Is a claimant precluded from raising a legal issue for the first time in U.S. District Court if it was not raised before the Administrative Law Judge (ALJ)? No, according to the recent decision of the U.S. Supreme Court in Carr v. Saul, 141 S.Ct. 1352, 2021 (Apr. 22, 2021). Justice Sotomayor delivered the opinion, holding petitioners had not forfeited their claims.
The issue in question in Carr and its companion cases was whether the ALJ was properly appointed. In 2018, the U.S. Supreme Court ruled that the appointment of Security and Exchange Commission (SEC) ALJs was unconstitutional under the Appointments Clause of the U.S. Constitution. Lucia v. Securities and Exchange Commission, 138 S.Ct. 2044 (2018). Although Lucia did not address Social Security Administration (SSA) ALJs, SSA responded by “re-appointing” its ALJ corps on July 16, 2018. See the July 2018 and April 2019 editions of this newsletter for more on the implications of the decision on the constitutionality of SSA ALJ appointments, including Social Security Ruling (SSR) 19-2p.
In the aftermath of Lucia, Carr and other plaintiffs challenged the legitimacy of the ALJs who had denied their disability claims and sought new hearings. The Commissioner argued the plaintiffs had forfeited their Appointments Clause challenges because they had not raised them before SSA during the administrative appeals process. These plaintiffs were essentially precluded from doing do since their administrative proceedings had already been concluded by the time Lucia was decided. But Courts of Appeals for the Eighth and Tenth Circuits adopted the Commissioner’s forfeiture argument. The Third, Fourth, and Sixth Circuits held the opposite. The Supreme Court resolved the conflict in the circuits by holding that given the non-adversarial nature of SSA hearings, issue-exhaustion is not required.
The Court relied heavily on its earlier decision in Sims v. Apfel, 530 U.S. 103 (2000), which found that issue-exhaustion at the Appeals Council was not required. Both Sims and Carr emphasized that issue exhaustion is not mandated by either statute or regulation. In both cases, the Court refused to impose a judicially created issue-exhaustion requirement in Social Security appeals. As in Sims, the Court emphasized the non-adversarial nature of the proceedings. Since the hearings are more inquisitorial in nature, they are not comparable to judicial proceedings. It also considered the extent to which the ALJ would be ill-suited to decide such a constitutional question, and the futility of an issue-exhaustion requirement. The Court found these two points of particular importance in “tip[ping] the scales” against imposing an issue-exhaustion requirement. Justice Sotomayor noted, however, that in the sphere of more routine, non-constitutional objections in individual benefits determinations, “the scales might tip differently.” The Court also rejected the Commissioner’s argument that the plaintiff’s challenges were untimely.
Ultimately, all nine justices concurred with the outcome of Justice Sotomayor’s opinion, although one needs to score card to follow who concurred with which section and who did not. Scholars of Supreme Court opinions and politics will undoubtedly enjoy the nuances. But the over-all outcome is good news for claimants, especially pro se claimants, for whom a requirement that all legal issues must be raised at the administrative levels could be more than challenging.