Damages and Arbitration Provisions in Proposed

Amendments to the Fair Housing Act

Certain proposed amendments to the Fair Housing Act would provide that parties may voluntarily subm it their dispute to an arbitrator empowered to impose compensatory and punitive 

damages (as opposed to equitable relief or restitution). These amendments would be permissible under the Seventh Amendment because they amount to a waiver of a right, that would 

otherwise obtain, to a jury trial on compensatory and punitive damages. The amendments also 

comport with the strictures of Article III. The Supreme Court has held that Article III 

strictures cannot be waived, but the Court also has found that purely voluntary procedures 

severely minimize any Article III concerns.

O ther aspects of the proposed amendments to the Fair Housing Act, which authorize mandatory 

proceedings before an arbitrator o r administrative law judge with the power to award compensatory and punitive damages, w ould likely not survive scrutiny under the Seventh Amendment and Article III. The cause o f action created by the Fair Housing Act appears to be 

derived from a common law action that is historically within the exclusive preserve of Article

III courts operating with a jury. Furthermore, the right at issue is private in nature, in that it is 

intended to determine the liability of one individual to another. In addition, the housing 

market is not a specialized area o f administrative regulation by the Federal Government. 

Finally, the Fair Housing Act setting does not seem to involve an imperative necessity for 

Congress to choose an administrative remedy, as demonstrated by the fact that judicial 

proceedings would remain available to plaintiffs and there would be only minimal differences 

in the relief available in the administrative and judicial forums. Under the Supreme Court’s 

admittedly confusing and inconsistent precedents, these factors suggest that the proposed 

mandatory administrative proceedings would not comport with Article III or the Seventh 

Amendment.

June 8, 1987

M e m o r a n d u m O pinion fo r th e A s sist a n t A tto r n e y G e n e r a l,

Civ il R ig hts D iv isio n

This responds to your request for our opinion on the Seventh Amendment 

issues raised by the use of civil penalties and punitive damages in proposed 

amendments to the Fair Housing Act, 42 U.S.C. §§ 3602-3631. The Civil 

Rights Division has drafted a bill entitled “Fair Housing Amendments Act of 

1987” (draft bill), while the Senate is considering S. 558.

The draft bill and S. 558 raise three questions. First, may an arbitrator award 

anything other than equitable relief in a voluntary arbitration proceeding? 

Second, is the defendant in a civil action entitled to a jury trial on the issue of 

liability for civil penalties? Third, may an arbitrator or an administrative law 

judge award compensatory damages, punitive damages, or civil penalties in an 

administrative proceeding?

50
I. Analysis

A. Punitive Damages in Voluntary Arbitration

The first question is whether an arbitrator may award damages in a voluntary 

proceeding under § 812 of the draft bill. The bill would permit the parties to 

agree to voluntary arbitration that would be binding on the parties. § 812(a)(2).1 

There is certainly no impediment to the arbitrator in such a voluntary proceeding imposing the equitable relief now outlined in the draft bill: a permanent or 

temporary injunction and restitution. Nor do we believe that the Seventh 

Amendment precludes the parties from agreeing voluntarily to submit their 

dispute to an arbitrator who could impose punitive damages. In these circumstances, both parties will have waived any Seventh Amendment rights that 

would otherwise obtain.

The question whether this proceeding is consistent with Article III of the 

Constitution is somewhat more problematic. The voluntary participation of 

private litigants in a proceeding outside the confines of the federal judiciary 

does not ipso facto insulate it from Article III attack. Commodities Futures

Trading Comm’n v. Schor, 478 U.S. 833, 851-54 (1986). The Court in Schor

emphasized that the strictures of Article III (unlike the protection of Seventh 

Amendment) cannot be waived by the consent of the parties. Id. For the reasons 

discussed more fully below, however, we believe that the arbitration proceeding contemplated in § 812 of the draft bill would survive Article III scrutiny 

because a very similar administrative scheme was upheld in Schor primarily 

because of its voluntary nature. Id. at 856-57.

B. Jury Trial in a Civil Action

On the issue of liability for punitive damages, we believe that the Seventh 

Amendment entitles the defendant to a jury trial in a civil action under either 

§ 814(c) of the draft bill or § 813 of S. 558.

The Supreme Court has held that suits by the Government to recover civil 

penalties are analogous to a common law action in debt, an action covered by 

the Seventh Amendment’s requirement of a jury trial. Tull v. United States, 481 

U.S. 412, 420-23 (1987). Therefore, the defendant in an action to recover a 

civil penalty under the Clean Water Act, 33 U.S.C. § 1319(d), is entitled to a 

jury trial. The Court distinguished between actions at law, which are covered 

by the Seventh Amendment, and actions in equity, which are not.2 Tull, 481 

U.S. at 416. Noting that civil penalties were punitive in nature, and were 

intended to do more than make the offender disgorge unlawful profits, the 

Court in Tull observed:

1 Section 812(a)(4), although incomplete, supports our assumption that the hearing will be conducted 

according to rules that provide for presentation o f witnesses and evidence so as to satisfy any due process 

concerns.

2 Actions at equity include temporary and permanent injunctions and orders, such as reparations, that 

restore the status quo.

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A civil penalty was a type of remedy at common law that could 

only be enforced in courts of law. Remedies intended to punish 

culpable individuals, as opposed to those intended simply to 

extract compensation or restore the status quo, were issued by 

courts of law, not courts of equity.

Id. at 422. The Court analyzed the legislative history of the Clean Water Act’s 

penalty provision and determined that it was intended to punish offenders and 

therefore reflected “more than a concern to provide equitable relief.” Id.

“Congress wanted the district court to consider the need for retribution and 

deterrence, in addition to restitution, when it imposed civil penalties.” Id. Tull

therefore stands for the proposition that civil penalties that are designed to 

punish are actions at law that must be tried to a jury under the Seventh 

Amendment. See also Curtis v. Loether, 415 U.S. 189, 194 (1974). The 

determination in a civil action of liability for “punitive damages” thus requires 

a trial by jury. Punitive damages are designed to punish and were, not surprisingly, identified by the Court as another kind of action at law that requires a 

jury trial. Tull, 481 U.S. at 422 n.7. Therefore, a defendant in an action brought 

under § 814(c) of the draft bill or § 813 of S. 558 would be entitled to a jury 

trial.

Moreover, even if civil penalties or punitive damages were not available, a 

jury trial would still be required so long as a private litigant could recover 

actual, compensatory damages. The Court in Curtis, noting that “[a] damages 

action sounds basically in tort,” held that a suit by an aggrieved person to 

collect damages under § 812 of the Fair Housing Act required a trial by jury. 

415 U.S. at 194-95.

C. Seventh Amendment and Article III: Permissibility of

Mandatory Arbitration

Having concluded that an action for compensatory or punitive damages 

would require a jury trial in an Article III court, we turn to the most difficult 

question posed by the draft bill and S. 558: whether providing precisely the 

same cause of action in an administrative tribunal where no jury is available 

can survive constitutional scrutiny under the Seventh Amendment and 

Article III.

1. Case Law

The Supreme Court has held that the Seventh Amendment does not prohibit 

Congress from assigning adjudication of certain statutory rights to an administrative forum, even if a jury would have been required under the Seventh 

Amendment had Congress assigned adjudication of the same rights to a federal 

court: Atlas Roofing Co. v. Occupational Safety & Health Comm’n, 430 U.S. 

442,450(1977):

52
At least in cases in which “public rights” are being litigated — 

e.g., cases in which the Government sues in its sovereign capacity to enforce public rights created by statutes within the power 

of Congress to enact — the Seventh Amendment does not 

prohibit Congress from assigning the factfinding function and 

initial adjudication to an administrative forum with which the 

jury would be incompatible.

See also Tull, 481 U.S. at 418 n.4; NLRB v. Jones & Laughlin Steel Corp., 301 

U.S. 1 (1937); Block v. Hirsh, 256 U.S. 135 (1921). The Court made clear, 

however, that actions involving “private rights” as distinguished from “public 

rights” could not be transferred to administrative proceedings:

Our prior cases support administrative factfinding in only those 

situations involving “public rights,” e.g., where the Government 

is involved in its sovereign capacity under an otherwise valid 

statute creating enforceable public rights. Wholly private tort, 

contract, and property cases, as well as a vast range of other 

cases are not at all implicated.

Atlas Roofing, 430 U.S. at 458.3

The problem is that the Court has never stated with any clarity what distinguishes a public right from a private right.4 “The distinction between public 

rights and private rights has not been definitively explained in [the Court’s] 

precedents.” Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 

U.S. 50,69 (1982) (plurality opinion). But while the Court’s application of the 

public rights doctrine has not been particularly consistent or coherent, the 

conceptual underpinnings of this theory are reasonably discernible.

Essentially, the public rights doctrine reflects the Court’s recognition that 

the nature and historical backdrop of the federal right at issue are quite 

significant in determining whether congressional substitution of alternative 

tribunals for Article III courts impermissibly encroaches on the independence 

and authority of the federal judiciary. At one end of the spectrum, the Court has 

sought to prevent Congress from usurping the constitutional prerogatives of 

courts and, in some circumstances, juries, by removing from Article III tribu3 Tull does not diverge from this line of cases. In a footnote, the majority stated:

The Court has also considered the practical limitations o f a jury trial and its functional compatibility with proceedings outside of traditional courts of law in holding that the Seventh Amendment is not applicable to administrative proceedings. But the Court has not used these considerations as an independent basis for extending the right to a jury trial under the Seventh Amendment.

481 U.S. at 418 n.4 (citing Atlas Roofing and Pemell v. Southall Realty, 416 U.S. 363 (1974)). We are not 

certain what these two sentences mean. At a minimum, however, they indicate that Tull is not meant to signal 

a reexamination o f the principles underlying Atlas Roofing.

4 We believe the public rights doctrine is primarily based on Article III principles and thus will discuss this 

issue principally in those terms. The conclusion that a right is “public” for A rticle III purposes would seem to 

subsume any Seventh Amendment objections on this basis. Cf. Atlas Roofing, 430 U.S. at 456; Northern

Pipeline, 458 U.S. at 67 n.18. In any event, in analyzing the public rights doctrine, the Court has treated the 

constraints o f the Seventh Amendment and Article III as virtually coextensive, discussing and citing Seventh 

Amendment and Article III cases interchangeably.

53
nals matters which the Constitution’s text, structure and history suggest are 

theirs to resolve. At the other end of the spectrum, the Court has perceived no 

plausible threat to an independent judiciary or trial by jury from non-Article III 

resolution of matters that are committed by the Constitution or historical 

consensus to political branches, and which thus “could have been determined 

exclusively” by the executive and legislative branches absent any judicial 

review save that required by the Due Process Clause.5 Northern Pipeline, 458 

U.S. at 68 (plurality opinion) (citing Crowell v. Benson, 285 U.S. 22 (1932)). In 

short, the dividing line that has emerged from the Court’s precedent is that 

cases which are “inherently . .. judicial,” Ex parte Bakelite Corp., 279 U.S. 

438, 458 (1929), because they involve traditional rights governing “the liability 

of one individual to another,” Crowell, 285 U.S. at 51, may not be removed 

from adjudication in the federal courts absent extraordinary circumstances, 

while those involving disputes “between the government and others” may 

permissibly be committed to agency adjudication. Ex parte Bakelite Corp., 279

5 This and sim ilar phrases, often repeated but rarely explained by the Court, apparently refer to those 

m atters that the political branches could have disposed o f in a summary fashion before the evolution of 

m odern substantive and procedural due process theories. This would include those areas where the text of the 

C onstitution grants plenary authority to one of the political branches — such as immigration or taxation — 

and disputes concerning the removal o f “privileges” such as Government financial assistance, rather than 

“rights” as traditionally understood. “The understanding o f these cases is that the Framers expected that 

Congress would be free to commit such matters completely to non>judicial executive determination, and that 

as a result there can be no constitutional objection to C ongress' employing the less drastic expedient of 

com m itting their determ ination to a legislative court or an administrative agency.” Northern Pipeline, 458 

U.S. at 68 (plurality opinion). See also Crowell v. Benson, 285 U.S. at 50, Thomas v. Union Carbide Agric.

Prod. Co., 473 U.S. 568, 596-97 n.l (1985) (Brennan, J., concurring). Moreover, “[t]his doctnne may be 

explained in part by reference to the traditional principle o f sovereign immunity, which recognizes that the 

G overnm ent may attach conditions to its consent to be sued ” Northern Pipeline, 458 U.S. at 67. See also

Murray's Lessee v. Hoboken Land & Improvement Co., 59 U.S. (18 How.) 272, 283-85 (1856); Ex parte

Bakelite Corp., 279 U.S. 438,452 (1929). In other words, the original Article III cases seem to be premised 

on concepts akin to the “bitter with the sweet” theory o f procedural due process and the “right/privilege” 

distinction. See Arnett v. Kennedy, 416 U.S. 134 (1974); Bailey v. Richardson, 182 F.2d 46 (1950), a ff d,

341 U.S. 918 (1951). That is, the Government could condition suit against itself on the plaintiffs waiver of 

any right to choose a forum or a jury trial, and in connection with exercising plenary grants of authority or 

lim iting financial benefits, the political branches were fully free to dispose of government-created entitlem ents w ithout providing any means o f contesting such summary action.

O f course, as a due process matter, subsequent case law has undermined these conceptual underpinnings. It 

is now clear that there is a property interest in Government entitlements, a substantive due process right 

against arbitrary or capricious government practices, and a prohibition against conditioning the extension of 

G overnm ent benefits on the waiver of constitutional rights. See, e.g., Goldberg v. Kelly, 397 U.S. 254 (1970); 

Cleveland Bd. o f Educ. v. Loudermill, 470 U.S. 532 (1985); Speiser v. Randall, 357 U.S. 513 (1958). 

N evertheless, for Article III purposes, we believe these concepts help to describe what is meant by matters 

which “could be conclusively determined” by the executive and legislative branches. The notion is that 

traditional, private state law claims antedating the newly created federal statutory rights are the type that 

should remain within the province of Article III courts. These rights do not exist solely by virtue of the federal 

statutory scheme, do not involve disputes between a private individual and the Government qua Government, 

and do not concern alleged deprivations caused by the G overnm ent's administration of its own regulatory or 

financial assistance schem es. Accordingly, even under a “consent to suit” or “bitter with the sweet” theory, 

such m atters would not be subject to summary disposition by the political branches because they involve 

traditional disputes solely between private individuals and would thus fall outside the rationale supporting the 

earlier Article III cases. Again, the rise of modem due process theory should not affect the Article III 

analysis. That recent due process cases create checks against the G overnm ent's power to engage in summary 

disposition o f certain matters does not provide a rationale supporting the non-Article III adjudication of 

m atters not previously subject to summary disposition.

54
U.S. at 451. Although the Court has not comprehensively or even consistently 

defined this concededly abstract line of demarcation, it has identified the 

factors that tend to differentiate public from private rights.

Probably the most important factor in defining the nature of the federal right 

presented is the historical underpinnings of the right. If the claim at issue is 

analogous to “the stuff of the traditional actions at common law tried by the 

courts at Westminster in 1789,” there is at least a strong presumption that it 

must be resolved by an Article III court. Northern Pipeline, 458 U.S. at 90 

(Rehnquist, J., concurring). Although the Northern Pipeline plurality and some 

earlier cases seem to hold that Congress may not “withdraw from judicial 

cognizance any matter which, from its nature, is the subject of a suit at the 

common law, or in equity, or admiralty, Northern Pipeline, 458 U.S. at 67 

(plurality opinion) (quoting Murray’s Lessee v. Hoboken Land & Improvement

Co., 59 U.S. (18 How.) 272, 284 (1856)), the Court’s recent decisions seemingly conclude that the traditional common law attributes of a claim do not, 

standing alone, prohibit such a withdrawal. Nevertheless, even these recent 

decisions have emphasized that such traditional legal and equitable causes of 

action are at the “protected core” of Article III judicial powers. Thomas v. 

Union Carbide Agric. Prod. Co., 473 U.S. 568,587 (1985). See also Schor, 478 

U.S. at 853. As the Court put it in Schor, “the state law character of a claim is 

significant for purposes of determining the effect that an initial adjudication of 

those claims by a non-Article III tribunal will have on the separation of powers 

for the simple reason that private, common law rights were historically the 

types of matters subject to resolution by Article III courts.” Id. at 854.6

Accordingly, if Congress creates a statutory cause of action, the roots of 

which can fairly be traced to a traditional legal or equitable claim, there is a 

heavy, albeit rebuttable, presumption that the claim may not be delegated to 

administrative adjudication.7

Conversely, “matters arising ‘between the Government and persons subject 

to its authority in connection with the performance of the constitutional functions of the executive or legislative departments,’ [and] matters that historically could have been determined exclusively by those departments” are clearly

6 The Court has emphasized that the historical antecedents of a particular right, not an objective evaluation 

o f whether it is o f the sort that should be resolved by the judiciary, are paramount in public rights analysis. As 

the plurality noted in Northern Pipeline:

Doubtless it could be argued that the need for independent judicial determination is greatest in 

cases arising between the Government and an individual. But the rationale for the public-rights 

line o f cases lies not in political theory, but rather in Congress' and this C ourt's understanding of 

what power was reserved to the Judiciary by the Constitution as a matter o f historical fact.

458 U.S. at 68 n.20, cited in Schor, 478 U.S. at 854.

7The public rights analysis obtains with respect to “new" rights created by congressional statutes, as well as 

to non-Article III adjudication o f common law claims not embodied in a congressional statute. See Curtis v. 

Loether, 415 U.S. 189, 193 (1974) (“We have considered the applicability of the constitutional right to jury 

trial in actions enforcing statutory rights ‘as a matter too obvious to be doubted.’”). See also Tull, 481 U.S at 

420; Pemell v. Southall Realty, 416 U.S. 363, 375 (1974). Indeed, a contrary conclusion would make 

nonsense of the C ourt's emphasis on the historical lineage o f the right and would essentially eviscerate the 

protection of Article III and the Seventh Amendment, because Congress always makes law by embodying 

“new" rights in a statute.

55
public rights. Northern Pipeline, 458 U.S. at 67-68 (plurality opinion) (quoting 

Crowell, 285 U.S. at 50). See also Schor, 478 U.S. at 853-54 (“when Congress 

selects a quasi-judicial method of resolving matters that ‘could be conclusively 

determined by the Executive and Legislative Branches,’ the danger of encroaching on the judicial powers is less than when private rights, which are 

normally within the purview of the judiciary, are relegated as an initial matter 

to administrative adjudication”); Thomas, 473 U.S. at 589; Ex parte Bakelite

Corp., 279 U.S. at 458; Oceanic Steam Navigation Co. v. Stranahan, 214 U.S. 

320, 339 (1909). The Court has thus concluded that disputes involving newly 

created rights unknown to the common law or matters that, as an historical 

matter, “could be conclusively determined by the Executive and Legislative 

Branches,” may be adjudicated by non-Article III forums. Thomas, 473 U.S. at 

589 (quoting Northern Pipeline, 458 U.S. at 68 (plurality opinion)). In such 

circumstances, the dispute is not over the scope of the federal statutory duty X 

owes to Y, but the scope of the Government’s authority in administering its 

own programs; it is thus a dispute between the Government and others. Accordingly, the Court has looked to whether the rights asserted are derived from a 

comprehensive regulatory scheme concerning a specialized area, such as federal broadcast licenses and “entitlements” to federal welfare benefits. See, e.g.,

Schor, 478 U.S. at 854-56; Thomas, 473 U.S. at 600-01 (Brennan, J., concurring).

It is more difficult to discern whether public rights are created by virtue of 

the Government’s participation in matters not committed to its exclusive and 

all-encompassing regulatory discretion. Specifically, it is unclear what significance should be attached to the mere fact of Government participation in a 

representative or prosecutorial capacity, rather than in its capacity as administrator of its own regulatory programs.

The Court has recently established that neither the presence nor the absence 

of the Government as a party of record is dispositive in resolving whether a 

particular right is public or private.8 Rather, one must “loo[k] beyond form to 

the substance of what [the statutory scheme] accomplishes” with due regard for 

“the origin of the right at issue [and] the concerns guiding the selection by Congress 

of a particular method for resolving disputes.” Id. at 587,589.

For this reason, as we previously stated with respect to another proposed 

amendment to the Fair Housing Act, the Government’s participation is of little 

significance if it “simply has stepped into the individual’s shoes in [the] 

administrative proceeding, and is suing in a representative capacity.”9 In this

8 In Northern Pipeline, the plurality stated: “It is thus clear that the presence o f the United States as a proper 

party to the proceeding is a necessary but not sufficient means o f distinguishing "private rights* from ‘public 

rights.’ ” 458 U.S. at 69 n.23. Only a few years later, however, a majority of the Court rejected this “brightline test" as exalting form over substance, holding that the United States’ party status was neither necessary 

nor sufficient in resolving the public rights question for purposes o f Article III. Thomas, 473 U.S. at 586. In 

Thomas, the Court rejected both the view that “the right to an Article III forum is absolute unless the federal 

governm ent is a party o f record" and the contrary view th a t44Article III has no force simply because a dispute 

is betw een the Governm ent and an individual.” Id.

9 “Seventh Amendm ent Implications o f Providing for the Administrative Adjudication of Claims Under 

Title VIII o f the Civil Rights Act of 1968,” 9 Op. O.L.C. 32 (1985).

56
context, the Government simply acts as a prosecutor to vindicate the rights of 

one private individual against another, not to resolve a dispute between an 

individual and the Government qua Government; it is thus difficult to discern 

why the presence of the United States should convert such private disputes into 

“public” rights. Giving such talismanic effect to the Government’s mere initiation of an administrative complaint would be inconsistent with Thomas' admonition that public rights analysis should not be a formalistic endeavor that 

focuses on the “identity of the parties alone” without “regard to the origin of 

the right at issue.” Id. at 587. As one commentator has noted, any such 

understanding of the Court’s Article III precedent does indeed result in “[f|orm 

. . . replacing] substance: Congress could avoid conferring jurisdiction upon 

an Article III court simply by altering the party structure in its new action, by 

replacing the private plaintiff with a government prosecutor.” L. Tribe, American Constitutional Law 43 (1978).10

Nevertheless, there are cases in which administrative schemes have provided 

incidental relief to private parties in the course of enforcing public policy. See

Schor, supra’, NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937); Block

v. Hirsh, 256 U.S. 135 (1921). The relief available in Jones & Laughlin,

however, was essentially equitable in nature (reinstatement and backpay), and 

only the NLRB could seek court enforcement of the order." Moreover, although the Court often cites Block v. Hirsh, 256 U.S. 135 (1921), for the 

proposition that what would usually be viewed as a private right — a landlord/ 

tenant dispute — can be a “public right,”12 it does so without noting what the 

Block court itself recognized. The case arose during an extraordinary housing 

shortage in the District of Columbia caused by World War I, which had 

transformed housing from its normal status as a matter of private sector 

concern into a matter of grave public concern: “circumstances have clothed the 

letting of buildings in the District of Columbia with a public interest so great as 

to justify regulation by law.” Id. at 155. Thus, Block did not involve a purely 

private right: “The [rent] commission did not . . . afford all-purpose relief to 

complaining private parties.” 2 Op. O.L.C. 16, 19 (1978). As we have previously observed, “[i]t cannot be concluded, based on these rather limited precedents, that administrative proceedings initiated by a public agency but providing the full panoply of judicial relief to private parties are necessarily permitted 

under the Seventh Amendment.” Id.

Further, the Court, principally in the Schor opinion, has considered two other 

factors in determining whether judicial resolution of particular disputes is

10 As we stated w ith regard to a 1978 proposal that would have authorized the Department of Housing and 

Urban Development to file administrative complaints:

It could be argued that Congress should not be able, under the vague rubric “public rig h t/' to 

circumvent the Seventh Am endm eat completely by creating a chain of administrative courts 

capable of giving traditional common-law remedies to private litigants seeking relief from 

wrongs (such as dignitary torts) traditionally regarded as private in character.

“Fair Housing — Civil R ights Act,” 2 Op. O.L.C. 16,20 (1978).

112 Op. O.L.C. at 19 (citing Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261 (1940)).

12See, e.g., Thomas, 473 U.S. at 589.

57
constitutionally required. Although the Court’s language admits of differing 

interpretations, we do not view these factors as interpretive aids in defining the 

public right but rather as exceptions to the public right doctrine. In other words, 

these factors identify the narrow circumstances in which non-Article III adjudication of arguably private rights may be permissible.

First, Schor establishes that the Court will attach great, if not dispositive, 

significance to whether the party asserting a constitutional deprivation has 

participated in the non-Article III proceeding on a purely voluntary basis and 

thus has effectively waived any right to complain. The complaining party in 

Schor had opted for the CFTC’s administrative forum rather than state or 

federal courts with full knowledge that the regulatory scheme allowed the 

CFTC to exercise jurisdiction over all counterclaims, including those involving 

matters of state law; indeed, the complaining party then “expressly demanded 

that [the opposing party] proceed on its [state law] counterclaim in the [administrative] proceeding rather than before the District Court.” 478 U.S. at 849. 

Although the Schor Court determined that Article III separation of powers 

limitations, unlike Seventh Amendment rights, cannot be “waived” by a private 

litigant, it nonetheless made clear that the purely voluntary nature of the 

proceedings severely minimized any Article III concerns that might otherwise 

have obtained: “just as Congress may encourage parties to settle a dispute out 

of court or resort to arbitration without impermissible incursions on the separation of powers, Congress may make available a quasi-judicial mechanism 

through which willing parties may, at their option, elect to resolve their 

differences.” Id. at 855. See also id. at 849 (noting that “the absence of consent 

to an initial adjudication” was “a significant factor” in Northern Pipeline's

condemnation of Article I bankruptcy courts).13

Second, the Schor Court also seemed to permit administrative adjudication 

of private rights, at least where participation in the administrative process is 

voluntary, if those private claims are wholly ancillary to the public rights 

created by the federal regulatory scheme and if their resolution in the administrative process is necessary to enable resolution of the statutory public rights in 

that forum. The issue in Schor concerned a CFTC administrative process 

established to provide reparations to “disgruntled customers of professional 

commodity brokers seek[ing] redress for the brokers’ violations of the Act or 

CFTC regulations.” Id. at 836. When Mr. Schor invoked this procedure, his 

broker counterclaimed, on state law grounds, for a debit balance which Mr. 

Schor alleged had resulted from the broker’s violations of the Commodity 

Exchange Act that were at issue in the administrative proceeding. If resolution 

of such private state law counterclaims was not permitted in the administrative 

forum, administrative resolution of the public rights created by the CEA would 

never occur, as a practical matter, “for when the broker files suit to recover the 

debit balance, the customer will normally be compelled either by compulsory

13 The Court in Thomas described the chem ical com panies as “voluntary participants in the program,” 473 

U.S. at 589, although the only element o f choice seems to have been whether to engage in the manufacture o f 

chem icals.

58
counterclaim rules or by the expense and inconvenience of litigating the same 

issues in two fora to forgo his reparations remedy and to litigate his claim in 

court.” Id. at 843-44.

Accordingly, Schor created an exception to the public rights doctrine, which 

permits resolution of private claims in otherwise valid administrative schemes 

where resolution of those private rights “is limited to that which is necessary to 

make the [scheme] workable” by resolving the public rights created by the 

regulatory scheme. Id. at 856. As the Court put it, “absent the CFTC’s exercise 

of that authority [over state law counterclaims], the purposes of the [administrative] reparations procedure would have been confounded.” Id. at 856. In 

context, then, Schor’s departure from the public rights line of cases is clearly 

premised on the voluntary and necessary aspects of the administrative tribunal’s 

resolution of private rights.

Finally, and most generally, the Court has looked to the “concerns motivating the legislature” in choosing a non-Article III forum. Thomas, 473 U.S. at 

590. In this regard, the Court has attached significance to a showing that there 

is an “imperative necessity” for administrative procedures because of the 

specialized, complex nature of the subject matter and a demonstrated need for 

expedited adjudication. Murray's Lessee, 59 U.S. (18 How.) at 282. See also

Schor, 478 U.S. at 852; Thomas, 473 U.S. at 590. Cf. Palmore v. United States,

411 U.S. 389, 407-08 (1973). The rationale here is that strong “evidence of 

valid and specific legislative necessities,” Schor, 478 U.S. at 855, can be 

accommodated without unduly disrupting separation of powers concerns because such exceptions are limited in scope and reveal that Congress’ sole 

motivation was to solve a pressing emergency, not to avoid Article III adjudication for its own sake. See id. at 855-57; Thomas, 473 U.S. 590-593.

2. Analysis

Application of these principles to the draft bill leads us to conclude that it is 

of doubtful constitutional validity. Although S. 558, unlike the draft bill, 

provides that the Department of Housing and Urban Development (HUD) will 

act as the moving party in an administrative proceeding, we do not believe that 

this difference alone should substantially affect the constitutional inquiry.14 

We will analyze each of the proposed bills in turn.

14We do not believe that the use o f administrative law judges to determine punitive damages may be upheld 

on the theory that the adm inistrative proceeding is merely an adjunct to the district court. The Supreme Court 

has upheld against Article III challenges the use of administrative agencies as factfinders in cases involving 

private rights “only as an adjunct to an Art. Ill court, analogizing the agency to a jury or a special m aster.” 

Atlas Roofing,4 3 0 U.S. at 4S0 n 7. However, we do not believe that these cases uphold the use of adjuncts in 

cases involving private rights that are also actions at common law. As originated in Crowell, the adjunct 

theory did not include private nghts of action found at common law. Crowell involved a case arising in 

admiralty and the Court distinguished this from common law actions* “In cases of equity and admiralty, it 

is historic practice to call to the assistance of courts" non-judicial factfinders. 285 U.S. at 51. However, “on 

the common law side of the Federal courts, the aid of juries is not only deemed appropriate but is required 

by the Constitution itself.” Id. Thus, the Court recognized that juries — not non-judicial factfinders —

Continued

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Perhaps the most important consideration in assessing the draft bill’s proposed administrative proceeding is that the right adjudicated is derived from a 

common law action that is historically within the exclusive preserve of Article 

III courts. In Curtis v. Loether, 415 U.S. 189 (1974), the Court concluded:

We think it is clear that a damages action under 812 [of the Fair 

Housing Act] is an action to enforce “legal rights” within the 

meaning of our Seventh Amendment decisions. A damages 

action under the statute sounds basically in tort — the statute 

merely defines a new legal duty, and authorizes the courts to 

compensate a plaintiff for the injury caused by the defendant’s 

wrongful breach. As the Court of Appeals noted, this cause of 

action is analogous to a number of tort actions recognized at 

common law. More important, the relief sought here — actual 

and punitive damages — is the traditional form of relief offered 

in the courts of law.

. Id. at 195-96 (citations omitted). Thus, the statutory right to be adjudicated in 

the draft bill’s administrative proceeding is directly analogous to a cause of 

action that was subject to judicial resolution at the time the Constitution came 

into being, thus creating a strong presumption that it must be tried in an Article

III court pursuant to normal procedures. Moreover, the Civil Rights Division 

draft bill provides that actual and punitive damages may be awarded in the 

arbitration hearing. § 813. As indicated earlier, these are classic “legal” remedies of the type that could be awarded only by a court of law with a jury, not by 

a court of equity. See Tull, 481 U.S. at 423 n.7. Cf. Atlas Roofing, 442 U.S. at 

459,460 (The Seventh Amendment is intended to “preserve” the right to a jury 

trial in common law suits, not to require them where none was previously 

required.).

Further, wholly apart from its historical roots, the right at issue here is 

private in nature, in that it is intended to determine the liability of one individual to another. Crowell, 285 U.S. at 51. Under the Civil Rights Division 

draft bill, virtually the only role played by the Government is to provide a

14 ( . . . continued)

were required in cases involving common law questions. Crowell's language certainly supports an argument 

that the Seventh Amendment prevents C ongress from placing actions that are both private and based on 

com m on law actions beyond the reach o f a jury trial. Crowell reads the Seventh Amendment as requiring a 

jury in cases arising under the common law , while permitting agencies to act as de facto juries for private 

rights arising in equity or admiralty. Id. at 51. See also Northern Pipeline, 458 U.S. at 81-82 (plurality 

opinion) (“Crowell does not support the further proposition necessary to appellants' argument — that 

C ongress possesses the same degree o f discretion in assigning traditionally judicial power to adjuncts 

engaged in the adjudication o f nghts not created by Congress.”) (emphasis in original); United States v. 

Raddatz, 447 U.S. 667 (1980). We are especially reluctant to adopt this adjunct theory in the Seventh 

A m endm ent context when to do so would perm it Congress to take from the courts a factfinding function that 

courts do not have in common law actions under the Seventh Amendment. See Tull, supra. Unlike the action 

at issue in Raddatz, the right being resolved under the draft bill is not one a court couid decide if it wished; the 

right to punitive dam ages has to be resolved by a jury. The adjunct theory, if applied to private rights based on 

com m on law actions would render the Seventh Amendment’s protection hollow, dependent entirely upon the 

whim o f a congressional majority.

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federal rule of decision that defines the liability between private actors. Under 

the proposed bill, only private litigants may initiate the administrative proceeding and they may themselves seek review or enforcement of the arbitrator’s 

order in court. § 813(a)(1), (c). Although HUD may prevent formal arbitration 

by not issuing a “reasonable cause” determination and may intervene in the 

hearing, the entire matter may well proceed to final judgment without Government participation, and, in any event, HUD’s intervenor role would clearly be 

limited to vindicating the rights of the private litigant. In this regard, we note as 

well that civil rights statutes generally are intended to create personal rights, 

guaranteed to the individual. See generally Connecticut v. Teal, 457 U.S. 446 

(1982); Regents o f the Univ. o f Cal. v. Bakke, 438 U.S. 265, 299 (1978) 

(opinion of Powell, J.); Los Angeles Dep’t o f Water & Power v. Manhart, 435 

U.S. 702, 708, 709 (1978); Shelly v. Kraemer, 334 U.S. 1, 22 (1948). In short, 

because the statutorily created right here derives from a dignitary tort and is 

enforceable primarily by private individuals for their own benefit pursuant to 

common law remedies, the Court’s precedents strongly indicate that these 

administrative hearings will be viewed as “wholly private tort. . . cases [that] 

are not at all implicated” by the public right exception described in Atlas

Roofing. Atlas Roofing, 430 U.S. at 458.

Moreover, none of the other factors on which the Court has focused militate 

in favor of the draft bill’s validity. It is clear that a defendant would be an 

involuntary participant in the arbitration proceedings, and it seems quite doubtful that the private housing market in the United States would generally be 

considered a “specialized area” for administrative regulation by the federal 

government. Further, the exception created in Schor for ancillary and necessary 

private claims is inapplicable since adjudication of common law claims is 

clearly not “incidental to, and completely dependent upon, adjudication of... 

claims created by federal law.” Schor, 478 U.S. at 856.15

13 We note that the Civil Rights D ivision's draft bill, as well as S. 558, provides for court enforcement o f the 

adm inistrator's award. Draft bill, § 813(d), (g); S. 558, § 812(h), (i). We confess that we are uncertain 

whether this is an argument in favor of or against the proposed bill's constitutional validity, because the 

Court’s precedents point in opposite directions. Under the adjunct theory of Article III, assignment o f some 

limited functions to a non*Article III tribunal is sometimes permissible, so long as “ ‘the essential attributes' 

o f judicial power are retained in the Art. Ill court.” Northern Pipeline, 458 U.S. at 81 (plurality opinion). See

also Crowell, 285 U.S. at 51. Thus, under the adjunct theory as traditionally understood, it w as quite clear that 

the constitutional permissibility o f the statutory scheme was enhanced if the non-Article III forum was given 

only quite limited “judicial" powers, such as the right to enforce its own orders. Quite naturally, therefore, 

Northern Pipeline, in contrasting Crowell, said that a major defect in the bankruptcy courts scheme w as that 

those non-Article III tribunals could enforce their own orders without “seek[ing] enforcement in the district 

court ” Northern Pipeline, 458 U.S. at 85 (plurality opinion). See also id. at 91 (Rehnquist, J., concurring); 

Crowell, 285 U.S. at 51. In Thomas, however, the Court stated that the Article III validity o f the arbitration 

scheme was enhanced because it “relie[d] tangentially, if at all, on the Judicial Branch for enforcement" of 

the arbitrators’ orders, Thomas, 473 U.S. at 591, a conclusion that seems directly at odds with Crowell,

Northern Pipeline, and the entire rationale of the adjunct theory as previously understood. See Crowell, 285 

U.S. at 33-38. Fortunately, we need not engage in the task o f reconciling these cases, because we have 

previously concluded that the adjunct theory is probably inapposite here because the statutory right to be 

enforced is derived directly from a private, common law claim. We note, parenthetically, that the powers 

assigned to the arbitrator under the draft bill and S. 558 are considerably greater than the power (i.e.,

assessment of value) assigned to the adjunct in Crowell, but less than the plenary pow ers given to the 

bankruptcy courts in Northern Pipeline. See 9 Op. O.L.C. at 40.

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We further note that the Fair Housing Act certainly does not seem to involve 

the imperative necessity that the Court recognized in Thomas as a legitimate 

motivating factor for Congress’ consideration in choosing an arguably prompter 

administrative remedy. 473 U.S. at 590. Indeed, the Curtis Court rejected 

similar arguments advocating the need for expedited judicial review of Title 

VIII actions without a jury trial. Noting the availability of preliminary injunctions and non-jury trials in cases seeking only equitable relief, the Court stated 

“[m]ore fundamentally, however, these considerations are insufficient to overcome the clear command of the Seventh Amendment.” 415 U.S. at 198. It is 

nonetheless conceivable that a strong legislative record demonstrating that 

administrative trials are for some reason necessary meaningfully to resolve 

Fair Housing cases would tend to support the validity of the congressional 

purpose in opting for these proceedings. Of course, any such claim is substantially undermined by the fact that judicial proceedings remain available to 

plaintiffs so inclined, thus undercutting any notion that administrative proceedings are “necessary.”

Indeed, in the circumstances presented here, the congressional purpose 

underlying the establishment of administrative proceedings may well be viewed 

as a substantial deficiency, because the draft bill’s structure and background 

suggest that the sole purpose of the administrative alternative is simply to 

supplement or displace adjudication by Article III courts and juries. In this 

regard, it is significant that “there are only minimal differences between the 

relief available in the administrative forum (in which a civil penalty for the 

Government replaces punitive damages for the individual) and the judicial 

forum.” 9 Op. O.L.C. at 37. By providing for punitive damages in either the 

administrative or judicial forum, moreover, the draft bill leaves it entirely up to 

a plaintiff in an individual case to choose between the Article III and Article I 

fora, without sacrificing any weapon in his arsenal of remedies. Thus, the clear 

effect of the Act is to create parallel, virtually identical Article III and Article I 

processes — a dualism that serves no apparent purpose other than enhancing 

plaintiffs options and his ability to avoid bringing his case before a jury or an 

Article III judge.

We do not mean to suggest that providing plaintiffs with a choice between 

such parallel schemes by itself raises independent due process problems, even 

where, as here, it renders the defendant’s right to a jury trial utterly dependent 

on the plaintiffs choice of fora. However, the dual structure may well directly 

signal “the concerns guiding the selection by Congress of a particular method 

for resolving disputes.” Thomas, 473 U.S. at 587. In this regard, it is also 

noteworthy that “the Department would enter the fray, not at the outset, but 

nearly [19] years after the creation of a private cause of action in the district 

court which provides for identical remedies, and nearly [13] years after the 

Supreme Court expressly ruled that under such circumstances trial by jury must 

be available on demand.” 2 Op. O.L.C. at 20.

Against this backdrop, a reviewing court may fairly conclude that, in contrast to Schor, Congress’ “primary focus was [not] on making effective a

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specific and limited federal regulatory scheme, [but] on allocating jurisdiction 

among federal tribunals.” Schor, 478 U.S. at 855. In other words, the background and parallel structure of the Act might well strongly suggest that the 

“concerns that drove Congress to depart from the requirements of Article III,” 

id. at 851, were merely Congress’ desire to depart from the requirements of 

Article III because of the cost and delay that attend a jury trial in a federal 

court. Although the speed and efficiency of Article I tribunals are virtues, we 

believe that speed and efficiency alone cannot be viewed as sufficient reason 

for establishing Article I adjudication absent “imperative necessity.” Indeed, 

acceptance of such a justification would lead to the somewhat circular rule that 

Congress may avoid the constraints of Article III and eliminate the Seventh 

Amendment rights ringingly endorsed in Tull solely on the ground that it 

believes that Article III adjudication is more cumbersome than alternative 

dispute resolution without judges and juries.

We turn next to consideration of S. 558, which is identical to the draft bill in 

all material respects save one: it provides that HUD may institute administrative proceedings “on behalf of the aggrieved person filing the complaint” of 

housing discrimination, rather than the aggrieved person himself. S. 558, 

§ 810(g)(2)(A). Significantly, the private complainant has a right to file a 

complaint or to intervene as a full party in an administrative proceeding 

initiated by HUD, and he apparently may obtain both judicial enforcement and 

review of an adverse decision even if HUD does not go forward. Id., §§ 810(a), 

812(h)(2). Although, for the reasons noted above, the issue is hardly free from 

doubt, we think that the better view is that HUD’s participation in initiating the 

complaint is not alone sufficient to obviate the constitutional difficulties previously described.

As we have suggested, HUD’s participation as a party in these circumstances 

says very little about the “public” nature of the right involved, but simply 

describes the parties that are authorized to enforce that right. For this reason, 

the better understanding of the Court’s precedent is that the Government’s 

party status should not be given dispositive weight, particularly where, as here, 

the Government does not possess exclusive enforcement authority.

. We are fortified in our conclusion by the fact that this Office has previously 

determined, albeit not without equivocation or difficulty, that a proposed 1978 

amendment to the Fair Housing Act, virtually indistinguishable from S. 558, 

was probably unconstitutional. We so concluded because, as with S. 558, HUD 

“would not be the sole enforcer of the statutorily created” government policy 

and would not be acting in a regulatory capacity with regard to a public right.16

An opinion that we rendered in 1985 points to a similar conclusion. There we 

concluded, albeit tentatively, that a proposed amendment would probably 

survive constitutional scrutiny, but we did so in large part because the administrative process failed to “provide the aggrieved individual the punitive dam16 2 Op. O.L.C. at 20. Although acknowledging the difficulty of the issue, we concluded: “were we to opine 

one way or the other, our conclusion would probably favor a finding that [the proposal] is unconstitutional/’ 

Id.

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ages typically available at common law.” 9 Op. O.L.C. at 38. As noted, S. 558, 

like the draft bill, does provide this traditional legal remedy, thus substantially 

reinforcing the private, common law nature of the cause of action and rendering the administrative hearing virtually identical to a judicial proceeding.

It should be noted, however, that Thomas and Schor, two subsequent decisions of the Supreme Court have evinced less sympathy for constitutional 

challenges to administrative proceedings and upheld statutes that share some, 

though clearly not all, of the defects described above. Nevertheless, for the 

reasons that we have previously indicated, a review of the Thomas and Schor

opinions persuades us that they contain nothing that requires an analysis or 

conclusion different from those expressed in our prior memoranda. First, with 

respect to the specific question of the Government’s party status, Thomas

reinforces the correctness of our previous determination that such party status 

means little unless it affects the “substance of what [the statute] accomplishes.” 

Thomas, 473 U.S. at 589. Second, Schor’s arguable departure from prior cases 

is not of controlling importance here because the proposed bills contemplate 

the involuntary participation of the defendant in administrative hearings and do 

not adjudicate private rights in order to preserve the agency’s practical ability 

to adjudicate public rights.

Finally, we discern nothing in Thomas that either signals any sort of wholesale retreat from the Court’s Article III jurisprudence or lends meaningful 

support to the proposed bills. Thomas simply upheld the administrative implementation of a comprehensive federal regulatory scheme in an opinion joined 

by every member of the Northern Pipeline plurality that reached the merits of 

the case. See Thomas, 473 U.S. at 595 (Brennan, J., concurring). At issue in 

Thomas was administrative resolution of a very mechanical and straightforward dispute over the amount of compensation owed for access to privileged 

data, a dispute that nonetheless needed to be resolved expeditiously if the 

administrative scheme was to accomplish its purpose. As the Court noted, 

“Congress, without implicating Article III, could have authorized EPA to 

charge follow-on registrants fee s” and that such “rate-making is an essentially 

legislative function.” Id. at 590 (emphasis added). Thus, the charging of such 

fees was a matter that “could be conclusively determined by the Executive and 

Legislative Branches.” Id. at 589 (quoting Northern Pipeline, 458 U.S. at 68). 

Conversely, the Court placed heavy reliance on the fact that the statute at issue 

did not “displac[e] a traditional cause of action [or] affec[t] a pre-existing 

relationship based on a common-law [claim]” because the statutory right to 

compensation “does not depend on or replace a right to such compensation 

under state law.” Id. at 584, 587. In short, Thomas broke no new Article III 

ground because “at its heart the dispute involve[d] the exercise of authority by 

a federal government arbitrator in the course of administration of [the statute’s] 

comprehensive regulatory scheme. As such it partakes of the characteristics of 

a standard agency adjudication.” Id. at 600 (Brennan, J., concurring).

Having said all that, we emphasize that, due to the meandering and confusing course of the Court’s precedent, it is both impossible to offer any determi64
native opinion in this area and possible to construct a defense of the proposed 

bills that may prevail in some courts. A line of defense that might be accepted 

by a sympathetic court would proceed along the following lines. First, elimination of racial and ethnic discrimination in housing is a paramount public 

purpose. Further, Congress has great discretion in choosing the manner in 

which to resolve disputes, so long as the subject matter of the dispute concerns 

an area over which Congress permissibly exercises authority, including any 

area it may reach pursuant to the Commerce Clause. See Atlas Roofing, 430 

U.S. at 456—457; Northern Pipeline, 458 U.S. at 105-113 (White, J., dissenting) (collecting authorities). Moreover, under a highly formalistic approach, a 

court could conclude that the common law antecedents of § 812 of the Fair 

Housing Act are unimportant because Congress created a “new” statutory duty 

when it outlawed housing discrimination, and that the presence of the United 

States, at least as the moving party under S. 558, is of great significance. The 

court could further determine that housing discrimination is a “specialized 

area” requiring administrative expertise and that it should defer to Congress’ 

determination that there is a tangible need for expedited review. More generally, a court could fairly note that differentiating between public and private 

rights or the regulatory and prosecutorial role of the government is a highly 

abstract endeavor that has not received, and is not susceptible to, principled or 

consistent resolution.

We acknowledge that there is language in some of the Court’s cases that can 

be interpreted to support such a line of analysis. This sort of analysis would 

place virtually no limits on congressional authority to remove the resolution of 

disputes entirely from Article III courts. Congress always creates “new” rights 

by enacting statutes; these statutes must always be directed at an area which 

Congress has the power to regulate, and administrative tribunals are always 

more expeditious and convenient than juries and judges. Indeed, such an 

analysis comes perilously close to subordinating Article Ill’s reservation of the 

“judicial Power” and the express guarantees of the Seventh Amendment to the 

Necessary and Proper Clause.17 Accordingly, we believe the draft bill and S. 

558 in their current form are and would likely be declared unconstitutional on 

Article III and Seventh Amendment grounds.

II. Conclusion

Although the policy implications of any modification to the draft bill are 

obviously for you to resolve, we recommend certain changes in order to 

enhance the constitutional viability of the draft bill. All concerns under the 

Seventh Amendment and Article III would be alleviated, of course, by deletion 

of the provisions establishing an administrative hearing process. Short of this, 

the best solution from a constitutional perspective would be to limit the relief 

available in an administrative proceeding to equitable remedies such as injunc17 Nor do we understand why the grave importance o f a public policy is an argument supporting removal of 

that controversy from an impartial judiciary insulated from political influence.

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tions and restitution, thus avoiding any conflict with the Seventh Amendment’s 

preservation of jury trials in “suits at Common Law.” At a minimum, serious 

consideration should be given to eliminating at least punitive damages for 

private litigants in the arbitration proceedings. The retention of compensatory 

damages alone might be upheld under reasoning similar to that the reasoning 

that we outlined in 1985. See 9 Op. O.L.C. 32.

C h a r l e s J. C o o p e r

Assistant Attorney General 

Office o f Legal Counsel

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