Lucia v. SEC

Supreme Court of the United States · 2018 · Administrative Law

585 U.S. 237 (2018)

Updated August 1, 2026

Administrative LawALJsAppointments ClauseOfficers of the United StatesemployeesSEC ALJssignificant authoritycontinuing office

Facts

The SEC may conduct administrative enforcement proceedings itself or delegate them to ALJs, and the SEC's five ALJs had been selected by staff members rather than by the Commission. SEC ALJs have authority to conduct adversarial hearings, including supervising discovery, ruling on evidence, hearing witnesses, deciding motions, and imposing certain sanctions. After a hearing, ALJ Cameron Elliot issued an initial decision finding Lucia had violated the Investment Advisers Act and imposing sanctions, and later issued a revised initial decision after remand from the Commission for additional factfinding. Lucia objected that Elliot's appointment violated the Appointments Clause because SEC ALJs are officers who must be appointed by the President, a court of law, or a head of department.

Issue

Whether SEC administrative law judges are merely employees or instead Officers of the United States subject to the Appointments Clause. If they are officers, the Court also had to decide what remedy is required when a party timely challenges an adjudication conducted by an improperly appointed ALJ.

Rule

An individual is an Officer of the United States, rather than a mere employee, when he or she occupies a continuing office established by law and exercises significant authority pursuant to the laws of the United States. Under Freytag, adjudicative officials who hold such a continuing office and exercise significant discretion in conducting important adversarial functions are officers even if their decisions are not always final. A party who makes a timely Appointments Clause challenge to the officer who adjudicated his case is entitled to a new hearing before a properly appointed official.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

The Federal Energy Review Board in Denver uses hearing judges to preside over enforcement cases. Each judge holds a career position created by federal statute, supervises discovery, rules on evidence, examines witnesses, and issues an initial decision that becomes the Board's final action if the Board declines review; the judges were selected by agency staff rather than by the Board members.

If a regulated company timely objects that the hearing judge who heard its case was unconstitutionally appointed, what is the strongest argument that the objection should succeed?

Explanation. Under the majority's rule, an individual is an officer if the person occupies a continuing position established by law and exercises significant authority pursuant to federal law. Adjudicators who take testimony, conduct hearings, rule on admissibility, manage discovery, and issue decisions exercise significant discretion in important functions. Final decisionmaking authority is not required, and staff selection is inadequate if the position is an office.