Lucia v. SEC

Whether the appointment of administrative law judges within the Securities and Exchange Commission must comport with the Appointments Clause of the U.S. Constitution.

In an administrative proceeding, overseen by a SEC administrative law judge (ALJ), Petitioners were found guilty of violating provisions of the Investment Advisers Act and Securities and Exchange Commission (SEC) anti-fraud rules by providing misleading information on forecasted returns to potential investors. Petitioners then sought review of the decision by the SEC and argued that one of the ALJs held his office in violation of the Appointments Clause. The Commission affirmed the decision and stated that the Appointments Clause did not apply to SEC ALJs. On appeal, the U.S. Court of Appeals for the D.C. Circuit rejected Petitioners’ Appointment Clause challenge determining that SEC ALJs are employees and not officers of the United States because they cannot issue final unreviewable decisions. Petitioners ask the court to decide the circuit split between the D.C. and the Tenth Circuits and find that SEC ALJs qualify as officers of the United States. Petitioners assert that the authority to make final decisions is merely one way to invoke the Appointments Clause, but that it is not dispositive. Petitioners further argue that SEC ALJs are inferior officers and therefore their appointment must comport with the provisions of the Appointments Clause. Petitioners also argue that most ALJ decisions are made final by the SEC without any Commission review.