In the case of Carr v. Saul, 19-1442 (S.Ct. April 22, 2021) Petitioners were six individuals whose applications for disability benefits were denied by the Social Security Administration (SSA). They each unsuccessfully challenged their respective adverse benefit determination in a hearing before an SSA administrative law judge (ALJ). The SSA Appeals Council denied discretionary review in each case. Thereafter, this Court decided Lucia v. SEC, 585 U. S. ___, which held that the appointment of Securities and Exchange Commission ALJs by lower-level staff violated the Constitution’s Appointments Clause. Under the Appointments Clause, only the President, “Courts of Law,” or “Heads of Departments” may appoint “Officers of the United States.    The Lucia Court determined that SEC ALJs were “Officers” rather than mere employees because they held “a continuing office established by law,” exercised “‘significant discretion’ when carrying out . . . ‘important functions,’” and often had the last word in SEC proceedings. A few weeks after Lucia was decided, the SSA’s Acting Commissioner addressed any Appointments Clause questions involving Social Security claims by ratifying the appointments of all SSA ALJs and “approving those appointments as her own.” 84 Fed. Reg. 9583 (2019). The following year, the SSA issued a ruling stating that the Appeals Council should, in response to timely requests for Appeals Council review, vacate preratification ALJ decisions and provide fresh review by a properly appointed adjudicator. That remedy was only available, however, to claimants who had raised an Appointments Clause challenge in either their ALJ or Appeals Council proceedings.  Claimants who had not objected to the ALJs’ appointments in their administrative proceedings would receive no relief. Petitioners fell into this latter category. Here, the claimants lost at the hearing level in front of ALJs. They appealed to the federal courts after exhausting appeals at the agency level.

Because the SSA ALJs who denied petitioners’ claims were appointed by lower-level staff, petitioners argued, in federal court, that they were entitled to a fresh administrative review by constitutionally appointed ALJs. In each case, the Court of Appeals held that petitioners could not obtain judicial review of their Appointments Clause claims because they failed to raise those challenges in their administrative proceedings. In court, SSA did not deny that the ALJs who decided the claimants’ cases were unconstitutionally appointed, but contended instead that petitioners had forfeited their Appointments Clause challenges by failing to raise them before the agency. Several federal circuits had held that claimants may raise an Appointments Clause challenge for the first time in federal court; other circuits required claimants to raise this issue before the agency. The Supreme Court granted certiorari to resolve this conflict.

The reason to require an issue to be raised at the agency is to give the agency the chance to address the issue and fix any problem. The federal courts are reviewing courts and do not wish to hear issues which have not been raised at the agency. For many agencies, this makes sense. Social security proceedings, however, are non-adversarial. Regulations require  SSA to review any information presented by the claimant. No statute or regulation requires claimants to present all  legal issues to the agency. The Court noted that agency adjudications are generally ill suited to address structural constitutional challenges, which usually fall outside the adjudicators’ areas of technical expertise. Secondly, the Court noted that it has consistently recognized a futility exception to exhaustion requirements. It made little sense to require litigants to present claims to adjudicators who are powerless to grant the relief requested. A Social Security ALJ has no special expertise in constitutional matters and cannot provide any relief to the claimant if the ALJ has not been properly appointed.

The United States Supreme Court then concluded that  the Courts of Appeals erred in imposing an issue-exhaustion requirement on petitioners’ Appointments Clause claims.

What This Means:

The take-away from this decision is good news for social security disability claimants. While it is generally a good idea to present legal arguments to the ALJ, it is not necessarily fatal if those arguments are not presented to the ALJ. This is especially true if the ALJ has no power to grant the requested relief. Legal arguments involving the Appointments Clause may be presented for the first time in court. This decision should not mean that claimants do not need to present evidence of disability to the ALJ; that evidence should always be presented to the agency.

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