On September 7, the U.S. Court of Appeals for the Fifth Circuit granted a stay of a Federal Deposit Insurance Corporation (FDIC) order, following a hearing conducted by an agency administrative law judge (ALJ), assessing a civil penalty against a former banking officer and also requiring his withdrawal from the banking industry. The case is Burgess v. FDIC.

In so ruling, the Fifth Circuit joined the U.S. Court of Appeals for the Tenth Circuit, which concluded, in Bandimere v. SEC, that the Securities and Exchange Commission (SEC) ALJs were “inferior Officers” who are subject to the provisions of the U.S. Constitution’s Appointments Clause, U.S. CONST. art. II, § 2, cl. 2..

These rulings could cast some doubt on the validity of the actions taken by ALJs, who have traditionally been considered to be exempt from the Appointments Clause. The Fifth Circuit and Tenth Circuit rulings conflict with a the U.S. Court of Appeals for the District of Columbia’s ruling in Raymond J. Lucia Companies Inc. v. SEC, and it appears likely that the U.S. Supreme Court will be asked to resolve this conflict.

The federal government employs thousands of ALJs to conduct important regulatory hearings and make findings of fact and conclusions of law. If some form of Senate confirmation is required for these officials, this could significantly impact the effectiveness of federal agencies and departments.