Marchant ex rel. A.A.H v. Berryhill, CIVIL ACTION No. 18-0345

• Decision Date: 28 May 2019
• Docket Number: CIVIL ACTION No. 18-0345
• Parties: TAQUENTA MARCHANT, on behalf of A.A.H, Plaintiff, v. NANCY A. BERRYHILL, Acting Commissioner of Soc. Sec., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

TAQUENTA MARCHANT, on behalf of A.A.H, Plaintiff, v. NANCY A. BERRYHILL, Acting Commissioner of Soc. Sec., Defendant.

CIVIL ACTION No. 18-0345

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MAY 28, 2019

MEMORANDUM

ROBERT F. KELLY, Sr. J.

This action concerns Plaintiff Taquenta Marchant's ("Marchant") request, on behalf of her daughter, A.A.H., for judicial review of an adverse decision of the Social Security Administration ("SSA"). On July 26, 2018, this case was referred to the Honorable Richard A. Lloret, United States Magistrate Judge for a report and recommendation.

Presently before the Court is the objection of Nancy A. Berryhill, Acting Commissioner of the Social Security Administration ("Commissioner"), pursuant to Federal Rule of Civil Procedure 72, to Judge Lloret's January 9, 2019 Report and Recommendation ("R. & R."), (Doc. No. 17). Judge Lloret found that the presiding administrative law judge ("ALJ") had not been properly appointed under the United States Constitution by Defendant, and that the SSA's final decision should be reversed and remanded to the agency. (R. & R. at 5.)

Furthermore, Judge Lloret found that Marchant had not forfeited her Appointments Clause claim, which she raised for the first time in her Reply Brief, (Doc. No. 14), on the grounds that such a claim cannot be waived and that it would have been futile for her to raise it before the agency. (Id.)

For the following reasons, we sustain the Commissioner's objections, overrule Judge Lloret's R. & R., and refer the matter to the Judge Lloret for a decision on the merits.

I. BACKGROUND

Marchant filed a claim for supplemental security income on behalf of her daughter on April 29, 2014. (Id. at 2.) She alleged disability based on asthma and attention-deficit/hyperactivity disorder. (Id.) Her claims were initially denied on July 25, 2014. (Id.) Marchant subsequently requested an administrative hearing. (Id.) At the hearing, held on February 22, 2017, Marchant testified. (Id.) On May 2, 2017, the ALJ issued an opinion finding A.A.H. did not have a disability. (Id.) The Appeals Council denied Marchant's request for review. (Id.)

On January 30, 2018, Marchant initiated this action. (Def.'s Obj. R. & R. 4.) Marchant, for the first time in her Reply Brief, argued that the ALJ presiding over her hearing was not appointed consistent with the Appointments Clause. (Pl.'s Reply Br. 1-2 & n.1.) Judge Lloret, relying extensively on his similar report and recommendation in Perez v. Berryhill, No. 18-1907, Doc. No. 15 (E.D. Pa. Jan. 7, 2019) and Magistrate Judge Rice's report and recommendation in Muhammad v. Berryhill, No. 18-1907 ECF Doc. No. 14, at 25 (E.D. Pa. Nov. 2, 2018), overruled by Muhammad v. Berryhill, 2019 WL 2248694 (E.D. Pa. May 23, 2019), found the argument persuasive and recommended that Marchant's claim be remanded to SSA for further proceedings before a properly appointed ALJ. (R. & R. 5.) The Commissioner timely objected pursuant to Federal Rule of Civil Procedure 72.

II. LEGAL STANDARD

When a party objects to a magistrate judge's report and recommendation, "[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to." Fed. R. Civ. P. 72(b)(3); see also E.E.O.C. v. City of Long Branch, 866 F.3d 93, 99 (3d Cir. 2017) (quoting 28 U.S.C. § 636(b)(1)) ("[T]he district court 'must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law.'"). "The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P. 72(b)(3).

III. DISCUSSION

The Commissioner objects to Judge Lloret's R. & R. on the grounds he erred in considering Marchant's Appointments Clause challenge following the Supreme Court of the United States' ("Supreme Court") decision in Lucia v. SEC, 138 S. Ct. 2044, 2053 (2018). (Def's Obj. R. & R. 1-3.) The Commissioner contends that Marchant waived the claim by failing to make a "timely challenge" to the constitutionality of the ALJ's appointment during the administrative process, as required by Lucia. (Id. at 3.) In opposition, Marchant argues that an Appointments Clause challenge cannot be waived in the SSA context, as there are only limited "issue exhaustion" requirements in SSA proceedings. (Pl.'s Reply Br. 4-8.) Marchant further contends that, even if she was required to make an Appointments Clause challenge at the administrative level, it would have been futile as there were no constitutionally appointed ALJs available to hear her case at the time. (Id. at 2-3.)

A. Lucia Establishes Appointments Clause Challenges Must be Timely

In Lucia, the Supreme Court held that Securities and Exchange Commission ("SEC") ALJs are "inferior officers" that must be appointed pursuant to the Appointments Clause of the United States Constitution.¹ See Lucia, 138 S. Ct. at 2051-56. In doing so, the Court leaned heavily on its analysis in Freytag v. C.I.R., 501 U.S. 868 (1991), concerning "special trial judges" ("STJs") of the United States Tax Court. See id. at 2052 ("Freytag says everything necessary to decide this case."). According to the Court, both the SEC ALJs and Tax Court STJs "hold a continuing office established by law" and "exercise the same 'significant discretion' when carrying out the same 'important functions,'" which include "ensur[ing] fair and orderly adversarial hearings." See id. at 2054 (quoting Freytag, 501 U.S. at 878). Specifically, the Court identified "four specific . . . powers" within the authority of ALJs and STJs: (1) "they [r]eceiv[e] evidence and [e]xamine witnesses at hearings" and depositions; (2) they conduct trials; (3) they "critically shape the administrative record" through rulings "on the admissibility of evidence"; and (4) they "have the power to enforce compliance with discovery orders." See id. (internal quotation marks omitted). The Court further highlighted the deference that the ALJ's and STJ's findings of fact are given, especially those based on credibility determinations, either as required by statute or through practice. See id.

The Court concluded its analysis by briefly discussing challenges made to ALJ appointments under the Appointments Clause. See id. at 2055. The Court stated:

"[O]ne who makes a timely challenge to the constitutional validity of the appointment of an officer who adjudicates his case" is entitled to relief. Lucia made just such a timely challenge: He contested the validity of Judge Elliot's appointment before theCommission, and continued pressing that claim in the Court of Appeals and this Court.

Id. (internal citations omitted) (quoting Ryder v. United States, 515 U.S. 177, 182-83 (1995)).

Though Lucia ostensibly concerns only SEC ALJs, courts and federal agencies have applied its reasoning across the board. See, e.g., Bank of Louisiana v. FDIC, 919 F.3d 916 (5th Cir. 2019) (FDIC ALJs); Jones Bros., Inc. v. Sec'y of Labor, 898 F.3d 669 (6th Cir. 2018) (Department of Labor Federal Mine Safety and Health Review Commission ALJs); Island Creek Coal Co. v. Wilkerson, 910 F.3d 254 (6th Cir. 2018) (Department of Labor Benefits Review Board ALJs); Assoc. Mortg. Bankers, Inc. v. Carson, No. 17-0075, 2019 WL 108882 (D.D.C. Jan. 4, 2019) (Department of Housing and Urban Development ALJs); Morris & Dickson Co. v. Whitaker, 360 F. Supp. 3d 434 (W.D. La. 2018) (Drug Enforcement Agency ALJs); but see Lucia, 138 S. Ct. at 2056 (Thomas, J., concurring) ("If the special trial judges in Freytag were "Officers of the United States," then so are the administrative law judges of the [SEC]. Moving forward, however, this Court will not be able to decide every Appointments Clause case by comparing it to Freytag.").

1. Applying Lucia to SSA Proceedings

Perhaps the agency most impacted by Lucia is the SSA. See, e.g., Johnson v. Berryhill, No. 17-1651, 2019 WL 1430242 (D. Conn. Mar. 29, 2019); Newbill v. Berryhill, No. 17-0410, 2019 WL 1407425 (S.D. Al. Mar. 28, 2019); Page v. Comm'r of Soc. Sec., 344 F. Supp. 3d 902 (E.D. Mich. 2018); Stearns v. Berryhill, No. 17-2031, 2018 WL 4380984 (E.D. Iowa Sept. 14, 2018); but see Lucia, 138 S. Ct. at 2058 (Breyer, J., concurring in part) (citing SSA as an agency where the Court's analysis may not apply because "[e]ach agency's governing statute is different, and some, unlike the [SEC's], may allow the delegation of duties without a published order or rule."). In applying Lucia, courts have struggled to interpret what constitutes a "timelychallenge" during SSA proceedings. Several courts have interpreted an Appointments Clause challenge to an SSA ALJ to be "timely" if raised at some point during the administrative process (collectively, the "Majority Decisions"). See, e.g., Velasquez on Behalf of Velasquez v. Berryhill, No. 17-17740, 2018 WL 6920457, at *3 (E.D. La. Dec. 17, 2018) ("Accordingly, I find that plaintiff has waived the Appointments Clause issue by failing to assert it before the ALJ or the Appeals Council."); Pearson v. Berryhill, No. 17-4031, 2018 WL 6436092, at *4 (D. Kan. Dec. 7, 2018) ("In light of the fact that plaintiff never raised this issue before the [SSA], the court finds that plaintiff did not make a timely challenge to the constitutional validity of the appointment of the ALJ."); Faulkner v. Comm'r of Soc. Sec., No. 17-1197, 2018 WL 6059403, at *3 (W.D. Tenn. Nov. 19, 2018) ("Plaintiff's failure to raise his Appointments Clause challenge at any point in the administrative process or show good cause why he did not do so forfeits his claim.").

The Majority Decisions look to the fact that the plaintiff in Lucia raised his Appointments Clause challenge for the first time before the SEC appeals council and have, thus, required the challenge to be raised during the administrative process to be considered timely. See, e.g., Kline v. Berryhill, No. 18-0180, 2019 WL 1782133,...