Administrative Law Blog Essay

Lucia and the Future of Administrative Adjudication

What is to become of administrative adjudication and adjudicators?  As the never-ending assault on the administrative state marches on, administrative adjudication is in the cross-hairs of reformers.  The latest chapter in the ongoing controversy over the proper role of adjudication within administrative agencies is the Supreme Court’s recent decision in Lucia v. SEC, that SEC Administrative Law Judges (ALJs) are “Officers of the United States” and thus must be appointed pursuant to the Appointments Clause of the Constitution.  What this means, in effect, is that all ALJs must be appointed either by the President, a Court of Law or a Department Head.   In the Court’s view, the result in Lucia flowed inexorably from precedent, and thus did not constitute a significant extension or revision of existing law.  But the decision papered over important lingering questions concerning administrative adjudication, which are likely to arise in the not-too-distant future.

The decision that the SEC’s ALJs were not properly appointed does not have significant implications for the future of administrative adjudication.  All that has to happen—which the SEC has already done—is for the ALJs to be appointed by the head of their department or independent agency.  They can use the same process they have always used to determine whom to appoint except that at the end of the process, the agency heads themselves will have to sign the appointment papers.  In some cases, statutory change may be necessary.  However, because agency heads, such as SEC Commissioners, are political appointees, the process of appointing ALJs might become politicized. And even if political considerations do not become important, agency heads might find it necessary to carefully review their appointees’ credentials, lest they be held responsible for ALJ mistakes or misdeeds.

The potential for politicization of the process of appointing ALJs raises another issue that the government pressed in Lucia: the standard for removing ALJs.  Although the Court declined to grant certiorari on the removal question, the government’s brief on the merits urged the Court to hold that the ALJs’ statutory protection against removal without cause violated separation of powers by reducing the President’s ability to control the execution of the law.  The conclusion, according to the government, flows from the Court’s determination in the Free Enterprise v. PCAOB case that the Constitution does not allow two layers of for-cause removal protection for federal officials.  While the PCAOB Court was careful to defer judgment on the removal of ALJs, and it is questionable that the President has a legitimate interest in removing ALJs without cause, it is open for the Court to determine that ALJs’ insulation from removal without cause is unconstitutional.

The removal issue has serious implications for administrative adjudication.  Presidential power to remove ALJs without cause would threaten the due process rights of litigants, especially in cases between the agency and a private party.  The framers of the Administrative Procedure Act recognized this when they prohibited supervision of ALJs by officials engaged in enforcement and investigative functions.   Amid a growing chorus of complaints that agencies, including the SEC, have an unfair advantage when they bring enforcement actions internally rather than to federal court, adjudication before an ALJ removable at will by the agency would aggravate the perception that agency enforcement actions brought before agency-employed ALJs are unfair.

So why is the Trump administration so eager to press the removal issue?  Perhaps it is because they view it as a step toward dismantling the administrative state.  Administrative state skeptics, inside and outside of the administration, are searching for ways to undercut the constitutionality of the administrative state, and this may be one of them.  Philip Hamburger, in his book Is Administrative Law Unlawful?, argues that only real judges, not Executive Branch officials conducting adjudications, are capable of providing due process under any circumstances.   But you don’t have to accept the full Hamburger to be concerned about the fairness of adjudication before ALJs that are freely removable by superiors who also hear appeals from their decisions.

How should the law react if the administration’s views on removal of ALJs prevail?  First, it would affect ALJs only in independent agencies because the cabinet secretaries at the top of Executive Branch departments are freely removable by the President, thus avoiding the “two layer” problem.  ALJs in the independent agencies would be constitutionally suspect while those within the Executive Branch, where agencies are under more direct political control, would be fine.

Second, reviewing courts might be tempted to be less deferential to the decisions of ALJs without insulation from removal, much as federal courts appear to be less deferential to administrative adjudicators in the immigration field due to the well-documented problems there.  ALJs do not exercise the Judicial Power of the United States—only federal judges can do that.  Once ALJs are brought under the direct control of their superiors, it might be best to view them as part of the enforcement arm of the agency.  Administrative state skeptics could persuasively argue that it is inappropriate and inconsistent with due process norms for courts to defer to the conclusions of enforcers, regardless of the process used within the agency to arrive at the decision of whether and how to enforce a regulatory requirement.

If the federal courts viewed ALJs as part of the enforcement mechanism and stopped deferring to their factual and legal conclusions, the entire system of administrative adjudication begins looking like a colossal waste of time and resources.  Without deference, federal courts might be overwhelmed with petitions for judicial review, or even worse, federal courts might be forced to perform the initial adjudication of many claims that are currently handled in the administrative system, which would require a major increase in the number of federal judges.  Of course, Congress could simply abolish regulatory programs that depend on administrative adjudication, which may be the ultimate goal of the administrative state skeptics and forces promoting deregulation.

Viewed through a purely normative lens, this whole analysis is nonsensical.  While the administrative state is far from perfect, Congress has determined that it is the best politically feasible structure for enforcing important regulatory requirements.  Normatively, insulation of ALJs from removal without cause is attractive because it enhances the fairness of agency proceedings.  So long as agency procedures meet minimum standards of procedural fairness as specified in the APA, without a clear constitutional prohibition on judicial deference to agency determinations, courts should defer to Congress’s judgment that agency adjudicatory determinations should be reversed only when they are not supported by substantial evidence or otherwise not in accordance with law.  By requiring ALJs to be appointed pursuant to the Constitution’s Appointments Clause, the decision in Lucia actually enhances the legitimacy of administrative adjudication.  Whether the Supreme Court will see it that way remains to be seen.