Filed: Jun. 15, 2020
Latest Update: Jun. 15, 2020
Summary: PUBLISH FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit FOR THE TENTH CIRCUIT June 15, 2020 _ Christopher M. Wolpert Clerk of Court WILLIE EARL CARR, Plaintiff - Appellee, v. No. 19-5079 COMMISSIONER, SSA, Defendant - Appellant. ––––––––––––––––––––––––––––––––––– KIM L. MINOR, Plaintiff - Appellee, No. 19-5085 v. COMMISSIONER, SSA, Defendant - Appellant. _ Appeal from the United States District Court for the Northern District of Oklahoma (D.C. Nos. 4:18-CV-0027
Summary: PUBLISH FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit FOR THE TENTH CIRCUIT June 15, 2020 _ Christopher M. Wolpert Clerk of Court WILLIE EARL CARR, Plaintiff - Appellee, v. No. 19-5079 COMMISSIONER, SSA, Defendant - Appellant. ––––––––––––––––––––––––––––––––––– KIM L. MINOR, Plaintiff - Appellee, No. 19-5085 v. COMMISSIONER, SSA, Defendant - Appellant. _ Appeal from the United States District Court for the Northern District of Oklahoma (D.C. Nos. 4:18-CV-00272..
More
PUBLISH FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT June 15, 2020
_________________________________
Christopher M. Wolpert
Clerk of Court
WILLIE EARL CARR,
Plaintiff - Appellee,
v.
No. 19-5079
COMMISSIONER, SSA,
Defendant - Appellant.
–––––––––––––––––––––––––––––––––––
KIM L. MINOR,
Plaintiff - Appellee,
No. 19-5085
v.
COMMISSIONER, SSA,
Defendant - Appellant.
_________________________________
Appeal from the United States District Court
for the Northern District of Oklahoma
(D.C. Nos. 4:18-CV-00272-FHM, 4:18-CV-00418-FHM)
_________________________________
Amanda L. Mundell, Attorney (Joseph H. Hunt, Assistant Attorney General; Mark B.
Stern, Joshua M. Salzman, and Daniel Aguilar, Attorneys, on the briefs) United States
Department of Justice, Washington, D.C. for Defendant - Appellant.
Paul F. McTighe, Jr., Tulsa, Oklahoma for the Plaintiffs – Appellees.
_________________________________
Before HARTZ, MATHESON, and CARSON, Circuit Judges.
_________________________________
MATHESON, Circuit Judge.
_________________________________
This appeal asks whether Social Security disability claimants waive Appointments
Clause challenges that they failed to raise in their administrative proceedings.
In separate claims, Willie Earl Carr and Kim L. Minor (“Appellees”) sought
disability benefits from the Social Security Administration (“SSA”). In each case, the
administrative law judge (“ALJ”) denied the claim, and the agency’s Appeals Council
declined to review.
In district court, Mr. Carr challenged the SSA’s denial of his claim for disability
benefits. While his case was pending, the Supreme Court held that Securities and
Exchange Commission (“SEC”) ALJs are “inferior officers” under the Appointments
Clause, U.S. Const. art. II, § 2, cl. 2, and therefore must be appointed by the President, a
court, or the head of the agency, Lucia v. S.E.C., 138 S. Ct. 2044, 2049 (2018). Shortly
after, Ms. Minor also sued in district court challenging the denial of benefits in her case.
In response to Lucia, the SSA Commissioner (“Commissioner”) appointed the
SSA’s ALJs. 1 The Commissioner did so “[t]o address any Appointments Clause
questions” Lucia posed. Effect of the Decision in Lucia v. Securities and Exchange
1
The SEC had only five ALJs when Lucia was decided. See Lucia, 138 S. Ct. at
2049. The SSA has approximately 1,600. See SSA, FY 2021 Congressional
Justification, 187-89 (2020), https://perma.cc/M3EJ-ZE23.
2
Commission (SEC) On Cases Pending at the Appeals Council (“Effect of Lucia”), 84
Fed. Reg. 9582, 9583 (Mar. 15, 2019). After the Commissioner’s action, Mr. Carr and
Ms. Minor each filed a supplemental brief, asserting for the first time that the ALJs who
had rejected their claims had not been properly appointed under the Appointments
Clause.
The district court upheld the ALJs’ denials of the claims, but it agreed with the
Appointments Clause challenges. The court vacated the SSA decisions and remanded for
new hearings before constitutionally appointed ALJs. It held that Mr. Carr and Ms.
Minor did not waive their Appointments Clause challenges by failing to raise them in
their SSA proceedings.
On appeal, the Commissioner argues that Appellees waived their Appointments
Clause challenges by failing to exhaust them before the SSA. Exercising jurisdiction
under 28 U.S.C. § 1291, we agree and reverse.
I. BACKGROUND
The following presents an overview of (A) SSA disability proceedings, (B) the
Appointments Clause, and (C) the factual and procedural background in these cases.
A. Social Security Administrative Procedure
When a Social Security claimant seeks disability benefits, the SSA makes an
“[i]nitial determination” regarding entitlement. 20 C.F.R. § 404.900(a)(1). Dissatisfied
claimants may seek agency reconsideration. Id. § 404.900(a)(2).
3
A claimant who disagrees with the reconsidered determination may request a
hearing before an SSA ALJ. Id. § 404.900(a)(3). An ALJ may (1) dismiss the request
for a hearing,
id. § 404.957, (2) remand for a revised determination,
id. § 404.948(c), (3)
issue a decision,
id. § 404.948(a), or (4) hold a hearing and then issue a decision,
id.
§ 404.953. “The issues before the [ALJ] include all the issues brought out in the initial,
reconsidered or revised determination that were not decided entirely in [the claimant’s]
favor,”
id. § 404.946(a), as well as new issues the ALJ raises,
id. § 404.946(b).
Claimants must “notify the [ALJ] in writing at the earliest possible opportunity” if they
“object to the issues to be decided at the hearing.”
Id. § 404.939.
A claimant may appeal an ALJ’s decision to the SSA Appeals Council (“Appeals
Council”). Id. § 404.900(a)(4). If the Appeals Council affirms or declines to review, the
claimant may sue in district court within 60 days.
Id. § 404.900(a)(5); 42 U.S.C.
§ 405(g).
B. Appointments Clause
The Appointments Clause provides:
[The President] . . . shall nominate, and by and with the
Advice and Consent of the Senate, shall appoint
Ambassadors, other public Ministers and Consuls, Judges of
the supreme Court, and all other Officers of the United States,
whose Appointments are not herein otherwise provided for,
and which shall be established by Law: but the Congress may
by Law vest the Appointment of such inferior Officers, as
they think proper, in the President alone, in the Courts of
Law, or in the Heads of Departments.
4
U.S. Const. art. II, § 2, cl. 2. “The Supreme Court has defined an officer generally as
‘any appointee exercising significant authority pursuant to the laws of the United
States.’” Bandimere v. S.E.C., 844 F.3d 1168, 1173 (10th Cir. 2016) (quoting Buckley v.
Valeo,
424 U.S. 1, 126 (1976) (per curiam)). “The term ‘inferior officer’ connotes a
relationship with some higher ranking officer or officers below the President: Whether
one is an ‘inferior’ officer depends on whether he has a superior.”
Id. (quotations
omitted). Employees—or “lesser functionaries”—need not be appointed under the
Appointments Clause.
Id. at 1170, 1173 (quotations omitted). The Appointments Clause
prevents the “diffusion of the appointment power,” Ryder v. United States,
515 U.S. 177,
182 (1995), and “promotes public accountability by identifying the public officials who
appoint officers,”
Bandimere, 844 F.3d at 1172.
In Lucia, the Supreme Court held that the SEC’s ALJs are inferior officers and
must be appointed by the President, a court, or a head of agency department. 138 S. Ct.
at 2049. Because the ALJ in Lucia had not been appointed in one of those ways, the
Court vacated the agency’s decision that Mr. Lucia had violated the Investment Advisers
Act, 15 U.S.C. § 80b–1 et seq., and remanded for a new hearing before a properly
appointed ALJ.
Id. at 2055-56. The Court did not address whether SSA ALJs are also
inferior officers subject to Appointments Clause appointment.
C. Factual and Procedural Background
Mr. Carr and Ms. Minor separately sought disability benefits in 2014. ALJs heard
and denied their claims in 2017. The Appeals Council declined to review both claims,
5
and they each sued in the Northern District of Oklahoma, contesting the ALJs’ decisions
on the merits.
After Mr. Carr’s suit was filed but before Ms. Minor’s, the Supreme Court decided
Lucia. Several weeks later, the SSA Commissioner appointed the agency’s ALJs. See
Effect of Lucia, 84 Fed. Reg. at 9583. The SSA explained that although
[t]he Supreme Court’s decision in Lucia did not specifically
address the constitutional status of ALJs who work in other
Federal agencies, including the [SSA,] [t]o address any
Appointments Clause questions involving Social Security
claims, and consistent with guidance from the Department of
Justice, on July 16, 2018[,] the Acting Commissioner of
Social Security ratified the appointments of our ALJs and
approved those appointments as her own.
Id.
Mr. Carr and Ms. Minor each filed briefs in district court raising, for the first time,
Appointments Clause challenges to the ALJs who denied their claims. The court upheld
the ALJs’ decisions on the merits but remanded for new hearings before ALJs properly
appointed under the Appointments Clause. Relying on Sims v. Apfel,
530 U.S. 103
(2000), it concluded that the claimants did not waive their Appointments Clause claims
by failing to raise them in their SSA proceedings. See Willie Earl C. v. Saul, No. 18-CV-
272-FHM,
2019 WL 2613819, at *5 (N.D. Okla. June 26, 2019); Kim L. M. v. Saul, No.
18-CV-418-FHM,
2019 WL 3318112, at *6 (N.D. Okla. July 24, 2019).
The Commissioner appealed as to both Mr. Carr and Ms. Minor. The appeals
have been consolidated and were argued together to this panel.
6
II. DISCUSSION
On appeal, the Commissioner “[does] not contest that [SSA] ALJs are inferior
officers and that the ALJs had not been properly appointed” when they denied Appellees’
benefits claims. Aplt. Br. at 8. He argues only that the district court erred by holding that
Appellees were not required to exhaust their Appointments Clause challenges in the
administrative proceedings. The Commissioner does not argue that a statute or regulation
requires issue exhaustion in the SSA context. He contends we should find such a
requirement “even without relying on a specific statute or regulation.” Id. at 21.
A. Standard of Review
“We review a district court’s ruling reversing the Commissioner’s final decision
de novo, applying the same standards as the district court.” Vallejo v. Berryhill, 849 F.3d
951, 954 (10th Cir. 2017). 2
2
When a district court excuses (or declines to excuse) a plaintiff’s failure to
exhaust, we review that decision for abuse of discretion. See, e.g., McGraw v. Prudential
Ins. Co. of Am., 137 F.3d 1253, 1263 (10th Cir. 1998) (“We may disturb [a district
court’s refusal to excuse failure to exhaust] only if it represents a clear abuse of
discretion.”); Koch v. White,
744 F.3d 162, 164 (D.C. Cir. 2014) (“[T]he decision
whether to excuse a failure to exhaust is reviewed for an abuse of discretion.”). The
district court here did not excuse Appellees’ failure to exhaust. It held there is no
exhaustion requirement for SSA Appointments Clause challenges, and it reversed the
ALJs’ decisions. See Willie Earl C.,
2019 WL 2613819, at *5; Kim L. M.,
2019 WL
3318112, at *6.
7
B. Additional Legal Background
Issue Exhaustion
The Supreme Court “long has acknowledged the general rule that parties exhaust
prescribed administrative remedies before seeking relief from the federal courts.”
McCarthy v. Madigan, 503 U.S. 140, 144-45 (1992). Moreover, “[i]n most cases, an
issue not presented to an administrative decisionmaker cannot be argued for the first time
in federal court.”
Sims, 530 U.S. at 112 (O’Connor, J., concurring); see also N.M. Health
Connections v. U.S. Dep’t of Health & Human Servs.,
946 F.3d 1138, 1165 n.25 (10th
Cir. 2019) (“In general, an issue must have been raised before an agency for a party to
seek judicial review of agency action on that issue.”); Nuclear Energy Inst., Inc. v. Envtl.
Prot. Agency,
373 F.3d 1251, 1297 (D.C. Cir. 2004) (“It is a hard and fast rule of
administrative law, rooted in simple fairness, that issues not raised before an agency are
waived and will not be considered by a court on review.”).
When a statute or regulation requires issue exhaustion, claimants waive issues they
fail to raise in their administrative proceedings. See Malouf v. S.E.C., 933 F.3d 1248,
1255 (10th Cir. 2019) (holding that an SEC claimant waived an Appointments Clause
challenge he did not raise before the agency); Energy W. Mining Co. v. Lyle ex rel. Lyle,
929 F.3d 1202, 1206 (10th Cir. 2019) (ruling that a claimant waived an Appointments
Clause challenge he failed to raise in his administrative hearing for Department of Labor
benefits). The Supreme Court has recognized that it has “imposed an issue-exhaustion
8
requirement even in the absence of a statute or regulation.” Sims, 530 U.S. at 108; see
also United States v. L. A. Tucker Truck Lines, Inc.,
344 U.S. 33, 37 (1952).
The exhaustion requirement, whether it concerns a remedy or an issue, furthers
two main institutional interests. See Woodford v. Ngo, 548 U.S. 81, 89 (2006). First, it
allows agencies “to correct [their] own mistakes.”
Id. (quotations omitted); see also L. A.
Tucker, 344 U.S. at 37 (“[O]rderly procedure and good administration require that
objections to the proceedings of an administrative agency be made while it has
opportunity for correction in order to raise issues reviewable by the courts.”). Second, it
“promotes efficiency” by expediting claims, limiting the number of cases that reach
federal courts, and conserving resources. See
Woodford, 548 U.S. at 89; see also In re
DBC,
545 F.3d 1373, 1379 (Fed. Cir. 2008) (requiring issue exhaustion because it served
efficiency and agency autonomy). Courts thus have declined to require issue exhaustion
only in rare circumstances, such as in Sims. Because the district court here relied on Sims
for its decision, we provide an overview of that case.
Sims v. Apfel
In Sims, the Supreme Court held that an SSA claimant did not waive issues she
wished to raise in district court and that she had failed to specify in her request for
Appeals Council review. 530 U.S. at 112. The SSA ALJ had denied the claimant’s
request for benefits. The claimant sought Appeals Council reconsideration but did not
identify the issues she wished to have reviewed.
Id. at 105. The Appeals Council denied
review.
Id. She sued in district court, this time listing her challenges to the ALJ’s
9
decision. Id. at 105-06. Because she raised issues in district court that she had not
identified in her appeal to the Council, the court held that it lacked jurisdiction. The Fifth
Circuit affirmed.
Id. at 106 (citing Sims v. Apfel,
200 F.3d 229, 230 (5th Cir. 1998) (per
curiam)).
The Supreme Court reversed in a fractured decision. Five Justices joined the first
section of Justice Thomas’s analysis, but only four joined the second section. Justice
O’Connor, who joined the first section but not the second, wrote a concurrence. Because
she relied on narrower grounds than the plurality, her analysis governs. See Marks v.
United States, 430 U.S. 188, 193 (1977) (“When a fragmented Court decides a case and
no single rationale explaining the result enjoys the assent of five Justices, the holding of
the Court may be viewed as that position taken by those Members who concurred in the
judgments on the narrowest grounds.” (quotations omitted)); Cirko ex rel. Cirko v.
Comm’r of Soc. Sec.,
948 F.3d 148, 155 n.4 (3d Cir. 2020) (“Under the rule of [Marks],
Justice O’Connor’s analysis . . . controls.”). We summarize below the various opinions.
a. Majority
In the first section of his analysis, joined by the majority, Justice Thomas observed
that issue exhaustion, even without a statute or regulation requiring it, is “a general rule
because it is usually appropriate under an agency’s practice for contestants in an
adversary proceeding before it to develop fully all issues there.” 530 U.S. at 109
(quotations and brackets omitted). But when “an administrative proceeding is not
10
adversarial, . . . the reasons for a court to require issue exhaustion are much weaker” and
do not apply to SSA Appeals Council proceedings.
Id. at 110.
b. Plurality
Justice Thomas’s second analysis section received only four votes. There, the
plurality said that issue exhaustion should not be required because “Social Security
proceedings are inquisitorial rather than adversarial.” Id. at 110-11. It reasoned that “[i]t
is the ALJ’s duty to investigate the facts and develop the arguments both for and against
granting benefits, and the Council’s review is similarly broad.”
Id. at 111 (citation
omitted).
The plurality said that “the Council’s review is plenary unless it states otherwise”
and that Appeals Council petition forms “provide[] only three lines for the request for
review.” Id. at 111-12. It concluded that the SSA process “therefore strongly suggests
that the Council does not depend much, if at all, on claimants to identify issues for
review.”
Id. at 112.
c. Justice O’Connor’s concurrence
Justice O’Connor concurred in the judgment and joined only the first section of
Justice Thomas’s analysis. She observed that, “[i]n most cases, an issue not presented to
an administrative decisionmaker cannot be argued for the first time in federal court[,]”
but that, “[i]n the absence of a specific statute or regulation requiring issue exhaustion,
. . . such a rule is not always appropriate.” Id. at 112-13 (O’Connor, J., concurring). In
her view, “the agency’s failure to notify claimants of an issue exhaustion requirement in
11
this context is a sufficient basis for our decision[,]” and “[r]equiring issue exhaustion is
particularly inappropriate here, where the regulation and procedures of the [SSA]
affirmatively suggest that specific issues need not be raised before the Appeals Council.”
Id. at 113. Because Appeals Council review is plenary and Appeals Council petition
forms contain only three lines, the claimant “did everything that the agency asked of her”
even though she did not specify issues in the form.
Id.
C. Analysis
Because the Commissioner does not argue that a statute or regulation requires
issue exhaustion, we consider whether the institutional interests supporting issue
exhaustion apply here. We then address whether the district court appropriately departed
from the exhaustion rule. We conclude exhaustion should apply here and that the district
court erroneously relied on Sims. We therefore reverse.
Purposes of Issue Exhaustion
We address whether the purposes for the exhaustion rule apply to the Appellees’
Appointments Clause challenges. 3
3
Although we have not addressed whether exhaustion is necessary in the SSA
ALJ context, other circuits have imposed an exhaustion requirement. See, e.g., Shaibi v.
Berryhill, 883 F.3d 1102, 1109 (9th Cir. 2017); Anderson v. Barnhart,
344 F.3d 809, 814
(8th Cir. 2003); Mills v. Apfel,
244 F.3d 1, 4-5 (1st Cir. 2001). The Third Circuit is the
only federal appellate court that has addressed exhaustion of an Appointments Clause
challenge in the SSA ALJ context. It held that claimants do not waive such challenges by
failing to raise them before their ALJs. See
Cirko, 948 F.3d at 159.
12
First, had Appellees exhausted their Appointments Clause claims, the SSA could
have corrected an appointment error. See Woodford, 548 U.S. at 89. The SSA “might
have changed its position on the Appointments Clause issue; and ‘if it did not, [it] would
at least [have been] put on notice of the accumulating risk of wholesale reversals being
incurred by its persistence.”
Malouf, 933 F.3d at 1257 (quoting L. A.
Tucker, 344 U.S. at
37). Even if corrective action was unlikely “at the behest of a single [benefits claimant],”
Mathews v. Eldridge,
424 U.S. 319, 330 (1976), Appellees’ failure to exhaust their
Appointments Clause challenges deprived the SSA of its interest in internal error-
correction, see
Woodford, 548 U.S. at 89. 4
Second, an exhaustion requirement here would have promoted both judicial and
agency efficiency. See id. Judicial efficiency would have been served if the SSA
Commissioner had appointed its ALJs in response to Appellees’ raising their
Appointments Clause challenges before the agency. Their doing so could have saved the
judiciary the time and expense of this litigation and the scores of similar cases currently
on appeal around the country. See Aplt. Br. at viii-xi (listing 49 related appeals in United
States circuit courts); McKart v. United States,
395 U.S. 185, 195 (1969) (“A
complaining party may be successful in vindicating his rights in the administrative
4
Even though the Supreme Court did not decide Lucia until after the ALJ
decisions here, this court had decided Bandimere, holding, as in Lucia, that the SEC’s
ALJs had not been properly appointed.
13
process. If he is required to pursue his administrative remedies, the courts may never
have to intervene.”).
As to agency efficiency, the SSA could have addressed the Appointments Clause
issue in the first instance if Appellees had raised it in their administrative proceedings and
avoided the possibility of having to conduct two ALJ merits hearings on their disability
benefits claims and those of many others. This prospect would undermine administrative
efficiency and delay pending cases. In re DBC, 545 F.3d at 1379 (“If [the plaintiff] had
objected to the [agency], instead of to this court in the first instance, it could have
obtained relief immediately, and thus avoided the unnecessary expenditure of the
administrative resources of the [agency] . . . .”). As the Commissioner notes, SSA
proceedings are time-consuming and the agency is flooded with claimants. See Aplt. Br.
at 27; see also SSA, Annual Performance Report, Fiscal Years 2019–2021, 3 (2020),
https://perma.cc/5GFC-2HKM (noting that “the average wait time for a hearing decision
[is] 470 days”). 5
5
Even if Appellees were to prevail on their Appointments Clause challenges here,
they do not contest on appeal the district court’s affirmance of the agency’s denial of
benefits. Oral Arg. at 25:07-25:30. In Bandimere and Lucia, by contrast, the claimants
appealed the ALJs’ merits decisions as well as the ALJs’ appointments. See Opening
Brief of Petitioner at 18, Bandimere v. S.E.C., 844 F.3d 1168 (10th Cir. 2016) (No. 15-
9586); Opening Brief for Petitioners at 46, Lucia v. S.E.C.,
138 S. Ct. 2044 (2018) (No.
15-1345).
14
No Exception to Issue Exhaustion Should Apply
In finding an exception to the issue exhaustion requirement, the district court
mistakenly relied on Sims, which held that exhaustion before the SSA Appeals Council is
not required.
First, the Supreme Court in Sims cautioned that its holding did not apply to the
issue before us. It held only that, when the claimant failed to raise issues in her petition
for Appeals Council review, she did not waive her ability to raise those issues in district
court. The Court emphasized that “[w]hether a claimant must exhaust issues before the
ALJ is not before us.” Sims, 530 U.S. at 107. And the four-Justice dissent predicted that
“the plurality would not forgive the requirement that a party ordinarily must raise all
relevant issues before the ALJ.”
Id. at 117 (Breyer, J., dissenting). 6 Appellees here did
not present their Appointments Clause challenges to the ALJs or the Appeals Council.
Second, the reasons the Sims Court did not require issue exhaustion in petitions to
the Appeals Council do not apply to SSA ALJ hearings. Justice O’Connor, providing the
deciding vote, observed that SSA Appeals Council petition forms provide only three lines
for claimants to specify the bases for appeal, and that appellate review is plenary by
6
Since Sims, other circuits have imposed an issue exhaustion requirement in the
SSA ALJ context. See, e.g., Shaibi, 883 F.3d at 1109 (holding that “Sims concerned only
whether a claimant must present all relevant issues to the Appeals Council,” and that
claimants “must raise all issues and evidence at their administrative hearings in order to
preserve them on appeal” (quotations omitted));
Mills, 244 F.3d at 4 (observing that the
failure to specify issues for Appeals Council review is “entirely different from failing to
offer evidence in the first instance to the ALJ, which is far more disruptive of the review
function”).
15
default. Id. at 113-14 (O’Connor, J., concurring). The Sims claimant, therefore, “did
everything that the agency asked of her” by filling out the form, even though she did not
specify the contested issues on appeal.
Id. at 114.
By contrast, SSA ALJs must notify claimants of the “specific issues to be decided”
at each hearing, 20 C.F.R. § 404.938(b)(1), and claimants must “notify the [ALJs] in
writing at the earliest possible opportunity” if they “object to the issues to be decided at
the hearing,” id. § 404.939. If Appellees’ ALJs did not list the Appointments Clause as
an issue “to be decided,” Appellees needed to object and raise it. The claimant in Sims
did not have a similar obligation with respect to Appeals Council review. 7
Third, the district court placed undue weight on the “non-adversarial” nature of
SSA ALJ proceedings. Although the Sims majority said the basis for issue exhaustion is
weakest when agency determination of benefits is inquisitorial, only the plurality relied
on this rationale to hold exhaustion was not required. The district court failed to
recognize that Justice O’Connor’s controlling concurrence relied on a narrower ground.
That is, the SSA does not notify claimants they must raise issues to the Appeals Council,
the Appeals Council review is plenary, and the claimant “did everything that the agency
asked of her” even though she identified no issues for review. Sims, 530 U.S. at 114
(O’Connor, J., concurring). Justice O’Connor’s reasoning does not apply to SSA ALJ
7
The Commissioner does not argue that § 404.939 requires issue exhaustion
before SSA ALJs. We need not decide that question, because we hold exhaustion of
Appointments Clause challenges is necessary even without a statutory or regulatory
requirement.
16
proceedings, where, as noted above, SSA regulations require claimants to object if they
dispute the issues to be decided at their ALJ hearings.
Fourth, even if SSA ALJ review of disability claims is largely non-adversarial,
Appointments Clause challenges are “adversarial” as described in Sims. The Sims
majority recognized that a proceeding is inquisitorial when the agency develops the
issues on its own and adversarial when the “parties are expected to develop the issues.”
Id. at 110.
An SSA ALJ typically develops issues regarding benefits, but a claimant must
object to an ALJ’s authority. See, e.g., 20 C.F.R. § 404.940 (explaining that a claimant
who believes an ALJ is prejudiced “must notify the [ALJ of the objection] at [the] earliest
opportunity”); Muhammad v. Berryhill, 381 F. Supp. 3d 462, 467 (E.D. Pa. 2019) (“[An
Appointments Clause] attack on the structural integrity of the process itself[] is as
adversarial as it gets and under . . . Sims presents the strongest case for requiring issue
exhaustion.” (citation and quotations omitted)).
Fifth and finally, the Third Circuit’s decision in Cirko is unpersuasive and counter
to our precedent. 8 There, the court held that claimants need not exhaust Appointments
Clause challenges before the SSA ALJ. It reasoned that, given their constitutional nature,
8
Cirko was decided after the parties filed their opening briefs. In its reply brief,
filed after Cirko, the Commissioner argues we should not follow the Third Circuit. Aplt.
Reply Br. at 11.
17
such challenges are “beyond the power of the agency to remedy.” Cirko, 948 F.3d at
157.
We rejected this view in Malouf and Energy West. See Malouf, 933 F.3d at 1257
(explaining that an administrative Appointments Clause challenge would have notified
the agency of the need to appoint its ALJs, a remedy within the SSA’s authority); Energy
W., 929 F.3d at 1206 (observing that an Appointments Clause challenge would not have
been futile because the agency’s appellate tribunal could vacate a judgment by an
unappointed ALJ). And to the extent Cirko relied on Sims, we decline to follow it for the
reasons discussed. 9
* * * *
The district court failed to provide adequate reasons to depart from the general
principle that “an issue must have been raised before an agency for a party to seek
judicial review of agency action on that issue.” N.M. Health Connections, 946 F.3d at
1165 n.25. 10
9
We also have recognized that an issue exhaustion requirement discourages the
strategic practice of “sandbagging.” Freytag v. Comm’r, 501 U.S. 868, 895 (1991)
(Scalia, J., concurring). That is, without an exhaustion requirement, a claimant might
proceed through the administrative process without raising an issue and then, if the SSA
denies benefits, raise the issue in court and seek a new ALJ hearing. See Forest
Guardians v. U.S. Forest Serv.,
641 F.3d 423, 431 n.6 (10th Cir. 2011) (“In practice, the
requirement that plaintiffs exhaust their administrative remedies greatly minimizes the
threat of sandbagging—i.e., the concern that plaintiffs will shirk their duty to raise claims
before the agency, only to present new evidence at trial that undermines the agency’s
decision.” (quotations omitted and alterations incorporated)).
10
Assuming, as we have found, issue exhaustion is required, Appellees urge us to
excuse their failure to raise their Appointments Clause challenge before the agency. The
18
III. CONCLUSION
We reverse the district court’s judgment.
district court did not address this issue. We decline to excuse Appellees’ failure to
exhaust for substantially the same reasons we have found an issue exhaustion
requirement.
19
