‘You’re Fired!’ Why the ALJ Multi-Track Dual Removal Provisions Violate the Constitution & Possible Fixes
47 Pages Posted: 25 Jul 2019
Date Written: July 23, 2019
When you light fireworks, you look forward to the ensuing explosion. Sometimes, however, all you get is a fizzle. Such was the outcome of the highly anticipated case of Lucia v. SEC. This case held that the Administrative Law Judges (ALJs) of the Securities and Exchange Commission (SEC) were inferior officers who must be constitutionally appointed. This holding was hardly surprising, especially given the solicitor general’s decision to switch sides after Lucia’s petition was filed with the Supreme Court. Indeed, the Court had to appoint Amicus Curiae Anton Metlitsky to argue the SEC’s original position that the SEC ALJs were merely employees.
While Metlitsky did his best, the argument was a loser from the start. Supreme Court precedent had already granted inferior officer status on many a lesser functionary, including a district court clerk, a federal marshal, and, most relevantly in Freytag v. Commissioner of Internal Revenue, Tax Court special trial judges. In fact, Justice Kagan’s majority opinion could simply have said, “SEC ALJs are inferior officers, duh. See our unanimous, did I mention unanimous?, decision in Freytag.”
Thus, Justice Kagan minimized Lucia’s impact by resting entirely on stare decisis. Fizzle number one. Fizzle number two: Justice Kagan correctly sidestepped the game-changing issue of whether the multi-track, statutory removal restrictions on SEC ALJs violate the United States Constitution. When granting certiorari, the Court refused to include the removal issue. Despite this refusal, the solicitor general asked the Court to address the issue in its merits brief. The Court again declined.
However, the question of the constitutionality of the ALJ removal limitations is coming. Indeed, on November 28, 2018, Raymond J. Lucia, Co. filed a new complaint alleging that “[t]hese multiple layers of tenure protection violate Article II of the United States Constitution. And, the potential ramifications are enormous. Insert explosion here!
Given that it is only a matter of time before this issue reaches the Supreme Court, this Article explains why the ALJ removal structure violates Article II of the United States Constitution and separation of powers. Moreover, unlike cases in which the courts have found removal provisions violate the Constitution and severed the offending provisions, here, there is no easy fix. Hence, the Court’s holding has the potential to affect all ALJs: those working for independent agencies and
those working for executive agencies.
This Article explains why the ALJs for-cause removal provisions are unconstitutional and offers three potential solutions, none of which is perfect. First, the removal protection that applies to all civil service employees might similarly protect ALJs. Second, the Court could narrow the holding in Humphrey’s Executor to hold that Congress can limit a president’s power to remove principal officers who exercise adjudicatory powers exclusively. Third, the Court could overrule Humphrey’s Executor entirely and hold that Congress cannot limit a president’s power to remove any principal officer. This Article explains the pluses and minuses of each. Finally, this Article concludes by offering some thoughts about the impact this issue will have on those attempting to dismantle the administrative state.
Keywords: separatio of powers, Lucia, removal, ALJs, civil servants, administrative law
JEL Classification: K
Suggested Citation: Suggested Citation