This Trump Decision Is A Major Blow To The Administrative State
The Trump administration switched sides Wednesday in a case pending before the Supreme Court that could retroactively nullify tens of thousands of agency decisions.
The case, Lucia v. SEC, has major implications for the process by which federal agencies try or punish those in violation of laws or regulations.
The litigation concerns an agency’s decision to allow career bureaucrats to preside as the functional equivalent of judges during enforcement proceedings. These officials, called administrative law judges (ALJs), are hired by career bureaucrats. They are not appointed by the president, a court or an agency head, but they exercise significant authority on behalf of the U.S. government in official proceedings.
ALJs can, among other things, issue subpoenas, make decisions about the credibility of witnesses or the admissibility of evidence, and issues provisional rulings that are generally upheld on final review — if a final review occurs at all.
The Constitution requires that the president, the courts, or the head of an executive department appoint all “inferior officers” of the United States.
A group of investment managers challenged the Securities and Exchange Commission’s (SEC) use of ALJs in an enforcement proceeding convened against them for alleged violations of securities law. The managers argue these proceedings are unlawful, because the ALJs are exactly the sort of “inferior officer” who must be appointed by the president, the court, or the head of an agency, since they exercise meaningful discretion on behalf of the federal government.
A lower federal court, the U.S. Court of Appeals for the D.C. Circuit, found in favor of the SEC. A three-judge panel found for the SEC, and the full court affirmed that decision on a five to five vote. The investment managers then appealed to the Supreme Court.
The Obama Justice Department sided with the SEC in the dispute, but Trump’s new solicitor general, Noel Francisco, changed positions Wednesday, and backed the money managers.
“Upon further consideration, and in light of the implications for the exercise of executive power under Article II, the government is now of the view that such ALJs are officers because they exercise ‘significant authority pursuant to the laws of the United States,'” Francisco wrote in a new brief at the Supreme Court.
A Supreme Court ruling against the SEC could have important implications for similarly-situated officials in other agencies. ALJs often preside in actions brought by a whole host of federal agencies. A finding against the SEC would potentially jeopardize, and perhaps invalidate, the legal status of thousands of other agency proceedings.
The Justice Department generally represents federal agencies before the high court. Accordingly, the solicitor general asked the justices to appoint another lawyer to represent the SEC as the litigation continues.
The high court could decide to take the case as soon as January.
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