Carr v. Saul

Administrative proceedings must be adversarial in nature for a court to impose the requirement of issue exhaustion.

Petitioners unsuccessfully challenged adverse benefits determinations in the Social Security Administration’s (SSA’s) internal proceedings process before administrative law judges (ALJs).  The Supreme Court of the United States determined, in Lucia v. SEC, 585 U.S. ___ (2018), that the appointment of ALJs selected by lower-level agency staff—other than the heads of departments—violated the Appointments Clause of the U.S. Constitution.  After the conclusion of their administrative proceedings, Petitioners argued before Federal District Courts that their ALJs were unconstitutionally appointed.  A circuit split developed, in which the Eighth and Tenth Circuits adopted the Social Security Commissioner’s reasoning that issue exhaustion applied, meaning Petitioners forfeited their Appointment Clause arguments by failing to raise the issue during their administrative hearings.  On appeal, the Supreme Court reversed, holding that Petitioners did not forfeit their Appointment Clause challenges.  The Supreme Court reasoned that the SSA’s administrative proceeding is not sufficiently adversarial to warrant the application of issue exhaustion.  Sims v. Apfel, 530 U.S. 103, 110–113 (2000).  Further, the ALJs were “ill suited to address” constitutional challenges and the Court had previously recognized a “futility exception to exhaustion requirements.”  The Courts of Appeals erred when they applied an issue exhaustion requirement.  The judgments of the Eighth and Tenth Circuits were REVERSED and REMANDED.