Lucia v. SEC
138 S. Ct. 2044
| SCOTUS | 2018Background
- The SEC brings enforcement actions before in-house administrative law judges (ALJs) who preside over hearings, take testimony, rule on evidence, issue subpoenas, and impose sanctions.
- ALJs at the SEC are career appointees under statute but were in practice selected by SEC staff, not by the Commission itself.
- After an ALJ issues an "initial decision," the Commission may review it; if the Commission declines review, the ALJ decision becomes final and is "deemed the action of the Commission."
- Raymond Lucia was adjudicated by ALJ Cameron Elliot, who issued an initial decision finding violations and imposing sanctions; Lucia challenged the constitutional validity of Elliot’s appointment under the Appointments Clause.
- The SEC and a divided D.C. Circuit held ALJs were mere employees not subject to the Appointments Clause; the Supreme Court granted certiorari to resolve the circuit split.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SEC ALJs are "Officers of the United States" under the Appointments Clause | Lucia: ALJs exercise continuing statutory duties and significant authority; thus are officers requiring appointment under the Clause | SEC/Government (initially): ALJs are employees who lack significant independent authority and are supervised by the Commission | ALJs are officers: they hold continuing offices and exercise significant authority comparable to Tax Court STJs (Freytag) |
| Effect of improperly appointed ALJ on adjudication | Lucia: Timely challenge entitles him to relief (new hearing) | SEC: ALJ appointment procedure was valid; if invalid, remedial scope should be limited | A timely Appointments Clause challenge requires a new hearing before a properly appointed official; the original ALJ (who adjudicated the case) cannot rehear it |
| Whether final-decision power is required for officer status | Lucia: ALJ powers in hearings suffice; finality not necessary (relying on Freytag) | Dissent (Sotomayor): Officer status requires at least some final, binding decisionmaking authority | Majority: Finality is not required; significant adjudicative authority (taking testimony, ruling on evidence, issuing initial decisions that can become final) is sufficient |
| Remedy scope regarding ratification or reappointment of ALJs | Lucia: Subsequent ratification or appointment cannot cure prior defect for that judge; new hearing needed | SEC argued ratification and other remedies could validate past proceedings | Court declined to address validity of SEC ratification order here; ordered rehearing before a properly appointed adjudicator or the Commission |
Key Cases Cited
- United States v. Germaine, 99 U.S. 508 (distinguishes officers from employees by tenure and continuing duties)
- Buckley v. Valeo, 424 U.S. 1 (per curiam) (officer status requires exercise of "significant authority" under U.S. law)
- Freytag v. Commissioner, 501 U.S. 868 (STJs are officers when they exercise significant adjudicative authority; controlling precedent for ALJs)
- Ryder v. United States, 515 U.S. 177 (timely Appointments Clause challenge entitles litigant to relief; appropriate remedy is rehearing before a properly appointed officer)
- Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477 (addresses removal protections and executive oversight; discussed by concurring/dissenting opinions)
- Butz v. Economou, 438 U.S. 478 (noting ALJs exercise authority comparable to federal trial judges)