Supreme Court considers power of agency judges and who should appoint them

WASHINGTON - In 2012, the Securities and Exchange Commission said the "Buckets of Money" strategy that Raymond Lucia pitched at investment seminars violated anti-fraud statutes.

An SEC administration law judge held a hearing and fined Lucia $300,000 and barred him from working as an investment adviser, a decision the commission affirmed.

Lucia's case was at the Supreme Court on Monday, not challenging the decision of the administrative law judge - although Lucia does - but arguing that the judge was improperly appointed to his job, something that could have a much larger impact on the federal government.

The court is considering whether administrative law judges, like the one in Lucia's case, are simply employees of the agency, or as Lucia contends, should be considered officers of the United States, as defined by the Constitution. That would mean appointment by either the president, the courts, or heads of departments.

There are administrative law judges throughout the federal government, and any number of decisions could become suspect if the court agrees with Lucia. An added twist in the case is that the Trump administration has switched sides and supports Lucia.

An hour of arguments did not point clearly to an outcome, although it appeared that some justices were looking for ways to limit the impact of whatever they decided.

Chief Justice John Roberts indicated that the agency judges have significant power, and that there is a lack of clarity about to whom they are responsible.

"The commission can say: 'Don't blame us. We didn't do it.' The president can say: 'Don't blame me. I didn't appoint them,' " Roberts said. "Instead, it's something in the administrative bureaucracy which operates as insulation from the political accountability that the drafters of the Constitution intended."

Justices Stephen Breyer and Elena Kagan, on the other hand, worried about the independence of the agency judges if political players were more involved in their hiring.

"We typically think we want the decision-maker to be insulated from political pressures," Kagan said to Mark Perry, Lucia's lawyer. "So wouldn't putting those decision-makers even closer to the political body only exacerbate the problem that you're complaining of?"

But Perry said the judges have the kind of "sovereign powers" that would define them as officers. Such decision-makers, he said, are not employees who can be hired by the chief administrative law judge, as the judge in Lucia's case was.

The dispute could have an impact on more than 100 cases at the SEC, and it could affect judges in other departments such as the Consumer Financial Protection Bureau. Perry told Justice Anthony Kennedy that about 150 agency judges could be affected, but it would not have an impact on such employees in the Social Security Administration.

To head off challenges of its decisions, the SEC voted to appoint its five administrative law judges, which Deputy Solicitor General Jeffrey Wall said satisfies the constitutional requirement and eliminates the problem (Lucia disagrees).

Because the Trump administration generally agreed with Lucia's position on the judges, the court appointed New York lawyer Anton Metlitsky to argue for the SEC. Metlitsky said the administrative law judges do not qualify as officers because their authority is limited. Every decision they make can be reviewed by the commission, he said.

The case is Lucia v. SEC.