In April 2023, the Pacific Legal Foundation filed a lawsuit on behalf of Thomas and Amy Villegas against the Environmental Protection Agency (“EPA”) to challenge an agency adjudication that EPA had initiated against the Villegases for an alleged violation of the Clean Water Act (“CWA”). In their complaint, the plaintiffs argued that the agency adjudication initiated against them violates the United States Constitution. Specifically, the plaintiffs argue that the administrative law judge (“ALJ”) assigned to conduct the agency adjudication did not have authority to hear the dispute because she had not been appointed to her position pursuant to the Appointments Clause of the Constitution. Shortly after the lawsuit was filed, EPA dropped the enforcement action against the Villegases, which lead to them voluntarily dismissing the case.
The term “agency adjudication” generally refers to an agency action with the force of law that resolves a claim or dispute between specific individuals and a federal agency. Federal agencies adjudicate a variety of different matters, from enforcement actions against individuals who have allegedly violated federal laws to applications for public benefits. The process for agency adjudication is outlined in the federal Administrative Procedure Act (“APA”) and must be presided over by ALJs.
In Villegas v. Regan, No. 2:23-cv-02171 (D. Kan. April 20, 2023), the Villegases argued that the agency adjudication initiated against them is an “illegitimate proceeding” because the ALJ assigned to hear the case was not assigned to her position according to the Appointments Clause. This is not the first time that a court has been asked to determine whether an ALJ has been constitutionally appointed. The question has made its way to the United States Supreme Court, and may do so again as certain questions remain unanswered. While the Villegases dismissed their lawsuit after EPA ended the agency adjudication, the arguments raised in their complaint are worth examining. Both EPA and the United States Department of Agriculture use agency adjudication to settle a variety of issues, making the legal status of ALJs important to the agricultural industry.
Agency Adjudication
Congress adopted the APA in 1946 to establish uniform procedures across all federal agencies for processes such as agency rulemaking and formal agency adjudication. According to the APA, an agency adjudication is defined as an “agency process for the formulation of an order.” 5 U.S.C. § 551(7). In turn, an “order” is defined as “the whole or part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, or an agency in a matter other than rule making but including licensing[.]” 5 U.S.C. § 551(6). In other words, the APA establishes an agency adjudication as an agency process that results in some kind of final agency determination other than a regulation.
The APA goes on to establish the process for agency adjudications. Under the APA, agency adjudications are structured similar to the adversarial trial process established in civil and criminal courts of law. When initialing an agency adjudication, the APA requires all parties involved to be given timely notice of “the time, place, and manner of the hearing; the legal authority and jurisdiction under which the hearing is not be held; and the matters of fact and law asserted.” 5 U.S.C. § 554(b). Additionally, the APA provides that during the formal adjudication, the parties will have the opportunity “to present [their] case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for a full and true disclosure of the facts.” 5 U.S.C. § 556(d). In general, an ALJ will preside over agency adjudications. The APA instructs agencies to hire as many ALJs as necessary to carry out adjudication proceedings. 5 U.S.C. § 3105. The APA also establishes the powers and authorities of the ALJ, providing that an ALJ may: administer oaths and affirmations; issue subpoenas; rule on evidentiary issues; hold depositions; regulate the course of the hearing; hold settlement conferences; inform the parties as to other means of dispute resolution; make or recommend decisions; take any other action authorized by the agency. 5 U.S.C. § 556(c).
If a party who has been through a formal agency adjudication is unsatisfied with the results or believes that the ruling issued by the ALJ is inconsistent with the law, they may appeal the decision to a federal district court. However, the APA provides that judicial review of agency actions is limited to final agency actions. 5 U.S.C. § 704. While the APA does not give a definition of final agency action, the Supreme Court in Bennet v. Spear, 520 U.S. 154 (1997) clarified that an agency’s action is “final” and subject to judicial review if the action represents the “consummation” of the agency’s decision making process and that it must be an action “by which rights or obligations have been determined, or from which legal consequences will flow.” In other words, an agency’s action is final if it is the agency’s final word on the matter, and if legal consequences occur as a result of the action. If a person subject to an agency adjudication would like a court to review the matter, they must wait until the agency adjudication is complete and the agency action is therefore final before any court will hear the issue. To learn more about agency adjudications, click here.
Appointments Clause
The Appointments Clause of the United States Constitution states that “Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Offices of the United States” must be appointed by the President subject to the advice and consent of the Senate. U.S. Const. Art. II, § 2, cl. 2. It also stipulates that Congress may vest the appointment of “inferior offices” in “the President alone, in the Courts of Law, or in the Heads of Departments.” U.S. Const. Art. II, § 2, cl. 2. The Supreme Court has interpreted this language as differentiating between two types of officers subject to the Appointment Clause: (1) “principal” officers who must be appointed by the President and confirmed by the Senate, and (2) “inferior” officers whose appointment Congress may assign to the President, judiciary, or a department head. If a government position is subject to the Appointments Clause, then no one may be considered to have been appropriately appointed to that position unless they were appointed according to the process described by the Appointments Clause.
While the Appointments Clause identifies certain types of principal offices, such as Supreme Court judges, it does not specify all the positions that fall under its authority. This has led to debate over which positions are subject to the Appointments Clause, and how to determine whether a position is “principal” or “inferior.” In Edmond v. U.S., 520 U.S. 651 (1997), the Supreme Court determined that a government officer is inferior as opposed to principal if the officer’s work “is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” In other words, an officer is inferior if their work is “directed and supervised” by a principal officer. The Court went on to outline three factors to help determine whether an officer’s work is “directed and supervised” by a principal officer: (1) whether the officer’s duties are subject to oversight by a Senate-confirmed official; (2) whether the officer is subject to removal without cause by a Senate-confirmed official; and (3) whether the office has the power to issue a final decision for a federal agency.
While the Supreme Court has provided a useful test to help determine whether an officer is principal or inferior, determining what government positions qualify as inferior officers remains less clear. There has been recent debate over whether ALJs are inferior officers who must be appointed pursuant to the Appointments Clause. Currently, most ALJs are not appointed to their positions by the President, the judiciary, or a department head as is required of inferior officers. Nor are ALJs appointed by the President and confirmed by the Senate as is required of principal officers. A finding that all ALJs are subject to the Appointments Clause could have broad impacts on how agencies conduct formal adjudication.
The Supreme Court has laid a two-part framework to determine whether a government position is subject to the Appointments Clause. In United States v. Germaine, 99 U.S. 508 (1878), the Court determined that the threshold requirement for determining whether someone is an officer of the government rather than simply a government employee is whether the person occupies a “continuing” position established by law. If a government position is “occasional or temporary,” such as the civil surgeons at the center of Germaine who had been hired temporarily to perform physical exams, then they are an employee, not an officer. However, a continuing position established by law is not on its own enough to show that a position is subject to the Appointments Clause. In Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court determined that to be a government officer, a person must hold a continuing position establish by law, and they must “exercise significant authority pursuant to the laws of the United States.” While the Court has never laid out an exact test to determine when someone has “significant authority” sufficient to make them an officer of the government as opposed to an employee, it has issued decisions that give some guidance.
In Freytag v. Commissioner, 501 U.S. 868 (1991), the Supreme Court considered whether special trial judges (“STJs”) appointed by the Chief Judge of the United States Tax Court to hear maters related to federal income tax were subject to the Appointments Clause. To make that decision, the Court had to determine whether the STJs were officers or employees. Ultimately, the Court concluded that the STJs were inferior officers subject to the Appointments Clause for two primary reasons. First, the Court referenced Germaine and concluded that the STJs were unlikely to be employees because their positions were not occasional or temporary because the STJ position was established by a federal statute that defined their duties, salary, and means of appointment. According to the Court, this went beyond the “occasional or temporary” status of mere employees. Next, the Court considered whether STJs had “significant authority” sufficient to render them officers of the United States. While the Court declined to articulate a specific test, they found that STJs possessed significant authority because they “take testimony, conduct trials, rule on the admissibility of evidence, and have the power to enforce compliance with discovery orders.” The Court observed that “[i]n the course of carrying out these important functions, the [STJs] exercise significant discretion.” Because of the authority granted to STJs, and because the STJ position was more than occasional or temporary, the Court found that STJs were inferior officers subject to the Appointments Clause.
More recently, the Supreme Court issued a decision in Lucia v. Securities and Exchange Commission, (2018) where it was asked to consider whether the ALJs employed by the Securities and Exchange Commission (“SEC”) to hear SEC enforcement actions were subject to the Appointments Clause. The Court began by noting that, like the STJs in Freytag, the SEC ALJ position was created by law, with its duties, salaries, and means of appointment specified by statute. The SEC ALJ position was not “occasional or temporary,” indicating that SEC ALJs were unlikely to be mere employees. Next, the Court considered whether the SEC ALJs possessed the “significant authority” necessary to show that they were officers subject to the Appointments Clause. Once again, the Court decided against articulating a specific test, finding that instead they could compare the duties of the SEC ALJ to the duties of the STJ outlined in Freytag. The Court found that the SEC ALJs could perform all the same functions as the STJs in Freytag, including taking testimony, conducting trials, ruling on evidentiary matters, and enforcing discovery orders. Additionally, once an SEC ALJ issued a decision in an agency adjudication, that order became the final word of the agency. Therefore, the Court concluded that due to the significant authority granted to the SEC ALJs, they were inferior officers subject to the Appointments Clause of the United States Constitution.
Following the Supreme Court’s ruling in Lucia, the Department of Justice’s (“DOJ”) Office of the Solicitor General issued a guidance memorandum directing agencies on best practices going forward. In the guidance document, the DOJ advised agencies to have their Department Heads “ratify and approve” the appointment of all existing ALJs in order to bring them into compliance with Appointments Clause requirements for inferior officers. While the DOJ acknowledged that the ruling in Lucia addresses only the status of SEC ALJs, the guidance document notes that DOJ interprets the Supreme Court’s decision as encompassing “all ALJs […] that possess the adjudicative powers highlighted by the Lucia majority.” The DOJ states that all ALJs in “similarly situated” positions as the SEC ALJs “should also be appointed as inferior officers.” However, not everyone agrees with the DOJ’s interpretation of Lucia. Other legal experts have questioned whether the Supreme Court intended Lucia to be so broadly read.
Conclusion
The arguments raised by the Villegases in their lawsuit were fairly straightforward for an Appointments Clause challenge. The Villegases claimed that the ALJ assigned to conduct a hearing concerning their alleged CWA violation did not have the authority to hear the dispute because she had not been appointed pursuant to the Appointments Clause. Specifically, the Villegases claimed that EPA’s ALJ had not been confirmed to her position by the Senate as required for principal officers, or by appointed by the President, the judiciary, or EPA’s department head as required for inferior officers. While the Villegases did argue that EPA’s ALJ was more likely to be a principal officer than an inferior officer because her work is not “directed and supervised” by someone in a Senate-confirmed position, they emphasized that either way, the ALJ had not been constitutionally appointed to her position.
After the Villegases initiated their lawsuit, EPA dropped the enforcement action against them, possibly due to statements made in DOJ’s post-Lucia guidance document. However, while the Villegases lawsuit may be at an end, it is likely that the question of whether all ALJs must be appointed pursuant to the Appointments Clause will be brought to court again. Although DOJ stated that it interprets Lucia as extending to all agency ALJs, such guidance documents do not have the same force of law as a Supreme Court opinion. The law surrounding appointment of ALJs remains murky, presenting challenges for regulators and regulated alike.
To read the complaint in Villegas v. Regan, click here.
To read the Supreme Court’s decision in Lucia v. SEC, click here.
To read the DOJ’s post-Lucia guidance memorandum, click here.
To read the text of the APA, click here.
For more National Agricultural Law Center resources on Administrative Law, click here.