John Davis v. Andrew Saul, 963 F.3d 790

Background

Three claimants (Davis, Thurman, Iwan) applied for Social Security disability benefits in 2013–2014; ALJs denied benefits and the Appeals Council denied review. None raised Appointments Clause objections before the ALJs or Appeals Council.
After Lucia v. SEC was decided (2018), holding that SEC ALJs are "Officers" and that a timely Appointments Clause challenge entitles a litigant to relief, claimants sought to raise the Appointments Clause issue for the first time in district court.
While Lucia was pending and after, the SSA issued emergency guidance instructing ALJs to acknowledge but not decide Appointments Clause challenges and later announced that the Acting Commissioner had ratified ALJ appointments.
Claimants moved for leave to file supplemental briefs raising the Appointments Clause argument in district court; the district court allowed briefing but refused to consider the newly raised claim, holding it waived for failure to raise it at the agency.
The Eighth Circuit affirmed, applying its precedent requiring issue exhaustion before an ALJ and explaining exhaustion promotes administrative correction, protects agency authority, and avoids wholesale disruptions if many claimants raise the issue only after an adverse decision.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an Appointments Clause challenge to SSA ALJ appointments may be raised for the first time in district court without having been raised before the ALJ or Appeals Council	Claimants: constitutional challenges need not be exhausted; Lucia entitles a timely challenge in court	Commissioner: claimants waived the issue by not presenting it to the ALJ or Appeals Council; exhaustion required	Court: claimants waived the challenge; exhaustion before the ALJ is required in these circumstances
Whether constitutional claims are categorically exempt from exhaustion	Claimants: constitutional nature obviates exhaustion	Commissioner: constitutional status does not confer special entitlement to litigate for the first time in federal court	Court: constitutional status alone does not excuse exhaustion; such claims can be forfeited
Whether exhaustion would have been futile because SSA guidance prevented ALJs from addressing Appointments Clause challenges	Claimants: SSA told ALJs not to decide such challenges, so raising them would be futile	Commissioner: even if ALJs could not remedy, raising the issue would have put the agency head on notice and could have led to ratification or corrective action	Court: futility not shown; exhaustion could have alerted agency and avoided widespread disruption
Whether the court should exercise discretion to hear the non-exhausted claim anyway	Claimants: discretionary waiver appropriate given separation-of-powers interest and practical unfairness	Commissioner: allowing late challenges would create perverse incentives and administrative chaos	Court: declined to exercise discretion; not a rare case warranting exception to exhaustion

Key Cases Cited

Lucia v. SEC, 138 S. Ct. 2044 (holding SEC ALJs are officers; a timely Appointments Clause challenge entitles relief)
Anderson v. Barnhart, 344 F.3d 809 (8th Cir.) (requiring issues be raised before the ALJ to avoid waiver)
Sims v. Apfel, 530 U.S. 103 (discussing exhaustion and Appeals Council review; relevance limited to Appeals Council step)
Harwood v. Apfel, 186 F.3d 1039 (8th Cir.) (claim need not be raised to Appeals Council; suggests stronger rule for ALJ-level exhaustion)
NLRB v. RELCO Locomotives, Inc., 734 F.3d 764 (8th Cir.) (Appointments Clause claims can be forfeited if not raised before the agency)
Freytag v. Commissioner, 501 U.S. 868 (discussing when courts may address appointment challenges raised late)
L.A. Tucker Truck Lines, Inc. v. United States, 344 U.S. 33 (administrative objections should be raised while agency can correct them)
Mathews v. Eldridge, 424 U.S. 319 (jurisdiction under 42 U.S.C. § 405(g); administrative exhaustion principles)
Bowen v. City of New York, 476 U.S. 467 (exhaustion policies guide exceptions)
McCarthy v. Madigan, 503 U.S. 140 (exhaustion protects agency authority and promotes judicial efficiency)