Warren E. Burger: Thank you, gentlemen. The case is submitted. We'll hear arguments next in Northern Pipeline Construction against Marathon Pipe Line and the related case. We'll just wait for the courtroom to clear Mr. Solicitor General. I think you may proceed now Mr. Solicitor General.
Rex E. Lee: Mr. Chief Justice, may it please the Court. At issue on this case is the constitutionality of the Bankruptcy Act of 1978, which represents Congress' most comprehensive effort in this century and perhaps in history to deal with bankruptcies. The problems that Congress identified were serious including an increase in the number of annual filings from 10,000 a year to over 254,000 a year in a period of only three decades. One of the most serious impediments to an efficient bankruptcy system, the Congress found was the court's -- that was the court system, and particularly the confusing distinction between summary and plenary jurisdiction. The 1978 Act creates a Bankruptcy Act in each district as an adjunct to the District Court. Judges of the new bankruptcy courts are to be appointed to 14-year terms by the President, with the advice and consent of the Senate. They may be removed by the “judicial council of the circuit” for “incompetence, misconduct, or disability” and they have plenary jurisdiction over bankruptcy matters.
Warren E. Burger: Wasn't this on the phased in basis?
Rex E. Lee: That is correct. They are the six years -- six-year period but the Act substantively would apply with the exception of the personnel over the interim period.
Warren E. Burger: In 1984 (Voice Overlap) --
Rex E. Lee: That is correct, Mr. Chief Justice. That is correct. It is the government's position that the constitution does not preclude Congress' chosen resolution of the important and difficult bankruptcy problems that Congress identified. Article I specification of congressional power to establish uniform laws on the subject of bankruptcies throughout the United States includes the power to establish specialized bankruptcy courts and give them plenary jurisdiction over their narrow specialty of bankruptcy. There is nothing in the language of Article III towards values that brings that Article into conflict in this case with Article I.
William H. Rehnquist: Are you saying, General, that any time Congress has granted a specific authority to legislate, it has the authority to create a special system of courts then?
Rex E. Lee: Certainly not.
William H. Rehnquist: Then how do you distinguish?
Rex E. Lee: On the basis of the guidelines that this Court laid down in Palmore which were -- but you have to have, first of all, of course, you have to have one of the specific grant of legislative authority to Congress. But in addition you have to have a specialized area in which Congress concludes that there is a particularized need warranting distinctive treatment for a specialized court.
William H. Rehnquist: Can I stop you there?
Rex E. Lee: Surely.
William H. Rehnquist: When you say a specialized area, do you mean an area where the judges in filling the courts will have a specialized competence in a particular branch of law?
Rex E. Lee: As -- my answer to that is, “Yes”, Justice Rehnquist. As I read the Court's opinion in Palmore, I believe that that is what the Court meant by specialized area and certainly that is our view of what is meant by specialized area. But it has to be a special link.
William H. Rehnquist: But then it seems that you will have real trouble with this statute because the jurisdiction vested in the bankruptcy judges just covers the gamut of cases.
Rex E. Lee: And that is one of the major criticisms that was raised against it by our opponents.My answer to that is twofold. The first is that the -- that it does include a number of possible types of actions that the bankruptcy judge can entertain, gets right to the heart of the fundamental problem that Congress identified as the serious impediment to an efficient and a fairer bankruptcy system.
Warren E. Burger: Is -- is there a severability clause in the acts that would several the non-bankruptcy matters from the bankruptcy?
Rex E. Lee: I am not aware of the severability clause, Your Honor, but of course this Court has clarified on me occasions that -- that that is not dispositive and in effect that the Court will interpret in such a way as to say rather than to --
Warren E. Burger: Well for -- for example, if the habeas corpus jurisdiction were appealed to -- was respect to a bankruptcy judge. And ignore the many people or someone present by what habeas corpus had to do with bankruptcy. But if the issue was raised there, could a court declare that section, the habeas corpus jurisdiction violated the constitution without damaging the rest of the Act?
Rex E. Lee: I would think clearly so and I would think also that there are other means available ultimately to this Court and indeed short of this Court that would be less severe such as the doctrine of abstention is applicable in the case of the bankruptcy courts. It may of the three evidence of appeal eventually leads to Article III determination and ultimately, therefore to this Court. I realized that there is a parade of horribles that has been suggested. The reason that it has been suggested is that the distinction between plenary and summary jurisdiction led to a circumstance in which so many times in the complicated bankruptcy cases and sometimes in the noncomplicated ones. All of the assets of the bankrupt were being consumed by litigating this subject of whether it was summary or was plenary. The bankrupt could have his -- his assets -- his assets distributed and could be declared a bankrupt. But in the event that he had a claim that needed to be satisfied, or in the event that the claim needed be satisfied against the bankrupt, that could not be handled by the particular court. And that's the problem that Congress attempted to satisfy. Now the theory is, as it has been suggested here, that this could lead to a rather broad range of potential types of lawsuits that would traditionally be handled by Article III Courts that could -- out of the statute, be handled by the Article I court. The first answer to that is, but that is the very type of problem that Congress saw as the most serious problem under that that was precluding an efficient bankruptcy system. Now it may be that in some other case, it will be a sufficient case of the Article I tail weighing the Article III dog that there might be either some administrative problems or prudential problems or even some problems that would rise at the level of constitutionality, but that is not this case. This case lies right at the core of the very problem that everyone agreed Congress needed to take care of where the bankrupt had a claim against someone else and in the process of this reorganization petition needed to be resolved. So that to the extent that there are constitutional problems raised by the parade of horribles, that's for another case and indeed I suspect that is the case with the continuing interpretation of many complex statutes, it will be arrived at short of a determination of constitutionality.
John Paul Stevens: Well taking this very case for a moment, before the statute was passed, could the bankruptcy referee have entered a binding judgment in this particular dispute?
Rex E. Lee: Oh, only if the parties consented.
John Paul Stevens: And if they did not consent they could not?
Rex E. Lee: That is correct.
John Paul Stevens: And is it clear that the non-Article III judge does have the -- you don't have any problem with him entering a binding judgment in a matter depending on state law between private parties?
Rex E. Lee: That is our position. It is of course subject --
John Paul Stevens: Is -- is there any precedent for that at all?
Rex E. Lee: Well, there is the precedent in the MacDonald versus Plymouth and Schumacher versus Beeler cases that that could be done by consent. Now concededly, those were by -- those were true adjuncts to the Article III court in those days and that's my fullest answer to that proposition. Our rejoinder to it and I'll save a little of his time by making his rejoinder. Our rejoinder to it is that in the Schumacher versus Beeler case, the court in talking about this consent jurisdiction to do -- to decide those kinds of cases referred -- and I'm quoting from page 374. The Court said, “The Congress by virtue of its constitutional authority over bankruptcies could confer or withhold jurisdiction to entertain such suits which at least by way of victim says that this Court can do that very thing.” But the big point, Justice Stevens, in my view is this; it is beyond dispute that this Court has held in a number of contexts in the past that Article III does not exhaust the Congress's path or to establish courts. And the mere fact that there is no precedent for this one, no square precedent for it, should not be that surprising because there was no press -- square precedent for Palmore or for Bakelite or for Crowell versus Benson. The control that is imposed on Congress's power to establish the courts other than under Article III is the control that was articulated in Palmore versus the United States. That is to say there must be a particularized need, a special area requiring expertise requiring (Voice Overlap) --
Sandra Day O'Connor: Do you think a special area language, generally might refer to a geographical area rather than --
Rex E. Lee: No. I do not. And of course, it's fruitless for me to tell this Court what it meant by specialized area. There -- there are the two different views. But I submit that if the Court in Palmore had meant specialized -- had meant specialized area to mean federal real estate, it would have said so. Usually when this Court refers to enclaves it does not refer to the means of specialized areas. And even more important, when you look at the whole concept of Congress's power to create non-Article III courts, it does tie back to the fact that some subject matters, some subject areas by their nature do require specialized courts and bankruptcy is one of those for two reasons. The first reason is that if you look at that list, 17 powers, 17 clauses that consists -- that constitute Article I Section 8 of all of them, there is none that is linked quite so directly to the resolution of private disputes as does bankruptcy.
Warren E. Burger: Could Congress, Mr. Solicitor General, have made the administration of bankruptcy problems totally and wholly administrative with traditional -- judicial review?
Rex E. Lee: My answer to that question --
Warren E. Burger: Without having any judges at all in the bankruptcy area?
Rex E. Lee: My answer to that question is, “Yes, Congress could have done that.” That is not the area that Congress --
John Paul Stevens: You mean even resolving the dispute in this case?
Rex E. Lee: Oh, I don't know -- well, I think that's why it would have been ineffective. I don't think they could have given -- administratively --
John Paul Stevens: Then your answer to the Chief Justice is, “No”.
Rex E. Lee: Well, they could not have -- I don't know. Yes, well -- I simply misunderstood the Chief Justice -- the thrust of the Chief Justice's question. Coming back to Justice O'Connor's question --
William H. Rehnquist: What's your present answer to the Chief Justice's question?
Rex E. Lee: Well, my answer is that Congress could have solved this problem by relegating whatever power it could constitutionally have given to administrative agencies but I do not think it could have given -- I don't think it could constitutionally have given to administrative entities the power to do the kinds of things that these judges have the power to do.
Byron R. White: Right, and then what, what is it?
Rex E. Lee: Well, entertain the suit in -- in this case. I think that -- that whatever -- that either under Article III or Article I, there is a certain responsibility when it comes to -- when it comes to deciding matters of that -- of that magnitude that they must be construed as -- with a judge. And indeed, if you look at the history of bankruptcy in this country, there -- there has been about a two century experiment with how to do it best. Almost from the beginnings of our republic, in 1800, the first bankruptcy statute was passed. And from then until 1841, bankruptcy actions were strictly involuntary and retaliatory. They could only be used against the bankrupt. The 1841 change provided for voluntary proceedings and then in 1898, it was the last major change when Congress brought them into existence, the referee system with power to exercise summary jurisdiction. The one constant feature over almost two centuries of bankruptcy had is that this is a field that has been separate and specialized. It has never been anything but separate and specialized. And therefore, Justice O'Connor, I conclude for this reason, plus the fact that bankruptcy itself really almost by definition anticipates the resolution of private controversies, these above all case -- this is above all other areas is a specialized area.
Sandra Day O'Connor: Yes, but then when you graft onto that, the jurisdiction over this wide range of other cases is where you get into the problem. I assume under the Act that can even cover a marital dissolution cases in state courts (Voice Overlap) --
Rex E. Lee: There are some who have suggested that.
Sandra Day O'Connor: -- (Voice Overlap) virtually to limit.
Rex E. Lee: There are some rule have suggested that. And my simple answer to that is -- that is not this case. It is going to be difficult enough at best to solve this case and you don't need to solve the next one in the process of this one. This case involves a commercial dispute in which the creditor had a contract -- excuse me -- the debtor had a contract claim and this is right at the core of what Congress intended. And this is not -- at least so far as I understand part of the -- of the parade of horribles. One final point with respect to Palmore, to the extent that there are any distinctions between Palmore in this case, they cut in favor of the constitutionality of the 1978 Act. One is that -- one of the distinctions is that this case does involve bankruptcy, which is I say does anticipate the resolution of conflicting private claims. And the second is, that this case, that Palmore involved a criminal prosecution and this case involves bankruptcy. In terms of relevant constitutional values, if there is to be a distinction between criminal prosecutions on the one hand and bankruptcy on the other, certainly, there is a greater need for the protection of the more independent Article III judge where the interest at stake affect life and liberty as well as property. And I would like to reserve the rest of my time.
William H. Rehnquist: Well one distinction between this and Palmore is that Palmore dealt with an area of 67 square miles and this covers the whole country.
Rex E. Lee: That is correct. But that is only saying, Justice Rehnquist, one that arose under Clause 17 and this one arises under Clause 4.
William H. Rehnquist: But I think Palmore is more like Canter in that respect.
Rex E. Lee: That is correct. And this one is more like Crowell v. Benson and Bakelite.
Warren E. Burger: Mr. Devney.
John L. Devney: Thank you, Your Honor. Mr. Chief Justice, and may it please the Court. Obviously, our position coincides with that of Solicitor General. I would hope that I would not have to repeat what he has said about some of the areas however I'm certainly available for questions. I'd like to address the issue more in terms of not bankruptcy but the question of whether we're dealing with an Article III court as opposed to an Article I or a legislative court. And in that regard, and I think this is -- obviously, the Solicitor's position, it's our view that we're dealing with the properly constituted legislative court. Now, early in this argument, Justice Rehnquist asked, I believe, what the limits were on Congress for the creation of legislative courts. History provides us with some idea of that, but at least there's a lawyer who's read this rather difficult cases several times. The only true answer to that is, “I don't know.” I think --
Byron R. White: We have -- we have a lot of (Inaudible) --
John L. Devney: I think that there is. I think the -- we know that the outer limits of that power is the existence of an enumerated power in Article I. I think the limitation, although I agree that Palmore sets up a condition that may have been appropriate in Palmore. I don't think it represents the outer limits of Congress's ability to set up Article III courts. But as to how far Congress can go, I cannot literally formulate that preposition for this Court. I can say and I do say that the bankruptcy court does not represent a step past the outer limits.
Byron R. White: Do you think Congress proceeded on this basis on an Article III basis, I mean on the -- on the legislative court basis?
John L. Devney: Yes, I do.
Byron R. White: Yes. You said both Houses --
John L. Devney: I do because the --
Byron R. White: You said both Houses did?
John L. Devney: Pardon me?
Byron R. White: You think both Houses did?
John L. Devney: Well, in both Houses were aware of the distinction.
Byron R. White: But you don't -- you don't think they were -- thought they were approaching it on an Article III basis was these -- these kinds of judges as being an adjunct to the District Court?
John L. Devney: Well, that's -- that's obviously what their statute said. And I think although it's inelegant, I think we see a belt and suspenders approach to the -- to the old question.
Byron R. White: Well, so they purported to create an Article III -- Article III courts, is that right?
John L. Devney: No. They purported --
Byron R. White: Article III officers or?
John L. Devney: They -- they deposited jurisdiction initially in an Article III court and then automatically delegated -- delegated it to an Article I court. That's my understanding.
Byron R. White: Well, do you think they thought that's what they were doing?
John L. Devney: I sure do, I think that's what the statute very plainly says.
Warren E. Burger: The statute was originally drafted with the Article III courts in mind, was it not?
John L. Devney: In the House of Representative as -- I think that's true, Your Honor. The -- the point that I think is important to recognize here is that when we talk about Canter, when we talk about Palmore, when we talk about the territories, we're talking about something that's rather anomalous if we -- if we reflect on it for a moment is -- and I think the anomaly arises out of the fact that people tend to think of the Article III judicial requirements only in terms of what's been referred to in the briefs here as federalism. But Article III is something more than federalism, it's a guarantee to the citizens of this country whether they're citizens of a state or of a territory that in certain circumstances, i.e. a case falling within the federal judicial power, they're entitled to a federal judge enjoying Article III protections. Now, given that set of circumstances and certainly Marshall understood that. When he decided Canter, he had no trouble at all saying, “However, if it's a valid Article I exercise, we need not have an Article III judiciary.” Now, I think that's important because I think there's a tendency to say, “Well, we're only talking about the territories and who cares about those folks?” In addition to that, we can talk about the Court of Military Appeals. And now we're no longer in the territories. Now, we're talking about a court that operates nationally, that operates at least theoretically in every state in the union. This is a court that at least, fortunately now at the present I am led to believe, but at least in the past, has been able to declare a sentences of death certainly today and deprive a man of his liberty.
William H. Rehnquist: (Inaudible) it would be something improper about the Court of Military Appeals upholding a death sentence if Congress had authorized it?
John L. Devney: No, not at all, but they're Article I judges.
William H. Rehnquist: So what?
John L. Devney: My point is, is that that is not the distinction between Article I and Article III. The nature of the offense, the gravity of the crime play no role in the distinction between Article I and Article III.
Warren E. Burger: Couldn't you broaden that, the gravity of the problem?
John L. Devney: Or perhaps -- perhaps so, sir. But stopping to reflect on -- on this point, here, we're talking about a breach of contract case. And the defendant in this breach of contract case has said, “I'm entitled to an Article III judge.” Given -- because this is a serious matter and is a federal question and would or might otherwise fall within the federal judicial power. It's certainly isn't any more a substantial question in any of those addressed by the Court of Military Appeals which also operates throughout the states. And I think what we can say is and something that this Court has always recognized, is that federal questions need not be decided by Article III courts but can be decided by Article I courts as well, and of course that's obvious because that's all legislative courts or Article I courts of this nation have ever done.
William H. Rehnquist: Well, Mr. Devney, do you think we can decide this case by saying, “Yes, Congress could authorize the bankruptcy court to decide a contract case and will wait until the next case to decide whether that (Inaudible) tort case or not?”
John L. Devney: No. I don't -- I'm not suggesting that's a basis to choose if you decide this case. I think --
William H. Rehnquist: We -- we have to have some fairly generalized principle of it?
John L. Devney: Well, I think you -- the generalized principle is that this is a validly constituted Article I court.
William H. Rehnquist: And it can decide contract, tort, antitrust, and a number of other things that might “pertain to” the bankruptcy.
John L. Devney: Sure it can but only if there's a bankruptcy. And that's -- that's the key to our position, Your Honor.
Byron R. White: Well, what about -- by bankruptcy you would include a chapter 11 reorganization?
John L. Devney: Oh yes, sir. Yes, sir. I mean --
John Paul Stevens: And I suppose you could broaden the definition of the reorganization to include quite a variety of things, couldn't you?
John L. Devney: Well, you might be able to and I -- I think what we're talking about is jurisdiction under Title 11, yes, sir. If there are no further questions, I thank the Court.
Warren E. Burger: Mr. Orenstein.
Melvin I. Orenstein: Mr. Chief Justice, and may it please the Court. The constitutional challenge which is raised by Marathon in this matter is based upon Article III of the Constitution. That section of the Constitution mandates that when the judicial power --
Warren E. Burger: Could you raise your voice a little bit, Mr. Orenstein?
Melvin I. Orenstein: Yes. That section of the Constitution mandates that when the judicial power of the United States is being exercised, the judges exercising that power must be vested with the salary and tenure protections of Article III of the Constitution. The bankruptcy judges serve to 14 years. Their salary is subject to diminution by act of Congress. They exercise the judicial power of the United States independent of the control of the Article III court. Therefore, the exercise of their jurisdiction in this matter is unconstitutional.
Warren E. Burger: How does that compare with the situation of the Court of Military Appeals?
Melvin I. Orenstein: Your Honor, I believe that the Court of Military Appeals is based upon a principle that the Commander in Chief has a power to discipline his forces. Now that's the power --
Warren E. Burger: (Voice Overlap) -- wasn't the court created as -- as a civilian court in effect as a check or a second look at the military decisions?
Melvin I. Orenstein: That may be, but Your Honor in the --
Warren E. Burger: Don't you think it is?
Melvin I. Orenstein: The Military Court of Appeals?
Warren E. Burger: Yes.
Melvin I. Orenstein: Yes.
Warren E. Burger: That was the purpose of it.
Melvin I. Orenstein: Yes. But I think that those -- in the case -- the case you're raising, the military courts and the tax courts, for example, I think they fall within a particular category of cases which allow the -- allow those courts to exercise jurisdiction which is not the jurisdiction of Article III of the constitution. I say that for this reason. There's a principle that this Court has developed in the past that certain kinds of power is susceptible to issue determination, but in the first instance, it may be exercised by the executive or the Congress because that department can exercise that power independent of the judicial system. For example, in the military courts situation, I think it's been recognized that the power which is being exercised by the military courts in the first instance is a power which stems from the power of the Commander-in-Chief to discipline his forces. That doesn't involve the determination of contract rights and matters of national application as you have in the bankruptcy courts. It's a very narrowly circumscribed area, it's circumscribed as to time and to place. And I think that that principle allows Congress to create courts outside of the structure of the constitution. In effect Your Honor, the kinds -- the kinds of values that are protected by Article III are the separation of powers at the federal level and the division of powers between the Federal Government and the States. When those powers are not deemed to be impaired in my judgment, then Congress has been allowed by this Court to create courts outside that structure.
Byron R. White: You mean that -- you mean they could -- you could have a special -- an Article I court to decide every case arising under one of the bill of rights, one of the amendments, one of the first 10 amendments? What does it say? How about the first -- just a First Amendment court, an Article I, First Amendment court?
Melvin I. Orenstein: Yes.
Byron R. White: That wouldn't involve separation of powers between, necessarily between in the Federal Government or wouldn't involve any questions of federalism?
Melvin I. Orenstein: Well, I think that anytime that you have state created rights in any sense that once you create -- once you --
Byron R. White: Well, what about -- what about the -- the First Amendment only applied for a long time when they applied it to the Federal Government and suppose there were some act of Congress that was attacked as violative of the First Amendment but we have a special Article I court decide that case?
Melvin I. Orenstein: I don't think so. I don't think so --
Byron R. White: Why not?
Melvin I. Orenstein: -- because I think that that --
Byron R. White: That isn't a separation of powers question, is it?
Melvin I. Orenstein: Well, on the other hand Your Honor if --
Byron R. White: Certainly, it's just a federalism question.
Melvin I. Orenstein: No, but I think that -- what that would lead to would be a position that Congress could establish. Those kind of courts outside of the structure of the constitution. And at a point, you would begin to dilute the Article III power to appoint where the courts couldn't serve their function.
Byron R. White: Could you -- could you tell me -- just summarize, what kind of matters did you say these -- new bankruptcy judges may decide that are beyond the control of any higher Court of the District Court or of the Court of Appeals?
Melvin I. Orenstein: Your Honor, it seems to me that we're talking about the kinds of cases that prior to the Bankruptcy Reform Act could not have been brought in the State or the Article III District Courts.
Byron R. White: Oh, I understand that but they are now -- can be -- but what matters are finely decided in the new bankruptcy courts that are not subject to control by the District Court or by the Court of Appeals?
Melvin I. Orenstein: On the appeal process you mean?
Byron R. White: Yes.
Melvin I. Orenstein: To the appeal process.
Byron R. White: Well, you just said that your fundamental objection was that these courts can now finally decide things that Article III judges have no control over?
Melvin I. Orenstein: Yes. And when I'm speaking of control Your Honor, I'm speaking of control at a trial level. I hardly believe that the appellate review system would -- would justify an answer to Article III. If that would -- you know, the constitution specifically provides that both the judges of the -- of the Supreme Court and the judges of the inferior court must be vested with the salary and tenure protections. It would even -- it seems to me that argument would lead you to a further problem with the District Court judges themselves. If you could -- if you could take the position that an appellate review --
Byron R. White: What is the standard of review on facts? Is it clearly erroneous?
Melvin I. Orenstein: Yes.
Byron R. White: I take it --
Melvin I. Orenstein: Under --
Byron R. White: -- it is, isn't it?
Melvin I. Orenstein: Yes, under Rule 810 of the bankruptcy --
Byron R. White: And so that Article -- no Article III judges on review can upset factfindings unless they're clearly erroneous, is that right?
Melvin I. Orenstein: Yes, that's right. But --
Byron R. White: But I suppose all questions of law are subject to being reviewed.
Melvin I. Orenstein: Questions of law would be subject to review, that's correct. But it seems to me that the factfinding process is the important process which is involved here. And that to -- in some way take the position that that process -- if it's subject to review, is sufficient to satisfy the Article III values. It seems to me as to ignore the reality of the factfinding process of -- and its impact in the trial situation. And -- and I -- I just can't believe that the appeal process is the kind of process which this Court would consider as a satisfactory to meet the Article III -- or the delegation standards which this Court has articulated in the -- in the Raddatz case in --
John Paul Stevens: Well, isn't the --
Melvin I. Orenstein: -- in United States against Raddatz.
John Paul Stevens: Mr. Orenstein, isn't there another consideration? Maybe I misunderstand the statute but supposing nobody ever takes an appeal, isn't it possible that the acts of the bankruptcy judges and the bankruptcy courts will have the force and effect of a -- of a regular judgment?
Melvin I. Orenstein: That's right. And -- and there's a further problem, in the bankruptcy setting, we have now panels of bankruptcy judges that are set up as an appeal court. So we now have a situation where you'd have to take two appeals in order to get to an Article III judge and it seems to me as a practical matter that that just can't -- in most cases can't happen. It's just too much of a burden to require people to take two appeals to get to an Article III judge to get the kind of protection that the Article III Section of the Constitution deems to be so important. And -- and it seems to me you also get to the remand problem. If you're going to go all the way up, you will ultimately going to all the way down before an Article I judge who's going to make that decision. So that no matter how you slice it ultimately, if you would take that approach, the appeal approach to satisfy Article III, you wind up with an Article I judge or rather a none out of the three officer deciding the important values which Article III was designed to protect.
Warren E. Burger: Aren't you now addressing the wisdom of the statute of differing the time when an Article III court can review rather than the constitutionality.
Melvin I. Orenstein: No, no Your Honor.
Warren E. Burger: Just because it's inconvenient, doesn't make something unconstitutional.
Melvin I. Orenstein: All right, I think that's probably true.
Warren E. Burger: Probably?
Melvin I. Orenstein: Yes, okay that's true. That's true. But you know the other side of that coin Your Honor is this. The -- the principle which is being argued in this case is that in the name of convenience and expediency that we ought to sacrifice the values of Article III, that's the other side of the coin. Expediency and need, it seems to be in one case is the same in a sense of constitutional --
William H. Rehnquist: You're saying but because it's convenient doesn't make it constitutional?
Melvin I. Orenstein: That's right. I guess that's the other side of the coin.
Thurgood Marshall: Counsel on the other hand, the -- an Article III judges aren't around looking for business, in case you don't know that.
Melvin I. Orenstein: Your Honor, I think wanted to be clearer on something. I take -- I got an impression that the Government here is taking the position somehow that we're attacking the entire jurisdiction, we're attacking the entire bankruptcy court. We're not doing that here. We understand that we don't want to dislocate the system, that's a practical problem. On the other hand, of course we think there are certain Article III values that ought to be protected. I don't believe that the kind of problem or dislocation you may be concerned about would occur -- this is the same situation which had occurred or existed for 200 years. These same cases have always been brought before the Article III courts. These same cases had always been tried in the state courts. So that you -- you really don't -- there's a lot of horribles perhaps paraded around here but as I say, this is a situation we've existed with all these years.
Warren E. Burger: Well you say that you are not attacking all of it. Now going to this matter of convenience or inconvenience, could conceivably an Article III court somewhere decide that the appeal from the bankruptcy -- Article I bankruptcy judges to the three panel Article I group was either unconstitutional or else under the supervisory powers of the court possibly, but only possibly, that there must be an appeal directly to the Article III United States Court of Appeals and then solve that problem.
Melvin I. Orenstein: Well, as I have indicated Your Honor, I think that it's not -- I mean, it's not a question of convenience in my judgment to assert that the appeal process satisfies the control of relationships which have to exist between an Article III court and its delegate. In my judgment, in effect, you have an Article I officer for all practical purposes deciding the final rights between these parties and there's a constitutional provision which very clearly it seems to me says that both the judges of the Supreme Court and the inferior courts must be vested with the salary and tenure protections. It was never intended I think, constitutionally that we could have a layer of federal trial courts at the district level who didn't have to be tenured. It seems to me the same proposition applies and when Congress creates inferior federal courts, I think it's required by constitutional mandate that they tenure those judges.
Thurgood Marshall: Mr. Orenstein, how do you distinguish the case of the magistrates that we were concerned with in Raddatz?
Melvin I. Orenstein: I really don't distinguish it. I think that the -- that case is a good model it seems to me for what we have here. I think that that case which laid down two broad principles as I understand them. The principles were that the final decision has to be made by the Article III judge and secondly, that the delegate has to serve the magistrate, the non-Article officer has to serve an advisory subordinate capacity to the Article III judge. That is what the Article III judge must have complete and direct control of the activities of that -- of that magistrate. Now, in the magistrate's cases and of course that was sustained. The delegation of power in that case was sustained and it seems to me it was sustained because as this Court said, there was complete control over the activities of that -- an Article III officer and the court did make the final decision. None of that is present here. When a case comes into the bankruptcy court, it starts off by a complaint. It goes to discovery. It goes to trial by jury and it goes into judgment in the bankruptcy court. The bank -- the Article III judge never gets into the act.
William H. Rehnquist: Do these judges empanel a jury?
Melvin I. Orenstein: Yes sir. They can try cases by jury. The power that these judges can --
Warren E. Burger: Well, so can the magistrates.
Melvin I. Orenstein: Pardon?
Warren E. Burger: So can the magistrates.
Melvin I. Orenstein: Yes, but by consent as I understand it. Yes --
Thurgood Marshall: I get -- I get the feeling that you're making a beautiful argument for Congress but we are not Congress. Congress has the power to determine jurisdiction in the federal courts. And you're arguing about this just as a bad way of doing it.
Melvin I. Orenstein: Well, Your Honor --
Thurgood Marshall: Assuming it's bad.
Melvin I. Orenstein: Yes.
Thurgood Marshall: Assuming that's the worst we are doing it. Is it constitutional?
Melvin I. Orenstein: Yes. That's -- that's --
Thurgood Marshall: And I -- you haven't said anything to me to convince me that it's not constitutional for Congress to do this.
Melvin I. Orenstein: Well, Your Honor --
Thurgood Marshall: Congress is the one who make the determination as to whether it should be in Article I or an Article III court, that's Congress' job.
Melvin I. Orenstein: Okay. Your Honor, Congress didn't make this an Article I court, Congress didn't intend to create an Article I court. Congress intended to create an Article III delegation to non-Article III officers and that's the question.
Thurgood Marshall: Well, what do you want us to do? To abolish bankruptcy?
Melvin I. Orenstein: No, I don't. I don't Your Honor. What I want you to do is to set aside the jurisdiction represented by this case before you.
Thurgood Marshall: Well that's Congress's point.
Melvin I. Orenstein: Well, I don't think --
Thurgood Marshall: Congress -- you said jurisdiction.
Melvin I. Orenstein: Yes, but Your Honor --
Thurgood Marshall: Congress determines the jurisdiction of all federal courts.
Melvin I. Orenstein: Your Honor, I don't believe that Congress can create courts to exercise jurisdiction, unless those jurisdictional basis are within the limits of the constitution. What I am saying is --
Thurgood Marshall: Of course --
Melvin I. Orenstein: -- there are limits to Congress's abilities to create Courts and to confer jurisdiction upon those courts and this case involves a --
Thurgood Marshall: Well couldn't take Congress take all of the jurisdiction of bankruptcy from the Article III courts? And give it --
John Paul Stevens: I suppose that's the issue, isn't it?
Thurgood Marshall: And give it to an Article I court?
Melvin I. Orenstein: No, I don't think it could. I don't think it can.
Thurgood Marshall: Why not?
Melvin I. Orenstein: Okay.
Thurgood Marshall: Why not?
Warren E. Burger: Even when it allows the appellate review by --
Melvin I. Orenstein: No --
Warren E. Burger: -- by an Article III court?
Melvin I. Orenstein: Well, Your Honor, I have already one through that appeal argument and I supposed you may or may not be persuaded or convinced. It's really the best argument I can make is that the constitution is very specific in this area that both judges on the -- on the appellate level and on the basic level have to be tenured with the Article III protections.
Byron R. White: Well, what if you don't call them judges? What about administrators? What about the National Labor Relations Board for example, you can't upset their factfindings either if they're supported by --
Melvin I. Orenstein: Well --
Byron R. White: -- substantial evidence.
Melvin I. Orenstein: Well, but now you're getting into the question of, “Can you create this court as an agency with all of these kinds of powers and with all of the --
Byron R. White: Well, I know, but it doesn't -- all you're doing -- arguably all you're doing is changing the name on -- on the organization. You don't call it a court, you call it an agency and if all members of the board or administrators --
Melvin I. Orenstein: No. I -- I don't think that would work Your Honor because -- whatever label you put on something doesn't mean anything unless you -- you look at what it does and what it can do. What we're saying --
Byron R. White: Well, I -- let me just -- you know what the National Labor Relations Board can do, they can -- they can make determinations of unfair labor practices and give an award in back pay in very, very large amounts.
John Paul Stevens: Is that award got any legal effect until the court enters this?
William H. Rehnquist: (Inaudible) by the Court of Appeals?
John Paul Stevens: Or do they have to petition an Article III judge to get it enforced?
Melvin I. Orenstein: That may be true. I -- I'm not entirely --
Byron R. White: That maybe -- that maybe true but when they petition for enforcement the Article III court has no authority to upset any factfinding that is -- that is supported by substantial evidence. And in this bankruptcy court, nothing is final if somebody wants to appeal.
Melvin I. Orenstein: But you have a different principle with the NLRB. That principle is based upon Congress's right to create an agency and that --
Byron R. White: Where did they get that, to mean -- to decide these cases?
Melvin I. Orenstein: This Court has long ago stated that there are certain kinds of factfinding functions which can be delegated to an agency, and that's done on the basis of --
Byron R. White: Well, what about the -- the kind of -- what's -- what's the matter with delegating pursuant to the bank -- the bankruptcy power, the that of factfinding that is delegated to these bankruptcy judges.
Melvin I. Orenstein: Because there are certain areas in which this Court has said Congress can make this kind of a delegation and these are areas involving public rights where a sovereign is suing to enforce a particular statute under a federally enacted legislation. There are certain kinds of rights that --
Byron R. White: (Voice Overlap) -- the sovereign isn't suing for anything under the National Labor Relations Board, private parties litigate before it.
Melvin I. Orenstein: Okay, then if it's a private party's situation then if it's a private parties situation, then you have to have as this case said in the Crowell case. You must have a relationship between that factfinder and the Article III court which is a properly controlled relationship and that's what we're complaining about here --
Warren E. Burger: And let's (Voice Overlap) a moment here.
Byron R. White: Do you think -- do you think as the -- the sovereign is enforcing its own laws, it can -- it can create anything it wants to -- have the disputes adjudicated by any kind of a --
Melvin I. Orenstein: No. There -- there --
Byron R. White: The criminal case.
Melvin I. Orenstein: I say, don't think it can. Because this Court has stated many times that you can't take private rights, contract rights, tort rights away from the judicial cognizance if you're --
Warren E. Burger: Getting back up to one of your earlier responses, it gave me the impression that you thought that the Congress of the United States had to get some leave or approval from the judiciary in order to create the Labor Board or the Federal Communications Commission.
Melvin I. Orenstein: I didn't mean --
Warren E. Burger: Congress was exercising its own inherent constitutional powers, was it not, when they created these agencies?
Melvin I. Orenstein: When it creates agencies? Yes, I didn't intend to --
Warren E. Burger: Now, the Federal Communications Committee can give -- a Commission can give or it can take away a broadcast license worth hundreds of millions of dollars --
Melvin I. Orenstein: That's correct.
Warren E. Burger: And that's subject to review by the Court of Appeals in the first instance but as Justice White pointed out the Court of Appeals is at least bound to affirm what the Commission has done, if it's supported by substantial evidence even if they disagree with the result reached. Is that not so?
Melvin I. Orenstein: I think that's right.
Warren E. Burger: Through the Federal Power Commission.
Melvin I. Orenstein: Yes. But you know, now Your Honor, you're moving into a whole area of agency factfinding power which I think is controlled by some different principles -- to the kind of principle, you're trying to apply here. At least this Court in the past --
Byron R. White: What is it -- what is it that -- what is that different principle?
Melvin I. Orenstein: It's a -- it's a doctrine which this Court has announced in the past.
Byron R. White: Suppose you file it before the Interstate Commerce Commission, you want to get reparations from another party, so here's a -- so here's a dispute between a shipper and a carrier and the Court and they -- and reparations are awarded.
Melvin I. Orenstein: All right.
Byron R. White: And a $1 million -- worth a $1 million.
Melvin I. Orenstein: Your Honor, I believe that's --
Byron R. White: (Voice Overlap) --
Melvin I. Orenstein: Yes. But that's under -- that's under a republic statute as I understand it.
Byron R. White: What? What is it?
Melvin I. Orenstein: I -- I understand it's a public --
Byron R. White: Under a public statute?
Melvin I. Orenstein: Well, a statute which confers a public right upon the individuals. It's not -- it's not the private rights. Your Honors, it seems to me if you were to employ that principle that you can take private rights and matters under the antitrust laws and matters under the whole range of federal legislation and move them out of the Article III protection that you've in effect -- you've nullified the Article III values. And it seems to me, this could has very carefully, in the last year or so in the (Inaudible) case articulated and affirmed those values as being as important today as they were 200 years ago. And it just seems to be that if you consider those values as being important that you can't allow a process by which Congress can erode or eat away those kinds -- in to the Article III jurisdiction. And I -- it seems to me that this Court has from time to time very carefully tried to develop principles which would avoid that problem.
Warren E. Burger: Suppose that when Congress pass this Act it had called these bankruptcy people bankruptcy magistrates and --
Melvin I. Orenstein: Okay.
Warren E. Burger: -- what about it? Does the name make any difference in terms of their function?
Melvin I. Orenstein: The label does not make any difference in my judgment. It's what they can do and what they can't do that makes a difference. The whole Magistrates Act really is built pretty well to cover the problem. The Magistrates Act says -- you know, the Article III judges got the power to refer and has got the power to determine what kind of conditions to make references. He's got the power to withdraw. He's got the power to accept, modify, reject, and take new evidence. He makes rules for those magistrates. There's a whole consent package which protects the jury rights of those parties. That's the kind of adjunct relationship that should have been created under the Bankruptcy Act and the Reform Act and they just didn't do it. They didn't have the time and I think there's a reason for it. They really thought that this was a separate system of courts. They really designed it that way. They set these judges up. They sit on the conferences. This is a part of the United States. It's in no sense an aid or a court which is in a super -- in a subordinate position. The very purpose that was argued before Congress was that these referees had to be raised to the same equal rank and importance as the Article III judges and they started out with that concept and that's what they got. In fact, you didn't get an adjunct for it. You got a label that says this is an adjunct court but that court itself --
Warren E. Burger: Nothing unusual about Congress changing its positions during the course of the evolution of a statutory scheme is there?
Melvin I. Orenstein: Oh, no. I don't have --
Warren E. Burger: Deciding on one's Act and have amendments, conferences and --
Melvin I. Orenstein: Yes. I -- I -- no, my only point is that there are certain prescribed standards here which I think should have been met and they weren't met because Congress just didn't get it all together. There was a compromise. If they were going to create an adjunct court, adjunct is a label, it really doesn't mean anything. Adjunct has to take on its meaning by the functions which this Article III judges can perform in relation to the level or the supervision of the Article III court. Adjunct implies a subordinate position, an adjunct to something. This Court is not an adjunct to anything. These judges make the final decisions. They are final factfinders and the only time that you can --
Warren E. Burger: Can be more final than any of the commissions that Justice White and others have mentioned to you?
Melvin I. Orenstein: In the --
Warren E. Burger: That is the -- the Federal Communications, Federal Power, Labor Board, Interstate Commerce.
Melvin I. Orenstein: They're not anymore final on that sense but they exercise different powers. They can try jury cases. I -- there isn't any agency I know that tries jury cases. There aren't any agency I know that tissues a writ of --
Byron R. White: That stands the argument on its head. You would think that if they can -- if they can award back pay and reparations without a jury, you'd think it'd be even more invalid but it isn't.
Melvin I. Orenstein: No, I think that gets into a question of what kinds of rights you're entitled to a jury trial in and in -- under the Act which you suggest, I suspect --
Byron R. White: You get a money award. You get a money award for having fired somebody illegally, that sounds pretty legal, isn't it?
Melvin I. Orenstein: Yes, but --
Warren E. Burger: Could territorial judges try jury cases?
Melvin I. Orenstein: Yes, I think they could because I think that once you get over in --
Warren E. Burger: Then what's the current law?
Melvin I. Orenstein: -- into the territories then you're not concerned with the kinds of -- of separation of powers. You've got a plenary power in Congress to legislate over those areas. You don't have a competing judiciary. You don't have a competing state sovereign. Those kinds kind of values which Article III attempts to protect, the whole problem of encroachment of federal power is not at issue in the territories because Congress has the plenary power under those circumstances to legislate. It can act both as a state and as a sovereign if it so chooses because it was given that power specifically under the Constitution.
Warren E. Burger: Well, that only became (Inaudible) I should think the people in Hawaii and Alaska thought they were entitled the same kind rights as people in Pennsylvania and (Voice Overlap).
Melvin I. Orenstein: Well, in the due process sense, certainly so. In the structural problem, in a structural sense, it's not the same problem. There's a tendency to confuse the two. The structural problem really -- the Constitution was designed to do a certain thing and that was to make sure that there was no alliance between the non-Article III judges and the Congress which would at some way allow the federal programs to be applied in prejudice to the rights of the states and the -- and the individuals or litigants who have those rights conferred upon them by the state laws.
Byron R. White: Of course Mr. Orenstein, in your home state of Minnesota, you had a territorial federal court at one time and -- but let me get in a -- let me ask you a question before you sit down and I'd like to have your comment on. This Act has been in effect for a little while.
Melvin I. Orenstein: Yes.
Byron R. White: And certainly, there have been a lot of bankruptcy proceedings and related proceedings that have gone down the -- through the process. Your Chief Judge Lord's opinion should be or judgment should be affirmed here. Do you have any comment on how the unconstitutionality can be cured with all of these things in the background?
Melvin I. Orenstein: Yes.
Byron R. White: Is it to operate prospectively or all these proceedings rendered null and void?
Melvin I. Orenstein: Your Honor, first let me say that I'm not asking that we go as far as Judge Lord went. He struck down the entire quantum of jurisdiction and I -- as far as I'm concerned, the focus of this case is -- is narrower. But in -- I -- you know, this Court has from time to time struck down jurisdictional exercises, for example, the O'Callahan versus Parker case. And there -- and there was a bankruptcy case by the way called Chicot County Drainage District versus Baxter Bank in which the bankruptcy court jurisdiction was struck down exactly the same kind of problem we have here. And the Court held it on collateral attack when another creditor tried to bring it up in a later suit that it was res judicata. And so those cases, all the cases that have gone to judgment and so on are res judicata. Insofar as the retroactivity or the prospectively, this Court in a number of cases has treated that issue, one was (Inaudible) and there are some others where this Court has in effect, it took the O'Callahan case and where that jurisdiction had been knocked out and said that that case would not apply retroactively will applied prospectively. So I feel this Court has left itself plenty of room in this area to work out those kind of problems so as not to result in any major dislocations.
Thurgood Marshall: We don't see any problem in this Court promoting an Article I judge to an Article III judge, do you?
Melvin I. Orenstein: No, I don't see any problem with that at all?
Thurgood Marshall: You don't see any problem at all?
Melvin I. Orenstein: No. Thank you Your Honor.
Warren E. Burger: Mr. Solicitor General, you have three minutes remaining.
Rex E. Lee: Thank you, just very briefly. Mr. Orenstein spoke of Article III values. There are two constitutional values that are implicated in this case. They come from two sources, Article I and Article III. Both are part of the Constitution and both must be taken into account. On the Article I side, Congress has a responsibility to establish uniform laws of bankruptcy. This Court has clarified in several opinions in (Inaudible) and Palmore among them. That Congress is entitled to particular deference than there is evidence that Congress actually analyzed the constitutional issue and did its best to resolve it. The legislative history leaves no doubt that Congress would have enacted the 1978 Act had before the Palmore standards and did its best to apply them. Those standards by their very definition, specialization of the area, particularization of the need and distinctiveness of the appropriate treatment are the kind of thing that lend themselves best, congressional factfinding and decision. On the Article III side, it is frankly difficult to see what damage if any has been done by this Act. I have been puzzled throughout my entire consideration of this case and frankly I was puzzled during Mr. Orenstein's argument. I am not certain whether the opponents of the statute would like it to be more like an Article III court or less like an Article III court. But in any event, we agree with the appellee on this proposition that the tenure and compensation guarantees are rooted in separation of powers concerns in the sense that the independence of the judiciary with which we're concerned is largely in independence from other branches of government. So that the --
John Paul Stevens: May I just --
Rex E. Lee: Yes, sir.
John Paul Stevens: -- affirm one thing. You don't go so far as to adopt Justice Jackson's rationale --
Rex E. Lee: Absolutely not.
John Paul Stevens: -- in the Tidewater case.
Rex E. Lee: Absolutely not. The Article III Concerns would be the greatest therefore in those cases where another branch of government is always or frequently the other party. That is the case with the court of claims, tax court or the Court of the Military Appeals, it is not the case with bankruptcy. The appellee's view is apparently that Congress must either give primary jurisdiction over bankruptcy to the District Courts which Congress has the (Inaudible) over eight years of consideration of this problem will not work. Or confer Article III status on bankruptcy courts thereby swelling the ranks of the tenured judiciary in a proportion that has never occurred in this country and what raised serious questions about diluting the quality of the Article III judiciary and there is evidence of that concern in the House Report. I know of nothing in the Constitution and certainly nothing in common sense that so limits Congress's choices and the decision of the District Court should be reversed.
Warren E. Burger: From what Article of the Constitution Mr. Solicitor General did the Congress derive its power to create the Labor Board, the FCC, the Federal Power and all the rest of them?
Rex E. Lee: It's my understanding -- I could be wrong, it's under the Commerce Clause.
Warren E. Burger: But it's a -- and then what Article do we find the Commerce Clause?
Rex E. Lee: Well, that's Article I.
Warren E. Burger: And the judges of the territories and (Voice Overlap) --
Rex E. Lee: That would be Article IV, Article IV. Thank you sir.
Sandra Day O'Connor: And General --
Warren E. Burger: Thank you --
Sandra Day O'Connor: -- Lee on this point, I mean if we were to focus primarily on Article I, its Article I that gives the Congress the power to constitute tribunals inferior to this Court.
Rex E. Lee: That is correct.
Sandra Day O'Connor: So if you were to rely on that, than any lower court judge could be --
Rex E. Lee: It's a good point Justice O' Connor. As I read -- that's Clause IV of Article I, Section 8 -- excuse me -- Clause 9, and as I read that one I think that what that refers to exclusively is the authority to create Article III courts.
Sandra Day O'Connor: Well when then you run into the necessary and proper clause too. So --
Rex E. Lee: That is correct.
Sandra Day O'Connor: -- to rely on Article I would lead us into a lot of difficulty.
Rex E. Lee: Excuse me -- that was just a (Inaudible), what I mean is Article I, Section 8, Clause 4.
Sandra Day O'Connor: Yes. Thank you.
Rex E. Lee: Thank you.
Warren E. Burger: Thank you gentlemen. The case is submitted.


William H. Rehnquist: We'll hear argument now in number oh one six seventy-nine, Gonzaga University and Rob- Roberta S League versus John Doe. Mr. Roberts. [Inaudible]
John G. Roberts, Jr.: Thank you, Mr. Chief Justice, may it please the Court: In nineteen seventy-four, when it en- enacted the Family Educational r- Rights and Privacy Act, Congress conditioned Federal funding for educational institutions on the institution not having a policy or practice of releasing student records without consent. Congress did not phrase this condition in terms of individual rights. It did not, for example, follow the model of title nine, enacted two years earlier and also dealing with educational institutions, and say something like, no student at a school receiving Federal funds shall have his records released without his consent. Instead, Congress proceeded more indirectly. It said that no funds shall be made available to any institution having a policy or practice of releasing student records without consent. The statute is directed to the Secretary of Education. He's the one who makes Federal funds available, not to the institution receiving the funds, and certainly not to the individual student. This Court's cases establish that that is a distinction that makes a difference. In Cannon, for example, the Court said there would be...
John G. Roberts, Jr.: far less reason -- Mr. Roberts, isn't it...
John Paul Stevens: primarily a distinction that makes a difference in c- connection with whether there's an implied cause of action, rather than whether nineteen eighty-three authorized a cause of action?
John G. Roberts, Jr.: In the implied right of action question there are two questions, did Congress intend to create a right, and did Congress intend to provide a judicial remedy? In the nineteen eighty-three context, there are two questions, did Congress intend to create a right, and did Congress intend to preclude resort to the nineteen eighty-three remedy, so that first question I think is the same under both categories of cases, and as the Court said in Cannon, if Congress phrases the statute as quo- quote, as a prohibition on the disbursement of public funds, there's far less reason to think that they intended a private remedy.
Anthony M. Kennedy: This- The the statute does talk about rights of students and rights rights of parents.
John G. Roberts, Jr.: Well, of course, the word rights does not appear in the disclosure provision, subsection B, and in Pennhurst, where the Court was dealing with the developmentally disabled bill of rights, the Court explained that just because the statute uses the word rights doesn't mean that it creates a nineteen eighty-three right.
Anthony M. Kennedy: Yes, I recognize in the one section that we're talking about here you have a stronger argument than the other, but if we a- assume for the moment would have a nineteen eighty-three cause of action under the whole act without going down provision by provision, then I I do think you have to recognize that w- the act does talk about rights of students, rights of parents t- to look at files, et cetera.
John G. Roberts, Jr.: Well, first of all, the Court in Blessing said that you don't look at the whole act.
Speaker: eighty-two.
Anthony M. Kennedy: I think it's that latter rationale that might be stronger for your case.
John G. Roberts, Jr.: Well, whatever rights, whether you're talking e- putting aside the question whether it's a nineteen eighty-three right or a right to participate in the process that's established under the statute, it is part of the policy or practice that the Secretary of Education is to look to in deciding whether to disburse funds.
Speaker: deal -- twelve...
John G. Roberts, Jr.: twelve A of our statutory appendix, Your Honor.
William H. Rehnquist: Thank you.
John G. Roberts, Jr.: It says to the Secretary, you set up an office to investigate, process, review, and adjudicate complaints about violations under FERPA.
Antonin Scalia: You you say violations of this section.
Speaker: There's no violation unless there's a policy.
Antonin Scalia: to investigate any individual complaint, un- unless the person comes in and says, not only do they do it to me, but this is their policy, right?
John G. Roberts, Jr.: It's as evidence that there might be a problem with the school's policy, and this is what makes it different, for example, from the Wright case.
Antonin Scalia: I guess that that's all that the plaintiff could a- could accomplish in court anyway.
John G. Roberts, Jr.: That's correct.
Antonin Scalia: So the Secretary's enforcement authority is coextensive with what the court would be able to do.
John G. Roberts, Jr.: I- In terms of the scope of liabil-
Antonin Scalia: You'd need an allegation of a policy or practice.
John G. Roberts, Jr.: Exactly, but it is the fact that Congress focused on the policy or practice that helps establish that they were not concerned with individual instances of disclosure.
Ruth Bader Ginsburg: Well, Mr. Roberts, why are they mutually exclusive? I mean, the the Secretary has this authority, and I think your argument would be more impressive if this were a large operation.
John G. Roberts, Jr.: It's it's very important to keep in mind the distinction behow- between how matters are handled before the Family Policy Compliance Office and in court.
Speaker: Do we know -- do we know...
Antonin Scalia: from the maybe the attorn- Solicitor General can tell us if the seven people are overworked?
John G. Roberts, Jr.: In fact, in practice most of what they do is field questions from the school, how do we handle this situation, what do we do...
Speaker: about this?
Ruth Bader Ginsburg: order? I mean tha- one of the points that was made is that if e- records are about to be divulged, say, to a newspaper, and the student or the parent wants an s- immediate stop order, you can go into court and get a TRO.
John G. Roberts, Jr.: Well, there certainly is.
Antonin Scalia: This office can't really give relief to any individual, however, right, except to tell the tell the school not to release wrongfully release records in the future, right?
John G. Roberts, Jr.: The focus of the office is in vindicating what the statute provides.
Speaker: So all -- all you have to...
Antonin Scalia: do is eliminate the policy, and everything that's happened in the past is water over the dam and...
Speaker: Because the --
Antonin Scalia: go and sin no more is what the Secretary says, right?
John G. Roberts, Jr.: Because the statute is directed to prospective compliance, not retrospective compensation for injuries.
Speaker: The nineteen eighty-th- --
Stephen G. Breyer: What do you do about the the language where it says, no funds shall be made available to a school that effectively prevents, et cetera, th- the students th- ri- giv- it says, of the right to inspect.
John G. Roberts, Jr.: The direct response is that you've left out words in the quote, which is that no funds shall be made available to an institution that has a policy or practice, and the question is, is Congress focusing on protecting individual rights in, as the Court said in Blessing, an individual way, or are they addressing a systemic concern.
Speaker: Subsection B does not talk about rights.
Speaker: And finally, I'll --  th- the answer  --
John Paul Stevens: b- be sure I've understand your answer.
John G. Roberts, Jr.: I think not,
Speaker: because --
John G. Roberts, Jr.: The the right to inspect is not an independent and freestanding right.
Speaker: Subsection B --
John Paul Stevens: initial submission is that this is not a rights-creating statute, it just er- addre- but but I don't know where the right comes from that they refer to in that section and also in...
Speaker: -- in on twelve A informing...
John Paul Stevens: parents and students of rights under this section.
John G. Roberts, Jr.: Under this section.
Speaker: repeatedly in --
John Paul Stevens: that the stu- they they would have had the rights described herein even if this statute had not been passed?
John G. Roberts, Jr.: No.
Speaker: action.
John Paul Stevens: opportunity in the statute wherever the statute used the word rights.
John G. Roberts, Jr.: Well, the statute doesn't use the words right under subsection B.
Speaker: right.
William H. Rehnquist: twelve three two G B is not the se- section at issue here.
Speaker: No...
William H. Rehnquist: What section is is the one at issue?
John G. Roberts, Jr.: twelve thirty-two G B is the section at issue.
Speaker: Well, but B...
William H. Rehnquist: does say, th- the parents of students the right to inspect and review.
John G. Roberts, Jr.: That's A, Your Honor.
Antonin Scalia: B is on six A,
Speaker: I gather is what you're --
John G. Roberts, Jr.: B is on six A and it does not refer to rights.
William H. Rehnquist: Okay.
John G. Roberts, Jr.: Thank you, Your Honor.
William H. Rehnquist: Ms. Millett, we'll hear from you.
Patricia A. Millett: Mr. Chief Justice, and may it please the Court: If I could begin by responding to Justice Kennedy's question about whether the Family Policy Compliance Office is overworked, I will tell you that they do work very hard, but they do they handle for a small staff, they handle an amazing amount of work, and have been doing so for twenty-eight years under this statute.
Speaker: as they go through the investigation stages.
Patricia A. Millett: Hmm?
John Paul Stevens: That's three letters a day.
Patricia A. Millett: Yes, but they also I'm I'm not done with my list if you'll forgive me.
Speaker: That's ten phone calls a day.
Patricia A. Millett: That's right and well and well over a well over a thousand e-mails, and I think one of the reasons that there isn't I mean, if you look at the the legal landscape out there, too, there hasn't been an e- enormous volume of nineteen eighty-three actions, and that is because the Secretary has been very successful, I think, in communicating and enforcing this in an informal manner with the universities.
Speaker: action...
Stephen G. Breyer: about the idea that this could be bifurcated, that it that it orders a right to inspect, because that isn't going to be too tough, you let the person look at the records, but there's a policy of disclosure.
Patricia A. Millett: If I could ask answer that in two stages.
Speaker: [Inaudible]
Anthony M. Kennedy: first three factors listed in Blessing, Congress intended that it benefit the plaintiff plaintiff, and it not be beyond judicial competence...
Speaker: Not not be --
Anthony M. Kennedy: must be a unam- unambiguously binding obligation on the State, it would s- seem to me that those are met here, and that you then have to go to the next part of the test which is th- th- th- that that creates a s- presumption that there is a right.
Patricia A. Millett: Hm.
Speaker: fails, a statute that --
Anthony M. Kennedy: does seem to me that it talks of the student and the parent...
Patricia A. Millett: Mhm.
Anthony M. Kennedy: in very specific terms, and it uses uses the term right.
Patricia A. Millett: Well, again, this this Court made clear in Pennhurst that you can't just look at the word right in isolation.
Speaker: precise language, but it contains --
John Paul Stevens: same question I asked Mr. Roberts, I suppose, but the first sentence of twelve thirty-two G A one A refers to a policy of denying access, denying the right to inspect and review education record. [:records] In your view, is that right a federally created right, or is that a right created by some other source and, if so, what is the source of the right?
Patricia A. Millett: I am sorry, I'm having there were...
Speaker: too many numbers in that. it's like G one --
John Paul Stevens: of the blue brief, and the first, very first sentence in the in the statute ends by saying the right to inspect and review the education...
Speaker: records of their children,
John Paul Stevens: and my question is whether you think that is a federally created right and, if not, what is the source of that right?
Patricia A. Millett: I think it's it's not for- I've two answers.
Speaker: pre-existing moral or legal -- Mhm.
John Paul Stevens: Do you think the right to which the statute refers is a federally created right,
Patricia A. Millett: Mhm.
John Paul Stevens: or right with a different source?
Patricia A. Millett: I think what the st- the statute is creating there is a Federal overlay to protect pre- as as as was said in the legislative history on page seventeen...
Speaker: of our brief,
John Paul Stevens: So that if a school came back and said, in our State there's no such right,
Speaker: then the statute would not apply?
Patricia A. Millett: Congress felt that when they said preexisting moral or legal rights, that ther- there was a sense of Congress that this is a type of, n- not not in a right sense that we use in for purposes of nineteen eighty-three actions, but con- the legislative history was that Congress had a sense here that this was something all individuals should have.
Speaker: But -- this...
John Paul Stevens: i- It It is som- something they should have by reason of this statute, and therefore it's rightly created, or by reason of some preexisting rule of law in some at some other source?
Patricia A. Millett: Well, i- Congress' language was preexisting moral or legal, rights and so I'm I'm not sure what one considers...
Speaker: If it's another source, it seems to me that...
John Paul Stevens: the State or the institution could say, in this locality there is no such right, and that would make the statute totally inapplicable.
Patricia A. Millett: No, no it wouldn't, because what you still have is, once you take these funds you have a Federal overlay.
Speaker: doesn't matter, which you have --
John Paul Stevens: nonexistent right, if I understand you...
Patricia A. Millett: Well, then thed- there's a fed there is there's no doubt that there's a Federal level of protection here for privacy, and it wa- it it's at a aggregated, collective system-wide level.
Speaker: level of   --
Anthony M. Kennedy: Mr. Roberts used the word obligation, you stay away from the the term, right, in the statute.
Speaker: or would you say it's a right...
Anthony M. Kennedy: that can be enforced through a comprehensive administrative scheme?
Patricia A. Millett: That that's right.
Speaker: that in fact --
David H. Souter: I think when he used the word, opportunity, that this is kind of the that the scheme of this section is sort of an if-then sort of scheme.
Speaker: Yes. yeah th- our ar-
David H. Souter: there's there's there's an opportunity.
Patricia A. Millett: Th- th- That's right.
Speaker: Thank you, Ms. Millett.
Patricia A. Millett: Thank you.
William H. Rehnquist: Ms. Brinkmann, we'll hear from you.
Beth S. Brinkmann: Mr. Chief Justice, and may it please the Court: In FERPA, Congress gave parents the right to prevent the release of certain education records.
William H. Rehnquist: Now, oi- you're reading from nine A, Ms. Brinkmann?
Speaker: Whereabouts on page nine A?
Beth S. Brinkmann: Your Honor, paragraph two begins that no...
Speaker: fund shall be given to an agency,
Beth S. Brinkmann: and explains that has a policy or...
Speaker: I don't see it either. I'm looking at page --
Speaker: nine A of the red brief.
Beth S. Brinkmann: It's on page eight A of the bu-
Antonin Scalia: You're switching briefs on us.
Beth S. Brinkmann: I'm sorry.
Beth S. Brinkmann: It's on page eight A of the blue brief, if you prefer that.
Antonin Scalia: Yes, it does.
Beth S. Brinkmann: Unless.
Antonin Scalia: Unless.
Beth S. Brinkmann: Yes.
Antonin Scalia: Now, if you don't have a policy or practice, the whole provision doesn't apply.
Beth S. Brinkmann: th- If you don't have a policy or practice of releasing information other than under the preceding section B one, you're correct,
Speaker: Your Honor. And B two A is --
Beth S. Brinkmann: B one says you can't a school can't have a policy of releasing without consent, other than to certain...
Speaker: categories.
Stephen G. Breyer: you read the word policy, what policy? I think Justice Scalia is reading it as, what policy?
Speaker: It's a policy --
Stephen G. Breyer: releasing records without written consent.
Beth S. Brinkmann: That's not what not na- that's not what B two A says.
Stephen G. Breyer: Hm.
Beth S. Brinkmann: any personally identifiable information, other than directory information, or is permitted under paragraph one.
Antonin Scalia: I'm I'm really not following you.
Beth S. Brinkmann: Yes.
Antonin Scalia: Unless.
Beth S. Brinkmann: Yes.
Antonin Scalia: Okay.
Beth S. Brinkmann: So...
Antonin Scalia: But but that whole provision, no funds shall be made available, only applies to an educational agency or institution which has a policy or practice of releasing.
Speaker: Absolutely.
Antonin Scalia: policy or practice of releasing, it's entirely exempt from that provision.
Beth S. Brinkmann: That's correct, Your Honor, because they did not Congress did not intend to go after inadvertent releases.
Speaker: twoA.
Beth S. Brinkmann: They may choose not to.
Speaker: parents.
Sandra Day O'Connor: be a scheme, at least as I read it, just directed at when Federal funds are going to be given to a school, and you determine that by whether the school has a particular policy or practice, and and the remedy is withholding funds.
Beth S. Brinkmann: Your Honor, in addition to the language, unless there is, our our position is, because there is that requirement, unless there is written consent from the parent, Congress intended to directly benefit the parents and to say to the parents in a particular situation, you can say no, I don't want this information released.
Speaker: benefit the child.
Antonin Scalia: because i- I mean, if the information is released and the parent says, I object, the institution can say, oh, I'm sorry, that was just just just a mistake.
Beth S. Brinkmann: There is, Your Honor, because the if they do have a policy in process, it's akin to the standard that the Court adopted in Gebser, and here Congress did that.
Speaker: parents, and again I have to --
William H. Rehnquist: if if they don't get consent from the parents, the express consequence is no funds shall be made available.
Beth S. Brinkmann: Which is the commonality in all of the Spending Clause cases that have come before the...
Speaker: Court, Your Honor.
Ruth Bader Ginsburg: the emphasis, I mean as was pointed out by Mr. Roberts.
Beth S. Brinkmann: Well, Your Honor, there's never been a formula.
Speaker: by these conditions.
Ruth Bader Ginsburg: stated you my question precisely.
Beth S. Brinkmann: No statute of that language has ever come before the Court, Your Honor, and all I'm saying is, there are many other s- cases in which statutes have been found to accord rights under section nineteen eighty-three that don't have that no-student-shall language.
William H. Rehnquist: What about yu- you say, you agree there is no example of a ca- we've decided where the term is no funds shall?
Beth S. Brinkmann: That statute has not come before the Court.
Speaker: If I may --
William H. Rehnquist: wherts- [:where's ] where the statute's i- th- the footnote you're quoting r- s- speaks in terms of, or addresses the no funds shall?
Beth S. Brinkmann: The precise language in that statute which is quoted in that footnote says that no Federal funds payments shall be made, Your Honor.
Speaker: Two more. You have...
Beth S. Brinkmann: Yes.
Antonin Scalia: So we have right the the word right used in B as well as in A, or at least with reference to B as well as with...
Speaker: Much more...
Beth S. Brinkmann: precisely, your Honor here because they are specifically talking not just about B generically, but about pe- permission or consent.
Stephen G. Breyer: Why does right refer to B? I mean, rights could refer to A.
Beth S. Brinkmann: Because the whole provision of D refers to permission or consent, Your Honor.
Speaker: or --
Stephen G. Breyer: permission or consent of and...
Speaker: Yes. Yes, but --
Stephen G. Breyer: that be the first is this, and the other is that.
Beth S. Brinkmann: But if you look at the structure of the provision, they are referring to the actual permission or consent, because that's when you would need to know, do I go to the when I for a college student,
Speaker: do I go to the --
Stephen G. Breyer: after he's eighteen is a right that goes to the student, not to the parent.
Beth S. Brinkmann: But Your Honor, this is specifically addressing the permission or consent...
Speaker: provision. You can tell by the...
Beth S. Brinkmann: heading of subsection D.
Speaker: required here. i- It would be in the regulations, Your Honor.
Speaker: Even if even if we...
Ruth Bader Ginsburg: we say that you met the three Blessing standards, Justice O'Connor said in that opinion, there's something more, and that the more is what seems to be the strongest emphasis of the case that Mr. Roberts and Ms. Millett made, and that is that Congress created an enforcement scheme that they meant to be it, that would be incompatible with individual enforcement.
Beth S. Brinkmann: Actually that, ironically, b- b- leads me to my third point, in fact.
Speaker: Under petitioner's interpretation --
Antonin Scalia: that.
Speaker: Yes, Your Honor, and and I think with...
Antonin Scalia: you you advance the ball at all by saying what they were worried about was precisely this thing.
Beth S. Brinkmann: Well, it was the point that Justice Ginsburg brought up before, which actually I think responds to your inquiry.
Speaker: But that that's...
Ruth Bader Ginsburg: It may not be the ideal remedy.
Beth S. Brinkmann: Your Honor, actually it's much more complicated than that.
Speaker: [Inaudible]
Ruth Bader Ginsburg: that nineteen eighty-three really doesn't fit this pattern, because why even, why should certain kinds of institutions be stopped, and others not,
Speaker: doing the same thing?
Beth S. Brinkmann: Because the relationship of students with a private school is different than a relationship with a public school.
Ruth Bader Ginsburg: But doesn't the student have the same, whether we're going to call it right or opportunity, in in the private school with respect to records,
Speaker: like a...
Ruth Bader Ginsburg: private university?
Beth S. Brinkmann: Only if the school receives Federal funds.
Speaker: Secondary and elementary --
Beth S. Brinkmann: Only universities, Your Honor.
Speaker: Ms. Brinkmann, can I can I  come back...
Antonin Scalia: to your your assertion that that there that there is no right to an injunction, you can't get an injunction under under this act, but you can't you can't get an injunction, even if we accept your your theory of the act.
Speaker: Absolutely, Your Honor.
Speaker: Absolutely, and in -- Because in this...
Antonin Scalia: which suggests that you're not vindicating a private right of of yours, that that that that that somehow what Congress is concerned with is the existence of a policy or practice that it doesn't like.
Speaker: With all due respect --
Antonin Scalia: even though you're being harmed by this release, under your theory you can't get an injunction against it.
Speaker: I I respectfully disagree.
Antonin Scalia: a policy or...
Speaker: prac-
Beth S. Brinkmann: absolutely could get an injunction, Your Honor.
Antonin Scalia: h- How so?
Beth S. Brinkmann: Because you needed the testimony of one witness in this case who said, we do this all of the time.
Speaker: before --
Antonin Scalia: that witness, and if you don't have such a witness, you cannot get an injunction, isn't that right?
Beth S. Brinkmann: That's right.
Stephen G. Breyer: Is that...
Speaker: can...
Stephen G. Breyer: I ask you one question on the practicality? if assuming all the language is ambiguous, et cetera, and I'd like you to remove this image from my mind.
Beth S. Brinkmann: I think I have at least five answers.
Speaker: People comply.
David H. Souter: if if the force if we accept the force of your argument, then I think we'd we'd have to say, well, Congress really didn't need to bother with the centralized administration provision, and yet Congress did put it in, and it seems to me the most likely reason that it put it in is the reason that Justice Breyer just gave.
Speaker: I think --
David H. Souter: you may have may have mayed have made a good argument for getting rid of it, but as long as it's there, it seems to have the same lesson that his his question suggests.
Beth S. Brinkmann: I think that the the FPCO office serves a admirable and y- meritorious role.
David H. Souter: But that may be a very good argument for saying that what Congress had in mind, in effect, in in confining the enforcement the way it seems to have done by this exclusive authority provision works in the general run of cases, and therefore there is not a good reason to say that Congress probably would have wanted this private right of action with the punitive damages.
Beth S. Brinkmann: I think it works generally, and then you look at the Blessing inquiry to see if Congress intended to create a right, they intended to create a right from all of those reasons I have said.
Speaker: mandatory.
David H. Souter: we're at the we're at we're beyond stage one, two...
Speaker: three and we're saying, okay,
David H. Souter: are there particular reasons to think that they that they did not.
Beth S. Brinkmann: Then it's presumptively available, a section nineteen eighty-three action.
Speaker: in the Sea Clammers case and Smith V Robinson.
William H. Rehnquist: W- why isn't the the theory of ce- centralized administration, spe- spelled out in the statute, with the Secretary's office doing this thing, why doesn't that overcome the presumption?
Beth S. Brinkmann: Because the presumption has to be overcome by an enforcement scheme, an administrative scheme that supplants the section nineteen eighty-three that has some address for a private...
Speaker: Well, certainly it doesn't...
William H. Rehnquist: have to be a duplicate of section nineteen...
Speaker: eighty-three,
William H. Rehnquist: or there'd be no point to saying it supplants...
Beth S. Brinkmann: Absolutely, Your Honor, but here there is absolutely no availability for any remedy for an individual injury, and Sea Clammers...
Speaker: Miss -- Miss Brink --
William H. Rehnquist: Wait a minute.
Beth S. Brinkmann: Not under B two A, if they have released records.
Speaker: case --
Antonin Scalia: can you give us one other example of a right that depends upon whether the person allegedly violating the right has done it before?
Speaker: Yes, Your Honor.
Antonin Scalia: policy or practice of doing it? For example, you know, your right to be free from unreasonable searches and seizures.
John Paul Stevens: I suppose you're going to tell us about the Monell case.
Beth S. Brinkmann: I was going to cite the Monell case.
Speaker: I think that's exactly what the Monell case is about.
Antonin Scalia: on whom you can sue.
Beth S. Brinkmann: Your Honor, a policy or practice may not have injured anyone in the past.
Antonin Scalia: Maybe, but it's a very strange right.
Speaker: This is the fact that...
Antonin Scalia: rights question, too, that I yu- you're relying on the use of the right, of the term, right, in the statute.
Beth S. Brinkmann: I don't believe so, Your Honor.
Speaker: have to --
Antonin Scalia: it refer to existing State privacy rights, or just to sort of a moral a moral notion of what things should be kept private?
Beth S. Brinkmann: Well, I have to emphasize, our statutory argument about rights is not based solely on the twelve thirty-two G D referenced rights.
Speaker: Well, Ms. Brinkmann, th-
Ruth Bader Ginsburg: there haven't been other cases where substantial monetary damages and punitive damages have been available, and maybe that's the concern.
Beth S. Brinkmann: It's not the same conduct, Your Honor, if I may.
Speaker: Thank...
William H. Rehnquist: you, Ms. Brinkmann.
Beth S. Brinkmann: Thank you, Your Honor.
William H. Rehnquist: Mr. Roberts, you have four minutes remaining.
John G. Roberts, Jr.: Thank you, Your Honor.
Antonin Scalia: They're answerable to us, presumably.
John G. Roberts, Jr.: Well It is implausible to suppose that the same Congress that was so worried about multiple interpretations of the law from the regional offices of one Department would have been perfectly content and, in fact, intended to confer the right for every one of sixty-two million students to go into court in a nineteen eighty-three action.
William H. Rehnquist: Thank you, Mr. Roberts.
Speaker: Thank you, Your Honor.