987 F.3d 1093
D.C. Cir.2021Background
- USDA filed administrative complaints under the Horse Protection Act accusing petitioners of entering “sore” horses in shows; petitioners failed to file timely answers and ALJ entered default orders imposing fines and temporary disqualifications.
- Petitioners appealed to the Department’s Judicial Officer raising Appointments Clause challenges to the ALJ and to the Judicial Officer; the Judicial Officer affirmed the defaults and declined to resolve the ALJ appointment question (urging that it be raised in the courts).
- While these petitions were pending, the Supreme Court decided Lucia v. SEC, and the government conceded the presiding USDA ALJ had been improperly appointed; the government moved to vacate and remand for proceedings before a properly appointed ALJ.
- Petitioners sought to press additional claims on appeal including (a) that USDA ALJs (and/or the Judicial Officer) are principal officers, (b) that the agency lacked statutory authority to both fine and disqualify in the same proceeding, and (c) a new Free Enterprise Fund–based claim that ALJs’ dual layers of for-cause tenure protection (MSPB + MSPB members’ protection) unconstitutionally limit the President’s removal power.
- The court held Lucia required vacatur and remand to properly appointed ALJs, rejected petitioners’ principal-officer claim about ALJs, declined to resolve several statutory and appointment challenges now (without prejudice on remand), and concluded petitioners’ dual–for-cause removal claim was forfeited because they never raised it before the agency and mandatory statutory exhaustion bars judicial excuse.
- Judge Rao concurred in part and dissented in part: would have reached and decided the dual-for-cause removal question on the merits and would have held the MSPB layer unconstitutional (leaving one for-cause layer or other narrower remedy).
Issues
| Issue | Petitioners' Argument | Government's Argument | Held |
|---|---|---|---|
| Whether Lucia requires vacatur/remand because the ALJ was improperly appointed | ALJ was an officer improperly appointed; relief should be vacatur and remand to properly appointed ALJ | Agreed after Lucia; move to vacate and remand | Granted: orders vacated and cases remanded for new hearings before constitutionally appointed ALJs |
| Whether petitioners may litigate for-cause removal (Free Enterprise Fund) challenge here despite not raising it before the agency | Court should reach structural constitutional removal claim now (Freytag exception) | Petitioners forfeited it; 7 U.S.C. § 6912(e) and agency rules require mandatory issue exhaustion and courts may not excuse non-exhaustion (Ross/Woodford) | Forfeited: claim not considered because statute/regulations mandate non-excusable exhaustion; can be raised on remand |
| Whether USDA ALJs (and/or Judicial Officer) are principal officers (Appointments Clause) | Petitioners: ALJs (and Judicial Officer) are principal officers so their appointments are invalid | Government: ALJs are inferior officers; Judicial Officer’s status is not implicated for remand because recusal/administrative fix available | ALJs are inferior officers under Edmond factors; challenge to Judicial Officer’s appointment not decided now (recusal and agency assurances) |
| Whether the agency had statutory authority under the Horse Protection Act to both fine and disqualify in same proceeding | Petitioners: Act does not permit disqualification + fines in the same proceeding | Government: procedural posture suggests remand is appropriate so merits can be addressed by agency | Court declined to decide now; parties may raise on remand |
Key Cases Cited
- Lucia v. SEC, 138 S. Ct. 2044 (U.S. 2018) (ALJs are officers for Appointments Clause purposes; improper appointment requires vacatur/remand)
- Free Enterprise Fund v. PCAOB, 561 U.S. 477 (U.S. 2010) (double layers of for-cause removal protection can be incompatible with Presidential removal power)
- Ross v. Blake, 136 S. Ct. 1850 (U.S. 2016) (statutory mandatory exhaustion precludes judicially created exceptions)
- Woodford v. Ngo, 548 U.S. 81 (U.S. 2006) (proper exhaustion requires using all steps and complying with agency’s issue-preservation rules)
- Munsell v. USDA, 509 F.3d 572 (D.C. Cir. 2007) (interpreting 7 U.S.C. § 6912(e) as imposing mandatory, nonjurisdictional exhaustion)
- Edmond v. United States, 520 U.S. 651 (U.S. 1997) (test for inferior officer: supervision, removal, and final decision authority)
- Freytag v. Commissioner, 501 U.S. 868 (U.S. 1991) (structural constitutional claims may be addressed on appeal)
- Seila Law v. CFPB, 140 S. Ct. 2183 (U.S. 2020) (reinforced limits on Congress’s ability to curtail Presidential removal power and narrowed Humphrey’s Executor)