The Supreme Court is considering a cert petition requesting that it hear the Lucia case, which we have blogged about extensively due to its potential impact on the outcome of the PHH case. Significantly, the DOJ recently filed a brief in the case siding against the SEC and with Lucia, who is challenging the constitutionality of how the SEC’s Administrative Law Judges (“ALJs”) are appointed.

Under the Appointments Clause of Article II of the U.S. Constitution, an “inferior officer” must be appointed by the President, a court, or the head of a “department.” Lucia argues that  because the SEC’s ALJs are hired by the SEC’s Office of Administrative Law Judges and not appointed by an SEC commissioner, their appointments would be unconstitutional if they are “inferior officers. ”

In its brief, the DOJ acknowledged the course change on this issue, stating that, “In prior stages of this case, the government argued that the Commission’s ALJs are mere employees rather than ‘Officers’ within the meaning of the Appointments Clause. Upon further consideration, and in light of the implications for the exercise of executive power under Article II, the government is now of the view that such ALJs are officers because they exercise ‘significant authority pursuant to the laws of the United States.'”

Needless to say, it is extremely unusual for the DOJ to take up arms against another government agency like this. How it impacts the outcome of the Lucia case is yet to be seen. As we’ve explained in prior posts, the CFPB uses SEC ALJs to hear its administrative cases. So, if the Supreme Court hears the Lucia case and determines that ALJs are inferior officers, it will call into question every SEC and CFPB case that an ALJ decided. It may also impact how the en banc D.C. Circuit decides the PHH case.

We will continue to follow the issues and keep you posted.