Legal Docket: Independence vs. accountability


NICK EICHER, HOST: It’s Memorial Day Monday, start of a new week for The World and Everything in It. Today is the 28th of May 2018. Good morning. I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard.

I’m expecting the Supreme Court to hand down some rulings tomorrow. The justices have about a month left and 34 cases still undecided. So we will learn quite a lot between now and roughly June 30th.

Two rulings came down last week.

The first (Upper Skagit Tribe v Lundgren et vir) involved a land dispute between residents of Washington state and a Native American tribe. The legal issue is which law applies: local real estate law or that of the tribe.

But last week’s decision does not get to the merits. By a vote of 7 justices to 2, the high court sent the case back to lower court to consider an argument—brought up late in the process—that lower courts hadn’t taken into account.

EICHER: The second ruling (Epic Systems Corp. v Lewis) is a blow to labor unions. This one involves several employees who wanted to band together, and as a group sue their employers. It’s called a class action. Lawsuits are expensive and any individual claim wouldn’t justify the cost of a separate lawsuit.

But these employees had signed contracts that required dispute resolution to happen individually and in arbitration, not in court.

The Supreme Court ruled 5 justices to 4 that the employment contracts are legal and binding, and that nothing in the applicable federal laws say otherwise.

A conservative majority sided with the employers, the liberals with the employees. The losing side complained the decision gives too much bargaining power to those looking to fill jobs.

REICHARD: Now, on to the final two oral arguments from this term we haven’t yet covered.

If you’ve listened every Monday since October, you are just moments away from having heard something of each argument the Supreme Court justices must decide.

Congratulations on your perseverance. Hang in there for about eight more minutes!

Here’s the second-to-last one today (Lucia v SEC). The argument is over the balance of power between the government and a 68-year-old now-former investment adviser. He is Raymond Lucia, the man known for his “Buckets of Money” presentations that he gave for free to retirees around the country.

Listen to one of his ads from several years ago:

LUCIA: I describe exactly how you can fill your buckets to make sure you don’t run out of money before you run out of time…(later)…having separate buckets allocated and spending down the safe money while you allow the riskier money to grow over long time periods, is now proven the most successful way to invest your money for retirement.

Lucia’s investment adviser career lasted forty years. Private investment groups gave him a thumbs up and nobody ever claimed he’d defrauded or cost anyone anything.

Until somebody did.

And his career all came crashing down when the agency charged with protecting investors decided Lucia’s numbers didn’t add up.

One of the Securities and Exchange Commission’s judges fined him. The judge is known as an administrative law judge, and he’s a key figure here. As I go on, I’ll refer to him by the shorthand initialism ALJ.

The ALJ handed down a $300,000 fine against Lucia. Not only that, he banned Lucia from ever again working in the investment industry.

Lucia says that’s unfair. He says the way the ALJ became the ALJ violates the Appointments Clause of the U.S. Constitution. That’s Article II, Section 2, Clause 2. It vests in the president the power to appoint “officers” in the executive branch. Alternatively, an agency commission the president appoints may also name executive officers.

The ALJ who fined and banned Lucia didn’t get his authority either of those ways. Instead, some staff members within the Securities and Exchange Commission appointed him.

Ergo, Lucia says, that ALJ’s judgment cannot be valid. Lucia wants a new trial, in a regular court where the rules of evidence and a jury decide his fate.

At the Supreme Court, Lucia’s lawyer, Mark Perry, laid it out this way:

PERRY: By adversarial I mean those cases — enforcement cases are a good example — where a private citizen is brought against his or her will before a government body to have his or her fate decided…. My client had an unconstitutional proceeding …

Perry distinguished his client’s situation from other agency determinations, such as with the Social Security Administration. There, a citizen voluntarily goes to that agency to seek benefits from the government. No heavy gavel of punishment comes down upon his head in that instance.

So Social Security ALJs aren’t like the Securities and Exchange Commission ALJs. And that’s why those kinds of judges are officers as defined by the Constitution’s outlay of the separation of powers.

Justice Elena Kagan didn’t quite see it that way. She saw politics infiltrating where it ought not be if the president chooses the ALJ.

KAGAN: …This is a situation where we have adjudications, where we typically think we want the decision-maker to be insulated from political pressures. So wouldn’t putting those decision-makers even closer to the political body only exacerbate the problem that you’re complaining of?

PERRY: Justice Kagan, there’s a difference between decisional independence and structural independence. Which the Appointments Clause is designed to ensure responsibility, accountability, transparency, and ultimately, liberty. Freedom.

In other words, Perry maintains, nothing less than tyranny is at stake here. The administrative state is out of control, outside the bounds of not only the Constitution, but prior Supreme Court rulings. Those lay out the criteria for deciding who is an officer and who’s an employee: things like pay, tenure, and the level of discretion someone has to decide things.

This ALJ is an officer by those measures.

Now, an odd aspect of this case is that the other side agrees with that. The Trump administration parted ways on a small wrinkle in Lucia’s case; that is, eventually the right people within the SEC did ratify the decision of the wrong people who put the ALJ in place. Both agree this is a separation of powers matter, but the administration thinks the case doesn’t demand a new trial because that ALJ was eventually ratified by the right people.

So, the Court had to appoint an outside party to argue in defense of how the SEC currently appoints ALJs.

That was Anton Metlitsky, who argued the court ought not expand what “officer of the United States” means. Besides, it’s not possible to wring politics out of this, regardless of who does the appointing. The argument boils down to, just leave things as they are now.

Chief Justice John Roberts doesn’t sound here very comfortable with the status quo.

ROBERTS: One of the principles that caused the drafters to give the authority to appoint officers to the president was the important one of accountability.

METLITSKY: Exactly.

ROBERTS: And in this case, if the individual were an officer, he would have to be appointed by the commission, and people would know who was responsible for whatever conduct or misconduct or decisions … he would take. But in this case, you don’t have that accountability. The commission can say:  Don’t blame us. We didn’t do it. The president can say: Don’t blame me. I didn’t appoint them. And, instead, it’s something in the administrative bureaucracy which operates as insulation from the political accountability that the drafters of the Constitution intended.

I think Ronald Mann over at SCOTUSblog said it best: The ALJ here “adopted a bright line rule of issuing lifetime bans on employment in the investment industry against any defendants who had the nerve to contest the proceedings against” the  SEC. That does seem tyrannical.

And as the Cato Institute’s Ilya Shapiro put it, any citizen subject to massive, life-ruining sanctions should have the chance to a day in an Article III court to defend himself. That is, a court with rules of evidence and a jury.

And now, the last oral argument left to cover from this term: Lagos v. United States, arising out of Texas.

The battle is over who pays for what under a federal law called the Mandatory Victims Restitution Act of 1996. That law tries to make a crime victim whole once again, to restore him to where he was before he was victimized.

For example, a convicted criminal might be ordered to pay for damaged property, might have to pay the medical costs for someone he hurt, or replace lost income he caused someone to suffer because of his crime.

Here, the former CEO of a trucking company pled guilty to defrauding a corporate lender and then filed for bankruptcy.

That lender racked up millions of dollars in legal fees to represent its interests in that bankruptcy proceeding, and lower courts ordered the trucking company chief executive to pay that money back.

As you might expect, the CEO objects.

His lawyer, Daniel Geyser, argued the law does not require his client pay for everything. Lost income, necessary child care, yes. Transportation costs incurred while part of criminal investigation by the government, yes.

GEYSER: …That language does not cover the cost of hiring four law firms, a consulting firm, and forensic experts for a private investigation in bankruptcy litigation.

The CEO lost in the lower courts because it was after all his fraud scheme that caused this cascade of problems. And in the 5th Circuit where Texas resides, that’s the law. It’s not the law in every circuit.

That’s why the Supreme Court took the case.

The justices looked for that line in the sand. Listen to Justice Neil Gorsuch address the lawyer for the federal government, Michael Hutson, assistant to the solicitor general.

Hudson argued for a very broad reading of the law, not to limit the victim’s recovery to a specific time frame.

GORSUCH: So I — I can imagine someone saying: My divorce proceedings are related to the crime of violence, and I should get my attorneys’ fees for my divorce proceeding too, and — and childcare and all the other things Justice Breyer enumerated.  Where — where is the stopping point here?

Hutson hammered on how broad the federal law should be read. An incredulous Justice Stephen Breyer couldn’t help himself. Listen carefully to the one-word question he asks in the middle of Hutson’s answer.

HUTSON: That’s because of … that Congress wanted to make sure that even the stuff that wouldn’t readily come to to your mind is covered. But Congress would have understood that in fraud offenses —­

BREYER: Lunches?

HUTSON: I think, Your Honor, perhaps, yes, absolutely.

Well, people do have to eat, but I think this one’s going for the convicted defrauder. A line has to be drawn somewhere.

And I’ll draw a line right here: If you’ve listened to every Monday episode of Legal Docket, from October 9th to right here at this line, then, again, congratulations. You have now heard something substantive about every single case under consideration at the Supreme Court this term.

And that’s this week’s Legal Docket!


(AP Photo/J. Scott Applewhite, File) In this Oct. 10, 2017, file photo, the Supreme Court in Washington is seen at sunset. 

WORLD Radio transcripts are created on a rush deadline. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of WORLD Radio programming is the audio record.

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