The Administrative Law Judge (ALJ) in the CFTC reparations proceeding ruled in Conti’s favor on both claims, and it was at that point Schor challenged the CFTC’s jurisdiction to hear Conti’s counterclaim against him. The ALJ rejected this contention, and the CFTC declined to review the decision. Schor then petitioned the United States Court of Appeals for the District of Columbia Circuit for review. The Court of Appeals held that the CFTC had jurisdiction over Schor’s claim against Conti, but not over Conti’s state-law based counterclaim against Schor for the debit balance, seeking to avoid the constitutional problems faced in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982). The U.S. Supreme Court granted certiorari, vacated the judgment, and remanded the case back to the Court of Appeals for further consideration under Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568 (1985). The Court of Appeals reinstated its previous judgment, and the Supreme Court granted certiorari again.
She then turned to the Article III issue. O’Connor chose to interpret Article III liberally, examining the underlying purposes of adjudication of cases by an independent judiciary. The right to be heard by an Article III tribunal is not absolute, and is subject to waiver by the parties. In this case, Schor waived his right to a trial with respect to Conti’s counterclaim, and elected to have the entire dispute resolved before the CFTC. It was only after the CFTC ruled against him that he challenged the agency’s jurisdiction. To O’Connor, Schor’s actions constituted an express waiver of his right to a civil trial.
Additionally, O’Connor held Congress’ grant of judicial power to the CFTC for the adjudication of state-law counterclaims did not intrude on the powers of the judiciary. She concluded that while Congress could not vest administrative agencies with ancillary or pendent jurisdiction of all claims, it was not outright forbidden for them to do so. Unlike the situation in Northern Pipeline, not only were the CFTC’s orders reviewable in the U.S. district courts, the CFTC was not granted the full powers of an Article III court, and the parties were given the option of invoking the agency’s jurisdiction, rather than being compelled to use it. Furthermore, any issue of intrusion upon the powers of state courts was irrelevant, O’Connor reasoned, because federal courts may exercise ancillary jurisdiction over state law claims anyway.
Justice Brennan dissented on the grounds that allowing Congress to grant such jurisdictional powers to administrative agencies eroded the powers of Article III courts, and allowed deprived litigants of the impartial decision making authority of an independent judiciary. He accused the majority of putting concerns of convenience and judicial economy ahead of separation of powers. Also, because the individual and structural/separation of powers issues served by Article III were “coextensive”, Brennan reasoned that the consent of the litigants to appear before a non-Article III tribunal should have no bearing on the legal analysis in this case.