After a circuit split on the constitutionality of the Securities and Exchange Commission's in-house judges, Gibson, Dunn & Crutcher partner Mark Perry is taking the question to the U.S. Supreme Court.
Perry filed a petition for writ of certiorari Friday on behalf of his client, financial investor Raymond Lucia. The petition asks the court to settle a circuit split over whether the hiring process for the SEC's administrative law judges is constitutional. While the U.S. Court of Appeals for the Tenth Circuit ruled against the SEC last year, the D.C. Circuit ruled for it in the Lucia case.
"Because a number of pending cases are likely to be affected, this constitutional issue should be decided sooner rather than later," Perry said in an email.
The D.C. court reheard that case en banc in May, but the recusal of Chief Judge Merrick Garland left a 5-5 split on the decision in June. That means the court's three-judge decision from last year still stands. The Tenth Circuit, meanwhile, declined to reconsider its decision en banc in May.
The crux of the issue is whether the SEC's ALJs, which oversee in-house tribunals on enforcement actions brought by the commission, are "inferior officers" under the Constitution's appointments clause. That clause states such officers must be appointed by the president, agency heads or courts. But at the SEC, the commission's Office of Administrative Law Judges hires the ALJs from a pool of candidates chosen by the Office of Personnel Management.
Perry said that appointing the ALJs would "promote political accountability and transparency." That's because allowing the elected president, or his chosen agency heads, to select the ALJs would keep them accountable to voters.
The government has argued every action taken by an ALJ is subject to final review by the SEC commissioners, who are political appointees.
Should the high court agree to hear the case and rule against the SEC, it's unclear whether prior proceedings handled by ALJs would be invalidated. The court may decide not to apply the decision retroactively, or could decline to address that question.