Carr v. Saul: Supreme Court to Decide When Social Security Claimants Must First Raise Appointments Clause Challenges

Carr v. Saul: Supreme Court to Decide When Social Security Claimants Must First Raise Appointments Clause Challenges

Legal Sidebari
Carr v. Saul: Supreme Court to Decide When
Social Security Claimants Must First Raise
Appointments Clause Challenges
March 12, 2021
In 2018, the Supreme Court in Lucia v. Securities and Exchange Commission (SEC) held that
administrative law judges (ALJs) of the SEC are “Officers of the United States”—government officials
who, under the Appointments Clause of the U.S. Constitution, must be appointed by the President “with
the Advice and Consent of the Senate,” or, in the case of “inferior” officers (but only when Congress so
provides), “the President alone,” “the Courts of Law,” or “the Heads of Departments.” Since Lucia,
litigants have continued to raise Appointments Clause chal enges regarding ALJs at other agencies. Carr
v. Saul (consolidated with Davis v. Saul), a case pending before the Supreme Court, concerns parties who
contend that Social Security Administration (SSA) ALJs who presided over their administrative
proceedings were unconstitutional y appointed. The issue in Carr, however, is not whether SSA’s ALJs
are officers under the Appointments Clause, but whether the petitioners are barred from raising those
chal enges in federal court because they did not raise them during their ALJ proceedings.
The outcome in Carr wil likely determine whether a Social Security claimant’s constitutional chal enge
to an ALJ’s appointment must first be raised during administrative proceedings before that chal enge can
be raised in federal court. It is also possible that Carr wil provide clearer guidance on courts’ ability to
hear certain other claims that were not first raised in administrative proceedings before the SSA and,
perhaps, other agencies. And even if the Carr decision only directly affects the SSA, it stil could have
consequential effects on the federal government’s administrative adjudication system: The SSA is
“probably the largest adjudicative agency in the western world,” annual y adjudicating an enormous
number of claims for benefits, and it employs the vast majority of the federal government’s ALJs. The
Court heard oral argument in Carr on March 3, 2021.
Issue Exhaustion
In administrative law, there are two “exhaustion” doctrines that implicate the availability of judicial
review of an agency decision. Under the doctrine of exhaustion of administrative remedies, a party
typical y must “complete the agency’s internal remedial steps (including administrative appeals) before
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turning to the judiciary.” For example, a claimant’s failure to seek review of SSA’s denial of benefits
through each step of its adjudicative process, as is general y required by statute and SSA regulations, is a
failure to exhaust administrative remedies. Conversely, issue exhaustion—the doctrine at issue in Carr—
refers to the oft-imposed requirement that a party seeking judicial review of an agency’s adverse
determination raise al arguments before the agency that it may wish to raise on appeal in federal court.
(Many courts also describe the failure to raise an argument before an agency as a waiver or forfeiture of
the argument.)
Exceptions to issue-exhaustion requirements may be found in statute, regulation, or judicial y created
doctrines. Some statutes or regulations that impose issue exhaustion requirements may contain
exceptions, such as when “extraordinary circumstances” prevented a party from raising a chal enge in the
administrative proceedings. And courts have sometimes excused a failure to exhaust issues where, for
example, raising an issue to an agency would be futile.
Over two decades ago, in Sims v. Apfel, the Supreme Court explained that issue-exhaustion requirements
general y stem from statutes or regulations, but acknowledged that courts often impose such a
requirement when a governing statute or regulation is silent on the matter. Yet the “desirability” of a
judicial y created issue-exhaustion requirement depends on how similar the agency proceeding is to
typical “adversarial litigation” in court. The Court explained that “the rationale for requiring issue
exhaustion is at its greatest” when “the parties are expected to develop the issues in an adversarial
administrative proceeding.” But the rationale is “much weaker” when the underlying adjudicative
proceeding is not adversarial.
Courts’ wil ingness to recognize exceptions to issue-exhaustion requirements may be particularly relevant
to claims under the Appointments Clause. In Freytag v. Commissioner, the Supreme Court considered the
petitioners’ Appointments Clause chal enge, even though they had not timely objected to their cases’
assignment to the adjudicator in question and had consented to the adjudicator. The Court explained that
the asserted constitutional defect went “to the validity of the . . . proceeding that” was “the basis for [the]
litigation,” and concluded it was “one of those rare cases” where the Court should exercise its discretion
to hear the chal enge. But as one court has explained, “Freytag treated the exhaustion mandate in that
[case] as arising on purely prudential grounds,” and lower courts “have not read Freytag’s exception
broadly and have regularly declined to consider unexhausted Appointments Clause chal enges,” such as
when a case is governed by a statutory exhaustion requirement. For reasons that wil be explained below,
some courts have refused to hear chal enges when parties have not raised “timely” Appointments Clause
chal enges.
Relevant Prior Supreme Court Decisions
Two previous Supreme Court decisions form the backdrop for Carr. First, Carr follows specifical y from
Lucia, where the Court held that SEC ALJs are “Officers of the United States” under the Appointments
Clause. The Lucia Court further held that the petitioner was entitled to relief based on the Court’s
decision in a prior case that relief is available to a party “who makes a timely chal enge to the
constitutional validity of the appointment of an officer who adjudicates his case.” The Court determined
that the petitioner had made a timely chal enge (and so was entitled to a new hearing before a new and
properly appointed adjudicator) because he had “contested the validity” of the SEC ALJ’s “appointment
before the Commission, and continued pressing that claim” in federal court. However, the Court did not
explain how this “timely chal enge” standard applies to parties in other contexts or how it corresponds
with the issue-exhaustion doctrine.
Second, in Sims v. Apfel, decided nearly twenty years before Lucia, the Court held that a Social Security
claimant is not barred from raising a claim in federal court that she did not raise before the SSA Appeals
Council—the administrative tribunal that reviews appeals from ALJ determinations and is the final

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agency decisionmaker in SSA proceedings. The Court determined that no statute or regulation required
issue exhaustion. And the Court found no basis to impose such a requirement—though from here, the
Justices in the majority parted ways in their reasoning. Notably, the Court did not decide “[w]hether a
claimant must exhaust issues before the ALJ,” limiting its decision to Appeals Council proceedings.
Writing for a four-Justice plurality, Justice Thomas argued that “the differences between courts and
agencies are nowhere more pronounced than in Social Security proceedings,” asserting that “Social
Security proceedings are inquisitorial rather than adversarial.” He explained that SSA ALJs have a “duty
to investigate the facts and develop the arguments both for and against granting benefits,” and that the
Appeals Council has a similarly expansive ambit for review. He also noted that the SSA Commissioner
does not act in an adversarial manner during ALJ proceedings, and does not appear to do so before the
Appeals Council, either. The plurality maintained that several SSA regulations and procedures underscore
the non-adversarial nature of SSA proceedings, including the three-line form claimants may use to request
Appeals Council review, which SSA advises should take no more than 10 minutes to complete.
Justice O’Connor agreed with the Court’s holding, but she did not concur with Justice Thomas’s rationale
regarding the inquisitorial nature of Appeals Council proceedings. Instead, in a concurring opinion,
Justice O’Connor wrote that SSA’s “failure to notify claimants of an issue exhaustion requirement in this
context is a sufficient basis for our decision.” In fact, she reasoned that SSA’s regulations and procedures
“affirmatively suggest that specific issues need not be raised before the Appeals Council” because a
claimant seeking Appeals Council review may simply submit the three-line form mentioned above, and
because the Council’s review is plenary—that is, it is not confined by the issues raised at the ALJ level.
Carr v. Saul
Petitioners in Carr are several claimants who sought disability benefits or supplemental security income
under the Social Security Act. Al petitioners were denied benefits by the SSA and al exhausted their
available administrative appeals. After petitioners reached federal court on appeal from SSA’s
determinations, the Supreme Court issued its decision in Lucia. Because SSA’s ALJs had been appointed
by agency staff and not by an entity identified in the Appointments Clause at the time of petitioners’
administrative proceedings, each petitioner subsequently argued in federal court that the ALJs who
decided their claims were unconstitutional y appointed officers. The government did not dispute that
SSA’s ALJs were subject to the Appointments Clause, instead arguing that petitioners had forfeited their
chal enges by failing to first raise them at the administrative level. Ultimately, the U.S. Courts of Appeals
for the Eighth Circuit and Tenth Circuit agreed. In November 2020, the Supreme Court granted
petitioners’ requests for review of whether they did not exhaust their Appointments Clause chal enges and
consolidated the cases.
Petitioners’ main argument for why they did not waive their Appointments Clause claims rests on Sims,
where the Court recognized that petitioners could bring certain claims in federal court that they had not
raised during the SSA administrative adjudication process. Petitioners explain that, as the Sims Court
found regarding Appeals Council proceedings, no statute or regulation requires issue exhaustion at the
ALJ level. Invoking Justice Thomas’s opinion from Sims, they argue that, just like Appeals Council
proceedings, ALJ proceedings are non-adversarial, inquisitorial proceedings that mainly rely on the
adjudicator—not the claimant—to spot issues for decision. And invoking Justice O’Connor’s
concurrence, they assert that SSA regulations fail to notify petitioners of an issue-exhaustion requirement.
They also note that a majority of Justices in Sims signed on to the explanation discussed above that court-
crafted issue-exhaustion requirements are less desirable in inquisitorial administrative proceedings.
Petitioners assert other arguments in support of their position. For example, they claim it would have been
futile to raise their Appointments Clause chal enges during their ALJ proceedings because SSA ALJs lack
the power to determine such chal enges. SSA itself acknowledged that its ALJs have no power to decide

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Appointments Clause chal enges in emergency messages it directed to ALJs (after petitioners had reached
federal court) in anticipation of and in response to Lucia. Petitioners also argue that, even if an issue-
exhaustion requirement applies in petitioners’ cases, the Court should excuse their failures to exhaust, as
it did in Freytag, due to courts’ “strong interest” in upholding the separation of powers.
The Acting U.S. Solicitor General (acting SG), who represents SSA before the Supreme Court, contends
that the petitioners forfeited their Appointments Clause chal enges. Notably, she does not argue that SSA
ALJs are not subject to the Appointments Clause, nor does she assert that a regulation or statute
applicable to SSA proceedings requires issue exhaustion. Instead, she argues that petitioners violated the
“general rule” imposed by Supreme Court precedent that “a party who fails to raise an objection in
administrative proceedings may not raise it for the first time in court.” The Acting SG also asserts that
petitioners violated the “timely chal enge” standard applied in Lucia, mentioned above. The acting SG
claims that the standard mandates that parties raise Appointments Clause chal enges in “agency
proceedings, not just later in court.” Sims, she contends, does not preclude holding that petitioners
violated these principles.
Carr’s Potential Impact
The parties dispute the possible consequences of the Court’s decision in Carr. For example, petitioners
contend that recognition of an issue-exhaustion requirement for SSA ALJ proceedings would move SSA’s
adjudicative system from one “where requesting ALJ review takes under 10 minutes to a system where
claimants must identify complex legal issues on pain of forfeiture.” They assert that this result “would
impose extreme, unfair burdens on people who are seeking SSA assistance”—many of whom are not
represented before the agency—and increase ALJs’ workloads and “existing delays.” Conversely, the
acting SG argues that the Court’s acceptance of petitioners’ “expansive theory” that issue exhaustion does
not govern SSA proceedings would burden courts by forcing them to consider questions raised initial y in
court about “technical and often fact-based issues that the agency has never considered.”
During oral argument in Carr, the Justices asked counsel for petitioners and for the government a number
of questions that underscored the potential importance of the case’s outcome. For example, Justice Barret
asked counsel for petitioners whether SSA proceedings are unique enough such that a decision that no
issue-exhaustion requirement applies to SSA ALJ proceedings would be limited to SSA, or whether it
could be extended to other agencies. Justice Breyer said that he “thought that there was a pretty wel -
established exception to the need to exhaust an issue where it is a constitutional issue.” And some Justices
expressed concern that, should the Court find for petitioners, claimants would be encouraged to
“sandbag”—that is, withhold arguments before the agency only to later raise objections if the agency
rendered an unfavorable decision.
To date, some courts have applied statutory and regulatory issue-exhaustion requirements to parties’
Appointments Clause chal enges. For example, the U.S. Court of Appeals for the Sixth Circuit recently
read a statutory issue-exhaustion requirement as applying to the petitioner’s Appointments Clause
chal enge concerning an agency’s compliance with a statute governing ALJ appointments (although the
court excused the lack of exhaustion under a statutory exception). The court stated, however, that the
exhaustion requirement at issue in that case would not extend to a facial chal enge to the constitutional
validity of the statute.
Congress may opt to consider clarifying legislation. Congress can and has imposed issue-exhaustion
requirements by statute in other contexts. Lawmakers might also consider a statutory issue-exhaustion
provision to govern SSA proceedings, which could include exceptions to that requirement. Congress
could also, by statute, direct SSA to impose a regulatory issue-exhaustion requirement (which the agency
likely is authorized to do). Such codified requirements could potential y apply to a variety of legal
chal enges, including those under the Appointments Clause.

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Author Information

Daniel J. Sheffner

Legislative Attorney

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