Opinion ID: 4111397
Heading Depth: 2
Heading Rank: 4

Heading: SEC ALJs

Text: The SEC conceded in its opinion that its ALJs are not appointed by the President, a court of law, or the head of a department. SEC Release No. 9972, 2015 WL 6575665, at . The sole question is whether SEC ALJs are inferior officers under the Appointments Clause. Under Freytag, we must consider the creation and duties of SEC ALJs to determine whether they are inferior officers. 501 U.S. at 881-82. The APA created the ALJ position. 5 U.S.C. § 556(b)(3); see also Mullen v. Bowen, 800 F.2d 535, 540 n.5 (6th Cir. 1986) (“[T]he ALJ’s position is not a creature of administrative law; rather, it is a direct creation of Congress under the [APA].”). Section 556 of the APA describes the duties of the “presiding employe[e]” at an administrative adjudication. 5 U.S.C. § 556. It states, “There shall preside at the taking of evidence . . . (1) the agency; (2) one or more members of the body which comprises the agency; or (3) one or more administrative law judges appointed under section 3105 of this title.” Id. § 556(b). Under 5 U.S.C. § 3105, “Each agency shall appoint as many administrative law judges as are necessary for proceedings required to be conducted in accordance with [5 U.S.C. §§ 556, 557].” Agencies hire ALJs through a merit-selection process administered by the Office of Personnel Management (“OPM”), which places ALJs within the civil service (i.e., the “competitive service”). 5 U.S.C. § 1302; 5 C.F.R. § 930.201. ALJ applicants must be licensed attorneys with at least seven years of - 14 - litigation experience. 5 C.F.R. § 930.204; Office of Pers. Mgmt., Qualification Standard for Administrative Law Judge Positions, https://perma.cc/2G7J-X5BW. OPM administers an exam and uses the results to rank applicants. 5 C.F.R. § 337.101. Agencies may select an ALJ from the top three ranked candidates.11 The SEC’s Chief ALJ hires from the top three candidates subject to “approval and processing by the [SEC’s] Office of Human Resources.” Notice of Filing at 2, Timbervest, LLC, File No. 3-15519, https://perma.cc/G8M2-36P3 (SEC Division of Enforcement filing in administrative enforcement action). Once hired, ALJs receive career appointments, 5 C.F.R. § 930.204(a), and are removable only for good cause, 5 U.S.C. § 7521. Their pay is detailed in 5 U.S.C. § 5372. The SEC currently employs five ALJs. Office of Pers. Mgmt., ALJs by Agency, https://perma.cc/6RYA-VQFV. The SEC has authority to delegate “any of its functions” except rulemaking to its ALJs. 15 U.S.C. § 78d-1(a). And SEC regulations task ALJs with “conduct[ing] hearings” and make them “responsible for the fair and orderly conduct of the proceedings.” 17 C.F.R. § 200.14. SEC ALJs “have the authority to do all things 11 See Vanessa K. Burrows, Cong. Res. Serv., Administrative Law Judges: An Overview at 2 (2010), https://perma.cc/T8YY-EE7F; Robin J. Arzt et al., Fed. Admin. Law Judge Found., Advancing the Judicial Independence and Efficiency of the Administrative Judiciary: A Report to the President-Elect of the United States, 29 J. Nat’l Ass’n Admin. L. Judiciary 93, 101 (2009). - 15 - necessary and appropriate to discharge [their] duties.” 17 C.F.R. § 201.111.12 The table below lists examples of those duties. Duty Provision(s) Administer oaths and affirmations 5 U.S.C. § 556(c)(1) 17 C.F.R. § 200.14(a)(1) 17 C.F.R. § 201.111(a) Consolidate “proceedings involving a common 17 C.F.R. § 201.201(a) question of law or fact” “Determin[e]” the “scope and form of evidence, 17 C.F.R. § 201.326 rebuttal evidence, if any, and cross-examination, if any” Enter default judgment 17 C.F.R. § 201.155 Examine witnesses 17 C.F.R. § 200.14(a)(4) Grant extensions of time or stays 17 C.F.R. § 201.161 Hold prehearing conferences 17 C.F.R. § 200.14(a)(6) Hold settlement conferences and require attendance of 5 U.S.C. § 556(c)(6) the parties 5 U.S.C. § 556(c)(8) 17 C.F.R. § 201.111(e) Inform the parties about alternative means of dispute 5 U.S.C. § 556(c)(7) resolution 17 C.F.R. § 201.111(k) Issue protective orders 17 C.F.R. § 201.322 Issue, revoke, quash, or modify subpoenas 5 U.S.C. § 556(c)(2) 17 C.F.R. § 200.14(a)(2) 17 C.F.R. § 201.111(b) 17 C.F.R. § 201.232(e) Order and regulate depositions 17 C.F.R. § 201.233 Order and regulate document production 17 C.F.R. § 201.230 Prepare an initial decision containing factual findings 5 U.S.C. § 556(c)(10) and legal conclusions, along with an appropriate order 17 C.F.R. § 200.14(a)(8) 17 C.F.R. § 200.30-9(a) 17 C.F.R. § 201.111(i) 17 C.F.R. § 201.360 12 Many of the SEC regulations refer to the duties of the “hearing officer.” Under 17 C.F.R. § 201.101(a)(5), a “hearing officer” includes an ALJ. This opinion applies only to SEC ALJs specifically and not to hearing officers generally. - 16 - Punish contemptuous conduct by excluding a person 17 C.F.R. § 201.180(a) from a deposition, hearing, or conference or by suspending a person from representing others in the proceeding Regulate the course of the hearing and the conduct of 5 U.S.C. § 556(c)(5) the parties and counsel 17 C.F.R. § 200.14(a)(5) 17 C.F.R. § 201.111(d) Reject deficient filings, order a party to cure 17 C.F.R. § 201.180(b), (c) deficiencies, and enter default judgment for failure to cure deficiencies Reopen any hearing prior to filing an initial decision 17 C.F.R. § 201.111(j) or prior to the fixed time for the parties to file final briefs with the SEC Rule on all motions, including dispositive and 5 U.S.C. § 556(c)(9) procedural motions 17 C.F.R. § 200.14(a)(7) 17 C.F.R. § 201.111(h) 17 C.F.R. § 201.220 17 C.F.R. § 201.250 Rule on offers of proof and receive relevant evidence 5 U.S.C. § 556(c)(3) 17 C.F.R. § 200.14(a)(3) 17 C.F.R. § 201.111(c) Set aside, make permanent, limit, or suspend 17 C.F.R. § 200.30-9(b) temporary sanctions the SEC issues 17 C.F.R. § 201.531 Take depositions or have depositions taken 5 U.S.C. § 556(c)(4)