Texas Court Stays Administrative Proceeding on SpaceX's Export Control-Related Hiring Decisions

The U.S. District Court for the Southern District of Texas temporarily halted administrative proceedings concerning SpaceX's export control-related hiring practices, in a Nov. 8 order. Granting the space exploration company's motion for a preliminary injunction in part and denying it in part, Judge Rolando Olvera said SpaceX is likely to succeed on its claim that a law making it illegal to discriminate based on citizenship status in hiring decisions, 8 U.S.C. 1324b, violates the Appointments Clause under the U.S. Constitution (Space Exploration Technologies v. Carol Bell, S.D. Tex. # 23-00137).

Olvera said that the law's "plain language, broader context, and legislative history" show that the decisions of administrative law judges in DOJ's Office of the Chief Administrative Hearing Officer are not subject to the review of the attorney general. As a result, the statute violates the Constitution's Appointments Clause, which requires the attorney general to review the administrative law judge's opinions.

A recent regulatory effort from DOJ to fix this gap falls flat, the judge added. As a result, Olvera stayed the administrative proceeding against SpaceX pending final resolution of the company's court case, granting a win for the space exploration firm.

The U.S. alleged that SpaceX engaged in illegal hiring practices by claiming it could only hire U.S. citizens and legal permanent residents because of export control laws (see 2308250041). DOJ said these laws impose no such restrictions, adding that the company's hiring and recruiting practices amounted to discrimination. SpaceX took to the Texas court to say that the administrative proceedings are unconstitutional since the administrative law judge presiding over the proceeding was "unconstitutionally insulated from Presidential authority," and is illicitly attempting to adjudicate SpaceX's rights in a place other than a federal court (see 2309210015).

SpaceX filed for a preliminary injunction against the proceeding, claiming that the government's interim rule looking to stabilize the shaky legal ground of the proceeding is itself illegal. The interim final rule, published two weeks after the preliminary injunction motion, subjects rulings from administrative law judges in this context to administrative review. Without this rule, the U.S. admits that the administrative judges' ability to issue final decisions without the chance for further review is incompatible with the Constitution (see 2310270063).

Olvera ruled that the interim rule "conflicts with the plain language of § 1324b, which only provides for review in an Article III [federal] court." After establishing that the remaining PI factors -- irreparable injury and balance of the harms -- fell for SpaceX, the judge stayed the administrative proceedings. However, Olvera ruled that SpaceX is not entitled to an injunction on its removal or Article III and Seventh Amendment claims, since the unconstitutional provisions are severable and SpaceX is unlikely to succeed on the merits of the claims, respectively.