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Appeals Court Strikes ALJ Appointments

By William Vogeler, Esq. on January 06, 2017 | Last updated on March 21, 2019

A federal appeals court has ruled that an administrative law judge's appointment was unconstitutional, setting up a battle that calls into question the validity of ALJ appointments across the country.

Siding with a businessman who was punished for violating securities laws, the Tenth Circuit Court of Appeals said that a Securities and Exchange Commission judge did not have authority to act in the case because he was not appointed by the President, a court, or a department head.

"Because the SEC ALJ was not constitutionally appointed, he held his office in violation of the Appointments Clause," the majority said.

Five SEC ALJs Just Lost Their Jobs

The court said the Appointments Clause. U.S. Const. art. II, § 2, cl. 2, mandates that inferior officers -- who report to higher officers -- must be appointed by the President, a court, or a department head. In this case, the SEC argued that its five ALJs were employees rather than inferior officers.

The appeals court disagreed, citing criteria defining a tax court judge as an inferior officer in Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991). The Tenth Circuit majority, Judges Mary Beck Briscoe and Scott M. Matheson, Jr., said the SEC ALJs fit the definition, and so their appointments were not constitutional.

More than 1,537 ALJ's at Risk

In dissent, Presiding Judge Monroe G. McKay said that under the majority rule "all federal ALJs are at risk of being declared inferior officers." He said there are 1,537 Social Security Administrational ALJs alone.

"Despite the majority's protestations, its holding is quite sweeping, and I worry that it has effectively rendered invalid thousands of administrative actions," he said.

The decision is at odds with the Washington D.C. Circuit decision in Lucia v. SEC and sets up showdown at the Supreme Court. But court watchers are waiting to see if the incoming administration pursues the issue.

Briscoe, in a concurring opinion, said there is "no cause for alarm that the administrative state will be eroded." She said the decision will have "none of the consequences to the nationwide civil service that the dissent predicts."

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