America’s Hidden Judiciary

Unbeknownst to most Americans, federal regulatory agencies have their own court system for adjudicating disputes that businesses and citizens have with regulators. These agencies rely on special courts headed by administrative law judges (ALJs). One big problem with this system is that it operates independently of legitimate Article III courts. Another problem is that agency-housed tribunals have a strong tendency to favor regulators over the regulated. And yet another problem is how these judges (which I call “transitory”) get loaned out between agencies. Inter-agency borrowing of ALJs may not immediately stand out to the average citizen as problematic, but it raises serious questions about constitutionality, executive transparency, and bureaucratic oversight.

In a new report for the Pacific Legal Foundation (PLF), I offer a systematic review of how federal agencies exchange their judges, analyzing a sample of 960 ALJs across forty-two federal agencies. In fact, agencies have likely lent and borrowed ALJs over the past ninety years, predating the 1946 Administrative Procedure Act (APA).

The APA is considered the constitution for the administrative state. It outlines important procedures for agencies to adhere to when conducting rulemaking, rendering adjudication, and issuing statements of public policy. The APA requires select agencies containing statutory permission to conduct formal adjudication on the record (and often in public) under the oversight of an ALJ. Yet, the phenomenon of interagency borrowing of ALJs was born entirely outside of the APA’s requirements.

How did this controversial practice come to be? Several agencies managed pre-APA tribunals to adjudicate their legal matters. The Federal Trade Commission (FTC) has one of the oldest recorded instances of adjudicating public hearings within the federal government. The 1914 FTC Act enabled agency hearing examiners (ALJs) to resolve disputes over unfair or deceptive acts and anti-competitive business transactions.

While ALJ borrowing formally began in the 1960s with the first documented instance at the NLRB, it may have begun decades earlier with the FTC in 1914 and the US Civil Service Commission in 1871. The Civil Service Commission is the predecessor to both the Merit Systems Protection Board (MSPB) and the Office of Personnel Management (OPM).

My report cites a 2014 case, Berlin v. Department of Labor (DOL), in which the MSPB borrowed a Coast Guard ALJ to conduct a two-day hearing for the DOL. MSPB also borrows judges from the FTC through a special interagency system, adjudicating cases arising from other agencies. MSPB likely derived this power from the Civil Service Commission, which formally authorized ALJ borrowing at the National Labor Relations Board (NRLB) in the 1960s. While the NRLB’s historical report documents its internally hired or “stationary” ALJs, it keeps the identity of the agencies that lend ALJs hidden. This lack of transparency is concerning.

In addition to the above, the DOL has a documented history of using pre-APA hearing examiners in the early 1900s. Examiners adjudicated public contracts for the manufacture and supply of materials under the Walsh-Healey Public Contracts Act (1936). In response to concerns over ex parte communications between Labor Department attorneys and examiners, its Division of Public Contracts kept them separated when traveling for work. Other agencies, like the Securities and Exchange Commission and NLRB, also took early steps to insulate their examiners from prosecutorial influence during the 1930s and 1940s. Most agencies today provide some degree of insulation for their judges after Congress amended the US Code in 1989 to provide ALJs with two layers of statutory removal protection.

Despite the above, Joanna Grisinger cites widespread concern over adjudicatory misconduct from a 1941 study by the Attorney General’s Committee on Administrative Procedure. According to the report, “parties confronted administrative officials not in formal courtrooms but in the agencies’ own offices, in space borrowed from other agencies, or in the field.” It is also very likely that agencies borrowed hearing examiners to conduct cases at these offices as well.

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