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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2018

## Text

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
NE IIIT sccteceishuressusscaieveservibevieses

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4
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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
se esses tcaaaeokanepasensntasknnaiebiinienss 10, 14
eas Oe EE Besicserensitncomnunioninncanahensionse 14
ee iy ie Ae I cts nathadenncschsannvenbbeensenibesss 16, 19
Oe ae Ae I hia siicenichccsaankenadsondncenctneddiees 16
Be ae. Or IE BO dss oreciccaicsanicdirinctadineiond 19
FR iaianeiscosicaiissacuciodsNaciatvensedinnntes 9,11
Fe as Ob ED caciscindain adsvacedscedeecnunenonnnin 3, 11,13
Se RN ar OE SE Sinsebestincininneuacnadsvesieumeaiantibea 9
BN A hi cccsinleesleddaslasieabiva 12, 14
Es hf RECRIR aI net tiene Meme tes eee ener EB 9,13
Sa a MN staccato hclensenetice io teainmmiatogs 9

BP a: ED vabstrenepictnisioncintinsncmerersesiniinaees 10, 19

Vv

TABLE OF AUTHORITIES—Continued

Page

Be ate Ae IE Ni hei csdccceiniiencodisstnasensaio 10, 11, 12, 19
ree Oe hah davticecnacectindubdetnemstadoinciabe 3, 12
yee 6 yk”: Ren eee 17
ea Oe ED SS cerdnnendsndconnteccdsomescseneses 16
eg els gt, Sens Aare ae er re 16, 17
Ss ee EE chacerstnnstiecneominenensacantiblesndese® 3, 19
Be eB I enthsirenbcentdansatitteninesisicnclaassiiiainiivel 3, 19
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

——

eS med Beene Be ae Pe Pai. i. * : : ~ =

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0772%3A15. Public record. Not legal advice.