MSPB Imposes Issue Exhaustion Requirement in Appointments Clause Case
This case law update was written by Conor D. Dirks, an attorney at the law firm of Shaw Bransford & Roth, where since 2013 he has represented federal officials and employees in all aspects of federal personnel employment law. In addition to his work on behalf of government employees, Mr. Dirks has successfully defended small and medium-sized government agencies against EEO complaints and MSPB appeals of agency disciplinary actions.
On March 31, 2022, the Merit Systems Protection Board (MSPB) broke from the U.S. Supreme Court’s recent decision in Carr v. Saul. The Board held that its regulations and the adversarial nature of its proceedings require Appointments Clause issues, constitutional issues that cannot be resolved by the Board’s administrative judges (AJs) and upon which the Board has historically declined to rule, to nonetheless be raised before the close of proceedings at the AJ level to be considered timely.
An Army Information Assurance Manager was terminated for alleged misconduct. The employee filed an appeal with the MSPB challenging her termination, and requested a hearing before a Board AJ. After the hearing, the AJ closed the record and issued an initial decision affirming the employee’s removal on June 13, 2018. On June 21, 2018, eight days later, the Supreme Court of the United States issued its opinion in Lucia v. Securities and Exchange Commission. The Lucia opinion, regarding the constitutionality of the SEC’s ALJ appointments under the Appointments Clause, had implications for and raised legal questions about the validity of other AJ and ALJ appointments across federal agencies, including AJs at the MSPB.
The employee timely filed a petition for review with the Board on July 15, 2018. In her petition, the employee raised for the first time a challenge to the appointment of the MSPB AJ who decided her case, and based her argument on the Supreme Court’s decision in Lucia. Her petition for review has been with the Board ever since, awaiting the restoration of the Board’s quorum (which was restored in March 2022).
The Board held that “[r]ecent Supreme Court precedent does not preclude the Board from applying timeliness and issue exhaustion requirements to Appointments Clause claims.” The Board conceded that in 2021, the Supreme Court held in Carr v. Saul, 141 S. Ct. 1352 (2021), that Social Security Administration (SSA) claimants were not required to exhaust (i.e. raise) Appointments Clause claims at the ALJ level to preserve those issues for judicial review by federal courts. But the Board rejected the application of Carr to Board appeals, for several reasons.
First, the Board found that their regulations at 5 C.F.R. § 1201.159(c) require parties to raise all issues at the AJ level, before the close of the record below, that they wish to preserve for Board review. The employee argued that Board regulations allow parties to raise new and material evidence and argument that was not raised below if it was previously unavailable despite the party’s due diligence, but the Board characterized her argument as the employee “discover[ing] a new legal argument when the Supreme Court decided Lucia,” rather than new and material evidence or argument that was previously unavailable. In other words, the Board held that there was nothing stopping the employee from making an Appointments Clause challenge based on the facts she was aware of prior to the Supreme Court’s decision in Lucia.
Second, the Board found that the “adversarial” nature of Board proceedings at the AJ level set it apart from the SSA ALJ proceedings considered by the Supreme Court in Carr. In Carr, the Court held that whether a court should impose a requirement of issue exhaustion “depends on the degree to which the analogy to normal adversarial litigation applies in a particular administrative proceeding.”
Unlike SSA proceedings, the Board wrote, MSPB regulations establish a traditional adversarial proceeding where:
Both parties may be represented by counsel;
Both parties must meet their respective burdens of proof in establishing their claims and defenses;
The initiation of a Board appeal includes a statement of reasons why the appellant believes the agency action at issue is wrong;
The Agency response to the appeal must include a statement of reasons for the action and all documents contained in the agency’s record of the action;
The parties conduct discovery, and the employee can raise additional claims or defenses up until the end of the prehearing conference; and,
The employee has a right to a hearing at which both parties present their cases.
Thus, according to the Board, Board proceedings fall into a category of proceedings discussed in Carr where “the rationale for requiring issue exhaustion is at its greatest” because of the adversarial nature of the proceedings.
The Board also analyzed the “futility” exception in Carr, an exception applied in the SSA claimants’ favor, allowing SSA claimants to raise Appointments Clause claims for the first time in federal court. The Court in Carr held that because “agency adjudications are generally ill suited to address structural constitutional challenges, which usually fall outside the adjudicators’ area of technical expertise,” and because “agency adjudicators are powerless to grant the relief requested,” it would be futile to require exhaustion of constitutional issues before SSA ALJs.
The Board held here that unlike the SSA ALJs, “consideration of constitutional claims, such as the Appointments Clause claim at issue here, is consistent with the Board’s role in adjudicating appeals.” The Board held that notwithstanding Carr, it was justified in imposing an issue exhaustion requirement on constitutional arguments even considering the Board’s repeated refusal to rule on the constitutionality of legislation. In reaching that holding, the Board relied on the Federal Circuit’s decision in Hansen v. Department of Homeland Security, 911 F.3d 1362, 1369 (Fed. Cir. 2018), which held that a party’s failure to raise a constitutional claim before the Board generally precludes the party from raising that claim for the first time “when seeking judicial review of the Board’s decision.”
The Board also held that it would not have been futile for the employee to raise the Appointments Clause issue because the AJ could have certified the question for an interlocutory appeal to the full Board while it awaited a quorum, thereby staying the AJ’s decision on her merits appeal until the constitutional question could be resolved.
For the above stated reasons, the MSPB denied the employee’s petition for review.
Read the full case: McClenning v. Army.
For over thirty years, Shaw Bransford & Roth P.C. has provided superior representation on a wide range of federal employment law issues, from representing federal employees nationwide in administrative investigations, disciplinary and performance actions, and Bivens lawsuits, to handling security clearance adjudications and employment discrimination cases.