On July 21, 2017, an investment adviser sought review by the Supreme Court of the D.C. Circuit’s recent ruling in Lucia that allowed to stand a district court decision holding that SEC administrative law judges (“ALJs”) are not officers subject to the appointments clause of the U.S. Constitution. We’ve blogged about Lucia extensively because the issue in that case has the potential to impact the outcome of the PHH case.
The initial PHH decision was decided by an SEC ALJ who was on loan to the CFPB. If the Supreme Court decides to hear Lucia and decides that SEC ALJs are subject to the appointments clause, then the initial ALJ decision in PHH may be invalidated. If that happens, the D.C. Circuit could remand PHH back to the CFPB for decision by a properly-appointed ALJ. That would provide the D.C. Circuit with another basis to decide the PHH case without addressing the constitutionality of the CFPB’s structure. Given how the PHH oral arguments went, that seems unlikely, but we will continue to follow Lucia just in case.