Amicus Curiae Brief — Lucia v. SEC, 138 S. Ct. 2044 (2018) (No. 17-130)

No. 17-130

IN THE

Supreme Court of the United States

RAYMOND J. LUCIA

AND RAYMOND J. LUCIA COMPANIES, INC.,

Petitioners,

V.

SECURITIES AND EXCHANGE COMMISSION,

Respondent.

On Petition For A Writ of Certiorari

To The United States Court of Appeals

For The District of Columbia Circuit

BRIEF OF THE AMERICAN FEDERATION

OF LABOR AND CONGRESS OF INDUSTRIAL

ORGANIZATIONS AS AMICUS CURIAE

IN SUPPORT OF AFFIRMANCE OF

JUDGMENT BELOW

HLAROLD CRAIG BECKER

LYNN K. RHINEHART

MATTHEW J. GINSBURG

(Counsel of Record)

American Federation of

Labor and Congress of

Industrial Organizations

815 16th Street, NW

Washington, DC 20005

(202) 637-5397

mginsburg@aflcio.org

Mosaic - (301) 927-3800 - Cheverly, MD

as:

TABLE OF CONTENTS

TABLE OF AUTHORITIES ..................:ceeee

INTEREST OF AMICUS CURIAE ................

SUMMARY OF THE ARGUMENT ..................

FETT EMEIIET erssnssscssinccisinsceseesenesenessosesncesvnvinnseves

1. Determiming Whether Administative

Law Judges Are Officers of the United

States Requires Examination of the

Particular Statutory Scheme Under

Which They Operate .................cccccceeeeeees

A.

B.

Administrative Law Judges Are

Officers of the United States Only

If They Have Authority to Issue

Final Decisions ...........0cccccccsccoresseserees

Examination of the NLRA and Its

Legislative History Illustrates the

Type of Case-by-Case Analysis

Needed to Determine If

Administrative Law Judges Are

Officers of the United States............

. The SEC Administrative Law

Judges Are Not Officers of the

Because the SEC Has Discretion Not

to Use Administative Law Judges and

to Define the Scope of Their Authority,

the Judges’ Statutory Just Cause

Protection Creates No Separation of

Powers Problem Under Free

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TABLE OF AUTHORITIES

Page

CASES:

Bandimere v. U.S. Securities and Exchange

Commission,

844 F.3d 1168 (10th Cir. 2016) ..................... 8

Consolidated Edison Co. v. NLRB,

SE Re 0 I onicininareenadetiwkaceunceonstetenietes 10

Dorsey Trailers, Inc.,

ay a eee 12

Edmond v. United States,

bth | __y EROner meD ee yee 5, 6

Free Enterprise Fund v. Public Company

Accounting Oversight Board,

SO Os I ccc apecasstnuinsecshemenauniiese passim

Freytag v. Commissioner,

ee Ee I ooo creescicaveessicctnncnntantaatimadumens 6, 7,8

Landry v. FDIC,

206 F.3e 1225 (D.C. Cir. 2000) ..........0000022.... 6, 7

Magnesium Casting Co. v. NLRB,

— uh Rg by } Seater a ae 3, 13, 14

New Process Steel, L.P. v. NLRB,

ee I I a enteselinictatesicseunasssccossouns ll

Opinion of the Justices,

os Gormemel. Chie. ) GE C1BRZ) on... cccncivcccscscssss. 8, 9

Raymond J. Lucia Cos. v. SEC,

Soe F.00 277 (D.C. Cie. 2016) .....cccccccccceeses 15, 17

iv

TABLE OF AUTHORITIES

Continued

Page

CONSTITUTIONAL PROVISIONS

|

A Te OT seadeepurmaildetemeenbneababaiinice

STATUTES AND REGULATIONS

Labor Management Relations Act of 1947,

Pub. L. 80-101, 61 Stat. 136..................... 10, 11, 12

Labor-Management Reporting and

Disclosure Act of 1959,

Pub. L. 86-257, 73 Stat. 519 ...........cccccccccseeses 13

National Labor Relations Act of 1935,

Pub. L. 74-198, 49 Stat. 449 oo... cccecceeeeeee 9, 10

Pub. L. 95-251, 92 Stat. 184 (March 27, 1978).. 10

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Vv

TABLE OF AUTHORITIES—Continued

Page

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LEGISLATIVE MATERIALS

Be PI cartes acntice da dacndnsnicniondamccdndoneline 12

S. Rep. No. 105, 80th Cong., Ist Sess.............. Ba, Be

OTHER AUTHORITIES

Board Memorandum Describing the

Authority and Assigned Responsibilities

of the General Counsel of the National

Labor Relations Board,

20 Fed. Reg. 2175 (April 1, 1955) ................ 13, 14

Officers of the United States Within the

Meaning of the Appointments Clause,

ee SI CO SPIED vipenicsccdanseredeiutivtiersens 5, 6,9

l

INTEREST OF AMICUS CURIAE

The American Federation of Labor and Congress of

Industrial Organizations is a federation of 55 national

and international labor organizations with a total

membership of over 12 million working men and

women.! This case addresses whether administrative

law judges at the Securities and Exchange Commis-

sion are inferior officers within the meaning of the

Appointments Clause and must, therefore, be ap-

pointed in accordance with the Clause. The unions

affiliated with the AFL-CIO are significant stakehold-

ers in the administrative decisionmaking processes

of the National Labor Relations Board and of other

federal agencies such as the Occupational Safety and

Health Review Commission and the Federal Mine

Safety and Health Review Commission, all of which

rely, in part, but in diverse manners, on fact-finding by

administrative law judges.

SUMMARY OF THE ARGUMENT

The question of whether administrative law judges

are Officers of the United States who must be ap-

pointed in accordance with the Appointments Clause

cannot be decided categorically because the answer

depends on the nature of the authority exercised by

particular judges. Congress, in a particular agency's

enabling statute, may vest that agency’s administra-

' Counsel for the petitioners and counsel for the respondent

have consented to the filing of amicus briefs. No counsel for a

party authored this brief amicus curiae in whole or in part, and

no person or entity, other than the amicus, made a monetary

contribution to the preparation or submission of this brief.

2

tive law judges with specific authority. Alternatively,

Congress may vest the agency’s principal officers

with discretion to delegate some portion of their

statutory decisionmaking power to the agency’s ad-

ministrative law judges and the principal officers

may exercise that discretion in whole or in part. In

either case, this Court must examine the authority

actually possessed by the specific administrative law

judges at issue in order to determine if they are Offi-

cers of the United States whose appointment is gov-

erned by the Clause.

The authority administrative law judges must

possess in order to be Officers of the United States

is the authority to issue final decisions not subject

to plenary, sua sponte review by superior officers.

The authority to conduct fact-fidning hearings cou-

pled with “purely recommendatory” power is not

sufficient. Free Enterprise Fund v. Public Com-

pany Accounting Oversight Board, 561 U.S. 477,

509-10 (2010).

The National Labor Relations Act (NLRA) helpful-

ly illustrates how the Appointments Clause applies

in the context of independent agencies. Congress

has twice amended the NLRA to redistribute deci-

sionmaking power between the National Labor Rela-

tions Board (NLRB or “the Board”) and lesser func-

tionaries withinthe agency, specifically administrative

law judges and regional directors. The result is that

the Board has exercised its statutory discretion to

delegate authority to conduct trials in unfair labor

practice cases and to issue “a recommended order”

to administrative law judges, but continues to have

plenary authority under the Act to modify or set aside

3

any order sua sponte. 29 U.S.C. § 160(d); 29 CLER.

$§ 102.35, 102.48. In contrast, the Board has exer-

cised its statutory discretion “to delegate to its re-

gional directors its powers” to resolve questions of

representation. 29 U.S.C. § 153(b). A regional direc-

tor’s decision is a “final determination” not subject to

plenary, sua sponte Board review. Magnesium Cast-

ing Co. v. NLRB, 401 U.S. 137, 141 (1971) (quoting

105 Cong. Rec. 19770 (statement of Senator Goldwa-

ter)). Thus, the Board’s administrative law judges

are non-officer employees while its regional direc-

tors are inferior officers.

As is directly relevant to this case, Congress simi-

larly vested the Securities and Exchange Commission

(SEC) with statutory authority to delegate decision

making authority in certain categories of cases to its

administrative law judges. Because the SEC has de-

clined, however, to actually delegate that power—in-

stead preserving its own authority to render final de-

cisions in all cases—the Court below correctly

determined that SEC administrative law judges, like

those at the NLRB, remain non-officer employees.

Finally, even if the SEC administrative law judges

were inferior officers, there would be no need for the

Court (o rewrite the Administrative Procedures Act

to narrow its protection of administrative law judges

as suggested by the Solicitor General. The agency's

own discretionary choice to use administrative law

judges, even if they have statutory just cause protec-

tion, does not create the type of separation of pow-

ers concerns that underlay this Court’s decision in

Free Enterprise Fund. \n Free Enterprise Fund,

Congress established the inferior offices, vested their

occupants with authority, and shielded the officers

from discharge. l[lere, in contrast, the executive

branch agency has chosen to use administrative law

judges who have statutory just cause protection and

chosen how much decisionmaking authority to vest

in those judges. “The President can .. . choose to

restrain himself in his dealings with subordinates” in

this manner without implicating separation of pow-

ers concerns. 561 U.S. at 497.

ARGUMENT

I. Determining Whether Administrative Law

Judges Are Officers of the United States

Requires Examination of the Particular

Statutory Scheme Under Which They

Operate

“(T]he very size and variety of the Federal Govern-

ment . . . discourage[s] general pronouncements”

concerning whether particular “civil servants within

independent agencies would . . . qualify as ‘Officers

of the United States,’ who ‘exercis/e] significant au-

thority pursuant to the laws of the United States|.|’”

Free Enterprise Fund, 561 U.S. at 506 (quoting Buck-

ley v. Valeo, 424 U.S. 1, 126 (1976)). Not surprisingly,

then, this Court has recognized that “[w|hether ad-

ministrative law judges are necessarily ‘Officers of

the United States’ is disputed.” /d. at 507 n.10. As we

explain below, administrative law judges within a

particular agency are inferior officers only if Con-

gress, in the enabling statute, vested the administra-

tive law judges with final decisionmaking power or

vested the agency’s principal officers with authority

to delegate some portion of their final decisionmak-

»)

ing power to the agency's judges and the principal

officers have done so.

A. Administrative Law Judges Are Officers

of the United States Only If They Have

Authority to Issue Final Decisions

Independent agencies are headed by one or more

“executive “Officers,” Free Enterprise Fund, 561 U.S.

at 506—principal officers who are endowed by the

agency's enabling statute with some aspect of the

“sovereign functions of government.” Officers of the

United States Within the Meaning of the Appoint-

ments Clause, 31 Op. O.L.C. 73, 84 (2007) (quoting

Floyd R. Mechem, A Treatise on the Law of Public

Offices and Officers § 4, at 5 (1890)). This “sovereign

authority” is “power lawfully conferred by the govern-

ment to bind third parties, or the government itself,

for the public benefit.” 31 Op. O.L.C. at 87. Pursuant

to the Appointments Clause, such principal officers,

whose offices must “be established by law,” are sub-

ject to presidential appointment “with the Advice and

Consent of the Senate.” U.S. Const. art. II, § 2, el. 2.

Unlike the power to appoint principal officers—

which must be exercised by the President directly —

“Congress may by law vest the Appointment of such

inferior Officers, as they think proper, in the Presi-

dent alone, in the Courts of Law, or in the Heads of

Departments.” /d. In the case of independent agen-

cies, Congress “ordinarily” vests this appointment

authority in “the department head, rather than the

President,” i.e., in the agency's principal officer. Free

Enterprise Fund, 561 U.S. at 493. See also Edmond

v. United States, 520 U.S. 651, 662 (1997) (noting that

6

“the term ‘inferior officer’ connotes a relationship

with some higher ranking officer or officers below

the President”). Cf. id. at 663 (citing example of “the

first executive department, the Department of For-

eign Affairs” in which the Secretary, the “principal

officer,” would be appointed by the President, and

“the chief Clerk,” “an inferior officer |was] to be ap-

pointed by the said principal officer” ).”

Whether a particular agency's functionaries are in-

ferior officers who must be appointed consistent

with the Appointment Clause rather than non-officer

employees turns not on what actions an agency's

functionaries take in any given case, but rather on

the authority vested in the functionaries. See, e.g.,

Freytag v. Commissioner, 501 U.S. 868, 882 (1991)

(disregarding what “duties” a functionary “on occa-

sion performs,” and looking instead to whether that

functionary “is an inferior officer for purposes of [the

governing statute],” in which case “he is an inferior

officer within the meaning of the Appointments

Clause”). In other words, the question is whether,

under the agency's enabling statute, the functionar-

ies are vested with “power . . . to bind third parties,

or the government itself, for the public benefit,” 31

Op. O.L.C. at 87.

As Judge Stephen Williams explained in Landry v.

FDIC, 204 F.3d 1125, 1134 (D.C. Cir. 2000), the deci-

* In the case of agencies headed by a multi-member board

or commission, such as the SEC and NLRB, this Court has con-

cluded that that body, acting as a whole, is the “Head{] of [a]

Department|]” for purposes of the Appointments Clause. Free

Enterprise Fund, 561 U.S. at 512-13.

i

sion on which the Court below relied, in Freytag,

“the S[pecial] T[ rial] J[udge]|s’ power of final decision

|delegated to the STJs by the Internal Revenue Code]

in certain classes of cases was critical.” That is evi-

dent because “the Court laid exceptional stress on

the STJs’ final decisionmaking power” “even though

in his case the STJ had not been exercising” the pow-

er, an “explanation [that] would have been quite un-

necessary if the purely recommendatory powers

were fatal in themselves.” /d. (emphasis in original).

Referring specifically to STJs’ authority to “take tes-

timony, conduct trials, rule on the admissibility of

evidence, and ... enforce compliance with discovery

orders,” this Court stated, “[t]he fact that an inferior

officer on occasion performs duties that may be per-

formed by an employee not subject to the Appoint-

ments Clause does not transform his status under

the Constitution.” Freytag, 501 U.S. at 881-82. Ac-

cord Free Enterprise Fund, 561 U.S. at 509-10 (stat-

ing that if the Court were to “restrict the [Public

Company Accounting Oversight] Board’s enforce-

ment powers, so that it would be a purely recommen-

datory panel[,|” “its members would no longer be

‘Officers of the United States’”).

Implicit in this reasoning is a recognition that,

short of a legal delegation of the “power of final deci-

sion,” it is not possible to define, and thus this Court

has not specified and should not attempt to specify,

the precise quantum of “purely recommendatory

powers,” Landry, 204 F.3d at 1134, necessary to dis-

tinguish between non-officer employees and inferior

officers. Surely Congress does not convey “officer”

status to any individual employed by the government

who merely “take[s] testimony,” who only “regulat| es]

8

document production and depositions,” or who is

limited to “ruling on the admissibility of evidence.”

Bandimere v. U.S. Securities and Exchange Com-

mission, 844 F.3d 1168, 1179-80 (LOth Cir. 2016). At

what point, then, does the combination of these

“more than ministerial tasks” add up to the “exercis|e

of] significant authority pursuant to the laws of the

United States”? Freytag, 501 U.S. at 881-82. The an-

swer—implicit in this Court’s two observations in

Free Enterprise Fund: (1) that, “unlike members of

the [Public Company Accounting Oversight] Board,”

who the Court assumed were Offices of the United

States, “many administrative law judges . . . possess

purely recommendatory powers,” and (2) that

“!w|hether administrative law judges are necessarily

‘Officers of the United States’ is disputed,” Free E'n-

terprise Fund, 561 U.S. at 507 n. 10—is never.

Just as “(t]he fact that an inferior officer on occa-

sion performs duties that may be performed by an

employee not subject to the Appointments Clause

does not transform his status under the Consti-

tution|[,|” Freytag, 501 U.S. at 882, the fact that an

individual performs some more-than-ministerial, yet

still recommendatory, tasks does not transform her

into an Officer of the United States. As a leading ear-

ly decision summarized this key distinction: “[|A] del-

egation of a portion of the sovereign power” involves

“a legal power, which may be rightfully exercised,

and in its effects it will bind the rights of others, and

be subject to revision and correction only according

to the standing laws of the State,” in contrast with a

person whose acts have no “authority and power of a

public act or law” absent the “subsequent sanction”

of an officer or the legislature. Opinion of the Jus-

')

tices, 3 Greenl. (Me.) 481, 482 (1822). See also 31 Op.

.L.C. at 82-83, 95 (describing the Supreme Judicial

Court of Maine’s opinion as providing “the fullest

early explication” of “the original meaning” of the

term “public office” and noting that “[o|ther courts

treated this early analysis as authoritative”).

B. Examination of the NLRA and Its

Legislative History Illustrates the Type

of Case-by-Case Analysis Needed to

Determine If Administrative Law Judges

Are Officers of the United States

Congress’ varying methods of distributing deci-

sionmaking authority within different independent

agencies on a statute-by-statute basis in furtherance

of specific congressional policy goals is helpfully il-

lustrated by the National Labor Relations Act (NLRA).

The principal officers of the agency created by the

NLRA—all appointed by the President with the advice

and consent of the Senate—are the five members of

the National Labor Relations Board and the General

Counsel. 29 U.S.C. §§ 153(a) & (d). The NLRA assigns

two responsibilities to the Board: the prevention of

unfair labor practices, 29 U.S.C. § 160, and the deter-

mination of collective bargaining representatives

within appropriate bargaining units, 29 U.S.C. § 159."

Under the original National Labor Relations Act of

1935 (“the Wagner Act”), Pub. L. 74-198, 49 Stat. 449,

* The General Counsel is charged with investigating and

prosecuting unfair labor practice complaints before the Board

and supervising the agency's regional offices. 29 U.S.C.

§ 153(d).

10

451 § 3(a), Congress assigned both of these responsi-

bilities to a three-member Board. For unfair labor

practice cases, the Wagner Act permitted the Board

io assign a “designated agent or agency” to conduct a

hearing, testimony from which “shall be reduced to

writing and filed with the Board” so that the Board

could decide “{ijf upon all the testimony taken the

Board shall be of the opinion that any person named

in the complaint has engaged in or is engaging in any

... unfair labor practice.” 49 Stat. at 453-54, §§ 10(b)

& (c). In the years that followed, the Board estab-

lished the practice of using “trial examiners”! to con-

duct unfair labor practice hearings. See, e.g., Consol-

idated Edison Co. v. NLRB, 305 U.S. 197, 224-28

(1938) (describing unfair labor practice hearing be-

fore trial examiner under Wagner Act).

A little over a decade later, in response to significant

congressional dissatisfaction with the NLRB decision-

making process in unfair labor practice cases, Con-

gress enacted the Labor Management Relations Act of

1947 (“the Taft-Hartley Act”), Pub. L. 80-101, 61 Stat.

136. That law substantially altered the NLRB's role

vis-a-vis trial examiners, expanding the Board's re-

sponsibility to decide unfair labor practice cases it-

self, while cabining the role played by trial examiners.

First, the Taft-Hartley Act increased the size of the

Board from three members to five and permitted the

' The tithe “administrative law judge” was substituted for

“trial examiner” in the NLRA pursuant to 5 U.S.C. § 3105 and

Pub. L. 95-251, 92 Stat. 184 § 3 (March 27, 1978) (codified as a

note to 5 U.S.C. $3105). We use the two terms interchangeably

in reference to the NLRB.

1]

new five-member Board to delegate its decisionmak-

ing power not to trial examiners, but to three-mem-

ber panels of the Board itself. 61 Stat. at 139, §§ 3(a)

& (b), codified as 29 U.S.C. §§ 158(a) & (b). A pri-

mary purpose of this amendment was “to increase

the Board's efficiency by permitting multiple three-

member groups to exercise the full powers of the

Board.” New Process Steel, L.P. v. NLRB, 560 U.S.

674, 699 (2010) (Kennedy, J., dissenting) (citing S.

Rep. No. 105, 80th Cong., Ist Sess., 8 (1947)). But

Congress also wanted the NLRB to take greater re-

sponsibility for its own policy decisions, perceiving

the Board as “hav{ing] fallen into the habit of dele-

gating the reviewing of transcripts of the hearings

and findings of trial examiners” to others within the

agency, rather than “familiariz[ing| themselves with

the briefs and bills of exception” so that “the diver-

gent views of the different |Board members| may be

reflected in each decision.” 5S. Rep. No. 105, 80th

Cong., Ist Sess. 8-9, reprinted in 1 NLRB, Legislative

History of the Labor Management Relations Act,

1947 414-15 (1948) (“Leg. Hist.”).

At the same time, the Taft-Hartley Act circum-

scribed the role played by trial examiners, limiting

them to “issu[{ing|] and caus[ing] to be served on the

parties to the proceeding a proposed report, togeth-

er with a recommended order.” 61 Stat. at 147,

§$ 10(¢c) (emphasis added), codified at 29 U.S.C,

§ 160(c). This proposed report and recommended

order “shall be filed with the Board, and if no excep-

tions are filed within twenty days after service there-

of upon such parties, or within such further period

as the Board may authorize, such recommended or-

der shall become the order of the Board and become

12

effective as therein prescribed.” /d. To make clear

that the decision whether to adopt a trial examiner's

decision rested solely with the Board, Congress re-

tained § 10(d) of the NLRA, stating that “the Board

nay at any time, upon reasonable notice and in such

manner as it shall deem proper, modify or set aside,

in whole or in part, any finding or order made or is-

sued by it{,]” “[ujntil the record in a case shall have

been filed in a court.” 29 U.S.C. § 160(d). On the

basis of this provision, “the Board has long held that,

under the plain language of Section 10(d), it has the

authority to modify its orders sua sponte.” Dorsey

Trailers, Inc., 322 NLRB 181, 181 (1996) (citing cas-

es), enf. denied on other grounds, 134 F.3d 125 (3rd

Cir. 1998).

Finally, Congress stated explicitly that “no trial ex-

aminer shall advise or consult with the Board with

respect to exceptions taken to his findings, rulings,

or recommendations.” 61 Stat. at 140, § 4(a), codi-

fied at 29 U.S.C. § 154(a). This amendment empha-

sized the limited role of the trial examiner as neutral

fact-finder, eliminating the then-prevailing practice

of “permit[{ting] a trial examiner, after his findings

have alternately been assailed and defended at pub-

lic hearing [before the Board], to make a final defense

of his published determination behind the scenes.”

S. Rep. No. 105, 80th Cong., Ist Sess. 10, 1 Leg. Hist.

at 416. See also 93 Cong. Rec. 5117, 5145, 2 Leg. Hist.

at 1494 (decrying “the practice of permitting the trial

examiner to argue ex parte, before the Board, in de-

fense of his findings, after the open hearing”).

A little over a decade after passage of the Taft-

Hartley Act, Congress amended the NLRA again.

L3

This time, in sharp contrast to the earlier amend-

ments, Congress expressly “authorized [the Board]

to delegate to its regional directors its powers under

section 9 [29 U.S.C. § 159] to determine the unit ap-

propriate for the purpose of collective bargaining, to

investigate and provide for hearings, and determine

whether a question of representation exists, and to

direct an election or take a secret ballot... and cer-

tify the results thereof.” Labor-Management Report-

ing and Disclosure Act of 1959, Pub. L. 86-257, 73

Stat. 519, 542 § 701(b), codified as 29 U.S.C. § 153(b).

As this Court has explained—rejecting a claim by an

employer that “plenary review by the Board of the

regional director's unit determination is necessary

at some point”—“§ 3(b) [29 U.S.C. § 153(b)] was

added” for the purpose of “‘expedit{ing] final dispo-

sition of cases by the Board, by turning over part of

its caseload to its regional directors for final deter-

mination.’” Magnesium Casting, 401 U.S. at 141

(quoting 105 Cong. Rec. 19770 (statement of Senator

Goldwater) ).

By enabling the Board to “turn over” a portion of

its statutory power to another actor within the agen-

cy “for final determination”—permitting “regional di-

rectors ... to act in all respects as the Board itself

would act” in representation cases, id.—-Congress

made clear that regional directors are inferior offi-

cers for Appointments Clause purposes. Tellingly,

the NLRB treats them as such. Regional directors

are appointed and subject to discharge by the NLRB

General Counsel with the approval of the Board.

NLRB, Board Memorandum Describing the Author-

ity and Assigned Responsibilities of the General

Counsel of the National Labor Relations Board (Ef-

14

fective April 1, 1955), 20 Fed. Reg. 2175 (April 1,

1955). Because they “exercise|| important policy-

making, policy-determining, or other executive func-

tions,” 5 U.S.C. § 3132(a)(2)(E), regional directors

are also members of the federal government’s Senior

Executive Service, meaning they are subject to being

“reassigned or reviewed by agency heads.” Free En-

terprise Fund, 561 U.S. at 506-07.

The difference in statutory decisionmaking au-

thority delegated to NLRB regional directors and to

the agency’s administrative law judges is laid bare

by “(t]he fact that Congress in 1961 rejected a reor-

ganization which would have delegated decision-

making power in unfair labor practice cases to the

hands of trial examiners subject to discretionary

Board review|.|}”" Magnesium Casting, 401 U.S. at

142 (citing 107 Cong. Rec. 10223, 12905-12932). As

this Court has explained, “it is unmistakably plain

... that... Congress did allow the [National Labor

Relations} Board to make a delegation of its author-

ity over determination of the appropriate bargaining

unit to the regional director,” just as it is plain “that

Congress .. . rejected a reorganization plan which

would have delegated decisionmaking power in un-

fair labor practice cases to the hands of trial exam-

iners.” /d. The result is that, under the NLRA, as

serially amended by Congress, NLRB regional direc-

tors are inferior officers and NLRB administrative

law judges are not.”

’ Nevertheless, the NLRB itself appoints its administrative

law judges consistent with the Administrative Procedures Act.

See 29 U.S.C. § 154(a); 5 U.S.C. § 3105.

15

©. The SEC Administrative Law Judges Are

Not Officers of the United States

Pursuant to this same statute-by-statute ap-

proach to understanding the Appointments Clause,

the Court below correctly determined that SEC ad-

ministrative law judges—who have a far narrower

scope of authority under their governing statute

than did the special trial judges at issue in Freytag

under the Internal Revenue Code—are not inferior

officers. Although the securities laws permit the

SEC to delegate some decisionmaking power to its

administrative law judges, the SEC has by regula-

tion declined to do so. Because the SEC has re-

tained final decisionmaking power for itself, its

administrative law judges remain non-officer em-

ployees.

As the Court below explained, “[o)|ver time Con-

gress expanded the responsibilities of the [Securi-

ties and Exchange] Commission, and by 1960 it was

administering six statutes[.|”" Raymond J. Lucia

Cos. v. SEC, 832 F.3d 277, 281 (D.C. Cir. 2016). In

1961, “the President sent Congress a proposal to al-

low the Commission to delegate some of its respon-

sibilities to divisions and individuals within the

Commission” and “[i]n response, Congress enacted

‘An Act to Authorize the Securities and Exchange

Commission to Delegate Certain Functions.’” /d.

(citing 1961 U.S.C.C.A.N. 1351, 1351-52 (President's

proposal), and Pub. L. No. 87-592, 76 Stat. 394, 304-

95 (1962)).

This law provides, in relevant part, that the SEC

“shall have the authority to delegate, by published

order or rule, any of its functions to... an adminis-

16

trative law judge,... including functions with re-

spect to hearing, determining, ordering, certifying,

reporting, or otherwise acting as to any work, busi-

ness, or matter.” 15 U.S.C. § 78d-l(a). At the same

lime, the law makes clear that, “[wJith respect to

the delegation of any of its functions, .. . the Com-

mission shall retain a discretionary right to review

the action of any .. . administrative law judge . .

upon its own initiative or upon petition of a party to

or intervenor in such action, within such time and

in such manner as the Commission by rule shall

prescribe.” 15 U.S.C. § 78d-1(b). “The vote of one

member of the Commission shall be sufficient to

bring any action before the Commission for review.”

Id.

Declining to take full advantage of its statutory

authorization to “delegate ... any of its functions to

.., an administrative law judge, including... with

respect to... determining... any... matter,” 15

U.S.C. § 78d-l(a), the SEC has, by regulation, reaf-

firmed its authority to, “on its own initiative, order

review of any initial decision, or any portion of any

initial decision [issued by an administrative law

judge].” 17 CLE. R. § 201.411(c). The use of the term

“initial decision” to describe an administrative law

judge's findings is revealing. Although, as a general

matter, “[rjeview by the Commission of an initial

decision shall be limited to the issues” raised by the

party seeking review, agency regulations make clear

that, *;o}]n notice to all parties, ... the Commission

ay, at any time prior to the issuance of its deci-

sion, raise and determine any other matters that it

deems material.” 17 C.F.R. § 201.411(d). In all cases,

an administrative law judge’s initial decision has no

17

effect until “the Commission .. . issue[s| an order

that the decision has become final.” 17 C.FR.

§ 201.360(d)(2). See also id. (“The decision be-

comes final upon issuance of the order.”).

The Court below acknowledged that, under the

statute, “the Commission could have chosen to adopt

regulations whereby an ALJ's initial decision would

be deemed a final decision of the Commission upon

the expiration of a review period, without any addi-

tional Commission action.” Lucia, 832 F.3d at 286

(emphasis in original). “But that is not what the

Commission has done|,|” reserving for itself both the

authority “to determine whether it wishes to order

review even when no petition for review is filed” and

the authority to determine when “the initial decision

lof the ALJ] becomes final,” thus “retain[ing] full de-

cision-making powers” for the Commission. /d. (cit-

ing 17 C.F-R. § 201.411(c)).

As a result, “the Commission's ALJs neither have

been delegated sovereign authority to act indepen-

dently of the Commission nor, by other means estab-

lished by Congress, do they have the power to bind

third parties, or the government itself, for the public

benefit.” /d. at 286 (citing 31 Op. O.L.C. at 87). What-

ever may be true of administrative law judges in oth-

er agencies—subject to congressional direction set

forth in those agencies’ own enabling statutes and to

delegation decisions by their own agency's principal

officers—SEC administrative law judges, like NLRB

administrative law judges, are employees, not inferi-

or officers.

18

Il. Because the SEC Has Discretion Not to Use

Administrative Law Judges and to Define

the Scope of Their Authority, the Judges’

Statutory Just Cause Protection Creates

No Separation of Powers Problem Under

Free Enterprise Fund

Finally, it bears brief mention that the Solicitor Gen-

eral’s suggestion that—if this Court were to find the

SEC administrative law judges to be inferior officers—

the Court should adopt a novel, narrowing construc-

tion of the statutory removal protections for the judges

in order to avoid “serious separation-of-powers con-

cerns,” SEC Br. 39, is wholly without merit.° The op-

eration of the legislative restriction on executive ac-

tion in relation to the administrative law judges at

issue here is easily distinguishable from the legislative

intrusion on executive authority over the Public Com-

pany Accounting Oversight Board (PCAOB) at issue

in Free Enterprise Fund, so interpretive contortion of

the sort the Solicitor General suggests is not required.

The Court in Free Enterprise Fund made clear

that the fundamental flaw with the law creating the

PCAOB was that, “[w]ithout the ability to oversee

the Board, or to attribute the Board's failings to those

whom he can oversee, the President is no longer the

judge of the Board’s conduct.” 561 U.S. at 496. Key

to this conclusion, however, was that Congress man-

° We agree with the Court-Appointed Amicus Curiae in Sup-

port of the Judgment Below, for the reasons stated in his brief,

that the Solicitor General's argument is not properly before the

Court. We present the argument above only as an additional

grounds for the Court not to address the matter.

19

dated the creation of the Board and vested it with

specified authority; the SEC had no discretion over

whether to create the Board or ability to shape what

it would do and, once appointed, Board members

could only be removed “‘for good cause shown.’” /d.

at 486 (quoting 15 U.S.C. § 7211(e)(6)).’ As a result,

“the [SEC] Commissioners are not responsible for

the Board's actions.” Id. at 496.

In contrast, both the securities laws at issue here

and the NLRA vest complete discretion in the SEC

and the NLRB over whether to use administrative

law judges at all. See 15 U.S.C. § 78d-1(a); 29 U.S.C.

§§ 160(b) & (c). The NLRA, for example, permits the

Board to decide that an evidentiary hearing in an un-

fair labor practice case should be held “before the

Board or a member thereof” or “before a designated

agent or agency,” such as an administrative law judge.

29 U.S.C. §§ 160(b) & (c). The Board’s own regula-

tions, not the statute, vest authority in the adminis-

trative law judges and define its scope. See 29 C.FE.R.

§§ 102.35, 102.48. This form of discretionary delega-

tion of authority by an executive agency does not

create the separation of powers problem identified

in Free Enterprise Fund.

When an executive branch agency chooses, with-

out legislative compulsion, to employ administrative

* The SEC did have statutory authority to remove functions

from the PCAOB, but only as a sanction and only under limited

circumstances specified in the statute. See 15 U.S.C. § 7217(d)

(1). Indeed, this Court made clear that “the Act forbids” such

removal of functions “without Commission findings equivalent

to those required to fire the Board.” Free Enterprise Fund,

561 U.S. at 505.

20

law judges, even when those judges are protected

from removal by statute, Congress has not en-

croached on the executive’s power. This Court ex-

plained in Free Enterprise Fund: “The President can

always choose to restrain himself in his dealings with

subordinates.” 561 U.S. at 497.°

As a result of their discretion not to use administra-

tive law judges at all, the SEC and the NLRB, if dissat-

isfied with administrative law judge decisionmaking,

could simply decline to delegate cases to the judges

or exercise their regulatory authority to limit the

scope of administrative law judge decisionmaking.

“The President could then hold the [SEC or the NLRB]

to account for its supervision of the [administrative

law judges], to the same extent that he may hold the

[SEC or the NLRB] to account for everything else it

does.” Free Enterprise Fund, 561 U.S. at 495-96.

Even if this Court were to find the SEC administra-

tive law judges to be inferior officers, therefore, there

is no separation of powers problem under Free En-

terprise Fund and thus no reason for this Court to

rewrite the Administrative Procedures Act as the So-

licitor General suggests.

* Of course, such a choice is different from the president's

decision to sign legislation. As this Court explained immedi-

ately after the above-quoted language, “He cannot, however,

choose to bind his successors by diminishing their powers.”

Free Enterprise Fund, 561 U.S. at 497.

21

CONCLUSION

The judgment of the court of appeals should be af-

firmed.

Respectfully submitted,

HAROLD CRAIG BECKER

LYNN K. RHINEHART

MATTHEW J. GINSBURG

(Counsel of Record )

815 16th Street, NW

Washington, DC 20005

(202) 637-5397

mginsburg@aflcio.org

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