The Supreme Court is poised to hear arguments in Raymond J. Lucia v. SEC on Monday, April 23, 2018. The sole issue for which cert was granted is whether administrative law judges (ALJs) of the Securities and Exchange Commission (SEC) are officers of the United States within the meaning of the Federal Constitution’s appointments clause. The answer to this question is quite simply “yes,” as I have explained elsewhere. Consequently, the SEC ALJs were appointed unconstitutionally.
When the Supreme Court granted cert in this case, the government was still arguing that SEC ALJs were “mere employees” and that as such, they need not be appointed pursuant to the appointments clause. U.S. Const. art. II, § 2. Shortly after cert. was granted, however, the government changed its mind, causing the Court to appoint Anton Metlitsky to brief and argue this case as amicus curiae in support of the government’s original position. The SEC Commissioners have since ratified the appointment of the unconstitutionally appointed ALJs. With the only issue before the Court resolved, the Court could decide that cert. was improvidently granted.
But the case presents another wrinkle. Not only did the Solicitor General Noel Francisco change positions on the appointments issue, he has raised an additional issue in his brief that was not heard below and, thus, would be inappropriate to address in this case: namely, whether the SEC ALJs are also subject to unconstitutional tenure protections. I am optimistic the Court will not fall for the government’s ploy, although other academics, like Dick Pierce, do not share my optimism. Hence, I would like to focus instead on the surprising arguments in Mr. Metlitsky’s brief.
You may recall that prior to the Supreme Court granting cert. in Lucia, there was a circuit split. The Tenth Circuit in Bandimere v. SEC had held that the SEC ALJs were inferior officers, while the District of Columbia Circuit in Raymond J. Lucia Co., Inc. v. SEC had held that they were not. In both cases, the parties and the judges argued about whether the Supreme Court’s holding in Freytag v. Commissioner, that special trial judges were inferior officers, controlled the resolution of the issue or whether the D.C. Circuit’s holding in Landry v. FDIC that FDIC ALJs were mere employees, controlled. The majority in Landry had creatively interpreted Freytag to conclude that ALJs were inferior officers only when they had the power to issue final decisions.
Again, as I have already explained in some detail, I have no doubt that the Freytag controls and am a bit dumbfounded by the D.C. Circuit’s refusal to understand and apply the case in either Landry or Lucia. Perhaps Mr. Metlitsky agrees, for he does not even cite Landry, let alone argue that the court’s reasoning is even persuasive. Instead, he acknowledges “that language in Freytag could be construed broadly to require that anyone who exercises authority… such as presiding over a hearing—is an officer.” However, he argues that such a reading would alter “the longstanding traditional view of the scope of the Appointments Clause.” He then relies on the Department of Justice’s Office of Legal Counsel 2007 opinion titled Officers of the United States Within the Meaning of the Appointments Clause to suggest that the longstanding traditional view of the scope of the Appointments Clause is that an individual wields “significant authority,” meaning she is an officer, only if “the individual has (i) the power to bind the government or third parties (ii) in her own name rather than in the name of a superior officer.”
Mr. Metlisky apparently did not care that the 2007 OLC opinion says no such thing. Moreover, the opinion actually supports the petitioner and government’s arguments. The opinion concludes:
any position having the two essential characteristics of a federal “office” is subject to the Appointments Clause. That is, a position, however labeled, is in fact a federal office if (1) it is invested by legal authority with a portion of the sovereign powers of the federal government, and (2) it is “continuing.” A person who would hold such a position must be properly made an “Officer of the United States” by being appointed pursuant to the procedures specified in the Appointments Clause.
Congress vests SEC ALJs with sovereign powers and continuing positions.
Mr. Metlinsky’s argument is novel and one that was never raised in any of the cases below. Perhaps once can credit him for not continuing to argue that whether one is an inferior officer depends entirely on whether one has final decision-making authority. But Mr. Metlisky not only mischaracterizes the OLC opinion, he ignores the Court’s jurisprudence in this area, as I have explained. Moreover, Jennifer Mascott has a nice post explaining why his argument is historically wrong.
But I wonder whether Mr. Metlisky made a smart, tactical decision. There are more than 1,500 ALJs, thousands of administrative judges, and many other potential governmental employees who may all fall within Freytag’s broad definition of inferior officer. Thus, the potential implications of this case are enormous. Indeed, Justice Breyer raised similar concerns about the potential implications of the holding in Free Enterprise v. PACOB. Hence, to temper the potential impact of Lucia, the moderates on the Supreme Court may find any restrained approach appealing, even one that is unsupported by the main legal authority cited, inconsistent with the Court’s case law, and wrong historically. Justice Kennedy, are you listening?
Linda Jellum is the Ellison C. Palmer Professor of Tax Law at Mercer Law School.
This post is part of a symposium on Lucia v. SEC. All of the posts can be read here.