Freytag v. Commissioner

LOCATION:Clark County Jail

DOCKET NO.: 90-762
DECIDED BY: Rehnquist Court (1990-1991)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 501 US 868 (1991)
ARGUED: Apr 23, 1991
DECIDED: Jun 27, 1991

John G. Roberts, Jr. – for respondent
Kathleen M. Sullivan – Argued the case for the petitioners

Facts of the case

Under 26 U.S.C. 7443A(b), the Chief Judge of the United States Tax Court (an Article I Court established by Congress) may appoint special trial judges to certain specified proceedings explicitly laid out in the statute, in which the special trial judges may issue decisions. He may also appoint them to “any other proceeding which the chief judge may designate,” but in those unspecified cases the special trial judge may not issue a final decision, only draft an opinion which must be reviewed by a regular judge of the Tax Court.

Freytag and several other defendants were charged with using a tax shelter to avoid paying roughly $1.5 billion in taxes. They consented to have their case heard by a special trial judge. The trial judge eventually drafted an opinion unfavorable to their position, which was reviewed and adopted by the Chief Judge. They then appealed the case, arguing that their case was too complex to assign to a special trial judge under section 7443A. Congress’s decision to allow the Chief Judge to make such an assignment, they argued, violated the Appointments Clause of the Constitution (Article II Section 2), which provides that Congress may “vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.” Freytag asserted that the “Courts of Law” referred to there were only Article III courts (Federal District Courts, Circuit Courts of Appeals, and the Supreme Court, all of which have judges with lifetime tenure), and that the Chief Judge was part of an Article I court, meaning that Congress could not assign him the power of appointment. The Fifth Circuit Court of Appeals rejected that argument, affirming the Tax Court’s decisions.


Does 26 U.S.C. 7443A(a) permit the assignment of particularly complex cases dealing with large amounts of money to “special trial judges” appointed by the Chief Judge of the U.S. Tax Court, provided that the special trial judges do not enter the decision but simply prepare an opinion for review and adoption by a regular Tax Court judge? Under the Appointments Clause of Article II Section 2, may Congress permit the Chief Judge of the U.S. Tax Court to appoint “special trial judges” to “any other proceeding which the chief judge may designate”?

Media for Freytag v. Commissioner

Audio Transcription for Oral Argument – April 23, 1991 in Freytag v. Commissioner

Audio Transcription for Opinion Announcement – June 27, 1991 in Freytag v. Commissioner

William H. Rehnquist:

The opinion of the Court in No. 90-762 Freytag against the Commissioner of Internal Revenue will be announced by Justice Blackmun.

Harry A. Blackmun:

This case comes to us from the Court of Appeals for the Fifth Circuit.

It is an important case for those concerned with governmental structure or it has to do with separation of powers, but perhaps it has little appeal by way of a bench announcement for those who are not so interested.

The litigation centers in a statute that authorizes the Chief Judge of the United States Tax Court to appoint special trial judges.

Under the statute, he may assign to them certain specified matters and “any other proceeding he may designate.”

And as to the latter of this special trial judge may only hear the case and prepare the proposed findings in an opinion but the actual decision is then rendered by the Tax Court judge.

The petitioners here sought re-determination of the Tax Court of approximately one and a half billion dollars in asserted federal income tax deficiencies.

There are cases where assigned to a Tax Court judge but were later reassigned to a special trial judge.

His unfavorable opinion was adapted by the Chief Judge as the opinion of the Tax Court.

The Fifth Circuit rejected petitioner’s arguments that the assignment of a complex case to a special trial judge was not authorized by the statute and that the assignment violated the appointments clause of the constitution which limits congressional discretion to vest the appointment of so-called inferior officers to the president, the heads of departments, and the courts of law.

We affirm that judgment.

We hold hat the statute authorizes the Chief Judge to assign any Tax Court proceeding regardless of complexity or amounted controversy to a special trial judge.

Its plain language which contains no limiting term restricting its reach.

We also hold that the statute does not transgress the structure of separation of powers embodied in the appointments clause.

Such power can be vested in the Chief Judge only if his court falls within one of the three repositories that the clause specifies.

Congress obviously did not intend to create or to grant the president the power to appoint special trial judges, and the term department refers only to cabinet level departments.

An article one court such as the Tax Court, however, is a court of law within the meaning of the clause and that is the answer to the issue in the case.

Justice Scalia has filed an opinion concurring in part and concurring in the judgment and is joined by Justice O’Connor, Justice Kennedy and Justice Souter.