One of the less scrutinized decisions of the Supreme Court’s latest term nonetheless has important implications for current and future litigants in disputes before administrative boards such as HUD’s Office of Hearings and Appeals. In the near term, the decision calls into question the validity of recent proceedings held before administrative law judges. In the long term, it opens the door for an increased politicization of the administrative hearing process by giving agency heads the power to appoint—and possibly remove—ALJs who have historically been isolated from the political whims of changing administrations.
In Lucia, et al. v. Securities and Exchange Commission, 138 S. Ct. 2044 (2018), the Court held that the Security and Exchange Commission’s ALJs were “inferior officers” of the United States, and thus subject to the Appointments Clause of the U.S. Constitution, which requires that such officers be appointed by the President, the courts, or heads of federal departments. Historically, however, most ALJs have been selected by agency staffs—not agency heads themselves—based on competitive civil service criteria. Since the SEC ruling at issue in Lucia was made by an ALJ who had been appointed through the normal competitive process, rather than by the SEC Commissioner, the Court held that the plaintiff was entitled to a new hearing before a properly appointed ALJ.
The Lucia decision immediately calls into question a host of prior actions presided over by administrative law judges appointed through the normal merit-based process. While the decision directly affects only the SEC’s ALJs, the Court’s reasoning for applying the Appointments Clause to those officials would seem to apply with equal force to a number of other agencies whose ALJs enjoy similar powers.
The more lasting fallout from the Lucia decision, however, may be that it opens the door for an increased politicization of the administrative process. The Trump administration took the first step through that door in July, when it issued an executive order that allows presidentially appointed agency heads to directly appoint all ALJs and removes many of the competitive requirements that formerly applied to those appointments. Perhaps more consequentially, while the Administrative Procedure Act currently protects ALJs from removal without cause—an important safeguard of their independence from political control—the Lucia decision begs serious questions about the constitutionality of those protections in view of the Court’s prior decision in Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U.S. 477 (2010), which held that certain executive officials could not be isolated from Presidential removal. Indeed, the government pressed the Court in Lucia to consider the constitutionality of the removal protections afforded to ALJs, but the Court declined. That question will surely be taken up by the lower courts as the administration continues to exert greater control over agency actions.
HUD currently houses two Administrative Law Judges and two Administrative Judges.