Glen Ridge I Condominiums, Ltd. v. Federal Savings & Loan Insurance Corp.

provides which “no court AKIN, ... Before DEVANY and SCALES, powers restrain or affect the exercise of JJ.

functions of a The trial court receiver.” agreed and dismissed the suit. Glen ON MOTION FOR REHEARING appeal asserts in section vio- that this AKIN, Justice. separat- lates the constitutional scheme of ed to the extent that it vests exclu- dispositive appeal The-issue of this power sive administrative may, consistent with constitution, the third adjudicate article of the federal created state common preclude litigants judicial from “re- law without the consent of the branch plurality opinion identified under the The court’s

subject only appellate review legislative Act. categories federal Administrative Procedure courts which three parts of the federal validly could exercise Ad- Prohibits FSLIC the territorial judicial power. These were judication courts-martial, courts,1 courts or ad- III, section of the Constitution Article pub- agencies adjudicate ministrative provides: of the United States 64-67, 102 rights. lic 458 U.S. at judicial power of the United clearly Bankruptcy courts were 2867-69. in such inferior courts shall be vested ... nor courts-martial. neither territorial courts Congress may from time to time as the Thus, squarely faced with the court was Judges ... ordain and establish. bankruptcy courts question of whether during good Be- shall hold their offices concerning pub- questions only adjudicated times, havior, shall, at stated receive rights. lic Services, Compensation, which for their during their shall not be diminished Con- arise, minimum, at a be- Public tinuance in Office. government persons subject and tween the system As an element of the constitutional authority a result of constitutional to its as balances, provisions of checks these legislative provisions typically and are or designed give judges maxi were exercise of found in connection with the independence mum from the executive or granted by constitu- congressional power government. legislative branches concerning interstate provisions tional 11, 16, Quarles, 350 U.S. United States v. commerce, taxation, immigration, foreign 1, 5, (1955). 76 S.Ct. 100 L.Ed. 8 These lands, health, public post the public the provisions produced confusion and have office, veterans, and debts of customs controversy, fully and have never been de 68, 70, at agents. 102 S.Ct. Zdanok, fined. 370 Company Glidden 22, 51, 2871; Benson, 285 U.S. Crowell 1459, 1463, 8 L.Ed.2d U.S. S.Ct. 292, (1932). 285, Oth- 76 L.Ed. 598 S.Ct. (1962); Redish, Courts, Legislative see congressional- public rights derive from er Agencies, and the North Administrative benefits, such as the restructur- ly-created Decision, Pipeline ern 1983 Duke L.J. ing relationships, radio of debtor-creditor (1982); see also 1616 Reminc Limited licenses, licenses, pilot and certifica- station Compa Partnership v. Atchison & Keller 71, carriers. 458 U.S. at tions for common (4th Cir.1983). ny, 704 F.2d We rights contrast at 2871. Public have, however, guidance in deci found two private rights as such state-created with Supreme sions of the United States Court. damages. 458 right contract to recover In Pipeline Northern Co. Construction 71-72, at 2871-72. U.S. at Pipeline Company, Marathon Pipe- plurality decided that Northern The (1982), L.Ed.2d 598 50. damages right contract line’s to recover bankrupt sued Mara- public right, but from Marathon was not a bankruptcy thon court for breach adjudicated must private right a contract, warranty, misrepre- breach of Rehnquist’s III Justice an article court. sentation, coercion, Marathon and duress. sought that the lawsuit concurrence stated ground moved for dismissal on the tradi- which were recovery under counts unconstitutionally Bankruptcy Act of 1978 common law and tionally actions at judicial power upon III conferred article Marathon’s adjudicated over could not be bankruptcy judges the life ten- who lacked tribunal. objection by a non-article salary protections ure of article III. Bankruptcy opinions held that Both Marathon Supreme agreed Act, grant jurisdiction of purporting rejected government’s contention courts, bankruptcy such actions to I with suffi- that article endowed 458 U.S. at unconstitutional. bankruptcy court’s authority cient for the 2874, 2880-81. claims. 102 S.Ct. at Pipeline’s of Northern the District of Columbia. states and Courts for territories outside the Products, Co., Agricultural contends that the issues in this public right liquidate lawsuit concern its 87 L.Ed.2d 409 Empire’s thereby recoup assets and Supreme United States Court there held payments deposi- insurance it has made to prohibit Congress that article III did not Empire. tors of This contention overlooks granting body juris- a non-article III that, though government the fact even disputes among participants diction over currently party, rights the substantive pesticide registration program, conducted private parties. at issue arose between two Agency the Environmental Portection Furthermore, rights in is- the substantive Insecticide, pursuant Fungi- sue here arose out of transactions conduct- cide and Rodenticide Act. 105 S.Ct. at according ed and not out of state law Act, 3328. Under the manufacturers were legislative provisions gov- constitutional or required to research data for EPA submit erning FSLIC. registration. review Manufacturers before FSLIC, of a state-chartered receiver pesticides previously similar to those savings right liquidate and loan has the registered were to use research allowed 1729(b)(1), assets. 12 latter’s U.S.C. §§ filed, previously provid- data that had been (c)(1); 1464(d)(ll). regulations FHLBB reg- they compensated ed that provide only “exercise all Disputes istrant for such use. over the institution of such ... to, compensation amount referred were including arising] any under ... ... [those than arti- by, and decided arbitrators rather 569(a)(6). deed of trust.” 12 This C.F.R. § cle III courts. regulation provides FSLIC with no other that, arising Thomas, different than those under the Court noted al- law, by Empire state and under obtained private though dispute the was between rights the deeds of trust. These had al- parties, it from scheme that consti- arose a in- ready vested before FSLIC became many the “public tuted a use” and bore Consequently, the did not volved. public right. The Court characteristics of Ridge under arise between FSLIC and Glen dispute pointed also out that the arose law, Empire statutory but between regulatory complex within the confines of a Ridge and the laws of this Glen under scheme and to allocate costs benefits state. pro- in the among voluntary participants Indeed, contest Ridge Glen does not gram highly and technical field concerned a right liquidate val- FSLIC’s to these assets peculiarly specialized suited to administra- thereby recoup idly by Empire, owned Stressing tive action. 105 at 3337-8. it chal- payments, insurance but rather use right participants the of FIFRA that lenges Empire’s validity claims to and the participant’s another trade secrets certain assets. the determination of Since such use right compensation latter’s for governed by state-created these claims are unique only arose in connection with trust, rights in the deeds of this lawsuit regulation, complex scheme of FIFRA right to public does not concern FSLIC’s the court concluded that: tradi- liquidate assets but instead concerns proposition holding is limited to the Our Consequent- tional common law remedies. legisla- Congress, acting for a valid that is ly, jurisdiction over this lawsuit constitution- purpose pursuant to its tive court, only III and the proper in an article I, may create a al under Article III grant to a non-article so right seemingly “private” 1464(d)(6)(c) body by section is unconstitu- regula- public closely integrated into a court, ex- It follows that the state tional. appropri- be a matter tory scheme as to ercing jurisdiction, erred its concurrent limited agency resolution with ate for dismissing the suit. judiciary. by the Article involvement Analysis Does Not Alter Un- Thomas at 3340. constitutionality right to collect and FSLIC that its by supported This conclusion is further savings and loan of a failed liquidate assets holding in Thomas v. Union Carbide closely integrated already are so into the FHLBB edies by Ridge held Empire Glen appro- regulatory scheme as to be a matter under Texas regulations law. FHLBB con- priate agency for resolution limited cerning dispute with Ridge with Glen fall by the III judiciary. involvement article short of unique, complex, highly Likewise, right contends that the regulatory technical scheme that underlies Ridge enjoin Thus, foreclosure and re- Thomas. none of here underlying scind appropriate debts is closely integrated are so into agency for resolution because FSLIC’s FHLBB regulatory process they process integral part claims-resolution is an appropriate only resolution with recoupment payments of its of insurance limited the judiciary. involvement savings from debtors of the failed and loan. Interpretation Northern dispute Because resolution of the between Thomas and FSLIC occurs outside the discussing Pipeline, regulatory basic fabric of the FHLBB Thomas stated: scheme, agree. we cannot holding The Court’s in that case estab- regulations FHLBB complex weave a only lishes may not vest provisions aspects network around most power adju- non-article III court the receiverships. instance, of FSLIC For dicate, judgment, render final and issue Regulations eight Code Federal contains binding orders in a traditional contract pages forty-six of rules and factual exam- arising law, action under state without ples concerning FSLIC determination litigants, subject consent of the deposit claims to insurance. See C.F.R. ordinary appellate review. Similarly, determining the rules for § 105 S.Ct. at 3335. FSLIC contends that its priority third-party creditors of the adjudication of Glen contract savings failed prescribing and loan and III infirmity claims avoids article because respect FSLIC actions underly- judgment FSLIC cannot render final or is- ing debts are extensive. 12 C.F.R. binding sue orders and it subject because 569(a)(7),(8). areas, In these and others § ordinary appellate more than review. such as assumption the sale and of a failed Because action on loan, thrift to savings another FSLIC equivalent judgment to final and because operates complex regulatory a scheme in a subject ordinary ap- FSLIC is to less than highly field, required technical as by the pellate review, agree. we cannot holding. Thomas things may necessary do all regulations governing FSLIC recov- obligations collect owed to the failed thrift. ery of debts held under deeds of trust and 1729(d). 12 may U.S.C. If no court take § recovery defenses to such contrast mark- any dispute arising out of edly comprehensive provisions with the out- collect, efforts to FSLIC action will be self- lined above. All respect that is said with executing. Upon adjudicating Ridge’s Glen recovery such and defenses is: adversely Ridge, claims to Glen section receiver obligations shall collect all [The] 1729(d) sell the allows FSLIC to contested institution, money and due such insured properties any judgment or without final may actions, suits, and ... institute ... binding The sale orders of a court. will or other proceedings exercise ... [and] effectively parties determine title and all rights all and of such institution thereby. Accordingly, the will be bound including power ... any ... under ... final determi- difference between FSLIC’s deed of trust.... adjudicating Ridge’s Glen upon nation 569(a)(6). 12 provisions judgment C.F.R. No set court’s of fore- claims and a § forth guidelines substantive rules or for closure and order of sale will be in name resolving a difference only. claims. Unlike and form Such is insuf- Thomas, regulations give deciding these no for ficient as a basis arti- or they by Ridge, requires remedies to Glen nor do cle III involvement the federal provide Thomas, judiciary. or rem- 105 S.Ct. at 3336. We substitutes for those that, North- purposes applying hold nations are subject to less ordinary than Thomas, ern interpreted by appellate review. adjudication FSLIC’s final determination on judgment is a binding final order. FINALITY OF AGENCY ACTION is subject ordinary appel FSLIC not (cid:127) Arguing required that Glen is review,

late provid but instead the review exhaust administrative remedies before by ed the federal Administrative Procedure seeking judicial review, FSLIC maintains Act is less ordinary appellate than review. that we should defer consideration of this reviewing A may court reverse FSLIC completion case until adjudication of FSLIC if supported is sub step then aside for review a federal stantial evidence. 5 If U.S.C. a § pursuant district court to the federal finding Ad- supported by is substantial evi dence, Procedure Phillips it is final and ministrative Act. Because conclusive. States, Construction Co. v. United 394 FSLIC action the trial court final 834, (Ct.Cl.1986). F.2d agency Substantial evi purposes judicial action for re- dence is a view, narrow standard of review when agree. we cannot contrasted ordinary appellate review. APA, judicial Under the review avail- Vigil v. Department Post Office able from agency final action. 5 U.S.C. States, United 406 F.2d Cir. 704. Whether final action has § 1969). review, ordinary Under appellate occurred is determined pragmatically. Ab- reviewing if reverse a find Gardner, bott Laboratories ing contrary great weight 136, 149, 1507, 1515, 87 S.Ct. 18 L.Ed.2d preponderance of the evidence. United (1967). Finality flexibly is viewed America, States v. Siemans 653 F.2d parties where all are before the court and a denied, (C.C.P.A.1981), cert. judicially legal present- resolvable issue (1982), 71 L.Ed.2d 304 Broadcasting System Columbia ed. Picken-Bond Company Construction 407, 425, Carpenters United Brotherhood L.Ed. America, Joiners Ridco, (8th Cir.1978); accord Inc. v. Sex purposes raising For the crucial ton, (Tex.Civ.App.— 623 S.W.2d concerning constitutionality writ). Likewise, Fort Worth no authority adjudicate FSLIC’s exclusive finding may finding reversed where dispute Ridge, finality its could clearly of fact is erroneous. Fed.R.Civ.P. Ridge’s proceeding occur either from Glen something 52. Substantial evidence is less result, administratively appealing evidence, weight than the and conse proceeding appealing in a court and quently the fact-finder will be sustained jurisdictional grounds. court’s dismissal on weight-of-the-ev less evidence than under a deprivation judicial adjudication Transport idence standard. Refrigerated the same in the either case. We hold that Commission, Co. v. Interstate Commerce grant of FSLIC’s motion to dismiss the 528, (5th Cir.1981). 663 F.2d 531 The sub equivalent state-court action ap stantial evidence standard restricts an agency final action and authorized constitu pellate clearly court more than the errone tional review. Because we have concurrent ous standard and the fact finder ac will federal district courts with the cordingly be sustained on less evidence un concerning of the States violations der evidence standard. substantial Constitution, 241, parte Royal, Ex 117 U.S. Equipment SSIH S.A. United States 247-248, 734, 737-38, 29 L.Ed. 868 Commission, International Trade 718 Ohio, (1886); Snypp State 365, (Fed.Cir.1983). F.2d 382 it is Since denied, 293 535, (6th Cir.1934), cert. more difficult for court appellate an (1934), 79 L.Ed. 663 U.S. agency reverse an under the administrative appeal properly before under of Glen substantial evidence standard than review, ordinary appellate us. FSLIC determi right may adjudicated by THE FEDERAL a LAW AS be non-article

STATE Kimbell, III body. 440 U.S. at RULE OF DECISION S.Ct. at 1457. Pipeline cites Northern FSLIC proposition that non-article Thomas for the When a court must decide whether the III whenever fed- warranted adopt federal rule of decision state law will supplies the rule of decision. Ac- eral law nationally or fashion a uniform federal FSLIC, cording whenever a federal rule, it to the common-law must adhere doctrines to choose applies choice-of-law analysis Supreme of the United States law, rule of decision re- federal a federal Kimbell, 728-730, in at Court controversy, despite possibil- solves the decide S.Ct. at 1459. court must may adopt a state ity that the federal law re- program whether the federal spe- than fashion a common-lawrule rather quires nationally body uniform a law concludes that a cial federal rule. FSLIC bar; applica- deal with the facts at choose federal law as federal court would specific tion of state law would frustrate that, the rule-of-decision this case and objectives program; of the federal and the accordingly, Congress may assign the case application a rule extent to which instead of an article III court. disrupt relationships would commercial agree. We do not predicated on state law. 440 99 S.Ct. at 1458. choosing To hold that the mere act of law under choice-of-law doctrines ability, its as creates a federal rule of decision for article receiver, to collect debts owed to the failed purposes, III where actual substantive savings thereby recoup and loan and law remains the same as the common law FSLIC, money paid depositors out to as state, place would form over sub- insurer, savings to the national is crucial Supreme stance. The Court Thomas and, industry re accordingly, and loan applied stated that article III can be nationally common quires uniform federal on the basis of rather than form. substance Kimbell, agree. law. We cannot Consequently, 105 S.Ct. at 3336. where government similarly argued that a nation the form of the federal rule of decision nec ally uniform federal common law was law, “federal” under but be choice to feder essary applying state law because the actual of the rule of decision substance lending programs their al would undermine rule, remains that of the state ability funds. 440 to recover disbursed require adjudication and Thomas Supreme at 1461. The U.S. at an article tribunal. government’s argu rejected adopted as the federal The conflict between the of Glen ments and state law 733-34, FSLIC, Ridge, private litigant, 440 U.S. at as a rule of decision. federal decisions have of the United involves S.Ct. at 1461. Other arising rejected nationally un- uniform bodies the United States likewise adoption, or application, will of in favor of program der nationwide federal laws that state laws governed by despite of state the fact juridical construct to be law to, and would cause formally inconvenient called “federal law”. United would be Foods, Inc., upon, efforts of varying effects States v. Kimbell agencies to collect L.Ed.2d and its United States loans, (1979); other debts. United Greaney, judgments see Deitrick v. 341, 355, Yazell, 86 S.Ct. 190, 202, 480, 486, 382 U.S. U.S. 60 84 L.Ed. States v. S.Ct. (1966); Royal (1940); Co., 500, 508, 404 see D’Oench, 15 L.Ed.2d 694 Duhme & Inc. States, 313 U.S. Deposit Corporation, Indemnity Co. v. United Insurance 997-98, 296-297, 995, L.Ed. 676, 679, 289, 85 447, 456, 86 61 S.Ct. 315 U.S. 62 S.Ct. McCutcheon, 283 (1941); L.Ed. 956 will be 1361 Custer If this construct 530, 531, 514, 519, 75 L.Ed. specially filled U.S. S.Ct. with federal common law 272, O’Neill, (1931); 106 U.S. Fink v. bridge created to of FSLIC’s the interstices (1882); 325, 327, 275, L.Ed. 196 enabling legislation, resulting public 646, Harpootlian, priority of liens on prop- and the a debtor’s United States (2d Cir.1982). erty presented in situations Yazell outside processes pro- the basic that the federal nationally in uniform The cases which a gram chiefly designed promote was law has been crafted con body of common uniformity compelling. national was not day-to-day that occur on a cern situations workings dispute the intimate in this case does not basis or that involve concern agencies processes chiefly of federal or instrumentalities. those that FSLIC was See, e.g., Greaney, designed promote: payment of insurance Deitrick v. U.S. 190, 191, 480, 481, depositors, ordering priorities 60 S.Ct. 84 L.Ed. 694 to of third- (insider creditors, (1940) dealing by party officer of national sale of a failed thrift under assumption, specific provision purchase liquidation in bank violation Act); Banking unchallenged National United States v. of assets of the failed thrift. 301, Instead, cancelling 332 U.S. it concerns title to as- California, Standard Oil of 306, 1604, 1606-07, preventing 91 sets claimed the thrift and 305- 67 S.Ct. (1947) (subrogation rights exercising Empire’s power from L.Ed. 2067 FSLIC soldier); foreclosure, injuries to which constitute matters out- United States for tort processes chief Allegheny County, 322 side those United States v. 174, 177, 182-183, 908, 913-14, arising function of and situations 64 S.Ct. FSLIC (1944)(state processes taxation of mu after those have broken down. 88 L.Ed. II); nationally body uniform plant during We conclude that a nitions World War Clear applicable common to dis- Trust v. law field (1943) putes between FSLIC and debtors of 87 L.Ed. (issuance savings concerning the government commer failed and loan va- underlying lidity of the title paper). cial debt and required. to assets is not (UAW) International Union v. Hoosier Next, appli- Corporation, 383 U.S. 703- we must determine Cardinal 1107, 1111-13, disputes 192 cation of state law to between 16 L.Ed.2d savings failed (1966), in and debtors of the demonstrates the difference rea- FSLIC validity of the debt would soning and loan over between the cases cited above legislative objectives. nationally specific frustrate adopting those state law. A uni- specific objective of in that a body of common law is crafted FSLIC form all speedy resolution of would was those situations where its absence against thrift because functioning processes claims the failed threaten the of those collec- integral to FSLIC’s program chiefly de- such claims are the federal It concludes liquidation 86 tion and of assets. signed promote. 383 U.S. at dis- to state law on dealing subjecting at 1112. Controversies with objective. provided by puted claims would frustrate bargaining rights collective UAW,rights forged on federal labor law de- calculated to Gleii claims are government paper endorsements of rights. The effect property fend its Trust, purchases of national Clearfield sale defending against seizure and officer of the bank bank stock fundamentally different of assets func- presented issues basic Dietrich more ba- regarding litigation effect of the federal processes tion of those payments Insurance sic FSLIC functions. designed promote program chiefly the collecti- not based on depositors are uniformity. required national of unchal- Sale bility of the thrift’s assets. despite the dis- lenged proceed uniformity assets will national Where the issue of Even challenged assets. position of the which oc- in connection with actions arises sale and price though purchase have broken processes cur after such adjusted, be- to be assumption may need down, uniformity is need for national litigation, the sale ongoing UAW, cause of the compelling. may pro- items majority of the other Consequently, issues deal- S.Ct. at party of third Finally, the claims ceed. judgments in Fink ing recovery of ty creditors performance obligations can satisfied assets not and of in real subject dispute augmented and later estate transactions and to assure that real course, protected prevail. property against should FSLIC Of if the interests are meritorious, challenge nonperformance dishonesty is the asset and of will not obli- gations. subject Participants have been such to distribution and no transactions expect rights. rely upon function of these If a impeded. FSLIC will have been nationally uniform rule of decision proliferation Without some evidence of the parties claims, applied strip is these of such the bene- we cannot hold that claims carefully fit of laws crafted for pro- their of fraud in the initial transaction are suffi- by replacing tection them with federal ciently they impede common that will so FSLIG, rules crafted for benefit of liquidations legisla- toas frustrate relationships commercial in Texas would be objectives. delay adju- tive The incident to severely disrupted.2 We conclude that the dication sup- under state law will tend to convenience to FSLIC a uniform is rule port application rule, of a uniform federal outweighed by disruption of commer- dispositive but will not be of the issue relationships cial would occur if a uni- outweighed by because it is the state’s form supplanted federal rule decision interests in preserving integrity of its state common law. property real laws. part final analysis the Kimbell 1730(k)(l) SECTION DOES NOT requires us to consider extent to which REQUIRE FEDERAL creation application nationally of a uni- COMMON LAW disrupt form federal rule would commercial that, regardless FSLIC contends relationships predicated upon state laws. analysis whether the requires Kimbell The basic dispute right concerns the law, nationally uniform federal section FSLIC to property foreclose on real 1730(k)(l) provides independent founda right Ridge of Glen to defeat such upon tion which an edifice of com foreclosure prop- under various Texas real mon law should be erected. Section erty determining laws. 1730(k)(l) provides: adopt state law as the federal rule of deci- action, suit, (A)ny civil or proceeding to sion, a regard court must due have Corporation party which the shall be a local interest in over prop- control local real shall be deemed to arise under the laws erty, recognize property that real law an States, United the United uniquely province area within the States district courts shall have state, give special consideration to thereof, jurisdiction regard without state real property law. Reconstruction controversy.... the amount in Corporation

Finance County, Beaver [Emphasis 204, 210, 992, 995, 328 U.S. 66 S.Ct. added.] (1946); L.Ed. Davies Warehouse Co. Inc., Citing D’Oench, Co., Duhme and Bowles, 144, 155, U.S. “arising under” (1944); 88 L.Ed. 635 Board Com- language means that federal law necessar- States, missioners v. United so, ily supplies the rule decision. If 285, 288, (1939); 60 S.Ct. 84 L.Ed. 313 body adjudicate. non-article III doWe Sunderland agree language jurisdic- because this 226, 232-233, 64, 65, 69 L.Ed. 259 tional for creation of and not a source federal common law. rights upon “Arising state-created which Glen under” one of several distinct designed promote sues hones- classes of the described in Arti- Experience Deposit In- indicates that creation of federal result indicated here.” invariably Corporation Corpora- common law would be crafted to the surance v. Lattimore Land Cir., D’Oench, FSLIC, tion, 1981). "(T)here benefit of is no F.2d See need to decide 447, 457, FDIC, adopt whether we would & v. state law or fashion a Duhme Co. (1942); uniform FDIC v. First federal standard where the state law 86 L.Ed. 956 (9th Cir.1978). Company, indicates a F.2d 1009 result less National FDIC that favorable 384 III, 2,

ele 1 of the Section clause Constitu- inherently possesses FSLIC asserts that it tion. Chase Manhattan Bank v. South sovereign immunity prohibit which would Development Company, Acres and, therefore, Glen suit when Con- 236, 237, 544, 545, 54 L.Ed.2d 501 gress immunity, waived this it created a 1730(k)(l) Section intended public right Ridge which Glen now asserts. jurisdiction confer of upon that class feder- agree. do not We involving al district for courts all suits agency, federal ex- whether based on the sovereign immunity Waiver of press legislation terms of its or not. Han- purely procedural entirely matter Corporation cock Financial v. Federal sovereign’s distinct from the extent of Savings and Loan Corpora- Insurance liability. Mitchell, v. 445 United States tion, 1325, (9th Cir.1974) 492 F.2d 1328 1352, 1349, 63 (1730(k)(l) grant origi- was intended as a of (1980); Chaloux, L.Ed.2d 607 v. 288 Boyer courts); jurisdiction nal to district see De- (N.D.N.Y., F.Supp. 366, 1968); 370 Univer Vilbiss Small Business Administra- sity Kentucky Guynn, 372 S.W.2d tion, (sim- (8th Cir.1981) 718 (Ky.1963); 416 Berger v. State Con language ilar 28of 1331 is “mere- U.S.C. § necticut, (Conn.1957); 130 S.2d 295 ly jurisdictional.”) Commercial Standard Fire and Marine D’Oench, enabling legislation Insurance, v. Commissioner 429 Co. provision FDIC included a identical (Tex.Civ.App. S.W.2d 935 —Austin 1730(k)(l) which stated that suits to “[a]ll 1968, writ); no County, Nueces Texas Corporation party which the be a shall shall B., (S.D. Nellie 174 F.Supp. be deemed to arise under laws of the Tex.1959); City Newark v. United 264(j). United States.” U.S.C. § (D.N.J., F.Supp. 1957). Af concurring in opinion argued that D’Oench sovereign sued, ter has consented to be merely jurisdictional 264(j) section was not liability its is based on the substantive law and that the Court should decide whether applied private City citizens. New that section freed the all FDIC ark, 174 F.Supp. at 921. litigation to “make its own law from mate- Ridge against defends fore- Glen law,” rials found in the common atU.S. upon principles closure of the substantive majority at 684. The S.Ct. law Texas. The mere waiver of sover- D’Oench declined hold that this section eign immunity Congress does not alter alone was a sufficient basis for creation of Accordingly, principles. rights these 455-456, federal common law. Ridge thereby public are not made 678-79. We conclude from adjudi- rights. An article III must 1730(k)(l) that statutes D’Oench such § private rights. cate these merely confers not and does mandate that federal common law cre- be every involving suit

ated the adminis- OF OF IMMU- CONDITIONS WAIVER 1730(k)(l) agency. Consequently, trative § NITY MAY BE UNCONSTITUTIONAL does dictate that this case must be also claims that this case involves governed by body of a uniform rights on public of the conditions because provides no independent common law and immunity. The sovereign the waiver of jurisdiction. basis for exclusive FSLIC plurality in Northern acknowl- WAIVER OF SOVEREIGN IMMUNITY public “may edged that the doctrine DOES NOT CREATE PUBLIC RIGHTS part explained reference to be principle sovereign immunity, traditional Next, suit FSLIC contends government may recognizes that the may adjudicated by be an administrative sued”. attach conditions to its consent be agency public because it concerns U.S. at at 2869. FSLIC sovereign created when waived pro this to mean that conditions immunity reads and allowed public rights which against respect, themselves are ceed FSLIC. In this adjudicated by an sovereign administrative condition waiver of to a immuni- rather ty. than an article III court. prohibition FSLIC asserts that the of sec- AN FSLIC IS NOT ADJUNCT TO AN 1464(d)(6)(C) may tion “no ... III ARTICLE COURT affect the of powers restrain or exercise by The final is contention FSLIC that it a ... is a functions of receiver” condition is adjunct an an article III court. Ac- upon the of sovereign immunity waiver ex- cordingly, may it maintains properly that it pressed 1725(c)(4). in section Because Con- assume Ridge’s over Glen gress may permissibly attach conditions to agree. claims. We cannot sovereign immunity,

its waiver in 1464(d)(6)(C) concludes that the condition may A III body adjudi non-article Ridge’s converts Glen state common-law falling cate judicial power cases within the rights. public into Because the con- of the United States if it a properly unconstitutional, dition is itself we cannot adjunct constituted to an article III court. agree. 81-85, 458 Pipeline, U.S. at 102 2876—79; S.Ct. at United v. States Rad No act of congress can authorize datz, 683; Crowell, at 447 U.S. 285 U.S. at violation federal constitution. 51-57, 52 at ques S.Ct. 292-94. The basic Brignoni-Ponce, United v. 422 States U.S. tion is the relationship betweenthe 873, 878, 2574, 2579, 95 S.Ct. 45 L.Ed.2d preserves two bodies the essential attrib (1975). 607 As stated in Williams v. power judicial utes of the within the article Rhodes, 23, 29, 5, 9, 393 U.S. 21 89 tribunal, III ad administrative (1968): L.Ed.2d 24 judication permissible where article (T)he provi- Constitution is filled with III court retains sufficient control. North grant sions specific ... 79, ern 458 Pipeline, U.S. at 102 77 power legislate areas; in certain these S.Ct. at 2874-75. granted powers always subject are example adjunct classic that they may limitation not be exercised magistrates by is that of the created in a way specific pro- violates other Act, Magistrates passes arti visions of Constitution. scrutiny cle III because: This applies legis- rule even in where areas (1) magistrates appointed are is ordinarily lative action conclusive. St. by judges; removed article III Joseph States, Stock Yards United Co. v. (2) magistrate positions by created 38, 50-52, 720, 725-26, 80 judiciary; the article III (1936), L.Ed. 1033 Almedia-Sanchez v. (3) magistrate cases are referred to a 266, 272, by judge mag- III an article to whom (1973). 37 L.Ed.2d 596 Further- adjunct; istrate is an more, prohibits what by Constitution (4) at the reference be cancelled express statutory action cannot be achieved any judge; time the article III Martin, indirection. v. Anderson 375 404, (5) 399, 456, magistrate may only to a 454, U.S. reference L.Ed.2d consent be made with the uncoerced lawsuit; parties prohibits Congress III from Article (6) contempt power retained in removing jurisdiction Ridge’s of Glen state judge; the article III common causes law of action article (7) appel- provides III court article and placing courts them FSLIC. late review. though Congress’ Even determination of Cook, 68, (4th what 73-74 conditions attach to its waiver of Wimmer 11AF.2d v. sovereign Cir.1985); immunity ordinarily would Gairola v. Commonwealth of conclusive, Services, Congress may indirectly Virginia Department not General Cir.1985); (4th avoid the effect of 1284-1285 by purporting article III F.2d Diagnostic Instrome- authorize Pacemaker constitutional violation as a Clinic dix, Inc., (9th 78, 85-86, F.2d 542-547 Cir. 102 S.Ct. at 2878-79. 1984); Kelleher, F.2d Goldstein The first and underlay fourth criteria also (1st Cir.1984); Foreman, 35-36 Collins v. Thomas, decision in 105 S.Ct. at (2d Cir.1984); 113-115 Leh Thus, 3337-3339. it FSLIC contends that Kuhn, Loeb, Incorporated man Bros. qualifies for adjunct status under each of Refining Corporation, Clark Oil and agree. criteria. not these We do (8th Cir.1984); F.2d 1315-1316 Pur of Glen Ltd., year v. Ed’s F.2d narrow, causes of action would involve Cir.1984); Lafayette Display Geras v. Fix specialized subject matter but rather a tures, Inc., 742 F.2d 1040-1045 extensive, complicated series of fi- broad Cir.1984); Metropol Washington Fields v. nancial real estate transactions itan F.2d Authority, Area Transit fraud, may implicate areas of broad con- (D.C.Cir.1984); 893-894 and Wharton tract, estate, real and financial Conse- law. Thomas v. United quently, FSLIC fails the first test of ad- Cir.1983). (3d possesses 929-930 FSLIC junct status under the Crowell/Northem only two of these it lacks the criteria: analysis. Pipeline power punish by contempt3 its de Further, allowing adjudicate FSLIC by termination is reviewed an article Ridge’s no Glen claims with interference or remaining court. As to all five of the makes any restraint court FSLIC de- criteria, adjunct fails the of FSLIC test equivalent terminations to final judgments status. only than rather limited orders enforceable type ad- created a different by provision the district court. There no junct Employees’ the United States Com- among requiring statutes FSLIC pensation Commission. This Commission any FSLIC to seek orders enforcement system a to that of administers similar Thus, in district FSLIC court. fails compensation, replaced worker’s which prongs second and third the Cro- admiralty negligence traditional action analysis. Pipeline well/Northem law. 33 U.S.C. 901-950. §§ Likewise, criterion of this the fourth Supreme held that Crowell analysis adjunct claim refutes FSLIC’s sys- imposed article III no to this obstacle legislation tos the at status. contrast tem because: Thomas, fed- Crowell and neither (1) agency made the administrative banking regu- legislation nor FHLBB eral only specialized, narrowly confined factu- specifically lations create in either regarding particular- al determinations a respect or Glen with law; ized area of any trust con- deeds of causes action (2) possessed only limited agency 1464; 12 nected therewith. 12 U.S.C. § Cf. power compensation orders to issue 569(a)(6). C.F.R. § only which the dis- could be enforced seven Because FSLIC meets one of court; trict Magistrate Act cases and criteria (3) required by law to fails each of the criteria the Cro- compensation seek of its or- enforcement test, it is not well/Northem court; ders in the district article properly adjunct constituted (4) rights in is- Congress created the may it not consti- Consequently, III court. by replacing the traditional sue seaman’s Ridge’s tutionally adjudicate claims. Glen negligence dam- action traditional ages, statutory liability ac- with a strict jurisdiction grant hold that the We statutory damages. tion for law, Ridge’s adjudicate state FSLIC to it vio- Crowell, 43-45, is unconstitutional because 37-38, claims 285 U.S. at Constitution of the 287, 289-90; 458 lates article III of the Pipeline, contempt. subpoenas by power to enforce such power to issue C.F.R. Part 509 confers subpoenas specifically grant the but does not

3«7 Consequently, Supreme States. the trial Court considering adjudica- exercise over these tion of certain causes action non-arti- However, causes of respect action. tribunals, cle III Commodity Futures — the causes of action under federal securi- Trading Schor, Commission v. ties laws and those aimed at actions of —, 92 L.Ed.2d 675 receiver, disparagement FSLIC as i.e. for original that our opinion of title and violation of state foreclosure that, failed to consider these factors and laws, are constitutionally within the when all such weighed factors are and con FSLIC, authority of judg- trial court’s together, sidered FSLIC’s Accordingly, ment is affirmed. we remand causes of action cannot be to the trial court for trial of the state law said to violate Article III of the Constitu only. causes of action tion of the United States of America. We agree analysis that the part REVERSED REMANDED in Schor aids in the part. disposition case, and AFFIRMED in of this but we conclude analysis supports that such our DEVANY, Before LAGARDE and decision. THOMAS JJ.1 question presented in Schor was SUPPLEMENTAL OPINION ON Commodity whether the Exchange Act MOTION FOR REHEARING (CEA), seq., empowered U.S.C. et the § DEVANY, Justice. Commodity Trading Futures Commission (CFTC) to entertain state law counter- Savings Federal and Loan Insurance Cor- reparation and, claims in proceedings CEA (FSLIC) poration previ- contends that our so, if grant whether that of authority vio- opinion (1) ous in failing error in apply lated Article III of the Constitution. The analysis the by mandated the most recent comprehensive CEA created a regulatory Supreme decision of the Court of the Unit- prevent structure to manip- fraudulent and regarding ed States concerns, (2) Article III ulative in trading conduct the futures in- failing require in exhaustion of adminis- dustry. part structure, As of such CFTC trative remedies as a ap- condition to the reparations procedure administers a peal Ridge of Glen I Condominiums, et al. through disgruntled customers of (Glen Ridge), (3) in failing to construe professional commodity brokers can seek applicable in statutes such a manner as redress for the brokers’ violation of the to avoid constitutional issues. FSLIC con- regulations. promul- CEA or CFTC CFTC cludes applied that had we analysis, gated regulation allowing a respondent required condition, such a or made such reparations in construction, proceeding present we would compelled to dis- arising counterclaims Ridge’s miss out of the transaction appeal or affirm the trial complaint. or occurrence in court’s described Ridge’s dismissal of Glen suit. Be- analysis cause this supports original our complaints CFTC, filed Schor with the decision, because the doctrine of exhaus- Services, alleging that ContiCommodity tion of inapplica- administrative remedies is (Conti) up Inc. had run an account debit ble, and because the suscepti- statutes are against through Schor violations of CFTC construction, ble to no other we cannot regulations. Conti, served, being before agree. Consequently, FSLIC’s motion for diversity commenced a in action rehearing is denied. District Court to recover the balance due FSLIC claims that resolution of this case on Schor’s dis- account. Schor moved to depends upon evaluation of a set of factors miss the federal district court action on derived from grounds reparation the most recent decision of proceed- that the CFTC majority opinion ing Devany joined by of this court on Decem- Justice has been suc- by ber 1986 was authored the Honorable Supple- cessors of both retired Justices in this Akin, Justice, Ted M. now retired. Another Opinion update opinion mental our because panel member of the was The Honorable R.T. recent law. case Scales, Justice, who is also now retired. Presid- adjudica- ing full resolution and claims decided before article judges afforded III with parties respect potential of all who free from tion domination the subject government, which were concept transactions other branches thereupon matter of suit. Conti significant Conti’s of waiver is a factor in deter- dismissed its suit filed a CFTC counter- III mining requires not article alleged claim for the debit balance. Conti adjudication of a claim article III courts. it not violated the CEA but that had express 106 S.Ct. 3256. Schor’s demand from debit balance resulted losses Schor’s district court suit be dismissed Conti’s trading by Schor’s and from the sustained proceed on its that Conti counterclaim including brokerage commis- expenses, reparations proceeding consti- CFTC sions, incurred connection such tuted such a waiver. This waiver served trading. Administrative The CFTC Law uphold propriety of CFTC on Judge Conti’s favor both ruled contrast, over Conti’s counterclaims. counterclaims. Schor’s claims Conti’s challenged vigorously has ruling, Schor raised for the first After such of Glen coun- statutory of CFTC’s authori- time Therefore, the initial Schor terclaims. adjudicate ty to Conti’s counterclaim. The in this supports factor our decision of Appeals ordered dismissal of the case. grounds juris- on that CFTC counterclaims Next, the Court examined allocation article III diction over such claims violated and article between CFTC in Construc- applied courts. The Court noted CFTC’s Pipeline Company, tion Co. v. Marathon jurisdiction over common law counterclaims 73 L.Ed.2d 598 departs model. traditional further noted S.Ct. 3258. The Court Supreme The Court evaluated the Court importation concepts of of that “wholesale considering Appeals by of decision several may pendent ancillary jurisdiction or ... factors, disposi- none of which is considered difficulties greater constitutional create (1) tive. These factors were: whether the presented by CFTC’s nar- ...” than those litigant asserting III issues had article Id. FSLIC jurisdiction. that row tribunal; III right his to an article waived Ridge’s appeal this must dismiss Glen court (2) III the extent to which the non-article enabling because, literally, “pre- act its body range jurisdiction of exercised the action, in either or any court state cludes in powers normally article vested court, affect restrain or would courts; (3) judicial III the extent of review of powers the or functions the exercise of tribunal; (4) III of the non-article the bal- added), (emphasis and because FSLIC ...” “private”, ance to struck between the be proscribes judi- legislation absolutely such aspects litigant’s of claim and state-law the the any of various cial of enforcement III to ability body of the non-article the alleged by Glen of actions causes (5) legislative purpose; and achieve its or judgments would restrain because such III the non-article whether submission to affect FSLIC’s actions. litigant the optional part is on the of forum After asserting law counterclaim. a state broadly applied 1464 has been Section factors, the Court held evaluation of these any judicial action literally proscribe by offended the III was not that article whatsoever, limit- save the over FSLIC However, ap- adjudicatory CFTC scheme. the Administrative ed under Federal review the case at bar plication of these factors to Savings and Procedure Act. Federal of claims exclu- convinces us that FSLIC’s Bonfanti, Corporation Loan Insurance jurisdiction princi- do the basic sive offend Cir.1987) (5th (unpublished); 818 F.2d 864 therefore, are, III and uncon- ples of article Savings Chupik Corporation stitutional. Corporation, Insurance Loan Cir.1986). Clearly, if FSLIC F.2d 1269 First, that, as inasmuch the Court stated upon it decides may actions take whatever protect indi- primarily article III serves no claim and litigant’s regard to a having with in personal vidual interests slightest against congressional anywhere policies court take the ac- the vindicat- regard thereto, by grant jurisdiction tion with FSLIC has ed of the a non-arti- of usurped functions article III important all cle III An tribunal. considera- says nothing claim courts. It striking tion in this balance was range pow- exercise FSLIC does not jurisdiction III body’s not the non-article III jurisdiction ers and of an article Schor, optional litigant. with the jury because it does not conduct trials or here, right in private, issue awas if “judgments” reality the harsh right common law derived from state law. adjudication completely re- S.Ct. at 3259. Court described the places jury right by to trial and the proper by analysis stating: judgment. ability of the courts to issue a The counterclaim ... is therefore a claim FSLIC, urged by Under the construction it of the kind assumed to at the “core” powers would more an have far than article normally of matters to Article reserved III plaintiff, court because it can act as Congress The risk that courts.... judge, deciding litigant’s jury may improperly have encroached on the adopt claims. To claim otherwise is to judiciary obviously magnified Supreme rejected formalism Court “withdraw(s) judi- when from Clearly, Schor. the con- Thomas and which, cognizance any cial matter struction of U.S.C. 1729 and 1464 §§ nature, subject its a suit at the offered bears no resemblance to law, common or in equity ...” ... authority the limited CFTC entertain (W)here private, common law are voluntary arising counterclaims out of the stake, congres- our examination of the reparation transaction from which pro- attempt sional control the manner in Instead, ceeding grew. position ar- adjudicated which those has gues in of the very impor- favor wholesale searching been ... concepts pendent tation or ancillary recognized proprie- Id. The then the Sckor court ty Congress’ purpose affording Therefore, warned. factor in second expeditious procedure disputes. for CEA supports Schor our decision. that, in the Court concluded Schor Next, the Schor court examined the ex situation, separation concerns tent of provided by review CFTC underlying III are offended article be- courts, finding juris that CFTC’s cause: objectionable diction was not because sub Congress gave authority the the to CFTC ject to “de novo” review in federal court adjudicate ... but the decision to invoke rather than deferential review under the parties this is left the entirely forum to “weight of evidence” the standard. FSLIC power judiciary and the of the to subject contends it is to review under jurisdiction take of these is unaf- matters “weight the “de rather novo” than the of fected. the According evidence” standard. Act, federal Administrative Procedure litigant’s right Id. The balance between a subject FSLIC is not to “de novo” review adjudication to article III of a state-law “weight or to the of more deferential the cause and the of of action interest Con- evidence” standard but of review FSLIC gress remedy tipped expeditious in an “arbitrary under the most deferential and agency by in favor of the administrative capricious” stan or “substantial evidence” remedy nature of the consensual 706(2)(E); 554(a), dards. 5 U.S.C. Mor §§ jurisdiction the fact that no was withdrawn Co., rison-Knudsen Inc. v. CHG Interna Clearly, analy- Schor from the courts. tional, Inc., 811 F.2d Cir. constitutionality uphold sis does not 1987). Consequently, prong of the third parties compelled are scheme wherein supports original the Schor test our deci ju- to and where abide FSLIC sion. affected, is not power dicial but where, addition, Next, can take “pri- any in no court court Schor balanced agency. to the administrative aspect right vate” of the in issue action affect there (5th Cir.1985); authority Chupik to adjudi- claims the F.2d Since FSLIC Cor poration Savings cate those matters which reside the core v. Federal and Loan judicial power to have power, Corporation, and claims Insurance F.2d adjudica- compel parties accept to FSLIC (5th Cir.1986); to Savings and Loan tion, any claims to be to oust court able Corporation Bonfanti, Insurance FSLIC, our any over (5th Cir.1987)(unpublished). F.2d 864 Sim statutory of this searching examination Schor, ilarly, Supreme Court was jurisdic- compels us to hold that the scheme uphold opinion asked of the Court FSLIC, granted by 12 tion claimed Appeals enabling that CFTC statutes could article III U.S.C. violates §§ deny authority them be construed over United States. Constitution avoiding under counterclaims the rubric questions constitutionality par where a contends that FSLIC further statutory ticular construction avoid dismissing Ridge’s we erred in not Schor, them. at 3252. The appeal for failure to exhaust administrative because, However, reasoning rejected Court doctrine of ex remedies. though jurisdictional not a a court will strain construe haustion of remedies is issue, judicial rule matter as to but is a committed statute so avoid a constitutional comity only. an exercise of judicially discretion and it will rewrite the statute to Morrison-Knudsen, at 1223. language so. do Id. unvarnished Further, presence of where the constitu prevailing and the con 1729 and §§ questions coupled tional inade statutes, too plain those are struction of quacy procedures, a re administrative support that will avoid their a construction viewing may dispense with such doc Thus, ad infirmity. we must constitutional Equipment trine. & Diesel Cor dress that issue. Aircraft Hirsch, poration rehearing is for overruled. motion As 91 L.Ed. 1796 original opinion, there are detailed in our questions

serious this case constitutional patently procedures are inade FSLIC’s

quate. Consequently, appeal properly us. before our further

opinion have the constitu should avoided by construing the question tional WILLOCK, Appellant, George Michael manner enabling such a statutes hold constitutional. We aware them Appeals that the States BUI, Appellee. Toan Viet has these acts the Ninth Circuit construed No. 01-86-0825-CV. in a a constitutional manner avoids ruling by simply that the acts do not Texas, Appeals Court contemplate jurisdiction over state Dist.). (1st Houston Morrison-Knudsen law counterclaims. 14, 1987. May International, Co., Inc., et al. CHG Cir.1987). Inc., al., et 811 F.2d 1209 respect reasoning

We of the Ninth Cir Court, light literal con

cuit but in and 1729

struction of U.S.C. §§ Ap

given Court of by the United States Circuit, numerous

peals for Fifth fol decisions District States it, language of

lowing we cannot strain Mississippi

the acts far. Sav North Hudspeth,

ings and Loan Association

Case Details

Case Name: Glen Ridge I Condominiums, Ltd. v. Federal Savings & Loan Insurance Corp.

Court Name: Court of Appeals of Texas

Date Published: Jun 25, 1987

Citation: 734 S.W.2d 374

Docket Number: 05-85-00873-CV

Court Abbreviation: Tex. App.