Yesterday, the Securities and Exchange Commission (SEC) hedged its bets: it issued an order ratifying the prior appointments of its administrative law judges (ALJs). The order also called for fresh proceedings in pending actions before these newly-blessed ALJs. The SEC did all of this to “put to rest” the argument — now pursued by the Solicitor General in Lucia v. SEC — that the SEC’s method for choosing its ALJs violates the Appointments Clause. The basic issue is whether ALJs are mere employees or “inferior officers” under Article II. If the former, then smooth sailing for the SEC, which has subdelegated its authority to appoint ALJs to its Chief Administrative Law Judge and internal Office of Human Resources (more on this below). If the latter, then the constitution requires that ALJs be chosen by the President alone, a “Head[] of Department[],” or “Court[] of Law.”

Luckily for the SEC, the Supreme Court has said that the Commission is a “Head[] of Department[].” So by ratifying its ALJs, the SEC seeks to preserve the validity of still-pending administrative decisions in the event more courts hold that its ALJs are inferior officers. So confident is the SEC in its cure that it lifted the stay on administrative proceedings subject to review in the Tenth Circuit, which had held just that. The SEC thus follows the lead of the similarly risk-averse and besieged Federal Trade Commission, which already endorsed its ALJ appointments more than two years ago.

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