FOIAengine: WILL TRUMP FIRE ADMINISTRATIVE LAW JUDGES?
LinkedIn is usually a repository of routine announcements and postings, but this headline raised an alarm: Expect All SEC Administrative Law Judges to be Fired Forthwith.
The prediction of such a drastic action came from a former top official in the Securities and Exchange Commission’s Enforcement Division. John Stark ran the SEC’s Office of Internet Enforcement for 14 years, and he was offering an insight that most others missed. The implications extend far beyond the SEC.
In a little-noticed filing with the federal appeals court in Philadelphia, a bombshell had just been dropped: the Justice Department would no longer defend the constitutionality of the law protecting administrative law judges from being fired “at will” by the president.
In essence, the Trump Administration was serving notice that it was ready to disregard or do away altogether with some administrative law judges, who hear cases and render decisions across scores of federal agencies and departments. The largest of those, the Social Security Administration, has 1,500 ALJs who annually make over 650,000 decisions in disputes about disability and retirement benefits.
Stark wasn’t suggesting that all ALJs would be given the boot. Instead, he was offering a prediction of where the ax might fall first: at his former agency, where an enforcement turnaround is already in overdrive. (See our story from last week, “Huge Turnaround in SEC’s Crypto Enforcement.”)
Backing up his prediction, Stark cited the executive order issued on February 18 by President Trump aimed at “reining in” (Trump’s words) the SEC and other independent agencies. That order calls for the SEC and others to submit any new regulations to the White House, set up White House liaison offices, and “regularly consult with and coordinate policies and priorities” with the White House.
An SEC spokesperson declined comment on whether the SEC had already set up such a liaison office, as well as how or if the agency planned to comply with Trump’s order to coordinate policies and priorities with the White House.
Beyond Social Security, ALJs have been an administrative mainstay in the federal government for almost a century – taking testimony, ruling on evidentiary questions, and making factual and legal determinations. They are also lightning rods for claims of administrative overreach, as evidenced by the scores of recent Freedom of Information Act requests to dozens of federal agencies, all found in our FOIAengine database that tracks FOIA requests in as close to real-time as their availability allows. See those requests here.
There are at least two dozen agencies that have ALJs who can impose civil penalties in administrative proceedings. In addition to the SEC, that includes the Commodity Futures Trading Commission, the Consumer Financial Protection Bureau, and the Environmental Protection Agency. Other agencies that rely on ALJs include the National Labor Relations Board, where the judges resolve unfair labor practice cases; the Federal Energy Regulatory Commission, whose judges hear disputes about matters like electric utilities and regional grids; and the Federal Trade Commission, where the judges adjudicate mergers.
Stark focused his attention on the SEC judges for good reason: the agency’s ALJs have been in the crosshairs of corporate litigants since a Supreme Court decision severely curtailed their power to levy fines. Indeed, the SEC has already slimmed its ALJ ranks; only three ALJs remain, down from five when the Supreme Court decided a different issue regarding the SEC’s in-house judges in 2018.
“Courts have already eroded SEC ALJ authority considerably,” Stark wrote in his LinkedIn post, citing last June’s 6-to-3 Supreme Court ruling in SEC v. Jarkesy that the SEC’s use of administrative law judges violates the Seventh Amendment when imposing civil penalties for fraud.
In Jarkesy, the Supreme Court held that courts must determine whether a particular cause of action is legal or equitable. If a claim resembles a common law cause of action – with penalties designed to punish and deter – then it’s a legal rather than equitable one, and the Seventh Amendment guarantee must be enforced; a jury trial must be available to a defendant. Other tools available to the SEC, such as restitution and cease and desist orders, are equitable. After Jarkesy, the SEC began confining its use of ALJs to such cases, where civil penalties are not sought.
But now, the Justice Department is calling into question even that limitation, based on the unitary executive theory. That doctrine, given credence in a 2010 Supreme Court case that also involved the SEC, says the Constitution prohibits Congress from placing any limits on the president’s ability to impose total control on the executive branch, including to fire subordinates at will.
“[T]his is the final nail in the coffin” for SEC ALJs, Stark said, referring to the Justice Department signaling it won’t defend the constitutionality of their job protections.
The Court in Jarkesy granted certiorari on the “unitary executive” question as well, but then sidestepped it because the Seventh Amendment disposed of the matter. The SEC dodged a bullet.
But now, the question of constitutionality is back, and likely headed again to Supreme Court. In the latest case, Axalta Coating Systems v. FAA, a paint company is challenging a fine imposed by an administrative law judge at the Transportation Department for violating a federal rule that requires paint cans to be packaged in a way that will keep them from leaking when transported on planes. The company is arguing, among other things, that because the president cannot remove such a judge at will – the gist of the unitary executive theory – the ALJ’s existence is unconstitutional.
In a February 20 letter to Senate Judiciary Committee Chairman Charles Grassley (R-Iowa), Acting Solicitor General Sarah Harris abandoned the Biden Administration’s position and agreed with Axalta: “I am writing to advise you that the Department of Justice has concluded that the multiple layers of removal restrictions for administrative law judges (ALJs) in 5 U.S.C. 1202(d) and 7521(a) violate the Constitution; that the Department will no longer defend them in court; and that the Department has taken that position in ongoing litigation.” A Justice Department attorney had already filed a similar letter with the Third Circuit, ahead of a hearing in the Axalta case.
The many FOIA requests about ALJs in PoliScio Analytics’ competitive-intelligence database FOIAengine reflect the ongoing scrutiny facing administrative judges. Most requests seek details about specific proceedings, while other requests are expansive.
Last April, Jacob Plaza of the Revolving Door Project asked the FTC for “any and all staff lists, organizational charts, lists of departed staff or other documents reflecting the staff composition and command structure of the Office of Administrative Law Judges between April 22nd, 2019 and April 22nd, 2024. The Revolving Door Project seeks all responsive records regardless of format, medium, or physical characteristics. In conducting your search, please understand the terms ‘record,’ ‘document,’ and ‘information’ in their broadest sense, to include any written, typed, recorded, graphic, printed, or audio material of any kind.”
Around the same time, Iain Melchizedek, a former CFPB analyst and self-described “whistleblower and advocate for ethical oversight,” sought “the identities of the Administrative Law Judges employed by the CFPB, and the total number of ALJs employed by the CFPB within the agency.” Meanwhile, Greg Saitz, investigations editor at the Financial Times, made a similar request of the SEC.
Mindful of John Stark’s baleful warning – Expect All SEC Administrative Law Judges to be Fired Forthwith – and the SEC’s subsequent silence, we asked Stark what reaction, if any, had come from his former agency colleagues. We didn’t hear back.
FOIAengine access now is available for all professional members of Investigative Reporters and Editors, a non-profit organization dedicated to improving the quality of journalism. IRE is the world’s oldest and largest association of investigative journalists. Following the federal government’s shutdown of FOIAonline.gov last year, FOIAengine is the only source for the most comprehensive, fully searchable archive of FOIA requests across dozens of federal departments and agencies. FOIAengine has more robust functionality and searching capabilities, and standardizes data from different agencies to make it easier to work with. PoliScio Analytics is proud to be partnering with IRE to provide this valuable content to investigative reporters worldwide.
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Next: Pharma-related FOIA requests from Point72 and other hedge funds.
John A. Jenkins, co-creator of FOIAengine, is a Washington journalist and publisher whose work has appeared in The New York Times Magazine, GQ, and elsewhere. He is a four-time recipient of the American Bar Association’s Gavel Award Certificate of Merit for his legal reporting and analysis. His most recent book is The Partisan: The Life of William Rehnquist. Jenkins founded Law Street Media in 2013. Prior to that, he was President of CQ Press, the textbook and reference publishing enterprise of Congressional Quarterly. FOIAengine is a product of PoliScio Analytics (PoliScio.com), a new venture specializing in U.S. political and governmental research, co-founded by Jenkins and Washington lawyer Randy Miller. Learn more about FOIAengine here. To review FOIA requests mentioned in this article, subscribe to FOIAengine.
Write to John A. Jenkins at JAJ@PoliScio.com.
