```

[House Report 106-976]
[From the U.S. Government Publishing Office]

106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-976

======================================================================

 
                     FEDERAL AGENCY COMPLIANCE ACT

                                _______
                                

October 12, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Gekas, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1924]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1924) to prevent Federal agencies from pursuing 
policies of unjustifiable nonacquiescence in, and relitigation 
of, precedents established in the Federal judicial courts, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                  

                                                                 Page
The Amendment..............................................           2
Purpose and Summary........................................           2
Background and Need for the Legislation....................           4
Hearings...................................................           8
Committee Consideration....................................           8
Votes of the Committee.....................................           8
Committee Oversight Findings...............................          10
Committee on Government Reform Findings....................          10
New Budget Authority and Tax Expenditures..................          10
Congressional Budget Office Cost Estimate..................          11
Constitutional Authority Statement.........................          12
Section-by-Section Analysis and Discussion.................          12
Agency Views...............................................          16
Changes in Existing Law Made by the Bill, as Reported......          22
Dissenting Views...........................................          25

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Agency Compliance Act''.

SEC. 2. PROHIBITING AGENCY NON-ACQUIESCENCE IN APPELLATE PRECEDENT.

    (a) In General.--Chapter 7 of title 5, United States Code, is 
amended by adding at the end the following:

``Sec. 707. Adherence to court of appeals precedent

    ``(a) Except as provided in subsection (b), an agency (as defined 
in section 701(b)(1) of this title) shall in civil matters, in 
administering a statute, rule, regulation, program, or policy within a 
judicial circuit, adhere to the existing precedent respecting the 
interpretation and application of such statute, rule, regulation, 
program, or policy, as established by the decisions of the United 
States court of appeals for that circuit.
    ``(b) An agency is not precluded under subsection (a) from taking a 
position, either in an administrative proceeding or in litigation, that 
is at variance with precedent established by a United States court of 
appeals if--
            ``(1) it is not certain whether the administration of the 
        statute, rule, regulation, program, or policy will be subject 
        to review exclusively by the court of appeals that established 
        that precedent or a court of appeals for another circuit;
            ``(2) the Government did not seek further review of the 
        case in which that precedent was first established, in that 
        court of appeals or the United States Supreme Court, because--
                    ``(A) neither the United States nor any agency or 
                officer thereof was a party to the case; or
                    ``(B) the Solicitor General determines or the 
                agency officer responsible for such determination 
                determines the decision establishing that precedent was 
                otherwise substantially favorable to the agency; or
            ``(3) it is reasonable to question the continued validity 
        of that precedent in light of a subsequent decision of that 
        court of appeals or the United States Supreme Court, a 
        subsequent change in any pertinent statute or regulation, or 
        any other subsequent change in the public policy or 
        circumstances on which that precedent was based.''.
    (b) Clerical Amendment.--The table of sections for chapter 7 of 
title 5, United States Code, is amended by adding at the end the 
following new item:

``707. Adherence to court of appeals precedent.''.

SEC. 3. AVOIDING UNNECESSARILY REPETITIVE LITIGATION.

    (a) In General.--Chapter 7 of title 5, United States Code, is 
amended by adding at the end the following:

``Sec. 708. Avoiding unnecessarily repetitive litigation

    ``In supervising the conduct of civil litigation, the officers of 
any agency of the United States authorized to conduct litigation, 
including the Department of Justice acting under sections 516 and 519 
of title 28, United States Code, should seek to ensure that the 
initiation, defense, and continuation of proceedings in the courts of 
the United States, within, or subject to the jurisdiction of, a 
particular judicial circuit, avoids unnecessarily repetitive litigation 
on questions of law already uniformly resolved against the United 
States in 3 or more courts of appeals. A decision on whether to iniate, 
defend, or continue litigation is not subject to review in any court by 
mandamus or otherwise on the grounds that the decision violates this 
section.''.
    (b) Clerical Amendment.--The table of sections for chapter 7 of 
title 5, United States Code, is amended by adding at the end the 
following new item:

``708. Avoiding unnecessarily repetitive litigation.''.

                          Purpose and Summary

    The Federal Agency Compliance Act, H.R. 1924, generally 
prevents agencies in civil matters from refusing to follow 
controlling precedents of the United States courts of appeals 
in the course of program administration and litigation. The 
Committee on the Judiciary (hereinafter referred to as 
committee) believes that citizens who file claims or who 
otherwise are involved in proceedings with Federal agencies 
have the right to expect that those agencies will obey the law 
as interpreted by the courts. Moreover, the committee believes 
that agencies should be discouraged from relitigating settled 
questions of law in multiple circuits. Unnecessary litigation 
is a needless expense for both the Government and private 
parties and a waste of limited judicial resources. The bill is 
based upon a recommendation by the Judicial Conference of the 
United States that Congress ``* * * enact legislation to--(a) 
generally prohibit agencies from adopting a policy of non-
acquiescence to the precedent established in a particular 
Federal circuit; and (b) require agencies to demonstrate 
special circumstances for relitigating an issue in an 
additional circuit when a uniform precedent has been 
established already in multiple courts of appeals.'' \1\
---------------------------------------------------------------------------
    \1\ Judicial Conference of the United States, Long Range Plan for 
the Federal Courts 34 (1995) (Recommendation 11).
---------------------------------------------------------------------------
    H.R. 1924 addresses the two kinds of agency 
nonacquiescence: intracircuit nonacquiescence--refusal to 
follow controlling appellate precedent within a specific 
Federal judicial circuit; and intercircuit nonacquiescence--
relitigating in other judicial circuits issues on which 
precedents have already been established in multiple 
circuits.\2\ Regarding intracircuit nonacquiescence, the bill 
generally requires an agency in civil matters to follow 
relevant existing court of appeals precedent in that circuit. 
The committee, however, recognizes that an agency should be 
able to assert a position contrary to precedent in limited 
circumstances, for example, such as when intervening legal, 
factual, or public policy developments may have undermined or 
changed the rationale for the earlier decision.
---------------------------------------------------------------------------
    \2\ See Samuel Estreicher & Richard L. Revesz, Nonacquiescence by 
Federal Administrative Agencies, 98 Yale L.J. 679 (1989).
---------------------------------------------------------------------------
    With respect to intercircuit nonacquiescence, the committee 
believes that agencies should not repeatedly relitigate legal 
issues that have been uniformly resolved against the Government 
or one of its agencies. The bill provides that officers of any 
agency of the United States authorized to conduct litigation, 
including the Department of Justice, should seek to ensure that 
the initiation, defense, and continuation of proceedings in the 
courts of the United States, avoid unnecessarily repetitive 
litigation on questions of law already uniformly resolved 
against the United States in three or more courts of appeals. 
The committee believes that it is important to conserve 
judicial and agency resources, as well as those of citizens and 
businesses that would otherwise be required to participate in 
unnecessary litigation. However, a decision by an agency under 
this provision is not subject to judicial review or 
enforcement.
    The Federal Agency Compliance Act gives effect to the 
principle of stare decisis. An appellate court's decisions 
resolving legal issues form precedents, which thereafter serve 
as controlling law on the legal points resolved. Stare decisis 
as applied to precedents of a United States court of appeals 
has been referred to as the ``law of the circuit'' doctrine. 
Respect for controlling law provides stability and 
predictability to our judicial system facilitating settlement 
of disputes and freeing parties from relitigating established 
legal precedents. It promotes uniformity by treating everyone 
alike within a circuit and providing litigants with a sense of 
fairness, regardless of their financial means. H.R. 1924 
ensures that Federal agencies, as well as other claimants and 
parties, will respect the law of the circuit.

                Background and Need for the Legislation

    Nonacquiescence is an agency's refusal to adhere to 
judicial precedent in handling or resolving a subsequent matter 
that presents the same question of law under sufficiently 
similar facts. As previously noted, H.R. 1924 addresses both 
types--intracircuit and intercircuit nonacquiescence.\3\
---------------------------------------------------------------------------
    \3\ During the 105th Congress, Mr. Gekas, the Chairman of the 
Subcommittee on Commercial and Administrative Law, introduced similar 
legislation, H.R. 1544, together with Mr. Frank of Massachusetts. The 
bill was passed by the House on February 25, 1998, by a vote of 241-
173. On September 11, 1997, a substantially similar bill, S. 1166, was 
introduced by Senator Ben Nighthorse Campbell. H.R. 1924 was introduced 
on May 25, 1999, and Senator Campbell introduced similar legislation, 
S. 932, the ``Federal Bureaucracy Accountability Act of 1999,'' on 
April 30, 1999.
---------------------------------------------------------------------------
    The routine practice of nonacquiescence generates 
significant social costs. Even though a party who challenges an 
agency decision in court may be certain to prevail based upon 
favorable precedent, that party nonetheless has been required 
to expend considerable resources to achieve that result. 
Moreover, the nonacquiescent agency may continue to apply its 
policy to those who are similarly situated, each of whom may 
ultimately have to file suit to obtain the relief previously 
deemed appropriate by the Federal court. As a prerequisite to 
judicial review, those aggrieved by agency action must 
generally exhaust their administrative remedies, which may 
involve hearings before administrative law judges, applications 
to appellate boards, or other proceedings required under the 
relevant statute. Thus, the process whereby an aggrieved party 
ultimately receives the relief to which the party is entitled 
under judicial precedent can be costly and protracted. Agency 
nonacquiescence has been an ongoing problem. In their study, 
Professors Samuel Estreicher and Richard Revesz trace the 
practice back to the 1920's,\4\ noting that since that time 
``many agencies have insisted, in varying degrees, on the 
authority to pursue their policies, despite conflicting court 
decisions.'' \5\ The Social Security Administration (SSA) and 
the Internal Revenue Service (IRS) were among those agencies 
cited as having practiced nonaquiescence.\6\ In 1975, the 
report of the Commission on Revision of the Federal Court 
Appellate System (the Hruska Commission) identified significant 
concerns about the impact of agency nonacquiescence 
practices.\7\ And in the 1980's, the Social Security 
Administration was strongly criticized by courts, legal 
scholars, and the Congress for its repeated nonacquiescence in 
the face of contrary appellate court rulings.\8\
---------------------------------------------------------------------------
    \4\ The origin of the practice of nonacquiescence at the Internal 
Revenue Service is explained further in Gary L. Rodgers' The 
Commissioner Does Not Acquiesce, 59 Neb. L. Rev. 1001, 1004-05 (1980) 
(footnotes omitted):

      Historically, the practice began in 1924 when the Tax Court 
      was known as the Board of Tax Appeals. At that time there 
      was no procedure for direct appeal from the Board's 
      decision. If the Service lost, it could bring suit in 
      Federal district court within 1 year to collect any 
      deficiency disallowed by the Board. In order that taxpayers 
      who were successful before the Board would not have to wait 
      a full year to find out if the [S]ervice planned to appeal, 
      the Commissioner would publish the decision to acquiesce or 
      nonacquiesce.
---------------------------------------------------------------------------
    \5\ See Estreicher & Revesz, supra note 2, at 681.
    \6\ Id.
    \7\ See Commission on Revision of the Federal Court Appellate 
System, Structure and Internal Procedures: Recommendations for Change, 
67 F.R.D. 195, app. B at 349-61 (1975).
    \8\ Estreicher & Revesz, supra note 2, at 681-82. During the 98th 
Congress, the House passed H.R. 3755, ``The Social Security Disability 
Benefits Reform Act of 1984,'' which barred SSA intracircuit 
nonacquiescence outright. The Senate took a somewhat different 
approach, instead mandating procedural safeguards whenever 
nonacquiescence was asserted. Although the relevant provisions in each 
bill were subsequently deleted, the Conference Report noted that the 
decision to eliminate them should ``not be interpreted as approval of 
`non-acquiescence' by a Federal agency to an interpretation of a U.S. 
Court of Appeals.'' H. Conf. Rep. No. 1039, 98th Cong., 2d Sess. 37 
(1984), reprinted in 1984 U.S.C.C.A.N. 3095. During the 99th Congress, 
the Subcommittee on Administrative Law and Governmental Relations of 
the House Judiciary Committee held hearings on ``Judicial Review of 
Agency Action: HHS Policy of Nonacquiescence'' at which a substantial 
body of testimony was received against the Social Security 
Administration's practice. Judicial Review of Agency Action: HHS Policy 
of Nonacquiescence: Hearing Before the Subcomm. on Administrative Law 
and Governmental Relations of the House Comm. on the Judiciary, 99th 
Cong., 1st Sess. (July 25, 1985).
---------------------------------------------------------------------------
    The problem of agency nonacquiescence was also recognized 
in 1990 by the Federal Courts Study Committee (the Study 
Committee), which was established by Congress to perform a 
comprehensive review of the problems and issues facing the 
Federal judiciary. In its report, the Study Committee 
recommended to Congress that the practice of agency 
nonacquiescence in administrative adjudication of Social 
Security disability claims be prohibited.\9\ The recommendation 
responded to an assertion by the Secretary of Health and Human 
Services (whose department at that time included the SSA) of a 
right to disregard the precedential holdings of the courts of 
appeals if the agency determined that the relevant court 
decisions were not in accord with its own policy. The Study 
Committee also called upon Congress to explore whether 
``legislative control'' should be applied to other executive 
branch agencies as well.\10\
---------------------------------------------------------------------------
    \9\ Report of the Federal Courts Study Committee 59-60 (1990). In 
the Study Committee's view, an exemption from this prohibition should 
be recognized for ``test'' cases designated by the Solicitor General.
    \10\ Id. at 60.
---------------------------------------------------------------------------
    In explaining the Judicial Conference recommendation for 
legislation to address the continuing problem, the Long Range 
Plan for the Federal Courts noted that the practice of 
unjustified nonacquiescence ``undermines the fundamental 
principle that an appellate court's decision on a particular 
point of law is controlling precedent for other cases raising 
the same issue.'' \11\ It went on to cite the practice's 
``questionable propriety and inefficiency'' and criticized it 
as ``unfair to litigants, many of whom are pro se, who 
frequently are unaware of precedent favorable to their cases.'' 
\12\
---------------------------------------------------------------------------
    \11\ Long Range Plan for the Federal Courts, supra note 1, at 35 
(commentary on Recommendation 11).
    \12\ Id.
---------------------------------------------------------------------------
    In a written statement in support of H.R. 1924 submitted to 
the subcommittee on behalf of the Judicial Conference of the 
United States, Judge Walter K. Stapleton of the United States 
Court of Appeals for the Third Circuit, observed:

          Over the past several decades, some Federal agencies 
        have refused to apply, either in a particular case or 
        across the board in all cases, decisions within the 
        same circuit that are contrary to the legal positions 
        taken by the agency. This intra-circuit non-
        acquiescence has, at times, resulted in an agency's 
        issuance of internal instructions to administrative 
        decision-makers to apply a rule of law at variance with 
        the circuit precedent. Litigants then have been 
        required to seek Federal judicial review of agency 
        action to avail themselves of existing decisional law 
        in their favor. The Judicial Conference of the United 
        States believes that when the Federal Government has 
        had a fair opportunity to litigate an issue in a court 
        of appeals and has lost, all citizens and businesses 
        within the court's jurisdiction who the decision favors 
        are entitled to have the government recognize their 
        right to equal treatment without having to establish 
        that right again through costly agency proceedings and 
        litigation. \13\
---------------------------------------------------------------------------
    \13\ Federal Agency Compliance Act: Hearing on H.R. 1924 Before the 
Subcomm. on Commercial and Administrative Law of the House Comm. on the 
Judiciary, 106th Cong., 1st Sess. [hereinafter Compliance Act Hearing 
on H.R. 1924] (written statement of Hon. Walter K. Stapleton, Judge, 
U.S. Court of Appeals for the Third Circuit at 3).

    In the 105th Congress, Judge Stephen H. Anderson of the 
United States Court of Appeals for the 10th Circuit testified 
on behalf of the Judicial Conference on H.R. 1544. In his 
testimony before the subcommittee, Judge Anderson noted that 
nonacquiescence ``violates all our concepts of the rule of law 
existing in this country for more than 200 years.'' \14\ He 
added that, oftentimes, agency nonacquiesence discourages 
meritorious claimants from pursuing what is their right under 
favorable precedent.
---------------------------------------------------------------------------
    \14\ Federal Agency Compliance Act: Hearing on H.R. 1544 Before the 
Subcomm. on Commercial and Administrative Law of the House Comm. on the 
Judiciary, 105th Cong., 1st Sess. at 11 (1997) [hereinafter Compliance 
Act Hearing on H.R. 1549] (testimony of Hon. Stephen H. Anderson, 
Judge, U.S. Court of Appeals for the 10th Circuit).
---------------------------------------------------------------------------
    He stated:

          This is a matter of the invisible statistic, the 
        invisible citizen claimant. What happens to the mass of 
        citizen claimants at the lowest level, the first desk 
        of an agency's consideration? That action we don't know 
        about. The only way that we know that something may be 
        wrong is the announcement over and over again, one way 
        or the other, by agencies that they have the right to 
        disregard the law set by the circuit in which they 
        conduct their affairs.\15\
---------------------------------------------------------------------------
    \15\ Id. at 16.

    John H. Pickering, Esq., testifying on behalf of the 
American Bar Association (ABA) during the 106th Congress, noted 
that the ABA has a longstanding interest in the issue of Social 
Security nonacquiescence and has frequently criticized its 
adverse effects on the bar, the courts and claimants.\16\
---------------------------------------------------------------------------
    \16\ Compliance Act Hearing on H.R. 1924, supra note 13 (written 
statement of John H. Pickering, Wilmer, Cutler & Pickering, on behalf 
of the ABA at 2).
---------------------------------------------------------------------------
    The legal and policy concerns surrounding agency 
nonacquiescence have been the subject of substantial debate. In 
essence, agencies consider it their responsibility to 
administer national programs with standards consistent 
throughout the country. They argue that adhering to divergent 
precedents established by the various courts of appeals 
detracts from this goal by fractionalizing those standards. In 
defense of intercircuit nonacquiescence, agencies argue that to 
freeze the law based upon a decision of one or two circuits 
prevents the ``percolation'' of issues that ensures 
comprehensive appellate review prior to final resolution by the 
Supreme Court.
    The committee believes, however, that equity and orderly 
governance require that agencies, like private citizens, should 
obey the law enunciated by courts of competent jurisdiction. If 
an agency disagrees with a court's decision, it has several 
options. It can seek further review of the matter by the court 
of appeals (the same panel or en banc) or by the Supreme Court 
until the issue is finally resolved. It can also seek to 
vindicate its position in other courts of appeals and perhaps 
obtain review of the matter in the Supreme Court if conflicting 
rulings are obtained among the circuits. If the agency 
disagrees with the outcome of the judicial process, it can 
petition Congress to amend the law. This structure is 
consistent with the principle of separation of powers under 
which it is the courts' constitutional role to interpret the 
laws governing agency actions. It is true that today some 
agencies assert that they fully or generally acquiesce in 
controlling precedents.\17\ However, some agencies do not 
``acquiesce'' in a particular court decision until agency 
officials review the judicial opinion and issue a directive to 
agency employees to follow the ruling in subsequent 
administrative proceedings.\18\ Thus, some agencies appear to 
treat controlling precedent as having no binding effect until 
the agency interprets such precedent and determines how it 
should be implemented.\19\ Under that rationale, the agency has 
become, in effect, a review level between the appellate courts 
and the Supreme Court, a view that the committee does not 
share. The committee believes the Federal agencies are not 
entitled to craft their own ``grace periods'' during which they 
may decline to observe the law as stated in an otherwise 
binding precedent.
---------------------------------------------------------------------------
    \17\ The Department of Justice has stated that ``agency 
nonacquiescence is uncommon'' and ``[w]here the government has lost a 
legal issue in three circuits, the Solicitor General only rarely 
permits a fourth appellate test of the issue.'' Letter from Andrew 
Fois, Assistant Attorney General, Department of Justice, to Honorable 
Henry J. Hyde, Chairman, Committee on the Judiciary (Sept. 17, 1997). 
In his written statement on H.R. 1924, William B. Schultz, Deputy 
Assistant Attorney General for the Civil Division of the Department of 
Justice, added that ``[w]e agree with the general proposition that 
agencies should follow court of appeals'' precedent within the 
circuit--and in the vast majority of instances that is precisely what 
agencies do. Nonacquiescence occurs only in rare cases.'' Compliance 
Act Hearing on H.R. 1924, supra note 13 (written statement of William 
B. Schultz at 1).
    \18\ Compliance Act Hearing on H.R. 1924, supra note 13 (written 
statement of Arthur J. Fried, Esq., General Counsel, Social Security 
Administration at 3). The SSA issues ``acquiescence rulings'' which 
explain how it will apply the decisions of courts of appeals that are 
at variance with the agency's national policies for adjucating claims. 
These ``rulings'' explain how SSA will apply the appellate court 
holding to other cases involving the issue at all levels of 
adjudication in the same circuit. See also 20 CFR 404.985 and 416.1485 
48,963 (SSA rules on application of circuit precedent to administrative 
decision making). During the 105th Congress, Daniel J. Wiles, Deputy 
Associate Chief Counsel, Office of Chief Counsel, Internal Revenue 
Service, explained the IRS ``Action on Decision'' (AOD) program in 
which he noted that in significant cases an AOD is issued which states 
whether the IRS position is one of acquiescence, acquiescence in result 
or nonacquiescence, supra note 14 at 30-31. Compliance Act Hearing on 
H.R. 1544, supra note 14 at 30-31.
    \19\ In 1996 a court of appeals reversed an SSA decision applying 
regulations the court had invalidated in an earlier case. Although the 
agency explained its failure to observe the earlier precedent on 
grounds that an ``acquiescence ruling'' had not been issued, the court 
rejected that argument, noting:

        Regardless of whether the Commissioner formally announces 
      her acquiescence, however, she is still bound by the law of 
      this circuit and does not have the discretion to decide 
      whether to adhere to it. `` `[T]he regulations of [SSA] are 
      not the supreme law of the land. ``It is, emphatically, the 
      province and duty of the judicial department, to say what 
      the law is,'' Marbury v. Madison, 1 Cranch 137, 2 L.Ed. 60 
      (1803) and the [Commissioner] will ignore that principle at 
      [her] peril.' '' Hillhouse v. Harris, 715 F.2d 428, 430 
      (8th Cir. 1983) (per curiam) (quoting Hillhouse v. Harris, 
---------------------------------------------------------------------------
      547 F.Supp. 88, 93 (W.D. Ark. 1982)).

Hutchison v. Chater, 99 F.3d 286, 287-88 (8th Cir. 1996) (bracketed 
language in opinion).
    The decision whether or not to acquiesce appears to be 
premised on the view that Federal agencies apply legal 
principles from court rulings in the administration of a 
statutory program only for reasons of comity, not because the 
precedent is legally binding on the agency.\20\ As long as an 
agency holds the view that following controlling precedent is 
optional, the committee believes that this bill is necessary. 
No one is above the law, especially Federal agencies, whose 
officials are sworn to uphold the rule of law.\21\
---------------------------------------------------------------------------
    \20\ United States Department of Energy v. Federal Labor Relations 
Authority, 106 F.3d 1158, 1165 (4th Cir. 1997) (Luttig, J. concurring) 
(quoting letter from William Kanter, Deputy Director of the Justice 
Department's Civil Division Appellate Staff dated Nov. 14, 1996).
    \21\ In Allegheny General Hospital v. NLRB, 608 F.2d 965 (3d Cir. 
1979), the court observed:

      Congress has not given to the NLRB the power or authority 
      to disagree, respectfully or otherwise, with decisions of 
      this court. For the Board to predicate an order on its 
      disagreement with this court's interpretation of a statute 
---------------------------------------------------------------------------
      is for it to operate outside the law.

Id. at 970 (citation omitted). See also Lopez v. Heckler, 713 F.2d 1432 
(9th Cir. 1983).

                                Hearings

    The Subcommittee on Commercial and Administrative Law of 
the Judiciary Committee held a hearing on H.R. 1924, the 
``Federal Agency Compliance Act,'' on Wednesday, October 27, 
1999. Testimony was received from the following witnesses: 
Senator Ben Nighthorse Campbell, United States Senator for the 
State of Colorado; Honorable Walter K. Stapleton, Judge, U.S. 
Court of Appeals for the Third Circuit, submitted a written 
statement of behalf of the Judicial Conference of the United 
States; William Schultz, Deputy Assistant Attorney General, 
Civil Division, United States Department of Justice; Arthur J. 
Fried, General Counsel, Social Security Administration; John 
Pickering, Chair of the Senior Lawyers Division of the American 
Bar Association, Wilmer, Cutler & Pickering; Honorable Ronald 
Bernoski, Social Security Administration, Office of Hearings 
and Appeals and President of the Association of Administrative 
Law Judges, Inc.; and Sheldon Cohen, Senior Counsel, Morgan, 
Lewis & Bockius, LLP.

                        Committee Consideration

    On Tuesday, June 20, 2000, the Subcommittee on Commercial 
and Administrative Law met in open session and ordered reported 
the bill H.R. 1924, with an amendment in the nature of a 
substitute by a voice vote, a quorum being present. On Tuesday, 
September 19, 2000, the committee met in open session and 
ordered reported favorably the bill H.R. 1924 with an amendment 
in the nature of a substitute by voice vote, a quorum being 
present.

                         Votes of the Committee

    There were six amendments offered during Full Committee 
consideration of H.R. 1924.
    Mr. Nadler offered an amendment, which was adopted by voice 
vote, providing that in order for the section of the bill on 
intercircuit nonacquiescence to apply, the precedent in three 
or more circuits must have been ``uniformly'' decided against 
the position of the government.
    Ms. Jackson Lee offered an amendment, which was defeated by 
a recorded vote of 9-17, to allow an agency to exercise its 
discretion not to acquiesce in an appellate court precedent if 
it determines that the precedent would impede the defense and 
protection of civil liberties or civil rights.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............              X   ..............
Mr. McCollum....................................................  ..............              X   ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............  ..............  ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............  ..............  ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............              X   ..............
Mr. Jenkins.....................................................  ..............              X   ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............              X   ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............  ..............  ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............              X   ..............
Mr. Scarborough.................................................  ..............              X   ..............
Mr. Vitter......................................................  ..............  ..............  ..............
Mr. Conyers.....................................................              X   ..............  ..............
Mr. Frank.......................................................              X   ..............  ..............
Mr. Berman......................................................  ..............  ..............  ..............
Mr. Boucher.....................................................  ..............  ..............  ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................  ..............  ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................              X   ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................  ..............  ..............  ..............
Mr. Weiner......................................................  ..............  ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................              9              17   ..............
----------------------------------------------------------------------------------------------------------------

    Mr. Nadler offered an amendment, defeated by a recorded 
vote of 11-17, to provide that the requirements of the bill 
should apply only to ``agency actions which involve a Federal 
health benefits program, a Federal program under which cash is 
paid based on need or insurance benefits are paid.''

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............              X   ..............
Mr. McCollum....................................................  ..............  ..............  ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............              X   ..............
Mr. Smith (TX)..................................................  ..............              X   ..............
Mr. Gallegly....................................................  ..............  ..............  ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............  ..............  ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............              X   ..............
Mr. Jenkins.....................................................  ..............              X   ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............              X   ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............  ..............  ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............              X   ..............
Mr. Scarborough.................................................  ..............              X   ..............
Mr. Vitter......................................................  ..............  ..............  ..............
Mr. Conyers.....................................................              X   ..............  ..............
Mr. Frank.......................................................  ..............              X   ..............
Mr. Berman......................................................              X   ..............  ..............
Mr. Boucher.....................................................  ..............  ..............  ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................              X   ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................              X   ..............  ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................  ..............  ..............  ..............
Mr. Wexler......................................................              X   ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Ms. Baldwin.....................................................  ..............  ..............  ..............
Mr. Weiner......................................................  ..............  ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................             11              17   ..............
----------------------------------------------------------------------------------------------------------------

    Mr. Nadler offered three amendments which were considered 
en bloc and defeated by a voice vote. Mr. Nadler's amendments 
provided: 1) That in order for an agency to be required to 
acquiesce to a circuit court of appeals decision it must have 
not sought review of that decision because it was not a party 
to that decision; 2) To provide that an agency may not be 
required to acquiesce to a decision of the circuit court of 
appeals if ``further review of the decision was effectively 
unavailable''; and 3) To provide that an agency could use a 
subsequent decision of a court of appeals other than that which 
rendered an otherwise binding precedent to determine that it 
``is reasonable to question the continued validity'' of that 
precedent and therefore nonacquiesce.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the committee reports 
that the findings and recommendations of the committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                Committee on Government Reform Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the committee sets forth, with 
respect to the bill, H.R. 1924, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 11, 2000.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1924, the Federal 
Agency Compliance Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lanette J. 
Keith, who can be reached at 226-2860.
            Sincerely,
                                  Dan L. Crippen, Director.

Enclosure

cc:
        Honorable John Conyers Jr.
        Ranking Democratic Member
H.R. 1924--Federal Agency Compliance Act.
    H.R. 1924 would require federal agencies to abide by 
appellate court precedents in a particular circuit when 
administering policies or regulations in that circuit, except 
under certain circumstances. The bill also would direct federal 
agencies to avoid unnecessary relitigation of legal issues, 
especially in instances where three or more judicial circuits 
have handed down rulings unfavorable to the government.
    CBO estimates that enacting H.R. 1924 would have no 
significant impact on the federal budget. Because enactment of 
the bill could affect direct spending and receipts, pay-as-you-
go procedures would apply--but the amounts involved would not 
be significant. The bill contains no intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act and would impose no costs on state, local, or tribal 
governments.
    Based on information from the Department of Justice (DOJ), 
CBO believes that federal agencies are generally in compliance 
with federal law and that they usually exercise appropriate 
discretion when determining whether an appeal in any particular 
case is warranted. For example, the Social Security 
Administration (SSA)--one of the agencies potentially most 
affected by this bill--already has a policy on acquiescence 
that essentially meets the requirements of H.R. 1924. It is 
possible that implementing this bill could reduce the amount of 
litigation concerning policies and regulations of some federal 
agencies. This could lead to lower litigation costs, as well as 
changes in the amounts paid for certain federal benefits and 
the amount of revenues collected. Based on information from 
DOJ, SSA, and the Internal Revenue Service, CBO expects that 
the magnitude of such changes would be small.
    The CBO staff contact for this estimate is Lanette J. 
Keith, who can be reached at 226-2860. This estimate was 
approved by Robert A. Sunshine, Assistant Director for Budget 
Analysis.

                   Constitutional Authority Statement

    Pursuant to rule XI, clause 2(l)(4) of the Rules of the 
House of Representatives, the committee finds the authority for 
this legislation in Article I, section 8, clause 18 of the 
Constitution.

               Section-by-Section Analysis and Discussion

Section 1. Short title
    Section 1 titles the bill as the ``Federal Agency 
Compliance Act.''
Section 2. Prohibiting agency non-acquiescence in appellate precedent
    Section 2(a) adds a new section, section 707, at the end of 
chapter 7 of title 5, United States Code, generally to prevent 
agencies from pursuing intracircuit nonacquiescence. More 
specifically, subsection (a) of section 707 provides that an 
agency must adhere in civil matters to controlling precedent 
established by the United States court of appeals for a given 
judicial circuit in administering a statute, rule, regulation, 
program, or policy within that circuit. ``Administering'' 
includes agency action in an administrative or judicial context 
that is required or arises as part of the agency's 
responsibilities under a statute, rule, regulation, program, or 
policy. The committee believes that citizens should be able to 
avail themselves of favorable circuit case law at every level 
of the administrative process. Subsection (a) incorporates the 
same definition of ``agency'' applicable to other provisions of 
the Administrative Procedure Act. While the bill does not 
define the term ``precedent,'' it is intended to carry its 
common meaning--i.e., a decision that a court will consider as 
controlling authority for an identical or similar question of 
law within its jurisdiction. Requiring agencies to adhere 
within a given judicial circuit to the precedents established 
by the respective court of appeals, however, does not bind an 
agency to rulings premised on materially distinguishable facts 
or circumstances, nor does it limit an agency's ability to seek 
clarification of earlier decisions. The requirement to adhere 
to a precedent attaches once the decision in which the 
precedent is established becomes effective--i.e., when the 
mandate of the appellate court issues in accordance with rule 
41 of the Federal Rules of Appellate Procedure. If the parties 
in a case are bound by the lower appellate decision pending 
Supreme Court review, it is appropriate for that decision to 
serve as precedent in other indistinguishable cases.\22\ 
Nevertheless, proceedings in such other cases might be stayed 
so that final action is not taken until after the Supreme Court 
acts.
---------------------------------------------------------------------------
    \22\ Under rule 41(d) of the Federal Rules of Appellate Procedure, 
a party may seek a stay of the mandate.
---------------------------------------------------------------------------
    Although the bill requires an agency to adhere to 
controlling appellate precedent concerning the laws the agency 
applies, it is not intended to alter the agency's prosecutorial 
or enforcement discretion as recognized in existing case law. 
Thus, even if a court of appeals decision establishes precedent 
in a given circuit on what acts or omissions constitute a 
violation of a particular law, this bill does not require an 
agency charged with enforcement of that law to initiate or 
continue administrative or judicial proceedings where an 
identical or similar act or omission occurs subsequently within 
that judicial circuit. Subsection (b) of section 707 specifies 
those instances when an agency is not precluded from taking a 
position that is contrary to the controlling precedent 
established by a court of appeals within the same circuit. This 
subsection, in essence, establishes three exceptions to the 
requirement in subsection (a). If none of the three exceptions 
are applicable to the agency, then it must adhere to the 
applicable appellate precedent within that circuit. The first 
exception, stated in section 707(b)(1), applies where the 
administration of a statute, rule, regulation, program, or 
policy could be subject to review by either the court of 
appeals that established that precedent or by a court of 
appeals for another circuit. This situation occurs where 
several venue options exist under the operative statute, and it 
is uncertain which circuit will ultimately consider proceedings 
for the pending claim or case. For example, any person 
aggrieved by a final order of the National Labor Relations 
Board (NLRB) can seek review of such order in the circuit in 
which the unfair labor practice in question was alleged to have 
been engaged, in any circuit in which the person resides or 
transacts business, or in the United States Court of Appeals 
for the District of Columbia. 29 U.S.C. Sec. 160(f) (1994). 
Thus, during the administrative consideration of the alleged 
unfair labor practice, it may be uncertain which of the three 
potential circuits would review the Board's decision. Even 
where multiple venues are possible, the agency must adhere to 
any precedents uniformly established by each of the court of 
appeals in which venue may lie. And, in any event, appellate 
jurisdiction becomes certain once proceedings are initiated in 
Federal court. On the other hand, other agencies have more 
certainty in the venue options for judicial review. For 
example, while the Social Security Act provides for Federal 
judicial review where the plaintiff resides or has his or her 
principal place of business, SSA decisions are typically 
reviewed within the circuit in which the claimant resides.\23\
---------------------------------------------------------------------------
    \23\ See 42 U.S.C. Sec. 405(g); see also Estreicher & Revesz, supra 
note 2, at 694.
---------------------------------------------------------------------------
    The second exception, stated in section 707(b)(2), 
recognizes that an agency should not be precluded from 
asserting a position contrary to precedent if the Government 
did not seek further review of the case in which that precedent 
was first established either in that court of appeals or in the 
United States Supreme Court because neither the Government nor 
any agency or officer thereof was a party to the case; or the 
Solicitor General determines, or the agency officer responsible 
for such determination determines, that the decision 
establishing that precedent was otherwise substantially 
favorable to the agency. This section ensures that the court 
will have an opportunity to evaluate its precedents in the 
context of agency views and expertise that were not available 
in the earlier proceeding. In addition, there may be situations 
where the Government did not seek further review because the 
Government substantially prevailed in the case. If the Solictor 
General or the appropriate agency officer determines that that 
was the situation, then the Government should not be bound for 
all time to rulings on secondary or incidental issues that did 
not affect the ultimate result. The third exception, stated in 
section 707(b)(3), recognizes that changes in the law or other 
relevant developments following the establishment of the 
precedent might make it reasonable to question its continued 
validity. These possible developments are: (1) a subsequent 
decision of that court of appeals or the United States Supreme 
Court; (2) a subsequent change in any pertinent statute or 
regulation; or (3) any other subsequent change in the public 
policy or circumstances on which that precedent was based. An 
agency should not seek to relitigate an issue on which there is 
established controlling precedent unless there are objectively 
reasonable grounds for believing that the appellate court, 
consistent with the principle of stare decisis, might decide 
the issue differently.
    The first development listed above involves those instances 
where, in one or more cases subsequent to the establishment of 
the precedent, that same appellate court or the Supreme Court 
has indicated a possible need for reexamination of the issue by 
questioning the validity of the prior holding, indicating a 
desire to revisit the issue in a future case, or expressing 
frustration at the results of the application of the prior 
interpretation. The second development arises when Congress or 
the agency changes a statute, regulation, or rule that was 
interpreted in the precedent. Such a change, if substantive and 
relevant, might provide a basis for the court to overrule or 
modify its prior decision. The third development primarily 
concerns changes occurring during the passage of time. Shifts 
in public policy may sometimes make it reasonable to argue that 
an appellate court might approach the same issue differently. 
Also, after a court of appeals renders its decision, other 
appellate courts might interpret the provision at issue 
differently, thereby suggesting a change in circumstances that 
could lead the same court to reconsider its former precedent. 
The bill does not purport to abrogate or limit any other rules 
or principles that may govern the acts or omissions of an 
agency. For example, H.R. 1924 does not diminish any existing 
obligations of agencies to acquiesce in appellate court 
decisions, nor does it otherwise affect existing law with 
respect to controlling precedent, the law of estoppel, or the 
ethical responsibility of parties and counsel to acknowledge 
and characterize faithfully any legal authority that may be 
relevant in a particular administrative or judicial proceeding. 
Thus, H.R. 1924 should not be interpreted or construed to 
lessen the obligation of the Federal Government to adhere to 
precedents in any other context.
    Unlike section 3 dealing with intercircuit nonacquiescence, 
the committee expects that Federal agencies and the Federal 
courts will enforce section 2 in appropriate circumstances. A 
variety of judicial remedies already exist to address the 
government's unwarranted failure to adhere to circuit 
precedent. These include the award of sanctions for vexatious 
multiplication of proceedings pursuant to Federal procedural 
rules and the award of fees and costs under the Equal Access to 
Justice Act (28 U.S.C. Sec. 2412). All such sanctions will 
remain available to help address agency nonacquiescence with 
the law of the circuit. Finally, the committee notes that, in 
the past, the Federal courts have occasionally entertained 
class actions aimed at overturning an agency's stated policy of 
refusing to acquiesce in particular circuit precedents. In 
cases of clear non-compliance (and assuming that provisions 
otherwise governing review of agency action have been 
satisfied), the committee expects that victims of agency 
nonacquiescence could bring actions to enforce the provisions 
of section 2. Prudential judicial doctrines, such as exhaustion 
of administrative remedies and ripeness, would permit a court 
to decline to hear claims that would be unnecessarily 
disruptive of agency process, thereby minimizing any fears of 
significant collateral litigation.
    H.R. 1924 adopts a balanced approach. The three exceptions 
in section 707(b) provide Federal agencies with sufficient 
flexibility to adhere to valid, established precedent so as not 
to interfere with continued development of the law. If an 
agency asserts the applicability of any of these three factors, 
a court will ultimately determine whether the factor is 
applicable. Thus, H.R. 1924 preserves the judiciary's 
constitutional role of interpreting the law, while allowing 
agencies to administer fairly their programs. Section 2(b) is a 
conforming amendment to the table of sections at the beginning 
of chapter 7 of title 5, United States Code, that adds a 
reference to the new section 707.
Section 3. Avoiding unnecessarily repetitive litigation.
    Section 3 adds a new section 708 to chapter 7 of title 5, 
United States Code, that is intended to convey the view of the 
committee that unnecessary relitigation of well-settled 
questions of law in multiple circuits should be avoided. 
Section 708 expresses the committee's belief that in 
supervising the conduct of civil litigation, the Department of 
Justice and the officers of any agency independently authorized 
to conduct litigation, should seek to ensure that the 
initiation, defense, and continuation of proceedings in Federal 
court avoid unnecessarily repetitive litigation on questions of 
law already uniformly resolved against the Government in three 
or more courts of appeals. Section 708 is intended to 
discourage the Government from pursuing wasteful and abusive 
appeals and relitigating settled questions of law. Agencies are 
expected to give careful scrutiny when deciding whether to 
relitigate. This section applies to situations where all 
existing appellate case law is against the Government's or 
agency's position and is based on the same or similar 
rationale. It would not, however, be applicable if at least one 
circuit has decided a case on grounds consistent with the 
Government's or agency's position. Furthermore, this section 
does not apply when the Government was not a party in the cases 
in which the adverse appellate decisions were rendered. A 
conforming amendment changes the table of sections for chapter 
7 of title 5, United States Code, to reflect the new section 
708.

                              Agency Views

                       United States Securities and
                                       Exchange Commission,
                                  Washington, DC, October 26, 1999.
Hon. George W. Gekas, Chairman,
Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
House of Representatives, Washington, DC.

Hon. Jerrold Nadler, Ranking Member,
Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
House of Representatives, Washington, DC.

        H.R. 1924: The Federal Agency Compliance Act

    Dear Congressmen Gekas and Nadler: I am writing to express 
my concerns about the Federal Agency Compliance Act, H.R. 1924. 
I greatly appreciate your staff members' courtesy in meeting 
with SEC staff on October 13, 1999 to discuss these concerns.
    At the outset, I would like to state that while the purpose 
of this bill--to eliminate unjustified, deliberate agency 
refusal to follow existing precedents of courts of appeals 
(``nonacquiescence'')--is salutary, I am not aware of 
widespread nonacquiescence among federal agencies. I can assure 
you that the Commission does not engage in such a practice and, 
instead, seeks to follow applicable appellate precedent. For 
agencies like the Commission, H.R. 1924, like its predecessor 
H.R. 1544, cuts too broad a swath. Its effect--to extend and 
perpetuate judicial outcomes in particular courts of appeals 
(normally only three judge panels of those courts) which are 
adverse to agencies' interests--is too a steep price to pay to 
fix isolated problems with a particular agency or subset of 
agencies.
    Two years ago, my predecessor as general counsel of the 
Commission, Richard Walker, commented on H.R. 1544, an earlier 
version of H.R. 1924. H.R. 1544 was introduced during the 
second session of the 105th Congress. Although H.R. 1924 
differs from H.R. 1544 in certain ways, it raises many of the 
same concerns as did H.R. 1544. I have attached a copy of 
Richard Walker's letter, originally sent to members of the 
House Committee on the judiciary on October 16, 1997, setting 
forth those concerns.
    Today, I would like to ask you to consider two of the most 
significant problems I see as arising from H.R. 1924. First, 
the bill would cede important litigation decisions of this 
agency to the judgment of other agencies with different 
missions and priorities. Second, the bill may inhibit the 
Commission from challenging judicial decisions made without the 
Commission's input even where the Commission's position is 
endorsed by a majority of appellate judges.
H.R. 1924 Cedes the Commission's Important Litigation Decisions to 
        Other Agencies.
    Section 2 of H.R. 1924, dealing with intracircuit 
nonacquiescence, is substantially similar to the provision on 
intracircuit nonacquiescence in H.R. 1544. Subject to certain 
exceptions, Section 2 requires all government agencies to 
adhere ``in civil matters, in administering a statute, rule, 
regulation, program, or policy within a judicial circuit'' \1\ 
to the precedent of that circuit.
---------------------------------------------------------------------------
    \1\ H.R. 1924 expressly includes ``civil matters,'' which did not 
appear in H.R. 1544.
---------------------------------------------------------------------------
    I am concerned that this provision, like its parallel 
provision in H.R. 1544, in effect cedes the important 
litigation decisions of this agency to other agencies that do 
not share this agency's mission or expertise. The provision can 
foreclose the Commission from taking a position at variance 
with precedent established in a case in which another agency 
has decided not to appeal, even where the Commission, had it 
been a party, might have chosen to appeal. Moreover, the option 
offered by Section 2 of allowing an agency to take a contrary 
position on questions decided in precedent that was ``otherwise 
substantially favorable to the Government'' does not mitigate 
the problem. Where an independent agency such as the Commission 
has not participated in the decision by another agency not to 
seek review in a particular case, it may be difficult to 
determine that agency's basis for not seeking review. What may 
seem substantially favorable to one agency may not seem so to 
another.
    H.R. 1924 appears to assume that judicial precedent is 
always clear and unambiguous. As explained in the attached 
letter, this is not so in the field of securities law. It is 
not always possible, therefore, to ascertain the scope of a 
decision until it is tested by presenting the same court of 
appeals with new cases involving different facts.
    It appears that the bill might allow judicial review of a 
Commission decision to take a position where merely the specter 
of nonacquiescence may be raised--for example, arguing for an 
interpretation of law where prior precedent is unclear. I am, 
therefore, concerned that the bill would promote costly, 
unnecessary collateral litigation on the appropriateness of the 
Commission's decisions to litigate. Such litigation would shift 
the court's focus from the merits of the Commission's 
substantive positions and would consume our scarce enforcement 
resources.
The Bill May Inhibit the Commission from Challenging Judicial Decisions 
        Even Where the Commission's Position is Endorsed by a Majority 
        of Appellate Judges.
    Section 3 of the bill, dealing with intercircuit 
nonacquiescence, provides that an agency ``should seek to 
ensure'' that it avoids unnecessarily repetitive litigation 
``on questions of law already consistently resolved against the 
United States in 3 or more circuits.'' This provision differs 
from the parallel provision in H.R. 1544 in certain noteworthy 
respects. First, apparently because the new provision exhorts 
(``should seek to ensure'') rather than commands (``shall 
ensure''), it eliminates certain subsections, including one 
making it clear that litigation decisions are not subject to 
review on the ground that they violate limits on relitigation. 
Second, H.R. 1544 barred agencies from relitigating legal 
issues ``already consistently resolved against the position of 
the United States, or an agency or officer thereof, in 
precedents established by the United States courts of appeals 
for 3 or more other judicial circuits,'' while H.R. 1924 
prohibits relitigation of issues ``already consistently 
resolved against the United States in 3 or more circuits'' 
(emphasis supplied). In my view, however, these distinctions do 
not eliminate the problems with the provision.
    I remain concerned that Section 3, although now hortatory, 
may still operate to inhibit the Commission from challenging 
judicial decisions made without benefit of its participation 
and expertise. Even though Section 3 now appears to be limited 
to government cases (by virtue of the second change mentioned 
above), I believe, for the reasons stated at length in Richard 
Walker's attached letter, that it is still unwise to bind the 
Commission by precedents in criminal cases, which, of course, 
are not prosecuted by the Commission.
    Moreover, the bill could substantially impair the 
Commission's ability to enforce the securities laws to the 
extent that Section 3 can be read to mean that a view of the 
law articulated by a minority of appellate judges could inhibit 
the Commission from taking a position endorsed by a 
majority.\2\ This is illustrated by the judicial history of the 
``misappropriation theory'' of insider trading, as recounted in 
the attached letter. As that letter explains, even if a 
majority of courts of appeals had endorsed the theory, a 
minority could have removed this important enforcement tool 
from the legal landscape had even one more court followed the 
minority.\3\ And yet the theory ultimately was adopted by the 
Supreme Court.
---------------------------------------------------------------------------
    \2\ If the bill is not intended to operate in this manner, its 
language ought to be modified to make it clear that litigation on an 
issue is not ``unnecessarily repetitive'' simply because three courts 
of appeals have resolved that issue against the agency's position. For 
example, when other courts of appeals in earlier decisions have 
resolved the issue in favor of the agency's position, the later 
position of three courts of appeals ought not inhibit an agency from 
pursuing a view of the law previously embraced by at least one circuit.
    \3\ Moreover, Section 2, the ``intracircuit nonacquiescence'' 
provision, so limits the grounds for asking a given court of appeals to 
revisit precedent, that it would prevent the Commission from asking a 
court of appeals that has issued an early adverse ruling to reconsider 
that ruling even if several--or indeed all--of the other courts of 
appeals had reached a different result.
---------------------------------------------------------------------------
    Moreover, because the bill eliminates the provision in 
Section 3(d) of H.R. 1544 that precluded judicial review of 
litigation decisions, it raises the specter of the same sort of 
collateral litigation on questions of litigation strategy as 
does Section 2.
    In sum, as the attached letter explains in more detail, 
while the proposed legislation reflects a balancing of 
interests that may be appropriate in litigation involving clear 
principles applied over time in administering benefits programs 
and the like, it is inappropriate as applied to the sort of 
complex enforcement litigation in which the Commission engages. 
As a consequence, I urge you to consider whether amendments can 
be made that would reduce the bill's adverse effects on 
enforcement programs such as the Commission's. Thank you for 
your consideration.
            Sincerely,
                     Harvey J. Goldschmid, General Counsel.

Attachment

                       United States Securities and
                                       Exchange Commission,
                                  Washington, DC, October 16, 1997.
Hon. George W. Gekas, Chairman,
Subcommittee on Commercial and Administrative Law,
Committee on the Judiciary,
House of Representatives, Washington, DC.

        H.R. 1544, the Federal Agency Compliance Act

    Dear Congressman Gekas: I appreciate this opportunity to 
express my concerns, as the General Counsel of the Securities 
and Exchange Commission, regarding the Federal Agency 
Compliance Act, H.R. 1544. I recognize that this bill has 
already been marked up in the House Committee on the Judiciary, 
but I hope that there may still be an opportunity to modify the 
proposed legislation as the legislative process moves forward.
    I understand and support the core purpose of H.R. 1544--to 
rein in federal agencies that deliberately refuse to follow 
existing precedents of U.S. Courts of Appeals (called ``agency 
nonacquiescence''). I assure you that the Commission, an 
independent regulatory agency, does not engage in such a 
practice. In fact, the Commission is careful to follow 
applicable appellate precedent in all of its litigation and 
administrative decisions.
    I am concerned, however, that H.R. 1544 makes other 
fundamental changes in the current system of judicial review of 
agency cases that will significantly impair the Commission's 
ability to fulfill its congressional mandate to protect 
investors and preserve the integrity of the nation's securities 
markets.
    There are several troublesome aspects of the bill. As 
explained below, these give rise to serious problems for the 
Commission, including the potential that H.R. 1544 could 
foreclose the Commission from asserting important but 
controversial legal theories because those theories have been 
rejected by three appellate courts, without the benefit of the 
Commission's expertise, in cases in which the Commission was 
not a party and did not participate. Moreover, adverse 
decisions by three courts of appeals could preclude the 
Commission from a legal theory even if a majority of appellate 
courts endorsed it. The recent history of the 
``misappropriation'' theory of insider trading, which is 
discussed more fully below, and which the Commission has used 
in some of its most significant securities fraud cases of the 
last fifteen years, illustrates the potential for unintended 
adverse consequences.
H.R. 1544 Could Foreclose The Commission From Challenging Ill-Reasoned 
        Judicial Decisions Made Without The Commission's Participation 
        and Expertise.
    H.R. 1544 requires federal agency officials to avoid 
litigating questions of law already resolved against the 
government's position in precedents established in three 
appellate circuits, even if a majority of the circuits have 
already endorsed the government's position. Federal securities 
law is made not only in the Commission's civil law enforcement 
litigation but in private securities litigation outside the 
Commission's control and in criminal cases independently 
prosecuted by numerous United States Attorneys' offices around 
the country. H.R. 1544 would bind the Commission by adverse 
decisions in those cases even though the Commission was not a 
party to, or participant in, those cases and even though the 
courts did not have the benefit of the Commission's expertise.
    Even if the portion of the legislation relating to the 
effect of adverse rulings by three courts of appeals were 
limited to government cases, I believe it would still be unwise 
to bind the Commission by precedents in criminal cases. 
Criminal prosecutors must devote their limited resources to 
more than just prosecuting securities law violations and may 
not be as well-equipped as the Commission to deal with the 
complex frontiers of the federal securities laws. Typically, 
the Commission is not involved in criminal prosecutions at the 
trial stage. The Commission may be consulted on an informal 
basis in some cases when the Department of Justice determines 
whether to appeal a criminal securities fraud case. If a 
criminal defendant appeals, however, the Commission may not 
learn about a case until a court of appeals renders its 
decision. As a result, adverse precedents specific to the 
securities laws administered by the Commission may develop 
without the Commission's input
    Recent judicial developments in the ``misappropriation 
theory'' of insider trading illustrate the potentially adverse 
effects of H.R. 1544 on the evolution of the securities laws. 
Up to 50% of the Commission's insider trading enforcement cases 
rely on the misappropriation theory, and many of our biggest 
cases were brought on that theory, such as SEC v. Drexel 
Burnham Lambert, SEC v. Ivan Boesky, and SEC v. Dennis Levine. 
Beginning in 1981, the Second, Seventh, and Ninth Circuits 
endorsed the theory, but in 1995 the Fourth Circuit rejected it 
in a criminal case. The Commission only became involved in the 
Fourth Circuit case after the adverse decision, when the 
government sought rehearing of the misappropriation issue by 
the full court. Rehearing was denied. The government did not 
seek Supreme Court review because the case was not a compelling 
one on the facts. Subsequently, the Eighth Circuit, following 
the Fourth Circuit's lead, also rejected the misappropriation 
theory in a criminal case, reversing a conviction. The 
government sought Supreme Court review of the Eighth Circuit 
case, because the facts were far more favorable to the 
government. The Supreme Court, fortunately, reversed the Eighth 
Circuit and upheld the misappropriation theory.\1\ But events 
could easily have taken a different turn.\2\
---------------------------------------------------------------------------
    \1\ See U.S. v. O'Hagan, ____ U.S. ____, 117 S.Ct. 2199, 138 L. Ed. 
2d 721 (June 25, 1997).
    \2\ The facts in the Eighth Circuit might have been less favorable 
for seeking review, for example. In any event, Supreme Court review is 
by no means certain. Indeed, the proposed legislation might make it 
more difficult to obtain Supreme Court review, since the government 
would be more likely to seek review in cases for which it would not 
have sought review before the legislation. Thus, H.R. 1544 would 
dramatically change the calculus for determining whether to seek 
review, with possibly unforeseen results.
---------------------------------------------------------------------------
    If H.R. 1544 had been the law when the Eighth Circuit 
decided against misappropriation, and if the Supreme Court had 
not granted review, the legal theory would have been in 
jeopardy. Another criminal case involving the misappropriation 
theory could have arisen, and the Commission would have been at 
risk of losing an important legal theory: (1) without having 
had the opportunity itself to develop the arguments, and (2) 
even though the entire Second Circuit (sitting en banc) and two 
other courts of appeals had endorsed it
A Minority View Could Bar The Commission From Taking A Position 
        Actually Endorsed By A Majority Of Appellate Judges.
    H.R. 1544 bars an agency from taking a position ``resolved 
unfavorably in ``precedents established'' by three courts of 
appeals, regardless of whether one or two or even six or eight 
other circuits have ruled in favor of the position. Thus, it 
may be possible for a majority of appellate judges who address 
an issue to endorse a government position even while three 
courts of appeals reject it. As illustrated by the 
misappropriation theory example above, the potential that a 
minority view could become binding is not insignificant. The 
Fourth Circuit decision that first rejected the 
misappropriation theory departed from the views of three other 
courts of appeals.\3\ That decision was followed by the Eighth 
Circuit's adverse decision. Even if a majority of the courts of 
appeals had endorsed the misappropriation theory, either before 
or after these two decisions, that majority of appellate courts 
ruling on the issue would not have prevented a minority from 
removing the theory from the Commission's arsenal if just one 
more court had followed the Fourth and Eighth Circuits.
---------------------------------------------------------------------------
    \3\ Actually, only one Fourth Circuit judge was sitting on the 
case. He wrote the opinion, in which the two district court judges 
sitting by designation concurred.
---------------------------------------------------------------------------
The Commission, Like Other Agencies With Independent Litigating 
        Authority, Would Have Special Problems Complying With H.R. 
        1544.
    The bill requires all government agencies to adhere to 
precedent in a specific circuit unless the government did not 
seek review because the decision was ``otherwise substantiatIly 
favorable'' to the government. This would create significant 
problems for the Commission, and the other agencies with 
independent litigating authority. Where an agency has not 
participated in the decision by another agency not to seek 
review in a particular case, it may be difficult to determine 
the basis for not seeking review. Moreover, what may seem 
substantially favorable to one agency may not seem so to 
another; and it seems inappropriate to bind one agency on an 
issue of importance to it based on another agency's 
determination that an adverse ruling on that issue is not 
important to that other agency.
    This also would curtail the independence of the 
Commission's litigating authority. The Commission would be 
foreclosed from appealing in cases in which another agency has 
declined to appeal for reasons other than that the decision was 
``substantially favorable'' to the government.
H.R. 1544 Would Promote Costly, Unnecessary Collateral Litigation That 
        Would Consume Scarce Enforcement Resources.
    H.R. 1544 seems to assume that precedent is always clear 
and unambiguous. The precise holding of many judicial 
decisions, however, is not clear, particularly in complex areas 
of the law such as securities regulation. Defendants in 
securities fraud cases often argue for broad readings of 
decisions adverse to the government.\4\ For this reason, the 
Commission's decision to pursue a case. will frequently be open 
to attack under H.R. 1544. Although H.R. 1544 specifies that 
federal agencies and officials may not be subject to mandamus 
actions, the legislation would only encourage defendants to 
harass the Commission with claims for sanctions and the like 
for pressing disputed positions allegedly in violation of the 
restrictions of H.R. 1544.
---------------------------------------------------------------------------
    \4\ The Commission, for example, has been repeatedly met with the 
argument that the Supreme Court's decision in Central Bank of Denver. 
N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), 
which held that there is no private right of action for aiding and 
abetting securities fraud, governs in cases having nothing to do with 
aiding and abetting. Defendants contend that Central Bank stands for a 
variety of propositions, such as that the securities laws must be 
construed narrowly and that the purpose of the securities laws to 
protect investors has no bearing in interpreting the statutory text.
---------------------------------------------------------------------------
H.R. 1544 Reflects A Balancing of Interests That May Be Appropriate For 
        The ``Cookie Cutter'' Litigation Of Some Agencies, But That 
        Would Be Detrimental To The Kind Of Complex Enforcement 
        Litigation In Which The Commission Engages.
    H.R. 1544 addresses problems that arise in ``cookie 
cutter'' litigation about which the Committee appears 
concerned, where the applicable principle is clear and is 
applied over and over again in administering a benefits 
program. This concern, however, does not apply to an 
enforcement litigation program such as the Commission's, which 
often involves questions about how prior decisions apply in new 
situations, as securities violators, ever-creative, engage in 
new schemes to defraud. The application of antifraud laws to 
new and evolving conduct is important.
    Clearly, the Committee must balance the benefits H.R. 1544 
would provide in resolving the problems of administering a 
benefits program that yields unfair results, against the 
problems H.R. 1544 would create for enforcement litigation 
programs like the Commission's. I recognize that in drafting 
H.R. 1544, the Committee has focused its attention on an area 
that the Committee has determined requires close attention. I 
believe, however, that the Commission's litigation does not 
raise the problems addressed by the legislation, and that 
including the Commission's enforcement litigation within the 
scope of H.R. 1544 would create problems that far outweigh any 
potential benefit of including the Commission's enforcement 
litigation. For this reason, I respectfully request that as the 
bill moves forward, you consider whether appropriate amendments 
can be made to reduce the adverse effects of H.R. 1544 on 
enforcement litigation programs that routinely encounter novel 
issues requiring flexibility in their resolution. As currently 
drafted, H.R. 1544 does not distinguish between enforcement 
litigation to protect the public by stopping and preventing 
violations of law, and other kinds of agency litigation in 
which an agency seeks to apply ``cookie cutter'' principles.
    In sum, I urge you to consider amending H.R. 1544 to avoid 
the problems it would create for the Commission. I would be 
happy to meet with you to discuss further how that might be 
done or to discuss in more detail the Commission's concerns.
            Sincerely,
                        Richard H. Walker, General Counsel.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                      TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *

                    PART I--THE AGENCIES GENERALLY

           *       *       *       *       *       *       *

                       CHAPTER 7--JUDICIAL REVIEW

Sec.
701.    Application; definitions.
     * * * * * * *
707.    Adherence to court of appeals precedent.
708.    Avoiding unnecessarily repetitive litigation.

           *       *       *       *       *       *       *

Sec. 707. Adherence to court of appeals precedent

    (a) Except as provided in subsection (b), an agency (as 
defined in section 701(b)(1) of this title) shall in civil 
matters, in administering a statute, rule, regulation, program, 
or policy within a judicial circuit, adhere to the existing 
precedent respecting the interpretation and application of such 
statute, rule, regulation, program, or policy, as established 
by the decisions of the United States court of appeals for that 
circuit.
    (b) An agency is not precluded under subsection (a) from 
taking a position, either in an administrative proceeding or in 
litigation, that is at variance with precedent established by a 
United States court of appeals if--
            (1) it is not certain whether the administration of 
        the statute, rule, regulation, program, or policy will 
        be subject to review exclusively by the court of 
        appeals that established that precedent or a court of 
        appeals for another circuit;
            (2) the Government did not seek further review of 
        the case in which that precedent was first established, 
        in that court of appeals or the United States Supreme 
        Court, because--
                    (A) neither the United States nor any 
                agency or officer thereof was a party to the 
                case; or
                    (B) the Solicitor General determines or the 
                agency officer responsible for such 
                determination determines the decision 
                establishing that precedent was otherwise 
                substantially favorable to the agency; or
            (3) it is reasonable to question the continued 
        validity of that precedent in light of a subsequent 
        decision of that court of appeals or the United States 
        Supreme Court, a subsequent change in any pertinent 
        statute or regulation, or any other subsequent change 
        in the public policy or circumstances on which that 
        precedent was based.

Sec. 708. Avoiding unnecessarily repetitive litigation

    In supervising the conduct of civil litigation, the 
officers of any agency of the United States authorized to 
conduct litigation, including the Department of Justice acting 
under sections 516 and 519 of title 28, United States Code, 
should seek to ensure that the initiation, defense, and 
continuation of proceedings in the courts of the United States, 
within, or subject to the jurisdiction of, a particular 
judicial circuit, avoids unnecessarily repetitive litigation on 
questions of law already uniformly resolved against the United 
States in 3 or more courts of appeals. A decision on whether to 
iniate, defend, or continue litigation is not subject to review 
in any court by mandamus or otherwise on the grounds that the 
decision violates this section.

           *       *       *       *       *       *       *

                            Dissenting Views

    As a general matter, we agree that agencies should comply 
with circuit court decisions. However, we dissent from H.R. 
1924, the ``Federal Agency Compliance Act,'' because we believe 
it to be an inappropriate and overbroad means of responding to 
the perceived problem of nonacquiescence.
    H.R. 1924 attempts to curb the perceived problem of 
``intracircuit nonacquiescence'' \1\ by legislatively mandating 
that Federal executive branch agencies adhere to precedents of 
the courts of appeals for disputes which arise within a 
particular circuit.\2\ The legislation only permits an agency 
to take a contrary position to such precedent where: (1) it is 
not certain whether the issue in question ``will be subject to 
review exclusively by the court of appeals that established 
that precedent or a court of appeals for another circuit;'' (2) 
the Government did not seek further review of the case in which 
that precedent was established ``because neither the United 
States nor any agency or officer thereof was a party to the 
case'' or ``because the decision establishing that precedent 
was otherwise substantially favorable to the Government;'' or 
(3) ``it is reasonable to question the continued validity of 
that precedent in light of a subsequent decision of that court 
of appeals or the United States Supreme Court,'' a subsequent 
change in the law, or any other subsequent change ``in the 
public policy or circumstances on which that precedent was 
based.'' \3\
---------------------------------------------------------------------------
    \1\ Agency failure to comply with circuit court precedent within a 
particular circuit.
    \2\ H.R. 1924, 106th Cong., 1st Sess. Sec. 2 (1999) [hereinafter 
H.R 1924].
    \3\ Section 3 of H.R. 1924 also urges agency officers to ensure 
that questions of law already consistently resolved against the United 
States in 3 or more courts appeals are not unnecessarily relitigated. 
However, an agency decision on ``whether to initiate, defend, or 
continue litigation'' is not subject to court review on the grounds 
that the agency decision violates the section.
---------------------------------------------------------------------------
    In attempting to diminish the instances of nonacquiescence, 
H.R. 1924 would create significant new problems. It would 
indiscriminately reduce the discretionary authority of every 
Federal agency to decide when to challenge circuit court 
decisions, not just the agencies that legislative proponents 
claim have abused their discretion. In doing so, H.R. 1924 
would diminish the effectiveness of the agencies that protect 
the rights of our citizens under the labor, civil rights, 
environmental, consumer safety, and other important laws. 
Moreover, the terms of H.R. 1924 are so vague that they will 
inevitably lead to uncertainty and confusion concerning their 
scope and applicability.
    It is for these reasons that the Department of Justice 
opposes H.R. 1924,\4\ which would likely lead to a Presidential 
veto if it passes.\5\ And it is for these reasons that groups 
such as the AFL-CIO,\6\ the Mexican American Legal Defense and 
Educational Fund,\7\ and environmental grounds such as Natural 
Resources Defense Council, Environmental Defense, Alliance for 
Justice, Friends of the Earth, Earthjustice Legal Defense Fund, 
and OMB Watch \8\ strongly oppose H.R. 1924, or its 
predecessor.\9\ We join in dissenting from this well 
intentioned, but ultimately misguided legislation. A summary of 
our concerns follows.
---------------------------------------------------------------------------
    \4\ See Hearing on H.R. 1924, Proposing The Federal Agency 
Compliance Act Before the Subcomm. on Commercial and Administrative Law 
of the House Comm. on the Judiciary, 106th Cong., 1st Sess. (Oct. 27, 
1999) (forthcoming) [hereinafter 1999 House Judiciary Hearings] 
(statement of William Schultz at 2).
    \5\ See Statement of Administration Policy, H.R. 1544: Federal 
Agency Compliance Act (February 25, 1998).
    \6\ Letter from Peggy Taylor, Director for Dept. of Legislation, 
American Federation of Labor and Congress of Industrial Organizations 
(Sept, 20, 2000) [hereinafter AFL-CIO Letter].
    \7\ Letter from Antonia Hernandez, President and General Counsel of 
Mexican American Legal Defense and Educational Fund, to the Hon. Henry 
J. Hyde, chairman, Committee on the Judiciary (Nov. 3, 1997) 
[hereinafter MALDEF Letter].
    \8\ Letter from Alyssondra Campaigne, Legislative Director of 
Natural Resources Defense Council, Elizabeth Thompson, Legislative 
Director of Environmental Defense, Nan Aron, President of Alliance for 
Justice, Courtney Cuff, Legislative Director of Friends of the Earth, 
Joan Mulhern, Legislative Counsel for Earthjustice Legal Defense Fund, 
and Gary D. Bass, Executive Director for OMB Watch (September 22, 
2000)(on file with the Minority Staff of the Committee on the 
Judiciary).
    \9\ H.R. 1544, 105th Cong., 1st Session (1997)[hereinafter H.R. 
1544].

                      I. H.R. 1924 IS UNNECESSARY

    In our view, H.R. 1924 is a ``solution in search of a 
problem.'' The Department of Justice testified that except 
where ``relitigation of a legal issue is later determined to be 
justified in prescribed circumstances,'' Federal agencies 
follow the holding of the circuit courts of appeals.\10\ 
Congressional intervention is particularly unnecessary with 
respect to the many agencies that depend on the Justice 
Department for their Federal court litigation \11\ due to the 
appellate restrictions already imposed on them by the Solicitor 
General's office. As Deputy Assistant Attorney William Schultz 
explained:
---------------------------------------------------------------------------
    \10\ See 1999 House Judiciary Hearings, supra n. 4 (statement of 
William Schultz at 2).
    \11\ 28 U.S.C. Sec. 516 (1993) (except as otherwise authorized by 
law, the conduct of litigation in which an agency is a party is 
reserved to the Department of Justice).

        [I]n cases within the litigation authority of the 
        Department of Justice, every appeal to a court of 
        appeals must be authorized by the Solicitor General. 
        Authorization comes only after an internal deliberative 
        process involving the agency, the responsible 
        litigating division of the Justice Department, and the 
        Solicitor General's staff. Adverse precedent in the 
        same circuit is a weighty reason not to authorize 
        appeal. (By the same token, if circumstances are such 
        that it is appropriate to request an appellate court to 
        revisit a legal issue previously decided, or to 
        preserve a legal argument for possible Supreme court 
        review, an appeal might be entirely appropriate despite 
        the existence of binding circuit precedent).\12\
---------------------------------------------------------------------------
    \12\ See 1999 House Judiciary Hearings, supra n. 4 (statement of 
William B. Schultz at 11).

Agencies are also hesitant to challenge court precedent because 
they face the possibility of paying other parties' attorneys 
fees under the Equal Access to Justice Act if it is determined 
that the government position was not ``substantially 
justified.'' \13\
---------------------------------------------------------------------------
    \13\ 28 U.S.C. Sec. 2412(d)(1)(A) (1994) (except as otherwise 
specifically provided by statute, a court shall award to a prevailing 
party in any civil action, other than the United States, fees and other 
expenses incurred by the party unless the court finds that the position 
of the United States was substantially justified or that special 
circumstances make an award unjust).
---------------------------------------------------------------------------
    Those of us who support the concept of statutory 
acquiescence believe that the legislation should be limited to 
benefits programs, such as those administered by the Social 
Security Administration (``SSA''). SSA has often been 
criticized for failing to acquiescence court decisions and 
precedent.\14\ It is important to note that the American Bar 
Association only endorses this bill as it applies to the Social 
Security Administration, but takes no position with regard to 
its application to other agencies.\15\ John Pickering, Chair of 
the Senior Lawyers Division of the American Bar Association 
testified that, ``We take no position regarding other 
applications to other agencies.'' \16\ Moreover, recently SSA 
has taken several actions to ameliorate the problem of 
nonacquiescence. Prior to June 1985, when a circuit court 
decision was inconsistent with SSA's interpretation of the law 
and regulations, their practice was to apply the decision only 
to the named litigants in that particular case. However, SSA 
announced a new policy wherein they would apply such circuit 
court decisions at the hearings level, following an 
acquiescence ruling, in adjudicating claims in the circuit.\17\ 
In 1990, SSA went even further adopting an explicit rule 
requiring such intracircuit acquiescence.\18\ As recently as 
September 18, 1997, SSA responded to concern that it 
occasionally takes too long to issue its acquiescence rulings 
by publishing a proposed regulation requiring it to offer 
litigants preliminary guidance within 10 days and requiring it 
either to appeal the circuit court decision or to adopt an 
appropriate acquiescence ruling within 120 days. In addition to 
publishing acquiescence rulings when they are issued, SSA will 
be required to identify and notify individuals whose cases may 
be affected by them.\19\
---------------------------------------------------------------------------
    \14\ See 1999 House Judiciary Hearings, supra n. 4, transcript at 
40 and 42.
    \15\ See Hearing on H.R. 1924, Proposing The Federal Agency 
Compliance Act Before Subcomm. on Commercial and Administrative Law of 
the House Comm. on the Judiciary, Cong., 1st Sess. (Oct. 27, 1999) 
(forthcoming) [hereinafter 1999 House Judiciary Hearings] 106th 
(Testimony of John H. Pickering).
    \16\ Id at 38.
    \17\ See Hearing on H.R. 1544, Proposing The Federal Agency 
Compliance Act Before the Subcomm. on Commercial and Administrative Law 
of the House Comm. on the Judiciary, 105th Cong., 1st Sess. (May 22, 
1997) (forthcoming) [hereinafter 1997 House Judiciary Hearings] 
(statement of Arthur J. Fried, General Counsel, Social Security 
Administration at 2).
    \18\ 20 C.F.R. Sec. 404.985 a-c (1990) (SSA will apply a holding 
from a Federal circuit court which conflicts with SSA legal 
interpretations, and publish an acquiescence ruling, unless SSA seeks 
further review or decides to relitigate the issue despite an 
acquiescence ruling after consulting the Department of Justice).
    \19\ 20 C.F.R. Sec. 416.1485 (1997).

  II. H.R. 1924's CATEGORICAL RESTRICTIONS DIMINISH NEEDED DISCRETION

    H.R. 1924's narrowing of agency discretion over whether to 
challenge circuit court precedents could have a number of 
adverse policy consequences. As noted above, H.R. 1924 provides 
only three exceptions to the intracircuit acquiescence 
rule.\20\ It omits a number of other justifiable exceptions--
such as cases including two alternative holdings (only one of 
which the agency likes) or cases involving litigation fact 
patterns which do not lend themselves to Supreme Court review 
(e.g., cases involving sympathetic parties violating important 
laws). The net result will be to unduly hamstring the 
government in developing its litigation strategies.
---------------------------------------------------------------------------
    \20\ H.R. 1924, supra n. 2, Sec. 2 ((I) it is not certain whether 
the issue will be subject to review by the court of appeals that 
established the precedent; (II) the government did not seek further 
review of the case in which the precedent was established because it 
was not a party to that case or the decision was otherwise 
substantially favorable; and (III) it is reasonable to question the 
continued validity of the precedent).
---------------------------------------------------------------------------
    This is one of the principal reasons why initiatives of 
this nature have been opposed on a bipartisan basis. Rex Lee, 
Solicitor General under President Reagan, argued that a similar 
1984 bill \21\ ``represents an unprecedented interference with 
the ability of the Justice Department to determine the cases it 
will appeal.'' \22\ Similarly, in their recent testimony 
opposing H.R. 1924, the Clinton Justice Department explained 
that the bill would significantly ``inhibit the Solicitor 
General in protecting the litigating interests of the United 
States. . . . [T]he Solicitor General should have the 
discretion, where the stakes are important enough, to continue 
to seek a circuit conflict and thus to facilitate Supreme Court 
review of decisions harmful to the United States.'' \23\
---------------------------------------------------------------------------
    \21\ Congress previously sought to address this matter with 
reference to SSA in 1984, during proceedings leading up to the 
enactment of the Social Security Disability Benefits Reform Act, Pub. 
L. No. 98-460, 98 Stat. 1794. Prior to enactment of the final 
legislation, the House passed a bill that would have required the SSA 
to acquiesce to circuit court precedent in Social Security disability 
benefits cases unless it sought Supreme Court review. See H.R. Rep. 98-
618, 98th Cong., 2d Sess. 22-26 (1984). The Senate bill did not contain 
such a provision; instead it would have required the SSA to publish a 
notice of nonacquiescence whenever it determined not to acquiesce. See 
S. Rep. 98-466, 98th Cong., 2d Sess. 21 (1984). Congress ultimately 
declined to include any provision on nonacquiescence in the act as 
finally passed. Rather than impose statutory restrictions on 
nonacquiescence in the 1984 legislation, the conferees urged SSA to 
change its policy of nonacquiescence. See H.R. Conf. Rep. No. 1039, 
98th Cong., 2d Sess. 37, (1984).
    \22\ 130 Cong. Rec. S11454 (1984) (Letter by Rex Lee, Solicitor 
General, to Hon. Robert Dole).
    \23\ 1999 House Judiciary Hearings, supra n.4 (statement of William 
B. Schultz at 14).
---------------------------------------------------------------------------
    Preserving the litigation prerogatives of our agencies is 
an important function of separation of powers and helps foster 
development of the case law. For example, in United States v. 
Mendoza,\24\ a unanimous Supreme Court held that the government 
could not be foreclosed from relitigating a legal issue it had 
previously litigated unsuccessfully in another action against a 
different party, even within the same judicial circuit:
---------------------------------------------------------------------------
    \24\ 464 U.S. 154 (1984).

        Government litigation frequently involves legal 
        questions of substantial public importance; indeed, 
        because the proscriptions of the United States 
        Constitution are so generally directed at governmental 
        action many constitutional questions can arise only in 
        the context of litigation to which the government is a 
        party. Because of those facts the government is more 
        likely than any private party to be involved in 
        lawsuits against different parties which nonetheless 
        involve the same legal issues. A rule allowing 
        nonmutual collateral estoppel against the government in 
        such cases could substantially thwart the development 
        of important questions of law by freezing the first 
        final decision rendered on a particular legal issue. 
        Allowing only one final adjudication would deprive this 
        Court of the benefit it receives from permitting 
        several courts of appeals to explore a difficult 
        question before this Court grants certiorari.\25\
---------------------------------------------------------------------------
    \25\ Id. at 160.

    It is particularly important to recognize that all of the 
Federal agencies are unique in some respects and therefore that 
the categorical prohibitions of H.R. 1924 would affect each 
agency differently. Harvey J. Goldschmid, the General Counsel 
of the Securities and Exchange Commission, highlighted the 
---------------------------------------------------------------------------
problems that his agency would face under the bill:

        I am concerned that this provision, like its parallel 
        provision in H.R. 1544, in effect cedes the important 
        litigation decisions of this agency to other agencies 
        that do not share this agency's mission or expertise. 
        The provision can foreclose the Commission from taking 
        a position at variance with precedent established in a 
        case in which another agency has decided not to appeal, 
        even where the Commission, had it been a party, might 
        have chosen to appeal. Moreover, the option offered by 
        section 2 of allowing an agency to take a contrary 
        position on questions decision in precedent that was 
        ``otherwise substantially favorable to the Government'' 
        does not mitigate the problem. Where an independent 
        agency such as the Commission has not participated in 
        the decision by another agency not to seek review in a 
        particular case, it may be difficult to determine that 
        agency's basis for not seeking review. What may seem 
        substantially favorable to one agency may not seem so 
        to another.\26\
---------------------------------------------------------------------------
    \26\ Letter from Harvey J. Goldschmid, General Counsel, United 
States Securities and Exchange Commission, to the Hon. George W. Gekas 
and the Hon. Jerrold Nadler (Oct. 26, 1999).

The SEC went on to explain how acquiescence rules could prove 
to be particularly damaging to them since they do not have the 
opportunity to challenge adverse precedents in criminal cases 
\27\ which can have an adverse impact on the SEC's ability to 
bring civil cases.\28\
---------------------------------------------------------------------------
    \27\ The Justice Department has criminal jurisdiction over the 
securities laws.
    \28\ For example, several circuit courts issued adverse precedents 
in criminal cases negating the ``misappropriation theory'' used to 
challenge insider trading before the Supreme Court ultimately adopted 
the SEC's new.

                III. H.R. 1924 IS OPENED-ENDED AND VAGUE

    Implementation of the provisions in H.R. 1924 would require 
the interpretation of terms that are inherently vague and 
ambiguous in their meaning. Under the legislation, even 
seemingly appropriate exercises of discretion might be subject 
to challenge. For instance, circuit court decisions frequently 
are subject to a variety of legal interpretations. It may not 
be possible to ascertain a decision's true scope and effect 
until an opportunity arises to test it by presenting the same 
court of appeals with a different factual scenario. Rather than 
challenging a precedent, an agency may merely be attempting to 
limit its effect. However, under H.R. 1924, such a legitimate 
strategy could be subject to challenge as violating the new 
acquiescence rules.
    In addition, the exceptions in the bill which allow an 
agency to challenge precedents are inherently subjective. In 
deciding whether to take a position at variance with 
intracircuit precedent, the agency must make determinations 
such as whether the government did not seek further review of 
the case because the precedent was ``otherwise substantially 
favorable.'' Another subjective exception would require the 
agency to determine whether ``it is reasonable to question the 
continued validity of that precedent.'' \29\
---------------------------------------------------------------------------
    \29\ H.R. 1924, supra n. 2, Sec. 2.
---------------------------------------------------------------------------
    Accordingly, the enactment of H.R. 1924 ultimately could 
create a whole new category of litigation. This would result in 
wasteful preliminary litigation over whether a case can 
proceed, in addition to litigation over the substance of the 
dispute. This type of collateral litigation is costly; it 
consumes scarce enforcement resources; and it can create the 
very type of delay that H.R. 1924 is intended to avoid.

    IV. H.R 1924 WILL HARM ENFORCEMENT OF THE LABOR, ENVIRONMENTAL, 
                 CONSUMER SAFETY, AND CIVIL RIGHTS LAWS

    Perhaps most seriously, we oppose H.R. 1924 because of the 
adverse consequences it will have on the ability of government 
agencies to protect our citizens' rights under important laws 
concerning labor, employment, workplace safety, consumer 
protection, civil rights, and the environment, to name but a 
few.
    H.R. 1924 will force agencies such as the National Labor 
Relations Board, the Department of Labor, the Occupational 
Safety and Health Administration, the National Highway 
Transportation Safety Administration, the Equal Employment 
Opportunity Commission, the Justice Department Civil Rights 
Division, the Environmental Protection Agency, and the Bureau 
of Land Management to litigate from a disadvantageous position. 
Unlike the well-funded interests the government frequently 
opposes in court, under the bill, such agencies will face 
complex new legal constraints when they determine which cases 
to appeal. To the extent this translates into less capable 
enforcement of these important laws, we will all be 
disadvantaged.
    It is for these reasons, among others, that the AFL-CIO has 
taken a position strongly opposing H.R. 1924, writing:

        Under this bill, agencies could be compelled to seek 
        Supreme Court review of cases that would not otherwise 
        warrant such review. Agencies could also be precluded 
        from making certain legitimate choices. For example, an 
        agency could be precluded from foregoing an appeal of 
        an adverse circuit court decision to the Supreme Court 
        in anticipation of a later case with stronger facts. Of 
        particular concern to us, this bill would prevent 
        agencies with jurisdiction over labor matters from 
        properly enforcing the labor and employment law.\30\
---------------------------------------------------------------------------
    \30\ AFL-CIO Letter, supra n. 6.

    The same concerns lie with civil rights enforcement. At the 
committee markup, Rep. Jackson Lee singled out her concern for 
the adverse impact H.R. 1924 would have in this critical legal 
---------------------------------------------------------------------------
area:

        Civil rights cases by nature challenge judges at every 
        level of our judicial system to properly scrutinized 
        those constitutional or statutory protections that all 
        Americans which is not addressed by this measure. These 
        are precisely the type or nature of precedents that are 
        subject to differing interpretations because judges 
        reasonably interpret a point of law or principle from 
        totally opposite viewpoints. . . . The limitations on 
        these agencies' ability to appeal decisions by circuit 
        courts to the Supreme Court in addition to their 
        ability to create novel and ingenious ways of 
        protecting the right of citizens is a sacred craft and 
        should only be regulated with the highest level of 
        scrutiny.\31\
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    \31\ Markup of H.R. 1924, The Federal Agency Compliance Act, Before 
the Subcommittee on Commercial and Administrative Law of the House 
Comm. on the Judiciary, 106th Cong., 2st Sess. (Sept. 20, 2000) 
(statement of Rep. Jackson Lee).

    Similarly, the Mexican American Legal Defense and 
Educational Fund, a staunch defender of civil rights, took a 
position against H.R. 1544, the predecessor version of H.R. 
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1924, noting, among other things,

        [b]y limiting each agency's discretion in determining 
        the cases it will appeal, agencies such as the U.S. 
        Department of Justice and the Social Security 
        Administration can only do less to adequately and 
        legally interpret and pursue particular cases deemed to 
        be significant in determining substantive policy.\32\
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    \32\ MALDEF Letter, supra n. 7 (emphasis added).

    We are aware that some would argue that the fact that under 
the bill agencies would be constrained in developing their 
litigation strategies could be a positive or negative 
development, depending on the political orientation of the 
administration. In our view, however, this argument ignores the 
fact that by and large agencies are in the posture of seeking 
to enforce laws designed to protect our workplace safety, civil 
rights, and environmental and health safeguards against 
culpable parties. If an agency chooses not to protect these 
rights, it doesn't need the ``cover'' of acquiescence 
requirements such as those set forth in H.R. 1924--the agency 
can simply exercise its discretion not to bring particular 
enforcement actions. It is only those agencies who desire to 
enforce these laws against recalcitrant interests which will 
face new difficulties under H.R. 1924. We therefore reject the 
assertion that H.R. 1924 will have a neutral impact on both 
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pro- and anti-enforcement administrations.

                               CONCLUSION

    In our view, supporters of H.R. 1924 have not established 
that abusive nonacquiescence exists on a sufficiently wide-
spread basis to justify legislation limiting the litigation 
authority of every agency in the government. In an effort to 
assist people who are having difficulty enforcing their own 
individual rights, H.R. 1924 would reduce the effectiveness of 
the agencies that are charged with the responsibility of 
protecting the rights of our citizens as a whole, including 
critical safeguards concerning employment rights, civil rights, 
consumer safety, and the environment.
    We believe that on the rare occasions when dangerous legal 
precedents are written--such as Plessy v. Ferguson (upholding 
``separate but equal'' facilities),\33\ and Korematsu v. United 
States (Japanese-American interment upheld) \34\--agencies 
protecting public safety and welfare should have unfettered 
discretion to challenge them. Accordingly, we dissent from this 
legislation.
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    \33\ 163 U.S. 537 (1896).
    \34\ 324 U.S. 885 (1944).

                                   John Conyers, Jr.
                                   Howard L. Berman.
                                   Jerrold Nadler.
                                   Melvin L. Watt.
                                   Sheila Jackson Lee.
                                   Maxine Waters.
                                   Martin T. Meehan.
                                   Steven R. Rothman.
                                   Anthony D. Weiner.

                                  
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