Cochran v. SEC: Vindicating Article III Jurisdiction over the Structural Constitution and ALJs

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In Cochran v. SEC the Fifth Circuit court of appeals sitting en banc opened the doors of federal district courts in Texas, Mississippi and Louisiana to constitutional challenges to agency  administrative law judges (ALJs) who enjoy multiple layers of protection from removal. This means that persons administratively charged by the SEC will no longer have to first endure years of pointless administrative proceedings before judges they claim are unconstitutional. By contrast, in six other circuits (Second, Fourth, Seventh, Eleventh, D.C. and Ninth), administrative agencies such as the SEC and FTC can instigate unconstitutional proceedings and evade judicial review by an Article III court for years on end. Defendants are thereby forced to settle or bankrupted before ever receiving meaningful judicial review.

Cochran is not only a groundbreaking course-correction vindicating Americans’ access to Article III courts for redress of their constitutional rights, but it creates a circuit split that may well prompt Supreme Court review. The Fifth Circuit, by a 9-7 vote (Haynes, Jones, Smith, Elrod, Willett, Duncan, Engelhardt, Oldham and Wilson) held that § 78y of the Exchange Act neither explicitly nor implicitly stripped jurisdiction from federal courts to hear this challenge.

Judge Oldham, joined by Judges Smith, Willett, Duncan, Engelhardt and Wilson, concurred separately in a remarkable opinion that set forth the origins of the administrative state in § 78y’s transfer of power “far away from the three branches of government the Founders worked so hard to create, separate and balance … [a]nd … as far away from democracy and universal suffrage as possible.”  They said that critical disjuncture has allowed “administrative agencies to operate in a separate, anti-constitutional, and anti-democratic space—free from pesky things like law and an increasingly diverse electorate.”

Please join Peggy Little, Senior Litigation Counsel of the New Civil Liberties Alliance (NCLA), who argued the en banc, and Gregory Garre, former U.S. Solicitor General and now partner at Latham & Watkins, who worked with another NCLA client in 2020 on a petition for certiorari to the Supreme Court on this point, for a discussion of this landmark decision and the concurrence’s open engagement with administrative power.  Peggy and Greg will discuss how this structural constitutional question was litigated in district courts in California, Texas and the Fifth, Ninth and Eleventh Circuits, what the Fifth Circuit got right that so many other circuits got wrong, and how this separation of powers question might reach the Supreme Court in the near future.



  • Peggy Little, Senior Litigation Counsel, New Civil Liberties Alliance  
  • Gregory Garre, Partner, Latham & Watkins



As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

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Guy DeSanctis:  Welcome to The Federalist Society’s webinar call. Today, February 2nd, we discuss "Cochran v. SEC: Vindicating Article III Jurisdiction over the Structural Constitution and ALJs." My name is Guy DeSanctis, and I’m Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call.


Today, we are fortunate to have with us Gregory G. Garre, partner at Latham & Watkins and Global Chair of the firm’s Supreme Court and Appellate Practice Group, and also Peggy Little, senior litigation counsel at New Civil Liberties Alliance. Peggy also argued Cochran v. SEC. Throughout the panel, if you have any questions, please submit them through the question-and-answer feature or the chat so that our speakers will have access to them for when we get to that portion of the webinar. With that, thank you for being with us today. Gregory and Peggy, the floor is yours.


Margaret Little:  Thank you, Guy. Cochran was a long time in coming and was a culmination of a lot of work in district courts, in California, in the northern district of Connecticut, and also appellate work on behalf of NCLA in three circuits. We were up against a very heavy climb. There were five circuits that held against us that there was no district court jurisdiction to hear these Article II separation of powers claims. And by the time of oral argument before the Fifth Circuit, yet another circuit had joined, the Ninth Circuit, which had also said there was no district court jurisdiction to hear these claims. It was argued on January 20th before 16 of the judges on the Fifth Circuit.


NCLA’s work on this began when we were asked to represent Ray Lucia on remand. And for those of you not familiar with the Lucia decision, I think it sets a good background for what we’ll be talking about today. Ray Lucia went through six years of proceedings, a good deal of it—two and half years, I believe—in administrative proceedings. And then he brought challenges to the appointment of his administrative law judge. He took that all the way through the DC Circuit, the DC Circuit, and then he sought en banc review there. And there was an even split, so the tie went to the government on that one. And then he did get cert. And at the US Supreme Court, they held that his administrative law judge had not been constitutionally appointed.


Both Ray Lucia and Michelle Cochran were in the situation that they were broke and on the receiving end of Pyrrhic victories because Ray Lucia’s prize for taking that appointment’s claim all the way to the Supreme Court was that he got to go back and do it all over again. He had to go through a whole brand-new round of administrative proceedings. And he still had an Article II claim in the case on the removal question—on the multiple layers of removal protections for SEC administrative law judges. And yet, the Supreme Court had not granted cert on that aspect of his Article II claims, so he had to go back and try to raise those before an administrative law judge. We stepped in at New Civil Liberties Alliance, and represented Ray, who had no more money for legal fees at that point. And in fact, his business was ruined by that time—six years into these SEC charges. So we brought suit in San Diego District Court to say he should not have to go through that insane Kafkaesque process all over again.


And it’s important to realize that while this looks like a fairly logical and simple outcome that we will be discussing today, at the time, we had five circuits against us. We had this US Supreme Court remanding the case to be reheard before an administrative law judge. And in both the briefing and many of the public accounts of the case, it was seen as, basically, a frivolous lawsuit, which is no fun to be accused of, and certainly no fun to try to bring into court. There were several troubling things also. Both Ray and Michelle had a particular administrative law judge, Cameron Elliot, who had told people who came before him that he always rules for the SEC and, in addition, that he always gives a maximum penalty to anyone who contests their charges.


One of the interesting things about the original opinion in Lucia is that Justice Kagan called out that administrative law judge, and she ordered that Ray’s same judge would not rehear his case. That is highly unusual for those of you who know that whenever a case is remanded, whether it be to a district judge or to administrative law judge, the Court does not oft order that it not be the same judge unless there’s real cause for concern. And, of course, this was one of the concerns in all of these things is that the administrative law judges are employed by the prosecutors, so there are due process and other fairness concerns. But the Supreme Court had at least ordered that there would be a new administrative law judge.


It’s hard to overstate the absurdity of the position of the SEC and the five circuits that they were able to lob at us in the briefing. No rational system of justice would be designed so that if you had an unconstitutional judge, you had to go through a full round of proceedings—proceedings that take years to resolve. And then you get to go into a circuit court and say, “Hey, that administrative law judge was not constitutional.” And it was also baffling to me why the five circuits even were ruled as they did because Free Enterprise Fund—which had been decided before any of those five circuit cases—had held that, under the very same statute, the SEC -- the Exchange Act Section 78y, that, in fact, there was district court jurisdiction to hear precisely this issue, which is removal protections. And so, it was both baffling and difficult to overcome these five circuit court opinions.


I won’t go into the details of the opinions. As you might imagine, having briefed it several times in San Diego, at the Ninth Circuit, at the Northern District Texas through the Eleventh Circuit, we also sought review. And Greg Garre helped us with a petition for certiorari in that case. So we briefed those cases a great deal. But I will point out one of them for those of you who would like to school yourself in how bad it can get. I would choose, as the worst of those decisions, the Tilton v. SEC case in the Second Circuit. It was an early decision. And it was very unsatisfactorily reasoned in the majority opinion. And it was also the only circuit court case that had a dissent, that is until the Ninth Circuit chimed in after en banc review was granted in Cochran.


And the frustrating thing about the Tilton decision -- and then we kept running up against the Standard Oil claim. I don’t know if any of you have run up against this, but one thing they love to say is that going through unconstitutional proceedings that may take years and ultimately be reversed is “part of the social burden under living under government.” And that language kept getting tossed at us left and right. The Tilton decision is particularly galling because there’s this footnote in the opinion in which they cite Learned Hand acknowledging that becoming a party to a lawsuit should be dreaded beyond almost anything else short of sickness or death. Nonetheless, the SEC—or rather the Second Circuit—seemed not to care that -- and actually, all of the circuit decisions had an enormously callous view of what it would mean for ordinary Americans to go through a multi-year administrative law process that would ultimately make no sense at all to have gone through in the first place.


Perhaps the most refreshing thing about the Cochran decision is it turned that ship around and actually looked hard at the question of what this would entail for the respondents who had been charged by the SEC. And they actually recited Mr. Lucia’s arduous journey through that process and noted that after eight years of fighting, he had to surrender his constitutional rights because he simply could not afford to fight any longer and had to settle.


The first hint that we might get a break in the Fifth Circuit was when we had noticed that the Court ordered a hearing on our motion for an injunction, staying the administrative proceedings pending appeal. And that was heard before Judges Jones, Oldham, and Higginson. And, to our delight, unanimously, they voted just a couple hours after the hearing to stay the administrative proceedings. And that was a sign that we had a circuit that was at least willing to listen to these questions. The panel that ultimately heard the merits of the jurisdictional question did rule against Michelle Cochran, 2-1. And they did so largely citing an opinion called Bank of Louisiana, in which, under a different statutory scheme for the FDIC, an earlier panel of the Fifth Circuit had ruled that you had to go through the administrative proceedings.


The Bank of Louisiana case was quite distinguishable for any number of reasons, including that the FDIC statute, Section 1818, expressly stripped jurisdiction from the district courts and said that for these claims under the section of the FDIC statute, you had to just go through administrative proceedings. Whereas not only did we not have a jurisdictional stripping section of the ‘34 Act, there, in fact, was a jurisdiction preserving section of the ‘34 Act that said nothing in this statute establishing administrative proceedings shall be construed to remove jurisdiction for remedies already available in the federal courts. So we had structural statutory grounds and also an important distinction between the Bank of Louisiana case. Nonetheless, we lost 2-1. We felt that this was certainly a question of exceptional importance and sought en banc rehearing. We were delighted when the briefing by the SEC was ordered, and ultimately, we had a rehearing en banc.


At the argument, I would say one of the things that was most interesting to me was the judges -- they seemed to appreciate the fact that what the courts in the five circuits—and actually six circuits by the time it was argued—what they were asking people to do was go through multiple years of administrative proceedings before they could ever find out if the judge that had heard those hearings was even constitutional. For Michelle Cochran, it was five years. For Ray Lucia, as the Cochran decision notes, it was eight years. There was a Tenth Circuit case involving a gentleman named David Bandimere. That was 10 years. George Jarkesy had seven years. Christopher Gibson, in the case in which Greg helped us petition for cert, had a four-year journey, and that’s still counting through the administrative proceedings.


And if you contrast that to the normal time from filing to resolution in the federal courts -- in the federal courts, it averages somewhere around two/two and a half years. So you’re talking about multiples of the normal district court time to resolution of a case if you go into administrative proceedings. This focuses on what I like to call—and I do so somewhat pejoratively—what I like to call the big lie. Andrew Ceresney, who was Enforcement Director of the SEC, at one point did acknowledge that, yes, it’s true you do not have the same due process protections in administrative proceedings, but they are shorter, swifter, faster, and offer a sort of truncated, but generally fair, way of the SEC to prosecute people. And that is just not true in the case of these individuals that I have set forth. And in fact, I think if someone were to do a study of how long these administrative proceedings take, there would be some disturbing data to come out of that. It’s something I keep telling myself I should do, but I haven’t had the chance to do yet.


So when the SEC charges you, you have to realize they’ve had years to investigate you. Now, they could charge you either in district court or in administrative proceedings. And they can bring those proceedings very swiftly and give you very little time to prepare a defense—and very often it’s as short as 60 or 90 days or sometimes 120 days for you to prepare your defense—and then they can sit on your case for multiple years. And that is just really a denial of litigants’ rights to have their claims timely heard. Then, when you consider the nature of their constitutional claim in all of these cases -- is that the judge hearing those unbalanced and inefficient proceedings are not even constitutionally permitted to hear them.


It was very refreshing to see the Court look -- the en banc Circuit Court take a fresh look at these questions. They not only looked at the logic of the proceedings. Of course, if you’re going to be putting your ability to defend yourself before an in-house judge, that judge should be constitutionally appointed, and that is a threshold question that must be decided. In the majority opinion, they also went through the logic and text of the statute, which was really the first time that someone had done that, and went into the differences, for example, that there was a jurisdiction preserving provision in 78y. They also, essentially, just enforced Free Enterprise Fund. That was the great mystery to me all along -- is Free Enterprise Fund held in 2010 that there’s district court jurisdiction for these kinds of administrative law claims. And for the life of me, I’ll never understand why five circuits could fail to follow that Supreme Court precedent.


It does make you wonder if courts in general, whether they be district courts or circuit courts, have become so inured to deferring to administrative agencies that that comes as a reflex. There certainly seem to be a lot of sloppy reasoning because the other thing that the Cochran en banc court did is they went through the factors that are set forth by the Supreme Court in a case called Thunder Basin as to whether the statutory scheme provides meaningful judicial review, whether it is within the expertise and competence of the agency, and also the third factor is -- gosh, I argue this so many times, I’m forgetting it. It’s the judicial review -- oh, whether it’s a wholly collateral issue. Okay?


And one of the very frustrating things, if you read those five circuit opinions, is they go through and say, “Well, this kind of looks collateral. But nonetheless, we’re going to say the SEC can rule on it on the first place.” And then they would say, “Well, yeah, it’s generally true that constitutional questions are not decided in administrative agencies. Nonetheless, maybe they can bring their expertise to bear and then moot the question out,” a particularly frustrating argument when you consider that the judge mooting out whether he or she isn’t qualified to hear the case in the first place is ruling on their own competence. And it’s not meaningful judicial review. So all three of those factors were very thoroughly thought through and well-reasoned and well decided by the panel – rather, the en banc majority in Cochran.


So it was, for us, really revolutionary is the way I would describe it or at least in terms -- it turned the ship around. There was a ship sailing down five to six circuits going in the wrong direction, and they righted that course. There are a couple of aspects of the majority opinion I’d also like to point out—and this goes to anyone listening who might be handling a question of this nature—and that would be the use of amicus briefs. One of the things that we are very indebted to here at NCLA is a wonderful set of amicus briefs that were filed in this and some similar cases on behalf of Ray Lucia. As the majority opinion points out, Texas Public Policy Foundation filed a great amicus that talked about this issue—a judge’s ability to rule on qualifications. And generally, a judge would be recused from such a decision.


And this was interesting for us to watch because we actually saw in a number of administrative decisions—one in the DEA, Drug Enforcement Administration administrative proceedings -- one of the ALJs there said, “I can’t rule on my own removal.” And the ALJ himself said, “This is not within my power to do.” Unfortunately, most of the administrative law judges—and certainly the ones in both Ray Lucia and Michelle Cochran’s case—did feel they had the capacity to rule that they were qualified to rule constitutionally, and they did so. So it was great to get that help at the circuit and in the en banc from these very well-done amicus briefs.


I would be remiss if I did not talk about the concurrence. The concurrence really is unusual, I think it would be fair to say. It delves very deeply into these questions. Now mind you, it’s only six judges. But it goes into a very scholarly review of these questions, and it locates the origin of the administrative state in Section 78y, the very provision that created this kind of administrative review under the Securities and Exchange Act, which is one of the oldest administrative law statutes. It talks about the fact that statute -- the quote is “seeded lawmaking to bureaucracy.”


In the panel description, we included some other quotations. I think one of them is it transferred power “far away from the three branches of government the founders worked so hard to create, separate, and balance, and is far away from democracy and universal suffrage as possible. And this has allowed administrative agencies to operate in a separate, anti-constitutional and anti-democratic space free from pesky things like law and an increasingly diverse electorate.” So the en banc not only secured us a majority that reversed the very erroneous course of proceedings that Michelle Cochran and Ray Lucia had faced, but it provided a very thoughtful dissent by six of the judges of the Fifth Circuit that we believe will be something that courts in the future will look to and learn from. At least, we hope that is the case.


The other point I guess I would make is we did not only ask for and get this great amicus support, but we gathered together a lot of materials, such as SEC commissioners themselves talking about how these proceedings are of concern. Commissioner Hester Peirce was greatly concerned about aspects of these proceedings. So I guess the lesson there is that we need to -- in preparing and winning one of these cases, you need to think as creatively as you can. If you’ve got five circuits against you, you need to do some hard thinking about lining up as much support as you can get. I think that’s generally all I have to say. Greg, do you want to step in and offer your thoughts on the process?


Gregory G. Garre:  Sure. That was a great summary, Peggy. And thanks. You know, I thought what I would say a little bit about is where things stand now in the Supreme Court because as many of you know, as we are celebrating the Cochran win, which was phenomenal, the Supreme Court has just agreed to hear this issue likely in the next term. So it’s interesting how those events intersect, and it’s no coincidence. I think many of us have thought about the challenges and dangers of the administrative state.


I’ll have to say, having worked on one of these cases, these cases are really unique in terms of impact—and Peggy alluded to this—on the individuals themselves. And one thing that we said in our cert papers in the Gibson case was that the administrative state can be ruthless in its ability to destroy the lives of those swept up in its machinery before any wrongdoing is even established. Peggy sort of alluded to the facts in these cases, but it really is remarkable that courts allowed this to go on as long as they did before the Fifth Circuit en banc eventually stepped in.


But thinking about how this issue got to the Supreme Court and how we got to where things stand today, I think it’s really a lesson in perseverance and the great work that NCLA does and many of the groups and probably individuals who are tuning in today do. From 2015 to 2021, there were seven circuits by our count which rejected this theory and held that the administrative review provisions stripped district courts of their jurisdiction to entertain structural constitutional challenges to administrative decision-makers—the Second Circuit, Fourth Circuit, Seventh Circuit, Ninth Circuit, Eleventh Circuit, DC Circuit, and Fifth Circuit, at least initially in the panel decision.


During this time, the Supreme Court denied cert in three instances: in Beto v. SEC in 2016—and Beto was really sort of the first case that kicked this off—in Tilton v. SEC in 2017 under the Second Circuit, and Gibson v. SEC in 2021 out of the Eleventh Circuit. And each time, the government was able to come in and say, “Well, there was no circuit conflict, so the Supreme Court, you don’t need to step in.” And this was, in my view, really one of those instances where the Supreme Court probably could have stepped in, but it didn't. And it ordinarily doesn’t, as you know, when there is no circuit conflict. But challengers kept bringing these claims.


And along the way, they picked up some helpful dissenting opinions. Judge Droney in the Tilton case in the Second Circuit wrote the first and extremely persuasive dissenting opinion that Peggy alluded to. Judge Bumatay in the Ninth Circuit in the Axon Enterprises case wrote a very persuasive dissenting opinion. And then Judge Haynes did in the Fifth Circuit in the panel decision in Cochran, which ultimately prompted the full Fifth Circuit to take it up. And then, Peggy and NCLA convinced the Fifth Circuit to rehear the Cochran case en banc and eventually convinced it to go its way, which created a circuit conflict. And lo and behold, fortuitous timing, Axon’s case, which the Ninth Circuit had rejected, was pending before the Court on cert. And so, the Court granted certiorari in the case January 24th, just a couple of weeks ago. So the Supreme Court, it’s that case that’s likely to be argued next term, early next term. But the Supreme Court now will take up the issue, and one hopes will follow the Fifth Circuit’s decision en banc in the Cochran case and not the prior circuit decisions.


So just to say a few words on the Axon Enterprises case, which the Court is now going to hear -- Axon case is slightly different in that, one, it involves a company as opposed to an individual like all the other cases, and two, it comes up in the context of administrative proceeding involving the FTC instead of the SEC, although as the government has pointed out that the administrative review schemes are functionally equivalent, certainly, the expectation is the Court’s resolution of this issue that the FTC administrative scheme will resolve it as the SEC scheme, too. So in Axon, Axon is a company which makes body-worn cameras. And it acquired a competitor, which prompted an investigation by the FTC as to the anti-competitive effects of that acquisition.


The FTC eventually threatened to initiate administrative proceedings in which it not only would reverse the acquisition but actually enable the competitor to use Axon’s intellectual property in its own manufacturing. Axon wasn’t too pleased about that. It filed suit in district court, asserting, among other things, that the FTC ALJs, who would consider this proceeding were constitutionally deficient because they were protected by dual layers of for cause removal. The FTC then immediately initiated administrative proceedings and no doubt hoped that it could keep the case before the administrative agency for a long time.


But the district court -- Axon then went to district court and brought a claim, the constitutional claim. The district court dismissed their claim for lack of jurisdiction following the circuit precedent, holding that the administrative review provisions stripped jurisdiction over these constitutional claims. Axon appealed to the Ninth Circuit. The Ninth Circuit, in a 2-1 decision, upheld the district court’s decision with Judge Bumatay dissenting. And then Axon filed a cert petition which raised, not only the jurisdictional question of whether the district courts had jurisdiction to entertain this structural constitutional challenge to the administrative decision maker, but also the merits question regarding the constitutionality of FTC ALJs.


As the SEC had done and government—the SG’s Office—had done in all the other cases, they initially argued that the Court should deny cert because there was no circuit conflict. But then, as we know now, the Cochran came along and created a circuit conflict. At which point, Axon filed a supplemental brief telling the Court that this was now absolutely necessary for the Court to grant review in line with the circuit conflict. And the government, I think, didn't even respond to that brief leading the Court to grant cert.


So the Supreme Court will decide this issue. One hopes that it will decide it favorably to the challengers and in line with the Cochran decision. In terms of what happens next in the Cochran case, it’s likely that the SG’s Office will file what’s known as whole petition asking the court to hold the Cochran case pending the disposition in Axon Enterprises and dispose of it in accordance with the decision in that case. I think you’re on mute, Peggy.


Margaret Little:  Thank you, Greg. We have a question about what do you think the consequences of winning looks like from our perspective? And I think winning is that administrative law judges cannot have more than one layer of removal protection. And of course, Humphrey’s Executor is always an issue. A true win would be to have the Supreme Court take a look at that doctrine as well because what the very comprehensive concurrence tells us is that we have drifted so far away from the original design of the Constitution that most of our laws are really regulations that govern the lives of Americans. And they do so in a way that is very opaque, nontransparent, and most importantly unaccountable to Americans. And so, administrative adjudication is one of those ways. It is a system that is full of due process concerns.


I know that at the time we started representing Ray Lucia and Michelle Cochran, there were Wall Street Journal and New York Times articles that talked about, for example, an administrative law judge who had been admonished by the chief judge for not being sufficiently loyal to the SEC in her decisions. Others, such as Cameron Elliot, openly admitted that he always rules in favor of the commission and imposes maximum penalties on anyone with the temerity to dispute their charges. Those are deeply concerning statements. Actually, it’s very interesting that Cameron Elliot, not long after the Lucia decision was decided, transferred to a different administrative agency. I don’t know if he was being too honest about the process for the SEC’s comfort or what precipitated his transfer. But at least SEC respondents no longer have to deal with a judge who made statements that would be deeply disqualifying and troubling if they came from a district judge.


And so, I think a win from our perspective would be taking a look at whether administrative law adjudication is even working. With these built-in structural biases, another judge in some of the New York Times and Wall Street Journal reporting admitted that, frankly, the SEC shifts the burden. When you’re hauled before an SEC ALJ, the burden is no longer on the government. It’s on you to show why they don’t have a case against you. And you have to remember they’ve had months, if not years, of investigation to gather documents. They then dump those documents on you at the beginning of proceedings. You have a very short time to respond.


Another good example of how bad those proceedings can get, Ray Lucia had witnesses—customers—who wanted to speak on his behalf. And this all came out in the briefing before his first case in the Supreme Court. And just very shortly before those witnesses were to testify, the SEC served them with subpoenas requiring them to produce all of their financial records over the course of the last five years before they could testify in his favor. And so of course, Ray, not wanting to put his customers at that sort of peril when all they were going to testify and say was that he had never misled them or anyone else, and no one had suffered losses from the conduct that he was being charged with -- and so he didn't even get to present witnesses on his own behalf. That would not be tolerated in the district court.


So from my perspective, I think a win is a judicial and also social and cultural review of things like administrative law judging and whether that is, in fact, how we want to be prosecuted by our government in a government that separates powers—judicial, executive, and legislative. Also, we’re ruled by things like guidance, which is just not part of any lawmaking. So I think a fresh look at all of these administrative proceedings and administrative power would be a win. Okay.


Gregory G. Garre:  So Peggy, I think someone asked, “Why do you think it took so long for the courts to get this straight?” And that’s a great question because this is kind of a look back on how long it took to get to where we are today and a little bit sobering when I hoped the courts would have gotten there quicker. I mean, I guess I would point to a few factors. I mean, I think, as Peggy mentioned earlier, there was a tendency to defer to the administrative agencies and general complacency and understanding that administrative proceedings would take place first, and so perhaps courts would be less likely to intervene.


I think also that the Thunder Basin factors that Peggy mentioned earlier may have contributed a little bit in making the inquiry more tenuous and vague than it had to have been and just starting with the statute to see if the statute actually stripped the district courts of jurisdiction over these claims, which it clearly doesn’t. And then I think maybe there was a lack of appreciation of the nature of the underlying constitutional claims and the importance of these structural constitutional protections, which, fortunately, I think the Supreme Court has addressed more recently in some of its decisions, including Free Enterprise Fund. Although, as Peggy mentioned, that was in 2010, and the courts really didn't pick up on it at all in the majority decision until the Cochran case.


Margaret Little:  As I like to say in the briefing, it’s not so much that the courts didn't acknowledge Free Enterprise Fund, it’s that they felt free to disagree with it. And that is a pretty astonishing thing when you come to think of it, given what I used to understand as the hierarchy of judicial precedent.


Let’s see. I’ve got another question here. They ask, in the course on my judicial law odyssey, have I encountered any Article III judge who was aware of Philip Hamburger’s work. Well, the folks on the concurrence are. And it was greatly gratifying to see that. For those of you who don’t know, New Civil Liberties Alliance was founded by Philip Hamburger. And its purpose—and we started litigating and filing briefs in 2018—its purpose at its founding was to get courts to take a fresh look at all of these questions of administrative power. So the concurrence went deeply into that topic. I do think many judges will be educated by what they read there. I certainly learned a few things myself in terms of the origins of the administrative power in Section 78y.


And I think its recitation of the incursions and encroachments upon our civil liberties that can be done by administrative agencies, even when they seem like they’re not necessarily a big thing at the time, they add up to the denial of our civil liberties. And those are not supposed to be subject to bureaucratic extinction. And I think that it’s extremely gratifying to see the concurrence think through those issues and acknowledge in how they have changed the way that Americans are governed. So I hope to see more of that.


I’m trying to look at my screen on these questions. One second here. Okay. Someone asked whether final agency action was a problem for us. And, yes, that was definitely a problem. It was actually comical. The briefing -- the SEC would come in and say, “Well, you’re acting as if this is final agency action, and it isn’t. And therefore, you can’t challenge this.” And we were like, “We know this is not final agency action. We are not claiming it’s final agency action. We are claiming that it is not covered by these proceedings.” I mean, the circuit court review is for the outcome of a lawful administrative proceeding.


And the circularity of some of the briefing was -- well, I can’t really say comical, although at times, that was perhaps the healthiest for me to look at it. But it was frustrating. It was like we were talking past each other. And we never made a claim it was final agency action. Of course, we hadn’t. I mean, Michelle hadn’t -- she hadn’t gone through her proceeding. We sought a stay, pending review. I mean, I’m not exactly sure what the SEC meant by those arguments, but they were -- we wasted a lot of time and paper on them. And I don’t think they were well-founded. But I also think the SEC was quite used to just kind of throwing that term out and winning. I mean, there’s a reason why people brief cases the way they do, and I think it probably had, for far too long, been a very successful strategy for them.


Let me see. Someone has asked about international arbitrations, and I would like to say I know the answer to that, but I don’t. But I guess I would say -- here’s the question. “Is an ALJ ruling on the Court’s competence without judicial review really a problem? Don’t we do the same with international arbitrations?” And I guess what I would say is arbitrations really are a different world. Typically, there’s a contractual agreement to be bound by arbitrations, or there’s some provision of international law that’s really not comparable to our domestic separation of powers and how we allow the government to prosecute Americans.


So many things happen in arbitrations. I have done arbitrations, and I’ve actually litigated about arbitrations. And my concern about arbitrations frankly is -- I used to say, “Arbitration is where all great crimes go to die,” because arbitration decisions are virtually unreviewable, at least in some contexts, and I find that troubling. Now mind you, if you’ve agreed to this contractually, it’s fine. You get your distribute result, and you don’t have the same appellate rights. But I think when the government is prosecuting a respondent, none of those protections—due process and appellate protections—should ever be surrendered by people charged by the government.


Okay. Someone asked about the implications for state regulatory actions in which the adjudicator is less independent than those in federal agencies. Here’s what little I know about state ALJs. In fact, several states, in fact, have a separate administrative law judging process. And those judges are not employed by the agency that is prosecuting you. And so, in fact, I would say they’re more independent in those states. I still think it’s a problem. I think that the people who founded this country, whether it be through a state constitution or a federal constitution, put the adjudicative power in its own branch. I’m not at all convinced that there are not enough to judges to decide those disputes. And so, whether they’re less or more independent, I think they’re just not -- they’re not in a separated branch. And I think that has inherent problems, whether it be under a state system or a federal system.


Let’s see. I’m trying to see if we got any additional questions in.


Gregory G. Garre:  Peggy, there’s one question about what would you do if you had one of these cases or issues pending now. And I think, certainly, I would alert the Court to the Supreme Court’s grant of cert and possibly ask for a stay. Although, I think a lot of courts would be reluctant to do that for a year or more as it’s going to take the Court to decide the issue. But that’s what I would do.


Margaret Little:  I agree. And I’d have plenty of briefing already at the ready in terms of starting a process that, in Michelle’s case, was five years, and in Ray’s, eight years. I think waiting a year for the Supreme Court to decide whether the process is constitutional in the first place is actually the more efficient way to reach the question, and so I absolutely would do as Greg suggested. And I think we’d have a lot of factual support for that.


I think we’ve discussed the questions that have shown up here. Let me go to the chat function. I’m not sure I got all of those. Okay. There was a data question about how you get data about processing time for cases. And that’s a really good question. I’m glad you asked it because it was super easy for us to get that data in federal courts because the courts have to report to the Judicial Conference on average time of resolution from filing to resolution of case. So you can go to any court and do that. I think there’s no accounting, that I’m aware of, of administrative law judges. One of the most frustrating aspects of this work -- and I did not work in administrative law before I came here, so I’ve had my eyes opened as to many things. One of them is that they have magic deadlines.


I’m not kidding you here. They have magic deadlines in SEC proceedings. And even though there’s a rule that says that the judge has to rule within a certain number of days—and it’s quite a long period of time; I think it’s close to a year; 300-and-some days they have to issue a decision and a ruling—they routinely extend their own deadlines. But God help you if you as a respondent miss a deadline, you’re cooked in these proceedings. So we like to call them magic deadlines to keep ourselves sane and our sense of where we’re going. But again, that’s a perfect example of the asymmetry. An Article III judge that’s sitting on a case and the prosecution has a deadline is going to generally hold them to it, same thing to a defendant. But when you have the ALJ extending his own deadline to file an appeal, I mean it’s the kind of thing that -- well, let me just put it this way. When I started this work, someone once said to me, “You will find yourself using the word Kafkaesque a lot.”


I mean, the perfect example is poor Ray Lucia, who goes through six years of proceedings, wins, and his prize is to go back and do it all over again. And the SEC says, “No, you got to go through the whole thing on removal.” And guess what? If he does, and he wins, then he still has to go back and do it a third time. No rational system of justice would ever be designed in that fashion. We kept arguing that. We kept saying that. We kept losing. And finally, this en banc court heard, and it was extremely gratifying. We knew we were right. We knew we had logic on our side. We knew we had the statutory text on our side. We had fundamental concepts of efficiency and fairness in how you would design a system. We knew we had all of those things on our side, but we lost, and we lost, and we kept losing. And it was a very long journey to this very satisfying creation of a circuit split that means that the Supreme Court will address the question.


I don’t know who -- well, someone has asked, “Who is the largest user of ALJs from an agency perspective?” The Social Security is, obviously. There are a number of such judges. One of the things that -- we’re far less concerned about administrative power used in Social Security or, say, veterans’ benefits cases because that is not someone who’s been hauled before the Court by the government. They’re someone going before a tribunal and saying, “I need a benefit.” And the ALJs there are making the decision, “Are you qualified for this benefit?” So the same due process concerns are not as starkly at stake in those proceedings.


If you take the entire number of administrative law judges and then you ask how many of those judges are in contested government prosecutions, it’s an astonishingly small number. I think it hovers somewhere around 200, maybe 250. Philip Hamburger—and I agree with him—thinks we would do just fine if we added another 250 federal judges to the Article III bench and then had them decide those cases. For one thing, as the evidence that we submitted to the Fifth Circuit shows, they would be decided more efficiently. They would not take anywhere between five and ten years to be decided. So if you separate out the large number of benefits ALJs who are really doing a different job, and then look at the number of ALJs who are deciding contested cases that the government has brought against Americans, it’s, to me, an easy call that we should go back to Article III judging.


Okay. Someone asked about how would they extend a deadline. They just do it. They issued an order saying, “I’m extending my deadline to issue my opinion.” It’s not even subtle, even though the rules require judges to issue their ruling within a certain time period. I don’t see a question yet that we haven’t answered. There’s some nice comments. Thank you for those. But I think we’ve answered many of those. Greg, do you have anything you’d like to sort of wind up with.


Gregory G. Garre:  I don’t. I mean, I was, as you were efficiently going through those questions, I was looking at the sign behind you that says, “Never, never, never give up.” And that’s as good of a motto as any for what you’ve done and accomplished.


Margaret Little:  It’s actually what Winston Churchill said, and it’s a motto very dear to my heart.


Guy DeSanctis:  Thank you both. On behalf of The Federalist Society, I want to thank our experts for the benefit of their valuable time and expertise today. And I want to thank our audience for joining and participating. We also welcome listener feedback by email at [email protected]. As always, keep an eye on our website and your emails for announcements about upcoming Teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.




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