Notice & Comment

Sheep in Wolves’ Clothing, by Christine Kexel Chabot

The Fifth Circuit’s recent decision invalidating tenure protections for SEC Administrative Law Judges (“ALJs”) in Jarkesy v. SEC builds on a series of recent challenges to similarly protected ALJs at the FTC and the Dep’t of Agriculture. At first blush the double for-cause tenure protections applicable to ALJs might seem to violate Article II of the U.S. Constitution, under the theory that Article II creates a unitary executive President whose plenary removal power affords her exclusive control over subordinate executive officers. This essay identifies several reasons why tenure-protections for ALJs do not violate Article II or unitary executive theory. This structure instead aligns with longstanding historical practice as well as unitary requirements of accountability set forth in Justice Scalia’s dissent in Morrison v. Olson. Challenges to inferior officers who serve as ALJs come as sheep in wolves’ clothing rather than an affront to Article II.

The current challenges to ALJs cast doubt on well-established regulatory structures in the United States. Tenure-protected ALJs have long made initial adjudicatory determinations which are subject to the final approval of administrative agency heads within the executive branch. What is less well known is that this tradition of independence in executive branch adjudication can be traced back to the Founding and decisions made by Alexander Hamilton as the first Secretary of the Treasury. As noted in my forthcoming Article, Interring the Unitary Executive, statutes enacted by the First Federal Congress and President George Washington required non-removable judges to make initial adjudicatory findings on remission of fines imposed for violations of customs laws. These independent judges made credibility determinations and assessed whether parties intentionally violated customs laws before handing final remission decisions off to Secretary Hamilton. Founding-era practice therefore supports tenure protections for ALJs. The double for-cause tenure protections applicable to ALJs render them less independent than non-removable judges who participated in executive branch adjudications at the Founding. Early practice suggests that other forms of supervision may substitute for removal power. Even decisions by non-removable officers do not disrupt Article II’s chain of command when the officers’ decisions are adequately supervised and reviewed by superiors in the executive branch.

This historical evidence is part of a larger debate about the original meaning of Article II, and whether the Vesting or Take Care Clauses establish a unitary executive President with an indefeasible and plenary removal power. Plenary removal power can be abused, and in the case of ALJs might allow a President to fire an ALJ who ruled against one of the President’s friends. While Congress would retain the power to impeach the President and prevent her from naming a replacement for the ALJ she fired, the threat of future removal would leave a sword of Damocles hanging over ALJs assigned to the same or similar matters in the future. Other scholars disagree that the original meaning of Article II dictates a removal power which would place the President this far above the law. An abusive exercise of removal power would seem to exceed the President’s basic power to execute the law and would certainly conflict with the President’s duty to take care that the laws be faithfully executed. My Article canvasses the entire body of public acts enacted by the First Federal Congress and President Washington and finds that these initial statutes overwhelmingly reflect the latter and non-unitary understandings of Article II.   

Of course, it may be that current applications of unitary theory do not really turn on originalism (indeed Judge Elrod’s majority opinion did not rely on originalist arguments in Jarkesy). These rulings may instead reflect a change in governing precedent: a shift from judicial deference to the political branches in the 18th and 19th centuries to a juristocracy sparked by Chief Justice Taft’s invalidation of statutory removal restrictions in Myers v. United States. As recounted by Nikolas Bowie & Daphna Renan, Myers was the first time that the Court “struck down a statute on the ground that it unconstitutionally regulated the President or executive branch.” In Myers, however, the Court considered only more extreme tenure protections that required the Senate to approve any presidential removals. The unitary theories that Chief Justice Taft advanced in Myers gained an important foothold when Justice Scalia raised unitary objections to for-cause removal protections for principal officers in his 1988 dissent in Morrison v. Olson. These unitary objections to for-cause protections never swayed a majority of the Court until its 2010 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board. There, the Court struck down a “novel” structure: double layers of for-cause tenure protection that created an unacceptable lack of accountability for inferior officers serving on the Accounting Oversight Board.

In Jarkesy, the majority treated Free Enterprise as a general ban on double layers of for-cause protection. It failed to recognize that unitary theory does not always require plenary removal power to ensure the accountability of inferior officers. As Justice Scalia explained in footnote four of his Morrison dissent, the unitary executive requirements of Article II “do [] not require that” the President “have plenary power to remove inferior officers.” The President’s control over inferior officers may instead be established through “supervision of[] principal officers.” Justice Scalia assumed that the principal officers exercising supervisory powers must be removable at will. But his reasoning also suggested that supervision could make up for a layer of accountability that would otherwise need to be established through plenary removal power over inferior officers. In other words, the double layers of for-cause protection that the Court found so troubling in Jarkesy may look more like a single layer of for-cause protection when one considers the SEC’s supervisory powers over ALJs.

Notwithstanding the tenure protections afforded by the Merit Systems Protection Board, ALJs do not select which cases they will hear, and the SEC has the final say over decisions that ALJs reach at the conclusion of their hearings. In this regard inferior officers who serve as ALJs are far more accountable to the SEC than the inferior officers who served as Board members in Free Enterprise. There, the SEC lacked “effective power” to “start, stop, or alter individual” investigations carried out by inferior officers on the Board. 561 U.S. 477, 504 (2010). As Judge Davis noted in his dissenting opinion in Jarkesy, “nowhere does the majority explain how the ALJ’s tenure protections interfere with the President’s ability to execute the laws.”

The Fifth Circuit was the first Court of Appeals to extend the Court’s holding in Free Enterprise to a decision invaliding tenure protections for ALJs. In so doing, it upended a longstanding historical practice of independence in executive branch adjudication and adopted an even more unitary theory of executive control than that recognized by Justice Scalia’s dissent in Morrison v. Olson. The majority opinion in Jarkesy was a groundbreaking decision designed to dismantle key adjudicative structures within the administrative state. Only time will tell if this novel approach prevails.

Christine Kexel Chabot is the Interim Director, Institute for Consumer Antitrust Studies, and Distinguished Professor in Residence, Loyola University Chicago School of Law.

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