Supreme Court Rules Against Issue Exhaustion

     From the syllabus of the just announced Supreme Court opinion in Carr v. Saul:

Held: The Courts of Appeals erred in imposing an issue-exhaustion requirement on petitioners’ Appointments Clause claims. Pp. 4–12.

(a) Administrative review schemes commonly require parties to give the agency an opportunity to address an issue before seeking judicial review of that question. Such administrative issue-exhaustion requirements are typically creatures of statute or regulation. But where as here, no statute or regulation imposes an issue-exhaustion requirement, courts decide whether to require issue exhaustion based on “an analogy to the rule that appellate courts will not consider arguments not raised before trial courts.” Sims v. Apfel, 530 U. S. 103, 109. “[T]he desirability of a court imposing a requirement of issue exhaustion depends on the degree to which the analogy to normal adversarial litigation applies in a particular administrative proceeding.” Ibid. In Sims, which declined to apply an issue-exhaustion requirement to SSA Appeals Council proceedings, the Court explained that “the rationale for requiring issue exhaustion is at its greatest” when “the parties are expected to develop the issues in an adversarial administrative proceeding,” but is “much weaker” when “an administrative proceeding is not adversarial.” Id., at 110. Although Sims dealt with administrative review before the SSA Appeals Council, much of the opinion’s rationale applies equally to SSA ALJ proceedings. Pp. 4–8.

(b) Even assuming that ALJ proceedings are comparatively more adversarial than Appeals Council proceedings, the question remains whether the ALJ proceedings here were adversarial enough to support the “analogy to judicial proceedings” that undergirds judicially created issue-exhaustion requirements. Sims, 530 U. S., at 112 (plurality opinion). Pp. 8–12. 

(1) In the specific context of petitioners’ Appointments Clause challenges, two considerations tip the scales decidedly against imposing an issue-exhaustion requirement. First, agency adjudications are generally ill suited to address structural constitutional challenges,which usually fall outside the adjudicators’ areas of technical expertise. See, e.g., Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477, 491. Second, this Court has consistently recognized a futility exception to exhaustion requirements. See, e.g., Bethesda Hospital Assn. v. Bowen, 485 U. S. 399, 405–406. Both considerations apply fully here: Petitioners assert purely constitutional claims about which SSA ALJs have no special expertise and for which they can provide no relief. United States v. L. A. Tucker Truck Lines, Inc., 344 U. S. 33, distinguished. Pp. 9–11.

(2) The Commissioner’s contention that petitioners cannot obtain new hearings because they did not “timely challenge” their adjudicators’ appointments presumes what the Commissioner has failed to prove: that petitioners’ challenges are, in fact, untimely. The Commissioner’s reliance on Ryder v. United States, 515 U. S. 177, and Lucia, 585 U. S. ___, is misplaced, as neither decision had occasion to opine on what would constitute a “timely” objection in an administrative re-view scheme like the SSA’s. Pp. 11–12.

Supreme Court To Hear Social Security Cases Today

     The Supreme Court is scheduled to hear oral arguments at 10:00 today in two cases that present the issue of when a Social Security claimant must raise an issue. Must it have been raised before the agency in order to raise it before the federal courts? This is in the context of Lucia challenges to the authority of Administrative Law Judges to hear cases but the Court's ruling will certainly affect Seila Law litigation. 

     You can listen to live audio of the oral arguments.

SCOTUS Schedules Oral Arguments In Appointments Clause Cases

      The Supreme Court has scheduled oral arguments for Carr v. Saul and Davis v. Saul for March 3. The issue presented by these cases is "Whether a claimant seeking disability benefits under the Social Security Act forfeits an appointments-clause challenge to the appointment of an administrative law judge by failing to present that challenge during administrative proceedings."

Supreme Court Agrees To Hear Social Security Cases

      The Supreme Court has agreed to hear Carr v. Saul and Davis v. Saul, two cases presenting the issue of whether the federal courts can consider Lucia objections to Administrative Law Judges (ALJs) having heard cases before the Social Security Administration when those objections had been raised administratively. The Supreme Court held in Lucia v. SEC that ALJs were unconstitutional since they had not been appointed by the agency head. Since that time they have been. 

     My opinion is that it's nuts to expect claimants to have raised Lucia objections when the Social Security Administration's stated position was that it wouldn't consider Lucia objections. It's also nuts because the Supreme Court had previously held that it was not necessary to raise other sorts of objections in Social Security cases administratively before raising them in the federal courts.

     It's possible but I imagine unlikely that the new Solicitor General for the Biden Administration could decide to settle these cases before they're heard.

Update On Lucia

      In June of 2018 the Supreme Court held in Lucia v. SEC that Administrative Law Judges (ALJs) as of that date were unconstitutional because they had not been appointed by the agency head. Social Security and other agencies cured this defect by having the agency head officially appoint each of the ALJs but this left the problem of cases decided before the new appointments. Social Security has tried to reduce the scope of that problem by arguing that the issue had to have been raised before the ALJ or at least before the Appeals Council.

     The first Court of Appeals opinions in one of the post-Lucia Social Security cases was Cirko v. Commissioner, a Third Circuit case, last November. Social Security lost. The Court held that the issue could be raised for the first time on appeal in the U.S. District Court.

     We now have three newer opinions from Courts of Appeals. In Carr v. Commissioner, the Tenth Circuit held on June 15, 2020 that the Court could not consider the Lucia issue since it had not been raised administratively. In Davis v. Saul, the Eight Circuit held the same way on June 26, 2020. However, in Ramsey v. Commissioner, the Sixth Circuit held on September 1 that the issue could be considered even though it had not been raised administratively. There are cases pending in other Courts of Appeals as well.

     The claimants in the Carr and Davis cases have asked that the Supreme Court review their cases. The Court doesn't have to do so but since there's disagreement among the Circuits, the Court probably will agree to hear the cases.

     Note that a Supreme Court opinion on this issue may have implications for the litigation over the constitutionality of the position of Social Security Commissioner brought about by the Supreme Court opinion in Seila Law v. CFPB. The Social Security Administration is trying very hard to pretend this issue doesn't even exist but it does and it will be litigated. Probably, it's already being litigated. I think it's irresponsible that Andrew Saul is still carrying out the role of Commissioner of Social Security. The attitude that Seila Law doesn't apply to Social Security seems to be based upon the assumption that because Seila Law was only about the Administration's desire to knock down the Consumer Financial Protection Bureau, which they hate, that other agencies that they don't hate (or don't want to admit to hating) won't be affected.  That assumes that the majority of the Supreme Court was just as cynical as they are and was only using a constitutional justification to harass an agency that the Court's majority hates as much as they do. That's not a safe assumption. As a lawyer, you may safely assume that your adversary is as cynical as you are but you should never assume that about a Court. Result oriented, maybe, but cynical, no. There is a distinction. But maybe I'm being too harsh. Another possibility is that those involved don't really care what the Supreme Court ultimately does about the Social Security Commissioner position because they expect to be out of office long before the Court can take up the issue. I guess that's just a different form of cynicism, however.

A Couple Of Things I'm Wondering About

     I've been wondering about a couple of things. First, what is happening in Puerto Rico (and other U.S. territories) when claimants inquire about filing SSI claims? Second, is Social Security trying to track Seila Law objections?

     My general impression is that secretiveness has increased at Social Security since the 2016 election. If you want proof, look at Social Security's postings of Emergency Messages (EMs). The purpose of EMs is to let employees in the field know about significant changes in agency policy or practice. Through May 21 of this year at least 22 new EMs had been released to agency employees but only two had been released to the public. None has been released to the public since May 21. There might be some good reason to withhold a few of those but the vast majority of EMs aren't sensitive. My guess is that the logic behind withholding these from the public is that the agency can't be called to account for failing to follow its own policies when the public doesn't know what those policies are.

     Because of the litigation over the constitutionality of current law that denies SSI to residents of most U.S. territories, there should be individuals attempting to file SSI claims in these territories. What's being done when that happens? How many people in the territories are attempting to file SSI claims? If I were representing clients in Puerto Rico who might be eligible for SSI, I'd certainly be telling them to try to file SSI claims but I'm not representing clients there.

     My expectation is that because of the Supreme Court opinion in the Seila Law case there will be litigation over the validity of actions taken by the Social Security Administration while headed by a Commissioner who can only be discharged by the President for cause. Shouldn't the agency be tracking cases where this sort of objection is made? That's what they did earlier in the run-up to and after the Supreme Court decision in Lucia v. SEC on the constitutionality of ALJ appointments.

Mr. Buckets Of Money Settles His Case

     Reuters reports that Raymond Lucia of Lucia v. SEC fame has settled his case with the Securities and Exchange Commission.  In the Lucia case, the Supreme Court decided that the constitution requires that Administrative Law Judges (ALJs) be appointed by agency heads. This caused problems at Social Security since its ALJs had not been appointed by the Commissioner of Social Security. That problem has since been rectified but litigation continues in cases decided before the ALJs received their official appointments. In fact, I'm surprised that there's only been one decision from a Court of Appeals on this issue so far.

     The new case that Mr. Lucia settled had to do with the issue of whether ALJs are unconstitutionally shielded from dismissal. This is all part of the Federalist Society "unitary executive" theory that Presidents must have unbridled discretion, that is if they're Republicans. The Federalist Society will suddenly discover that the constitution imposes dramatic limitations on Presidential power if Joe Biden is elected President.

     Mr. Lucia eventually settled because he was tired of fighting constitutional battles. All Mr. "Buckets of Money" really wants to do is bilk simple-minded investors!

     The assault on ALJs isn't over just because Mr. Lucia settled his case. It doesn't identify them but the Reuters article says there are at least three other such ALJ removal cases pending. The upcoming Supreme Court decision in the Seila Law case will probably have implications for this litigation.

I Predict This Will Come To Pass If Biden Is Elected

     From Regulating Impartiality In Agency Adjudication by Kent Barnett, 69 Duke L.J.1695-1748 (2020):

... [T]he majorities in Lucia v. SEC and Free Enterprise Fund v. PCAOB expressly declined to resolve whether the U.S. Constitution condones SEC administrative law judges’ and other similarly situated agency adjudicators’ current statutory protection from at-will removal. The crux of the problem is that, on one hand, senior officials may use at-will removal to pressure agency adjudicators [such as Administrative Law Judges] and thereby potentially imperil the impartiality that due process requires. On the other hand, Article II limits Congress’s ability to cocoon executive officers, including potentially agency adjudicators, from at-will removal.

This Article argues that the executive branch itself can and should moot or mitigate this constitutional clash. Nothing in Article II prevents the president from issuing executive orders and agencies from promulgating regulations—collectively, what I refer to as “impartiality regulations”—that require good cause for disciplining and removing agency adjudicators, as well as other means of protecting adjudicator impartiality. Indeed, the executive branch has a long-standing yet overlooked practice of using executive orders and regulations for similar purposes. Impartiality regulations are but one form of the executive branch’s internal separation of powers. Such self-imposed separation provides a strong theoretical and practical solution for the agency-adjudicator dilemma. ...

    This may be the rare law review article that has an effect on the real world.
     By the way, my assumption here is that in Seila Law v. CFPB the Supreme Court will find the position of director of the Consumer Finance Protection Board to be unconstitutional because the incumbent may only be discharged for cause. Perhaps, I should say I expect that the Supreme Court will hold that while the position itself is constitutional, that the incumbent no longer has protection against being discharged without cause. The same would be the case for the position of Commissioner of Social Security. Administrative Law Judges would be next in line and I expect the same for them. I don't think Seila Law is getting as much attention as it should. Lucia was easily dealt with. Seila Law is a much larger threat to federal administrative law. Probably, the only way to deal with it is what the author of this article suggests, that is assuming that one cares about administrative justice. I think that Democrats care about administrative justice. I think that Republicans are enthralled with the idea of "deconstructing the administrative state." I think the only possible result of that is anarchy but judging by the Trump Presidency, Republicans like anarchy.

Social Security Loses In CA3 On Issue Of When Lucia Argument Had To Have Been Raised

     After the Supreme Court held in Lucia v. SEC that Administrative Law Judges (ALJs) as then appointed were unconstitutional, there was the inevitable issue of which Social Security claimants would get new hearings. The Social Security Administration argued that the issue had to have been raised before the Administrative Law Judge or at least before the Appeals Council. They have now given up on the argument that Lucia had to have been raised before the ALJ and have remanded all of the cases where the Lucia issue was raised at least before the Appeals Council. The issue of whether the issue had to have been raised at least before the Appeals Council is being litigated in the federal courts. 

     We have our first Court of Appeals opinions in one of the post-Lucia Social Security cases, Cirko v. Commissioner, a Third Circuit case. Social Security lost. The Court held that it did not matter that the Lucia issue wasn't raised until after the matter reached the United States District Court.

     Social Security is still litigating this issue before other Courts of Appeals. It's possible that the agency will win elsewhere. If that happens, the issue will have to be decided by the Supreme Court.

Andrew Saul Hasn't Hit The Ground Running

     Andrew Saul was sworn in as Commissioner of Social Security on June 17. A few days later I posted a list of issues on Saul's docket. Let's go through that list and see what actions Saul has taken:

What To Do About Hicks v. Commissioner of Social Security

• Social Security twisted its rules to cut off benefits for as many of Eric Conn's former clients as possible. The 6th Circuit Court of Appeals ruled against the agency on November 21, 2018. Ever since then the Solicitor General and Social Security have been "considering" whether to ask the Supreme Court to hear the case. I doubt that they are seriously considering that. I think they've just been stalling until a new Commissioner was confirmed because it's hard to decide how to implement the decision of the Court of Appeals.  They can't stall much longer. -- A decision was made that Social  Security would not ask the Supreme Court to hear the case but that was inevitable since there was no reason for the Supreme Court to hear the case. No decision has been made on the difficult question of how to handle the Conn cases in the wake of the 6th Circuit opinion.

What To Do About Cases Pending At The Appeals Council Which Were Decided Prior To Lucia v. SEC And An Objection Has Been Made To ALJ

• The Supreme Court decided last year that Administrative Law Judges (ALJs) as then appointed were unconstitutional. Social Security changed the way ALJs were appointed to adjust to this decision but there are thousands of cases still pending at the Appeals Council that were heard before the Lucia opinion. The agency has suggested that they want to avoid remanding all these cases for new hearings with different ALJs by having the Appeals Council issue new decisions on its own. This is arguably illegal and probably impractical. A decision on this can't be delayed much longer. -- No action. This one won't wait much longer.

Proposed Regulation That Has Been Published For Comments And Can Now Be Made Final

• Removing inability to communicate in English as a factor in determining disability. Anti-immigrant proposals are very popular with Republicans these days but Saul will poison his relationship with Congressional Democrats if he goes ahead with this one and they have the power to make his life difficult.-- No action.

Proposed Regulations That Have Not Yet Been Published For Comments

• Considering social media in determining disability. Unpopular with many in Congress, including Republicans.
• Revising evaluation of vocational factors in determining disability (probably increasing age categories in grid regulations). Go ahead with this one and you've made a declaration of war on Congressional Democrats.
• Hearings held by Administrative Appeals Judges. Nobody knows exactly what this one is but if it's what I think it is -- trying to get rid of independent ALJs -- it's going to be unpopular with all Democrats and many Republicans in Congress. -- No action on any of these proposed regulations. Will there ever be any action?

Stance On Employee Unions

• The Trump Administration has taken an extremely aggressive and antagonistic stance on federal employee unions. Social Security has followed suit. Democrats on the House Ways and Means Committee are already pressuring Saul to soften Social Security's approach. Will he be a loyal Republican and continue the harsh anti-union stance or does he modify it to avoid conflict with Congressional Democrats who can make his life difficult? His message to agency staff suggests that he'll soften the anti-union stance. -- No publicly announced action on employee unions.

Process For Appointing New ALJs

• The old process for appointing ALJs was found unconstitutional. What will the new process be? -- Apparently, the agency has been in the process of hiring new ALJs. I don't think there's been any announcement of what the process is.

Fee Cap 

• This one may be wishful thinking on my part. The cap on fees that may be charged for representing Social Security claimants hasn't been raised since February 9, 2009. By any normal standard it's way past time to increase it. However, I'm not sure that the organizations that represent those who represent claimants have been able to generate any real pressure to increase the cap. -- No action.

SSA Wants To Get Around Lucia By Having Appeals Council Rewrite ALJ Decisions?

     See below for an order from the Appeals Council concerning a case where an objection had been made to the consideration of the case by an Administrative Law Judge (ALJ) who had not been appointed in a manner consistent with the Supreme Court's interpretation of the constitution in Lucia v. SEC. The agency thinks it can get around Lucia by having the Appeals Council rewrite the decision. Click on each page below to view full size.

     There are some obvious problems with what the Appeals Council has done. In Lucia itself, the Supreme Court didn't remand the case to the SEC to rewrite the decision. It specifically remanded it to a different ALJ. Why would the Appeals Council remedy the constitutional defect in a manner different from the Supreme Court? The Appeals Council is saying the hearing held previously was fatally defective yet it is not giving the claimant a new hearing. Isn't the claimant entitled to a hearing before an ALJ who was properly appointed? There's not going to be a hearing before the Appeals Council itself. There's also the not so small problem that it's been more than a year since the ALJ hearing and decision. The Appeals Council decision will cover the issue of whether the claimant is disabled all the way up to the date of its action yet the claimant is given no opportunity to submit medical evidence concerning this time period or to have a new hearing concerning this time period.

     I can only guess what's been going on behind the scenes at Social Security with respect to Lucia. My guess is that there's been a lot of disagreement and little leadership. Despite this order, I doubt that the agency's final position has been resolved. We'll see what happens once Andrew Saul is confirmed as Commissioner, which will likely happen later today.

     By the way, note that the Appeals Council supposedly issued this notice of May 22 but we didn't receive it until May 28. There are serious problems printing and mailing decisions at every level of the Social Security Administration. This matters because of appeal deadlines.

What's Going On At The Appeals Council With The Lucia Cases?

     I posted on April 8 about the first Appeals Council remand that I had heard of referring to Lucia v. SEC, the Supreme Court case that held that Administrative Law Judges (ALJs) who had not been appointed by an agency head were unconstitutionally appointed. That remand wasn't for a claimant represented by my firm. Since that time I've seen a redacted copy of the Appeals Council order in that case. It looked like a case that was going to be remanded anyway. I have heard of no other Lucia remands at Social Security. I have heard of no cases where the Appeals Council tried to rewrite an ALJ decision to somehow skirt Lucia. Also, I have seen no changes to the HALLEX manual that is used to disseminate new policies and procedures at the Appeals Council.

     After Social Security issued Social Security Ruling 19-1p on Lucia, I assumed that the agency knew what it wanted to do. I'm beginning to think that they still don't know what they want to do although that makes me wonder how the Ruling got issued. 

     More and more Social Security seems like an agency adrift with an Acting Commissioner who feels she lacks the authority to lead even on something like this where there's really only one course of action that's even doable -- remanding all the cases where a Lucia objection was made. There's not enough staff at the Appeals Council to rewrite all those decision, not to mention that doing so probably wouldn't pass muster in the federal courts. How is this a tough decision?

First Lucia Remand

     I have received the first report of a case remanded by Social Security's Appeals Council on account of the Supreme Court decision in Lucia v. SEC. It was sent back to a different Administrative Law Judge.

No, I Don’t Think That SSA Can Solve Its Lucia Problem By Having The Appeals Council Deny All The People Who Filed Lucia Objections

      I’ve already heard some colleagues say that the new Social Security Ruling giving the agency’s response to the Supreme Court opinion in Lucia v. SEC means that the agency thinks it can solve its Lucia problem by having the Appeals Council itself issue de novo decisions in the cases. There are a couple of problems with this. First, the Appeals Council isn’t set up to issue thousands of de novo decisions. Second, and more important, the Social Security Act says that claimants are entitled to hearings. If you’re agreeing that the hearing that was held was constitutionally invalid, how do you get around giving the claimant a new hearing? There’s a lot of wishful thinking at Social Security. I hope they’re not so far gone that they think they can get away with that. I think the language that some are pointing to about the Appeals Council issuing decisions is only intended to allow the Appeals Council to issue fully favorable decisions in a few cases.

     I have to mention that after Lucia came down I told everyone who would listen that we should be filing Lucia objections in every case pending at the Appeals Council.

New Lucia Ruling

 The Social Security Administration is publishing a new Ruling concerning the effects of the Supreme Court opinion in Lucia v. SEC. I haven’t had time to digest the Ruling but it sounds like there’s a lot of remands coming for those who filed timely objections.

Was A Claimant Required To Make A Lucia Objection Administratively In Order To Preserve The Issue For Federal Court?

     Since the Supreme Court's decision in Lucia v. SEC that Administrative Law Judges (ALJs) as they had been appointed to that time were unconstitutional there's been a big issue concerning the thousands of Social Security cases pending in the federal courts. It would seem that all should be remanded for new hearings except for one problem. Almost none of the claimants involved had raised the issue while the cases were pending at Social Security. In most administrative litigation an objection must be filed while the case is pending before the agency in order to preserve the issue for federal court. However, there's a prior Supreme Court decision that says that as a general matter that is not required in Social Security cases. There's also the fact that Social Security had announced prior to the Lucia decision that it would refuse to consider any argument about ALJ constitutionality. Why require that an objection be made when the agency has announced that it won't consider it?

     We've been waiting for the federal courts to act on this issue. There have been a number of decisions that have accepted Social Security's argument but those have been rather summary decisions that barely discussed the issue. We now have a more substantive decision in Muhammad v. Berryhill and it goes the other way. It's the recommended decision of a federal Magistrate Judge. The District Court judge could overrule this recommendation but it is certainly a substantive decision. We're a long way from even a Court of Appeals decision in this case.

     This issue may or may not end up at the Supreme Court. My guess is that it won't because the Courts of Appeals will all come down against Social Security. Even though a number of District Courts have accepted the agency's arguments, I just think those arguments are weak.

When Will The Appeals Council Act?

     The Securities and Exchange Commission is remanding all cases pending before the full Commission for new hearings before different Administrative Law Judges, without regard to whether the Lucia issue was raised before ALJ or even before the full Commission. When will Social Security follow suit? Tens of thousands of cases are pending at Appeals Council. My firm has a considerable number of cases pending at the Appeals Council. We’ve raised the Lucia issue in each one. We’re not getting remands. We’re not getting denials of review. The cases are just sitting there.  What are they waiting on? Come on, Mr. Lucia himself didn’t raise the issue of ALJ appointment before the ALJ.

Sad Trombones For Lucia

     From the Joint Explanatory Statement (page 67) of the Conference Committee on the bill to fund the Social Security Administration (and other agencies) for Fiscal Year 2019, which begins on October 1, 2018:

It is vital that Administrative Law Judges (ALJs) be independent, impartial, and selected based on their qualifications. The conferees expect SSA to maintain a high standard for the appointment of ALJs, including the requirement that ALJ s have demonstrated experience as a licensed attorney and pass an ALJ examination administered by the Office of Personnel Management.

     This would largely undo Trump's big win in Lucia v. SEC or at least render it mostly meaningless.

Mass AC Remands On Lucia Grounds Coming?

     From a revised version of Social Security's Emergency Message EM-18003 on Important Information Regarding Possible Challenges to the Appointment of Administrative Law Judges in SSA’s Administrative Process:

If a claimant or representative files a timely Appointments Clause challenge and timely requests Appeals Council review, the AC will consider the challenge in the context of the facts of the case (including, but not limited to, the date of the ALJ decision and the date the challenge was raised) in determining whether there is a basis to grant review. The AC will determine whether granting review is appropriate under 20 CFR 404.970 or 416.1470, or both, when considering both the decision on the merits and any potentially unresolved Appointments Clause issues.

In those matters where a timely Appointments Clause challenge to an ALJ decision issued prior to July 16, 2018 is raised to the Appeals Council in a proper request for review, the AC will grant review and issue a decision or order remand, as appropriate.

Could Social Security ALJs Be Appointed Based On Their Politics?

     Because of President Trump's Executive Order, Administrative Law Judges (ALJs) will no longer be appointed through a process controlled by the federal Office of Personnel Management (OPM). Agency heads will be able to appoint the ALJs pretty much however they want to appoint them.

     Social Security and other agencies would never appoint ALJs on political criteria, would they? We'll see but take a look at what happened with Immigration Judges during the George W. Bush Administriation. Of course, the Trump Administration is too high minded to do anything like that.