WILLIE EARL CARR, Plaintiff - Appellee, v. COMMISSIONER, SSA, Defendant - Appellant. ; KIM L. MINOR, Plaintiff - Appellee, v. COMMISSIONER, SSA, Defendant - Appellant.
No. 19-5079, 19-5085
United States Court of Appeals for the Tenth Circuit
June 15, 2020
PUBLISH
Amanda L. Mundell, Attorney (Joseph H. Hunt, Assistant Attorney General; Mark B. Stern, Joshua M. Salzman, and Daniel Aguilar, Attorneys, on the briefs) United States Department of Justice, Washington, D.C. for Defendant - Appellant.
Paul F. McTighe, Jr., Tulsa, Oklahoma for the Plaintiffs – Appellees.
MATHESON, Circuit Judge.
This appeal asks whether Social Sеcurity disability claimants waive Appointments Clause challenges that they failed to raise in their administrative proceedings.
In separate claims, Willie Earl Carr and Kim L. Minor (“Appellees“) sought disability benefits from the Social Security Administration (“SSA“). In each case, the administrative law judge (“ALJ“) denied the claim, and the agency‘s Appeals Council declined to review.
In district court, Mr. Carr challenged the SSA‘s denial of his claim for disability benefits. While his case was pеnding, the Supreme Court held that Securities and Exchange Commission (“SEC“) ALJs are “inferior officers” under the Appointments Clause,
In response to Lucia, the SSA Commissioner (“Commissioner“) appointed the SSA‘s ALJs.1 The Commissioner did so “[t]o address any Appointments Clause questions” Lucia posed. Effect of the Decision in Lucia v. Securities and Exchange
The district court upheld the ALJs’ denials of the claims, but it agreed with the Appointments Clause challenges. The court vacated the SSA decisions and remanded for new hearings before constitutionally аppointed ALJs. It held that Mr. Carr and Ms. Minor did not waive their Appointments Clause challenges by failing to raise them in their SSA proceedings.
On appeal, the Commissioner argues that Appellees waived their Appointments Clause challenges by failing to exhaust them before the SSA. Exercising jurisdiction under
I. BACKGROUND
The following presents an overview of (A) SSA disability proceedings, (B) the Appointments Clause, and (C) the factual and procedural background in these cases.
A. Social Security Administrative Procedure
When a Social Security claimant seeks disability benefits, the SSA makes an “[i]nitial determination” regarding entitlement.
A claimant may appeal an ALJ‘s decision to the SSA Appeals Council (“Appeals Council“).
B. Appointments Clause
The Appointments Clause provides:
[The President] . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not hеrein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
In Lucia, thе Supreme Court held that the SEC‘s ALJs are inferior officers and must be appointed by the President, a court, or a head of agency department. 138 S. Ct. at 2049. Because the ALJ in Lucia had not been appointed in one of those ways, the Court vacated the agency‘s decision that Mr. Lucia had violated the Investment Advisers Act,
C. Factual and Procedural Background
Mr. Carr and Ms. Minor separately sought disability benefits in 2014. ALJs heard and denied their claims in 2017. The Appeals Council declined to review both claims,
After Mr. Carr‘s suit was filed but before Ms. Minor‘s, the Supreme Court decided Lucia. Several weeks later, the SSA Commissioner appointed the agency‘s ALJs. See Effect of Lucia, 84 Fed. Reg. at 9583. The SSA explained that аlthough
[t]he Supreme Court‘s decision in Lucia did not specifically address the constitutional status of ALJs who work in other Federal agencies, including the [SSA,] [t]o address any Appointments Clause questions involving Social Security claims, and consistent with guidance from the Department of Justice, on July 16, 2018[,] the Acting Commissioner of Social Security ratified the appointments of our ALJs and approved those appointments as her own.
Id.
Mr. Carr and Ms. Minor each filed briefs in district court raising, for the first time, Appointments Clause challenges to the ALJs who denied their claims. The court upheld the ALJs’ decisions on the merits but remanded for new hearings before ALJs properly appointed under the Appointments Clause. Relying on Sims v. Apfel, 530 U.S. 103 (2000), it concluded that the claimants did not waive their Appointments Clause claims by failing to raise them in their SSA proceedings. See Willie Earl C. v. Saul, No. 18-CV-272-FHM, 2019 WL 2613819, at *5 (N.D. Okla. June 26, 2019); Kim L. M. v. Saul, No. 18-CV-418-FHM, 2019 WL 3318112, at *6 (N.D. Okla. July 24, 2019).
The Commissioner appealed as to both Mr. Carr and Ms. Minor. The appeals have been consolidated and were argued together to this panel.
On appeal, the Commissioner “[does] not contest that [SSA] ALJs are inferior officers and that the ALJs had not been properly appointed” when they denied Appellees’ benefits claims. Aplt. Br. at 8. He argues only that the district court erred by holding that Appellees were not required to exhaust their Appointments Clause challenges in the administrative proceedings. The Commissioner does not argue that a statute or regulation requires issue exhaustion in the SSA context. He contends we should find such a requirement “even without relying on a specific statute or regulation.” Id. at 21.
A. Standard of Review
“We review a district court‘s ruling reversing the Commissioner‘s final decision de novo, applying the same standards as the district court.” Vallejo v. Berryhill, 849 F.3d 951, 954 (10th Cir. 2017).2
1. Issue Exhaustion
The Supreme Court “long has acknowledged the general rule that parties exhaust prescribed administrative remedies before seeking relief from the federal courts.” McCarthy v. Madigan, 503 U.S. 140, 144-45 (1992). Moreover, “[i]n most cases, аn issue not presented to an administrative decisionmaker cannot be argued for the first time in federal court.” Sims, 530 U.S. at 112 (O‘Connor, J., concurring); see also N.M. Health Connections v. U.S. Dep‘t of Health & Human Servs., 946 F.3d 1138, 1165 n.25 (10th Cir. 2019) (“In general, an issue must have been raised before an agency for a party to seek judicial review of agency action on that issue.“); Nuclear Energy Inst., Inc. v. Envtl. Prot. Agency, 373 F.3d 1251, 1297 (D.C. Cir. 2004) (“It is a hard and fast rule of administrative law, rooted in simple fairness, that issues not raised before an agency are waived and will not be considered by a court on review.“).
When a statute or regulation requires issue exhaustion, claimants waive issues they fail to raise in their administrative proceedings. See Malouf v. S.E.C., 933 F.3d 1248, 1255 (10th Cir. 2019) (holding that an SEC claimant waived an Appointments Clause challenge he did not raise before the agency); Energy W. Mining Co. v. Lyle ex rel. Lyle, 929 F.3d 1202, 1206 (10th Cir. 2019) (ruling that a claimant waived an Appointments Clause challenge he failed to raise in his administrative hearing for Department of Labor benefits). The Supreme Court has recognized that it has “imposed an issue-exhaustion
The exhaustion requirement, whether it concerns a remedy or an issue, furthers two main institutional interests. See Woodford v. Ngo, 548 U.S. 81, 89 (2006). First, it allows agencies “to correct [their] own mistakes.” Id. (quotations omitted); see also L. A. Tucker, 344 U.S. at 37 (“[O]rderly procedure and good administration require that objections to the proceedings of an administrative agency be made while it has opportunity for correction in order to raise issues reviewable by the courts.“). Second, it “promotes efficiency” by expediting claims, limiting the number of cases that reach federal courts, and conserving resources. See Woodford, 548 U.S. at 89; see also In re DBC, 545 F.3d 1373, 1379 (Fed. Cir. 2008) (requiring issue exhaustion because it served efficiency and agency autonomy). Courts thus have declined to require issue exhaustion only in rare circumstances, such as in Sims. Because the district court here relied on Sims for its decision, we provide an overview of that case.
2. Sims v. Apfel
In Sims, the Supreme Court held that an SSA claimant did not waive issues she wished to raise in district court and that she had failed to specify in her request for Appeals Council review. 530 U.S. at 112. The SSA ALJ had denied the claimant‘s request for benefits. The claimant sought Appeals Council reconsideration but did not identify the issues she wished to have reviewed. Id. at 105. The Appeals Council denied review. Id. She sued in district court, this time listing her challenges to the ALJ‘s
The Supreme Court reversed in a fractured decision. Five Justices joined the first section of Justice Thomas‘s analysis, but only four joined the second section. Justice O‘Connor, who joined the first section but not the second, wrote a concurrence. Because she relied on narrower grounds than the plurality, her analysis governs. See Marks v. United States, 430 U.S. 188, 193 (1977) (“When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, the holding of the Court may be viewed as that position taken by thosе Members who concurred in the judgments on the narrowest grounds.” (quotations omitted)); Cirko ex rel. Cirko v. Comm‘r of Soc. Sec., 948 F.3d 148, 155 n.4 (3d Cir. 2020) (“Under the rule of [Marks], Justice O‘Connor‘s analysis . . . controls.“). We summarize below the various opinions.
a. Majority
In the first section of his analysis, joined by the majority, Justice Thomas observed that issue exhaustion, even without a statute or regulation requiring it, is “a general rule because it is usually appropriate under an agency‘s practice for contestants in an adversary proceeding before it to devеlop fully all issues there.” 530 U.S. at 109 (quotations and brackets omitted). But when “an administrative proceeding is not
b. Plurality
Justice Thomas‘s second analysis section received only four votes. There, the plurality said that issue exhaustion should not be required because “Social Security proceedings are inquisitоrial rather than adversarial.” Id. at 110-11. It reasoned that “[i]t is the ALJ‘s duty to investigate the facts and develop the arguments both for and against granting benefits, and the Council‘s review is similarly broad.” Id. at 111 (citation omitted).
The plurality said that “the Council‘s review is plenary unless it states otherwise” and that Appeals Council petition forms “provide[] only three lines for the request for review.” Id. at 111-12. It concluded that the SSA process “therefore strongly suggests that the Council does not depend much, if at all, on claimants to identify issues for review.” Id. at 112.
c. Justice O‘Connor‘s concurrence
Justice O‘Connor concurred in the judgment and joined only the first section of Justice Thomas‘s analysis. She observed that, “[i]n most cases, an issue not presented to an administrative decisionmaker cannot be argued for the first time in federal court[,]” but that, “[i]n the absence of a specific statute or regulation requiring issue exhaustion, . . . such a rule is not always appropriate.” Id. at 112-13 (O‘Connor, J., concurring). In her view, “the agency‘s failure to notify claimants of an issue exhaustion requirement in
C. Analysis
Because the Commissioner does not argue that a statute or regulation requires issue exhaustion, we consider whether the institutional interests supporting issue exhaustion apply here. We then address whether the district court appropriately departed from the exhaustion rule. We conclude exhaustion should apply here and that the district court erroneously relied on Sims. We therefore reverse.
1. Purposes of Issue Exhaustion
We address whether the purposes for the exhaustion rule apply to the Appellees’ Appointments Clause challenges.3
Second, an exhaustion requirement here would have promoted both judicial and agency efficiency. See id. Judicial efficiency would have been served if the SSA Commissionеr had appointed its ALJs in response to Appellees’ raising their Appointments Clause challenges before the agency. Their doing so could have saved the judiciary the time and expense of this litigation and the scores of similar cases currently on appeal around the country. See Aplt. Br. at viii-xi (listing 49 related appeals in United States circuit courts); McKart v. United States, 395 U.S. 185, 195 (1969) (“A complaining party may be successful in vindicating his rights in the administrative
As to agency efficiency, the SSA could have addressed the Appointments Clause issue in the first instance if Appellees had raised it in their administrative proceedings and avoided the possibility of having to conduct two ALJ merits hearings on their disability benefits claims and those of many others. This prospect would undermine administrative efficiency and delay pending cases. In re DBC, 545 F.3d at 1379 (“If [the plaintiff] had objected to the [agency], instead of to this court in the first instance, it could have obtained relief immediately, and thus avoided the unnecessary expenditure of the administrative resources of the [agency] . . . .“). As the Commissioner notes, SSA proceedings are time-consuming and the agency is flooded with claimants. See Aplt. Br. at 27; see also SSA, Annual Performance Report, Fiscal Years 2019–2021, 3 (2020), https://perma.cc/5GFC-2HKM (noting that “the averagе wait time for a hearing decision [is] 470 days“).5
In finding an exception to the issue exhaustion requirement, the district court mistakenly relied on Sims, which held that exhaustion before the SSA Appeals Council is not required.
First, the Supreme Court in Sims cautioned that its holding did not apply to the issue before us. It held only that, when the claimant failed to raise issues in her petition for Appeals Council review, she did not waive her ability to raise those issues in district court. The Court emphasized that “[w]hether a claimant must exhaust issues before the ALJ is not before us.” Sims, 530 U.S. at 107. And the four-Justice dissent predicted that “the plurality would not forgive the requirement that a party ordinarily must raise all relevant issues before the ALJ.” Id. at 117 (Breyer, J., dissenting).6 Appellees here did not present their Appointments Clause challenges to the ALJs or the Appeals Council.
Second, the reasons the Sims Court did not require issue exhaustion in petitions to the Appeals Council do not apply to SSA ALJ hearings. Justice O‘Connor, providing the deciding vote, оbserved that SSA Appeals Council petition forms provide only three lines for claimants to specify the bases for appeal, and that appellate review is plenary by
By contrast, SSA ALJs must notify claimants of the “specific issues to be decided” at each hearing,
Third, the district court placed undue weight on the “non-adversarial” nature of SSA ALJ proceedings. Although the Sims majority said the basis for issue exhaustion is weakest when agency determination of benefits is inquisitorial, only the plurality relied on this rationale to hold exhaustion was not required. The district court failed to recognize that Justice O‘Connor‘s controlling concurrence relied on a narrower ground. That is, the SSA does not notify claimants they must raise issues to the Appeals Council, the Appeals Council review is plenary, and the claimant “did everything that the agency asked of hеr” even though she identified no issues for review. Sims, 530 U.S. at 114 (O‘Connor, J., concurring). Justice O‘Connor‘s reasoning does not apply to SSA ALJ
Fourth, even if SSA ALJ review of disability claims is largely non-adversarial, Appointments Clause challenges are “adversarial” as described in Sims. The Sims majority recognized that a proceeding is inquisitorial when thе agency develops the issues on its own and adversarial when the “parties are expected to develop the issues.” Id. at 110.
An SSA ALJ typically develops issues regarding benefits, but a claimant must object to an ALJ‘s authority. See, e.g.,
Fifth and finally, the Third Circuit‘s decision in Cirko is unpersuasive and counter to our precedent.8 There, the court held that claimants need not exhaust Appointments Clause challenges before the SSA ALJ. It reasoned that, given their constitutional nature,
We rejected this view in Malouf and Energy West. See Malouf, 933 F.3d at 1257 (explaining that an administrative Appointments Clause challenge would have notified the agency of the need tо appoint its ALJs, a remedy within the SSA‘s authority); Energy W., 929 F.3d at 1206 (observing that an Appointments Clause challenge would not have been futile because the agency‘s appellate tribunal could vacate a judgment by an unappointed ALJ). And to the extent Cirko relied on Sims, we decline to follow it for the reasons discussed.9
* * * *
The district court failed to provide adequate reasons to depart from the general principle that “an issue must have been raised before an agency for a party to seek judicial review of agency action on that issue.” N.M. Health Connections, 946 F.3d at 1165 n.25.10
We reverse the district court‘s judgment.
district court did not address this issue. We decline to excuse Appellees’ failure to exhaust for substantially the same reasons we have found an issue exhaustion requirement.