Bandimere v Securities and Exchange Commission

Bandimere petitioned for review of Commission’s findings that he committed securities violations and imposing sanctions arguing the administrative law judge who heard his case was unconstitutionally appointed. The panel, 2-1 with an added concurrence, agreed and granted the petition. The majority held that the constitutional question was properly before the court as it was raised in the administrative proceeding and was the only argument raised by Bandimere. It held that the United States Supreme court decision in Freytag which involved the status of special tax judges controlled the analysis here and that under the Freytag factors Commission’s administrative law judges are inferior officers for Appointments Clause purposes and must therefore be appointed by the president, an Article III court or the commission because the position was created by the Administrative Procedure Act, the duties salaries and means of appointment are set by statute and the judges have significant discretion in carrying out important duties at the hearing stage including making evidentary rulings and credibility determinations. It rejected Commission’s counterarguments hooding Freytag does not require final decision-making authority for a position to be an inferior officer instead of an employee and deference to Congress is inappropriate here when the statutory scheme violates the Appointments Clause as is the case here as the Office of Personnel Management and Commission’s chief administrative law judge, not Commission, actually hire the judges. It also rejected the dissent’s arguments holding some deference is given to the decisions of the judges and the concerns about other administrative law judges and the effect on reviewing their decisions are not before the court and in any event overblown. The concurrence argued the concerns about other judges to be misplaced as all Appointments Clause decisions are done on a case by case basis and Commission treats the judges’ decisions as final in some circumstances. The dissent argued that final decision-making authority is essential to inferior officer status, that the judges here lack that and the decision puts thousands of administrative law judges at risk of losing for cause protection while leaving hundreds of thousands of decisions at risk on appeal.

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