DAVID F. BANDIMERE, Petitioner,
UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Respondent. IRONRIDGE GLOBAL IV, LTD; IRONRIDGE GLOBAL PARTNERS, LLC, Amici Curiae.
TYMKOVICH, Chief Judge, KELLY, BRISCOE, LUCERO, HARTZ,
HOLMES, MATHESON, BACHARACH, PHILLIPS, MCHUGH, and MORITZ,
matter is before the court on the Security and Exchange
Commission's Petition for Rehearing or Rehearing En
Banc. We also have a response from the petitioner. Upon
consideration, the request for panel rehearing is denied by a
majority of the original panel members.
petition and response were also transmitted to all the judges
of the court who are in regular active service. Upon that
circulation, a poll was called. A majority voted to deny en
banc reconsideration. See Fed. R. App. P. 35(a).
Consequently, the en banc request is likewise denied.
LUCERO, J., joined by MORITZ, J., dissenting from the denial
of rehearing en banc.
this request for rehearing en banc presents numerous
questions of constitutional importance, it is my view that we
should rehear the matter. First, the panel majority opinion
fails to accord proper deference to the constitutional
structure of checks and balances and agency separation of
functions that flow from that fundamental construct. Second,
the panel decision needlessly and improvidently expands the
reach of Freytag v. Commissioner, 501 U.S. 868
(1991), which involved judges on the Tax Court, to the
unrelated issue of agency administrative law judges
("ALJs"). In light of the significant consequences
of this decision, it is not our office to expand the holding
in Freytag, to the contrary, any such expansion
should remain in the sole discretion of the Supreme Court.
Third, the impact of this opinion will be substantial, and it
presents a threat of disruption throughout our government.
Finally, the majority opinion fails to respect the carefully
crafted procedural protections that are incorporated in the
Administrative Procedure Act ("APA"), an essential
condition of the congressional delegation of authority to
each of these reasons, en banc review is not only
appropriate, but necessary. That the Supreme Court may
ultimately review this case does not relieve us of our
independent obligation to rehear it. For the foregoing
reasons, I respectfully dissent from the denial of en banc
James Madison observed, "The accumulation of all powers,
legislative, executive, and judiciary, in the same hands,
whether of one, a few, or many, and whether hereditary,
self-appointed, or elective, may justly be pronounced the
very definition of tyranny." The Federalist No. 47, at
324 (James Madison) (J. Cooke ed., 1961). To prevent the
tyranny against which Madison admonished, the founders
crafted a constitutional division of authority among three
co-equal branches of government, controlled by a series of
checks and balances. The panel opinion in this case not only
veers away from that constitutional structure, it aggregates
power in administrative agency officials contrary to this
face of a rapidly growing and largely unregulated body of
administrative law during the first half of the twentieth
century, and concerns about the commingling of functions
within administrative agencies, Congress enacted the APA,
which provides governing principles. As observed by Senator
Pat McCarran in the foreword to the APA's compiled
legislative history, the Act was celebrated as "a
comprehensive charter of private liberty and a solemn
undertaking of official fairness" that "enunciates
and emphasizes the tripartite form of our democracy."
Administrative Procedure Act Legislative History, at iii
need to maintain separation of functions was felt
particularly in the area of agency adjudication, and a
significant concern motivating the drafters of the APA was
the perceived bias of administrative adjudicators. "Many
complaints were voiced against the actions of the hearing
examiners, it being charged that they were mere tools of the
agency concerned and subservient to the agency heads in
making their proposed findings of fact and
recommendations." Ramspeck v. Fed. Trial Exam'rs
Conference, 345 U.S. 128, 131 (1953). Prior to the APA,
hearing examiners were "employees of an agency, their
classification was determined by the ratings given them by
the agency, and their compensation and promotion depended
upon their classification." Ramspeck, 345 U.S.
at 130. Accordingly, "[t]he examiners were in a
dependent status." Id. As the Supreme Court has
long recognized, "one who holds his office only during
the pleasure of another cannot be depended upon to maintain
an attitude of independence against the latter's
will." Humphrey's Ex'r v. United
States, 295 U.S. 602, 629 (1935).
Report of the President's Committee on Administrative
Management cogently articulates the concerns:
There is a conflict of principle involved in [the
agencies'] make-up and functions. They are vested with
duties of administration and at the same time they are given
important judicial work. The evils resulting from this
confusion of principles are insidious and far reaching.
Pressures and influences properly enough directed toward
officers responsible for formulating and administering policy
constitute an unwholesome atmosphere in which to adjudicate
private rights. But the mixed duties of the commissions
render escape from these subversive influences impossible.
Furthermore, the same men are obliged to serve both as
prosecutors and as judges. This not only undermines judicial
fairness; it weakens public confidence in that fairness.
Commission decisions affecting private rights and conduct lie
under the suspicion of being rationalizations of the
preliminary findings with the Commission, in the role of
prosecutor, presented to itself.
S. Rep. No. 79-752 (1945), as reprinted in
Administrative Procedure Act Legislative History 189
(quotation and ellipses omitted). In light of these concerns,
the APA authors adopted the view that the "commingling
of functions of investigation or advocacy with the function
of deciding [was] plainly undesirable" and should be
remedied by "isolating those who engage in the
activity" of adjudication via independent hearing
officers. S. Comm. on the Judiciary, 79th Cong., Rep. on
Admin. Procedure Act (Comm. Print 1945), as reprinted
in Administrative Procedure Act Legislative History 25
(quotation and ellipses omitted).
majority opinion undermines this well-established structure
of ALJ independence, and places the legitimacy of our
administrative agencies in serious doubt. Whether SEC ALJs
exercise the "significant authority" necessary to
constitute inferior officers, Bandimere v. U.S. SEC,
844 F.3d 1168, 1173 (10th Cir. 2016), should be informed not
just by their daily duties, but by the independent guardrails
of our constitutional structure, to wit, the separation of
functions within administrative agencies. The majority
opinion notes that the Appointments Clause reflects
"both separation of powers and checks and balances"
concerns, and "promotes public accountability."
Id. at 1172. But my ...