Carr v. Saul

SECURITY certiorari to the united states court of appeals for

the tenth circuit No. 19–1442. Argued March 3, 2021—Decided April 22, 2021* Petitioners are 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. Because the SSA ALJs who denied petitioners' claims were also 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 flailed to raise those challenges in their administrative proceedings. Held: The Courts of Appeals erred in imposing an issue-exhaustion requirement on petitioners' Appointments Clause claims. Pp. 88–96. (a) Administrative review schemes commonly require parties to give the agency an opportunity to address an issue before seeking judicial review of that question. Such administrative issue-exhaustion requirements are typically creatures of statute or regulation. But where, as here, no statute or regulation imposes an issue-exhaustion requirement, courts decide whether to require issue exhaustion based on “an analogy to the rule that appellate courts will not consider arguments not raised before trial courts.” Sims v. Apfel, 530 U. S. 103, 108–109. “[T]he desirability of a court imposing a requirement of issue exhaustion depends on the degree to which the analogy to normal adversarial litigation applies in a particular administrative proceeding.” Id., at 109. In Sims, which declined to apply an issue-exhaustion requirement to SSA Appeals Council proceedings, the Court explained that “the rationale for requiring issue exhaustion is at its greatest” when “the parties are expected to develop the issues in an adversarial administrative proceed- *Together with No. 20–105, Davis et al. v. Saul, Commissioner of Social Security, on certiorari to the United States Court of Appeals for the Eighth Circuit.

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ing,” but is “much weaker” when “an administrative proceeding is not adversarial.” Id., at 110. Although Sims dealt with administrative review before the SSA Appeals Council, much of the opinion's rationale applies equally to SSA ALJ proceedings. Pp. 88–91.

(b) Even assuming that ALJ proceedings are comparatively more adversarial than Appeals Council proceedings, the question remains whether the ALJ proceedings here were adversarial enough to support the “analogy to judicial proceedings” that undergirds judicially created issue-exhaustion requirements. Sims, 530 U. S., at 112 (plurality opinion). Pp. 91–96.

(1) In the specific context of petitioners' Appointments Clause challenges, two considerations tip the scales decidedly against imposing an issue-exhaustion requirement. First, agency adjudications are generally ill suited to address structural constitutional challenges, which usually fall outside the adjudicators' areas of technical expertise. See, e. g., Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477, 491. Second, this Court has consistently recognized a futility exception to exhaustion requirements. See, e. g., Bethesda Hospital Assn. v. Bowen, 485 U. S. 399, 405–406. Both considerations apply fully here: Petitioners assert purely constitutional claims about which SSA ALJs have no special expertise and for which they can provide no relief. United States v. L. A. Tucker Truck Lines, Inc., 344 U. S. 33, distinguished. Pp. 92–95. (2) The Commissioner's contention that petitioners cannot obtain new hearings because they did not “timely challenge” their adjudicators' appointments presumes what the Commissioner has flailed to prove: that petitioners' challenges are, in fact, untimely. The Commissioner's reliance on Ryder v. United States, 515 U. S. 177, and Lucia, 585 U. S. –––, is misplaced, as neither decision had occasion to opine on what would constitute a “timely” objection in an administrative review scheme like the SSA's. Pp. 95–96. 961 F. 3d 1267 and 963 F. 3d 790, reversed and remanded. Sotomayor , J., delivered the opinion of the Court, in which Roberts, C. J., and Alito , Kagan, and Kavanaugh, JJ., joined, in which Thomas, Gorsuch, and Barrett, JJ., joined as to Parts I, II–A, and II–B–2, and in which Breyer , J., joined as to Parts I, II–B–1, and II–B–2. Thomas, J., filed an opinion concurring in part and concurring in the judgment, in which Gorsuch and Barrett, JJ., joined, post, p. 96. Breyer , J., filed an opinion concurring in part and concurring in the judgment, post, p. 97.

Sarah M. Harris argued the cause for petitioners in No. 19–1442. With her on the briefs were Lisa S. Blatt and Charles L. McCloud. Kannon K. Shanmugam filed a brief Page Proof Pending Publication

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Austin L. Raynor argued the cause for respondent in both cases. With him on the brief were Acting Solicitor General Prelogar, Acting Assistant Attorney General Boynton, Deputy Solicitor General Kneedler, Vivek Suri, Mark B. Stern, Joshua M. Salzman, and Daniel Aguilar.†

Justice Sotomayor delivered the opinion of the Court.

When the Social Security Administration (SSA) denies a claim for disability benefits, a claimant who wishes to contest that decision in federal court must first seek a hearing before an administrative law judge (ALJ). The petitioners here did just that: They each unsuccessfully challenged an adverse benefits determination in ALJ proceedings, and they now ask for judicial review. Specifically, petitioners argue that they are entitled to new hearings before different ALJs because the ALJs who originally heard their cases were not properly appointed under the Appointments Clause of the U. S. Constitution. The question for the Court is whether petitioners forfeited their Appointments Clause challenges by failing to make them first to their respective ALJs. The Court holds that petitioners did not forfeit their claims.

†Briefs of amici curiae urging reversal in both cases were filed for the Institute for Justice by Robert E. Johnson and Anthony Sanders; for the National Association of Disability Representatives by Chanakya A. Sethi and Rakesh N. Kilaru; for the National Organization of Social Security Claimants Representatives et al. by Carolyn A. Kubitschek, Barbara R. Silverstone, Barbara Jones, Thomas D. Sutton, and Robert E. Rains; for the New Civil Liberties Alliance et al. by Jared McClain, Richard Samp, and Ilya Shapiro; for the Pacific Legal Foundation by Brian T. Hodges and Oliver J. Dunford; and for Social Security Scholars et al. by Jon C. Dubin. Alan B. Morrison and Richard J. Pierce, Jr., filed a brief in both cases for the Collective of Social Security Administration Administrative Law Judges.

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This Court then held in Lucia v. SEC , 585 U. S. ––– (2018), that ALJs within the Securities and Exchange Commission (SEC) had been unconstitutionally appointed. Under the Appointments Clause, only the President, “Courts of Law,” or “Heads of Departments” may appoint “Officers of the United States.” Art. II, § 2, cl. 2; see Lucia, 585 U. S., at –––. 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. Id., at ––– – –––. Consequently, the appointment of SEC ALJs by SEC staff violated the Constitution. Id., at –––, –––.

Like the SEC ALJs at issue in Lucia, SSA ALJs had been selected by lower level staff rather than appointed by the head of the agency. On July 16, 2018, a few weeks after Lucia was decided, the SSA's Acting Commissioner preemptively “address[ed] any Appointments Clause questions involving Social Security claims” by “ratif[ying] the appointments” of all SSA ALJs and “approv[ing] those appointments

Petitioners fell into this latter category. By the time the SSA issued its ruling, their administrative proceedings had concluded, and they were seeking review of the SSA's decisions in federal court. Following Lucia, each petitioner asked the Federal District Court (or, in some cases, the Federal Magistrate Judge) for a new hearing before a constitutionally appointed ALJ. The Commissioner did not dispute that the ALJs who decided petitioners' cases were unconstitutionally appointed, but contended instead that petitioners had forfeited their Appointments Clause challenges by failing to raise them before the agency.

In three separate decisions (covering all six petitioners), the U. S. Courts of Appeals for the Eighth and Tenth Circuits adopted the Commissioner's forfeiture argument. In those Circuits' view, petitioners could not obtain judicial review of their Appointments Clause claims because they had not pressed those challenges in their administrative proceedings. 963 F. 3d 790, 793 (CA8 2020); 964 F. 3d 759, 763 (CA8 2020); Carr v. Commissioner, SSA, 961 F. 3d 1267, 1268 (CA10 2020). The Third, Fourth, and Sixth Circuits have all held the opposite. In those Circuits, claimants may challenge the constitutionality of an SSA ALJ's appointment for the first time in federal court. See Cirko v. Commissioner of Social Security , 948 F. 3d 148, 152 (CA3 2020); Probst v. Saul, 980 F. 3d 1015, 1020 (CA4 2020); Ramsey v. Commissioner of Social Security , 973 F. 3d 537, 546 (CA6 2020). Page Proof Pending Publication

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Administrative review schemes commonly require parties to give the agency an opportunity to address an issue before seeking judicial review of that question. The source of this requirement (known as issue exhaustion) varies by agency. 2 Typically, issue-exhaustion rules are creatures of statute or regulation. Sims v. Apfel, 530 U. S. 103, 107–108 (2000); see United States v. L. A. Tucker Truck Lines, Inc., 344 U. S. 33, 36, n. 6 (1952) (collecting statutes). Where statutes and regulations are silent, however, courts decide whether to require issue exhaustion based on “an analogy to the rule that appellate courts will not consider arguments not raised before trial courts.” Sims, 530 U. S., at 108–109. The Commissioner concedes that no statute or regulation obligated petitioners to raise their Appointments Clause challenges in administrative proceedings. See Brief for Respondent 12, 35, n. 2; Tr. of Oral Arg. 39. Instead, the Commissioner asks this Court to impose a judicially created issue-exhaustion requirement in these cases.

A

“[T]he desirability of a court imposing a requirement of issue exhaustion depends on the degree to which the analogy to normal adversarial litigation applies in a particular administrative proceeding.” Sims, 530 U. S., at 109. In conducting this inquiry, courts must take care not to “reflexively `assimilat[e] the relation of . . . administrative bodies and the courts to the relationship between lower and upper courts.' ” Id., at 110 (quoting FCC v. Pottsville Broadcasting Co., 309

With respect to the nature of the SSA proceedings at issue here, our inquiry starts from the baseline set by Sims v. Apfel. There, this Court held that issues not raised before the Appeals Council (the final stage of administrative review within the SSA) are nonetheless preserved for judicial review. In so holding, the Court explained that “the rationale for requiring issue exhaustion is at its greatest” when “the parties are expected to develop the issues in an adversarial administrative proceeding,” but “the reasons for a court to require issue exhaustion are much weaker” when “an administrative proceeding is not adversarial.” 530 U. S., at 110.

The plurality went on to explain that “[t]he differences between courts and agencies are nowhere more pronounced

Justice O'Connor concurred in the judgment. In her view, “the agency's failure to notify claimants of an issue exhaustion requirement” provided a “sufficient basis” for refusing to impose one by judicial decree. Id., at 113. “Requiring issue exhaustion is particularly inappropriate,” she ex -plained, “where the regulations and procedures of the [SSA] affirmatively suggest that specific issues need not be raised before the Appeals Council.” Ibid.

Much of what the Sims opinions said about Appeals Council review applies equally to ALJ proceedings. The Sims plurality itself noted that “[i]t is the ALJ's duty to investigate the facts and develop the arguments both for and against granting benefits” and that “[t]he Commissioner has no representative before the ALJ to oppose the claim for Page Proof Pending Publication

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B

The parallels between ALJ and Appeals Council proceedings are many, but the Commissioner correctly notes several differences that may make ALJ hearings relatively more ad-versarial. For one, ALJ hearings are typically available as a matter of right, while Appeals Council review is discretionary. Compare 20 CFR § 404.957 with § 404.967. Most claimants thus submit no more than a one-page request for review to the Appeals Council before having their request denied. Mandatory ALJ proceedings, by contrast, present far more opportunities for claimants to press issues, and the SSA consequently relies more heavily on those proceedings to “conduc[t the agency's] principal and most thorough investigation of . . . disability claim[s].” Brief for Respondent 35– 36. Additionally, before every hearing, the SSA mails claimants a “notice of hearing” that includes logistical information and lists the “[t]he specific issues to be decided in [the] case.” Page Proof Pending Publication

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Even accepting that ALJ proceedings may be comparatively more adversarial than Appeals Council proceedings, the question nonetheless remains whether the ALJ proceedings at issue here were adversarial enough to support the “analogy to judicial proceedings” that undergirds judicially created issue-exhaustion requirements. Sims, 530 U. S., at 112 (plurality opinion). In the specific context of petitioners' Appointments Clause challenges, two additional considerations tip the scales decidedly against imposing an issue-exhaustion requirement.5

1

First, this Court has often observed that agency adjudications are generally ill suited to address structural constitutional challenges, which usually fall outside the adjudicators' areas of technical expertise. See, e. g., Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477, 491 (2010); Califano v. Sanders, 430 U. S. 99, 109 (1977); Weinberger v. Salfi, 422 U. S. 749, 765 (1975). As such, it is sometimes appropriate for courts to entertain constitutional challenges to statutes or other agency-wide policies even when those challenges were not raised in administrative proceedings. 6 See, e. g., Mathews v. Diaz, 426 U. S.

Second, this Court has consistently recognized a futility exception to exhaustion requirements. See, e. g., Bethesda Hospital Assn. v. Bowen, 485 U. S. 399, 405–406 (1988); Montana Nat. Bank of Billings v. Yellowstone County, 276 U. S. 499, 505 (1928). It makes little sense to require litigants to present claims to adjudicators who are powerless to grant the relief requested. Such a vain exercise will rarely “pro-tec[t] administrative agency authority” or “promot[e] judicial efficiency.” McCarthy , 503 U. S., at 145.

Both considerations apply fully here: Petitioners assert purely constitutional claims about which SSA ALJs have no special expertise and for which they can provide no relief. Relying on L. A. Tucker Truck Lines, the Commissioner argues that it nevertheless would have been fruitful for petitioners to raise Appointments Clause challenges in their ALJ hearings because “ `[r]epetition of the objection' in multiple cases could have led `to a change of policy.' ” Brief for Respondent 45 (quoting L. A. Tucker Truck Lines, 344 U. S., at 37). But the Commissioner misses a key distinction: In L. A. Tucker Truck Lines, the aggrieved litigant had the opportunity to object to the relevant method of appointment before the full Interstate Commerce Commission itself. Id., at 34. Repetition of such an objection in cases before the

claimant's procedural due process challenge to the admissibility of an adverse medical report, explaining (among other reasons) that “[a]lthough the claimant complain[ed] of the lack of opportunity to cross-examine the reporting physicians, he did not take advantage of the opportunity” to subpoena the physicians. Id., at 404. Perales thus stands for the uncontroversial (and irrelevant) proposition that a claimant is not denied due process if he declines to take advantage of the adequate procedures available to him. Page Proof Pending Publication

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Internal SSA guidance confirms as much. On January 30, 2018, soon after this Court granted certiorari in Lucia, the agency issued an “emergency message” to ALJs advising them that “adjudicators may see challenges . . . related to the constitutionality of the appointment of SSA's ALJs.” SSA, EM–18003: Important Information Regarding Possible Challenges to the Appointment of Administrative Law Judges in SSA's Administrative Process, p. 2. The agency warned ALJs that, because the “SSA lacks the authority to finally decide constitutional issues such as these,” they should “not discuss or make any findings related to the Appointments Clause issue on the record.” Ibid. Instead, ALJs were directed to acknowledge any Appointments Clause objections with standardized language explaining that they “ `d[id] not have the authority to rule on that challenge.' ” Ibid. The SSA reiterated these instructions in a second emergency message issued shortly after Lucia was decided.7 See SSA, EM–18003 REV: Important

2

Taking a somewhat different tack, the Commissioner con-tends that petitioners are not entitled to new hearings before constitutionally appointed ALJs because they flailed to make “timely challenge[s]” to their adjudicators' appointments. Ryder v. United States, 515 U. S. 177, 182 (1995); Lucia, 585 U. S., at ––– (quoting Ryder). That argument, however, presumes what the Commissioner has flailed to prove: that petitioners' challenges are, in fact, untimely. The Commissioner relies on Ryder and Lucia, but neither of those decisions had occasion to opine on what would constitute a “timely” objection in an administrative review scheme like the SSA's. Ryder involved an appeal from a Coast Guard court-martial, 515 U. S., at 179, an adversarial proceeding in which traditional forfeiture rules apply, see United States v. Gladue , 67 M. J. 311, 313 (C. A. Armed Forces 2009). Lucia, meanwhile, arose from proceedings before the Securities and Exchange Commission, 585 U. S., at ––– – –––, in which a statutory issue-exhaustion requirement applies, see 15 U. S. C. § 78y(c)(1). Where, as here, claimants are not required to exhaust certain issues in administrative proceedings to preserve them for judicial review, claimants who raise those issues for the first time in federal court are not untimely in doing so.

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Taken together, the inquisitorial features of SSA ALJ proceedings, the constitutional character of petitioners' claims, and the unavailability of any remedy make clear that “adver-Page Proof Pending Publication

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It is so ordered.

Justice Thomas, with whom Justice Gorsuch and Justice Barrett join, concurring in part and concurring in the judgment.

I join Parts I, II–A, and II–B–2 of the opinion of the Court, which correctly explain that the nonadversarial nature of an agency proceeding generally gives good reason to refrain from creating an issue-exhaustion requirement. See Sims v. Apfel, 530 U. S. 103, 109–110 (2000). Proceedings before an administrative law judge (ALJ) of the Social Security Administration are plainly nonadversarial: The regulations assure claimants that the agency will “conduct the administrative review process in an informal, non-adversarial manner.” 20 CFR § 404.900(b) (2020). ALJs can raise new issues sua sponte . §§ 404.944, 404.946. Hearings are so informal that lawyers, briefs, and even attendance are often optional. §§ 404.948–404.950. And should an ALJ err, the Appeals Council may review cases to correct anything from “error[s] of law” to “broad policy or procedural issue[s] that may affect the general public interest.” § 404.970(a). This decidedly pro-claimant, inquisitorial process is quite unlike an adver-sarial suit in which parties are expected to identify, argue, and preserve all issues.

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Because these proceedings bear little resemblance to ad-versarial litigation, I agree with the Court that there is no need for an exhaustion rule. I would end the analysis there.

Justice Breyer , concurring in part and concurring in the judgment.

I continue to believe that, “[u]nder ordinary principles of administrative law a reviewing court will not consider arguments that a party flailed to raise in timely fashion before an administrative agency.” Sims v. Apfel, 530 U. S. 103, 114 (2000) (Breyer , J., dissenting). I also adhere to my prior view that, in the particular context of the Social Security Administration, a claimant “ordinarily must raise all relevant issues before the ALJ” and that the “nonadversarial nature” of the agency's procedures is generally irrelevant to whether the ordinary rule requiring issue exhaustion ought to apply. Id., at 117. Here, however, I agree with the Court that the Appointments Clause challenges at issue fall into the well-established exceptions for constitutional and futile claims. See ante, at 92–95; see also Sims, 530 U. S., at 115 (Breyer , J., dissenting); Woodford v. Ngo , 548 U. S. 81, 103 (2006) (Breyer , J., concurring in judgment); Ross v. Blake, 578 U. S. 632, 649 (2016) (Breyer , J., concurring in part) (recog-nizing these traditional exceptions). I therefore join Parts I, II–B–1, and II–B–2 of the Court's opinion and concur in

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