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 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 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 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 The executive order concludes that, under Lucia, “at least some — and perhaps all — ALJs are ‘Officers of the United States.’”5 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 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 An ALJ subsequently found Lucia liable for fraudulent and misleading marketing practices and imposed sanctions.8
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 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 “Officers” are distinct from “mere employees” of the executive branch, whose appointments fall outside the strictures of the Constitution.11 Individuals who “exercis[e] significant authority pursuant to the laws of the United States” are considered officers.12 And although the SEC itself is a “Head[] of Department,” the SEC had delegated the appointment of ALJs to SEC staff members.13 Thus, Lucia contended, the administrative proceeding was invalid because the presiding ALJ was unconstitutionally appointed.14 The SEC rejected this argument and found that SEC ALJs are employees, not officers.15 It also rejected Lucia’s challenges to the liability and sanctions determinations.16
Lucia petitioned for review in the D.C. Circuit. A panel denied Lucia’s petition, unanimously agreeing that SEC ALJs are employees.17 The court explained that SEC ALJs do not exercise “significant authority pursuant to the laws of the United States”18 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 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 By leaving in place the panel’s determination, the en banc order conflicted with Bandimere v. SEC,21 a Tenth Circuit case holding that SEC ALJs are officers.22 Lucia petitioned for certiorari to resolve the split between the circuits,23 and the Supreme Court granted the petition.24
The Supreme Court reversed and remanded. Writing for the Court, Justice Kagan25 declined to elaborate on Buckley v. Valeo’s26 “significant authority” test for differentiating between officers and employees. Instead, she looked to Freytag v. Commissioner,27 in which the Court had determined that “special trial judges” (STJs) of the United States Tax Court were officers that exercised “significant authority.”28 In Lucia, there was no “need to refine or enhance” the Buckley test29 because, the Court explained, “Freytag says everything necessary to decide this case.”30 Proceeding “point for point,”31 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 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 they “conduct trials” by “administer[ing] oaths, rul[ing] on motions, and generally ‘regulat[ing] the course of’ a hearing;”34 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 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 So, because SEC ALJs “have equivalent duties and powers as STJs,” they too are officers subject to the Appointments Clause.37
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 is sufficient to constitute “power to enforce compliance with discovery orders” under Freytag.39 Second, it is irrelevant under Freytag that the SEC reviews ALJs’ factual findings de novo, rather than under a deferential standard.40
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 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
Justice Thomas concurred.43 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 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 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 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 Second, he would have addressed “the constitutionality of the statutory for cause removal protections that Congress provided for administrative law judges.”48 Justice Breyer explained that answering the “for cause” removal question is a necessary predicate to properly deciding whether SEC ALJs are officers.49 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 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
Justice Sotomayor dissented.52 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 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 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
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 which the “head of department” had already “retroactively” appointed by the time the litigation reached the Supreme Court.57 In contrast, the SSA is “probably the largest adjudicative agency in the western world.”58 Of the 1931 ALJs scattered through executive agencies, 1655 of them are SSA ALJs.59 The benefits disbursement hearings they oversee provide essential financial support to millions of Americans.60 Indeed, on average, SSA ALJs conduct more than 650,000 hearings per year,61 making most Americans far more likely to encounter an SSA ALJ than an Article III federal judge over the course of their lifetime.62 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 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
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 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 Under the executive order, ALJ candidates need only “possess a professional license to practice law and be authorized to practice law.”67 Moreover, agencies now design their own hiring procedures.68 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
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 Moreover, SSA ALJs “issue decisions . . . [with] independent effect” that “contain[] factual findings, legal conclusions, and appropriate remedies.”71 Like the SEC, when the appellate body within the SSA declines to review an ALJ’s decision, the decision becomes final.72 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 First, like SEC ALJs, they “take testimony” by “receiv[ing] evidence and examin[ing] witnesses,” and also by “tak[ing] pre-hearing depositions.”74 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 Third, they “rule on the admissibility of evidence,” thereby “critically shap[ing] the administrative record.”76 Fourth, SSA ALJs also have the power to punish “[c]ontemptuous conduct . . . by means as severe as excluding the offender from the hearing.”77 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
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 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 Likewise, the SEC prosecutes violations of securities laws in adversarial hearings.81 When a party files for reconsideration of a Social Security benefits determination,82 however, the resulting hearing before an ALJ is “inquisitorial rather than adversarial.”83 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 “The Commissioner has no representative before the ALJ to oppose the claim for benefits” and does not “oppose[] claimants before the [Appeals] Council.”85 Indeed, regulations governing the proceedings “expressly provide that the SSA ‘conduct[s] the administrative review process in an informal, nonadversary manner.’”86 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
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 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 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 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 Third, before obscene materials may be seized by the government, the First Amendment requires the “procedural safeguard[]” of “a prior judicial adversarial proceeding.”92
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 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
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 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.