Issue Preservation in Administrative Appeals Post-Lucia

by Henry Zurn*

At the very end of its last term, the Supreme Court in Lucia v. SECsided with a discredited investment manager in his challenge to the Securities and Exchange Commission’s enforcement procedures.[1]Specifically, the Court held that the SEC’s administrative law judges (ALJs) are Officers of the United States who, for the purposes of the Article II Appointments Clause, must be appointed by the President, a court, or the head of an administrative agency.[2]Although the Court decided narrowly – declining to consider potential ramifications in other administrative contexts[3]– the decision had immediate and potentially massive implications for the federal bureaucracy.[4]As the dust continues to settle post-Lucia, a number have questions have arisen regarding the decisions’ effect on the thousands of cases pending before administrative law judges across the country.

Among these issues is the important question of who can bring similar lawsuits to challenge ALJ appointments with regards to their own cases. Because the SEC presides over only a handful of cases in any given year and employs only five ALJs, the decision will be felt more acutely elsewhere.[5]The Social Security Administration (SSA), for instance, employs around 1,500 ALJs,[6]each of whom may be subject to the Luciaruling.[7]If every one of the final determinations by SSA were now available for Lucia-type review, the government could potentially be crippled under the burden of appeals. On the other hand, the Appointments Clause is a Constitutional requirement, and individuals have a right to fair administrative process according to the rules.[8]One recent case out of the Sixth Circuit, Jones Brothers, Inc. v. Secretary of Labor, 898 F.3d 669 (2018), effectively balances these competing interests and should serve as a model nationwide as courts continue to consider Luciaappeals from across the administrative state.

Federal courts have so far split on whether or not to allow appeals to move forward on Luciaclaims when the plaintiff fails to raise the issue in the administrative process. For example, in Shelton v. Berryhill, a federal magistrate in Virginia granted leave to amend an appeal to raise the Luciaissue even though the issue had not been raised during the administrative process.[9]The court noted that Fourth Circuit precedent was silent on the question of issue preservation as presented here.[10]On the other hand, in Davidson v. Comm’r of Soc. Sec., a Tennessee federal court rejected Luciachallenge because it had not been raised in the administrative process.[11]

In Jones Brothers, the Sixth Circuit considered a challenge to the appointment of an ALJ working for the Federal Mine Safety and Health Review Commission (FMSHRC),[12]an independent agency tasked with adjudicating disputes arising under the Mine Safety and Health Act.[13]Jones Brothers, a general contractor, had been hired in 2015 to make certain repairs to a state highway in Tennessee. During the project, the company violated a few miscellaneous Mine Safety and Health Administration regulations and was assessed a few thousand dollars in civil penalties.[14]An FMSHRC ALJ upheld the penalties, and the full Commission affirmed.[15] Critically for the company, although it did not challenge the constitutionality of the ALJ’s appointment in the initial administrative hearing, it did report in a footnote the existence of a circuit split on the appointments clause question before the full Commission.[16]

The law generally requires a litigant to raise issues in their administrative hearings in order to preserve them for appeal to Article III courts.[17]In Jones Bros.the Sixth Circuit, relying on statutory language, held that this requirement applies even to constitutional challenges where the Mining Safety and Health Commission lacks the authority to remedy the specific alleged violation.[18]This requirement could have been sufficient to reject the company’s appeal, but the court applied a narrow exception located within the Mine Safety and Health Act that allows courts to excuse forfeiture “because of extraordinary circumstances.”[19]The court held that the specific conditions surrounding the Lucia decision, combined with the company’s footnoted reference to the circuit split, were sufficient to excuse the forfeiture.[20]Thus, the court recognized the importance of issue preservation while simultaneously guaranteeing that Jones Brothers get a fair shot.

Each administrative agency has its own unique statute authorizing judicial review with various limitations. So, it’s not clear to what degree the Jones Bros.statutory logic can apply cleanly in different administrative contexts. The statute that authorizes judicial review of final decisions of the Commissioner of Social Security, for instance, contains neither the strict issue preservation requirement nor the exception for “extraordinary circumstances” that would excuse forfeiture in cases like this.[21]However, Jones Bros. offers a compelling roadmap for courts as they move forward with an increasing number ofLuciaappeals, especially in the context of Social Security determinations. The conditions surrounding the Lucia decision are the same for all most, if not all, potential plaintiffs, so the important question will be whether they acknowledged the indeterminacy of the law in the administrative proceedings. This will likely vitiate the claims of the vast majority of Social Security plaintiffs but will guarantee that those who recognized the problem are allowed to press the issue after the fact. Whether one believes that the disallowed claims result in a substantive injustice probably depends on how important one believes the constitutional appointment of ALJs is to the fairness of the system writ large, but that’s a question for another blog.

*Gabriella D’Agostini is a Junior Editor on MJEAL. He can be reached at hzurn@umich.edu.


The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[1]Ann E. Marimow, Supreme Court sides with discredited investment adviser, says SEC judge was improperly appointed, Wash. Post (June 21, 2018),https://www.washingtonpost.com/politics/courts_law/supreme-court-sides-with-discredited-investment-adviser-says-agency-judges-are-constitutional-officers/2018/06/21/1d21e7c0-755f-11e8-b4b7-308400242c2e_story.html?utm_term=.187b755b8d28.

[2]Lucia v. SEC, 138 S. Ct. 2044, 2055 (2018).

[3]Justice Breyer urged the Court to consider the decision’s potential ramifications for ALJ decisions in other administrative contexts, suggesting that the decisions’ logical extension could broadly undermine the entire system of administrative judges. Lucia v. SEC, 138 S.Ct. 2044 (Breyer, J., dissenting).

[4]In his dissenting opinion, Justice Breyer suggests that Lucia, in combination with the holding in Free Enterprise Fund v. Public Co. Accounting Oversight Board, 561 U.S. 477 (2010), will make unconstitutional the whole corps of removal-protected administrative law judges throughout the federal bureaucracy. Seeid.

[5]Dave Michaels and Brent Kendall, High Court Rules Appointments Process for SEC Judges Violated Constitution, WSJ(June 21, 2018), https://www.wsj.com/articles/high-court-rules-appointments-process-for-sec-judges-violated-constitution-1529592616.

[6]Social Sec. Admin., How to Become and Administrative Law Judge, https://www.ssa.gov/appeals/alj_recruit.html

[7]They are definitely subject to the ruling, even if it specifically applied just to SEC ALJs. Cite narrowness. Cite language that suggests breadth.

[8]See generally Londoner v. City of Denver, 210 U.S. 373 (1908).

[9]Shelton v. Berryhill, 2018 U.S. Dist. LEXIS 180887 (Oct. 22, 2018).

[10]Id. at 4.

[11]Davidson v. Comm’r of Soc. Sec., 2018 U.S. Dist. LEXIS 168054

[12]Jones Bros., Inc. v. Sec’y of Labor, 898 F.3d 669 (July 31, 2018).

[13]Federal Mine Safety and Health Review Commission, About FMSRC, https://www.fmshrc.gov/about.

[14]Supranote 12 at 672.

[15]Id.

[16]See id. at 673.

[17]See, e.g.Meanel v. Apfel, 172 F.3d 1111, 1115 (9th Cir. 1999) (as amended) (holding that a plaintiff forfeits issues not raised before an ALJ or Appeals Council).

[18]Supranote 14 at 674.

[19]30 U.S.C. § 816(a)(1)

[20]Supranote 14 at 677-79.

[21]See42 U.S.C. § 405

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