ELR Citation: ELR 20698
No(s). 84-497 (U.S. Jul 1, 1985)

The Court holds that §3(c)(1)(D)(ii) of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), providing for binding arbitration to determine the amount of compensation required for a follow-on applicant's use of an original registrant's data, does not violate Article III by limiting judicial review of the arbitrator's decision to questions of fraud, misrepresentation, or other misconduct.

The Court first holds that the claims of the appellees establish a case or controversy. In order to challenge the constitutionality of the arbitrator's jurisdiction they merely had to show that they have been or inevitably will be subject to such jurisdiction. The data consideration procedures of the 1978 amendments are in place, and follow-on registrations have been issued, making the claims timely. The issues are fit for judicial decision, because they are purely legal and need no further factual clarification, and hardship would result if judicial review is denied, because the uncertainty and expense of depending on a process of questionable constitutionality both impairs FIFRA's effectiveness and harms the appellees. The appellees have standing because they suffer the injury of choosing between an allegedly unconstitutional adjudication and the relinquishment of their right to compensation. Their injury is likely to be redressed by the requested relief: broadened judicial review or an injunction against follow-on application registration.

Turning to the constitutional question, the court notes that not every federal question need be tried before an Article III court with a judge enjoying life tenure and protection against salary reduction, and that Congress has the power under Article I to vest decisionmaking in tribunals lacking Article III characteristics.The Court first holds that the prior registrant's right to compensation is derived solely from FIFRA and not from state law, distinguishing its holding in Northern Pipeline Construction Co. v. Marathon Pipeline Co. that Article III review is required for a traditional contract action arising under state law. The Court rejects the public rights/private rights dichotomy as a bright line for determining the applicability of Article III, noting that the dichotomy was not embraced by a majority of the court in Northern Pipeline, and ruling that the presence or absence of the government in the dispute is not determinative. The court determines to rely on the substance of the proceedings at issue rather than on formal categories, and concludes that the public rights doctrine simply recognizes that when Congress selects a quasi-judicial method of resolving matters that could have been resolved by it or the executive branch, the danger of encroaching on judicial powers is reduced. Turning to the substance of FIFRA, the Court holds that the right to compensation under the Act has many of the characteristics of a public right insofar as public health is furthered by the use of previously submitted data for follow-on registration. The Court rules that Congress has the power to allow an agency to allocate costs among voluntary participants in a regulatory scheme without Article III adjudication; in this case Congress has merely taken the additional step of vesting the allocative authority in civilian arbitrators without diminishing the likelihood of impartial decisionmaking. The process does not encroach on the independence of the judiciary, given that the arbitration scheme has its own system of internal sanctions, largely independent of the judicial branch. Finally, the Court notes that Article III court review is allowed for cases involving fraud, misconduct, or misrepresentation and for due process claims.

The Court refuses to consider the appellees' argument that FIFRA's standard for compensation is so vague as to be an unconstitutional delegation of legislative powers, because the argument was neither adequately briefed nor argued and was not fully litigated before the district court.

Justice Brennan concurs in the judgment, but argues that the court should have based its decision on Northern Pipeline's exception to Article III adjudication for cases involving public rights disputes. He argues that, contrary to the Court's assertion, Northern Pipeline did not hold that the presence or absence of the government as a party is sufficient to distinguish private from public rights disputes, and allowed for review of even public rights disputes on constitutional grounds and possibly in case of an impermissable accumulation of power in the other branches of government. Justice Brennan would hold that while the compensation question involves individual liabilities, it arises in the context of a federal regulatory scheme that both assigns the resolution of disputes to a regulatory agency and prescribes the rule of decision for that resolution, making the arbitration decision akin to a standard agency adjudication. Furthermore, Congress had provided for limited review of the arbitrator's decision, preserving judicial authority over questions of law.

Justice Stevens concurs in the judgment, but argues that the appellees do not have standing to challenge the constitutionality of the arbitration procedure, because the relief that they request would not follow from a decision in their favor. Justice Stevens argues that the only precondition to EPA's use of the original submitter's data is the follow-on applicant's agreement to give compensation. There is nothing in FIFRA to suggest that use of the data is dependent on or necessarily subsequent to compensation, as the statute only provides for denial of an application where the follow-on applicant has defaulted in the registration process. Congress' wish to facilitate pesticide registration and FIFRA's severability provision suggest that Congress did not intend that the constitutionality of the arbitration process should affect the rest of the registration scheme.

[Lower court decision appears at 13 ELR 20969.]

Counsel for Appellants
Lawrence Gerald Wallace, Deputy Solicitor General
Department of Justice, 10th & Constitution Ave., NW
Washington DC 20036
(202) 633-2211

Counsel for Appellees
Kenneth Ward Weinstein
McKenna, Conner & Cuneo
1575 Eye St. NW, Washington DC 20005
(202) 789-7500