Facts of the Case
Willie Earl Carr sought disability benefits from the Social Security Administration (“SSA”), but an administrative law judge (“ALJ”) denied his claim and the agency’s Appeals Council declined to review the decision. Carr appealed to a federal district court.
While his case in the district court was pending, the U.S. Supreme Court held, in Lucia v. Securities and Exchange Commission, that Securities and Exchange Commission ALJs are “inferior officers” under the Appointments Clause of Article II of the U.S. Constitution, and as inferior officers, they must be appointed by the President, a court, or the head of the agency.
In response to Lucia, the SSA Commissioner appointed the SSA’s ALJs. After these appointment actions, Carr raised a claim for the first time that the ALJs who had rejected their claims had not been properly appointed under the Appointments Clause.
The district court agreed, vacating the SSA’s decision and remanding the case for new hearings before constitutionally appointed ALJs. By agreeing on the merits, the district court held that Carr had not waived his right to raise an Appointments Clause claim by failing to raise that claim during the administrative proceedings. The SSA Commissioner appealed, arguing that Carr did waive the Appointments Clause challenge by failing to raise it earlier. The U.S. Court of Appeals for the Tenth Circuit agreed and reversed the lower court.
Does a person seeking disability benefits under the Social Security Act forfeit their ability to challenge the appointment of an administrative law judge under the Appointments Clause if they fail to present that challenge during administrative proceedings?
Persons seeking disability benefits under the Social Security Act need not argue at the agency level that the administrative law judges hearing their disability claims were unconstitutionally appointed for that argument to be preserved on appeal. Justice Sonia Sotomayor authored the majority opinion.
Generally, administrative review schemes require parties to give the agency an opportunity to address an issue before seeking judicial review of that question, known as “issue exhaustion.” However, if there is not a statute or regulation that imposes an issue-exhaustion requirement, courts decide whether to require issue exhaustion in a manner consistent with “the rule that appellate courts will not consider arguments not raised before trial courts.” In this case, issue exhaustion was not necessary.
First, agency adjudications are not well suited to address structural constitutional challenges because such issues usually fall outside the adjudicators’ areas of technical expertise. Second, issue exhaustion is generally not required when the agency is unable to provide meaningful relief to resolve the issue. As such, the Courts of Appeals erred in imposing an issue-exhaustion requirement on petitioners’ Appointments Clause claims.
Justice Clarence Thomas authored an opinion concurring in part and concurring in the judgment, which Justices Neil Gorsuch and Amy Coney Barrett joined. Justice Thomas agreed with the Court that there was no need for an exhaustion rule based solely on the conclusion that the proceedings bear little resemblance to adversarial litigation.
Justice Stephen Breyer authored an opinion concurring in part and concurring in the judgment, noting that in his view, the “nonadversarial nature” of the agency’s procedures is generally irrelevant to whether the ordinary rule requiring issue exhaustion ought to apply.” However, the Appointments Clause challenges at issue fall into the well-established exceptions for constitutional and futile claims.
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