SEC headquarters in Washington. Credit: Diego M. Radzinschi

The U.S. Supreme Court on Friday agreed to rule on the constitutional status of Securities and Exchange Commission administrative law judges, granting review in a case that could affect thousands of commission proceedings.

Lucia v. SEC presents an issue that has created a sharp circuit split, making it a likely candidate for Supreme Court review. Several related cases are before appeals courts, awaiting high court action. The court's ruling could also affect administrative law judges in other federal agencies.

The SEC dispute, closely watched by white-collar lawyers, was among 12 cases that the justices agreed to review. Among the other cases, the justices will decide whether online retailers must pay state sales taxes even if they have no physical presence in the state and will consider challenges by Texas to lower court rulings that struck down its redistricting plans.

In Lucia, the U.S. Court of Appeals for the D.C. Circuit ruled in August 2016 that administrative law judges are SEC employees, not constitutional officers who must be hired by the president, a court or a department head, rather than by internal staff of the U.S. Securities and Exchange Commission, as had been the agency's practice.

However, ruling four months later in SEC v. Bandimere, the U.S. Court of Appeals for the Tenth Circuit said that the SEC judges are “inferior officers” under the Constitution.

The disagreement escalated in November, when U.S. Solicitor General Noel Francisco said in a brief in the Lucia case that the Trump administration would no longer defend the D.C Circuit ruling. The SEC then moved immediately to “ratify” the appointments of its five in-house judges in its capacity as a department head.

Francisco urged the court to grant review in Lucia, also suggesting that the justices appoint an outside lawyer to defend the D.C. Circuit decision.

Though the agency sought certiorari in Bandimere, the court's order list on Friday did not include that case, suggesting that it may be put on hold while the justices consider Lucia, in some ways a cleaner appeal.

A complicating factor in the Bandimere case, first raised in the government's petition, is that Gorsuch was still a judge on the Tenth Circuit when the government sought en banc review of the decision—a request that would have been put forward to all the circuit's judges. The court denied the en banc request in May—after Gorsuch was sworn in as a justice.

Francisco's petition in Bandimere mentioned the Lucia case and said the court “may wish … to consider” the constitutional issue in Lucia, not Bandimere, “because the government's petition for rehearing en banc in this case was filed in the court of appeals while Justice Gorsuch was a member of that court.”