The Status of Administrative Law Judges Is In Further Doubt

Washington, D.C. (February 21, 2025) - The status of federal agency proceedings using Administrative Law Judges (ALJs) was cast into further doubt on February 20, 2025, when the Department of Justice (DOJ) informed the Senate Judiciary Committee that the DOJ will no longer defend the constitutionality of “for cause” removal provisions for those judges. This latest development comes on top of last year’s Supreme Court ruling in an “earth shattering” decision, SEC v. Jarkesy (see Lewis Brisbois Alert), that stripped the Securities and Exchange Commission (SEC) of the ability to use in-house tribunals presided over by ALJs to obtain civil penalties against individuals accused of securities fraud. The continued cutbacks in the role and status of ALJs signal a higher internal standard of review for prosecution of SEC and other agency proceedings, a development that could have significant impacts on businesses subject to federal agency jurisdiction.

Following Jarkesy, the SEC has greatly curtailed its use of ALJs, limiting its in-house administrative proceedings to (1) adjudicating mostly technical, non-fraud violations of the securities laws engaged in by SEC registrants (e.g., investment advisers, broker-dealers, mutual funds, accountants), and (2) what are termed “follow-on” proceedings, in which the SEC determines what, if any, administrative remedies a person subject to a federal district court judgment must face, such as industry and officer and director bars. But given recent changes in position by the DOJ, it appears that even this trimmed-back ALJ use by the SEC and other agencies may not be long for the administrative world, particularly if the Trump administration is successful in taking greater control over independent agencies,(see our prior alert on the February 18, 2025, Executive Order).

The February 20 letter is consistent with recent DOJ action in a pending case, Rev. Father Emmanuel Lemelson v. SEC, Civ. No. 1:24-cv-2415 (D. D.C. 2024), There, the DOJ submitted a similar notice of a change in position, stating that for-cause removal provisions for ALJs at 5 U.S.C. § 7521, “do not comport with the separation of powers and Article II and that the United States will no longer defend [the provisions] in litigation.” Id., ECF No. 16 (Feb. 18, 2025).

Businesses that have proceedings or potential proceedings before an Administrative Law Judge should take note of these significant new developments and consult with counsel on their implications for particular matters.

Lewis Brisbois’s Administrative Law & Regulatory Practice attorneys are closely monitoring these developments and advising clients on the risk and opportunities these changes present.

Authors:

Thomas A. Brooks, Partner

Paul Kisslinger, Partner

Jane C. Luxton, Managing Partner - Washington, D.C. and Co-Chair of Administrative Law & Regulatory Practice

Rosario Palmieri, Partner and Co-Chair of Administrative Law & Regulatory Practice

Malcolm Savage, Associate