November 9, 2020 - Federal Circuit Insights

What Does the Supreme Court’s Grant in Two Social Security Cases Have to Do With Arthrex?

As readers know, we have written about Arthrex a lot. So what better way to start Monday than another short post? Today, the Supreme Court granted cert. in Carr v. Saul, No. 19-1442, and Davis v. Saul, No. 20-105—two cases involving the Social Security Act. What does that have to do with Arthrex? Here’s the question presented for both petitions:

Whether a claimant seeking disability benefits under the Social Security Act forfeits an appointments-clause challenge to the appointment of an administrative law judge by failing to present that challenge during administrative proceedings.

The issue in both Carr and Davis is whether Social Security claimants needed to raise their Appointments Clause challenge in the administrative agency.

On its face, that is essentially the same as one of the questions that the government sought review of in Arthrex—arguing that patent owners forfeited their Appointments Clause challenge by not raising it in the PTAB. Here is what the government asked the Supreme Court to review in Arthrex:

Whether the court of appeals in Arthrex erred by adjudicating an Appointments Clause challenge that had not been presented to the agency.

But unlike in the Social Security cases granted today, the Supreme Court did not grant review of the government’s forfeiture question in Arthrex. At first glance, that inconsistency now seems odd. The government in today’s Social Security cases even noted that “[t]he question presented in these cases overlaps with one of the questions presented in United States v. Arthrex, Inc., petition for cert. pending, No. 19-1434 (filed June 25, 2020).” And if the Supreme Court in Carr and Davis were to broadly hold that claimants forfeit their Appointments Clause challenges by not raising them in the Social Security Administration, wouldn’t that suggest that the Federal Circuit would need to reconsider its ruling that patent owners preserved appointments-clause challenges despite failing to raise them before the PTAB? (Of course, that assumes the Supreme Court holds there is an appointments-clause problem with PTAB judges in Arthrex.)

Before you read too much into this—there are many differences between the Social Security cases and Arthrex. For starters, Carr and Davis aren’t about whether Social Security ALJs are constitutionally appointed; that issue was essentially decided by the Supreme Court in Lucia—which decided that Securities and Exchange Commission ALJs were inferior officers rather than employees, and thus needed to be appointed by a department head. The Social Security Administration fixed the constitutional problem identified in Lucia by having the head of the department ratify the ALJs’ appointment. (And it should be noted that the issue in Arthrex, in contrast, is whether the PTAB judges are inferior officers or principal officers, the latter requiring presidential appointment and Senate advice and consent.) So the only issue in Carr and Davis is the forfeiture issue. And there are other differences too: the Social Security Administration also authorized new hearings post-Lucia if a claimant raised an Appointments Clause challenge before the Agency. As the government also noted in its cert. briefing, courts of appeals have recognized that other “distinctive characteristics of Social Security proceedings justify” their no-forfeiture holdings.

Finally, there may be an even more straightforward reason why the Supreme Court granted the forfeiture question in Carr and Davis but not in Arthrex. Even though the government won on the forfeiture issue in the courts of appeals, the government acquiesced to cert. in Carr and Davis—agreeing with the petitioner Social Security claimants that it was an important issue for the Supreme Court to decide. The government noted that there was an entrenched split in the circuits, which was unlikely to resolve itself without the Court’s intervention. And given the millions of disability cases and hundreds of thousands of Social Security ALJ hearings, the government noted that the issue would affect a profound number of cases. As important as PTAB cases are, the volume simply isn’t the same.

So what’s our takeaway? Unfortunately, it’s more wait and see. The Court’s cert. denial on the forfeiture issue in Arthrex is a little more interesting now given the grant in Carr and Davis. And it seems possible that Carr and Davis could have some effect on the Arthrex cases depending upon what the Supreme Court does. But most likely, the Court just felt like it had to grant in Carr and Davis given the circuit split and number of cases that the circuit split was affecting.