News & Insights

The 10th Circuit Court Of Appeals Found Alj’s For The Securities And Exchange Commission To Be In Violation Of The Appointments Clause, Which Could Potentially Upend The Black Lung Benefits Act

An opinion from the 10th Circuit Court of Appeals, Bandimere v. Sec. & Exch. Comm’n, 844 F.3d 1168 (10th Cir. 2016), has the potential to substantially upend the Black Lung Benefits Act, particularly as it concerns authority of Administrative Law Judges to decided cases under the Black Lung Benefit Act.

In Bandimere, the 10th Circuit Court of Appeals addressed a contention that Securities and Exchange Commission (SEC) Administrative Law Judges were “Inferior Officers” under the Appointments Clause, which must be appointed by the President, a Court of Law or a Head of Department. The Court based its review on Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991), which held that Special Trial Judges appointed by the Tax Court were Inferior Officers under the Appointments Clause, but were permitted to hear cases because they were appointed by a Court of Law. The SEC conceded the SEC ALJ’s were not appointed by a Court of Law, Head of Department or the President, so the issue presented to the Court was whether the ALJ’s were Inferior Officers or employees for purposes of the Appointments Clause.

The Court noted that the Supreme Court in Freytag based its conclusion on three characteristics, all of which were equally applicable to SEC ALJ’s. Namely, the Court concluded “(1) the position of the SEC ALJ’s was “established by Law,” (2) “the duties, salary, and means of appointment … are specified by statute,” and (3) SEC ALJ’s “exercise significant discretion” in “carrying out … important functions.” (Internal citations omitted). Of these characteristics, the last received the most discussion. The Court rejected the SEC’s contention that ALJ’s cannot render final decisions, as the SEC retains the power to review their decision de novo, and thus are not Inferior Officers. The Court noted that Special Trial Judges were found to be “Inferior Officers” even though the ultimate decisional authority rested with the Tax Court judges, and therefore that factor did not distinguish Bandimere from Freytag. Based on this analysis, the Court concluded that SEC ALJ’s were Inferior Officers, and thus, were in violation of the Appointments Clause.

There was dissent that addressed some of the merits of the majority’s position, but also discussed the consequences of the decision. The dissent brought up Social Security Administration ALJ’s, who share many of the same characteristics as SEC ALJ’s, reasoning that this decision could reach those judges as well. Although a concurrence argued this fear was unfounded, as the Appointments Clause demands a position-by-position analysis and the ruling cannot be automatically extended to SSA ALJ’s, no meaningful difference was identified.

The same arguments, as applied to SEC ALJ’s, and extended to SSA ALJ’s by the dissent, would seem to apply to Department of Labor ALJ’s which handle Black Lung and Longshoreman Cases. There is currently a circuit split on this issue, as the DC Circuit, in Raymond J. Lucias Cos, Inc. v. SEC, 832 F.3d 277, 283 (D.C. Cir 2016), reached the opposite conclusion of Bandimere. The US Supreme Court issued the writ in Lucias on January 12, 2018, and will resolve this issue.

The Department of Labor Solicitor General issued a brief in Lucias, arguing that DOL ALJ’s are “Inferior Officers” for purposes of the Appointments Clause. However, in an attempt to avoid the result of Bandimere, the Secretary of Labor, Alexander Acosta ratified the appointment of all ALJ’s on December 21, 2017. The DOL is therefore taking the position that this ratification satisfies the Appointments Clause. If that position is accepted, the resolution of the issues presented in Bandimere/Lucias will not reach the DOL ALJ’s.