San Filippo v. Berryhill

Background

Vincent San Filippo sought judicial review under § 205(g) of the Social Security Act, 42 U.S.C. § 405(g), of the Commissioner of Social Security’s final decision denying his application for Disability Insurance Benefits. An Administrative Law Judge held a hearing on September 12, 2017, and decided on January 31, 2018, that San Filippo was not disabled. The Social Security Administration Appeals Council denied review on September 24, 2018, making the decision final for purposes of judicial review.

Both sides moved for judgment on the pleadings. San Filippo asked the court to set aside the Commissioner’s decision, while the Commissioner asked the court to affirm it. During the case, the magistrate judge directed the parties to address whether the Administrative Law Judge had been properly appointed under the Constitution’s Appointments Clause, in light of the Supreme Court’s decision in Lucia v. SEC. San Filippo had not raised that issue during the administrative proceedings.

Issue

The disputed issue was whether San Filippo’s failure to raise and exhaust the Appointments Clause challenge before the Social Security Administration prevented him from raising it in federal court.

Court’s analysis

The court rejected the Commissioner’s argument that Social Security statutes or regulations required exhaustion of this constitutional challenge. The regulations cited by the Commissioner addressed matters such as explaining disagreement with an agency decision, objections to hearing issues, and recusal for bias or partiality. The court found that they did not require a claimant to present an Appointments Clause challenge to the Administrative Law Judge.

The court also declined to impose an exhaustion requirement as a matter of judicial procedure. It emphasized that Social Security proceedings are conducted in an informal, non-adversarial manner and that Administrative Law Judges must affirmatively develop the record. The court found that the usual reasons for requiring exhaustion—giving the agency an opportunity to correct its own mistake and promoting efficiency—were weak here because the Social Security Administration had instructed its Administrative Law Judges and Appeals Council not to decide or discuss Appointments Clause challenges under its guidance then in effect.

The court distinguished Second Circuit precedent involving Securities and Exchange Commission proceedings because those proceedings were adversarial and the agency’s review structure provided a meaningful path for considering the constitutional issue. The court also noted that the Social Security Administration later ratified its Administrative Law Judges’ appointments and issued guidance concerning Appointments Clause challenges, but concluded that San Filippo was not required to raise the issue after the Appeals Council’s deadline had passed.

Disposition

Because the Commissioner objected to the magistrate judge’s report and recommendation, the district court reviewed the challenged issues independently. Judge Vernon S. Broderick agreed with the magistrate judge that San Filippo’s failure to raise the Appointments Clause argument during the administrative process did not prevent federal-court review. The court adopted the report as supplemented and remanded the case for a new hearing before a properly appointed Administrative Law Judge. The clerk was directed to terminate any open motions and close the case. The opinion did not award San Filippo disability benefits or decide that he was disabled.