Lucia v. SEC
Perhaps one of the most durable effects of the Trump Administration will be its heretofore successful attempt to remake the federal judiciary. In its first two years, the Administration has appointed more federal judges than any of its recent predecessors.1×1. Deanna Paul, Trump Promised to Remake the Courts. He’s Installing Conservative Judges at a Record Pace, Wash. Post (July 19, 2018), https://wapo.st/2LoDAYY [https://perma.cc/JNS9-75TY]. While most attention has been paid to the Administration’s rapid appointment of Article III judges, equally significant are its efforts at gaining more control over Article I administrative law judges (ALJs). Last Term, in Lucia v. SEC,2×2. 138 S. Ct. 2044 (2018). the Supreme Court held that ALJs of the Securities and Exchange Commission (SEC) were “‘Officers of the United States’ subject to the Appointments Clause.”3×3. Id. at 2055. In response, the Trump Administration issued an executive order exempting all ALJs from competitive civil service hiring requirements and requiring them to be appointed by a head of department.4×4. See Exec. Order No. 13,843, 83 Fed. Reg. 32,755 (July 13, 2018). The executive order concludes that, under Lucia, “at least some — and perhaps all — ALJs are ‘Officers of the United States.’”5×5. Id. This conclusion is defensible. But Lucia also includes language emphasizing the “adversarial” nature of the hearings overseen by SEC ALJs, which could provide a basis for limiting its holding in the future and protecting the decisionmaking process of ALJs from undue politicization.
Raymond Lucia came to the attention of the SEC when promoting “Buckets of Money,” a retirement wealth-management strategy, on his daily radio show, at seminars, and in several books.6×6. Raymond J. Lucia Cos., Exchange Act Release No. 67,781, Investment Company Act Release No. 30,193, 104 SEC Docket 2130, 2131 (Sept. 5, 2012). Alleging violations of the antifraud provisions of the Investment Advisers Act and the rule against misleading advertising, the SEC brought an administrative enforcement action against Lucia and his corporation.7×7. Id. at 2134–35. An ALJ subsequently found Lucia liable for fraudulent and misleading marketing practices and imposed sanctions.8×8. Raymond J. Lucia Cos., 106 SEC Docket 3613, 3628, 3636–38 (ALJ July 8, 2013). Sanctions against Lucia included $300,000 in civil money penalties and a lifetime industry bar. Id. at 3637–38.
On appeal to the SEC, Lucia argued that SEC ALJs are “Officers of the United States” that must be appointed in accordance with the Appointments Clause.9×9. See Raymond J. Lucia Cos., Exchange Act Release No. 75837, Investment Company Act Release No. 4190, 112 SEC Docket 1754, 1769 (Sept. 3, 2015). Under the Appointments Clause, the appointment of inferior “Officers of the United States” may be vested by Congress “in the President alone, in the Courts of Law, or in the Heads of Departments.”10×10. U.S. Const. art. II, § 2, cl. 2. “Officers” are distinct from “mere employees” of the executive branch, whose appointments fall outside the strictures of the Constitution.11×11. Lucia, 138 S. Ct. at 2049. Individuals who “exercis[e] significant authority pursuant to the laws of the United States” are considered officers.12×12. Buckley v. Valeo, 424 U.S. 1, 126 (1976) (per curiam). And although the SEC itself is a “Head of Department,” the SEC had delegated the appointment of ALJs to SEC staff members.13×13. Lucia, 138 S. Ct. at 2050 (alterations in original) (citing Free Enter. Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477 (2010)). Throughout the Lucia litigation, Social Security Administration (SSA) ALJs were also not hired by the President, courts of law, or heads of department. Rather, they were selected through a competitive civil service hiring process designed to ensure their expertise and impartiality. See, e.g., O’Leary v. OPM, DA-300A-12-0651, 2016 WL 3365404 (M.S.P.B. June 17, 2016). As such, they were vulnerable to Appointments Clause challenges asserting that, as “Officers of the United States,” they had been unconstitutionally appointed. Thus, Lucia contended, the administrative proceeding was invalid because the presiding ALJ was unconstitutionally appointed.14×14. Lucia, 112 SEC Docket at 1769. The SEC rejected this argument and found that SEC ALJs are employees, not officers.15×15. Id. at 1772. It also rejected Lucia’s challenges to the liability and sanctions determinations.16×16. Id. at 1755, 1772.
Lucia petitioned for review in the D.C. Circuit. A panel denied Lucia’s petition, unanimously agreeing that SEC ALJs are employees.17×17. Raymond J. Lucia Cos. v. SEC, 832 F.3d 277, 286–89 (D.C. Cir. 2016). The panel also upheld the SEC’s liability and sanctions determinations against Lucia. Id. at 292–96. The court explained that SEC ALJs do not exercise “significant authority pursuant to the laws of the United States”18×18. Id. at 284 (quoting Buckley v. Valeo, 424 U.S. 1, 126 (1976) (per curiam)). because they “neither have been delegated sovereign authority to act independently of the Commission nor . . . do they have the power to bind third parties, or the government itself.”19×19. Id. at 286. Undeterred, Lucia petitioned for rehearing en banc, which was granted. The ten-member en banc court divided evenly and issued a per curiam order denying Lucia’s claim.20×20. See Raymond J. Lucia Cos. v. SEC, 868 F.3d 1021 (D.C. Cir. 2017) (en banc). By leaving in place the panel’s determination, the en banc order conflicted with Bandimere v. SEC,21×21. 844 F.3d 1168 (10th Cir. 2016). a Tenth Circuit case holding that SEC ALJs are officers.22×22. Id. at 1179. Lucia petitioned for certiorari to resolve the split between the circuits,23×23. Petition for Writ of Certiorari, Lucia, 138 S. Ct. 2044 (No. 17-130). At the panel and en banc stages of the D.C. Circuit litigation, the Department of Justice defended the SEC’s position, “[b]ut in responding to Lucia’s petition, the Government switched sides” and argued that SEC ALJs are officers. Lucia, 138 S. Ct. at 2050. When the Court granted the petition, it appointed an amicus curiae to defend the D.C. Circuit decision below. Id. at 2050–51. and the Supreme Court granted the petition.24×24. At both the certiorari and merits stage, the government asked the Court to consider “whether the statutory restrictions on removing the Commission’s ALJs are constitutional” and the Court twice declined. Lucia, 138 S. Ct. at 2050 n.1.
The Supreme Court reversed and remanded. Writing for the Court, Justice Kagan25×25. Justice Kagan was joined by Chief Justice Roberts and Justices Kennedy, Thomas, Alito, and Gorsuch. Justice Breyer concurred in the judgment in part. declined to elaborate on Buckley v. Valeo’s26×26. 424 U.S. 1 (1976) (per curiam). “significant authority” test for differentiating between officers and employees. Instead, she looked to Freytag v. Commissioner,27×27. 501 U.S. 868 (1991). in which the Court had determined that “special trial judges” (STJs) of the United States Tax Court were officers that exercised “significant authority.”28×28. Id. at 881. In Lucia, there was no “need to refine or enhance” the Buckley test29×29. Lucia, 138 S. Ct. at 2052. because, the Court explained, “Freytag says everything necessary to decide this case.”30×30. Id. at 2053. Proceeding “point for point,”31×31. Id. the Court illustrated that SEC ALJs were functionally indistinguishable from Freytag STJs. Both “hold a continuing office established by law” and exercise “‘significant discretion’ when carrying out the same ‘important functions.’”32×32. Id. (quoting Freytag, 501 U.S. at 882). Indeed, SEC ALJs possess the same four powers mentioned in Freytag. Specifically, they “take testimony” at hearings by “receiv[ing] evidence” and “examin[ing] witnesses;”33×33. Id. (original alterations omitted) (first quoting Freytag, 501 U.S. at 881; then quoting 17 C.F.R. § 201.111(c) (2018); and then quoting 17 C.F.R. § 200.14(a)(4)). they “conduct trials” by “administer[ing] oaths, rul[ing] on motions, and generally ‘regulat[ing] the course of’ a hearing;”34×34. Id. (original alterations omitted) (quoting 17 C.F.R. § 201.111). they “rule on the admissibility of evidence,” thereby “critically shap[ing] the administrative record;” and they “have the power to enforce compliance with discovery orders” and “may punish all ‘[c]ontemptuous conduct.’”35×35. Id. (alteration in original) (first quoting Freytag, 501 U.S. at 882; then quoting 17 C.F.R. § 201.180(a)). And ALJs issue decisions that may become the final action of the SEC — making their decisions similar to those of the STJs in Freytag, but “with potentially more independent effect.”36×36. Id. So, because SEC ALJs “have equivalent duties and powers as STJs,” they too are officers subject to the Appointments Clause.37×37. Id.
The Court rejected two arguments for distinguishing SEC ALJs from the Freytag STJs. First, even though SEC ALJs enjoy “less capacious power to sanction misconduct” than STJs, their authority to exclude wrongdoers from a proceeding, “summarily suspend” lawyers from representing their clients, and generally “issue an opinion complete with factual findings, legal conclusions, and sanctions”38×38. Id. at 2054. is sufficient to constitute “power to enforce compliance with discovery orders” under Freytag.39×39. Id. at 2053 (quoting Freytag, 501 U.S. at 882). Second, it is irrelevant under Freytag that the SEC reviews ALJs’ factual findings de novo, rather than under a deferential standard.40×40. Id. at 2054–55.
Having established that the ALJ who adjudicated the SEC’s administrative enforcement action against Lucia was an unconstitutionally appointed “Officer of the United States,” the Court turned to remedial concerns. The Court explained that “the ‘appropriate’ remedy for an adjudication tainted with an appointments violation is a new ‘hearing before a properly appointed’ official,”41×41. Id. at 2055 (quoting Ryder v. United States, 515 U.S. 177, 183, 188 (1995)). and clarified that the “properly appointed official” cannot be the same official who “already both heard Lucia’s case and issued an initial decision on the merits.”42×42. Id.
Justice Thomas concurred.43×43. Justice Thomas was joined by Justice Gorsuch. He noted that “precedents like Freytag discuss what is sufficient to make someone an officer of the United States, [but] our precedents have never clearly defined what is necessary.”44×44. Lucia, 138 S. Ct. at 2056 (Thomas, J., concurring). Looking to the original public meaning of “Officers of the United States,” Justice Thomas argued that “[t]o the Founders, this term encompassed all federal civil officials ‘with responsibility for an ongoing statutory duty.’”45×45. Id. (quoting NLRB v. SW Gen., Inc., 137 S. Ct. 929, 946 (2017) (Thomas, J., concurring)) (citing Jennifer L. Mascott, Who Are “Officers of the United States”?, 70 Stan L. Rev. 443, 564 (2018)). On that ground, he concluded that SEC ALJs were officers of the United States.
Justice Breyer concurred in the judgment in part and dissented in part.46×46. Justice Ginsburg and Justice Sotomayor joined only Part III, which disagreed with the Court’s remedial requirement that, on remand, Lucia receive a hearing before a different ALJ. He expressed three disagreements with the Court. First, although he agreed that the SEC did not properly appoint its ALJs, he would have avoided the constitutional question by reaching that outcome on statutory grounds.47×47. Lucia, 138 S. Ct. at 2057 (Breyer, J., concurring in part and dissenting in part). Specifically, as Justice Breyer read the Administrative Procedure Act (APA), the statute does not “permit the Commission to delegate its power to appoint its administrative law judges to its staff.” Id. at 2058. Second, he would have addressed “the constitutionality of the statutory for cause removal protections that Congress provided for administrative law judges.”48×48. Id. at 2057 (internal quotation marks omitted). Justice Breyer explained that answering the “for cause” removal question is a necessary predicate to properly deciding whether SEC ALJs are officers.49×49. Id. at 2059. And he cautioned that, “[b]y considering each question in isolation, the Court risks . . . unraveling, step-by-step, the foundations of the Federal Government’s administrative adjudication system.”50×50. Id. at 2064. Third, Justice Breyer argued that, because the Court’s reversal “is based on a technical constitutional question” that “implies no criticism at all of the original” ALJ, the proper remedy need not include a hearing in front of a new ALJ.51×51. Id.
Justice Sotomayor dissented.52×52. Justice Sotomayor was joined by Justice Ginsburg. She noted that the Court’s decisions have not yet defined a more precise definition of “significant authority,” leading to “confusion [that] can undermine the reliability and finality of proceedings and result in wasted resources.”53×53. Lucia, 138 S. Ct. at 2065 (Sotomayor, J., dissenting). She proposed a clear line between officers and employees: officers have “the ability to make final, binding decisions on behalf of the Government”; employees “merely advise and provide recommendations to an officer.”54×54. Id. Under this framework, Justice Sotomayor would have found SEC ALJs to be mere employees because they do not have the authority to make final decisions.55×55. Id. at 2067.
The holding of Lucia has modest implications for the SEC, but it threatens to alter drastically the workings of other agencies, especially the Social Security Administration (SSA). The SEC employs only five ALJs,56×56. Administrative Law Judges: ALJs by Agency and Level, U.S. Office of Personnel Mgmt. (Mar. 2017), https://www.opm.gov/services-for-agencies/administrative-law-judges/#url=ALJs-by-Agency [https://perma.cc/L2T6-7EH5]. which the “head of department” had already “retroactively” appointed by the time the litigation reached the Supreme Court.57×57. Lucia, 138 S. Ct. at 2055 n.6. The Court declined to address whether or not these “ratifications” were a constitutionally valid method of reappointing the ALJs. Id. In contrast, the SSA is “probably the largest adjudicative agency in the western world.”58×58. Heckler v. Campbell, 461 U.S. 458, 461 n.2 (1983) (quoting J. Mashaw et al., Social Security Hearings and Appeals xi (1978)). Of the 1931 ALJs scattered through executive agencies, 1655 of them are SSA ALJs.59×59. U.S. Office of Personnel Mgmt., supra note 56. The benefits disbursement hearings they oversee provide essential financial support to millions of Americans.60×60. In fiscal year 2017, the SSA paid approximately $793 billion in Old-Age and Survivors Insurance benefits to 51 million beneficiaries a month, approximately $141 billion in Disability Insurance benefits to approximately 10 million beneficiaries a month, and approximately $51 billion in Supplemental Security Income benefits to over 8 million recipients a month. Soc. Sec. Admin., Annual Performance Report: Fiscal Years 2017–2019, at 4, https://www.ssa.gov/budget/FY19Files/2019APR.pdf [https://perma.cc/Q7MW-A8WP]. Indeed, on average, SSA ALJs conduct more than 650,000 hearings per year,61×61. Soc. Sec. Admin., Information About SSA’s Hearings and Appeals Operations, https://www.ssa.gov/appeals/about_us.html [https://perma.cc/TX7L-39A3]. making most Americans far more likely to encounter an SSA ALJ than an Article III federal judge over the course of their lifetime.62×62. Marilyn Zahm, Opinion, Do You Have a Social Security Card? Then Take This Executive Order Personally, Wash. Post (July 18, 2018), https://wapo.st/2moIuXQ [https://perma.cc/R28U-J4AB]. In the weeks following Lucia, the Trump Administration attempted to resolve any speculation about how Lucia applies to SSA ALJs by issuing an executive order. The order concluded that, in light of Lucia, “at least some — and perhaps all — ALJs are ‘Officers of the United States’ and thus subject to the Constitution’s Appointments Clause.”63×63. Exec. Order No. 13,843, § 1, 83 Fed. Reg. 32,755 (July 13, 2018). Accordingly, the executive order required all ALJs to be exempt from “competitive examination and competitive service selection procedures,” and instead to be hired at the discretion of agency heads.64×64. Id.
By granting agency heads broad discretion to hire ALJs, the executive order opens the door to the politicization of the Social Security benefits disbursement procedure. Before the executive order, the Office of Personnel Management (OPM) administered a centralized ALJ hiring process and “establish[ed] a list of eligible candidates from which agencies ma[de] competitive service selections of ALJs.”65×65. Brief Amicus Curiae of Federal Administrative Law Judges Conference in Support of Neither Party at 7, Lucia, 138 S. Ct. 2044 (No. 17-130); see 5 U.S.C. § 1104 (2012). To be eligible, ALJ candidates had to “demonstrate an active law license in good standing, at least seven years of litigation . . . experience, and achieve a sufficient score on a multi-part competitive examination.”66×66. Brief Amicus Curiae of Federal Administrative Law Judges Conference in Support of Neither Party, supra note 65, at 7–8; see 5 U.S.C. § 3304; 5 C.F.R. § 930.204 (2018). Under the executive order, ALJ candidates need only “possess a professional license to practice law and be authorized to practice law.”67×67. Exec. Order No. 13,843, § 3(a)(ii), 83 Fed. Reg. at 32,755. Moreover, agencies now design their own hiring procedures.68×68. Id. §§ 1, 3(a)(ii) (noting “the need to provide agency heads with additional flexibility,” id. § 1, and requiring ALJ appointments to “be made in accordance with such regulations and practices as the head of the agency concerned finds necessary,” id. § 3(a)(ii)); see also Zahm, supra note 62. Where a politically appointed “head of department” may hire any minimally qualified ALJ candidate of her choosing, “[o]ne can envisage an anti-welfare Social Security chief selecting an ALJ who is skeptical of benefits claims.”69×69. Editorial, Trump Is Politicizing the Federal Government Even Further. Step In, Congress., Wash. Post (July 22, 2018), https://wapo.st/2mAvHl5 [https://perma.cc/7H2D-6G6A].
The executive order’s conclusion that SSA ALJs are “Officers of the United States” is a justifiable, but not inevitable, reading of Lucia. By repeatedly emphasizing the “adversarial” nature of the proceedings in Freytag and Lucia, the Court may have suggested a constitutional ground for distinguishing SEC ALJs and SSA ALJs. SSA ALJs oversee nonadversarial benefits disbursement hearings, while SEC ALJs oversee more adversarial, trial-like proceedings. And constitutional doctrine consistently distinguishes between adversarial and nonadversarial hearings, indicating that ALJs that oversee adversarial hearings may be more likely to be “Officers of the United States.” To prevent the politicization of the Social Security benefits-disbursement system, Congress or a future presidential administration should seek to narrowly construe Lucia and argue that its conclusion that SEC ALJs are “Officers of the United States” does not inevitably lead to the conclusion that SSA ALJs are also “Officers of the United States.”
The Administration’s conclusion that SSA ALJs are “Officers of the United States” under Lucia is doctrinally defensible. Much of Lucia and Freytag suggests that SSA ALJs are “Officers of the United States.” Like SEC ALJs, they “hold a continuing office established by law” — they “receive a career appointment” to a “position created by statute,” including its “duties, salary, and means of appointment.”70×70. Lucia, 138 S. Ct. at 2053 (internal alterations omitted) (citing Freytag v. Comm’r, 501 U.S. 868, 881 (1991)); see 5 U.S.C. § 3105; 5 C.F.R. § 930.204–205. Moreover, SSA ALJs “issue decisions . . . [with] independent effect” that “contain factual findings, legal conclusions, and appropriate remedies.”71×71. Lucia, 138 S. Ct. at 2053; see 20 C.F.R. § 498.220 (2018). Like the SEC, when the appellate body within the SSA declines to review an ALJ’s decision, the decision becomes final.72×72. See Lucia, 138 S. Ct. at 2053–54; 20 C.F.R. §§ 404.967, 416.1467 (establishing that the SSA’s Appeals Council may decline to review an ALJ’s decision); id. §§ 404.955, 404.969, 416.1455, 416.1469 (establishing that, if the Appeals Council does not review an ALJ decision, the decision becomes final). SSA ALJs also possess each of the “four specific (if overlapping) powers Freytag mentioned” that allow them to exercise “significant discretion” when “ensur[ing] fair and orderly” hearings.73×73. Lucia, 138 S. Ct. at 2053. First, like SEC ALJs, they “take testimony” by “receiv[ing] evidence and examin[ing] witnesses,” and also by “tak[ing] pre-hearing depositions.”74×74. Id. (internal alterations omitted) (first quoting Freytag, 501 U.S. at 881; then quoting 17 C.F.R. § 201.111(c) (2018); and then quoting 17 C.F.R. § 200.14(a)(4)); see 20 C.F.R. §§ 404.929, 404.935, 416.1429, 498.204(b)(10) (stating that SSA ALJs have the power to receive evidence); id. § 498.204(b)(9) (discussing the SSA ALJs’ power to examine witnesses); Soc. Sec. Admin., Hearings, Appeals, and Litigation Law Manual I-2-6-22 (2014) (explaining the prehearing deposition power). Second, SSA ALJs “conduct trials” by “administer[ing] oaths, rul[ing] on motions, and generally ‘regulat[ing] the course of’ a hearing, as well as the conduct of parties and counsel.”75×75. Lucia, 138 S. Ct. at 2053 (first quoting Freytag, 501 U.S. at 882; and then quoting 17 C.F.R. § 201.111); see 20 C.F.R. § 404.950(e); id. § 498.204(b)(4) (discussing SSA ALJs’ power to administer oaths); id. § 498.204(b)(6) (establishing the power to rule on dispositive and procedural motions); id. § 498.204(b)(8) (explaining that SSA ALJs “[r]egulate the course of the hearing and the conduct of representatives, parties, and witnesses”). Third, they “rule on the admissibility of evidence,” thereby “critically shap[ing] the administrative record.”76×76. Lucia, 138 S. Ct. at 2053 (quoting Freytag, 501 U.S. at 882); see 20 C.F.R. 498.204(b)(10) (stating that SSA ALJs have the power to “[r]eceive, exclude, or limit evidence”). Both SEC and SSA ALJs also shape the administrative record by “issuing document subpoenas.” Lucia, 138 S. Ct. at 2053; see 20 C.F.R. § 404.950(d)(1) (discussing SSA ALJs’ power to issue subpoenas for witnesses and documents). And both SEC and SSA ALJs rely on federal district courts to compel compliance with those subpoenas. See 42 U.S.C. § 405(e) (2012). Fourth, SSA ALJs also have the power to punish “[c]ontemptuous conduct . . . by means as severe as excluding the offender from the hearing.”77×77. Lucia, 138 S. Ct. at 2053 (first alteration in orginal) (quoting 17 C.F.R. 201.180(a)(1)); see Soc. Sec. Admin., Hearings, Appeals, and Litigation Law Manual I-2-6-60(D) (2016). In short, the executive order’s determination that all ALJs, including SSA ALJs, are probably “Officers of the United States” under Lucia finds much support in both Freytag and Lucia.78×78. Before the executive order reformed all ALJ hiring practices to uniformly comply with the Appointments Clause, litigants noticed the parallels between SEC and SSA ALJs and began filing Appointments Clause challenges to SSA ALJs. See, e.g., Hugues v. Berryhill, No. CV 17-3892, 2018 WL 3239835, at *2 n.2 (C.D. Cal. July 2, 2018).
But SSA ALJs are meaningfully distinct from Freytag STJs and Lucia SEC ALJs in at least one way: the benefits determination proceedings they oversee are nonadversarial.79×79. See McNeil v. Wisconsin, 501 U.S. 171, 181 n.2 (1991) (“What makes a system adversarial rather than inquisitorial is not the presence of counsel . . . but rather, the presence of a judge who does not (as an inquisitor does) conduct the factual and legal investigation himself, but instead decides on the basis of facts and arguments pro and con adduced by the parties.”); United States v. Loughner, 672 F.3d 731, 762 (9th Cir. 2012) (discussing the characteristics of “adversarial” hearings). In Freytag, the STJ presided over a U.S. Tax Court hearing in which the “Chief Counsel for the Internal Revenue Service or his delegate” was adverse to the taxpayer.80×80. See 26 U.S.C. § 7452 (2012). Likewise, the SEC prosecutes violations of securities laws in adversarial hearings.81×81. See 17 C.F.R. § 202.5 (describing the enforcement activities of the SEC). When a party files for reconsideration of a Social Security benefits determination,82×82. See 20 C.F.R. § 416.1430 (2018). however, the resulting hearing before an ALJ is “inquisitorial rather than adversarial.”83×83. Sims v. Apfel, 530 U.S. 103, 111 (2000); see also id. at 110 (observing that “[t]he differences between courts and agencies are nowhere more pronounced than in Social Security proceedings”). In such a hearing, “[i]t is the ALJ’s duty to investigate the facts and develop the arguments both for and against granting benefits.”84×84. Id. at 111. “The Commissioner has no representative before the ALJ to oppose the claim for benefits” and does not “oppose claimants before the [Appeals] Council.”85×85. Id. Indeed, regulations governing the proceedings “expressly provide that the SSA ‘conduct[s] the administrative review process in an informal, nonadversary manner.’”86×86. Id. (alteration in original) (quoting 20 C.F.R. § 404.900(b) (1999)); see also 20 C.F.R. § 416.1432 (2018) (specifying the parties to a proceeding before an ALJ); id. § 416.1444 (describing the procedures of an ALJ hearing); id. § 416.1449 (describing how arguments are presented in an ALJ hearing). Thus, unlike the STJs of the U.S. Tax Court in Freytag and the SEC ALJs in Lucia, SSA ALJs generally oversee inquisitorial, rather than adversarial, hearings.87×87. To be sure, SSA ALJs also oversee sanctions hearings, which are adversarial. See 20 C.F.R. § 498.202. But the “essential” function of the ALJ is to oversee nonadversarial benefits disbursement hearings as an adjudicator, Richardson v. Perales, 402 U.S. 389, 403 (1971), thereby distinguishing them from STJs and SEC ALJs.
Throughout the Lucia litigation, parties and amici suggested that the distinction between adversarial and nonadversarial hearings had constitutional salience. Specifically, they asserted that, for the purposes of the Appointments Clause, SEC ALJs could be distinguished from ALJs that do not oversee adversarial hearings.88×88. See, e.g., Transcript of Oral Argument at 9, Lucia, 138 S. Ct. 2044 (No. 17-130), https://www.supremecourt.gov/oral_arguments/argument_transcripts/2017/17-130_1p23.pdf [https://perma.cc/9W2S-S2DG]; Brief for Petitioners at 42, Lucia, 138 S. Ct. 2044 (No. 17-130); Brief of Respondent Supporting Petitioners at 14, Lucia, 138 S. Ct. 2044 (No. 17-130); Brief of Amicus Curiae the Forum of United States Administrative Law Judges in Support of Neither Party at 1 & n.2, Lucia, 138 S. Ct. 2044 (No. 17-130). The Court’s opinion may imply approval of this distinction, as it mentions that SEC ALJs and U.S. Tax Court STJs both oversee “adversarial” hearings no fewer than five times.89×89. See Lucia, 138 S. Ct. at 2049 (“An ALJ assigned to hear an SEC enforcement action has extensive powers . . . [to] ensure a ‘fair and orderly’ adversarial proceeding.” (quoting 17 C.F.R. 200.14(a) (2018)); id. at 2052 (discussing “the responsibilities involved in presiding over adversarial hearings”); id. at 2053 (“Both sets of officials have all the authority needed to ensure fair and orderly adversarial hearings . . . .”); id. (“[T]he Commission’s ALJs have equivalent duties and powers as STJs in conducting adversarial inquiries.”); id. at 2054 (discussing “someone conducting adversarial hearings”). Justice Thomas also mentions “adversarial” in his concurrence. Id. at 2057 (Thomas, J., concurring) (“These judges exercise many of the agency’s statutory duties, including issuing initial decisions in adversarial proceedings.”). But neither Lucia nor any of the briefs squarely explain why an ALJ that oversees an adversarial hearing should be considered an “Officer of the United States,” while an ALJ that oversees a nonadversarial hearing should be considered a “mere employee.”
Although Lucia does not elaborate on the distinction, it is a foundational, crosscutting principle of constitutional law that adversarial proceedings like those in Freytag and Lucia are distinct from inquisitorial proceedings, like those conducted by the SSA. At least three distinct doctrinal frameworks distinguish adversarial from purely inquisitorial proceedings and further presume that adversarial hearings are more effective than nonadversarial hearings at protecting important private interests. First, the Due Process Clause entitles individuals to adversarial evidentiary proceedings only when the private interest at stake outweighs the public interest in “conserving scarce fiscal and administrative resources.”90×90. Mathews v. Eldridge, 424 U.S. 319, 348 (1976); see also Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 545 (1985) (“In only one case, Goldberg v. Kelly, has the Court required a full adversarial evidentiary hearing prior to adverse governmental action.” (internal citation omitted)). Second, in criminal trials — where the defendant’s liberty is at stake — the Sixth Amendment “right to effective assistance of counsel” ensures that “the prosecution’s case [must] survive the crucible of meaningful adversarial testing.”91×91. United States v. Cronic, 466 U.S. 648, 656 (1984); cf. McNeil v. Wisconsin, 501 U.S. 171, 183 (1991) (Stevens, J., dissenting) (accusing the majority of “undermin[ing] the protections that undergird our adversarial system of justice” and “reflect[ing] a preference for an inquisitorial system”). Third, before obscene materials may be seized by the government, the First Amendment requires the “procedural safeguard” of “a prior judicial adversarial proceeding.”92×92. Wallace v. Wellborn, 204 F.3d 165, 167 (5th Cir. 2000) (citing Quantity of Copies of Books v. Kansas, 378 U.S. 205, 210 (1964)). Congress has also assumed that adversarial proceedings concern weightier interests than nonadversarial proceedings in crafting legislation to protect indigent parties: the Equal Access to Justice Act entitles a “prevailing party” in an “adversary adjudication” before an administrative agency to recover attorney’s fees from the government. Ardestani v. INS, 502 U.S. 129, 132 (1991) (citing 5 U.S.C. § 504(a)(1)).
By repeatedly emphasizing the “adversarial” nature of SEC adjudications, Lucia gestured toward the constitutional consensus that adversarial proceedings more effectively protect private interests than nonadversarial hearings. And the Supreme Court has highlighted the role of the judge in defining a hearing as “adversarial,” explaining that “adversarial” hearings are defined by “the presence of a judge who . . . decides on the basis of facts and arguments pro and con adduced by the parties.”93×93. McNeil, 501 U.S. at 181 n.2. Thus, in light of the significant private interests likely at issue, an ALJ overseeing an adversarial hearing is more likely to “exercis[e] significant authority pursuant to the laws” under the Appointments Clause than an ALJ overseeing a nonadversarial hearing.94×94. Buckley v. Valeo, 424 U.S. 1, 126 (1976) (per curiam).
Any potential argument that SSA ALJs are not “Officers of the United States” has little salience at the moment. As it stands, the executive order requires SSA ALJs to be appointed by an “agency head.”95×95. Exec. Order No. 13,843, 83 Fed. Reg. 32,755 (July 13, 2018). But, because the executive order threatens the impartiality of Social Security ALJs, Congress or a future presidential administration should rescind the executive order and reinstate the merit-based civil service hiring of SSA ALJs. Such a maneuver would expose these ALJs to Appointments Clause challenges. Should the executive order be rescinded, the fact that SSA ALJs do not preside over adversarial hearings may provide a basis for future litigants to argue that SSA ALJs are not “Officers of the United States” under Lucia and Freytag.