Lucia v. SEC (17-130)

argument 17-130

Lucia v. SEC

Supreme Court of the United States 59 min 6 speakers 6 chapters transcribed 4 days ago official recording ↗

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What is the constitutional argument about SEC ALJs being inferior officers versus principal officers?

John G. Roberts 0:00

We'll hear argument first this morning, case seventeen one hundred thirty, Lucia

Johnny C. 0:04

versus the Securities and Exchange Commission. Mr Perry. Thank you, Mr Chief Justice, and may it please the court. SEC ALJs have been invested with the sovereign power to preside over formal adjudications. They are officers under all of this court's precedence, particularly Freytag and Edmund, in any textually and historically accurate construction of the appointments clause.

Unknown 0:33

That day. All right. And More than inferior officers.

Johnny C. 0:38

Justice Ginsburg, we are contesting they are inferior officers, not principal officers, correct? In part because their work is supervised by principal officers, the commissioners of the SEC, and that relationship of directory and supervision is what marks them as inferior, but not as employees. And it's important to note that in exercising those duties uh under the direction of the SEC. They have independence in their decisional functions. their hearing functions and their evidentiary functions. These are all sovereign powers that we give to judges, that governments give to judges. The puissance de jugère, as Montesquieu put it, and and that is those are powers that ordinary citizens, private citizens, simply do not have.

Johnny C. 1:18

absent agreement of the parties and that governments when they delegate them must do two officers, all of those powers together makes one an officer, as this Court quite firmly and clearly recognised in Frytag.

John G. Roberts 1:31

Well of course the decisions of uh uh the ALJ's in every case uh aren't operative until the Commission issues an order of finality, right?

Johnny C. 1:42

Well, Your Honor, the Commission by regulation does issue a finality order. The by statute the decisions of the ALJs are deemed the decision of the Commission if not reviewed, and the review period by regulation expires after 42 days. And Congress importantly gave the the ALJs the power to make final decisions. That's in the APA, Section 557B. And and the right of review in the statute in the Exchange Act is discretionary. So that when Congress says here is an office of the ALJ that can make a final decision on behalf of the agency, unless the agency chooses to review it, that officer must be invested with the power to enter a final decision, whether or not the agency actually allows that officer to exercise it.

Johnny C. 2:24

There's two levels of authority here, and the one that Congress gave, because tomorrow the Commission could adopt a new regulation that says we're not going to going to review any initial decisions in investment advisor cases under our discretion. Every such decision would become final. And we know, as a matter of fact, that ninety percent of ALJ decisions do become final with no review by the Commission. So this these are the I am sorry.

Elena Kagan 2:50

Um every petition for review that has been filed has been accepted for review. The only cases that ninety percent encompasses de fault petitions. If people don't show up, And nobody can test what's going on. Why don't we take the SEC at its word? that it's looking at the default judgment on its face don't see anything wrong with it. Nobody's pointing out that there's anything wrong with it. And they're the ones who submit or adopt it as final. Doesn't become uh final except by the actions of the SEC officers.

Johnny C. 3:29

Two answers, Justice Sodomayar. First, those defaults itself recognize an exercise of sovereign power. The ALJ issues a notice, a hearing notice, that says appear at this time in this place. Or you will suffer the consequences. And if the presentation

Elena Kagan 3:44

Well most of the time, um I don't know of many judges uh well judges sign order to show causes. But it's usually prepared by a function functionary in the court. Um Why is merely issuing the order to show cause a sovereign enough power to designate someone a a officer rather than an employee. When it's being done on behalf of not in the name of, on behalf of the SEC.

Johnny C. 4:14

Well first, Your Honor, the the hearing the note the hearing notice, which is different than order show cause, is issued in the name of the ALJ and goes out under the name of the ALJ, if that matters, as does the subpoena, as does all the document requirements, as does everything related to the hearing.