The Georgia Republican Party v. Securities and Exchange Commission

• Court: Court of Appeals for the Eleventh Circuit
• Decided: April 26, 2018
• Docket: 16-16623
• Status: Published

Opinion

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[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 16-16623 ________________________

Agency No. 34-78683

THE GEORGIA REPUBLICAN PARTY, NEW YORK REPUBLICAN STATE COMMITTEE, TENNESSEE REPUBLICAN PARTY,

Petitioners,

versus

SECURITIES AND EXCHANGE COMMISSION, FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.,

Respondents.

________________________

Petition for Review of a Decision of the Securities and Exchange Commission ________________________

(April 26, 2018) Case: 16-16623 Date Filed: 04/26/2018 Page: 2 of 16

Before WILLIAM PRYOR and JULIE CARNES, Circuit Judges, and CORRIGAN, * District Judge.

JULIE CARNES, Circuit Judge:

In 2015, the Financial Industry Regulatory Authority (“FINRA”), a self-

regulatory organization operating under the auspices of the Securities and

Exchange Commission, proposed adopting Rule 2030—a regulation governing the

political contributions of FINRA members who solicit government officials for

investment advisory services contracts. A year later, after notice and comment, the

Commission issued an order approving the Rule.

The Georgia Republican Party, the New York Republican State Committee,

and the Tennessee Republican Party filed a petition challenging the Commission’s

order. They contend that the Commission lacked the authority to approve Rule

2030 and that the Rule violates the First Amendment. We, however, are unable to

consider the petition’s merits because the Georgia Party does not have standing to

challenge the Rule and this Court is not the proper venue for either the New York

Committee or the Tennessee Party. As a result, we dismiss the Georgia Party for

lack of jurisdiction, and transfer the appeal of the remaining two parties to the

United States Court of Appeals for the District of Columbia Circuit.

* Honorable Timothy J. Corrigan, United States District Judge for the Middle District of Florida, sitting by designation.

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I. BACKGROUND

In 2010, the Commission enacted rules generally prohibiting investment

advisors from “provid[ing] investment advisory services for compensation to a

government entity within two years after a contribution to an official of the

government entity.” 17 C.F.R. § 275.206(4)–5(a)(1); see 75 Fed. Reg. 41018,

41068–69 (2010). The Commission’s rules also prohibit investment advisors from

using placement agents—persons who solicit government officials for investment

advisory services contracts on behalf of investment advisers—unless such agents

are “regulated person[s]” within FINRA. 17 C.F.R. § 275.206(4)–5(a)(2)(i)(A).

The Commission’s rules further prohibit investment advisers from working with

placement agents unless FINRA enacts rules that prohibit these placement agents

from “engaging in distribution or solicitation activities if certain political

contributions have been made” and such rules are “substantially equivalent” to, or

“more stringent” than, the Commission’s comparable rules for investment advisers.

Id. § 275.206(4)–5(f)(9)(ii).

So, in 2015, FINRA proposed Rule 2030 to the Commission for adoption.

80 Fed. Reg. 81650, 81650–56 (2015); see 15 U.S.C. § 78s(b)(1) (requiring that

self-regulatory organizations receive approval from the Commission before any

rule change may take effect). Subject to some exceptions, Rule 2030 prohibits

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placement agents from “engag[ing] in distribution or solicitation activities for

compensation with a government entity on behalf of an investment adviser that

provides or is seeking to provide investment advisory services to such government

entity within two years after a contribution to an official of the government entity.”

FINRA Rule 2030(a). Thus, if a placement agent makes a contribution to a

government official, the placement agent must wait two years before it can solicit

the employing governmental entity for an investment advisory services contract

and be paid for doing so.

Rule 2030 also includes provisions that attempt to prevent placement agents

from circumventing the Rule by making indirect contributions to government

officials. One such provision states that placement agents may not “solicit or

coordinate any person or political action committee to make” payments “to a

political party of a state or locality of a government entity with which the covered

member is engaging in, or seeking to engage in, distribution or solicitation

activities on behalf of an investment adviser.” FINRA Rule 2030(b).

In August 2016, after notice and comment, the Commission issued a final

order approving the Rule. 81 Fed. Reg. 60051, 60051–52 (2016). In response, the

Georgia Party, the New York Committee, and the Tennessee Party filed a joint

petition in this Court under 15 U.S.C. § 78y(a), asserting that the Commission

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lacked the authority to approve Rule 2030 and that the Rule violates the First

Amendment.

II. DISCUSSION

A. The Georgia Party Lacks Standing to Challenge Rule 2030. “Article III of the Constitution restricts [the judicial power] to the traditional

role of Anglo–American courts, which is to redress or prevent actual or imminently

threatened injury to persons caused by private or official violation of law.”

Summers v. Earth Island Inst., 555 U.S. 488, 492 (2009). Standing doctrine

“reflect[s] this fundamental limitation” and “requires federal courts to satisfy

themselves that the plaintiff has alleged such a personal stake in the outcome of the

controversy as to warrant his invocation of federal-court jurisdiction.” Id. at 493

(emphasis omitted) (internal quotation marks omitted). So, if a plaintiff lacks

standing, then “federal courts do not have jurisdiction over his or her complaint.”

Stalley ex rel. U.S. v. Orlando Reg’l Healthcare Sys., Inc., 524 F.3d 1229, 1232

(11th Cir. 2008).

“The party invoking federal jurisdiction bears the burden of establishing”

standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). “Since

[standing elements] are not mere pleading requirements but rather an indispensable

part of the plaintiff’s case, each element must be supported in the same way as any

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other matter on which the plaintiff bears the burden of proof, i.e., with the manner

and degree of evidence required at the successive stages of the litigation.” Id. At

the pleading stage “general factual allegations of injury . . . may suffice.” Id. But

in response to a summary judgment motion, “the plaintiff can no longer rest on

such ‘mere allegations,’ but must ‘set forth’ by affidavit or other evidence ‘specific

facts.’” Id. (quoting Fed. R. Civ. P. 56(e)). In this context, a petition for appellate

review of a final agency order is more analogous to a motion for summary

judgment, “in that both request a final judgment on the merits.” Iowa League of

Cities v. EPA, 711 F.3d 844, 869 (8th Cir. 2013). “Accordingly, parties seeking

direct appellate review of an agency action must prove each element of standing as

if they were moving for summary judgment in a district court.” Id. Thus,

petitioners “bear the responsibility of meeting the same burden of production,

namely ‘specific facts’ supported by ‘affidavit or other evidence.’” Id. at 870

(quoting Lujan, 504 U.S. at 561); see also Sierra Club v. EPA, 793 F.3d 656, 662

(6th Cir. 2015); N. Laramie Range Alliance v. FERC, 733 F.3d 1030, 1034 (10th

Cir. 2013); Citizens Against Ruining the Environment v. EPA, 535 F.3d 670, 675

(7th Cir. 2008); Sierra Club v. EPA, 292 F.3d 895, 899–900 (D.C. Cir. 2002).

To establish standing then, a petitioner must put forth specific facts

supported by evidence showing that: “(1) it has suffered an ‘injury in fact’ . . . (2)

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the injury is fairly traceable to the challenged action of the defendant; and (3) it is

likely, as opposed to merely speculative, that the injury will be redressed by a

favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC),

Inc., 528 U.S. 167, 180–81 (2000). Our focus here is on the first element: injury

in fact. An injury in fact must be “concrete and particularized and . . . actual or

imminent, not conjectural or hypothetical.” Id. at 180. “[T]he injury required for

standing need not be actualized,” but it must be “real, immediate, and direct.”

Davis v. FEC, 554 U.S. 724, 734 (2008). “Although imminence is concededly a

somewhat elastic concept, it cannot be stretched beyond its purpose, which is to

ensure that the alleged injury is not too speculative for Article III purposes—that

the injury is certainly impending.” Clapper v. Amnesty Int’l USA, 568 U.S. 398,

409 (2013) (emphasis in original) (quoting Lujan, 504 U.S. at 565 n.2). Indeed,

the Supreme Court has “repeatedly reiterated that ‘threatened injury must be

certainly impending to constitute injury in fact,’ and that ‘[a]llegations of possible

future injury’ are not sufficient.” Id. (alteration and emphases in original) (quoting

Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)). And it has “been reluctant to

endorse standing theories that require guesswork as to how independent

decisionmakers will exercise their judgment.” Id. at 1150. A prospective injury

that is contingent on the choices of a third party is less likely to establish standing.

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See id.; see also Summers, 555 U.S. at 494 (“[Petitioners] can demonstrate

standing only if application of the regulations by the Government will affect them

. . . .” (emphasis in original)).

Here, the Georgia Party is not directly regulated by Rule 2030 because it is

not a placement agent. Nevertheless, the Party argues that it suffers an injury in

fact from Rule 2030 because the Rule: (1) inhibits the Party’s ability to fundraise;

(2) forces the Party to divert resources; and (3) harms its members. Although each

of these types of harm can potentially establish injury in fact, the Georgia Party has

not put forward adequate facts to support any of these theories.

1. Injury based on the impairment of the Georgia Party’s ability to fundraise

The Georgia Party, relying on the D.C. Circuit’s opinion in Taxation without

Representation of Wash. v. Regan, 676 F.2d 715 (D.C. Cir. 1982), rev’d on other

grounds, 461 U.S. 540 (1983), contends that it suffers a direct injury from Rule

2030 because the Rule will hinder the Party’s ability to fundraise. The Party

asserts that, because Rule 2030 prohibits placement agents from “solicit[ing] or

coordinat[ing]” to make any “[p]ayment to a political party of a state . . . with

which the covered member is engaging in, or seeking to engage in, distribution or

solicitation activities on behalf of an investment adviser,” the Rule will necessarily

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harm the Party’s fundraising because some placement agents will not be able to

contribute to the Party.

The Georgia Party, however, does not provide sufficient evidence to support

its assertions. The Party’s only evidence is the affidavit of J. Adam Pipkin, the

Georgia Party’s Executive Director. Mr. Pipkin’s affidavit states broadly that

those regulated by Rule 2030 “will be . . . limited in their ability to contribute to

the Georgia Republican Party” and that the Rule “will significantly hinder the state

party.” Mr. Pipkin does not assert that he himself would like to contribute to the

Georgia Party but has decided not to do so because of Rule 2030. He does not

identify another person who wishes to contribute but will not because of the Rule.

And he does not offer any factual support for his general assertion that the Georgia

Party will be “significantly hinder[ed]” in some way. In other words, the affidavit

offers no facts to show that the Georgia Party’s fundraising will actually be

harmed. The affidavit’s generalized “[a]llegations of possible future injury,”

without factual support, “are not sufficient” to establish “certainly impending”

injury. Clapper, 568 U.S. at 409 (alteration and emphases in original) (quoting

Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)).

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2. Injury based on the diversion of the Georgia Party’s resources

The Georgia Party also argues that it is harmed because it must divert

resources from its core mission to advise state and local officeholders about the

impact of Rule 2030 on their ability to fundraise. We have recognized that an

“organization has standing to sue on its own behalf if the defendant’s illegal acts

impair its ability to engage in its projects by forcing the organization to divert

resources to counteract those illegal acts.” Ga. Latino Alliance for Human Rights

v. Governor of Ga., 691 F.3d 1250, 1259–60 (11th Cir. 2012) (quotation marks

omitted).

Mr. Pipkin, however, does not state in his affidavit that the Georgia Party

has been, or will be, forced to divert any resources at all—let alone that such

diversion impairs the Party. Because the Georgia Party offers no facts whatsoever

to support this theory, it necessarily fails.

3. Injury to the Georgia Party’s members Finally, the Georgia Party contends that it has standing because its members

have standing. “An association has standing to bring suit on behalf of its members

when its members would otherwise have standing to sue in their own right, the

interests at stake are germane to the organization’s purpose, and neither the claim

asserted nor the relief requested requires the participation of individual members in

the lawsuit.” Friends of the Earth, 528 U.S. at 181. To establish standing under

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this theory, an organization must “make specific allegations establishing that at

least one identified member ha[s] suffered or [will] suffer harm.” Summers, 555

U.S. at 498. We cannot accept an organization’s “self-descriptions of [its]

membership . . . . regardless of whether it is challenged.” Id. at 499.

The Georgia Party alleges that Rule 2030 harms its members in two ways.

First, members who are placement agents directly regulated by Rule 2030 face

consequences for making contributions to certain candidates. Second, members

who are state and local officials are inhibited by Rule 2030 from receiving such

contributions.

Yet, once again, the Georgia Party has failed to allege that a specific

member will be injured by the rule, and it certainly offers no evidence to support

such an allegation. Mr. Pipkin’s affidavit identifies that he is a member of the

Party, but his affidavit does not establish that he is regulated by Rule 2030 or that

he plans to make (or receive) a specific contribution that would trigger the Rule.

And Mr. Pipkin’s affidavit identifies no other members of the Georgia Party who

are covered or affected by Rule 2030. Thus, the Party has failed to identify at least

one member who has or will suffer harm from Rule 2030 as required to show

injury in fact.

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The Georgia Party invokes this Court’s previous decision in Florida State

Conference of the NAACP v. Browning to argue that it need not “name names” to

establish standing based on prospective harm. 522 F.3d 1153, 1160 (11th Cir.

2008). In Browning, we held that organizations need not identify particular

members who would be harmed because future “probabilistic injuries” to

unidentified members were sufficient if at least one member was “certain to get

injured in the end.” Id. at 1162–64.

Here, however, Mr. Pipkin’s affidavit does not aver that at least one of the

Georgia Party’s members is certain to be injured by Rule 2030. Moreover, since

Browning, the Supreme Court has rejected probabilistic analysis as a basis for

conferring standing. In Summers, the majority rejected the dissent’s theory that an

organization could establish standing if “there is a statistical probability that some

of [its] members are threatened with concrete injury.” 555 U.S. at 497. The

Supreme Court reasoned that probabilistic standing ignores the requirement that

organizations must “make specific allegations establishing that at least one

identified member had suffered or would suffer harm.” Id. at 498; see also id. at

498–99 (“This requirement of naming the affected members has never been

dispensed with in light of statistical probabilities, but only where all the members

of the organization are affected by the challenged activity.”). So “[w]hile it is

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certainly possible—perhaps even likely—that one individual will” suffer an injury

from Rule 2030, “that speculation does not suffice.” Id. at 499.

The Georgia Party also erroneously relies on Arcia v. Florida Secretary of

State, where we held that three organizational plaintiffs had standing to challenge

“Florida’s efforts to remove the names of ineligible voters from the State’s voter

rolls.” 772 F.3d 1335, 1339, 1342 (11th Cir. 2014). To be sure, we explained that

an “organizational plaintiff[] need not establish that all of [its] members are in

danger” and approvingly cited our holding in Browning that “large organizations

. . . ha[v]e standing [when] there [is] a high probability that at least one of the[ir]

members w[ill] be [harmed].” Id. at 1342. But in Arcia, we were not asked

whether Summers and its requirement that an organization proffer “at least one

identified member [who] had suffered or would suffer harm,” 555 U.S. at 498

(emphasis added), had abrogated our precedent about probabilistic injury to

unnamed plaintiffs. Nor did we need to answer this question because we

acknowledged that the organizations in Arcia “represent a large number of people,

like Ms. Arcia and Ms. Antoine, who face a realistic danger of being identified in

the [voter] removal program[].” Id. (emphasis added). In the light of this

identification of two members, the only question before this Court was whether

there was a realistic danger of injury to the named members, and not whether there

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was a sufficient possibility that any member would suffer an injury. We did not

relax the requirement that an organization name at least one member who can

establish an actual or imminent injury.

In short, the Georgia Party has failed to put forward sufficient factual

support to show that it has, or will, suffer an injury in fact from Rule 2030 to

establish standing under any theory. For reasons unknown to this Court, the

Georgia party has not submitted an affidavit from a member who is a placement

agent regulated by Rule 2030 and who has decided not to make a particular

contribution because of the Rule. See Tenn. Republican Party v. SEC, 863 F.3d

507, 517 (6th Cir. 2017) (“[T]here is no reason why Petitioners could not have put

forth an affidavit from a particular municipal advisor professional who would have

contributed more than $250 were it not for the 2016 Amendments.”). Because we

lack jurisdiction over a party that does not have standing, we dismiss the Georgia

Party for lack of jurisdiction.

B. This Circuit is not the Proper Venue for the New York Committee and the Tennessee Party. Having dismissed the Georgia Party, we now address whether this is the

appropriate venue for the New York Committee and the Tennessee Party. 1 The

1 We need not—and do not—address whether the New York Committee and the Tennessee Party have standing, because “[j]urisdiction is vital only if the court proposes to issue a judgment

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New York Committee and the Tennessee Party filed their petition in this Court

under 15 U.S.C. § 78y(a), which provides that: “A person aggrieved by a final

order of the Commission entered pursuant to this chapter may obtain review of the

order in the United States Court of Appeals for the circuit in which he resides or

has his principal place of business, or for the District of Columbia Circuit.”

Without the Georgia Party, this Circuit is clearly not the appropriate venue

for the New York Committee and the Tennessee Party because neither party

resides or has its principal place of business within this Circuit.

The only question then is the proper remedy. We could dismiss the New

York Committee and the Tennessee Party for improper venue, Fed. Power

Comm’n v. Texaco, Inc., 377 U.S. 33, 39 (1964) (holding that a circuit court “erred

in failing to dismiss [a] petition for lack of venue”), but we have been hesitant to

do so where dismissal would deprive a party of its right to appellate review, see

Becker v. Comm’r of Internal Revenue, 852 F.2d 524, 526 (11th Cir. 1988). We

also have “inherent authority to transfer an appeal when [this] is not the court of

proper venue” and doing so “would be in the interest of justice.” Id.

on the merits.” Sinochem Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 431 (2007) (quoting Intec USA, LLC v. Engle, 467 F.3d 1038, 1041 (7th Cir. 2006)).

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Because the New York Committee and the Tennessee Party could not refile

their petition in a proper venue due to the fact that it is now well outside the 60-day

filing period, 15 U.S.C. § 78y(a)(1), we conclude that it is in the interest of justice

to transfer the appeal. The parties dispute whether venue would be proper for both

the New York Committee and the Tennessee Party in the Second or Sixth Circuits,

where each respectively resides. But, at oral argument, all agreed that the D.C.

Circuit would be a proper venue. Accordingly, we transfer the appeal there.

CONCLUSION

We DISMISS the Georgia Party for lack of jurisdiction and TRANSFER

the New York Committee and Tennessee Party’s petition to the D.C. Circuit.