On June 21, 2018, the U.S. Supreme Court decided Lucia v. Securities and Exchange Commission.1 While many scholars immediately dismissed the case as inconsequential, it had serious implications for the federal administrative judiciary. First, it found administrative law judges (ALJs) at the Securities and Exchange Commission (SEC) officers, not mere employees, in a manner that made them indistinguishable from other ALJs in executive branch agencies. Second, it provided additional legal precedent concerning the scope of presidential authority under Article II, section 2, clause 2 of the U.S. Constitution, the Appointments Clause. Third, the Court’s decision was used as justification to make sweeping changes to the administrative judiciary and provided a legal basis for other constitutional and legal challenges against ALJs and administrative judges throughout the federal government.
March 11, 2022 Feature
The Far-Reaching Tentacles of Lucia v. SEC
By Judge Danette L. Mincey
Lucia’s Indistinguishable Scope
By a vote of 7–2, the Court in Lucia held ALJs at the SEC are “inferior officers” of the United States, not mere employees, who must be appointed pursuant to the Appointments Clause—by the president, a head of department, or a court of law. For purposes of appointments, the Appointments Clause lays out the exclusive method of appointing officers of the United States, a class of government officials distinct from mere employees. The Court ended its analysis there and stopped short of addressing an equally compelling issue also raised on appeal, the removability of these officers once appointed.
The Court’s ruling in Lucia relied heavily on its precedent in Freytag v. Commissioner, which pronounced the special trial judges (STJ) of the U.S. Tax Court “inferior officers” of the United States due to the continuing nature of their positions and their exercise of significant authority pursuant to the laws of the United States.2 The Court, applying its unadorned significant authority test set forth in Freytag, found the SEC ALJs near carbon copies of the STJs in Freytag and determined they too were “inferior officers.” Specifically, the Court found the establishment statutes for both officers specified their duties, salary, and manner of appointment. Both took testimony, received evidence, examined witnesses, administered oaths, took pre-hearing depositions, conducted trials, ruled on motions, ruled on the admissibility of evidence, regulated the course of the hearing, and possessed the power to punish all contemptuous conduct—all indicia of officers.3
The Court’s ruling in Lucia left in its wake a plethora of unanswered questions regarding the scope of the decision and the application of the decision beyond the facts of the case. Because the Court left these questions unanswered, government officials quickly provided their own interpretation of the Court’s ruling. The White House swiftly interpreted Lucia to apply to all ALJs throughout the federal government, regardless of whether they conduct adversarial or non-adversarial proceedings, and similarly situated non-ALJ administrative judges, particularly if they preside over adversarial administrative hearings and possess similar indicia of officers highlighted by the Court in Freytag and Lucia.4 The Solicitor General found the Court’s reasoning in Lucia applied with equal force to other federal agency ALJs and similarly situated non-ALJ adjudicators.5
In 2018, President Trump, in stated reliance on Lucia, issued Executive Order (EO) 13843 titled “Excepting Administrative Law Judges from the Competitive Service,” removing ALJs from the competitive service and placing them instead in the excepted service. This action extinguished the Office of Personnel Management’s (OPM) extensive competitive examining and hiring process responsibilities, allowing the administration to have greater control over the appointments of these newly minted officers.6 Previously, OPM had a statutory, nondelegable duty to administer the ALJ oral and written examination as well as to set the qualification standards for ALJ candidates.7 In the wake of Lucia, this competitive process was obliterated with the stroke of a pen and has not been reinstated, even with a change in administration. Legislation was introduced to restore civil service hiring protections for ALJs. However, this legislation has yet to advance to a floor vote in either the House of Representatives or the Senate.
Many constitutional scholars believe the president’s power under the Appointments Clause is illimitable.8 As such, the complex competitive examining and hiring process that previously existed for ALJs may no longer be constitutional under the Appointments Clause because ALJs are now officers, not employees. While certain types of qualifications are permissible because they are inherent in Congress’s authority to create an office and establish the officer’s duties and responsibilities, the Constitution distinguishes between the creation of an office and the appointment of the officer to that office. Thus, the extensive oral and written testing requirements, and manner by which ALJs on the certification list could actually be selected for appointment, may now be unconstitutional.
If the officer in question is a principal officer, then the previous complex competitive hiring process for ALJs almost certainly is unconstitutional because the Appointments Clause confers plenary power to the president to nominate principal officers and plenary power to the Senate to reject or confirm the president’s nominee through its advice and consent responsibility.9 A lack of precedent exists to definitively conclude the same for inferior officers. Because former President Trump’s EO remains in effect, agencies have altered their ALJ hiring procedures to conform to both the Court’s decision in Lucia and the EO.
The Evolving Expanse of Presidential Appointments Clause Power
The Lucia case was decided at a pivotal time amid a slew of broader coordinated attacks against the administrative judiciary and the larger administrative state. These attacks include challenging the appointments of ALJs and non-ALJ adjudicators at federal agencies other than the SEC, as well as challenging the statutory removal protections for ALJs and other executives within the executive branch. While Lucia on its face seemed innocuous and merely clarified that SEC ALJs were not mere employees who could be appointed by a low-level employee, the wider application of Lucia had a significant impact on the federal administrative judiciary.
In the three years since the Court decided Lucia, appointments of ALJs have been challenged in numerous other federal agencies. Justice Elena Kagan, writing for the Court, clearly articulated the remedy for an appointment clause violation: “a new hearing before a properly appointed official.” As a result, many agencies followed the advice of the Solicitor General and proactively reappointed their judges in a manner consistent with the Appointments Clause to cure any potential constitutional defects that might be raised. However, this did nothing to cure the constitutional defects of individuals who had already had their cases decided by unconstitutionally appointed ALJs. The Supreme Court later addressed this issue in Carr v. Saul, finding individuals can raise this constitutional challenge after the hearing because raising the challenge at the hearing is futile. The Court reasoned that ALJs are ill-equipped to decide constitutional issues and lack the power to even grant the relief requested.10
Judges other than ALJs were also impacted by the Court’s ruling in Lucia. Administrative judges are largely employed by the agency whose cases they adjudicate and take two forms: administrative law judges appointed under 5 U.S.C. § 3105 of the Administrative Procedure Act and non-ALJ adjudicators who are appointed pursuant to agency- or position-specific establishment acts. Unlike ALJs, non-ALJ adjudicators are not appointed pursuant to uniform governing statutes. Therefore, their duties, responsibilities, and authorities vary greatly throughout the federal government. Some non-ALJ adjudicators, such as immigration judges (IJs), conduct trial-like proceedings, while others do not. There are roughly 1,800 ALJs and over 5,000 non-ALJ adjudicators in the executive branch.
The Solicitor General, in a formal opinion, opined the Court’s ruling in Lucia could apply with equal force to non-ALJ adjudicators. Applying the Court’s reasoning in Freytag and Lucia to IJs, for example, they easily satisfy the unadorned significant authority test applied by the Court in Freytag due to the continuing nature of their positions and their exercise of significant authority pursuant to the laws of the United States. Pursuant to 8 U.S.C. § 1101(b)(4), IJs are appointed by the attorney general within the Executive Office for Immigration Review (EOIR). They have continuing duties established by statute and conduct trial-like proceedings for deciding the inadmissibility or deportability of an alien. During the conduct of these proceedings, IJs administer oaths, receive evidence, interrogate, examine, and cross-examine witnesses. IJs also issue subpoenas and have the authority to sanction by civil money penalty any action in contempt of the judge’s proper exercise of authority. At the conclusion of the proceeding, IJs decide the case based on the evidence produced. As such, IJs are near carbon copies of the STJs in Freytag and easily satisfy the officer test set forth in Freytag.11 Furthermore, because IJs are subject to supervision by the attorney general, a principal officer, and their decisions are subject to review by the Board of Immigration Appeals, an executive branch entity, they are most likely inferior rather than principal officers.
In 2021, the Court issued its highly anticipated decision in United States v. Arthrex, finding the administrative patent judges (APJs), non-ALJ adjudicators, at the Patent Trial and Appeal Board (Board) were improperly appointed principal officers.12 Respondent Arthrex argued the APJs exercised far too much authority to be considered inferior officers. Instead, Arthrex argued APJs were principal officers because neither the Secretary of Commerce nor the director of the Board possessed the authority to review the final decisions of APJs or remove the APJs at will. The Federal Circuit Court agreed, determined APJs are principal officers, and decided the appropriate remedy was to invalidate the tenure protections of APJs, making APJs removable at will by the secretary.
The Supreme Court, applying its precedent in Edmond v. United States, explained in Arthrex that an inferior officer must be directed and supervised, at some level, by others who were appointed by presidential nomination with the advice and consent of the Senate.13 The Court found the distinguishing factor between whether an individual is a principal or inferior officer is that the term “inferior officer” connotes a relationship with some higher-ranking officer or officers below the president. Whether one is inferior depends primarily on whether the individual has a superior to which they are answerable.
The judges in Edmond had no authority to render final decisions on behalf of the United States unless first reviewed and approved by a superior executive officer. The Court found this level of decisional review equated to the type of supervision needed for inferior officers. However, this type of supervision was absent with the APJs. The Court concluded that the unreviewable executive power exercised by the APJs and their “for good cause” removal protections are incompatible with their status as inferior officers. Thus, the Court decided they were principal officers. However, the Court came to a different conclusion from the Federal Circuit Court regarding the appropriate remedy for their unconstitutional appointments.
The Court found governing constitutional principles charted a clear course for an appropriate remedy. Instead of striking the removal protections of the APJs or finding they must be appointed as principal officers in a manner consistent with the Appointments Clause, the Court ordered their decisions subject to review by the director, thus ensuring a level of supervision and control over the APJs not previously present under their statutory scheme. The Court found Congress vested the director of the Board with the powers and authorities of the Board. As such, it concluded that 35 U.S.C. § 6(c), which makes the decisions of the APJs final and unreviewable, unenforceable.14 The Court clarified that adjudicators who exercise significant authority within the executive branch must be properly appointed commensurate with their level of authority. It also clarified that executive branch adjudicators who issue final agency decisions that are nonreviewable by the agency or any other executive officer within the executive branch are likely principal rather than inferior officers.
The vast majority of ALJs and non-ALJ adjudicators throughout the federal government under the Court’s analysis in Freytag are “inferior officers” because their statutory scheme allows for review of their decisions by a senior executive official(s) within the executive branch. To the extent there still exists otherwise, the Court clarified in Arthrex the proper remedy is to convert these adjudicators into inferior officers by requiring their decisions to be reviewed by other superior officers within the executive branch. However, not all constitutional violations can be remedied with reappointment or the addition of supervision.
Article II of the Constitution vests executive power within the presidency and requires the president to “take care that the laws be faithfully executed.” This has been interpreted by the Court as the power of the president to hold executive branch officers accountable by removing them at will. The Court in a 5–4 decision in Seila Law LLC v. Consumer Financial Protection Bureau removed the restriction in the Dodd-Frank Act limiting the president’s ability to replace the Consumer Financial Protection Bureau (CFPB) director only for cause. The Court clarified the restraints on the president’s constitutional duty to ensure that the laws are faithfully executed do not extend to limiting the president’s removal power to heads of independent agencies headed by a single principal officer director because this type of restraint violates the separation of powers doctrine.15
In Seila Law, the Court examined the full extent of presidential appointment and removal powers, concluding when it comes to principal officers who, acting alone, wield significant executive power, the ultimate executive power belongs to the president, and that power includes the ability to supervise and, if necessary, remove the agents who wield executive power in his stead. The Court recognized in its long history of examining the limits of the president’s removal power, it had only recognized two restraints: first, when an agency is headed by a multimember body of experts who are balanced along partisan lines, appointed to staggered terms, and perform only quasi-judicial or quasi-legislative functions; and second, when removal protections are extended to inferior officers who have limited duties and no policymaking or administrative authority such as ALJs who perform quasi-judicial functions. The Court declined to extend these exceptions, and Justice Brett Kavanaugh, in his dissenting opinion, stated these two exceptions represent the outermost constitutional limits of permissible congressional restraints on the president’s removal power.16
Lucia as a Basis for Unrelated Challenges
Judges throughout the administrative judiciary have faced other significant challenges since the Court’s decision in Lucia. IJs, for example, have faced unmitigated political pressures and legal challenges. One such challenge was based largely on a misinterpretation of the Court’s decision in Lucia.17 On November 2, 2020, the Federal Labor Relations Authority (FLRA) found IJs were management officials. The U.S. Department of Justice, Executive Office for Immigration Review, Office of the Chief Immigration Judge (EOIR), alleged, due to the Court’s decision in Lucia, changed circumstances existed, warranting clarification of the bargaining unit of IJs to exclude all IJs from their bargaining unit on the grounds they are now management officials and therefore not appropriate unit members under 5 U.S.C. § 7112(b)(1).
EOIR asserted because IJs are officers under the Constitution, they are automatically management officials under 5 U.S.C. § 7103(a). They argued it was incongruous that an individual who exercises significant authority within the executive branch, who is an officer and not a mere employee, is not also considered a management official. They did not consider the differing legal definitions of employee versus management official in a labor-relations context and employee versus officer in the context of the Appointments Clause. However, the FLRA found the relevant determination turns on the duties and responsibilities of the position and not how an individual’s employment starts—whether by appointment, competitive selection, or other method. Ultimately, the FLRA decided Lucia irrelevant to their analysis, but still found the IJs management officials because they determined the IJs influence agency policy by interpreting immigration laws when they apply the law and existing precedent to the unique facts of each case.
Applying the reasoning utilized by the FLRA, all ALJs and non-ALJ adjudicators are management officials because they exercise similar duties and responsibilities. Yet, the Federal Service Labor-Management Relations Statute is not written so broadly as to encompass all these classes of individuals. The statute requires individuals to be engaged in policymaking, which is distinctly different from interpreting and applying policy made by others.
The Court in Lucia did not examine whether the SEC ALJs engaged in policymaking as defined in the Federal Service Labor-Management Relations Statute because it was irrelevant to determining whether the STJs and SEC ALJs were officers. Instead, they viewed these functions as inherently adjudicatory and examined them in that light. Examining the IJs’ duties and responsibilities in a similar light finds they are near carbon copies of judges in Freytag and Lucia. Furthermore, their establishment statute confers no policymaking duties, authorities, or responsibilities, only those inherently adjudicatory in nature.
Lucia and Unresolved Issues for the Administrative Judiciary
The future is not yet written for how the most significant of these challenges for the administrative judiciary will be resolved by the Court, the constitutionality of 5 U.S.C. § 7521, the dual for-cause removal standard for ALJs. This standard ensures the decisional independence of ALJs. However, the Court’s expansive view on unconstitutional intrusions on presidential removal power and its precedent in Free Enterprise places the constitutionality of this statutory provision in jeopardy.18
The role of ALJs who perform purely adjudicatory functions, as well as the role of Merit Systems Protection Board judges, who also perform purely adjudicatory functions, is fundamentally different from the duties and responsibilities of the Public Company Accounting Oversight Board (PCAOB) in Free Enterprise and provides optimism for a different outcome by the Court. Congress did not intend for ALJs to be removed at the whim of the agency or for political reasons, and the Court recognized in Free Enterprise that it was not making a general pronouncement that two levels of good-cause tenure protections are always unconstitutional. The Court made clear in its holding in Free Enterprise that its decision did not extend to ALJs who perform purely adjudicatory functions.19 As such, I remain optimistic regarding the constitutionality of ALJ removal protections.
Equally alarming is the uncertainty as it pertains to what restrictions, if any, can be placed on the appointment of ALJs. The previous competitive hiring process for ALJs served to ensure ALJs were not subject to undue political influence and that only qualified individuals were ultimately appointed to conduct procedural due process proceedings guaranteed to the public. Whether Congress can reinstate the competitive hiring process for ALJs, including reinstating the oral and written examination, is not yet certain. The answer will greatly depend on the Court’s evolving expansion of Presidential Appointments Clause power and the restrictions that can be placed on the president’s ultimate duty to hold officers accountable.
A legal quagmire exists. I surmise we will not be able to have our cake and eat it too—reinstating the OPM competitive examining and hiring process for ALJs and preserving for good cause removal protections. The way forward may lie outside the current construct of the federal administrative judiciary.20
In conclusion, Lucia was not the sleeper case that scholars quickly dismissed when it was initially decided. The significant implications of the Court’s decision remain for the administrative judiciary and for all statutorily appointed officers within the executive branch.
Endnotes
1. Lucia v. Sec. & Exch. Comm’n, 138 S. Ct. 2044 (2018).
2. Id. at 2053 (citing Freytag v. Comm’r, 501 U.S. 868, 881 (1991)).
3. Id.
4. Exec. Order No. 13843, 83 Fed. Reg. 32755 (July 13, 2018).
5. Memorandum from Solic. Gen., U.S. Dep’t of Just., to Agency Gen. Counsels, Guidance on Administrative Law Judges After Lucia v. SEC (S. Ct.) (July 2018).
6. Exec. Order No. 13,843.
7. 5 U.S.C. §1104(a).
8. Cass Sunstein & Adrian Vermuele, The Unitary Executive: Past, Present, Future, 2020 Sup. Ct. Rev. 83 (2020).
9. Edmond v. United States, 520 U.S. 651 (1997); Myers v. United States, 272 U.S. 52 (1926).
10. 141 S. Ct. 1352 (2021).
11. Freytag v. Comm’r, 501 U.S. 868 (1991).
12. 141 S. Ct. 1970 (2021).
13. Id. at 1980 (citing Edmond v. United States, 520 U.S. 651, 663 (1997)).
14. Id.
15. Seila Law LLC v. Consumer Fin. Prot. Bureau, 140 S. Ct. 2183 (2021).
16. Id.
17. U.S. Dep’t of Just., Exec. Off. for Immigr. Rev. & Nat’l Ass’n of Immigr. Judges, Decision & Order on Review, 71 FLRA No. 207 (Nov. 2, 2020).
18. Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477 (2010).
19. Id. at 507 n.10.
20. Lukas Gemar, Protecting Adjudicators from Political Threats, Regul. Rev. (Aug. 12, 2021), https://www.theregreview.org/2021/08/12/gemar-protecting-adjudicators-from-political-threats.