Article II Complications Surrounding SEC-Employed Administrative Law Judges

Authors

Thomas C. Rossidis

Document Type

Note

Abstract

(Excerpt)

This Note argues, first, that SEC ALJs are inferior officers pursuant to Article II’s Appointments Clause, and second, that SEC ALJs’ multilevel tenure protection is constitutional. Because Supreme Court precedent determined that inferior officers are “established by Law,” hold statutory duties and compensation, exercise “significant authority,” and operate under the supervision of an officer appointed by the President with the consent of the Senate, SEC ALJs are inferior officers, rather than mere employees. Furthermore, since the Supreme Court also concluded that inferior officers are endowed with removal protection as it is “deem[ed] best for the public interest,” notwithstanding the narrow PCAOB ruling in Free Enterprise Fund, SEC ALJs’ dual-layer protection is not suspect of affecting the President’s ability to faithfully execute the laws of the United States.

Part I introduces the legislation underlying both the SEC’s development and the ALJ hiring process, including the ALJs’ duties and responsibilities within the SEC’s Office of Enforcement. Moreover, Part I details the framework of the Supreme Court and D.C. Circuit Court surrounding the Article II Appointments Clause issues. Part II begins with the development of district court cases that first engaged this issue following the enactment of Dodd-Frank. This Part also looks to independent agencies outside the SEC to see how those agencies and Congress responded to the constitutional challenges. Part III then determines that SEC ALJs are inferior officers and are subject to reappointment by SEC Commissioners. Next, this Part explores a solution to safeguard the anticipated attacks on past and pending ALJ decisions by adopting the de facto officer doctrine. Finally, this Part concludes that SEC ALJ dual-layer tenure protection is constitutionally within the separation of powers framework.