Bradshaw v. Berryhill

372 F.Supp.3d 349

Sharron BRADSHAW, Plaintiff,

v.Nancy BERRYHILL, Acting Commissioner of Social Security, Defendant.

No. 5:18-CV-00100-RN

United States District Court, E.D. North Carolina, Western Division.

Signed March 26, 2019

Charlotte Williams Hall, Charles T. Hall Law Firm, Raleigh, NC, for Plaintiff.

Jamie D.C. Dixon, Mary Ellen Russell, Social Security Administration Office of General Counsel, Office of Program Law, Baltimore, MD, for Defendant.

Order

Robert T. Numbers, II, United States Magistrate Judge

Plaintiff Sharon Bradshaw asks the court to vacate the decision denying her claim for disability benefits because the appointment of the Administrative Law Judge who issued the decision violated the Constitution's Appointments Clause. Acting Commissioner of Social Security Nancy Berryhill does not take much issue with Bradshaw's conclusion about the validity of the ALJ's appointment but claims that Bradshaw waived this argument by not raising it before the ALJ.

This controversy arises from the Supreme Court's decision in Lucia v. Securities and Exchange Commission , ––– U.S. ––––, 138 S.Ct. 2044, 201 L.Ed.2d 464 (2018). In Lucia , the Supreme Court determined that the SEC's ALJs were officers of the United States instead of merely employees of the federal government. Id. at 2054. As a result, the Constitution required that the President, a court of law, or a head of a department appoint them to their position. Id. at 2050 (citing U.S. Const. Art. II, § 2, cl. 2.). Because the SEC had not appointed the ALJ who ruled against Lucia as required by the Appointments Clause, the Supreme Court held that he was entitled to a new hearing before a properly appointed official. Id. at 2055.

Particularly relevant to this dispute is the Supreme Court's statement that Lucia was entitled to a new hearing because he made "a timely challenge" to the constitutionality of the ALJ's appointment. Id. at 2055. The Court explained that Lucia "contested the validity of [the ALJ's] appointment before the Commission, and continued to press that claim in the Court of Appeals and this Court." Id. at 2056.

The Acting Commissioner claims that Bradshaw did not make a timely challenge because she did not raise the Appointments Clause issue before the ALJ. But neither the statutes nor the regulations that govern Social Security proceedings required Bradshaw to do so. And the court will not impose an issue-exhaustion requirement because both precedent and constitutional concerns counsel against it. Thus, Bradshaw's Appointments Clause challenge is timely and the court will address it.

After considering the merits of this matter, the court concludes that the appointment of the ALJ who issued the decision below did not comply with the Appointments Clause. The ALJ was an inferior officer of the United States and she was not appointed by the President, a court of law, or the head of a department. Thus, the court vacates the decision below and remands the matter to the SSA for proceedings before a validly appointed ALJ.

I. Background

In December 2013, Bradshaw filed a claim for disability insurance benefits with the Social Security Administration. Admin. Tr. at 16, D.E. 10. After the SSA denied her initial claim and her request for reconsideration, Bradshaw filed a written request for a hearing before an ALJ. Id. at 99–102, 104–07, 108. In her request, the only reason provided for her appeal was that she was disabled and could not work. Id. at 108.

At that time, representatives of both the Office of Personnel Management and the Social Security Administration evaluated applicants who wished to become ALJs. Gehlken Dec. ¶¶ 3–10, D.E. 28–1. Ultimately, the Social Security Administration's Director for the Center for Personnel Policy and Staffing was responsible for appointing ALJs. Id. ¶ 11.

In early December 2015, an ALJ held a hearing to review Bradshaw's claim. Admin. Tr. at 38. Ultimately, the ALJ decided in March 2017 that Bradshaw was not disabled. Id. at 16–32. Bradshaw then unsuccessfully sought review before the Appeals Counsel. Id. at 1–3.

Bradshaw filed a civil action in March 2018 seeking review of the ALJ's decision. Compl. passim , D.E. 5. Both parties moved for a judgment on the pleadings in their favor. D.E. 15, 18. As part of her motion, Bradshaw urged the court to vacate the decision because the ALJ's appointment did not comply with the Appointments Clause. Pl.'s Mem. in Supp. of Mot. for J. on the Pleadings at 23–26, D.E. 16. In response, the Government claimed that Bradshaw waived this issue by not raising it before the ALJ. Def's Resp. to Pl.'s Mot. at 12–21, D.E. 19. The court¹ held a hearing on the Appointments Clause issue in December 2018.

II. Analysis

As noted at the outset, this case presents two issues. The court must first address whether Bradshaw's Appointments Clause challenge is timely. If it is, then the court must turn to whether the SSA violated the Appointments Clause when it appointed the ALJ who issued the ruling under review here. Bradshaw prevails on the timeliness issue because there is no requirement that claimants raise constitutional issues before an ALJ to preserve them for federal court review. And she also prevails on the merits of her claim because the ALJ was an inferior officer who was not appointed by the President, a court of law, or the head of a department. Thus, the court will remand this matter for further proceedings before a validly appointed ALJ.

a. Was Bradshaw required to raise the Appointments Clause issue to the ALJ?

The Government relies heavily on the statement in Lucia 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, 115 S.Ct. 2031, 132 L.Ed.2d 136 (1995) ). While this language makes clear that a timely challenge is a prerequisite to the relief Bradshaw seeks, it provides no guidance—no matter how many times the Acting Commissioner invokes it—about what constitutes a timely challenge in the Social Security context.

But the Supreme Court's decision in Sims v. Apfel does. Sims considered "whether a Social Security claimant waives judicial review of an issue if he fails to exhaust that issue by presenting it to the Appeals Council in his request for review." 530 U.S. 103, 106, 120 S.Ct. 2080, 147 L.Ed.2d 80 (2000). Although Sims dealt with issue exhaustion at the Appeals Counsel level, it provides a roadmap for the court's analysis of whether issue exhaustion is required at the ALJ level.

The Supreme Court began by noting that a claimant may only seek review in federal court of a final decision of the Commissioner of Social Security. Id. at 106, 120 S.Ct. 2080 (citing 42 U.S.C. § 405(g) ). To properly obtain a final decision, the Court explained, the claimant must ask for review of an ALJ's decision from the Appeals Counsel. Id. at 106–07, 120 S.Ct. 2080. If a claimant does not seek Appeals Counsel review, there is no final decision and thus no right to "judicial review because he has failed to exhaust administrative remedies." Id.

Sims sought review from the Appeals Counsel, and had thus exhausted her administrative remedies. Id. at 107, 120 S.Ct. 2080. But when she sued in the district court, she relied on an argument that she had not presented to the Appeals Counsel. Id. at 106, 120 S.Ct. 2080. So what happens when a claimant obtains a final decision from the Commissioner and then raises an issue before a federal court they did not raise to the Appeals Counsel? In other words, does the Social Security Act's administrative exhaustion requirement also require issue exhaustion at the Appeals Counsel level?

In answering this question, the Supreme Court noted that "requirements of administrative issue exhaustion are largely creatures of statute." Id. at 107, 120 S.Ct. 2080. And "it is common for an agency's regulations to require issue exhaustion in administrative appeals." Id. at 108, 120 S.Ct. 2080. But, the Supreme Court explained, neither a statute nor "SSA regulations ... require issue exhaustion." Id.

Even without a statute or regulation requiring issue exhaustion, a court can still impose one based on the analogous provision "that appellate courts will not consider arguments not raised before trial courts." Id. at 108–09, 120 S.Ct. 2080. But whether it is desirable to do so "depends on the degree to which the analogy to normal adversarial litigation applies in a particular administrative proceeding." Id. at 109, 120 S.Ct. 2080. If "an administrative proceeding is not adversarial ... the reasons for a court to require issue exhaustion are much weaker." Id. at 110, 120 S.Ct. 2080. In considering whether to apply an issue-exhaustion requirement, courts should caution against "reflexively ‘assimilat[ing] the relation of ... administrative bodies and the courts to the relationship between lower and upper courts.’ " Id. (quoting FCC v. Pottsville Broad. Co. , 309 U.S. 134, 144, 60 S.Ct. 437, 84 L.Ed. 656 (1940) ).

After setting out these principles, a majority of the Court determined that there was no issue-exhaustion requirement at the Appeals Counsel level. But there majority was divided about the reason behind this outcome.

A four-justice plurality began by noting that "[t]he differences between courts and agencies are nowhere more pronounced than in Social Security proceedings." Id. at 110, 120 S.Ct. 2080. In fact, "the SSA is ‘[p]erhaps the best example of an agency’ that is not" based on "the judicial model of decisionmaking[.]" Id.

There were factors that, according to the plurality, showed Social Security proceedings were "inquisitorial rather than adversarial." Id. To begin with, the SSA's regulations provide that the process was to proceed " ‘in an informal, nonadversary manner.’ " Id. (quoting 20 C.F.R. § 404.976(a) ). But beyond that, there were other indicia that Social Security proceedings are nonadversarial. For...