Title

Circuit Court Split over the Constitutionality of SEC Administrative Law Judges Tees Up Issue for the Supreme Court
Client Memorandum

Created date

1/5/2017

The Tenth and D.C. Circuit Courts of Appeal have come to opposite conclusions in response to constitutional challenges to the Securities Exchange Commission’s (the “SEC’s”) appointment of Administrative Law Judges (“ALJs”). As detailed in our prior client alert, securities defendants across the country have contended that ALJs are inferior officers who were not appointed according to the Appointments Clause in Article II of the Constitution.

The issue initially appeared settled when the D.C. Circuit held in Lucia v. SEC, that ALJs were not officers subject to the requirements of the Appointments Clause. But, on December 27, 2016, the Tenth Circuit decided in Bandimere v. SEC that ALJs were indeed inferior officers and therefore were in violation of the Appointments Clause.

The Tenth Circuit’s ruling, if ultimately upheld, has implications for pending and prior SEC actions, and may lead to similar questions about other agencies’ administrative law judges. Given the circuit split, the constitutionality of the SEC’s ALJ appointment process may be headed to the Supreme Court.