TheCorporateCounsel.net

Last week, Acting Solicitor General Sarah Harris sent a letter to Senator Charles Grassley informing the Senate that the DOJ had determined that statutory removal restrictions on administrative law judges were unconstitutional and that it would no longer defend them in court:

In Free Enterprise Fund v. PCAOB, 561 U.S.477(2010), the Supreme Court determined that granting “multilayer protection from removal” to executive officers “is contrary to Article II’s vesting of the executive power in the President.” Id. at 484. The President may not “be restricted in his ability to remove a principal [executive]officer, who is in turn restricted in his ability to remove an inferior [executive] officer.” Ibid.

A federal statute provides that a federal agency may remove an ALJ “only for good cause established and determined by the Merit Systems Protection Board on the record after opportunity for hearing before the Board.” 5 U.S.C. 7521(a). Another statute provides that a member of the Board” may be removed by the President only for inefficiency, neglect of duty, or malfeasance in office.” 5 U.S.C. 1202(d). Consistent with the Supreme Court’s decision in Free Enterprise Fund, the Department has determined that those statutory provisions violate Article II by restricting the President’s ability to remove principal executive officers, who are in turn restricted in their ability to remove inferior executive officers.

What does this mean for the SEC’s ALJs? Well, here’s what Project 2025 has to say about what should be done with the SEC’s administrative proceedings:

Eliminate all administrative proceedings (APs) within the SEC except for stop orders related to defective registration statements. The SEC enforcement system does not need to have both district court cases and APs. Alternatively, respondents should be allowed to elect whether an adjudication occurs in the SEC’s administrative law court or an ordinary Article III federal court.

I guess that last sentence leaves a little wiggle room, but if I were an SEC ALJ, I think I’d be updating my resume.  Other commenters are more emphatic in their assessment of the impact of the DOJ’s move. For example, former SEC staff member John Reed Stark headlines his LinkedIn post on the DOJ’s action as follows: “Expect All SEC Administrative Law Judges to be Fired Forthwith.”

– John Jenkins