Why recent constitutional challenges may have implications for agencies and their administrative judges

Several recent court decisions have far-reaching implications for agency administrative judges and others — prompting a wide range of questions from attorneys and some lawmakers over the past year.

In Lucia v. Securities and Exchange Commission, the Supreme Court in 2018 found administrative law judges at the agency “officers of the United States” and subject to the appointments clause of the U.S. Constitution.

Under the appointments clause, the president must nominate and the Senate must confirm public officials who have been deemed to have “significant authority” over the laws of the United States.

The 2018 case involved a financial adviser, Raymond Lucia, who an SEC administrative law judge charged with violating the Investment Advisers Act. The judge imposed a fine and banned Lucia for life from the investment industry.

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Lucia, however, appealed to the commission. Administrative law judges (ALJs) like those who ruled on his case are considered “officers of the United States,” he argued. And because this ALJ wasn’t appointed by the president or confirmed by the Senate, the judge’s ruling violated the appointments clause of the Constitution.

The Supreme Court eventually agreed with Lucia. ALJs are officers subject to the appointments clause, the court said.

Members of a House Judiciary subcommittee in November examined the consequences of an October 2019 Federal Circuit decision, which found the current structure of the Patent Trial and Appeal Board (PTAB) unconstitutional under the appointments clause.

At issue is whether the PTAB judges hold “significant authority” and therefore should serve as “principal officers” of the United States. The federal circuit said they should be, again, opening up an array of questions about past and future decisions from PTAB judges and about the judges themselves.

“We need to learn more about the impact of this decision on existing cases and the likelihood of the decision being upheld or modified by either the en banc Federal Circuit or the Supreme Court,” Hank Johnson (D-Ga.), chairman of the House Judiciary Courts, Intellectual Property and the Internet Subcommittee, said at a Nov. 19 hearing on the topic. “Most importantly, we need to begin to consider whether Congress must get involved to provide a sensible solution. Frankly, I worry that we cannot trust the courts to fix this.”

Lawmakers at the hearing didn’t settle on any definitive conclusions on the future of PTAB and its judges.

But these court decisions and others could have implications on several quasi-judicial agencies and other federal entities — and on the administrative judges themselves, who, depending on how these court rulings are implemented, could lose existing due process rights if their appointment process changes.

Jim Eisenmann, a former executive director and general counsel for the Merit Systems Protection Board, said both court decisions could hold implications for the MSPB.

“The argument here is that these MSPB judges exercise the same significant authority as these administrative law judges do — and just like the ALJs their appointments are unconstitutional and they have no authority,” said Eisenmann, who currently practices as an attorney with the law firm Kalijarvi, Chuzi, Newman and Fitch.

The MSPB’s administrative judges today currently issue initial decisions on cases federal employees and agencies bring before the board. The judges’ decisions often stand, though agencies and employees can request a “petition for review” before a board of three, presidentially-appointed, Senate-confirmed members.

But the MSPB has lacked a quorum for nearly three years now, and it currently has no members at all. Nearly 2,300 petitions for review are awaiting action from the board, according to the MSPB’s latest count posted to its website.

The current situation makes it incredibly difficult for the MSPB to resolve potential questions about the board’s judges and their constitutionality, Eisenmann said.

“This could be fixed … if there’s a board that appoints the judges properly,” he added. “Or you could remove those duties that the judges have that give them this ‘significant authority.'”

But with no members, the board can’t change judges’ duties or review their recommended decisions, nor can it appoint administrative judges altogether.

Similar questions surround impasses panel

A similar debate over the constitutionality of the members of the Federal Service Impasses Panel may occur next year in federal district court.

President Donald Trump in November gave the Federal Labor Relations Authority the power to remove the chairman or members of the Federal Service Impasses Panel (FSIP).

On first glance, the move was a curious one. The panel, a body of seven presidentially-appointed members who serve as a component of the FLRA, has been issuing decisions on labor-management disputes that often lean in favor of the agencies, not federal employee unions.

But Trump’s delegation of authority makes more sense considering an August lawsuit from the American Federation of Government Employees.

Though FSIP members are appointed by the president, they’re not Senate-confirmed. But in its lawsuit, AFGE argued the members should be.

The union sought injunctive relief in the U.S. District Court for the District of Columbia from the panel’s May ruling on a dispute over the AFGE contract with the Social Security Administration.

Again, the appointments clause of the U.S. constitution requires “principal officers” to be “appointed by and with the advice and consent” of the Senate. FSIP members, however, are currently considered “inferior officers.”

The panel’s members, AFGE argued, have “significant authority” to resolve labor disputes and issue “final and binding decisions” without direct supervision. Given these responsibilities, FSIP members should be considered “principal officers,” the union said.

It cited the Lucia decision in its August lawsuit in federal district court.

Meanwhile, the president’s November delegation of authority is an attempt to clear up its position on the FSIP: Because panel members are under the supervision of the FLRA, those members are considered “inferior officers” and therefore not subject to Senate confirmation.

FSIP Chairman Mark Carter described the president’s November action as a “clarification.” The panel ratified past decisions last month “out of an abundance of caution, and in view of ongoing and potential litigation and the need to remove any question regarding the validity of its orders.”

“For over 40 years, FSIP has provided prompt and effective assistance in resolving federal-sector bargaining impasses,” Carter said in a Dec. 3 statement announcing the panel’s ratification moves. “During that time, the FSIP’s chairman and members have been subject to appointment and removal by the president alone, while its orders and decisions have been subject to review both by agency heads and the FLRA via the unfair labor practice procedure.”

The AFGE lawsuit is currently awaiting action in the U.S. District Court for the District of Columbia.

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