy where pain is not considered. In fact, the only deference at all to these rulings is a boilerplate statement contained in a file that, ''Pain was considered in this residual functional capacity,'' with no elaboration on the part of the disability State agency treating physician, or disability State agency physician, as to the effect this pain has on the individual's ability to function or engage in work activity. Finally, they do not even request the opinion of the treating physician, let alone consider the treating physician's opinion as regards the individual's ability to function in work activity.
We have class actions that have come about as a result of the agency's nonacquiescence, roughly a half a million cases that were referred to by Judge Anderson. Also, we believe the situation is——
Mr. NADLER. Half a million did you say?
Mr. ALLSUP. Yes, a total of four class action cases which I have the names here, if you would like.
Mr. NADLER. The names of each individual——
Mr. ALLSUP. No, no, no, no; the names of the class actions themselves. I have those right here, and I have the dates of at least three of the four that came about.
Mr. GEKAS. If they are in printed form, we'll accept them for the record, unless they're already part of your written statement.
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Mr. ALLSUP. Let's see, in the written statement I think I allude to them; I don't——
Mr. GEKAS. You mention them, but I don't know if you——
Mr. ALLSUP. I do have them; I can provide them to the subcommittee.
[The information follows:]
INSERT OFFSET RING FOLIOS 16 TO 17 HERE
Mr. ALLSUP. The last thing I wanted to mention was that we feel that the situation is worsening due to the ruling that was issued in 1996 by the agency that goes on to basically quote in this particular ruling—let me find it here. No. 2: ''SSA decisionmakers 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.''
Also, a recent memorandum in January 1997 that I provided to the New York Times quotes, ''An administrative law judge is bound to follow agency policy even if in the agency's—the ALJ's opinion—the policy is contrary to law.'' And I would, in addition to that, I would recommend that the subcommittee would request of the agency a memorandum that we've learned that came about in February 1997 entitled, ''Report of the Reorganization of the Hearings and Appeals Function Work Group to the Commissioner of Social Security.''
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And, finally, as far as the situation deteriorating as regards nonacquiescence, the agency has announced that they intend to manage the ALJ's decisionmaking more closely in the area of quality reviews where they will regulate the review of allowance decisions rendered by the administrative law judges, largely because of the high reversal rates by administrative law judges. As recently as fiscal year 1995, there was a 62-percent reversal rate. Also, they intend to regulate the weight that the administrative law judge gives to the opinion of the State agency physician, because the administrative law judge routinely throws out the opinion of the State agency physician because it is groundless.
As I mentioned earlier, the agency does not seek the opinion of the treating physician as regards the individual's ability to function and engage in work activity because they don't want it. As a result, they either rely on a third party medical—third-party physician who examines the individual on one occasion and/or the opinion of the physician of the State agency who has never treated the individual either. It's simply an issue of file documentation.
And, in closing, thank you for the opportunity to come here.
[The prepared statement of Mr. Allsup follows:]
PREPARED STATEMENT OF JAMES F. ALLSUP, PRESIDENT, ALLSUP, INC.
Mr. Chairman and members of the Subcommittee, thank you for the opportunity to comment on the proposed legislation, H.R. 1544, the Federal Agency Compliance Act, that is of such critical importance to the American public. My name is Jim Allsup and I am founder and president of Allsup Incorporated, an organization that represents disabled employees in their Social Security disability and Medicare claims. Since starting a private disability representational service in 1984, we have helped nearly 25,000 individuals from 50 states obtain their entitled benefits. On their behalf, I strongly support H.R. 1544.
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I provide a unique perspective when addressing the issue of federal agency nonacquiescence, in that my employees and I have processed disability claims both inside and outside of the Social Security Administration. Together we have more than 500 years of experience as employees of SSA and its state disability determination services, and also as private non-attorney representatives of individuals.
Publicly, Social Security policymakers routinely allege that the agency practices a policy of acquiescence. On April 24, for example, Deputy Commissioner for Programs and Policy Carolyn W. Colvin made the following statement in her written testimony to the House Ways and Means Social Security Subcommittee: ''Under SSA's acquiescence policy, a ruling is issued in all cases where the final circuit court decision conflicts with SSA policy and SSA decides not to appeal the decision to the Supreme Court.'' She went on to write, ''SSA recently published a ruling re-emphasizing our acquiescence policy, and one of the initiatives in Process Unification is to streamline the process for issuing these rulings.''
When hearing these statements, one is led to believe that the agency actively complies with the precedents set by the Federal courts and practices a policy of acquiescence. But in reality, the agency does exactly the opposite. Let us take a look at Social Security agency policy as it is practiced policy in its disability decision-making that includes the practice of nonacquiescence contained in agency policy, rather than acquiescence to the law.
DISABILITY DETERMINATION SERVICES (DDS) DECISION-MAKING
In its disability decision-making process, SSA typically contracts with state agencies to make the medical determination for them in determining whether an individual will qualify for benefits. These state agencies are referred to as ''Disability Determination Services,'' or DDS. They utilize SSA's ''Program Operations Manual System'' or POMS, in arriving at their medical determination. The POMS consists of multiple manuals that contain the SSA claim procedures, incorporating agency policy, that DDS must utilize in developing the medical file and subsequently making the medical determination.
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The following examples illustrate how the POMS directs the DDS personnel in the file development and decision-making process a practice of nonacquiescence.
Example 1—Nonacquiescence of Pain Consideration
All 12 circuit courts of appeal have ruled, in a cumulative total of at least 69 decisions, that pain must be considered when determining an individual's residual functional capacity (RFC). However, the agency ignores these rulings in practice. In most pain related disability claims SSA processes at the initial level, the agency's consideration of pain is merely the typed statement, ''Pain was considered in this RFC.'' This statement is inserted in the decision and stands alone with absolutely no elaboration from the DDS physician as to what effect this pain has on the individual's ability to function or engage in work activity.
EXAMPLE 2—NONACQUIESCENCE OF TREATING PHYSICIAN CONSIDERATION
All 12 circuit courts of appeal have ruled, in a cumulative total of at least 57 decisions, that the opinion of a treating physician must be given considerable or controlling weight when determining an individual's RFC, if it is well supported by medically acceptable clinical and laboratory diagnostic techniques, and is not inconsistent with the other substantial evidence of record. However, the agency also ignores these rulings in practice by rarely even requesting the opinion of a treating physician about an individual's RFC. In the small percentage of claims that this opinion is requested, it is given very little weight. Instead, agency policy frequently relies on a one-time, third party medical examination and the opinion of a physician who has never even treated the individual. It then caps off the disability decision-making process with the DDS physician, who has never met or treated and observed the individual, virtually guessing as to the individual's RFC. The claimant never has an opportunity to cross examine or confront this DDS physician at hearings subsequently conducted by agency Administrative Law Judges (ALJs). Administrative Law Judges routinely throw out the DDS physician's testimony because of the inability of the claimant to challenge it.
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Example 3—Vocational Consideration
The agency's own regulations require that consideration must be given to the likelihood of an individual being able to perform other work activity based on his or her diagnosis, limitations, age, education and past work experience. However, by routinely declaring an individual capable of ''medium'' or above work activity, via the DDS physician guesswork previously described, the agency uses its Vocational Rules to deny rather than award virtually all claimants under the age of 60. Thus, vocational consideration that many times would result in the award of claims is avoided in a similar manner as the pain and treating physician considerations discussed in Examples 1 and 2.
Example 4—Claims Processing Time and Quality Review
In addition to avoiding proper documentation, SSA ensures that nonacquiescence is practiced and claims denied through agency emphasis on claims processing time and selective quality review. A disability claim examiner's job performance in the DDS is primarily evaluated by his or her claim processing time. The shorter the time, the better the evaluation the longer the time, the worse the evaluation. There is a disincentive to take the necessary time to fully document the claim file, even if the claim examiner was inclined to do so. Furthermore, quality review of disability claims is almost entirely skewed to the review of allowances rather than disallowances. At times, nearly 100 percent of all allowances are subject to quality review, versus only about 10 percent of disallowances. In essence, claims examiners have an incentive to escape quality reviews by denying claims. Therefore, changing the incentives for claims examiners would improve medical documentation of cases.
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PROCESS UNIFICATION
In addition to ensuring that agency policy and nonacquiescence is adhered to by DDS personnel via the POMS, SSA has now decided that its Administrative Law Judges (ALJs) must also adhere to agency policy as part of the agency's new ''Process Unification'' initiative. In an effort to contain spiraling costs in response to intense Congressional and GAO pressure, the agency has decided to further manipulate the law (beyond its already unjustifiable practices) instead of initiating long overdue, necessary and radical administration reform. This new effort is called Process Unification. The intent of Process Unification is to streamline claim decision-making, shorten the time it takes to make the initial decision, and ensure that decision is rarely overturned on appeal. This is due to a massive claim backlog, and long processing times and high reversal rates by administrative law judges. In fiscal year 1995, 69 percent of all initial disability claims were denied. Of those claims that were appealed to administrative law judges, 62 percent were reversed. A key focus in Process Unification is to develop a ''one book'' policy that would bind all disability decision-makers, including the agency's administrative law judges.
A few examples of Process Unification include:
A July 1996 ruling issued by the agency clarifying its long-standing ''acquiescence policy.'' This ruling is binding on all components of the agency (including administrative law judges.)
A January 1997 Office of the General Counsel memorandum stating, in part, that ''An administrative law judge is bound to follow agency policy even if in the administrative law judge's opinion, the policy is contrary to law.''
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The agency's plans to regulate when the ''less-than-sedentary'' RFC assessment can be utilized. This finding is most often applied by administrative law judges and usually applies to nearly totally incapacitated individuals who are not capable of even the lightest forms of work activity. (The agency recently emphasized that it expects this designation to be rarely used in the future.)
The agency's plans to regulate the review of administrative law judges' allowance decisions. Quality assurance reviews by the Appeals Council are becoming more frequent of favorable ALJ decision for claimants which reverse DDS denial decisions. This is similar to the selective quality review of DDS claim examiner allowances previously mentioned.
The agency's plan to regulate the weight given to its DDS physician's opinion by the administrative law judge. Administrative law judges routinely dismiss this opinion because of its lack of substance.
SSA NONACQUIESCENCE IMPACT
What is the impact of this routine practice of nonacquiescence on the part of the Social Security Administration contained in SSA policy? Consider the following:
Readjudication Costs Via Adverse Class Action Litigation
SSA's latest quarterly report indicates it still has a total of nearly half a million claims to readjudicate due to nonacquiescence class action litigation. What does this waste cost the taxpayer? Should Congress demand an answer?
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Harm to the Disabled Individual
Legitimately entitled disabled individuals are denied or delayed critical income replacement in the form of monthly Social Security benefits, and health insurance in the form of Medicare coverage and extended COBRA benefits. This denial of financial security amid a life altering, catastrophic event often results in the total or near destitution of the individual and his or her family. Financial ruin and the loss of homes, automobiles and families are not uncommon. And this is often the outcome for the lucky ones; those who do not die waiting for their claims to be awarded.
Breach of Contract with the American Worker
Social Security Disability Insurance (SSDI) is funded by a payroll tax assessed to both the individual employee and his or her employer. Each dollar in FICA taxes is allocated among several different Social Security coverages, one being disability insurance coverage. The working individual is led to believe that in the event of disability, the Social Security Administration will live up to is agreement to pay a disability claim, if warranted, in exchange for the ''insurance premiums'' the individual paid in the form of FICA taxes. This agreement is broken each and every time Social Security agency policy unfairly denies or delays a disability claim.
Loss of Employee Benefit Incentives to the Employer
Because the employer pays half of the FICA tax, any employer-provided disability and health insurance is designed to integrate with Social Security and Medicare benefits. This integration calls for a dollar-for-dollar reduction in employer-paid disability benefits in exchange for each dollar received in Social Security benefits. It also calls for Medicare to pay primary to any employer-provided health insurance that is afforded the individual upon a disability. Each unfairly denied Social Security disability claim often results in the employer paying the entire disability and health tab, thereby removing a primary incentive to provide its own disability and health coverage.
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In 1994, Congress authorized a $500 billion reallocation of the FICA tax dollar from the Social Security Retirement and Survivors trust funds to the Disability Insurance trust fund over the next 16 years. This reallocation is primarily due to rising claim loads and the failure of the Social Security Administration to modernize its administration practices.
Necessary new practices include giving claimants immediate, early access to rehabilitation services that would enhance the likelihood of return to work.
Currently, only 1 of every 1,000 recipients returns to work. This is totally unacceptable. Surely when the public becomes aware of this massive reallocation of the FICA tax dollar out of the retirement program, and the reasons for it, there will be a tremendous outcry.
The agency, responding to the pressures of this essentially insolvent disability insurance program, has consciously chosen to contain costs by further eroding the rule of the law in lieu of employing radical administration reform.
H.R. 1544, The Federal Agency Compliance Act, will go a long way to force this agency to respect and abide by the rule of law. The American public deserves no less.
INSERT OFFSET RING FOLIOS 18 TO 22 HERE
Mr. GEKAS. Yes, we'll ask you, of course, to stay to receive questions from the members of the subcommittee.
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Mr. Ferrara.
STATEMENT OF PETER J. FERRARA, GENERAL COUNSEL AND CHIEF ECONOMIST, AMERICANS FOR TAX REFORM
Mr. FERRARA. Thank you, Mr. Chairman. My name is Peter Ferrara. I'm general counsel and chief economist for Americans for Tax Reform, the Nation's largest grassroots taxpayer group, and we're here today to say that we strongly support your proposed legislation, H.R. 1544. If anything, I think we'd go even farther than you have. I want to say, also, I support the comments that have been made by the other panelists here. This is one of the few times where I have had an opportunity to speak where I feel that they have basically covered the waterfront and done a good—very good—job, and I just want to add or emphasize three points.
First of all, we agree that there is no justification for intracircuit nonacquiescence; that that's just bureaucratic abuse and lawlessness.
Second, however—this is a point that has not been addressed before—we think that this means that the IRS should have to follow the rulings of the tax court; that we don't think that they should have the authority for nonacquiescence to tax court decisions. If they're going to have that authority, then let's just get rid of the tax court. If they don't have to follow them, what's the point? So, we think that maybe that should be emphasized as part of the legislation.
And, third, what I want to emphasize, I think the ''three strikes and you're out'' rule for circuit court decisions is a very good one, and I want to stress strong support for that. We heard this morning, ''Well, sometimes we can't appeal the case of the Supreme Court, and so the three strikes and you're out rule is too burdensome.'' Well, that's why you get three strikes; we don't just throw you out in the first strike; maybe one of the cases you couldn't appeal, but maybe one of the other ones you could have, and in any event, we've had three circuit courts look at this, and they've all come out the same way, and that doesn't mean you have no place to go. You can appeal to Congress if these courts have got the statute wrong; you can go back to Congress, and Congress can fix it. So, we think that this is a good rule, and I haven't heard anything this morning to the contrary.
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And can you believe what we heard this morning from the Social Security Administration? ''Even cases that we're going to follow, we don't pay any attention to for a year, because—until we figure out what we're going to do with them.'' I mean, my gosh, the whole country's online now. Every lawyer in the country knows every case that was decided yesterday on his computer. These people say they don't pay any attention to it for a year. I hope, Mr. Nadler, that you adopt your suggested amendment.
Mr. NADLER. Which one?
Mr. FERRARA. The one you were making in response to the General Counsel for the Social Security Administration. You were saying maybe you should add an amendment where they said the ALJ's are not allowed to consider rulings until there's some kind of order of acquiescence which takes them a year. I think—let me suggest what the amendment might say. It should say the ALJ shall consider all relevant decisions regardless of whether there's an agency order of acquiescence in force. If the lawyer stands up tomorrow and says, ''You know, yesterday there was a decision, and it's relevant to this case,'' what they're saying is the ALJ says, ''Well, we're not going to think—we're going to ignore that for a year, even if we decide it's a valid decision, and it applies, because we've got to wait until the bureaucrats read it, and the bureaucrats write an order of acquiescence,'' and that's just complete nonsense.
The ALJ's can read decisions; some of them may come out differently, but the judges all come out differently. That's why we have appeals, as you suggested. Now I think we need—an amendment ought to be added to this legislation to correct that abuse.
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Finally, let me say, in terms of holding people personally accountable, which I agree with, and an enforcement mechanism—there is an enforcement mechanism that's been available; it's called impeachment. You have the authority to impeach—I'm not talking about the President—but officials who have been confirmed by the Senate and have line authority over these people. I think that legislative history should say that people who are not going to comply with the requirements of this legislation, that Congress will consider removing them from office; if they're going to engage in lawlessness and bureaucratic abuse, that they should be removed from office.
Thank you very much.
[The prepared statement of Mr. Ferrara follows:]
PREPARED STATEMENT OF PETER J. FERRARA, GENERAL COUNSEL AND CHIEF ECONOMIST, AMERICANS FOR TAX REFORM
Chairman Gekas, Members of the Subcommittee, ladies and gentlemen, thank you for inviting me to testify this morning on this important legislation.
Americans for Tax Reform, the nation's largest grassroots taxpayer activist group, supports H.R. 1544 as a quite reasonable and modest step in controlling run away Federal bureaucrats.
Everyone in this nation is governed by the rule of law. Federal bureaucrats refusing to follow court decisions is an abuse of their authority and of the general public. While we recognize that legal battles can be lost and won before a legal question is settled as a matter of law, after a certain point refusal to comply amounts to lawlessness and authoritarianism. We think the practice of many federal bureaucrats falls into this category. Congress must legislatively subject these bureaucrats to the authority of the nation's courts and the rule of law through a clear set of rules.
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We would strongly recommend the following:
1. We see no valid basis for nonacquiescence to a court ruling within the jurisdiction of that court. That means an ''unappealed federal District Court ruling and a Circuit Court ruling'' must be accepted by Federal agencies as binding within the circuit of the ruling court.
2. The principal stated above means as well that all unappealed Tax Court rulings must be accepted as binding on the Internal Revenue Service (IRS) across the entire country. The Tax Court is a judicial body established in accordance with the Constitution with expertise over tax matters. It's jurisdiction is national in scope. The IRS practice however venerable, of laughing off all Tax Court decisions whenever it feels like it cannot be justified as a matter of principle.
How can taxpayers comply with the law when the courts say one thing and the administering bureaucrats say another? How can the Congress subject the public to a taxing authority that does not have to obey the courts? If the IRS does not agree with a Tax court ruling, it can appeal it. Otherwise, it must follow it. To allow the IRS to do otherwise in my view amounts to a Constitutional crisis and a breakdown in the legitimacy of Federal law and action.
3. Federal agencies can legitimately say they will not follow one Circuit Court ruling throughout the whole country, as long as they have a reasonable argument for an alternative position. But when this loss develops into a trend of losses, then failure to comply again amounts to official lawlessness. The proposed legislation before this Committee has a very good solution on this issue with essentially a three strikes and you're out rule. Three Circuit Court losses with no victories should be taken as establishing a national rule that Federal bureaucrats must follow across the country. If an agency cannot win one out of three Circuit Court decisions and cannot get the Supreme Court to hear an appeal in any of those cases, then any nonacquiescence cannot be seen as having a sound basis at that point and would again amount to lawlessness. If an agency can get one Circuit to rule its way, creating a split in the Circuits, then it may follow nonacquiescence without a definitive court ruling on the issue until the Supreme Court rules or the Congress acts.
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Some have suggested that the proposed legislation has no way to enforce this three strikes rule. But Congress already has enforcement authority in the Constitution's impeachment powers. Congress should make clear in the legislative history that it will impeach the Presidentially appointed official with first line authority over any Federal bureaucrat who does not follow the legislatively mandated three strikes rule.
Mr. GEKAS. We thank you.
The Chair will indulge in the first round of questioning by allotting itself 5 minutes.
Mr. Ferrara, do you believe that—and then I'll ask each member of the witness panel to consider answering in his own right—do you think that we could go a long way toward solving some of these problems if we had the ALJ's as an independent group of members of the judiciary? Meaning, that if we formed them into a corps, self-administering as it were, to whom cases were referred from the various agencies, on a nice discretional, accountable basis, wouldn't some of these worries that you expressed about the directives to the ALJ's and the waiting for a year, wouldn't they dissipate or be on the way to dissipation?
Mr. FERRARA. Well, I haven't thought that through completely. It sounds like a good idea to me, but maybe I defer to some of the other panel members who have thought about it more.
Mr. GEKAS. Very good. Mr. Allsup, you want to be even stronger sanctions than the legislation now contains; you want to see, according to your testimony, penalties or sanctions against the policymakers or the decisionmakers who nonacquiesce. Are you talking about the State examiners, the State physicians, et cetera?
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Mr. ALLSUP. First of all, Mr. Chairman, in response to the question about the ALJ's, I would indicate that it is my opinion that the ALJ's should be independent of agency management; that it is this direct line authority over the ALJ's that leads to the abuse that we're seeing today.
As regards the——
Mr. GEKAS. Excuse me, on that, on that point, it's been my thought over the years that I've been observing this that the ALJ's are put under tremendous pressures in various degrees, not only that they are subservient to the agency's decision, but they also have to agonize over every decision that comes to them, because of the upward pressures or pressures downward from the top.
Mr. ALLSUP. Exactly; it's a catch-22 situation, and it's a very terrible situation, and the agency now is exerting additional influence upon them because they want the judges now to follow the policy; simple as that.
Mr. GEKAS. Now, on the question of the sanctions——
Mr. ALLSUP. As regards—yes, I feel very strongly that the—I've seen this for 20 years, when I was an employee of the agency as well as a practitioner since I left—that unless these policymakers incur direct penalty and are responsible for their actions, this behavior will continue. I think we saw it this morning with the general counsel from Social Security—his response to, ''How would the agency respond to H.R. 1544 if enacted?'' There's got to be a measure of personal accountability, and unless there's some form of penalty, strong penalty, I think we're going to see this behavior continue. Promises aren't going to cut it. They'll promise and promise and promise; I've seen it for 20 years. They say one thing; they do another. That is their practice; that is their culture.
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Mr. GEKAS. The Chair defers in all of these questions to the Judicial Conference who believes that the loud noise being made should be curtailed.
The Judicial Conference is satisfied with the tenor of our bill, and I believe that includes its extended ability under our language to invoke the sanctions that are available to them under the Rules of Civil Procedure, and so I have a difficult time skipping over that or extending that concern to what you are suggesting. But I want you to know that that will come up in our committee deliberations; I promise you that.
Mr. ALLSUP. I think it's important.
Mr. PICKERING. The American Bar Association is strongly on record as favoring an independent corps of ALJ's; that is our policy for the very reasons that have been expressed. It is inevitable, and particularly has been true in the case of Social Security administrative law judges, where the ABA adopted a special resolution awarding recognition to the ALJ's for standing firm against the administration which tried to knock everybody off the disability rolls.
On the matter of sanctions, in my prepared statement at page 3, there is a quote from proposed legislation approved by the ABA house of delegates which would call for a ''mandamus review of unnecessary litigation, and if granted, imposition of $50,000 in liquidated damages as well as court costs and attorneys' fees.''
It's very difficult—the courts are burdened enough; they don't really like to get into these disciplinary actions. Often you would like to bring a rule 11 sanction against—in a case where you think opposing counsel had been outrageous, but the courts don't like those cases, and so on, which is why I think Judge Anderson quite rightly said, ''Let's see how this works initially.'' We certainly would not be opposed to some kind of sanctions, but it may be wise to just take the first step and see what happens.
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Mr. GEKAS. The Chair's time has expired; we will get back to Professor Coenen, I hope, on this question. Does the gentlelady wish to——
Ms. JACKSON LEE. Yes, I will be brief.
Mr. GEKAS. I will yield to the gentlelady from Texas, and then we'll recess for the vote that's pending.
Ms. JACKSON LEE. I thank the gentleman for his kindness and the chairperson for having this hearing, particularly because I think it raises very important questions of law and policy.
Mr. Pickering, as a personal privilege, might I say that my husband, Prof. Elwin Lee in Texas, was a former associate of——
Mr. PICKERING. Was, indeed. I remember him most fondly, and I'm glad to see you; I hadn't realized—I see the ''Lee'' now. Please give him my best regards.
Ms. JACKSON LEE. Mr. Chairman, if you'd forgive us for that, and I appreciate, and both welcome you to this hearing, appreciate your comments.
Mr. GEKAS. Are you from Harrisburg, TX? [Laughter.]
Ms. JACKSON LEE. We've managed that, yes, as well. We've adopted him in Texas, and we enjoyed the relationship here in Washington.
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I think that there are important points as it relates to the Social Security Administration and the issue of disability assessment where I would agree with trying to find a solution. Let me offer to you my concerns. I think that we have to acknowledge a balance of power, separation of power, which I think the agencies argue why there is this policy of nonacquiescence.
Professor Coenen, if you would comment on a real dilemma that I have when there are issues dealing with affirmative action and civil rights, particularly the fifth circuit as it is now crafted—I would never want the Government to yield on determinations dealing with equal rights, affirmative action, which have been devastating to those of us who suffer under the fifth circuit opinions. What is your assessment when it comes to those real-life issues?
Mr. COENEN. That is an excellent question. The subject of acquiescence in other contexts—for example, do State officials have to acquiesce to a Federal circuit court ruling?—is a different question, and I would suggest a more complex question, than the one before the committee today.
By way of example, assume the situation in which someone claims there is a need of State officials to acquiesce in the so-called Hopwood case out of the fifth circuit, with which those State officials disagree. One problem, although I can't give you a definitive answer to the question, is that, of course, much in the Hopwood case is, arguably at least, dicta and it's not exactly clear what the precedent of that case is so you'd have to get through all those steps before you said, ''OK, this is the precedent of Hopwood.''
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Ms. JACKSON LEE. And that's why the Department of Justice—I would have encouraged them to continue to argue against that case wherever they could as an example of what the current state of the law is.
Mr. COENEN. But by way of example, in terms of the nonacquiescence issue, Hopwood is really a different situation than this one. For example, this legislation deals only with situations in which there is venue certainty. With respect to a court of appeals' ruling that deals with a particular State, it's possible that later challenges to the State's practice would occur not in Federal court at all, but in State court. So, there would be at least some possible argument that there's venue uncertainty in that situation. That's not true here; it's not true with social security claims. Social Security disability claims cannot be appealed to the State courts; we know where they're going.
In addition, it's important to note that this legislation concerns a situation in which the Federal Government itself has already had a chance to litigate a legal question, and has lost. In a case like Hopwood, to be sure, the judgment of the court of appeals binds the University of Texas, but the University of Mississippi was not a party to that lawsuit; it didn't have a chance to defend whatever position it might take on issues of affirmative action and in admissions. So, when we're talking about the two different things, I think it's very important to recognize these differences.
Now, beyond that, I have to emphasize that I've written a lengthy article on intracircuit nonacquiescence with respect to Federal agencies. I haven't written an article on acquiescence to circuit rulings with respect to State officials; that's just a very different question, I think.
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Ms. JACKSON LEE. Well, let me thank the chairman and yield back.
Let me say to you that I—the difficulty of you being able to answer the question, I think it leaves a lot of room for question as this legislation may apply, because my question was directed to the Federal agencies that might have to intervene—EEOC, Department of Justice—around these questions, so there would be a Federal agency responsibility.
But I thank the chairman, and I look forward to further deliberations on this matter.
Mr. GEKAS. The time of the lady has expired. This subcommittee stands in recess until 1 p.m.
[Recess.]
Mr. GEKAS. The time of recess having expired, the subcommittee will come to order. We'll proceed with questioning of the panel by the gentleman from New York, Mr. Nadler, and then, if there appears time, we'll have a second round for the Chair and Mr. Nadler, but there may not be time.
The Minnesota Law Review article that you wrote, Professor Coenen, that concentrated on Social Security more than the Labor Board or IRS, et cetera. Is that correct?
Mr. COENEN. Yes, although it does treat the subject of intracircuit nonacquiescence in general, as does the bill.
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Mr. GEKAS. Yes.
Mr. Nadler.
Mr. NADLER. Thank you, Mr. Chairman. I suppose we also ought to apologize to the witnesses for coming in after one o'clock. We had two votes on the House floor which we didn't know about, not just one.
Let me observe, first of all, that in this case I have—I'm holding the Stieberger case, which was decided at the district court level in 1990 and was then in the court of appeals, and was the leading case which I think several of you cited on this question. This was a class action suit which vindicated the rights of thousands and thousands of people against the lawless policy of nonacquiescence of the Social Security Administration. I'm looking at the appearances, and the case was argued by Legal Services for the Elderly in New York, the Legal Aid Society, MFY Legal Services. Those are all legal services-funded agencies, and this was a case where we saved thousands and thousands of people from the improper and illegal activities of the Social Security Administration in not obeying the law, a case that couldn't have been brought except as a class action by legal services attorneys.
I wanted to ask, the case that you dealt with, that you've described before, that's one of the leading cases, would that have been possible without legal services' attorneys on a class action basis?
Mr. COENEN. The case I dealt with was the Hyatt case; it was a case that was handled by way of a collaborative effort between my firm, Robinson, Bradshaw & Hinson, which is basically a corporate law firm, and the local legal services office. I know there's a lot of controversy about legal services. In my personal experience, I found that collaboration extremely effective, and I think it would have been very, very difficult to obtain the results we did in Hyatt without the sort of joint effort that that case involved.
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Mr. NADLER. Thank you.
Let me ask Mr. Pickering, Mr. Coenen, and probably Mr. Allsup, in that order, the following question. You've heard the testimony here before, and you heard Mr. Fried, the general counsel for the Social Security Administration, say in a very honest and direct answer to my question that when I asked, ''If this bill as written were enacted into law, would you change your practice in any way?'', his answer was no, because as far as the Social Security Administration is concerned, they don't follow a policy of nonacquiescence, despite what you have all pointed out.
When the circuit court of appeals says that what they're doing is wrong, they can't have hundreds of different ALJ's come up with hundreds of different interpretations of the court decision. So, they have to have a binding interpretation of the court decision. The Administrator decides what the court meant. He issues the acquiescence ruling, maybe a year later, they start following it or his interpretation of it, and until then they don't follow it.
Obviously, if you pass this bill, they would take the same attitude. They would say, ''Well, we're acquiescing; it may still take us a year; we'll try to get it down.''
How do you think we should amend the bill or do you think we should amend the bill to make it work? Let me make some suggestions, and then I'd ask for your evaluations. One, should we provide for more sanctions than are available to the courts now? Two, should we perhaps say directly that when a court decision is handed down by the circuit, that the ALJ's must apply it immediately, and let the disagreements between them on how to apply it go up the normal review chain? Three, should we have the ALJ's as an independent corps and combined with the thing I said a moment ago?
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And, finally, let me ask—Judge Anderson said that he didn't think we needed more teeth in this bill, that the fact that it passed, albeit that it was really precatory in nature, that the administrative agencies and the courts together regard it so seriously that that would be sufficient. One, do you agree with him or do you think we have to put more enforcement mechanisms in the bill? And, two, as I asked, would you evaluate the ones I suggested and any others that you might come up with?
Mr. PICKERING. I'll be glad to try to answer. I think the best that could be done, Mr. Nadler, would be to have an independent corps of ALJ's. That seems to be where the real part of the problem is, that the Social Security Administration doesn't trust the ALJ's to be thinking judges on their own in interpreting, following——
Mr. NADLER. Could I ask you one question right on that point? If we wrote into the law a provision that the the ALJ's must carry forth the decision of the circuits, would that be necessary if there is an independent ALJ corps and, two, if we did that with an independent corps, might that be held in some way to say that they should disregard district court decisions?
Mr. PICKERING. Well, I'm not quite sure that I follow ''to disregard district court decisions.''
Mr. NADLER. In other words, if we said that ''You've got to follow circuit court decisions,'' might that be read to imply, ''Don't worry about district court decisions?''
Mr. PICKERING. Possibly; I think it might be a good idea to say ''follow court decisions.'' Of course, appeals from the ALJ's go initially to the Federal district courts, and the problem, I think, surfaces eventually where you get up to the court of appeals level, but, certainly, if you're going to equate them to the ALJ's, you wouldn't want it to be a partial freedom, that all of the circuit and not necessarily the district court——
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Mr. NADLER. So, we shouldn't have such a provision? Is it enough simply to give them an independent corps, and we don't then have to have a direction that you should follow——
Mr. PICKERING. Yes, I would think that is the appropriate way to go. As I have said before, I think that there are sufficient sanctions for the courts to act now, but the courts—that takes scarce judicial resources to deal with that. Our ABA policy adopted back in 1990 did have a provision about mandamus and a file—a fine, rather. So, I think it might be advisable to try to get the wake-up call—which I regard this legislation as—through and then see whether you need something more after you've had some experience.
Mr. NADLER. Thank you.
Let me ask Professor Coenen—if I'm pronouncing it right——
Mr. COENEN. Coenen.
Mr. NADLER [continuing]. Coenen, excuse me—to comment on the same set of questions. But one further question for Mr. Pickering. Passing a bill to set up an independent ALJ corps, not just for Social Security but all over, is a major legislative task. If you had to separate it out, would you think it better to say we're going to pass this bill, and include a directive to ALJ's to follow the circuit court decisions in it, and then try later to set up—or in a separate bill to set up an independent ALJ corps? Or should we put the ALJ thing in this bill, and try later to direct them?
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Mr. COENEN. With all respect, you all know more about getting bills passed then I do, but my gut reaction is that it would muddy the waters a good bit to incorporate an additional subject—that is, the subject of the degree of independence of ALJ's. Now, I defer to Mr. Pickering on the wisdom of that effort, and it may well be appropriate to legislate on that subject. I am worried that if this bill becomes one that treats a variety of administrative law topics, that it will get bogged down in the legislative process. But, again, I defer to you on that matter.
Now, with respect to the suggestion of providing in the bill, specifically, that, for example, ALJ's should be provided with circuit court decisions, it seems to me that——
Mr. NADLER. Not be provided with; bound by.
Mr. COENEN. Pardon?
Mr. NADLER. Not provided with; bound by.
Mr. COENEN. Yes.
Mr. NADLER. In other words, I presume the attorney would make them aware.
Mr. COENEN. Yes. I believe it would be useful to have that level of specificity in the bill for the reason that we heard this morning: that the Social Security Administration otherwise is not prepared to change its existing policy at all, even if the bill is passed.
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One last topic that I want to touch upon in terms of the teeth of the bill is the existing exception in subparagraph (b)(3). I have, in my written statement, suggested that it would be useful to look at the (b)(3) exception again and to objectify it and narrow it. I simply——
Mr. NADLER. You're talking about the multiple circuit or the intracircuit?
Mr. COENEN. I'm sorry, this is section 707, intracircuit nonacquiescence, section 707(b)(3). So, that's another area in which I worry that, unless the language of the bill is tightened up, the real-world practice of intracircuit nonacquiescence will continue.
Mr. NADLER. Well, certainly—let me just observe that certainly, you'd want some sort of exception on these grounds to allow the law to develop over time. Could you suggest to the committee perhaps a tightened version of language on that subject?
Mr. COENEN. I could, and, in fact, attached to my statement is a shot at a first draft of a tightened exception. I agree strongly with the concept of the exception; I don't have a problem with that. It's merely the phrasing of the exception.
Mr. NADLER. Drawn too broadly you think?
Mr. COENEN. Precisely.
Mr. NADLER. We'd appreciate—I can't speak for—I would appreciate it——
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Mr. GEKAS. I'll join in the request.
Mr. NADLER. We would appreciate then if you could take another stab suggesting tighter language, which we will certainly look at very carefully.
[The information follows:]
PROPOSED REVISION OF H.R. 1544 707 (With Explanatory Notes)
The following constitutes my proposed revision of section 707, prepared in response to the Committee's request:
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 administering, or litigating with respect to, 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. For purposes of this section, every published decision of a United States court of appeals shall give rise to precedent of that court from the time of its issuance except that the decision shall not operate as a precedent from such time as it has been expressly repudiated, or for so long as its effectiveness is stayed pending further review, by that court or by the Supreme Court of the United States. The duty of adherence to precedent imposed by this section shall extend to all stages of any administrative process, including without limitation all stages of processing any claimed entitlement to benefits under the Social Security Act.
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(b) An agency is not precluded under subsection (a) from taking a position that is at variance with precedent established by a United States court of appeals if—
''(1) because of governing venue provisions, it is not certain whether the administration of the statute, rule, regulation, program, or policy will be subject to review by the court of appeals that established that precedent or a court of appeals for another circuit, provided that—
(A) venue shall be deemed certain (i) in the circuit in which the claimant resides at the time the agency acts in any matter involving any claimed entitlement to benefits under the Social Security Act or (ii) in the appropriate circuit in any other matter that presents a comparably high level of venue certainty at the time the agency acts; and
(B) the agency may not, regardless of venue uncertainty, take a position that has been rejected by each court of appeals in which venue may lie;
''(2) the Government did not seek further review of the case in which that precedent was established, in that court of appeals or the United States Supreme Court, because neither the United States nor any agency or officer thereof was a party to the case or because the decision establishing that precedent was otherwise substantially favorable to the Government; or
''(3) the agency takes that position only after securing express approval to do so from the Solicitor General of the United States, whose approval (which shall not be judicially reviewable) must be accompanied by the Solicitor General's written certification (which shall be provided to any opposing party) that exceptional post-decision developments cast serious doubt on the continuing validity of the precedent, provided that for purposes of this subparagraph (b)(3)—
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(A) the agency may decline to adhere to the questioned precedent only in litigation, and only in one case, until the continued efficacy of the precedent is determined, so that the agency shall continue to follow the precedent in, and process without delay, all other claims and cases;
(B) if the matter concerns an award of government benefits to which a claimant would be entitled if the precedent were followed, interim benefits shall be made available to the claimant pending final disposition of all judicial appeals; and
(C) ''genuinely exceptional post-decision developments'' shall be limited to: (i) a change in the statutory or regulatory language that was relied on in the precedent to reject the agency's position; (ii) a subsequent published decision by the court of appeals or by the United States Supreme Court that is demonstrably in tension with the precedent; or (iii) subsequent rulings in multiple other courts of appeals that directly reject the precedent.
(b) Clerical Amendment—The table of sections at the beginning of chapter 7 of title 5, United States Code, is amended by adding at the end of following new item:
''707. Adherence to court of appeals precedent.''
———
EXPLANATORY NOTES
This proposed revision of Section 707 is offered in response to the Subcommittee's request. In an effort to be most helpful to the Committee, I have offered a redraft of the entire bill, which is designed to maintain both the original structure of the bill and as much of its original language as possible in light of the proposed modifications. The following points are offered by way of explanation:
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Subsection (a): The revision adds a reference to ''litigating'' in subsection (a) because it seems questionable not to refer to litigation in the general rule set forth in that subsection, but then to refer specifically (as the existing bill does) to ''litigation'' in the subsection (b) exception. (Also, the separate references to administration and litigation in subsection (a) seem particularly appropriate if, as proposed, the (b)(3) requested-reconsideration-of-precedent exception is limited to the litigation context.) The new second sentence of subsection (a) responds to the nonacquiescence-pending-certiorari issue discussed in my prepared statement and at pages 1442–44 of my Minnesota Law Review article. It also addresses in effect a major trouble spot identified at the May 22 hearing—namely, the protracted delays of the Social Security Administration in issuing so-called Acquiescence Rulings—by requiring adherence to a circuit court decision from the time of its issuance. The new third sentence of subsection (a)—in keeping with current Social Security regulations, see 20 C.F.R. 404.985—clarifies that the requirement of intracircuit non-acquiescence applies at all stages of any multi-level claims process, including decisions made by state agencies involved at the initial levels of processing Social Security disability claims. See also 75 Minn. L. Rev. at 1435.
Subsection (b)(l): New subsection (b)(l)(A) is designed to deal with the problem of potential, hypertechnical claims of a lack of absolute venue certainty (particularly in Social Security disability cases), which is discussed in my prepared statement. See also 75 Minn. L. Rev. at 1350 n.34. New subparagraph (b)(l)(B) deals with the separate problem presented when there is true venue uncertainty, but all courts in which venue might lie have rejected the agency's position. See id. at 1348 n. 26.
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Subsection (b)(3): This paragraph replicates, in modified form, the draft exception set forth as an appendix to my prepared statement. In response to a central concern expressed by the Department of Justice, the revision provides that decisions made by the Solicitor General to relitigate a point of law under the (b)(3) exception will not be subject to judicial review. One key difference between the revision and the (b)(3) exception now set forth in H.R. 1544 is that the revision calls for a limited ''test case'' approach—rather than a wholesale non-acquiescence approach—to deal with the problem of relitigating arguably derelict precedents. Notably, the existing Social Security regulations themselves endorse this narrower ''test case'' approach. See 20 C.F.R. 404.985(d). Thus the proposed bill, as now written, would actually seem to authorize more non-acquiescence than the current SSA regulations permit.
The revision also limits relitigation non-acquiescence to the litigation context because (as my prepared statement indicates) there should be sufficient opportunity to raise these sorts of issues in court even if the agency must acquiesce in circuit court law in administering its program. If, however, it is deemed advisable to authorize non-acquiescence for relitigation purposes in the administration context, it would still be advisable to do so—in keeping with the existing Social Security regulations—on only a limited ''test case'' basis.
The proposed (b)(3) exception calls for direct involvement of the Solicitor General in decisions to challenge allegedly derelict circuit court precedent and also limits ''test case'' non-acquiescence to a single case. These proposals track the proposal of the Federal Courts Study Committee, which was endorsed by former Solicitor General Lee.
Mr. NADLER. Mr. Allsup, do you——
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Mr. ALLSUP. As I indicated before, I think it's imperative that the administrative law judges be independent of management; that it's an absolute must as regards timeliness and an administrative law judge applying a ruling, Federal court ruling. The thing to keep in mind here is that we have these people out there around the country who, as I mentioned before, many of these people are destitute, and whatever measure is applied has to keep in mind these individuals' plight. I mean, you have people who routinely lose their home; they lose their automobiles; they lose their families.
Mr. NADLER. And then they get a compliance ruling later.
Mr. ALLSUP. Exactly, and there is no consideration by the policymakers; they never see these people face to face; they never come in contact.
Mr. NADLER. Mr. Chairman, I have one final question if that's OK? One further question for any of you—you may be able to answer it now; if not, maybe later. Can any of you give us one or more examples of an acquiescence ruling that is not in conformity with the circuit court rulings they purport to implement? In other words, where the question isn't just that they delayed, but the ruling of the agency, the acquiescence ruling, saying this is what the new law is; it's wrong, you know, because the agency's advancing its own agenda?
Mr. PICKERING. I can't give you an example now, but we certainly will try to see if there are some.
[The information follows:]
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American Bar Association,
Senior Lawyers Division,
Chicago, IL, June 2, 1997.
Hon. GEORGE W. GEKAS,
Chair, Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
U.S. House of Representatives,
Washington, DC
DEAR MR. CHAIRMAN: I would like to express once again my appreciation for the opportunity to testify at the May 22, 1997 hearing on issues of Federal agency non-acquiescence.
During the hearing, our panel was asked whether we are aware of situations in which the Social Security Administration issues an acquiescence ruling, but refuses to follow that ruling in future claims. We have consulted with several ABA members familiar with Society Security practice, and to our knowledge, this particular practice does not appear to be a problem. We caution, however, that the fact that the practice does not appear to be an issue in reported decisions, does not mean that it does not exist. The agency might fail to follow an acquiescence ruling by deciding affirmatively that a particular issue is distinguishable form that which was addressed in a previous ruling, or by misapplying the standard set forth in the previous ruling. These actions, as well as those of intentional noncompliance, are likely to fall within the ''invisible statistics'' to which Judge Anderson referred—agency decisions that claimants do not appeal beyond the administrative level, and thus, that do not receive Federal court review.
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In our opinion, H.R. 1544, the ''Federal Agency Compliance Act'', will address the Subcommittee's concerns on this particular issue by eliminating the need for acquiescence rulings, and requiring the Social Security Administration either to follow legal precedents set by the Federal circuit courts of appeal, or to challenge those decisions through the judicial process.
Sincerely,
JOHN H. PICKERING,
Chair.
Mr. ALLSUP. I don't have one. The one I mentioned earlier was as the Hutchison case itself came about, because of the agency's refusal to issue an acquiescence ruling as a result of the Tyrrell case.
Mr. NADLER. Well, what I'm looking at is the refusal to issue or the delay in issuing is one thing, but do we also have a problem of the agency issuing acquiescence rulings that are not in fact acquiescence rulings? If you have examples, please supply the committee.
Mr. GEKAS. Yes, we would need a list of such cases; that would help our cause.
Mr. ALLSUP. I can certainly search.
Mr. NADLER. Thank you. We'd appreciate that.
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Mr. Chairman.
Mr. GEKAS. Yes.
Mr. NADLER. I know that, with all the votes, some Members were unable to ask questions. I ask unanimous consent that all Members have 7 days to submit written questions to the witnesses for the record.
Mr. GEKAS. Without objection.
Mr. NADLER. Thank you, Mr. Chairman.
Mr. GEKAS. We really thank this panel, and as always, Mr. Allsup has given us pertinent solid information. Professor Coenen, your law review article in conjunction with your current testimony is very valuable, and, Mr. Pickering, we can't thank you enough for speaking for the Bar Association, and I take it your own personal views as well, because this is an array of support which looks very favorable for this legislation. Thanks very much. We'll talk again someday.
The subcommittee is adjourned.
[Whereupon, at 1:33 p.m., the subcommittee adjourned.]
A P P E N D I X
Material Submitted for the Hearing
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PREPARED STATEMENT OF HON. SHEILA JACKSON LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. Chairman, I rise in support of the premise under which H.R. 1544 was introduced by Chairman Gekas and Rep. Frank. However, this support is tempered by some very serious concerns about the potential impact of any Congressional legislation that would mandate a series of qualified restrictions upon the relitigation of any controlling circuit precedent applicable to federal agencies. In theory, this effort may appear to be a harmless endeavor to create uniformity and consistency in the relationship between the executive and legislative branches, but unfortunately, this is not entirely the case.
The problem of ''intracircuit nonacquiescence,'' defined as when a federal agency refuses to apply an appellate court ruling beyond the individual case decided, is a serious problem for both the body of adverse claimants who file grievances against the corpus of federal bureaucratic agencies and the federal judiciary as a whole. In these situations, a party who goes on to challenge an agency decision and is successful in court, will not receive true remedy, because the non-acquiescent agency may continue to apply that policy to similarly-situated individuals—each of whom must then file suit to obtain the relief previously deemed appropriate in a federal court. This process of ''relitigation,'' from a pragmatic perspective, can be very costly for both the typical citizen who continues to litigate a claim, as well as, the average taxpayer who must compensate for skyrocketing legal fees involving claims against non-compliant federal agencies.
Furthermore, I am very concerned with the impact of ''intracircuit nonacquiescence'' on the legal principle of stare decisis. Stare decisis is the foundational pillar of the common law system of conflict resolution we hold so dear in this country; without it, our federal judiciary becomes nothing more than a ''second-class citizen'' in the branches of federal authority (subordinate to the executive and legislative). Plainly stated, if an appellate court decision on a specific point of law does not apply to forthcoming cases of a similar state of ripeness and justifiability, then the judicial power, especially as a controlling federal ''check and balance,'' is deemed to be ineffectual and virtually irrelevant. Ultimately, however, as important as these considerations are to so many Americans, I must admit that they are not first among my concerns about how H.R. 1544, (if enacted) would affect the lives of everyday Americans. The bottom line is how would a legislative initiative of this kind limit the ability of federal entities to address the systematic encroachment of the judicial branch upon the civil liberties of the average citizen.
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Particularly, the Department of Justice (its Civil Rights Division) and the Civil Rights Divisions of various federal agencies (e.g. The Department of Health and Human Services), would be my primary focus in this categorical objection to the language of H.R. 1544. The limitation on these agencies' ability to appeal seemingly unjust circuit court decisions to the Supreme Court (i.e. autonomy of relitigation) in addition to their ability to create novel and ingenious ways of protecting the civil rights of citizens, is a sacred craft that should be regulated only with the highest and most hesitant level of scrutiny. The decision to tamper with the ability to protect the civil liberties of citizens from all forms of abuse and interference (in or out of government), should never be a hasty one. I am most opposed to the language of H.R. 1544, which seems to serve this unfortunate end. We must never sacrifice our precious liberties and the ability to vigilantly protect them, in exchange for a procedural and technical correction of current judicial inapplicability that pending the fact findings of this Committee, still holds a contestable civic value.
Mr. Chairman, I believe that the Judiciary Committee's role in this regard is clear and compelling. We must do all we can to ensure efficient and effective government, but not at the expense of our civil rights and liberties. I concede, that there are critical functions that are left to the federal and not the state governments which require direction and guidance from Congress, the Judiciary, and Executive branches to insure that the federal government regardless of size and complexity remains responsive to the needs and requirements of the people of the United States. In light of this effort, I charge that we in this Committee must strive to come to a fair and just compromise that significantly addresses the needs of all of our constituents and America as a whole.
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I thank the panel participants who are giving testimony for their time and expertise as we work together to address mutual areas of concern.
42–849CC
1997
FEDERAL AGENCY COMPLIANCE ACT
HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
ON
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H.R. 1544
FEDERAL AGENCY COMPLIANCE ACT
MAY 22, 1997
Serial No. 21
Printed for the use of the Committee on the Judiciary
For sale by the U.S. Government Printing Office
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 SMITH, Texas
STEVEN SCHIFF, New Mexico
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
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BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
SONNY BONO, California
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRISTOPHER B. CANNON, Utah
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
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
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STEVEN ROTHMAN, New Jersey
THOMAS E. MOONEY, Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Staff Director
Subcommittee on Commercial and Administrative Law
GEORGE W. GEKAS, Pennsylvania, Chairman
STEVEN SCHIFF, New Mexico
LAMAR SMITH, Texas
BOB INGLIS, South Carolina
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
JERROLD NADLER, New York
SHEILA JACKSON LEE, Texas
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
RAYMOND V. SMIETANKA, Chief Counsel
CHARLES E. KERN II, Counsel
JAMES W. HARPER, Counsel
C O N T E N T S
HEARING DATE
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May 22, 1997
TEXT OF BILL
H.R. 1544
OPENING STATEMENT
Gekas, Hon. George W., a Representative in Congress from the State of Pennsylvania, and chairman, Subcommittee on Commercial and Administrative Law
WITNESSES
Allsup, James F., president, Allsup, Inc., Belleville, IL
Anderson, Hon. Stephen H., judge, U.S. Court of Appeals for the Tenth Circuit, Salt Lake City, UT, on behalf of the Judicial Conference of the United States
Coenen, Dan T., J. Alton Hosch Professor, University of Georgia School of Law
Ferrara, Peter J., general counsel and chief economist, Americans for Tax Reform
Fried, Arthur J., General Counsel, Social Security Administration
Pickering, John H., Wilmer, Cutler & Pickering, on behalf of the American Bar Association
Preston, Stephen W., Deputy Assistant Attorney General, Civil Division, U.S. Department of Justice
Wiles, Daniel J., Deputy Associate Chief Counsel (Domestic Field Service), Office of Chief Counsel, Internal Revenue Service
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Allsup, James F., president, Allsup, Inc., Belleville, IL: Prepared statement
Social Security Administration Nonacquiescence
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Anderson, Hon. Stephen H., judge, U.S. Court of Appeals for the Tenth Circuit, Salt Lake City, UT, on behalf of the Judicial Conference of the United States: Prepared statement
Coenen, Dan T., J. Alton Hosch Professor, University of Georgia School of Law:
Prepared statement
Proposed revision of H.R. 1544 707 (with explanatory notes)
Ferrara, Peter J., general counsel and chief economist, Americans for Tax Reform
Fried, Arthur J., General Counsel, Social Security Administration:
Letter dated May 19, 1997, to the Editor of the St. Louis Post Dispatch, from John J. Callahan, Acting Commissioner, Social Security Administration
Prepared statement
Pickering, John H., Wilmer, Cutler & Pickering, on behalf of the American Bar Association:
Letter dated June 2, 1997, to Chairman Gekas
Members of the Federal Courts Study Committee
Prepared statement
Preston, Stephen W., Deputy Assistant Attorney General, Civil Division, U.S. Department of Justice:
Prepared statement
Submissions to Representative Meehan's questionsL58, 60
Wiles, Daniel J., Deputy Associate Chief Counsel (Domestic Field Service), Office of Chief Counsel, Internal Revenue Service: Prepared statement
APPENDIX
Material submitted for the hearing
(Footnote 1 return)
The Study Committee also recognized the need to exempt ''test'' cases, which were to be so designated by the Solicitor General.
(Footnote 2 return)
A limited non-acquiescence provision has been included in H.R. 1227 and S. 365, 105th Congress, which would allow a district court judge to render a declaratory judgment when the Internal Revenue Service decides not to acquiesce in a precedent of the court of appeals within that circuit.
(Footnote 3 return)
Under the NLRB's venue provision, the Board has the power to petition the court of appeals for the circuit in which the unfair labor practice in question occurred or in which such person resides or transacts business, for the enforcement of such order and for appropriate relief 29 U.S.C. 160(e) (1994). In addition, any person aggrieved by a final Board order can seek review of such order in the circuit in which the unfair labor practice in question was alleged to have been engaged, in any circuit in which the person resides or transacts business, or in the U.S. Court of Appeals for the District of Columbia. 29 U.S.C. 160(f) (1994). (Note, the NLRB's involvement with the federal courts by-passes the district court level.) The venue provisions for the Social Security Administration (see 42 U.S.C. 405 (1994)) and the Internal Revenue Service (see 28 U.S.C. 7482(b)(1994)) are not as broad.
(Footnote 4 return)
These numbers do not include collection, disclosure, criminal, or other non-tax civil litigation.
(Footnote 5 return)
In one additional case, Sealy Power, Ltd. v. Commissioner, 46 F.3d 382 (5th Cir. 1995), AOD 1995–10, the IRS indicated that it would not follow the decision of the Fifth Circuit only if another court of appeals reached a contrary result. Thus, until and unless that occurs, the IRS will follow that opinion in that circuit.
(Footnote 6 return)
Placid Oil Co. v. IRS, 988 F.2d 554 (5th Cir. 1993), reh'g denied, AOD 1995–04; Gaw v. Commissioner, 45 F.3d 461 (D.C. Cir. 1995), AOD 1996–04; and Hurt v. United States, 70 F.3d 1261 (4th Cir. 1995), AOD 1997–05.
(Footnote 7 return)
Kelley v. Commissioner, 877 F.2d 756 (9th Cir. 1989), AOD 1991–08, and Fendell v. Commissioner, 906 F.2d 362 (8th Cir. 1990), AOD 1991–01. These cases both involved the issue of whether consents to extend the limitations period for assessments must be obtained at the individual taxpayer level or at a flow-through entity level (partnership, ''S'' Corporation, or complex trust). The courts of appeals determined that those consents must be obtained at the entity level. Longstanding Service practice had been only to obtain consents from individuals, not from flow-through entities.
(Footnote 8 return)
Because the individual shareholders frequently resided in different districts (and circuits), it would be possible under these decisions for different limitations periods to apply to shareholders of the same ''S'' Corporation.
(Footnote 9 return)
Powell v. Commissioner, 958 F.2d 53 (4th Cir. 1992), cert. denied, 61 U.S.L.W. 3332 (1992), AOD 1993–04. Note, however, that the Fourth Circuit itself has distinguished and limited the application of this opinion in later cases. See Balkisson v. Commissioner, 995 F.2d 525 (4th Cir. 1993).
(Footnote 10 return)
I.R.C. section 7482(b) provides that venue for appellate review is generally determined where the taxpayer resides or has a principal place of business at the time of the filing of the petition or complaint.
(Footnote 11 return)
Weis, ''Agency Non-Acquiescence—Respectful Lawlessness or Legitimate Disagreement?'', 48 U. Pitt. L. Rev. 845, 851–852 (1987).
(Footnote 12 return)
If this exception were for some reason rejected as unduly narrow, insertion of the word ''typically'' before the phrase ''as a result'' might remove the perceived problem.
(Footnote 13 return)
If the limitation to ''only one case'' were deemed too restrictive, language such as ''no more than three cases'' might be substituted.