Amicus Curiae Brief — Federal Maritime Comm'n v. South Carolina Ports Authority

RECEIVED y Supreme Court, U.S

1D FILED

pec 05 2001 es ai

LDC _No. 01-46 29 2001

IN THE OFFICE OFTHE CLERK _

Supreme Court of the United States

FEDERAL MARITIME COMMISSION,

Petitioner,

_

SOUTH CAROLINA STATE PORTS AUTHORITY, et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Fourth Circuit

BRIEF FOR SENATORS EDWARD M. KENNEDY AND

RUSSELL D. FEINGOLD AS AMICI CURIAE

IN SUPPORT OF PETITIONER

LLOYD N. CUTLER

Counsel of Record

A. STEPHEN HUT, JR.

CHRISTOPHER J. MEADE

JENNIFER M. ROCKOFF

WILMER, CUTLER & PICKERING

2445 M Street, N.W.

Washington, D.C. 20037

November 29, 2001 (202) 663-6000

Counsel for Amici Curiae

Senators Edward M. Kennedy and Russell D. Feingold

eS

TABLE OF CONTENTS

STATEMENT OF INTEREST OF AMICI

INTRODUCTION AND SUMMARY OF

BACKGROUND

A. The Statutory and Regulatory Framework. ............ 3

Be UII cxntindicsincrncensecncnpsssentensonssnccsesnneneents 6

STATES HAVE NO SOVEREIGN IMMUNITY

AS AGAINST THE UNITED STATES. ..............200000++ 8

AN AGENCY PROCEEDING IS THE PROC-

ESS BY WHICH THE EXECUTIVE DECIDES

HOW IT WILL ENFORCE FEDERAL LAW. ........... 12

. A STATE DOES NOT HAVE IMMUNITY IN

A COMMISSION PROCEEDING AS ANY

COMPULSION RESULTS FROM THE AC-

TION OF THE UNITED STATES. ...........02ss0c0eeseeseeees 20

A. Sovereign Immunity Protects a State From

Coercion by a Private Party. ............ccssscsseseeeseees 21

B. Private Parties and the Commission Do Not

Have Independent Coercive Powers and

Any Coercion in the Regulatory Scheme Is -

the Power of the United States. ................cseseessee 23

2. Enforcement Action by Private Party

3. Enforcement Action by the United

TABLE OF AUTHORITIES

CASES

Page(s)

Alden v. Maine, 527 U.S. 706 (1999)........cccccccseseseeseseee passim

Bennett v. Spear, 520 U.S. 154 (1997).....cccccccccescosecceseceessees 16

California v. United States, 320 U.S. 577

CPOE) .coconssccscnsesenrepiiinesnisiaaiiaianiannane 1, 3, 4,9, 15

Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984)............. 13, 14, 19, 26

Chisholm v. Georgia, 2 U.S. (2 Dall.) 419

CE FED) nccccsscscsnssensestqiiistniaatsiatindiis ain 1, 22, 24, 26

Coyle v. Smith, 221 U.S. 559 (1911) ...ccccccccccsecseececsececeseeseceee 2

EEOC v. Wyoming, 460 U.S. 226 (1983).......cccccceceseeeees 27, 28

FMC v. Port of Seattle, 521 F.2d 431 (9th Cir.

DTS) «cccsssscenscsncscsincsasesettehuitiiisedaieaeien: Metin ane 27

Fort Stewart Schools v. Federal Labor Relations

Authority, 495 U.S. 641 (1990)......ccccccccccscssesesseceseseecees 14

Freytag v. Commissioner, 501 U.S. 868 (1991) ............ 17, 19

Garcia v. San Antonio Metropolitan Transit

Authority, 469 U.S. 528 (1985)......ccccccccccceseseeceseeees 27, 28

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824).....c.e.00000. 1,9

Hans v. Louisiana, 134 U.S. 1 (1890)........ccececceceseee 23, 24, 26

Heckler v. Campbell, 461 U.S. 458 (1983) .......cccecoceceseseeeee 17

Holly Farms Corp. v. NLRB, 517 U.S. 392 (1996).......0.0..+. 14

INS v. Aguirre-Aguirre, 526 U.S. 415 (1999) ......ccccececessseees 14

In re Ayers, 123 U.S. 443 (1887) .....cccccccccccceceeseceesessececsessees 23

NLRB y. Bell Aerospace Co., 416 U.S. 267 (1974) .....c.e00.0- 14

Nevada v. Hall, 440 U.S. 410 (1979).........ccccceseee 1, 22, 27, 28

New York v. United States, 505 U.S. 144 (1992)....... 2, 24, 26

Pension Benefit Guaranty Corp. v. LTV Corp., -

GBB DB. GBD (ID D secccsccssistactnsssisaiiatsiuiatiidiaiaes 15

Petchem, Inc. v. FMC, 853 F.2d 958 (D.C. Cir.

SIGE) .x.ccussceveesesceensmnaseneinsiesasideiiamaneaalnen ne 15

a s w

TABLE OF AUTHORITIES—Continued

Page(s)

Principality of Monaco v. Mississippi, 292 U.S.

BUD (1934).....cccccccccssecerssssssseseseeeenseerenssnensssnsnseennees 10, 11

Printz v. United States, 521 U.S. 898 (1997) ........ceeeeeeneees 2

Puerto Rico Aqueduct & Sewer Authority v.

Metcalf & Eddy, Inc., 506 U.S. 139 (1993) .........00-+e++0+ )

Reno v. Condon, 528 U.S. 141 (2000) ............... 2, 11, 12, 28

Ristow v. South Carolina Ports Authority, 58 F.3d

1051 (4th Cir. 1995)..........ccccccccssssssseresserensenseseeseesenssnnenes 7

SEC v. Chenery Corp., 318 U.S. 80 (1943) ........ccsesseeerereees 16

SEC v. Chenery Corp., 332 U.S. 194 (1947) ..... 13, 14, 15, 16

Seminole Tribe v. Florida, 517 U.S. 44 (1996)........ 10, 23, 27

South Carolina v. Baker, 485 U.S. 505 (1988) .............+ 2, 11

South Carolina State Ports Authority v. FMC, 243

F.3d 165 (4th Cir. 2001) ........ccccccceeseeseeneeenes 8, 12, 20, 24

United States v. Locke, 529 U.S. 89 (2000) ..........ceeeeeeeereeees 9

United States v. Mead Corp., 533 U.S. 218, 121

S. Cr. 2164 (QOO1)...ccecccccsccecscvsecrereccsccsecsenseecsersesssssoesees 14

United States v. Mississippi, 380 U.S. 128 (1965)..........-+-+ 10

United States v. Morton Salt Co., 338 U.S. 632

(1950) ....c.cececscecscscsssssocercssesesesesescsesesenescscosessssessssnssenenees 18

United States v. Texas, 143 U.S. 621 (1892) ........... 11, 27, 28

Vermont Yankee Nuclear Power Corp. v. Natural

Resources Defense Council, Inc., 435 U.S.

SID (IDTB) ....acecrerecsccecececcecscsececscsrercsececscsscsesesseoscscceconses 15

West Virginia v. United States, 479 U.S. 305

(19GB) .asececsesesessssescscseescsccscsvscsesscrcrnssssssssecees 10, 20, 27, 28

CONSTITUTIONAL AND STATUTORY PROVISIONS

UPS, Coomat. ant. VIE.......ccccccccccsccscccssccsccssccssscssccssccssncsseesscssccssees :

§ U.S.C. § 553 ...csccccecesescccsscssssssssesenenessesenssensnensssanennenensnennens .

5 U.S.C. $§ 553-S5SB...........cccecessesesevsesesenennessnsnsnnnssnsnnenenenns

The Hobbs Act, 28 U.S.C. § 2341 ef S€q. .......-ce-eeeereeeees 6, 26

2B U.S.C. § 2344.....ccccccsserssseseressesesensnenesnennnensenenenees 6,7

(s)

28 U.S.C. § 2521 .orccosor pe rel ne

46 U.S.C. app. § 1702(14}.rmnmnnninnonnrneerrrn, ;

46 U.S.C. app. § 1706 .occsccseeseressnessrssntsretsrttnssrerrrrrr, -

PR a iiincntesemunnincanucn :

46 U.S.C. app.'§ 1709(0).escccrcstitivnvrnncc -

46 U.S.C. app. § 17108) ..ecscsestssninevenrc. 4, 5,7, 18

46 U.S.C. app. § 1710(C)..ccccccccecocsccsesesseeeseessec..., i 4. 18

46 U.S.C. app. § 1710(h) ..ececemntsntusininerreccc ww

46 U.S.C. app. $1712(8) eesmnnnnnennnnrrrrrrnrn 5, 6

46 U.S.C. app. § 1712(€) .eccscseitisnnveren 6, 27

46 USC. opp § 171%) 4

S.C. app. § 1713(C) rcecevsevsssssvsseseseeeseseeees 5, 6, 20, 24.2

46 U.S.C. app. § 1713) ecronnennnnnneees, 56,20, 24,26

Reorganization Plan No. 7 of 1961, 75 Stat. 840.............3

RULES & REGULATIONS

QC CPR. § 00027 nnn nsec cceeeseeee 4.15

46 CFR. §§ 502.51-502.56 .ececccsssscsveoee 45,17

Oe i ivirnivicstintliieancinbetidianbaniti eater

| _ Seaearnecar es tener aamense: 5, 18

peed |, TA TT Na oe

CPR. 62020 5

46 CER. § 902.223 00. eccctcsessssseirenevenerse 4 5,7, 15

RRR aR a neN Mes ¢

a... 5, 16

46 CER. § 00.221 ornrnnnnnnrnnnnnnr 5.7

R. § 502.227(8)(6) ..ececsccsssssessevrerseeveres..5, 15, 16 ;

46 CFR. § “2281” PT A 2a om Y

itinentsiinaiiceehee eat -

| RRR Ns 19

v

TABLE OF AUTHORITIES—Continued

BOOKS, ARTICLES & TREATISES

Page(s)

1 Davis, Kenneth Culp & Richard J. Pierce, Jr.,

Administrative Law Treatise (3d ed. 1994)............. 13, 15

3 Debates on the Federal Constitution (Jonathan

CO _————————————————————EE

Federalist No. 12 (Hamilton) ......................ccssseeseseereeeees 9,10

Federalist No. 39 (Madison) ..................ccssescseeeeeeeeeeeenees

Federalist No. 44 (Madison) .................cccccccsseeeennereenennennnnnees

Federalist No. 64 (Jay) ............c.csscsssssssssrsesensserensnssenssssosesees

Federalist No. 81 (Hamilton) .....................cc00eeesreeees 21, 22, 23

Pierce, Richard J., Jr., The Choice Between Adju-

dicating and Rulemaking for Formulating

and Implementing Energy Policy, 31 Hast-

igs LJ. 1 (1979) ........ccecererereeersrerensseesesseesesesssersnensenees

AGENCY ORDERS

Motion of Respondent South Carolina State Ports

Authority To Dismiss Complaint Granted, in

South Carolina Maritime Services, Inc. v.

South Carolina State Ports Authority, No. 99-

21 CPRAC Jam. S$, DOOD) ..00..ccccerccrevreccseccscssecssccsecrsesessssesees

Order Reversing the Administrative Law Judge’s

Order and Recommendation for Further Pro-

ceedings, in South Carolina Maritime Ser-

vices, Inc. v. South Carolina State Ports

Authority, No. 99-21 (FMC Mar. 23, 2000) ....... 7, 25, 26

STATEMENT OF INTEREST OF AMICI

Amici are United States Senators, both of whom serve

on the Senate Judiciary Committee. Amici file this brief be-

cause the court of appeals’ decision in this case, if allowed to

stand, could call into question a range of important statutes

enacted by the Congress of the United States, including the

Shipping Act of 1984. The rule announced by the court of

appeals, in addition, could limit the ability of Congress in the

future to adopt legislation that vests federal administrative

agencies with the authority and flexibility they may need to

enforce important federal regulatory programs against state

instrumentalities. '

INTRODUCTION AND SUMMARY OF ARGUMENT

By any standard, one of the central attributes of sover-

eignty is the “‘right to govern."” See Nevada v. Hall, 440

U.S. 410, 416 (1979) (quoting Chisholm v. Georgia, 2 U.S.

(2 Dall.) 419, 472 (1793)). Although this case involves a

state’s claim of sovereign immunity, it is equally about the

right of the United States to govern. Congress enacted the

Shipping Act of 1984, applied that law to state instrumentali-

“Commission”) enforce the Act. The unprecedented decision

of the court of appeals, however, if allowed to stand, would

undermine Congress’ ability to legislate and the Commis-

sion’s ability to enforce federal law in an area that implicates

Congress’ well-settled and plenary authority to regulate in-

terstate and foreign shipping. See, e.g., Gibbons v. Ogden,

22 U.S. (9 Wheat.) 1 (1824); see also California v. United

States, 320 U.S. 577 (1944). It would do so, moreover, even

' No part of this brief was drafted by any of the parties to this action,

and no one other than the amici or their counsel have made a monetary

contribution to the preparation or submission of this brief. All parties

have consented to the filing of this brief.

2

though the federal regulatory process at issue neither threat-

ens the states’ separate and distinct status, see, e.g., Coyle v.

Smith, 221 U.S. 559 (1911), nor seeks to commandeer the

states to enact or enforce federal law, see New York v. United

States, 505 U.S. 144 (1992); Printz v. United States, 521 U.S.

898 (1997). Rather, as in Reno v. Condon, 528 U.S. 141

(2000), and South Carolina v. Baker, 485 U.S. 505 (1988),

this case does not “seek to control or influence the manner in

which States regulate private parties,” Baker, 485 U.S. at

514-15.

In the court of appeals’ view, an administrative proceed-

ing brought before the Commission by a private party is suf-

ficiently analogous to a private lawsuit that a state instrumen-

tality may cloak itself in sovereign immunity and, on that ba-

sis, demand dismissal of the regulatory proceeding before the

Commission. The approach adopted by the court of appeals

fundamentally misconceives the role of the Commission, the

function of the administrative proceeding at issue, and the

constitutionally prescribed allocation of state and federal

power. An administrative proceeding, whether commenced

by private complaint or at the agency’s own initiative, is not

a private lawsuit. Rather, the proceeding is the process by

which the Commission determines how it should discharge -

its obligation to enforce federal law.

This Court has recognized that the states retained their

immunity against private suit when they joined the Union. It

has also recognized, however, that the states surrendered

their immunity with respect to actions taken by the national

government within the sphere of its limited, but supreme au-

thority. Because this case involves the power of the United

States—and its power to enforce its laws—any coercion that

may be present in this regulatory scheme is constitutionally

permissible. To deny the Commission authority to proceed

against the states is to deny the fundamental tenet of federal-

ism that the broad sovereignty of the states ends at the

3

boundary of the federal government’s “right to govern” in

areas of federal concern.

BACKGROUND

A. The Statutory and Regulatory Framework.

The Shipping Act regulates an “essential part of inter-

state and foreign trade.” California, ty at 586. dl

passed the Act to protect the Uni tates against in-

cenainesd competition in the shipping industry, and, to fur-

ther this goal, granted antitrust immunity to domestic ship-

ping carriers and the maritime terminal operators that berth

them. See 46 U.S.C. app. § 1706. Nonetheless, to prevent

abuse of this immunity, the Act prohibits discriminatory

practices by the regulated entities. Id. § 1709.

The Federal Maritime Commission is the administrative

agency empowered to administer and enforce the Shipping

Act. The Commission is composed of five members ap-

pointed by the President with the advice and consent of the

Senate.’ As this Court described the Commission’s prede-

tled history, the Ports Authority does not, and could not, argue that the

Shipping Act does not apply to state instrumentalities.

3 -The Commissioners are removable by the President for inefficiency,

neglect of duty, or malfeasance in office. Reorganization Plan No. 7 of

1961, 75 Stat. 840, 840.

4

cessor agency, it is “the expert body established . . . for safe-

guarding this specialized aspect of the national interest.”

California, 320 U.S. at 584.

The Commission has a number of regulatory tools at its

disposal to perform its “extensive regulatory duties,” 46

C.F.R. § 502.281. In addition to adjudications of the type at

issue in the present case, id. § 502.142, the Commission may

conduct nonadjudicatory investigations when the Commis-

sion determines, in its discretion, “that information is re-

quired for the purposes of rulemaking or is necessary or help-

ful in the determination of its policies.” Id. § 502.282. The

Commission may also promulgate rules using notice-and-

comment rulemaking, id. §§ 502.51-502.56; see also 5

U.S.C. § 553, and so-called “negotiated rulemaking,” 46

C.F.R. § 502.56 (“The Commission, either upon petition of

interested persons or upon its own motion, may establish a

negotiated rulemaking committee to negotiate and develop

consensus on a proposed rule, if . . . use of such a committee

is determined by the Commission to be in the public inter-

est.”’).

Under the Act, potential violations of the nondiscrimina-

tion provision may be brought to the Commission’s attention

by a private party, 46 U.S.C. app. § 1710(a), or upon its own

motion, id. §§ 1710(c), 1713(a).* In either case, the statute

requires that the Commission provide the “opportunity” for

some type of hearing. Jd. § 1713(a).

The Commission has determined, pursuant to its dele-

gated authority, that the initial assessment of any violation

should be made by an administrative law judge (“ALJ”). 46

C.F.R. § 502.223. In a hearing before the ALJ, non-lawyers

are permitted to represent parties. Id. § 502.27 (permitting a

* The Act also permits the United States or the complainant to seek an

injunction in federal court. 46 U.S.C. app. § 1710(h).

os

5

“person who is not an attorney at law” to practice before the

Commission if certain criteria are met). The ALJ does not

have any independent enforcement power. See id.

§ 502.210(b). After the conclusion of the hearing, the

ALJ makes an “initial or recommended decision{].” Id.

§ 502.223.

Any party may seek the Commission’s review of the

ALJ’s decision, or (as here) the Commission may review the

decision on its own motion. See id. § 502.227. On such re-

view, the Commission may take notice of “technical or scien-

tific facts within the general knowledge of the Commission

as an expert body.” Jd. § 502.226(a). Moreover, the Com-

mission has the option of limiting the relevant issues through

rulemaking. See id. § 502.227(a)(6); see also id. §§ 502.51-

502.56. Finally, the Commission may decide, through rule-

making or by adjudicatory order in a particular case, to ex-

empt a “class of agreements . . . or [a] specified activity . . .

from any requirement of the Shipping Act” if it determines

that the exemption “will not result in substantial reduction in

competition or be detrimental to commerce.” Id. § 502.67.

If the Commission finds a violation, it may issue a cease

and desist order, order reparations to be paid to the injured

party, or assess civil penalties payable to the United States.

46 U.S.C. app. §§ 1710(a), 1712(a), 1713(c). The Commis-

sion does not possess independent coercive power to enforce

its orders. See id. § 1713(c). The Commission’s decision

constitutes the “final decision{]” of the agency. 46 C.F.R.

§ 502.225.

If the regulated party does not comply with the order, the

statute provides enforcement mechanisms. If the Commis-

sion orders reparations to be paid to a private party, the stat-

ute provides that “the person to whom the award was made

may seek enforcement of the order in a United States district

court having jurisdiction [over] the parties.” 46 U.S.C. app.

§ 1713(d). An injured private party may also seek to enforce

a nonreparation order in court. Id. § 1713(c).

6

Alternatively, the statute. provides an enforcement

mechanism for the United States. Although the Commission

itself does not have independent enforcement authority, the

Attorney General may file an enforcement action on behalf

of the United States in a federal district court. See id. (“In

case of violation of an order of the Commission, . . . the At-

torney General . . . may seek enforcement by a United States

district court having jurisdiction over the parties.”). The

Commission may also induce compliance—both throughout

the proceedings and with the final order—by assessing civil

penalties for violations of regulations or of a Commission

order. /d. § 1712(a). The Commission does not have inde-

pendent authority to enforce these penalty provisions, but, as

with the final order, may request that the Attorney General

bring an enforcement action. Id. § 1712(e). Any civil penal-

ties are payable to the “United States.” Id. § 1712(a).

If a party disagrees with a Commission order, it has two

options. First, it may choose to defend in any enforcement

action. See id. § 1713(c)-(d). Alternatively, the regulated

party may file a petition for review of the agency’s action, in

the court of appeals, under the Hobbs Act. 28 U.S.C. § 2341

et seq. In such an action, “{t}he action shall be against the

United States.” Id. § 2344.

B. The Present Case.

The South Carolina State Ports Authority (“Ports Au-

thority”) is a “maritime terminal operator” covered by the

Shipping Act of 1984, see 46 U.S.C. app. § 1702(14), and is

therefore subject to the Act’s nondiscrimination provision, id.

§ 1709(d). A private company, South Carolina Maritime

Services, Inc. (“Maritime Services”), objected that the Ports

Authority had violated the nondiscrimination provision by

refusing it berthing space while granting berthing space to

another company that Maritime Services believed to be simi-

larly situated. Availing itself of the procedural mechanism to

bring the alleged violation to the Commission’s attention,

7

Maritime Services filed an administrative complaint against

the Ports Authority. See id. § 1710(a).

Following the procedures that the Commission has es-

tablished by bar 0m an ALJ was assigned to hold a hear-

ing and to provide a recommended decision to the Commis-

sion. See 46 C.F.R. § 502.223. In this hearing, the Ports Au-

thority asserted, inter alia, that because it had been deemed

an arm of the State under Fourth Circuit precedent, see Ris-

tow v. South Carolina Ports Auth., 58 F.3d 1051 (4th Cir.

1995), it was entitled to invoke the sovereign immunity of

the State as a complete defense in the Commission S

proceedings. The ALJ agreed and, on that basis, dismissed

the proceeding. Pet. App. 59a-60a.

Although neither party appealed, the Commission de-

cided to hear the matter on its own motion. See 46 C.F.R.

§ 502.227. The Commission rejected the notion that an ad-

ministrative proceeding initiated by a private party 1s similar

to a lawsuit and that sovereign immunity should thus apply.

Rather, the Commission stated, both “Commission atone oA

tions, and private complaint proceedings, are part of a unlit

system of regulation.” Pet. App. 34a. Whether the proceed-

ing is initiated by a private complaint or on the Commis-

sion’s own motion (including after investigating at the in-

stance of a private party), the Commission held, they are both

part of a “unitary . . . regulatory scheme” in which all...

determinations as to whether the Act has been violated to

are made by the Commission.” Pet. App. 34a-35a (citation

omitted). |

The Ports Authority then filed a petition for review in

the court of appeals under the Hobbs Act. As required by the

Hobbs Act, the United States and the Commission were re-

spondents in the action. See 28 U.S.C. § 2344. The initial

complaining party, Maritime Services, was not named in the

petition and is not a party before this Court.

8

The Court of Appeals for the Fourth Circuit

Ports Authority’s petition for review. South cine tien

Ports Auth. v. FMC, 243 F.3d 165 (4th Cir. 2001). The court

of appeals held that this Court’s cases involving the immu-

nity of the states from private lawsuits in federal and state

courts apply with equal force to adjudicatory proceedings

before an administrative agency. See id. at 169.° To reach

this conclusion, the court of appeals equated an adjudicatory

administrative proceeding initiated by a private party before

the Commission with a suit in court, stating that, in its view

the proceeding before the Commission “walks, talks and

squawks” like a lawsuit. Id. at 174. The Fourth Circuit held

that because this case involved an “adjudicati

udication,”

immunity must apply. Jd. Ee ee

ARGUMENT

I. STATES HAVE NO SOVEREIGN IMMU

AGAINST THE UNITED STATES. —

; Our government is founded on a system of dual sover-

cignty. Each government—both state and federal—is sover-

eign and distinct within its sphere. See Federalist No. 39

(Madison) (“[The states] form distinct and independent por-

tions of the supremacy, no more subject, within their respec-

tive spheres, to the general authority, than the general author-

ity is subject to them, within its own sphere.”). The states

did not forfeit this sovereignty by ratifying the Constitution,

5

For example, the Fourth Circuit stated:

(The Supreme] Court noted [in Alden] the i

“presumption that

no anomalous and unheard-of proceedings or suits were in-

tended to be raised up by the Constitution . . . .” This lan-

pa ey Se or suits,” makes it clear that

‘ not suits, are nevertheless barred

the doctrine of sovereign immunity. — 7

243 F.3d at 170 (internal quotations and citation omitted).

9

but, rather, retain “a residuary and inviolable sovereignty.”

Id. This Court has held that, as part of this residual sover-

eignty, states possess sovereign immunity, according them

“the respect owed them as members of the federation.”

Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy,

Inc., 506 U.S. 139, 146 (1993); see also Alden v. Maine, 527

U.S. 706, 715 (1999) (sovereign immunity “central to

[states’] sovereign dignity”).

At the same time, however, the states did surrender a

portion of their sovereignty to the national government. This

notion is reflected in the Supremacy Clause, and in the very

structure of our federal system. U.S. Const. art. VI. The

states, for example, relinquished to the federal government

the plenary authority to regulate interstate and foreign com-

merce. As this Court recognized in Gibbons v. Ogden, 22

U.S. (9 Wheat.) 1, 196 (1824), this power is “complete in

itself, may be exercised to its utmost extent, and acknowl-

edges no limitations, other than are prescribed in the constitu-

tion.” Indeed, the need for a central government to regulate

commerce, without interference from the states or foreign

nations, was “one of the reasons for adopting the Constitu-

tion.” United States v. Locke, 529 U.S. 89, 99 (2000); see

also Federalist Nos. 12 (Hamilton), 44 (Madison), 64 (Jay).

The federal power to regulate the activity of the states in

maritime commerce is uncontroverted in the present case. As

this Court stated in the context of the Shipping Act of 1916:

“fT]t is too late in the day to question the power of Congress

under the Commerce Clause to regulate such an essential part

of interstate and foreign trade as the activities and instrumen-

talities which were here authorized to be regulated by the

Commission, whether they be the activities and instrumen-

talities of private persons or of public agencies.” California

vy. United States, 320 U.S. 577, 586 (1944) (citation omitted).

Indeed, even where members of this Court have expressed

doubt regarding the power of the federal government to regu-

late the states, no doubt was expressed regarding the federal

10

government’s constitutional authority to regulate navigation.

EEOC v. Wyoming, 460 U.S. 226, 269 n.5 (1983) (Powell, J.,

dissenting, joined by O’Connor, J.) (“[I]t is part of the power

to regulate interstate navigation that lies within the very core

of the Commerce Clause. I certainly do not suggest that

principles of federalism should prevent Congress from regu-

lating navigation.”).

By granting the federal government plenary authority to

regulate in defined areas, the states necessarily relinquished

part of their sovereign immunity under the “plan of the [Con-

Stitutional] convention.” Federalist No. 81 (Hamilton); see

also Alden, 527 U.S. at 755 (“{C]ertain limits are implicit in

the constitutional principle of state sovereign immunity.”);

Principality of Monaco y. Mississippi, 292 U.S. 313, 322-23

(1934). Most significantly, “{iJn ratifying the Constitution,

the States consented to suits brought by . . . the Federal Gov-

ernment,” Alden, 527 U.S. at 755 (citation omitted), and thus

“States have no sovereign immunity as against the Federal

Government.” West Virginia v. United States, 479 U.S. 305,

311 (1987); see also United States v. Mississippi, 380 U.S.

128, 140 (1965) (“{NJothing in [the Eleventh Amendment] or

any other provision of the Constitution prevents or has ever

been seriously supposed to prevent a State’s being sued by

the United States.”). For this reason, the Court has consis-

tently recognized that the federal government may bring suit

against a state in federal court to obtain compliance with fed-

eral law. See, e.g., Alden, 527 U.S. at 755-56, 759-60; Semi-

nole Tribe v. Florida, 517 U.S. 44, 71 n.14 (1996). Such

power, the Court has held, is not only “inherent in the consti-

tutional plan,” Principality of Monaco, 292 U.S. at 329 (cita-

tions omitted), but is also necessary to the “permanence of

11

the Union,” United States v. Texas, 143 U.S. 621, 644-45

(1892).°

Where the federal government has the power to regulate

the activity of the states, it also has the power to enforce its

laws against the states—either through direct enforcement or

by otherwise inducing compliance with its regulatory

scheme. “Any federal regulation demands compliance,

even by the states. South Carolina v. Baker, 485 U.S. _

515 (1988). In Reno v. Condon, 528 U.S. 141 (2000), =

example, the Court upheld a “regulatory scheme in whic

federal law prohibited states from disclosing personal infor-

mation in department of motor vehicle records. The Court

expressly noted that the provisions at issue were enforceable,

in part, by a regulatory process under which the United States

Attorney General could impose substantial fines on the states

for non-compliance. Id. at 146-47. The state objected that

these penalty provisions had the effect of coercing the state,

° imi , ign immunity were “in the plan of the

Other limits on states’ sovereign imi “ir '

convention.” See Federalist No. 81 (Hamilton). In ratifying the Constitu-

tion, states also consented to suit by other states:

i i ... involve[s] a dis-

A] suit one State against another State . in

= pt lao principle of the constitutional plan which

provides means for the judicial settlement of controversies be-

parties i cases established by their own

pcb nye yh wer - tn gh necessary feature of the

formation of a more perfect Union. |

Principality of Monaco, 292 U.S. at 328-29 (internal quotations and cita-

tions omitted).

12

noting that the statute’s “penalty provisions over the

States on 0 poteatiel punickeneat should thay fall to compty

with the Act.” Id. at 150. The Court observed that such a

threat is “an inevitable consequence of regulating a state ac-

tivity. . Id. (internal quotations and citation omitted). In

short, since “[a]ny federal regulation demands compliance,”

the federal government may coerce states in order to encour-

= bes 9 compliance. I/d. (internal quotations and citation

It is against this background of the power of the federal

government to take appropriate enforcement action against

the states, in spheres committed to federal authority, that the

Court should assess the constitutionality of Commission ad-

judications of violations of the Shipping Act.

Il. AN AGENCY PROCEEDING IS THE PROCESS

BY WHICH THE EXECUTIVE DECIDES HOW

WILL ENFORCE FEDERAL LAW. a

The court of appeals held that the reasoning of this

Court's precedents involving the immunity of the a from

private lawsuits in federal and state courts applies with equal

force to adjudicatory proceedings initiated by a private party

ae rv ener eget agency. See 243 F.3d at 169. To

clusion, the court of appeals equated the adju-

dicatory administrative proceeding before the town

with a private suit in court, stating that, in its view, the pro-

ceeding before the Commission “walks, talks, and squawks”

like a lawsuit. Jd. at 174. In the court’s view, the “placement

[of the proceeding] within the Executive Branch cannot blind

us to the fact that the proceeding is truly an adjudication,” id.

and, for this reason, sovereign immunity applies. as

The Fourth Circuit’s reasoning, however, fundamentally

misconceives the administrative process. The Commission’s

adjudicatory process is the means by which it gather facts,

assesses competing law and policy considerations, and de-

termines what position it will take in enforcing federal law.

13

While that process is informed by a privately initiated pro-

ceeding before an administrative law judge, it is fundamen-

tally different from a lawsuit.

Agencies can go about deciding what position to take in

the enforcement of the law in various ways: they can engage

in notice-and-comment rulemaking, adjudications, negotiated

rulemaking, informal agency action, and various permuta-

tions of each of these. 5 U.S.C. §§ 553-558; see generally |

Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative

Law Treatise 225-401 (3d ed. 1994). There are many rea-

sons why an agency might choose one form over another.

For example, “the agency may not have had sufficient ex-

perience with a particular problem to warrant rigidifying its

tentative judgment into a hard and fast rule. Or the problem

may be so specialized and varying in nature as to be impossi-

ble to capture within the boundaries of a general rule.” SEC

v. Chenery Corp., 332 U.S. 194, 202-03 (1947) (“Chenery

IT’). Moreover, a decision about which means to use entails

a political judgment by an agency about how it should allo-

cate its limited resources to address a wide array of issues.

See 1 Davis & Pierce, Administrative Law Treatise 280, see

also id. at 365 (“It is not uncommon for a single rulemaking

to require a decade and commitment of 10 percent of an

agency’s total staff and resources.”); Richard J. Pierce, Jr.,

The Choice Between Adjudicating and Rulemaking for For-

mulating and Implementing Energy Policy, 31 Hastings L.J.

1 (1979). In each instance, however, the agency is doing the

same thing: It is determining what position the national gov-

ernment should take in enforcing the law. See Chenery Il,

332 U.S. at 200-03.

The Court’s Chevron jurisprudence also recognizes that

rulemakings and adjudications are merely different means by

which an agency makes these policy decisions. See Chevron

U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837 (1984). In Chevron, the Court held that courts

should defer to an agency’s interpretation of a statute, so long

14

as rn — because the resolution of such a question

involves a policy judgment that Con

Id. at 842-43. As the Court stated: whe th ane

ministrative agency to administer a congressionally cre-

ated - + program necessarily requires the formulation of pol-

icy . * to fill any gap left, implicitly or explicitly, by Con-

gress.” Id. at 843 (internal quotations and citation omitted)

(first alteration in original). Although Chevron itself in-

volved a notice-and-comment rulemaking, this Court has re-

peatedly applied Chevron deference to policy made through

adjudications as well. E.g., INS v. Aguirre-Aguirre, 526 U.S

415, 423-25 (1999); Holly Farms Corp. v. NLRB, 517 US.

392, 389-99 (1996); Fort Stewart Schools v. Federal Labor

Relations Auth., 495 U.S. 641, 644-45 (1990). This defer-

ence to both adjudications and rulemakings is required be-

cause each represents the agency’s determination of a policy

issue delegated to it by Congress. See also United States v

Mead Corp., 533 US. 218, __, 121 S. Ct. 2164, 2171

(2001) (“Delegation of such [policy making] authority may

be shown in a variety of ways, as by an agency’s power to

engage : adjudication or notice-and-comment rulemak-

oe, |

| The functional equivalence of rulemaking and adjudica-

tion as a means to execute the law is central to administrative

law. See Chenery Il, 332 U.S. at 200-03. Moreover, the

Court has steadfastly declined to dictate one method of deci-

sional process (rulemaking) over another (adjudication): “In

ma ve important functions . . . , an administrative

agency must be equipped to act either b

individual order.” Jd. at 202. To era A 9 ile

process, the Court has held, would “stultify the administra-

tive process,” making the process “inflexible and incapable

of dealing with many of the specialized problems which

arise.” Id. (citation omitted). The Court reaffirmed this

holding in NLRB v. Bell Aerospace Co., 416 U.S. 267, 294-

95 (1974) (“{T]he choice between rulemaking and adjudica-

tion lies . . . within the [agency’s] discretion.”). Moreover,

15

since Bell Aerospace, this Court “has not even suggested that

a court can constrain an agency’s choice between rulemaking

and adjudication.” 1 Davis & Pierce, Administrative Law

Treatise 273. As the Court held in Vermont Yankee Nuclear

Power Corp. v. Natural Resources Defense Council, Inc.,

435 US. 519, 524-25 (1978), courts should not “intrude(]

into the agency’s decision making process,” but should leave

the decision making process to the “discretion of the agencies

to which Congress has confided the responsibility for sub-

stantive judgments.” See also id. at 545 (dictating additional

procedures “‘propel[s] the court into the domain which Con-

has set aside exclusively for the administrative

agency”) (quoting Chenery II, 332 U.S. at 196); see also

Pension Benefit Guaranty Corp. v. LTV Corp., 496 U.S. 633,

653-56 (1990) (applying Vermont Yankee to adjudications).

When the Commission in this case commenced a pro-

ceeding against the Ports Authority on the basis of a com-

plaint by a private party, it was engaged in the sort of adjudi-

cative lawmaking that is central to administrative law. The

Commission, as “the expert body established . . . for safe-

guarding this specialized aspect of the national interest,”

California, 320 U.S. at 584, is responsible for the “final deci-

sion” of the agency, 46 C.F.R. § 502.225. To this end, the

agency has established a procedure by which a recommended

decision is made by an administrative law judge after con-

ducting a hearing. Id. § 502.223 (“To the administrative law

judges is delegated the authority to make and serve initial or

recommended decisions.”). In such proceedings, non-

lawyers are permitted to appear. Id. § 502.27. Although the

ALJ makes an initial determination, “[t}he ALJ's decision is

no more than a recommendation that the Commission is free

to reject.” Petchem, Inc. v. FMC, 853 F.2d 958, 962 (D.C.

Cir. 1988).

After receiving the recommendation of the ALJ, the

Commission is then free to reach whatever determination it

deems appropriate. See 46 C.F.R. § 502.227(a)(6). Because

16

it is the Commission that makes the final policy judgment for

the agency, the Commission may—as in this case—review

the decision of an ALJ even when neither party appeals the

case. See id.’ Moreover, in making this final decision for the

agency, the Commission may take notice of “technical or sci-

entific facts within the general knowledge of the Commission

as an expert body.” Jd. § 502.226(a).

Unlike a case before a court, neither the ALJ nor the

Commission has independent enforcement power or inde-

pendent contempt power: the United States must go to court

to compel action of any sort. Moreover, a reviewing court

can only review the decision “[on] the grounds” provided by

the agency, as a contrary rule would “propel the court into

the domain which Congress has set aside exclusively for the

administrative agency.” Chenery II, 332 U.S. at 196 (sum-

marizing SEC v. Chenery Corp., 318 U.S. 80 (1943) (“Chen-

ery I)).” In this case, the private party that brought the ini-

tial complaint declined to seek review of the ALJ’s order of

dismissal before the Commission; significantly, it is the

Commission that reached out to continue to pursue the pro-

ceeding, and it is the Commission that is the petitioner in this

Court.

The court of appeals’ focus on certain procedural simi-

larities between the agency process and a private lawsuit

overlooked the more important functional equivalence of no-

” Needless to say, the Commission's ability to decide an issue even

when no party has “appealed” contrasts with the role of a federal court.

A court can only hear “cases,” and therefore does not have the power to

act without an aggrieved party. The Commission, by contrast, is setting

the policy for the Executive branch and, therefore, has the right—and

duty—to act even when no party seeks review.

Chenery I, of course, stands in contrast to the rule this Court and

federal appellate courts apply in reviewing the decisions of lower courts.

This Court and the courts of appeals may affirm a decision on alternate

grounds. See, e.g., Bennett v. Spear, 520 U.S. 154, 166 (1997).

17

‘ce-and-comment rulemaking and agency adjudication. The

a fact that an agency proceeds by means of —

does not convert the matter from agency action into a aw

suit: “It is no doubt true that [agencies] adjudicate, “0

they determine facts, apply a rule of law to those facts, al

thus arrive at a decision. But there is nothing ‘inherently ju-

dicial’ about ‘adjudication;”” rather, adjudications by agen-

cies involve “individuals exefcising executive rather +" Jue

dicial power (in the constitutional sense). Freytag v. hare

missioner, 501 U.S. 868, 908-09 (1991) (Scalia, J, joi ~- y

O’Connor, Kennedy, and Souter, JJ., concurring in the judg-

ment) (emphasis in original).

or does the fact that this case may have required the

eo 4 of factual issues mean that the Commission oo

ceeding must be equated with a private lawsuit. Agencie

necessarily resolve factual issues in a broad array of —

in the process of executing the law. Indeed , as this open —

recognized, it may even decide such issues through - po

and-comment rulemakings. In Heckler v. Campbe r -

U.S. 458 (1983), for example, the Social Security A a

stration developed a “matrix” to decide whether a

cant’s particular factual scenario would constitute a ; _

ity” within the meaning of the Social Security ——

assessment that had previously been determined rough

hearings. Id. at 461-62. The Court upheld the agency - ”

proach, concluding that an agency may rely[} on rulem 8

to resolve certain classes of issues,” “even where an —

enabling statute expressly requires it to hold a hearing. .

at 467.

imilarly, the regulatory scheme at issue here permits

the pam to to timit the issues decided by omens in

notice-and-comment rulemaking to narrow the range : =

sues. See 46 C.F.R. § 502.227(a)(6); see also id. $§ 50 ot

502.56. Moreover, pursuant to its delegated authority to

minister and enforce the law, the agency may also decide, /

“order or rule,” to exempt a “class of agreements . . . OF (a

18

specified activity . . . from any requirement of the Shipping

Act,” so long as it determines that the exemption “will not

result in substantial reduction in competition or be detrimen-

tal to commerce.” Id. § 502.67.

That a Commission proceeding may be initiated by the

filing of a complaint by a private party, 46 U.S.C. app.

§ 1710(a), as well as at the Commission’s own initiative,

id. § 1710(c), does not transform the agency proceeding into

the equivalent of a private lawsuit.” As Justice Jackson ob-

served for the Court in United States v. Morton Salt Co., 338

US. 632, 642 (1950), although there have been times “espe-

cially early in the history of the federal administrative tribu-

nal” where “courts were persuaded to engraft judicial limita-

tions upon the administrative process,” judicial and adminis-

trative powers are distinct concepts. In particular, “an ad-

ministrative agency charged with seeing that the laws are en-

forced may . . . have and exercise the powers of original in-

quiry” and “can investigate merely on suspicion that the law

is being violated, or even just because it wants assurance that

it is not.” Jd. at 642-43. Surely, the Commission’s power to

investigate—to assure itself that the law is not being vio-

lated—extends far enough to permit the Commission to con-

duct proceedings, not only when it has itself uncovered evi-

dence of a violation of law, but when a private party brings

alleged wrongdoing to its attention. This process of “in-

form[ing] itself as to whether there is [a] probable violation

of the law,” id., does not alter the fact that the Commission is

engaged in law enforcement and not the sort of adjudication

of claims that characterizes the judicial system.

a . ‘

It is certainly reasonable for Congress to have concluded that this

statutory structure constitutes an appropriate way to bring potential viola-

tions of law to the Executive's attention, so the Executive Branch can

then decide what action it should take.

19

Finally, and for similar reasons, an administrative pro-

ceeding before the Commission is unlike an adjudication be-

fore an Article I court such as the Court of Federal Claims or

a bankruptcy court. Unlike the Commission, those entities

have not been delegated, and do not exercise, any authority to

make policy on behalf of the Executive Branch. See Chev-

ron, 467 U.S. at 843-44. Similarly, neither the Court of Fed-

eral Claims nor a bankruptcy court can be said to be engaged

in the enforcement, as opposed to the neutral application, of

the law. The Commission conducts adjudications to deter-

riaine what position the United States should take in enforcing

the law. In sharp contrast, these Article I courts act as neutral

arbiters and possess independent coercive powers, see 28

U.S.C. § 2521; Fed. R. Bankr. P. 9020. See also Freytag,

501 U.S. at 891 (Tax Court exercises “judicial power” be-

cause “i]t is neither an advocate nor rulemaker. ... [I]t con-

strues statutes passed by Congress and regulations promul-

gated by the Internal Revenue Service.”). Unlike Commis-

sion proceedings, moreover, appeals from the decisions of

the Court of Federal Claims and the bankruptcy courts are

not, as a matter of course, brought against the United States,

and the determinations of these Article I courts are not en-

forced through actions brought by the Attorney General.

Thus, even though some analogies may be drawn be-

tween an administrative proceeding before the Commission

and a lawsuit, the two are fundamentally different: an ad-

ministrative proceeding before the Commission constitutes

an action by the federal government to decide the position of

the United States in enforcing federal law, while a lawsuit

involves the final and enforceable resolution of a discrete

case or controversy by a disinterested referee with no inde-

pendent duty to investigate and enforce the law.

20

Ill. A STATE DOES NOT HAVE IMMUNITY IN A

COMMISSION PROCEEDING AS- ANY COM-

PULSION RESULTS FROM THE ACTION OF

THE UNITED STATES.

This Court has long recognized that sovereign immunity

protects the states from the requirement that they defend law-

suits as a result of private compulsion. Here, the Ports Au-

thority’s argument fails, not only because a Commission pro-

ceeding is not a lawsuit, but also because no private party —

may compel a marine terminal operator to appear and defend

itself before the Commission. As a result, the sort of private

compulsion that forms the essential touchstone of sovereign

immunity doctrine is not present here.

In a proceeding before the Commission, whether initi-

ated by a private party or the Commission, the Commission

lacks independent enforcement power. As the court of ap-

peals observed, “under the Act, a state may choose to ignore

a subpoena, an order, or a judgment.” 243 F.3d at 175.

Rather, the direct, coercive force of the law is not implicated

until either the Attorney General, in his discretion, brings an

action to enforce the Commission’s order or a private party

brings an action seeking to enforce an order in federal district

court. See 46 U.S.C. app. § 1713(c)-(d). There is no ques-

tion, however, that the United States may maintain a suit

against a state instrumentality, and that the “States have no

sovereign immunity as against the Federal Government.”

West Virginia v. United States, 479 U.S. at 311. A claim

brought by a private party to enforce a reparation or other

order, in contrast, would likely be met with the state’s asser-

tion of a sovereign immunity defense. To the extent such a

defense has merit, the state could readily avoid suit, and

would suffer no coercion at the hand of a private party.

Finally, it is possible that a state instrumentality might,

at the administrative stage, feel the indirect pressure of the

threat of a later enforcement action that the Attorney General

might bring. Any such coercion, however, is the product of a

21

constitutional structure that permits the United States to en-

force neutral regulations against state instrumentalities, and

that permits the United States to bring suit against state in-

strumentalities to obtain compliance. In short, any such co-

ercion is the product of federal action—or the threat of fed-

eral action—and not the sort of private action that implicates

sovereign immunity.

A. Sovereign Immunity Protects a State From Coer-

cion by a Private Party.

In Federalist No. 81, in a passage repeatedly quoted by

this Court, see, e.g., Alden, 527 U.S. at 716-17, Alexander

Hamilton laid out the general principle that states are im-

mune from suits by private parties: “It is inherent in the na-

ture of sovereignty not to be amenable to the suit of an indi-

vidual without its consent. This is the general sense, and the

general practice of mankind; and the exemption, as one of the

attributes of sovereignty, is now enjoyed by the government

of every State in the Union.” Federalist No. 81 (Hamilton)

(emphasis omitted). Hamilton continued, giving further con-

tent to this general statement, and linked sovereign immunity

to a state’s protection from compulsion by a private party:

The contracts between a nation and individuals are

only binding on the conscience of the sovereign, and

have no pretensions to a compulsive force. They

confer no right of action, independent of the sover-

eign will. To what purpose would it be to authorize

suits against States for the debts they owe? How

could recoveries be enforced?

Ia."°

10 Some of the statements of the Founders could be construed (as the

court of appeals seems to have concluded) to support the thesis that sov-

ereign immunity protects states not only from coercion by a private party,

but also from the mere fact of-being asked to appear. At the Virginia

22

Similarly, in his dissenting opinion in Chisholm v. Geor-

gia, Justice Iredell tied sovereign immunity to protection of a

sovereign against compulsion by an individual: “my present

opinion is strongly against any construction of [the Constitu-

tion], which will admit, under any circumstances, a compul-

Sive suit against a State for the recovery of money.” 2 U.S.

(2 Dall.) at 449-50. Justice Iredell went on to note that the

citizen’s recourse is to the conscience of the sovereign: “The

remedy, in the language of Blackstone, being a matter of

grace, and not on compulsion.” Jd. at 444; see also id. at 442

(““If any person has, in point of property, a just demand upon

the King, he must petition him in his Court of Chancery,

where his Chancellor will administer right, as a matter of

grace, though not upon compulsion.’”) (quoting Blackstone).

Translating this from the context of the King to that of the

States, Justice Iredell stated: “public faith alone is the ground

of relief, and the Legislative body the only one that can af-

ford a remedy, which from the very nature of it must be the

effect of its discretion and not of any compul process.”

Id. at 446. ‘ watind

Since Justice Iredell’s famous dissent, this Court has

repeatedly tied sovereign immunity to protecting the states

ratifying convention, for example, John. Marshall stated: “I hope that no

gentleman will think that a state will be called at the bar of the federal

court.” 3 Debates on the Federal Constitution 555 (Jonathan Elliot 2d

ed. 1 836). Nonetheless, two sentences later, Marshall explicitly linked

the indignity to coercion: “It is not rational to suppose that the sovereign

power should be dragged before a court.” Id. (emphasis added). Other

Statements by the Founders are best seen as conclusory statements that

States are immune from private suits. See, e.g., id. at 533 (Madison) (“It

is not in the power of individuals to call any state into court... . [I]f a

state should condescend to be a party, this court may take cognizance of

it.”). The Founders’ concern about coercion is not surprising, in light of

the hefty war debt of many of the states, and the concern of many of the

Founders that states not be compelled to pay these debts. See, e.g., Fed-

- eralist No. 81 (Hamilton); see also Alden, 527 U.S. at 716; Nevada v.

Hall, 440 U.S. 410, 418 (1979). %

23

from coercion by a private party (or foreign state or Indian

tribe). See, e.g., Alden, 527 U.S. at 717 (“The contracts be-

tween a nation and individuals are only binding on the con-

science of the sovereign, and have no pretensions to a com-

pulsive force.””) (quoting Federalist No. 81); Seminole Tribe,

517 U.S. at 75 (refusing to subject state official “to the full

remedial powers of a federal court, including, presumably,

contempt sanctions” in a private suit); In re Ayers, 123 U.S.

443, 505 (1887) (private suits against states present “the in-

dignity of subjecting a State to the coercive process of judi-

cial tribunals at the instance of private parties”); Hans v. Lou-

isiana, 134 U.S. 1, 21 (1890) (a state “cannot be compelled

by suit [by an individual] to perform its contracts”). Where

there is no such coercion, a state’s sovereign immunity is not

implicated.

B. Private Parties and the Commission Do Not Have

Independent Coercive Powers and Any Coercion

in the Regulatory Scheme Is the Power of the

United States.

Under this principle, the court of appeals erred in direct-

ing that the Commission dismiss the administrative proceed-

ing brought against respondent. Neither the private party nor

the Commission has any independent coercive power in the

ing. As a result, any coercive effect on the Ports Au-

thority must be the product of (1) the risk of stigma the Ports

Authority may experience by failing to comply with federal

adminisirative rules and orders; (2) the possibility that a pri-

vate party might bring an action to enforce an order of repa-

ration or other order entered by the Commission; or (3) the

possibility that the Attorney General might someday bring an

enforcement action. None of these potential sources of coer-

cion, however, supports the court of appeals’ decision.

1. Stigmatic Harm

In an administrative proceeding initiated by a private

party, the state cannot be “compelled” by the party or the

24

Commission to do anything. As the court of appeals recog-

nized: “[U}nder the Act, a state may chaose to ignore a sub-

poena, an order, or a judgment.” 243 F.3d at 175 (citation

omitted).

The court of appeals recognized the lack of enforcement

power, but noted that the state would suffer an unacceptable

“stigma” if it chose not to answer to the administrative pro-

ceedings: “[A] judgment or a subpoena against a state is a

powerful thing, if not legally, then certainly politically. All

parties, and certainly political entities such as states, have an

interest in avoiding the stigma that attaches even to an unen-

forceable default judgment.” Id. (emphasis added). Yet the

possible “stigma” that the Fourth Circuit objects to is nothing

more than the political accountability that principles of feder-

alism require that a state bear. See Alden, 527 U.S. at 775-

52; Hans, 134 U.S. at 21 (“The legislative department of a

State represents its polity and its will, and is called upon by

the highest demands of natural and political law to preserve

justice and judgment, and to hold inviolate the public obliga-

tions. Any departure from this rule . . . never fails in the end

to incur the odium of the world, and to bring lasting injury

upon the state itself.”); Chisholm, 2 U.S. (2 Dall.) at 446

(Iredell, J., dissenting) (if a state legislature fails to provide a

remedy for its citizens, it must incur “whatever reproach” its

citizens deem appropriate); cf. New York v. United States,

505 U.S. 144, 168 (1992). Thus, the court of appeals got it

backwards: the state might ignore the administrative pro-

ceeding, but must be willing to accept “whatever reproach

the [state] may incur.” Chisholm, 2 U.S. (2 Dall.) at 446

(Iredell, J., dissenting).

2. Enforcement Action by Private Party

Similarly, the possibility that a private party might

someday bring an action in federal district court seeking to

enforce a reparation or other order against a state instrumen-

tality, see 46 U.S.C. app. § 1713(c)-(d), does not support the

court of appeals’ decision. In such an action, it is likely that

25

a state would assert sovereign immunity. To the extent that a

court treats a privately initiated action to enforce a reparation

or other order as a private suit against the state, it is likely

that the court would sustain the defense.'’ In this instance,

the state instrumentality could not and would not be coerced:

it would be free to participate in the district court litigation

and to accept any judgment the court might enter, or it would

be free to assert its immunity and to leave the private plaintiff

without a judicial remedy.

But the fact that a state instrumentality might assert sov-

ereign immunity as a defense to an action to enforce a repara-

tion order does not deprive the Commission of the authority

to determine whether reparations are due. As the Commis-

sion stated in this case:

. [E}ven if a court were to rule that a Commission

reparations award is unenforceable, the issuance of

an order finding violations of the Shipping Act 1s

not futile. The Commission must be able to deter-

mine whether the actions of regulated entities like

{the Ports Authority] violate the Shipping Act.

Whethér or not a complainant is able to collect on a

reparations award is a separate issue, distinct from

the Commission’s obligation to pass judgment on

the legality of allegedly unreasonable or otherwise

prohibited actions.

1! ‘The Court need not, and should not, decide here whether sovereign

immunity is available as a defense in a private enforcement proceeding.

Compare Pet. App. 35a-37a (Commission argues that a state would not

have sovereign immunity in such an action) with Brief for the United

States in Opposition at 9 n.2 (Solicitor General takes position that states

would have immunity in a private enforcement proceeding). If, as the

Solicitor General asserts, states have sovereign immunity in such a pro-

ceeding, the states would not suffer any coercion as they could assert this

i : if the Commission is correct, any coercion present would be

26

Pet. App. 37a.'? Moreover, sovereign immunity is a discre-

tionary defense, which a state may assert or may forgo.

Rather than face public “reproach,” the state might well elect

to defend its actions either before the court of appeals, under

the Hobbs Act, 28 U.S.C. § 2341 et seq., or before the district

court in an enforcement action, 46 U.S.C. app. § 1713(c)-(d).

3. Enforcement Action by the United States

If private enforcement were all that was at stake, and if a

State were entitled to assert sovereign immunity in such an

action, a state might default in the Commission proceeding

with little concern: the state could avoid any enforceable

judgment and would merely need to assess the political cost

of non-compliance. Under the statutory scheme, however,

the United States has a duty to enforce the law, including by

going to federal district court to seek an enforceable judg-

ment in appropriate cases. The Act specifies that the United

States, through the Attorney General, “may seek enforcement

[of a nonreparation order] by a United States district court

having jurisdiction over the parties.” 46 U.S.C. app.

12 _-

Furthermore, a Commission order determining that a state has vio-

lated the law—even if that order is unenforceable—is important to ensure

that a state is accountable to its citizens. This Court has repeatedly noted

that a state must be politically accountable to its citizens for any failure to

comply with federal law, and that such accountability is critical to the

workings of federalism. Alden, 527 U.S. at 775-52; Hans, 134 U.S. at 21;

Chisholm, 2 U.S. (2 Dall.) at 448 (Iredell, J., dissenting); of New York,

505 U.S. at 168. In the context of administrative law, however, the sub-

stantive requirements of law are not always based on preexisting norms,

but at times depend on the administrative agency choosing one policy

from the range of permissible policy choices. See Chevron, 467 U.S. at

842-43. In other words, the substantive requirements of law are often not

27

§ 1713(c). Similarly, the Attorney General may seek en-

forcement of an order assessing civil penalties “in an appro-

priate district court of the United States.” Id. § 1712(e). But

such action by the United States does not give rise to sover-

eign immunity concerns; it is well settled that states do not

have sovereign immunity as to suits by the federal govern-

ment. Compare Alden, 527 U.S. at 755-56, 759-60 and

Seminole Tribe, 517 U.S. at 71 n.14 with West Virginia v.

United States, 479 U.S. at 311 and United States v. Texas,

143 U.S. at 645; see also FMC v. Port of Seattle, 521 F.2d

431, 433 (9th Cir. 1975) (stating, in the context of a proceed-

ing involving a state instrumentality, “[i]t is beyond cavil that

the very backbone of an administrative agency’s effective-

ness in carrying out the congressionally mandated duties of

industry regulation is the rapid exercise of the power to in-

vestigate the activities of the entities over which it has juris-

diction and the right under the appropriate conditions to have

district courts enforce its [actions]”).

It is true that states may feel some pressure—or effective

coercion—to participate in the administrative process based

on the threat that the United States may someday bring an

enforcement action. Such indirect coercion, however,

is entirely consistent with the federal structure and the consti-

tutional allocation of state and federal power. Any such co-

ercion is intimately intertwined with the United States’s

“right to govern.” Hall, 440 U.S. at 416.

Where the federal government has the power to regulate

the states, it also has the power to enforce its laws against the

states—either through direct enforcement or by inducing

compliance with its regulatory scheme. Even in those areas

in which members of the Court have expressed doubts about

the federal government’s power to regulate states, see, ¢.g.,

Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528,

557-79 (1985) (Powell, J., dissenting); EEOC v. Wyoming,

460 U.S. at 265-75 (Powell, J., dissenting), no Justice has

ever suggested that the United States is limited in taking en-

28

forcement action where the substantive power exists. Thus,

although members of the Court doubted whether the federal

government could regulate age discrimination involving state

employees, EEOC v. Wyoming, 460 U.S. at 265-75 (Powell,

J., dissenting), or the wages paid to those employees, Garcia,

469 U.S. at 557-79 (Powell, J., dissenting), it has never been

suggested that, once that power was found, the United States

could be denied the ability to enforce the law. See Alden,

527 U.S. at 759 (suggesting that any federal interest could

have been protected by sending an attorney for the United

States to Maine to enforce wage-and-hour laws). If the fed-

eral government has the power to regulate the activity of the

States—as it does here—it necessarily has the power to in-

duce compliance. The power to regulate, without the power

to induce compliance, is no power at all.

Just two Terms ago, this Court upheld, over constitu-

tional challenge, a federal law that regulaied the states and

induced compliance through a federal administrative mecha-

nism. In Reno v. Condon, the state objected that the penalty

provisions of the scheme coerced it to comply, noting that the

Statute’s “penalty provisions hang over the States as a poten-

tial punishment should they fail to comply with the Act.”

528 U.S. at 150. The Court rejected this challenge on the

ground that any such coercion is “an inevitable consequence

of regulating a state activity.” Jd. (internal quotations and

citation omitted). As the Court noted: “Any federal regula-

tion demands compliance,” and this pressure assures compli-

ance. /d. (internal quotations and citation omitted).

In sum, whether the federal power is understood as ap-

plying at the hearing stage or at the enforcement stage, it is

the federal government that is acting, and thus the federal

government's “right to govern” that is at stake. Hall, 440

U.S. at 416. Accordingly, sovereign immunity does not ap-

ply in these proceedings. See West Virginia v. United States,

479 U.S. at 311; United States v. Texas, 143 U.S. at 645.

29

CONCLUSION

For the foregoing reasons, the judgment of the court of

appeals should be reversed.

Respectfully submitted,

LLOYD N. CUTLER

Counsel of Record

A. STEPHEN HUT, JR.

CHRISTOPHER J. MEADE

JENNIFER M. ROCKOFF

WILMER, CUTLER & PICKERING

2445 M Street, N.W.

Washington, D.C. 20037

November 29, 2001 (202) 663-6000

Counsel for Amici Curiae

Senators Edward M. Kennedy and Russell D. F eingold