Tenth Circuit Denies SEC’s Request to Reconsider Ruling on Constitutionality of ALJ Program

Tenth Circuit Denies SEC’s Request to Reconsider Ruling on Constitutionality of ALJ Program

Tenth Circuit Denies SEC’s Request to Reconsider Ruling on Constitutionality of ALJ Program

On Wednesday, the U.S. Court of Appeals for the Tenth Circuit denied the SEC’s request for a rehearing en banc in the case of Bandimere v SEC, thus confirming its earlier ruling that the SEC’s use of “non-appointed” Administrative Law Judges (“ALJs”) is unconstitutional. The SEC’s last avenue of appeal is by leave to the Supreme Court. Whether or not the Supreme Court will take the case may hinge on the outcome of a case pending before the U.S. Court of Appeals for the D.C. Circuit which involves the same constitutional issue. The D.C. Circuit originally ruled in the SEC’s favor, but will be rehearing the case later this year. If the D.C. Circuit rules in the SEC’s favor again, there will be a Circuit split, which increases the likelihood that the Supreme Court will hear the appeal.

The specific issue in both appeals is whether the SEC’s ALJs are “Officers of the United States” within the meaning of the Appointment Clause, which requires that such positions be filled by appointment of the President, a court of law, or the head of a department. There is no dispute that the SEC’s ALJs were not appointed in conformity with the Appointment Clause, but the SEC argues that appointments are unnecessary because its ALJs are merely employees of the federal government. The SEC relies heavily on the fact that its ALJs do not have final decision-making authority.

The Tenth Circuit’s decision to deny rehearing in Bandimere was not unanimous. Two judges dissented, including  Judge Lucero who stated that the court’s earlier decision “presents a threat of disruption throughout [the] government” which could affect other agencies that employ ALJ programs.