On January 12, 2018, the U.S. Supreme Court granted certiorari in Lucia v. Securities and Exchange Commission, No. 17-130, agreeing to resolve a circuit split regarding the appointment process for Securities and Exchange Commission (“SEC”) administrative law judges (“ALJs”). The case raises significant questions as to whether ALJs constitute inferior officers who must be selected and appointed by the SEC Commissioners themselves (who are politically accountable), or whether they constitute mere employees who can be hired like any other agency employee. See Shearman & Sterling LLP, D.C. Circuit Court Of Appeals Rejects Constitutional Challenge to SEC’s Use of Administrative Proceedings, Need-to-Know Litigation Weekly, Aug. 15, 2016, http://www.lit-wc.shearman.com/dc-circuit-court-of-appeals-rejects-constitutional; Shearman & Sterling LLP, Tenth Circuit Splits With D.C. Circuit On Constitutionality Of SEC ALJs, Need-to-Know Litigation Weekly, Jan. 2, 2017, http://www.lit-wc.shearman.com/tenth-circuit-splits-with-dc-circuit-on-constitut; Shearman & Sterling LLP, In Reversal, SEC Agrees That Its Administrative Law Judges Are Inferior Officers That Require Commission Appointment, But Still Seeks Supreme Court Review To Resolve Circuit Split, Need-to-Know Litigation Weekly, Dec. 12, 2017, http://www.lit-wc.shearman.com/in-reversal-sec-agrees-that-its-administrative-la.
The impact on pending SEC proceedings should be narrow regardless of how the Supreme Court resolves the split due to the SEC’s recent decision to appoint its ALJs as though they are inferior officers, rather than mere employees. However, if the Supreme Court reverses the D.C. Circuit and holds that the SEC’s ALJs are inferior officers, it could open the door for challenges to prior decisions handed down by its ALJs prior to their appointment, especially decisions that were never appealed to the Commission, and could also provide a basis for litigants to challenge in-house administrative judges used by various other agencies.
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