Supremes Weigh Appointments Dispute, With The Administrative State’s Power In Balance
People gather on the plaza in front of the Supreme court before oral arguments on Benisek v. Lamone, a redistricting case on whether Democratic lawmakers in Maryland unlawfully drew a congressional district in a way that would prevent a Republican candidate from winning, in Washington, U.S., March 28, 2018.
The Supreme Court Monday heard a constitutional challenge to the process by which the U.S. Securities and Exchange Commission (SEC) appoints administrative law judges (ALJs), who preside over agency enforcement actions.
Though the dispute may appear arcane, the Court’s decision could have sweeping effects on the president’s power to supervise and influence federal bureaucrats. The case comes at a moment when President Donald Trump’s supporters accuse career officials of intentionally undermining the administration’s agenda, and the president himself considers dismissing special counsel Robert Mueller.
The case was occasioned when the SEC brought antifraud charges against an investment advisor named Raymond Lucia. The action was assigned to an ALJ named Cameron Elliot who found Lucia violated agency rules and provisions of the Investment Advisors Act. He assessed a monetary fine and banned Lucia from working in brokerage for the rest of his life.
Lucia appealed the decision, challenging (among other things) the validity of Elliot’s appointment. The Constitution ’s appointments clause requires the president, the courts, or a department head to appoint so-called inferior officers of the United States. Lucia says agency ALJs qualify as inferior officers who must be appointed by an authority listed in the Constitution. Since agency officials hire SEC ALJs — not commissioners or the president — he contends the proceeding and the ruling against him are null and void as Elliot was not lawfully installed.
The U.S. Court of Appeals for the D.C. Circuit rejected that argument, prompting an appeal to the Supreme Court.
Lucia argues ALJs qualify as constitutional inferior officers because they exercise significant and binding authority in adversarial proceedings.
“SEC ALJs exercise an extraordinary power to affect citizens’ lives through formal adjudication,” his final brief to the court reads. “They rule on evidence, apply the law to facts, and issue decisions that, as here, can have devastating consequences.”
Lucia also noted SEC ALJs are similar in numerous respects to special trial judges of the U.S. Tax Court. The high court said those officials count as inferior officers in a 1991 decision called Freytag v. Commissioner. Those parallels appeared decisive for several justices.
“I don’t see … what’s different here than in Freytag,” Chief Justice John Roberts said, noting special trial judges have only one additional power when compared to ALJs.
Justice Elena Kagan appeared to agree.
“It’s just so hard to get around this, the commonalities of these judges and the judges in Freytag,” she said.
But Anton Metlitsky, an attorney appointed by the Court to defend the SEC selection process, warned a decision favoring Lucia could deal a body blow to the administrative state, negating thousands of agency appointments.
“Petitioners’ rule could cast doubt on the constitutionality of the method of appointment of many thousands of civil servants,” Metlitsky’s brief reads. By extension, it could invalidate thousands of agency decisions.
Justice Stephen Breyer appeared sensitive to that issue, expressing concern that a finding for Lucia could jeopardize the merit-based civil service to the extent that it could place thousands of federal employees under the direct influence of political appointees.
“If I adopt your approach, goodbye to the merit civil service at the higher levels and goodbye to the independence of ALJs,” he told Mark Perry, Lucia’s attorney. Kagan also broached this possibility at an earlier juncture of the argument.
Seizing on this point, Justice Anthony Kennedy wondered if the appearance of a politicized bureaucracy would undermine public faith in government.
“It’s important to the perception of justice that the adjudicator be independent,” he told Perry. “Which way does that cut as to your argument?”
The Trump administration argued in support of Lucia with an important caveat. Solicitor General Noel Francisco, the government’s Supreme Court lawyer, said the justices should make clear the president has the power to remove inferior officers like ALJs.
“Without the authority to remove an ALJ for misconduct or for failure to follow lawful instructions or perform adequately, the president (and his chosen principal officers) cannot properly supervise those who exercise executive authority,” Francisco’s brief reads.
Though the brief makes no mention of the special counsel, Mueller could qualify as the sort of inferior officer at issue in this case, and a ruling for Lucia could buttress the White House’s arguments if Trump dismisses Mueller.
A decision in the case, Lucia v. SEC, is expected by June.
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