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

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No. 17-130

IN THE

Supreme Court of the United States

RAYMOND J. LUCIA, ET AL..,

Petitioners,

Vv.

SECURITIES AND EXCHANGE COMMISSION,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the District of Columbia Circuit

BRIEF FOR COURT-APPOINTED

AMICUS CURIAE IN SUPPORT OF THE

JUDGMENT BELOW

JONATHAN D. HACKER ANTON METLITSKY

DEANNA M. RICE (Counsel of Record)

SAMANTHA M. GOLDSTEIN ametlitsky@omm.com

O’MELVENY & MYERS LLP O’MELVENY & Myers LLP

1625 Eye Street, N.W. Times Square Tower

Washington, D.C. 20006 Seven Times Square

(202) 383-5300 New York, N.Y. 10036

(212) 326-2000

JAMES W. CROOKS

O’MELVENY & MYERS LLP

400 South Hope Street

Los Angeles, Cal. 90071

(213) 430-6000

Attorneys for Amicus Curiae

QUESTION PRESENTED

Whether administrative law judges of the Secu-

rities and Exchange Commission are Officers of the

United States within the meaning of the Appoint-

ments Clause.

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ....0...........ccc000000 1

RELEVANT CONSTITUTIONAL,

STATUTORY, AND REGULATORY

IIIT cick: scrihinteilnicisisiniahsnineensempneieanmuseteninnndnns |

STATEMENT OF THE CASE .....................cccceeseeeeeees 1

A. Administrative Law Judges And The

Administrative Procedure Act...................... 3

B. Securities And Exchange Commission

i niisdserneainnatnaenditaninenctiigubpsibtiinidennbataevenisen 6

C. Proceedings Before The Commission ......... 12

DUD casetnccictncistitsersttnennsinrenicnsie 13

SUMMARY OF ARGUMENT........00000.0..............0000 14

TUE schicisertihitipeitisiiepiciiintininelicitiieaigindetmmencemnsisnennysnt 21

I. ONLY SOMEONE WHO HAS BEEN

LAWFULLY DELEGATED AUTHORITY

TO BIND THE GOVERNMENT OR

THIRD PARTIES IN HER OWN NAME

CAN BE AN “OFFICER” UNDER THE

APPOINTMENTS CLAUSE................0.:cc000000 23

A. Only Persons Who Have Been

Lawfully Delegated Authority To Bind

The Government Or Third Parties Can

Be Constitutional Officers .......................... 24

Il.

iii

TABLE OF CONTENTS

(continued)

Page

B. Appointees Who Have Authority To

Bind The Government Or Alter

Private-Party Rights Only As Agents

Of A Superior Officer Are Not

Themselves Constitutional Officers ...........

C. This Court Should Not Expand The

Meaning Of The Term “Officers Of The

United States” Beyond Its Historically

Understood Limits ....................:cccceeeeeeeeeeees

SEC ADMINISTRATIVE LAW JUDGES

ARE NOT “OFFICERS OF THE UNITED

STATES” FOR PURPOSES OF THE

APPOINTMENTS CLAUSE ................0000:0000000

A. SEC ALJs Are Not Constitutional

“Officers” Because They Cannot Bind

The Government Or Alter The Rights

Of Private Parties In Their Own Name.....

1. SEC ALJs Have No Authority To Bind

The Government Or Private Parties ...........

2. SEC ALJs Are Not Comparable To

Article Ill Judges In Any Relevant

B. SEC ALJs’ Employee Status Is

Consistent With The Purpose Of The

Appointments Clause.................ssscccsssseoeees

TABLE OF CONTENTS

(continued)

Page

C. Congress Has Not Adopted The View

That ALJs Are Constitutional “Officers

Of The United States” .........................6c000 54

Ill. THE COURT HAS NOT INSTRUCTED

THE COURT-APPOINTED AMICUS TO

BRIEF THE PARTIES’ REMEDIAL AND

REMOVAL ARGUMENTS .............:.ccccccceeeeees 58

IE cas ececsnctcemensssscseveinretseresnaenrssterseennneti 60

TABLE OF AUTHORITIES

CASES

Andrade v. Regnery,

824 F.2d 1253 (D.C. Cir. 1987).............

Auffmordt v. Hedden,

137 U.S. 310 (1880)............crrrrerreeees

Bandimere v. SEC,

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

Buckley v. Valeo,

GIG TAB. FC ie ecsescecvscvcesescevesenrcevscecees

Butz v. Economou,

438 U.S. 478 (1978)........cccccccesseeeeeeeeeeees

Dep't of Transp. v. Ass'n of Am. R.Rs.,

135 S. Ct. 1225 (2015).........cccccceceeeeeeeees

Edmond v. United States,

520 U.S. 651 (1997)........ccccccssereereerereeees

Ex parte Hennen,

38 U.S. (13 Pet.) 230 (1839)................

Ex parte Siebold,

100 U.S. 371 (1880)............ccccccreeeees

FCC v. Allentown Broad. Co.,

349 U.S. 358 (1955)........ccccccssceseereeeeeees

Page(s)

TABLE OF AUTHORITIES

(continued)

Page(s)

Fed. Mar. Comm'n v. S.C. State Ports Auth.,

Se es PE CE riadé-tisudcvibietedicdoctidssbniomenders 52

Free Enter. Fund v. Pub. Co. Accounting

Oversight Bd.,

ee Ne ee i cinicrtncs iasiecsniieendebinniaden 3, 28, 29

Freytag v. Comm’r,

es Se essen iccsoccsescdnesessececessesents passim

Go-Bart Importing Co. v. United States,

Be eis I EE cttiniinacischicadebinivecnsewsscpenventsiaenie 31

I.N.S. v. Chadha,

Ee ee I tbiscenninteasrsctecichebstinicccsacinn 25, 49

Kay v. FCC,

396 F.3d 1184 (D.C. Cir. 2008).............c.c0ccscceeee 14

King v. Burnell,

SIE MT ENB PITID cesseciiccenusscadvuioendectdbustndenee 26

Lamar v. United States,

a I is ic cestcda ns cgucenestnediniicsnds 55

Myers v. United States,

Se a eansenes 31

Ramspeck v. Fed. Trial Exam'rs Conf,

Pe ri RAO i astdncscannstecesciscossctunsied 3, 4, 5, 52

vil

TABLE OF AUTHORITIES

(continued)

Page(s)

Rice v. Ames,

AR ER SE eo ee RSID oP 30

Roell v. Withrow,

I | aie 50

Steele v. United States,

Be ee EE cc ccnscaceodecestncectoonnssecstcivedie 33, 55

Stone v. Comm’,

866 F.34 343 (D.C. Cir. 1968)...........cccccecccccecesss 38

United States v. Allred,

nN te 30

United States v. Germaine,

ee es ME Oi ictintiecccscccbceseccocssenses 3, 22, 33, 55

United States v. Gitma,

25 F. Cas. 1323 (C.C.E.D. Va. 1879)................. 30

United States v. Hendee,

er dds cep iaamigaken 55

United States v. Mundell,

fe GT ek ee | eee 33

CONSTITUTIONAL PROVISIONS

Peis Ns GU, Bla eh Gils Di cctinseiesciesseccedsenpasecenans 18, 39

Ss Cs MIO Oh OO Ole ie Ci Sececsdconcdicdadesacctienscnseant 42

vill

TABLE OF AUTHORITIES

(continued)

Page(s)

oe ee Re G1 Pemee i enernan ee i % |

Ss, HN, CPUS Se Oi cicnncacsticstadnenenescssccistestamccunaniedl 42

STATUTES

is Oe ee ccceenisacccacs ini csenniinctciasigsiaidintirasieseaiiats 5, 6, 56

Oe ee MEINE cicascincaiecndesocsannssesiCeccamevnndtibebaiiibeiniiah 5, 6, 56

Oe te Oe elotcnrticscesatncctcbbicenscisinoreninceesesiocamntsiitini 57

Ge Ee ees Oe i etiiccncacieenccictnscupcipinmnniebiitinnpininds 6, 56

ey ici stnaceeshinlabincasivaiadinsciincinnaniosnk 6, 56

Bh egal Oe AI seniessnividesicisuisarbstsbntoninestierivibebindiesameese 5, 7, 57

ae Oe BI datcicincicscsesiecnccssttsestivescciatiiitetisnndubiainns 58

a Bee celicciciniensiccsamasdcceieneitndncsicnteivassignigtabiiatie 5

OP Oe SI brcvesvnisincisiijesiicnsomiinianmuacatnansceaitecahens 5, 58

rs We ciesevicsspicasiciessinndicsiemmiiniaiiaauniiin 7

BD IE, Oe PEM tvineeccsarscisstinncnctacntcneieentaiepmiea passim

ee Wea cea esvisinninshnisinenasinaeentipitennbikunisinesics 9, 49

Be as OD crtdnseriscnnnesuiidisienbineliaiisaiiedieiobvanbetinietl 50

ee CS SINR seaicnstihesiicsacnsisceisivtisnreniuionnicctegesinttcisotonn 50

TABLE OF AUTHORITIES

(continued)

Page(s)

a ee ai avinistrnntticiannintiiniindavencieuactnniias 50

i Serenata I stnriesinreninincsasactintninticitisiinciaininaiiin 50

OE Brett Oe ae S OE ENS Le 50

Bee Sy Oe PN ict cntasritincidtiinieninnninuniiniintanetiiuveiiaes 37

Re Re Oe pte stcasiinistsictuvidcnlsionisesiabiuneniaseliiaints 50

Act of Aug. 4, 1790, 1 Stat. 146 ...................00000 32, 33

Act of Feb. 28, 1871, 16 Stat. 433..............0...00000000 30

Act of June 8, 1872, Ch. 335, 17 Stat. 283............. 31

Act of Sept. 24, 1789, Ch. 20, 1 Stat. 73......31, 32, 33

An Act of 1898, Ch. 447, 30 Stat. 445.000... cee 40

An Act of 1898, Ch. 466, 30 Stat. 476...............0000 40

Pub. L. No. 87-592, 76 Stat. 394 (1962) .............006 7

Pub. L. No. 89-554, 80 Stat. 378 (1966) ................ 56

Pub. L. No. 95-251, 92 Stat. 183 (1978) .............00 4

REGULATIONS

SF Fir eile Oh SOG thiccatincsicsenisntinmmmitcnmeiionsanen 8,9

Sr A re -

TABLE OF AUTHORITIES

(continued)

Page(s)

a cinsdasieanasercenmlpanniian ~

I oi scenicahcotesdbsasialatioabsierenctetooneals 9

Oe a cris aadicdemntvonmsagmredndas 11

Fs Oe sD ienscacecnaisnseieseiccnjeuncieasosionendiis 9, 49

I ais isirciccensscaseisions 9, 10, 11, 45

ee Se ee ER diceterinicinisnemenesniessintmssicnsonns passim

shoe & Yaa 10, 14, 44

Ee Sree rclils OF GA cach diecsiceessnhenmibecnrutdiivniatmonianectenivnadin 7

37 Fed. Reg. 16,787 (Aug. 19, 1972) .....c.cccccccceseseoeee 4

RULES

Sie ANNs W's: Ui rcinreniioininsininsnsiesinehaneiusdadenianiacitianicantia 50

Se a Be Ce cecacinndansinrnssincinsnnaniacemnitiaetionts 37

is Ms incest cai caiicditinitabinssiiincdiduiinbramnannininnie 38

OTHER AUTHORITIES

1 Asher C. Hinds,

Hinds’ Precedents of the House of

Bea TesNNNSSS C1GGT) ...0.00ccccresersccsescccssescosces 27, 40

TABLE OF AUTHORITIES

(continued)

Page(s)

Administrative Procedure Act, Promotion of

Hearing Examiners,

SE Gs FRE I, TO CAGED) cicccccescccssccccccssecesesees 57

Administrative Procedure Act: Legislative

History, 79th Congress, 1944-46..............00... 56, 57

Application of the Emoluments Clause to a

Member of the President’s Council on

Bioethics,

RR re eee 42

Appointment—Holding of Two Offices—

Commissioner of Labor,

26 Op. Att'y Gen. 247 (1907) .......ccccccscscccceceseeees 24

Attorney General’s Manual on the

Administrative Procedure Act (1947) ............ 6, 45

Barron & Kagan,

Chevron’s Nondelegation Doctrine, 2001

ee BS, een 53

Civil-Service Commission,

13 Op. Att’y Gen. 516 (1871) ....................... 34, 48

Common Legislative Encroachments on

Executive Branch Authority,

oe RE ih) errs 28

xii

TABLE OF AUTHORITIES

(continued)

Page(s)

Constitutionality of Proposed Regulations of

Joint Committee on Printing,

ae eee 27, 41

Constitutionality of the Ronald Reagan

Centennial Commission Act of 2009,

2009 WL 2810453 (O.L.C. Apr. 21, 2009)......... 41

Deputy Clerks of United States District

Courts—Premium on Official Bonds,

29 Op. Att’y Gen. 593 (1912) ............cccceeeeseeeeeees 34

Floyd R. Mechem,

A Treatise on the Law of Public Offices and

CG CIID cevtsserosistsnsctitennctapatesieinhmaionh 24

BERR. Bom. om. GRE CROP on ccccctccccscosccsviassasstiernns 55

In re Alchemy Ventures, Inc.,

2013 WL 6173809 (SEC Oct. 17, 2013)............. 11

In re Raymond J. Lucia Cos.,

2012 WL 3838150 (Sept. 5, 2012)..................000 12

In re Raymond J. Lucia Cos.,

2013 WL 3379719 (July 8, 2013).................eeee 12

In re Timbervest LLC,

No. 3-15519 (SEC June 23, 2015) ................c0000ee 7

xiii

TABLE OF AUTHORITIES

(continued)

Page(s)

Jennifer L. Mascott,

Who Are “Officers of the United States”? , 70

ESA 32

Office—Compensation,

22 Op. Att'y Gem. 184 (1806) ........ccccccccerccccesceees 24

Officers of the United States Within the

Meaning of the Appointments Clause,

| __,, S ne passim

Opinion of the Justices,

3 Greenl. (Me.) 481 (1822) ................ccc0cc0000e 26, 27

Paul Verkuil et al.,

The Federal Administrative Judiciary,

Admin. Conf. of the United States,

Recommendations and Reports, Vol. II,

BEY WII ccececsncccecscaccuscéececavecaveses 3, 6

Proposed Commission on Deregulation of

International Ocean Shipping,

yo Lk S| 39, 40

Proposed Legislation to Grant Additional

Power to The President’s Commission on

Organized Crime,

7 Op. O.L.C. 128 (1983) ..............0000+. 38, 39, 41, 50

xiv

TABLE OF AUTHORITIES

(continued)

Page(s)

Robert J. Jackson, Jr.,

Fact and Fiction: The SEC’s Oversight of

Administrative Law Judges, The CLS Blue

4 11

SEC, Order (Nov. 30, 2017),

https://www.sec.gov/litigation/opinions/

i sirntetiastecntrcinntnnnsiniitnininnpademcnmes 7

The Constitutional Separation of Powers

Between the President and Congress,

Se Te eee 22, 34

SN a I net caiman 25

INTEREST OF AMICUS CURIAE

By order dated January 18, 2018, this Court in-

vited Anton Metlitsky to brief and argue this case as

amicus curiae in support of the judgment below. The

court below held that administrative law judges of

the Securities and Exchange Commission are not

“Officers of the United States” under the Appoint-

ments Clause of the United States Constitution.'

RELEVANT CONSTITUTIONAL, STATUTORY,

AND REGULATORY PROVISIONS

Relevant constitutional, statutory, and regulato-

ry provisions are reproduced in the appendix to this

brief.

STATEMENT OF THE CASE

The Appointments Clause regulates the means

of appointment of “Officers of the United States.”

U.S. Const. art. Il, § 2, cl. 2. “Principal” officers

must be appointed by the President “by and with the

Advice and Consent of the Senate.” Jd. Congress

may also provide for “inferior Officers” to be appoint-

ed in that manner, but alternatively may “vest the

Appointment of such inferior Officers, as they think

proper, in the President alone, in the Courts of Law,

or in the Heads of Departments.” /d.

The Appointments Clause is primarily “designed

to preserve political accountability relative to im-

portant Government assignments.” Edmond ov.

! No counsel for a party authored this brief in whole or in

part, and no person other than amicus curiae and his firm

made a monetary contribution to this briefs preparation or

submission.

United States, 520 U.S. 651, 663 (1997). In light of

that purpose, the “Officers of the United States” who

must be appointed in the manner required by the

Clause include only those persons who both hold a

continuing government position “established by |[fed-

eral] Law,” U.S. Const. art. Il, § 2, cl. 2, and who

have the authority, in their own name, to “bind|] the

government or third parties for the benefit of the

public,” Officers of the United States Within the

Meaning of the Appointments Clause, 31 Op. O.L.C.

73, 77 (2007) (“2007 OLC Op.”). In this way, federal

appointees authorized to “exercise the power of the

United States” by binding the government or private

parties are “accountable to the President”—either

directly or through a senior official who is himself a

presidential appointee—and the President is in turn

“accountable to the people.” Dep't of Transp. v. Ass'n

of Am. R.Rs., 135 8. Ct. 1225, 1238 (2015) (Alito, J.,

concurring).

By contrast, “a person whose acts have no au-

thority and power of a public act or law absent the

subsequent sanction of an officer or the legisla-

ture”—for example, a person exercising “advisory” or

“investigative” functions—is not an “Officer of the

United States” but an employee. 2007 OLC Op. 95,

98 (quotations omitted). The overwhelming majority

of those working in the Executive Branch are mere

employees—.i.e., “lesser functionaries subordinate to

officers of the United States,” Buckley v. Valeo, 424

U.S. 1, 126 n.162 (1976)—who need not be appointed

under the Appointments Clause. In 1879, this Court

estimated that 90% of all federal workers were “un-

doubtedly” employees, not officers. United States v.

Germaine, 99 U.S. 508, 509 (1879). By 2010, “[t/he

applicable proportion” of non-officer employees had

“of course increased dramatically.” Free Enter. Fund

v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477,

506 n.9 (2010).

The question presented in this case is whether

administrative law judges (“ALJs”) employed by the

Securities and Exchange Commission (“SEC” or

“Commission”) are inferior “Officers of the United

States,” such that they must be appointed in con-

formity with the Appointments Clause. Pet. i. The

background relevant to answering the question pre-

sented is as follows:

A. Administrative Law Judges And The

Administrative Procedure Act

1. The “rapid growth of administrative law” be-

ginning in the early Twentieth Century increased

the number of agency hearings to the point that “the

agency heads ... [could] rarely preside over hearings

in which evidence is required.” Ramspeck v. Fed.

Trial Exam'’rs Conf., 345 U.S. 128, 130 (1953). “The

agencies met this problem ... by designating hearing

or trial examiners to preside over hearings for the

reception of evidence.” Jd. at 130-31; see also Paul

Verkuil et al., The Federal Administrative Judiciary,

Admin. Conf. of the United States, Recommenda-

tions and Reports, Vol. Il, 1992 ACUS 770, 799

(1992) (“hearing examiners presided at adjudications

before enactment of the [Administrative Procedure

Act (APA’)|, and the term ‘examiner’ was used at

least as early as 1906”). Those examiners “made a

report to the agency setting forth proposed findings

of fact and recommended action,” with the “final de-

cision” left to the agency heads. Ramspeck, 345 U.S.

at 131.

Before Congress enacted the APA, employing

agencies themselves determined hearing examiners’

compensation and promotion under the Classifica-

tion Act of 1923, placing the examiners in a “depend-

ent status” to those agencies. /d. at 130. This re-

sulted in “[mJany complaints ... against the actions

of the hearing examiners, it being charged that they

were mere tools of the agency concerned and subser-

vient to the agency heads in making their proposed

findings of fact and recommendations.” /d. at 131.

2. Congress in the APA sought to address con-

cerns about the independence of hearing examin-

ers—known today as ALJs*—and considered “the se-

curing of fair and competent hearing personnel ...

the heart of formal administrative adjudication.”

Butz v. Economou, 438 U.S. 478, 514 (1978) (quota-

tion omitted). The APA thus “contains a number of

provisions designed to guarantee the independence

of [ALJs].” Id.

In particular, Congress “intended to make hear-

ing examiners a special class of semi-independent

subordinate hearing officers by vesting control of

their compensation, promotion and tenure in the

Civil Service Commission to a much greater extent

than in the case of other federal employees.”

Ramspeck, 345 U.S. at 132 (quotation omitted).

2 Hearing examiners were first referred to as “administra-

tive law judges” by regulation in 1972, 37 Fed. Reg. 16,787

(Aug. 19, 1972), and then by statute in 1978, Pub. L. No. 95-

251, 92 Stat. 183 (1978).

Thus, “[eJach agency” may “appoint” ALJs, 5 U.S.C.

§ 3105, but the Office of Personnel Management

(“OPM”)—formerly the Civil Service Commission—

determines who is qualified to hold that position, id.

§ 5372. Agencies have no authority to alter an ALJ's

salary, id., and no “action” (including removal) can

be taken by the agency against the ALJ except “for

good cause established and determined by the Merit

Systems Protection Board,” id. § 7521(a).

3. Although the APA granted ALJs structural

independence from their employing agencies, it did

not grant them any independent policymaking or de-

cisional authority, instead ensuring that ALJs re-

main “subordinate” to their agencies. Ramspeck, 345

U.S. at 132; see also 5 U.S.C. § 557(c) (referring to

ALJs as “subordinate employees”). Thus, as a gen-

eral matter, the APA authorizes ALJs to “preside at

the taking of evidence” in formal adjudications, 5

U.S.C. § 556(b)—which includes the power, for ex-

ample, to “issue subpoenas,” “receive relevant evi-

dence,” and “regulate the course of the hearing,” id.

§ 556(c)—and to issue “initial decision[s],” id.

§ 557(b). But the Act also ensures that on “appeal

from or review of the initial decision, the agency has

all the powers which it would have in making the in-

itial decision” itself. Id.

Thus, the agency has final and plenary authori-

ty over ALJ decisions not only as to questions of law

but also as to questions of fact. See FCC vu. Allen-

town Broad. Co., 349 U.S. 358, 364-65 (1955). The

APA, in other words, ensures that evidence is taken

and facts are determined “in the first instance by an

official not subject to agency coercion,” but that “the

agency retains full power over policy, a power it can

exercise when it performs its reviewing function.”

1992 ACUS at 803; see also Attorney General’s Man-

ual on the Administrative Procedure Act 83 (1947)

(agency “is in no way bound by the decision” of ALJ

and “retains complete freedom of decision—as

though it had heard the evidence itself”).

4. Congress has defined the terms “officer” and

“employee” as used in Title 5 of the U.S. Code. The

statutory definition of “officer” includes only individ-

uals who must be appointed in the manner provided

by the Appointments Clause, 5 U.S.C. § 2104, while

the definition of “employee” includes officers and

those appointed by, among others, “an individual

who is an employee under this section,” id.

§ 2105(a)(1)(D). Title 5 refers to ALJs as “employ-

ees.” See, e.g., id. § 556(c) (“employees presiding at

hearings”); id. § 557(b) (“presiding employee”).

B. Securities And Exchange Commission

ALJs

The question presented in this case turns on the

powers of the ALJs employed by the SEC. Pet. i.°

The duties and authority of SEC ALJs are set forth

in SEC regulations promulgated under authority

Congress has granted the SEC.

1. The SEC is a five-member independent agen-

cy whose members the President appoints by and

5 As petitioners note, there are nearly 2,000 ALJs across

the federal government, many of whom appear to exercise func-

tions different from those of SEC ALJs. Pet. Br. 41-42.

Whether ALJs other than SEC ALJs are “Officers of the United

States” is not at issue here.

with the advice and consent of the Senate. See 15

U.S.C. § 78d(a). Among other functions, the Com-

mission is empowered to enforce federal securities

laws and regulations. See, e.g., id. § 78d. One

mechanism for SEC enforcement is an administra-

tive action within the Commission. 17 C.F.R.

§ 202.5(b).

The Commission itself is authorized by 5 U.S.C.

§ 3105 to appoint ALJs to preside over such hear-

ings. Since 1962, however, Congress has authorized

the Commission to delegate “any of its functions”

other than rulemaking to “a division of the Commis-

sion, an individual Commissioner, an administrative

law judge, or an employee or employee board.” 15

U.S.C. § 78d-1(a); see Pub. L. No. 87-592, 76 Stat.

394, 394-95 (1962). The Commission under this au-

thority had (until recently) delegated the power to

hire ALJs to SEC staff, who typically chose from a

list of qualified candidates provided by OPM.‘ Pet.

App. 295a-297a.®

* Cameron Elliot, the ALJ who presided below, was an

ALJ at the Social Security Administration before the SEC, and

he may have been hired by the SEC under a process somewhat

different from that described above. Notice at 2, Jn re Timber-

vest LLC, No. 3-15519 (SEC June 23, 2015) (filed by SEC En-

forcement Division), https://perma.cc/5RMX-R6V4. It is undis-

puted, however, that ALJ Elliot was “hired without the in-

volvement of individual Commissioners.” /d.

5 On November 30, 2017, the Commission “ratified” the

appointment of its current ALJs, including the ALJ who pre-

sided over petitioners’ hearing, and ordered a reopening of the

record in all cases then still pending before the SEC. See SEC,

Order (Nov. 30, 2017), https://www.sec.gov/litigation/opinions/

2017/33-10440.pdf. The Commission took no action, however,

2. a. The SEC has delegated certain authorities

to its ALJs under the statute just described, which

authorizes the Commission to delegate “any of its

[non-rulemaking] functions” to (among others) ALJs.

15 U.S.C. § 78d-1(a). Subsection (b) of that statute

provides that the “Commission shall retain a discre-

tionary right to review the [delegated] action ... upon

its own initiative or upon petition,” and lists circum-

stances in which Commission review is mandatory.

Id. § 78d-1(b). Subsection (c) provides that if plenary

discretionary review of delegated functions is not

sought or undertaken, “then the action of any” dele-

gee (including an AL,.J) listed in subsection (a) “shall,

for all purposes, including appeal or review thereof,

be deemed the action of the Commission.” Id. § 78d-

l(c).

ALJs’ authority is thus limited by the scope of

delegation from the Commission. By regulation,

“lajll proceedings shall be presided over by the

Commission or, if the Commission so orders, by a

hearing officer.” 17 C.F.R. § 201.110. The “hearing

officer” may be, among others, an ALJ. Id.

§ 201.101(a)(5). ALJs are responsible for “con-

duct{ing] hearings” and for ensuring “the fair and

orderly conduct of the proceedings.” Jd. § 200.14(a).

And the Commission grants ALJs “the authority to

do all things necessary and appropriate to discharge

[their] duties,” including administering oaths, receiv-

ing evidence, ruling on motions, issuing subpoenas,

with respect to cases (like this one) in which a petition for judi-

cial review had already been filed. See Resp. Br. 3 n.2.

and issuing an initial decision on whether the securi-

ties laws have been violated. Jd. § 201.111.

b. The Commission, however, has not delegated

ALJs authority to bind the government or private

parties. Rather, as the SEC explained in the pro-

ceedings below, the Commission retains “plenary au-

thority over the course of ... administrative proceed-

ings and the rulings of [its] law judges—before and

after the issuance of the initial decision and irrespec-

tive of whether any party has sought relief.” Pet.

App. 91a (quotation omitted).

For instance, although ALJs may issue subpoe-

nas, see 17 C.F.R. §§ 200.14(a)(2), 201.111, they can-

not enforce them—only a federal district court can

enforce an SEC subpoena, including by contempt,

and only at the request of the Commission itself. 15

U.S.C. § 78u(c). The only authority the ALJ has to

punish “[clontemptuous conduct” is to exclude the

offender from the hearing room or preclude her from

representing a party in the proceeding—actions that

are subject to immediate de novo review by the

Commission. 17 C.F.R. § 201.180(a)(1), (2).

ALJs also lack authority to issue a decision on

the merits that binds the Commission or private par-

ties. Rather, the ALJ prepares an “initial decision,”

which “include[s] findings and conclusions, and the

reasons or basis therefor, as to all the materi-

al issues of fact, law or discretion presented on the

record and the appropriate order, sanction, relief, or

denial thereof.” Id. § 201.360(b). The Commission

“may affirm, reverse, modify, set aside or remand for

further proceedings, in whole or in part,” any initial

decision. Jd. § 201.411(a). The Commission may

“make any findings or conclusions that in its judg-

ment are proper and on the basis of the record.” Jd.

The Commission’s review is de novo as to both law

and facts. Id.; see 15 U.S.C. § 78d-1(b). And while

the Commission as a matter of practice accords “con-

siderable weight” to some ALJ credibility findings, it

does not accept such findings “blindly,” Pet. App.

92a-93a n.117 (quotation omitted), and is under no

legal obligation to accept or defer to those findings at

all, see 17 C.F.R. §§ 201.411(a), 201.452.

Finally, the Commission’s review is not limited

to the record before the ALJ. Rather, the Commis-

sion may—as it did in this case, see infra at 12—

remand the matter to the ALJ “for further proceed-

ings,” 17 C.F.R. § 201.411(a), including “the taking of

additional evidence,” id. § 201.452, and may even

elect to “accept or hear additional evidence” itself, id.

c. Notably, no ALJ initial decision can become

final without a subsequent affirmative act of the

Commission. The Commission will review an AL.J’s

initial decision on a petition for review, id.

§ 201.411(b), and can do so sua sponte if no petition

is filed, id. § 201.411(c). Even if the Commission de-

cides not to conduct plenary review, the AL.J’s deci-

sion does not automatically become final, nor does it

otherwise carry any force of its own. Rather, no ini-

tial decision by an ALJ becomes final until the

Commission enters its own finality order. ld.

§ 201.360(d)(2). Moreover, were the Commission ev-

er to delegate to ALJs the authority to issue a deci-

sion that took effect without the Commission’s af-

firmative sanction, that decision would, by operation

of statute, be the decision of the Commission, not the

ALJ. See 15 U.S.C. § 78d-1(c).

Thus, contrary to petitioners’ assertion that an

SEC ALJ decision becomes final even if it is not “af-

firmatively adopted by the agency,” Pet. Br. 32, no

initial decision becomes final simply because of “the

lapse of time”; it is “the Commission’s issuance of a

finality order” that makes an initial decision not se-

lected for plenary review “effective and final.” Pet.

App. 90a (quotation omitted). As the Commission

emphasized below, the “effect of this rule ... is that

[SEC] ALJs’ initial decisions ... do not become the

final and effective decision of the agency without af-

firmative action on [the Commission’s] part—

specifically, [its] issuance of a finality order.” Pet.

App. 90a n.109.

The same is true if an ALJ finds a party to be in

“default.” 17 C.F.R. § 201.155. An initial decision

based on default has no effect absent further action

by the Commission. See In re Alchemy Ventures,

Inc., 2013 WL 6173809, at *4 (SEC Oct. 17, 2013); 17

C.F.R. § 201.360(d)(2).®

6 Petitioners state that “[ijn about 90% of cases, ... the

ALJ’s initial decision ‘become{s] final without plenary agency

review.” Pet. Br. 32 (quoting Bandimere v. SEC, 844 F.3d

1168, 1180 n.25 (10th Cir. 2016)). SEC Commissioner Jackson

recently provided context for that statistic. During 2014 and

2015, 80% of all SEC ALJ decisions arose from a default, and in

the remainder of initial decisions that did not receive plenary

review, no petition for review was filed. Review was sought in

approximately 10% of cases, and granted in every one of those.

Robert J. Jackson, Jr., Fact and Fiction: The SEC’s Oversight of

Administrative Law Judges, The CLS Blue Sky Blog (Mar. 9,

2018), https://perma.cc/EM5Y-B7R2.

C. Proceedings Before The Commission

1. On September 5, 2012, the Commission insti-

tuted administrative proceedings against petitioners

for four alleged violations of the Investment Advisers

Act. See In re Raymond J. Lucia Cos., 2012 WL

3838150 (Sept. 5, 2012). The Commission assigned

ALJ Elliot to oversee the initial stages of the pro-

ceeding. See id.

After the ALJ issued an initial decision conclud-

ing that petitioners had violated the securities laws

as to one of the four charges and recommending

sanctions, see In re Raymond J. Lucia Cos., 2013 WL

3379719 (July 8, 2013), the Commission sua sponte

remanded the case for further findings on the three

charges the ALJ did not address in that initial deci-

sion, concluding that “even if no party chooses to

seek review, the law judge’s findings would assist

{the Commission’s] determination of whether to or-

der review on [its] own initiative,” Pet. App. 242a.

The ALJ subsequently issued a revised initial

decision, considering the additional three charges

and concluding that “[t]he sanction determinations

made in the [original initial decision] remain[ed] ap-

propriate.” Pet. App. 118a.

2. a. Both petitioners and the SEC Division of

Enforcement petitioned for review. The Commission

granted review and concluded, based “on an inde-

pendent review of the record,” except as to unchal-

lenged factual findings, that petitioners violated the

securities laws and imposed the sanctions recom-

mended by the ALJ. Pet. App. 39a-40a.

b. The Commission also rejected petitioners’ ar-

gument that the AL.J’s initial decision was void be-

cause the ALJ was an “Officer of the United States,”

concluding that “the appointment of Commission

ALJs is not subject to the requirements of the Ap-

pointments Clause,” Pet. App. 86a, because they are

employees, not constitutional officers, see Pet. App.

86a-95a.

Two Commissioners dissented on the merits,

and also noted that an Article III court should decide

the Appointments Clause issue. Pet. App. 110a-

ll4a.

D. Proceedings Below

The court of appeals denied petitioners’ petition

for review of the Commission’s decision, including

their Appointments Clause challenge.

The court explained that SEC ALJs are not “Of-

ficers of the United States” required to be appointed

in conformity with the Appointments Clause because

they have not “been delegated sovereign authority to

act independently of the Commission,” and do not

“have the power to bind third parties, or the gov-

ernment itself, for the public benefit.” Pet. App. 16a.

SEC ALJs, the court reasoned, cannot issue any de-

cision that becomes final absent affirmative Com-

mission action. Pet. App. 14a-15a. And ultimate de-

eision-making authority in all events remains with

‘ne Commission: the Commission reviews ALJs’ ini-

tial decisions de novo and it “may make any findings

or conclusions that in its judgment are proper and on

the basis of the record,” Pet. App. 18a-19a (quoting

17 C.F.R. § 201.411(a)); the Commission “controls

the record for review and decides what is in the rec-

ord,” Pet. App. 19a (quotation omitted); the Commis-

sion “may ‘remand for further proceedings,” id.

(quoting 17 C.F.R. § 201.411(a)), or “the taking of

additional evidence,” id. (quoting 17 C.F.R.

§ 201.452); and the Commission may “hear addition-

al evidence” itself, id. (quoting 17 C.F.R. § 201.452).

Moreover, “the Commission may defer to [ALJs’]

credibility determinations where the record provides

no basis for disturbing the finding, but ... is not re-

quired to adopt the credibility determinations of

[the] ALJ.” Jd. (citing Kay v. FCC, 396 F.3d 1184,

1189 (D.C. Cir. 2005)).

The court of appeals granted rehearing en banc,

Pet. App. 244a-246a, but denied the petition for re-

view by an equally divided court, Pet. App. la-2a.

SUMMARY OF ARGUMENT

l. A federal appointee is an “Officer of the Unit-

ed States” under the Appointments Clause if she

holds a continuing position established by federal

law (which is undisputed here) and she has been

delegated (i) the power to bind the government or

private parties (ii) in her own name rather than in

the name of a superior officer.

A. The consistent understanding of Congress,

the Executive Branch, and knowledgeable observers

since the Founding era is that an individual is an

“Officer of the United States” only if (among other

things) she has been delegated a portion of the sov-

ereign authority of the United States, meaning that

she can bind the government or alter the rights of

private parties. Persons whose acts have no force

absent the subsequent sanction of a superior officer,

in contrast, are not constitutional officers.

Thus, for example, persons who can authorita-

tively interpret the law, bring enforcement actions

and make litigation decisions on behalf of the United

States, promulgate regulations, or issue decisions

binding on private parties may be constitutional of-

ficers. It has been established since at least the

Nineteenth Century, however, that persons who per-

form investigative functions but can only make rec-

ommendations based on the results of their investi-

gation are not officers. That is so even if those indi-

viduals have power to perform hearing-related func-

tions such as issuing subpoenas, administering

oaths, taking testimony, and receiving documents.

That result is fully consistent with this Court's

precedent.

B. It has also been understood since the First

Congress, and this Court’s cases confirm, that even

an individual who has de facto authority to bind the

government or alter private-party rights is not a

constitutional officer for purposes of the Appoint-

ments Clause if she can only exercise that authority

in the name of a superior officer rather than in her

own name. Such an individual is considered an

agent of a principal who is a constitutional officer,

not an officer herself. The principal—i.e., the consti-

tutional officer—will be held accountable for the acts

of the agent done in the principal’s name.

C. This Court’s modern cases have described

constitutional officers as those who exercise “signifi-

cant authority pursuant to the laws of the United

States.” Buckley, 424 U.S. at 126. Although the

Court has not had occasion to flesh out the precise

contours of that standard, it is fully consistent with

the longstanding historical rule just described.

Petitioners and the Solicitor General argue for a

substantially broader understanding of officer sta-

tus, relying on a portion of this Court’s opinion in

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

describes as “significant” certain hearing-related

functions of the Tax Court special trial judges at is-

sue there—i.e., taking testimony, conducting trials,

ruling on the admissibility of evidence, and enforcing

compliance with discovery orders. Some of these

functions bind neither the government nor private

parties, so the Court’s opinion could be read as

adopting a broader understanding of officer status

inconsistent with the longstanding view described

above. But Freytag’s holding is fully consistent with

that longstanding view, and this Court should not

construe the opinion more broadly, for several rea-

sons.

First, the special trial judges in Freytag could

bind the government and private parties by issuing

final judgments in their own name in some circum-

stances. It is true that language in the Court’s opin-

ion suggests that the Court might have viewed the

hearing-related functions described in the previous

paragraph as by themselves sufficient to make spe-

cial trial judges constitutional officers, even absent

the ability to enter final binding judgments. But

that language was unnecessary to the holding in

Freytag, and in any event, even those hearing-

related functions included the ability to bind the

government and private parties, because special trial

judges have the authority to enforce their own dis-

covery orders by punishing contempt. While other

functions set forth in the opinion—such as ruling on

the admissibility of evidence—are unrelated to any

enforcement authority, the Court did not consider

whether such powers alone would suffice to establish

officer status, and there is no basis to read Freytag

broadly to indicate that they would, inconsistent

with the historical understanding described above.

Second, not only could petitioners’ standard call

into question the constitutionality of the appoint-

ment process of untold number of federal actors who

perform “significant” functions, it would also cast

significant doubt on the constitutionality of the

more-than-a-century-old practice of establishing in-

vestigative commissions whose members, including

members of Congress, are not appointed in the man-

ner prescribed by the Appointments Clause. These

commissions generally do not have the power to pun-

ish contempt, but do have the power to issue sub-

poenas, administer oaths, examine witnesses, and

receive documents—i.e., similar powers to those ex-

ercised by the special tria! judges in Freytag (and

SEC ALJs). Despite these powers, both Congress

and the Executive Branch have repeatedly concluded

that so long as a commission can only make recom-

mendations based on the results of the investigation

but not act on those recommendations—for example,

by promulgating a regulation—the commission

members are not constitutional officers. That con-

clusion is crucial not only for purposes of the Ap-

pointments Clause, but also because the Incompati-

bility Clause, U.S. Const. art. Il, § 6, cl. 2, prevents

members of Congress from being appointed to feder-

al “Offices.” Petitioners’ understanding of Freytag

would likely preclude members of Congress from

serving on such commissions, and invalidate more

than one hundred years of consistent practice and

understanding.

Third, limiting officers to persons who have au-

thority to bind the government or private parties in

their own name furthers the purpose of the Ap-

pointments Clause. The President (directly or

through his direct subordinates) is appropriately

held to account for persons who bind the government

or private parties in their own name. But there is no

reason to hold the President accountable for those

whose acts require subsequent sanction by a superi-

or—or those who can act only in a superior’s name—

because the President will be held accountable for

the acts of the officer who grants subsequent sanc-

tion or in whose name the act is done.

Fourth, the historical understanding provides

Congress and the President an administrable rule

for determining when the Appointments Clause and

other provisions that turn on officer status (such as

the Foreign Emoluments Clause) apply. A rule that

hinges officer status on the “significance” (in a collo-

quial sense) of a person’s functions would make it

difficult for Congress and the President to structure

the government consistent with those provisions.

Il. SEC ALJs are not constitutional officers be-

cause, although they occupy continuing positions in

the federal government established by law, they sat-

isfy neither of the traditional rule’s other necessary

prerequisites for officer status.

A. An SEC ALJ has no authority to bind the

Commission in any respect because the Commission

can review any ALJ decision or determination—

including credibility findings and decisions about

what constitutes the record—de novo. The fact that

the Commission sometimes chooses to defer to an

ALJ’s credibility determinations even though it is

not required to do so is irrelevant, because what

matters is whether the Commission is bound by any

ALJ act. It is not.

Nor can SEC ALJs alter the rights of private

parties (or bind the Commission) by entering final

decisions—even in cases when the Commission does

not conduct plenary review, an ALJ decision has no

force at all until the Commission affirmatively en-

ters a finality order. The Solicitor General contends

that despite the Commission’s finality-order re-

quirement, an AL.J initial decision that the Commis-

sion decides not to review de novo is a final decision

of the ALJ because it “shall, for all purposes ... be

deemed the action of the Commission.” 15 U.S.C.

§ 78d-1(c). That is wrong for two reasons. First,

§ 78d-1(c) only applies to actions that the Commis-

sion has delegated ALJs the authority to perform in

the first place, and the Commission has not delegat-

ed ALJs the authority to enter decisions that have

any effect without affirmative Commission adoption.

Second, even if the Solicitor General’s understanding

of subsection (c) were correct, all final decisions un-

der that provision are issued in the Commission’s

name, not the ALJ’s. The ALJ, in other words, acts

only as the Commission’s agent, and the fact that

every final decision is entered in the Commission’s

name ensures that it is the Commissioners who are

held accountable.

Petitioners also argue that SEC ALJs are consti-

tutional officers even absent the power to enter bind-

ing decisions because SEC ALJs possess hearing-

related powers similar to those of the special trial

judges in Freytag, including the power to issue sub-

poenas, swear oaths, and receive evidence. But

those are not functions limited to constitutional of-

ficers. And ALJs have no authority to punish con-

tempt (or do anything else) in a manner that alters a

party’s legal rights.

Moreover, although SEC ALJs share some fea-

tures in common with Article II] judges and other

adjudicators the Court has held are constitutional

officers, the powers that render those persons offic-

ers—e.g., the power to enter binding judgments and

punish contempt—are powers that SEC ALJs lack.

B. Holding that SEC ALJs are employees rather

than officers promotes the core accountability pur-

pose of the Appointments Clause because no SEC

ALJ decision has binding effect absent affirmative

Commission action, and every binding decision is

made in the Commission’s name. The Commission-

ers will thus be held fully accountable for those deci-

sions.

C. Nothing in the APA or the securities laws

suggests that Congress understood ALJs in general

or SEC ALJs in particular to be constitutional offic-

ers. To the contrary, every indication is that Con-

gress has always understood that ALJs are civil-

service employees, not “Officers of the United

States.”

Ill. If this Court holds that SEC ALJs are con-

stitutional officers, petitioners present an argument

about the appropriate remedy for an Appointments

Clause violation, and the Solicitor General asks the

Court to decide whether restrictions on ALJs’ re-

moval are constitutional (or whether a serious con-

stitutional question can be avoided by narrowly con-

struing those restrictions). The Court has not invit-

ed Court-appointed amicus to take a position on ei-

ther question, because neither implicates arguments

“in support of the judgment below.” 138 S. Ct. 923.

Moreover, the Court did not add a question present-

ed concerning the removal question despite requests

that it do so, indicating that the removal question is

not properly before the Court.

ARGUMENT

The Appointments Clause requires that “Offic-

ers of the United States” be appointed by the Presi-

dent with the advice and consent of the Senate, ex-

cept that Congress may alternatively provide that

“inferior Officers” be appointed by the President

alone, the Head of a Department, or a Court of Law.

U.S. Const. art. I], § 2, cl. 2. The ALJ who presided

over petitioners’ hearing, and the SEC’s other ALJJs,

were not initially appointed in any of those ways, but

instead were selected by SEC staff under authority

delegated from the Commission. See supra at 7. The

question presented is whether that manner of ap-

pointing SEC ALJs is unlawful because they are

constitutional officers. The answer is no.

As the parties ultimately agree, the question

whether SEC ALJs must be appointed pursuant to

the Appointments Clause turns on whether SEC

ALJs “exercis[e] significant authority pursuant to

the laws of the United States.” Buckley, 424 U.S. at

126.7 This Court has not had occasion to articulate

the precise scope of that constitutional precondition.

But a centuries-old understanding of the term “Of-

ficers of the United States” yields a rule fully con-

sistent with the Appointments Clause’s purpose and

this Court’s cases: An individual wields “significant

authority” only if she holds an office that has been

“delegat([ed] by legal authority ... a portion of the

sovereign powers of the federal government.” 2007

OLC Op. 78; see Resp. Br. 15. And for the reasons

explained below, that criterion is satisfied only if the

individual has (i) the power to bind the government

or third parties (ii) in her own name rather than in

the name of a superior officer.

’ Petitioners suggest that any appointee whose position

includes “tenure, duration, continuing emolument, or continu-

ous duties” is a constitutional officer. Pet. Br. 18 (quoting

Auffmordt v. Hedden, 137 U.S. 310, 327 (1890)). It is true that

holding “a continuing position[]” in the federal government “es-

tablished by law”’—as SEC ALJs indisputably do, see supra at

4-5—is a necessary precondition for officer status. See, e.g.,

Freytag, 501 U.S. at 881; Germaine, 99 U.S. at 511-12; see also

The Constitutional Separation of Powers Between the President

and Congress, 20 Op. O.L.C. 124, 139-42, 145-47 (1996). But as

the Solicitor General explains, it is not sufficient. An official

must both “wield significant authority” and “occupy a continu-

ing office” to become an “Officer of the United States.” Resp.

Br. 17-18 n.3; accord 2007 OLC Op. 73-74.

SEC ALJs are not “Officers of the United States”

because they can do neither of these things. An SEC

ALJ has no authority to bind the government or al-

ter the rights of third parties at all. And regardless,

even if an SEC ALJ in theory had such authority, it

could be exercised solely in the name of the Commis-

sion, not in the ALJ’s own name. The decision below

should be affirmed.

I. ONLY SOMEONE WHO HAS BEEN LAW-

FULLY DELEGATED AUTHORITY TO

BIND THE GOVERNMENT OR THIRD

PARTIES IN HER OWN NAME CAN BE AN

“OFFICER” UNDER THE APPOINTMENTS

CLAUSE

As the Solicitor General agrees, an individual

appointed to a continuing, statutorily created posi-

tion in the federal government exercises “significant

authority pursuant to the laws of the United States,”

Buckley, 424 U.S. at 126, and is therefore a constitu-

tional officer, only if she has been delegated power to

“exercise a portion of the sovereign authority of the

United States.” Resp. Br. 15. Such sovereign au-

thority primarily consists of the power to “bin[d] the

government or third parties for the benefit of the

public, such as by administering, executing, or au-

thoritatively interpreting the laws.” 2007 OLC Op.

77; see Resp. Br. 15.8 And even appointees who have

® “Delegated sovereign authority also includes other activ-

ities of the Executive Branch concerning the public that ... have

long been understood to be sovereign functions, particularly the

authority to represent the United States to foreign nations or to

command military force on behalf of the government.” 2007

such authority are not constitutional officers unless

they have authority to exercise it in their own name

rather than as a mere agent of a superior officer.

A. Only Persons Who Have Been Lawfully

Delegated Authority To Bind The Gov-

ernment Or Third Parties Can Be Con-

stitutional Officers

1. a. It has long been understood—and at least

the Solicitor General does not dispute, Resp. Br.

15—that a constitutional officer is an individual “in-

vested with some portion of the sovereign functions

of government, to be exercised by him for the benefit

of the public.” Floyd R. Mechem, A Treatise on the

Law of Public Offices and Officers § 1, at 1-2 (1890).

As Mechem’s treatise explained, “[rjeflecting the un-

derstanding from the first hundred years of Ameri-

can law, including pre-Founding English law,” 2007

OLC Op. 84, the “delegation ... of some of the sover-

eign functions of government” is the “most important

characteristic which distinguishes an office,” and

“luJnless the powers conferred are of this nature, the

individual is not a public officer,” Mechem, supra,

§ 4, at 5; accord 2007 OLC Op. 77; Office—

Compensation, 22 Op. Att’y Gen. 184, 187 (1898);

Appointment—Holding of Two Offices—

Commissioner of Labor, 26 Op. Att’y Gen. 247, 249

(1907).

This Court has explained, albeit in a somewhat

different context, what it means to exercise a portion

OLC Op. 77. Those other types of sovereign authority are not

implicated here.

of the sovereign powers of the United States—viz., to

take action that “alter|s] the legal rights, duties and

relations of persons,” whether private parties or gov-

ernment actors. [.N.S. v. Chadha, 462 U.S. 919, 952

(1983); see also The Federalist No. 64, at 436 (Jay)

(referring to the Constitution’s allocation of “power

to do” each “act of sovereignty by which the citizens

are to be bound and affected”). The question is not

whether the person can or does exercise functions

that can be considered important—the fact that

countless federal employees have “substantial prac-

tical authority” does not make them subject to the

Appointments Clause. 2007 OLC Op. 98. Rather,

the understanding since the Nation’s early years has

been that the sine qua non of officer status is the

lawfully delegated authority to exercise “legal pow-

er” and “bind[] the government or third parties for

the benefit of the public.” Jd. at 77, 98 (quotation

omitted).

Acts that bind the government include filing en-

forcement actions in court or before an administra-

tive body, making litigation decisions that bind the

United States, and issuing binding interpretations of

the law. Acts that bind private parties include issu-

ing regulations that carry the force of law and enter-

ing final decisions in adjudications (which often also

bind the government). Individuals holding continu-

ing federal positions who exercise such sovereign au-

thorities must be appointed pursuant to the Ap-

pointments Clause.

By contrast, “a person whose acts have no au-

thority and power of a public act or law absent the

subsequent sanction of an officer or the legisla-

ture”—for example, a person exercising “advisory” or

“investigative” functions—is not an “Officer of the

United States” but an employee. Id. at 95, 98 (quo-

tation omitted). Thus, persons serving on an inves-

tigatory commission with the power (for example) to

issue subpoenas, administer oaths, and examine

witnesses but no authority to act on their findings or

recommendations are not “Officers of the United

States.” See infra at 39-42.

b. This understanding of the meaning of a pub-

lic “office” or “officer” is reflected in commentary

from knowledgeable observers beginning before the

Founding and continuing through the Nation’s first

Century.

The Continental Congress, for example, under-

stood officers in England to be “persons holding sov-

ereign authority delegated from the King that ena-

bled them in conducting the affairs of government to

affect the people ‘against [their] will, and without

[their] leave.” 2007 OLC Op. 82 (quoting King v.

Burnell, Carth. 478, 478 (K.B. 1700)).

Similarly, in 1822, the Supreme Judicial Court

of Maine—in providing “the fullest early explication”

of the term “Officer of the United States,” id. at 83—

explained that “[t]here is a manifest difference be-

tween an office, and an employment under the gov-

ernment,” Opinion of the Justices, 3 Greenl. (Me.)

481, 482 (1822). An office “implies a delegation of a

portion of the sovereign power to, and possession of

it by the person filling the office,” that “in its ef-

fects[,] ... will bind the rights of others.” Jd. Mere

employment, in contrast, characterizes appointees

who are “agent/s] act[ing] only on behalf of [their]

principal”—i.e., a superior officer—whose “sanction

is generally considered as necessary to give the acts

performed the authority and power of a public act.”

Id.

Surveying these and other materials, the Judici-

ary Committee of the House of Representatives in

1899 similarly concluded that an “office” requires a

delegation of sovereign authority, which “involves

necessarily the power to (1) legislate, or (2) execute

law, or (3) hear and determine judicially questions

submitted,” 1 Asher C. Hinds, Hinds’ Precedents of

the House of Representatives 604, 607 (1907)

(“Hinds”)—i.e., the power to “bind the Government

or do any act affecting the rights of a single individ-

ual citizen,” id. at 610. Thus, the Committee con-

cluded, membership on “a commission created by law

to investigate and report, but having no legislative,

judicial, or executive powers,” did not constitute an

“office.” Id. at 604.

Likewise, the Executive Branch’s longstanding

view has been that an “Officer of the United States”

is someone holding a continuing position created by

federal law who has authority to “bind[] the govern-

ment or third parties for the benefit of the public,”

2007 OLC Op. 77, whereas a mere employee is “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,” id. at 95 (quotation

omitted); see also Constitutionality of Proposed Regu-

lations of Joint Committee on Printing, 8 Op. O.L.C.

42, 48 (1984) (while the “administration and en-

forcement” of the law must be performed by constitu-

tional officers, “investigative and informative” func-

tions need not be); Common Legislative Encroach-

ments on Executive Branch Authority, 13 Op. O.L.C.

248, 249 (1989) (person occupying position that is

merely “advisory,” “investigative,” or “informative”

does not qualify as an officer).

2. This Court’s more recent cases have stated

that a constitutional officer has the power to exercise

“significant authority pursuant to the laws of the

United States.” Buckley, 424 U.S. at 126; see Frey-

tag, 501 U.S. at 881; Edmond, 520 U.S. at 663; Free

Enter. Fund, 561 U.S. at 486. The Court has not had

occasion to more concretely articulate the governing

standard, but as the Office of Legal Counsel has ex-

plained, “the phrase ‘significant authority pursuant

to the laws of the United States” should be under-

stood as a “shorthand for the full historical under-

standing of the essential elements of a public office.”

2007 OLC Op. 87. And this Court’s cases from the

beginning have labeled “officers” only those holding

a continuing position in the federal government who

are, at a minimum, authorized to bind the govern-

ment or alter the rights of private parties.

a. This Court’s recent cases reflect this under-

standing. The heads of the Federal Election Com-

mission at issue in Buckley were authorized to “ad-

minister and enforce” federal legislation, and their

“enforcement power [was] both direct and wide rang-

ing.” 424 U.S. at 111. They therefore possessed

power both to bind the United States and to alter

private parties’ rights. And the members of the Pub-

lic Company Accounting Oversight Board in Free En-

terprise Fund were “charged with enforcing” various

securities laws and standards, and were authorized

to issue regulations that carry the force of law. 561

U.S. at 485.

The Tax Court special! trial judges and Court of

Criminal Appeals military judges this Court consid-

ered in Freytag and Edmond possessed similar au-

thorities to bind the government and alter third-

party rights. Court of Criminal Appeals judges, for

example, review de novo the most serious court-

martial judgments, Edmond, 520 U.S. at 662, and

review of their decisions is limited, particularly as to

factual findings, id. at 664-65. Moreover, Court of

Criminal Appeals judges have authority to “render a

final decision on behalf of the United States,” subject

to review by superior executive officers. Jd. at 665.

Tax Court special trial judges also have the power,

among other things, to enter final decisions in some

cases. Freytag, 501 U.S. at 882, 891; see infra at 36.

This Court’s modern cases, in short, have never

held to be a constitutional officer anyone lacking au-

thority to bind the government or alter the legal

rights of private parties.

b. The same is true of this Court’s earlier cases.

As the Solicitor General correctly explains, many of

those cases concerned “whether Congress intended to

treat a position it had created by statute as an ‘of-

fice,’ not whether the functions of the position were

so significant that the Constitution required that the

position be held by an officer” of the United States.

Resp. Br. 24. Therefore not all of those cases provide

particularly helpful guidance about the type of sig-

nificant authority this Court has deemed necessary

for constitutional officer status. See id.

Even so, the positions that this Court’s earlier

cases called “offices” were delegated power to bind

the government or alter private rights. See, e.g., Ex

parte Siebold, 100 U.S. 371, 380 (1880) (federal mar-

shals had authority, among other things, to “keep

the peace and protect [election] supervisors in the

discharge of their duties,” “prevent fraudulent regis-

tration and voting,” and “immediately to arrest any

person who commits, or attempts to commit, ... any

offence against the laws of the United States”); id. at

379-80 (election supervisors authorized, among other

things, “to cause such names to be registered as they

may think proper to be so marked ... and for purpos-

es of identification to affix their signatures to each

page of the original list,” “to challenge any vote the

legality of which they may doubt,” and to “require|}”

deputy marshals to perform certain duties, Act of

Feb. 28, 1871, 16 Stat. 433, 436%); United States v.

Allred, 155 U.S. 591, 594-95 (1895) (federal circuit

court commissioners, among other things, “issue/|d]

warrants,” “cause[d] the offenders to be arrested and

imprisoned, or bailed, for trial,” and “institute|d]

prosecutions under the laws relating to crimes

against the elective franchise and civil rights of citi-

zens’); Rice v. Ames, 180 U.S. 371, 374 (1901) (extra-

dition commissioners, like other commissioners, had

power to issue arrest warrants and imprison offend-

ers); Go-Bart Importing Co. v. United States, 282

® See also United States v. Gitma, 25 F. Cas. 1323, 1323

(C.C.E.D. Va. 1879) (relevant Act “provides that ‘when required’

to do so by the supervisors it shall be the duty of deputy mar-

shals to ‘attend the polls’ in their districts or precincts” (em-

phasis added)).

U.S. 344, 353 n.2 (1931) (federal district court com-

missioners had authority, among other things, to

“arrest and imprison” defendants, to “issue warrants

for” fugitives, to “issue search warrants,” and to “in-

stitute prosecutions under laws relating to the elec-

tive franchise and civil rights”); Myers v. United

States, 272 U.S. 52, 158 (1926) (postmaster first-

class assumed to be an officer was authorized by

statute to, among other things, resolve certain dis-

putes, Act of June 8, 1872, Ch. 335, 17 Stat. 283,

307, issue money orders, id. at 297-300, and “affix

his signature to the certificate of sufficiency of guar-

antors or sureties,” id. at 313); Myers, 272 U.S. at

159 (U.S. Attorney, who can make litigation deci-

sions on behalf of the United States, is an “inferior

officer”); Ex parte Hennen, 38 U.S. (13 Pet.) 230

(1839) (district court clerk described as an “inferior

officer” was required to provide a bond to the United

States in case of a suit brought against him, see Act

of Sept. 24, 1789, Ch. 20, 1 Stat. 73, 76, making clear

that he exercised authority that affected individual

rights).

This Court’s cases are thus fully consistent with

the traditional understanding that federal appoin-

tees are “Officers of the United States,” requiring

appointment in conformity with the Appointments

Clause, only if (among other things) ‘ey have au-

thority to bind the government or alter the rights of

private parties.

B. Appointees Who Have Authority To

Bind The Government Or Alter Private-

Party Rights Only As Agents Of A Supe-

rior Officer Are Not Themselves Consti-

tutional Officers

Although the authority to bind the government

or private parties is a necessary precondition of con-

stitutional officer status—and the lack of it here re-

solves this case, see infra Part Il—it is not sufficient.

Longstanding practice, Executive Branch under-

standing, and this Court’s precedents all confirm

that even an appointee to a continuing position in

the federal government who has the de facto power

to bind the government or alter private rights is not

a constitutional officer if that power cannot be exer-

cised in the appointee’s own name, but only in the

name of a superior who is a constitutional officer.

The First Congress, for example, established

various deputy positions and vested appointment au-

thority for those positions in the deputies’ principals

even though the principals were not department

heads. Specifically, the First Congress authorized

marshals, collectors, and surveyors—none of whom

was the head of a department—to appoint their own

deputies to assist them in their duties. 1 Stat. 73,

87; Act of Aug. 4, 1790, Ch. 35, 1 Stat. 145, 155; see

also Jennifer L. Mascott, Who Are “Officers of the

United States”?, 70 Stan. L. Rev. 443, 525-26 &

nn.491-96 (2018) (explaining why the appointing of-

ficers were not department heads).

The fact that the First Congress chose a method

of appointment for these deputies that the Appoint-

ments Clause does not specify demonstrates that it

did not consider them to be constitutional officers.

Yet these deputies had substantial authority to im-

pact the rights of nongovernmental parties. To take

one example, deputy marshals assisted their princi-

pal in maintaining custody over federal prisoners. 1

Stat. 73, 88; see United States v. Mundell, 6 Call.

245, 246, 248-49 (C.C.D. Va. 1795). To take another,

collectors could authorize their deputies to grant

permits for ships to unload imported goods. 1 Stat.

152, 155. The First Congress thus understood that

deputies who acted only as agents of their superiors

(rather than under authority delegated to their own

office) need not be constitutional officers.

This Court reached the same conclusion in Ger-

maine, where it held that a civil surgeon appointed

by the commissioner of pensions was not a constitu-

tional officer because “[h]je [wa]s but an agent of the

commissioner.” 99 U.S. at 512; accord Auffmordt,

137 U.S. at 328. And in Steele v. United States, 267

U.S. 505 (1925), the Court concluded that deputy

marshals were “not in the constitutional sense ... of-

ficer[s] of the United States” even though they, along

with the marshal, “are the persons chiefly charged

with the enforcement of the peace of the United

States, as that is embraced in the enforcement of

federal law,” id. at 508, and even though deputy

marshals are “called upon to exercise great responsi-

bility and discretion in the service of” their duties,

id.

Executive Branch opinions have long reflected

the same view. In 1871, for example, the Attorney

General explained that Congress provided non-

Article II selection methods for positions such as

deputy marshal because “the office was substantially

in the principal.” Civil-Service Commission, 13 Op.

Att’y Gen. 516, 521 (1871). These deputies, in other

words, were only the “representatives” of a principal

who was ultimately “responsible for their conduct.”

Id. Deputy district court clerks, in contrast, were of-

ficers because they were not only granted authority

to “do every act which [their] principal[s] might do,”

but could do them in their “own name as deputy.”

Deputy Clerks of United States District Courts—

Premium on Official Bonds, 29 Op. Att’y Gen. 593,

597 (1912). Thus, as the Office of Legal Counsel has

more recently explained, an “agent” who “acts only

on behalf of his principal” and has no power in his

own office is merely an employee. 2007 OLC Op. 98

(quotation omitted); cf. The Constitutional Separa-

tion of Powers Between the President and Congress,

20 Op. O.L.C. at 144 n.57 (“That an employee may

not exercise independent discretion does not, of

course, mean that his or her duties may not encom-

pass responsibilities requiring the exercise of judg-

ment and discretion under the ultimate control and

supervision of an officer.”). This long-established

rule “preserve|s} political accountability,” Edmond,

520 U.S. at 663, because the principal will be held

accountable for the agent’s acts in the principal's

name.

C. This Court Should Not Expand The

Meaning Of The Term “Officers Of The

United States” Beyond Its Historically

Understood Limits

Petitioners (and the Solicitor General) seek to

expand the category of constitutional officers dra-

matically beyond its historical limits, contending

that this category is “expansive” and “sweeping.”

Pet. Br. 16. Although petitioners never clarify exact-

ly how “significant authority” should be measured,

they suggest that the category includes any authori-

ty that can colloquially be described as important,

significant, or non-ministerial. See, e.g., Pet. Br. 21-

23. And they rely heavily on this Court’s statement

in Freytag that characterized as “significant” the au-

thority of special trial judges to “take testimony,

conduct trials, rule on the admissibility of evidence,

and ... enforce compliance with discovery orders.”

501 U.S. at 881-82. Petitioners contend that any

federal appointee who exercises similar hearing-

related functions (including SEC ALJs) must be a

constitutional officer. Pet. Br. 23; see Resp. Br. 21.

It is true that language in Freytag could be con-

strued broadly to require that anyone who exercises

authority that could be deemed “significant” in a col-

loquial sense—such as presiding over a hearing—is

an officer even if she has no authority to bind the

government or alter private-party rights, let alone to

do so in the name of her own office. But Freytag

never considered, let alone purported to alter, the

longstanding traditional view of the scope of the Ap-

pointments Clause. Cf. 2007 OLC Op. 86 (the refer-

ence to “significant authority” in Buckley and subse-

quent cases “does vary somewhat from the well-

established historical formulation, but nothing in the

Court’s opinion suggests any intention to break with

the longstanding understanding of a public office or

fashion a new term of art” (citation omitted)). And

there is no need to adopt petitioners’ and the Solici-

tor General’s ahistorical and overly broad construc-

tion to support the holding in Freytag, which is fully

consistent with the traditional understanding.

Petitioners’ reading of Freytag, moreover, would

have significant negative practical consequences (in-

cluding calling into question the constitutionality of

more than a century’s worth of presidential and con-

gressional investigative commissions), would not

materially advance the purpose of the Appointments

Clause, and would be difficult for the political

branches to administer.

1. The traditional rule fully supports the

Court’s holding in Freytag because the special trial

judges at issue in that case undoubtedly had author-

ity to bind the government and private parties, in at

least two respects.

First, they could enter binding final judgments

in their own name in some circumstances, 501 U.S.

at 882, which suffices to establish their officer sta-

tus. It is true that the Court’s opinion stated that

the authority to issue final judgments “would” con-

firm special trial judges’ officer status “[e]ven if”

their hearing-related duties described above “were

not as significant” as the Court believed. Jd. Even

so, special trial judges’ ability to enter final judg-

ments fully supported the Court’s holding, and it

was therefore unnecessary to the Court’s holding to

consider the constitutional status of other appointees

who do not possess such authority.

Second, the hearing-related functions of special

trial judges that this Court collectively labeled “sig-

nificant” included the power to bind the government

and private parties by “enforc[ing] compliance with

discovery orders.” Jd. at 881-82. As the SEC ex-

plained below, special trial judges had “power to en-

force compliance with discovery orders” because they

had authority to punish contempt. SEC C.A. En

Banc Br. 31 (quotation omitted).!° And the “power of

contempt is a hallmark of an adjudicative official’s

status as a constitutional officer,” id. at 33, precisely

because it is a power to bind the government and

private parties.

The Solicitor General acknowledges this con-

tempt power but argues that what the Court in Frey-

tag found important was that special trial judges

could enforce discovery orders, and not “the particu-

lar type” of enforcement power special trial judges

possessed. Resp. Br. 21 n.4 (quotation omitted). But

it is not apparent what authority other than the

power to punish contempt allowed special trial judg-

es to “enforce compliance with discovery orders,” 501

U.S. at 882, as the Commission acknowledged below,

SEC C.A. En Banc Br. 31. If special trial judges

lacked contempt power, they would have been “de-

pendent upon [a] court for enforcement” of a subpoe-

na or other order. Proposed Legislation to Grant

‘© The Court in Freytag noted the Tax Court’s contempt

power. See 501 U.S. at 891 (citing 26 U.S.C. § 7456(c)). The

Tax Court has delegated to special! trial judges various hearing-

related powers, including the power to issue subpoenas, admin-

ister oaths, examine witness, and rule on the admissibility of

evidence, and has also delegated “such further and incidental

authority ... as may be necessary for the conduct of trials and

other proceedings.” Tax Ct. R. 181 (1990). Congress labeled

the contempt power an “incidental” authority in the statute

granting that authority to the Tax Court. 26 U.S.C. § 7456(c).

Additional Power to The President’s Commission on

Organized Crime, 7 Op. O.L.C. 128, 130 (1983).

Admittedly, the other special trial judge func-

tions that this Court mentioned—i.e., the power to

“take testimony, conduct trials, [and] rule on the

admissibility of evidence,” Freytag, 501 U.S. at 881-

82—are unconnected to the power to punish con-

tempt or otherwise bind the government or alter pri-

vate-party rights. But Freytag did not consider

whether—let alone conclude that—any such authori-

ty alone would have been enough to establish officer

status. Certainly, the mere mention of such func-

tions among others that do empower special trial

judges to bind parties should not be read to overcome

the centuries-old understanding that the power to

bind the government or private parties is a neces-

sary condition for constitutional officer status.!!

2. Adopting petitioners’ standard would also

have significant adverse practical consequences.

For one thing, a rule that classifies anyone who

performs “important,” “significant,” or “non-

ministerial” tasks as an officer could result in sub-

jecting, for example, every government attorney, in-

vestigator, and law-enforcement officer to the Ap-

'! Special trial judges arguably also have power to bind

the government in another respect: the Tax Court must accept

their findings of fact unless “clearly erroneous.” See Tax Ct. R.

183(d) (“the findings of fact recommended by the Special Trial

Judge shall be presumed to be correct”); see also Stone v.

Comm’, 865 F.2d 342, 347 (D.C. Cir. 1989) (interpreting same

language in prior version of Tax Court rules to provide for

clearly erroneous standard of review).

pointments Clause. Petitioners’ rule could cast

doubt on the constitutionality of the method of ap-

pointment of many thousands of civil servants.

Adopting petitioners’ and the Solicitor General's

reading of Freytag, moreover, would call into signifi-

cant doubt the validity of a more-than-a-century-old,

unbroken congressional practice of establishing

commissions that include members not appointed

under the Appointments Clause—including mem-

bers of Congress—and that have historically been

granted authority to exercise hearing-related powers

akin to those possessed by special trial judges (and

SEC ALJs, see infra at 48-50), but not the power to

punish contempt. For example, such commissions

typically possess the powers incident to investiga-

tion, e.g., to issue subpoenas, administer oaths, col-

lect documents, and call and examine witnesses.

See, e.g., Proposed Legislation to Grant Additional

Power to The President’s Commission on Organized

Crime, 7 Op. O.L.C. at 130 & n.7 (list of many such

commissions); Proposed Commission on Deregulation

of International Ocean Shipping, 7 Op. O.L.C. 202,

202 (1983) (discussing congressional commissions).

If such authorities sufficed to establish officer status,

then these commissions would be irredeemably un-

constitutional: even if they could otherwise be

staffed with properly appointed constitutional offic-

ers, members of Congress would absolutely be pre-

cluded from serving on them by the Incompatibility

Clause, which prohibits Senators and Representa-

tives from being “appointed to any civil Office under

the Authority of the United States.” U.S. Const. art.

I, § 6, cl. 2.

Yet both Congress and the Executive have for

more than a century consistently concluded that

such committees pose no Appointments Clause or

Incompatibility Clause problem precisely because,

despite the hearing-related powers they (like special

trial judges) possess, such commissions can investi-

gate, make findings, and make recommendations,

but (unlike special trial judges) they cannot enforce

those findings or recommendations to bind the gov-

ernment or private parties.

Thus, for example, the House Judiciary Commit-

tee’s 1899 report described earlier, after “extensively

survey|ing] the definition of an ‘office,” 2007 OLC

Op. 85, and concluding that investigation and report-

ing are not officer functions, see supra at 27, applied

its analysis to certain commissions that Congress

had recently created, considering whether the In-

compatibility Clause precluded members of Congress

from serving on them, Hinds at 611. The Committee

concluded that commission membership was not an

office, even when the commission was empowered to,

for example, administer oaths, issue subpoenas, and

collect documents and examine witnesses. See, e.g.,

An Act of 1898, Ch. 447, 30 Stat. 445; An Act of

1898, Ch. 466, 30 Stat. 476.

The Office of Legal Counsel similarly has con-

cluded that investigative commission members are

not constitutional officers despite subpoena and oth-

er related powers when they “possess no enforce-

ment authority or power to bind the Government.”

Proposed Commission on Deregulation of Interna-

tional Ocean Shipping, 7 Op. O.L.C. at 202; see also

id. at 203 (noting relevant commission’s power to is-

sue subpoenas and examine witnesses); see also Con-

stitutionality of Proposed Regulations of Joint Com-

mittee on Printing, 8 Op. O.L.C. at 48 (non-officers

may exercise “investigative and informative powers

of the type generally delegated to congressional

committees”). And that Office has specifically con-

cluded that non-officers can issue subpoenas and

administer oaths, and explained that the subpoena

power in particular “has not been viewed as the ex-

ercise of a coercive power”: the issuing agent is “de-

pendent upon the courts for enforcement” of the sub-

poena by punishing contempt, and no “matter what

the issuing agent finds out, it cannot, in the absence

of any other power, use the information to do any-

thing, such as enact or execute a law, adjudicate a

dispute, or otherwise take any affirmative action

which will affect an individual’s rights.” Proposed

Legislation to Grant Additional Power to The Presi-

dent's Commission on Organized Crime, 7 Op. O.L.C.

at 130 (quotation omitted). The same is true of other

hearing-related powers, such as the power to call

witnesses, admit evidence, and administer oaths—if

those authorities do not include the power to use the

information collected “to do anything” that binds the

government or private parties, it has uniformly been

understood that those powers need not be wielded by

officers. !2

‘2 The Office of Legal Counsel has also made clear that

such commissions would meet the other requirements of a con-

stitutional office—e.g., tenure and continuing duties—if the

commission could take binding action based on its findings.

See, e.g., Constitutionality of the Ronald Reagan Centennial

Commission Act of 2009, 2009 WL 2810453, at *2 & n.6 (O.L.C.

Petitioners’ argument that hearing-related

powers similar to those typically possessed by inves-

tigative commissions establish officer status cannot

be reconciled with this joint Legislative and Execu-

tive Branch practice and understanding."

3. Petitioners’ standard would also not materi-

ally advance the purpose of the Appointments

Clause, namely, “to preserve political accountability

relative to important Government assignments.”

Edmond, 520 U.S. at 663.

The constrained historical understanding of the

attributes of a constitutional office appropriately en-

sures that the President (directly or through a direct

appointee) will be accountable for the acts of those

who themselves bind the government or private par-

ties, because the President or his direct appointee is

responsible for appointing the actor who exercised

that authority. By contrast, when “a person[’s] ...

Apr. 21, 2009) (“members of an unpaid commission ... [can]

hold offices in the constitutional sense” (citing prior opinions)).

'3 Petitioners’ sweeping construction could also have un-

predictable implications for the application of other constitu-

tional provisions that turn on “Officer” status, such as the Im-

peachment Clause and the Foreign Emoluments Clause, both of

which only apply to constitutional officers. U.S. Const. art. I,

§ 9, cl. 8; id. art. I, § 4; see, e.g., Application of the Emoluments

Clause to a Member of the President’s Council on Bioethics, 29

Op. O.L.C. 55, 70-71 & n.8 (2005) (describing and approving the

traditional view of the Department of Justice that “Office of

Profit or Trust under [the United States)” in the Foreign Emol-

uments Clause is synonymous with “Officer of the United

States” in the Appointments Clause, thereby limiting the num-

ber of persons in the federal workplace who are subject to the

complex restrictions of the former).

acts have no authority ... absent the subsequent

sanction of an officer,” 2007 OLC Op. 95 (quotation

omitted), the officer who grants the “subsequent

sanction” (and the President or the President’s direct

subordinate who appointed that officer) will be, and

should be, held directly accountable for the decision.

Likewise, when an employee acts solely in the name

of a superior officer, that superior will be blamed or

praised for acts done in his name—regardless of the

method by which the employee was hired—and the

President is accountable for the superior’s appoint-

ment. Cf. Andrade v. Regnery, 824 F.2d 1253, 1257

(D.C. Cir. 1987) (such delegation “does not offend the

Appointments Clause so long as the duly appointed

official has final authority over the implementation

of the governmental action”).

4. Finally, construing “Officer of the United

States” to turn on the authority to bind the govern-

ment or alter private rights in the officer's own

name—rather than on an amorphous standard based

on a subjective assessment of the perceived im-

portance or significance of the appointee’s authority

—would provide an administrable rule for Congress

and the Executive Branch to determine which posi-

tions require compliance with the Appointments

Clause and other constitutional provisions applicable

to officers. Adopting petitioners’ vague standard

would complicate the political branches’ efforts to

comply not only with the Appointments Clause but

also other constitutional provisions (such as the For-

eign Emoluments Clause, see supra at 42 n.13) that

turn on officer status.

Il. SEC ADMINISTRATIVE LAW JUDGES

ARE NOT “OFFICERS OF THE UNITED

STATES” FOR PURPOSES OF THE AP-

POINTMENTS CLAUSE

Under the foregoing principles, SEC ALJs are

not constitutional officers subject to the Appoint-

ments Clause.

A. SEC ALJs Are Not Constitutional “Offic-

ers” Because They Cannot Bind The

Government Or Alter The Rights Of Pri-

vate Parties "» Their Own Name

1. SEC ALJs Have No Authority To Bind The

Government Or Private Parties

a. SEC ALJs have no authority to bind the

Commission in any respect. Congress provided that

“the Commission shall retain a discretionary right to

review the action of any [delegee, including an] ad-

ministrative law judge, ... upon its own initiative or

upon petition of a party to or intervenor in such ac-

tion.” 15 U.S.C. § 78d-1(b). Consistent with that di-

rective, the Commission can revisit de novo any find-

ing of fact or determination of law made by an ALJ,

see id., and “ultimately controls the record for review

and decides what is in the record,” Pet. App. 91a; see

17 C.F.R. §§ 201.411(a), 201.452. Thus, unlike (for

example) the Court of Criminal Appeals military

judges in Edmond, whose factual findings could be

revised only when not supported by substantial evi-

dence, 520 U.S. at 665, every decision an SEC ALJ

makes can be revised fully by the Commission, so

the Commission “is in no way bound by the decision”

of the ALJ, Attorney General’s Manual on the Ad-

ministrative Procedure Act 83 (1947).

Petitioners and the Solicitor General believe it

important that, as a factual matter, the Commission

often decides to defer to an AL.J’s credibility deter-

minations, Pet. Br. 24; Resp. Br. 36-37, but that is

irrelevant: it is undisputed that the Commission has

no legal obligation to defer to ALJ credibility deter-

minations, and thus that ALJs have no authority to

bind the Commission, see Pet. App. 92a-93a n.117,

which is what matters for officer status. If and when

the Commission chooses to defer to the ALJ, the

Commission itself is accountable for that decision.

b. SEC ALJs also lack authority to make final

decisions that are binding on private parties (or the

Commission). They are authorized only to issue ini-

tial decisions, 17 C.F.R. § 201.360, which have no

force of their own—no party’s rights are affected un-

til the Commission issues a final decision.

The Commission can issue a final decision after

conducting plenary review, either when a petition for

review is filed, id. § 201.411(b), or when the Com-

mission elects to review the AL.J’s decision on its

own initiative, id. § 201.411(c). If the Commission

decides not to conduct plenary review, an ALJ initial

decision cannot take effect until the Commission is-

sues a finality order. Jd. § 201.360(d)(2).'4 Even in

the case of a default, the ALJ must issue an initial

‘4 Petitioners err in describing finality orders as “non-

discretionary.” Pet. Br. 33. The Commission issues a finality

order only if it has decided not to exercise its discretion to con-

duct plenary review. 17 C.F.R. § 201.360(d)(1).

decision, which is then subject to review through one

of the mechanisms just described. See supra at 11.

Both petitioners and the Solicitor General em-

phasize that the Commission does not actually en-

gage in plenary review in most cases. Pet. Br. 32-33;

Resp. Br. 22. That is true, see supra at 11 n.6, but

beside the point. The relevant question, as petition-

ers admit, “is simply whether a position possesses

delegated sovereign authority to act in the first in-

stance, whether or not that act may be subject to di-

rection or review by superior officers.” Pet. Br. 30-

31 (quoting 2007 OLC Op. 75). SEC ALJs have not

been delegated “sovereign authority to act in the

first instance” because their initial decisions do not

themselves alter the legal rights of individuals (or

bind the government). Those initial decisions “have

no authority and power of a public act or law absent

the subsequent sanction of an officer,” 2007 OLC Op.

95 (quotation omitted)—i.e., the sanction of the

Commission either after plenary review or through

the issuance of a finality order.

The lack of any delegated power to issue binding

decisions distinguishes SEC ALJs from the special

trial judges in Freytag. See supra at 36. It also dis-

tinguishes SEC ALJs from judges on the Court of

Criminal Appeals in Edmond. Those judges had au-

thority to enter binding final decisions in their own

name, subject to review (but not de novo review) by

superior executive officers. Hdmond, 520 U.S. at

665; see also U.S. Edmond Br., 1997 WL 33018, at

*25 (Court of Criminal Appeals “authorized by stat-

ute to issue final decisions that are reviewable under

a deferential standard”). As petitioners and the So-

licitor General correctly note, Pet. Br. 29; Resp. Br.

35, the fact that the Court of Criminal Appeals’ final

decisions were reviewable by a superior executive

officer was, in part, what made those judges inferior

rather than principal officers. Edmond, 520 U.S. at

665. But the fact that they could issue final deci-

sions that became effective absent subsequent sanc-

tion by a superior officer is at least one reason why

those judges were constitutional officers in the first

place.

c. The Solicitor General recognizes that under

Commission regulations, even when the Commission

decides not to conduct plenary review, an AL.J’s ini-

tial decision has no force absent a Commission final-

ity order. Resp. Br. 35. He contends, however, that

“the ALJ’s decision is still the Commission’s final de-

cision by operation of [§ 78d-1(c)],” id., which pro-

vides that if the Commission declines to exercise re-

view, or if no review is sought, “then the action of

[the delegee, including an] administrative law judge,

... Shall, for all purposes, including appeal or review

thereof, be deemed the action of the Commission,” 15

U.S.C. § 78d-1(c).

That is incorrect. Subsection (c) does not come

into play at all unless the ALJ exercises a function

delegated under subsection (a). But the Commission

has not delegated ALJs the authority to enter a deci-

sion that can have effect without the Commission’s

affirmative sanction through a finality order. See

supra at 10-11. Thus, subsection (c)’s “deemed” pro-

vision does not apply to ALJ initial decisions.

Moreover, even if the Solicitor General’s reading

of § 78d-1(c) were correct, it would only confirm that

SEC ALJs are not constitutional officers. After all,

§ 78d-1(c) deems an ALJ's initial decision to be the

decision of the Commission, not the ALJ. In other

words, even if ALJs had de facto authority to alter a

party’s rights, they could only do so in the name of

the Commission.

In this respect, ALJs are akin to the non-officer

deputies that Congress established as early as

1789—“agent[s]" who “act[{] only on behalf of [their]

principal,” i.e., the Commission. 2007 OLC Op. 98

(quotation omitted). The fact that Congress did not

delegate SEC ALJs any power to issue decisions in

their own name shows that they are not officers but

“representatives” of the Commission, which is ulti-

mately “responsible for their conduct,” Civil-Service

Commission, 13 Op. Att'y Gen. at 521, and which can

and will be held accountable for that conduct, con-

sistent with the Appointments Clause’s purpose, see

supra at 1-2.

d. Petitioners and the Solicitor General also rely

heavily on other functions SEC ALJs may perform

when presiding over hearings. They note that SEC

ALJs may, for example, administer oaths, issue sub-

poenas, hold hearings, take testimony, and admit

evidence. Pet. Br. 23; Resp. Br. 21. But as explained

earlier, it has long been understood that non-officers

can exercise such hearing-related powers—powers

routinely possessed by bodies serving investigative

functions whose members are not constitutional of-

ficers. See supra at 39-42.

Petitioners and the Solicitor General point to

Freytag’s statement that the power to “take testimo-

ny, conduct trials, rule on the admissibility of evi-

dence, and ... enforce compliance with discovery or-

ders,” 501 U.S. at 881-82, is “significant.” But SEC

ALJs do not have the power to “enforce” discovery or

any other orders in any way relevant to the Ap-

pointments Clause, because they “have no authority

to punish disobedience of discovery orders or other

orders with contempt sanctions of fine or imprison-

ment.” Pet. App. 7a; see supra at 9. Indeed, as the

Commission explained, SEC ALJs are even “power-

less to enforce their subpoenas. The Commission it-

self would need to seek an order from a federal dis-

trict court to compel compliance.” Pet. App. 94a

n.120 (citing 15 U.S.C. § 78u(c)). SEC ALJs only

have power to deal with “contemptuous conduct”

“during a proceeding”—they can exclude the offend-

ing party from the hearing room or prevent him from

representing others in the proceedings. 17 C.F.R.

§ 201.180(a). That limited authority is subject to

immediate review by the Commission, _ id.

§ 201.180(a)(2), and if not reviewed is deemed an ac-

tion of the Commission, 15 U.S.C. § 78d-1(c), so it

cannot create officer status. See supra at 47-48.

And even if done in the ALJ’s own name, this pow-

er—along with SEC AL.Js’ other hearing-related

powers, such as the power to admit evidence—is an

authority anyone performing an investigative func-

tion would have.

Such authority, by itself, does not establish a

constitutional office, see supra at 39-42, because its

exercise does not by itself “alter[{] the legal rights,

duties and relations of persons.” Chadha, 462 U.S.

at 952. To be sure, an officer who does have authori-

ty to bind the government or private parties may use

powers inherent in conducting a hearing or investi-

gation to find the facts necessary to determining the

parties’ legal rights. But if “no matter what [a fed-

eral actor] finds out” at the conclusion of the hearing

or investigation, the actor cannot “use the infor-

mation to do anything, such as enact or execute a

law, adjudicate a dispute, or otherwise take any af-

firmative action which will affect an individual’s

rights,” Proposed Legislation to Grant Additional

Power to The President's Commission on Organized

Crime, 7 Op. O.L.C. at 130 (quotation omitted), she

is not an officer.

To be sure, an appointee’s role in “shaping the

record” through such functions, Pet. Br. 24; Resp. Br.

20, 24, could suggest officer status if the appointee’s

evidentiary rulings and other acts actually “shaped

the record” in a manner binding on the agency.'®

But as explained above, no SEC ALJ's evidentiary

‘8 Contrary to petitioners’ suggestion, magistrate judges

are not officers based solely on their ability to “shape the evi-

dentiary record” in a federal court case. Pet. Br. 30. Magis-

trate judges are authorized to enter final judgments, 28 U.S.C.

§ 636(c)(1), and enter unreviewable orders, Roell v. Withrow,

538 U.S. 580, 585 (2003); 28 U.S.C. § 636(c)(3). They may also

enforce those orders and others through the contempt power,

and may summarily order imprisonment or a fine. 28 U.S.C.

§ 636(e). Magistrates can also issue arrest warrants, 18 U.S.C.

§ 3041; authorize criminal complaints, Fed. R. Crim. P. 3; order

pre-trial detention, 18 U.S.C. §§ 3141(a), 3142(a)(4); detair ma-

terial witnesses, 18 U.S.C. § 3144; try misdemeanor cases, 18

U.S.C. § 3401(a); and impose sentences for petty offenses with-

out the parties’ consent, 28 U.S.C. § 636(a)(4). Magistrate

judges are therefore constitutional officers for reasons having

nothing to do with their ability to “shape the evidentiary rec-

ord.”

ruling is binding on the Commission, which has ple-

nary authority to determine and analyze the rec-

ord—an authority the Commission exercised in this

case. See supra at 12. SEC ALJs simply have no

power to bind the government or private parties, let

alone the power to do so in the ALJ’s own name ra-

ther than that of the Commission. SEC ALJs there-

fore are not constitutional officers subject to the Ap-

pointments Clause.

2. SEC ALJs Are Not Comparable To Article Ill

Judges In Any Relevant Respect

Petitioners and the Solicitor General also argue

that SEC ALJs are constitutional officers because of

a “parallel between ALJs and Article III judges.”

Resp. Br. 25; see Pet. Br. 18-20. Not so.

SEC ALJs preside over proceedings that “are

adversarial in nature.” Butz, 438 U.S. at 513. ALJs

thus may do many things that Article III judges also

do, including exercise the hearing-related functions

described above. And ALJs are “functionally compa-

rable” to judges in the sense that “the process of

agency adjudication,” like the process by which a

court decides a case, is “structured so as to assure

that the hearing examiner exercises his independent

judgment on the evidence before him, free from pres-

sures by the parties or other officials within the

agency.” Id.

Thus, ALJs’ adjudicative functions render them

sufficiently analogous to trial judges to afford ALJs

absolute immunity for actions taken in presiding

over agency hearings. /d. at 514. The similarities

between agency adjudications and judicial proceed-

ings also warrant granting the States sovereign im-

munity in agency proceedings held before ALJs, Fed.

Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743,

753-67 (2002), although the final decision in Federal

Maritime Commission was rendered by the Commis-

sion, not an ALJ, id. at 750. But it does not follow

that SEC ALJs must be “Officers of the United

States” simply because district court judges are.

SEC ALJs lack the crucial authorities that district

courts possess—viz., the authority to bind the gov-

ernment or private parties, for example by entering

binding final judgments or punishing contempt.

SEC ALJs thus are nothing like district court judges

in any way that matters for Appointments Clause

purposes.

It is certainly true, as the Solicitor General ex-

plains, Resp. Br. 27, that Congress in the APA

sought to make ALJs “a special class of semi-

independent subordinate hearing officers.”

Ramspeck, 345 U.S. at 132 (quotation omitted).

Congress achieved this balance by giving ALJs “lim-

ited separation from their agencies with respect to

‘their tenure and compensation,” Pet. Br. 37 (quot-

ing Ramspeck, 345 U.S. at 132 n.2), so that they

would be able to maintain neutrality in evaluating

evidence and formulating their initial decisions, see

supra at 3-5. But as petitioners recognize, by keep-

ing ALJs within the agency, Congress also ensured

that hearing examiners would be “subordinate to

their respective agencies” in “every ... significant re-

spect” other than “tenure and compensation.” Pet.

Br. 37-38. Crucially, Congress did not seek to in-

crease ALJ independence—and certainly not SEC

ALJ independence—by granting ALJs independent

authority to bind the government or private parties.

That is the authority that matters, and it is lacking

here.

There is some irony, moreover, in petitioners’

complaint that, despite the structural independence

that Congress has provided ALJs, they are still not

sufficiently “independent.” Pet. Br. 38-40. If that is

so, adopting petitioners’ position would only make

matters worse, since requiring appointment by a

high-level political officer is itself a form of political

control over the appointee. Cf. Barron & Kagan,

Chevron’s Nondelegation Doctrine, 2001 Sup. Ct.

Rev. 201, 223 n.80 (2001) (“Presidents often have a

good deal of actual control over independent agencies

[despite for-cause removal restrictions] by virtue of

their appointments and other powers.”). Congress

gave agencies like the Commission flexibility to en-

hance ALJs’ structural independence beyond what

the APA requires by authorizing them to delegate

the power to hire ALJs to non-political employees—

as the Commission had until recently done, see supra

at 7—while at the same time reserving policymaking

and decisionmaking authority (and thus accountabil-

ity) to the Commission. The manner in which Con-

gress achieved this balance is fully consistent with

the Appointments Clause, and there is no reason to

disturb it.

B. SEC ALJs’ Employee Status Is Con-

sistent With The Purpose Of The Ap-

pointments Clause

The Appointments Clause’s accountability pur-

pose is fully served by classifying SEC ALJs as em-

ployees rather than constitutional officers. Because

“the Commission is not bound in any way by its

ALJ[s’] decisions,” “the blame for its unpopular deci-

sions,” as well as the praise for its good ones, “fall(s]

squarely on the commissioners and, in turn, the

president who appointed them.” Bandimere, 844

F.3d at 1198 (McKay, J., dissenting). Indeed, be-

cause SEC ALJ decisions have no force without sub-

sequent Commission action—and because those de-

cisions in all events are issued in the name of the

Commission, not the ALJ—it is “quite clear where

the buck stops” in matters initially heard by an SEC

ALJ. Id. Thus, “[s]o long as the commissioners have

been validly appointed”—which no one disputes

here—“the Appointments Clause is satisfied.” /d.

(emphasis added).

C. Congress Has Not Adopted The View

That ALJs Are Constitutional “Officers

Of The United States”

Finally, petitioners (but, notably, not the Solici-

tor General) also argue that “Congress provided, in

both the securities laws and the APA, that ALJs are

‘officers,” a designation petitioners say “is all but

dispositive of [SEC ALJs’] status under the Ap-

pointments Clause.” Pet. Br. 12. Although congres-

sional intent is “not dispositive of the constitutional

question here,” Resp. Br. 29, Congress has long

made abundantly clear its view that ALJs are not

constitutional officers but employees.

Petitioners correctly note that the APA original-

ly described ALJs as “officers,” and the securities

laws refer to them as “officers of the Commission.”

See Pet. Br. 35-36. But that does not mean that

Congress understood SEC ALJs to be constitutional

officers for purposes of the Appointments Clause.

Petitioners cite Germaine, which concluded that the

statutory term “Officer of the United States” there

carried the same meaning as under the Appoint-

ments Clause. 99 U.S. at 510. Unlike in Gern sine,

however, Congress has never referred to ALJs as of-

ficers of the United States. And even if Congress had

used that more specific term, this Court has held

that the phrase “officer of the United States,’ when

employed in the statutes of the United States, is to

be taken usually to have the limited constitutional

meaning,” but can also “include others than those

appointed by the President, heads of departments,

and courts.” Steele, 267 U.S. at 507. Congress's ref-

erence to ALJs as simple “officers” or “officers of the

Commission” does not demonstrate an intent to cre-

ate a constitutional office. See also Lamar v. United

States, 240 U.S. 60, 65 (1916) (“words may be used in

a statute in a different sense from that in which they

are used in the Constitution”); United States v. Hen-

dee, 124 U.S. 309, 313 (1888) (clerk was “officer” un-

der compensation statute, even though he was “not,

in the constitutional sense of the word, an officer of

the United States”).

In any event, any doubt about Congress’s under-

standing was erased in 1966, when it restated and

codified Title 5 of the U.S. Code “without substantive

change.” H.R. Rep. No. 89-901, at 1 (1965). Peti-

tioners correctly explain that Congress in 1966 “de-

fined ‘officer’ in the APA as ‘an individual ... re-

quired by law to be appointed in the civil service by’

‘the President,’ ‘a court of the United States,’ or ‘the

head of an Executive agency’ or ‘military depart-

ment.” Pet. Br. 36 (emphasis in original) (citing 5

U.S.C. § 2104(a)(1)); see Pub. L. No. 89-554, 80 Stat.

378, 408-09 (1966). What petitioners miss, however,

is that Congress simultaneously deleted every refer-

ence to ALJs (then called “hearing examiners”) as

“officers,” and replaced each such reference with

“employee,” e.g., 80 Stat. 386-87, which is how these

provisions read today, e.g., 5 U.S.C. §§ 556, 557 (de-

scribing ALJ as “presiding employee”); see also id.

§ 2105(a) (defining “employee” to include individuals

“appointed in the civil service by ... an individual

who is an employee under this section”). The fact

that Congress added definitions of “officer” and “em-

ployee” to Title 5 and at the same time made clear

that ALJs were employees refutes petitioners’ con-

tention that Congress understood ALJs to be consti-

tutional officers. '®

‘6 Petitioners err in asserting that the APA's legislative

history shows that Congress “understood that hearing examin-

ers would be executive Officers.” Pet. Br. 36. When formulat-

ing the APA, Congress considered a proposal! “that the Judicial!

Conference appoint an officer to appoint and remove examin-

ers,” Administrative Procedure Act: Legislative History, 79th

Congress, 1944-46, at 50, which raised concerns about possible

“constitutional problems as to the appointing power,” id., given

that “the Judicial Conference is a committee and not a court,”

id. at 42. The problem was not that hearing examiners had to

be appointed in conformity with the Appointments Clause, but

that a position assigned responsibility for appointing and re-

moving hearing examiners for all agencies might have to be

filled by a constitutional officer chosen under the Appointments

Clause—which would not have occurred under the proposal!

that the Judicial Conference choose the appointing officer, be-

cause the Judicial Conference is not a court of law (or depart-

Petitioners also suggest in passing what appears

to be a statutory argument: that by granting the

“agency” authority to appoint ALJs, 5 U.S.C. § 3105,

Congress intended that ALJs could be appointed on-

ly by agency heads, an obligation petitioners believe

“the Commission has failed to discharge,” Pet. Br. 3.

Not so. Congress authorized the Commission to del-

egate “any of its functions to,” among others, “an

employee.” 15 U.S.C. § 78d-1(a). Petitioners do not

explain why this broad delegation authority does not

encompass delegation of the power to hire AL.Js.

To the extent petitioners contend that the word

“agency” in § 3105 precludes delegation because it

necessarily refers only to the head of the agency,

that construction is implausible. For example, the

very next section of the Code uses the phrase “the

head of an Executive department.” 5 U.S.C. § 3106.

And Title 5 elsewhere uses the term “agency head.”

E.g., id. § 608. Had Congress intended that ALJs

could be appointed only by a department head, it

ment head). Congress, of course, ultimately decided that hear-

ing examiners would be “appointed and removed within the

usual framework of the public service,” id. at 50, an arrange-

ment that raised no constitutional concerns at all.

Petitioners also incorrectly contend that the Attorney

General, when asked to opine on the extent of the Civil Service

Commission's authority under section 11 of the APA, deemed

hearing examiners constitutional! officers. Pet. Br. 37; see Ad-

41 Op. Att'y Gen. 74 (1951). The Attorney General! instead con-

cluded that section 11 would pose no Appointments Clause

problem even if ALJs were inferior officers. See id. at 79-80.

The Attorney General therefore did not have to—and in fact did

not—consider whether ALJs actually were inferior officers.

would have used one of those readily available for-

mulations. The fact that Congress did not do so con-

firms that it considered ALJs employees that need

not be appointed under the Appointments Clause.

Ill. THE COURT HAS NOT INS1 RUCTED THE

COURT-APPOINTED AMICUS TO BRIEF

THE PARTIES’ REMEDIAL AND REMOV-

AL ARGUMENTS

Petitioners present arguments about the appro-

priate remedy for an Appointments Clause violation.

Pet. Br. 42-58. The Solicitor General, meanwhile,

argues that if the Court reverses the court of appeals

as to the Appointments Clause question, it should

also consider whether Congress’s decision to grant

ALJs “good cause” removal protection is unconstitu-

tional, and whether the Court can avoid that ques-

tion by construing “for cause” and the Merit System

Protection Board’s authority under 5 U.S.C. § 7521

narrowly. Resp. Br. 39-55. This brief does not con-

sider those questions because the Court has not in-

structed Court-appointed amicus to take a position

on them.

A. Amicus was appointed to “brief and argue

this case ... in support of the judgment below.” 138

S. Ct. 923. Petitioners’ remedial arguments by their

terms are relevant only if the judgment below is re-

versed. The Court has thus not instructed the

Court-appointed amicus to address those arguments.

B. So too with the Solicitor General's removal

argument. The judgment below rests on the conclu-

sion that SEC ALJs are not constitutional officers.

The Solicitor General argues that the Court should

reach the removal question “[s]hould the Court agree

that the Commission’s ALJs are officers.” Resp. Br.

39-40 n.7. If the Court concludes that SEC ALJs are

officers under the Appointments Clause, the judg-

ment below would be reversed regardless of the an-

swer to the removal question. See Pet. Cert. Reply

11. Because any argument as to removal would not

be in support of the judgment below, it is similarly

outside the scope of amicus’s appointment.

Moreover, the Court has indicated that the re-

moval issue is not properly before it. The Solicitor

General asked the Court at the certiorari stage to

add an additional question concerning removal if the

Court did not believe that issue to be within the

scope of the question presented in the petition.

Resp. Cert. Br. 21, 26. Petitioners objected, explain-

ing that the removal question was not “even remote-

ly encompassed by petitioners’ question presented,”

Pet. Cert. Reply 10, and presented several additional

arguments for why the Court should not consider the

removal question, including that it has never been

decided by any court and that the answer would not

affect the judgment, id. at 9-11. But petitioners spe-

cifically “requeste|d}” that if “the Court nevertheless

[were] inclined to decide the removal issue now,”

that “the Court [should] formulate a specific ques-

tion on that topic,” as the Solicitor General had also

requested. Jd. at 11. This Court declined to add an

additional question presented, indicating the Court’s

agreement with petitioners that the removal ques-

tion is not properly before it.

CONCLUSION

For the foregoing reasons, the decision below

should be affirmed.

Respectfully submitted,

JONATHAN D. HACKER ANTON METLITSKY

DEANNA M. RICE (Counsel of Record)

SAMANTHA M. GOLDSTEIN ametlitsky@omm.com

O'MELVENY & MYERS LLP O’MELVENY & MYERS LLP

1625 Eye Street, N.W. Times Square Tower

Washington, D.C. 20006 Seven Times Square

(202) 383-5300 New York, N.Y. 10036

(212) 326-2000

JAMES W. CROOKS

O’MELVENY & MYERS LLP

400 South H Street

Los Angeles, Cal. 90071

(213) 430-6000

March 26, 2018

APPENDIX

RELEVANT CONSTITUTIONAL PROVISIONS

Article I, Section 6, Clause 2 of the United

States Constitution (Incompatibility Clause):

*~**

[Njo Person holding any Office under the United

States, shall be a Member of either House during his

Continuance in Office.

Article I, Section 9, Clause 8 of the United

States Constitution (Foreign Emoluments

Clause):

No Title of Nobility shall be granted by the United

States: And no Person holding any Office of Profit or

Trust under them, shall, without the Consent of the

Congress, accept of any present, Emolument, Office,

or Title, of any kind whatever, from any King, Prince,

or foreign State.

Article II, Section 2, Clause 2 of the United

States Constitution (Appointments Clause):

*~**

(The President] shall nominate, and by and with the

Advice and Consent of the Senate, shall appoint Am-

bassadors, other public Ministers and Consuls,

Judges of the supreme Court, and all other Officers of

the United States, whose Appointments are not

herein otherwise provided for, and which shall be es-

tablished by Law: but the Congress may by Law vest

the Appointment of such inferior Officers, as they

think proper, in the President alone, in the Courts of

Law, or in the Heads of Departments.

Article II, Section 4 of the United States Con-

stitution (Impeachment Clause):

The President, Vice President and all civil Officers of

the United States, shall be removed from Office on

Impeachment for, and Conviction of, Treason, Brib-

ery, or other high Crimes and Misdemeanors.

RELEVANT STATUTES

5 U.S.C. § 554:

Adjudications.

*~**

(d) The employee who presides at the reception of ev-

idence pursuant to section 556 of this title shall make

the recommended decision or initial decision required

by section 557 of this title, unless he becomes unavail-

able to the agency. Except to the extent required for

the disposition of ex parte matters 2s authorized by

law, such an employee may not—

(1) consult a person or party on a fact in issue, un-

less on notice and opportunity for all parties to partic-

ipate; or

(2) be responsible to or subject to the supervision or

direction of an employee or agent engaged in the per-

formance of investigative or prosecuting functions for

an agency.

An employee or agent engaged in the performance of

investigative or prosecuting functions for an agency

in a case may not, in that or a factually related case,

participate or advise in the decision, recommended

decision, or agency review pursuant to section 557 of

this title, except as witness or counsel in public pro-

ceedings. This subsection does not apply—

(A) in determining applications for initial li-

censes;

(B) to proceedings involving the validity or ap-

plication of rates, facilities, or practices of public util-

ities or carriers; or

the body comprising the agency.

*~**

5 U.S.C. § 556:

Hearings; presiding employees; powers and du-

ties; burden of proof; evidence; record as basis

of decision.

(a) This section applies, according to the provisions

thereof, to hearings required by section 553 or 554 of

this title to be conducted in accordance with this sec-

tion.

(b) There shall preside at the taking of evidence—

(1) the agency;

(2) one or more members of the body which com-

prises the agency; or

(3) one or more administrative law judges ap-

pointed under section 3105 of this title.

This subchapter does not supersede the conduct of

specified classes of proceedings, in whole or in part,

by or before boards or other employees specially pro-

vided for by or designated under statute. The func-

tions of presiding employees and of employees partic-

ipating in decisions in accordance with section 557 of

this title shall be conducted in an impartial manner.

A presiding or participating employee may at any

time disqualify himself. On the filing in good faith of

a timely and sufficient affidavit of personal bias or

other disqualification of a presiding or participating

employee, the agency shall determine the matter as a

part of the record and decision in the case.

its powers, employees presiding at hearings may—

(1) administer oaths and affirmations;

(2) issue subpenas authorized by law;

(3) rule on offers of proof and receive relevant evi-

dence;

(4) take depositions or have depositions taken

when the ends of justice would be served;

(5) regulate the course of the hearing;

(6) hold conferences for the settlemen. or simplifi-

cation of the issues by consent of the parties or by the

use of alternative means of dispute resolution as pro-

vided in subchapter IV of this chapter;

(7) inform the parties as to the availability of one

or more alternative means of dispute resolution, and

encourage use of such methods;

(8) require the attendance at any conference held

pursuant to paragraph (6) of at least one representa-

tive of each party who has authority to negotiate con-

cerning resolution of issues in controversy;

(9) dispose of procedural requests or similar mat-

ters;

(10) make or recommend decisions in accordance

with section 557 of this title; and

(11) take other action authorized by agency rule

consistent with this subchapter.

*~**

5 U.S.C. § 557:

Initial decisions; conclusiveness; review by

agency; submissions by parties; contents of de-

cisions; record.

(a) This section applies, according to the provisions

thereof, when a hearing is required to be conducted in

accordance with section 556 of this title.

(b) When the agency did not preside at the reception

of the evidence, the presiding employee or, in cases

not subject to section 554(d) of this title, an employee

qualified to preside at hearings pursuant to section

556 of this title, shall initially decide the case unless

the agency requires, either in specific cases or by gen-

eral rule, the entire record to be certified to it for de-

cision. When the presiding employee makes an initial

decision, that decision then becomes the decision of

the agency without further proceedings unless there

is an appeal to, or review on motion of, the agency

within time provided by rule. On appeal from or re-

view of the initial decision, the agency has all the pow-

ers which it would have in making the initial decision

except as it may limit the issues on notice or by rule.

When the agency makes the decision without having

presided at the reception of the evidence, the presid-

ing employee or an employee qualified to preside at

hearings pursuant to section 556 of this title shall

first recommend a decision, except that in rule mak-

ing or determining applications for initial licenses—

(1) instead thereof the agency may issue a tenta-

tive decision or one of its responsible employees may

recommend a decision; or

(2) this procedure may be omitted in a case in

which the agency finds on the record that due and

timely execution of its functions imperatively and un-

avoidably so requires.

sion, or a decision on agency review of the decision of

subordinate employees, the parties are entitled to a

reasonable opportunity to submit for the considera-

tion of the employees participating in the decisions—

(1) proposed findings and conclusions; or

(2) exceptions to the decisions or recommended

decisions of subordinate employees or to tentative

agency decisions; and

(3) supporting reasons for the exceptions or pro-

posed findings or conclusions.

The record shall show the ruling on each finding, con-

clusion, or exception presented. All decisions, includ-

ing initial, recommended, and tentative decisions, are

a part of the record and shall include a statement of—

(A) findings and conclusions, and the reasons or

basis therefor, on all the material issues of fact, law,

or discretion presented on the record; and

(B) the appropriate rule, order, sanction, relief,

or denial thereof.

x***

5 U.S.C. § 2104:

Officer.

(a) For the purpose of this title, “officer”, except as

otherwise provided by this section or when specifi-

cally modified, means a justice or judge of the United

States and an individual who is—

(1) required by law to be appointed in the civil ser-

vice by one of the following acting in an official capac-

ity—

(A) the President;

(B) a court of the United States;

(D) the Secretary of a military department;

(2) engaged in the performance of a Federal func-

tion under authority of law or an Executive act; and

(3) subject to the supervision of an authority named

by paragraph (1) of this section, or the Judicial Con-

ference of the United States, while engaged in the per-

formance of the duties of his office.

(b) Except as otherwise provided by law, an officer of

the United States Postal Service or of the Postal Reg-

ulatory Commission is deemed not an officer for pur-

poses of this title.

5 U.S.C. § 2105:

Employee.

(a) For the purpose of this title, “employee”, except as

otherwise provided by this section or when specifi-

cally modified, means an officer and an individual

who is—

(1) appointed in the civil service by one of the fol-

lowing acting in an official capacity—

(A) the President;

(B) a Member or Members of Congress, or the

Congress;

(D) an individual who is an employee under

this section;

(E) the head of a Government controlled corpo-

ration; or

(F) an adjutant general designated by the Sec-

retary concerned under section 709(c) of title 32;

(2) engaged in the performance of a Federal func-

tion under authority of law or an Executive act; and

(3) subject to the supervision of an individual

named by paragraph (1) of this subsection while en-

gaged in the performance of the duties of his position.

*~**

5 U.S.C. § 3105:

Appointment of administrative law judges.

Each agency shall appoint as many administrative

law judges as are necessary for proceedings required

to be conducted in accordance with sections 556 and

557 of this title. Administrative law judges shall be

assigned to cases in rotation so far as practicable, and

may not perform duties inconsistent with their duties

and responsibilities as administrative law judges.

5 U.S.C. § 5372:

Administrative law judges.

(a) For the purposes of this section, the term “admin-

istrative law judge” means an administrative law

judge appointed under section 3105.

(b)(1)(A) There shall be 3 levels of basic pay for ad-

ministrative law judges (designated as AL—1, 2, and

3, respectively), and each such judge shall be paid at

1 of those levels, in accordance with the provisions of

this section.

(B) Within level AL—3, there shall be 6 rates of

basic pay, designated as AL—3, rates A through F, re-

spectively. Level AL—2 and level AL—1 shall each have

1 rate of basic pay.

not be less than 65 percent of the rate of basic pay for

level IV of the Executive Schedule, and the rate of

basic pay for AL—1 may not exceed the rate for level

IV of the Executive Schedule.

(2) The Office of Personnel Management shall de-

termine, in accordance with procedures which the Of-

fice shall by regulation prescribe, the level in which

each administrative-law-judge position shall be

placed and the qualifications to be required for ap-

pointment to each level.

(3) (A) Upon appointment to a position in AL-3, an

administrative law judge shall be paid at rate A of

AL-3, and shall be advanced successively to rates B,

C, and D of that level at the beginning of the next pay

period following completion of 52 weeks of service in

the next lower rate, and to rates E and F of that level

10a

at the beginning of the next pay period following com-

pletion of 104 weeks of service in the next lower rate.

(B) The Office of Personnel Management may

provide for appointment of an administrative law

judge in AL-—3 at an advanced rate under such circum-

stances as the Office may determine appropriate.

(4) Subject to paragraph (1), effective at the begin-

ning of the first applicable pay period commencing on

or after the first day of the month in which an adjust-

ment takes effect under section 5303 in the rates of

basic pay under the General Schedule, each rate of

basic pay for administrative law judges shall be ad-

justed by an amount determined by the President to

be appropriate.

scribe regulations necessary to administer this sec-

tion.

5 U.S.C. § 7521:

Actions against administrative law judges.

(a) An action may be taken against an administrative

law judge appointed under section 3105 of this title by

the agency in which the administrative law judge is

employed only for good cause established and deter-

mined by the Merit Systems Protection Board on the

record after opportunity for hearing before the Board.

(b) The actions covered by this section are—

(1) a removal;

(2) a suspension;

(3) a reduction in grade;

lla

(4) a reduction in pay; and

(5) a furlough of 30 days or less;

but do not include—

(A) a suspension or removal under section 7532 of

this title;

(B) a reduction-in-force action under section 3502

of this title; or

title.

15 U.S.C. § 78d-1:

Delegation of functions by Commission.

(a) Authorization; functions delegable; eligible per-

sons; application of other laws.

In addition to its existing authority, the Securities

and Exchange Commission shall have the authority

to delegate, by published order or rule, any of its func-

tions to a division of the Commission, an individual

Commissioner, an administrative law judge, or an

employee or employee board, including functions with

respect to hearing, determining, ordering, certifying,

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

ness, or matter. Nothing in this section shall be

deemed to supersede the provisions of section 556(b)

of Title 5, or to authorize the delegation of the func-

tion of rulemaking as defined in subchapter II of chap-

ter 5 of Title 5, with reference to general rules as dis-

tinguished from rules of particular applicability, or of

the making of any rule pursuant to section 78s(c) of

this title.

12a

(b) Right of review; procedure.

With respect to the delegation of any of its functions,

as provided in subsection (a) of this section, the Com-

mission shall retain a discretionary right to review

the action of any such division of the Commission, in-

dividual Commissioner, administrative law judge,

employee, or employee board, upon its own initiative

or upon petition of a party to or intervenor in such ac-

tion, within such time and in such manner as the

Commission by rule shall prescribe. The vote of one

member of the Commission shall be sufficient to bring

any such action before the Commission for review. A

person or party shall be entitled to review by the Com-

mission if he or it is adversely affected by action at a

delegated level which (1) denies any request for action

pursuant to section 77h(a) or section 77h(c) of this ti-

tle or the first sentence of section 78/(d) of this title;

(2) suspends trading in a security pursuant to section

781(k) of this title; or (3) is pursuant to any provision

of this chapter in a case of adjudication, as defined in

section 551 of Title 5, not required by this chapter to

be determined on the record after notice and oppor-

tunity for hearing (except to the extent there is in-

volved a matter described in section 554(a)(1) through

(6) of such Title 5).

If the right to exercise such review is declined, or if no

such review is sought within the time stated in the

rules promulgated by the Commission, then the ac-

tion of any such division of the Commission, individ-

ual Commissioner, administrative law judge, em-

ployee, or employee board, shall, for all purposes, in-

cluding appeal or review thereof, be deemed the ac-

tion of the Commission.

l3a

15 U.S.C. § 78u:

Investigations and actions.

***

mission, refusal to obey subpena; criminal sanctions.

In case of contumacy by, or refusal to obey a subpena

issued to, any person, the Commission may invoke the

aid of any court of the United States within the juris-

diction of which such investigation or proceeding is

carried on, or where such person resides or carries on

business, in requiring the attendance and testimony

of witnesses and the production of books, papers, cor-

respondence, memoranda, and other records. And

such court may issue an order requiring such person

to appear before the Commission or member or officer

designated by the Commission, there to produce rec-

ords, if so ordered, or to give testimony touching the

matter under investigation or in question; and any

failure to obey such order of the court may be pun-

ished by such court as a contempt thereof. All process

in any such case may be served in the judicial district

whereof such person is an inhabitant or wherever he

may be found. Any person who shall, without just

cause, fail or refuse to attend and testify or to answer

any lawful inquiry or to produce books, papers, corre-

spondence, memoranda, and other records, if in his

power so to do, in obedience to the subpena of the

Commission, shall be guilty of a misdemeanor and,

upon conviction, shall be subject to a fine of not more

than $1,000 or to imprisonment for a term of not more

than one year, or both.

*“**

l4a

RELEVANT REGULATIONS

17 C.F.R. § 200.14:

Office of Administrative Law Judges.

(a) Under the Administrative Procedure Act (5 U.S.C.

551-559) and the federal securities laws, the Office of

Administrative Law Judges conducts hearings in pro-

ceedings instituted by the Commission. The Adminis-

trative Law Judges are responsible for the fair and

orderly conduct of the proceedings and have the au-

thority to:

(1) Administer oaths and affirmations;

(2) Issue subpoenas;

(3) Rule on offers of proof;

(4) Examine witnesses;

(5) Regulate the course of a hearing;

(6) Hold pre-hearing conferences;

(7) Rule upon motions; and

(8) Unless waived by the parties, prepare an initial

decision containing the conclusions as to the factual

and legal issues presented, and issue an appropriate

order.

(b) The Chief Administrative Law Judge performs the

duties of an Administrative Law Judge under the Ad-

ministrative Procedure Act and the duties delegated

to him or her by the Commission that are compatible

with those duties. The Chief Administrative Law

Judge is responsible for the orderly functioning of the

Office of Administrative Law Judges apart from the

conduct of administrative proceedings and acts as li-

aison between that Office and the Commission.

15a

17 C.F.R. § 201.110:

Presiding officer.

All proceedings shall be presided over by the Commis-

sion or, if the Commission so orders, by a hearing of-

ficer. When the Commission designates that the hear-

ing officer shall be an administrative law judge, the

Chief Administrative Law Judge shall select, pursu-

ant to 17 CFR 200.30-10, the administrative law

judge to preside.

17 C.F.R. § 201.111:

Hearing officer: Authority.

The hearing officer shall have the authority to do all

things necessary and appropriate to discharge his or

her duties. No provision of these Rules of Practice

shall be construed to limit the powers of the hearing

officer provided by the Administrative Procedure Act,

5 U.S.C. 556, 557. The powers of the hearing officer

include, but are not limited to, the following:

(a) Administering oaths and affirmations;

(b) Issuing subpoenas authorized by law and revok-

ing, quashing, or modifying any such subpoena;

admission of evidence and offers of proof;

(d) Regulating the course of a proceeding and the con-

duct of the parties and their counsel;

(e) Holding prehearing and other conferences as set

forth in § 201.221 and requiring the attendance at any

such conference of at least one representative of each

16a

party who has authority to negotiate concerning the

resolution of issues in controversy;

(f) Recusing himself or herself upon motion made by

a party or upon his or her own motion;

(g) Ordering, in his or her discretion, in a proceeding

involving more than one respondent, that the inter-

ested division indicate, on the record, at least one day

prior to the presentation of any evidence, each re-

spondent against whom that evidence will be offered;

(h) Subject to any limitations set forth elsewhere in

these Rules of Practice, considering and ruling upon

all procedural and other motions, including a motion

to correct a manifest error of fact in the initial deci-

sion. A motion to correct is properly filed under this

Rule only if the basis for the motion is a patent mis-

statement of fact in the initial decision. Any motion to

correct must be filed within ten days of the initial de-

cision. A brief in opposition may be filed within five

days of a motion to correct. The hearing officer shall

have 20 days from the date of filing of any brief in op-

position filed to rule on a motion to correct;

(i) Preparing an initial decision as provided in

§ 201.360;

(j) Upon notice to all parties, reopening any hearing

prior to the filing of an initial decision therein, or, if

no initial decision is to be filed, prior to the time fixed

for the filing of final briefs with the Commission; and

(k) Informing the parties as to the availability of one

or more alternative means of dispute resolution, and

encouraging the use of such methods.

17a

i7 C.F.R. § 201.155:

Default; motion to set aside default.

(a) A party to a proceeding may be deemed to be in

default and the Commission or the hearing officer

may determine the proceeding against that party

upon consideration of the record, including the order

instituting proceedings, the allegations of which may

be deemed to be true, if that party fails:

(1) To appear, in person or through a representa-

tive, at a hearing or conference of which that party

has been notified;

(2) To answer, to respond to a dispositive motion

within the time provided, or otherwise to defend the

proceeding; or

(3) To cure a deficient filing within the time speci-

fied by the commission or the hearing officer pursuant

to § 201.180(b).

(b) A motion to set aside a default shall be made

within a reasonable time, state the reasons for the

failure to appear or defend, and specify the nature of

the proposed defense in the proceeding. In order to

prevent injustice and on such conditions as may be

appropriate, the hearing officer, at any time prior to

the filing of the initial decision, or the Commission, at

any time, may for good cause shown set aside a de-

fault.

17 C.F.R. § 201.180:

Sanctions.

(a) Contemptuous conduct—

18a

(1) Subject to exclusion or suspension. Contemptu-

ous conduct by any person before the Commission or

a hearing officer during any proceeding, including at

or in connection with any conference, deposition or

hearing, shall be grounds for the Commission or the

hearing officer to:

(i) Exclude that person from such deposition,

hearing or conference, or any portion thereof; and/or

(ii) Summarily suspend that person from repre-

senting others in the proceeding in which such con-

duct occurred for the duration, or any portion, of the

proceeding.

(2) Review procedure. A person excluded from a

deposition, hearing or conference, or a counsel sum-

marily suspended from practice for the duration or

any portion of a proceeding, may seek review of the

exclusion or suspension by filing with the Commis-

sion, within three days of the exclusion or suspension

order, a motion to vacate the order. The Commission

shall consider such motion on an expedited basis as

provided in § 201.500.

(3) Adjournment. Upon motion by a party repre-

sented by counsel subject to an order of exclusion or

suspension, an adjournment shall be granted to allow

the retention of new counsel. In determining the

length of an adjournment, the Commission or hearing

officer shall consider, in addition to the factors set

forth in § 201.161, the availability of co-counsel for the

party or of other members of a suspended counsel's

firm.

(b) Deficient filings; leave to cure deficiencies. The

Commission or the hearing officer may reject, in

whole or in part, any filing that fails to comply with

19a

any requirements of these Rules of Practice or of any

order issued in the proceeding in which the filing was

made. Any such filings shall not be part of the record.

The Commission or the hearing officer may direct a

party to cure any deficiencies and to resubmit the fil-

ing within a fixed time period.

filing. The Commission or the hearing officer may en-

ter a default pursuant to § 201.155, dismiss one or

more claims, decide the particular claim(s) at issue

against that person, or prohibit the introduction of ev-

idence or exclude testimony concerning that claim if a

person fails:

(1) To make a filing required under these Rules of

Practice; or

(2) To cure a deficient filing within the time speci-

fied by the Commission or the hearing officer pursu-

ant to paragraph (b) of this section.

17 C.F.R. § 201.360:

Initial decision of hearing officer and timing of

hearing.

(a)(1) When required. Unless the Commission directs

otherwise, the hearing officer shall prepare an initial

decision in any proceeding in which the Commission

directs a hearing officer to preside at a hearing, pro-

vided, however, that an initial decision may be waived

by the parties with the consent of the hearing officer

pursuant to § 201.202.

(2) Time period for filing initial decision and for hear-

ing—

20a

(i) Initial decision. In the order instituting pro-

ceedings, the Commission will specify a time period in

which the hearing officer’s initial decision must be

filed with the Secretary. In the Commission’s discre-

tion, after consideration of the nature, complexity,

and urgency of the subject matter, and with due re-

gard for the public interest and the protection of in-

vestors, this time period wil! be either 30, 75, or 120

days. The time period will run from the occurrence of

the following events:

(A) The completion of post-hearing briefing in

a proceeding where the hearing has been completed;

(B) The completion of briefing on a § 201.250

motion in the event the hearing officer has deter-

mined that no hearing is necessary; or

that, pursuant to § 201.155, a party is deemed to be

in default and no hearing is necessary.

(ii) Hearing. Under the 120-day timeline, the

hearing officer shall issue an order scheduling the

hearing to begin approximately four months (but no

more than ten months) from the date of service of the

order instituting the proceeding. Under the 75-day

timeline, the hearing officer shall issue an order

scheduling the hearing to begin approximately 2%

months (but no more than six months) from the date

of service of the order instituting the proceeding. Un-

der the 30-day timeline, the hearing officer shall issue

an order scheduling the hearing to begin approxi-

mately one month (but no more than four months)

from the date of service of the order instituting the

proceeding. These deadlines confer no substantive

rights on respondents. If a stay is granted pursuant

2la

to § 201.161(c)(2)(i) or § 201.210(c)(3), the time period

specified in the order instituting proceedings in which

the hearing officer’s initial decision must be filed with

the Secretary, as well as any other time limits estab-

lished in orders issued by the hearing officer in the

proceeding, shall be automatically tolled during the

period while the stay is in effect.

(3) Certification of extension; motion for extension.

(i) In the event that the hearing officer presiding

over the proceeding determines that it will not be pos-

sible to file the initial decision within the specified pe-

riod of time, the hearing officer may certify to the

Commission in writing the need to extend the initial

decision deadline by up to 30 days for case manage-

ment purposes. The certification must be issued no

later than 30 days prior to the expiration of the time

specified for the issuance of an initial decision and be

served on the Commission and all parties in the pro-

ceeding. If the Commission has not issued an order to

the contrary within 14 days after receiving the certi-

fication, the extension set forth in the hearing officer’s

certification shall take effect.

(ii) Either in addition to a certification of exten-

sion, or instead of a certification of extension, the

Chief Administrative Law Judge may submit a mo-

tion to the Commission requesting an extension of the

time period for filing the initial decision. First, the

hearing officer presiding over the proceeding must

consult with the Chief Administrative Law Judge.

Following such consultation, the Chief Administra-

tive Law Judge may determine, in his or her discre-

tion, to submit a motion to the Commission request-

ing an extension of the time period for filing the initial

decision. This motion may request an extension of any

22a

length but must be filed no later than 15 days prior to

the expiration of the time specified in the certification

of extension, or if there is no certification of extension,

30 days prior to the expiration of the time specified in

the order instituting proceedings. The motion will be

served upon all parties in the proceeding, who may

file with the Commission statements in support of or

in opposition to the motion. If the Commission deter-

mines that additional time is necessary or appropri-

ate in the public interest, the Commission shall issue

an order extending the time period for filing the ini-

tial decision.

(iii) The provisions of this paragraph (a)(3) confer

no rights on respondents.

(b) Content. An initial decision shall include findings

and conclusions, and the reasons or basis therefor, as

to all the material issues of fact, law or discretion pre-

sented on the record and the appropriate order, sanc-

tion, relief, or denial thereof. The initial decision shall

also state the time period, not to exceed 21 days after

service of the decision, except for good cause shown,

within which a petition for review of the initial deci-

sion may be filed. The reasons for any extension of

time shall be stated in the initial decision. The initial

decision shall also include a statement that, as pro-

vided in paragraph (d) of this section:

(1) The Commission will enter an order of finality

as to each party unless a party or an aggrieved person

entitled to review timely files a petition for review of

the initial decision or a motion to correct a manifest

error of fact in the initial decision with the hearing

officer, or the Commission determines on its own ini-

tiative to review the initial decision; and

23a

(2) If a party or an aggrieved person entitled to

review timely files a petition for review or a motion to

correct a manifest error of fact in the initial decision

with the hearing officer, or if the Commission takes

action to review as to a party or an aggrieved person

entitled to review, the initial decision shall not be-

come final as to that party or person.

promptly serve the initial decision upon the parties

and shall promptly publish notice of the filing thereof

on the SEC Web site. Thereafter, the Secretary shall

publish the initial decision in the SEC Docket; pro-

vided, however, that in nonpublic proceedings no no-

tice shall be published unless the Commission other-

wise directs.

(d) Finality.

(1) If a party or an aggrieved person entitled to

review timely files a petition for review or a motion to

correct a manifest error of fact in the initial decision,

or if the Commission on its own initiative orders re-

view of a decision with respect to a party or a person

aggrieved who would be entitled to review, the initial

decision shall not become final as to that party or per-

son.

(2) If a party or aggrieved person entitled to re-

view fails to file timely a petition for review or a mo-

tion to correct a manifest error of fact in the initial

decision, and if the Commission does not order review

of a decision on its own initiative, the Commission will

issue an order that the decision has become final as to

that party. The decision becomes final upon issuance

of the order. The order of finality shall state the date

on which sanctions, if any, take effect. Notice of the

24a

order shall be published in the SEC Docket and on the

SEC Web site.

17 C.F.R. § 201.410:

Appeal of initial decisions by hearing officers.

(a) Petition for review; when available. In any proceed-

ing in which an initial decision is made by a hearing

officer, any party, and any other person who would

have been entitled to judicial review of the decision

entered therein if the Commission itself had made the

decision, may file a petition for review of the decision

with the Commission.

(b) Procedure. The petition for review of an initial de-

cision shall be filed with the Commission within such

time after service of the initial decision as prescribed

by the hearing officer pursuant to § 201.360(b) unless

a party has filed a motion to correct an initial decision

with the hearing officer. If such correction has been

sought, a party shall have 21 days from the date of the

hearing officer’s order resolving the motion to correct

to file a petition for review. The petition shall set forth

a statement of the issues presented for review under

§ 201.411(b). In the event a petition for review is filed,

any other party to the proceeding may file a cross-pe-

tition for review within the original time allowed for

seeking review or within ten days from the date that

the petition for review was filed, whichever is later.

mission, the petition for review shall not exceed three

pages in length. Incorporation of pleadings or filings

by reference into the petition is not permitted. Mo-

tions to file petitions in excess of those limitations are

disfavored.

25a

(d) Financial disclosure statement requirement. Any

person who files a petition for review of an initial de-

cision that asserts that person’s inability to pay either

disgorgement, interest or a penalty shall file with the

opening brief a sworn financial disclosure statement

containing the information specified in § 201.630(b).

(e) Prerequisite to judicial review. Pursuant to Section

704 of the Administrative Procedure Act, 5 U.S.C.

704, a petition to the Commission for review of an in-

itial decision is a prerequisite to the seeking of judi-

cial review of a final order entered pursuant to such

decision.

17 C.F.R. § 201.411:

Commission consideration of initial decisions

by hearing officers.

(a) Scope of review. The Commission may affirm, re-

verse, modify, set aside or remand for further proceed-

ings, in whole or in part, an initial decision by a hear-

ing officer and may make any findings or conclusions

that in its judgment are proper and on the basis of the

record.

(b) Standards for granting review pursuant to a peti-

tion for review—

(1) Mandatory review. After a petition for review

has been filed, the Commission shall review any ini-

tial decision that:

(i) Denies any request for action pursuant to

Section 8(a) or Section 8(c) of the Securities Act of

1933, 15 U.S.C. 77h(a), (c), or the first sentence of Sec-

tion 12(d) of the Exchange Act, 15 U.S.C. 781(d);

26a

(ii) Suspends trading in a security pursuant

to Section 12(k) of the Exchange Act, 15 U.S.C. 78/(k);

(iii) Is in a case of adjudication (as defined in

5 U.S.C. 551) not required to be determined on the

record after notice and opportunity for hearing (ex-

cept to the extent there is involved a matter described

in 5 U.S.C. 554(a) (1) through (6)).

(2) Discretionary review. The Commission may

decline to review any other decision. In determining

whether to grant review, the Commission shall con-

sider whether the petition for review makes a reason-

able showing that:

(i) A prejudicial error was committed in the

conduct of the proceeding; or

(ii) The decision embodies:

(A) A finding or conclusion of material

fact that is clearly erroneous; or

(B) A conclusion of law that is erroneous;

of law or policy that is important and that the Com-

mission should review.

tion for review. The Commission may, on its own ini-

tiative, order review of any initial decision, or any por-

tion of any initial decision, within 21 days after the

end of the period established for filing a petition for

review pursuant to § 201.410(b). A party who does not

intend to file a petition for review, and who desires

the Commission’s determination whether to order re-

view on its own initiative to be made in a shorter time,

27a

may make a motion for an expedited decision, accom-

panied by a written statement that the party waives

its right to file a petition for review. The vote of one

member of the Commission, conveyed to the Secre-

tary, shall be sufficient to bring a matter before the

Commission for review.

(d) Limitations on matters reviewed. Review by the

Commission of an initial decision shall be limited to

the issues specified in an opening brief that complies

with § 201.450(b), or the issues, if any, specified in the

briefing schedule order issued pursuant to

§ 201.450(a). Any exception to an initial decision not

supported in an opening brief that complies with

§ 201.450(b) may, at the discretion of the Commis-

sion, be deemed to have been waived by the petitioner.

On notice to all parties, however, the Commission

may, at any time prior to issuance of its decision, raise

and determine any other matters that it deems mate-

rial, with opportunity for oral or written argument

thereon by the parties.

(e) Summary affirmance.

(1) At any time within 21 days after the filing of

a petition for review pursuant to § 201.410(b), any

party may file a motion in accordance with § 201.154

asking that the Commission summarily affirm an in-

itial decision. Any party may file an opposition and

reply to such motion in accordance with § 201.154.

Pending determination of the motion for summary af-

firmance, the Commission, in its discretion, may de-

lay issuance of a briefing schedule order pursuant to

§ 201.450.

(2) Upon consideration of the motion and any op-

position or upon its own initiative, the Commission

28a

may summarily affirm an initial decision. The Com-

mission may grant summary affirmance if it finds

that no issue raised in the initial decision warrants

consideration by the Commiesion of further oral or

written argument. The Commission will decline to

grant summary affirmance upon a reasonable show-

ing that a prejudicial error was committed in the con-

duct of the proceeding or that the decision embodies

an exercise of discretion or decision of law or policy

that is important and that the Commission should re-

view.

(f) Failure to obtain a majority. In the event a majority

of participating Commissioners do not agree to a dis-

position on the merits, the initial decision shall be of

no effect, and an order will be issued in accordance

with this result.

17 C.F.R. § 201.452:

Additional evidence.

Upon its own motion or the motion of a party, the

Commission may allow the submission of additional

evidence. A party may file a motion for leave to ad-

duce additional evidence at any time prior to issuance

of a decision by the Commission. Such motion shall

show with particularity that such additional evidence

is material and that there were reasonable grounds

for failure to adduce such evidence previously. The

Commission may accept or hear additional evidence,

may remand the proceeding to a self-regulatory or-

ganization, or may remand or refer the proceeding to

a hearing officer for the taking of additional evidence,

as appropriate.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.