Constraint Through Independence.

Author:Listwa, Daniel B.
 
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NOTE CONTENTS

INTRODUCTION 550 I. LOOKING AT THE BIGGER PICTURE 554 A. The "Anti-Administrativists" and the Call for Constraint 554 B. Judge Winter and the System-Level View 561 II. A CASE STUDY IN THE MODERN ADMINISTRATIVE STATE: THE NLRB 568 A. Review of Conclusions of Law 569 1. Supreme Court Practice Since Allentown Mack 570 2. Questions of Law in the Appellate Courts 572 B. Review of Findings of Fact 576 1. Circuit Courts' Articulation of "Substantial Evidence" Review 576 2. Circuit Courts' Application of "Substantial 580 Evidence" Review a. Tactical Grounds for Upholding Findings of Fact 581 b. Tactical Grounds for Reversing Findings of Fact 582 c. Role of the Administrative Law Judge's Findings 584 3. Empirical Evidence of Courts' 588 Deference Toward NLRB Fact-Finding and ALJs' Role in Facilitating Judicial Review a. Methodology 588 b. Raw Data Results 590 c. Chi-Squared Test for Statistical Significance 593 III. IMPLICATIONS 596 A. The Continued Relevance of Judge Winter's Warning 596 B. New Strategies for Administrative Constraint: Bolstering the Role of Independent Administrative Law Judges 599 CONCLUSION 609 INTRODUCTION

Barely even thirteen pages long, the Supreme Court's opinion in Lucia v. SEC seemed to render overblown the great anticipation leading up to the case. (1) Several commentators predicted that the Court's opinion would fundamentally change the authority and independence of administrative law judges (ALJs), non-Article III adjudicators who are mainstays of the modern federal bureaucracy. Instead, Justice Kagan, writing for the majority, relied on a fact-specific comparison to a past precedent to explain that the Securities and Exchange Commission (SEC) had appointed its ALJs in an unconstitutional manner--going forward, the Commissioners themselves, and not their staff, had to sign off on new hires. (2) Because the decision ostensibly made no new law, some have said that "Lucia went out with a whimper." (3) But while such a conclusion is understandable given the narrowness of the Court's reasoning, Justice Breyer's separate opinion suggests more far-reaching consequences. By embracing a constitutional, as opposed to statutory, ground for ruling against the SEC, Justice Breyer warned, the Court opened the door to finding unconstitutional the removal protections applied to ALJs throughout the administrative state. (4) Such a holding, he noted, would undermine a "central part" of the Administrative Procedure Act's (APA's) "overall scheme" by eroding the independence these adjudicative officers have from their respective agencies. (5)

Justice Breyer's prognostications were no mere musings. Under the current statutory regime, an agency can only remove its ALJs for "good cause" and only with the consent of an independent federal agency, the Merit System Protection Board (MSPB). (6) This requirement insulates ALJs, at least to some extent, from the influences of their respective agencies' political appointees. Seeking to unravel ALJ independence, the government declined to defend the SEC and instead pressed the Court to go beyond the appointments question and address removal. (7) The government's position is best understood in light of the Trump Administration's stated objective to reduce and reshape the power of the administrative state. (8) Indeed, the current administration's deep skepticism of independent ALJs is part of a larger program of opposition to the bureaucratic arm of the federal government - a program that includes fervent condemnation of Chevron deference, the doctrine directing courts to uphold agency interpretations of statutes so long as they are reasonable, (9) and Auer deference, the parallel doctrine regarding agency interpretations of their own regulations. (10) As Gillian Metzger described, this "anti-administrativism"--which we might alternatively call administrative skepticism--represents a core position of a modern conservative movement that is pushing for greater judicial constraint of administrative agencies. (11)

To those concerned with administrative overreach, the calls to pull back on independence and interpretive deference are intuitively attractive. But despite the plausibility of this modern critique, there is reason to believe that these efforts are counterproductive--that they would actually decrease judicial constraints on administrative agencies. The problem for the anti-administrativists is that their movement focuses myopically on individual doctrines and particular facets of administrative law, without considering the system as a whole. This failure to look at the bigger picture has abetted the Trump Administration's effort to do away with removal protections for ALJs, despite the fact that adjudicator independence--we argue--is essential to facilitating judicial oversight of agencies like the SEC.

In this Note, we argue for a return to a vision of the administrative state that looks to the bigger picture, by explaining how the failure to adopt such a system-level view has led supporters of the modern conservative critique to advocate reforms that actually undermine their stated goals. Our starting point for this analysis is an observation made by Judge Ralph Winter half a century ago. (12) Using judicial review of the National Labor Relations Board (NLRB) (13) as a case study, Judge Winter suggested that the failure to afford the agency sufficient freedom in its statutory interpretation would undermine efforts to constrain the Board. It would do so, he suggested, by incentivizing the Board to avoid courts' scrutiny on issues of law by manipulating factual findings to carry out its policy ends furtively. Taking seriously these institutional dynamics, Judge Winter made a case for loosening review of statutory interpretation while making review of factual conclusions more vigorous. (14)

Undertaking our own analysis of the recent case law involving review of the NLRB, we show that Judge Winter's criticism remains true. Although the courts closely stand guard over the agency's legal conclusions, ready to deny deference and substitute their own reasoning where they determine it is appropriate, judicial review of the agency's determinations on factual matters is far more lenient. (15) This analysis suggests that those interested in constraining administrative agencies engaged in adjudications should be more concerned with the threat of unchecked fact-finding than with deference to statutory interpretation. To forward this project, we offer a detailed analysis, including a first-of-its-kind empirical study, of how courts engage in review of the NLRB's factual conclusions. We draw from these observations and data suggestions for reforms. (16)

Among other insights, our analysis of review of fact-finding reveals how deeply judicial scrutiny is tied to examining the administrative record for "red flags," that is, suggestions that the agency has manipulated its findings to reach its desired goals. As we explain, the reliance on such red flags in order to carry out judicial review reveals the critical importance of ALJs who have some degree of independence from the agencies within which they work. ALJs generate the initial administrative record, often providing the key evidence upon which the courts rely in identifying red flags in the agency's conclusions. Courts and ALJs are thus engaged in a form of cooperative review, constraining agency fact-finding from both the top and the bottom. Absent an independent ALJ, the agency would be free to develop the administrative record in a way that would prevent the appearance of red flags, essentially nullifying effective judicial review.

In addition to supporting this thesis through a qualitative review of appellate cases reviewing NLRB decisions, we constructed and analyzed a data set of nearly two hundred opinions--containing nearly three hundred holdings--in which the circuit court reviewed the NLRB's fact-finding after an initial hearing by an ALJ. This quantitative study reveals that in cases in which the ALJ and the agency agree on the facts, the court almost never overturns the NLRB's order. In contrast, where the ALJ disagrees with the NLRB on the facts, which gives rise to a "red flag" in the record, the court is as likely to overturn as not. This data strongly suggests that judicial review of agency fact-finding without an initial hearing by an ALJ is toothless; absent the red flag of ALJ disagreement, the court will simply defer in the vast majority of cases.

Looking to examples beyond the NLRB as well, we illustrate that ALJs are critical to the functioning of judicial review. Courts simply lack the experience and expertise necessary to determine, ex post, whether the agency was fair and reasonable in its fact-finding. For this reason, there is no clear alternative to reliance on the record development provided by an independent ALJ system. The implication is thus that the skeptics have it backwards: if the goal is to constrain the administrative state in the context of complex regulatory regimes, then neither paring down deference nor attacking ALJ independence is advisable. Reducing deference would motivate a retreat into the facts, where it would be harder for both courts and political actors, including Congress, to monitor agency policy-making. Cutting back on ALJ independence would weaken the first line of defense against manipulation of the facts by agency enforcement officers.

This Note proceeds in three Parts. Part I provides an overview of the anti-administrativist position and the system-level view that we offer in response. Part II reconsiders Judge Winter's observations half a century later, by analyzing recent cases reviewing the NLRB and examining the level of deference accorded to both the agency's legal and factual conclusions, respectively. Part II uncovers the important role of ALJs through a detailed look at how courts engage in review of agency fact-finding, including our...

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