It may be hard for the U.S. Supreme Court to turn this one down.

A recent decision by the U.S. Court of Appeals for the Tenth Circuit declaring that the way the Securities and Exchange Commission appoints administrative law judges violates the Constitution sets up a clean split among the circuits and may implicate the validity of administrative proceedings in other areas of government.

In Bandimere v. U.S. Securities and Exchange Commission, 15-9586, a divided court agreed with Colorado businessman David Bandimere that the ALJ who kicked him out of the securities industry and ordered him to pay financial penalties was appointed in violation of the Appointments Clause.

Judges Mary Beck Briscoe and Scott Matheson were in the majority, saying that, under Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991), the ALJ was indeed an "inferior officer," who must be appointed by the President.

Judge Monroe McKay dissented, saying the "sweeping language" of the majority's decision made him "worry that it has effectively rendered invalid thousands of administrative actions."

"Under the majority's reading of Freytag, all federal ALJ's are at risk of being declared inferior officers," McKay said.

The Bandimere decision is in direct conflict with the D.C. Circuit's August decision in Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016) which squarely held the appointment of ALJs does not violate the Appointments Clause, as the ALJs aren't inferior officers because they don't have the authority to issue a final decision. Only the commission has that power.

K&L Gates Partner Vincente Martinez, who served as the SEC's chief of the Office of Market Intelligence at the Division of Enforcement said the clash between "two courts deciding the same issue in the same context present strong circumstances for Supreme Court review."

"The circuit split is directly on point on whether finality of decision by ALJs is the determining concern for deciding whether they are officers or employees," Martinez said.

There have been a series of challenges nationally to the use of administrative proceedings on due process and equal protection grounds—the latter based on a claim of selective enforcement by opting to bring some cases in federal court.

Until recently, most district courts have rejected those challenges, but that changed in 2015 with opinions in district courts in Georgia and New York, where judges found they had jurisdiction to consider the claims—only to be overturned on that issue.

On June 1, the U.S. Court of Appeals for the Second Circuit held in Tilton v. SEC there was a lack of jurisdiction in the case of Lynn Tilton, nicknamed The Diva of Distressed Debt. A divided panel said Tilton could always wait for the end of her SEC proceeding, and review by the commission, to take her constitutional challenge to the circuit.

The decision cleared the way for an SEC proceeding before an ALJ this fall where Randy Mastro, a partner at Gibson Dunn & Crutcher, defended Tilton. He welcomed the 10th Circuit aboard Wednesday.

"There's something fundamentally wrong and unjust about the SEC steering these incredibly complex cases, where the stakes are so high, to internal ALJs rather than giving people facing serious jeopardy the right to an Article III judge and trial by jury," Mastro said. "This decision makes crystal clear the inherent problems and unconstitutionality of the SEC approach and now there's a split in the circuits hopefully this will lead to review by the Supreme Court."

The difference between federal court and internal SEC proceedings, Mastro and other lawyers argue, is profound. The SEC has an overwhelmingly better record internally, and even with recent changes by the SEC, there is still limited discovery before ALJs, time limits on getting to a hearing and the lack of the option for a jury trial.

Jacob Frenkel of Dickinson Wright in Washington, D.C., spent 10 years at the SEC's Division of Enforcement.

Frenkel said the private bar is enamored by the appointments clause issue, "but that issue misses the more fundamental problem."

"The appointments clause issue is fixable and it's reasonable to expect that the Supreme Court is not going permit years of ALJ decisions, let alone decisions upheld by the full commission, to fall on a technical issue," Frenkel said. "It would be far more meaningful for these cases to address the more significant issue of prejudice and these modest, prophylactic fixes that the commission embraces as concession do not go far enough to protect the rights of defendants."

"The 'generous' gifts of a few more depositions and some discovery does not come anywhere close to the protections afforded by the rules of civil procedure," he said.

Frenkel also cautioned that the case might be derailed before the Supreme Court has a chance to take it up should the 10th Circuit decide to grant rehearing en banc.

That prospect is possible, Frenkel said, because of "a very well reasoned dissent that's in line with the majority of trial courts and with other circuits—importantly, the Second and the Eleventh."

Bandimere was represented by David Zisser of Jones & Keller; the SEC by Senior Counsel Lisa Helvin.