In a series of recent
posts (most recent here), I’ve been sharply critical of filings by the Solicitor General in the Hargan v. Garza abortion litigation, involving HHS’s efforts to deny minors in their de facto custody the ability to exercise
their constitutional rights. Last month, for example, I wrote that the Solicitor General’s nominal “Petition for Certiorari”
in No. 17-654 “[i]n many
respects . . . departs, sometimes dramatically, from the justly lauded,
traditional standards and practices of [the Office of the Solicitor General].”
Unfortunately, it appears
that the Hargan litigation is not a
singular aberration. Three weeks after
his petition in Hargan, the Solicitor
General filed another
extraordinary brief in No. 17-130, Lucia v. SEC, about a topic far removed
from (and less heated than) abortion rights—namely, whether the Administrative
Law Judges (ALJs) who work in the Securities and Exchange Commission (SEC) are hired
in a manner that violates the Appointments Clause of the Constitution, Art. II,
§ 2, cl. 2.
In his Lucia brief, filed on behalf of the Respondent
SEC, the SG urges the Court to grant Lucia’s
petition for certiorari, even though the government prevailed below. As I’ll discuss, SG Francisco failed to offer a compelling reason why the government was switching its longstanding legal position in Lucia; but that’s not what makes the brief especially concerning. Such a reversal is unusual, but it’s not, in and of
itself, problematic. Indeed, one of the
most laudable practices of the Office of Solicitor General is the confession of
error.
What makes the brief extraordinary,
from the perspective of the Office’s usual standards, are two other things:
-- First, the SG did not explain why, under the government’s new
view, the proper response was not for the defendant agency—the SEC—to change
its practices to conform to the government’s new view of what the Constitution
requires, rather than (as the SG has urged) for the Court to grant cert.
What’s more, the brief failed to inform the Court that the SEC was about to take steps, the very next
day, to cure the alleged constitutional infirmity identified in the petition
and thereby also eliminate the purported basis for the Court to grant the
petition. The SG’s stated justification
for the Court to grant the petition is no longer operative—yet the SG has not whispered
a word to the Court about that decisive change of circumstance.
-- Second, the SG not only asked the Court to grant cert. on the Appointments Clause
question where there was no longer any factual predicate for it; he also asked
the Court to expand the Question Presented to include an additional
constitutional challenge to a federal statute (regarding ALJs’ “for cause”
removal protections) that no court has accepted, on which no court of appeals
has opined, and that the petitioners themselves have not raised.
* * * *
Some background: Petitioners Lucia, et al., were registered
investment advisers who marketed a wealth-management strategy called “Buckets
of Money.” The SEC instituted administrative
proceedings against them based upon allegations that they had used misleading slideshow
presentations to deceive prospective clients about how the “Buckets of Money”
strategy would have performed under historical market conditions, in violation
of three federal statutes.
The Commission assigned
the initial stages of the proceeding to ALJ Cameron Elliot. After a hearing, Elliot concluded that the petitioners
had willfully and materially misled investors in violation of the Investment
Advisers Act, and ordered a variety of sanctions. Such an ALJ decision does not itself operate
by force of law: It becomes final only
upon an order issued by the SEC itself, and the SEC reviews the ALJ’s decision de novo.
In this case, the Commission conducted an independent review of the record,
except with respect to the findings not challenged on appeal, and the
Commission determined that the ALJ had correctly found that the petitioners had
willfully made fraudulent statements and omissions in violation of the
Investment Advisers Act. With limited
exceptions, the Commission also affirmed the sanctions that ALJ Elliot had proposed.
Lucia and the other
petitioners challenged the SEC process on the ground that ALJ Elliot was an
“inferior” “Officer[] of the United States” who had not been appointed in
conformity with the Appointments Clause.
The Appointments Clause provides that such inferior Officers must be
appointed in one of four ways: by the President, by and with the advice and
consent of the Senate; by the President alone; by a court of law; or—as most
relevant here—by the head of a Department.
The five-member Commission is the head of a
Department, and the relevant statute would permit the Commissioners to appoint
ALJs. See 5 U.S.C. 3105 (“Each agency shall appoint as many
administrative law judges as are necessary . . . .”). If the Commission had done so, such an
appointment would have satisfied the Appointments Clause even if ALJ Elliot is
an inferior “Officer.” The SEC, however,
for some reason had not itself directly appointed its ALJs. Most of them were, instead, chosen by the Commission’s
Office of Human Resources, based upon recommendations by the SEC’s Chief ALJ
and an interview committee, who in turn selected individuals from among three
candidates identified by the U.S. Office of Personnel Management. ALJ Elliot, too, appears to have been hired
by the Office of Human Resources, albeit perhaps not pursuant to the OPM “Rule
of Three” (see this
transcript at pp. 4470-72).
Everyone agrees that if ALJ Elliot is an “Officer of the
United States,” his hiring by the SEC’s Office of Human Resources violated the
Appointments Clause, because the Commission itself did not (as of the date of
the ALJ’s hearing) approve the appointment.
(As the Office of Legal Counsel has explained, the appointment process can largely be delegated to officials
other than the head of the Department, such as the Human Resources Department, as
long as the “ultimate decision” on the appointment remains with the head of the
Department. Here, however, the SEC did
not (until recently—see below) confirm the appointment of ALJ Elliot.)
The question presented
by the Lucia petition thus is whether
ALJ Elliot is an “Officer” for purposes of the Appointments Clause, or whether he
is, instead, a mere “employee,” who may constitutionally be appointed as Mr.
Elliot was here.
There’s a circuit split
on that question: The U.S. Court of
Appeals for the D.C. Circuit says that the SEC ALJs are employees for
Appointments Clause purposes, whereas the Court of Appeals for the Tenth
Circuit says they’re “Officers.” Until a
few weeks ago, the longstanding view of the SEC itself, and of the United
States, was that these ALJs are employees, and thus that it is not
constitutionally necessary for the SEC Commissioners themselves to appoint them. That is the position the government argued to
the en banc D.C. Circuit in the Lucia case
in May. The court of appeals affirmed
the judgment against Lucia by an equally divided 5-5 vote (with Chief Judge
Garland recused).
In his Lucia brief in the Supreme Court, however,
SG Francisco, on behalf of the SEC, now reverses the United States’s
traditional view: He argues that the
ALJs are “Officers” and therefore were hired in violation of the Appointments
Clause.
I tend to think the
government’s previous, traditional view was correct—that the SEC’s ALJs are
employees rather than officers, primarily because they do not have the independent
power, without the action of the Commission itself, to bind third parties or
the government itself for the public benefit.
See 31 Op. O.L.C. 73, 87 (2007). Concededly, however, it’s a close and
unresolved question, owing in part to the somewhat cryptic and imprecise
opinion of the Court in Freytag v. Commissioner (1991). Reasonable minds
can differ.
And apparently SG Francisco
does: His view, after “further
consideration” of the question (p.9), is that the ALJs are “Officers” and thus
must be appointed by the SEC itself. Fair
enough. Just because a new SG does not
agree with the traditional view of the United States on a legal question,
however, does not mean that the government should therefore change its legal
position in court—particularly not where, as here, the Trump Administration
itself pressed the traditional view before an en banc court of appeals just six
months earlier (reply brief here; oral argument here); and where the new view would impose greater constraints on the
flexibility of the client agency. The
traditional understanding is that the core of the Solicitor General’s responsibility
is, in
the words of former SG Seth Waxman, “to ascertain and
represent the interests of the United States in litigation.” And, obviously, it is not in the interests of
the United States to flip its views every time a particular Solicitor General
happens to personally think that the prevailing U.S. position is not the one he
would have arrived at on a clean slate.
Such convulsive shifts, based entirely on the person who happens to be
SG at a given time, would undermine the credibility of OSG’s representations to
the Court.
This doesn’t mean that
such shifts are always inappropriate, however.
Sometimes, for instance, major changes in the Supreme Court’s own
jurisprudence might warrant a reconsideration of the government’s views. And in still other cases, a Solicitor
General, Attorney General, and/or the President might conclude that the
traditional U.S. position was insufficiently protective of constitutional
rights—such as the switch in positions of the George W. Bush Administration on
the Second Amendment, or President Obama’s conclusion that Section 3 of the
Defense of Marriage Act was unconstitutional.
The SG’s Lucia brief,
unfortunately, fails to offer any such compelling reason for the about-face,
apart from the fact that the new SG undertook “further consideration” of the
question. (The brief also refers (pp.9-10) to “the
implications for the exercise of executive power under Article II”—but it
doesn’t say what those “implications” might be.
Indeed, executive power is enhanced
if the agency may choose among different means of appointing ALJs—a flexibility
that the government’s new view would foreclose.)
* * * *
The failure to offer a
good explanation for the shift in the government’s traditional view, however,
is not what makes the brief so troubling.
What’s much more inexplicable is the SG’s failure to offer a persuasive
reason why certiorari is warranted in
light of the new position of the United States, and his failure to inform the
Court of intervening developments undertaken by the Respondent agency itself that
eliminate the need for the Court to resolve the Question Presented.
The SG argues (p.10) that
the Court should grant cert. because
“[t]he question presented has arisen frequently across the courts of appeals on
petitions for review of the Commission’s decisions, and it will continue to arise absent this Court’s intervention.” Indeed, the SG represents (p.25) that “the Commission’s
ability to enforce the nation’s securities laws has, in significant respects,
been put on hold pending this Court’s resolution of the question presented.”
This is simply untrue,
however—or, more to the point, it was something entirely within the Respondent
agency’s own power to prevent. The
upshot of the SG’s brief for the SEC is this:
“We have been acting unconstitutionally.” OK, then, if that's the case—if the SEC’s
new view is that its ALJs are “officers”—then why wouldn’t the Commission now simply
appoint ALJs in conformity with the
Appointments Clause, by making the appointments itself, thereby curing the
constitutional defect? (The federal
statute allows the SEC to do so. The
SG’s view of the constitutional question, that is to say, does not mean that
any federal statute is unconstitutional.)
One would expect the brief to say something about that possibility—about
whether and how the SEC was responding to its new view that the appointments
had been unconstitutional. Yet on this
crucial question, the brief is silent.
Worse yet, the brief
does not mention the critical fact that the SEC was, indeed, about to cure the
constitutional defect. The very next day
after the brief was filed, the Commission— in its capacity as head of a
department—“ratified”
the appointment of Elliot and its other ALJs. The Commission further ordered that all
pending cases, including those that had already been appealed from an ALJ to
the Commission itself, must be reconsidered before a properly appointed ALJ,
with an opportunity for the parties to submit new evidence.
Because of this action by the SEC, the question
presented will not “continue to arise
absent this Court’s intervention,” nor will “the Commission’s ability to enforce
the nation’s securities laws [be] put on hold pending this Court’s resolution
of the question presented.” There is no
longer any reason for the Court to consider the merits of an agency practice
that no longer exists and that the agency and the Solicitor General have
concluded cannot be revived.[1]
The SG’s failure even to identify, let alone discuss,
this development, is indefensible, best I can tell.
* * * *
Perhaps that failure can
be explained by the other remarkable aspect of the SG’s new brief: the SG’s eagerness for the Court also to
consider an additional constitutional
question, concerning the ALJs’ statutory protection from removal, that is not
affected by the SEC’s recent appointment of the ALJs.
Only the Commission
itself can remove ALJs from office, and then “only for good cause established
and determined by the Merit Systems Protection Board.” 5 U.S.C. 7521(a). Moreover, the President can only remove the
members of the MSPB and (probably) Commissioners on the SEC itself for “good
cause,” e.g. (as to the MSPB), “only for inefficiency, neglect of duty, or
malfeasance in office.” 5 U.S.C.
1202(d). After the Court’s decision in Free Enterprise Fund v. Public Co.
Accounting Oversight Bd., it is an open question whether this multi-layer
“for cause” removal protection for ALJs is constitutional. See FEF, 561 U.S. at 507 n.10; id. at 542-43
(Breyer, J., dissenting).
The SG’s brief urges the
Court to resolve this removal question, too.
“It is critically important,” writes Francisco (p.21), “that the Court,
in considering whether the Commission’s ALJs are ‘Officers of the United
States,’ address whether the restrictions imposed by statute on their removal
are consistent with the constitutionally prescribed separation of powers.” Yet not only doesn’t the SG offer any reasons
why the Court’s consideration of that question would be “critically important”
now, he does not even offer any good
reason why the Court should do so. And
there are plenty of good reasons—reasons the Solicitor General himself
typically invokes, but that he disregards here—why the Court should not grant the petition in order to
review that question.
For one thing, the
petitioners themselves have not raised it in the case, let alone in their
petition, and, as they explain in their reply brief, they do not want the Court
to address it. Indeed, as the reply
brief notes (pp. 10-11), even if the petitioners did take the view that they
have a right to appear before an ALJ who is not protected by such removal restrictions, that question might never
arise in their case—if, for example, “the proceeding is dismissed, or
petitioners are afforded a new trial in an Article III forum.”
Moreover, not only is
there not a circuit split on the question, but no federal court has ever held that the ALJ removal protections are
unconstitutional, and no court of appeals has even opined on the question, one
way or the other. (The question has been
raised in a D.C. Circuit case (Timbervest
v. SEC, No. 15-1416) that the court of appeals is holding in abeyance pending
the Supreme Court’s disposition of Lucia.) Thus, as petitioners note (p.10), “[t]he
Solicitor General . . . asks this Court to break new ground”—to address the
constitutionality of a federal statute, no less!—“without the benefit of a
decision from the court below or any other court of appeals.”
Finally, the SG does not
even suggest, let alone argue, that the ALJ “good cause” removal provisions of
the federal law are unconstitutional—and there are very good reasons to believe
that they are not, because an ALJ’s principal role is, of course, to “perform adjudicative rather than enforcement
or policymaking functions.” FEF, 561 U.S.
at 507 n.10; see also Wiener v. United
States, 357 U.S. 349 (1958).[2]
Obviously, then, if the
Solicitor General were applying his Office’s usual standards, he would never
have urged the Court to consider the merits of the removal question. In this respect, too, he has starkly deviated
from the traditional practices of the Office.
* * * *
The
Justices are scheduled to discuss Lucia at
their conference this coming Friday, January 5.
For the reasons I’ve set out here, the case is not cert.-worthy: In light of
the Respondent’s new view of what the Appointments Clause requires, and the
SEC’s recent appointments of its ALJs, there’s no reason for the Court to
consider the merits of the agency’s past practice, which it has now repudiated
and abandoned.
Nevertheless,
Lucia notes in its reply brief that the SEC’s action to fix the problem going forward does
not remedy the petitioners’ own injuries (p.5):
“Although the government now agrees that SEC ALJs are Officers, it has
afforded petitioners no redress for having subjected them to trial before an
unconstitutionally constituted tribunal.”
It further asserts (p.6) that “[a]bsent review by this Court, the
judgment below will stand uncorrected notwithstanding the Justice Department’s
confession of error.” I’m not sure
that’s right. It might be the case that
the SEC can now order the petitioners’ own case to be reopened before a
properly appointed ALJ, just as it has done with respect to cases that remain
pending before the Commission. If so,
the Commission obviously should do so right away. If it does not do so, however—or if the
agency no longer has jurisdiction to so “reopen” the petitioners’ case because
the appeal is pending in an Article III court (a question I haven’t researched)—the
Court should grant Lucia’s petition, vacate the judgment below, and remand the
case to the court of appeals, with an order for that court to remand the case
to the agency for reconsideration before a newly appointed ALJ (or some other
lawful disposition).
[1] In its reply brief, Lucia offers two reasons why the
Court should hear the case, even after this curative action by the
Commission. Neither reason is
persuasive, however.
First,
Lucia suggests (p.6) that perhaps the SEC itself—in contrast to the SG—might
actually refuse to appoint the ALJs, and “continu[e] to assert that its ALJs
are employees. . . . [T]he Commission
will not actually acknowledge that petitioners were tried by an
unconstitutional adjudicator or provide an appropriate remedy for that
constitutional violation.” The
SEC, however, already has acknowledged
that a Commission appointment is necessary to cure a constitutional
defect: That is precisely the argument
of the brief that the Solicitor General filed on behalf of the SEC. Even
if there might be certain officials at the SEC who do not personally agree with
the view in the brief, the Commission itself is now formally on record as
conceding that an appointment by the “Head” of the “Department” is
constitutionally required—and it has taken steps to comply with that
requirement.
Second,
Lucia argues (p.8) that the SEC’s purported “ratification” does not do the
(constitutional) trick, because the SEC used the wrong nomenclature: Instead of saying that the SEC “hereby
appoints” the existing ALJs, or words to that effect, the Commission stated
that it was ratifying the “agency’s prior
appointment” of the five identified ALJs—and the agency, as such, had not, in fact, made the prior appointments. Surely, however, the Commission’s failure to
use any special “magic words”—or, more to the point, its insertion of the word
“agency’s” to refer to the actions of the SEC’s Human Resources
Department—should not make any constitutional difference. The Commission has expressed its will to
appoint Elliot and the other ALJs through an open and unequivocal public act,
which is all the Constitution requires. See Marbury, 5 U.S. at 156-57. (And even if some clerical correction were
required to confirm the new appointments, that would hardly be reason for the
Court to grant cert.)
[2] The SG writes, in
passing (p.20), that “the status of the Commission’s ALJs as constitutional
‘Officers’ . . . has implications for whether the statutory restrictions on
their removal are consistent with separation-of-powers principles.” That’s not correct: It’s mixing apples and oranges. Whether or not ALJs are “officers” for
purposes of the Appointments Clause
is a question entirely distinct from whether Congress’s prescribed method for
removing ALJs “impermissibly burdens the President's power to control or
supervise” such actors “in the[ir] execution of . . . duties under the Act” and
thereby “interfere[s] impermissibly with his constitutional obligation to
ensure the faithful execution of the laws.”
Morrison v. Olson, 487 U.S. at
692-93. To be sure, evaluation of the
ALJ’s particular functions, and of the SEC’s supervisory authority over such
ALJs, is relevant to both questions, and it’s difficult to imagine any
“employee,” not covered by the Appointments Clause, for whom Congress may not
provide “for cause” removal protection; nevertheless, the answer to the “officer/employee” question for Appointments Clause
purposes does not resolve, or even affect, the question of whether particular
removal restrictions are constitutional.