Lucia Turns Out to Be Much Ado About Nothing

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The Court’s decision about administrative judges skirts major separation of powers questions.

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The securities industry initially brought the case Lucia v. SEC because of its outrage over the U.S. Securities and Exchange Commission’s (SEC) frequent channeling of cases to its in-house adjudicators, rather than to federal court, and the rather unfair perception that doing so produced bias in the adjudication process. Yet, the question eventually presented to the U.S. Supreme Court was much narrower than what motivated the litigation initially. In the end, the Court only held that the Commission’s in-house adjudicators need to be appointed as inferior officers in accordance with the Appointments Clause.

The Appointments Clause requires “Officers of the United States” to be either nominated by the President and confirmed by the U.S. Senate or, in the case of so-called inferior officers, appointed by the President, the head of a department, or a court. The jurisprudence around that clause has been roundly criticized as quite opaque, but the issue raised by the Commission in Lucia was rather straightforward: Could members of the agency’s staff, rather than the Commission itself, appoint the agency’s administrative law judges?

The Court held that the Commission itself must make the appointment of administrative judges, as the Commissioners collectively constitute the head of the “department.”

The primary criticism of past case law has been that no one could really tell how to determine exactly who is an officer of the United States. Various tests have been proposed and occasionally adopted. These tests ask variously whether the officer exercises substantial executive power, whether and to what degree the officer is supervised by somebody who is politically accountable, or whether the officer exercises the sorts of powers that the framers of the Constitution would have imagined under the definition “officer of the United States.”

The decision in Lucia did not resolve which of these tests is appropriate, and it did not provide much guidance about who should be considered an officer of the United States in the future. Instead, the Court analogized the SEC’s administrative law judges to special tax judges, whom the Court, in earlier case, had decided were officers of the United States and needed to be appointed by the head of a department. The Court, as briefly as possible, said that it simply could not distinguish Lucia from that earlier case. SEC administrative law judges, it said, were therefore officers of the United States, and in failing to have the Commission itself appoint them the SEC had violated the Appointments Clause.

The impact of the Lucia decision will not be dramatic, though it is yet another example where a separation of powers argument “worked,” even if the remedies provided to plaintiffs who successfully raise separation of powers claims are modest.

Lucia probably does mean that agency adjudicators will, in most cases, need to be appointed by agency heads, which could make them both more accountable and potentially more politicized. On the other hand, agency heads are likely too busy to spend much time ensuring that the politics of their adjudicators match their own. Agency adjudicators matter, particularly to those who appear before them, but they are rarely a part of broad policy initiatives. Agency heads are therefore likely to continue to prioritize those policy proposals and not individual administrative judge appointments. In most cases, agency heads will probably just rubber-stamp selections made by their staff members through the processes that existed before Lucia.

Because Lucia was decided as narrowly as possible, it should not disrupt the SEC’s administrative proceedings – the commissioners have already moved to ratify the appointments of the agency’s ALJs, which should satisfy the Court’s new requirements. The real impact will come in pending cases filed before the commissioners ratified the appointments, because the Court awarded Lucia a new trial before a different administrative law judge. The same could be required for other unfinalized cases decided by other administrative law judges at the Commission, or by adjudicators at other agencies whose appointments have not been ratified by the heads of those agencies. So there is a category of pending cases now thrown into doubt.

The Supreme Court’s majority decision, and Justice Stephen G. Breyer’s dissent, seem to facilitate making the case immaterial by approving of “instant” cures such as ratification. Many agencies already follow procedures that call for ratification of appointments by the agency head.

The Lucia Court could have issued a much broader decision, one that fundamentally changed how adjudicative procedures in agencies work. Yet, administrative law judges have been around for a long time and have become a fixture within American administrative justice. It appears that a majority of Court sees little reason to unsettle established and trusted institutions for picayune doctrinal reasons.

I think this is a good idea. Although admirers of an independent judiciary might well worry about adjudications being decided by administrative law judges—or a panoply of other “administrative judges”—these adjudicatory officials within agencies play a critical role in the day-to-day operation of government. For instance, to handle the separation of families at the border, the government must ensure immigration detainees a hearing before immigration judges—another specialized administrative tribunal.

Administrative tribunals handle scores of disputes with important outcomes. If the Supreme Court were ever to hold that administrative tribunals were unconstitutional—that adjudications could only proceed within the federal judiciary—such a holding would require a massive increase in the number of judicial appointees. It might even require the development of specialized bodies of federal judges to handle decisions related to, for example, natural gas pipeline reimbursement questions or other highly technical areas of law where specialized expertise matters.

It is not clear to me, however, that the Court’s handling of separation of powers doctrine will ever lead it to raise any significant questions about administrative adjudication. When it was first filed, the Lucia litigation looked to raise such questions. But in the end, the Court’s resolution of Lucia was not the kind of sweeping separation of powers decision that will in any way uproot the agency adjudication process.

David Zaring

David Zaring is an associate professor of legal studies and business ethics at The Wharton School of the University of Pennsylvania.

This essay is part of a series, entitled The Supreme Court’s 2018 Regulatory Term.