Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now
In a show of support for the decisional independence of administrative law judges, the American Bar Association has filed an amicus brief in a case involving the U.S. Securities and Exchange Commission.
The ABA filed its amicus brief Sept. 5 with the U.S. Supreme Court in support of the SEC in Securities and Exchange Commission, Petitioner v. George R. Jarkesy, Jr., et al., 22-859.
It noted in its brief that its membership includes approximately 500 judges and ALJs.
“The for-cause removal protections granted by Congress to ALJs enhance the decisional independence of for-cause removal protections granted by Congress to ALJs enhance the decisional independence of ALJs by insulating them from agency interference with their employment,” the brief states, noting that the ABA has a “long history of supporting decisional independence for judges, including all administrative adjudicators.”
According to court records, George Jarkesy launched two hedge funds with his advisory firm, respondent Patriot28, L.L.C., serving as the funds’ investment adviser.
The funds attracted approximately 120 investors and managed approximately $24 million in assets.
In 2013, the SEC brought an administrative proceeding against Jarkesy and the respondents under the Securities Act, Exchange Act and Advisers Act.
Respondents then sued the SEC in the U.S. District Court for the District of Columbia, seeking to enjoin the agency adjudication on various constitutional grounds.
The district court dismissed the suit for lack of jurisdiction and the United States Court of Appeals for the District of Columbia Circuit affirmed.
“Those courts held that respondents’ claims could be brought only in a court of appeals at the conclusion of the agency proceeding, not in a district court during the pendency of the SEC adjudication,” according to a writ of certiorari petition in the case.
In the meantime, the SEC assigned the initial stages of the proceeding to an ALJ, who held an evidentiary hearing and issued a decision finding that respondents had violated the Securities Act, Exchange Act and Advisers Act.
According to an ABA release, under the Administrative Procedure Act, ALJs across federal agencies have enjoyed statutory removal protection.
In May 2022, a divided three-judge panel of the U.S. Court of Appeals for the 5th Circuit held that those removal protections violated Article II’s requirement that the president be able to ensure that the laws be faithfully executed.
The ABA noted in its brief to the Supreme Court that it played an active role in the passage of the Administrative Procedure Act, which governs federal administrative law judges.
The Supreme Court granted the SEC’s petition June 30 for review of the 5th Circuit’s decision.
The ABA amicus brief addresses the question of whether Congress violated Article II of the U.S. Constitution by granting for-cause removal protection to certain ALJs, according to the ABA.
According to the brief, the ABA supplements the SEC’s arguments on this question through three points.
First, ALJs perform adjudicatory roles that are functionally comparable to federal district court judges.
Second, whether the judicial process occurs before a federal district judge or an ALJ, decisional independence is essential to the integrity and public perception of that process.
Also, limiting agency power to remove ALJs supports judicial independence and reinforces the legitimacy of ALJs’ decisions.
The brief states that ALJs within the SEC and other federal agencies play crucial and important roles within the larger judiciary system.
“In sum, ALJs play significant adjudicatory roles, and Congress recognized as much in granting ALJs for-cause protection against removal from those roles.,” the brief states.
According to the brief, the ABA has supported grievance procedures for ALJs who feel that their independence has been infringed by the agencies whose regulations they adjudicate.
The ABA has also extended its support for decisional independence to the state administrative adjudicative process.
As recently as last year, the ABA urged Congress to adopt merit-based hiring of ALJs and administrative judges, as well as to establish an independent federal benefits tribunal.
“APA and agency removal restrictions give ALJs the decisional independence they need to maintain public confidence in their decisions,” the brief states, with it concluding by asking that the Supreme Court hold that the APA’s for-cause removal protections for federal ALJs are constitutional.
Please enable JavaScript to view this content.