April 22, 2021

Supreme Court Rejects Issue-Exhaustion Requirement for Social Security Claimants in Carr v. Saul

On April 22, 2021, the Supreme Court held in Carr et al. v. Saul that Social Security applicants did not need to raise a challenge to the constitutionality of the appointment of the administrative law judges (ALJ) in their case in order to raise that issue in federal court. The case was on review from the U.S. Court of Appeals for the Tenth Circuit, and it was consolidated on appeal with Davis et al. v. Saul, No. 20–105, from the U.S. Court of Appeals for the Eighth Circuit.

These appeals stem from the Supreme Court’s decision in Lucia v. SEC, 585 U. S. ___ (2018), in which the Court held that ALJs within the Securities and Exchange Commission (SEC) had been unconstitutionally appointed because, as “Officers” under the Appointments Clause, ALJs may only be appointed by the president, “Courts of Law,” or “Heads of Departments.” Following Lucia, a group of SSA claimants, who were challenging their denial of SSA benefits in federal court, argued that the ALJs who denied their SSA claims were unconstitutionally appointed and requested a new hearing before a new ALJ. They had not raised these arguments in the administrative proceedings. Both the Tenth and Eighth Circuit Courts of Appeals held the challenges waived based on “issue-exhaustion,” a procedural doctrine that in general requires litigants to raise all issues before a lower court or administrative agency or risk forfeiture of that issue. Both Courts of Appeals held that the SSA claimants forfeited their Appointments Clause challenges by failing to raise them during the administrative process.

The Supreme Court reversed, holding that SAA claimants need not raise all of their specific issues before the agency in order to preserve them and seek relief in federal court. The Court made four main points.

First, the Court stressed that exhaustion rules like the one the government sought here typically “are creatures of statute or regulation.” Because there was no applicable statute or regulation in this case, the Court inquired whether the proceeding was “inquisitorial” — where the administrative law judge has the responsibility to help the claimant identify the relief to which the claimant is entitled — or “adversarial.” The Court noted that proceedings before ALJs handling social security claims cannot be considered adversarial because the purpose is “’to investigate the facts and develop the arguments both for and against granting benefits and that ‘[t]he Commissioner has no representative before the ALJ to oppose the claim for benefits.’” The Court also noted that “[t]he SSA regulations that ensure informal, nonadversarial proceedings and plenary review apply . . . to ALJs.” These regulations, in part, require ALJs to look into issues fully, and permit them to “’raise a new issue’ at any time” before making their decision. The Court also found significant that “SSA ‘regulations provide no notice that claimants must . . . raise specific issues before’ the ALJ ‘to preserve them for review in federal court.’” Second, the Court observed that “agency adjudications are generally ill suited to address structural constitutional challenges” because they “usually fall outside the adjudicators’ areas of technical expertise.” Third, the Court reasoned that it “has consistently recognized a futility exception to exhaustion requirements[,]” explaining that “[i]t makes little sense to require a litigant to present claims to adjudicators [i.e. ALJs] who are powerless to grant the relief requested.” Fourth, the Court observed that in Lucia, the proceedings were before the SEC, which has a statutory exhaustion requirement, and is thus distinct from the Social Security statute. In the end, “the inquisitorial features of [Social Security Administration administrative law judge] proceedings, the constitutional character of petitioners’ claims, and the unavailability of any remedy make clear that” an issue-exhaustion requirement is inappropriate.

Justice Sotomayor authored the opinion of the Court, which was joined by Chief Justice Roberts, and Justices Alito, Kagan, and Kavanaugh, joined. Justices Thomas, Gorsuch, and Barrett joined as to Parts I, II–A, and II–B–2, and in which Justice Breyer joined as to Parts I, II–B–1, and II–B–2. Justice Thomas filed an opinion concurring in part and concurring in the judgment, in which Justices Gorsuch and Barrett joined. Justice Breyer filed an opinion concurring in part and concurring in the judgment.

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