No, it’s not a utilitarian approach. A utilitarian approach would be the one you favor: apply libertarian principles to the facts at hand, law be damned.
“Utilitarian” is not a synonym for “unprincipled” or “arbitrary.” Utilitarianism is the view that one should do whatever maximizes utility. Applying libertarian principles regardless of the positive law is not a utilitarian approach (unless one claims that we ought to apply libertarian principles because doing so will maximize utility).
[S]aying that federal judges are free to apply their own ideas of the Good, theTrue, and the Beautiful means that we’re in a lawless society: one in which the judges can impose whatever policies they want to impose upon us, and we can’t do anything.
But nobody has proposed that judges ought to apply whatever principles they think are just. Matt_Georgia’s original proposal (which he seems to have retracted) was that judges ought to apply whatever principles are in fact just (i.e., libertarian principles). And libertarian law has been worked out in quite some detail. Of course, there are disagreements about how to apply libertarian principles to particular issues, but this is the case with every law code known to man, including the Constitution (not every conceivable constitutional issue was explicitly discussed at the ratifying conventions).
On the alleged arbitrariness of natural law: The argument that judges ought to follow the positive law since otherwise the legal system would be unpredictable and arbitrary relies on the assumption that the rule of law is objectively better than arbitrary government. Isn’t this a kind of natural-law argument?
I think Dr. Gutzman’s position on Chisholm is defensible because we do not have an absolute duty to prevent others from acting unjustly. But we do have an absolute duty not to commit any injustices ourselves, even if we have taken an oath to do so. This means, e.g., that a judge may never convict someone of drug possession, even if a law that is in accordance with the constitution obliges him to do so.