The McCarthy Causal-Link Doctrine: Third Circuit Clarifies Standing Requirements for Challenging DEA ALJ Removal Protections

Introduction

In Stephen McCarthy v. Drug Enforcement Administration, No. 24-2704 (3d Cir. July 21 2025), the United States Court of Appeals for the Third Circuit confronted two recurrent administrative-law themes: (1) constitutional attacks on the tenure protection of agency Administrative Law Judges (ALJs), and (2) arbitrary-and-capricious review of sanctions imposed by the Drug Enforcement Administration (DEA) under the Controlled Substances Act (CSA).

The petitioner, physician assistant Stephen McCarthy, lost his DEA Certificate of Registration (COR) after he wrote multiple controlled-substance prescriptions without a valid physician-supervision agreement required by Pennsylvania law. He argued that:

DEA ALJ Paul E. Soeffing was impermissibly insulated from removal, violating Article II, and therefore his decision was void.
The Administrator’s adoption of the ALJ’s recommendation was arbitrary, capricious, and a “flagrant departure” from past DEA practice.

The Third Circuit rejected both contentions, sharpening—perhaps more than any previous circuit opinion—the causal-link requirement that challengers must satisfy before obtaining relief for alleged unconstitutional removal protections. Because that refined standard is likely to reverberate well beyond the DEA context, the decision is best understood as inaugurating what this commentary calls the “McCarthy Causal-Link Doctrine.”

Summary of the Judgment

Removal-protection claim: Even assuming DEA ALJs enjoy double-layer for-cause protection that is unconstitutional under Free Enterprise Fund, the petitioner could not show that those protections actually caused his injury—i.e., revocation of his COR. Without a demonstrable causal nexus, the court refused to entertain the structural challenge.
Arbitrary-and-capricious claim: The court found substantial evidence that McCarthy wrote 17 controlled-substance prescriptions while unsupervised and partially disclaimed responsibility. Comparing that conduct to prior DEA decisions, the Administrator’s sanction was neither outlier nor unexplained.
Sanctions & counsel conduct: The court noted, in a separate show-cause order, counsel’s submission of AI-generated, non-existent precedent, underscoring professional-responsibility obligations.
Disposition: Petition for review denied; government’s motion to supplement the record (showing the ALJ’s valid appointment) granted.

Analysis

1. Precedents Cited and Their Influence

Free Enterprise Fund v. PCAOB, 561 U.S. 477 (2010) – Identified the problem of double-insulated officers.
Collins v. Yellen, 594 U.S. 220 (2021) – Articulated that removal-protection violations do not make agency acts void per se; plaintiffs must show compensable harm.
NLRB v. Starbucks Corp., 125 F.4th 78 (3d Cir. 2024) – Required a “link” between removal infirmity and injury; McCarthy extends that logic.
CFPB v. National Collegiate Master Student Loan Trust, 96 F.4th 599 (3d Cir. 2024) – Confirmed that agency action stands absent proven prejudice.
Fox Television Stations, Inc., 556 U.S. 502 (2009) – Stated agencies must acknowledge shifts in policy.
DEA administrative precedents: Jayam Krishna-Iyer, M.D. (2009); Melanie Baker, N.P. (2021); Brenton D. Wynn, M.D. (2022); Fares Jeries Rabadi, M.D. (2022); and D.C. Circuit’s unpublished St. Croix (2022).

By weaving together Collins, Starbucks, and National Collegiate, the panel solidified a unified Third-Circuit position: a litigant must do more than allege unconstitutional insulation—they must plausibly allege (and later prove) that such insulation affected the challenged outcome. Absent a factual bridge, the claim collapses.

2. The Court’s Legal Reasoning

a. Standing & the Causal-Link Requirement

The panel began with an assumption that the ALJ’s two-layer for-cause protection is indeed unconstitutional—a question left open. Nevertheless, under Collins a violation of the Take-Care Clause does not automatically invalidate agency action; a plaintiff must still show harm.

Judge Chung applied Starbucks and National Collegiate to hold that McCarthy failed to allege—even hypothetically—how the DEA Administrator would have reached a different result if the ALJ had been freely removable. No allegation suggested the Administrator was “hamstrung” from removing or influencing the ALJ, nor that the ALJ would have behaved differently. Consequently, the constitutional claim was dismissed.

b. Arbitrary-and-Capricious Review

Applying Humphreys v. DEA (3d Cir. 1996) and APA §706(2)(A), the court examined whether the sanction was a “flagrant departure” from precedent. McCarthy’s argument relied on eight AI hallucinations and two genuine cases. The court refused to credit the AI “summaries” and found the two authentic decisions consistent with DEA policy:

Where registrants accept full responsibility and show strong mitigation, lesser sanctions are possible (Krishna-Iyer).
Where registrants equivocate, revocation remains appropriate (St. Croix).

McCarthy’s partial contrition, coupled with the public-interest factors under 21 U.S.C. §823(g)(1) (formerly §823(f)), validated the Administrator’s conclusion that revocation, not suspension, was warranted.

3. Potential Impact of the Judgment

Removal-protection jurisprudence: The decision crystallizes the Third Circuit’s causation framework, making it harder for litigants to obtain vacatur simply by pointing to structural flaws without factual harm. Other circuits may adopt or distinguish the “McCarthy Causal-Link Doctrine.”
DEA enforcement: Reinforces that unintentional or negligent violations—especially those involving Schedule II–V drugs—can support complete revocation when coupled with minimal remorse.
Practitioner ethics & AI: The court’s flagging of AI-generated hallucinations, and its separate show-cause order, set an unmistakable warning to bar members: verify AI output or risk sanctions.
Administrative litigation strategy: Petitioners must now craft detailed factual narratives linking constitutional defects to concrete prejudice, e.g., evidence that an ALJ or Board would have behaved differently but for insulation.

Complex Concepts Simplified

Certificate of Registration (COR): A DEA license permitting medical practitioners to handle controlled substances. Without it, prescribing controlled drugs is illegal.
Schedule II–V substances: Controlled substances ranked by potential for abuse; Schedule II (e.g., oxycodone) is highly regulated, Schedule V the least.
Multilevel Tenure Protection: When an officer (e.g., ALJ) is removable only for cause by another officer (e.g., MSPB Board member) who is himself removable only for cause. Such layers can impede presidential control, raising separation-of-powers concerns.
Arbitrary and Capricious Review: Under the Administrative Procedure Act, courts must set aside agency action that lacks rational explanation, ignores important factors, or represents an unexplained change in policy.
Acceptance of Responsibility: In DEA precedent, remorse and corrective steps are “major factors” in deciding whether continued registration serves the public interest.
AI Hallucination: Fabricated content generated by artificial intelligence models, often plausible in form but nonexistent in reality. Citing such material violates duties of candor and competency.

Conclusion

McCarthy cements a pivotal procedural hurdle for constitutional attacks on agency adjudications within the Third Circuit: the petitioner must establish a tangible causal link between flawed removal protections and the adverse agency outcome. By denying relief absent such a connection, the court harmonizes its doctrine with Supreme Court guidance and places the burden squarely on litigants to demonstrate prejudice.

On the merits, the judgment reiterates that the DEA may revoke registrations where registrants demonstrate poor oversight and tepid contrition, even in the absence of proven drug diversion. It likewise signals judicial intolerance toward unverified, AI-generated citations—an admonition likely to influence appellate advocacy nationwide.

Overall, the ruling fortifies executive control principles, clarifies arbitrary-and-capricious benchmarks in DEA matters, and inaugurates the “McCarthy Causal-Link Doctrine,” a precedent that future litigants—and their counsel—must take to heart.