March 21, 2017
Authored by: Crystal Homa
In the past few months, there has been a lot of speculation regarding the future of many administrative agencies under Trump’s administration. However, two current cases pending in the D.C. Circuit have the potential to have a dramatic impact on administrative agencies and past and present regulatory enforcement actions by such agencies.
In Lucia v. SEC, the SEC brought claims against Lucia for misleading advertising in violation of the Investment Advisers Act of 1940. The enforcement action was initially resolved by an administrative law judge (ALJ); however Luica was later granted a petition for review based on an argument that the administrative hearing was unconstitutional because the ALJ was unconstitutionally appointed. The issue made it up to the U.S. Court of Appeals for the D.C. Circuit who recently held that the ALJ was constitutionally appointed because the judge was an “employee”, not an officer. However, other courts have held just the opposite. In December, the 10th Circuit held in Bandimere v. SEC that ALJs were “inferior officers” and thus must be appointed pursuant to the Appointments Clause. A rehearing en banc has been granted in Lucia to address this issue.
On the heels of Lucia, in PHH v. CFPB, the CFPB brought claims against PHH for violations of the Real Estate Settlement Procedures Act. Similarly, this enforcement proceeding was originally decided by an ALJ. However, PHH appealed the ALJ decision for a multitude of reasons and the appeal has also made it up to the D.C. Circuit where a rehearing en banc was granted last month. In the court’s order granting a rehearing en banc, the court ordered, among other things, that the parties address what the appropriate holding would be in PHH if the court holds in Lucia that the ALJ was unconstitutional.