Damages and Arbitration Provisions in Proposed
Amendments to the Fair Housing Act
C ertain proposed am endm ents to the Fair Housing Act would provide that parties may voluntar
ily subm it their dispute to an arbitrator empowered to im pose compensatory and punitive
dam ages (as opposed to equitable relief or restitution). These amendments would be permis
sible under the Seventh Amendment because they amount to a waiver o f a right, that would
otherw ise obtain, to a jury trial on com pensatory and punitive damages. The amendments also
com port with the strictures of A rticle III. The Supreme Court has held that Article III
strictures cannot be waived, but the Court also has found that purely voluntary procedures
severely m inim ize any Article III concerns.
O ther aspects o f the proposed am endm ents to the Fair Housing Act, which authorize mandatory
proceedings before an arbitrator o r adm inistrative law judge with the power to award compen
satory and punitive damages, w ould likely not survive scrutiny under the Seventh Amend
m ent and A rticle III. The cause o f action created by the Fair Housing Act appears to be
derived from a com m on law action that is historically within the exclusive preserve of Article
III courts operating with a jury. Furtherm ore, the right at issue is private in nature, in that it is
intended to determ ine the liability o f one individual to another. In addition, the housing
m arket is not a specialized area o f adm inistrative regulation by the Federal Government.
Finally, the Fair Housing Act setting does not seem to involve an imperative necessity for
Congress to choose an administrative remedy, as demonstrated by the fact that judicial
proceedings would remain available to plaintiffs and there w ould be only minimal differences
in the relief available in the adm inistrative and judicial forum s. Under the Supreme C ourt’s
adm ittedly confusing and inconsistent precedents, these factors suggest that the proposed
m andatory adm inistrative proceedings would not comport with Article III or the Seventh
A m endm ent.
June 8, 1987
M e m o r a n d u m O pin io n f o r t h e A s s is t a n t A t t o r n e y G e n e r a l ,
C iv i l R ig h t s D iv isio n
This responds to your request for our opinion on the Seventh Amendment
issues raised by the use of civil penalties and punitive damages in proposed
amendments to the Fair Housing Act, 42 U.S.C. §§ 3602-3631. The Civil
Rights Division has drafted a bill entitled “Fair Housing Amendments Act of
1987” (draft bill), while the Senate is considering S. 558.
The draft bill and S. 558 raise three questions. First, may an arbitrator award
anything other than equitable relief in a voluntary arbitration proceeding?
Second, is the defendant in a civil action entitled to a jury trial on the issue of
liability for civil penalties? Third, may an arbitrator or an administrative law
judge award compensatory damages, punitive damages, or civil penalties in an
administrative proceeding?
50
I. Analysis
A. Punitive Damages in Voluntary Arbitration
The first question is whether an arbitrator may award damages in a voluntary
proceeding under § 812 of the draft bill. The bill would permit the parties to
agree to voluntary arbitration that would be binding on the parties. § 812(a)(2).1
There is certainly no impediment to the arbitrator in such a voluntary proceed
ing imposing the equitable relief now outlined in the draft bill: a permanent or
temporary injunction and restitution. Nor do we believe that the Seventh
Amendment precludes the parties from agreeing voluntarily to submit their
dispute to an arbitrator who could impose punitive damages. In these circum
stances, both parties will have waived any Seventh Amendment rights that
would otherwise obtain.
The question whether this proceeding is consistent with Article III of the
Constitution is somewhat more problematic. The voluntary participation of
private litigants in a proceeding outside the confines of the federal judiciary
does not ipso facto insulate it from Article III attack. Commodities Futures
Trading Comm’n v. Schor, 478 U.S. 833, 851-54 (1986). The Court in Schor
emphasized that the strictures of Article III (unlike the protection of Seventh
Amendment) cannot be waived by the consent of the parties. Id. For the reasons
discussed more fully below, however, we believe that the arbitration proceed
ing contemplated in § 812 of the draft bill would survive Article III scrutiny
because a very similar administrative scheme was upheld in Schor primarily
because of its voluntary nature. Id. at 856-57.
B. Jury Trial in a Civil Action
On the issue of liability for punitive damages, we believe that the Seventh
Amendment entitles the defendant to a jury trial in a civil action under either
§ 814(c) of the draft bill or § 813 of S. 558.
The Supreme Court has held that suits by the Government to recover civil
penalties are analogous to a common law action in debt, an action covered by
the Seventh Amendment’s requirement of a jury trial. Tull v. United States, 481
U.S. 412, 420-23 (1987). Therefore, the defendant in an action to recover a
civil penalty under the Clean Water Act, 33 U.S.C. § 1319(d), is entitled to a
jury trial. The Court distinguished between actions at law, which are covered
by the Seventh Amendment, and actions in equity, which are not.2 Tull, 481
U.S. at 416. Noting that civil penalties were punitive in nature, and were
intended to do more than make the offender disgorge unlawful profits, the
Court in Tull observed:
1 Section 812(a)(4), although incom plete, supports o ur assum ption that the hearing w ill be conducted
according to rules that provide for presentation o f witnesses and evidence so as to satisfy any due process
concerns.
2 A ctions at equity include tem porary and perm anent injunctions and orders, such as reparations, that
restore the status quo.
51
A civil penalty was a type of remedy at common law that could
only be enforced in courts of law. Remedies intended to punish
culpable individuals, as opposed to those intended simply to
extract compensation or restore the status quo, were issued by
courts of law, not courts of equity.
Id. at 422. The Court analyzed the legislative history of the Clean Water Act’s
penalty provision and determined that it was intended to punish offenders and
therefore reflected “more than a concern to provide equitable relief.” Id.
“Congress wanted the district court to consider the need for retribution and
deterrence, in addition to restitution, when it imposed civil penalties.” Id. Tull
therefore stands for the proposition that civil penalties that are designed to
punish are actions at law that must be tried to a jury under the Seventh
Amendment. See also Curtis v. Loether, 415 U.S. 189, 194 (1974). The
determination in a civil action of liability for “punitive damages” thus requires
a trial by jury. Punitive damages are designed to punish and were, not surpris
ingly, identified by the Court as another kind of action at law that requires a
jury trial. Tull, 481 U.S. at 422 n.7. Therefore, a defendant in an action brought
under § 814(c) of the draft bill or § 813 of S. 558 would be entitled to a jury
trial.
Moreover, even if civil penalties or punitive damages were not available, a
jury trial would still be required so long as a private litigant could recover
actual, compensatory damages. The Court in Curtis, noting that “[a] damages
action sounds basically in tort,” held that a suit by an aggrieved person to
collect damages under § 812 of the Fair Housing Act required a trial by jury.
415 U.S. at 194-95.
C. Seventh Amendment and Article III: Permissibility o f
Mandatory Arbitration
Having concluded that an action for compensatory or punitive damages
would require a jury trial in an Article III court, we turn to the most difficult
question posed by the draft bill and S. 558: whether providing precisely the
same cause of action in an administrative tribunal where no jury is available
can survive constitutional scrutiny under the Seventh Amendment and
Article III.
1. Case Law
The Supreme Court has held that the Seventh Amendment does not prohibit
Congress from assigning adjudication of certain statutory rights to an adminis
trative forum, even if a jury would have been required under the Seventh
Amendment had Congress assigned adjudication of the same rights to a federal
court: A tlas Roofing Co. v. Occupational Safety & Health Comm’n, 430 U.S.
442,450(1977):
52
At least in cases in which “public rights” are being litigated —
e.g., cases in which the Government sues in its sovereign capac
ity to enforce public rights created by statutes within the power
of Congress to enact — the Seventh Amendment does not
prohibit Congress from assigning the factfinding function and
initial adjudication to an administrative forum with which the
jury would be incompatible.
See also Tull, 481 U.S. at 418 n.4; NLRB v. Jones & Laughlin Steel Corp., 301
U.S. 1 (1937); Block v. Hirsh, 256 U.S. 135 (1921). The Court made clear,
however, that actions involving “private rights” as distinguished from “public
rights” could not be transferred to administrative proceedings:
Our prior cases support administrative factfinding in only those
situations involving “public rights,” e.g., where the Government
is involved in its sovereign capacity under an otherwise valid
statute creating enforceable public rights. Wholly private tort,
contract, and property cases, as well as a vast range of other
cases are not at all implicated.
Atlas Roofing, 430 U.S. at 458.3
The problem is that the Court has never stated with any clarity what distin
guishes a public right from a private right.4 “The distinction between public
rights and private rights has not been definitively explained in [the Court’s]
precedents.” Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458
U.S. 50,69 (1982) (plurality opinion). But while the Court’s application of the
public rights doctrine has not been particularly consistent or coherent, the
conceptual underpinnings of this theory are reasonably discernible.
Essentially, the public rights doctrine reflects the Court’s recognition that
the nature and historical backdrop of the federal right at issue are quite
significant in determining whether congressional substitution of alternative
tribunals for Article III courts impermissibly encroaches on the independence
and authority of the federal judiciary. At one end of the spectrum, the Court has
sought to prevent Congress from usurping the constitutional prerogatives of
courts and, in some circumstances, juries, by removing from Article III tribu
3 Tull does not diverge from this line o f cases. In a footnote, the majority stated:
The Court has also considered the practical lim itations o f a ju ry trial and its functional com pat
ibility with proceedings outside o f traditional courts o f law in holding that the Seventh Amend
ment is not applicable to adm inistrative proceedings. But the C ourt has not used these consider
ations as an independent basis for extending the right to a ju ry trial under the Seventh Amendment.
481 U.S. at 418 n.4 (citing Atlas Roofing and Pem ell v. Southall Realty , 416 U .S. 363 (1974)). We are not
certain what these tw o sentences m ean. At a m inim um , how ever, they indicate that Tull is not m eant to signal
a reexam ination o f the principles underlying Atlas Roofing.
4 We believe the public rights d octrine is prim arily based on A rticle III principles and thus w ill discuss this
issue principally in those terms. The conclusion that a right is “ public” for A rticle III purposes would seem to
subsume any Seventh Amendm ent objections on this basis. Cf. Atlas Roofing , 430 U.S. a t 456; Northern
Pipeline , 458 U.S. at 67 n.18. In any event, in analyzing the public rights doctrine, the C ourt has treated the
constraints o f the Seventh Amendm ent and A rticle III as virtually coextensive, discussing and citing S eventh
A mendment and A rticle III cases interchangeably.
53
nals matters which the Constitution’s text, structure and history suggest are
theirs to resolve. At the other end of the spectrum, the Court has perceived no
plausible threat to an independent judiciary or trial by jury from non-Article III
resolution of matters that are committed by the Constitution or historical
consensus to political branches, and which thus “could have been determined
exclusively” by the executive and legislative branches absent any judicial
review save that required by the Due Process Clause.5 Northern Pipeline, 458
U.S. at 68 (plurality opinion) (citing Crowell v. Benson, 285 U.S. 22 (1932)). In
short, the dividing line that has emerged from the Court’s precedent is that
cases which are “inherently . .. judicial,” Ex parte Bakelite Corp., 279 U.S.
438, 458 (1929), because they involve traditional rights governing “the liability
of one individual to another,” Crowell, 285 U.S. at 51, may not be removed
from adjudication in the federal courts absent extraordinary circumstances,
while those involving disputes “between the government and others” may
permissibly be committed to agency adjudication. Ex parte Bakelite Corp., 279
5 T his and sim ilar phrases, often repeated but rarely explained by the Court, apparently refer to those
m atters that the political branches co u ld have disposed o f in a sum m ary fashion before the evolution o f
m odern substantive and procedural d ue process theories. T h is would include those areas where the text of the
C onstitution grants plenary authority to one o f the political branches — such as immigration or taxation —
and d isputes concerning the removal o f “privileges” such as G overnm ent financial assistance, rather than
“rig h ts” as traditionally understood. “ The understanding o f these cases is that the Framers expected that
C ongress w ould be free to commit such m atters com pletely to non>judicial executive determ ination, and that
as a result there can be no constitutional objection to C ongress' em ploying the less drastic expedient of
com m itting th eir determ ination to a legislative court o r an adm inistrative agency.” Northern Pipeline , 458
U .S. at 68 (plurality opinion). See also Crowell v. Benson , 285 U.S. at 50, Thomas v. Union Carbide Agric.
Prod. Co., 473 U .S. 568, 596-97 n .l (1985) (Brennan, J., concurring). M oreover, “ [t]his doctnne may be
explained in part by reference to the traditional principle o f sovereign immunity, w hich recognizes that the
G overnm ent may attach conditions to its consent to be sued ” Northern Pipeline, 458 U.S. at 67. See also
M urray's Lessee v. Hoboken Land & Improvement Co., 59 U.S. (18 How.) 272, 283-85 (1856); Ex parte
Bakelite Corp., 279 U.S. 4 3 8 ,4 5 2 (1929). In other words, the original A rticle III cases seem to be premised
on concepts akin to the “bitter with th e sw eet” theory o f procedural due process and the “right/privilege”
distinction. See Arnett v. Kennedy, 4 1 6 U.S. 134 (1974); Bailey v. Richardson, 182 F.2d 46 (1950), a f f d,
341 U .S. 918 (1951). That is, the G overnm ent could condition suit against itself on the p la in tiffs w aiver of
any rig h t to choose a forum or a jury trial, and in connection with exercising plenary grants o f authority or
lim iting financial benefits, the political branches were fully free to dispose o f governm ent-created entitle
m ents w ithout providing any means o f contesting such sum m ary action.
O f course, as a d ue process matter, subsequent case law has underm ined these conceptual underpinnings. It
is now clear that there is a property interest in G overnm ent entitlem ents, a substantive due process right
a g ain st arbitrary o r capricious governm ent practices, and a prohibition against conditioning the extension of
G overnm ent benefits on the waiver o f constitutional rights. See, e.g., Goldberg v. Kelly, 397 U.S. 254 (1970);
Cleveland Bd . o f Educ. v. Loudermill, 470 U .S. 532 (1985); Speiser v. Randall, 357 U.S. 513 (1958).
N evertheless, fo r A rticle III purposes, w e believe these concepts help to describe w hat is meant by matters
w hich “could be conclusively determ ined” by the executive and legislative branches. The notion is that
traditional, private state law claims antedating the newly created federal statutory rights are the type that
should rem ain w ithin the province o f A rticle III courts. T hese rights do not exist solely by virtue o f the federal
statu to ry schem e, do not involve disputes betw een a private individual and the G overnm ent qua G overnment,
and d o not co ncern alleged deprivations caused by the G overnm ent's adm inistration o f its own regulatory or
financial assistance schem es. A ccordingly, even under a “consent to suit” or “bitter with the sweet” theory,
such m atters w ould not be subject to sum m ary disposition by the political branches because they involve
traditional d isputes solely between private individuals and w ould thus fall outside the rationale supporting the
e arlie r Article III cases. Again, the ris e o f m odem due process theory should not affect the A rticle III
analysis. T hat recent due process cases create checks against the G overnm ent's pow er to engage in summary
disposition o f certain m atters does not provide a rationale supporting the non-A rticle III adjudication of
m atters not previously subject to sum m ary disposition.
54
U.S. at 451. Although the Court has not comprehensively or even consistently
defined this concededly abstract line of demarcation, it has identified the
factors that tend to differentiate public from private rights.
Probably the most important factor in defining the nature of the federal right
presented is the historical underpinnings of the right. If the claim at issue is
analogous to “the stuff of the traditional actions at common law tried by the
courts at Westminster in 1789,” there is at least a strong presumption that it
must be resolved by an Article III court. Northern Pipeline , 458 U.S. at 90
(Rehnquist, J., concurring). Although the Northern Pipeline plurality and some
earlier cases seem to hold that Congress may not “withdraw from judicial
cognizance any matter which, from its nature, is the subject of a suit at the
common law, or in equity, or admiralty, Northern Pipeline, 458 U.S. at 67
(plurality opinion) (quoting M urray’s Lessee v. Hoboken Land & Improvement
Co., 59 U.S. (18 How.) 272, 284 (1856)), the Court’s recent decisions seem
ingly conclude that the traditional common law attributes of a claim do not,
standing alone, prohibit such a withdrawal. Nevertheless, even these recent
decisions have emphasized that such traditional legal and equitable causes of
action are at the “protected core” of Article III judicial powers. Thomas v.
Union Carbide Agric. Prod. Co., 473 U.S. 568,587 (1985). See also Schor, 478
U.S. at 853. As the Court put it in Schor, “the state law character of a claim is
significant for purposes of determining the effect that an initial adjudication of
those claims by a non-Article III tribunal will have on the separation of powers
for the simple reason that private, common law rights were historically the
types of matters subject to resolution by Article III courts.” Id. at 854.6
Accordingly, if Congress creates a statutory cause of action, the roots of
which can fairly be traced to a traditional legal or equitable claim, there is a
heavy, albeit rebuttable, presumption that the claim may not be delegated to
administrative adjudication.7
Conversely, “matters arising ‘between the Government and persons subject
to its authority in connection with the performance of the constitutional func
tions of the executive or legislative departments,’ [and] matters that histori
cally could have been determined exclusively by those departments” are clearly
6 The Court has em phasized that the historical antecedents o f a particular right, not an objective evaluation
o f w hether it is o f the sort that should be resolved by the judiciary, are param ount in public rights analysis. As
the plurality noted in Northern Pipeline :
Doubtless it could be argued that the need for independent ju dicial determ ination is greatest in
cases arising betw een the G overnm ent and an individual. But the rationale for the public-rights
line o f cases lies not in political theory, but rather in C ongress' and this C o u rt's understanding o f
what pow er w as reserved to the Judiciary by the C onstitution as a m atter o f historical fact.
458 U.S. at 68 n.20, cited in Schor, 478 U.S. at 854.
7The public rights analysis obtains with respect to “new " rights created by congressional statutes, as well as
to non-A rticle III adjudication o f common law claims not em bodied in a congressional statute. See Curtis v.
Loether , 415 U.S. 189, 193 (1974) (“We have considered the applicability o f the constitutional right to jury
trial in actions enforcing statutory rights ‘as a m atter too obvious to be doubted.’” ). See also Tull, 481 U.S at
420; Pemell v. Southall Realty, 416 U.S. 363, 375 (1974). Indeed, a contrary conclusion would make
nonsense o f the C o u rt's em phasis on the historical lineage o f the right and would essentially eviscerate the
protection of A rticle III and the Seventh A m endment, because C ongress always m akes law by em bodying
“new " rights in a statute.
55
public rights. Northern Pipeline, 458 U.S. at 67-68 (plurality opinion) (quoting
Crowell, 285 U.S. at 50). See also Schor, 478 U.S. at 853-54 (“when Congress
selects a quasi-judicial method of resolving matters that ‘could be conclusively
determined by the Executive and Legislative Branches,’ the danger of en
croaching on the judicial powers is less than when private rights, which are
normally within the purview of the judiciary, are relegated as an initial matter
to administrative adjudication”); Thomas, 473 U.S. at 589; Ex parte Bakelite
Corp., 279 U.S. at 458; Oceanic Steam Navigation Co. v. Stranahan, 214 U.S.
320, 339 (1909). The Court has thus concluded that disputes involving newly
created rights unknown to the common law or matters that, as an historical
matter, “could be conclusively determined by the Executive and Legislative
Branches,” may be adjudicated by non-Article III forums. Thomas, 473 U.S. at
589 (quoting Northern Pipeline, 458 U.S. at 68 (plurality opinion)). In such
circumstances, the dispute is not over the scope of the federal statutory duty X
owes to Y, but the scope of the Government’s authority in administering its
own programs; it is thus a dispute between the Government and others. Accord
ingly, the Court has looked to whether the rights asserted are derived from a
comprehensive regulatory scheme concerning a specialized area, such as fed
eral broadcast licenses and “entitlements” to federal welfare benefits. See, e.g.,
Schor, 478 U.S. at 854-56; Thomas, 473 U.S. at 600-01 (Brennan, J., concurring).
It is more difficult to discern whether public rights are created by virtue of
the Government’s participation in matters not committed to its exclusive and
all-encompassing regulatory discretion. Specifically, it is unclear what signifi
cance should be attached to the mere fact of Government participation in a
representative or prosecutorial capacity, rather than in its capacity as adminis
trator of its own regulatory programs.
The Court has recently established that neither the presence nor the absence
of the Government as a party of record is dispositive in resolving whether a
particular right is public or private.8 Rather, one must “loo[k] beyond form to
the substance of what [the statutory scheme] accomplishes” with due regard for
“the origin of the right at issue [and] the concerns guiding the selection by Congress
of a particular method for resolving disputes.” Id. at 587,589.
For this reason, as we previously stated with respect to another proposed
amendment to the Fair Housing Act, the Government’s participation is of little
significance if it “simply has stepped into the individual’s shoes in [the]
administrative proceeding, and is suing in a representative capacity.”9 In this
8 In Northern Pipeline , the plurality stated: “It is thus clear that the presence o f the U nited States as a proper
party to the proceeding is a necessary b u t not sufficient m eans o f distinguishing "private rights* from ‘public
rig h ts.’ ” 4 5 8 U .S. at 69 n.23. Only a fe w years later, how ever, a m ajority o f the C ourt rejected this “bright-
line test" as exalting form over substance, holding that the U nited States’ party status was neither necessary
nor su fficien t in resolving the public rig h ts question for purposes o f A rticle III. Thomas, 473 U.S. at 586. In
Thomas, the C ourt rejected both the v iew that “the right to an A rticle III forum is absolute unless the federal
governm ent is a party o f record" and th e contrary view th a t44A rticle III has no force sim ply because a dispute
is betw een the G overnm ent and an in dividual.” Id.
9 “Seventh A m endm ent Implications o f Providing for the A dm inistrative A djudication o f C laim s Under
Title V III o f the C ivil R ights Act of 1968,” 9 Op. O .L.C . 32 (1985).
56
context, the Government simply acts as a prosecutor to vindicate the rights of
one private individual against another, not to resolve a dispute between an
individual and the Government qua Government; it is thus difficult to discern
why the presence of the United States should convert such private disputes into
“public” rights. Giving such talismanic effect to the Government’s mere initia
tion of an administrative complaint would be inconsistent with Thomas' admo
nition that public rights analysis should not be a formalistic endeavor that
focuses on the “identity of the parties alone” without “regard to the origin of
the right at issue.” Id. at 587. As one commentator has noted, any such
understanding of the Court’s Article III precedent does indeed result in “[f|orm
. . . replacing] substance: Congress could avoid conferring jurisdiction upon
an Article III court simply by altering the party structure in its new action, by
replacing the private plaintiff with a government prosecutor.” L. Tribe, Am eri
can Constitutional Law 43 (1978).10
Nevertheless, there are cases in which administrative schemes have provided
incidental relief to private parties in the course of enforcing public policy. See
Schor, supra’, NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937); Block
v. Hirsh, 256 U.S. 135 (1921). The relief available in Jones & Laughlin,
however, was essentially equitable in nature (reinstatement and backpay), and
only the NLRB could seek court enforcement of the order." Moreover, al
though the Court often cites Block v. Hirsh, 256 U.S. 135 (1921), for the
proposition that what would usually be viewed as a private right — a landlord/
tenant dispute — can be a “public right,” 12 it does so without noting what the
Block court itself recognized. The case arose during an extraordinary housing
shortage in the District of Columbia caused by World War I, which had
transformed housing from its normal status as a matter of private sector
concern into a matter of grave public concern: “circumstances have clothed the
letting of buildings in the District of Columbia with a public interest so great as
to justify regulation by law.” Id. at 155. Thus, Block did not involve a purely
private right: “The [rent] commission did not . . . afford all-purpose relief to
complaining private parties.” 2 Op. O.L.C. 16, 19 (1978). As we have previ
ously observed, “[i]t cannot be concluded, based on these rather limited prece
dents, that administrative proceedings initiated by a public agency but provid
ing the full panoply of judicial relief to private parties are necessarily permitted
under the Seventh Amendment.” Id.
Further, the Court, principally in the Schor opinion, has considered two other
factors in determining whether judicial resolution of particular disputes is
10 As we stated w ith regard to a 1978 proposal that w ould have authorized the D epartm ent o f H ousing and
U rban D evelopm ent to file adm inistrative complaints:
It could be argued that Congress should not be able, under the vague rubric “public rig h t/' to
circum vent the Seventh A m endm eat com pletely by creating a chain o f adm inistrative courts
capable o f giving traditional com m on-law remedies to private litigants seeking re lie f from
w rongs (such as dignitary torts) traditionally regarded as private in character.
“Fair H ousing — C ivil R ights A ct,” 2 Op. O .L.C. 1 6 ,2 0 (1978).
112 Op. O.L.C. at 19 (citing Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261 (1940)).
12See, e.g., Thomas, 473 U .S. at 589.
57
constitutionally required. Although the Court’s language admits of differing
interpretations, we do not view these factors as interpretive aids in defining the
public right but rather as exceptions to the public right doctrine. In other words,
these factors identify the narrow circumstances in which non-Article III adjudi
cation of arguably private rights may be permissible.
First, Schor establishes that the Court will attach great, if not dispositive,
significance to whether the party asserting a constitutional deprivation has
participated in the non-Article III proceeding on a purely voluntary basis and
thus has effectively waived any right to complain. The complaining party in
Schor had opted for the CFTC’s administrative forum rather than state or
federal courts with full knowledge that the regulatory scheme allowed the
CFTC to exercise jurisdiction over all counterclaims, including those involving
matters of state law; indeed, the complaining party then “expressly demanded
that [the opposing party] proceed on its [state law] counterclaim in the [admin
istrative] proceeding rather than before the District Court.” 478 U.S. at 849.
Although the Schor Court determined that Article III separation of powers
limitations, unlike Seventh Amendment rights, cannot be “waived” by a private
litigant, it nonetheless made clear that the purely voluntary nature of the
proceedings severely minimized any Article III concerns that might otherwise
have obtained: “just as Congress may encourage parties to settle a dispute out
of court or resort to arbitration without impermissible incursions on the separa
tion of powers, Congress may make available a quasi-judicial mechanism
through which willing parties may, at their option, elect to resolve their
differences.” Id. at 855. See also id. at 849 (noting that “the absence of consent
to an initial adjudication” was “a significant factor” in Northern Pipeline's
condemnation of Article I bankruptcy courts).13
Second, the Schor Court also seemed to permit administrative adjudication
of private rights, at least where participation in the administrative process is
voluntary, if those private claims are wholly ancillary to the public rights
created by the federal regulatory scheme and if their resolution in the adminis
trative process is necessary to enable resolution of the statutory public rights in
that forum. The issue in Schor concerned a CFTC administrative process
established to provide reparations to “disgruntled customers of professional
commodity brokers seek[ing] redress for the brokers’ violations of the Act or
CFTC regulations.” Id. at 836. When Mr. Schor invoked this procedure, his
broker counterclaimed, on state law grounds, for a debit balance which Mr.
Schor alleged had resulted from the broker’s violations of the Commodity
Exchange Act that were at issue in the administrative proceeding. If resolution
of such private state law counterclaims was not permitted in the administrative
forum, administrative resolution of the public rights created by the CEA would
never occur, as a practical matter, “for when the broker files suit to recover the
debit balance, the customer will normally be compelled either by compulsory
13 T he C ourt in Thomas described the chem ical com panies as “ voluntary participants in the program ,” 473
U .S. at 589, although the only element o f choice seem s to have been w hether to engage in the m anufacture o f
chem icals.
58
counterclaim rules or by the expense and inconvenience of litigating the same
issues in two fora to forgo his reparations remedy and to litigate his claim in
court.” Id. at 843-44.
Accordingly, Schor created an exception to the public rights doctrine, which
permits resolution of private claims in otherwise valid administrative schemes
where resolution of those private rights “is limited to that which is necessary to
make the [scheme] workable” by resolving the public rights created by the
regulatory scheme. Id. at 856. As the Court put it, “absent the CFTC’s exercise
of that authority [over state law counterclaims], the purposes of the [adminis
trative] reparations procedure would have been confounded.” Id. at 856. In
context, then, Schor’s departure from the public rights line of cases is clearly
premised on the voluntary and necessary aspects of the administrative tribunal’s
resolution of private rights.
Finally, and most generally, the Court has looked to the “concerns motivat
ing the legislature” in choosing a non-Article III forum. Thomas, 473 U.S. at
590. In this regard, the Court has attached significance to a showing that there
is an “imperative necessity” for administrative procedures because of the
specialized, complex nature of the subject matter and a demonstrated need for
expedited adjudication. M urray's Lessee, 59 U.S. (18 How.) at 282. See also
Schor, 478 U.S. at 852; Thomas, 473 U.S. at 590. Cf. Palmore v. United States,
411 U.S. 389, 407-08 (1973). The rationale here is that strong “evidence of
valid and specific legislative necessities,” Schor, 478 U.S. at 855, can be
accommodated without unduly disrupting separation of powers concerns be
cause such exceptions are limited in scope and reveal that Congress’ sole
motivation was to solve a pressing emergency, not to avoid Article III adjudi
cation for its own sake. See id. at 855-57; Thomas, 473 U.S. 590-593.
2. Analysis
Application of these principles to the draft bill leads us to conclude that it is
of doubtful constitutional validity. Although S. 558, unlike the draft bill,
provides that the Department of Housing and Urban Development (HUD) will
act as the moving party in an administrative proceeding, we do not believe that
this difference alone should substantially affect the constitutional inquiry.14
We will analyze each of the proposed bills in turn.
14W e do not believe that the use o f adm inistrative law ju d g es to determ ine punitive dam ages may be upheld
on the theory that the adm inistrative proceeding is merely an adjunct to the district court. T he Supreme C ourt
has upheld against A rticle III challenges the use o f adm inistrative agencies as factfinders in cases involving
private rights “only as an adjunct to an Art. Ill court, analogizing the agency to a jury or a special m aster.”
Atlas Roofing ,4 3 0 U.S. at 4S0 n 7. However, we do not believe that these cases uphold the use of adjuncts in
cases involving private rights that are also actions at com m on law. As originated in Crowell, the adjunct
theory did not include private n g h ts o f action found at common law. Crowell involved a case arising in
admiralty and the C ourt distinguished this from common law actions* “ In cases of equity and adm iralty, it
is historic practice to call to the assistance o f courts" non-judicial factfinders. 285 U.S. at 51. However, “ on
the common law side o f the Federal courts, the aid o f ju ries is not only deem ed appropriate but is required
by the C onstitution itself.” Id. Thus, the C ourt recognized that juries — not non-judicial factfinders —
Continued
59
Perhaps the most important consideration in assessing the draft bill’s pro
posed administrative proceeding is that the right adjudicated is derived from a
common law action that is historically within the exclusive preserve of Article
III courts. In Curtis v. Loether, 415 U.S. 189 (1974), the Court concluded:
We think it is clear that a damages action under 812 [of the Fair
Housing Act] is an action to enforce “legal rights” within the
meaning of our Seventh Amendment decisions. A damages
action under the statute sounds basically in tort — the statute
merely defines a new legal duty, and authorizes the courts to
compensate a plaintiff for the injury caused by the defendant’s
wrongful breach. As the Court of Appeals noted, this cause of
action is analogous to a number of tort actions recognized at
common law. More important, the relief sought here — actual
and punitive damages — is the traditional form of relief offered
in the courts of law.
. Id. at 195-96 (citations omitted). Thus, the statutory right to be adjudicated in
the draft bill’s administrative proceeding is directly analogous to a cause of
action that was subject to judicial resolution at the time the Constitution came
into being, thus creating a strong presumption that it must be tried in an Article
III court pursuant to normal procedures. Moreover, the Civil Rights Division
draft bill provides that actual and punitive damages may be awarded in the
arbitration hearing. § 813. As indicated earlier, these are classic “legal” rem
edies of the type that could be awarded only by a court of law with a jury, not by
a court of equity. See Tull, 481 U.S. at 423 n.7. Cf. Atlas Roofing, 442 U.S. at
459,460 (The Seventh Amendment is intended to “preserve” the right to a jury
trial in common law suits, not to require them where none was previously
required.).
Further, wholly apart from its historical roots, the right at issue here is
private in nature, in that it is intended to determine the liability of one indi
vidual to another. Crowell, 285 U.S. at 51. Under the Civil Rights Division
draft bill, virtually the only role played by the Government is to provide a
14 ( . . . continued)
w ere required in cases involving common law questions. Crowell's language certainly supports an argument
that the Seventh A m endm ent prevents C ongress from placing actions that are both private and based on
com m on law actions beyond the reach o f a ju ry trial. Crowell reads the Seventh Amendm ent as requiring a
ju ry in cases a risin g under the common law , while perm itting agencies to act as de facto juries for private
rights arising in equity o r admiralty. Id. a t 51. See also Northern Pipeline , 458 U.S. at 81-82 (plurality
opinio n ) (“ Crowell does not support the further proposition necessary to appellants' argum ent — that
C ongress possesses the sam e degree o f discretion in assigning traditionally judicial pow er to adjuncts
engaged in the adjudication o f nghts not created by C ongress.” ) (em phasis in original); United States v.
Raddatz , 447 U .S. 667 (1980). We are especially reluctant to adopt this adjunct theory in the Seventh
A m endm ent context w hen to d o so would perm it Congress to take from the courts a factfinding function that
courts d o not have in com m on law actions under the Seventh Am endm ent. See Tull, supra. U nlike the action
at issue in Raddatz , the rig h t being resolved under the draft bill is not one a court couid decide if it wished; the
rig h t to punitive dam ages has to be resolved by a ju ry . The a djunct theory, if applied to private rights based on
com m on law actio n s w ould render the Seventh A m endm ent’s protection hollow , dependent entirely upon the
w him o f a congressional majority.
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federal rule of decision that defines the liability between private actors. Under
the proposed bill, only private litigants may initiate the administrative proceed
ing and they may themselves seek review or enforcement of the arbitrator’s
order in court. § 813(a)(1), (c). Although HUD may prevent formal arbitration
by not issuing a “reasonable cause” determination and may intervene in the
hearing, the entire matter may well proceed to final judgment without Govern
ment participation, and, in any event, HUD’s intervenor role would clearly be
limited to vindicating the rights of the private litigant. In this regard, we note as
well that civil rights statutes generally are intended to create personal rights,
guaranteed to the individual. See generally Connecticut v. Teal, 457 U.S. 446
(1982); Regents o f the Univ. o f Cal. v. Bakke, 438 U.S. 265, 299 (1978)
(opinion of Powell, J.); Los Angeles D ep’t o f Water & Power v. Manhart, 435
U.S. 702, 708, 709 (1978); Shelly v. Kraemer, 334 U.S. 1, 22 (1948). In short,
because the statutorily created right here derives from a dignitary tort and is
enforceable primarily by private individuals for their own benefit pursuant to
common law remedies, the Court’s precedents strongly indicate that these
administrative hearings will be viewed as “wholly private to rt. . . cases [that]
are not at all implicated” by the public right exception described in Atlas
Roofing. Atlas Roofing, 430 U.S. at 458.
Moreover, none of the other factors on which the Court has focused militate
in favor of the draft bill’s validity. It is clear that a defendant would be an
involuntary participant in the arbitration proceedings, and it seems quite doubt
ful that the private housing market in the United States would generally be
considered a “specialized area” for administrative regulation by the federal
government. Further, the exception created in Schor for ancillary and necessary
private claims is inapplicable since adjudication of common law claims is
clearly not “incidental to, and completely dependent upon, adjudication o f . . .
claims created by federal law.” Schor, 478 U.S. at 856.15
13 W e note that the C ivil Rights D ivision's draft bill, as w ell as S. 558, provides for court enforcem ent o f the
adm inistrator's aw ard. D raft bill, § 813(d), (g); S. 558, § 812(h), (i). W e confess that w e are uncertain
w hether this is an argum ent in favor o f or against the proposed b ill's constitutional validity, because the
C ourt’s precedents point in opposite directions. U nder the adjunct theory o f Article III, assignm ent o f some
lim ited functions to a non*Article III tribunal is som etim es perm issible, so long as “ ‘the essential attributes'
o f judicial pow er are retained in the Art. Ill court.” Northern Pipeline, 458 U.S. at 81 (plurality opinion). See
also Crowell, 285 U.S. at 51. Thus, under the adjunct theory as traditionally understood, it w as quite c le a r that
the constitutional perm issibility o f the statutory scheme w as enhanced if the non-A rticle III forum was given
only quite lim ited “ju d icial" pow ers, such as the right to enforce its own orders. Quite naturally, therefore,
Northern Pipeline, in contrasting Crowell, said that a m ajor defect in the bankruptcy courts scheme w as that
those non-A rticle III tribunals could enforce their own orders w ithout “seek[ing] enforcem ent in the district
court ” Northern Pipeline , 458 U.S. at 85 (plurality opinion). See also id. at 91 (R ehnquist, J., concurring);
Crowell, 285 U.S. a t 51. In Thomas, however, the Court stated that the A rticle III validity o f the arbitration
scheme was enhanced because it “relie[d] tangentially, if at all, on the Judicial Branch fo r enforcem ent" o f
the arbitrators’ orders, Thomas, 473 U.S. at 591, a conclusion that seems directly at odds with Crowell,
Northern Pipeline, and the entire rationale o f the adjunct theory as previously understood. See Crowell, 285
U.S. at 3 3 -3 8 . Fortunately, we need not engage in the task o f reconciling these cases, because w e have
previously concluded that the adjunct theory is probably inapposite here because the statutory right to be
enforced is derived directly from a private, com m on law claim . We note, parenthetically, that the pow ers
assigned to the arb itrato r under the draft bill and S. 558 are considerably greater than the pow er (i.e.,
assessm ent o f value) assigned to the adjunct in Crowell, but less than the plenary pow ers given to the
bankruptcy courts in Northern Pipeline. See 9 Op. O.L.C. at 40.
61
We further note that the Fair Housing Act certainly does not seem to involve
the imperative necessity that the Court recognized in Thomas as a legitimate
motivating factor for Congress’ consideration in choosing an arguably prompter
administrative remedy. 473 U.S. at 590. Indeed, the Curtis Court rejected
similar arguments advocating the need for expedited judicial review of Title
VIII actions without a jury trial. Noting the availability of preliminary injunc
tions and non-jury trials in cases seeking only equitable relief, the Court stated
“[m]ore fundamentally, however, these considerations are insufficient to over
come the clear command of the Seventh Amendment.” 415 U.S. at 198. It is
nonetheless conceivable that a strong legislative record demonstrating that
administrative trials are for some reason necessary meaningfully to resolve
Fair Housing cases would tend to support the validity of the congressional
purpose in opting for these proceedings. Of course, any such claim is substan
tially undermined by the fact that judicial proceedings remain available to
plaintiffs so inclined, thus undercutting any notion that administrative proceed
ings are “necessary.”
Indeed, in the circumstances presented here, the congressional purpose
underlying the establishment of administrative proceedings may well be viewed
as a substantial deficiency, because the draft bill’s structure and background
suggest that the sole purpose o f the administrative alternative is simply to
supplement or displace adjudication by Article III courts and juries. In this
regard, it is significant that “there are only minimal differences between the
relief available in the administrative forum (in which a civil penalty for the
Government replaces punitive damages for the individual) and the judicial
forum.” 9 Op. O.L.C. at 37. By providing for punitive damages in either the
administrative or judicial forum, moreover, the draft bill leaves it entirely up to
a plaintiff in an individual case to choose between the Article III and Article I
fora, without sacrificing any weapon in his arsenal of remedies. Thus, the clear
effect of the Act is to create parallel, virtually identical Article III and Article I
processes — a dualism that serves no apparent purpose other than enhancing
plaintiffs options and his ability to avoid bringing his case before a jury or an
Article III judge.
We do not mean to suggest that providing plaintiffs with a choice between
such parallel schemes by itself raises independent due process problems, even
where, as here, it renders the defendant’s right to a jury trial utterly dependent
on the plaintiffs choice of fora. However, the dual structure may well directly
signal “the concerns guiding the selection by Congress of a particular method
for resolving disputes.” Thomas, 473 U.S. at 587. In this regard, it is also
noteworthy that “the Department would enter the fray, not at the outset, but
nearly [19] years after the creation of a private cause of action in the district
court which provides for identical remedies, and nearly [13] years after the
Supreme Court expressly ruled that under such circumstances trial by jury must
be available on demand.” 2 Op. O.L.C. at 20.
Against this backdrop, a reviewing court may fairly conclude that, in con
trast to Schor, Congress’ “primary focus was [not] on making effective a
62
specific and limited federal regulatory scheme, [but] on allocating jurisdiction
among federal tribunals.” Schor, 478 U.S. at 855. In other words, the back
ground and parallel structure of the Act might well strongly suggest that the
“concerns that drove Congress to depart from the requirements of Article III,”
id. at 851, were merely Congress’ desire to depart from the requirements of
Article III because of the cost and delay that attend a jury trial in a federal
court. Although the speed and efficiency of Article I tribunals are virtues, we
believe that speed and efficiency alone cannot be viewed as sufficient reason
for establishing Article I adjudication absent “imperative necessity.” Indeed,
acceptance of such a justification would lead to the somewhat circular rule that
Congress may avoid the constraints of Article III and eliminate the Seventh
Amendment rights ringingly endorsed in Tull solely on the ground that it
believes that Article III adjudication is more cumbersome than alternative
dispute resolution without judges and juries.
We turn next to consideration of S. 558, which is identical to the draft bill in
all material respects save one: it provides that HUD may institute administra
tive proceedings “on behalf of the aggrieved person filing the complaint” of
housing discrimination, rather than the aggrieved person himself. S. 558,
§ 810(g)(2)(A). Significantly, the private complainant has a right to file a
complaint or to intervene as a full party in an administrative proceeding
initiated by HUD, and he apparently may obtain both judicial enforcement and
review of an adverse decision even if HUD does not go forward. Id., §§ 810(a),
812(h)(2). Although, for the reasons noted above, the issue is hardly free from
doubt, we think that the better view is that HUD’s participation in initiating the
complaint is not alone sufficient to obviate the constitutional difficulties previ
ously described.
As we have suggested, HUD’s participation as a party in these circumstances
says very little about the “public” nature of the right involved, but simply
describes the parties that are authorized to enforce that right. For this reason,
the better understanding of the Court’s precedent is that the Government’s
party status should not be given dispositive weight, particularly where, as here,
the Government does not possess exclusive enforcement authority.
. We are fortified in our conclusion by the fact that this Office has previously
determined, albeit not without equivocation or difficulty, that a proposed 1978
amendment to the Fair Housing Act, virtually indistinguishable from S. 558,
was probably unconstitutional. We so concluded because, as with S. 558, HUD
“would not be the sole enforcer of the statutorily created” government policy
and would not be acting in a regulatory capacity with regard to a public right.16
An opinion that we rendered in 1985 points to a similar conclusion. There we
concluded, albeit tentatively, that a proposed amendment would probably
survive constitutional scrutiny, but we did so in large part because the adminis
trative process failed to “provide the aggrieved individual the punitive dam-
16 2 Op. O.L.C. at 20. A lthough acknow ledging the difficulty o f the issue, we concluded: “w ere we to opine
one way o r the other, o ur conclusion would probably favor a finding that [the proposal] is u n c onstitutional/’
Id.
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ages typically available at common law.” 9 Op. O.L.C. at 38. As noted, S. 558,
like the draft bill, does provide this traditional legal remedy, thus substantially
reinforcing the private, common law nature of the cause of action and render
ing the administrative hearing virtually identical to a judicial proceeding.
It should be noted, however, that Thomas and Schor, two subsequent deci
sions of the Supreme Court have evinced less sympathy for constitutional
challenges to administrative proceedings and upheld statutes that share some,
though clearly not all, of the defects described above. Nevertheless, for the
reasons that we have previously indicated, a review of the Thomas and Schor
opinions persuades us that they contain nothing that requires an analysis or
conclusion different from those expressed in our prior memoranda. First, with
respect to the specific question of the Government’s party status, Thomas
reinforces the correctness of our previous determination that such party status
means little unless it affects the “substance of what [the statute] accomplishes.”
Thomas, 473 U.S. at 589. Second, Schor’s arguable departure from prior cases
is not of controlling importance here because the proposed bills contemplate
the involuntary participation of the defendant in administrative hearings and do
not adjudicate private rights in order to preserve the agency’s practical ability
to adjudicate public rights.
Finally, we discern nothing in Thomas that either signals any sort of whole
sale retreat from the Court’s Article III jurisprudence or lends meaningful
support to the proposed bills. Thomas simply upheld the administrative imple
mentation of a comprehensive federal regulatory scheme in an opinion joined
by every member of the Northern Pipeline plurality that reached the merits of
the case. See Thomas, 473 U.S. at 595 (Brennan, J., concurring). At issue in
Thomas was administrative resolution of a very mechanical and straightfor
ward dispute over the amount o f compensation owed for access to privileged
data, a dispute that nonetheless needed to be resolved expeditiously if the
administrative scheme was to accomplish its purpose. As the Court noted,
“Congress, without implicating Article III, could have authorized EPA to
charge follow-on registrants fe e s ” and that such “rate-making is an essentially
legislative function.” Id. at 590 (emphasis added). Thus, the charging of such
fees was a matter that “could be conclusively determined by the Executive and
Legislative Branches.” Id. at 589 (quoting Northern Pipeline, 458 U.S. at 68).
Conversely, the Court placed heavy reliance on the fact that the statute at issue
did not “displac[e] a traditional cause of action [or] affec[t] a pre-existing
relationship based on a common-law [claim]” because the statutory right to
compensation “does not depend on or replace a right to such compensation
under state law.” Id. at 584, 587. In short, Thomas broke no new Article III
ground because “at its heart the dispute involve[d] the exercise of authority by
a federal government arbitrator in the course of administration of [the statute’s]
comprehensive regulatory scheme. As such it partakes of the characteristics of
a standard agency adjudication.” Id. at 600 (Brennan, J., concurring).
Having said all that, we emphasize that, due to the meandering and confus
ing course of the Court’s precedent, it is both impossible to offer any determi
64
native opinion in this area and possible to construct a defense of the proposed
bills that may prevail in some courts. A line of defense that might be accepted
by a sympathetic court would proceed along the following lines. First, elimina
tion of racial and ethnic discrimination in housing is a paramount public
purpose. Further, Congress has great discretion in choosing the manner in
which to resolve disputes, so long as the subject matter of the dispute concerns
an area over which Congress permissibly exercises authority, including any
area it may reach pursuant to the Commerce Clause. See Atlas Roofing, 430
U.S. at 456—457; Northern Pipeline, 458 U.S. at 105-113 (White, J., dissent
ing) (collecting authorities). Moreover, under a highly formalistic approach, a
court could conclude that the common law antecedents of § 812 of the Fair
Housing Act are unimportant because Congress created a “new” statutory duty
when it outlawed housing discrimination, and that the presence of the United
States, at least as the moving party under S. 558, is of great significance. The
court could further determine that housing discrimination is a “specialized
area” requiring administrative expertise and that it should defer to Congress’
determination that there is a tangible need for expedited review. More gener
ally, a court could fairly note that differentiating between public and private
rights or the regulatory and prosecutorial role of the government is a highly
abstract endeavor that has not received, and is not susceptible to, principled or
consistent resolution.
We acknowledge that there is language in some of the Court’s cases that can
be interpreted to support such a line of analysis. This sort of analysis would
place virtually no limits on congressional authority to remove the resolution of
disputes entirely from Article III courts. Congress always creates “new” rights
by enacting statutes; these statutes must always be directed at an area which
Congress has the power to regulate, and administrative tribunals are always
more expeditious and convenient than juries and judges. Indeed, such an
analysis comes perilously close to subordinating Article Ill’s reservation of the
“judicial Power” and the express guarantees of the Seventh Amendment to the
Necessary and Proper Clause.17 Accordingly, we believe the draft bill and S.
558 in their current form are and would likely be declared unconstitutional on
Article III and Seventh Amendment grounds.
II. Conclusion
Although the policy implications of any modification to the draft bill are
obviously for you to resolve, we recommend certain changes in order to
enhance the constitutional viability of the draft bill. All concerns under the
Seventh Amendment and Article III would be alleviated, of course, by deletion
of the provisions establishing an administrative hearing process. Short of this,
the best solution from a constitutional perspective would be to limit the relief
available in an administrative proceeding to equitable remedies such as injunc
17 N or do we understand why the grave im portance o f a public policy is an argum ent supporting removal of
that controversy from an im partial judiciary insulated from political influence.
65
tions and restitution, thus avoiding any conflict with the Seventh Amendment’s
preservation of jury trials in “suits at Common Law.” At a minimum, serious
consideration should be given to eliminating at least punitive damages for
private litigants in the arbitration proceedings. The retention of compensatory
damages alone might be upheld under reasoning similar to that the reasoning
that we outlined in 1985. See 9 Op. O.L.C. 32.
C h a r l e s J. C o o p e r
Assistant Attorney General
Office o f Legal Counsel
66