Supreme Court Hears Oral Argument in Two Important Appointments Clause Cases
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 1, 2021, the Supreme Court of the United States heard argument in United States v. Arthrex on the question of whether administrative patent judges of the U.S. Patent and Trademark Office are principal officers of the United States who therefore must be appointed by the President and confirmed by the Senate. Just two days later, on March 3, 2021, the Court heard argument in Carr v. Saul, a case about whether Social Security claimants who failed to raise an Appointments Clause challenge to the appointment of SSA administrative law judges at the administrative level waived the argument before the courts.
Both cases arise under the Appointments Clause of the U.S. Constitution, the part of Article II, Section 2, Clause 2 that empowers the President to nominate and, with the advice and consent of the United States Senate, confirm “Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States.” The Appointments Clause differentiates between “Officers of the United States” that must be nominated by the President and confirmed by the Senate, and “inferior Officers” whose appointment authority Congress can place with the President alone, the courts, or the head of a federal agency.
Which positions inside the Executive Branch are “principal” or “inferior” officers under the Appointments Clause, and not mere employees, has been subject to a wave of litigation since the Supreme Court’s decision in Lucia v. Securities and Exchange Commission. The Supreme Court held in Lucia that administrative law judges of the SEC, who had been appointed under traditional Title 5 procedures, were actually “inferior Officers of the United States” under the Appointments Clause. Therefore, their prior Title 5 appointments therefore did not comply with the Appointments Clause because they were appointed by SEC staff members, rather than by the President or the head of the agency.
Following the Lucia decision, other administrative judges across the Executive Branch came under scrutiny, including the Patent Trial and Appeal Board administrative patent judges (APJs) at issue in Arthrex and the SSA administrative law judges at issue in Carr.
APJs are appointed by the Secretary of Commerce “in consultation with” the Director of the United States Patent and Trademark Office. They can only be removed for cause under Title 5 procedures that apply to almost all federal employees. However, they exercise significant power, most obviously their power to issue binding rulings on patent appeals. The question, then, is whether the APJs have the power and independence of a “principal” Officer of the United States, rather than a mere inferior Officer of the United States (having been appointed by the Secretary).
At oral argument in Arthrex, the government argued against finding that APJs are principal Officers, which would have required confirmation by the Senate. Specifically, the government argued that because the USPTO director promulgates rules of procedure and can remove APJs from their judicial assignments, his control and supervision of APJs made this case similar to Edmond v. United States, where the Court upheld the appointment procedure of military court judges because they were “inferior officers” appointed by the head of the agency.
Justice Gorsuch, however, compared the case to the Court’s 2020 decision in Seila Law v. Consumer Financial Protection Bureau, specifically the holding that executive branch officials must be accountable to the Chief Executive, i.e. “subject to the ongoing supervision and control of the elected President.” Gorsuch commented to the government’s attorney that “there’s no chain of dependence running to the president with respect to the supervision of a particular decision.”
The government responded that even if APJs were “principal” officers, and subject to nomination by the President and confirmation by the Senate, the President would not exercise any greater power of control over their decisions after they were confirmed. In other words, the APJs would be free to issue decisions inconsistent with the political goals or policy goals of the administration.
After Justice Kavanaugh observed that no Presidentially-appointed, Senate-confirmed official reviews decisions of APJs, the government responded that if the Justices thought that it was necessary for a Senate-confirmed official to have “plenary authority to revisit the decisions of the underlings,” the appropriate remedy would be to sever the provision in the statute that says only the PTAB can grant rehearings, thereby opening up the possibility that the Director of the USPTO could grant a rehearing if he took issue with the decision of an APJ.
For its part, Arthrex argued that APJs were principal officers under the Constitution, and that “[a]llowing unaccountable officers to decide those cases finally, stripping any accountable principal of authority to overturn them, defeats that structural protection.” Arthrex proposed granting review authority to the Director of the USPTO, who is nominated by the President and subject to Senate confirmation. Arthrex argued that the Director need not review each decision, but that review must be available. Arthrex argued that even in cases where the Director declined review, the Director would still remain “accountable” for decisions he chose not to review, versus the current posture where the Director had no legal authority to review.
In contrast to Arthrex, both parties in Carr v. Saul agreed that the Court’s Lucia decision applied to SSA ALJs, and that the ALJs were “inferior officers” requiring appointment by the President or Head of the Department. Indeed, in July 2018, SSA’s Acting Commissioner (the Head of the Department within the meaning of the Appointments Clause) reappointed each of their ALJs, thereby ensuring that hearings going forward would comply with the Appointments Clause.
With that issue settled, the question remained whether claimants seeking disability benefits under the Social Security Act who had their hearings prior to the reappointment must have their exhausted Appointments Clause challenges before the ALJ as a prerequisite to obtaining judicial review on the issue.
Justice Alito questioned whether the claimants were harmed by the unconstitutional appointments of ALJs, given that SSA had already corrected the problem by reappointing the very same ALJs via the procedure endorsed by the Court in Lucia. He asked: “So is this ALJ now smarter than he or she was at the time of your hearing? More inclined to be favorable?” Justice Alito also stated that he believed granting new hearings for each claimant “seems like an enormous waste of time and money. How…can you account to the taxpayers and other claimants for this?”
The claimants argued that unlike SSA, other agencies had imposed “issue exhaustion” rules by regulation, such as the Department of Veterans Affairs and the Railroad Retirement Board. Justice Thomas questioned the government extensively on this issue, asking what the exhaustion requirement was based on if not by statute or regulation. Justice Kagan noted that SSA had previously committed to review the matter of issue exhaustion, but had yet to promulgate a regulation.
Justice Barrett distinguished between SSA claims and the “adversarial system” where issue exhaustion requirements are common because parties are incentivized to raise all issues that would benefit them. She asked “[w]hat incentive does the claimant have to say to the ALJ, ‘You know, you actually can’t give me benefits and you can’t adjudicate this proceeding because your appointment should have been made under the Appointments Clause’?”
Justice Breyer observed that courts rarely require exhaustion of constitutional claims, and that besides, it would have been futile for the claimants to raise the constitutional issue before an ALJ with no authority to resolve it.
Both Arthrex and Carr hold special significance to the federal community because of the current structure of many Executive Branch agencies employing career administrative judges or administrative law judges. As the Lucia holding drives its way through the Executive Branch and the law is clarified with subsequent cases like Arthrex, the Appointments Clause issue is likely to continue to impact the structure of these agencies and the independence of administrative adjudications.
Both cases now await decision by the Court, which will issue in the coming months.
You can listen to oral arguments in United States v. Arthrex and Carr v. Saul here.
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.