Supreme Court Strikes Blow to Unaccountable Bureaucracy in Lucia v. SEC

This morning, the Supreme Court issued a decision in Lucia v. Securities and Exchange Commission, holding that the SEC's administrative law judges are "officers of the United States" subject to the Appointments Clause of the Constitution.  (We covered this topic and case in a breakout panel at our National Policy Conference in April.)  Justice Kagan wrote for the Court (citations omitted):

The sole question here is whether the Commission’s ALJs are “Officers of the United States” or simply employees of the Federal Government. The Appointments Clause prescribes the exclusive means of appointing “Officers.” Only the President, a court of law, or a head of department can do so.  And as all parties agree, none of those actors appointed Judge Elliot before he heard Lucia’s case; instead, SEC staff members gave him an ALJ slot. So if the Commission’s ALJs are constitutional officers, Lucia raises a valid Appointments Clause claim. The only way to defeat his position is to show that those ALJs are not officers at all, but instead non-officer employees—part of the broad swath of “lesser functionaries” in the Government’s workforce. For if that is true, the Appointments Clause cares not a whit about who named them. . . . 

For all the reasons we have given, and all those Freytag gave before, the Commission’s ALJs are “Officers of the United States,” subject to the Appointments Clause.

This decision will help SEC ALJs be more accountable, as they will need to be appointed by a politically accountable person instead of just agency staff.  Justices Thomas and Gorsuch concurred to analyze the original public meaning of "officer" (citations omitted):

The Appointments Clause provides the exclusive process for appointing “Officers of the United States.” While principal officers must be nominated by the President and confirmed by the Senate, Congress can authorize the appointment of “inferior Officers” by “the President alone,” “the Courts of Law,” or “the Heads of Departments.”  

This alternative process for appointing inferior officers strikes a balance between efficiency and accountability. Given the sheer number of inferior officers, it would be too burdensome to require each of them to run the gauntlet of Senate confirmation. But, by specifying only a limited number of actors who can appoint inferior officers without Senate confirmation, the Appointments Clause maintains clear lines of accountability—encouraging good appointments and giving the public someone to blame for bad ones. 

The Founders likely understood the term “Officers of the United States” to encompass all federal civil officials who perform an ongoing, statutory duty—no matter how important or significant the duty.  “Officers of the United States” was probably not a term of art that the Constitution used to signify some special type of official. . . . The Founders considered individuals to be officers even if they performed only ministerial statutory duties—including recordkeepers, clerks, and tidewaiters (individuals who watched goods land at a customhouse).  Early congressional practice reflected this understanding. With exceptions not relevant here, Congress required all federal officials with ongoing statutory duties to be appointed in compliance with the Appointments Clause. 

Applying the original meaning here, the administrative law judges of the Securities and Exchange Commission easily qualify as “Officers of the United States.” These judges exercise many of the agency’s statutory duties, including issuing initial decisions in adversarial proceedings. As explained, the importance or significance of these statutory duties is irrelevant. All that matters is that the judges are continuously responsible for performing them.

Also worth noting is Justice Gorsuch's concurrence in today's South Dakota v. Wayfair decision:

My agreement with the Court’s discussion of the history of our dormant commerce clause jurisprudence, however, should not be mistaken for agreement with all aspects of the doctrine. The Commerce Clause is found in Article I and authorizes Congress to regulate interstate commerce. Meanwhile our dormant commerce cases suggest Article III courts may invalidate state laws that offend no congressional statute. Whether and how much of this can be squared with the text of the Commerce Clause, justified by stare decisis, or defended as misbranded products of federalism or antidiscrimination imperatives flowing from Article IV’s Privileges and Immunities Clause are questions for another day.

Justice Gorsuch consistently compares court decisions and doctrines to the Constitution, with an eye to the appropriate role of the courts, to determine whether they are correct.  Justices Thomas and Gorsuch are constantly pointing the Supreme Court to the text of the Constitution, its original meaning, and the proper role of the courts in our system of federalism and the separation of powers.

Top 10 Republican Lawyer Posts for 2016

Here are the top 10 posts for 2016 from The Republican Lawyer blog.  These posts show how the left is trying to destroy the First Amendment and how out of control the Obama Administration was on matters of speech.  Furthermore, they prove once again how Donald Trump’s victory was also a victory for the Constitution. 

10. "Judge Sanctions DOJ Attorneys for Putting Politics Ahead of Truth, Ethics, and Justice."  We will be happily working to confirm Senator Sessions as Attorney General to fight the ethical abuses and politicization of the Department of Justice under President Obama. 

9. "Brennan Center: The Only Democrats in New York who Don't See Vote Fraud." Any honest Democrat in New York would admit to you that vote fraud is real and that voter ID is needed; just most know that partisan groups like the Brennan Center will attack them for saying it.

8. "Democrats Keeping the Zombie Vote Alive."  Colorado Secretary of State Wayne Williams stated:  "It is impossible to vote from the grave legally” but apparently Democrats do it anyway. 

7. "Former SEC Commissioners Reject Political-Disclosure Rulemaking."  Obama Administration efforts to force mandatory disclosure of corporate spending on political and other advocacy activities should be viewed as primarily political rather than economic and, as such, would not serve to help shareholders evaluate corporate performance or promote shareholder value

6. "FEC Democrats Vote to Censor Books, Documentary Films."  FEC Democrats voted to assert regulatory power over books and films.  That means they believe the FEC has the power to censor certain books and documentary films.

5. "Congress Shall Make No Law: Protecting the First Amendment from Attack."  Preventing attacks on the First Amendment can only be done through fighting back against speech suppressive activity.

4. "RNLA Explains What Open, Fair and Honest Elections Mean."  By “open,” we mean a process in which all sides can have “observers” and the process is determined by legislatures well in advance.  By “fair,” we mean election officials should be from both parties and they should administer the election process in an orderly, unbiased fashion.  By “honest,” we mean free from fraud.

3. "Reactions to Donald Trump's Potential Supreme Court Justice List." One of the most popular issues for Donald Trump was his list of potential Supreme Court nominees. 

2. "Leader McConnell Won the Fight on the Scalia Vacancy."  Thank you, Sen. McConnell, for your leadership on judicial nominations and fighting to protect the judiciary from judges who will legislate from the bench and not respect the rule of law and the role of the courts.

1. "A Great Justice, Ignored Because of his Race."  The left excludes Justice Clarence Thomas from the National Museum of African American History and Culture despite his remarkable and impactful 25 years on the court.  

Former SEC Commissioners Reject Political-Disclosure Rulemaking

The Federalist Society’s Jeff Dinwoodie recently hosted three former Securities and Exchange Commission commissioners to discuss past and future issues at the powerful financial agency. Troy Paredes, Annette Nazareth, and Paul Atkins graded the commission on various issues ranging from Dodd-Frank to esoteric oversight boards.  

While the commissioners disagreed on many issues they spoke unanimously on one major issue where securities law and election law overlap: political-spending disclosure. No one spoke in favor of pressuring the Commission into a rulemaking requiring disclosure of public-company political spending.

The issue has bedeviled the Commission for years. Shortly after the Supreme Court decided Citizens United v. FEC, the Senate considered a bill requiring this disclosure but it failed to garner requisite support. More recently Senators Charles Schumer, Elizabeth Warren, Robert Menendez, and Jeff Merkeley threatened to scuttle Commissioner nominees Lisa Fairfax and Hester Pierce because they refused to declare ex ante they would support a political-spending rulemaking.

Senator Schumer responded to this heresy with trademark vapidity: “If one feels that undisclosed special interest money cascading into our politics is one of the worst problems American faces, then this approach is very logical.” Apparently fighting ISIS, trillions in debt, and stagnant job growth take a backseat to learning whether corporation X supported its trade association. SEC chairwoman Mary Jo White disagrees with Schumer’s priority assessment and has thus far deflected attempts by politicos and agitprops to force her hand.

Paul Atkins has long opposed this potential rulemaking, laying out his rationale in a 2013 law review article, MATERIALITY: A BEDROCK PRINCIPLE PROTECTING LEGITIMATE SHAREHOLDER INTERESTS AGAINST DISGUISED POLITICAL AGENDAS. In it, he articulated three reasons why this disclosure is deleterious: (i.) materiality is lacking, (ii.) cost/benefit analysis is off balance, and (iii.) it is antithetical to the Commission's mission and a low priority compared to 2008 crisis-related issues.

Atkins revived his reasoning at the panel. The SEC’s mission is to maintain fair, orderly, and efficient markets, facilitate capital formation, and to protect investors by ensuring that market participants have accurate material information about SEC-registered securities. Whether corporations support 501(c)(4)s or (c)(6)s that advocate certain policies or support certain candidates is immaterial to that mission. In fact, the groups pushing companies to reveal their political spending do not represent average investors but entities that usually take positions adversarial to corporate objectives. Thus they have incentives to force business perspectives from the political marketplace. These include state and union pension funds (unions coincidentally aren’t affected). 

In fact, more than 75% of the corporate public policy spending proposals in 2012 were proposed by a coalition of special-interest investors coordinated by the Center for Political Accountability, Walden Asset Management, and the American Federation of State, County and Municipal Employees. These groups ‘name and shame’ resisting corporations to bring unwanted publicity so they retreat from important policy battles.

Paredes agreed that the Commission should carefully analyze the cost/benefit to disclosure requirements not directly related to the touchstone “materiality” requirement. So did Democrat Commissioner Annette Nazareth who praised Chairwoman White for not bowing to outside pressure and suggested the SEC was ill-suited for this responsibility with all the other issues facing the Commission.

In his paper discussing this issue, Atkins wrote, “Efforts to force mandatory disclosure of corporate spending on political and other advocacy activities should be viewed as primarily political rather than economic and, as such, would not serve to help shareholders evaluate corporate performance or promote shareholder value.” Commissioners nominated on both sides of the aisle realize the political nature of these disclosure efforts and deserve praise for saying so.

By Paul Jossey