Supreme Court

Is Lucia Still Cert-Worthy?

While the Trump Administration supports Supreme Court review, it's not clear there's enough in the case to interest the justices.

|The Volokh Conspiracy |

This Friday the Supreme Court will consider adding additional cases to what is already a loaded term. Among the cases the justices will consider is Raymond J. Lucia Co. v. Securities & Exchange Commission, a constitutional challenge to the manner in which the SEC has traditionally appointed its Administrative Law Judges.

Lucia is the sort of case us Administrative Law nerds dream about. The prescise issue is whether SEC ALJs are "officers" under the Constitution (albeit "inferior officers) or are mere employees. This matters because the Constitution places limits on how officers may be appointed. Inferior officers may be appointed by the President, by courts, or by the "Heads of Departments." They may not be appointed in other means, however, such as by an agency's human resources deparment or the Office of Personnel Managemennt.

Although the SEC has the statutory authority to appoint its own ALJs—and the SEC itself is considered the "head" of the agency—that is not how SEC ALJs have been traditionally appointed. Therefore, should SEC ALJs be consisdered officers, they are appointed in an unconstitutional way.

When the Lucia cert petition was first filed, it seemed like an almost certain grant. The U.S. Court of Appeals for the D.C. Circuit initially rejected Lucia's constitutional challenge, creating a circuit split with the U.S. Court of Appeals for the Tenth Circuit. That split was preserved after the D.C. Circuit subsequently split 5-5 when reviewing the case en banc. Were that not enough, the Solicitor General's office filed a brief in support of certiorari, accepting petitioner's claim that the SEC's ALJs are officers and arguing the Court should not only take the case but also broaden the issues under consideration to include whether the Constitution prevents limiting the SEC's removal authority over ALJs as well. (For more on this see Jennifer Mascott's Notice & Comment post.) As this point, Lucia looked like a potential blockbuster.

In its brief supporting certiorari, the SG noted the udnerlying issue has split the circuits, and was likely to recur with some regularity. But then a funny thing happened: The SEC elected to cure the potential constitutional defect by announcing it would reappoint ALJs and call for pending cases to be reconsidered so as to eliminate the Appointments Clause claim. While this decision did not necessarily moot Lucia's claim, it would prevent future claims challenging the method of SEC ALJ appointment. The circuit split remains, but the practical effect of this split has been greatly reduced. As Marty Lederman notes in a post highly critical of the SG's office:

Because of this action by the SEC, the question presented will not "continue to arise absent this Court's intervention," nor will "the Commission's ability to enforce the nation's securities laws [be] put on hold pending this Court's resolution of the question presented." There is no longer any reason for the Court to consider the merits of an agency practice that no longer exists and that the agency and the Solicitor General have concluded cannot be revived.

The SEC's actions don't address all of petitioner Lucia's concerns, but do seem to reduce the cert-worthiness of the case. As a general matter, the sUpreme Court is not in the business of error correction (perahps other than for habeas cases arising in the U.S. Court of Appeals for the Sixth Circuit) and rarely feels the need to resolve circuit splits that are unlikely to recur.

Whether or not the justices remain interested in this case, the behind-the-scenes politics of Lucia will remain intriguing. Among other things, the SEC had the power to make this case go away much sooner than it did—but nonetheless waited until after the SG filed its cert-stage brief before deciding to change the way it picks its ALJs. Might this suggest the SEC only adopted this position reluctantly?

And what should we make of the SG's suggesting that the Court consider the removal limitations on ALJs as well? While this question will certainly arise in future cases—as litigants test the limits of Free Enterprise Fund v. PCAOB—it seems a bit premature here. Lower courts have been focused on how ALJs are appointed, not hypothetical cases in which ALJs could be removed or in which the threat of removal perhaps undermines claims of ALJ independence. While agencies (and us AdLaw-types) might like the Court to resolve the removal question sooner rather than later, I am doubtful four justices will (yet) fill the same way. After all, it's not as if they don't already have enough to do this term.

UPDATE: For the argument that Lucia is still cert-worthy, see Lucia's reply brief, especially pages 6-9, where Lucia notes that the SEC's actions do not afford it any relief. Also of note, Lucia's brief opposes inclusion of the removal issue urged by the SG.

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  1. Among other things, the SEC had the power to make this case go away much sooner than it did — but nonetheless waited until after the SG filed its cert-stage brief before deciding to change the way it picks its ALJs. Might this suggest the SEC only adopted this position reluctantly?

    I think that’s quite a good guess. And for “the SEC” we might need to read “one SEC Commissioner” since, at the time, there were only three Commissioners and all three were required for a quorum. So maybe the SG’s filing wasn’t, as the rather excitable Marty Lederman suggests, a disingenuous ploy to pre-empt action he knew was coming from the SEC, but the necessary kick to get the third Commissioner in line. Maybe having held out, the third Commissioner decided she’d rather fold than have SCOTUS issue a ruling preventing the SEC from changing its mind later. (Obviously I am using the unisex “she.”)

  2. The reply brief claims that the SEC’s purported ratification of the appointments of its ALJs is legally ineffective, so that the SEC is still operating with no real ALJs.

    If post filing events, that don’t touch directly on the resolution of the case in question, like the SEC’s attempted ALJ do-over, are as Prof Adler implies, relevant to whether cert should be granted, then perhaps the question of whether the SEC is continuing to operate with defective ALJs will pique SCOTUS’ interest.

    But they do seem to be very keen to kick the can down the road whenever possible, so perhaps we’ll have to wait for some other aggrieved SEC customer to get into court before we find out whether the SEC’s mulligan has landed on the fairway.

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