Lemelson v. Securities Exchange Commission

CourtDistrict Court, District of Columbia
DecidedMay 27, 2025
DocketCivil Action No. 2024-2415
StatusPublished

This text of Lemelson v. Securities Exchange Commission (Lemelson v. Securities Exchange Commission) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Lemelson v. Securities Exchange Commission, (D.D.C. 2025).

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

REVEREND FATHER EMMANUEL LEMELSON,

Plaintiff, Civil Action No. 24 - 2415 (SLS) v. Judge Sparkle L. Sooknanan

SECURITIES AND EXCHANGE COMMISSION,

Defendant.

MEMORANDUM OPINION

The Reverend Father Emmanuel Lemelson was recently the subject of a Securities and

Exchange Commission (SEC or Commission) civil enforcement action in federal court where a

jury found him liable under antifraud provisions of the federal securities laws. Lemelson was

ordered to pay a civil penalty and enjoined from violating certain federal securities laws for five

years. Now the SEC has initiated an in-house administrative proceeding to suspend or bar

Lemelson from working in the securities industry. Lemelson brought this lawsuit to challenge the

SEC’s follow-on proceeding on constitutional and res judicata grounds. Lemelson seeks

preliminary injunctive relief, and the SEC has moved to dismiss under Federal Rules of Civil

Procedure 12(b)(1) and 12(b)(6). The Court is unpersuaded by Lemelson’s arguments. It dismisses

two of his claims under Rule 12(b)(1) for lack of jurisdiction and the rest under Rule 12(b)(6).

BACKGROUND

A. Statutory Background

“The Investment Advisers Act of 1940 was the last in a series of Acts designed to eliminate

certain abuses in the securities industry, abuses which were found to have contributed to the stock market crash of 1929 and the depression of the 1930[s].” SEC v. Cap. Gains Rsch. Bureau, Inc.,

375 U.S. 180, 186 (1963). “Like the Securities Act of 1933 and the Securities Exchange Act of

1934, the Investment Advisers Act was intended to achieve a high standard of business ethics in

the securities industry.” Robare Grp., Ltd. v. SEC, 922 F.3d 468, 472 (D.C. Cir. 2019)

(cleaned up). The Advisers Act accordingly “establishes federal fiduciary standards to govern the

conduct of investment advisers,” Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 17

(cleaned up), “imposing on them an affirmative duty of utmost good faith, and full and fair

disclosure of all material facts,” Robare Grp., Ltd., 922 F.3d at 472 (cleaned up).

Section 203(f) of the Advisers Act “authorized the SEC to oversee the registration and

licensing of different classes of participants in the securities markets[.]” Bartko v. SEC, 845 F.3d

1217, 1219 (D.C. Cir. 2017) (citations omitted). It also “authorized the [SEC] to suspend or bar a

participant from specific classes if certain conditions were met.” Id. (citations omitted).

As presently codified, 15 U.S.C. § 80b-3(f) allows the SEC to suspend or bar someone if it finds

“on the record after notice and opportunity for hearing” that (1) such a suspension or bar is “in the

public interest,” and (2) that the person “has been convicted” of certain crimes or has been

“enjoined from any action, conduct, or practice” specified in another paragraph, id., including

being enjoined from “engaging in or continuing any conduct or practice . . . in connection with the

purchase or sale of any security,” id. § 80b-3(e)(4). These proceedings are called “follow-on

administrative proceeding[s].” Bartko, 845 F.3d at 1219. And the Advisers Act allows “[a]ny

person or party aggrieved by” an SEC order issued pursuant to such proceedings to “obtain a

review of [the] order in the United States court of appeals within any circuit wherein such person

resides or has his principal office or place of business, or in the United States Court of Appeals for

the District of Columbia[.]” 15 U.S.C. § 80b-13(a).

2 B. Factual Background

The Court draws the facts, accepted as true, from the Plaintiff’s Complaint. Wright v.

Eugene & Agnes E. Meyer Found., 68 F.4th 612, 619 (D.C. Cir. 2023).

The Reverend Father Emmanuel Lemelson “manages an investment fund called The

Spruce Peak Fund, LP.” First Am. Compl. (Am. Compl.) ¶ 3, ECF No. 10. About ten years ago,

in 2015, the SEC “launched an . . . investigation against him . . . after a pharmaceutical company

complained about Lemelson’s . . . public criticism of the company the year before.” Id. ¶ 8.

“In September 2018, just months after Lemelson sent an open letter to Congress accusing [the]

SEC of incompetence and financial illiteracy, the agency sued Lemelson in the United States

District Court for the District of Massachusetts,” alleging that he “had engaged in market

manipulation and other nefarious misconduct.” Id.

The SEC “overwhelmingly lost its case before the Massachusetts federal jury and obtained

only a small fraction of the relief it demanded.” Id. ¶ 11. But the district court still “entered a final

judgment” that “summarily enjoined Lemelson ‘from violating Section 10(b) of the [Securities]

Exchange Act and [SEC] Rule 10b-5 for a period of five years’ while ordering him to pay a

$160,000 civil penalty and no disgorgement.” Id. And the SEC has now initiated a follow-on

administrative proceeding to suspend or bar Lemelson, citing the district court’s injunction as the

relevant predicate act. Id. ¶ 20. Lemelson spends much of his Amended Complaint cataloguing

various details to show that the SEC is biased against him. See id. ¶¶ 6–10, 12–20. He summarizes

the central problem as follows: The “SEC has not only an intense and obvious prejudice against

[him] but also the undeniable appearance of bias in favor of its own lawyers, who are now

appearing before [the] SEC” and one of its Administrative Law Judges (ALJs) “as lead prosecutors

3 of the administrative follow-on proceeding after having advised [the] SEC, ex parte, in connection

with the parallel Massachusetts federal court litigation against Lemelson.” Id. ¶ 21.

C. Procedural Background

Lemelson filed his Amended Complaint on December 17, 2024, bringing five claims

against the Commission. See id. ¶¶ 30–47. He alleges (1) that the SEC denied him due process,

(2) that the SEC usurped judicial power in violation of Article III, (3) that the SEC has

unconstitutionally deprived him of a jury trial, (4) that the SEC ALJ’s multiple layers of removal

protections violate Article II, and (5) that res judicata bars the follow-on administrative

proceeding. See id. Lemelson moved for a preliminary injunction on the same day. See Pl.’s Mot.

Prelim. Inj., ECF No. 11. And on January 16, 2025, the SEC moved to dismiss the case. See Mot.

Dismiss, ECF No. 13; see also Def.’s Opp’n Mot. Prelim. Inj., ECF No. 14. These motions are

fully briefed and are ripe for review. See Pl.’s Opp’n Mot. Dismiss (Pl.’s Opp’n), ECF No. 18;

Pl.’s Reply Supp. Mot. Prelim. Inj., ECF No. 17; Def.’s Reply Supp. Mot. Dismiss (Def.’s Reply),

ECF No. 21.

LEGAL STANDARDS

“A motion under Rule 12(b)(1) presents a threshold challenge to a court’s jurisdiction.”

Ctr. for Biological Diversity v. U.S. Int’l Dev. Fin. Corp., 585 F. Supp. 3d 63, 69 (D.D.C. 2022)

(cleaned up). The plaintiff “bears the burden of providing by a preponderance of the evidence that

the Court has subject-matter jurisdiction over her claims.” Schmidt v.

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