Lisa Probst v. Andrew Saul ( 2020 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 19-1529
LISA PROBST,
Plaintiff - Appellee,
v.
ANDREW SAUL, Commissioner of Social Security,
Defendant - Appellant.
No. 19-1531
SHARRON BRADSHAW,
Plaintiff - Appellee,
v.
ANDREW SAUL, Commissioner of Social Security,
Defendant - Appellant.
Appeals from the United States District Court for the Eastern District of North Carolina, at
Raleigh. James E. Gates and Robert T. Numbers II, Magistrate Judges. (5:18-cv-00130-
JG; 5:18-cv-00100-RN)
Argued: September 10, 2020 Decided: November 20, 2020
Before KEENAN, WYNN, and RICHARDSON, Circuit Judges.
Affirmed by published opinion. Judge Wynn wrote the majority opinion, in which Judge
Keenan joined. Judge Richardson wrote an opinion concurring in the judgment.
ARGUED: Daniel Aguilar, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellant. Charlotte W. Hall, ARROWOOD & HALL, PLLC,
Raleigh, North Carolina, for Appellees. ON BRIEF: Joseph H. Hunt, Assistant Attorney
General, Mark B. Stern, Joshua M. Salzman, Civil Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant.
2
WYNN, Circuit Judge:
Plaintiffs-Appellees Lisa Probst and Sharron Bradshaw unsuccessfully applied for
Social Security disability benefits. After pursuing administrative appeals within the Social
Security Administration, they sought judicial review in federal district court.
While their cases were pending, the Supreme Court issued its opinion in Lucia v.
Securities and Exchange Commission, 138 S. Ct. 2044 (2018). Lucia elucidated a possible
constitutional objection to administrative proceedings pursuant to the Appointments
Clause. But neither Probst nor Bradshaw had raised that objection before the Social
Security Administration.
In this appeal, we are tasked with determining whether Probst and Bradshaw may
raise an Appointments Clause challenge in federal court that they did not preserve before
the agency. We agree with the courts below that claimants for Social Security disability
benefits do not forfeit Appointments Clause challenges by failing to raise them during their
administrative proceedings. Accordingly, we affirm.
I.
Bradshaw and Probst commenced their applications for Social Security disability
benefits before the Social Security Administration (“SSA”) in 2013 and 2014, respectively.
State disability agencies denied their claims, Administrative Law Judges (“ALJs”) upheld
the denials, and the SSA’s Appeals Council declined to reconsider the decisions. At that
point, in March 2018, Probst and Bradshaw each turned to federal district courts.
Three months later, however, the Supreme Court held that ALJs employed by the
Securities and Exchange Commission were “inferior” “Officers of the United States”—not
3
“simply employees of the Federal Government”—for purposes of the Appointments Clause
of the Constitution. Lucia, 138 S. Ct. at 2051 & n.3, 2055. The Appointments Clause
mandates that such “Officers” be appointed by the President, or if permitted by Congress,
by a court or a department head. U.S. Const. art. II, § 2, cl. 2; see Lucia, 138 S. Ct. at 2051
n.3 (describing the distinction between “principal” and “inferior” officers). Because the
ALJ in Lucia had not been so appointed, the Court concluded that the petitioner there was
entitled to a new hearing before a different, validly appointed ALJ. Lucia, 138 S. Ct. at
2055.
Following Lucia, Probst and Bradshaw argued—for the first time—that they, too,
deserved new hearings because the ALJs who reviewed their claims were also improperly
appointed. The Commissioner of Social Security 1 objected on exhaustion grounds, arguing
that Probst and Bradshaw had forfeited their Appointments Clause challenges by failing to
raise them during their agency proceedings—even though those proceedings concluded
before the Supreme Court issued its opinion in Lucia. 2
The district courts rejected the Commissioner’s argument and declined to require
exhaustion. Accordingly, the courts granted judgments on the pleadings to Probst and
1
Acting Commissioner of Social Security Nancy Berryhill was the original named
defendant in these cases. She has since been replaced by Commissioner Andrew Saul, who
represents the agency here. For present purposes, we use the shorthand “Commissioner” to
refer to both.
2
The Commissioner does not dispute that, at the time of Probst and Bradshaw’s
administrative proceedings, the SSA’s ALJs needed to be—but were not—appointed
consistent with the Appointments Clause. See Opening Br. at 12 n.2.
4
Bradshaw and, in line with Lucia, remanded their cases to the SSA for new hearings before
different, properly appointed ALJs. The Commissioner timely appealed.
II.
“In most cases, an issue not presented to an administrative decisionmaker cannot be
argued for the first time in federal court.” Sims v. Apfel, 530 U.S. 103, 112 (2000)
(O’Connor, J., concurring in part and concurring in the judgment). And for good reason.
Among other virtues, issue-exhaustion requirements preserve agency autonomy and foster
judicial economy. See McCarthy v. Madigan, 503 U.S. 140, 144–46 (1992); Nuclear
Energy Inst., Inc. v. EPA, 373 F.3d 1251, 1297–98 (D.C. Cir. 2004). But there are
circumstances under which this general rule need not apply, “even where administrative
and judicial interests would counsel otherwise.” McCarthy, 503 U.S. at 146. We hold that
this is one such case.
We are not alone in reaching this conclusion. Four Courts of Appeals have
considered the specific question before us: whether Social Security applicants must
administratively exhaust Appointments Clause challenges to the authority of the very ALJs
assessing their claims. The Third and Sixth Circuits have declined to require exhaustion in
this context. See Ramsey v. Comm’r of Soc. Sec., 973 F.3d 537 (6th Cir. 2020); Cirko ex
rel. Cirko v. Comm’r of Soc. Sec., 948 F.3d 148 (3d Cir. 2020). The Eighth and Tenth
Circuits have held the opposite. See Davis v. Saul, 963 F.3d 790 (8th Cir. 2020); Carr v.
Comm’r, SSA, 961 F.3d 1267 (10th Cir. 2020). We join the Third and Sixth Circuits in
concluding that imposing an exhaustion requirement here would be inappropriate.
5
Issue-exhaustion requirements are “largely creatures of statute.” Sims, 530 U.S. at
107. Where Congress has codified an exhaustion requirement—such as in 15 U.S.C. §
78y(c)(1), which provides that “[n]o objection to an order or rule of the [Securities and
Exchange] Commission . . . may be considered by the court unless it was urged before the
Commission or there was reasonable ground for failure to do so”—courts generally defer
to that choice. See, e.g., Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 665
(1982); Washington Ass’n for Television & Child. v. FCC, 712 F.2d 677, 681–82 & n.6
(D.C. Cir. 1983). Likewise, where an agency has adopted an issue-exhaustion requirement
in the regulations governing its internal review process, courts customarily “ensure against
the bypassing of that requirement by refusing to consider unexhausted issues.” Sims, 530
U.S. at 108; see also Island Creek Coal Co. v. Bryan, 937 F.3d 738, 747 (6th Cir. 2019).
However, when neither a statute nor a regulation speaks to exhaustion in the relevant
context, the decision of whether to impose such a requirement is left to “sound judicial
discretion.” See McCarthy, 503 U.S. at 144.
The Commissioner concedes that there are no statutes or regulations requiring issue
exhaustion in Social Security proceedings. See Oral Arg. at 8:43, 9:24; Opening Br. at 19;
Reply Br. at 7. Nor have we located any such authority. 3
3
The strongest candidates are 20 C.F.R. §§ 404.939 and 404.940, but they fall short.
Section 404.939 requires claimants to “notify the administrative law judge . . . at the earliest
possible opportunity” if they “object to the issues to be decided at [their] hearing[s].” 20
C.F.R. § 404.939. However, “the issues” referenced therein are those that the SSA has
already determined will be heard, see id. § 404.938(b)(1), and there is no suggestion that a
claimant’s failure to raise a new issue will lead to forfeiture down the road. Section 404.940
provides that a claimant who “object[s] to the administrative law judge who will conduct
6
The question, then, is whether to imply and enforce an exhaustion requirement that
neither Congress nor the SSA itself has seen fit to impose. For guidance, we look to the
Supreme Court’s framework outlined in McCarthy v. Madigan, which instructs us to
balance “the interest of the individual in retaining prompt access to a federal judicial forum
against countervailing institutional interests favoring exhaustion.” 503 U.S. at 146. This
balancing is meant to be “intensely practical,” and we are to give special attention to “the
nature of the claim presented” and “the characteristics of the particular administrative
procedure provided.” Id. We conclude that the balance tips against requiring exhaustion of
Appointments Clause challenges in the Social Security context. 4
[her] hearing . . . must notify the administrative law judge at [her] earliest opportunity.”
See id. § 404.940. Theoretically, that language could encompass Appointments Clause
challenges. But, read in context, the regulation clearly strikes at allegations of bias or
special interest, rather than an ALJ’s constitutional status.
4
We note that we are unconvinced by the Commissioner’s argument that Lucia itself
imposed a general exhaustion requirement for Appointments Clause challenges. In Lucia,
the Supreme Court explained that “‘one who makes a timely challenge to the constitutional
validity of the appointment of an officer who adjudicates his case’ is entitled to relief.” 138
S. Ct. at 2055 (quoting Ryder v. United States, 515 U.S. 177, 182–83 (1995)). The
petitioner there “made just such a timely challenge” by first contesting the validity of his
ALJ’s appointment before the SEC. Id. The Commissioner argues that this language
imposes “an important limitation” on Appointments Clause challenges—specifically, that
only those challenges raised before the agency itself may be considered “timely.” See, e.g.,
Opening Br. at 12–13. But we decline to read a categorical exhaustion requirement into
what appears to be nothing more than the Supreme Court’s stating the obvious. Where
issue exhaustion is required—whether by statute, by regulation, or by judicial imposition—
then a claimant who fails to raise her argument before the agency generally will be out of
luck. Such a requirement existed in Lucia, as exhaustion before the SEC is mandated by
statute. See 15 U.S.C. § 78y(c)(1). By contrast, where issue exhaustion is not required, an
objection raised in judicial proceedings in the first instance cannot be said to be untimely.
7
A.
We begin our balancing analysis by examining the “nature of [Probst and
Bradshaw’s] claim[s].” Id. The ordinary concerns favoring exhaustion “apply with
particular force” when the claim at issue implicates the agency’s “special expertise” or
“discretionary power.” Id. at 145. Indeed, the Commissioner directs us to several Social
Security cases in which courts have enforced implied exhaustion requirements for claims
that were clearly within the agency’s competency to resolve. For example, in Anderson v.
Barnhart, a claimant argued that the ALJ hearing his case erred by failing to consider
whether his morbid obesity posed a physical impairment. 344 F.3d 809, 814 (8th Cir.
2003). Because the claimant never raised this argument during agency proceedings,
however, the Eighth Circuit held that he had forfeited it. Id. Similarly, in Shaibi v. Berryhill,
the Ninth Circuit held that a represented claimant may not challenge the accuracy of a
vocational expert’s testimony for the first time in federal court. 883 F.3d 1102, 1109 (9th
Cir. 2017).
But the claim presented in this case is of a fundamentally different nature. An
Appointments Clause challenge, at bottom, is a “structural,” separation-of-powers
objection. See Freytag v. Comm’r of Internal Revenue, 501 U.S. 868, 878–79 (1991). The
judiciary is at least as equipped to evaluate such a claim as the SSA is. 5 Thus, permitting
5
In a passing citation to our decision in Nationsbank Corp. v. Herman, 174 F.3d
424 (4th Cir. 1999), the Commissioner suggests that this Court categorically requires
“litigants . . . to raise constitutional challenges in agency proceedings if they wish to
preserve those claims for judicial review.” Reply Br. at 12. But the Commissioner
mischaracterizes our statement there, and, in doing so, misses the point. Nationsbank
8
judicial review in the first instance may be appropriate. See Free Enter. Fund v. Pub. Co.
Acct. Oversight Bd., 561 U.S. 477, 491 (2010) (“Petitioners’ constitutional claims are also
outside the [Securities and Exchange] Commission’s competence and expertise.”); cf. UC
Health v. NLRB, 803 F.3d 669, 672–73 (D.C. Cir. 2015) (allowing “challenges to the
composition of an agency [to] be raised [in the first instance] on review”).
Additionally, there was little “discretionary power” to exercise here. McCarthy, 503
U.S. at 145. At the time of Probst and Bradshaw’s ALJ hearings, every SSA ALJ was
equally constitutionally invalid. No individual ALJ could have opted to recuse him- or
herself to resolve the issue. 6
Thus, neither the agency’s expertise nor its discretion is implicated here, which
dampens the impact of the traditional pro-exhaustion rationales. And on the other side of
the scale—actively counseling against requiring exhaustion—is the important role the
Appointments Clause plays in “preserving liberty” within our system of government.
NLRB v. Noel Canning, 573 U.S. 513, 570 (2014) (Scalia, J., concurring); see Cirko, 948
F.3d at 153–54. We conclude that the “nature of the claim presented” here does not favor
exhaustion.
simply reiterated that “under our consistent and unambiguous line of cases,” constitutional
claims are not per se exempt from exhaustion requirements. See 174 F.3d at 429 (collecting
cases).
6
We will return to the question of whether a claimant’s decision to raise an
Appointments Clause challenge under these circumstances would have, nevertheless,
facilitated systemic change within the agency as a whole. As pertains to the nature of Probst
and Bradshaw’s claims, however, we note that the agency was without real discretion to
address them.
9
B.
McCarthy also asks us to consider the “characteristics of the particular
administrative procedure provided.” 503 U.S. at 146. The Supreme Court’s latest treatment
of issue exhaustion in the Social Security context is Sims v. Apfel, 530 U.S. at 103.
In a fractured vote, the Sims Court declined to require issue exhaustion before the
SSA’s Appeals Council. Five Justices agreed with the broad proposition that, absent a
statute or regulation requiring otherwise, “the desirability of a court imposing a
requirement of issue exhaustion depends on the degree to which the analogy to normal
adversarial litigation applies in a particular administrative proceeding.” Id. at 109 (plurality
opinion); see also id. at 113 (O’Connor, J., joining Parts I and II-A of plurality opinion and
concurring in the judgment). The Court explained that the rationale undergirding
exhaustion is strongest in traditional, adversarial proceedings, where “contestants” before
the agency are expected to “develop fully all issues.” Id. at 109–10 (plurality opinion)
(quoting United States v. L. A. Tucker Truck Lines, Inc., 344 U.S. 33, 36–37 (1952)). But
“[w]here, by contrast, an administrative proceeding is not adversarial, . . . the reasons for a
court to require issue exhaustion are much weaker.” Id. at 110 (emphasis added).
Writing only for a plurality, Justice Thomas went on to conclude that the non-
adversarial nature of Social Security proceedings is “quite clear” and that, therefore,
requiring issue exhaustion before the Appeals Council “ma[de] little sense.” Id. at 111–12
(plurality opinion).
Justice O’Connor wrote separately because, in her view, “the agency’s failure to
notify claimants of an issue exhaustion requirement in this context [was] a sufficient basis
10
for [the] decision.” Id. at 113 (O’Connor, J., concurring in part and concurring in the
judgment). Moreover, the SSA’s regulations and procedures “affirmatively suggest[ed]
that specific issues need not be raised before the Appeals Council”—for example, by telling
claimants that “that [they] could request review by . . . filling out a 1–page form that should
take 10 minutes to complete.” Id. at 113–14. To impose an issue-exhaustion requirement
against claimants who “did everything that the agency asked” would, in Justice O’Connor’s
view, be both “inappropriate” and unfair. See id.Justice O’Connor’s analysis provides the narrowest grounds for the Court’s holding
and, therefore, controls. See Marks v. United States, 430 U.S. 188, 193–94 (1977). The
upshot of Sims, then, is that requiring issue exhaustion before the Appeals Council would
have been improper because: (1) the non-adversarial nature of Social Security proceedings
made the case for exhaustion “much weaker,” as five Justices held; and (2) the SSA gave
no notice to claimants that they might forfeit an issue by failing to raise it, as Justice
O’Connor concluded was determinative.
While Sims only considered a narrow question—whether a claimant must exhaust
issues before the SSA’s Appeals Council—and was careful to state that the present
inquiry—“[w]hether a claimant must exhaust issues before [an] ALJ”—was not before it,
the Court’s reasoning nonetheless applies with considerable force to the question at hand.
Sims, 530 U.S. at 107.
First, our Court has determined that the SSA “administrative hearing process is not
an adversarial one.” Pearson v. Colvin, 810 F.3d 204, 210 (4th Cir. 2015). By regulation,
SSA ALJs bear a primary and independent responsibility to develop the facts and issues in
11
a non-adversarial fashion. See, e.g., 20 C.F.R. §§ 404.944, 416.1400(b). That automatically
makes the argument for exhaustion “much weaker.” Sims, 530 U.S. at 110.
Second, several aspects of the ALJ review process could actually “mislead the
Social Security claimant to believe issue exhaustion is not required.” Id. at 114 (O’Connor,
J., concurring) (quotations omitted). For example, on the standard ALJ hearing-request
form, claimants are given a meager four lines to explain why they “disagree” with their
initial benefits determination. 7 See Form HA-501-U5, https://www.ssa.gov/forms/ha-
501.pdf. And at the hearing itself, a claimant “may” state her case in person or in writing—
but she isn’t required to. See 20 C.F.R. § 404.949. This “failure to notify claimants of an
issue exhaustion requirement” is “sufficient” to preclude enforcement of such a
requirement. Sims, 530 U.S. at 113 (O’Connor, J., concurring).
In sum, given the substantial overlap in the administrative schemes governing ALJ
hearings and Appeals Council review, Sims strongly cautions against requiring exhaustion
of Appointments Clause challenges here.
C.
Finally, to the extent there are individual and institutional interests we have not yet
considered, we weigh them here. McCarthy, 503 U.S. at 146. Social Security claimants
have a lot riding on their applications; modest as they are, disability payments often
7
Justice O’Connor found significant that Form HA-520, which claimants use to
request Appeals-Council review, similarly provides “roughly two inches” for claimants to
state their issues. Sims, 530 U.S. at 113.
12
comprise most of a beneficiary’s income. 8 Accordingly, the individual interest in the fair-
hearing protections guaranteed by the Appointments Clause is high. And though we might
wonder whether a successful challenge will produce a different outcome on remand, a
claimant’s “difficulty [in] show[ing] direct harm” or prejudice “does not diminish the
important individual liberty safeguarded by the Appointments Clause.” Cirko, 948 F.3d at
154.
The Commissioner highlights two countervailing institutional interests, neither of
which is compelling under the circumstances. First is the agency’s interest in self-
correction. The current litigation could have been avoided, the Commissioner argues, if
individual claimants like Probst and Bradshaw had raised Appointments Clause challenges
during their agency proceedings. That would have allowed the SSA to recognize the
mounting litigation risk posed by its ALJs’ constitutional infirmity sooner, prompting
reform. Cf. L. A. Tucker, 344 U.S. at 37. As a practical matter, however, that proposition
is farfetched. As the Supreme Court has observed, “[i]t is unrealistic to expect that the
[Commissioner] would consider substantial changes in the current administrative review
system at the behest of a single aid recipient raising a constitutional challenge in an
adjudicatory context.” Mathews v. Eldridge, 424 U.S. 319, 330 (1976).
So, while “an agency ought to have an opportunity to correct its own mistakes . . .
before it is haled into federal court,” McCarthy, 503 U.S. at 145, that courtesy only extends
8
See Michelle Stegman Bailey & Jeffrey Hemmeter, Characteristics of
Noninstitutionalized DI and SSI Program Participants, 2013 Update, tbls. 2, 4 (2015),
https://www.ssa.gov/policy/docs/rsnotes/rsn2015-02.html.
13
so far. And here, the SSA’s own actions demonstrate that the agency was aware of its
looming Appointments Clause problem months before Probst and Bradshaw sought review
in district court. In a January 2018 Emergency Message, the SSA instructed its ALJs to
acknowledge—but not otherwise discuss or decide—Appointments Clause challenges
raised by claimants. See SSA, Emergency Message EM-18003 (Jan. 30, 2018). That
directive cited two 2016 Court of Appeals decisions dealing with the constitutional status
of the SEC’s ALJs—that in Lucia itself, 832 F.3d 277 (D.C. Cir. 2016), and Bandimere v.
Securities & Exchange Commission, 844 F.3d 1168 (10th Cir. 2016)—and further noted
that “[t]he Department of Justice ha[d] taken the position . . . that the SEC’s ALJs are
inferior officers” subject to the Appointments Clause. SSA EM-18003. However, the SSA
took no further action until the Supreme Court issued its opinion in Lucia that summer, at
which point the Commissioner ratified the appointments of all the agency’s ALJs, thereby
validating their constitutional status. See 84 Fed. Reg. 9582-02, 9583 (Mar. 15, 2019) (“To
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 [the SSA’s] ALJs and
approved those appointments as her own.”).
All this is to say that the SSA was in a far better position than individual claimants
to recognize “the accumulating risk of wholesale reversals being incurred by its
persistence,” L. A. Tucker, 344 U.S. at 37; did, in fact, recognize that risk; and yet waited
14
to take corrective action. 9 It is hard to imagine that the SSA would have behaved any
differently if more claimants like Probst and Bradshaw had raised their Appointments
Clause claims before the ALJs.
The second institutional interest relates to the impact of any remanded cases on the
broader Social Security system. The Commissioner warns that, unless we require
exhaustion, the result will be “severe disruption” as a torrent of claimants choose to pursue
“a do-over before a new ALJ.” Opening Br. at 28; see also Carr, 961 F.3d at 1274 (noting
that “the agency is flooded with claimants”); Davis, 963 F.3d at 794 (discussing the impact
of “hundreds if not thousands of social security claimants” seeking new hearings). The
Commissioner does not provide specific numbers, but represents that the “many hundreds
of cases” already presenting this issue in federal courts are only “the tip of the iceberg.”
Opening Br. at 28.
Had this case come before us in July 2018, when the number of potential Lucia
claimants was at its peak, the volume of probable remands might have weighed more
heavily on our analysis. See McCarthy, 503 U.S. at 146 (“Application of [exhaustion]
balancing . . . is ‘intensely practical.’”). But now that the Commissioner has ratified the
9
Although Probst and Bradshaw were represented by counsel at their ALJ hearings,
a sizeable number of Social Security claimants proceed pro se, or with non-attorney
representation. See Social Security Administration (SSA) Annual Data for Representation
at Social Security Hearings, Soc. Sec. Admin. (May 23, 2018),
https://www.ssa.gov/open/data/representation-at-ssa-hearings.html. Whether ALJs are
“Officers of the United States” subject to the Appointments Clause is not exactly the stuff
of dinner-table conversation; we would not expect most lay applicants to be aware of
lurking Appointments Clause issues, let alone raise them before the ALJs presiding over
their hearings.
15
appointments of all ALJs as her own, there are no new Appointments Clause challenges
brewing in SSA cases. And because Social Security claimants have only a sixty-day
window to appeal an Appeals Council decision to a district court, all claimants whose
benefits were denied before the Commissioner’s July 2018 ratification of the SSA’s ALJs
have “long since either filed an appeal in district court or become time-barred from doing
so.” Cirko, 948 F.3d at 159 (citing 42 U.S.C. § 405(g)). In other words, even if the
Commissioner is correct that there are “many hundreds of [these] cases in federal district
courts,” those cases represent all such claims, not the “tip of the iceberg.” Opening Br. at
28; see Cirko, 948 F.3d at 159 (“The effect of our decision today, then, is limited to the
hundreds (not hundreds of thousands) of claimants whose cases are already pending in the
district courts[.]”); Ramsey, 973 F.3d at 547 n.5 (same). Our decision thus poses only a
minor inconvenience for an agency whose ALJs “hear approximately 650,000 cases”
annually. See Reply Br. at 2; see Cirko, 948 F.3d at 159 (referring to the pending
Appointments Clause cases as “a drop in the bucket” for the SSA).
III.
Balancing the individual and institutional interests at play, including considering the
nature of the claim presented and the characteristics of the ALJ proceedings, we decline to
impose an exhaustion requirement. We therefore hold that a claimant does not forfeit an
Appointments Clause challenge by failing to raise it in the course of Social Security
proceedings. Accordingly, we affirm the judgments of the district courts remanding these
cases for new administrative hearings before different, constitutionally appointed ALJs.
AFFIRMED
16
RICHARDSON, Circuit Judge, concurring in the judgment:
I agree with my good colleagues that the district court properly found that Lisa
Probst and Shannon Bradshaw did not forfeit their Appointments Clause challenges by
failing to raise them during their respective administrative proceedings. And while I agree
with much that my colleagues have to say, my path differs. For that reason, I write
separately.
Issue exhaustion is “largely [a] creature[] of statute” or regulation. Sims v. Apfel,
530 U.S. 103, 107–08 (2000). Thus, we must first look at the relevant statutes and
regulations to determine whether such a requirement exists. But the Government never
argued before this Court that a statute or regulation imposes an applicable issue-exhaustion
requirement. Appellant Br. 12–17; Reply Br. 4–12. In doing so, the Government waived
the most interesting question in this case: Do the Social Security regulations create—and
thus provide notice of—an issue-exhaustion requirement? 1
1
Without resolving the question, a little background should help an interested reader
consider whether the existing regulations require the claimant to raise any “issue” before
the administrative law judge (ALJ) or whether the regulations specifically require the
claimant to raise any objection to the assigned ALJ.
Several regulations discuss what “issues” are before the ALJ. If the agency denies
benefits, then a claimant may request review by an ALJ. 20 C.F.R. § 404.929. The
regulations provide that when requesting review, the claimant “should include . . . [t]he
reasons [the claimant] disagree[s] with the previous determination or decision.”
§ 404.933(a). The ALJ then must provide notice about “[t]he specific issues to be decided
in [the claimant’s] case.” § 404.938(b) (emphasis added). If, however, the claimant
“object[s] to the issues to be decided at the hearing, [the claimant] must notify the” ALJ
with reasons for the objections “at the earliest possible opportunity, but no later than” five
days before the hearing. § 404.939 (emphasis added). And at the hearing, 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,” although the ALJ
17
Respecting the importance of raising an issue before the proper tribunal, I would
hold the Government to their own waiver. Although interesting, I would not reach out to
decide whether the regulations in fact create an issue-exhaustion requirement. The
majority acknowledges and accepts the Government’s waiver. See Majority Op. 7. But
the majority then presses forward to decide—on the merits, without briefing, and in a
footnote—that the agency regulations cannot be interpreted to create an issue-exhaustion
requirement. Id. at 7, n.3; cf. Robert A. Johnston Co. v. Southland Dairy Distrib. Co., 368
F.2d 993, 995 (4th Cir. 1966) (noting that discussing issues without the benefit of briefing
can lead to “precipitous” and ill-considered decisions). That seems unwise, particularly
when the answer is less clear than the majority’s footnote lets on.
After accepting the Government’s waiver, I would move to the Government’s
argument that even in the absence of a statute or regulation, we should impose a judicially
created issue-exhaustion requirement. Appellant Br. at 20; see also Sims, 530 U.S. at 108;
United States v. L.A. Tucker Truck Lines, 344 U.S. 33, 37 (1952). I agree with my
may raise and consider new issues if the claimant is notified. § 404.946(a), (b)(1). The
claimant also “may raise a new issue,” and this new issue “may be raised even though it
arose after the request for a hearing and even though it has not been considered in an initial
or reconsidered determination.” § 404.946(b)(1).
Another regulation deals directly with objections to the assigned ALJ.
Section 404.940 explains that if the claimant “object[s] to the administrative law judge who
will conduct the hearing, [the claimant] must notify the administrative law judge at [her]
earliest opportunity.” § 404.940 (emphasis added); see also id. (noting that if the ALJ does
not withdraw, then the claimant may present her objection to the Appeals Council). But
see Majority Op. 7 n.3 (concluding the “language [of § 404.940] could encompass
Appointment Clause challenges” but deciding the “context” limits the “language” to
“allegations of bias or special interest”).
18
colleagues that we may not. But I reach that conclusion because the controlling opinion in
Sims instructs that the Social Security Administration must “notify claimants of an issue
exhaustion requirement” before the judiciary can impose one. 530 U.S. at 113 (O’Connor,
J., concurring in part and concurring in the opinion). 2 And the Government’s refusal to
rely, at least in this Court, on its own regulations waives the only plausible source for
providing that notice.
For these reasons, I concur in the judgment.
2
Sims cautioned that its decision was limited to a Social Security claimant who
failed to present an issue to the Appeals Council after an adverse decision from an ALJ.
530 U.S. at 110–12 (plurality); id. at 112–14 (O’Connor, J., concurring in part and
concurring in the opinion); see also id. at 107 (making clear that whether “a claimant must
exhaust issues before the ALJ is not before us”). But despite the potential reasons for
considering issue exhaustion differently during different stages of the Social Security
process, I read Justice O’Connor’s controlling opinion as categorically requiring notice for
issue exhaustion to apply in Social Security proceedings. That notice may come from the
regulations or administrative materials but, at least before this Court, the Government has
not argued that anything provides the requisite notice.
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