Notice & Comment

Third Circuit Holds Claimants May Raise Lucia Challenges to SSA ALJs for First Time in District Court

Today the Third Circuit issued an opinion regarding application of exhaustion requirements to Lucia v. SEC, 138 S. Ct. 2044 (2018), challenges to Social Security Administration ALJs – Cirko v. Commissioner, 2020 WL 370832.

Lucia decided that the SEC’s ALJs were officers of the United States, and thus that their appointments were unconstitutional because the appointing official was not one specified by the Appointments Clause.  As a remedy, the matter had to be tried before a properly appointed SEC ALJ, and it could not be the original ALJ appointed in a constitutionally sufficient manner.  While concurring, Justice Breyer questioned the necessity of returning the case to a different ALJ.

By the time Lucia was decided, throwing into question the appointments of ALJs all over the Government, social security claimants Cirko and Bizarre were already in District Court challenging the SSA’s denial of their applications for benefits.  Not being learned in Constitutional Law, neither had raised the Appointments Clause hearing before the ALJ presiding over their hearing or the Appeals Council.  They raised the Lucia issue for the first time in the District Court.  Based on President Trump’s July 13, 2018 Executive Order, the SSA reappointed its ALJ’s in accordance with the Executive Order and Lucia. The Appeals Council undertook to grant request for review in cases where the claimant had: (1) timely requested Appeals Council review of an ALJ’s decision or dismissal issued before July 16, 2018; and (2) raised, at either the Appeals Council or the ALJ level, a Lucia challenged to the presiding ALJ’s appointment. SSR 19-1p: Titles II and XVI: Effect of the Decision in Lucia v. Securities and Exchange Commission (SEC) on Cases Pending at the Appeals Council.  Nevertheless, SSA sought dismissal of plaintiffs’ challenges because they had not made the Lucia challenge before the agency.

The Circuit held that because no applicable statutory or regulatory exhaustion requirements existed, the decision to impose discretion was “a matter of sound judicial discretion.”  That discretion was to be guided by: (a) the nature of the claim presented, (b) the characteristics of the procedure provided, and (c) a weighing of the respective interests of the social security claimants and the Government.  

With respect to the first, the panel explained that exhaustion was generally inappropriate with respect to structural constitutional challenges, like those alleging a violation of the Appointments Clause.  The Lucia Court’s order that the SEC provide petitioner a new hearing before a constitutionally-appointed ALJ different from the original ALJ, reflected the critical nature of structural challenges and the difficulty of showing prejudice in such a context. 

The nature of the social security proceedings also weighed against imposing an exhaustion requirement. The Court found the inquisitorial nature of the proceedings critical, relying on Sims v. Apfel, 530 U.S. 103 (2000), which concluded that social security claimants need not exhaust issues before the Appeals Council in order to raise them in a District Court challenge to the SSA’s denial of their claim.  The decision was anticipated in Jon C. Dubin, Torquemada Meets Kafka: The Misapplication of the Issue Exhaustion Doctrine to Inquisitorial Administrative Proceedings, 97 Colum. L. Rev. 1289, 1303 (1997).

The Court then weighed the claimants’ and the Government’s interests.  The interest of claimants in excusing exhaustion requirement was high given the diminished expectation of even represented claims in an inquisitorial proceeding.  And claimants interest warranted even greater solicitude, because many claimants are unrepresented.  In short, “an exhaustion requirement for Appointments Clause claims would impose an unprecedented burden on SSA claimants.”  The Government’s interest in being alerted to the claim during the administrative process was quite low.  SSA could not claim expertise with respect to Appointments Clause issues nor was an ALJ, or the SSA, likely to declare SSA process for appointing its ALJs unconstitutional.  The Government did assert that waiving an exhaustion requirement would require re-litigation of thousands of disability cases that had already been resolved by ALJs.  But the Court estimated the number of cases that would have to be re-done as hundreds, not thousands.  It noted that SSA had already voluntarily ordered Appeals Council review of disability cases in which the Lucia claim had been raised at the Appeals Council level, far more cases than the Court’s ruling would require SSA to consider. [1]

[1] Ironically, cases would either be decided by essentially the same cadre of ALJs or could be tried by ALJs who as less independent than the original ALJs who decided the cases. As one leading commentator has observed “[t]he Administration’s post-Lucia actions through the EO and as proposed in the SG’s Guidance Memo, threaten to significantly diminish ALJ independence by eliminating previous merit-based and other restrictions on appointments, and reducing restrictions on removal, so that ALJs function more like at-will, political appointees.”  CAROLYN A. KUBITSCHEK AND JON C. DUBIN, SOCIAL SECURITY DISABILITY LAW AND PROCEDURE IN FEDERAL COURT, §6.3 (2020 EDITION, THOMSON REUTERS PUBLISHING CO.)  (also available on Westlaw, Secondary Sources, Text & Treatises, “SSFEDCT” ) .

Print Friendly, PDF & Email