[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
On January 3, 2017, Respondent submitted a motion for a ruling on the pleadings (motion to dismiss), pursuant to 17 C.F.R. § 201.250(a). On January 4, 2017, Respondent submitted a motion for withdrawal, in which he argues that I am disqualified from presiding over this proceeding.Respondent argues in his motion to dismiss that Commission administrative law judges are appointed in violation of the Appointments Clause of Article II of the Constitution, and that this proceeding must therefore be dismissed. See Motion to Dismiss at 2-3. On the same basis, Respondent argues in his motion for withdrawal that I must disqualify myself from this proceeding. See Motion for Withdrawal. The two United States Circuit Courts of Appeal that would likely have jurisdiction over any petition for review from a final Commission action arising from this proceeding are currently split on the applicability of the Appointments Clause to Commission ALJs. Compare Bandimere v. SEC, __ F.3d __, No. 15-9586, 2016 WL 7439007, at *15 (10th Cir. Dec. 27, 2016), with Raymond J. Lucia Cos. v. SEC, 832 F.3d 277, 283-89 (D.C. Cir. 2016). The Commission, however, has held that its ALJs are not subject to the Appointments Clause. See Raymond J. Lucia Cos., Exchange Act Release No. 75837, 2015 WL 5172953, at *21-23 (Sept. 3, 2015).Respondent's motion to dismiss is therefore DENIED IN PART as to his Appointments Clause argument. In responding to the motion to dismiss, the Division of Enforcement need only address the remaining arguments. Respondent's motion for withdrawal is DENIED. This Order does not resolve Respondent's pending motion to amend his answer, to which the Division should file a response.SO ORDERED._______________________________Cameron Elliot
Administrative Law Judge
SIDE BAR: Raymond J. Lucia Companies, Inc. and Raymond J. Lucia, Petitioners, v. Securities and Exchange Commission, Respondent (Opinion, United States Court of Appeals for the District of Columbia Circuit, August 9, 2016):Finally, petitioners point to nothing in the securities laws that suggests Congress intended that Commission ALJs be appointed as if Officers. They do point to the reference to "officers of the Commission" in 15 U.S.C. § 77u, but there is no indication Congress intended these officers to be synonymous with "Officers of the United States" under the Appointments Clause. Of course, petitioners contend that Congress was constitutionally required to make the Commission ALJs inferior Officers based on the duties they perform. But having failed to demonstrate that Commission ALJs perform such duties as would invoke that requirement, this court could not cast aside a carefully devised scheme established after years of legislative consideration and agency implementation. See 5 U.S.C. §§ 3105, 3313; see also Civil Service Reform Act of 1978, Pub. L. 95-454, 92 Stat. 1111Page 18 of the DCCir Opinion
ALSO READ: "SEC Opts for Intercircuit Nonacquiescence" (BrokeAndBroker.com Blog, January 9, 2017)On January 3, 2017, Respondent moved to amend his answer under Rule of Practice 220(e) to assert an affirmative defense based on the Appointments Clause of Article II of the United States Constitution. The Division of Enforcement does not oppose Respondent's motion. Therefore, the motion is GRANTED; Respondent must file his amended answer by January 17, 2017, per the parties' agreed scheduling order.Cameron Elliot
Administrative Law Judge