Tuesday’s decision by the U.S. Court of Appeals for the Tenth Circuit declaring that the way the SEC appoints Administrative Law Judges (ALJs) violates the Constitution sets up a clean split among the circuits and may implicate the validity of administrative proceedings in other areas of government, Law.com reported today. In Bandimere v. U.S. Securities and Exchange Commission, 15-9586, a divided court agreed with Colorado businessman David Bandimere that the ALJ who kicked him out of the securities industry and ordered him to pay financial penalties was appointed in violation of the Appointments Clause. Judges Mary Beck Briscoe and Scott Matheson were in the majority, saying that, under Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991), the ALJ was indeed an “inferior officer,” who must be appointed by the President. Judge Monroe McKay dissented, saying that the “sweeping language” of the majority’s decision made him “worry that it has effectively rendered invalid thousands of administrative actions.” The Bandimere decision is in direct conflict with the D.C. Circuit’s August decision in Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016) which squarely held the appointment of ALJs does not violate the Appointments Clause, as the ALJs aren’t inferior officers because they don’t have the authority to issue a final decision. Only the commission has that power.
