Rocket innovator SpaceX is evoking US founding fathers and the Constitution in its lawsuit against the US government. The impetus for the litigation is in response to a recent complaint filed at the Office of the Chief Administrative Hearing Officer (OCAHO), an office within the Executive Office for Immigration Review, an administrative court of the US Department of Justice.
The lawsuit, brought by the Justice Department’s Civil Rights Division, alleges SpaceX discriminated against hiring asylees and refugees, thereby violating the Immigration and Nationality Act (INA) in that “...SpaceX failed to fairly consider or hire asylees and refugees because of their citizenship status and imposed what amounted to a ban on their hire regardless of their qualification, in violation of federal law.” SpaceX cited export control laws as the reason why it was precluded from hiring immigrants who held asylee or refugee status.
National security issues are prevalent in an enterprise such as SpaceX where technology and data are highly protected and therefore the company is subject to export controls such as the International Traffic in Arms Regulations and the Export Administration Regulations. However, it turns out that those laws do not require employers to treat asylum or refugee immigrants differently than U.S. citizens or green card holders.
Perhaps interpreting the export control laws is not so easy. Indeed, in April of 2023 - 4 months before filing its complaint against SpaceX - the US Department of Justice Civil Rights Division issued a “Fact Sheet” for employers to use titled “How to Avoid Immigration Related Discrimination When Complying with U.S.Export Control Laws.”
Whether this was a SpaceX management misinterpretation of the law or outright discrimination is to be determined, but SpaceX has countersued in a Texas Federal District Court claiming that the government’s complaint is unconstitutional. In summary, the lawsuit states that the administrative proceeding violates SpaceX’s constitutional right to have the case heard in an “Article III” court and calls for enjoining the government from pursuing the claim, among other remedies.
Article III refers to the Judicial Branch of the U.S. Constitution and it gives US District Court, US Appellate Court, and US Supreme Court judges the highest level of independence with life tenures and provides a judicial forum protected by the Seventh Amendment right to a jury trial. By contrast, administrative courts and their arbiters, Administrative Law Judges (ALJ), have been established by Congress to adjudicate federal disputes brought before executive agencies and are considered part of the executive branch, not the judicial branch. ALJ’s adjudicate Social Security and disability hearings, immigration removal hearings, Environmental Protection Agency Hearings, and Security Exchange Commission hearings, among others.
These ALJ’s have the power to rule on preliminary motions, conduct prehearing conferences, issue subpoenas, conduct hearings (which may include written and/or oral testimony and cross-examination), review briefs, and prepare and issue decisions, along with written findings of fact and conclusions of law. See Office of Personnel Management; Administrative Law Positions.
Certainly, administrative courts have a very practical place in the judicial landscape; otherwise we would have relatively few Article III courts, laboriously adjudicating millions of claims. But a Federal District Court - an Article III court - is what SpaceX wants. Naming US Attorney General Merrick Garland, the head of OCAHO, and even the assigned Administrative Law Judge as defendants, SpaceX heavily relies on a case currently under review in the US Supreme Court.
Securities and Exchange Commission v. George R. Jarkesy, Jr., et al., No. 22-859. In fact, the injunction SpaceX’s lawsuit seeks asks the Texas District Court to enjoin the administrative proceeding, at least until the US Supreme Court makes its decision in Jarkesy in case it’s favorable to its position. In Jarkesy, the Securities Exchange Commission (SEC) imposed a civil penalty of $300,000, and to pay back $685,000 in improperly held and gained funds, among other remedies for misrepresentation and various violations of the securities laws.
SpaceX essentially narrowed in on two of Jarkesy’s main arguments: 1) That the imposition of civil penalties in an agency adjudication violated the Seventh Amendment (i.e. depriving the respondent its right to a jury trial) and 2) That the ALJ is “unconstitutionally insulated” from Presidential authority because firing an ALJ is limited by two levels of scrutiny before an ALJ can be removed (arguing that Article II vests the entire power to execute laws in the President alone and therefore the President must have unrestricted removal power).
SpaceX also claims that the ALJ is unconstitutionally appointed because the Appointments Clause of the Constitution mandates that only the President can appoint the head of an agency, with the advice and consent of the US Senate. SpaceX argues that an ALJ acts like the head of the agency, with its long list of judicial powers and ability to render a final decision in the federal dispute. As such, the judge is essentially “adjudicating without Executive oversight” because, it turns out, the President did not appoint the ALJ at all. Rather, the appointment is made by the Attorney General who was given power by Congress to appoint an “inferior officer,” which results in the ALJ appointment. U.S. Const. art. II, §2, cl.2.
While the arguments are bold and a strict reading of the Constitution, there is a stark contrast to the SEC case SpaceX is betting on. The SEC can choose whether to initiate enforcement proceedings either in an administrative court (15 U.S.C. 77h-1, 78u-2, 78u-3, 80b-3), or in federal district court (15 U.S.C. 77t, 80b-9).
But here, with SpaceX, the Department of Justice is acting on discrimination based on immigration status under 8 USC §1324b (of the Immigration and Nationality Act (the “INA”). Unlike the statute regulating the SEC, the INA does not mention a choice of venue in which to initiate enforcement. In fact, it directs the special counsel to “file a complaint with the OCAHO” (and thus present the matter in front of an ALJ). 8 USC §1342b(c)(2), (d) (1). Given this distinct directive and the recognized place for administrative proceedings, this battle may not fall in favor of SpaceX.
Article (c) by K & G Law LLP.
Originally published at Daily Journal (September 2023)
