Lucia v. SEC—One Year Later, by Kent Barnett & Earl Cooke

by Guest Blogger — Wednesday, Aug. 21, 2019

The Supreme Court issued its opinion in Lucia v. SEC on June 21, 2018. The Lucia Court held that “the [Securities and Exchange Commission’s] ALJs are Officers of the United States, subject to the Appointments Clause” and not “simply employees of the Federal Government.” The SEC’s ALJs are “Officers of the United States” because they “occupy a continuing position established by law” and “exercise significant authority.”

Some thought that Lucia would have “far reaching consequences for the government’s various administrative agencies” or cause “years of costly litigation” for numerous plaintiffs. For instance, would ALJs who work for other agencies also be “Officers”? What about other agency adjudicators who are not ALJs? If ALJs or other adjudicators are officers, are they appointed by department heads, as the Appointments Clause requires, or mere agency heads? And, perhaps most importantly, as Justice Breyer worried, would Lucia’s holding that ALJs were officers “risk transforming administrative law judges from independent adjudicators into dependent decisionmakers” by bringing their multi-tiered protection from department heads’ at-will removal into question?

With these concerns in mind, we set out to evaluate the impact of Lucia by embarking on a limited empirical project of the federal district- and circuit-court cases citing Lucia during the full first year after the decision was released (June 21, 2018 to June 21, 2019). The data set includes 201 federal cases, encompassing eight circuit-court decisions and 193 federal district-court decisions.[1] We coded each decision for, among other things, the court, which opinion in Lucia the decision referenced, the purpose of the Lucia citation, the agency at issue, and the subject matter at issue.

The data reveal that Lucia has not proved as significant or disruptive as many had feared or hoped—at least in judicial proceedings and at least not yet.

The data set was not very diverse. Most of the decisions concern the Social Security Administration (SSA) and quote Lucia in deciding whether a party forfeited an appointment-based challenge. The SSA represents 88% of cases (176/201) in the data set. The other few entities exceeding one case include the SEC (7), Federal Oversight and Management Board (3), Housing and Urban Development (2), and Benefits Review Board (2). Coincidentally, 88% of citations to Lucia discussed forfeiture of rights,[2] as opposed to the merits of an appointments-based challenge.

Courts have split as to what constitutes a timely constitutional challenge concerning the SSA. The general consensus is that “an Appointments Clause challenge is timely only when raised and preserved at the administrative level.”[3] However, a minority of courts have rejected the government’s administrative-exhaustion defense.[4] Courts in the minority focus on the following: (1) the lack of authority for ALJs to resolve constitutional challenges to their own appointments; (2) the fact that Sims v. Apfel, 530 U.S. 103 (2000), does not require claimants to assert constitutional challenges before the SSA’s Appeals Council; and (3) the absence of any “statutory analogue warning [SSA] claimants that failure to raise a constitutional question before the agency may risk forfeiture of the issue,” despite forfeiture warnings with other agencies.

The significant focus on forfeiture, instead of the merits, in judicial review should not be too surprising. The Solicitor General’s guidance on how to proceed in litigation instructed agencies (1) “[to] no longer argue that ALJs are employees [and . . . (2)] request voluntary remands in cases in which an Appointments Clause challenge has been timely and preserved.” The government’s focus on forfeiture, instead of the merits of Appointments Clause challenges, ultimately limits the impact of Lucia in the courts—even if the decision has more impact within agencies’ appointment practices.

We also considered which Lucia opinions the lower courts cited. Lucia consists of four opinions:

  • Justice Kagan’s majority opinion, holding that the ALJs were “Officers of the United States” under the Court’s earlier decisions and thus subject to the Appointments Clause;
  • Justice Thomas’s concurring opinion, arguing that the ALJs were “Officer of the United States” under the original understanding of the Constitution;
  • Justice Breyer’s concurring and dissenting opinion, arguing that the appointment violated statutory law (and thus rendered a constitutional inquiry unnecessary), expressing concern over the majority’s failure to consider ALJs’ multi-tiered protection from at-will removal as part of its constitutional analysis, and questioning the majority’s remedy to remand the matter for a do-over agency hearing; and
  • Justice Sotomayor’s dissenting opinion, arguing that the ALJs should be classified as “employees.”

Courts citing Lucia always invoked the majority opinion. In fact, 197 of the 201 coded decisions cited only the majority opinion. The four remaining decisions cited Thomas’ concurrence, in addition to the majority opinion, in the context of determining an executive official’s status as an employee or inferior officer.

In all, nine cases cited a Lucia opinion in the context of determining an official’s status, including five that do not cite Thomas’ concurrence. Three of those opinions, however, discussed Thomas’ concurrence in NLRB v. SW General, Inc., an opinion that Thomas cites in his Lucia opinion, that advanced the same underlying argument that he propounded in Lucia, and that considered the propriety of appointed “acting” officials under the Appointments Clause.[5] Two of those three decisions (Peters and Guedes) referred to Thomas’s concurring opinion in the context of deciding whether then–Acting Attorney General Matthew Whitaker was an “Officer of the United States” under the Appointments Clause.

But perhaps our most interesting finding concerns what has not transpired: Breyer’s concurrence was not cited in a single decision. Despite the legal and scholarly communities’ interest and often concern over ALJs’ endangered protection from at-will removal,[6] the issue has not become a meaningful one in litigation. At least yet.

 

Kent Barnett is the J. Alton Hosch Associate Professor, University of Georgia School of Law. Earl Cooke is a 2019 graduate of the University of Georgia School of Law.

 


[1] One notable case in our data set is Aurelius Investment, LLC v. Puerto Rico. The Supreme Court granted certiorari to review the First Circuit’s judgment on June 20, 2019. The Court is expected to answer whether the “de facto officer doctrine allow courts to deny meaningful relief to successful separation-of-powers challengers.” The First Circuit applied the “de facto officer doctrine” to uphold the Federal Oversight and Management Board’s actions after unanimously holding that the appointments of the Board’s members violated the Appointments Clause.

[2] 176 cases, including 170 cases in which the SSA was a party, cited Lucia in the forfeiture context.

[3] Bizarre v. Berryhill, 364 F. Supp. 3d 418, 420 (M.D. Pa. 2019) (listing supporting cases).

[4] See id. at 425 (citing Faulkner v. Comm’r of Soc. Sec., No. 1:17-CV-1197, 2018 WL 6059403, at *2–3 & n.1 (W.D. Tenn. Nov. 19, 2018); Abbington v. Berryhill, No. 1:17-552, 2018 WL 6571208, at *2 (S.D. Ala. Dec. 13, 2018)).

[5] See U.S. v. Peters, 2018 WL 6313534; Aurelius Investment, LLC v. Puerto Rico, 915 F.3d 838; and Guedes v. Bureau of Alcohol, Tobacco, Firearms, and Explosives, 356 F.Supp.3d 109

[6] See generally, e.g., Linda D. Jellum, “You’re Fired!” Why the ALJ Multi-Track Dual Removal Provisions Violate the Constitution and Possible Fixes, 26 Geo. Mason L. Rev. (forthcoming 2019); Richard J. Pierce, Jr., The Court Should Change the Scope of the Removal Power by Adopting a Pure Functional Approach, 26 Geo. Mason L. Rev. (forthcoming 2019).

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2 thoughts on “Lucia v. SEC—One Year Later, by Kent Barnett & Earl Cooke

  1. Daniel Solomon

    So judges at SSA remain “chicken processors” and the APA ALJ “Bill of Rights” is still supposedly supreceded by the Civil Service Reform Act?

    When will these slights be remedied?

    Reply

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