The Trump administration on Wednesday abandoned its defense of the Securities and Exchange Commission’s in-house judicial system, siding with opponents who say the hiring process for the SEC’s judges is unconstitutional. In a brief filed with the U.S. Supreme Court, lawyers for the Justice Department wrote they now consider the SEC’s administrative law judges to be officers like other presidential appointees, instead of employees who are picked through a human-resources process. That means the way the SEC hires the judges may violate a constitutional clause that safeguards separation-of-powers principles.
The Justice Department’s brief didn’t explicitly describe the judges’ appointments as unconstitutional, but said the selection process for the in-house judge at issue in the case “did not conform” to a constitutional requirement. Mark Perry, a partner at Gibson, Dunn & Crutcher LLP who represented the challengers, said the Supreme Court’s involvement is still needed to resolve a disagreement between lower courts over the judges’ status. The Supreme Court would have to appoint an outside party to argue the case since the Justice Department has turned its back on defending it, the brief says. “We are one step closer to victory,” Mr. Perry said Wednesday.
The SEC didn’t sign the Justice Department’s brief. The regulator likely felt it couldn’t join the position because SEC commissioners have previously issued opinions in contested cases stating that judges are employees, not officers, said Andrew Vollmer, a professor at the University of Virginia School of Law and a former deputy general counsel of the SEC. An SEC spokesman declined to comment.