Removing from state administrative agencies.

• Author: Rector, Emily M.
• Position: To federal courts

INTRODUCTION

It is doubtful that appointees to the federal judiciary expect their posts will require them to stand in the shoes of, say, the Mississippi Motor Vehicle Commission, (1) the Illinois Liquor Control Commission, (2) or the Wisconsin Employment Relations Commission? Equating a federal court with a state administrative agency seems strange, at the very least. What business do federal courts have in the dealings of Mississippi car lots, or Illinois beer distributorships? Perhaps justifiably, there is a mental disconnect between our visions of federal courts and state administrative agencies. They do, after all, find themselves separated by both horizontal and vertical institutional barriers. State administrative agencies are insulated vertically from federal courts through our federal system of government. Moreover, state agencies and federal courts are horizontally disconnected through separation of powers--agencies occupy a position in the executive branch while federal courts are positioned in the judiciary.

In spite of these institutional barriers, removal jurisdiction (4) has the potential to provide a direct link between state agencies and federal courts. In the normal course of things, removal jurisdiction permits federal courts to hear matters which were originally commenced in state courts, provided the federal court has original jurisdiction over the claim. (5) Procedurally, the defendant petitions the district court to take hold of the matter. (6) At that point, the state court's jurisdiction ceases, and the case is lodged in the district court. (7) The district court's jurisdiction is then subject to remand either at the plaintiff's request or on the judge's own motion. (8) Thus, removal jurisdiction is a procedural mechanism which typically permits federal courts to render judgments in matters commenced in state courts.

Through this same procedural mechanism, however, defendants have also petitioned federal courts to take hold of proceedings commenced in state administrative bodies, (9) and, surprisingly, in some cases the federal judiciary has accepted the invitation. (10) What follows is a strange turn of events. A proceeding instituted in, for example, the Wisconsin Employment Relations Commission suddenly finds itself whisked off to federal court. A state administrative law judge is swapped for an Article III judge, and the relative informality of administrative adjudication gives way to a full blown federal trial. (11)

What permits removal from a state agency? The federal removal statute (12) allows a defendant to transfer "any civil action brought in a State court" where a federal district court can exercise original jurisdiction. (13) Whether to treat an administrative agency as "State court" for the purposes of the removal statute has recently sparked debate in the federal courts. (14) Two camps have formed. One clutches the words of the removal statute as conclusive proof that an action before a "non-court" such as an administrative agency is not removable. (15) I label this view the "formalist" approach. The other camp treats the words of the statute as a starting point, insisting upon a functional approach that considers the agency's powers and essential nature to determine its "courtness," and from there determines whether the action is removable. (16) I call this competing view the "functional" approach.

Each approach is fraught with difficulties. The central problem with the formalist approach lies in its premise that courts and agencies are inherently different. Recent developments have, to a degree, blurred the distinction between state agencies and state courts. Below I explore the growing similarity between state courts and state agencies in terms of the disputes that they handle as well as in terms of their institutional structuring. I contend that treating removal from a state court as proper while barring removal from a state agency perhaps does not make sense, given that state agencies are increasingly judicial in character.

The functional test comes with its own set of difficulties. In particular, the functional test's assessment of the agency's "courtness" is a highly elastic analysis, which runs the risk of becoming an unprincipled inquiry. Further, there are conflicts among courts about how the test is to be applied--for instance, whether to analyze the "courtness" of the agency's operations as a whole, or to analyze how court-like the agency is in handling the particular dispute. Lastly, the functional test creates an opportunity for unequal treatment of diversity and federal question cases even though such disparate treatment is not sanctioned by the removal statute.

After surveying the difficulties with the current formal and functional approaches, I conclude that there must be a better way to sort out the "agency removal problem." At the close of this Note, I formulate a new functional approach. This new functional approach is an adaptation of the inquiry developed in Commodity Futures Trading Commission v. Schor, (17) which considered the extent to which Congress may delegate judicial power to non-Article III decisionmakers, such as federal agencies. I contend that the "modified Schor inquiry" is better than the current formalist and functional tests. It disentangles the many competing concerns underlying the agency removal problem, and it promises to fix some of the practical problems courts have had in applying the current tests.

This Note proceeds as follows. Part I begins by summarizing the formalist approach to removal adopted by the Ninth Circuit and surveys the disputes handled by modern state agencies and their institutional structuring. This Part proceeds to question whether it is proper to treat agencies as distinct from courts in the context of removal. Part II then outlines the alternative approach to agency removal, the functional tests adopted by the First and Seventh Circuits, and identifies the practical and conceptual problems that these tests present. Part III presents a new answer to the removal question, sketching a test derived from the Schor case.

1. THE FORMALIST APPROACH TO AGENCY REMOVAL AND ATTENDANT DIFFICULTIES

   This Part addresses the formalist approach to agency removal. It begins by outlining the approach, as articulated by the Ninth Circuit in Oregon Bureau of Labor and Industries v. U.S. West Communications, Inc. (18) This Part then further explores the formalist approach's sharp distinction between state courts and state agencies. If the body adjudicating the dispute is a court, removal is permitted; if the body adjudicating the dispute is denominated an agency, however, removal is not permitted. This Part then proceeds to question whether making a distinction between state courts and state agencies in the context of removal is logical in light of two considerations. One, the disputes before state agencies and state courts may not be distinct. Two, state agencies are developing a resemblance to state courts in terms of their institutional structuring.

   1. The Formalist Approach: Looking to the Federal Removal Statute

      One approach to the question of whether actions before state agencies may be removed to federal court is to look to the literal language of the federal removal statute. Oregon Bureau provides an example of this approach. Oregon Bureau involved allegations that U.S. West discriminated against one of its employees after he "accompanied an Oregon state safety compliance officer on an inspection of a U.S. West facility." (19) The employee took his complaint against U.S. West to the Bureau of Labor and Industries (BOLI), an administrative body created under the authority of Oregon law. (20) U.S. West removed to the District Court for the District of Oregon on the basis of federal question jurisdiction. (21) BOLI sought remand, but the district court held that removal was authorized under the statute and denied its motion for remand. (22) BOLI subsequently sought review in the Ninth Circuit.

      The Ninth Circuit looked to the plain text of the removal statute: "The issue of whether BOLI is a 'state court' for purposes of 28 U.S.C. [section] 1441 (a) is a statutory construction question.... We look first to the statutory language. If it is clear and consistent with the statutory scheme, the plain language is conclusive and our inquiry goes no further." (23) The court found the statutory term "State court" to be clear and consistent with the statutory scheme, and that there was no ambiguity inherent in the term "State court." (24) Because the term "State court" was not ambiguous, the court held that a literal application of the statutory text decided the case. In the court's view, only civil actions "brought in a State court" are removable, and in the case before it, neither party had argued that BOLI was a "State court" in the formal sense. Thus, remand was required:

      It is undisputed that BOLI is not a court. The parties agree that BOLI is an administrative agency, albeit one that, like many others, conducts court-like adjudications. Thus, we again need go no further. Because BOLI is not a court, the BOLI proceedings were not removable under 28 U.S.C. [section] 1441(a). The district court therefore erred in denying BOLI's motion to remand. (25) Simply put, the Ninth Circuit decided agencies are agencies and courts are courts, and only proceedings from the latter are removable under the plain text of the removal statute.

      U.S. West, which opposed remand, argued that the removal statute recognized a gray area between agency and court. (26) It asserted that the statutory term "State court" should be read "to encompass court-like administrative agency adjudications." (27) Since BOLI was a court in the functional sense--it was empowered to handle the proceeding in a court-like way--proceedings commenced before it could be removed to federal court. (28) The Ninth Circuit disagreed; the agency's court-like functioning...