En banc D.C. Circuit splits over constitutionality of SEC administrative law judges

|The Volokh Conspiracy |


One First Street was not the only place for dramatic legal developments on Monday. Just down Constitution Avenue, at the E. Barrett Prettyman Courthouse, the U.S. Court of Appeals for the D.C. Circuit was doing its part to help ensure that the Supreme Court has a monumental term next year.

Sitting en banc, the D.C. Circuit split 5-5 over the constitutionality of the Securities and Exchange Commission's administrative law judges in Raymond J. Lucia Cos. v. SEC. Given the composition of the en banc panel, this means that the court could not have split purely along partisan lines. The en banc panel included four judges nominated by a Republican (Henderson, Brown, Kavanaugh, Griffith) and six judges nominated by a Democrat (Rogers, Tatel, Srinivasan, Millett, Pillard and Wilkins); therefore, at least one judge did not play to political type. (Chief Judge Garland did not participate.)

The underlying issue is whether the SEC's ALJs are "officers" for purposes of the Appointments Clause, which largely turns on the authority they exercise. If the ALJs are officers, then they are unconstitutional, as the SEC's ALJs are appointed through an administrative process, and not by the "head of a department," as the Appointments Clause requires. If, on the other hand, the ALJs are not "officers" (in this case, inferior officers) but are instead merely employees, then there is no problem.

A three-judge panel had previously rejected a constitutional challenge to the SEC's ALJs. A panel of the U.S. Court of Appeals for the 10th Circuit reached the opposite conclusion last year in Bandimere v. SEC. I discussed this decision here.

Monday's D.C. Circuit split virtually guarantees Supreme Court review of the underlying issue—perhaps as early as next year.