5th Circuit Decision Leaves ALJs on 'Shaky' Ground
A 5th U.S. Circuit Court of Appeals ruling last week against the SEC could have implications for FCC enforcement actions and the powers of administrative law judges like the FCC’s ALJ Jane Halprin, but it is too early to be sure how the ruling against the SEC applies to other agencies, said academics and communications attorneys in interviews. Based on that Jarkesy v. SEC decision, U.S. Supreme Court rulings and a pair of cases currently before SCOTUS, the outlook for ALJs at federal agencies -- including the FCC -- “looks a little shaky,” said Jeffrey Lubbers, an administrative law professor at American University. “I’d be surprised if this decision is the final word,” said former FCC General Counsel Tom Johnson, now with Wiley.
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Jarkesy v. SEC concerns an enforcement proceeding against investment fund employees that was held before an SEC ALJ. A three-judge panel ruled that the SEC’s enforcement action violated the constitutional right to a jury trial, that Congress violated the Constitution by giving the SEC the power to choose whether enforcement proceedings are overseen by an ALJ or the federal court system and that ALJs are unconstitutional because the president can’t directly remove them from office. “SEC ALJs are sufficiently insulated from removal that the President cannot take care that the laws are faithfully executed,” said the majority opinion from Circuit Judge Jennifer Elrod. The ruling is widely seen as an “extreme” outlier, said Lubbers.
The 5th Circuit’s rulings in Jarkesy could have implications for other federal agencies like the FCC, but that's not immediately clear, academics and attorneys told us. “Certainly, the Jarkesy case has potentially significant consequences for the ALJ process and for administrative law in general,” emailed Halprin. “It is really too early to predict as of now what those consequences might be.” The FCC's process for sending cases to the ALJ differs from that of the SEC, which can choose whether to put cases in front of ALJs or the courts. The 5th Circuit specifically targeted that discretion, which could make it harder to apply the same reasoning to the FCC, said Lubbers. An FCC spokesperson declined to comment.
The arguments on the constitutionality of ALJs are the ones most likely to have an impact at the FCC, Lubbers said. He said it's puzzling that the majority argued against the tenure protections that are intended to separate the ALJs from their associated federal entities. “These are conservatives that are concerned with fairness,” he said of the majority opinion. “Why would they want to make it worse by making the ALJs less independent of these agencies?”
The 5th Circuit’s ruling likely wouldn’t directly affect the FCC unless there were action by the U.S. Supreme Court, attorneys told us. Jarkesy hasn’t been appealed to SCOTUS, but attorneys told us it could end up there, and there are other cases already before the court -- SEC v. Cochran and Axon Enterprise v. FTC -- that touch on related questions of agency and ALJ authority.
SCOTUS' taking up those cases is widely seen as a signal that the court is working its way toward taking action on ALJs, said Ronald Levin, an administrative law professor at Washington University in St. Louis. Lubbers agreed, but said there are signs that the court might not be totally opposed to administrative entities like ALJs. In a 2018 decision in Oil States Energy Services v. Greene’s Energy Group, a mix of left- and right-leaning justices including Clarence Thomas, Elena Kagan, Sonia Sotomayor and Samuel Alito upheld the authority of the U.S. Patent Office’s Trial and Appeal Board. Chief Justice John Roberts and Justice Neil Gorsuch wrote a dissent that presented similar arguments to those in the 5th Circuit’s Jarkesy ruling.
SEC ALJs have long been scrutinized for providing the agency what is perceived as “home-field advantage,” Johnson said in an interview. The FCC’s ALJs aren’t generally seen that way and the FCC is “more circumscribed” in their use, he said. “I wouldn’t assume the arguments would apply to the FCC,” he said.
If an entity did want to use the 5th Circuit’s ruling against the FCC before a SCOTUS ruling, the likely strategy would be to appeal an order to the courts after it goes through the ALJ hearing proceeding and receives a final ruling, said Johnson. Broadcast attorney Art Belendiuk, who frequently appears before Halprin, said he doesn’t think it would be easy to apply the Jarkesy ruling to the agency, but he thinks juries, not ALJs, should decide cases. ALJs serve an important role as fact-finders, but a jury proceeding would be more equitable, he said.
Johnson said the 5th Circuit’s ruling might also have implications for the FCC another way -- the agency has a challenge to the USF pending there, in docket 22-60008. The petitioners are challenging the constitutionality of congressional authority to delegate the FCC to collect and spend USF dollars, a similar tactic to the Jarkesy case, he said. Between the Jarkesy decision and the recent order on Section 230, “the 5th Circuit has shown a willingness to really hold agencies’ feet to the fire,” Johnson said.