The U.S. Supreme Court “continues its growing streak of rebukes” with a 7-2 ruling that the Securities and Exchange Commission “infringed upon powers given to the president.” This “victory for the rule of law, constitutional accountability, and liberty,” will echo through the federal government.
SCOTUS determined that the power granted to administrative judges is potent enough to qualify them as “inferior officers” which require an “appointment by the president, a federal department head or a court.” Even liberal Justice Elena Kagan agrees. Just “as armies can often enforce their will through conventional weapons, so too can administrative judges.”
President Obama was happy to allow SEC appointed judges to rule by their personal political agenda. However, that gravy train is over now.
Nick Morgan used to work for the enforcement division of the SEC. He notes, “the Supreme Court continues its growing streak of rebukes to the SEC,” explaining that last year SCOTUS “scaled back the agency’s ability to recover ill-gotten profits from defendants’ misconduct.”
Earlier this week the court accepted another case “that could narrow the scope of defendants’ liability for securities fraud.”
Not only will the White House have a say in all new appointments, the decision “could also make it easier for these in-house judges to be fired by a president’s political appointees in agencies, instead of being protected from such action, as is currently the case.” In other words, “let the housecleaning begin.”
Obama’s administration took the exact opposite position. Because the judges’ decisions “are not final” and “subject to review by the commission,” the streamlined method seemed perfectly reasonable. The Justices didn’t buy it. Mistakes in those cases rarely get caught and corrected.
On Thursday, seven of the justices confirmed what President Donald Trump’s administration has been saying all along. Low-level staffers simply do not have the authority to pick and choose administrative law judges.
The practice usurps powers that were given to the president in the U.S. Constitution in violation of the “appointments clause” that controls how certain federal positions are filled.
The test case involves the SEC but the practice is common throughout government agencies.
Radio personality Raymond Lucia hosted an investment adviser show from his California studio, based around his “Buckets of Money” strategy to amass retirement wealth. Lucia seems to be the only one with the buckets full of money. His listeners weren’t very happy and an SEC complaint was filed.
Lucia’s attorney, Mark Perry beamed. “We are thrilled with the result, which is a victory for the rule of law, constitutional accountability, and liberty.”
When he presented his case to the administrative law judge, he lost. He was fined “for making misleading claims.” He was also “banned” from any type of “investment-related work.”
Lucia challenged the decision and it gradually rose to the highest court. It wasn’t up to SCOTUS to decide if Lucia defrauded his listeners or not.
That question had to be put on the back burner until the top court figured out if the judge actually had the legal authority to make a decision in the first place. “No,” they say. He didn’t.
Justice Kagan was elected to type up the majority opinion. In it, they flipped the lower court’s ruling that said the SEC hiring practices were just fine.
A whopping seven justices disagreed. “The agency’s commissioners, who are presidentially appointed, should have named them, not SEC staff,” they wrote.
Of the seven in the majority, six found the whole hiring process totally unconstitutional. Justice Stephen Breyer agreed it was wrong, but only as a violation of federal administrative law. Ruth Bader Ginsburg unsurprising opposed, joined by Sonia Sotomayor.
Liberals are frantically trying to get their heads around the idea that Justice Kagan would actually side with conservatives. “Why is Kagan playing nice with conservatives this term? What, put bluntly, is in it for her?” Left-leaning Slate reports.
Now the Lucia case goes back to square one for a totally fresh hearing “in front of a properly appointed administrative judge, or the commission itself.” The new hearing may produce the same result but at least this time it will be done properly.
Advocates for corporate rights are doing handstands. For years, they have been complaining the ballooning powers of the SEC’s enforcement division were giving them an unfair “home court” advantage on cases which belonged in federal district court instead.
By correcting the injustice, even if not directly appointed by President Trump, the administrative judges will now be picked by officials who themselves were appointed by the president.
Low-level staffers are no longer making the hiring decisions for people with authority exponentially higher than the people hiring them.
Several dozen cases are currently pending which will be affected by this week’s decision at the SEC alone. Countless numbers of current matters across federal appeals court are suddenly up in the air.
According to Lucia’s attorney, he estimates that there are “around 150 administrative judges across 25 agencies who might fall under the officer designation.”