Lucia v. Securities and Exchange Commission

DOES THE CONSTITUTION TAKE A BROAD VIEW OF “OFFICERS”?

Lucia first asserts that the meaning of “officer” for the purposes of the Appointments Clause has been consistently, broadly defined to include “[e]very official whose position is ‘established by Law’ and who exercises ‘significant authority’” under the law. This broad definition, Lucia argues, is in fact consistent with historic definitions—found in eighteenth and nineteenth century dictionaries—of the word “officer,” which was defined, among other things, as “[a] person commissioned or authorized to perform any public duty.” Indeed, Lucia claims, this broad view is critical to maintain governmental accountability. A broad definition of the word “officer,” Lucia and the SEC contend, means that elected officials—who are clearly identified by and accountable to their constituents—are responsible for more, not less, appointment of officers through the Appointment Clause, which results in increased accountability because voters are better informed of any appointments. In fact, Lucia argues that “two centuries” of Supreme Court decisions support this view, defining “officer” to encompass, among others, engineers, assistant surgeons, extradition commissioners, and United States attorneys.

Metlitsky, the Court-appointed amicus curiae in support of the judgment below, counters by explaining that a broad view of the word “officer” does not, in fact, bolster accountability of elected officials tasked with appointing officers under the Appointments Clause. Metlitsky claims that the manner in which someone is hired—either through the Appointments Clause or through a regular, non-constitutional hiring method—does not significantly affect accountability. In other words, Metlitsky asserts, an employee’s behavior and performance, good or ill, reflects on the superior regardless if that employee is an “officer” or not. Moreover, Metlitsky claims that a broad view of the word “officer” calls into question long-standing congressional practices. Indeed, Metlitsky argues that this broad definition is vague and subjective, and it would consequently present an unworkable standard for courts to apply, which would complicate settled practice and precedent.

DO SEC ALJs EXERCISE “SIGNIFICANT AUTHORITY” UNDER FEDERAL LAW?

Both Lucia and the SEC assert that only persons who exercise “significant authority” under United States law are “officers” within the meaning of the Appointments Clause. Lucia and the SEC note that “significant authority,” as the Supreme Court explained in Freytag v. Commissioner, encompasses the exercise of substantive, important functions, like “tak[ing] testimony, conduct[ing] trials, rul[ing] on the admissibility of evidence, and hav[ing] the power to enforce compliance with discovery orders.” Indeed, both Lucia and the SEC claim that SEC ALJs exercise these kinds of functions when they conduct trial-type hearings—which involve, among other things, ordering the production of evidence, issuing protective orders, examining witnesses, and regulating the scope of cross-examination—and prepare “initial decisions” with regards to the factual and legal issues presented. Contrary to Metlitsky’s argument, Lucia and the SEC assert that the inability of the SEC ALJs to make final decisions that bind parties does not mean that the SEC ALJs do not exercise significant authority because the SEC ALJs still, ultimately, resolve disputes on behalf of the SEC. In fact, both Lucia and the SEC contend that the SEC ALJs are like the special trial judges in Freytag, who the Supreme Court held were “officers” within the meaning of the Appointments Clause.

On the other hand, Metlitsky argues that “significant authority,” although it does encompass the trial-type activities mentioned by Lucia and the SEC, requires a delegation to “exercise a portion of the sovereign authority of the United States.” Indeed, the key feature of “significant authority,” Metlitsky argues, is the ability for individuals who exercise it to bind parties—like the government, citizens, or companies—to acts made by those individuals. In fact, Metlitsky notes that there are a variety of acts that fit this description: filing enforcement actions against the government, issuing regulations against private parties, or entering final decisions in adjudications. SEC ALJs, Metlitsky contends, are not “officers” because they lack the authority to bind parties: they cannot bind the SEC because the SEC can review the SEC ALJs’ findings of fact and conclusions of law de novo, nor can the SEC ALJs issue a final decision that binds parties because the SEC must issue a “finality order” to give the SEC ALJs’ initial decisions binding effect. Metlitsky admits that the SEC often defers to SEC ALJs’ credibility determinations regarding factual issues, but notes this is a voluntary choice—and not a legal obligation—that the SEC makes. Further, Metlitsky counters Lucia and the SEC’s claim that SEC ALJs are like the special trial judges in Freytag by noting that the kinds of acts that both the SEC ALJs and Freytag’s special trial judges have in common—like taking testimony, conducting trials, or ruling on the admissibility of evidence—do not, ultimately, bind the parties in the adjudication. In fact, Metlitsky points out that Freytag’s special trial judges could issue their own final judgments and, crucially, enforce some of their own orders by holding parties in contempt; a power that the SEC ALJs lack. Because no parties are bound by any decision made by a SEC ALJ until the SEC itself issues a final order, Metlitsky argues that SEC ALJs do not exercise “significant authority” under federal law and are thus not “officers” within the meaning of the Appointments Clause.

HAS CONGRESS STATUTORILY DESIGNATED THAT SEC ALJs ARE “OFFICERS” WITHIN THE MEANING OF THE APPOINTMENTS CLAUSE?

Lucia further contends that Congress has, in fact, defined SEC ALJs to be “officers” within the meaning of the Appointments Clause through various statutes, including the Administrative Procedure Act (“APA”). Lucia claims that Supreme Court precedent dictates that the Appointments Clause must be followed whenever Congress “denominates an official an ‘officer,’” and that, here, Congress has termed SEC ALJs to be “officers” in federal securities laws, which describe them as “officers of the Commission.” Moreover, Lucia notes that the APA as enacted similarly described “officers” in such a way that SEC ALJs would fall within its definition. It is through this way, Lucia claims, that Congress has deemed SEC ALJs to be “officers” within the meaning of the Appointments Clause, independent of whether the SEC ALJs exercise “significant authority.”

Countering Lucia’s argument, Metlitsky claims that Congress has not, in fact, termed SEC ALJs to be “officers” within the meaning of the Appointments Clause. Metlitsky agrees that Congress has referred to SEC ALJs as “officers,” but asserts that Congress has never defined SEC ALJs to be “officer[s] of the United States.” This distinction, Metlitsky contends, is crucial because it is the latter designation that, in some circumstances, requires the use of the Appointments Clause method. Indeed, Metlitsky notes that the Supreme Court has long recognized instances in which statutes referred to individuals as “officers” outside the meaning of the Appointments Clause.