CEI briefs the public on the need for administrative law court reform

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The Competitive Enterprise Institute recently hosted our first Capitol Hill event of the year, urging Congress to propose administrative law court (ALC) reform. Our Constitution recognizes a strict separation of powers dividing all three branches of government. No one branch was intended to assume all powers onto itself. ALCs violate this doctrine by empowering government regulators with their own hidden court system.

CEI put ALCs into the spotlight by hosting a public briefing at the U.S. Capitol. The event was inspired by a recently published CEI report, “Conflict of Justice: Making the Case for Administrative Law Court Reform.”

We featured unique insights from five expert panelists. Headlining the event was Rep. Harriet Hageman (R-WY), who in her previous role as a litigator represented many clients against federal government overreach.

During her more than 30 years of litigating, Rep. Hageman defended clients before ALCs and was perhaps among the few to have successfully defeated agencies after enduring prolonged adjudication.

She spoke about her uphill struggle against the Environmental Protection Agency, mentioning how it was noticeably easier to adjudicate a claim before an independent Article III court than within the agency’s ALC.

“Being in a regular district court because of Chevron deference and the various deference doctrines, we are already starting with not being on an even playing field. When you take it [a case] before administrative law courts, it has become even worse.”

ALCs primarily serve the interests of federal agencies themselves by justifying excessive regulatory activities, like costly fines, settlements, and gag orders. ALC reform begins with correcting the legislation that empowers agency adjudication, the Administrative Procedure Act (APA).

“We are planning on doing an administrative law reform,” Rep. Hageman explained. “If you have ideas of ways the process or the APA should be amended, I invite every single one of you to get a hold of my office for ideas.”

Rep. Hageman favors allowing private litigants to determine what court of law they will be served in, an ALC or an Article III court.

“It is only the agency that gets to determine if they’re going to use an ALJ [administrative law judge]. How about we just level the playing field?” the Congresswoman stated. “I think that move alone would substantially limit the kind of enforcement actions that these agencies bring.”

Competitive Enterprise Institute senior economist Ryan Young provided remarks of his own, illustrating the insidious level of unfairness that ALCs represent.

“In this special court, the agency chooses the judge, the agency pays their salary, you often do not have the right to a jury trial, the agency sets the procedural rules that you have to follow, the agency sets the rules of evidence. In some cases, it can withhold evidence from your attorney, and you will not be able to see it,” Young said. “This is a broken system, and it needs reform.”

Following Young, I spoke to ALCs’ transparency problems. Even gauging just how many federal agencies there are across government, discovering the existence and scope of ALCs has proven to be difficult.

Unlike Article III courts, ALCs possess no central repository. Information can be hard to come by beyond what the host agency decides to report. This has led to around 33 percent of the 44 known ALCs to possess incomplete or missing data on their annual case activity.

Many ALCs obscure data on their adjudications deep within their host agency’s legislative budget proposals. Others lack any official identity or information on their ALJs outside of a simple online welcome page.

To remedy this, I propose two policy solutions drawn from a recent CEI report. Both proposals urge Congress to pass legislation that moves ALCs out of the executive branch and into the judicial branch to remove the manipulative sway that agencies wield. This would also integrate administrative law cases into the PACER system for public view.

The gradualist approach would enable multiple presidential administrations to move ALCs into the judiciary a few agencies at a time. New trial courts would be created to accommodate the former ALJs, as they bolster the ranks of existing federal courts.

The magistrate approach sees legislation that creates the formation of a new specialized magistrate court in the judicial branch to house former ALCs. Circuit court judges would be tasked with appointing new magistrate judges to manage administrative law matters with exclusive jurisdiction.

Peggy Little of the New Civil Liberties Alliance shared her experience litigating on behalf of two clients, Ray Lucia and Michelle Cochran, who scored rare victories against the SEC’s court system.

“This is just straight out of Kafka. You are talking about people who are appealing their cases to the very people prosecuting them,” Little explained. “And tied in those proceedings for 10 years in a system that is rigged against them from the beginning.”

Little questioned why people are only now discovering the problems that ALCs impose. One reason is the SEC’s “gag order” that prevents people—98% of whom have settled their cases with the agency—from publicly speaking about their case afterward.

Josh Robbins of the Pacific Legal Foundation (PLF) focused on one of the largest legal impediments to reforming agency adjudication, the Supreme Court case Atlas Roofing v. OSHA (1977).

This decision enables federal agencies to deny litigants access to a civil jury trial, overriding their Seventh Amendment guarantee involving the imposition of enforcement actions (i.e., fines). During the founding, the Anti-Federalists and Federalists disputed whether Congress possessed the authority to regulate jury trials. Emerging from this debate was the constitutional guarantee to a jury trial in civil affairs, with no exceptions.

Atlas Roofing makes it as if this debate never happened,” Robbins explained, “Congress can actually fix this problem itself by providing for jury trials in administrative adjudications through the ones like Ryan and Stone have put forward today.”

Last but not least, Will Yeatman of PLF raised the alarm about the crippling expense that agency-enforced civil monetary penalties have imposed on regular Americans facing ALCs. This initially began in the late 1970s with the emergence of congressional authorizations for agencies to impose civil fines.

This has become an increasingly costly regulatory burden for victims of enforcement actions that ALCs validate. “In 2022, agencies have imposed at least $10.2 billion of civil monetary fines in their in-house adjudication,” Yeatman stated. “They were not around at the founding of the administrative state.”

CEI’s briefing on ALC reform lays the groundwork for Congress to directly address this hidden court system. Regular Americans should no longer be denied justice from agencies that wield ALCs to justify their own excessive authority. It’s time for legislation that amends the APA and puts an end to agency adjudication.