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105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-395
_______________________________________________________________________


 
                     FEDERAL AGENCY COMPLIANCE ACT

_______________________________________________________________________


November 8, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1544]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 1544) to prevent Federal agencies from pursuing policies 
of unjustifiable nonacquiescence in, and relitigation of, 
precedents established in the Federal judicial circuits, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     4
Hearings.........................................................     8
Committee Consideration..........................................     8
Vote of the Committee............................................     9
Committee Oversight Findings.....................................     9
Committee on Government Reform and Oversight Findings............     9
New Budget Authority and Tax Expenditures........................     9
Congressional Budget Office Estimate.............................     9
Constitutional Authority Statement...............................    11
Section-by-Section Analysis and Discussion.......................    11
Agency Views.....................................................    15
Changes in Existing Law Made by the Bill, as Reported............    21
Dissenting Views.................................................    23

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

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

SEC. 2. PROHIBITING INTRACIRCUIT AGENCY NONACQUIESCENCE IN APPELLATE 
                    PRECEDENT.

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

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

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

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

SEC. 3. PREVENTING UNNECESSARY AGENCY RELITIGATION IN MULTIPLE 
                    CIRCUITS.

  (a) In General.--Chapter 7 of title 5, United States Code, as amended 
by section 2(a), is amended by adding at the end the following:

``Sec. 708. Supervision of litigation; limiting unnecessary 
                    relitigation of legal issues

  ``(a) In supervising the conduct of litigation, the officers of any 
agency of the United States authorized to conduct litigation, including 
the Department of Justice acting under sections 516 and 519 of title 
28, United States Code, shall ensure that the initiation, defense, and 
continuation of proceedings in the courts of the United States within, 
or subject to the jurisdiction of, a particular judicial circuit avoids 
unnecessarily repetitive litigation on questions of law already 
consistently resolved against the position of the United States, or an 
agency or officer thereof, in precedents established by the United 
States courts of appeals for 3 or more other judicial circuits.
  ``(b) Decisions on whether to initiate, defend, or continue 
litigation for purposes of subsection (a) shall take into account, 
among other relevant factors, the following:
          ``(1) The effect of intervening changes in pertinent law or 
        the public policy or circumstances on which the established 
        precedents were based.
          ``(2) Subsequent decisions of the United States Supreme Court 
        or the courts of appeals that previously decided the relevant 
        question of law.
          ``(3) The extent to which that question of law was fully and 
        adequately litigated in the cases in which the precedents were 
        established.
          ``(4) The need to conserve judicial and other parties' 
        resources.
  ``(c) The Attorney General shall report annually to the Committees on 
the Judiciary of the Senate and the House of Representatives on the 
efforts of the Department of Justice and other agencies to comply with 
subsection (a).
  ``(d) A decision on whether to initiate, defend, or continue 
litigation is not subject to review in a court, by mandamus or 
otherwise, on the grounds that the decision violates subsection (a).''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 7 of title 5, United States Code, as amended by section 2(b), 
is amended by adding at the end the following new item:

``708. Supervision of litigation; limiting unnecessary relitigation of 
legal issues.''.

                          Purpose and Summary

    The Federal Agency Compliance Act, H.R. 1544, generally 
prevents agencies from refusing to follow controlling 
precedents of the United States courts of appeals in the course 
of program administration and litigation of their programs. The 
Committee on the Judiciary (hereinafter referred to as 
Committee) believes that citizens who file claims or who 
otherwise are involved in proceedings with federal agencies 
have the right to expect that those agencies will obey the law 
as interpreted by the courts. Moreover, the Committee believes 
that agencies must be discouraged from relitigating settled 
questions of law in multiple circuits. Unnecessary litigation 
is a needless expense for both the Government and private 
parties and a waste of limited judicial resources. The bill is 
based upon a recommendation by the federal judiciary that 
Congress ``* * * enact legislation to--(a) generally prohibit 
agencies from adopting a policy of nonacquiescence to the 
precedent established in a particular federal circuit; and (b) 
require agencies to demonstrate special circumstances for 
relitigating an issue in an additional circuit when a uniform 
precedent has been established already in multiple courts of 
appeals.'' 1
---------------------------------------------------------------------------
    \1\ Judicial Conference of the United States, Long Range Plan for 
the Federal Courts 34 (1995) (Recommendation 11).
---------------------------------------------------------------------------
    H.R. 1544 addresses the two kinds of agency 
nonacquiescence: intracircuit nonacquiescence--refusal to 
follow controlling appellate precedent within a specific 
federal judicial circuit; and intercircuit nonacquiescence--
relitigating in other judicial circuits issues on which 
precedents have already been established in multiple 
circuits.2 Regarding intracircuit nonacquiescence, 
the bill generally requires an agency and all agency officials 
who administer statutes and regulations within a given judicial 
circuit to follow relevant existing court of appeals precedent 
in that circuit. The Committee, however, recognizes that an 
agency should be able to assert a position contrary to 
precedent in limited circumstances, for example, such as when 
intervening legal, factual, or public policy developments may 
have undermined or changed the rationale for the earlier 
decision.
---------------------------------------------------------------------------
    \2\ See Samuel Estreicher & Richard L. Revesz, Nonacquiescence by 
Federal Administrative Agencies, 98 Yale L.J. 679 (1989).
---------------------------------------------------------------------------
    With respect to intercircuit nonacquiescence, the Committee 
believes that agencies should not repeatedly relitigate legal 
issues that have been consistently resolved against the 
Government, or one of its agencies, by multiple courts of 
appeals. The bill requires the Department of Justice and other 
agency officials in such situations to consider the following 
factors, among others, when deciding whether to pursue 
litigation: (1) the effect of intervening changes in pertinent 
law or public policy or circumstances on which the other courts 
of appeals' decisions were based; (2) subsequent decisions of 
the Supreme Court or the courts of appeals that previously 
decided the relevant question of law; (3) the extent to which 
that question of law was fully and adequately litigated in the 
earlier cases; and (4) the need to conserve the resources of 
the federal courts and non-agency parties to the litigation. 
Although these provisions discouraging intercircuit 
nonacquiescence are not subject to judicial review or 
enforcement, the bill requires the Attorney General to report 
annually to Congress on agency compliance.
    The Federal Agency Compliance Act gives effect to the 
principle of stare decisis. An appellate court's decisions 
resolving legal issues form precedents, which thereafter serve 
as controlling law on the legal points resolved. Stare decisis 
as applied to precedents of a United States court of appeals 
has been referred to as the ``law of the circuit'' doctrine. 
Respect for controlling law provides stability and 
predictability to our judicial system facilitating settlement 
of disputes and freeing parties from relitigating established 
legal precedents. It promotes uniformity by treating everyone 
alike within a circuit and providing litigants with a sense of 
fairness, regardless of their financial means. H.R. 1544 
ensures that federal agencies, as well as other claimants and 
parties, will respect the law of the circuit.

                Background and Need for the Legislation

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

        Historically, the practice began in 1924 when the Tax 
      Court was known as the Board of Tax Appeals. At that time 
      there was no procedure for direct appeal from the Board's 
      decision. If the Service lost, it could bring suit in 
      federal district court within one year to collect any 
      deficiency disallowed by the Board. In order that taxpayers 
      who were successful before the Board would not have to wait 
      a full year to find out if the [S]ervice planned to appeal, 
      the Commissioner would publish the decision to acquiesce or 
---------------------------------------------------------------------------
      nonacquiesce.

    \5\ See Estreicher & Revesz, supra note 2, at 681.
    \6\ Id.
    \7\ See Commission on Revision of the Federal Court Appellate 
System, Structure and Internal Procedures: Recommendations for Change, 
67 F.R.D. 195, app. B at 349-61 (1975).
    \8\ Estreicher & Revesz, supra note 2, at 681-82. During the 98th 
Congress, the House passed H.R. 3755, ``The Social Security Disability 
Benefits Reform Act of 1984,'' which barred SSA intracircuit 
nonacquiescence outright. The Senate took a somewhat different 
approach, instead mandating procedural safeguards whenever 
nonacquiescence was asserted. Although the relevant provisions in each 
bill were subsequently deleted, the Conference Report noted that the 
decision to eliminate them should ``not be interpreted as approval of 
`non-acquiescence' by a federal agency to an interpretation of a U.S. 
Court of Appeals.'' H. Conf. Rep. No. 1039, 98th Cong., 2d Sess. 37 
(1984), reprinted in 1984 U.S.C.C.A.N. 3095. During the 99th Congress, 
the Subcommittee on Administrative Law and Governmental Relations of 
the House Judiciary Committee held hearings on ``Judicial Review of 
Agency Action: HHS Policy of Nonacquiescence'' at which a substantial 
body of testimony was received against the Social Security 
Administration's practice. Judicial Review of Agency Action: HHS Policy 
of Nonacquiescence: Hearing Before the Subcomm. on Administrative Law 
and Governmental Relations of the House Comm. on the Judiciary, 99th 
Cong., 1st Sess. (July 25, 1985).
---------------------------------------------------------------------------
    The problem of agency nonacquiescence was also recognized 
at the beginning of this decade by the Federal Courts Study 
Committee (the Study Committee), which was established by 
Congress to perform a comprehensive review of the problems and 
issues facing the federal judiciary. In its report, the Study 
Committee recommended to Congress that the practice of agency 
nonacquiescence in administrative adjudication of Social 
Security disability claims be prohibited.9 The 
recommendation responded to an assertion by the Secretary of 
Health and Human Services (whose department at that time 
included the SSA) of a right to disregard the precedential 
holdings of the courts of appeals if the agency determined that 
the relevant court decisions were not in accord with its own 
policy. The Study Committee also called upon Congress to 
explore whether ``legislative control'' should be applied to 
other executive branch agencies as well.10
---------------------------------------------------------------------------
    \9\ Report of the Federal Courts Study Committee 59-60 (1990). In 
the Study Committee's view, an exemption from this prohibition should 
be recognized for ``test'' cases designated by the Solicitor General.
    \10\ Id. at 60.
---------------------------------------------------------------------------
    In its 1995 recommendation for legislation to address the 
continuing problem, the Judicial Conference of the United 
States noted that the practice of unjustified nonacquiescence 
``undermines the fundamental principle that an appellate 
court's decision on a particular point of law is controlling 
precedent for other cases raising the same issue.'' 
11 It went on to cite the practice's ``questionable 
propriety and inefficiency'' and criticized it as ``unfair to 
litigants, many of whom are pro se, who frequently are unaware 
of precedent favorable to their cases.'' 12
---------------------------------------------------------------------------
    \11\ Long Range Plan for the Federal Courts, supra note 1, at 35 
(commentary on Recommendation 11).
    \12\ Id.
---------------------------------------------------------------------------
    Testifying before the Subcommittee on behalf of the 
Judicial Conference, Judge Stephen H. Anderson of the United 
States Court of Appeals for the Tenth Circuit stated that 
nonacquiescence ``violates all our concepts of the rule of law 
existing in this country for more than 200 years.'' 
13 He added that it is unfair to individual 
claimants to force them to relitigate an issue that has 
previously been decided by an appellate court. Oftentimes, 
agency nonacquiesence discourages meritorious claimants from 
pursuing what is their right under favorable precedent.
---------------------------------------------------------------------------
    \13\ Federal Agency Compliance Act: Hearing on H.R. 1544 Before the 
Subcomm. on Commercial and Administrative Law of the House Comm. on the 
Judiciary, 105th Cong., 1st Sess. at 11 (1997) [hereinafter Compliance 
Act Hearing] (testimony of Hon. Stephen H. Anderson, Judge, U.S. Court 
of Appeals for the Tenth Circuit).
---------------------------------------------------------------------------
He stated:

          This is a matter of the invisible statistic, the 
        invisible citizen claimant. What happens to the mass of 
        citizen claimants at the lowest level, the first desk 
        of an agency's consideration? That action we don't know 
        about. The only way that we know that something may be 
        wrong is the announcement over and over again, one way 
        or the other, by agencies that they have the right to 
        disregard the law set by the circuit in which they 
        conduct their affairs.14
---------------------------------------------------------------------------
    \14\ Id. at 16.

    John H. Pickering, Esq., testifying on behalf of the 
American Bar Association, emphasized the ``lawless'' aspect of 
nonacquiescence, a label he noted was applied by former 
Solicitor General Rex Lee.15 Pickering also 
observed:
---------------------------------------------------------------------------
    \15\ Id. at 64.

          Claimants, who are frequently indigent, should not be 
        forced to relitigate legal issues on which the agency 
        has not prevailed but refuses to follow or appeal. 
        Judge Learned Hand once said that if democracy is to be 
        preserved, there must be one commandment: ``Thou shalt 
        not ration justice.'' By continuing to pursue its 
        policy of nonacquiescence, the Social Security 
        Administration is limiting access to the justice 
        system, and thereby rationing justice, for: (1) the 
        claimant who must pursue lengthy appeals to obtain a 
        decision on an issue of law that could have been 
        resolved at the agency level; (2) claimants whose cases 
        are delayed because the agency's resources are spent on 
        duplicative efforts; and (3) claimants who may be 
        denied timely access to the federal court system 
        because the court is forced to consider anew, issues of 
        law that it has already decided.16
---------------------------------------------------------------------------
    \16\ Compliance Act Hearing, supra, note 13, at 67 (testimony of 
John H. Pickering, Wilmer, Cutler & Pickering, on behalf of the 
American Bar Association).

    The legal and policy concerns surrounding agency 
nonacquiescence have been the subject of substantial debate. In 
essence, agencies consider it their responsibility to 
administer national programs with standards consistent 
throughout the country. They argue that adhering to divergent 
precedents established by the various courts of appeals 
detracts from this goal by fractionalizing those standards. In 
defense of intercircuit nonacquiescence, agencies argue that to 
freeze the law based upon a decision of one or two circuits 
prevents the ``percolation'' of issues that ensures 
comprehensive appellate review prior to final resolution by the 
Supreme Court.
    The Committee believes, however, that equity and orderly 
governance require that agencies, like private citizens, should 
obey the law enunciated by courts of competent jurisdiction. If 
an agency disagrees with a court's decision, it has several 
options. It can seek further review of the matter by the court 
of appeals (the same panel or en banc) or by the Supreme Court 
until the issue is finally resolved. It can also seek to 
vindicate its position in other courts of appeals and perhaps 
obtain review of the matter in the Supreme Court if conflicting 
rulings are obtained among the circuits.17 If the 
agency disagrees with the outcome of the judicial process, it 
can petition Congress to amend the law. This structure is 
consistent with the principle of separation of powers under 
which it is the courts'' constitutional role to interpret the 
laws governing agency actions.
---------------------------------------------------------------------------
    \17\ Critics argue, however, that the agencies can go to 
unreasonable lengths in trying to gain a circuit decision in their 
favor. See Rodgers, supra note 4, at 1018 (footnote omitted):

        The IRS claims that as a rule of thumb, it will conform 
      to a judicial interpretation if faced with two or more 
      adverse decisions, but the Service surrendered to insurance 
      companies in Revenue Ruling 72-84 only after losing five 
      decisions in court. The ``dealers reserve'' issue was 
      litigated in the courts of six circuits before being 
      resolved by the Supreme Court in 1959. In the latter 
      instance, it should be noted that the IRS was at least 
      dealing with a conflict among the circuits, losing in four 
      circuits and winning in two before ultimately winning when 
      the Supreme Court affirmed the judgment favorable to the 
      Commissioner from the Seventh Circuit.
    It is true that today some agencies assert that they fully 
or generally acquiesce in controlling precedents. 18 
However, some agencies do not ``acquiesce'' in a particular 
court decision until agency officials review the judicial 
opinion and issue a directive to agency employees to follow the 
ruling in subsequent administrative proceedings.19 
Thus, some agencies appear to treat controlling precedent as 
having no binding effect until the agency interprets such 
precedent and determines how it should be 
implemented.20 Under that rationale, the agency has 
become, in effect, a review level between the appellate courts 
and the Supreme Court, a view that the Committee does not 
share.21
---------------------------------------------------------------------------
    \18\ The Department of Justice has stated that today ``agency 
nonacquiescence is uncommon'' and ``[w]here the government has lost a 
legal issue in three circuits, the Solicitor General only rarely 
permits a fourth appellate test of the issue.'' Letter from Andrew 
Fois, Assistant Attorney General, Department of Justice, to Honorable 
Henry J. Hyde, Chairman, Committee on the Judiciary (Sept. 17, 1997).
    \19\ Compliance Act Hearing, supra, note 14, at 27 (statement of 
Daniel J. Wiles, Deputy Associate Chief Counsel, Office of Chief 
Counsel, Internal Revenue Service); Id. at 22 (statement of Arthur 
Fried, Esq., General Counsel, Social Security Administration) The SSA 
issues ``acquiescence rulings'' which explain how it will apply the 
decisions of circuit courts that are at variance with the agency's 
national policies. These ``rulings'' explain how SSA will apply the 
appellate court holding at all levels of adjudication in the same 
circuit. See also 62 Fed. Reg. 48,963 (Sept. 18, 1997) (proposed 
revisions to SSA rules on application of circuit precedent to 
administrative decision making).
    \20\ Only last year, a court of appeals reversed an SSA decision 
applying regulations the court had invalidated in an earlier case. 
Although the agency explained its failure to observe the earlier 
precedent on grounds that an ``acquiescence ruling'' had not been 
issued, the court rejected that argument, noting:

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

Hutchison v. Chater, 99 F.3d 286, 287-88 (8th Cir. 1996) (bracketed 
language in opinion).
---------------------------------------------------------------------------
    \21\ Concerned about delay in an agency following relevant 
precedent, the Committee adopted an amendment by Mr. Nadler aimed at 
dealing with the problem of agency officials such as administrative law 
judges, being barred by the agency from acquiescing until the agency 
formally accepted the court's ruling, for example, through the issuance 
by the Social Security Administration of an ``Acquiescence Ruling.'' 
The Committee believes that federal agencies are not entitled to craft 
their own ``grace periods'' during which they may decline to observe 
the law as stated in an otherwise binding precedent. This amendment 
would make it possible for a claimant, for example, to bring a decision 
of a federal court of appeals to the attention of an administrative law 
judge, and have that law applied even in the absence of an 
``Acquiescence Ruling'' or other agency action.
---------------------------------------------------------------------------
    The decision whether or not to acquiesce appears to be 
premised on the view that federal agencies apply legal 
principles from court rulings in the administration of a 
statutory program only for reasons of comity, not because the 
precedent is legally binding on the agency.22 As 
long as an agency holds the view that following controlling 
precedent is optional, the Committee believes that this bill is 
necessary. No one is above the law, especially federal 
agencies, whose officials are sworn to uphold the rule of 
law.23
---------------------------------------------------------------------------
    \22\ United States Department of Energy v. Federal Labor Relations 
Authority, 106 F.3d 1158, 1165 (4th Cir. 1997) (Luttig, J. concurring) 
(quoting letter from William Kanter, Deputy Director of the Justice 
Department's Civil Division Appellate Staff dated Nov. 14, 1996).
    \23\ In Allegheny General Hospital v. NLRB, 608 F.2d 965 (3d Cir. 
1979), the court observed:

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

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

                                Hearings

    The Subcommittee on Commercial and Administrative Law of 
the Judiciary Committee held a hearing on H.R. 1544, the 
``Federal Agency Compliance Act,'' on May 22, 1997. Testimony 
was received from the following eight witnesses: Judge Stephen 
H. Anderson of the United States Court of Appeals for the Tenth 
Circuit, representing the Judicial Conference of the United 
States; Arthur Fried, Esq., General Counsel of the Social 
Security Administration; Daniel J. Wiles, Esq., Deputy 
Associate Chief Counsel of the Internal Revenue Service; 
Stephen W. Preston, Esq., Deputy Assistant Attorney General, 
Civil Division of the Department of Justice; John Pickering, 
Esq., representing the American Bar Association; Professor Dan 
Coenen of the University of Georgia School of Law; James F. 
Allsup, Esq., of Allsup, Inc., an organization that represents 
Social Security disability and Medicare claimants; and Peter 
Ferrara, General Counsel and Chief Economist for Americans for 
Tax Reform.

                        Committee Consideration

    On Thursday, July 24, 1997, the Subcommittee on Commercial 
and Administrative Law met in open session and ordered reported 
the bill H.R. 1544, by a voice vote, a quorum being present. On 
Wednesday, September 17, 1997, the Committee met in open 
session and ordered reported favorably the bill H.R. 1544 with 
amendment by voice vote, a quorum being present.

                         Vote of the Committee

    There were two amendments offered during full Committee 
consideration of H.R. 1544. Mr. Nadler offered an amendment, 
which was adopted by voice vote, providing that all officers 
and employees of an agency, including administrative law 
judges, are required to adhere to precedent. Ms. Jackson Lee 
offered an amendment, which was defeated by voice vote, to 
allow an agency to exercise its discretion not to acquiesce in 
an appellate court precedent if it determines that the 
precedent would impede the defense and protection of civil 
liberties or civil rights.

                      Committee Oversight Findings

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

         Committee on Government Reform and Oversight Findings

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

               New Budget Authority and Tax Expenditures

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

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 1544, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 4, 1997.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1544, the Federal 
Agency Compliance Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Susanne S. 
Mehlman (for federal costs), Kathy Ruffing (for social 
security), and Pearl Richardson (for revenues).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 1544--Federal Agency Compliance Act

    H.R. 1544 would require federal agencies to abide by 
appellate court precedents in a particular circuit when 
administering policies or regulations in that circuit, except 
under certain circumstances. The bill also would direct federal 
agencies to avoid unnecessary relitigation of legal issues, 
especially in instances where three or more judicial circuits 
have handed down rulings unfavorable to the government.
    Based on information from the Department of Justice, CBO 
believes that federal agencies are generally in compliance with 
federal law and that they usually exercise appropriate 
discretion when determining whether an appeal in any particular 
case is warranted. For example, the Social Security 
Administration (SSA)--one of the agencies potentially most 
affected by this bill--already has a policy on acquiescence 
that essentially meets the requirements of H.R. 1544. However, 
because its numerous administrative proceedings often involve 
contentious issues such as determining disability, SSA's 
administrators and administrative law judges (ALJs) 
occasionally differ as to the applicability of precedents in 
particular cases. This bill, by specifically reinforcing the 
obligation of administrative law judges to adhere to appeals 
court precedents for their particular circuit, could intensify 
those differences. in some cases, most likely causing ALJs to 
award disability benefits in more cases than they otherwise 
would. Spending or receipts of other agencies could be 
similarly affected. For example, the bill could result in a 
slight revenue loss to the government if it were to cause the 
Internal Revenue Service to adhere to appellate court 
precedents in particular circuits more than it otherwise would. 
In addition, the legislation might cause SSA and other agencies 
to devote more resources to monitoring their adjudicative 
proceedings. Such occurrences are likely to result in some 
increase in costs or decrease in revenues to the government, 
but CBO cannot predict the extent of these occurrences or their 
budgetary impact.
    Because enactment of the bill could affect direct spending 
and receipts, pay-as-you-go procedures would apply. The bill 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act of 1995 and would 
impose no costs on state, local, or tribal governments.
    The CBO staff contacts for this estimate are Susanne S. 
Mehlman (for federal costs), Kathy Ruffing (for social 
security), and Pearl Richardson (for revenues). This estimate 
was approved by Robert A. Sunshine, Deputy Assistant Director 
for Budget Analysis.

                   Constitutional Authority Statement

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

                      Section-by-Section Analysis

Section 1. Short title

    Section 1 titles the bill as the ``Federal Agency 
Compliance Act.''

Section 2. Prohibiting intracircuit agency nonacquiescence in appellate 
        precedent

    Section 2(a) adds a new section, Section 707, at the end of 
chapter 7 of title 5, United States Code, generally to prevent 
agencies from pursuing intracircuit nonacquiescence. More 
specifically, subsection (a) of section 707 provides that an 
agency must adhere to controlling precedent established by the 
United States court of appeals for a given judicial circuit in 
administering a statute, rule, regulation, program, or policy 
within that circuit. ``Administering'' includes agency action 
in an administrative or judicial context that is required or 
arises as part of the agency's responsibilities under a 
statute, rule, regulation, program, or policy.
    Section 707(a) also requires all officers and employees of 
an agency, including administrative law judges, to adhere to 
the controlling precedents in that circuit. To the extent that 
those precedents affect the official duties of such persons, 
they must act accordingly. This provision makes clear that 
agency acquiescence does not apply only to the Secretary or 
head of the agency. The Committee believes that citizens should 
be able to avail themselves of favorable circuit case law at 
every level of the administrative process.
    Subsection (a) incorporates the same definition of 
``agency'' applicable to other provisions of the Administrative 
Procedure Act. While the bill does not define the term 
``precedent,'' it is intended to carry its common meaning--
i.e., a decision that a court will consider as controlling 
authority for an identical or similar question of law within 
its jurisdiction. Requiring agencies to adhere within a given 
judicial circuit to the precedents established by the 
respective court of appeals, however, does not bind an agency 
to rulings premised on materially distinguishable facts or 
circumstances, nor does it limit an agency's ability to seek 
clarification of earlier decisions.
    The requirement to adhere to a precedent attaches once the 
decision in which the precedent is established becomes 
effective--i.e., when the mandate of the appellate court issues 
in accordance with Rule 41 of the Federal Rules of Appellate 
Procedure. If the parties in a case are bound by the lower 
appellate decision pending Supreme Court review, it is 
appropriate for that decision to serve as precedent in other 
indistinguishable cases.24 Nevertheless, proceedings 
in such other cases might be stayed so that final action is not 
taken until after the Supreme Court acts.
---------------------------------------------------------------------------
    \24\ Under Rule 41(b) of the Federal Rules of Appellate Procedure, 
a party may seek a stay of the mandate.
---------------------------------------------------------------------------
    Although the bill requires an agency to adhere to 
controlling appellate precedent concerning the laws the agency 
applies, it is not intended to alter the agency's prosecutorial 
or enforcement discretion as recognized in existing case law. 
Thus, even if a court of appeals decision establishes precedent 
in a given circuit on what acts or omissions constitute a 
violation of a particular law, this bill does not require an 
agency charged with enforcement of that law to initiate or 
continue administrative or judicial proceedings where an 
identical or similar act or omission occurs subsequently within 
that judicial circuit.
    Subsection (b) of section 707 specifies those instances 
when an agency is not precluded from taking a position that is 
contrary to the controlling precedent established by a court of 
appeals within the same circuit. This subsection, in essence, 
establishes three exceptions to the requirement in subsection 
(a). If none of the three exceptions are applicable to the 
agency, then it must adhere to the applicable appellate 
precedent within that circuit.
    The first exception, stated in section 707(b)(1), applies 
where the administration of a statute, rule, regulation, 
program, or policy could be subject to review by either the 
court ofappeals that established that precedent or by a court 
of appeals for another circuit. This situation occurs where several 
venue options exist under the operative statute, and it is uncertain 
which circuit will ultimately consider proceedings for the pending 
claim or case.
    For example, any person aggrieved by a final order of the 
National Labor Relations Board (NLRB) can seek review of such 
order in the circuit in which the unfair labor practice in 
question was alleged to have been engaged, in any circuit in 
which the person resides or transacts business, or in the 
United States Court of Appeals for the District of Columbia. 29 
U.S.C. Sec. 160(f) (1994). Thus, during the administrative 
consideration of the alleged unfair labor practice, it may be 
uncertain which of the three potential circuits would review 
the Board's decision. Even where multiple venues are possible, 
the agency must adhere to any precedents uniformly established 
by each of the court of appeals in which venue may lie. And, in 
any event, appellate jurisdiction becomes certain once 
proceedings are initiated in federal court.
    On the other hand, other agencies have more certainty in 
the venue options for judicial review. For example, while the 
Social Security Act provides for federal judicial review where 
the plaintiff resides or has his or her principal place of 
business, SSA decisions are typically reviewed within the 
circuit in which the claimant resides.25
---------------------------------------------------------------------------
    \25\ See 42 U.S.C. Sec. 405(g); see also Estreicher & Revesz, supra 
note 2, at 694.
---------------------------------------------------------------------------
    The second exception, stated in section 707(b)(2), 
recognizes that an agency should not be precluded from 
asserting a position contrary to precedent if the Government 
did not seek further review of the case in which that precedent 
was first established either in that court of appeals or in the 
United States Supreme Court because neither the Government nor 
any agency or officer thereof was a party to the case; or the 
decision establishing that precedent was otherwise 
substantially favorable to the Government. This section ensures 
that the court will have an opportunity to evaluate its 
precedents in the context of agency views and expertise that 
were not available in the earlier proceeding. In addition, 
there may be situations where the Government did not seek 
further review because the Government substantially prevailed 
in the case. The fact that the Government substantially 
prevails in a case should not bind it for all time to rulings 
on secondary or incidental issues that did not affect the 
ultimate result.
    The third exception, stated in section 707(b)(3), 
recognizes that changes in the law or other relevant 
developments following the establishment of the precedent might 
make it reasonable to question its continued validity. These 
possible developments are: (1) a subsequent decision of that 
court of appeals or the United States Supreme Court; (2) a 
subsequent change in any pertinent statute or regulation; or 
(3) any other subsequent change in the public policy or 
circumstances on which that precedent was based. An agency 
should not seek to relitigate an issue on which there is 
established controlling precedent unless there are objectively 
reasonable grounds for believing that the appellate court, 
consistent with the principle of stare decisis, might decide 
the issue differently.
    The first development listed above involves those instances 
where, in one or more cases subsequent to the establishment of 
the precedent, that same appellate court or the Supreme Court 
has indicated a possible need for reexamination of the issue by 
questioning the validity of the prior holding, indicating a 
desire to revisit the issue in a future case, or expressing 
frustration at the results of the application of the prior 
interpretation. The second development arises when Congress or 
the agency changes a statute, regulation, or rule that was 
interpreted in the precedent. Such a change, if substantive and 
relevant, might provide a basis for the court to overrule or 
modify its prior decision. The third development primarily 
concerns changes occurring during the passage of time. Shifts 
in public policy may sometimes make it reasonable to argue that 
an appellate court might approach the same issue differently. 
Also, after a court of appeals renders its decision, other 
appellate courts might interpret the provision at issue 
differently, thereby suggesting a change in circumstances that 
could lead the same court to reconsider its former precedent.
    The bill does not purport to abrogate or limit any other 
rules or principles that may govern the acts or omissions of an 
agency. For example, H.R. 1544 does not diminish any existing 
obligations of agencies to acquiesce in appellate court 
decisions, nor does it otherwise affect existing law with 
respect to controlling precedent, the law of estoppel, or the 
ethical responsibility of parties and counsel to acknowledge 
and characterize faithfully any legal authority that may be 
relevant in a particular administrative or judicial proceeding.
    H.R. 1544 adopts a balanced approach. The three general 
exceptions in section 707(b) provide federal agencies with 
sufficient flexibility to adhere to valid, established 
precedent so as not to interfere with continued development of 
the law. If an agency asserts the applicability of any of these 
three factors, a court will ultimately determine whether the 
factor is applicable. Thus, H.R. 1544 preserves the judiciary's 
constitutional role of interpreting the law, while allowing 
agencies to administer fairly their programs.
    Section 2(b) is a conforming amendment to the table of 
sections at the beginning of chapter 7 of title 5, United 
States Code, that adds a reference to the new section 707.

Section 3. Preventing unnecessary agency relitigation in multiple 
        circuits

    Section 3 adds a new section 708 to chapter 7 of title 5, 
United States Code, that is intended to discourage, although 
not prohibit, intercircuit nonacquiescence. Section 708(a) 
requires the Department of Justice and the officers of any 
agency independently authorized to conduct litigation to ensure 
that the initiation, defense, and continuation of proceedings 
in federal court avoids unnecessarily repetitive litigation on 
questions of law already consistently resolved against the 
Government in multiple courts of appeals.
    Section 708(a) discourages the Government from pursuing 
wasteful and abusive appeals and relitigating settled questions 
of law. This section provides a basic framework to guide 
Justice Department and other litigating agency officials in 
exercising their discretion to initiate, defend, or continue 
litigation of issues that one or more agencies have litigated 
repeatedly, but without success, in other circuits. This 
section does not apply when the Government was not a party in 
the cases in which the adverse appellate decisions were 
rendered.
    Agencies are expected to give careful scrutiny when 
deciding whether to litigate questions of law that have been 
``consistently resolved'' against the United States or an 
agency thereof by the United States courts of appeals for three 
or more circuits. If an agency in that situation intends to 
pursue the matter in yet another forum, it should be prepared 
to justify that decision based on the factors listed and any 
other relevant factors. This section applies to situations 
where all existing appellate case law is against the 
Government's or agency's position and is based on the same or 
similar rationale. It would not, however, be applicable if at 
least one circuit has decided a case on grounds consistent with 
the Government's or agency's position.
    Section 708(b) identifies four factors that, among other 
relevant considerations, must be taken into account by 
supervising officials in deciding whether to initiate, defend, 
or continue litigation in light of the general mandate of 
subsection (a): (1) the effect of intervening changes in 
pertinent law or the public policy or circumstances on which 
the precedents were based; (2) subsequent decisions of the 
Supreme Court or of courts of appeals that previously decided 
the relevant questions of law; (3) the extent to which that 
question of law was fully and adequately litigated in the 
precedent-setting cases; and (4) the need to conserve judicial 
and parties' resources. These factors provide general 
guidelines for litigation decisions similar to the criteria 
already utilized by the Solicitor General and other executive 
branch officials. They are flexibleenough to permit the 
relitigation of exceptional cases with critical ramifications or highly 
unusual circumstances.
    To justify a litigation decision, an agency should balance 
its chances for success in the present case against the burdens 
of additional litigation on other parties and the courts. 
Because the agency must weigh practical and programmatic 
considerations peculiarly within its discretion or expertise, 
its compliance with this section in making that decision is not 
subject to judicial review, by mandamus or otherwise (section 
708(d)). Instead, pursuant to section 708(c), the House and 
Senate Judiciary Committees will receive annual reports from 
the Attorney General on agencies' efforts to comply with 
subsection (a). This will enable the Committees to assess the 
extent of agency compliance and any need for additional 
legislation.
    A conforming amendment changes the table of sections for 
chapter 7 of title 5, United States Code, to reflect the new 
section 708.

                              Agency Views

                        U.S. Department of Justice,
                             Office of Legislative Affairs,
                                Washington, DC, September 17, 1997.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: We appreciate this opportunity to 
present the views of the Department of Justice on H.R. 1544, 
the ``Federal Agency Compliance Act.'' For the reasons set 
forth in the Department's testimony of May 22, 1997, and 
summarized below, the Department strongly opposes the proposed 
legislation.\1\
---------------------------------------------------------------------------
    \1\ On May 22, 1997, Deputy Assistant Attorney General Stephen W. 
Preston testified before the Subcommittee on Commercial and 
Administrative Law of the House Judiciary Committee on H.R. 1544. In 
connection with his testimony, Mr. Preston submitted a written 
statement that presents the Department's views on agency 
nonacquiescence in circuit precedent, as well as reasons why the 
Department opposes the proposed legislation.
---------------------------------------------------------------------------

                                   i

    Section 2 of the bill (enacting new 5 U.S.C. Sec. 707), 
which would require federal agencies to acquiesce in adverse 
court of appeals decisions within a judicial circuit except in 
certain enumerated circumstances, is unnecessary and would 
impair the flexibility needed in administrative and litigation 
decisionmaking. Moreover, this section could spawn a whole new 
species of useless litigation. We oppose this provision for 
essentially the same reasons that former Solicitor General Rex 
Lee opposed a similar provision in 1984, which the Congress 
declined to enact. A copy of former Solicitor General Lee's 
letter to the then-Chairman of the Senate Committee on Finance 
is enclosed.
    Agency nonacquiescence is uncommon. Federal agencies 
generally act in accordance with legal principles announced in 
the holdings of appellate courts, except where 
extraordinarycircumstances warrant continued litigation of a legal 
issue previously decided.
    There are already significant checks that work quite well 
to prevent agencies from unreasonably refusing to acquiesce in 
circuit precedent. The principal check, of course, is that an 
adverse court of appeals' decision is generally a reliable 
indicator of how future cases in the same circuit will be 
decided; except where there is a point in relitigating, 
agencies have an obvious incentive to follow applicable 
precedent. Additional checks include the requirement of 
Solicitor General approval to appeal any subsequent case in 
that circuit to the court of appeals, the Equal Access to 
Justice Act's authorization of attorney's fees against the 
government to the prevailing party unless the agency's position 
was ``substantially justified,'' and the Justice Department's 
desire to maintain its credibility before the courts by not 
needlessly challenging circuit precedent.
    We assume that the bill is not intended to require an 
agency to acquiesce in a circuit decision until after the time 
for the Solicitor General to seek Supreme Court review has 
expired, and the decision has therefore become final. But even 
if that problem is put to one side, the proposed legislation, 
if enacted, would unduly interfere with administrative and 
litigation decisionmaking that is necessarily discretionary and 
highly context-specific. The practical result would be to 
require the government to consider seeking Supreme Court review 
in cases in which the Solicitor General would otherwise forego 
further review. The bill would force an agency to choose 
between seeking further review of an adverse decision or 
acquiescing in that decision in situations in which the former 
is effectively unavailable and yet the latter is not 
necessarily appropriate. A statutory restriction of 
nonacquiescence to a few enumerated circumstances would be ill-
advised because there are various--albeit infrequent--
situations in which it may be entirely reasonable for the 
agency to persist in its position and seek to relitigate the 
issue.
    To the extent that it would allow some form of judicial 
review of an agency's alleged failure to acquiesce, the 
proposed legislation stands to create a whole new category of 
litigation and, for that reason alone, is troubling. In many 
instances, court of appeals' decisions are ambiguous, and the 
precise extent of a court's actual holding may be unclear, 
especially with respect to cases involving different facts. The 
legislation could generate separate proceedings, even trials, 
on that and other issues--for example, on whether the prior 
decision was really substantially favorable to the government, 
or on whether it is reasonable to question the continued 
validity of that precedent. The enormous costs and burdens 
aside, it seems essentially pointless to invite premature and 
abstract litigation concerning the appropriateness of the 
agency's nonacquiescence and efforts to relitigate, as opposed 
to litigation concerning the substantive agency policy that is 
alleged to be inconsistent with circuit precedent and the 
merits of the underlying claims.

                                   II

    Proposed 5 U.S.C. Sec. 708, which would require government 
officers to ensure that the United States not engage in 
``unnecessarily repetitive litigation'' by continuing to 
litigate an issue of law that has been resolved against the 
government by three or more courts of appeals, is also 
unnecessary as a practical matter, and could inhibit the 
Solicitor General in protecting the interests of the United 
States.
    Where the government has lost a legal issue in three 
circuits, the Solicitor General only rarely permits a fourth 
appellate test of the issue. While section 708 would not impose 
an inflexible barrier, it could inhibit the Solicitor General 
from seeking a circuit conflict in exceptionally important 
cases in which the government had suffered adverse decisions in 
three courts of appeals.
    In nearly every Term, the Supreme Court issues a decision 
rejecting rulings of three or more courts of appeals. Since the 
Supreme Court is open to revisiting issues that seemed settled 
in the courts of appeals, the Solicitor General should have the 
discretion, where the stakes are important enough, to continue 
to seek a conflict and thus to facilitate Supreme Court review 
of decisions harmful to the United States.
    The Department therefore strongly opposes both proposed 5 
U.S.C. Sec. Sec. 707 and 708. The Office of Management and 
Budget has advised that there is no objection from the 
standpoint of the Administration's program to the presentation 
of this report. Please feel free to call upon us if we may be 
of assistance in connection with this or any other matter.
            Sincerely,
                                               Andrew Fois,
                                        Assistant Attorney General.
                                ------                                

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

              h.r. 1544, the federal agency compliance act

    Dear Congressman Gekas: I appreciate this opportunity to 
express may concerns, as the General Counsel of the Securities 
and Exchange Commission, regarding the Federal Agency 
Compliance Act, H.R. 1544. I recognize that this bill has 
already been marked up in the House Committee on the Judiciary, 
but I hope that there may still be an opportunity to modify the 
proposed legislation as the legislative process moves forward.
    I understand and support the core purpose of H.R. 1544--to 
rein in federal agencies that deliberately refuse to follow 
existing precedents of U.S. Courts of Appeals (called ``agency 
nonacquiescence''). I assure you that the Commission, an 
independent regulatory agency, does not engage in such a 
practice. In fact, the Commission is careful to follow 
applicable appellate precedent in all of its litigation and 
administrative decisions.
    I am concerned, however, that H.R. 1544 makes other 
fundamental changes in the current system of judicial review of 
agency cases that will significantly impair the Commission's 
ability to fulfill its congressional mandate to protect 
investors and preserve the integrity of the nation's securities 
markets.
    There are several troublesome aspects of the bill. As 
explained below, these give rise to serious problems for the 
Commission, including the potential that H.R. 1544 could 
foreclose the Commission from asserting important but 
controversial legal theories because those theories have been 
rejected by three appellate courts, without the benefit of the 
Commission's expertise, in cases in which the Commission was 
not a party and did not participate. Moreover, adverse 
decisions by three courts of appeals could preclude the 
Commission from a legal theory even if a majority of appellate 
courts endorsed it. The recent history of the 
``misappropriation'' theory of insider trading, which is 
discussed more fully below, and which the Commission has used 
in some of its most significant securitiesfraud cases of the 
last fifteen years, illustrates the potential for unintended adverse 
consequences.

H.R. 1544 could foreclose the Commission from challenging ill-reasoned 
        judicial decisions made without the Commission's participation 
        and expertise.

    H.R. 1544 requires federal agency officials to avoid 
litigating questions of law already resolved against the 
government's position in precedents established in three 
appellate circuits, even if a majority of the circuits have 
already endorsed the government's position. Federal securities 
law is made not only in the Commission's civil law enforcement 
litigation but in private securities litigation outside the 
Commission's control and in criminal cases independently 
prosecuted by numerous United States Attorneys' offices around 
the country. H.R. 1544 would bind the Commission by adverse 
decisions in those cases even though the Commission was not a 
party to, or participant in, those cases and even though the 
courts did not have the benefit of the Commission's expertise.
    Even if the portion of the legislation relating to the 
effect of adverse rulings by three courts of appeals were 
limited to government cases, I believe it would still be unwise 
to bind the Commission by precedents in criminal cases. 
Criminal prosecutors must devote their limited resources to 
more than just prosecuting securities law violations and may 
not be as well-equipped as the Commission to deal with the 
complex frontiers of the federal securities laws. Typically, 
the Commission is not involved in criminal prosecutions at the 
trial stage. The Commission may be consulted on an informal 
basis in some cases when the Department of Justice determines 
whether to appeal a criminal securities fraud case. If a 
criminal defendant appeals, however, the Commission may not 
learn about a case until a court of appeals renders its 
decision. As a result, adverse precedents specific to the 
securities laws administered by the Commission may develop 
without the Commission's input.
    Recent judicial developments in the ``misappropriation 
theory'' of insider trading illustrate the potentially adverse 
effects of H.R. 1544 on the evolution of the securities laws. 
Up to 50% of the Commission's insider trading enforcement cases 
rely on the misappropriation theory, and many of our biggest 
cases were brought on that theory, such as SEC v. Drexel 
Burnham Lambert, SEC v. Ivan Boesky, and SEC v. Dennis Levine. 
Beginning in 1981, the Second, Seventh, and Ninth Circuits 
endorsed the theory, but in 1995 the Fourth Circuit rejected it 
in a criminal case. The Commission only became involved in the 
Fourth Circuit case after the adverse decision, when the 
government sought rehearing of the misappropriation issue by 
the full court. Rehearing was denied. The government did not 
seek Supreme Court review because the case was not a compelling 
one on the facts. Subsequently, the Eighth Circuit, following 
the Fourth Circuit's lead, also rejected the misappropriation 
theory in a criminal case, reversing a conviction. The 
government sought Supreme Court review of the Eighth Circuit 
case, because the facts were far more favorable to the 
government. The Supreme Court, fortunately, reversed the Eighth 
Circuit and upheld the misappropriation theory.\1\ But events 
could easily have taken a different turn.\2\
---------------------------------------------------------------------------
    \1\ See U.S. v. O'Hagan, __ U.S.__, 117 S.Ct. 2199, 138 L. Ed. 2d 
721 (June 25, 1997).
    \2\ The facts in the Eighth Circuit might have been less favorable 
for seeking review, for example. In any event, Supreme Court review is 
by no means certain. Indeed, the proposed legislation might make it 
more difficult to obtain Supreme Court review, since the government 
would be more likely to seek review in cases for which it would not 
have sought review before the legislation. Thus, H.R. 1544 would 
dramatically change the calculus for determining whether to seek 
review, with possibly unforeseen results.
---------------------------------------------------------------------------
    If H.R. 1544 had been the law when the Eighth Circuit 
decided against misappropriation, and if the Supreme Court had 
not granted review, the legal theory would have been in 
jeopardy. Another criminal case involving the misappropriation 
theory could have arisen, and the Commission would have been at 
risk of losing an important legal theory: (1) without having 
had the opportunity itself to develop the arguments, and (2) 
even though the entire Second Circuit (sitting en banc) and two 
other courts of appeals had endorsed it.

A minority view could bar the Commission from taking a position 
        actually endorsed by a majority of appellate judges.

    H.R. 1544 bars an agency from taking a position 
``resolved'' unfavorably in ``precedents established'' by three 
courts of appeals, regardless of whether one or two or even six 
or eight other circuits have ruled in favor of the position. 
Thus, it may be possible for a majority of appellate judges who 
address an issue to endorse a government position even while 
three courts of appeals reject it. As illustrated by the 
misappropriation theory example above, the potential that a 
minority view could become binding is not insignificant. The 
Fourth Circuit decision that first rejected the 
misappropriation theory departed from the views of three other 
courts of appeals.\3\ That decision was followed by the Eighth 
Circuit's adverse decision. Even if a majority of the courts of 
appeals had endorsed the misappropriation theory, either before 
or after these two decisions, that majority of appellate courts 
ruling on the issue would not have prevented a minority from 
removing the theory from the Commission's arsenal if just one 
more court had followed the Fourth and Eighth Circuits.
---------------------------------------------------------------------------
    \3\ Actually, only one Fourth Circuit judge was sitting on the 
case. He wrote the opinion, in which the two district court judges 
sitting by designation concurred.
---------------------------------------------------------------------------

The Commission, like other agencies with independent litigating 
        authority, would have special problems complying with H.R. 1544

    The bill requires all government agencies to adhere to 
precedent in a specific circuit unless the government did not 
seek review because the decision was ``otherwise substantially 
favorable'' to the government. This would create significant 
problems for the Commission, and the other agencies with 
independent litigating authority. Where an agency has not 
participated in the decision by another agency not to seek 
review in a particular case, it may be difficult to determine 
the basis for not seeking review. Moreover, what may seem 
substantially favorable to one agency may not seem so to 
another; and it seems inappropriate to bind one agency on an 
issue of importance to it based on another agency's 
determination that an adverse ruling on that issue is not 
important to that other agency.
    This also would curtail the independence of the 
Commission's litigating authority. The Commission would be 
foreclosed from appealing in cases in which another agency has 
declined to appeal for reasons other than that the decision was 
``substantially favorable'' to the government.

H.R. 1544 would promote costly, unnecessary collateral litigation that 
        would consume scarce enforcement resources.

    H.R. 1544 seems to assume that precedent is always clear 
and unambiguous. The precise holding of many judicial 
decisions, however, is not clear, particularly in complex areas 
of the law such as securities regulation. Defendants in 
securities fraud cases often argue for broad readings of 
decisions adverse to the government.4 For this 
reason, the Commission's decision to pursue a case will 
frequently be open to attack under H.R. 1544. Although H.R. 
1544 specifies that federal agencies and officials may not be 
subject to mandamus actions, the legislation would only 
encourage defendants to harass the Commission with claims for 
sanctions and the like for pressing disputed positions 
allegedly in violation of the restrictions of H.R. 1544.
---------------------------------------------------------------------------
    \4\ The Commission, for example, has been repeatedly met with the 
argument that the Supreme Court's decision in Central Bank of Denver, 
N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), 
which held that there is no private right of action for aiding and 
abetting securities fraud, governs in cases having nothing to do with 
aiding and abetting. Defendants contend that Central Bank stands for a 
variety of propositions, such as that the securities laws must be 
construed narrowly and that the purpose of the securities laws to 
protect investors has no bearing in interpreting the statutory text.
---------------------------------------------------------------------------

H.R. 1544 reflects a balancing of interests that may be appropriate for 
        the ``cookie cutter'' litigation of some agencies, but that 
        would be detrimental to the kind of complex enforcement 
        litigation in which the Commission engages

    H.R. 1544 addresses problems that arise in ``cookie 
cutter'' litigation about which the Committee appears 
concerned, where the applicable principle is clear and is 
applied over and over again in administering a benefits 
program. This concern, however, does not apply to an 
enforcement litigation program such as the Commission's, which 
often involves questions about how prior decisions apply in new 
situations, as securities violators, ever-creative, engage in 
new schemes to defraud. The application of antifraud laws to 
new and evolving conduct is important.
    Clearly, the Committee must balance the benefits H.R. 1544 
would provide in resolving the problems of administering a 
benefits program that yields unfair results, against the 
problems H.R. 1544 would create for enforcement litigation 
programs like the Commission's. I recognize that in drafting 
H.R. 1544, the Committee has focused its attention on an area 
that the Committee has determined requires close attention. I 
believe, however, that the Commission's litigation does not 
raise the problems addressed by the legislation, and that 
including the Commission's enforcement litigation within the 
scope of H.R. 1544 would create problems that far outweigh any 
potential benefit of including the Commission's enforcement 
litigation. For this reason, I respectfully request that as the 
bill moves forward, you consider whether appropriate amendments 
can be made to reduce the adverse effects of H.R. 1544 on 
enforcement litigation programs that routinely encounter novel 
issues requiring flexibility in their resolution. As currently 
drafted, H.R. 1544 does not distinguish between enforcement 
litigation to protect the public by stopping and preventing 
violations of law, and other kinds of agency litigation in 
which an agency seeks to apply ``cookie cutter'' principles.
    In sum, I urge you to consider amending H.R. 1544 to avoid 
the problems it would create for the Commission. I would be 
happy to meet with you to discuss further how that might be 
done or to discuss in more detail the Commission's concerns.
            Sincerely,
                                         Richard H. Walker,
                                                   General Counsel.

         Changes in Existing Law Made by the Bill, as Reported

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

                      TITLE 5, UNITED STATES CODE

          * * * * * * *

                     PART I--THE AGENCIES GENERALLY

          * * * * * * *

                       CHAPTER 7--JUDICIAL REVIEW

Sec.
701.  Application; definitions.
     * * * * * * *
707.  Adherence to court of appeals precedent.
708.  Supervision of litigation; limiting unnecessary relitigation of 
          legal issues.
     * * * * * * *

Sec. 707. Adherence to court of appeals precedent

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

Sec. 708. Supervision of litigation; limiting unnecessary relitigation 
                    of legal issues

  (a) In supervising the conduct of litigation, the officers of 
any agency of the United States authorized to conduct 
litigation, including the Department of Justice acting under 
sections 516 and 519 of title 28, United States Code, shall 
ensure that the initiation, defense, and continuation of 
proceedings in the courts of the United States within, or 
subject to the jurisdiction of, a particular judicial circuit 
avoids unnecessarily repetitive litigation on questions of law 
already consistently resolved against the position of the 
United States, or an agency or officer thereof, in precedents 
established by the United States courts of appeals for 3 or 
more other judicial circuits.
  (b) Decisions on whether to initiate, defend, or continue 
litigation for purposes of subsection (a) shall take into 
account, among other relevant factors, the following:
          (1) The effect of intervening changes in pertinent 
        law or the public policy or circumstances on which the 
        established precedents were based.
          (2) Subsequent decisions of the United States Supreme 
        Court or the courts of appeals that previously decided 
        the relevant question of law.
          (3) The extent to which that question of law was 
        fully and adequately litigated in the cases in which 
        the precedents were established.
          (4) The need to conserve judicial and other parties' 
        resources.
  (c) The Attorney General shall report annually to the 
Committees on the Judiciary of the Senate and the House of 
Representatives on the efforts of the Department of Justice and 
other agencies to comply with subsection (a).
  (d) A decision on whether to initiate, defend, or continue 
litigation is not subject to review in a court, by mandamus or 
otherwise, on the grounds that the decision violates subsection 
(a).
          * * * * * * *

                            Dissenting Views

    As a general matter, we agree that agencies should comply 
with circuit court decisions. However, we dissent from H.R. 
1544, the ``Federal Agency Compliance Act,'' because we believe 
it to be an inappropriate means of responding to the perceived 
problem of nonacquiescence.
    In attempting to diminish the instances of nonacquiescence, 
H.R. 1544 would create significant new problems. It would 
indiscriminately reduce the discretionary authority of every 
federal agency to decide when to challenge circuit court 
decisions, not just the agencies that legislative proponents 
claim have abused their discretion. In doing so, H.R. 1544 
would diminish the effectiveness of the agencies that protect 
the rights of our citizens under the labor, civil rights, 
environmental, and other important laws. Moreover, the terms of 
H.R. 1544 are so vague that they will inevitably lead to 
uncertainty and confusion concerning their scope and 
applicability.
    It is for these reasons that the Department of Justice 
opposes H.R. 1544, which would likely lead to a Presidential 
veto if it passes. And it is for these reasons that groups such 
as the AFL-CIO 1 and the Mexican American Legal 
Defense and Educational Fund 2 strongly oppose its 
passage. We join in dissenting from this well intentioned, but 
ultimately misguided legislation.
---------------------------------------------------------------------------
    \1\ Letter from Peggy Taylor, Director for Dept. of Legislation, 
American Federation of Labor and Congress of Industrial Organizations 
(Oct. 27, 1997) [hereinafter AFL-CIO Letter].
    \2\ Letter from Antonia Hernandez, President and General Counsel of 
Mexican American Legal Defense and Educational Fund, to the Hon. Henry 
J. Hyde, Chairman, Committee on the Judiciary (Nov. 3, 1997) 
[hereinafter MALDEF Letter].
---------------------------------------------------------------------------

                         summary of legislation

    H.R. 1544 attempts to curb the perceived problem of 
``intracircuit nonacquiescence'' 3 by legislatively 
mandating that federal executive branch agencies adhere to 
precedents of the courts of appeals for disputes which arise 
within a particular circuit.4 The legislation only 
permits an agency to take a contrary position to such precedent 
where: (1) it is not certain whether the issue in question 
``will be subject to review by the court of appeals that 
established that precedent or a court of appeals for another 
circuit;'' (2) the Government did not seek further review of 
the case in which that precedent was established ``because 
neither the United States nor any agency or officer thereof was 
a party to the case'' or ``because the decision establishing 
that precedent was otherwise substantially favorable to the 
Government;'' or (3) ``it is reasonable to question the 
continued validity of that precedent in light of a subsequent 
decision of that court of appeals or the United States Supreme 
Court,'' a subsequent change in the law, or any other 
subsequent change ``in the public policy or circumstances on 
which that precedent was based.'' The bill also permits agency 
adjudicators to determine their own binding interpretations of 
circuit court precedents.5
---------------------------------------------------------------------------
    \3\ Agency failure to comply with circuit court precedent within a 
particular circuit.
    \4\ H.R. 1544, 105th Cong., 1st Sess. (1997) [hereinafter H.R. 
1544].
    \5\ Id. Sec. 2.
---------------------------------------------------------------------------
    H.R. 1544 addresses the perceived problem of ``intercircuit 
nonacquiescence'' 6 by requiring federal agencies to 
comply with precedents established by the courts of appeals in 
three or more judicial circuits for disputes which arise 
outside of those circuits. In determining whether to challenge 
such precedents, the agency is required to consider (1) ``the 
effect of intervening changes in pertinent law or the public 
policy'' or other changes in circumstances; (2) ``subsequent 
decisions of the United States Supreme Court or the courts of 
appeals that previously decided the relevant question of law;'' 
(3) ``the extent to which that question of law was fully and 
adequately litigated'' when the precedents were established; 
and (4) ``the need to conserve judicial and other parties' 
resources.'' 7
---------------------------------------------------------------------------
    \6\ Agency failure to adhere to precedents outside a particular 
circuit.
    \7\ H.R. 1544, supra n. 4 Sec. 3.
---------------------------------------------------------------------------

I. H.R. 1544 is unnecessary

    In our view, H.R. 1544 is a ``solution in search of a 
problem.'' The Department of Justice testified that except 
where extraordinary circumstances warrant continued litigation 
of a legal issue previously decided, federal agencies follow 
the holding of the circuit courts of appeals. 8 
Congressional intervention is particularly unnecessary with 
respect to the many agencies that depend on the Justice 
Department for their federal court litigation 9 due 
to the appellate restrictions already imposed on them by the 
Solicitor General's office. As Deputy Assistant Attorney 
General Preston explained:
---------------------------------------------------------------------------
    \8\ See Hearing on H.R. 1544, Proposing The Federal Agency 
Compliance Act Before the Subcomm. on Commercial and Administrative Law 
of the House Comm. on the Judiciary, 105th Cong., 1st Sess. (May 22, 
1997) (forthcoming) [hereinafter 1997 House Judiciary Hearings] 
(statement of Stephen W. Preston at 1).
    \9\ 28 U.S.C. Sec. 516 (1993) (except as otherwise authorized by 
law, the conduct of litigation in which an agency is a party is 
reserved to the Department of Justice).

          In cases within the litigation authority of the 
        Department of Justice, the Solicitor General must 
        approve any appeal to a court of appeals. 28 C.F.R. 
        0.20. Where the government has lost a legal issue in 
        three circuits, an agency would ordinarily have an 
        uphill battle in persuading the Solicitor General to 
        authorize an appeal to still another circuit. The 
        appeal authorization process is a rigorous one, and it 
        is an unusual legal issue or set of circumstances that 
        would prompt the Solicitor General to permit a fourth 
        appellate test. 10
---------------------------------------------------------------------------
    \10\ See 1997 House Judiciary Hearings, supra n. 8 (statement of 
Stephen W. Preston at 7).

Agencies are also hesitant to challenge court precedent because 
they face the possibility of paying other parties' attorneys 
fees under the Equal Access to Justice Act if it is determined 
that the government position was not ``substantially 
justified.'' 11
---------------------------------------------------------------------------
    \11\ 28 U.S.C. Sec. 2412(d)(1)(A) (1994) (except as otherwise 
specifically provided by statute, a court shall award to a prevailing 
party in any civil action, other than the United States, fees and other 
expenses incurred by the party unless the court finds that the position 
of the United States was substantially justified or that special 
circumstances make an award unjust).

    The Social Security Administration (``SSA'') is the agency 
that was criticized most frequently at the hearing on H.R. 1544 
before the Subcommittee on Commercial and Administrative Law. 
12 SSA, however, has taken several actions to 
ameliorate the problem of nonacquiescence. Prior to June of 
1985, when a circuit court decision was inconsistent with SSA's 
interpretation of the law and regulations, their practice was 
to apply the decision only to the named litigants in that 
particular case. In June of 1985, however, SSA announced a new 
policy wherein they would apply such circuit court decisions at 
the hearings level, following an acquiescence ruling, in 
adjudicating claims in the circuit.13 In 1990, SSA 
went even further adopting an explicit rule requiring such 
intracircuit acquiescence.14 As recently as 
September 18, 1997, SSA responded to concern that it 
occasionally takes too long to issue its acquiescence rulings 
by publishing a proposed regulation requiring it to offer 
litigants preliminary guidance within 10 days and requiring it 
either to appeal the circuit court decision or to adopt an 
appropriate acquiescence ruling within 120 days. In addition to 
publishing acquiescence rulings when they are issued, SSA will 
be required to identify and notify individuals whose cases may 
be affected by them.15
---------------------------------------------------------------------------
    \12\ See 1997 House Judiciary Hearings, supra n. 8, transcript at 
17, 22-23, 45-46, 75-76, 83, 86-92, 99-100, 102, and 106.
    \13\ See 1997 House Judiciary Hearings, supra n. 8 (statement of 
Arthur J. Fried, General Counsel, Social Security Administration at 2).
    \14\ 20 C.F.R. Sec. 404.985 a-c (1990) (SSA will apply a holding 
from a federal circuit court which conflicts with SSA legal 
interpretations, and publish an acquiescence ruling, unless SSA seeks 
further review or decides to relitigate the issue despite an 
acquiescence ruling after consulting the Department of Justice).
    \15\ 20 C.F.R. Sec. 416.1485 (1997).
---------------------------------------------------------------------------

II. H.R. 1544's categorical restrictions diminish needed discretion

    H.R. 1544's narrowing of agency discretion over whether to 
challenge circuit court precedents would have a number of 
adverse policy consequences. As noted above, H.R. 1544 provides 
only three exceptions to the intracircuit acquiescence 
rule.16 It omits a number of other justifiable 
exceptions--such as cases including two alternative holdings 
(only one of which the agency likes) or cases involving 
litigation fact patterns which do not lend themselves to 
Supreme Court review (e.g., cases involving sympathetic parties 
violating important laws). The net result will be to unduly 
hamstring the government in developing its litigation 
strategies.
---------------------------------------------------------------------------
    \16\ H.R. 1544, supra n. 4, Sec. 2 ((I) it is not certain whether 
the issue will be subject to review by the court of appeals that 
established the precedent; (II) the government did not seek further 
review of the case in which the precedent was established because it 
was not a party to that case or the decision was otherwise 
substantially favorable; and (III) it is reasonable to question the 
continued validity of the precedent).
---------------------------------------------------------------------------
    This is one of the principal reasons why initiatives of 
this nature have been opposed on a bipartisan basis. Rex Lee, 
Solicitor General under President Reagan, argued that a similar 
1984 bill 17 ``represents an unprecedented 
interference with the ability of the Justice Department to 
determine the cases it will appeal.'' 18 Similarly, 
in their recent testimony opposing H.R. 1544, the Clinton 
Justice Department explained that the bill would significantly 
undermine ``the Solicitor General's role in carefully screening 
cases in which to seek Supreme Court review, and in 
implementing the government's litigation and substantive 
policies in doing so.'' 19
---------------------------------------------------------------------------
    \17\ Congress previously sought to address this matter with 
reference to SSA in 1984, during proceedings leading up to the 
enactment of the Social Security Disability Benefits Reform Act, Pub. 
L. No. 98-460, 98 Stat. 1794. Prior to enactment of the final 
legislation, the House passed a bill that would have required the SSA 
to acquiesce to circuit court precedent in social security disability 
benefits cases unless it sought Supreme Court review. See H.R. Rep. 98-
618, 98th Cong., 2d Sess. 22-26 (1984). The Senate bill did not contain 
such a provision; instead it would have required the SSA to publish a 
notice of nonacquiescence whenever it determined not to acquiesce. See 
S. Rep. 98-466, 98th Cong., 2d Sess. 21 (1984). Congress ultimately 
declined to include any provision on nonacquiescence in the Act as 
finally passed. Rather than impose statutory restrictions on 
nonacquiescence in the 1984 legislation, the conferees urged SSA to 
change its policy of nonacquiescence. See H.R. Conf. Rep. No. 1039, 
98th Cong., 2d Sess. 37, (1984).
    \18\ 130 Cong. Rec. S11454 (1984) (Letter by Rex Lee, Solicitor 
General, to Hon. Robert Dole).
    \19\ 1997 House Judiciary Hearings, supra n. 8 (statement of 
Stephen W. Preston at 4).
---------------------------------------------------------------------------
    Preserving the litigation prerogatives of our agencies is 
an important function of separation of powers and helps foster 
development of the case law. For example, in United States v. 
Mendoza,20 a unanimous Supreme Court held that the 
government could not be foreclosed from relitigating a legal 
issue it had previously litigated unsuccessfully in another 
action against a different party, even within the same judicial 
circuit:
---------------------------------------------------------------------------
    \20\ 464 U.S. 154 (1984).

          Government litigation frequently involves legal 
        questions of substantial public importance; indeed, 
        because the proscriptions of the United States 
        Constitution are so generally directed at governmental 
        action many constitutional questions can arise only in 
        the context of litigation to which the government is a 
        party. Because of those facts the government is more 
        likely than any private party to be involved in 
        lawsuits against different parties which nonetheless 
        involve the same legal issues. A rule allowing 
        nonmutual collateral estoppel against the government in 
        such cases could substantially thwart the development 
        of important questions of law by freezing the first 
        final decision rendered on a particular legal issue. 
        Allowing only one final adjudication would deprive this 
        Court of the benefit it receives from permitting 
        several courts of appeals to explore a difficult 
        question before this Court grants 
        certiorari.21
---------------------------------------------------------------------------
    \21\ Id. at 160.

    It is particularly important to recognize that all of the 
federal agencies are unique in some respects and therefore that 
the categorical prohibitions of H.R. 1544 would affect each 
agency differently. Richard H. Walker, the General Counsel of 
the Securities and Exchange Commission, highlighted the 
---------------------------------------------------------------------------
problems that his agency would face under the bill:

          H.R. 1544 addresses problems that arise in ``cookie 
        cutter'' litigation about which the Committee appears 
        concerned, where the applicable principle is clear and 
        is applied over and over again in administering a 
        benefits program. This concern, however, does not apply 
        to an enforcement litigation program such as the 
        Commission's, which often involves questions about how 
        prior decisions apply in new situations, as securities 
        violators, ever-creative, engage in new schemes to 
        defraud. The application of antifraud laws to new and 
        evolving conduct is important.22
---------------------------------------------------------------------------
    \22\  Letter from Richard H. Walker, General Counsel, United States 
Securities and Exchange Commission, to the Hon. Barney Frank (Oct. 16, 
1997) [hereinafter SEC Letter].

The SEC went on to explain how acquiescence rules could prove 
to be particularly damaging to them since they do not have the 
opportunity to challenge adverse precedents in criminal cases 
23 which can have an adverse impact on the SEC's 
ability to bring civil cases.24 A number of the 
independent agencies will face this same inequity under the 
bill--they will find themselves hamstrung by circuit court 
precedent litigated by the Justice Department, but which the 
agency had no part in crafting. This is a serious flaw in H.R. 
1544.
---------------------------------------------------------------------------
    \23\ The Justice Department has criminal jurisdiction over the 
securities laws.
    \24\ For example, several circuit courts issued adverse precedents 
in criminal cases negating the ``misappropriation theory'' used to 
challenge insider trading before the Supreme Court ultimately adopted 
the SEC's view. See U.S. v. O'Hagan, __ U.S. __, 117 S.Ct. 2199, 138 
L.Ed. 2271 (June 25, 1997).
---------------------------------------------------------------------------
    The provision of H.R. 1544 allowing individual agency 
adjudicators to develop their own interpretations of circuit 
court decisions 25 would also create particularly 
serious problems for some agencies. This mandate could allow 
decision makers at the initial and reconsideration levels of 
agency review who do not have any legal training in 
interpreting and applying court decisions to develop binding 
legal decisions.26 For the Social Security 
Administration, this mandate could pave the way for a myriad of 
conflicting legal interpretations. As SSA General Counsel 
Arthur Fried noted:
---------------------------------------------------------------------------
    \25\ H.R. 1544, supra n. 4, Sec. 2.
    \26\ Letter from Arthur J. Fried, General Counsel for Social 
Security Administration, to the Hon. George W. Gekas, Chairman, 
Subcomm. on Commercial and Administrative Law (July 7, 1997) 
[hereinafter Fried Letter].

          If each of SSA's thousands of decision makers were 
        responsible for interpreting circuit court holdings, it 
        could result in conflicting decisions by different 
        decision makers, even within the same circuit. SSA 
        would have no way to ensure uniform application of 
        eligibility standards as required by law, leading to 
        further litigation.27
---------------------------------------------------------------------------
    \27\ See, e.g., 1997 House Judiciary Hearings, supra n. 8 
(statement of Arthur J. Fried at 3).

    Finally, the requirement that an agency generally must 
comply with adverse precedents issued by three circuit courts 
is unduly restrictive. A review of the most recent Supreme 
Court terms reveals that it is not at all unusual for the Court 
to issue a decision rejecting rulings of three or more courts 
of appeals.28 The SEC also has explained how a three 
circuit rule could have had a serious adverse impact on the 
development of securities law and made it more difficult to 
successfully prosecute inside trading 
perpetrators.29
---------------------------------------------------------------------------
    \28\ See, e.g., United States v. Gaudin, 115 S.Ct. 2310 (1995) (in 
affirming Ninth Circuit ruling that materiality of false statement 
under 18 U.S.C. 1001 was jury question, Supreme Court in effect 
rejected the decision of every other circuit to have considered the 
issue, except the Federal Circuit); Central Bank of Denver v. First 
Interstate Bank of Denver, 511 U.S. 164 (1995) (Supreme Court rejected 
private right of action against aiders and abettors under Securities 
Exchange Act, which all 11 courts of appeal to have considered the 
question have recognized); United States v. Texas, 507 U.S. 529 (1993) 
(Supreme Court rejected construction of Debt Collection Act adopted by 
three circuits before circuit conflict arose).
    \29\ See SEC Letter, supra n. 22.
---------------------------------------------------------------------------

III. H.R. 1544 is opened-ended and vague

    Implementation of the provisions in H.R. 1544 would require 
the interpretation of terms that are inherently vague and 
ambiguous in their meaning. Under the legislation, even 
seemingly appropriate exercises of discretion might be subject 
to challenge. For instance, circuit court decisions frequently 
are subject to a variety of legal interpretations. It may not 
be possible to ascertain a decision's true scope and effect 
until an opportunity arises to test it by presenting the same 
court of appeals with a different factual scenario. Rather than 
challenging a precedent, an agency may merely be attempting to 
limit its effect. However, under H.R. 1544, such a legitimate 
strategy could be subject to challenge as violating the new 
acquiescence rules.
    In addition, the exceptions in the bill which allow an 
agency to challenge precedents are inherently subjective. In 
deciding whether to take a position at variance with 
intracircuit precedent, the agency must make determinations 
such as whether the government did not seek further review of 
the case because the precedent was ``otherwise substantially 
favorable.'' Another subjective exception would require the 
agency to determine whether ``it is reasonable to question the 
continued validity of that precedent.'' 30 The 
exceptions that apply to intercircuit precedents present 
similar problems. Here the agency must consider such open-ended 
factors as ``the effect of intervening changes'' in law and 
policy, ``the extent to which that question of law was fully 
and adequately litigated,'' and ``the need to conserve judicial 
and other parties' resources.'' 31
---------------------------------------------------------------------------
    \30\ H.R. 1544, supra n. 4, Sec. 3.
    \31\ Id.
---------------------------------------------------------------------------
    Accordingly, the enactment of H.R. 1544 ultimately could 
create a whole new category of litigation. This would result in 
wasteful preliminary litigation over whether a case can 
proceed, in addition to litigation over the substance of the 
dispute. This type of collateral litigation is costly; it 
consumes scarce enforcement resources; and it can create the 
very type of delay that H.R. 1544 is intended to avoid.

IV. H.R 1544 will harm enforcement of the labor and environmental laws 
        and the civil rights laws

    Perhaps most seriously, we oppose H.R. 1544 because of the 
adverse consequences it will have on the ability of government 
agencies to protect our citizens'' rights under important laws 
concerning labor, employment, workplace safety, civil rights, 
and the environment, to name but a few.
    H.R. 1544 will force agencies such as the National Labor 
Relations Board, the Department of Labor, the Occupational 
Safety and Health Administration, the Equal Employment 
Opportunity Commission, the Justice Department Civil Rights 
Division, the Environmental Protection Agency, and the Bureau 
of Land Management to litigate from a disadvantageous position. 
Unlike the well-funded interests the government frequently 
opposes in court, under the bill, the agencies will face 
complex new legal constraints when they determine which cases 
to appeal. To the extent this translates into less capable 
enforcement of these important laws, we will all be 
disadvantaged.
    It is for these reasons, among others, that the AFL-CIO has 
taken a position strongly opposing H.R. 1544, writing:

          The AFL-CIO is particularly concerned about how this 
        bill would affect agencies that enforce labor and 
        employment laws. Although the text of the bill does not 
        single out any particular federal agency, the National 
        Labor Relations Board (NLRB) has come under severe 
        attack in this Congress. This bill would prevent 
        agencies with jurisdiction over labor matters from 
        properly enforcing the labor and employment 
        laws.32
---------------------------------------------------------------------------
    \32\ AFL-CIO Letter, supra n. 1.

    The same concerns lie with civil rights enforcement. At the 
Subcommittee markup, Rep. Jackson-Lee singled out her concern 
for the adverse impact H.R. 1544 would have in this critical 
---------------------------------------------------------------------------
legal area:

          The bottom line is how would a legislative initiative 
        of this kind limit the ability of federal entities to 
        address the systematic encroachment of the judicial 
        branch upon the civil liberties of the average citizen. 
        Particularly, the Department of Justice (its Civil 
        Rights Division) and the Civil Rights Divisions of 
        various federal agencies (e.g. The Department of Health 
        and Human Services), would be my primary focus in this 
        categorical objection to the language of H.R. 1544. The 
        limitation on these agencies' ability to appeal 
        seemingly unjust circuit court decisions to the Supreme 
        Court (i.e. autonomy of relitigation) in addition to 
        their ability to create novel and ingenious ways of 
        protecting the rights of citizens, is a sacred craft 
        that should be regulated only with the highest and most 
        hesitant level of scrutiny. We must do all we can to 
        ensure efficient and effective government, but not at 
        the expense of our civil rights and 
        liberties.33
---------------------------------------------------------------------------
    \33\ Markup of H.R. 1544, The Federal Agency Compliance Act, Before 
the Subcomm. on Commercial and Administrative Law of the House Comm. on 
the Judiciary, 105th Cong., 1st Sess. (July 24, 1997) (statement of 
Rep. Jackson-Lee).

    Similarly, the Mexican American Legal Defense and 
Educational Fund, a staunch defender of civil rights, has taken 
---------------------------------------------------------------------------
a position against H.R. 1544, noting, among other things,

           * * * [b]y limiting each agency's discretion in 
        determining the cases it will appeal, agencies such as 
        the U.S. Department of Justice and the Social Security 
        Administration can only do less to adequately and 
        legally interpret and pursue particular cases deemed to 
        be significant in determining substantive policy. 
        34
---------------------------------------------------------------------------
    \34\ MALDEF Letter, supra n. 2 (emphasis added).

    H.R. 1544 would also hamstring enforcement of a range of 
laws designed to protect the environment. This is why the EPA 
concurred with the Department of Justice in opposing the 
legislation. In introducing the Senate counterpart legislation 
to H.R. 1544 (S. 1166), Senator Campbell (R-CO), telegraphed 
his intention of limiting the ability of the Bureau of Land 
---------------------------------------------------------------------------
Management to protect federal lands from grazing damage:

          When the Bureau of Land Management recently proposed 
        reform regulations for grazing permits, ranchers 
        challenged the new provisions. After exhausting all 
        administrative remedies, the ranchers took their case 
        to court. Following lengthy and costly litigation, the 
        appellate court ruled in favor of the ranchers. 
        However, under the nonacquiescence policy, the BLM 
        could refuse to abide by this ruling each and every 
        time this issue arises. 35
---------------------------------------------------------------------------
    \35\ 143 Cong. Rec. S9211 (daily ed. Sept. 11, 1997) (statement of 
Sen. Campbell).

    We are aware that some would argue that the fact that under 
the bill agencies would be constrained in developing their 
litigation strategies could be a positive or negative 
development, depending on the political orientation of the 
Administration. In our view, however, this argument ignores the 
fact that by and large agencies are in the posture of seeking 
to enforce laws designed to protect our workplace safety, civil 
rights, and environmental safeguards against culpable parties. 
If an agency chooses not to protect these rights, it doesn't 
need the ``cover'' of acquiescence requirements such as those 
set forth in H.R. 1544--the agency can simply exercise its 
discretion not to bring particular enforcement actions. It is 
only those agencies who desire to enforce these laws against 
recalcitrant interests which will face new difficulties under 
H.R. 1544. We therefore reject the assertion that H.R. 1544 
will have a neutral impact on both pro- and anti-enforcement 
Administrations.

                               conclusion

    In our view, supporters of H.R. 1544 have not established 
that abusive nonacquiescence exists on a sufficiently wide-
spread basis to justify legislation limiting the litigation 
authority of every agency in the government. In an effort to 
assist people who are having difficulty enforcing their own 
individual rights, H.R. 1544 would reduce the effectiveness of 
the agencies that are charged with the responsibility of 
protecting the rights of our citizens as a whole, including 
critical safeguards concerning employment rights, civil rights, 
and the environment.
    We believe that on the rare occasions when dangerous legal 
precedents are written--such as Dredd Scott v. Sanford (denying 
slaves constitutional rights), 36 Plessy v. Ferguson 
(upholding ``separate but equal'' facilities), 37 
and Korematsu v. United States (Japanese-American interment 
upheld) 38--our agencies should have unfettered 
discretion to challenge them. Accordingly, we dissent from this 
legislation.
---------------------------------------------------------------------------
    \36\ 60 U.S. 393 (1856).
    \37\ 163 U.S. 537 (1896).
    \38\ 324 U.S. 885 (1944).
---------------------------------------------------------------------------
                                   John Conyers, Jr.
                                   Maxine Waters.
                                   Rick Boucher.
                                   Sheila Jackson Lee.