WorkCompCentral reported on September 10, 2018, that "Trump Order Makes ALJ Appointments More Political." The article refers to the Executive Order Excepting Administrative Law Judges from the Competitive Service, which references Lucia v. Securities and Exchange Commission, No. 17-130 (June 21, 2018), a decision of the Supreme Court of the United States (SCOTUS). It is an intriguing topic regarding the employment of Administrative Law Judges (ALJ) by the Federal government. This has implications for any administrative judge perhaps, depending upon whatever state constitution or statute authorizes such appointment.
The matter was instigated when the Securities Exchange Commission (SEC) charged Mr. Lucia with some security law violations. The SEC assigned the matter to an ALJ who thereafter concluded Mr. Lucia "had violated the law." The ALJ therefore imposed sanctions. Mr. Lucia appealed citing the "Appointments Clause" of the United States Constitution regarding Presidential powers:
. . . and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law 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.
Mr. Lucia contended that agency ALJs are "Officers of the United States," and as the ALJ assigned to his case had not been appointed by either the President, "the Courts of Law" or the "Heads of Departments," that his appointment was invalid. A panel of The Circuit Court for the District of Columbia held that SEC ALJs are not "Officers of the United States." When the whole Circuit Court heard the case ("rehearing en banc), it split evenly on the question, thus leaving the panel decision intact. That itself is interesting in understanding the dynamic of appellate decision processes.
The Lucia case has an intriguing procedural element also. The SEC was defended before the Circuit Court by the U.S. Department of Justice, which agreed that the ALJ was an employee, not an Officer. However, when Mr. Lucia petitioned the SCOTUS, the "Government switched sides," leaving the SEC on its own. The SEC is a federal agency that has 4,527 employees; it is not the Social Security Administration (61,062 employees) or Veteran's Affairs (378,319), but the SEC hardly seems defenseless. However, the SCOTUS "appointed an amicus curiae (friend of the court) to defend the SEC's "employee" contention. The SCOTUS noted that "the only way to defeat" Mr. Lucia's argument would be to "show that those ALJs are not officers at all, but instead non-officer employees," or "lesser functionaries."
The SCOTUS reversed the Circuit Court for the District of Columbia, concluding that ALJs are "Officers of the United States." It was not a unanimous decision, with six Justices joining the majority, a seventh concurring in the result, but dissenting in part, and two dissenting outright. The SCOTUS conclusion was founded on previously concluding that "special trial judges" of the U.S. Tax Court were "Officers," essentially because they serve on an ongoing basis, their appointment is "specified in the Tax Code," and though they "cannot enter a final decision," they exercise significant duties and possess significant discretion. The SCOTUS attached some significance to the ALJ appointment being a "career appointment."
In the midst of that litigation, the SEC issued an order ratifying its appointment of existing ALJs. To "put to rest any claim" regarding the appointments clause, the SEC, the "Commission - in its capacity as head of a department - hereby ratifies the agency's prior appointment of" a Chief ALJ and four other ALJs by name. Thus, as the litigation proceeded regarding "employee v. officer," the agency appointed those ALJs again under the Appointments Clause, removing any potential for future issues in a case such as Lucia's, at least with SEC ALJs.
The June 2018 executive order mentioned above then followed the SCOTUS decision. It recognized that the government "benefits from a professional cadre of administrative law judges (ALJs)." It echoes the finding of "significant duties" and "significant discretion" made by the SCOTUS. It therefore concludes, more broadly than the SEC-focused decision in Lucia, that "at least some ‑‑ and perhaps all ‑‑ ALJs are 'Officers of the United States' and thus subject to the Constitution’s Appointments Clause.
Based thereon, the President of the United States (POTUS) concluded that the hiring of ALJs should be "an exception to the competitive hiring rules and examinations for the position of ALJ." Thus, affording agencies with greater discretion in the appointment of these career positions.
This action was to "reduce the likelihood of successful Appointments Clause challenges, and forestall litigation in which such concerns have been or might be raised." There are those who see this conclusion as politicizing the appointment process, as the WCC headline alludes.
The Executive Order changes appointment and retention for ALJs in a variety of federal departments. Arguably, that change could make the process more political than it has heretofore been. However, the change was mandated to the SEC by the SCOTUS, not by any Executive Order. And, that decision by the SCOTUS was essentially an adoption of the Court's decision in Freytag v. Commissioner, 501 U. S. 868 (1991) regarding arguably similar Tax Court "special trial judges." Further, Freytag and thus Lucia, are founded upon the Court's decision in Buckley v. Valeo, 424 U. S. 1, 126, n. 162 (1976). Some would argue that the foundation for future challenges to agency ALJs under the Appointments Clause are therefore both possible and perhaps probable absent Executive recognition of and compliance with Lucia.
As such, it is practical to believe that similar challenges regarding the appointment process of other agency ALJs might well have reached the same destination as Lucia, albeit after a similar delay. It is notable that Mr. Lucia was charged in 2012. The decision of the SCOTUS came six years later. And, the result of the SCOTUS decision is that the case against him must now be retried by another ALJ (The SCOTUS concluded that the "head of the department" ratification order from the SEC could not "cure" the ALJ's impaired position under the Appointments Clause at the time of his trial decision).
Also of note, one of the dissenting SCOTUS Justices agreed with the Court's conclusion that the ALJ appointment by the SEC was improper. His disagreement lay in the reasoning, which he contends could instead be reconciled by statute, rather than resorting to "constitutional grounds." As such, the majority on the issue of improper appointment in this setting was in fact seven of the nine justices.
The two dissenting Justices disagreed with the SCOTUS conclusion of what constitutes an Officer and proposed a more restrictive "significant authority" test than that applied by the majority. In so doing, the dissent asserted that (1) "this Court’s Appointments Clause jurisprudence offers little guidance on who qualifies as an 'Officer of the United States,'" and that therefore (2) "[Q]uestions about the Clause continue to arise regularly both in the operation of the Executive Branch and in the proposed legislation.” There seems consensus that clarity regarding the Appointments Clause would be beneficial, while there remain perhaps differing opinions as to what that clarity should be precisely. Whether one agrees with the Executive order, it does bring that clarity.
Both Lucia and the Executive Order perhaps will guide appointments, and avoid the litigation and debate that "arise regularly?" In that vein, the decision likewise addresses the concerns about Executive Branch operation and litigation. Some may argue that the more accurate assessment of the situation is that the Constitution (Appointments Clause) makes ALJ appointments more political. In the end, the Constitution contains constraints and requirements, the highest court in the country has provided its considered interpretation, and the chief executive has effectuated that judicial interpretation.
That does not mean that critics cannot criticize (Taylor Swift might contend they most certainly will "haters gotta hate," but would that be banal?) It does mean that the change in federal ALJ appointment brings clarity, will decrease litigation and debate, and thus increase predictability and finality regarding ALJ decisions in similar settings. In all, the Lucia decision is instructive and productive, and the Executive Order is appropriate.
