D.C. Circuit Review – Reviewed: Fifth Circuit Edition

by Aaron Nielson — Friday, Sept. 15, 2017@Aaron_L_Nielson

I love the U.S. Court of Appeals for the Fifth Circuit.

Many years ago I flew to Houston for a clerkship interview with Judge Jerry Smith. I had never been to Houston before; indeed, I may not have ever been to Texas before. When I arrived, I remember worrying about the humidity and the heat. (I got over it.) I also remember the first question I was asked during the interview by one of the clerks: “Was Erie rightly decided?” And I remember meeting Judge Smith and going to lunch with him and the rest of the team — we had Tex-Mex. It was a happy day when the Judge called a few days later to offer me the clerkship. So after graduating, I moved to Texas, a place I never expected to live. It was a fantastic year. Every month or so I’d take a trip with the Judge to New Orleans to hear oral argument. And every day, the clerks had lunch with Judge Smith. (Because he had been city attorney before his appointment to the Fifth Circuit, he knew amazing places to eat that were far off the beaten path.) More than that, we had great conversations as we worked on fascinating cases. The variety of legal issues was remarkable; we’d have a maritime case, followed by a criminal case, followed by a diversity jurisdiction case — all in a single sitting. It was one of the best years of my life. In short, Houston is a wonderful city; Texas is a wonderful state; and the Fifth Circuit is a wonderful court.

This week, the D.C. Circuit — which I also am more than a little fond of! — did not decide any cases.* But last week the Fifth Circuit issued a decision that explicitly disagrees with the D.C. Circuit. And the issue is important; it relates to the circuit split that the D.C. Circuit has with the Tenth Circuit — which may trigger Supreme Court review. It is about the Appointments Clause. Accordingly, this week is a good time to focus on the Fifth Circuit.

In Burgess v. FDIC, a Fifth Circuit panel (Judge Owen, joined by Judges Jones and Clement) issued a stay pending disposition of a petition for review. The panel concluded that it is likely that FDIC administrative law judges are inferior officers and not simply employees of the United States.

As explained by Judge Owen:

A government worker is an “Officer of the United States” subject to the Appointments Clause if he or she exercises “significant authority pursuant to the laws of the United States.” In Freytag v. Commissioner of Internal Revenue, the Supreme Court applied this standard to hold that a Special Trial Judge (STJ) in the United States Tax Court, an Article I court, was an inferior Officer subject to the Clause.

Later, the D.C. Circuit in Landry v. FDIC considered whether FDIC ALJs are inferior Officers—the same issue Burgess raises here—and held that they are not. In its rationale, the court read Freytag as holding that a government worker must have final decision-making authority to be considered an Officer. That court recently applied its Landry rule in Raymond J. Lucia Companies, Inc. v. SEC to hold that SEC ALJs are not “inferior Officers” either.

While en banc review of Lucia was pending before the D.C. Circuit, the Tenth Circuit, in Bandimere v. SEC, rejected the D.C. Circuit’s interpretation of Freytag. It held that (1) final decision-making authority is not a necessary condition to Officer status; and (2) SEC ALJs are inferior Officers. The D.C. Circuit subsequently denied en banc review in Lucia by an equally divided court, and accordingly, a circuit split remains regarding SEC ALJ’s. A petition for a writ of certiorari is now pending before the Supreme Court in Lucia.

The Fifth Circuit panel disagreed with the D.C. Circuit:

We conclude, based on the Supreme Court’s decision in Freytag, that Burgess has made a “strong showing” that he is likely to succeed on the merits of his petition for review. In Freytag, the Court considered an Appointments Clause challenge to a proceeding in the United States Tax Court over which an STJ appointed by the Chief Judge of the Tax Court had presided. The relevant statute authorized the STJ to decide certain cases, but in others, to “hear the case and prepare proposed findings and an opinion,” without issuing a decision. Freytag’s proceeding was conducted under the latter provision, and when the Tax Court ruled adversely to him after adopting the proposed findings of the STJ, Freytag argued that the STJ was an inferior Officer within the meaning of the Appointments Clause and had not been appointed in accordance with its requirements. Although the STJ lacked authority to enter a final judgment in Freytag’s case, the Court agreed. The Court based its holding on the “significance of the duties and discretion that special trial judges possess.” In reaching this conclusion, the Court noted that (1) the position was “established by Law;” (2) its “duties, salary, and means of appointment . . . are specified by statute;” and (3) the officeholder was empowered to “exercise significant discretion” over “important functions.” The Court then stated that “[e]ven if the duties of [STJs] . . . were not as significant as we . . . have found them to be,” the “independent authority” that STJs exercised when authorized to enter a final judgment in some cases rendered them “inferior Officers” for all purposes.

The Court held that the STJs’ significant statutory duties and discretion brought them within the Appointments Clause. The Court’s additional statement—that these duties and discretion, coupled with the power to enter final judgments also makes the STJs Officers—was dicta or an alternative basis for its decision. We therefore conclude, contrary to the D.C. Circuit’s decision in Landry, that final decision-making authority is not a necessary condition for Officer status.

Fascinating. The D.C. Circuit does a lot of admin law, but it does not have a monopoly on it. It will be interesting to see if the Supreme Court weighs in.

* Apologies; this is a quick post. I’m traveling.

 

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About Aaron Nielson

Professor Nielson is an associate professor at Brigham Young University Law School, where he teaches and writes in the areas of administrative law, civil procedure, federal courts, and antitrust. He currently serves as a public member of the Administrative Conference of the United States, a federal agency that studies the administrative process and makes recommendations on ways to improve it. He also co-chairs the Rulemaking Committee of the American Bar Association’s Section of Administrative Law & Regulatory Practice. Previously he chaired the Section's Antitrust & Trade Regulation Committee. Before joining the academy, Professor Nielson was a partner in the Washington, D.C. office of Kirkland & Ellis LLP (where he remains of counsel). He also has served as a law clerk to Justice Samuel A. Alito, Jr. of the U.S. Supreme Court, Judge Janice Rogers Brown of the U.S. Court of Appeals for the D.C. Circuit, and Judge Jerry E. Smith of the U.S. Court of Appeals for the Fifth Circuit. Follow him on Twitter @Aaron_L_Nielson.

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