Carr v. Saul: Issue Exhaustion Not Required for Social Security Claimants’ Appointments Clause Challenges

Carr v. Saul: Issue Exhaustion Not Required for Social Security Claimants’ Appointments Clause Challenges

Legal Sidebari

Carr v. Saul: Issue Exhaustion Not Required
for Social Security Claimants’ Appointments
Clause Challenges
April 29, 2021
On April 22, 2021, the Supreme Court handed down its decision in Carr v. Saul (consolidated with Davis
v. Saul), holding that six Social Security claimants had not forfeited their challenges to the constitutional
status of administrative law judges (ALJs) employed by the Social Security Administration (SSA). The
six petitioners argued for the first time in federal court that the ALJs who presided over their disability
hearings were appointed in violation of the Appointments Clause of the Constitution; none of the
petitioners first raised those arguments in administrative proceedings before the SSA. The Supreme Court
unanimously held that the petitioners did not forfeit their constitutional challenges, either by failing to
comply with the administrative law doctrine of “issue exhaustion” or Supreme Court precedent requiring
“timely” Appointments Clause claims.
While the decision is a significant victory for the petitioners, the greater impact of Carr is uncertain and
may be limited by key aspects of the Court’s majority opinion. This Sidebar discusses the Carr decision,
as well as background principles that inform and underlie the decision and the decision’s potential impact.
(An earlier Sidebar discussed the issues in Carr before the Court reached its decision.)
Legal Background
Issue Exhaustion
In administrative law, there are two “exhaustion” doctrines that affect whether and how a federal court
will review a federal agency’s decision. Under the doctrine of exhaustion of administrative remedies, a
party typically must “complete the agency’s internal remedial steps (including administrative appeals)
before turning to the judiciary.” 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
all arguments before the agency that it may wish to raise on appeal in federal court.
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Relevant Prior Decisions: Lucia v. SEC and Sims v. Apfel
Two previous Supreme Court decisions set the backdrop for Carr. First, Carr follows from the Court’s
2018 decision in Lucia v. Securities and Exchange Commission (SEC), where the Court held that SEC
ALJs are “Officers of the United States” under the Appointments Clause. The Appointments Clause
provides that “Officers of the United States” must be appointed by the President “with the Advice and
Consent of the Senate,” but that Congress can provide for the appointment of “inferior” officers by “the
President alone,” “the Courts of Law,” or “the Heads of Departments.” The Lucia Court ruled that SEC’s
ALJs had not been appointed in a manner prescribed by the Clause. It also held that the petitioner in Lucia
was entitled to a remedy of a new hearing before a new and properly appointed adjudicator because he
had made “‘a timely challenge to the constitutional validity of the appointment of’” the ALJ who presided
over his case by raising his challenge before the Commission and continuing to raise it on appeal in
federal court. However, the Court did not explain how this “timely challenge” standard applies to parties
in other contexts, or how it corresponds with the issue-exhaustion doctrine.
Second, in its 2000 decision in Sims v. Apfel, the Court held that a Social Security claimant may preserve
a claim on judicial review that she did not raise before the SSA Appeals Council—the administrative
tribunal that reviews appeals from SSA ALJ determinations and is the final agency decisionmaker in SSA
proceedings. The Sims Court determined that no statute or regulation required issue exhaustion and found
no basis to impose such a requirement. However, the majority in Sims did not agree on a rationale for the
Court’s conclusion. Writing for a four-Justice plurality, Justice Thomas asserted that several practices,
procedures, and regulations underscore that “Social Security proceedings are inquisitorial rather than
adversarial” and that, therefore, a judicially crafted issue-exhaustion rule is not warranted for Appeals
Council proceedings. Justice O’Connor agreed with the Court’s holding but did not concur with Justice
Thomas’s rationale. Instead, she opined in a concurring opinion that SSA’s “failure to notify claimants of
an issue exhaustion requirement in this context is a sufficient basis for our decision.” Notably, the Sims
Court did not decide “[w]hether a claimant must exhaust issues before the ALJ.”
Carr v. Davis
Carr stemmed from the six petitioners’ individual Social Security disability proceedings. All petitioners
were denied benefits by SSA and all 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, at the time of petitioners’ administrative proceedings, had been appointed by
agency staff and not by an entity identified in the Appointments Clause, each petitioner subsequently
argued in federal court that the ALJs who decided their claims were unconstitutionally appointed officers.
The government did not dispute that SSA’s ALJs were subject to the Appointments Clause, instead
arguing that the petitioners had forfeited their challenges by failing to first raise them before SSA. 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 forfeited their Appointments Clause
challenges and consolidated their cases.
The Supreme Court’s Decision
On review, the Supreme Court held that the petitioners had not forfeited their Appointments Clause
challenges by failing to raise them before their SSA ALJ proceedings. Justice Sotomayor wrote the
majority opinion in Carr, which Chief Justice Roberts and Justices Alito, Kagan, and Kavanaugh joined
in full. Additionally, Justice Thomas (joined by Justices Barrett and Gorsuch) and Justice Breyer each
concurred with the Court’s ultimate conclusion—thus making the Court’s judgment unanimous—but
wrote separate opinions explaining that they would have rested on more limited grounds than did Justice
Sotomayor. Justice Sotomayor’s opinion for the majority affirmed the principle announced by the

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majority in Sims that, in the absence of a statutorily or regulatorily imposed issue-exhaustion requirement
(as is the case in SSA ALJ proceedings) the “‘desirability’” of a court-established issue-exhaustion
requirement depends on how similar a proceeding is to typical “adversarial litigation.” In laying out this
principle, the Court rejected the government’s argument that issue exhaustion was required in this case by
a “general rule” embodied by prior Court decisions, explaining that “[w]here claimants are not expected
to develop certain issues in ALJ proceedings, it is generally inappropriate to treat those issues as
forfeited.”
Justice Sotomayor’s analysis for the majority was in part based on Sims. Both Justice Thomas’s plurality
opinion and Justice O’Connor’s concurrence in Sims, she wrote, largely applied to the Carr petitioners.
She reasoned that many of the practices, procedures, and regulations that apply to ALJ proceedings are
the same as or similar to those applicable to Appeals Council proceedings, which the plurality in Sims
argued demonstrated the nonadversarial nature of Appeals Council proceedings. In line with Justice
O’Connor’s Sims concurrence, the Carr majority reasoned that SSA’s regulations do not notify claimants
that they have to raise particular arguments at the ALJ level or risk forfeiting them. Thus, the Court found
that Sims set the “baseline” for the Court’s decision in Carr.
The Court, however, did not rest entirely on Sims. The majority acknowledged that certain differences
between SSA Appeals Council and ALJ proceedings may render the latter “relatively more adversarial.”
No matter to what degree SSA ALJ proceedings may be more adversarial than Appeals Council
proceedings and to what extent that would affect the application of issue exhaustion to such proceedings,
the Court concluded that two particular considerations tipped “the scales decidedly against imposing an
issue-exhaustion requirement” in the petitioners’ cases. First, the petitioners’ Appointments Clause
arguments were “purely constitutional” objections “about which SSA ALJs have no special expertise.”
Second, the Court concluded that it would have been futile for the petitioners to raise their Appointments
Clause challenges before SSA’s ALJs. The ALJs could not provide the requested relief because they were
unable to “reappoint[] themselves,” and none of their appointments had, at the time, been ratified by the
SSA Commissioner. Further, SSA’s adjudicative process did not permit petitioners to appeal to the
Commissioner—“the one person who could remedy their Appointments Clause challenges.” In sum, “the
inquisitorial features of SSA ALJ proceedings, the constitutional character of petitioners’ claims, and the
unavailability of any remedy” clearly indicated, per the Court, that no issue-exhaustion requirement
applied to petitioners’ Appointments Clause challenges.
Justice Sotomayor’s majority opinion also rejected the government’s argument that the petitioners had
violated the “timely challenge” Appointments Clause standard invoked in Lucia. The Court appeared to
equate that standard with normal forfeiture and issue-exhaustion principles. The Court concluded that,
because the petitioners in Carr were not under an obligation to exhaust their Appointments Clause
challenges before raising them in federal court, they did not fail to “timely” raise those challenges when
they raised them for the first time in federal court.
Impact of Carr
The Court in Carr did not provide explicit guidance on how its decision would apply to other parties or
contexts, but certain aspects of the decision indicate that its application in other scenarios may be narrow.
As an initial matter, if Carr is confined to Appointments Clause challenges to SSA adjudicators, it could
likely have limited impact. Lucia was decided almost three years ago, and Social Security claimants have
only 60 days to challenge an Appeals Council decision in federal court. Thus, as one court observed in
2020, “every claimant whose benefits were denied prior to Lucia has long since either filed an appeal in
district court or become time-barred from doing so.” Further, in July 2018, the SSA Commissioner
ratified the appointments of SSA’s ALJs and the administrative appeals judges of the Appeals Council,
thus ensuring, per one court of appeals, that “there are no new Appointments Clause challenges brewing
in SSA cases.”

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While Carr may not be confined solely to appointments challenges to SSA adjudicators, it is not clear
how broadly the decision can be applied to SSA claimants in other contexts. The Court held that it was
improper to impose an issue-exhaustion requirement in Carr, but the Court opined in a footnote that
outside the Appointments Clause context, “such as in the sphere of routine objections to individual
benefits determinations, the scales might tip differently.” A determining factor in how “the scales might
tip” in such a context may be the extent to which SSA ALJ proceedings are more adversarial than Appeals
Council proceedings, a question left open by the Court. Even after Carr, there may be cases where SSA
claimants still must raise issues before an ALJ to preserve those issues for judicial review.
Relatedly, Carr did not explain how an SSA claimant’s constitutional argument might be resolved where
it is neither futile nor a “structural constitutional challenge” like an Appointments Clause claim. As
Justice Breyer wrote in his concurrence in Carr, there is a “well-established principle” that constitutional
claims are generally subject to judicial review. Nonetheless, Chief Justice Roberts had inquired during
oral argument in Carr about the prospect of distinguishing between certain constitutional questions for
purposes of exhaustion, asking whether “it’s one thing to expect” an unrepresented “plaintiff not to raise
an obscure lawyerly issue like the Appointments Clause, but maybe different under the Due Process
Clause.” However, in Mathews v. Eldridge, in which the Court held that Social Security claimants are not
entitled under the Due Process Clause of the Fifth Amendment to an evidentiary hearing before their
benefits are terminated, the Court “observed” that if the plaintiff “had exhausted the full set of available
administrative review procedures, failure to have raised his constitutional claim would not bar him from
asserting it later in a district court.”
It is also not entirely clear whether Carr can be applied to agency adjudicative proceedings outside of
SSA where neither a statute nor regulation requires issue exhaustion. In those cases, a court must
examine “‘the characteristics of the particular administrative procedure’” at issue to determine whether it
is appropriate for the court to craft an issue-exhaustion requirement.
Carr was influenced by the fact that there is no statutory or regulatory issue-exhaustion requirement
applicable to SSA ALJ proceedings. Congress or SSA could establish an issue-exhaustion requirement by
statute or regulation, respectively, which could potentially apply to a variety of legal challenges, including
those under the Appointments Clause. Courts have applied statutory and regulatory issue-exhaustion
requirements to parties’ Appointments Clause challenges. A congressionally or agency-crafted issue-
exhaustion requirement could also include exceptions to its application.

Author Information

Daniel J. Sheffner

Legislative Attorney

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