CASE
SUMMARY
Today, administrative agencies issue rules with the force of law, enforce laws, and prosecute people in proceedings before administrative law judges they hire. NCLA’s client Michelle Cochran worked as an auditor with a small Texas accounting firm until 2013, but she fell prey to this system when the U.S. Securities and Exchange Commission brought an enforcement action against the firm three years later and named her as a defendant, claiming she aided and abetted its alleged federal accounting rule violations. Representing herself, Ms. Cochran fought the allegations against her in a proceeding before an ALJ SEC hired to hear the case. At the time, SEC ALJs were hired by the prosecuting agency like any other civil servant. Unsurprisingly, ALJs rule for SEC in most cases. In 2017, Ms. Cochran’s ALJ ruled against her, imposing a $22,000 fine and banning her from practicing as an accountant before SEC for five years.
Then, the U.S. Supreme Court ruled in June 2018’s Lucia v. SEC decision that SEC ALJs must be appointed by the president rather than hired by the agency. SEC subsequently concluded that everyone facing pending enforcement proceedings had to be retried before new ALJs, assigning Ms. Cochran’s case to a new ALJ for a do-over in 2018.
To “faithfully execute the laws” under the Constitution, the president must be able to appoint and remove all federal officers. But SEC ALJs, like most civil servants, are protected by what amounts to life tenure. If the president cannot remove “officers” such as ALJs, then he can’t control the administrative agencies he’s charged with overseeing. The Supreme Court unanimously held in April 2023 that Ms. Cochran had the right to challenge the constitutionality of her ALJ’s removal protections in federal court before undergoing an administrative adjudication, a major NCLA victory.