U.S. Solicitor General's Office at Main Justice. Credit: Mike Scarcella/ ALM

In a case testing the status of administrative law judges at the U.S. Securities and Exchange Commission, several U.S. Supreme Court justices on Monday seemed concerned the judges could lose their independence and become politicized.

“Wouldn't putting those decision-makers even closer to the political body only exacerbate the problem?” Justice Elena Kagan asked at one point.

Justice Anthony Kennedy seemed to agree, stating that “it's important to the perception of justice that the adjudicator be independent.”

The court's ruling in Lucia v. Securities and Exchange Commission could affect hundreds of administrative judges throughout the federal bureaucracy, by deciding whether they are “officers” who must be appointed by the president or department head, or instead are employees who can be picked by agency staff.

Against the backdrop of headlines about President Donald Trump's threats to fire officials involved in the Russia probe, the Lucia case drew more interest than might have been expected. That is because Solicitor General Noel Francisco, who reversed the government's views on the SEC question, also urged the court to consider strengthening presidential power to remove as well as appoint key officers.

Though Deputy Solicitor General Jeffrey Wall raised the removal issue more than once, some justices seemed uninterested or antagonistic, preferring to sort out the hiring implications of the designation of officers.

Kagan told Wall that Congress wanted hearing examiners and adjudicators to “have some detachment … some insulation from the political system. Not the way an Article III judge does, but something. And you want to ratchet that down.”

The case was brought by Raymond Lucia, a financial adviser who was fined and banished from the industry by the SEC because of allegedly misleading statements in his “Buckets of Money” seminars.

Represented by Mark Perry of Gibson, Dunn & Crutcher, Lucia claimed the process was tainted because SEC judges were picked internally, rather than appointed by the president or department heads under the appointments clause of the Constitution.

When Francisco agreed with Lucia in a brief filed last November, the SEC swiftly changed gears and appointed its judges more formally. But the case was not moot because Lucia still faced punishment.

In addition, because both parties were on the same side, the court appointed O'Melveny & Myers partner Anton Metlitsky to assert the orphaned position that SEC judges should be regarded as employees, not officers. Metlitsky made some headway in limiting the type of government functionaries who should be classified as officers.

At the end of the argument Chief Justice John Roberts Jr., for whom Metlitsky once clerked, told him that he had “ably discharged” the responsibility of defending the decision below.

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